THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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.

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

If you have sold or transferred all your shares in Hua Yi Copper Holdings Limited (“Company”), you should at once hand this circular and the accompanying form of proxy to the purchaser or transferee or to the bank, the licensed securities dealer or registered institution or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

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**HUA YI COPPER HOLDINGS LIMITED 華藝礦業控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

(Stock Code: 559)

(1) PROPOSED OPEN OFFER OF 1,301,282,600 OFFER SHARES OF HK$0.05 EACH AT THE SUBSCRIPTION PRICE OF HK$0.15 PER OFFER SHARE ON THE BASIS OF TWO OFFER SHARES FOR EVERY ONE SHARE HELD ON THE RECORD DATE, (2) RE-ELECTION OF DIRECTORS AND

(3) NOTICE OF SPECIAL GENERAL MEETING

Financial adviser to the Company

Underwriter to the Open Offer

Independent Financial Adviser to the Independent Board Committees and Independent Shareholders

Terms used in this cover page have the same meanings as defined in this circular.

A letter of advice from Menlo Capital, to the Independent Board Committee and the Independent Shareholders is set out on pages 23 to 25 of this circular. The recommendation of the Independent Board Committee to the Independent Shareholders is set out on page 22 of this circular.

It should be noted that the Underwriting Agreement contains provisions granting the Underwriter the right to terminate the obligations of the Underwriter thereunder on the occurrence of certain events. These events are set out in the section headed “Termination of the Underwriting Agreement” in this circular. If the Underwriting Agreement is terminated by the Underwriter or does not become unconditional, the Open Offer will not proceed.

A notice convening the SGM to be held at 11:00 a.m. on Wednesday, 25 November 2009 at Unit 7, 2nd Floor, Kingsford Industrial Centre, 13 Wang Hoi Road, Kowloon Bay, Kowloon, Hong Kong is set out on pages 147 to 149 of this circular. Whether or not you are able to attend the meeting, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time of the meeting to the office of the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting in person should you so wish.

9 November 2009

for identification purposes only

CONTENTS

	Page
Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Termination of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Summary of the Open Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Letter from Menlo Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Appendix I – Financial Information of the Group . . . . . . . . . . . . . . . . . . . . .	36
Appendix II – Unaudited Pro Forma Financial Information . . . . . . . . . . . . . .	105
Appendix III – Summary of the Constitution of the Company and
Bermuda Company Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	109
Appendix IV – Details of Directors Proposed to be Re-elected . . . . . . . . . . . .	135
Appendix V – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	137
Notice of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	147

– i –

EXPECTED TIMETABLE

The expected timetable for the Open Offer as set out below is indicative only and has been prepared on the assumption that the Open Offer will be approved by the Independent Shareholders at the SGM. The expected timetable is subject to change, and any such change will be announced in a separate announcement by the Company as and when appropriate:

2009

Last day of dealings in the Shares on
a cum-entitlement basis . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . Tuesday, 17 November
Commencement of dealings in the Shares on
an ex-entitlement basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 18 November
Latest time for lodging transfer of the Shares
in order to be qualified for the Open Offer	. . . . 4:30 p.m. on Thursday, 19 November
Register of members of the Company closes
(both dates inclusive) . . . . . . . . . . . . . . . . .	. . . . . . . . . . From Friday, 20 November to
	Wednesday, 25 November
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 25 November
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 25 November
Announcement of the results of the SGM . . . . . . . . . . . . . . . . Wednesday, 25 November
Register of members of the Company re-opens	. . . . . . . . . . . . . Thursday, 26 November
Despatch of the Prospectus Documents . . . . .	. . . . . . . . . . . . . . Thursday, 26 November
Latest time for acceptance of and payment
for Offer Shares . . . . . . . . . . . . . . . . . . . . . .	. . . . 4:00 p.m. on Thursday, 10 December
Latest time for the Open Offer to
become unconditional . . . . . . . . . . . . . . . . .	. . . . . 4:00 p.m. on Tuesday, 15 December
Announcement of the results of acceptance of
the Open Offer . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . Wednesday, 16 December
Certificates for the Offer Shares expected to be
despatched on or before . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 17 December
Dealings in fully-paid Offer Shares expected to commence . . . . . Monday, 21 December

– ii –

EXPECTED TIMETABLE

EFFECT OF BAD WEATHER ON THE LATEST ACCEPTANCE DATE

The Latest Acceptance Time will not take place if there is:

a tropical cyclone warning signal number 8 or above, or
a “black” rainstorm warning
(i) in force in Hong Kong at any local time before 12:00 noon and no longer in force after 12:00 noon on the Latest Acceptance Date. Instead the Latest Acceptance Time will be extended to 5:00 p.m. on the same business day; or
(ii) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on the Latest Acceptance Date. Instead the Latest Acceptance Time will be rescheduled to 4:00 p.m. on the following business day (other than Saturday) which does not have either of those warnings in force at any time between 9:00 a.m. and 4:00 p.m..

If the Latest Acceptance Time does not take place on the Latest Acceptance Date, the dates mentioned in the section headed “Expected timetable” in this circular may be affected. An announcement will be made by the Company in such event.

– iii –

DEFINITIONS

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

“Announcement”
the announcement of the Company dated 19 October 2009 in relation to the Open Offer
“Application Form(s)” the application form(s) to be issued in connection with the Open Offer
“associate(s)” has the same meaning ascribed thereto in the Listing Rules
“Board” the board of Directors
“CCASS”
the Central Clearing and Settlement System established and operated by HKSCC
“Companies Ordinance”
the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)
“Company”
Hua Yi Copper Holdings Limited (stock code: 559), a company incorporated in Bermuda with limited liability and the Shares of which are listed on the main board of the Stock Exchange
“Controlling shareholder(s)”
has the same meaning ascribed thereto in the Listing Rules
“Director(s)” director(s) of the Company
“Excluded Shareholder(s)”
Overseas Shareholder(s), whom the Directors, based on legal opinions provided by the legal advisers, consider it necessary or expedient not to offer the Open Offer to such Shareholders on account either of the legal restrictions under the laws of the relevant places or the requirements of the relevant regulatory bodies or stock exchanges in those places
“Group”
the Company and its subsidiaries
“HKSCC”
Hong Kong Securities Clearing Company Limited
“Hong Kong”
the Hong Kong Special Administrative Region of the PRC

– 1 –

DEFINITIONS

“Independent Board Committee”
“Independent Shareholders”
“Intense Rise”
“Irrevocable Undertaking”
“Last Trading Day”
“Latest Acceptance Time”
“Latest Practicable Date”
“Listing Rules”
“Menlo Capital”
“Offer Shares”
an independent board committee of the Board comprised of all the independent non-executive Directors, namely Dr. Wong Yun Kuen, Mr. Chiu Wai On and Mr. Man Kwok Leung, formed for advising the Independent Shareholders in relation to the Open Offer
Shareholders other than the Directors (excluding independent non-executive Directors) and chief executive of the Company and their respective associates
Intense Rise Holdings Limited, a company incorporated in the British Virgin Islands with limited liability and is wholly owned by Mr. Wong Hin Shek, an executive Director
the irrevocable undertaking dated 16 October 2009 given by Intense Rise in favour of the Company and the Underwriter
16 October 2009, being the date of the Underwriting Agreement, which is the last trading day on which the Shares were traded on the Stock Exchange immediately preceding the publication of the Announcement
4:00 p.m. on Thursday, 10 December 2009, or such other date and/or time as the Underwriter and the Company may agree, being the latest time for acceptance of, and payment for, the Offer Shares
6 November 2009, being the latest practicable date prior to the printing of this circular of ascertaining certain information in this circular
the Rules Governing the Listing of Securities on the Stock Exchange
Menlo Capital Limited, a licensed corporation to carry on business in Type 6 (advising on corporate finance) regulated activities under the SFO
1,301,282,600 new Shares to be issued and allotted under the Open Offer

– 2 –

DEFINITIONS

“Open Offer”
the proposed offer for subscription of the Offer Shares at a price of HK$0.15 per Offer Share by the Company to the Qualifying Shareholders on the basis of two Offer Shares for every Share held on the Record Date
“Overseas Shareholders”
Shareholders whose names appear on the register of members of the Company at the close of business on the Record Date and whose addresses as shown on such register are outside Hong Kong
“PRC” the People’s Republic of China
“Prospectus”
the prospectus to be issued by the Company in relation to the Open Offer
“Prospectus Documents”
the Prospectus and the Application Form(s)
“Prospectus Posting Date”
the date of posting the Prospectus Documents to Qualifying Shareholders and the Prospectus to Excluded Shareholders for their information only
“Qualifying Shareholders”
Shareholders, other than the Excluded Shareholders, whose names appear on the register of members of the Company at the close of business on the Record Date
“Record Date”
Wednesday, 25 November 2009, or such other date as may be agreed between the Company and the Underwriter, being the date by reference to which entitlements to the Open Offer are to be determined
“SFO”
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“SGM”
the special general meeting of the Company to be held on 25 November 2009 at which resolutions will be proposed to consider, and, if thought fit, to approve the Open Offer and re-election of Directors
“Share(s)”
share(s) of HK$0.05 each in the share capital of the Company
“Shareholder(s)”
holder(s) of Share(s)
“Stock Exchange”
The Stock Exchange of Hong Kong Limited
“Takeovers Code”
the Hong Kong Code on Takeovers and Mergers

– 3 –

DEFINITIONS

“Underwriter”
“Underwriting Agreement”
“Underwritten Shares”
“HK$”
“%” or “per cent.”
Kingston Securities Limited, a licensed corporation to carry on business in Type 1 regulated activity (dealing in securities) under the SFO
the underwriting agreement dated 16 October 2009 entered into between the Company and the Underwriter in relation to the Open Offer
being 1,140,429,850 Offer Shares, representing the total number of Offer Shares to be issued pursuant to the Open Offer excluding 160,852,750 Offer Shares undertaken to be subscribed by Intense Rise pursuant to the Irrevocable Undertaking
Hong Kong dollars, the lawful currency of Hong Kong
percentage or per centum

– 4 –

TERMINATION OF THE UNDERWRITING AGREEMENT

The Underwriter shall be entitled by notice in writing to the Company, served prior to 4:00 p.m. on 15 December 2009, to terminate the Underwriting Agreement if, prior to such time:

(1) in the absolute opinion of the Underwriter, the success of the Open Offer would be materially and adversely affected by:
(a) the introduction of any new regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may, in the absolute opinion of the Underwriter, materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Open Offer; or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreement), of a political, military, financial, economic or other nature (whether or not ejusdem generic with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the absolute opinion of the Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or
(c) any material adverse change in the business or in the financial or trading position or prospects of the Group as a whole; or
(d) the imposition of any moratorium, suspension or material restriction on trading of the Shares on the Stock Exchange due to exceptional financial circumstances or otherwise; or
(e) any suspension in the trading of Shares on the Stock Exchange for a period of more than ten consecutive business days, excluding any suspension in connection with the clearance of, among others, the Announcement, the Prospectus Documents or other announcements or circulars in connection with the Open Offer; or
(2) any material adverse change in market conditions (including, without limitation, a change in fiscal or monetary policy or foreign exchange or currency markets, suspension or restriction of trading in securities, and a change in currency conditions for the purpose of this paragraph includes a change in the system under which the value of the Hong Kong currency is pegged with that of the currency of the United States of America) occurs which in the absolute opinion of the Underwriter makes it inexpedient or inadvisable to proceed with the Open Offer; or

– 5 –

TERMINATION OF THE UNDERWRITING AGREEMENT

(3) this circular or the Prospectus in connection with the Open Offer when published contain information (either as to business prospects or the condition of the Group or as to its compliance with any laws or the Listing Rules or any applicable regulations) which has not prior to the date hereof been publicly announced or published by the Company and which may in the absolute opinion of the Underwriter is material to the Group as a whole and is likely to affect materially and adversely the success of the Open Offer or might cause a prudent investor not to apply for its assured entitlements of Offer Shares under the Open Offer.

If the Underwriter gives a notice of termination to the Company in accordance with the terms of the Underwriting Agreement, all obligations of the Underwriter under the Underwriting Agreement shall cease and no party shall have any claim against any other party in respect of any matter or thing arising out of or in connection with the Underwriting Agreement provided that the Company shall remain liable to pay to the Underwriter any reasonable legal fees and other reasonable out-of-pocket expenses incurred by the Underwriter, except that the 2.5% underwriting fee shall not be payable to the Underwriter if the Underwriting Agreement does not become unconditional or if it is terminated by the Underwriter pursuant to the Underwriting Agreement. If the Underwriter exercises its right to terminate the Underwriting Agreement, the Open Offer will not proceed.

– 6 –

SUMMARY OF THE OPEN OFFER

The following information is derived from, and should be read in conjunction with, the full text of this circular.

Basis of the Open Offer:

two Offer Shares for every one Share held on the Record Date

Subscription Price:

HK$0.15 per Offer Share payable in full upon acceptance

Number of Shares in issue as at 650,641,300 Shares the Latest Practicable Date:

Number of Offer Shares:

1,301,282,600 Offer Shares, representing 200% of the existing issued share capital of the Company and representing approximately 66.67% of the issued share capital of the Company as enlarged by the issue of the Offer Shares

Enlarged issued share capital immediately upon completion of the Open Offer:
1,951,923,900 Shares
Amount to be raised by the Open Offer:

approximately HK$195.2 million (before expenses)

Basis of entitlement:

Offer Shares will be allotted in the proportion of two Offer Shares for every one Share held by the Qualifying Shareholders on the Record Date. No Offer Shares will be offered to the Excluded Shareholders (if any) and will be taken up by the Underwriter.

No arrangement for application for Offer Shares by Qualifying Shareholders in excess of their entitlements as described above.

– 7 –

LETTER FROM THE BOARD

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**HUA YI COPPER HOLDINGS LIMITED 華藝礦業控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

(Stock Code: 559)

Executive Directors: Mr. Wong Hin Shek (Chairman) Mr. Chau Lai Him

Independent Non-executive Directors: Dr. Wong Yun Kuen Mr. Chiu Wai On Mr. Man Kwok Leung

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

Head office and principal place of business in Hong Kong: Unit 7, 2nd Floor Kingsford Industrial Centre 13 Wang Hoi Road Kowloon Bay Kowloon Hong Kong

9 November 2009

To the Shareholders

Dear Sir or Madam,

INTRODUCTION

As announced by the Company in the Announcement, the Company proposed to raise approximately HK$195.2 million, before expenses, by way of the Open Offer of 1,301,282,600 Offer Shares at a subscription price of HK$0.15 per Offer Share. The Company will offer for subscription of 1,301,282,600 Offer Shares in the proportion of two Offer Shares for every one Share held by the Qualifying Shareholders on the Record Date.

* for identification purposes only

– 8 –

LETTER FROM THE BOARD

The Independent Board Committee has been formed to advise the Independent Shareholders in respect of the Open Offer. Menlo Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

The purpose of this circular is to provide you with information regarding the (i) details of the Open Offer; (ii) the recommendation of the Independent Board Committee in relation to the Open Offer; and (iii) a letter of advice from Menlo Capital to the Independent Board Committee and the Independent Shareholders in relation to the Open Offer; (iv) the re-election of Directors, together with notice convening the SGM.

PROPOSED OPEN OFFER

Issue statistics

Basis of the Open Offer : Two Offer Shares for every one Share held on the Record Date Number of Shares in issue as at the : 650,641,300 Shares Latest Practicable Date Number of Offer Shares : 1,301,282,600 Offer Shares Subscription price : HK$0.15 per Offer Share Enlarged issued share capital : 1,951,923,900 Shares immediately upon completion of the Open Offer

As at the Latest Practicable Date, the Company does not have any outstanding options, warrants, derivatives or convertible securities which may confer any right to the holder thereof to subscribe for, convert or exchange into new Shares.

Pursuant to the Underwriting Agreement, the Company has undertaken that it shall not, without the prior consent of the Underwriter, issue any Shares or issue or grant any share options or other securities convertible into, exchangeable for or which carry rights to acquire Shares (other than the Offer Shares) from the date of the Underwriting Agreement until after the Latest Acceptance Time, being at 4:00 p.m. on Thursday, 10 December 2009.

The Offer Shares proposed to be issued pursuant to the terms of the Open Offer represent 200% of the Company’s existing issued share capital as at the Latest Practicable Date and approximately 66.67% of the enlarged issued share capital of the Company immediately following the completion of the Open Offer.

– 9 –

LETTER FROM THE BOARD

Qualifying Shareholders

The Open Offer is only available to the Qualifying Shareholder. To qualify for the Open Offer, a Shareholder must be registered as a member of the Company at the close of business on the Record Date and not be an Excluded Shareholder.

In order to be registered as members of the Company at the close of business on the Record Date, Shareholders must lodge any transfers of Shares (together with the relevant share certificates) with the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, for registration no later than 4:30 p.m. on Thursday, 19 November 2009.

The register of members of the Company will close from Friday, 20 November 2009 to Wednesday, 25 November 2009 (both dates inclusive). No transfer of Shares will be registered during this book closure period.

The Company will send the Prospectus Documents to the Qualifying Shareholders only. For the Excluded Shareholders, the Company will send the Prospectus to them for their information only.

Excluded Shareholders

The Company will only send the Prospectus to the Excluded Shareholders for their information but will not send any Application Forms to them. The Excluded Shareholders who are also Independent Shareholders will be entitled to attend and vote at the SGM.

The Prospectus Documents are not intended to be registered under the applicable securities legislation of any jurisdiction other than Hong Kong and Bermuda.

Based on the register of members of the Company as at the Latest Practicable Date, there were no Overseas Shareholders. If at any time before or on the Record Date, there are any Overseas Shareholders, the Company will make enquiries regarding the legal restrictions under the laws of the relevant regulatory body or stock exchange for extending the Open Offer to such Overseas Shareholders and will only exclude such Overseas Shareholders for the Open Offer if it would be necessary or expedient to do so in accordance with Rule 13.36(2)(a) of the Listing Rules. If the Directors, after making enquiries, find it necessary or expedient to exclude such Overseas Shareholders for the Open Offer, the Company will not make provisional allotment of Offer Shares to such Overseas Shareholders.

On the basis that none of the Shareholders will change their respective registered addresses to other addresses and there will be no new Overseas Shareholders from the Latest Practicable Date up to and including the Record Date, there will not be any Excluded Shareholders for the purpose of the Open Offer.

Any Offer Shares which would otherwise be allotted to the Excluded Shareholders under the Open Offer will be taken up by the Underwriter.

– 10 –

LETTER FROM THE BOARD

Book closure period

For the purposes of determining the entitlement to the Open Offer and the attendance of the SGM, the register of members of the Company will close from Friday, 20 November 2009 to Wednesday, 25 November 2009 (both dates inclusive). No transfer of Shares will be registered during this book closure period.

No application for excess Offer Shares

Under the Open Offer, there will be no trading in nil-paid entitlements of the Offer Shares.

There is no arrangement for application of Offer Shares by Qualifying Shareholders in excess of their entitlements. Considering that each Qualifying Shareholder will be given equal and fair opportunities to participate in the Company’s future development by subscribing for his/her/its entitlements under Open Offer, if application for excess Offer Shares is arranged, the Company considers that it will put in additional effort and costs to administer the excess application procedures, which is not cost-effective from the viewpoint of the Company. Any Offer Shares not taken up by the Qualifying Shareholders will be underwritten by the Underwriter.

Subscription price

The subscription price for the Offer Shares is HK$0.15 per Offer Share, payable in cash in full upon application. The subscription price represents:

(i) a discount of approximately 57.14% to the closing price per Share of HK$0.350 as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 54.95% to the average of the closing prices per Share of approximately HK$0.333 for the last 5 trading days as quoted on the Stock Exchange up to and including the Last Trading Day;
(iii) a discount of approximately 53.99% to the average of the closing prices per Share of approximately HK$0.326 for the last 10 trading days as quoted on the Stock Exchange up to and including the Last Trading Day;
(iv) a discount of approximately 30.88% to the theoretical ex-entitlement price of approximately HK$0.217 per Share calculated based on the closing price per Share as quoted on the Stock Exchange on the Last Trading Day;
(v) a discount of approximately 75.41% to the audited consolidated net assets value per Share of approximately HK$0.61 as at 30 June 2009; and
(vi) a discount of approximately 42.31% to the closing price per share of HK$0.26 as quoted on the Stock Exchange as at the Latest Practicable Date.

The subscription price for the Offer Shares was determined after arm’s length negotiations between the Company and the Underwriter with reference to the prevailing market condition. As the Offer Shares are offered to all Qualifying Shareholders, the Directors would like to set the subscription price at a level that would attract the

– 11 –

LETTER FROM THE BOARD

Qualifying Shareholders to participate in the Open Offer. The Directors (including the independent non-executive Directors) consider that the terms of the Open Offer, including the subscription price, are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Status of the Offer Shares

The Offer Shares, when allotted, issued and fully paid, will rank pari passu in all respects with the Shares in issue on the date of allotment and issue of the Offer Shares. Holders of the Offer Shares, when allotted, issued and fully paid, will be entitled to receive all future dividends and distributions which are declared, made or paid on or after the date of allotment and issue of the Offer Shares.

Certificates of the Offer Shares

Subject to the conditions of the Open Offer being fulfilled, share certificates for all fully-paid Offer Shares are expected to be posted by Thursday, 17 December 2009 to those Shareholders who have validly applied and paid for Offer Shares at their own risk.

Application for listing of the Offer Shares

The Company will apply to the Stock Exchange for the listing of, and permission to deal in, the fully paid Offer Shares. Dealings in the Offer Shares on the Stock Exchange will be subject to the payment of stamp duty in Hong Kong, Stock Exchange trading fees, SFC transaction levy and other applicable fees and charges in Hong Kong.

Subject to the grant of the listing of, and permission to deal in, the Offer Shares on the Stock Exchange as well as compliance with the stock admission requirements of HKSCC, the Offer Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Offer Shares on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Fractional entitlements

No fractional entitlements or allotments are expected to arise as a result of the Open Offer.

REASONS FOR THE OPEN OFFER AND USE OF PROCEEDS

The Company was incorporated in Bermuda with limited liability. The principal business activities are manufacture and trading of cables, wires and copper wires in the PRC.

– 12 –

LETTER FROM THE BOARD

The Directors are of the view that the Open Offer would strengthen the financial position of the Group and enable the Group to expand its capital base. In addition, the Open Offer allows the Qualifying Shareholders to maintain their respective proportional shareholdings in the Company and to participate in the future growth and development of the Company. The Directors (including the independent non-executive Directors) believe that the Open Offer is in the interests of the Company and the Shareholders as a whole.

The Directors have considered other fund raising methods such as bank borrowing, placement of new Shares and rights issue. The Directors consider that the Open Offer, which does not require time for trading of nil-paid rights shares and will not incur additional costs in respect of the trading of nil-paid rights, is more time and cost effective and in the interests of the Company and the Shareholders as a whole.

The estimated net proceeds of the Open Offer are approximately HK$190.0 million. The estimated expenses of approximately HK$5.2 million in relation to the Open Offer, including, among others, financial, legal and other professional advisory fee, underwriting commission, printing and translation expenses will be borned by the Company. The Board intends to apply all the net proceeds for general working capital purposes as well as for future business development including but not limit to further capital investment in the existing business or other investment projects which are in line with the Group’s overall strategy.

Irrevocable Undertaking

As at the Latest Practicable Date, Intense Rise was interested in 80,426,375 Shares, representing approximately 12.36% of the existing issued share capital of the Company. Pursuant to the Open Offer, Intense Rise will be entitled to subscribe for a maximum of 160,852,750 Offer Shares. Intense Rise has irrevocably undertaken to the Company and the Underwriter, among other matters, that: (i) the Shares beneficially owned by it will remain registered in the same name or be registered in the name of its nominees from the date of the Irrevocable Undertaking up to the close of business of the Record Date; (ii) it will subscribe or procure the subscription in full for its entitlement under the Open Offer pursuant to the terms of the Open Offer; and (iii) it will not and will procure that (so far as applicable and reasonably possible) company(ies) controlled by it will not during the period from immediately after the execution of the Underwriting Agreement and prior to or on the date the Underwriting Agreement becoming unconditional, dispose of or transfer the beneficial interests in any of the Shares beneficially owned by it.

– 13 –

LETTER FROM THE BOARD

UNDERWRITING ARRANGEMENTS

Underwriting Agreement

Date : 16 October 2009 Underwriter : Kingston Securities Limited Number of Underwritten : 1,140,429,850 Offer Shares, being the total number of Shares Offer Shares under the Open Offer excluding 160,852,750 Offer Shares undertaken to be subscribed by Intense Rise pursuant to its Irrevocable Undertaking Commission : 2.5% of the aggregate subscription price of the Underwritten Shares

The Directors are of the opinion that the terms of the Underwriting Agreement and the amount of commission given to the Underwriter are fair as compared to the market practice and commercially reasonable as agreed between the Company and the Underwriter.

To the best of the Directors’ knowledge and information, the Underwriter and its ultimate beneficial owners are independent third parties and are not connected with the Company and its connected person (as defined in the Listing Rules).

Conditions of the Open Offer

The Open Offer is conditional on, among other things, each of the following conditions being fulfilled:

(i) the Company despatching this circular to the Shareholders containing, among other matters, details of the Open Offer together with proxy form and notice of SGM;
(ii) the passing of a resolution by the Independent Shareholders at the SGM to approve the Open Offer;
(iii) the Listing Committee of the Stock Exchange granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked listing of and permission to deal in all the Offer Shares (in their fully-paid forms);
(iv) the filing and registration of all documents relating to the Open Offer, which are required to be filed or registered with the Registrar of Companies in Hong Kong in accordance with the Companies Ordinance;
(v) the filing of the Prospectus Documents with the Registrar of Companies in Bermuda on or as soon as reasonably practicable after the Prospectus Posting Date;

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LETTER FROM THE BOARD

(vi) the posting of the Prospectus Documents to Qualifying Shareholders by the Prospectus Posting Date;
(vii) compliance with and performance of all the undertakings and obligations of the Company under the Underwriting Agreement; and
(viii) compliance with and performance by Intense Rise of all of its obligations and undertakings under the Irrevocable Undertaking.

Neither of the Company nor the Underwriter may waive the conditions (i) to (vi) and (viii) above. The Underwriter may waive the condition (vii) in whole or in part by written notice to the Company.

If the above conditions are not satisfied and/or waived in whole or in part by the Underwriter by the Latest Acceptance Time or such later date or dates as the Underwriter may agree with the Company in writing, the Underwriting Agreement shall terminate and no party will have any claim against any other party for costs, damages, compensation or otherwise (save in respect of any reasonable legal fees or other reasonably out-of-pocket expenses, if any, of the Underwriter, or the indemnity given to the Underwriter and any rights or obligations which may accrue under the Underwriting Agreement prior to such termination).

Termination of the Underwriting Agreement

The Underwriter shall be entitled by notice in writing to the Company, served prior to 4:00 p.m. on 15 December 2009, to terminate the Underwriting Agreement if, prior to such time:

(1) in the absolute opinion of the Underwriter, the success of the Open Offer would be materially and adversely affected by:
(a) the introduction of any new regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may, in the absolute opinion of the Underwriter, materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Open Offer; or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreement), of a political, military, financial, economic or other nature (whether or not ejusdem generic with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the absolute opinion of the Underwriter materially and

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LETTER FROM THE BOARD

adversely affect the business or the financial or trading position or prospects of the Group as a whole; or

(c) any material adverse change in the business or in the financial or trading position or prospects of the Group as a whole; or
(d) the imposition of any moratorium, suspension or material restriction on trading of the Shares on the Stock Exchange due to exceptional financial circumstances or otherwise; or
(e) any suspension in the trading of Shares on the Stock Exchange for a period of more than ten consecutive business days, excluding any suspension in connection with the clearance of, among others, the Announcement, the Prospectus Documents or other announcements or circulars in connection with the Open Offer; or
(2) any material adverse change in market conditions (including, without limitation, a change in fiscal or monetary policy or foreign exchange or currency markets, suspension or restriction of trading in securities, and a change in currency conditions for the purpose of this paragraph includes a change in the system under which the value of the Hong Kong currency is pegged with that of the currency of the United States of America) occurs which in the absolute opinion of the Underwriter makes it inexpedient or inadvisable to proceed with the Open Offer; or
(3) this circular or the Prospectus in connection with the Open Offer when published contain information (either as to business prospects or the condition of the Group or as to its compliance with any laws or the Listing Rules or any applicable regulations) which has not prior to the date hereof been publicly announced or published by the Company and which may in the absolute opinion of the Underwriter is material to the Group as a whole and is likely to affect materially and adversely the success of the Open Offer or might cause a prudent investor not to apply for its assured entitlements of Offer Shares under the Open Offer,

If the Underwriter gives a notice of termination to the Company in accordance with the terms of the Underwriting Agreement, all obligations of the Underwriter under the Underwriting Agreement shall cease and no party shall have any claim against any other party in respect of any matter or thing arising out of or in connection with the Underwriting Agreement provided that the Company shall remain liable to pay to the Underwriter any reasonable legal fees and other reasonable out-of-pocket expenses incurred by the Underwriter, except that the 2.5% underwriting fee described above shall not be payable to the Underwriter if the Underwriting Agreement does not become unconditional or if it is terminated by the Underwriter pursuant to the Underwriting Agreement. If the Underwriter exercises its right to terminate the Underwriting Agreement, the Open Offer will not proceed.

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LETTER FROM THE BOARD

WARNING OF THE RISKS OF DEALING IN THE SHARES

The Open Offer is conditional upon, among other things, the fulfillment of the conditions set out below under the section headed “Conditions of the Open Offer” above. In addition, the Underwriter is entitled under the Underwriting Agreement to terminate the Underwriting Agreement on the occurrence of certain events, including but not limited to force majeure, as described above. Accordingly, the Open Offer may or may not proceed.

Any dealing in the Shares from the date of this circular up to the date on which all the conditions of the Open Offer are fulfilled will accordingly bear the risk that the Open Offer may not become unconditional or may not proceed. Any Shareholders or other persons contemplating any dealings in the Shares are advised to consult their own professional advisers.

Shareholders should note that, based on the expected timetable, the Shares will be dealt in on an ex-entitlement basis commencing from Wednesday, 18 November 2009 and that dealing in Shares will take place even though the conditions under the Underwriting Agreement remain unfulfilled. Any Shareholder or other person dealing in the Shares up to the date on which all conditions to which the Open Offer is subject are fulfilled (which is expected to be at 4:00 p.m. on Tuesday, 15 December 2009) will accordingly bear the risk that the Open Offer may not become unconditional and may not proceed.

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS OF THE COMPANY

Save as disclosed below, the Company has not conducted any fund raising activities in the past twelve months before the date of the Announcement and up to the Latest Practicable Date:

			Intended use of
	Date of initial		net proceeds	Actual use of
Nature of transaction	announcement	Net proceeds	as announced	net proceeds
Placing of new Shares	10 December 2008	Approximately	General working	Retained as general
		HK$30.3 million	capital of	working capital at
			the Group	the banks of the
				Group
Top-up placing and top-up	11 May 2009	Approximately	General working	Retained as general
subscription		HK$12.2 million	capital of	working capital at
of Shares			the Group	the banks of the
				Group
Placing of new Shares	26 May 2009	Approximately	General working	Retained as general
		HK$61.4 million	capital of	working capital at
			the Group	the banks of the
				Group

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LETTER FROM THE BOARD

CHANGES IN SHAREHOLDING STRUCTURE

The existing shareholding structure of the Company as at the Latest Practicable Date and the shareholding structure of the Company immediately upon completion of the Open Offer are set out below for illustration purpose only:

Shareholders Intense Rise_(Note 1)_ Public The Underwriter Other public Shareholders Total	As at the Latest Practicable Date No. of Shares % 80,426,375 12.36 – 0.00 570,214,925 87.64 650,641,300 100.00	Immediately upon completion of the Open Offer Assuming all Qualifying Shareholders take up the Offer Shares in full Assuming no Qualifying Shareholder (other than Intense Rise) takes up the Offer Shares(Note 2) No. of Shares % No. of Shares % 241,279,125 12.36 241,279,125 12.36 – 0.00 1,140,429,850 58.43 1,710,644,775 87.64 570,214,925 29.21 1,951,923,900 100.00 1,951,923,900 100.00	Immediately upon completion of the Open Offer Assuming all Qualifying Shareholders take up the Offer Shares in full Assuming no Qualifying Shareholder (other than Intense Rise) takes up the Offer Shares(Note 2) No. of Shares % No. of Shares % 241,279,125 12.36 241,279,125 12.36 – 0.00 1,140,429,850 58.43 1,710,644,775 87.64 570,214,925 29.21 1,951,923,900 100.00 1,951,923,900 100.00
			100.00

Notes :

Intense Rise is wholly owned by Mr. Wong Hin Shek, being an executive Director.
This scenario is for illustrative purpose only and will never occur. Pursuant to the Underwriting Agreement, in the event of the Underwriter being called upon to subscribe for or procure subscribers to subscribe for any of the Underwritten Shares not taken up by the Qualifying Shareholders (“Untaken Shares”):
(1) the Underwriter shall not subscribe, for its own account, for such number of Untaken Shares which will result in the shareholding of it and parties acting in concert (within the meaning of the Takeovers Code) with it in the Company to exceed 29.9% of the voting rights of the Company upon the completion of the Open Offer; and
(2) the Underwriter shall use all reasonable endeavours to ensure that each of the subscribers of the Untaken Shares procured by it (i) shall be third party independent of, not acting in concert (within the meaning of the Takeovers Code) with and not connected with the Directors or chief executive of the Company or substantial Shareholders or their respective associates (as defined in the Listing Rules); and (ii), save for the Underwriter itself and its associates, shall not, together with any party acting in concert (within the meaning of the Takeovers Code) with it, hold 10.0% or more of the voting rights of the Company upon completion of the Open Offer.

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LETTER FROM THE BOARD

RE-ELECTION OF DIRECTORS

Pursuant to bye-law 86(2) of the bye-laws of the Company, Dr. Wong Yun Kuen and Mr. Chiu Wai On who were appointed as Directors after the annual general meeting of the Company held on 24 November 2008, will hold office only until the SGM and, being eligible, offers themselves for re-election.

Details of Dr. Wong Yun Kuen and Mr. Chiu Wai On, which are required to be disclosed pursuant to the Listing Rules, are set out in Appendix IV to this circular.

SGM

The SGM will be held at 10:00 a.m. on Wednesday, 25 November 2009 at Unit 7, 2nd Floor, Kingsford Industrial Centre, 13 Wang Hoi Road, Kowloon Bay, Kowloon, Hong Kong, the notice of which is set out on pages 147 to 149 of this circular, to consider and, if thought fit, approve the Open Offer and re-election of Directors.

In compliance with the Listing Rules, all the resolutions to be proposed at the SGM will be voted on by way of a poll.

You will find enclosed a form of proxy for use at the SGM. Whether or not you are able to attend the SGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time of the meeting to the office of the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, Hong Kong. Completion and return of the form of proxy will not preclude you from attending and voting at the SGM in person should you so wish and in such event, the proxy shall be deemed to be revoked.

The Open Offer is not wholly or partly underwritten or sub-underwritten by the Directors, chief executive or substantial Shareholders. As the Open Offer will increase the issued share capital of the Company by more than 50%, pursuant to Rule 7.24(5) of the Listing Rules, the Open Offer must be made conditional on approval by Independent Shareholders at the SGM and any Controlling Shareholders and their associates or where there is no Controlling Shareholder, the Directors (excluding independent non-executive Directors) and chief executive of the Company and their respective associates shall abstain from voting in favour of the relevant resolution relating to the Open Offer. As at the Latest Practicable Date, the Company had no Controlling Shareholder and 80,426,375 Shares, representing approximately 12.36% of the entire issued Shares, were held by Interest Rise, a company wholly owned by Mr. Wong Hin Shek, an executive Director. Mr. Wong Hin Shek and his associates are required to abstain from voting in favour of the relevant resolution to approve the Open Offer at the SGM.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors believe that the terms of the Open Offer are fair and reasonable and the re-election of Directors are in the interests of the Company and the Shareholders as a whole and recommend the Independent Shareholders and Shareholders (as the case may be) to vote in favour of the relevant resolutions to be proposed at the SGM. You are advised to read carefully the letter from the Independent Board Committee regarding the Open Offer on pages 21 to 22 of this circular. The Independent Board Committee, having taken into account the advice of Menlo Capital, the text of which is set out on pages 23 to 25 of this circular, considers that (i) the terms of the Open Offer and the Underwriting Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the Open Offer is in the interests of the Company and the Shareholders as a whole.

FURTHER INFORMATION

Your attention is drawn to the information set out in the appendices to this circular.

By order of the Board Hua Yi Copper Holdings Limited Wong Hin Shek Chairman and Executive Director

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LETTER FROM INDEPENDENT BOARD COMMITTEE

The following is the full text of a letter from the Independent Board Committee, which has been prepared for the purpose of incorporation into this circular, setting out its recommendation to the Independent Shareholders in relation to the Open Offer:

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**HUA YI COPPER HOLDINGS LIMITED 華藝礦業控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

(Stock Code: 559)

9 November 2009

To the Independent Shareholders

Dear Sir or Madam,

PROPOSED OPEN OFFER OF 1,301,282,600 OFFER SHARES OF HK$0.05 EACH AT THE SUBSCRIPTION PRICE OF HK$0.15 PER OFFER SHARE ON THE BASIS OF TWO OFFER SHARES FOR EVERY ONE SHARE HELD ON THE RECORD DATE

We refer to the “Letter from the Board” set out in the circular dated 9 November 2009 (“ Circular ”) of which this letter forms part. Capitalised terms defined in the Circular shall have the same meanings when used herein unless the context otherwise requires.

We have been appointed as the Independent Board Committee to consider the Open Offer and to advise the Independent Shareholders as to the fairness and reasonableness of the Open Offer and to recommend whether or not the Independent Shareholders should vote for the resolution to be proposed at the SGM to approve the Open Offer. Menlo Capital has been appointed to advise the Independent Board Committee in relation to the terms of the Open Offer.

We wish to draw your attention to the letter from Menlo Capital to the Independent Board Committee and the Independent Shareholders which contains its advice to us in relation to the Open Offer as set out in the Circular. We also draw your attention to the Letter from the Board.

for identification purposes only

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LETTER FROM INDEPENDENT BOARD COMMITTEE

Having taken into account the principal factors and reasons considered by and the opinion of Menlo Capital as stated in its letter of advice, we consider (i) the terms of the Open Offer and the Underwriting Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the Open Offer is in the interests of the Company and the Shareholders as a whole. We therefore recommend the Independent Shareholders to vote in favour of the resolution approving the Open Offer to be proposed at the SGM.

Yours faithfully, Independent Board Committee

Dr. Wong Yun Kuen Independent non-executive Director

Mr. Chiu Wai On Independent non-executive Director

Mr. Man Kwok Leung Independent non-executive Director

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LETTER FROM MENLO CAPITAL

The following is the letter of advice from Menlo Capital to advise the Independent Board Committee and the Independent Shareholders in connection with the proposed Open Offer, which has been prepared for the purpose of inclusion in this circular:

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Menlo Capital Limited 17/F., Asia Standard Tower 59- 65 Queen’s Road Central, Hong Kong

9 November 2009

To the Independent Board Committee and the Independent Shareholders of Hua Yi Copper Holdings Limited

Dear Sirs,

PROPOSED OPEN OFFER OF 1,301,282,600 OFFER SHARES OF HK$0.05 EACH AT THE SUBSCRIPTION PRICE OF HK$0.15 PER OFFER SHARE ON THE BASIS OF TWO OFFER SHARES FOR EVERY ONE SHARE HELD ON THE RECORD DATE

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders whether the Open Offer is in the interests of the Company and the Independent Shareholders as a whole and the terms of which are fair and reasonable insofar as the Company and the Independent Shareholders are concerned, details of which are set out in the letter from the Board (the “ Board Letter ”) contained in this circular of the Company dated 9 November 2009 (the “ Circular ”) of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context of this letter otherwise requires.

On 19 October 2009, the Board announced to raise approximately HK$195.2 million, before expenses, by way of the Open Offer of 1,301,282,600 Offer Shares at a subscription price of HK$0.15 per Offer Share. The Company will offer for subscription of 1,301,282,600 Offer Shares in the proportion of two Offer Shares for every one Share held by the Qualifying Shareholders on the Record Date. There will not be any arrangement for application of the Offer Shares by the Qualifying Shareholders in excess of their entitlement.

As the Open Offer will increase the issued share capital of the Company by more than 50%, pursuant to the Listing Rules, the Open Offer must be made conditional on approval by the Independent Shareholders at the SGM and any Controlling Shareholders and their associates or where there is no Controlling Shareholder, the Directors (excluding independent non-executive Directors) and chief executive of the Company and their respective associates shall abstain from voting in favour of the relevant resolution relating

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LETTER FROM MENLO CAPITAL

to the Open Offer. As at the Latest Practicable Date, the Company had no Controlling Shareholder and 80,426,375 Shares, representing approximately 12.36% of the entire issued Shares, were held by Interest Rise, a company wholly owned by Mr. Wong Hin Shek, an executive Director. Mr. Wong Hin Shek and his associates are required to abstain from voting in favour of the relevant resolution to approve the Open Offer at the SGM.

The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries, which to the best of their knowledge and belief, there are no other facts the omission of which would make any statement in the Circular misleading.

We have not considered the taxation implications on the Shareholders in relation to the subscription for, holding or disposal of the Offer Shares or exercise of any rights attaching to them, since these are particular to their individual circumstances. It is emphasised that we will not accept responsibility for any tax effects on, or liabilities of any person resulting from the subscription for, holding or disposal of the Offer Shares or exercise of any rights attaching to them or otherwise. In particular, the Shareholders subject to overseas or Hong Kong taxation on securities dealings should consider their own tax position and, if in any doubt, should consult their own professional advisers.

We consider that we have received sufficient information to enable us to reach an informed view and to justify our reliance on the accuracy of the information and representations contained in the Circular and to provide a reasonable basis for our view and recommendation. We have taken all reasonable steps pursuant to rule 13.80 (including notes) of the Listing Rules which include the following:

(a) obtaining all the information and documents relevant to an assessment of the fairness and reasonableness of the terms of the Open Offer, including but not limited to, the Announcement, the Board Letter, the terms of the Open Offer and the annual report of the Company for the year ended 30 June 2009;
(b) researching the relevant market and the other conditions relevant to the Open Offer;
(c) reviewing the fairness, reasonableness and completeness of any assumptions or projections relevant to the Open Offer, the performance and financial situation of the Company as well as the reasons and background of the Open Offer;
(d) confirming we have not relied on any third party expert opinion or advise in forming our opinion; and
(e) reviewing and assessing other alternatives of fund raising and the reasons given by the management for rejecting these alternatives.

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LETTER FROM MENLO CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED

In assessing the Open Offer and in giving our recommendation to the Independent Board Committee and the Independent Shareholders, we have taken into account the following principal factors and reasons:

A. Financial highlights of the Group

The Company was incorporated in Bermuda with limited liability. The principal business activities are manufacture and trading of cables, wires and copper wires in the PRC.

As set out in the Company’s annual report 2008 for the year ended 30 June 2008 (the “ Annual Report 2008 ”), the Group recorded a turnover of approximately HK$3,076 million (comprising turnover of approximately HK$2,969 million and approximately HK$107 million aroused from the continuing operations and the discontinuing operations respectively), representing an increase of approximately 11.93% as compared to the turnover of approximately HK$2,748 million recorded for the previous year. As advised by the Company, the increase in turnover was mainly due to the customer network and market position established by the Company over the years which allowed the Group to maintain a steady inflow of orders for copper rod products. As set out in Annual Report 2008, the Group recorded a net profit attributable to the Shareholders of approximately HK$10.66 million (comprising net profit of approximately HK$15.52 million and net loss of approximately HK$4.86 million aroused from the continuing operations and the discontinuing operations respectively) for the year ended 30 June 2008 and a net loss of approximately HK$14.15 million for the previous year. As advised by the Company, the improvement was mainly due to the increase in turnover as mentioned above, the increase in fair value change of derivative financial instruments and the reduction of impairment loss in the discontinued operations of the Group.

As set out in the Company’s annual report 2009 for the year ended 30 June 2009 (the “ Annual Report 2009 ”), the Group recorded a turnover of approximately HK$1,197 million (comprising turnover of approximately HK$1,089 million and approximately HK$108 million aroused from the continuing operations and the discontinuing operations respectively), representing a decrease of approximately 61.08% as compared to the turnover of approximately HK$3,076 million recorded for the previous year. As advised by the Company, the decrease in turnover was primarily attributable to the consequence of the global economic downturn which led to a significant decline of the overall turnover of the Group. As set out in Annual Report 2009, the Group recorded a net loss attributable to the Shareholders of approximately HK$322.60 million (comprising net loss of approximately HK$286.52 million and approximately HK$36.09 million aroused from the continuing operations and the discontinuing operations respectively) for the year ended 30 June 2009 and a net profit of approximately HK$10.66 million for the previous year. As advised by the Company, the loss was primarily attributable to (i) the decrease in turnover as mentioned above; (ii) the substantial decrease in copper prices which affected the selling prices and profit margin of the Group’s product; and (iii) the impairment loss of the mining business due to the decline in value of the iron-ore mines.

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LETTER FROM MENLO CAPITAL

B. Reasons for the Open Offer

As set out in the Board Letter, the Directors are of the view that the Open Offer would strengthen the financial position of the Group and enable the Group to expand its capital base. In addition, the Open Offer allows the Qualifying Shareholders to maintain their respective proportional shareholdings in the Company and to participate in the future growth and development of the Company. The Directors believe that the Open Offer is in the interests of the Company and the Shareholders as a whole. The estimated net proceeds of the Open Offer is approximately HK$190.0 million. The Board intends to apply all the net proceeds for general working capital purposes as well as for future business development including but not limit to further capital investment in the existing business or other investment projects which are in line with the Group’s overall strategy.

As set out in the Annual Report 2009, as a consequence of the financial crisis which affected the global economy as a whole, the copper prices dropped dramatically since August 2008 which led to a decrease in selling prices and profit margins of the Group’s product. To mitigate the risk of fluctuation in inventory value, the Group had tightened its inventory and purchasing policy during the year 2009. As a result of the decline in demand due to the economic downturn and the drop in selling prices of the Group’s products together with the disposal of the copper rod business located in Dongguan City, turnover from the copper rod business decreased significantly by approximately 65% from the previous year and the segment loss of approximately HK$260 million was recorded for the year 2009 as compared to a segmental profit of approximately HK$76 million for the previous year.

In view that the copper rod business is the core business of the Group with the turnover for the year ended 30 June 2009 represented approximately 95.16% and approximately 86.58% of the turnover of the operating business and the total turnover of the Group for the year ended 30 June 2009 and the financial tsunami in the second half of 2008 might continue to have an adverse impact on the copper rods business of the Group, we consider the prospect of the Group remain challenging if there is no new capital and investment/expansion introduced into the Group.

Having considered that (i) the Group recorded a net loss of approximately HK$322.60 million for the year ended 30 June 2009 resulting the sharp fall of net current assets from approximately HK$311.55 million as at 30 June 2008 to approximately HK$11.12 million as at 30 June 2009; (ii) the liquidity position of the Group with bank balances and cash of approximately HK$89.00 million and borrowings repayable within one year of approximately HK$96.94 million for the year ended 30 June 2009; (iii) the financial tsunami in the second half of 2008 might continue to have an adverse impact on the core business of the Group; (iv) the tightening credit standard for banking after the global financial crisis; (v) the Open Offer would strengthen the capital base and hence the financial position of the Group; and (vi) the Open Offer allows the Qualifying Shareholders maintain their respective proportional shareholdings in the Company and participate in the

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LETTER FROM MENLO CAPITAL

growth of the Company, we concur with the Directors’ view that the Open Offer is in the ordinary and usual course of business and the interests of the Company and the Shareholders as a whole.

C. The Open Offer

The Open Offer is on the basis of two Offer Shares for every one Shares held. The subscription price is HK$0.15 per Offer Share (the “ Subscription Price ”), payable in full when a Qualifying Shareholder accepts his/her/its provisional allotment under the Open Offer.

The Subscription Price represents:

(i) a discount of approximately 57.14% to the closing price per Share of HK$0.350 as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 54.95% to the average of the closing prices per Share of approximately HK$0.333 for the last 5 trading days as quoted on the Stock Exchange up to and including the Last Trading Day;
(iii) a discount of approximately 53.99% to the average of the closing prices per Share of approximately HK$0.326 for the last 10 trading days as quoted on the Stock Exchange up to and including the Last Trading Day;
(iv) a discount of approximately 30.88% to the theoretical ex-entitlement price of approximately HK$0.217 per Share calculated based on the closing price per Share as quoted on the Stock Exchange on the Last Trading Day;
(v) a discount of approximately 75.41% to the audited consolidated net asset value per Share of approximately HK$0.61 as at 30 June 2009 (based on 650,641,300 Shares in issue as at the Last Trading Day); and
(vi) a discount of approximately 42.31% to the closing price of HK$0.26 per Share as quoted on the Stock Exchange as at the Latest Practicable Date.

As stated in the Board Letter, the Subscription Price was determined after arm’s length negotiations between the Company and the Underwriter with reference to the prevailing market condition. As the Offer Shares are offered to all Qualifying Shareholders, the Directors would like to set the Subscription Price at a level that would attract the Qualifying Shareholders to participate in the Open Offer. The Directors consider that the terms of the Open Offer, including the Subscription Price, are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM MENLO CAPITAL

(a) Historical closing prices

We have reviewed the movements in the trading price of the Shares during the period from 16 October 2008 (being the 12 calendar months period prior to the date of the Underwriting Agreement) to the Latest Practicable Date (the “ Review Period ”). The closing prices of the Shares during the Review Period are set out below:

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

0.8000
0.7000
0.6000
0.5000
0.4000
0.3000
0.2000
0.1000
0.0000
Closing Price (HK$)
16/10/2008 30/10/2008 13/11/2008 27/11/2008 11/12/2008 25/12/2008 8/1/2009 22/1/2009 5/2/2009 19/2/2009 5/3/2009 19/3/2009 2/4/2009 16/4/2009 30/4/2009 14/5/2009 28/5/2009 11/6/2009 25/6/2009 9/7/2009 23/7/2009 6/8/2009 20/8/2009 3/9/2009 17/9/2009 1/10/2009 15/10/2009 29/10/2009 6/11/2009
----- End of picture text -----

Source: website of the Stock Exchange (www.hkex.com.hk)

Note: The trading of the Shares was suspended from 8 to10 December 2008 and on 19 October 2009 during the Review Period.

As shown in the above graph, the closing prices of the Shares ranged from the lowest of HK$0.255 on 20 March 2009, 23 March 2009, 30 October 2009 and 4 November 2009 to the highest of HK$0.76 on 8 June 2009 during the Review Period. The closing price of the Shares has surged up to HK$0.73 on 7 April 2009 and we noted from the Company’s announcement dated 7 April 2009 that save as disclosed in the Company’s announcement dated 3 April 2009 in relation to the disposal of interest in a joint venture company, the Board did not aware of any matter discloseable under the general obligation imposed by rule 13.09 of the Listing Rules, which is or may be of a price-sensitive nature. The closing price of the Shares has then surged to another peak to HK$0.76 on 8 June 2009. As advised by the Company, the Company did not aware of any matter discloseable under the general obligation imposed by rule 13.09 of the Listing Rules, which is or may be of a price-sensitive nature, for such rise in the Share price, other than the placing under specific mandate as announced on 26 May 2009 and the issue of the circular on such placing on 9 June 2009. Thereafter, the closing prices of the Shares had showed a gradual downward trend and the closing prices of the

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LETTER FROM MENLO CAPITAL

Shares have been fluctuated between the range from HK$0.255 to HK$0.305 from resumption of trading of Shares on 20 October 2009 to the Latest Practicable Date.

We note that it is a common market practice that, in order to enhance the attractiveness of an open offer exercise and to encourage the existing shareholders to participate in the open offer, the price of an open offer normally represents a discount to the prevailing market prices of the relevant shares. Hence, the fact that the Subscription Price is lower than the prevailing market prices of the Shares is in line with general practice and is acceptable.

(b) Comparison with other Open Offers

In assessing the fairness of the Subscription Price, we consider a broader comparison of open offers of ordinary shares of other companies listed on the Stock Exchange to provide a more general reference for the pricing of the Open Offer. To the best of our knowledge, we have identified 21 open offers (the “ Comparables ”) conducted by the companies that are listed on the Main Board or the Growth Enterprise Market of the Stock Exchange, which announced the respective open offers from 16 April 2009 up to and including 16 October 2009, being the date of the Underwriting Agreement, for reference. As the terms of the Comparables are determined under similar market conditions and sentiments as the Open Offer, we believe that the Comparables may reflect the recent trend of the open offer transactions in the market and consider the Comparables are fair and representative samples. Details of the Comparables are summarized in the following table:

			Premium/
			(discount) of	Premium/
			subscription	(discount) of
			price over/(to)	subscription
			the closing	price over (to)
			price on the	the theoretical	Maximum
Comparable	Date of	Basis of	last trading	ex-entitlement	dilution	Underwriting	Excess
(stock code)	announcements	entitlement	day	price	(Note 1)	commission	application
			%	%	%	%
Heng Tai Consumables Group	16/04/09	1 for 2	(60.90)	(51.00)	33.33	2.50	No
Ltd (197)
Golife Concepts Holdings Ltd	23/04/09	8 for 1	(60.00)	(14.53)	88.89	not	Yes
(8172)						mentioned
RBI Holdings Limited (566)	27/04/09	4 for 1	(86.11)	(55.36)	80.00	2.50	No
Wah Sang Gas Holdings Limited	04/05/09	1 for 1	(93.80)	(88.24)	50.00	2.50	Yes
(8035)(Note 2)
Hua Han Bio-Pharmaceutical	14/05/09	1 for 2	(39.02)	(29.87)	33.33	2.50	No
Holdings Limited (587)
Shanghai Allied Cement Limited	15/05/09	1 for 2	(32.60)	(24.40)	33.33	4.00	Yes
(1060)

– 29 –

LETTER FROM MENLO CAPITAL

			Premium/
			(discount) of	Premium/
			subscription	(discount) of
			price over/(to)	subscription
			the closing	price over (to)
			price on the	the theoretical	Maximum
Comparable	Date of	Basis of	last trading	ex-entitlement	dilution	Underwriting	Excess
(stock code)	announcements	entitlement	day	price	(Note 1)	commission	application
			%	%	%	%
Beauforte Investors Corporation	27/05/09	6 for 5	70.21	23.08	54.55	0	Yes
Limited (21)(Note 3)
SMI Corporation Limited (198)	02/06/2009	3 for 1	(71.80)	(39.02)	75.00	3.0	Yes
(Note 4)
Wang Sing International	02/06/2009	2 for 1	(56.50)	(28.60)	66.67	1.25	No
Holdings Limited (2389)
Enerchina Holdings Limited	15/06/2009	1 for 2	(81.01)	(73.91)	33.33	2.00	Yes
(622)
China Zenith Chemical Group	18/06/2009	1 for 2	(53.40)	(43.30)	33.33	2.50	No
Limited (362)
GOME Electrical Appliances	22/06/2009	18 for 100	(40.00)	(36.10)	15.25	not	No
Holdings Limited (493)(Note 5)						mentioned
M Dream Inworld Limited (8100)	22/06/2009	1 for 3	(70.00)	(63.71)	25.0	2.00	Yes
Vertex Group Limited (8228)	25/06/2009	1 for 2	(38.36)	(12.79)	33.33	2.50	Yes
China Leason Investment Group	10/07/2009	3 for 7	(63.64)	(55.06)	30.0	2.50	No
Co., Limited (8270)
Sau San Tong Holdings Limited	23/07/2009	5 for 1	(83.87)	(46.52)	83.33	2.50	Yes
(8200)
China Botanic Development	10/08/2009	5 for 1	(83.61)	(45.95)	83.33	1.50	No
Holdings Limited (2349)
G-Vision International	12/08/2009	3 for 1	(75.00)	(42.86)	75.00	2.50	No
(Holdings) Limited (657)
Grandtop International Holdings	21/08/2009	8 for 5	(1.23)	(0.50)	61.54	2.50	No
Limited (2309)
Xian Yuen Titanium Resources	26/08/2009	1 for 2	(54.29)	(44.06)	33.33	2.00	No
Holdings Limited (353)
Finet Group Limited (8317)	25/09/2009	1 for 1	(22.22)	(12.50)	50.0	1.50	No
Maximum			(86.11)	(73.91)	88.89	4.00
Minimum			(1.23)	(0.50)	25.00	1.25
Mean			(56.57)	(37.94)	51.59	2.30
Company		2 for 1	(57.14)	(30.88)	66.67	2.50	No

Source: website of the Stock Exchange (www.hkex.com.hk)

– 30 –

LETTER FROM MENLO CAPITAL

Notes:

Maximum dilution effect of each open offer is calculated as: (number of offer shares to be issued under the basis of entitlement)/(number of existing shares held for the entitlement for the offer shares under the basis of entitlement + number of offer shares), e.g. for open offer with basis of 2 offer shares for every existing share held, the maximum dilution effect is calculated as 2/(2+1)= 66.67%.
As the last trading day prior to the relevant open offer announcement is in the year 2004, we consider that the discounts represented by the offer price to the closing price on such last trading day and to the theoretical ex-entitlement price per share based on the closing price on such last trading day are irrelevant as the recent market conditions and sentiments are different than those in the year 2004 and hence such open offer will not be included in our analysis.
The open offer announced by Beauforte Investors Corporation Limited was priced at a significant premium over the closing price per share on the last trading day prior to the relevant open offer announcement and to the theoretical ex-entitlement price per share based on the closing price per share on the last trading day prior to the relevant open offer announcement. The pricing of that open offer is considered to be exceptional as compared to that of other Comparables and thus may distort the result of our analysis. Therefore, such open offer is excluded in our analysis.
As the last trading day prior to the relevant open offer announcement is in the year 2005, we consider that the discounts represented by the offer price to the closing price on such last trading day and to the theoretical ex-entitlement price per share based on the closing price on such last trading day are irrelevant as the recent market conditions and sentiments are different than those in the year 2005 and hence such open offer will not be included in our analysis.
As the last trading day prior to the relevant open offer announcement is in the year 2008, we consider that the discounts represented by the offer price to the closing price on such last trading day and to the theoretical ex-entitlement price per share based on the closing price on such last trading day are irrelevant as the recent market conditions and sentiments are different than those in the year 2008 and hence such open offer will not be included in our analysis.

As shown in the above table, the discount represented by the prices to the closing prices of shares of the Comparables on the last trading days prior to the release of the respective open offer announcements ranged from discount of approximately 1.23% to approximately 86.11% (the “ LTD Market Range ”). The discount of approximately 57.14% as represented by the Subscription Price to the closing price of the Shares on the Last Trading Day falls slightly higher than the mean and within the LTD Market Range.

The discount represented by the prices to the theoretical ex-entitlement prices of the shares of the Comparables ranged from discount of approximately 0.50% to approximately 73.91% (the “ TEP Market Range ”). The discount of approximately 30.88% as represented by the Subscription Price to the theoretical ex-entitlement price falls below the mean and within the TEP Market Range.

– 31 –

LETTER FROM MENLO CAPITAL

In general, we consider that it is common for the listed issuers in Hong Kong to issue offer shares at a discount to the market price in order to enhance the attractiveness of an open offer transaction. Having considered that (i) the Subscription Price was determined after arm’s length negotiations between the Company and the Underwriter; (ii) the discount represented by the Subscription Price to the closing price of the Shares on the Last Trading Day falls within the LTD Market Range; (iii) the discount represented by the Subscription Price to the theoretical ex-entitlement price falls within the TEP Market Range; and (iv) all Qualifying Shareholders are offered an equal opportunities to subscribe for the Offer Shares, we consider the Subscription Price is fair and reasonable so far as the Independent Shareholders are concerned.

(c) Underwriting Commission

The Company will pay the Underwriter an underwriting commission of 2.5% of the total Subscription Price on the number of Offer Shares underwritten by the Underwriter. In view of (i) the underwriting commission of 2.5% falls within the range of the commissions of the Comparables; and (ii) 12 of the 21 Comparables have been charged at or above an underwriting commission of 2.5%, we consider the underwriting commission of 2.5% is in line with the market and is fair and reasonable as far as the Independent Shareholders are concerned.

(d) Application for excess Offer Shares

As set out in the Board Letter, under the Open Offer, there will be no trading in nil-paid entitlements of the Offer Shares. There is no arrangement for application of Offer Shares by Qualifying Shareholders in excess of their entitlements. Considering that each Qualifying Shareholder will be given equal and fair opportunities to participate in the Company’s future development by subscribing for his/her/its entitlements under Open Offer, if application for excess Offer Shares is arranged, the Company considers that it will put in additional effort and costs to administer the excess application procedures, which is not cost-effective from the viewpoint of the Company. Any Offer Shares not taken up by the Qualifying Shareholders will be underwritten by the Underwriter.

We consider that the absence of the excess application arrangement may not be desirable from the point of view of those Qualifying Shareholders who wish to take up additional Offer Shares in excess of their assured entitlements. However, we consider that the aforesaid should be balanced against the fact that the terms of the Open Offer are structured with an intention to encourage the Qualifying Shareholders to take up their respective assured allotment of the Offer Shares as the Subscription Price is set at a discount to the prevailing market price of the Shares which provides reasonable incentives to the Qualifying Shareholders to participate in the Open Offer. As such, it is reasonable to expect that majority of the Qualifying Shareholders who are positive about the prospects of the Company will apply for the Offer Shares

– 32 –

LETTER FROM MENLO CAPITAL

and the Offer Shares available for excess application will be minimal. The absence of excess application arrangement therefore may not be considered material to the Qualifying Shareholders. In addition, as shown in the Comparable table above, the absence of the excess application arrangement under the open offer is not uncommon.

In view of the above, we consider the absence of the excess application arrangement under the Open Offer, on balance, is acceptable.

D. Risks associated with the Open Offer

Shareholders should note that, as stated in the Board Letter, the Open Offer is subject to, among other things, the Underwriting Agreement having become unconditional and the Underwriter not having terminated the Underwriting Agreement in accordance with the terms thereof (a summary of which is set out in the sub-paragraph headed “Termination of the Underwriting Agreement” in the Board Letter). As such, the Open Offer may or may not proceed. The Shareholders and potential investors should exercise caution when dealing in the Shares, and if they are in any doubt about their position, they should consult their professional advisers.

E. Alternatives to the Open Offer

We have enquired with the Company and are advised that they have considered other methods of fund raisings such as rights issue, placement of new Shares and bank borrowing. Taking into account that (i) the Group recorded a net loss of approximately HK$322.60 million for the year ended 30 June 2009 resulting the sharp fall of net current assets from approximately HK$311.55 million as at 30 June 2008 to approximately HK$11.12 million as at 30 June 2009, the strengthening of the financial position of the Group and enable the Group to expand its capital base in a timely manner is in the interest of the Group and the Shareholders; (ii) a rights issue has a higher cost and take a longer time to complete the trading of nil-paid rights as compared to open offer and will incur more expense to the Group with net loss for the year ended 30 June 2009; (iii) a debt financing and bank borrowing will increase the gearing and incur further interest burden to the Group with net loss for the year ended 30 June 2009; (iv) any placing of new Shares without first offering the existing Shareholders the opportunity to participate in the Company’s equity raising exercise would result in dilution of shareholding of and per Share value to the existing Shareholders; and (v) the Open Offer will enable the Shareholders to maintain their proportionate interests in the Company should they so wish, we are of the view that fund raising by way of the Open Offer is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

F. Financial effect of the Open Offer

(i) Net asset value

Based on the statement of unaudited pro forma financial information set out in Appendix II of the Circular, the unaudited pro forma adjusted

– 33 –

LETTER FROM MENLO CAPITAL

consolidated net tangible assets of the Group amounts to approximately HK$536.32 million upon completion of the Open Offer representing an increase of HK$194.32 million as compared to the audited consolidated net tangible assets of the Group of approximately HK$342.0 million as at 30 June 2009. The unaudited pro forma adjusted consolidated net tangible assets per Share of the Group would be approximately HK$0.33 (based on 1,635,453,900 Shares in issue immediately following the completion of the Open Offer (excluding the Share Placing)) immediately following the completion of the Open Offer, representing a decrease of approximately 67.65% from the audited consolidated net tangible assets per Share of the Group of approximately HK$1.02 (based on 334,171,300 Shares in issue as at 30 June 2009) as at 30 June 2009.

(ii) Gearing Ratio

As set out in Annual Report 2009, as at 30 June 2009, the Group’s gearing ratio was approximately 0.27 (defined as total bank borrowings of approximately HK$108 million to the Shareholders’ funds of approximately HK$397 million). As advised by the Company, there will not be significant impact on the gearing of the Group upon completion of the Open Offer.

(iii) Working capital

The Open Offer shall have a positive effect on the Group’s working capital upon completion as the proceeds from the Open Offer will bring in a net cash inflow to the Group.

In light of the enhancement on the unaudited pro forma adjusted consolidated net tangible assets and the working capital of the Group as a result of the Open Offer, we are of the opinion that the Open Offer is in the interests of the Company and the Independent Shareholders as a whole.

G. Potential dilution effect

As the Open Offer is offered to all Qualifying Shareholders on the same basis, the Qualifying Shareholders will be able to maintain their proportional interests in the Company if they take up their allotments under the Open Offer in full. Any Qualifying Shareholders who choose not to take up in full their assured entitlements under the Open Offer will have their shareholdings in the Company diluted by up to a maximum of approximately 66.67% from their shareholding interest upon completion of the Open Offer.

In all cases of open offers, the dilution on the shareholding of those qualifying shareholders who do not take up in full their assured entitlements under the open offers is inevitable. In fact, the dilution magnitude of any open offers depends mainly on the extent of the basis of entitlement under such exercises since the higher offering ratio of new shares to existing shares is the greater the dilution on the shareholding would be.

– 34 –

LETTER FROM MENLO CAPITAL

Having taken into account:

(i) the Group recorded a net loss of approximately HK$322.60 million for the year ended 30 June 2009 resulting the sharp fall of net current assets from approximately HK$311.55 million as at 30 June 2008 to approximately HK$11.12 million as at 30 June 2009;
(ii) the liquidity position of the Group with bank balances and cash of approximately HK$89.00 million and borrowings repayable within one year of approximately HK$96.94 million for the year ended 30 June 2009;
(iii) the Open Offer would strengthen the capital base and hence the financial position of the Group;
(iv) the Open Offer is on the basis that all Qualifying Shareholders have been offered the same opportunity to maintain their proportional interests in the Company;
(v) the inherent dilutive nature of Open Offer in general;
(vi) the discount represented by the Subscription Price to the closing price of the Share on the Last Trading Day falls within the LTD Market Range;
(vii) the discount represented by the Subscription Price to the theoretical ex-entitlement price falls within the TEP Market Range; and
(viii) the positive impact on the financial position of the Group as a result of the Open Offer,

we consider the potential dilution effect on the shareholding which may only happen to the Qualifying Shareholders who decide not to accept the Open Offer is acceptable.

RECOMMENDATIONS

Taking into consideration of the above mentioned principal factors and reasons, we consider that the Open Offer is (i) in ordinary and usual course of businesses of the Group; (ii) in normal commercial terms; (iii) fair and reasonable so far as the Independent Shareholders are concerned; and (iv) in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the relevant ordinary resolution to be proposed at the SGM to approve the Open Offer.

Yours faithfully, For and on behalf of Menlo Capital Limited Michael Leung Director

– 35 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. THREE-YEAR FINANCIAL SUMMARY

Set out below is a summary of the audited consolidated results of the Group for each of the three years ended 30 June 2009 as extracted from the relevant annual reports of the Company. The auditors have expressed an unqualified opinion on those financial statements in their reports for the three years ended 30 June 2009.

CONSOLIDATED INCOME STATEMENT

Continuing operations 2009 2008 2007 HK$’000 HK$’000 HK$’000 Turnover 1,089,318 2,968,984 2,666,903 Cost of sales (1,323,985) (2,902,092) (2,590,271) Gross (loss)/profit (234,667) 66,892 76,632 Interest income 4,485 11,848 3,993 Other income 6,131 16,342 785 General and administrative expenses (43,656) (52,897) (38,906) Selling and distribution expenses (2,324) (3,135) (3,832) Finance costs (21,320) (42,624) (43,874) Share of results of a jointly-controlled entity (3,129) (2,078) (369) Gain on asset swap 53,505 – – Gains on deemed disposal of a jointly-controlled entity and disposal of available-for-sale investment, net 7,237 – – Impairment loss on intangible asset (102,917) – – Impairment loss on property, plant and equipment (19,621) – – Change in fair value of derivative financial instruments 434 32,737 19,017 Change in fair value of convertible note designated as at fair value through profit or loss and loss on disposal of assets classified as held for sale and associated liabilities 31,233 – – Impairment loss arising from adjustment to fair value less cost to sell – – – (Loss)/profit before taxation (324,609) 27,085 13,446 Taxation 35,360 (11,272) 779 (Loss)/profit for the year (289,249) 15,813 14,225	Continuing operations 2009 2008 2007 HK$’000 HK$’000 HK$’000 Turnover 1,089,318 2,968,984 2,666,903 Cost of sales (1,323,985) (2,902,092) (2,590,271) Gross (loss)/profit (234,667) 66,892 76,632 Interest income 4,485 11,848 3,993 Other income 6,131 16,342 785 General and administrative expenses (43,656) (52,897) (38,906) Selling and distribution expenses (2,324) (3,135) (3,832) Finance costs (21,320) (42,624) (43,874) Share of results of a jointly-controlled entity (3,129) (2,078) (369) Gain on asset swap 53,505 – – Gains on deemed disposal of a jointly-controlled entity and disposal of available-for-sale investment, net 7,237 – – Impairment loss on intangible asset (102,917) – – Impairment loss on property, plant and equipment (19,621) – – Change in fair value of derivative financial instruments 434 32,737 19,017 Change in fair value of convertible note designated as at fair value through profit or loss and loss on disposal of assets classified as held for sale and associated liabilities 31,233 – – Impairment loss arising from adjustment to fair value less cost to sell – – – (Loss)/profit before taxation (324,609) 27,085 13,446 Taxation 35,360 (11,272) 779 (Loss)/profit for the year (289,249) 15,813 14,225	Continuing operations 2009 2008 2007 HK$’000 HK$’000 HK$’000 Turnover 1,089,318 2,968,984 2,666,903 Cost of sales (1,323,985) (2,902,092) (2,590,271) Gross (loss)/profit (234,667) 66,892 76,632 Interest income 4,485 11,848 3,993 Other income 6,131 16,342 785 General and administrative expenses (43,656) (52,897) (38,906) Selling and distribution expenses (2,324) (3,135) (3,832) Finance costs (21,320) (42,624) (43,874) Share of results of a jointly-controlled entity (3,129) (2,078) (369) Gain on asset swap 53,505 – – Gains on deemed disposal of a jointly-controlled entity and disposal of available-for-sale investment, net 7,237 – – Impairment loss on intangible asset (102,917) – – Impairment loss on property, plant and equipment (19,621) – – Change in fair value of derivative financial instruments 434 32,737 19,017 Change in fair value of convertible note designated as at fair value through profit or loss and loss on disposal of assets classified as held for sale and associated liabilities 31,233 – – Impairment loss arising from adjustment to fair value less cost to sell – – – (Loss)/profit before taxation (324,609) 27,085 13,446 Taxation 35,360 (11,272) 779 (Loss)/profit for the year (289,249) 15,813 14,225	For the year ended 30 June Discontinued operations 2009 2008 2007 HK$’000 HK$’000 HK$’000 107,958 106,937 81,136 (104,909) (91,816) (67,383)	For the year ended 30 June Discontinued operations 2009 2008 2007 HK$’000 HK$’000 HK$’000 107,958 106,937 81,136 (104,909) (91,816) (67,383)	For the year ended 30 June Discontinued operations 2009 2008 2007 HK$’000 HK$’000 HK$’000 107,958 106,937 81,136 (104,909) (91,816) (67,383)	2009 HK$’000 1,197,276 (1,428,894)	Total 2008 HK$’000 3,075,921 (2,993,908)	2007 HK$’000 2,748,039 (2,657,654)
(234,667) 4,485 6,131 (43,656) (2,324) (21,320) (3,129) 53,505 7,237 (102,917) (19,621) 434 31,233 – (324,609) 35,360	66,892 11,848 16,342 (52,897) (3,135) (42,624) (2,078) – – – – 32,737 – – 27,085 (11,272)	76,632 3,993 785 (38,906) (3,832) (43,874) (369) – – – – 19,017 – – 13,446 779	3,049 286 43 (6,052) (2,621) (4,280) – – – – – – (26,512) – (36,087) –	15,121 346 807 (14,773) (2,757) (3,521) – – – – – – – – (4,777) (82)	13,753 705 1,264 (10,361) (2,871) (2,742) – – – – – – – (28,000) (28,252) (127)	(231,618) 4,771 6,174 (49,708) (4,945) (25,600) (3,129) 53,505 7,237 (102,917) (19,621) 434 4,721 – (360,696) 35,360	82,013 12,194 17,149 (67,670) (5,892) (46,145) (2,078) – – – – 32,737 – – 22,308 (11,354)	90,385 4,698 2,049 (49,267) (6,703) (46,616) (369) – – – – 19,017 – (28,000)
								(14,806) 652
(289,249)	15,813	14,225	(36,087)	(4,859)	(28,379)	(325,336)	10,954	(14,154)

– 36 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(Loss)/profit for the year attributable to: Equity holders of Company Minority interests Dividend (Loss)/earnings per share from continuing and discontinued operations – Basic – Diluted from continuing operations – Basic – Diluted	Continuing operations 2009 2008 2007 HK$’000 HK$’000 HK$’000 (286,516) 15,522 14,225 (2,733) 291 – (289,249) 15,813 14,225 – – 23,467	For the year ended 30 June Discontinued operations 2009 2008 2007 HK$’000 HK$’000 HK$’000 (36,087) (4,859) (28,379) – – – (36,087) (4,859) (28,379) – – –	2009 HK$’000 (322,603) (2,733) (325,336) – (140.96) HK cents (140.96) HK cents (125.19) HK cents (125.19) HK cents	Total 2008 2007 HK$’000 HK$’000 10,663 (14,154) 291 – 10,954 (14,154) – 23,467 (Restated) (Restated) 6.89 HK cents (10.57) HK cents 6.78 HK cents (10.57) HK cents 10.03 HK cents 10.62 HK cents 9.87 HK cents 10.48 HK cents	2007 HK$’000 (14,154) –
					(14,154)

					23,467


					(10.57) HK cents

					10.62 HK cents

					10.48 HK cents

– 37 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED BALANCE SHEET

As at 30 June 2009 2008 HK$’000 HK$’000 261,837 210,028 14,000 – 14,241 63,217 55,128 158,467 – 18,057 46,753 – 21,198 –	As at 30 June 2009 2008 HK$’000 HK$’000 261,837 210,028 14,000 – 14,241 63,217 55,128 158,467 – 18,057 46,753 – 21,198 –	2007 HK$’000 172,140 – 53,531 – 18,023 – 46,898
413,157 21,179 38,092 14,702 1,739 365 – – – 89,000 165,077 – 165,077 54,965 – 96,940 2,049 – – 153,954 – 153,954 11,123 424,280	449,769 330,074 357,648 100,477 29,634 1,734 625 642 26,268 147,397 994,499 102,053 1,096,552 58,305 76,963 599,278 6,682 – 372 741,600 43,405 785,005 311,547 761,316	290,592
		302,926 403,360 – 17,732 1,340 1,651 – 72,583 157,135
		956,727 79,744
		1,036,471
		59,613 142,110 601,136 5,241 466 1,362
		809,928 20,332
		830,260
		206,211
		496,803

– 38 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Non-current liabilities Borrowings Deferred tax liabilities Net assets EQUITY Capital and reserves Share capital Reserves Equity attributable to equity holders of the Company Minority interest Total equity	As at 30 June 2009 2008 HK$’000 HK$’000 11,364 – 15,790 54,143 27,154 54,143 397,126 707,173 16,709 177,061 380,417 527,376 397,126 704,437 – 2,736 397,126 707,173	2007 HK$’000 – 15,748
		15,748
		481,055

		134,627 346,428
		481,055 –
		481,055

– 39 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE TWO YEARS ENDED 30 JUNE 2009

Set out below are the audited consolidated financial statements of the Group for the two years ended 30 June 2009 which are extracted from the annual reports of the Group for the year ended 30 June 2009.

CONSOLIDATED INCOME STATEMENT

For the year ended 30 June

Continuing operations 2009 2008 HK$’000 HK$’000 1,089,318 2,968,984 (1,323,985) (2,902,092)	Continuing operations 2009 2008 HK$’000 HK$’000 1,089,318 2,968,984 (1,323,985) (2,902,092)	Discontinued operations 2009 2008 HK$’000 HK$’000 107,958 106,937 (104,909) (91,816)	Discontinued operations 2009 2008 HK$’000 HK$’000 107,958 106,937 (104,909) (91,816)	Total 2009 2008 HK$’000 HK$’000 1,197,276 3,075,921 (1,428,894) (2,993,908	Total 2009 2008 HK$’000 HK$’000 1,197,276 3,075,921 (1,428,894) (2,993,908
(234,667) 4,485 6,131 (43,656) (2,324) (21,320) (3,129) 53,505 7,237 (102,917) (19,621) 434 31,233 (324,609) 35,360	66,892 11,848 16,342 (52,897) (3,135) (42,624) (2,078) – – – – 32,737 – 27,085 (11,272)	3,049 286 43 (6,052) (2,621) (4,280) – – – – – – (26,512) (36,087) –	15,121 346 807 (14,773) (2,757) (3,521) – – – – – – – (4,777) (82)	(231,618) 4,771 6,174 (49,708) (4,945) (25,600) (3,129) 53,505 7,237 (102,917) (19,621) 434 4,721 (360,696) 35,360	82,013 12,194 17,149 (67,670 (5,892 (46,145 (2,078 – – – – 32,737 –
					22,308 (11,354
(289,249)	15,813	(36,087)	(4,859)	(325,336)	10,954

(286,516) (2,733)	15,522 291	(36,087) –	(4,859) –	(322,603) (2,733)	10,663 291
(289,249) –	15,813 –	(36,087) –	(4,859) –	(325,336) –	10,954

					–

– 40 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Continuing operations Discontinued operations 2009 2008 2009 2008 NOTES HK$’000 HK$’000 HK$’000 HK$’000 (Loss)/earnings per share from continuing and discontinued operations 13 – Basic – Diluted from continuing operations 13 – Basic – Diluted	Total 2009 2008 HK$’000 HK$’000 (Restated) (140.96) HK cents 6.89 HK cents (140.96) HK cents 6.78 HK cents (125.19) HK cents 10.03 HK cents (125.19) HK cents 9.87 HK cents	Total 2009 2008 HK$’000 HK$’000 (Restated) (140.96) HK cents 6.89 HK cents (140.96) HK cents 6.78 HK cents (125.19) HK cents 10.03 HK cents (125.19) HK cents 9.87 HK cents

		6.78 HK cents

		10.03 HK cents

		9.87 HK cents

– 41 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED BALANCE SHEET

At 30 June

NOTES ASSETS AND LIABILITIES Non-current assets Property, plant and equipment 14 Prepayments for acquisition of property, plant and equipment 14 Prepaid lease payments for land – non-current portion 15 Intangible asset 16 Interest in a jointly-controlled entity 18 Convertible note designated as at fair value through profit or loss 19 Loans receivable, secured 23 Current assets Inventories 20 Debtors, other receivables, deposits and prepayments 21 Loans receivable, secured 23 Bills receivable 22 Prepaid lease payments for land – current portion 15 Derivative financial assets 24 Tax recoverable Pledged deposits 36, 39 Bank balances and cash 39 Assets classified as held for sale 31 Current liabilities Creditors, other advances and accruals 25 Bills payable 26 Borrowings 27 Taxation Derivative financial liabilities 24 Liabilities associated with assets classified as held for sale 31 Net current assets Total assets less current liabilities	2009 HK$’000 261,837 14,000 14,241 55,128 – 46,753 21,198	2008 HK$’000 210,028 – 63,217 158,467 18,057 – –
	413,157 21,179 38,092 14,702 1,739 365 – – – 89,000 165,077 – 165,077 54,965 – 96,940 2,049 – 153,954 – 153,954 11,123 424,280	449,769
		330,074 357,648 100,477 29,634 1,734 625 642 26,268 147,397
		994,499 102,053
		1,096,552
		58,305 76,963 599,278 6,682 372
		741,600 43,405
		785,005
		311,547
		761,316

– 42 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

NOTES Non-current liabilities Borrowings 27 Deferred tax liabilities 28 Net assets EQUITY Capital and reserves Share capital 29 Reserves Equity attributable to equity holders of the Company Minority interest Total equity	2009 HK$’000 11,364 15,790 27,154 397,126 16,709 380,417 397,126 – 397,126	2008 HK$’000 – 54,143
		54,143
		707,173

		177,061 527,376
		704,437 2,736
		707,173

– 43 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

BALANCE SHEET

At 30 June 2009

Notes Non-current assets Interests in subsidiaries 17 Current assets Deposits and prepayments Bank balances and cash 39 Current liabilities Accrued charges Amounts due to subsidiaries 17 Net current assets Capital and reserves Share capital 29 Reserves 30	2009 HK$’000 137,731 113 21,136 21,249 317 176 493 20,756 158,487	2008 HK$’000 502,203
		132 164
		296
		29 –
		29
		267
		502,470

	16,709 141,778	177,061 325,409
	158,487	502,470

– 44 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2009

Share capital HK$’000 134,627	Share premium HK$’000 981	Cont- ributed surplus HK$’000 (Note (a)) 172,724	Exchange reserve HK$’000 (Note (b)) 18,868	Statutory reserve fund HK$’000 (Note (c)) –	Special reserve HK$’000 (Note (d)) (43,246)	Share option reserve HK$’000 (Note (e)) 4,128	(Accu- mulated losses)/ retained profits a HK$’000 192,973	Total ttributable to the equity holders of the Company HK$’000 481,055	Minority interest HK$’000 –	Total HK$’000 481,055
– – – 22,000 434 – – – 20,000 – 177,061 – – – – – (168,208) 6,971 885 – – –	– – – 87,561 163 186 – – 36,000 – 124,891 – – – – – – 35,162 6,567 – 3,420 –	– – – – – – – – – – 172,724 – – – – – 168,208 – – – – –	38,602 – 38,602 – – – – – – – 57,470 (1,748) (3,044) (32,921) – (37,713) – – – – – –	– – – – – – – 14,005 – – 14,005 – – – – – – – – – – –	– – – – – – – – – – (43,246) – – – – – – – – – – –	– – – – – (186) 7,959 – – (1,275) 10,626 – – – – – – – – 3,420 (3,420) (10,626)	– 10,663 10,663 – – – – (14,005) – 1,275 190,906 – – – (322,603) (322,603) – – – – – 10,626	38,602 10,663 49,265 109,561 597 – 7,959 – 56,000 – 704,437 (1,748) (3,044) (32,921) (322,603) (360,316) – 42,133 7,452 3,420 – –	71 291 362 – – – – – 2,374 – 2,736 (3) – – (2,733) (2,736) – – – – – –	38,673 10,954
										49,627 109,561 597 – 7,959 – 58,374 –
										707,173
										(1,751) (3,044) (32,921) (325,336)
										(363,052) – 42,133 7,452 3,420 – –
16,709	170,040	340,932	19,757	14,005	(43,246)	–	(121,071)	397,126	–	397,126

– 45 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes:

(a) In prior years, the Group undertook a capital reorganisation resulting in eliminating the share premium account of the Company as at 30 September 2005 of HK$260,881,000 against the accumulated losses as at 30 September 2005 of HK$88,157,000 with the remaining balance of HK$172,724,000 credited to contributed surplus of the Company.

During the current year, the Group undertook a capital reorganisation resulting in eliminating the share capital of the Company of HK$168,208,000 which was credited to the contributed surplus of the Company.

(b) The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations and share of reserve of a jointly-controlled entity.
(c) According to articles of association of the Group’s subsidiary operating in the People’s Republic of China (the “PRC”), the subsidiary is required to transfer 10% of its net profit as determined in accordance with the PRC Accounting Rules and Regulations to its statutory reserve fund until the reserve balance reaches 50% of the registered capital. The transfer to this reserve must be made before distribution of dividend to equity holders of the PRC subsidiary.
(d) The special reserve arose from the business combination carried out by the Company in 2004, which was accounted for as a reverse acquisition. The details of the transaction were set out in the circular of the Company dated 14 June 2004.
(e) The share option reserve represents the fair value of the actual or estimated number of unexercised share options granted to the eligible parties.

– 46 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 30 June 2009

Notes Operating activities (Loss)/profit before taxation Adjustments for: Depreciation of property, plant and equipment 7 Amortisation of intangible asset 7 Charge of prepaid lease payments for land 7 Impairment loss on prepaid lease payments for land 7 Impairment loss on property, plant and equipment Impairment loss on intangible asset Equity-settled share-based payments 7 Change in fair value of derivative financial instruments Change in fair value of convertible notes Allowance for doubtful debts 7 Bad debts written off 7 Gain on disposal of property, plant and equipment, net 7 Gain on asset swap Gains on deemed disposal of a jointly-controlled entity and disposal of available-for-sale investment, net Loss on disposal of assets held for sale Interest income Finance costs 9 Share of results of a jointly-controlled entity Operating cash flows before movements in working capital Decrease/(increase) in inventories Decrease in debtors, other receivables, deposits and prepayments Decrease/(increase) in bills receivable Decrease in creditors, other advances and accruals Decrease in bills payable Decrease in derivative financial instruments Net cash generated from/(used in) operating activities of assets and liabilities held for sale Cash generated from/(used in) operations Hong Kong profits tax refunded/(paid) Taxation in Mainland China Net cash generated from/(used in) operating activities	2009 HK$’000 (360,696) 22,819 422 1,125 488 19,621 102,917 3,420 (434) (31,233) 364 3,452 (4) (53,505) (7,237) 26,512 (4,485) 21,320 3,129	2008 HK$’000 22,308 16,148 364 1,528 – – – 7,959 (32,737) – – – – – – – (11,848) 42,624 2,078 48,424 (24,858) 47,570 (11,902) (39,278) (65,147) 32,773 (1,184) (13,602) (11,595) (2,141) (27,338)
	(252,005) 300,418 178,445 9,471 (8,220) (1,963) 687 7,776 234,609 6,024 (562) 240,071	48,424 (24,858 47,570 (11,902 (39,278 (65,147 32,773 (1,184
		(13,602 (11,595 (2,141
		(27,338

– 47 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes Investing activities Interest received Loans repaid by/(advanced to) third parties Net proceeds on disposal of a jointly-controlled entity 18 Purchases of property, plant and equipment Proceeds on disposal of property, plant and equipment Direct costs incurred for disposal of subsidiaries 32 Additions of prepaid lease payments for land Net cash outflow arising from acquisition of subsidiaries 33 Settlement of promissory note receivable Net cash outflow arising from the asset swap 32 Net cash outflow arising from the disposal of assets and liabilities held for sale 31 Net cash used in investing activities of assets and liabilities held for sale Net cash used in investing activities Financing activities Interest paid on borrowings Interest paid on finance leases Repayment of obligations under finance leases Net proceeds from issue of shares New borrowings raised Repayment of borrowings (Increase)/decrease in pledged deposits Net cash generated from/(used in) financing activities of assets and liabilities held for sale Net cash (used in)/generated from financing activities Net decrease in cash and cash equivalents Effect of foreign exchange rate changes Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year Analysis of the balances of cash and cash equivalents Bank balances and cash Bank balances and cash attributable to assets classified as held for sale	2009 HK$’000 1,439 23,166 19,121 (11,305) 2,479 (1,497) – – 13,445 (62,682) (7,187) –	2008 HK$’000 11,848 (53,579) – (3,730) 4,064 – (4,260) (65,812) – – – (661) (112,130) (42,602) (22) (466) 110,158 1,956,934 (1,958,792) 46,315 (284) 111,241 (28,227) 15,596 161,860 149,229 147,397 1,832 149,229
	(23,021) (18,625) – – 49,585 677,672 (978,987) (1,283) 750 (270,888) (53,838) (6,391) 149,229	(112,130
		(42,602 (22 (466 110,158 1,956,934 (1,958,792 46,315 (284
		111,241
		(28,227 15,596 161,860
	89,000
	89,000 –	147,397 1,832
	89,000

– 48 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 June 2009

1. ORGANISATION AND OPERATIONS

The Company is incorporated in Bermuda as an exempted company with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The addresses of the registered office and principal place of business of the Company are disclosed in Corporate Information in the annual report.

The Company is an investment holding company. The activities of the Company’s subsidiaries and jointly-controlled entity are set out in Notes 17 and 18 respectively. During the year, the Group’s interest in a jointly-controlled entity and life-like plants and production business were entirely disposed of, further details of which are set out in Note 18 and 31 respectively. There is also an asset swap arrangement during the year, further details of which is set out in Note 32.

In prior years, the directors regarded Hong Kong dollar as the functional currency of the Company. During the year, the directors reassessed the Company’s functional currency after the asset swap in February 2009. The directors considered that the functional currency of the Company should be changed from Hong Kong dollar to Renminbi after the asset swap. The change of functional currency is applied prospectively from the date of change in accordance with HKAS 21 ‘The Effect of Change in Foreign Exchange Rates’. As the Company is listed on the Main Board of the Stock Exchanges of Hong Kong, the directors consider that it will be more appropriate to adopt Hong Kong dollar as the Group’s and the Company’s presentation currency. All values are rounded to the nearest thousand except where otherwise indicated.

2. ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

In the current year, the Group has adopted all of the new and revised Hong Kong Financial Reporting Standards (“HKFRSs”), which in collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) that are relevant to its operations and effective for the current accounting period of the Group and the Company. The adoption of these new and revised HKFRSs did not result in substantial changes to the Group’s accounting policies.

The adoption of HK(IFRIC) – Int 12 “Service concession arrangements”, HK(IFRIC) – Int 13 “Customer Loyalty Programmes”, HK(IFRIC) – Int 14 “HKAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction”, HK(IFRIC) – Int 9 & HKAS 39 Amendments “Embedded Derivatives” and HKAS 39 & HKFRS 7 Amendments “Reclassification of financial assets” has no impact on these financial statements.

– 49 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At the date of approval of these financial statements, the following Standards and Interpretations were in issue but not yet effective:

Effective date

HKAS 1 (Revised)	Presentation of financial statements	(i)
HKAS 23 (Revised)	Borrowing costs	(i)
HKAS 32 & HKAS 1	Puttable financial instruments and	(i)
(Amendments)	obligations arising on liquidation
HKFRS 1 & HKAS 27	Cost of an investment in a subsidiary,	(i)
(Amendments)	jointly controlled entity or associate
HKFRS 8	Operating segments	(i)
HK(IFRIC) – Int 15	Agreements for the construction of real	(i)
	estates
HKFRS 2 (Amendment)	Vesting conditions and cancellations	(i)
HKFRS 2 (Amendment)	Group Cash – Settled Share-based Payment	(v)
	Transaction
HKFRS 7 (Amendment)	Improving disclosures about financial	(i)
	instruments
HKAS 27 (Revised)	Consolidated and separate financial	(ii)
	statements
HKAS 39 (Amendment)	Eligible hedged items	(ii)
HKFRS 1 (Revised)	First-time adoption of HKFRSs	(ii)
HKFRS 1 (Amendments)	Amendments to HKFRS 1 First-time	(v)
	Adoption of Hong Kong Financial
	Reporting Standards – Additional
	Exemptions for First-time Adopters
HKFRS 3 (Revised)	Business combinations	(ii)
HK(IFRIC) – Int 17	Distributions of non-cash assets to owners	(ii)
HK(IFRIC) – Int 16	Hedges of a net investment in a foreign	(iii)
	operation
HK(IFRIC) – Int 18	Transfers of assets from customers	(iv)
2008 Improvements to	– HKAS 1, HKAS 16, HKAS 19,	(i)
HKFRSs that may result in	HKAS 20, HKAS 23, HKAS 27,
accounting changes for	HKAS 28, HKAS 29, HKAS 31,
presentation, recognition	HKAS 36, HKAS 38, HKAS 39,
or measurement	HKAS 40 & HKAS 41
	– HKFRS 5	(ii)
2009 Improvements to	– HKAS 39 (80)	(i)
HKFRSs that may result in	– HKAS 38, HKFRS 2, HK(IFRIC)	(ii)
accounting changes for	– Int 9, HK(IFRIC) – Int 16
presentation, recognition	– HKAS 1, HKAS 7, HKAS 17,	(v)
or measurement	HKAS 36, HKAS 39, HKFRS
	5, HKFRS 8

Effective date

(i) Annual periods beginning on or after 1 January 2009
(ii) Annual periods beginning on or after 1 July 2009

(iii) Annual periods beginning on or after 1 October 2008

(iv) Transfers of assets from customers received on or after 1 July 2009

(v) Annual periods beginning on or after 1 January 2010

The Group is in the process of making an assessment of what the impact of these new or revised Standards or Interpretations is expected to be in the period of their initial application.

– 50 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

These financial statements have been prepared in accordance with all applicable HKFRSs, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance.

Basis of preparation of financial statements

The financial statements have been prepared under the historical cost convention, except for certain financial instruments, which are measured at fair value, as explained in the accounting policies set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and 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 year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

All inter-company transactions, balances, income, expenses and unrealised gains on transaction between group enterprises are eliminated in full on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment on the asset transferred.

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

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

Business combinations

Acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured as 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 are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale, which are recognised and measured at fair value less costs to sell.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Subsidiaries

Subsidiaries are entities in which the Group has the power to govern the financial and operating policies, so as to obtain benefits from their activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

– 51 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Interests in subsidiaries are included in the Company’s balance sheet at cost less any impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

Joint ventures

Joint venture arrangements that involve the establishment of a separate entity in which venturers have joint control over the economic activity of the entity are referred to as jointly-controlled entities. Joint control exists when the strategic financial and operating policy decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control.

The results and assets and liabilities of jointly-controlled entity are incorporated in the consolidated financial statements using the equity method of accounting. Under the equity method, investment in jointly-controlled entity is carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the profit or loss and of changes in equity of the jointly-controlled entity, less any identified impairment losses. When the Group’s share of losses of a jointly-controlled entity equals or exceeds its interest in that jointly-controlled entity, the Group discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that jointly-controlled entity.

When a group entity transacts with a jointly-controlled entity of the Group, unrealised profits or losses are eliminated to the extent of the Group’s interest in the jointly-controlled entity, except to the extent that unrealised losses provide evidence of an impairment of the asset transferred, in which case, the full amount of losses is recognised.

Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of the assets’ (disposal groups’) previous carrying amount and fair value less costs to sell.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for goods sold and services provided in the normal course of business, net of returns, discounts and other similar allowances and excludes value-added tax or other sales related taxes.

(i) Sales of goods are recognised when goods are delivered and title has passed.
(ii) Interest income from a financial asset is accrued on a time-apportioned 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.
(iii) Rental income from operating leases is recognised in equal instalments over the accounting periods covered by the lease term.
(iv) Revenue for providing services is recognised when the services have been rendered.

Property, plant and equipment

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses.

– 52 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Buildings are depreciated over the shorter of the term of the lease or fifty years using the straight-line method.

Leasehold improvements are depreciated over the shorter of the remaining term of the lease or at 5% per annum using the straight-line method.

Depreciation is provided to write off the cost of property, plant and equipment other than properties under construction, over their estimated useful lives, using the reducing balance method, at the following rates per annum:

Equipment, furniture and fixtures 6.67% – 30% Plant and machinery (including mining-related machinery and equipment) 6.67% – 20% Motor vehicles 12.5% – 30%

Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment losses. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

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 derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated income statement in the year in which the item is derecognised.

Prepaid lease payments for land

Prepaid lease payments for land are stated at cost less subsequent accumulated amortisation and any accumulated impairment losses. The costs of prepaid lease payments for land are amortised on a straight-line basis over the respective terms of the land use rights.

Deferred overburden removal costs

Stripping ratios are determined by comparing the quantity of iron-ore concentrated powder mined to the quantity of overburden, or waste removed to access the iron-ore concentrated powder. Costs are deferred to the consolidated balance sheet, where appropriate, when the actual stripping ratios vary from the planned mine average stripping ratios. Deferral of costs to the balance sheet is not made where the actual stripping ratio is expected to be evenly distributed. Costs, which have previously been deferred to the balance sheet (deferred overburden removal costs), are included in the income statement on the units of production basis utilising average stripping ratios. Changes in estimates of average stripping ratios are accounted for prospectively from the date of the change.

Intangible assets

Mining right

Mining right is stated at cost less accumulated amortisation and any impairment losses and is amortised on the units of production method utilising only proven and probable iron-ore reserves in the depletion base.

Exploration and evaluation assets

Exploration and evaluation assets comprise costs which are directly attributable to: researching and analysing existing exploration data; conducting geological studies, exploratory drilling and sampling; examining and testing extraction and treatment methods; and compiling pre-feasibility and feasibility studies. Exploration and evaluation assets also include the costs incurred in acquiring mining rights, the entry premiums paid to gain access to areas of interest and amounts payable to third parties to acquire interests in existing projects.

– 53 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

During the initial stage of a project, exploration and evaluation costs are expensed as incurred. Expenditure on a project after it has reached a stage at which there is a high degree of confidence in its viability is capitalised as exploration and evaluation assets and not amortised, and transferred to mining rights if the project proceeds. If a project does not prove viable, all irrecoverable costs associated with the project are expensed in the income statement. Exploration and evaluation assets are stated at cost less impairment losses, if any.

Impairment of exploration and evaluation assets

The carrying amount of the exploration and evaluation assets is reviewed annually and adjusted for impairment in accordance with HKAS 36 “Impairment of Assets” whenever one of the following events or changes in circumstances indicate that the carrying amount may not be recoverable (the list is not exhaustive):

the period for which the entity has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed.
substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned.
exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area.
sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

An impairment loss is recognised in the income statement whenever the carrying amount of an asset exceeds its recoverable amount.

Impairment of assets

At each balance sheet date, the Group reviews the carrying amounts of its 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 losses (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

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

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

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

– 54 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost, including an appropriate portion of fixed and variable overhead expenses, is calculated using the first-in, first-out method. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in the income statement in the period in which they are incurred.

Taxation

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

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes income statement items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.

Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

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

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the consolidated income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the assets concerned to the lessee. Assets held under finance leases are capitalised at their fair values at the inception of the lease or, if lower, at the present

– 55 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

value of the minimum lease payments. The corresponding liability to the lessor, net of interest charges, is included in the balance sheet as a finance lease obligation. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are charged to the income statement over the period of the relevant leases so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

All other leases are classified as operating leases and the rentals are charged to the consolidated income statement on a straight line basis over the relevant lease terms.

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 functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet 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 as profit or loss in the period in which they arise. Exchange differences arising on the translation of non-monetary items carried at fair value are included as profit or loss.

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Company (i.e. Hong Kong dollars) at the rate of exchange prevailing at the balance sheet date, and their income and expenses are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised as a separate component of equity (the exchange reserve). Such exchange differences are recognised as profit or loss in the period in which the foreign operation is disposed of.

Financial instruments

Financial assets and financial liabilities are recognised in the balance sheet when the Group 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 and 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 in profit or loss.

Financial assets

Financial assets at fair value through profit or loss

Convertible note designated as at fair value through profit or loss is classified as at fair value through profit or loss. Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in the consolidated income statement incorporates any dividend or interest earned on the financial assets.

– 56 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Loans and receivables

The Group’s non-derivative financial assets mainly include loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables (including debtors, other receivables, loans receivable, bills receivable and bank deposits) are carried at amortised cost using the effective interest method, less any identified impairment losses. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. Impairment losses are reversed in subsequent periods when an increase in the asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance sheet date. 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 impacted.

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

significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor.

If any such evidence exists, any impairment loss is determined and recognised as follows:

For loans and other receivables carried at amortised cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate, where the effect of discounting is material. This assessment is made collectively where financial assets carried at amortised cost share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade and other receivables directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in the income statement.

– 57 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Effective interest method

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

Income is recognised on an effective interest basis for debt instruments other than those financial assets designated as at fair value through profit or loss.

Financial liabilities and equity

Financial liabilities and equity instruments issued by an entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

Borrowings

Bank borrowings are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the terms of the borrowings.

Other financial liabilities

Other financial liabilities including creditors, other advances and bills payable are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

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

Derivatives not qualified for hedging

Derivatives that do not qualify for hedge accounting are deemed as financial assets/financial liabilities held for trading and are measured at fair value with fair value changes recognised in profit or loss except for derivative instruments which are linked to and must be settled by delivery of unquoted equity instruments whose fair value cannot be reliably measured and such derivative instruments are stated at cost less any impairment losses, if applicable.

Derecognition

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

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

– 58 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, 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.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Provision for close down, restoration and environmental costs

One consequence of iron-ore mining is land subsidence caused by the resettlement of the land at the mining sites. Depending on the circumstances, the Group may relocate inhabitants from the mining sites prior to conducting mining activities or the Group may compensate the inhabitants for losses or damage from close down and land subsidence after the sites have been mined. The Group may also be required to make payments for restoration, rehabilitation or environmental protection of the land after the sites have been mined.

Close down and restoration costs include the dismantling and demolition of infrastructure and the removal of residual materials and remediation of disturbed areas. Close down and restoration costs are provided in the accounting period when the obligation arising from the related disturbance occurs, whether this occurs during mine development or during the production phase, based on the net present value of estimated future costs. The cost is capitalised where it gives rise to future benefits, whether the rehabilitation activity is expected to occur over the life of the operation or at the time of close down. The capitalised cost is amortised over the life of the operation and the increase in the net present value of the provision is included in borrowing costs. Where there is a change in the expected decommissioning and restoration costs, an adjustment is recorded against the carrying amount of the provision and related assets, and the effect is then recognised in the income statement on a prospective basis over the remaining life of the operation. Provision for close down and restoration costs do not include any additional obligations which are expected to arise from future disturbance. The cost estimates are reviewed and revised at each balance sheet date to reflect changes in conditions.

Share-based payment transactions

Equity-settled share-based payment transactions

Share options granted to employees of the Company and others providing similar services

The fair value of share options has been recognised in the consolidated income statement as share-based payments.

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

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

Share options granted to others

Share options issued in exchange for goods or services are measured at the fair values of the goods or services received unless that fair value cannot be estimated reliably, in which case, the fair value is estimated by reference to the fair value of the share options. 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 share option reserve.

– 59 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Employees’ benefits

Short term benefits

Salaries, annual bonuses, paid annual leaves and other allowances are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present value.

Defined contribution pension obligations

Contributions to defined contribution retirement plans are recognised as an expense in profit or loss when the services are rendered by the employees. The Group has no further payment obligations once the contributions have been made.

Related parties

Two parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals (being members of key management personnel, significant shareholders and/or their close family members) or other entities and include entities which are under the significant influence of related parties of the Group where those parties are individuals, and post-employment benefit plans which are for the benefit of employees of the Group or of any entity that is a related party of the Group.

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

The Group makes estimates and assumptions concerning the future in preparing accounting estimates. The resulting accounting estimates may not equal to the actual results. The key estimates and assumptions that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed as below.

Net realisable value of inventories

Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expenses. These estimates are based on the current market condition and the historical experience of manufacturing and selling products of similar nature. It could change significantly as a result of competitors’ actions in response to severe industry cycles. Management will reassess the estimations at each balance sheet date.

Depreciation of property, plant and equipment

Property, plant and equipment is depreciated on a straight-line basis and reducing balance method over their estimated useful lives, after taking into account the estimated residual values, if any. The Group reviews the estimated useful lives and the estimated residual values, if any, of the assets regularly in order to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives and residual values are based on the Group’s historical experience with similar assets and taking into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.

– 60 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Income taxes

The Group is subject to income taxes in Hong Kong and PRC jurisdictions. The Group carefully evaluates tax implications of transactions in accordance with prevailing tax regulations and makes tax provision accordingly. However, judgement is required in determining the Group’s provision for income taxes as there are many transactions and calculations of which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Reserve estimates and impairment of mining right

Reserves are estimates of the amount of products that can be economically and legally extracted from the Group’s properties. In order to calculate reserves, estimates and assumptions are required about a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs, transport costs, commodity demand and commodity prices.

Estimating the quantity and/or grade of reserves requires the size, shape and depth of ore bodies or fields to be determined by analysing geological data such as drilling samples. This process may require complex and difficult geological judgments and calculations to interpret the data.

Because the economic assumptions used to estimate reserves change from period to period, and because additional geological data is generated during the course of operations, estimates of reserves may change from period to period. Changes in reported reserves may affect the Group’s financial results and financial position in a number of ways, including the following:

(i) Asset carrying values may be affected due to changes in estimated future cash flows.
(ii) Depreciation, depletion and amortisation charged in the consolidated income statement may change where such charges are determined by the units of production basis, or where the useful economic lives of assets change.
(iii) Decommissioning, site restoration and environmental provisions may change where changes in estimated reserves affect expectations about the timing or cost of these activities.
(iv) The carrying value of deferred tax may change as a result of changes in the asset carrying values as discussed above.

Provision for close down, restoration and environmental costs

The provision for close down, restoration and environmental costs is determined by management based on their past experience and best estimation of future expenditures, after taking into account existing relevant PRC regulations. However, in so far as the effect on the land and the environment from current mining activities becomes apparent in future years, the estimate of the associated costs may be subject to revision from time to time.

5. FINANCIAL RISK MANAGEMENT

a. Financial risk management objectives and policies

The Group’s major financial instruments include debtors, other receivables, loans receivable, derivative financial assets and liabilities, pledged deposits, bank balances, creditors, bills payable, 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 Group manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

– 61 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Foreign currency risk

Most of the Group’s assets and liabilities are denominated in Hong Kong dollars, United States dollars and Renminbi, which are the functional currencies of respective group companies. There is also no significant exposure arising from exchange forward contracts. The Group does not expect any significant exposure to foreign currency risks.

Credit risk

The Group’s maximum exposure to credit risk in the event of the counterparties’ failure to perform their obligations in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated balance sheet. In order to minimise credit risk, the Group has policies in place for determination of credit limits, credit approvals and other 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 each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the credit risk is significantly reduced.

Except for loans receivable from third parties, the Group has no significant concentration of credit risk with exposure spread over a number of counterparties and customers.

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

Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade debtors are set out in Note 21.

Interest rate risk

Cash flow interest rate risk is the risk that the cash flows of the financial instruments will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the fair value of the financial instruments will fluctuate because of changes in market interest rates. The Group is exposed to cash flow interest rate risk which relates primarily to the Group’s floating-rate bank borrowings and the details of borrowings are disclosed in Note 27. Management closely monitors cash flow interest rate risk and will consider hedging significant interest rate exposure should the need arise.

The interest rates and terms of repayment of the Group’s borrowings are disclosed in Note 27.

At 30 June 2009, it is estimated that a general increase/decrease of 100 basis points in interest rates, with all other variables held constant, would increase/decrease the Group’s loss after taxation and accumulated losses by HK$5,294,000 (2008: decrease/increase the profit and retained profits by HK$5,992,000).

The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the balance sheet date and had been applied to the exposure to interest rate risk for both derivative and non-derivative financial instruments in existence at that date. The 100 basis point increase or decrease represents management’s assessment of a reasonably possible change in interest rates over the period until the next annual balance sheet date. The analysis is performed on the same basis for 2008.

Liquidity risk

Individual operating entities within the Group are responsible for their own cash management, including the short term investment of cash surpluses and the raising of loans to cover expected cash demands, subject to approval by the Company’s board when the borrowings exceed certain predetermined levels of authority. The Group’s policy is to regularly monitor its liquidity requirements and its compliance with lending covenants,

– 62 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

The following table details the remaining contractual maturities at the balance sheet date of the Group’s non-derivative financial liabilities and derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates, or if floating, based on rates current at the balance sheet date) and the earliest date the Group can be required to pay.

Carrying amount Total contractual undiscounted cash flow HK$’000 HK$’000 108,304 110,799 54,965 54,965 163,269 165,764 – – – –	Carrying amount Total contractual undiscounted cash flow HK$’000 HK$’000 108,304 110,799 54,965 54,965 163,269 165,764 – – – –	Within 1 year or on demand HK$’000 96,940 54,965 151,905 – –	More than 1 year but less than 2 years HK$’000 – – – – –	More than 2 years but less than 5 years HK$’000 13,859 – 13,859 – –	More than 5 years HK$’000 – –
					–

					–
					–

599,278 135,268	613,318 135,268	613,318 135,268	– –	– –	– –
734,546	748,586	748,586	–	–	–

372	372	372	–	–	–
372	372	372	–	–	–

Copper price risk

The Group is exposed to price risk of copper rods, which are the major raw materials for the production process. To mitigate the copper price risk, the Group has entered into copper futures contracts to hedge against the fluctuations of copper price. Details of the copper futures contracts outstanding at balance sheet date are set out in Note 24.

– 63 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 30 June 2008, it was estimated that a general increase/decrease of 10% in copper futures contract price, with all other variables held constant, would decrease/increase the Group’s profit after taxation and retained profits by HK$4,976,000 in respect of the instruments outstanding throughout the last year. At 30 June 2009, the Group has no outstanding copper futures contract as detailed in Note 24.

The sensitivity analysis above has been determined assuming that the change in copper futures contract price had occurred at the balance sheet date and had been applied to the exposure to copper futures contract price risk for both derivative and non-derivative financial instruments in existence at that date. The 10% increase or decrease represents management’s assessment of a reasonably possible change in copper futures contract price over the period until the next annual balance sheet date.

b. Fair value

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 on active liquid markets are determined with reference to quoted market prices; and
the fair values of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices or rates from observable current market transactions.

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

6. TURNOVER AND SEGMENTAL INFORMATION

Turnover, which is also revenue, represents the amounts received and receivable for goods sold to outside customers, net of returns and discounts and sales related taxes during the year.

Business segments

For management purposes, the Group has five principal operating divisions – (i) manufacture and trading of copper rods; (ii) iron-ore mining, manufacture and sale of iron-ore concentrated powder; (iii) manufacture and sale of cable and wires; (iv) manufacturing and trading of life-like plants; and (v) production, distribution and licensing of television programmes.

Segment information about these businesses is presented below as primary segment information.

On 21 May 2007, the Company announced a plan to dispose of its business of manufacture and trading of life-like plants based on a conditional sale and purchase agreement dated 19 May 2007. Accordingly, the business segment of manufacture and trading of life-like plants (the “Life-like Plants Operation”) was classified as discontinued operation in the prior years. According to the supplemental agreements dated 19 September 2007, 17 December 2007, 28 February 2008, 20 May 2008 and 30 September 2008, entered into among the Group, the purchaser and Kong Sun Holdings Limited (the holding company of the purchaser), the long stop date and the disposal of the Life-like Plants Operation is extended to 31 December 2008. Kong Sun Holdings Limited and its subsidiaries are collectively referred to as the Kong Sun Group. The disposal of Life-like Plants Operation was completed on 16 December 2008, details of which are disclosed in the Company’s announcement dated 16 December 2008.

Since 2007, the Group ceased all the operations relating to the production, distribution and licensing of television programmes. The related inventories, which were master tapes of television programmes, have been fully sold or written off and no further sales transaction was generated from this business segment. Accordingly, the business segment of production, distribution and licensing of television programmes was classified as discontinued operation in the prior years.

– 64 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the year ended 30 June 2009

Total HK$’000 1,089,318 (285,656)	Discontinued operations Life-like plants Production, distribution and licensing of television programmes Total Consolidated HK$’000 HK$’000 HK$’000 HK$’000 107,958 – 107,958 1,197,276 (9,575) – (9,575) (295,231)	Discontinued operations Life-like plants Production, distribution and licensing of television programmes Total Consolidated HK$’000 HK$’000 HK$’000 HK$’000 107,958 – 107,958 1,197,276 (9,575) – (9,575) (295,231)	Discontinued operations Life-like plants Production, distribution and licensing of television programmes Total Consolidated HK$’000 HK$’000 HK$’000 HK$’000 107,958 – 107,958 1,197,276 (9,575) – (9,575) (295,231)	Discontinued operations Life-like plants Production, distribution and licensing of television programmes Total Consolidated HK$’000 HK$’000 HK$’000 HK$’000 107,958 – 107,958 1,197,276 (9,575) – (9,575) (295,231)

				(295,231)

2,647 (7,420) 7,237 31,233 53,505 (102,917) (19,621) (488) (3,129) (324,609) 35,360	– – – (26,512) – – – – –	– – – – – – – – –	– – – (26,512) – – – – – (36,087) –	2,647 (7,420) 7,237 4,721 53,505 (102,917) (19,621) (488) (3,129)
				(360,696) 35,360
(289,249)			(36,087)	(325,336)

– 65 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 30 June 2009

					Production,
					distribution
					and
		Iron-ore			licensing of
		concentrated	Cable and	Life-like	television
	Copper rods	powder	wires	plants	programmes	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
BALANCE SHEET
Assets
Segment assets	80,454	77,842	254,946	–	–	413,242
Unallocated corporate
assets						164,992
Consolidated total assets						578,234

Liabilities
Segment liabilities	(26,142)	(22,244)	(85,159)	–	(34,510)	(168,055)
Unallocated corporate
liabilities						(13,053)
Consolidated total
liabilities						(181,108)

OTHER INFORMATION

		Continuing	operations			Discontinued	operations
						Production,
						distribution
		Iron-ore				and licensing
	Copper	concentrated	Cable and		Life-like	of television
	rods	power	wires	Total	plants	programmes	Total	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Capital additions	120	1,830	9,355	11,305	169	–	169	11,474
Depreciation	10,769	6,411	5,639	22,819	689	–	689	23,508
Allowance for doubtful debts	–	364	–	364	–	–	–	364
Bad debts written off	3,452	–	–	3,452	–	936	936	4,388

– 66 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the year ended 30 June 2008

Continuing operations Copper rods Iron-ore concentrated power Total HK$’000 HK$’000 HK$’000 2,964,803 4,181 2,968,984 76,036 (2,356) 73,680 – – 7,872 – – (9,765) – – (42,624) (2,078) – (2,078) 27,085 (11,272) 15,813	Discontinued operations Life-like plants Production, distribution and licensing of television programmes TotalConsolidated HK$’000 HK$’000 HK$’000 HK$’000 106,937 – 106,937 3,075,921 (492) (719) (1,211) 72,469	Discontinued operations Life-like plants Production, distribution and licensing of television programmes TotalConsolidated HK$’000 HK$’000 HK$’000 HK$’000 106,937 – 106,937 3,075,921 (492) (719) (1,211) 72,469	Discontinued operations Life-like plants Production, distribution and licensing of television programmes TotalConsolidated HK$’000 HK$’000 HK$’000 HK$’000 106,937 – 106,937 3,075,921 (492) (719) (1,211) 72,469	Discontinued operations Life-like plants Production, distribution and licensing of television programmes TotalConsolidated HK$’000 HK$’000 HK$’000 HK$’000 106,937 – 106,937 3,075,921 (492) (719) (1,211) 72,469

				72,469

7,872 (9,765) (42,624) (2,078) 27,085 (11,272)	– – – –	– – – –	– (45) (3,521) – (4,777) (82)	7,872 (9,810 (46,145 (2,078
				22,308 (11,354
15,813			(4,859)	10,954

				Production,
				distribution
		Iron-ore		and licensing
	Copper	concentrated	Life-like	of television
	rods	powder	plants	programmes	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
BALANCE SHEET
Assets
Segment assets	1,139,077	207,241	102,053	974	1,449,345
Interest in a jointly-controlled entity	18,057	–	–	–	18,057
Unallocated corporate assets					78,919
Consolidated total assets					1,546,321
Liabilities
Segment liabilities	706,038	57,992	43,405	30,334	837,769
Unallocated corporate liabilities					1,379
Consolidated total liabilities					839,148

– 67 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

OTHER INFORMATION

	Continuing operations	Continuing operations		Discontinued operations	Discontinued operations	Discontinued operations
					Production,
					distribution
		Iron-ore			and licensing
	Copper	concentrated		Life-like	of television
	rods	power	Total	plants	programmes	Total	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Capital additions	3,074	656	3,730	859	–	859	4,589
Depreciation	15,375	773	16,148	2,257	–	2,257	18,405

Geographical segments

The Group’s operations are located in Hong Kong, the PRC, America, Europe and other Asian regions.

The following table provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the goods:

PRC America Europe Hong Kong Other Asian regions	Continuing operations 2009 2008 HK$’000 HK$’000 1,089,318 2,968,984 – – – – – – – – 1,089,318 2,968,984	Discontinued operations 2009 2008 HK$’000 HK$’000 – – 104,448 100,236 1,857 4,377 1,202 2,268 451 56 107,958 106,937	Consolidated turnover by geographical market 2009 2008 HK$’000 HK$’000 1,089,318 2,968,984 104,448 100,236 1,857 4,377 1,202 2,268 451 56 1,197,276 3,075,921	Consolidated turnover by geographical market 2009 2008 HK$’000 HK$’000 1,089,318 2,968,984 104,448 100,236 1,857 4,377 1,202 2,268 451 56 1,197,276 3,075,921
				3,075,921

The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment, analysed by the geographical areas in which the assets are located:

PRC Hong Kong	Carrying amount of segment assets 2009 2008 HK$’000 HK$’000 413,242 1,187,669 – 261,676 413,242 1,449,345	Additions to property, plant and equipment 2009 2008 HK$’000 HK$’000 11,305 3,730 – – 11,305 3,730	Additions to property, plant and equipment 2009 2008 HK$’000 HK$’000 11,305 3,730 – – 11,305 3,730
			3,730

– 68 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

7. (LOSS)/PROFIT BEFORE TAXATION

(Loss)/profit before taxation has been arrived at after charging: Auditors’ remuneration Depreciation of property, plant and equipment (Note 14) Amortisation of intangible asset (Note 16) Cost of inventories Charge of prepaid lease payments for land (Note 15) Operating lease rentals in respect of rented premises Impairment loss on prepaid lease payments for land (Note 15) Allowance for doubtful debts (Note 21) Bad debts written off Wages, salaries and pension contributions including directors’ remuneration (Note 8) Share-based payments expense and after crediting: Exchange (gains)/losses, net Net rental income after deducting outgoings Interest income on promissory note receivable Interest income on loans receivable Management fee income Subcontracting fee income Gain on disposal of property, plant and machinery, net	Continuing operations 2009 2008 HK$’000 HK$’000 657 1,127 22,819 16,148 422 364 1,323,985 2,902,092 1,125 1,528 453 535 488 – 364 – 3,452 –	Continuing operations 2009 2008 HK$’000 HK$’000 657 1,127 22,819 16,148 422 364 1,323,985 2,902,092 1,125 1,528 453 535 488 – 364 – 3,452 –	Discontinued operations 2009 2008 HK$’000 HK$’000 95 360 689 2,257 – – 104,909 91,816 193 463 223 560 – – – – 936 –	Discontinued operations 2009 2008 HK$’000 HK$’000 95 360 689 2,257 – – 104,909 91,816 193 463 223 560 – – – – 936 –	Consolidated 2009 2008 HK$’000 HK$’000 752 1,487 23,508 18,405 422 364 1,428,894 2,993,908 1,318 1,991 676 1,095 488 – 364 – 4,388 –	Consolidated 2009 2008 HK$’000 HK$’000 752 1,487 23,508 18,405 422 364 1,428,894 2,993,908 1,318 1,991 676 1,095 488 – 364 – 4,388 –
	3,816 8,255 3,420	– 17,665 7,959	936 4,781 –	– 14,093 –	4,752 13,036 3,420	– 31,758 7,959
	(1,079) (537) (237) (3,046) (646) (3,304) (4)	(2,309) (1,301) – – (3,023) (5,896) –	566 – – – – – –	(2,310) – – – – – –	(513) (537) (237) (3,046) (646) (3,304) (4)	(4,619) (1,301) – – (3,023) (5,896) –

Note: Cost of inventories includes HK$23,299,000 (2008: HK$33,432,000) relating to staff costs, depreciation of property, plant and equipment and charge of prepaid lease payments for land, for which amounts are also included in the respective total amounts disclosed separately above.

– 69 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

8. REMUNERATION OF DIRECTORS AND FIVE HIGHEST PAID INDIVIDUALS

Particulars of the remuneration of the directors and the five highest paid individuals for the year were as follows:

							Retirement	Retirement
			Salaries and		Share-based		benefit	scheme
Name of director	Fees		other	benefits	payment		contributions			Total
	2009	2008	2009	2008	2009	2008	2009	2008		2009	2008
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
Mr. Wong Hin Shek	–	–	–	–	–	–	–		–	–	–
Mr. Chau Lai Him	–	–	120	195	–	–	5		9	125	204
Mr. Chow Kin Ming	–	–	–	576	–	–	–		4	–	580
Mr. Chu Yuk Kuen	–	–	165	390	543	–	–		–	708	390
Mr. Chung Kam Kwong	115	107	–	–	–	–	–		–	115	107
Mr. Lo Chao Ming	50	60	–	–	–	–	–		–	50	60
Mr. Lee Kin Keung	295	82	–	–	–	–	–		–	295	82
Mr. Yue Peter	–	21	–	–	–	–	–		–	–	21
Mr. Chan Sio Keong	–	–	536	585	–	742	10	10		546	1,337
Mr. Chan Kwan Hung	–	–	294	900	–	1,114	4		9	298	2,023
Mr. Wong Yun Kuen	1	–	–	–	–	–	–		–	1	–
Mr. Chiu Wai On	1	–	–	–	–	–	–		–	1	–
Mr. Man Kwok Leung	7	–	–	–	–	–	–		–	7	–
Total	469	270	1,115	2,646	543	1,856	19	32		2,146	4,804

During the current and prior years, certain directors of the Company were granted share options, in respect of their services to the Group, under the share option scheme of the Company, further details of which are set out in Note 38. The fair value of such options which was recognised in the consolidated income statement over the vesting period, was determined as at the date of grant and the amount included in the consolidated financial statements for the current and the prior years was included in the above directors’ remuneration disclosures. There was no arrangement under which a director waived or agreed to waive any remuneration during the years.

The five highest paid individuals of the Group include three (2008: three) executive directors of the Company, details of whose remuneration are included above. The remuneration of the remaining two (2008: two) individuals for the year ended 30 June 2009 were as follows:

Salaries Contributions to retirement benefits schemes Equity-settled share options expense	2009 HK$’000 837 14 – 851	2008 HK$’000 525 12 1,299
		1,836

– 70 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Their emoluments fell within the following bands:

HK$Nil – HK$1,000,000 HK$1,000,001 – HK$1,500,000	Number of individuals 2009 2008 2 1 – 1 2 2	Number of individuals 2009 2008 2 1 – 1 2 2
		2

During the current year, share option was granted to Nil non-director, highest paid individual (2008: two individuals) in respect of their services to the Group, further details of which are included in the disclosures in Note 38. The fair value of such options, which was recognised in the consolidated income statement over the vesting period, was determined as at the date of grant and the amount included in the consolidated financial statements for the prior year was included in the above non-director, highest paid individuals’ remuneration disclosures.

There was no arrangement under which the above non-director, highest paid individuals waived or agreed to waive any remuneration during the years.

9. FINANCE COSTS

Interest on bank borrowings and other loans wholly repayable within five years Interest on finance leases	Continuing operations 2009 2008 HK$’000 HK$’000 21,320 42,602 – 22 21,320 42,624	Discontinued operations 2009 2008 HK$’000 HK$’000 4,280 3,521 – – 4,280 3,521	Consolidated 2009 2008 HK$’000 HK$’000 25,600 46,123 – 22 25,600 46,145	Consolidated 2009 2008 HK$’000 HK$’000 25,600 46,123 – 22 25,600 46,145
				46,145

10. TAXATION

Hong Kong profits tax Current year Underprovision in respect of prior years Taxation in the PRC Current year Overprovision in respect of prior years Deferred taxation (Note 28)	Continuing operations 2009 2008 HK$’000 HK$’000 424 2,215 302 – 36 11,553 (10,137) –	Continuing operations 2009 2008 HK$’000 HK$’000 424 2,215 302 – 36 11,553 (10,137) –	Discontinued operations 2009 2008 HK$’000 HK$’000 – 82 – – – – – –	Discontinued operations 2009 2008 HK$’000 HK$’000 – 82 – – – – – –	Consolidated 2009 2008 HK$’000 HK$’000 424 2,297 302 – 36 11,553 (10,137) –	Consolidated 2009 2008 HK$’000 HK$’000 424 2,297 302 – 36 11,553 (10,137) –
	(9,375) (25,985)	13,768 (2,496)	– –	82 –	(9,375) (25,985)	13,850 (2,496
	(35,360)	11,272	–	82	(35,360)	11,354

– 71 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Hong Kong profits tax is calculated at 16.5% (2008: 16.5%) of the estimated assessable profit arising in Hong Kong during the year. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the jurisdictions in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.

The domestic tax rate of principal subsidiaries in the PRC is used as it is where the operations of the Group are substantially based. For the six months ended 31 December 2007, pursuant to the approvals obtained from the relevant PRC tax authorities, the major subsidiaries in Dongguan, the PRC, enjoy tax benefit and were entitled to the PRC enterprise income tax of 24% and local income tax of 3% and therefore, subject to a total corporate income tax rate of 27%. On 16 March 2007, the Fifth Plenary Session of the Tenth National People’s Congress promulgated the Corporate Income Tax Law of the PRC (the “New Tax Law”), which became effective on 1 January 2008. Further, on 6 December 2007, the State Council released the implementation rules to the New Tax Law. According to the New Tax Law, from 1 January 2008, the standard corporate income tax rate for enterprises in the PRC was reduced from 33% to 25%. Accordingly the applicable corporate income tax rate was 25% for the six months ended 30 June 2008. The applicable corporate income tax rate was 25% for the year ended 30 June 2009.

The tax for the year can be reconciled to the (loss)/profit before taxation per the consolidated income statement as follows:

(Loss)/profit before taxation Tax at the PRC domestic income tax rate as at the balance sheet date of 25% (2008: 25%) Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Tax effect of tax losses not recognised Utilisation of tax losses previously not recognised Underprovision in respect of prior years, net Tax effect of share of results of a jointly-controlled entity Effect of different tax rates of subsidiaries operating in other jurisdictions and changes in tax rates Others Tax for the year	2009 HK$’000 (360,696)	2008 HK$’000 22,308

	(90,174) 34,562 (33,290) 59,697 – (9,835) – 3,680 –	5,577 11,767 (4,928) – (1,452) – 520 (10) (120)
	(35,360)	11,354

11. (LOSS)/PROFIT FOR THE YEAR ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

The consolidated loss attributable to equity holders of the Company for the year ended 30 June 2009 includes a loss of HK$7,366,000 (2008: a loss of HK$941,000) which has been dealt with in the financial statements of the Company.

12. DIVIDEND

The Board does not recommend the payment of any dividend for the year ended 30 June 2009 (2008: HK$Nil).

13. (LOSS)/EARNINGS PER SHARE

The calculation of basic (loss)/earnings per share amounts is based on the (loss)/profit for the years attributable to equity holders of the Company, and the weighted average number of ordinary shares in issue during the year, as adjusted to reflect the share subdivision and share consolidation during the year. Basic and diluted earnings per share amounts for the year ended 30 June 2008 are restated to take into effect the share subdivision and share consolidation during the year ended 30 June 2009.

– 72 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The calculation of diluted (loss)/earnings per share amounts is based on the (loss)/profit for the year attributable to equity holders of the Company. The weighted average number of ordinary shares used in the calculation is the number of ordinary shares in issue during the year, as used in the basic (loss)/earnings per share calculation, and the weighted average number of ordinary shares assumed to have been issued at no consideration on the deemed exercise or conversion of all dilutive potential ordinary shares into ordinary shares.

From continuing and discontinued operations

The calculation of the basic and diluted (loss)/earnings per share is based on the following data:

(Loss)/earnings for the purpose of basic and diluted (loss)/earnings per share Weighted average number of ordinary shares for the purpose of basic (loss)/earnings per share Effect of dilutive potential ordinary shares in respect of share options Weighted average number of ordinary shares for the purpose of diluted (loss)/earnings per share	2009 2008 HK$’000 HK$’000 (322,603) 10,663 Number of shares 2009 2008 (Restated) 228,858,862 154,771,700 – 2,515,330 228,858,862 157,287,030	2008 HK$’000 10,663

		157,287,030

From continuing operations

The calculation of the basic and diluted (loss)/earnings per share from continuing operations is based on the following data:

(Loss)/profit for the year Loss for the year from discontinued operations (Loss)/earnings for the purpose of basic and diluted (loss)/earnings per share from continuing operations	2009 HK$’000 (322,603) 36,087 (286,516)	2008 HK$’000 10,663 4,859
		15,522

The denominators used are the same as those detailed above for calculating basic and diluted (loss)/earnings per share for continuing and discontinued operations.

From discontinued operations

Basic loss per share for discontinued operations is 15.77 HK cents (2008: 3.14 HK cents (restated)) based on the loss for the year from discontinued operations of HK$36,087,000 (2008: HK$4,859,000).

No diluted loss per share from the (i) continuing and discontinued operations for the current year; (ii) continuing operations for the current year; and (iii) discontinued operation for the current and prior years, was disclosed because there was no outstanding share options as at 30 June 2009 and the outstanding share options as at 30 June 2008 were anti-dilutive.

– 73 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

14. PROPERTY, PLANT AND EQUIPMENT AND PREPAYMENTS FOR ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT

Construction in progress HK$’000 5,325 388 – (4,436) 404 1,963	Buildings Leasehold improvements HK$’000 HK$’000 54,755 6,720 687 – (271) – – – 6,682 772 12,274 –	Buildings Leasehold improvements HK$’000 HK$’000 54,755 6,720 687 – (271) – – – 6,682 772 12,274 –	Equipment, furniture and fixtures HK$’000 6,298 701 – – 724 2,690	Plant and machinery HK$’000 149,330 1,490 (3,793) 4,436 13,257 16,713	Motor vehicles HK$’000 5,635 464 – – 517 4,393	Total HK$’000 228,063 3,730 (4,064) – 22,356 38,033
3,644 3,338 (1,595) (32,888) (4) 63,891 (1,391) 34,995 – – – – – – – – – –	74,127 4,736 – 30,639 (84) 47,249 (41,992) 114,675 5,036 3,065 857 8,958 5,574 (10) – 6,730 (8,377) 12,875	7,492 – – – (9) – – 7,483 704 507 121 1,332 373 (2) – – – 1,703	10,413 227 (721) – (10) 5,625 (4,433) 11,101 3,334 1,174 366 4,874 3,465 (4) (145) – (3,509) 4,681	181,433 3,004 (27) 2,249 (162) 61,404 (110,116) 137,785 44,299 10,555 4,432 59,286 11,870 (50) (7) 12,891 (54,224) 29,766	11,009 – (955) – (10) 1,177 (4,872) 6,349 2,550 847 243 3,640 1,537 (3) (671) – (2,977) 1,526	288,118 11,305 (3,298) – (279) 179,346 (162,804)
						312,388
						55,923 16,148 6,019
						78,090 22,819 (69) (823) 19,621 (69,087)
						50,551
34,995 3,644	101,800 65,169	5,780 6,160	6,420 5,539	108,019 122,147	4,823 7,369	261,837

						210,028

– 74 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group has pledged buildings with a carrying amount at 30 June 2009 of HK$98,194,000 (2008: HK$52,738,000) to secure banking facilities granted to the Group (Note 36).

As at 30 June 2009, the prepayment amounts represented prepayments made for acquisition of items of property, plant and equipment, of which most were utilised on the completion of the acquisition subsequent to 30 June 2009.

Details of impairments are set out in Note 16.

15. PREPAID LEASE PAYMENTS FOR LAND

NOTES Net carrying amount: At beginning of year Charge to the consolidated income statement 7 Acquisition of subsidiaries 32(i), 33 Disposal of subsidiaries under asset swap 32(ii) Impairment loss 7 Additions Exchange realignment At end of year	2009 HK$’000 64,951 (1,125) 11,450 (60,109) (488) – (73) 14,606	2008 HK$’000 54,871 (1,528) 852 – – 4,260 6,496
		64,951

The Group’s net carrying amount of the prepaid lease payments for land is analysed as follows:

Leasehold land under medium-term lease in the PRC Analysed for reporting purposes as: Non-current Current	2009 HK$’000 14,606	2008 HK$’000 64,951

	14,241 365	63,217 1,734
	14,606	64,951

The Group has pledged prepaid lease payments for land with a carrying amount at 30 June 2009 of HK$14,345,000 (2008: HK$28,800,000) to secure banking facilities granted to the Group (Note 36).

At 30 June 2009, the Group was in the process of obtaining the relevant title documents of certain of its land use rights with a carrying amount of HK$Nil (2008: HK$30,832,000).

Details of impairments are set out in Note 16.

– 75 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

16. INTANGIBLE ASSET

Cost: At 1 July 2007 Acquisition arising on business combination _(Note 33) At 30 June 2008 and 2009 Accumulated amortisation and impairment: At 1 July 2007 Amortisation for the year (Note 7) At 30 June 2008 Amortisation for the year (Note 7)_ Impairment loss** At 30 June 2009 Net carrying amount: At 30 June 2009 At 30 June 2008	Mining right HK$’000 – 158,831
	158,831
	– 364
	364 422 102,917
	103,703
	55,128

	158,467

The mining right purchased as part of a business combination of Yeading Enterprises Limited and its subsidiaries (collectively referred to as the “Yeading Group”) during the year ended 30 June 2008 are initially recognised at the aggregate of the total consideration and direct costs attributable to the above business combination paid by the Group less the net assets of the Yeading Group acquired at the date of the completion of acquisition, details of which are set out in Note 33. At subsequent balance sheet dates, mining right is measured using the cost model.
** Amortisation is provided to write off the cost of the mining right using the units of production method based on the proven and probable mineral reserves under the assumption that the Group can renew the mining right till all proven and probable reserves have been mined.

The amortisation charge for the mining right for the year is included in the Group’s “cost of sales” in the consolidated income statement.

*** In the prior year, the Group acquired 100% equity interests of the Yeading Group with a view that iron-ore mining business is in a fast growing trend with immense potential and such acquisition would diversify the Group into a new business with significant growth potential. However, there are a number of unforeseeable and uncontrollable factors happened subsequent to such investment decision in the global economy in 2008 and has been continuing which resulted in the prospect of the iron-ore mining industry has not been growing as fast as expected.

The prospect of iron-ore mining business grows in line with the economy. The global recession and slower economic growth of the PRC are negatively hindering the manufacturing activities in the PRC which in turn affects the demand of, and put pressure on the market price of iron-ore.

– 76 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

In view of the slower economic growth of the PRC and uncertainty in the economic recovery during this period of global recession, the prospect of the iron-ore market will continue to be affected and the business in iron-ore mining will continue to be difficult and challenging. The Group believes that the profitability potential of the Yeading Group will be reduced in the short and medium terms. The Group considered such decline indicated that the carrying amount of the Group’s iron-ore mining business has been impaired and impairment losses of HK$102,917,000, HK$19,621,000 and HK$488,000 have been recognised in the consolidated income statement for the current year to reduce the carrying values of the intangible asset, property, plant and equipment and prepaid lease payments for land (all are attributable assets of the iron-ore mining business) respectively to their estimated recoverable amounts. The estimated recoverable amounts of these assets of the Group were determined based on a value-in-use calculation of the Group’s iron-ore mining business with reference to a valuation report issued by Norton Appraisal Limited, an independent firm of professionally qualified valuers, in respect of the iron-ore mining business of the Group.

Details of the Group’s mining right and exploration right are as follows:-

Mines	Locations	Expiry date	Notes
Mining right
(北堡子鐵礦)	(承德市隆化縣中關鎮北堡子村)	10 December 2011	(a)
Zhong Guan Town Mine	Bei Bao Zi Village, Zhong Guan
	Town, Long Hua County,
	Chengde City, He Bei
	Province, the PRC
Exploration right
(章吉營鄉孤山村孤山鐵礦)	(河北省承德市隆化縣)	19 October 2009	(b)
Gu Shan Mine	Gu Shan Village Long Hua
	County, Chengde City, He Bei
	Province, the PRC

(a) The directors considered that the aggregate of the total consideration and direct costs attributable to the business combination of the Yeading Group paid by the Group less the net assets of the Yeading Group acquired at the date of completion of the acquisition is recognised as the initial cost of mining right of the Group and therefore no goodwill or discount on acquisition arose from the acquisition of the Yeading Group in the prior year.
(b) The exploration right represented licence for the right for exploration in the specified location in the PRC, and the period of this exploration right is within 1 year. In the opinion of the directors of the Company, the mining project with the above exploration right has not reached a stage at which there is a high degree of confidence in its viability and therefore nil initial cost is capitalised for this exploration right into the exploration and evaluation asset upon the completion of the acquisition of the Yeading Group and as at 30 June 2008 and 2009.

– 77 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

17. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Amounts due from subsidiaries Less: impairment loss on amounts due from subsidiaries	The Company 2009 2008 HK$’000 HK$’000 1 1 612,730 587,580	The Company 2009 2008 HK$’000 HK$’000 1 1 612,730 587,580
	612,731 (475,000)	587,581 (85,378)
	137,731	502,203

The amounts due from subsidiaries are unsecured, interest-free and are not repayable within twelve months after the balance sheet date. The carrying amount of the amounts due from subsidiaries approximates their fair value and in substance represents the Company’s interests in the subsidiaries in the form of quasi-equity loans and therefore they are included under the non-current assets of the Company.

An impairment loss on amounts due from subsidiaries of HK$475,000,000 (2008: HK$85,378,000) was recognised as at 30 June 2009 because the related recoverable amounts of the amounts due from subsidiaries with reference to the fair values of the respective subsidiaries were estimated to be less than their carrying amounts. Accordingly, the carrying amounts of the related amounts due therefrom are reduced to their recoverable amounts.

The following list contains only the particulars of the principal subsidiaries at 30 June 2009 which principally affect the results, assets or liabilities of the Group as the directors are of the opinion that a full list of all the subsidiaries would be of excessive length.

The amounts due to subsidiaries are unsecured, interest-free and have no fixed terms of repayment.

			Proportion of
		Issued and	nominal value of
	Place of	fully paid	issued capital or
	incorporation or	share capital	registered capital
	establishment/	or registered	held by the
Name of company	operation	capital	Group	Principal activities
Hua Yi Copper (BVI)	British Virgin	US$1	100%	Investment holding
Company Limited	Islands
Wah Yeung Capital	British Virgin	US$1	100%	Investment holding
Resources Limited	Islands
昆山華藝銅業有限公司	PRC	US$5,000,000	100%	Manufacture and
Kunshan Hua Yi Copper				trading of copper
Products Company				products
Limited #
Brightpower Assets	British Virgin	US$1	100%	Investment holding
Management Limited	Islands

– 78 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

			Proportion of
		Issued and	nominal value of
	Place of	fully paid	issued capital or
	incorporation or	share capital	registered capital
	establishment/	or registered	held by the
Name of company	operation	capital	Group	Principal activities
承德劍鋒礦業集團隆化隆鑫	PRC	RMB5,000,000	90.25%	Manufacture and sale
礦業有限公司				of iron-ore
Chengde Jianfeng				concentrated
Mining Industry Group				powder
Long Hua Long Xin
Mining Industry
Company Limited
上杭建潤電業有限公司	PRC	HK$40,000,000	100%	Manufacture and
Fund Resources Electric				trading of cable and
Industry Co. Ltd (Shang				wire products
Hang)#
昆山周氏電業有限公司	PRC	US$5,000,000	100%	Manufacture and
Kunshan Chau’s				trading of cable and
Electrical Company				wire products
Limited#

Wholly-foreign-owned enterprise

None of the subsidiaries issued any debt securities at the balance sheet date.

Except for Hua Yi Copper (BVI) Company Limited, all the subsidiaries are indirectly held by the Company.

18. INTEREST IN A JOINTLY-CONTROLLED ENTITY

				2009	2008
				HK$’000	HK$’000
Share	of	net	assets	–	18,057

As at 30 June 2008, the interest in a jointly-controlled entity represented the Group’s 45% equity interest in Fujian Jinyi Copper Products Company Limited (“Jinyi Copper”). Jinyi Copper was established as a limited liability company in the PRC and was engaged in manufacture and sales of copper wires.

Pursuant to a capital injection agreement dated 17 October 2008, Jinyi Copper, the Group’s then 45%-owned jointly-controlled entity increased its registered and paid-up capital by the amount of RMB160,000,000, resulting in a deemed disposal of the equity interest in Jinyi Copper by the Group. Following the deemed disposal, the Group’s equity interest in Jinyi Copper was reduced from 45% to 9% and lost the joint control over the economic activities of Jinyi Copper, and therefore Jinyi Copper ceased to be a jointly-controlled entity of the Group and became an available-for-sale investment. Gain on the deemed disposal amounting to HK$7,466,000 (2008: HK$Nil), including recognition of exchange reserve of HK$3,044,000 upon the deemed disposal, was recognised in the consolidated income statement for the year.

Subsequent to the deemed disposal and on 3 April 2009, the Group entered into a sale and purchase agreement with Best Ground Group Limited, an independent third party, to dispose of its entire 9% equity interest in Jinyi Copper at a net consideration of HK$19,121,000 as further detailed in the Company’s announcement dated 3 April 2009. The cash consideration was partially received by the Group at the completion date of the disposal and the remaining

– 79 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

consideration has been fully received subsequent to 30 June 2009. Loss on such further disposal on the available-for-sale investment amounting to HK$229,000 (2008: HK$Nil) was recognised in the consolidated income statement for the year.

The summarised financial information in respect of the Group’s jointly-controlled entity in the prior year is as follows:

Group’s share of jointly-controlled entity’s assets and liabilities: Current assets Non-current assets Current liabilities Non-current liabilities Net assets Group’s share of the jointly-controlled entity’s results: Income Expenses and taxation Loss for the year	2008 HK$’000 70,437 40,299 (83,034) (9,645)
	18,057

	19,686 (21,764)
	(2,078)

19. CONVERTIBLE NOTE DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS

A convertible note with principal amount of HK$40,000,000 carrying coupon interest at 4% per annum with maturity date on 15 December 2011 (the “Maturity Date”), was issued by the Kong Sun Group to the Group as part of consideration for the Group’s disposal of the Life-like Plants Operation. Further details of the disposal are set out in Note 31.

The Group has the right at any time during the conversion period to convert the whole or part of the outstanding principal amount of the convertible note into conversion shares; and the right, at any time during the period between 20 months after the issue of the convertible note and before the Maturity Date, to redeem, the whole or part of the outstanding principal amount of the convertible note. On the other hands, the Kong Sun Group has the right, at any time during the period commencing from the date immediately following the date of issue of the convertible note up to the day immediately prior to and exclusive of the Maturity Date, to mandatorily convert the whole of the outstanding principal amount of the convertible note registered in the name of noteholder into conversion shares at the then applicable conversion price of HK$0.1 per conversion share that subject to adjustment clauses in the convertible note agreement, or redeem any convertible note remaining outstanding at the Maturity Date at its nominal value. The convertible note may be transferred to any person but shall not be assigned or transferred to a connected person of the issuer without the prior written consent of the issuer.

Upon initial recognition, the Group has designated the convertible note as a financial asset at fair value through profit or loss and is carried at fair value. The fair value of the convertible note on the issue date is HK$15,520,000 (Note 31) based on a professional valuation performed by LCH (Asia-Pacific) Surveyors Limited, an independent firm of professionally qualified valuers.

At 30 June 2009, the fair value of the convertible note is HK$46,753,000, based on the professional valuation performed by Kovas Magni Appraisal Limited, an independent firm of professionally qualified valuers. Accordingly, a gain on fair value of HK$31,233,000 was credited to the consolidated income statement.

– 80 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

20. INVENTORIES

Raw materials Work in progress Finished goods	2009 HK$’000 8,672 8,101 4,406 21,179	2008 HK$’000 259,774 3,090 67,210
		330,074

21. DEBTORS, OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Included in the Group’s debtors, other receivables, deposits and prepayments were trade debtors with outsiders of HK$28,899,000 (2008: HK$108,510,000), and trade balances with related companies of HK$Nil (2008: HK$182,016,000). The Group allows an average credit period of 0 to 90 days to its trade debtors with outsiders and a credit period of 45 days to its related companies. The above related companies are entities of Solartech International Holdings Limited (“Solartech”) and its subsidiaries (the “Solartech Group”). Since 22 April 2008, the Company became an associate of Solartech as a result of the Company’s issue of its shares as partial settlement for the acquisition of the Yeading Group and therefore they became related companies of the Company on the same date. On 5 May 2009, the Company ceased to be the associate of Solartech as a result of the disposal of the entire equity interest in the Company held by Solartech. These companies are related companies of the Group as a director of these companies is also a director of the Company as at the balance sheet date.

(i) The aging analysis of trade debtors, net of allowance for doubtful debts, based on invoice date, is as follows:

Within 30 days 31 – 60 days 61 – 90 days Over 90 days	2009 HK$’000 11,318 4,228 6,105 7,248 28,899	2008 HK$’000 100,278 53,085 27,322 109,841
		290,526

(ii) The movements in the allowance for doubtful debts during the year, including both specific and collective loss components, are as follows:

At beginning of year Impairment loss recognised (Note 7) Disposal of subsidiaries under asset swap Exchange realignment	The Group 2009 2008 HK$’000 HK$’000 6,845 6,796 364 – (6,845) – – 49 364 6,845	The Group 2009 2008 HK$’000 HK$’000 6,845 6,796 364 – (6,845) – – 49 364 6,845
		6,845

– 81 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 30 June 2009, the Group’s trade debtors of HK$364,000 (2008: HK$6,845,000) were individually determined to be impaired. The individually impaired receivables related to customers that were in financial difficulties and management assessed that none of the receivables is expected to be recovered. Consequently, specific and full allowances for doubtful debts were recognised for such balances as at the respective balance sheet dates. The Group does not hold any collateral over these balances.

Except for the above, no allowance has been made for estimated irrecoverable amounts from the sale of goods.

(iii) The aging analysis of trade debtors that are neither individually nor collectively considered to be impaired is as follows:

Neither past due nor impaired Less than 1 month past due 1 to 3 months past due More than 3 months past due	The Group 2009 2008 HK$’000 HK$’000 27,488 99,437 278 63,909 489 32,670 644 94,510 28,899 290,526	The Group 2009 2008 HK$’000 HK$’000 27,488 99,437 278 63,909 489 32,670 644 94,510 28,899 290,526
		290,526

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

Trade debtors that were past due but not impaired relate to a number of independent customers that have a good track record with the Group of which HK$Nil (2008: HK$130,017,000) were trade debts with related companies. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral over these balances.

At 30 June 2009, included in debtors, other receivables, deposits and prepayments were cash advances to related companies amounted to HK$Nil (2008: HK$20,038,000). The amounts were unsecured, interest-free and repayable on demand.

At 30 June 2009, other than the trade debtors disclosed above, none of the balances included in debtors, other receivables, deposits and prepayments were either past due or impaired which there were no recent history of default.

At 30 June 2009, included in debtors, other receivables, deposits and prepayments were amounts due from financial institutions amounting to HK$Nil (2008: HK$14,159,000) resulting from the net settlements of derivative financial instruments which were in the closed out positions as at the balance sheet date. The prior year amount was fully settled during the year.

22. BILLS RECEIVABLE

As at 30 June 2008 and 2009, all bills receivables aged within 180 days.

– 82 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

23. LOANS RECEIVABLE, SECURED

(i) As at 30 June 2008, there was a loan receivable of HK$43,909,000 due from a third party, which was interest-bearing at 2.5% per annum and secured by the plant and machinery of the third party. As at 30 June 2008, the balance is repayable by 30 June 2009. Therefore it was classified as a current asset as at 30 June 2008.

On 4 February 2009, the Solartech Group and the Group entered into an asset swap arrangement as further detailed in Note 32 and accordingly, the above loan receivable was derecognised from the consolidated balance sheet of the Group on the same date.

(ii) At 30 June 2009, there were two loans of HK$35,900,000 in aggregate due from two independent third parties (2008: three loans of HK$56,568,000 in aggregate). These loans are interest-bearing at 5% per annum or prime rate and secured by interests in coal and mineral mines located in Mongolia, of which one of the loans in the amount of HK$14,702,000 as at the balance sheet date is repayable on 30 June 2010 and therefore this loan receivable was classified as a current asset as at 30 June 2009. The remaining loan in the amount of HK$21,198,000 as at the balance sheet date was originally due for repayment on 31 August 2009. On 31 August 2009, the repayment date is extended to 31 August 2010, and therefore it was classified as a non-current asset as at 30 June 2009. The prior year loans of HK$56,568,000 were repayable within 12 months from 30 June 2008 and therefore were classified as a current asset as at 30 June 2008.

24. DERIVATIVE FINANCIAL ASSETS/LIABILITIES

Copper futures contracts Foreign exchange forward contracts	2009 Assets Liabilities HK$’000 HK$’000 – – – – – –	2008 Assets Liabilities HK$’000 HK$’000 18 – 607 (372) 625 (372)	2008 Assets Liabilities HK$’000 HK$’000 18 – 607 (372) 625 (372)
			(372)

There is no copper futures contract or forward foreign exchange contract entered into by the Group which remains outstanding as at 30 June 2009.

Copper futures contracts

The major terms of the outstanding copper future contracts of the Group which had not been designated as hedging instruments as at 30 June 2008 were as follows:

	As at 30 June
	2008
Quantities (in tonnes)	1,000
Average price per tonne	US$8,521
	From August
	2008 to
	September
Delivery period	2008
Fair value gain of copper futures contracts recognised as current assets (in
HK$’000)	18

– 83 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Forward foreign exchange contracts

The forward foreign exchange contracts are settled at specific time intervals and the major terms of the forward foreign exchange contracts as at 30 June 2008 are as follows:

At 30 June 2008

Notional amount/settlement interval Maturity dates Contracted exchange rates US$1,000,000/month or US$3,000,000/month 10 February 2009 HK$7.745/US$1 US$1,000,000/month or US$2,000,000/month 31 December 2008 HK$7.738/US$1 US$1,000,000/month or US$3,000,000/month 23 December 2009 HK$7.72/US$1 US$500,000/month or US$1,000,000/month 24 April 2009 HK$7.73/US$1 US$1,000,000/month or US$3,000,000/month 22 June 2009 HK$7.7499 to HK$7.7399/US$1	Fair value gain/(loss) as at 30 June 2008 HK$’000 HK$’000 181 – 245 – – (35) 181 – – (337) 607 (372)	Fair value gain/(loss) as at 30 June 2008 HK$’000 HK$’000 181 – 245 – – (35) 181 – – (337) 607 (372)
		(372)

The above derivatives were measured at fair value at each balance sheet date and were with financial institutions. The fair values of copper futures contracts were determined based on the quoted market prices and the fair values of foreign exchange contracts were provided by banks or financial institutions at the balance sheet date. The change in fair value of derivative financial instruments of HK$434,000 (2008: HK$32,737,000) has been credited to the consolidated income statement during the year.

25. CREDITORS, OTHER ADVANCES AND ACCRUALS

Included in the Group’s creditors, other advances and accruals were trade creditors with outsiders of HK$15,220,000 (2008: HK$19,178,000).

The aging analysis of trade creditors, based on invoice date, is as follows:

Within 30 days 31 – 60 days 61 – 90 days Over 90 days	2009 HK$’000 4,778 2,182 2,106 6,154 15,220	2008 HK$’000 14,663 2,663 418 1,434
		19,178

At 30 June 2009, included in creditors, other advances and accruals were cash advances from related companies amounted to HK$10,894,000 (2008: HK$Nil). The amounts were unsecured, interest-free and have no fixed terms of repayment. The above related companies have a common director with the Company as at the balance sheet date.

– 84 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

26. BILLS PAYABLE

As at 30 June 2009, the Group had no outstanding bills payable. As at 30 June 2008, all bills payables aged within 180 days.

27. BORROWINGS

Borrowings are analysed as follows: Bank loans Trust receipt loans Other loans Secured Unsecured The carrying amounts of borrowings repayable: Within one year shown under current liabilities More than two years but not exceeding five years shown under non-current liabilities	2009 HK$’000 80,682 – 27,622 108,304	2008 HK$’000 115,813 458,538 24,927
		599,278

	80,682 27,622	574,351 24,927
	108,304	599,278

	96,940 11,364	599,278 –
	108,304	599,278

The average effective interest rates of the bank loans and trust receipt loans range from 5% to 9% (2008: 5% to 7%) per annum.

Except for an amount of HK$23,622,000 at 30 June 2009 (2008: HK$13,168,000) which carried interest at fixed rates ranging from 7% to 36% (2008: 7% to 36%) per annum, other loans were unsecured, interest-free and repayable on demand.

Over 95% of the Group’s borrowings are denominated in the functional currencies of the relevant group entities and therefore exposed to minimal foreign exchange rate risk.

At 30 June 2009, the Group had available HK$5,455,000 (2008: HK$164,081,000) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met.

Details of the assets pledged for the Group’s facilities are set out in Note 36.

– 85 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

28. DEFERRED TAX

The following is the major deferred tax liabilities/(assets) recognised by the Group and their movements are:

Accelerated tax depreciation HK$’000 At 1 July 2007 15,748 Credited to income statement for the year (Note 10) (1,272) Change in tax rates (Note 10) (1,133) Acquisition of subsidiaries (Note 33) – Exchange realignment 1,183 At 30 June 2008 14,526 Credited to income statement for the year (Note 10) – Acquisition of subsidiaries under asset swap (Note 32(i)) – Disposal of subsidiaries under asset swap (Note 32(ii)) (14,514) Exchange realignment (12) At 30 June 2009 –	Intangible asset Revaluation of properties HK$’000 HK$’000 – – (91) – – – 39,708 – – – 39,617 – (25,835) (150) – 2,158 – – – – 13,782 2,008	Total HK$’000 15,748 (1,363) (1,133) 39,708 1,183
		54,143 (25,985) 2,158 (14,514) (12)
		15,790

At 30 June 2009, the Group has unused tax losses of HK$21,398,000 (2008: HK$30,389,000) available for offset against future profits. No deferred tax asset has been recognised in respect of such tax losses due to the unpredictability of future profit streams.

The Group had no other significant unprovided deferred tax asset or liability at the balance sheet date (2008: HK$Nil).

– 86 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

29. SHARE CAPITAL

Ordinary shares of HK$0.20 each at 1 July 2007, 30 June 2008 and HK$0.05 each at 30 June 2009 Authorised: As at 1 July 2007 and 2008 Capital reorganisation (Note i) As at 30 June 2009 Issued and fully paid: As at 1 July 2007 Exercise of share options (Note ii) Issue of shares by placements (Note iii) Issue of shares for acquisition of subsidiaries (Note 33) As at 30 June 2008 Capital reorganisation (Note i) Exercise of share options (Note ii) Issue of shares by placements (Note iii) As at 30 June 2009	Number of shares 1,500,000,000 4,500,000,000 6,000,000,000	Amount HK$’000 300,000 –
		300,000

	673,134,500 2,172,000 110,000,000 100,000,000 885,306,500 (708,245,200) 17,700,000 139,410,000	134,627 434 22,000 20,000
		177,061 (168,208) 885 6,971
	334,171,300	16,709

Notes:

(i) A special resolution was passed at a special meeting held on 15 December 2008 approving the capital reorganisation scheme (the “Scheme”) of the Company which became effective on 16 December 2008. Pursuant to the Scheme, the capital reorganisation involved:
(a) Capital Reduction: the par value of each then issued existing share was reduced from HK$0.20 each to HK$0.01 each by cancellation of HK$0.19 of the paid-up capital on each of the then existing shares;
(b) Sub-Division: each of the then authorised but unissued shares in the capital of the Company of par value HK$0.20 each was sub-divided into 20 shares of par value HK$0.01 each; and
(c) Share Consolidation: upon completion of the capital reduction and the sub-division as mentioned in a) and b) above becoming effective, every five shares of HK$0.01 each in both the issued and unissued share capital of the Company were consolidated into one consolidated share of HK$0.05 each.

Following the implementation of the capital reorganisation set out above, the Company’s authorised share capital of HK$300,000,000 was divided into 6,000,000,000 consolidated shares of par value HK$0.05 each, and the number of issued shares and the issued share capital amount were reduced by 708,245,200 and HK$168,208,000 respectively.

– 87 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(ii) During the year ended 30 June 2009, 17,700,000 (2008: 2,172,000) new ordinary shares of par value HK$0.05 each were issued at subscription price of HK$0.421 (2008: HK$0.275) each on exercise of 17,700,000 (2008: 2,172,000) (Note 38) share options at an aggregate consideration of HK$7,452,000 (2008: HK$597,000), net of issuing expenses, of which HK$885,000 (2008: HK$434,000) was credited to share capital and the remaining balance of HK$6,567,000 (2008: HK$163,000) was credited to the share premium account. In addition, an amount attributable to the related share options of HK$3,420,000 (2008: HK$186,000) has been transferred from share option reserve to the share premium account.
(iii) During the year ended 30 June 2009, 139,410,000 (2008: 110,000,000) new ordinary shares of par value HK$0.05 each were issued at subscription prices ranging from HK$0.30 to HK$0.355 (2008: HK$0.96 to HK$1.20) each to the then independent third parties of the Group at an aggregate consideration, net of issuing expenses, of HK$42,133,000 (2008: HK$109,561,000), of which HK$6,971,000 (2008: HK$22,000,000) was credited to share capital and the remaining balance of HK$35,162,000 (2008: HK$87,561,000) was credited to the share premium account.

30. RESERVES

The Company At 1 July 2007 Issue of new shares (Note 29) Issue of shares upon exercise of share options (Note 29) Transfer upon exercise of share options (Note 29) Recognition of equity-settled share-based payments (Note 38) Acquisition of subsidiaries (Note 33) Forfeiture of share options Loss for the year At 30 June 2008 and 1 July 2008 Capital reorganisation (Note 29) Issue of new shares (Note 29) Issue of shares upon exercise of share options (Note 29) Recognition of equity-settled share-based payments (Note 38) Transfer upon exercise of share options (Note 29) Cancellation and lapse of share options Loss for the year At 30 June 2009	Share premium Contributed surplus HK$’000 HK$’000 981 246,018 87,561 – 163 – 186 – – – 36,000 – – – – –	Share premium Contributed surplus HK$’000 HK$’000 981 246,018 87,561 – 163 – 186 – – – 36,000 – – – – –	Share option reserve Accumulated losses HK$’000 HK$’000 4,128 (56,460) – – – – (186) – 7,959 – – – (1,275) 1,275 – (941)	Share option reserve Accumulated losses HK$’000 HK$’000 4,128 (56,460) – – – – (186) – 7,959 – – – (1,275) 1,275 – (941)	Total HK$’000 194,667 87,561 163 – 7,959 36,000 – (941)
	124,891 – 35,162 6,567 – 3,420 – –	246,018 168,208 – – – – – –	10,626 – – – 3,420 (3,420) (10,626) –	(56,126) – – – – – 10,626 (396,988)	325,409 168,208 35,162 6,567 3,420 – – (396,988)
	170,040	414,226	–	(442,488)	141,778

– 88 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

31. ASSETS/(LIABILITIES) CLASSIFIED AS HELD FOR SALE

In prior years, the Group entered into a conditional sale and purchase agreement with independent third parties to dispose of the entire issue capital in FT China Limited and FT Far East Limited, both being indirect wholly-owned subsidiaries of the Company, which carried on the Life-like Plants Operation and the consideration therefor would be settled by way of promissory note and convertible (Note 19) issued by the Kong Sun Group. The disposal of the entire issue capital in FT China Limited and FT Far East Limited was completed during the current year.

The major classes of assets and liabilities of the Life-like Plants Operation as at 30 June 2008 are as follows:

Property, plant and equipment Prepaid lease payments for land Inventories Debtors, deposits and prepayments Pledged deposits (Note 36) Bank balances and cash Impairment loss arising from adjustment to fair value less costs to sell Assets classified as held for sale Creditors and accruals Bills payable Liabilities associated with assets classified as held for sale	2008 HK$’000 32,672 15,756 71,669 2,588 5,536 1,832 (28,000)
	102,053

	35,412 7,993
	43,405

The trade debtor balances as at 30 June 2008 included in debtors, deposits and prepayments aged within 90 days. The trade creditor balances as at 30 June 2008 included in creditors and accruals aged within 90 days. The bills payable aged within 90 days.

A loss on disposal of the Life-like Plants Operation of HK$26,512,000 (2008: HK$Nil) was recognised during the year based on the net assets of Life-like Plants Operation of HK$55,477,000 at the completion date of disposal and the fair value of the aggregate consideration of HK$28,965,000 based on the fair value of (i) the promissory note in the amount of HK$13,445,000; and (ii) convertible note with initial recognition amount of HK$15,520,000 (Note 19) issued by the Kong Sun Group to the Group upon the completion of the disposal. The promissory note was fully settled to the Group during the current year.

Net cash outflow on disposal of assets and liabilities held for sale:

HK$’000 Bank balances and cash disposed of 7,187

– 89 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

32. ACQUISITION AND DISPOSAL OF SUBSIDIARIES UNDER AN ASSET SWAP ARRANGEMENT

On 5 December 2008, the Company, Wah Yeung Capital Resources Limited (“Wah Yeung”), an indirectly wholly-owned subsidiary of the Company, Solartech, Chau’s Industrial Investments Limited (“Chau’s Industrial”), a wholly-owned subsidiary of Solartech, Chau’s Electrical Company Limited (“Chau’s Electrical”), an indirect wholly-owned subsidiary of Solartech entered into three sale and purchase agreements and one set-off deed (collectively referred to as the “Asset Swap”), pursuant to which the Group agreed to acquire from Solartech (i) 100% equity interest in Solartech Enterprises Limited (“Solartech Enterprises”) and its subsidiaries (the “Solartech Enterprises Group”) and the unsecured and interest-free shareholder’s loan owed by the Solartech Enterprises Group to Chau’s Industrial (the “Solartech Enterprises Shareholder Loan”); and (ii) 100% equity interest in Fund Resources Limited (“Fund Resources”) and its subsidiary (the “Fund Resources Group”), and the unsecured and interest-free shareholder’s loan owed by the Fund Resources Group to Chau’s Electrical (the “Fund Resources Shareholder Loan”) in the consideration for the Group’s disposal of (i) 100% equity interest in Modern China Enterprises Limited (“Modern China”) and its subsidiaries (the “Modern China Group”); (ii) 100% equity interest in Hua Yi Copper Products Company Limited (“HY Products”) and its subsidiary (the “HY Products Group”); and (iii) the unsecured and interest-free shareholder’s loan owed by the HY Products Group to Wah Yeung (the “HY Products Shareholder Loan”). An additional consideration of HK$20,000,000 is also payable by the Group to the Solartech Group under the Asset Swap. The Asset Swap was completed on 4 February 2009. Further details are set out in the Company’s circular dated 31 December 2008 and announcement dated 30 December 2008.

(i) Acquisition of subsidiaries under the Asset Swap

Accordingly, the Solartech Enterprises Group and the Fund Resources Group became subsidiaries of the Company and their results were consolidated to the Group’s consolidated financial statements since the date of acquisition in the current year.

– 90 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Details of net assets of subsidiaries acquired in the Asset Swap are as follows:

Solartech Enterprises Group	Solartech Enterprises Group	Fund Resources Group	Fund Resources Group
Acquirees’ carrying amount before the Asset Swap Fair value adjustments HK$’000 HK$’000 101,171 – – – 4,188 3,112 10,061 – 20,772 – 2,505 – 2,530 – (49,394) – (89,979) – (354) – (20,682) – – (778)	Sub-total Acquirees’ carrying amount before the Asset Swap Fair value adjustments HK$’000 HK$’000 HK$’000 101,171 75,738 2,437 – 14,000 – 7,300 1,060 3,090 10,061 6,242 – 20,772 14,157 – 2,505 20 – 2,530 1,327 – (49,394) (15,549) – (89,979) (77,085) – (354) – – (20,682) (44,318) – (778) – (1,380)	Sub-total Fair value as at the completion date HK$’000 HK$’000 78,175 179,346 14,000 14,000 4,150 11,450 6,242 16,303 14,157 34,929 20 2,525 1,327 3,857 (15,549) (64,943) (77,085) (167,064) – (354) (44,318) (65,000) (1,380) (2,158) (37,109) 167,064
			(37,109) 167,064
			129,955

Satisfied by:
Part of consideration on
disposal of subsidiaries
under the Asset Swap
(Note 32(ii))	129,955

Since the acquisition from the Asset Swap, the Solartech Enterprises Group and the Fund Resources Group contributed an aggregate amount of HK$49,533,000 to the Group’s turnover and loss of HK$12,242,000 to the operating results for the year ended 30 June 2009.

– 91 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Had the acquisition taken place at the beginning of the year, the revenue of the Group and the loss of the Group for the year would have been HK$1,319,290,000 and HK$312,297,000, respectively.

(ii) Disposal of subsidiaries under the Asset Swap

The assets and liabilities of the Modern China Group and the HY Products Group disposed of in the Asset Swap are as follows:

Property, plant and equipment (Note 14) Prepaid lease payments for land (Note 15) Loan receivable Inventories Debtors, deposits and prepayments Bills receivable Pledged deposits Bank balances and cash Creditors, other advances and accruals Bills payable The HY Products Shareholder Loan Taxation Borrowings Deferred tax liabilities (Note 28) Net deficiency of assets disposal of the Modern China Group and the HY Products Group Assignment of HY Products Shareholder Loan Translation reserve realised upon disposal Direct costs incurred for the disposal Gain on Asset Swap Consideration Consideration satisfied by: Net deficiency in assets of the Solartech Enterprises Group and the Fund Resources Group and the Solartech Enterprises Shareholder Loan and the Fund Resources Shareholder Loan acquired (Note 32(i)) Amounts due to related companies as further consideration Net cash inflow/(outflow) on the Asset Swap: Bank balances and cash acquired Bank balances and cash disposed of	HK$’000 93,717 60,109 44,407 24,780 152,224 20,949 27,551 66,539 (60,063 (75,000 (107,570 (432 (252,393 (14,514
	(19,696 107,570 (32,921 1,497 53,505
	109,955

	129,955 (20,000
	109,955

	3,857 (66,539
	(62,682

– 92 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

33. ACQUISITION OF SUBSIDIARIES

On 22 April 2008, the Group acquired 100% equity interest of the Yeading Group for an aggregate consideration of HK$171,118,000. This transaction has been accounted for by the acquisition method of accounting. The Yeading Group is mainly engaged in holding the mining and exploration interests in two open iron-ore mines located in He Bei Province, the PRC, and sale of iron-ore concentration powder. Further details are set out in the Company’s circular dated 31 December 2007 and announcement dated 22 April 2008.

The consideration was satisfied as to (i) RMB55,000,000 (equivalent to HK$61,118,000) in cash; and (ii) HK$110,000,000 by allotment and issue of 100,000,000 ordinary shares of the Company to the vendor (Note 29) .

The net assets acquired in the above transaction were as follows:

Notes Net assets acquired: Property, plant and equipment 14 Prepaid lease payments for land 15 Intangible asset – mining right 16 Inventories Debtors, other receivables, deposits and prepayments Bank and cash balances Creditors, other advances and accruals Deferred tax liabilities 28 Minority interest Consideration satisfied by: Cash paid Shares of the Company – at fair value* Direct costs attributable to the acquisition Net cash outflow arising on acquisition: Consideration and direct costs paid in cash Cash and cash equivalent balances acquired	Acquirees’ carrying amount before combination HK$’000 38,033 852 – 2,290 1,858 1,341 (37,970) – (2,374) 4,030	Fair value adjustments HK$’000 – – 158,831 – – – – (39,708) – 119,123	Fair value HK$’000 38,033 852 158,831 2,290 1,858 1,341 (37,970 (39,708 (2,374
			123,153

			HK$’000 61,118 56,000
			117,118 6,035
			123,153

			HK$’000 67,153 (1,341
			65,812

– 93 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The fair value of the 100,000,000 ordinary shares of the Company issued as part of the consideration was determined with reference to the market share price of HK$0.56 of the Company’s shares at the completion date of acquisition, at the total fair value of HK$56,000,000 of which HK$20,000,000 was credited to share capital and the remaining balance of HK$36,000,000 was credited to the share premium account (Note 29).

Included in turnover and profit for the prior year was HK$4,181,000 and HK$1,014,000 respectively attributable to the business generated by the Yeading Group since its acquisition on 22 April 2008.

Had the business combination been effected at the beginning of prior year, the turnover of the Group would have been HK$3,112,410,000, and the profit for that year would have been HK$12,359,000.

34. CAPITAL COMMITMENTS

	2009	2008
	HK$’000	HK$’000
Capital expenditure contracted for but not provided in the
consolidated financial statements in respect of
acquisition of:
Leasehold improvements	33	3,549

35. LEASE COMMITMENTS

The Group as lessee

As at the balance sheet date, the Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of office premises which fall due as follows:

Within one year In the second to fifth years inclusive	2009 HK$’000 39 – 39	2008 HK$’000 555 210
		765

Leases are negotiated for an average term of three years and rentals are fixed for such period.

36. PLEDGE OF ASSETS

At 30 June 2009, the Group has pledged the following assets to secure general banking facilities granted to the Group. The carrying values of these assets are analysed as follows:

Notes Property, plant and equipment 14 Prepaid lease payments for land 15 Bank deposits Bank deposits included in assets classified as held for sale 31	2009 HK$’000 98,194 14,345 – – 112,539	2008 HK$’000 52,738 28,800 26,268 5,536
		113,342

– 94 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Details of the pledged assets and corporate guarantees given by the related companies for the Group’s banking facilities are set out in Note 41.

37. MAJOR NON-CASH TRANSACTION

As disclosed in Note 33, during the prior year, part of the consideration of acquisition of subsidiaries were satisfied as to HK$110,000,000 by allotment and issue of 100,000,000 ordinary shares (“Consideration Shares”) of the Company to the vendor (Note 29). The fair value of the Consideration Shares of the Company determined with reference to the market share price of HK$0.56 of the Company’s shares at the completion date of acquisition, at the total fair value of HK$56,000,000.

38. SHARE OPTION SCHEME

The share option scheme was adopted by the Company on 4 December 2003, which replaced its old share options scheme adopted in 1996. Under the share option scheme, the directors may, at their discretion, grant to full-time employees and executive directors of the Group the right to take up options to subscribe for shares of the Company. Additionally, the Company may, from time to time, grant share options to outside third parties for services provided to the Company. The share option scheme, unless otherwise cancelled or amended, will expire on 3 December 2013. The subscription price of options is subject to a minimum which is the higher of the nominal value of a share, the closing price of the shares on the Stock Exchange on the date of grant and the average of the closing prices of the shares on the Stock Exchange on the five trading days immediately preceding the grant date of the options.

The maximum number of unexercised share options permitted to be granted under the share option scheme must not exceed 10% of the shares of the Company in issue at any time. No option may be granted to any person which, if exercised in full, would result in the total number of shares already issued and issuable to him under the share option scheme exceeding 30% of the aggregate number of shares subject to the share option scheme, at the time it is proposed to grant the relevant option to such person.

The acceptance of an option, if accepted, must be made within 21 days from the date of the offer of the grant with a non-refundable payment of HK$1 from the grantee to the Company.

The total number of shares issued and to be issued upon exercise of options granted to each participant (including exercised, cancelled and outstanding options) in 12-month period must not exceed 1% of the shares in issue from time to time unless the same is approved by the shareholders.

Share options do not confer rights on the holders to dividends or to vote at shareholders’ meetings.

During the year, share-based payments of HK$3,420,000 (2008: HK$7,959,000) has been charged to the consolidated income statement.

– 95 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The following table discloses movements of the Company’s share option scheme during the years: For the year ended 30 June 2009

Number of share options Capacity Date of grant Exercisable period Vesting period Exercise price Outstanding at 1.7.2008 Granted during the year Exercised during the year HK$ (Note 29 (ii)) Employees 9 December 2005 1 January 2006 to 31 December 2008 9 December 2005 to 31 December 2008 0.275 336,000 – – Directors and employees 5 November 2007 1 February 2008 to 31 January 2011 5 November 2007 to 1 February 2008 0.910 17,700,000 – – 5 November 2007 to 31 January 2009 5 November 2007 to 31 January 2010 Directors 19 May 2009 20 May 2009 to 19 May 2012 Nil 0.421 – 2,810,000 (2,810,000) Employees 19 May 2009 20 May 2009 to 19 May 2012 Nil 0.421 – 1,825,000 (1,825,000) Others 19 May 2009 20 May 2009 to 19 May 2012 Nil 0.421 – 13,065,000 (13,065,000) Others 9 December 2005 1 January 2006 to 31 December 2008 9 December 2005 to 31 December 2008 0.275 4,000,000 – – Others 6 April 2006 1 May 2006 to 30 April 2011 6 April 2006 to 30 April 2008 0.495 30,600,000 – – 6 April 2006 to 30 April 2009 6 April 2006 to 30 April 2009 Others 5 November 2007 1 August 2008 to 31 July 2011 1 November 2007 to 31 July 2008 0.910 15,000,000 – – 5 November 2007 to 31 July 2009 5 November 2007 to 31 July 2010 Total 67,636,000 17,700,000 (17,700,000)	Cancelled and lapsed during the year Outstanding at 30.6.2009 (336,000) – (17,700,000) – – – – – – – (4,000,000) – (30,600,000) – (15,000,000) – (67,636,000) –	Cancelled and lapsed during the year Outstanding at 30.6.2009 (336,000) – (17,700,000) – – – – – – – (4,000,000) – (30,600,000) – (15,000,000) – (67,636,000) –
		–

– 96 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The following table discloses movements of the Company’s share option scheme during the years:

For the year ended 30 June 2008

Capacity Date of grant Exercisable period Vesting period Exercise price HK$ Employees 9 December 2005 1 January 2006 to 31 December 2008 9 December 2005 to 31 December 2008 0.275 Directors and employees 5 November 2007 1 February 2008 to 31 January 2011 5 November 2007 to 1 February 2008 0.910 5 November 2007 to 31 January 2009 5 November 2007 to 31 January 2010 Others 9 December 2005 1 January 2006 to 31 December 2008 9 December 2005 to 31 December 2008 0.275 Others 6 April 2006 1 May 2006 to 30 April 2011 6 April 2006 to 30 April 2008 0.495 6 April 2006 to 30 April 2009 6 April 2006 to 30 April 2010 Others 5 November 2007 1 August 2008 to 31 July 2011 1 November 2007 to 31 July 2008 0.910 5 November 2007 to 31 July 2009 5 November 2007 to 31 July 2010 Total	Outstanding at 1.7.2007 1,008,000 – 5,500,000 40,800,000 – 47,308,000	Number of share options Granted during the year Exercised during the year Lapsed during the year (Note 29 (ii)) – (672,000) – 17,700,000 – – – (1,500,000) – – – (10,200,000) 15,000,000 – – 32,700,000 (2,172,000) (10,200,000)	Outstanding at 30.6.2008 Exercisable period 336,000 1 January 2008 to 31 December 2008 17,700,000 1 February 2008 to 31 January 2011 February 2009 to 31 January 2011 February 2010 to 31 January 2011 4,000,000 1 January 2008 to 31 December 2008 30,600,000 1 May 2008 to 30 April 2009 1 May 2009 to 30 April 2010 1 May 2010 to 30 April 2011 15,000,000 1 August 2008 to 31 July 2011 1 August 2009 to 31 July 2010 1 August 2010 to 31 July 2011 67,636,000

– 97 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The fair value of share options granted to employees of the Group, directors of the Company and other parties providing similar services during the year, determined at the date of grant of the shares options, is expensed over the vesting period. These fair values were calculated using the Black-Scholes Options Pricing Model. The inputs into the model were as follows:

Date of grant	15 May 2009
Share price on the date of grant	HK$0.400
Exercise price	HK$0.421
Expected volatility	116.45%
Expected life	1.5 years
Risk-free rate	0.31% p.a.
Expected dividend yield	Nil

The volatility of share options granted during the year were generated from Bloomberg based on the Company’s 390 day historical shares prices before the dates of valuation, respectively.

The weighted average closing price of the Company’s shares immediately before the dates on which share options were exercised during the year was HK$0.65 (2008: HK$0.72) per share.

At the balance sheet date and the date of the approval of these financial statements, the Company had no share option outstanding under the share option scheme.

Share options do not confer rights on the holders to dividends or to vote at shareholders’ meetings.

39. BANK BALANCES AND CASH (INCLUDING PLEDGED DEPOSITS)

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term time deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short term time deposit rates. The bank balances are deposited with creditworthy financial institutions with no recent history of default. The carrying amounts of the bank balances and cash approximate their fair values.

Pledged bank deposits and bank balances and cash were denominated in the following currencies: Hong Kong Dollar RMB U.S. Dollar Euro	2009 HK$’000 82,246 6,362 380 12 89,000	The Group 2008 HK$’000 43,017 62,575 68,073 – 173,665	The Company 2009 2008 HK$’000 HK$’000 21,135 140 – – 1 24 – – 21,136 164	The Company 2009 2008 HK$’000 HK$’000 21,135 140 – – 1 24 – – 21,136 164
				164

The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

– 98 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

40. RETIREMENT BENEFITS SCHEME

The Group operates a Mandatory Provident Fund Scheme (the “MPF Scheme”) for all qualifying employees in Hong Kong. The assets of the MPF Scheme are held separately from those of the Group in funds under the control of trustees.

Pursuant to the PRC government regulations, the Group is required to contribute to a central pension scheme in respect of certain of the Group’s employees in the PRC based on a certain percentage of the salaries of those employees and there is no forfeited contributions under the central pension scheme.

The retirement benefits cost charged to the consolidated income statement represents contributions payable to the schemes by the Group at rates specified in the rules of the schemes.

During the year, the Group made retirement benefits schemes contributions of HK$989,000 (2008: HK$785,000).

41. RELATED PARTY TRANSACTIONS

In addition to the transactions detailed elsewhere in these financial statements, during the year, the Group entered into the following transactions with related companies (2008: fellow subsidiaries and related companies):

	2009	2008
	HK$’000	HK$’000
Rental expenses of office premises	251	180
Rental income of staff quarters	537	1,301
Management fee income	646	3,023

During the year, the Group sold goods to and purchased goods from the related companies (2008: fellow subsidiaries and related companies) in the amount of HK$149,930,000 (2008: HK$324,321,000) and HK$1,498,000 (2008: HK$Nil) respectively.

The above transactions were determined with reference to the terms mutually agreed between the Group and the relevant parties.

At 30 June 2008, certain bank deposits and bank balances and property, plant and equipment of related companies with an aggregate carrying amount of HK$18,000,000 and corporate guarantees given by the related companies have been pledged against the banking facilities granted to the Group. No such arrangement was made during the year.

Compensation of key management

The key management of the Group comprises all directors and the five highest paid employees, details of their remuneration are disclosed in Note 8.

42. CAPITAL RISK MANAGEMENT

The Group’s objective of managing capital is to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce cost of capital.

The capital structure of the Group consists of debts, which includes the borrowings disclosed in Note 27, bank balances and cash in Note 39 and equity attributable to equity holders of the Company, comprising share capital, reserves and retained earnings/(accumulated losses) as disclosed in the consolidated statement of changes in equity.

– 99 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group’s management reviews the capital structure on a semi-annual basis. 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 management, the Group will balance its overall capital structure through new share issues as well as the issue of new debt or redemption of existing debts.

The gearing ratio at the balance sheet dates was as follows:

Debts Bank balances and cash Net debts Equity Net debt to equity ratio	2009 HK$’000 108,304 (89,000) 19,304 397,126 5%	2008 HK$’000 599,278 (173,665)
		425,613

		707,173

		60%

43. SUMMARY OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES BY CATEGORY

The carrying amounts of the Group’s financial assets and financial liabilities as recognised at 30 June 2009 and 2008 may be categorised as follows:

	2009	2008
	HK$’000	HK$’000
Financial assets
Derivative financial assets at fair value	46,753	625
Loans and receivables (including bank balances and cash)
at amortised cost	164,731	661,424
Financial liabilities
Derivative financial liabilities at fair value	–	372
Financial liabilities measured at amortised cost	163,269	734,546

44. POST BALANCE SHEET DATE EVENTS

(i) On 26 May 2009, the Company and Kingston Securities Limited (“Kingston Securities”) entered into a placing agreement pursuant to which the Company has conditionally agreed to place through Kingston Securities on a fully underwritten basis to not fewer than six independent third parties, an aggregate of 316,470,000 shares at HK$0.20 per share at an aggregate consideration before issuing expenses of HK$63,294,000, of which HK$3,165,000 was credited to share capital and the remaining balance of HK$60,129,000 was credited to the share premium account. The placement was completed on 16 July 2009. Further details are set out in the Company’s announcement and circular dated 26 May 2009 and 9 June 2009, respectively.
(ii) On 20 August 2009, Hua Yi Copper (BVI) Company Limited, a wholly-owned subsidiary of the Company, entered into a sale and purchase agreement with Jumbo Wise Investments Limited, an independent third party for the disposal of its 100% entire equity interest in Fortune Point Limited (“Fortune Point”) and its subsidiaries (the “Fortune Point Group”) at a cash consideration of HK$4.5 million as set out in the Company’s announcement dated 20 August 2009. The disposal of the Fortune Point Group was completed on 24 August 2009.

– 100 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

45. CONTINGENT LIABILITY

Environmental contingencies

To date, the Group has not incurred any significant expenditure for environmental remediation, and is currently not involved in any environmental remediation, and has not accrued any further amounts for environmental remediation relating to its operations. Under the existing legislation, management believes that there is no probable liability that will have a material adverse effect on the financial position or operating results of the Group and therefore, no provision was made as at 30 June 2008 and 2009. The PRC government, however, has moved, and may move further towards the adoption of more stringent environmental standards. Environmental liabilities are subject to considerable uncertainties which affect the Group’s ability to estimate the ultimate cost of remediation efforts. These uncertainties include (i) the exact nature and extent of the contamination at various sites including, but not limited to coal mines and land development areas, whether operating, closed or sold; (ii) the extent of required cleanup efforts; (iii) varying costs of alternative remediation strategies; (iv) changes in environmental remediation requirements; and (v) the identification of new remediation sites. The exact amount of such future cost is indeterminable due to such factors as the unknown magnitude of possible contamination and the unknown timing and extent of the corrective actions that may be required. Accordingly, the outcome of environmental liabilities under future environmental legislation cannot reasonably be estimated at present, and could be material.

46. COMPARATIVE AMOUNTS

Decrease in pledged deposits of HK$46,315,000 included in investing activities in the 2008 consolidated cash flow statement has been reclassified to financing activities to confirm with current year’s classification.

– 101 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. BUSINESS REVIEW AND PROSPECTS

Business Review

During the year ended 30 June 2009, the continuing operations of the Group are copper rod business, mining business and the cable and wire business. The disposal of the life-like plant business was completed during the year. The copper rod business continued to be the core business of the Group and recorded a turnover of approximately HK$1,037 million, representing approximately 87% of the Group’s total turnover. The turnover of the discontinued life-like plant business was approximately HK$108 million, accounted for approximately 9% of the Group’s total turnover, while the cable and wire business and iron-ore mining business merely recorded approximately HK$50 million and HK$3 million, representing approximately 4% and less than 1% of the Group’s total turnover respectively. All turnover from continuing operations of the Group was generated from the PRC during the year.

Copper Rod Business

The copper rod business covers the manufacturing and trading of copper rods and copper wires used primarily in producing power wires and cables for household electrical products and infrastructure facilities.

As a consequence of the financial crisis which affected the global economy as a whole, the copper prices dropped dramatically since August 2008 which led to a decrease in selling prices and profit margins of the Group’s product. To mitigate the risk of fluctuation in inventory value, the Group had tightened its inventory and purchasing policy during the year under review. As a result of the decline in demand due to the economic downturn and the drop in selling prices of the Group’s products together with the disposal of the copper rod business located in Dongguan City as part of the asset swap transaction, turnover from the copper rod business decreased significantly by approximately 65% from previous corresponding year to HK$1,037 million. A segmental loss of HK$260 million was recorded for the year under review as compared to a segmental profit of approximately HK$76 million for the year ended 30 June 2008.

Mining business

Mining operation in the iron-ore concentrated powder processing plant was suspended during the Beijing Olympic Game period and was remained idle since then as the prospect of profitability from the operation was remote as the price of iron-ore concentrated powder declined significantly due to the global economic downturn.

– 102 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

In view of the uncertainty of the profitability of the mining business, the Group made an impairment loss of the mining business of approximately HK$123 million during the year in order to reflect the adverse impact of the uncertainty on the value of the mining business.

Life-like plants business

The Group had fulfilled all the conditions precedent to the disposal of life-like plants business in December 2008. Upon completion of the transaction, the Group would focus in its core business.

Prospects

Upon completion of the asset swap transaction in February 2009, the Group’s production facilities were located in close proximity with each other, which would allow a saving in cost, more flexibility on the part of the management in allocating and mobilizing available resources, in particular labour resources, within the same production base. The Group’s external financing from banks were significantly reduced as a result of the asset swap. At the same time, the Group was also strengthened by the vertical integration of its business which covers copper electrical wires production and power wires and cables production.

The Group would continue its cost control initiatives and risk management measures in each of its business segments with the view to remain competitive in the industry. The Group is also committed to explore new opportunities to maximize the returns to the shareholders and enhance the efficiency and effectiveness of the Group’s capital as a whole.

4. INDEBTEDNESS OF THE GROUP

Borrowings

As at the close of business on 30 September 2009, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had total outstanding borrowings of approximately HK$81.8 million, comprising secured bank loans of approximately HK$53.2 million, and unsecured other loans with related interest payables of approximately HK$28.6 million.

The Group’s certain prepaid lease payments for land and property, plant and equipment with an aggregate carrying value of approximately HK$64.5 million as at 30 September 2009 are pledged to banks to secure general banking facilities granted to the Group.

– 103 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

To date, the Group has not incurred any significant expenditure for environmental remediation, and is currently not involved in any environmental remediation, and has not accrued any further amounts for environmental remediation relating to its operations. Under the existing legislation, management believes that there is no probable liability that will have a material adverse effect on the financial position or operating results of the Group and therefore, no provision was made therefor as at 30 September 2009. The PRC government, however, has moved, and may move further towards the adoption of more stringent environmental standards. Environmental liabilities are subject to considerable uncertainties which affect the Group’s ability to estimate the ultimate cost of remediation efforts. These uncertainties include (i) the exact nature and extent of the contamination at various sites including, but not limited to coal mines and land development areas, whether operating, closed or sold; (ii) the extent of required cleanup efforts; (iii) varying costs of alternative remediation strategies; (iv) changes in environmental remediation requirements; and (v) the identification of new remediation sites. The exact amount of such future cost is indeterminable due to such factors as the unknown magnitude of possible contamination and the unknown timing and extent of the corrective actions that may be required. Accordingly, the outcome of environmental liabilities under future environmental legislation cannot reasonably be estimated at present, and could be material.

Save as disclosed above or as otherwise mentioned herein at the close of the business on 30 September 2009, the Group did not have any other outstanding indebtedness, loan capital, bank overdrafts and liabilities under acceptance (other than normal trade bills) or other similar indebtedness, debentures, mortgages, charges or loans or acceptance credits or hire purchase or finance lease commitment, guarantees or contingent liabilities.

The Directors confirm that, save as disclosed therein, there has not been any material change in the indebtedness or contingent liabilities of the Group since 30 September 2009.

5. WORKING CAPITAL STATEMENT

The Directors are of the opinion that taking into account of the Group’s internally generated funds, the currently available banking and other facilities, the estimated net proceeds from the Open Offer, and in the absence unforeseen circumstances, the Group will have sufficient working capital of a period of twelve months from the date of this circular.

6. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 30 June 2009, the date on which the latest published audited consolidated financial statements of the Company were made up.

– 104 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The following is an illustrative and unaudited pro forma statement of adjusted consolidated net tangible assets of the Group which has been prepared on the basis of the notes set out below for illustrating the effect of the Open Offer on the audited consolidated net tangible assets of the Group as if it had taken place on 30 June 2009. This unaudited pro forma financial information has been prepared for illustrative purposes only, and because of its hypothetical nature, it may not give a true picture of the financial position of the Group as at 30 June 2009 or any future date.

The unaudited pro forma statement of adjusted consolidated net tangible assets of the Group is prepared based on the audited consolidated net tangible assets of the Group as at 30 June 2009 as set out in the financial information of the Group in Appendix I to the Circular for the year ended 30 June 2009 and is adjusted for the effect of the Open Offer.

			Unaudited		Unaudited
			pro forma		pro forma
			adjusted	Audited	adjusted
	Audited		consolidated	consolidated	consolidated
	consolidated	Estimated	net tangible	net tangible	net tangible
	net tangible	net	assets of the	assets of the	assets of the
	assets of the	proceeds	Group after	Group per	Group per
	Group as at	from the	the Open	Share as at	Share as at
	30 June 2009	Open Offer	Offer	30 June 2009	30 June 2009
	(Note 1)	(Note 2)		(Note 3)	(Note 4)
	HK$’000	HK$’000	HK$’000	HK$	HK$
Based on the subscription
price of HK$0.15 per
Offer Share	341,998	194,322	536,320	1.02	0.33

Notes:

The audited consolidated net tangible assets of the Group as at 30 June 2009 is arrived at the audited net assets of the Group of approximately HK$397,126,000 as at 30 June 2009, after deduction of the intangible assets of approximately HK$55,128,000.
The estimated net proceeds from the Open Offer are calculated based on 1,301,282,600 Offer Shares to be issued at the subscription price of HK$0.15 per Offer Share, after deduction of the estimated related legal and professional expenses of approximately HK$870,000. Pursuant to the Underwriting Agreement, an underwriting commission shall be paid to the Underwriter calculated at 2.5% of the aggregate subscription price of the Offer Shares underwritten by the Underwriter. No underwriting commission is reflected above as it is assumed that the Underwriter is not required to underwrite the Offer Shares for the preparation of this unaudited pro forma statement of adjusted consolidated net tangible assets of the Group.
The calculation of audited consolidated net tangible assets value of the Group per Share as at 30 June 2009 is based on the audited consolidated net tangible assets of the Group of approximately HK$341,998,000 and the 334,171,300 Shares in issue as at 30 June 2009.

– 105 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

On 16 July 2009, the Company placed 316,470,000 Shares and thereafter the Company’s Shares in issue became 650,641,300 Shares (the “Share Placing”). However, for the purpose of illustrating the effect of the Open Offer on the audited consolidated net tangible assets of the Group as if it had taken place on 30 June 2009, the impact of the Share Placing has not been included in this unaudited pro forma statement of adjusted consolidated net tangible assets of the Group.

The calculation of unaudited pro forma adjusted consolidated net tangible assets value of the Group per Share as at 30 June 2009 is based on the unaudited pro forma adjusted consolidated net tangible assets of the Group after the Open Offer of approximately HK$536,320,000; and 1,635,453,900 Shares in issue immediately following the completion of the Open Offer (excluding the Share Placing) which comprise the additional 1,301,282,600 Offer Shares to the Qualifying Shareholders on the basis of two Offer Shares for every one Share held by the Qualifying Shareholders.
Save as disclosed above, no adjustment has been made to reflect any trading results or other transaction of the Group entered into subsequent to 30 June 2009.

– 106 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

REPORT ON UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The following is the text of a report from BDO Limited, the reporting accountants of the Company as set out in this Appendix and prepared for the sole purpose of inclusion in this Circular:

==> picture [80 x 32] intentionally omitted <==

BDO Limited Certified Public Accountants 德豪會計師事務所有限公司 25th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong Telephone: (852) 2541 5041 Facsimile: (852) 2815 2239

9 November 2009

The Board of Directors Hua Yi Copper Holdings Limited

Dear Sirs,

We report on the unaudited pro forma financial information (the “Unaudited Pro Forma Financial Information”) of Hua Yi Copper Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) as set out on pages 105 and 106 under the heading of “UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP” in Appendix II to the Company’s circular (the “Circular”) dated 9 November 2009, which have been prepared by the directors of the Company, solely for illustrative purposes only, to provide information about how the proposed issue of offer shares to the qualifying shareholders on the basis of two offer shares for every one share held on the record date (the “Offer Shares”) to raise approximately HK$195 million, before expenses (the “Open Offer”) might have affected the relevant financial information of the Group as at 30 June 2009. The basis of preparation of the Unaudited Pro Forma Financial Information is set out on pages 105 and 106 of the Circular.

Respective Responsibilities of Directors of the Company and Reporting Accountants

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with Rule 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

It is our responsibility to form an opinion, as required by Rule 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issues.

– 107 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

Basis of Opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of the Company.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors 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 Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

The Unaudited Pro Forma Financial Information is for illustrative purpose 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 Group as at 30 June 2009 or any future date.

Opinion

In our opinion:

(a) the Unaudited 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 Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

Yours faithfully, For and on behalf of

BDO Limited Certified Public Accountants Hong Kong

Chan Kam Wing, Clement

Director

Practising Certificate number P02038

– 108 –

APPENDIX III SUMMARY OF CONSTITUTION OF THE COMPANY AND BERMUDA COMPANY LAW

Set out below is a summary of provisions of the memorandum of association (the “Memorandum of Association”) and bye-laws (the “Bye-laws”) of the Company and certain aspects of Bermuda company law.

1. MEMORANDUM OF ASSOCIATION

The Memorandum of Association states, inter alia, that the liability of members of the Company is limited to the amount, if any, for the time being unpaid on the Shares respectively held by them and that the Company is an exempted company as defined in the Companies Act 1981 of Bermuda (the “Companies Act”). The Memorandum of Association also sets out the objects for which the Company was formed including to act and to perform all the functions of a holding company. As an exempted company, the Company will be carrying on business outside Bermuda from a place of business within Bermuda.

In accordance with and subject to section 42A of the Companies Act, the Memorandum of Association empowers the Company to purchase its own shares and pursuant to its Bye-laws, this power is exercisable by the board of Directors (the “board”) upon such terms and subject to such conditions as it thinks fit.

2. BYE-LAWS

The following is a summary of certain provisions of the Bye-laws:

(a) Directors

(i) Power to allot and issue shares and warrants

Subject to any special rights conferred on the holders of any shares or class of shares, any share may be issued with or have attached thereto such rights, or such restrictions, whether with regard to dividend, voting, return of capital, or otherwise, as the Company may by ordinary resolution determine (or, in the absence of any such determination or so far as the same may not make specific provision, as the board may determine). Subject to the Companies Act, any preference shares may be issued or converted into shares that are liable to be redeemed, at a determinable date or at the option of the Company or, if so authorised by the Memorandum of Association, at the option of the holder, on such terms and in such manner as the Company before the issue or conversion may by ordinary resolution determine. The board may issue warrants conferring the right upon the holders thereof to subscribe for any class of shares or securities in the capital of the Company on such terms as it may from time to time determine.

Subject to the provisions of the Companies Act, the Bye-laws, any direction that may be given by the Company in general meeting and, where applicable, the rules of any Designated Stock Exchange (as defined in the Bye-laws) and without prejudice to any special rights or restrictions for the

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APPENDIX III SUMMARY OF CONSTITUTION OF THE COMPANY AND BERMUDA COMPANY LAW

time being attached to any shares or any class of shares, all unissued shares in the Company shall be at the disposal of the board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and on such terms and conditions as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount.

Neither the Company nor the board shall be obliged, when making or granting any allotment of, offer of, option over or disposal of shares, to make, or make available, any such allotment, offer, option or shares to members or others with registered addresses in any particular territory or territories being a territory or territories where, in the absence of a registration statement or other special formalities, this would or might, in the opinion of the board, be unlawful or impracticable. Members affected as a result of the foregoing sentence shall not be, or be deemed to be, a separate class of members for any purpose whatsoever.

(ii) Power to dispose of the assets of the Company or any of its subsidiaries

There are no specific provisions in the Bye-laws relating to the disposal of the assets of the Company or any of its subsidiaries.

Note: The Directors may, however, exercise all powers and do all acts and things which may be exercised or done or approved by the Company and which are not required by the Bye-laws or the Companies Act to be exercised or done by the Company in general meeting.

(iii) Compensation or payments for loss of office

Payments to any Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually entitled) must be approved by the Company in general meeting.

(iv) Loans and provision of security for loans to Directors

There are no provisions in the Bye-laws relating to the making of loans to Directors. However, the Companies Act contains restrictions on companies making loans or providing security for loans to their directors, the relevant provisions of which are summarised in the paragraph headed “Bermuda Company Law” in this Appendix.

(v) Financial assistance to purchase shares of the Company

Neither the Company nor any of its subsidiaries shall directly or indirectly give financial assistance to a person who is acquiring or proposing to acquire shares in the Company for the purpose of that acquisition whether before or at the same time as the acquisition takes place or afterwards, provided that the Bye-laws shall not prohibit transactions permitted under the Companies Act.

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(vi) Disclosure of interests in contracts with the Company or any of its subsidiaries

A Director may hold any other office or place of profit with the Company (except that of auditor of the Company) in conjunction with his office of Director for such period and, subject to the Companies Act, upon such terms as the board may determine, and may be paid such extra remuneration (whether by way of salary, commission, participation in profits or otherwise) in addition to any remuneration provided for by or pursuant to any other Bye-laws. A Director may be or become a director or other officer of, or a member of, any company promoted by the Company or any other company in which the Company may be interested, and shall not be liable to account to the Company or the members for any remuneration, profits or other benefits received by him as a director, officer or member of, or from his interest in, such other company. Subject as otherwise provided by the Bye-laws, the board may also cause the voting power conferred by the shares in any other company held or owned by the Company to be exercised in such manner in all respects as it thinks fit, including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company, or voting or providing for the payment of remuneration to the directors or officers of such other company.

Subject to the Companies Act and to the Bye-laws, no Director or proposed or intending Director shall be disqualified by his office from contracting with the Company, either with regard to his tenure of any office or place of profit or as vendor, purchaser or in any other manner whatsoever, nor shall any such contract or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company or the members for any remuneration, profit or other benefits realised by any such contract or arrangement by reason of such Director holding that office or the fiduciary relationship thereby established. A Director who to his knowledge is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or arrangement with the Company shall declare the nature of his interest at the meeting of the board at which the question of entering into the contract or arrangement is first taken into consideration, if he knows his interest then exists, or in any other case, at the first meeting of the board after he knows that he is or has become so interested.

A Director shall not vote (nor be counted in the quorum) on any resolution of the board approving any contract or arrangement or other proposal in which he or any of his associates is materially interested but this prohibition shall not apply to any of the following matters, namely:

(aa) ay contract or arrangement for giving to such Director or his associate(s) any security or indemnity in respect of money lent by

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him or any of his associates or obligations incurred or undertaken by him or any of his associates at the request of or for the benefit of the Company or any of its subsidiaries;

(bb) any contract or arrangement for the giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director or his associate(s) has himself/themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security;
(cc) any contract or arrangement concerning an offer of shares or debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase, where the Director or his associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer;
(dd) any contract or arrangement in which the Director or his associate(s) is/are interested in the same manner as other holders of shares or debentures or other securities of the Company by virtue only of his/their interest in shares or debentures or other securities of the Company;
(ee) any contract or arrangement concerning any other company in which the Director or his associate(s) is/are interested only, whether directly or indirectly, as an officer or executive or a shareholder or in which the Director and any of his associates are not in aggregate beneficially interested in 5 percent. or more of the issued shares or of the voting rights of any class of shares of such company (or of any third company through which his interest or that of any of his associates is derived); or
(ff) any proposal or arrangement concerning the adoption, modification or operation of a share option scheme, a pension fund or retirement, death, or disability benefits scheme or other arrangement which relates both to Directors, his associates and employees of the Company or of any of its subsidiaries and does not provide in respect of any Director, or his associate(s), as such any privilege or advantage not accorded generally to the class of persons to which such scheme or fund relates.

(vii) Remuneration

The ordinary remuneration of the Directors shall from time to time be determined by the Company in general meeting, such remuneration (unless otherwise directed by the resolution by which it is voted) to be divided

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amongst the Directors in such proportions and in such manner as the board may agree or, failing agreement, equally, except that any Director holding office for part only of the period in respect of which the remuneration is payable shall only rank in such division in proportion to the time during such period for which he held office. The Directors shall also be entitled to be prepaid or repaid all travelling, hotel and incidental expenses reasonably incurred or expected to be incurred by them in attending any board meetings, committee meetings or general meetings or separate meetings of any class of shares or of debentures of the Company or otherwise in connection with the discharge of their duties as Directors.

Any Director who, by request, goes or resides abroad for any purpose of the Company or who performs services which in the opinion of the board go beyond the ordinary duties of a Director may be paid such extra remuneration (whether by way of salary, commission, participation in profits or otherwise) as the board may determine and such extra remuneration shall be in addition to or in substitution for any ordinary remuneration provided for by or pursuant to any other Bye-law. A Director appointed to be a managing director, joint managing director, deputy managing director or other executive officer shall receive such remuneration (whether by way of salary, commission or participation in profits or otherwise or by all or any of those modes) and such other benefits (including pension and/or gratuity and/or other benefits on retirement) and allowances as the board may from time to time decide. Such remuneration may be either in addition to or in lieu of his remuneration as a Director.

The board may establish or concur or join with other companies (being subsidiary companies of the Company or companies with which it is associated in business) in establishing and making contributions out of the Company’s monies to any schemes or funds for providing pensions, sickness or compassionate allowances, life assurance or other benefits for employees (which expression as used in this and the following paragraph shall include any Director or ex-Director who may hold or have held any executive office or any office of profit with the Company or any of its subsidiaries) and ex-employees of the Company and their dependants or any class or classes of such persons.

The board may pay, enter into agreements to pay or make grants of revocable or irrevocable, and either subject or not subject to any terms or conditions, pensions or other benefits to employees and ex-employees and their dependants, or to any of such persons, including pensions or benefits additional to those, if any, to which such employees or ex-employees or their dependants are or may become entitled under any such scheme or fund as is mentioned in the previous paragraph. Any such pension or benefit may, as the board considers desirable, be granted to an employee either before and in anticipation of, or upon or at any time after, his actual retirement.

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(viii) Retirement, appointment and removal

At each annual general meeting, one third of the Directors for the time being (or if their number is not a multiple of three, then the number nearest to but not less than one third) will retire from office by rotation provided that every Director shall be subject to retirement by rotation at least once every three years. The Directors to retire in every year will be those who have been longest in office since their last re-election or appointment but as between persons who became or were last re-elected Directors on the same day those to retire will (unless they otherwise agree among themselves) be determined by lot.

Note: There are no provisions relating to retirement of Directors upon reaching any age limit.

The Directors shall have the power from time to time and at any time to appoint any person as a Director either to fill a casual vacancy on the board or, subject to authorisation by the members in general meeting, as an addition to the existing board but so that the number of Directors so appointed shall not exceed any maximum number determined from time to time by the members in general meeting. Any Director appointed by the Board to fill a casual vacancy shall hold office until the next following general meeting of members of the Company after his appointment and be subject to re-election at such meeting and any Director appointed by the Board as an addition to the existing Board shall hold office only until the next following annual general meeting of the Company and shall then be eligible for re-election at the relevant meeting. Neither a Director nor an alternate Director is required to hold any shares in the Company by way of qualification.

A Director may be removed by an ordinary resolution of the Company before the expiration of his period of office (but without prejudice to any claim which such Director may have for damages for any breach of any contract between him and the Company) provided that the notice of any such meeting convened for the purpose of removing a Director shall contain a statement of the intention to do so and be served on such Director fourteen (14) days before the meeting and, at such meeting, such Director shall be entitled to be heard on the motion for his removal. Unless otherwise determined by the Company in general meeting, the number of Directors shall not be less than two. There is no maximum number of Directors unless otherwise determined from time to time by members of the Company.

The board may from time to time appoint one or more of its body to be managing director, joint managing director, or deputy managing director or to hold any other employment or executive office with the Company for such period (subject to their continuance as Directors) and upon such terms as the board may determine and the board may revoke or terminate any of such appointments (but without prejudice to any claim for damages that such

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Director may have against the Company or vice versa). The board may delegate any of its powers, authorities and discretions to committees consisting of such Director or Directors and other persons as the board thinks fit, and it may from time to time revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes, but every committee so formed shall, in the exercise of the powers, authorities and discretions so delegated, conform to any regulations that may from time to time be imposed upon it by the board.

(ix) Borrowing powers

The board may from time to time at its discretion exercise all the powers of the Company to raise or borrow money, to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company and, subject to the Companies Act, to issue debentures, bonds and other securities of the Company, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

Note: These provisions, in common with the Bye-laws in general, can be varied with the sanction of a special resolution of the Company.

(b) Alterations to constitutional documents

The Bye-laws may be rescinded, altered or amended by the Directors subject to the confirmation of the Company in general meeting. The Bye-laws state that a special resolution shall be required to alter the provisions of the Memorandum of Association, to confirm any such rescission, alteration or amendment to the Bye-laws or to change the name of the Company.

(c) Alteration of capital

The Company may from time to time by ordinary resolution in accordance with the relevant provisions of the Companies Act:

(i) increase its capital by such sum, to be divided into shares of such amounts as the resolution shall prescribe;
(ii) consolidate and divide all or any of its capital into shares of larger amount than its existing shares;
(iii) divide its shares into several classes and without prejudice to any special rights previously conferred on the holders of existing shares as the directors may determine;
(iv) sub-divide its shares or any of them into shares of smaller amount than is fixed by the Memorandum of Association;

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(v) change the currency denomination of its share capital;
(vi) make provision for the issue and allotment of shares which do not carry any voting rights; and
(vii) cancel any shares which, at the date of passing of the resolution, have not been taken, or agreed to be taken, by any person, and diminish the amount of its capital by the amount of the shares so cancelled.

The Company may, by special resolution, subject to any confirmation or consent required by law, reduce its authorised or issued share capital or, save for the use of share premium as expressly permitted by the Companies Act, any share premium account or other undistributable reserve.

(d) Variation of rights of existing shares or classes of shares

Subject to the Companies Act, all or any of the special rights attached to the shares or any class of shares may (unless otherwise provided for by the terms of issue of that class) be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. To every such separate general meeting the provisions of the Bye-laws relating to general meetings will mutatis mutandis apply, but so that the necessary quorum (other than at an adjourned meeting) shall be two persons or (in the case of a member being a corporation) its duly authorised representative holding or representing by proxy not less than one-third in nominal value of the issued shares of that class and at any adjourned meeting two holders present in person or (in the case of a member being a corporation) its duly authorised representative or by proxy whatever the number of shares held by them shall be a quorum. Every holder of shares of the class shall be entitled on a poll to one vote for every such share held by him, and any holder of shares of the class present in person or by proxy may demand a poll.

(e) Special resolution-majority required

A special resolution of the Company must be passed by a majority of not less than three-fourths of the votes cast by such members as, being entitled so to do, vote in person or, in the case of such members as are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which not less than twenty-one (21) clear days’ notice, specifying (without prejudice to the power contained in the Bye-laws to amend the same) the intention to propose the resolution as a special resolution, has been duly given. Provided that, except in the case of an annual general meeting, if it is so agreed by a majority in number of the members having a right to attend and vote at such meeting, being a majority together holding not less than ninety-five per cent. (95%) in nominal value of the shares giving that right and, in the case of an annual general

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meeting, if so agreed by all members entitled to attend and vote thereat, a resolution may be proposed and passed as a special resolution at a meeting of which less than twenty-one (21) clear days’ notice has been given.

(f) Voting rights

Subject to any special rights or restrictions as to voting for the time being attached to any shares by or in accordance with the Bye-laws, at any general meeting on a show of hands every member present in person or by proxy or (being a corporation) by its duly authorised representative shall have one vote and on a poll every member present in person or by proxy or, in the case of a member being a corporation, by its duly authorised representative shall have one vote for every fully paid share of which he is the holder but so that no amount paid up or credited as paid up on a share in advance of calls or installments is treated for the foregoing purposes as paid up on the share.

Notwithstanding anything contained in the Bye-laws, where more than one proxy is appointed by a member which is a clearing house (as defined in the Bye-laws) (or its nominee(s)), each such proxy shall have one vote on a show of hands.

On a poll, a member entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.

At any general meeting a resolution put to the vote of the meeting is to be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) voting by way of a poll is required to be demanded pursuant to the rules of the Designated Stock Exchange or a poll is demanded by (i) the chairman of the meeting or (ii) at least three members present in person (or in the case of a member being a corporation by its duly authorised representative) or by proxy for the time being entitled to vote at the meeting or (iii) any member or members present in person (or in the case of a member being a corporation by its duly authorised representative) or by proxy and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting or (iv) a member or members present in person (or in the case of a member being a corporation by its duly authorised representative) or by proxy and holding shares in the Company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid equal to not less than one-tenth of the total sum paid up on all shares conferring that right.

If a recognised clearing house (or its nominee(s) or in each case, being a corporation) is a member of the Company it may authorise such persons as it thinks fit to act as its representative(s) at any meeting of the Company or at any meeting of any class of members of the Company provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. A person authorised pursuant to this provision shall be deemed to have been duly authorised without further evidence of

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the facts and be entitled to exercise the same rights and powers on behalf of the recognised clearing house (or its nominee(s)) as if such person was the registered holder of the shares held by that clearing house (or its nominee(s)) in respect of the number and class of shares specified in the relevant authorisation including the right to vote individually on a show of hands.

Where the Company has any knowledge that any shareholder is, under the rules of the Designated Stock Exchange (as defined in the Bye-laws), required to abstain from voting on any particular resolution of the Company or restricted to voting only for or only against any particular resolution of the Company, any votes cast by or on behalf of such shareholder in contravention of such requirement or restriction shall not be counted.

(g) Requirements for annual general meetings

An annual general meeting of the Company must be held in each year other than the year in which its statutory meeting is convened at such time (within a period of not more than 15 months after the holding of the last preceding annual general meeting unless a longer period would not infringe the rules of any Designated Stock Exchange (as defined in the Bye-laws)) and place as may be determined by the board.

(h) Accounts and audit

The board shall cause true accounts to be kept of the sums of money received and expended by the Company, and the matters in respect of which such receipt and expenditure take place, and of the property, assets, credits and liabilities of the Company and of all other matters required by the provisions of the Companies Act or necessary to give a true and fair view of the Company’s affairs and to explain its transactions.

The accounting records shall be kept at the registered office or, subject to the Companies Act, at such other place or places as the board decides and shall always be open to inspection by any Director. No member (other than a Director) shall have any right of inspecting any accounting record or book or document of the Company except as conferred by law or authorised by the board or the Company in general meeting.

Subject to the Companies Act and the Bye-laws, a printed copy of the Directors’ report, accompanied by the balance sheet and profit and loss account, including every document required by law to be annexed thereto, made up to the end of the applicable financial year and containing a summary of the assets and liabilities of the Company under convenient heads and a statement of income and expenditure, together with a copy of the auditors’ report, shall be sent to each person entitled thereto at least twenty-one (21) days before the date of the general meeting and at the same time as the notice of annual general meeting and laid before the Company at the annual general meeting in accordance with the requirements of

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the Companies Act provided that this provision shall not require a copy of those documents to be sent to any person whose address the Company is not aware or to more than one of the joint holders of any shares or debentures; however, to the extent permitted by and subject to compliance with all applicable laws, including the rules of the Designated Stock Exchange (as defined in the Bye-laws), and to obtaining all necessary consents, if any, the Company may send to such persons summarised financial statements derived from the Company’s annual accounts and the directors’ report instead provided that any such person may by notice in writing served on the Company, demand that the Company sends to him, in addition to summarised financial statements, a complete printed copy of the Company’s annual financial statement and the directors’ report thereon.

Subject to the Companies Act, at the annual general meeting or at a subsequent special general meeting in each year, the members shall appoint an auditor to audit the accounts of the Company and such auditor shall hold office until the members appoint another auditor. Such auditor may be a member but no Director or officer or employee of the Company shall, during his continuance in office, be eligible to act as an auditor of the Company. The remuneration of the auditor shall be fixed by the Company in general meeting or in such manner as the members may determine.

The financial statements of the Company shall be audited by the auditor in accordance with generally accepted auditing standards. The auditor shall make a written report thereon in accordance with generally accepted auditing standards and the report of the auditor shall be submitted to the members in general meeting. The generally accepted auditing standards referred to herein may be those of a country or jurisdiction other than Bermuda. If the auditing standards of a country or jurisdiction other than Bermuda are used, the financial statements and the report of the auditor should disclose this fact and name such country and jurisdiction.

(i) Notices of meetings and business to be conducted thereat

An annual general meeting shall be called by notice of not less than twenty-one (21) clear days and any special general meeting at which it is proposed to pass a special resolution shall (save as set out in sub-paragraph (e) above) be called by notice of at least twenty-one (21) clear days. All other special general meetings shall be called by notice of at least fourteen (14) clear days. The notice must specify the time and place of the meeting and, in the case of special business, the general nature of that business. The notice convening an annual general meeting shall specify the meeting as such.

(j) Transfer of shares

All transfers of shares may be effected by an instrument of transfer in the usual or common form or in a form prescribed by the Designated Stock Exchange (as defined in the Bye-laws) or in such other form as the board may approve and which may be under hand or, if the transferor or transferee is a clearing house or its

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nominee(s), by hand or by machine imprinted signature or by such other manner of execution as the board may approve from time to time. The instrument of transfer shall be executed by or on behalf of the transferor and the transferee provided that the board may dispense with the execution of the instrument of transfer by the transferee in any case in which it thinks fit, in its discretion, to do so and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the register of members in respect thereof. The board may also resolve either generally or in any particular case, upon request by either the transferor or the transferee, to accept mechanically executed transfers.

The board in so far as permitted by any applicable law may, in its absolute discretion, at any time and from time to time transfer any share upon the principal register to any branch register or any share on any branch register to the principal register or any other branch register.

Unless the board otherwise agrees, no shares on the principal register shall be transferred to any branch register nor may shares on any branch register be transferred to the principal register or any other branch register. All transfers and other documents of title shall be lodged for registration and registered, in the case of shares on a branch register, at the relevant registration office and, in the case of shares on the principal register, at the registered office in Bermuda or such other place in Bermuda at which the principal register is kept in accordance with the Companies Act.

The board may, in its absolute discretion, and without assigning any reason, refuse to register a transfer of any share (not being a fully paid up share) to a person of whom it does not approve or any share issued under any share incentive scheme for employees upon which a restriction on transfer imposed thereby still subsists, and it may also refuse to register any transfer of any share to more than four joint holders or any transfer of any share (not being a fully paid up share) on which the Company has a lien.

The board may decline to recognise any instrument of transfer unless a fee of such maximum sum as any Designated Stock Exchange (as defined in the Bye-laws) may determine to be payable or such lesser sum as the Directors may from time to time require is paid to the Company in respect thereof, the instrument of transfer, if applicable, is properly stamped, is in respect of only one class of share and is lodged at the relevant registration office or registered office or such other place at which the principal register is kept accompanied by the relevant share certificate(s) and such other evidence as the board may reasonably require to show the right of the transferor to make the transfer (and if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do).

The registration of transfers may be suspended and the register closed on giving notice by advertisement in an appointed newspaper and, where applicable, any other newspapers in accordance with the requirements of any Designated Stock Exchange (as defined in the Bye-laws) or by any means in such manner as may be

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accepted by the Designated Stock Exchange (as defined in the Bye-laws) to that effect, at such times and for such periods as the board may determine and either generally or in respect of any class of shares. The register of members shall not be closed for periods exceeding in the whole thirty (30) days in any year.

(k) Power for the Company to purchase its own shares

The Bye-laws supplement the Company’s Memorandum of Association (which gives the Company the power to purchase its own shares) by providing that the power is exercisable by the board upon such terms and conditions as it thinks fit.

(l) Power for any subsidiary of the Company to own shares in the Company

There are no provisions in the Bye-laws relating to ownership of shares in the Company by a subsidiary.

(m) Dividends and other methods of distribution

Subject to the Companies Act, the Company in general meeting may declare dividends in any currency to be paid to the members but no dividend shall be declared in excess of the amount recommended by the board. The Company in general meeting may also make a distribution to its members out of contributed surplus (as ascertained in accordance with the Companies Act). No dividend shall be paid or distribution made out of contributed surplus if to do so would render the Company unable to pay its liabilities as they become due or the realisable value of its assets would thereby become less than the aggregate of its liabilities and its issued share capital and share premium account.

Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise provide, (i) all dividends shall be declared and paid according to the amounts paid up on the shares in respect whereof the dividend is paid but no amount paid up on a share in advance of calls shall for this purpose be treated as paid up on the share and (ii) all dividends shall be apportioned and paid pro rata according to the amount paid up on the shares during any portion or portions of the period in respect of which the dividend is paid. The Directors may deduct from any dividend or other monies payable to a member by the Company on or in respect of any shares all sums of money (if any) presently payable by him to the Company on account of calls or otherwise.

Whenever the board or the Company in general meeting has resolved that a dividend be paid or declared on the share capital of the Company, the board may further resolve either (a) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the shareholders entitled thereto will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment, or (b) that shareholders entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the board may think

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fit. The Company may also upon the recommendation of the board by an ordinary resolution resolve in respect of any one particular dividend of the Company that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to shareholders to elect to receive such dividend in cash in lieu of such allotment.

Whenever the board or the Company in general meeting has resolved that a dividend be paid or declared the board may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind.

All dividends or bonuses unclaimed for one year after having been declared may be invested or otherwise made use of by the board for the benefit of the Company until claimed and the Company shall not be constituted a trustee in respect thereof. All dividends or bonuses unclaimed for six years after having been declared may be forfeited by the board and shall revert to the Company.

(n) Proxies

Any member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member of the Company. In addition, a proxy or proxies representing either a member who is an individual or a member which is a corporation shall be entitled to exercise the same powers on behalf of the member which he or they represent as such member could exercise.

(o) Call on shares and forfeiture of shares

Subject to the Bye-laws and to the terms of allotment, the board may from time to time make such calls upon the members in respect of any monies unpaid on the shares held by them respectively (whether on account of the nominal value of the shares or by way of premium). A call may be made payable either in one lump sum or by installments. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding twenty per cent. (20%) per annum as the board may agree to accept from the day appointed for the payment thereof to the time of actual payment, but the board may waive payment of such interest wholly or in part. The board may, if it thinks fit, receive from any member willing to advance the same, either in money or money’s worth, all or any part of the monies uncalled and unpaid or installments payable upon any shares held by him, and upon all or any of the monies so advanced the Company may pay interest at such rate (if any) as the board may decide.

If a member fails to pay any call on the day appointed for payment thereof, the board may serve not less than fourteen (14) clear days’ notice on him requiring payment of so much of the call as is unpaid, together with any interest which may

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have accrued and which may still accrue up to the date of actual payment and stating that, in the event of non-payment at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited.

If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the board to that effect.

Such forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture.

A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, notwithstanding, remain liable to pay to the Company all monies which, at the date of forfeiture, were payable by him to the Company in respect of the shares, together with (if the board shall in its discretion so require) interest thereon from the date of forfeiture until the date of actual payment at such rate not exceeding twenty per cent. (20%) per annum as the board determines.

(p) Inspection of register of members

The register and branch register of members shall be open to inspection between 10:00 a.m. and 12:00 noon on every business day by members of the Company without charge or any other person, upon a maximum payment of five Bermuda dollars, at the registered office or such other place in Bermuda at which the register is kept in accordance with the Companies Act or, if appropriate, upon a maximum payment of ten dollars at the registration office, unless the register is closed in accordance with the Companies Act.

(q) Quorum for meetings and separate class meetings

For all purposes the quorum for a general meeting shall be two members present in person or (in the case of a member being a corporation) by its duly authorised representative or by proxy and entitled to vote. In respect of a separate class meeting (other than an adjourned meeting) convened to sanction the modification of class rights the necessary quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class.

(r) Rights of the minorities in relation to fraud or oppression

There are no provisions in the Bye-laws relating to rights of minority shareholders in relation to fraud or oppression. However, certain remedies are available to shareholders of the Company under Bermuda law, as summarised in paragraph 4(e) of this Appendix.

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(s) Procedures on liquidation

A resolution that the Company be wound up by the court or be wound up voluntarily shall be a special resolution.

If the Company shall be wound up (whether the liquidation is voluntary or by the court) the liquidator may, with the authority of a special resolution and any other sanction required by the Companies Act, divide among the members in specie or kind the whole or any part of the assets of the Company whether the assets shall consist of property of one kind or shall consist of properties of different kinds and the liquidator may, for such purpose, set such value as he deems fair upon any one or more class or classes of property to be divided as aforesaid and may determine how such division shall be carried out as between the members or different classes of members. The liquidator may, with the like authority, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator, with the like authority, shall think fit, but so that no contributory shall be compelled to accept any shares or other property in respect of which there is a liability.

(t) Untraceable members

The Company may sell any of the shares of a member who is untraceable if (i) all cheques or warrants (being not less than three in total number) for any sum payable in cash to the holder of such shares have remained uncashed for a period of 12 years; (ii) upon the expiry of the 12 year period, the Company has not during that time received any indication of the existence of the member; and (iii) the Company has caused an advertisement to be published in accordance with the rules of the Designated Stock Exchange (as defined in the Bye-laws) giving notice of its intention to sell such shares and a period of three months, or such shorter period as may be permitted by the Designated Stock Exchange (as defined in the Bye-laws), has elapsed since such advertisement and the Designated Stock Exchange (as defined in the Bye-laws) has been notified of such intention. The net proceeds of any such sale shall belong to the Company and upon receipt by the Company of such net proceeds, it shall become indebted to the former member of the Company for an amount equal to such net proceeds.

(u) Other provisions

The Bye-laws provide that to the extent that it is not prohibited by and is in compliance with the Companies Act, if warrants to subscribe for shares have been issued by the Company and the Company does any act or engages in any transaction which would result in the subscription price of such warrants being reduced below the par value of a share, a subscription rights reserve shall be established and applied in paying up the difference between the subscription price and the par value of a share on any exercise of the warrants.

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The Bye-laws also provide that the Company is required to maintain at its registered office a register of directors and officers in accordance with the provisions of the Companies Act and such register is open to inspection by members of the public without charge between 10:00 a.m. and 12:00 noon on every business day.

3. VARIATION OF MEMORANDUM OF ASSOCIATION AND BYE-LAWS

The Memorandum of Association may be altered by the Company in general meeting. The Bye-laws may be amended by the Directors subject to the confirmation of the Company in general meeting. The Bye-laws state that a special resolution shall be required to alter the provisions of the Memorandum of Association or to confirm any amendment to the Bye-laws or to change the name of the Company. For these purposes, a resolution is a special resolution if it has been passed by a majority of not less than three-fourths of the votes cast by such members of the Company as, being entitled to do so, vote in person or, in the case of such members as are corporations, by their respective duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which not less than twenty-one (21) clear days’ notice specifying the intention to propose the resolution as a special resolution has been duly given. Except in the case of an annual general meeting, the requirement of twenty-one (21) clear days’ notice may be waived by a majority in number of the members having the right to attend and vote at the relevant meeting, being a majority together holding not less than 95 percent in nominal value of the shares giving that right.

4. BERMUDA COMPANY LAW

The Company is incorporated in Bermuda and, therefore, operates subject to Bermuda law. Set out below is a summary of certain provisions of Bermuda company law, although this does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of Bermuda company law and taxation, which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar:

(a) Share capital

The Companies Act provides that where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called the “share premium account”, to which the provisions of the Companies Act relating to a reduction of share capital of a company shall apply as if the share premium account were paid up share capital of the company except that the share premium account may be applied by the company:

(i) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares;
(ii) in writing off:

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(aa) the preliminary expenses of the company; or
(bb) the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company; or
(iii) in providing for the premiums payable on redemption of any shares or of any debentures of the company.

In the case of an exchange of shares the excess value of the shares acquired over the nominal value of the shares being issued may be credited to a contributed surplus account of the issuing company.

The Companies Act permits a company to issue preference shares and subject to the conditions stipulated therein to convert those preference shares into redeemable preference shares.

The Companies Act includes certain protections for holders of special classes of shares, requiring their consent to be obtained before their rights may be varied. Where provision is made by the memorandum of association or bye-laws for authorising the variation of rights attached to any class of shares in the company, the consent of the specified proportions of the holders of the issued shares of that class or the sanction of a resolution passed at a separate meeting of the holders of those shares is required, and where no provision for varying such rights is made in the memorandum of association or bye-laws and nothing therein precludes a variation of such rights, the written consent of the holders of three-fourths of the issued shares of that class or the sanction of a resolution passed as aforesaid is required.

(b) Financial assistance to purchase shares of a company or its holding company

A company is prohibited from providing financial assistance for the purpose of an acquisition of its own or its holding company’s shares unless there are reasonable grounds for believing that the company is, and would after the giving of such financial assistance be, able to pay its liabilities as they become due. In certain circumstances, the prohibition from giving financial assistance may be excluded such as where the assistance is only an incidental part of a larger purpose or the assistance is of an insignificant amount such as the payment of minor costs.

(c) Purchase of shares and warrants by a company and its subsidiaries

A company may, if authorised by its memorandum of association or bye-laws, purchase its own shares. Such purchases may only be effected out of the capital paid up on the purchased shares or out of the funds of the company otherwise available for dividend or distribution or out of the proceeds of a fresh issue of shares made for the purpose. Any premium payable on a purchase over the par value of the shares to

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be purchased must be provided for out of funds of the company otherwise available for dividend or distribution or out of the company’s share premium account. Any amount due to a shareholder on a purchase by a company of its own shares may (i) be paid in cash; (ii) be satisfied by the transfer of any part of the undertaking or property of the company having the same value; or (iii) be satisfied partly under (i) and partly under (ii). Any purchase by a company of its own shares may be authorised by its board of directors or otherwise by or in accordance with the provisions of its bye-laws. Such purchase may not be made if, on the date on which the purchase is to be effected, there are reasonable grounds for believing that the company is, or after the purchase would be, unable to pay its liabilities as they become due. The shares so purchased may either be cancelled or held as treasury shares. Any purchased shares that are cancelled will, in effect, revert to the status of authorised but unissued shares. If shares of the company are held as treasury shares, the company is prohibited to exercise any rights in respect of those shares, including any right to attend and vote at meetings, including a meeting under a scheme of arrangement, and any purported exercise of such a right is void. No dividend shall be paid to the company in respect of shares held by the company as treasury shares; and no other distribution (whether in cash or otherwise) of the company’s assets (including any distribution of assets to members on a winding up) shall be made to the company in respect of shares held by the company as treasury shares. Any shares allotted by the company as fully paid bonus shares in respect of shares held by the company as treasury shares shall be treated for the purposes of the Companies Act as if they had been acquired by the company at the time they were allotted.

A company is not prohibited from purchasing and may purchase its own warrants subject to and in accordance with the terms and conditions of the relevant warrant instrument or certificate. There is no requirement under Bermuda law that a company’s memorandum of association or its bye-laws contain a specific provision enabling such purchases.

Under Bermuda law, a subsidiary may hold shares in its holding company and in certain circumstances, may acquire such shares. The holding company is, however, prohibited from giving financial assistance for the purpose of the acquisition, subject to certain circumstances provided by the Companies Act. A company, whether a subsidiary or a holding company, may only purchase its own shares if it is authorised to do so in its memorandum of association or bye-laws pursuant to section 42A of the Companies Act.

(d) Dividends and distributions

A company may not declare or pay a dividend, or make a distribution out of contributed surplus, if there are reasonable grounds for believing that (i) the company is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) the realisable value of the company’s assets would thereby be less than the aggregate of its liabilities and its issued share capital and share premium accounts. Contributed surplus is defined for purposes of section 54 of the

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Companies Act to include the proceeds arising from donated shares, credits resulting from the redemption or conversion of shares at less than the amount set up as nominal capital and donations of cash and other assets to the company.

(e) Protection of minorities

Class actions and derivative actions are generally not available to shareholders under the laws of Bermuda. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong done to the company where the act complained of is alleged to be beyond the corporate power of the company or is illegal or would result in the violation of the company’s memorandum of association and bye-laws. Furthermore, consideration would be given by the court to acts that are alleged to constitute a fraud against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than actually approved it.

Any member of a company who complains that the affairs of the company are being conducted or have been conducted in a manner oppressive or prejudicial to the interests of some part of the members, including himself, may petition the court which may, if it is of the opinion that to wind up the company would unfairly prejudice that part of the members but that otherwise the facts would justify the making of a winding up order on just and equitable grounds, make such order as it thinks fit, whether for regulating the conduct of the company’s affairs in future or for the purchase of shares of any members of the company by other members of the company or by the company itself and in the case of a purchase by the company itself, for the reduction accordingly of the company’s capital, or otherwise. Bermuda law also provides that the company may be wound up by the Bermuda court, if the court is of the opinion that it is just and equitable to do so. Both these provisions are available to minority shareholders seeking relief from the oppressive conduct of the majority, and the court has wide discretion to make such orders as it thinks fit.

Except as mentioned above, claims against a company by its shareholders must be based on the general laws of contract or tort applicable in Bermuda.

A statutory right of action is conferred on subscribers of shares in a company against persons, including directors and officers, responsible for the issue of a prospectus in respect of damage suffered by reason of an untrue statement therein, but this confers no right of action against the company itself. In addition, such company, as opposed to its shareholders, may take action against its officers including directors, for breach of their statutory and fiduciary duty to act honestly and in good faith with a view to the best interests of the company.

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(f) Management

The Companies Act contains no specific restrictions on the power of directors to dispose of assets of a company, although it specifically requires that every officer of a company, which includes a director, managing director and secretary, in exercising his powers and discharging his duties must do so honestly and in good faith with a view to the best interests of the company and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Furthermore, the Companies Act requires that every officer should comply with the Companies Act, regulations passed pursuant to the Companies Act and the bye-laws of the company. The directors of a company may, subject to the bye-laws of the company, exercise all the powers of the company except those powers that are required by the Companies Act or the bye-laws to be exercised by the members of the company.

(g) Accounting and auditing requirements

The Companies Act requires a company to cause proper records of accounts to be kept with respect to (i) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; (ii) all sales and purchases of goods by the company and (iii) the assets and liabilities of the company.

Furthermore, it requires that a company keeps its records of account at the registered office of the company or at such other place as the directors think fit and that such records shall at all times be open to inspection by the directors or the resident representative of the company. If the records of account are kept at some place outside Bermuda, there shall be kept at the office of the company in Bermuda such records as will enable the directors or the resident representative of the company to ascertain with reasonable accuracy the financial position of the company at the end of each three month period, except that where the company is listed on an appointed stock exchange, there shall be kept such records as will enable the directors or the resident representative of the company to ascertain with reasonable accuracy the financial position of the company at the end of each six month period.

The Companies Act requires that the directors of the company must, at least once a year, lay before the company in general meeting financial statements for the relevant accounting period. Further, the company’s auditor must audit the financial statements so as to enable him to report to the members. Based on the results of his audit, which must be made in accordance with generally accepted auditing standards, the auditor must then make a report to the members. The generally accepted auditing standards may be those of a country or jurisdiction other than Bermuda or such other generally accepted auditing standards as may be appointed by the Minister of Finance of Bermuda under the Companies Act; and where the generally accepted auditing standards used are other than those of Bermuda, the report of the auditor shall identify the generally accepted auditing standards used. All members of the company are entitled to receive a copy of every financial

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statement prepared in accordance with these requirements, at least five (5) days before the general meeting of the company at which the financial statements are to be tabled. A company the shares of which are listed on an appointed stock exchange may send to its members summarized financial statements instead. The summarized financial statements must be derived from the company’s financial statements for the relevant period and contain the information set out in the Companies Act. The summarized financial statements sent to the company’s members must be accompanied by an auditor’s report on the summarized financial statements and a notice stating how a member may notify the company of his election to receive financial statements for the relevant period and/or for subsequent periods.

The summarized financial statements together with the auditor’s report thereon and the accompanied notice must be sent to the members of the company not less than twenty-one (21) days before the general meeting at which the financial statements are laid. Copies of the financial statements must be sent to a member who elects to receive the same within seven (7) days of receipt by the company of the member’s notice of election.

(h) Auditors

At each annual general meeting, a company must appoint an auditor to hold office until the close of the next annual general meeting; however, this requirement may be waived if all of the shareholders and all of the directors, either in writing or at the general meeting, agree that there shall be no auditor.

A person, other than an incumbent auditor, shall not be capable of being appointed auditor at an annual general meeting unless notice in writing of an intention to nominate that person to the office of auditor has been given not less than twenty-one (21) days before the annual general meeting. The company must send a copy of such notice to the incumbent auditor and give notice thereof to the members not less than seven (7) days before the annual general meeting. An incumbent auditor may, however, by notice in writing to the secretary of the company waive the requirements of the foregoing.

Where an auditor is appointed to replace another auditor, the new auditor must seek from the replaced auditor a written statement as to the circumstances of the latter’s replacement. If the replaced auditor does not respond within fifteen (15) days, the new auditor may act in any event. An appointment as auditor of a person who has not requested a written statement from the replaced auditor is voidable by a resolution of the shareholders at a general meeting. An auditor who has resigned, been removed or whose term of office has expired or is about to expire, or who has vacated office is entitled to attend the general meeting of the company at which he is to be removed or his successor is to be appointed; to receive all notices of, and other communications relating to, that meeting which a member is entitled to receive; and to be heard at that meeting on any part of the business of the meeting that relates to his duties as auditor or former auditor.

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(i) Exchange control

An exempted company is usually designated as “non-resident” for Bermuda exchange control purposes by the Bermuda Monetary Authority. Where a company is so designated, it is free to deal in currencies of countries outside the Bermuda exchange control area which are freely convertible into currencies of any other country. The permission of the Bermuda Monetary Authority is required for the issue of shares and securities by the company and the subsequent transfer of such shares and securities. In granting such permission, the Bermuda Monetary Authority accepts no responsibility for the financial soundness of any proposals or for the correctness of any statements made or opinions expressed in any document with regard to such issue. Before the company can issue or transfer any further shares and securities in excess of the amounts already approved, it must obtain the prior consent of the Bermuda Monetary Authority.

The Bermuda Monetary Authority has granted general permission for the issue and transfer of shares and securities to and between persons regarded as resident outside Bermuda for exchange control purposes without specific consent for so long as any equity securities, including shares, are listed on an appointed stock exchange (as defined in the Companies Act). Issues to and transfers involving persons regarded as “resident” for exchange control purposes in Bermuda will be subject to specific exchange control authorisation.

(j) Taxation

Under present Bermuda law, no Bermuda withholding tax on dividends or other distributions, nor any Bermuda tax computed on profits or income or on any capital asset, gain or appreciation will be payable by an exempted company or its operations, nor is there any Bermuda tax in the nature of estate duty or inheritance tax applicable to shares, debentures or other obligations of the company held by non-residents of Bermuda. Furthermore, a company may apply to the Minister of Finance of Bermuda for an assurance, under the Exempted Undertakings Tax Protection Act 1966 of Bermuda, that no such taxes shall be so applicable until 28th March 2016, although this assurance will not prevent the imposition of any Bermuda tax payable in relation to any land in Bermuda leased or let to the company or to persons ordinarily resident in Bermuda.

(k) Stamp duty

An exempted company is exempt from all stamp duties except on transactions involving “Bermuda property”. This term relates, essentially, to real and personal property physically situated in Bermuda, including shares in local companies (as opposed to exempted companies). Transfers of shares and warrants in all exempted companies are exempt from Bermuda stamp duty.

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(l) Loans to directors

Bermuda law prohibits the making of loans by a company to any of its directors or to their families or companies in which they hold more than a twenty per cent. (20%) interest, without the consent of any member or members holding in aggregate not less than nine-tenths of the total voting rights of all members having the right to vote at any meeting of the members of the company. These prohibitions do not apply to (a) anything done to provide a director with funds to meet the expenditure incurred or to be incurred by him for the purposes of the company, provided that the company gives its prior approval at a general meeting or, if not, the loan is made on condition that it will be repaid within six months of the next following annual general meeting if the loan is not approved at or before such meeting, (b) in the case of a company whose ordinary business includes the lending of money or the giving of guarantees in connection with loans made by other persons, anything done by the company in the ordinary course of that business, or (c) any advance of moneys by the company to any officer or auditor under Section 98(2)(c) of the Companies Act which allows the company to advance moneys to an officer or auditor of the company for the costs incurred in defending any civil or criminal proceedings against them, on condition that the officer or auditor shall repay the advance if any allegation of fraud or dishonesty is proved against them. If the approval of the company is not given for a loan, the directors who authorised it will be jointly and severally liable for any loss arising therefrom.

(m) Inspection of corporate records

Members of the general public have the right to inspect the public documents of a company available at the office of the Registrar of Companies in Bermuda which will include the company’s certificate of incorporation, its memorandum of association (including its objects and powers) and any alteration to the company’s memorandum of association. The members of the company have the additional right to inspect the bye-laws of a company, minutes of general meetings and the company’s audited financial statements, which must be presented to the annual general meeting. Minutes of general meetings of a company are also open for inspection by directors of the company without charge for not less than two (2) hours during business hours each day. The register of members of a company is open for inspection by members of the public without charge. The company is required to maintain its share register in Bermuda but may, subject to the provisions of the Companies Act, establish a branch register outside Bermuda. Any branch register of members established by the company is subject to the same rights of inspection as the principal register of members of the company in Bermuda. Any person may on payment of a fee prescribed by the Companies Act require a copy of the register of members or any part thereof which must be provided within fourteen (14) days of a request. Bermuda law does not, however, provide a general right for members to inspect or obtain copies of any other corporate records.

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A company is required to maintain a register of directors and officers at its registered office and such register must be made available for inspection for not less than two (2) hours in each day by members of the public without charge. If summarized financial statements are sent by a company to its members pursuant to section 87A of the Companies Act, a copy of the summarized financial statements must be made available for inspection by the public at the registered office of the company in Bermuda.

(n) Winding up

A company may be wound up by the Bermuda court on application presented by the company itself, its creditors or its contributors. The Bermuda court also has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the Bermuda court, just and equitable that such company be wound up.

A company may be wound up voluntarily when the members so resolve in general meeting, or, in the case of a limited duration company, when the period fixed for the duration of the company by its memorandum expires, or the event occurs on the occurrence of which the memorandum provides that the company is to be dissolved. In the case of a voluntary winding up, such company is obliged to cease to carry on its business from the time of passing the resolution for voluntary winding up or upon the expiry of the period or the occurrence of the event referred to above. Upon the appointment of a liquidator, the responsibility for the company’s affairs rests entirely in his hands and no future executive action may be carried out without his approval.

Where, on a voluntary winding up, a majority of directors make a statutory declaration of solvency, the winding up will be a members’ voluntary winding up. In any case where such declaration has not been made, the winding up will be a creditors’ voluntary winding up.

In the case of a members’ voluntary winding up of a company, the company in general meeting must appoint one or more liquidators within the period prescribed by the Companies Act for the purpose of winding up the affairs of the company and distributing its assets. If the liquidator at any time forms the opinion that such company will not be able to pay its debts in full, he is obliged to summon a meeting of creditors.

As soon as the affairs of the company are fully wound up, the liquidator must make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon call a general meeting of the company for the purposes of laying before it the account and giving an explanation thereof. This final general meeting requires at least one month’s notice published in an appointed newspaper in Bermuda.

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In the case of a creditors’ voluntary winding up of a company, the company must call a meeting of creditors of the company to be summoned on the day following the day on which the meeting of the members at which the resolution for winding up is to be proposed is held. Notice of such meeting of creditors must be sent at the same time as notice is sent to members. In addition, such company must cause a notice to appear in an appointed newspaper on at least two occasions.

The creditors and the members at their respective meetings may nominate a person to be liquidator for the purposes of winding up the affairs of the company provided that if the creditors nominate a different person, the person nominated by the creditors shall be the liquidator. The creditors at the creditors’ meeting may also appoint a committee of inspection consisting of not more than five persons.

If a creditors’ winding up continues for more than one year, the liquidator is required to summon a general meeting of the company and a meeting of the creditors at the end of each year to lay before such meetings an account of his acts and dealings and of the conduct of the winding up during the preceding year. As soon as the affairs of the company are fully wound up, the liquidator must make an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of, and thereupon shall call a general meeting of the company and a meeting of the creditors for the purposes of laying the account before such meetings and giving an explanation thereof.

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APPENDIX IV DETAILS OF DIRECTORS PROPOSED TO BE RE-ELECTED

Pursuant to the Listing Rules, the particulars of Directors who will be proposed to be re-elected at the SGM are provided below:

Independent Non-executive Directors

Dr. Wong Yun Kuen , aged 51, joined the Group as an independent non-executive Director on 26 June 2009. He received his Ph.D. degree from Harvard University, and was “Distinguished Visiting Scholar” at Wharton School of the University of Pennsylvania. Dr. Wong has worked in financial industries in the United States and Hong Kong for more than 10 years, and has considerable experience in corporate finance, investment and derivative products. He is a member of the Hong Kong Securities Institute. Dr. Wong is currently a member of each of the Audit Committee and Remuneration Committee of the Company. He is an executive director of UBA Investments Limited, and an independent non-executive director of each of Harmony Asset Limited, Bauhaus International (Holdings) Limited, China Yunnan Tin Minerals Group Company Limited, Climax International Company Limited, Superb Summit International Timber Company Limited, Golden Resorts Group Limited, Kong Sun Holdings Limited and China Grand Forestry Green Resources Group Limited, which are companies listed on the main board of the Stock Exchange, and Kaisun Energy Group Limited and China E-Learning Group Limited, which are companies listed on the Growth Enterprise Market of the Stock Exchange. He was an independent non-executive director of Grand Field Group Holdings Limited, a company listed on the main board of the Stock Exchange, for the period from 2 September 2004 to 4 September 2009. Save as disclosed above, Dr. Wong does not hold any positions with the Company and its subsidiaries nor has he held any directorship in other listed public companies or any other major appointments and professional qualifications in the past three years.

As at the Latest Practicable Date, Dr. Wong does not have any interests in the Shares within the meaning of Part XV of the Securities and Futures Ordinance. Save as his co-directorship with Mr. Wong Hin Shek, the executive Director and Mr. Man Kwok Leung, the independent non-executive Director, in Climax International Company Limited and Mr. Wong Hin Shek, the executive Director, in Golden Resorts Group Limited, Dr. Wong does not have any relationship with any other Directors, senior management or substantial or controlling Shareholders.

Dr. Wong does not have a service contract with the Company and he is entitled to a remuneration of approximately HK$60,000 per annum which is determined by the Board with reference to his position, his level of responsibilities, remuneration policy of the Company and prevailing market conditions. Dr. Wong has no fixed term of service with the Company but he is subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Bye-laws. Save as disclosed herein, there are no other matters concerning Dr. Wong that need to be brought to the attention of the Shareholders nor any further information to be disclosed pursuant to the requirements of rule 13.51(2)(h) to (v) of the Listing Rules.

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Mr. Chiu Wai On , aged 39, joined the Group as an independent non-executive Director on 26 June 2009. He is a member of the Hong Kong Institute of Certified Public Accountants and a fellow member of the Association of Chartered Certified Accountants. Mr. Chiu possesses 12 years of professional experience in accounting and auditing services. He is also the chairman of the Audit Committee and a member of the Remuneration Committee of the Company. Mr. Chiu is also an independent non-executive director of New Times Energy Corporation Limited, a company listed on the main board of the Stock Exchange. Save as disclosed above, Mr. Chiu does not hold any positions with the Company and its subsidiaries, nor has he held any directorship in other listed public companies or any other major appointments and professional qualifications in the past three years.

As at the Latest Practicable Date, Mr. Chiu does not have any interests in the Shares within the meaning of Part XV of the Securities and Futures Ordinance, nor does he have any relationship with any other Directors, senior management or substantial or controlling Shareholders.

Mr. Chiu does not have a service contract with the Company and he is entitled to a remuneration of approximately HK$60,000 per annum which is determined by the Board with reference to his position, his level of responsibilities, remuneration policy of the Company and prevailing market conditions. Mr. Chiu has no fixed term of service with the Company but he is subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Bye-laws. Save as disclosed herein, there are no other matters concerning Mr. Chiu that need to be brought to the attention of the Shareholders nor any further information to be disclosed pursuant to the requirements of rule 13.51(2)(h) to (v) of the Listing Rules.

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APPENDIX V

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

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

(a) Share capital

The authorised and issued capital of the Company as at the Latest Practicable Date were and immediately following completion of the Open Offer will be as follows:

Authorised: 6,000,000,000 Shares	HK$ 300,000,000

Fully paid Shares in issue or to be issued: 650,641,300 Shares in issue as at the Latest Practicable Date 1,301,282,600 Offer Shares to be issued pursuant to the Open Offer	32,532,065 65,064,130
1,951,923,900 Shares	97,596,195

All the issued Shares rank pari passu with each other in all respects including the rights as to voting, dividends and return of capital. The Offer Shares to be allotted and issued will, when issued and fully paid, rank pari passu in all respects with the existing Shares in issue on the date of allotment of the Offer Shares in fully-paid form. The Company had no debt securities in issue as at the Latest Practicable Date.

None of the securities of the Company is listed or dealt in on any of the stock exchange other than the Stock Exchange and no such listing or permission to deal is being or proposed to be sought.

(b) Share options

The Company did not have any other options, warrants or other convertible securities or rights affecting the Shares and no capital of any member of the Group is under option, or agreed conditionally or unconditionally to be put under option as at the Latest Practicable Date.

There is no arrangement under which future dividends are waived or agreed to be waived.

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APPENDIX V

GENERAL INFORMATION

2. DISCLOSURE OF INTERESTS

Save as disclosed below, as at the Latest Practicable Date, none of the Directors or chief executives (if any) of the Company had, or was deemed to have, any interests or short positions in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of part XV of the SFO) which were required (a) 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) pursuant to section 352 of Part XV of the SFO to be entered in the register referred to therein; or (c) pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to the Company and the Stock Exchange:

Approximate Interests in the percentage of Company or its securities in associated Capacity in Long/short the same class Name of Director corporation holding interest position No. of Shares of securities Wong Hin Shek the Company Interest of controlled Long 241,279,125 12.36 corporation (Note)

Note: Mr. Wong Hin Shek is the sole beneficial owner of Intense Rise, which, as at the Latest Practicable Date, was interested in 241,279,125 Shares, by virtue of the provision of the Part XV of the SFO, Mr. Wong Hin Shek is deemed to be interested in all the Shares in which Intense Rise is interested.

3. SUBSTANTIAL SHAREHOLDERS

Save as disclosed below, as at the Latest Practicable date, so far as is known to any Director or chief executive (if any) of the Company, no other person (not being a Director, chief executive (if any) of the Company) had an interest or short positions in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or

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APPENDIX V

GENERAL INFORMATION

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 member of the Group:

Long position

			Approximate
			percentage of
			securities in
		Number of	the same class
Name of Shareholder	Capacity	Shares	of securities
Intense Rise	Beneficial interest	241,279,125	12.36
Chu Yuet Wah (Note)	Interest of controlled	1,140,429,850	58.42
	corporation
Ma Siu Fong (Note)	Interest of controlled	1,140,429,850	58.42
	corporation
Kingston Securities	Others	1,140,429,850	58.42
Limited (Note)

Note: Kingston Securities Limited is owned as to 51% and 49% by Chu Yuet Wah and Ma Siu Fong respectively. Therefore, each of Chu Yuet Wah and Ma Siu Fong is deemed to be interested in all the Shares which are beneficially owned by Kingston Securities Limited for the purpose of SFO.

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

None of the Directors was materially interested in any contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date which was significant in relation to the business of the Group.

None of the Directors has any direct or indirect interests in any assets which have been acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group since 30 June 2009, being the date to which the latest published audited consolidated accounts of the Group were made up.

5. MATERIAL CONTRACTS

The following contracts, not being contracts in the ordinary course of business of the Group, were entered into by the Company or its subsidiaries during the period commencing two years preceding the date of the Announcement and up to the Latest Practicable Date and are or may be material:

the Underwriting Agreement.

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APPENDIX V

GENERAL INFORMATION

the sale and purchase agreement dated 20 August 2009 entered into between Hua Yi Copper (BVI) Company Limited, a wholly-owned subsidiary of the Company as Vendor and Jumbo Wise Investments Limited as purchaser in relation to the sale and purchase of the entire equity interest of Fortune Point Limited at a consideration of HK$4.5 million.
the placing agreement dated 26 May 2009 entered into between the Company and Kingston Securities Limited in relation to the placing of a maximum of 316,470,000 new Shares at HK$0.2 per Share.
the top-up placing agreement dated 11 May 2009 entered into between the Company, Intense Rise and Kingston Securities Limited in relation to the placing and top-up subscription of 35,410,000 Shares at HK$0.355 per Share.
the sale and purchase agreement dated 3 April 2009 entered into between Master Achieve Enterprises Limited, a wholly-owned subsidiary of the Company and Best Ground Group Limited in relation to the sale and purchase of 9% of the equity capital of Fujian Jinyi Copper Products Company Limited at a consideration of RMB17.1 million.
the placing agreement dated 5 December 2008 entered into between the Company as issuer and Kingston Securities Limited as placing agent in relation to the placing of 104,000,000 Shares at HK$0.3 per Share, details of which were set out in the circular of the Company dated 31 December 2008.
the sale and purchase agreement dated 5 December 2008 entered into between Wah Yeung Capital Resources Limited, Solartech International Holdings Limited and the Company in respect of the purchase by Solartech International Holdings Limited of the entire share capital of Modern China Enterprises Limited, the entire share capital of Hau Yi Copper Products Company Limited and the unsecured and interest-free shareholder’s loan owned by the Hua Yi Copper Products Company Limited and its subsidiaries to Wah Yeung Capital Resources Limited at a consideration of approximately HK$189.6 million (subject to set-off arrangement and adjustments), details of which were set out in the circular of the Company dated 31 December 2008.
the sale and purchase agreement dated 5 December 2008 entered into between Chau’s Electrical Company Limited, the Company and Solartech International Holdings Limited in respect of the purchase by the Company of entire share capital of Fund Resources Limited and the unsecured and interest-free shareholder’s loan owing by Fund Resources Limited to Chau’s Electrical Company Limited at a consideration of approximately HK$77.1 million (subject to the set-off arrangement and adjustments), details of which were set out in the circular of the Company dated 31 December 2008.

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APPENDIX V

GENERAL INFORMATION

the sale and purchase agreement dated 5 December 2008 entered into between Chau’s Industrial Investment Limited, the Company and Solartech International Holdings Limited in respect of the purchase by the Company of the entire share capital of Solartech Enterprises Limited and the unsecured and interest-free shareholder’s loan owned by the Solartech Enterprises Limited to Chau’s Industrial Investment Limited at a consideration of approximately HK$101.0 million (subject to the set-off arrangement and adjustments), details of which were set out in the Circular of the Company dated 31 December 2008.
the deed of set-off and transition arrangements dated 5 December 2008 entered into between Solartech International Holdings Limited, Chau’s Industrial Investment Limited, Chau’s Electrical Company Limited, the Company and Wah Yueng Capital Resources Limited in respect of the sale and purchase of all the issued shares in Solartech Enterprises Holdings Limited and its subsidiaries, Modern China Enterprises Limited and its subsidiaries and Hua Yi Copper Products Company Limited and its subsidiaries, details of which were set out in the Circular of the Company dated 31 December 2008.
the framework agreement (the “ Framework Agreement ”) dated 21 February 2008 entered into between the Company, China Alliance International Holding Group Limited and 首鋼控股有限責任公司 (Shougang Holdings Limited) in relation to, among others, the cooperation in metals and minerals exploration and mining and the Company shall, among other things, subject to fulfilment of certain conditions, grant to China Alliance International Holding Group Limited and 首鋼控股有限公司 (Shougang Holdings Limited) jointly an option to subscribe for 10,500,000 Shares, which was the subject of the announcement of the Company dated 26 February 2008. The parties involved has entered into a termination deed on 16 May 2008 to terminate the Framework Agreement, which was the subject of the announcement of the Company dated 16 May 2008.
the share purchase agreement dated 7 October 2007 and the supplemental agreements thereto dated 15 October 2007, 15 December 2007, 31 March 2008 and 19 April 2008 respectively entered into between the Company and Belleview Global Limited in relation to the acquisition of Yeading Enterprises Limited and the loan agreement dated 7 October 2007 and the supplemental agreement thereto dated 31 March 2008 entered into between HYC Finance Company Limited, a subsidiary of the Company, Meyton Investment Limited and Yeading Enterprises Limited in relation to certain loan, which were the subject of the announcements of the Company dated 15 October 2007, 31 March 2008 and 22 April 2008 respectively. The consideration comprised (i) a cash amount of Hong Kong dollars equivalent of RMB55,000,000 (subject to adjustment); and (ii) HK$110,000,000 payable by issuance of consideration shares at HK$1.10 per consideration share. The acquisition was completed on 22 April 2008.

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APPENDIX V

GENERAL INFORMATION

6. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened against the Company or any of its subsidiaries.

7. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors has entered into any service contracts with the Company or any of its subsidiaries or associated companies, excluding contracts expiring within one year without payment of compensation other than statutory compensation.

8. CORPORATE INFORMATION AND PARTIES INVOLVED IN THE OPEN OFFER

Registered office Clarendon House 2 Church Street Hamilton HM 11 Bermuda Head office and principal Unit 7, 2nd Floor place of business in Kingsford Industrial Centre Hong Kong 13 Wang Hoi Road Kowloon Bay Kowloon Hong Kong Authorised Mr. Wong Hin Shek and representatives Ms. Man Tsz Sai Lavender Unit 7, 2nd Floor Kingsford Industrial Centre 13 Wang Hoi Road Kowloon Bay Kowloon Hong Kong Company secretary Ms. Man Tsz Sai Lavender ACIS, ACS Legal advisers to the As to Hong Kong law: Company D.S. Cheung & Co. Solicitors Room 1910-1913, Hutchison house, 10 Harcourt Road, Central, Hong Kong As to Bermuda law: Conyers Dill & Pearman 2901 One Exchange Square 8 Connaught Place, Central, Hong Kong

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APPENDIX V

GENERAL INFORMATION

Auditors

BDO Limited, Certified Public Accountants 25th Floor, Wing On Centre 111 Connaught Road Central Hong Kong

Principal share registrar Butterfield Fulcrum Group (Bermuda) Limited Rosebank Centre 11 Bermudian Road Pembroke Bermuda

Branch share registrar and Tricor Tengis Limited transfer office 26/F, Tesbury Centre 28 Queen’s Road East Wanchai Hong Kong
Principal bankers (in Standard Chartered Bank (Hong Kong) Limited alphabetical order) Standard Chartered Bank Building 4-4A Des Voeux Road Central Hong Kong
The Hong Kong and Shanghai Banking Corporation Limited
1 Queen’s Road Central Hong Kong

Underwriter Kingston Securities Limited Suite 2801, 28th Floor One International Finance Centre, 1 Harbour View Street Central, Hong Kong

Independent financial Menlo Capital Limited adviser 17/F., Asia Standard Tower 59-65 Queen’s Road Central, Hong Kong

9. BRIEF BIOGRAPHICAL DETAILS OF DIRECTORS

Executive Directors

Mr. Wong Hin Shek , aged 39, was appointed as the chairman and executive Director of the Company on 24 July 2009. Mr. Wong has extensive experience in finance, operation and strategic investment of listed companies in Hong Kong. He worked in a number of reputable investment banks and the Listing Division of the Stock Exchange. Mr. Wong is also a responsible officer of Veda Capital Limited, a licensed corporation which carries out Type 6 (advising on corporate finance) regulated activity under the SFO. He holds a Master of Science (Financial Management) degree from University of London in United Kingdom and a Bachelor

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APPENDIX V

GENERAL INFORMATION

of Commerce degree from University of Toronto in Canada. Mr. Wong is also an executive director of Climax International Company Limited and Golden Resorts Group Limited, which are companies listed on the Stock Exchange. Mr. Wong was also an executive director of China Public Procurement Limited for the period from 19 November 2007 to 22 September 2009. The business address of Mr. Wong is Unit 7, 2nd Floor, Kingsford Industrial Centre, 13 Wang Hoi Road, Kowloon Bay, Kowloon, Hong Kong.

Mr. Chau Lai Him , aged 58, has been appointed as an executive Director since August 2004. He has more than 30 years’ experience in manufacturing business of cable and wire products and copper products. Mr. Chau is also an executive director of Solartech International Holdings Limited, a company listed on the Stock Exchange. The business address of Mr. Chau is Unit 7, 2nd Floor, Kingsford Industrial Centre, 13 Wang Hoi Road, Kowloon Bay, Kowloon, Hong Kong.

Independent Non-executive Directors

Dr. Wong Yun Kuen , aged 51, joined the Group as an independent non-executive Director on 26 June 2009, Dr. Wong received his Ph.D. degree from Harvard University, and was “Distinguished Visiting Scholar” at Wharton School of the University of Pennsylvania. Dr. Wong has worked in financial industries in the United States and Hong Kong for more than 10 years, and has considerable experience in corporate finance, investment and derivative products. He is a member of the Hong Kong Securities Institute. He is an executive director of UBA Investments Limited, and an independent non-executive director of each of Harmony Asset Limited, Bauhaus International (Holdings) Limited, Kaisun Energy Group Limited, China Yunnan Tin Minerals Group Company Limited, Climax International Company Limited, Superb Summit International Timber Company Limited, China E-Learning Group Limited, Golden Resorts Group Limited, Kong Sun Holdings Limited and China Grand Forestry Green Resources Group Limited, which are companies listed on the Stock Exchange. He was an independent non-executive director of Grand Field Group Holdings Limited, a company listed on the main board of the Stock Exchange, for the period from 2 September 2004 to 4 September 2009. The business address of Dr. Wong is Unit 7, 2nd Floor, Kingsford Industrial Centre, 13 Wang Hoi Road, Kowloon Bay, Kowloon, Hong Kong.

Mr. Chiu Wai On , aged 39, joined the Group as an independent non-executive Director on 26 June 2009. Mr. Chiu is a member of the Hong Kong Institute of Certified Public Accountants and a fellow member of the Association of Chartered Certified Accountants. Mr Chiu possesses 12 years of professional experience in accounting and auditing services. Mr. Chiu is also an independent non-executive director of New Times Energy Corporation Limited, a company listed on the Stock Exchange. The business address of Mr. Chiu is Unit 7, 2nd Floor, Kingsford Industrial Centre, 13 Wang Hoi Road, Kowloon Bay, Kowloon, Hong Kong.

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APPENDIX V

GENERAL INFORMATION

Mr. Man Kwok Leung , aged 62, joined the Group as an independent non-executive Director on 21 May 2009. Mr. Man is a solicitor of the High Court of Hong Kong and a civil celebrant of marriages. Mr. Man has extensive experience in the legal practice. He had been appointed by Xinhua News Agency as a district advisor from 1995 to 1997. He is currently appointed as a director of Apleichau Kai Fong Primary School, the deputy chairman of Apleichau Kai Fong Welfare Association, the secretary of Apleichau Promotion of Tourism Association and the honorary legal advisor of Junior Police Officers’ Association. Mr. Man is also an independent non-executive director of Climax International Company Limited and Kong Sun Holdings Limited, which are company listed on the Stock Exchange. The business address of Mr. Man is Unit 7, 2nd Floor, Kingsford Industrial Centre, 13 Wang Hoi Road, Kowloon Bay, Kowloon, Hong Kong.

10. EXPERT AND CONSENT

Name

Qualification

BDO Limited Certified Public Accountants Menlo Capital a licensed corporation to carry on business in Type 6 (advising on corporate finance) regulated activities under the SFO

BDO Limited and Menlo Capital have given and have not withdrawn their respective written consent to the issue of this circular with the inclusion herein of their letters or opinions or reports or reference to their names in the form and context in which it appears.

As at the Latest Practicable Date, BDO Limited and Menlo Capital had not had any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

BDO Limited and Menlo Capital have not had any direct or indirect interests in any assets which have been, since 30 June 2009 (being the date to which the latest published audited accounts of the Company were made up), acquired or disposed of by or leased to any member of the Group, or which are proposed to be acquired or disposed of by or leased to any member of the Group.

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APPENDIX V

GENERAL INFORMATION

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours from 9:00 a.m. to 5:00 p.m. on any business day at the principal place of business of the Company in Hong Kong at Unit 7, 2nd Floor, Kingsford Industrial Centre, 13 Wang Hoi Road, Kowloon Bay, Kowloon, Hong Kong from the date of this circular up to and including 10 December 2009, being the Latest Acceptance Date and also be available at the SGM:

(a) the memorandum of association and bye-laws of the Company;
(b) the material contracts referred to in the section headed “Material contracts” in this appendix;
(c) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out on pages 21 to 22 of this circular;
(d) the letter from Menlo Capital containing its advice to the Independent Board Committee and the Independent Shareholders, the text of which is set out in the section headed “Letter from Menlo Capital” in this circular;
(e) the annual reports of the Company for the two years ended 30 June 2009 and 30 June 2008 respectively;
(f) the report of BDO Limited on the unaudited pro forma consolidated net tangible assets of the Group as set out in appendix II to this circular; and
(g) the written consent by BDO Limited and Menlo Capital referred to in the section headed “Expert and consent” in this appendix.

12. GENERAL

(a) The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and its principal place of business in Hong Kong is at Unit 7, 2nd Floor, Kingsford Industrial Centre, 13 Wang Hoi Road, Kowloon Bay, Kowloon, Hong Kong.
(b) The branch share registrar and transfer office of the Company in Hong Kong is Tricor Tengis Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(c) The secretary of the Company is Ms. Man Tsz Sai, Lavender, an Associate of The Hong Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and Administrators.
(d) The English text of this circular shall prevail over the Chinese text.

– 146 –

NOTICE OF SGM

==> picture [53 x 50] intentionally omitted <==

**HUA YI COPPER HOLDINGS LIMITED 華藝礦業控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

(Stock Code: 559)

NOTICE IS HEREBY GIVEN that a special general meeting (“ SGM ”) of Hua Yi Copper Holdings Limited (“ Company ”) will be held at Unit 7, 2nd Floor, Kingsford Industrial Centre, 13 Wang Hoi Road, Kowloon Bay, Kowloon, Hong Kong on Wednesday, 25 November 2009 at 11:00 a.m. for the purpose of considering and, if thought fit, passing (with or without amendments) the following resolutions as an ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT subject to and conditional upon The Stock Exchange of Hong Kong Limited approving the listing of, and granting the permission to deal in, the Offer Shares (as defined below) in their fully-paid forms to be allotted to the Qualifying Shareholders (as defined in the circular dated 9 November 2009 (“ Circular ”) to the shareholders of the Company of which the notice convening the meeting at which this resolution is proposed forms part, a copy of the Circular marked “A” has been produced to the meeting and signed by the Chairman of the meeting for the purpose of identification) by way of open offer as announced by the Company on 19 October 2009:
(a) the issue by way of open offer (“ Open Offer ”) of 1,301,282,600 shares of HK$0.05 each (collectively, the “ Offer Shares ”) to the holders of the shares of HK$0.05 each of the Company (each, a “ Share ”) whose names appear on the register of members of the Company on the Record Date (as defined in the Circular) in the proportion of two Offer Shares for every Share then held at the subscription price of HK$0.15 per Offer Share payable in full upon acceptance and otherwise with no facility for excess applications for the assured allotments of Offer Shares according to the terms and conditions set out in the Circular be and is hereby approved;
(b) the directors of the Company (“ Directors ”) be and are hereby authorised to allot and issue the Offer Shares pursuant to or in connection with the Open Offer provided that in the case of shareholders of the Company whose addresses as shown on the register of members of the Company at the close of business on the Record Date are in any jurisdictions outside Hong Kong, and to whom the Directors,

for identification purposes only

– 147 –

NOTICE OF SGM

based on the enquiry made by the Company, consider it necessary or expedient not to offer the Offer Shares on account of the legal advice given by the legal counsels of such jurisdictions (“ Excluded Shareholders ”), the Offer Shares shall not be issued to the Excluded Shareholders but shall be taken up by the Underwriter (as defined in the Circular);

(c) the Directors be and are hereby authorised to do all such acts and things, to sign and execute all such further documents and to take such steps or other exclusions or other arrangements in relation to the Excluded Shareholders as they may in their absolute discretion deem necessary, appropriate, desirable or expedient to give effect to or in connection with the Open Offer and the Underwriting Agreement (as defined in the Circular) or any of the transactions contemplated thereunder; and
(d) the Directors be and are hereby authorised to do all such acts and things, to sign and execute all such further documents and to take such steps as the Directors may in their absolute discretion consider necessary, appropriate, desirable or expedient to give effect to or in connection with the Open Offer and the Underwriting Agreement or any transactions contemplated thereunder.”
“ THAT Dr. Wong Yun Kuen be re-elected as an independent non-executive Director and the board of Directors be authorized to fix his remuneration.”
“ THAT Mr. Chiu Wai On be re-elected as an independent non-executive Director and the board of Directors be authorized to fix his remuneration.”

By order of the Board Hua Yi Copper Holdings Limited Wong Hin Shek Chairman and Executive Director

Hong Kong, 9 November 2009

Registered Office

Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head office and principal place of business in Hong Kong: Unit 7, 2nd Floor Kingsford Industrial Centre 13 Wang Hoi Road Kowloon Bay Kowloon Hong Kong

– 148 –

NOTICE OF SGM

Notes:

A Member entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and vote instead of him. A proxy need not be a Member of the Company. In order to be valid, the form of proxy must be deposited with the office of the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited, at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong together with any power of attorney or other authority, if any, under which it is signed, or a certified copy of that power or authority, not less than 48 hours before the time for holding the meeting or adjournment thereof.
Completion and return of the form of proxy shall not preclude a Member from attending and voting in person at the SGM or on the poll concerned and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
As at the date of this notice, the executive Directors are Mr. Wong Hin Shek and Mr. Chau Lai Him; and the independent non-executive Directors are Dr. Wong Yun Kuen, Mr. Chiu Wai On and Mr. Man Kwok Leung.

– 149 –

AI assistant

Kingwell Group Limited — Proxy Solicitation & Information Statement 2009

49757_rns_2009-11-08_9d85353c-7085-4ef4-a133-f019b5a1cb88.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

HUA YI COPPER HOLDINGS LIMITED 華藝礦業控股有限公司[*]

EXPECTED TIMETABLE

EFFECT OF BAD WEATHER ON THE LATEST ACCEPTANCE DATE

DEFINITIONS

HUA YI COPPER HOLDINGS LIMITED 華藝礦業控股有限公司[*]

(Stock Code: 559)

INTRODUCTION

PROPOSED OPEN OFFER

Issue statistics

Qualifying Shareholders

Excluded Shareholders

Book closure period

No application for excess Offer Shares

Subscription price

Status of the Offer Shares

Certificates of the Offer Shares

Application for listing of the Offer Shares

Fractional entitlements

REASONS FOR THE OPEN OFFER AND USE OF PROCEEDS

Irrevocable Undertaking

UNDERWRITING ARRANGEMENTS

Underwriting Agreement

Conditions of the Open Offer

Termination of the Underwriting Agreement

WARNING OF THE RISKS OF DEALING IN THE SHARES

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS OF THE COMPANY

CHANGES IN SHAREHOLDING STRUCTURE

RE-ELECTION OF DIRECTORS

SGM

RECOMMENDATION

FURTHER INFORMATION

HUA YI COPPER HOLDINGS LIMITED 華藝礦業控股有限公司[*]

(Stock Code: 559)

PROPOSED OPEN OFFER OF 1,301,282,600 OFFER SHARES OF HK$0.05 EACH AT THE SUBSCRIPTION PRICE OF HK$0.15 PER OFFER SHARE ON THE BASIS OF TWO OFFER SHARES FOR EVERY ONE SHARE HELD ON THE RECORD DATE

Yours faithfully, Independent Board Committee

PROPOSED OPEN OFFER OF 1,301,282,600 OFFER SHARES OF HK$0.05 EACH AT THE SUBSCRIPTION PRICE OF HK$0.15 PER OFFER SHARE ON THE BASIS OF TWO OFFER SHARES FOR EVERY ONE SHARE HELD ON THE RECORD DATE

PRINCIPAL FACTORS AND REASONS CONSIDERED

A. Financial highlights of the Group

B. Reasons for the Open Offer

C. The Open Offer

(a) Historical closing prices

(b) Comparison with other Open Offers

LETTER FROM MENLO CAPITAL

(c) Underwriting Commission

(d) Application for excess Offer Shares

D. Risks associated with the Open Offer

E. Alternatives to the Open Offer

F. Financial effect of the Open Offer

(i) Net asset value

(ii) Gearing Ratio

(iii) Working capital

G. Potential dilution effect

RECOMMENDATIONS

1. THREE-YEAR FINANCIAL SUMMARY

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE TWO YEARS ENDED 30 JUNE 2009

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

BALANCE SHEET

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE FINANCIAL STATEMENTS

1. ORGANISATION AND OPERATIONS

2. ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

Effective date

3. SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

Basis of preparation of financial statements

Basis of consolidation

Business combinations

Subsidiaries

Joint ventures

Non-current assets held for sale

Revenue recognition

Property, plant and equipment

Kingwell Group Limited Proxy Solicitation & Information Statement 2009

**HUA YI COPPER HOLDINGS LIMITED 華藝礦業控股有限公司[*]**

**HUA YI COPPER HOLDINGS LIMITED 華藝礦業控股有限公司[*]**

**HUA YI COPPER HOLDINGS LIMITED 華藝礦業控股有限公司[*]**