Joy Spreader Group Inc. - Proxy Solicitation & Information Statement 2010

IMPORTANT

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

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

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

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of AGTech Holdings Limited.

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AGTech Holdings Limited

(incorporated in Bermuda with limited liability)

(Stock Code: 8279)

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF AN INDIRECT 35% EQUITY INTEREST IN GOT

This circular will remain on the “Latest Company Announcement” page of the GEM website operated by the Stock Exchange at www.hkgem.com for at least seven days from the day of its posting and will be published on the website of the Company at www.agtech.com.

For identification purpose only

26 April 2010

CHARACTERISTICS OF GEM

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

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

– i –

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
The Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Shareholding structure of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Information on the Exequs Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Reasons for the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Financial effects of the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Financial and trading prospects of the Group . . . . . . . . . . . . . . . . . . . . . . . . . .	13
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Additional information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Appendix I – Financial information of the Group . . . . . . . . . . . . . . . . . .	14
Appendix II – Financial information of the Exequs Group. . . . . . . . . . . .	71
Appendix III – Financial information of the Century Decai Group . . . . .	96
Appendix IV − Financial information of GOT . . . . . . . . . . . . . . . . . . . . . .	118
Appendix V – Unaudited pro forma financial information
of the Enlarged Group. . . . . . . . . . . . . . . . . . . . . . . . . . .	143
Appendix VI – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	149

– ii –

DEFINITIONS

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

“Acquisition”
the proposed acquisition of the Sale Shares by the Purchaser for a total consideration of HK$50 million pursuant to the Agreement
“Agreement”

the conditional sale and purchase agreement dated 5 March 2010 entered into between the Purchaser and the Vendor in relation to the Acquisition

“associates” has the meaning ascribed to it under the GEM Listing Rules
“Board” the board of Directors
“Business Day”
a day (other than a Saturday, a Sunday and public holidays) on which banks are open for general business in Hong Kong
“BVI” British Virgin Islands
“Century Decai” (Beijing Century Decai Technology Co., Ltd.*), a company incorporated in the PRC with limited liability and a wholly-owned subsidiary of Exequs
“Century Decai Group” Century Decai and GOT
“Company”

AGTech Holdings Limited, a company incorporated in Bermuda with limited liability, the issued Shares of which are listed on GEM (stock code: 8279)

“Completion” completion of the Agreement
“Completion Date” the date on which Completion takes place
“connected persons” has the meaning ascribed to it under the GEM Listing Rules
“Consideration” the consideration of HK$50 million payable by the Company for the Sale Shares and to be satisfied in the manner as described in this circular

– 1 –

DEFINITIONS

“Consideration Shares”

57,894,000 new Shares to be allotted and issued at an issue price of approximately HK$0.38 per Share
“Director(s)”
director(s) of the Company
“Enlarged Group”
the Group together with the Exequs Group after Completion
“Exequs” Exequs Co. Ltd., a company incorporated in the BVI with limited liability which is wholly owned by the Vendor
“Exequs Group” Exequs, Century Decai and GOT
“GEM” The Growth Enterprise Market of the Stock Exchange
“GEM Listing Rules”
the Rules Governing the Listing of Securities on GEM

“GOT” (Beijing Greatwall GOT Information Products Co., Ltd.*), a company incorporated in the PRC with limited liability and 35% equity interest of which is held by Century Decai

“Group” the Company and its subsidiaries
“Hong Kong” Hong Kong Special Administrative Region of the PRC
“Latest Practicable Date”
22 April 2010, being the latest practicable date prior to the printing of this circular for ascertaining certain information referred to in this circular
“Listing Committee” the listing committee of the Stock Exchange
“Mr. Sun”
Mr. Sun Ho, an executive Director and the chairman of the Company
“PRC”
the People’s Republic of China which, for the purpose of this circular, excludes Hong Kong, Macao Special Administrative Region of the PRC and Taiwan
“Purchaser”
FAIRMAX ENTERPRISES LIMITED, a company incorporated in the BVI with limited liability which is an indirect wholly-owned subsidiary of the Company

– 2 –

DEFINITIONS

“Sale Shares”	50,000 issued shares of US$1.00 each in the share capital
	of Exequs
“SFO”	Securities and Futures Ordinance (Chapter 571 of the
	laws of Hong Kong)
“Share(s)”	ordinary share(s) of HK$0.002 each in the share capital
	of the Company
“Shareholder(s)”	holder(s) of the Share(s)
“Shareholder’s Loan”	the shareholder’s loan stated in the unaudited
	consolidated accounts of the Exequs Group as at 31
	December 2009 in the amount of HK$10 million owed by
	the Exequs Group to the Vendor
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Vendor”	SPEEDSUPER LIMITED, a company incorporated in the
	BVI with limited liability
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“RMB”	Renminbi, the lawful currency of the PRC
“US$”	United States dollars, the lawful currency of the United
	States of America
“%”	per cent

For illustration purposes, figures in RMB in this circular have been translated into HK$ at the exchange rate of RMB1 = HK$1.136. Figures in US$ in this circular have been translated into HK$ at the exchange rate of US$1 = HK$7.75. Such conversions shall not be construed as representations that amounts in RMB and US$ were or may have been converted into HK$ using such exchange rates or any other exchange rates or at all.

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LETTER FROM THE BOARD

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AGTech Holdings Limited

(incorporated in Bermuda with limited liability)

(Stock Code: 8279)

Executive Directors: Mr. Sun Ho (Chairman) Mr. Robert Geoffrey Ryan Mr. Bai Jinmin Mr. Liang Yu

Registered Office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Non-executive Director: Ms. Yang Yang

Independent non-executive Directors: Mr. Kwok Wing Leung Andy Mr. Wang Ronghua Mr. Hua Fengmao

Head office & principal place of business: Unit 3912, 39th Floor Shell Tower Times Square Causeway Bay Hong Kong

26 April 2010

To the Shareholders,

Dear Sir or Madam,

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF AN INDIRECT 35% EQUITY INTEREST IN GOT

INTRODUCTION

On 5 March 2010, the Board announced that the Purchaser, an indirect wholly-owned subsidiary of the Company, entered into the Agreement with the Vendor pursuant to which the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the Sale Shares, being 50,000 issued shares in Exequs representing the entire issued share capital of Exequs, for an aggregate consideration of HK$50 million.

For identification purpose only

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LETTER FROM THE BOARD

Exequs is an investment holding company incorporated in the BVI. The principal asset held by Exequs is the entire registered capital of Century Decai, which in turn holds a 35% equity interest in GOT. GOT is one of the vendors approved by China Sports Lottery Administration Centre for the research, development and production of sports lottery terminals and systems.

The Acquisition constitutes a major transaction of the Company under the GEM Listing Rules. The Agreement and the transactions contemplated thereunder including the issue of the Consideration Shares are therefore subject to the approval of the Shareholders at the special general meeting of the Company. MAXPROFIT GLOBAL INC and Mr. Sun, which are beneficially interested in an aggregate of 2,033,328,000 Shares representing approximately 56.66% of the total issued Shares, have given written consent to the Acquisition on 5 March 2010. The written consent from MAXPROFIT GLOBAL INC and Mr. Sun is accepted in lieu of holding a general meeting to approve the Agreement and the transactions contemplated thereunder pursuant to Rule 19.44 of the GEM Listing Rules.

The purpose of this circular is to provide you with, among other things, (i) details of the Agreement; (ii) financial and other information of the Group; (iii) financial information of the Exequs Group; (iv) financial information of the Century Decai Group; (v) financial information of GOT; and (vi) unaudited pro forma financial information of the Enlarged Group.

THE AGREEMENT

Date

5 March 2010

Parties

Purchaser: FAIRMAX ENTERPRISES LIMITED, an indirect wholly-owned subsidiary of the Company

Vendor: SPEEDSUPER LIMITED

To the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, (i) the Vendor is an investment holding company; and (ii) the Vendor and its ultimate beneficial owner(s) are third parties independent of the Purchaser and the Company and their respective connected persons. The Group has not entered into any previous transactions with the Vendor or its associates which would otherwise require aggregation pursuant to Rule 19.22 of the GEM Listing Rules.

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LETTER FROM THE BOARD

Assets to be acquired

The Sale Shares (being a total of 50,000 issued shares in the share capital of Exequs), representing the entire issued share capital of Exequs.

The Sale Shares shall be acquired free from liens and encumbrances and together with all rights attached thereto from the date of Completion.

The Consideration

The Consideration for the Acquisition is HK$50 million which shall be satisfied as to HK$28 million in cash and as to the balance of HK$22 million by the allotment and issue of the Consideration Shares in the following manner:

(i) on the Completion Date, the Purchaser is required to deposit the amount of HK$15 million to the Vendor’s designated bank account and the Company shall allot and issue 57,894,000 Consideration Shares to the Vendor;
(ii) on or before 5 March 2011, the Purchaser is required to deposit the amount of HK$9.5 million to the Vendor’s designated bank account; and
(iii) within ten Business Days from the receipt of evidence satisfactory to the Company showing full settlement of other receivables of Century Decai as at 28 February 2010 in the aggregate amount of RMB3,018,803.98 (equivalent to approximately HK$3,429,361.32), the Purchaser shall deposit the remaining balance in the amount of HK$3.5 million to the Vendor’s designated bank account.

The Consideration was arrived at after arm’s length negotiations between the parties, taking into account the financial performance of GOT as referred to in the paragraph headed “Information on the Exequs Group” below, the net asset value of the Exequs Group, the growth potential of the business of GOT and the possible future earnings contribution from the Exequs Group to the Group.

The issue price of approximately HK$0.38 per Consideration Share represents:

(i) a premium of approximately 28.8% over the closing price of HK$0.295 per Share as quoted on the Stock Exchange on 5 March 2010, being the date of the Agreement;
(ii) a premium of approximately 31.5% over the average of the closing prices of the Shares as quoted on the Stock Exchange over the last five consecutive trading days up to and including 5 March 2010 of HK$0.289 per Share;
(iii) a premium of approximately 39.7% over the average of the closing prices of the Shares as quoted on the Stock Exchange over the last ten consecutive trading days up to and including 5 March 2010 of HK$0.272 per Share;

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LETTER FROM THE BOARD

(iv) a premium of approximately 5.6% over the closing price of HK$0.36 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
(v) a premium of approximately 35.2% over the audited net asset value per Share attributable to owners of the Company as at 31 December 2009 of approximately HK$0.281.

The Consideration Shares, when issued, will rank pari passu with all other Shares in issue as at the date of issue. As set out in the announcement of the Company dated 5 March 2010, the Company initially considered to issue the Consideration Shares under a specific mandate to be approved by the Shareholders at a special general meeting of the Company. Taking into account that MAXPROFIT GLOBAL INC and Mr. Sun had given written consent to the Acquisition on 5 March 2010, it would be burdensome for the Company just to hold a meeting to approve the issue of the Consideration Shares. In the circumstances, the Company decided that the Consideration Shares would be issued under the general mandate granted to the Directors by the Shareholders at the annual general meeting of the Company held on 2 November 2009. An application has been made to the Listing Committee for the listing of and permission to deal in the Consideration Shares.

The Consideration Shares represent approximately (i) 1.61% of the existing issued share capital of the Company; and (ii) 1.59% of the share capital of the Company as enlarged by the issue of the Consideration Shares. The aggregate nominal value of the Consideration Shares is HK$115,788. Upon the allotment and issue of the Consideration Shares, there will not be any change in control of the Company. Pursuant to the Agreement, the Consideration Shares are subject to lock-up whereby the Vendor shall be restricted from transferring or disposing of any of the Consideration Shares from the date of the allotment and issue of the Consideration Shares by the Company up to the date being six months after the date of the allotment and issue of the Consideration Shares (both dates inclusive).

Pursuant to the Agreement, the Vendor agreed that the obligation on the part of the Exequs Group to repay the Shareholder’s Loan shall be waived entirely and neither the Purchaser nor the Exequs Group shall have any liability relating to the Shareholder’s Loan with effective from the Completion Date. As advised by the Vendor, as at the Latest Practicable Date, the outstanding amount of the Shareholder’s Loan was HK$10 million.

Conditions precedent

The Agreement is subject to and conditional upon the fulfillment or waiver of the following conditions:

(i) the Purchaser being satisfied with the results of the due diligence review on the Exequs Group;
(ii) all the representations and warranties given by the parties contained in the Agreement remaining true and accurate as at the Completion Date;
(iii) all commitments as set out in the Agreement being fulfilled by the Vendor before the Completion Date;

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LETTER FROM THE BOARD

(iv) there being no material adverse changes in the operations, assets and liabilities, financial positions or profitability of the Exequs Group;
(v) there being no material adverse changes in the business of the Exequs Group caused by any laws, regulations or government policies in any jurisdictions in which the Exequs Group operates;
(vi) the transfer of the Sale Shares by the Vendor to the Purchaser being lawful and legal;
(vii) the Agreement and the transactions contemplated thereunder including the allotment and issue of the Consideration Shares having been approved by the Shareholders at a special general meeting of the Company or by written Shareholders’ approval in lieu of holding a special general meeting of the Company pursuant to the GEM Listing Rules;
(viii)the Listing Committee having granted the listing of and permission to deal in the Consideration Shares; and
(ix) the Purchaser having obtained all necessary consents and approvals from the relevant authorities in respect of the Agreement and the transactions contemplated thereunder.

The Purchaser shall have the right to waive conditions (i), (ii) (insofar as it relates to the Vendor), (iii), (iv) and (v); while the Vendor shall have the right to waive conditions (ii) (insofar as it relates to the Purchaser), (vi) and (ix). If the above conditions are not fulfilled or waived by 30 April 2010 (or such other later date as agreed by the Vendor and the Purchaser), the Agreement shall lapse and the obligations of the parties under the Agreement shall cease save for antecedent breaches.

Completion shall take place within five Business Days after the fulfillment or waiver of all the above conditions.

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LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

Set out below is a summary of the shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) immediately after the allotment and issue of the Consideration Shares, which are prepared on the assumptions that there would be no other changes in the issued share capital of the Company since the Latest Practicable Date:

					Immediately after the	Immediately after the
	As at	the			allotment and issue of
	Latest Practicable		Date		the Consideration Shares
	Number of	Approximate			Number of	Approximate
	Shares			%	Shares		%

MAXPROFIT GLOBAL INC
(Note 1)	2,006,250,000		55.91		2,006,250,000	55.02
Mr. Sun (Note 3)	27,078,000			0.75	27,078,000		0.74
	2,033,328,000		56.66		2,033,328,000	55.76

Fine Bridge International Limited
(Note 2)	44,876,600			1.25	44,876,600		1.23
Mr. Bai Jinmin (Note 3)	3,343,750			0.09	3,343,750		0.09
	48,220,350			1.34	48,220,350		1.32
Mr. Hua Fengmao (Note 3)	1,355,000			0.04	1,355,000		0.04
Mr. Liang Yu (Note 3)	3,343,750			0.09	3,343,750		0.09
Mr. Wang Ronghua (Note 3)	2,275,000			0.06	2,275,000		0.06
Ms. Yang Yang (Note 3)	400,000			0.01	400,000		0.01
	2,088,922,100		58.20		2,088,922,100	57.28
The Vendor	–			–	57,894,000		1.59
Other public Shareholders	1,499,600,400		41.80		1,499,600,400	41.13

	3,588,522,500		100.00		3,646,416,500	100.00

Notes:

MAXPROFIT GLOBAL INC is beneficially and wholly owned by Mr. Sun.
Fine Bridge International Limited is wholly owned by HB Resources Investment Limited, which is in turn beneficially and wholly owned by Mr. Bai Jinmin.
(i) Mr. Sun, Mr. Bai Jinmin and Mr. Liang Yu are executive Directors; (ii) Ms. Yang Yang is a non-executive Director; and (iii) Mr. Hua Fengmao and Mr. Wang Ronghua are independent non-executive Directors as at the Latest Practicable Date.

INFORMATION ON THE EXEQUS GROUP

Exequs and Century Decai

Exequs was incorporated in the BVI with limited liability on 12 September 2008. The principal business of Exequs is investment holding. It is held by the Vendor for the sole purpose of holding the investment in the entire registered capital of Century Decai.

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LETTER FROM THE BOARD

Century Decai was established in the PRC with limited liability on 25 April 2007 and became a wholly foreign-owned enterprise on 16 December 2008. Its scope of business mainly includes the research and development of software and hardware products for computers and network systems, sales of computer systems and network technology solutions as well as the provision of information and technical support services. Save for 35% equity interest in GOT, Century Decai has no other material assets and has not undertaken any operations since its date of incorporation.

GOT

GOT was established in the PRC with limited liability in 1994 and is one of the largest terminal and system providers for sports lottery in the PRC. Initially, it was approved by the State Council and authorised by, among others, the Ministry of Finance, State Administration of Taxation and the former Ministry of Electric Industry and was set up for the implementation of commercial terminal projects in the PRC. The scope of business provided by GOT was research and development, manufacturing and sales of commercial terminals in the PRC at that time.

In 1998, GOT became one of the vendors approved by China Sports Lottery Administration Centre for the research, development and production of sports lottery terminals and systems. In 2004, it established a manufacturing base in Beijing with annual production capability of over 200,000 units. After over 10 years of industry experience, GOT has built up superior research and development abilities in sports lottery terminals and systems and developed an extensive sales network in over 20 provinces and cities in the PRC. In addition, GOT has enhanced its after-sales services by setting up service centres in several provinces and cities across the PRC to handle product repair and provide technical support services. Through its efficient call centre system, under normal circumstances, GOT is able to respond to customers’ enquiries within 1 hour after receiving their calls and provide on-site maintenance services within 2 hours (for customers in urban areas) to 6 hours (for customers in rural areas) upon customers’ requests. GOT is recognised as a reputable brand in the PRC sports lottery field and was appraised by General Administration of Sport of China as the “Outstanding Company Contributing to Sports Lottery” in 2005.

As at the Latest Practicable Date, GOT is owned as to 35% by Century Decai and 65% by China Electronics Corporation (“CEC”). To the best knowledge of the Directors, CEC is the largest state-owned information technology enterprise established under the laws of the PRC in 1989 with the approval of the State Council of the PRC. CEC is a nationwide electronics and information technology conglomerate directly administered by the PRC government. It actively focuses on communications, consumer electronics, semiconductor and software sectors in the PRC.

Financial information

Based on the accountants’ report of the Exequs Group prepared in accordance with Hong Kong Financial Reporting Standards as set out in Appendix II to this circular, for the period from 12 September 2008 (date of incorporation) to 31 December 2008, the audited profit (both

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LETTER FROM THE BOARD

before and after tax) of the Exequs Group was approximately HK$31.25 million. The audited profit (both before and after tax) of the Exequs Group for the year ended 31 December 2009 was approximately HK$4.59 million. Based on the accountants’ report of the Century Decai Group prepared in accordance with Hong Kong Financial Reporting Standards as set out in Appendix III to this circular, the audited profit before tax of the Century Decai Group was approximately RMB6.33 million (equivalent to approximately HK$7.19 million) for the year ended 31 December 2008. The audited profit after tax of the Century Decai Group was approximately RMB6.29 million (equivalent to approximately HK$7.15 million) for the year ended 31 December 2008. For the year ended 31 December 2009, the Century Decai Group recorded audited profit (both before and after tax) of approximately RMB4.05 million (equivalent to approximately HK$4.60 million). Based on the accountants’ report of GOT prepared in accordance with Hong Kong Financial Reporting Standards as set out in Appendix IV to this circular, the audited profit before tax of GOT was approximately RMB21.75 million (equivalent to approximately HK$24.71 million) for the year ended 31 December 2008. The audited profit after tax of GOT was approximately RMB18.46 million (equivalent to approximately HK$20.97 million) for the year ended 31 December 2008. For the year ended 31 December 2009, GOT recorded audited profit before tax of approximately RMB15.11 million (equivalent to approximately HK$17.16 million) and audited profit after tax of approximately RMB12.82 million (equivalent to approximately HK$14.56 million). The audited consolidated net assets of the Exequs Group as at 31 December 2009 was approximately HK$36.21 million.

REASONS FOR THE ACQUISITION

The Company is an investment holding company. The Group is a fully integrated solutions provider for the PRC sports lottery market and is principally engaged in the provision of (i) territorial management and marketing consultancy services; (ii) lottery shop and retail chain management and marketing consultancy services; (iii) research, design and development of lottery games and systems; and (iv) supply of lottery sales terminals and accessories in the PRC. The Group has operations in various provinces in the PRC.

As disclosed in the annual report of the Company for the six months ended 31 December 2009, the Directors foresee strong prospects in the sports lottery sector in the PRC. It has been the intention of the management of the Company to identify suitable business opportunities to enhance the value of its PRC sports lottery business so as to strengthen its market leadership position, generate additional revenue for the Group and maximize return to the Shareholders.

It is expected that sports lottery sales will grow continuously with market opportunities to be brought about by 2010 South Africa World Cup, 2010 Guangzhou Asian Games and the yearly NBA games in the United States of America. The Directors expect that China Sports Lottery Administration Centre and the relevant authorities will demand more advanced sports lottery terminals, systems and technologies to cope with such market opportunities. Considering that GOT is an established key industry player with cutting-edge technologies and is strongly supported by its controlling shareholder, CEC, the Directors believe that GOT is in a good position to develop new sports lottery projects for the government of the PRC. The

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LETTER FROM THE BOARD

Directors consider that the Acquisition would benefit all business divisions of the Group by providing excellent opportunities to further extend its sales network coverage into more provinces and cities in the PRC, thereby enhancing its market competitiveness and achieving potential synergies. Furthermore, the Directors believe that the Acquisition will enhance the Group’s new product research and development capabilities, in particular, the Group’s self-mastered innovation capabilities. The Group is able to rapidly establish a dynamic information technology platform to capture any future market opportunities in the PRC sports lottery industry through the Acquisition.

Based on the above industry growth drivers, the established operations of GOT and the current financial position of the Exequs Group, the Directors consider that there is a potential for GOT to bring a stable income stream to the Group and are of the view that the terms of the Agreement (including the issue price of the Consideration Shares) are fair and reasonable and the Acquisition is in the interests of the Company and its Shareholders as a whole.

The cash portion of the Consideration is expected to be funded by the internal resources of the Group.

FINANCIAL EFFECTS OF THE ACQUISITION

Upon Completion, GOT will be accounted for as an associated company of the Group by using equity method of accounting. As set out in Appendix II to this circular, GOT contributed approximately HK$5.10 million share of profit to the Exequs Group for the year ended 31 December 2009. In view of the historical earnings contribution from GOT, the Directors believe the Acquisition will widen the earnings base of the Enlarged Group.

Set out in Appendix V to this circular is the unaudited pro forma financial information on the Enlarged Group which illustrates the financial effect of the Acquisition on the assets and liabilities of the Group assuming Completion had taken place on 31 December 2009. Based on the unaudited pro forma financial information in Appendix V to this circular, the total assets of the Group would increase to HK$1,053.31 million from HK$1,036.01 million; and its total liabilities would increase to HK$30.56 million from HK$30.47 million, as a result of the Acquisition.

Shareholders should note that the earnings contribution from GOT after Completion will depend on the future performance of GOT; and the actual effect of the Acquisition on the assets and liabilities of the Group will depend on the financial position of the Exequs Group as at the Completion Date, which cannot be quantified as at the Latest Practicable Date.

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LETTER FROM THE BOARD

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

After the Acquisition, the Group’s market competitiveness and market presence will be strengthened to capture business opportunities in the blooming sports lottery market in the PRC. Looking forward, the Group considers that the growth momentum of the PRC lottery industry will be sustained for the coming years and it will step up efforts on all fronts to capitalise on the trend. In anticipation of the growth potential of the sports lottery business in the PRC, the Group will continue to serve as a reliable supplier of quality lottery products as well as a professional management and marketing consultant in the sport lottery market in the PRC. Meanwhile, the Group will continue to look for new investment business opportunities with a view to seeking further expansion, enhancing the Group’s overall competiveness and improving its business and financial performance.

GENERAL

As Completion is subject to the fulfillment of a number of conditions precedent, the Acquisition may or may not proceed. Shareholders and potential investors should exercise caution when dealing in the Shares.

ADDITIONAL INFORMATION

Your attention is drawn to the further information contained in the appendices to the circular.

Yours faithfully, By order of the Board AGTech Holdings Limited Sun Ho

Chairman

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL SUMMARY

In order to conform to the statutory financial year end date of the Group’s principal operating subsidiaries, which are mainly situated in the PRC, the Board announced that the financial year end date of the Company had been changed from 30 June to 31 December on 10 December 2009. Accordingly, the latest financial year end date of the Company was 31 December 2009 which covered a 6-month period from 1 July 2009 to 31 December 2009. Further details of the change of financial year end date are set out in the announcement of the Company dated 10 December 2009.

The following is a summary of the financial information of the Group for each of the 6-month period ended 31 December 2009 and the two years ended 30 June 2008 and 2009 extracted from the audited financial statements of the Group for the 6-month period ended 31 December 2009 and the two years ended 30 June 2008 and 2009. The auditors’ reports by HLB Hodgson Impey Cheng in respect of the Group’s audited accounts for each of the 6-month period ended 31 December 2009 and the two years ended 30 June 2008 and 2009 did not contain any qualified opinion.

Results

			For the period
		1 July –	1 July 2008 –	1 July 2007 –
	31 December 2009		30 June 2009	30 June 2008
		HK$	HK$	HK$
Revenue
– continuing operations		33,822,293	58,988,495	43,163,581
– discontinued operation		340,447	2,633,483	1,806,589
Total		34,162,740	61,621,978	44,970,170


Loss for the period
attributable to owners of
the Company
– continuing operations		(44,268,184)	(189,237,306)	(126,898,578)
– discontinued operation		8,897,185	(262,425)	(1,637,475)
Total		(35,370,999)	(189,499,731)	(128,536,053)

Assets and liabilities

			As at
	31 December 2009		30 June 2009	30 June 2008
		HK$	HK$	HK$
Total assets		1,036,008,408	1,073,894,601	1,152,055,442
Total liabilities		(30,465,966)	(36,812,081)	(44,421,781)
		1,005,542,442	1,037,082,520	1,107,633,661


Equity attributable to owners
of the Company		1,002,482,563	1,034,828,450	1,103,511,128
Non-controlling interests		3,059,879	2,254,070	4,122,533
		1,005,542,442	1,037,082,520	1,107,633,661

– 14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP

As mentioned in the sub-section headed “Financial Summary” above, the Board announced that the financial year end date of the Company had been changed from 30 June to 31 December on 10 December 2009. Accordingly, the latest financial year end date of the Company was 31 December 2009 which covered a 6-month period from 1 July 2009 to 31 December 2009. Set out below are the audited consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity and consolidated statement of cash flows, together with the notes to the financial statements of the Group as extracted from the annual report of the Company for the period ended 31 December 2009. References to page numbers in this section are to the page numbers of such annual report of the Company.

Consolidated Statement of Comprehensive Income

For the period ended 31 December 2009

		Period ended	Year ended
		31 December	30 June
		2009	2009
	Notes	HK$	HK$
			(As restated)
Continuing operations
Revenue	7	33,822,293	58,988,495
Cost of sales and services		(13,236,893)	(34,739,385)
Gross profit		20,585,400	24,249,110
Bank interest income		1,327,959	2,632,778
Other (cost)/income		(58,250)	188,807
Selling and administrative expenses		(42,215,563)	(63,402,528)
Loss from business operations		(20,360,454)	(36,331,833)
Share-based payments		(12,848,042)	(123,090,447)
Net foreign exchange gain/(loss)		1,209,532	(57,676)
Amortisation of other intangible assets	18	(19,656,315)	(39,270,108)
Loss before tax		(51,655,279)	(198,750,064)
Income tax	9	3,290,160	7,910,646

Loss for the period/year from continuing
operations	11	(48,365,119)	(190,839,418)
Discontinued operation	10
Profit/(loss) for the period/year from
discontinued operation		8,897,185	(262,425)
Loss for the period/year		(39,467,934)	(191,101,843)
Other comprehensive income
Exchange differences on translating foreign
operations		1,152,733	(2,610,263)
Exchange differences released upon disposals
of subsidiaries		25,580	53,553

Other comprehensive income for the
period/year, net of tax		1,178,313	(2,556,710)
Total comprehensive income for the
period/year		(38,289,621)	(193,658,553)

– 15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

		Period ended	Year ended
		31 December	30 June
		2009	2009
	Notes	HK$	HK$
			(As restated)
Loss attributable to:
Owners of the Company		(35,370,999)	(189,499,731)
Non-controlling interests		(4,096,935)	(1,602,112)
		(39,467,934)	(191,101,843)


Total comprehensive income attributable to:
Owners of the Company		(34,195,430)	(192,045,625)
Non-controlling interests		(4,094,191)	(1,612,928)
		(38,289,621)	(193,658,553)


Loss per Share	14
From continuing and discontinued operations
Basic and diluted		HK0.99 cent	HK5.30 cents


From continuing operations
Basic and diluted		HK1.24 cents	HK5.30 cents

– 16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Financial Position

At 31 December 2009

Consolidated Statement of Financial Position At 31 December 2009
		At	At
		31 December	30 June
		2009	2009
	Notes	HK$	HK$
Non-current assets
Property, plant and equipment	15	21,665,730	25,112,795
Goodwill	16	663,365,373	662,199,119
Other intangible assets	18	100,391,297	119,638,728
Investment in an associate	19	–	–
Deposits and prepayments	23	41,283,167	46,175,666
Other assets		1,615,392	1,612,552

		828,320,959	854,738,860

Current assets
Inventories	20	–	114,958
Trade receivables	21	17,452,520	9,592,417
Amounts due from customers for
contract work	22	–	1,539,009
Other receivables, deposits and prepayments	23	48,714,279	35,701,425
Pledged bank deposits	24	–	501,217
Bank balances and cash	24	141,520,650	171,706,715

		207,687,449	219,155,741

Current liabilities
Trade payables	25	–	779,388
Other payables, accruals and deposits
received	26	6,157,466	5,948,026
Current tax liabilities		290,489	1,201,501

		6,447,955	7,928,915

Net current assets		201,239,494	211,226,826

Total assets less current liabilities		1,029,560,453	1,065,965,686

Non-current liabilities
Deferred tax liabilities	27	24,018,011	28,883,166

Net assets		1,005,542,442	1,037,082,520


Capital and reserves
Share capital	28	7,163,670	7,162,670
Reserves		995,318,893	1,027,665,780

Equity attributable to owners of the Company		1,002,482,563	1,034,828,450
Non-controlling interests		3,059,879	2,254,070
Total equity		1,005,542,442	1,037,082,520

– 17 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the period ended 31 December 2009

																			Attributable	Attributable	Attributable
							Share												to owners of			Non-
	Share			Share			options		Statutory		Exchange		Contributed			Accumulated				the		controlling
	capital			premium			reserve		reserve		reserve			surplus			losses			Company		interests			Total
	HK$			HK$			HK$		HK$		HK$			HK$			HK$			HK$		HK$			HK$
	(Note 28)								(Note (a))					(Note (b))
At 1 July 2008	7,160,170		998,518,599			106,194,072			310,757		90,497,119			58,299,875		(157,469,464)			1,103,511,128			4,122,533		1,107,633,661
Loss for the year		–			–			–		–		–			–	(189,499,731)			(189,499,731)			(1,602,112)		(191,101,843)
Other comprehensive income for
the year		–			–			–		–	(2,545,894)				–			–		(2,545,894)		(10,816)			(2,556,710)
Total comprehensive income for
the year		–			–			–		–	(2,545,894)				–	(189,499,731)			(192,045,625)			(1,612,928)		(193,658,553)
Recognitions of equity-settled
share-based payments		–			–	123,090,447				–		–			–			–	123,090,447				–	123,090,447
Shares issued on exercise of part
of a share option	2,500			325,000			(55,000)			–		–			–			–		272,500			–		272,500
Lapse of share options		–			–		(3,830,170)			–		–			–		3,830,170				–		–		–
Released upon disposal of a
subsidiary_(Note 34(d))_		–			–			–		–		–			–			–			–	(255,535)			(255,535)
At 30 June 2009	7,162,670		998,843,599			225,399,349			310,757		87,951,225			58,299,875		(343,139,025)			1,034,828,450			2,254,070		1,037,082,520

Loss for the period		–			–			–		–		–			–	(35,370,999)			(35,370,999)			(4,096,935)		(39,467,934)
Other comprehensive income for
the period		–			–			–		–	1,175,569				–			–		1,175,569		2,744			1,178,313
Total comprehensive income for
the period		–			–			–		–	1,175,569				–	(35,370,999)			(34,195,430)			(4,094,191)		(38,289,621)
Recognitions of equity-settled
share-based payments		–			–		12,848,042			–		–			–			–		12,848,042			–		12,848,042
Shares issued on exercise of part
of a share option	1,000			705,967			(597,067)			–		–			–			–		109,900			–		109,900
Capital contribution from non-
controlling interests		–			–			–		–		–			–			–			–	4,900,000			4,900,000
Transfer to profit or loss on
disposal of a subsidiary		–			–			–	(292,038)			–			–		292,038				–		–		–
Released upon disposal of
subsidiaries_(Note 34 (a))_		–			–			–		–		–	(11,108,399)					–	(11,108,399)				–	(11,108,399)
Transfer from accumulated losses		–			–			–	1,138,751			–			–		(1,138,751)				–		–		–

At 31 December 2009	7,163,670		999,549,566			237,650,324			1,157,470		89,126,794			47,191,476		(379,356,737)			1,002,482,563			3,059,879		1,005,542,442

Notes:

(a) In accordance with the statutory requirements in the PRC, subsidiaries of the Company registered in the PRC are required to transfer a certain percentage of their annual net income from retained profits to statutory reserve. The statutory reserve is not distributable.
(b) The contributed surplus of the Group represents (1) the difference between (a) the nominal value of the share capital and the existing balances on the share premium account of a subsidiary acquired pursuant to the Group reorganisation prior to the listing of the Company’s Shares; and (b) the nominal value of the Shares issued by the Company and the release and waiver of the amount owed by the then holding company of the subsidiary to the Company in exchange thereof; (2) the release and waiver of the amount owed by the Company to its former immediate holding company; and (3) transfer from share premium account.

– 18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Cash Flows

For the period ended 31 December 2009

		Period ended	Year ended
		31 December	30 June
		2009	2009
	Notes	HK$	HK$
OPERATING ACTIVITIES
(Loss)/profit before tax
From continuing operations		(51,655,279)	(198,750,064)
From discontinued operation	10	8,897,185	(253,663)
Adjustments for:
Share-based payments		12,848,042	123,090,447
Depreciation of property, plant and equipment		3,742,180	7,040,380
Amortisation of other intangible assets		19,656,315	39,270,108
Loss on disposal of property, plant and
equipment		38,241	118,731
Impairment losses recognised on amounts due
from customers for contract work		1,539,009	–
Impairment losses recognised on other
receivables, deposits and prepayments		148,136	–
Net gains on disposals of subsidiaries		(10,881,260)	(201,982)
Bank interest income		(1,327,959)	(2,639,979)
Operating cash flows before movements in
working capital		(16,995,390)	(32,326,022)
Decrease in deposits and prepayments		4,892,499	8,562,718
Decrease in inventories		–	132,756
(Increase)/decrease in trade receivables		(7,930,050)	1,830,874
Decrease in amounts due from customers for
contract work		–	1,029,126
Increase in other receivables, deposits and
prepayments		(13,554,612)	(13,553,936)
Decrease in trade payables		(430,297)	(2,095,732)
Increase in other payables, accruals and
deposits received		1,659,609	3,211,749
Cash used in operations		(32,358,241)	(33,208,467)
Income taxes paid		(2,540,021)	(304,103)
NET CASH USED IN OPERATING
ACTIVITIES		(34,898,262)	(33,512,570)

– 19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

		Period ended	Year ended
		31 December	30 June
		2009	2009
	Notes	HK$	HK$
INVESTING ACTIVITIES
Interest received		1,327,959	2,639,979
Purchase of other intangible assets		(209,026)	(493,333)
Purchase of other assets		–	(1,613,006)
Purchase of property, plant and equipment		(391,720)	(9,517,107)
Proceeds from disposal of property, plant and
equipment		45,228	1,775,389
Net cash outflow on disposal of subsidiaries	34(a)	(1,047,343)	–
Decrease in pledged bank deposits		181,217	785,965
NET CASH USED IN INVESTING
ACTIVITIES		(93,685)	(6,422,113)
FINANCING ACTIVITIES
Proceeds from issue of Shares		109,900	272,500
Capital contributed from non-controlling
interests		4,900,000	–

NET CASH GENERATED BY FINANCING
ACTIVITIES		5,009,900	272,500

NET DECREASE IN CASH AND CASH
EQUIVALENTS		(29,982,047)	(39,662,183)
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE PERIOD/YEAR		171,706,715	211,656,479
EFFECT OF EXCHANGE RATE CHANGES		(204,018)	(287,581)
CASH AND CASH EQUIVALENTS AT THE
END OF THE PERIOD/YEAR		141,520,650	171,706,715


ANALYSIS OF THE BALANCES OF CASH
AND CASH EQUIVALENTS
Bank balances and cash		141,520,650	171,706,715

– 20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Consolidated Financial Statements

For the period ended 31 December 2009

1. GENERAL

The Company was incorporated in Bermuda as an exempted company with limited liability and its issued Shares have been listed on GEM.

At 31 December 2009, the Directors regard MAXPROFIT GLOBAL INC, a private limited company incorporated in the British Virgin Islands, as the immediate and ultimate holding company of the Company.

The addresses of the registered office and principal place of business of the Company are disclosed in the “Corporate Information” section of this annual report.

The Company is an investment holding company and its principal subsidiaries are mainly engaged in provision of sports lottery management and marketing consultancy services, supply of sports lottery sales terminals (and accessories) and provision of lottery advisory service in the PRC. Details of the principal activities of such principal subsidiaries are set out in Note 35.

The consolidated financial statements are presented in Hong Kong dollars. The functional currency of the Company is Renminbi. As the Company is listed in Hong Kong, the Directors consider that it is appropriate to present the consolidated financial statements in Hong Kong dollars.

The Company announced on 10 December 2009 that the financial year end date of the Company was changed from 30 June to 31 December commencing from the financial year 2009. Accordingly, the financial statements for the current period cover the six-month period from 1 July 2009 to 31 December 2009. The corresponding amounts shown for the consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated statement of cash flows and related notes cover the twelve-month period from 1 July 2008 to 30 June 2009 and therefore may not be comparable with the amounts shown for the current period.

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

In the current period, the Group has applied all of the new and revised standards, amendments and interpretations (the “new and revised HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) that are relevant to its operations and effective for annual periods beginning on or after 1 July 2009.

HKAS 1 (Revised) Presentation of Financial Statements HKAS 23 (Revised) Borrowing Costs HKAS 27 (Revised) Consolidated and Separate Financial Statements HKAS 32 & HKAS 1 (Amendments) Puttable Financial Instruments and Obligations Arising on Liquidation HKAS 39 (Amendment) Eligible Hedged Items HKFRS 1 (Revised) First-time Adoption of HKFRSs HKFRS 1 & HKAS 27 (Amendments) Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate HKFRS 2 (Amendment) Vesting Conditions and Cancellations HKFRS 3 (Revised) Business Combinations HKFRS 7 (Amendments) Improving Disclosures about Financial Instruments HKFRS 8 Operating Segments HK(IFRIC)-Int 15 Agreements for the Construction of Real Estate HK(IFRIC)-Int 16 Hedges of a Net Investment in a Foreign Operation HK(IFRIC)-Int 17 Distributions of Non-cash Assets to Owners HK(IFRIC)-Int 18 Transfers of Assets from Customers HKFRSs (Amendments) Improvements to HKFRSs issued in 2008 HKFRSs (Amendments) Improvements to HKFRSs issued in 2009

Except as described below, the adoption of the new and revised HKFRSs has no material effect on the consolidated financial statements of the Group for the current and prior accounting periods.

– 21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

New and revised HKFRSs affecting presentation and disclosure only

HKAS 1 (revised in 2007) Presentation of Financial Statements

HKAS 1 (2007) has introduced terminology changes (including revised titles for the consolidated financial statements) and changes in the format and content of the consolidated financial statements.

HKFRS 8 Operating Segments

HKFRS 8 is a disclosure standard that has not resulted in a redesignation of the Group’s reportable segments (see Note 8).

Improving Disclosures about Financial Instruments (Amendments to HKFRS 7 Financial Instruments: Disclosures)

The amendments to HKFRS 7 expand the disclosures required in relation to fair value measurements and liquidity risk. The Group has not presented comparative information for the expanded disclosures in accordance with the transitional provision set out in the amendments.

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

HKFRSs (Amendments)	Improvements to HKFRSs issued in 20091
HKAS 24 (Revised)	Related Party Disclosures4
HKAS 32 (Amendments)	Classification of Rights Issues3
HKFRS 1 (Amendments)	Additional Exemptions for First-time Adopters2
HKFRS 2 (Amendments)	Group Cash-settled Share-based Payment Transactions2
HKFRS 9	Financial Instruments (relating to the classification and
	measurement of financial assets)6
HK (IFRIC)-Int 14 (Amendments)	Prepayments of a Minimum Funding Requirement4
HK (IFRIC)-Int 19	Extinguishing Financial Liabilities with Equity
	Instruments5

Notes:

1 Amendments that are effective for annual periods beginning on or after 1 January 2010
2 Effective for annual periods beginning on or after 1 January 2010
3 Effective for annual periods beginning on or after 1 February 2010
4 Effective for annual periods beginning on or after 1 January 2011
5 Effective for annual periods beginning on or after 1 July 2010
6 Effective for annual periods beginning on or after 1 January 2013

HKFRS 9 Financial Instruments introduces new requirements for the classification and measurement of financial assets and will be effective from 1 January 2013, with earlier application permitted. The standard requires all 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. The application of HKFRS 9 might affect the classification and measurement of the Group’s financial assets.

In addition, as part of Improvements to HKFRSs (2009) , HKAS 17 Leases has been amended in relation to the classification of leasehold land. The amendments will be effective from 1 January 2010, with earlier application permitted. Before the amendments to HKAS 17, leasees were required to classify leasehold land as operating leases and presented as prepaid lease payments in the consolidated statement of financial position. The amendments have removed such a requirement. Instead, the amendments require the classification of leasehold land to be based on the general principles set out in HKAS 17, that are based on the extent to which risks and rewards incidental to ownership of a leased asset lie with the lessor or the lessee. The application of the amendments to HKAS 17 might not affect the classification and measurement of the Group’s leasehold land.

– 22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group is in the process of assessing the impact of other new and revised HKFRSs on the financial performance and financial position of the Group.

3. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have 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 consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the GEM Listing Rules and by the Hong Kong Companies Ordinance.

Basis of consolidation

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

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

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

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

Non-controlling interests in subsidiaries are presented separately from the equity of the owners of the Company.

Allocation of total comprehensive income to non-controlling interests

Total comprehensive income and expense of a subsidiary is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Prior to 1 July 2009, losses applicable to the non-controlling interests in excess of the non-controlling interests in the subsidiary’s equity were allocated against the interests of the Group except to the extent that the non-controlling interests had a binding obligation and were able to make an additional investment to cover the losses.

Changes in the Group’s ownership interests in existing subsidiaries

Changes in the Group’s ownership interests in existing subsidiaries prior to 1 July 2009

Increases in interests in existing subsidiaries were treated in the same manner as the acquisition of subsidiaries, with goodwill or a bargain purchase gain being recognised where appropriate. For decreases in interests in subsidiaries regardless of whether the disposals would result in the Group losing control over the subsidiaries, the difference between the consideration received and the carrying amount of the share of net assets disposed of was recognised in profit or loss.

Changes in the Group’s ownership interests in existing subsidiaries after 1 July 2009

Changes in the Group’s ownership interest in a subsidiary that do not result in the Group losing control over the subsidiary are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control over a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest determined at the date when control is lost and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Where certain assets

– 23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

of the subsidiary are measured at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the related assets (i.e. reclassified to profit or loss or transferred directly to accumulated losses at the date when control is lost). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under HKAS 39 or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

Business combinations

Business combinations prior to 1 July 2009

Acquisition of businesses was accounted for using the purchase method. The cost of the acquisition was measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that met the relevant conditions for recognition were generally recognised at their fair values at the acquisition date.

Goodwill arising on acquisition was recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after assessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeded the cost of the business combination, the excess was recognised immediately in profit or loss.

The non-controlling interest in the acquiree was initially measured at the non-controlling interest’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Contingent consideration was recognised, if and only if, the contingent consideration was probable and could be measured reliably. Subsequent adjustments to contingent consideration were recognised against goodwill.

Business combinations achieved in stages were accounted for as separate steps. Goodwill was determined at each step. Any additional acquisition did not affect the previously recognised goodwill.

Business combinations on or after 1 July 2009

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

At the acquisition date, the acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under HKFRS 3 (2008) are recognised at their fair values, except that:

deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 Income Taxes and HKAS 19 Employee Benefits respectively;
liabilities or equity instruments related to the replacement by the Group of an acquiree’s share-based payment awards are measured in accordance with HKFRS 2 Share-based Payment ; and
assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard.

– 24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after assessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis.

Where the consideration the Group transfers in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and considered as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with the corresponding adjustments being made against goodwill or gain on bargain purchase. Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period about facts and circumstances that existed as of the acquisition date. Measurement period does not exceed one year from the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with HKAS 39, or HKAS 37 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognised in profit or loss.

Where a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss.

Changes in the value of the previously held equity interest recognised in other comprehensive income and accumulated in equity before the acquisition date are reclassified to profit or loss when the Group obtains control over the acquiree.

Goodwill

Goodwill arising on acquisition of a business is carried at cost less accumulated impairment losses, if any, and is presented separately in the consolidated statement of financial position.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro-rata basis based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated statement of comprehensive income. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the amount of profit or loss on disposal.

Investments in an associate

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are initially recognised in the consolidated statement of financial position at cost and adjusted thereafter for the post-acquisition changes in the Group’s share of net assets of the associates, less any impairment in the value of individual investments. When the Group’s share of losses of an associate exceeds the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are provided only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is not tested for impairment separately. Instead, the entire carrying amount of the investment is tested for impairment as a single asset. Any impairment loss recognised is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment in the associate. Any reversal of impairment loss is recognised to the extent that the recoverable amount of the investment subsequently increases.

Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.

Revenue recognition

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

Revenue from projects involving the provision of lottery advisory service and enterprise solutions are recognised when the outcome of the contract can be estimated reliably. The details of the revenue recognition are set out in the sub-section of “Construction contracts” as below.

Revenue from sports lottery management and marketing consultancy services is recognised when the services are rendered, the revenue can be reliably estimated and it is probable that the revenue will be received.

Revenue from the supply of sports lottery sales terminals (and accessories) is recognised when the sports lottery sales terminals (and accessories) are supplied to the customers.

Revenue from the sales of computer software products is recognised upon the transfer of risks and rewards of ownership, which generally coincides with the time when goods are delivered to the customers and title has passed.

Revenue from separately priced product maintenance contracts, which is received or receivable from customers, is deferred and amortised on a straight-line method over the contracted period.

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

Property, plant and equipment

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

Depreciation is recognised so as to write off the cost of items of property, plant and equipment less their residual values over their useful lives, using the straight-line method.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

Construction contracts

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Where contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as an amount due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is shown as an amount due to customers for contract work. Amounts received before the related work is performed are included in the consolidated statement of financial position, as a liability, as advances received. Amounts billed for work performed but not yet paid by the customer are included in the consolidated statement of financial position under amounts due from customers for contract work.

Leasing

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

The Group as lessee

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

Leasehold land for own use

The land and building elements of a lease of land and building are considered separately for the purpose of lease classification, unless the lease payments cannot be allocated reliably between the land and building elements, in which case the entire lease is generally treated as a finance lease and accounted for as property, plant and equipment. To the extent the allocation of the lease payments can be made reliably, interest in leasehold land is accounted for as operating leases and amortised over the lease term on a straight-line basis.

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 its respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the exchange rates prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise, except for exchange differences arising on a monetary item that forms part of the Company’s net investment in a foreign operation, in which case, such exchange differences are recognised in other comprehensive income in the consolidated financial statements and will be reclassified from equity to profit or loss on disposal of the foreign operation. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income, in which cases, the exchange differences are recognised directly in other comprehensive income.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. Hong Kong dollars) using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of foreign currency translation reserve (attributed to non-controlling interests as appropriate).

On disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, a disposal involving loss of control over a subsidiary that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss.

Goodwill and fair value adjustments on identifiable assets acquired arising on the acquisition of a foreign operation on or after 1 January 2005 are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of the reporting period. Exchange differences arising are recognised in the foreign currency translation reserve.

Retirement benefit costs

Payments to defined contribution retirement benefit schemes (Mandatory Provident Fund scheme and state-managed retirement benefit schemes) are charged as expenses when employees have rendered services entitling them to the contributions.

Share-based payment transactions

Share options granted to Directors, eligible employees and other eligible participants in an equity-settled share-based payment transaction

For grants of share options that are conditional upon satisfying specified vesting conditions, the fair value of services received is determined by reference to the fair value of share options granted at the grant date and is expensed on a straight-line basis over the vesting period, with a corresponding increase in equity (share options 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 original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to share options reserve.

For share options that are vested at the date of grant, the fair value of the share options granted is expensed immediately to profit or loss.

At the time when the share options are exercised, the amount previously recognised in share options 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 options reserve will be transferred to accumulated losses.

Share options granted to a consultant in an equity-settled share-based payment transaction

Share options granted 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 immediately, unless the goods or services qualify for recognition as assets. Corresponding adjustment has been made to equity (share options reserve).

Taxation

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

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax 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 the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered.

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

Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately and with finite useful lives are carried at costs less accumulated amortisation and accumulated impairment losses, if any. Amortisation is recognised on a straight-line basis over their estimated useful lives. Alternatively, intangible assets with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of impairment losses on tangible and intangible assets other than goodwill below).

Gains and losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognised separately from goodwill are initially measured at their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets acquired in a business combination are measured at cost less accumulated amortisation and accumulated impairment losses (if any), on the same basis as intangible assets that are acquired separately.

Software licences

Expenditure on acquisition of software licences is measured initially at cost and amortised on a straight-line method over their estimated useful lives or licensing period, whichever is shorter.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible assets are measured at cost less accumulated amortisation and accumulated impairment losses (if any), on the same basis as intangible assets that are acquired.

Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. In addition, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is indication that they may be impaired.

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

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but such 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 periods. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount under another standard, in which case the reversal of the impairment loss is treated as a revaluation increase under that standard.

Inventories

Inventories, including any materials for the construction contracts, are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial instruments

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

Financial assets

The Group’s financial assets comprise those classified as loans and receivables. The accounting policy adopted is set out below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including trade receivables, amounts due from customers for contract work, other receivables, pledged bank deposits and bank balances) are measured at amortised cost using the effective interest method, less any impairment (see the accounting policy in respect of impairment loss on financial assets below).

Impairment of financial assets

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

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

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

Financial liabilities and equity

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

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The accounting policies adopted in respect of financial liabilities and equity instruments are set out below.

Financial liabilities

Financial liabilities (including trade payables and other payables, accruals and deposits received) are subsequently measured at amortised cost using the effective interest method.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Equity instruments

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

Derecognition

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

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

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

Provisions

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

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

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of 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 period.

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculations require the Group to estimate the future cash flows expected to arise from the cash-generating units and suitable discount rates in order to calculate the present values. Where the actual future cash flows are less than expected, a material impairment loss may arise. At 31 December 2009, the carrying amount of goodwill is HK$663,365,373 (at 30 June 2009: HK$662,199,119). Details of the recoverable amount calculation are disclosed in Note 17.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Impairment of intangible assets acquired in business combinations

At the end of the reporting period, management reconsidered the recoverability of the intangible assets arising from the acquisitions of subsidiaries, in which the carrying amount at 31 December 2009 is HK$96,072,050 (at 30 June 2009: HK$115,532,669). The businesses of the related subsidiaries continue to progress in a satisfactory manner. Sensitivity analysis has been carried out by management and no impairment is considered necessary at 31 December 2009. Adjustment will be made in future periods if future market activities indicate that adjustments for impairment are appropriate.

5. CAPITAL RISK MANAGEMENT

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

The capital structure of the Group consists of cash and cash equivalents and equity attributable to owners of the Company, comprising issued share capital and reserves.

The Directors review the capital structure regularly. As part of this review, the Directors consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the Directors, the Group will balance its overall capital structure through the payment of dividends, new share issues and share buybacks as well as the issue of new debt.

6. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

		At	At
		31 December	30 June
		2009	2009
	Notes	HK$	HK$
Financial assets
Loans and receivables
Trade receivables	21	17,452,520	9,592,417
Amounts due from customers for contract work	22	–	1,539,009
Financial assets included in other receivables,
deposits and prepayments	23	36,934,578	24,353,603
Pledged bank deposits	24	–	501,217
Bank balances and cash	24	141,520,650	171,706,715

		195,907,748	207,692,961


Financial liabilities
Financial liabilities at amortised cost
Trade payables	25	–	779,388
Financial liabilities included in other payables,
accruals and deposits received	26	5,397,644	5,358,140
		5,397,644	6,137,528

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Financial risk management objectives and policies

The Group’s major financial instruments include trade receivables, other receivables, bank balances, pledged bank deposits, trade payables and other payables. 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.

Market risks

Currency risk

Transactional currency exposures arise from revenue or cost of sales and services by operating units in currencies other than the units’ functional currency. Substantially all the Group’s revenue and cost of sales and services are denominated in the functional currency of the operating units making the revenue, and substantially all the cost of sales and services are denominated in the units’ functional currency. Accordingly, the Directors consider that the Group is not exposed to significant currency risk.

The Group currently does 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.

Interest rate risk

The Group’s cash flow interest rate risk primarily relates to variable-rate bank balances. The Group has not used any interest rate swaps in order to mitigate its exposure associated with fluctuations relating to interest cash flows. However, the management monitors interest rate exposure and will consider other necessary actions when significant interest rate exposure is anticipated.

Price risk

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

Credit risk

The Group’s maximum exposure to credit risk in the event of the counterparties’ failure to perform their obligations at 31 December 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. In order to minimise the credit risk, the Group has monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the Directors consider that the Group’s credit risk is significantly reduced.

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

At the end of the reporting period, the Group has certain concentrations of credit risk as 83% (at 30 June 2009: 68%) and 99% (at 30 June 2009: 97%) of the Group’s trade receivables were due from the Group’s largest customer and the five largest customers, respectively.

Further quantitative data in respect of the Group’s exposure to credit risk arising from trade receivables are disclosed in Note 21.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Liquidity risk

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows.

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

	On demand	More than 1	Total
	or within	year but less	undiscounted	Carrying
	1 year	than 5 years	cash flows	amounts
	HK$	HK$	HK$	HK$
At 31 December 2009
Non-derivative
financial liabilities
Other payables,
accruals and deposits
received	5,397,644	–	5,397,644	5,397,644
At 30 June 2009
Non-derivative
financial liabilities
Trade payables	779,388	–	779,388	779,388
Other payables,
accruals and deposits
received	5,358,140	–	5,358,140	5,358,140

(c) Fair value of financial instruments

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

The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active markets are determined with reference to quoted market bid and ask prices respectively.
The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models (e.g. discounted cash flow analysis using observable and/or unobservable inputs).

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

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. REVENUE

Revenue represents the amounts received and receivable from provision of sports lottery management and marketing consultancy services, supply of sports lottery sales terminals (and accessories) and provision of lottery advisory service in the PRC for the period/year, and is analysed as follows:

	Period ended	Year ended
	31 December 2009	30 June 2009
	HK$	HK$
		(As restated)
Revenue in respect of provision of management and
marketing consultancy services to SLACs and authorised
operators of the sports lottery, as well as supply of sports
lottery sales terminals (and accessories) to the SLACs for
certain municipality and provinces in the PRC	33,822,293	58,876,266
Revenue in respect of provision of lottery advisory service	–	112,229
	33,822,293	58,988,495

8. SEGMENT INFORMATION

Application of HKFRS 8 Operating Segments

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 (the “CODM”) for the purposes 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. The Directors consider that the adoption of HKFRS 8 has not resulted in a redesignation of the reportable segments for the Group 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.

Under HKFRS 8, reported segment information is based on internal management reporting information that is regularly reviewed by the Directors, being the CODM of the Group. The measurement policies the Group used for segment reporting under HKFRS 8 are the same as those used in its HKFRS financial statements. The Directors assess segment profit or loss using a measure of operating profit whereby certain items, central administration costs, share-based payments, bank interest income and income tax are not included in arriving at the segment results of operating segments.

The Group’s operating segments under HKFRS 8 are as follows:

Sports lottery management and marketing consultancy services and supply of sports lottery sales terminals (and accessories) – provision of management and marketing consultancy services to SLACs and authorised operators of sports lottery, as well as supply of sports lottery sales terminals (and accessories) to the SLACs for certain municipality and provinces in the PRC (“Consultancy services”).
Lottery information technology solutions – provision of lottery advisory service to authorised operator of lottery in the PRC (“Information technology solutions”).

– 36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

An operation (Enterprise solutions – provision of information technology management solutions which include design and installation of digital image processing system, sales of computer software products and related maintenance services (“Enterprise solutions”)) discontinued in the current period was reported as separate business segment under HKAS 14. The segment information reported below does not include any amounts for this discontinued operation, which is described in more detail in Note 10 below.

Information regarding the Group’s reportable segments is presented below.

Segment revenue and results

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

			Segment	revenue	Segment loss	Segment loss
	Period ended			Year ended	Period ended	Year ended
	31 December			30 June	31 December	30 June
			2009	2009	2009	2009
			HK$	HK$	HK$	HK$
				(As restated)
Consultancy services		33,822,293		58,876,266	(20,358,781)	(49,201,564)
Information technology
solutions			–	112,229	(3,213,893)	(2,715,759)

Total for continuing
operations		33,822,293		58,988,495	(23,572,674)	(51,917,323)


Bank interest income					1,327,959	2,632,778
Share-based payments					(12,848,042)	(123,090,447)
Central administration costs					(16,562,522)	(26,375,072)

Loss before tax (continuing
operations)					(51,655,279)	(198,750,064)

Revenue reported above represents revenue generated from customers. There were no inter-segment sales for the period ended 31 December 2009 (for the year ended 30 June 2009: nil).

Segment loss represents the loss generated by each segment without allocation of central administration costs, share-based payments, bank interest income and income tax. This is the measure reported to the CODM for the purposes of resources allocation and assessment of segment performance.

– 37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Segment assets and liabilities

	At 31 December	At 30 June
	2009	2009
	HK$	HK$
Segment assets
Consultancy services	937,244,997	948,665,797
Information technology solutions	14,269,259	17,436,747
Total segment assets	951,514,256	966,102,544
Assets relating to Enterprise solutions
(now discontinued)	–	4,243,127
Unallocated corporate assets	84,494,152	103,548,930
Consolidated assets	1,036,008,408	1,073,894,601


Segment liabilities
Consultancy services	4,711,476	4,605,044
Information technology solutions	142,854	160,856
Total segment liabilities	4,854,330	4,765,900
Liabilities relating to Enterprise solutions
(now discontinued)	–	1,797,565
Unallocated corporate liabilities	25,611,636	30,248,616
Consolidated liabilities	30,465,966	36,812,081

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

all assets other than unallocated corporate assets are allocated to reportable segments. Goodwill is allocated to reportable segments as described in Note 17; and
all liabilities other than unallocated corporate liabilities, current and deferred tax liabilities are allocated to reportable segments.

Other segment information

		Depreciation	Depreciation	Depreciation	of
		property,	plant		and	Amortisation of other			Additions to
		equipment				intangible		assets	non-current assets
		Period			Year	Period		Year	Period	Year
		ended 31		ended 30		ended 31		ended 30	ended 31	ended 30
		December			June	December		June	December	June
		2009			2009	2009		2009	2009	2009
		HK$			HK$	HK$		HK$	HK$	HK$
Consultancy	services	3,115,472		5,458,973		19,093,653	38,146,002		372,071	18,056,923
Information	technology
solutions		368,913		951,698		562,662		1,124,106	209,026	493,333

		3,484,385		6,410,671		19,656,315	39,270,108		581,097	18,550,256
Unallocated		237,951		563,096		–		–	10,000	86,668

		3,722,336		6,973,767		19,656,315	39,270,108		591,097	18,636,924

– 38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Revenue from major services

The Group’s revenue from continuing operations from its major services is as follows:

			Period ended	Period ended	Year ended
			31 December		30 June
				2009	2009
				HK$	HK$
					(As restated)
Consultancy	services			33,822,293	58,876,266
Information	technology	solutions		–	112,229
				33,822,293	58,988,495

Geographical information

The Group’s operations are located in the PRC.

The Group’s revenue from continuing operations from external customers and information about its non-current assets* by geographical locations are detailed below:

			Revenue from external	Revenue from external	Revenue from external
			customers			Non-current assets*
		Period ended		Year ended		At		At
		31 December			30 June	31 December	30	June
			2009		2009	2009		2009
			HK$		HK$	HK$		HK$
				(As	restated)
PRC			33,822,293	58,988,495		818,257,027	841,089,017
Hong	Kong		–		–	10,063,932	13,584,857
			33,822,293	58,988,495		828,320,959	854,673,874

* Non-current assets excluding those relating to Enterprise solutions operation.

Information about major customers

Revenue from customers of corresponding periods contributing over 10% of total revenue of the Group is as follows:

		Period ended	Period ended	Year ended
		31 December		30 June
			2009	2009
			HK$	HK$
Customer	A		24,806,385	36,630,863
Customer	B		3,448,922	–
Customer	C		–	6,285,900

			28,255,307	42,916,763

– 39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. INCOME TAX (FROM CONTINUING OPERATIONS)

	Period ended 31	Year ended 30
	December 2009	June 2009
	HK$	HK$
		(As restated)
Current tax:
– PRC Enterprise Income Tax	1,196,080	2,245,640
Under/(over) provision of current tax in previous year:
– PRC Enterprise Income Tax	427,839	(338,759)
Deferred tax (Note 27):
– Current period/year	(4,914,079)	(9,817,527)
Total income tax recognised in profit or loss	(3,290,160)	(7,910,646)

No provision for Hong Kong profits tax has been made as there were no assessable profits for the year ended 30 June 2009 and for the period ended 31 December 2009.

On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 and reduced corporate profit tax rate from 17.5% to 16.5%, which is effective from the year of assessment 2008/2009. Hong Kong profits tax is calculated at 16.5% of the estimated assessable profits for both current and prior periods.

PRC subsidiaries are subject to PRC Enterprise Income Tax at 25% for both current and prior periods. Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

Under the Law of the People’s Republic of China on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% from 1 January 2008 onwards.

Income tax for the period/year can be reconciled to loss before tax per the consolidated statement of comprehensive income as follows:

	Period ended	Year ended
	31 December	30 June
	2009	2009
	HK$	HK$
		(As restated)
Loss before tax (from continuing operations)	(51,655,279)	(198,750,064)


Tax at domestic income tax rate (Note)	(10,091,270)	(36,953,403)
Tax effect of expenses not deductible for tax purpose	5,954,594	32,172,612
Tax effect of income not taxable for tax purpose	(260,790)	(1,611,962)
Utilisation of previously unrecognised tax losses	–	(176,278)
Tax effect of unrecognised estimated tax losses	5,593,546	8,814,671
Under/(over) provision in previous year	427,839	(338,759)
Reversal of temporary differences	(4,914,079)	(9,817,527)
	(3,290,160)	(7,910,646)

Note: The applicable tax rates for Macao, the PRC and Hong Kong are 12%, 25% and 16.5% (for the year ended 30 June 2009: 12%, 25% and 16.5%) respectively.

– 40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. DISCONTINUED OPERATION

Disposal of Enterprise solutions operation

On 19 November 2009, the Company entered into a sale agreement to dispose of MegaInfo Limited and its subsidiaries (the “MegaInfo Group”), which carried out all of the Group’s Enterprise solutions operation. The disposal of the Enterprise solutions operation is consistent with the Group’s long-term policy to focus its activities on Consultancy services operation and Information technology solutions operation. The disposal was completed on 19 November 2009, on which date control of the Enterprise solutions operation passed to the acquirer. Details of the assets and liabilities disposed of, and the calculation of the profit or loss on disposal, are disclosed in Note 34.

	Period ended	Year ended
	31 December	30 June
	2009	2009
	HK$	HK$
Profit/(loss) for the period/year from discontinued
operation
Revenue	340,447	2,633,483
Cost of sales and services	(71,813)	(1,774,342)
Bank interest income	605	7,201
Other income	34,810	1,308,930
Selling and administrative expenses	(2,296,063)	(2,428,171)
Net foreign exchange loss	(441)	(764)
Loss before tax	(1,992,455)	(253,663)
Attributable income tax	–	(8,762)

	(1,992,455)	(262,425)
Gain on disposal of discontinued operation (including
HK$17,200 and HK$11,108,399 released from
exchange reserve and contributed surplus respectively
from equity to profit or loss on disposal of
discontinued operation (Note 34(a)))	10,889,640	–
Profit/(loss) for the period/year from discontinued
operation (attributable to owners of the Company)	8,897,185	(262,425)

– 41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Profit/(loss) for the period/year from discontinued operation has been arrived at after charging:

	Period ended	Year ended
	31 December	30 June
	2009	2009
	HK$	HK$
Auditors’ remuneration	–	–
Cost of inventories recognised as expenses	–	8,236
Depreciation of property, plant and equipment	19,844	66,613
Impairment losses recognised on amounts due from
customers for contract work	1,539,009	–
Impairment losses recognised on other receivables,
deposits and prepayments	148,136	–
Operating lease rentals in respect of rented premises	52,656	192,140
Fees, salaries, discretionary bonuses and other benefits	336,702	1,356,807
Social security costs	8,392	26,088
	345,094	1,382,895


Cash flows from discontinued operation
Net cash inflows/(outflows) from operating activities	6,073	(224,162)
Net cash inflows from investing activities	178,769	779,993
Net cash inflows	184,842	555,831

11. LOSS FOR THE PERIOD/YEAR FROM CONTINUING OPERATIONS

Loss for the period/year from continuing operations is attributable to:

	Period ended	Year ended
	31 December	30 June
	2009	2009
	HK$	HK$
Owners of the Company	(44,268,184)	(189,237,306)
Non-controlling interests	(4,096,935)	(1,602,112)
	(48,365,119)	(190,839,418)

– 42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Loss for the period/year from continuing operations has been arrived at after charging/(crediting):

	Period ended	Year ended
	31 December	30 June
	2009	2009
	HK$	HK$
		(As restated)
Auditors’ remuneration	500,000	750,000
Depreciation of property, plant and equipment	3,722,336	6,973,767
Net losses on disposals of property, plant and equipment	38,241	118,731
Net losses/(gains) on disposals of subsidiaries
(Note 34 (b), (c) and (d))	8,380	(201,982)
Operating lease rentals in respect of rented premises	2,347,523	4,458,211


Employee benefit expense, including Directors’ remunerations
(Note 12):
Fees, salaries, discretionary bonuses and other benefits	12,768,115	29,324,349
Share-based payments	5,955,742	58,376,552
Social security costs	1,246,622	1,545,188
Retirement benefit schemes contributions	59,054	122,569

	20,029,533	89,368,658

12. DIRECTORS’ EMOLUMENTS

The emoluments paid or payable to each of the eight Directors (for the year ended 30 June 2009: eight) were as follows:

For the period ended 31 December 2009

				Contributions
		Salaries	Share-	to retirement
		and other	based	benefit		Total
	Fees	benefits	payments	schemes	emoluments
	HK$	HK$	HK$	HK$		HK$
Executive Directors:
Mr. Sun Ho	1,800,000	150,000	–	6,000		1,956,000
Mr. Robert Geoffrey Ryan	1,046,766	51,228	901,631	–		1,999,625
Mr. Bai Jinmin	600,000	–	1,283,577	6,000		1,889,577
Mr. Liang Yu	608,229	20,946	880,687	13,646		1,523,508
Non-executive Director:
Ms. Yang Yang	100,000	–	88,069	–		188,069
Independent non-executive
Directors:
Mr. Wang Ronghua	50,000	–	–	–		50,000
Mr. Hua Fengmao	50,000	–	–	–		50,000
Mr. Kwok Wing Leung Andy	50,000	–	–	–		50,000
Total emoluments	4,304,995	222,174	3,153,964	25,646		7,706,779

– 43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 30 June 2009

				Contributions
		Salaries	Share-	to retirement
		and other	based	benefit		Total
	Fees	benefits	payments	schemes	emoluments
	HK$	HK$	HK$	HK$		HK$
Executive Directors:
Mr. Sun Ho	3,600,000	450,000	–	12,000		4,062,000
Mr. Robert Geoffrey Ryan	2,093,532	225,690	9,675,917	–		11,995,139
Mr. Bai Jinmin	1,200,000	–	12,120,673	5,000		13,325,673
Mr. Liang Yu	1,218,707	29,223	8,149,284	27,193		9,424,407
Non-executive Director:
Ms. Yang Yang	200,000	–	814,928	–		1,014,928
Independent non-executive
Directors:
Mr. Wang Ronghua	100,000	–	–	–		100,000
Mr. Hua Fengmao	100,000	–	–	–		100,000
Mr. Kwok Wing Leung Andy	100,000	–	–	–		100,000
Total emoluments	8,612,239	704,913	30,760,802	44,193		40,122,147

During the period, no emoluments were paid by the Group to any of the Directors as an inducement to join or upon joining the Group or as compensation for loss of office. None of the Directors has waived any emoluments during the period.

13. EMPLOYEES’ EMOLUMENTS

Of the five individuals with the highest emoluments in the Group, four (for the year ended 30 June 2009: four) were Directors whose emoluments are included in Note 12 above. The emoluments of the remaining one (for the year ended 30 June 2009: one) highest paid individual were as follows:

	Period ended	Year ended
	31 December	30 June
	2009	2009
	HK$	HK$
Salaries and other benefits	286,384	349,182
Discretionary bonus	–	2,289,200
Share-based payments	901,631	5,917,919
	1,188,015	8,556,301

– 44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Their emoluments were within the following bands:

				Period ended	Year ended
			31	December 2009	30 June 2009
				Number of	Number of
				employees	employees
HK$1,000,001	to	HK$1,500,000		1	–
HK$8,500,001	to	HK$9,000,000		–	1

				1	1

During the period, no emoluments were paid by the Group to any of the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office.

14. LOSS PER SHARE

From continuing and discontinued operations

The calculation of basic and diluted loss per Share is based on the loss attributable to owners of the Company from continuing and discontinued operations for the period ended 31 December 2009 of HK$35,370,999 (for the year ended 30 June 2009: HK$189,499,731) and the weighted average number of 3,581,563,261 Shares (for the year ended 30 June 2009: 3,580,211,712 Shares) in issued during the current and prior periods.

The computation of the diluted loss per Share does not assume the exercises of the Company’s share options as their exercises would decrease the loss per Share of both current and prior periods.

From continuing operations

The calculation of the basic and diluted loss per Share attributable to owners of the Company from continuing operations is based on the following data:

Loss figures are calculated as follows:

	Period ended	Year ended
	31 December	30 June
	2009	2009
	HK$	HK$
Loss for the period/year attributable to owners of the
Company from continuing and discontinued
operations	(35,370,999)	(189,499,731)
Less:
Profit/(loss) for the period/year from discontinued
operation (Note 10)	8,897,185	(262,425)
Loss for the purpose of calculating basic/diluted loss
per Share from continuing operations	(44,268,184)	(189,237,306)

The denominators used are the same as those detailed above for both basic and diluted loss per Share.

The computation of the diluted loss per Share does not assume the exercises of the Company’s share options as their exercises would decrease the loss per Share of both current and prior periods.

– 45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

From discontinued operation

The calculation of the basic and diluted earnings/(loss) per Share attributable to owners of the Company from discontinued operation is based on the following data:

	Period ended	Year ended
	19 November	30 June
	2009	2009
Number of Shares
Weighted average number of ordinary Shares for the
purpose of calculating basic earnings/(loss) per Share	3,581,482,887	3,580,211,712
Effect of dilutive potential ordinary Shares:
Share options	77,490,621	–
Weighted average number of ordinary Shares for the
purpose of calculating diluted earnings/(loss) per
Share	3,658,973,508	3,580,211,712

Basic earnings per Share for the period from discontinued operation is HK0.25 cent per Share (basic loss per Share for the year ended 30 June 2009: HK0.007 cent per Share) and diluted earnings per Share for the period from discontinued operation is HK0.24 cent per Share (diluted loss per Share for the year ended 30 June 2009: HK0.007 cent per Share), based on the profit for the period from discontinued operation of HK$8,897,185 (loss for the year ended 30 June 2009: HK$262,425) and the denominators detailed above for both basic and diluted earnings/(loss) per Share.

The computation of the diluted loss per Share for the year ended 30 June 2009 does not assume the exercises of the Company’s share options as their exercises would decrease the loss per Share.

– 46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. PROPERTY, PLANT AND EQUIPMENT

		Sports				Furniture,
		lottery sales		Leasehold	Computer	fixtures and	Motor
	Building	terminals	improvements		equipment	equipment	vehicles	Total
	HK$	HK$		HK$	HK$	HK$	HK$	HK$
COST
At 1 July 2008	839,962	7,573,685		3,345,775	3,537,385	1,753,637	5,869,202	22,919,646
Additions	–	10,687,132		528,324	842,920	589,491	3,895,891	16,543,758
Disposals	–	–		–	(169,041)	(104,695)	(2,413,228)	(2,686,964)
Effect of foreign currency
exchange differences	(2,434)	(21,945)		(3,789)	(7,335)	(2,677)	(10,991)	(49,171)
At 30 June 2009	837,528	18,238,872		3,870,310	4,203,929	2,235,756	7,340,874	36,727,269
Additions	–	–		166,024	136,645	89,051	–	391,720
Disposals	–	(18,194)		–	(16,477)	(67,447)	(6,527)	(108,645)
Derecognised on disposal
of subsidiaries	–	–		(1,549,650)	(845,243)	(106,190)	–	(2,501,083)
Effect of foreign currency
exchange differences	1,474	32,115		3,291	6,450	2,615	9,854	55,799
At 31 December 2009	839,002	18,252,793		2,489,975	3,485,304	2,153,785	7,344,201	34,565,060


DEPRECIATION
At 1 July 2008	–	292,982		2,011,562	1,414,259	676,761	979,252	5,374,816
Depreciation expense	41,888	3,241,208		704,175	1,150,232	487,441	1,415,436	7,040,380
Eliminated on disposals of
assets	–	–		–	(49,153)	(37,780)	(705,911)	(792,844)
Effect of foreign currency
exchange differences	(12)	(1,762)		(1,465)	(1,836)	(360)	(2,443)	(7,878)
At 30 June 2009	41,876	3,532,428		2,714,272	2,513,502	1,126,062	1,686,334	11,614,474
Depreciation expense	20,967	1,826,171		344,359	521,659	241,602	787,422	3,742,180
Eliminated on disposals of
assets	–	(5,458)		–	(9,146)	(10,572)	–	(25,176)
Eliminated on disposal of
subsidiaries	–	–		(1,538,898)	(803,166)	(104,182)	–	(2,446,246)
Effect of foreign currency
exchange differences	82	6,942		1,371	2,408	865	2,430	14,098
At 31 December 2009	62,925	5,360,083		1,521,104	2,225,257	1,253,775	2,476,186	12,899,330


CARRYING AMOUNTS
At 31 December 2009	776,077	12,892,710		968,871	1,260,047	900,010	4,868,015	21,665,730


At 30 June 2009	795,652	14,706,444		1,156,038	1,690,427	1,109,694	5,654,540	25,112,795

– 47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

Building : 5% Sports lottery sales terminals : 20% Leasehold improvements : 20% or over the relevant lease terms, whichever is shorter Computer equipment : 33[1] ⁄3% – 50% Furniture, fixtures and equipment : 20% – 33[1] ⁄3% Motor vehicles : 10% – 25%

16. GOODWILL

HK$

COST
At 1 July 2008	664,123,438
Effect of foreign currency exchange differences	(1,924,319)
At 30 June 2009	662,199,119
Effect of foreign currency exchange differences	1,166,254
At 31 December 2009	663,365,373

CARRYING AMOUNTS
At 31 December 2009	663,365,373

At 30 June 2009	662,199,119

Particulars regarding impairment testing on goodwill are disclosed in Note 17.

17. IMPAIRMENT TESTING ON GOODWILL

Goodwill has been allocated for impairment testing purpose to the following cash-generating unit(s) (“CGU(s)”):

Information technology solutions
Consultancy services

The carrying amounts of goodwill were allocated to the CGUs as follows:

			31 December	At 30 June
			2009	2009
			HK$	HK$
Information	technology	solutions	2,912,179	2,907,059
Consultancy	services		660,453,194	659,292,060
			663,365,373	662,199,119

– 48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The basis of the recoverable amounts of the above CGUs and their major underlying assumptions are summarised below:

Information technology solutions

The recoverable amount of this CGU is determined based on a value in use calculation which uses cash flow projections based on financial budgets approved by management covering a 5-year period and a discount rate of 15.52% per annum. The key assumptions for the value in use calculation are those regarding the discount rate, growth in revenue and direct costs during the period. The management estimates discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU.

Consultancy services

During the year ended 30 June 2009 and the period ended 31 December 2009, management of the Group determined that there were no impairments of goodwill.

– 49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. OTHER INTANGIBLE ASSETS

				Capitalised			Non-
		Club	development		Software	competition			Contracted
	membership			costs	licences		agreements		Customer		Total
		HK$		HK$	HK$		HK$		HK$		HK$
COST
At 1 July 2008		1,741,936		1,876,366	11,467,290		5,635,277	191,230,421			211,951,290
Additions		–		493,333	–		–		–		493,333
Effect of foreign
currency exchange
differences		–		(5,576)	–		(16,328)		(554,096)		(576,000)

At 30 June 2009		1,741,936		2,364,123	11,467,290		5,618,949	190,676,325			211,868,623
Additions		–		209,026	–		–		–		209,026
Derecognised on disposal
of subsidiaries		–		–	(11,467,290)		–		–		(11,467,290)
Effect of foreign
currency exchange
differences		–		4,162	–		9,896		335,816		349,874

At 31 December 2009		1,741,936		2,577,311	–		5,628,845	191,012,141		200,960,233


AMORTISATION AND
IMPAIRMENT
At 1 July 2008		–		–	11,467,290		1,784,505		39,839,661		53,091,456
Amortisation expense		–		–	–		1,124,106		38,146,002		39,270,108
Effect of foreign
currency exchange
differences		–		–	–		(5,487)		(126,182)		(131,669)

At 30 June 2009		–		–	11,467,290		2,903,124		77,859,481		92,229,895
Amortisation expense		–		–	–		562,662		19,093,653		19,656,315
Eliminated on disposal of
subsidiaries		–		–	(11,467,290)		–		–		(11,467,290)
Effect of foreign
currency exchange
differences		–		–	–		5,335		144,681		150,016

At 31 December 2009		–		–	–		3,471,121		97,097,815	100,568,936


CARRYING AMOUNTS
At 31 December 2009		1,741,936		2,577,311	–		2,157,724		93,914,326	100,391,297


At 30 June 2009		1,741,936		2,364,123	–		2,715,825	112,816,844			119,638,728

The Directors consider that the club membership has indefinite useful life and is worth at least at its carrying amount by reference to the latest market prices.

The amount of the capitalised development costs represents the expenditure capitalised for development of certain sports lottery products, which have not yet been put to use.

The amount of the software licences represents the expenditure on acquisition which is amortised on a straight-line method over the estimated useful life of 10 years, or the licensing period of 1 year, whichever is shorter.

– 50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The amount of the non-competition agreements represents the fair value of the non-competition clause embedded in the employment contracts between top management and SYSTEK LTD and its subsidiary (“Systek Group”) upon the acquisition of Systek Group by the Group. The amount is amortised on a straight-line method over the estimated useful life of 5 years.

The amount of the contracted customer represents the fair value of the contractual rights stated in the consultancy agreements with a principal customer of SHINING CHINA INC and its subsidiaries (“Shining China Group”) for providing consultancy services upon the acquisition of Shining China Group by the Group (the “Contracted Customer”). The amount is amortised on a straight-line method over the period of 4 to 6 years in accordance with the terms of the consultancy agreements.

19. INVESTMENT IN AN ASSOCIATE

		At 31 December	At 30 June
		2009	2009
		HK$	HK$
	Cost of investment in an associate (unlisted)	14,272	14,272
	Derecognised on disposal of subsidiaries (Note 34 (a))	(14,272)	–
		–	14,272

	Impairment loss recognised	(14,272)	(14,272)
	Eliminated on disposal of subsidiaries (Note 34 (a))	14,272	–
		–	(14,272)

		–	–


20.	INVENTORIES
		At 31 December	At 30 June
		2009	2009
		HK$	HK$
	Networking and image processing equipment	–	114,958


21.	TRADE RECEIVABLES
		At 31 December	At 30 June
		2009	2009
		HK$	HK$
	Trade receivables	17,452,520	10,124,707
	Less: Allowance for doubtful debts	–	(532,290)

		17,452,520	9,592,417

– 51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following is an analysis of trade receivables by age, presented based on the terms of the related contracts, net of allowance for doubtful debts:

	At 31 December	At 30 June
	2009	2009
	HK$	HK$
0 to 30 days	9,753,691	6,275,630
31 to 60 days	925,656	908,064
61 to 90 days	866,460	786,989
91 to 120 days	779,072	901,859
121 to 365 days	5,127,641	665,924
Over 365 days	–	53,951
	17,452,520	9,592,417

The credit terms granted to customers are varied and are generally the result of negotiations between individual customers and the Group. No interest is charged on trade receivables.

At 31 December 2009, 0.01% (at 30 June 2009: 35%) of the trade receivables are past due but not impaired. Of the trade receivables balance at the end of the period, approximately HK$14,410,000 (at 30 June 2009: approximately HK$6,551,000) is due from the Group’s largest customer.

Receivables that are 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, the Directors are of the opinion that no provision for impairment is necessary in respect of these balances as there has not been a significant change in the credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offsetting against any amounts owed by the Group to the counterparties.

Ageing of past due but not impaired

	At 31 December	At 30 June
	2009	2009
	HK$	HK$
0 to 30 days	476	908,064
31 to 60 days	577	786,989
61 to 90 days	836	901,859
91 to 120 days	–	379,781
121 to 365 days	–	307,787
Over 365 days	–	32,307
Total	1,889	3,316,787


Average age (days)	51	74

– 52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Movement in the allowance for doubtful debts

	Period ended	Year ended
	31 December	30 June
	2009	2009
	HK$	HK$
Balance at beginning of the period/year	532,290	532,290
Amounts written off during the period/year as uncollectible	(532,290)	–
Balance at end of the period/year	–	532,290

There was no provision for impairment losses in respect of trade receivables from customers at 31 December 2009 (at 30 June 2009: nil). The Group does not hold any collateral over these balances.

Ageing of impaired trade receivables

		At	31 December	At 30 June
			2009	2009
			HK$	HK$
Over 365 days			–	532,290


AMOUNTS DUE FROM CUSTOMERS FOR CONTRACT	WORK
		At	31 December	At 30 June
			2009	2009
			HK$	HK$
Contracts in progress at the end of the reporting period:
Contracts costs incurred plus recognised profits less
recognised losses			15,198,321	15,198,321
Less: progress billings			(13,659,312)	(13,659,312)
			1,539,009	1,539,009
Impairment losses recognised			(1,539,009)	–
			–	1,539,009


Represented by:
Due from customers included in current assets			–	1,539,009

22. AMOUNTS DUE FROM CUSTOMERS FOR CONTRACT WORK

At 31 December 2009, there were no retentions held by customers for contract work. Advances received from customers for contract work amounted to nil (at 30 June 2009: HK$50,814).

– 53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

	At 31 December	At 30 June
	2009	2009
	HK$	HK$
Deposits paid to suppliers	1,565,152	1,332,554
Prepayments	53,062,868	57,523,488
Rental, utility and guarantee deposits	5,238,486	4,997,422
Other receivables	30,130,940	18,023,627

	89,997,446	81,877,091
Less: Deposits and prepayments classified as non-current
assets	(41,283,167)	(46,175,666)

	48,714,279	35,701,425

None of the above assets is either past due or impaired. The financial assets included in the above balances relate to receivables on which there was no recent history of default.

24. PLEDGED BANK DEPOSITS/BANK BALANCES AND CASH

Bank balances and cash comprise cash held by the Group and short-term bank deposits carrying effective interest at 0.001% – 6.0% per annum (at 30 June 2009: 0.1% – 9.3% per annum) with an original maturity of three months or less.

Pledged bank deposits represent deposits pledged to banks to secure banking facilities granted to the Group. No deposits have been pledged at the reporting period to secure undrawn facilities (at 30 June 2009: HK$501,217).

At 31 December 2009, the bank balances and cash of approximately HK$70,286,000 (at 30 June 2009: approximately HK$81,636,000) were denominated in RMB which is not freely convertible into other currencies.

25. TRADE PAYABLES

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

	At 31 December	At 30 June
	2009	2009
	HK$	HK$
0 to 30 days	–	260,421
31 to 60 days	–	97,087
61 to 90 days	–	105,084
121 to 365 days	–	287
Over 365 days	–	316,509
	–	779,388

The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame.

– 54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

26. OTHER PAYABLES, ACCRUALS AND DEPOSITS RECEIVED

	At 31 December	At 30 June
	2009	2009
	HK$	HK$
Deposits received from customers for contracts	–	50,814
Accrued charges	1,314,751	2,304,476
Other payables	4,842,715	3,592,736
	6,157,466	5,948,026

The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame. Other payables are non-interest-bearing.

27. DEFERRED TAXATION

The following are the deferred tax liabilities related to intangible assets recognised and movements thereon during the current and prior periods:

	HK$
At 1 July 2008	38,810,384
Effect of foreign currency exchange differences	(109,691)
Credit to profit or loss (Note 9)	(9,817,527)
At 30 June 2009	28,883,166
Effect of foreign currency exchange differences	48,924
Credit to profit or loss (Note 9)	(4,914,079)
At 31 December 2009	24,018,011

At the end of the reporting period, the Group has estimated unused tax losses of approximately HK$119,251,000 (at 30 June 2009: approximately HK$66,212,000) available for offsetting against the future taxable profits of the companies in which the losses arose. No deferred tax asset has been recognised in respect of such estimated tax losses due to unpredictability of future profit streams. Included in unrecognised estimated unused tax losses are losses of approximately HK$28,592,000 (at 30 June 2009: approximately HK$11,898,000) that will expire within 5 years. Other estimated unused tax losses of approximately HK$90,659,000 (at 30 June 2009: approximately HK$54,314,000) may be carried forward indefinitely.

– 55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

28. SHARE CAPITAL

	Number of Shares	Amount
		HK$
Authorised:
Ordinary shares of HK$0.002 each at 30 June 2009 and
31 December 2009	5,000,000,000	10,000,000


Issued and fully paid:
Ordinary shares of HK$0.002 each at 1 July 2008	3,580,085,000	7,160,170
Exercise of part of a share option (Note (a))	1,250,000	2,500
Ordinary shares of HK$0.002 each at 30 June 2009	3,581,335,000	7,162,670
Exercise of part of a share option (Note (b))	500,000	1,000
Ordinary shares of HK$0.002 each at 31 December 2009	3,581,835,000	7,163,670

Notes:

(a) During the year ended 30 June 2009, part of an option for 1,250,000 shares of HK$0.002 each was exercised at the exercise price of HK$0.218 per share, resulting in the issue of 1,250,000 shares of HK$0.002 each.
(b) During the period ended 31 December 2009, part of an option for 500,000 shares of HK$0.002 each was exercised at the exercise price of HK$0.2198 per share, resulting in the issue of 500,000 shares of HK$0.002 each.

These Shares rank pari passu in all respects with other Shares in issue.

None of the Company’s subsidiaries purchased, sold or redeemed any of the Company’s listed securities during the period.

29. OPERATING LEASE COMMITMENTS

At the end of the reporting period, the Group has commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:

	31 December	At 30 June
	2009	2009
	HK$	HK$
Within one year	5,683,935	5,102,950
In the second to fifth years inclusive	2,248,653	4,134,337
	7,932,588	9,237,287

Operating lease payments represent rentals payable by the Group for certain of its office premises. Leases are negotiated for terms of one to three years and rentals are fixed over the lease periods.

– 56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

30. CAPITAL COMMITMENTS

			31 December	30 June
			2009	2009
			HK$	HK$
Contracted	but	not provided for:
Research	and	development expenditures	1,241,861	–

31. RETIREMENT BENEFIT SCHEMES

The Group participates in employee social security plans as required by the regulations in the PRC and Macao. The Group also participates in the Mandatory Provident Fund scheme to which all qualified employees of the Group in Hong Kong are entitled. The assets of the retirement benefit schemes are held, separately from those of the Group, in funds under the control of the trustees. The employees of the subsidiaries in the PRC are members of social security schemes operated by the relevant local government authorities. The pension plans are funded by payments from employees and by the relevant group companies. The amounts charged to the consolidated statement of comprehensive income represent contributions payable by the Group at the specified rates according to the respective plans. The only obligation of the Group in respect of the retirement benefit schemes is to make the specified contributions.

32. SHARE-BASED PAYMENT TRANSACTIONS

The Share Option Scheme was adopted pursuant to a resolution passed on 18 November 2004 for the primary purpose of providing incentives to Directors and eligible participants (as defined in the Share Option Scheme), and will be expired 10 years commencing on the adoption of the Share Option Scheme. Under the Share Option Scheme, the Board may at its discretion grant options to eligible employees, including directors of the Company and its subsidiaries, certain consultants, suppliers or customers of the Group who, in the sole discretion of the Board, have contributed or will contribute or can contribute to the Group, to subscribe for Shares in the Company from time to time. The maximum number of Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme and any other schemes shall not exceed 10% of the Shares in issue at the date of approval of the Share Option Scheme, without prior approval from the Shareholders. The number of Shares in respect of which options may be granted under the Share Option Scheme to any individual in any one year is not permitted to exceed 1% of the Shares in issue at the date of approval of the Share Option Scheme, without prior approval from the Shareholders.

Options granted to a Director, the chief executive or substantial Shareholder of the Company or any of their associates (as defined in the GEM Listing Rules) require the approval of independent non-executive Directors (excluding an independent non-executive Director who is the prospective grantee in question). Options granted to substantial Shareholders or independent non-executive Directors or their respective associates in excess of 0.1% of the Company’s share capital and with a value in excess of HK$5 million must be approved in advance by the Shareholders.

Options granted must be taken up within 28 days of the date of grant, upon payment of HK$1 per option. Options may be exercised at any time from the date of grant of the share option to a period to be notified by the Board to each grantee at the time of making such offer, which shall not expire later than 10 years from the date of grant.

The subscription price of the share option is determined by the Board, and the amount will not be less than the higher of (a) the closing price of Shares on the Stock Exchange on the date of grant; (b) the average closing price of the Shares as stated in the daily quotation sheets issued by the Stock Exchange for the 5 business days immediately preceding the date of grant; and (c) the nominal value of a Share on the date of grant.

– 57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following table discloses details and movements of the Company’s share options held by Directors, eligible employees and other eligible participants of the Group under the Share Option Scheme during the period ended 31 December 2009 and the year ended 30 June 2009:

												Outstanding
		Exercise		Outstanding	Granted	Exercised	Forfeited	Outstanding	Granted	Exercised	Forfeited	at 31
		price per		at	during the	during the	during the	at	during the	during the	during the	December
Name	Date of grant	Share	Exercise period	1 July 2008	year	year	year	30 June 2009	period	period	period	2009
		HK$
Directors:
Mr. Robert Geoffrey Ryan	22 March 2007	1.40	22 March 2008 –	6,687,500	–	–	(6,687,500)	–	–	–	–	–
			21 March 2009
			22 March 2009 –	6,687,500	–	–	(6,687,500)	–	–	–	–	–
			21 March 2010
			22 March 2010 –	6,687,500	–	–	(6,687,500)	–	–	–	–	–
			21 March 2011
			22 March 2011 –	6,687,500	–	–	(6,687,500)	–	–	–	–	–
			21 March 2012
	9 October 2008	0.2198	9 October 2009 –	–	3,343,750	–	–	3,343,750	–	–	–	3,343,750
			8 October 2010
			9 October 2010 –	–	3,343,750	–	–	3,343,750	–	–	–	3,343,750
			8 October 2011
			9 October 2011 –	–	3,343,750	–	–	3,343,750	–	–	–	3,343,750
			8 October 2012
			9 October 2012 –	–	3,343,750	–	–	3,343,750	–	–	–	3,343,750
			8 October 2013
Mr. Bai Jinmin	15 June 2007	1.77	15 June 2008 –	6,687,500	–	–	(6,687,500)	–	–	–	–	–
			14 June 2009
			15 June 2009 –	6,687,500	–	–	(6,687,500)	–	–	–	–	–
			14 June 2010
			15 June 2010 –	6,687,500	–	–	(6,687,500)	–	–	–	–	–
			14 June 2011
			15 June 2011 –	6,687,500	–	–	(6,687,500)	–	–	–	–	–
			14 June 2012
	9 October 2008	0.2198	9 October 2009 –	–	3,343,750	–	–	3,343,750	–	–	–	3,343,750
			8 October 2010
			9 October 2010 –	–	3,343,750	–	–	3,343,750	–	–	–	3,343,750
			8 October 2011
			9 October 2011 –	–	3,343,750	–	–	3,343,750	–	–	–	3,343,750
			8 October 2012
			9 October 2012 –	–	3,343,750	–	–	3,343,750	–	–	–	3,343,750
			8 October 2013

– 58 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

												Outstanding	Outstanding
		Exercise		Outstanding	Granted	Exercised	Forfeited	Outstanding	Granted	Exercised	Forfeited		at 31
		price per		at	during the	during the	during the	at	during the	during the	during the	December
Name	Date of grant	Share	Exercise period	1 July 2008	year	year	year	30 June 2009	period	period	period		2009
		HK$
Mr. Liang Yu	11 July 2008	0.754	11 July 2009 –	–	6,687,500	–	(6,687,500)	–	–	–	–		–
			10 July 2010
			11 July 2010 –	–	6,687,500	–	(6,687,500)	–	–	–	–		–
			10 July 2011
			11 July 2011 –	–	6,687,500	–	(6,687,500)	–	–	–	–		–
			10 July 2012
			11 July 2012 –	–	6,687,500	–	(6,687,500)	–	–	–	–		–
			10 July 2013
	9 October 2008	0.2198	9 October 2009 –	–	3,343,750	–	–	3,343,750	–	–	–	3,343,750
			8 October 2010
			9 October 2010 –	–	3,343,750	–	–	3,343,750	–	–	–	3,343,750
			8 October 2011
			9 October 2011 –	–	3,343,750	–	–	3,343,750	–	–	–	3,343,750
			8 October 2012
			9 October 2012 –	–	3,343,750	–	–	3,343,750	–	–	–	3,343,750
			8 October 2013
Ms. Yang Yang	11 July 2008	0.754	11 July 2009 –	–	668,750	–	(668,750)	–	–	–	–		–
			10 July 2010
			11 July 2010 –	–	668,750	–	(668,750)	–	–	–	–		–
			10 July 2011
			11 July 2011 –	–	668,750	–	(668,750)	–	–	–	–		–
			10 July 2012
			11 July 2012 –	–	668,750	–	(668,750)	–	–	–	–		–
			10 July 2013
	9 October 2008	0.2198	9 October 2009 –	–	334,375	–	–	334,375	–	–	–	334,375
			8 October 2010
			9 October 2010 –	–	334,375	–	–	334,375	–	–	–	334,375
			8 October 2011
			9 October 2011 –	–	334,375	–	–	334,375	–	–	–	334,375
			8 October 2012
			9 October 2012 –	–	334,375	–	–	334,375	–	–	–	334,375
			8 October 2013

– 59 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

												Outstanding
		Exercise		Outstanding	Granted	Exercised	Forfeited	Outstanding	Granted	Exercised	Forfeited	at 31
		price per		at	during the	during the	during the	at	during the	during the	during the	December
Name	Date of grant	Share	Exercise period	1 July 2008	year	year	year	30 June 2009	period	period	period	2009
		HK$
Eligible	employees and other eligible participants
	27 September	0.218	27 September 2008 –	1,250,000	–	(1,250,000)	–	–	–	–	–	–
	2006		26 September 2009			(Note 1)
			27 September 2009 –	1,250,000	–	–	–	1,250,000	–	–	–	1,250,000
			26 September 2010
	22 March 2007	1.40	22 March 2008 –	31,431,250	–	–	(31,431,250)	–	–	–	–	–
			21 March 2009
			22 March 2009 –	31,431,250	–	–	(31,431,250)	–	–	–	–	–
			21 March 2010
			22 March 2010 –	31,431,250	–	–	(31,431,250)	–	–	–	–	–
			21 March 2011
			22 March 2011 –	31,431,250	–	–	(31,431,250)	–	–	–	–	–
			21 March 2012
	15 June 2007	1.77	15 June 2008 –	9,375,000	–	–	(9,375,000)	–	–	–	–	–
			14 June 2009
			15 June 2009 –	9,375,000	–	–	(9,375,000)	–	–	–	–	–
			14 June 2010
			15 June 2010 –	9,375,000	–	–	(9,375,000)	–	–	–	–	–
			14 June 2011
			15 June 2011 –	9,375,000	–	–	(9,375,000)	–	–	–	–	–
			14 June 2012
	26 February 2008	0.908	26 February 2009 –	20,750,000	–	–	(20,750,000)	–	–	–	–	–
			25 February 2010
			26 February 2010 –	20,750,000	–	–	(20,750,000)	–	–	–	–	–
			25 February 2011
			26 February 2011 –	20,750,000	–	–	(20,750,000)	–	–	–	–	–
			25 February 2012
			26 February 2012 –	20,750,000	–	–	(20,750,000)	–	–	–	–	–
			25 February 2013
	11 July 2008	0.754	11 July 2009 –	–	12,250,000	–	(12,250,000)	–	–	–	–	–
			10 July 2010
			11 July 2010 –	–	12,250,000	–	(12,250,000)	–	–	–	–	–
			10 July 2011
			11 July 2011 –	–	12,250,000	–	(12,250,000)	–	–	–	–	–
			10 July 2012
			11 July 2012 –	–	12,250,000	–	(12,250,000)	–	–	–	–	–
			10 July 2013
	9 October 2008	0.2198	9 October 2009 –	–	36,234,375	–	(562,500)	35,671,875	–	(500,000)	–	35,171,875
			8 October 2010							(Note 2)
			9 October 2010 –	–	36,234,375	–	(562,500)	35,671,875	–	–	–	35,671,875
			8 October 2011
			9 October 2011 –	–	36,234,375	–	(562,500)	35,671,875	–	–	–	35,671,875
			8 October 2012
			9 October 2012 –	–	36,234,375	–	(562,500)	35,671,875	–	–	–	35,671,875
			8 October 2013

– 60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

																										Outstanding	Outstanding
		Exercise		Outstanding			Granted			Exercised			Forfeited		Outstanding			Granted			Exercised			Forfeited			at 31
		price per			at	during		the	during		the	during		the		at	during		the	during		the	during		the	December
Name	Date of grant	Share	Exercise period	1 July 2008			year			year			year		30 June 2009			period			period			period			2009
		HK$
Consultant
	8 October 2009	0.398	8 April 2010 –		–			–			–			–		–	2,500,000					–	(2,500,000)				–
			7 April 2011
			8 April 2011 –		–			–			–			–		–	2,500,000					–	(2,500,000)				–
			7 April 2012
			8 April 2012 –		–			–			–			–		–	2,500,000					–	(2,500,000)				–
			7 April 2013
			8 April 2013 –		–			–			–			–		–	2,500,000					–	(2,500,000)				–
			7 April 2014
Total				302,225,000		264,825,000			(1,250,000)(380,400,000)						185,400,000		10,000,000				(500,000)		(10,000,000)			184,900,000


Exercisable at the end of the year/period				54,181,250												–										46,787,500

Weighted average exercise price				HK$1.33			HK$0.38		HK$0.218				HK$1.21		HK$0.2198		HK$0.398			HK$0.2198			HK$0.398			HK$0.2198

Notes:

(1) During the year ended 30 June 2009, the weighted average closing price of the Shares immediately before the date on which the option was exercised was HK$0.405. The weighted average share price on the date of exercise was HK$0.445.
(2) During the period ended 31 December 2009, the weighted average closing price of the Shares immediately before the date on which the option was exercised was HK$0.37. The weighted average share price on the date of exercise was HK$0.40.
(3) No options were expired during the period ended 31 December 2009 and the year ended 30 June 2009.

– 61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At the end of the reporting period, the number of Shares of which options had been granted and remained outstanding under the Share Option Scheme was 184,900,000 (at 30 June 2009: 185,400,000), representing approximately 5.16% (at 30 June 2009: approximately 5.18%) of the Shares of the Company in issue at that date.

During the period ended 31 December 2009, the Company measures the fair value of the share option granted to a consultant by reference to the fair value of services received. The total fair value of the share option granted to the consultant for the period ended 31 December 2009 amounted to nil.

The fair values of options granted during the year ended 30 June 2009 were calculated using the binominal model, details of which are as follows:

	Date of grant	Date of grant
	11 July 2008	9 October 2008
Number of Shares to be issued upon exercise of options
granted	78,425,000	186,400,000
Estimated fair values of options granted	HK$32,295,000	HK$16,487,000
Significant inputs into the model:
Closing share price at date of grant	HK$0.75	HK$0.176
Exercise price	HK$0.754	HK$0.2198
Expected volatility	67.45% – 89%	71% – 89%
Expected life of options	2 – 5 years	2 – 5 years
Risk-free interest rate	2.259% – 3.19%	1.175% – 2.269%
Dividend yield	nil	nil

Expected volatility was determined by using the historical volatility of the share prices of other companies in the similar industry over the expected life of the options. No other feature of the options granted was incorporated into the measurement of fair values.

The variables and assumptions used in computing the fair values of the share options are based on the Directors’ best estimate. The value of an option varies with different variables of certain subjective assumptions.

– 62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

On 9 October 2008, certain options previously granted to certain Directors, eligible employees and other eligible participants were forfeited by cancellation. On the same date, the Company granted options carrying rights to subscribe a total of 186,400,000 Shares under the Share Option Scheme to certain Directors, eligible employees and other eligible participants, options carrying rights to subscribe 178,400,000 Shares were identified by the Company as replacement equity instruments for the cancelled equity instruments. The incremental value arising from the aforementioned cancellation and replacement was approximately HK$10,092,000, which represented the difference between the fair values of the replacement options and the fair values of the cancelled options at the date of the replacement options were granted. The fair values of the replacement options and cancelled options were estimated using the binominal method. The following table lists the inputs to the model used:

	Number of Shares in	Number of Shares in
	respect of the	respect of the
	cancelled options	replacement options
Number of Shares to be issued upon exercise
of options granted	178,400,000	178,400,000
Estimated fair values of options granted	HK$6,395,000	HK$16,487,000
Significant inputs into the model:
Closing share price at date of the replacement options
were granted	HK$0.176	HK$0.176
Exercise price	HK$0.754 – HK$1.802	HK$0.2198
Expected volatility	66.11% – 110.91%	71% – 89%
Expected life of options	2 – 5 years	2 – 5 years
Risk-free interest rate	0.138% – 2.238%	1.175% – 2.269%
Dividend yield	nil	nil

33. RELATED PARTY TRANSACTIONS

Apart from those disclosed elsewhere in these financial statements, the Group entered into the following significant related party transactions during the current and prior periods:

	Period ended	Year ended
	31 December	30 June
	2009	2009
	HK$	HK$
Compensation of key management personnel:
Short-term employee benefits	4,527,169	9,317,152
Share-based payments	3,153,964	30,760,802
Post-employment benefits	25,646	44,193
	7,706,779	40,122,147

– 63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

34. DISPOSALS OF SUBSIDIARIES

(a) Disposal of MegaInfo Group

During the period ended 31 December 2009, the Group disposed of its entire equity interest in MegaInfo Group which carried out all of its Enterprise solutions operation.

Consideration received

	Period ended 31
	December 2009
	HK$
Consideration received in cash and cash equivalents	1

*Analysis of assets and liabilities over which control was lost*
	At 19 November
	2009
	HK$
Current assets
Inventories	115,070
Trade receivables	69,947
Other receivables, deposits and prepayments	393,622
Pledged deposits	320,000
Bank balances and cash	1,047,344
Non-current assets
Property, plant and equipment	54,837
Investment in an associate (Note 19)	–
Current liabilities
Trade payables	(349,091)
Other payables, accruals and deposits received	(1,450,169)
Net assets disposed of	201,560

Gain on disposal of MegaInfo Group

	Period ended	Period ended
	31 December
		2009
		HK$
Consideration received		1
Net assets disposed of		(201,560)
Cumulative exchange differences released		(17,200)
Cumulative contributed surplus released		11,108,399
Gain on disposal		10,889,640

The gain on disposal is included in the profit for the period ended 31 December 2009 from discontinued operation in the consolidated statement of comprehensive income (Note 10).

– 64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Net cash outflow on disposal of MegaInfo Group

	Period ended
	31 December
	2009
	HK$
Consideration received in cash and cash equivalents	1
Less: cash and cash equivalent balances disposed of	(1,047,344)
	(1,047,343)

(b) Disposal of

(China Lottery Management (Anhui) Co., Ltd.*)

During the period ended 31 December 2009, the Group disposed of its entire equity interest in (China Lottery Management (Anhui) Co., Ltd.*) upon deregistration.

Consideration received

Period ended 31 December 2009 HK$ Consideration received in cash and cash equivalents –

Loss on disposal of (China Lottery Management (Anhui) Co., Ltd.*)

	Period ended
	31 December
	2009
	HK$
Consideration received	–
Net assets disposed of	–
Cumulative exchange differences released	(6,409)
Loss on disposal	(6,409)

The loss on disposal is included in the loss for the period ended 31 December 2009 from continuing operations in the consolidated statement of comprehensive income.

Net cash movement on disposal of (China Lottery Management (Anhui) Co., Ltd.*)

Period ended 31 December 2009 HK$ Consideration received in cash and cash equivalents –

– 65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) Disposal of

(China Lottery Management (Jiangsu) Co., Ltd.*)

During the period ended 31 December 2009, the Group disposed of its entire equity interest in (China Lottery Management (Jiangsu) Co., Ltd.*) upon deregistration.

Consideration received

Period ended 31 December 2009 HK$ Consideration received in cash and cash equivalents –

Loss on disposal of (China Lottery Management (Jiangsu) Co., Ltd.*)

	Period ended
	31 December
	2009
	HK$
Consideration received	–
Net assets disposed of	–
Cumulative exchange differences released	(1,971)
Loss on disposal	(1,971)

The loss on disposal is included in the loss for the period ended 31 December 2009 from continuing operations in the consolidated statement of comprehensive income.

Net cash movement on disposal of (China Lottery Management (Jiangsu) Co., Ltd.*)

Period ended 31 December 2009 HK$ Consideration received in cash and cash equivalents –

– 66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(d) Disposal of

**(China Lottery Technology (Hunan) Co., Ltd.*)**

During the year ended 30 June 2009, the Group disposed of its entire equity interest in (China Lottery Technology (Hunan) Co., Ltd.*) upon deregistration.

Consideration received

Year ended 30 June 2009 HK$ Consideration received in cash and cash equivalents –

Gain on disposal of (China Lottery Technology (Hunan) Co., Ltd.*)

	Year ended
	30 June
	2009
	HK$
Consideration received	–
Net assets disposed of	–
Non-controlling interests	255,535
Cumulative exchange differences released	(53,553)
Gain on disposal	201,982

The gain on disposal is included in the loss for the year ended 30 June 2009 from continuing operations in the consolidated statement of comprehensive income.

Net cash movement on disposal of (China Lottery Technology (Hunan) Co., Ltd.*)

Year ended 30 June 2009 HK$ Consideration received in cash and cash equivalents –

English name is for identification purposes only

– 67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

35. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY

Details of the Company’s principal subsidiaries at 31 December 2009 are set out as follows:

==> picture [425 x 560] intentionally omitted <==

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

|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|Proportion|of|
|nominal|value|
|Issued|and|of|issued|
|fully|paid|share|capital/|
|Form|of|Place|of|Principal|capital/|registered|
|business|incorporation/|place|of|registered|capital|held|by|
|Name|of|subsidiary|structure|registration|operations|capital|the|Company|Principal|activities|
|Asia|Gaming|Technologies|Incorporated|Hong|Kong|PRC|2,000|ordinary|51%|(indirect)|Sales|and|distribution|
|Limited|shares|of|of|software|games|
|HK$1|each|and|system|and|
|provision|of|
|maintenance,|after-|
|sales,|training|and|
|consultancy|services|
|for|such|products|
|Wholly-|PRC|PRC|Registered|51%|(indirect)|Sales|and|distribution|
|foreign|capital|of|of|software|games|
|(Asia|Gaming|owned|HK$5|million|and|system|and|
|Technologies|(Beijing)|enterprise|provision|of|
|Co.,|Ltd.)|maintenance,|after-|
|sales,|training|and|
|consultancy|services|
|for|such|products|
|Maxprofit|Management|Incorporated|Hong|Kong|Hong|Kong|600,000|100%|(indirect)|Provision|of|
|Limited|ordinary|management|
|shares|of|services|for|the|
|HK$1|each|Group|
|Wholly-|PRC|PRC|Registered|100%|(indirect)|Research|and|
|foreign|capital|of|development|of|
|(Beijing|Systek|Science|owned|HK$21|sports|lottery|
|&|Technology|enterprise|million|information|
|Development|Co.,|Ltd.)|technology|
|Wholly-|PRC|PRC|Registered|100%|(indirect)|Provision|of|sports|
|foreign|capital|of|lottery|management|
|(China|Lottery|owned|HK$150|and|marketing|
|Management|Co.,|Ltd.)|enterprise|million|consultancy|services|
|and|supply|of|sports|
|lottery|sales|
|terminals|(and|
|accessories)|
|Domestic|PRC|PRC|Registered|100%|(indirect)|Provision|of|sports|
|enterprise|capital|of|lottery|management|
|(China|Lottery|RMB5|million|and|marketing|
|Management|(Hunan)|consultancy|services|
|Co.,|Ltd.)|

----- End of picture text -----

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

					Proportion of
					nominal value
				Issued and	of issued
				fully paid share	capital/
	Form of	Place of	Principal	capital/	registered
	business	incorporation/	place of	registered	capital held by
Name of subsidiary	structure	registration	operations	capital	the Company	Principal activities
	Domestic enterprise	PRC	PRC	Registered capital of	100% (indirect)	Provision of sports lottery management
(China Lottery				RMB5 million		and marketing
Management (Jiangxi)						consultancy services
Co., Ltd.*)	Domestic enterprise	PRC	PRC	Registered capital of	100% (indirect)	Provision of sports lottery management
(China Lottery				RMB10		and marketing
Management (Liaoning)				million		consultancy services
Co., Ltd.*)
SYSTEK LTD	Incorporated	BVI	PRC	1 ordinary share	100% (indirect)	Investment holding
				of US$1
SHINING CHINA INC	Incorporated	BVI	PRC	50,000 ordinary	100% (indirect)	Investment holding
				shares of
				US$1 each

English name is for identification purposes only.

The above table lists out the principal subsidiaries of the Company which, in the opinion of the Directors, principally affected the results or assets of the Group. To give details of other subsidiaries would, in the opinion of the Directors, result in particulars of excessive length.

None of the subsidiaries had issued any debt securities during the period and at the end of the reporting period.

36. DIVIDEND

The Board does not recommend the payment of a final dividend for the period (for the year ended 30 June 2009: nil).

37. COMPARATIVE FIGURES

The results and cash flows of the Enterprise solutions operation have been presented as discontinued operation and accordingly, the comparative figures for the year ended 30 June 2009 of the consolidated statement of comprehensive income had been reclassified in accordance with HKFRSs. For comparative purposes, certain comparative figures have also been reclassified to conform with current period presentation to align with the financial statements presentation of the Group.

38. EVENTS AFTER THE REPORTING PERIOD

After the reporting period, on 5 March 2010, the Group entered into a conditional sale and purchase agreement dated 5 March 2010 to acquire control of Exequs Co. Ltd. and its subsidiary (collectively, the “Exequs Group”) at a total consideration of HK$50,000,000, which shall be satisfied as to HK$28,000,000 in cash and as to HK$22,000,000 by the allotment and issue of the 57,894,000 consideration shares at an issue price of approximately HK$0.38 per share. The Exequs Group holds a 35% equity interest in GOT. GOT is one of the vendors approved by SLAC for the research, development and production of sports lottery terminals and systems. At the date of approval of these financial statements, the acquisition has not yet been completed.

– 69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. INDEBTEDNESS

Borrowings

At the close of business on 28 February 2010, being the latest practicable date for the purpose of preparing this indebtedness statement prior to the printing of this circular, the Enlarged Group had no borrowings outstanding.

Contingent liabilities

As at 28 February 2010, the Enlarged Group had no significant contingent liabilities.

Capital and other commitments

As at 28 February 2010, the Enlarged Group had capital commitments in respect of research and development expenditures amounting to HK$1,241,861 which had been authorized and contracted but not provided for.

In addition, as at 28 February 2010, the Enlarged Group had operating lease commitments amounting to HK$7,075,895.

Disclaimers

Save as disclosed above, as at the close of business on 28 February 2010, the Enlarged Group did not have any bank overdrafts or loans, or other similar indebtedness, mortgages, charges, hire purchase commitments, or guarantees or other material contingent liabilities.

The Directors have confirmed that, save as disclosed above, there has not been any other material changes in the indebtedness, commitments or contingent liabilities of the Enlarged Group since the latest practicable date.

4. MATERIAL ADVERSE CHANGE

The Directors are not aware, as at the Latest Practicable Date, of any material adverse change in the financial or trading position of the Group since 31 December 2009, the date to which the latest published audited financial statements of the Company were made up.

5. WORKING CAPITAL

The Directors, after due and careful consideration, are of the opinion that, taking into account of the internal resources available to the Enlarged Group, the Enlarged Group would have sufficient working capital for at least 12 months from the date of this circular.

– 70 –

FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

1. ACCOUNTANTS’ REPORT ON THE EXEQUS GROUP

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

==> picture [184 x 67] intentionally omitted <==

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

26 April 2010

The Board of Directors AGTech Holdings Limited Unit 3912, 39/F Shell Tower, Times Square Causeway Bay Hong Kong

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding Exequs Co. Ltd. (“Exequs”) and its subsidiary (hereinafter collectively referred to as the “Exequs Group”), including the consolidated statement of financial position as at 31 December 2008 and 2009, the consolidated statement of comprehensive income, consolidated statement of changes in equity and the consolidated statement of cash flows for the period from 12 September 2008 (date of incorporation of Exequs) to 31 December 2008 and the year ended 31 December 2009 (the “Relevant Periods”), for inclusion in the circular dated 26 April 2010 (the “Circular”) issued by AGTech Holdings Limited (the “Company”) in connection with the major transaction in respect of the proposed acquisition (the “Acquisition”) by FAIRMAX ENTERPRISES LIMITED (the “Purchaser”), an indirect wholly-owned subsidiary of the Company, of 50,000 issued shares of US$1.00 each in the share capital of Exequs from SPEEDSUPER LIMITED (the “Vendor”).

Exequs was incorporated in the British Virgin Islands with limited liability on 12 September 2008. The principal activity of Exequs is investment holding. The address of the registered office and principal place of business of Exequs is P.O. Box 3444, Road Town, Tortola, British Virgin Islands. As at the date of this report, the Vendor is the sole shareholder of the entire issued share capital of Exequs.

– 71 –

FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

As at the date of this report, Exequs has the following subsidiary, which is private company with limited liability:

		Place and date of	Issued and fully	Attributable
		establishment/	paid up registered	equity interests	Principal
Name of subsidiary		operation	capital	held by Exequs	activities
	(transliterated	Limited liability company	Registered capital of RMB30,000,000	100% (Direct)	Investment holding
as Beijing Century Decai		established in the
Technology Co., Ltd.)		People’s Republic
(“Century Decai”)		of China (“PRC”)
		on 25 April 2007

No audited financial statements have been prepared for Exequs as Exequs was incorporated in a country where there is no statutory audit requirement.

The financial statements of Century Decai for the period from 25 April 2007 (date of establishment) to 31 December 2007 and the years ended 31 December 2008 and 2009 were prepared in accordance with the relevant accounting principles and financial regulations applicable to enterprises established in the PRC. The financial statements of Century Decai for the period ended 31 December 2007 were audited by (Beijing Sanqian Certified Public Accountants Co., Ltd.), certified public accountants registered in the PRC. The financial statements of Century Decai for the years ended 31 December 2008 and 2009 were audited by (Bei Jing Dong Cai Certified Public Accountants), certified public accountants registered in the PRC.

For the purpose of this report, the sole director of Exequs has prepared consolidated management accounts of the Exequs Group for the Relevant Periods in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) (the “Underlying Financial Statements”). We have, for the purpose of this report, carried out appropriate audit procedures in respect of the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

We have examined the Underlying Financial Statements and have carried out such additional procedures as we considered necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” as recommended by the HKICPA.

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

– 72 –

FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

The Underlying Financial Statements are the responsibility of the sole director of Exequs who approved their issue. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information together with the notes thereon gives, for the purpose of this report, a true and fair view of the state of affairs of the Exequs Group as at 31 December 2008 and 2009 and of the consolidated results and cash flows of the Exequs Group for the Relevant Periods.

I. FINANCIAL INFORMATION

Consolidated statement of comprehensive income

		Period from
		12 September
		2008 (Date of
	incorporation) to		Year ended 31
		31 December	December
		2008	2009
	Notes	HK$	HK$
		(Audited)	(Audited)
Share of profit of an associate		303,376	5,097,842
Interest income	8	7,757	2,853
Excess over the cost of a business
combination	21	30,954,015	–
General and administrative expenses		(14,264)	(512,336)
Profit before tax		31,250,884	4,588,359
Income tax	9	(1,693)	–
Profit for the period/year	10	31,249,191	4,588,359
Other comprehensive income
Exchange differences arising on translation
to presentation currency		–	(13,114)
Total comprehensive income for the
period/year		31,249,191	4,575,245

– 73 –

FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

Consolidated statement of financial position

		At 31	At 31
		December	December
		2008	2009
	Notes	HK$	HK$
		(Audited)	(Audited)
Non-current assets
Property, plant and equipment	14	4,516	3,592
Interest in an associate	15	39,020,562	42,107,001

		39,025,078	42,110,593

Current assets
Other receivables	16	1,163,948	3,462,661
Amount due from an associate	15	387,559	385,279
Bank balances and cash	17	1,212,952	347,098

		2,764,459	4,195,038

Current liabilities
Other payables	18	111,599	95,916
Amount due to a shareholder	19	10,000,060	9,997,779
Current tax liabilities		41,187	–

		10,152,846	10,093,695

Net current liabilities		(7,388,387)	(5,898,657)
Net assets		31,636,691	36,211,936


EQUITY ATTRIBUTABLE TO OWNERS
OF EXEQUS
Share capital	20	387,500	387,500
Reserves		31,249,191	35,824,436

Total equity		31,636,691	36,211,936

– 74 –

FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

Consolidated statement of changes in equity

	Attributable	to owners	of Exequs
	Share	Exchange	Retained
	capital	reserve	profits	Total
	HK$	HK$	HK$	HK$
	(Note 20)
Issue of shares at 12 September
2008 (date of incorporation)	387,500	–	–	387,500
Profit for the period	–	–	31,249,191	31,249,191
Total comprehensive income for
the period	–	–	31,249,191	31,249,191
Balance at 31 December 2008	387,500	–	31,249,191	31,636,691

Profit for the year	–	–	4,588,359	4,588,359
Other comprehensive income for
the year	–	(13,114)	–	(13,114)
Total comprehensive income for
the year	–	(13,114)	4,588,359	4,575,245
Balance at 31 December 2009	387,500	(13,114)	35,837,550	36,211,936

– 75 –

FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

Consolidated statement of cash flows

		Period from
		12 September
		2008 (Date of
	incorporation) to		Year ended
		31 December	31 December
	Note	2008	2009
		HK$	HK$
		(Audited)	(Audited)
OPERATING ACTIVITIES
Profit before tax		31,250,884	4,588,359
Adjustments for:
Share of profit of an associate		(303,376)	(5,097,842)
Depreciation of property, plant and equipment		–	924
Excess over the cost of a business combination	21	(30,954,015)	–
Interest income		(7,757)	(2,853)
Operating cash flows before movements in
working capital		(14,264)	(511,412)
Increase in other receivables		–	(2,212,869)
(Increase)/decrease in amount due from an
associate		(387,559)	2,280
Increase/(decrease) in other payables		85,844	(101,527)
Cash used in operations		(315,979)	(2,823,528)
Income tax paid		–	(41,187)
NET CASH USED IN OPERATING ACTIVITIES		(315,979)	(2,864,715)
INVESTING ACTIVITIES
Interest received		7,757	2,853
Acquisition of a subsidiary	21	(8,866,386)	–
Dividends received from an associate		–	2,011,403

NET CASH (USED IN)/GENERATED BY
INVESTING ACTIVITIES		(8,858,629)	2,014,256
FINANCING ACTIVITIES
Proceeds from issue of shares		387,500	–
Advances from/(repayment to) shareholder		10,000,060	(2,281)
NET CASH GENERATED BY/(USED IN)
FINANCING ACTIVITIES		10,387,560	(2,281)
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS		1,212,952	(852,740)
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE PERIOD/YEAR		–	1,212,952
EFFECT OF EXCHANGE RATE CHANGES		–	(13,114)
CASH AND CASH EQUIVALENTS AT THE
END OF THE PERIOD/YEAR		1,212,952	347,098


ANALYSIS OF THE BALANCES OF CASH
AND CASH EQUIVALENTS
Bank balances and cash		1,212,952	347,098

– 76 –

FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

Notes to the financial information

1. GENERAL INFORMATION

Exequs was incorporated in the British Virgin Islands with limited liability on 12 September 2008. The sole director of Exequs regards SPEEDSUPER LIMITED, a private limited company incorporated in the British Virgin Islands, as the immediate and ultimate holding company of Exequs. The address of the registered office and principal place of business of Exequs is P.O. Box 3444, Road Town, Tortola, British Virgin Islands.

Exequs is an investment holding company and the principal activity of its subsidiary, Century Decai, is investment holding.

The Financial Information is presented in Hong Kong dollars (“HK$”) which is different from the functional currency of Exequs, Renminbi (“RMB”), as the director of Exequs considers that for the conveniences of the Financial Information users, the results and financial position of the Exequs Group are expressed in HK$.

2. APPLICATION OF HKFRSs

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, Exequs Group has consistently applied HKFRSs, Hong Kong Accounting Standards (“HKAS(s)”), amendments and interpretations (“INT”) issued by the HKICPA that are effective for annual accounting periods beginning on or after 1 July 2009.

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

HKFRSs (Amendments)	Improvements to HKFRSs issued in 20091	Improvements to HKFRSs issued in 20091
HKAS 24 (Revised)	Related Party Disclosures4
HKAS 32 (Amendments)	Classification of Rights Issues3
HKFRS 1 (Amendments)	Additional Exemptions for First-time	Adopters2
HKFRS 2 (Amendments)	Group Cash-settled Share-based Payment Transactions2
HKFRS 9	Financial Instruments (relating to	the classification	and
	measurement of financial assets)6
HK (IFRIC)-Int 14 (Amendments)	Prepayments of a Minimum Funding	Requirement4
HK (IFRIC)-Int 19	Extinguishing Financial Liabilities with Equity Instruments5

1 Amendments that are effective for annual periods beginning on or after 1 January 2010
2 Effective for annual periods beginning on or after 1 January 2010
3 Effective for annual periods beginning on or after 1 February 2010

4 Effective for annual periods beginning on or after 1 January 2011

5 Effective for annual periods beginning on or after 1 July 2010

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

The director of Exequs anticipates that the application of the other new and revised HKFRSs will have no material impact on the financial performance and financial position of the Exequs Group.

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 Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”) and by the Hong Kong Companies Ordinance.

– 77 –

FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

Basis of consolidation

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

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

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

Non-controlling interests in subsidiaries are presented separately from the equity of the owners of Exequs.

Allocation of total comprehensive income to non-controlling interests

Total comprehensive income and expense of a subsidiary is attributed to the owners of Exequs and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Prior to 1 July 2009, losses applicable to the non-controlling interests in excess of the noncontrolling interests in the subsidiary’s equity were allocated against the interests of the Exequs Group except to the extent that the non-controlling interests had a binding obligation and were able to make an additional investment to cover the losses.

Changes in the Exequs Group’s ownership interests in existing subsidiaries

Changes in the Exequs Group’s ownership interests in existing subsidiaries prior to 1 July 2009

Increases in interests in existing subsidiaries were treated in the same manner as the acquisition of subsidiaries, with goodwill or a bargain purchase gain being recognised where appropriate. For decreases in interests in subsidiaries regardless of whether the disposals would result in the Exequs Group losing control over the subsidiaries, the difference between the consideration received and the carrying amount of the share of net assets disposed of was recognised in profit or loss.

Changes in the Exequs Group’s ownership interests in existing subsidiaries after 1 July 2009

Changes in the Exequs Group’s ownership interest in a subsidiary that do not result in the Exequs Group losing control over the subsidiary are accounted for as equity transactions. The carrying amounts of the Exequs Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of Exequs.

When the Exequs Group loses control over a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest determined at the date when control is lost and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Where certain assets of the subsidiary are measured at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if Exequs had directly disposed of the related assets (i.e. reclassified to profit or loss or transferred directly to accumulated losses at the date when control is lost). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under HKAS 39 or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

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FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

Business combinations

Business combinations prior to 1 July 2009

Acquisition of businesses was accounted for using the purchase method. The cost of the acquisition was measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Exequs Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that met the relevant conditions for recognition were generally recognised at their fair values at the acquisition date.

Goodwill arising on acquisition was recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Exequs Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after assessment, the Exequs Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeded the cost of the business combination, the excess was recognised immediately in profit or loss.

Business combinations achieved in stages were accounted for as separate steps. Goodwill was determined at each step. Any additional acquisition did not affect the previously recognised goodwill.

Business combinations on or after 1 July 2009

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Exequs Group, liabilities incurred by the Exequs Group to former owners of the acquiree and the equity interests issued by the Exequs Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.

deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 Income Taxes and HKAS 19 Employee Benefits respectively;
liabilities or equity instruments related to the replacement by the Exequs Group of an acquiree’s sharebased payment awards are measured in accordance with HKFRS 2 Share-based Payment ; and
assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations are measured in accordance with that standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after assessment, the Exequs Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

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FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

Where the consideration the Exequs Group transfers in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and considered as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with the corresponding adjustments being made against goodwill or gain on bargain purchase. Measurement period adjustments are adjustments that arise from additional information obtained during the measurement period about facts and circumstances that existed as of the acquisition date. Measurement period does not exceed one year from the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with HKAS 39, or HKAS 37 Provisions, Contingent Liabilities and Contingent Assets , as appropriate, with the corresponding gain or loss being recognised in profit or loss.

Where a business combination is achieved in stages, the Exequs Group’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Exequs Group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss.

Goodwill

Goodwill arising on an acquisition of a business is carried at cost less accumulated impairment losses, if any, and is presented separately in the consolidated statement of financial position.

For the purposes of impairment testing, goodwill is allocated to each of the Exequs Group’s cash-generating units expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro-rata basis based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated statement of comprehensive income. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the amount of profit or loss on disposal.

Investments in an associate

An associate is an entity over which the Exequs Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in this Financial Information using the equity method of accounting. Under the equity method, investments in associates are initially recognised in the consolidated statement of financial position at cost and adjusted thereafter for the post-acquisition changes in the Exequs Group’s share of net assets of the associates, less any impairment in the value of individual investments. When the Exequs Group’s share of losses of an associate exceeds the Exequs Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Exequs Group’s net investment in the associate), the Exequs Group discontinues recognising its share of further losses. Additional losses are provided only to the extent that the Exequs Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Exequs Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is not

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FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

tested for impairment separately. Instead, the entire carrying amount of the investment is tested for impairment as a single asset. Any impairment loss recognised is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment in the associate. Any reversal of impairment loss is recognised to the extent that the recoverable amount of the investment subsequently increases.

Any excess of the Exequs Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where a group entity transacts with an associate of the Exequs Group, profits and losses are eliminated to the extent of the Exequs Group’s interest in the relevant associate.

Revenue recognition

Dividend income is recognised when the shareholder’s right to receive payment has been established.

Property, plant and equipment

Property, plant and equipment are stated in the consolidated statement of financial position at cost less accumulated depreciation and accumulated impairment losses, if any.

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

Foreign currencies

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise, except for exchange differences arising on a monetary item that forms part of Exequs’s net investment in a foreign operation, in which case, such exchange differences are recognised in other comprehensive income in the Financial Information and will be reclassified from equity to profit or loss on disposal of the foreign operation. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income, in which cases, the exchange differences are recognised directly in other comprehensive income.

For the purpose of presenting Financial Information, the assets and liabilities of the Exequs Group’s foreign operations are translated into the presentation currency of the Exequs Group (i.e. Hong Kong dollars) using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of foreign currency translation reserve (attributed to non-controlling interests as appropriate).

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FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

On disposal of a foreign operation (i.e. a disposal of the Exequs Group’s entire interest in a foreign operation, a disposal involving loss of control over a subsidiary that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of Exequs are reclassified to profit or loss.

Goodwill and fair value adjustments on identifiable assets acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of the reporting period. Exchange differences arising are recognised in the foreign currency translation reserve.

Retirement benefit costs

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

Taxation

Taxation represents the sum of tax currently payable and deferred tax.

Tax currently payable is calculated based on taxable profit for the period. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other periods and that are never taxable or deductible. The Exequs Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted at end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax 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.

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

Impairment of tangible and intangible assets other than goodwill

At the end of the reporting period, the Exequs Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. In addition, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is indication that they may be impaired.

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FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

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

Financial instruments

Financial assets

The Exequs Group’s financial assets comprise those classified as loans and receivables. The accounting policy adopted is set out below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including other receivables, amount due from an associate, and bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment.

Impairment of financial assets

Financial assets

Financial liabilities and equity

Financial liabilities

Financial liabilities (including other payables and amount due to a shareholder) are subsequently measured at amortised cost using the effective interest method.

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FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

Equity instruments

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

Derecognition

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

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

Provisions

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

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

5. CAPITAL RISK MANAGEMENT

The Exequs Group manages its capital to ensure that the entities in the Exequs Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Exequs Group’s overall strategy remains unchanged during the Relevant Periods.

The capital structure of the Exequs Group consists of cash and cash equivalents and equity attributable to owners of Exequs, comprising issued share capital and reserves.

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

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FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

6. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

	At 31 December	At 31 December
	2008	2009
	HK$	HK$
Financial assets
*Loans and receivables*
Other receivables	1,163,948	3,462,661
Amount due from an associate	387,559	385,279
Bank balances and cash	1,212,952	347,098

	2,764,459	4,195,038


	At 31 December	At 31 December
	2008	2009
	HK$	HK$
Financial liabilities
*Financial liabilities at amortised cost*
Other payables	111,599	95,916
Amount due to a shareholder	10,000,060	9,997,779

	10,111,659	10,093,695

(b) Financial risk management objectives and policies

The Exequs Group’s major financial instruments include other receivables, bank balances, amount due from an associate, other payables and amount due to a shareholder. 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.

Market risks

Currency risk

Transactional currency exposures arise from transactions conducted by operating units in currencies other than the units’ functional currency. Substantially all the Exequs Group’s income and operating costs are denominated in the units’ functional currency. Accordingly, the management considers that the Exequs Group is not exposed to significant currency risk.

The Exequs Group currently does 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.

Interest rate risk

The Exequs Group’s cash flow interest rate risk primarily relates to variable-rate bank balances. The Exequs Group has not used any interest rate swaps in order to mitigate its exposure associated with fluctuations relating to interest cash flows. However, the management monitors interest rate exposure and will consider other necessary actions when significant interest rate exposure is anticipated.

Price risk

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

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FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

Credit risks

The Exequs Group’s maximum exposure to credit risk in the event of the counterparties’ failure to perform their obligations as at the end of reporting period in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated statement of financial position. In order to minimise the credit risk, the Exequs Group reviews the recoverable amount of each individual debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the management considers that the Exequs Group’s credit risk is significantly reduced.

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

Liquidity risk

In the management of the liquidity risk, the Exequs Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Exequs Group’s operations and mitigate the effects of fluctuations in cash flows.

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

	On demand or
	less than 1 year	Carrying amounts
	HK$	HK$
At 31 December 2008
Non-derivative financial liabilities
Other payables	111,599	111,599
Amount due to a shareholder	10,000,060	10,000,060

	10,111,659	10,111,659


At 31 December 2009
Non-derivative financial liabilities
Other payables	95,916	95,916
Amount due to a shareholder	9,997,779	9,997,779

	10,093,695	10,093,695

(c) Fair value of financial instruments

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

The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active markets are determined with reference to quoted market bid and ask prices respectively.
The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models (e.g. discounted cash flow analysis using observable and/or unobservable inputs).

The management considers that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in Financial Information approximate their fair values.

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FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

7. SEGMENT INFORMATION

The management reviews the Exequs Group’s internal financial reporting and other information and also obtains other relevant external information in order to assess performance and allocate resources and operating segment is identified with reference to these.

The management considers that the business of the Exequs Group is organised in one operating segment as investment holding. Additional disclosure in relation to segment information is not presented as the management assesses the performance of the only operating segment identified based on the consistent information as disclosed in the consolidated financial statements.

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

Exequs is domiciled in the British Virgin Islands and its principal activity is investment holding. Save for 35% equity interest in an associate (Note 15), Century Decai has not undertaken any operations since its date of incorporation. The Exequs Group’s income for the Relevant Periods is mainly derived from the share of profit of its associate. Substantially all the assets and liabilities of the Exequs Group are located in the PRC.

8. INTEREST INCOME

	Period ended	Year ended
	31 December 2008	31 December 2009
	HK$	HK$
	(Audited)	(Audited)
Bank interest income	7,757	2,853


INCOME TAX
	Period ended	Year ended
	31 December 2008	31 December 2009
	HK$	HK$
	(Audited)	(Audited)
Current income tax:
– PRC enterprise income tax	1,693	–

9. INCOME TAX

Exequs is an exempted company incorporated in the British Virgin Islands and, as such, is not liable for taxation in the British Virgin Islands.

Century Decai is subject to PRC Enterprise Income Tax at 25%.

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FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

Income tax for the period/year can be reconciled to the profit per the consolidated statement of comprehensive income as follows:

	Period ended	Year ended
	31 December 2008	31 December 2009
	HK$	HK$
	(Audited)	(Audited)
Profit before tax	31,250,884	4,588,359


Tax calculated at statutory income tax rate of 25%	7,812,721	1,147,090
Income not subject to tax	(7,811,028)	(1,147,090)
Tax charge	1,693	–

No deferred tax assets and liabilities are recognised in the Financial Information as the Exequs Group did not have material temporary differences arising between the tax bases of assets and liabilities and their carrying amounts at 31 December 2008 and 2009.

10. PROFIT FOR THE PERIOD/YEAR

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

							Period ended	Year ended
						31	December 2008	31 December 2009
							HK$	HK$
							(Audited)	(Audited)
Depreciation	of	property,	plant	and	equipment		–	924

11. DIRECTORS’ EMOLUMENTS

During the Relevant Periods, there was no emoluments paid or payable to the director of Exequs.

During the Relevant Periods, no remuneration was paid by Exequs Group to the director of Exequs as an inducement to join or upon joining the Exequs Group or as compensation for loss of office. None of the directors of Exequs has waived any remuneration during the Relevant Periods.

12. EMPLOYEES’ EMOLUMENTS

	Period ended	Year ended
	31 December 2008	31 December 2009
	HK$	HK$
	(Audited)	(Audited)
Salaries and other benefits	548	65,258
Social security costs	60	12,451
Retirement benefit schemes contributions	73	10,904

	681	88,613

The emoluments were all within HK$Nil to HK$1,000,000. The emoluments for each of the Relevant Periods were paid to a non-director employee.

13. EARNINGS PER SHARE

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

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FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

14. PROPERTY, PLANT AND EQUIPMENT

	Office equipment
	HK$
COST
Acquisition of subsidiaries	4,516
At 31 December 2008 and 2009	4,516

DEPRECIATION
At 31 December 2008	–

Depreciation charge for the year	924
At 31 December 2009	924

CARRYING AMOUNTS
At 31 December 2009	3,592

At 31 December 2008	4,516

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

Office equipment : 15%-20%

15. INTEREST IN AN ASSOCIATE

Details of the Exequs Group’s interest in an associate are as follows:

	At 31 December	At 31 December
	2008	2009
	HK$	HK$
Cost of investment in an associate
Unlisted	38,717,186	38,717,186
Share of post-acquisition profits and other comprehensive
income, net of dividends received	303,376	3,389,815

	39,020,562	42,107,001

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FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

As at 31 December 2009 and 2008, the Exequs Group had interests in the following associate:

					Percentage of ownership	Percentage of ownership
					interest attributable to the
				Place of	Exequs	Group
			Particulars	incorporation	At	At
			of registered	and	31 December	31 December
Name of entity (transliterated as			capital Registered capital of	operation PRC	2009 35%	2008 35%	Principal activities Research, development and production of
Beijing Greatwall GOT		RMB42,647,431					sports lottery
Information	Products Co., Ltd.)						terminals and
(“GOT”)							systems

The Exequs Group’s shareholding in the associate is held through Century Decai, a wholly-owned subsidiary of Exequs.

The amount due from an associate is unsecured, interest-free and has no fixed terms of repayment.

Summarised financial information in respect of the Exequs Group’s associate is set out below:

		At 31 December	At 31 December
		2008	2009
		HK$	HK$
	Total assets	194,250,619	166,383,221
	Total liabilities	(96,071,725)	(59,963,529)

	Net assets	98,178,894	106,419,692


	Exequs Group’s share of net assets of associate	34,362,613	37,246,892


		Year ended	Year ended
		31 December 2008	31 December 2009
		HK$	HK$
	Total revenue	172,285,650	148,797,284


	Total profit for the year	21,091,843	14,565,265


	Exequs Group’s share of profit of an associate for the
	period/year	303,376	5,097,842


	Amount due from an associate	387,559	385,279


16.	OTHER RECEIVABLES
		At 31 December	At 31 December
		2008	2009
		HK$	HK$
	Other receivables	1,163,948	3,462,661

None of the above assets is either past due or impaired. The financial assets included in the above balances relate to receivables on which there was no recent history of default.

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FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

17. BANK BALANCES AND CASH

At 31 December 2008 and 2009, the bank balances and cash of HK$1,127,290 and HK$284,317 respectively were denominated in RMB which is not freely convertible into other currencies.

All bank deposits carry interest at floating rates based on daily bank deposit rates.

18. OTHER PAYABLES

				December	December
				2008	2009
				HK$	HK$
Other	payables			111,599	95,916


Other	payables	are	non-interest-bearing.

19. AMOUNT DUE TO A SHAREHOLDER

The amount due is unsecured, interest-free and has no fixed terms of repayment.

20. SHARE CAPITAL

	At 31 December	At 31 December
	2008	2009
	HK$	HK$
Authorised:
50,000 ordinary shares of US$1 each	387,500	387,500


Issued and fully paid:
50,000 ordinary shares of US$1	387,500	387,500

Exequs was incorporated in the British Virgin Islands on 12 September 2008 with an authorised share capital of US$50,000 divided into 50,000 ordinary shares of US$1 each. Upon incorporation, Exequs issued and allotted 50,000 ordinary shares of US$1 each at par for cash for the initial working capital of Exequs.

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FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

21. BUSINESS COMBINATION

On 16 December 2008, Exequs acquired the entire equity interest of Century Decai at a consideration of HK$10,000,000. Century Decai is an investment holding company and owns 35% equity interest in GOT (Note 15).

The fair values of the identifiable assets and liabilities of Century Decai as at the date of acquisition and the corresponding carrying amounts immediately before the acquisition are as follows:

		Acquiree’s
	Fair value	carrying amount
	HK$	HK$
Bank balances and cash	1,133,614	1,133,614
Property, plant and equipment (Note 14)	4,516	4,516
Interest in an associate	38,717,186	38,717,186
Other receivables	1,163,948	1,163,948
Amount due from an associate	387,559	387,559
Other payables	(25,755)	(25,755)
Amount due to a shareholder	(387,559)	(387,559)
Current tax liabilities	(39,494)	(39,494)

	40,954,015	40,954,015
Excess over the cost of a business combination recognised in
the consolidated statement of comprehensive income	(30,954,015)
Total purchase consideration	10,000,000

Purchase consideration settled in cash		10,000,000
Cash and cash equivalents in subsidiary acquired		(1,133,614)
Cash outflow on acquisition		8,866,386

The acquired business contributed income of HK$303,376 and net profit of HK$295,359 to the Exequs Group for the period from 16 December 2008 to 31 December 2008. If the acquisition had occurred on 12 September 2008 (date of incorporation of Exequs), the Exequs Group’s income would have been HK$1,947,329, and profit after tax would have been HK$1,846,074.

– 92 –

APPENDIX II FINANCIAL INFORMATION OF THE EXEQUS GROUP

II. SUBSEQUENT EVENTS

Save as disclosed elsewhere in the Financial Information, no other significant event took place subsequent to 31 December 2009.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Exequs Group have been prepared in respect of any period subsequent to 31 December 2009.

Yours faithfully,

HLB Hodgson Impey Cheng

Chartered Accountants Certified Public Accountants Hong Kong

– 93 –

FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE EXEQUS GROUP

For the Relevant Periods

(a) Business review

Exequs was incorporated in the BVI on 12 September 2008 as an investment holding company with its only investment in the wholly-owned subsidiary Century Decai, which is in turn holding 35% equity interest in GOT. Exequs Group’s income is mainly related to the share of the profit or loss of its associate GOT.

(b) Financial review, financial position and capital structure

During the Relevant Periods, the respective net asset values as at 31 December 2008 and 2009 were HK$31,636,691 and HK$36,211,936 respectively. The respective share of profit of GOT for the period from 12 September 2008 to 31 December 2008 and for the year ended 31 December 2009 were HK$303,376 and HK$5,097,842. During the period from 12 September 2008 to 31 December 2008, the Exequs Group recorded an excess over the cost of a business combination of approximately HK$30.95 million as a result of the acquisition of Century Decai by Exequs on 16 December 2008. Taking this into account, the respective profits for the period from 12 September 2008 to 31 December 2008 and for the year ended 31 December 2009 were HK$31,249,191 and HK$4,575,245.

The respective bank balances as at 31 December 2008 and 2009 were HK$1,212,952 and HK$347,098 respectively, while the respective current liabilities (excluding the Shareholder’s Loan to be waived) as at 31 December 2008 and 2009 were HK$152,786 and HK$95,916 respectively.

During the Relevant Periods, the Exequs Group funded its operation by its internal resources and shareholder’s loan. There was no change in capital structure during the Relevant Periods. No financial instrument was used for hedging purposes during the Relevant Periods. Save for the acquisition of the 35% equity interest in GOT in 2008, there were no material acquisitions and disposals of subsidiaries and associated companies during the Relevant Periods. There were no contingent liabilities and capital commitment as at 31 December 2008 and 2009.

(c) Employment and remuneration policy

During the Relevant Periods, the Exequs Group employed 1 staff. The respective staff cost for the period from 12 September 2008 to 31 December 2008 and for the year ended 31 December 2009 were HK$681 and HK$88,613. The remuneration policy was reviewed in line with the market conditions, current legislation and the performance of the staff.

(d) Future plan and prospects

As the Exequs Group’s main asset is the 35% equity interest in GOT, the management expected its prospects should be in line with the growing sports lottery sales market as mentioned in the paragraph headed “Reasons for the Acquisition”.

– 94 –

FINANCIAL INFORMATION OF THE EXEQUS GROUP

APPENDIX II

(e) Details of charges on assets

The Exequs Group had no charges on its assets as at 31 December 2008 and 31 December 2009.

(f) Borrowings and gearing ratio

The Exequs Group had no borrowings outstanding (except the Shareholder’s Loan) as at 31 December 2008 and 31 December 2009.

(g) Foreign exchange exposure

Since the operations of the Exequs Group are in the PRC and most of the transactions, monetary assets and liabilities are denominated in RMB, the Exequs Group’s exposure to foreign currency risk is minimal.

– 95 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

1. ACCOUNTANTS’ REPORT ON CENTURY DECAI

==> picture [184 x 68] intentionally omitted <==

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

26 April 2010

The Board of Directors AGTech Holdings Limited Unit 3912, 39/F Shell Tower, Times Square Causeway Bay Hong Kong

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding (transliterated as Beijing Century Decai Technology Co., Ltd.) (“Century Decai”), including the statement of financial position as at 31 December 2007, 2008 and 2009, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the period from 25 April 2007 (date of establishment of Century Decai) to 31 December 2007 and the years ended 31 December 2008 and 2009 (the “Relevant Periods”), for inclusion in the circular dated 26 April 2010 (the “Circular”) issued by AGTech Holdings Limited (the “Company”) in connection with the major transaction in respect of the proposed acquisition (the “Acquisition”) by FAIRMAX ENTERPRISES LIMITED (the “Purchaser”), an indirect wholly-owned subsidiary of the Company, of 50,000 issued shares of US$1.00 each in the share capital of Exequs Co. Ltd. (“Exequs”) from SPEEDSUPER LIMITED (the “Vendor”).

Century Decai was established in the People’s Republic of China (“PRC”) on 25 April 2007. The principal activity of Century Decai is investment holding. The address of the registered office and principal place of business of Century Decai is Room 909, Building No.1, Compound A6, Shuguang Xili, Chaoyang District, Beijing, the PRC. As at the date of this report, Exequs is the sole registered owner of Century Decai.

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FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

For the purpose of this report, the directors of Century Decai have prepared management accounts of Century Decai for the Relevant Periods in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) (the “Underlying Financial Statements”). We have, for the purpose of this report, carried out appropriate audit procedures in respect of the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

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

The Underlying Financial Statements are the responsibility of the directors of Century Decai who approved their issue. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information together with the notes thereon gives, for the purpose of this report, a true and fair view of the state of affairs of Century Decai as at 31 December 2007, 2008 and 2009 and of the results and cash flows of Century Decai for the Relevant Periods.

– 97 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

I. FINANCIAL INFORMATION

Statement of comprehensive income

		Period
		from 25
		April 2007
		(date of
	establishment)		Year	Year
		to 31	ended 31	ended 31
		December	December	December
		2007	2008	2009
	Notes	RMB	RMB	RMB
		(Audited)	(Audited)	(Audited)
Share of profit of an associate		–	6,461,592	4,488,548
Interest income	8	74,902	165,227	2,512
General and administrative expenses		(260,163)	(299,930)	(445,581)
(Loss)/profit before tax		(185,261)	6,326,889	4,045,479
Income tax	9	–	(36,051)	–
(Loss)/profit for the period/year	10	(185,261)	6,290,838	4,045,479

– 98 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

Statement of financial position

		At 31	At 31	At 31
		December	December	December
		2007	2008	2009
	Notes	RMB	RMB	RMB
		(Audited)	(Audited)	(Audited)
Non-current assets
Property, plant and equipment	14	–	3,953	3,164
Interest in an associate	15	–	34,154,698	36,872,246

		–	34,158,651	36,875,410

Current assets
Other receivables	16	2,159,980	1,018,804	3,048,804
Amount due from an associate	15	–	339,231	339,231
Bank balances and cash	17	27,821,814	986,717	250,335

		29,981,794	2,344,752	3,638,370

Current liabilities
Other payables	18	22,455	22,544	23,493
Amount due to a shareholder	19	144,600	339,231	339,231
Current tax liabilities	9	–	36,051	–

		167,055	397,826	362,724

Net current liabilities		29,814,739	1,946,926	3,275,646

Net assets		29,814,739	36,105,577	40,151,056


EQUITY ATTRIBUTABLE TO
OWNERS OF CENTURY DECAI
Paid-up capital	20	30,000,000	30,000,000	30,000,000
Reserves		(185,261)	6,105,577	10,151,056
Total equity		29,814,739	36,105,577	40,151,056

– 99 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

Statement of changes in equity

Attributable to

	Attributable to	Attributable to
	owners of Century Decai
	Paid-up	Retained
	capital	profits	Total
	RMB	RMB	RMB
	(Note 20)
Paid-up registered capital	30,000,000	–	30,000,000
Loss for the period	–	(185,261)	(185,261)
Balance at 31 December 2007	30,000,000	(185,261)	29,814,739
Profit for the year	–	6,290,838	6,290,838
Balance at 31 December 2008	30,000,000	6,105,577	36,105,577
Profit for the year	–	4,045,479	4,045,479
Balance at 31 December 2009	30,000,000	10,151,056	40,151,056

– 100 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

Statement of cash flows

			Period
			from 25
			April 2007
			(date of
		establishment)		Year	Year
			to 31	ended 31	ended 31
			December	December	December
			2007	2008	2009
	Notes		RMB	RMB	RMB
			(Audited)	(Audited)	(Audited)
OPERATING ACTIVITIES
(Loss)/Profit before tax			(185,261)	6,326,889	4,045,479
Adjustments for:
Share of profit of an associate			–	(6,461,592)	(4,488,548)
Depreciation of property, plant and
equipment			–	197	789
Interest income			(74,902)	(165,227)	(2,512)
Operating cash flows before
movements in working capital			(260,163)	(299,733)	(444,792)
(Increase)/decrease in other
receivables			(2,159,980)	1,141,176	(2,030,000)
Increase in amount due from an
associate			–	(339,231)	–
Increase in other payables			22,455	89	949
Cash (used in)/generated from
operations			(2,397,688)	502,301	(2,473,843)
Income tax paid			–	–	(36,051)
NET CASH (USED IN)/GENERATED
BY OPERATING ACTIVITIES			(2,397,688)	502,301	(2,509,894)
INVESTING ACTIVITIES
Interest received			74,902	165,227	2,512
Acquisition of an associate	15		–	(28,130,606)	–
Acquisition of property, plant and
equipment	14		–	(4,150)	–
Dividends received from an associate			–	437,500	1,771,000

NET CASH GENERATED BY/(USED
IN) INVESTING ACTIVITIES			74,902	(27,532,029)	1,773,512

– 101 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

		Period
		from 25
		April 2007
		(date of
	establishment)		Year	Year
		to 31	ended 31	ended 31
		December	December	December
		2007	2008	2009
	Notes	RMB	RMB	RMB
		(Audited)	(Audited)	(Audited)
FINANCING ACTIVITIES
Proceeds from paid-up registered
capital		30,000,000	–	–
Advances from/(repayment to)
shareholder		144,600	194,631	–

NET CASH GENERATED BY
FINANCING ACTIVITIES		30,144,600	194,631	–

NET INCREASE/(DECREASE) IN
CASH AND CASH EQUIVALENTS		27,821,814	(26,835,097)	(736,382)
CASH AND CASH EQUIVALENTS
AT THE BEGINNING OF THE
PERIOD/YEAR		–	27,821,814	986,717

CASH AND CASH EQUIVALENTS
AT THE END OF THE
PERIOD/YEAR	17	27,821,814	986,717	250,335


ANALYSIS OF THE BALANCES OF
CASH AND CASH EQUIVALENTS
Bank balances and cash		27,821,214	986,717	250,335

– 102 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

Notes to the financial information

1. GENERAL INFORMATION

Century Decai was established in the PRC on 25 April 2007. At 31 December 2009, the directors of Century Decai regard Speedsuper Limited and Exequs, both private limited companies incorporated in the British Virgin Islands, as the ultimate and immediate holding company of Century Decai respectively. The address of the registered office and principal place of business of Century Decai is Room 909, Building No.1, Compound A6, Shuguang Xili, Chaoyang District, Beijing, the PRC.

Century Decai is an investment holding company.

The Financial Information is presented in Renminbi (“RMB”) which is same as the functional currency of Century Decai.

2. APPLICATION OF HKFRSs

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, Century Decai has consistently applied HKFRSs, Hong Kong Accounting Standards (“HKAS(s)”), amendments and interpretations (“INT”) issued by the HKICPA that are effective for annual accounting periods beginning on or after 1 July 2009.

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

HKFRSs (Amendments)	Improvements to HKFRSs issued in 20091	Improvements to HKFRSs issued in 20091
HKAS 24 (Revised)	Related Party Disclosures4
HKAS 32 (Amendments)	Classification of Rights Issues3
HKFRS 1 (Amendments)	Additional Exemptions for First-time	Adopters2
HKFRS 2 (Amendments)	Group Cash-settled Share-based Payment Transactions2
HKFRS 9	Financial Instruments (relating to	the classification	and
	measurement of financial assets)6
HK (IFRIC)-Int 14 (Amendments)	Prepayments of a Minimum Funding	Requirement4
HK (IFRIC)-Int 19	Extinguishing Financial Liabilities with Equity Instruments5

1 Amendments that are effective for annual periods beginning on or after 1 January 2010

2 Effective for annual periods beginning on or after 1 January 2010 3 Effective for annual periods beginning on or after 1 February 2010 4 Effective for annual periods beginning on or after 1 January 2011 5 Effective for annual periods beginning on or after 1 July 2010 6 Effective for annual periods beginning on or after 1 January 2013

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

– 103 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

3. SIGNIFICANT ACCOUNTING POLICIES

Investments in an associate

An associate is an entity over which Century Decai has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in this Financial Information using the equity method of accounting. Under the equity method, investments in associates are initially recognised in the consolidated statement of financial position at cost and adjusted thereafter for the post-acquisition changes in Century Decai’s share of net assets of the associates, less any impairment in the value of individual investments. When Century Decai’s share of losses of an associate exceeds Century Decai’s interest in that associate (which includes any long-term interests that, in substance, form part of Century Decai’s net investment in the associate), Century Decai discontinues recognising its share of further losses. Additional losses are provided only to the extent that Century Decai has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over Century Decai’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is not tested for impairment separately. Instead, the entire carrying amount of the investment is tested for impairment as a single asset. Any impairment loss recognised is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment in the associate. Any reversal of impairment loss is recognised to the extent that the recoverable amount of the investment subsequently increases.

Any excess of Century Decai’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where an entity transacts with an associate of Century Decai, profits and losses are eliminated to the extent of Century Decai’s interest in the relevant associate.

Revenue recognition

Dividend income is recognised when the shareholder’s right to receive payment has been established.

Property, plant and equipment

Property, plant and equipment are stated in the consolidated statement of financial position at cost less accumulated depreciation and accumulated impairment losses, if any.

– 104 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

Foreign currencies

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise, except for exchange differences arising on a monetary item that forms part of Century Decai’s net investment in a foreign operation, in which case, such exchange differences are recognised in other comprehensive income in the Financial Information and will be reclassified from equity to profit or loss on disposal of the foreign operation. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income, in which cases, the exchange differences are recognised directly in other comprehensive income.

Retirement benefit costs

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

Taxation

Taxation represents the sum of tax currently payable and deferred tax.

Tax currently payable is calculated based on taxable profit for the period. Taxable profit differs from profit as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other periods and that are never taxable or deductible. Century Decai’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted at end of the reporting period.

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

– 105 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

Impairment of tangible and intangible assets other than goodwill

At the end of the reporting period, Century Decai reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. In addition, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is indication that they may be impaired.

Financial instruments

Financial assets

Century Decai’s financial assets comprise those classified as loans and receivables. The accounting policy adopted is set out below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including other receivables, amount due from an associate and bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment.

Impairment of financial assets

Financial assets

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

– 106 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

Financial liabilities and equity

Financial liabilities

Financial liabilities (including other payables and amount due to a shareholder) are subsequently measured at amortised cost using the effective interest method.

Equity instruments

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

Derecognition

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

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

Provisions

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

– 107 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

5. CAPITAL RISK MANAGEMENT

Century Decai manages its capital to ensure that the entities will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. Century Decai’s overall strategy remains unchanged during the Relevant Periods.

The capital structure of Century Decai consists of cash and cash equivalents and equity attributable to owners of Century Decai, comprising issued share capital and reserves.

The management reviews the capital structure regularly. As part of this review, the management considers the cost of capital and the risks associated with each class of capital. Based on recommendations of the management, Century Decai will balance its overall capital structure through the payment of dividends and the increase of registered capital.

6. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

	At	At	At
	31 December	31 December	31 December
	2007	2008	2009
	RMB	RMB	RMB
Financial assets
*Loans and receivables*
Other receivables	2,159,980	1,018,804	3,048,804
Amount due from an associate	–	339,231	339,231
Bank balances and cash	27,821,814	968,717	250,335

	29,981,794	2,344,752	3,638,370


	At	At	At
	31 December	31 December	31 December
	2007	2008	2009
	RMB	RMB	RMB
Financial liabilities
*Financial liabilities at amortised cost*
Other payables	22,455	22,544	23,493
Amount due to a shareholder	144,600	339,231	339,231

	167,055	361,775	362,724

– 108 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

(b) Financial risk management objectives and policies

Century Decai’s major financial instruments include other receivables, bank balances, amount due from an associate, other payables and amount due to a shareholder. 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.

Market risks

Currency risk

Transactional currency exposures arise from transactions conducted by operating units in currencies other than the units’ functional currency. Substantially all Century Decai’s income and operating costs are denominated in the units’ functional currency. Accordingly, the management considers that Century Decai is not exposed to significant currency risk.

Century Decai currently does 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.

Interest rate risk

Century Decai’s cash flow interest rate risk primarily relates to variable-rate bank balances. Century Decai has not used any interest rate swaps in order to mitigate its exposure associated with fluctuations relating to interest cash flows. However, the management monitors interest rate exposure and will consider other necessary actions when significant interest rate exposure is anticipated.

Price risk

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

Credit risks

Century Decai’s maximum exposure to credit risk in the event of the counterparties’ failure to perform their obligations as at the end of reporting period in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated statement of financial position. In order to minimise the credit risk, Century Decai reviews the recoverable amount of each individual debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the management considers that Century Decai’s credit risk is significantly reduced.

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

Liquidity risk

In the management of the liquidity risk, Century Decai monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance Century Decai’s operations and mitigate the effects of fluctuations in cash flows.

– 109 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

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

	On demand
	or less than	Carrying
	1 year	amounts
	RMB	RMB
At 31 December 2007
Non-derivative financial liabilities
Other payables	22,455	22,455
Amount due to a shareholder	144,600	144,600

	167,055	167,055


At 31 December 2008
Non-derivative financial liabilities
Other payables	22,544	22,544
Amount due to a shareholder	339,231	339,231

	361,775	361,775


At 31 December 2009
Non-derivative financial liabilities
Other payables	23,493	23,493
Amount due to a shareholder	339,231	339,231

	362,724	362,724

(c) Fair value of financial instruments

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

The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active markets are determined with reference to quoted market bid and ask prices respectively.
The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models (e.g. discounted cash flow analysis using observable and/or unobservable inputs).

The management considers that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in Financial Information approximate their fair values.

7. SEGMENT INFORMATION

The management reviews the Century Decai’s internal financial reporting and other information and also obtains other relevant external information in order to assess performance and allocate resources and operating segment is identified with reference to these.

The management considers that the business of Century Decai is organised in one operating segment as investment holding. Additional disclosure in relation to segment information is not presented as the management assesses the performance of the only operating segment identified based on the consistent information as disclosed in the financial statements.

– 110 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

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

Save for 35% equity interest in an associate (Note 15), Century Decai has not undertaken any operations since its date of incorporation. Century Decai’s income for the Relevant Periods is mainly derived from the share of profit of its associate. Substantially all the assets and liabilities of Century Decai are located in the PRC.

8. INTEREST INCOME

			Period ended	Year ended	Year ended
			31 December	31 December	31 December
			2007	2008	2009
			RMB	RMB	RMB
			(Audited)	(Audited)	(Audited)
Bank	interest	income	74,902	165,227	2,512

9. INCOME TAX

	Period ended	Year ended	Year ended
	31 December	31 December	31 December
	2007	2008	2009
	RMB	RMB	RMB
	(Audited)	(Audited)	(Audited)
Current income tax
– PRC enterprise income tax	–	36,051	–

Century Decai is subject to PRC Enterprise Income Tax at 25%.

Income tax for the period/year can be reconciled to the (loss)/profit per the statement of comprehensive income as follows:

	Period ended	Year ended	Year ended
	31 December	31 December	31 December
	2007	2008	2009
	RMB	RMB	RMB
	(Audited)	(Audited)	(Audited)
(Loss)/Profit before tax	(185,261)	6,326,889	4,045,479


Tax calculated at statutory income tax rate
of 25%	(46,315)	1,581,722	1,011,370
Expenses not deductible for tax	(46,315)	–
Income not subject to tax	–	(1,545,671)	(1,011,370)
Tax charge	–	36,051	–

No deferred tax assets and liabilities are recognised in the Financial Information as Century Decai did not have material temporary differences arising between the tax bases of assets and liabilities and their carrying amounts at 31 December 2007, 2008 and 2009.

– 111 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

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

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

						Period ended	Year ended	Year ended
						31 December	31 December	31 December
						2007	2008	2009
						RMB	RMB	RMB
						(Audited)	(Audited)	(Audited)
Depreciation	of	property,	plant	and	equipment	–	197	789

11. DIRECTORS’ EMOLUMENTS

During the Relevant Periods, there was no emolument paid or payable to the directors of Century Decai.

During the Relevant Periods, no remuneration was paid by Century Decai to the directors of Century Decai as an inducement to join or upon joining Century Decai or as compensation for loss of office. None of the directors of Century Decai has waived any remuneration during the Relevant Periods.

12. EMPLOYEES’ EMOLUMENTS

	Period ended	Year ended	Year ended
	31 December	31 December	31 December
	2007	2008	2009
	RMB	RMB	RMB
	(Audited)	(Audited)	(Audited)
Salaries and other benefits	–	11,618	57,453
Social security costs	–	1,600	9,600
Retirement benefit schemes contributions	–	1,297	10,962

	–	14,515	78,015

The emoluments were all within RMB Nil to RMB 1,000,000. The emoluments for each of the Relevant Periods were paid to a non-director employee.

13. EARNINGS PER SHARE

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

– 112 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

14. PROPERTY, PLANT AND EQUIPMENT

	Office equipment
	RMB
COST
Additions for the period ended 31 December 2008	4,150
At 31 December 2008 and 2009	4,150

DEPRECIATION
Depreciation charge for the year	197
At 31 December 2008	197

Depreciation charge for the year	789
At 31 December 2009	986

CARRYING AMOUNTS
At 31 December 2009	3,164

At 31 December 2008	3,953

At 31 December 2007	–

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

Office equipment: 15% – 20%

15. INTEREST IN AN ASSOCIATE

Details of Century Decai’s interest in an associate are as follows:

	At	At	At
	31 December	31 December	31 December
	2007	2008	2009
	RMB	RMB	RMB
Cost of investment in an associate
Unlisted	–	28,130,606	28,130,606
Share of post-acquisition profits and
other comprehensive income, net
of dividends received	–	6,024,092	8,741,640

	–	34,154,698	36,872,246

– 113 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

As at 31 December 2009 and 2008, Century Decai had interests in the following associate:

==> picture [401 x 135] intentionally omitted <==

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

|||||||||||
|---|---|---|---|---|---|---|---|---|---|
|Percentage|of|ownership|
|interest|attributable|to|
|Century|Decai|
|Particulars|Place|of|At|31|At|31|
|of|registered|incorporation|December|December|
|Name|of|entity|capital|and|operation|2009|2008|Principal|activities|
|Registered|capital|PRC|35%|35%|Research,|development|
|(transliterated|of|RMB42,647,431|and|production|of|
|as|Beijing|Greatwall|sports|lottery|
|GOT|Information|terminals|and|
|Products|Co.,|Ltd.)|systems|
|(“GOT”)|

----- End of picture text -----

During the year ended 31 December 2008, Century Decai acquired the 35% equity interest in GOT at an aggregate consideration of RMB28,130,606.

The amount due from an associate is unsecured, interest-free and has no fixed terms of repayment.

Summarised financial information in respect of Century Decai’s associate is set out below:

==> picture [436 x 399] intentionally omitted <==

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

||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
|At|31|December|At|31|December|
|2008|2009|
|RMB|RMB|
|Total|assets|170,027,567|146,497,099|
|Total|liabilities|(84,091,581)|(52,796,689)|
|Net|assets|85,935,986|93,700,410|
|Century|Decai’s|share|of|net|assets|of|associate|30,077,595|32,795,143|
|Year|ended|Year|ended|
|31|December|31|December|
|2008|2009|
|RMB|RMB|
|Total|revenue|150,801,630|131,013,033|
|Total|profit|for|the|year|18,461,690|12,824,424|
|Century|Decai’s|share|of|profit|of|an|associate|for|the|year|6,461,592|4,485,548|
|Amount|due|from|an|associate|339,231|339,231|
|16.|OTHER|RECEIVABLES|
|At|At|At|
|31|December|31|December|31|December|
|2007|2008|2009|
|RMB|RMB|RMB|
|Other|receivables|2,159,980|1,018,804|3,048,804|

----- End of picture text -----

None of the above assets is either past due or impaired. The financial assets included in the above balances relate to receivables on which there was no recent history of default.

– 114 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

17. BANK BALANCES AND CASH

At 31 December 2007, 2008 and 2009, the bank balances and cash of RMB27,821,814, RMB986,717 and RMB250,335 respectively were denominated in RMB which is not freely convertible into other currencies.

All bank deposits carry interest at floating rates based on daily bank deposit rates.

18. OTHER PAYABLES

			At		At		At
		31	December	31	December	31	December
			2007		2008		2009
			RMB		RMB		RMB
Other	payables		22,455		22,544		23,493

Other payables are non-interest-bearing.

19. AMOUNT DUE TO A SHAREHOLDER

The amount due is unsecured, interest-free and has no fixed terms of repayment.

20. PAID-UP CAPITAL

					At		At		At
				31	December	31	December	31	December
					2007		2008		2009
					RMB		RMB		RMB
Registered	and	paid-up	capital		30,000,000		30,000,000		30,000,000

Century Decai was established in the PRC on 25 April 2007 with a registered and paid-up capital of RMB30,000,000.

II. SUBSEQUENT EVENTS

Save as disclosed elsewhere in the Financial Information, no other significant event took place subsequent to 31 December 2009.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of Century Decai have been prepared in respect of any period subsequent to 31 December 2009.

Yours faithfully,

HLB Hodgson Impey Cheng

Chartered Accountants Certified Public Accountants

Hong Kong

– 115 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE CENTURY DECAI GROUP

(a) Business review

Century Decai was established in PRC on 25 April 2007 as an investment holding company with its only investment is the 35% equity interest in GOT. Century Decai’s income is mainly related to the share of the profit or loss of its associate GOT.

(b) Financial review, financial position and capital structure

During the Relevant Periods, the respective net asset values as at 31 December 2007, 2008 and 2009 were RMB29,814,739, RMB36,105,577 and RMB40,151,056. The respective share of profit of GOT for the period ended 31 December 2007 and the years ended 31 December 2008 and 2009 were nil, RMB6,461,592 and RMB4,488,548. The loss for the period ended 31 December 2007 was RMB185,261 and the respective profits for the years ended 31 December 2008 and 2009 were RMB6,290,838 and RMB4,045,479.

The respective bank balances as at 31 December 2007, 2008 and 2009 were RMB27,821,814, RMB986,717 and RMB250,335, while the respective current liabilities as at 31 December 2007, 2008 and 2009 were RMB167,055, RMB397,826 and RMB362,724.

During the Relevant Periods, the Century Decai Group funded its operation by its internal resources. There was no change in capital structure during the Relevant Periods. No financial instrument was used for hedging purposes during the Relevant Periods. Save for the acquisition of the 35% equity interest in GOT in 2008, there were no material acquisitions and disposals of subsidiaries and associated companies during the Relevant Periods. There were no contingent liabilities and capital commitment as at 31 December 2007, 2008 and 2009.

(c) Employment and remuneration policy

The Century Decai Group had no employee for the period ended 31 December 2007. During the years ended 31 December 2008 and 2009, the Century Decai Group employed 1 staff. The respective staff cost for the period ended 31 December 2007 and the years ended 31 December 2008 and 2009 were nil, RMB14,515 and RMB78,015. The remuneration policy was reviewed in line with the market conditions, current legislation and the performance of the staff.

(d) Future Plan and Prospects

As the Century Decai Group’s main asset is the 35% equity interest in GOT, the management expected its prospects should be in line with the growing sports lottery sales market as mentioned in the paragraph headed “Reasons for the Acquisition”.

– 116 –

FINANCIAL INFORMATION OF THE CENTURY DECAI GROUP

APPENDIX III

(e) Details of charges on assets

The Century Decai Group had no charges on its assets as at 31 December 2007, 2008 and 2009.

(f) Borrowings and gearing ratio

The Century Decai Group had no borrowings outstanding as at 31 December 2007, 2008 and 2009.

(g) Foreign exchange exposure

Since the operations of the Century Decai Group are in the PRC and most of the transactions, monetary assets and liabilities are denominated in RMB, the Century Decai Group’s exposure to foreign currency risk is minimal.

– 117 –

FINANCIAL INFORMATION OF GOT

APPENDIX IV

1. ACCOUNTANTS’ REPORT ON GOT

==> picture [230 x 84] intentionally omitted <==

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

26 April 2010

The Board of Directors

AGTech Holdings Limited Unit 3912, 39/F Shell Tower, Times Square Causeway Bay Hong Kong

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding (transliterated as Beijing Greatwall GOT Information Products Co., Ltd.) (“GOT”), including the statement of financial position as at 31 December 2007, 2008 and 2009, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the years ended 31 December 2007, 2008 and 2009 (the “Relevant Periods”), for inclusion in the circular dated 26 April 2010 (the “Circular”) issued by AGTech Holdings Limited (the “Company”) in connection with the major transaction in respect of the proposed acquisition (the “Acquisition”) by FAIRMAX ENTERPRISES LIMITED (the “Purchaser”), an indirect wholly-owned subsidiary of the Company, of 50,000 issued shares of US$1.00 each in the share capital of Exequs Co. Ltd. (“Exequs”) from SPEEDSUPER LIMITED (the “Vendor”).

GOT was established in the People’s Republic of China (“PRC”) on 8 August 1994. The principal activities of GOT are research, development and production of sports lottery terminals and systems. The registered office address of GOT is 11th Floor, Building No. 1 Jia, No. 66 Zhong Guan Cun East Road, Haidian District, Beijing, the PRC, and its principal place of business is 12th Floor, Building No. 1 Jia, No. 66 Zhong Guan Cun East Road, Haidian District, Beijing, the PRC. As at the date of this report, GOT is owned as to 35% by (transliterated as Beijing Century Decai Technology Co., Ltd.) (“Century Decai”) and 65% by China Electronics Corporation.

– 118 –

FINANCIAL INFORMATION OF GOT

APPENDIX IV

The financial statements of GOT for the years ended 31 December 2007, 2008 and 2009 were prepared in accordance with the relevant accounting principles and financial regulations applicable to enterprises established in the PRC. The financial statements of GOT for the year ended 31 December 2007 were audited by (Huayin Certified Public Accountants Ltd.), certified public accountants registered in the PRC. The financial statements of GOT for the years ended 31 December 2008 and 2009 were audited by (China Audit Asia Pacific Certified Public Accountants Co., Ltd.), certified public accountants registered in the PRC.

For the purpose of this report, the directors of GOT have prepared management accounts of GOT for the Relevant Periods in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) (the “Underlying Financial Statements”). We have, for the purpose of this report, carried out appropriate audit procedures in respect of the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

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

The Underlying Financial Statements are the responsibility of the directors of GOT who approved their issue. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information together with the notes thereon gives, for the purpose of this report, a true and fair view of the state of affairs of GOT as at 31 December 2007, 2008 and 2009 and of the results and cash flows of GOT for the Relevant Periods.

– 119 –

FINANCIAL INFORMATION OF GOT

APPENDIX IV

I. FINANCIAL INFORMATION

Statement of comprehensive income

		2007	2008	2009
	Notes	RMB	RMB	RMB
		(Audited)	(Audited)	(Audited)
Revenue	7	111,123,298	150,801,630	131,013,033
Cost of sales		(76,422,422)	(107,952,005)	(94,672,927)
Gross Profit		34,700,876	42,849,625	36,340,106
Other income	8	284,498	189,544	992,534
Selling and distribution
expenses		(6,617,496)	(8,282,101)	(8,231,463)
Administrative expenses		(9,149,316)	(11,846,002)	(12,285,587)
Other operating expenses		(14,096)	(496,912)	(185,176)
Finance costs	9	(175,500)	(664,603)	(1,520,575)
Profit before tax		19,028,966	21,749,551	15,109,839
Income tax	10	(2,654,375)	(3,287,861)	(2,285,415)
Profit for the year	11	16,374,591	18,461,690	12,824,424

– 120 –

FINANCIAL INFORMATION OF GOT

APPENDIX IV

Statement of financial position

		2007	2008	2009
	Notes	RMB	RMB	RMB
		(Audited)	(Audited)	(Audited)
Non-current assets
Property, plant and equipment	15	15,944,677	15,734,075	15,088,497
Deferred tax assets	19	630,267	1,951,978	1,933,039

		16,574,944	17,686,053	17,021,536

Current assets
Inventories	16	52,108,266	93,546,817	56,387,027
Trade receivables	17	5,756,773	23,759,644	34,489,244
Other receivables, deposits
and prepayments	18	2,083,908	4,176,126	3,649,452
Current tax assets		–	351,101	–
Bank balances and cash	20	23,927,207	30,507,826	34,949,840

		83,876,154	152,341,514	129,475,563

Current liabilities
Trade payables	21	14,195,727	24,605,881	14,922,563
Other payables and accruals	22	10,511,672	6,808,620	5,838,395
Borrowings	23	–	21,000,000	10,000,000
Current tax liabilities		1,494,682	–	518,504

		26,202,081	52,414,501	31,279,462

Net current assets		57,674,073	99,927,013	98,196,101

Total assets less current
liabilities		74,249,017	117,613,066	115,217,637

Non-current liabilities
Borrowings	23	–	20,000,000	10,000,000
Provision for warranties	24	3,274,721	11,677,080	11,517,227

		3,274,721	31,677,080	21,517,227

Net assets		70,974,296	85,935,986	93,700,410


EQUITY ATTRIBUTABLE
TO OWNERS OF GOT
Paid-up capital	25	42,647,431	42,647,431	42,647,431
Reserves		28,326,865	43,288,555	51,052,979

Total equity		70,974,296	85,935,986	93,700,410

– 121 –

FINANCIAL INFORMATION OF GOT

APPENDIX IV

Statement of changes in equity

	Attributable to	Attributable to	Attributable to
	owners	of GOT
	Paid-up		Retained
	capital		profits	Total
	RMB		RMB	RMB
	(Note 25)
At 1 January 2007	42,647,431		13,952,274	56,599,705
Profit for the year	–		16,374,591	16,374,591
Payment of dividends (Note 13)	–		(2,000,000)	(2,000,000)
Balance at 31 December 2007	42,647,431		28,326,865	70,974,296

Profit for the year	–		18,461,690	18,461,690
Payment of dividends (Note 13)	–		(3,500,000)	(3,500,000)
Balance at 31 December 2008	42,647,431		43,288,555	85,935,986

Profit for the year	–		12,824,424	12,824,424
Payment of dividends (Note 13)	–		(5,060,000)	(5,060,000)
Balance at 31 December 2009	42,647,431		51,052,979	93,700,410

– 122 –

FINANCIAL INFORMATION OF GOT

APPENDIX IV

Statement of cash flows

		2007	2008	2009
		RMB	RMB	RMB
	Notes	(Audited)	(Audited)	(Audited)
OPERATING ACTIVITIES
Profit before tax	11	19,028,966	21,749,551	15,109,839
Adjustments for:
Interest income		(284,498)	(189,544)	(274,634)
Interest expenses		175,500	664,603	1,520,575
Depreciation of property, plant
and equipment		1,410,161	1,313,315	1,513,439
Loss on disposal of items of
property, plant and equipment		14,095	396,562	85,176
Impairment loss recognised in
respect of trade and other
receivables		232,600	44,193	33,592

Operating cash flows before
movements in working capital		20,576,824	23,978,680	17,987,987
(Increase)/decrease in inventories		(28,913,725)	(41,438,551)	37,159,790
Increase in trade receivables		(4,299,962)	(18,025,619)	(10,763,192)
Decrease/(increase) in other
receivables		5,253,454	(2,113,663)	526,674
Increase/(decrease) in trade
payables		13,025,734	2,720,458	(12,877,279)
(Decrease)/increase in other
payables		(3,578,115)	3,986,644	2,223,736
Increase/(decrease) in provision
for warranties		1,945,161	8,402,359	(159,853)
Cash generated by /(used in)
operations		4,009,371	(22,489,692)	34,097,863
Income tax paid		(1,952,674)	(6,455,355)	(1,396,871)
NET CASH GENERATED
BY/(USED IN) OPERATING
ACTIVITIES		2,056,697	(28,945,047)	32,700,992
INVESTING ACTIVITIES
Acquisition of property, plant and
equipment		(463,065)	(2,034,525)	(1,046,234)
Interest received		284,498	189,544	274,634
Sale proceeds from disposal of
property, plant and equipment		–	535,250	93,197
NET CASH USED IN
INVESTING ACTIVITIES		(178,567)	(1,309,731)	(678,403)

– 123 –

FINANCIAL INFORMATION OF GOT

APPENDIX IV

		2007	2008	2009
		RMB	RMB	RMB
	Notes	(Audited)	(Audited)	(Audited)
FINANCING ACTIVITIES
Dividends paid	13	(2,000,000)	(3,500,000)	(5,060,000)
Proceeds from/(repayment of)
borrowings		–	41,000,000	(21,000,000)
Interest paid		(175,500)	(664,603)	(1,520,575)
NET CASH (USED IN)/
GENERATED BY
FINANCING ACTIVITIES		(2,175,500)	36,835,397	(27,580,575)
NET (DECREASE)/INCREASE
IN CASH AND CASH
EQUIVALENTS		(297,370)	6,580,619	4,442,014
CASH AND CASH
EQUIVALENTS AT THE
BEGINNING OF THE YEAR		24,224,577	23,927,207	30,507,826

CASH AND CASH
EQUIVALENTS AT THE END
OF THE YEAR		23,927,207	30,507,826	34,949,840


ANALYSIS OF THE
BALANCES OF CASH AND
CASH EQUIVALENTS
Bank balances and cash		23,927,207	30,507,826	34,949,840

– 124 –

FINANCIAL INFORMATION OF GOT

APPENDIX IV

Notes to the Financial Information

1. GENERAL INFORMATION

GOT was established in the PRC on 8 August 1994. The directors of GOT regard China Electronics Corporation, an enterprise established in the PRC, as the holding company of GOT. The registered office address of GOT is 11th Floor, Building No. 1 Jia, No. 66 Zhong Guan Cun East Road, Haidian District, Beijing, the PRC, and its principal place of business is 12th Floor, Building No. 1 Jia, No. 66 Zhong Guan Cun East Road, Haidian District, Beijing, the PRC.

The principle activities of GOT are research, development and production of sports lottery terminals and systems.

The Financial Information is presented in Renminbi (“RMB”) which is same as the functional currency of

GOT.

2. APPLICATION OF HKFRSs

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, GOT has consistently applied HKFRSs, Hong Kong Accounting Standards (“HKAS(s)”), amendments and interpretations (“INT”) issued by the HKICPA that are effective for annual accounting periods beginning on or after 1 July 2009.

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

HKFRSs (Amendments)	Improvements to HKFRSs issued in 20091	Improvements to HKFRSs issued in 20091
HKAS 24 (Revised)	Related Party Disclosures4
HKAS 32 (Amendments)	Classification of Rights Issues3
HKFRS 1 (Amendments)	Additional Exemptions for First-time	Adopters2
HKFRS 2 (Amendments)	Group Cash-settled Share-based Payment Transactions2
HKFRS 9	Financial Instruments (relating to	the classification	and
	measurement of financial assets)6
HK (IFRIC)-Int 14 (Amendments)	Prepayments of a Minimum Funding	Requirement4
HK (IFRIC)-Int 19	Extinguishing Financial Liabilities with Equity Instruments5

1 Amendments that are effective for annual periods beginning on or after 1 January 2010
2 Effective for annual periods beginning on or after 1 January 2010
3 Effective for annual periods beginning on or after 1 February 2010
4 Effective for annual periods beginning on or after 1 January 2011
5 Effective for annual periods beginning on or after 1 July 2010 6 Effective for annual periods beginning on or after 1 January 2013

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

– 125 –

FINANCIAL INFORMATION OF GOT

APPENDIX IV

3. SIGNIFICANT ACCOUNTING POLICIES

Revenue recognition

Revenue from the supply of sports lottery sales terminals and systems is recognised when the sports lottery sales terminals and systems are supplied to the customers.

Property, plant and equipment

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

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

Leasing

GOT as lessee

Leasehold land for own use

Foreign currencies

In preparing the financial statements of GOT, transactions in currencies other than the functional currency of GOT (foreign currencies) are recorded in its functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the exchange rates prevailing on the dates of the

– 126 –

FINANCIAL INFORMATION OF GOT

APPENDIX IV

transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise, except for exchange differences arising on a monetary item that forms part of GOT’s net investment in a foreign operation, in which case, such exchange differences are recognised in other comprehensive income in the Financial Information and will be reclassified from equity to profit or loss on disposal of the foreign operation. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income, in which cases, the exchange differences are recognised directly in other comprehensive income.

Retirement benefit costs

Payments to defined contribution retirement benefit schemes (State-managed retirement benefit schemes) are charged as expenses when employees have rendered services entitling them to the contributions.

Taxation

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

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

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

Intangible assets

Research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

the technical feasibility of completing the intangible asset so that it will be available for use or sale;

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APPENDIX IV

the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.

Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, GOT reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. In addition, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is indication that they may be impaired.

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

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method.

Financial instruments

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

Financial assets

GOT’s financial assets comprise those classified as loans and receivables. The accounting policy adopted is set out below.

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Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including trade receivables, other receivable and bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment.

Impairment of financial assets

Financial assets

Financial liabilities and equity

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

An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its liabilities. The accounting policies adopted in respect of financial liabilities and equity instruments are set out below.

Financial liabilities

Financial liabilities (including trade payables, and other payables, and borrowings) are subsequently measured at amortised cost using the effective interest method.

Equity instruments

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

Derecognition

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

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

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

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APPENDIX IV

Provisions

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

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

5. CAPITAL RISK MANAGEMENT

GOT manages its capital to ensure that the entity will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. GOT’s overall strategy remains unchanged from prior period.

The capital structure of GOT consists of cash and cash equivalents and equity attributable to owners of GOT, comprising issued share capital and reserves.

The management reviews the capital structure regularly. As part of this review, the management considers the cost of capital and the risks associated with each class of capital. Based on recommendations of the directors, GOT will balance its overall capital structure through the payment of dividends, new share issues and share buybacks as well as the issue of new debt.

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APPENDIX IV

6. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

	2007	2008	2009
	RMB	RMB	RMB
Financial assets
Loans and receivables
Trade receivables	5,756,773	23,759,644	34,489,244
Financial assets included in other
receivables, deposits and prepayments	430,000	1,514,320	2,729,500
Bank balances and cash	23,927,207	30,507,826	34,949,840

	30,113,980	55,781,790	72,168,584


Financial liabilities
Financial liabilities at amortised cost
Trade payables	14,195,727	24,605,881	14,922,563
Financial liabilities included in other
payables and accruals	2,821,976	3,614,659	5,280,004
Borrowings	–	41,000,000	20,000,000
	17,017,703	69,220,540	40,202,567

(b) Financial risk management objectives and policies

GOT’s major financial instruments include trade receivables, other receivables, bank balances and cash, trade payables, other payables, and 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.

Market risks

Currency risk

Transactional currency exposures arise from revenue or cost of sales in currencies other than the GOT’s functional currency. Substantially all GOT’s transactions are denominated in the functional currency of GOT. Accordingly, the directors consider that GOT is not exposed to significant currency risk.

GOT currently does 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.

Interest rate risk

GOT’s fair value interest rate risk primarily relates to fixed-rate borrowings, further details of these borrowings are set out in Note 23 to the Financial Information. GOT’s cash flow interest rate risk primarily relates to variable-rate bank balances. GOT has not used any interest rate swaps in order to mitigate its exposure associated with fluctuations relating to interest cash flows. However, the management monitors interest rate exposure and will consider other necessary actions when significant interest rate exposure is anticipated.

Price risk

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

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APPENDIX IV

Credit risk

GOT’s maximum exposure to credit risk in the event of the counterparties’ failure to perform their obligations as at the end of reporting period in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the statement of financial position. In order to minimise the credit risk, GOT has monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, GOT reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors consider that GOT’s credit risk is significantly reduced.

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

GOT has certain concentrations of credit risk as 93%, 95% and 83% of GOT’s trade receivables at 31 December 2007, 2008 and 2009 respectively were due from five largest customers, respectively.

Further quantitative data in respect of GOT’s exposure to credit risk arising from trade receivables are disclosed in Note 17.

Liquidity risk

In the management of the liquidity risk, GOT monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance GOT’s operations and mitigate the effects of fluctuations in cash flows.

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

	On demand	More than 1	Total
	or within 1	year but less	undiscounted	Carrying
	year	than 5 years	cash flows	amounts
	RMB	RMB	RMB	RMB
At 31 December 2009
Non-derivative financial
liabilities
Trade payables	14,895,713	26,850	14,922,563	14,922,563
Other payables	2,821,976	–	2,821,976	2,821,976
Borrowings	10,332,877	10,872,877	21,205,754	20,000,000


At 31 December 2008
Non-derivative financial
liabilities
Trade payables	24,579,031	26,850	24,605,881	24,605,881
Other payables	3,614,659	–	3,614,659	3,614,659
Borrowings	21,418,094	22,285,753	43,703,847	41,000,000


At 31 December 2007
Non-derivative financial
liabilities
Trade payables	14,167,978	27,749	14,195,727	14,195,727
Other payables	5,280,004	–	5,280,004	5,280,004

(c) Fair value of financial instruments

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

The fair values of financial assets and financial liabilities with standard terms and conditions and traded in active markets are determined with reference to quoted market bid and ask prices respectively.
The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models (e.g. discounted cash flow analysis using observable and/or unobservable inputs).

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APPENDIX IV

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

7. SEGMENT INFORMATION

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

The directors consider that the business of GOT is organised in one operating segment as research, development and production of sports lottery terminals and systems in the PRC. Additional disclosure in relation to segment information is not presented as the directors assess the performance of the only operating segment identified based on the consistent information as disclosed in the financial statements.

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

Details of interest income, depreciation and amortisation in relation to the operating segment are disclosed in Notes 8 and 11 below respectively.

GOT is established in the PRC with its major operations in the PRC. Total turnover and revenue represented the revenue from external customers arising from the supply of sports lottery terminals and systems in the PRC. Substantially all the assets and liabilities of GOT are located in the PRC.

8. OTHER INCOME

		2007	2008	2009
		RMB	RMB	RMB
		(Audited)	(Audited)	(Audited)
	Bank interest income	284,498	189,544	274,634
	Sundry income	–	–	717,900
		284,498	189,544	992,534


9.	FINANCE COSTS
		2007	2008	2009
		RMB	RMB	RMB
		(Audited)	(Audited)	(Audited)
	Interest on borrowings
	wholly repayable within 5 years	175,500	664,603	1,520,575


10.	INCOME TAX
		2007	2008	2009
		RMB	RMB	RMB
		(Audited)	(Audited)	(Audited)
	Current income tax
	– PRC enterprise income tax	3,284,642	4,609.572	2,266,476
	Deferred tax (Note 19)
	– Current year	(630,267)	(1,321,711)	18,939
		2,654,375	3,287,861	2,285,415

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APPENDIX IV

GOT is subject to PRC Enterprise Income Tax at 15%.

Income tax for the year can be reconciled to the profit per the statement of comprehensive income as follows:

	2007	2008	2009
	RMB	RMB	RMB
	(Audited)	(Audited)	(Audited)
Profit before tax	19,028,966	21,749,551	15,109,839


Tax calculated at statutory income tax rate
of 15%	2,854,345	3,262,433	2,266,476
Expenses not deductible for tax	487,663	1,357,245	–
(Reversal)/recognition of temporary differences	(630,267)	(1,321,711)	18,939
Others	(57,366)	(10,106)	–

Tax charge	2,654,375	3,287,861	2,285,415

11. PROFIT FOR THE YEAR

Profit for the year has been arrived at after charging:

	2007	2008	2009
	RMB	RMB	RMB
	(Audited)	(Audited)	(Audited)
Auditors’ remuneration	26,300	31,200	35,000
Depreciation of property, plant and equipment	1,410,161	1,313,315	1,513,439
Net losses on disposal of property, plant and
equipment	14,095	396,562	85,176
Operating lease rentals in respect of rented
premises	245,959	477,175	372,075
Research and development cost expensed as
incurred	623,808	434,404	1,538,303
Impairment loss recognised in respect of trade
and other receivables	232,600	44,193	33,592


Employee benefit expenses, including directors’
remunerations (Note 12):
Fees, salaries, discretionary bonuses and other
benefits	6,517,488	9,717,153	8,052,691
Social security costs	988,836	1,281,965	1,112,532
Retirement benefit scheme contributions	612,033	731,176	670,961

	8,118,357	11,730,294	9,836,184

12. DIRECTORS’ EMOLUMENTS

During the Relevant Periods, there was no emoluments paid or payable to the directors of GOT.

During the Relevant Periods, no emoluments were paid by GOT to any of the directors as an inducement to join or upon joining GOT or as compensation for loss of office. None of directors has waived any emoluments during the Relevant Periods.

13. DIVIDENDS

GOT distributed dividends of RMB2,000,000, RMB3,500,000 and RMB5,060,000 for the Relevant Periods, respectively.

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APPENDIX IV

14. EARNINGS PER SHARE

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

15. PROPERTY, PLANT AND EQUIPMENT

		Plant,
		machinery
		and	Motor	Leasehold
	Buildings	equipment	vehicles	improvements	Total
	RMB	RMB	RMB	RMB	RMB
COST
At 1 January 2007	13,701,874	4,274,213	937,276	293,139	19,206,502
Additions	–	463,065	–	–	463,065
Disposals	–	(266,875)	–	–	(266,875)
At 31 December 2007	13,701,874	4,470,403	937,276	293,139	19,402,692
Additions	–	1,662,209	372,316	–	2,034,525
Disposals	–	(1,568,645)	(811,435)	–	(2,380,080)
At 31 December 2008	13,701,874	4,563,967	498,157	293,139	19,057,137
Additions	–	1,046,234	–	–	1,046,234
Disposals	–	(497,125)	(125,841)	–	(622,966)
At 31 December 2009	13,701,874	5,113,076	372,316	293,139	19,480,405


DEPRECIATION
At 1 January 2007	154,146	1,702,045	187,870	256,573	2,300,634
Depreciation expense	616,584	588,756	168,255	36,566	1,410,161
Eliminated on disposals
of assets	–	(252,780)	–	–	(252,780)

At 31 December 2007	770,730	2,038,021	356,125	293,139	3,458,015
Depreciation expense	616,584	574,191	122,540	–	1,313,315
Eliminated on disposals
of assets	–	(1,119,292)	(328,976)	–	(1,448,268)

At 31 December 2008	1,387,314	1,492,920	149,689	293,139	3,323,062
Depreciation expense	616,584	797,419	99,436	–	1,513,439
Eliminated on disposals
of assets	–	(350,212)	(94,381)	–	(444,593)

At 31 December 2009	2,003,898	1,940,127	154,744	293,139	4,391,908


CARRYING AMOUNTS
At 31 December 2007	12,931,144	2,432,382	581,151	–	15,944,677


At 31 December 2008	12,314,560	3,071,047	348,468	–	15,734,075


At 31 December 2009	11,697,976	3,172,949	217,572	–	15,088,497

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FINANCIAL INFORMATION OF GOT

APPENDIX IV

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

Buildings:	5%
Plant, machinery and equipment:	20%
Motor vehicles:	25%
Leasehold improvements:	12.5%

16. INVENTORIES

		2007	2008	2009
		RMB	RMB	RMB
		(Audited)	(Audited)	(Audited)
	Raw materials	26,822,733	39,934,577	13,777,557
	Work-in-progress	–	22,594	1,596,240
	Finished goods	25,285,533	53,589,646	41,013,230
		52,108,266	93,546,817	56,387,027


17.	TRADE RECEIVABLES
		2007	2008	2009
		RMB	RMB	RMB
		(Audited)	(Audited)	(Audited)
	Trade receivables	6,981,149	25,006,768	35,769,960
	Less: Allowance for doubtful debts	(1,224,376)	(1,247,124)	(1,280,716)

		5,756,773	23,759,644	34,489,244

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

	2007	2008	2009
	RMB	RMB	RMB
Within 1 year	5,690,628	22,426,844	27,408,100
Over 1 year but less than 2 years	55,376	1,310,052	6,159,670
Over 2 years but less than 3 years	–	22,748	921,474
Over 3 years	10,769	–	–
	5,756,773	23,759,644	34,489,244

The credit terms granted to customers are varied and are generally the result of negotiations between individual customers and GOT. No interest is charged on trade receivables.

At 31 December 2007, 2008 and 2009, approximately 1%, 1% and 3% of the trade receivables are past due but not impaired respectively. Of the trade receivables balance at 31 December 2007, 2008 and 2009, RMB5,382,419, RMB22,658,825 and RMB29,432,350 are due from GOT’s largest customer.

Receivables that were past due but not impaired relate to certain independent customers that have a good track record with GOT. Based on past experience, the directors are of the opinion that no provision for impairment is necessary in respect of these balances as there has not been a significant change in the credit quality and the balances are still considered fully recoverable. GOT does not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by GOT to the counterparty.

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APPENDIX IV

FINANCIAL INFORMATION OF GOT

Ageing of past due but not impaired

		2007	2008	2009
		RMB	RMB	RMB
	Within 1 year past due	–	22,748	921,474
	Over 1 year but less than 2 years past due	–	–	–
	Over 2 years but less than 3 years past due	10,769	–	–
		10,769	22,748	921,474


	Movement in the allowance for doubtful debts
		2007	2008	2009
		RMB	RMB	RMB
		(Audited)	(Audited)	(Audited)
	Balances at beginning of the year	991,776	1,224,376	1,247,124
	Impairment losses recognised on receivables	232,600	22,748	33,592
	Balances at end of the year	1,224,376	1,247,124	1,280,716


18.	OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS
		2007	2008	2009
		RMB	RMB	RMB
		(Audited)	(Audited)	(Audited)
	Deposits paid	1,186,090	2,400,900	344,200
	Prepayments	467,818	260,906	575,752
	Others receivables	430,000	1,514,320	2,729,500

		2,083,908	4,176,126	3,649,452

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APPENDIX IV

19. DEFERRED TAXATION

The following are the deferred tax assets in respect of the provision of impairment loss on receivables and their movements thereon during the Relevant Periods:

	RMB
	(Audited)
At 1 January 2007	–
Credit to profit or loss (Note 10)	630,267
At 31 December 2007	630,267
Credit to profit or loss (Note 10)	1,321,711
At 31 December 2008	1,951,978
Charge to profit or loss (Note 10)	(18,939)
At 31 December 2009	1,933,309

20. BANK BALANCES AND CASH

At 31 December 2007, 2008 and 2009, the bank balances and cash of RMB23,927,207, RMB30,507,826 and RMB34,949,840 respectively were denominated in RMB which is not freely convertible into other currencies.

All bank deposits carry interest at floating rates based on daily bank deposit rates.

21. TRADE PAYABLES

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

	2007	2008	2009
	RMB	RMB	RMB
	(Audited)	(Audited)	(Audited)
Within 1 year	14,167,978	24,579,031	14,895,713
Over 1 year but less than 3 years	27,749	26,850	26,850
	14,195,727	24,605,881	14,922,563

22. OTHER PAYABLES AND ACCRUALS

	2007	2008	2009
	RMB	RMB	RMB
	(Audited)	(Audited)	(Audited)
Deposits received from customers	7,689,696	3,193,361	558,391
Accrued charges	2,142,758	2,772,049	2,352,018
Other payables	679,218	842,610	2,927,986
	10,511,672	6,808,620	5,838,395

Other payables are non-interest-bearing.

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FINANCIAL INFORMATION OF GOT

APPENDIX IV

23. BORROWINGS

	2007	2008	2009
	RMB	RMB	RMB
	(Audited)	(Audited)	(Audited)
Secured term loan	–	11,000,000	–
Unsecured term loan	–	30,000,000	20,000,000

	–	41,000,000	20,000,000

Carrying amount repayable:
On demand or within one year	–	21,000,000	10,000,000
More than one year, but not exceeding two years	–	10,000,000	10,000,000
More than two years, but not exceeding
five years	–	10,000,000	–
	–	41,000,000	20,000,000

The above borrowings were provided by a finance company, which is controlled by China Electronics Corporation, the holding company of GOT. The secured term loan was secured by the pledge of properties held by GOT (Note 15). The respective weighted average effective interest rate on the borrowings for the year ended 2007, 2008 and 2009 is 5.85 %, 6.53% and 5.80% per annum.

24. PROVISION FOR WARRANTIES

	RMB
	(Audited)
At 1 January 2007	1,329,560
Addition provision recognised	3,357,234
Reduction arising from payments	(1,412,073)
At 31 December 2007	3,274,721
Addition provision recognised	10,332,122
Reduction arising from payments	(1,929,763)
At 31 December 2008	11,677,080
Addition provision recognised	8,662,488
Reduction arising from payments	(8,822,341)
At 31 December 2009	11,517,227

GOT provides warranties to its customers on certain of its products, under which faulty products are repaired or replaced. The amount of the provision for the warranties is estimated based on sales volumes and past experience of the level of repairs and returns. The estimation basis is reviewed on an ongoing basis and revised where appropriate.

25. PAID-UP CAPITAL

				2007	2008	2009
				RMB	RMB	RMB
				(Audited)	(Audited)	(Audited)
Registered	and	paid-up	capital	42,647,431	42,647,431	42,647,431

– 139 –

FINANCIAL INFORMATION OF GOT

APPENDIX IV

26. RETIREMENT BENEFIT SCHEME

GOT participates in employee social security plans as required by the regulations in the PRC. The employees are members of social security schemes operated by the relevant local government authorities. The pension plans are funded by payments from employees and by GOT. The amounts charged to the statement of comprehensive income represent contributions payable by GOT at the specified rates according to the respective plans. The only obligation of GOT in respect of the retirement benefit schemes is to make the specified contributions.

II. SUBSEQUENT EVENTS

Save as disclosed elsewhere in the Financial Information, no other significant event took place subsequent to 31 December 2009.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of GOT have been prepared in respect of any period subsequent to 31 December 2009.

Yours faithfully, HLB Hodgson Impey Cheng Chartered Accountants Certified Public Accountants Hong Kong

– 140 –

FINANCIAL INFORMATION OF GOT

APPENDIX IV

2. MANAGEMENT DISCUSSION AND ANALYSIS OF GOT

(a) Business review

GOT was established in the PRC on 8 August 1994 with registered and paid-up capital of RMB42,647,400. During the Relevant Periods, GOT was mainly engaged in research, development and production of sports lottery terminals and systems. GOT was one of the largest players in the PRC sports lottery terminals market with average market share of over 40% during the Relevant Periods.

(b) Financial review, financial position and capital structure

During the Relevant Periods, the respective net asset values were RMB70,974,296, RMB85,935,986 and RMB93,700,410. The respective revenues for the Relevant Periods were RMB111,123,298, RMB150,801,630 and RMB131,013,033, while the respective net profit after tax for the Relevant Periods were RMB16,374,591, RMB18,461,690 and RMB12,824,424. Due to the implementation of PRC government policy in 2008 requiring lottery shops to upgrade and/or replace their old lottery terminals, the demand for lottery terminals increased which boosted the revenue of GOT during that year. In light of this, GOT had an outstanding financial performance in 2008.

As at 31 December 2007, 2008 and 2009, the respective bank balances were RMB23,927,207, RMB30,507,826 and RMB34,949,840. While, the respective net current assets were RMB57,674,073, RMB99,927,013 and RMB98,196,101.

During the Relevant Periods, GOT funded its operation by its internal resources and borrowings from a finance company controlled by China Electronics Corporation (“CEC”). The above interest-bearing borrowings were secured by the properties held by GOT. No financial instrument was used for hedging purposes during the Relevant Periods. There were no material acquisitions and disposals of subsidiaries and associated companies during the Relevant Periods. Save for the provision for warranties to customers on product repair and replacement, GOT had no contingent liabilities and capital commitment as at 31 December 2007, 2008 and 2009.

(c) Employment and remuneration policy

As at 31 December 2007, 2008 and 2009, the total number of employees of GOT were 117, 134 and 96 respectively. The respective staff costs for the Relevant Periods were RMB8,118,357, RMB11,730,294 and RMB9,836,184. The remuneration policy was reviewed in line with the market conditions, current legislation and the performance of the individual staff.

– 141 –

FINANCIAL INFORMATION OF GOT

APPENDIX IV

(d) Future Plan and Prospects

GOT is an established key industry player with cutting-edge technologies. Leveraging on its continuous robust investment in research and development together with strong support from its controlling shareholder CEC, the management expected that GOT will continue to develop new technologies for the sports lottery industry in the PRC so as to capture those market opportunities as mentioned in the paragraph headed “Reasons for the Acquisition” in the letter from the Board.

(e) Details of charges on assets

The carrying amounts of pledged properties for the borrowings from a finance company controlled by CEC were nil as at 31 December 2007, RMB12,314,560 as at 31 December 2008 and RMB11,697,976 as at 31 December 2009.

(f) Borrowings and gearing ratio

As at 31 December 2007, 2008 and 2009, the total borrowings outstanding were nil, RMB41,000,000 and RMB20,000,000. The gearing ratios (based on total borrowings over total equity) were approximately nil, 48% and 21% respectively.

(g) Foreign exchange exposure

Since the operations of GOT are in the PRC and most of the transactions, monetary assets and liabilities are denominated in RMB, GOT’s exposure to foreign currency risk is minimal.

– 142 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The accompanying unaudited pro forma consolidated statement of financial position of the Enlarged Group (the “Pro Forma Financial Information”) has been prepared by the Directors to illustrate the effect of the proposed Acquisition.

The Pro Forma Financial Information has been prepared as if the proposed Acquisition had been completed on 31 December 2009 and is based on (i) the audited consolidated statement of financial position of the Group as at 31 December 2009 as set out in Appendix I to this circular; and (ii) the audited consolidated statement of financial position of the Exequs Group as at 31 December 2009 as set out in Appendix II to this circular, after making pro forma adjustments that are (i) directly attributable to the proposed Acquisition and not relating to future events or decisions; and (ii) factually supportable.

The Pro Forma Financial Information has been prepared for illustrative purposes only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, it may not give a true picture of the financial position of the Enlarged Group as at 31 December 2009 or any future date.

		The Exequs
	The Group as	Group as at
	at 31 December	31 December	Pro forma	Pro forma	Pro forma	Pro forma
	2009	2009	adjustment	adjustment	adjustment	Enlarged Group
	HK$	HK$	HK$	HK$	HK$	HK$
	(Audited)	(Audited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	(Note 1)	(Note 2)	(Note 3)	(Note 4)	(Note 5)
Non-current assets
Property, plant and equipment	21,665,730	3,592				21,669,322
Goodwill	663,365,373	–	42,357,712		(42,357,712)	663,365,373
Other intangible assets	100,391,297	–				100,391,297
Investment in an associate	–	42,107,001				42,107,001
Deposits and prepayments	41,283,167	–				41,283,167
Other assets	1,615,392	–				1,615,392

	828,320,929	42,110,593				870,431,552

– 143 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

		The Exequs
	The Group as	Group as at
	at 31 December	31 December	Pro forma	Pro forma	Pro forma	Pro forma
	2009	2009	adjustment	adjustment	adjustment	Enlarged Group
	HK$	HK$	HK$	HK$	HK$	HK$
	(Audited)	(Audited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	(Note 1)	(Note 2)	(Note 3)	(Note 4)	(Note 5)
Current assets
Trade receivables	17,452,520	–				17,452,520
Other receivables, deposits and
prepayments	48,714,279	3,462,661				52,176,940
Amount due from an associate	–	385,279				385,279
Bank balances and cash	141,520,650	347,098	(28,000,000)			112,864,748
			(1,003,000)

	207,687,449	4,195,038				182,879,487

Current liabilities
Other payables, accruals and
deposits received	6,157,466	95,916				6,253,382
Amount due to a shareholder	–	9,997,779		(9,997,779)		–
Current tax liabilities	290,489	–				290,489

	6,447,955	10,093,695				6,543,871

Net current assets/(liabilities)	201,239,494	(5,898,657)				176,335,616

Total assets less current
liabilities	1,029,560,453	36,211,936				1,046,767,168

Non-current liabilities
Deferred tax liabilities	24,018,011	–				24,018,011

Net assets	1,005,542,442	36,211,936				1,022,749,157


Capital and reserves
Share capital	7,163,670	387,500	115,788		(387,500)	7,279,458
Reserves	995,318,893	35,824,436	14,241,924	9,997,779	(45,822,215)	1,012,409,820
			(1,003,000)		3,852,003

Equity attributable to owners
of the Company	1,002,482,563	36,211,936				1,019,689,278
Non-controlling interests	3,059,879	–				3,059,879

Total equity	1,005,542,442	36,211,936				1,022,749,157

– 144 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

Notes to the Pro Forma Financial Information:

The balances have been extracted from the audited consolidated statement of financial position of the Group as at 31 December 2009 as shown in the published annual report of the Company for the period ended 31 December 2009 as set out in Appendix I to this circular.
The adjustment reflects the inclusion of the assets, liabilities and equity of the Exequs Group as if the proposed Acquisition had been completed on 31 December 2009. The balances have been extracted from the audited consolidated statement of financial position of the Exequs Group as at 31 December 2009 as set out in Appendix II to this circular.
The adjustments reflect (i) the estimated fair value of the total consideration for the proposed Acquisition of HK$42,357,712, comprising fair value of cash consideration of HK$28,000,000 and estimated fair value of the Consideration Shares of HK$14,357,712 (based on the issue of 57,894,000 Consideration Shares by the Company to the Vendor valued at the published closing price of HK$0.248 each on 31 December 2009); and (ii) the payment of the estimated costs directly attributable to the proposed Acquisition of approximately HK$1,003,000 by the Group from its internal resources, as if the proposed Acquisition had been completed on 31 December 2009.

Since the actual dates of settlement of the total consideration for the proposed Acquisition and the estimated costs directly attributable to the proposed Acquisition would be different from the assumptions used in the preparation of the Pro Forma Financial Information, the actual financial position arising from the proposed Acquisition might be materially different from the financial position as shown in this Appendix.

Pursuant to the Agreement, the Vendor agreed that the obligation on the part of the Exequs Group to repay the Shareholder’s Loan shall be waived entirely and neither the Purchaser nor the Exequs Group shall have any liability relating to the Shareholder’s Loan with effective from the Completion Date. The adjustment reflects the waiver of the Shareholder’s Loan due and owing to the Vendor, as if the Acquisition had been completed at the date reported on.
The adjustments reflect the estimated bargain purchase gain arising from the proposed Acquisition of HK$3,852,003 and the elimination of the share capital and pre-acquisition reserves of the Exequs Group, as if the proposed Acquisition had been completed on 31 December 2009.

For the purpose of the preparation of the Pro Forma Financial Information, the estimated bargain purchase gain arising from the proposed Acquisition represents the excess of the consolidated net assets of the Exequs Group of HK$46,209,715 (which have taken into account the waiver of Shareholder’s Loan of HK$9,997,779 as of 31 December 2009), over the estimated fair value of the total consideration for the proposed Acquisition of HK$42,357,712 as referred to in note 3 above. For the purpose of the preparation of the Pro Forma Financial Information, the consolidated net assets of the Exequs Group as at 31 December 2009 have been assumed to approximate the fair values of the identifiable assets, liabilities and contingent liabilities of the Exequs Group upon completion of the proposed Acquisition.

Since the actual fair value of the Consideration Shares and the actual fair values of the identifiable assets, liabilities and contingent liabilities of the Exequs Group upon completion of the proposed Acquisition would be different from their estimated fair values used in the preparation of the Pro Forma Financial Information, the actual financial position arising from the proposed Acquisition might be materially different from the financial position as shown in this Appendix.

– 145 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

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

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

==> picture [184 x 68] intentionally omitted <==

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

26 April 2010

The Board of Directors AGTech Holdings Limited Unit 3912, 39/F Shell Tower, Times Square Causeway Bay Hong Kong

Dear Sirs,

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

INTRODUCTION

We report on the unaudited pro forma consolidated statement of financial position (the “Pro Forma Financial Information”) of AGTech Holdings Limited (the “Company”) and its subsidiaries (collectively, the “Group”), and Exequs Co. Ltd. (“Exequs”) and its subsidiary (hereinafter collectively referred to as the “Enlarged Group”), as set out in Section A entitled “Unaudited Pro Forma Financial Information of the Enlarged Group” in Appendix V to the Company’s circular dated 26 April 2010 (the “Circular”). The Pro Forma Financial Information has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the proposed Acquisition (as defined in the Circular) might have affected the financial information presented. The basis of preparation of the Pro Forma Financial Information is set out in Section A of Appendix V to the Circular.

– 146 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

RESPECTIVE RESPONSIBILITIES OF THE DIRECTORS OF THE COMPANY AND THE REPORTING ACCOUNTANTS

It is the responsibility solely of the directors of the Company to prepare the Pro Forma Financial Information in accordance with paragraph 7.31 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants.

It is our responsibility to form an opinion, as required by paragraph 7.31(7) of the GEM Listing Rules, on the 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 Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

BASIS OF OPINION

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

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

The Pro Forma Financial Information is for illustrative purposes only, based on the judgments and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position of the Enlarged Group as at 31 December 2009 or any future date.

– 147 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX V

OPINION

In our opinion:

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

Yours faithfully,

HLB Hodgson Impey Cheng Chartered Accountants

Certified Public Accountants Hong Kong

– 148 –

GENERAL INFORMATION

APPENDIX VI

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief: (i) the information contained in this circular is accurate and complete in all material respects and not misleading; (ii) there are no other matters the omission of which would make any statement in this circular misleading; and (iii) all opinions expressed in this circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

2. SHARE CAPITAL

Assuming there is no change to the number of Shares in issue from the Latest Practicable Date to the Completion Date, the authorised and issued share capital of the Company (a) as at the Latest Practicable Date; and (b) after Completion and upon the allotment and issue of the Consideration Shares were/will be as follows:

(a) As at the Latest Practicable Date

Authorised:			HK$
5,000,000,000		Shares	10,000,000

_Issued and fully _	paid:
3,588,522,500		Shares	7,177,045

(b) After Completion and upon the allotment and issue of the Consideration Shares

Authorised:			HK$
5,000,000,000		Shares	10,000,000

_Issued and fully _	paid:
3,588,522,500		Existing Shares	7,177,045
57,894,000		Consideration Shares to be alloted and issued	115,788

3,646,416,500			7,292,833

– 149 –

GENERAL INFORMATION

APPENDIX VI

3. DISCLOSURE OF INTERESTS

(a) Interests of the Directors or chief executive of the Company

As at the Latest Practicable Date, the interests and short positions of the Directors or chief executive of the Company in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which (a) 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 short positions which they were taken or deemed to have under such provisions of the SFO), or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) adopted by the Company, to be notified to the Company and the Stock Exchange, were as follows:

(i) Interests in the Shares and underlying Shares under equity derivatives (as defined in Part XV of the SFO)

Interests in the Shares:

Number of Shares

				Approximate
	Personal	Corporate		percentage
Name of Director	interest	interest	Total	held
Mr. Sun Ho	27,078,000	2,006,250,000	2,033,328,000	56.66%
		(Note1)
Mr. Bai Jinmin	3,343,750	44,876,600	48,220,350	1.34%
		(Note2)
Mr. Liang Yu	3,343,750	–	3,343,750	0.09%
Ms. Yang Yang	400,000	–	400,000	0.01%
Mr. Wang Ronghua	2,275,000	–	2,275,000	0.06%
Mr. Hua Fengmao	1,355,000	–	1,355,000	0.04%

Notes:

These 2,006,250,000 Shares were held in the name of MAXPROFIT GLOBAL INC. As MAXPROFIT GLOBAL INC is beneficially and wholly-owned by Mr. Sun Ho, an executive Director and chairman of the Company, Mr. Sun was deemed to be interested in such Shares.
These 44,876,600 Shares were held in the name of Fine Bridge International Limited. Fine Bridge International Limited is beneficially and wholly-owned by HB Resources Investment Limited, which in turn is beneficially and wholly-owned by Mr. Bai Jinmin, an executive Director. Accordingly, HB Resources Investment Limited and Mr. Bai were deemed to be interested in such Shares.

– 150 –

GENERAL INFORMATION

APPENDIX VI

(ii) Interests in the share options of the Company

As at

				As at
		Exercise		Latest	Approximate
		price per	Exercisable	Practicable	percentage
Name of Director	Date of grant	Share	period	Date	held
		(HK$)	(Note)
Mr. Robert	9 October 2008	0.2198	9 October 2009 –	13,375,000	0.37%
Geoffrey Ryan			8 October 2013
Mr. Bai Jinmin	9 October 2008	0.2198	9 October 2009 –	10,031,250	0.28%
			8 October 2013
Mr. Liang Yu	9 October 2008	0.2198	9 October 2009 –	10,031,250	0.28%
			8 October 2013
Ms. Yang Yang	9 October 2008	0.2198	9 October 2009 –	1,337,500	0.037%
			8 October 2013

Note: A portion of the option representing 25% of the total underlying Shares entitled under such option shall be vested in the grantee of the option in each of the 4 years during the exercisable period. If the grantee does not exercise such portion of the option within one year after it has been vested in him/her, such portion of the option will lapse.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or (b) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or (c) were required, pursuant to the Model Code adopted by the Company, to be notified to the Company and the Stock Exchange.

– 151 –

GENERAL INFORMATION

APPENDIX VI

(b) Interests of Shareholders discloseable pursuant to the SFO

As at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company based on the register maintained by the Company pursuant to Part XV of the SFO, the following persons (other than a Director or chief executive of the Company) had, or were deemed or taken to have interests or short positions in the shares and underlying shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or, were directly or indirectly, 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 Enlarged Group or had any option in respect of such capital:

Interests in the Shares:

			Approximate
			percentage of
			issued share
		Number of	capital of the
Name of Shareholder	Capacity	Shares held	Company
MAXPROFIT GLOBAL	Beneficial	2,006,250,000	55.91%
INC	owner (Note)

Note: As disclosed above, Mr. Sun Ho was deemed to be interested in these 2,006,250,000 Shares by virtue of his interest in MAXPROFIT GLOBAL INC.

Save as disclosed above, as at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company based on the register maintained by the Company pursuant to Part XV of the SFO, no other persons (not being a Director or chief executive of the Company) had, or deemed to have, any interests or short positions in the shares or underlying shares which were required to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, nor were there any persons, directly or indirectly, 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 Enlarged Group or held any option in respect of such capital.

(c) Competing interests

As at the Latest Practicable Date, none of the Directors, controlling Shareholder or their respective associates was interested in any business apart from the Enlarged Group’s businesses which competes or is likely to compete, either directly or indirectly, with the businesses of the Enlarged Group.

– 152 –

GENERAL INFORMATION

APPENDIX VI

(d) Other interests

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have, since 31 December 2009 (being the date to which the latest published audited accounts of the Company were made up), been (i) acquired or disposed of by; or (ii) leased to; or (iii) proposed to be acquired or disposed of by; or (iv) proposed to be leased to, any member of the Enlarged Group.

None of the Directors was materially interested in any contract or arrangement subsisting at the Latest Practicable Date which is significant in relation to the business of the Enlarged Group.

4. MATERIAL CONTRACTS

The following are contracts (not being contracts entered into in the ordinary course of business) entered into by the Enlarged Group within the two years immediately preceding the Latest Practicable Date and which are or may be material:

(a) on 6 October 2009, AGTech Limited, a wholly-owned subsidiary of the Company, entered into respective agreements with Gextech Holdings Limited to subscribe for new shares in, and a call option for the issue of convertible notes by, Gextech Holdings Limited for a total consideration of £4,021,993.50 (equivalent to approximately HK$49,470,520). Upon completion of the respective agreements, the aforesaid new shares, together with the shares that are issuable to AGTech Limited upon full conversion of the convertible notes, in Gextech Holdings Limited, shall allow AGTech Limited to hold up to a maximum of approximately 55.0% of the enlarged issued share capital of Gextech Holdings Limited. On 6 November 2009, the Company further announced that the aforesaid agreements lapsed as certain documents were still outstanding and could not be delivered by Gextech Holdings Limited to AGTech Limited before the target completion date of the agreements;
(b) on 30 October 2009, (China Lottery Management Co., Ltd.), a wholly-owned subsidiary of the Company, entered into a strategic co-operation agreement with Beijing Honking Cyber Info-tech Co., Ltd., pursuant to which both parties agreed to leverage on their respective resources advantages to explore jointly the mobile lottery betting business, mobile lottery information service business and mobile technology products development business in various provinces in PRC; and
(c) the Agreement.

5. CLAIMS AND LITIGATION

As at the Latest Practical Date, the Directors were not aware of any claims or litigation of material importance pending or threatened against any member of the Enlarged Group.

– 153 –

GENERAL INFORMATION

APPENDIX VI

6. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Enlarged Group which does not expire or is not determinable by the Enlarged Group within one year without payment of compensation (other than statutory compensation).

7. EXPERT AND CONSENT

The following is the qualification of the expert who has given opinion or advice contained in this circular:

Name

Qualification

HLB Hodgson Impey Cheng Chartered accountants, certified public accountants

HLB Hodgson Impey Cheng has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and references to its name in the form and context in which they respectively appear.

As at the Latest Practicable Date, HLB Hodgson Impey Cheng had no shareholding, directly or indirectly, in any member of the Enlarged 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 Enlarged Group.

As at the Latest Practicable Date, HLB Hodgson Impey Cheng had no direct or indirect interests in any assets which had been, since 31 December 2009 (being the date to which the latest published audited accounts of the Company were made up), (i) acquired or disposed of by; or (ii) leased to; or (iii) proposed to be acquired or disposed of by; or (iv) proposed to be leased to, any member of the Enlarged Group.

– 154 –

GENERAL INFORMATION

APPENDIX VI

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the Company’s head office and principal place of business in Hong Kong at Unit 3912, 39th Floor, Shell Tower, Times Square, Causeway Bay, Hong Kong, for a period of 14 days from the date hereof:

(a) the memorandum of association and bye-laws of the Company;
(b) the material contracts referred to in the paragraph headed “Material contracts” in this appendix;
(c) the published annual reports of the Company for the financial year ended 30 June 2008 and for the six months ended 31 December 2009;
(d) the accountants’ reports on the Exequs Group (as set out in Appendix II to this circular), the Century Decai Group (as set out in Appendix III to this circular) and GOT (as set out in Appendix IV to this circular);
(e) the letter from HLB Hodgson Impey Cheng in relation to the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix V to this circular;
(f) the letter of consent referred to in the paragraph headed “Expert and consent” in this appendix; and
(g) a copy of each circular issued pursuant to the requirements set out in Chapters 19 and/or 20 of the GEM Listing Rules which has been issued by the Company since 31 December 2009 (being the date of the latest published audited accounts).

9. MISCELLANEOUS

(a) The company secretary of the Company is Mr. Wong Wai Sing. Mr. Wong is a fellow member of the Hong Kong Institute of Certified Public Accountants and The Association of Chartered Certified Accountants.
(b) The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.
(c) The head office and principal place of business of the Company in Hong Kong is situated at Unit 3912, 39th Floor, Shell Tower, Times Squares, Causeway Bay, Hong Kong.
(d) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Abacus Limited at 26 Floor, Tesbury Centre, 28 Queen’s Road East, Hong Kong.
(e) The English text of this circular shall prevail over the corresponding Chinese text.

– 155 –

AI assistant

Joy Spreader Group Inc. — Proxy Solicitation & Information Statement 2010

51106_rns_2010-04-23_d488fcca-1d0f-41cf-9924-7bbd99d5089a.pdf

IMPORTANT

AGTech Holdings Limited

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF AN INDIRECT 35% EQUITY INTEREST IN GOT

DEFINITIONS

DEFINITIONS

AGTech Holdings Limited

(Stock Code: 8279)

MAJOR TRANSACTION IN RELATION TO THE ACQUISITION OF AN INDIRECT 35% EQUITY INTEREST IN GOT

INTRODUCTION

LETTER FROM THE BOARD

THE AGREEMENT

Date

Parties

Vendor: SPEEDSUPER LIMITED

Assets to be acquired

The Consideration

Conditions precedent

SHAREHOLDING STRUCTURE OF THE COMPANY

INFORMATION ON THE EXEQUS GROUP

Exequs and Century Decai

LETTER FROM THE BOARD

GOT

Financial information

LETTER FROM THE BOARD

REASONS FOR THE ACQUISITION

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE ACQUISITION

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

GENERAL

ADDITIONAL INFORMATION

1. FINANCIAL SUMMARY

Results

Assets and liabilities

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements

1. GENERAL

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

New and revised HKFRSs affecting presentation and disclosure only

HKAS 1 (revised in 2007) Presentation of Financial Statements

HKFRS 8 Operating Segments

Improving Disclosures about Financial Instruments (Amendments to HKFRS 7 Financial Instruments: Disclosures)

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

Allocation of total comprehensive income to non-controlling interests

Changes in the Group’s ownership interests in existing subsidiaries

Changes in the Group’s ownership interests in existing subsidiaries prior to 1 July 2009

Changes in the Group’s ownership interests in existing subsidiaries after 1 July 2009

APPENDIX I

Business combinations

Business combinations prior to 1 July 2009

Business combinations on or after 1 July 2009

Goodwill

Investments in an associate

APPENDIX I

Revenue recognition

Property, plant and equipment

Construction contracts

Leasing

The Group as lessee

Leasehold land for own use

Foreign currencies

Retirement benefit costs

Share-based payment transactions

Share options granted to Directors, eligible employees and other eligible participants in an equity-settled share-based payment transaction

Share options granted to a consultant in an equity-settled share-based payment transaction

Taxation

Intangible assets

Intangible assets acquired separately

Intangible assets acquired in a business combination

Software licences

Research and development expenditure

Impairment of tangible and intangible assets other than goodwill

Inventories

Joy Spreader Group Inc. Proxy Solicitation & Information Statement 2010