Genesis Scale Holdings Limited — Proxy Solicitation & Information Statement 2010

Feb 25, 2010

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

This circular is for information only and does not constitute an invitation of offer to acquire, purchase or subscribe for securities of the Climax International Company Limited.

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CLIMAX INTERNATIONAL COMPANY LIMITED 英 發 國 際 有 限 公 司[*]

(Incorporated in Bermuda with limited liability)

(Stock code: 439)

VERY SUBSTANTIAL DISPOSAL

AND

CONNECTED TRANSACTION AND

NOTICE OF THE SPECIAL GENERAL MEETING

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

Optima Capital Limited

A notice convening a special general meeting (the ‘‘SGM’’) to be held at Unit A, 10/F, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong at 11: 30 a.m. on 15 March 2010 is set out on pages 139 to 140 of this circular. Whether or not you are able to attend the SGM, you are requested to complete the accompanying form of proxy for use at the SGM in accordance with the instructions printed thereon and return the same to the Company’s share registrar and transfer office in Hong Kong, Tricor Secretaries Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and, in any event, not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjourned meeting thereof should you so wish.

A letter from the independent board committee of the Company is set out on pages 15 to 16 of this circular. A letter from Optima Capital Limited, the independent financial adviser, containing its advice to the independent board committee and the independent shareholders of the Company is set out on pages 17 to 29 of this circular.

• For identification purposes only

26 February 2010

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
THE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
INFORMATION ON THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
INFORMATION ON THE COMPANY AND THE GROUP . . . . . . . . . . . . . . . . .	7
INFORMATION ON THE TARGET GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
FINANCIAL INFORMATION ON THE TARGET GROUP . . . . . . . . . . . . . . . . .	11
REASONS FOR AND BENEFITS OF THE DISPOSAL . . . . . . . . . . . . . . . . . . . . .	11
FINANCIAL AND TRADING PROSPECTS OF THE GROUP . . . . . . . . . . . . .	11
FINANCIAL EFFECT OF THE DISPOSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
LISTING RULES IMPLICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . .	15
LETTER FROM OPTIMA CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
APPENDIX I — FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . .	30
APPENDIX II — UNAUDITED PRO FORMA FINANCIAL INFORMATION
ON THE REMAINING GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . .	119
APPENDIX III — GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	129
NOTICE OF SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	139

– i –

DEFINITIONS

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

• ‘‘Agreement’’ the agreement dated 8 October 2009 entered into between the Company, the Purchaser and the Target Company in relation to the Disposal

• ‘‘Announcement’’ the announcement of the Company dated 10 November 2009 relating to, among other things, the Agreement

• ‘‘associate(s)’’ has the meaning ascribed to it under the Listing Rules ‘‘Board’’ the board of Directors ‘‘Business Day’’ means any day (excluding a Saturday) on which banks generally are open for business in Hong Kong during normal working hours

• ‘‘BVI’’ the British Virgin Islands

• ‘‘Bye-Laws’’ the bye-laws of the Company ‘‘Company’’ Climax International Company Limited, a company incorporated in Bermuda with limited liability and the shares of which are listed on the main board of the Stock Exchange

• ‘‘Completion’’ completion of the Disposal in accordance with the terms and conditions of the Agreement

• ‘‘Completion Date’’ the date falling the third Business Day after all the conditions precedent having been fulfilled

• ‘‘Conditions’’ conditions precedent for completion of the Agreement as set out in the section headed ‘‘Conditions precedent to Completion’’ in this circular

• ‘‘connected person(s)’’ has the meaning ascribed to it under the Listing Rules ‘‘Consideration’’ HK$2,500,016, being the consideration for the sale and purchase of the Sale Shares and the Debt

• ‘‘Debt’’ the total indebtedness owed by the Target Group to the Company at Completion

• ‘‘Director(s)’’ the director(s) of the Company ‘‘Disposal’’ the disposal of the Sale Shares and the Debt by the Company to the Purchaser pursuant to the terms and subject to the conditions set out in the Agreement

– 1 –

DEFINITIONS

• ‘‘Good Power International Limited’’

Good Power International Limited, a company incorporated in BVI with limited liability and a Substantial Shareholder of the Company

• ‘‘Group’’ the Company and its subsidiaries

• ‘‘Hong Kong’’ Hong Kong Special Administrative Region of the PRC

• ‘‘Independent Board an independent committee of the Board comprising all the Committee’’ independent non-executive Directors which has been formed to advise to the Independent Shareholders in respect of the Disposal

• ‘‘Independent Shareholders other than the Purchaser and its associates Shareholders’’

• ‘‘Latest Practicable 23 February 2010, being the latest practicable date prior to the Date’’ printing of this circular for ascertaining certain information contained herein

• ‘‘Listing Rules’’ Rules Governing the Listing of Securities on the Stock Exchange

‘‘Optima Capital’’ Optima Capital Limited, a licensed corporation to carry out type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities under the SFO which has been appointed by the Company as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Agreement and the transactions contemplated thereunder

• ‘‘PRC’’ the People’s Republic of China, excluding Hong Kong, Macau Special Administrative Region of the PRC and Taiwan

• ‘‘Purchaser’’ Good Billion Holdings Limited, a company incorporated in the BVI with limited liability

• ‘‘Remaining Group’’ the Group immediately after Completion

• ‘‘Sale Shares’’ 2 shares with a par value of US$1.00 each in the capital of the Target Company, being the entire issued share capital of the Target Company as at the date of the Agreement

• ‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as amended, supplemented or otherwise modified from time to time

• ‘‘SGM’’ a special general meeting of the Company to be convened for the purpose of considering and, if thought fit, approving, among other things, the Disposal

– 2 –

DEFINITIONS

‘‘Share(s)’’

ordinary share(s) of HK$0.01 each in the share capital of the Company

• ‘‘Shareholder(s)’’

holder(s) of the Share(s)

• ‘‘Stock Exchange’’

The Stock Exchange of Hong Kong Limited

• ‘‘subsidiaries’’ has the meaning ascribed to it in the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

• ‘‘Substantial has the meaning ascribed to it under the Listing Rules Shareholder’’

• ‘‘Takeovers Code’’

• the Code on Takeovers and Mergers approved by the Securities and Future Commission established and continuing in existence under section 3 of the SFO amended from time to time

• ‘‘Target Company’’ Climax Investments Limited, a company incorporated in BVI with limited liability

• ‘‘Target Group’’

the Target Company and its subsidiaries

• ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong

• ‘‘US$’’ United States dollars, the lawful currency of the United States of America

• ‘‘%’’ per cent.

– 3 –

LETTER FROM THE BOARD

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CLIMAX INTERNATIONAL COMPANY LIMITED 英 發 國 際 有 限 公 司[*]

(Incorporated in Bermuda with limited liability)

(Stock code: 439)

Executive Director: Wong Hin Shek (Chief Executive Officer)

Independent Non-executive Directors: Lau Man Tak Man Kwok Leung Wong Yun Kuen

Registered office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Head office and principal place of business in Hong Kong: Unit A, 10/F Wings Building 110–116 Queen’s Road Central Central Hong Kong

26 February 2010

To the Shareholders,

Dear Sir or Madam,

VERY SUBSTANTIAL DISPOSAL AND

CONNECTED TRANSACTION AND

NOTICE OF THE SPECIAL GENERAL MEETING

INTRODUCTION

As announced by the Company in the Announcement, the Company, the Purchaser and the Target Company entered into the Agreement pursuant to which the Purchaser has conditionally agreed to acquire and the Company has conditionally agreed to sell the Sale Shares and the Debt at a total Consideration of HK$2,500,016, which will be settled by way of cheque or cashier order at Completion.

• For identification purposes only

– 4 –

LETTER FROM THE BOARD

The Purchaser is an associate of Good Power International Limited, by virtue of both being wholly owned by Mr. Tse On Kin, which is a Substantial Shareholder of the Company. Accordingly, the Purchaser is a connected person of the Company.

The Disposal constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. As the applicable percentage ratios as referred to in Chapter 14 of the Listing Rules exceed 75%, the Disposal also constitutes a very substantial disposal for the Company under the Listing Rules and is conditional upon the approval of the Shareholders by way of poll at the SGM. The Purchaser and its associates are required to abstain from voting on the resolution in respect of the Disposal at the SGM.

The purpose of this circular is to provide you with, among other things, (i) details of the Agreement; (ii) further information in respect of the Disposal; (iii) a letter of recommendation of the Independent Board Committee to the Independent Shareholders; (iv) a letter of advice from Optima Capital to the Independent Board Committee and the Independent Shareholders in respect of the Agreement and the transactions contemplated thereunder; (v) financial information of the Group; (vi) unaudited pro forma financial information of the Remaining Group; and (vii) the notice of the SGM.

THE AGREEMENT

Date:

8 October 2009

Parties:

• (1) the Company, as vendor;

• (2) the Purchaser; and

• (3) the Target Company.

Assets to be disposed of:

The Sale Shares, representing the entire issued share capital of the Target Company, and the Debt.

Consideration:

The Consideration shall be HK$2,500,016 which shall be payable by the Purchaser to the Company at Completion by way of cheque or cashier order.

– 5 –

LETTER FROM THE BOARD

Basis of determining the Consideration:

The Consideration was determined after arm’s length negotiation between the Company and the Purchaser taken into account the unaudited consolidated net liabilities of the Target Group as at 31 March 2009 of approximately HK$394,291,000, the net loss incurred by the Target Group in the past three financial years and the estimated recoverable amount of the Debt outstanding at 7 October 2009.

The Directors are of the opinion that the Consideration is fair and reasonable and the Disposal is on normal commercial terms and is in the interest of the Company and the Shareholders as a whole.

Conditions precedent to Completion:

Completion is conditional upon, among other things:

• (i) the Company having obtained the approval of the Independent Shareholders at the SGM by way of poll in respect of the Agreement and the transactions contemplated under the Agreement; and

• (ii) all necessary consents and approvals required to be obtained by the Company in compliance with Listing Rules.

If any of the conditions above is not fulfilled or waived on or before 31 December 2009 or such other date as the parties shall mutually agree in writing, the obligations in relation to the Agreement shall cease. Following non-Completion of the Agreement, no party to the Agreement shall have any obligations and liabilities thereunder save for any antecedent breach of any of the provisions of the Agreement. The Company, the Purchaser and the Target Company have agreed to extend the date for fulfilment of the conditions to 31 March 2010 or such other date as the parties shall mutually agree in writing. As at the Latest Practicable Date, none of the above conditions has been waived or fulfilled.

Completion:

Completion shall take place on the Completion Date at or before 5: 00 p.m. (or such other time as the Purchaser and the Company may agree not less than 7 days prior to Completion Date in writing).

INFORMATION ON THE PURCHASER

To the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, the Purchaser is (i) a company incorporated in BVI and principally engaged in investment holding; and (ii) an associate of Good Power International Limited, by virtue of both being wholly owned by Mr. Tse On Kin, which is a Substantial Shareholder of the Company. Accordingly, the Purchaser is a connected person of the Company.

The Company understands from Mr. Tse On Kin that he is not engaged in any negotiation nor has any plan to dispose of any Shares.

– 6 –

LETTER FROM THE BOARD

INFORMATION ON THE COMPANY AND THE GROUP

The Company is an investment holding company incorporated in Bermuda. The Group is principally engaged in the trading of electronic products and design, development, production and marketing of paper products. Following the Disposal, the Group’s principal activity will be trading of electronic products.

As announced by the Company in the announcement dated 3 February 2010, the Stock Exchange informed the Company on 28 January 2010 that in view of the prolonged suspension of trading in the Shares and the concerns from the Stock Exchange regarding compliance with Rule 13.24 of the Listing Rules, it has placed the Company in the first delisting stage pursuant to Practice Note 17 to the Listing Rules on 23 September 2008. The available information raises doubt whether the paper business and/or the electronic trading business are sustainable and viable. The Stock Exchange has concerns whether the Company is able to comply with Rule 13.24 as follows:

• (i) The Company is winding down its paper products business segment and proposes to dispose it. The paper products business segment experienced (a) substantial reduction in turnover; (b) sustained losses for the past three financial years; (c) a net deficit position. Companies in this segment are involved in a number of litigations due to failure to pay debts.

• (ii) The Company has commenced electronics trading business only for a short period of time. The new segment at current stage does not itself support sufficiency of operation due to small scale of operations and concerns on viability of the business model.

Besides, the loss of books and records of certain subsidiaries proposed to be disposed as announced by the Company on 22 December 2009 raises concerns that there are significant failings and weaknesses in the Group’s financial reporting procedures and internal control systems.

Since the end of the financial year ended 31 March 2009, the Company has commenced its new business segment in trading of electronic products which has been carried out by staff having solid experience in electronic market. For the 6 months ended 30 September 2009, the turnover of electronic products segment amounted to approximately HK$86,752,000 which has already represented approximately 87% of the total turnover of the Group. The Company considers, based on the turnover of the 6 months ended 30 September 2009, that it has sufficient level of operation after the Disposal to warrant the continued listing of its securities as required under Rule 13.24 of the Listing Rules.

– 7 –

LETTER FROM THE BOARD

The Company is required to submit viable resumption proposal to address the following issues:

• (i) demonstrate that the Company has a sufficient level of operations or has assets of sufficient value as required under Rule 13.24 of the Listing Rules;

• (ii) demonstrate that circumstances no longer exist to suggest that there may be significant deficiencies in the internal control system of the Group and/or concern about management integrity which will pose a risk to investors and may damage market confidence; and

• (iii) inform market all material information related to the regulatory investigation and implications on the Company.

The resumption proposal should contain a detailed plan of the Company, in clear, plausible and coherent terms, and sufficient information (including financial projections) for the assessment and substantiation of the Group’s level of operations and a conclusion that the Group has a viable and sustainable business. The resumption proposal should also demonstrate that the Company is in compliance with the Listing Rules and all applicable laws and regulations.

The Company should appoint an independent professional party to perform a review of the Group’s internal control system and take remedial actions to rectify any control failings or weaknesses identified by the independent professional party.

If the Company fails to submit a viable resumption proposal to address the above conditions on or before 27 July 2010, the Stock Exchange may proceed to place the Company in the second delisting stage pursuant to Practice Note 17 to the Listing Rules.

INFORMATION ON THE TARGET GROUP

The Target Company, incorporated in BVI with limited liability, is an investment holding company wholly owned by the Company prior to Completion. The Target Group is principally engaged in design, development, production and marketing of paper products.

Climax Marketing Company Limited is a limited company incorporated in Hong Kong which is 50% owned by each of Climax Services Limited and the Target Company and its principal business activity is the provision of marketing services, outsourcing manufacturing and sales of goods. On 24 February 2010, a winding-up petition was heard and a winding up order was made against Climax Marketing Company Limited.

Climax Paper Converters (International) Limited is a limited company incorporated in BVI which is a wholly owned subsidiary of the Target Company and is dormant.

Shiu’s Investments Limited is a limited company incorporated in BVI which is a wholly owned subsidiary of the Target Company and its principal business activity is manufacturing and distribution of paper products.

– 8 –

LETTER FROM THE BOARD

Climax Supply Management Company Limited is a limited company incorporated in Hong Kong which is a wholly owned subsidiary of the Target Company and is dormant.

Climax Management Company Limited is a limited company incorporated in Hong Kong which is a wholly owned subsidiary of the Target Company and its principal business activity is provision of management services.

Climax Services Limited is a limited company incorporated in Hong Kong which is a wholly owned subsidiary of the Target Company and its principal business activity is investment holding.

Climax Paper Converters, Limited is a limited company incorporated in Hong Kong which is a wholly owned subsidiary of the Target Company and its principal business activity is manufacturing and distribution of paper products.

Climax Paper Products Manufacturing (Dongguan) Company Limited is a limited company established under the laws of the PRC which is a wholly owned subsidiary of Climax Paper Converters, Limited and its principal business activity is manufacturing and distribution of paper products.

Yatama Investments Limited is a limited company incorporated in BVI which is a wholly owned subsidiary of the Target Company and is dormant.

– 9 –

LETTER FROM THE BOARD

The Target Group Corporate Structure Chart

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– 10 –

LETTER FROM THE BOARD

FINANCIAL INFORMATION ON THE TARGET GROUP

Set out below is the financial information of the Target Group for the two years ended 31 March 2008 and 31 March 2009 and for the six months ended 30 September 2009 which is extracted from the accountants’ report on the Group as set out in Appendix I to this circular:

				For the
		For the	For the	six months ended
		year ended	year ended	30 September
		31 March 2008	31 March 2009	2009
		(HK$’000)	(HK$’000)	(HK$’000)
Net	loss before tax	41,291	87,740	11,862
Net	loss after tax	43,523	87,816	11,786
Net	liabilities	306,458	394,288	406,074

REASONS FOR AND BENEFITS OF THE DISPOSAL

The Company has from time to time reviewed the business operations and financial position of the Group with an aim to achieving the best interests for the Company and the Shareholders. In light of the tough economic climate and the unsatisfactory financial performance of the Target Group, in particular, the sustained net loss position of the Target Group for the past three financial years, as well as the net liability position of the Target Group as at 31 March 2009, the Group has decided to dispose of the Target Group. The Company did not have any change in control (as defined in the Takeovers Code) during the 24 months preceding the Disposal. Since the end of the financial year ended 31 March 2009, the Company has commenced its new business segment in trading of electronic products which has been carried out by staff having solid experience in electronic market.

As disclosed in the accountant’s report as set out in Appendix I to this circular, there are numerous litigations against the Group. All of the litigations are related to the Target Group, except for the legal action taken by Orix Asia Limited which has been settled in October 2009. As advised by the legal adviser of the Company, after completion of the Disposal, given that the Company and the Remaining Group has not guaranteed the obligation of the relevant defendants, the judgments (if any) in the actions against the relevant companies under the Target Group will not give rise to or result in any liability of the Company and/or the Remaining Group. The Purchaser has confirmed to the Company that he will continue to proceed with the transaction on the same terms as stated in the Agreement.

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

For the 6 months ended 30 September 2009, the turnover of electronic products segment amounted to approximately HK$86,752,000 which has already represented approximately 87% of the total turnover of the Group. Upon Completion, the resources used in the Target Group can be reallocated to the electronic products segment in order to

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LETTER FROM THE BOARD

further improve its performance. The Company will continue to enlarge the customer base and improve the quality of the products in order to increase the turnover of electronic products segment.

As at the Latest Practicable Date, apart from the newly developed business in trading of electronic products, the Company has not entered into any new area of business. There are no negotiations, agreements or plans relating to acquisitions of assets and/or businesses. However, the Group will continue to identify other investment opportunities in companies and businesses in Hong Kong that would bring in good cash flow, earnings and/or capital appreciation to the Group so as to enhance Shareholders value.

The Directors (including the independent non-executive Directors) consider that the terms of the Agreement are on normal commercial terms, which are fair and reasonable and in the interests of the Company and Shareholders as a whole.

FINANCIAL EFFECT OF THE DISPOSAL

Upon Completion, the Company will cease to hold any interest in the Target Group and the Target Group will cease to be subsidiaries of the Company and its financial results will not be consolidated into the Company’s financial statements.

The Company expects to record a gain on disposal of approximately HK$42 million (after deduction of the related expenses payable by the Group) calculated with reference to the estimated net liabilities value of the Target Group as at 30 September 2009 and the Debt.

Set out in Appendix II to this circular is the unaudited pro forma financial information of the Remaining Group which illustrates the financial impact of the Disposal on the assets and liabilities, results and cash flows of the Group and is summarised as below:

Earnings

As extracted from the accountants’ report on the Group as set out in Appendix I to this circular, the loss before taxation for the six months ended 30 September 2009 was approximately HK$18,994,000.

As set out in Appendix II to this circular, assuming Completion had taken place on 1 April 2009, the unaudited pro forma profit before taxation from the Remaining Group for the six months ended 30 September 2009 was approximately HK$24,178,000, representing an increase of approximately HK$43,172,000. The increase was mainly contributed by the gain on disposal of the Target Group of approximately HK$31,310,000.

– 12 –

LETTER FROM THE BOARD

Net assets

As extracted from the accountants’ report on the Group as set out in Appendix I to this circular, the audited consolidated total assets and total liabilities of the Group as at 30 September 2009 were approximately HK$144,095,000 and HK$110,842,000 respectively. The audited consolidated net asset value attributable to the Shareholders as at 30 September 2009 was approximately HK$33,253,000.

As set out in Appendix II to this circular, assuming Completion had taken place on 30 September 2009, the unaudited pro forma consolidated total assets and total liabilities of the Remaining Group were approximately HK$126,637,000 and HK$51,153,000 respectively. The unaudited pro forma consolidated net asset value attributable to the Shareholders was approximately HK$75,484,000.

Gearing

As stated in Appendix I to this circular, the gearing ratio of the Group, defined as the percentage of total interest bearing debt to net asset value, was approximately 1% as at 30 September 2009.

Based on the unaudited pro forma consolidated statement of financial position as set out in Appendix II to this circular, assuming Completion had taken place on 30 September 2009, the total equity of the Remaining Group would have been increased to approximately HK$75 million as of 30 September 2009. Accordingly, the gearing ratio would have been reduced to nil.

Cash position

As set out in Appendix II to this circular, assuming Completion had taken place on 30 September 2009, the unaudited pro forma consolidated cash balance was HK$68,422,000 or 54% of the Remaining Group’s total asset of approximately HK$126,637,000. The Company will continue to look for other investment opportunities.

USE OF PROCEEDS

The net proceed is intended to be used for the general working capital of the Company.

LISTING RULES IMPLICATION

The Purchaser is an associate of Good Power International Limited, by virtue of both being wholly owned by Mr. Tse On Kin, which is a Substantial Shareholder of the Company. Accordingly, the Purchaser is a connected person of the Company and the Disposal constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. As the applicable percentage ratios in respect of the Disposal under Rule 14.07 of the Listing Rules exceed 75%, the Disposal also constitutes a very substantial disposal for the Company under Chapter 14 of the Listing Rules and is therefore subject to

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LETTER FROM THE BOARD

the requirements of reporting, announcement and Independent Shareholders approval pursuant to the Listing Rules. The Purchaser and its associates are required to abstain from voting on the resolution in respect of the Disposal at the SGM.

SGM

The Company will convene the SGM at Unit A, 10/F, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong at 11: 30 a.m. on 15 March 2010 at which resolution will be proposed for the purpose of considering and if thought fit, approving, among other things, the Disposal. The notice of the SGM is set out on pages 139 and 140 of this circular.

A form of proxy for use at the SGM is enclosed. Whether or not you are able to attend the SGM in person, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the Company’s Hong Kong branch share registrar, Tricor Standard Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding such meeting or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting at the SGM or any adjourned meeting should you so wish.

RECOMMENDATIONS

Based on the reasons set out in the paragraph headed ‘‘ Reasons for and benefits of the Disposal’’, the Directors (including the independent non-executive Directors whose recommendation is contained in the ‘‘Letter from the Independent Board Committee’’ on pages 15 to 16 of this circular) consider that the terms of the Agreement and the transactions contemplated thereunder are fair and reasonable and in the interest of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM.

GENERAL

Your attention is drawn to the additional information set out in the appendices to this circular and the notice of the SGM.

Yours faithfully,

For and on behalf of the Board of Climax International Company Limited Wong Hin Shek Executive Director

– 14 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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CLIMAX INTERNATIONAL COMPANY LIMITED 英 發 國 際 有 限 公 司[*]

(Incorporated in Bermuda with limited liability)

(Stock code: 439)

26 February 2010

To: the Independent Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION

We refer to the circular dated 26 February 2010 of the Company (the ‘‘Circular’’), of which this letter forms part. Terms defined in this letter bear the same meanings as given to them in the Circular unless the context otherwise requires.

We have been appointed as members of the Independent Board Committee to consider the Agreement and the transaction contemplated thereunder and to advise the Independent Shareholders as to the fairness and reasonableness of the Agreement and the transaction contemplated thereunder and to recommend how the Independent Shareholders should vote at the SGM. Optima Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in relation to the terms of the Agreement and the transaction contemplated thereunder.

We wish to draw your attention to the letter from the Board set out on pages 4 to 14 of the Circular, and the letter from Optima Capital to the Independent Board Committee and the Independent Shareholders set out on pages 17 to 29 of the Circular which contains its advice in relation to the Agreement and the transaction contemplated thereunder.

• For identification purposes only

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the principal factors and reasons considered by and the advice from Optima Capital, we consider the Disposal is in the interests of the Company and the Shareholders as a whole, and the terms of the Agreement and the transaction contemplated thereunder are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. We therefore recommend the Independent Shareholders to vote in favour of the resolution approving the Agreement and the transaction contemplated thereunder to be proposed at the SGM.

Yours faithfully, For and on behalf of the Independent Board Committee Mr. LAU Man Tak Mr. MAN Kwok Leung Independent Non-executive Directors

Dr. WONG Yun Kuen

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LETTER FROM OPTIMA CAPITAL

The following is the text of the letter of advice from Optima Capital to the Independent Board Committee and Independent Shareholders prepared for inclusion in this circular.

Unit 3618, 36th Floor, Bank of America Tower 12 Harcourt Road Central Hong Kong

26 February 2010

To: the Independent Board Committee and the Independent Shareholders

Dear Sirs or Madam,

VERY SUBSTANTIAL DISPOSAL AND CONNECTED TRANSACTION

INTRODUCTION

We refer to our engagement as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Disposal. Details of the Disposal are set out in the letter from the Board contained in the circular of the Company to the Shareholders dated 26 February 2010 (the ‘‘Circular’’), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires.

On 10 November 2009, the Company announced that the Company entered into the Agreement to dispose of its entire interest in the Target Company and the Debt due by the Target Group to the Company. The Disposal constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules and is subject to, among other things, the approval of the Independent Shareholders by way of poll at the SGM. The Purchaser and its associates are required to abstain from voting on the resolution in respect of the Disposal at the SGM. The Independent Board Committee comprising all the three independent nonexecutive Directors, namely Mr. Lau Man Tak, Mr. Man Kwok Leung and Dr. Wong Yun Kuen has been established to consider the terms of the Agreement and to advise the Independent Shareholders in respect of the Disposal. We, Optima Capital, have been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

In formulating our opinion, we have relied on the statements, information, opinions and representations contained in the Circular and the information, opinions and representations expressed by the executive Director and management of the Company. We have assumed that all the statements, information, opinions and representations contained or referred to in the Circular or otherwise provided or made or given by the Company and/or the executive Directors and/or its senior management staff, for which they

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LETTER FROM OPTIMA CAPITAL

are solely responsible, are true and accurate and valid at the time they were made and given and continue to be true up to and including the date of the SGM. We have also sought and obtained confirmation from the executive Directors that no material facts have been omitted from the information supplied and opinions expressed to us. We have no reason to doubt the truth and accuracy of the information provided to us or to believe that any material facts have been omitted or withheld. We have also assumed that all representations contained or referred to in the Circular were true at the date of the Circular. We have not, however, conducted any independent investigation into the business, operations, or financial condition of the Group, nor have we carried out any independent verification of the information supplied.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion as regards the terms of the Disposal, we have taken into account the following principal factors and reasons:

1. Business of the Group and reasons for the Disposal

The Company is an investment holding company. The Group has long been engaged in the design, development, production and marketing of paper products. By the end of 2009, the Group has newly established its business in the trading of electronic products. According to the management of the Group, the electronic products traded by the Group are mainly LCD monitors, while the paper products manufactured and sold by the Target Group are mainly decorated paper-made stationary and gift sets such as note pads, paper files, gift boxes, paper-made photo frames and photo albums.

The following table sets out an analysis of the revenue of the Group by business segment for the three years ended 31 March 2007, 2008 and 2009 and the six months ended 30 September 2008 and 2009 as extracted from the accountants’ report of the Group (the ‘‘Accountants’ Report’’) contained in Appendix I to the Circular:

Revenue Paper products Electronic products Total Net loss	For the year ended 31 March 2007 2008 2009 HK$’000 % HK$’000 % HK$’000 % 258,910 100.0 167,321 100.0 66,169 94.4 — — — — 3,947 5.6 258,910 100.0 167,321 100.0 70,116 100.0 (59,711) (43,608) (99,622)	For the six months ended 30 September 2008 2009 HK$’000 % HK$’000 % 47,973 100.0 12,768 12.8 — — 86,752 87.2 47,973 100.0 99,520 100.0 (29,528) (19,037)

As illustrated above, paper products business had been the Group’s sole business segment prior to 2009. When the Group started its electronic products business near the end of the 2009 financial year, the contribution of paper products business to the Group’s total revenue decreased from 100% to 94.4% in 2009, which decreased further to 12.8% during the six months ended 30 September 2009. Starting from the six months

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LETTER FROM OPTIMA CAPITAL

ended 30 September 2009, electronic products business had replaced paper products business as the principal source of income of the Group and the Group’s results had improved from a net loss of approximately HK$29.5 million for the six months ended 30 September 2008 to HK$19.0 million for the same period in 2009.

As mentioned in the 2009/10 interim report of the Company, the paper products business is getting increasingly difficult. Customers generally adopted a more cautious approach in placing orders and requested more accommodating pricing for their orders that gave great challenges to the paper products business. As advised by the management of the Company, the United States and Europe are the biggest markets of the Target Group. The economies of the United States and Europe have been badly affected by the sub-prime credit problems in the United States which have resulted in a global economic slowdown since the second half of 2008. Since stationary and gift sets are not necessities, their market demand has dropped significantly at times of economic downturn. Furthermore, along with the increasing awareness of environmental protection and technology development, people nowadays are encouraged to reduce the use of paper and get more used to electronic means in daily life such as making notes and organising photos and diary. In light of these factors, the Directors see a deteriorating prospect in the paper products business. In addition, according to the management of the Target Group, paper products manufacturing in the PRC faces keen competition. Since the paper products manufacturing business does not require high-end technology or substantial capital input in the production process, the entry barrier of this business is low. As a result, the Target Group faces keen competition in terms of pricing among numerous paper product manufacturers in the PRC.

As mentioned in the letter from the Board, the Group decided to dispose of the Target Group mainly because of the unsatisfactory financial performance of the Target Group, the sustained loss-making track record and the substantial net liability of the Target Group. In view of the difficult market environment for the paper products manufacturing business as described above and the unsatisfactory financial performance and conditions of the Target Group as discussed below, we are of the view that it is in the commercial interest of the Group to dispose of the loss-making Target Group and re-direct its focus to other industries which may generate a better return for the Group.

Shareholders should note that due to the prolonged suspension of trading of the Shares, the Stock Exchange has indicated that the Company is put under stage one of the delisting process and the Company is required to submit a resumption proposal to the Stock Exchange on or before 27 July 2010, or the Stock Exchange may proceed to place the Company in the second delisting stage pursuant to Practice Note 17 to the Listing Rules. Shareholders may refer to the paragraph headed ‘‘Information on the Company and the Group’’ set out in the letter from the Board contained in the Circular for details regarding the suspension. While it is not within our scope to consider matters in relation to the resumption of Shares and therefore we consider it appropriate to assess the fairness and reasonableness of terms of the Disposal independent of the resumption of the Shares, Shareholders should note that after completion of the Disposal, the electronics trading business would be the only business

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LETTER FROM OPTIMA CAPITAL

of the Remaining Group. The resumption in trading of the Shares remains critically subject to various factors including but not limited to the viability and sustainability of the electronics trading business of the Group and the ability of the Company to submit a viable resumption proposal and address the other concerns of the Stock Exchange.

2. Financial position and past performance of the Target Group

(a) Financial position of the Target Group

Set out below is a summary of the financial position of the Target Group as at 30 September 2009 as extracted from note 34(ii) to the Accountants’ Report:

Non-current assets Prepayments Current assets Trade receivables Deposits, prepayments and other receivables Bank balances and cash Current liabilities Trade and other payables Tax payables Obligations under finance leases Amount due to immediate holding company (i.e. the Debt) Amounts due to fellow subsidiaries Net current liabilities Net liabilities Minority interests Equity attributable to owners of the Company

As at 30 September 2009 HK$’000 9,693 2,497 6,235 158 8,890 57,061 2,136 492 364,843 125 424,657 (415,767) (406,074) (1) (406,075)

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LETTER FROM OPTIMA CAPITAL

As shown in the table above, the Target Group had net liabilities attributable to owners of the Company of approximately HK$406.1 million as at 30 September 2009, including the Debt which amounted to approximately HK$364.8 million as at that date. If the Debt is excluded, the Target Group had net liabilities of approximately HK$41.2 million as at 30 September 2009.

Major assets of the Target Group are prepayments. According to note 16 to the Accountants’ Report, the prepayments represent advances by the Group to a third party (the ‘‘Landlord’’) for the construction of production and related facilities (the ‘‘Baoan Factory’’) in Baoan, the PRC. Pursuant to the relevant agreements signed between Climax Paper Converters, Limited (a wholly-owned subsidiary of the Target Company) and the Landlord, the Group is entitled to use the Baoan Factory for a term of 30 years up to the end of 2019 free of charge as consideration for the settlement of the advances. As advised by the management of the Company, the advances made to the Landlord by the Group have been accounted for as prepayments in the consolidated statements of financial position of the Company and are amortised to the consolidated income statement of the Company on a straight-line basis. In August 2006, the Group relocated its production facilities from the Baoan Factory to Dongguan, the PRC and subsequently entered into an agreement (the ‘‘Leaseback Agreement’’) with the Landlord to lease back the Baoan Factory to the Landlord. In January 2009, the Group transferred the rights of use and management of part of the Baoan Factory (the ‘‘First Phase’’) to the Landlord at a consideration of approximately HK$7.9 million and a loss of approximately HK$5.3 million was recognised as a result of the transfer. Details of the transfer were set out in the announcement of the Company dated 23 January 2009. As at 30 September 2009, the balance of the prepayments in respect of the Baoan Factory amounted to HK$9.7 million, which represented the cost paid by the Group for the right of use of the Baoan Factory (other than the First Phase), net of the amount released to the income statement so far. However, we are advised by the Company that the Target Group does not possess any legal titles to the Baoan Factory and the investment in the Baoan Factory could only be recouped by the Group through rental charges receivable under the Leaseback Agreement.

Apart from trade and other payables and tax payables, the Target Group had no borrowings or any other material liabilities as at 30 September 2009.

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LETTER FROM OPTIMA CAPITAL

(b) Past performance of the Target Group

Set out below is the key financial information on the consolidated income statements of the Target Group as extracted from note 34(ii) to the Accountants’ Report:

Turnover Cost of sales Gross profit (loss) Gross profit (loss) margin Other income Selling and distribution expenses Administrative expenses Total impairment losses recognised in respect of plant and equipment, available- for-sale investments, deposits, prepayments and other receivables, and amounts due from fellow subsidiaries Finance costs Loss before taxation Income tax expenses Loss for the year/period and attributable to owners of the Company	Year ended 31 March 2007 2008 2009 HK$’000 HK$’000 HK$’000 258,910 167,321 66,169 (240,913) (153,241) (87,536) 17,997 14,080 (21,367) 7.0% 8.4% (32.3)% 958 8,771 12,514 (16,127) (10,680) (4,267) (49,473) (46,664) (44,665) (6,000) (3,946) (29,393) (5,584) (2,852) (562) (58,229) (41,291) (87,740) — (2,232) (76) (58,229) (43,523) (87,816)	Six months ended 30 September 2008 2009 HK$’000 HK$’000 47,973 12,768 (51,827) (13,339) (3,854) (571) (8.0)% (4.5)% 2,677 1,347 (2,489) (811) (11,325) (11,497) (1,914) (41) (268) (289) (17,173) (11,862) (927) 76 (18,100) (11,786)

As set out in the table above, turnover of the Target Group had demonstrated a decreasing trend with a year-on-year decrease of approximately 35.4% in 2008 and approximately 60.5% in 2009. Operating cashflow before movements in working capital had been negative for each of the three years ended 31 March 2007 to 2009 and the six months ended 30 September 2008 and 2009.

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LETTER FROM OPTIMA CAPITAL

We are advised by the management of the Company that the major markets of the products of the Target Group are the United States and Europe, accounting for approximately 48.0% and 27.4% respectively of the Target Group’s revenue for the year ended 31 March 2009. As mentioned in the 2008 annual report of the Company, the decrease in turnover in 2008 was largely due to the decrease in orders for paper products from customers in the United States who had generally adopted a more cautious approach in placing orders and requested more accommodating pricing as a result of the credit crunch started off in the United States at the fourth quarter of 2008. Besides, the Group relocated its production facilities from the Baoan Factory to Dongguan, the PRC during 2008. The relocation resulted in extra costs in the disposal and impairments of fixed assets, which further hampered the Group’s results in the financial year ended 31 March 2008.

In 2009, the market demand and pricing for paper products remained weak given the unfolding of the economic downturn in the United States and Europe. Besides, the Target Group faced further pressure from the rise in material costs and labour wages. The increase in operating costs without corresponding increment in selling prices squeezed the gross margin and forced the Target Group to refuse unprofitable sale orders, resulting in the shrink in operation scale of the paper products business as reflected by the substantial drop in turnover and increase in net loss margin for the six months ended 30 September 2009 as compared to the corresponding period in 2008.

Based on our discussions with the management of the Company, they are of the view that the prospects of the Target Group will remain difficult and the lossmaking situation is unlikely to turn around in the near future without substantial revamping of the operating and capital structure of the Target Group.

(c) Disclaimer of opinion on the Accountants’ Report

We would like to draw your attention to the opinion of the reporting accountants on the financial statements of the Group for the year ended 31 March 2009 and the six months ended 30 September 2009. As stated in the Accountants’ Report, the reporting accountants were unable to express an opinion as to whether those consolidated financial statements give a true and fair view of the state of affairs of the Group as at 31 March 2009 and 30 September 2009 and of the loss and cash flows of the Group for the year ended 31 March 2009 and the six months ended 30 September 2009.

In respect of the financial information for the year ended 31 March 2009, it was stated in the Accountants’ Report that, because the accounting books and records of Climax Paper Products Manufacturing (Dongguan) Co., Ltd. (‘‘CPD’’) located in Dongguan, the PRC were lost during relocation of factory due to cessation of business and not be able to be recovered, the reporting accountants were unable to carry out audit procedures to satisfy themselves as to whether the income, expenses, assets and liabilities relating to CPD which have been included

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LETTER FROM OPTIMA CAPITAL

in the consolidated financial statements of the Group have been accurately recorded and properly accounted for in the financial statements. The reporting accountants were also unable to obtain sufficient reliable evidence to satisfy themselves as to whether the Group has any significant contingent liabilities and commitments in respect of CPD that need to be adjusted for or disclosed in the financial information of the Group.

In respect of the six months ended 30 September 2009, in addition to the aforesaid lost of certain accounting books and records of the Target Group, the reporting accountants further pointed out that due to the high turnover rate of accounting personnel as a result of lack of adequate financial resources of the Target Group, they were unable to obtain complete set of accounting books and records of the Target Group in respect of the status and completeness of lawsuits and claims related to the Target Group. The reporting accountants were therefore unable to obtain sufficient reliable evidence to satisfy themselves as to the existence, accuracy and completeness of disclosures of contingent liabilities, commitment and pledge of assets of the Target Group that need to be adjusted for or disclosed in the financial information of the Group.

Because of the significance of the matters, the reporting accountants did not express an opinion on the consolidated financial statements of the Group as to whether they give a true and fair view of the statement of the Group’s affairs as at 31 March 2009 and of its loss and cash flows for the year ended 31 March 2009. We however note that in the opinion of the reporting accountants, the financial information gives a true and view of the state of affairs of the Group as at 31 March 2007 and 2008 and of the Group’s results and cash flows for the years then ended.

In the absence of other more comprehensive or reliable source of financial information of the Target Group, we could only refer to the Accountants’ Report as the basis of our analysis in respect of the financial information of the Target Group. In using the information in the Accountants’ Report, we have considered factors that (i) the financial position of the Target Group was already weak as at 31 December 2008 with net liabilities standing at approximately HK$306.5 million (2007: HK$263.9 million) including the Debt and HK$55.6 million (2007: HK$13.1 million) excluding the Debt; and (ii) according to the previous annual reports of the Company, the paper products business of the Group had recorded net losses for consecutive years since 2006. Shareholders should note that in light of the disclaimer of opinion by the reporting accountants, if there are any adjustments which should have been made to the financial information of the Target Group, our analysis of the financial information of the Target Group as set out above might have been affected. We are however not in a position to judge or assess the effects of such adjustments, if any.

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LETTER FROM OPTIMA CAPITAL

(d) Litigations against the Target Group

As disclosed in note 34(i) to the Accountants’ Report, a number of lawsuits and claims were lodged against the Target Group and most of them are related to claims of various kinds of payables, such as trade payables and hire-purchase and factoring loans payables. As at 30 September 2009, trade and other payables of approximately HK$9.4 million and provision for litigation of approximately HK$1.5 million in aggregate have been recorded in the financial statements of the Group. In view of the substantial amount of litigations, it appears that the Target Group had liquidity problems in settling payables in its normal course of business and the viability of the paper products business of the Target Group is questionable.

Furthermore, the legal adviser of the Company is of the opinion that after completion of the Disposal, given that the Company and the Remaining Group has not guaranteed the obligation of the relevant defendants (except for a legal action taken by Orix Asia Limited which has been settled in October 2009), the judgments (if any) in the actions against the relevant companies under the Target Group will not give rise to or result in any liability of the Company and or the Remaining Group. On this basis, we consider that the Disposal is in the interest of the Company as the Remaining Group would not be subject to the contingent liabilities of the Target Group in relation to the outstanding litigations or be required to incur resources to deal with such litigations relating to the Target Group following the Disposal.

3. Principal terms of the Disposal

On 8 October 2009, the Company entered into the Agreement with the Purchaser, pursuant to which the Purchaser has conditionally agreed to acquire and the Company has conditionally agreed to sell the Sale Shares and the Debt at a total Consideration of HK$2,500,016. The Sale Shares represent the entire issued share capital of the Target Company as at the date of the Agreement and the Debt represents the total indebtedness owed by the Target Group to the Company at Completion. The Consideration shall be settled by the Purchaser to the Company at Completion by way of a cheque or cashier order.

Completion of the Agreement is conditional upon, among other things, the Company having obtained the approval of the Independent Shareholders of the Agreement at the SGM by way of poll and all necessary consents and approvals required in compliance with the Listing Rules.

4. Evaluation of the Consideration

As mentioned in the letter from the Board, the Consideration was determined after arm’s length negotiations between the Company and the Purchaser taking into account the unaudited consolidated net liabilities of the Target Group, the loss making track record of the Target Group and the estimated recoverable amount of the Debt outstanding. In view of the substantial net liabilities and loss making track record of

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LETTER FROM OPTIMA CAPITAL

the Target Group and the uncertainty in the prospects of the paper products business as discussed above, it is impracticable to evaluate the Consideration using parameters such as price-to-earnings ratio or with reference to the net book value. In the circumstances, we have evaluated the Consideration in light of the recoverability of the Debt.

We are provided with an estimation (the ‘‘Estimation’’) of the recoverable amount of the Debt prepared by the management of the Company. In view of the uncertain prospects of the Target Group and the net liability position of the Target Group, the management considers that a possible alternative for the Group to exit from its investment in the Target Group is to voluntarily liquidate the Target Group. The management has therefore prepared the Estimation assuming a liquidation scenario for the Target Group by estimating the amount recoverable from a forced sale of all the assets of the Target Group and distributing the proceeds therefrom (net of estimated liquidation expenses) to all the creditors (including members of the Remaining Group) in proportion to the amount due to them respectively.

(a) Underlying assumptions of the Estimation

The assets held by the Target Group comprised mainly (i) long-term prepayments in respect of the Baoan Factory; (ii) plant and equipment; and (iii) deposits, trade and other receivables.

As mentioned in the section headed ‘‘Financial position and past performance of the Target Group’’ above, one of the major asset items held by the Target Group is the prepayments related to the Baoan Factory which amounted to approximately HK$9.7 million as at 30 September 2009. Pursuant to the Leaseback Agreement, the production and related facilities would generate rental income to the Group until 2019 and therefore the Group recorded the prepayments on its balance sheet as a long-term asset. Nevertheless, as the Target Group does not possess legal title to the Baoan Factory, the management of the Company considers that the marketability of the Baoan Factory is extremely low and the Target Group may not be able to realise any value from the Baoan Factory in a liquidation scenario.

The plant and equipment of the Target Group are mainly furniture, machinery and equipments for production use. The management of the Group assumed that such assets could be realised at the carrying value (representing costs minus accumulated depreciation and impairment) which is in our view a fair measure of the potential recoverable amount.

In respect of the deposits, trade and other receivables, the management of the Company assumed a 50% recovery rate. According to notes 20 and 21 to the Accountants’ Report, the Group recorded impairment in respect of trade receivables of approximately HK$7.0 million and impairment in respect of deposits, prepayments and other receivables of approximately HK$19.0 million during the year ended 31 March 2009. We were advised by the management that both impairments were related to the business of the Target Group and

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LETTER FROM OPTIMA CAPITAL

represented approximately 68.2% of the gross trade receivables of the Target Group and approximately 75.5% of the gross deposits, prepayments and other receivables of the Target Group as at 31 March 2009. On this basis, we consider the assumption of a 50% recovery in the deposits, trade and other receivables as at 30 September 2009 for the purpose of the Estimation to be reasonable.

After assessing the recoverable amount of all the assets of each of the entities in the Target Group under the aforementioned assumptions, the management of the Company noted that except for Climax Paper Converters Limited (‘‘CPCL’’), Climax Marketing Company Limited (‘‘Climax Marketing’’) and Shiu’s Investments Limited (‘‘Shiu’s Investment’’), the other entities within the Target Group (the ‘‘Insolvent Companies’’) have no recoverable amount net of estimated liquidation expenses at all. The Directors consider that the Debt due by the Insolvent Companies is unlikely to be recoverable.

In respect of CPCL, Climax Marketing and Shiu’s Investment, the estimated recoverable amount of their total assets is less than their respective total liabilities. Such estimated recoverable amount of total assets is assumed to be distributed to all the creditors in proportion to the relevant amount due to them.

(b) Results of the Estimation

The result of the Estimation shows that a total of approximately HK$2.5 million could be distributed to the Company in respect of the Debt on a liquidation scenario based on the above assumptions. The Consideration of HK$2,500,016 is determined with reference to the foresaid result of the Estimation. We are further advised by the management of the Company that as the financial position of the Target Group continued to deteriorate subsequent to 31 March 2009, the recoverable amount of the Debt is estimated to reduce to approximately HK$2.0 million based on the updated management accounts of the companies within the Target Group as at 30 September 2009. Given the Target Group had substantial net liabilities and outstanding litigations, it is unreasonable to expect that any arm’s length purchaser would be willing to pay any material consideration for the Target Group. In light of this, we are of the view that the Consideration which is based on the Estimation is fair and reasonable.

(c) Liquidation as an alternative

We have discussed with the Company on the possibility of voluntarily liquidating all the members of the Target Group as an alternative means to divest the Target Group. We are advised by the management of the Company that should the Company choose to liquidate the Target Group, the Company would have to devote man-power and incur legal and administrative expenses to deal with various debtors and creditors possibly for a prolonged period, while the amount of monies recoverable from the liquidation is not guaranteed. In light of this, we agree with the Directors that the Disposal would be a more efficient means for the Group to achieve an exit from its investment in the Target Group.

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LETTER FROM OPTIMA CAPITAL

5. Financial effects of the Disposal on the Group

(a) Earnings

In view of the unpromising prospects of the paper products manufacturing business and the disappointing results of the Target Group in the past, it is unlikely that the performance of the Target Group could improve in the near future without a substantial revamp of its operating and capital structure. The Disposal is therefore an opportunity for the Group to remove the possible negative impact of the Target Group on the future earnings of the Remaining Group.

According to the unaudited pro forma financial information on the Remaining Group as set out in Appendix II to the Circular (the ‘‘Pro Forma Financial Statements’’), based on the Consideration net of the estimated fees and expenses in connection with the Disposal, and the net liabilities of the Target Group of approximately HK$406.1 million and the Debt of approximately HK$364.8 million as at 30 September 2009, it is expected that the Company would record a gain on the Disposal of approximately HK$42.2 million as a result of Completion. Such gain, however, is a one-off item and will not have continuing income statement effect on the Remaining Group.

According to the Pro Forma Consolidated Financial Statements set out in Appendix II to the Circular, the results of the Group would be improved from a loss of approximately HK$19.0 million to a profit of approximately HK$24.1 million, assuming Completion took place on 1 April 2009. Such profit is largely attributable to the aforesaid gain on the Disposal which is one-off and nonrecurring.

(b) Net asset value

As mentioned above, the Group is expected to recognise a gain on the Disposal of approximately HK$42.2 million and such expected gain will add to the net asset value of the Remaining Group. According to the Pro Forma Financial Statements, assuming Completion had taken place on 30 September 2009, the net assets of the Remaining Group as at 30 September 2009 would increase from approximately HK$33.3 million to approximately HK$75.5 million.

(c) Cashflow

We are advised by the Company that further working capital will have to be injected into the Target Group to sustain its operation should the Group wish to continue with its paper products business. As such, the Disposal will remove the pressure of having to finance the future working capital needs of the Target Group and allow the Remaining Group to focus its resources on the electronic products business. The net proceeds from the Disposal, which are estimated to be approximately HK$1.0 million, would also provide additional working capital to the Remaining Group.

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CONCLUSION AND RECOMMENDATION

Having considered the principal factors and reasons set out above, in particular:

• (a) the loss-making track record of the Target Group for consecutive years since 2006;

• (b) the weak financial position of the Target Group, with net liabilities of approximately HK$406.1 million (including the Debt) or about HK$41.2 (excluding the Debt) as at 30 September 2009;

• (c) the low recoverability of the Debt;

• (d) there is an expected gain on the Disposal of approximately HK$42.2 million;

• (e) the unpromising prospects and anticipated future losses of the Target Group and the further working capital requirement of the Target Group under the current difficult operating environment;

• (f) the Remaining Group would not have to face or deal with the outstanding litigations related to the Target Group following the Disposal; and

• (g) the Disposal will allow the Group to focus its financial and management resources on the electronic products business,

we consider that the Disposal is in the interests of the Company and the Shareholders as a whole, and the terms of the Disposal are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Disposal.

Yours faithfully, for and on behalf of Optima Capital Limited Beatrice Lung Managing Director

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. ACCOUNTANTS’ REPORT ON THE GROUP

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the Company’s reporting accountants, SHINEWING (HK) CPA Limited, Certified Public Accountants, Hong Kong.

==> picture [220 x 61] intentionally omitted <==

26 February 2010

The Board of Directors

Climax International Company Limited

Dear Sirs,

We set out below our report on the financial information (the ‘‘Financial information’’) of Climax International Company Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) for the three years ended 31 March 2007, 2008 and 2009 and the six months ended 30 September 2009 (the ‘‘Relevant Periods’’) for the inclusion in the circular of the Company dated 26 February 2010 (the ‘‘Circular’’) in connection with the proposed disposal of the entire equity interests in Climax Investments Limited and its subsidiaries (the ‘‘Target Group’’). The Financial information comprise the consolidated statements of financial position as at 31 March 2007, 2008 and 2009 and 30 September 2009, and the consolidated income statements, the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows of the Group for the Relevant Periods, and a summary of significant accounting policies and other explanatory notes.

The Company was incorporated in Bermuda as an exempted company with limited liability under the Companies Act 1981 of Bermuda (as amended). As at the date of this report, the address of the registered office of the Company is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda and the principal place of business of the Company is Unit A, 10/F, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong.

The Group has adopted 31 March as their financial year end date. We have acted as auditors of the Group for the three years ended 31 March 2007, 2008 and 2009. Audited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Hong Kong for each of the Relevant Periods.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Company acts as an investment holding company. As at the date of this report, the Company had direct and indirect interests in the principal subsidiaries set out in Section A of this report, all of which are private companies with limited liabilities. No statutory audited financial statements have been prepared for those companies incorporated in the British Virgin Islands as there was no statutory audit requirement.

For the purpose of this report, the directors of the Company have prepared the consolidated financial statements of the Group for the Relevant Periods (the ‘‘Underlying Financial Statements’’) in accordance with Hong Kong Financial Reporting Standards (‘‘HKFRSs’’) issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).

We have performed an independent audit on the Underlying Financial Statements and for the purpose of this report, we have examined the Underlying Financial Statements in accordance with the Auditing Guideline 3.340 ‘‘Prospectuses and the Reporting Accountant’’ as recommended by the HKICPA.

The Financial Information of the Group for the Relevant Periods as set out in this report has been prepared based on the Underlying Financial Statements for the Relevant Periods without making any adjustments for the purpose of inclusion in the Circular.

The Underlying Financial Statements are the responsibility of the directors of the Company. The directors of the Company are also responsible for the contents of the Circular in which this report is included. It is our responsibilities to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

– 31 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

BASIS FOR DISCLAIMER OF OPINION

In respect of our audits of the Financial Information of the Group for both the year ended 31 March 2009 and the six months ended 30 September 2009, we were unable to express an opinion as to whether those consolidated financial statements give a true and fair view of the state of affairs of the Group as at 31 March 2009 and 30 September 2009 and of the loss and cash flows of the Group for the year ended 31 March 2009 and the six months ended 30 September 2009 in accordance with HKFRS for the following reasons:

. Year ended 31 March 2009

The accounting books and records of a Group’s subsidiary, namely Climax Paper Products Manufacturing (Dongguan) Co., Ltd. (‘‘CPD’’) located in Dongguan, the PRC, were lost during relocation of factory due to cessation of business and not be able to be recovered. As a result, we were unable to carry out audit procedures to satisfy ourselves as to whether the income, expenses, assets and liabilities relating to CPD which have been included in the consolidated financial statements of the Group as stated below have been accurately recorded and properly accounted for in the Financial Information:

Income and expenses for the year ended 31 March 2009:

Turnover HK$1,070,000 Cost of sales HK$8,063,000 Other income HK$2,569,000 Selling and distribution expenses HK$44,000 Administrative expenses HK$6,767,000 Impairment loss recognised in respect of deposits, prepayments and other receivables HK$215,000

Assets and liabilities as at 31 March 2009 (in gross amount):

Deposits, prepayments and other receivables	HK$808,000
Bank balances and cash	HK$28,000
Trade and other payables	HK$2,036,000
Tax payables	HK$1,810,000

We were also unable to obtain sufficient reliable evidence to satisfy ourselves as to whether the Group has any significant contingent liabilities and commitment in respect of CPD that need to be adjusted for or disclosed in the Financial Information.

– 32 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

. Six months ended 30 September 2009

Certain accounting books and records of the Target Group were lost and not be able to be recovered during the relocation of office of the Target Group in October 2009 and the high turnover rate of accounting personnel as a result of lack of adequate financial resources of the Target Group. Against this background, we were unable to carry out audit procedures to satisfy ourselves as to whether the income, expenses, assets and liabilities relating to the Target Group which have been included in the Financial Information of the Group as stated below have been accurately recorded and properly accounted for in the Financial Information:

Consolidated income and expenses of the Target Group for the six months ended 30 September 2009:

Turnover	HK$12,768,000
Cost of sales	HK$13,339,000
Other income	HK$1,347,000
Selling and distribution expenses	HK$811,000
Administrative expenses	HK$11,497,000
Impairment loss recognised in respect of amounts due
from fellow subsidiaries	HK$41,000
Finance costs	HK$289,000

Consolidated assets and liabilities of the Target Group as at 30 September 2009:

Prepayments	HK$9,693,000
Trade receivables	HK$2,497,000
Deposits, prepayments and other receivables	HK$6,235,000
Bank balances and cash	HK$158,000
Trade and other payables	HK$57,061,000
Tax payables	HK$2,136,000
Obligations under finance leases	HK$492,000
Amount due to holding company	HK$364,843,000
Amount due to a fellow subsidiary	HK$125,000

Furthermore, as set out in note 34 to the Financial Information, there were a number of lawsuits and claims against the Group which remained outstanding at 30 September 2009. Most lawsuits and claims were still in progress up to the date of this report. As a result of the lost of accounting books and records and the high turnover rate of accounting personnel of the Target Group, the directors of the Company were unable to provide us with complete set of accounting books and records of the Target Group with respect of the status of the lawsuits and claims and the completeness of any other lawsuits and claims arose. We were therefore unable to obtain sufficient reliable evidence to satisfy ourselves as to the existence, accuracy and completeness of disclosures of contingent liabilities, commitment and pledge of assets of the Target Group including but not limited to those in relation to the aforementioned lawsuits and claims that need to be adjusted for or disclosed in the Financial Information.

– 33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

DISCLAIMER OF OPINION: DISCLAIMER ON VIEW GIVEN BY LIMITATION OF SCOPE

Because of the significance of the matters described in the basis for disclaimer of opinion, we were not able to obtain sufficient appropriate evidence and carry out necessary examination procedures to provide a basis for an opinion on the Financial Information for the year ended 31 March 2009 and the six months ended 30 September 2009 accordingly, we were unable to conclude whether any adjustment is necessary to the Financial Information in preparing our report for inclusion in the Circular for the year ended 31 March 2009 and the six months ended 30 September 2009. We therefore do not express an opinion on the Financial Information as to whether it gives a true and fair view of the state of the Group’s affairs as at 31 March 2009 and 30 September 2009 and of its results and cash flows for the year/period then ended.

In our opinion, for the purpose of this report, the Financial Information gives a true and fair view of the state of affairs of the Group as at 31 March 2007 and 2008 and of the Group’s results and cash flows for the years then ended.

REVIEW CONCLUSION

The comparative consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Group for the six months ended 30 September 2008 together with the notes thereon (the ‘‘2008 Comparative Financial Information’’) have been extracted from the Group’s unaudited financial information for the same period which was prepared by the directors solely for the purpose of this Report. We have reviewed the 2008 Comparative Financial Information in accordance with Hong Kong Standard on Review Engagements 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ issued by the HKICPA. Our review of the 2008 Comparative Financial Information consists principally of making enquires, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review excludes audit procedures such as test of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the 2008 Comparative Financial Information.

Because of the significance of the matters described in the basis for disclaimer of opinion, we were unable to reach a review conclusion that nothing has come to our attention that causes us to believe that the 2008 Comparative Financial Information is prepared, in all material respects, in accordance with the accounting policies consistent with those used in the preparation of the Financial Information which conform with HKFRSs.

– 34 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(A) FINANCIAL INFORMATION OF THE GROUP

Consolidated Income Statements

NOTES Turnover 7 Cost of sales Gross profit (loss) Other income 8 Selling and distribution expenses Administrative expenses Impairment loss recognised in respect of plant and equipment 15 Impairment loss recognised in respect of available-for-sale investments 17 Impairment loss recognised in respect of deposits, prepayments and other receivables 21 (Loss) gain on changes in fair value of financial assets at fair value through profit or loss 18 Gain on redemption of financial assets at fair value through profit or loss 18 Loss on changes in fair value of held for trading investments Gain (loss) on disposal of held for trading investments Finance costs 9 Loss before taxation Income tax expense 10 Loss for the year/period 11 Attributable to Owners of the Company Minority interests Loss per share attributable to owners of the Company (in Hong Kong cents) — Basic 14	Year 2007 HK$’000 258,910 (240,913) 17,997 10,176 (16,127) (59,903) — (6,000) — — — — — (5,854) (59,711) — (59,711) (59,711) — (59,711) (17.72 cents)	ended 31 March 2008 2009 HK$’000 HK$’000 167,321 70,116 (153,241) (91,451) 14,080 (21,335) 9,741 7,110 (10,720) (4,299) (47,096) (45,523) (446) (10,408) (3,500) — — (18,985) (643) 131 — 187 — (4,526) 60 (1,540) (2,852) (358) (41,376) (99,546) (2,232) (76) (43,608) (99,622) (43,608) (99,622) — — (43,608) (99,622) (4.82 cents) (9.01 cents)	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) 47,973 99,520 (51,827) (99,329) (3,854) 191 3,401 1,587 (2,489) (811) (18,964) (16,065) (1,914) — — — — — 318 — — — (5,667) (3,882) 866 — (298) (14) (28,601) (18,994) (927) (43) (29,528) (19,037) (29,528) (19,037) — — (29,528) (19,037) (2.77 cents) (1.66 cents)

– 35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statements of Comprehensive Income

Loss for the year/period Translation differences of foreign operations Total comprehensive loss for the year/ period, net of tax Attributable to Owners of the Company Minority interests	Year ended 31 March 2007 2008 2009 HK$’000 HK$’000 HK$’000 (59,711) (43,608) (99,622) 577 974 (13) (59,134) (42,634) (99,635) (59,134) (42,634) (99,635) — — — (59,134) (42,634) (99,635)	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) (29,528) (19,037) 57 — (29,471) (19,037) (29,471) (19,037) — — (29,471) (19,037)

– 36 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Statements of Financial Position

NOTES Non-current assets Plant and equipment 15 Prepayments 16 Available-for-sale investments 17 Financial assets at fair value through profit or loss 18 Current assets Inventories 19 Trade receivables 20 Deposits, prepayments and other receivables 21 Held for trading investments 22 Amounts due from related companies 23 Deposits in other financial institution 24 Bank balances and cash 25 Current liabilities Trade and other payables 26 Amounts due to directors 27 Tax payables Obligations under finance leases — amount due within one year 28 Short-term bank borrowings 29 Net current (liabilities) assets Total assets less current liabilities Non-current liability Obligations under finance leases — amount due after one year 28 Capital and reserves Share capital 31 Reserves Equity attributable to owners of the Company Minority interests	As at 31 March 2007 2008 2009 HK$’000 HK$’000 HK$’000 63,852 32,665 4,113 26,311 24,071 10,217 3,500 — — — 12,357 — 93,663 69,093 14,330 51,087 15,160 200 39,937 8,766 7,224 20,975 24,795 8,861 — — 9,820 — — 63 — 53,697 69,803 17,594 3,226 2,737 129,593 105,644 98,708 70,316 45,596 57,844 1,130 161 — — 2,232 2,330 9,146 1,794 492 51,904 3,898 82 132,496 53,681 60,748 (2,903) 51,963 37,960 90,760 121,056 52,290 4,183 951 — 86,577 120,105 52,290 6,180 9,576 11,486 80,396 110,528 40,803 86,576 120,104 52,289 1 1 1 86,577 120,105 52,290	As at 30 September 2009 HK$’000 1,266 9,693 — —
		10,959
		— 50,221 9,317 5,938 — 80 67,580
		133,136
		108,095 — 2,255 492 —
		110,842
		22,294
		33,253
		—
		33,253
		11,486 21,766
		33,252 1
		33,253

– 37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statements of Changes in Equity

At 1 April 2006 Total comprehensive loss for the year Capital reduction Issue of new shares upon exercise of share options Issue of new shares upon placing Transaction costs attributable to issue of new shares upon placing Issue of new shares upon open offer Transaction costs attributable to issue of new shares upon open offer At 31 March 2007 and 1 April 2007 Total comprehensive loss for the year Issue of new shares upon placing Transaction costs attributable to issue of new shares upon placing Recognition of equity — settled share based payment At 31 March 2008 and 1 April 2008 Total comprehensive loss for the year Cancellation of share options Issue of new shares upon placing Transaction costs attributable to issue of new shares upon placing Recognition of equity — settled share based payment At 31 March 2009 and 1 April 2009 Total comprehensive loss for the period At 30 September 2009 (Unaudited) At 1 April 2008 Total comprehensive loss for the period Issue of new shares upon placing Transaction costs attributable to issue of new shares upon placing Recognition of equity-settled share based payment At 30 September 2008	Attributable to owners of the Company Share capital Share premium Translation reserve Share option reserve Capital reserve Contributed surplus HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note a) (Note b) 59,310 (396) (442) 1,392 17,900 47,297 — — 577 — — — (56,644) — — — — 56,644 315 189 — — — — 390 7,800 — — — — — (290) — — — — 2,809 25,284 — — — — — (1,123) — — — — 6,180 31,464 135 1,392 17,900 103,941 — — 974 — — — 3,396 75,219 — — — — — (3,128) — — — — — — — 675 — — 9,576 103,555 1,109 2,067 17,900 103,941 — — (13) — — — — — — (1,392) — — 1,910 28,459 — — — — — (809) — — — — — — — 2,260 — — 11,486 131,205 1,096 2,935 17,900 103,941 — — — — — — 11,486 131,205 1,096 2,935 17,900 103,941 9,576 103,555 1,109 2,067 17,900 103,941 — — 57 — — — 1,910 28,459 — — — — — (809) — — — — — — — 2,261 — — 11,486 131,205 1,166 4,328 17,900 103,941	Attributable to owners of the Company Share capital Share premium Translation reserve Share option reserve Capital reserve Contributed surplus HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note a) (Note b) 59,310 (396) (442) 1,392 17,900 47,297 — — 577 — — — (56,644) — — — — 56,644 315 189 — — — — 390 7,800 — — — — — (290) — — — — 2,809 25,284 — — — — — (1,123) — — — — 6,180 31,464 135 1,392 17,900 103,941 — — 974 — — — 3,396 75,219 — — — — — (3,128) — — — — — — — 675 — — 9,576 103,555 1,109 2,067 17,900 103,941 — — (13) — — — — — — (1,392) — — 1,910 28,459 — — — — — (809) — — — — — — — 2,260 — — 11,486 131,205 1,096 2,935 17,900 103,941 — — — — — — 11,486 131,205 1,096 2,935 17,900 103,941 9,576 103,555 1,109 2,067 17,900 103,941 — — 57 — — — 1,910 28,459 — — — — — (809) — — — — — — — 2,261 — — 11,486 131,205 1,166 4,328 17,900 103,941	Attributable to owners of the Company Share capital Share premium Translation reserve Share option reserve Capital reserve Contributed surplus HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note a) (Note b) 59,310 (396) (442) 1,392 17,900 47,297 — — 577 — — — (56,644) — — — — 56,644 315 189 — — — — 390 7,800 — — — — — (290) — — — — 2,809 25,284 — — — — — (1,123) — — — — 6,180 31,464 135 1,392 17,900 103,941 — — 974 — — — 3,396 75,219 — — — — — (3,128) — — — — — — — 675 — — 9,576 103,555 1,109 2,067 17,900 103,941 — — (13) — — — — — — (1,392) — — 1,910 28,459 — — — — — (809) — — — — — — — 2,260 — — 11,486 131,205 1,096 2,935 17,900 103,941 — — — — — — 11,486 131,205 1,096 2,935 17,900 103,941 9,576 103,555 1,109 2,067 17,900 103,941 — — 57 — — — 1,910 28,459 — — — — — (809) — — — — — — — 2,261 — — 11,486 131,205 1,166 4,328 17,900 103,941	Attributable to owners of the Company Share capital Share premium Translation reserve Share option reserve Capital reserve Contributed surplus HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note a) (Note b) 59,310 (396) (442) 1,392 17,900 47,297 — — 577 — — — (56,644) — — — — 56,644 315 189 — — — — 390 7,800 — — — — — (290) — — — — 2,809 25,284 — — — — — (1,123) — — — — 6,180 31,464 135 1,392 17,900 103,941 — — 974 — — — 3,396 75,219 — — — — — (3,128) — — — — — — — 675 — — 9,576 103,555 1,109 2,067 17,900 103,941 — — (13) — — — — — — (1,392) — — 1,910 28,459 — — — — — (809) — — — — — — — 2,260 — — 11,486 131,205 1,096 2,935 17,900 103,941 — — — — — — 11,486 131,205 1,096 2,935 17,900 103,941 9,576 103,555 1,109 2,067 17,900 103,941 — — 57 — — — 1,910 28,459 — — — — — (809) — — — — — — — 2,261 — — 11,486 131,205 1,166 4,328 17,900 103,941	Attributable to owners of the Company Share capital Share premium Translation reserve Share option reserve Capital reserve Contributed surplus HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note a) (Note b) 59,310 (396) (442) 1,392 17,900 47,297 — — 577 — — — (56,644) — — — — 56,644 315 189 — — — — 390 7,800 — — — — — (290) — — — — 2,809 25,284 — — — — — (1,123) — — — — 6,180 31,464 135 1,392 17,900 103,941 — — 974 — — — 3,396 75,219 — — — — — (3,128) — — — — — — — 675 — — 9,576 103,555 1,109 2,067 17,900 103,941 — — (13) — — — — — — (1,392) — — 1,910 28,459 — — — — — (809) — — — — — — — 2,260 — — 11,486 131,205 1,096 2,935 17,900 103,941 — — — — — — 11,486 131,205 1,096 2,935 17,900 103,941 9,576 103,555 1,109 2,067 17,900 103,941 — — 57 — — — 1,910 28,459 — — — — — (809) — — — — — — — 2,261 — — 11,486 131,205 1,166 4,328 17,900 103,941	Attributable to owners of the Company Share capital Share premium Translation reserve Share option reserve Capital reserve Contributed surplus HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note a) (Note b) 59,310 (396) (442) 1,392 17,900 47,297 — — 577 — — — (56,644) — — — — 56,644 315 189 — — — — 390 7,800 — — — — — (290) — — — — 2,809 25,284 — — — — — (1,123) — — — — 6,180 31,464 135 1,392 17,900 103,941 — — 974 — — — 3,396 75,219 — — — — — (3,128) — — — — — — — 675 — — 9,576 103,555 1,109 2,067 17,900 103,941 — — (13) — — — — — — (1,392) — — 1,910 28,459 — — — — — (809) — — — — — — — 2,260 — — 11,486 131,205 1,096 2,935 17,900 103,941 — — — — — — 11,486 131,205 1,096 2,935 17,900 103,941 9,576 103,555 1,109 2,067 17,900 103,941 — — 57 — — — 1,910 28,459 — — — — — (809) — — — — — — — 2,261 — — 11,486 131,205 1,166 4,328 17,900 103,941	Accumulated losses Total Minority interests HK$’000 HK$’000 HK$’000 (14,725) 110,336 1 (59,711) (59,134) — — — — — 504 — — 8,190 — — (290) — — 28,093 — — (1,123) — (74,436) 86,576 1 (43,608) (42,634) — — 78,615 — — (3,128) — — 675 — (118,044) 120,104 1 (99,622) (99,635) — 1,392 — — — 30,369 — — (809) — — 2,260 — (216,274) 52,289 1 (19,037) (19,037) — (235,311) 33,252 1 (118,044) 120,104 1 (29,528) (29,471) — — 30,369 — — (809) — — 2,261 — (147,572) 122,454 1	Accumulated losses Total Minority interests HK$’000 HK$’000 HK$’000 (14,725) 110,336 1 (59,711) (59,134) — — — — — 504 — — 8,190 — — (290) — — 28,093 — — (1,123) — (74,436) 86,576 1 (43,608) (42,634) — — 78,615 — — (3,128) — — 675 — (118,044) 120,104 1 (99,622) (99,635) — 1,392 — — — 30,369 — — (809) — — 2,260 — (216,274) 52,289 1 (19,037) (19,037) — (235,311) 33,252 1 (118,044) 120,104 1 (29,528) (29,471) — — 30,369 — — (809) — — 2,261 — (147,572) 122,454 1	Total HK$’000 110,337 (59,134) — 504 8,190 (290) 28,093 (1,123)
	6,180 — 3,396 — —			1,392 — — — 675	17,900 — — — —	103,941 — — — —			86,577 (42,634) 78,615 (3,128) 675
	9,576 — — 1,910 — —					103,941 — — — — —			120,105 (99,635) — 30,369 (809) 2,260
	11,486 —	131,205 —	1,096 —	2,935 —	17,900 —	103,941 —			52,290 (19,037)
	11,486	131,205	1,096	2,935	17,900	103,941		1	33,253
	9,576 — 1,910 — —			2,067 — — — 2,261	17,900 — — — —	103,941 — — — —			120,105 (29,471) 30,369 (809) 2,261
	11,486	131,205	1,166	4,328	17,900	103,941		1	122,455

Notes:

• (a) The balance of capital reserve represents the capital reserve arising from the group restructuring which took place in 1992.

• (b) The balance of contributed surplus arose as a result of the Company’s capital reduction exercises which took place in the financial years of 2003 and 2006.

– 38 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Statements of Cash Flows

Operating activities Loss before taxation Adjustments for: Release of non-current prepayments Depreciation of plant and equipment Directors’ emoluments waived Impairment loss recognised in respect of available-for-sale investments Loss (gain) on changes in fair value of financial assets at fair value through profit or loss Loss on changes in fair value of held for trading investments Impairment loss recognised in respect of plant and equipment Loss on written off of plant and equipment Impairment loss recognised in respect of trade receivables, net Impairment loss recognised in respect of deposits, prepayments and other receivables Deposits forfeited for early termination of a rental agreement Interest income Dividend income Finance costs Net loss (gain) on disposal of plant and equipment (Gain) loss on disposal of held for trading investments Gain on redemption of financial assets at fair value through profit or loss Loss on non-current prepayments upon sales of right of use and management of premises Allowance for (reversal of) inventories included in cost of sales Equity settled share-based payment Provision for litigation	Year ended 31 March 2007 2008 2009 HK$’000 HK$’000 HK$’000 (59,711) (41,376) (99,546) 2,239 2,240 1,941 9,692 9,259 4,757 (1,200) (462) — 6,000 3,500 — — 643 (131) — — 4,526 — 446 10,408 — — 3,813 2,316 1,383 2,303 — — 18,985 — — 1,600 (97) (1,409) (1,161) — — (134) 5,854 2,852 358 3,485 3,710 (1,365) — (60) 1,540 — — (187) — — 5,255 4,131 (435) 9,660 — 675 2,260 — — 671	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) (28,601) (18,994) 1,119 524 2,750 188 — — — — (318) — 5,667 3,882 1,914 — 113 2,659 — — — — — — (591) (165) (134) — 298 14 — — (866) — — — — — 1,685 200 2,261 — — 868

– 39 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Operating cash flows before movements in working capital Decrease in inventories (Increase) decrease in trade receivables Decrease (increase) in deposits, prepayments and other receivables Increase (decrease) in trade and other payables Decrease in bills payable Cash from (used in) operation Hong Kong Profits Tax paid Net cash from (used in) operating activities Investing activities Purchase of held for trading investments (Increase) decrease in deposits paid to other financial institution Purchase of plant and equipment Advance from (to) related companies Proceeds from disposal of held for trading investments Proceeds from redemption of financial assets at fair value through profit or loss Proceeds from disposal of plant and equipment Proceeds from sales of right of use and management of premises Interest received Dividend received Purchase of financial assets at fair value through profit or loss Net cash (used in) from investing activities	Year ended 31 March 2007 2008 2009 HK$’000 HK$’000 HK$’000 (27,291) (19,034) (34,447) 19,698 36,362 5,300 (13,295) 29,788 (761) 643 (3,820) (5,843) 22,221 (24,720) 11,577 (692) — — 1,284 18,576 (24,174) — — — 1,284 18,576 (24,174) — (369) (56,961) — (53,697) (16,106) (10,308) (1,575) (333) 3,360 — (63) — 429 41,075 — — 12,675 4,050 20,008 11,334 — — 7,850 97 1,409 1,161 — — 134 — (13,000) — (2,801) (46,795) 766	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) (14,703) (10,824) 3,791 — 3,231 (42,997) (5,808) (456) 8,361 49,383 — — (5,128) (4,894) — (118) (5,128) (5,012) (51,642) — (15,458) 69,723 — — — 63 26,492 — 12,675 — 3,876 — — — 591 165 134 — — — (23,332) 69,951

– 40 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Financing activities Issue of new shares upon placing Issue of new shares upon open offer Issue of new shares for upon exercise of share options New bank loans raised Principal repayment for obligations under finance leases Net cash used in repayment of trust receipts, import loans, export loans and discounted bills Transaction costs attributable to issue of new shares Interest paid Repayment to directors Finance leases charges paid Repayment of bank loans Net cash from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year/period Effect of foreign exchange rate changes of cash and cash equivalents Cash and cash equivalents at the end of the year/period Analysis of cash and cash equivalents, represented by: Bank balances and cash Bank overdrafts	Year ended 31 March 2007 2008 2009 HK$’000 HK$’000 HK$’000 8,190 78,615 30,369 28,093 — — 504 — — 5,000 — — (10,212) (10,584) (2,253) (3,369) (33,941) (1,975) (1,413) (3,128) (809) (4,677) (2,310) (287) (1,870) (507) (161) (1,177) (542) (71) (3,328) (5,000) — 15,741 22,603 24,813 14,224 (5,616) 1,405 (8,097) 6,606 1,303 479 313 (53) 6,606 1,303 2,655 17,594 3,226 2,737 (10,988) (1,923) (82) 6,606 1,303 2,655	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) 30,369 — — — — — — — (940) — (960) — (809) — (241) (14) (101) — (57) — — — 27,261 (14) (1,199) 64,925 1,303 2,655 1 — 105 67,580 290 67,580 (185) — 105 67,580

– 41 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. GENERAL INFORMATION

Climax International Company Limited (the ‘‘Company’’) was incorporated in Bermuda as an exempted company with limited liability with its shares listed on The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’). The address of the registered office of the Company is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda and the principal place of business of the Company is Unit A, 10/F, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong.

The Company is an investment holding company. Its subsidiaries are principally engaged in trading of electronic products and design, development, production and marketing of paper products, including photo albums, gift items and stationery.

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

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS (‘‘HKFRSs’’)

Throughout the Relevant Periods, the Group has consistently applied all new and revised Hong Kong Accounting Standards (‘‘HKASs’’), HKFRSs, amendments and interpretations (‘‘INTs’’) (herein collectively referred to as ‘‘New HKFRSs’’) issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’) which are effective for the Relevant Periods.

The Group has not early applied the following new and revised standards, amendments and interpretations that have been issued but not yet effective.

HKFRSs (Amendments)	Amendment to HKFRS 5 as part of Improvements to HKFRSs 20081
HKFRSs (Amendments)	Improvements to HKFRSs 20092
HKAS 24 (Revised)	Related Party Disclosures3
HKAS 27 (Revised)	Consolidated and Separate Financial Statements1
HKAS 32 (Amendment)	Classification of Right Issues 4
HKAS 39 (Amendment)	Eligible Hedged Items1
HKFRS 1 (Revised)	First-time Adoption of HKFRSs1
HKFRS 1 (Amendment)	Additional Exemptions for First-time Adopters5
HKFRS 2 (Amendment)	Group Cash-settled Share-based Payment Transactions5
HKFRS 3 (Revised)	Business Combinations1
HKFRS 9	Financial Instruments6
HK(IFRIC) — INT 14	The Limit on a Defined Benefit Asset, Minimum Funding Requirements
(Amendment)	and their Interaction3
HK(IFRIC) — INT 17	Distributions of Non-cash Assets to Owners1
HK(IFRIC) — INT 19	Extinguishing Financial Liabilities with Equity Instruments7

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

• 2 Effective for annual periods beginning on or after 1 July 2009 and 1 January 2010, as appropriate. 3 Effective for annual periods beginning on or after 1 January 2011.

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

• 5 Effective for annual periods beginning on or after 1 January 2010.

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

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

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

– 42 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

The directors of the Company anticipate that the application of other new and revised standards, amendments or interpretations will have no material impact on the Financial Information.

3. SIGNIFICANT ACCOUNTING POLICIES

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

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

Basis of consolidation

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

The results of subsidiaries acquired or disposed of during the Relevant Periods are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

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

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

Minority interests in the net assets of consolidated subsidiaries are presented separately from the Group’s equity therein. Minority interests in the net assets consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold in the normal course of business, net of discounts and sales related taxes.

Revenue from sales of goods is recognised when goods are delivered and title has passed.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Interest income from a financial asset including financial assets at fair value through profit or loss 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.

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

Dividend income from investments including financial assets at fair value through profit or loss is recognised when the shareholders’ rights to receive payment have been established.

Plant and equipment

Plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.

Depreciation is provided to write off the cost of items of plant and equipment over their estimated useful lives and after taking into account of their estimated residual values, using the straight-line method.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

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

Impairment losses on tangible assets

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 impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment loss is recognised as an expense immediately.

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

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 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 income statement.

– 44 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Financial assets

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

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial 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 other than those financial assets classified as at FVTPL, of which interest income is included in net gains or losses.

Financial assets at fair value through profit or loss

Financial assets at FVTPL has two subcategories, including financial assets held for trading and those designated as at FVTPL on initial recognition.

A financial asset is classified as held for trading if:

• . it has been acquired principally for the purpose of selling in the near future; or

• . it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

• . it is a derivative that is not designated and effective as a hedging instrument.

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

• . such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• . the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• . it forms part of a contract containing one or more embedded derivatives, and HKAS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial assets at FVTPL are measured at fair value, with changes in fair value arising from remeasurement recognised directly in income statement in the period in which they arise. The net gain or loss recognised in income statement excludes any dividend or interest earned on the financial assets.

– 45 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At the end of each reporting period subsequent to initial recognition, loans and receivables (including trade receivables, deposits and other receivables, amounts due from related companies, deposits in other financial institution and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment loss. (see accounting policy on impairment of financial assets below).

Available-for-sale investments

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

For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments, they are measured at cost less any identified impairment loss at the end of each reporting period (see accounting policy on impairment of financial assets below).

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the 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.

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

• . significant financial difficulty of the issuer or counterparty; or

• . default or delinquency in interest or principal payments; or

• . it becoming probable that the borrower will enter bankruptcy or financial 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 30-120 days, observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, impairment loss is recognised in income statement 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 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.

– 46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade and other receivables, amount due from related companies and deposits in other financial institution 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 income statement. When trade and other receivables, amount due from related companies and deposits in other financial institution are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to income statement.

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 income statement 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.

Impairment losses on available-for-sale equity investments will not be reversed in income statement in subsequent periods.

Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The Group’s financial liabilities are generally classified as other financial liabilities.

Effective interest method

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

Interest expense is recognised on an effective interest basis.

Other financial liabilities

Other financial liabilities including trade and other payables, amounts due to directors, short-term bank borrowings and obligations under finance leases are subsequently measured at amortised cost using the effective interest method.

Equity instruments

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

Derecognition

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

– 47 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

that had been recognised in other comprehensive income is recognised in income statement. If the Group retains substantially all the risks and rewards of ownership of a transferred asset, the Group continues to recognise the financial asset and recognise a collateralised borrowing for proceeds received.

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

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect is material).

Share-based payment transactions

Equity-settled share-based payment transactions

Share options granted to directors and employees of the Company

The fair value of services received determined by reference to the fair value of share options granted at the grant date is expensed on a straight-line basis over the vesting period, with a corresponding increase in equity (share option reserve).

At the end of the reporting period, the Group revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the estimates during the vesting period, if any, is recognised in income statement, with a corresponding adjustment to share option reserve.

At the time when the share options are exercised, the amount previously recognised in share option reserve will be transferred to share premium. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised in share option reserve will be transferred to accumulated losses.

Share options granted to suppliers/consultants

Share options issued in exchange for goods or services are measured at the fair values of the goods or services received, unless that fair value cannot be reliably measured, in which case the goods or services received are measured by reference to the fair value of the share options granted. The fair values of the goods or services received are recognised as expenses, with a corresponding increase in equity (share option reserve), when the Group obtains the goods or when the counterparties render services, unless the goods or services qualify for recognition as assets.

Borrowing costs

All borrowing costs are recognised as and included in finance costs in the consolidated income statement in the year/period in which they are incurred.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method.

– 48 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Taxation

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

The tax currently payable is based on taxable profit for the year/period. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years/periods and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using the tax rate that has 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 Financial Information and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at the end of each 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 when 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. Deferred tax is recognised in to income statement, 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.

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

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in income statement in the year/period in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in income statement for the year/period.

For the purposes of presenting the Financial Information, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. HK$) at the rate of exchange prevailing at the end of the reporting period, and their income and expenses are translated at the average exchange rates for the year/period. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (the translation reserve).

– 49 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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 the consolidated income statement on a straight-line basis over the term of the relevant lease.

The Group as lessee

Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to consolidated income statement.

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

Retirement benefits costs

Payments to the state-managed retirement benefit schemes in the People’s Republic of China (the ‘‘PRC’’) and the Mandatory Provident Fund Scheme in Hong Kong are charged as expenses when employees have rendered service entitling them to the contributions.

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in note 3, the directors of the Company are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and 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 year/period in which the estimate is revised if the revision affects only that year/ period, or in the year/period of the revision and future periods if the revision affects both current and future periods.

The followings are 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 recognised in respect of trade receivables, deposits, prepayments and other receivables

Allowance for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the receivables are not recoverable.

In making the judgment, management considered detailed procedures have been in place to monitor this risk as a significant proportion of the Group’s majority of working capital is devoted to trade receivables, deposits, prepayments and other receivables. In determining whether impairment loss is

– 50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

required, the Group takes into consideration the ageing status, and likelihood of collection. Specific provision is only made for trade receivables, deposits, prepayments and other receivables that are unlikely to be collected.

Useful lives and impairment assessment of plant and equipment

Plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment losses. The estimation of useful lives affects the level of annual depreciation expenses recorded. Plant and equipment are evaluated for possible impairment on a specific asset basis or in groups of similar assets, as applicable. This process requires management’s estimate of future cash flows generated by each assets or group of assets.

The impairment loss of approximately HK$446,000, HK$10,408,000 and HK$1,914,000 for the year end 31 March 2008 and 2009 and the six months ended 30 September 2008 was recognised in respect of plant and equipment for the year/period was based on a valuation conducted by an independent qualified professional valuer not connected to the Group using valuation techniques which involve certain assumptions of market conditions respectively. Favourable or unfavourable changes to these assumptions would result in changes in the carrying value of the Group’s plant and equipment and corresponding adjustments to the amount of gain or loss reported in the consolidated income statement.

Allowance for inventories

The management of the Group reviews the ageing analysis of inventories at the end of each reporting period, and writes down the value of obsolete and slow-moving inventory items identified that are no longer suitable for trade. The management estimates the net realisable value for finished goods based primarily on the latest invoice prices and current market conditions. If the conditions of inventories are deteriorated, or the market conditions worsen significantly, additional allowances may be required.

Provision for litigation

During the year, the Group had been involved in certain litigations in respect of trade and other payables to third parties by the Group. The directors determine the provision for litigation based on their best estimates and legal advice, if any. If the final outcome of litigations is different from the estimation made by the directors, additional provision for litigation may be required.

5. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in 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 during the year/period.

The capital structure of the Group consists of equity attributable to owners of the Company, which includes issued share capital and reserves, borrowings and bank balances and cash and will conduct review to balance its overall capital structure periodically.

In order to maintain or adjust the capital structure, the Group may issue new shares or/and share options. The directors of the Company will also consider the raise of long-term borrowings as second resource of capital when investment opportunities arise and the return of such investments will justify the cost of debts from the borrowings. The directors of the Company also endeavor to ensure the steady and reliable cash flow from the normal business operation.

– 51 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

6. FINANCIAL INSTRUMENTS

• a. Categories of financial instruments

Financial assets Available-for-sale investments Fair value through profit or loss — designated as at FVTPL — held for trading investments Loan and receivables (including cash and cash equivalents) Financial liabilities Other financial liabilities stated at amortised cost	As at 31 March 2007 2008 2009 HK$’000 HK$’000 HK$’000 3,500 — — — 12,357 — — — 9,820 71,371 83,082 84,990 136,679 52,400 51,444	As at 30 September 2009 HK$’000 — — 5,938 123,045
		105,113

• b. Financial risk management objectives and policies

The Group’s major financial instruments include trade receivables, deposits and other receivables, amounts due from related companies, deposits in other financial institution, bank balances and cash, trade and other payables, amounts due to directors, obligations under finance leases and short-term bank borrowings. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Credit risk

The Group’s maximum exposure to credit risk in the event of the counterparties’ failure to perform their obligations as at 31 March 2007, 2008 and 2009 and 30 September 2009 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. The Group has concentration risk as 42%,48% and 52% and 95% at 31 March 2007, 2008 and 2009 and 30 September 2009 respectively of the total trade receivables was due from the Group’s largest customer and the Group has concentration risk as 42%, 18% and 22% and 97% at 31 March 2007, 2008 and 2009 and 30 September 2009 respectively of the five largest customers respectively within the paper products business segment. The Group limits its exposure to credit risk by prudently selecting customers. The Group also continually evaluates the credit risk of its customers to ensure appropriateness of the amount of credit granted. Credit is extended to customers based on the evaluation of individual customer’s financial conditions and collateral in the form of cash deposits or letter of credit, which are usually required from new customers. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

The credit risk on liquid funds is limited because the counterparties are banks and financial institutions with high credit-ratings.

– 52 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Currency risk

Certain trade receivables and trade payables of the Group are denominated in foreign currencies which expose the Group to currency risk. The Group did not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

The carrying amounts of the Group’s foreign currency denominated financial assets and liabilities, translated into HK$ at the end of each reporting period are as follows:

		As at 31 March 2007
	Financial assets	Financial liabilities	Net exposure
	HK$’000	HK$’000	HK$’000
United States Dollar (‘‘USD’’)	29,115	1,775	27,340
Renminbi (‘‘RMB’’)	4,700	4,156	544
		As at 31 March 2008
	Financial assets	Financial liabilities	Net exposure
	HK$’000	HK$’000	HK$’000
USD	6,690	97	6,593
RMB	984	11,902	(10,918)
		As at 31 March 2009
	Financial assets	Financial liabilities	Net exposure
	HK$’000	HK$’000	HK$’000
USD	9,109	6,437	2,672
RMB	1,497	25,369	(23,872)
	As at 30 September 2009
	Financial assets	Financial liabilities	Net exposure
	HK$’000	HK$’000	HK$’000
USD	50,211	49,886	325
RMB	—	18,507	(18,507)

Sensitivity analysis

The Group mainly exposes to exchange rate fluctuations of USD and RMB. The following table details the Group’s sensitivity to a 5% increase for the year ended 31 March 2007 and 2008 and 10% increase for the year ended 31 March 2009 and the six months ended 30 September 2009, respectively in HK$ against the relevant foreign currency while all other variables are held constant. The above rates are the sensitivity rates used when reporting foreign currency risk internally to key management personnel and represent management’s assessment of the reasonably possible change in foreign exchange rates. As a result of the volatile financial market in 2008, the management adjusted the sensitivity rate from 5% to 10% for the purpose of assessing foreign currency risk. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the end of each reporting period for a 5% change for the year ended 31 March 2007 and 2008 and 10% change for the year ended 31 March 2009 and the six months ended 30 September 2009, respectively in foreign currency rates.

– 53 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The sensitivity analysis includes monetary items where the denomination of the balances is in a currency other than the functional currency of the respective group entities. A positive number below indicates an increase in loss for the year/period where HK$ strengthen 5% for the year ended 31 March 2007 and 2008 and 10% for the year ended 31 March 2009 and the six months ended 30 September 2009, respectively against the relevant currency while a negative number represents a decrease in loss for the year/period. For a 5% for the year ended 31 March 2007 and 2008 and 10% for the year ended 31 March 2009 and the six months ended 30 September 2009, respectively strengthening of the relevant currency against HK$, there would be an equal and opposite impact on the result for the Relevant Periods.

Currency risk

USD RMB Total impact	Loss after taxation As at 31 March As at 30 September 2007 2008 2009 2009 HK$’000 HK$’000 HK$’000 HK$’000 (1,367) (330) (267) (33) (27) 546 2,387 1,850 (1,394) 216 2,120 1,817

Interest rate risk

The Group’s cash flow interest rate risk primarily relates to variable-rate bank borrowings (see note 29 for details of these borrowings), variable-rate deposits in other financial institution and variable rate obligations under finance leases (see note 28 for details of the finance leases).

The Group’s fair value interest rate risk relates primarily to the fixed rate obligations under finance leases.

The Group’s exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note. The Group’s interest rate risk is mainly concentrated on the fluctuation of market interest rate arising from the Group’s borrowings.

The Group currently does not have any interest rate risk hedging policy. However, the management monitors interest rate risk exposure and will consider hedging significant risk exposure should the need arise.

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end of each reporting period. For variable-rate bank borrowings, the analysis is prepared assuming the amount of liability outstanding at the end of each reporting period was outstanding for the whole year/period and the assumed change in interest rate exists throughout the year/period. A 100 basis point increase or decrease in market rate 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 had been 100 basis points higher/lower and all other variables were held constant, the Group’s loss would have increased/decreased by approximately HK$275,000, HK$243,000, HK$719,000 and HK$668,000 for the year ended 31 March 2007, 2008 and 2009 and the six months ended 30 September 2009 respectively.

– 54 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Price risk

The Group’s held for trading investments comprise listed equity securities in Hong Kong. These listed equity securities are subject to market price risk. The management manages this exposure by maintaining a portfolio of investments with different risk profiles. Details of the held for trading investments are set out in note 22.

Sensitivity analysis

The sensitivity analysis below has been determined based on the exposure to equity price risks at the reporting date.

If the prices of the respective equity instruments had been 10% higher/lower, loss for the year ended 31 March 2009 and the six months ended 30 September 2009, would decrease/increase by HK$982,000 and HK$594,000 respectively as a result of the change in fair value of held for trading investments.

Liquidity risk

Internally generated cash flow and bank loans are the general sources of funds to finance the operations of the Group. Majority of the Group’s banking lines are subject to variable interests rate and are renewable annually. The Group’s liquidity risk management includes making available standby banking facilities and diversifying the funding sources. The Group regularly reviews its major funding positions to ensure it has adequate financial resources in meeting its financial obligations.

– 55 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

As at 31 March 2007 Non-derivative financial liabilities Trade and other payables Amounts due to directors Obligations under finance leases Bank borrowings As at 31 March 2008 Non-derivative financial liabilities Trade and other payables Amounts due to directors Obligations under finance leases Bank borrowings As at 31 March 2009 Non-derivative financial liabilities Trade and other payables Obligations under finance leases Bank borrowings As at 30 September 2009 Non-derivative financial liabilities Trade and other payables Obligations under finance leases	Within 1 year HK$’000 70,316 1,130 9,680 52,564 133,690 45,596 161 1,920 3,933 51,610 50,870 497 88 51,455 104,621 497 105,118	More than 1 year but less than 2 years HK$’000 — — 3,002 — 3,002 — — 934 — 934 — — — — — — —	After 2 years but less than 5 years HK$’000 — — 1,417 — 1,417 — — 67 — 67 — — — — — — —	Total undiscounted cash flows HK$’000 70,316 1,130 14,099 52,564 138,109 45,596 161 2,921 3,933 52,611 50,870 497 88 51,455 104,621 497 105,118	Carrying amount HK$’000 70,316 1,130 13,329 51,904
					136,679
					45,596 161 2,745 3,898
					52,400
					50,870 492 82
					51,444
					104,621 492
					105,113

– 56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• c. Fair value of financial instruments

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

• . the fair value of financial assets and financial liabilities with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market bid prices and ask prices respectively; and

• . the fair value of other financial assets and financial liabilities (excluding derivative instruments) is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices or rates from observable current market transactions and dealer quotes for similar instrument.

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

Fair value measurements recognised in the 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 markets for identical assets or liabilities.

• . Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• . 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).

Held for trading investments There were no transfers between Level 1 and 2 in the period.	As at 30 September 2009 Level 1 HK$’000 5,938

– 57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. TURNOVER AND SEGMENT INFORMATION

The Group has adopted HKFRS 8 Operating Segments with effect from 1 January 2009. HKFRS 8 is a disclosure standard that requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker (‘‘CODM’’) for the purpose of allocating resources to segments and assessing their performance. In contrast, the predecessor Standard (HKAS 14 Segment Reporting) required an entity to identify two sets of segments (business and geographical) using a risks and returns approach. In the past, the Group’s primary reporting format was business segments/geographical segments by location of assets/geographical segments by location of customers. The application of HKFRS 8 has not resulted in a redesignation of the Group’s reportable segments as compared with the primary reportable segments determined in accordance with HKAS 14. Nor has the adoption of HKFRS 8 changed the basis of measurement of segment profit or loss.

During the year ended 31 March 2007 and 2008 and the six months ended 30 September 2008, the Group operated a single business segment, being design, development, production and marketing of paper products. During the year ended 31 March 2009 and the six months ended 30 September 2009, the Group’s operating and reportable segments are as follows:

• (i) Paper products — design, development, production and marketing of paper products, and

• (ii) Electronic products — trading of electronic products

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 3. Segment profit/loss represents the profit earned by/loss from each segment mainly without allocation of central administration costs and directors’ salaries, some items of other income, finance costs and income tax expense. This is the measure reported to the CODM for the purposes of resources allocation and performance assessment.

For the purposes of monitoring segment performance and allocating resources between segments

• . all assets are allocated to reportable segments other than prepayments, held for trading investments, amounts due from related companies, deposits in other financial institution, bank balances and cash, and other corporate assets.

• . all liabilities are allocated to reportable segments other than tax payables, short-term borrowings and other corporate liabilities.

– 58 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(a) Segment revenue and results

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

For the year ended 31 March 2009

Revenue Segment (loss) profit Gain on disposal of plant and equipment Scrap sales of raw materials and finished goods Unallocated corporate income Impairment loss recognised in respect of plant and equipment Impairment loss recognised in respect of deposits, prepayments and other receivables Unallocated corporate expenses Gain on changes in fair value of financial assets at fair value through profit or loss Gain on redemption of financial assets at fair value through profit or loss Loss on changes in fair value of held for trading investments Loss on disposal of held for trading investments Depreciation of plant and equipment Loss on written off of plant and equipment Impairment loss recognised in respect of trade receivables Finance costs Unallocated corporate expenses Loss before taxation	Paper products HK$’000 66,169 (25,666) 1,365 847 (10,408) (13,391) (990) (3,813) (2,303)	Electronic Products HK$’000 3,947 32 — — — — — — —	Total HK$’000 70,116 (25,634) 1,365 847 4,898 7,110 (10,408) (13,391) (5,594) (18,985) 131 187 (4,526) (1,540) (990) (3,813) (2,303) (358) (38,417) (99,546)

– 59 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the six months ended 30 September 2009

Revenue Segment (loss) profit Scrap sales of raw materials and finished goods Changes in fair value of held for trading investments Loss on written off of plant and equipment Depreciation of plant and equipment Release of non-current prepayments Unallocated corporate income Unallocated corporate expenses Finance costs Loss before taxation (b) Segment assets and liabilities	Paper products HK$’000 12,768 (2,609) 24 (2,659) —	Electronic products HK$’000 86,752 761 — — (3)	Total HK$’000 99,520
			(1,848) 24 (3,882) (2,659) (3) (524) 1,563 (11,651) (14)
			(18,994)

As at 31 March 2009

Paper products Electronic products HK$’000 HK$’000 Assets Segment assets 22,418 3,947 Unallocated corporate assets Liabilities Segment liabilities 48,852 3,915 Unallocated corporate liabilities	Total HK$’000 26,365 86,673
	113,038
	52,767 7,981
	60,748

– 60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As at 30 September 2009

Paper products Electronic products HK$’000 HK$’000 Assets Segment assets 8,732 47,755 Unallocated corporate assets Liabilities Segment liabilities (57,363) (46,963) Unallocated corporate liabilities	Total HK$’000 56,487 87,608 144,095 (104,326) (6,516) (110,842)

The Group’s unallocated corporate assets mainly consist of prepayments, held for trading investments, amounts due from related companies, deposits in other financial institution, bank balances and cash. The Group’s unallocated corporate liabilities mainly consist of tax payables and short-term borrowings.

(c) Other information

For the year ended 31 March 2009

Capital expenditure Unallocated Depreciation of plant and equipment Unallocated Gain on disposal of plant and equipment Unallocated Impairment loss recognised in respect of trade receivables Loss on written off of plant and equipment Allowance for inventories Deposits forfeited for early termination of a rental agreement	Paper products HK$’000 (300) (4,417) 1,339 (2,303) (3,813) (9,660) 1,600	Electronic products HK$’000 — — — — — — —	Total HK$’000 (300) (33) (333) (4,417) (340) (4,757) 1,339 26 1,365 (2,303) (3,813) (9,660) 1,600

– 61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the six months ended 30 September 2009

Paper products Electronic products HK$’000 HK$’000 Depreciation of plant and equipment — 3 Unallocated Loss on written off of plant and equipment 2,659 — Allowance for inventories 200 —	Total HK$’000 3 185
	188 2,659 200

The Group’s operations are located in PRC and Hong Kong. The following table provides an analysis of the Group’s turnover by geographical market based on the geographical location of customers, irrespective of the origin of the goods:

United States of America Europe Asia-Pacific (excluding Hong Kong) Australia Hong Kong Others	Turnover by geographical market	Turnover by geographical market	Turnover by geographical market
	Year ended 31 March 2007 2008 2009 HK$’000 HK$’000 HK$’000 152,292 78,890 33,630 61,029 51,398 19,178 33,382 25,136 14,810 — — — 3,322 1,157 497 8,885 10,740 2,001 258,910 167,321 70,116	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) 24,382 5,107 11,043 3,831 10,737 55,725 — 33,581 360 — 1,451 1,276 47,973 99,520
			99,520

The following is an analysis of the carrying amount of assets, and capital expenditure, analysed by geographical areas in which the assets are located:

PRC Hong Kong Others		Carrying amount of assets	Carrying amount of assets
	2007 HK$’000 162,030 36,864 24,362 223,256	As at 31 March 2008 HK$’000 92,068 75,978 6,691 174,737	2009 HK$’000 16,966 93,146 2,926 113,038	As at 30 September 2009 HK$’000 13,104 80,770 50,221
				144,095

– 62 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

PRC Hong Kong		Capital expenditure	Capital expenditure
	2007 HK$’000 13,810 2,482 16,292	As at 31 March 2008 HK$’000 1,218 357 1,575	2009 HK$’000 — 333 333	As at 30 September 2009 HK$’000 — —
				—

8. OTHER INCOME

Other income consisted of: Dividend income Claims received Reversal of impairment loss recognised in respect of trade receivables Gain on disposal of plant and equipment Interest income Rental income, gross Scrap sales of raw materials Others 9. FINANCE COSTS	Year ended 31 March 2007 2008 2009 HK$’000 HK$’000 HK$’000 — — 134 120 — — 1,241 — — 828 — 1,365 97 1,409 1,161 1,166 3,551 3,004 6,461 3,729 847 263 1,052 599 10,176 9,741 7,110	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) 134 — — — — — — — 591 165 1,649 1,190 420 24 607 208 3,401 1,587	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) 134 — — — — — — — 591 165 1,649 1,190 420 24 607 208 3,401 1,587
			1,587

Interest on: — bank borrowings wholly repayable within five years — obligations under finance leases	Year ended 31 March 2007 2008 2009 HK$’000 HK$’000 HK$’000 4,677 2,310 287 1,177 542 71 5,854 2,852 358	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) 241 14 57 — 298 14	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) 241 14 57 — 298 14
			14

– 63 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

10. INCOME TAX EXPENSE

Hong Kong Profits Tax — Current year — Overprovision in prior years PRC Enterprise Income Tax (‘‘EIT’’) — Current year	Year ended 31 March 2007 2008 2009 HK$’000 HK$’000 HK$’000 — 443 76 — — — — 443 76 — 1,789 — — 2,232 76	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) 927 115 — (72) 927 43 — — 927 43

On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 which reduced corporate profits tax rate from 17.5% to 16.5% effective from the year of assessment 2008/2009. Therefore, Hong Kong Profits Tax is calculated at 17.5%, 17.5%, 16.5%, 16.5% and 16.5% of the estimated assessable profit for the year ended 31 March 2007, 2008 and 2009 and the six months ended 30 September 2008 and 2009 respectively.

The Group carries out manufacturing activities in the PRC through its subsidiaries and under the terms of a processing agreement with a third party factories, and has substantial involvement in these manufacturing activities undertaken in the PRC. The profits earned are thus considered to be partly arising and derived from the manufacturing activities carried out in the PRC and partly from other activities performed in Hong Kong. Accordingly, the Group claimed a 50: 50 offshore concession in respect of Hong Kong Profits Tax.

Tax arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

The subsidiaries established in the PRC are subject to the EIT at rate of 33% for the year ended 31 March 2007 and 2008 and at 25% for the year ended 31 March 2009 and the six months ended 30 September 2008 and 2009. No provision for EIT has been made for these subsidiaries established in the PRC for the year ended 31 March 2007 and 2009 and the six months ended 30 September 2008 and 2009 as they did not generate any assessable profits during the year/period.

On 16 March 2007, the PRC promulgated the Law of the PRC on EIT (the ‘‘New Law’’) by Order No. 63 of the President of the PRC. On 6 December 2007, the State Council of the PRC issued Implementation Regulations of the New Law. Under the New Law and Implementation Regulation, the EIT rate of the Group’s subsidiaries in the PRC reduced from 33% to 25% from 1 January 2008 onwards.

– 64 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The income tax expense for the Relevant Periods can be reconciled to the loss before taxation per consolidated income statement as follows:

Loss before taxation Calculated at applicable tax rate Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Tax effect of tax losses and other deductible temporary differences not recognised Income tax on concessionary rate Utilisation of tax loss not previously recognised Overprovision in prior years Effect of different tax rates of subsidiaries operating in the PRC	Year ended 31 March 2007 2008 2009 HK$’000 HK$’000 HK$’000 (59,711) (41,376) (99,546) (10,449) (7,241) (16,425) 3,076 7,251 4,673 (876) (307) (999) 7,731 1,475 12,725 365 579 2,717 — (275) (357) — — — 153 750 (2,258) — 2,232 76	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) (28,601) (18,994) (4,719) (3,134) 637 1,223 (37) (22) 4,954 1,975 92 73 — — — (72) — — 927 43

Details of deferred taxation are set out in note 33.

– 65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. LOSS FOR THE YEAR/PERIOD

Loss for the year/period has been arrived at after charging (crediting): Directors’ emoluments (note 12) Other staff costs Share-based payment Retirement benefit scheme contributions for staff Severance payments to workers Forfeited contributions utilised to offset employers’ contributions Total staff costs Impairment loss recognised in respect of trade receivables Allowance for (reversal of) inventories (included in cost of sales) Auditor’s remuneration Cost of inventories recognised as expenses Deposits forfeited for early termination of a rental agreement Depreciation on: — own assets — assets held under finance leases Net loss (gain) on disposal of plant and equipment Loss on written off of plant and equipment Loss on non-current prepayments upon sales of right of use and management of premises Minimum lease payment in respect of — rented premises — hire of equipment Net exchange loss Provision for litigation Release of non-current prepayments and after crediting: Rental income, net of outgoings (note)	Year 2007 HK$’000 3,741 46,117 — 4,457 331 (34) 54,612 3,557 4,131 2,490 240,913 — 6,079 3,613 3,485 — — 8,076 130 1,732 — 2,239 63	ended 31 March 2008 2009 HK$’000 HK$’000 5,249 1,001 32,064 24,023 675 1,695 1,151 1,076 603 1,663 (441) (259) 39,301 29,199 1,383 2,303 (435) 9,660 861 1,002 153,241 91,451 — 1,600 6,187 4,278 3,072 479 3,710 (1,365) — 3,813 — 5,255 9,764 8,944 130 — 2,075 432 — 671 2,240 1,941 1,311 1,063	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) 778 120 12,239 6,499 1,696 — 641 225 — — — — 15,354 6,844 — — 1,685 200 — 650 51,827 99,329 — — 2,750 188 — — — — 113 2,659 — — 2,649 1,830 — — — — — 868 1,119 524 530 666	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) 778 120 12,239 6,499 1,696 — 641 225 — — — — 15,354 6,844 — — 1,685 200 — 650 51,827 99,329 — — 2,750 188 — — — — 113 2,659 — — 2,649 1,830 — — — — — 868 1,119 524 530 666
				6,844
				— 200 650 99,329 — 188 — — 2,659 — 1,830 — — 868 524 666

Note: Net of outgoings included in administrative expenses of approximately HK$1,103,000, HK$2,240,000, HK$1,941,000, HK$1,119,000 and HK$524,000 for the year ended 31 March 2007, 2008 and 2009 and six months ended 30 September 2008 and 2009 respectively.

– 66 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

12. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

(i) Directors’ emoluments

Details of emoluments paid and payable to the directors of the Company for the Relevant Periods are as follows:

For the year ended 31 March 2007 Executive directors: Kan Shiu Cheong, Frederick Chan Hoi Lam Yau Kang Nam Jiang Hai Qing Independent non-executive directors: Ng Sui Keung Lai Kin Keung Yueh Yung Hsin	Fees HK$’000 — — — — — 100 100 100 300 300	Salaries and other benefits HK$’000 600 800 960 696 3,056 — — — — 3,056	Discretionary bonuses HK$’000 150 150 — 58 358 — — — — 358	Retirement benefit scheme contributions HK$’000 6 6 3 12 27 — — — — 27	Share- based payment HK$’000 — — — — — — — — — —	Total HK$’000 756 956 963 766
						3,441
						100 100 100
						300
						3,741

– 67 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the year ended 31 March 2008 Executive directors: Kan Shiu Cheong, Frederick (note 1) Chan Hoi Lam (note 1) Yau Kang Nam (note 2) Jiang Hai Qing (note 2) Wong Hin Shek (note 3) Chan Siu Mun (note 3) Lo Miu Sheung, Betty (note 2 and 6) Non-executive directors: Tse On Po, Vincent (note 4) Tse On Kin (note 4) Independent non-executive directors: Ng Sui Keung (note 5) Lai Kin Keung (note 5) Yueh Yung Hsin (note 5) Wong Yun Kuen (note 6) Chan Hoi Ling (note 6) Lau Man Tak (note 7)	Fees HK$’000 — — — — — — — — 34 34 68 99 99 99 46 46 1 390 458	Salaries and other benefits HK$’000 900 900 320 638 — — — 2,758 — — — — — — — — — — 2,758	Discretionary bonuses HK$’000 — 2,000 — — — — — 2,000 — — — — — — — — — — 2,000	Retirement benefit scheme contributions HK$’000 9 9 4 11 — — — 33 — — — — — — — — — — 33	Share- based payment HK$’000 — — — — — — — — — — — — — — — — — — —	Total HK$’000 909 2,909 324 649 — — —
						4,791
						34 34
						68
						99 99 99 46 46 1
						390
						5,249

Notes:

• (1) Resigned on 26 March 2008.

• (2) Retired on 25 January 2008.

• (3) Appointed on 18 June 2007.

• (4) Appointed on 6 September 2007.

• (5) Resigned on 27 March 2008.

• (6) Appointed on 26 June 2007.

• (7) Appointed on 27 March 2008.

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 March 2009 Executive directors: Chan Hoi Ling (note 1) Wong Hin Shek Chan Siu Mun (note 2) Non-executive directors: Tse On Po, Vincent (note 3) Tse On Kin (note 3) Independent non-executive directors: Wong Yun Kuen Lau Man Tak Man Kwok Leung (note 4)	Fees HK$’000 60 — — 60 20 80 100 60 60 53 173 333	Salaries and other benefits HK$’000 — — — — — — — — — — — —	Discretionary bonuses HK$’000 — — — — — 103 103 — — — — 103	Retirement benefit scheme contributions HK$’000 — — — — — — — — — — — —	Share- based payment HK$’000 — 565 — 565 — — — — — — — 565	Total HK$’000 60 565 —
						625
						20 183
						203
						60 60 53
						173
						1,001

Notes:

• (1) Re-designated as an executive director from independent non-executive director on 13 May 2008.

• (2) Resigned on 13 May 2008.

• (3) Resigned on 1 August 2008.

• (4) Appointed on 13 May 2008.

– 69 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the six months ended 30 September 2008 (unaudited) Executive directors: Chan Hoi Ling (note 1) Kan Shiu Cheong, Frederick (note 2) Wong Hin Shek Chan Siu Mun (note 3) Non-executive directors: Tse On Po, Vincent Tse On Kin Independent non- executive directors: Wong Yun Kuen Lau Man Tak Man Kwok Leung (note 4)	Fees HK$’000 30 — — — 30 20 80 100 30 30 23 83 213	Salaries and other benefits HK$’000 — — — — — — — — — — — — —	Discretionary bonuses HK$’000 — — — — — — — — — — — — —	Retirement benefit scheme contributions HK$’000 — — — — — — — — — — — — —	Share- based payment HK$’000 — — 565 — 565 — — — — — — — 565	Total HK$’000 30 — 565 —
						595
						20 80
						100
						30 30 23
						83
						778

Notes:

• (1) Re-designated as an executive director from independent non-executive director on 13 May 2008.

• (2) Resigned on 26 March 2008.

• (3) Resigned on 13 May 2008.

• (4) Appointed on 13 May 2008.

– 70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Salaries Retirement Shareand other Discretionary benefit scheme based Fees benefits bonuses contributions payment Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

For the six months ended 30 September 2009 Executive directors: Chan Hoi Ling (Note 1) Wong Hin Shek Independent non- executive directors: Wong Yun Kuen Lau Man Tak Man Kwok Leung	30 — 30 30 30 30 90 120	— — — — — — — —	— — — — — — — —	— — — — — — — —	— — — — — — — —	30 —
						30
						30 30 30
						90
						120

Note:

(1) Resigned on 24 November 2009.

Discretionary bonuses were determined with reference to the Group’s operating results, and individual performance. Two directors waived emoluments of HK$1,200,000 for the year ended 31 March 2007. One director, Yau Kang Nam waived emoluments of HK$462,000 for the year ended 31 March 2008. No director has waived any emoluments during the year ended 31 March 2009 and six months ended 30 September 2008 and 2009.

– 71 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(ii) Employees’ emoluments

Of the five individuals with the highest emoluments in the Group, three, three, nil, nil and one for the year ended 31 March 2007, 2008 and 2009 and the six months ended 30 September 2008 and 2009, respectively, were directors of the Company whose emoluments are included in the disclosures above. The emoluments of the remaining two, two, five, five and five for the year ended 31 March 2007, 2008 and 2009 and the six months ended 30 September 2008 and 2009, respectively, individuals are as follows:

Salaries and other benefits Discretionary bonuses Retirement benefit scheme contributions	Year ended 31 March 2007 2008 2009 HK$’000 HK$’000 HK$’000 1,918 2,004 3,839 273 30 560 24 24 54 2,215 2,058 4,453	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) 213 2,324 — — — 16 213 2,340	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) 213 2,324 — — — 16 213 2,340
			2,340

Emoluments of these employees were within the following bands:

HK$ nil to HK$1,000,000 HK$1,000,001 to HK$1,500,000	Number of individual(s) Year ended 31 March Six months ended 30 September 2007 2008 2009 2008 2009 (unaudited) — — 2 5 4 2 2 3 — 1 2 2 5 5 5	Number of individual(s) Year ended 31 March Six months ended 30 September 2007 2008 2009 2008 2009 (unaudited) — — 2 5 4 2 2 3 — 1 2 2 5 5 5
		5

During the Relevant Periods, no emoluments were paid by the Group to the directors or the employees as an inducement to join or upon joining the Group or as compensation for loss of office.

13. DIVIDEND

No dividends were paid or proposed during the year/period, nor has any dividend been proposed since the end of each reporting period.

– 72 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

14. LOSS PER SHARE — BASIC

The calculation of the basic loss per share attributable to the owners of the Company for the year/period is based on the following data:

							Six months ended	Six months ended	Six months ended
		Year	ended	31 March			30 September
		2007		2008	2009		2008		2009
	HK$’000		HK$’000		HK$’000		HK$’000	HK$’000
							(unaudited)
Loss for the year/period
attributable to the owners of
the Company for the purpose
of basic loss per share		(59,711)	(43,608)		(99,622)		(29,528)		(19,037)
							Six months ended
	Year ended		31 March				30 September
	2007		2008		2009		2008		2009
							(unaudited)
Number of shares:
Weighted average
number of shares for
the purpose of basic
loss per share	336,912,036	905,231,626		1,105,228,260		1,065,164,000		1,148,661,000

No diluted loss per share is presented for the Relevant Periods as the exercise price of the Company’s outstanding share options was higher than the average market price of shares during the Relevant Periods.

– 73 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

15. PLANT AND EQUIPMENT

COSTS At 1 April 2006 Exchange realignment Additions Disposals At 31 March 2007 and 1 April 2007 Exchange realignment Additions Disposals At 31 March 2008 and 1 April 2008 Exchange realignment Additions Disposals Written off At 31 March 2009 and 1 April 2009 Written off At 30 September 2009 ACCUMULATED DEPRECIATION AND IMPAIRMENT At 1 April 2006 Exchange realignment Provided for the year Eliminated on disposals At 31 March 2007 and 1 April 2007 Exchange realignment Provided for the year Impairment loss recognised during the year Eliminated on disposals At 31 March 2008 and 1 April 2008 Exchange realignment Provided for the year Impairment loss recognised during the year Eliminated on disposals Eliminated on written off At 31 March 2009 and 1 April 2009 Provided for the period Eliminated on written off At 30 September 2009 CARRYING VALUES At 31 March 2007 At 31 March 2008 At 31 March 2009 At 30 September 2009	Leasehold improvements HK$’000 7,596 — — (7,596) — — — — — — — — — — — — 2,974 — 309 (3,283) — — — — — — — — — — — — — — — — — — —	Furniture and fixtures HK$’000 7,603 22 5,214 (2,730) 10,109 566 598 — 11,273 52 333 (103) (4,237) 7,318 (5,040) 2,278 4,040 12 797 (2,715) 2,134 97 1,665 — — 3,896 12 1,385 1,936 (83) (1,282) 5,864 188 (5,040) 1,012 7,975 7,377 1,454 1,266	Machinery and equipment HK$’000 183,769 349 10,479 (22,827) 171,770 1,011 613 (73,458) 99,936 117 — (37,399) (5,911) 56,743 (56,743) — 129,547 297 7,846 (19,621) 118,069 894 6,767 446 (49,879) 76,297 103 2,794 7,951 (27,619) (5,226) 54,300 — (54,300) — 53,701 23,639 2,443 —	Motor vehicles HK$’000 3,560 37 — — 3,597 107 337 (1,870) 2,171 10 — (682) (231) 1,268 (1,268) — 2,424 11 319 — 2,754 52 282 — (1,731) 1,357 5 176 176 (527) (130) 1,057 — (1,057) — 843 814 211 —	Moulds HK$’000 1,208 — — — 1,208 — — (1,208) — — — — — — — — 1,208 — — — 1,208 — — — (1,208) — — — — — — — — — — — — — —	Office equipment HK$’000 8,645 21 599 (1,743) 7,522 68 27 (43) 7,574 8 — (46) (760) 6,776 (6,776) — 7,499 11 421 (1,742) 6,189 48 545 — (43) 6,739 5 402 345 (32) (688) 6,771 — (6,771) — 1,333 835 5 —	Total HK$’000 212,381 429 16,292 (34,896)
							194,206 1,752 1,575 (76,579)
							120,954 187 333 (38,230) (11,139)
							72,105 (69,827)
							2,278
							147,692 331 9,692 (27,361)
							130,354 1,091 9,259 446 (52,861)
							88,289 125 4,757 10,408 (28,261) (7,326)
							67,992 188 (67,168)
							1,012
							63,852
							32,665
							4,113
							1,266

– 74 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The above items of plant and equipment are depreciated over their estimated useful lives, using the straight-line method, at the following rates per annum:

Leasehold improvements 4%–5% Furniture and fixtures 8%–33% Machinery and equipment 8%–14% Motor vehicles 20% Moulds 20% Office equipment 10%–20%

The carrying amount of machinery and equipment includes an amount of nil after full impairment of approximately HK$35,828,000, HK$4,392,000, HK$1,480,000 and nil as at 31 March 2007, 2008, 2009 and 30 September 2009 respectively in respect of assets held under finance leases.

Machinery and equipment with carrying values of approximately HK$515,000 and HK$421,000 were temporarily sequestrated by 深圳市寶安區人民法院 and 廣東省東莞市第二人民法院 as at 31 March 2009 respectively. Details of which set out in note 34(j).

During the year ended 31 March 2008 and 2009, the directors conducted a review of the Group’s plant and equipment and determined that a number of those assets were impaired due to the plant and equipment were idle and physically damaged. Accordingly, impairment loss in respect of plant and equipment of approximately HK$446,000, HK$10,408,000 has been recognised for the year ended 31 March 2008 and 2009 respectively. The values of idle machinery and equipment are based on market value determined by Grant Sherman Appraisal Limited, an independent qualified professional valuer not connected to the Group.

16. PREPAYMENTS

Amount to be utilised within one year Amount to be utilised after one year Less: Amount to be utilised within one year included in deposits, prepayments and other receivables	As at 31 March 2007 2008 HK$’000 HK$’000 2,239 2,240 26,311 24,071 28,550 26,311 (2,239) (2,240) 26,311 24,071	2009 HK$’000 1,048 10,217 11,265 (1,048) 10,217	As at 30 September 2009 HK$’000 1,048 9,693 10,741 (1,048) 9,693

Prepayment represents the amounts advanced by the Group to a third party (the ‘‘Landlord’’) for the construction of production and related facilities (the ‘‘Baoan Factory’’) in Baoan, the PRC. The Baoan Factory with an aggregate construction area of 97,250 square metre. is divided into an aggregate construction area of 51,771 square metre (the ‘‘First Phase’’) and 45,479 square metre (the ‘‘Second Phase’’) respectively. Pursuant to the original and supplementary agreements signed between a subsidiary of the Company and the Landlord, the Group is entitled to use the production and related facilities for a term of 30 years up to 31 December 2019 free of charge as consideration for the settlement of the advances. The amounts charged to the consolidated income statement as consideration for the settlement for the year ended 31 March 2007, 2008 and 2009 and six months ended 30 September 2009 were approximately HK$2,239,000, HK$2,240,000, HK$1,941,000 and HK$524,000 respectively.

– 75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group relocated its production lines from the Baoan Factory to Dongguan, the PRC and in August 2006, the Group entered into an agreement with the Landlord to lease back the Baoan Factory to the Landlord in two phases for terms commencing on 1 September 2006 and 1 June 2007 respectively until 31 December 2019. For the year ended 31 March 2007, 2008 and 2009 and the six months ended 30 September 2009, the Group recorded a gross rental income of approximately HK$1,166,000, HK$3,551,000 and HK$3,004,000 and HK$1,190,000 respectively.

During the year ended 31 March 2009, the Group entered into an agreement with the Landlord, pursuant to which the lease of the First Phase is terminated on 1 January 2009 and the Group agreed to transfer the rights of use and management of the First Phase for the period from 1 January 2009 to 31 December 2019 at the consideration of approximately RMB7,041,000 (equivalent to approximately HK$7,850,000) to the Landlord. Accordingly, the difference of approximately HK$5,255,000 between the consideration and carrying value of the First Phase was recognised as a loss in the consolidated income statement during the year ended 31 March 2009.

17. AVAILABLE-FOR-SALE INVESTMENTS

Unlisted equity securities, at cost Less: Impairment loss recognised	As at 31 March 2007 2008 HK$’000 HK$’000 9,500 9,500 (6,000) (9,500) 3,500 —	2009 HK$’000 9,500 (9,500) —	As at 30 September 2009 HK$’000 9,500 (9,500) —

The above investments represent unlisted equity investments in Vevion Hong Kong Limited (‘‘Vevion’’), a company incorporated in Hong Kong, in which the Company acquired 1,900,000 shares or 8.26% of the equity interests in 2006. They are measured at cost less impairment at the end of each reporting period because the range of reasonable fair value estimates is so significant that the directors of the Company are of the opinion that these fair values cannot be measured reliably.

During the year ended 31 March 2007 and 2008, impairment loss of HK$6,000,000 and HK$3,500,000 were respectively recognised by reference to the estimated recoverable amount of the investments. Valuation has been conducted by RHL Appraisal Limited, an independent qualified professional valuer not connected to the Group, for the purpose of assessing the recoverable amounts. Such valuation has been carried out using cash flow projections based on financial budgets approved by management and applying the discounted cash flow technique.

– 76 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

18. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

During the year ended 31 March 2008, the Group subscribed for convertible note at principal amount of HK$13,000,000 issued by Wai Yuen Tong Medicine Holdings Limited (the ‘‘CN’’) which is listed in Hong Kong (‘‘the CN issuer’’) at a total consideration equal to the principal amount. The Group has designated this convertible note as financial assets at fair value through profits or loss.

The details of the convertible notes were set out below:

Date of issue		3 August 2007
Aggregate principal amount		HK$13,000,000
Coupon rate		1 percent per annum
Conversion price		HK$0.58
Conversion period	3 August 2007 to 2 August 2009
Collaterals		Nil
Maturity date		2 August 2009

In case of early redemption, at any time after six months of the issuance of the CN, the CN issuer shall be entitled at its discretion by giving not less than 30 days notice to the holders of the CN to redeem all (but not some only) outstanding CN.

In case of redemption on maturity, 100% of the principal amount with any accrued and unpaid interest will be repaid.

As at 31 March 2008, the CN was valued at HK$12,357,000, which is determined by reference to the valuation report issued by RHL Appraisal Limited, an independent qualified professional valuer not connected to the Group. A decrease in fair value of HK$643,000 is recognised in the consolidated income statement for the year ended 31 March 2008.

The fair value of the CN was calculated using the Binomial Model. The inputs into the models were as follows:

	18 September 2008	31 March 2008
Stock price	HK$0.14	HK$0.207
Exercise price	HK$0.58	HK$0.58
Expected volatility	79.74%	82.70%
Expected dividend yield	0%	0%
Risk free Rate	Hong Kong Exchange Fund Bills	Hong Kong Exchange Fund Bills
	& Notes as at 18 September 2008	& Notes as at 31 March 2008
Credit Spread (1.333 years)	N/A	485b.p.

On 18 September 2008, the CN issuer had early redeemed the CN with consideration of approximately HK$12,675,000. Accordingly, as the carrying amount of the CN on the date of redemption is approximately HK$12,488,000 which is determined by reference to the valuation report issued by BMI Appraisals Limited, an independent qualified professional valuer not connected to the Group, gain on changes in fair value of the CN and redemption of the CN of approximately HK$131,000 and HK$187,000 respectively was recognised in the consolidated income statement during the year ended 31 March 2009. The value of the CN varies with different variables of certain subjective assumptions. Any change in the variables so adopted may materially affect the estimation of the fair value of the CN.

– 77 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

19. INVENTORIES

Raw materials Work in progress Finished goods	As at 31 March 2007 2008 HK$’000 HK$’000 33,576 9,135 11,323 4,925 6,188 1,100 51,087 15,160	2009 HK$’000 — — 200 200	As at 30 September 2009 HK$’000 — — —
			—

During the year ended 31 March 2008, there was an increase in the estimated net realisable value of certain finished goods due to change in demand in market. As a result, a reversal of write-down of finished goods of approximately HK$435,000 had been recognised and included in cost of sales.

20. TRADE RECEIVABLES

Trade receivables consisted of:

Trade receivables Less: Impairment loss recognised	As at 31 March 2007 2008 HK$’000 HK$’000 44,795 13,500 (4,858) (4,734) 39,937 8,766	2009 HK$’000 14,261 (7,037) 7,224	As at 30 September 2009 HK$’000 57,258 (7,037)
			50,221

The aged analysis of trade receivables net of impairment recognised at the end of the reporting period is as follow:

0–30 days 31–60 days 61–90 days 91–120 days Over 120 days	As at 31 March 2007 2008 HK$’000 HK$’000 28,034 4,249 1,188 1,694 1,188 897 826 447 8,701 1,479 39,937 8,766	2009 HK$’000 6,062 1,123 16 16 7 7,224	As at 30 September 2009 HK$’000 48,028 1,396 142 129 526
			50,221

The Group normally allows a credit period of 30–120 days to its customers.

– 78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At the end of each reporting period, the ageing analysis of trade receivables which are past due but not impaired are as follows:

0–30 days 31–60 days 61–90 days 91–120 days Over 120 days	As at 31 March 2007 2008 HK$’000 HK$’000 6,854 1,565 1,188 636 1,188 151 826 347 8,701 1,479 18,757 4,178	2009 HK$’000 289 18 16 16 7 346	As at 30 September 2009 HK$’000 656 1,465 128 16 526
			2,791

Trade receivables that were neither past due nor impaired relate to a wide range of customers for whom there was no recent history of default.

Trade receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable.

Movement in the impairment loss recognised in respect of trade receivables:

Balance at beginning of the year/period Impairment loss recognised Amount written off as uncollectible Impairment loss reversed Balance at end of the year/period	As at 31 March 2007 2008 HK$’000 HK$’000 2,542 4,858 3,557 1,383 — (1,507) (1,241) — 4,858 4,734	2009 HK$’000 4,734 2,303 — — 7,037	As at 30 September 2009 HK$’000 7,037 — — —
			7,037

Included in the impairment loss recognised in respect of trade receivables are individually impaired trade receivables with an aggregate balance of approximately HK$4,858,000, HK$4,734,000, HK$7,037,000 and HK$7,037,000 as at 31 March 2007, 2008, 2009 and 30 September 2009 respectively since the management considered the prolonged outstanding balances were uncollectible. The Group does not hold any collateral over these balances.

– 79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES

Deposits and other receivables Less: Impairment loss recognised Prepayments Less: Impairment loss recognised	As at 31 March 2007 2008 HK$’000 HK$’000 18,015 21,574 — — 18,015 21,574 2,960 3,221 — — 20,975 24,795	2009 HK$’000 24,595 (17,116) 7,479 3,251 (1,869) 8,861	As at 30 September 2009 HK$’000 25,175 (17,116)
			8,059 3,127 (1,869)
			9,317

Movement in the impairment loss recognised in respect of deposits, prepayments and other receivables:

Balance at beginning of the year/period Impairment loss recognised during the year/period Balance at end of the year/period	As at 31 March 2007 2008 HK$’000 HK$’000 — — — — — —	2009 HK$’000 — 18,985 18,985	As at 30 September 2009 HK$’000 18,985 —
			18,985

Included in the impairment loss recognised in respect of deposits, prepayments and other receivables are individually impaired other receivables with an aggregate balance of approximately HK$18,985,000 at 31 March 2009 and 30 September 2009 since the management considered the prolonged outstanding balances were uncollectible. The Group does not hold any collateral over these balances.

22. HELD FOR TRADING INVESTMENTS

The held for trading investments comprise equity securities listed in Hong Kong and are stated at fair values which are based on the quoted market bid prices on the Stock Exchange.

– 80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23. AMOUNTS DUE FROM RELATED COMPANIES

Amounts due from related companies disclosed pursuant to section 161B of the Companies Ordinance are as follows:

Name of related party Vevion (Note 1) Always Online (Hong Kong) Company Limited (‘‘Always’’) (Note 1)	As at 31 March 2007 2008 HK$’000 HK$’000 — — — — — —	2009 HK$’000 24 39 63	As at 30 September 2009 HK$’000 — —
			—

The above balances are unsecured, interest-free and repayable on demand.

The maximum balances outstanding during the Relevant Periods are as follow:

Name of related party Vevion (Note 1) Always (Note 1)	Year ended 31 March 2007 2008 2009 HK$’000 HK$’000 HK$’000 — — 24 — — 39	Six months ended 30 September 2009 HK$’000 24
		39

Note:

• (1) Mr. Chan Hoi Lam, a director of a subsidiary of the Company, is also the common director in these companies.

24. DEPOSITS IN OTHER FINANCIAL INSTITUTION

The amounts represented deposits placed with securities brokers for trading listed securities in Hong Kong and carry interest at prevailing market rates.

25. BANK BALANCES AND CASH

Bank balances and cash comprise bank balances carry interest at prevailing market rates.

At the end of each reporting period, bank balances and cash were substantially denominated in HK$.

– 81 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

26. TRADE AND OTHER PAYABLES

Trade payables Other payables Provision for litigation Accruals	As at 31 March 2007 2008 HK$’000 HK$’000 43,889 30,233 — 1,347 — — 26,427 14,016 70,316 45,596	2009 HK$’000 30,926 4,533 671 21,714 57,844	As at 30 September 2009 HK$’000 81,516 3,967 1,539 21,073
			108,095

Ageing analysis of trade payables is as follows:

0–30 days 31–60 days 61–90 days 91–120 days Over 120 days	As at 31 March 2007 2008 HK$’000 HK$’000 18,407 4,854 4,599 2,909 4,283 2,753 5,060 2,745 11,540 16,972 43,889 30,233	2009 HK$’000 5,395 412 31 452 24,636 30,926	As at 30 September 2009 HK$’000 22,321 30,419 25 73 28,678
			81,516

The average credit period for purchases ranged from 30 days to 120 days.

27. AMOUNTS DUE TO DIRECTORS

Executive directors: Ms. Chan Hoi Ling (note 1) Mr. Chan Hoi Lam (note 2) Mr. Yau Kang Nam (note 3) Non-executive directors: Mr. Tse On Kin (note 4) Mr. Tse On Po, Vincent (note 4) Independent non-executive directors: Mr. Wong Yun Kuen (note 5) Mr. Lau Man Tak (note 6) Mr. Ng Sui Keung (note 7) Mr. Lai Kin Keung (note 7) Mr. Yueh Yung Hsin (note 7)	As at 31 March 2007 2008 HK$’000 HK$’000 — 46 270 — 560 — — 34 — 34 — 46 — 1 100 — 100 — 100 — 1,130 161	2009 HK$’000 — — — — — — — — — — —	As at 30 September 2009 HK$’000 — — — — — — — — — —
			—

– 82 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes:

• (1) Re-designated as an executive director from independent non-executive director on 13 May 2008 and resigned on 24 November 2009.

• (2) Resigned on 26 March 2008.

• (3) Retired on 25 January 2008.

• (4) Appointed on 26 June 2007 and resigned on 1 August 2008.

• (5) Appointed on 26 June 2007

• (6) Appointed on 27 March 2008

• (7) Resigned on 27 March 2008.

The amounts were unsecured, interest-free and have been fully repaid during the year ended 31 March 2009.

28. OBLIGATIONS UNDER FINANCE LEASES

It is the Group’s policy to lease certain of its machinery and equipment under finance leases. The average lease term is 3 to 4 years. Interest rates are either fixed at the contract date or variable with reference to the prevailing market rates. The average effective borrowing rate (which was also equal to contracted interest rates) ranged from 6.6% to 7.1% for the year ended 31 March 2007, 6.63% to 10.5% for the year ended 31 March 2008 and 2009 and six months ended 30 September 2008 and 2009. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

Amounts payable under finance leases Within one year More than one year but not exceeding two years More than two years but not exceeding five years Less: Future finance charges Present value of lease obligations	Minimum lease payments As at 31 March 2007 2008 2009 HK$’000 HK$’000 HK$’000 9,680 1,920 497 3,002 934 — 1,417 67 — 14,099 2,921 497 (770) (176) (5) 13,329 2,745 492	As at 30 September 2009 HK$’000 497 — — 497 (5) 492

– 83 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Present value of minimum lease payments

Amounts payable under finance leases Within one year More than one year but not exceeding two years More than two years but not exceeding five years Present value of lease obligations Less: Amount due within one year shown under current liabilities Amount due for settlement after one year	As at 31 March 2007 2008 HK$’000 HK$’000 9,146 1,794 2,813 885 1,370 66 13,329 2,745 (9,146) (1,794) 4,183 951	2009 HK$’000 492 — — 492 (492) —	As at 30 September 2009 HK$’000 492 — —
			492 (492)
			—

The Group’s obligations under finance leases are denominated in HK$ and secured by the lessors’ charge over the leased assets.

29. SHORT-TERM BANK BORROWINGS

Export loans (note a) Discounted bills Trust receipts and import loans (note a) Short-term bank loans (note b) Bank overdrafts (note c)	As at 31 March 2007 2008 HK$’000 HK$’000 18,108 1,470 4,135 — 13,673 505 5,000 — 10,988 1,923 51,904 3,898	2009 HK$’000 — — — — 82 82	As at 30 September 2009 HK$’000 — — — — —
			—

Notes:

• a. Export loans, trust receipts and import loans carry at variable interest rates ranging from 6.4% to 7.4% per annum in 2007 and 4.28% to 5.19% per annum in 2008.

• b. Short-term bank loans carry a variable interest rate ranging from 5% to 6% in per annum.

• c. Bank overdrafts carry at interest rate of 5% to 6% per annum in 2007, 7.25% to 9% per annum in 2008 and 9% per annum in 2009.

As at 31 March 2007 and 2008, all the above bank borrowings were granted to the subsidiaries of the Company by banks and were guaranteed by the Company.

– 84 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

30. MAJOR NON-CASH TRANSACTION

For the year ended 31 March 2007, certain subsidiaries of the Group entered into finance lease arrangements of approximately HK$5,984,000 in respect of machinery and equipment with capital value at the inception of the lease of approximately HK$9,264,000.

31. SHARE CAPITAL

Notes Authorised: At 1 April 2006, 31 March 2007, 31 March 2008, 31 March 2009 and 30 September 2009 Issued and fully paid: At 1 April 2006 Issue of new shares upon exercise of share options (a) Capital reduction (b) Issue of new shares upon placing (c) Issue of new shares upon open offer (d) At 31 March 2007 Issue of new shares upon placing (e) At 31 March 2008 Issue of new shares upon placing (f) Exercise of share option (g) At 31 March 2009 and 30 September 2009	Number of shares Par value per ordinary share HK$ 10,000,000,000 0.01 5,930,985,107 0.01 31,500,000 0.01 (5,664,360,852) 0.01 39,000,000 0.01 280,936,879 0.01 618,061,134 339,600,000 0.01 957,661,134 191,000,000 0.01 6 0.01 1,148,661,140	Share capital HK$’000 100,000 59,310 315 (56,644) 390 2,809 6,180 3,396 9,576 1,910 — 11,486

Notes:

• (a) On 7 April 2006, the Company issued 31,500,000 shares at exercise price of HK$0.016 each upon exercise of share options.

• (b) On 11 April 2006, the Company undertook the following capital reorganisation:

• (i) every twenty shares of par value of HK$0.01 each in the issued ordinary share capital of the Company had been consolidated into one consolidation share (the ‘‘Consolidation Share’’) of par value of HK$0.20;

• (ii) the paid up capital of each Consolidation Share in issue cancelled to the extent of HK$0.19 on the nominal value of HK$0.20 of each Consolidation Share so as to form one reorganised share of par value of HK$0.01 each; and

• (iii) the credit arising from the capital reorganisation was transferred to the contributed surplus account of the Company.

– 85 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• (c) On 26 July 2006, the Company allotted 39,000,000 new shares to Mr. Chan Hoi Lam (Mr. Chan), an existing substantial shareholder and director of the Company who resigned on 26 March 2008, at a price of HK$0.21 per share pursuant to a subscription agreement upon a successful placing by Mr. Chan of the same number of existing shares of the Company held by Mr. Chan with an underwritten arrangement.

• (d) On 15 March 2007, the Company issued 280,936,879 new shares as a result of an open offer (the ‘‘ Open Offer Shares’’) with underwriting arrangement on the basis of five Open Offer Shares for every six existing shares at HK$0.10 per Open Offer Share.

• (e) (i) On 26 April 2007, 33,000,000 ordinary shares of HK$0.01 each at price of HK$0.171 each in the capital of the Company were issued pursuant to placing and subscription agreements in relation to the placing of existing shares and subscription for new shares of the Company.

• (ii) On 8 May 2007, 33,000,000 ordinary shares of HK$0.01 each at price of HK$0.180 each in the capital of the Company were issued pursuant to placing and subscription agreements in relation to the placing of existing shares and subscription for new shares of the Company.

• (iii) On 5 July 2007, 136,800,000 ordinary shares of HK$0.01 each at price of HK$0.26 each in the capital of the Company were issued pursuant to a placing and subscription agreements in relation to the placing of existing shares and subscription for new shares of the Company.

• (iv) As the Company announced on 6 June 2007, 24 August 2007 and 26 November 2007, the Company conditionally agreed to place, through Kingston Securities Limited (the ‘‘Placing Agent’’) on a best effort basis, a maximum of 273,600,000 ordinary shares of HK$0.01 each in the capital of the Company by two equal tranches. Completion of the tranche 1 placing took placed on 26 July 2007 that the Placing Agent has fully placed a total of 136,800,000 tranche 1 placing shares at price of HK$0.23 per placing share. Up to 24 November 2007, none of the tranche II placing shares have been placed and the tranche II placing agreement has expired and ceased thereafter.

• (f) On 23 June 2008, 191,000,000 ordinary shares of HK$0.01 each at price of HK$0.159 each in the capital of the Company were issued pursuant to a placing and subscription agreements in relation to the placing of new shares of the Company.

• (g) On 30 September 2008, the Company issued 6 ordinary shares of HK$0.01 each for cash at the exercise price of HK$0.174 each upon exercise of share options granted on 17 June 2008.

All the shares issued during the Relevant Periods rank pari passu with then existing shares in all respects.

– 86 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

32. SHARE OPTIONS

On 29 August 2002, the Company adopted a share option scheme (the ‘‘Scheme’’) which complies with the new requirements of Chapter 17 of the Listing Rules effective 1 September 2001.

During the year ended 31 March 2008 and 2009, 6,180,000 and 36,000,000 options were granted under the Scheme to employees of the Group respectively.

The fair value of the share options granted during the year at the date of grant is HK$0.109293 and HK$0.062799 each at 31 March 2008 and 2009 respectively which were valued by RHL Appraisal Limited, an independent qualified professional valuer not connected to the Group.

The fair values of the share options granted during the year/period were calculated using the Trinomial Model and the Binomial Model. The inputs into model were as follows:

	17 June 2008	30 April 2007
Weighted average share price	HK$0.171	HK$0.2084
Weighted average exercise price	HK$0.174	HK$0.2084
Expected volatility	78.86%	66.17%
Expected life	3	3
Risk free rate	3.382%	3.994%
Expected dividend yield	N/A	N/A
Valuation model used	Trinomial Model	Binomial Model

The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of weekly annualised volatility of the underlying stock.

During the year ended 31 March 2008 and 2009, the Group recognised the total expenses of approximately HK$675,000 and HK$2,260,000 in relation to share options granted by the Company respectively.

– 87 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The details of the movements in the number of options outstanding during the Relevant Periods which have been granted under the Scheme are as follows:

Year ended 31 March 2007

Category Name of participant Date of grant Exercise period Previous exercise price per share Adjusted exercise price per share Adjusted exercise price per share (Notes 1 & 2) (Note 1) (Note 5) (Note 6) HK$ HK$ HK$ Directors Kan Shiu Cheong, Frederick 20.9.2005 20.9.2005 to 19.9.2008 0.0244 0.488 0.419 Chan Hoi Lam 3.4.2003 3.4.2003 to 2.4.2006 0.016 — — 20.9.2005 20.9.2005 to 19.9.2008 0.0244 0.488 0.419 Jiang Hai Qing 3.4.2003 3.4.2003 to 2.4.2006 0.016 — — Employees In aggregate 3.4.2003 3.4.2003 to 2.4.2006 0.016 — — 26.4.2005 26.4.2005 to 25.4.2008 0.0322 0.644 0.533 Total Exercisable at the end of the year	Outstanding at 1.4.2006 44,437,500 31,500,000 44,437,500 11,250,000	Exercised during the year — (31,500,000) — —	Number o Lapsed during the year — — — (11,250,000)	f share options Adjustment during the year (Note 5) (42,215,625) — (42,215,625) —	Adjustment during the year (Note 6) 365,851 — 365,851 —	Outstanding at 31.3.2007 Weighted average closing price (Note 3) HK$ 2,587,726 — — 0.0140 2,587,726 — — — 5,175,452 — — 2,554,970 — 2,554,970 7,730,422 7,730,422
	131,625,000	(31,500,000)	(11,250,000)	(84,431,250)	731,702
	23,062,500 43,875,000	— —	(23,062,500) —	— (41,681,250)	— 361,220
	66,937,500	—	(23,062,500)	(41,681,250)	361,220
	198,562,500	(31,500,000)	(34,312,500)	(126,112,500)	1,092,922
	198,562,500

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APPENDIX I

Year ended 31 March 2008

Category Name of participant Date of grant Exercise period Exercise price per share (Notes 1 & 2) (Note 1) HK$ Directors Kan Shiu Cheong, Frederick (note) 20.9.2005 20.9.2005 to 19.9.2008 0.4190 Chan Hoi Lam (note) 20.9.2005 20.9.2005 to 19.9.2008 0.4190 Employees In aggregate 26.4.2005 26.4.2005 to 25.4.2008 0.5330 30.4.2007 30.4.2007 to 29.4.2010 0.2084 Total Exercisable at the end of the year	Number of share options Outstanding at 1.4.2007 Granted during the year Outstanding at 31.3.2008 2,587,726 — 2,587,726 2,587,726 — 2,587,726 5,175,452 — 5,175,452 2,554,970 — 2,554,970 — 6,180,000 6,180,000 2,554,970 6,180,000 8,734,970 7,730,422 6,180,000 13,910,422 7,730,422 13,910,422	Number of share options Outstanding at 1.4.2007 Granted during the year Outstanding at 31.3.2008 2,587,726 — 2,587,726 2,587,726 — 2,587,726 5,175,452 — 5,175,452 2,554,970 — 2,554,970 — 6,180,000 6,180,000 2,554,970 6,180,000 8,734,970 7,730,422 6,180,000 13,910,422 7,730,422 13,910,422
		5,175,452
		2,554,970 6,180,000
		8,734,970
		13,910,422
		13,910,422

Note: Resigned as directors on 26 March 2008 and become employees of the Group.

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Year ended 31 March 2009

Category Name of participant Date of grant Exercise period Exercise price per share (Notes 1 & 2) (Note 1) HK$ Director Wong Hin Shek 17.6.2008 17.6.2008 to 16.6.2011 0.1740 Employees and others In aggregate 26.4.2005 26.4.2005 to 25.4.2008 0.5330 20.9.2005 20.9.2005 to 6.10.2008 (Note 4) 0.4190 30.4.2007 30.4.2007 to 29.4.2010 0.2084 17.6.2008 17.6.2008 to 16.6.2011 0.1740 Exercisable at the end of the year		Numbe	r of share options	r of share options	Outstanding at 31.3.2009 Weighted average closing price (Note 3) HK$ 9,000,000 — — 6,180,000 26,999,994 0.1503 33,179,994 42,179,994 42,179,994
	Outstanding at 1.4.2008 — 2,554,970 5,175,452 6,180,000 — 13,910,422 13,910,422 13,910,422	Granted during the year 9,000,000 — — — 27,000,000 27,000,000 36,000,000	Exercised during the year — — — — 6 6 6	Lapsed during the year —
				2,554,970 5,175,452 — —
				7,730,422
				7,730,422

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Six months ended 30 September 2009

Category Name of participant Date of grant Exercise period Exercise price per share (Note 1 & 2) (Note 1) HK$ Director Wong Hin Shek 17.6.2008 17.6.2008 to 16.6.2011 0.1740 Employees and others In aggregate 30.4.2007 30.4.2007 to 29.4.2010 0.2084 17.6.2008 17.6.2008 to 16.6.2011 0.1740 Exercisable at the end of the period Notes:	Outstanding at 1.4.2009 9,000,000 6,180,000 26,999,994 33,179,994 42,179,994 42,179,994	Number of share options Granted during the period Exercised during the period Lapsed during the period — — — — — — — — — — — — — — —	Number of share options Granted during the period Exercised during the period Lapsed during the period — — — — — — — — — — — — — — —	Outstanding at 30.9.2009 9,000,000
			— —	6,180,000 26,999,994
			—	33,179,994
			—	42,179,994
				42,179,994

• (1) All dates are shown day/month/year.

• (2) The vesting period of the options is from the date of grant until the commencement of the exercise period.

• (3) The weighted average closing price of the Company’s shares immediately before the dates on which the options were exercised.

• (4) The exercise period was extended from 19 September 2008 to 6 October 2008.

• (5) The reorganisation of share capital of the Company was approved by shareholders on 10 April 2006 and became effective on 11 April 2006. Pursuant to the terms of the Scheme, the exercise price and number of shares that can be subscribed for under the Scheme are required to be adjusted upon the capital reorganisation becoming effective.

• (6) The open offer was completed on 15 March 2007. Pursuant to the terms of Share Option Scheme, the exercise price and number of shares that can be subscribed for under the Scheme are required to be adjusted upon the completion of the open offer.

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FINANCIAL INFORMATION OF THE GROUP

33. DEFERRED TAXATION

The followings are the major deferred tax (liabilities) assets recognised and the movements thereon during the Relevant Periods:

At 1 April 2006 (Charge) credit to the consolidated income statement for the year At 31 March 2007 (Charge) credit to the consolidated income statement for the year At 31 March 2008 Credit (charge) to the consolidated income statement for the year Change in tax rate At 31 March 2009 and 30 September 2009	Accelerated tax depreciation HK$’000 (1,364) (645) (2,009) (677) (2,686) 2,659 27 —	Estimated tax losses HK$’000 1,364 645 2,009 677 2,686 (2,659) (27) —	Total HK$’000 — —
			— —
			— — —
			—

The Group has unused tax losses of approximately HK$176,748,000 HK$187,811,000 and HK$216,856,000 and HK$229,650,000 at 31 March 2007, 2008 and 2009 and 30 September 2009 respectively and other deductible temporary difference of approximately HK$nil, HK$6,000 and HK$24,759,000 and HK$23,933,000 at 31 March 2007, 2008 and 2009 and 30 September 2009 respectively available for offsetting against future profits. A deferred tax asset has been recognised in respect of HK$11,480,000, HK$3,869,000 and HK$16,115,000 and HK$nil at 31 March 2007, 2008 and 2009 and 30 September 2009 respectively of such losses. No deferred tax asset has been recognised in respect of the remaining tax losses of approximately HK$165,268,000, HK$183,942,000 and HK$200,741,000 and HK$229,650,000 at 31 March 2007, 2008 and 2009 and 30 September 2009 respectively due to the unpredictability of future profit streams. At 31 March 2009 and 30 September 2009, included in unrecognised tax losses are losses of approximately HK$11,279,000 that will expire in 2014. Other losses may be carried forward indefinitely.

34. LITIGATION AND EVENTS AFTER THE REPORTING PERIOD

• (i) As at 30 September 2009, a number of lawsuits and claims were lodged against the Group which remain outstanding as follow:

a) Golddoor Company Limited (‘‘Golddoor’’)

On 27 August 2008, one of the Group’s customers, Golddoor brought an action in the High Court of Hong Kong under HCA 1606 of 2008 against a wholly-owned subsidiary of the Company, Climax Paper Converters, Limited (‘‘CPCL’’) for the balance of deposit of approximately RMB1,435,000 (equivalent to approximately HK$1,624,000) together with interest, further and/or other relief and cost of this action. CPCL has already filed a defence on 13 October 2008. Up to the date of this report, this action is still in progress and no hearing date has been fixed. With the advice from the Group’s legal adviser, the directors of the Company are of the opinion that the Group has proper and valid defence to Golddoor, accordingly, no provision for the claim has been made further to the deposit received recognised for these financial statements.

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On 29 October 2008, Golddoor also brought an action in the People’s Court of Dongguan, Guangdong Province under (2008) 東法民四初字第1105號 against CPCL and Climax Paper Products Manufacturing (Dongguan) Co., Ltd. (‘‘CPD’’) for the balance of deposit of RMB1,429,000 (equivalent to approximately HK$1,617,000). CPCL and CPD have already filed a defence on 2 December 2008. On 15 November 2009, Golddoor applied a withdrawal of the action in 廣東省東莞市第二人民法院 under (2009) 東二法民四初字第97號 and the action had been withdrawn on 16 November 2009.

b) Hang Seng Bank (‘‘Hang Seng’’)

One of the Group’s suppliers, Kai Sung Papers Co. Ltd. (‘‘Kai Sung’’) entered into a factoring agreement with Hang Seng pursuant to which the ownership of any debts owed to Kai Sung to vest in Hang Seng. From May to August 2007, CPCL entered into various contracts with Kai Sung pursuant to which Kai Sung agreed to sell and deliver to CPCL and CPCL agreed to purchase goods from Kai Sung for the total purchase price of approximately HK$1,795,000. On 18 March 2009, Hang Seng brought an action in the High Court of Hong Kong under HCA 769 of 2009 against CPCL for the outstanding balance of approximately HK$1,405,000 plus cost and interest on the said balance. Since no defence have been served by CPCL, judgment has been issued by the High Court of Hong Kong on 8 April 2009, pursuant to which CPCL should pay approximately HK$1,405,000 plus costs of HK$1,000 and interest of approximately HK$601,000 from 8 August 2007 to 18 March 2009 and continuing to accrue at the judgment rate until payment. On 22 July 2009, Hang Seng has accepted payment of HK$1,110,000 by installments in full and final settlement of the judgment. CPCL paid the first installment of total HK$100,000 on 11 September 2009 and 14 September 2009. The Group had accrued for such payables as at 30 September 2009.

c) Lockey Paper Products Factory Limited (‘‘Lockey Paper’’)

On 30 March 2009, one of the Group’s suppliers, Lockey Paper brought an action in the District Court of Hong Kong under DCCJ 1606 of 2009 against a wholly-owned subsidiary of the Company, Shiu’s Investments Limited (‘‘SIL’’) for approximately HK$357,000 and an action in the High Court of Hong Kong under HCA 889 of 2009 against CPCL for approximately HK$3,756,000 being the total outstanding balances of the price for goods sold and delivered to SIL and CPCL together with interest, further and/or other relief and costs. Since no defence has been given by SIL and CPCL, notices of intention to enter into judgment were served on SIL and CPCL on 20 April 2009. Subsequently, judgment have been issued by the District Court of Hong Kong and the High Court of Hong Kong on 15 July 2009 and 7 July 2009 respectively, pursuant to which SIL and CPCL do pay the sum of outstanding balances together with interest until payment and costs to Lockey Paper. Up to the date of this report, no repayment has been made by SIL and CPCL but no further legal action was taken by Lockey Paper. The Group had accrued for such outstanding balance plus cost and interest of HK$166,000 as at 30 September 2009.

d) Champion Basic International Limited (‘‘Champion Basic’’)

On 29 May 2009, one of the Group’s suppliers, Champion Basic brought an action in the District Court of Hong Kong under DCCJ 2551 of 2009 against a wholly-owned subsidiary of the Company, Climax Marketing Company Limited (‘‘CMCL’’) for approximately HK$281,000 being the outstanding balance of the price for goods sold and delivered to CMCL together with interest, further and/or other relief and cost. Since no defence has been given by CMCL, notice of intention to enter judgment was served on CMCL on 10 July 2009. On 28 August 2009, judgment has been issued by the District Court, pursuant to which CMCL do pay the sum of outstanding balance together with interest until payment and costs of HK$7,130. Subsequently, garnishee orders were issued by the District Court with Standard Chartered Bank (Hong Kong) Limited, DBS Bank (Hong Kong) Limited and Wing Hang Bank, Limited on 16 September 2009, 29 September 2009 and 30 September 2009 respectively. At 12 November 2009, the garnishee, Standard Chartered Bank (Hong Kong) Limited made a payment of approximately HK$110,000 with a cashier order dated 6

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FINANCIAL INFORMATION OF THE GROUP

November 2009 for partial payment of the outstanding balance. On 25 November 2009, CMCL is still indebted to the Champion Basic in the sum of approximately HK$192,000 together with further interest until the date of full payment. The Group had accrued for such outstanding balance and interest of HK$14,000 as at 30 September 2009.

On 8 December 2009, a winding-up petition was filed against CMCL by Champion Basic in the High Court of Hong Kong under HCCW 705 of 2009. The hearing of the winding-up petition against CMCL was originally scheduled on 10 February 2010 and was adjourned by the High Court of Hong Kong to 24 February 2010. On 24 February 2010, the winding-up petition was heard and a winding up order was made against CMCL. Upon the application of Champion Basic, provisional liquidators of CMCL were appointed by the High Court of Hong Kong. As at 30 September 2009, there are no significant non-current assets and liabilities of CMCL need to be reclassified as current assets and liabilities as a result of the winding-up order.

e) Orix Asia Limited (‘‘Orix’’)

By lease agreements dated 18 March 2005 and 7 April 2005 made between Orix and SIL, Orix agreed to let and SIL agreed to take on lease certain machines for a period of 48 months. The Company and CPCL have provided financial guarantees to SIL. On 5 March 2009, Orix brought an action in the District Court of Hong Kong under DCCJ 693 of 2009 against the Company, SIL and CPCL for recovery of approximately HK$199,000 under the lease and guarantees agreements together with interest and costs. Since no defence have been given by the Company, SIL or CPCL, judgment has been issued by the District Court on 16 April 2009, pursuant to which the Company, SIL and CPCL do jointly and severally pay the sum of outstanding balances together with interest until payment and costs to Orix. Subsequently, a statutory demand was served on the Company and CPCL on 17 September 2009 for the outstanding balances plus cost and interest of approximately HK$9,000. At 14 October 2009, the Company had made payment to Orix in full and final settlement of the judgment.

f) Fook Woo Assort Paper Co. Ltd. (‘‘Fook Woo’’)

On 21 July 2008, one of the Group’s suppliers, Fook Woo brought an action in the High Court of Hong Kong under HCA 782 of 2008 against CPCL for approximately HK$1,201,000 being the outstanding balance of the price for goods sold and delivered to the CPCL together with interest, further and/or other relief and cost. Since no defence have been given by CPCL, judgment has been issued by High Court on 11 August 2008, pursuant to which CPCL do pay the sum of outstanding balance together with interest until payment and costs to Fook Woo. Up to the date of this report, no repayment has been made by CPCL and no further legal action was taken by Fook Woo. The Group had accrued for such outstanding balance plus cost and interest of HK$585,000 as at 30 September 2009.

g) 深圳市恆輝印刷包裝有限公司 (‘‘Heng Hui’’)

On 11 December 2008, one of the Group’s suppliers, Heng Hui brought an action in 深圳市寶 安區人民法院 under (2009) 深寶法民二初字第752號 against 東莞長安肇業文具制品廠 (‘‘SILF’’, a factory held by SIL), SIL, CPD, CPCL and CMCL (collectively referred to as the ‘‘Defendants for Heng Hui’’) for approximately RMB1,002,000 being the outstanding balance of the price for goods sold and delivered to SILF and CPD together with interest, further and/or other relief and cost. On 5 March 2009, three sets of machines of the Defendants for Heng Hui were temporarily sequestrated by 深圳市寶安區人民法院 upon application of Heng Hui (with net carrying value as at 31 March 2009 of approximately HK$515,000 and 30 September 2009 of nil). On 15 May 2009, judgment has been issued by 深圳市寶安區人民法院, pursuant to which the Defendants for Heng Hui should accept the delivery of remaining goods of approximately RMB443,000 (equivalent to approximately HK$501,000) and do pay the sum of outstanding balance together with interest until payment and costs to Heng Hui. SILF has subsequently made an appeal to 深圳市中級人民法院 on 7 July 2009.

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FINANCIAL INFORMATION OF THE GROUP

On 7 January 2010, judgment has been issued by 深圳市中級人民法院 pursuant to which SILF has withdrawn the appeal. Up to the date of this report, no repayment has been made by the Defendants for Heng Hui and no further legal action was taken by Heng Hui. The Group had accrued for such outstanding balance plus cost of RMB20,000 (equivalent to approximately HK$23,000) and interest of RMB39,000 (equivalent to approximately HK$44,000) as at 30 September 2009.

h) 東莞市華彰紙業有限公司 (‘‘Hua Zhang’’)

On 6 March 2009, one of the Group’s suppliers, Hua Zhang brought an action in 廣東省東莞 市第二人民法院 under (2009) 東二法民四初字第188號 against SILF, SIL and CPD (collectively referred to as the ‘‘Defendants for Hua Zhang’’) for RMB558,000 (equivalent to approximately HK$632,000) being the outstanding balance of the price for goods sold and delivered to Defendants for Hua Zhang together with interest, further and/or other relief and cost. On 11 March 2009, 廣東 省東莞市第二人民法院 issued judgment pursuant to which the bank account of CPD with a value of approximately RMB558,000 (equivalent to approximately HK$632,000) should be frozen or machines and assets of SIL with equivalent value should be sequestrated upon application of Hua Zhang. On 18 March 2009, a bank balance of approximately RMB129 (equivalent to approximately HK$146) was frozen and eleven machines were temporarily sequestrated (with net carrying value of eleven sets of machines as at 31 March 2009 of approximately HK$421,000 and 30 September 2009 of nil). On 11 May 2009, Hua Zhang and Defendants for Hua Zhang reached an accommodation that the Defendants for Hua Zhang only need to repay approximately RMB466,000 (equivalent to approximately HK$528,000) by three installments instead of approximately RMB558,000 (equivalent to approximately HK$632,000). Hua Zhang agreed to release the sequestration of assets when the second installment is paid. On 21 May 2009, the properties (i.e. the bank balance and eleven sets of machines) arrested were released by 廣東省東莞市第二人民法院. Up to the date of this report, no repayment has been made by Defendants for Hua Zhang according to the agreed repayment schedule but no further legal action was taken by Hua Zhang. The Group had accrued for the outstanding balance of RMB155,000 (equivalent to approximately HK$177,000) and interest of RMB28,000 (equivalent to approximately HK$32,000) as at 30 September 2009.

i) 北京康得新複合材料股份有限公司 (‘‘Kang De Xin’’)

On 5 November 2008, one of the Group’s suppliers, Kang De Xin brought an action in 北京市 第一中級人民法院 under (2008) 中民初字第15766號 against SILF, CPCL and CPD (collectively referred to as the ‘‘Defendants for Kang De Xin’’) for approximately RMB417,000 (equivalent to approximately HK$472,000) being the outstanding balance of the price for goods sold and delivered to Defendants for Kang De Xin together with interest, further and/or other relief and cost. The writ was served on Defendants for Kang De Xin on 10 February 2009. On 3 November 2009, 北京市第一 中級人民法院 issued judgment pursuant to which CPCL do pay approximately RMB417,000 together with interest until payment and costs. Subsequently, CPD made an appeal on 17 November 2009. This legal action is still in progress up to the date of this report. The Group had accrued for the outstanding balance as at 30 September 2009.

j) 宋留坡 (‘‘Song’’)

On 9 June 2009, one of the Group’s employees, Song brought an action in 東莞市勞動爭議仲 裁庭長安分庭 under (2009) 第1029號 against SILF for approximately RMB863,000 (equivalent to approximately HK$978,000) being the compensation of medication and treatment as Song suffered from leukemia. On 15 June 2009, two machines of the SILF were temporarily sequestrated by 廣東省 東莞市第二人民法院 upon application of Song. On 16 July 2009, judgment has been issued by 東莞 市勞動爭議仲裁庭長安分庭 pursuant to which SILF do pay approximately RMB53,000 (equivalent to approximately HK$60,000) as the compensation of medication for the period from 18 December 2008 to 29 May 2009 and withdraw the institute proceedings from Song to SILF. On 17 August 2009, Song brought another action in 東莞市勞動爭議仲裁庭長安分庭 under (2009) 第641號 against SILF for approximately RMB29,000 (equivalent to approximately HK$33,000) being the

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FINANCIAL INFORMATION OF THE GROUP

compensation of medication from 13 May 2009 to 17 August 2009. On 27 September 2009, judgment has been issued by 東莞市勞動爭議仲裁庭長安分庭 pursuant to which SILF do pay approximately RMB25,000 (equivalent to approximately HK$28,000) for the period from 29 May 2009 to 17 August 2009. The auction of the sequestrated machines was held on 23 October 2009. The amount from auction was approximately RMB256,000 (equivalent to approximately HK$290,000) and part of which was used to settle the outstanding balances of approximately RMB53,000 (equivalent to approximately HK$60,000) and approximately RMB25,000 (equivalent to approximately HK$28,000). On 5 January 2010, Song brought another action in 東莞市勞動爭議仲裁庭長安分庭 under (2009) 第7號 against SILF for approximately RMB29,000 (equivalent to approximately HK$33,000) being the compensation of medication from 21 August 2009 to 31 December 2009. On 28 January 2010, judgment has been issued by 東莞市勞動爭議仲裁庭長安分庭 pursuant to which SILF do pay approximately RMB29,000 (equivalent to approximately HK$33,000) being the compensation of medication from 21 August 2009 to 31 December 2009. On 9 February 2010, notice of enforcement of payment under the judgment dated 28 January 2010 had been made by 廣東省東 莞市第二人民法院. Up to the date of this report, no repayment has been made by SILF and no further legal action was taken by Song. The Group had accrued for the outstanding balance as at 30 September 2009.

k) 廣州市榮天豪油墨塗料有限公司 (‘‘Rong Tian Hao’’)

On 28 October 2008, one of the Group’s suppliers, Rong Tian Hao brought an action in 廣東 省東莞市人民法院 under (2009) 東二法執字第3320號 against SIL and SILF (collectively referred to as the ‘‘Defendants for Rong Tian Hao’’) for approximately RMB107,000 (equivalent to approximately HK$121,000) being the outstanding balance of the price for goods sold and delivered to Defendants for Rong Tian Hao together with interest, further and/or other relief and cost. On 27 November 2008, Rong Tian Hao and Defendants for Rong Tian Hao reached an accommodation that the Defendants for Rong Tian Hao would pay an aggregate amount of approximately RMB107,000 (equivalent to HK$121,000) and 廣東省東莞市人民法院 had withdrawn the institute proceedings. Since no payment was made by Defendants for Rong Tian Hao to Rong Tian Hao, notice of enforcement of payment under the judgment had been made by 廣東省東莞市人 民法院 on 7 April 2009. On 20 April 2009, Rong Tian Hao and Defendants for Rong Tian Hao reached another accommodation that the Defendants for Rong Tian Hao would pay an aggregate amount of approximately RMB119,000 (equivalent to HK$135,000) by three installments. Up to the date of this report, no repayment has been made by Defendants for Rong Tian Hao according to the agreed repayment schedule and no further legal action was taken by Rong Tian Hao. The Group had accrued for the outstanding balance as at 30 September 2009.

l) Chan Ming Fung (‘‘Chan’’)

On 20 October 2009, one of the Group’s employees, Chan brought an action in the Labour Tribunal against CPCL for approximately HK$359,000 being the outstanding salaries. Pursuant to an order issued by the Labour Tribunal, CPCL do pay the outstanding balance in eleven installments. A certificate of award/order was registered in the District Court on 30 October 2009. CPCL settled the first and second installments in October 2009. However, no repayment was made according to the agreed repayment schedule and no further legal action was taken by Chan up to the date of this report. The Group had accrued for the outstanding balance as at 30 September 2009.

m) Mandatory Provident Fund Schemes Authority (‘‘MPFSA’’)

On 27 November 2009, MPFSA brought actions in the District Court of Hong Kong under DCCJ 5039 of 2009 and DCCJ 5040 of 2009 against CPCL and Climax Management Company Limited (‘‘CMGT’’) for the sum of approximately HK$114,000 and HK$192,000 due and owing to MPFSA respectively pursuant to sections 18(1) and 18(2) of the Mandatory Provident Fund Schemes Ordinance (Chapter 485). Since no defence has been served by CPCL and CMGT, judgments have been issued by the District Court of Hong Kong on 11 January 2010, pursuant to

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APPENDIX I

which CPCL and CMGT do pay the sum of outstanding together with fixed costs of approximately HK$2,000. However, no payment was made by CPCL and CMGT and no further legal action was taken by MPFSA up to the date of this report. The Group had accrued for the outstanding balances as at 30 September 2009.

As at 30 September 2009, trade and other payables of approximately HK$9,430,000 and provision for litigation of approximately HK$1,539,000 in aggregate have been recorded for the above litigations against the Group.

• (ii) Pursuant to the agreement dated 8 October 2009, the Company conditionally agreed to dispose of the entire equity interests in Climax Investments Limited and its subsidiaries (hereinafter collectively referred to as the ‘‘Target Group’’) and the sum of the outstanding loans owed by the Target Group to Good Billion Holdings Limited, wholly owned by a substantial shareholder of the Company at approximately HK$2.5 million (the ‘‘Disposal’’). Up to the date of this report, the Disposal has not been completed.

The consolidated statements of financial position as at the end of each reporting period, the consolidated income statements, consolidated statements of comprehensive income and consolidated statements of cash flows of the Target Group during the Relevant Periods are set out as follows:

a) Consolidated statements of financial position of the Target Group

Non-current assets Plant and equipment Prepayments Available-for-sale investments Current assets Inventories Trade receivables Deposits, prepayments and other receivables Amounts due from related companies Bank balances and cash	As at 31 March 2007 2008 HK$’000 HK$’000 62,095 31,184 26,311 24,071 3,500 — 91,906 55,255 51,087 15,160 39,937 8,766 18,288 22,230 — — 12,780 1,078 122,092 47,234	2009 HK$’000 2,659 10,217 — 12,876 200 3,277 6,156 63 132 9,828	As at 30 September 2009 HK$’000 — 9,693 —
			9,693
			— 2,497 6,235 — 158
			8,890

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FINANCIAL INFORMATION OF THE GROUP

Current liabilities Trade and other payables Amounts due to directors Tax payables Obligations under finance leases — amount due within one year Amount due to holding company Amounts due to fellow subsidiaries Short-term bank borrowings Net current liabilities Total assets less current liabilities Non-current liability Obligations under finance leases — amount due after one year Capital and reserves Share capital Reserves Equity attributable to owners of the Company Minority interests	As at 31 March 2007 2008 HK$’000 HK$’000 68,190 43,570 270 — — 2,232 9,146 1,794 250,833 250,833 93,383 105,669 51,904 3,898 473,726 407,996 (351,634) (360,762) (259,728) (305,507) 4,183 951 (263,911) (306,458) — — (263,912) (306,459) (263,912) (306,459) 1 1 (263,911) (306,458)	2009 HK$’000 50,109 — 2,330 492 363,979 — 82 416,992 (407,164) (394,288) — (394,288) — (394,289) (394,289) 1 (394,288)	As at 30 September 2009 HK$’000 57,061 — 2,136 492 364,843 125 — 424,657 (415,767) (406,074) — (406,074) — (406,075) (406,075) 1 (406,074)

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FINANCIAL INFORMATION OF THE GROUP

b) Consolidated income statements of the Target Group

Turnover Cost of sales Gross profit (loss) Other income Selling and distribution expenses Administrative expenses Impairment loss recognised in respect of plant and equipment Impairment loss recognised in respect of available-for-sale investments Impairment loss recognised in respect of deposits, prepayments and other receivables Impairment loss recognised in respect of amounts due from fellow subsidiaries Finance costs Loss before taxation Income tax expense Loss for the year/period Attributable to Owners of the Company Minority interests	Year 2007 HK$’000 258,910 (240,913) 17,997 958 (16,127) (49,473) — (6,000) — — (5,584) (58,229) — (58,229) (58,229) — (58,229)	ended 31 March 2008 2009 HK$’000 HK$’000 167,321 66,169 (153,241) (87,536) 14,080 (21,367) 8,771 12,514 (10,680) (4,267) (46,664) (44,665) (446) (10,408) (3,500) — — (18,985) — — (2,852) (562) (41,291) (87,740) (2,232) (76) (43,523) (87,816) (43,523) (87,816) — — (43,523) (87,816)	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) 47,973 12,768 (51,827) (13,339) (3,854) (571) 2,677 1,347 (2,489) (811) (11,325) (11,497) (1,914) — — — — — — (41) (268) (289) (17,173) (11,862) (927) 76 (18,100) (11,786) (18,100) (11,786) — — (18,100) (11,786)

– 99 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• c) Consolidated statement of comprehensive income of the Target Group

Loss for the year/period Translation differences of foreign operations Total comprehensive loss for the year/period, net of tax	Year 2007 HK$’000 (58,229) 577 (57,652)	ended 31 March 2008 2009 HK$’000 HK$’000 (43,523) (87,816) 974 (13) (42,549) (87,829)	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) (18,100) (11,786) 57 — (18,043) (11,786)

• d) Consolidated statements of cash flows of the Target Group

				Six months	ended
	Year	ended 31 March		30 September
	2007	2008	2009	2008	2009
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
				(unaudited)
Operating activities
Loss before taxation	(58,227)	(41,291)	(87,740)	(17,173)	(11,862)
Adjustments for:
Release of
non-current prepayments	2,239	2,240	1,941	1,119	524
Depreciation of plant and
equipment	9,692	8,322	4,668	2,588	—
Impairment loss recognised
in respect of available-for-
sale investments	6,000	3,500	—	—	—
Impairment loss recognised
in respect of plant and
equipment	—	446	10,408	1,914	—
Loss on written off of plant
and equipment	—	—	3,813	113	2,659
Impairment loss recognised
in respect of trade
receivables, net	2,316	1,383	2,303	—	—
Impairment loss recognised
in respect of deposits,
prepayments and other
receivables	—	—	18,985	—	—
Deposits forfeited for early
termination of a rental
agreement	—	—	1,600	—	—
Interest income	(97)	(1,409)	(131)	(296)	—
Finance costs	5,854	2,852	562	268	289
Net loss (gain) on disposal
of plant and equipment	3,485	3,710	(1,365)	—	—

– 100 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Loss on non-current prepayments upon sales of right of use and management of premises Allowance for (reversal of) inventories included in cost of sales Provision for litigation Operating cash flows before movements in working capital Decrease in inventories (Increase) decrease in trade receivables Decrease (increase) in deposits, prepayments and other receivables Increase (decrease) in trade and other payables Decrease in bills payable Cash from (used in) operating activities Hong Kong Profits Tax paid Net cash from (used in) operating activities	Year 2007 HK$’000 — 4,131 — (24,607) 19,698 (11,326) 1,095 21,881 (692) 6,049 — 6,049	ended 31 March 2008 2009 HK$’000 HK$’000 — 5,255 (435) 9,660 — 671 (20,682) (29,370) 36,362 5,300 29,788 3,186 (3,942) (5,702) (24,620) 5,867 — — 16,906 (20,719) — — 16,906 (20,719)	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) — — 1,685 200 — 868 (9,782) (7,322) 3,791 — 3,230 780 (5,814) (79) 6,210 6,084 — — (2,365) (537) — (118) (2,365) (655)

– 101 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Investing activities Purchase of plant and equipment Advance (to) from related companies Advance (to) from holding company Advances from (to) a fellow subsidiaries Proceeds from disposal of plant and equipment Proceeds from sales of right of use and management of premises Interest received Net cash from investing activities Financing activities New bank loan raised Principal repayment for obligations under finance leases Net cash used in repayment of trust receipt, import loans and export loans and discounted bills Interest paid Repayment to directors Finance leases charges paid Repayment of bank loans Net cash used in financing activities Net increase (decrease) in cash and cash equivalents	Year 2007 HK$’000 (10,308) — (49,234) 95,596 4,050 — 97 40,201 5,000 (10,212) (3,369) (4,677) (3,930) (1,177) (3,328) (21,693) 24,557	ended 31 March 2008 2009 HK$’000 HK$’000 (1,575) (333) — (63) — 113,145 12,286 (105,668) 20,008 11,334 — 7,850 1,409 131 32,128 26,396 — — (10,584) (2,253) (33,941) (1,975) (2,310) (491) (270) — (542) (71) (5,000) — (52,647) (4,790) (3,613) 887	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) — — — 63 — 864 1,019 125 3,876 — — — 296 — 5,191 1,052 — — (940) — (960) — (211) (289) 61 — (57) — — — (2,107) (289) 719 108

– 102 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Cash and cash equivalents of the year/period Effect of foreign exchange rate changes of cash and cash equivalents Cash and cash equivalents at the end of year/period Analysis of cash and cash equivalents, represented by: Bank balances and cash Bank overdrafts	Year 2007 HK$’000 (8,124) (14,641) 1,792 12,780 (10,988) 1,792	ended 31 March 2008 2009 HK$’000 HK$’000 1,792 (845) 976 8 (845) 50 1,078 132 (1,923) (82) (845) 50	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) (845) 50 1 — (125) 158 60 158 (185) — (125) 158	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) (845) 50 1 — (125) 158 60 158 (185) — (125) 158
				158
				158 —
				158

1. COMMITMENTS

Capital commitments Capital expenditure in respect of acquisition of plant and equipment contracted for but not provided in the Financial Information Other commitments Expenditure in respect of construction project in relation to non-current prepayment contracted for but not provided in the Financial Information	As at 31 March 2007 2008 HK$’000 HK$’000 4,882 13,695 848 902 5,730 14,597	2009 HK$’000 12,742 902 13,644	As at 30 September 2009 HK$’000 12,742 902
			13,644

– 103 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

36. OPERATING LEASE COMMITMENTS

The Group as lessee

At the end of each reporting period, the Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of rented premises, and hire of equipment which fall due as follows:

Within one year In the second to fifth year inclusive Over five years Within one year In the second to fifth year inclusive	2007 HK$’000 11,861 47,554 20,157 79,572 2007 HK$’000 130 324 454	Rented premises As at 31 March 2008 2009 HK$’000 HK$’000 11,071 6,189 41,472 11,606 12,148 — 64,691 17,795 Hire of equipment As at 31 March 2008 2009 HK$’000 HK$’000 130 — 194 — 324 —	As at 30 September 2009 HK$’000 505 — —
			505
			As at 30 September 2009 HK$’000 — —
			—

Operating lease payments for rented premises represent rentals payable by the Group for its office premises and factories. Leases for rented premises and hire of equipment are negotiated for an average term from one to ten years. The lease payments are fixed and no arrangements have been entered into for contingent rental.

– 104 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group as lessor

As explained in note 16, the Group leased back the Baoan Factory, which the Group had the right of usage upto 31 December 2019, back to the Landlord. At the end of each reporting period, the Group had contracted for the following future minimum lease payments each receivable in respect of the Baoan Factory:

Within one year In the second to fifth year inclusive Over five years	2007 HK$’000 2,854 15,446 29,616 47,916	Rented premises As at 31 March 2008 2009 HK$’000 HK$’000 5,052 2,314 20,208 9,256 26,671 10,220 51,931 21,790	As at 30 September 2009 HK$’000 2,314 9,256 6,754
			18,324

37. RETIREMENT BENEFIT SCHEME

Hong Kong

A retirement plan has been established for all eligible employees of the Group in Hong Kong starting from 1 January 1996. Eligible employees enjoy a defined contribution scheme to which the employees and the Group contribute 5% and 5-10% of monthly salary respectively. Employees under the defined contribution scheme are entitled to 100% of the employers’ contribution and the accrued interest upon retirement or leaving the Group after completing ten years of service counting from the date of joining the Group, or at a reduced scale of between 30% and 90% after completing three to nine years of service counting from the date of joining the Group. From 1 December 2000 onwards, staff in Hong Kong are required to join the new Mandatory Provident Fund Scheme (the ‘‘MPF Scheme’’). Contributions to the MPF Scheme are made in accordance with the statutory limits prescribed by the Mandatory Provident Fund Ordinance.

The aggregate employers’ contributions, net of forfeited contributions, amounted to:

Employers’ contributions under defined contribution schemes Less: Forfeited contributions utilised to offset employers’ contributions to the defined contribution scheme	Year 2007 HK$’000 2,226 (34) 2,192	ended 31 March 2008 2009 HK$’000 HK$’000 397 350 (441) (259) (44) 91	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) 361 144 — — 361 144	Six months ended 30 September 2008 2009 HK$’000 HK$’000 (unaudited) 361 144 — — 361 144
				144

– 105 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the year ended 31 March 2007, 2008 and 2009 and the six months ended 30 September 2008 and 2009, no forfeited contributions arising from employees leaving the scheme before becoming fully vested and which are available to reduce the contributions payable by the Group in the future.

PRC

The Group also participates in a defined contribution retirement scheme organised by the government in the PRC. All employees of the Group in the PRC are entitled to an annual pension equal to a fixed portion of their individual final basic salaries at their retirement date. The Group is required to contribute a specified percentage of the payroll of its employees to the retirement scheme. The total contribution incurred in connection with the scheme for the year ended 31 March 2007, 2008 and 2009 and the six months ended 30 September 2008 and 2009 was approximately HK$1,987,000, HK$754,000, HK$726,000 and HK$280,000 and HK$81,000 respectively. No forfeited contributions may be used by the employers to reduce the existing level of contributions.

38. RELATED PARTY TRANSACTIONS

Other than the details as disclosed elsewhere in the Financial Information, the Group entered into the following related party transactions during the Relevant Periods:

• i) the Group sold goods, amounting approximately HK$26,000, HK$75,000 and HK$20,000 for the year ended 31 March 2007, 2008 and 2009 to Vevion respectively, HK$876,000 and HK$21,000 for the year ended 31 March 2007 and 2008 to Easyfil (Hong Kong) Limited respectively, HK$2,000 for the year ended 31 March 2009 to Always respectively in which Mr. Chan Hoi Lam, the director of a subsidiary of the Company, has a beneficial interest.

• ii) the Group paid rent and building management fee, amounting approximately HK$267,000, HK$589,000, HK$542,000 and HK$291,000 for the year ended 31 March 2007, 2008 and 2009 and six months ended 30 September 2008 to Vevion respectively.

• iii) the Group paid compensation for breach of contract in respect of disposal of a branch office in Beijing of HK$419,000 to Vevion for the year ended 31 March 2008.

The remuneration of key management of the Group is set out in note 12.

– 106 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

39. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY

	Place of	Issued and fully		Percentage of nominal	Percentage of nominal	value
	incorporation/	paid share/		of issued share/registered			Principal
Name of subsidiary	registration	registered capital		capital held by the Company			activities
				31 March		30 September
			2007	2008	2009	2009
			%	%	%	%
Directly held:
New Able Investments	British Virgin	US$1	N/A	100	100	100	Investment
Limited (note i)	Islands						holding
	(‘‘BVI’’)
New Able Trading	Hong Kong	HK$1	N/A	N/A	100	100	Trading of
Limited (note i)							electronic
							products
Indirectly held:
Climax Management	Hong Kong	HK$2	100	100	100	100	Provision of
Company Limited							management
							services
Climax Marketing	Hong Kong	HK$2	100	100	100	100	Provision of
Company Limited							marketing
(note ii)							services for the
							Group/
							Outsourcing
							manufacturing
							and sales of
							goods.
Climax Paper	Hong Kong	Ordinary	100	100	100	100	Manufacture and
Converters, Limited		HK$100,000					distribution of
		Deferred					paper products
		(Note iii)
		HK$20,000,000
英發紙品製造（東莞）	PRC	HK$47,630,000	100	100	100	100	Manufacture and
有限公司Climax		(Note iv)/					distribution of
Paper Products		HK$47,630,000					paper products
Manufacturing
(Dongguan)
Company Limited*
Shiu’s Investment	BVI	US$1	100	100	100	100	Manufacture and
Limited							distribution of
							paper products

• English translation of company name is for identification purpose only

– 107 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes:

• (i) New Able Investments Limited and New Able Trading Limited were incorporated on 30 May 2007 and 17 February 2009 respectively.

• (ii) On 8 December 2009, a winding-up petition was issued by High Court of Hong Kong. Details are set out in note 34.

• (iii) These deferred shares practically carry no right to dividends or to receive notice or to attend or vote at any general meeting of this subsidiary or to participate in any distribution on winding up.

• (iv) The subsidiary decreased its registered capital from HK$68,000,000 to HK$47,630,000 during the year ended 31 March 2009.

The above table lists the subsidiaries of the Company which, in opinion of the directors of the Company, principally affected the results of the Group for the Relevant Periods or formed a substantial portion of the net assets or liabilities of the Group at the end of each reporting period of the Relevant Periods. To give detail of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

None of the subsidiaries had any debt securities subsisting as at 30 September 2009 or any time during the Relevant Periods.

– 108 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(B) SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of any of the companies in the Group have been prepared in respect of any period subsequent to 30 September 2009.

Yours faithfully,

SHINEWING (HK) CPA Limited

Certified Public Accountants Pang Wai Hang Practising Certificate Number: P05044

Hong Kong

– 109 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2. MANAGEMENT DISCUSSION AND ANALYSIS ON THE REMAINING GROUP

Set out below is the management discussion and analysis of the operating results and business review of the Remaining Group for each of the three years ended 31 March 2007, 2008 and 2009 and for the six months ended 30 September 2009.

For the Year Ended 31 March 2007

Business and Financial Review

For the year ended 31 March 2007, the Remaining Group did not commence any trading activity and recorded a net loss of approximately HK$1.5 million.

Liquidity and Financial Resources

The Remaining Group financed its expenses mainly with funds raised from the placing of ordinary shares. Those financing activities increased the cash and bank balances of Remaining Group to approximately HK$4.8 million as at 31 March 2007. The Remaining Group did not have any bank borrowing or debt as at 31 March 2007 and thus the gearing ratio was zero.

Material Acquisitions and Disposals

The Remaining Group had no material acquisitions and disposals during the year ended 31 March 2007.

Capital Structure

On 7 April 2006, 31,500,000 ordinary shares of HK$0.01 each in the capital of the Remaining Group were issued for the exercises of share option by the then director of the Remaining Group.

On 11 April 2006, the Remaining Group undertook a capital reorganisation of consolidating every twenty shares of par value of HK$0.01 each in the issued ordinary share capital of the Remaining Group into one consolidated share (the ‘‘Consolidated Share’’) of par value of HK$0.20; and cancelling the paid up capital of each Consolidated Share in issue to the extent of HK$0.19 on the nominal value of HK$0.20 of each Consolidated Share so as to form one reorganised share of par value of HK$0.01 each.

On 26 July 2006, 39,000,000 ordinary shares of HK$0.01 each in the capital of the Remaining Group were issued pursuant to placing and subscription agreements in relation to placing of existing shares and subscription for new shares of the Remaining Group.

On 15 March 2007, 280,936,897 ordinary shares of HK$0.01 each in the capital of the Remaining Group were issued by way of an open offer on the basis of five open offer shares for every six existing shares held by the then qualifying shareholders on the record date.

– 110 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Except the above, the Remaining Group had no other changes in capital structure during the year ended 31 March 2007.

Future Plans Relating to Material Investment or Capital Asset

As at 31 March 2007, the Remaining Group did not have any future plans relating to material investment or capital asset.

Charge on Assets

As at 31 March 2007, the Remaining Group did not pledge any assets.

Contingent Liabilities

As at 31 March 2007, the Remaining Group had given guarantee to banks in respect of general banking facilities utilised by the Target Group amounted to approximately HK$51.9 million.

Capital Commitments

As at 31 March 2007, the Remaining Group had no expenditure contracted for but not provided in the financial statements in respect of acquisition of property, plant and equipment.

Foreign Exchange Exposure

Most of the assets and liabilities of the Remaining Group are denominated in HK$. The Remaining Group had no material foreign exchange exposure, and did not make any hedging arrangement during the year.

Employees and Remuneration Policy

The Remaining Group remunerated its employees with respect to its employment terms, individual performance and the prevailing industry practice. Its remuneration packages were reviewed on a periodical basis to ensure that it is maintained at a competitive level. As at 31 March 2007, the Remaining Group had headcounts of approximately 7.

– 111 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the Year Ended 31 March 2008

Business and Financial Review

For the year ended 31 March 2008, the Remaining Group did not commence any trading activity and recorded a net loss of approximately HK$0.085 million (31 March 2007: HK$1.5 million).

Liquidity and Financial Resources

The Remaining Group financed its expenses mainly with funds raised from the placing of ordinary shares. As at 31 March 2008, the Remaining Group had deposits in other financial institution and cash and bank balances of approximately HK$55.8 million (31 March 2007: HK$4.8 million). The Remaining Group did not have any bank borrowing or debt as at 31 March 2008 and thus the gearing ratio was zero (31 March 2007: zero).

Material Acquisitions and Disposals

The Remaining Group had no material acquisitions and disposals during the year ended 31 March 2008.

Capital Structure

On 26 April 2007, 33,000,000 ordinary shares of HK$0.01 each at placing price of HK$0.171 each in the capital of the Remaining Group were issued pursuant to placing and subscription agreements in relation to placing of existing shares and subscription for new shares of the Remaining Group.

On 8 May 2007, 33,000,000 ordinary shares of HK$0.01 each at placing price of HK$0.180 each in the capital of the Remaining Group were issued pursuant to placing and subscription agreements in relation to placing of existing shares and subscription for new shares of the Remaining Group.

On 5 July 2007, 136,800,000 ordinary shares of HK$0.01 each at placing price of HK$0.260 each in the capital of the Remaining Group were issued pursuant to placing and subscription agreements in relation to placing of existing shares and subscription for new shares of the Remaining Group.

On 26 July 2007, 136,800,000 ordinary shares of HK$0.01 each at placing price of HK$0.230 each in the capital of the Remaining Group were issued pursuant to a placing agreement.

Except the above, the Remaining Group had no other changes in capital structure during the year ended 31 March 2008.

– 112 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Future Plans Relating to Material Investment or Capital Asset

As at 31 March 2008, the Remaining Group did not have any future plans relating to material investment or capital asset.

Charge on Assets

As at 31 March 2008, the Remaining Group did not pledge any assets.

Contingent Liabilities

As at 31 March 2008, the Remaining Group had given guarantee to banks in respect of general banking facilities utilised by Target Group amounted to approximately HK$3.9 million (31 March 2007: HK$51.9 million).

Capital Commitments

As at 31 March 2008, the Remaining Group had no expenditure contracted for but not provided in the financial statements in respect of acquisition of property, plant and equipment.

Foreign Exchange Exposure

Most of the assets and liabilities of the Remaining Group are denominated in HK$. The Remaining Group had no material foreign exchange exposure, and did not make any hedging arrangement during the year.

Employees and Remuneration Policy

The Remaining Group remunerated its employees with respect to its employment terms, individual performance and the prevailing industry practice. Its remuneration packages were reviewed on a periodical basis to ensure that it is maintained at a competitive level. As at 31 March 2008, the Remaining Group had headcounts of approximately 7.

– 113 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the Year Ended 31 March 2009

Business and Financial Review

For the year ended 31 March 2009, the Remaining Group has started a new trading business in electronic market and turnover was approximately HK$3.9 million (31 March 2008: nil) and the Remaining Group recorded a net loss of approximately HK$11.8 million (31 March 2008: HK$0.085 million).

The new business has given a great challenge and opportunity to the management. In future, the Remaining Group will excel in its new business and take advantage of the market adversities and seize upon suitable investments opportunities.

Liquidity and Financial Resources

The Remaining Group financed its expenses mainly with funds raised from the placing of ordinary shares. As at 31 March 2009, the Remaining Group had deposits in other financial institution and cash and bank balances of approximately HK$72.4 million (31 March 2008: HK$55.8 million). The Remaining Group did not have any bank borrowing or debt as at 31 March 2009 and thus the gearing ratio was zero (31 March 2008: zero).

Material Acquisitions and Disposals

The Remaining Group had no material acquisitions and disposals during the year ended 31 March 2009.

Capital Structure

On 23 June 2008, 191,000,000 ordinary shares of HK$0.01 each in the capital of the Remaining Group were issued pursuant to a placing agreement in relation to placing of new shares of the Remaining Group at the placing price of HK$0.159 per placing share.

On 30 September 2008, 6 ordinary shares of HK$0.01 each in the capital of the Remaining Group were issued upon exercise of share options granted on 17 June 2008.

Except the above, the Remaining Group had no other changes in capital structure during the year ended 31 March 2009.

Future Plans Relating to Material Investment or Capital Asset

As at 31 March 2009, the Remaining Group did not have any future plans relating to material investment or capital asset.

Charge on Assets

As at 31 March 2009, the Remaining Group did not pledge any assets.

– 114 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Contingent Liabilities

As at 31 March 2009, the Remaining Group had given guarantee to banks in respect of general banking facilities utilised by Target Group amounted to approximately HK$0.082 million (31 March 2008: HK$3.9 million).

On 5 March 2009, the Remaining Group was being sued for recovery of approximately HK$199,000 under the lease and guarantees agreements with Orix Asia Limited. On 16 April 2009, judgment has been issued. The Remaining Group had accrued for such balances plus cost and interest as at 31 March 2009.

Capital Commitments

As at 31 March 2009, the Remaining Group had no expenditure contracted for but not provided in the financial statements in respect of acquisition of property, plant and equipment.

Foreign Exchange Exposure

Most of the assets and liabilities of the Remaining Group are denominated in HK$. The Remaining Group had no material foreign exchange exposure, and did not make any hedging arrangement during the year.

Employees and Remuneration Policy

The Remaining Group remunerated its employees with respect to its employment terms, individual performance and the prevailing industry practice. Its remuneration packages were reviewed on a periodical basis to ensure that it is maintained at a competitive level. As at 31 March 2009, the Remaining Group had headcounts of approximately 5.

– 115 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the Six Months Ended 30 September 2009

Business and Financial Review

For the six months ended 30 September 2009, the Remaining Group recorded turnover of approximately HK$86.8 million (30 September 2008: nil) and the Remaining Group recorded a net loss of approximately HK$7.3 million (30 September 2008: HK$11.4 million).

The new business has given a great challenge and opportunity to the management. In future, the Remaining Group will continue to enlarge the customer base and improve the quality of the products in achieving the aim of profitability in electronic products business. Furthermore, the Remaining Group will closely monitor the condition of electronic products to seize new market opportunities.

Liquidity and Financial Resources

The Remaining Group financed its expenses mainly with internal financial resources. As at 30 September 2009, the Remaining Group had deposits in other financial institution and cash and bank balances of approximately HK$67.5 million (31 March 2009: HK$72.4 million). The Remaining Group did not have any bank borrowing or debt as at 30 September 2009 and thus the gearing ratio was zero (31 March 2009: zero).

Material Acquisitions and Disposals

The Remaining Group had no material acquisitions and disposals during the six months ended 30 September 2009.

Capital Structure

The Remaining Group had no changes in capital structure during the six months ended 30 September 2009.

Future Plans Relating to Material Investment or Capital Asset

As at 30 September 2009, the Remaining Group did not have any future plans relating to material investment or capital asset.

Charge on Assets

As at 30 September 2009, the Remaining Group did not pledge any assets.

– 116 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Contingent Liabilities

As at 30 September 2009, the Remaining Group had not provided any guarantee in favour of any party nor there were any significant contingent liabilities except for the below. As at 31 March 2009, the Remaining Group had given guarantee to banks in respect of general banking facilities utilised by Target Group amounted to approximately HK$0.082 million.

On 5 March 2009, the Remaining Group was being sued for recovery of approximately HK$199,000 under the lease and guarantees agreements with Orix Asia Limited (‘‘Orix’’). On 16 April 2009, judgment has been issued. Subsequently, a statutory demand was served on the Remaining Group on 17 September 2009 for the outstanding balances plus interest and cost of approximately HK$9,000. On 14 October 2009, the Remaining Group had made payment to Orix in full and final settlement of the judgment.

Capital Commitments

As at 30 September 2009, the Remaining Group had no expenditure contracted for but not provided in the financial statements in respect of acquisition of property, plant and equipment.

Foreign Exchange Exposure

Most of the assets and liabilities of the Remaining Group are denominated in HK$. The Remaining Group had no material foreign exchange exposure, and did not make any hedging arrangement during the year.

Employees and Remuneration Policy

The Remaining Group remunerated its employees with respect to its employment terms, individual performance and the prevailing industry practice. Its remuneration packages were reviewed on a periodical basis to ensure that it is maintained at a competitive level. As at 30 September 2009, the Remaining Group had headcounts of approximately 5.

3. INDEBTEDNESS

Commitment

As at the close of business on 31 December 2009, being the latest practicable date for the purpose of this indebtedness statement, the Group had total future minimum lease payments under non-cancelable operating leases in respect of rented premises amounting to approximately HK$100,000, capital expenditure in respect of acquisition of plant and equipment contracted for amounting to approximately HK$12,742,000 and expenditure in respect of construction project in relation to non-current prepayment contracted for amounting to approximately HK$902,000.

– 117 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the purpose of the above indebtedness statement, foreign currency amounts have been translated into Hong Kong dollars at the rate of exchange prevailing the close of business on 31 December 2009.

Disclaimers

As mentioned in the Appendix I of this circular, certain accounting books and records of the Target Group were lost and not be able to be recovered during the relocation of office of the Target Group in October 2009 and the high turnover rate of accounting personnel as a result of lack of adequate financial resources of the Target Group. The Directors are unable to represent complete set of accounting books and records of the Target Group. Accordingly, the Directors are unable to represent that all transactions entered by the Group up to the close of business on 31 December 2009 have been properly included in this indebtedness statement.

Save as aforesaid or as otherwise disclosed in this statement of indebtedness, and apart from intra-group liabilities and normal trade payables, the Group did not have outstanding as at the close of business on 31 December 2009 any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptable credits, debentures, mortgages, charges, finance lease or hire purchases commitments, guarantees or other material contingent liabilities.

4. WORKING CAPITAL

The Directors, after due and careful enquiry, are of the opinion that, taking into account (i) the proceeds generated from the Disposal, and (ii) the internal resources of the Remaining Group, the Remaining Group, without the necessity for obtaining external financing and credit facility, has sufficient working capital for its present requirements in the next twelve months from the date of this Circular.

The Directors consider that their disclaimer made in relation to the statement of indebtedness as set out on pages 117 to 118 of this Circular does not have any significant impact on their opinion as expressed above on the sufficiency of working capital of the Remaining Group.

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APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

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26 February 2010

The Board of Directors Climax International Company Limited Unit A, 10/F, Wings Building 110–116 Queen’s Road Central Central Hong Kong

Dear Sirs,

We report on the unaudited pro forma financial information of Climax International Company Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) set out in Appendix II of the circular dated 26 February 2010 (the ‘‘Circular’’) in connection with the proposed disposal of the entire equity interest in Climax Investments Limited and its subsidiaries (hereinafter collectively referred to as the ‘‘Target Group’’) (the Group, excluding the Target Group hereinafter referred to as the ‘‘Remaining Group’’) and the sum of the outstanding loans owed by the Target Group to the Company on completion (the ‘‘Disposal’’), which has been prepared by the directors of the Company (the ‘‘Directors’’), for illustrative purpose only, to provide information about how the Disposal might have affected the financial information presented. The basis of preparation of the unaudited pro forma financial information is set out in Appendix II of the Circular.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND REPORTING ACCOUNTANTS

It is the responsibility solely of the Directors to prepare the unaudited pro forma financial information in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and with reference to Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’).

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

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APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

BASIS OF OPINION

We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 ‘‘Accountants’ Reports on Pro Forma Financial Information in Investment Circulars’’ issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the Directors. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma financial information has been properly compiled by the Directors on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purpose of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

The unaudited pro forma financial information is for illustrative purpose only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of:

• . the financial position of the Group as at 30 September 2009 or any future date; or

• . the results and cash flows of the Group for the six months ended 30 September 2009 or any future period.

OPINION

In our opinion:

• a) the unaudited pro forma financial information has been properly compiled by the Directors on the basis stated;

• b) such basis is consistent with the accounting policies of the Group; and

• c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Yours faithfully,

SHINEWING (HK) CPA Limited

Certified Public Accountants Pang Wai Hang Practising Certificate Number: P05044 Hong Kong

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APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

On 8 October 2009, Climax International Company Limited (the ‘‘Company’’) entered into a sale and purchase agreement (the ‘‘Agreement’’) with Good Billion Holdings Limited (‘‘the ‘‘Purchaser’’), pursuant to which the Company has conditionally agreed to sell and the Purchaser has conditionally agreed to purchase the entire equity interest of Climax Investments Company Limited and its subsidiaries (the ‘‘Target Group’’) and the sum of the outstanding loans owed by the Target Group to the Company on completion (‘‘Sale Loans’’) for a cash consideration of HK$2,500,016 (the ‘‘Disposal’’).

The unaudited pro forma financial information of the Remaining Group (as defined below) has been prepared by the directors of the Company (the ‘‘Directors’’) in accordance with Rule 4.29 of the Listing Rules for the purpose of illustrating the effect of the Disposal as if the Disposal had taken place on 30 September 2009 for the unaudited pro forma consolidated statement of financial position and on 1 April 2009 for the unaudited pro forma consolidated income statement, pro forma consolidated statement of comprehensive income and pro forma consolidated statement of cash flows.

The unaudited pro forma consolidated statement of financial position of the Remaining Group (as defined below) has been prepared based on the audited consolidated statement of financial position of the Company and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) (the Group excluding the Target Group hereinafter referred to as the ‘‘Remaining Group’’) as at 30 September 2009, which has been extracted from the accountants’ report of the Company for the six months ended 30 September 2009 as set out in Appendix I of the circular dated 26 February 2010 (the ‘‘Circular’’), and adjusted in accordance with the pro forma adjustments described in the notes thereto as if the Disposal had been taken place on 30 September 2009.

The unaudited pro forma consolidated income statement, consolidated statement of comprehensive income and consolidated statement of cash flows of the Remaining Group have been prepared based on the audited consolidated income statement, consolidated statement of comprehensive income and consolidated statement of cash flows of the Group for the six months ended 30 September 2009, which has been extracted from the accountants’ report of the Group for the six months ended 30 September 2009 as set out in Appendix I of the Circular, and adjusted in accordance with the pro forma adjustments described in the notes thereto as if the Disposal had been taken place at the commencement of the period being reported, i.e. 1 April 2009.

The unaudited pro forma financial information has been prepared by the Directors and based on a number of assumptions, estimates, uncertainties and currently available information to provide information of the Remaining Group upon completion of the Disposal. As it has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial position, results of operations or cash flows of the Remaining Group had the Disposal been completed as at the respective dates to which it is made up to or at any future dates.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE REMAINING GROUP

Non-current assets Plant and equipment Prepayments Current assets Trade receivables Deposits, prepayments and other receivables Amount due from a fellow subsidiary Amount due from holding company Held for trading investments Deposits in other financial institution Bank balances and cash Current liabilities Trade and other payables Tax payables Obligations under finance leases Net current assets Total assets less current liabilities Capital and reserves Share capital Reserves Equity attributable to owners of the Company Minority interests	Audited consolidated statement of financial position of the Group as at 30 September 2009 Pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 Note 2 Note 3 Note 4 1,266 9,693 (9,693) 10,959 50,221 (2,497) 9,317 (6,235) 125 — 125 (125) — 364,843 (364,843) 5,938 80 67,580 (158) 1,000 133,136 108,095 (57,061) 2,255 (2,136) 492 (492) 110,842 22,294 33,253 11,486 21,766 406,075 (406,075) 42,232 33,252 1 (1) 33,253	Unaudited pro forma consolidated statement of financial position of the Remaining Group HK$’000 1,266 —
		1,266
		47,724 3,207 — — 5,938 80 68,422
		125,371
		51,034 119 —
		51,153
		74,218
		75,484
		11,486 63,998
		75,484 —
		75,484

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT OF THE REMAINING GROUP

Turnover Cost of sales Gross profit Other income Selling and distribution expenses Administrative expenses Loss on changes in fair value of held for trading investments Gain on disposal of subsidiaries Finance costs (Loss) profit before taxation Income tax expense (Loss) profit for the period	Audited consolidated income statement of the Group for the six months ended 30 September 2009 Pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 Note 5 Note 6 Note 7 99,520 (12,768) (99,329) 13,339 191 1,587 (1,347) 275 (811) 811 (16,065) 11,538 (3,882) — 31,310 (14) 289 (275) (18,994) (43) (76) (19,037)	Unaudited pro forma consolidated income statement of the Remaining Group for the six months ended 30 September 2009 HK$’000 86,752 (85,990) 762 515 — (4,527) (3,882) 31,310 — 24,178 (119) 24,059

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APPENDIX II

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME OF THE REMAINING GROUP

(Loss) profit for the period Translation differences of foreign operations Total comprehensive (loss) income for the period, net of tax Attributable to Owners of the Company Minority interests (Loss) profit for the period	Audited consolidated statement of comprehensive income of the Group for the six months ended 30 September 2009 Pro forma adjustments HK$’000 HK$’000 HK$’000 Note 5 Note 7 (19,037) 11,786 31,310 — (19,037) (19,037) — (19,037)	Unaudited pro forma consolidated statement of comprehensive income of the Remaining Group for the six months ended 30 September 2009 HK$’000 24,059 —
		24,059
		24,059 —
		24,059

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE REMAINING GROUP

Operating activities (Loss) profit before taxation Adjustments for: Release of non-current prepayments Depreciation of plant and equipment Loss on changes in fair value of held for trading investments Loss on written off of plant and equipment Interest income Finance costs Allowance for inventories included in cost of sales Gain on disposal of subsidiaries Provision for litigation Operating cash flows before movements in working capital Increase in trade receivables Increase in deposits, prepayments and other receivables Increase in trade and other payables Cash used in operation Hong Kong Profits Tax paid Net cash used in operating activities	Audited consolidated statement of cash flows of the Group for the six months ended 30 September 2009 Pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 Note 8 Note 6 Note 9 (18,994) 11,862 31,310 524 (524) 188 3,882 2,659 (2,659) (165) (275) 14 (289) 275 200 (200) — (31,310) 868 (868) (10,824) (42,997) (780) (456) 79 49,383 (6,084) (4,894) (118) 118 (5,012)	Unaudited pro forma consolidated statement of cash flows of the Remaining Group for the six months ended 30 September 2009 HK$’000 24,178 — 188 3,882 — (440) — — (31,310) — (3,502) (43,777) (377) 43,299 (4,357) — (4,357)

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX II

Investing activities Decrease in deposits in other financial institution Repayment from related companies Interest received Proceeds from disposal of subsidiaries (net of cash and cash equivalents disposed of) Advance to the Target Group Net cash from investing activities Financing activity Interest paid Net cash used in financing activity Net increase in cash and cash equivalent Cash and cash equivalent at beginning of the period Cash and cash equivalent at the end of the period Analysis of cash and cash equivalents, represented by:bank balances and cash	Audited consolidated statement of cash flows of the Group for the six months ended 30 September 2009 Pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 Note 8 Note 6 Note 9 69,723 63 (63) 165 275 — 868 — (989) 69,951 (14) 289 (275) (14) 64,925 2,655 82 67,580 67,580	Unaudited pro forma consolidated statement of cash flows of the Remaining Group for the six months ended 30 September 2009 HK$’000 69,723 — 440 868 (989) 70,042 — — 65,685 2,737 68,422 68,422

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

APPENDIX II

Notes to the unaudited pro forma financial information:

• (1) The audited consolidated statement of financial position of the Group as at 30 September 2009, and the audited consolidated income statement, the audited consolidated statement of comprehensive income and the audited consolidated statement of cash flows of the Group for the six months ended 30 September 2009 were extracted from the accountants’ report of the Company as set out in Appendix I of the Circular. The unaudited pro forma consolidated income statement, pro forma consolidated statement of comprehensive income and pro forma consolidated statement of cash flows are presented for a period of six months ended 30 September 2009 as the Directors are of the view that such presentation best reflects the position of the Group after the Disposal, as the results of the Group for the year ended 31 March 2009 mainly reflected the contributions of the ceased paper products business whereas the electronic products business of the Group was commenced in March 2009.

• (2) The adjustment reflects the exclusion of the assets and liabilities of the Target Group, assuming that the Disposal had completed on 30 September 2009. The amount of asset, liabilities and minority interests of the Target Group as at 30 September 2009 was extracted from the accountants’ report as set out in Appendix I of the Circular.

• (3) The adjustment reflects the reclassification of the inter-company balances between the Target Group and the Remaining Group excluding the Company.

• (4) The adjustment represents the estimated unaudited gain on disposal, as if the Disposal had completed on 30 September 2009, which is calculated as follows:

Consideration Less: estimated payment of fee and expenses in connection with the Disposal Estimated net cash proceeds Add: net liabilities values of the Target Group attributable to the owners of the Company as at 30 September 2009 Less: disposal of the Sale Loans Gain on disposal	HK$’000 2,500 (1,500) 1,000 406,075 (364,843) 42,232

The adjustment will not have continuing income statement effect on the Remaining Group.

• (5) The adjustment represents the exclusion of the income and expenses attributable to the Target Group from the consolidated income statement of the Group for the six months ended 30 September 2009, which was extracted from the accountants’ report of the Group in Appendix I of the Circular, as if the Disposal had completed on 1 April 2009. The adjustment will not have continuing income statement effect on the Remaining Group.

• (6) The adjustment represents the reclassification of interest income received by the Remaining Group from the Target Group for the six months ended 30 September 2009 to other income of the Remaining Group.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE REMAINING GROUP

• (7) The adjustment represents the estimated unaudited gain on disposal, as if the Disposal had completed on 1 April 2009, which is calculated as follows:

Estimated net cash proceeds (note 4) Add: net liabilities values of the Target Group attributable to the owners of the Company as at 1 April 2009 Less: disposal of the Sale Loans Gain on disposal	HK$’000 1,000 394,289 (363,979) 31,310

The adjustment will not have continuing income statement effect on the Remaining Group.

• (8) The adjustment reflects the exclusion of the cash flows of the Target Group for the six months ended 30 September 2009, which was extracted from the accountants’ report of the Group as set out in Appendix I of the Circular, assuming that the Disposal had completed on 1 April 2009. The adjustment will not have continuing cash flow statement effect on the Remaining Group.

• (9) The adjustment of HK$868,000 reflects the cash and cash equivalents adjustment of HK$1,000,000, as explained in Note (4) above, less bank balances and cash of the Target Group disposed of approximately HK$132,000 assuming that the Disposal had completed on 1 April 2009. The adjustment will not have continuing cash flow statement effect on the Remaining Group.

• (10) The final amount of assets and liabilities of the Target Group and the gain from the Disposal will be different from those amounts as presented above.

• (11) No adjustment has been made to reflect any trading result or other transactions of the Group and the Target Group entered into subsequent to 30 September 2009.

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APPENDIX III

GENERAL INFORMATION

1. RESPONSIBILITY OF THE DIRECTORS

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company or their respective associates in the Shares, underlying Shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and/or short positions in which they were taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO or as otherwise, notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies adopted by the Company (‘‘Model Code’’) were as follows:

Director Capacity Wong Hin Shek Personal	Number of shares or underlying shares held Interest in shares held Interest in underlying shares held Total Interest Percentage of the issued share capital — 9,000,000 9,000,000 0.78%

All the interests disclosed above represent long position in the shares or underlying shares of the Company

Saved as disclosed above, as at the Latest Practicable Date, none of the Director or chief executive of the Company had any interests or short positions in the Shares and the underlying shares of the Company or any of its associated corporation (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were recorded in the register required to be kept by the Company under Section 352 of the SFO, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

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GENERAL INFORMATION

3. SUBSTANTIAL SHAREHOLDERS’ INTERESTS

As at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company, the following interests of which fall to be disclosed under Divisions 2 and 3 of Part XV of the SFO, or who were deemed to be directly or indirectly interested in 5% or more of the issued share capital of the Company, or which were recorded in the register of interests required to be kept under Section 336 of the SFO or have notified to the Company were as follows:

Substantial Shareholders Capacity Good Power International Limited Beneficial Owner Tse On Kin Interest of corporation controlled	Number of shares or underlying shares held Interest in shares held Interest in underlying shares held Total Interest Percentage of the issued share capital 176,000,000 — 176,000,000 15.32% 176,000,000 — 176,000,000 15.32%

Saved as disclosed above, as at the Latest Practicable Date, the Company had not notified by any persons (other than the Directors of the Company and the chief executive of the Group) who had interests or short positions in the Shares or underlying shares of the Company which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 2 and 3 Part XV of the SFO, or which were recorded in the register required to be kept by the Company under Section 336 of the SFO, or who were interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group, or any options in respect of such capital.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

5. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or substantial Shareholders or their respective associates had any interests in any business which competes or may compete with the business of the Group.

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GENERAL INFORMATION

6. DIRECTORS’ INTERESTS IN ASSETS/CONTRACTS AND OTHER INTERESTS

So far as known to the Directors, none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date which was significant in relation to the businesses of the Group.

None of the Directors nor the expert(s) referred to in paragraph headed ‘‘Experts and Consents’’ of this Appendix has any direct or indirect interests in any assets which have been acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2009, being the date to which the latest published audited consolidated accounts of the Group were made up.

7. LITIGATION

(i) Golddoor Company Limited (‘‘Golddoor’’)

On 27 August 2008, one of the Group’s customers, Golddoor brought an action in the High Court of Hong Kong under HCA 1606 of 2008 against a wholly-owned subsidiary of the Company, Climax Paper Converters, Limited (‘‘CPCL’’) for the balance of deposit of approximately RMB1,435,000 (equivalent to approximately HK$1,624,000) together with interest, further and/or other relief and cost of this action. CPCL has already filed a defence on 13 October 2008. This action is still in progress and no hearing date has been fixed.

On 29 October 2008, Golddoor also brought an action in the People’s Court of Dongguan, Guangdong Province under (2008) 東法民四初字第1105號 against CPCL and Climax Paper Products Manufacturing (Dongguan) Co., Ltd. (‘‘CPD’’) for the balance of deposit of RMB1,429,000 (equivalent to approximately HK$1,617,000). CPCL and CPD have already filed a defence on 2 December 2008. On 15 November 2009, Golddoor applied a withdrawal of the action in 廣東省東莞市第二人民法院 under (2009) 東二法民四初字第97號 and the action had been withdrawn on 16 November 2009.

(ii) Hang Seng Bank (‘‘Hang Seng’’)

One of the Group’s suppliers, Kai Sung Papers Co. Ltd. (‘‘Kai Sung’’) entered into a factoring agreement with Hang Seng pursuant to which the ownership of any debts owed to Kai Sung to vest in Hang Seng. From May to August 2007, CPCL entered into various contracts with Kai Sung pursuant to which Kai Sung agreed to sell and deliver to CPCL and CPCL agreed to purchase goods from Kai Sung for the total purchase price of approximately HK$1,795,000. On 18 March 2009, Hang Seng brought an action in the High Court of Hong Kong under HCA 769 of 2009 against CPCL for the outstanding balance of approximately HK$1,405,000 plus cost and interest on the said balance. Since no defence have been served by CPCL, judgment has been issued by the High Court of Hong Kong on 8 April 2009, pursuant to which CPCL should pay approximately HK$1,405,000 plus costs of HK$1,000 and interest of approximately HK$601,000 from 8 August 2007 to 18 March 2009 and continuing to accrue at the

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APPENDIX III

GENERAL INFORMATION

judgment rate until payment. On 22 July 2009, Hang Seng has accepted payment of HK$1,110,000 by installments in full and final settlement of the judgment. CPCL paid the first installment of total HK$100,000 on 11 September 2009 and 14 September 2009.

(iii) Lockey Paper Products Factory Limited (‘‘Lockey Paper’’)

On 30 March 2009, one of the Group’s suppliers, Lockey Paper brought an action in the District Court of Hong Kong under DCCJ 1606 of 2009 against a wholly-owned subsidiary of the Company, Shiu’s Investments Limited (‘‘SIL’’) for approximately HK$357,000 and an action in the High Court of Hong Kong under HCA 889 of 2009 against CPCL for approximately HK$3,756,000 being the total outstanding balances of the price for goods sold and delivered to SIL and CPCL together with interest, further and/or other relief and costs. Since no defence has been given by SIL and CPCL, notices of intention to enter into judgment were served on SIL and CPCL on 20 April 2009. Subsequently, judgment have been issued by the District Court of Hong Kong and the High Court of Hong Kong on 15 July 2009 and 7 July 2009 respectively, pursuant to which SIL and CPCL do pay the sum of outstanding balances together with interest until payment and costs to Lockey Paper. No repayment has been made by SIL and CPCL but no further legal action was taken by Lockey Paper.

(iv) Champion Basic International Limited (‘‘Champion Basic’’)

On 29 May 2009, one of the Group’s suppliers, Champion Basic brought an action in the District Court of Hong Kong under DCCJ 2551 of 2009 against a wholly-owned subsidiary of the Company, Climax Marketing Company Limited (‘‘CMCL’’) for approximately HK$281,000 being the outstanding balance of the price for goods sold and delivered to CMCL together with interest, further and/or other relief and cost. Since no defence has been given by CMCL, notice of intention to enter judgment was served on CMCL on 10 July 2009. On 28 August 2009, judgment has been issued by the District Court, pursuant to which CMCL do pay the sum of outstanding balance together with interest until payment and costs of HK$7,130. Subsequently, garnishee orders were issued by the District Court with Standard Chartered Bank (Hong Kong) Limited, DBS Bank (Hong Kong) Limited and Wing Hang Bank, Limited on 16 September 2009, 29 September 2009 and 30 September 2009 respectively. At 12 November 2009, the garnishee, Standard Chartered Bank (Hong Kong) Limited made a payment of approximately HK$110,000 with a cashier order dated 6 November 2009 for partial payment of the outstanding balance. On 25 November 2009, CMCL is still indebted to the Champion Basic in the sum of approximately HK$192,000 together with further interest until the date of full payment.

On 8 December 2009, a winding-up petition was filed against CMCL by Champion Basic in the High Court of Hong Kong under HCCW 705 of 2009. The hearing of the winding-up petition against CMCL was originally scheduled on 10 February 2010 and was adjourned by the High Court of Hong Kong to 24 February

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GENERAL INFORMATION

1. On 24 February 2010, the winding-up petition was heard and a winding up order was made against CMCL. Upon the application of Champion Basic, provisional liquidators of CMCL were appointed by the High Court of Hong Kong.

(v) Orix Asia Limited (‘‘Orix’’)

By lease agreements dated 18 March 2005 and 7 April 2005 made between Orix and SIL, Orix agreed to let and SIL agreed to take on lease certain machines for a period of 48 months. The Company and CPCL have provided financial guarantees to SIL. On 5 March 2009, Orix brought an action in the District Court of Hong Kong under DCCJ 693 of 2009 against the Company, SIL and CPCL for recovery of approximately HK$199,000 under the lease and guarantees agreements together with interest and costs. Since no defence have been given by the Company, SIL or CPCL, judgment has been issued by the District Court on 16 April 2009, pursuant to which the Company, SIL and CPCL do jointly and severally pay the sum of outstanding balances together with interest until payment and costs to Orix. Subsequently, a statutory demand was served on the Company and CPCL on 17 September 2009 for the outstanding balances plus cost and interest of approximately HK$9,000. At 14 October 2009, the Company had made payment to Orix in full and final settlement of the judgment.

(vi) Fook Woo Assort Paper Co. Ltd. (‘‘Fook Woo’’)

On 21 July 2008, one of the Group’s suppliers, Fook Woo brought an action in the High Court of Hong Kong under HCA 782 of 2008 against CPCL for approximately HK$1,201,000 being the outstanding balance of the price for goods sold and delivered to the CPCL together with interest, further and/or other relief and cost. Since no defence have been given by CPCL, judgment has been issued by High Court on 11 August 2008, pursuant to which CPCL do pay the sum of outstanding balance together with interest until payment and costs to Fook Woo. No repayment has been made by CPCL and no further legal action was taken by Fook Woo.

(vii) 深圳市恆輝印刷包裝有限公司 (‘‘Heng Hui’’)

On 11 December 2008, one of the Group’s suppliers, Heng Hui brought an action in 深圳市寶安區人民法院 under (2009) 深寶法民二初字第752號 against 東莞長安肇業 文具制品廠 (‘‘SILF’’, a factory held by SIL), SIL, CPD, CPCL and CMCL (collectively referred to as the ‘‘Defendants for Heng Hui’’) for approximately RMB1,002,000 being the outstanding balance of the price for goods sold and delivered to SILF and CPD together with interest, further and/or other relief and cost. On 5 March 2009, three sets of machines of the Defendants for Heng Hui were temporarily sequestrated by 深圳市 寶安區人民法院 upon application of Heng Hui (with net carrying value as at 31 March 2009 of approximately HK$515,000 and 30 September 2009 of nil). On 15 May 2009, judgment has been issued by 深圳市寶安區人民法院, pursuant to which the Defendants for Heng Hui should accept the delivery of remaining goods of approximately RMB443,000 (equivalent to approximately HK$501,000) and do pay the sum of outstanding balance together with interest until payment and costs to Heng Hui. SILF has subsequently made an appeal to 深圳市中級人民法院 on 7 July 2009. On 7 January

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GENERAL INFORMATION

2010, judgment has been issued by 深圳市中級人民法院 pursuant to which SILF has withdrawn the appeal. Up to the date of this report, no repayment has been made by the Defendants for Heng Hui and no further legal action was taken by Heng Hui.

(viii) 東莞市華彰紙業有限公司 (‘‘Hua Zhang’’)

On 6 March 2009, one of the Group’s suppliers, Hua Zhang brought an action in 廣東省東莞市第二人民法院 under (2009) 東二法民四初字第188號 against SILF, SIL and CPD (collectively referred to as the ‘‘Defendants for Hua Zhang’’) for RMB558,000 (equivalent to approximately HK$632,000) being the outstanding balance of the price for goods sold and delivered to Defendants for Hua Zhang together with interest, further and/or other relief and cost. On 11 March 2009, 廣東省 東莞市第二人民法院 issued judgment pursuant to which the bank account of CPD with a value of approximately RMB558,000 (equivalent to approximately HK$632,000) should be frozen or machines and assets of SIL with equivalent value should be sequestrated upon application of Hua Zhang. On 18 March 2009, a bank balance of approximately RMB129 (equivalent to approximately HK$146) was frozen and eleven machines were temporarily sequestrated (with net carrying value of eleven sets of machines as at 31 March 2009 of approximately HK$421,000 and 30 September 2009 of nil). On 11 May 2009, Hua Zhang and Defendants for Hua Zhang reached an accommodation that the Defendants for Hua Zhang only need to repay approximately RMB466,000 (equivalent to approximately HK$528,000) by three installments instead of approximately RMB558,000 (equivalent to approximately HK$632,000). Hua Zhang agreed to release the sequestration of assets when the second installment is paid. On 21 May 2009, the properties (i.e. the bank balance and eleven sets of machines) arrested were released by 廣東省東莞市第二人民法院. No repayment has been made by Defendants for Hua Zhang according to the agreed repayment schedule but no further legal action was taken by Hua Zhang.

(ix) 北京康得新複合材料股份有限公司 (‘‘Kang De Xin’’)

On 5 November 2008, one of the Group’s suppliers, Kang De Xin brought an action in 北京市第一中級人民法院 under (2008) 中民初字第15766號 against SILF, CPCL and CPD (collectively referred to as the ‘‘Defendants for Kang De Xin’’) for approximately RMB417,000 (equivalent to approximately HK$472,000) being the outstanding balance of the price for goods sold and delivered to Defendants for Kang De Xin together with interest, further and/or other relief and cost. The writ was served on Defendants for Kang De Xin on 10 February 2009. On 3 November 2009, 北京市第 一中級人民法院 issued judgment pursuant to which CPCL do pay approximately RMB417,000 together with interest until payment and costs. Subsequently, CPD made an appeal on 17 November 2009. This legal action is still in progress.

(x) 宋留坡 (‘‘Song’’)

On 9 June 2009, one of the Group’s employees, Song brought an action in 東莞市 勞動爭議仲裁庭長安分庭 under (2009) 第1029號 against SILF for approximately RMB863,000 (equivalent to approximately HK$978,000) being the compensation of medication and treatment as Song suffered from leukemia. On 15 June 2009, two

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APPENDIX III

machines of the SILF were temporarily sequestrated by 廣東省東莞市第二人民法院 upon application of Song. On 16 July 2009, judgment has been issued by 東莞市勞動爭 議仲裁庭長安分庭 pursuant to which SILF do pay approximately RMB53,000 (equivalent to approximately HK$60,000) as the compensation of medication for the period from 18 December 2008 to 29 May 2009 and withdraw the institute proceedings from Song to SILF. On 17 August 2009, Song brought another action in 東莞市勞動爭 議仲裁庭長安分庭 under (2009) 第641號 against SILF for approximately RMB29,000 (equivalent to approximately HK$33,000) being the compensation of medication from 13 May 2009 to 17 August 2009. On 27 September 2009, judgment has been issued by 東莞市勞動爭議仲裁庭長安分庭 pursuant to which SILF do pay approximately RMB25,000 (equivalent to approximately HK$28,000) for the period from 29 May 2009 to 17 August 2009. The auction of the sequestrated machines was held on 23 October 2009. The amount from auction was approximately RMB256,000 (equivalent to approximately HK$290,000) and part of which was used to settle the outstanding balances of approximately RMB53,000 (equivalent to approximately HK$60,000) and approximately RMB25,000 (equivalent to approximately HK$28,000). On 5 January 2010, Song brought another action in 東莞市勞動爭議仲裁庭長安分庭 under (2009) 第7 號 against SILF for approximately RMB29,000 (equivalent to approximately HK$33,000) being the compensation of medication from 21 August 2009 to 31 December 2009. On 28 January 2010, judgment has been issued by 東莞市勞動爭議仲裁 庭長安分庭 pursuant to which SILF do pay approximately RMB29,000 (equivalent to approximately HK$33,000) being the compensation of medication from 21 August 2009 to 31 December 2009. On 9 February 2010, notice of enforcement of payment under the judgment dated 28 January 2010 had been made by 廣東省東莞市第二人民法 院. Up to the date of this report, no repayment has been made by SILF and no further legal action was taken by Song.

(xi) 廣州市榮天豪油墨塗料有限公司 (‘‘Rong Tian Hao’’)

On 28 October 2008, one of the Group’s suppliers, Rong Tian Hao brought an action in 廣東省東莞市人民法院 under (2009) 東二法執字第3320號 against SIL and SILF (collectively referred to as the ‘‘Defendants for Rong Tian Hao’’) for approximately RMB107,000 (equivalent to approximately HK$121,000) being the outstanding balance of the price for goods sold and delivered to Defendants for Rong Tian Hao together with interest, further and/or other relief and cost. On 27 November 2008, Rong Tian Hao and Defendants for Rong Tian Hao reached an accommodation that the Defendants for Rong Tian Hao would pay an aggregate amount of approximately RMB107,000 (equivalent to HK$121,000) and 廣東省東莞市人民法院 had withdrawn the institute proceedings. Since no payment was made by Defendants for Rong Tian Hao to Rong Tian Hao, notice of enforcement of payment under the judgment had been made by 廣東省東莞市人民法院 on 7 April 2009. On 20 April 2009, Rong Tian Hao and Defendants for Rong Tian Hao reached another accommodation that the Defendants for Rong Tian Hao would pay an aggregate amount of approximately RMB119,000 (equivalent to HK$135,000) by three installments. No repayment has been made by Defendants for Rong Tian Hao according to the agreed repayment schedule and no further legal action was taken by Rong Tian Hao.

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(xii) Chan Ming Fung (‘‘Chan’’)

On 20 October 2009, one of the Group’s employees, Chan brought an action in the Labour Tribunal against CPCL for approximately HK$359,000 being the outstanding salaries. Pursuant to an order issued by the Labour Tribunal, CPCL do pay the outstanding balance in eleven installments. A certificate of award/order was registered in the District Court on 30 October 2009. CPCL settled the first and second installments in October 2009. No repayment was made according to the agreed repayment schedule and no further legal action was taken by Chan.

(xiii) Mandatory Provident Fund Schemes Authority (‘‘MPFSA’’)

On 27 November 2009, MPFSA brought actions in the District Court of Hong Kong under DCCJ 5039 of 2009 and DCCJ 5040 of 2009 against CPCL and Climax Management Company Limited (‘‘CMGT’’) for the sum of approximately HK$114,000 and HK$192,000 due and owing to MPFSA respectively pursuant to sections 18(1) and 18(2) of the Mandatory Provident Fund Schemes Ordinance (Chapter 485). Since no defence has been served by CPCL and CMGT, judgments have been issued by the District Court of Hong Kong on 11 January 2010, pursuant to which CPCL and CMGT do pay the sum of outstanding together with fixed costs of approximately HK$2,000. No payment was made by CPCL and CMGT and no further legal action was taken by MPFSA.

Save as disclosed above, as at the Latest Practicable Date, neither the Company nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened by or against the Company or any of its subsidiaries.

8. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by any member of the Group within the two years immediately preceding the date of this circular that are or may be material:

• (i) the placing agreement dated 23 May 2008 entered into between the Company and Kingston Securities Limited in relation to placing of in aggregate of 191,000,000 placing shares at a price of HK$0.159 each, details of which have already been disclosed in the announcement of the Company dated 26 May 2008;

• (ii) the underwriting agreement and the supplemental underwriting agreement dated 8 September 2008 and 17 September 2008 respectively entered into between the Company and Kingston Securities Limited in relation to the right issue, details of which have already been disclosed in the announcements of the Company dated 11 September 2008 and 18 September 2008 respectively;

• (iii) the transfer agreement dated 15 January 2009 entered into between Climax Paper Converters, Limited, a wholly owned subsidiary of the Company, Baoan County Xixiang Town Tiegang Five Brothers Stationery Manufacturer (寶安區西鄉鎮鐵

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GENERAL INFORMATION

崗村五強文具制品廠) and the Company in relation to the transfer of the rights to use and management of the first phase of the premises located in the PRC, details of which have already been disclosed in the announcement of the Company dated 23 January 2009; and

• (iv) the Agreement.

9. EXPERTS AND CONSENTS

The following is the qualification of the experts who have given opinions or advice, which are contained or referred to in this circular:

Name Qualification SHINEWING (HK) CPA certified public accountants Limited (‘‘Shinewing’’) Optima Capital a licensed corporation to carry out type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities under the SFO

Shinewing and Optima Capital have given and have not withdrawn their written consent to the issue of this circular with the inclusion of their letters both dated 26 February 2010 and references to their names, in the form and context in which they appear.

As at the Latest Practicable Date, neither Shinewing nor Optima Capital had any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, neither Shinewing nor Optima Capital had direct or indirect interest in any assets which had been acquired, or disposed of by, or leased to any member of the Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Group since 31 March 2009, the date to which the latest published audited financial statements of the Company were made up.

10. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position or outlook of the Group since 31 March 2009, being the date to which the latest published audited consolidated financial statements of the Group were made up.

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11. MISCELLANEOUS

• (a) The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton HM11,Bermuda and the head of office and principal place of business of the Company is at Unit A, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong.

• (b) The registrar and transfer office in Hong Kong is Tricor Standard Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

• (c) The company secretary of the Company is Tsang Kwai Ping, who is a member of Hong Kong Institute of Certified Public Accountants and a member of the Institute of Chartered Accountants in England and Wales.

• (d) In the event of consistency, the English texts of this circular shall prevail their respective Chinese texts.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the principal place of business of the Company in Hong Kong at Unit A, 10/F., Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong:

• (a) the memorandum of association and Bye-Laws of the Company;

• (b) the annual reports of the Company for the two years ended 31 March 2008 and 2009;

• (c) the interim report of the Company for the six months ended 30 September 2008 and 2009;

• (d) the letter from the Independent Board Committee, the text of which is set out on pages 15 to 16 of this circular;

• (e) the letter from Optima Capital, the text of which is set out on pages 17 to 29 of this circular;

• (f) the accountants’ report on the Group, the text of which is set out on pages 30 to 109 of this circular;

• (g) the written consents from Shinewing and Optima Capital as referred to in paragraph headed ‘‘Experts and Consents’’ of this Appendix;

• (h) the material contracts referred to in the paragraph headed ‘‘Material contracts’’ to this Appendix; and

• (i) this circular.

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NOTICE OF SGM

==> picture [51 x 43] intentionally omitted <==

CLIMAX INTERNATIONAL COMPANY LIMITED 英 發 國 際 有 限 公 司[*]

(Incorporated in Bermuda with limited liability)

(Stock code: 439)

NOTICE IS HEREBY GIVEN that the special general meeting of the Company (‘‘SGM’’) will be held at Unit A, 10/F, Wings Building, 110–116 Queen’s Road Central, Central, Hong Kong at 11: 30 a.m. on 15 March 2010, to consider and, if thought fit, pass the following resolution (with or without modifications):

ORDINARY RESOLUTION

1. ‘‘THAT

• a) the conditional agreement dated 8 October 2009 (the ‘‘Agreement’’), a copy of which has been produced to the meeting marked ‘‘A’’ and signed by the chairman of the meeting for the purpose of identification) entered into among the Company (the ‘‘Vendor’’), Good Billion Holdings Limited (the ‘‘Purchaser’’) and Climax Investments Limited (the ‘‘Target Company’’) pursuant to which the Purchaser has conditionally agreed to acquire and the Company has conditionally agreed to sell the 2 shares with a par value of US$1.00 each in the share capital of the Target Company and the total indebtedness owed by the Target Company and its subsidiaries at completion of the Agreement and implementation of all transactions contemplated thereunder be are hereby approved, ratified and confirmed.

• b) any one director of the Company be and is hereby authorised for and on behalf of the Company to execute all such documents, instruments and agreements and to do all such acts or things as he may deem necessary or desirable for or in connection with the implementation of the Agreement and all transactions and other matters contemplated thereunder or ancillary thereto, to waive compliance from and/or agree to any amendment or supplement to any of the provisions of the Agreement which in their opinion is not of a material nature and to effect or implement any other matters referred to in this resolution.’’

By order of the Board

Climax International Company Limited Wong Hin Shek

Executive Director

Hong Kong, 26 February 2010

• For identification purposes only

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NOTICE OF SGM

Registered office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Head office and principal place of business: Unit A, 10/F Wings Building 110–116 Queen’s Road Central Central Hong Kong

Notes:

1. Any member entitled to attend and vote at the SGM shall be entitled to appoint another person as his proxy to attend and vote instead of him. A proxy need not be a member of the Company.

2. Where there are joint holders of shares, any one of such joint holders may vote at the SGM, either in person or by proxy, in respect of such share as if he was solely entitled thereto, but if more than one of such joint holders are present at the SGM, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members and where applicable, any branch register of members of the Company to be kept pursuant to the provisions of the Companies Act 1981 of Bermuda, as amended from time to time, in respect of the joint holding.

3. The form of proxy and (if required by the board of directors of the Company) the power of attorney or other authority (if any) under which it is signed, or certified copy of such power or authority, shall be delivered to the Company’s Hong Kong branch share registrar, Tricor Standard Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than forty-eight (48) hours before the time appointed for holding the SGM or adjourned meeting at which the person named in the form proposes to vote or, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, not less than 24 hours before the time appointed for the taking of the poll and in default the form of proxy shall not be treated as valid.

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