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Persistence Gold Group Ltd Interim / Quarterly Report 2010

Mar 17, 2011

50623_rns_2011-03-17_3648cf06-45a6-41e3-baf9-96b0cd6dc19d.pdf

Interim / Quarterly Report

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(Incorporated in Bermuda with limited liability)

Stock Code: 1104

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  • For identification purpose only

Contents

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Corporate Information 2
About APAC Resources 3
2010 Highlights 4
CEO Message 6
Management Discussion and Analysis 8
Condensed Consolidated Income Statement 12
Condensed Consolidated Statement of Comprehensive Income 14
Condensed Consolidated Statement of Financial Position 15
Condensed Consolidated Statement of Changes in Equity 16
Condensed Consolidated Statement of Cash Flows 17
Notes to the Condensed Financial Statements 18
Independent Review Report 38
Other Information 40

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1

Second Interim Report 2010 APAC Resources Limited

Corporate Informati on

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BOARD OF DIRECTORS

Executive Directors:

Ms. Chong Sok Un (Chairman) Mr. Andrew Ferguson (Chief Executive Offi cer) Mr. Yue Jialin Mr. Kong Muk Yin

Non-Executive Directors:

Mr. Lee Seng Hui Mr. So Kwok Hoo Mr. Liu Yongshun Mr. Peter Anthony Curry

Independent Non-Executive Directors:

Mr. Wong Wing Kuen, Albert Mr. Chang Chu Fai, Johnson Francis Mr. Robert Moyse Willcocks

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS

32/F China Online Centre 333 Lockhart Road Wanchai Hong Kong Tel: +852 2541 0338 Fax: +852 2541 9133

REGISTERED OFFICE

Clarendon House 2 Church Street Hamilton HM11 Bermuda PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

AUDIT COMMITTEE

Mr. Wong Wing Kuen, Albert (Chairman) Mr. Chang Chu Fai, Johnson Francis Mr. Robert Moyse Willcocks Mr. Lee Seng Hui

REMUNERATION COMMITTEE

Ms. Chong Sok Un (Chairman) Mr. Lee Seng Hui Mr. Wong Wing Kuen, Albert Mr. Chang Chu Fai, Johnson Francis Mr. Robert Moyse Willcocks

COMPANY SECRETARY

Ms. Fung Sam Ming

AUDITORS

Butterfi eld Fulcrum Group (Bermuda) Limited Rosebank Centre 11 Bermudiana Road Pembroke HM08 Bermuda

HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE

Tricor Secretaries Limited 26/F Tesbury Centre 28 Queen’s Road East Wanchai Hong Kong

WEBSITE

Graham H.Y. Chan & Co

LEGAL ADVISERS

P.C. Woo & Co Robertsons Conyers Dill & Pearman

www.apacresources.com www.irasia.com/listco/hk/apac/index.htm

STOCK CODE

1104

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2

Second Interim Report 2010 APAC Resources Limited

About APAC Resources

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APAC Resources Limited (“ APAC ”) is an established natural resources investment and commodities trading company listed on the Hong Kong Stock Exchange (stock code: 1104). Focused on natural resources, our business lines comprise of primary investments; trading and investment in listed securities; and commodity trading. Our investment business is run from Hong Kong, with the commodity trading division operating from Hong Kong and Shanghai.

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Minor investments Major investments

Shareholder Structure

COL Capital Limited

Fushan Interna�onal Energy Group Limited

CCB Interna�onal Asset Management Limited*

Penta Investment Advisers*

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

27.51%
48.77%
13.83%
4.91%
4.98%
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Others

  • Source: Bloomberg as at 25 February 2011

Major Investments

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Company Code % Held Focus
Metals X Limited MLX.AX 29.08 Tin/Nickel
Mount Gibson Iron Limited MGX.AX 25.61 Iron ore
Kalahari Minerals Plc KAH.L 14.79 Uranium
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3

Second Interim Report 2010 APAC Resources Limited

2010 Highlights

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

HK$m
1,000 849
Revenue
750 �����
Commodity trading 500
299 301
250 126
10 46
0
2008 2009 2010 Year
HK$m
500 350
Net gain (loss) in
250 125 trading and
0
investment in
-250
����������������
-500
(409)
2008 2009 2010 Year
HK$ m
600 536
������������������
��������������������� 300
118
2
0
2008 2009 2010 Year
��������� EPS
HK$m HK Cents
1,2501,000 16.81 1,104 2520 ����������������
750500 7.15 373 1510 EPS
250 5
0 0
-250 -5 �����������������
-500 -10 ���������������
-750 -15
-1,000-1,250 -20-25 owners and EPS
-1,500 -30
(26.49) [(1,252)]
2008 2009 2010 Year
----- End of picture text -----

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4

Second Interim Report 2010 APAC Resources Limited

2010 Highlights

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December:

Full year profits are HK$1,104 million

December:

Earnings per share (basic) is 16.81 HK Cents

December:

APAC increases its interest in Kalahari Minerals to 14.79%

November:

APAC commences the buy back of shares

June:

APAC increases its interest in Kalahari Minerals to 9.99%

April:

APAC completes placement of 1,100,000,000 shares raising HK$550 million (gross proceeds)

January:

Mr. Andrew Ferguson joins APAC as Chief Executive Officer

Second Interim Report 2010 APAC Resources Limited

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5

CEO Message

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Dear Investor,

Thank you for your interest in APAC Resources (“ APAC ”).

This is my fi rst year with APAC. As a transitional year for APAC, I take pleasure in reporting maiden results with a number of signifi cant achievements under new management which provide a solid foundation for APAC’s future growth.

Upon my joining APAC, I inherited two primary investments – Mount Gibson and Metals X. The fi rst question the board asked was – do we dispose of these investments? My instinct was to maintain both of them. Mount Gibson, Australia’s fourth largest iron producer, is able to

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benefi t from rising iron ore prices and well positioned to grow. Metals X, Australia’s largest tin producer, currently benefi ts from the structural tightness in supply and demand fundamentals which in turn has taken the tin price to an all time high.

As a resource investment and commodity trading house, earnings and growth of our net assets are key indicators to APAC’s performance. The 2010 year saw our company achieving a 196% increase in net profi t to circa HK$1.1 billion, an all time high and earnings per share of 16.81 HK cents, from 7.15 HK cents in 2009. To provide greater transparency to the market, we started announcing our net asset value (“ NAV ”) based on market value from August 2010. With Mount Gibson as the main driver of our investment portfolio, our NAV rose by 47% to HK$1.09 per share in the year to December 2010.

Our primary investments have been strong contributors, based on solid operational performances and improving commodity prices. For the 2010 year, Mount Gibson reported record net profi t of A$233 million, up 239% year-on-year, due to a combination of steady production and sales, and the strengthening of iron ore prices. With a net cash position of A$351 million plus a third mine, Extension Hill, due to start production in the second half of 2011, the outlook for Mount Gibson and iron ore remains very positive. We have also been very pleased with the results from Metals X, which has increased tin production from its Renison mine and progressed the Wingellina nickel project.

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6

Second Interim Report 2010 APAC Resources Limited

CEO Message

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In conjunction with our primary investments in Mount Gibson and Metals X, we also run an investment portfolio comprising various global resource companies. These can include shorter term trading opportunities as well as positions we believe, one day, could become another primary investment. The largest position is a 14.79% interest in Kalahari Minerals, which controls the world’s fi fth largest uranium deposit, Husab, via its 41.12% stake in Extract Resources (“ Extract ”). Extract is on track to receive its mining licence and commence its mine construction in 2011. For 2010, we report a net gain from our trading and investment in listed securities of HK$350 million, up 181% from the previous year.

With iron ore prices posting new highs in 2010, our commodities team in Shanghai also had a good year, reporting a record profi t of HK$126 million on gross turnover of HK$849 million. We also successfully renegotiated our iron ore offtake with Mount Gibson following the breakdown of the iron ore benchmark pricing system.

Over the past year, the outlook for the global economy has improved, based on a strong recovery in emerging markets and government stimulus led stabilisation in the developed world. The IMF is now forecasting global growth of 4.3% in 2011. Given Chinese and other emerging economies’ demand and continued supply constraints, we remain positive on the

commodities space, though it is not without risks and we expect volatility to remain high. We continue to look for opportunities for direct mine investments and to add to our portfolio of strategic investments. With a contracted off-take with Mount Gibson and signifi cant trading expertise, we are also actively looking to extend and diversify our commodity trading business.

APAC’s strengths are its people behind the scenes. Without their skill set, dedication, support and trust, we would not have been able to deliver such a successful year. I would like to thank our shareholders, directors and the team for their continued support.

Best Wishes,

Andrew Ferguson Chief Executive Offi cer

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7

Second Interim Report 2010 APAC Resources Limited

Management Discussion and Analysis

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Financial Results

For the twelve months ended 31 December 2010 (the “ 2010 Period ”), we achieved record turnover of HK$848,699,000 (2009: HK$301,420,000) representing an increase of 182% over 2009. The main driver was the signifi cant growth in the commodity trading business which benefi tted from continuing strength in the iron ore market. We also took advantage of buoyant equity market conditions to post a net gain of HK$350,025,000 (2009: HK$124,702,000) in its equity portfolio, representing an increase of 181% year on year. Overall, net profi t attributable to owners of HK$1,104,447,000 (2009: HK$372,603,000) was achieved, translating to a 135% improvement in earnings per share (basic) of 16.81 HK cents (2009: 7.15 HK cents) and a 40% increase in the (equity accounted) net asset value per share to HK$0.73 (2009: HK$0.52) as at 31 December 2010.

Business Review

Trading and Investment in Listed Securities

The fragile global economic environment which had adversely affected equity markets in the fi rst half of 2010, had improved in the second half of 2010, underpinning strong gains from trading and investments in listed securities. This resulted in the Group reversing the reported net loss of HK$106,334,000 for the fi rst half of 2010 into a profi t of HK$350,025,000 (2009: HK$124,702,000) for the full year. The 181% improvement in profi t over 2009, was largely refl ecting unrealised gains in relation to trading securities which amounted to HK$334,267,000 (2009: HK$6,389,000).

As at 31 December 2010, we maintained a long term investment portfolio of HK$115,860,000 (2009: HK$96,376,000) and a short term investment portfolio of HK$1,371,802,000 (2009: HK$71,899,000) focused on listed natural resource companies. The portfolio of trading securities is dominated by a 14.79% interest in the AIM listed Kalahari Minerals Plc (“ Kalahari ”), with interests in uranium, gold, copper and other base metals in Namibia. The remaining portfolio comprises mostly minor holdings in various natural resource companies listed on major stock exchanges including Australia, Canada, Hong Kong and United Kingdom.

Trading in Commodities

Commodity prices, including iron ore, dipped in the second quarter of 2010 but rebounded and sustained a strong upward move in the second half of the year. Accordingly, we enjoyed generally favourable conditions for our commodity trading business and reported a profi t of HK$125,772,000 (2009: HK$46,092,000), representing a 173% increase over the 2009 period, on gross turnover of HK$848,699,000 (2009: HK$301,420,000), up 182% from the previous year. In November 2010, we entered into new long term purchase agreements with Mount Gibson Iron Limited (“ Mount Gibson ”) for the purchase of hematite iron ore from its Koolan Island and the Tallering Peak mines. These replaced the previous benchmark-related contracts and are now based on the Platts Iron Ore index using monthly pricing.

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8

Second Interim Report 2010 APAC Resources Limited

Management Discussion and Analysis

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PRINCIPAL ASSOCIATED COMPANIES

The Group’s two principal associated companies are Mount Gibson and Metals X Limited (“ Metals X ”). The share of profi t of associates (after tax) of the Group for the year ended 31 December 2010 was HK$536,379,000. (2009: HK$118,028,000), representing a 354% increase over the previous year. As at 31 December 2010, the Group’s interest in associates amounted to HK$3,272,253,000 (2009: HK$2,357,583,000).

Mount Gibson

Mount Gibson, an Australian listed mining company, currently producing iron ore from Koolan Island and the Tallering Peak mines in Western Australia, with combined production of circa 7 million tonnes per year. The Extension Hill mine is due to start production during the second half of 2011. Mount Gibson’s production should increase to circa 10 million tonnes per year. Company reserves were 56 million tonnes at a grade of 62.0% Fe with a total resource of 109 million tonnes as of 30 June 2010.

For the 2010 Period, Mount Gibson reported a total production of circa 7 million tonnes, with the record fi nancial results driven by large increases in realised prices, refl ecting the strong demand within the iron ore market. Accordingly, the Mount Gibson results included total revenue of A$701,071,000 (circa HK$5,571,061,000) (2009: A$445,531,000, circa HK$3,100,562,000), representing a 57% increase on the 2009 period, and a net profi t of A$233,000,000 (circa HK$1,851,535,000) (2009: A$68,700,000, circa HK$478,100,000), representing a 239% increase on the 2009 period. Mount Gibson’s fi nancial position has strengthened further, with a reported net asset value of A$1,072,095,000 and net cash position of A$351,000,000 as at 31 December 2010.

The excellent results of Mount Gibson validate our original investment strategy.

Metals X

Metals X, an Australian-based emerging diversifi ed resource group with a primary focus on tin via its 50% interest in the producing Renison mine in Tasmania, Australia, and nickel via its world class and wholly owned Wingellina nickel deposit. The company also has a portfolio of strategic investments, namely Westgold Resources (31.8%), Aragon Resources (28.8%) and Agaton Phosphate (75.0%).

During the 2010 Period, Renison production increased to circa 6,500 tonnes of tin in concentrate while mining reserves were upgraded twice during the year to 119,207 tonnes of 0.57% tin. Signifi cantly, the company also received its Native Title Approvals for the Wingellina project.

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9

Second Interim Report 2010 APAC Resources Limited

Management Discussion and Analysis

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OTHER MAJOR INVESTMENTS

Kalahari

Kalahari’s key assets are its holdings of approximately 41% in the ASX listed Extract Resources Limited (“ Extract ”) and its 45% interest in AIM listed North River Resources Plc. Extract is developing the Husab Uranium Project in Namibia, the fi fth largest primary uranium deposit in the world, based on updated JORC resources of 367 million pounds of uranium (U3O8).

During 2010, the outlook for uranium improved signifi cantly, with the spot price increasing over 59% from US$44 to almost US$70 by year-end. With China purchasing around a quarter of 2010 supply to build stockpiles and Russia acquiring a number of globally signifi cant uranium companies, security of supply has become an issue for various nations. In 2011, Extract will focus on fi nalising the defi nitive feasibility study for Husab, permitting and fi nancing this globally signifi cant uranium mine development.

Financial Review

Liquidity, Financial Resources and Capital Structure

As at 31 December 2010, our non-current assets amounted to HK$3,389,762,000 (2009: HK$2,454,951,000) and net current assets amounted to HK$1,678,947,000 (2009: HK$507,063,000) with a current ratio of 9.2 times (2009: 17.0 times) calculated on the basis of its current assets over current liabilities.

As at 31 December 2010, we had borrowings of HK$156,382,000 (2009: nil) and had undrawn banking facilities amounting to HK$834,618,000 secured against its investments in listed associates, available-for-sale investments, trading securities, the Company’s corporate guarantee and term deposits. As at 31 December 2010, we had a gearing ratio of 0.03 (2009: Nil), calculated on the basis of total borrowings over equity attributable to owners of the Company as at 31 December 2010.

During the 2010 Period, we successfully placed 1,100,000,000 shares at HK$0.50 per share to new investors, raising gross proceeds of HK$550,000,000 and thereby increasing our working capital base to enable us to take advantage of market opportunities as they arise. As a result of this placement, the exercise of warrants and buy back of shares by the Company, the issued share capital of the Company increased from 5,690,343,455 to 6,910,567,990 during the 2010 Period.

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10

Second Interim Report 2010 APAC Resources Limited

Management Discussion and Analysis

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Foreign Exchange Exposure

For the period under review, the Group’s assets were mainly denominated in Australian dollars and Hong Kong dollars while the liabilities were mainly denominated in Hong Kong dollars. As a substantial portion of the assets is held as long-term investments, there would be no material immediate effect on the cash fl ows of the Group from adverse movements in foreign exchange. In light of this, the Group did not actively hedge for the risk arising from the Australian Dollar denominated assets.

Pledge of Assets

As at 31 December 2010, certain of the Group’s investment in listed associates, available-for-sale investments and trading securities of HK$3,444,392,000 (2009: HK$1,929,666,000) were pledged to a stock-broking fi rm to secure margin loan facilities made available to the Group. The Group’s bank deposits of HK$79,426,000 (2009: HK$89,324,000) were pledged to banks to secure various trade banking facilities granted to the Group.

EMPLOYEES AND REMUNERATION POLICY

The Group ensured that its employees are remunerated according to the prevailing manpower market conditions and individual performance with its remuneration policies reviewed on a regular basis. All the employees are entitled to participate in the Company’s benefi t plans including medical insurance, share options scheme and Mandatory Provident Fund Scheme (subject to the applicable laws and regulations of the PRC for its employees in the PRC). Further details relating to the Company’s share option scheme are set out on page 42 of this report under the section headed “SHARE OPTION SCHEME” and Note 17 to the condensed fi nancial statements.

FORWARD LOOKING OBSERVATIONS

Over the past year, commodity prices have continued to strengthen as China’s rapacious appetite for resources has been coupled with a steady recovery in demand from the developed nations. Barring external shocks and likely increased volatility, we remain upbeat on the natural resources sector given economic growth expectations in 2011.

Accordingly, we continue to evaluate opportunities to expand and diversify our commodity trading business as well as potential acquisitions of direct mine investments and strategic interests in natural resource companies. We believe this multi-pronged strategy, combined with our robust fi nancial position and strong expertise disciplined approach to investments will provide a solid platform to maximise returns for you, our shareholders.

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11

Second Interim Report 2010 APAC Resources Limited

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The board of directors (the “ Board ”) of APAC Resources Limited (the “ Company ”) is pleased to announce the unaudited second interim results of the Company and its subsidiaries (collectively the “ Group ”) for the twelve months ended 31 December 2010, which has been reviewed by the auditors of the Group and the audit committee of the Company. This second interim results is prepared due to the change of fi nancial year end date from 31 December to 30 June, details of which are disclosed in the announcement of the Company dated 11 February 2011.

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six and twelve months ended 31 December 2010

Note Six months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Unaudited)		 Six months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Unaudited)		 Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Revenue
3
Revenue from sales of goods
Net gain from sales of trading
securities
Change in fair value of trading
securities
Change in fair value of other
f nancial assets
Interest income
Reversal of impairment loss on
interest in an associate
12
Other operating income
4
Purchases
Other cost of sales
Equity-settled share option expenses
Salaries and allowances
Operating lease rental on buildings
Impairment loss on available-for-sale
investments
Impairment loss on other receivable
Share of prof t less losses of
associates
Impairment loss on interest in
an associate
Exchange gain, net
Other operating expenses
Finance costs
5
Prof t before taxation c/f
6		 470,480
470,480
11,833
432,140
3,669
2,820
109,592
50,743
(355,411)
(64,371)
(39,979)
(7,943)
(1,140)
–
(3,781)
453,220
–
9,864
(6,117)
(1,515)
1,064,104		 301,420
301,420
92,666
(109,503)
–
6,707
466,553
2,351
(197,377)
(65,445)
(2,410)
(7,601)
(1,221)
(28,174)
–
100,687
(304,024)
293
(6,717)
(56)
248,149		 848,699
848,699
12,212
334,267
343
5,760
109,592
92,169
(596,894)
(124,458)
(39,979)
(14,977)
(2,584)
(20,630)
(3,781)
700,780
–
3,816
(16,446)
(2,171)
1,285,718		 301,420
301,420
112,133
6,389
–
7,839
466,553
36,190
(197,377)
(65,445)
(14,783)
(15,622)
(2,765)
(28,174)
–
168,033
(304,024)
1,431
(13,946)
(13,468)
444,384

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12

Second Interim Report 2010 APAC Resources Limited

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CONDENSED CONSOLIDATED INCOME STATEMENT (Continued)

For the six and twelve months ended 31 December 2010

Note Six months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Unaudited)		 Six months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Unaudited)		 Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Prof t before taxation b/f
6
Income tax expense
7
Prof t for the period
Attributable to:
Owners of the Company
Earnings per share
9
— Basic (HK cents per share)
— Diluted (HK cents per share)		 1,064,104
(103,039)
961,065
961,065
13.89
13.89		 248,149
(38,917)
209,232
209,232
3.68
3.66		 1,285,718
(181,271)
1,104,447
1,104,447
16.81
16.78		 444,384
(71,781)
372,603
372,603
7.15
7.07

Details of dividend payable to owners of the Company are set out in note 8.

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13

Second Interim Report 2010 APAC Resources Limited

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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six and twelve months ended 31 December 2010

Six months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Unaudited)		 Six months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Unaudited)		 Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Prof t for the period
Other comprehensive income,
net of tax
Exchange differences arising on
translation of foreign operations
Share of other comprehensive
income of associates
Exchange difference from sharing
of interest in associates
Change in equity of associates
on previously held interest
Reversal previously recognised
changes in fair value of
investment held for trading
Fair value change of available-for-sale
investments
Reclassif cation adjustment for
the cumulative other comprehensive
income to prof t or loss upon
disposal of partial interest
in an associate
Total comprehensive income
for the period
Total comprehensive income
attributable to:
Owners of the Company		 961,065
8,255
64,873
396,032
–
–
71,235
(5,017)
535,378
1,496,443
1,496,443		 209,232
1,136
38,982
147,466
(83,108)
442,409
(2,034)
–
544,851
754,083
754,083		 1,104,447
8,072
47,966
307,583
–
–
40,115
(11,276)
392,460
1,496,907
1,496,907		 372,603
2,319
144,692
306,501
(83,108)
442,409
31,120
–
843,933
1,216,536
1,216,536

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14

Second Interim Report 2010 APAC Resources Limited

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CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION At 31 December 2010

Note Group
31 December
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Group
31 December
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Assets
Non-current assets
Property, plant and equipment
10
Available-for-sale investments
11
Interest in associates
12
Total non-current assets
Current assets
Trade and other receivables
13
Other f nancial assets
Trading securities
14
Pledged bank deposits
15
Cash and cash equivalents
15
Total current assets
Total assets
Equity and Liabilities
Capital and reserves
Share capital
16
Reserves
Retained earnings/(accumulated losses)
Equity attributable to owners of the Company
and total equity
Current liabilities
Trade and other payables
Margin f nancing
20
Tax payable
Total liabilities
Total equity and liabilities		 1,649
115,860
3,272,253
3,389,762
21,142
343
1,371,802
79,426
411,262
1,883,975
5,273,737
691,057
3,572,625
805,027
5,068,709
22,398
156,382
26,248
205,028
5,273,737		 992
96,376
2,357,583
2,454,951
59,415
–
71,899
89,324
318,203
538,841
2,993,792
569,034
2,885,162
(492,182)
2,962,014
10,020
–
21,758
31,778
2,993,792

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Second Interim Report 2010 APAC Resources Limited

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the twelve months ended 31 December 2010

Attributable to Owners of the Company
Share
Capital
Share
Premium
Special
Reserve
Investment
Revaluation
Reserve
Exchange
Reserve
Share
Option
Reserve
Net
Unrealised
Gains/
(Losses)
Reserve
Capital
Redemption
Reserve
Retained
Prof ts/
(Accumulated
Losses)
Total
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
At 1 January 2009 (audited)
Prof t for the period
Other comprehensive
income for the period
Total comprehensive
income for the period
Issue of shares upon
exercise of warrants
Issue of shares upon
placement, net of expenses
Equity-settled share option
expenses
Lapse of equity - settled
share option
At 31 December 2009
(audited)
At 1 January 2010
(audited)
Prof t for the period
Other comprehensive
income for the period
Total comprehensive
income for the period
Issue of shares upon
exercise of warrants
Issue of shares upon
placement, net of expenses
Repurchase of issued capital
Equity-settled share
option expenses
Lapse of equity - settled
share option
At 31 December 2010
(unaudited)		 472,866
1,988,220
(14,980)
(41,594)
(64,586)
262,627
(15,331)
–
(1,315,961)
1,271,261
–
–
–
–
–
–
–
–
372,603
372,603
–
–
–
34,341
297,216
–
144,692
–
367,684
843,933
–
–
–
34,341
297,216
–
144,692
–
740,287
1,216,536
6,168
12,337
–
–
–
–
–
–
–
18,505

90,000
350,929
–
–
–
–
–
–
–
440,929
–
–
–
–
–
14,783
–
–
–
14,783
–
–
–
–
–
(83,492)
–
–
83,492
–
569,034
2,351,486
(14,980)
(7,253)
232,630
193,918
129,361
–
(492,182)
2,962,014
569,034
2,351,486
(14,980)
(7,253)
232,630
193,918
129,361
–
(492,182)
2,962,014
–
–
–
–
–
–
–
–
1,104,447
1,104,447
–
–
–
41,866
307,127
–
43,467
–
–
392,460
–
–
–
41,866
307,127
–
43,467
–
1,104,447
1,496,907
13,179
26,357
–
–
–
–
–
–
–
39,536
110,000
426,149
–
–
–
–
–
–
–
536,149
(1,156)
(4,720)
–
–
–
–
–
1,156
(1,156)
(5,876)
–
–
–
–
–
39,979
–
–
–
39,979
–
–
–
–
–
(193,918)
–
–
193,918
–
691,057
2,799,272
(14,980)
34,613
539,757
39,979
172,828
1,156
805,027
5,068,709

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the twelve months ended 31 December 2010

Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Net Cash (Used in)/From Operating Activities
Net Cash From/(Used In) Investing Activities
Net Cash From Financing Activities
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at 1 January
Effect of foreign exchange rate changes
Cash and Cash Equivalents at 31 December		 (819,902)
180,871
724,018
84,987
318,203
8,072
411,262		 429,159
(493,283)
248,989
184,865
131,019
2,319
318,203

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NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the twelve months ended 31 December 2010

1. General

The Company is incorporated as an exempted company with limited liability in Bermuda under the Companies Act 1981 of Bermuda (as amended) and its shares are listed on The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”). The address of its registered offi ce is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda and the address of its principal offi ce in Hong Kong is 32/F., China Online Centre, 333 Lockhart Road, Wanchai, Hong Kong.

The Company and its subsidiaries (collectively referred to as the “ Group ”) are principally engaged in the (i) trading in commodities; and (ii) trading and investment in listed securities with a portfolio primarily focused on natural resources and related sector and related industries.

These unaudited condensed consolidated second interim fi nancial statements (“ Second Interim Financial Statements ”) are presented in Hong Kong dollars (“ HK$ ”), which is the Company’s functional and presentation currency.

2. Basis of Preparation and Accounting Policies

Pursuant to a resolution of the Board of Directors dated 11 February 2011, the Company’s fi nancial year end date has been changed from 31 December to 30 June so as to align the Company’s fi nancial year end date with those of the Company’s principal overseas listed associates which are the Group’s substantial investments. Accordingly, the next audited fi nal results will cover a period of eighteen months from 1 January 2010 to 30 June 2011. The fi rst interim report which was issued on 25 August 2010 has covered the six-month period from 1 January 2010 to 30 June 2010. This second interim report covers the twelvemonth period from 1 January 2010 to 31 December 2010. The comparative fi gures presented for the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of fi nancial position, consolidated statement of changes in equity and consolidated statement of cash fl ows and related notes cover the fi nancial year from 1 January 2009 to 31 December 2009, as extracted from the audited fi nancial statements for the year ended 31 December 2009.

These Second Interim Financial Statements are prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“ Listing Rules ”), including compliance with Hong Kong Accounting Standard (“ HKAS ”) 34, “ Interim Financial Reporting ” issued by the Hong Kong Institute of Certifi ed Public Accountants (the “ HKICPA ”).

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2. Basis of Preparation and Accounting Policies (Continued)

These Second Interim Financial Statements should be read in conjunction with the 2009 annual report.

These Second Interim Financial Statements contain condensed consolidated fi nancial statements and selected explanatory notes. The notes include an explanation of events and transactions that are signifi cant to an understanding of the changes in fi nancial position and performance of the Group since the 2009 annual report. The Second Interim Financial Statements and notes thereon do not include all of the information required for full set of fi nancial statements prepared in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”, which term collectively includes HKASs and Interpretations).

In the current period, the Group has applied, for the fi rst time, the following new standards, amendments and interpretations (hereinafter collectively referred to as ‘‘ new HKFRSs ’’), issued by the HKICPA, which are effective for the current accounting period of the Group.

HKAS 1 (Amendments) Presentation of f nancial statements
HKAS 7 (Amendment) Statement of cash f ows
HKAS 27 (Revised) Consolidated and separate f nancial statements
HKAS 28 (Revised) Investments in associates
HKAS 38 (Amendment) Intangible assets
HKAS 39 (Amendment) Eligible hedged items
HKFRSs (Amendments) Improvements to HKFRSs 2009
HKFRSs (Amendments) Amendment to HKFRS 5 as part of improvements
to HKFRSs 2008
HKFRS 1 (Revised) First-time adoption of Hong Kong Financial
Reporting Standards
HKFRS 1 (Amendments) Additional exemptions for f rst-time adopters
HKFRS 2 (Amendments) Group cash-settled share-based payment
transactions
HKFRS 3 (Revised) Business combinations
HKFRS 5 (Amendments) Non-current assets held for sale and discontinued
operations
HKFRS 7 (Amendment) Financial instruments : disclosures
HK (IFRIC) – INT 17 Distribution of non-cash assets to owners
HK (IFRIC) – INT 18 Transfers of assets from customers

The adoption of the new HKFRSs had no material effect on how the results and fi nancial position for the prior accounting period have been prepared and presented. Accordingly, no prior period adjustment has been required.

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2. Basis of Preparation and Accounting Policies (Continued)

The Group has not early applied the following new and revised HKFRSs that have been issued but are not yet effective, in these fi nancial statements. The directors of the Company anticipate that the application of these standards, amendments and interpretations will have no material impact on the fi nancial statements of the Group.

HKFRSs (Amendments) Improvements to HKFRSs 2010[2] HKAS 24 (Revised) Related party disclosures[4] HKAS 32 (Amendment) Classifi cation of rights issues[1] HKFRS 1 (Amendment) Limited exemption from comparative HKFRS 7 disclosure for fi rst-time adopters[3] HKFRS 7 (Amendment) Disclosures – transfers of fi nancial assets[5] HKFRS 9 Financial instruments (relating to the classifi cation and measurement of fi nancial assets)[6] HK(IFRIC) – INT 14 Prepayments of a minimum funding requirement[4] (Amendment) HK(IFRIC) – INT 19 Extinguishing fi nancial liabilities with equity instruments[3]

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

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

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

  • 5 Effective for annual periods beginning on or after 1 July 2011

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

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3. Segment Information

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

  • (i) trading in commodities; and

  • (ii) trading and investment in listed securities.

Segment revenue and result

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

Twelve months ended 31 December 2010

Trading in
commodities		 Trading and
investment
in listed
securities		 Group
Total
HK$’000 HK$’000 HK$’000
(Unaudited) (Unaudited) (Unaudited)
Revenue
Gross sales proceeds from trading
and investment in listed securities
Segment result
Share of prof ts less losses of associates
Gain on disposal of partial interest in
an associate
Reversal of impairment loss on
interest in an associate
Impairment loss on other receivable
Impairment loss on available-for-sale
investments
Unallocated corporate income
Unallocated corporate expenses
Finance costs
Prof t before taxation
Income tax expense
Prof t for the period
848,699 – 848,699
– 90,151 90,151
125,772 350,025 475,797
700,780
90,894
109,592
(3,781) – (3,781)
– (20,630) (20,630)
3,908
(68,671)
(653) (864) (2,171)
1,285,718
(16,820) (335) (181,271)
1,104,447

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3. Segment Information (Continued)

Segment revenue and result (Continued)

Twelve months ended 31 December 2009

Trading in
commodities
HK$’000
(Audited)		 Trading and
investment
in listed
securities
HK$’000
(Audited)		 Group
Total
HK$’000
(Audited)
Revenue
Gross sales proceeds from trading
and investment in listed securities
Segment result
Share of prof t less losses of associates
Excess of the Group’s interest in
the net fair value of an associate’s
identif able assets, liabilities and
contingent liabilities over cost of
investment
Impairment loss on available-for-sale
investments
Reversal of impairment loss on
interest in an associate
Impairment loss on interest in
an associate
Unallocated corporate income
Unallocated corporate expenses
Finance costs
Prof t before taxation
Income tax expense
Prof t for the period		 301,420
–
46,092
–
(8)
(5,030)		 –
268,671
124,702
(28,174)
(13,460)
(15,091)		 301,420
268,671
170,794
168,033
21,244
(28,174)
466,553
(304,024)
2,079
(38,653)
(13,468)
444,384
(71,781)
372,603

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3. Segment Information (Continued)

Segment revenue and result (Continued)

Other segment items included in consolidated income statement for the twelve months ended 31 December 2010 are as follows :

Trading in
commodities		 Trading and
investment
in listed
securities		 Unallocated Total
HK$’000
(Unaudited)		 HK$’000
(Unaudited)		 HK$’000
(Unaudited)		 HK$’000
(Unaudited)
Depreciation
Interest income
Change in fair value of
trading securities
(3) – (709) (712)
3,167 1,155 1,438 5,760
– 334,267 – 334,267

Other segment items included in consolidated income statement for the twelve months ended 31 December 2009 are as follows :

Trading and
investment
Trading in in listed
commodities securities Unallocated Total
HK$’000 HK$’000 HK$’000 HK$’000
(Audited) (Audited) (Audited) (Audited)
Depreciation (3) – (655) (658)
Interest income 6,962 762 115 7,839
Change in fair value of
trading securities – 6,389 – 6,389

Segment assets

An analysis of the Group’s assets by operating segment is set out below:

31 December
2010
HK$’000
(Unaudited)		 31 December
2009
HK$’000
(Audited)
Trading in commodities
Trading and investment in listed securities
Interest in associates
Unallocated assets
Total assets		 439,525
1,515,281
1,954,806
3,272,253
46,678
5,273,737		 424,729
168,631
593,360
2,357,583
42,849
2,993,792

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Second Interim Report 2010 APAC Resources Limited

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4. Other Operating Income

Group
Six months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Unaudited)		 Group
Six months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Unaudited)		 Group
Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Group
Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Dividend income
Excess of the Group’s interest
in the net fair value of an
associate’s identif able
assets, liabilities and
contingent liabilities over
cost of investment
Underwriting fee recovered
Gain on disposal of partial
interest in an associate
Sundry income		 564
–
–
50,288
(109)
50,743		 779
–
–
–
1,572
2,351		 1,037
–
–
90,894
238
92,169		 796
21,244
8,641
–
5,509
36,190

5. Finance Costs

Group
Six months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Unaudited)		 Group
Six months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Unaudited)		 Group
Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Group
Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Interest on margin f nancing
Interest on short-term loan
Interest on bank borrowings		 208
–
1,307
1,515		 55
–
1
56		 864
–
1,307
2,171		 8,266
5,193
9
13,468

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Second Interim Report 2010 APAC Resources Limited

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6.

Prof t Before Taxation
Group
Six months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Unaudited)		 Group
Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Prof t before taxation has been
arrived at after charging/
(crediting) the following :
Depreciation
Legal and professional fees
Loss on disposal of property,
plant and equipment
Consultancy fee
— settled by cash
— equity-settled share option
expenses
Total consultancy fee
Staff costs, including directors’
emoluments
— salaries and allowances
— equity-settled share option
expenses
— directors’ quarters
— retirement benef ts scheme
contributions, net of nil
forfeited contributions
Total staff costs		 291
1,837
–
1,320
6,525
7,845
6,951
33,454
640
352
41,397		 329
1,823
1
1,078
–
1,078
7,585
2,410
101
(85)
10,011		 712
3,746
–
2,392
6,525
8,917
13,094
33,454
1,283
600
48,431		 658
45
1
2,005
–
2,005
15,221
14,783
220
181
30,405

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Second Interim Report 2010 APAC Resources Limited

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7. Income Tax Expense

Group
Six months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Unaudited)		 Group
Six months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Unaudited)		 Group
Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Group
Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Income tax expense for
the period
Hong Kong prof ts tax
The PRC enterprise
income tax
Overseas tax provided
Total income tax expense		 11,693
642
12,335
90,704
103,039		 7,774
979
8,753
30,164
38,917		 16,228
642
16,870
164,401
181,271		 20,543
1,233
21,776
50,005
71,781

Hong Kong profi ts tax has been provided for at the rate of 16.5% on the Group’s estimated assessable profi t for the twelve months ended 31 December 2010 and 2009.

The PRC subsidiaries are subject to the PRC enterprise income tax at 25%.

The Group’s share of associates’ tax charge for the twelve months ended 31 December 2010 is included in the overseas tax provided for the period above.

The Group has no signifi cant unprovided deferred taxation at the reporting date.

8. Dividend

No dividends had been paid or declared by the Company during the period (2009: nil).

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Second Interim Report 2010 APAC Resources Limited

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9. Earnings Per Share

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

Group
Six months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Unaudited)		 Group
Six months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Unaudited)		 Group
Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Group
Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Prof t for the purpose of basic
and diluted earnings per share
Weighted average number of
ordinary shares used in the
calculation of basic earnings
per share
Effect of dilutive potential ordinary
shares in respect of :
— warrants
— share options
Weighted average number of
ordinary shares used in the
calculation of diluted earnings
per share		 961,065
6,919,971,795
–
–
6,919,971,795		 209,232
1,104,447
Number of shares
5,678,907,037
6,571,413,781
30,550,099
11,055,727
–
–
5,709,457,136
6,582,469,508		 372,603
5,212,630,859
55,272,054
–
5,267,902,913

The calculation of the diluted earnings per share did not assume the exercise of the Company’s outstanding share options as their exercise prices were higher than the average market price of the Company’s shares during the period.

The warrants lapsed on 4 February 2010. There was no dilutive effect for the six months ended 31 December 2010.

10. Property, Plant and Equipment

During the period, the Group incurred approximately HK$1,350,000 (twelve months ended 31 December 2009: HK$15,000) on acquisition of property, plant and equipment.

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11. Available-for-sale Investments

Group
31 December
2010
31 December
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Group
31 December
2010
31 December
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Non-current
Listed equity securities, Hong Kong, at fair value
Listed equity securities, overseas, at fair value		 24,722
91,138
115,860		 23,816
72,560
96,376

12. Interest in Associates

Group
31 December
2010
31 December
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Group
31 December
2010
31 December
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Cost of investment in associates
Listed, overseas
Unlisted in the PRC
Share of post- acquisition prof ts and other
comprehensive income, net of dividends received
Less : impairment loss
Fair value of listed investments		 2,097,387
22,848
1,346,450
(194,432)
3,272,253
5,712,159		 2,141,216
22,848
497,543
(304,024)
2,357,583
3,573,413

At 31 December 2009, the Group held 26.75% interest in Mount Gibson Iron Limited (“ MGX ”). At 31 December 2010, the Group’s interest in MGX was reduced to 25.61%.

At 31 December 2010 and 2009, the Group held 29.08% and 40% interest in Metals X Limited (“ MLX ”) and 平港上海貿易有限公司 , respectively. MLX has released its audited results for the year ended 30 June 2010 but its unaudited results for the six months ended 31 December 2010 have not yet been released. Accordingly results of MLX for the six months ended 31 December 2010 have been included based on management accounts of MLX.

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Second Interim Report 2010 APAC Resources Limited

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12. Interest in Associates (Continued)

In determining the recoverable amount of MLX, having taken into account of the difference in characteristics of mining business and securities market, the Group considered it to be more prudent to temporarily adopt the net asset value of MLX as at 31 December 2010 instead of its securities trading value, a basis referred to by the HKAS 36 to adopt. The Group considered this would better refl ect the business value of the associate and would reassess the recoverable amount of MLX when the Group’s audited fi nal results for the eighteen months from 1 January 2010 to 30 June 2011 are prepared.

13. Trade and Other Receivables

Group
31 December
2010
31 December
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Group
31 December
2010
31 December
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Trade receivables
Interest receivables
Other receivables
Other deposits and prepayments		 3,200
–
–
17,942
21,142		 48,660
5,685
1
5,069
59,415

The Group allows an average credit period of 0 – 90 days to its trade customers.

All the trade receivables are not considered to be impaired and had not past due.

14. Trading Securities

Group
31 December
2010
31 December
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Group
31 December
2010
31 December
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Trading securities, at fair value
Listed equity securities, in Hong Kong
Listed equity securities, overseas		 22,599
1,349,203
1,371,802		 7,839
64,060
71,899

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29

Second Interim Report 2010 APAC Resources Limited

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15. Cash and Cash Equivalents

16. Group
31 December
2010
31 December
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Group
31 December
2010
31 December
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Group
31 December
2010
31 December
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Pledged bank deposits
Cash at bank and in hand
Cash held in securities accounts maintained in
securities companies
Less : pledged bank deposits
Cash and cash equivalents
Share Capital		 79,426
400,121
11,141
490,688
(79,426)
411,262
Number of
shares		 89,324
318,036
167
407,527
(89,324)
318,203
Amount
HK$’000
411,262
Number of
shares
Ordinary shares of HK$0.10 each
Authorised:
At 1 January 2010
Increase during the period
At 31 December 2010
Issued and fully paid:
At 1 January 2010
Issue of shares upon exercise of warrants
Issue of shares under placement
Repurchase of issued shares
At 31 December 2010		 8,000,000,000
12,000,000,000
20,000,000,000
5,690,343,455
131,784,535
1,100,000,000
(11,560,000)
6,910,567,990		 800,000
1,200,000
2,000,000
569,034
13,179
110,000
(1,156)
691,057

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30

Second Interim Report 2010 APAC Resources Limited

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16. Share Capital (Continued)

Details of the major changes in the Company’s share capital during the twelve months ended 31 December 2010 are as follows:

  • (a) Pursuant to an ordinary resolution passed on 29 June 2010, the authorised share capital of the Company was increased to 20,000,000,000 shares by the creation of 12,000,000,000 shares of HK$0.10 each.

  • (b) On 23 April 2010, the Company completed a placing of 1,100,000,000 new shares at the price of HK$0.50 per share, which raised gross proceeds of HK$550,000,000.

17. Share Option Scheme

The Company operates a share option scheme (the “ Scheme ”) for the purpose of providing incentives or rewards to selected persons (including the Company’s directors, employees of the Group and other eligible participants as defi ned under the Scheme) who contribute to the Group. The Scheme was adopted on 22 September 2004 and will remain in force for 10 years from the date of adoption until 21 September 2014.

During the twelve months period ended 31 December 2010, 334,000,000 share options (twelve months ended 31 December 2009 (audited) : 166,000,000 share options) were lapsed or expired. As at 31 December 2010, there were 567,000,000 (as at 31 December 2009 (audited) : 334,000,000) share options outstanding.

Pursuant to the announcement of the Company dated 4 May 2010, 567,000,000 share options were proposed to be granted to grantees to subscribe for a total of 567,000,000 shares at the exercise price of HK$1.00 per share. The grant of directors’ share options under the Scheme to two executive directors were conditional upon approval of independent shareholders at the annual general meeting on 29 June 2010, which was obtained accordingly.

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Second Interim Report 2010 APAC Resources Limited

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17. Share Option Scheme (Continued)

Details of the share options outstanding as at 31 December 2010 under the Scheme are as follows :

Closing price
No. of share immediate
options No. of share before
Outstanding lapsed or options Outstanding date of grant/
Exercise as at expired granted as at date of
Exercisable price 1 January during during 31 December approval by
Grantee Date of grant period per share 2010 the period the period 2010 shareholders
(note a
HK$ and note c) HK$
Directors
Ms. Chong Sok Un 15 August 2007 15 August 2007 to 1.50 110,000,000 110,000,000 – – 1.02
5 July 2010
29 June 2010 7 July 2010 1.00 – – 150,000,000 150,000,000 0.55
(note b) to 6 July 2013
Mr. Andrew Ferguson 29 June 2010 7 July 2010 to 1.00 – – 250,000,000 250,000,000 0.55
(note b) 6 July 2013
Mr. Kong Muk Yin 4 May 2010 7 July 2010 to 1.00 – – 20,000,000 20,000,000 0.71
6 July 2013
Mr. Yue Jialin 4 May 2010 7 July 2010 to 1.00 – – 2,000,000 2,000,000 0.71
6 July 2013
Mr. So Kwok Hoo 4 May 2010 7 July 2010 to 1.00 – – 2,000,000 2,000,000 0.71
6 July 2013
Mr. Liu Yongshun 27 July 2007 27 July 2007 to 1.20 150,000,000 150,000,000 – – 1.45
28 May 2010
4 May 2010 7 July 2010 to 1.00 – – 2,000,000 2,000,000 0.71
6 July 2013
Mr. Peter Anthony 4 May 2010 7 July 2010 to 1.00 – – 60,000,000 60,000,000 0.71
Curry 6 July 2013

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32

Second Interim Report 2010 APAC Resources Limited

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17. Share Option Scheme (Continued)

Grantee
Date of grant
Exercisable
period
Exercise
price
per share
HK$		 Outstanding
as at
1 January
2010		 No. of share
options
lapsed or
expired
during
the period		 No. of share
options
granted
during
the period
(note a
and note c)		 Outstanding
as at
31 December
2010
Closing price
immediate
before
date of grant/
date of
approval by
shareholders
HK$
Directors(Continued)
Mr. Wong Wing Kuen,
Albert
6 July 2007
6 July 2007 to
5 July 2010
1.50
4 May 2010
7 July 2010 to
6 July 2013
1.00
Mr. Chang Chu Fai,
Johnson Francis
6 July 2007
6 July 2007 to
5 July 2010
1.50
4 May 2010
7 July 2010 to
6 July 2013
1.00
Mr. Robert Moyse
Willcocks
4 May 2010
7 July 2010 to
6 July 2013
1.00
Others
Employees
29 May 2007
29 May 2007 to
28 May 2010
1.20
6 July 2007
6 July 2007 to
5 July 2010
1.50
4 May 2010
(note f)
7 July 2010 to
6 July 2013
1.00
Consultants
6 July 2007
6 July 2007 to
5 July 2010
1.50
3 October 2007
3 October 2007 to
2 October 2010
1.40
4 May 2010
7 July 2010 to
6 July 2013
1.00		 3,000,000
–
2,000,000
–
–
33,000,000
1,000,000
–
10,000,000
25,000,000
–
334,000,000		 3,000,000
–
2,000,000
–
–
33,000,000
1,000,000
–
10,000,000
25,000,000
–
334,000,000		 –
2,000,000
–
2,000,000
2,000,000
–
–
25,000,000
–
–
50,000,000
567,000,000		 –
1.47
2,000,000
0.71
–
1.47
2,000,000
0.71
2,000,000
0.71
–
1.09
–
1.47
25,000,000
0.71
–
1.47
–
1.22
50,000,000
0.71
567,000,000

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33

Second Interim Report 2010 APAC Resources Limited

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17. Share Option Scheme (Continued)

Notes :

  • (a) The relevant share options are exercisable subject to the vesting conditions as detailed in the announcement of the Company dated 4 May 2010.

  • (b) The share options were granted on 4 May 2010 conditional upon approval at annual general meeting which were eventually obtained on 29 June 2010.

  • (c) The share options are measured using the Black-Scholes Model. The inputs into the Model are summarised as follows:

Date of grant 4 May 2010 29 June 2010
Expected volatility 85.31% 83.45%
Risk-free interest rate 1.21% 1.10%
Expected annual dividend yield 0% 0%
Fair value per option (HK$) HK$0.27 – HK$0.33 HK$0.15 – HK$0.21

  • (d) The expected volatility was determined by using the historical volatility of the Company’s share price over the previous three years.

  • (e) The risk-free rate is being yield of 3-year Exchange Fund Note at the date of grant.

  • (f) The share options granted by the Company on 4 May 2010 included 10,000,000 share options to a consultant who became an employee of the Group from 1 October 2010. The respective share options granted was disclosed under category of “Employees”. The respective equity-settled share option expenses are included in consultancy fee.

  • (g) The Group recognised approximately HK$39,979,000 expense for the twelve months ended 31 December 2010 (twelve months ended 31 December 2009 : HK$14,783,000) in relation to share options granted by the Company.

18. Warrants

On 5 February 2007, the Company issued a total of 251,800,000 bonus warrants (the “ Warrants ”), as a result of the rights issue completed on 1 February 2007, with an aggregate subscription amount of HK$75,540,000. Each of the Warrants entitled the warrant-holder to subscribe for one ordinary share of the Company of HK$0.10 each at the initial subscription price of HK$0.30 (subject to adjustment (if any) during the period from 5 February 2007 until 4 February 2010 (both dates inclusive).

As at 31 December 2009, 132,094,050 Warrants were outstanding. During the twelve months period ended 31 December 2010, 131,784,535 Warrants were exercised for 131,784,535 ordinary shares (twelve months ended 31 December 2009 (audited): 61,684,400 Warrants were exercised for 61,684,400 ordinary shares) at a price of HK$0.30 each. The rights attaching to the outstanding 309,515 Warrants expired on 4 February 2010.

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Second Interim Report 2010 APAC Resources Limited

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19. Operating Lease Commitments

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

Group
31 December
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Group
31 December
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Within one year
After one year but within f ve years		 3,638
777
4,415		 1,885
1,006
2,891

Operating lease payments represent rental payable by the Group for its offi ce premises, car parking space, director’s quarters and a photocopying machine. Leases are negotiated for the terms between six months and fi ve years.

20. Pledge of Assets

Group
31 December
2010
31 December
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Group
31 December
2010
31 December
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
(a)
Margin loan facilities secured by certain of
Group’s investment in listed associates,
available-for-sale investments and
trading securities
(b)
Trade f nance facilities of US$ 60 million
(2009: HK$10 million and US$60 million)
granted by banks and secured by
bank deposits of the Group		 3,444,392
79,426
3,523,818		 1,929,666
89,324
2,018,990

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Second Interim Report 2010 APAC Resources Limited

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21. Related Party Transactions

  • (a) During the twelve months period, the Group entered into the following material related party transactions.
2010
HK$’000
(Unaudited)		 2009
HK$’000
(Audited)
Purchase from Mount Gibson Mining
Limited and Koolan Island Ore Pty
Limited_(note 1)
Corporate service fee to Star Telecom
Holding Limited(note 2)
Corporate consultancy service income
from Fushan International Energy
Group Limited(note 3)
Sales co-ordination service income from
首長鋼鐵國際貿易有限公司 (note 4)_		 576,902
442
–
–		 197,377
–
924
3,388

Notes :

  • (1) Both companies are subsidiaries of MGX, an associate of the Group.

  • (2) The company is a related company of the Company as Ms. Chong Sok Un and Mr. Kong Muk Yin are the common directors of both companies.

  • (3) The company is a substantial shareholder of the Company.

  • (4) The company was a related company of the Group as Mr. Cao Zhong, being a former director of the Company who resigned on 20 October 2009, was the common director of both companies.

  • (b) Compensation of key management personnel

Group
Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)		 Group
Twelve months ended
31 December
2010
2009
HK$’000
HK$’000
(Unaudited)
(Audited)
Short-term employee benef ts
Post-employment benef ts
Share-based payment		 6,990
30
29,629
36,649		 7,746
36
14,783
22,565

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Second Interim Report 2010 APAC Resources Limited

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22. Events After the Reporting Period

There are no signifi cant events subsequent to 31 December 2010 which would materially affect the Group’s operating and fi nancial position as of the date of this report.

23. Approval of the Second Interim Financial Statements

The Second Interim Financial Statements were approved by the board of directors on 25 February 2011.

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Second Interim Report 2010 APAC Resources Limited

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INDEPENDENT REVIEW REPORT

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REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION TO THE BOARD OF DIRECTORS OF APAC RESOURCES LIMITED

(incorporated in Bermuda with limited liability)

Introduction

We have reviewed the second interim fi nancial information set out on pages 12 to 37, which comprises the condensed consolidated statement of fi nancial position of APAC Resources Limited (the “ Company ”) and its subsidiaries (together the “ Group ”) as of 31 December 2010 and the related condensed consolidated income statement and condensed consolidated statements of comprehensive income, changes in equity and cash fl ows for the twelve-month period then ended, and a summary of signifi cant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on the interim fi nancial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard (“ HKAS ”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certifi ed Public Accountants. The directors of the Company are responsible for the preparation and presentation of this interim fi nancial information in accordance with HKAS 34. Our responsibility is to express a conclusion on this interim fi nancial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Scope of review

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Hong Kong Institute of Certifi ed Public Accountants. A review of interim fi nancial information consists of making inquiries, primarily of persons responsible for fi nancial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all signifi cant matters that might be identifi ed in an audit. Accordingly, we do not express an audit opinion.

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38

Second Interim Report 2010 APAC Resources Limited

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Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim fi nancial information is not prepared, in all material respects, in accordance with HKAS 34.

Graham H. Y. Chan & Co.

Certifi ed Public Accountants (Practising)

Hong Kong, 25 February 2011

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39

Second Interim Report 2010 APAC Resources Limited

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INTERIM DIVIDEND

The Board has resolved not to declare the payment of an interim dividend for the twelve months ended 31 December 2010 (2009: nil) as the Company has the intention to repurchase its own shares as and when the market conditions are considered appropriate and the available cash fl ow and/or working capital facilities will be retained for such purpose.

OTHER INFORMATION

DIRECTORS’ INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at 31 December 2010, the interests and short positions held by each director and chief executive of the Company and their associates in the shares, underlying shares or debentures of the Company or any of its associated corporations, if any, (within the meaning of Part XV of the Securities and Futures Ordinance (“ SFO ”)), as recorded in the register required to be kept by the Company under section 352 of the SFO or otherwise notifi ed to the Company and The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (“ Model Code ”) contained in the Rules Governing the Listing of Securities on the Stock Exchange (the “ Listing Rules ”) were as follows:

Long positions in shares and underlying shares of the Company

Name of Director
Capacity in which
interests are held		 Number of shares/underlying shares
held in the Company
Total interests
as to % to the
issued share
capital of the
Company as at
31 December
2010
Interests in
shares
Interests
under equity
derivatives
Total interests
(Note 2)
(Note 1)
Ms. Chong Sok Un
Benef cial owner
and interest of
controlled corporation
Mr. Andrew Ferguson
Benef cial owner
Mr. Kong Muk Yin
Benef cial owner
Mr. Yue Jialin
Benef cial owner
Mr. Lee Seng Hui
Interest of controlled
corporation
(Note 5)
Mr. So Kwok Hoo
Benef cial owner		 1,900,939,562
(Note 3)
150,000,000
2,050,939,562
29.68%
25,000,000
250,000,000
275,000,000
3.98%
—
20,000,000
20,000,000
0.29%
—
2,000,000
2,000,000
0.03%
598,532,893
—
598,532,893
(Note 4)
8.66%
—
2,000,000
2,000,000
0.03%

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Second Interim Report 2010 APAC Resources Limited

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DIRECTORS’ INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES (Continued)

Long positions in shares and underlying shares of the Company (Continued)

Name of Director
Capacity in which
interests are held		 Number of shares/underlying shares
held in the Company
Total interests
as to % to the
issued share
capital of the
Company as at
31 December
2010
Interests in
shares
Interests
under equity
derivatives
Total interests
(Note 2)
(Note 1)
Mr. Liu Yongshun
Benef cial owner
Mr. Peter Anthony Curry
Benef cial owner
Mr. Wong Wing Kuen,
Albert
Benef cial owner
Mr. Chang Chu Fai,
Johnson Francis
Benef cial owner
Mr. Robert Moyse Willcocks
Benef cial owner		 —
2,000,000
2,000,000
0.03%
—
60,000,000
60,000,000
0.87%
—
2,000,000
2,000,000
0.03%
—
2,000,000
2,000,000
0.03%
—
2,000,000
2,000,000
0.03%

Notes:

  1. The percentage of shareholding is calculated on the basis of the Company’s issued share capital of 6,910,567,990 shares as at 31 December 2010.

  2. The relevant interests are share options granted pursuant to the Company’s share option scheme adopted on 22 September 2004 (the “ Scheme ”). Upon exercise of the share options in accordance with the Scheme, ordinary shares of HK$0.10 each in the share capital of the Company are issuable. The share options are personal to the respective Directors and the holders thereof are entitled to subscribe for shares of the Company. Further details of the share options are set out in Note 17 to the condensed fi nancial statements.

  3. These shares are held by: (i) Rise Cheer Investments Limited (“ Rise Cheer ”) as to 1,124,640,000 shares, and (ii) Taskwell Limited (“ Taskwell ”) as to 776,299,562 shares, both of which are wholly-owned subsidiaries of COL Capital Limited (“ COL ”). Accordingly, COL is deemed to have interests in the shares in which Rise Cheer and Taskwell are interested. As at 31 December 2010, COL was 70.11% owned by Vigor Online Offshore Limited which in turn is a wholly-owned subsidiary of China Spirit Limited (“ China Spirit ”) in which Ms. Chong Sok Un maintains 100% benefi cial interest. Ms. Chong Sok Un is therefore deemed to have interests in the shares in which COL is interested through her 100% interest in China Spirit.

  4. This represents security interests held by: (i) Itso Limited as to 11,060,000 shares, and (ii) Sun Hung Kai Strategic Capital Limited as to 587,472,893 shares, both of which are indirect wholly-owned subsidiaries of Sun Hung Kai & Co. Limited (“ SHK ”).

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41

Second Interim Report 2010 APAC Resources Limited

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DIRECTORS’ INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES (Continued)

Long positions in shares and underlying shares of the Company (Continued)

Notes: (Continued)

  1. SHK is an indirect non wholly-owned subsidiary of Allied Properties (H.K.) Limited (“ APL ”) which in turn is a non wholly-owned subsidiary of Allied Group Limited (“ AGL ”). Accordingly, AGL is deemed to have the same long position as APL which in turn is deemed to have the same long position as SHK under the SFO. Lee and Lee Trust, a discretionary trust of which Mr. Lee Seng Hui is one of the trustees, owned approximately 53.32% interest in the issued share capital of AGL as at 31 December 2010. Accordingly, Lee and Lee Trust is deemed to have the same long position as AGL under the SFO and Mr. Lee Seng Hui, being a trustee of Lee and Lee Trust, is therefore deemed to have interests in the shares in which Lee and Lee Trust is interested. On 17 February 2011, SHK, APL, AGL and Lee and Lee Trust ceased to have an interest in these shares and thus Mr. Lee Seng Hui ceased to have any interests in the shares on 17 February 2011.

Save as disclosed above, as at 31 December 2010, none of the Company’s directors, chief executive or their respective associates had any other personal, family, corporate and other interests or short positions in shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under section 352 of the SFO or as otherwise notifi ed to the Company and the Stock Exchange pursuant to the Model Code contained in the Listing Rules.

Other than those disclosed in this section, no right to subscribe for equity or debt securities of the Company has been granted by the Company to, nor have any such rights been exercised by, any Directors or chief executive (including their respective spouse or children under 18 years of age) during the twelve months ended 31 December 2010.

SHARE OPTION SCHEME

On 4 May 2010, a total of 567,000,000 share options were granted to certain eligible participants who are directors, employees and/or consultants of the Company and/or its subsidiaries to subscribe for shares of the Company at the exercise price of HK$1.00. Further details of the share options granted to the Directors and other eligible participants of the Company are disclosed in the announcement of the Company dated 4 May 2010 and the circular dated 27 May 2010 and Note 17 to the condensed fi nancial statements.

ARRANGEMENTS TO PURCHASE SHARES OR DEBENTURES

Save as disclosed under the section headed “DIRECTORS’ INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES” and Note 17 to the condensed fi nancial statements, at no time during the period under review was the Company or any of its subsidiaries a party to any arrangements to enable the directors of the Company, their respective spouse or children under 18 years of age to acquire benefi ts by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

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42

Second Interim Report 2010 APAC Resources Limited

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SUBSTANTIAL SHAREHOLDERS

As at 31 December 2010, the following persons, other than a director or chief executive of the Company or any of its subsidiaries, were interested or had short positions in more than 5% of the shares and underlying shares of the Company or its subsidiaries according to the register required to be kept under section 336 of the SFO in the respective amounts as follows:

Long positions in shares and underlying shares of the Company

Name of Shareholder
Capacity in which
interests are held		 Number of shares/underlying shares
held in the Company
Total interests
as to % to the
issued share
capital of the
Company as at
31 December
2010
Interests
in shares
Interests
under equity
derivatives
Total interests
(Note 1)
Fushan International Energy
Group Limited
Interest of
controlled corporation
Rise Cheer Investments
Limited
Benef cial owner
Taskwell Limited
Benef cial owner
COL Capital Limited
Interest of
controlled corporation
Sun Hung Kai & Co. Limited
Interest of
controlled corporation
(Notes 5 & 8)
Allied Properties (H.K.)
Limited
Interest of
controlled corporation
(Notes 5 & 8)
Allied Group Limited
Interest of
controlled corporation
(Notes 6 & 8)
Lee and Lee Trust
Interest of
controlled corporation
(Notes 7 & 8)		 956,000,000
—
956,000,000
(Note 2)
13.83%
1,124,640,000
—
1,124,640,000
16.27%
776,299,562
—
776,299,562
11.23%
1,900,939,562
—
1,900,939,562
(Note 3)
27.51%
598,532,893
—
598,532,893
(Note 4)
8.66%
598,532,893
—
598,532,893
8.66%
598,532,893
—
598,532,893
8.66%
598,532,893
—
598,532,893
8.66%

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43

Second Interim Report 2010 APAC Resources Limited

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SUBSTANTIAL SHAREHOLDERS (Continued)

Long positions in shares and underlying shares of the Company (Continued)

Notes:

  1. The percentage of shareholding was calculated on the basis of the Company’s issued share capital of 6,910,567,990 shares as at 31 December 2010.

  2. These shares are held by Benefi t Rich Limited (“ Benefi t Rich ”), a wholly-owned subsidiary of Fushan International Energy Group Limited (“ Fushan ”). Accordingly, Fushan is deemed to have the same long position as Benefi t Rich under the SFO.

  3. These shares are held by: (i) Rise Cheer Investments Limited (“ Rise Cheer ”) as to 1,124,640,000 shares, and (ii) Taskwell Limited (“ Taskwell ”) as to 776,299,562 shares, both of which are wholly-owned subsidiaries of COL Capital Limited (“ COL ”). Accordingly, COL is deemed to have the same long position as Rise Cheer and Taskwell under the SFO. As at 31 December 2010, COL was 70.11% owned by Vigor Online Offshore Limited which in turn is a wholly-owned subsidiary of China Spirit Limited in which Ms. Chong Sok Un maintains 100% benefi cial interest.

  4. This represents security interests held by: (i) Itso Limited (“ Itso ”) as to 11,060,000 shares, and (ii) Sun Hung Kai Strategic Capital Limited (“ SHKSC ”) as to 587,472,893 shares, both of which are indirect wholly-owned subsidiaries of Sun Hung Kai & Co. Limited (“ SHK ”). Accordingly, SHK is deemed to have the same long position as Itso and SHKSC under the SFO.

  5. SHK is a non wholly-owned subsidiary of AP Emerald Limited (“ APE ”). APE is a wholly-owned subsidiary of AP Jade Limited (“ APJ ”) which in turn is a wholly-owned subsidiary of Allied Properties (H.K.) Limited (“ APL ”). Accordingly, APL, APJ and APE are deemed to have the same long position as SHK under the SFO.

  6. APL is a non wholly-owned subsidiary of Allied Group Limited (“ AGL ”). Accordingly, AGL is deemed to have the same long position as APL under the SFO.

  7. Mr. Lee Seng Hui, Ms. Lee Su Hwei and Mr. Lee Seng Huang are the trustees (“ Trustees ”) of Lee and Lee Trust, being a discretionary trust. They together owned approximately 53.32% interest in the issued share capital of AGL as at 31 December 2010. Accordingly, Lee and Lee Trust is deemed to have the same long position as AGL under the SFO.

  8. By the announcement dated 31 December 2008 jointly made by SHK, APL and AGL, it was announced that on 24 December 2008, SHKSC and/or Itso (as vendors) entered into three separate sale and purchase agreements (“ SP Agreements ”) with three respective purchasers for the sale and purchase of an aggregate of 598,532,893 shares (“ Sale Shares ”) of the Company. Pursuant to the SP Agreements, payment obligations of each of the purchasers were secured by a share charge (“ Share Charge(s) ”) executed in favour of the relevant vendors.

Pursuant to the SP Agreements and the Share Charges, SHK, APL, AGL and the Trustees are deemed to be interested in the Sale Shares by virtue of the Share Charges. On 17 February 2011, SHK, APL, AGL and the Trustees ceased to have any interest in the Sale Shares following the release of the Share Charges.

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44

Second Interim Report 2010 APAC Resources Limited

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SUBSTANTIAL SHAREHOLDERS (Continued)

Save as disclosed above, no other person had interest or short position in the shares and underlying shares of the Company or its subsidiaries, which are recorded in the register required to be kept by the Company pursuant to section 336 of the SFO as at 31 December 2010.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the twelve months ended 31 December 2010, the Company purchased 11,560,000 shares of HK$0.10 each in the capital of the Company at prices ranging from HK$0.48 to HK$0.53 per share on the Stock Exchange.

Particulars of the purchase of shares are as follows:

Date Number of
shares
repurchased
Highest price
paid per share
Lowest price
paid per share
(HK$)
(HK$)		 Aggregate
consideration
paid (excluding
expenses)
(HK$)
November 2010
December 2010
Total		 9,840,000
0.530
0.480
1,720,000
0.495
0.490
11,560,000		 5,005,400
850,500
5,855,900

The repurchased shares were cancelled and accordingly, the Company’s issued share capital was diminished by the nominal value thereof. The premium payable on repurchases was charged against the Company’s share premium account.

Save as disclosed above, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities during the twelve months ended 31 December 2010.

COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES

For the twelve months ended 31 December 2010, the Company has complied with the code provisions of The Code on Corporate Governance Practices (“ CG Code ”) as set out in Appendix 14 of the Listing Rules, except for the deviation in respect of the specifi c term of non-executive Directors’ appointment under code provision A.4.1 of the CG Code.

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45

Second Interim Report 2010 APAC Resources Limited

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AUDIT COMMITTEE REVIEW

The Audit Committee has reviewed with the management the accounting policies and practices adopted by the Group and discussed internal controls and fi nancial reporting matters including a general review of the unaudited second interim fi nancial report for the twelve months ended 31 December 2010. In carrying out this review, the Audit Committee has relied on a review conducted by the Group’s external auditors in accordance with the Hong Kong Standard on Review Engagements 2410 issued by the HKICPA as well as obtaining reports from management. The Audit Committee has not undertaken independent audit checks.

COMPLIANCE WITH THE MODEL CODE

The Company has adopted the Model Code as set out in Appendix 10 of the Listing Rules as the code for dealing in securities of the Company by the Directors and supervisors. Having made specifi c enquiry, the Company confi rmed that all Directors and supervisors had complied with the required standard as set out in the Model Code for the twelve months ended 31 December 2010.

By order of the Board Chong Sok Un Chairman

Hong Kong, 25 February 2011

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46

Second Interim Report 2010 APAC Resources Limited

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