Sinopharm Tech Holdings Limited - Proxy Solicitation & Information Statement 2010

THIS JOINT 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 joint 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 joint circular.

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

If you have sold or transferred all your Aptus Shares or China Vanguard Shares, you should at once hand this joint circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

This joint circular is for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for any securities of Aptus or China Vanguard.

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APTUS HOLDINGS LIMITED 問博控股有限公司

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 8212)

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 8156)

VERY SUBSTANTIAL ACQUISITION REGARDING ACQUISITION OF THE ENTIRE EQUITY INTERESTS OF CASDON MANAGEMENT LIMITED

VERY SUBSTANTIAL ACQUISITION REGARDING ACQUISITION OF THE ENTIRE EQUITY INTERESTS OF CASDON MANAGEMENT LIMITED AND VERY SUBSTANTIAL DISPOSAL REGARDING DISPOSAL OF APTUS HOLDINGS LIMITED BY POTENTIAL DILUTION

A letter from the Aptus Board is set out on pages 7 to 28 of this joint circular.

A letter from the China Vanguard Board is set out on pages 29 to 39 of this joint circular.

A notice convening the Aptus EGM to be held on Friday, 7 May 2010 at 10:00 a.m. at Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong is set out on pages AEGM – 1 to AEGM – 3 of this joint circular. A form of proxy for use thereat is also enclosed. Whether or not you are able to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Aptus’ share registrar in Hong Kong, Tricor Tengis Ltd., at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the Aptus EGM or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the Aptus EGM or any adjourned meeting (as the case may be) or upon the poll concerned should you so wish. In such event, the instrument appointing a proxy shall be deemed to be revoked.

A notice convening the China Vanguard EGM to be held on Friday, 7 May 2010 at 10:30 a.m. at Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong is set out on pages CVEGM – 1 to CVEGM – 3 of this joint circular. A form of proxy for use thereat is also enclosed. Whether or not you are able to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the China Vanguard’s share registrar in Hong Kong, Tricor Standard Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the China Vanguard EGM or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the China Vanguard EGM or any adjourned meeting (as the case may be) or upon the poll concerned should you so wish. In such event, the instrument appointing a proxy shall be deemed to be revoked.

This joint circular will remain on the “Latest Company Announcements” page of the GEM website at www.hkgem.com for at least 7 days from the date of its publication and on the websites of Aptus and China Vanguard at www.aptus.com.hk and www. cvg.com.hk respectively.

22 April 2010

* for identification purpose only

CHARACTERISTICS OF GEM

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

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

	Page
Characteristics of GEM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	i
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Aptus Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Letter from the China Vanguard Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	29
Appendix I – Financial information on the Aptus Group. . . . . . . . . . . . . . . . . . . . . .	I – 1
Appendix II – Financial information on the China Vanguard Group. . . . . . . . . . . . .	II – 1
Appendix III – Financial information on the Target Group. . . . . . . . . . . . . . . . . . . . . .	III – 1
Appendix IV – Unaudited pro forma financial information
on the Enlarged Aptus Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV – 1
Appendix V – Unaudited pro forma financial information
on the Enlarged China Vanguard Group. . . . . . . . . . . . . . . . . . . . . .	V – 1
Appendix VI – Valuation report of the Target Group. . . . . . . . . . . . . . . . . . . . . . . . . .	VI – 1
Appendix VII – Reports on forecasts underlying the valuation
of the Target Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII – 1
Appendix VIII – Valuation report on the land and buildings of
the Enlarged Aptus Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VIII – 1
Appendix IX – Valuation report on the land and buildings of
the Enlarged China Vanguard Group. . . . . . . . . . . . . . . . . . . . . . . . .	IX – 1
Appendix X – General information of Aptus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	X – 1
Appendix XI – General information of China Vanguard. . . . . . . . . . . . . . . . . . . . . . . .	XI – 1
Notice of Aptus EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	AEGM – 1
Notice of China Vanguard EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	CVEGM – 1

DEFINITIONS

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

“Acquisition” the proposed acquisition of the Sale Share by the Purchaser from the Vendor as contemplated under the S&P Agreement (as supplemented by the Supplemental Agreement)

“Announcement” the announcement issued jointly by Aptus and China Vanguard dated 1 December 2009 in respect of, among other matters, the Acquisition and the Disposal
“Aptus” Aptus Holdings Limited (問博控股有限公司) (stock code: 08212), an exempted company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the GEM
“Aptus Board”

the board of Aptus Directors

“Aptus Bond(s)” the zero coupon secured convertible bond(s) in the principal amount of HK$234,000,000 due 2011 with a step-up cash coupon issued by Aptus on 22 November 2006
“Aptus Directors”

the directors of Aptus

“Aptus EGM” the extraordinary general meeting of Aptus to be convened and held on Friday, 7 May 2010 at 10:00 a.m. at Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong to consider and, if thought fit, approve, among other matters, the Acquisition and the transactions contemplated thereunder
“Aptus Group”
Aptus and its subsidiaries
“Aptus Share(s)” ordinary share(s) of HK$0.01 each in the share capital of Aptus
“Aptus Shareholder(s)” holder(s) of the Aptus Share(s)
“associates” has the meaning ascribed thereto in the GEM Listing Rules
“Authority” any authority, agency or representative of the Hong Kong government including any quasi-government authority or organisation or association
“Bondholder(s)” holder(s) of the Convertible Bonds

“Boxes” any box to be sold by the Target Group to End Users for the purpose of storage of deceased cremated ashes and other ancestral properties

DEFINITIONS

“Business” the business of the Target Group to be engaged in operating and managing the Owned Properties that provides and sells approximately 69,000 Boxes for the storage of deceased cremated ashes and other ancestral properties “Business Day(s)” a day (other than a Saturday, Sunday or public or statutory holiday) on which licensed banks are generally open for business in Hong Kong throughout their normal business hours

“BVI” the British Virgin Islands “Change of Law” any change of law or regulation or introduction of new law or regulation which prohibits or restricts the Target Group’s Business or renders the Target Group’s Business illegal or impossible without further approval from the Authority

“China Vanguard” China Vanguard Group Limited (眾彩科技股份有限公司*) (stock code: 08156), an exempted company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the GEM; the ultimate shareholder of Aptus, holding approximately 33.95% equity interests of Aptus as at the Latest Practicable Date
“China Vanguard Board” the board of China Vanguard Directors
“China Vanguard Directors” the directors of China Vanguard

“China Vanguard EGM” the extraordinary general meeting of China Vanguard to be convened and held on Friday, 7 May 2010 at 10:30 a.m. at Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong to consider and, if thought fit, approve, among other matters, the Acquisition and the transactions contemplated thereunder and the Disposal

“China Vanguard Group” China Vanguard and its subsidiaries, including the Aptus Group
“China Vanguard Share(s)” ordinary share(s) of HK$0.01 each in the capital of China Vanguard
“China Vanguard Shareholder(s)” holder(s) of the China Vanguard Share(s)
“Code”

The Hong Kong Code on Takeovers and Mergers

“Completion” completion of the sale and purchase of the Sale Share in accordance with the terms and conditions of the S&P Agreement (as supplemented by the Supplemental Agreement)

“connected persons”

has the meaning ascribed thereto in the GEM Listing Rules

DEFINITIONS

“Consideration”	the consideration of HK$1,085,000,000 to be satisfied by the
	Purchaser pursuant to the S&P Agreement (as supplemented by
	the Supplemental Agreement) for the purchase of the Sale Share
“Conversion Shares”	the new Aptus Shares to be issued to the Bondholder(s) upon
	conversion of the Convertible Bonds
“Convertible Bonds”	the convertible bond(s) in the principal amount of
	HK$850,000,000 (in the agreed form) to be issued by Aptus
	in favour of the Vendor at Completion to satisfy in part of the
	Consideration
“Deposit”	the aggregate cash payment of HK$85,000,000 paid by the
	Purchaser to the Vendor at any time and in any amount after
	signing of the S&P Agreement but prior to Completion to satisfy
	in part of the Consideration
“Disposal”	the deemed disposal of the equity interest in Aptus by dilution
	under Rule 19.29 of the GEM Listing Rules on the part of China
	Vanguard
“End Users”	any individual or corporation not connected to the Purchaser or
	any members of the Aptus Group and the China Vanguard Group
	which have paid in full or in part or by instalment for the purchase
	of any Boxes and the payment is not refundable
“Enlarged Aptus Group”	the Aptus Group and the Target Group, as enlarged after
	Completion
“Enlarged China Vanguard Group”	the China Vanguard Group and the Enlarged Aptus Group, as
	enlarged after Completion
“Final Notice”	a Notice that has become final with no further right to appeal
“GEM”	the Growth Enterprise Market of the Stock Exchange
“GEM Listing Rules”	the Rules Governing the Listing of Securities on the GEM
“Good United”	Good United Management Limited, a company incorporated in the
	BVI, a wholly-owned subsidiary of Aptus
“Grand Promise”	Grand Promise International Limited, a company incorporated in
	the BVI with limited liabilities, and a wholly-owned subsidiary of
	China Vanguard
“Guarantor”	Mr. Kong Lung Cheung, the director and ultimate beneficial owner
	of the Vendor

DEFINITIONS

“Hong Kong”

the Hong Kong Special Administrative Region of the PRC

“Independent Third Party(ies)” any person(s) or company(ies) and their respective ultimate beneficial owner(s), to the best of the Aptus Directors’ or China Vanguard Directors’ (as the case may be) knowledge, information and belief, having made all reasonable enquiries, are third parties independent of Aptus or China Vanguard (as the case may be) and connected persons of Aptus or China Vanguard (as the case may be)

“Initial Conversion Price” HK$0.25 per Conversion Share, subject to usual anti-dilution adjustments, being the initial price at which the Convertible Bonds may be converted into the Conversion Shares
“Latest Practicable Date” 16 April 2010, being the latest practicable date prior to the printing of this joint circular for ascertaining certain information contained in this joint circular
“Loan Capitalisation” the subscription of an aggregate total of 122,160,000 new Aptus Shares by Extra Right Group Limited and Mr. Ng Kim Ming at a total subscription price of HK$38,750,000 by capitalising the entire amount of the loan owed by Aptus to Extra Right Group Limited and part of the loans owed by Aptus to Mr. Ng Kim Ming in accordance with the terms and conditions of Subscription Agreement I and Subscription Agreement II, both dated 1 December 2009 which was completed on 16 December 2009
“March Announcement” the announcement issued jointly by Aptus and China Vanguard dated 19 March 2010 in respect of, among other matters, the amendments to the terms and conditions of the S&P Agreement
“Notice”
any order, notice or decision made or issued by any Authority
“Owned Properties” the properties and all houses erected thereon and owned by the Target Group
“Placees” Subject to the requirements of the GEM Listing Rules and the Code, any person or entity and its respective ultimate beneficial owners who shall not be any of the Vendor, Guarantor, the connected person of Aptus and China Vanguard and their respective associates and shall not be parties acting in concert with Precise Result for the purpose of the Code, and none of the Placees shall be offered such number of the Aptus Shares so as to hold more than 10% of the entire issued share capital of Aptus immediately after the completion of the Third Placing

DEFINITIONS

“Placings”	the placing of up to a total of 160,000,000 new Aptus Shares by
	Convoy Investment Services Limited for and on behalf of Aptus
	pursuant to a placing agreement dated 2 November 2009 and made
	between Aptus and Convoy Investment Services Limited which
	was completed on 10 December 2009 and the placings of up to
	a total of 260,000,000 existing Aptus Shares owned by Precise
	Result by placing agents for and on behalf of Precise Result
	pursuant to placing agreements dated 14 December 2009 and 19
	February 2010 respectively, the placings of 260,000,000 Aptus
	Shares were completed on 16 December 2009 and 25 February
	2010 respectively
“PRC”	the People’s Republic of China, which for the purpose of this
	joint circular, excludes Hong Kong, Macau Special Administrative
	Region and Taiwan
“Precise Result”	Precise Result Profits Limited, a company incorporated in the BVI
	and an indirect wholly-owned subsidiary of China Vanguard
“Promissory Notes”	together, the Secured Promissory Note and the Unsecured
	Promissory Note
“Purchaser”	Sea Marvel Limited, a company incorporated in the BVI with
	limited liability, and a wholly-owned subsidiary of Aptus
“S&P Agreement”	the conditional legally binding sale and purchase agreement dated
	20 November 2009 entered into between the Purchaser, the Vendor
	and the Guarantor in relation to the sale and purchase of the Sale
	Share (as supplemented by the Supplemental Agreement)
“Sale Share”	the issued and fully paid up share of the Target owned by the
	Vendor
“Secured Promissory Note”	the promissory note (in the agreed form) to be issued by Aptus
	in favour of the Vendor on Completion in the principal amount of
	HK$20,000,000 and secured by a first fixed charge over the entire
	issued share capital of Good United in order to satisfy in part of
	the Consideration
“Share Charge”	the share charge dated 22 November 2006 issued by Aptus in
	favour of BNY Corporate Trustee Services Limited over the entire
	issued share capital of Good United
“Stock Exchange”	The Stock Exchange of Hong Kong Limited

DEFINITIONS

“Subscription Agreement I” the subscription agreement dated 1 December 2009 entered into between Aptus and Extra Right Group Limited in respect of the capitalisation of the entire amount of the loan of HK$20,000,000 owed by Aptus to Extra Right Group Limited “Subscription Agreement II” the subscription agreement dated 1 December 2009 entered into between Aptus and Mr. Ng Kim Ming in respect of the capitalisation of part of the loan in the amount of HK$18,750,000 owed by Aptus to Mr. Ng Kim Ming “Supplemental Agreement” the supplemental agreement dated 19 March 2010 entered into between the Purchaser, the Vendor and the Guarantor to amend certain terms and conditions of the S&P Agreement “Target” Casdon Management Limited, a company incorporated in the BVI and wholly owned by the Vendor, an Independent Third Party “Target Group” the Target and its subsidiaries “Third Placing” the placing of up to a total of 280,000,000 existing Aptus Shares owned by Precise Result by a placing agent, on a best effort basis, for and on behalf of Precise Result pursuant to the placing agreement dated 13 April 2010 which has not been completed as at the Latest Practicable Date

“Unsecured Promissory Note” the promissory note (in the agreed form) to be issued by Aptus in favour of the Vendor on Completion in the principal amount of HK$130,000,000 in order to satisfy in part of the Consideration
“Vendor” Red Rabbit Capital Limited, a company incorporated in the BVI, which is wholly owned by the Guarantor, and an Independent Third Party
“HK$” Hong Kong dollars, the lawful currency of Hong Kong “RMB” Renminbi, the lawful currency of the PRC “US$” United States dollars, the lawful currency of the United States of America
“%” per cent.

* for identification purpose only

LETTER FROM THE APTUS BOARD

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APTUS HOLDINGS LIMITED 問博控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 8212)

Executive Directors:

Madam Cheung Kwai Lan Mr. Chan Ting Mr. Fung King Him Daniel Mr. Lam Wai Pong

Registered Office:

Cricket Square Hutchins Drive, P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Independent non-executive Directors:

Mr. Tian He Nian Mr. Zhang Xiu Fu Mr. Zou Qi Jun Mr. To Yan Ming Edmond

Principal place of business in Hong Kong: Room 2201, 22nd Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

To the Aptus Shareholders, and for information only,

to the holders of the Aptus Bonds

22 April 2010

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION REGARDING ACQUISITION OF THE ENTIRE EQUITY INTERESTS OF CASDON MANAGEMENT LIMITED

INTRODUCTION

Reference is made to the Announcement and the March Announcement respectively in which Aptus and China Vanguard jointly announced that, on 20 November 2009 and 19 March 2010 respectively, the Purchaser, the Vendor and the Guarantor entered into the S&P Agreement and the Supplemental Agreement where the Purchaser has conditionally agreed to acquire from the Vendor the Sale Share at a consideration of HK$1,085,000,000.

LETTER FROM THE APTUS BOARD

The Acquisition constitutes a very substantial acquisition on the part of Aptus given the Purchaser is a wholly-owned subsidiary of Aptus pursuant to Rule 19.06(5) of the GEM Listing Rules. Accordingly, the Acquisition is subject to, among other things, the approval of the Aptus Shareholders at the Aptus EGM. As no Aptus Shareholder has a material interest in the Acquisition which is different from the other Aptus Shareholders, no Aptus Shareholders will be required to abstain from voting on the proposed resolutions to approve the Acquisition and the transactions contemplated thereunder at the Aptus EGM. Any vote exercised by the Aptus Shareholders at the Aptus EGM shall be taken by poll.

The purpose of this joint circular is to provide Aptus Shareholders, among other things, (i) further details with respect to the Acquisition and the transactions contemplated thereunder; (ii) information on due diligence findings of the Target Group as at the Latest Practicable Date; and (iii) a notice convening the Aptus EGM.

THE S&P AGREEMENT (AS SUPPLEMENTED BY THE SUPPLEMENTAL AGREEMENT)

Date: 20 November 2009 Parties: Purchaser: Sea Marvel Limited Vendor: Red Rabbit Capital Limited Guarantor: Kong Lung Cheung

To the best of the Aptus Directors’ knowledge, information and belief, having made all reasonable enquiries, the Vendor and the Guarantor, being the ultimate beneficial owner of the Vendor, are Independent Third Parties to Aptus and China Vanguard. Save for the entering into of a non-legally binding memorandum of understanding between Aptus and the Vendor in relation to the Acquisition as disclosed in the announcement of Aptus dated 30 October 2009, there are no other prior and/or continuing businesses/transactions entered into between each of the Vendor, the Guarantor on the one part and Aptus, China Vanguard, their connected persons and associates on the other part.

Assets to be acquired

Pursuant to the S&P Agreement (as supplemented by the Supplemental Agreement), the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the Sale Share, representing the entire issued share capital of the Target as at the Latest Practicable Date.

LETTER FROM THE APTUS BOARD

Consideration

The aggregate consideration for the Sale Share is HK$1,085,000,000 and shall be settled in the following manner:

(i) the Deposit of HK$85,000,000 shall be paid by the Purchaser at any time and in any amount after signing of the S&P Agreement but prior to Completion;
(ii) as to HK$850,000,000 by the Purchaser procuring Aptus to issue the Convertible Bonds;
(iii) as to HK$20,000,000 by the Purchaser procuring Aptus to issue the Secured Promissory Note; and
(iv) as to HK$130,000,000 by the Purchaser procuring Aptus to issue the Unsecured Promissory Note.

As at the Latest Practicable Date, the Deposit has been paid by the Purchaser. The payments referred to in items (ii) to (iv) above shall be made on Completion.

The Consideration was agreed between the Vendor and the Purchaser after arm’s length negotiations on normal commercial terms after considering with reference to (i) the valuation of the Business of the Target Group based on the valuation of the Target Group annexed as Appendix VI to this joint circular, of HK$1,337,000,000; (ii) the reduction in the number of Boxes (storage units) for storage of deceased cremated ashes and other ancestral properties in respect of the Business from approximately 100,000 to approximately 69,000; and (iii) the reduction in the number of piece (or parcel) of lands comprising the Owned Properties from 52 to 43. With respect to the fairness and reasonableness of the Consideration, the Aptus Directors have taken into account the following factors: (i) the valuation of the Target Group amounted to HK$1,337,000,000, the Consideration represents a discount of about 18.85% to this valuation; (ii) the loss position of Aptus during the two financial years ended 30 June 2009; (iii) the net liability position of Aptus as at 30 June 2008 and 30 June 2009; and (iv) the Aptus Shares were traded in very thin trading volume for the past few months immediately prior to the date of the S&P Agreement. In view of the above, the Aptus Directors consider the Consideration to be fair and reasonable and that the S&P Agreement (as supplemented by the Supplemental Agreement) is on normal commercial terms and its terms are fair and reasonable and the entering into of the S&P Agreement (as supplemented by the Supplemental Agreement) is in the interests of the Aptus Group and the Aptus Shareholders as a whole.

Conditions precedent

Completion is subject to the following conditions having been fulfilled or waived (as the case may be):

(a) the Purchaser being satisfied with the results of the due diligence review to be conducted on the assets, liabilities, operations and affairs of the Target Group;

LETTER FROM THE APTUS BOARD

(b) all approvals, consents, authorisations and licenses (so far as necessary) required to be obtained on the part of the Vendor or the Guarantor in relation to the transactions contemplated under the S&P Agreement (as supplemented by the Supplemental Agreement) having been obtained;
(c) all approvals, consents, authorisations and licenses (so far as necessary) required to be obtained on the part of the Purchaser in relation to the transactions contemplated under the S&P Agreement (as supplemented by the Supplemental Agreement) having been obtained;
(d) if applicable, all approvals, waiver of rights or consents being obtained from the existing convertible bonds holders of Aptus and if and to the extent required, China Vanguard to enable the transactions contemplated under the S&P Agreement (as supplemented by the Supplemental Agreement) to proceed without resulting in any breach or termination or acceleration of obligations under such convertible bonds;
(e) the warranties given by the Vendor under the S&P Agreement (as supplemented by the Supplemental Agreement) remaining true and accurate in all respects;
(f) the passing by the Aptus Shareholders at the Aptus EGM to be convened and held of an ordinary resolution approving the S&P Agreement (as supplemented by the Supplemental Agreement) and the transactions contemplated thereunder, including but not limited to the issue of the Convertible Bonds and allotment and issue of the Conversion Shares and the issue of the Promissory Notes;
(g) the Listing Committee of the Stock Exchange granting the listing of and permission to deal in the Conversion Shares;
(h) the obtaining of a legal opinion (in form and substance satisfactory to the Purchaser) from a counsel in Hong Kong in relation to the legality and validity of the Business of the Target Group;
(i) the obtaining of a valuation report (in form and substance satisfactory to the Purchaser) from a firm of independent professional valuers appointed by the Purchaser showing the valuation of the Business of the Target Group to be not less than HK$1,300,000,000;
(j) the passing by the China Vanguard Shareholders at the China Vanguard EGM to be convened and held of an ordinary resolution approving the Acquisition and the Disposal;
(k) the Share Charge having been released;
(l) the obtaining of a BVI legal opinion (in form and substance satisfactory to the Purchaser) from a firm of BVI legal advisers appointed by the Vendor and acceptable to the Purchaser in relation to the S&P Agreement (as supplemented by the Supplemental Agreement) and the transactions contemplated thereunder (including but not limited to (i) the due incorporation and good standing of all the BVI group companies in the Target Group; and (ii) the ownership of each BVI group companies’ share capital being consistent with the details stated in the S&P Agreement (as supplemented by the Supplemental Agreement); and

LETTER FROM THE APTUS BOARD

(m) the obtaining of a surveyor report from a firm of independent professional surveyor on the Owned Properties.

Conditions (a) and (e) above are waivable by the Purchaser under the S&P Agreement (as supplemented by the Supplemental Agreement). As at the Latest Practicable Date, the Purchaser has no current intention to waive such conditions. Conditions (b), (c), (d), (f), (g), (h), (i), (j), (k), (l) and (m), are incapable of being waived. As at the Latest Practicable Date, none of the conditions set out above have been fulfilled/waived.

Long stop date

If any of the conditions for the Completion has not been satisfied (or, as the case may be, waived by the Purchaser) on or before 4:00 p.m. on 30 June 2010 or such later date as the Vendor and the Purchaser may agree, the S&P Agreement (as supplemented by the Supplemental Agreement) shall cease and determine.

Completion and refund of the Deposit

Completion shall take place at 4:00 p.m. within three Business Days after all the conditions of the S&P Agreement (as supplemented by the Supplemental Agreement) have been fulfilled or as the case may be, waived.

In the event that Completion does not take place as stipulated as a result of the sole default of the Purchaser, the Vendor may forthwith determine the S&P Agreement (as supplemented by the Supplemental Agreement) by giving notice of termination in writing to the Purchaser to such effect, in which event the Vendor shall be entitled to forfeit the Deposit paid by the Purchaser absolutely and neither party shall have any obligations and liabilities thereunder and neither party shall take any action to claim for damages or to enforce specific performance or any other rights and remedies save for any antecedent breaches of the terms thereof.

In the event that Completion does not take place otherwise than as a result of the sole default of the Purchaser, the Purchaser may forthwith determine the S&P Agreement (as supplemented by the Supplemental Agreement) by giving notice of termination in writing to the Vendor to such effect, in which event the Vendor shall forthwith refund the Deposit paid by the Purchaser, without interest, to the Purchaser and neither party shall have any obligations and liabilities thereunder and neither party shall take any action to claim for damages or to enforce specific performance or any other rights and remedies save for any antecedent breaches of the terms thereof.

Upon Completion, the Target will become an indirect wholly-owned subsidiary of Aptus. The other members of the Target Group will become indirect wholly-owned or non wholly-owned subsidiaries of Aptus and their accounts will be consolidated into the financial statements of Aptus. After Completion, Aptus will consider to hire staff with other operational experience relevant to the Business of the Target Group. Upon Completion and as a result of the Acquisition, there will be no change in control of Aptus.

LETTER FROM THE APTUS BOARD

THE CONVERTIBLE BONDS

To satisfy part of the Consideration, the Purchaser will procure Aptus to issue to the Vendor the Convertible Bonds in the principal amount of HK$850,000,000.

The following is a summary of the principal terms of the Convertible Bonds:

Aggregate principal amount: HK$850,000,000

Initial Conversion Price:

HK$0.25 per Conversion Share, subject to usual anti-dilution adjustments in certain events such as share consolidation, share subdivision, capitalisation issue, capital distribution, rights issue and other equity or equity derivatives issues. Such adjustments will be certified by an independent approved merchant bank or the auditors of Aptus for the then time being. Pursuant to the instrument constituting the Convertible Bonds, the Initial Conversion Price will not be adjusted upon the completion of the placing of up to a total of 160,000,000 new Aptus Shares by Aptus and the Loan Capitalisation.

The Initial Conversion Price of HK$0.25 per Conversion Share represents:

(i) a discount of approximately 13.79% to the closing price of HK$0.290 per Aptus Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a discount of approximately 36.71% to the closing price of HK$0.395 per Aptus Share as quoted on the Stock Exchange on 19 November 2009, being the last full trading day immediately prior to the entering into of the S&P Agreement;
(iii) a discount of approximately 31.13% to the average of the closing prices of HK$0.363 per Aptus Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including 19 November 2009, being the last full trading day immediately prior to the entering into of the S&P Agreement;
(iv) a discount of approximately 27.95% to the average of the closing prices of HK$0.347 per Aptus Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including 19 November 2009, being the last full trading day immediately prior to the entering into of the S&P Agreement; and

LETTER FROM THE APTUS BOARD

(v) a discount of approximately 14.68% to the average of the closing prices of HK$0.293 per Aptus Share as quoted on the Stock Exchange for the last 100 consecutive trading days up to and including 19 November 2009, being the last full trading day immediately prior to the entering into of the S&P Agreement.

The Initial Conversion Price was determined after arm’s length negotiations among the Purchaser, the Vendor and Aptus with reference to the prevailing market prices of the Aptus Shares for the past 100 consecutive trading days immediately prior to the date of the S&P Agreement and the thin trading volume during the same period.

Interest rate:

Zero coupon

Maturity Date: The sixth anniversary from the date of the first issue of the Convertible Bonds

Redemption:

Unless previously redeemed or converted or purchased and cancelled, Aptus will redeem the Convertible Bonds on the maturity date.

Aptus may at any time before the maturity date by serving at least seven days’ prior written notice to the Bondholder(s) with the total amount proposed to be redeemed from the Bondholder(s) specified therein, redeem the Convertible Bonds (in whole or in part) at par.

Any amount of the Convertible Bonds which remains outstanding on the maturity date shall be redeemed at its then outstanding principal amount.

Transferability:

The Bondholder(s) may assign or transfer the Convertible Bonds to Independent Third Parties in whole or in part in integral multiples of HK$1,000,000 or if the outstanding principal amount of the Convertible Bonds is less than HK$1,000,000, the whole but not in part of the Convertible Bonds may be assigned or transferred.

Conversion:

Under the terms of the Convertible Bonds, any conversion (a) shall not trigger a mandatory offer obligation under Rule 26 of the Code on the part of the Bondholder which exercised the conversion right and its party(ies) acting in concert as defined under the Code and (b) will not cause the public float of Aptus unable to meet the requirement under the GEM Listing Rules.

LETTER FROM THE APTUS BOARD

Subject to above, the Bondholder(s) will have the right to convert the whole or part of the principal amount of the Convertible Bonds into Conversion Shares at any time and from time to time, from the date of issue of the Convertible Bonds in amounts of not less than a whole multiple of HK$1,000,000 on each conversion.

Conversion period:

Bondholder(s) shall have the right to convert at any time following the date of issue of the Convertible Bonds, up to and including the maturity date, the whole or any part (in an amount or integral multiple of HK$1,000,000) of the principal amount of the Convertible Bonds into Conversion Shares.

Conversion Shares:

Upon full conversion of the Convertible Bonds at the Initial Conversion Price, an aggregate of 3,400,000,000 Conversion Shares will be issued by Aptus (representing approximately 164.75% of the existing issued share capital of Aptus, approximately 62.23% of the issued share capital of Aptus as enlarged by the allotment and issue of the Conversion Shares, assuming full conversion of the Convertible Bonds and the Conversion Shares were to be issued at the Initial Conversion Price. However, under the terms of the Convertible Bonds, any conversion must not trigger a mandatory offer under Rule 26 of the Code on the part of the Bondholder which exercised the conversion rights and its party(ies) acting in concert as defined under the Code.

Voting: A Bondholder will not be entitled to receive notice of, attend or vote, at any general meeting of Aptus by reason only of it being a Bondholder.

Listing:

No application will be made for the listing of the Convertible Bonds on the Stock Exchange or any other stock exchange.

Ranking:

The Convertible Bonds will rank pari passu with all other present and future unsecured and un-subordinated obligations of Aptus.

The Conversion Shares to be issued as a result of the exercise of the conversion rights attaching to the Convertible Bonds will rank pari passu in all respects with all other Aptus Shares in issue at the date on which the conversion rights attached to the Convertible Bonds are exercised. The Conversion Shares will be allotted and issued pursuant to the specific mandate to be sought at the Aptus EGM and will be allotted and issued upon exercise by the Bondholder(s).

The Convertible Bonds will not be sold to any connected persons of Aptus.

No application will be made by Aptus for the listing of the Convertible Bonds. Application will be made by Aptus to the Listing Committee for the listing of, and permission to deal in, the Conversion Shares.

LETTER FROM THE APTUS BOARD

THE PROMISSORY NOTES

The aggregate principal amount of the Promissory Notes is HK$150,000,000. Each of the Promissory Note is repayable in one lump sum on the date falling three years from its date of issue (“ Maturity Date ”) and bears no interest. Aptus as the issuer has the right to effect prepayment of the outstanding principal amount due under each of Promissory Note prior to its Maturity Date in integral multiples of HK$1,000,000 or if the outstanding principal amount due is less than HK$1,000,000, the whole of it. Out of the total amount of HK$150,000,000 of the Promissory Notes, HK$20,000,000 of the Promissory Notes will upon issue be secured by a first fixed charge over the entire issued share capital of Good United and the remaining principal sum of HK$130,000,000 is unsecured. Good United, a direct wholly-owned subsidiary of Aptus, is also an indirect non wholly-owned subsidiary of China Vanguard. The principal activity of Good United is investment holding. Good United holds 70% equity interests in CNPC Huayou CU Energy Investment Co., Limited (“ CNPC CU Energy ”), which previously had the profit sharing rights on Nos 1, 32 and 43 Heavy oil blocks of Xin Jiang Fengcheng Oilfied (the “ Xin Jiang Oilfield ”). On 24 April 2009, CNPC CU Energy entered into an agreement terminating the profit sharing rights with respect to the Xin Jiang Oilfield (the “ Termination Agreement ”). On 17 November 2009, Aptus and China Vanguard jointly announced that all monies payable under the Termination Agreement, which is considered as the principal asset of Good United and its subsidiaries, have been received by the Aptus Group on 17 November 2009 and the termination of the profit sharing arrangement came into effect on 17 November 2009 accordingly upon the terms of the Termination Agreement.

The Promissory Notes may, with prior notice in writing to Aptus, be freely transferable and assignable to any Independent Third Parties in whole or in integral multiples of HK$1,000,000 and in whole only if the outstanding principal sum of the Promissory Notes is less than HK$1,000,000.

THE PUT OPTION

In consideration of the payment of HK$10 by the Purchaser to each of the Vendor and the Guarantor, the Vendor and the Guarantor have agreed to grant a put option (the “ Put Option ”) to the Purchaser pursuant to which the Purchaser shall be entitled to exercise the Put Option in the period 24 months from the date of Completion (the “ Put Option Period ”) upon the occurrence of certain events (the “ Put Option Events ”) as stipulated in the Supplemental Agreement by giving notice (the “ Put Option Exercise Notice ”) to the Vendor and the Guarantor (or any of them) (the “ Put Option Seller ”) to require the Put Option Seller to purchase the Sale Share (the “ Put Option Share ”).

LETTER FROM THE APTUS BOARD

The consideration (the “ Put Option Consideration ”) for the sale and purchase of the Put Option Share shall be an amount equal to the Consideration (i.e. HK$1,085,000,000) and shall be paid in full upon completion of the sale and purchase of the Put Option Share (“ Put Option Completion ”), provided that (i) if at the time of the Put Option Completion there shall be any amount outstanding under the Promissory Notes and/or Convertible Bonds and the Vendor at its option delivers the remaining balance of the Convertible Bonds, the Secured Promissory Note and/or the Unsecured Promissory Note to the Purchaser for cancellation, such outstanding amounts shall be applied to set-off the amount of the Put Option Consideration payable; and (ii) any amount of dividends declared and paid to the Purchaser attributable to the Business (but not including any earned but undistributed profit of the Business at the time of Put Option Completion) from the date of Completion up to the time of the Put Option Completion shall be applied to set-off the amount of the Put Option Consideration payable. The Put Option Seller shall pay the amount (after such set-off in (i) and (ii) above, where applicable) to the Purchaser at the Put Option Completion.

In the event that the amount to be set-off shall be greater than the Put Option Consideration, the Purchaser shall pay such excess amount to the Vendor at Put Option Completion.

The Put Option Events include,

(1) (a) there is any Final Notice issued by any Authority or there is a Change of Law which restricts or prohibits the use of the Owned Properties (or any part of it) for the Business; and/or
(b) any Authority has taken action for breach of the permitted use of the Owned Properties as permitted under the government leases under which the Owned Properties are held and/or under other relevant laws and regulations of Hong Kong respecting or in connection with or arising (directly or indirectly) out of the use of the Owned Properties (or any part of it) for the Business; and/or
(c) the requisite no-objection letters, licences, consents, approvals or (as the case may be, waivers) (if any) which must be obtained for the lawful use of the Owned Properties (or any part of it) for the Business (the “ Requisite Approvals ”) shall not have been obtained from the relevant Authority (other than due to the failure and/or default of the Purchaser and/or its associates) by the end of the Put Option Period, or a final decision with no right of appeal shall be made by the relevant Authority refusing the grant of the Requisite Approvals during the Put Option Period (other than due to the failure and/or default of the Purchaser and/or its associates);

and in the circumstances as specified in (a), (b) and/or (c) immediately above, a material part of the Business is thereby affected (for the purpose of the Put Option, “ material ” means 50% or more of the total site area of the Lot Nos. 2051, 2052, 2061, 2044, 2046, 2059 and 2065 of DD No.104);

LETTER FROM THE APTUS BOARD

(2) judgement and/or order is entered or granted by the Court of Hong Kong in favour of the Authority or a valid order and/or demand is made and/or issued by the Authority, for reentry and possession of the Owned Properties (or any part of it) for breach of the permitted use of the Owned Properties as permitted under the government leases under which the Owned Properties are held and/or under other relevant laws and regulations of Hong Kong respecting or in connection with or arising (directly or indirectly) out of the use of the Owned Properties (or any part of it) for the Business, and a material part of the Business is thereby affected; and/or
(3) if any of the title issues which the counsels and/or the solicitors have opined in the legal advices on the Owned Properties obtained prior to Completion does constitute a blot or defect on title to all or any of the Owned Properties and a material part of the Business is thereby affected.

Put Option Completion is to be completed on a date to be specified in the Put Option Exercise Notice which must not be a day falling earlier than the 60th day and not later than 120th day after the date of the Put Option Exercise Notice. If the Put Option is not exercised by the Purchaser within the Put Option Period, the Put Option shall lapse upon expiry of the Put Option Period. So long as the Put Option Exercise Notice is issued within the Put Option Period, the date of Put Option Completion may fall outside the date of Put Option Period.

The Put Option Exercise Notice, once issued, is binding on the Put Option Seller and the Purchaser and may not be withdrawn. The Put Option shall only be exercised once in full but not in part.

In the event that the Put Option Seller shall fail to effect payment of the Put Option Consideration upon Put Option Completion, the Promissory Notes and the Convertible Bonds as may then be outstanding and held by the Vendor shall automatically be deemed to have been repaid (or cancelled as in the case of the Convertible Bonds) in full forthwith and the security as then held by the Vendor under the Secured Promissory Note shall automatically be deemed to have been released and discharged in full forthwith by the Vendor in favour of the Purchaser free from all encumbrances.

LETTER FROM THE APTUS BOARD

The following table summarises the shareholding structure of Aptus as at the Latest Practicable Date and as a result of the exercise of the	conversion rights attaching to the Convertible Bonds before and after the completion of the Third Placing:	Before completion of the Third Placing Upon completion of the Third Placing	Immediately after Immediately after the Immediately after the completion of	the conversion of the completion of the Third Placing, the Third Placing, the conversion of	Immediately after the full conversion Convertible Bonds at the Initial the full conversion the Convertible Bonds at the Initial	of the Convertible Bonds at the Conversion Price immediately Immediately after of the Convertible Bonds at the Conversion Price immediately	Initial Conversion Price subject before triggering a mandatory completion of the Initial Conversion Price subject before triggering a mandatory	to the terms and conditions general offer obligation under Third Placing to the terms and conditions general offer obligation under	As at the Latest under the bond instruments the present provisions of the Code (for illustrative under the bond instruments the present provisions of the Code	Practicable Date (for illustrative purposes only) (for illustrative purposes only) purposes only) (for illustrative purposes only) (for illustrative purposes only)	Approximate Approximate % Approximate % Approximate Approximate % Approximate %	% of issued of enlarged of enlarged % of enlarged of enlarged of enlarged	Name of Aptus No. of share capital No. of issued share No. of issued share No. of issued share No. of issued share No. of issued share	Shareholders Aptus Shares of Aptus Aptus Shares capital of Aptus Aptus Shares capital of Aptus Aptus Shares capital of Aptus Aptus Shares capital of Aptus Aptus Shares capital of Aptus	(Note 3)	Precise Result	(Notes 1 & 2) 700,596,428 33.95% 700,596,428 12.82% 700,596,428 27.19% 420,596,428 20.38% 420,596,428 7.70% 420,596,428 14.29%	Bondholder(s) – – 3,400,000,000 62.23% 512,695,000 19.90% – – 3,400,000,000 62.23% 880,400,000 29.90%	Placees – – – – – – 280,000,000 13.57% 280,000,000 5.12% 280,000,000 9.51%	Public 1,363,075,000 66.05% 1,363,075,000 24.95% 1,363,075,000 52.91% 1,363,075,000 66.05% 1,363,075,000 24.95% 1,363,075,000 46.30%	Total 2,063,671,428 100.00% 5,463,671,428 100.00% 2,576,366,428 100.00% 2,063,671,428 100.00% 5,463,671,428 100.00% 2,944,071,428 100.00%			Notes:	1. As at the Latest Practicable Date, 48,750,000 Aptus Shares out of such 700,596,428 Aptus Shares owned by Precise Result have been lent to Evolution Master Fund, Ltd. SPC,	Segregated Portfolio M.	2. Subsequent to the entering into of the S&P Agreement, on 14 December 2009 and 19 February 2010 respectively, Precise Result and placing agents entered into placing	agreements to place, on a best effort basis, up to 120,000,000 then existing Aptus Shares and 140,000,000 then existing Aptus Shares respectively. These placings were	completed on 16 December 2009 and 25 February 2010 respectively. During the period from 30 March 2010 to 9 April 2010, Precise Result disposed an aggregate total of	11,150,000 Aptus Shares in the open market of the Stock Exchange. Accordingly, the number of Aptus Shares held by Precise Result reduced from 971,746,428 as at the date	of the Announcement to 700,596,428 as at the Latest Practicable Date.	On 13 April 2010, Precise Result and a placing agent entered into a placing agreement relating to the Third Placing to place, on a best effort basis, up to 280,000,000 existing	Aptus Shares. As at the Latest Practicable Date, the Third Placing has not been completed. Upon completion of the Third Placing and assuming the 280,000,000 existing Aptus	Shares are fully placed, the number of Aptus Shares held by Precise Result will be reduced from 700,596,428 to 420,596,428.	3. Under the terms of the Convertible Bonds, any conversion must not trigger a mandatory offer obligation under Rule 26 of the Code on the part of the Bondholder(s) which	exercised the conversion right and its party(ies) acting in concert as defined under the Code. Therefore, the Bondholder(s) shall not have the right to convert the whole or part	of the principal amount of the Convertible Bonds into Conversion Shares to the extent that immediately after such conversion, the Bondholder(s) together with parties acting in	concert with it or deemed to be so acting with it, taken together will, directly and indirectly, control or be interested in 20% or more of the voting rights of Aptus or such other	percentage as may from time to time be specified in the Code as being the level for triggering a mandatory general offer or be deemed to be an associated company (as defined	under the Code) or deemed to be acting in concert in force from time to time whichever shall be the lowest.

LETTER FROM THE APTUS BOARD

INFORMATION OF THE VENDOR

The Vendor is principally engaged in investment holdings and wholly owned by the Guarantor.

INFORMATION ON THE TARGET GROUP

The Target was incorporated on 12 March 2009 in the BVI and, upon Completion, the Target Group plans to operate and manage the Owned Properties and to provide and sell approximately 69,000 Boxes for storage of deceased cremated ashes and other ancestral properties in Hong Kong. It is also expected that the Target Group will provide other auxiliary services to its selling and managing of the storage spaces. The major source of income of the Target Group is expected to be the income from the selling of Boxes. Aptus will appoint management staff with relevant expertise, professional and educational qualifications as soon as practicable, when suitable candidates are identified to assist in supervising the operation of the Target Group after Completion.

In addition, the Aptus Directors will closely monitor the operation and the business environment of the Target Group and implement appropriate internal control policies on the Target Group where appropriate.

The Target, through its non wholly-owned subsidiaries, currently holds 90% interest in 43 parcels of agricultural land in Yuen Long, New Territories, Hong Kong, with four 2-storey houses and two single-storey houses erected thereon. The six houses have a total gross floor area of approximately 1,013.8 sq. m. (including a total balcony area of approximately 60.1 sq. m.). The remaining 10% interest in the subject land and buildings is held by Fuk Hing Lane Development Company Limited, an Independent Third Party. Your attention is drawn to “Group III – Property interests to be acquired by the Group in Hong Kong” in Appendix VIII of this joint circular for further details of the land and buildings held by the Target Group.

Construction works have commenced to refurbish the houses for providing Boxes for storage of deceased cremated ashes and other ancestral properties and the related businesses and services. The houses are planned to comprise a total of approximately 69,000 Boxes which will be refurbished by the end of December 2010. The total capital expenditure for the aforesaid construction and refurbishment is estimated to be not more than HK$45,000,000.

According to valuation report annexed as Appendix VI to this joint circular, the valuation of the Business of the Target Group based on discounted cash flow method amounted to HK$1,337,000,000.

LETTER FROM THE APTUS BOARD

Set out below is a summary of the key financial data of the Target Group based on the audited consolidated accounts of the Target Group for the period from 12 March 2009 (date of incorporation of the Target) to 30 November 2009 which has been prepared in accordance with the Hong Kong Financial Reporting Standard:

	The period from 12 March 2009
	(date of incorporation of the Target)
	to 30 November 2009
	HK$
	(audited)
Loss before tax for the period	18,000
Loss after tax for the period	18,000
	As at 30 November 2009
	HK$
	(audited)
Net liabilities	18,000

Industry overview on the business of the Target Group

Demand and supply for the industry of providing spaces for ancestral property storage in Hong Kong

Hong Kong is one of the most densely populated cities in the world. Shortages of land forced most Hong Kong people to abandon burials beginning in the 1980s. Also, Hong Kong currently is running out of spaces for cremated ashes by virtue of escalating demand arising from ageing population and decreasing supply of niches.

During the year ended 31 December 2008, according to the Hong Kong Yearbook 2008, 41,530 deaths were registered in Hong Kong. With reference to the question raised by the Hon Ronny Tong and an oral reply by the Secretary for Food and Health, Dr York Chow, in the Legislative Council on 21 October 2009 (the “ Q&A ”), the annual total numbers of deaths and cremations in the next 10 years (i.e. from 2010 to 2019) are estimated to be about 47,700 and 43,900 respectively, representing a cremation rate of approximately 92%.

Currently, the Food and Environmental Hygiene Department operates six government crematoria, 11 public cemeteries and eight columbaria, and oversees the management of 28 private cemeteries. With reference to the Q&A and the reply made by the Secretary for Food and Health to the question raised by the Hon Kam Nai-wai on 9 December 2009, the supply is far from adequate to meet the demand and the public have turned to seek private columbarium facilities. With reference to the administration’s paper made by the Food and Health Bureau on columbarium development on 9 February 2010, the eight public columbaria managed by the Food and Environmental Hygiene Department provide approximately 167,900 public niches. In July 2009, funding approval was obtained from the Finance Committee of the Legislative Council for the construction of a new public columbarium within the Wo Hop Shek Cemetery which will provide about 41,000 new columbarium niches for 80,000 urns, for use in 2012. Save for the public niches, about 328,000 niches are provided by the non-governmental Board of Management of the Chinese Permanent Cemeteries, and cemeteries managed by Catholic, Protestant, Buddhist and other religious bodies. In addition, 49,300 newly-built niches will be provided in the coming two years.

LETTER FROM THE APTUS BOARD

Legal and regulatory requirements

There is no specific laws and regulations in Hong Kong governing the operation of private columbaria in Hong Kong apart from the Government Leases requirements regarding use of the lands granted thereunder and the indirect applications (where applicable) of certain Ordinances of Hong Kong including but not limited to the Town Planning Ordinance (Chapter 131 of the Laws of Hong Kong), the Public Health and Municipal Services Ordinance (Chapter 132 of the Laws of Hong Kong), the Buildings Ordinance (Chapter 123 of the Laws of Hong Kong) and regulations made thereunder respectively. With reference to the question raised by the Hon Tanya Chan and a written reply by the Secretary for Food and Health, Dr York Chow, in the Legislative Council on 9 December 2009, the operation of various trades in Hong Kong, including that of private columbaria, must be in compliance with statutory requirements, including the requirement for business premises to comply with land use zoning. In addition, the use of the land must not be in breach of the terms of the land lease. Apart from this, as human ashes do not give rise to public health and environmental hygiene concerns, the Government does not impose any specific regulation on the operation of private columbaria. The Government is also looking into ways to set up voluntary disclosure system in order to increase the transparency on the industry of the Target Group, save for aforesaid, Aptus and China Vanguard are not aware of other proposed legislative amendments that may have material impact on the Business of the Target Group.

Board representation of Aptus

Aptus has no intention to substantially change its board composition upon Completion, save for the possible engagement of additional director(s) when appropriate candidates are identified, to assist in supervising the Business of the Target Group, and to strengthen the overall expertise of the Aptus Board. Aptus has appointed an executive director Mr. Lam Wai Pong, who has relevant experience to assist the Aptus Board in overseeing the development of the Business. Mr. Lam Wai Pong has the experience in site acquisition, consultancy and property valuation, and asset and property management in Hong Kong. The Guarantor, his associates or their respective representatives will not be appointed as a director or the chief executive of Aptus upon Completion.

REASONS FOR THE ACQUISITION

After having strengthened Aptus’ financial position via the disposal of its natural gas related assets, the Aptus Group is currently principally engaged in the trading and distribution of edible oil and mineral materials. As indicated in the circular of Aptus dated 24 June 2009, the Aptus Group has been looking for a number of new business opportunites in order to enhance business growth as well as Aptus Shareholders’ returns.

As the population of Hong Kong has been increasing, there is a growing need for the storage space of deceased cremated ashes and other ancestral properties. As indicated in the Aptus’ announcement dated 30 October 2009, supply of storage space of personal properties of ancestors in Hong Kong remains limited in recent years. The Acquisition, if materialised, represents an opportunity for Aptus to tap into the business of providing spaces for storage of deceased cremated ashes and other ancestral properties. In view of the growing demand for such businesses in Hong Kong, the Aptus Directors believe that the Acquisition would significantly benefit Aptus in the diversification of its business, income and asset base.

LETTER FROM THE APTUS BOARD

The Aptus Directors have also taken into account of the following factors, including (i) the aforesaid prospect of the business of providing spaces for storage of deceased cremated ashes and other ancestral properties is positive given the growing demand and shortage of supply in Hong Kong; (ii) the loss position for Aptus during the two financial years ended 30 June 2009; (iii) the Acquisition represents an opportunity for Aptus to tap into the Business; and (iv) the Acquisition will benefit Aptus in the diversification of its business, income and asset base. Based on the foregoing, the Aptus Directors (including the independent non-executive Aptus Directors) believe that the Acquisition would further enhance the growth of the Aptus Group in order to maximise returns to the Aptus Shareholders. Taking into account the benefits of the Acquisition, the Aptus Board is of the view that the terms of the Acquisition are fair and reasonable and the Acquisition is in the interests of the Aptus Group and the Aptus Shareholders as a whole.

Regarding Aptus’ existing operations of edible oil and mineral materials trading, at this point in time, Aptus intends to (i) short term: continually reassess the market conditions for the trading of edible oil and to make profitable trades when possible with a target to re-achieve previous levels of revenue and gross profit; and (ii) long term: Aptus is confident that the global economy will eventually recover and that commodity and currency volatility will decline, providing a kinder backdrop for edible oil trading and mineral materials trading operations of the Aptus Group. Once a stabler trading environment is established, Aptus will look to expand these operations. At this time, management of Aptus have not entered into any discussions for disposal of this trading business.

FINANCIAL EFFECTS

1. Net asset

As stated in Appendix I to this joint circular, the audited consolidated net assets was approximately HK$57,878,000 as at 31 October 2009.

As set out in Appendix IV to this joint circular, assuming Completion had taken place, the pro forma total assets and total liabilities of the Enlarged Aptus Group would have been approximately HK$1,440,463,000 and HK$1,169,868,000 respectively, therefore the pro forma net assets of the Enlarged Aptus Group would have been approximately HK$270,595,000. Therefore, the Acquisition will increase the Aptus Group’s net assets.

2. Working capital

As stated in Appendix I to this joint circular, the audited consolidated net current assets of Aptus as at 31 October 2009 was approximately HK$57,849,000.

As set out in the Appendix IV to this joint circular, assuming Completion had taken place, the pro forma net current liabilities of the Enlarged Aptus Group would have been approximately HK$30,151,000. Therefore, the Acquisition will reduce the Aptus Group’s net current assets.

3. Earnings

As stated in Appendix I to this joint circular, the audited consolidated net profit of Aptus for the four months ended 31 October 2009 was approximately HK$162,593,000.

LETTER FROM THE APTUS BOARD

As set out in the Appendix IV to this joint circular, assuming Completion had taken place, the pro forma net profit of the Enlarged Aptus Group would have been approximately HK$149,504,000. Therefore, the Acquisition will reduce the Aptus Group’s earnings. The Directors consider the impact of the Acquisition on the Group’s earning will be minimal in the short run and believe that the Acquisition will improve the Enlarged Aptus Group’s trading prospects in the future.

RISK FACTORS

Principal risk factors which may be faced by the Enlarged Aptus Group relating to the Business are as follows:

1. Investments in new business

The Acquisition represents an investment by Aptus in a new business sector (i.e. the Business) which may pose significant challenges to Aptus’ administrative, financial and operational resources. Although the new business brought about by completion of the Acquisition is relatively simple and straightforward, the lack of relevant experience in the new business sector means that there is no assurance that Aptus will be able to deliver the return on investment within the scheduled timeline. If the new Business is not commercially successful, the business, financial condition and operating results of the Enlarged Aptus Group could be adversely and materially affected.

2. Short operating history of the Target Group

The Target Group has a relatively short operating history upon which an evaluation of its prospects and profitability can be based. Such prospect and profitability must be considered in the light of the risks, uncertainties, expenses and difficulties commonly encountered by any new company. Such risks and uncertainties involve the Target Group’s ability to engage in experienced management staff, market’s acceptance of the Target Group’s business position and competition from other competitors. There is no assurance that the Enlarged Aptus Group will be successful in implementing and/or commercialising all or any of the business plans and/or targets of the Business nor is there any assurance that the Enlarged Aptus Group will be able to secure its expected business targets and/or customers and orders for the Business to its satisfaction. All in all, these uncertainties and factors may significantly hinder the successful implementation of the business plans and/or operation of the Business and may have a significant negative effect to the prospects and financial performance of the Enlarged Aptus Group.

3. Disputes with the minority shareholder of the land and buildings

The Target Group currently holds 90% interest in 43 parcels of land together with the buildings erected thereon. The minority shareholder, Fuk Hing Lane Development Company Limited, may have economic or business interests or goals that are not in line with those of the Enlarged Aptus Group and may act in its own interest rather than that of the Enlarged Aptus Group. There is no assurance that the best interests and business philosophy of the Enlarged Aptus Group will always be shared by this minority shareholder, which could lead to dispute with members of the Enlarged Aptus Group and distract the attention of the management of the Enlarged Aptus Group from the management of its business (including the Business), and in such event, the prospects, operation and financial performance of the Enlarged Aptus Group could be materially and adversely affected.

LETTER FROM THE APTUS BOARD

4. Uncertainty of public acceptance of the Enlarged Aptus Group’s services in repsect of the Business

The success and commercialisation of the Business for the provision and sale of storage space for cremated ashes of deceased and other ancestral properties of the Enlarged Aptus Group depend on the degree and extent of public acceptance of the kind of storage services provided by the Enlarged Aptus Group. There is no assurance that the public will readily and continuously accept the storage and related services provided by the Target Group respecting the Business and that the Enlarged Aptus Group will be successful in implementing all or any of the business plans respecting the Business in accordance with the intended terms and time frame. Even if the Enlarged Aptus Group is successful in implementing the business plans respecting the Business as planned, there is no assurance that sufficient sales will be generated and/or maintained to achieve the desirable performance. In any or all of these events, the business prospect and financial performance of the Enlarged Aptus Group may be materially and adversely affected.

5. Changes in law, regulations and policies

There is no specific laws and regulations in Hong Kong governing the operation of private columbaria or the use of the Owned Properties for the storage space of deceased cremated ashes and other ancestral properties apart from the Government Leases requirements respecting the Owned Properties regarding use of the lands granted thereunder and the indirect applications (where applicable) of certain Ordinances of Hong Kong including but not limited to the Town Planning Ordinance (Chapter 131 of the Laws of Hong Kong), the Public Health and Municipal Services Ordinance (Chapter 132 of the Laws of Hong Kong), the Buildings Ordinance (Chapter 123 of the Laws of Hong Kong) and regulations made thereunder respectively. In the event that the Government of Hong Kong should consider reviewing its current policy and introduce new laws, regulations and policies that regulate the operation of private columbaria and/or the use of lands as columbaria, the operation, prospect and financial performance of the Enlarged Aptus Group may be materially and adversely affected.

6. Title of the Owned Properties

The Owned Properties of the Target Group to be used for the Business are located in the New Territories. The land tenure system in the New Territories is not as simple and straightforward as that of the urban areas of Hong Kong. The complexity of land tenure in the New Territories coupled with the uncertainties over Chinese customs and customary rights, disputes over rights of way, easements, encroachment of land and other title issues have from time to time led to disputes over titles of New Territories lands. Every reasonable effort has caused to be made by Aptus to verify the title of the Owned Properties through its legal advisers and counsels and certain title issues which may impact on title to the Owned Properties have been identified. These existing or future disputes and/or challenges by third parties could materially adversely affect the revenue and profitability of the Business; substantial cost and expenses could be incurred in resolving and/or defending such disputes and challenges and the business, operation and financial performance of the Enlarged Aptus Group would be materially and adversely affected.

LETTER FROM THE APTUS BOARD

Upon completion of the Acquisition, it is a term of the S&P Agreement (as supplemented by the Supplemental Agreement) that the Vendor and the Guarantor are to provide the Purchaser with a joint and several undertaking and indemnities (the “Undertaking and Indemnity”) to indemnify and keep the Purchaser fully and effectually indemnified on demand by the Purchaser from and against (1) any actions, proceedings, arbitrations, claims or demands of whatever nature (including without limitation third party claims or demands) brought or threatened against the Purchaser (and/or any of the legal and beneficial owners of the Owned Properties) respecting or in connection with or arising (directly or indirectly) out of the title issues relating to the Owned Properties as may then be identified by solicitors and/or counsels (the “Claims”); and (2) all damages, losses, liabilities, claims, fines, penalties, settlement, fees, compensations, interest, costs and expenses (including without limitation all legal costs and expenses on a full indemnity basis) which may be paid, borne, suffered, sustained or incurred by the Purchaser (and/or any of the legal and beneficial owners of the Owned Properties) respecting or in connection with or arising (directly or indirectly) out of any of the Claims.

7. Use of Owned Properties for the Business

Aptus has obtained the advices of various counsels on the legality of use of the Owned Properties for the Business. The principal advices as obtained are summarised under the paragraph headed “Legal Opinions” in Appendix VI “Valuation report of the Target Group” of this joint circular. Despite the obtaining of the legal advices, the legality of use of the Owned Properties for the Business is not certain in the absence of direct judicial authorities on the interpretation of the relevant legislations and subsidiary regulations made thereunder and of the Government Leases and/ or the applicable land title documents (including Government Notifications) respecting the Owned Properties on their use as private columbaria. The use of the Owned Properties for the Business may or may not be a breach of the relevant legislations and subsidiary regulations made thereunder, the Government Leases and/or the applicable land title documents (including Government Notifications) affecting the Owned Properties is a grey area. There is no assurance that the use of the Owned Properties for the Business on or at the Owned Properties or in the buildings erected thereon do not constitute a breach of the relevant legislations and subsidiary regulations made thereunder, the Government Leases and/or the applicable land title documents (including Government Notifications) affecting the Owned Properties. In the event that the said use and/or operation does constitute a breach, the Government of Hong Kong could, among others, exercise its right to enter the Owned Properties affected, the Enlarged Aptus Group will then have to cease using the Owned Properties for the Business and could then be facing possible claims by those who have already bought columbarium niches of the Enlarged Aptus Group for breach of contract including but not limited to claims for refund of the fees paid for purchase of the columbarium niches and for damages and the revenue and profitability of the Enlarged Aptus Group could be adversely and materially affected, substantial cost and expenses could be incurred in resolving and/or defending any actions, proceedings or proposed actions or proceedings in respect of such breach(es) and the business, operation and financial performance of the Enlarged Aptus Group would be adversely affected.

LETTER FROM THE APTUS BOARD

the Government Leases of the Owned Properties for use of the lands and buildings erected thereon for offensive trade, conversion of agricultural and garden land for building purposes other than for agricultural and garden uses, construction of buildings and/or land use zoning). In the event that the Business cannot be commenced (or is forced to be suspended) until the obtaining of such requisite consents, licences, approvals or (as the case may be, waivers) (if any), the prospects, operations and financial performance of the Enlarged Aptus Group will materially adversely be affected.

In view of the above risks, the Vendor and the Guarantor have, under the S&P Agreement (as supplemented by the Supplemental Agreement), granted to the Purchaser the Put Option with its principal terms and conditions more particularly set out in the paragraph headed “The Put Option” in this letter from the Aptus Board. In essence, in the event of happening of any or all of the Put Option Events in the Put Option Period, the Vendor and/or the Guarantor will have to purchase the Sale Share from the Purchaser at a consideration equal to the Consideration (subject to set-off as mentioned in that paragraph) upon exercise by the Purchaser of the Put Option in the Put Option Period. Please refer to the said paragraph for further details of the principal terms and conditions of the Put Option.

GEM LISTING RULES IMPLICATIONS

The Acquisition constitutes a very substantial acquisition on the part of Aptus pursuant to Rule 19.06(5) of the GEM Listing Rules. Accordingly, the Acquisition is subject to, among other things, the approval of the Aptus Shareholders at the Aptus EGM to be convened. As no Aptus Shareholder has a material interest in the Acquisition which is different from the other Aptus Shareholders, no Aptus Shareholders will be required to abstain from voting on the proposed resolution to approve the Acquisition and the transactions contemplated thereunder at the Aptus EGM to be convened.

Since the Purchaser has the discretion to exercise the Put Option to require the Vendor and the Guarantor (or any of them) to purchase the Sale Share, and in accordance with Rule 19.75 of the GEM Listing Rules, only the premium (i.e. HK$10, being the price paid by Aptus to each of the Vendor and the Guarantor in acquiring the Put Option) will be taken into consideration for the purpose of classification of notifiable transactions. The grant of the Put Option to the Purchaser does not constitute a notifiable transaction for Aptus under Chapter 19 of the GEM Listing Rules as none of the relevant percentage ratios are more than 5%. On exercise of the Put Option by the Purchaser, the exercise price, the value of the underlying assets and the profits and revenue attributable to such assets will be used for the purpose of the calculation of the relevant percentage ratios under the GEM Listing Rules. Aptus will comply with the relevant GEM Listing Rules requirements upon the exercise of the Put Option by the Purchaser.

LETTER FROM THE APTUS BOARD

Shareholders under Chapter 19 of the GEM Listing Rules. However, should there be any change in relevant facts of the Put Option at the time of exercise of the Put Option by the Purchaser or should the Vendor or the Guarantor becomes a connected person of Aptus at the time of the exercise of the Put Option by the Purchaser, Aptus will be required to compute the percentage ratios at the time of exercise of the Put Option pursuant to Rule 20.70(2) of the GEM Listing Rules, irrespective of whether Aptus has sought approval from Aptus Shareholders at the time of entering into the Put Option. Depending on the result of the relevant percentage ratios, Aptus may be required to comply with the announcement, reporting and Aptus Shareholders’ approval requirements (or independent shareholders’ approval requirements if either the Vendor or the Guarantor or both shall become a connected person of Aptus at the time of exercise of the Put Option by the Purchaser) at the time of the exercise of the Put Option.

APTUS EGM

The Aptus EGM will be held at 10:00 a.m. on Friday, 7 May 2010 at Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, for the purpose of considering, and if thought fit, approving the S&P Agreement (as supplemented by the Supplemental Agreement) and the transactions contemplated thereunder, the issue of the Convertible Bonds and the issue of the Conversion Shares upon exercise of the conversion rights attached to the Convertible Bonds and the granting of the Put Option.

A notice convening the Aptus EGM is set out on pages AEGM-1 to AEGM-3 of this joint circular. A form of proxy for use thereat is also enclosed. Whether or not you are able to attend the Aptus EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to Aptus’ share registrar in Hong Kong, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the Aptus EGM or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the Aptus EGM or any adjourned meeting (as the case may be) or upon the poll concerned should you so wish. In such event, the instrument appointing a proxy shall be deemed to be revoked.

To the best knowledge of the Aptus Directors, none of the Vendor, the Guarantor and their respective associates holds any Aptus Shares as at the Latest Practicable Date.

VOTING AT APTUS EGM

The Acquisition and the transactions contemplated under the S&P Agreement (as supplemented by the supplemental Agreement) are subject to, among other things, the approval by the Aptus Shareholders at the Aptus EGM to be taken by way of a poll.

RECOMMENDATION

Having considered the factors and reasons set out in the paragraph headed “Reasons for the Acquisition” of this letter from the Aptus Board, the Aptus Directors consider that the terms of the S&P Agreement (as supplemented by the Supplemental Agreement) and the transactions contemplated thereunder and granting of the Put Option are fair and reasonable to Aptus and in the interests of the Aptus Shareholders as a whole. Accordingly, the Aptus Directors recommend the Aptus Shareholders to vote in favour of the relevant resolutions to be proposed at the Aptus EGM.

LETTER FROM THE APTUS BOARD

ADDITIONAL INFORMATION

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

By Order of the Board of Aptus Holdings Limited 問博控股有限公司 Fung King Him Daniel Director

LETTER FROM THE CHINA VANGUARD BOARD

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 8156)

Executive Directors:

Madam Cheung Kwai Lan Mr. Chan Tung Mei Mr. Chan Ting Ms. Chan Siu Sarah Mr. Lau Hin Kun

Independent non-executive Directors:

Mr. Tian He Nian Mr. Zhang Xiu Fu Mr. To Yan Ming Edmond

Registered Office: Cricket Square Hutchins Drive, P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Principal place of business in Hong Kong: Room 2201, 22nd Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

To the China Vanguard Shareholders, and for information only, to the holders of the convertible bonds issued by Grand Promise

22 April 2010

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION REGARDING ACQUISITION OF THE ENTIRE EQUITY INTERESTS OF CASDON MANAGEMENT LIMITED AND VERY SUBSTANTIAL DISPOSAL REGARDING DISPOSAL OF APTUS HOLDINGS LIMITED BY POTENTIAL DILUTION

INTRODUCTION

The Consideration shall be settled in the following manner: (i) the Deposit of HK$85,000,000 shall be paid by the Purchaser at any time and in any amount after signing of the S&P Agreement but prior to Completion; (ii) as to HK$850,000,000 by the Purchaser procuring Aptus to issue the Convertible Bonds;

* for identification purpose only

LETTER FROM THE CHINA VANGUARD BOARD

(iii) as to HK$20,000,000 by the Purchaser procuring Aptus to issue the Secured Promissory Note; and (iv) as to HK$130,000,000 by the Purchaser procuring Aptus to issue the Unsecured Promissory Note. As at the Latest Practicable Date, the Deposit has been paid by the Purchaser. The payments referred to in items (ii) to (iv) above shall be made on Completion.

As a result of the Purchaser, being an indirect non wholly-owned subsidiary of China Vanguard, entering into the S&P Agreement (as supplemented by the Supplemental Agreement) with the Vendor and assuming there will not be any further issue and/or repurchase of Aptus Shares, China Vanguard’s indirect interests in Aptus would be diluted by, up to 21.13 percentage points, from holding approximately 33.95% as at the Latest Practicable Date to approximately 12.82% assuming full conversion of the Convertible Bonds into Conversion Shares at the Initial Conversion Price, while China Vanguard will continue to hold, indirectly, 700,596,428 Aptus Shares immediately before completion of the Third Placing.

On 13 April 2010, Precise Result and placing agent entered into a placing agreement relating to the Third Placing to place, on a best effort basis, up to 280,000,000 existing Aptus Shares. As at the Latest Practicable Date, the Third Placing has not been completed. Upon completion of the Third Placing and assuming the 280,000,000 existing Aptus Shares are fully placed, the number of Aptus Shares held by Precise Result will be reduced from 700,596,428 to 420,596,428. Assuming full conversion of the Convertible Bonds into Conversion Shares at the Initial Conversion Price, China Vanguard’s indirect interests in Aptus would be diluted by, up to 12.68 percentage points, from holding approximately 20.38% to approximately 7.70%.

Upon the issue of the Conversion Shares in full and in the event that China Vanguard shall no longer have control of the Aptus Board, Aptus will cease to be an indirect non wholly-owned subsidiary of China Vanguard and will then be treated as an available-for-sale financial asset.

The Acquisition constitutes a very substantial acquisition on the part of China Vanguard given the Purchaser is an indirect non wholly-owned subsidiary of China Vanguard pursuant to Rule 19.06(5) of the GEM Listing Rules. Accordingly, the Acquisition is subject to, among other things, the approval of the China Vanguard Shareholders at the China Vanguard EGM. The Disposal is regarded as a deemed disposal on the part of China Vanguard under Rule 19.29 of the GEM Listing Rules and constitutes a very substantial disposal under Rule 19.06(4) of the GEM Listing Rules which is subject to China Vanguard Shareholders’ approval at the China Vanguard EGM. As no China Vanguard Shareholder has a material interest in the Acquisition and the Disposal which is different from the other China Vanguard Shareholders, no China Vanguard Shareholders will be required to abstain from voting on the resolutions to approve the Acquisition and the transactions contemplated thereunder and the Disposal respectively at the China Vanguard EGM. Any vote exercised by the China Vanguard Shareholders at the China Vanguard EGM shall be taken by poll.

The purpose of this joint circular is to provide China Vanguard Shareholders, among other things, (i) further details with respect to the Acquisition and the transactions contemplated thereunder and the Disposal; (ii) information on due diligence findings of the Target Group as at the Latest Practicable Date; and (iii) a notice convening the China Vanguard EGM.

LETTER FROM THE CHINA VANGUARD BOARD

THE S&P AGREEMENT (AS SUPPLEMENTED BY THE SUPPLEMENTAL AGREEMENT)

Date: 20 November 2009 Parties: Purchaser: Sea Marvel Limited Vendor: Red Rabbit Capital Limited Guarantor: Kong Lung Cheung

To the best of the China Vanguard Directors’ knowledge, information and belief, having made all reasonable enquiries, the Vendor and the Guarantor, being the ultimate beneficial owner of the Vendor, are Independent Third Parties to Aptus and China Vanguard. Save for the entering into of a non-legally binding memorandum of understanding between Aptus and the Vendor in relation to the Acquisition as disclosed in the announcement of Aptus dated 30 October 2009, there are no other prior and/or continuing businesses/transactions entered into between each of the Vendor, the Guarantor on one part and Aptus, China Vanguard, their connected persons and associates on the other part.

Details of the S&P Agreement (as supplemented by the Supplemental Agreement), the terms of the Convertible Bonds and their dilution effect, the terms of the Promissory Notes and the Put Option, are set out under the paragraphs headed “The S&P Agreement (as supplemented by the Supplemental Agreement)”, “The Convertible Bonds”, “The Promissory Notes”, “The Put Option” and “Effect on the share capital of Aptus” in the Letter from the Aptus Board.

INFORMATION ON THE TARGET GROUP

Details of the Target Group are set out under the paragraph headed “Information on the Target Group” in the Letter from the Aptus Board.

Aptus will appoint management staff with relevant expertise, professional and educational qualifications as soon as practicable, when suitable candidates are identified to assist in supervising the operation of the Target Group. In addition, the China Vanguard Directors will also closely monitor the operation and the business environment of the Target Group and implement appropriate internal control policies on the Target Group where appropriate.

Board representation of China Vanguard

China Vanguard has no intention to substantially change its board composition upon Completion, save for possible engagement of additional director(s) when appropriate candidates are identified, to assist in supervising the Business of the Target Group, and to strengthen overall expertise of the China Vanguard Board. The Guarantor, his associates or their respective representatives will not be appointed as a director or the chief executive of China Vanguard upon Completion.

LETTER FROM THE CHINA VANGUARD BOARD

REASONS FOR THE ACQUISITION AND THE DISPOSAL

China Vanguard Group is principally engaged in (i) development and operation of technology platforms for intellectual property (“ IP ”) protection, collection of copyright (royalty/license) fees on behalf of IP owners and the provision of value-added services in the entertainment sector in the PRC; (ii) lottery-related businesses in the PRC; (iii) distribution of natural supplementary products and food related and other operations; and (iv) trading business.

Aptus Group is currently principally engaged in the trading and distribution of edible oil and mineral materials.

As the population of Hong Kong has been increasing, there is a growing need for the storage space for deceased cremated ashes and other ancestral properties. As indicated in the Aptus’ announcement dated 30 October 2009, supply of storage space of personal properties of ancestors in Hong Kong remains limited in recent years. The Acquisition, if materialised, represents an opportunity for China Vanguard to tap into the business of providing spaces for storage of deceased cremated ashes and other ancestral properties through the Enlarged Aptus Group. In view of the growing demand for such businesses in Hong Kong, the China Vanguard Directors believe that the Acquisition would significantly benefit China Vanguard in the diversification of its business, income and asset base.

With respect to the fairness and reasonableness of the Acquisition, the China Vanguard Directors have taken into account of the following factors, including (i) the aforesaid prospect of the business of providing spaces for storage of deceased cremated ashes and other ancestral properties is positive given the growing demand and shortage of supply in Hong Kong; (ii) the loss position for China Vanguard during the two financial years ended 30 June 2009; (iii) the Acquisition represents an opportunity for China Vanguard to tap into the Business; and (iv) the Acquisition will benefit China Vanguard in the diversification of its business, income and asset base. Based on the foregoing, the China Vanguard Directors (including the independent non-executive China Vanguard Directors) believe that the Acquisition would further enhance the growth of the China Vanguard Group and will enhance returns to the China Vanguard Shareholders. Taking into account the benefits of the Acquisition, the China Vanguard Board is of the view that the terms of the Acquisition are fair and reasonable and the Acquisition is in the interests of China Vanguard and the China Vanguard Shareholders as a whole.

Although Aptus will cease to be an indirect non wholly-owned subsidiary of China Vanguard upon the conversion of all the Convertible Bonds by the Bondholders, the China Vanguard Directors have also considered that Aptus has been recording a loss during the two financial years ended 30 June 2009, and the Disposal represents an opportunity for China Vanguard to tap into the Business of providing spaces for storage of deceased cremated ashes and other ancestral properties with good potential through trading off a certain extent of the shareholding of Aptus. Upon Completion and as a result of the Disposal, there would not be a change in control of China Vanguard Board. Based on the foregoing, the China Vanguard Board considers that the Disposal is also fair and reasonable to China Vanguard and in the interests of the China Vanguard Shareholders as a whole.

Based on Aptus’ annual report for the financial year ended 30 June 2009, the net loss before and after taxation from continuing operation of Aptus for the financial year ended 30 June 2008 were approximately HK$53,048,000 and HK$53,051,000 respectively and the net loss before and after taxation from continuing operation of Aptus for the financial year ended 30 June 2009 were both approximately HK$41,835,000. Aptus recorded net liabilities of approximately HK$17,711,000 and approximately HK$86,729,000 as at 30 June 2008 and 30 June 2009 respectively.

LETTER FROM THE CHINA VANGUARD BOARD

Assuming full conversion of the Convertible Bonds into the Conversion Shares at the Initial Conversion Price, the equity interest of China Vanguard in Aptus, before the completion of Third Placing, will be diluted by 21.13 percentage points, from 33.95% to 12.82%, while after the completion of the Third Placing, the equity interest of China Vanguard in Aptus will be diluted by 12.68 percentage points, from 20.38% to 7.70% and in the event that China Vanguard shall no longer has control of the Aptus Board, Aptus will cease to be an indirect non wholly-owned subsidiary of China Vanguard and will then be treated as an available-for-sale financial asset. In that case, China Vanguard is expected to record a loss on deemed disposal of approximately HK$6,152,000 (after Completion of Acquisition and then the deconsolidation of accounts of Aptus at the same time) based on the net assets of Aptus of approximately HK$57,878,000 as at 31 October 2009.

China Vanguard, via 49%-owned joint venture company China Culture Development Digital Technology Co., Ltd. (“ CCDDT ”), its jointly controlled entities and its subsidiaries (together “ CCDDT Group ”) is in the business of development and operation of technology platforms for IP protection, collection of copyright fees on behalf of IP owners and provision of value added services in karaoke venues throughout the PRC. CCDDT Group has already established operations in 30 provinces and direct jurisdiction cities in the PRC and has commenced copyright fee collection in over 20 of these provinces. CCDDT Group intends to continue its nationwide rollout of the karaoke content management service system (“ Karaoke CMS ”) and provision of copyright fee collection services to all provinces and direct jurisdiction cities in the PRC and to commence copyright fee collection in all of these provinces. Further to this, CCDDT Group intends to rollout value added services in karaoke venues such as advertising and sales of lottery tickets.

China Vanguard’s current lottery related business in the PRC is carried out via 51%-owned Shenzhen Bozone IT Co., Ltd (“ Bozone ”). Bozone and its subsidiaries provides equipment and/or services to the Welfare Lottery Centres in Shenzhen, Heolongjiang and Zhejiang. Equipment and services include software development for large scale computer lottery sales systems, integration of network systems, network security solutions, lottery operation solutions and services and research and development into the supply of computer lottery terminals. Bozone plans to geographically expand its client base as well as increase the quality and range of the suites of services which it supplies to existing and future clients. Meanwhile, as mentioned above, China Vanguard will also look to expand into lottery ticket sales in karaoke venues.

Through wholly-owned non-listed subsidiaries, China Vanguard distributes various food products in Hong Kong under the brand name B&B. Currently, the products can be found on the shelves of various major supermarkets and department stores in Hong Kong.

At this point in time, China Vanguard has not entered into any discussions for disposal of the above businesses.

Regarding Aptus’ existing operations of edible oil and mineral materials trading, at this point in time, Aptus intends to (i) short term: continually reassess the market conditions for the trading of edible oil and to make profitable trades when possible with a target to re-achieve previous levels of revenue and gross profit; and (ii) longer term: Aptus is confident that the global economy will eventually recover and that commodity and currency volatility will decline, providing a kinder backdrop for edible oil trading and mineral materials trading operations of the Aptus Group. Once a stabler trading environment is established, Aptus will look to expand these operations. At this point in time, management of Aptus has not entered into any discussions for disposal of this trading business.

LETTER FROM THE CHINA VANGUARD BOARD

FINANCIAL EFFECTS

1. Net asset

As stated in Appendix II to this joint circular, the audited consolidated net assets of China Vanguard as at 31 October 2009 was approximately HK$2,162,522,000.

As set out in the Appendix V to this joint circular, assuming Completion had taken place, the pro forma total assets and total liabilities of the Enlarged China Vanguard Group would have been approximately HK$2,395,528,000 and HK$271,060,000 respectively, therefore the pro forma net assets of the Enlarged China Vanguard Group would have been approximately HK$2,124,468,000. Therefore, the Acquisition will slightly reduce the China Vanguard Group’s net assets.

2. Working capital

As stated in Appendix II to this joint circular, the audited consolidated net current assets of China Vanguard as at 31 October 2009 was approximately HK$101,739,000.

As set out in the Appendix V to this joint circular, assuming Completion had taken place, the pro forma net current assets of the Enlarged China Vanguard Group would have been approximately HK$43,890,000. Therefore, the Acquisition will reduce the China Vanguard Group’s net current assets.

3. Earnings

As stated in Appendix II of this joint circular, the audited consolidated net profit for the four months ended 31 October 2009 was approximately HK$8,961,000.

As set out in the Appendix V to this joint circular, assuming Completion had taken place, the pro forma net loss of the Enlarged China Vanguard Group would have been approximately HK$159,784,000. Therefore, the Acquisition will reduce the China Vanguard Group’s earnings.

RISK FACTORS

Principal risk factors which may be faced by the Enlarged China Vanguard Group relating to the Business are as follows:

1. Investments in new business

The Acquisition represents an investment by China Vanguard in a new business sector (i.e. the Business) which may pose significant challenges to China Vanguard’ administrative, financial and operational resources. Although the new business brought about by completion of the Acquisition is relatively simple and straightforward, the lack of relevant experience in the new business sector means that there is no assurances that China Vanguard will be able to deliver the return on investment within the scheduled timeline. If the new Business is not commercially successful, the business, financial condition and operating results of the Enlarged China Vanguard Group could be adversely and materially affected.

LETTER FROM THE CHINA VANGUARD BOARD

2. Short operating history of the Target Group

3. Disputes with the minority shareholder of the land and buildings

The Target Group currently holds 90% interest in 43 parcels of land together with the buildings erected thereon. The minority shareholder, Fuk Hing Lane Development Company Limited, may have economic or business interests or goals that are not in line with those of the Enlarged Aptus Group and may act in its own interest rather than that of the Enlarged Aptus Group. There is no assurance that the best interests and business philosophy of the Enlarged Aptus Group will always be shared by this minority shareholder, which could lead to dispute with members of the Enlarged Aptus Group and distract the attention of the management of the Enlarged Aptus Group from the management of its business (including the Business), and in such event, the prospects, operation and financial performance of the Enlarged China Vanguard Group could be materially and adversely affected.

4. Uncertainty of public acceptance of the Enlarged China Vanguard Group’s services in respect of the Business

The success and commercialisation of the Business for the provision and sale of storage space for cremated ashes of deceased and other ancestral properties of the Enlarged Aptus Group depend on the degree and extent of public acceptance of the kind of storage services provided by the Enlarged China Vanguard Group. There is no assurance that the public will readily and continuously accept the storage and related services provided by the Target Group respecting the Business and that the Enlarged Aptus Group will be successful in implementing all or any of the business plans respecting the Business in accordance with the intended terms and time frame. Even if the Enlarged Aptus Group is successful in implementing the business plans respecting the Business as planned, there is no assurance that sufficient sales will be generated and/or maintained to achieve the desirable performance. In any or all of these events, the business prospect and financial performance of the Enlarged China Vanguard Group may be materially and adversely affected.

5. Changes in law, regulations and policies

There is no specific laws and regulations in Hong Kong governing the operation of private columbaria or the use of the Owned Properties for the storage space of deceased cremated ashes

LETTER FROM THE CHINA VANGUARD BOARD

and other ancestral properties apart from the Government Leases requirements respecting the Owned Properties regarding use of the lands granted thereunder and the indirect applications (where applicable) of certain Ordinances of Hong Kong including but not limited to the Town Planning Ordinance (Chapter 131 of the Laws of Hong Kong), the Public Health and Municipal Services Ordinance (Chapter 132 of the Laws of Hong Kong), the Buildings Ordinance (Chapter 123 of the Laws of Hong Kong) and regulations made thereunder respectively. In the event that the Government of Hong Kong should consider reviewing its current policy and introduce new laws, regulations and policies that regulate the operation of private columbaria and/or the use of lands as columbaria, the operation, prospect and financial performance of the Enlarged China Vanguard Group may be materially and adversely affected.

6. Title of the Owned Properties

The Owned Properties of the Target Group to be used for the Business are located in the New Territories. The land tenure system in the New Territories is not as simple and straightforward as that of the urban areas of Hong Kong. The complexity of land tenure in the New Territories coupled with the uncertainties over Chinese customs and customary rights, disputes over rights of way, easements, encroachment of land and other title issues have from time to time led to disputes over titles of New Territories lands. Every reasonable effort has caused to be made by Aptus to verify the title of the Owned Properties through its legal advisers and counsels and certain title issue which may impact on title to the Owned Properties have been identified. These existing or future disputes and/or challenges by third parties could materially adversely affect the revenue and profitability of the Business could be materially adversely affected, substantial cost and expenses could be incurred in resolving and/or defending such disputes and challenges and the business, operation and financial performance of the China Vanguard Group would be materially and adversely affected.

7. Use of Owned Properties for the Business

LETTER FROM THE CHINA VANGUARD BOARD

circular. Despite the obtaining of the legal advices, the legality of use of the Owned Properties for the Business is not certain in the absence of direct judicial authorities on the interpretation of the relevant legislations and subsidiary regulations made thereunder and of the Government Leases and/ or the applicable land title documents (including Government Notifications) respecting the Owned Properties on their use as private columbaria. The use of the Owned Properties for the Business may or may not be a breach of the relevant legislations and subsidiary regulations made thereunder, the Government Leases and/or the applicable land title documents (including Government Notifications) affecting the Owned Properties is a grey area. There is no assurance that the use of the relevant legislations and subsidiary regulations made thereunder, the Owned Properties for the Business and/ or the operation of the Business on or at the Owned Properties or in the buildings erected thereon do not constitute a breach of the relevant legislations and subsidiary regulations made thereunder, the Government Leases and/or the applicable land title documents (including Government Notifications) affecting the Owned Properties. In the event that the said use and/or operation does constitute a breach, the Government of Hong Kong could, among others, exercise its right to enter the Owned Properties affected, the Enlarged Aptus Group will then have to cease using the Owned Properties for the Business and could then be facing possible claims by those who have already bought columbarium niches of the Enlarged Aptus Group for breach of contract including but not limited to claims for refund of the fees paid for purchase of the columbarium niches and for damages and the revenue and profitability of the Enlarged China Vanguard Group could be adversely and materially affected, substantial cost and expenses could be incurred in resolving and/or defending any actions, proceedings or proposed actions or proceedings in respect of such breach(es) and the business, operation and financial performance of the Enlarged China Vanguard Group would be adversely affected.

There is no assurance that the Enlarged Aptus Group will be granted by the relevant government authorities with all requisite consents, licences, approvals or (as the case may be, waivers) (if any) which must be obtained for the use of the Owned Properties for the operation of the Business (including but not limited to those (if applicable) that may be required under the terms of the Government Leases of the Owned Properties for use of the lands and buildings erected thereon for offensive trade, conversion of agricultural and garden land for building purposes other than for agricultural and garden uses, construction of buildings and/or land use zoning). In the event that the Business cannot be commenced (or is forced to be suspended) until the obtaining of such requisite consents, licences, approvals or (as the case may be, waivers) (if any), the prospects, operations and financial performance of the Enlarged China Vanguard Group will materially adversely be affected.

In view of the above risks, the Vendor and the Guarantor have, under the S&P Agreement (as supplemented by the Supplemental Agreement), granted to the Purchaser the Put Option with its principal terms and conditions more particularly set out in the paragraph headed “The Put Option” in the letter from the Aptus Board. In essence, in the event of happening of any or all of the Put Option Events in the Put Option Period, the Vendor and/or the Guarantor will have to purchase the Sale Share from the Purchaser at a consideration equal to the Consideration (subject to set-off as mentioned in that paragraph) upon exercise by the Purchaser of the Put Option in the Put Option Period. Please refer to the said paragraph for further details of the principal terms and conditions of the Put Option.

LETTER FROM THE CHINA VANGUARD BOARD

GEM LISTING RULES IMPLICATIONS

The Acquisition constitutes a very substantial acquisition on the part of China Vanguard pursuant to Rule 19.06(5) of the GEM Listing Rules. Accordingly, the Acquisition is subject to, among other things the approval of the China Vanguard Shareholders at the China Vanguard EGM. The Disposal constitutes a very substantial disposal of China Vanguard under Rule 19.06(4) of the GEM Listing Rules which is subject to China Vanguard Shareholders’ approval at China Vanguard EGM to be convened. As no China Vanguard Shareholder has a material interest in the Acquisition and the Disposal which is different from the other China Vanguard Shareholders, no China Vanguard Shareholders will be required to abstain from voting on the proposed resolution to approve the Acquisition and the Disposal at the China Vanguard EGM to be convened.

Since the Purchaser has the discretion to exercise the Put Option to require the Vendor and the Guarantor (or any of them) to purchase the Sale Share, and in accordance with Rule 19.75 of the GEM Listing Rules, only the premium (i.e. HK$10, being the price paid by Aptus to each of the Vendor and the Guarantor in acquiring the Put Option) will be taken into consideration for the purpose of classification of notifiable transactions. The grant of the Put Option to the Purchaser does not constitute a notifiable transaction for Aptus under Chapter 19 of the GEM Listing Rules as none of the relevant percentage ratios are more than 5%. On exercise of the Put Option, the exercise price, the value of the underlying assets and the profits and revenue attributable to such assets will be used for the purpose of the calculation of the relevant percentage ratios under the GEM Listing Rules. China Vanguard will comply with the relevant GEM Listing Rules requirements upon the exercise of the Put Option by the Purchaser.

As set out in the paragraph headed “The Put Option” under the section headed “Letter from the Aptus Board” above, the actual monetary value of the Put Option price (subject to set-off as mentioned in the said paragraph) has been determined as at the Latest Practicable Date in accordance with the Supplemental Agreement. Pursuant to Rule 19.76(2) of the GEM Listing Rules, if the actual monetary value of the total consideration payable upon exercise and all other relevant information are known and disclosed to the shareholders at the time where shareholders’ approval of the entering into the option is obtained and there has been no change in any relevant facts at the time of exercise, such approval will be sufficient for satisfying the shareholders’ approval requirement of the Chapter 19 of the GEM Listing Rules. Accordingly, an ordinary resolution in respect of the grant and the exercise of the Put Option and all transactions contemplated thereunder will be proposed at the China Vanguard EGM for approval by the China Vanguard Shareholders under Chapter 19 of the GEM Listing Rules. However, should there be any change in relevant facts of the Put Option at the time of exercise of the Put Option by the Purchaser or should the Vendor or the Guarantor becomes a connected person of China Vanguard at the time of the exercise of the Put Option by the Purchaser, China Vanguard will be required to compute the percentage ratios at the time of exercise of the Put Option pursuant to Rule 20.70(2) of the GEM Listing Rules, irrespective of whether China Vanguard has sought approval from shareholders at the time of entering into the Put Option. Depending on the result of the relevant percentage ratios, China Vanguard may be required to comply with the announcement, reporting and shareholders’ approval requirements (or independent shareholders’ approval requirements if either the Vendor or the Guarantor or both shall become a connected person of China Vanguard at the time of exercise of the Put Option by the Purchaser) at the time of the exercise of the Put Option.

LETTER FROM THE CHINA VANGUARD BOARD

CHINA VANGUARD EGM

The China Vanguard EGM will be held at 10:30 a.m. on Friday, 7 May 2010 at Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, for the purpose of considering, and if thought fit, approving the S&P Agreement (as supplemented by the Supplemental Agreement) and the transactions contemplated thereunder, the granting of the Put Option and the Disposal.

A notice convening the China Vanguard EGM is set out on pages CVEGM-1 to CVEGM-3 of this joint circular. A form of proxy for use thereat is also enclosed. Whether or not you are able to attend the China Vanguard EGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the China Vanguard’s share registrar in Hong Kong, Tricor Standard Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the China Vanguard EGM or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the China Vanguard EGM or any adjourned meeting (as the case may be) or upon the poll concerned should you so wish. In such event, the instrument appointing a proxy shall be deemed to be revoked.

To the best knowledge of the China Vanguard Directors, none of the Vendor, the Guarantor and their respective associates holds any China Vanguard Shares as at the Latest Practicable Date.

VOTING AT CHINA VANGUARD EGM

The Acquisition and the transactions contemplated, the granting of the Put Option and the Disposal are subject to, among other things, the approval by the China Vanguard Shareholders at the China Vanguard EGM to be taken by way of a poll.

RECOMMENDATION

Having considered the factors and reasons set out in the paragraph headed “Reasons for the Acquisition and the Disposal” of this letter from the China Vanguard Board, the China Vanguard Directors consider that the terms of the S&P Agreement (as supplemented by the Supplemental Agreement) and the transaction contemplated thereunder, the granting of the Put Option and the Disposal are fair and reasonable to China Vanguard and in the interests of the China Vanguard Shareholders as a whole. Accordingly, the China Vanguard Directors recommend the China Vanguard Shareholders to vote in favour of the relevant resolutions to be proposed at the China Vanguard EGM.

ADDITIONAL INFORMATION

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

By Order of the Board of China Vanguard Group Limited 眾彩科技股份有限公司* Chan Siu Sarah

Director

for identification purpose only

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

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==> picture [122 x 43] intentionally omitted <==

22 April 2010

The Directors Aptus Holdings Limited Room 2201, 22/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong

Dear Sirs,

INTRODUCTION

We set out below our report on the financial information (the “Financial Information”) of Aptus Holdings Limited (the “Company”) and its subsidiaries (together, the “Aptus Group”) set out in Appendix I below, for inclusion in the circular of the Company dated 22 April 2010 (the “Circular”) in connection with the very substantial acquisition regarding acquisition of the entire equity interests of Casdon Management Limited. The Acquisition constitutes a very substantial acquisition of the Company.

The Financial Information comprises the consolidated statement of financial position of the Aptus Group as at 30 June 2007, 2008, 2009 and 31 October 2009 and the consolidated income statement and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows of the Aptus Group for each of the years ended 30 June 2007, 2008, 2009 and for the four months ended 31 October 2009 (the “Relevant Periods”), and a summary of significant accounting policies and other explanatory notes.

The Company was incorporated in the Cayman Islands on 26 November 2001 as an exempted company with limited liability under the Companies Law of the Cayman Islands.

As at the date of this report, the Company has direct and indirect interests in the principal subsidiaries and jointly controlled entities as set out in notes 43 and 44 of Appendix I below respectively. The Company and its subsidiaries have adopted 30 June as their financial year end date. The audited financial statements of the Aptus Group for the three years ended 30 June 2007, 2008 and 2009 were audited by W.H. Tang & Partners CPA Limited.

BASIS OF PREPARATION

The Financial Information has been prepared by the directors of the Company based on the audited consolidated financial statements of the Aptus Group for each of the years ended 30 June 2007, 2008, 2009 and for the four months ended 31 October 2009 on the basis set out in note 3 below. The Financial Information has been prepared in accordance with Hong Kong Financial Reporting Standards (the “HKFRSs”), which also include Hong Kong Accounting Standards (“HKAS”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and accounting principles generally accepted in Hong Kong.

I – 1

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

DIRECTORS’ RESPONSIBILITY

The directors of the Company are responsible for the preparation and the true and fair presentation of the Financial Information in accordance with the HKFRSs. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of the Financial Information that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

REPORTING ACCOUNTANT’S RESPONSIBILITY

Our responsibility is to express an opinion on the Financial Information based on our audit. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the HKICPA and carried out such additional procedures as we considered necessary in accordance with the Auditing Guideline “Prospectuses and the Reporting Accountant” issued by the HKICPA. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the Financial Information is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Financial Information. The procedures selected depend on the reporting accountants’ judgment, including the assessment of the risks of material misstatement of the Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity’s preparation and true and fair presentation of the Financial Information in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors of the Company, as well as evaluating the overall presentation of the Financial Information.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the Financial Information for the Relevant Periods for the purpose of this report, gives a true and fair view of the state of the Aptus Group’s affairs as at 30 June 2007, 2008, 2009 and 31 October 2009 and of the Aptus Group’s results and cash flows for the Relevant Periods.

I – 2

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

COMPARATIVE FINANCIAL INFORMATION

Respective responsibilities of directors and reporting accountants

The directors of the Company are responsible for the preparation of the unaudited financial information of the Group including the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the four months ended 31 October 2008 (the “Comparative Unaudited Financial Information”), together with the notes thereto.

Our responsibility is to form a conclusion, based on our review, on the Comparative Unaudited Financial Information. For the purpose of this report, we conduct our review of the Comparative Unaudited Financial Information in accordance with the Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. The review consists principally of making enquiries of management and applying analytical procedures to the financial information and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. The review excludes audit procedures such as tests of controls and verification of assets and liabilities and transactions. It is substantially less in scope and provides a lower level of assurance than an audit. Accordingly, we do not express an opinion on the Comparative Unaudited Financial Information.

Review conclusion in respect of the 2008 comparative financial information

Based on our review, for the purpose of this report, nothing has come to our attention that causes us to believe that the Comparative Unaudited Financial Information is not prepared, in all material respects, in accordance with the accounting policies consistent with those used in the preparation of the Financial Information, which conform with the HKFRSs.

I – 3

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

1. FINANCIAL INFORMATION

The following is the Financial Information of the Aptus Group as at 30 June 2007, 2008, 2009 and 31 October 2009 and for each of the years ended 30 June 2007, 2008 and 2009 and for the period from 1 July 2009 to 31 October 2009, prepared on the basis set out in note 3 below.

Accordingly, no adjustment was made by the reporting accountants against the figures as shown in the published accounts.

Consolidated income statement

Notes Continuing operations Revenue 8 Cost of sales Gross profit Other revenue 8 Selling and distribution costs Administrative expenses Finance costs 9 Loss before taxation 10 Income tax expenses 13 Loss for the year/period from continuing operations Discontinued operations Profit (loss) for the year/period from discontinued operations 14 Profit (loss) for the year/period	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 57,655 39,562 18,292 (54,140) (39,309) (18,246) 3,515 253 46 310 50 14 (3,254) – – (86,810) (20,264) (4,911) (24,396) (33,087) (36,984) (110,635) (53,048) (41,835) (464) (3) – (111,099) (53,051) (41,835) – (4,036) (28,557) (111,099) (57,087) (70,392)	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 3,073 18,013 (3,065) (17,967) 8 46 – 5 – – (6,372) (1,741) (11,918) (12,607) (18,282) (14,297) – – (18,282) (14,297) 180,875 (3,413) 162,593 (17,710)	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 3,073 18,013 (3,065) (17,967) 8 46 – 5 – – (6,372) (1,741) (11,918) (12,607) (18,282) (14,297) – – (18,282) (14,297) 180,875 (3,413) 162,593 (17,710)
			46 5 – (1,741) (12,607)
			(14,297) –
			(14,297)
			(3,413)
			(17,710)

I – 4

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

Notes Attributable to: Equity holders of the Company Continuing operations Discontinued operations Non-controlling interests Continuing operations Discontinued operations Profit (loss) per share From continuing operations and discontinued operations Basic 17 Diluted From continuing operations Basic 17 Diluted	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 (110,764) (52,807) (41,657) – (4,036) (28,557) (110,764) (56,843) (70,214) (335) (244) (178) – – – (111,099) (57,087) (70,392) (HK6.61 cents) (HK3.33 cents) (HK3.99 cents) N/A N/A N/A (HK6.61 cents) (HK3.09 cents) (HK2.37 cents) N/A N/A N/A	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) (18,201) (14,241) 180,875 (3,413) 162,674 (17,654) (81) (56) – – 162,593 (17,710) HK9.19 cents (HK1.00 cent) HK7.95 cents N/A (HK1.03 cents) (HK0.81 cent) N/A N/A	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) (18,201) (14,241) 180,875 (3,413) 162,674 (17,654) (81) (56) – – 162,593 (17,710) HK9.19 cents (HK1.00 cent) HK7.95 cents N/A (HK1.03 cents) (HK0.81 cent) N/A N/A
			(17,654)
			(56) –
			(17,710)

			(HK1.00 cent)

			N/A

			(HK0.81 cent)

			N/A

I – 5

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Consolidated statement of comprehensive income

Profit (loss) for the year/period Other comprehensive income for the year/period Exchange differences on translation of financial statements of overseas operations Continuing operations Discontinued operations Release of translation reserve due to disposal of jointly controlled entities Continuing operations Discontinued operations Total comprehensive income for the year/period Attributable to: Equity shareholders of the Company Continuing operations Discontinued operations Non-controlling interests Continuing operations Discontinued operations Total comprehensive income for the year/period	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 (111,099) (57,087) (70,392) 5,882 20,091 (481) – – – – – – – – – (105,217) (36,996) (70,873) (105,719) (37,699) (70,650) – – – (105,719) (37,699) (70,650) 502 703 (223) – – – 502 703 (223) (105,217) (36,996) (70,873)	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 162,593 (17,710) 61 (760) – – – – (19,990) – 142,664 (18,470) (18,158) (18,342) 160,885 – 142,727 (18,342) (63) (128) – – (63) (128) 142,664 (18,470)	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 162,593 (17,710) 61 (760) – – – – (19,990) – 142,664 (18,470) (18,158) (18,342) 160,885 – 142,727 (18,342) (63) (128) – – (63) (128) 142,664 (18,470)
			(18,470)

			(18,342) –
			(18,342)
			(128) –
			(128)
			(18,470)

I – 6

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Consolidated statement of financial position

Notes Non-current assets Property, plant and equipment 18 Goodwill 19 Interest in an associate 20 Prepaid lease payments 21 Construction in progress 22 Current assets Inventories 23 Trade and other receivables and prepayments 24 Prepaid lease payments – current portion 21 Tax recoverable Bank balances and cash 25 Assets classified as held for sale 15 Current liabilities Trade payables, accrued liabilities and other payables 26 Tax liabilities Bank and other borrowings – due within one year 27 Convertible bonds 28 Liabilities associated with assets classified as held for sale 15 Net current assets Total assets less current liabilities	2007 HK$’000 183,140 81,215 – 12,496 14,004 290,855 2,133 37,180 380 – 49,110 88,803 – 88,803 19,792 688 2,125 – 22,605 – 22,605 66,198 357,053	At 30 June 2008 HK$’000 218,006 81,215 1,889 15,502 6,912 323,524 4,306 38,995 452 680 40,629 85,062 – 85,062 26,378 – 11,344 – 37,722 – 37,722 47,340 370,864	At 31 October 2009 2009 HK$’000 HK$’000 45 29 – – – – – – – – 45 29 – – 34,995 437,256 – – 1 – 1,990 3,178 36,986 440,434 350,193 – 387,179 440,434 10,739 13,692 – 16,654 36,145 37,976 – 314,263 46,884 382,585 123,825 – 170,709 382,585 216,470 57,849 216,515 57,878	At 31 October 2009 2009 HK$’000 HK$’000 45 29 – – – – – – – – 45 29 – – 34,995 437,256 – – 1 – 1,990 3,178 36,986 440,434 350,193 – 387,179 440,434 10,739 13,692 – 16,654 36,145 37,976 – 314,263 46,884 382,585 123,825 – 170,709 382,585 216,470 57,849 216,515 57,878
				29
				– 437,256 – – 3,178
				440,434 –
				440,434
				13,692 16,654 37,976 314,263
				382,585 –
				382,585
				57,849
				57,878

I – 7

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

Notes Non-current liabilities Bank and other borrowings 27 Convertible bonds 28 Net assets (liabilities) Capital and reserves Share capital 29 Reserves 30 Equity attributable to equity holders of the Company Non-controlling interests Total equity	2007 HK$’000 106,105 243,144 349,249 7,804 16,979 (24,487) (7,508) 15,312 7,804	At 30 June 2008 HK$’000 114,251 274,324 388,575 (17,711) 17,444 (50,433) (32,989) 15,278 (17,711)	At 31 October 2009 2009 HK$’000 HK$’000 – – 303,244 – 303,244 – (86,729) 57,878 17,628 17,815 (119,412) 25,071 (101,784) 42,886 15,055 14,992 (86,729) 57,878	At 31 October 2009 2009 HK$’000 HK$’000 – – 303,244 – 303,244 – (86,729) 57,878 17,628 17,815 (119,412) 25,071 (101,784) 42,886 15,055 14,992 (86,729) 57,878
				–
				57,878

				17,815 25,071
				42,886 14,992
				57,878

I – 8

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Statement of financial position of the Company

Notes Non-current assets Property, plant and equipment 18 Interests in subsidiaries 43 Investment in jointly controlled entities 44 Current assets Trade and other receivables and prepayments 24 Bank balances and cash 25 Current liabilities Trade payables, accrued liabilities and other payables 26 Tax liabilities Convertible bonds 28 Bank and other borrowings 27 Net current assets (liabilities) Total assets less current liabilities Non-current liabilities Bank and other borrowings 27 Convertible bonds 28 Net assets (liabilities) Capital and reserves Share capital 29 Reserves 30 Total equity	2007 HK$’000 33 50,748 210,277 261,058 96 1,288 1,384 3,410 – – – 3,410 (2,026) 259,032 19,357 243,144 262,501 (3,469) 16,979 (20,448) (3,469)	At 30 June 2008 HK$’000 21 50,819 210,277 261,117 209 1,499 1,708 4,890 – – 11,344 16,234 (14,526) 246,591 16,500 274,324 290,824 (44,233) 17,444 (61,677) (44,233)	At 31 October 2009 2009 HK$’000 HK$’000 9 5 51,377 51,609 210,277 – 261,663 51,614 475 403,348 602 1,822 1,077 405,170 7,451 11,071 – 16,663 – 314,263 36,145 37,976 43,596 379,973 (42,519) 25,197 219,144 76,811 – – 303,244 – 303,244 – (84,100) 76,811 17,628 17,815 (101,728) 58,996 (84,100) 76,811	At 31 October 2009 2009 HK$’000 HK$’000 9 5 51,377 51,609 210,277 – 261,663 51,614 475 403,348 602 1,822 1,077 405,170 7,451 11,071 – 16,663 – 314,263 36,145 37,976 43,596 379,973 (42,519) 25,197 219,144 76,811 – – 303,244 – 303,244 – (84,100) 76,811 17,628 17,815 (101,728) 58,996 (84,100) 76,811
				51,614
				403,348 1,822
				405,170
				11,071 16,663 314,263 37,976
				379,973
				25,197
				76,811
				– –
				–
				76,811

				17,815 58,996
				76,811

I – 9

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

Consolidated statement of changes in equity

Share capital HK$’000 At 1 July 2006 16,681 Shares issued on exercise of options 298 Recognition of equity-settled share based payment – Acquisition of jointlly controlled entities – Recognition of equity components of convertible bonds – Total comprehensive income for the year – At 30 June 2007 and 1 July 2007 16,979 Shares issued on exercise of options 465 Released on deemed disposal of a subsidiary – Release of share option reserve – Recognition of equity-settled share based payment – Total comprehensive income for the year – At 30 June 2008 and 1 July 2008 17,444 Discontinued operations – Shares issued on exercise of options 184 Total comprehensive income for the year – At 30 June 2009 and 1 July 2009 17,628 Shares issued on exercise of options 187 Release of convertible bond reserve – Total comprehensive income for the period – At 31 October 2009 17,815 For four months ended 31 October 2008 (Unaudited) At 1 July 2008 17,444 Shares issued on exercise of options 150 Total comprehensive income for the period – At 31 October 2008 17,594	Convertible Share bonds premium reserve HK$’000 HK$’000 88,096 – 2,864 – – – – – – 10,712 – – 90,960 10,712 4,091 – – – – – – – – – 95,051 10,712 – – 1,671 – – – 96,722 10,712 1,756 – – (10,712) – – 98,478 – 95,051 10,712 1,359 – – – 96,410 10,712	Share option reserve HK$’000 23,207 – 54,913 – – – 78,120 – – (85,794) 7,674 – – – – – – – – – – – – – –	Translation reserve HK$’000 339 – – – – 5,045 5,384 – (12) – – 19,144 24,516 (19,990) – (436) 4,090 – – 43 4,133 24,516 – (688) 23,828	Retained profits/ Capital (Accumulated Discontinued reserve losses) operations HK$’000 HK$’000 HK$’000 15,826 (114,725) – – – – – – – – – – – – – – (110,764) – 15,826 (225,489) – – – – – – – – 85,794 – – – – – (56,843) – 15,826 (196,538) – – – 19,990 – – – – (70,214) – 15,826 (266,752) 19,990 – – – – 10,712 – – 162,674 (19,990) 15,826 (93,366) – 15,826 (196,538) – – – – – (17,654) – 15,826 (214,192) –	Total HK$’000 29,424 3,162 54,913 – 10,712 (105,719) (7,508) 4,556 (12) – 7,674 (37,699) (32,989) – 1,855 (70,650) (101,784) 1,943 – 142,727 42,886 (32,989) 1,509 (18,342) (49,822)	Non- controlling interests HK$’000 14,073 – – 737 – 502 15,312 – (737) – – 703 15,278 – – (223) 15,055 – – (63) 14,992 15,278 – (128) 15,150	Total HK$’000 43,497 3,162 54,913 737 10,712 (105,217)
							7,804 4,556 (749) – 7,674 (36,996)
							(17,711) – 1,855 (70,873)
							(86,729) 1,943 – 142,664
							57,878

							(17,711) 1,509 (18,470)
							(34,672)

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Consolidated statement of cash flows

Notes OPERATING ACTIVITIES Profit (loss) before income tax Continuing operations Discontinued operations Adjustments for: Interest income Interest expenses Depreciation of property, plant and equipment Allowances for doubtful receivable Loss on disposal of property, plant and equipment Impairment loss on goodwill Loss on disposal of an associate Amortization of prepaid lease payments Gain on disposal of jointly controlled entities Loss on deemed disposal of a subsidiary held by a jointly controlled entity Share option expenses Share of results of an associate Reversal of allowances recognized in respect of doubtful receivable Operating cash flows before movements in working capital Decrease (increase) in inventories Decrease (increase) in trade and other receivables and prepayments (Decrease) increase in trade and other payables Cash from (used in) operations Tax refund (paid) NET CASH FROM (USED IN) OPERATING ACTIVITIES	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 (110,635) (53,048) (41,835) – (4,451) (27,072) (110,635) (57,499) (68,907) (598) (707) (611) 24,396 37,485 42,438 4,211 17,719 19,765 – 856 – 65 – 3 – – 31,761 – – 7 152 461 466 – – – – 7 – 54,913 7,674 – – 40 (124) – – (100) (27,496) 6,036 24,698 1,798 (2,318) 2,591 9,154 (2,746) (5,640) (8,378) 5,726 (4,761) (24,922) 6,698 16,888 (1,364) (1,071) 554 (26,286) 5,627 17,442	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) (18,282) (14,297) 197,694 (3,413) 179,412 (17,710) – (388) 12,933 14,579 16 6,670 – – – – – – – – – 157 (197,907) – – – – – – (116) – – (5,546) 3,192 – 1,189 944 (315) 5,238 7,385 636 11,451 – (986) 636 10,465	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) (18,282) (14,297) 197,694 (3,413) 179,412 (17,710) – (388) 12,933 14,579 16 6,670 – – – – – – – – – 157 (197,907) – – – – – – (116) – – (5,546) 3,192 – 1,189 944 (315) 5,238 7,385 636 11,451 – (986) 636 10,465
			(17,710) (388) 14,579 6,670 – – – – 157 – – – (116) –
			3,192 1,189 (315) 7,385
			11,451 (986)
			10,465

I – 11

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

Notes INVESTING ACTIVITIES Interest received Purchases of property, plant and equipment Purchases of construction in progress Cash consideration on acquisition of jointly controlled entities Cash outflow from disposal of jointly controlled entities 32 Proceeds from disposal of an associate Deemed disposal of a subsidiary held by a jointly controlled entity 32 Purchases of prepaid lease payments NET CASH USED IN INVESTING ACTIVITIES FINANCING ACTIVITIES Interest paid Issue of shares Net (repayments) raising of borrowings Proceeds from issue of convertible bonds NET CASH FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR/PERIOD Effect of foreign exchange rate changes CASH AND CASH EQUIVALENTS AT END OF THE YEAR/PERIOD, represented by Bank balances and cash Cash and cash equivalents included in assets held for sale	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 598 707 611 (1,650) (10,666) (6,988) (5,871) (17,249) (22,994) (120,902) – – – – – – – 2,006 – (208) – (99) (2,191) (316) (127,924) (29,607) (27,681) (2,908) (5,223) (10,882) 3,162 4,556 1,855 (38,532) 7,879 19,685 234,000 – – 195,722 7,212 10,658 41,512 (16,768) 419 3,360 49,110 40,629 4,238 8,287 (198) 49,110 40,629 40,850 49,110 40,629 1,990 – – 38,860 49,110 40,629 40,850	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) – 388 – (2,392) – (11,619) – – (39,297) – – – – – – (79) (39,297) (13,702) (1,015) (1,975) 1,943 1,509 – 2,383 – – 928 1,917 (37,733) (1,320) 40,850 40,629 61 1,503 3,178 40,812 3,178 40,812 – – 3,178 40,812	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) – 388 – (2,392) – (11,619) – – (39,297) – – – – – – (79) (39,297) (13,702) (1,015) (1,975) 1,943 1,509 – 2,383 – – 928 1,917 (37,733) (1,320) 40,850 40,629 61 1,503 3,178 40,812 3,178 40,812 – – 3,178 40,812
			(13,702)
			(1,975) 1,509 2,383 –
			1,917
			(1,320)
			40,629 1,503
			40,812

			40,812 –
			40,812

I – 12

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

1. GENERAL INFORMATION

The Company was incorporated in the Cayman Islands as an exempted company with limited liability and its shares are listed on the Growth Enterprise Market (the “GEM”) of 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 the Corporate Information of the Annual Report.

The consolidated financial information is presented in Hong Kong dollars which is the same as the functional currency of the Company.

The principal activities of the Company is investment holding. The activities of its principal subsidiaries and jointly controlled entities are set out in notes 43 and 44 respectively.

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

The HKICPA has issued a number of new and revised HKFRSs, which are effective for accounting periods beginning on or after 1 July 2007, 2008 and 2009. The Company has early adopted these new and revised HKFRSs except for those listed below in preparing the financial statements for the years ended 30 June 2007, 2008, 2009 and for the period ended 31 October 2009. The adoption of these new and revised HKFRSs did not have any significant impact on its results of operations and financial position.

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these Financial Information.

HKFRS 9 Financial Instrument[1] HKAS 24 (Revised) Related Party Disclosures[2] HK (IFRIC)–Int 19 Extinguishing Financial Liabilities with Equity Instruments[3]

Apart from the above, the HKICPA has also issued Improvements to HKFRSs^ which sets out amendments to a number of HKFRSs primarily with a view to reviewing inconsistencies and clarify wording.

1 Effective for annual periods beginning on or after 1 January 2010
2 Effective for annual periods beginning on or after 1 January 2011
3 Effective for annual periods beginning on or after 1 July 2010
^ Improvements to HKFRSs issued in May 2009, contain amendments to HKFRS 2, HKFRS 5, HKFRS 8, HKAS 1, HKAS 7, HKAS 17, HKAS 18, HKAS 36, HKAS 38, HKAS 39, HK(IFRIC)-Int 9 and HK(IFRIC)Int 16. These amendments are effective for annual periods beginning on or after 1 January 2010 although there are separate transitional provisions for each standard.

The Company is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application and it has concluded that the adoption of these new and revised HKFRSs are unlikely to have a significant impact on the Group’s results of operations and financial position.

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

3. SIGNIFICANT ACCOUNTING POLICIES

These financial information have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”), which 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”), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. These financial information also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”). A summary of the significant accounting policies adopted by the Group is set out below.

Basis of preparation of the financial information

The consolidated financial information for the Relevant Periods comprise the Company, its subsidiaries, its jointly controlled entities and the Group’s interest in associates.

The measurement basis used in the preparation of the financial information is the historical cost basis except that the financial instruments are stated at their fair value as explained in the accounting polices set out below.

Assets of disposal group classified as held for sale is stated at lower of carrying amount and fair value less costs to sell.

The preparation of financial information in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

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

Judgements made by management in the application of HKFRSs that have a significant effect on the financial information and estimates with a significant risk of material adjustment in the next year are discussed in note 4.

Subsidiaries and non-controlling interests

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from their activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

An investment in a subsidiary is consolidated into the consolidated financial information from the date that control commences until the date that control ceases. Intra-group balances and transactions and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial information. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

Non-controlling interests represent the portion of the net assets of subsidiaries attributable to interests that are not owned by the Company, whether directly or indirectly through subsidiaries, and in respect of which the Group has not agreed any additional terms with the shareholders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. Noncontrolling interests are presented in the consolidated statement of financial position within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated income statement as an allocation of the total profit or loss for the year between non-controlling interests and the equity shareholders of the Company.

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Where losses applicable to the minority exceed the minority’s interests in the equity of a subsidiary, the excess, and any further losses attributable to the minority, are charged against the Group’s interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. If the subsidiary subsequently reports profits, the Group’s interest is allocated all such profits until the minority’s share of losses previously absorbed by the Group has been recovered.

In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less any impairment losses.

Associates

An associate is an entity in which the Group or Company has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.

An investment in an associate is accounted for in the consolidated financial information under the equity method and is initially recorded at cost and adjusted thereafter for the post acquisition change in the Group’s share of the associate’s net assets. The consolidated income statement includes the Group’s share of post acquisition, posttax results of the associates for the year, including any impairment loss on goodwill relating to the investment in associates recognised for the year.

When the Group’s share of losses exceeds its interest in the associate, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. For this purpose, the Group’s interest in the associate is the carrying amount of the investment under the equity method together with the Group’s long-term interests that in substance form part of the Group’s net investment in the associate.

Unrealised profits and losses resulting from transactions between the Group and its associate are eliminated to the extent of the Group’s interest in the associate, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in income statement.

Goodwill

Goodwill represents the excess of the cost of a business combination or an investment in an associate over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities.

Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment. In respect of associates, the carrying amount of goodwill is included in the carrying amount of the interest in the associate.

Any excess of the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of a business combination or an investment in an associate is recognised immediately in profit or loss.

On disposal of a cash-generating unit or an associate during the year, any attributable amount of purchased goodwill is included in the calculation of the profit or loss on disposal.

Non-current assets held for sale and discontinued operation

(a) Non-current assets (or assets of 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. A disposal group is a group of assets to be disposed of together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction.

I – 15

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Immediately before classification as held for sale, the measurement of the non-current assets (and all individual assets and liabilities in a disposal group) is brought up-to-date in accordance with the accounting policies before the reclassification. Then, on initial classification as held for sale and until disposal, the non-current assets (except for certain assets and explained below), or disposal groups, are recognized at the lower of their carrying amount and fair value less costs to sell. The principal exceptions to this measurement policy so far as the financial statements of the Group and the Company are concerned are deferred tax assets and financial assets (other than in vestments in subsidiaries). These assets, even if held for sale, would continue to be measured in accordance with the policies set out elsewhere in note 3.

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.

(b) Discontinued operation

A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which represents a separate major line of business or geographical area of operations, or a part of single coordinated plan to dispose of a separate major line of business or geographical area of operation, or is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale (as referred to in (a) above), if earlier. It also occurs when the operations is abandoned.

Where an operation is classified as discontinued, a single amount is presented on the face on the income statement, which comprises:

the post-tax profit or loss of the discontinued operations; and
the post-tax gain or loss recognized on the measurement to fair value less costs to sell, or on the disposal, of the assets or disposal group(s) constituting the discontinued operation.

Business combinations

The acquisition of business is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under Hong Kong Financial Reporting Standard (“HKFRS”) 3 “Business Combinations” are recognized at their fair values at the acquisition date, except for non-current assets (disposal groups) that are classified as held for sale in accordance with HKFRS 5 Non-Current Assets Held for Sale and Discontinued Operations, which are recognized and measured at fair value less costs to sell.

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

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

I – 16

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Interests in jointly controlled entities

Joint venture arrangements that involve the establishment of a separated entity in which venturers have joint control over the economic activity of the entity are referred to as jointly controlled entities.

The Group recognizes its interests in jointly controlled entities using proportionate consolidation. The Group’s share of each of the assets, liabilities, income and expenses of the jointly controlled entities are combined with the Group’s similar line items, line by line, in the consolidated financial statements.

Any goodwill arising on the acquisition of the Group’s interest in a jointly controlled entity is accounted for in accordance with the Group’s accounting policy for goodwill arising on the acquisition of a business.

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

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

Revenue recognition

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

Revenue from sales of gas and gas appliances are recognized when goods are delivered and title has passed.

Gas transportation revenue and gas connection fee income are recognized when the corresponding services are performed.

Sales of goods are recognized when goods are delivered and title has been passed.

Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Property, plant and equipment

Property, plant and equipment, comprising leasehold buildings, furniture and fixtures, office equipment, motor vehicles, computer equipment, gas distribution network, gas storage equipment and other equipment are stated at cost less accumulated depreciation and any identified impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the property, plant and equipment to its working condition and location for its intended use. Expenditure incurred after property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the income statement in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the property, plant and equipment, the expenditure is capitalized as an additional cost of that property plant and equipment.

I – 17

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Property, plant and equipment are depreciated at rates sufficient to write off their cost less accumulated impairment losses over their estimated useful lives on a straight-line basis. The principal annual rates are as follows:

Leasehold buildings 3%-5% Furniture and fixtures 20% Office equipment 7%-25% Computer equipment 20%-25% Motor vehicles 6%-14% Gas distribution network 5%-10% Gas storage equipment 5%-31% Other equipment 8%-19%

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued used 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 derecognized.

Construction in progress

Construction in progress represents property, plant and equipment in the course of construction for production or for its own use purposes. Construction in progress is carried at cost less any recognized impairment loss. Construction in progress is classified to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Inventories

Inventories, including construction materials, gas and gas appliances for sales are stated at the lower of cost and net realizable value. Cost, which comprises all costs of purchase and, where applicable other costs that has been incurred in bringing the inventories to their present location and condition, is calculated using the weighted average method. Net realizable value represents the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

Leasing

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

The Group as lessor

Rental income from operating lease is recognized in the consolidated income statement on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized as an expenses on a straight-line basis over the lease term.

The Group as lessee

Rentals payable under operating leases are charged to profit and loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognized as reduction of rental expense over the lease term on a straight-line basis.

Leasehold land and building

Land and building elements of a lease of land and building are considered separately for the purposes of lease classification, leasehold land which title is not expected to pass to the lessee by the end of the lease term is classified as an operating lease unless the lease payments cannot be allocated reliably between the land and building elements, in which case, the entire lease is classified as a finance lease and accounted for as property, plant and equipment.

I – 18

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Impairment losses on assets other than goodwill

At the end of the reporting period, 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 the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognized as an expense immediately, unless the relevant asset is carried at a revalued amount under another standard, in which case the impairment loss is treated as a revaluation decrease under that standard. An asset’s recoverable amount is calculated as the higher of the asset’s value in use or its net selling price.

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

Financial instruments

Financial assets and financial liabilities are recognized on the statement of financial position when a group entity becomes a party to the contractual provisions of the instruments. 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 “FVTPL”) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into loans and receivables. All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

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

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

Loans and receivables

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

I – 19

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Impairment of financial assets

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

For loans and receivables, 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-organization.

For accounts receivables that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include Group’s past experience of collecting payments and observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortized cost, an impairment loss is recognized 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.

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

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

Financial liabilities and equity

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

An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. The Group’s financial liabilities are generally classified into financial liabilities at fair value through profit and loss and other financial liabilities.

Effective interest method

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

Interest expense is recognized on an effective interest basis.

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Financial liabilities

Financial liabilities including trade payables, accrued liabilities and other payables, and bank and other borrowings are subsequently measured at amortized cost, using the effective interest rate method.

Convertible bonds

Convertible bonds that contains liability component and conversion option components

Convertible bonds issued by the Group that contain both the liability and conversion option components are classified separately into respective items on initial recognition. Conversion option will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company own equity instruments is classified as an equity instrument.

On initial recognition, the fair value of the liability component is determined using the prevailing market interest rate of similar non-convertible debts. The difference between the proceeds of the issue of the convertible bonds and the fair value assigned to the liability component, representing the conversion option for the holder to convert the bonds into equity, is included in equity (equity component of convertible bonds).

In subsequent periods, the liability component of the convertible bonds is carried at amortized cost using the effective interest method. The equity component, represented by the option to convert the liability component into ordinary shares of the Company, will remain in convertible bonds reserve until the conversion option is exercised (in which case the balance stated in convertible bonds reserve will be transferred to premium). Where the option remains unexercised at the expiry date, the balance stated in convertible bonds reserve will be released to the retained earnings. No gain or loss is recognized in profit or loss upon conversion or expiration of the option.

Transaction costs that related to the issue of the convertible bonds are allocated to the liability and equity components in proportion to the allocation of the proceeds. Transaction costs relating to the equity component are charged directly to equity. Transaction costs relating to the liability component are included in the carrying amount of the liability portion and amortized over that the period of the convertible bonds using the effective interest method.

Equity instruments

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

Derecognition

Financial assets are derecognized 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 the cumulative gain or loss that had been recognized directly in equity is recognized in profit or loss.

Financial liabilities are derecognized from the Group’s consolidated statement of financial position when the obligation specified in the relevant contract is discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid or payable is recognized in profit or loss.

Taxation

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

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

I – 21

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

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

Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries, associates and interests in jointly controlled entities, 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.

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

Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset is realized. Deferred tax is charged or credited in the 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.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At each end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the end of the reporting period. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognized in profit or loss in the period in which they arise, except for exchange differences arising on a monetary item that forms part of the Group’s net investment in a foreign operation, in which case, such exchange differences are recognized in equity in the consolidated financial statements. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognized directly in equity, in which cases, the exchange differences are also recognized directly in equity.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s entities are translated into the presentation currency of the Group (i.e. Hong Kong dollars) at the rate of exchange prevailing at the end of the reporting period, 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 recognized as a separate component of equity (the exchange translation reserve). Such exchange differences are recognized in profit or loss in the period in which the foreign operation is disposed of.

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

I – 22

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Cash and cash equivalents

Cash and cash equivalents are carried in the consolidated statement of financial position at cost.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

For the purpose of the consolidated statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

Provisions

A provision is recognized when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation. When the effect of discounting is material, the amount recognized for a provision is the present value at the end of the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the income statement.

Employee benefits

(a) Retirement benefits schemes

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance for those employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the income statement as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme.

The employees of the Group’s subsidiary that operated in the People’s Republic of China and Singapore are required to participate in a central pension scheme operated by the local municipal government and Central Provident Fund Scheme, respectively. These subsidiaries are required to contribute pension, based on a certain percentage of their payroll costs, to the pension schemes. The contributions are charged to income statement as they become payable in accordance with the rules of the pension schemes.

(b) Share option schemes

The Company operates share option schemes for the purpose of providing incentives and rewards to eligible participant who, in the sole discretion of the Board, have contributed or may contribute to the Group. Upon the exercise of share options, the resulting shares issued are recorded by the Company as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded by the Company in the share premium account. Options which are cancelled prior to their exercise date, or which lapse, are deleted from the register of outstanding options.

(c) Share award scheme

The Group also grants employees and consultants (but not directors) shares of the Company at nil consideration under its share award scheme. Under the share award scheme, the awarded shares are newly issued at par value. The fair value of the employees’ and consultants’ services received in exchange for the grant of shares newly issued is recognized as staff costs in the income statement with a corresponding increase in an employee share based compensation reserve under equity.

I – 23

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Retirement benefit costs

Payments to mandatory provident fund scheme (“MPF scheme”) and state-managed retirement benefits scheme and the defined contribution schemes are charged as expense as they fall due.

Operating segments

Operating segments are reported in a manner consistent with the internal management reporting provided to the chief operating decision-markers. Segment assets consist primarily of fixed assets, financial assets and other assets. The Group evaluates performance on the basis of profit or loss from operations after tax expense but not including the major non-cash items. The major non-cash items are fair value changes on investment properties together with their respective deferred tax expenses. No inter segment turnover is accounted for.

Dividends

Dividends proposed or declared after the end of the reporting period is not recognized as a liability at the end of the reporting period.

Equity-settled share-based payment transactions

Share options granted to directors, employees or other eligible participants of the Company

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

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

Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of that asset. Capitalization of such borrowing costs ceases when the assets are substantially ready for their intended use or sale.

All other borrowing costs are charged to the income statement in the year in which they are incurred.

Related parties

A party is considered to be related to the Group if:

(i) directly, or indirectly through one or more intermediaries, the party:
controls, is controlled by, or is under common control with, the Company or Group;
has an interest in the Company that gives it significant influence over the Company or Group; or
has joint control over the Company or Group;
(ii) the party is an associate;
(iii) the party is a jointly-controlled entity;
(iv) the party is a member of the key management personnel of the Company or its parent;
(v) the party is a close member of the family of any individual referred to in (i) or (iv);

I – 24

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

(vi) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or
(vii) the party is a post-employment benefit plan for the benefit of employees of the Company or Group, or of any entity that is a related party of the Company or Group.

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the process of applying the Group’s accounting policies, which are described in note 3, management has made the following judgments that have significant effect on the amounts recognized in the financial statements. The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are also discussed below:

Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives, after taking into account of their estimated residual value. The determination of the useful lives and residual values involve management’s estimation. The Group assesses annually the residual value and the useful life of the property, plant and equipment and if the expectation differs from the original estimate, such a difference may impact the depreciation in the year and the estimate will be changed in the future period.

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. Where the actual cash flows are less than expected, a material impairment loss may arise. As at 31 October 2009, the carrying amount of goodwill is approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$81,215,000 and 30 June 2007: HK$81,215,000) and impairment loss of approximately HK$Nil (30 June 2009: HK$31,761,000, 30 June 2008: HK$Nil and 30 June 2007: HK$Nil) was recognized in the consolidated income statement. Details of the impairment test on goodwill are disclosed in note 19.

Income tax

As at 31 October 2009, no deferred tax asset was recognized in the Group’s consolidated statement of financial position in relation to the estimated unused tax losses of approximately HK$5,969,000 (30 June 2009: HK$5,969,000, 30 June 2008: HK$20,632,000 and 30 June 2007: HK$11,804,000) due to the unpredictability of future profit streams. The realisability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available in the future. In cases where the actual future profits generated are more than expected, a material recognition of deferred tax asset may arise, which would be recognized in the income statement for the period in which such recognition takes place.

Share option expenses

The share option expense is subject to the limitations of the Black-Scholes option pricing model and the uncertainty in estimates used by management in the assumptions. The estimates include limited early exercise behavior, expected interval and frequency of open exercise periods in the share option life, and other relevant parameters of the share option model (see note 31 for the estimates).

The number of options to be vested at the end of vesting period involves management estimation. Should the number of options being vested at the end of vesting period be changed, there would be material changes in the amount of share option benefits recognized in the consolidated income statement and share option reserve.

I – 25

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Estimated allowance of accounts receivables

The Group makes allowance of accounts receivables based on an assessment of the recoverability of receivables. Allowance is applied to accounts receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of allowance requires the use of judgment and estimates. Where the expectation on the recoverability of accounts receivables is different from the original estimate, such difference will impact the carrying value of accounts receivables and doubtful debt expenses in the periods in which such estimate has been changed.

5. FINANCIAL INSTRUMENTS

Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximizing the return to shareholders through the optimization of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings and convertible bonds disclosed in notes 27 and 28 respectively, and equity attributable to equity holders of the Company, comprising issued share capital disclosed in note 29, reserves and retained profits as disclosed in consolidated statements of changes in equity. The management reviews the capital structure by considering the cost of capital and the risks associated with each class of capital. In view of this, the Group will balance its overall capital structure through the payment of dividends, new share issues as well as the issue of new debt or the redemption of existing debt. The Group’s overall strategy remains unchanged throughout the year.

Categories of financial instruments

The Group

Financial assets Available-for-sales financial asset Held-for-trading investments Loans and receivables (including cash and cash equivalents) Derivative financial assets Financial liabilities Amortized costs Derivative financial liabilities	2007 HK$’000 – – 86,290 – 2007 HK$’000 371,166 –	At 30 June 2008 HK$’000 – – 79,624 – At 30 June 2008 HK$’000 426,297 –	2009 HK$’000 – – 36,985 – 2009 HK$’000 350,128 –	At 31 October 2009 HK$’000 – – 440,434 –

				At 31 October 2009 HK$’000 365,931 –

I – 26

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

The Company

Financial assets Available-for-sales financial assets Held-for-trading investments Loans and receivables (including cash and cash equivalents) Derivative financial assets Financial liabilities Amortized costs Derivative financial liabilities	2007 HK$’000 – – 1,384 – 2007 HK$’000 265,911 –	At 30 June 2008 HK$’000 – – 1,708 – At 30 June 2008 HK$’000 307,058 –	2009 HK$’000 – – 1,077 – 2009 HK$’000 346,840 –	At 31 October 2009 HK$’000 – – 405,170 –

				At 31 October 2009 HK$’000 363,310 –

6. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s major financial instruments include trade and other receivables and prepayments, trade payables, accrued liabilities and other payables, bank and other borrowings and convertible bonds. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Credit risk

The Group’s credit risk is primarily attributable to its trade and other receivables and bank balances. At the respective end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties arising from the carrying amount of the respective recognized financial assets stated in the consolidated statement of financial position.

In order to minimize the credit risk, the management of the Group has delegated a team responsible 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 end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

The credit risk on liquid funds is limited because the counterparties are authorized banks in Hong Kong and the PRC.

Foreign currency risk

The Group collects most of its revenue in Renminbi “RMB” and incurs most of its expenditure including capital expenditure in RMB. Future exchange rates of RMB could vary significantly from the current or historical exchange rates as a result of controls that could be imposed by the PRC government. The exchange rates may also be affected by economic developments and political changes domestically and internationally, and supply and demand of RMB. The appreciation or devaluation of RMB against foreign currencies may have positive or negative impact on the results of operations of the Group.

I – 27

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

As at the end of the reporting period, the Group has convertible bonds, certain bank balances and bank and other borrowings denominated in Singaporean dollars (“SGD”), Hong Kong dollars (“HKD”), Renminbi (“RMB”) and United States dollars (“USD”), which are the currencies other than the functional currency of respective group entities. The carrying amounts of the Group’s foreign currency denominates monetary assets and liabilities are as follows:

				Assets				Liabilities
					At				At
		At	30 June		31 October		At 30 June		31 October
	2007		2008	2009	2009	2007	2008	2009	2009
	HK$’000		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
RMB	295,568		323,854	335,306	437,759	105,690	118,781	126,991	2,977
SGD	262		180	200	1,335	243	17	18	364
HKD	82,648		82,977	50,577	1,369	265,911	307,058	346,839	379,244
USD	1,180		1,575	1,141	–	10	441	105	–

The Group currently does not have a foreign currency hedging policy. However, management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arises. The directors considered that the Group’s exposure to foreign currency exchange risk is insignificant as the majority of the Group’s transactions are denominated in the functional currency of the respective group entities.

The Group uses a 5% sensitivity rate to report foreign currency risk internally to key management personnel and represents management’s assessment of the reasonable possible change in foreign exchange rates. If RMB had strengthened/weakened by 5%, loss for the period ended 31 October 2009 would have been increased/decreased by approximately HK$14,000 (30 June 2009: increased/decreased by approximately HK$112,000, 30 June 2008: decreased/increased by approximately HK$166,000 and 30 June 2007: decreased/increased by approximately HK$236,000) as a result of foreign exchange losses/gains on translation of transactions denominated in RMB.

Certain financial assets and liabilities of the Group are denominated in USD. However, the exchange rate of USD against HKD is relatively stable, accordingly, no sensitivity analysis has been presented on the currency risk.

In addition, certain financial assets and liabilities of the Group are denominated in SGD. In the opinion of the management, no sensitivity analysis has been presented on the currency risk because the amount involved is insignificant.

Interest rate risk

The Group’s interest rate risk arises from bank and other borrowings and convertible bonds. Borrowings obtained at variable rates expose the Group to cash flow interest rate risk. Borrowings at fixed rates expose the Group to fair value interest rate risk. Details of the Group’s bank and other borrowings are set out in note 27.

The Group is also exposed to fair value interest rate risk in relation to convertible bonds. It is the Group’s policy to keep its borrowings at fixed rate so as to minimize the cash flow interest rate risk.

Sensitivity analysis

At 31 October 2009, it is estimated that a general increase or decrease of 100 basis points in interest rates with all other variable held constant, would decrease/increase the Group’s profit by approximately HK$90,000 (30 June 2009: decrease/increase HK$361,000, 30 June 2008: increase/decrease HK$278,000 and 30 June 2007: increase/ decrease HK$194,000). The above sensitivity analysis has been determined assuming that the change in interest rates had occurred at the end of the reporting period and had been applied to the exposure to interest rate risk for financial instrument in existence at that date. The 100 basis points increase or decrease represents management’s assessment of a reasonably possible change in interest rates over the period until the next annual end of the reporting period. The analysis was performed on the same basis for the Relevant Periods.

I – 28

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

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. The Group’s policy is to regularly monitor its liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.

The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay:

For period ended 31 October 2009

Trade payables, accrued liabilities and other payables Bank and other borrowings Convertible bonds For year ended 30 June 2009 Trade payables, accrued liabilities and other payables Bank and other borrowings Convertible bonds For year ended 30 June 2008 Trade payables, accrued liabilities and other payables Bank and other borrowings Convertible bonds	Carrying amounts HK$’000 13,692 37,976 314,263 365,931 Carrying amounts HK$’000 10,739 36,145 303,244 350,128 Carrying amounts HK$’000 26,378 125,595 274,324 426,297	Total contractual undiscounted cash flows HK$’000 13,692 37,976 352,180 403,848 Total contractual undiscounted cash flows HK$’000 10,739 37,853 345,501 394,093 Total contractual undiscounted cash flows HK$’000 26,378 142,356 351,351 520,085	Within 1 year or on demands HK$’000 13,692 37,976 352,180 403,848 Within 1 year or on demands HK$’000 10,739 37,853 – 48,592 Within 1 year or on demands HK$’000 26,378 11,344 – 37,722	More than 1 year but less than 2 years HK$’000 – – – – More than 1 year but less than 2 years HK$’000 – – – – More than 1 year but less than 2 years HK$’000 – 71,165 – 71,165	More than 2 years but less than 5 years HK$’000 – – – – More than 2 years but less than 5 years HK$’000 – – 345,501 345,501 More than 2 years but less than 5 years HK$’000 – 42,473 351,351 393,824	Over 5 years HK$’000 – – –
						–

						Over 5 years HK$’000 – – –
						–

						Over 5 years HK$’000 – 17,374 –
						17,374

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

For year ended 30 June 2007

Trade payables, accrued liabilities and other payables Bank and other borrowings Convertible bonds	Carrying amounts HK$’000 19,792 108,230 243,144 371,166	Total contractual undiscounted cash flows HK$’000 19,792 113,641 364,716 498,149	Within 1 year or on demands HK$’000 19,792 2,231 – 22,023	More than 1 year but less than 2 years HK$’000 – 29,433 – 29,433	More than 2 years but less than 5 years HK$’000 – 66,472 364,716 431,188	Over 5 years HK$’000 – 15,505 –
						15,505

Fair values

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

the fair value of financial assets and financial liabilities (including derivative instruments) with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices and ask prices respectively; and
the fair value of other financial assets and financial liabilities (including derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices or rates from observable and/or unobservable input. For an option based derivative, the fair value is estimated using option pricing model.

In the opinion of the directors, all financial instruments are carried at amounts not materially different from their fair values as at the end of each Relevant Periods.

7. SEGMENT INFORMATION

The Group has adopted HKFRS 8 Operating Segments. HKFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operation decision maker in order to allocate resources to the segment and to assess its performance. In contrast, the predecessor standard (HKAS 14 Segment Reporting) required an entity to identify two sets of segments (business and geographical), using a risks and rewards approach, with the entity’s system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments. In the past, the Group’s primary reporting format was business segments. The application of HKFRS 8 has resulted in a redesignation of the Group’s reportable segments as compared with the primary reportable segments determined in accordance with HKAS 14, but has no effect on the results for the Relevant Periods.

For the year ended 30 June 2007

Continuing operations

(a) Distribution of edible oil
(b) Profit sharing on oil field
(c) Gas related

I – 30

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

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

Distribution of edible oil HK$’000 Revenue (from external customers) 42,912 Operating profit (loss) 123 Finance costs (27) Proft (loss) before income tax 96 Income tax expenses – Profit (loss) for the year 96 Capital expenditure – Depreciation – Amortization – Other non-cash expenses –	Profit sharing on oil field HK$’000 – (1,187) – (1,187) – (1,187) – – – –	Gas related HK$’000 14,743 (1,922) (1,934) (3,856) (464) (4,320) 1,650 4,194 152 –	All other segments HK$’000 – (83,253) (22,435) (105,688) – (105,688) – 17 – 74,769	Total group HK$’000 57,655

				(86,239) (24,396)
				(110,635) (464)
				(111,099)

				1,650

				4,211

				152

				74,769

The following is an analysis of the Group’s assets and liabilities by operating segment:

Distribution of edible oil HK$’000 Segment assets 1,442 Segment liabilities 531 Convertible bonds – 531	Profit sharing on oil field HK$’000 30,419 1,233 – 1,233	Gas related HK$’000 265,122 104,709 – 104,709	All other segments HK$’000 82,675 22,237 243,144 265,381	Total group HK$’000 379,658

				128,710 243,144
				371,854

The following is an analysis of the Group’s information about the geographical location of:

(i) the Group’s revenue from external customers

(ii) the Group’s property, plant and equipment, intangible assets, goodwill and other non-current assets (“Specific non-current assets”)

The geographical location of customers is based on the location at which the services were provided or the goods delivered. The geographical location of the specific non-current assets is based on the physical location of the asset, in the case of property, plant and equipment, the location to which they are allocated, in the case of intangible assets, goodwill and other non-current assets, the location of operations.

I – 31

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

Hong Kong PRC South East Asia Europe	Revenue from external customers HK$’000 – 14,743 42,232 680 57,655	Specified non-current assets HK$’000 81,250 209,605 – –
		290,855

For the year ended 30 June 2008 Continuing operations

(a) Distribution of edible oil

Discontinued operation

(a) Gas related
(b) Profit sharing on oil field

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

Continuing operations Discontinued operations Total Profit Total Distribution All other continuing sharing on Gas discontinued of edible oil segments operations oil field related operations HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Revenue (from external customers) 39,562 – 39,562 – 65,793 65,793 Operating profit (loss) (28) (19,933) (19,961) (840) 834 (6) Finance costs – (33,087) (33,087) – (4,398) (4,398) Share of results of an associate – – – – (40) (40) Loss on deemed disposal of a subsidiary – – – – (7) (7) Profit (loss) before income tax (28) (53,020) (53,048) (840) (3,611) (4,451) Income tax expenses – (3) (3) – 415 415 Loss for the year (28) (53,023) (53,051) (840) (3,196) (4,036) Capital expenditure – – – 2 12,837 12,839 Depreciation – 13 13 33 17,673 17,706 Amortization – – – – 461 461 Allowance for doubtful receivable – – – – 856 856 Other non-cash expenses – 38,854 38,854 – – –	Total group HK$’000 105,355

	(19,967) (37,485) (40) (7)
	(57,499) 412
	(57,087)

	12,839

	17,719

	461

	856

	38,854

I – 32

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

The following is an analysis of the Group’s assets and liabilities by operating segment:

Continuing operations Discontinued operations Total Profit Total Distribution All other continuing sharing on Gas discontinued of edible oil segments operations oil field related operations HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Segment assets 1,754 33,312 35,066 33,581 339,939 373,520 Segment liabilities 457 32,687 33,144 1,672 117,157 118,829 Convertible bonds – 274,324 274,324 – – – 457 307,011 307,468 1,672 117,157 118,829	Total group HK$’000 408,586

	151,973 274,324
	426,297

The following is an analysis of the Group’s information about the geographical location of:

(i) the Group’s revenue from external customers

(ii) the Group’s property, plant and equipment, intangible assets, goodwill and other non-current assets (“Specific non-current assets”)

Hong Kong PRC South East Asia For the year ended 30 June 2009 Continuing operations (a) Distribution of edible oil Discontinued operation	Revenue from external customers HK$’000 – 65,793 39,562 105,355	Specified non-current assets HK$’000 81,303 240,332 –
		321,635

(a) Gas related

(b) Profit sharing on oil field

I – 33

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

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

Continuing operations Discontinued operations Total Profit Total Distribution All other continuing sharing on Gas discontinued of edible oil segments operations oil field related operations HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Revenue (from external customers) 18,292 – 18,292 – 106,803 106,803 Operating profit (loss) 11 (4,862) (4,851) (412) (21,323) (21,735) Finance costs – (36,984) (36,984) – (5,454) (5,454) Share of results of an associate – – – – 124 124 Loss on disposal of an associate – – – – (7) (7) Profit (loss) before income tax 11 (41,846) (41,835) (412) (26,660) (27,072) Income tax expenses – – – – (1,485) (1,485) Profit (loss) for the year 11 (41,846) (41,835) (412) (28,145) (28,557) Capital expenditure – 7 7 – 33,996 33,996 Depreciation – 17 17 29 19,719 19,748 Amortization – – – – 466 466 Other non-cash expenses – 34,770 34,770 31,761 – 31,761	Total group HK$’000 125,095

	(26,586) (42,438) 124 (7)
	(68,907) (1,485)
	(70,392)

	34,003

	19,765

	466

	66,531

The following is an analysis of the Group’s assets and liabilities by operating segment:

Continuing operations Discontinued operations Total Profit Total Distribution All other continuing sharing on Gas discontinued of edible oil segments operations oil field related operations HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Segment assets 1,341 1,763 3,104 33,927 350,193 384,120 Segment liabilities 122 46,762 46,884 – 123,825 123,825 Convertible bonds – 303,244 303,244 – – – 122 350,006 350,128 – 123,825 123,825	Total group HK$’000 387,224

	170,709 303,244
	473,953

The following is an analysis of the Group’s information about the geographical location of:

(i) the Group’s revenue from external customers

(ii) the Group’s property, plant and equipment, intangible assets, goodwill and other non-current assets (“Specific non-current assets”)

I – 34

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

Hong Kong PRC South East Asia	Revenue from external customers HK$’000 – 106,803 18,292 125,095	Specified non-current assets HK$’000 9 36 –
		45

For the four months ended 31 October 2009

Continuing operations

(a) Trading of mineral materials and edible oil

Discontinued operation

(b) Gas related
(b) Profit sharing on oil field

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

Continuing operations Discontinued operations Trading of Total Profit Total mineral materials All other continuing sharing on Gas discontinued and edible oil segments operations oil field related operations HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Revenue (from external customers) 3,073 – 3,073 – 18,323 18,323 Operating profit (loss) 2 (6,366) (6,364) – 1,002 1,002 Finance costs – (11,918) (11,918) – (1,015) (1,015) Gain on disposal of jointly controlled entities – – – – 197,707 197,707 Profit (loss) before income tax 2 (18,284) (18,282) – 197,694 197,694 Income tax expenses – – – – (16,819) (16,819) Profit (loss) for the period 2 (18,284) (18,282) – 180,875 180,875 Capital expenditure – – – – – – Depreciation – 16 16 – 2,041 2,041 Amortization – – – – 64 64 Other non-cash expenses – 11,019 11,019 – – –	Total group HK$’000 21,396

	(5,362) (12,933) 197,707
	179,412 (16,819)
	162,593

	–

	2,057

	64

	11,019

I – 35

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

The following is an analysis of the Group’s assets and liabilities by operating segment:

Continuing operations Discontinued operations Total Profit Total Distribution All other continuing sharing on Gas discontinued of edible oil segments operations oil field related operations HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Segment assets 1,343 439,120 440,463 – – – Segment liabilities 62 68,260 68,322 – – – Convertible bonds – 314,263 314,263 – – – 62 382,523 382,585 – – –	Total group HK$’000 440,463

	68,322 314,263
	382,585

The following is an analysis of the Group’s information about the geographical location of:

(i) the Group’s revenue from external customers
(ii) the Group’s property, plant and equipment, intangible assets, goodwill and other non-current assets (“Specific non-current assets”)

Hong Kong PRC South East Asia For the four months ended 31 October 2008 (Unaudited)	Revenue from external customers HK$’000 – 18,323 3,073 21,396	Specified non-current assets HK$’000 5 24 –
		29

Continuing operations

(a) Distribution of edible oil

Discontinued operation

(c) Gas related
(b) Profit sharing on oil field

I – 36

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

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

Continuing operations Discontinued operations Total Profit Total Distribution All other continuing sharing on Gas discontinued of edible oil segments operations oil field related operations HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Revenue (from external customers) 18,013 – 18,013 – 27,953 27,953 Operating profit (loss) 69 (1,759) (1,690) (176) (1,389) (1,565) Finance costs – (12,607) (12,607) – (1,972) (1,972) Share of results of an associate – – – – 124 124 Proft (loss) before income tax 69 (14,366) (14,297) (176) (3,237) (3,413) Income tax expenses – – – – – – Profit (loss) for the period 69 (14,366) (14,297) (176) (3,237) (3,413) Capital expenditure – – – – 14,011 14,011 Depreciation – 4 4 12 6,654 6,666 Amortization – – – – 157 157 Other non-cash expenses – 11,938 11,938 – – –	Total group HK$’000 45,966

	(3,255) (14,579) 124
	(17,710) –
	(17,710)

	14,011

	6,670

	157

	11,938

The following is an analysis of the Group’s assets and liabilities by operating segment:

Continuing operations Discontinued operations Total Profit Total Distribution All other continuing sharing on Gas discontinued of edible oil segments operations oil field related operations HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Segment assets 1,401 1,029 2,430 33,620 346,437 380,057 Segment liabilities 137 35,392 35,529 – 121,137 121,137 Convertible bonds – 286,262 286,262 – – – 137 321,654 321,791 – 121,137 121,137	Total group HK$’000 382,487

	156,666 286,262
	442,928

I – 37

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

The following is an analysis of the Group’s information about the geographical location of:

(i) the Group’s revenue from external customers
(ii) the Group’s property, plant and equipment, intangible assets, goodwill and other non-current assets (“Specific non-current assets”)

Hong Kong PRC South East Asia	Revenue from external customers HK$’000 – 27,958 18,013 45,971	Specified non-current assets HK$’000 31,830 247,998 –
		279,828

8. REVENUE AND OTHER REVENUE

The principal activities of the Group are (i) trading of edible oil and mineral materials, (ii) holding profit sharing right of oil field, (iii) sales of gas and gas appliances, provision of gas transportation services and installation services for gas connected.

Revenue represents invoiced value of sales, net of returns, discounts allowed or sales taxes where applicable.

Revenue recognized for the Relevant Periods is as follows:

Continuing operations Revenue Sales of goods Gas transportation Installation income for gas connection Discontinued operations Revenue Sales of goods Gas transportation Installation income for gas connection	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 52,728 39,562 18,292 644 – – 4,283 – – 57,655 39,562 18,292 – 41,845 74,906 – 2,787 4,301 – 21,161 27,596 – 65,793 106,803	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 3,073 18,013 – – – – 3,073 18,013 14,986 19,472 747 1,304 2,590 7,177 18,323 27,953	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 3,073 18,013 – – – – 3,073 18,013 14,986 19,472 747 1,304 2,590 7,177 18,323 27,953
			18,013

			19,472 1,304 7,177
			27,953

I – 38

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Continuing operations Other revenue Interest income Sundry income Exchange losses, net Discontinued operations Other revenue Interest income Rental income Sundry income 9. FINANCE COSTS Continuing operations Interest on borrowings wholly repayable within five years Interest on borrowings wholly repayable after five years Interest on convertible bonds Discontinued operations Interest on borrowings wholly repayable within five years Interest on borrowings wholly repayable after five years	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 598 50 6 165 – 8 (453) – – 310 50 14 – 657 605 – 290 359 – 132 162 – 1,079 1,126 For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 2,606 1,907 2,214 1,934 – – 19,856 31,180 34,770 24,396 33,087 36,984 – 50 – – 4,348 5,454 – 4,398 5,454	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) – 5 – – – – – 5 – 383 – 80 23 135 23 598 For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 899 669 – – 11,019 11,938 11,918 12,607 – – 1,015 1,972 1,015 1,972	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) – 5 – – – – – 5 – 383 – 80 23 135 23 598 For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 899 669 – – 11,019 11,938 11,918 12,607 – – 1,015 1,972 1,015 1,972
			12,607

			– 1,972
			1,972

I – 39

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

10. LOSS BEFORE TAXATION

Continuing operations Loss before taxation has been arrived at after charging (crediting): Staff costs (excluding directors’ emoluments –Note 11) Wages and salaries Retirement benefits scheme contributions Total staff costs Auditors’ remuneration – Provided for the year – Underprovision in last year Amortization of prepaid lease payments Depreciation of property, plant and equipment Operating lease rentals in respect of land and building Cost of inventories recognized as expenses (Note) Loss on disposal of property, plant and equipment Share option expenses Net foreign exchange losses (gains), net	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 8,902 4,622 770 162 111 21 9,064 4,733 791 350 380 506 – – 86 152 – – 4,211 13 17 1,248 643 309 54,140 39,309 18,246 65 – – 54,913 7,674 – – 120 (63)	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 333 381 26 12 359 393 – – – – – – 16 4 91 117 3,065 17,967 – – – – (1) –	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 333 381 26 12 359 393 – – – – – – 16 4 91 117 3,065 17,967 – – – – (1) –
			393
			– – – 4 117 17,967 – – –

Note: For the four months ended 31 October 2009, cost of inventories of continuing operations included approximately of HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$Nil, 30 June 2007: HK$2,380,000 and 31 October 2008: HK$Nil) relating to depreciation expenses, which amount is also included in the respective total amounts disclosed separately above in note 10 for each of these types.

I – 40

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Discontinued operations Loss before taxation has been arrived at after charging (crediting): Staff costs (excluding directors’ emoluments –Note 11) Wages and salaries Retirement benefits scheme contributions Total staff costs Auditors’ remuneration – Provided for the year – Underprovision in last year Amortization of prepaid lease payments Depreciation of property, plant and equipment Operating lease rentals in respect of land and building Cost of inventories recognized as expenses_(Note)_ Loss on disposal of property, plant and equipment Allowance for doubtful receivable Impairment of goodwill Loss on disposal of an associate Share of results of an associate	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 – 5,217 6,818 – – – – 5,217 6,818 – 12 14 – – – – 461 466 – 17,706 19,748 – 421 101 – 47,660 80,729 – – 3 – 856 – – – 31,761 – – 7 – 40 (124)	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 942 2,081 – – 942 2,081 – 12 – – 64 157 2,041 6,666 12 67 17,018 22,524 – – – – – – – – – (116)

Note: For the four months ended 31 October 2009, cost of inventories of discontinued operations included approximately of HK$1,885,000 (30 June 2009: HK$14,990,000, 30 June 2008: HK$10,533,000, 30 June 2007: HK$Nil and 31 October 2008: HK$6,053,233) relating to depreciation expenses, which amount is also included in the respective total amounts disclosed separately above in note 10 for each of these types.

I – 41

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

11. DIRECTOR’S AND SENIOR MANAGEMENT’S EMOLUMENTS

(a) Directors’ emoluments

For the year ended 30 June 2007

Emoluments paid or payable to each of the six directors of the Company during the year were as follows:

Executive Directors: Cheung Kwai Lan Chan Ting Fung King Him, Daniel Independent Non-executive Directors: Tian He Nian Zhao Zhi Ming To Yan Ming, Edmond	Fees HK$’000 24 24 24 39 39 47 197	Salaries and other emoluments HK$’000 1,950 1,300 562 – – – 3,812	Contribution to retirement benefits scheme HK$’000 – 12 12 – – – 24	Total HK$’000 1,974 1,336 598 39 39 47
				4,033

For the year ended 30 June 2008

Emoluments paid or payable to each of the seven directors of the Company during the year were as follows:

Executive Directors: Cheung Kwai Lan Chan Ting Fung King Him, Daniel Independent Non-executive Directors: Tian He Nian Zhang Xiu Fu_(Note 1)_ Zhao Zhi Ming To Yan Ming, Edmond	Fees HK$’000 24 24 24 39 90 39 47 287	Salaries and other emoluments HK$’000 2,400 1,600 626 – – – – 4,626	Contribution to retirement benefits scheme HK$’000 – 9 12 – – – – 21	Total HK$’000 2,424 1,633 662 39 90 39 47
				4,934

Note 1: Appointed on 25 January 2008

Note 2: Mr. Zou Qi Jun was subsequently appointed as Independent Non-executive Director on 9 September 2008.

I – 42

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

For the year ended 30 June 2009

Emoluments paid or payable to each of the eight directors of the Company during the year were as follows:

Executive Directors: Cheung Kwai Lan Chan Ting Fung King Him, Daniel Independent Non-executive Directors: Tian He Nian Zou Qi Jun_(Note 1) Zhang Xiu Fu Zhao Zhi Ming(Note 2)_ To Yan Ming, Edmond	Fees HK$’000 24 24 24 78 63 120 78 47 458	Salaries and other emoluments HK$’000 – – 882 – – – – – 882	Contribution to retirement benefits scheme HK$’000 – 1 12 – – – – – 13	Total HK$’000 24 25 918 78 63 120 78 47
				1,353

Note 1: Mr. Zou Qi Jun was appointed as Independent Non-executive Director on 9 September 2008.

Note 2: Mr. Zhao Zhi Ming resigned on 30 June 2009.

For the four months ended 31 October 2009

Emoluments paid or payable to each of the seven directors of the Company during the period were as follows:

Executive Directors: Cheung Kwai Lan Chan Ting Fung King Him, Daniel Independent Non-executive Directors: Tian He Nian Zou Qi Jun Zhang Xiu Fu To Yan Ming, Edmond	Fees HK$’000 8 8 8 26 26 40 16 132	Salaries and other emoluments HK$’000 – – 480 – – – – 480	Contribution to retirement benefits scheme HK$’000 – 2 4 – – – – 6	Total HK$’000 8 10 492 26 26 40 16
				618

Note: Mr. Lam Wai Pong was subsequently appointed as Executive director on 8 January 2010.

I – 43

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

For the four months ended 31 October 2008 (unaudited)

Emoluments paid or payable to each of the eight directors of the Company during the period were as follows:

Executive Directors: Cheung Kwai Lan Chan Ting Fung king Him, Daniel Independent Non-executive Directors: Tian He Nian Zou Qi Jun_(Note)_ Zhang Xiu Fu Zhao Zhi Ming To Yan Ming, Edmond	Fees HK$’000 8 8 8 26 11 40 26 16 143	Salaries and other emoluments HK$’000 – – 261 – – – – – 261	Contribution to retirement benefits scheme HK$’000 – – 4 – – – – – 4	Total HK$’000 8 8 273 26 11 40 26 16
				408

Note: Mr. Zou Qi Jun was appointed as Independent Non-executive Director on 9 September 2008.

(b) Senior management emoluments

Of the five individuals whose emoluments were the highest of the Group for the Relevant Periods include 3 directors whose emoluments are set out in the above. The emoluments payables to the remaining 2 individuals during the Relevant Periods as follows:

Salaries, allowances and other benefits Contributions to retirement benefits scheme The emoluments fell with the following bands: Emoluments bands Nil – HK$1,000,000 HK$1,000,001 – HK$2,000,000 HK$2,000,001 – HK$3,000,000	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 4,069 2,146 746 24 19 20 4,093 2,165 766 For the year ended 30 June 2007 2008 2009 No. of No. of No. of individuals individuals individuals – 1 2 1 1 – 1 – –	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 612 982 10 12 622 994 For the four months ended 31 October 2009 2008 No. of No. of individuals individuals 2 2 – – – –

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

I – 44

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

12. STAFF COSTS (INCLUDING DIRECTOR’S EMOLUMENTS)

Continuing operations Wages and salaries Retirement benefits scheme contributions Discontinued operations Wages and salaries Retirement benefits scheme contributions INCOME TAX EXPENSES Continuing operations The charge comprises: Current year Hong Kong Profits Tax Other jurisdictions Income tax expenses charged for the year/period	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 12,911 9,535 2,110 186 132 34 13,097 9,667 2,144 For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 – 5,217 6,818 – – – – 5,217 6,818 For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 – – – 464 3 – 464 3 –	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 945 785 32 16 977 801 For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 942 2,081 – – 942 2,081 For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) – – – – – –	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 945 785 32 16 977 801 For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 942 2,081 – – 942 2,081 For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) – – – – – –
			–

13. INCOME TAX EXPENSES

I – 45

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Discontinued operations The charge comprises: Current year Hong Kong Profits Tax Other jurisdictions Over-provision in prior years Hong Kong Profits Tax Other jurisdictions Income tax expenses charged (credited) for the year/period	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 – – – – 1,953 1,485 – – – – (2,368) – – (415) 1,485	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) – – 16,819 – – – – – 16,819 –	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) – – 16,819 – – – – – 16,819 –
			– –
			–

No provision for Hong Kong Profits Tax has been made in the financial statements as the Group had no assessable profit derived in Hong Kong for the Relevant Periods.

Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions

Pursuant to the relevant laws and regulations in the PRC, certain PRC jointly controlled entities of the Company are exempted from PRC Enterprise Income Tax for the first two years commencing from their first profit making year of operation and thereafter, these PRC entities will be entitled to a 50% relief from PRC for the following three years (“Tax Preference”).

On 16 March 2007, the PRC promulgated the Law of the PRC on Enterprise Income Tax (the “New Law”) by Order No. 63 of the President of the PRC. On 6 December 2007, the State Council of the PRC issued Implementation Regulations of the New Law. The New Law and Implementation Regulations changes the PRC Enterprise Income Tax rate to 25% and will affect the PRC group entitles of the Company from 1 January 2008.

Entities that originally enjoy the Tax Preference can continue enjoying the Tax Preference based on the original tax rate until after the expiration of the Tax Preference. Entities that did not start Tax Preference before 2008 because they were still in loss position shall start the Tax Preference from 2008.

I – 46

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

The amount of income tax expenses charged (credit) to the consolidated income statement reconciled to the loss per consolidated income statement is as follows:

Profit (loss) before income tax: Continuing operations Discontinued operations Tax at the Hong Kong Profits Tax rate Tax effect of expenses that are not deductible for tax purposes Tax effect of income that is not taxable for tax purposes Tax effect of tax losses not recognized Effect of different tax rates of subsidiaries operating in other jurisdictions Tax effect of over-provision in prior years Income tax expenses (credit)	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 (110,635) (53,048) (41,835) – (4,451) (27,072) (110,635) (57,499) (68,907) (19,361) (10,062) (11,370) 18,559 6,812 12,129 (68) (1,659) (2) 2,112 7,356 3,162 (778) (491) (2,434) – (2,368) – 464 (412) 1,485	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) (18,282) (14,297) 197,694 (3,413) 179,412 (17,710) 29,603 (2,922) – 2,359 – – – 563 (12,784) – – – 16,819 –

At 31 October 2009, the Group has unused tax losses of approximately HK$5,969,000 (30 June 2009: HK$5,969,000, 30 June 2008: HK$20,632,000, 30 June 2007: HK$11,804,000 and 31 October 2008: HK$15,041,000) available for offset against future profits. No deferred tax asset has been recognized in respect of the unused tax losses due to the unpredictability of future profits streams.

Deductible temporary differences have not been recognized in these financial statements owing to the absence of objective evidence in respect of the availability of sufficient taxable profits that are expected to arise to offset against the deductible temporary differences. Included in unused estimated tax losses are losses of approximately HK$Nil (30 June 2009: HK$566,000, 30 June 2008: HK$15,229,000, 30 June 2007: HK$6,401,000 and 31 October 2008: HK$15,041,000) that will expire within 2 to 4 years from the year origination. Other losses may be carried forward indefinitely.

I – 47

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

The components of unrecognized deductible (taxable) temporary differences are as follows:

Deductible temporary differences: Unutilized tax losses Taxable temporary differences: Accelerated tax allowances	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 11,804 20,632 5,969 (4) (2) – 11,800 20,630 5,969	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 5,969 15,041 – – 5,969 15,041	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 5,969 15,041 – – 5,969 15,041
			15,041

14. DISCONTINUED OPERATIONS

For the year ended 30 June 2009

On 24 April 2009, the Group entered into agreements relating to the termination of the Profit Sharing Rights for return of monies provided to China Huayou Group Corporation and compensatory interest for an amount of approximately RMB39,856,000 (approximately HK$45,226,000) and the disposals by Aptus of the equity interest in Changde Joint Venture and Hunan Joint Venture for the consideration of RMB255,000,000 (approximately HK$289,350,000) and approximately RMB100,144,000 (approximately HK$113,634,000) respectively. Changde Joint Venture and Hunan Joint Venture together refer as a Disposal Group.

Details of the assets and liabilities disposed of are disclosed in note 15.

I – 48

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

An analysis of the combined result and combined cash flows of the discontinued operations of each year/period is as follows:

Profit (loss) for the year/period from discontinued operations Revenue and other revenue Expenses Gain on disposal of jointly controlled entities Profit (loss) before taxation Income tax expenses Profit (loss) for the year from discontinued operations Cash flows from discontinued operations Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities Net cash inflows (outflows)	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 – 66,872 107,929 – (71,323) (135,001) – – – – (4,451) (27,072) – 415 (1,485) – (4,036) (28,557) – 18,871 22,925 – (29,659) (27,686) – (5,009) 6,355 – (15,797) 1,594	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 18,346 28,551 (18,359) (31,964) 197,707 – 197,694 (3,413) (16,819) – 180,875 (3,413) 4,265 19,059 (1,009) (19,980) (2,818) 1,550 438 629	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 18,346 28,551 (18,359) (31,964) 197,707 – 197,694 (3,413) (16,819) – 180,875 (3,413) 4,265 19,059 (1,009) (19,980) (2,818) 1,550 438 629
			(3,413) –
			(3,413)

			19,059 (19,980) 1,550
			629

15. NON-CURRENT ASSETS HELD FOR SALE

For the year ended 30 June 2009

Assets related to the gas related business classified as held for sale Liabilities of the gas related business associated with assets classified as held for sale Net assets of the gas related business classified as held for sale Reserve of the gas related business classified as held for sale	2009 HK$’000 350,193
	123,825
	226,368

	19,990

I – 49

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

Note: The Group has entered into an agreement to dispose of its gas related business. The major classes of assets and liabilities comprising the operations classified as held for sale at the end of the reporting period are as follows:

Property, plant and equipment_(Note) Construction in progress Goodwill(Note 19) Prepaid lease payments Prepayments, deposits and other receivables Accounts receivables Inventories Bank balances and cash Assets related to the gas related business classified as held for sale Accounts payables Accrued liabilities and other payables Tax liabilities Bank and other borrowings(Note)_ Liabilities of the gas related business associated with assets classified as held fro sale Net assets of the gas related business classified as held for sale Reserve of the gas related business classified as held for sale	2009 HK$’000 231,819 2,877 49,454 15,775 8,513 1,181 1,714 38,860
	350,193
	4,713 8,900 1,503 108,709
	123,825
	226,368

	19,990

Note: The Disposal Group has pledged gas distribution network having a carrying amount of approximately HK$117,278,000 to secure bank borrowings granted to the Disposal Group. In addition, leasehold buildings included in property, plant and equipment are located in the People’s Republic of China and held under medium term lease.

Borrowings of approximately HK$15,105,000 is secured by corporate guarantee from a shareholder of a jointly controlled entity, interest charged at 2.55% per annum and has fixed repayment term.

Borrowing of approximately HK$59,907,000 is secured by gas network of a jointly controlled entity, interest charged at 5.508%-5.751% per annum and has fixed repayment term.

Borrowing of approximately HK$33,697,000 is unsecured, interest charged at 4.779%-5.67% per annum and has fixed repayment term.

16. DIVIDENDS

The directors of the Group did not recommend a payment of dividend for the Relevant Periods.

I – 50

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

17. PROFIT (LOSS) PER SHARE

From continuing and discontinued operations

The calculation of basic profit (loss) per share is based on the following data:

Profit (loss) for the purposes of basic loss per share Weighted average number of ordinary shares for the purpose of basic loss per share	For the year ended For the four months ended 30 June 31 October 2007 2008 2009 2009 2008 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (110,764) (56,843) (70,214) 162,674 (17,654) Number of shares ’000 ’000 ’000 ’000 ’000 1,676,490 1,706,834 1,760,441 1,770,713 1,757,846

For the year ended 30 June 2007, 2008 and 2009 and the four months ended 31 October 2008, no diluted loss per share has been presented, as the outstanding share options, warrants and convertible bonds of the Company are anti-dilutive since their exercise or concession would result in a decrease in profit (loss) per share. For the four months ended 31 October 2009, the diluted earning per share was HK7.95 cents based on the diluted profit of HK$173,694,000 and weighted average number of ordinary shares of 2,184,147,000 Shares.

From continuing operations

The calculation of the basic profit (loss) per share from continuing operations attributable to the ordinary equity shareholders of the parent is based on the following data:

For the year ended
30 June
2007
2008
2009
HK$’000
HK$’000
HK$’000
Profit (loss) for year/period
attributable to equity holders
of the parent
(110,764)
(56,843)
(70,214)
Less: Profit (loss) for the year/period
attributable to the equity
holders of the Company from
discontinued operations
–
(4,036)
(28,557)
Profit (loss) for the purpose of
basic per share
(110,764)
(52,807)
(41,657)

For the four months ended
31 October
2009
2008
HK$’000
HK$’000
(Unaudited)
162,674
(17,654)
180,875
(3,413)
(18,201)
(14,241)

The denominators used are the same as those detailed above for basic profit (loss) per share.

From discontinued operations

Profit (loss) per share for the discontinued operations is HK10.22 cents per share (30 June 2009: loss per share HK1.62 cents, 30 June 2008: HK0.24 cents, 30 June 2007: loss per share HKNil cent and 31 October 2008: HK0.19 cent per share), based on the profit (loss) for the year/period from the discontinued operations of approximately HK$180,875,000 (30 June 2009: loss of HK$28,557,000, 30 June 2008: loss of HK$4,036,000, 30 June 2007: HK$Nil and 31 October 2008: loss of HK$3,413,000) and the denominators detailed above for basic profit (loss) per share.

I – 51

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

18. PROPERTY, PLANT AND EQUIPMENT

The Group

COST At 1 July 2006 Exchange realignment Additions Acquired on acquisition of jointly controlled entities Disposal At 30 June 2007 and 1 July 2007 Exchange realignment Additions Transfer from construction in progress Deemed disposal of a subsidiary held by a jointly controlled entity At 30 June 2008 and 1 July 2008 Exchange realignment Additions Transfer from construction in progress Disposal Reclassified as held for sale At 30 June 2009, 1 July 2009 and 31 October 2009 DEPRECIATION At 1 July 2006 Exchange realignment Charged for the year Eliminated on disposals At 30 June 2007 and 1 July 2007 Exchange realignment Charged for the year Deemed disposal of a subsidiary held by a jointly controlled entity	Furniture Gas and Computer Office distribution fixtures equipment equipment network HK$’000 HK$’000 HK$’000 HK$’000 57 148 6 – 1 6 – 3,431 – – – – – – – 153,943 (19) – – – 39 154 6 157,374 5 49 2 16,602 – – 2 9,637 – – – 15,022 – – – (1,818) 44 203 10 196,817 – – – (370) – 7 – 6,133 – – – 20,592 – – – – – – – (223,172) 44 210 10 – 15 22 1 – – 3 – – 12 34 1 3,332 (9) – – – 18 59 2 3,332 5 42 1 1,175 8 36 2 14,640 – – – (43)	Gas Motor storage Other Leasehold vehicles equipment equipment buildings HK$’000 HK$’000 HK$’000 HK$’000 – – – – 33 219 116 247 1,334 – 316 – 1,488 9,822 5,190 11,100 (70) – (3) – 2,785 10,041 5,619 11,347 291 1,055 601 1,206 302 – 471 254 – – 9,089 1,520 (54) (160) (17) (50) 3,324 10,936 15,763 14,277 (6) (20) (33) (27) 680 3 165 – – – 5,783 640 – – (35) – (3,998) (10,919) (21,643) (14,890) – – – – – – – – – – – – 150 280 229 173 (15) – (3) – 135 280 226 173 41 92 85 40 485 1,122 1,035 391 (3) (8) (2) (1)	Total HK$’000 211 4,053 1,650 181,543 (92)
			187,365 19,811 10,666 25,631 (2,099)
			241,374 (456) 6,988 27,015 (35) (274,622)
			264
			38 3 4,211 (27)
			4,225 1,481 17,719 (57)

I – 52

APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

At 30 June 2008 and 1 July 2008 Exchange realignment Charged for the year Eliminated on disposals Reclassified as held for sale At 30 June 2009 and 1 July 2009 Charged for the period At 31 October 2009 NET BOOK VALUES At 31 October 2009 At 30 June 2009 At 30 June 2008 At 30 June 2007	Furniture Gas and Computer Office distribution fixtures equipment equipment network HK$’000 HK$’000 HK$’000 HK$’000 31 137 5 19,104 – – – (63) 8 37 1 16,147 – – – – – – – (35,188) 39 174 6 – 3 12 1 – 42 186 7 – 2 24 3 – 5 36 4 – 13 66 5 177,713 21 95 4 154,042	Gas Motor storage Other Leasehold vehicles equipment equipment buildings HK$’000 HK$’000 HK$’000 HK$’000 658 1,486 1,344 603 (2) (4) (8) (2) 446 776 1,823 527 – – (32) – (1,102) (2,258) (3,127) (1,128) – – – – – – – – – – – – – – – – – – – – 2,666 9,450 14,419 13,674 2,650 9,761 5,393 11,174	Total HK$’000 23,368 (79) 19,765 (32) (42,803)
			219 16
			235
			29

			45

			218,006

			183,140

The leasehold buildings of the Group is located in the PRC and held under medium lease term.

For the year ended 30 June 2009, depreciation provided for the year within the Group after reclassified as held for sale included HK$29,000 from discontinued operations expenses.

At the end of each Relevant Periods, none of the Group’s property, plant and equipment was held under finance lease.

I – 53

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

The Company

COST At 1 July 2006 Disposal At 30 June 2007, 1 July 2007, 30 June 2008, 1 July 2008, 30 June 2009, 1 July 2009 and 31 October 2009 DEPRECIATION At 1 July 2006 Charged for the year Eliminated on disposal At 30 June 2007 and 1 July 2007 Charged for the year At 30 June 2008 and 1 July 2008 Charged for the year At 30 June 2009 and 1 July 2009 Charged for the period At 31 October 2009 NET BOOK VALUES At 31 October 2009 At 30 June 2009 At 30 June 2008 At 30 June 2007	Computer equipment HK$’000 38 – 38 9 8 – 17 8 25 6 31 3 34 4 7 13 21	Furniture and fixtures HK$’000 44 (20) 24 14 8 (9) 13 4 17 5 22 1 23 1 2 7 11	Office equipment HK$’000 2 – 2 – 1 – 1 – 1 1 2 – 2 – – 1 1	Total HK$’000 84 (20) 64 23 17 (9) 31 12 43 12 55 4 59 5 9 21 33

I – 54

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

19. GOODWILL

The Group

COST
At 1 July 2006
Arising on acquisition of jointly controlled entities
At 30 June 2007, 1 July 2007, 30 June 2008, 1 July 2008
Reclassified as held for sale
At 30 June 2009, 1 July 2009 and at 31 October 2009
IMPAIRMENT
At 1 July 2006, 30 June 2007, 1 July 2007, 30 June 2008, 1 July 2008
Impairment loss recognized for the year
At 30 June 2009 and 1 July 2009
Impairment loss recognized for the period
At 31 October 2009
CARRYING VALUES
At 31 October 2009
At 30 June 2009
At 30 June 2008
At 30 June 2007

HK$’000
35,122
49,454
84,576
(49,454)
35,122
(3,361)
(31,761)
(35,122)
–
(35,122)
–
–
81,215
81,215

The Group tests goodwill annually for impairment in the financial year in which the acquisition takes place, or more frequently if there is indications that goodwill might be impaired.

The recoverable amounts of cash generating units (“CGUs”) are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the year. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

The value in use calculations is derived from cash flow projections based on the most recent financial budgets approved by management for the next 3 years. Cash flows beyond that 3 years period have been extrapolated using a steady growth rate, which is based on industry growth forecasts.

During the year ended 30 June 2009, the Group recognized an impairment loss of approximately HK$31,761,000 in relation to goodwill arising on acquisition of subsidiary, CNPC Huayou Cu Energy Investment Co. Limited due to the termination of profits sharing right on oilfield and the carrying amount would over the recoverable amount in the future. In addition, goodwill of approximately HK$49,454,000 was reclassified to non-current assets held for sale (note 15).

I – 55

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

20. INTEREST IN AN ASSOCIATE

The Group

Cost of unlisted investment Share of post-acquisition losses Disposal Exchange realignment	2007 HK$’000 – – – – –	At 30 June 2008 HK$’000 1,744 (40) – 185 1,889	At 2009 31 October 2009 HK$’000 HK$’000 1,889 – 124 – (2,013) – – – – –	At 2009 31 October 2009 HK$’000 HK$’000 1,889 – 124 – (2,013) – – – – –
				–

During the Relevant Periods, the Group has interests in the following associate:

				Proportion of
				nominal value
	Form of	Place of		of issued share
	business	incorporation/	Class of	capital held by	Nature of
Name of Company	structure	operation	shares held	the Group	business
臨澧華油燃氣有限公司	Incorporated	PRC	Registered	23.49%	Distribution of
(Note)			capital		natural gas
(Linli Huayou Gas Co.,
Ltd.)

Note : For the year ended 30 June 2008, Linli Huayou Gas Co., Limited (“Linli”) is a subsidiary of a jointly controlled entity, Changde Huayou Gas Co., Limited (“Changde Joint Venture”), which holds 70% registered capital of Linli. Due to the change in share structure of Linli, shareholding held by Changde Joint Venture was decreased to 48.61% and Linli became an associate of the Group. Changde Joint Venture disposed its equity interest in Linli in November 2008.

Combined financial information in respect of the Group’s associates is set out below:

Total assets Total liabilities Total assets The Group’s share of associates’ net assets Revenue Loss for the year The Group’s share of result of associated	2007 HK$’000 – – – – – – –	At 30 June 2008 HK$’000 9,003 (961) 8,042 1,889 2,838 (170) (40)	At 2009 31 October 2009 HK$’000 HK$’000 9,542 – (973) – 8,569 – 2,013 – 1,719 – 526 – 124 –	At 2009 31 October 2009 HK$’000 HK$’000 9,542 – (973) – 8,569 – 2,013 – 1,719 – 526 – 124 –
				–

				–

				–

				–

				–

In November 2008, Changde Joint Venture disposed its equity interest in Linli, at a consideration of approximately HK$4,145,000.

Loss on disposal of Linli of approximately HK$7,000 was shared by the Group. Up to the date of disposal of Linli, the Group shared Linli’s profit of approximately HK$124,000 for the year ended 30 June 2009.

I – 56

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

21. PREPAID LEASE PAYMENTS

The Group

2007 HK$’000 At the beginning – Acquisition of jointly controlled entities 12,645 Additions 99 Exchange realignment 284 13,028 Less: Charged to consolidated income statement for the year/period (152) Reclassified as held for sale – At the end 12,876 Analysis for reporting purposes: Non-current portion 12,496 Current portion 380 12,876	At 30 June 2008 HK$’000 12,876 – 2,191 1,348 16,415 (461) – 15,954 15,502 452 15,954	At 2009 31 October 2009 HK$’000 HK$’000 15,954 – – – 316 – (29) – 16,241 – (466) – (15,775) – – – – – – – – –	At 2009 31 October 2009 HK$’000 HK$’000 15,954 – – – 316 – (29) – 16,241 – (466) – (15,775) – – – – – – – – –
			– – –
			–

			– –
			–

The amount represented medium-term land use rights situated in the PRC and premises under operating leases in the PRC.

22. CONSTRUCTION IN PROGRESS

The Group

2007 HK$’000 At the beginning – Acquisition of jointly controlled entities 7,956 Additions 5,871 Deemed disposal of a subsidiary held by a jointly controlled entity – Transferred to property, plant and equipment – Exchange realignment 177 Reclassified as held for sale – At the end 14,004	At 30 June 2008 HK$’000 14,004 – 17,249 (184) (25,631) 1,474 – 6,912	At 2009 31 October 2009 HK$’000 HK$’000 6,912 – – – 22,994 – – – (27,015) – (14) – (2,877) – – –	At 2009 31 October 2009 HK$’000 HK$’000 6,912 – – – 22,994 – – – (27,015) – (14) – (2,877) – – –
			–

I – 57

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

23. INVENTORIES

The Group

At 30 June 2007 2008 HK$’000 HK$’000 Raw materials and consumables 1,075 2,197 Finished good 1,058 2,109 2,133 4,306 All inventories are stated at cost. TRADE AND OTHER RECEIVABLES AND PREPAYMENTS The Group At 30 June 2007 2008 HK$’000 HK$’000 Trade receivables 1,509 1,466 Other receivables and prepayments 35,671 38,385 37,180 39,851 Less: Allowances for doubtful receivable – (856) 37,180 38,995	At 2009 31 October 2009 HK$’000 HK$’000 – – – – – – At 2009 31 October 2009 HK$’000 HK$’000 – 403,300 34,995 33,956 34,995 437,256 – – 34,995 437,256	At 2009 31 October 2009 HK$’000 HK$’000 – – – – – – At 2009 31 October 2009 HK$’000 HK$’000 – 403,300 34,995 33,956 34,995 437,256 – – 34,995 437,256
		437,256 –
		437,256

24. TRADE AND OTHER RECEIVABLES AND PREPAYMENTS

Payment terms with customers are mainly on credit. Invoices are normally payable within 180 days of issuance. The following is an aged analysis of trade receivables at the end of the reporting period:

Current to 90 days 91 to 180 days Over 180 days	2007 HK$’000 226 1,045 238 1,509	At 30 June 2008 HK$’000 489 – 977 1,466	At 2009 31 October 2009 HK$’000 HK$’000 – 403,300 – – – – – 403,300	At 2009 31 October 2009 HK$’000 HK$’000 – 403,300 – – – – – 403,300
				403,300

At 31 October 2009, the trade receivables with carrying amount of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$489,000 and 30 June 2007: HK$1,159,000) are neither past due nor impaired at the reporting date.

The Group has policies for allowances for doubtful receivable which are based on the evaluation of collectibility and age analysis of accounts and on the management’s judgement including the credit creditworthiness, collaterals and the past collection history of each customer.

I – 58

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

At 31 October 2009, the Group made an allowance of approximately HK$Nil, (30 June 2009: HK$Nil, 30 June 2008: HK$856,000 and 30 June 2007: HK$Nil) in respect of trade receivables, which was past due at the reporting date with long age and slow repayments were received from respective customers since the due date. The directors considered the related receivables may be impaired and specified allowance is made.

Movement in the allowances for doubtful receivable:

Balance at the beginning Charge for the year – trade receivables Amount recovered during the year – trade receivables Exchange realignment Reclassified as parts of disposal group of asset held for sale Balance at the end of year/period	2007 HK$’000 – – – – – –	At 30 June 2008 HK$’000 – 856 – – – 856	At 2009 31 October 2009 HK$’000 HK$’000 856 – – – (100) – 46 – (802) – – –	At 2009 31 October 2009 HK$’000 HK$’000 856 – – – (100) – 46 – (802) – – –
				–

Other receivables and prepayments included:

(a) At 31 October 2009, prepayments for the drilling operation of Xin Jiang Oilfield in the PRC of approximately HK$34 million (30 June 2009: HK$34 million, 30 June 2008: HK$34 million and 30 June 2007: HK$30 million) from discontinued operations.

The fair value of the Group’s trade and other receivables and prepayments at the end of each Relevant Periods was approximate to the corresponding carrying amount.

The Company

Trade receivables Other receivables and prepayments	2007 HK$’000 – 96 96	At 30 June 2008 HK$’000 – 209 209	At 2009 31 October 2009 HK$’000 HK$’000 – 403,300 475 48 475 403,348	At 2009 31 October 2009 HK$’000 HK$’000 – 403,300 475 48 475 403,348
				403,348

I – 59

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

25. BANK BALANCES AND CASH

The Group

Cash and cash deposits denominated in: Hong Kong dollar Chinese Renminbi United States dollar Singaporean dollar	2007 HK$’000 1,293 46,375 1,180 262 49,110	At 30 June 2008 HK$’000 1,504 37,370 1,575 180 40,629	At 2009 31 October 2009 HK$’000 HK$’000 610 1,829 39 26 1,141 1,133 200 190 1,990 3,178	At 2009 31 October 2009 HK$’000 HK$’000 610 1,829 39 26 1,141 1,133 200 190 1,990 3,178
				3,178

Included in the balance was approximately HK$26,000 (30 June 2009: HK$39,000, 30 June 2008: HK$37,370,000 and 30 June 2007: HK$46,375,000), representing bank deposits denominated in Renminbi placed with banks in the PRC by the Group. The remittance of these funds out of the PRC is subject to the exchange control restrictions imposed by the PRC government.

The Company

		At 30 June		At
	2007	2008	2009	31 October 2009
	HK$’000	HK$’000	HK$’000	HK$’000
Cash and cash deposits
denominated in:
Hong Kong dollar	1,288	1,499	602	1,822

26. TRADE PAYABLES, ACCRUED LIABILITIES AND OTHER PAYABLES

The Group

Trade payables Accrued liabilities and other payables	2007 HK$’000 10,305 9,487 19,792	At 30 June 2008 HK$’000 6,823 19,555 26,378	At 2009 31 October 2009 HK$’000 HK$’000 105 52 10,634 13,640 10,739 13,692	At 2009 31 October 2009 HK$’000 HK$’000 105 52 10,634 13,640 10,739 13,692
				13,692

The following is an aged analysis of trade payables at the end of each Relevant Periods:

Within 90 days Over 90 days	2007 HK$’000 1,662 8,643 10,305	At 30 June 2008 HK$’000 219 6,604 6,823	At 2009 31 October 2009 HK$’000 HK$’000 – 52 105 – 105 52	At 2009 31 October 2009 HK$’000 HK$’000 – 52 105 – 105 52
				52

I – 60

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

The fair value of the Group’s trade payables, accrued liabilities and other payables at the end of each Relevant Periods was approximate to the corresponding carrying amount.

The Company

2007 HK$’000 Trade payables, accrued liabilities and other payables 3,410 BANK AND OTHER BORROWINGS The Group 2007 HK$’000 Other loan, unsecured_(Note a) 2,857 Other loan, secured(Note b) 34,194 Bank loans, secured(Note c) 54,232 Bank loans, unsecured(Note d) 16,947 108,230 The Group’s borrowings are repayable as follows: 2007 _HK$’000 On demand or within one year 2,125 More than one year, but not exceeding two years 28,031 Two to five years 63,307 Over five years 14,767 108,230 Less: Amount due within one year shown under current liabilities (2,125) 106,105	At 30 June 2008 HK$’000 4,890 At 30 June 2008 HK$’000 11,344 33,975 60,020 20,256 125,595 At 30 June 2008 HK$’000 11,344 63,704 40,054 10,493 125,595 (11,344) 114,251	At 2009 31 October 2009 HK$’000 HK$’000 7,451 11,071 At 2009 31 October 2009 HK$’000 HK$’000 19,645 21,476 16,500 16,500 – – – – 36,145 37,976 At 2009 31 October 2009 HK$’000 HK$’000 36,145 37,976 – – – – – – 36,145 37,976 (36,145) (37,976) – –

27. BANK AND OTHER BORROWINGS

The fair value of the Group’s borrowings at the end of each Relevant Periods was approximate to the corresponding carrying amount.

Notes:

a. Borrowings of approximately HK$21,476,000 (30 June 2009: HK$19,645,000, 30 June 2008: HK$11,344,000 and 30 June 2007: HK$2,857,000) is unsecured, interest bearing at prime rate.
b. Borrowings of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$17,475,000 and 30 June 2007: HK$17,694,000) is secured by corporate guarantee from a shareholder of jointly controlled entity, interest charged at 2.55% per annum and has fixed repayment term.

I – 61

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Borrowings of approximately HK$16,500,000 (30 June 2009: HK$16,500,000, 30 June 2008: HK$16,500,000 and 30 June 2007: HK$16,500,000) is interest bearing at 2-3% over prime rate, secured by corporate guarantee from China Vanguard Group Limited, the ultimate holding company of the Company, and repayable in next twelve months.

c. Borrowings of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$60,020,000 and 30 June 2007: HK$54,232,000) is secured by a gas network of a jointly controlled entity, interest charged at 5.55.7% per annum and has fixed repayment terms.
d. Borrowings of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$20,256,000 and 30 June 2007: HK$16,947,000) is unsecured, interest charged at 4.8% per annum and has fixed repayment term.

At 30 June 2009, bank and other borrowings of approximately HK$108,709,000 were reclassified to liabilities of the gas related business associated with assets classified as held for sale.

The details of the Group’s borrowings, which are denominated in foreign currencies are set out as below:

At 31 October 2009 At 30 June 2009 At 30 June 2008 At 30 June 2007 The Company Other loan, unsecured Other loan, secured	2007 HK$’000 2,857 16,500 19,357	At 30 June 2008 HK$’000 11,344 16,500 27,844	RMB HK$’000 equivalent – – 97,750 88,873 At 2009 31 October 2009 HK$’000 HK$’000 19,645 21,476 16,500 16,500 36,145 37,976	RMB HK$’000 equivalent –

				–

				97,750

				88,873

				37,976

28. CONVERTIBLE BONDS

The Group and the Company

(a) On 22 November 2006, the Company issued convertible bonds due on 21 November 2011 with a principal amount of HK$234,000,000, which is with a gross yield at 11% per annum, calculated in a semi-annual basis. The convertible bonds were issued for the purpose of the acquisition of a 48.33% equity interest in the Changde Joint Venture, 33% equity interest in the Hunan Joint Venture and general working purposes.

On 28 August 2009, the Company and Evolution, the sole beneficial owner have entered into a deed of undertaking as follows:

(a) in consideration of the undertaking given by the Company referred to in paragraph (b) below, Evolution irrevocably and unconditionally undertakes to the Company that it will not exercise its conversion right under the convertible bonds; and
(b) in consideration of the undertaking given by Evolution referred to in paragraph (a) above, the Company irrevocably and unconditionally undertakes to Evolution that when the Redemption Amount is Available for Redemption, it will be applied to redeem the convertible bonds.

I – 62

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

On 15 January 2010, the sole beneficial owner issued a put exercise notice requiring full redemption of the convertible bonds in the outstanding principal and any unpaid and accrued interest.

The fair value of the liability component of the convertible bonds is estimated by computing the present value of all future cash flows discounted using prevailing market rate of interest for similar instrument with a similar credit rating and with consideration of the convertible bonds. The residual amount, representing the value of the equity component is credited to a Company’s reserve account.

The Directors had assessed the fair values of the early redemption rights and considered the fair value is insignificant.

The convertible bonds have been spilt between the liability and equity components as follows:

		At 30 June				At
	2007	2008		2009	31 October 2009
	HK$’000	HK$’000		HK$’000		HK$’000
Nominal value of convertible
bonds issued	234,000	234,000		234,000		234,000
Equity component	(10,712)	(10,712)		(10,712)		(10,712)
Liability component at the
issuance date	223,288	223,288		223,288		223,288
Interest paid	–	–		(5,850)		(5,850)
Imputed finance cost	19,856	51,036		85,806		96,825
Liability component as at
the end of reporting date	243,144	274,324		303,244		314,263

As the bondholders undertake that it will not		exercise its conversion right, equity				component of
approximately HK$10,712,000 was released to accumulated losses			as at 31 October 2009.
SHARE CAPITAL
The Group and the Company
				Number of
				shares		HK$’000
Authorized:
At 1 July 2007, 30 June 2008, 1 July 2008, 30 June 2009,
1 July 2009 and 31 October 2009, shares of HK$0.01 each				20,000,000,000		200,000

Issued and fully paid:
At 1 July 2006				1,668,141,428		16,681
Shares issued on exercise of options				29,740,000		298
At 30 June 2007 and 1 July 2007				1,697,881,428		16,979
Shares issued on exercise of options				46,510,000		465
At 30 June 2008 and 1 July 2008				1,744,391,428		17,444
Shares issued on exercise of options				18,450,000		184
At 30 June 2009 and 1 October 2009				1,762,841,428		17,628
Shares issued on exercise of options				18,670,000		187
At 31 October 2009				1,781,511,428		17,815

29. SHARE CAPITAL

I – 63

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Notes:

(i) For the year ended 30 June 2007, the Company allotted and issued 4,970,000, 18,905,000 and 5,865,000 shares of HK$0.01 each for cash at the exercise prices of HK$0.08, HK$0.1006 and HK$0.147 per share respectively, as a result of the exercise of share options.
(ii) For the year ended 30 June 2008, the Company allotted and issued 6,660,000, 39,550,000 and 300,000 shares of HK$0.01 each for cash at the exercise prices of HK$0.08, HK$0.1006 and HK$0.147 per share respectively, as a result of the exercise of share options.
(iii) For the year ended 30 June 2009, the Company allotted and issued 18,450,000 shares of HK$0.01 each for cash at the exercise prices of HK$0.1006 per share, as a result of the exercise of share options.
(iv) For the period ended 31 October 2009, the Company allotted 2,075,000, 6,070,000 and 10,525,000 shares of HK$0.01 each for cash at the exercise prices of HK$0.1006, HK$0.147 and HK$0.08 per share respectively, as a result of the exercise of share options.

I – 64

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

30. RESERVES

(a) The Group

The amounts of the Group’s reserves and the movements therein for the current year are presented in the consolidated statements of changes in equity on page 10 of the Financial Information.

(b) The Company

Share capital HK$’000 At 1 July 2006 16,681 Shares issued on exercise of options 298 Recognition of equity-settled share based payment – Recognition of equity component of convertible bonds – Total comprehensive income for the year – At 30 June 2007 and 1 July 2007 16,979 Shares issued on exercise of options 465 Recognition of equity-settled share based payment – Transfer to accumulated losses due to lapse of share options – Total comprehensive income for the year – At 30 June 2008 and 1 July 2008 17,444 Shares issued on exercise of options 184 Total comprehensive income for the year – At 30 June 2009 and 1 July 2009 17,628 Shares issued on exercise of options 187 Release of convertible bond reserve – Total comprehensive income for the period – At 31 October 2009 17,815 For four months ended 31 October 2008 (unaudited) At 1 July 2008 17,444 Repurchase of shares 150 Total comprehensive income for the period – At 31 October 2008 17,594	Convertible Share bond premium reserve HK$’000 HK$’000 88,096 – 2,864 – – – – 10,712 – – 90,960 10,712 4,091 – – – – – – – 95,051 10,712 1,671 – – – 96,722 10,712 1,756 – – (10,712) – – 98,478 – 95,051 10,712 1,359 – – – 96,410 10,712	Share option reserve HK$’000 23,207 – 54,913 – – 78,120 – 7,674 (85,794) – – – – – – – – – – – – –	Retained profits/ Capital (Accumulated reserve losses) HK$’000 HK$’000 15,826 (110,397) – – – – – – – (105,669) 15,826 (216,066) – – – – – 85,794 – (52,994) 15,826 (183,266) – – – (41,722) 15,826 (224,988) – – – 10,712 – 158,968 15,826 (55,308) 15,826 (183,266) – – – (14,364) 15,826 (197,630)	Total HK$’000 33,413 3,162 54,913 10,712 (105,669)
				(3,469) 4,556 7,674 – (52,994)
				(44,233) 1,855 (41,722)
				(84,100) 1,943 – 158,968
				76,811

				(44,233) 1,509 (14,364)
				(57,088)

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

31. SHARE OPTION SCHEME

The Company currently operates a share option scheme (the “Scheme”), which is adopted on 13 May 2002, for the purpose of providing incentives and rewards to the eligible participants who, in the sole discretion of the Board, have contributed or may contribute to the Group.

Pursuant to the Scheme, the board of directors may, at their discretion, grant share options (the “Options”) to eligible participants who, in the sole discretion of the Board, have contributed or may contribute to the Group. The Scheme became effective on 14 May 2002 and will remain in force for ten years from that date.

The maximum number of unexercised Options currently permitted to be granted under the Scheme is an amount equivalent to, upon their exercise, 10% of the shares of the Company in issue as at the date of the approval of the Scheme or the date of the general meeting for refreshing the 10% limit under the scheme. The limit on the number of shares which may be issued upon exercise of all outstanding options granted under the Scheme must not exceed 30% of the shares of the Company in issue from time to time. The maximum number of shares issuable under the Scheme to each eligible participant in the Scheme within any 12-month period is limited to 1% of the number of shares of the Company in issue at any time.

The offer of a grant of the Options may be accepted in writing within 21 days from the date of the offer, upon payment of a nominal consideration of HK$1 in total by the grantee. The exercise period of the Options granted is determined by the board of directors, and shall not be more than ten years from the date of the grant of the Options. The Scheme does not require a minimum period for which the Options must be held nor a performance target which must be achieved before the Options can be exercised.

The subscription price will be determined by the board of directors, but may not be less than the highest of (i) the closing price of shares on the Stock Exchange on the date of grant of the Options; (ii) the average of the closing prices of the Company’s shares on the Stock Exchange for the five trading days immediately preceding the date of grant of the Options; and (iii) the nominal value of the Company’s shares on the date of offer.

Details of movements in the Options of Scheme held by eligible participants are as follows:

At 31 October 2009 Date of Exercise Eligible participants grant price HK$ 1/11/2004 0.1006 30/9/2004 0.147 10/9/2004 0.08 At 30 June 2009 Date of Exercise Eligible participants grant price** HK$ 1/11/2004 0.1006 30/9/2004 0.147 10/9/2004 0.08	Outstanding at 1/7/2009 2,075,000 6,070,000 10,525,000 18,670,000 Outstanding at 1/7/2008 20,525,000 6,070,000 10,525,000 37,120,000	Granted during the period – – – – Granted during the year – – – –	Lapsed/ cancelled during the period – – – – Lapsed/ cancelled during the year – – – –	Exercised during the period (2,075,000) (6,070,000) (10,525,000) (18,670,000) Exercised during the year (18,450,000) – – (18,450,000)	Outstanding Exercise at 31/10/2009 period of Options – 1/11/2004 to 30/10/2009 – 30/9/2004 to 29/9/2009 – 10/9/2004 to 9/9/2009 – Outstanding Exercise at 30/6/2009 period of Options 2,075,000 1/11/2004 to 30/10/2009 6,070,000 30/9/2004 to 29/9/2009 10,525,000 10/9/2004 to 9/9/2009 18,670,000

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APPENDIX I

FINANCIAL INFORMATION ON THE APTUS GROUP

At 30 June 2008 Date of Exercise Eligible participants grant price* HK$ 20/3/2006 2.54 1/11/2004 0.1006 30/9/2004 0.147 10/9/2004 0.08	Outstanding at 1/7/2007 125,030,000 60,075,000 6,370,000 17,185,000 208,660,000	Granted during the year – – – – –	Lapsed/ cancelled during the year (125,030,000) – – – (125,030,000)	Exercised during the year – (39,550,000) (300,000) (6,660,000) (46,510,000)	Outstanding Exercise at 30/6/2008 period of Options – 20/3/2006 to 19/3/2008 20,525,000 1/11/2004 to 30/10/2009 6,070,000 30/9/2004 to 29/9/2009 10,525,000 10/9/2004 to 9/9/2009 37,120,000

At 30 June 2007 Date of Exercise Eligible participants grant price* HK$ 20/3/2006 2.54 1/11/2004 0.1006 30/9/2004 0.147 10/9/2004 0.08	Outstanding at 1/7/2006 125,030,000 78,980,000 12,235,000 22,155,000 238,400,000	Granted during the year – – – – –	Lapsed/ cancelled during the year – – – – –	Exercised during the year – (18,905,000) (5,865,000) (4,970,000) (29,740,000)	Outstanding Exercise at 30/6/2007 period of Options 125,030,000 20/3/2006 to 19/3/2008 60,075,000 1/11/2004 to 30/10/2009 6,370,000 30/9/2004 to 29/9/2009 17,185,000 10/9/2004 to 9/9/2009 208,660,000

The exercise price of the Options is subject to adjustment in the case of rights or bonus issues, or other similar changes in the Company’s share capital.

At 31 October 2009, the number of shares in respect of which Options had been granted and remained outstanding under the scheme was Nil% (30 June 2009: 1.06%, 30 June 2008: 2.13% and 30 June 2007: 12.29%) of the shares of the Company in issue at that date.

During the year ended 30 June 2006, options were granted on 20 March 2006. The closing price of the Company’s shares on 20 March 2006 was HK$2.60. The estimated fair value of the options granted on is approximately HK$85,800,000.

These fair values were calculated by using the Black-Scholes pricing model. The inputs into the model were as follows:

Share price on grant date	HK$2.60
Exercise price	HK$2.54
Expected volatility	57.63%
Expected life	2 years
Risk-free rate	4%
Expected dividend yield	0%

Expected volatility was determined by using the historical volatility of the Company’s share price over the previous 1 year. The expected life used in the model has been adjusted, based on the management’s best estimate, for the effects on non transferability, exercise restrictions and behavioral considerations.

The risk-free interest rate represents the yields to maturity of respective Hong Kong Exchange Fund Note as at 20 March 2006.

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

The Group recognized the total expenses of approximately HK$Nil for the four months ended 31 October 2009 (for the year ended 30 June 2009: HK$Nil, for the year ended 30 June 2008: HK$7,674,000, for the year ended 30 June 2007: HK$54,913,000 and for the four months ended 31 October 2008: HK$Nil) in relation to Options granted by the Company.

At the date of approval of this Financial Information, the Company has no outstanding options under the Scheme.

32. NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

For the four months ended 31 October 2009

For the four months ended 31 October 2009, the Company disposed investments in jointly controlled entities, Changde Hauyou Gas Co., Limited (“Changde Hauyou”) and Hunan Huayou Natural Gas Transportation and distribution Company Limited. Details of the deposal was summarized as follows:

NET ASSETS DISPOSED Property, plant and equipment Goodwill Construction in progress Prepaid lease payments Inventories Accounts receivables, deposits, prepayments and other receivables Bank balances and cash Accounts payables, accrued liabilities and other payables Tax liabilities Bank and other borrowings Net assets Less: Release of translation reserve Gain on dispsoal Total consideration Net cash inflow arising on disposal: Cash consideration Bank balances and cash disposed of	Changde Hauyou HK$’000 111,868 26,227 3,886 13,513 1,504 9,779 35,459 (11,987) (1,162) (15,114) 173,973 (14,220) 129,756 289,509 289,509 (35,459) 254,050	Hunan Hauyou HK$’000 116,864 23,227 – 2,199 576 317 3,838 (3,674) (41) (91,791) 51,515 (5,770) 67,951 113,696 113,696 (3,838) 109,858	Total HK$’000 228,732 49,454 3,886 15,712 2,080 10,096 39,297 (15,661) (1,203) (106,905) 225,488 (19,990) 197,707 403,205 403,205 (39,297) 363,908

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Deemed disposal of a subsidiary

For year ended 30 June 2008, Linli Huayou Gas Co., Limited (“Linli”) is a subsidiary of a jointly controlled entity, Changde Huayou Gas Co., Limited (“Changde Huayou”) of Aptus Holdings Limited, which holds 70% registered capital of Linli. Due to the change in share structure of Linli, shareholding held by Changde Huayou decreased to 48.61% and Linli became an associate of the Group. Loss arisen on deemed disposal of equity interest in Linli was approximately of HK$7,000.

Property, plant and equipment
Accounts receivables
Prepayments, deposits and other receivables
Inventories
Construction in progress
Bank balances and cash
Accounts payables
Accrued liabilities and other payables
Net assets
Less: Minority interests
Less: Released of translation reserve
Net amount of assets disposed of
Loss on disposal
Represented by investment in an associate at the date of deemed disposal
Net cash outflow arising on deemed disposal:
Bank balances and cash disposed of

Linli
HK$’000
2,042
23
4
146
184
208
(36)
(71)
2,500
(737)
(12)
1,751
(7)
1,744
208

33. CONTINGENT LIABILITIES

The Group and the Company did not have any significant contingent liabilities.

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

34. OPERATING LEASE COMMITMENTS

The Group as lessee

At the end of reporting period, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Continuing operations

Within one year In the second and fifth years inclusive Discontinued operations Within one year In the second to fifth years inclusive Over five years	2007 HK$’000 59 – 59 – – – –	At 30 June 2008 HK$’000 26 – 26 19 7 – 26	At 2009 31 October 2009 HK$’000 HK$’000 31 151 – 549 31 700 10 – 14 – 3 – 27 –	At 2009 31 October 2009 HK$’000 HK$’000 31 151 – 549 31 700 10 – 14 – 3 – 27 –
				700

				– – –
				–

Operating lease payments represents rentals payable by the Group for certain of its office properties.

The Company did not have any lease commitments as at 31 October 2009 (30 June 2009: HK$Nil, 30 June 2008: HK$Nil and 30 June 2007: HK$Nil).

The Group as lessor

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

Discontinued operations

Within one year In the second to fifth years inclusive Over five years	129 246 – 375	314 263 – 577	520 1,631 2,106 4,257	– – –
				–

Leases are negotiated for an average term of 2 to 10 years.

The Group and the Company did not have any lease arrangements from continuing operations.

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

35. CAPITAL COMMITMENTS

Continuing operations

		At	30	June	June					At
	2007			2008			2009	31 October 2009
	HK$’000		HK$’000				HK$’000		HK$’000
Capital expenditure in respect
of the investment in a subsidiary
– authorized but not contracted for	39,956			44,220			44,137			44,158

MAJOR NON-CASH TRANSACTIONS
	For	the year ended					For the	four months		ended
		30 June						31 October
	2007	2008				2009	2009			2008
	HK$’000	HK$’000			HK$’000		HK$’000		HK$’000
									(Unaudited)
Share option expenses	54,913	7,674				–		–		–

Imputed interest on
convertible bonds	19,856	31,180				34,770	11,019			11,938

Impairment of goodwill	–		–			31,761		–		–

36. MAJOR NON-CASH TRANSACTIONS

37. RETIREMENT BENEFITS SCHEME

With the introduction of Mandatory Provident Fund Scheme (the “MPF Scheme”) in December 2000 in Hong Kong, the Group has arranged its employees in Hong Kong to join the MPF Scheme. The retirement benefits scheme contributions charged to the consolidated income statement represents contributions payable to the MPF Scheme by the Group at rates specified in the rules of the MPF Scheme.

The employees employed in the PRC subsidiaries are members of the state-managed retirement benefits schemes operated by the PRC government. The PRC subsidiaries are required to contribute a certain percentage of their payroll to the retirement benefits schemes to fund the benefits.

The only obligation of the Group with respect to the retirement benefits schemes is to make the required contributions under the schemes.

The employees employed in the Singapore subsidiary are members of the Central Provident Fund Scheme. The Singapore subsidiary is required to contribute pension, based on a certain percentage of their payroll, to the Central Provident Fund Scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefits scheme is to make the required contributions under the scheme.

The total cost charged to the consolidated income statement of approximately HK$32,000 (30 June 2009: HK$34,000, 30 June 2008: HK$132,000 and 30 June 2007: 186,000) represents retirement benefits scheme contributions for the Relevant Periods.

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

38. PROVISION FOR LONG SERVICE PAYMENTS

Under the Hong Kong Employment Ordinance, the Group is obliged to make lump sum payments on cessation of employment in certain circumstances to certain employees who have completed at least five years of service with the Group. The amount payable is dependent on the employee’s final salary and years of service, and is reduced by entitlements accrued under the Group’s retirement plan that are attributable to contributions made by the Group. The Group does not set aside any assets to fund any remaining obligations.

The Group had no significant provision for long service payments at each of end at each reporting periods.

39. PLEDGE OF ASSETS

The Group has pledged 100% of the issued share capital of Good United Management Limited (“GUM”), a whollyowned subsidiary of the Company, was pledged in favors of the holder(s) of the convertible bonds issued by the Company on 22 November 2006. GUM held 70% equity interest in CNPC Huayou Cu Energy Investment Co. Limited, which owned profit sharing rights on Xin Jiang Oilfield. In addition, at 31 October 2009, borrowings of approximately HK$Nil (30 June 2009: HK$59,907,000 which is classified as liabilities associated with asset classified as held for sale, 30 June 2008: HK$60,020,000 and 30 June 2007: HK$54,232,000) has been secured by gas network of a jointly controlled entity, Hunan Joint Venture.

40. SHARE AWARD SCHEME

On 13 October 2004, the Company adopted a share award scheme for employees and consultants, excluding executive directors and chief executive, of the Group for the purpose of recognizing the contributions of certain employees and consultants of the Group to the growth of the Group, by rewarding them with opportunities to obtain an ownership interest in the Company and to further motivate them and give an incentive to these persons to continue to contribute to the Group’s long term success and prosperity.

No share award was granted during the Relevant Periods.

41. BANKING FACILITIES

At the end of reporting periods, the Group’s banking facilities from discontinued operations which consisted mainly of secured bank loans of approximately HK$Nil (30 June 2009: HK$59,907,000, 30 June 2008: HK$60,020,000 and 30 June 2007: HK$54,232,000) and unsecured bank loan of approximately HK$Nil (30 June 2009: HK$33,697,000, 30 June 2008: HK$20,256,000 and 30 June 2007: HK$16,947,000). Banking facilities was secured by certain gas network of a jointly controlled entity and unconditional irrecoverable corporate guarantees.

The Group did not have any banking facilities for its continuing operaion.

42. RELATED PARTY TRANSACTIONS

Compensation of directors and key management personnel

The remuneration of directors and other members of key management during the Relevant Periods were as follows:

Short-term benefits Post employment benefits	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 9,369 8,344 1,917 84 76 25 9,453 8,420 1,942	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 824 602 10 8 834 610	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 824 602 10 8 834 610
			610

The remuneration of directors and key management personnel is determined by the remuneration committee having regard to the performance of individuals and market trends.

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

43. INTERESTS IN SUBSIDIARIES

The Company

Unlisted shares, at cost Amounts due from subsidiaries	2007 HK$’000 4,000 46,748 50,748	At 30 June 2008 HK$’000 4,000 46,819 50,819	At 31 2009 October 2009 HK$’000 HK$’000 4,000 4,000 47,377 47,609 51,377 51,609	At 31 2009 October 2009 HK$’000 HK$’000 4,000 4,000 47,377 47,609 51,377 51,609
				51,609

(a) Amounts due from subsidiaries are unsecured, interest free and have no fixed repayment terms. In the opinion of the directors of the Company, the carrying amounts of the amounts due from subsidiaries at 30 June 2007, 2008 and 2009 and 31 October 2009 approximate to their fair values.
(b) Particulars of the Company’s principal subsidiaries which principally affected the results, assets or liabilities the Group are as follows:

Details of the subsidiaries at 31 October 2009 are as follows:

			Percentage of	Percentage of
	Place of	Nominal value	equity attributable
	incorporation	of issued and	to the Company
Name	and operations	paid-up share	Direct	Indirect		Principal activities
Good United Management	British Virgin	Ordinary US$1	100%		–	Investment holding
Limited	Islands
Top Entrepreneur	British Virgin	Ordinary US$200	75%		–	Investment holding
Profits Limited	Islands
B & B Natural Products	British Virgin	Ordinary US$1	–		75%	Investment holding
(BVI) Limited	Islands
Rapid Progress Profits	British Virgin	Ordinary US$8	–	56.25%		Investment holding
Limited	Islands
Sea Marvel Limited	British Virgin	Ordinary US$1	100%		–	Investment holding
	Islands
Hsing Long Trading	Singapore	Ordinary	–	70.31%		Distribution of edible oil
Co. Pte. Ltd.		SGD100,000
CNPC Huayou Cu Energy	People’s Republic	Registered	–		70%	Holding of profit sharing
Investment Co. Limited	of China (“PRC”)	capital of				right of Xin Jiang
		RMB100,000,000				Oilfield

44. INVESTMENT IN JOINTLY CONTROLLED ENTITIES

		At 30 June		At 31
	2007	2008	2009	October 2009
	HK$’000	HK$’000	HK$’000	HK$’000
Investment in jointly controlled entities	210,277	210,277	210,277	–

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

Particulars of the Company’s jointly controlled entities are as follows:

				Percentage of	Percentage of
	Place of		Nominal value	equity attributable
	incorporation		of issued and	to the	Company
Name	and operations		paid-up share	Direct	Indirect	Principal activities
Changde Huayou	Sino-foreign	PRC	Registered	–	48.33%	Development and
Gas Co., Limited	equity joint					management of natural
常德華油燃氣有限公司	venture					gas pipelines and
						distribution facilities
						in PRC
Hunan Huayou Natural	Sino-foreign	PRC	Registered	–	33%	Construction and
Gas Transportation	equity joint					development of natural
and Distribution	venture					gas pipelines and related
Company Limited						consultation services
湖南華油天然氣輸配
有限責任公司

Note:

The Group holds 48.33% of the issued capital of Changde Joint Venture and 33% of the issued capital of Hunan Joint Venture. Pursuant to the shareholder’s agreement in relation to the acquisition of Changde Joint Venture and Hunan Joint Venture, each shareholder has a veto right relating to certain financial and operating decisions, and is therefore considered as having joint control over Changde Joint Venture and Hunan Joint Venture.

The following amounts represent the Group’s proportionate share of the assets, liabilities, revenue and expenses of the jointly controlled entities and are included in the consolidated statement of financial position and consolidated income statements as a result of proportionate consolidation:

			At 30	At 30	June					At
		2007			2008			2009	31 October 2009
		HK$’000	HK$’000					HK$’000		HK$’000
Current assets		55,654			48,263			300,739		–
Non-current assets		209,468		242,223				–		–
Current liabilities		17,961			30,750			123,825		–
Non-current liabilities		86,748			86,407			–		–
Non-controlling interests		750			–			–		–

		Date of	For the		year ended			For the	four	months ended
	acquisition to		30		June				31 October
	30	June 2007	2008				2009	2009		2008
		HK$’000	HK$’000		HK$’000			HK$’000		HK$’000
Revenue		14,743	65,793			106,803		18,323		27,958
Expenses		(19,057)	(68,989)		(103,187)			(18,493)		(31,371)
Non-controlling interests		(3)	–				–		–	–
Profit (loss) for the year/period		(4,317)	(3,196)				3,616	(170)		(3,413)

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

45. SUBSEQUENT EVENTS

(i) On 2 November 2009, the Company entered into a placing agreement in placing 160,000,000 shares to independent investors at a price of HK$0.25 per placing share. The placing was completed on 10 December 2009.
(ii) On 20 November 2009, the Company entered into a Sales and Purchases Agreement in acquiring entire equity interests of Casdon Management Limited at a consideration of HK$1,775,000,000.
(iii) On 1 December 2009, the Company entered into Subscription Agreement with two subscribers by capitalizing of the loan of approximately HK$38,750,000 owed by the Company to the subscribers. The loan capitalization was completed on 16 December 2009.
(iv) On 15 January 2010, the Sole Beneficial Owner of the Convertible Bonds issued a put exercise notice requiring full redemption of the Convertible Bonds in the outstanding principal amount of HK$234,000,000 and accrued but unpaid interests.

46. COMPARATIVE FIGURES

Certain comparative figures have been restated to conform with the Relevant Periods’ presentation.

2. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company or any of its subsidiary companies in respect of any period subsequent to 31 October 2009 and up to the date of this report. In addition, no dividend or distribution has been declared, made or paid by the Company or any of its subsidiary companies in respect of any period subsequent to 31 October 2009.

W.H. Tang & Partners CPA Limited Certified Public Accountants Hong Kong

TANG Wai Hung

Practising Certificate No. P03525

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FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

3. MANAGEMENT DISCUSSION AND ANALYSIS

Set out below is the management discussion and analysis of the operating results and business review extracted from the respective annual reports of Aptus for the three years ended 30 June 2007, 2008 and 2009 and for the four months ended 31 October 2009.

For the year ended 30 June 2007

FINANCIAL REVIEW

The Aptus Group recorded a turnover of HK$57.7 million and loss attributable to the Aptus Shareholders of approximately HK$110.8 million for the year ended 30 June 2007. These results for the 12 months to 30 June 2007 primarily reflects the Aptus Group’s edible oil trading operations as the Aptus Group’s investment in the Changde Joint Venture and the Hunan Joint Venture were only completed in February 2007 and the Xin Jiang Oilfield project is still yet to commence commercial production and sales. The Changde Joint Venture and Hunan Joint Venture are treated as jointlycontrolled entities of the Aptus Group and their accounts are consolidated into the Aptus Group’s financial statements on a proportional basis.

The Aptus Group’s turnover of HK$57.7 million represented sales of edible oil products of HK$43.0 million and gas related revenue shared from the Changde Joint Venture and Hunan Joint Venture of HK$14.7 million. Gross profit of HK$0.7 million and HK$2.8 million were recorded in the Aptus Group’s edible oil trading sector and gas sector, respectively.

Although the turnover of the edible oil operations increased by 39% as compared to 2006, the gross margin decreased from HK$0.9 million in 2006 to HK$0.7 million in 2007 due to the Aptus Group’s adoption of a low-price strategy to facilitate sales during the periods of continuing difficult business conditions.

Since Hunan Joint Venture commenced its business in late 2006, the revenue generated by Hunan Joint Venture at the beginning stage is currently unable to cover its fixed direct operating costs, such as depreciation. Accordingly, gross loss of HK$2.6 million was generated by Hunan Joint Venture. As Changde Joint Venture has been operating for years and hence the scale of operations are larger, gross profit of HK$5.4 million was generated during the year. As a result, gross profit of HK$2.8 million was recorded in the Aptus Group’s gas sector as a whole.

Despite the increase in turnover, the Aptus Group recorded a net loss attributable to Aptus Shareholders of HK$110.8 million for the year ended 30 June 2007 against a loss of HK$40.8 million previously. A large proportion of this HK$110.8 million loss is non-recurring:

(i) Share option expense of HK$54.9 million (a non-cash item), is recognized in current year. Based on the existing options in issue, there is only circa HK$7.7 million in such expenses to be written off over the coming fiscal year; and
(ii) HK$13.3 million in legal and professional fees related to the investment in the two Hunan joint ventures and the subsequent issuance of Aptus Holdings Limited’s convertible bond to finance these investments.

I – 76

FINANCIAL INFORMATION ON THE APTUS GROUP

APPENDIX I

This year’s loss increased by HK$70 million compared to the previous corresponding year, the increase can be explained almost entirely as follows: (i) a HK$31.7 million increase in share option expenses, HK$54.9 million this period against HK$23.2 million, previously; (ii) the HK$13.3 million charge for legal and professional fees as mentioned above; and (iii) the maiden HK$19.9 million expense for imputed finance charges associated with the convertible bonds.

For the period under review, no dividends have been declared.

LIQUIDITY AND FINANCIAL RESOURCES

As at 30 June 2007, the Aptus Group had assets of approximately HK$379.7 million (2006: approximately HK$77.0 million), including net cash and bank balances of approximately HK$49.1 million (2006: approximately HK$3.4 million).

As at 30 June 2007, the Aptus Group had borrowed loans (including convertible bonds) of approximately HK$351.4 million. The gearing ratio, defined as the ratio between total borrowings and the Group’s capital and reserves was approximately 45 times (2006: 70.24%). During the year ended 30 June 2007, the Group financed its operations and investing activities primarily with internally generated cash flows and borrowings.

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND ANY RELATED HEDGES

The business activities of the Aptus Group are not exposed to material fluctuations in exchange rate except for the Aptus Group’s operations through its subsidiaries in the People’s Republic of China and Singapore, which are subject to fluctuation in exchange rates between Renminbi, Singaporean dollars and Hong Kong dollars.

MATERIAL ACQUISITION

The transactions for acquisition of 48.33% equity interest in Changde Joint Venture and 33% equity interest in Hunan Joint Venture have been approved by the Aptus Shareholders in the extraordinary general meeting held on 7 November 2006. The Aptus Group has obtained certificates of approval for Aptus’ investment in Changde Joint Venture and Hunan Joint Venture and updated business licenses of these two Joint Ventures in February of 2007.

CONTINGENT LIABILITIES

As at 30 June 2007, the Aptus Group had no contingent liabilities.

CAPITAL STRUCTURE

During the year ended 30 June 2007, Aptus issued 29,740,000 shares under the share option scheme to provide incentives and rewards to eligible participants. As at 30 June 2007, the number of Aptus’ issued shares was enlarged to 1,697,881,428 shares.

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EMPLOYEES, REMUNERATION POLICIES AND SHARE OPTION SCHEME

As at 30 June 2007, the Aptus Group had 26 full time employees. Remuneration is determined by reference to market terms and the performance, qualification and experience of individual employees. In addition to salaries and provident fund contributions, the Aptus Group also offers medical benefits and training programs. Share options may be granted to employees based on performance evaluation in order to provide incentives and rewards.

CHARGES ON GROUP’S ASSETS

As at 30 June 2007, the 100% of the issued share capital of Good United Management Limited (“GUM”), a wholly-owned subsidiary of Aptus, was pledged in favour of the holder(s) of the convertible bonds issued by Aptus on 22 November 2006. GUM held 70% equity interests in CNPC Huayou CU Energy Investment Co., Limited, which owned profit sharing rights on Xin Jiang Oilfield. In addition, bank borrowings of approximately HK$54,232,000 is secured by gas network of Hunan Joint Venture.

For the year ended 30 June 2008

FINANCIAL REVIEW

Turnover

The Aptus Group recorded a turnover of approximately HK$105.4 million for the year ended 30 June 2008 (“Year 2008”), an increase of about 83% as compared to approximately HK$57.7 million for the year ended 30 June 2007 (“Year 2007”). In the year under review, turnover from the natural gas related operations improved significantly while turnover of the edible oil trading business contracted slightly.

The Changde Joint Venture benefited from an increase in end users within its jurisdiction whilst the Hunan Joint Venture benefited from an increase in distribution stations. As a result, revenues from these operations increased by about 3.5 times from approximately HK$14.7 million in Year 2007 to approximately HK$65.8 million in Year 2008.

The turnover from the edible oil trading business decreased by about 8% from approximately HK$42.9 million in Year 2007 to approximately HK$39.6 million in Year 2008, which was resulted from the continuous increase in the price of consumer goods thus reducing margins and demand.

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Gross Profit

The details of gross profit and gross profit ratio of the Aptus Group are as follows:

Natural gas related Trading of edible oil Overall	2008 Gross Gross Profit Profit Ratio HK$’000 % 18,133 27.6 253 0.6 18,386 17.5	2007 Gross Gross Profit Profit Ratio HK$’000 % 2,843 19.3 672 1.6 3,515 6.1	2007 Gross Gross Profit Profit Ratio HK$’000 % 2,843 19.3 672 1.6 3,515 6.1
			6.1

The Aptus Group’s overall gross profit ratio increased significantly from 6.1% in Year 2007 to 17.5% in Year 2008 due to the increasing relative contribution from the higher margin natural gas related operations acquired in February 2007. Natural Gas Joint Ventures (Hunan Joint Venture and Changde Joint Venture) accounted for 62.4% of the Aptus Group’s revenue in Year 2008 against just 25.5% last year. As can be seen from the above, the major share of gross profits are now being contributed by the Natural Gas Joint Ventures.

The Aptus Group’s share of turnover from the Natural Gas Joint Ventures for Year 2008 included installation income for gas connection of approximately HK$21.2 million against approximately HK$4.3 million in Year 2007. Gross profit margin of installation income is very high. As such, the significant rise in installation income has contributed to the overall widening of the gross profit margins of the Aptus Group’s natural gas related operations. Further, costs of the Hunan Joint Venture are predominantly fixed in nature (mainly depreciation) and are thus inelastic in relation to the volume of gas transported along its pipeline. Thus the increase in turnover of the Hunan Joint Venture in Year 2008 did not see a corresponding increase in cost of sales thereby also contributing to the widening of overall gross profit margins.

As mentioned previously, the prices of consumer goods in general rose significantly in Year 2008. In reaction to tougher market conditions, the low-price strategy adopted by the Aptus Group’s edible oil trading business resulted in lower gross margins here in Year 2008.

Operating Costs

The Aptus Group’s operating costs, comprising selling and distribution costs and administrative expenses, decreased significantly by about HK$50.6 million from approximately HK$90 million in Year 2007 to approximately HK$39.4 million this year. The decrease was mainly attributable to the net effect of (i) less share option expenses charged against the Aptus Group’s profit and loss account from approximately HK$54.9 million in Year 2007 to approximately HK$7.7 million in Year 2008; (ii) a decrease in legal and professional fees from approximately HK$13.7 million (mainly for issue of convertible bonds) in Year 2007 to approximately HK$0.2 million in Year 2008; and (iii) an increase in depreciation under selling and distribution costs from

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APPENDIX I

approximately HK$1.5 million in Year 2007 to approximately HK$6.8 million in Year 2008. The increase in depreciation was mainly attributable to city-level gas operation operated by Changde Joint Venture as additional 84km pipeline network was built in the current year.

Finance Costs

The increase in finance costs over Year 2008 of about HK$13.1 million, from HK$24.4 million in Year 2007 to HK$37.5 million in Year 2008, was mainly attributable to the increase in imputed finance costs of convertible bonds (at the Aptus level), which were issued by the Aptus Group in November 2006. The imputed finance costs of convertible bonds increased due principally to the fact that only approximately seven months interest were charged to the Group’s financial statements in Year 2007 against a full year charge this year.

LIQUIDITY AND FINANCIAL RESOURCES

As at 30 June 2008, the Aptus Group had assets of approximately HK$408.6 million (2007: approximately HK$379.7 million), including cash and bank balances of approximately HK$40.6 million (2007: approximately HK$49.1 million).

As at 30 June 2008, the Aptus Group had borrowed loans (including convertible bonds) of approximately HK$399.9 million (2007: HK$351.4 million), for details please refer to notes 26 and 28 to the financial statements.

The Aptus Directors consider it is not meaningful to publish a gearing ratio for the Aptus Group until such time as the Group is in a positive shareholders’ equity position.

CONTINGENT LIABILITIES

As at 30 June 2008, the Aptus Group had no contingent liabilities.

CHARGES ON GROUP’S ASSETS

As at 30 June 2008, the 100% of the issued share capital of Good United Management Limited (“GUM”), a wholly-owned subsidiary of the Company, was pledged in favor of the holder(s) of the convertible bonds issued by Aptus on 22 November 2006. GUM held 70% equity interests in CNPC Huayou CU Energy Investment Co., Limited, which owned profit sharing rights on Xin Jiang Oilfield. In addition, bank borrowings of approximately HK$60 million were secured by the gas network of the Hunan Joint Venture.

CAPITAL STRUCTURE

During the year ended 30 June 2008, Aptus issued 46,510,000 shares based on share options granted in 2004 under the share option scheme to eligible participants. As at 30 June 2008, the number of Aptus’ issued shares was enlarged to 1,744,391,428 Aptus Shares.

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APPENDIX I

CONVERTIBLE BONDS

On 22 November 2006, Aptus issued convertible bonds due on 21 November 2011 with a principal amount of HK$234,000,000, which is interest-bearing at 5% per annum from and including 21 May 2008. The convertible bonds were issued for the purpose of the acquisition of a 48.33% equity interest in Changde Joint Venture, 33% equity interest in the Hunan Joint Venture and general working capital purposes.

On each of 21 November 2008, 21 November 2009 and 21 November 2010 (each a “Put Option Date”), each bondholder will have the right to require the Company to redeem in whole or in part of the convertible bonds of such bondholders on the Put Option Date together with interest accrued to the Put Option Date.

Unless previously redeemed, converted or purchased and cancelled, the convertible bonds will be redeemed at 150.15% of their principal amount on 21 November 2011.

During the period from 1 July 2007 to the date of the annual report 2008 approved, Aptus did not receive request from any bondholders to redeem the convertible bonds on the forthcoming Put Option Dates.

The fair value of the liability component of the convertible bonds is estimated by computing the present value of all future cash flow discounted using prevailing market rate of interest for similar instrument with a similar credit rating and with consideration of the convertible bonds. The residual amount, representing the value of the equity component, is credited to Aptus’ reserve account.

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND ANY RELATED HEDGES

No significant exchange risk is expected as the Aptus Group’s cash, borrowings, income and expenses are settled in Hong Kong dollars, RMB or US dollars. The Aptus Group’s major investment and financing strategies are to invest in domestic projects in the PRC by Hong Kong dollars borrowings. As RMB appreciation is expected to continue in the foreseeable future and the Aptus Group’s operating income is substantially denominated in RMB, the Aptus Group did not perform any foreign currency hedging activities during the year. Nevertheless, the Aptus Group will from time to time review and adjust the Aptus Group’s investment and financing strategies based on the RMB, US dollars and Hong Kong dollars exchange rate movement.

EMPLOYEES, REMUNERATION POLICIES AND SHARE OPTION SCHEME

As at 30 June 2008, the Aptus Group had 17 full time staff employed by the Company and its subsidiaries and the Aptus Group’s jointly controlled entities employed 258 full time staff. Remuneration is determined by reference to market terms and the performance, qualification and experience of individual employees. In addition to salaries and provident fund contributions, the Aptus Group also offers medical benefits and training programs. Share options may be granted to employees based on performance evaluation in order to provide incentives and rewards.

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APPENDIX I

SIGNIFICANT INVESTMENT

For the year ended 30 June 2008, the Aptus Group did not have any significant investments.

MATERIAL ACQUISITION AND DISPOSAL OF SUBSIDIARIES

For the year ended 30 June 2008, the Aptus Group did not have any material acquisition and disposal of subsidiaries.

For the year ended 30 June 2009

FINANCIAL REVIEW

On 24 April 2009, Aptus entered into agreements relating to the termination of Profit Sharing Rights and the disposal of the 48.33% equity interest in the Changde Joint Venture and 33% equity interest in the Hunan Joint Venture. Financial information of the Profit Sharing Rights and the Natural Gas Joint Ventures for the Year 2009 were classified as discontinued operations. The comparative figures for the Year 2008 had been restated accordingly.

Turnover

Regarding the continuing operation, the turnover from edible oil trading business decreased by approximately 53.8% from approximately HK$39.6 million in the Year 2008 to approximately HK$18.3 million in the Year 2009, which was resulted from the continuous increase in the price of consumer goods thus reducing margins and demand.

Gross Profit

The details of gross profit and gross profit ratio of the Aptus Group are as follows:

	2009	2009	2008	2008
	Gross	Gross Profit	Gross	Gross Profit
	Profit	Ratio	Profit	Ratio
	HK$’000	%	HK$’000	%
Continuing operation
– trading of edible oil	46	0.3	253	0.6

As mentioned in the section headed of “Turnover” above, in reaction to tougher market conditions, the low-price strategy adopted by the Aptus Group’s edible oil trading business resulted in lower gross margins in the Year 2009.

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APPENDIX I

Loss From Discontinued Operations

Loss from discontinued operations represented net result of the Aptus Group’s share of net profit of the Natural Gas Joint Ventures for the Year 2009 of approximately HK$3.6 million, net loss of termination of the Profit Sharing Rights of approximately HK$0.4 million and impairment loss on goodwill for acquisition of CNPC Energy of approximately HK$31.8 million. That for the Year 2008 of approximately HK$4 million only represented the Aptus Group’s share of net loss of the Natural Gas Joint Ventures of approximately HK$3.2 million and net loss of termination of the Profit Sharing Rights of approximately HK$0.8 million.

The result of the Natural Gas Joint Ventures improved over the Year 2009. The Aptus Group’s share of the Natural Gas Joint Ventures’ net profit for the Year 2009 was approximately HK$3.6 million while that of net loss of approximately HK$4 million was recorded in the Year 2008. The improvement in the performance was principally attributable to the increases in the Changde Joint Venture’s end users and the number of distribution stations of Hunan Joint Venture.

In connection with the Profit Sharing Rights, no commercial production was launched during the Year 2009 and the previous corresponding period. Losses for the Profit Sharing Rights, mainly representing administrative expenses, of approximately HK$0.4 million and HK$0.8 million were derived in the Year 2009 and the Year 2008, respectively. On 24 April 2009, management of the Group entered into a termination agreement for the Profit Sharing Rights. Accordingly, the goodwill on acquisition of CNPC Energy, which held the rights on the Profit Sharing Arrangement, of approximately HK$31.8 million was written off in the current year.

On 24 April 2009, Aptus entered into agreements to dispose of its equity in the Natural Gas Joint Ventures. The transactions have been completed in September 2009. Gain on disposal of the Natural Gas Joint Ventures is to be recorded in the Aptus Group’s quarterly report for the three months ending 30 September 2009.

Operating Costs

The Aptus Group’s operating costs, representing mainly of administrative expenses, decreased by about HK$15.4 million from approximately HK$20.3 million in the Year 2008 to approximately HK$4.9 million in the Year 2009. The decrease was mainly attributable to (i) tightened control of staff costs and (ii) no share option expense recorded in the Year 2009. Staff costs decreased from approximately HK$9.7 million in the Year 2008 to approximately HK$2.1 million in the Year 2009. Share option expense charged in the Year 2008 amounted to approximately HK$7.7 million.

Finance Costs

The increase in finance costs over the Year 2009 from approximately HK$33.1 million in the Year 2008 to approximately HK$37 million in the Year 2009, was mainly attributable to the increase in imputed finance costs of the convertible bonds, which were issued by the Group in November 2006.

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APPENDIX I

LIQUIDITY AND FINANCIAL RESOURCES

As at 30 June 2009, the Aptus Group held assets of approximately HK$387.2 million (Year 2008: approximately HK$408.6 million), including cash and bank balances of approximately HK$2 million (Year 2008: approximately HK$40.6 million). Significant decrease in cash and bank balances as compared to immaterial fluctuation in the Aptus Group’s total assets was noted because substantial cash and bank balances held by the Natural Gas Joint Ventures of approximately HK$38.9 million have been classified as assets held for sale in the current year.

As at 30 June 2009, the Aptus Group had borrowed loans (including convertible bonds) of approximately HK$339.4 million (Year 2008: HK$399.9 million). Decrease in outstanding bank and other borrowings noted in the current year was principally attributable to the net effect of (i) the borrowings held by the Natural Gas Joint Ventures (Year 2009: HK$108.7 million; Year 2008: HK$97.8 million) have been classified as liabilities associated with assets classified as held for sale in the Year 2009 but as bank and other borrowings in the Year 2008; and (ii) imputed finance costs of approximately HK$34.8 million accrued to the convertible bonds during the Year 2009.

The Aptus Directors consider it is not meaningful to publish a gearing ratio for the Aptus Group until such time as the Aptus Group is in a positive shareholders’ equity position.

CONTINGENT LIABILITIES

As at 30 June 2009, the Aptus Group had no contingent liabilities.

CHARGES ON GROUP’S ASSETS

As at 30 June 2009, 100% of the issued share capital of Good United Management Limited (“GUM”), a wholly-owned subsidiary of Aptus, was pledged in favor of the holder(s) of the convertible bonds. GUM held 70% equity interests in CNPC Energy, which owned the Profit Sharing Rights. In addition, bank borrowings of approximately HK$59.9 million were secured by the gas network of the Hunan Joint Venture.

CAPITAL STRUCTURE

During the year ended 30 June 2009, Aptus issued 18,450,000 shares based on share options granted in 2004 under the share option scheme to eligible participants. As at 30 June 2009, the number of Aptus’ issued shares was enlarged to 1,762,841,428 shares.

CONVERTIBLE BONDS

On 22 November 2006, Aptus issued convertible bonds due on 21 November 2011 with a principal amount of HK$234,000,000, which is with a gross yield at 11% per annum, calculated on a semi-annual basis. The convertible bonds were issued for the purpose of the acquisition of a 48.33% equity interest in Changde Joint Venture and a 33% equity interest in the Hunan Joint Venture and general working capital purposes.

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FINANCIAL INFORMATION ON THE APTUS GROUP

On 14 May 2009, Aptus and China Vanguard Group Limited, the ultimate holding company of Aptus, announced in the joint announcement that, in relation to the sales agreements of disposal of interest in Changde Joint Venture and Hunan Joint Venture (the “Sales Agreements”), part of the proceeds from the Sales Agreements would likely be applied to redeem the convertible bonds. On 28 August 2009, Aptus entered into a deed with Evolution, the sole beneficial owner of the convertible bonds, undertook to Aptus that Evolution will not exercise its conversion right under the convertible bonds and Aptus undertook to Evolution that Aptus will redeem the convertible bonds when enough cash amount is available for the redemption.

On each of 21 November 2009 and 21 November 2010 (each a “Put Option Date”), each bondholder will have the right to require Aptus to redeem in whole or in part of the convertible bonds of such bondholder(s) on the Put Option Date together with interest accrued to the Put Option Date.

Unless previously redeemed, converted, purchased and cancelled, the convertible bonds will be redeemed at 150.15% of their principal amount on 21 November 2011.

The fair value of the liability component, as stated in the consolidated balance sheet and note 30, of the convertible bonds is estimated by computing the present value of all future cash flow discounted using prevailing market rate of interest for similar instrument with a similar credit rating and with consideration of the convertible bonds. The residual amount, representing the value of the equity component, is credited to Aptus’ reserve account.

For details of convertible bonds, please refer to the joint announcements of Aptus and China Vanguard Group Limited (“China Vanguard”) dated 9 November 2006, 23 October 2008, 7 January 2009 and 28 August 2009.

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND ANY RELATED HEDGES

No significant exchange risk is expected as the Aptus Group’s cash, borrowings, income and expenses are settled in Hong Kong dollars, RMB or US dollars. The Aptus Group’s major investment and financing strategies are to invest in domestic projects in the PRC by Hong Kong dollars borrowings. As the exchange rate of RMB against Hong Kong dollars is relatively stable and the Aptus Group’s operating income is substantially denominated in RMB, the Aptus Group did not perform any foreign currency hedging activities during the year. Nevertheless, the Aptus Group will from time to time review and adjust the Aptus Group’s investment and financing strategies based on the RMB, US dollars and Hong Kong dollars exchange rate movement.

EMPLOYEES, REMUNERATION POLICIES AND SHARE OPTION SCHEME

As at 30 June 2009, the Aptus Group had 13 staff employed by Aptus and its subsidiaries. Remuneration is determined by reference to market terms and the performance, qualification and experience of individual employees. In addition to salaries and provident fund contributions, the Aptus Group also offers medical benefits and training programs. Share options may be granted to employees based on performance evaluation in order to provide incentives and rewards.

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SIGNIFICANT INVESTMENT

For the year ended 30 June 2009, the Aptus Group did not have any significant investments.

MATERIAL ACQUISITION AND DISPOSAL

On 24 April 2009, Aptus entered into agreements relating to the disposal of the 48.33% equity interest in the Changde Joint Venture and 33% equity interest in the Hunan Joint Venture own by Aptus. These transactions, together with the termination agreement regarding the Profit Sharing Rights were approved by the shareholders in the extraordinary general meeting held on 10 July 2009. For the details of the transactions, please refer to the joint circular of Aptus and China Vanguard Group Limited dated 24 June 2009.

For the period ended 31 October 2009

FINANCIAL REVIEW

Financial information regarding the Natural Gas Joint Ventures and the profit sharing rights with respect to the Xin Jiang Oilfield for the four months ended 31 October 2009 (“Period 2009”) have been classified as discontinued operations and the comparative figures for the four months ended 31 October 2008 (“Period 2008”) have been restated accordingly. The figures for Period 2009 have been audited whereas the figures for Period 2008 were not audited.

Turnover

For Period 2009, the Aptus Group recorded a consolidated turnover from continuing operations of HK$3.07 million as compared to approximately HK$18.01 million for Period 2008 due to continuing tough market conditions.

Gross Profit

The gross profit generated by the continuing operations for the Period 2009 decreased by 82.6% to approximately HK$8,000 (Period 2008: approximately HK$46,000) with the gross profit ratio remaining stable at 0.26% for Period 2009 as compared to 0.25% for Period 2008.

For the four months ended 31 October 2009, there was a significant turnaround in the bottom line with net profit after taxation of approximately HK$162.6 million against a net loss of approximately HK$17.7 million for Period 2008. This turnaround is due predominantly to the gain from the disposals of the Natural Gas Joint Ventures of approximately HK$197.7 million.

Financial resources and liquidity

As at 31 October 2009, the Group held assets of approximately HK$440.5 million (30 June 2009: approximately HK$387.2 million), including cash and bank balance of approximately HK$3 million (30 June 2009: approximately HK$2 million). The increase in the Group’s total assets by approximately HK$53.3 million and the decrease in the liabilities associated with assets classified as held for sale of approximately HK$123.8 million over the four months ended 31 October 2009

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were principally due to the completion of the disposal transaction of Natural Gas Joint Venture. Profit from the discontinued operation of approximately HK$180.9 million for the four months ended 31 October 2009 was recognized.

The Group maintained stable debt position over the four months ended 31 October 2009. As at 31 October 2009, the Group had outstanding borrowings of approximately HK$38.0 million (30 June 2009: approximately HK$36.1 million) and convertible bonds of approximately HK$314.3 million (30 June 2009: approximately HK$303.2 million).

The gearing ratio, defined as the ratio between total borrowings (including convertible bonds) and the Group’s capital and reserves was approximately 609%. The Group’s gearing ratio has been improved significantly over the current period. As at 30 June 2009, the Group was in a negative shareholders’ equity position and no gearing ratio was available.

CAPITAL STRUCTURE

During the four months ended 31 October 2009, the Company issued 18,670,000 shares to eligible participants due to shares options exercised. As at 31 October 2009, the number of the Company’s issued shares was enlarged to 1,781,511,428 shares.

SIGNIFICANT INVESTMENTS, ACQUISITIONS AND DISPOSALS

On 30 October 2009, the Group has entered into a sale and purchase agreement to acquire Casdon Management Limited, which is principally engaged in the operation and management of certain properties that provide lawful storage spaces as ancestral halls for private worship of the deceased ancestors by their descendants or a common ancestor or the members of a private institute or corporation in Hong Kong.The shareholders’ meeting is yet to be held to approve the acquisition as of the Latest Practicable Date.

The disposal of 48.33% interest in Changde Joint Venture and 33% interest in Hunan Joint Venture had completed on 10 September 2009 and 11 September 2009 respectively.

In addition to the above, the Group did not make any significant acquisitions, investments or disposals during the four months ended 31 October 2009.

CHARGES ON THE GROUP’S ASSETS

As at 31 October 2009 and up to the Latest Practicable Date, the 100% of the issued share capital of GUM, a wholly-owned subsidiary of the Company, was pledged in favour of the holder(s) of the convertible bonds issued by the Company on 22 November 2006. GUM held 70% equity interests in CNPC Huayou Cu Energy Investment Co., Limited.

As at 30 June 2009, borrowings of approximately HK$59,907,000 had been secured by the gas network of Hunan Huayou Natural Gas Transportation & Distribution Company Limited (“Hunan Huayou”). The Company’s equity in assets of Hunan Huayou and the Company’s obligation in respect of the borrowings of Hunan Huayou were included in assets classified as held for sale and liabilities associated with assets classified as held for sale respectively, in the Company’s consolidated statement of financial position as at 30 June 2009.

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APPENDIX I

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND ANY RELATED HEDGES

No significant exchange risk is expected as the Group’s cash, borrowings, income and expenses are settled in Hong Kong dollars, RMB or US dollars. The Group’s major investment and financing strategies are to invest in domestic projects in the PRC by Hong Kong dollars borrowings. As significant RMB depreciation is not expected in the foreseeable future and the Group’s operating income is substantially denominated in RMB, the Group did not perform any foreign currency hedging activities during the period. Nevertheless, the Group will from time to time review and adjust the Group’s investment and financing strategies based on the RMB, US dollars and Hong Kong dollars exchange rate movement.

CONTINGENT LIABILITIES

The Group did not have any contingent liabilities as at 31 October 2009 (30 June 2009: NIL).

EMPLOYEES AND REMUNERATION POLICIES

The Group employed 12 full-time staff employed by the Company and its subsidiaries as at 31 October 2009. Employees’ remuneration is in line with market conditions, working experience and performance. In addition to basic salaries and provident fund contributions, the Group also offers medical benefits and training programs.

4. INDEBTEDNESS, LIQUIDITY AND FINANCIAL RESOURCES

A. STATEMENTS OF INDEBTEDNESS

As at 28 February 2010, the Enlarged Aptus Group has borrowings of approximately HK$117,684,000 comprising:

(a) Unsecured borrowings of approximately HK$333,000; and
(b) Liability component of convertible bonds of approximately HK$117,351,000.

The convertible bonds of approximately HK$117,684,000 are secured by 100% of the issued share capital of Good United Management Limited, a subsidiary of Aptus Holdings Limited.

Save as aforesaid and apart from intra-group liabilities, the Enlarged Aptus Group did not have any outstanding mortgages, charges, debentures, loan capital, debt securities, loans, bank overdraft or other similar indebtedness, financial lease or hire purchase commitments, liabilities under acceptances or acceptance credits or guarantees or other material contingent liabilities as at 28 February 2010.

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5. WORKING CAPITAL

The Aptus Directors, after due and careful consideration, are of the opinion that, in the absence of unforeseen circumstances, the Enlarged Aptus Group will have sufficient working capital for its requirements for the next 12 months from the date of this joint circular.

6. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Aptus Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 October 2009, being the date to which the Aptus Group’s latest published audited accounts were made up.

7. BUSINESS PROSPECTS

Trend of business of the Aptus Group

Upon completion of the disposals of the natural gas joint ventures, the Aptus Group’s principal activity is the trading of edible oil via its non-listed Singapore subsidiary.

Regarding the continuing operation for the four months ended 31 October 2009, the turnover from edible oil and mineral materials trading business decreased by approximately 82.6% from approximately HK$46,000 million during the four months ended 31 October 2008 to approximately HK$8,000 million during the four months ended 31 October 2009, which was resulted from the continuous increase in the price of consumer goods.

Such operations are expected to improve on the back of increasing health consciousness and as the global economic conditions recover. Management envisions Aptus’ edible oil trading business to not only be able to regain the temporary loss in revenue experienced in the four months ending 31 October 2009 but to extend beyond. Meanwhile, the management of the Aptus Group intends to seek out for favourable investment opportunities and bring such new opportunities to fruition.

Trading and financial prospects of the Enlarged Aptus Group

Upon completion of the Acquisition, the Aptus Group’s principal activity will be the trading of edible oil and mineral materials via its non-listed Singapore subsidiary and provision of spaces for private worship of the deceased ancestors by their descendants of a common ancestor or the members of a private institute or corporation in Hong Kong via the Target Group.

The Aptus Directors consider that Aptus’ growth momentum will be enhanced by diversifying into the new business. In view of the growing demand for provision of spaces for private worship of the deceased ancestors by their descendants of a common ancestor or the members of a private institute or corporation in Hong Kong, the Aptus Directors expect a stable revenue source from the newly acquired business. In view of the prospects relating to new business sector, Aptus believes that the new project will be a successful strategy for Aptus’ business.

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The Aptus Group intends to finance the new business by its internal generated cash flows and external fund sources including but not limited to placing of shares, issuance of convertible bonds and bank and other borrowings.

Convertible Bonds

Pursuant to the third amendment deed entered into on 16 November 2009, amendments were made to the terms of the convertible bond(s) relating to the timing of the right of the bondholder(s) to require full or partial redemption of the convertible bond(s) to the effect that the bondholder(s) now may require redemption of all or some only of the convertible bond(s) at their early redemption amount together with interest accrued to the put option date on (i) any date during the period from 21 November 2009 to 14 January 2010 (both dates inclusive) (the “ Period ”); (ii) 15 January 2010; and (iii) 21 November 2010, provided that in the case of a put option date during the Period, the redemption amount shall have been converted from RMB into HK$ and received by Aptus in full in freely disposable cleared funds in Hong Kong and is available to redeem the convertible bond(s). Amendment has also been made to the requisite notice period for Aptus to require full redemption of the convertible bond(s) on or at any time after 21 November 2008 and prior to 11 November 2011 so that “not less than five business days’ notice” is required.

The November Deed was also entered into on 16 November 2009.

On 8 January 2010, the bondholder(s) issued a put exercise notice requiring full redemption of the convertible bond(s) in the outstanding principal amount of HK$234,000,000 by 15 January 2010. All parties are proceeding on the basis that the outstanding amounts payable must be paid by 15 January 2010 or within a 30 days grace period and that no event of default will occur unless due payment is not made by 14 February 2010 and Bank of New York Mellon (“Trustee”) serves notice of an event of default after that date. Aptus believes that it has sufficient internal resources to retire all outstanding principal and accrued but unpaid interest and intends to redeem the convertible bond(s).

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APPENDIX II

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22 April 2010

The Directors China Vanguard Group Limited Room 2201, 22/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Dear Sirs,

INTRODUCTION

We set out below our report on the financial information (the “Financial Information”) of China Vanguard Group Limited (the “Company”) and its subsidiaries (together, the “Group”) set out in Appendix II below, for inclusion in the circular of the Company dated 22 April 2010 (the “Circular”) in connection with the very substantial acquisition regarding acquisition of the entire equity interests of Casdon Management Limited and very substantial disposal regarding disposal of Aptus Holdings Limited by potential dilution. As a result of the very substantial acquisition of the entire equity interests of Casdon Management Limited by Aptus Holdings Limited (the “Aptus”), an indirect non wholly-owned subsidiary of the Company and assuming there will not be any further issue and repurchase of Aptus Shares, China Vanguard’s indirect interests in Aptus would be potentially diluted by up to 21.10 percentage points from holding approximately 33.95% as at the Latest Practicable Date to approximately 12.85% by assuming full conversion of the Convertible Bonds into Conversion Shares of Aptus at the Initial Conversion Price, while the Company will continue to hold, indirectly, 700,596,428 Aptus Shares prior to the placing of 280,000,000 Aptus shares on 13 April 2010. Upon the issue of the Conversion Shares in full, Aptus will cease to be an indirect non wholly-owned subsidiary of the Company and will then be treated as an available-for-sale financial asset. The Acquisition constitutes a very substantial acquisition on the part of the Company and also constitutes very substantial disposal of Aptus by potential dilution.

The Financial Information comprises the consolidated statement of financial position of the Group as at 30 June 2007, 2008, 2009 and 31 October 2009 and the consolidated income statement and the consolidated statement of comprehensive income, the consolidated statements of changes in equity and the consolidated statement of cash flows of the Group for each of the years ended 30 June 2007, 2008, 2009 and for the four months ended 31 October 2009 (the “Relevant Periods”), and a summary of significant accounting policies and other explanatory notes.

The Company was incorporated in the Cayman Islands on 11 December 2001 as an exempted company with limited liability under the Companies Law of the Cayman Islands.

As at the date of this report, the Company has direct and indirect interests in the principal subsidiaries and jointly controlled entities as set out in note 44 and 45 of Appendix II below respectively. The Company and its subsidiaries have adopted 30 June as their financial year end date. The audited financial statements of the Group for the three years ended 30 June 2007, 2008 and 2009 were audited by W.H. Tang & Partners CPA Limited.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

BASIS OF PREPARATION

The Financial Information has been prepared by the directors of the Company based on the audited consolidated financial statements of the Group for each of the years ended 30 June 2007, 2008, 2009 and for the four months ended 31 October 2009 on the basis set out in note 3 below. The Financial Information has been prepared in accordance with Hong Kong Financial Reporting Standards (the “HKFRSs”), which also include Hong Kong Accounting Standards (“HKAS”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and accounting principles generally accepted in Hong Kong.

DIRECTORS’ RESPONSIBILITY

REPORTING ACCOUNTANT’S RESPONSIBILITY

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the Financial Information for each of the years ended 30 June 2007, 2008, 2009 and for the four months ended 31 October 2009 for the purpose of this report, gives a true and fair view of the state of the Group’s affairs as at 30 June 2007, 2008, 2009 and 31 October 2009 and of the Group’s results and cash flows for each of the Relevant Periods.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Emphasis of matters

Without qualifying in our opinion, we would like to draw your attention to note 4 in the financial statements which indicates that the possible early redemption request from the convertible bond holder to exercise their right on or before 30 April 2010. These conditions, along with other matters as set forth in note 4 regarding the convertible bonds, indicate the existence of a material uncertainty which may cast significant doubt about the Company’s ability to continue as a going concern.

COMPARATIVE FINANCIAL INFORMATION

Respective responsibilities of directors and reporting accountants

Our responsibility is to form a conclusion, based on our review, on the Comparative Unaudited Financial Information. For the purpose of this report, we conduct our review of the Comparative Unaudited Financial Information in accordance with the Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by HKICPA. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets and liabilities and transactions. It is substantially less in scope and provides a lower level of assurance than an audit. Accordingly, we do not express an opinion on the Comparative Unaudited Financial Information.

Review conclusion in respect of the 2008 comparative financial information

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

I. FINANCIAL INFORMATION

The following is the Financial Information of the Group as at 30 June 2007, 2008, 2009 and 31 October 2009 and for each of the years ended 30 June 2007, 2008 and 2009 and for the period from 1 July 2009 to 31 October 2009, prepared on the basis set out in note 3 below.

Accordingly, no adjustment was made by the Reporting Accountants against the figures as shown in the published accounts.

Consolidated income statement

Notes Continuing operations Revenue 8 Cost of sales Gross profit Other revenue 8 Selling and distribution costs Administrative expenses Gain on disposal of subsidiaries Gain (loss) on change in fair value for derivative financial instruments Finance costs 9 Loss before taxation 10 Income tax expenses 13 Loss for the year/period from continuing operations Discontinued operations Profit (loss) for the year/period from discontinued operations 14 Profit (loss) for the year/period	2007 HK$’000 88,246 (63,410) 24,836 5,908 (4,972) (134,223) 30,635 – (24,526) (102,342) (1,411) (103,753) 272 (103,481)	For the year ended 30 June 2008 HK$’000 78,292 (46,707) 31,585 4,533 (2,657) (89,310) – (13,347) (37,476) (106,672) (2,306) (108,978) (4,036) (113,014)	2009 HK$’000 85,079 (40,473) 44,606 8,565 (8,095) (75,607) – 25,629 (60,658) (65,560) (1,149) (66,709) (28,557) (95,266)	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 32,051 33,927 (13,071) (23,179) 18,980 10,748 388 2,171 (2,928) (1,928) (138,329) (20,625) – – (31,646) – (17,364) (19,908) (170,899) (29,542) (1,015) 740 (171,914) (28,802) 180,875 (3,413) 8,961 (32,215)	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 32,051 33,927 (13,071) (23,179) 18,980 10,748 388 2,171 (2,928) (1,928) (138,329) (20,625) – – (31,646) – (17,364) (19,908) (170,899) (29,542) (1,015) 740 (171,914) (28,802) 180,875 (3,413) 8,961 (32,215)
					10,748 2,171 (1,928) (20,625) – – (19,908)
					(29,542) 740
					(28,802)
					(3,413)
					(32,215)

II – 4

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Notes Attributable to: Equity holders of the Company Continuing operations Discontinued operations Non-controlling interests Continuing operations Discontinued operations Loss per share From continuing operations and discontinued operations Basic 17 From continuing operations Basic 17	2007 HK$’000 (72,793) 272 (72,521) (30,960) – (103,481) (HK7.75 cents) (HK7.78 cents)	For the year ended 30 June 2008 HK$’000 (112,369) (4,036) (116,405) 3,391 – (113,014) (HK8.03 cents) (HK7.75 cents)	2009 HK$’000 (72,086) (28,557) (100,643) 5,377 – (95,266) (HK3.12 cents) (HK2.24 cents)	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) (181,290) (30,290) 180,875 (3,413) (415) (33,703) 9,376 1,488 – – 8,961 (32,215) (HK0.013 cents) (HK1.04 cents) (HK5.64 cents) (HK0.94 cents)	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) (181,290) (30,290) 180,875 (3,413) (415) (33,703) 9,376 1,488 – – 8,961 (32,215) (HK0.013 cents) (HK1.04 cents) (HK5.64 cents) (HK0.94 cents)
					(33,703)
					1,488 –
					(32,215)

					(HK1.04 cents)

					(HK0.94 cents)

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Consolidated statement of comprehensive income

Notes Profit (loss) for the year/period Other comprehensive income for the year/period Exchange differences on translation of financial statements of overseas operations Continuing operations Discontinued operations Release of translation reserve due to disposal of jointly controlled entities Continuing operations Discontinued operations Total comprehensive income for the year/period Attributable to: Equity shareholders of the Company Continuing operations Discontinued operations Non-controlling interests Continuing operations Discontinued operations Total comprehensive income for the year/period	2007 HK$’000 (103,481) 7,827 – – – (95,654) (66,320) – (66,320) (29,334) – (29,334) (95,654)	For the year ended 30 June 2008 HK$’000 (113,014) 27,939 – – – (85,075) (89,434) – (89,434) 4,359 – 4,359 (85,075)	2009 HK$’000 (95,266) (835) – – – (96,101) (101,434) – (101,434) 5,333 – 5,333 (96,101)	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 8,961 (32,215) 2,677 4,763 – – – – (19,990) – (8,352) (27,452) (181,180) (34,963) 160,885 – (20,295) (34,963) 11,943 7,511 – – 11,943 7,511 (8,352) (27,452)	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 8,961 (32,215) 2,677 4,763 – – – – (19,990) – (8,352) (27,452) (181,180) (34,963) 160,885 – (20,295) (34,963) 11,943 7,511 – – 11,943 7,511 (8,352) (27,452)
					(27,452)

					(34,963) –
					(34,963)
					7,511 –
					7,511
					(27,452)

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Consolidated statement of financial position

Notes Non-current assets Property, plant and equipment 18 Goodwill 19 Other intangible assets 20 Interest in associates 21 Available-for-sale financial asset 22 Prepaid lease payments 23 Construction in progress 24 Current assets Inventories 25 Trade and other receivables and prepayments 26 Prepaid lease payments – current portion 23 Tax recoverable Pledged bank deposits Bank balances and cash 27 Assets classified as held for sale 15 Current liabilities Trade and other payables 28 Tax liabilities Derivative financial instruments 30(b) Bank and other borrowings – due within one year 29 Convertible bonds 30(a) Liabilities associated with assets classified as held for sale 15 Net current assets Total assets less current liabilities	2007 HK$’000 235,697 280,689 2,603 238 – 12,496 14,004 545,727 6,536 89,656 380 – 5,000 204,722 306,294 – 306,294 57,528 1,422 – 5,617 – 64,567 – 64,567 241,727 787,454	At 30 June 2008 HK$’000 276,868 2,297,186 5,358 2,127 63,780 15,502 6,912 2,667,733 6,912 114,487 452 680 5,033 292,600 420,164 – 420,164 66,093 539 100,861 66,745 – 234,238 – 234,238 185,926 2,853,659	At 31 October 2009 2009 HK$’000 HK$’000 54,670 51,297 2,215,971 2,119,796 8,677 9,598 – – 63,780 63,780 – – – – 2,343,098 2,244,471 2,423 2,416 56,040 464,011 – – – – 5,110 5,121 231,195 100,148 294,768 571,696 350,193 – 644,961 571,696 58,081 63,432 1,163 17,290 75,232 36,996 36,145 37,976 – 314,263 170,621 469,957 123,825 – 294,446 469,957 350,515 101,739 2,693,613 2,346,210	At 31 October 2009 2009 HK$’000 HK$’000 54,670 51,297 2,215,971 2,119,796 8,677 9,598 – – 63,780 63,780 – – – – 2,343,098 2,244,471 2,423 2,416 56,040 464,011 – – – – 5,110 5,121 231,195 100,148 294,768 571,696 350,193 – 644,961 571,696 58,081 63,432 1,163 17,290 75,232 36,996 36,145 37,976 – 314,263 170,621 469,957 123,825 – 294,446 469,957 350,515 101,739 2,693,613 2,346,210
				2,244,471
				2,416 464,011 – – 5,121 100,148
				571,696 –
				571,696
				63,432 17,290 36,996 37,976 314,263
				469,957 –
				469,957
				101,739
				2,346,210

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APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Notes Non-current liabilities Bank and other borrowings 29 Convertible bonds 30(a)&(b) Net assets Capital and reserves Share capital 31 Reserves Equity attributable to equity holders of the Company Non-controlling interests Total equity	2007 HK$’000 106,105 243,144 349,249 438,205 9,361 416,336 425,697 12,508 438,205	At 30 June 2008 HK$’000 114,251 471,097 585,348 2,268,311 32,353 2,215,272 2,247,625 20,686 2,268,311	At 31 October 2009 2009 HK$’000 HK$’000 – – 522,739 183,688 522,739 183,688 2,170,874 2,162,522 32,119 32,119 2,102,684 2,082,389 2,134,803 2,114,508 36,071 48,014 2,170,874 2,162,522	At 31 October 2009 2009 HK$’000 HK$’000 – – 522,739 183,688 522,739 183,688 2,170,874 2,162,522 32,119 32,119 2,102,684 2,082,389 2,134,803 2,114,508 36,071 48,014 2,170,874 2,162,522
				183,688
				2,162,522

				32,119 2,082,389
				2,114,508 48,014
				2,162,522

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Statement of financial position of the Company

Notes Non-current assets Property, plant and equipment 18 Interests in subsidiaries 44 Current assets Deposits, prepayments and other receivable 26 Bank balances 27 Current liabilities Trade and other payables 28 Amount due to subsidiaries 44 Derivative financial instruments 30(b) Net current liabilities Total assets less current liabilities Non-current liabilities Convertible bonds 30(b) Net assets Capital and reserves Share capital 31 Reserves 32 Total equity	2007 HK$’000 – 307,975 307,975 3,085 6 3,091 1,796 3,192 – 4,988 (1,897) 306,078 – 306,078 9,361 296,717 306,078	At 30 June 2008 HK$’000 – 2,463,889 2,463,889 63 740 803 6,022 7,421 100,861 114,304 (113,501) 2,350,388 196,773 2,153,615 32,353 2,121,262 2,153,615	At 31 October 2009 2009 HK$’000 HK$’000 379 368 2,411,846 2,287,881 2,412,225 2,288,249 296 712 9,647 10,224 9,943 10,936 3,069 13,734 7,635 7,510 75,232 36,996 85,936 58,240 (75,993) (47,304) 2,336,232 2,240,945 219,495 183,688 2,116,737 2,057,257 32,119 32,119 2,084,618 2,025,138 2,116,737 2,057,257

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Consolidated statement of changes in equity

								Employee				Retained
					Capital	Convertible	share-based		Share			profits/					Non-
		Share		Share	redemption	bonds	redemption		option	Translation	Special	(Accumulated	Discontinued			controlling
		capital	premium		reserve	reserve		reserve	reserve	reserve	reserve	losses) operations			Total		interests	Total
		HK$’000	HK$’000		HK$’000	HK$’000		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000		HK$’000	HK$’000
At 1 July 2006		6,241		290,004	–	–		35,572	39,399	1,935	(1)	24,808		–	397,958		55,893	453,851
Bonus issue		3,120		(3,120)	–	–		–	–	–	–	–		–	–		–	–
Recognition of equity-settled
share based payment		–		–	–	–		–	83,347	–	–	–		–	83,347		–	83,347
Acquisition of jointly controlled
entities		–		–	–	–		–	–	–	–	–		–	–		737	737
Capital contribution from minority
interests		–		–	–	–		–	–	–	–	–		–	–		3,162	3,162
Recognition of equity components
of convertible bonds		–		–	–	10,712		–	–	–	–	–		–	10,712		–	10,712
Disposal of subsidiaries		–		–	–	–		–	–	–	–	–		–	–		(7,381)	(7,381)
Dividend paid to minority
shareholders of subsidiaries		–		–	–	–		–	–	–	–	–		–	–		(10,117)	(10,117)
Reduction on minority holding		–		–	–	–		–	–	–	–	–		–	–		(452)	(452)
Total comprehensive income for the
year		–		–	–	–		–	–	6,201	–	(72,521)		–	(66,320)		(29,334)	(95,654)
At 30 June 2007 and 1 July 2007		9,361		286,884	–	10,712		35,572	122,746	8,136	(1)	(47,713)		–	425,697		12,508	438,205
Released on deemed disposal of a
subsidiary held by a jointly
controlled entity		–		–	–	–		–	–	(12)	–	–		–	(12)		(737)	(749)
Capital contribution from
minority interests		–		–	–	–		–	–	–	–	–		–	–		4,556	4,556
Release of share option reserve		–		–	–	–		–	(120,002)	–	–	120,002		–	–		–	–
Recognition of equity-settled
share based payment		–		–	–	–		–	8,538	–	–	–		–	8,538		–	8,538
Conversion of convertible bonds		1		83	–	–		–	–	–	–	–		–	84		–	84
Shares issued pursuant to sale
and purchase agreement		22,622	1,854,982		–	–		–	–	–	–	–		–	1,877,604		–	1,877,604
Share issued for repayment
of loan		200		16,419	–	–		–	–	–	–	–		–	16,619		–	16,619
Shares issued on exercise of options		169		8,360	–	–		–	–	–	–	–		–	8,529		–	8,529
Discontinued operations		–		–	–	–		–	–	–	–	–		–	–		–	–
Total comprehensive income for the
year		–		–	–	–		–	–	26,971	–	(116,405)		–	(89,434)		4,359	(85,075)
At 30 June 2008 and 1 July 2008		32,353	2,166,728		–	10,712		35,572	11,282	35,095	(1)	(44,116)		–	2,247,625		20,686	2,268,311
Discontinued operations		–		–	–	–		–	–	(19,990)	–	–		19,990	–		–	–
Capital contribution from
minority interests		–		–	–	–		–	–	–	–	–		–	–		10,052	10,052
Shares issued on exercise of warrants		–		22	–	–		–	–	–	–	–		–	22		–	22
Repurchase of shares		(234)		(11,176)	234	–		–	–	–	–	(234)		–	(11,410)		–	(11,410)
Total comprehensive income for the
year		–		–	–	–		–	–	(791)	–	(100,643)		–	(101,434)		5,333	(96,101)
At 30 June 2009 and 1 July 2009		32,119	2,155,574		234	10,712		35,572	11,282	14,314	(1)	(144,993)		19,990	2,134,803		36,071	2,170,874
Release of share option reserve		–		–	–	–		–	(11,282)	–	–	11,282		–	–		–	–
Total comprehensive income for the
period		–		–	–	(10,712)		–	–	110	–	10,297		(19,990)	(20,295)		11,943	(8,352)
At 31 October 2009		32,119	2,155,574		234	–		35,572	–	14,424	(1)	(123,414)		–	2,114,508		48,014	2,162,522

For four months ended 31 October	2008 (Unaudited)
At 1 July 2008		32,353	2,166,728		–	10,712		35,572	11,282	35,095	(1)	(44,116)		–	2,247,625		20,686	2,268,311
Repurchase of shares		(118)		(6,610)	118	–		–	–	–	–	(118)		–	(6,728)		–	(6,728)
Total comprehensive income for the
period		–		–	–	–		–	–	(1,260)	–	(33,703)		–	(34,963)		7,511	(27,452)
At 31 October 2008		32,235	2,160,118		118	10,712		35,572	11,282	33,835	(1)	(77,937)		–	2,205,934		28,197	2,234,131

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Consolidated statement of cash flows

Notes OPERATING ACTIVITIES Profit (loss) before income tax Continuing operations Discontinued operations Adjustment for: Interest income Interest expenses Depreciation of property, plant and equipment Allowances for doubtful receivable Loss on disposal of property, plant and equipment Impairment loss on goodwill Gain on disposal of subsidiaries Gain on disposal of associates Amortization of prepaid lease payments Gain on disposal of a subsidiary held by a jointly controlled entity Loss on deemed disposal of a subsidiary held by a jointly controlled entity Gain on disposal of jointly controlled entities Share option expenses Amortization of other tangible assets Loss arising from settlement of financial liabilities by issuing of shares Provision for obsolete inventories Share of results of associates (Gain) loss on change in fair value for derivative financial instruments Reversal of allowances recognized in respect of doubtful receivable Operating cash flows before movements in working capital Decrease (increase) in inventories Decrease (increase) in trade and other receivables and prepayments (Decrease) increase in trade and other payables Cash from (used in) operations Tax refund (paid) NET CASH FROM (USED IN) OPERATING ACTIVITIES	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 (102,342) (106,672) (65,560) 303 (4,451) (27,072) (102,039) (111,123) (92,632) (2,460) (3,857) (4,025) 24,537 41,874 66,112 10,670 28,837 34,343 – 5,848 697 70 31 334 145 – 31,761 (30,635) – – – – (8) 152 461 466 – – (1,158) – 7 – – – – 83,347 8,538 – 1,848 1,943 1,326 – 2,810 – – 438 37 – 40 (124) – 13,347 (25,629) – – (100) (14,365) (10,806) 11,400 (1,712) (958) 2,738 (872) (25,540) 48,099 16,264 20,838 3,779 (685) (16,466) 66,016 (1,623) (3,846) 50 (2,308) (20,312) 66,066	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) (170,899) (29,542) 197,694 (3,413) 26,795 (32,955) (255) (1,534) 18,379 10,850 5,108 21,261 – – 2 – 96,175 – – – – – – 157 – (1,158) – – (197,907) – – – 256 442 – – – – – (124) 31,646 – – – (19,801) (3,061) 7 1,730 (4,735) 82,219 5,360 (9,595) (19,169) 71,293 (1,707) (328) (20,876) 70,965	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) (170,899) (29,542) 197,694 (3,413) 26,795 (32,955) (255) (1,534) 18,379 10,850 5,108 21,261 – – 2 – 96,175 – – – – – – 157 – (1,158) – – (197,907) – – – 256 442 – – – – – (124) 31,646 – – – (19,801) (3,061) 7 1,730 (4,735) 82,219 5,360 (9,595) (19,169) 71,293 (1,707) (328) (20,876) 70,965
			(32,955) (1,534) 10,850 21,261 – – – – – 157 (1,158) – – – 442 – – (124) – –
			(3,061) 1,730 82,219 (9,595)
			71,293 (328)
			70,965

II – 11

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Notes INVESTING ACTIVITIES Interest received Purchases of property, plant and equipment Purchases of other intangible assets Purchases of construction in progress Increase in pledged bank deposits Cash consideration on acquisition of jointly controlled entities Reduction on minority shareholding Proceeds from disposal of subsidiaries Proceeds from disposal of property, plant and equipment Proceeds from disposal of associates Redemption of convertible bonds Cash outflow from disposal of jointly controlled entities Acquisition of subsidiaries, net of cash and cash equivalents acquired 34 Disposal of a subsidiary held by a jointly controlled entity 34 Deemed disposal of a subsidiary held by a jointly controlled entity 34 Purchases of prepaid lease payments NET CASH USED IN (FROM) INVESTING ACTIVITIES FINANCING ACTIVITIES Interest paid Issue of shares Net repayment of borrowings Capital contribution from minority interests Proceeds from issue of convertible bonds Dividend paid to minority shareholders of subsidiaries Payment of shares buy-backs NET CASH USED IN (FROM) FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR/PERIOD Effect of foreign exchange rate changes CASH AND CASH EQUIVALENTS AT END OF THE YEAR/PERIOD, represented by Bank balances and cash Cash and cash equivalents included in assets held for sale	2007 HK$’000 2,484 (46,620) – (5,871) 8,308 (120,902) (96,773) 31,219 21 – – – – – – (99) (228,233) (4,464) – (39,354) 3,162 234,000 (10,117) – 183,227 (47,314) 244,983 7,053 204,722 204,722 – 204,722	For the year ended 30 June 2008 HK$’000 3,857 (14,191) (693) (17,249) (33) – – – – – – – 138,160 – (208) (2,191) 107,452 (5,306) 8,529 (17,929) 4,556 – – – (10,150) 76,990 204,722 10,888 292,600 292,600 – 292,600	2009 HK$’000 4,025 (18,860) (4,653) (22,994) (77) – – – 286 2,033 – – – 1,351 – (316) (39,205) (11,835) 22 (35,716) 10,052 – – (11,410) (48,887) (22,026) 292,600 (519) 270,055 231,195 38,860 270,055	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 255 1,534 (1,712) (10,905) (1,173) – – – (11) – – – – – – – – – – 2,033 (111,135) – (39,297) – – – – – – – – – (153,073) (7,338) (1,923) (3,181) – – 1,831 (87,043) 1,943 – – – – – – (6,728) 1,851 (96,952) (172,098) (33,325) 270,055 292,600 2,191 (7,842) 100,148 251,433 100,148 251,433 – – 100,148 251,433	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 255 1,534 (1,712) (10,905) (1,173) – – – (11) – – – – – – – – – – 2,033 (111,135) – (39,297) – – – – – – – – – (153,073) (7,338) (1,923) (3,181) – – 1,831 (87,043) 1,943 – – – – – – (6,728) 1,851 (96,952) (172,098) (33,325) 270,055 292,600 2,191 (7,842) 100,148 251,433 100,148 251,433 – – 100,148 251,433
					(7,338)
					(3,181) – (87,043) – – – (6,728)
					(96,952)
					(33,325)
					292,600 (7,842)
					251,433

					251,433 –
					251,433

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APPENDIX II

1. GENERAL INFORMATION

The consolidated financial information is presented in Hong Kong dollars which is the same as the functional currency of the Company.

The principal activities of the Company is investment holding. The activities of its principal subsidiaries and jointly controlled entities are set out in notes 44 and 45 respectively.

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

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective,in these Financial Information.

HKFRS 9 Financial Instrument[1] HKAS 24 (Revised) Related Party Disclosures[2] HK (IFRIC)–Int 19 Extinguishing Financial Liabilities with Equity Instruments[3]

Apart from the above, the HKICPA has also issued Improvements to HKFRSs^ which sets out amendments to a number of HKFRSs primarily with a view to reviewing inconsistencies and clarify wording.

1 Effective for annual periods beginning on or after 1 January 2010 2 Effective for annual periods beginning on or after 1 January 2011
3 Effective for annual periods beginning on or after 1 July 2010
^ Improvements to HKFRSs issued on May 2009, contain amendments to HKFRS 2, HKFRS 5, HKFRS 8, HKAS 1, HKAS 7, HKAS 17, HKAS 18, HKAS 36, HKAS 38, HKAS 39, HK(IFRIC)-Int 9 and HK(IFRIC)Int 16. These amendments are effective for annual periods beginning on or after 1 January 2010 although there are separate transitional provisions for each standard.

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APPENDIX II

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation of the financial information

The consolidated financial information for the Relevant Periods comprise the Company, its subsidiaries, its jointly controlled entities and the Group’s interest in associates.

Assets of disposal group classified as held for sale is stated at lower of carrying amount and fair value less costs to sell.

Subsidiaries and non-controlling interests

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APPENDIX II

In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less any impairment losses.

Associates

Goodwill

On disposal of a cash-generating unit or an associate during the year, any attributable amount of purchased goodwill is included in the calculation of the profit or loss on disposal.

Non-current assets held for sale and discontinued operation

(a) Non-current assets (or assets of 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. A disposal group is a group of assets to be disposed of together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction.

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APPENDIX II

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.

(b) Discontinued operation

Where an operation is classified as discontinued, a single amount is presented on the face on the income statement, which comprises:

the post-tax profit or loss of the discontinued operations; and
the post-tax gain or loss recognized on the measurement to fair value less costs to sell, or on the disposal, of the assets or disposal group(s) constituting the discontinued operation.

Business combinations

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

Interests in jointly controlled entities

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APPENDIX II

Revenue recognition

Revenue from sales of gas and gas appliances are recognized when goods are delivered and title has passed.

Gas transportation revenue and gas connection fee income are recognized when the corresponding services are performed.

Sales of goods are recognized when goods are delivered and title has been passed.

Revenue from the provision of lottery-related hardware and software systems is recognized when the services are rendered.

Revenue from the provision of Karaoke CMS services and licence fee collection business (“Karaoke CMS”) is recognized when it is probable that the economic benefit will flow to the Group.

Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Property, plant and equipment

Property, plant and equipment, comprising leasehold land and buildings, leasehold improvement, plant and machinery, furniture, fixtures and equipment, motor vehicles, computer equipment, gas distribution network, gas storage equipment and other equipment are stated at cost less accumulated depreciation and any identified impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the property, plant and equipment to its working condition and location for its intended use. Expenditure incurred after property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the income statement in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the property, plant and equipment, the expenditure is capitalized as an additional cost of that property plant and equipment.

Leasehold land and buildings	3%-5% or over the lease term but limited to 15 years
Furniture, fixtures and equipment	7%-25%
Computer equipment	20%-25%
Plant and machinery	3%-12%
Motor vehicles	6%-20%
Gas distribution network	5%-10%
Gas storage equipment	5%-31%
Leasehold improvement	Over the lease term

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Construction in progress

Inventories

Leasing

The Group as lessor

The Group as lessee

Leasehold land and building

Impairment losses on assets other than goodwill

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APPENDIX II

Intangible assets

Intangible assets acquired separately are capitalized at cost and those acquired from a business combination are capitalized at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to the class of intangible assets. Intangible assets, excluding development costs, created within the business are not capitalized and expenditure is charged against the profit in the year in which the expenditure is incurred.

Useful lives of acquired intangible assets are assessed to be either finite or indefinite. Intangible assets with finite useful lives are stated at cost less accumulated amortization and any accumulated impairment losses. Intangible assets with indefinite useful lives are stated at cost less any subsequent accumulated impairment losses.

Amortization for intangible assets with finite useful lives is provided on a straight-line basis over their estimated useful lives.

Intangible assets are tested for impairment annually either individually or at the cash-generating unit level. Useful lives are also examined on an annual basis and, where applicable, adjustments are made on a prospective basis.

As intangible asset is derecognized on disposal or no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of the intangible asset, calculated as the difference between the net disposal proceeds and the carrying amount of the intangible asset, is recognized in the income statement in the year the intangible asset is derecognized.

Patents

Cost incurred on the acquisition of patents are capitalised in the consolidated statement of financial position and stated at cost. Patents are not revalued as there is no active market for these assets.

Technical know-how

Acquired technical know-how is stated at cost less amortization and any identified impairment losses.

Computer software

Costs incurred on the acquisition of computer software are capitalized in the consolidated statement of financial position at cost less amortization and any identified impairment losses.

Research and development expenditures

Expenditure on research activities is recognized as an expense in the period in which it is incurred. An internallygenerated intangible asset arising from development expenditure is recognized only if it is anticipated that the development costs incurred on a clearly-defined project will be recovered through future commercial activity. Where no internally generated intangible asset can be recognized, development cost is charged to profit or loss in the year in which it is incurred.

Impairment

Intangible assets with indefinite useful lives are tested for impairment annually by comparing their carrying amounts with their recoverable amounts, irrespective of whether there is any indication that they may be impaired. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognized as an expense immediately.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimated of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years.

Intangible assets with finite useful lives are tested for impairment when there is an indication that an asset may be impaired.

Financial instruments

Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into one of the two categories, including loans and receivables and available-for-sale financial assets. All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

Interest Income is recognized on an effective interest basis for debt instruments.

Loans and receivables

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as (a) loans and receivables, (b) held to maturity investments or (c) financial assets at fair value through profit or loss “FVTPL”. At each end of the reporting period subsequent to initial recognition, available-for-sale financial assets are measured at fair value. Changes in fair value are recognized in equity, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognized in equity is removed from equity and recognized in consolidated income statement.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Impairment of financial assets

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

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

For loans and receivables, 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-organization.

Impairment losses on available-for-sale equity investments will not be reversed in profit or loss in subsequent periods. Any increase in fair value subsequent to impairment loss is recognized directly in equity.

Financial liabilities and equity

The accounting policies adopted in respect of financial liabilities and equity instruments are set out below.

Effective interest method

Interest expense is recognized on an effective interest basis.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Financial liabilities

Financial liabilities including trade and other payables, and bank and other borrowings are subsequently measured at amortized cost, using the effective interest rate method.

Convertible bonds

(i) Convertible bonds that contains liability component and conversion option components

Convertible bonds issued by the Group that contain both the liability and conversion option components are classified separately into respective items on initial recognition. Conversion option will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of Aptus own equity instruments is classified as an equity instrument.

In subsequent periods, the liability component of the convertible bonds is carried at amortized cost using the effective interest method. The equity component, represented by the option to convert the liability component into ordinary shares of the Aptus, will remain in convertible bonds reserve until the conversion option is exercised (in which case the balance stated in convertible bonds reserve will be transferred to premium). Where the option remains unexercised at the expiry date, the balance stated in convertible bonds reserve will be released to the retained earnings. No gain or loss is recognized in profit or loss upon conversion or expiration of the option.

(ii) Convertible bonds that contain liability component and conversion/redemption option derivatives

Convertible bonds assumed by the Company from Grand Promise International Limited contain liability and conversion/redemption option derivatives components are classified separately into respective items on initial recognition. Conversion option derivatives that will be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instruments is a conversion option derivative. The redemption option derivatives represent the redemption at the option of the bond holders before the maturity date. At the date of issue, both the liability and conversion/redemption option components are recognized at fair value.

In subsequent periods, the liability component of the convertible bonds is carried at amortized cost using the effective interest method. The conversion/redemption option derivative is measured at fair value with changes in fair value recognized in profit or loss.

Transaction costs that related to the issue of the convertible bonds are allocated to the liability and conversion/redemption option components in proportion to the allocation of the proceeds. Transaction costs relating to the conversion/redemption option derivatives is charged to profit and loss immediately. Transaction costs relating to the liability component are included in the carrying amount of the liability portion and amortized over that the period of the convertible bonds using the effective interest method.

Equity instruments

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

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Derivative financial instruments

Derivative financial instruments are initially measured at fair value on the contract date, and are remeasured to fair value at subsequent reporting dates. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognized in profit or loss as they arise.

Embedded derivatives

Derivatives embedded in non-derivative host contracts are separated from the relevant host contracts (the liability component) and deemed as held-for-trading when the economic characteristics and risks of the embedded derivatives are not closely related to those of the host contracts, and the combined contracts are not measured at fair value through profit or loss. In all other circumstances, derivatives embedded are not separated and are accounted for together with the host contracts in accordance with appropriate standards. Where the Group needs to separate an embedded derivative but is unable to measure the embedded derivative, the combined contract is treated as held-fortrading.

Derecognition

Taxation

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

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Foreign currencies

Cash and cash equivalents

Cash and cash equivalents are carried in the consolidated statement of financial position at cost.

Provisions

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Employee benefits

(a) Retirement benefits schemes

(b) Share option schemes

(c) Share award scheme

Retirement benefit costs

Payments to mandatory provident fund scheme (“MPF scheme”) and state-managed retirement benefits scheme and the defined contribution schemes are charged as expense as they fall due.

Operating segments

Dividends

Dividends proposed or declared after the end of the reporting period is not recognized as a liability at the end of the reporting period.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Equity-settled share-based payment transactions

Share options granted to directors, employees or other eligible participants of the Company

Borrowing costs

All other borrowing costs are charged to the income statement in the year in which they are incurred.

Related parties

A party is considered to be related to the Group if:

(i) directly, or indirectly through one or more intermediaries, the party:
controls, is controlled by, or is under common control with, the Company or Group;
has an interest in the Company that gives it significant influence over the Company or Group; or
has joint control over the Company or Group;
(ii) the party is an associate;
(iii) the party is a jointly-controlled entity;
(iv) the party is a member of the key management personnel of the Company or its parent;
(v) the party is a close member of the family of any individual referred to in (i) or (iv);
(vi) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or
(vii) the party is a post-employment benefit plan for the benefit of employees of the Company or Group, or of any entity that is a related party of the Company or Group.

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Depreciation of property, plant and equipment

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. Where the actual cash flows are less than expected, a material impairment loss may arise. As at 31 October 2009, the carrying amount of goodwill is approximately HK$2,119,796,000 (30 June 2009: HK$2,215,971,000, 30 June 2008: HK$2,297,186,000 and 30 June 2007: HK$280,689,000) and impairment loss of approximately HK$96,175,000 (30 June 2009: HK$31,761,000, 30 June 2008: HK$Nil and 30 June 2007: HK$145,000) was recognized in the consolidated income statement. Details of the impairment test on goodwill are disclosed in note 19.

Amortization of other intangible assets

Other intangible assets with finite useful lives are amortized on a straight-line basis over their estimated useful lives. The determination of useful lives and residual values involve management’s estimation. The Group assesses annually the useful life of other intangible assets and if the expectation differs from the original estimate, such a difference may impact the amortization in the year and the estimate will be changed in the future period.

Income tax

As at 31 October 2009, no deferred tax asset was recognized in the Group’s consolidated statement of financial position in relation to the estimated unused tax losses of approximately HK$74,761,000 (30 June 2009: HK$66,399,000, 30 June 2008: HK$77,399,000 and 30 June 2007: HK$42,276,000) due to the unpredictability of future profit streams. The realisability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available in the future. In cases where the actual future profits generated are more than expected, a material recognition of deferred tax asset may arise, which would be recognized in the income statement for the period in which such recognition takes place.

Share option benefit expenses

The share option benefit expense is subject to the limitations of the Black-Scholes option pricing model and the uncertainty in estimates used by management in the assumptions. The estimates include limited early exercise behavior, expected interval and frequency of open exercise periods in the share option life, and other relevant parameters of the share option model (see note 33 for the estimates).

Estimated allowance of accounts receivables

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APPENDIX II

Convertible bonds

Referring to the fourteen undertaking amendment agreement entered into between the Company and the holder(s) of convertible bonds (the “Bondholders”) dated 31 March 2010, each Bondholder will have the right to require the Company to redeem in whole or in part of the convertible bonds of such Bondholder(s) on a Put Option Date on 30 April 2010 together with interest accrued to the Put Option Date. Any early redemption request from the Bondholders will cause unexpected cash outflow from the Company and will have an impact on the going concern of the Company. Up to the date of the financial statements approved by the Board, the Company did not receive request from any Bondholder to redeem the convertible bonds on the forthcoming Put Option Date. As such, in the opinion of the directors, the Company did not have going concern problem as at the balance sheet date and the liability portion of the convertible bonds was classified under non-current liabilities.

5. FINANCIAL INSTRUMENTS

Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximizing the return to shareholders through the optimization of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings and convertible bonds disclosed notes 29 and 30 respectively, and equity attributable to equity holders of the Company, comprising issued share capital disclosed in note 31, reserves and accumulated profits as disclosed in consolidated statements of changes in equity. The management reviews the capital structure by considering the cost of capital and the risks associated with each class of capital. In view of this, the Group will balance its overall capital structure through the payment of dividends, new share issues as well as the issue of new debt or the redemption of existing debt. The Group’s overall strategy remains unchanged throughout the year.

Categories of financial instruments

The Group

Financial assets Available-for-sales financial asset Held-for-trading investments Loans and receivables (including cash and cash equivalents Derivative financial assets Financial liabilities Amortized costs Derivative financial liabilities	2007 HK$’000 – – 299,378 – 2007 HK$’000 412,394 –	At 30 June 2008 HK$’000 63,780 – 412,120 – At 30 June 2008 HK$’000 718,186 100,861	2009 HK$’000 63,780 – 292,345 – 2009 HK$’000 616,965 75,232	At 31 October 2009 HK$’000 63,780 – 569,280 –

				At 31 October 2009 HK$’000 599,359 36,996

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APPENDIX II

The Company

Financial assets Available-for-sales financial asset Held-for-trading investments Loans and receivables (including cash and cash equivalents) Derivative financial assets Financial liabilities Amortized costs Derivative financial liabilities	2007 HK$’000 – – 3,091 – 2007 HK$’000 4,988 –	At 30 June 2008 HK$’000 – – 803 – At 30 June 2008 HK$’000 210,216 100,861	2009 HK$’000 – – 9,943 – 2009 HK$’000 241,563 75,232	At 31 October 2009 HK$’000 – – 10,936 –

				At 31 October 2009 HK$’000 204,932 36,996

6. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s major financial instruments include trade and other receivables and prepayments, trade and other payables, derivative financial instruments and bank and other borrowings. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Credit risk

The Group’s credit risk is primarily attributable to its trade and other receivables and bank balances. At the respective the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties arising from the carrying amount of the respective recognized financial assets stated in the consolidated statement of financial position.

The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

The credit risk on liquid funds is limited because the counterparties are authorized banks in Hong Kong and the PRC.

Foreign currency risk

The Group collects most of its revenue in Renminbi (“RMB”) and incurs most of its expenditure including capital expenditure in RMB. Future exchange rates of RMB could vary significantly from the current or historical exchange rates as a result of controls that could be imposed by the PRC government. The exchange rates may also be affected by economic developments and political changes domestically and internationally, and supply and demand of RMB. The appreciation or devaluation of RMB against foreign currencies may have positive or negative impact on the results of operations of the Group.

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APPENDIX II

As at the end of the reporting period, the Group has convertible bonds, certain bank balances and bank and other borrowings denominated in Singaporean dollars (“SGD”), Hong Kong dollars (“HKD”) and United States dollars (“USD”), which are the currencies other than the functional currency of respective group entities. The carrying amounts of the Group’s foreign currency denominates monetary assets and liabilities are as follows:

						Liabilities	Liabilities
		At 30 June		At		At 30 June		At
	2007	2008	2009 31 October 2009		2007	2008	2009 31 October 2009
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
RMB	463,622	534,495	553,563	165,957	144,243	145,181	170,875	45,426
SGD	262	180	200	1,091	243	17	18	–
HKD	383,724	2,358,804	2,298,004	2,648,929	269,320	376,330	351,462	387,294
USD	4,413	194,418	136,292	190	10	298,058	294,830	220,925

The Group uses a 5% sensitivity rate to report foreign currency risk internally to key management personnel and represents management’s assessment of the reasonable possible change in foreign exchange rates. If RMB had strengthened/weakened by 5%, loss for the period ended 31 October 2009 would have been increased/decreased by approximately HK$202,400 (30 June 2009: increased/decreased by approximately HK$314,000, 30 June 2008: decreased/increased by approximately HK$121,400 and 30 June 2007: decreased/increased by approximately HK$60,600) as a result of foreign exchange losses/gains on translation of transactions denominated in RMB.

Interest rate risk

Sensitivity analysis

At 31 October 2009, it is estimated that a general increase or decrease of 100 basis points in interest rates with all other variable held constant, would decrease/increase the Group’s loss by approximately HK$1,001,000 (30 June 2009: decrease/increase HK$1,947,000, 30 June 2008: increase/decrease HK$832,000 and 30 June 2007: increase/ decrease 194,000). The above sensitivity analysis has been determined assuming that the change in interest rates had occurred at the end of the reporting period and had been applied to the exposure to interest rate risk for financial instrument in existence at that date. The 100 basis points increase or decrease represents management’s assessment of a reasonably possible change in interest rates over the period until the next annual end of the reporting period. The analysis was performed on the same basis for the Relevant Periods.

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APPENDIX II

Liquidity risk

For period ended 31 October 2009

Trade and other payables Tax liabilities Bank and other borrowings Convertible bonds For year ended 30 June 2009 Trade and other payables Tax liabilities Bank and other borrowings Convertible bonds For year ended 30 June 2008 Trade and other payables Tax liabilities Bank and other borrowings Convertible bonds	Total contractual Carrying undiscounted amounts cash flows o HK$’000 HK$’000 63,432 63,432 17,290 17,290 37,976 37,976 534,947 623,474 653,645 742,172 Total contractual Carrying undiscounted amounts cash flows o HK$’000 HK$’000 58,081 58,081 1,163 1,163 36,145 37,853 597,971 730,595 693,360 827,692 Total contractual Carrying undiscounted amounts cash flows o HK$’000 HK$’000 66,093 66,093 539 539 180,996 197,757 571,958 736,445 819,586 1,000,834	Within 1 year or n demands HK$’000 63,432 17,290 37,976 314,163 432,861 Within 1 year or n demands HK$’000 58,081 1,163 37,853 75,232 172,329 Within 1 year or n demands HK$’000 66,093 539 66,745 100,861 234,238	More than 1 year but less than 2 years HK$’000 – – – – – More than 1 year but less than 2 years HK$’000 – – – – – More than 1 year but less than 2 years HK$’000 – – 71,165 – 71,165	More than 2 years but less than 5 years HK$’000 – – – 309,311 309,311 More than 2 years but less than 5 years HK$’000 – – – 655,363 655,363 More than 2 years but less than 5 years HK$’000 – – 42,473 635,584 678,057	Over 5 years HK$’000 – – – –
					–

					Over 5 years HK$’000 – – – –
					–

					Over 5 years HK$’000 – – 17,374 –
					17,374

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

For year ended 30 June 2007

Trade and other payables Tax liabilities Bank and other borrowings Convertible bonds	Total contractual Carrying undiscounted amounts cash flows o HK$’000 HK$’000 57,528 57,528 1,422 1,422 111,722 117,308 243,144 364,716 413,816 540,974	Within 1 year or n demands HK$’000 57,528 1,422 5,898 – 64,848	More than 1 year but less than 2 years HK$’000 – – 29,433 – 29,433	More than 2 years but less than 5 years HK$’000 – – 66,472 364,716 431,188	Over 5 years HK$’000 – – 15,505 –
					15,505

Fair values

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

the fair value of financial assets and financial liabilities (including derivative instruments) with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices and ask prices respectively; and
the fair value of other financial assets and financial liabilities (including derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices or rates from observable and/or unobservable input. For an option based derivative, the fair value is estimated using option pricing model.

In the opinion of the directors, all financial instruments are carried at amounts not materially different from their fair values as at the end of each Relevant Periods.

Fair value measurements recognized in the statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the assets or liability that are not based on observable market data (unobservable inputs).

==> picture [398 x 72] intentionally omitted <==

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

At 30 June 2007
Level 1 Level 2 Level 3 Total
HK$’000 HK$’000 HK$’000 HK$’000
Available-for-sale
financial assets
Unlisted securities – – – –
----- End of picture text -----

II – 32

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Available-for-sale financial assets Unlisted securities Available-for-sale financial assets Unlisted securities Available-for-sale financial assets Unlisted securities	Level 1 HK$’000 – Level 1 HK$’000 – Level 1 HK$’000 –	At 30 June 2008 Level 2 Level 3 HK$’000 HK$’000 – 63,780 At 30 June 2009 Level 2 Level 3 HK$’000 HK$’000 – 63,780 At 31 October 2009 Level 2 Level 3 HK$’000 HK$’000 – 63,780	Total HK$’000 63,780

			Total HK$’000 63,780

			Total HK$’000 63,780

During the Relevant Periods, there was no transfers out of Level 3 fair value measurements.

Reconciliation of Level 3 fair value measurements of financial assets

At 1 July 2006, 30 July 2007 and 1 July 2007 Purchases At 30 June 2008, 1 July 2008, 30 June 2009, 1 July 2009 and 31 October 2009	Unlisted securities HK$’000 – 63,780
	63,780

7. SEGMENT INFORMATION

For the year ended 30 June 2007

Continuing operations

(a) Distribution of natural supplementary products
(b) Provision of lottery-related hardware and software systems
(c) Distribution of edible oil
(d) Profit sharing on oil field
(e) Gas related

II – 33

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Discontinued operation

(a) Manufacturing and distribution of honey mead
(b) Operation of restaurant

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

Distribution of natural supplementary products HK$’000 Revenue (from external customers) 2,279 Operating profit (loss) (664) Finance costs – Proft (loss) before income tax (664) Income tax expenses – Gain on diposal of subsidiaries – Profit (loss) for the year (664) Capital expenditure 839 Depreciation 688 Amortization – Other non-cash expenses – Impairment of goodwill 145	Provision of lottery- related hardware and software systems HK$’000 28,283 9,510 (130) 9,380 (947) – 8,433 41,474 5,188 1,848 – –	Distribution of edible oil HK$’000 42,912 123 (27) 96 – – 96 – – – – –	Profit sharing on oil field HK$’000 – (1,187) – (1,187) – – (1,187) – – – – –	Gas related HK$’000 14,743 (1,922) (1,934) (3,856) (464) – (4,320) 1,650 4,194 152 – –	All other segments HK$’000 29 (114,311) (22,435) (136,746) – 30,635 (106,111) 2,093 246 – 103,203 –	Manufacturing and Total distribution continuing of honey operations mead HK$’000 HK$’000 88,246 929 (108,451) 421 (24,526) (11) (132,977) 410 (1,411) (31) 30,635 – (103,753) 379 46,056 – 10,316 – 2,000 – 103,203 – 145 –	Operation of restaurant HK$’000 2,286 (107) – (107) – – (107) 564 354 – – –	Total discontinued operations HK$’000 3,215 314 (11) 303 (31) – 272 564 354 – – –	Total group HK$’000 91,461

									(108,137) (24,537)
									(132,674) (1,442) 30,635
									(103,481)

									46,620

									10,670

									2,000

									103,203

									145

II – 34

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

The following is an analysis of the Group’s assets and liabilities by operating segment:

Provision of lottery- Distribution related of natural hardware supplementary and software products systems HK$’000 HK$’000 Segemnt assets 66,084 75,538 Unallocated – – Consolidated assets 66,084 75,538 Segment liabilities 882 39,258 Unallocated – – 882 39,258	Distribution of edible oil HK$’000 1,442 – 1,442 531 – 531	Profit sharing on oil field HK$’000 30,419 – 30,419 1,233 – 1,233	Gas related HK$’000 265,122 – 265,122 104,709 – 104,709	All other segments HK$’000 3,959 409,457 413,416 530 266,673 267,203	Total continuing operations HK$’000 442,564 409,457
					852,021

					147,143 266,673
					413,816

The following is an analysis of the Group’s information about the geographical location of:

(i) the Group’s revenue from external customers

(ii) the Group’s property, plant and equipment, intangible assets, goodwill and other non-current assets (“Specific non-current assets”)

The geographical location of customers is based on the location at which the services were provided or the goods delivered. The geographical location of the specific non-current assets is based on the physical location of the asset, in the case of property,p lant and equipment, the location to which they are allocated, in the case of intangible assets, goodwill and other non-current assets, the location of operations.

	Revenue from	Specified
	external customers	non-current assets
	HK$’000	HK$’000
Hong Kong (place of domicile)	2,279	36,034
PRC	43,984	509,693
South East Asia	44,518	–
Europe	680	–
	91,461	545,727
For the year ended 30 June 2008
Continuing operations

(a) Distribution of natural supplementary products (b) Provision of lottery-related hardware and software systems (c) Distribution of edible oil (d) Karaoke CMS Discontinued operation

(a) Gas related (b) Profit sharing on oil field

II – 35

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

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

Distribution of natural supplementary products HK$’000 Revenue (from external customers) 2,707 Operating profit (loss) (6,854) Finance costs – Proft (loss) before income tax (6,854) Income tax expenses – Share of results of an associate – Loss on deemed disposal of a subsidiary held by a jointly controlled entity – Profit (loss) for the year (6,854) Capital expenditure 671 Depreciation 889 Amortization – Other non-cash expenses – Allowances for doubtful receivable 195 Provision for obsolete inventories 438	Provision of lottery- related hardware and software systems HK$’000 35,715 8,814 (82) 8,732 (2,301) – – 6,431 2,634 9,440 1,943 – 14 –	Distribution of edible oil HK$’000 39,562 (28) (5) (33) – – – (33) – – – – – –	Karaoke CMS HK$’000 226 (1,915) – (1,915) – – – (1,915) 197 559 – – – –	All other segments HK$’000 82 (69,213) (37,389) (106,602) (5) – – (106,607) 23 243 – 44,025 4,783 –	Total continuing operations HK$’000 78,292 (69,196) (37,476) (106,672) (2,306) – – (108,978) 3,525 11,131 1,943 44,025 4,992 438	Gas related HK$’000 65,793 834 (4,398) (3,564) 415 (40) (7) (3,196) 12,837 17,673 461 – 856 –	Profit sharing of oil field HK$’000 – (840) – (840) – – – (840) 2 33 – – – –	Total discontinued operations HK$’000 65,793 (6) (4,398) (4,404) 415 (40) (7) (4,036) 12,839 17,706 461 – 856 –	Total group HK$’000 144,085

									(69,202) (41,874)
									(111,076) (1,891) (40) (7)
									(113,014)

									16,364

									28,837

									2,404

									44,025

									5,848

									438

II – 36

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

The following is an analysis of the Group’s assets and liabilities by operating segment:

Distribution of natural supplementary products HK$’000 Segemnt assets 22,120 Unallocated – Consolidated assets 22,120 Segment liabilities 699 Unallocated – Convertible bonds – 699	Provision of lottery- related hardware and software systems HK$’000 75,597 – 75,597 31,390 – – 31,390	Distribution of edible oil HK$’000 1,754 – 1,754 457 – – 457	Karaoke CMS HK$’000 57,563 – 57,563 790 – – 790	All other segments HK$’000 3,857 2,553,486 2,557,343 585 94,878 571,958 667,421	Total continuing operations HK$’000 160,891 2,553,486 2,714,377 33,921 94,878 571,958 700,757	Gas related HK$’000 339,939 – 339,939 117,157 – – 117,157	Profit sharing of oil field HK$’000 33,581 – 33,581 1,672 – – 1,672	Total discontinued operations HK$’000 373,520 – 373,520 118,829 – – 118,829	Total group HK$’000 534,411 2,553,486
									3,087,897

									152,750 94,878 571,958
									819,586

The following is an analysis of the Group’s information about the geographical location of:

(i) the Group’s revenue from external customers

(ii) the Group’s property, plant and equipment, intangible assets, goodwill and other non-current assets (“Specific non-current assets”)

Hong Kong (place of domicile) PRC South East Asia	Revenue from external customers HK$’000 2,707 101,816 39,562 144,085	Specified non-current assets HK$’000 2,372 2,665,361 –
		2,667,733

For the year ended 30 June 2009

Continuing operations

(a) Distribution of natural supplementary products
(b) Provision of lottery-related hardware and software systems (c) Distribution of edible oil

(d) Karaoke CMS

Discontinued operation

(a) Gas related

(b) Profit sharing on oil field

II – 37

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

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

Distribution of natural supplementary products HK$’000 Revenue (from external customers) 793 Operating profit (loss) (1,030) Finance costs (1) Proft (loss) before income tax (1,031) Income tax expenses – Share of results of an associate – Gain (loss) on disposal of associates – Gain on disposal of a subsidiary held by a jointly controlled entity – Profit (loss) for the year (1,031) Capital expenditure – Depreciation 788 Amortization – Other non-cash expenses – Allowances for doubtful receivable 697	Provision of lottery- related hardware and software systems HK$’000 42,843 15,933 – 15,933 (991) – 15 – 14,957 2,648 10,359 1,326 – –	Distribution of edible oil HK$’000 18,292 11 – 11 – – – – 11 – 19 – – –	Karaoke CMS HK$’000 22,889 (8,205) (6) (8,211) (158) – – 1,158 (7,211) 8,154 3,038 – – –	All other segments HK$’000 262 (12,784) (60,651) (73,435) – – – – (73,435) 1,077 391 – 57,492 –	Total continuing operations HK$’000 85,079 (6,075) (60,658) (66,733) (1,149) – 15 1,158 (66,709) 11,879 14,595 1,326 57,492 697	Gas related HK$’000 106,803 (21,323) (5,454) (26,777) (1,485) 124 (7) – (28,145) 33,996 19,719 466 – –	Profit sharing of oil field HK$’000 – (412) – (412) – – – – (412) – 29 – 31,761 –	Total discontinued operations HK$’000 106,803 (21,735) (5,454) (27,189) (1,485) 124 (7) – (28,557) 33,996 19,748 466 31,761 –	Total group HK$’000 191,882

									(27,810) (66,112)
									(93,922) (2,634) 124 8 1,158
									(95,266)

									45,875

									34,343

									1,792

									89,253

									697

II – 38

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

The following is an analysis of the Group’s assets and liabilities by operating segment:

Distribution of natural supplementary products HK$’000 Segemnt assets 7,581 Unallocated – Consolidated assets 7,581 Segment liabilities 386 Unallocated – Convertible bonds – 386	Provision of lottery- related hardware and software systems HK$’000 87,482 – 87,482 28,421 – – 28,421	Distribution of edible oil HK$’000 1,341 – 1,341 122 – – 122	Karaoke CMS HK$’000 71,252 – 71,252 14,873 – – 14,873	All other segments HK$’000 4,481 2,431,802 2,436,283 592 50,995 597,971 649,558	Total continuing operations HK$’000 172,137 2,431,802 2,603,939 44,394 50,995 597,971 693,360	Gas related HK$’000 350,193 – 350,193 123,825 – – 123,825	Profit sharing of oil field HK$’000 33,927 – 33,927 – – – –	Total discontinued operations HK$’000 384,120 – 384,120 123,825 – – 123,825	Total group HK$’000 556,257 2,431,802
									2,988,059

									168,219 50,995 597,971
									817,185

The following is an analysis of the Group’s information about the geographical location of:

(i) the Group’s revenue from external customers

(ii) the Group’s property, plant and equipment, intangible assets, goodwill and other non-current assets (“Specific non-current assets”)

The geographical location of customers is based on the location at which the services were provided or the goods delivered. The geographical location of the specific non-current assets is based on the physical location of the asset, in the case of property,plant and equipment, the location to which they are allocated, in the case of intangible assets, goodwill and other non-current assets, the location of operations.

Hong Kong (place of domicile) PRC South East Asia	Revenue from external customers HK$’000 793 172,797 18,292 191,882	Specified non-current assets HK$’000 1,876 2,341,222 –
		2,343,098

For the four months ended 31 October 2009

Continuing operations

(a) Distribution of natural supplementary products

(b) Provision of lottery-related hardware and software systems

(d) Karaoke CMS

Discontinued operation

(a) Gas related

(b) Profit sharing on oil field

II – 39

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

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

Distribution of natural supplementary products HK$’000 Revenue (from external customers) 249 Operating profit (loss) (310) Finance costs – Proft (loss) before income tax (310) Income tax expenses – Gain on disposal of jointly controlled entities – Profit (loss) for the year (310) Capital expenditure – Depreciation 218 Amortization – Other non-cash expenses –	Provision of lottery- related Trading of hardware mineral and software materials and systems edible oil HK$’000 HK$’000 15,119 3,073 5,209 2 – – 5,209 2 (950) – – – 4,259 2 1,223 – 3,541 – 256 – – –	Karaoke CMS HK$’000 13,557 (531) – (531) (65) – (596) 472 1,163 – –	All other segments HK$’000 53 (157,905) (17,364) (175,269) – – (175,269) 17 186 – 112,641	Total continuing operations HK$’000 32,051 (153,535) (17,364) (170,899) (1,015) – (171,914) 1,712 5,108 256 112,641	Gas related HK$’000 18,323 1,002 (1,015) (13) (16,819) 197,707 180,875 – 2,041 64 –	Profit sharing of oil field HK$’000 – – – – – – – – – – –	Total discontinued operations HK$’000 18,323 1,002 (1,015) (13) (16,819) 197,707 180,875 – 2,041 64 –	Total group HK$’000 50,374

								(152,533) (18,379)
								(170,912) (17,834) 197,707
								8,961

								1,712

								7,149

								320

								112,641

The following is an analysis of the Group’s assets and liabilities by operating segment:

Distribution of natural supplementary products HK$’000 Segment assets 7,709 Goodwill – Consolidated assets 7,709 Segment liabilities 328 Convertible bonds – 328	Provision of lottery- related Trading of hardware mineral and software materials and systems edible oil HK$’000 HK$’000 89,696 1,343 – – 89,696 1,343 27,546 62 – – 27,546 62	Karaoke CMS HK$’000 67,408 – 67,408 10,997 – 10,997	All other segments HK$’000 530,215 2,119,796 2,650,011 79,765 534,947 614,712	Total continuing operations HK$’000 696,371 2,119,796 2,816,167 118,698 534,947 653,645	Gas related HK$’000 – – – – – –	Profit sharing of oil field HK$’000 – – – – – –	Total discontinued operations HK$’000 – – – – – –	Total group HK$’000 696,371 2,119,796
								2,816,167

								118,698 534,947
								653,645

II – 40

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

The following is an analysis of the Group’s information about the geographical location of:

(i) the Group’s revenue from external customers;.
(ii) the Group’s property, plant and equipment, intangible assets, goodwill and other non-current assets (“Specific non-current assets”).

Hong Kong (place of domicile) PRC South East Asia	Revenue from external customers HK$’000 249 47,052 3,073 50,374	Specified non-current assets HK$’000 1,648 2,242,823 –
		2,244,471

For the four months ended 31 October 2008 (Unaudited)

Continuing operations

(a) Distribution of natural supplementary products
(b) Provision of lottery-related hardware and software systems
(c) Distribution of edible oil
(d) Karaoke CMS

Discontinued operation

(a) Gas related
(b) Profit sharing on oil field

II – 41

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

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

Distribution of natural supplementary products HK$’000 Revenue (from external customers) 304 Operating profit (loss) (805) Finance costs – Profit (loss) before income tax (805) Income tax expenses – Share of results of an associate – Profit (loss) for the year (805) Capital expenditure – Depreciation 197 Amortization – Other non-cash expenses –	Provision of lottery- related hardware and software systems HK$’000 11,041 2,448 – 2,448 740 – 3,188 2,648 2,590 278 –	Distribution of edible oil HK$’000 18,013 69 – 69 – – 69 – – – –	Karaoke CMS HK$’000 4,343 (2,264) – (2,264) – – (2,264) 8,154 760 164 –	All other segments HK$’000 226 (9,082) (19,908) (28,990) – – (28,990) 966 637 – 18,699	Total continuing operations HK$’000 33,927 (9,634) (19,908) (29,542) 740 – (28,802) 11,768 4,184 442 18,699	Gas related HK$’000 27,958 (1,389) (1,972) (3,361) – 124 (3,237) 14,011 6,654 157 –	Profit sharing of oil field HK$’000 – (176) – (176) – – (176) – 12 – –	Total discontinued operations HK$’000 27,958 (1,565) (1,972) (3,537) – 124 (3,413) 14,011 6,666 157 –	Total group HK$’000 61,885

									(11,199) (21,880)
									(33,079) 740 124
									(32,215)

									25,779

									10,850

									599

									18,699

The following is an analysis of the Group’s assets and liabilities by operating segment:

Distribution of natural supplementary products HK$’000 Segment assets 7,117 Goodwill – Consolidated assets 7,117 Segment liabilities 544 Convertible bonds – 544	Provision of lottery- related hardware and software systems HK$’000 76,815 – 76,815 29,573 – 29,573	Distribution of edible oil HK$’000 1,401 – 1,401 137 – 137	Karaoke CMS HK$’000 62,608 – 62,608 3,808 – 3,808	All other segments HK$’000 267,196 2,247,733 2,514,929 62,942 590,656 653,598	Total continuing operations HK$’000 415,137 2,247,733 2,662,870 97,004 590,656 687,660	Gas related HK$’000 346,437 – 346,437 121,137 – 121,137	Profit sharing of oil field HK$’000 33,620 – 33,620 – – –	Total discontinued operations HK$’000 380,057 – 380,057 121,137 – 121,137	Total group HK$’000 795,194 2,247,733
									3,042,927

									218,141 590,656
									808,797

II – 42

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

The following is an analysis of the Group’s information about the geographical location of:

(i) the Group’s revenue from external customers;
(ii) the Group’s property, plant and equipment, intangible assets, goodwill and other non-current assets (“Specific non-current assets”).

The geographical location of customers is based on the location at which the services were provided or the goods delivered. The geographical location of the specific non-current assets is based on the physical location of the asset, in the case of property,plant and equipment, the location to which they are allocated, in the case of intangible assets, goodwill and other non-current assets, the location of operations.

Hong Kong (place of domicile) PRC South East Asia	Revenue from external customers HK$’000 304 43,568 18,013 61,885	Specified non-current assets HK$’000 33,897 2,633,836 –
		2,667,733

II – 43

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

8. REVENUE AND OTHER REVENUE

The principal activities of the Group are (i) the distribution of natural supplementary products, (ii) provision of lottery-related hardware and software systems, (iii) distribution of edible oil, (iv) holding profit sharing right of oil field, (v) sales of gas and gas appliances, provision of gas transportation services and installation services for gas connected and (vi) provision of Karaoke CMS services and licence fee collection business.

Revenue represents invoiced value of sales, net of returns, discounts allowed or sales taxes where applicable.

Revenue recognized for the Relevant Periods is as follows:

For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 Continuing operations Revenue Distribution of natural supplementary products 2,279 2,707 793 Provision of lottery-related hardware and software systems 28,283 35,715 42,843 Distribution of edible oil 42,912 39,562 18,292 Gas related 14,743 – – Provision of karaoke CMS services – 226 22,889 Sales of goods 29 82 262 88,246 78,292 85,079 Discontinued operations Revenue Manufacturing and distribution of honey mead 929 – – Operation of restaurant 2,286 – – Gas related – 65,793 106,803 3,215 65,793 106,803	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 249 304 15,119 11,041 3,073 18,012 – – 13,557 4,343 53 227 32,051 33,927 – – – – 18,323 27,953 18,323 27,953	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 249 304 15,119 11,041 3,073 18,012 – – 13,557 4,343 53 227 32,051 33,927 – – – – 18,323 27,953 18,323 27,953
		33,927

		– – 27,953
		27,953

II – 44

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Continuing operations Other revenue Interest income Others Discontinued operations Other revenue Interest income Others 9. FINANCE COSTS Continuing operations Interest on borrowings wholly repayable within five years Interest on borrowings wholly repayable after five years Interest on convertible bonds Discontinued operations Interest on borrowings wholly repayable within five years Interest on borrowings wholly repayable after five years Interest on convertible bonds	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 2,460 3,200 3,420 3,448 1,333 5,145 5,908 4,533 8,565 – 657 605 3 422 521 3 1,079 1,126 For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 2,736 1,989 3,166 1,934 – – 19,856 35,487 57,492 24,526 37,476 60,658 11 50 – – 4,348 5,454 – – – 11 4,398 5,454	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 255 1,534 133 637 388 2.171 – – 23 598 23 598 For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 898 1,209 – – 16,466 18,699 17,364 19,908 – – 1,015 1,972 – – 1,015 1,972	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 255 1,534 133 637 388 2.171 – – 23 598 23 598 For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 898 1,209 – – 16,466 18,699 17,364 19,908 – – 1,015 1,972 – – 1,015 1,972
			19,908

			– 1,972 –
			1,972

II – 45

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

10. PROFIT (LOSS) BEFORE TAXATION

For the year ended
30 June
2007
2008
2009
HK$’000
HK$’000
HK$’000
Continuing operations
Profit (loss) before taxation has
been arrived at after charging
(crediting):
Staff costs (excluding directors’
emoluments –note 11)
Wages and salaries
13,428
12,431
19,691
Retirement benefits scheme
contributions
217
297
901
Total staff costs
13,645
12,728
20,592
Auditors’ remuneration
– Provided for the year
968
1,456
1,587
– Underprovision in last year
–
–
268
Amortization of other intangible
assets
1,848
1,943
1,326
Depreciation of property, plant and
equipment
10,316
11,131
14,595
Operating lease rentals in respect of
land and building
1,872
3,107
4,677
Cost of inventories recognized
as expenses_(Note a)
63,410
46,707
40,473
Loss on disposal of property,
plant and equipment
70
31
331
Bad debts
74
–
1,623
Allowance for doubtful receivable
–
4,992
697
Share option expenses
83,347
8,538
–
Impairment of goodwill
145
–
–
Net foreign exchange
losses (gains), net
(5,805)
(8,685)
175
Provision for obsolete inventories
–
438
37
(Gain) loss on change on fair value
of derivative financial instrument
(Note b)_
–
13,347
(25,629)
Loss arising from settlement of
financial liabilities by issuing
of shares
–
2,810
–
Inventories written off
–
–
191
Gain on disposal of a subsidiary held
by a jointly controlled entities
–
–
(1,158)
(Gain) loss on disposal of associates
–
–
(15)

For the four months ended
31 October
2009
2008
HK$’000
HK$’000
(Unaudited)
7,202
5,877
500
257
7,702
6,134
1,962
864
–
–
256
352
5,108
4,184
2,134
2,087
13,071
23,179
2
–
–
907
–
–
–
–
96,175
–
119
32
–
–
31,646
–
–
–
–
–
–
(1,158)
–
–

Note a: For the four months ended 31 October 2009, cost of inventories of continuing operations included approximately of HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$Nil, 30 June 2007: HK$2,380,000 and 31 October 2008: HK$Nil) relating to depreciation expenses, which amount is also included in the respective total amounts disclosed separately above in note 10 for each of these types.

Note b: Arising from convertible bonds, please refer to note 30.

II – 46

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Discontinued operations Profit (loss) before taxation has been arrived at after charging (crediting): Staff costs (excluding directors’ emoluments –note 11) Wages and salaries Retirement benefits scheme contributions Total staff costs Auditors’ remuneration – Provided for the year – Underprovision in last year Amortization of prepaid lease payments Depreciation of property, plant and equipment Operating lease rentals in respect of land and building Cost of inventories recognized as expenses Loss on disposal of property, plant and equipment Allowance for doubtful receivable Impairment of goodwill Net foreign exchange losses (gains), net (Gain) loss on disposal of associates	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 664 5,217 6,818 – – – 664 5,217 6,818 – 12 14 – – – – 461 466 354 17,706 19,748 – 421 101 1,062 47,660 80,729 – – 3 – 856 – – – 31,761 – – – – – 7	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 942 2,081 – – 942 2,081 – 12 – – 64 157 2,041 6,666 12 67 17,018 17,967 – – – – – – (113) – – –	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 942 2,081 – – 942 2,081 – 12 – – 64 157 2,041 6,666 12 67 17,018 17,967 – – – – – – (113) – – –
			2,081
			12 – 157 6,666 67 17,967 – – – – –

Note a: For the four months ended 31 October 2009, cost of inventories of discontinued operations included approximately of HK$1,885,000, (2009: HK$14,990,000, 2008: HK$10,583,000, 2007: HK$Nil) relating to depreciation expenses, which amount is also included in the respective total amounts disclosed separately above in note 10 for each of these types.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

11. DIRECTOR’S AND SENIOR MANAGEMENT’S EMOLUMENTS

(a) Directors’ emoluments

For the year ended 30 June 2007

Emoluments paid or payable to each of the eight directors of the Company during the year were as follows:

Executive Directors: Cheung Kwai Lan Chan Tung Mei Chan Ting Lau Hin Kun Independent Non-executive Directors: Tian He Nian Zhao Zhi Ming To Yan Ming, Edmond Non-executive Directors: Shaw Kyle Arnold Junior (Note 1)	Fees HK$’000 102 78 102 78 117 117 125 25 744	Salaries and other emoluments HK$’000 1,950 650 1,300 312 – – – – 4,212	Contribution to retirement benefits scheme HK$’000 – – 20 16 – – – – 36	Total HK$’000 2,052 728 1,422 406 117 117 125 25
				4,992

Note 1: Retired on 24 October 2006

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

For the year ended 30 June 2008

Emoluments paid or payable to each of the nine directors of the Company during the year were as follows:

Executive Directors: Cheung Kwai Lan Chan Tung Mei Chan Ting Chan Siu Sarah_(Note 1) Lau Hin Kun Independent Non-executive Directors: Tian He Nian Zhang Xiu Fu(Note 2)_ Zhao Zhi Ming To Yan Ming, Edmond	Fees HK$’000 107 78 107 7 78 133 180 117 125 932	Salaries and other emoluments HK$’000 3,300 1,100 2,200 160 282 – – – – 7,042	Contribution to retirement benefits scheme HK$’000 – – 12 1 12 – – – – 25	Total HK$’000 3,407 1,178 2,319 168 372 133 180 117 125
				7,999

Note 1: Appointed on 28 May 2008

Note 2: Appointed on 25 January 2008

For the year ended 30 June 2009

Emoluments paid or payable to each of the nine directors of the Company during the year were as follows:

Executive Directors: Cheung Kwai Lan Chan Tung Mei Chan Ting Chan Siu Sarah Lau Hin Kun Independent Non-executive Directors: Tian He Nian Zhang Xiu Fu Zhao Zhi Ming_(Note 1)_ To Yan Ming, Edmond	Fees HK$’000 102 78 102 78 78 156 240 156 125 1,115	Salaries and other emoluments HK$’000 4,260 1,300 2,730 1,950 309 – – – – 10,549	Contribution to retirement benefits scheme HK$’000 – – 13 12 12 – – – – 37	Total HK$’000 4,362 1,378 2,845 2,040 399 156 240 156 125
				11,701

Note 1: Resigned on 30 June 2009

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

For the four months ended 31 October 2009

Emoluments paid or payable to each of the eight directors of the Company during the period were as follows:

Executive Directors: Cheung Kwai Lan Chan Tung Mei Chan Ting Chan Siu Sarah Lau Hin Kun Independent Non-executive Directors: Tian He Nian Zhang Xiu Fu To Yan Ming, Edmond	Fees HK$’000 34 26 34 26 26 52 80 42 320	Salaries and other emoluments HK$’000 1,920 400 1,000 680 99 – – – 4,099	Contribution to retirement benefits scheme HK$’000 – – 6 4 4 – – – 14	Total HK$’000 1,954 426 1,040 710 129 52 80 42
				4,433

For the four months ended 31 October 2008 (unaudited)

Emoluments paid or payable to each of the nine directors of the Company during the period were as follows:

Executive Directors: Cheung Kwai Lan Chan Tung Mei Chan Ting Chan Siu Sarah Lau Hin Kun Independent Non-executive Directors: Tian He Nian Zhang Xiu Fu Zhao Zhi Ming_(Note 1)_ To Yan Ming, Edmond	Fees HK$’000 34 26 34 26 26 52 80 52 42 372	Salaries and other emoluments HK$’000 1,500 500 1,000 640 117 – – – – 3,757	Contribution to retirement benefits scheme HK$’000 – – 4 4 4 – – – – 12	Total HK$’000 1,534 526 1,038 670 147 52 80 52 42
				4,141

Note:

(1) Resigned on 30 June 2009

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APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

(b) Senior management emoluments

Of the five individuals whose emoluments were the highest in the Group for the Relevant Periods include four (30 June 2009: four, 30 June 2008: three, 30 June 2007: two and 31 October 2008: four) Directors whose emoluments are set out in the above. The emoluments payable to the remaining individual during the Relevant Periods as follows:

Salaries, allowances and other benefits Contributions to retirement benefits scheme	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 4,756 2,146 1,540 36 19 12 4,792 2,165 1,552	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 680 515 4 4 684 519	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 680 515 4 4 684 519
			519

The emoluments fell with the following bands:

		For the year ended		For the four	months ended
		30 June		31 October
	2007	2008	2009	2009	2008
	No. of	No. of	No. of	No. of	No. of
	individuals	individuals	individuals	individuals	individuals
Emoluments bands
Nil-HK$1,000,000	1	1	–	1	1
HK$1,000,001 –
HK$2,000,000	1	1	1	–	–
HK$2,000,001 –
HK$3,000,000	1	–	–	–	–

12. STAFF COSTS (INCLUDING DIRECTOR’S EMOLUMENTS)

Continuing operations Wages and salaries Retirement benefits scheme contributions	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 18,384 20,405 31,355 253 322 938 18,637 20,727 32,293	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 11,621 10,006 514 269 12,135 10,275	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 11,621 10,006 514 269 12,135 10,275
			10,275

II – 51

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Discontinued operations Wages and salaries Retirement benefits scheme contributions 13. INCOME TAX EXPENSES Continuing operations The charge comprises: Current year Hong Kong Profits Tax Other jurisdictions Over-provision in prior years Hong Kong Profits Tax Other jurisdictions Income tax expenses charged (credited) for the year/period Discontinued operations The charge comprises: Current year Hong Kong Profits Tax Other jurisdictions Over-provision in prior years Hong Kong Profits Tax Other jurisdictions Income tax expenses charged (credited) for the year/period	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 664 5,217 6,818 – – – 664 5,217 6,818 For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 – – – 1,411 2,306 1,970 – – – – – (821) 1,411 2,306 1,149 For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 – – – 31 1,953 1,485 – – – – (2,368) – 31 (415) 1,485	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 942 2,081 – – 942 2,081 For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) – – 1,015 83 – – – (823) 1,015 (740) For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) – – 16,819 – – – – – 16,819 –

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

No provision for Hong Kong Profits Tax has been made in the financial statements as the Group had no assessable profit derived in Hong Kong for the Relevant Periods.

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

The amount of income tax expenses charged to the consolidated income statement reconciled to the loss per consolidated income statement is as follows:

(Loss) profit before income tax: Continuing operations Discontinued operations Tax at the Hong Kong Profits Tax rate Tax effect of expenses that are not deductible for tax purposes Tax effect of income that is not taxable for tax purposes Tax effect of tax losses not recognized Tax effect of utilization of tax losses previously not recognized Effect of different tax rates of subsidiaries operating in other jurisdictions Tax effect of over-provision in prior years Income tax expenses	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 (102,342) (106,672) (65,560) 303 (4,451) (27,072) (102,039) (111,123) (92,632) (17,858) (19,447) (15,284) 33,820 16,305 9,747 (14,908) (4,074) (7,613) 5,268 11,193 20,960 (1,413) – (284) (3,467) 282 (4,071) – (2,368) (821) 1,442 1,891 2,634	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) (170,899) (29,542) 197,694 (3,413) 26,795 (32,955) 4,421 (5,437) 21,914 1,818 (22) (331) 4,891 6,040 (164) (4) (13,206) (2,003) – (823) 17,834 (740)

At 31 October 2009, the Group has unused tax losses of approximately HK$74,761,000 (30 June 2009: HK$66,399,000, 30 June 2008: HK$77,399,000, 30 June 2007: HK$42,276,000 and 31 October 2008: HK$86,687,000) available for offset against future profits. No deferred tax asset has been recognized in respect of the unused tax losses due to the unpredictability of future profits streams.

II – 53

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Deductible temporary differences have not been recognized in these financial statements owing to the absence of objective evidence in respect of the availability of sufficient taxable profits that are expected to arise to offset against the deductible temporary differences. Included in unused estimated tax losses are losses of approximately HK$21,614,000 (30 June 2009: HK$19,270,000, 30 June 2008: HK$15,229,000, 30 June 2007: HK$11,705,000 and 31 October 2008: HK$17,918,000) that will expire within 2 to 4 years from the year origination. Other losses may be carried forward indefinitely.

The components of unrecognized deductible (taxable) temporary differences are as follows:

Deductible temporary differences: Unutilized tax losses Other Accelerated tax allowances Taxable temporary differences: Accelerated tax allowances	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 42,276 77,399 66,399 8,513 7,828 8,121 – – 259 (1,065) (569) – 49,724 84,658 74,779	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 74,761 86,687 – – 492 263 – – 75,253 86,950	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 74,761 86,687 – – 492 263 – – 75,253 86,950
			86,950

14. DISCONTINUED OPERATIONS

For the year ended 30 June 2007

In September 2006, the Group ceased its manufacturing and sales of honey mead business by disposal of interest in the subsidiaries, Wuhu Bee & bee Natural Food Company Limited and Zhuhai Free Trade Zone Bee & Bee Natural Food Company Limited.

In addition, in April 2007, the Group disposed one of its subsidiaries, La Cucina Italian (Macau) Limited, a restaurant operated in Macau. Details of these assets and liabilities disposed of are disclosed in note 34.

For the year ended 30 June 2009

Details of the assets and liabilities disposed of are disclosed in note 15.

II – 54

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

An analysis of the combined result/result and combined cash flows/cash flows of the discontinued operations of each year/period is as follows:

Profit (loss) for the year/period from discontinued operations Revenue and other revenue Expenses Gain on disposal of jointly controlled entities Profit (loss) before taxation Income tax expenses Profit (loss) for the year from discontinued operations Cash flows from discontinued operations Net cash flows from operating activities Net cash flows from investing activities Net cash flows from financing activities Net cash inflows (outflows)	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 3,218 66,872 107,929 (2,915) (71,323) (135,001) – – – 303 (4,451) (27,072) (31) 415 (1,485) 272 (4,036) (28,557) 5,139 18,871 22,925 (561) (29,659) (27,686) (1,356) (5,009) 6,355 3,222 (15,797) 1,594	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 18,346 28,551 (18,359) (31,964) 197,707 – 197,694 (3,413) (16,819) – 180,875 (3,413) 4,265 19,059 (1,009) (19,980) (2,818) 1,550 438 629	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 18,346 28,551 (18,359) (31,964) 197,707 – 197,694 (3,413) (16,819) – 180,875 (3,413) 4,265 19,059 (1,009) (19,980) (2,818) 1,550 438 629
			(3,413) –
			(3,413)

			19,059 (19,980) 1,550
			629

15. NON-CURRENT ASSETS HELD FOR SALE

For the ended 30 June 2009

Assets related to the gas related business classified as held for sale Liabilities of the gas related business associated with assets classified as held for sale Net assets of the gas related business classified as held for sale Reserve of the gas related business classified as held for sale	2009 HK$’000 350,193
	123,825
	226,368

	19,990

II – 55

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Property, plant and equipment_(Note) Construction in progress Goodwill(Note 19) Prepaid lease payments Prepayments, deposits and other receivables Accounts receivables Inventories Bank balances and cash Assets related to the gas related business classified as held for sale Accounts payables Accrued liabilities and other payables Tax liabilities Bank and other borrowings(Note)_ Liabilities of the gas related business associated with assets classified as held fro sale Net assets of the gas related business classified as held for sale Reserve of the gas related business classified as held for sale	2009 HK$’000 231,819 2,877 49,454 15,775 8,513 1,181 1,714 38,860
	350,193
	4,713 8,900 1,503 108,709
	123,825
	226,368

	19,990

Borrowings of approximately HK$15,105,000 is secured by corporate guarantee from a shareholder of a jointly controlled entity, interest charged at 2.55% per annum and has fixed repayment term.

Borrowing of approximately HK$59,907,000 is secured by gas network of a jointly controlled entity, interest charged at 5.508%-5.751% per annum and has fixed repayment term.

Borrowing of approximately HK$33,697,000 is unsecured, interest charged at 4.779%-5.67% per annum and has fixed repayment term.

16. DIVIDENDS

The directors of the Group did not recommend a payment of dividend for the Relevant Periods.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

17. LOSS PER SHARE

For continuing and discontinued operations

The calculation of basic loss per share is based on the following data:

Loss for the purposes of basic loss per share Weighted average number of ordinary shares for the purpose of basic loss per share	For the year ended For the four months ended 30 June 31 October 2007 2008 2009 2009 2008 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (72,521) (116,405) (100,643) (415) (33,703) Number of shares ’000 ’000 ’000 ’000 ’000 936,079 1,449,641 3,220,582 3,211,894 3,232,608

No diluted loss per share has been presented in both years, as the outstanding share options, warrants and convertible bonds of the Company are anti-dilutive since their exercise or concession would result in a decrease in loss per share.

From continuing operations

The calculation of the basic loss per share from continuing operations attributable to the ordinary equity shareholders of the parent is based on the following data:

For the year ended
30 June
2007
2008
2009
HK$’000
HK$’000
HK$’000
Loss for year/period attributable to equity
holders of the parent
(72,521)
(116,405)
(100,643)
Less: Profit (loss) for the year/period
attributable to the equity
holders of the Company from
discontinued operations
272
(4,036)
(28,557)
Loss for the purpose of basic
per share from basic loss per share
(72,793)
(112,369)
(72,086)

For the four months ended
31 October
2009
2008
HK$’000
HK$’000
(Unaudited)
(415)
(33,703)
180,875
(3,413)
(181,290)
(30,290)

The denominators used are the same as those detailed above for basic loss per share.

From discontinued operations

Profit per share for the discontinued operations is HK5.63 cents per share (30 June 2009: loss per share HK0.89 cents, 30 June 2008: HK0.28 cents, 30 June 2007: profit per share HK0.03 cent and 31 October 2008: HK0.11 cent per share), based on the profit (loss) for the year/period from the discontinued operations of approximately HK$180,875,000 (30 June 2009: loss of HK$28,557,000, 30 June 2008: loss of HK$4,036,000, 30 June 2007: profit of HK$272,000 and 31 October 2008: loss of HK$3,413,000) and the denominators detailed above for basic profit (loss) per share.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

18. PROPERTY, PLANT AND EQUIPMENT

The Group

Leasehold land Gas Gas Furniture, Plant and distribution storage fixtures and and Leasehold building network equipment equipment machinery improvement HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 COST At 1 July 2006 6,378 – – 1,676 3,339 2,066 Exchange realignment 617 3,431 219 159 29 – Additions 781 – – 886 42,100 1,154 Acquired on acquisition of jointly controlled entities 11,100 153,943 9,822 5,190 – – Disposal of subsidiaries – – – (629) (2,845) (2,112) Disposal – – – (22) – – At 30 June 2007 and 1 July 2007 18,876 157,374 10,041 7,260 42,623 1,108 Exchange realignment 2,009 16,602 1,056 915 4,549 8 Additions 254 9,637 – 1,086 – 910 Acquired on acquisition of subsidiaries – – – 7,884 – 334 Transfer from construction in progress 1,520 15,022 – 9,089 – – Deemed disposal of a subsidiary held by a jointly controlled entity (50) (1,818) (160) (17) – – Disposal – – – (41) – – At 30 June 2008 and 1 July 2008 22,609 196,817 10,937 26,176 47,172 2,360 Exchange realignment (43) (370) (21) (82) (88) (1) Additions – 6,133 3 7,878 1,798 – Transfer from construction in progress 640 20,592 – 5,783 – – Disposal – – – (131) – – Disposal of a subsidiary held by a jointly controlled entity – – – (852) – – Reclassified as held for sale (14,890) (223,172) (10,919) (21,643) – – At 30 June 2009 and 1 July 2009 8,316 – – 17,129 48,882 2,359 Exchange realignment 4 – – 8 23 – Additions – – – 1,238 147 – Disposal – – – (2) – – At 31 October 2009 8,320 – – 18,373 49,052 2,359	Motor Computer vehicles equipment HK$’000 HK$’000 3,277 3,698 61 211 1,552 147 1,488 – (284) – (99) – 5,995 4,056 385 448 2,166 138 721 – – – (54) – – – 9,213 4,642 (13) (8) 2,906 142 – – (1,197) – – – (3,998) – 6,911 4,776 2 2 319 8 – – 7,232 4,786	Total HK$’000 20,434 4,727 46,620 181,543 (5,870) (121)
		247,333 25,972 14,191 8,939 25,631 (2,099) (41)
		319,926 (626) 18,860 27,015 (1,328) (852) (274,622)
		88,373 39 1,712 (2)
		90,122

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APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

DEPRECIATION At 1 July 2006 Exchange realignment Charge for the year Disposal of subsidiaries Eliminated on disposals At 30 June 2007 and 1 July 2007 Exchange realignment Charged for the year Deemed disposal of a subsidiary held by a jointly controlled entity Eliminated on disposals At 30 June 2008 and 1 July 2008 Exchange realignment Charged for the year Eliminated on disposals Eliminated on disposal of a subsidiary held by a jointly controlled entity Reclassified as held for sale At 30 June 2009 and 1 July 2009 Exchange realignment Charged for the period At 31 October 2009 NET BOOK VALUES At 31 October 2009 At 30 June 2009 At 30 June 2008 At 30 June 2007	Leasehold land Gas and distribution building network HK$’000 HK$’000 106 – 6 – 633 3,332 – – – – 745 3,332 128 1,174 867 14,640 (1) (43) – – 1,739 19,103 (6) (62) 1,039 16,147 – – – – (1,128) (35,188) 1,644 – 1 – 135 – 1,780 – 6,540 – 6,672 – 20,870 177,714 18,131 154,042	Gas Furniture, storage fixtures and equipment equipment HK$’000 HK$’000 – 403 – 2 280 553 – (236) – (12) 280 710 92 136 1,122 1,876 (8) (2) – (10) 1,486 2,710 (4) (16) 776 4,789 – (63) – (51) (2,258) (3,127) – 4,242 – 1 – 1,176 – 5,419 – 12,954 – 12,887 9,451 23,466 9,761 6,550	Plant and Leasehold machinery improvement HK$’000 HK$’000 1,199 440 1 – 3,927 395 (1,188) (283) – – 3,939 552 860 7 7,844 466 – – – – 12,643 1,025 (36) (1) 8,327 637 – – – – – – 20,934 1,661 10 – 2,880 159 23,824 1,820 25,228 539 27,948 698 34,529 1,335 38,684 556	Motor vehicles HK$’000 444 2 752 (168) (18) 1,012 63 1,164 (3) – 2,236 (6) 1,690 (645) – (1,102) 2,173 1 442 2,616 4,616 4,738 6,977 4,983	Computer equipment HK$’000 254 14 798 – – 1,066 192 858 – – 2,116 (5) 938 – – – 3,049 1 316 3,366 1,420 1,727 2,526 2,990	Total HK$’000 2,846 25 10,670 (1,875) (30)
						11,636 2,652 28,837 (57) (10)
						43,058 (136) 34,343 (708) (51) (42,803)
						33,703 14 5,108
						38,825
						51,297

						54,670

						276,868

						235,697

The leasehold land and buildings of the subsidiary is located in the PRC and held under medium lease term.

For the year ended 30 June 2009, depreciation provided for the year within the Group after reclassified as held for sale included HK$29,000 from discontinued operations expenses.

At the end of each Relevant Periods, none of the Group’s property, plant and equipment was held under finance lease.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

The Company

COST At 1 July 2006, 30 June 2007, 1 July 2007, 30 June 2008 and 1 July 2008 Additions At 30 June 2009 and 1 July 2009 Additions At 31 October 2009 DEPRECIATION At 1 July 2006, 30 June 2007, 1 July 2007, 30 June 2008 and 1 July 2008 Charged for the year At 30 June 2009 and 1 July 2009 Charged for the period At 31 October 2009 NET BOOK VALUES At 31 October 2009 At 30 June 2009 At 30 June 2008 At 30 June 2007	Computer equipment HK$’000 – 48 48 7 55 – 5 5 3 8 47 43 – –	Furniture, fixtures and equipment HK$’000 – 11 11 10 21 – 1 1 2 3 18 10 – –	Motor vehicle HK$’000 – 343 343 – 343 – 17 17 23 40 303 326 – –	Total HK$’000 – 402
				402 17
				419
				– 23
				23 28
				51
				368

				379

				–

				–

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

19. GOODWILL

The Group

COST
At 1 July 2006
Arising on acquisition of jointly controlled entities
Arising on increase of equity interest in subsidiaries
At 30 June 2007 and 1 July 2007
Arising on acquisition of subsidiaries
At 30 June 2008 and 1 July 2009
Reclassified as held for sale
At 30 June 2009, 1 July 2009 and at 31 October 2009
IMPAIRMENT
At 1 July 2006
Impairment loss recognized for the year
At 30 June 2007 and 1 July 2007
Impairment loss recognized for the year
At 30 June 2008 and 1 July 2008
Impairment loss recognized for the year
At 30 June 2009 and 1 July 2009
Impairment loss recognized for the period
At 31 October 2009
CARRYING VALUES
At 31 October 2009
At 30 June 2009
At 30 June 2008
At 30 June 2007

HK$’000
138,422
49,454
96,319
284,195
2,016,497
2,300,692
(49,454)
2,251,238
(3,361)
(145)
(3,506)
–
(3,506)
(31,761)
(35,267)
(96,175)
(131,442)
2,119,796
2,215,971
2,297,186
280,689

The Group tests goodwill annually for impairment in the financial year in which the acquisition takes place, or more frequently if there is indications that goodwill might be impaired.

For the year ended 30 June 2008, addition of goodwill was arisen from acquisition of subsidiaries, Grand Promise International Limited and Best Delight Group Limited of approximately HK$1,877,427,000 and HK$139,070,000 respectively.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Key assumptions are as follows:

(a) Provision of lottery related hardware and software systems

			At 30 June		At
		2007	2008	2009	31 October 2009
	Discount rate	5%	5%	5%	5%
	Growth rate	20%	20%	20%	20%
(b)	Provision of karaoke CMS services
			At 30 June		At
		2007	2008	2009	31 October 2009
	Discount rate	–	5%	5%	5%
	Growth rate_(Note)_	–	90%	90%	90%

Note: Business of provision of karaoke CMS services is in its early development stage, the management estimates a growth rate of approximately 90% per cent per annum for the development stage and would then remain constant for subsequent years.

During the period ended 31 October 2009, the Group recognized an impairment loss of approximately HK$96,175,000 in relation to goodwill arising on acquisition of subsidiary, Aptus Holdings Limited.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

20. OTHER INTANGIBLE ASSETS

The Group

Research and development HK$’000 COST At 1 July 2006 – Exchange realignment – Disposal of subsidiaries – At 30 June 2007 and 1 July 2007 – Acquired on acquisition of subsidiaries and jointly controlled entities 924 Additions 693 Exchange realignment 20 At 30 June 2008 and 1 July 2008 1,637 Additions 3,402 Transfer to technical know-how (3,372) Transfer from research and development – Exchange realignment (3) At 30 June 2009 and 1 July 2009 1,664 Additions 1,173 Exchange realignment – At 31 October 2009 2,837 AMORTIZATION At 1 July 2006 – Disposal of subsidiaries – Charge for the year – Exchange realignment – At 30 June 2007 and 1 July 2007 – Charge for the year – Exchange realignment – At 30 June 2008 and 1 July 2008 – Charge for the year – Exchange realignment – At 30 June 2009 and 1 July 2009 – Charge for the period – Exchange realignment – At 31 October 2009 – CARRYING VALUES At 31 October 2009 2,837 At 30 June 2009 1,664 At 30 June 2008 1,637 At 30 June 2007 –	Patent HK$’000 2,379 – (2,379) – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –	Computer software in lottery systems HK$’000 4,644 269 – 4,913 – – 525 5,438 1,251 – – (11) 6,678 – 3 6,681 437 – 1,848 25 2,310 1,937 357 4,604 887 (10) 5,481 42 2 5,525 1,156 1,197 834 2,603	Technical know-how HK$’000 519 – (519) – 2,829 – 64 2,893 – – 3,372 (5) 6,260 – 3 6,263 519 (519) – – – 6 – 6 439 (1) 444 214 – 658 5,605 5,816 2,887 –	Total HK$’000 7,542 269 (2,898) 4,913 3,753 693 609 9,968 4,653 (3,372) 3,372 (19) 14,602 1,173 6 15,781 956 (519) 1,848 25 2,310 1,943 357 4,610 1,326 (11) 5,925 256 2 6,183 9,598 8,677 5,358 2,603

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

The above intangible assets other than patent and research and development have definite useful lives. Such intangible assets are amortized on a straight-line basis over the following periods:

Computer software	5	years
Technical know-how	3	years

21. INTEREST IN ASSOCIATES

The Group

Cost of unlisted investment Share of post-acquisition losses Disposal Exchange realignment	2007 HK$’000 238 – – – 238	At 30 June 2008 HK$’000 1,982 (40) – 185 2,127	At 2009 31 October 2009 HK$’000 HK$’000 2,127 – 124 – (2,251) – – – – –	At 2009 31 October 2009 HK$’000 HK$’000 2,127 – 124 – (2,251) – – – – –
				–

During the Relevant Periods, the Group has interests in the following associates:

				Proportion of	Proportion of
				nominal value
	Form of	Place of		of issued share
	business	incorporation/	Class of	capital held by		Nature of
Name of Company	structure	operation	shares held	the Group		business
深圳市博眾技術服務
有限公司_(Note a)_	Incorporated	PRC	Registered		24.99%	Provision of
(Shenzhen Bozone			capital			lottery-related
Technology Services						hardware and
Co. Ltd.)						software
						systems
臨澧華油燃氣有限公司	Incorporated	PRC	Registered		23.49%	Distribution of
(Note b)			capital			natural gas
(Linli Huayou Gas Co.
Ltd.)

Note a: Shenzhen Bozone Technology Services Co. Ltd. (“Bozone Technology”) was deregistrated during the year.

Note b: For the year ended 30 June 2008, Linli Huayou Gas Co., Limited (“Linli”) is a subsidiary of a jointly controlled entity, Changde Huayou Gas Co., Limited (“Changde Joint Venture”), which holds 70% registered capital of Linli. Due to the change in share structure of Linli, shareholding held by Changde Joint Venture was decreased to 48.61% and Linli became an associate of the Group. Changde Joint Venture disposed its equity interest in Linli in November 2008.

II – 64

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Combined financial information in respect of the Group’s associates is set out below:

Total assets Total liabilities Total assets The Group’s share of associates’ net assets Revenue Loss for the year The Group’s share of result of associated	2007 HK$’000 513 (3) 510 127 – (2) –	At 30 June 2008 HK$’000 9,958 (964) 8,994 2,217 2,838 (170) (40)	At 2009 31 October 2009 HK$’000 HK$’000 10,115 – (979) – 9,136 – 2,291 – 1,719 – 526 – 124 –	At 2009 31 October 2009 HK$’000 HK$’000 10,115 – (979) – 9,136 – 2,291 – 1,719 – 526 – 124 –
				–

				–

				–

				–

				–

In November 2008, Changde Joint Venture disposed its equity interest in Linli, at a consideration of approximately HK$4,145,000.

Gain on disposal of Bozone Technology of approximately HK$15,000 was recorded by the Group.

22. AVAILABLE-FOR-SALE FINANCIAL ASSET

The Group
		At 30 June		At
	2007	2008	2009	31 October 2009
	HK$’000	HK$’000	HK$’000	HK$’000
Cost of unlisted investment, at
cost less impairment	–	63,780	63,780	63,780

Unlisted investment represents investment in an unlisted equity securities issued by a private entity incorporated in the PRC. The Group holds 9.99% of shareholding right. In the opinion of the directors, the Group is unable to exercise significant influence on the financial and operation of the investee, therefore, the investment is classified as available-for-sale financial asset.

The unlisted investment is measured at cost less impairment at the end of the reporting period because the range of reasonable fair value estimates is so significant that the directors of the Company are in the opinion that its fair value cannot be measured reliably. During the Relevant Periods, impairment loss had not been made.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

23. PREPAID LEASE PAYMENTS

The Group

At the beginning Acquisition of jointly controlled entities Additions Exchange realignment Less: Charged to consolidated income statement for the year Reclassified as held for sale At the end Analysis for reporting purposes: Non-current portion Current portion At 30 June/31 October	2007 HK$’000 – 12,645 99 284 13,028 (152) – 12,876 12,496 380 12,876	At 30 June 2008 HK$’000 12,876 – 2,191 1,348 16,415 (461) – 15,954 15,502 452 15,954	At 2009 31 October 2009 HK$’000 HK$’000 15,954 – – – 316 – (29) – 16,241 – (466) – (15,775) – – – – – – – – –	At 2009 31 October 2009 HK$’000 HK$’000 15,954 – – – 316 – (29) – 16,241 – (466) – (15,775) – – – – – – – – –
				– – –
				–

				– –
				–

The amount represented medium-term land use rights situated in the PRC and premises under operating leases in the PRC.

24. CONSTRUCTION IN PROGRESS

The Group

At the beginning Acquisition of jointly controlled entities Additions Deemed disposal of a subsidiary held by a jointly controlled entity Transferred to property, plant and equipment Exchange realignment Reclassified as held for sale At the end	2007 HK$’000 – 7,956 5,871 – – 177 – 14,004	At 30 June 2008 HK$’000 14,004 – 17,249 (184) (25,631) 1,474 – 6,912	At 2009 31 October 2009 HK$’000 HK$’000 6,912 – – – 22,994 – – – (27,015) – (14) – (2,877) – – –	At 2009 31 October 2009 HK$’000 HK$’000 6,912 – – – 22,994 – – – (27,015) – (14) – (2,877) – – –
				–

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

25. INVENTORIES

The Group

Raw materials and consumables Finished good	2007 HK$’000 6,150 386 6,536	At 30 June 2008 HK$’000 2,450 4,462 6,912	At 2009 31 October 2009 HK$’000 HK$’000 486 744 1,937 1,672 2,423 2,416	At 2009 31 October 2009 HK$’000 HK$’000 486 744 1,937 1,672 2,423 2,416
				2,416

All inventories are stated at cost.

26. TRADE AND OTHER RECEIVABLES AND PREPAYMENTS

The Group

Trade receivables Other receivables and prepayments Less: Allowances for doubtful receivable	2007 HK$’000 10,861 78,795 89,656 – 89,656	At 30 June 2008 HK$’000 16,047 104,288 120,335 (5,848) 114,487	At 2009 31 October 2009 HK$’000 HK$’000 9,860 416,534 51,697 52,994 61,557 469,528 (5,517) (5,517) 56,040 464,011	At 2009 31 October 2009 HK$’000 HK$’000 9,860 416,534 51,697 52,994 61,557 469,528 (5,517) (5,517) 56,040 464,011
				469,528 (5,517)
				464,011

0 to 30 days 31 to 60 days 61 to 365 days Over 1 year	2007 HK$’000 2,934 1,893 5,696 338 10,861	At 30 June 2008 HK$’000 6,873 4,077 3,708 1,389 16,047	At 2009 31 October 2009 HK$’000 HK$’000 5,061 408,011 737 3,801 3,298 3,905 764 817 9,860 416,534	At 2009 31 October 2009 HK$’000 HK$’000 5,061 408,011 737 3,801 3,298 3,905 764 817 9,860 416,534
				416,534

At 31 October 2009, the trade receivables with carrying amount of approximately HK$1,008,000 (30 June 2009: HK$8,149,000, 30 June 2008: HK$14,658,000 and 30 June 2007: HK$9,702,000) are neither past due nor impaired at the reporting date.

At 31 October 2009, the Group made an allowance of approximately HK$Nil, (30 June 2009: HK$344,000, 30 June 2008: HK$1,051,000 and 30 June 2007: HK$Nil) in respect of trade receivables, which was past due at the reporting date with long age and slow repayments were received from respective customers since the due date. The directors considered the related receivables may be impaired and specified allowance is made.

II – 67

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Movement in the allowances for doubtful receivable:

2007 HK$’000 Balance at the beginning – Charge for the year – trade receivables – Charge for the year – other receivables – Amount written off as uncollectibe – Amount recovered during the year – trade receivables – Exchange realignment – Reclassified as parts of disposal group of asset held for sale – Balance at the end of year/period –	At 30 June 2008 HK$’000 – 1,051 4,797 – – – – 5,848	At 2009 31 October 2009 HK$’000 HK$’000 5,848 5,517 344 – 353 – (172) – (100) – 46 – (802) – 5,517 5,517	At 2009 31 October 2009 HK$’000 HK$’000 5,848 5,517 344 – 353 – (172) – (100) – 46 – (802) – 5,517 5,517
			5,517

At 31 October 2009, included in the Group’s trade receivable with a carrying amount of approximately HK$Nil (30 June 2009: HK$416,000, 30 June 2008: HK$338,000 and 30 June 2007: HK$1,159,000) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amount are still considered recoverable. The Group does not hold any collateral over these balances.

Other receivables and prepayments included:

(a) At 31 October 2009, prepayments for the drilling operation of Xin Jiang Oilfield in the PRC of approximately HK$Nil (30 June 2009: HK$34 million, 30 June 2008: HK$34 million and 30 June 2007: HK$30 million) from discontinued operations.
(b) At 31 October 2009, deposits for investment in a jointly controlled entity of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$4.7 million and 30 June 2007: HK$Nil).
(c) At 31 October 2009, deposits held in securities dealer of a jointly controlled entity of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$16 million and 30 June 2007: HK$Nil).
(d) At 31 October 2009, prepayment of professional fees for investments of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$25.1 million and 30 June 2007: HK$29.8 million).

The fair value of the Group’s trade and other receivables and prepayments at the end of each Relevant Periods was approximate to the corresponding carrying amount.

==> picture [398 x 84] intentionally omitted <==

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

The Company
At 30 June At
2007 2008 2009 31 October 2009
HK$’000 HK$’000 HK$’000 HK$’000
Deposits, prepayments and
other receivable 3,085 63 296 712
----- End of picture text -----

II – 68

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

27. BANK BALANCES AND CASH

The Group

2007 HK$’000 Cash and cash deposits denominated in: Hong Kong dollar 28,493 Chinese Renminbi 174,787 United States dollar 1,180 Singaporean dollar 262 204,722	At 30 June 2008 HK$’000 77,839 74,321 140,260 180 292,600	At 2009 31 October 2009 HK$’000 HK$’000 7,374 18,076 87,329 80,791 136,292 1,091 200 190 231,195 100,148	At 2009 31 October 2009 HK$’000 HK$’000 7,374 18,076 87,329 80,791 136,292 1,091 200 190 231,195 100,148
			100,148

Included in the balance was approximately HK$80,791,000 (30 June 2009: HK$87,329,000, 30 June 2008: HK$74,321,000 and 30 June 2007: HK$174,787,000), representing bank deposits denominated in Renminbi placed with banks in the PRC by the Group. The remittance of these funds out of the PRC is subject to the exchange control restrictions imposed by the PRC government. In addition, an amount of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$138,686,000 and 30 June 2007: HK$Nil), representing bank deposits denominated in United States dollars placed with a bank in Hong Kong in an escrow account upon acquisition of subsidiaries and jointly controlled entities.

The Company

			At 30 June		At
		2007	2008	2009	31 October 2009
		HK$’000	HK$’000	HK$’000	HK$’000
Cash	and cash deposits denominated
in	Hong Kong dollar	6	740	9,647	10,224

28. TRADE AND OTHER PAYABLES

The Group

Trade payables Other payables	2007 HK$’000 10,536 46,992 57,528	At 30 June 2008 HK$’000 6,823 59,270 66,093	At 2009 31 October 2009 HK$’000 HK$’000 13,315 9,108 44,766 54,324 58,081 63,432	At 2009 31 October 2009 HK$’000 HK$’000 13,315 9,108 44,766 54,324 58,081 63,432
				63,432

II – 69

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

The following is an aged analysis of trade payables at the end of each Relevant Periods:

0 to 30 days 31 to 120 days 121 to 180 days 181 to 365 days Over 1 year	2007 HK$’000 1,662 1,040 2,986 3,981 867 10,536	At 30 June 2008 HK$’000 27 – 169 2,885 3,742 6,823	At 2009 31 October 2009 HK$’000 HK$’000 76 2,704 3,776 1,354 9,358 4,443 105 607 – – 13,315 9,108	At 2009 31 October 2009 HK$’000 HK$’000 76 2,704 3,776 1,354 9,358 4,443 105 607 – – 13,315 9,108
				9,108

The fair value of the Group’s trade and other payables at the end of each Relevant Periods was approximate to the corresponding carrying amount.

The Company

2007 HK$’000 Other payables 1,796 29. BANK AND OTHER BORROWINGS The Group 2007 HK$’000 Other loan, unsecured_(note a) 19,357 Other loan, secured(note b) 17,694 Bank loans, secured(note c) 57,724 Bank loans, unsecured(note d)_ 16,947 111,722	At 30 June 2008 HK$’000 6,022 At 30 June 2008 HK$’000 83,246 17,474 60,020 20,256 180,996	At 2009 31 October 2009 HK$’000 HK$’000 3,069 13,734 At 2009 31 October 2009 HK$’000 HK$’000 36,145 37,976 – – – – – – 36,145 37,976	At 2009 31 October 2009 HK$’000 HK$’000 3,069 13,734 At 2009 31 October 2009 HK$’000 HK$’000 36,145 37,976 – – – – – – 36,145 37,976
			37,976

The Group’s borrowings are repayable as follows:

On demand or within one year More than one year, but not exceeding two years Two to five years Over five years Less: Amount due within one year shown under current liabilities	2007 HK$’000 5,617 28,031 63,307 14,767 111,722 (5,617) 106,105	At 30 June 2008 HK$’000 66,745 63,704 40,054 10,493 180,996 (66,745) 114,251	At 2009 31 October 2009 HK$’000 HK$’000 36,145 37,976 – – – – – – 36,145 37,976 (36,145) (37,976) – –	At 2009 31 October 2009 HK$’000 HK$’000 36,145 37,976 – – – – – – 36,145 37,976 (36,145) (37,976) – –
				37,976 (37,976)
				–

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

The fair value of the Group’s borrowings at the end of each Relevant Periods was approximate to the corresponding carrying amount.

Note:

a. Borrowings of approximately HK$16,500,000 (30 June 2009: HK$16,500,000, 30 June 2008: HK$16,500,000 and 30 June 2007: HK$16,500,000) are unsecured, interest bearing at 2-3% over prime rate.
Borrowings of approximately HK$21,476,000 (30 June 2009: HK$19,645,000, 30 June 2008: HK$11,345,000 and 30 June 2007: HK$2,857,000) is unsecured, interest bearing at prime rate.

Borrowings of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$55,401,000 and 30 June 2007: Nil) is unsecured, interest bearing at prime rate and payable on demand.

b. Borrowings of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$17,474,000 and 30 June 2007: HK$17,694,000) is secured by a shareholder of jointly controlled entity, interest charged at 2.55% per annum and has fixed repayment term.
c. Borrowings of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$60,020,000 and 30 June 2007: HK$54,232,000) is secured by a gas network of a jointly controlled entity, interest charged at 5.55.7% per annum and has fixed repayment terms.
Borrowings of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$Nil, 30 June 2007: HK$3,492,000) is secured by leasehold properties of a subsidiary and interest charged at 6.732% per annum.
d. Borrowings of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$20,256,000 and 30 June 2007: HK$16,947,000) is unsecured, interest charged at 4.8% per annum and has fixed repayment term.

At 30 June 2009, bank and other borrowings of approximately HK$108,709,000 were reclassified to liabilities of the gas related business associated with assets classified as held for sale.

The details of the Group’s borrowings, which are denominated in foreign currencies are set out as below:

At 31 October 2009 At 30 June 2009 At 30 June 2008 At 30 June 2007	RMB HK$’000 equivalent –

	–

	97,750

	92,365

30. CONVERTIBLE BONDS

The Group

(a) On 22 November 2006, the subsidiary of the Company, Aptus Holdings Limited (“Aptus”) issued convertible bonds due on 21 November 2011 with a principal amount of HK$234,000,000, which is with a gross yield at 11% per annum, calculated in a semi-annual basis. The convertible bonds were issued for the purpose of the acquisition of a 48.33% equity interest in the Changde Joint Venture, 33% equity interest in the Hunan Joint Venture and general working purposes.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

On 28 August 2009, the Company and Evolution, the sole beneficial owner have entered into a deed of undertaking as follows:

(a) in consideration of the undertaking given by the Company referred to in paragraph (b) below, Evolution irrevocably and unconditionally undertakes to the Company that it will not exercise its conversion right under the convertible bonds; and
(b) in consideration of the undertaking given by Evolution referred to in paragraph (a) above, the Company irrevocably and unconditionally undertakes to Evolution that when the Redemption Amount is Available for Redemption, it will be applied to redeem the convertible bonds.

Unless previously redeemed, converted or purchased and cancelled, the convertible bonds will be redeemed at 150.15% of their principal amount on 21 November 2011.

The Directors had assessed the fair values of the early redemption rights and considered the fair value is insignificant.

The convertible bonds have been spilt between the liability and equity components as follows:

Nominal value of convertible bonds issued Equity component Liability component at the issuance date Interest paid Imputed finance cost Liability component as at the end of reporting date	2007 HK$’000 234,000 (10,712) 223,288 – 19,856 243,144	At 30 June 2008 HK$’000 234,000 (10,712) 223,288 – 51,036 274,324	At 2009 31 October 2009 HK$’000 HK$’000 234,000 234,000 (10,712) (10,712) 223,288 223,288 (5,850) (5,850) 85,806 96,825 303,244 314,263

As the bondholders undertake not to exercise its conversion right, equity component of approximately HK$10,712,000 was credited to accumulated loss.

(b) The Company absorbed the convertible bonds issued by Grand Promise International Limited with a principal amount of US$35 million. The convertible bonds are denominated in United State dollars. The convertible bonds holders are entitled to convert the convertible bonds into ordinary shares of the Company at a conversion price of HK$0.8 per each ordinary share. If any of the convertible bonds have not been converted, they will be redeemed on the maturity date at 141.06% of the outstanding principal amount of the Bonds.

The convertible bonds contain two components: liability component and conversion option derivative. The effective interest rate of the liability component is 16.38%. The conversion option derivative is measured at fair value with changes in fair value recognized in profit and loss.

II – 72

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

The movement of the liability component and conversion option derivative of the convertible bonds for the year is set out as below:

Nominal value at the issuance date Interest expenses Conversion during the year Loss arising on change of fair value At 30 June 2008 and 1 July 2008 Imputed finance cost Changes of fair values At 30 June 2009 and 1 July 2009 Redemption of convertible bonds Imputed finance cost Change of fair values At 31 October 2009	Conversion option derivative component HK$’000 87,541 – (27) 13,347 100,861 – (25,629) 75,232 (69,882) – 31,646 36,996 (Note a)	Liability component HK$’000 185,459 11,365 (51) – 196,773 22,722 – 219,495 (41,253) 5,446 – 183,688 (Note b)

Note a: Recorded in current liabilities as derivative financial instruments.

Note b: Total of approximately of HK$183,688,000 (30 June 2009: HK$522,739,000, 30 June 2008: HK$471,097,000 and 30 June 2007: HK$243,144,000) is recorded as non-current liabilities.

The Company

Nominal value at the issuance date Interest expenses Conversion during the year Loss arising on change of fair value At 30 June 2008 and 1 July 2008 Imputed finance cost Changes of fair values At 30 June 2009 and 1 July 2009 Redemption of convertible bonds Imputed finance cost Change of fair values At 31 October 2009	Conversion option derivative component HK$’000 87,541 – (27) 13,347 100,861 – (25,629) 75,232 (69,882) – 31,646 36,996	Liability component HK$’000 185,459 11,365 (51) – 196,773 22,722 – 219,495 (41,253) 5,446 – 183,688

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

31. SHARE CAPITAL

The Group and the Company

Authorized: At 1 July 2007, 30 June 2008, 1 July 2008, 30 June 2009, 1 July 2009 and 31 October 2009, shares of HK$0.01 each Issued and fully paid: At 1 July 2006 Bonus issue on 1 November 2006 At 30 June 2007 and 1 July 2007, shares of HK$0.01 each Shares issued on exercise of options Conversion of convertible bonds Shares issued for repayment of loan Shares issued pursuant to sale and purchase agreement At 30 June 2008 and 1 July 2008, shares of HK$0.01 each Shares issued on exercise of warrants Shares buy-back At 30 June 2009, 1 July 2009 and 31 October 2009, shares of HK$0.01 each	Number of shares ’000 20,000,000 624,053 312,026 936,079 16,900 106 20,023 2,262,174 3,235,282 17 (23,405) 3,211,894	HK$’000 200,000 6,241 3,120 9,361 169 1 200 22,622 32,353 – (234) 32,119

For the year ended 30 June 2009, the Company repurchased a total of 23,405,000 shares of its own shares through the Stock Exchange for an aggregate consideration of approximately HK$11,410,000. The highest and lowest prices per share paid by the Company for the purchase of shares during the year were HK$0.63 and HK$0.25 respectively.

All the repurchased shares were cancelled by the Company upon such repurchase and, accordingly, the issued share capital of the Company was reduced by the nominal value of these shares.

The premium payable on the repurchase was charged against the share premium account. The directors considered that, as the Company’s shares are trading at a discount to the expected net asset value per share, the repurchase of shares would be beneficial to the Company.

Warrants

On 1 November 2006, a bonus issue of 124,810,561 warrants was made on the basis of one warrant for every five issued shares held on 24 October 2006. Each warrant entitles its holder to subscribe in cash at a price of HK$1.33 for one share of the Company at any time from 3 November 2006 to 2 November 2008, both days inclusive. 16,600 warrants were exercised during the year and the balance of warrants expired on 2 November 2008.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

32. RESERVES

(a) The Group

The amounts of the Group’s reserves and the movements therein for the current year are presented in the consolidated statements of changes in equity on page II-10 of the Financial Information.

(b) The Company

At 1 July 2006 Bonus issue Recognition of share option reserve Total comprehensive income for the year At 30 June 2007 and 1 July 2007 Release of share option reserve Recognition of equity-settled share based payment Conversion of convertible bonds Shares issued pursuant to sale and purchase agreement Share issued for repayment of loan Shares issued on exercise of options Total comprehensive income for the year	Share capital HK$’000 6,241 3,120 – – 9,361 – – 1 22,622 200 169 –	Share premium HK$’000 290,004 (3,120) – – 286,884 – – 83 1,854,982 16,419 8,360 –	Capital redemption reserve HK$’000 – – – – – – – – – – – –	Employee share-based redemption reserve HK$’000 35,572 – – – 35,572 – – – – – – –	Share option reserve HK$’000 16,192 – 28,434 – 44,626 (34,208) 864 – – – – –	Retained profits/ Special (Accumulated reserve losses) HK$’000 HK$’000 2,569 (43,372) – – – – – (29,562) 2,569 (72,934) – 34,208 – – – – – – – – – – – (56,163)	Total HK$’000 307,206 – 28,434 (29,562)
							306,078 – 864 84 1,877,604 16,619 8,529 (56,163)

II – 75

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Share capital HK$’000 At 30 June 2008 and 1 July 2008 32,353 Shares issued on exercise of warrants – Repurchase of shares (234) Total comprehensive income for the year – At 30 June 2009 and 1 July 2009 32,119 Total comprehensive income for the year – At 31 October 2009 32,119 For four months ended 31 October 2008 (Unaudited) At 1 July 2008 32,353 Repurchase of shares (118) Total comprehensive income for the year – At 31 October 2008 32,235	Share premium HK$’000 2,166,728 22 (11,176) – 2,155,574 – 2,155,574 2,166,728 (6,610) – 2,160,118	Capital redemption reserve HK$’000 – – 234 – 234 – 234 – 118 – 118	Employee share-based redemption reserve HK$’000 35,572 – – – 35,572 – 35,572 35,572 – – 35,572	Share option reserve HK$’000 11,282 – – – 11,282 – 11,282 11,282 – – 11,282	Retained profits/ Special (Accumulated reserve losses) HK$’000 HK$’000 2,569 (94,889) – – – (234) – (25,490) 2,569 (120,613) – (59,480) 2,569 (180,093) 2,569 (94,889) – (118) – (14,615) 2,569 (109,622)	Total HK$’000 2,153,615 22 (11,410) (25,490)
						2,116,737 (59,480)
						2,057,257

						2,153,615 (6,728) (14,615)
						2,132,272

33. SHARE-BASED PAYMENT TRANSACTIONS

Pre-IPO Share Option Scheme

As at 30 June 2009, all options granted under the Pre-IPO Share Option Scheme were either exercised or lapsed.

Share Option Scheme

The Company has adopted a share option scheme (the “Share Option Scheme”), under which the Directors may, at its discretion, invite any persons belonging to any of the following classes of participants, to take up options to subscribe for the shares in the Company:

(a) any employees (whether full-time or part-time) of the Company, any of its subsidiaries or any entity (the “Invested Entity”) in which the Group holds any equity interest, including any executive director of the Company, any of such subsidiaries or any Invested Entity;
(b) any Non-executive Directors (including Independent Non-executive Directors) of the Company, any of its subsidiaries or any Invested Entity;
(c) any supplier of goods or services to any member of the Group or any Invested Entity;
(d) any customer of the Group or any Invested Entity;
(e) any person or entity that provides research, development, or other technological support to the Group or any Invested Entity; and

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

(f) any shareholder of any member of the Group or any Invested Entity or any holder of any securities issued by any member of the Group or any Invested Entity.

The Share Option Scheme will remain valid for a period of 10 years commencing from 18 October 2002. The exercise price of the share options is determinable by the Directors, and may not be less than the highest of:

(i) the closing price of the shares of the Company as stated in the Stock Exchange’s daily quotation sheets on the date of grant, which must be a business day;
(ii) the average closing price of the shares of the Company as stated in the Stock Exchange’s daily quotation sheets for the five business days immediately preceding the date of grant; and
(iii) the nominal value of a share of the Company.

No share options was granted during the period ended 31 October 2009 (30 June 2009: Nil, 30 June 2008: Nil and 30 June 2007: 62,400,000).

There were 84,100,000 outstanding share options brought forward from 1 July 2008 and no share options was exercised for the year ended 30 June 2009 and for the period ended 31 October 2009.

For the period ended 31 October 2009

							Number
			Number				of share	Exercise
			of share	Granted	Exercised	Lapsed	options at	period of
Categories of	Date of	Exercise	options at	during	during	during	31 October	share
grantees	grant	price	1 July 2009	the year	the year	the year	2009	options
		HK$	’000	’000	’000	’000	’000
Cheung Kwai Lan	23/11/2006	0.62	1,560	–	–	–	1,560	23/11/2006 –
								17/10/2012
	23/11/2006	0.62	1,560	–	–	–	1,560	23/5/2007 –
								17/10/2012
	23/11/2006	0.62	3,120	–	–	–	3,120	23/11/2007 –
								17/10/2012
Chan Tung Mei	23/11/2006	0.62	1,560	–	–	–	1,560	23/11/2006 –
								17/10/2012
	23/11/2006	0.62	1,560	–	–	–	1,560	23/5/2007 –
								17/10/2012
	23/11/2006	0.62	3,120	–	–	–	3,120	23/11/2007 –
								17/10/2012
Chan Ting	23/11/2006	0.62	1,560	–	–	–	1,560	23/11/2006 –
								17/10/2012
	23/11/2006	0.62	1,560	–	–	–	1,560	23/5/2007 –
								17/10/2012
	23/11/2006	0.62	3,120	–	–	–	3,120	23/11/2007 –
								17/10/2012
Lau Hin Kun	23/11/2006	0.62	350	–	–	–	350	23/11/2006 –
								17/10/2012
	23/11/2006	0.62	350	–	–	–	350	23/5/2007 –
								17/10/2012
	23/11/2006	0.62	700	–	–	–	700	23/11/2007 –
								17/10/2012

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Categories of Date of Exercise grantees grant price HK$ Tian He Nian 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62 To Yan Ming Edmond 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62 Eligible participants 18/8/2004 0.427 (adjusted) Eligible participants 23/11/2006 0.62 Total	Number of share options at 1 July 2009 ’000 260 260 530 260 260 530 28,500 33,380 84,100	Granted during the year ’000 – – – – – – – – –	Exercised during the year ’000 – – – – – – – – –	Lapsed during the year ’000 – – – – – – – – –	Number of share Exercise options at period of 31 October share 2009 options ’000 260 23/11/2006 – 17/10/2012 260 23/5/2007 – 17/10/2012 530 23/11/2007 – 17/10/2012 260 23/11/2006 – 17/10/2012 260 23/5/2007 – 17/10/2012 530 23/11/2007 – 17/10/2012 28,500 19/8/2004 – 17/10/2012 33,380 23/11/2006 – 17/10/2012 84,100

The closing prices of the Company’s shares on 18 August 2004, 22 March 2006 and 23 November 2006, the dates of grant of the share options, were HK$0.64 (adjusted to HK$0.427 due to issue of bonus shares on 1 November 2006), HK$2.90 (adjusted to HK$1.90 due to issue of bonus shares on 1 November 2006) and HK$0.63, respectively.

The exercise in full of the share options would, under the present capital structure of the Company, result in the issue of 84,100,000 additional ordinary shares of the Company at additional share capital of HK$841,000 and share premium of HK$45,800,500.

At 31 October 2009, the number of the shares in respect of which option had been granted and remained outstanding under the scheme was 2.62% (30 June 2009: 2.62%, 30 June 2008: 2.60% and 30 June 2007: 15.09%) of the shares of the Company in issue at that date.

The maximum number of shares of the Company which may be issued upon exercise of all the outstanding options granted and yet to be issued under the Pre-IPO Share Option Scheme, the Share Option Scheme or any other schemes must not, in aggregate, exceed 30% of the shares of the Company in issue from time to time.

The maximum number of shares which may be granted under the Pre-IPO Share Option Scheme of the Company must not exceed 40,000,000 shares, being 10% of the issued share capital as at the listing of the Company’s shares on GEM on 12 November 2002.

The maximum number of shares issued and to be issued on the exercise of options granted and to be granted to each eligible participant (included both exercised and outstanding options) in any 12-month period must not exceed 1% of the total issued share capital of the Company in issue at any time. Any further grant of share options in excess of this limit is subject to shareholder’s approval in a general meeting.

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

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

For the year ended 30 June 2009

Categories of Date of Exercise grantees grant price HK$ Cheung Kwai Lan 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62 Chan Tung Mei 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62 Chan Ting 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62 Lau Hin Kun 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62 Tian He Nian 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62 To Yan Ming Edmond 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62 Eligible participants 18/8/2004 0.427 (adjusted) Eligible participants 23/11/2006 0.62 Total	Number of share options at 1 July 2008 ’000 1,560 1,560 3,120 1,560 1,560 3,120 1,560 1,560 3,120 350 350 700 260 260 530 260 260 530 28,500 33,380 84,100	Granted during the year ’000 – – – – – – – – – – – – – – – – – – – – –	Exercised during the year ’000 – – – – – – – – – – – – – – – – – – – – –	Lapsed during the year ’000 – – – – – – – – – – – – – – – – – – – – –	Number of share Exercise options at period of 30 June share 2009 options ’000 1,560 23/11/2006 – 17/10/2012 1,560 23/5/2007 – 17/10/2012 3,120 23/11/2007 – 17/10/2012 1,560 23/11/2006 – 17/10/2012 1,560 23/5/2007 – 17/10/2012 3,120 23/11/2007 – 17/10/2012 1,560 23/11/2006 – 17/10/2012 1,560 23/5/2007 – 17/10/2012 3,120 23/11/2007 – 17/10/2012 350 23/11/2006 – 17/10/2012 350 23/5/2007 – 17/10/2012 700 23/11/2007 – 17/10/2012 260 23/11/2006 – 17/10/2012 260 23/5/2007 – 17/10/2012 530 23/11/2007 – 17/10/2012 260 23/11/2006 – 17/10/2012 260 23/5/2007 – 17/10/2012 530 23/11/2007 – 17/10/2012 28,500 19/8/2004 – 17/10/2012 33,380 23/11/2006 – 17/10/2012 84,100

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

For the year ended 30 June 2008

			Number				Number	Exercise
			of share	Granted	Exercised	Lapsed	of share	period of
Categories of	Date of	Exercise	options at	during	during	during	options at	share
grantees	grant	price	1 July 2007	the year	the year	the year	30 June 2008	options
		HK$	’000	’000	’000	’000	’000
Cheung Kwai Lan	23/11/2006	0.62	1,560	–	–	–	1,560	23/11/2006 –
								17/10/2012
	23/11/2006	0.62	1,560	–	–	–	1,560	23/5/2007 –
								17/10/2012
	23/11/2006	0.62	3,120	–	–	–	3,120	23/11/2007 –
								17/10/2012
Chan Tung Mei	23/11/2006	0.62	1,560	–	–	–	1,560	23/11/2006 –
								17/10/2012
	23/11/2006	0.62	1,560	–	–	–	1,560	23/5/2007 –
								17/10/2012
	23/11/2006	0.62	3,120	–	–	–	3,120	23/11/2007 –
								17/10/2012
Chan Ting	23/11/2006	0.62	1,560	–	–	–	1,560	23/11/2006 –
								17/10/2012
	23/11/2006	0.62	1,560	–	–	–	1,560	23/5/2007 –
								17/10/2012
	23/11/2006	0.62	3,120	–	–	–	3,120	23/11/2007 –
								17/10/2012
Lau Hin Kun	18/8/2004	0.427	1,600	–	(1,600)	–	–	19/8/2004 –
		(adjusted)						17/10/2012
	23/11/2006	0.62	350	–	–	–	350	23/11/2006 –
								17/10/2012
	23/11/2006	0.62	350	–	–	–	350	23/5/2007 –
								17/10/2012
	23/11/2006	0.62	700	–	–	–	700	23/11/2007 –
								17/10/2012
Tian He Nian	23/11/2006	0.62	260	–	–	–	260	23/11/2006 –
								17/10/2012
	23/11/2006	0.62	260	–	–	–	260	23/5/2007 –
								17/10/2012
	23/11/2006	0.62	530	–	–	–	530	23/11/2007 –
								17/10/2012
Zhao Zhi Ming	23/11/2006	0.62	260	–	–	–	260	23/11/2006 –
								17/10/2012
	23/11/2006	0.62	260	–	–	–	260	23/5/2007 –
								17/10/2012
	23/11/2006	0.62	530	–	–	–	530	23/11/2007 –
								17/10/2012

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Categories of Date of Exercise grantees grant price HK$ To Yan Ming Edmond 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62 Eligible participants 18/8/2004 0.427 (adjusted) Eligible participants 22/3/2006 1.90 (adjusted) Eligible participants 23/11/2006 0.62 Total For the year ended 30 June 2007 Categories of Date of Exercise grantees grant price HK$ Cheung Kwai Lan 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62 Chan Tung Mei 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62 Chan Ting 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62	Number of share options at 1 July 2007 ’000 260 260 530 37,000 40,210 39,130 141,210 Number of share options at 1 July 2006 ’000 – – – – – – – – –	Granted during the year ’000 – – – – – – – Granted during the year ’000 1,560 1,560 3,120 1,560 1,560 3,120 1,560 1,560 3,120	Exercised during the year ’000 – – – (8,500) – (6,800) (16,900) Exercised during the year ’000 – – – – – – – – –	Number Exercise Lapsed of share period of during options at share the year 30 June 2008 options ’000 ’000 – 260 23/11/2006 – 17/10/2012 – 260 23/5/2007 – 17/10/2012 – 530 23/11/2007 – 17/10/2012 – 28,500 19/8/2004 – 17/10/2012 (40,210) – 22/3/2006 – 22/3/2008 – 32,330 23/11/2006 – 17/10/2012 (40,210) 84,100 Number Exercise Lapsed of share period of during options at share the year 30 June 2007 options ’000 ’000 – 1,560 23/11/2006 – 17/10/2012 – 1,560 23/5/2007 – 17/10/2012 – 3,120 23/11/2007 – 17/10/2012 – 1,560 23/11/2006 – 17/10/2012 – 1,560 23/5/2007 – 17/10/2012 – 3,120 23/11/2007 – 17/10/2012 – 1,560 23/11/2006 – 17/10/2012 – 1,560 23/5/2007 – 17/10/2012 – 3,120 23/11/2007 – 17/10/2012

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Categories of Date of Exercise grantees grant price HK$ Lau Hin Kun 18/8/2004 0.427 (adjusted) 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62 Tian He Nian 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62 Zhao Zhi Ming 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62 To Yan Ming, Edmond 23/11/2006 0.62 23/11/2006 0.62 23/11/2006 0.62 Shaw Kyle Arnold Junior 19/10/2004 0.433 (adjusted) Eligible participants 18/8/2004 0.427 (adjusted) Eligible participants 22/3/2006 1.90 (adjusted) Eligible participants 23/11/2006 0.62 Total	Number of share options at 1 July 2006 ’000 1,600 – – – – – – – – – – – – 1,200 37,000 40,210 – 80,010	Granted during the year ’000 – 350 350 700 260 260 530 260 260 530 260 260 530 – – – 39,130 62,400	Exercised during the year ’000 – – – – – – – – – – – – – – – – – –	Number Exercise Lapsed of share period of during options at share the year 30 June 2007 options ’000 ’000 – 1,600 19/8/2004 – 17/10/2012 – 350 23/11/2006 – 17/10/2012 – 350 23/5/2007 – 17/10/2012 – 700 23/11/2007 – 17/10/2012 – 260 23/11/2006 – 17/10/2012 – 260 23/5/2007 – 17/10/2012 – 530 23/11/2007 – 17/10/2012 – 260 23/11/2006 – 17/10/2012 – 260 23/5/2007 – 17/10/2012 – 530 23/11/2007 – 17/10/2012 – 260 23/11/2006 – 17/10/2012 – 260 23/5/2007 – 17/10/2012 – 530 23/11/2007 – 17/10/2012 (1,200) – 20/10/2004 – 17/10/2012 – 37,000 19/8/2004 – 17/10/2012 – 40,210 22/3/2006 – 22/3/2008 – 39,130 23/11/2006 – 17/10/2012 (1,200) 141,210

During the year ended 30 June 2007, 62,400,000 options were granted on 23 November 2006. The estimated fair value of the options granted is approximately HK$11,282,000.

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APPENDIX II

These fair values were calculated by using the Black-Scholes Option Pricing Model. The inputs into the model were as follows:

			Share option grant date	Share option grant date	Share option grant date
	22 March
	2006		23 November 2006
Share price on grant date (HK$)	2.90	0.70	0.70		0.70	0.70
Exercise price (HK$)	2.85	0.62	0.62		0.62	0.62
Expected volatility	83.83%	74.67%	74.67%	74.67%		74.67%
Expected life	2 years	1 year	2 years	2.5	years	3 years
Risk-free rate	4%	3.66%	3.68%	3.69%		3.709%
Expected dividend yield	0.69%	0%	0%		0%	0%

Expected volatility for the options granted 22 March 2006 and 23 November 2006 was determined by using the historical volatility of the Company’s share price over the previous 2 years and 1 to 3 years respectively. The expected life used in the model has been adjusted, based on the management’s best estimate, for the effects on non transferability, exercise restrictions and behavioural considerations.

At 31 October 2009, the Group recognized the total expenses of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$864,000, 30 June 2007: HK$28,434,000 and 31 October 2008: HK$Nil) in relation to share options granted by the Company.

In addition, the Group recognized share option expenses of its subsidiary, Aptus Holdings Limited of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$7,674,000, 30 June 2007: HK$54,913,000 and 31 October 2008: HK$Nil) into the consolidated income statement.

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APPENDIX II

34. NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

For the four months ended 31 October 2009

NET ASSETS DISPOSED Property, plant and equipment Goodwill Construction in progress Prepaid lease payments Inventories Accounts receivables, deposits, prepayments and other receivables Bank balances and cash Accounts payables, accrued liabilities and other payables Tax liabilities Bank and other borrowings Net assets Less: Release of translation reserve Gain on disposal Total consideration Net cash inflow arising on disposal: Cash consideration Bank balances and cash disposed of	Changde Hauyou HK$’000 111,868 26,227 3,886 13,513 1,504 9,779 35,459 (11,987) (1,162) (15,114) 173,973 (14,220) 129,756 289,509 289,509 (35,459) 254,050	Hunan Hauyou HK$’000 116,864 23,227 – 2,199 576 317 3,838 (3,674) (41) (91,791) 51,515 (5,770) 67,951 113,696 113,696 (3,838) 109,858	Total HK$’000 228,732 49,454 3,886 15,712 2,080 10,096 39,297 (15,661) (1,203) (106,905) 225,488 (19,990) 197,707 403,205 403,205 (39,297) 363,908

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APPENDIX II

Disposal of a subsidiary held by a jointly controlled entity

On 31 August 2008, the Group disposed equity interest in 北京中文發影音文化傳播有限公司 (China Culture Development Music Culture Broadcasting Co., Limited). Details of the disposal was summarised as follows:

NET ASSETS DISPOSED Property, plant and equipment Other receivables and prepayments Bank balances and cash Accruals and other payables Net assets Gain on disposal Total consideration Satisified by: Cash Net cash inflow arising on disposal: Cash consideration Bank balances and cash disposal of	HK$’000 801 52 320 (660) 513 1,158 1,671 1,671 1,671 (320) 1,351

Acquisition of subsidiaries

For the year ended 30 June 2008, the Group acquired 100% equity interest in Grand Promise International Limited (“Grand Promise”) and Best Delight Group Limited (“Best Delight”) and their subsidiaries and jointly controlled entities at a consideration of approximately HK$1,877,604,000 and HK$139,000,000, respectively. For the acquisition of Grand Promise, the Group issued 2,262,173,906 ordinary shares of HK$0.01 per share for the acquisition. The closing price of the Company’s share as at 11 April 2008, the completion date of the transaction was HK$0.83 and non-cash consideration of approximately HK$1,877,604,000 for this acquisition transaction was resulted. For the acquisition of Best Delight, the Group has paid cash consideration of HK$139,000,000.

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Set out below is the details of Grand Promise and Best Delight upon completion of the acquisition and goodwill of approximately HK$1,877,427,000 and HK$139,070,000 was recorded in these transactions respectively.

NET ASSETS (LIABILITIES) ACQUIRED Property, plant and equipment Available-for-sale financial asset Research and development Other intangible assets Other receivables and prepayments Bank balances and cash Accruals and other payables Other loan Convertible bonds Goodwill on acquisition Total consideration SATISFIED BY Cash consideration Shares allotted Net cash inflow arising on acquisition: Cash consideration Bank balances and cash acquired Net inflow of cash and cash equivalents in respect of the acquisition of subsidiaries	Grand Promise HK$’000 8,939 – 924 2,829 5,212 277,044 (895) (13,816) (280,060) 177 1,877,427 1,877,604 – 1,877,604 1,877,604 – 277,044 277,044	Best Delight HK$’000 – 63,780 – – – 116 (65) (63,901) – (70) 139,070 139,000 139,000 – 139,000 (139,000) 116 (138,884)	Total HK$’000 8,939 63,780 924 2,829 5,212 277,160 (960) (77,717) (280,060) 107 2,016,497 2,016,604 139,000 1,877,604 2,016,604 (139,000) 277,160 138,160

Note: Consideration for acquisition of Grand Promise was satisfied by allotment of 2,262,173,906 ordinary shares of the Company of HK$0.01 par values. Fair value of the shares allotted at the acquisition date was HK$0.83.

The acquirees’ carrying amount of net assets before combination approximates to its fair value. Accordingly, no fair value adjustments are required. Grand Promise contributed to the Group’s loss before taxation of approximately HK$2,369,000 between the date of acquisition to 30 June 2008.

Consideration for acquisition of Best Delight was satisfied by cash of HK$139,000,000.

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APPENDIX II

Major non-cash transactions

Share option expenses Imputed interest on convertible bonds Impairment of goodwill	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 83,347 8,538 – 19,856 35,487 57,492 145 – 31,761	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) – – 16,466 18,699 96,175 –	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) – – 16,466 18,699 96,175 –

			18,699

			–

(a) During the year ended 30 June 2009, the Group incurred share option expenses of approximately HK$Nil (2008: HK$8,538,000).
(b) During the year, the Group incurred imputed interest on convertible bonds of approximately HK$57,492,000 (2008: HK$35,487,000).
(c) During the year, impairment loss on goodwill of approximately HK$31,761,000 (2008: HK$Nil) was provided in the consolidated income statement.

Deemed disposal of a subsidiary held by a jointly controlled entity

For year ended 30 June 2008, Linli Huayou Gas Co., Limited (“Linli”) is a subsidiary of a jointly controlled entity, Changde Huayou Gas Co., Limited (“Changde Joint Venture”), which holds 70% registered capital of Linli. Due to the change in share structure of Linli, shareholding held by Changde Joint Venture decreased to 48.61% and Linli became an associate of the Group. Loss arisen on deemed disposal of equity interest in Linli was approximately of HK$7,000.

Property, plant and equipment Accounts receivables Prepayments, deposits and other receivables Inventories Construction in progress Bank balances and cash Accounts payables Accrued liabilities and other payables Net assets Less: Minority interests Less: Released of translation reserve Net amount of assets disposed of Loss on disposal Represented by investment in an associate at the date of deemed disposal Net cash outflow arising on deemed disposal: Bank balances and cash disposed of	Linli HK$’000 2,042 23 4 146 184 208 (36) (71)
	2,500 (737) (12)
	1,751 (7)
	1,744

	208

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Acquisition of jointly controlled entities

For the year ended 30 June 2007, the Group acquired a 48.33% equity interest in Changde Joint Venture and 33% equity interest in Hunan Joint Venture at a cash consideration of approximately HK$131,066,000 and HK$79,211,000 respectively.

Set out below is the details of Changde Joint Venture and Hunan Joint Venture upon completion of the acquisition and goodwill of approximately HK$26,227,000 and HK$23,227,000 was recorded in these transactions.

NET ASSETS ACQUIRED Property, plant and equipment Prepaid lease payments Inventories Construction in progress Accounts receivables Deposits, prepayments and other receivables Bank balances and cash Accounts payables Accruals and others payables Tax payable Borrowings Minority interests Goodwill on acquisition Total consideration SATISFIED BY Cash consideration Net cash outflow arising on acquisition: Cash consideration Bank balances and cash acquired Net outflow of cash and cash equivalents in respect of the acquisition of jointly controlled entities	Changde Joint Venture HK$’000 66,857 12,645 1,966 7,956 429 3,617 63,336 (6,205) (3,100) (1,568) (40,357) (737) 104,839 26,227 131,066 131,066 (131,066) 63,336 (67,730)	Hunan Joint Venture HK$’000 114,686 – 1,878 – – 503 26,039 (12,048) (1,750) (5) (73,319) – 55,984 23,227 79,211 79,211 (79,211) 26,039 (53,172)	Total HK$’000 181,543 12,645 3,844 7,956 429 4,120 89,375 (18,253) (4,850) (1,573) (113,676) (737) 160,823 49,454 210,277 210,277 (210,277) 89,375 (120,902)

The acquiree’s carrying amount of net assets before combination approximates to its fair values. Accordingly, no fair value adjustments are required. Changde Joint Venture contributed to the Group’s profit before taxation by approximately HK$1,348,000 between the date of acquisition to 30 June 2007. Huana Joint Venture contributed to the Group’s loss before taxation of HK$5,204,000 between the date of acquisition to 30 June 2007.

Disposal of subsidiaries

For the year ended 30 June 2007, the Group discontinued its business of (i) manufacturing and sales of honey mead and (ii) operations of a restaurant. The subsidiaries disposed were Wuhu Bee & Bee Natural Food Company Limited (“Wuhu B&B”), Zhuhai Free Trade Zone Bee & Bee Natural Food Company Limited (“Zhuhai B&B”) and La Cucina Italian (Macau) Limited (“La Cucina”).

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

In additions, the Company disposed Shenzhen Bozone Mobile Technology IT Co., Limited (“Bozone Mobile”) and Guangzhou Latech Computer Technology Co., Limited (“GZ Latech”) to streamline the Group’s structure.

Wuhu B&B and Zhuhai B&B HK$’000 Property, plant and equipment 1,825 Deposits 3,756 Technical know-how – Inventories 2,096 Accounts receivables 1,087 Deposits, prepayments and other receivables 172 Bank balances and cash 47,237 Accounts payables – Accruals and other payables (2,829) Tax payable (84) Net assets (liabilities) 53,260 Less: Minority interests (4,760) 48,500 Less: Release of translation reserve (1,773) Net amount of assets (liabilities) 46,727 Gain (loss) on disposal 29,273 Total consideration 76,000 Satisfied by: Cash 76,000 Net cash inflow arising on disposal: Cash consideration 76,000 Bank balances and cash disposed of (47,237) 28,763	GZ Latech HK$’000 25 – – 2,904 – 2,874 33 – (1,142) – 4,694 (2,300) 2,394 (115) 2,279 864 3,143 3,143 3,143 (33) 3,110	La Cucina HK$’000 2,109 – – 114 – 146 461 – (3,370) – (540) – (540) – (540) 555 15 15 15 (461) (446)	Bozone Mobile HK$’000 35 – 2,379 1,429 54 1,961 208 (180) (5,508) – 378 (321) 57 – 57 (57) – – – (208) (208)	Total HK$’000 3,994 3,756 2,379 6,543 1,141 5,153 47,939 (180) (12,849) (84) 57,792 (7,381) 50,411 (1,888) 48,523 30,635 79,158 79,158 79,158 (47,939) 31,219

35. CONTINGENT LIABILITIES

The Company provided corporate guarantees to the extent of approximately HK$10,000,000 (30 June 2009: HK$10,000,000, 30 June 2008: HK$10,000,000 and 30 June 2007: HK$10,000,000) to a bank to secure general banking facilities granted to a subsidiary.

The Company provided corporate guarantees to the extend of approximately HK$16,500,000 (30 June 2009: HK$16,500,000, 30 June 2008: HK$16,500,000 and 30 June 2007: HK$16,500,000) to secure other loan granted to a subsidiary.

The total facilities utilized by the Group at 31 October 2009 amounted to approximately HK$16,500,000 (30 June 2009: HK$16,500,000, 30 June 2008: HK$16,500,000 and 30 June 2007: HK$16,500,000).

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APPENDIX II

36. OPERATING LEASE COMMITMENTS

The Group as lessee

At the end of reporting period, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Continuing operations

Within one year In the second and fifth years inclusive Discontinued operations Within one year In the second to fifth years inclusive Over five years	2007 HK$’000 2,149 2,797 4,946 – – – –	At 30 June 2008 HK$’000 4,019 2,873 6,892 19 7 – 26	At 2009 31 October 2009 HK$’000 HK$’000 4,323 4,776 2,290 6,814 6,613 11,590 10 – 14 – 3 – 27 –	At 2009 31 October 2009 HK$’000 HK$’000 4,323 4,776 2,290 6,814 6,613 11,590 10 – 14 – 3 – 27 –
				11,590

				– – –
				–

Operating lease payments represents rentals payable by the Group for certain of its office properties.

The Company did not have any lease commitment as at 31 October 2009.

The Group as lessor

Discontinued operations

Within one year In the second to fifth years inclusive Over five years	129 246 – 375	314 263 – 577	520 1,631 2,106 4,257	– – –
				–

Leases are negotiated for an average term of 2 to 10 years.

The Group and the Company did not have any lease arrangement from continuing operations.

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APPENDIX II

37. CAPITAL COMMITMENTS

Continuing operations

		At 30 June		At
	2007	2008	2009 31 October 2009
	HK$’000	HK$’000	HK$’000	HK$’000
Capital expenditure in respect
of the investment in a subsidiary
– authorized but not contracted for	39,956	44,220	44,137	44,158

38. RETIREMENT BENEFITS SCHEME

The only obligation of the Group with respect to the retirement benefits schemes is to make the required contributions under the schemes.

The total cost charged to the consolidated income statement of approximately HK$514,000 (30 June 2009: HK$938,000, 30 June 2008: HK$322,000 and 30 June 2007: 253,000). For the period ended 31 October 2008: HK$269,000 represents retirement benefits scheme contributions for the Relevant Periods.

39. PROVISION FOR LONG SERVICE PAYMENTS

The Group had no significant provision for long service payments at each of end at each reporting periods.

40. PLEDGE OF ASSETS

The Group has pledged all the issued and outstanding shares of Birdview Group Limited (a wholly-owned subsidiary of Grand Promise International Limited) together with all proceeds in favor of the holder(s) of the convertible bonds previously issued by Grand Promise and by the Deeds of Adherence on completion of acquisition of Grand Promise in April 2008, the convertible bonds were taken up by the Company.

At 31 October 2009, the Group has pledged its bank deposits of approximately HK$5,121,000, (30 June 2009: HK$5,110,000, 30 June 2008: HK$5,033,000 and 30 June 2007: HK$5,000,000) and leasehold property at net book value of approximately HK$Nil (30 June 2009: HK$Nil, 30 June 2008: HK$Nil, 30 June 2007: HK$5,834,000) as securities for the general banking facilities granted to the Group.

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APPENDIX II

The Group has pledged 100% of the issued share capital of Good United Management Limited (“GUM”), a subsidiary of the Company, was pledged in favors of the holder(s) of the convertible bonds issued by Aptus on 22 November 2006. GUM held 70% equity interest in CNPC Huayou Cu Energy Investment Co. Limited, which owned profit sharing rights on Xin Jiang Oilfield. In addition, borrowings of approximately HK$Nil (30 June 2009: HK$59,907,000 which is classified as liabilities associated with asset classified as held for sale, 30 June 2008: HK$60,020,000 and 30 June 2007: HK$54,232,000) has been secured by gas network of a jointly controlled entity, Hunan Joint Venture.

41. SHARE AWARD SCHEME

On 24 January 2005, the Company adopted a share award scheme for employees and consultants, excluding executive directors and chief executive, of the Group for the purpose of recognizing the contributions of certain employees and consultants of the Group to the growth of the Group, by rewarding them with opportunities to obtain an ownership interest in the Company and to further motivate them and give an incentive to these persons to continue to contribute to the Group’s long term success and prosperity. Under the scheme, following the making of an award to employees and consultants, the relevant newly issued shares vest over a period of time provided that the employees and consultants continue to contribute to the Group at the relevant time and satisfies any other conditions specified at the time the award is made. The maximum aggregate number of shares that can be awarded under the scheme is limited to 20% of the issued share capital of the Company and no cash consideration should be paid for the shares allotted under the share award scheme.

No share award was granted during the Relevant Periods.

The fair value of shares under the share award scheme is measured by the last 14 days of trading average of the quoted market price of the Shares on the Stock Exchange before the date of grant.

42. COMPARATIVE FIGURES

Certain comparative figures have been restated to conform with current year’s presentation.

43. RELATED PARTY TRANSACTIONS

Compensation of directors and key management personnel

The remuneration of directors and other members of key management during the Relevant Periods were as follows:

Short-term benefits Post employment benefits	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 11,277 12,550 16,472 108 94 120 11,385 12,644 16,592	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 6,624 5,907 42 40 6,666 5,947

The remuneration of directors and key management personnel is determined by the remuneration committee having regard to the performance of individuals and market trends.

Acquisition of subsidiaries

For the year ended 30 June 2008, the Group acquired subsidiaries from certain related parties at a consideration of approximately HK$1,877,604,000.

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APPENDIX II

44. INTERESTS IN SUBSIDIARIES

The Company

Unlisted shares, at cost Amounts due from subsidiaries Amounts due to subsidiaries	2007 HK$’000 40,834 267,141 307,975 3,192	At 30 June 2008 HK$’000 55,534 2,408,355 2,463,889 7,421	At 31 October 2009 2009 HK$’000 HK$’000 55,534 55,534 2,356,312 2,232,347 2,411,846 2,287,881 7,635 7,510	At 31 October 2009 2009 HK$’000 HK$’000 55,534 55,534 2,356,312 2,232,347 2,411,846 2,287,881 7,635 7,510
				2,287,881

				7,510

(a) Amounts due from (to) subsidiaries are unsecured, interest free and have no fixed repayment terms. In the opinion of the directors of the Company, the carrying amounts of the amounts due from (to) subsidiaries at 30 June 2007, 2008 and 2009 and 31 October 2009 approximate to their fair values.
(b) Particulars of the Company’s principal subsidiaries which principally affected the results, assets or liabilities the Group are as follows:

Details of the subsidiaries are as follows:

		Class of	Percentage of	Percentage of
		shares held/	equity interest
	Place of	Issued and fully	attributable
	incorporation/	paid up shares/	to the Company		Principal
Name of company	operation	registered capital	Direct	Indirect	activities
Precise Result Profits	British Virgin	Ordinary share	–	100%	Investment holding
Limited	Islands	US$1
Aptus Holdings Limited	Cayman Islands	Ordinary shares	–	55.12%	Investment holding
		HK$17,628,414
China Success Enterprises	British Virgin	Ordinary shares	100%	–	Investment holding
Limited	Islands	US$2,000
Loyalion Limited	Hong Kong	Ordinary shares	–	100%	Investment holding
		HK$1,000
B & B International Marketing	Hong Kong	Ordinary shares	–	100%	Distribution of natural
(HK) Limited		HK$2			supplementary products
B & B International Marketing	British Virgin	Ordinary share	–	100%	Investment holding
Limited	Islands	US$1
B & B Winery Limited	Hong Kong	Ordinary shares	–	100%	Investment holding
		HK$1,000
B & B Enterprises Limited	Hong Kong	Ordinary shares	–	100%	Investment holding
		HK$100
Natural Lives Company	Hong Kong	Ordinary shares	–	60%	Distribution of natural
Limited		HK$500,000			supplementary products
B & B Group Holdings	Hong Kong	Ordinary share	–	100%	Investment holding
Limited		HK$1

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		Class of	Percentage of	Percentage of
		shares held/	equity interest
	Place of	Issued and fully	attributable
	incorporation/	paid up shares/	to the Company		Principal
Name of company	operation	registered capital	Direct	Indirect	activities
Rain International Company	Hong Kong	Ordinary shares	–	100%	Distribution of natural
Limited		HK$1,000,000			supplementary products
Step Gain Limited	British Virgin	Ordinary shares	–	100%	Investment holding
	Islands	US$10
雙遼市步得秸稈科技	PRC	Registered capital	–	100%	Animal feed
有限公司#		HK$3,400,000			(玉米秸稈飼料)
(Shuang Liao City Step Gain
Technology Limited†)
Greatest Luck Limited	British Virgin	Ordinary share	–	100%	Investment holding
	Islands	US$1
深圳生港科技有限公司#	PRC	Registered capital	100%	–	Investment holding
(Formerly known as		US$10,000,000
深圳市生港蜂業有限公司#）
(B & B (Shenzhen) Limited†)
Ace Bingo Group Limited	British Virgin	Ordinary share	–	100%	Investment holding
	Islands	US$1
Cheerfull Group Holdings	British Virgin	Ordinary shares	–	51%	Investment holding
Limited	Islands	US$50,000
深圳市博眾信息技術	PRC	Registered capital	–	51%	Provision of lottery-related
有限公司#		RMB10,000,000			hardware and software
(Shenzhen Bozone IT					systems
Co. Limited†)
深圳市龍江風采信息技術	PRC	Registered capital	–	50.49%	Provision of lottery-related
有限公司#		RMB1,000,000			hardware and software
(Shenzhen Longjiang					systems
Fengcai IT Co. Limited†)
黑龍江省博眾信息技術	PRC	Registered capital	–	33.15%	Provision of lottery-related
有限公司		RMB500,000			hardware and software
(Heilongjiang Bozone IT					systems
Co. Ltd) (Formerly known as
哈爾濱市龍江風采信息
科技有限公司#
Harbin Longjiang
Fengcai Technology
Co. Limited†)
Muller Group Limited	British Virgin	Ordinary share	–	100%	Investment holding
	Islands	US$1
Lucky Villa Investments	Hong Kong	Ordinary share	–	100%	Investment holding
Limited		HK$1
Best Delight Group Limited	British Virgin	Ordinary share	–	100%	Investment holding
	Islands	US$1

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

		Class of	Percentage of	Percentage of
		shares held/	equity interest
	Place of	Issued and fully	attributable
	incorporation/	paid up shares/	to the Company		Principal
Name of company	operation	registered capital	Direct	Indirect	activities
Lead Team Investments	Hong Kong	Ordinary share	–	100%	Investment holding
Limited		HK$1
Grand Promise International	British Virgin	Ordinary shares	–	100%	Investment holding
Limited	Islands	US$10,000
Birdview Group Limited	Hong Kong	Ordinary share	–	100%	Investment holding
		HK$1
北京本心齋茶文化	PRC	Registered capital	–	100%	Trading of packaged food,
有限責任公司#		RMB100,000			drinks, clothing,
(Beijing Beuxinzhai Teahouse					commodities, toys and
Co., Limited†)					stationeries
Good United Management	British Virgin	Ordinary share	–	55.12%	Investment holding
Limited	Islands	US$1
Top Entrepreneur	British Virgin	Ordinary shares	–	41.34%	Investment holding
Profits Limited	Islands	US$200
B & B Natural Products	British Virgin	Ordinary share	–	41.34%	Investment holding
(BVI) Limited	Islands	US$1
Rapid Progress Profits	British Virgin	Ordinary shares	–	31.01%	Investment holding
Limited	Islands	US$8
Hsing Long Trading	Singapore	Ordinary shares	–	38.75%	Distribution of edible oil
Co. Pte. Ltd.		SGD100,000
CNPC Huayou Cu Energy	PRC	Registered capital	–	38.58%	Holding of profit sharing
Investment Co., Limited#		RMB100,000,000			right of Xin Jiang
					Oilfield
Sea Marvel Limited	British Virgin	Ordinary shares	–	55.12%	Investment holding
	Islands	US$1

The statutory financial year end date of these subsidiaries is 31 December

† For identification only

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45. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES

Particulars of jointly controlled entities are as follows:

				Proportion of
				Nominal value
	Form of	Place of		of registered
	business	establishment/	Class of	capital held	Principal
Name of entity	structure	and operations	capital	by the Group	activities
				%
常德華油燃氣有限公司#	Sino-foreign	PRC	Registered	26.92%	Development and
(Changde Huayou	equity joint				management of
Gas Co., Limited)	venture				natural gas pipelines
					and distribution
					facilities in PRC
湖南華油天然你輸配	Sino-foreign	PRC	Registered	18.38%	Construction and
有限責任公司#	equity joint				development of
(Hunan Huayou Natural	venture				natural gas pipelines
Gas Transportation					and related
and Distribution					consultation services
Company Limited)
北京中文發數字科技	Sino-foreign	PRC	Registered	49%	Research and
有限公司#	equity joint				development of
(China Culture	venture				software and
Development Digital					information
Technology Co.,					technology products;
Limited†)					system integrations;
					technology
					consultancy and
					other services
重慶禮光博軟科技發展	Limited liability	PRC	Registered	29.89%	Development of software,
有限公司#	company				trading of computer
(Chongqing Li Jiang					hardware
Development Co., Limited+)
天合文化集團有限公司#	Limited liability	PRC	Registered	24.50%	Carryout copyright
(Excellent Union	company				transactions of
Communication Group					Karaoke programmes
Co., Limited†)					between IP owners
(Formerly known as					and Karaoke venues
北京天合文化有限公司					and also provide
(Beijing Tian He Culture					technical support
Co., Limited†))					and operational
					services for value-added
					services at Karaoke venues
河南天合文化有限公司#	Limited liability	PRC	Registered	12.50%	Carryout copyright
(Henan Tian He	company				transactions of
Culture Co., Limited†)					Karaoke programmes
					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

				Proportion of
				Nominal value
	Form of	Place of		of registered
	business	establishment/	Class of	capital held	Principal
Name of entity	structure	and operations	capital	by the Group	activities
				%
四川天合文化有限公司#	Limited liability	PRC	Registered	12.27%	Carryout copyright
(Sichuan Tian He	company				transactions of
Culture Co., Limited†)					Karaoke programmes
					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
雲南天合世紀文化傳播	Limited liability	PRC	Registered	12.50%	Carryout copyright
有限公司#	company				transactions of
(Yunnan Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
遼寧天合文化有限公司#	Limited liability	PRC	Registered	13.72%	Carryout copyright
(Liaoning Tian He	company				transactions of
Culture Co., Limited†)					Karaoke programmes
					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
湖南天合世嘉文化有限公司#	Limited liability	PRC	Registered	18.50%	Carryout copyright
(Hunan Tian He	company				transactions of
Culture Co., Limited†)					Karaoke programmes
					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

				Proportion of
				Nominal value
	Form of	Place of		of registered
	business	establishment/	Class of	capital held	Principal
Name of entity	structure	and operations	capital	by the Group	activities
				%
北京天合傳媒網絡有限公司#	Limited liability	PRC	Registered	24.50%	Carryout copyright
(Beijing Tian He	company				transactions of
Culture Co., Limited†)					Karaoke programmes
					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
北京天合新紀元文化	Limited liability	PRC	Registered	12.50%	Carryout copyright
有限公司#	company				transactions of
(Beijing Tian He					Karaoke programmes
New Century Culture					between IP owners
Co., Limited†)					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
內蒙古天合文化有限公司#	Limited liability	PRC	Registered	12.50%	Carryout copyright
(Inner Mongolia	company				transactions of
Tian He Culture					Karaoke programmes
Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
上海天合文化傳播有限公司#	Limited liability	PRC	Registered	18.50%	Carryout copyright
(Shanghai Tian He	company				transactions of
Culture Co., Limited†)					Karaoke programmes
					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues

II – 98

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

				Proportion of
				Nominal value
	Form of	Place of		of registered
	business	establishment/	Class of	capital held	Principal
Name of entity	structure	and operations	capital	by the Group	activities
				%
山西天合文化傳播有限公司#	Limited liability	PRC	Registered	12.50%	Carryout copyright
(Shanxi Tian He	company				transactions of
Culture Co., Limited†)					Karaoke programmes
					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
天津天合新紀元文化	Limited liability	PRC	Registered	18.50%	Carryout copyright
傳播有限公司#	company				transactions of
(Tianjin Tian He					Karaoke programmes
New Century					between IP owners
Culture Co., Limited†)					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
黑龍江天合世紀文化	Limited liability	PRC	Registered	18.62%	Carryout copyright
有限公司#	company				transactions of
(Heilongjiang Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
山東天合世紀文化	Limited liability	PRC	Registered	24.50%	Carryout copyright
傳播有限公司#	company				transactions of
(Shandong Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
浙江天合文化	Limited liability	PRC	Registered	12.50%	Carryout copyright
發展有限公司#	company				transactions of
(Zhejiang Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues

II – 99

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

				Proportion of
				Nominal value
	Form of	Place of		of registered
	business	establishment/	Class of	capital held	Principal
Name of entity	structure	and operations	capital	by the Group	activities
				%
陝西天合陽光文化	Limited liability	PRC	Registered	24.50%	Carryout copyright
傳播有限公司#	company				transactions of
(Shaanxi Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
海南天合傳美文化	Limited liability	PRC	Registered	12.50%	Carryout copyright
有限公司#	company				transactions of
(Hainan Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
重慶天合世紀文化	Limited liability	PRC	Registered	12.50%	Carryout copyright
傳媒有限公司#	company				transactions of
(Chongqing Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
江蘇天合新紀元文化	Limited liability	PRC	Registered	24.50%	Carryout copyright
有限公司#	company				transactions of
(Jiangsu Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues

II – 100

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

				Proportion of
				Nominal value
	Form of	Place of		of registered
	business	establishment/	Class of	capital held	Principal
Name of entity	structure	and operations	capital	by the Group	activities
				%
吉林天合世嘉文化	Limited liability	PRC	Registered	24.50%	Carryout copyright
有限公司#	company				transactions of
(Jilin Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
湖北天合文化發展	Limited liability	PRC	Registered	12.50%	Carryout copyright
有限公司#	company				transactions of
(Hubei Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
寧夏天合文化	Limited liability	PRC	Registered	24.50%	Carryout copyright
有限公司#	company				transactions of
(Ningxia Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
甘肅天合文化	Limited liability	PRC	Registered	24.50%	Carryout copyright
有限公司#	company				transactions of
(Gansu Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues

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APPENDIX II

				Proportion of
				Nominal value
	Form of	Place of		of registered
	business	establishment/	Class of	capital held	Principal
Name of entity	structure	and operations	capital	by the Group	activities
				%
安徽天合文化	Limited liability	PRC	Registered	12.50%	Carryout copyright
有限公司#	company				transactions of
(Anhui Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
貴州天合陽光文化	Limited liability	PRC	Registered	12.50%	Carryout copyright
有限公司#	company				transactions of
(Guizhou Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
青海天合文化	Limited liability	PRC	Registered	12.50%	Carryout copyright
有限公司#	company				transactions of
(Qinghai Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
江西天合新紀元文化	Limited liability	PRC	Registered	12.50%	Carryout copyright
有限公司#	company				transactions of
(Jiangxi Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues

II – 102

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

				Proportion of
				Nominal value
	Form of	Place of		of registered
	business	establishment/	Class of	capital held	Principal
Name of entity	structure	and operations	capital	by the Group	activities
				%
河北天人合文化	Limited liability	PRC	Registered	24.50%	Carryout copyright
有限公司#	company				transactions of
(Hubei Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
福建天合文化傳播	Limited liability	PRC	Registered	12.50%	Carryout copyright
有限公司#	company				transactions of
(Fujian Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
廣州天合文化發展	Limited liability	PRC	Registered	12.50%	Carryout copyright
有限公司#	company				transactions of
(Guangzhou Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues
新疆天合新文化	Limited liability	PRC	Registered	12.50%	Carryout copyright
有限公司#	company				transactions of
(Xinjiang Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues

II – 103

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

				Proportion of
				Nominal value
	Form of	Place of		of registered
	business	establishment/	Class of	capital held	Principal
Name of entity	structure	and operations	capital	by the Group	activities
				%
廣西天合文化	Limited liability	PRC	Registered	12.50%	Carryout copyright
有限公司#	company				transactions of
(Guangxi Tian He					Karaoke programmes
Culture Co., Limited†)					between IP owners
					and Karaoke venues
					and also provide
					technical support
					and operational
					services for value-added
					services at Karaoke venues

For identification only
The statutory financial year end date of these jointly controlled entities is 31 December

The following amounts represent the Group’s proportionate share of the assets, liabilities, revenue and expensive of the jointly controlled entries and are included in the consolidated balance sheet and consolidated income statements as a result of proportionate consolidation:

Current assets Non-current assets Current liabilities Non-current liabilities Minority interests Revenue Expenses Minority Interest Loss for the period	2007 HK$’000 55,654 209,468 17,961 86,748 750 2007 HK$’000 14,743 (19,057) (3) (4,317)	At 30 June 2008 HK$’000 92,559 255,491 31,540 86,406 – 2008 HK$’000 70,726 (75,838) – (5,112)	At 2009 31 October 2009 HK$’000 HK$’000 350,361 45,544 21,630 21,864 138,698 10,997 – – 7,033 7,557 At 2009 31 October 2009 HK$’000 HK$’000 130,025 13,885 (132,449) (14,481) (1,164) 81 (3,588) (515)

46. LEGAL LITIGATION

Legal action has been taken to recover the escrow money of approximately HK$4,675,000 against a solicitor in Singapore. Full provision has been made in year 2008 or prudence by considering that the outcome of legal action is uncertain.

II – 104

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APPENDIX II

47. SUBSEQUENT EVENTS

(i) On 2 November 2009, the Group entered into a placing agreement in placing 160,000,000 shares in Aptus Holdings Limited at a placing price of HK$0.25 per share. The placing was completed on 10 December 2009.
(ii) On 20 November 2009, the Group entered into a Sale and Purchase Agreement in acquiring 100% equity interest in Casdon Management Limited at a consideration of HK$1,775,000,000.
(iii) On 1 December 2009, the Group entered into two Subscription agreement with two subscribers, the subscribers agreed to subscribe for an aggregate of 63,050,000 shares and 59,110,000 shares in Aptus Holdings Limited, by capitalizing the amount of loan of HK$20,000,000 and HK$18,750,000 owned by Aptus Holdings Limited to the subscribers. The subscription was completed on 16 December 2009.
(iv) On 14 December 2009, the Group entered into a placing agreement in placing 120,000,000 shares in Aptus Holdings Limited at the price of HK$0.25 per share. The placing was completed on 16 December 2009.
(v) On 16 December 2009, the Group entered into a placing agreement in placing 200,000,000 shares in Aptus Holdings Limited at the price of HK$0.25 per share. The placing was lapsed on 31 January 2010.
(vi) On 31 December 2009, the Group signed a sale and purchase agreement in disposing a leasehold property in the PRC at a consideration of RMB7,500,000.
(vii) On 19 February 2010, the Group entered into a placing agreement in placing 140,000,000 shares in Aptus Holdings Limited at the price of HK$0.28 per share. The placing was completed on 25 February 2010.
(viii) On 13 April 2010, the Group entered into a placing agreement in placing 280,000,000 shares in Aptus Holdings Limited at the price of HK$0.28 per share.

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APPENDIX II

48. INFORMATION OF APTUS HOLDINGS LIMITED DISPOSED OF

Included in the consolidated income statement and the consolidated comprehensive income of the Group are the results of the Aptus Holdings Limited during the Relevant Periods which are presented on a consolidated basis after elimination of intra-entity transactions.

Consolidated income statement

Continuing operations Revenue Cost of sales Gross profit Other revenue Selling and distribution costs Administrative expenses Finance costs Loss before taxation Income tax expenses Loss for the year/period from continuing operations Discontinued operations Profit (loss) for the year/ period from discontinued operations Profit (loss) for the year/period	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 57,655 39,562 18,292 (54,140) (39,309) (18,246) 3,515 253 46 310 50 14 (3,254) – – (86,810) (20,264) (4,911) (24,396) (33,087) (36,984) (110,635) (53,048) (41,835) (464) (3) – (111,099) (53,051) (41,835) – (4,036) (28,557) (111,099) (57,087) (70,392)	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) 3,073 18,013 (3,065) (17,967) 8 46 – 5 – – (6,372) (1,741) (11,918) (12,607) (18,282) (14,297) – – (18,282) (14,297) 180,875 (3,413) 162,593 (17,710)

II – 106

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Attributable to: Equity holders of the Company Continuing operations Discontinued operations Non-controlling interests Continuing operations Discontinued operations Profit (loss) per share From continuing operations and discontinued operations Basic Diluted From continuing operations Basic Diluted	For the year ended 30 June 2007 2008 2009 HK$’000 HK$’000 HK$’000 (110,764) (52,807) (41,657) – (4,036) (28,557) (110,764) (56,843) (70,214) (335) (244) (178) – – – (111,099) (57,087) (70,392) (HK6.61 cents) (HK3.33 cents) (HK3.99 cents) N/A N/A N/A (HK6.61 cents) (HK3.09 cents) (HK2.37 cents) N/A N/A N/A	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) (18,201) (14,241) 180,875 (3,413) 162,674 (17,654) (81) (56) – – 162,593 (17,710) HK9.19 cents (HK1.00 cents) HK7.95 cents N/A (HK1.03 cents) (HK0.81 cents) N/A N/A	For the four months ended 31 October 2009 2008 HK$’000 HK$’000 (Unaudited) (18,201) (14,241) 180,875 (3,413) 162,674 (17,654) (81) (56) – – 162,593 (17,710) HK9.19 cents (HK1.00 cents) HK7.95 cents N/A (HK1.03 cents) (HK0.81 cents) N/A N/A
			(17,654)
			(56) –
			(17,710)

			(HK1.00 cents)

			N/A

			(HK0.81 cents)

			N/A

II – 107

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Consolidated statement of comprehensive income

Profit (loss) for the year/period
Other comprehensive income
for the year/period
Exchange differences on
translation of financial
statements of overseas operations
Continuing operations
Discontinued operations
Release of translation reserve due to
disposal of jointly controlled entities
Continuing operations
Discontinued operations
Total comprehensive income for
the year/period
Attributable to:
Equity shareholders of the Company
Continuing operations
Discontinued operation
Non-controlling interests
Continuing operations
Discontinued operations
Total comprehensive income
for the year/period

For the year ended
For the four months ended
30 June
31 October
2007
2008
2009
2009
2008
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
(Unaudited)
(111,099)
(57,087)
(70,392)
162,593
(17,710)
5,882
20,091
(481)
61
(760)
–
–
–
–
–
–
–
–
–
–
–
–
–
(19,990)
–
(105,217)
(36,996)
(70,873)
142,664
(18,470)
(105,719)
(37,699)
(70,650)
(18,158)
(18,342)
–
–
–
160,885
–
(105,719)
(37,699)
(70,650)
142,727
(18,342)
502
703
(223)
(63)
(128)
–
–
–
–
–
502
703
(223)
(63)
(128)
(105,217)
(36,996)
(70,873)
142,664
(18,470)

II – 108

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Included in the Consolidated statement of financial position of the Group are assets and liabilities of Aptus Holdings Limited at the end of the reporting period which are presented on a consolidation basis after elimination of intraentity transactions.

Consolidated statement of financial position

Non-current assets Property, plant and equipment Goodwill Interest in an associate Prepaid lease payments Construction in progress Current assets Inventories Trade and other receivables and prepayments Prepaid lease payments – current portion Tax recoverable Bank balances and cash Assets classified as held for sale Current liabilities Trade payables, accrued liabilities and other payables Tax liabilities Bank and other borrowings – due within one year Convertible bonds Liabilities associated with assets classified as held for sale Net current assets Total assets less current liabilities	2007 HK$’000 183,140 81,215 – 12,496 14,004 290,855 2,133 37,180 380 – 49,110 88,803 – 88,803 19,792 688 2,125 – 22,605 – 22,605 66,198 357,053	At 30 June 2008 HK$’000 218,006 81,215 1,889 15,502 6,912 323,524 4,306 38,995 452 680 40,629 85,062 – 85,062 26,378 – 11,344 – 37,722 – 37,722 47,340 370,864	2009 HK$’000 45 – – – – 45 – 34,995 – 1 1,990 36,986 350,193 387,179 10,739 – 36,145 – 46,884 123,825 170,709 216,470 216,515	At 31 October 2009 HK$’000 29 – – – –
				29
				– 437,256 – – 3,178
				440,434 –
				440,434
				13,692 16,654 37,976 314,263
				382,585 –
				382,585
				57,849
				57,878

II – 109

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Non-current liabilities Bank and other borrowings Convertible bonds Net assets (liabilities) Capital and reserves Share capital Reserves Equity attributable to equity holders of the Company Non-controlling interests Total equity	2007 HK$’000 106,105 243,144 349,249 7,804 16,979 (24,487) (7,508) 15,312 7,804	At 30 June 2008 HK$’000 114,251 274,324 388,575 (17,711) 17,444 (50,433) (32,989) 15,278 (17,711)	2009 HK$’000 – 303,244 303,244 (86,729) 17,628 (119,412) (101,784) 15,055 (86,729)	At 31 October 2009 HK$’000 – –
				–
				57,878

				17,815 25,071
				42,886 14,992
				57,878

II – 110

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

Consolidated statement of changes in equity

At 1 July 2006 Shares issued on exercise of options Recognition of equity-settled share based payment Acquisition of jointlly controlled entities Recognition of equity components of convertible bonds Total comprehensive income for the year At 30 June 2007 and 1 July 2007 Shares issued on exercise of options Released on deemed disposal of a subsidiary Release of share option reserve Recognition of equity-settled share based payment Total comprehensive income for the year At 30 June 2008 and 1 July 2008 Discontinued operations Shares issued on exercise of options Total comprehensive income for the year At 30 June 2009 and 1 July 2009 Shares issued on exercise of options Release of convertible bond reserve Total comprehensive income for the period At 31 October 2009 For four months ended 31 October 2008 (Unaudited) At 1 July 2008 Shares issued on exercise of options Total comprehensive income for the period At 31 October 2008	Share capital HK$’000 16,681 298 – – – – 16,979 465 – – – – 17,444 – 184 – 17,628 187 – – 17,815 17,444 150 – 17,594	Convertible Share bonds premium reserve HK$’000 HK$’000 88,096 – 2,864 – – – – – – 10,712 – – 90,960 10,712 4,091 – – – – – – – – – 95,051 10,712 – – 1,671 – – – 96,722 10,712 1,756 – – (10,712) – – 98,478 – 95,051 10,712 1,359 – – – 96,410 10,712	Share option reserve HK$’000 23,207 – 54,913 – – – 78,120 – – (85,794) 7,674 – – – – – – – – – – – – – –	Translation reserve HK$’000 339 – – – – 5,045 5,384 – (12) – – 19,144 24,516 (19,990) – (436) 4,090 – – 43 4,133 24,516 – (688) 23,828	Retained profits/ Capital (Accumulated Discontinued reserve losses) operations HK$’000 HK$’000 HK$’000 15,826 (114,725) – – – – – – – – – – – – – – (110,764) – 15,826 (225,489) – – – – – – – – 85,794 – – – – – (56,843) – 15,826 (196,538) – – – 19,990 – – – – (70,214) – 15,826 (266,752) 19,990 – – – – 10,712 – – 162,674 (19,990) 15,826 (93,366) – 15,826 (196,538) – – – – – (17,654) – 15,826 (214,192) –	Total HK$’000 29,424 3,162 54,913 – 10,712 (105,719) (7,508) 4,556 (12) – 7,674 (37,699) (32,989) – 1,855 (70,650) (101,784) 1,943 – 142,727 42,886 (32,989) 1,509 (18,342) (49,822)	Non- controlling interests HK$’000 14,073 – – 737 – 502 15,312 – (737) – – 703 15,278 – – (223) 15,055 – – (63) 14,992 15,278 – (128) 15,150	Total HK$’000 43,497 3,162 54,913 737 10,712 (105,217)
								7,804 4,556 (749) – 7,674 (36,996)
								(17,711) – 1,855 (70,873)
								(86,729) 1,943 – 142,664
								57,878

								(17,711) 1,509 (18,470)
								(34,672)

II – 111

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

Consolidated statement of cash flows

OPERATING ACTIVITIES
Profit (loss) before income tax
Continuing operations
Discontinued operations
Adjustment for:
Interest income
Interest expenses
Depreciation of property,
plant and equipment
Allowances for doubtful
receivable
Loss on disposal of property,
plant and equipment
Impairment loss on goodwill
Loss on disposal of
an associate
Amortization of prepaid
lease payments
Gain on disposal of jointly
controlled entities
Loss on deemed disposal of
a subsidiary held by
a jointly controlled entity
Share option expenses
Share of results of an associate
Reversal of allowances
recognized in respect of
doubtful receivable
Operating cash flows before
movements in working capital
Decrease (increase) in inventories
Decrease (increase) in trade and
other receivables and
prepayments
Decrease (increase) in trade and
other payables
Cash from (used in) operations
Tax refund (paid)
NET CASH FROM (USED IN)
OPERATING ACTIVITIES

For the year ended
For the four months ended
30 June
31 October
2007
2008
2009
2009
2008
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
(Unaudited)
(110,635)
(53,048)
(41,835)
(18,282)
(14,297)
–
(4,451)
(27,072)
197,694
(3,413)
(110,635)
(57,499)
(68,907)
179,412
(17,710)
(598)
(707)
(611)
–
(388)
24,396
37,485
42,438
12,933
14,579
4,211
17,719
19,765
16
6,670
–
856
–
–
–
65
–
3
–
–
–
–
31,761
–
–
–
–
7
–
–
152
461
466
–
157
–
–
–
(197,907)
–
–
7
–
–
–
54,913
7,674
–
–
–
–
40
(124)
–
(116)
–
–
(100)
–
–
(27,496)
6,036
24,698
(5,546)
3,192
1,798
(2,318)
2,591
–
1,189
9,154
(2,746)
(5,640)
944
(315)
(8,378)
5,726
(4,761)
5,238
7,385
(24,922)
6,698
16,888
636
11,451
(1,364)
(1,071)
554
–
(986)
(26,286)
5,627
17,442
636
10,465

II – 112

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

INVESTING ACTIVITIES
Interest received
Purchases of property,
plant and equipment
Purchases of construction
in progress
Cash consideration on
acquisition of jointly
controlled entities
Cash outflow from disposal of
jointly controlled entities
Proceeds from disposal of an
associate
Deemed disposal of
a subsidiary held by
a jointly controlled entity
Purchases of prepaid lease
payments
NET CASH USED IN
INVESTING ACTIVITIES
FINANCING ACTIVITIES
Interest paid
Issue of shares
Net (repayments) raising of borrowings
Proceeds from issue of
convertible bonds
NET CASH FROM
FINANCING ACTIVITIES
NET (DECREASE) INCREASE IN
CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE YEAR/
PERIOD
Effect of foreign exchange
rate changes
CASH AND CASH EQUIVALENTS
AT END OF THE YEAR/PERIOD,
represented by
Bank balances and cash
Cash and cash equivalents included in
assets held for sale

For the year ended
For the four months ended
30 June
31 October
2007
2008
2009
2009
2008
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
(Unaudited)
598
707
611
–
388
(1,650)
(10,666)
(6,988)
–
(2,392)
(5,871)
(17,249)
(22,994)
–
(11,619)
(120,902)
–
–
–
–
–
–
–
(39,297)
–
–
–
2,006
–
–
–
(208)
–
–
–
(99)
(2,191)
(316)
–
(79)
(127,924)
(29,607)
(27,681)
(39,297)
(13,702)
(2,908)
(5,223)
(10,882)
(1,015)
(1,975)
3,162
4,556
1,855
1,943
1,509
(38,532)
7,879
19,685
–
2,383
234,000
–
–
–
–
195,722
7,212
10,658
928
1,917
41,512
(16,768)
419
(37,733)
(1,320)
3,360
49,110
40,629
40,850
40,629
4,238
8,287
(198)
61
1,503
49,110
40,629
40,850
3,178
40,812
49,110
40,629
1,990
3,178
40,812
–
–
38,860
–
–
49,110
40,629
40,850
3,178
40,812

II – 113

APPENDIX II

FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

2. SUBSEQUENT FINANCIAL STATEMENTS

W.H. Tang & Partners CPA Limited Certified Public Accountants Hong Kong

TANG Wai Hung Practising Certificate No. P03525

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

3. MANAGEMENT DISCUSSION AND ANALYSIS

Set out below is the management discussion and analysis of the operating results and business review extracted from the respective annual reports of China Vanguard for the three years ended 30 June 2007, 2008 and 2009 and the four months ended 31 October 2009.

For the year ended 30 June 2007

FINANCIAL REVIEW

The China Vanguard Group recorded a turnover of HK$91.46 million and loss attributable to the shareholders of approximately HK$72.52 million for the year ended 30 June 2007. Significant progress has been made by the China Vanguard Group in developing its presence in the China lottery-related sector and in the oil and gas related industries. The results for the 12 months to 30 June 2007, predominantly reflect the revenues from the lottery-related business and edible oil trading businesses. The China Vanguard Group is pleased to announce that its 51%-owned China lottery-related company, Bozone, has made a contribution to our results of HK$28.28 million in revenue and HK$9.51 million in segmental results for the year.

The China Vanguard Group’s turnover of HK$91.46 million represented HK$28.28 million of revenues from the lottery-related division, sales of edible oil products of HK$42.91 million, gas related revenue shared from the Changde Joint Venture and the Hunan Joint Venture of HK$14.74 million, and revenue of HK$5.53 million from the sale of natural products and others. Segment result of profit of HK$9.51 million, segment result of profit of HK$0.12 million, segment result of loss of HK$1.92 million, segment result of loss of HK$0.86 million and segment result of loss of HK$1.19 million were recorded in the China Vanguard Group’s lottery division, edible oil trading sector, natural gas joint ventures, natural products and others divisions and oil mining respectively.

Overall revenue for the China Vanguard Group, was HK$91.46 million against HK$81.61 million previously. The China Vanguard Group recorded a net loss attributable to shareholders after minorities of HK$72.52 million for the year ended 30 June 2007 against a net loss of HK$39.91 million for the previous corresponding period. HK$96.60 million of the HK$103.48 million loss before minorities is non-recurrent as follows:

(i) Share option expenses of HK$83.3 million (a non-cash item) is recognized in the current year. Based on the existing options in issue, there is only circa HK$8.6 million (including the share option expenses of Aptus) in such expenses to be written off over the coming fiscal year; and
(ii) HK$13.3 million in legal and professional fees related to the investment in Changde Joint Venture and Hunan Joint Venture.

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APPENDIX II

This year’s loss increased by HK$32.61 million compared to the previous corresponding year, the increase can be explained almost entirely as follows: (i) a HK$43.9 million increase in share option expenses, HK$83.3 million this period against HK$39.40 million previously, (ii) the HK$13.3 million charge for legal and professional fees as mention previously, (iii) the maiden HK$19.9 million expenses for imputed finance charges associated with the convertible bond issued by Aptus and (iv) no share award expenses this period against HK$36.06 million previously.

LIQUIDITY AND FINANCIAL RESOURCES

As at 30 June 2007, shareholders’ funds amounted to approximately HK$438,205,000 (2006: HK$453,851,000). Current assets amounted to approximately HK$306,294,000 (2006: HK$356,185,000), mainly comprising of cash and bank deposits. The China Vanguard Group had current liabilities amounting to approximately HK$64,567,000 (2006: HK$43,063,000), mainly its trade and other payables and bank borrowings. The China Vanguard Group’s bank borrowings amounted to approximately HK$74,671,000 (2006: HK$4,078,000) for the year ended 30 June 2007. The China Vanguard Group financed its operations primarily with internally generated cash flows and banking facilities granted by banks. The net asset value per share of China Vanguard was approximately HK$0.47 (2006: HK$0.48 (restated due to issue of bonus shares)). The gearing ratio was 14.73% (2006: 9.49%) on the basis of current liabilities divided by shareholders’ funds.

EMPLOYMENT AND REMUNERATION POLICIES

As at 30 June 2007, the China Vanguard Group employed 25 staff in Hong Kong, 2 staff in Singapore and 87 staff in the PRC. Staff costs excluding directors’ remuneration amounted to approximately HK$14,309,000 (2006: HK$7,873,000). Employee remuneration is determined by reference to market terms and the performance, qualification and experience of individual employees. In addition to basic salaries and provident fund contributions, the China Vanguard Group also offers medical benefits and training programs. Share options may be granted to employees based on performance evaluation in order to provide incentives and rewards.

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND ANY RELATED HEDGES

The business activities of the China Vanguard Group are not exposed to material fluctuations in exchange rate except for the China Vanguard Group’s operations through its subsidiaries in the People’s Republic of China and Singapore, which are subject to fluctuation in exchange rates between Renminbi, Singaporean dollars and Hong Kong dollars.

CONVERTIBLE BONDS

On 22 November 2006 China Vanguard’s non wholly-owned subsidiary, Aptus issued convertible bonds due on 21 November 2011 with a principal amount of HK$234,000,000, which is interest-bearing at 5% per annum from and including 21 May 2008. The convertible bonds were issued for the purpose of the acquisition of a 48.33% equity interest in Changde Huayou Gas Co. Ltd. (“Changde Joint Venture”), 33% equity interest in the Hunan Huayou Natural Gas Transportation & Distribution Company Limited (“Hunan Joint Venture”) and general working capital purposes.

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APPENDIX II

On or at any time after 21 November 2008 and prior to 11 November 2011, Aptus may redeem the convertible bonds in whole but not in part, together with the interest accrued to the redemption date.

The holder(s) of the convertible bonds may exercise the right at any time from 1 January 2007 up to close of business on 11 November 2011 or, if the convertible bonds shall have been called for redemption before 21 November 2011, up to the close of business on a date no later than 7 business days prior to the date fixed for redemption thereof. The initial conversion price will be HK$2.40 per Aptus share, subject to adjustment upon occurrence of certain prescribed dilution events.

On each of 21 November 2008, 21 November 2009 and 21 November 2010 (each a “Put Option Date”), each bondholder will have the right to require Aptus to redeem in whole or in part the convertible bonds of such bondholder on the Put Option Date together with interest accrued to the Put Option Date.

Unless previously redeemed, converted or purchased and cancelled, the convertible bonds will be redeemed at 150.15% of their principal amount on 21 November 2011.

SIGNIFICANT INVESTMENT

For the year ended 30 June 2007, the China Vanguard Group did not have any significant investments.

MATERIAL ACQUISITION AND DISPOSALS OF SUBSIDIARIES

For the year ended 30 June 2007, the China Vanguard Group has completed the acquisition of 48.33% equity interest in Changde Joint Venture and of 33% equity interest in Hunan Joint Venture. In February 2007, the certificates of approval for Aptus’ investment in Changde Joint Venture and Hunan Joint Venture and the updated business licenses of these two Joint Ventures were obtained.

On 7 September 2006, the China Vanguard Group has completed the disposal of our 55% interest in Wuhu Bee & Bee Natural Food Company Limited and 100% interest in Zhuhai Free Trade Zone Bee & Bee Natural Food Company Limited. During the year, the China Vanguard Group also disposed Guangzhou Latech Computer Technology Company Limited, Jinan Weita Technology Company Limited and La Cucina Italian (Macau) Limited to streamline the business of the China Vanguard Group.

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CONTINGENT LIABILITIES

As at 30 June 2007, the China Vanguard Group had no contingent liabilities.

CHARGES ON GROUP ASSETS

As at 30 June 2007, the China Vanguard Group has pledged its bank deposits of approximately HK$5,000,000 (30 June 2006: HK$13,308,000) and leasehold property at net book value of approximately HK$5,834,000 (30 June 2006: HK$5,918,000) to banks to secure the general banking facilities granted to the China Vanguard Group.

In addition, borrowings of approximately HK$54,232,000 has been secured by a gas network of a jointly controlled entity, Hunan Joint Venture.

As at 30 June 2007 the 100% of the issued share capital of Good United Management Limited (“GUM”), a wholly-owned subsidiary of China Vanguard’s non wholly-owned subsidiary, Aptus, was pledged in favour of the holder(s) of the convertible bonds issued by Aptus on 22 November 2006. GUM held 70% equity interests in CNPC Huayou Cu Energy Investment Co., Limited, which owned profit sharing rights on Xin Jiang Oilfield.

CAPITAL STRUCTURE

Bonus Share Issue

On 1 November 2006, a bonus issued of 312,026,403 Shares was made on the basis of one bonus share for every two existing Shares held on the 24 October 2006.

Bonus Warrant Issue

On 1 November 2006, a bonus issued of 124,810,561 warrants was made on the basis of one warrant for every five issued shares held on 24 October 2006. Each warrant entitles its holder to subscribe in cash at a price of HK$1.33 for one share of China Vanguard at any time from 3 November 2006 to 2 November 2008, both days inclusive. No warrant was exercised during the period and exercise in full of these warrants would result in the issue of 124,810,561 additional shares of HK$0.01 each.

For the year ended 30 June 2008

FINANCIAL REVIEW

Turnover

The China Vanguard Group recorded a turnover of approximately HK$144.09 million for the year ended 30 June 2008 (“Year 2008”), an increase of approximately 63% as compared to approximately HK$88.25 million for the year ended 30 June 2007 (“Year 2007”). In the year under review, turnover from both of our natural gas-related operations improved significantly. Meanwhile,

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turnover from our lottery-related operations has exhibited fair growth while turnover of our edible oil trading business contracted slightly.

With regards to our natural gas-related operations, the Changde Joint Venture benefited from an increase in end users within its jurisdiction whilst the Hunan Joint Venture benefited from an increase in distribution stations. As a result, revenues from these operations increased by approximately 3.5 times from approximately HK$14.7 million in Year 2007 to approximately HK$65.8 million in Year 2008.

The turnover from the lottery-related operations increased by approximately 26% from approximately HK$28.3 million in Year 2007 to approximately HK$35.7 million in Year 2008, this was mainly attributed to higher contributions from our lottery-related operations in Zhejiang province, the PRC.

The turnover from the edible oil trading business decreased by approximately 8% from approximately HK$42.9 million in Year 2007 to approximately HK$39.6 million in Year 2008, due to the continuous increase in the price of consumer goods thus reducing margins and demand.

Gross Profit

The details of gross profit and gross profit ratio of the China Vanguard Group for continuing operations are as follows:

Karaoke CMS Natural gas-related Lottery-related Trading of edible oil Others Overall	2008 Gross Gross Profit Profit Ratio HK$’000 % 197 87.2 18,133 27.6 30,314 84.9 253 0.6 821 29.4 49,718 34.5	2007 Gross Gross Profit Profit Ratio HK$’000 % – – 2,843 19.3 21,111 74.6 672 1.6 210 9.1 24,836 28.1	2007 Gross Gross Profit Profit Ratio HK$’000 % – – 2,843 19.3 21,111 74.6 672 1.6 210 9.1 24,836 28.1
			28.1

The China Vanguard Group’s overall gross profit ratio increased from 28.1% in Year 2007 to 34.5% in Year 2008. On the lottery-related side, the gross profit ratio improved due to a higher ratio of system maintenance revenue to POS machine sales. System maintenance gross profit margins are higher than those achieved from sales of POS machines. Further, a greater contribution was made by the high margin natural gas-related operations which were acquired in February 2007. The natural gas joint ventures (Hunan Joint Venture and Changde Joint Venture/Natural Gas Joint Ventures) accounted for 45.7% of the China Vanguard Group’s revenue in Year 2008 against just 16.7% last year.

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The China Vanguard Group’s share of turnover from the Natural Gas Joint Ventures for Year 2008 included installation income for gas connection of approximately HK$21.2 million against approximately HK$4.3 million in Year 2007. Gross profit margin of installation income is very high. As such, the significant rise in installation income has contributed to the overall widening of the gross profit margins of the China Vanguard Group’s natural gas-related operations. Further, costs of the Hunan Joint Venture are predominantly fixed in nature (mainly depreciation) and are thus inelastic in relation to the volume of gas transported along its pipeline. Thus the increase in turnover of the Hunan Joint Venture in Year 2008 did not see a corresponding increase in cost of sales thereby also contributing to the widening of overall gross profit margins.

With regards to the edible oil trading business, as mentioned previously, the prices of consumer goods in general rose significantly in Year 2008. In reaction to tougher market conditions, the low-price strategy adopted by the China Vanguard Group’s edible oil trading business resulted in lower gross profit margins here in Year 2008.

Operating costs (Continued operations)

The China Vanguard Group’s operating costs, comprising selling and distribution costs and administrative expenses, decreased by approximately HK$14.7 million from approximately HK$139.2 million in Year 2007 to approximately HK$124.5 million this year. The decrease was mainly attributable to the net effect of (i) less share option expenses charged against the China Vanguard Group’s profit and loss account from approximately HK$83.3 million in Year 2007 to approximately HK$8.5 million in Year 2008; (ii) an increase in legal and professional fees from approximately HK$15.4 million (mainly for the issue of convertible bonds of Aptus) in Year 2007 to approximately HK$30.9 million in Year 2008 (mainly for the acquisition of Grand Promise); (iii) an increase in depreciation expenses from approximately HK$7.9 million in Year 2007 to approximately HK$18.3 million in Year 2008 (excluding depreciation charged to cost of sales) (the increase in depreciation was mainly attributable to the city-level gas operation operated by Changde Joint Venture as an additional 84km of pipeline network was built in the current year; and full year depreciation charged for this year for some fixed assets acquired during last fiscal year whereas only partial year was charged); (iv) an increase in salaries and allowance from approximately HK$18.6 million in Year 2007 to approximately HK$25.9 million in Year 2008 due to increase in more staff and increase in pay scale; (v) an increase in donation from none in Year 2007 to approximately HK$2.2 million in Year 2008; (vi) an increase in loss arising from settlement of financial liabilities by issuing of shares from none in Year 2007 to approximately HK$2.8 million in Year 2008; (vii) an increase in loss arising on changes of fair values of derivative financial instruments (convertible bonds of China Vanguard) from none in Year 2007 to approximately HK$13.3 million in Year 2008; (viii) an increase in allowance for doubtful receivable from none in Year 2007 to approximately HK$5.8 million in Year 2008; and (ix) overall increase in operation costs.

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Finance Costs

The increase in finance costs over Year 2008 of about HK$17.4 million, from approximately HK$24.5 million in Year 2007 to approximately HK$41.9 million in Year 2008, was mainly attributable to the increase in imputed finance costs of the convertible bonds of China Vanguard (convertible bonds were assumed in April 2008 through the acquisition of Grand Promise) and of the convertible bonds of Aptus, which were issued by Aptus in November 2006. The imputed finance costs of the convertible bonds increased due principally to the fact that only approximately seven months interest were charged to Aptus’s financial statements in Year 2007 against a full year charge this year and the newly acquired convertible bonds of Grand Promise in April 2008.

LIQUIDITY AND FINANCIAL RESOURCES

As at 30 June 2008, China Vanguard Shareholders’ funds amounted to approximately HK$2.3 billion (2007: HK$438.2 million). Current assets amounted to approximately HK$420.2 million (2007: HK$306.3 million), mainly comprising of cash and bank balance and trade and other receivables and prepayments. The China Vanguard Group had current liabilities amounting to approximately HK$234.2 million (2007: HK$64.6 million), mainly comprising of its trade and other payables, derivative financial instruments and bank and other borrowings. The China Vanguard Group’s bank borrowings amounted to approximately HK$80.3 million (2007: HK$74.7 million) for the year ended 30 June 2008. The China Vanguard Group financed its operations primarily with internally generated cash flows, proceeds from the convertible bonds and banking facilities granted by banks. The net asset value per share of China Vanguard was approximately HK$0.70 (2007: HK$0.47). The gearing ratio was 10.33% (2007: 14.73%) on the basis of current liabilities divided by China Vanguard Shareholders’ funds.

CONTINGENT LIABILITIES

As at 30 June 2008, the China Vanguard Group had no contingent liabilities.

CHARGES ON GROUP ASSETS

As at 30 June 2008, the China Vanguard Group has pledged all the issued and outstanding shares of Birdview Group Limited (a wholly-owned subsidiary of Grand Promise) together with all proceeds in favor of the holder(s) of the convertible bonds previously issued by Grand Promise. By the Deeds of Adherence, on completion of the acquisition of Grand Promise in April 2008, the convertible bonds were taken up by China Vanguard.

As at 30 June 2008, the China Vanguard Group has pledged its bank deposits of approximately HK$5 million (30 June 2007: HK$5 million) to a bank to secure the general banking facilities granted to the China Vanguard Group.

In addition, borrowings of approximately HK$60 million (30 June 2007: HK$54.2 million) have been secured by the gas network of the Hunan Joint Venture.

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As at 30 June 2008 the 100% of the issued share capital of Good United Management Limited (“GUM”), a wholly-owned subsidiary of China Vanguard’s non wholly-owned subsidiary, Aptus, was pledged in favor of the holder(s) of the convertible bonds issued by Aptus on 22 November 2006. GUM held 70% equity interests in CNPC Huayou CU Energy Investment Co., Limited, which owned profit sharing rights on Xin Jiang Oilfield.

CAPITAL STRUCTURE

During the year ended 30 June 2008, 16,900,000 China Vanguard Shares were issued due to the exercise of share options under the existing share option scheme; 2,262,173,906 China Vanguard Shares were issued on acquisition of Grand Promise as consideration; 20,023,192 China Vanguard Shares were issued on acquisition of then shareholder’s loan of Grand Promise on 11 April 2008; and 105,931 China Vanguard Shares were issued due to the conversion of the convertible bonds issued by China Vanguard.

CONVERTIBLE BONDS

On 11 April 2008, upon completion of acquisition of Grand Promise, China Vanguard took up the convertible bonds with a principal amount of US$35 million (equivalent to approximately HK$273 million) previously issued by Grand Promise by the Deeds of Adherence. The principal amount of the convertible bonds shall accrete at a yield of 7% per annum, compounded semiannually. Unless previously redeemed, converted or purchased and cancelled, the convertible bonds will be redeemed at 141.06% of their principal amount on 30 November 2012.

The fair value of the liability component of the convertible bonds is estimated by computing the present value of all future cash flow discounted using prevailing market rate of interest for similar instrument with a similar credit rating and with consideration of the convertible bonds. Any differences between the face amount and the fair value of the convertible bonds will be charged to the profit and loss account. The residual amount, representing the value of the equity component, is credited to non-current liability of China Vanguard.

On 22 November 2006, China Vanguard’s non wholly-owned subsidiary Aptus issued convertible bonds due on 21 November 2011 with a principal amount of HK$234 million, which is interest-bearing at 5% per annum from and including 21 May 2008. The convertible bonds were issued for the purpose of the acquisition of a 48.33% equity interest in the Changde Joint Venture, 33% equity interest in the Hunan Joint Venture and general working capital purposes.

Unless previously redeemed, converted or purchased and cancelled, the convertible bonds will be redeemed at 150.15% of their principal amount on 21 November 2011.

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND ANY RELATED HEDGES

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foreseeable future and the China Vanguard Group’s operating income is substantially denominated in RMB, the China Vanguard Group did not perform any foreign currency hedging activities during the year. Nevertheless, the China Vanguard Group will from time to time review and adjust the China Vanguard Group’s investment and financing strategies based on the RMB, US dollars and Hong Kong dollars exchange rate movement.

EMPLOYMENT AND REMUNERATION POLICIES

As at 30 June 2008, China Vanguard and its subsidiaries employed 31 staff in Hong Kong, 2 staff in Singapore and 74 staff in the PRC; and the China Vanguard Group’s jointly controlled entities employed 490 staff in the PRC. Staff costs excluding directors’ remuneration amounted to approximately HK$17.9 million (2007: HK$14.3 million). Employee remuneration is determined by reference to market terms and the performance, qualification and experience of individual employees. In addition to basic salaries and provident fund contributions, the China Vanguard Group also offers medical benefits and training programs. Share options may be granted to employees based on performance evaluation in order to provide incentives and rewards.

SIGNIFICANT INVESTMENT

For the year ended 30 June 2008, the China Vanguard Group did not have any significant investments.

MATERIAL ACQUISITION AND DISPOSALS OF SUBSIDIARIES

During the year ended 30 June 2008, the China Vanguard Group completed the acquisition of the entire issued capital of Grand Promise and Best Delight Group Limited.

For the year ended 30 June 2009

FINANCIAL REVIEW

On 24 April 2009, Aptus entered into agreements relating to the disposal of the 48.33% equity interest in the Changde Joint Venture and 33% equity interest in the Hunan Joint Venture and the termination of profit sharing rights for the Xin Jiang Oilfield. Financial information regarding the Natural Gas Joint Ventures and the profit sharing rights for Year 2009 has been classified as discontinued operations and the comparative figures for Year 2008 has been restated accordingly.

Turnover

The China Vanguard Group recorded a turnover from continuing operations of approximately HK$85,079,000 for Year 2009, an increase of approximately 8.7% as compared to approximately HK$78,292,000 for Year 2008.

Turnover from its continuing operations such as the Karaoke CMS operation and lotteryrelated operations has exhibited commendable growth while the turnover of our edible oil trading business contracted due to much tougher market conditions.

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The attributable turnover from the Karaoke CMS operations increased by approximately 100 times from approximately HK$226,000 recorded for only approximately 3 months ended 30 June 2008 to approximately HK$22,889,000 recorded for the 12 months ended 30 June 2009, this was attributable to a full year’s result for Year 2009 as compared to only approximately 3 months for the previous financial year as well as the Karaoke CMS operations gaining momentum in terms of settop box installation and copyright fee collections.

The turnover from the lottery-related operations increased by approximately 20.0% from approximately HK$35,715,000 in Year 2008 to approximately HK$42,843,000 in Year 2009, this was mainly attributed to higher contributions from our lottery-related operations in Zhejiang province, the PRC.

The turnover from the edible oil trading business decreased by approximately 53.8% from approximately HK$39,562,000 in Year 2008 to approximately HK$18,292,000 in Year 2009, due to the continuous increase in the price of consumer goods thus reducing margins and demand.

Gross Profit

The details of gross profit and gross profit ratio of the China Vanguard Group for continuing operations are as follows:

Karaoke CMS and license fee collection business Lottery-related Trading of edible oil Others Overall	2009 Gross Gross Profit Profit Ratio HK$’000 % 7,296 31.9 37,224 86.9 46 0.3 40 3.8 44,606 52.4	2008 Gross Gross Profit Profit Ratio HK$’000 % 197 87.2 30,314 84.9 253 0.6 821 29.4 31,585 40.3	2008 Gross Gross Profit Profit Ratio HK$’000 % 197 87.2 30,314 84.9 253 0.6 821 29.4 31,585 40.3
			40.3

Loss From Discontinued Operations

Loss from discontinued operations of approximately HK$28,557,000 represented net result of the China Vanguard Group’s share of net profit of the Natural Gas Joint Ventures for Year 2009 of approximately HK$3,616,000, net loss of termination of the profit sharing rights of approximately HK$412,000 and impairment loss on goodwill of approximately HK$31,761,000. Loss from discontinued operations for Year 2008 of approximately HK$4,036,000 only represented the China Vanguard Group’s share of net loss of the Natural Gas Joint Ventures of approximately HK$3,196,000 and net loss of termination of the profit sharing rights of approximately HK$840,000.

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The result of the Natural Gas Joint Ventures improved over Year 2009. The China Vanguard Group’s share of the Natural Gas Joint Ventures’ net profit for Year 2009 was approximately HK$3,616,000 while that of net loss of approximately HK$3,196,000 was recorded in Year 2008. The improvement in the performance was principally attributable to the increases in the Changde Joint Venture’s end users and the number of distribution stations of Hunan Joint Venture.

On 24 April 2009, Aptus entered into agreements to dispose of its equity in the Natural Gas Joint Ventures. The disposal transactions have been completed in September 2009. Gain on disposal of the Natural Gas Joint Ventures is to be recorded in the China Vanguard Group’s quarterly report for the three months ending 30 September 2009.

The China Vanguard Group’s overall gross profit ratio from continuing operations increased from 40.3% in Year 2008 to 52.4% in Year 2009. With regards to the Karaoke CMS and license fee collection operations, the gross profit ratio was 31.9% for the 12 months ended 30 June 2009 as compared to 87.2% recorded for only approximately 3 months ended 30 June 2008. On the lotteryrelated side, the gross profit ratio remained rather stable.

With regards to the edible oil trading business, as mentioned previously, weak economic conditions have hampered the growth of this sector. As a result, the gross profit ratio for Year 2009 was 0.3% as compared to 0.6% for Year 2008.

Operating Costs (Continuing Operations)

The China Vanguard Group’s operating costs, comprising selling and distribution costs and administrative expenses, decreased by approximately HK$8,265,000 from approximately HK$91,967,000 in Year 2008 to approximately HK$83,702,000 this year. The decrease was mainly attributable to the net effect of (i) decrease in legal and professional fees from approximately HK$31,075,000 (mainly for the acquisition of Grand Promise) in Year 2008 to approximately HK$5,893,000 in Year 2009 (mainly for the restructuring of the convertible bonds); (ii) increase in depreciation expenses from approximately HK$10,723,000 in Year 2008 to approximately HK$13,085,000 in Year 2009, the increase in depreciation was mainly attributable to the incorporation of a full year depreciation charge for the assets concerning the Karaoke CMS operations whereas only partial year was charged in Year 2008; (iii) increase in salaries and allowance from approximately HK$20,426,000 in Year 2008 to approximately HK$31,355,000 in Year 2009 due to the expansion of the Karaoke CMS operation and increase in overall pay scale; (iv) decrease in loss on arising from settlement of financial liabilities by issuing shares from approximately HK$2,810,000 in Year 2008 to approximately HK$nil in Year 2009; (v) increase in traveling expenses from approximately HK$1,980,000 in Year 2008 to and approximately HK$4,476,000 in Year 2009 due to more business traveling to and from the PRC and within the PRC; (vi) an increase in rent and rate from approximately HK$3,389,000 in Year 2008 to approximately HK$5,704,000 in Year 2009 due to the expansion of the Karaoke CMS operation; and (vii) overall increase in operation costs.

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Finance Costs

The increase in finance costs from continuing operations in Year 2009 of about HK$23,182,000, from approximately HK$37,476,000 in Year 2008 to approximately HK$60,658,000 in Year 2009, was mainly attributable to the increase in imputed finance costs of the convertible bonds of China Vanguard (convertible bonds were assumed in April 2008 through the acquisition of Grand Promise) and of the convertible bonds of Aptus, which were issued by Aptus in November 2006. The imputed finance costs of the convertible bonds increased due principally to the fact that only approximately 3 months interest were charged to China Vanguard’s financial statements in Year 2008 against a full year charge this year and the currency conversion with regards to the Grand Promise convertible bonds.

LIQUIDITY AND FINANCIAL RESOURCES

As at 30 June 2009, shareholders’ funds excluding assets and liabilities classified as held for sale amounted to approximately HK$1,944,506,000 (2008: HK$2,268,311,000). Current assets excluding assets classified as held for sale amounted to approximately HK$294,768,000 (2008: HK$420,164,000), mainly comprising of bank balances and cash and trade and other receivables and prepayments. The China Vanguard Group had current liabilities excluding liabilities classified as held for sale amounting to approximately HK$150,976,000 (2008: HK$234,238,000), mainly comprising of its trade and other payables, derivative financial instruments and other borrowings. The China Vanguard Group has no bank borrowings excluding bank borrowings classified as held for sale as at 30 June 2009 (2008: HK$80,276,000). The China Vanguard Group financed its operations primarily with internally generated cash flows, and banking facilities granted by a bank. The net asset value per share of China Vanguard excluding assets and liabilities classified as held for sale was approximately HK$0.61 (2008: HK$0.70). The gearing ratio was 7.76% (2008: 10.33%) on the basis of current liabilities excluding liabilities classified as held for sale divided by shareholders’ funds excluding assets and liabilities classified as held for sale.

CONTINGENT LIABILITIES

As at 30 June 2009, the China Vanguard Group had no contingent liabilities.

CHARGES ON GROUP ASSETS

As at 30 June 2009, the China Vanguard Group has pledged all the issued and outstanding shares of Birdview Group Limited (a wholly-owned subsidiary of Grand Promise) together with all proceeds in favor of the holders of the convertible bonds previously issued by Grand Promise. By the Deeds of Adherence, on completion of the acquisition of Grand Promise in April 2008, the convertible bonds were taken up by China Vanguard.

As at 30 June 2009, the China Vanguard Group has pledged its bank deposits of approximately HK$5,110,000 (30 June 2008: HK$5,033,000) to a bank to secure the general banking facilities granted to the Group.

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APPENDIX II

In addition, borrowings of approximately HK$59,907,000 which is classified as liabilities held for sale (30 June 2008: HK$60,020,000) have been secured by the gas network of the Hunan Joint Venture.

As at 30 June 2009, the 100% of the issued share capital of Good United Management Limited (“GUM”), a wholly-owned subsidiary of Aptus, was pledged in favor of the holder(s) of the convertible bonds issued by Aptus on 22 November 2006. GUM held 70% equity interests in CNPC Huayou Cu Energy Investment Co., Limited, which owned the profit sharing rights on Xin Jiang Oilfield.

CAPITAL STRUCTURE

During the year ended 30 June 2009, 16,600 China Vanguard Shares were issued due to the exercise of warrants and the cancellation of 23,405,000 shares due to repurchase of China Vanguard Shares by China Vanguard.

CONVERTIBLE BONDS

On 11 April 2008, upon completion of acquisition of Grand Promise, China Vanguard took up the convertible bonds with a principal amount of US$35,000,000 (equivalent to approximately HK$273,000,000) previously issued by Grand Promise by the Deeds of Adherence. The principal amount of the convertible bonds shall accrete at a yield of 7% per annum, compounded semiannually. Unless previously redeemed, converted or purchased and cancelled, the convertible bonds will be redeemed at 141.06% of their principal amount on 30 November 2012.

Subsequent to the balance sheet date, on 3 July 2009, China Vanguard has redeemed part of the relevant note, being approximately US$3,370,000 (equivalent to approximately HK$26,286,000) in the case of the Evolution convertible bond and approximately US$8,420,000 (equivalent to approximately HK$65,676,000) in the case of Liberty Harbor convertible bond. The redemption price is the price of principal amount to be redeemed plus a yield of 7% per annum, compounded semi-annually, on the amount redeemed, commencing on the date of the issuance of the bond and including the relevant redemption date subject to currency conversion in accordance with the terms of the relevant bond.

China Vanguard and Grand Promise have been in negotiations with Liberty Harbor and Evolution with regards to the restructuring of the Grand Promise convertible bonds which resulted in a series of amendments and undertaking being entered into in order to give all parties adequate time to reach restructuring terms which are acceptable to all parties.

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The amended Grand Promise convertible bonds “Amended Grand Promise convertible bonds” have been amended as follows:

(a) The Grand Promise convertible bonds as amended by the First, Second and Third Amendment Deeds

The net impact of the First, Second and Third Amendment Deeds, was to push back the period during which Liberty Harbor and Evolution may require redemption of the outstanding principal amounts of the Grand Promise convertible bonds from “the period from 30 May 2009 to the date falling 15 business days thereafter (inclusive)” to “the period from 30 September 2009 to the date falling 15 business days thereafter (inclusive)”.

For details of each of the amendment deed, please refer to the announcements of the China Vanguard dated 18 June 2009, 4 August 2009 and 22 September 2009 respectively.

(b) The Undertakings by China Vanguard and Grand Promise

In consideration of Liberty Harbor and Evolution entering into the various amendment deeds, China Vanguard and Grand Promise have executed in total 5 undertakings in favor of Liberty Harbor and Evolution pursuant to which, amongst other things:

(i) Grand Promise agreed that it would, on or prior to 30 September 2009, enter into definitive legally binding and enforceable documentation (“Bond Restructuring Documents”) required to implement the restructuring of all amounts outstanding under the Amended Grand Promise convertible bonds; and
(ii) China Vanguard and Grand Promise undertook certain restrictions with regards to the withdraw or transfer from the bank accounts maintained or controlled by any member of the China Vanguard Group (other than Aptus or its subsidiaries, CCDDT or Excellent Union) during the undertaking period (being the period commencing from 18 June 2009 and ending on the first to occur of (i) 30 September 2009 and (ii) the date on which the Bond Restructuring Documents are executed.

For details of each of the undertaking, please refer to the announcements of China Vanguard dated 18 June 2009, 15 July 2009, 4 August 2009, 28 August 2009 and 22 September 2009 respectively.

The negotiations between China Vanguard, Grand Promise, Liberty Harbor and Evolution in relation to the Grand Promise convertible bonds restructuring are continuing. If the Liberty Harbor and Evolution were to request redemption of the Amended Grand Promise convertible bonds in full, the China Vanguard Group would not have sufficient working capital available to redeem the full amount from existing internal resources and available banking facilities. The auditors of China Vanguard have given an emphasis of matters in respect of China Vanguard’s ability to continue as a going concern in their report.

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The fair value of the liability component of the convertible bonds is estimated by computing the present value of all future cash flow discounted using prevailing market rate of interest for similar instrument with a similar credit rating and with consideration of the convertible bonds. Any differences between the face amount and the fair value of the convertible bonds will be charged to the profit and loss account. The residual amount, representing the value of the equity component, is credited to non-current liability of China Vanguard.

On 22 November 2006, Aptus issued convertible bonds due on 21 November 2011 with a principal amount of HK$234,000,000, which is with a gross yield at 11% per annum, calculated on a semi-annual basis. The convertible bonds were issued for the purpose of the acquisition of a 48.33% equity interest in the Changde Joint Venture, 33% equity interest in the Hunan Joint Venture and general working capital purposes.

On 14 May 2009, Aptus and China Vanguard announced in the joint announcement that, in relation to the sales agreements of disposal of interest in Changde Joint Venture and Hunan Joint Venture (the “Sales Agreements”), part of the proceeds from the Sales Agreements would likely be applied to redeem the convertible bonds of Aptus. On 28 August 2009, Aptus entered into a deed with Evolution, the sole beneficial owner of the convertible bonds of Aptus, undertook to Aptus that Evolution will not exercise its conversion right under the convertible bonds and Aptus undertook to Evolution that Aptus will redeem the convertible bonds of Aptus when enough cash amount is available for the redemption.

On each of 21 November 2009 and 21 November 2010 (each a “Put Option Date”), each bondholder will have the right to require the Aptus to redeem in whole or in part of the convertible bonds of such bondholder(s) on the Put Option Date together with interest accrued to the Put Option Date.

Unless previously redeemed, converted or purchased and cancelled, the convertible bonds of Aptus will be redeemed at 150.15% of their principal amount on 21 November 2011.

The fair value of the liability component, of the Aptus convertible bonds is estimated by computing the present value of all future cash flow discounted using prevailing market rate of interest for similar instrument with a similar credit rating and with consideration of the Aptus convertible bonds. The residual amount, representing the value of the equity component, is credited to Aptus’ reserve account.

For details of Aptus convertible bonds, please refer to the joint announcements of Aptus and China Vanguard dated 9 November 2006, 23 October 2008, 7 January 2009 and 28 August 2009.

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND ANY RELATED HEDGES

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denominated in RMB, the China Vanguard Group did not perform any foreign currency hedging activities during the year. Nevertheless, the China Vanguard Group will from time to time review and adjust the China Vanguard Group’s investment and financing strategies based on the RMB, US dollars and Hong Kong dollars exchange rate movement.

EMPLOYMENT AND REMUNERATION POLICIES

As at 30 June 2009, China Vanguard and its subsidiaries employed 32 staff in Hong Kong, and 109 staff in the PRC; and the China Vanguard Group’s jointly controlled entities employed 653 staff in the PRC. Staff costs from continuing operations excluding directors’ remuneration amounted to approximately HK$20,592,000 (2008: HK$12,728,000). Employee remuneration is determined by reference to market terms and the performance, qualification and experience of individual employees. In addition to basic salaries and provident fund contributions, the China Vanguard Group also offers medical benefits and training programs. Share options may be granted to employees based on performance evaluation in order to provide incentives and rewards.

SIGNIFICANT INVESTMENT

For the year ended 30 June 2009, the China Vanguard Group did not have any significant investments.

MATERIAL ACQUISITION AND DISPOSALS OF SUBSIDIARIES

On 24 April 2009, Aptus entered into agreements relating to the disposal of the 48.33% equity interest in the Changde Joint Venture and 33% equity interest in the Hunan Joint Venture owned by Aptus. These transactions, together with the termination agreement regarding the Profit Sharing Rights were approved by the shareholders of Aptus in the extraordinary general meeting held on 10 July 2009. For the details of the transactions, please refer to the joint circular of Aptus and China Vanguard and dated 24 June 2009.

In addition, there were disposals of a subsidiary of a jointly controlled entity – China Culture Development Video Music Culture Broadcasting Co., Limited which provided consultation and organising of karaoke related services and associated companies – (i) Shenzhen Bozone Technology Services Co., Ltd., which provided lottery related hardware and software systems and (ii) Linli Huayou Gas Co., Ltd., which distributed natural gas. Except for the above, the China Vanguard Group did not make any material acquisition or disposal of subsidiaries and affiliated companies during the year ended 30 June 2009.

For the period ended 31 October 2009

FINANCIAL REVIEW

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Turnover

For Period 2009 the Group’s consolidated revenue from continuing operations were approximately HK$32,051,000, which represented a decrease of about 5.5% as compared to approximately HK$33,927,000 for Period 2008. The decrease was predominately due to a decline in turnover from Aptus’ Singaporean subsidiary which carries on a trading business. The decline, however, was offset by the rapid developments of CCDDT Group as well as by a stronger performance from the China Vanguard Group’s lottery-related operations.

The revenue from the Aptus’ trading business was approximately HK$3,073,000 for Period 2009 as compared to Period 2008 of approximately HK$18,013,000 due to continuing tough market conditions. The revenue from our lottery-related operations increased by 36.9% to approximately HK$15,119,000 in Period 2009 from approximately HK$11,041,000 in Period 2008 mainly due to the contribution from the Zhejiang province, the PRC. Meanwhile, CCDDT Group has successfully collected copyright fees on behalf of IP owners from karaoke venues in over 23 provinces in the PRC for Period 2009, whereas only 5 provinces for Period 2008.

Gross Profit

The gross profit for Period 2009 increased by about 76.6% to approximately HK$18,980,000 (Period 2008: approximately HK$10,748,000).

Gross profit ratio increased to approximately 59.2% for Period 2009 as compared to approximately 31.7% for Period 2008. Gross profit ratio increased due to higher gross profit ratio from our Karaoke CMS and lottery-related operations.

For the four months ended 31 October 2009, the net profit after taxation was approximately HK$8,961,000 against a net loss of approximately HK$32,215,000 for the Period 2008. This change is due predominantly to the gain from the disposals of the Natural Gas Joint Ventures of approximately HK$197,707,000.

Operating Costs

For Period 2009, profit for the period before non-controlling interest recorded was approximately HK$8,961,000 (Period 2008: loss of approximately HK$32,215,000). The bulk of the change of approximately HK$41,176,000 was mainly attributable to the net effect of (i) an increase in profit from discontinued operations from loss of HK$3,413,000 in Period 2008 to approximately HK$180,875,000 in Period 2009; (ii) a decrease in gain on disposal of a subsidiary held by a jointly controlled entity from approximately HK$1,163,000 in Period 2008 to HK$nil in Period 2009; (iii) an increase in impairment of goodwill from HK$nil in Period 2008 to approximately HK$96,175,000 in Period 2009; (iv) an increase in loss on changed in fair value for convertible bonds from HK$nil in Period 2008 to approximately HK$31,646,000 in Period 2009; (v) a decrease in interest expenses from approximately HK$19,908,000 in Period 2008 to approximately HK$17,364,000 in Period 2009 mainly due to the repayment of part of the Grand Promise convertible bonds in July 2009; (vi) an increase in arrangement fee of convertible

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bonds from HK$nil in Period 2008 to approximately HK$9,172,000 in Period 2009; and (vii) an increase in legal and professional fee charges from approximately HK$357,000 in Period 2008 to approximately HK$7,573,000 in Period 2009.

Finance Costs

The decrease in finance costs from continuing operations for Period 2009 was approximately HK$2,544,000, from approximately HK$19,908,000 in Year 2008 to approximately HK$17,364,000 in Year 2009, was mainly due to the repayment of part of the Grand Promise convertible bonds in July 2009.

FINANCIAL RESOURCES AND LIQUIDITY

As at 31 October 2009, shareholders’ funds was approximately HK$2,162,522,000 (30 June 2009: approximately HK$1,944,506,000, excluding assets and liabilities classified as held for sale). Current assets was approximately HK$571,696,000 (30 June 2009: approximately HK$294,768,000, excluding assets classified as held for sale), mainly comprising of bank balances and cash and trade and other receivables and prepayments. The China Vanguard Group had current liabilities approximately HK$469,957,000 (30 June 2009: approximately HK$170,621,000, excluding liabilities classified as held for sale), mainly comprising of its trade and other payables, derivative financial instruments convertible bonds and other borrowings. The China Vanguard Group has no bank borrowings (30 June 2009: HK$nil, excluding bank borrowings classified as held for sale). The China Vanguard Group financed its operations primarily with internally generated cash flows, and banking facilities granted by a bank. The net asset value per share of China Vanguard was approximately HK$0.67 (30 June 2009: approximately HK$0.61, excluding assets and liabilities classified as held for sale). The gearing ratio was approximately 21.73% (30 June 2009: approximately 8.77% on the basis of current liabilities excluding liabilities classified as held for sale divided by shareholders’ funds excluding assets and liabilities classified as held for sale) on the basis of current liabilities divided by shareholders’ funds.

CONTINGENT LIABILITIES

As at 31 October 2009, the China Vanguard Group had no contingent liabilities.

CHARGES ON THE GROUP ASSETS

As at 31 October 2009, the China Vanguard Group has pledged all the issued and outstanding shares of Birdview Group Limited (a wholly-owned subsidiary of Grand Promise) together with all proceeds in favor of the holder(s) of the convertible bonds previously issued by Grand Promise; and by the Deeds of Adherence on completion of acquisition of Grand Promise in April 2008, the convertible bonds were taken up by China Vanguard.

At 31 October 2009, the China Vanguard Group has pledged its bank deposits of approximately HK$5,121,000 (30 June 2009: approximately HK$5,110,000) as security for the general banking facilities granted to the Group. As at 31 October 2009, the 100% of the issued share capital of Good United Management Limited (“GUM”), a subsidiary of China Vanguard, was pledged in favors of the holder(s) of the convertible bonds issued by Aptus on 22 November 2006.

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In addition, there were borrowings of approximately HK$59,907,000, which was classified as liabilities associated with asset classified as held for sale as at 30 June 2009, has been secured by gas network of a jointly controlled entity, Hunan Huayou Natural Gas Transportation & Distribution Company Limited (“Hunan Joint Venture”) but there were HK$nil borrowings as at 31 October 2009 due to the disposal of Hunan Joint Venture.

CAPITAL STRUCTURE

During the four months ended 31 October 2009, there was no material change in the capital structure of the China Vanguard Group.

CONVERTIBLE BONDS

On 17 June 2009, 15 July 2009, 4 August 2009, 28 August 2009, 14 September 2009, 22 September 2009, 29 September 2009 and 30 October 2009 respectively, China Vanguard and its wholly-owned subsidiary Grand Promise have entered into various agreements with the Grand Promise convertible bondholders to allow all the parties more time to continue the negotiation on the restructuring and/or repayment of all amounts outstanding. China Vanguard and Grand Promise have redeemed the principal of the Grand Promise convertible bonds partially, being approximately US$3,370,000 (equivalent to approximately HK$26,117,500) in the case of the Evolution convertible bond and approximately US$8,420,000 (equivalent to approximately HK$65,255,000) in the case of Liberty Harbor Convertible bond.

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND ANY RELATED HEDGES

No significant exchange risk is expected as the China Vanguard Group’s cash, borrowings, income and expenses are settled in Hong Kong dollars, RMB or US dollars. The China Vanguard Group’s major investment and financing strategies are to invest in domestic projects in the PRC by Hong Kong dollars and US dollars borrowings. As the exchange rate of RMB against Hong Kong dollars is relatively stable and the China Vanguard Group’s operating income is substantially denominated in RMB, the China Vanguard Group did not perform any foreign currency hedging activities during the period. Nevertheless, the China Vanguard Group will from time to time review and adjust the China Vanguard Group’s investment and financing strategies based on the RMB, US dollars and Hong Kong dollars exchange rate movement.

EMPLOYEES

The China Vanguard Group, including jointly controlled entities, employed 696 employees as at 31 October 2009 (30 June 2009: 794). Employees’ remuneration is in line with market conditions, working experience and performance. In addition to basic salaries and provident fund contributions, the Group also offers medical benefit and training programs.

SIGNIFICANT INVESTMENT

For the four months ended 31 October 2009, the China Vanguard Group did not have any significant investments.

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MATERIAL, ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES

The China Vanguard Group did not make any material acquisition or disposal of subsidiaries and affiliated companies during the four months ended 31 October 2009 except the following:

On 30 October 2009, the China Vanguard Group has entered into a sale and purchase agreement to acquire Casdon Management Limited, which is principally engaged in the operation and management of certain properties that provide lawful storage spaces as ancestral halls for private worship of the deceased ancestors by their descendants or a common ancestor or the members of a private institute or corporation in Hong Kong.The shareholders’ meeting is yet to be held to approve the acquisition as of the Latest Practicable Date.

In September 2009, the China Vanguard Group had completed the disposal by Aptus of the 48.33% interest in Changde Huayou Gas Co. Limited and 33% interest in Hunan Huayou Natural Gas Transportation and Distribution Co., Limited.

4. INDEBTEDNESS, LIQUIDITY AND FINANCIAL RESOURCES

A. STATEMENTS OF INDEBTEDNESS

As at the close of business on 28 February 2010, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this joint circular, the China Vanguard Group had an aggregate outstanding borrowings of approximately HK$230,062,000 comprising:

(a) unsecured borrowings of approximately HK$333,000;
(b) the carrying amount of the convertible bonds on the balance sheet as at 28 February 2010 was approximately HK$221,629,000; and
(c) bank overdraft of approximately HK$8,100,000.

Convertible bonds of approximately HK$221,629,000 are secured by 100% of the issued share capital of the subsidiaries of China Vanguard, namely Grand Promise and Good United.

Bank overdraft of approximately HK$8,100,000 is secured by fixed deposits in bank.

Save as aforesaid and apart from intra-group liabilities, the Enlarged China Vanguard Group did not have any outstanding mortgages, charges, debentures, loan capital, debt securities, loans, bank overdraft or other similar indebtedness, financial lease or hire purchase commitments, liabilities under acceptances or acceptance credits or guarantees or other material contingent liabilities as at 28 February 2010.

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5. WORKING CAPITAL

Under the Grand Promise convertible bonds referred to in the section headed “Material Contracts” in Appendix XI as amended by the fourteen amendment deeds referred to in paragraphs (s), (t), (x), (y), (dd), (ee), (jj), (kk), (zz), (aaa), (fff), (ggg), (lll) and (mmm) in that section, each of Liberty Harbor and Evolution has the option during the period from 18 June 2009 to 30 April 2010 to require Grand Promise to redeem all or any part of the outstanding Grand Promise convertible bonds if it has not exercised its right to convert or to exchange the note into China Vanguard Shares on during the period from 18 June 2009 to 30 April 2010. If the holders of the Grand Promise convertible bonds were to request for redemption of the outstanding Grand Promise convertible bonds in full, the China Vanguard Group would not have sufficient working capital available from its existing internal resources and available banking facilities. Under the terms of the amendment and restatement agreement referred to in paragraph (nnn) in the section headed “Material Contracts” in Appendix XI, Grand Promise has agreed that it shall on or prior to 30 April 2010, enter into definitive legally binding and enforceable documentation required to implement the restructuring of all amounts outstanding under the Grand Promise convertible bonds. As at the Latest Practicable Date, no agreement had been reached. On the assumption that agreements on satisfactory terms can be reached with Liberty Harbor and Evolution in relation to the redemption of the Grand Promise convertible bonds, the China Vanguard Directors, after due and careful consideration, are of the opinion that, after taking into account the China Vanguard Group’s present internal resources and available banking facilities or similar indebtedness, the Enlarged China Vanguard Group will have sufficient working capital for its present requirements for at least the next 12 months from the date of this joint circular.

6. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the China Vanguard Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 October 2009, being the date to which the China Vanguard Group’s latest published audited accounts were made up.

7. MANAGEMENT DISCUSSION AND ANALYSIS UPON THE DEEMED DISPOSAL OF APTUS

China Vanguard Group is principally engaged in (1) development and operation of technology platforms for intellectual property (“IP”) protection, collection of copyright (royalty/license) fees on behalf of IP owners and the provision of value-added services in the entertainment sector in the PRC; (2) lottery-related businesses in the PRC; (3) distribution of natural supplementary products and food related and other operations and (4) trading business of Aptus. As at the Latest Practicable Date, as a result of the Placing(s) and the Loan Capitalisation as announced by Aptus on 2 November 2009 and 1 December 2009 and by the announcement issued by China Vanguard dated 16 December 2009 and 19 February 2010 respectively, Aptus is still a non wholly-owned subsidiary of China Vanguard as China Vanguard still has the power to govern the financial and operating policies of Aptus and there is no indicator for China Vanguard to lose its control on Aptus for the time being. Assuming full conversion of the Convertible Bonds into Conversion Shares at the Initial Conversion Price, China Vanguard’s indirect interests in Aptus immediately before completion of the Third Placing would be diluted by, up to 21.13 percentage points from holding approximately 33.95% as at the Latest Practicable Date to approximately 12.82%, while after the completion of the Third Placing, the equity interest of China Vanguard in Aptus will be diluted by 12.68 percentage points from 20.38% to 7.70%. Accordingly, Aptus will cease to be an indirect non

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wholly-owned subsidiary of China Vanguard and will then be treated as an available-for-sale financial asset.

The financial information of China Vanguard prepared in accordance with HKFRS for each of the financial years ended 30 June 2007, 2008, 2009 and for the four months ended 31 October 2009 are set out in Appendix II to this joint circular. The unaudited pro forma financial information of the Enlarged China Vanguard Group is set out in Appendix V to this joint circular.

Set out below is the management discussion and analysis on the China Vanguard Group after Aptus is treated as an available-for-sale financial asset (the “Remaining China Vanguard Group”) for the three years ended 30 June 2009 and for the four months ended 31 October 2008 and 2009 (the “Review Period”). The financial data in respect of the Remaining China Vanguard Group is derived from the consolidated financial statements of the China Vanguard Group and Aptus Group during the Review Period.

Operating Results from Continuing Operations

During the Review Period, the Remaining China Vanguard Group reported revenue of approximately HK$30,591,000, HK$38,730,000, HK$66,787,000, HK$15,914,000 and HK$28,978,000 for each of the financial years ended 30 June 2007, 2008 and 2009 and four months ended 31 October 2008 and 2009 respectively, representing an increase of approximately 26.61% and an increase of approximately 72.44% respectively, as compared to the same financial year ended ended 30 June 2008 and 2009; and an increase of approximately 82.09% as compared to the four months ended 31 October 2009. The gross profit margin of the Remaining China Vanguard Group decreased from approximately 80.90% for the financial year ended 30 June 2008 to 66.72% for the financial year ended 30 June 2009 due to the lower gross profit margin from Karaoke CMS and license fee than that of the system maintenance revenue from the lottery-related business of the Remaining China Vanguard Group and due to only approximately 3 months results for the financial year ended 30 June 2008 as compare to full year result for the financial year ended 30 June 2009 recorded from Karaoke CMS. The gross profit margin of the Remaining China Vanguard Group improved from approximately 69.70% to 80.90% during the financial year ended 30 June 2008 due to a higher ratio of system maintenance revenue to POS machine sales for the financial year ended 30 June 2007. System maintenance gross profit margins are higher than those achieved from sales of POS machines. The gross profit margin of the Remaining China Vanguard Group were approximately 67.25% and 65.47% during the four months ended 31 October 2008 and 2009 and have been rather constant. The Remaining China Vanguard Group reported a profit of approximately HK$7,618,000, a loss of approximately HK$55,927,000, HK$24,874,000, HK$14,505,000 and HK$153,632,000 for each of the financial years ended 30 June 2007, 2008 and 2009, and for the four months ended 31 October 2008 and 2009 respectively.

Segment information from Continuing Operations

During the financial year ended 30 June 2007, Remaining China Vanguard Group recorded segment operating profit result of approximately HK$9,510,000, segment operating loss result of approximately HK$664,000 and segment operating loss result of approximately HK$31,058,000 in the lottery-related division, natural products and others divisions respectively.

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During the financial year ended 30 June 2008, Remaining China Vanguard Group recorded segment operating profit result of approximately HK$8,814,000, segment operating loss result of approximately HK$6,854,000, segment operating loss result of approximately HK$1,915,000 and segment operating loss result of approximately HK$49,280,000 in the lottery-related division, natural products, Karaoke CMS, and others divisions respectively.

During the financial year ended 30 June 2009, Remaining China Vanguard Group recorded segment operating profit result of approximately HK$15,933,000, segment operating loss result of approximately HK$1,030,000, segmental operating loss result of approximately HK$8,205,000 and segment operating loss result of approximately HK$7,922,000 in the lottery-related division, natural products, Karaoke CMS, and others divisions respectively.

During the four months ended 31 October 2008, Remaining China Vanguard Group recorded segment operating profit result of approximately HK$2,448,000, segment operating loss result of approximately HK$805,000, segmental operating loss result of approximately HK$2,264,000 and segment operating loss result of approximately HK$7,323,000 in the lottery-related division, natural products, Karaoke CMS, and others divisions respectively.

During the four months ended 31 October 2009, Remaining China Vanguard Group recorded segment operating profit result of approximately HK$5,209,000, segment operating loss result of approximately HK$310,000, segmental operating loss result of approximately HK$531,000 and segment operating loss result of approximately HK$151,539,000 in the lottery-related division, natural products, Karaoke CMS, and others divisions respectively.

Capital Resources and Liquidity

During the Review Period, the Remaining China Vanguard Group reported bank balances and cash of approximately HK$160,612,000, HK$257,004,000, HK$234,315,000, HK$248,506,000 and HK$102,091,000 for each of the financial years ended 30 June 2007, 2008 and 2009 and for the four months end 31 October 2008 and 2009 respectively.

During the Review Period, the Remaining China Vanguard Group reported bank and other borrowings of approximately HK$3,492,000, HK$55,401,000, HK$nil, HK$18,486,000 and HK$nil for each of the financial years ended 30 June 2007, 2008 and 2009 and for the four months end 31 October 2008 and 2009 respectively.

During the Review Period, the Remaining China Vanguard Group’s gearing ratio, on the basis of current liabilities excluding liabilities classified as held for sale divided by shareholders’ funds excluding assets and liabilities classified as held for sale were approximately 9.75%, 8.60%, 5.48%, 6.89% and 4.15% as at 30 June 2007, 2008 and 2009 and as at 31 October 2008 and 2009 respectively.

The Remaining China Vanguard Group intends to finance its operations by its internal generated cash flows and external fund sources including but not limited to placing of shares, issuance of convertible bonds and bank and other borrowings.

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Capital structure of the Remaining China Vanguard Group

During the financial year ended 30 June 2007, on 1 November 2006, a bonus issue of 312,026,403 China Vanguard Shares was made on the basis of one bonus share for every two existing China Vanguard Shares held on 24 October 2006. On 1 November 2006, a bonus issue of 124,810,561 warrants was made on the basis of one warrant for every five issued shares held on 24 October 2006. Each warrant entitles its holder to subscribe in cash at a price of HK$1.33 for one share of China Vanguard at any time from 3 November 2006 to 2 November 2008, both days inclusive. No warrant was exercised during the period and exercise in full of these warrants would result in the issue of 124,810,561 additional China Vanguard Shares of HK$0.01 each.

During the financial year ended 30 June 2008, an additional of 16,900,000 China Vanguard Shares were issued due to the exercise of share options under the existing share option scheme; an additional of 2,262,173,906 China Vanguard Shares were issued on acquisition of Grand Promise as consideration; an additional of 20,023,192 China Vanguard Shares were issued on acquisition of then shareholder’s loan of Grand Promise on 11 April 2008; and 105,931 China Vanguard Shares were issued due to the conversion of the convertible bonds issued by the China Vanguard.

During the financial year ended 30 June 2009, an additional of 16,600 China Vanguard Shares were issued due to the exercise of warrants and the cancellation of 23,405,000 China Vanguard Shares due to repurchase of shares by China Vanguard.

During the four months ended 31 October 2008, an additional of 16,600 China Vanguard Shares were issued due to the exercise of warrants and the cancellation of 11,790,000 China Vanguard Shares due to repurchase of shares by China Vanguard.

During the four months ended 31 October 2009, there was no material change on the capital structure of China Vanguard.

Convertible Bonds

On 11 April 2008, upon completion of acquisition of Grand Promise, China Vanguard took up the convertible bonds with a principal amount of US$35 million (equivalent to approximately HK$273 million) previously issued by Grand Promise by the Deeds of Adherence. The principal amount of the convertible bonds shall accrete at a yield of 7% per annum, compounded semiannually. Unless previously redeemed, converted or purchased and cancelled, the convertible bonds will be redeemed at approximately 141.06% of their principal amount on 30 November 2012.

As of 31 October 2009, China Vanguard has redeemed part of the principal of the relevant convertible bonds, being approximately US$3,370,000 (equivalent to approximately HK$26,117,500) in the case of the Evolution convertible bond and approximately US$8,420,000 (equivalent to approximately HK$65,255,000) in the case of Liberty Harbor convertible bond. The redemption price is the price of principal amount to be redeemed plus a yield of 7% per annum, compounded semi-annually, on the amount redeemed, commencing on the date of the issuance of the bond and including the relevant redemption date subject to currency conversion in accordance with the terms of the relevant bond. China Vanguard and Grand Promise have been

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in negotiations with Liberty Harbor and Evolution with regards to the restructuring of the Grand Promise convertible bonds which resulted in a series of amendments and undertaking being entered into in order to give all parties adequate time to reach restructuring terms which are acceptable to all parties. The amended Grand Promise convertible bonds “Amended Grand Promise convertible bonds” have been amended as follows:

(a) The Grand Promise convertible bonds as amended by the First, Second, Third and Fourth Amendment Deeds

The net impact of the First, Second, Third and Fourth Amendment Deeds, was to push back the period during which Liberty Harbor and Evolution may require redemption of the outstanding principal amounts of the Grand Promise convertible bonds from “the period from 30 September 2009 to the date falling 15 business days thereafter (inclusive)” to “the period from 30 November 2009 to 13 January 2010 (inclusive)”. For details of each of the amendment deed, please refer to the announcements of China Vanguard dated 18 June 2009, 4 August 2009, 22 September 2009 and 30 October 2009 respectively.

(b) The Undertakings by China Vanguard and Grand Promise

In consideration of Liberty Harbor and Evolution entering into the various amendment deeds, China Vanguard and Grand Promise have executed in total 7 undertakings in favor of Liberty Harbor and Evolution pursuant to which, amongst other things:

(i) Grand Promise agreed that it would, on or prior to 13 January 2010, enter into definitive legally binding and enforceable documentation (“Bond Restructuring Documents”) required to implement the restructuring of all amounts outstanding under the Amended Grand Promise convertible bonds.
(ii) The withdrawals or transfers restrictions do not apply for working capital purposes or in the ordinary course of business of the relevant China Vanguard Group (provided such amounts shall not in aggregate exceed HK$3,000,000 per month) or for payment of the professional costs borne by China Vanguard.
(iii) The withdrawal restrictions previously applied in Aptus have been deleted entirely. The new withdrawal or transfers restriction do not apply for working capital purposes or in the ordinary course of business of Aptus (provided such amounts shall not in aggregate exceed HK$1,000,000 per month from the proceeds of sale assets by Aptus but subject to an automatic increase of HK$1,000,000 on the 30th day of each month succeeding October 2009) or for payment of the professional costs borne by Aptus.
(iv) China Vanguard and Grand Promise undertook certain restrictions with regards to the withdrawal or transfer from any bank account maintained or controlled by Aptus to the extent that following such withdrawal or transfer the funds standing to the credit of such bank accounts are less than the net proceeds (including deduction of any proceeds directly applied to repay debt of Aptus) of sale of any assets by Aptus.

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(v) Aptus shall not complete any transaction or combination of transactions that reduces China Vanguard’s indirect pro rata share of the total net cash directly held by Aptus, unless China Vanguard increases its own total net cash held immediately prior to completion of such transaction by an amount equal to or greater than the difference between the number of China Vanguard’s shares immediately prior to completion of such transaction and China Vanguard’s shares immediately after completion of such transaction.
(vi) The undertaking period commenced on 18 June 2009 and ends on the first to occur of (i) 13 January 2010 and (ii) the date on which China Vanguard, Grand Promise, Liberty Harbor and Evolution have executed the Bond Restructuring Documents.

For details of each of the undertaking, please refer to the announcements of China Vanguard dated 18 June 2009, 15 July 2009, 4 August 2009, 28 August 2009, 14 September 2009, 22 September 2009, 29 September 2009 and 30 October 2009 respectively.

Contingent liabilities

During the Review Period, the Remaining China Vanguard Group had no contingent liabilities.

Employee and Remuneration Policies

During the Review Period, the employee benefit expenses excluding directors’ remuneration of the Remaining China Vanguard Group for each of the financial years ended 30 June 2007, 2008 and 2009 and for the four months ended 31 October 2008 and 2009 were approximately HK$4,581,000, HK$7,995,000, HK$19,801,000, HK$5,741,000 and HK$7,343,000 respectively, which include salaries, allowances, benefits in kind and contribution to staff retirement schemes. Employee remuneration is determined by reference to market terms and the performance, qualification and experience of individual employees. In addition to basic salaries and provident fund contributions, the Remaining China Vanguard Group also offers medical benefits and training programs. Share options may be granted to employees based on performance evaluation in order to provide incentives and rewards.

Exposure to fluctuations in exchange rates and any related hedges

During the Review Period, the business activities of the Remaining China Vanguard Group are not exposed to material fluctuations in exchange rate except for the Remaining China Vanguard Group’s operations through its subsidiaries in the People’s Republic of China, which are subject to fluctuation in exchange rates between Renminbi and Hong Kong dollars.

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Material acquisition and disposal of subsidiaries

During the financial year ended 30 June 2007, the Remaining China Vanguard Group has completed the disposal of our 55% interest in Wuhu Bee & Bee Natural Food Company Limited and 100% interest in Zhuhai Free Trade Zone Bee & Bee Natural Food Company Limited. During the said year, the Remaining China Vanguard Group also disposed Guangzhou Latech Computer Technology Company Limited, Jinan Weita Technology Company Limited and La Cucina Italian (Macau) Limited to streamline the business of the Group.

During the financial year ended 30 June 2008, the Remaining China Vanguard Group completed the acquisition of the entire issued capital of Grand Promise and Best Delight Group Limited.

During the financial year ended 30 June 2009, there were disposals of a subsidiary of a jointly controlled entity – China Culture Development Video Music Culture Broadcasting Co., Limited which provided consultation and organising of karaoke related services and associated company – Shenzhen Bozone Technology Services Co., Ltd., which provided lottery related hardware and software systems.

During the four months ended 31 October 2008, there were disposals of a subsidiary of a jointly controlled entity – China Culture Development Video Music Culture Broadcasting Co., Limited which provided consultation and organising of karaoke related services and associated company – Shenzhen Bozone Technology Services Co., Ltd., which provided lottery related hardware and software systems.

During the four months ended 31 October 2009, there was no material acquisition or disposal of subsidiaries and affiliated companies.

Charges on Remaining China Vanguard Group’s assets

As at 30 June 2007, the Remaining China Vanguard Group has pledged its bank deposits of approximately HK$5,000,000 and leasehold property at net book value of approximately HK$5,834,000 to banks to secure the general banking facilities granted to the Remaining China Vanguard Group.

As at 30 June 2008, the Remaining China Vanguard Group has pledged all the issued and outstanding shares of Birdview Group Limited (a wholly-owned subsidiary of Grand Promise) together with all proceeds in favor of the holder(s) of the convertible bonds previously issued by Grand Promise. By the Deeds of Adherence, on completion of the acquisition of Grand Promise in April 2008, the convertible bonds were taken up by China Vanguard. As at 30 June 2008, the Remaining China Vanguard Group has pledged its bank deposits of approximately HK$5,033,000 to a bank to secure the general banking facilities granted to the Remaining China Vanguard Group.

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APPENDIX II

As at 30 June 2009, the Remaining China Vanguard Group has pledged all the issued and outstanding shares of Birdview Group Limited (a wholly-owned subsidiary of Grand Promise) together with all proceeds in favor of the holders of the convertible bonds previously issued by Grand Promise. By the Deeds of Adherence, on completion of the acquisition of Grand Promise in April 2008, the convertible bonds were taken up by China Vanguard. As at 30 June 2009, the Remaining China Vanguard Group has pledged its bank deposits of approximately HK$5,110,000 to a bank to secure the general banking facilities granted to the Remaining China Vanguard Group.

As at 31 October 2008, the Remaining China Vanguard Group has pledged all the issued and outstanding shares of Birdview Group Limited (a wholly-owned subsidiary of Grand Promise) together with all proceeds in favor of the holders of the convertible bonds previously issued by Grand Promise. By the Deeds of Adherence, on completion of the acquisition of Grand Promise in April 2008, the convertible bonds were taken up by China Vanguard. As at 31 October 2008, the Remaining China Vanguard Group has pledged its bank deposits of approximately HK$5,056,000 to a bank to secure the general banking facilities granted to the Remaining China Vanguard Group.

As at 31 October 2009, the Remaining China Vanguard Group has pledged all the issued and outstanding shares of Birdview Group Limited (a wholly-owned subsidiary of Grand Promise) together with all proceeds in favor of the holders of the convertible bonds previously issued by Grand Promise. By the Deeds of Adherence, on completion of the acquisition of Grand Promise in April 2008, the convertible bonds were taken up by China Vanguard. As at 31 October 2009, the Remaining China Vanguard Group has pledged its bank deposits of approximately HK$5,121,000 to a bank to secure the general banking facilities granted to the Remaining China Vanguard Group.

8. BUSINESS PROSPECTS

Trend of business of the China Vanguard Group

Upon completion of the disposals of the natural gas joint ventures, the China Vanguard Group’s principal activities consist of: (i) provision of the karaoke content management service system and license fee collection business; (ii) engaging in lottery-related businesses in the PRC; (iii) trading business via Aptus; and (iv) distribution of natural supplementary products and food related and other operations.

The attributable turnover from the karaoke content management service system operations increased by approximately 100 times from approximately HK$226,000 recorded for only approximately 3 months ended 30 June 2008 to approximately HK$22,889,000 recorded for the 12 months ended 30 June 2009, this was attributable to a full year’s result for year ended 30 June 2009 as compared to only approximately 3 months for the previous financial year as well as the karaoke content management service system operations gaining momentum in terms of set-top box installation and copyright fee collections.

The turnover from the lottery-related operations increased by approximately 20.0% from approximately HK$35,715,000 in the financial year ended 30 June 2008 to approximately HK$42,843,000 in the financial year ended 30 June 2009, this was mainly attributed to higher contributions from the lottery-related operations in Zhejiang province, the PRC.

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FINANCIAL INFORMATION ON THE CHINA VANGUARD GROUP

APPENDIX II

The turnover from the trading business decreased by approximately 53.8% from approximately HK$39,562,000 in the financial year ended 30 June 2008 to approximately HK$18,292,000 in the financial year ended 30 June 2009, due to the continuous increase in the price of consumer goods thus reducing margins and demand. Yet the trading business operations via Aptus will no longer be consolidated into the accounts of China Vanguard upon the completion of the Disposal.

Regarding the Grand Promise convertible bonds, the China Vanguard Group has been in negotiations with the bondholders with regards to the restructuring of the Grand Promise convertible bonds which resulted in a series of amendments and undertakings being entered into in order to give all parties adequate time to reach restructuring terms which are acceptable to all parties. For further details, please refer to the announcements dated 18 June 2009, 15 July 2009, 4 August 2009, 28 August 2009, 14 September 2009, 22 September 2009, 29 September 2009, 30 October 2009, 13 January 2010, 25 February 2010 and 31 March 2010 respectively.

Trading and financial prospects of the Enlarged China Vanguard Group

Upon completion of the Acquisition and the Disposal, the China Vanguard Group’s principal activity will be (i) provision of the karaoke content management service system and license fee collection business; (ii) engaging in lottery-related businesses in the PRC; (iii) distribution of natural supplementary products; and (iv) provision of spaces for private worship of the deceased ancestors by their descendants of a common ancestor or the members of a private institute or corporation in Hong Kong via the Target Group.

The China Vanguard Directors consider that China Vanguard’s growth momentum will be enhanced by diversifying into the new business. In view of the growing demand for provision of spaces for private worship of the deceased ancestors by their descendants of a common ancestor or the members of a private institute or corporation in Hong Kong, the China Vanguard Directors expect a stable revenue source from the newly acquired business. In view of the prospects relating to new business sector, China Vanguard believes that the new project will be a successful strategy for China Vanguard’s business.

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APPENDIX III FINANCIAL INFORMATION ON THE TARGET GROUP

1. ACCOUNTANT’S REPORT ON THE TARGET GROUP

==> picture [135 x 57] intentionally omitted <==

22 April 2010

The Board of Directors Aptus Holdings Limited Room 2201, 22nd Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

Dear Sirs,

We set out below our report on the financial information of Casdon Management Limited (“Casdon”) and its subsidiaries (collectively referred to as “Casdon Group”) including the consolidated statement of financial position and statement of financial position of Casdon as at 30 November 2009, consolidated statement of comprehensive income and consolidated statement of changes in equity for the period from 12 March 2009 (date of incorporation) to 30 November 2009 (the “Relevant Period”), and the notes thereto (the “Financial Information”) for inclusion in the joint circular dated 22 April 2010 issued by Aptus Holdings Limited (“Aptus”) and China Vanguard Group Ltd. (“China Vanguard”) in connection with the proposed acquisition of the entire equity interests in Casdon by Sea Marvel Limited, a wholly-owned subsidiary of Aptus (the “Proposed Acquisition”) (the “Circular”).

Casdon was incorporated in the British Virgin Islands (“BVI”) with limited liability on 12 March 2009. Casdon is principally engaged in investment holding.

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APPENDIX III FINANCIAL INFORMATION ON THE TARGET GROUP

As at the date of this report, the particulars of Casdon’s subsidiaries are as follows:

	Place and date		Effective
	of registration/	Issued	percentage
Name of subsidiary	incorporation	share capital	held by Casdon	Principal activities
Wealth Concept Holdings	BVI	US$1	100%	Investment holding
Limited	12 September 2007
(“Wealth Concept”)
Sharp Keen Investments	BVI	US$1	100%	Investment holding
Limited	3 November 2009
(“Sharp Keen”)
Keep Top Asia Pacific Limited	Hong Kong	HK$1	100%	Investment holding
(“Keep Top”)(Note)	12 November 2008
Start Well Corporation Limited	Hong Kong	HK$2	100%	Investment holding
(“Start Well”)	10 October 2007
Merit Capital Investment	Hong Kong	HK$2	100%	Investment holding
Limited (“Merit Capital”)	23 March 2009
Allied Effort Limited	Hong Kong	HK$100	95%	Project management
(“Allied Effort”)	17 December 2008
Fully Concept Limited	Hong Kong	HK$2	100%	Investment holding
(“Fully Concept”)	17 December 2008
Loyal Truth Corporation	Hong Kong	HK$100	90%	Properties holding
Limited (“Loyal Truth”)	10 October 2007
Blissful Year Limited	Hong Kong	HK$100	90%	Properties holding
(“Blissful”)	20 December 2007
882HK Limited (“882HK”)	Hong Kong	HK$100	90%	Properties holding
	20 September 2007
Cheerful Year Limited	Hong Kong	HK$100	90%	Properties holding
(“Cheerful”)	20 December 2007
Civic Limited (“Civic”)	Hong Kong	HK$198	90%	Properties holding
	20 December 2007

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FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX III

	Place and date		Effective
	of registration/	Issued	percentage
Name of subsidiary	incorporation	share capital	held by Casdon	Principal activities
Good Day Limited	Hong Kong	HK$100	90%	Properties holding
(“Good Day”)	20 December 2007
Hero Limited (“Hero”)	Hong Kong	HK$100	90%	Properties holding
	20 December 2007
Happy Dragon Limited	Hong Kong	HK$100	90%	Properties holding
(“Happy Dragon”)	3 December 2008
Fully Kingdom Limited	Hong Kong	HK$100	90%	Properties holding
(“Fully Kingdom”)	3 December 2008
Rich Wealthy Limited	Hong Kong	HK$100	90%	Properties holding
(“Rich Wealthy”)	3 December 2008
HK126 Limited (“HK126”)	Hong Kong	HK$100	90%	Properties holding
	2 May 2008

Note: On 1 February 2010, Casdon disposed of its 100% equity interest in Keep Top to a third party for a consideration of HK$1.

The financial year end date of Casdon and its subsidiaries is 30 June and 31 March respectively. The Financial Information has been prepared for the period ended 30 November 2009 as the sole director of Casdon considers financial result for Casdon for the period from 12 March 2009 (date of incorporation) to 30 June 2009 is insignificant.

No statutory audited financial statements have been prepared for Casdon for the period from 12 March 2009 (date of incorporation) to 30 November 2009, Wealth Concept for the period from 12 September 2007 (date of incorporation) to 31 March 2008 and year ended 31 March 2009 and Sharp Keen for the period from 3 November 2009 (date of incorporation) to 30 November 2009 since there are no statutory requirements for these entities to prepare the audited financial statements.

No statutory audited financial statements have been prepared for Keep Top for the period from 12 November 2008 (date of incorporation) to 31 March 2009, Merit Capital for the period from 23 March 2009 (date of incorporation) to 31 March 2009, Allied Effort and Fully Concept for the period from 17 December 2008 (date of incorporation) to 31 March 2009, Happy Dragon and Fully Kingdom and Rich Wealthy for the period from 3 December 2008 (date of incorporation) to 31 March 2009 since they were incorporated shortly before 30 November 2009. We have acted as the auditors of the remaining entities of Casdon Group.

For the purpose of this report, the sole director of Casdon has prepared the consolidated financial statements of Casdon Group for the Relevant Period in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) (the “Underlying Financial Statements”). We have carried out an independent audit on the Underlying Financial Statements in accordance with the Hong Kong Standards on Auditing issued by the HKICPA.

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APPENDIX III

FINANCIAL INFORMATION ON THE TARGET GROUP

The Financial Information set out in this report has been prepared by the sole director of Casdon based on the Underlying Financial Statements and in accordance with HKFRSs. No adjustments are considered necessary to adjust the Underlying Financial Statements for the Relevant Period for the preparation of the Financial Information and we consider it is appropriate for the purpose of preparing our report for inclusion in the Circular. We have examined the Financial Information and have carried out additional procedures as considered necessary in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountants” issued by the HKICPA.

The sole director of Casdon is responsible for the preparation of the Underlying Financial Statements and the Financial Information which give a true and fair view. It is fundamental that appropriate accounting policies are selected and applied consistently. The directors of Aptus are responsible for the contents of the Circular in which this report is included. It is our responsibility to form an independent opinion, based on our examination, on the Financial Information and to report our opinion to you.

OPINION

In our opinion, the Financial Information for the purpose of this report gives a true and fair view of the state of affairs of Casdon Group and Casdon as at 30 November 2009 and of the consolidated result of Casdon Group for the Relevant Period.

EMPHASIS OF MATTER – MATERIAL UNCERTAINTY REGARDING THE GOING CONCERN ASSUMPTION

Without qualifying our opinion, we draw attention to Note 2 to the Financial Information which indicates that Casdon Group and Casdon had a net current liability of approximately HK$147,940,000 and HK$123,768,000 and a capital deficiency of approximately HK$18,000 and HK$18,000 respectively as at 30 November 2009. This condition as disclosed in Note 2 to the Financial Information indicates the existence of material uncertainty which may cast significant doubt about Casdon Group and Casdon’s ability to continue as a going concern.

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APPENDIX III FINANCIAL INFORMATION ON THE TARGET GROUP

I. FINANCIAL INFORMATION

Consolidated Statement of Comprehensive Income

		Period from
		12 March
		2009 (date of
		incorporation) to
		30 November
		2009
	Notes	HK$’000
Turnover	8	–
Administrative expenses		(18)
Loss before taxation		(18)
Income tax expense	9	–
Loss for the period and total comprehensive loss
for the period	10	(18)
Attributable to:
Owner of Casdon		(18)
Minority interests		–
		(18)

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APPENDIX III FINANCIAL INFORMATION ON THE TARGET GROUP

Consolidated Statement of Financial Position

Notes Non-current asset Properties under development 11 Current liability Amount due to a holding company 12 Capital and reserve Share capital 13 Accumulated loss	At 30 November 2009 HK$’000 147,922 147,940 (18) – (18) (18)

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APPENDIX III FINANCIAL INFORMATION ON THE TARGET GROUP

Statement of Financial Position

Notes Non-current assets Properties under development 11 Investments in subsidiaries 15 Current liability Amount due to a holding company 12 Capital and reserve Share capital 13 Accumulated loss	At 30 November 2009 HK$’000 3,750 120,000 123,750 123,768 (18) – (18) (18)

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APPENDIX III FINANCIAL INFORMATION ON THE TARGET GROUP

Consolidated Statement of Changes in Equity

At 12 March 2009 (date of incorporation) Share issued on 8 April 2009 Loss for the period and total comprehensive loss for the period Acquisition of subsidiaries At 30 November 2009		Equity attributable to owner	of Casdon Total HK$’000 – – (18) – (18)	Minority interests HK$’000 – – – – –	Total HK$’000 – – (18) – (18)
		Share Accumulated capital loss HK$’000 HK$’000 – – – – – (18) – – – (18)

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APPENDIX III FINANCIAL INFORMATION ON THE TARGET GROUP

Notes to the Financial Information

1. GENERAL

Casdon was incorporated in the BVI with limited liability on 12 March 2009.

The registered office and principal place of business is situated at Sea Meadow House, Blackburne Highway, (P.O. Box 116), Road Town, Tortola, British Virgin Islands and Unit 607, Tower 1, Harbour Centre, 1 Hok Cheung Street, Hunghom, Kowloon, Hong Kong, respectively.

The principal activity of Casdon Group is properties holding.

The sole director of Casdon considers Red Rabbit Capital Limited, a company incorporated in the BVI to be the holding company of Casdon.

The Financial Information of the Relevant Period is presented in Hong Kong dollars (“HK$”), which is the same as the functional currency of Casdon Group.

Casdon Group had no cash transaction during the Relevant Period. Accordingly, no statement of cash flow has been prepared.

2. BASIS OF PREPARATION

The Financial Information has been prepared on a going concern basis because the holding company, Red Rabbit Capital Limited has agreed to unconditionally waive its rights to the payment of the amount due to holding company by Casdon Group and Casdon after the reporting period and the sole director of Casdon anticipates that Casdon Group and Casdon will generate positive cash flow from its business.

In addition, Aptus has agreed to provide financial support to Casdon Group and Casdon to enable it to meet its financial obligations as they fall due for the foreseeable future upon completion of the acquisition of entire equity interests in Casdon.

Should Casdon Group and Casdon be unable to continue in business as a going concern, adjustments might have to be made to provide for any further liabilities which might arise. These adjustments have not yet reflected in the Financial Information.

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

For the purpose of preparing and presenting the Financial Information during the Relevant Period, Casdon Group has applied all the new and revised Hong Kong Accounting Standards (“HKASs”), HKFRSs, amendments and interpretations (“INTs”) issued by the HKICPA that are effective for the accounting period beginning on 12 March 2009.

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FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX III

At the date of this report, the HKICPA has issued the following new and revised standards, amendments and INTs are not yet effective for the accounting period beginning on 12 March 2009. Casdon Group has not early adopted these new and revised standards, amendments and INTs.

HKFRSs (Amendments) Improvements to HKFRSs May 2008[1] HKFRSs (Amendments) Improvements to HKFRSs April 2009[2] HKAS 24 (Revised) Related Party Disclosures[3] HKAS 27 (Revised) Consolidated and Separate Financial Statements[4] HKAS 32 (Amendment) Classification of Right Issues[5] HKAS 39 (Amendment) Eligible Hedged Items[4] HKFRS 1 (Revised) First-time Adoption of Hong Kong Financial Reporting Standards[4] HKFRS 1 (Amendment) Additional Exemptions for First-time Adopters[6] HKFRS 1 (Amendment) Limited Exemption from Comparative HKFRS 7 Disclosures for First-time Adopters[7] HKFRS 2 (Amendment) Group Cash-Settled Share-based Payment Transactions[6] HKFRS 3 (Revised) Business Combinations[4] HKFRS 9 Financial Instruments[8] HK(IFRIC)-INT 14 (Amendment) Prepayments of a Minimum Funding Requirements[3] HK(IFRIC)-INT 17 Distributions of Non-cash Assets to Owners[4] HK(IFRIC)-INT 19 Extinguishing Financial Liabilities with Equity Instruments[7]

1 Amendments to HKFRS 5, effective for annual periods beginning on or after 1 July 2009
2 Effective for annual periods beginning on or after 1 July 2009 and 1 January 2010, as appropriate
3 Effective for annual periods beginning on or after 1 January 2011
4 Effective for annual periods beginning on or after 1 July 2009
5 Effective for annual periods beginning on or after 1 February 2010
6 Effective for annual periods beginning on or after 1 January 2010
7 Effective for annual periods beginning on or after 1 July 2010
8 Effective for annual periods beginning on or after 1 January 2013

The sole director of Casdon anticipates that the application of these new and revised standards, amendments or INTs will have no material impact on the results and the financial position of Casdon Group.

4. SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. These policies have been consistently applied to the Relevant Period and are materially consistent with the accounting policies adopted by Casdon.

The Financial Information has been prepared on the historical cost basis as explained in the accounting policies set out below.

(a) Basis of consolidation

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

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

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

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

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

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APPENDIX III FINANCIAL INFORMATION ON THE TARGET GROUP

(b) Investments in subsidiaries

Investments in subsidiaries are included in Casdon’s statement of financial position at cost less any identified impairment loss.

(c) Properties under development

Properties under development are stated at cost less any identified impairment losses. The cost of properties under development comprises land costs, construction costs and other directly attributable expenses incurred during the development period.

(d) Impairment losses on tangible assets

At end of the Relevant Period, Casdon Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

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

(e) Financial instruments

Financial liabilities are recognised on the consolidated statement of financial position and statement of financial position of Casdon when a group entity becomes a party to the contractual provisions of the instrument. Financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial liabilities are added to or deducted from the fair value of the financial liabilities, as appropriate, on initial recognition.

Financial liabilities and equity

Financial liabilities and equity instruments issued by Casdon Group 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 Casdon Group after deducting all of its liabilities. Casdon Group’s financial liability is classified as other financial liability.

Effective interest method

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

Interest expense is recognised on an effective interest basis.

Other financial liability

Other financial liability including amount due to a holding company is subsequently measured at amortised cost, using the effective interest rate method.

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FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX III

Equity instruments

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

Derecognition

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

(f) Taxation

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

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

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the consolidated statement of financial position and the corresponding tax base 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 the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax 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 profit or loss.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of Casdon Group’s accounting policies, which are described in Note 4, the sole director of Casdon is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

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

The following is the critical judgment, apart from those involving estimations, that the sole director of Casdon has made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in Financial Information.

Going concern basis

The assessment of the going concern assumption involves making a judgement by the sole director of Casdon, at a particular point of time, about the future outcome of events or conditions which are inherently uncertain. The sole director of Casdon considers that Casdon Group and Casdon have the ability to continue as a going concern.

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

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FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX III

Estimated impairment of properties under development

Casdon Group evaluates whether properties under development have suffered any impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The recoverable amounts of cash-generating units represent the higher of the asset’s fair value less costs to sell or its value-in-use. The calculations of fair value less costs to sell or value-in-use require the use of estimates.

6. CAPITAL RISK MANAGEMENT

Casdon Group manages its capital to ensure that entities in Casdon Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.

The capital structure of Casdon Group consists of equity attributable to owner of Casdon, comprising issued share capital and accumulated loss. The sole director of Casdon reviews the capital structure on a regular basis. As a part of this review, the sole director of Casdon considers the cost of capital and the risks associated, and takes appropriate actions to adjust Casdon Group’s capital structure.

7. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

	At 30 November	2009
	Casdon Group	Casdon
	HK$’000	HK$’000
Financial liabilities at amortised cost	147,940	123,768

(b) Financial risk management objectives and policies

Casdon Group’s and Casdon’s major financial instrument represents amount due to a holding company which is disclosed in Note 12. The risk associated with the financial instrument includes liquidity risk. The policies on how to mitigate the risk are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Liquidity risk

Casdon Group and Casdon had net current liability of approximately HK$147,940,000 and HK$123,768,000, respectively as at 30 November 2009. The liquidity of Casdon Group and Casdon is primarily dependent on the anticipated positive cash flow generated from its business and from Aptus upon completion of the acquisition of entire equity interests in Casdon. Details of which are set out in Note 2.

(c) Fair value

The fair value of other financial liability is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instrument.

The sole director of Casdon considers that the carrying amount of financial liability recorded at amortised cost in the Financial Information approximate to the fair value due to its short-term maturity.

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FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX III

8. TURNOVER

Casdon Group did not earn any income during the Relevant Period.

9. INCOME TAX EXPENSES

The companies established in the BVI are incorporated under the International Business Company Act of the BVI and are exempt from BVI income taxes.

No provision for Hong Kong Profits Tax has been made as Casdon Group did not generate any assessable profits in Hong Kong in the Relevant Period.

The income tax expense for the period can be reconciled to the loss before taxation per the consolidated statement of comprehensive income as follows:

	Period from 12 March	Period from 12 March
		2009 (date of
	incorporation) to
	30	November 2009
		HK$’000
Loss before taxation		(18)

Tax at the domestic income tax rate of 16.5%		(3)
Tax effect of expenses not deductible for tax purpose		3
Income tax expense for the period		–

No provision for deferred taxation has been recognised in the Financial Information as at 30 November 2009.

10. LOSS FOR THE PERIOD AND TOTAL COMPREHENSIVE LOSS FOR THE PERIOD

	Period from
	12 March
	2009 (date of
	incorporation) to
	30 November
	2009
	HK$’000
Loss for the period and total comprehensive loss for the period
has been arrived at after charging:
Director’s remuneration	–
Auditors’ remuneration	–

During the Relevant Period, no director waived any emoluments and no emoluments were paid to directors as an inducement to join or upon joining Casdon Group or as compensation for loss of office.

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FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX III

11. PROPERTIES UNDER DEVELOPMENT

Casdon Group

CARRYING AMOUNT Acquired on acquisition of subsidiaries Addition during the period At 30 November 2009 Casdon CARRYING AMOUNT Addition during the period and at 30 November 2009	HK$’000 144,172 3,750
	147,922

	HK$’000 3,750

Casdon Group’s and Casdon’s interests in properties under development were held in Hong Kong under mediumterm leases.

12. AMOUNT DUE TO A HOLDING COMPANY

The amount due to Red Rabbit Capital Limited, a holding company of Casdon, is unsecured, non-interest bearing and repayable on demand.

Subsequent to the end of the reporting period, the holding company agrees to unconditionally waive its rights to the payment of the amount due by Casdon Group and Casdon.

13. SHARE CAPITAL

Ordinary share of USD1 each: Authorised: At 12 March 2009 (date of incorporation) and 30 November 2009 Issued and fully paid: At 12 March 2009 (date of incorporation) Issue of shares At 30 November 2009	Number of shares 50,000 – 1 1	Amount US$’000 50 – – –	Amount for presentation HK$’000 – –
			–

Casdon was incorporated in the BVI on 12 March 2009 with an authorised share capital of US$50,000 divided into 50,000 ordinary shares of US$1 each. On 8 April 2009, 1 ordinary share of US$1 each was issued at par as initial share capital.

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APPENDIX III FINANCIAL INFORMATION ON THE TARGET GROUP

14. ACQUISITION OF SUBSIDIARIES

Acquisition of assets and liabilities through acquisition of subsidiaries

On 24 November 2009, Casdon acquired the entire equity interests in Wealth Concept and Keep Top at total consideration of HK$120,000,000. The acquisition is accounted as acquisition of assets and related liabilities.

Details of the net assets acquired are summarised below:

Net assets acquired Properties under development Amount due to holding company Total consideration Total consideration satisfied by: Amount due to a holding company	HK$’000 144,172 (24,172) 120,000 120,000

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APPENDIX III

FINANCIAL INFORMATION ON THE TARGET GROUP

15. INVESTMENTS IN SUBSIDIARIES

Unlisted Shares, at cost

At 30 November 2009 HK$’000 120,000

At 30 November 2009, Casdon had interests in the following subsidiaries:

	Place of		Nominal Value	Effective
	incorporation	Class of	of paid-up	percentage
Name of subsidiary	and operation	shares held	share capital	held by Casdon	Principal activities
Wealth Concept	BVI	Ordinary shares	US$1	100%	Investment holding
Sharp Keen	BVI	Ordinary shares	US$1	100%	Investment holding
Keep Top	Hong Kong	Ordinary shares	HK$1	100%	Investment holding
Start Well	Hong Kong	Ordinary shares	HK$2	100%	Investment holding
Merit Capital	Hong Kong	Ordinary shares	HK$2	100%	Investment holding
Allied Effort	Hong Kong	Ordinary shares	HK$100	95%	Project management
Fully Concept	Hong Kong	Ordinary shares	HK$2	100%	Investment holding
Loyal Truth	Hong Kong	Ordinary shares	HK$100	90%	Properties holding
Blissful	Hong Kong	Ordinary shares	HK$100	90%	Properties holding
882HK	Hong Kong	Ordinary shares	HK$100	90%	Properties holding
Cheerful	Hong Kong	Ordinary shares	HK$100	90%	Properties holding
Civic	Hong Kong	Ordinary shares	HK$198	90%	Properties holding
Good Day	Hong Kong	Ordinary shares	HK$100	90%	Properties holding
Hero	Hong Kong	Ordinary shares	HK$100	90%	Properties holding
Happy Dragon	Hong Kong	Ordinary shares	HK$100	90%	Properties holding
Fully Kingdom	Hong Kong	Ordinary shares	HK$100	90%	Properties holding
Rich Wealthy	Hong Kong	Ordinary shares	HK$100	90%	Properties holding
HK126	Hong Kong	Ordinary shares	HK$100	90%	Properties holding

None of the subsidiaries had any debt securities outstanding as at the end of reporting period or at any time during the Relevant Period.

III – 17

FINANCIAL INFORMATION ON THE TARGET GROUP

APPENDIX III

16. CAPITAL COMMITMENTS

Casdon Group and Casdon

	At
	30 November
	2009
	HK$’000
Construction commitments contracted for but not provided in
the Financial Information	41,250

17. RELATED PARTY TRANSACTIONS

(a) The balance with holding company at end of the reporting period is disclosed in Note 12.
(b) Compensation of key management personnel

During the Relevant Period, Mr. Kong Lung Cheung, the sole director of Casdon, considers he is the only key management personnel of Casdon.

No emolument was paid or payable to the sole director of Casdon during the Relevant Period.

II. EVENTS AFTER THE REPORTING PERIOD

1. Non-adjusting events after the reporting period

(a) After the end of the reporting period, the holding company, Red Rabbit Capital Limited, agreed to unconditionally waive its rights to the payment of the amount due to holding company by Casdon Group and Casdon.
(b) On 1 February 2010, Casdon disposed of its 100% equity interest in Keep Top to a third party for a consideration of HK$1 and the loss on disposal was immaterial.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of Casdon Group and Casdon have been prepared in respect of any period subsequent to 30 November 2009.

Yours faithfully,

SHINEWING (HK) CPA Limited

Certified Public Accountants

Ip Yu Chak

Practising Certificate Number: P04798

Hong Kong

III – 18

APPENDIX III FINANCIAL INFORMATION ON THE TARGET GROUP

2. MANAGEMENT DISCUSSION AND ANALYSIS

The Target Company is incorporated on 12 March 2009 in the British Virgin Islands and the Target Group plans to operate and manage certain properties that provide storage of personal properties of ancestors in Hong Kong. The Target Group has not commenced any operation and it will be engaged in provision of lawful spaces as shrine for private worship of the deceased ancestors by their descendants of a common ancestor or the members of a private institute or corporation in Hong Kong.

The financial information of the Target Group was prepared in accordance with HKFRS for the period from 12 March 2009 (date of incorporation of the Target) to 30 November 2009, which is set out in this Appendix.

Set out below is the management discussion and analysis on the Target Group for the period from 12 March 2009 (date of incorporation of the Target) to 30 November 2009. The financial data in respect of the Target Group is derived from the accountants’ report on the Target Group.

Operating Results

During the period from 12 March 2009 (date of incorporation of the Target) to 30 November 2009, the Target Group reported nil turnover and a loss for the period of approximately HK$18,000. The loss was solely attributable to the consolidated administrative expenses of the Target Group during the period.

Capital Resources and Liquidity

During the period from 12 March 2009 (date of incorporation of the Target) to 30 November 2009, the Target Group reported an amount due to a holding company of approximately HK$147,940,000. The Target Group also has a capital commitment of approximately HK$41.25 million.

Contingent liabilities

During the period from 12 March 2009 (date of incorporation of the Target) to 30 November 2009, the Target Group had no contingent liabilities.

Material acquisition and disposal of subsidiaries

During the period from 12 March 2009 (date of incorporation of the Target) to 30 November 2009, the Target Group has acquired the entire equity interest in Wealth Concept Holding Limited and Keep Top Asia Pacific Limited at a consideration of HK$120,000,000.

Charges on Target Group’s assets

During the period from 12 March 2009 (date of incorporation of the Target) to 30 November 2009, the Target Group has no charges on the Target Group’s assets.

III – 19

APPENDIX III FINANCIAL INFORMATION ON THE TARGET GROUP

EMPLOYEES, REMUNERATION POLICIES AND SHARE OPTION SCHEME

As at 30 November 2009, the Target company had 1 management personnel as the sole director of the Target. During the period from 12 March 2009 to 30 November 2009, no emolument was paid or payable to the sole director of the Target.

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND ANY RELATED HEDGES

The business activities of the Target Group are not exposed to material fluctuations in exchange rate.

FUTURE PLANS FOR MATERIAL INVESTMENTS OR CAPITAL ASSETS

As at 30 November 2009, the Target Group has construction commitments contracted in the amount of approximately HK$41,250,000 for refurbishing the old houses as shrine for providing the storage space of personal properties of ancestors and the related business and services. The old houses are planned to comprise 69,000 storage units will completed by the end of December 2010. The total capital expenditure for the aforesaid construction and refurbishment is estimated to be not more than HK$45,000,000.

III – 20

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED APTUS GROUP

APPENDIX IV

A. INTRODUCTION

Pursuant to the sale and purchase agreement as set out in the Circular, Aptus Holdings Limited (the “Aptus”, together with its subsidiaries, (hereinafter collectively referred to as the “Aptus Group”) has conditionally agreed to acquire 100% of the equity interest in Casdon Management Limited (the “Target”), and its subsidiaries (hereafter collectively referred to as the “Target Group”) (together with the Group, hereinafter collectively referred to as the “Enlarged Group”) (the ”Acquisition”) at the consideration of approximately HK$1,085,000,000, which shall be settled in the following manner: (i) cash of HK$85,000,000; (ii) the issuance of convertible bonds of HK$850,000,000; (iii) the issuance of secured promissory note of HK$20,000,000; and (iv) the issuance of unsecured promissory note of HK$130,000,000.

The estimated consideration for the Acquisition was determined by reference to the market value of the business of the Target Group as at 28 February 2010 of approximately HK$1,337,000,000 valued by Castores Magi Asia Limited.

The unaudited pro forma financial information of the Enlarged Group (the “Unaudited Pro Forma Financial information”) has been prepared based on the audited consolidated statements of comprehensive income and cash flows (formerly known as the “consolidated income statement” and “consolidated cash flow statement”, respectively) of the Group for the four months ended 31 October 2009 and the audited consolidated statement of financial position (formerly known as the “consolidated balance sheet”) of the Group as at 31 October 2009 as set out in Appendix I to this joint circular and the audited financial information of Target Group as set out in the accountants’ reports in Appendix III to this joint circular, respectively, after giving effect to the pro forma adjustments described in the accompanying notes. Narrative descriptions of the pro forma adjustments that are (i) directly attributable to the transactions; and (ii) factually supportable, are set out in the accompanying notes.

The Unaudited Pro Forma Financial Information is prepared by the directors based on a number of assumptions, estimates, uncertainties and currently available information, and is provided for illustrative purposes of the effect on (i) the financial position of the Enlarged Group as if the Acquisition had been completed on 31 October 2009; (ii) the financial performance and cash flow position of the Enlarged Group as if the Acquisition had been completed on 1 July 2009. Accordingly, as a result of the uncertain nature of the accompanying Unaudited Pro Forma Financial Information, it may not give a true picture of the actual financial position and result of the Enlarged Group that would have been attained. Furthermore, the Unaudited Pro Forma Financial Information does not purport to predict the Enlarged Group’s future results of operations, financial position or cash flows.

IV – 1

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED APTUS GROUP

APPENDIX IV

The Unaudited Pro Forma Financial Information should be read in conjunction with the audited financial information of the Group for the four months ended 31 October 2009 as set out in Appendix IV to this joint circular and the audited financial information of Target Group for the period from 12 March 2009 (date of incorporation) to 30 November 2009 as set out in Appendix III to this joint circular, and other financial information included elsewhere in this circular.

In addition, for the purpose of this Unaudited Pro Forma Financial Information, in the opinion of the Directors, the Target Group’s fair value of the assets and liabilities being acquired is subject to changes upon completion of the proposed Acquisition because the fair value of the Target Group’ s assets and liabilities being acquired shall be assessed on the date of Completion. Since this Unaudited Pro Forma Financial Information is prepared solely for illustrative purposes, the possible changes in fair value of the assets and liabilities of the Target Group being acquired were not reflected in the Unaudited Pro Forma Financial Information.

IV – 2

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED APTUS GROUP

APPENDIX IV

B. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE ENLARGED GROUP

31 Non-current assets Property, plant and equipment Property under development Goodwill Current assets Trade and other receivables and prepayments Bank balances and cash Current liabilities Accounts payables, accrued liabilities and other payables Tax liabilities Bank and other borrowings Convertible bonds Net current assets/(liabilities) Total assets less current liabilities Capital and reserves Share capital Reserve Equity attributable to Equity holders of the Company Non-controlling interests Non-current liabilities Bank and other borrowings Convertible bonds	The Group Target Group as at as at October 2009 30 November 2009 HK$’000 HK$’000 (Note 1) (Note 2) 29 – – 147,922 – – 29 147,922 437,256 – 3,178 – 440,434 – 13,692 147,940 16,654 – 37,976 – 314,263 – 382,585 147,940 57,849 (147,940) 57,878 (18) 17,815 – 25,071 (18) 42,886 (18) 14,992 – 57,878 (18) – – – – 57,878 (18)	Pro-forma Pro-forma combined adjustments HK$’000 HK$’000 Note 29 147,922 – 937,078 3 & 4 147,951 437,256 3,178 (85,000) 5 440,434 161,632 (144,940) 4 & 6 16,654 37,976 314,263 530,525 (90,091) 57,860 17,815 25,053 212,735 4, 5 & 6 42,868 14,992 57,860 – 150,000 5 – 634,283 5 57,860	Pro-forma balances HK$’000 29 147,922 937,078
			1,085,029
			437,256 (81,822)
			355,434 16,692 16,654 37,976 314,263
			385,585
			(30,151)
			1,054,878

			17,815 237,788
			255,603 14,992
			270,595 150,000 634,283
			1,054,878

IV – 3

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED APTUS GROUP

C. UNAUDITED PRO FORMA STATEMENT OF COMPREHENSIVE INCOME OF THE ENLARGED GROUP

Target Group
for the period
The Group
from 12 March
for the four
2009 (date of
months ended
incorporation) to
Pro-forma
31 October 2009
30 November 2009
adjustments
HK$’000
HK$’000
HK$’000
(Note 1)
(Note 2)
(Note 7)
Continuing operations
Revenue
3,073
–
Cost of sales
(3,065)
–
Gross profit
8
–
Other revenue
–
–
Administrative expenses
(6,372)
(18)
Finance costs
(11,918)
–
(13,071)
Loss before taxation
(18,282)
(18)
Income tax expenses
–
–
Loss for the period from
continuing operation
(18,282)
(18)
Discontinued operations
Profit for the period from
discontinued operations
180,875
–
Profit/(loss) for the period
162,593
(18)
Attributable to:
Equity holders of the Company
Continuing operations
(18,201)
(18)
(13,071)
Discontinued operations
180,875
–
162,674
(18)
Non-controlling interests
Continuing operations
(81)
–
Discontinued operations
–
–
162,593
(18)

Pro-forma
balances
HK$’000
3,073
(3,065)
8
–
(6,390)
(24,989)
(31,371)
–
(31,371)
180,875
149,504
(31,290)
180,875
149,585
(81)
–
149,504

IV – 4

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED APTUS GROUP

APPENDIX IV

D. UNAUDITED PRO FORMA STATEMENT OF CASH FLOW OF THE ENLARGED GROUP

Target Group
for the period
The Group
from 12 March
for the four
2009 (date of
months ended
incorporation) to
Pro-forma
31 October 2009
30 November 2009
adjustment
HK$'000
HK$'000
HK$'000
(Note 1)
(Note 8)
(Note 7)
OPERATING ACTIVITIES
Profit/(loss) before income tax
Continuing operations
(18,282)
–
(13,071)
Discontinued operations
197,694
–
179,412
–
Adjustment for:
Finance costs
12,933
–
13,071
Depreciation of property, plant
and equipment
16
–
Gain on disposal of jointly
controlled entities
(197,907)
–
Operating cash flows before
movements in working capital
(5,546)
–
Decrease in trade and other
receivables and prepayment
944
–
Increase in trade payables,
accrued liabilities and
other payables
5,238
–
Cash from operations
636
–
NET CASH FROM OPERATING
ACTIVITIES
636
–

Pro-forma
balances
HK$'000
(31,353)
197,694
166,341
26,004
16
(197,907)
(5,546)
944
5,238
636
636

IV – 5

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED APTUS GROUP

APPENDIX IV

Target Group
for the period
The Group
from 12 March
for the four
2009 (date of
months ended
incorporation) to
31 October 2009 30 November 2009
HK$'000
HK$'000
(Note 1)
(Note 8)
INVESTING ACTIVITIES
Cash outflow from disposal of jointly
controlled entities
(39,297)
–
NET CASH (USED IN) INVESTING
ACTIVITIES
(39,297)
–
FINANCING ACTIVITIES
Interest paid
(1,015)
–
Issue of shares
1,943
–
NET CASH FROM FINANCING
ACTIVITIES
928
–
NET DECREASE IN CASH AND
CASH EQUIVALENTS
(37,733)
–
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE YEAR
40,850
–
Effect of foreign exchange rate changes
61
–
CASH AND CASH EQUIVALENTS AT END
OF THE YEAR,
represented by
Bank balances and cash
3,178
–

Pro-forma
balances
HK$'000
(39,297)
(39,297)
(1,015)
1,943
928
(37,733)
40,850
61
3,178

Notes:

The balances are extracted from the audited financial information of the Group for the period ended 31 October 2009 as set out in Appendix I of this circular.
The balances are extracted from the audited financial information of Target Group as set out in Appendix III to this circular.

IV – 6

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED APTUS GROUP

APPENDIX IV

Under Hong Kong Financial Reporting Standard 3 Business Combinations issued by the Hong Kong Institute of Certified Public Accountants (the ‘HKICPA”), the Group apply the purchase method to account for the acquisition of the Target Group in the consolidated financial statements of the Group, and the individual assets and liabilities of the Target Group acquired by the Group are adjusted to fair values at 30 November 2009 in preparation for the unaudited pro forma statement of financial position of the Enlarged Group.

For the purpose of the unaudited pro forma statement of financial position of the Enlarged Group, the Directors of the Company assumed the fair values of the assets and liabilities of Target Group as at 30 November 2009 to be their respective carrying values.

The goodwill arising from the Acquisition is calculated as follows:

Consideration_(Note 5) Share of fair value of net assets of the Target Group acquired(Note 4)_ Goodwill	HK$’000 1,085,000 (147,922)
	937,078

The interest in fair value of net assets of the Target group acquired by the Group is calculated a follows :

Net liabilities attributable to equity holder of Target Group Add: Waive of amount due to shareholder of Target Group of approximately HK$147,940,000 on the date of completion The Group’s interest in fair value of net assets of the Target Group	HK$’000 (18) 147,940
	147,922

Amount due to shareholder of Target Group of approximately HK$147,940,000 will be waived on the date of completion of Acquisition.

In accordance with the Sale and Purchase Agreement, the Consideration for the proposed Acquisition is HK$1,085,000,000, satisfied by the following:

Cash Secured promissory note Unsecured promissory note Issuance of convertible bonds by the Company	HK$’000 85,000 20,000 130,000 850,000
	1,085,000

The convertible bonds to be issued by the Company is initial recognized into liability and equity component in accordance with Hong Kong Accounting Standard (“HKAS”) 39 Financial Instruments: Recognition and Measurement issued by the HKICPA. In initial recognition of the convertible bonds, 5% discount rate was used.

Principal repaid in sixth years (Discount at 5% per annum) Liability component Equity component Total proceeds from issuance of convertible bonds	HK$’000 634,283

	634,283 215,717
	850,000

IV – 7

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED APTUS GROUP

APPENDIX IV

Legal and professional fee of approximately HK$3 million has been accrued in respect of the Acquisition.
The adjustment represents the imputed interest expenses on the Convertible Bonds and the Promissory Notes mentioned in Note 5 issued as the consideration for the Acquisition, assuming effective interest rates of 5% per annum, as if they were issued on 1 July 2009. This unaudited pro forma adjustment will have continuing income statement effect to the Enlarged Group, and the actual amount will vary according to the timing the Convertible Bonds and Promissory Notes being converted and the applicable effective interest rates.
(a) As the Target Group does not operate a bank account or cash account or hold any cash equivalents and has had no cash transactions during the period. Accordingly, such presentation of statement of cash flows would provide no additional useful information in preparing the unaudited pro-form consolidated statement of cash flow of the enlarged group for the period ended 31 October 2009.
(b) Cash consideration of HK$85 million is paid for the Acquisition, no adjustments should be made by considering that there has no impact on the pro-forma consolidated statement of cash flows, as the Acquisition had been completed on 1 July 2009.

IV – 8

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED APTUS GROUP

APPENDIX IV

==> picture [256 x 78] intentionally omitted <==

==> picture [122 x 44] intentionally omitted <==

22 April 2010

The Directors Aptus Holdings Limited Room 2201, 22/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong

Dear Sirs,

We report on the unaudited pro forma financial information of Aptus Holdings Limited (the “Aptus”) and its subsidiaries (hereinafter collectively referred to as the “Aptus Group”), which has been prepared by the directors of Aptus for illustrative purposes only, to provide information about how the proposed acquisition of the 100% equity interest in Casdon Management Limited (the “Target Company”) and its subsidiaries (hereafter collectively referred to as the “Target Group”) (together with the Aptus Group, hereinafter collectively referred to as (the “Enlarged Group”), might have affected the financial information presented therein, for inclusion in Appendix IV of the circular dated 22 April 2010 (the “Circular”). The basis of preparation of the Unaudited Pro Forma Financial Information is set out in Appendix IV to the Circular.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND REPORTING ACCOUNTANTS

It is solely the responsibility of the directors of Aptus to prepare the Unaudited Pro Forma Financial Information in accordance with Rule 7.31 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

It is our responsibility to form an opinion, as required by Rule 7.31(7) of the GEM Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

BASIS OF OPINION

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

IV – 9

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED APTUS GROUP

APPENDIX IV

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 Aptus on the basis stated, that such basis is consistent with the accounting policies of the Aptus Group and that the adjustments are appropriate for the purpose of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 7.31(1) of the GEM Listing Rules.

Our work did not constitute an audit or review made in accordance with Hong Kong Standards on Auditing or Hong Kong Standards on Review Engagements issued by the HKICPA, and accordingly, we do not express any such audit or review assurance on the Unaudited Pro Forma Financial Information.

The Unaudited Pro Forma Financial Information had been prepared for illustrative purpose only, based on the judgements and assumptions of the directors of Aptus, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in future and may not be indicative of :

the financial position of the Aptus Group as at 31 October 2009 had the acquisition of the Target Group actually been completed on that date or any future date; nor
the results of operations and cash flows of the Aptus Group for the four months ended 31 October 2009 had the acquisition of the Target Group actually been completed on 1 July 2009 or any future periods.

OPINION

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of Aptus on the basis stated;
(b) such basis is consistent with the accounting policies of the Aptus Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 7.31(1) of the GEM Listing Rules..

Yours faithfully,

W.H. Tang & Partners CPA Limited

Certified Public Accountants Hong Kong

TANG Wai Hung

Practising Certificate Number P03525

IV – 10

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED CHINA VANGUARD GROUP

APPENDIX V

A. INTRODUCTION

Pursuant to the sale and purchase agreement as set out in the Circular, China Vanguard Group Limited (the “Company”), together with its subsidiaries, (hereinafter collectively referred to as the “CVG Group”) has: (a) conditionally agreed to acquire 100% of the equity interest in Casdon Management Limited (the “Target”), and its subsidiaries (hereafter collectively referred to as the “Target Group”) (together with the Group, hereinafter collectively referred to as the “Enlarged Group”) (the ”Acquisition”) at the consideration of approximately HK$1,085,000,000, which shall be settled in the following manner: (i) cash of HK$85,000,000; (ii) the issuance of convertible bonds of HK$850,000,000 of Aptus Holdings Limited; (iii) the issuance of secured promissory note of HK$20,000,000; and (iv) the issuance of unsecured promissory note of HK$130,000,000, (b) disposal of equity interest in Aptus Holdings Limited by potential dilution in assuming full conversion of the convertible bonds of HK$850,000,000 at the initial conversion price.

The unaudited pro forma financial information of the Enlarged Group (the “Unaudited Pro Forma Financial Information”) has been prepared based on the audited consolidated statements of comprehensive income and cash flows (formerly known as the “consolidated income statement” and “consolidated cash flow statement”, respectively) of the CVG Group for the four months ended 31 October 2009 and the audited consolidated statement of financial position (formerly known as the “consolidated balance sheet”) of the CVG Group as at 31 October 2009 as set out in Appendix II to this joint circular and the audited financial information of Target Group as set out in the accountants’ reports in Appendix III to this joint circular, respectively, after giving effect to the pro forma adjustments described in the accompanying notes. Narrative descriptions of the pro forma adjustments that are (i) directly attributable to the transactions; and (ii) factually supportable, are set out in the accompanying notes.

The Unaudited Pro Forma Financial Information is prepared by the directors based on a number of assumptions, estimates, uncertainties and currently available information, and is provided for illustrative purposes of the effect on (i) the financial position of the Enlarged Group as if the Acquisition had been completed on 31 October 2009; (ii) the financial performance and cash flow position of the Enlarged Group as if the Acquisition had been completed on 1 July 2009. Accordingly, as a result of the uncertain nature of the accompanying Unaudited Pro Forma Financial Information, it may not give a true picture of the actual financial position and result of the Enlarged Group that would have been attained. Furthermore, the Unaudited Pro Forma Financial Information dose not purport to predict the Enlarged Group’s future results of operations, financial position or cash flows.

The Unaudited Pro Forma Financial Information should be read in conjunction with the audited financial information of the CVG Group for the four months ended 31 October 2009 as set out in Appendix V to this joint circular and the audited financial information of Target Group for the period from 12 March 2009 (date of incorporation) to 30 November 2009 as set out in Appendix III to this joint circular, and other financial information included elsewhere in this joint circular.

V – 1

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED CHINA VANGUARD GROUP

APPENDIX V

In addition, for the purpose of this Unaudited Pro Forma Financial Information, in the opinion of the Directors, the Target Group’s fair value of the assets and liabilities being acquired is subject to changes upon completion of the proposed Acquisition because the fair value of the Target Group’s assets and liabilities being acquired shall be assessed on the date of completion. Since this Unaudited Pro Forma Financial Information is prepared solely for illustrative purposes, the possible changes in fair value of the assets and liabilities of the Target Group being acquired were not reflected in the Unaudited Pro Forma Financial Information.

B. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE ENLARGED GROUP

Non-current assets Property, plant and equipment Goodwill Other intangible assets Available-for-sale financial asset Property under development Current assets Inventories Trade and other receivables and prepayments Pledged bank deposits Bank balances and cash Current liabilities Trade and other payables Tax liabilities Derivative financial instruments Bank and other borrowings - due within one year Convertible bonds	The Group as at 31 October 2009 HK$’000 (Note 1) 51,297 2,119,796 9,598 63,780 – 2,244,471 2,416 464,011 5,121 100,148 571,696 63,432 17,290 36,996 37,976 314,263 469,957	Target Group as at 30 November 2009 HK$’000 (Note 2) – – – – 147,922 147,922 – – – – – 147,940 – – – – 147,940	Pro-forma Pro-forma Pro-forma combined adjustments adjustments HK$’000 HK$’000 HK$’000 (Note 3, 4, 5) (Note 6) 51,297 (29) 2,119,796 937,078 (937,078) 9,598 63,780 19,824 147,922 (147,922) 2,392,393 2,416 464,011 (437,256) 5,121 100,148 (85,000) 81,822 571,696 211,372 (144,940) (16,692) 17,290 (16,654) 36,996 37,976 (37,976) 314,263 (314,263) 617,897	Pro-forma balances HK$’000 51,268 2,119,796 9,598 83,604 –
				2,264,266
				2,416 26,755 5,121 96,970
				131,262
				49,740 636 36,996 – –
				87,372

V – 2

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED CHINA VANGUARD GROUP

APPENDIX V

Net current assets/(liabilities) Total assets less current liabilities Non-current liabilities Bank and other borrowings Convertible bonds Net assets/(liabilities) Capital and reserves Share capital Reserve Equity attributable to Equity holders of the Company Non-controlling interests	The Group as at 31 October 2009 HK$’000 (Note 1) 101,739 2,346,210 – 183,688 183,688 2,162,522 32,119 2,082,389 2,114,508 48,014 2,162,522	Target Group as at 30 November 2009 HK$’000 (Note 2) (147,940) (18) – – – (18) – (18) (18) – (18)	Pro-forma Pro-forma Pro-forma combined adjustments adjustments HK$’000 HK$’000 HK$’000 (Note 3, 4, 5) (Note 6) (46,201) 2,346,192 – 150,000 (150,000) 183,688 634,283 (634,283) 183,688 2,162,504 32,119 2,082,371 212,735 (218,869) 2,114,490 48,014 (31,902) 2,162,504	Pro-forma balances HK$’000 43,890
				2,308,156
				– 183,688
				183,688
				2,124,468

				32,119 2,076,237
				2,108,356 16,112
				2,124,468

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED CHINA VANGUARD GROUP

APPENDIX V

C. UNAUDITED PRO FORMA STATEMENT OF COMPREHENSIVE INCOME OF THE ENLARGED GROUP

Target Group for the period from 12 March The Group 2009 (date of for the four incorporation) months ended to 31 October 30 November 2009 2009 HK$’000 HK$’000 (Note 1) (Note 2) Continuing operations Revenue 32,051 – Cost of sales (13,071) – Gross profit 18,980 – Other revenue 388 – Selling and distribution costs (2,928) – Administrative expenses (138,329) (18) Loss on changes in fair value for derivative finanical instruments (31,646) – Loss on deemed diposal of a subsidiary – – Finance costs (17,364) – Loss before taxation (170,899) (18) Income tax expenses (1,015) – Loss for the period from continuing operations (171,914) (18) Discontinued operations Profit for the period from discontinued operations 180,875 – Profit/(loss) for the period 8,961 (18)	Pro-forma Pro-forma Pro-forma combined adjustments adjustments HK$’000 HK$’000 HK$’000 (Note 7a) (Note 7b) 32,051 (3,073) (13,071) 3,065 18,980 388 (2,928) (138,347) 6,390 (31,646) – (6,152) (17,364) 11,918 (170,917) (1,015) (171,932) 180,875 (180,875) 8,943	Pro-forma balances HK$’000 28,978 (10,006)
		18,972 388 (2,928) (131,957) (31,646) (6,152) (5,446)
		(158,769) (1,015)
		(159,784)
		–
		(159,784)

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED CHINA VANGUARD GROUP

APPENDIX V

D. UNAUDITED PRO FORMA STATEMENT OF CASH FLOW OF THE ENLARGED GROUP

Target Group for the period from 12 March The Group 2009 (date of for the four incorporation) months ended to 31 October 30 November 2009 2009 HK$’000 HK$’000 (Note 1) (Note 8) OPERATING ACTIVITIES Profit/(loss) before income tax Continuing operations (170,899) – Discontinued operations 197,694 – 26,795 – Adjustment for: Interest income (255) – Interest expenses 18,369 – Depreciation of property, plant and equipment 5,108 – Allowances for doubtful receivable – – Loss on disposal of property, plant and equipment 2 – Impairment loss on goodwill 96,175 – Gain on disposal of a jointly controlled entity (197,907) – Amortization of other intangible assets 256 – Loss on deemed disposal of a subsidiary – – Gain on change in fiar value for derivative financial instruments 31,646 – Operating cash flows before movements in working capital (19,811) – Decrease in inventories 7 – Increase in trade and other receivables and prepayments (4,735) – Increase in trade and other payables 5,360 – Cash from operations (19,179) – Tax paid (1,707) – NET CASH (USED IN) OPERATING ACTIVITIES (20,886) –	Pro-forma Pro-forma Pro-forma combined adjustments adjustments HK$’000 HK$’000 HK$’000 (Note 7b) (Note 9) (170,899) (6,152) 18,282 197,694 (197,694) 26,795 (255) 18,369 (12,933) 5,108 (16) – 2 96,175 (197,907) 197,907 256 – 6,152 31,646 (19,811) 7 (4,735) (944) 5,360 (5,238) (19,179) (1,707) (20,886)	Pro-forma balances HK$’000 (158,769) –
		(158,769) (255) 5,436 5,092 – 2 96,175 – 256 6,152 31,646
		(14,265) 7 (5,679) 122
		(19,815) (1,707)
		(21,522)

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED CHINA VANGUARD GROUP

APPENDIX V

Target Group for the period from 12 March The Group 2009 (date of for the four incorporation) months ended to 31 October 30 November 2009 2009 HK$’000 HK$’000 (Note 1) (Note 8) INVESTING ACTIVITIES Interest received 255 – Purchases of property, plant and equipment (1,712) – Purchases of other tangible assets (1,173) – Purchases of construction in progress – – Increase in pledged bank deposits (11) – Redemption of convertible bonds (111,135) – Cash outflows from disposal of jointly controlled entities (39,297) – NET CASH (USED IN) INVESTING ACTIVITIES (153,073) – FINANCING ACTIVITIES Interest paid (1,913) – Issue of shares 1,831 – Capital contribution from minority interests 1,943 – NET CASH FROM FINANCING ACTIVITIES 1,861 – NET DECREASE IN CASH AND CASH EQUIVALENTS (172,098) – CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 270,055 – Effect of foreign exchange rate changes 2,191 – 100,148 – CASH AND CASH EQUIVALENTS AT END OF THE YEAR, represented by Bank balances and cash 100,148 –	Pro-forma Pro-forma Pro-forma combined adjustments adjustments HK$’000 HK$’000 HK$’000 (Note 7b) (Note 9) 255 (1,712) (1,173) – (11) (111,135) (39,297) 39,297 (153,073) (1,913) 1,015 1,831 1,943 (1,943) 1,861 (172,098) 270,055 (40,850) 2,191 (61) 100,148 100,148 (3,178)	Pro-forma balances HK$’000 255 (1,712) (1,173) – (11) (111,135) –
		(113,776)
		(898) 1,831 –
		933
		(134,365) 229,205 2,130
		96,970

		96,970

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED CHINA VANGUARD GROUP

APPENDIX V

Notes:

The balances are extracted from the audited financial information of the CVG Group for the period ended 31 October 2009 as set out in Appendix II of this joint circular.
The balances are extracted from the audited financial information of Target Group as set out in Appendix III to this joint circular.
Under Hong Kong Financial Reporting Standard 3 Business Combinations issued by the Hong Kong Institute of Certified Public Accountants (the ‘HKICPA”), the CVG Group apply the purchase method to account for the acquisition of the Target Group in the consolidated financial statements of the Group, and the individual assets and liabilities of the Target Group acquired by the CVG Group are adjusted to fair values at 31 October 2009 in preparation for the unaudited pro forma statement of financial position of the Enlarged Group.

For the purpose of the unaudited pro forma statement of financial position of the Enlarged Group, the Directors of the Company assumed the fair values of the assets and liabilities of Target Group as at 31 October 2009 to be their respective carrying values.

The goodwill arising from the Acquisition is calculated as follows:

		HK$’000
	Consideration_(Note 5)_	1,085,000
	Share of fair value of net assets of the Target Group acquired_(Note 4)_	(147,922)
	Goodwill	937,078

4.	The interest in fair value of net assets of the Target group acquired by the Group is calculated a follows:
		HK$’000
	Net liabilities attributable to equity holder of Target Group	(18)
	Add:
	Waive of amount due to shareholder of Target Group of
	approximately HK$147,940,000 on the date of completion	147,940
	The Group’s interest in fair value of net assets of the Target Group	147,922

Amount due to shareholder of Target Group of approximately HK$147,940,000 will be waived on the date of completion of the Acquisition.

Legal and professional fee of approximately HK$3 million has been accrued in respect of the Acquisition.

In accordance with the Sale and Purchase Agreement, the Consideration for the proposed Acquisition is HK$1,085,000,000, satisfied by the following:

Cash Secured promissory note Unsecured promissory note Issuance of convertible bonds by the Company	HK$’000 85,000 20,000 130,000 850,000
	1,085,000

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED CHINA VANGUARD GROUP

APPENDIX V

Principal repaid in sixth years (Discount at 5% per annum) Liability component Equity component Total proceeds from issuance of convertible bonds	HK$’000 634,283

	634,283 215,717
	850,000

By assuming full conversion of the convertible bonds into conversion shares at the initial conversion price and the placing was successful, while the Company will continue to hold, indirectly, 711,746,428 Aptus shares, the Company’s indirect interests in Aptus would be diluted by, up to 21.46%% from holding approximately 34.49% to approximately 13.03%. The adjustments is reflected the de-consolidated of Aptus Group from the consolidated statement of financial position of CVG Group as at 31 October 2009 and Aptus will be treated as an available-forsale-financial asset.
a. The adjustment reflects the de-consolidation of Aptus Group (after acquire 100% interest in Target Group) from consolidated statement of comprehensive income from the CVG Group for the year ended 30 June 2009.
b. The adjustment reflects the gain on disposal of Aptus from the de-consolidation of Aptus Group from the CVG Group.

Calculation of the loss on deemed disposal as follows:

Assets to be disposed on de-consolidation Liabilities to be disposed on de-consolidation Loss on deemed disposal on de-consolidation	HK$’000 420,639 (414,487)
	6,152

Adjustments 7(a) and 7(b) will not have continuing income statement effect to the CVG Group.

As the Target Group does not operate a bank account or cash account or hold any cash equivalents and has had no cash transactions during the period. Accordingly, such presentation of statement of cash flows would provide no additional useful information in preparing the unaudited pro-form consolidated statement of cash flow of the enlarged group for the year ended 31 October 2009.
The adjustment reflects the de-consolidation of Aptus Group (after acquire 100% interest in Target Group) from consolidated statement of cash flow from the CVG Group for the year ended 31 October 2009.

This adjustment will not have continuing effect to the CVG Group.

V – 8

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED CHINA VANGUARD GROUP

APPENDIX V

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==> picture [122 x 44] intentionally omitted <==

22 April 2010

The Directors China Vanguard Group Limited Unit 2201, 22/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Dear Sirs,

We report on the unaudited pro forma financial information of China Vanguard Group Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “CVG Group”), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about (i) how the proposed acquisition of the 100% equity interest in Casdon Management Limited (the “Target Company”) and its subsidiaries (hereafter collectively referred to as the “Target Group”) (together with the CVG Group, hereinafter collectively referred to as the “Enlarged Group”) and (ii) disposal of equity interest in Aptus Holdings Limited by potential dilution in conversion of the convertible bonds, might have affected the financial information presented therein, for inclusion in Appendix V of the circular dated 22 April 2010 (the “Circular”). The basis of preparation of the Unaudited Pro Forma Financial Information is set out in Appendix V to the Circular.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND REPORTING ACCOUNTANTS

It is solely the responsibility of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with Rule 7.31 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

BASIS OF OPINION

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

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UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE ENLARGED CHINA VANGUARD GROUP

APPENDIX V

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 CVG Group and that the adjustments are appropriate for the purpose of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 7.31(1) of the GEM Listing Rules.

The Unaudited Pro Forma Financial Information had been prepared for illustrative purpose only, based on the judgements 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 future and may not be indicative of:

the financial position of the CVG Group as at 31 October 2009 had the acquisition of the Target Group actually been completed on that date or any future date; nor
the results of operations and cash flows of the CVG Group for the four months ended 31 October 2009 had the acquisition of the Target Group actually been completed on 1 July 2009 or any future periods.

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 CVG Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Rule 7.31(1) of the GEM Listing Rules.

Yours faithfully,

W. H. Tang & Partners CPA Limited

Certified Public Accountants Hong Kong

TANG Wai Hung

Practising Certificate Number P03525

V – 10

APPENDIX VI

VALUATION REPORT OF THE TARGET GROUP

The following is the text of the valuation report dated 22 April 2010 from Castores Magi Asia Limited, an independent valuer, in respect of its valuation on the business carried out by Casdon Management Limited and its subsidiaries as at 28 February 2010, prepared for the purpose of incorporation in this joint circular.

==> picture [202 x 58] intentionally omitted <==

Suite 211

China Insurance Group Building 141 Des Voeux Road Central Hong Kong

22 April 2010

The Directors Aptus Holdings Limited Room 2201 on 22nd Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

The Directors China Vanguard Group Limited Room 2201 on 22nd Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

Dear Sirs,

In accordance with the instructions of Aptus Holdings Limited and China Vanguard Group Limited (hereinafter altogether known as “the Companies”), we have made an appraisal of the Market Value of a 100% equity interest of Casdon Management Limited (hereinafter known as “Casdon”) and its subsidiaries (altogether hereinafter known as “Casdon Group”), as at 28 February 2010 (hereinafter known as the “Valuation Date”).

VI – 1

APPENDIX VI

VALUATION REPORT OF THE TARGET GROUP

The purpose of this appraisal is to formulate and express an independent opinion on the Market Value of Casdon as at the Valuation Date on the premise of a going concern. The term “Market Value” as used herein is defined as “the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion”. We understand that the use of our work product will not supplant other due diligence, which you should conduct in reaching business decisions for the Companies. Our work is designed solely for public disclosure purposes. There are no other purposes intended or should be inferred.

INTRODUCTION

Casdon was incorporated in British Virgin Islands with limited liability on 12 March 2009. Casdon Group will principally engage in selling boxes for storage of deceased cremated ashes and other personal properties. Casdon Group will also engage in provision of spaces for boutique shops, Fung Shui masters’ offices and vegetarian restaurants for rental income purposes. Casdon, through its non wholly-owned subsidiaries, currently holds 90% interest in 43 parcels of land and a number of old houses in Yuen Long, New Territories, Hong Kong (for details, please refer to Group V in Appendix IX of this joint circular) and plans to refurbish them for storage of deceased cremated ashes and other ancestral property in view of the growing need for the storage space of personal properties of ancestors and the related businesses and services.

In accordance with a certification letter dated 26 March 2010 and a confirmation email dated 19 April 2010 from Casdon’s architectural consultant, Messrs KLS International Architects & Planners Co. Ltd., the development project will comprise a total of 69,000 boxes upon completion of refurbishment.

HISTORICAL DEVELOPMENT OF BURIAL GROUND, CEMETERY, CREMATORIUM AND COLUMBARIA IN HONG KONG

The history of first burial ground in Hong Kong could be traced back to as early as 1841 when the deceased British soldiers and sailors were randomly buried on the beach in the vicinity of Possession Point. Since the establishment of Protestant Burial Ground and Roman Burial Ground at the present locality of Three Pacific Place in Wanchai from late 1841 to 1842 and Hong Kong Cemetery in Happy Valley in 1845, traditional practice of coffin burials has been very popular in the next 140 years though sporadic cremation was undertaken for religious and sanitary reasons.

It was not until 1946, the Colonial Government discovered that a densely populated city like Hong Kong, where the provision of adequate burial space was a continual problem, it should be the official aim to popularize cremation. Nevertheless, the Kai Lung Wan Public Crematorium in Pokfulam was not on too large a scale and was too far from town. In addition, the Japanese Crematorium at Sookunpoo (erected on Inland Lot No. 1879) was vacated by Urban Services Department after the Second World War and Hindoo Crematorium at Sookunpoo and Sikh Burning Ground behind Sikh Temple were only for private use. In tackling these problems, the former Japanese Crematorium on Boundary Street, which had been built by the occupying Japanese army to treat their war dead, was considered to rebuild as the new crematorium. However, the then Colonial Government sensed that the Chinese would resent compulsory cremation on religious grounds and its enforcement would have far reaching effects. The new crematorium completed its short mission as from November 1948 to September 1950 and the Japanese-designed cremators were re-

VI – 2

VALUATION REPORT OF THE TARGET GROUP

APPENDIX VI

installed in a smaller crematorium in Diamond Hill Cemetery in July 1951. Nevertheless, this crematorium was not so popular.

In the 1960s, an official policy of encouraging cremation was adopted in Hong Kong. In 1962, a new crematorium overlooking Cape Collinson containing a Christian Chapel, a Chinese Farewell Pavilion, Hindu Temple and a columbarium fitted with 367 niches for cinerary urns was completed. In the next two decades, cremation was highly advocated by the Hong Kong Government due to the continual population growth. Sixty-eight percent of those who died in 1993 were cremated, compared with thirty-five percent in 1976.

MARKET OVERVIEW

Hong Kong is one of the most densely populated cities in the world. Land shortage induced most Hong Kong people to abandon burials in the 1980s. Nevertheless, Hong Kong currently has run out of space for cremated ashes by virtue of escalating demand arising from ageing population and decreasing supply of niches.

==> picture [409 x 191] intentionally omitted <==

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

Ageing Population in Hong Kong from 2005 to 2009
Population
1,000,000
800,000 87,300 95,800 102,300 108,400 118,000 Age: >=85
110,200 116,000 122,200 127,100 130,500 Age: 80-84
600,000 176,400 182,500 187,700 197,100 202,300
Age: 75-79
400,000 226,000 232,500 237,700 234,500 232,000 Age: 70-74
200,000
246,800 238,000 228,900 221,000 224,200 Age: 65-69
0
2005 2006 2007 2008 2009
Year
----- End of picture text -----

Source: Census and Statistics Department

Hong Kong has an expanding and ageing population. While the population grew by 2.76% between 2005 and 2009, the population aged 65 and over increased by 7.12%. With a growing and ageing population in Hong Kong, the number of deaths and the corresponding number of cremations have been escalating gradually year on year. The number of deaths from 2005 to 2009 were 38,683, 37,415, 39,963, 41,530 and 40,200, respectively. On the other hand, the number of cremations from 2005 to 2009 were 33,288, 32,215, 34,427, 36,410 and 36,486, respectively. In accordance with the estimation from Hong Kong SAR Government, the annual total numbers of deaths and cremations in the next 10 years (i.e. from 2010 to 2019) are estimated to be about 47,700 and 43,900, respectively. In recent years, the cremation rate has been rising from 85.79% in 2005 to 90.76% in 2009. The cremation rate is anticipated to rise further in the coming years, steadily reaching 90% or more after 2010.

VI – 3

APPENDIX VI

VALUATION REPORT OF THE TARGET GROUP

Nowadays, in addition to the columbarium facilities run by non-government organisations such as the Board of Management of Chinese Permanent Cemeteries (hereinafter known as “BMCPC”), religious entities and the private sector, there are a total of eight public columbaria managed by the Food and Environmental Hygiene Department (hereinafter known as “FEHD”) providing approximately 167,900 public niches. All of these public niches have been allotted.

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

The Total Number of Deaths From 2004 to 2009
43,000
42,000
41,000
40,000
39,000
38,000
37,000
36,000
35,000
34,000
2004 2005 2006 2007 2008 2009
Year
----- End of picture text -----

Source: Census and Statistics Department

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

The Total Number of Deaths and
the Corresponding Number of Cremations
from 2005 to 2009
50,000
40,000
30,000 Others
20,000 85.79% 85.91% 85.16% 85.11% 90.76% Cremations
10,000
0
2005 2006 2007 2008 2009
Year
Deaths
The Total Number of
----- End of picture text -----

Source: LegCo Panel on Food Safety and Environmental Hygiene and Census and Statistics Department

VI – 4

APPENDIX VI

VALUATION REPORT OF THE TARGET GROUP

For the public niches, it is estimated that there won’t be tremendous supply of niches before 2012. To enhance provision of columbarium facilities, the FEHD has put up for allotment a total of 21,875 public niches in Kwai Chung and Diamond Hill in 2009. These niches can accommodate 47,082 cinerary urns. In addition, some 300 re-used public niches are available each year for allotment to applicants on the waiting list. In July 2009, funding approval was obtained from the Finance Committee of the Legislative Council for the construction of a new public columbarium within the Wo Hop Shek Cemetery. The project will provide some 41,000 new columbarium niches, which can accommodate about 80,000 urns, for use in 2012. Apart from public columbaria, a total of about 208,700 niches are provided and managed by the non-governmental BMCPC, all of which have been allotted besides a few to be re-used. BMCPC anticipated that about 41,300 newly-built niches will be provided in the coming two years. Other cemeteries managed by the Catholic, Protestant, Buddhist and other religious bodies provided about 119,300 niches in total, of which some 35,400 are not yet allotted. It is projected that about 8,000 newlybuilt niches will be available in the coming two years.

Generally speaking, the community has a certain demand for private columbaria, as private columbaria offer value-added services that public columbaria do not provide, such as daily incense and offerings. As a matter of fact, public columbaria could only provide a limited number of niches. Besides, storage of cremains does not give rise to any public health concerns. Hence, the Hong Kong SAR Government has not enacted any legislation to regulate private columbaria from this perspective. From 2006 to 2008, FEHD only received a total of 17 enquiries or complaints from members of the public against private columbaria.

Recently, Hong Kong SAR Government has been actively promoting alternative ways of disposal of cremains, such as scattering cremains in Gardens of Remembrance or in designated Hong Kong waters. The number of such applications has risen markedly in 2007 and 2008. The number of applications for scattering cremains of the deceased in designated local waters increased from 160 in 2007 to 243 in 2008, whereas that for scattering cremains in Gardens of Remembrance has more than doubled from 175 in 2007 to 383 in 2008. Nonetheless, these alternative ways of disposal of cremains are still small in numbers in comparing with the total number of deaths per annum.

LEGAL OPINIONS

In reviewing the legality and validity of the business of Casdon Group, we have relied on the legal opinions dated 10 December 2009, 21 December 2009 and 15 April 2010 provided by Red Rabbit Capital Limited (“Red Rabbit”)’s legal advisers in Hong Kong known as Messrs Edward Chan S.C. and Messrs Raymond Chan, Kenneth Yuen & Co., respectively, and the legal opinions provided by Aptus Holdings Limited’s legal advisers in Hong Kong known as Messrs Naresh L. Daryanani dated 18 January 2010 and Benjamin Chain & Kenneth Y.F. Wong dated 20 February 2010 and 3 March 2010, respectively.

(I) Messrs Edward Chan S.C. (“Edward Chan”)

(A) First Advice Pertaining to Lots Nos. 2044, 2059, 2061, 4160A-J and RP, 4752 in DD104, Yuen Long (Dated 10 December 2009)

It is stated in the legal opinion, inter alia , that:

VI – 5

APPENDIX VI

VALUATION REPORT OF THE TARGET GROUP

(1) Block Crown (Government) Lease (“BGL”)
(a) It is well settled law that the statement of use entered under the column of “Description of Lot” in the Schedule to a BGL is merely a description of the use of the land at the time of the granting of the BGL and does not restrict future use of the land. Neither is there an implied term in a BGL that the land cannot be used for any purpose other than that for which it was being used at the time of the grant of the BGL: see AG v Melhado Investment Limited [1983] HKLR 327 (CA).
(b) Edward Chan is of the view that there is no prohibition against the placing of cremated ashes of the dead on the land under the BGL. However this does not mean that once can freely build a columbarium on the lots because of the limitation imposed by the building covenant in the BGL.
(c) Some people may conduct the last rites or service at the time of depositing the ashes of their deceased relatives into the niches and worship their deceased relatives regularly at the places where the ashes are kept.... The ceremonies could be very noisy.... In Edward Chan’s view, performance of these rites, service and worshipping rituals may well amount to a breach the offensive trades covenant under the BGL. Whether it is so would be a matter of degree depending on the level of noise and smell emitted during the ceremonies.
(2) General Notification (“GN”) No. 364

In 1924, the following GNs were revoked by GN570 of 1924:–

(a) GN 365 of 1906;
(b) GN 697 of 1909;
(c) GN 278 of 1911;
(d) GN S.114 of 1918;
(e) GN S.261 of 1921;
(f) GN S.139 of 1924; and
(g) GN 294 of 1924.

In 1934, GN570 of 1924 as amended by GN 470 of 1931 was revoked by GN364. Thus, the conditions to be considered in this advice should be those contained in GN 364.

VI – 6

VALUATION REPORT OF THE TARGET GROUP

APPENDIX VI

(3) General Condition (“GC”) C15 of GN364 – “Grave” and “Human Remains”

GC 15 prohibits the making of grave on the Lots. In Edward Chan’s view, no matter whether the contents in the containers or urns are “human remains” or not, plainly the niches with the name plates/tablets of the deceased persons placed in front thereof could not be said to be graves.

GC 15 further prohibits interment of any “human remains” in the Lot. Since the condition itself draws the distinction between “interred in” and “deposited on”, Edward Chan is of the view that regardless whether cremated ashes are to be considered as human remains or not, the placing of containers or urns containing ashes in the niches could not be “interment of” human remains in the Lot.

Chinese Burial Customs

Edward Chan does not claim any expertise in Chinese burial customs, but to his understanding and according to the finding of his recent research, cremation was not an acceptable means for disposal of the body after death under the Chinese customs. There was no exception to the indigenous Chinese in Hong Kong in the early 1900s.

A fortiori , if the custom is so strong that during the times of epidemic the Chinese would refuse to dispose of the carcasses of their deceased relatives by burning the body of the dead, which, from hygienic point of view, must be most appropriate and suitable in the case of an epidemic death, cremation would hardly be employed to deal with the dead body at the turn of the century. Even for the poor, they went for interring the corpses instead of disposing of the same by burning which, logically, should be a lot more convenient and affordable at that time.

Chinese Burial Customs in Hong Kong

According to the Government’s Report on the New Territories, 18991912 dated 9 June 1912, the ancient customs and tradition of the Chinese were well preserved and adhered to by the native Chinese inhabitants in the New Territories between 1899 and 1912. They attached very great importance to ancestor worship and selection of burial sites with good fung shui (風水). It is this remote that, in 1912, the general Chinese inhabitants in the New Territories would depart from the traditional Chinese burial customs and went for cremation.

VI – 7

VALUATION REPORT OF THE TARGET GROUP

APPENDIX VI

In the article entitled “Chinese Burial Customs in Hong Kong” published in the Journal of the Hong Kong Branch of the Royal Asiatic Society Vol. 1 (1961), the writer, B.D. Wilson, M.A., wrote:–

“The deceased is considered to be in a better position to watch over his earthly descendants if buried close to his native place, where it is also, of course, easier for his family to pay their respect to him…

In the New Territories, there are at present no funeral parlour and few undertakers. As in the agricultural interior of China, practical responsibility still falls mainly on the kinsmen of the deceased. The customary burial of villagers is in two stages: initial coffin burial and subsequent exhumation and re-interment of remains. Having encoffined the body, the relatives normally sustain the vigil directly outside the home under a temporary shelter. Burial then takes place in a traditional village area, but no monument is erected beyond a small unshaped stone at the head of the grave. After five years or more, the body is exhumed. The bones will be cleaned by the family and be placed either in a funerary urn ( kam t’aap 金塔) or in a formal masonry grave ( shaan fan 山墳) shaped like a horseshoe. In the funerary urn, the bones will be arranged in a manner as if the deceased were sitting in the Buddhist lotus posture.

The sitting of funerary urns and horseshoe graves is of particular importance. Relatives will go to great lengths to ensure that the fung shui (風水) of the site is propitious. In other words, they wish to ensure that the benevolent influence of the site will protect the deceased, as a member of the family, so that he in turn will look kindly upon his relatives…”

At the end of the article, the writer concluded that:–

“It must be emphasized that this brief description of current Chinese burial customers in Hong Kong represents no more than the observed practice at a particular point of time. Custom sic is a living body that changes gradually from generation to generation. It would therefore be unwise to assume that all these customs will survive. The impact of congestion, lack of burial space and improving social conditions in Hong Kong may well cause further changes. In particular, the proposed official encouragement of cremation as a means of disposal of the dead may do much to upset the current burial pattern, although it will follow the Buddhist practice more closely. The basic factor seems to be that Hong Kong Chinese are not so much

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concerned with the means of disposal of the dead as with being able to pinpoint the eventual resting place of the remains of the deceased, whether in the form of bones or ashes. Exhumation, as such, seems to play no significant part in the process except as a practical means of reducing the physical bulk of the deceased to proportion that will either fit into a funerary urn or below a horseshoe grave. Cremation, therefore, which serves the same practical purpose as exhumation in reducing bulk, should equally, prove unobjectionable to Hong Kong Chinese, backed as it is by Buddhist belief. In short, one may expect that within a generation cremation may largely replace burials and exhumation as a means of customary disposal of Chinese dead in Hong Kong.”

This article reveals that by 1960 and 1961, the Chinese inhabitants in the New Territories were still in the habit of disposing of the dead by burial and they still had an aversion to cremation. As indicated in the concluding paragraph of the article, cremation was merely in its embryonic stage among the Chinese population in Hong Kong in the early 1960s because of the Government’s encouragement and in the light of the storage of burial sites.

History of Cremation in Hong Kong

1912

In about 1911, people in Hong Kong could hardly cremate human carcasses in the absence of any crematorium in Hong Kong. Edward Chan doesn’t think the Chinese community in Hong Kong at that time would have practiced open-air cremation as what the Hindus or Sikhs would.

In 1912, the Japanese community constructed the first crematorium for human remains in Hong Kong in the then So Kon Po Valley. It was opened in December 1912. In the same year, a Bill for the control of cremation and regulation of crematoria was drafted. The Government also considered providing a public crematorium.

See Report of the Head of the Sanitary Department dated 27 February 1914 attached to the Medical and Sanitary Reports for the Year 1913

1914

Two years later, in 1914, in recognition of the need and practice of cremation by the Japanese community and the Sikhs, the Government introduced the Bill entitles “An Ordinance to provide for the regulation of the burning of Human Remains and to enable Crematoria to be established”. On 27 February 1914, the Cremation Ordinance No. 5 of 1914 was passed.

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See The 1914 Bill

Objects and Reasons of the Bill

Minutes of the Meetings of the then LegCo on 5 and 26 February 1914 Cremation Ordinance No. 5 of 1914

Although the then Attorney General asserted in the second reading of the 1914 Bill that “……the practice of cremation is on the increase amongst all sections of the community…amongst the general members of the community cremation is also a practice which seems to be growing” (see Minutes of the LegCo Meeting on 26 February 1914) as a matter of fact, the then Head of Sanitary Department acknowledged in his subsequent report that “cremation is now practiced by the Japanese in their Sokunpo Crematorium; and by the Indians at the Sikh Temple but it is still repugnant to Chinese sentiment, and there is no present expectation that the congestion of Chinese burying grounds in the Colony can be relieved in that way”.

See Report of the Head of the Sanitary Department – Annex A of the Government’s Medical and Sanitary Reports for the Year 1914

In 1914, the rural New Territories was not yet under the purview of the then Sanitary Board. (See Opening paragraph of Annex B to the Medical and Sanitary Reports for the Year 1914) It is uncertain whether the Head of the Sanitary Department was referring to the Chinese in the urban area of Hong Kong only or whether he intended to include the Chinese inhabitant in the New Territories. Be that as it may, if in the year of 1914, the Chinese community living in the urban area of Hong Kong (who should have been more receptive to the foreign influence than those living in the New Territories) did not accept cremation, one can hardly expect that the Chinese inhabitants in the New Territories would accept and practice the cremation of their ancestors’ or relatives’ bodies.

1919

In 1919, the Government proposed to build a cremation for general use at Happy Valley but the idea was abandoned for unknown reason in 1920.

See Minutes of LegCo meeting held on 10 April 1919 at p.17 Report of Proceedings of the Public Works Committed at a Meeting held on the 27 February 1919

Report of the Director of Public Works For the Year 1920

1920

In 1920, by GN 607 dated 17 December 1920, the Government announced that the Japanese Community consented to the use of crematorium in the Sookonpo Valley for the cremation of persons of other nationalities. (see GN607 of 1932)

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1932

In about 1932, Government constructed the first public crematorium at Kai Kung Wan. (See GN S.415 of 1932)

1934

In 1934, the Cremation Ordinance 1914 was repealed by the Cremation Ordinance 1934. Discretionary power was reserved to the Government for approval of cremation to be practiced at places other than:

(a) Government’s crematoria,
(b) The Japanese Crematorium at Sookunpo
(c) The Sikhs burning ground behind the Sikh Temple,
(d) The cremation ground for Indian troops at Kowloon, and
(e) Crematoria thereafter established with the Government’s consent.

Such amendment was made in recognition of the practice of cremation by the monks and nuns in the New Territories.

In the Minutes of the meeting of the LegCo held on 26 July 1934, the then Colonial Secretary confirmed that the Government had erected on public crematorium near Kai Lung Wan for the cremation of unclaimed bodies of unidentified children under six years of age but it had never been used by 1934.

From the above brief history about cremation in Hong Kong, one can be certain that:–

(a) Cremation was repugnant to the general Chinese public in 1914.
(b) Between 1898 (when the New Territories was leased to the British Government) and 1934, cremation was extremely uncommon and indeed was not practiced amongst the Chinese in Hong Kong except possibly for the Buddhist monks and nuns. Even the Japanese could hardly find a proper venue and facilities for practicing cremation until they established their own crematorium in 1912 let alone the Chinese (assuming that they would have wanted to do so). Before the Japanese agreed to open their crematorium for the limited use by non-Japanese in 1920, there was simply no crematorium available for use by the public in Hong Kong (other than the Japanese and Hindus).

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(c) In 1934, there were only three places in Hong Kong where cremation could be lawfully practiced. They were the Japanese Crematorium, the Sikh burning ground behind the Sikh Temple and the cremation ground for Indian troops at Kowloon. Again, this shows that cremation was still unpopular among the Chinese in Hong Kong and it was also impracticable for them to do so in 1934.

The above observation is fortified by the Government’s own statistics on the number of cremations and interments done from 1899 to 1934.

As shown in the Government’s statistics, the number of cremation practiced every year between 1899 and 1934 in Hong Kong is far below the number of interments. In fact, the actual number of cremations conducted during the period is extremely small (ranging from 0 to 67 in a year).

It must follow that the question of dealing with ashes left after cremation of human remains was never an issue and was hardly anything which the Government would be concerned with to the extent that it would prompt the Government to impose a special term in the Government lease to deal with the issue. This would support the inference in retaining up GC15, the Government would probably not have in mind anything concerning deposit of ashes left after cremation.

It is also of interest to note that GC15 prohibits the erection of grave and the depositing of human remains. It does not seek to prohibit the placing of ancestral tablets for worshipping purposes. This is some indication, albeit not a strong one, that it was not intended to use GC15 as a means of controlling the use of the land for the worshipping of the dead.

“Human Remains” and “Ashes” – Ordinary, Plain and Popular Sense

There is no definition given for the words “human remains” in GN278 of 1911 and GN364.

However, comparison of the relevant legislations enacted in 1911 and 1934 against the current legislations is useful to ascertain the meaning of the words “human remains” and “ashes” as they were used in the Government documents in the early 1900s.

In 1914 and 1934

Section 5 of the Cremation Ordinance 1914 itself expressly distinguished “human remains”, which was the subject matter to be burned, from “ashes”, which was the resultant product of the burning process to be deposited or interred.

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Regulation 15 made in 1914 under section 5 of the Cremation Ordinance 1914 also expressly drew a distinction between “remains of a deceased person” which was the subject master to be cremated and “ashes” which clearly referred to the resultant product from cremation. There was no specific definition of “human remains” and “ashes” for the purpose of the Ordinance and the Regulations.

These facts give rise to a strong inference that, from 1912 when the 1914 Bill was drafted to 1914 when Cremations Ordinance 1914 received its assert, it was not within the contemplation of the both Government and the legislature at all that “human remains” might have been understood to have included the “ashes” formed after the cremation of the human remains. It should go without saying that “human remains” and “ashes” were two different things in their ordinary, plain and popular meaning at that time.

In 1934, the Cremation of Ordinance 1914 was repealed by the Cremation Ordinance 1934. Section 7 of the amended Ordinance itself again drew a distinction between “human remains” which was the subject matter to be burnt (see s.7(b)) and “ashes resulting from any such burning” which were the subject matters to be disposed of or interred (see s.7(c)) without separately defined the terms. Throughout the 1934 Ordinance, the words “human remains” were consistently applied for describing the subject matter for burning.

Clearly, to the mind of the Government administration and the legislature in 1934, “human remains” did not include “ashes resulting from the burning of human remains” for otherwise s.7(c) could have easily been drafted as “the disposal or interment of the same” or s.7(b)) could have easily been drafted as “the cases in which and the conditions under which the burning, disposal or interment of any human remains may take place”.

Regulation 13 made under sections 7 of the Cremation Ordinance 1934 stipulated that “after the cremation of the remains of a deceased person, the ashes shall be given into the charge of the person who applied for the cremation if he so desires…” Again the Regulation itself distinguished “ashes” from “remains”.

Also, “human remains” and “ashes” were not particularly defined in the Cremation Ordinance 1934 and the Regulations made the thereunder. This further supports the view that in those days, it was not thought that the words “human remains” could possibly be misunderstood to cover “ashes” reduced by cremation from “human remains” such that a special definition to clearly differentiate the two would be warranted. In their ordinary, plain and popular sense, they were cleared considered to be two different things in the pre-1934 period.

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Post-1960s

The current legislations differ from those in the 1914 and 1934. It is now thought necessary to have statutory definitions of “human remains” and “ashes” in Cremation and Gardens of Remembrance Regulation, Cap. 132M, viz:

“human remains” means the dead body of any human being or any stillborn child, but does not include ashes resulting from the cremation thereof;

“ashes” mean ashes resulting from the cremation of human remains;”

The presence of the statutory definition may be said to be an implicit acknowledgement that “remains” may otherwise be understood to include also “ashes resulting from the cremation of remains” or there may be some ambiguity as to whether the “ashes” should be considered as “human remains”.

The same definition of “human remains” can also be found in the Public Funeral Halls Regulations, Cap. 132BN and the Public Cemeteries Regulation, Cap. 132BI.

In the Chinese Permanent Cemeteries Rules, Cap. 112A, “human remains” is also defined as “the dead body of human beings in any stage of decomposition, including parts thereof or skeletal remains, but does not include cremated human ashes”.

Section 6(4) of the Private Cemeteries Regulation, Cap.132BF provides that “A grave for the interment of human remains, other than those resulting from exhumation or ashes after cremation, shall not exceed an area of 900 x 2400 mm”. This may also said to be suggestive that the literal meaning of “human remains” may otherwise include “ashes after cremation”.

In section 11(1) of the Private Cemetery Regulation (1960), there is a prohibition of the depositing of human remains in a vault in a private cemetery unless such remains as encoffined, there is a proviso that skeletal remains and ashes after cremation may be encoffined in an urn. The proviso concerning ashes would suggest that ashes would otherwise be caught as human remains in the earlier part of the section. Hence, if one looks at section 11 of the Private Cemetery Regulation, then one may say that it was recongnized in this 1960 Regulation that human remains would included ashes after cremation.

The obvious difference in the drafting of the legislation between the two periods (i.e. pre-1934 period and post 1960s period) strongly suggest that, back in the pre-1934 period, it was commonly understood that the words “human remains” did not include “ashes cremated from the dead/human remains” in its plain and ordinary sense. Since the public are concerned with the GN 364, it is the meaning of those words as used in the surrounding circumstances in 1934 which matters.

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Edward Chan’s view is that “human remains” literally does not include “ashes”. The relevant meaning of the word “remains” as given by the Shorter Oxford Dictionary is “(part or parts of) a person’s body after death”. On this meaning, it is difficult to see how the ashes left after cremation of a person’s body could still be called “human remains”. The fact that the ashes originate from the human remains does not mean that ashes are humans remains, in as much as humans remains could not be said to be human beings, and ashes from burnt firewood could not be said to be firewood. Edward Chan thinks one of the difficulties of treating ashes resulted from cremation of human remains is that physically the ashes do not have any traces of similarity in outlook with human remains, and as far as Edward Chan knows, even the chemical properties of ashes and human remains are also completely different. His understanding is that human remains are still organic substances, out of which it is possible to extract the human DNA, but the ashes after cremation would be inorganic and it is not possible to extract the human DNA from them. On the basis that if it is correct to say that in fact it is not really possible to differentiate ashes resulting from human remains from ashes resulting from say, the cremation of animal carcasses, then in Edward Chan’s view, this is a very strong reason to support the view that ashes in the ordinary plain and popular sense could not be said to be human remains and vice versa.

(4) Special Condition (“SC”) (a) of GN364 – “Chai Tong”

SC2(a) was introduced by GN S.261 of 26 August 1921. Edward Chan’s understanding is that in the 1920s, the Government was against the establishments of Chai Tong because it was thought at that time that these establishments were not really religious or charitable and the public, in particular the well to do women folks, were attracted to make payment to them. The Government was suspicious of the real objectives of these Chai Tong and, in 1920, decided to refuse all new establishments of Chai Tong and extensions to the existing ones. The Government’s intention to prohibit use of the land as a Chai Tong or for any other purpose of a similar nature has nothing to do placement of cremated ashes and ancestral worship.

(5) Town Planning Zoning

Under the Outline Zoning Plan (“OZP”), use of land within the “Village – Type Development” (“V”) zone as ancestral hall is always permitted (see Column 1 the Schedule of Uses for the V zone). In addition, the Notes, which “form part of the Plan” (see the Notes itself and section 4 of the Town Planning Ordinance, Cap.131) and carry statutory effort, provide that:–

“(9) The following uses or developments are always permitted on land falling within the boundaries of the Plan…
(b) provision, maintenance or repair of… shrine (神龕)

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(13) Unless otherwise specified, all building, engineering and other operations incidental to and all uses directly related and ancillary to the permitted uses and developments within the same zone are always permitted and no separate permission is required.”

Non-indigenous villagers

There is no prohibition in the government leases against the use of the Lots by non-indigenous villagers.

Edward Chan can’t see why non-residents and non-villagers of the village cannot place the cremated ashes of their ancestors on the land under the OZP if the use of the land for storage of ashes is otherwise permitted. The planning intention for “V” zone stated in the Schedule of Uses merely spells out that land within “V’ zone is intended for village expansion, development of Small Houses by indigenous villagers, regulating village type development in a more orderly pattern, ensuring efficient use of the land and provision of infrastructures and services. It does not seek to limit use and occupation of the “V” zone land by the local residents and villagers.

“Shrine”

The meaning of the word “shrine” given by the Oxford Advanced Learner’s English-Chinese Dictionary 4th Edition are:–

(a) “any place that is regarded as holy because of its association with a special person or event神聖的地方或處所; 聖地; 聖壇; 聖祠; 神龕” and the example given is “He built a chapel as a shrine to the memory of his dead wife” and
(b) “tomb or container in which holy relics are kept”.
The meaning given by The Concise Oxford Dictionary are:
(a) Casket especially one holding sacred relics;
(b) Tomb usually sculptured or highly ornamented of saint etc;
(c) Altar or chapel of special associations;
(d) Place hallowed by some memory.

Obviously, the objects of veneration placed in a shrine can be human beings other than a deity or deities if a chapel to the memory of a person’s deceased wife is a shrine.

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Although in Chinese, the word “神” is added to go with the word “龕”, it does not necessarily limit a shrine for the purpose of venerating deities only. The word “龕” itself and the words “神龕” can both be translated into “shrine” (see on-line dictionary of sina.com.hk). In Edward Chan’s view, the word “shrine” does include “ancestral shrine” and “shrine for deity or deities”. As a matter of fact, many Chinese people in Hong Kong have shrines or altars for worshipping both their ancestors and gods at home.

In Edward Chan’s opinion, if the word “shrine” includes “tombs” and “caskets”, corpse, skeletal remains and cremated ashes from human remains plainly can be placed in a shrine. Of course this would mean that they must be placed in a proper container with suitable words or indications to identify the subject memorial or worship.

(6) Government Enforcement Power under Cap.131

Edward Chan notes from the Notes of the OZP that Development Permission Area Plan (“DPA”) for Ngau Tam Mei area was previously published. He believes those instructing him have already ascertained whether the lots would have fall within such DPA plan. In light of the confirmation from Instructing Solicitors that there was no Interim Development Permission Area Plan (“IDPA”) or DPA applicable to the lots, it is unnecessary to consider the Government enforcement power under the Town Planning Ordinance Cap.131 on the basis of unauthorized uses under the DPA.

(7) Conclusion

On the whole, Edward Chan is of the view that:–

(a) under the BGL of DD104, there is no prohibition against placing or storage of cremated ashes of the dead on the land but it must guard against any breach of the offensive trades covenant and the building covenant;
(b) GC15 and SC2(a) contained in GN364 do not apply to the deposit of ashes resulted from the cremation of human remains and the worship of the deceased ancestors;
(c) Placing and storage of ashes properly cremated from the dead and worship of the deceased ancestors are permitted under the OZP on the ground that the provision of “shrine” as well as operation and users related thereto are always permitted within “V” zone.
(B) Supplemental Advice Pertaining to Lots Nos. 2044, 2059, 2061, 4160A-J and RP, 4752 (“the Lots”) AND Lots Nos. 2046, 2051, 2052 and 2065 (“the Additional Lots”) All in DD 104, Yuen Long (Dated 15 April 2010)

It is stated in the legal opinion, inter alia , that:

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(1) Original User of the 8 Lots

Lots 2061 and 2065

Edward Chan shares his Instructing Solicitors’ view that Lots 2061 and 2065 were granted for agricultural uses at the very beginning given:–

(a) these lots were classified as 3rd class land; and
(b) the respective Crown rents payable per unit acre of the lots (i.e. $1 per acre) at the date of their original grant were in line with the then Government’s policy in the fixing of Crown rent chargeable for 3rd class agricultural land (see the Report on the New Territories, 1899 – 1912:).

“Agricultural land was classified as 1st, 2nd or 3rd class, and Crown rent was assessed at $3, $2 or $1 per acre accordingly, except in the New Kowloon where it is $5, $3 and $1.50. Building land was charged $50 an acre (or 50 cents per annum for a small house) and $100 an acre in the case of the more thriving villages. These rates were fixed by a proclamation of July date illegible 1906, and an undertaking was given that they should not be raised….”

It is safe to conclude that lots classified as “3rd” class in the Schedule to the BGL of DD 104 were originally granted for agricultural purposes.

Lot 2059

It is also safe to conclude that Lot 2059 (which was listed immediately above Lot 2061 on the same Schedule and classified as 3rd class land) was initially granted for agricultural purposes.

Lots 2046 and 2051

Insofar as Lots 2046 and 2051 are concerned, the respective Crown rents payable were consistent with the then prescribed rent chargeable for 3rd class agricultural lots. It follows that these two lots should also have been granted originally for agricultural uses under the BGL.

Lots 2044 and 2052

Since the classification of Lots 2044 and 2052 is identical to that of Lots 2046 and 2051, it follows that Lots 2044 and 2052 should also be granted initially for agricultural uses.

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Lot 4160

By Government Notification No.S10 dated 15 January 1915, the Government announced that Lot 4160 with an area of 0.17 acres was to be sold as an “agricultural lot” by public auction on 21 January 1915 and the annual Crown rent payable was $0.20.

The said notification was merely an advertisement of the intended sale of Lot 4160 by the Government. It is not conclusive for proof that the lot was indeed successfully sold on the date specified in the Government notification and on the terms set out therein. It is impossible for Edward Chan to form a concrete opinion on the lawful user of Lot 4160 under its original government grant based on this single piece of document. Furthermore, he does not have any information on the carving out history of Lot 4160. For the present purpose, he assumes that sections A to J and Remaining Portion together constitute the whole of Lot 4160 and that the “House” class area of 0.01 acre is not specifically confined to any one of the sections.

(2) The 8 Lots – Change of Class and Increase in Crown Rents

Lots 2046 and 2065

Areas and classifications of Lots 2046 and 2065 remain unchanged throughout. Government rent payable in respect of Lot 2065 remains intact. Beyond doubt, Lots 2046 and 2065 can be used for agricultural purposes only under their existing Government leases. Buildings (or parts thereof) erected on these two lots are plainly unauthorized under their Government leases unless the buildings are used for and directly related to agricultural purposes because the BGL stipulates that:–

“…the Lessee or any other person or persons shall not, nor will, during the continuance of this demise……convert any ground hereby expressed to be demised as agricultural or garden ground into use for building purposes other than for the proper occupation of the same ground as agricultural or garden ground without the previous Licence…”

Edward Chan would like to point out that the fact that there is such restrictive covenant contained in the lease does not mean that there will be an automatic breach of the covenant if the land was not used for agricultural purposes. The covenant is breached only if the land is converted into “building purposes other than for the proper occupation of the same as agricultural or garden ground without the previous licence” from the Government. So if no building was involved in the new use, then there would be no breach of this covenant.

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Use of the buildings and structures (or parts thereof) currently erected on Lots 2046 and 2065 for deposit and storage of cremated ashes of the dead or domestic purposes, clearly would constitute a breach of the Government leases of these two lots.

Lots 2044, 2051, 2052, 2059, 2061 and 4160

Insofar as Lots 2044, 2051, 2052, 2059, 2061 and 4160 are concerned, Instructing Solicitors do not know when, how, in what circumstances and on what terms the classes of them were altered.

In the premises, the issue is whether the Government has by conduct waived the right to enforce the original restriction on user covenant in respect of these 6 lots thereby converting the permitted users of portions of them from agricultural to building under the Government leases at some unknown stage.

(3) Implied Waiver of Original Covenant by the Government – The Law

In the present case, if lay client shall be able to adduce sufficient evidence for proof that:–

(a) buildings have been erected and standing on portions of the 6 lots for over 50 years or more;
(b) Government has knowledge of the existence of the buildings, though she has done nothing to intervene or has not taken out any enforcement action; and
(c) escalated Crown rents in respect of the “H” or “House” class portions of these 6 lots have been charged by and accepted by the Government for a considerable period of time;

In Edward Chan’s opinion, it would be inherently unfair for the Government to insist that the whole of these 6 lots can be used for agricultural purposes only under the leases.

Whether those matters in the above paragraph (a), (b) and (c) can be successfully established is a matter of evidence. Edward Chan understands that client has inspected the Government Yuen Long District Lands Officer’s aerial photos which show that buildings had been erected on these 6 lots for more than half a century. These aerial photos taken and kept by the Government District Lands Officer are useful for proof of the existence of the existing buildings over the past several decades and the Government’s knowledge of this fact.

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In the present case, Government has not merely received rents thereby waiving the past breach (assuming the change of user from agricultural to building purposes has not been expressly approved by the Government). By charging and receiving Crown rents which are substantially higher than the quanta initially charged for pure agricultural uses, coupled with the absence of any enforcement action against the presence of the buildings for more than 50 years and knowledge of the existence of the buildings as evidenced by the aerial photos taken by the Government, Edward Chan is of the view that the Court would be prepared to accept that the Government has clearly evinced an intention to waive the original restriction of user covenants insofar as the “H” and “House” class portions are concerned. The buildings have been in existence for more than 50 years, it would be difficult for the Government to prove that in the past 50 years she had no knowledge at all and that it was impossible for her to notice their existence.

Be that as it may, Edward Chan is not saying that the existing buildings would be free from the risk of any enforcement action by the Government under the Government lease. If the areas of Lots 2044, 2051, 2052, 2059, 2061 and 4160 covered by buildings have exceeded the respective “H” or “House” class areas, that would constitute a breach of the restriction of the user covenant. The acceptance of Crown rents in the past may not constitute an abandonment of the covenants itself by the Government as he has already said above. Crown rents might have been increased exclusively for permission of/reflection on the change of classification of land from agricultural to “House” uses merely insofar as those “H” or “House” class areas specified in the above paragraph are concerned.

In addition, there is not sufficient information for Edward Chan to form a view on the possible terms of the Government leases of Lots 2044, 2051, 2052, 2059 and 2061. As such, he is unable to comment whether there is any breach of the Government lease by the existing buildings in terms of the development parameters e.g. their height, number of storeys and site coverage.

(4) Crown Rent Roll – Secondary Evidence

Further and alternatively, in the absence of any primary evidence after thorough search and investigations, the Court would accept the Government “A” Rent Roll records as secondary evidence for proof of the permitted use of a lot under its Government lease.

In the present case, parts of Lots 2044, 2051, 2052, 2059, 2061 and 4160 are classified as “H” or “House” land in the relevant “A” Rent Roll records. In the absence of any primary evidence to the contrary, I believe the Court would be prepared to accept these “A” Rent Roll records as secondary evidence for proof of conversion of the permitted user from agricultural to building purposes insofar as the “H” or “House” class areas are concerned.

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In passing, I would add that, in my view, the word “House” in the context of the “A” Rent Roll record should not be confused with the “one house” restriction under the lease of a land. The latter refers to the number and form of building which can be lawfully erected on a piece of land while the former, in my opinion, refers to the permitted use of the land itself.

(5) Government Enforcement Power under Cap. 131

For completeness sake, Edward Chan would very briefly add that, even if the Lots and the Additional Lots would have been subject to the control of an IDPA and/ or DPA plan in the past, in his view, client would have a strong justification on the ground of “existing use” for using the land for building purposes because the buildings have been in existence for many years prior to 1991 before any of the plan(s) have come into effect. Besides, it would not be easy for the Government to prove the internal use of the buildings prior to 1991.

(II) Raymond Chan, Kenneth Yuen & Co. (“RCKY”)

It is stated that in the legal opinion, inter alia , that:

(1) RCKY confirms the legality of the houses which exist on the subject Lot Nos. 2059, 2044, 2051, 2061 & 4752 in DD 104 since
(a) “A” rent roll records show the existence of “houses” (expressed by letter “H” and the area occupied by such houses) when the government received Crown rent paid by the Crown lessees/owners of the lots;
(b) such houses have existed since about 1931 or for over 70 years without any interference by the government, so that the time limit (prescribed under the Limitation Ordinance) for any action which the government may take for any alleged breach of building covenant (if any, which is not admitted) for erection of such houses without the approval in writing of District Officer or Crown/ Government’s Surveyor as required under the conditions of the Government Leases or GN364 would have expired, so that the government is barred under legislation to take any action for such alleged breach;
(c) the Government’s receipt of government/Crown rent with express notice of such houses’ existence and calculation of Crown rent according to the size of the houses and area occupied by such houses estopped the government from taking any action to demolish such houses; and
(d) the conditions including building covenant in GN364 are deemed to have been complied with under Section 14 of the Conveyancing & Property Ordinance, so that the building covenant is deemed to have been fulfilled.

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(2) There is no question of lease modification or making application for building licence to legalize the houses because if the Government regards any such houses to be illegal or unauthorized structures/buildings, the Government must require such houses to be demolished before fresh application for building the houses/structures/buildings may be processed; and
(3) Regarding a house built on Lot No. 2059 in DD 104, it has existed for over 70 years and has been encroaching upon and over part of the adjacent land at Lot No. 2072 in DD 104 for so long. The owner and successors-in-title of Lot No. 2072 in DD 104 cannot be traced and has not made any claim to recover possession of such part of Lot No. 2072 so occupied by the said house on Lot No. 2059 and has not sought any order or injunction to require removal or demolition of such part of the said house to stop the trespass by way of such encroachment upon such part of Lot No. 2072, so that the time limit prescribed under Limitation Ordinance for so doing has long expired, and it is beyond reasonable doubt that the owner or successor-in-title of Lot No. 2072 cannot successfully take any action to recover possession or seek such order/injunction, and the title of Lot No. 2059 and the house thereon is not practically affected by such encroachment.

Note: RCKY further confirms that the legal opinion of Lots 2052, 2046 and 2065 in DD104 are basically the same as such of the lots described in (1).

(III) Naresh L. Daryanani (“Naresh”)

It is stated that in the legal opinion, inter alia , that:

(1) Regarding the usual building covenant which may be contained in the Block Government Lease of DD 104 in relation to other Lots Nos. 2044, 2059, 2051, 2061 and 4160, it is necessary to obtain the approval of Crown Surveyor or any person duly authorized by the Governor of Hong Kong in that behalf for erection of any building or structure on the lots. It is understood from those instructing me that there is no record at all available from Land Registry or District Land Office or any Government departments that any approval has ever been given by any Government authority for erection of the houses existing on such other Lots. By virtue of the conduct of the Government in receiving Crown rent in such amount calculated according to the exact areas of these 5 subject lots occupied by houses thereon (as confirmed by “A” rent roll records), the Government must have clear knowledge of the areas of each such 5 lots occupied by houses and received consideration (Crown rent so calculated) for acknowledging the existence of such houses. Such conduct of the Government is inconsistent with such reserving any right to take enforcement action against the owners of the said 5 lots for any breach of the Block Government Lease due to lack of approval from Crown Surveyor or government authority for erection of such houses thereon.

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VALUATION REPORT OF THE TARGET GROUP

(2) According to the usual standard restrictive covenants contained in the Block Government Lease, it is provided that “in the event of any building being erected on any premises expressed to be demised as agricultural or garden ground the rent payable in respect of such premises shall be such sum as shall be specified in the licence for the erection of such building to be granted in manner hereinafter appearing…”. It can therefore be inferred that the “Crown rent” (shown in “A” rent roll records) calculated according to the area of the subject lots occupied by houses of particular “class” is the rent payable in respect of the subject lots in “such sum as specified in the licence for erection of such building (house)(s)”. “A” rent roll record is therefore very good secondary evidence to infer that such licence ie. approval from Crown Surveyor or any person duly authorized by the Governor of Hongkong in that behalf for building such houses was given.
(3) Under Section 7(1) of the Limitation Ordinance, Cap.347, no action shall be brought by the Crown to recover any land upon expiration of 60 years from the date when the right of action accrued to the Crown. Section 11 of the Limitation Ordinance also provides that a right of action to recover land by virtue of forfeiture or breach of condition shall be deemed to have accrued on the date on which the forfeiture was incurred or the condition broken. Section 37 of the Limitation Ordinance further provides that this Ordinance (i.e. Limitation Ordinance) shall apply to the proceedings by or against the Crown in like manner as it applies to proceedings between subjects.
(4) Naresh understands that the houses on Lot Nos. 2059, 2051, 2061, 2044 and 4160 (which was later divided into Sections A to J and The Remaining Portion) have existed for over 60 years and some of which even started to exist as early as 1931. The time limit prescribed under the Limitation Ordinance for the Government to take any action by virtue of forfeiture or breach of condition (if any, despite lack of proof to such effect) has long expired. It is therefore beyond reasonable doubt (as the standard for proof of good title) that the Government would not succeed in making any claim against these lots in relation to the said houses thereon, and the risk of the Government taking any such action is minimal. Further, the Government by accepting Crown rent in such amount calculated according to the area occupied by the houses of particular class on the subject lots should be estopped from taking any action to dispute the legality of those houses under the principle of justice because it took continuous benefit from others’ wrongdoing. The “A” rent roll record showing the existence of houses also amounts to representation on the part of the Government which the public rely upon that the Government allows such houses to exist and is receiving Crown rent for such.

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VALUATION REPORT OF THE TARGET GROUP

(5) Missing Land Grant Documents

Block Government Lease of DD 104 applies to Lot Nos. 2044, 2051, 2061, 2059 & 2082. Regarding other lots (which are not the one with houses thereon for placing the earthenware jars containing cremated ashes), GN364 is the best secondary evidence for proving the root of title of the lots. Although there is no information about the identities of the lessees, they would not be evidence to disprove the ownership of assignees or successors-in-title in respect of the lots proven by Conveyances on Sale or other title documents duly registered at the Land Registry which have not been challenged for over 50 years, and it is beyond reasonable doubt that no one may make any successful claims to dispute the ownership or any such claims are also time-barred under the Limitation Ordinance.

Note: Naresh further confirms that his legal opinion also applies to both Lots Nos. 2046 and 2065 in DD104.

(IV) Benjamin Chain & Kenneth Y. F. Wong (“BCKW”)

It is stated that in the legal opinion, inter alia, that:

(1) For the purpose of the advice it was assumed that:
(a) apart from the fact that according to the Government Rent Rolls record, the Government has been receiving (additional) rent on the basis that certain houses are erected on some of the lots, there is no other evidence of consent/licence etc. There is also no evidence (apart from bare statements) that the houses are over 60 years old;
(b) GC15 and SC2(a) in GN364 as identified in Edward Chan’s legal opinion (“The Advice”) do not apply.
(c) the Approval Ngau Tam Mei Outline Zone Plan No. S/YL-NTM/12 (“The Plan”) applies.
(d) for our purpose the only possible usages (without application) allowed under The Plan are ancestral hall and/or shrine.
(2) The mere existence of the houses by themselves would plainly not contravene the offensive trade covenant. Likewise they would not contravene the Plan.
(3) On the basis of the evidence in particular the Government Rent Rolls record, BCKW are satisfied that the houses without more also would not contravene either the user or the building covenant.
(4) BCKW agree that depending on the facts, and it is a matter of degree, the offensive trade covenant may be breached.

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VALUATION REPORT OF THE TARGET GROUP

(5) On the user covenant the issue is again fact sensitive, since under the user covenant the lessee is allowed to build “for the proper occupation of the same ground as agricultural or garden ground.”
(6) Turning to the Plan, a columbarium is unlikely to come within the permitted use of ancestral hall.
(7) BCKW are however unable to agree that the use of the houses as a columbarium must be justified under the permitted use of shrine.
(8) No matter how wide such definitions of shrine can be, BCKW are doubtful that as a matter of language it can be extended to include a columbarium or columbaria operated as a business venture with rows and columns of niches. The Chinese term of “神庵” also does not help.
(9) While it is of course ultimately a question of fact and degree, and it may be that if only a limited number of ashes were stored, there would be strong arguments that there would be no breach.
(10) In that case, there would in the opinion of BCKW be no breach of the Plan, but in that case there would also be no need to resort to the permitted user of shrine.
(11) BCKW assume that proposed user is of a comparatively recent origin. They therefore are unable to share Naresh’s opinion that even if the houses are all over 60 years (of which there is no concrete proof), the Government cannot take enforcement action.
(12) On this point there is also an additional legal issue as to whether a breach of either the user or building covenant is a continuing breach. In the opinion BCKW, at least for the former (user) it is more likely than not that it is.
(13) In summary, the opinion of BCKW is that depending on how extensive the storage of deceased’s ashes are, the proposed usage may be permissible.
(14) By reason of the foregoing, BCKW were not of opinion that the use of house as columbarium must fall foul of the permitted use of shrine under the Plan. BCKW are only of the view that in that case, it may not even be necessary to resort to the permitted use of shrine.

Note: BCKW further confirms that his legal opinion applies to Lots Nos. 2051, 2052, 2061, 2044, 2046, 2059 and 2065 in DD104.

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX VI

BASIS OF VALUATION AND ASSUMPTIONS

We have appraised the equity of Casdon on the basis of “Market Value” on the premise of a going concern. The going concern premise assumes that Casdon is normally viewed as continuing in operation in the foreseeable future with neither the intention nor necessity of liquidation or of curtailing materially the scale of its operation basis. Implicit in this definition is the fact that the willing buyer would not pay more to acquire Casdon appraised than he could reasonably expect to earn in the future from an investment in Casdon.

The valuation of Casdon requires consideration of all pertinent factors affecting the operations of the business and its ability to generate future investment returns. The factors considered in the appraisal including, but were not limited to, the following factors:

the history of Casdon Group;
the economic and industry outlooks affecting Casdon Group’s business;
the size and growth prospects of the market;
the past and projected future results of Casdon and the bases and assumptions for such results;
the market-derived investment returns of entities in similar line of business;
the stage of development of the project;
the proposed no. of boxes to be provided in the development project;
the risks faced by Casdon in implementing the development project; and
the risks mentioned in the aforesaid legal opinions and “Risk Factors” section of this joint circular.

In view of the ever-changing business environment in which Casdon Group is operating, we have made a number of reasonable assumptions in the course of our appraisal, which are set out as follows:

Casdon Group will operate its business on a continuous basis to the best of its ability and will allocate sufficient resources for the planned expansion;
the assumptions on which the financial forecasts of Casdon Group will be achievable. The principal assumptions are:
It is estimated that 69,000 boxes would be built in the year 2010;

(Note: Casdon’s architectural consultant – Messrs KLS International Architects & Planners Co. Ltd. confirms that no storage box will be placed at the portion of the building on Lots 2046 and 2065 and the total no. of boxes will be unchanged at 69,000 units)

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APPENDIX VI

Depending on market situation, conservatively, approximately 69,000 boxes would be sold before year ending 31 December 2017;
According to the recent market research, the selling price of each box would range from approximately HK$20,000 to approximately HK$100,000. The weighted average selling price of HK$61,000 was used for the forecast analysis;
It is estimated that there will be 10,000 blessing places. According to recent market research, blessing places can be leased out for approximately HK$5,000 each per year;
It is expected that the boxes would be sold through independent distributors such as funeral houses and insurance companies. About 35% of the gross sales of the boxes would be the commission payable to those distributors;
It is estimated that the total capital expenditure for the development will be approximately HK$49,000,000 of which HK$45,000,000 is for refurbishment/ construction costs and HK$4,000,000 is for the purchase of shuttle vans;
Red Rabbit, the sole shareholder of Casdon, undertakes to entirely pay for any expenses incurred in obtaining the building licences, planning permission and the land premium required from Hong Kong SAR Government in the event of lease modification, if any;
There will not be any obstacles in undertaking land exchange and lease modification and obtaining the building licences from Lands Department and planning permission/ approval from the Town Planning Board, if any; and
The land title problems (if any) of those agricultural lots without houses erected thereon shall not adversely affect the business of Casdon.
there will be no material changes from political, legal, economic or financial aspects in the jurisdictions in which Casdon Group currently runs or intends to run its business which will materially affect its operation;
there will be no substantial market fluctuation in the industry in the jurisdictions or states in which Casdon Group currently runs or intends to run its business, which will materially affect its operations and the revenues attributed to shareholders;
there will be no substantial fluctuation in current tax rates, interest rates and foreign currency exchange rates in the jurisdictions or states in which Casdon Group currently runs or intends to run its business, which will materially affect its operations and the revenues attributed to shareholders;
Casdon Group will have no obstacle to undertake various procedures in compliance with the planning restrictions and Government lease conditions;

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX VI

portions of the buildings covering Lots 2046 and 2065 will not be used for deposit and storage of cremated ashes of the deed or domestic purposes;
the management of Casdon Group will not make any decision, which is harmful to the revenue generation ability of Casdon Group’s business; and
Casdon Group will allocate sufficient resources to keep abreast of its future expansion.

In the process of valuing Casdon, we considered the classical appraisal approaches to value, namely the Market Approach, Cost Approach and Income Approach. The Market Approach is basically a comparison method which estimates market value from analyzing sales and financial data and ratios of comparable public and, whenever possible, private companies. To the best of our understanding, there are no public sale and purchase of similar business transactions that were completed in Hong Kong. Under such circumstances, we have not relied on the Market Approach in our estimate of the Market Value of Casdon Group due to insufficient supporting data.

The Cost Approach seeks to estimate the Market Value of a company by quantifying the amount of money that would be required to replace the manufacturing capabilities of the firm. In other words, this approach assumes that Casdon’s value is indicated by the cost of reproducing or replacing its manufacturing assets less an allowance for physical deterioration and obsolescence. We considered this approach is not an appropriate approach for valuing Casdon given that the future business growth of Casdon will be neglected.

The Income Approach focuses on the income-producing capability of a company. This approach’s underlying theory is that the value of Casdon can be measured by the present worth of the net economic benefit to be received. In our opinion, this approach is the most appropriate in valuing Casdon since a rational buyer normally will purchase a company only if the present value of the expected economic benefits is at least equal to the purchase price. Likewise, a rational seller normally will not sell if the present value of the expected economic benefits is more than the selling price. Thus, a sale generally will occur only at an amount equal to the economic benefits of ownership. Based on this valuation principle, we use the Income Approach to estimate the future economic benefits of Casdon and discount these benefits to its present value using a discount rate that is appropriate for the expected risks associated with realizing those benefits.

VALUATION METHODOLOGY

In choosing the Income Approach as the most appropriate approach, we have used the Discounted Cash Flow (hereinafter known as “DCF”) Method, which estimates the Market Value of Casdon by discounting the future cash flow to its present value. This would necessitate the subtraction, from the net income, the capital expenditures and changes in working capital and the addition of depreciation and amortization in the computation of cash flow. DCF analysis reflects investment criteria and requires the appraiser to make empirical and subjective assumptions.

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VALUATION REPORT OF THE TARGET GROUP

In using the DCF Method, we adopted the Free Cash Flows to Equity (hereinafter known as “FCFE”) Technique. The FCFE Technique values the enterprise by estimating the Market Value of the ownership interests (equity) of the enterprise. This technique requires that Casdon’s interest expenses, if any, be excluded from the free cash flows and the resulting cash flow to be discounted at the relevant rate of return required by equity. This technique then equates the value of the ownership interests as the value of the enterprise.

We derived the discount rate by using the Capital Asset Pricing Model (hereinafter known as “CAPM”). The CAPM derives the required rate of return of an asset by adding the risk-free rate to the risk premium of the asset. The CAPM is built on the premise that the variance in returns is the appropriate measure of risk but only that portion of the variance of the returns of an asset that is not reduced by diversification has to be compensated, therefore the appropriate return required of an asset is determined by the volatility of the asset’s returns relative to the returns that can be achieved by a broad market portfolio. This measured non-diversifiable risk is represented by the beta of the asset and the risk premium of the asset is its beta multiplied to the risk premium of a broad market portfolio.

In identifying the guideline companies in the relevant industries, we have referred to Standard Industrial Classification (hereinafter known as “SIC”) Code. The SIC is the statistical classification standard underlying all establishment-based Federal economic statistics classified by industry. The SIC is used to promote the comparability of establishment data describing various facets of the U.S. economy. The classification covers the entire field of economic activities and defines industries in accordance with the composition and structure of the economy.

In the course of our valuation, we used the SIC composite compound annual equity return of 5 years (SIC Code 72) from Morningstar Inc. as the broad market portfolio return in our CAPM computations. The category of SIC Code 72 comprises 10 companies which primarily engaged in providing services generally to individuals.

It is our opinion that the SIC composite compound annual equity return of 5 years represents the most reliable objective market rate of return to be used in valuing Casdon, since it captures investors’ expectations, prevailing market conditions and the accompanying risks associated with them.

In addition to the compound annual equity return, to derive the required cost of equity in our valuation, we have added the country risk for Hong Kong in which Casdon operates, legal risks and business risk for its sole business operation. Furthermore, majority of the guideline companies mentioned above are based and listed in the U.S., which has a more developed and liquid capital market than Hong Kong, thus it has the necessity to add the relevant country risk premiums to the compound annual equity return.

This study is fully cognizant of the fact that there are other relevant companies that are privately held, or are not listed in the stock exchange, or are not headquartered in the U.S.

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VALUATION REPORT OF THE TARGET GROUP

In valuing Casdon, we determined an unlevered Ordinary Least Squares (OLS) beta for Casdon by deriving a representative industry beta based on a selected group of companies under SIC Code 72. Some of these companies are operating the business of similar nature and have been selected as our guideline companies, which include Carriage Services Inc. (Ticker: CSV) and Stonemor Partners LP (Ticker: STON). These companies principally engage in cemetery operations such as the sales of interment rights, caskets, burial vaults, cremation niches, markers, and other cemetery related merchandise and providing various services to meet a family’s funeral needs. An unlevered beta is the beta a company would have if it had no debt. It removes a company’s financial decision from the beta calculation and reflects Casdon’s business risks. The OLS betas are estimated by the traditional method of running a simple regression in which excess monthly returns on a company or composite is the dependent variable and the excess return on the market is the independent variable.

The equity risk premium of Casdon was reached by multiplying the unlevered OLS beta to the difference between the SIC composite compound annual equity return of 5 years and the risk free rate.

In the course of our valuation, we have pondered over various risks to be encountered by Casdon as mentioned in the aforesaid legal opinions and “Risk Factors” sections of this circular. Such risks have been considered in our valuation.

The discount rate adopted in this valuation is 6.41%, which is generated by applying the risk-free rate of 2.28%, beta of 0.63, compound annual equity return of 2.09%, country risk of 1%, business risk of 1%, risk of changing Government law, policies and regulations of 0.5%, risk of breach of offensive trade covenant of 0.5%, risk of breach of user and building covenants of 0.75% and risk of violation of the Plan of 0.5%.

By definition, the ownership interests in closely held companies are typically not readily marketable, and by definition not as liquid and as easily converted to cash compared to similar interest in public companies. Therefore, a share of stock in a privately held company is usually worth less than an otherwise comparable share in a publicly held company. Numerous studies have been made showing that the Lack of Marketability (hereinafter known as “LOM”) discount for a closely held stocks compared with a publicly traded counterpart averages between 10% and 50%, and many different researchers have obtained these averages over a wide span of years. We have opted to apply a 20% LOM discount to the value of Casdon.

GENERAL COMMENTS

For the purpose of this appraisal and in arriving at our opinion of value, we have relied to a very considerable extent on the information, statements, opinion and representations provided to us by Casdon and the Companies. We were furnished with the basic information of business plan, legal opinions from Red Rabbit’s legal advisers – Edward Chan and RCKY and Aptus Holdings Limited’s legal advisers – Naresh and BCKW, a certification letter and a confirmation email from Casdon’s architectural consultant – Messrs KLS International Architects & Planners Co. Ltd. pertaining to the total no. of units to be provided, various survey plans from Casdon’s land surveyor – Messrs Kin Tat Engineering Survey Co., financial projection of Casdon Group for a period of eight years ending 31 December 2017 and relevant publicly available information. These data have been utilized without further verification as correctly representing the development plan, results and future prospects of the operation and the financial condition of Casdon.

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VALUATION REPORT OF THE TARGET GROUP

In valuing the equity interest of Casdon, to large extent, we relied on the legal opinions given by Red Rabbit’s legal advisers - Edward Chan and RCKY, and Aptus Holdings Limited’s legal advisers - Naresh and BCKW, pertaining to the legality of the houses and structures and legality and validity of the business of Casdon Group. As such, no responsibility is assumed by us for any legal matters in this aspect.

To the best of our knowledge, all data set forth in this report are true and accurate. Although gathered from reliable sources, neither guarantee is made nor liability assumed for the accuracy of any data, opinions, or estimates identified as being furnished by others, which have been used in formulating this analysis.

In the process of compiling our valuation report, we have made reference to the following documents and materials:

(a) Friend of China (1842-1859);
(b) The Treaty Ports of China and Japan: A Complete Guide to the Open Ports of Those Countries, Together with Peking, Yedo, Hongkong and Macao (1867), by Charles King, Nicholas Belfield Dennys and William Frederick Mayers;
(c) Handbook for China (遊歷中國見擷要錄) (1913), by Carl Crow;
(d) Official Record of Proceedings of Legislative Council, (2 April 1896, 5 February 1914, 26 February 1914, 21 January 1915, 10 April 1919, 26 July 1934, 8 November 1934, 2 December 1936, 16 December 1936, 19 November 2008, 21 October 2009, 9 December 2009 and 27 January 2010);
(e) Plan of the City of Victoria – Hong Kong (corrected to 1929), by John Bartholomew & Co.
(f) C.S.O Files in the Land Office (24 September 1931 – 9 October 1940);
(g) General Correspondence Files (25 May 1946 – 28 March 1955);
(h) A Sense of History (1995), by Carl T, Smith;
(i) Encyclopedia of Cremation (2005), by Douglas James Davies and Lewis H. Mates;
(j) Hong Kong Statistics (2009), by Census and Statistics Department; and
(k) Minutes of Meeting of the Panel on Food Safety and Environmental Hygiene (12 May 2009).

We are unable to accept any responsibilities for any operation and financial information and documents that have not been supplied to us by Casdon and the Companies. We have had no reason to doubt the authenticity and accuracy of the information provided or the reasonableness of the opinions expressed by Casdon, the Companies and their directors, which have been provided to us. We also sought and received confirmation that no material factors have been omitted from the information provided.

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VALUATION REPORT OF THE TARGET GROUP

In the course of our valuation, we relied on Casdon’s financial projections during the 8 years’ forecast period. We have tested this estimate against relevant data pertaining to the various economies and the replication industry, and find it is fair and reasonable.

In arriving at our opinion, we have assumed that Casdon Group has adopted necessary security measures and has considered several contingency plans to protect and maintain the reliability of its business.

We have assumed that the appraised equity of Casdon is freely disposable and transferable for its existing or alternative uses in the open market disregarding any further land premium, tax, fee and charges payable to the government upon disposal.

In the course of our valuation, we have adopted the basis of valuation and made the valuation assumptions in accordance with the International Valuation Standards (Eighth Edition) published by The International Valuation Standards Committee and The HKIS Valuation Standards on Trade-Related Business Assets and Business Enterprises (First Edition, 2004) published by the Hong Kong Institute of Surveyors.

We note that the Government’s land records of certain agricultural lots owned by Casdon Group (including site areas and land grant documents) were lost during the Second World War. In addition, the location of one agricultural lot cannot be identified in accordance with the existing plans and Government land records. As confirmed by Casdon and the legal opinion dated 13 January 2010 issued by Naresh, the aforesaid issues would not adversely affect the land title and the business of Casdon as the existing houses in running the business were not erected on these agricultural lots. We also note that a house erected on one of the agricultural lots encroaches on another parcel of farmland owned by the third party. As confirmed by Casdon and the legal opinion dated 21 December 2009 issued by RCKY, the ownership of this parcel of farmland could be successfully obtained by Casdon Group by way of adverse possession. As a valuer, we are not qualified to verify these confirmations given by Casdon and the aforesaid legal opinions in formulating our valuation opinion.

We have made no investigation of the legal title or any liabilities attached to Casdon Group. All legal documents disclosed (if any) are for reference only and no responsibility is assumed for any legal matters concerning the legal title and the rights (if any) to Casdon Group. We have not verified the original documents furnished to us, any responsibility for our misinterpretation of the legal documents, therefore, cannot be accepted. Besides, we are not in a position to advise and comment on the title, survey plans and encumbrances to Casdon Group.

No allowance has been made in our valuation for any charges or amounts owing neither on Casdon Group nor for any expenses or taxation, which may be incurred in effecting a sale. It is assumed that Casdon will be rendered free from encumbrances, restrictions and outgoings of any onerous nature, which could affect its value.

Unless otherwise stated, the base currency of this report is Hong Kong Dollar.

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VALUATION REPORT OF THE TARGET GROUP

APPENDIX VI

OPINION OF VALUE

Based on the analysis, reasoning and data outlined as above, and on the appraisal method employed, it is our opinion that as at the Valuation Date, the Market Value of Casdon is reasonably stated by the amount of HK$1,337,000,000 (HONG KONG DOLLARS ONE BILLION THREE HUNDRED AND

THIRTY-SEVEN MILLION ONLY).

A sensitivity analysis has been made on the assumption that the discount rate has a fluctuation of ±1%. The result of the sensitivity analysis is set out as follows:

Discount Rate	Valuation Result
	(HK$)
5.41%	1,392,000,000
6.41%	1,337,000,000
7.41%	1,284,000,000

The conclusion of value is based on generally accepted appraisal procedures and practices that rely extensively on assumptions and considerations, not all of which can be easily quantified or ascertained exactly. While we have exercised our professional judgment in arriving at the appraisal, you are urged to consider carefully the nature of such assumptions, which are disclosed in this report and should exercise caution when interpreting this report.

We hereby certify that we have neither present nor prospective interest in Casdon Group nor the Companies or the value reported.

Yours faithfully, For and on behalf of

Castores Magi Asia Limited

Deret Au Chi Chung

Member of China Institute of Real Estate Appraisers and Agents Registered Business Valuer of Hong Kong Business Valuation Forum B.Sc. MRICS MHKIS RPS MCIArb AHKIArb

Director

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APPENDIX VII REPORTS ON FORECASTS UNDERLYING THE VALUATION OF THE TARGET GROUP

Set out below are the texts of the reports from W.H. Tang & Partners CPA Limited and Goldin Financial Limited in connection with the discounted cash flow forecast underlying the valuation on the Target Group as at 28 February 2010 and prepared for the purpose of inclusion in this joint circular.

(A) REPORT FROM W.H. TANG & PARTNERS CPA LIMITED

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22 April 2010

The Directors China Vanguard Group Limited Room 2201, 22/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

The Directors Aptus Holdings Limited Room 2201, 22/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Dear Sirs,

We have examined the calculations of the business valuation (the “Valuation”) dated 22 April 2010 prepared by Castores Magi Asia Limited (the “Castores”) in respect of the appraisal of the valuation of the market value of 100% equity interest of Casdon Management Limited (hereafter known as “Target”) and its subsidiaries (collectively known as “Target Group”) as at 28 February 2010 as set out in Appendix VI to the joint circular of Aptus and China Vanguard dated 22 April 2010 (the “Circular”), of which this report forms part of.

The Valuation, including the bases and assumptions as set out in Appendix VI of the Circular, for which the directors of Target, Aptus, China Vanguard and the Castores are responsible, has been prepared through the application of the income approach technique known as the discounted cash flow method. Pursuant to paragraph 19.62 of the GEM Listing Rules, any valuation of assets (other than land and buildings) or businesses acquired by a listed issuer based on discounted cash flows or projections of profits, earnings or cash flows will be regarded as a profit forecast adopted for the purpose of preparing the Valuation. The profit projection of the business enterprise of Target

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REPORTS ON FORECASTS UNDERLYING THE VALUATION OF THE TARGET GROUP

APPENDIX VII

Group for the 8 years (the “Profit Forecast”), of which the directors of Aptus, China Vanguard and Target Group are jointly responsible for, has been prepared using a set of assumptions that include hypothetical assumptions about future events and other assumptions that may or may not necessarily be expected to occur. Consequently, readers are cautioned that the Profit Forecast may not be appropriate for purposes other than for deriving the Valuation of Target Group as at 28 February 2010. Even if the events anticipated under the hypothetical assumptions occur, actual results are still likely to be different from the Profit Forecast since the other anticipated events may or may not occur as expected.

Our engagement was conducted in accordance with Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” with reference to the procedures under Auditing Guideline 3.341 “Accountants’ Report on Profit Forecasts” issued by the Hong Kong Institute of Certified Public Accountants. Our work was performed solely to assist the directors of Aptus and China Vanguard to evaluate whether the Profit Forecast was complied properly so far as the accounting policies that have been used and the related calculations are concerned. We have reviewed and compared the accounting policies underlying the Profit Forecast with the accounting policies normally adopted by Aptus and its subsidiaries (the “Aptus Group”) and China Vanguard and its subsidiaries (the “China Vanguard Group”). We found that the accounting policies are consistent with those accounting policies normally adopted by the Aptus Group and China Vanguard Group. Our work does not constitute any valuation of Target Group and we were unable to obtain sufficient appropriate evidence to evaluate or express any opinion on the appropriateness of the bases and assumptions made.

In our opinion, the Profit Forecast, so far as the calculations are concerned, has been properly compiled in accordance with bases and assumptions adopted by the directors of Aptus and China Vanguard and Target in preparing the Profit Forecast and is presented on a basis consistent in all material respects with the accounting policies normally adopted by Aptus Group and China Vanguard Group.

In performing our duties in the subject matter, subject to the industry standards of which we are a member, we accept no liability to any other party who is shown or gains access to this letter.

Yours faithfully,

For and on behalf of

W.H. Tang & Partners CPA Limited

TANG Wai Hung Director

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REPORTS ON FORECASTS UNDERLYING THE VALUATION OF THE TARGET GROUP

APPENDIX VII

(B) REPORT FROM GOLDIN FINANCIAL LIMITED

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Goldin Financial Limited

23/F, Two International Finance Centre 8 Finance Street Central, Hong Kong

22 April 2010

The Directors Aptus Holdings Limited Room 2201, 22/F Hopewell Centre 183 Queen’s Road East Wanchai, Hong Kong

The Directors China Vanguard Group Limited Room 2201, 22/F Hopewell Centre 183 Queen’s Road East Wanchai, Hong Kong

Dear Sirs,

We refer to the valuation prepared by Castores Magi Asia Limited (“Castores”) in relation to the valuation of 100% equity interest of Casdon Management Limited and its subsidiaries (the “Valuation”). The report of Castores is included in Appendix VI to the joint circular of Aptus and China Vanguard dated 22 April 2010 (the “Circular”), of which this report forms part of. Capitalised terms used in this letter have the same meanings as defined in the Circular unless the context otherwise requires.

We note that the Valuation, which has been developed based on the discounted cash flow analysis, is regarded as a profit forecast under Chapter 19 of the GEM Listing Rules.

We have reviewed the forecasts upon which the Valuation has been made, for which you as the Aptus Directors and China Vanguard Directors are solely responsible, and have discussed with you and Castores regarding the basis and assumptions of the forecasts. We have also reviewed the letter issued by W.H. Tang & Partners CPA Limited (“W.H. Tang”) dated 22 April 2010 addressed to yourselves as set out in Appendix VII to the Circular regarding whether the forecasts, so far as the arithmetical accuracy of the calculations are concerned, have been properly compiled in accordance with the assumptions made by the Aptus Directors and China Vanguard Directors.

VII – 3

REPORTS ON FORECASTS UNDERLYING THE VALUATION OF THE TARGET GROUP

APPENDIX VII

On the basis of the foregoing and all the information comprising the Valuation and the arithmetical accuracy of the calculations reviewed by W.H. Tang, we are satisfied that the forecasts upon which the Valuation has been made, for which you as the directors of Aptus and China Vanguard are solely responsible, have been made after due and careful enquiry by you.

Yours faithfully, For and on behalf of Goldin Financial Limited

Billy Tang Director

VII – 4

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED APTUS GROUP

APPENDIX VIII

The following is the text of a letter, summary of values and valuation certificate dated 22 April 2010 from Castores Magi (Hong Kong) Limited, an independent property valuer, in respect of its valuation of the property interests held by the Enlarged Aptus Group as at 31 January 2010, prepared for the purpose of incorporation in this joint circular.

CASTORES

CASTORES MAGI (HONG KONG) LIMITED REGISTERED PROFESSIONAL SURVEYORS REAL ESTATE, MINERALS, MACHINERY & EQUIPMENT AND BUSINESS VALUERS

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MAGI

Suite 211 China Insurance Group Building 141 Des Voeux Road Central Hong Kong

22 April 2010

The Directors Aptus Holdings Limited Room 2201, 22nd Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

Dear Sirs,

In accordance with your instruction to value the properties in which Aptus Holdings Limited (the “Company”) and its subsidiaries (together the “Group”) and Casdon Management Limited (collectively referred to as the “Enlarged Aptus Group”) have interests, we confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the values of the relevant properties as at 31 January 2010 (“date of valuation”).

Our valuations of the properties are on the basis of Market Value which we would define as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.” Market Value is understood as the value of an asset estimated without regard to costs of sale or purchase and without offset for any associated taxes.

Our valuations of the property interests have been made on the assumption that the owner sells the properties on the market in their existing state without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any other similar arrangement which would serve to increase the values of the properties.

VIII – 1

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED APTUS GROUP

APPENDIX VIII

The property interests have been valued on a market basis assuming sale by reference to comparable market transactions. This approach rests on the wide acceptance of market price as the best indicator of value and pre-supposes that evidence of recent transactions in the market place can be extrapolated to similar properties, subject to allowances for variable factors.

In valuing the property in which the Government Leases expired before 30 June 1997, we have taken into account the provisions of Annex III of the Joint Declaration of the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the People’s Republic of China (the “PRC”) on the question of Hong Kong and the New Territories Leases (Extension) Ordinance (Chapter 150 of the Laws of Hong Kong) stipulating that such leases may be extended without premium until 30 June 2047, and that an annual rent at three per cent. of the rateable value of the properties will be charged from the date of extension.

We have not attributed any commercial value to the rented properties in Group I and Group II mainly due to the prohibition against assignment or sub-letting or lack of substantial profit rent.

In valuing the property interests, we have adopted the basis of valuation and have made the valuation assumptions in accordance with the HKIS Valuation Standards on Properties (First Edition 2005) published by the Hong Kong Institute of Surveyors.

In valuing the property interests, we have complied with all the requirements contained in Chapter 8 of the Rules Governing the Listing of Securities on The Growth Enterprise Market of The Stock Exchange of Hong Kong Limited.

We have relied to a considerable extent on the information provided by the Enlarged Aptus Group, and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, occupation, lettings, rental, site and floor areas and all other relevant matters.

We have not carried out detailed site measurements to verify the correctness of the site areas in respect of the relevant properties but have assumed that the site areas shown on the documents and official site plans handed to us are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurements have been taken.

We have inspected the exterior and, where possible, the interior of the properties, in respect of which we have been provided with such information as we have required for the purpose of our valuations. However, no structural survey, investigation or examination has been made, but in the course of our inspections, we did not note any serious defects. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. No tests were carried out to any of the services.

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

VIII – 2

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED APTUS GROUP

APPENDIX VIII

We have been shown copies of various documents relating to the properties and have caused searches to be made at the Land Registry regarding the properties in Hong Kong. However, we have not searched the original documents to verify any amendments which may not appear on the copies handed to us. We are not in a position to advise on the title of the properties. However, we have made reference to the opinion given by the Company’s PRC legal advisers on PRC laws in respect of the Group’s title to the property in the PRC.

The scope of valuation has been determined with reference to the property list provided by the Enlarged Aptus Group. The properties on the list have been included in this valuation certificate.

We have had no reason to doubt the authenticity and accuracy of the information provided to us by the Enlarged Aptus Group. We have also sought and received confirmation from the Enlarged Aptus Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and have no reason to suspect that any material information has been withheld.

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

The conclusion of values is based on generally accepted valuation procedures and practices that rely extensively on assumptions and considerations, not all of which can be easily quantified or ascertained exactly. While we have exercised our professional judgment in arriving at the valuations, you are urged to consider carefully the nature of such assumptions which are disclosed in this report and should exercise caution when interpreting this report.

Our valuations are summarized below and the valuation certificate is attached.

Yours faithfully, For and on behalf of

Castores Magi (Hong Kong) Limited

Ernest Cheung Wah Fu

Member of China Institute of Real Estate Appraisers and Agents B.Sc. MRICS MHKIS RPS MCIArb

Director

Note: Ernest Cheung Wah Fu is a Registered Professional Surveyor who has over 17 years of experience in valuing properties in Hong Kong and the PRC. His name is included in the List of Property Valuers for Undertaking Valuations for Incorporation or Reference in Listing Particulars and Circulars and Valuations in Connection with Takeovers and Mergers set forth by the Hong Kong Institute of Surveyors.

VIII – 3

APPENDIX VIII

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED APTUS GROUP

SUMMARY OF VALUES

Group I – Property interest rented by the Group in Hong Kong

			Capital value in
			existing state as at
	Property		31 January 2010
			HK$
1.	Room 2202 on 22nd Floor,		No commercial value
	Hopewell Centre,
	No. 183 Queen’s Road East,
	Wanchai,
	Hong Kong.
		Sub-Total:	Nil
Group II – Property interest rented by the Group in the PRC
1.	Room 902 on Level 9, Cheng Shi Hao Xing,		No commercial value
	No. 58 Eastern Section of Huan Cheng South Road,
	Xin Cheng District,
	Xian,
	Shaanxi Province,
	The PRC.
		Sub-Total:	Nil

VIII – 4

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED APTUS GROUP

APPENDIX VIII

Group III – Property interests to be acquired by the Group in Hong Kong

				Capital value in
			Percentage	existing state
			of interest	attributable
		Capital value in	attributable to	to Casdon
		existing state	Casdon	Management
		as at	Management	Limited as at 31
	Property	31 January 2010	Limited	January 2010
		HK$		HK$
1.	Lot Nos. 1995, 1996, 2043,	25,465,000	90%	22,918,500
	2044, 2046, 2048, 2049, 2050,	(excluding six parcels of		(excluding six
	2051, 2052, 2054, 2058, 2059,	land known as Lot Nos.		parcels of
	2061, 2062, 2063, 2065, 2066, 2073, 2074, 2075, 2077, 2078,	2054, 2066, 2078,		land known as Lot Nos. 2054, 2066,
	2080, 2081, 2082, 2122, 2124,	2080, 2081 & 4196)		2078, 2080, 2081 &
	2172, 2298, 4160A-J and R.P.,			4196)
	4191 and 4196 in
	Demarcation District No. 104
	together with six houses
	erected thereon,
	Ngau Tam Mei,
	Yuen Long,
	New Territories,
	Hong Kong.
	Sub-Total:	25,465,000		22,918,500
	Grand Total:	25,465,000		22,918,500

VIII – 5

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED APTUS GROUP

APPENDIX VIII

VALUATION CERTIFICATE

Group I – Property interest rented by the Group in Hong Kong

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 1. Room 2202 on The property comprises an office The property is No commercial value 22nd Floor, unit on 22nd Floor of a 64-storey rented by the Hopewell Centre, commercial building. The building was Group for a No.183 completed in about 1980. term of 2 years Queen’s Road East, commencing Wanchai, The property has a lettable area of about from 1 March Hong Kong. 953 sq. ft. (88.5 sq. m.). 2008 to 28 February The property is currently occupied by 2010 at a the Group for office purpose. monthly rent of HK$20,966 exclusive of rates, airconditioning charges and management fees.

Note: The tenant is B & B International Marketing (HK) Limited, an indirect wholly-owned subsidiary of China Vanguard Group Ltd.

VIII – 6

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED APTUS GROUP

APPENDIX VIII

Group II – Property interest rented by the Group in the PRC

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 1. Room 902 on The property comprises a domestic unit The property is No commercial value Level 9, on Level 9 of a multi-storey residential rented by the Cheng Shi Hao building. The building completion year Group for a Xing, was unknown. term of 1 year No. 58 Eastern commencing Section of Huan The property has a lettable area of about from 1 June Cheng South Road, 114.5 sq. m. 2009 to 31 Xin Cheng District, May 2010 at Xian, The property is currently occupied by an annual rent Shaanxi Province, the Group for dormitory purpose. of RMB24,000 The PRC. exclusive of utility charges and management fees.

Notes:

The tenant is 華油中匯能源發展有限責任公司, a subsidiary of which 70% interest is attributable to the Company.
According to the opinion provide by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

VIII – 7

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED APTUS GROUP

APPENDIX VIII

Group III – Property interests to be acquired by the Group in Hong Kong

Description and tenure

Property

Lot Nos. 1995, The property comprises 43 parcels of 1996, 2043, 2044, agricultural land with four 2-storey 2046, 2048, 2049, houses and two single-storey houses 2050, 2051, 2052, erected thereon. 2054, 2058, 2059, 2061, 2062, 2063, The site areas of Lot Nos. 2054, 2066, 2065, 2066, 2073, 2078, 2080, 2081 and 4196 are not 2074, 2075, 2077, available from the Government’s land 2078, 2080, records. The remaining 37 parcels 2081, 2082, 2122, of land have a total site area of 2124, 2172, 2298, 90,948 sq. ft. (8,449.3 sq. m.). These 43 4160A-J and R.P., parcels of land (except Lot Nos. 2172 4191 and 4196 and 2298) were adjoining to each other. in Demarcation District No. 104 The six houses have a total gross together with six floor area of approximately 1,013.8 houses erected sq. m. (including a total balcony area of thereon, approximately 60.1 sq. m.) The ages of Ngau Tam Mei, these six houses were unknown. Yuen Long, New Territories, Lot Nos. 2063, 2066, 2077, 4191 and Hong Kong. 4196 of the property were subject to

Lot Nos. 2063, 2066, 2077, 4191 and 4196 of the property were subject to New Grant Nos. 5539, 5655, 5678, 5711 and 6002, respectively. The Government Lease terms of these New Grants were unknown from the Government’s land records.

Capital value in Particulars of existing state as at occupancy 31 January 2010 HK$ The various 25,465,000 parcels of (excluding six agricultural land parcels of land are currently known as lot nos. either vacant 2054, 2066, 2078, or occupied as 2080, 2081 & 4196) access road. (see Note 7 below) (100% interest) The houses of the property are 22,918,500 currently under (excluding six renovation. parcels of land known as lot nos. 2054, 2066, 2078, 2080, 2081 & 4196) (90% interest attributable to Casdon Management Limited)

The remaining lots of the property were held under various Government Leases for a term of 75 year renewed for a further term of 24 years commencing from 1 July 1898 (as extended until 30 June 2047 under Section 6 of the New Territories Leases (Extension) Ordinance).

The current annual Government rent payable for the various lots of the property is equal to 3% of the rateable value for the time being of the lots.

VIII – 8

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED APTUS GROUP

APPENDIX VIII

Notes:

The registered owners of the property are set out below:

Lot No.	Registered Owner
2054, 2074, 2075, 2078,	Loyal Truth Corporation Limited, of which 90% interest was held by Casdon Management
2080, 2081	Limited
2082	Blissful Year Limited, of which 90% interest was held by Casdon Management Limited
2058	882HK Limited, of which 90% interest was held by Casdon Management Limited
2051, 2052, 2062	Cheerful Year Limited, of which 90% interest was held by Casdon Management Limited
2061, 2063, 2065	Civic Limited, of which 90% interest was held by Casdon Management Limited
2044, 2059	Good Day Limited, of which 90% interest was held by Casdon Management Limited
1995, 1996, 2043, 2046,	Hero Limited, of which 90% interest was held by Casdon Management Limited
2048, 2049, 2050, 2066,
2073, 2077, 2122, 4191,
4196
4160 A-J	Happy Dragon Limited, of which 90% interest was held by Casdon Management Limited
4160 R.P.	Fully Kingdom Limited, of which 90% interest was held by Casdon Management Limited
2124	Rich Wealthy Limited, of which 90% interest was held by Casdon Management Limited
2172, 2298	HK 126 Limited, of which 90% interest was held by Casdon Management Limited

The various lots of the property fall within the land use zone of “Village Type Development” in the Approved Ngau Tam Mei Outline Zoning Plan No. S/YL-NTM/12. According to the notes attached to this Outline Zoning Plan, land within this zone is primarily intended for development of Small House by indigenous villagers. It is also intended to concentrate village type development within this zone for a more orderly development pattern, efficient use of land and provision of infrastructures and services. Selected commercial and community uses serving the needs of the villagers and in support of the village development are always permitted on the ground floor of a New Territories Exempted House. Other commercial, community and recreational uses may be permitted on application to the Town Planning Board.

According to this note, the following uses (column 1) are always permitted: agricultural use, government use (police reporting centre, post office only), houses (New Territories Exempted House only), on-farm domestic structure, religious institution (ancestral hall only) and rural committee/village office. In addition, the following uses are always permitted on the ground floor of a New Territories Exempted House: eating place, library, school, shop and services.

According to this note, the following uses (column 2) may be permitted with or without conditions on application to the Town Planning Board: burial ground, eating place, flat, government refuse collection point, government use (not elsewhere specified), house (not elsewhere specified), institutional use (not elsewhere specified), market, petrol filling station, place of recreation, sports or culture, private club, public clinic, public convenience, public transport terminus or station, public utility installation, public vehicle park (excluding container vehicle), religious institution (not elsewhere specified), residential institution, school, shop and services, social welfare facility, utility installation for private project.

The following lots of the property were acquired within 5 years and their acquisition costs were set out below:

Lot No.	Acquisition Date	Acquisition Cost(HK$)
2054, 2074, 2075, 2078, 2080, 2081	20 February 2008	1,200,000
2082	20 February 2008	2,000,000
2058	3 May 2008	2,000,000
2077	3 May 2008	2,000,000
2051, 2052	9 May 2008	2,000,000
2062	3 May 2008	2,000,000
2061	9 May 2008	2,000,000
2063, 2065	3 May 2008	2,000,000
2044	9 May 2008	2,000,000
2059	3 May 2008	2,000,000
1995, 1996, 2043, 2046, 2048, 2049, 2050,	9 May 2008	2,000,000
2066, 2073, 2122, 4191, 4196
4160 A-J	2 February 2009	600,000
4160 R.P.	2 February 2009	200,000
2124	2 February 2009	200,000
2172, 2298	28 July 2008	1,466,496
	VIII – 9

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED APTUS GROUP

APPENDIX VIII

Six houses were located in the following lots:

Lot No. Description 2051, 2052 One 2-storey house 2061 One 2-storey house One single storey house 2044, 2046 One 2-storey house One single storey house 2059, 2065 One 2-storey house Total	Gross Floor Area (sq. m.) (Approximate) 137.3 (including a balcony area of about 4.1 sq. m.) 178.3 (including a balcony area of about 16.3 sq. m.) 16.1 202.4 (including a balcony area of about 16.1 sq. m.) 37 442.7 (including a balcony area of about 23.6 sq. m.) 1,013.8

The above areas are based on the dimension plans prepared by Casdon Management Limited’s land surveyor, Kin Tat Engineering Survey Co.

We have been informed by the Enlarged Aptus Group that portion of the building erected on Lot Nos. 2059 and 2065 encroaches into Lot No. 2072 in Demarcation District No. 104 of which the registered owner is an independent third party. We have been advised by the Enlarged Aptus Group that the Enlarged Aptus Group will obtain ownership of Lot No. 2072 in Demarcation District No. 104 by means of adverse possession.
The location of Lot No. 4196 cannot be identified. In our valuation, we have excluded this Lot No. 4196.
The site areas of Lot Nos. 2054, 2066, 2078, 2080, 2081 and 4196 were unavailable from the Government’s land records. We have excluded these lots in our valuations. Our opinion of value represents the values of the following lots only:
Lot Nos. 1995, 1996, 2043, 2044, 2046, 2048, 2049, 2050, 2051, 2052, 2058, 2059, 2061, 2062, 2063, 2065, 2073, 2074, 2075, 2077, 2082, 2122, 2124, 2172, 2298, 4160A-J and R.P. and 4191.
Lot No. 2082 is subject to a sealed copy order vide memorial no. 08102101700074 dated 16 May 2008 in favour of Chung Wah Steel Furniture Factory Company Limited (Plaintiff), Cheerful Year Limited (1st Defendant) and Blissful Year Limited (2nd Defendant) under HCA 827 of 2008. Registration of this sealed copy order was withheld.
According to the legal opinion provided by Red Rabbit Capital Limited’s legal advisers, Messrs Raymond Chan, Kenneth Yuen & Co., the houses of the property are legally erected on the various parcels of land of the property.
A breakdown of the capital value was set out as follows:

90% interest attributable to Casdon Management Limited

	90% interest attributable to	90% interest attributable to
37 parcels of land 6 houses Total	100% interest Casdon Management Limited HK$23,655,000 HK$21,289,500 HK$1,810,000 HK$1,629,000 HK$25,465,000 HK$22,918,500
		HK$22,918,500

VIII – 10

APPENDIX IX VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

The following is the text of a letter, summary of values and valuation certificate dated 22 April 2010 from Castores Magi (Hong Kong) Limited, an independent property valuer, in respect of its valuation of the property interests held by the Enlarged China Vanguard Group as at 31 January 2010, prepared for the purpose of incorporation in this joint circular.

CASTORES

CASTORES MAGI (HONG KONG) LIMITED REGISTERED PROFESSIONAL SURVEYORS REAL ESTATE, MINERALS, MACHINERY & EQUIPMENT AND BUSINESS VALUERS

==> picture [55 x 15] intentionally omitted <==

MAGI

Suite 211

China Insurance Group Building 141 Des Voeux Road Central Hong Kong

22 April 2010

The Directors China Vanguard Group Limited Room 2201, 22nd Floor Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong

Dear Sirs,

In accordance with your instruction to value the properties in which China Vanguard Group Limited (the “Company”) and its subsidiaries (together the “Group”) and Casdon Management Limited (collectively referred to as the “Enlarged China Vanguard Group”) have interests, we confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the values of the relevant properties as at 31 January 2010 (“date of valuation”).

Our valuations of the properties are on the basis of Market Value which we would define as “The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.” Market Value is understood as the value of an asset estimated without regard to costs of sale or purchase and without offset for any associated taxes.

IX – 1

APPENDIX IX VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

In valuing the property in which the Government Leases expire before 30 June 1997, we have taken into account the provisions of Annex III of the Joint Declaration of the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the People’s Republic of China (the “PRC”) on the question of Hong Kong and the New Territories Leases (Extension) Ordinance (Chapter 150 of the Laws of Hong Kong) stipulating that such leases may be extended without premium until 30 June 2047, and that an annual rent at three per cent. of the rateable value of the properties will be charged from the date of extension.

We have not attributed any commercial value to the rented properties in Groups I, II, III and IV mainly due to the prohibition against assignment or sub-letting or lack of substantial profit rent.

We have relied to a considerable extent on the information provided by the Enlarged China Vanguard Group, and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, occupation, lettings, rental, site and floor areas and all other relevant matters.

IX – 2

APPENDIX IX VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

The scope of valuation has been determined with reference to the property list provided by the Enlarged China Vanguard Group. The properties on the list have been included in this valuation certificate.

We have had no reason to doubt the authenticity and accuracy of the information provided to us by the Enlarged China Vanguard Group. We have also sought and received confirmation from the Enlarged China Vanguard Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and have no reason to suspect that any material information has been withheld.

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

Our valuations are summarized below and the valuation certificate is attached.

Yours faithfully, For and on behalf of

Castores Magi (Hong Kong) Limited

Ernest Cheung Wah Fu

Member of China Institute of Real Estate Appraisers and Agents

B.Sc. MRICS MHKIS RPS MCIArb

Director

Note: Ernest Cheung Wah Fu is a Registered Professional Surveyor who has over 17 years of experience in valuing properties in Hong Kong and the PRC. His name is included in the List of Property Valuers for Undertaking Valuations for Incorporation or Reference in Listing Particulars and Circulars and Valuations in Connection with Takeovers and Mergers set forth by the Hong Kong Institute of Surveyors.

IX – 3

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

SUMMARY OF VALUES

Group I – Property interest rented by China Vanguard Group Ltd. in Hong Kong

Capital value in existing state as at Property 31 January 2010 HK$ 1. Room 2201 on 22nd Floor, No commercial value Hopewell Centre, No. 183 Queen’s Road East, Wanchai, Hong Kong. Sub-Total: Nil Group II – Property interests rented by China Vanguard Group Ltd. in the PRC Capital value in existing state as at Property 31 January 2010 HK$ 1. Rooms 1105-1109, 1110B and 1111 on Level 11, No commercial value Ge Hua Building, No. 1 Qing Long Hu Tong, Dongcheng District, Beijing, The PRC. 2. Rooms 1110A and 1112 on Level 11, No commercial value Ge Hua Building, No. 1 Qing Long Hu Tong, Dongcheng District, Beijing, The PRC. 3. Room 801 on Level 8 of Block A, No commercial value Tian Hai Commercial Building, No. 107 Dong Si Bei Main Street, Dongcheng District, Beijing, The PRC.

IX – 4

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in existing state as at Property 31 January 2010 HK$ 4. Rooms 802-3, 805-813, 815 and 816 on Level 8 of Block A, No commercial value Tian Hai Commercial Building, No. 107 Dong Si Bei Main Street, Dongcheng District, Beijing, The PRC. 5. Room 103 of Building No. 3, No commercial value No. 88 Jian Guo Road, Chaoyang District, Beijing, The PRC. 6. Rooms 315 and 316 on Level 3, No commercial value New Heng Ji International Building, No. 3 Mai Zi Dian Xi Road, Chaoyang District, Beijing, The PRC. 7. Unit 602 on Level 6 of Block 2, No commercial value No. 12 Court, Xi Da Wang Road, Chaoyang District, Beijing, The PRC. 8. Room A01 on Level 7, No commercial value No. 485 He Nan Bei Road, Shanghai, The PRC. 9. Unit 602 on Level 6, No. 5, No commercial value Dong Fang Lai Yin He Bin Garden, No. 333 Nong of Han Zhong Road, Shanghai, The PRC.

IX – 5

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Property

Capital value in existing state as at 31 January 2010 HK$

Unit A606A on Level 6, Tian An New Technology Plaza, Che Gong Miao Road, Futian District, Shenzhen, The PRC.
Unit A606A on Level 6, No commercial value Tian An New Technology Plaza, Che Gong Miao Road, Futian District, Shenzhen, The PRC.
Unit A606B on Level 6, No commercial value Tian An New Technology Plaza, Che Gong Miao Road, Futian District, Shenzhen, The PRC.
Unit A606C on Level 6, No commercial value Tian An New Technology Plaza, Che Gong Miao Road, Futian District, Shenzhen, The PRC.
Unit A on Level 12 of Block B1, No commercial value Hua Hao Yuan Garden, Futian District, Shenzhen, The PRC.
Unit G on Level 14 of Block 3, No commercial value Luo Hu Jin Hua Building, Yan He South Road, Luo Hu District, Shenzhen, The PRC.
Unit 6 on Level 9 of Block B, Tai An Xuan Building, No commercial value Futian District, Shenzhen, The PRC.

IX – 6

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Property

Unit 8 on Level 9, Tai Ran Tai Kang Xuan Building, Futian District, Shenzhen, The PRC.
Unit 301 on Level 3, Jia Wen Court, Jia Fu Garden, Fu Qiang Road, Futian District, Shenzhen, The PRC.
Unit 02 on Level 5, Jia Xian Court, Jia Fu Garden, Fu Qiang Road, Futian District, Shenzhen, The PRC.
Shop No. 8 on Level 2, Jin Di Ming Jin Plaza, Futian District, Shenzhen, The PRC.
Unit 1203 on Level 12 of North Block, Fu Li Ying Li Building, No. 3 Hua Qiang Road, Zhu Jiang New City, Guangzhou, Guangdong Province, The PRC.

Capital value in existing state as at 31 January 2010 HK$

No commercial value

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Property

Unit 2806 on Level 28 of Block B, Dong Fang Ming Yuan, No. 33 Shi Gu Road, Bai Xia District, Nanjing, Jiangsu Province, The PRC. 22. Unit 203 on Level 2 of Block 1, Jin Cang Garden, No. 759 Shi Quan Street, Cang Lang District, Suzhou, Jiangsu Province, The PRC. 23. Unit 1707 on Level 17 of Block E, Dong Qing Building, No. 52 Qing Chun Road, Hangzhou, Zhejiang Province, The PRC. 24. Unit 4 on Level 13 of Block B2, Xi Hu International Technology Building, No. 391 Wen Er Road, Hangzhou, Zhejiang Province, The PRC. 25. Unit 902 on Level 9 of Block 3, Wai Tan Garden, Ningbo, Zhejiang Province, The PRC.

Capital value in existing state as at 31 January 2010 HK$

No commercial value

No commercial value No commercial value

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Property

Room 2003 on Level 20, Hu Nan Cultural Building, No. 139 Shao Shan Bei Road, Fu Rong District, Changsha, Hunan Province, The PRC. 27. Room 302 on Level 3 of Block 1, Yao Ling Changsha City National Tax Bureau Dormitory Building, No. 355 Shao Shan Bei Road, Changsha, Hunan Province, The PRC. 28. Block G on Level 12, Sheng Wei Building, No. 480 Nan Nei Huan Street, Taiyuan, Shanxi Province, The PRC. 29. Block B on Level 11, Sheng Wei Building, No. 480 Nan Nei Huan Street, Taiyuan, Shanxi Province, The PRC. 30. Five office units on Level 5, No. 55 Dong Yu Long Street, Jin Jiang District, Chengdu, Sichuan Province, The PRC.

Capital value in existing state as at 31 January 2010 HK$

No commercial value

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in existing state as at Property 31 January 2010 HK$ 31. Unit 203 on Level 2, No commercial value Chuang Xin Building, No. 5 Ke Yuan Yi Road, Hi-Tech Industrial Development Zone, Shi Qiao Pu, Chongqing, The PRC. 32. Unit 301 on Level 3, No commercial value Chuang Xin Building, No. 5 Ke Yuan Yi Road, Hi-Tech Industrial Development Zone, Shi Qiao Pu, Chongqing, The PRC. 33. Unit 608 on Level 6, No commercial value Fu Cheng Building, Ma An Shan Nan Road, Hefei, Anhui Province, The PRC. 34. Unit 703 on Level 7, No commercial value No. 131 Bei Huan Zhong Road, Fuzhou, Fujian Province, The PRC. 35. Level 13, No commercial value No. 2 Zhong Hua Bei Street, Guiyang, Guizhou Province, The PRC. 36. Unit 303 on Level 3 of Block 1, No commercial value Jian Xin Road, Chaoyang District, Anshun, Guizhou Province, The PRC.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Property

Unit 1B on Level 1 of Block 69, Jian Ye City Garden, No. 88 Jian Ye Road, Zhengzhou, Henan Province, The PRC. 38. Unit 1908 on Level 19, Zhao Fu Building, No. 717 Wu Luo Road, Hong Shan District, Wuhan, Hubei Province, The PRC. 39. Unit 1601 and 1602 on Level 16 of Block A, Xin Du Building, No. 18 Wei Jin Road, Nan Kai District, Tianjin, The PRC. 40. Blocks C and D on Level 9, Ji Cheng Building, Dan Xia Road, Xishan District, Kunming, Yunnan Province, The PRC. 41. Unit A2 on Level 18, Gang Ao Development Building, No. 49-1 Guo Mao Main Road, Longhua District, Haikou, Hainan Province, The PRC.

Capital value in existing state as at 31 January 2010 HK$

No commercial value

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in existing state as at Property 31 January 2010 HK$ 42. Unit 702 on Level 7, No commercial value Jin Wai Tan Commercial Building, No. 66 Zhong Shan Road, Nanning, Guangxi Province, The PRC. 43. An office space in the office area of Xining Drama Group, No commercial value Unit 5 of Gao Cao Lane, Zhi Fang Street, Chengxi District, Xining, Qinghai Province, The PRC. 44. Unit 1401 on Level 14 of Block 1, No commercial value Fuzhou Bei Road, Qingdao, Shandong Province, The PRC. 45. Block C on Level 18, No commercial value Hong Yuan Building, No. 2 Huan Shan Road, Lixia District, Jinan, Shandong Province, The PRC. 46. Units 2407-10 on Level 24, No commercial value Join Us Plaza, No. 15 Song Hua Jiang Street, Nangang District, Harbin, Heilongjiang Province, The PRC.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Property

Unit 1306 on Level 13, Chang Jiang International Building, No. 28 Chang Jiang Road, Nangang District, Harbin, Heilongjiang Province, The PRC. 48. Unit 2112 on Level 21, Chang Jiang International Building, No. 28 Chang Jiang Road, Nangang District, Harbin, Heilongjiang Province, The PRC. 49. Unit 317 on Level 3, No. 26 Incubation Base, Harbin Hi-Tech Incubation Centre, Harbin, Heilongjiang Province, The PRC. 50. Units 109 and 111 on Level 1, No. 62 Zhu Jiang Road, Fan Fang District, Harbin, Heilongjiang Province, The PRC. 51. Units 802, 803 on Level 8 of Block A, Yin Du Building, No. 9 Tong Ze Bei Street, Heping District, Shenyang, Liaoning Province, The PRC.

Capital value in existing state as at 31 January 2010 HK$

No commercial value

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APPENDIX IX

			Capital value in
			existing state as at
	Property		31 January 2010
			HK$
52.	Three office units at Qi Gong Village,	No commercial value
	Ban Fang Gou, Urumqi County,
	Urumqi,
	Xinjiang Uyghur Autonomous Region,
	The PRC.
53.	Unit 4B on Level 10, Block 1,	No commercial value
	Ming Jin Plaza,
	Futian District,
	Shenzhen,
	The PRC.
54.	Unit 5B on Level 5 of Block A1,	No commercial value
	Hua Hao Yuan,
	Futian District,
	Shenzhen,
	The PRC.
55.	Unit B1903 on Level 19,	No commercial value
	Shui Xie Garden,
	Shui Shang Bei Road,
	Nan Kai District,
	Tianjin,
	The PRC.
56.	Units 7011-7014 on Level 7,	No commercial value
	Ying Jia International Building,
	No. 8 Xi Lin Nan Road Di Zhi Ju Nan Street,
	Sai Han District,
	Hohhot,
	Inner Mongolia Autonomous Region,
	The PRC.
		Sub-Total:	Nil

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APPENDIX IX VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Group III – Property interest rented by Aptus Holdings Limited in Hong Kong

Property

Room 2202 on 22nd Floor, Hopewell Centre, No. 183 Queen’s Road East, Wanchai, Hong Kong.

Capital value in existing state as at 31 January 2010 HK$ No commercial value Sub-Total: Nil

Group IV – Property interest rented by Aptus Holdings Limited in the PRC

Room 902 on Level 9, Cheng Shi Hao Xing, No commercial value No. 58 Eastern Section of Huan Cheng South Road, Xin Cheng District, Xian, Shaanxi Province, The PRC. Sub-Total: Nil

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Group V – Property interests to be acquired by Aptus Holdings Limited in Hong Kong

				Capital value in
			Percentage	existing state
			of interest	attributable
		Capital value in	attributable to	to Casdon
		existing state	Casdon	Management
		as at	Management	Limited as at 31
	Property	31 January 2010	Limited	January 2010
		HK$		HK$
1.	Lot Nos. 1995, 1996, 2043,	25,465,000	90%	22,918,500
	2044, 2046, 2048, 2049, 2050,	(excluding six parcels of		(excluding six
	2051, 2052, 2054, 2058, 2059,	land known as Lot Nos.		parcels of
	2061, 2062, 2063, 2065, 2066, 2073, 2074, 2075, 2077, 2078,	2054, 2066, 2078,		land known as Lot Nos. 2054, 2066,
	2080, 2081, 2082, 2122, 2124,	2080, 2081 & 4196)		2078, 2080, 2081 &
	2172, 2298, 4160A-J and R.P.,			4196)
	4191 and 4196 in
	Demarcation District No. 104
	together with six houses
	erected thereon,
	Ngau Tam Mei,
	Yuen Long,
	New Territories,
	Hong Kong.
	Sub-Total:	25,465,000		22,918,500
	Grand Total:	25,465,000		22,918,500

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

VALUATION CERTIFICATE

Group I – Property interest rented by China Vanguard Group Ltd. in Hong Kong

				Capital value in
			Particulars of	existing state as at
	Property	Description and occupancy	tenancy	31 January 2010
				HK$
1.	Room 2201 on 22nd	The property comprises an office unit on	The property is	No commercial value
	Floor,	22nd Floor of a 64-storey commercial	rented by the
	Hopewell Centre,	building. The building was completed in	Group for a
	No. 183 Queen’s	about 1980.	term of 3 years
	Road East,		commencing from
	Wanchai,	The property has a lettable area of about	1 March 2007 to
	Hong Kong.	6,355 sq. ft. (590.4 sq. m.).	28 February 2010
			at a monthly rent
		The property is currently occupied by	of HK$139,810
		the Group for office purpose.	exclusive of rates,
			air-conditioning
			charges and
			management fees.

Note: The tenant is B & B International Marketing (HK) Limited, an indirect wholly-owned subsidiary of the Company.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Group II – Property interests rented by China Vanguard Group Ltd. in the PRC

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 1. Rooms 1105-1109, The property comprises seven office The property is No commercial value 1110B and 1111 on units on Level 11 of a 16-storey office rented by the Level 11, building. The building was completed in Group for a Ge Hua Building, about 2006. term of 3 years No. 1 Qing Long commencing from Hu Tong, The property has a total lettable area of 16 August 2007 to Dongcheng District, about 1,109.54 sq. m. 15 August 2010 at Beijing, a monthly rent of The PRC. The property is currently occupied by RMB139,802.04 the Group for office purpose. for the first and second year and RMB143,130.66 for the third year.

Notes:

The tenant is 北京天合文化有限公司 (currently known as 天合文化集團有限公司), a jointly controlled entity of which 24.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

IX – 18

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Description and occupancy

Property

Rooms 1110A and The property comprises two office 1112 on Level 11, units on Level 11 of a 16-storey office Ge Hua Building, building. The building was completed in No. 1 Qing Long about 2006. Hu Tong, Dongcheng District, The property has a lettable area of about Beijing, 305.99 sq. m. The PRC.

The property is currently occupied by the Group for office purpose.

Capital value in Particulars of existing state as at tenancy 31 January 2010 HK$ The property is No commercial value rented by the Group for a term of 3 years commencing from 16 August 2007 to 15 August 2010 at a monthly rent of RMB38,554.71 for the first and second year and RMB39,472.71 for the third year. The rent is exclusive of management fee.

Notes:

The tenant is 深圳市博眾信息技術有限公司, a subsidiary of which 51% interest is attributable to the Company.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

				Capital value in
			Particulars of	existing state as at
	Property	Description and occupancy	tenancy	31 January 2010
				HK$
3.	Room 801 on Level 8	The property comprises an office unit on	The property is	No commercial value
	of Block A,	Level 8 of an 8-storey office building.	rented by the
	Tian Hai Commercial	The building was completed in about	Group for a
	Building,	2005.	term of 1 years
	No. 107 Dong Si Bei		commencing from
	Main Street,	The property has a lettable area of about	18 April 2009 to
	Dongcheng District,	32.2 sq. m.	17 April 2010 at
	Beijing,		a monthly rent
	The PRC.	The property is currently occupied by	of RMB2,449
		the Group for office purpose.	exclusive of
			management fees.

Notes:

The tenant is 北京中文發數字科技有限公司, a jointly controlled entity of which 49% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

IX – 20

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Property

Description and occupancy

Capital value in Particulars of existing state as at tenancy 31 January 2010 HK$

Rooms 802-3, 805The property comprises 13 office units 813, 815 and 816 on on Level 8 of an 8-storey office building. Level 8 of Block A, The building was completed in about Tian Hai Commercial 2005. Building, No. 107 Dong Si Bei The property has a total lettable area of Main Street, about 792.3 sq. m. Dongcheng District, Beijing, The property is currently occupied by The PRC. the Group for office purpose.

The property is No commercial value rented by the Group for a term of 1 years commencing from 25 January 2009 to 24 January 2010 at a monthly rent of RMB65,068 exclusive of management fees.

Subsequently, the property is rented on a monthly basis.

Notes:

The tenant is 北京中文發數字科技有限公司, a jointly controlled entity of which 49% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement shall continue to be enforceable.

IX – 21

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Description and occupancy

Property

Room 103 of The property comprises an office unit on Building No. 3, Level 1 of a 28-storey office building. No. 88 Jian Guo The building was completed in about Road, 2000. Chaoyang District, Beijing, The property has a lettable area of about The PRC. 228.58 sq. m.

The property is currently occupied by the Group for office purpose.

Capital value in Particulars of existing state as at tenancy 31 January 2010 HK$ The property is No commercial value rented by the Group for a term of 5 years commencing from 5 December 2008 to 4 December 2013 at a monthly rent of RMB29,166 exclusive of utility charges and management fees.

Notes:

The tenant is 北京本心齋茶文化有限責任公司, an indirect wholly-owned subsidiary of the Company.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

IX – 22

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

				Capital value in
			Particulars of	existing state as at
	Property	Description and occupancy	tenancy	31 January 2010
				HK$
6.	Rooms 315 and 316	The property comprises two office units	The property is	No commercial value
	on Level 3,	on Level 3 of a 19-storey office building.	rented by the
	New Heng Ji	The building was completed in about	Group for a term
	International	2001.	commencing from
	Building,		22 September
	No. 3 Mai Zi Dian Xi	The property has a total lettable area of	2008 to 30
	Road,	about 300 sq. m.	November 2011
	Chaoyang District,		at an annual rent
	Beijing,	The property is currently occupied by	of RMB378,000
	The PRC.	the Group for office purpose.	inclusive of
			management fees.

Notes:

The tenant is 北京天合新紀元文化有限公司, a jointly controlled entity of which 12.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

IX – 23

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in
Particulars of existing state as at
Property Description and occupancy tenancy 31 January 2010 HK$
1. Unit 602 on Level 6 The property comprises a domestic unit The property is No commercial value of Block 2, on Level 6 of a multi-storey residential rented by the No. 12 Court, building. The building completion year Group for a term Xi Da Wang Road, was unknown. commencing from Chaoyang District, 25 November Beijing, The property has a lettable area of about 2008 to 9 May The PRC. 70.28 sq. m. 2010 at a monthly rent of RMB2,750
The property is currently occupied by exclusive of the Group for dormitory purpose. utility charges.

Notes:

The tenant is 章宇昕.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

IX – 24

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 8. Room A01 on The property comprises an office unit on The property is No commercial value Level 7, Level 7 of a 17-storey office building. rented by the No. 485 He Nan Bei The building was completed in about Group for a Road, 1995. term of 3 years Shanghai, commencing from The PRC. The property has a lettable area of about 1 September 2008 428 sq. m. to 31 August 2011 at an annual rent The property is currently occupied by of RMB184,896 the Group for office purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 上海天合文化傳播有限公司, a jointly controlled entity of which 18.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

IX – 25

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 9. Unit 602 on Level The property comprises a domestic unit The property is No commercial value 6, No. 5, on Level 6 of a 26-storey residential rented by the Dong Fang building. The building was completed in Group for a Lai Yin He Bin about 2005. term of 1 year Garden, commencing from No. 333 Nong of Han The property has a lettable area of about 1 July 2009 to Zhong Road, 130 sq. m. 30 June 2010 at Shanghai, a monthly rent The PRC. The property is currently occupied by of RMB7,000 the Group for dormitory purpose. inclusive of management fees.

Notes:

The tenant is 上海天合文化傳播有限公司, a jointly controlled entity of which 18.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

IX – 26

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 10. Unit A606A on The property comprises a workshop The property is No commercial value Level 6, unit on Level 6 of a 19-storey industrial rented by the Tian An New building. The building was completed in Group for a Technology Plaza, about 2001. term of 2 years Che Gong Miao Road, commencing from Futian District, The property has a lettable area of about 8 March 2008 to Shenzhen, 20.3 sq. m. 7 March 2010 at The PRC. a monthly rent The property is currently occupied by of RMB2,598 the Group for workshop purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 深圳生港蜂業有限公司 (currently known as 深圳生港科技有限公司), a wholly-owned subsidiary of the Company.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was legally binding.

IX – 27

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 11. Unit A606B on The property comprises a workshop The property is No commercial value Level 6, unit on Level 6 of a 19-storey industrial rented by the Tian An New building. The building was completed in Group for a Technology Plaza, about 2001. term of 2 years Che Gong Miao Road, commencing from Futian District, The property has a lettable area of about 8 March 2008 to Shenzhen, 409.8 sq. m. 7 March 2010 at The PRC. a monthly rent The property is currently occupied by of RMB52,493 the Group for workshop purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 深圳市龍江風釆信息技術有限公司, a subsidiary of which 50.49% interest is attributable to the Company.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was legally binding.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 12. Unit A606C on The property comprises a workshop The property is No commercial value Level 6, unit on Level 6 of a 19-storey industrial rented by the Tian An New building. The building was completed in Group for a Technology Plaza, about 2001. term of 2 years Che Gong Miao Road, commencing from Futian District, The property has a lettable area of about 8 March 2008 to Shenzhen, 44.6 sq. m. 7 March 2010 at The PRC. a monthly rent The property is currently occupied by of RMB5,709 the Group for workshop purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 深圳市博眾信息技術有限公司, a subsidiary of which 51% interest is attributable to the Company.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was legally binding.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 13. Unit A on Level 12 The property comprises a domestic unit The property is No commercial value of Block B1, on Level 12 of a 32-storey residential rented by the Hua Hao Yuan building. The building was completed in Group for a Garden, about 2006. term of 1 year Futian District, commencing from Shenzhen, The property has a lettable area of about 15 May 2009 to The PRC. 40.76 sq. m. 14 May 2010 at a monthly rent The property is currently occupied by of RMB2,500 the Group for dormitory purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 張豔軍.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 14. Unit G on Level 14 The property comprises a domestic unit The property is No commercial value of Block 3, on Level 14 of a 33-storey residential rented by the Luo Hu Jin Hua building. The building was completed in Group for a Building, about 2004. term of 1 year Yan He South Road, commencing from Luo Hu District, The property has a lettable area of about 18 May 2009 to Shenzhen, 76.92 sq.m. 17 May 2010 at The PRC. a monthly rent The property is currently occupied by of RMB2,900 the Group for dormitory purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 張豔軍.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 15. Unit 6 on Level 9 The property comprises a domestic unit The property is No commercial value of Block B, Tai An on Level 9 of a 32-storey residential rented by the Xuan Building, building. The building was completed in Group for a Futian District, about 2000. term of 2 years Shenzhen, commencing from The PRC. The property has a lettable area of about 26 March 2008 to 49.71 sq. m. 25 March 2010 at a monthly rent The property is currently occupied by of RMB2,100 the Group for dormitory purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 許文.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Description and occupancy

Property

Unit 8 on Level 9, The property comprises a domestic unit Tai Ran Tai Kang on Level 9 of a 32-storey residential Xuan Building, building. The building was completed in Futian District, about 2000. Shenzhen, The PRC.

The property has a lettable area of about 61.4 sq. m.

The property is currently occupied by the Group for dormitory purpose.

Capital value in Particulars of existing state as at tenancy 31 January 2010 HK$ The property is No commercial value rented by the Group for a term of 2 years commencing from 26 March 2008 to 25 March 2010 at a monthly rent of RMB3,300 exclusive of utility charges and management fees.

Notes:

The tenant is 許文.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 17. Unit 301 on Level 3, The property comprises a domestic unit The property is No commercial value Jia Wen Court, on Level 3 of a 12-storey residential rented by the Jia Fu Garden, building. The building was completed in Group for a Fu Qiang Road, about 2003. term of 2 years Futian District, commencing from Shenzhen, The property has a lettable area of about 15 October 2009 The PRC. 141.6 sq. m. to 14 October 2011 at a monthly The property is currently occupied by rent of RMB4,800 the Group for dormitory purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 穆承.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 18. Unit 02 on Level 5, The property comprises a domestic unit The property is No commercial value Jia Xian Court, on Level 5 of a 12-storey residential rented by the Jia Fu Garden, building. The building was completed in Group for a Fu Qiang Road, about 2004. term of 5 years Futian District, commencing from Shenzhen, The property has a lettable area of about 1 November 2009 The PRC. 108 sq. m. to 31 October 2014 at a monthly The property is currently occupied by rent of RMB3,900 the Group for dormitory purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 穆承.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

IX – 35

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 19. Shop No. 8 on The property comprises a shop unit The property is No commercial value Level 2, on Level 2 of a 32-storey commercial rented by the Jin Di Ming Jin Plaza, building. The building was completed in Group for a term Futian District, about 2008. commencing Shenzhen, from 1 August The PRC. The property has a lettable area of about 2009 to 30 932.44 sq. m. September 2014 at a monthly rent The property is currently occupied by of RMB55,946 the Group for shop purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 深圳生港科技有限公司, a wholly-owned subsidiary of the Company.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

IX – 36

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 20. Unit 1203 on Level 12 The property comprises an office unit on The property is No commercial value of North Block, Level 12 of a 30-storey office building. rented by the Fu Li Ying Li The building was completed in about Group for a Building, 2007. term of 3 years No. 3 Hua Qiang commencing from Road, The property has a lettable area of about 13 August 2008 to Zhu Jiang New City, 196.3 sq. m. 12 August 2011 Guangzhou, at a monthly rent Guangdong Province, The property is currently occupied by of RMB19,630 The PRC. the Group for office purpose. for the first and second year and RMB21,200 for the third year.

Notes:

The tenant is 謝燦英.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 21. Unit 2806 on Level 28 The property comprises an office unit on The property is No commercial value of Block B, Level 28 of a 31-storey office building. rented by the Dong Fang Ming The building was completed in about Group for a Yuan, 2002. term of 2 years No. 33 Shi Gu Road, commencing Bai Xia District, The property has a lettable area of about from 20 October Nanjing, 184.78 sq. m. 2008 to 19 Jiangsu Province, October 2010 at The PRC. The property is currently occupied by an annual rent the Group for office purpose. of RMB80,000 exclusive of utility charges and management fees.

Notes:

The tenant is 江蘇天合新紀元文化有限公司, a jointly controlled entity of which 24.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in
Particulars of existing state as at
Property Description and occupancy tenancy 31 January 2010 HK$
1. Unit 203 on Level 2 of The property comprises a domestic unit The property is No commercial value Block 1, on Level 2 of a 6-storey residential rented by the Jin Cang Garden, building. The building was completed in Group for a No. 759 Shi Quan about 1994. term of 1 year Street, commencing from Cang Lang District, The property has a lettable area of about 2 July 2009 to Suzhou, 110 sq.m. 1 July 2010 at Jiangsu Province, a monthly rent The PRC. The property is currently occupied by of RMB2,500 the Group for dormitory purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 錢順兵.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

				Capital value in
			Particulars of	existing state as at
	Property	Description and occupancy	tenancy	31 January 2010
				HK$
23.	Unit 1707 on Level 17	The property comprises an office unit on	The property is	No commercial value
	of Block E,	Level 17 of a 17-storey office building.	rented by the
	Dong Qing Building,	The building was completed in about	Group for a term
	No. 52 Qing Chun	1988.	commencing from
	Road,		11 May 2009 to
	Hangzhou,	The property has a lettable area of about	11 May 2010 at
	Zhejiang Province,	132 sq. m.	an annual rent
	The PRC.		of RMB67,200
		The property is currently occupied by	exclusive of
		the Group for office purpose.	utility charges
			and management
			fees.

Notes:

The tenant is 深圳市博眾信息技術有限公司, a subsidiary of which 51% interest is attributable to the Company.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 24. Unit 4 on Level 13 The property comprises an office unit on The property is No commercial value of Block B2, Level 13 of a 13-storey office building. rented by the Xi Hu International The building was completed in about Group for a term Technology Building, 2008. commencing from No. 391 Wen Er Road, 25 June 2008 to Hangzhou, The property has a lettable area of about 22 August 2011 Zhejiang Province, 170.18 sq. m. at a daily rent The PRC. of RMB3.2 per The property is currently occupied by sq. m. exclusive the Group for office purpose. of management fees.

Notes:

The tenant is 浙江天合文化發展有限公司, a jointly controlled entity of which 12.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 25. Unit 902 on Level 9 of The property comprises a domestic unit The property is No commercial value Block 3, on Level 9 of a 28-storey residential rented by the Wai Tan Garden, building. The building was completed in Group for a Ningbo, about 2006. term of 1 year Zhejiang Province, commencing from The PRC. The property has a lettable area of about 17 September 156.21 sq.m. 2009 to 16 September 2010 The property is currently occupied by at a monthly rent the Group for dormitory purpose. of RMB5,400 exclusive of utility charges and management fees.

Notes:

The tenant is 張鵬飛.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 26. Room 2003 on The property comprises an office unit on The property is No commercial value Level 20, Level 20 of a 28-storey office building. rented by the Hu Nan Cultural The building was completed in about Group for a Building, 2004. term of 1 year No. 139 Shao Shan commencing from Bei Road, The property has a lettable area of about 1 June 2009 to Fu Rong District, 132.58 sq. m. 31 May 2010 at Changsha, a quarterly rent Hunan Province, The property is currently occupied by of RMB20,000 The PRC. the Group for office purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 湖南天合世嘉文化有限公司, a jointly controlled entity of which 18.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

IX – 43

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 27. Room 302 on Level 3 The property comprises a domestic unit The property is No commercial value of Block 1, on Level 3 of a 17-storey residential rented by the Yao Ling Changsha building. The building was completed in Group for a City National Tax about 2003. term of 1 year Bureau Dormitory commencing from Building, The property has a lettable area of about 1 July 2009 to No. 355 Shao Shan 136 sq. m. 30 June 2010 at Bei Road, a monthly rent Changsha, The property is currently occupied by of RMB2,000 Hunan Province, the Group for dormitory purpose. exclusive of The PRC. utility charges and management fees.

Notes:

The tenant is 湖南天合世嘉文化有限公司, a jointly controlled entity of which 18.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 28. Block G on Level 12, The property comprises an office unit on The property is No commercial value Sheng Wei Building, Level 12 of a 17-storey office building. rented by the No. 480 Nan Nei The building was completed in about Group for a term Huan Street, 2007. commencing from Taiyuan, 1 June 2008 to Shanxi Province, The property has a lettable area of about 30 May 2011 at The PRC. 83 sq. m. an annual rent of RMB37,000 The property is currently occupied by inclusive of the Group for office purpose. management fees.

Notes:

The tenant is 張增華.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

IX – 45

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 29. Block B on Level 11, The property comprises an office unit on The property is No commercial value Sheng Wei Building, Level 11 of a 17-storey office building. rented by the No. 480 Nan Nei The building was completed in about Group for a Huan Street, 2007. term of 1 year Taiyuan, commencing from Shanxi Province, The property has a lettable area of about 1 June 2009 to The PRC. 84.59 sq. m. 31 May 2010 at an annual rent The property is currently occupied by of RMB30,000 the Group for office purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 山西天合文化傳播有限公司, a jointly controlled entity of which 12.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 30. Five office units on The property comprises 5 office units on The property is No commercial value Level 5, Level 5 of a multi-storey office building. rented by the No. 55 Dong Yu Long The building completion year was Group for a Street, unknown. term of 1 year Jin Jiang District, commencing from Chengdu, The property has a total lettable area of 1 January 2009 Sichuan Province, about 150 sq.m. to 31 December The PRC. 2009 at a monthly The property is currently occupied by rent of RMB4,250 the Group for office purpose. inclusive of utility charges.

Subsequently, the property is rented on a monthly basis.

Notes:

The tenant is 四川天合文化有限公司, a jointly controlled entity of which 12.27% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in
Particulars of existing state as at
Property Description and occupancy tenancy 31 January 2010 HK$
1. Unit 203 on Level 2, The property comprises a workshop The property is No commercial value Chuang Xin Building, unit on Level 2 of an 8-storey industrial rented by the No. 5 Ke Yuan Yi building. The building was completed in Group for a Road, about 1993. term of 1 year Hi-Tech Industrial commencing from Development Zone, The property has a lettable area of about 1 April 2009 at Shi Qiao Pu, 67.04 sq. m. a monthly rent Chongqing, of RMB1,887.2 The PRC. The property is currently occupied by inclusive of the Group for workshop purpose. management fee.

Notes:

The tenant is 重慶禮光博軟科技發展有限公司, a jointly controlled entity of which 29.89% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 32. Unit 301 on Level 3, The property comprises a workshop The property is No commercial value Chuang Xin Building, unit on Level 3 of an 8-storey industrial rented by the No. 5 Ke Yuan Yi building. The building was completed in Group for a Road, about 1993. term of 2 years Hi-Tech Industrial commencing from Development Zone, The property has a lettable area of about 12 August 2008 to Shi Qiao Pu, 93 sq. m. 11 August 2010 Chongqing, at a monthly rent The PRC. The property is currently occupied by of RMB2,604 the Group for workshop purpose. inclusive of management fees.

Notes:

The tenant is 重慶天合世紀文化傳媒有限公司, a jointly controlled entity of which 12.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

IX – 49

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 33. Unit 608 on Level 6, The property comprises an office unit on The property is No commercial value Fu Cheng Building, Level 6 of a 11-storey office building. rented by the Ma An Shan Nan The building was completed in about Group for a Road, 2000. term of 2 years Hefei, commencing from Anhui Province, The property has a lettable area of about 1 November 2008 The PRC. 110 sq. m. to 31 October 2010 at a monthly The property is currently occupied by rent of RMB3,850 the Group for office purpose. exclusive of management fees.

Notes:

The tenant is 安徽天合文化有限公司, a jointly controlled entity of which 12.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

IX – 50

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 34. Unit 703 on Level 7, The property comprises an office unit on The property is No commercial value No. 131 Bei Huan Level 7 of a 31-storey office building. rented by the Zhong Road, The building was completed in about Group for a Fuzhou, 2004. term of 2 years Fujian Province, commencing from The PRC. The property has a lettable area of about 1 March 2009 to 300 sq. m. 28 February 2011 at a monthly rent The property is currently occupied by of RMB8,000 the Group for office purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 福建天合文化傳播有限公司, a jointly controlled entity of which 12.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 35. Level 13, The property comprises a office unit The property is No commercial value No. 2 Zhong Hua Bei on Level 13 of a multi-storey office rented by the Street, building. The building completion year Group for a term Guiyang, was unknown. commencing from Guizhou Province, 1 January 2010 The PRC. The property has a lettable area of about to 31 December 40 sq. m. 2013 at a monthly rent of RMB2,200 The property is currently occupied by exclusive of the Group for office purpose. utility charges.

Notes:

The tenant is 貴州天合陽光文化有限公司, a jointly controlled entity of which 12.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

IX – 52

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in
Particulars of existing state as at
Property Description and occupancy tenancy 31 January 2010 HK$
1. Unit 303 on Level 3 of The property comprises a domestic unit The property is No commercial value Block 1, on Level 3 of a multi-storey residential rented by the Jian Xin Road, building. The building completion year Group for a Chaoyang District, was unknown. term of 1 year Anshun, commencing from Guizhou Province, The property has a lettable area of about 8 September 2009 The PRC. 104 sq.m. to 7 September 2010 at a monthly
The property is currently occupied by rent of RMB800. the Group for dormitory purpose.

Notes:

The tenant is 貴州天合陽光文化有限公司, a jointly controlled entity of which 12.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

IX – 53

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 37. Unit 1B on Level 1 The property comprises a domestic unit The property is No commercial value of Block 69, on Level 1 of a multi-storey residential rented by the Jian Ye City Garden, building. The building was completed in Group for a term No. 88 Jian Ye Road, about 2001. commencing from Zhengzhou, 1 July 2009 to Henan Province, The property has a lettable area of about 1 July 2012 at The PRC. 178.5 sq. m. an annual rent of RMB48,000 The property is currently occupied by exclusive of the Group for dormitory purpose. utility charges and management fees.

Notes:

The tenant is 河南天合文化有限公司, a jointly controlled entity of which 12.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 38. Unit 1908 on The property comprises an office unit on The property is No commercial value Level 19, Level 19 of a 30-storey office building. rented by the Zhao Fu Building, The building was completed in about Group for a No. 717 Wu Luo 2003. term of 3 years Road, commencing from Hong Shan District, The property has a lettable area of about 20 July 2008 to Wuhan, 121.12 sq. m. 19 July 2011 at Hubei Province, a monthly rent The PRC. The property is currently occupied by of RMB3,997 the Group for office purpose. exclusive of management fees.

Notes:

The tenant is 曹小.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

IX – 55

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 39. Unit 1601 and 1602 The property comprises 2 office units on The property is No commercial value on Level 16 of Level 16 of a 28-storey office building. rented by the Block A, The building was completed in about Group for a Xin Du Building, 2007. term of 2 years No. 18 Wei Jin Road, commencing Nan Kai District, The property has a total lettable area of from 1 October Tianjin, about 194.28 sq. m. 2008 to 30 The PRC. September 2010 The property is currently occupied by at a daily rent the Group for office purpose. of RMB2.4 per sq. m. inclusive of management fees.

Notes:

The tenant is 天津天合新紀元文化傳播有限公司, a jointly controlled entity of which 18.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

				Capital value in
			Particulars of	existing state as at
	Property	Description and occupancy	tenancy	31 January 2010
				HK$
40.	Blocks C and D on	The property comprises 2 office units on	The property is	No commercial value
	Level 9,	Level 9 of a 15-storey office building.	rented by the
	Ji Cheng Building,	The building was completed in about	Group for a term
	Dan Xia Road,	2006.	commencing from
	Xishan District,		1 November 2008
	Kunming,	The property has a total lettable area of	to 31 December
	Yunnan Province,	about 380 sq. m.	2013 at a monthly
	The PRC.		rent of RMB9,000
		The property is currently occupied by	exclusive of
		the Group for office purpose.	management fees.

Notes:

The tenant is 雲南天合世紀文化傳播有限公司, a jointly controlled entity of which 12.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

				Capital value in
			Particulars of	existing state as at
	Property	Description and occupancy	tenancy	31 January 2010
				HK$
41.	Unit A2 on Level 18,	The property comprises an office unit on	The property is	No commercial value
	Gang Ao Development	Level 18 of a 24-storey office building.	rented by the
	Building,	The building was completed in about	Group for a term
	No. 49-1 Guo Mao	2004.	commencing from
	Main Road,		25 May 2008 to
	Longhua District,	The property has a lettable area of about	25 May 2011 at
	Haikou,	168.82 sq. m.	an annual rent of
	Hainan Province,		RMB107,369.52
	The PRC.	The property is currently occupied by	exclusive of
		the Group for office purpose.	utility charges.

Notes:

The tenant is 海南天合傳美文化有限公司, a jointly controlled entity of which 12.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Description and occupancy

Property

Unit 702 on Level 7, The property comprises a domestic unit Jin Wai Tan on Level 7 of a 25-storey residential Commercial Building, building. The building was completed in No. 66 Zhong Shan about 2001. Road, Nanning, The property has a lettable area of about Guangxi Province, 127.9 sq. m. The PRC. The property is currently occupied by the Group for dormitory purpose.

Capital value in Particulars of existing state as at tenancy 31 January 2010 HK$ The property is No commercial value rented by the Group for a term commencing from 1 September 2009 to 30 September 2011 at a monthly rent of 5,500 for the first year and a monthly rent of RMB6,250 for the second year exclusive of utility charges and management fees.

Notes:

The tenant is 廣西天合世紀文化有限公司, a jointly controlled entity of which 16.17% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

				Capital value in
			Particulars of	existing state as at
	Property	Description and occupancy	tenancy	31 January 2010
				HK$
43.	An office space in the	The property comprises an office space	The property is	No commercial value
	office area of Xining	within a multi-storey office building.	rented by the
	Drama Group,	The building completion year was	Group for a
	Unit 5 of Gao Cao	unknown.	term of 1 year
	Lane,		commencing from
	Zhi Fang Street,	The property has a lettable area of about	1 January 2010
	Chengxi District,	15 sq. m.	to 31 December
	Xining,		2010 at a monthly
	Qinghai Province,	The property is currently occupied by	rent of RMB500.
	The PRC.	the Group for office purpose.

Notes:

The tenant is 青海天合文化有限公司, a jointly controlled entity of which 12.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

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APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 44. Unit 1401 on Level 14 The property comprises a domestic unit The property is No commercial value of Block 1, on Level 14 of a 29-storey residential rented by the Fuzhou Bei Road, building. The building was completed in Group for a Qingdao, about 2006. term of 1 year Shandong Province, commencing from The PRC. The property has a lettable area of about 9 March 2009 to 174 sq. m. 8 March 2010 at an annual rent The property is currently occupied by of RMB53,000 the Group for dormitory purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 山東天合世紀文化傳播有限公司, a jointly controlled entity of which 24.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

IX – 61

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 45. Block C on Level 18, The property comprises an office unit on The property is No commercial value Hong Yuan Building, Level 18 of a 26-storey office building. rented by the No. 2 Huan Shan The building was completed in about Group for a Road, 2004. term of 1 year Lixia District, commencing Jinan, The property has a lettable area of about from 1 October Shandong Province, 174 sq. m. 2009 to 30 The PRC. September 2010 The property is currently occupied by at an annual rent the Group for office purpose. of RMB47,000 exclusive of utility charges and management fees.

Notes:

The tenant is 山東天合世紀文化傳播有限公司, a jointly controlled entity of which 24.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

				Capital value in
			Particulars of	existing state as at
	Property	Description and occupancy	tenancy	31 January 2010
				HK$
46.	Units 2407-10 on	The property comprises 4 office units on	The property is	No commercial value
	Level 24,	Level 24 of a 30-storey office building.	rented by the
	Join Us Plaza,	The building was completed in about	Group for a term
	No. 15 Song Hua	2001.	commencing from
	Jiang Street,		16 April 2008 to
	Nangang District,	The property has a total lettable area of	15 April 2011 at
	Harbin,	about 240.32 sq. m.	a monthly rent of
	Heilongjiang		RMB14,619.47.
	Province,	The property is currently occupied by
	The PRC.	the Group for office purpose.

Notes:

The tenant is 哈爾濱市龍江風釆信息科技有限公司, (currently known as 黑龍江省博眾信息技術有限公司), a subsidiary of which 33.15% interest is attributable to the Company.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in
Particulars of existing state as at
Property Description and occupancy tenancy 31 January 2010 HK$
1. Unit 1306 on The property comprises an office unit on The property is No commercial value Level 13, Level 13 of a 24-storey office building. rented by the Chang Jiang The building was completed in about Group for a International 2005. term of 1 year Building, commencing from No. 28 Chang Jiang The property has a lettable area of about 1 May 2009 to Road, 102 sq. m. 30 April 2010 at Nangang District, an annual rent Harbin, The property is currently occupied by of RMB65,000 Heilongjiang the Group for office purpose. inclusive of Province, management fees. The PRC.

Notes:

The tenant is 黑龍江天合世紀文化有限公司, a jointly controlled entity of which 18.62% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

IX – 64

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in
Particulars of existing state as at
Property Description and occupancy tenancy 31 January 2010 HK$
1. Unit 2112 on The property comprises an office unit on The property is No commercial value Level 21, Level 21 of a 24-storey office building. rented by the Chang Jiang The building was completed in about Group for a International 2005. term of 1 year Building, commencing from No. 28 Chang Jiang The property has a lettable area of about 1 May 2009 to Road, 50 sq. m. 30 April 2010 at Nangang District, an annual rent Harbin, The property is currently occupied by of RMB35,000 Heilongjiang the Group for office purpose. inclusive of Province, management fees. The PRC.

Notes:

The tenant is 黑龍江天合世紀文化有限公司, a jointly controlled entity of which 18.62% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

				Capital value in
			Particulars of	existing state as at
	Property	Description and occupancy	tenancy	31 January 2010
				HK$
49.	Unit 317 on Level 3,	The property comprises a workshop unit	The property is	No commercial value
	No. 26 Incubation	on Level 3 of a multi-storey industrial	rented by the
	Base,	building. The building was completed in	Group for a term
	Harbin Hi-Tech	about 2002.	commencing from
	Incubation Centre,		1 November 2008
	Harbin,	The property has a lettable area of about	to 1 November
	Heilongjiang	20 sq. m.	2010 at an
	Province,		annual rent of
	The PRC.	The property is currently occupied by	RMB11,000.
		the Group for workshop purpose.

Notes:

The tenant is 哈爾濱市龍江風釆信息科技有限公司, (currently known as 黑龍江省博眾信息技術有限公司), a subsidiary of which 33.15% interest is attributable to the Company.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

				Capital value in
			Particulars of	existing state as at
	Property	Description and occupancy	tenancy	31 January 2010
				HK$
50.	Units 109 and 111 on	The property comprises 2 office units on	The property is	No commercial value
	Level 1,	Level 1 of a multi-storey office building.	rented by the
	No. 62 Zhu Jiang	The building completion year was	Group for a term
	Road,	unknown.	commencing from
	Fan Fang District,		1 July 2008 to
	Harbin,	The property has a total lettable area of	30 June 2010 at
	Heilongjiang	about 72 sq. m.	an annual rent of
	Province,		RMB42,768.
	The PRC.	The property is currently occupied by
		the Group for office purpose.

Notes:

The tenant is 黑龍江省博眾信息科技有限公司, a subsidiary of which 33.15% interest is attributable to the Company.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

IX – 67

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 51. Units 802, 803 on The property comprises 2 office units on The property is No commercial value Level 8 of Block A, Level 8 of a multi-storey office building. rented by the Yin Du Building, The building was completed in about Group for a No. 9 Tong Ze Bei 2005. term of 1 year Street, commencing Heping District, The property has a total lettable area of from 8 February Shenyang, about 163 sq. m. 2009 to 7 Liaoning Province, February 2010 The PRC. The property is currently occupied by at an annual rent the Group for office purpose. of RMB70,000 inclusive of utility charges.

Notes:

The tenant is 遼寧天合文化有限公司, a jointly controlled entity of which 13.72% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

IX – 68

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Description and occupancy

Property

Three office units at The property comprises three office Qi Gong Village, units within a multi-storey office Ban Fang Gou, building. The building completion year Urumqi County, was unknown. Urumqi, Xinjiang Uyghur The property has a total lettable area of Autonomous Region, about 90 sq. m. The PRC. The property is currently occupied by the Group for office purpose.

Capital value in Particulars of existing state as at tenancy 31 January 2010 HK$ The property is No commercial value rented by the Group for a term commencing from 1 January 2010 to 31 December 2013 at a monthly rent of RMB2,000.

Notes:

The tenant is 新彊天合文化有限公司, a jointly controlled entity of which 12.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Property

Description and occupancy

Capital value in Particulars of existing state as at tenancy 31 January 2010 HK$

Unit 4B on The property comprises a domestic unit Level 10, Block 1, on Level 10 of a 32-storey residential Ming Jin Plaza, building. The building was completed in Futian District, about 2008. Shenzhen, The PRC. The property has a lettable area of about 43 sq. m.

The property is currently occupied by the Group for dormitory purpose.

The property is No commercial value rented by the Group for a term of 1 year commencing from 5 December 2009 to 4 December 2010 at a monthly rent of RMB3,000 exclusive of utility charges and management fees.

Notes:

The tenant is 許文.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

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VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 54. Unit 5B on Level 5 of The property comprises a domestic unit The property is No commercial value Block A1, on Level 5 of a 32-storey residential rented by the Hua Hao Yuan, building. The building was completed in Group for a Futian District, about 2004. term of 1 year Shenzhen, commencing from The PRC. The property has a lettable area of about 1 December 2009 31 sq. m. to 30 November 2010 at a monthly The property is currently occupied by rent of RMB2,100 the Group for dormitory purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 許文.
According to the opinion provided by the Company’s legal advisers on PRC laws, the tenancy agreement was enforceable.

IX – 71

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 55. Unit B1903 on The property comprises a domestic unit The property is No commercial value Level 19, on Level 19 of a 20-storey residential rented by the Shui Xie Garden, building. The building was completed in Group for a Shui Shang Bei Road, about 2004. term of 1 year Nan Kai District, commencing from Tianjin, The property has a lettable area of about 5 December 2009 The PRC. 205.85 sq. m. to 4 December 2010 at a The property is currently occupied by monthly rent of the Group for dormitory purpose. RMB9,000.

Notes:

The tenant is 天津天合新紀元文化傳播有限公司, a jointly controlled entity of which 18.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

IX – 72

APPENDIX IX

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 56. Units 7011-7014 The property comprises 4 office units on The property is No commercial value on Level 7, Level 7 of a 28-storey office building. rented by the Ying Jia International The building was completed in about Group for a Building, 2009. term of 5 years No. 8 Xi Lin Nan commencing Road Di Zhi Ju Nan The property has a total lettable area of from 1 December Street, about 232 sq. m. 2009 to 30 Sai Han District, November 2014 Hohhot, The property is currently occupied by at an annual rent Inner Mongolia the Group for office purpose. of RMB84,680 Autonomous Region, inclusive of The PRC. management fees.

Notes:

The tenant is 內蒙古天合文化有限公司, a jointly controlled entity of which 24.5% nominal value of registered capital is held by the Group.
According to the opinion provided by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

IX – 73

APPENDIX IX VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Group III – Property interest rented by Aptus Holdings Limited in Hong Kong

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 1. Room 2202 on The property comprises an office unit on The property is No commercial value 22nd Floor, 22nd Floor of a 64-storey commercial rented by the Hopewell Centre, building. The building was completed in Group for a No. 183 Queen’s about 1980. term of 2 years Road East, commencing from Wanchai, The property has a lettable area of about 1 March 2008 to Hong Kong. 953 sq. ft. (88.5 sq. m.). 28 February 2010 at a monthly rent The property is currently occupied by of HK$20,966 the Group for office purpose. exclusive of rates, air-conditioning charges and management fees.

Note: The tenant is B & B International Marketing (HK) Limited, an indirect wholly-owned subsidiary of China Vanguard Group Ltd.

IX – 74

APPENDIX IX VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Group IV – Property interest rented by Aptus Holdings Limited in the PRC

Capital value in Particulars of existing state as at Property Description and occupancy tenancy 31 January 2010 HK$ 1. Room 902 on The property comprises a domestic unit The property is No commercial value Level 9, on Level 9 of a multi-storey residential rented by the Cheng Shi Hao Xing, building. The building completion year Group for a No. 58 Eastern was unknown. term of 1 year Section of Huan commencing from Cheng South Road, The property has a lettable area of about 1 June 2009 to Xin Cheng District, 114.5 sq. m. 31 May 2010 at Xian, an annual rent Shaanxi Province, The property is currently occupied by of RMB24,000 The PRC. the Group for dormitory purpose. exclusive of utility charges and management fees.

Notes:

The tenant is 華油中匯能源發展有限責任公司, a subsidiary of which 70% interest is attributable to Aptus Holdings Limited.
According to the opinion provide by the Company’s legal advisers on PRC laws, no opinion was given on the tenancy agreement.

IX – 75

APPENDIX IX VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Group V – Property interests to be acquired by Aptus Holdings Limited in Hong Kong

Property Description and tenure

Capital value in Particulars of existing state as at occupancy 31 January 2010 HK$

Lot Nos. 1995, 1996, 2043, 2044, 2046, 2048, 2049, 2050, 2051, 2052, 2054, 2058, 2059, 2061, 2062, 2063, 2065, 2066, 2073, 2074, 2075, 2077, 2078, 2080, 2081, 2082, 2122, 2124, 2172, 2298, 4160AJ and R.P., 4191 and 4196 in Demarcation District No. 104 together with six houses erected thereon, Ngau Tam Mei, Yuen Long, New Territories, Hong Kong.

The property comprises 43 parcels of agricultural land with four 2-storey houses and two single-storey houses erected thereon.

The site areas of Lot Nos. 2054, 2066, 2078, 2080, 2081 and 4196 are not available from the Government’s land records. The remaining 37 parcels of land have a total site area of 90,948 sq. ft. (8,449.3 sq. m.). These 43 parcels of land (except Lot Nos. 2172 and 2298) were adjoining to each other.

The six houses have a total gross floor area of approximately 1,013.8 sq. m. (including a total balcony area of approximately 60.1 sq. m.) The ages of these six houses were unknown.

The various 25,465,000 (excluding parcels of six parcels of land agricultural land known as lot nos. are currently 2054, 2066, 2078, either vacant 2080, 2081 & 4196) or occupied as (see Note 7 below) access road. (100% interest)

The houses of 22,918,500 (excluding the property are six parcels of land currently under known as lot nos. renovation. 2054, 2066, 2078, 2080, 2081 & 4196) (90% interest attributable to Casdon Management Limited)

The current annual Government rent payable for the various lots of the property is equal to 3% of the rateable value for the time being of the lots.

IX – 76

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

Notes:

The registered owners of the property are set out below:

Lot No. Registered Owner

2054, 2074, 2075, 2078, 2080, 2081	Loyal Truth Corporation Limited, of which 90% interest was held by Casdon
	Management Limited
2082	Blissful Year Limited, of which 90% interest was held by Casdon Management
	Limited
2058	882HK Limited, of which 90% interest was held by Casdon Management Limited
2051, 2052, 2062	Cheerful Year Limited, of which 90% interest was held by Casdon Management
	Limited
2061, 2063, 2065	Civic Limited, of which 90% interest was held by Casdon Management Limited
2044, 2059	Good Day Limited, of which 90% interest was held by Casdon Management
	Limited
1995, 1996, 2043, 2046, 2048, 2049,	Hero Limited, of which 90% interest was held by Casdon Management Limited
2050, 2066, 2073, 2077, 2122, 4191,
4196
4160 A-J	Happy Dragon Limited, of which 90% interest was held by Casdon Management
	Limited
4160 R.P.	Fully Kingdom Limited, of which 90% interest was held by Casdon Management
	Limited
2124	Rich Wealthy Limited, of which 90% interest was held by Casdon Management
	Limited
2172, 2298	HK 126 Limited, of which 90% interest was held by Casdon Management Limited

The various lots of the property fall within the land use zone of “Village Type Development” in the Approved Ngau Tam Mei Outline Zoning Plan No. S/YL-NTM/12. According to the notes attached to this Outline Zoning Plan, land within this zone is primarily intended for development of Small House by indigenous villagers. It is also intended to concentrate village type development within this zone for a more orderly development pattern, efficient use of land and provision of infrastructures and services. Selected commercial and community uses serving the needs of the villagers and in support of the village development are always permitted on the ground floor of a New Territories Exempted House. Other commercial, community and recreational uses may be permitted on application to the Town Planning Board.

IX – 77

VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

APPENDIX IX

The following lots of the property were acquired within 5 years and their acquisition costs were set out below:

Lot No.	Acquisition Date	Acquisition Cost
		(HK$)
2054, 2074, 2075, 2078, 2080, 2081	20 February 2008	1,200,000
2082	20 February 2008	2,000,000
2058	3 May 2008	2,000,000
2077	3 May 2008	2,000,000
2051, 2052	9 May 2008	2,000,000
2062	3 May 2008	2,000,000
2061	9 May 2008	2,000,000
2063, 2065	3 May 2008	2,000,000
2044	9 May 2008	2,000,000
2059	3 May 2008	2,000,000
1995, 1996, 2043, 2046, 2048, 2049,	9 May 2008	2,000,000
2050, 2066, 2073, 2122, 4191, 4196
4160 A-J	2 February 2009	600,000
4160 R.P.	2 February 2009	200,000
2124	2 February 2009	200,000
2172, 2298	28 July 2008	1,466,496

Six houses were located in the following lots:

Lot No. Description 2051, 2052 One 2-storey house 2061 One 2-storey house One single storey house 2044, 2046 One 2-storey house One single storey house 2059, 2065 One 2-storey house Total	Gross Floor Area (sq. m.) (Approximate) 137.3 (including a balcony area of about 4.1 sq. m.) 178.3 (including a balcony area of about 16.3 sq. m.) 16.1 202.4 (including a balcony area of about 16.1 sq. m.) 37 442.7 (including a balcony area of about 23.6 sq. m.) 1,013.8

The above areas are based on the dimension plans prepared by Casdon Management Limited’s land surveyor, Kin Tat Engineering Survey Co.

We have been informed by the Enlarged China Vanguard Group that portion of the building erected on Lot Nos. 2059 and 2065 encroaches into Lot No. 2072 in Demarcation District No. 104 of which the registered owner is an independent third party. We have been advised by the Enlarged China Vanguard Group that the Enlarged China Vanguard Group will obtain ownership of Lot No. 2072 in Demarcation District No. 104 by means of adverse possession.
The location of Lot No. 4196 cannot be identified. In our valuation, we have excluded this Lot No. 4196.
The site areas of Lot Nos. 2054, 2066, 2078, 2080, 2081 and 4196 were unavailable from the Government’s land records. We have excluded these lots in our valuations. Our opinion of value represents the values of the following lots only:

Lot Nos. 1995, 1996, 2043, 2044, 2046, 2048, 2049, 2050, 2051, 2052, 2058, 2059, 2061, 2062, 2063, 2065, 2073, 2074, 2075, 2077, 2082, 2122, 2124, 2172, 2298, 4160A-J and R.P. and 4191.

IX – 78

APPENDIX IX VALUATION REPORT ON THE LAND AND BUILDINGS OF THE ENLARGED CHINA VANGUARD GROUP

Lot No. 2082 is subject to a sealed copy order vide memorial no. 08102101700074 dated 16 May 2008 in favour of Chung Wah Steel Furniture Factory Company Limited (Plaintiff), Cheerful Year Limited (1st Defendant) and Blissful Year Limited (2nd Defendant) under HCA 827 of 2008. Registration of this sealed copy order was withheld.
According to the legal opinion provided by Red Rabbit Capital Limited’s legal advisers, Messrs Raymond Chan, Kenneth Yuen & Co., the houses of the property are legally erected on the various parcels of land of the property.
A breakdown of the capital value was set out as follows:

100% interest 37 parcels of land HK$23,655,000 6 houses HK$1,810,000 Total HK$25,465,000

90% interest attributable to Casdon Management Limited

HK$21,289,500 HK$1,629,000 HK$22,918,500

IX – 79

GENERAL INFORMATION OF APTUS

APPENDIX X

1. RESPONSIBILITY STATEMENT

This joint circular, for which the Aptus Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Aptus Group. The Aptus Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:

(a) the information contained in this joint circular is accurate and complete in all material respects and is not misleading;
(b) there are no other matters or facts the omission of which would make any statement in this joint circular misleading; and
(c) all opinions expressed in this joint circular have been arrived at after due and careful consideration and are founded on basis and assumptions that are fair and reasonable.

2. SHARE CAPITAL

The authorised and issued and fully paid up share capital of Aptus as at the Latest Practicable Date were as follows:

Authorised: 20,000,000,000 Aptus Shares Issued and fully paid: 2,063,671,428 Aptus Shares	HK$ 200,000,000.00

	20,636,714.28

The authorised and issued and fully paid up share capital of Aptus upon the allotment and issue of the Conversion Shares and the allotment and issue of conversion shares assuming full exercise of the Aptus Bonds will be as follows:

Authorised: 20,000,000,000 Aptus Shares Issued and fully paid: 2,063,671,428 Aptus Shares 3,400,000,000 Issue of the Conversion Shares 59,280,401 Issue of the conversion shares assuming full exercise of the Aptus Bond(s) 5,522,951,829 Aptus Shares	HK$ 200,000,000.00

	20,636,714.28 34,000,000.00 592,804.01
	55,229,518.29

X – 1

APPENDIX X

GENERAL INFORMATION OF APTUS

As at the Latest Practicable Date, there were no outstanding options entitling the holders thereof to subscribe for new Aptus Shares. Based on the prevailing conversion price of the outstanding convertible bonds, there were outstanding Aptus Bond(s) entitling the holder to convert into 59,280,401 new Aptus Shares. Save for the aforesaid, there were no other outstanding securities of Aptus. All the Aptus Shares in issue and the conversion shares and the new Aptus Shares which will fall to be issued upon the exercise of the Aptus Bond(s) shall rank pari passu with each other in all respects, including dividend and voting rights.

3. DISCLOSURE OF INTERESTS IN APTUS SHARES, UNDERLYING APTUS SHARES AND DEBENTURES

(a) Aptus Directors’ and chief executives’ interests and short positions in shares, underlying shares and debentures of Aptus or any associated corporation

As at the Latest Practicable Date, the interests and short positions of the Aptus Directors in the shares, underlying shares and debentures of Aptus or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) (“SFO”)) which were required to be notified to Aptus and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO) or as recorded in the register required to be kept by Aptus under Section 352 of the SFO, or otherwise notified to Aptus and the Stock Exchange pursuant to the required standard of dealings by Aptus Directors as referred to in Rules 5.46 to 5.67 of the GEM Listing Rules, were as follows:

(i) Long positions in the ordinary shares of Aptus or any of its associated corporations:

			Number of Shares held	Number of Shares held
						Approximate
						percentage or
	Aptus/Name of	Interest in				attributable
Name of	associated	controlled	Beneficial	Family	Total	percentage of
Aptus Director	corporation	corporation	owner	interest	interest	shareholding
						(%)
Cheung	Aptus_(Note 1)_	700,596,428	–	–	700,596,428	33.95
Kwai Lan
	China Vanguard	2,095,857,322	2,070,000	–	2,097,927,322	65.32
	(Notes 4 & 5)	(Note 6)

Notes:

These 700,596,428 Aptus Shares are held by Precise Result.
Precise Result is a company incorporated in the BVI and is a wholly-owned subsidiary of China Success Enterprises Limited (“China Success”). As at the Latest Practicable Date, 48,750,000 Aptus Shares out of such 700,596,428 Aptus Shares owned by Precise Result have been lent to Evolution Master Fund, Ltd. SPC, Segregated Portfolio M.

X – 2

GENERAL INFORMATION OF APTUS

APPENDIX X

China Success is a company incorporated in the BVI and a wholly-owned subsidiary of China Vanguard.
These 2,095,857,322 China Vanguard Shares are held by Best Frontier Investments Limited (“Best Frontier”).
The entire issued share capital of Best Frontier comprises 910 shares of US$1.00 each, of which 909 shares are held by Madam Cheung Kwai Lan and 1 share is held by Mr. Chan Tung Mei. As Madam Cheung Kwai Lan is entitled to exercise or control the exercise of one-third or more of the voting power at the general meetings of Best Frontier, she is deemed to be interested in the entire issued share capital of Best Frontier by virtue of the SFO. Madam Cheung Kwai Lan, being a director of Aptus, is also a director of Best Frontier.
In addition to the interest in the aggregate of 2,097,927,322 China Vanguard Shares as set out in the table above, Madam Cheung Kwai Lan is interested in the following underlying China Vanguard Shares:
(i) 6,240,000 China Vanguard Shares, being the maximum number of China Vanguard Shares which may be allotted and issued to Madam Cheung Kwai Lan upon exercise of the options granted to Madam Cheung Kwai Lan under the share option scheme of China Vanguard which are outstanding as at the Latest Practicable Date; and
(ii) 6,240,000 China Vanguard Shares, being the maximum number of China Vanguard Shares which may be allotted and issued to Mr. Chan Tung Mei upon exercise of the options granted to him under the share option scheme of China Vanguard which are outstanding as at the Latest Practicable Date and which Madam Cheung Kwai Lan is deemed to be interested by virtue of Mr. Chan Tung Mei being the spouse of Madam Cheung Kwai Lan pursuant to the SFO.

(ii) Share options of Aptus:

Save as disclosed herein, as at the Latest Practicable Date, none of the Aptus Directors or chief executives of Aptus had any interests or short positions in any Aptus Shares, underlying Aptus Shares or debentures of Aptus or any of its associated corporations (within the meaning of Part XV of the SFO), which would have to be notified to Aptus and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were required pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, to be notified to Aptus and the Stock Exchange.

X – 3

GENERAL INFORMATION OF APTUS

APPENDIX X

(b) Substantial Aptus Shareholders’ interests and short positions in the Aptus Shares, underlying Aptus Shares and debentures of Aptus

As at the Latest Practicable Date, the interests and short positions of persons, other than the Aptus Directors or chief executives of Aptus, in the Aptus Shares and underlying Aptus Shares of Aptus which would fall to be disclosed to Aptus under the provisions of Divisions 2 and 3 of Part XV of the SFO or, who are, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Aptus Group, or substantial shareholders as recorded in the register required to be kept by Aptus under Section 336 of the SFO were as follows:

(1) Long positions in Aptus Shares

			Number of
		Number of	share options		Percentage
Name of Aptus	Capacity/Nature	ordinary	and underlying	Aggregated	of Aptus
Shareholder	of interest	Aptus Shares held	Aptus Shares held	long position	shareholding (%)
Precise Result	Beneficial owner	700,596,428	–	700,596,428	33.95
(Note 2)		(Note 1)
China Success	Interest in controlled	700,596,428	–	700,596,428	33.95
(Notes 3 & 4)	corporation	(Note 1)
China Vanguard	Interest in controlled	700,596,428	–	700,596,428	33.95
(Notes 1 and 4)	corporation	(Note 1)
Best Frontier	Interest in controlled	700,596,428	–	700,596,428	33.95
(Notes 4 and 5)	corporation	(Note 1)
Cheung Kwai	Interest in controlled	700,596,428	–	700,596,428	33.95
Lan_(Note 5)_	corporation	(Note 1)
Chan Tung Mei	Interest in controlled	700,596,428	–	700,596,428	33.95
(Note 5)	corporation	(Note 1)
Evolution Master	Beneficial owner	48,750,000	406,532,314	455,282,314	22.06
Fund, Ltd. SPC,
Segregated Portfolio
M (“Evolution”)(Note 6)
Evolution Capital	Investment manager	48,750,000	406,532,314	455,282,314	22.06
Management, LLC
(“Evo LLC”)(Not 6)
Structured Investments Ltd.	Other	48,750,000	406,532,314	455,282,314	22.06
(Note 6)

X – 4

APPENDIX X

GENERAL INFORMATION OF APTUS

			Number of
	Number of		share options		Percentage
Name of Aptus	Capacity/Nature	ordinary	and underlying	Aggregated	of Aptus
Shareholder	of interest Aptus Shares held		Aptus Shares held	long position	shareholding (%)
Evo Capital Management	Investment manager 48,750,000		406,532,314	455,282,314	22.06
Asia Limited_(Note 6)_
Citigroup Global Markets	Person having a security	–	453,878,314	453,878,314	21.99
Ltd.	interest in Aptus Shares
Citigroup Global Markets	Person having a security	–	453,878,314	453,878,314	21.99
Europe Ltd.	interest in Aptus Shares
Citigroup Global Markets	Person having a security	–	453,878,314	453,878,314	21.99
LLC	interest in Aptus Shares
Citigroup Global Markets	Person having a security	–	453,878,314	453,878,314	21.99
(International) Finance AG interest in Aptus Shares
Citigroup Financial	Person having a security	–	453,878,314	453,878,314	21.99
Products Inc.	interest in Aptus Shares
Citigroup Global Markets	Person having a security	–	453,878,314	453,878,314	21.99
Holdings Inc.	interest in Aptus Shares
Citigroup Inc.	Person having a security	–	453,878,314	453,878,314	21.99
	interest in Aptus Shares
Short positions in underlying Aptus Shares
			Number of
Name of Aptus	Capacity/		underlying		Percentage of
Shareholder	Nature of interest		Aptus Shares	Aptus shareholding (%)
Evolution_(Note 6)_	Beneficial owner		48,750,000		2.36
Evo LLC	Investment manager		48,750,000		2.36
(Note 6)

(2) Short positions in underlying Aptus Shares

Notes:

Such 700,596,428 Aptus Shares refer to the same parcel of Aptus Shares.
Precise Result is a company incorporated in the BVI and is a wholly-owned subsidiary of China Success. As at the Latest Practicable Date, 48,750,000 Aptus Shares out of such 700,596,428 Aptus Shares owned by Precise Result have been lent to Evolution.

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China Success is a company incorporated in the BVI and a wholly-owned subsidiary of China Vanguard. Best Frontier is the holding company of China Vanguard holding 2,095,857,322 China Vanguard Shares representing approximately 65.25% of the issued share capital of China Vanguard as at the Latest Practicable Date.
By virtue of the SFO, each of China Success, China Vanguard and Best Frontier is deemed to be interested in these 700,596,428 Aptus Shares directly held by Precise Result.
The entire issued share capital of Best Frontier comprises 910 shares of US$1.00 each, of which 909 shares are held by Madam Cheung Kwai Lan and 1 share is held by is Mr. Chan Tung Mei. As Madam Cheung Kwai Lan is entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of Best Frontier, she is deemed to be interested in the China Vanguard Shares which Best Frontier is interested by virtue of the SFO. As Mr. Chan Tung Mei is the spouse of Madam Cheung Kwai Lan, he is deemed to be interested in the China Vanguard Shares which Madam Cheung Kwai Lan is deemed to be interested by virtue of the SFO.
Aptus and Evolution entered into a deed of undertaking dated 28 August 2009. Pursuant to the deed of undertaking, Evolution undertook, amongst other things, that it will not exercise its conversion rights under the Aptus Bond(s) and Aptus undertook it will redeem the Aptus Bond(s) when Aptus has converted is RMB into HK$ which is then available for payment to redeem the convertible Aptus Bond(s). The 406,532,314 number of conversion shares is based on the information of disclosure of interests filed to the Stock Exchange. To the Directors’ information, as at the Lastest Practicable Date, the maximum number of conversion shares is 59,280,401 for the outstanding Aptus Bond(s).

Save as disclosed above, as at the Latest Practicable Date, the Aptus Directors and the chief executives of Aptus were not aware of any other person (other than the Aptus Directors and the chief executives of Aptus) who had, or was deemed to have, interests or short positions in the Aptus Shares or underlying shares of Aptus (including any interests in options in respect of such capital), which would fall to be disclosed to Aptus and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who was directly or indirectly interested in 5% 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 Aptus Group.

4. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have been entered into by the Enlarged Aptus Group within the two years immediately preceding the date of this joint circular and are, or may be, material. The material contracts can be summarised into the following: (i) the deeds of undertaking and amendment deeds in relation to the Aptus Bond(s); (ii) the agreements in relation to the termination of the profit sharing rights with respect to the Xin Jiang Oilfield and the disposals of the Changde Huayou Gas Co., Limited (“Changde”) equity interest and Hunan Huayou Natural Gas Transportation and Distribution Company Limited (“Hunan”) equity interest held by Aptus; (iii) the agreements in relation to the Acquisition; (iv) the Loan Capitalisation documents; (v) the placing of new Aptus Shares by Aptus; and (vi) the construction consultancy agreement in relation to the decoration and improvement of existing buildings in the lots in Yuen Long. Details as follows:

(a) the deed of waiver dated 22 October 2008 executed and delivered by Aptus pursuant to which, amongst other things, Aptus agreed to waive certain of its right under the terms and conditions of the Aptus Bond(s);
(b) the deed of amendment dated 23 October 2008 entered into between Aptus, Bank of New York Mellon (“Trustee”) and the BNY Corporate Trustee Services Limited (“Security Trustee”) amending the trust deed constituting the Aptus Bond(s);

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APPENDIX X

(c) the deed of amendment dated 30 December 2008 entered into between Aptus, the Trustee and the Security Trustee further amending the trust deed constituting the Aptus Bond(s);
(d) the master agreement dated 24 April 2009 entered into between Aptus, CNPC Huayou CU Energy Investment Co., Ltd. (“CNPC CU Energy”), CNPC Kunlun Natural Gas Company Limited (“Kunlun”) and China Huayou Group Corporation (“Huayou”) pursuant to which, the parties agreed that:
i. CNPC CU Energy and Huayou agreed to enter into the Termination Agreement (as defined in paragraph (e) below); and
ii. Aptus agreed to enter into the Changde Sale Agreement (as defined in paragraph (f) below) and the Hunan Sale Agreement (as defined in paragraph (g) below) with Kunlun;
(e) the termination agreement dated 24 April 2009 entered into between CNPC CU Energy and Huayou in relation to the termination of the profit sharing rights with respect to the Xin Jiang Oilfield for the return of monies provided to Huayou and compensatory interest for an amount of approximately RMB39,856,000 (equivalent to approximately HK$45,226,000) (“Termination Agreement”);
(f) the sale agreement dated 24 April 2009 entered into between Aptus and Kunlun in relation to the disposal of the 48.33% Changde equity interest held by the Aptus Group for the consideration of RMB255,000,000 (equivalent to approximately HK$289,350,000) (“Changde Sale Agreement”);
(g) the sale agreement dated 24 April 2009 entered into between Aptus and Kunlun in relation to the disposal of the 33% Hunan equity interest held by the Aptus Group for the consideration of approximately RMB100,144,000 (equivalent to approximately HK$113,634,000) (“Hunan Sale Agreement”);
(h) the deed of acknowledgement and undertaking dated 19 June 2009 between Aptus and Evolution in relation to (i) the acknowledgement that Aptus would not be able to redeem the Aptus Bond(s) until the redemption amount is available for redemption; (ii) the undertaking to consult with Aptus prior to issuing any notice to redeem the Aptus Bond(s) before the redemption amount is available for redemption and take into account all reasonable requirements of Aptus, having regard to the logistics and timing of the redemption amount being available for redemption; and (iii) Aptus agreed in favour of Evolution that it would use its best efforts to convert the redemption amount from RMB into HK$ in freely disposable cleared funds in Hong Kong as soon as possible;

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(i) the deed of undertaking dated 28 August 2009 entered into between Aptus and Evolution in relation to (i) Evolution undertook to Aptus that it will not exercise its conversion right under the Aptus Bond(s), and Aptus undertook to Evolution that when the consideration payable under the Changde Sale Agreement and Hunan Sale Agreement and has been converted from RMB into HK$ and received by Aptus in full in freely disposable cleared funds in Hong Kong and is available for payment to redeem the Aptus Bond(s), it will be applied to redeem the Aptus Bond(s);
(j) the deed of waiver dated 19 October 2009 executed and delivered by Aptus pursuant to which, amongst other things, Aptus agreed to waive its certain right under the terms and conditions of the Aptus Bond(s);
(k) the construction consultancy contract dated 30 October 2009 for HK$45,000,000 entered into between Rammon Renovation Limited and the Target for project management services for decoration and improvement of existing buildings in the lots in Yuen Long;
(l) the placing agreement dated 2 November 2009 between Aptus and Convoy Investment Services Limited in relation to the placing of up to a total of 160,000,000 new Aptus Shares at the placing price of HK$0.25 each by Convoy Investment Services Limited for and on behalf of Aptus;
(m) the deed of amendment dated 16 November 2009 entered into between Aptus, the Trustee and the Security Trustee further amending the trust deed constituting the Aptus Bond(s), amongst other things, amendments were made to the terms of the Aptus Bond(s) relating to the timing of the right of the bondholder(s) to require full or partial redemption of the Aptus Bond(s) to the effect that the bondholder(s) now may require redemption of all or some only of the Aptus Bond(s) at their early redemption amount together with interest accrued to the put option date on (i) any date during the period from 21 November 2009 to 14 January 2010 (both dates inclusive) (the “Period”); (ii) 15 January 2010; and (iii) 21 November 2010, provided that in the case of a put option date during the Period, the redemption amount shall have been converted from RMB into HK$ and received by Aptus in full in freely disposable cleared funds in Hong Kong and is available to redeem the Aptus Bond(s). Amendment has also been made to the requisite notice period for Aptus to require full redemption of the Aptus Bond(s) on or at any time after 21 November 2008 and prior to 11 November 2011 so that “not less than five business days’ notice” is required. In addition, (i) Evolution confirmed and undertook to Aptus that it will not exercise its conversion right under the Aptus Bond(s); and (ii) Aptus confirmed and undertook to Evolution that after the redemption amount has been converted from RMB into HK$ and received by Aptus in full in freely disposable cleared funds in Hong Kong and is available for payment to redeem the Aptus Bond(s), it will notify Evolution as soon as possible and the redemption amount will be applied to redeem the Aptus Bond(s);

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(n) the deed of undertaking dated 16 November 2009 entered into between Aptus and Evolution in relation to (i) Evolution confirmed and undertook to Aptus that it will not exercise the conversion right under Aptus Bond(s); (ii) Aptus confirmed and undertook to Evolution that after the redemption amount has been converted from RMB into HK$ and received by Aptus in full in freely disposable cleared funds in Hong Kong and is available for payment to redeem the Aptus Bond(s), it will notify Evolution as soon as possible and the redemption amount will be applied to redeem the Aptus Bond(s);
(o) the S&P agreement;
(p) the Convertible Bonds;
(q) the Secured Promissory Note;
(r) the Unsecured Promissory Note;
(s) the Subscription Agreement I;
(t) the Subscription Agreement II;
(u) the deed of undertaking dated 12 February 2010 between Aptus and Evolution in relation to the Aptus Bond(s), pursuant to which, amongst other things, Evolution undertook to Aptus that it will not, and will procure that the Bondholder(s), the Trustee and/or the Security Trustee do not: (i) treat the non-payment by 14 February 2010 of the outstanding principal amounts, interest and other amounts payable on the Aptus Bond(s) (the “ Non-Payment ”) as an event of default (the “ Event of Default ”) or potential event of default (the “ Potential Event of Default ”) under the trust deed constituting the Aptus Bond(s); or (ii) exercise any rights under the trust deed or any security document which Evolution, the Trustee or the Security Trustee may otherwise have in respect of the Non-Payment including without limitation any rights in respect of any Event of Default or Potential Event of Default, unless and until Aptus has failed to redeem the Aptus Bond(s) in full by 12 March 2010 or such later date as Evolution may agree in writing from time to time;
(v) the letter dated 12 March 2010 issued by Evolution in relation to the Aptus Bond(s), notifying the “later date” referred to in paragraph (u) above shall be “26 March 2010”;
(w) the Supplemental Agreement;
(x) the letter dated 24 March 2010 issued by Evolution in relation to the Aptus Bond(s), notifying the “later date” referred to in paragraph (v) above shall be “16 April 2010”; and
(y) the letter dated 16 April 2010 issued by Evolution in relation to the Aptus Bond(s), notifying the “later date” referred to in paragraph (x) above shall be “29 April 2010” or “11 June 2010” if certain criteria is met.

5. APTUS DIRECTORS’ SERVICE CONTRACTS

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

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APPENDIX X

6. LITIGATION

Save as disclosed in this joint circular, as at the Latest Practicable Date, no member of the Enlarged Aptus Group is engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance is known to the Aptus Directors to be pending or threatened against any member of the Enlarged Aptus Group as at the Latest Practicable Date.

7. COMPETING INTERESTS

As at the Latest Practicable Date, so far as the Aptus Directors were aware, none of the Aptus Directors, employees or substantial Aptus Shareholders nor their respective associates has any interest in business which competes with or may compete with the business of the Enlarged Aptus Group or has any other conflict of interests which any person has or may have with the Enlarged Aptus Group.

8. EXPERTS AND CONSENTS

The following is the qualifications of the expert who have given an opinion or advice contained in this joint circular:

Name Qualification Castores Magi Asia Limited Independent valuer (“ Castores ”) Castores Magi (Hong Kong) Limited Independent property valuer (“ Castores HK ”) Goldin Financial Limited a corporation licensed to carry out type 6 (advising on (“ Goldin Financial ”) corporate finance) regulated activity under the SFO SHINEWING (HK) CPA Limited Certified public accountants (“ SHINEWING ”) W.H. Tang & Partners CPA Limited Certified public accountants (“ W.H.Tang ”)

As at the Latest Practicable Date, each of Goldin Financial, Castores, Castores HK, W.H.Tang and SHINEWING did not have any direct or indirect interest in any asset which had been acquired, or disposed of by, or leased to any member of the Aptus Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Aptus Group since 31 October 2009, being the date to which the latest published audited financial statements of the Aptus Group were made up.

As at the Latest Practicable Date, each of Goldin Financial, Castores, Castores HK, W.H.Tang and SHINEWING was not interested beneficially or non-beneficially in any Aptus Shares or any of its subsidiaries or any right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Aptus Group.

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APPENDIX X

Each of Goldin Financial, Castores, Castores HK, W.H.Tang and SHINEWING has given and has not withdrawn its written consent to the issue of this joint circular with the inclusion of its respective letter and/or report and/or reference to its name in the form and context in which they respectively appear.

9. INTEREST IN ASSETS

As at the Latest Practicable Date, none of the Aptus Directors had any direct or indirect interest in any asset which had been acquired, or disposed of by, or leased to any member of the Enlarged Aptus Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Enlarged Aptus Group since 31 October 2009, being the date to which the latest published audited financial statements of the Aptus Group were made up.

10. APTUS DIRECTORS’ INTEREST IN CONTRACTS

As at the Latest Practicable Date, none of the Aptus Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Enlarged Aptus Group subsisting at the Latest Practicable Date which was significant in relation to the business of the Enlarged Aptus Group.

11. GENERAL

(a) The registered office of Aptus is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.
(b) The head office and principal place of business of Aptus in Hong Kong is at Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(c) The branch share registrar and transfer office of Aptus in Hong Kong is Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(d) The company secretary of Aptus is Mr. Chan Ka Yin, who is a member of the Hong Kong Institute of Certified Public Accountants and Association of Chartered Certified Accountants.
(e) The compliance officer of Aptus is Mr. Fung King Him Daniel, who is also an executive director of Aptus.
(f) Aptus established an audit committee with written terms of reference in compliance with Rules 5.28 to 5.29 of the GEM Listing Rules. The primary duties of the audit committee are to review Aptus’ annual reports and accounts, half-year reports and quarterly reports and to provide advice and comments thereon to the Aptus Board. The audit committee of Aptus comprises four members, all being independent non-executive directors. The details of the members are as follows:

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APPENDIX X

Mr. Tian He Nian, aged 69, was the Deputy Head of the Department of United Front Work of the Central Government of the PRC from 1998 to 2003. He is the Vice-Chairman of China Overseas Association. He is also an independent non-executive director and audit committee member of China Vanguard. He joined Aptus Group in September 2004.

Mr. Zhang Xiu Fu, aged 76, is also a member of each of the audit committee and remuneration committee of Aptus. He devoted himself to the Chinese Revolution in August 1948 and joined the Communist Party in March 1950. He had served as the Head of the Municipal Police of Hangzhou City, Zhejiang Province, the Chief Officer of the Provincial Police of Zhejiang Province, a member of the Communist Party’s Provincial Standing Committee in Zhejiang Province and the Secretary of the Political and Legislative Affairs Committee. He had also served as the Commissar of the Chinese People’s Armed Police, the Vice Minister and the Vice Head of the party organization of the Chinese Ministry of Legislation, a representative of the Nine National People’s Congress, a member of the Legislation Committee of the National People’s Congress and the Vice President of China Law Science Association. He currently serves as the President of the China Legal Aid Foundation. He is also an independent non-executive director, a member of the audit committee and remuneration committee of China Vanguard. He joined the Aptus Group in January 2008.

Mr. Zou Qi Jun, aged 73, is also a member of the remuneration committee of Aptus. He was born in Chongqing City of the PRC. He graduated from Zhongshan Medical University in 1956. He has been the President of the Second Associated Hospital of Jinan University (Shenzhen City People’s Hospital), and a director, medical professor and the Chief Physician of Institute of Gerontology of Shenzhen City. He was a special allowance expert of the State Council and a distinguished expert in Shenzhen City. He has also served as a guest expert reviewer of the Chinese Journal of Medicine, the executive editor of the Chinese Journal of Microcirculation, executive editor of China’s Journal of Haemodynamics, director of Chinese Microcirculation Association, Vice Chairman of the Council of Chinese Medical Association in the Guangdong Province for Geriatrics, and the Chairman of the Council of the Shenzhen Municipal Chinese Medical Association. Mr. Zou is currently the Vice President of the Shenzhen Institute of Health Technology, Chief Health Education Expert of Shenzhen City and health education adviser of the Health Bureau of Shenzhen City. He joined the Aptus Group in September 2008.

Mr. To Yan Ming Edmond, aged 38, is also the chairman of the audit committee and a member of the remuneration committee of Aptus. Mr. To holds a bachelor degree in Commerce in Accounting from Curtin University of Technology in Western Australia. He is a practicing accountant and presently the director of Fortitude C.P.A. Limited, Edmond To CPA Limited and Zhonglei (HK) CPA Company Limited. He is a member of both the CPA Australia and Hong Kong Institute of Certified Public Accountants. He worked for one of the international accounting firms, Deloitte Touche Tohmatsu and has over 10 years of experience in auditing, accounting, floatation and taxation matters. Mr. To was appointed as an independent non-executive director and members of the audit and remuneration committee of BEP International Holdings and Theme International Holdings Limited (the securities

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APPENDIX X

of both companies are listed on the Main Board of the Stock Exchange) on 5 June 2009 and 5 November 2009 respectively. Mr. To was appointed as an independent non-executive director, member and chairman of the audit committee, and member of remuneration and nomination committee of Wai Chun Group Holdings Limited (the securities of which are listed on the Main Board of the Stock Exchange) on 29 September 2009. Mr. To is also an independent non-executive director, the chairman of the audit committee and a member of the remuneration committee of China Vanguard. Mr. To joined the Aptus Group in January 2005.

(g) The Aptus Board comprises four executive directors, being Madam Cheung Kwai Lan, Mr. Chan Ting, Mr. Fung King Him Daniel and Mr. Lam Wai Pong; and four independent nonexecutive directors, being Mr. Tian He Nian, Mr. Zhang Xiu Fu, Mr. Zou Qi Jun and Mr. To Yan Ming Edmond.

12. CORPORATE INFORMATION

Directors

Madam Cheung Kwai Lan (“Madam Chung”), aged 71, was appointed as an executive director on 20 December 2004. She is also director of various subsidiaries of Aptus Group. Madam Cheung is responsible for business development, strategic planning and marketing for Aptus Group. She is a founder and chairman of China Vanguard, the securities of which are listed on the GEM which is the ultimate holding company of Aptus, and is also the Vice President of the Zhang Xueliang Foundation（張學良基金會）. She graduated from Shanxi Tai Yuan Medical School in 1960 and was a researcher at Shanxi Province Tai Yuan (Atomic Energy) Research Centre（山西省太原（原子能）研究所）, which was one of the institutions of the Chinese Academy of Sciences. She also participated in the research and development of the radioactive material Cobalt 60 for imaging and cancer treatment. She is the mother of Mr. Chan Ting, being an executive director of Aptus and Ms. Chan Siu Sarah, being the General Counsel of the Aptus Group.

Madam Cheung’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Mr. Chan Ting (“Mr. Chan”), aged 40, was appointed as an executive director and the authorised representative of Aptus on 27 August 2004. He is also the Chief Executive Officer of Aptus, director of various subsidiaries of the Aptus Group and the Chairman of the remuneration committee of Aptus. He was awarded a bachelor degree in Economics from Macquarie University in Australia in 1993. Mr. Chan has over 16 years of solid experience in establishing and managing companies in the PRC. He is an executive director and chief executive officer of China Vanguard. He is the son of Madam Cheung Kwai Lan, being an executive director of Aptus and the brother of Ms. Chan Siu Sarah, being the General Counsel of the Aptus Group.

Mr. Chan’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

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APPENDIX X

Mr. Fung King Him Daniel (“Mr. Fung”), aged 40, was appointed as an executive director, the compliance officer and authorised representative of Aptus on 27 August 2004. He is also director of various subsidiaries of the Aptus Group. He holds a bachelor degree from the University of Wisconsin in the United States of America with double majors in Mathematics and Computer Science. He previously worked in Lehman Brothers Asia Limited, HSBC Asset Management Limited and Platinum Securities Company Limited.

Mr. Fung’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Mr. Lam Wai Pong (“Mr. Lam”), aged 55, was appointed as an executive director of Aptus on 8 January 2010. He holds a Bachelor of Science (Engineering) from University of London, United Kingdom. He is a Chartered Civil Engineer, a member of the Institution of Civil Engineering and a member of the Hong Kong Institution of Engineers. He has over 30 years of extensive experience in the civil engineering fields. Mr. Lam was appointed as an independent non-executive director and member of each of the audit committee and remuneration committee of China Au Group Holdings Limited (formerly known as “Blu Spa Holdings Limited”) (the securities of which are listed on the GEM) since August 2005.

Mr. Lam’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

The business address of Mr. Tian He Nian, Mr. Zhang Xiu Fu, Mr. Zou Qi Jun and Mr. To Yan Ming Edmond is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong. Please refer to section “11. General” of this appendix for their respective details.

Senior Managements

Ms. Chan Siu Sarah (“Ms. Chan”), aged 45, is the General Counsel of Aptus Group. She obtained her law degree from the London School of Economics and Political Science in 1989 and was qualified to practice law as solicitor in Hong Kong in 1992 and England and Wales in 1993. She did her solicitor’s training with the international firm of Baker & McKenzie in Hong Kong and, after qualification, worked for 4 years at the international firm of Linklaters in Hong Kong specializing in projects and project finance with a particular focus on China. She then spent the next 7 years as corporate counsel with the Asia Pacific regional headquarter of Lucent Technologies in Hong Kong attending legal matters in the region. From 2004 to 2007, she was appointed the regional general counsel for the Asia Pacific region of Avon Products Inc., leading its legal, government and regulatory affair teams in the region. Ms. Chan has been an executive director of Avon Products Co., Ltd., the securities of which are listed on the JASDAQ Securities Exchange, Inc. for the period from March 2006 to December 2007. Ms. Chan is also the executive director and general counsel of China Vanguard. Ms. Chan is the daughter of Madam Cheung Kwai Lan and the sister of Mr. Chan Ting, all being executive directors of Aptus. She joined the Aptus Group in May 2008.

Ms. Chan’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

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APPENDIX X

GENERAL INFORMATION OF APTUS

Mr. Young Russell (“Mr. Young”), aged 47, is a Director of Corporate Strategy of Aptus Group. He is involved in the corporate strategy and business development of Aptus Group. He holds a Bachelor of Commerce and Administration from Victoria University, New Zealand and a Masters in Business Studies from Massey University, New Zealand. He has over 16 years experience in the finance industry and has held senior positions in a number of reputable investment banks. Prior to joining the Aptus Group, he was Regional Head of Mid-Cap Research for Nomura International (Hong Kong) Ltd. after having been Head of Energy and Basic Material Research and Regional Head of Utilities Research. Mr. Young was formerly an independent non-executive director of one of Asia’s largest downstream aluminum products producers. He joined the Aptus Group in April 2006.

Mr. Young’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Mr. Wong Kim Ket (“Mr. Wong”), aged 48, is an executive director of a subsidiary of Aptus, Hsing Long Trading Co. Pte., Ltd., in Singapore, which is mainly engaged in the edible oil trading business. He is one of the founders of the subsidiary and has been managing the subsidiary for more than 10 years. His formal educational background is in computer engineering while also holding a Master in Business Administration (MBA) from University of Oregon in USA. His responsibilities include overall day-today management and operations, and implementation and control of new as well as existing strategies and businesses for the subsidiary. He has more than 19 years of working experience in international trade and financial operations.

Mr. Wong’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Mr. Chan Ka Yin, aged 35, joined Aptus Group as the Chief Financial Officer in March 2006. He was appointed as the Company Secretary on 28 February 2007. He holds a bachelor degree in Business Administration from the University of Hong Kong. He is a member of the Hong Kong Institute of Certified Public Accountants and Association of Chartered Certified Accountants. He has over 13 years of experience in auditing, accounting and financial management.

Mr. Chan Ka Yin’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

13. DOCUMENTS FOR INSPECTION

Copies of the following documents are available for inspection at the principal place of business of Aptus in Hong Kong at Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong during normal business hours on any Business Day from the date of this joint circular up to and including the date of the Aptus EGM:

(a) the memorandum and articles of association of Aptus;
(b) the material contracts referred to in the paragraph headed “Material contracts” in this appendix;

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(c) the written consents from experts referred to in the paragraph headed “Experts and consents” in this appendix;
(d) the accountants’ report on the Aptus Group prepared by W.H. Tang, the text of which is set out in Appendix I to this joint circular;
(e) the accountants’ report from SHINEWING in respect of the Target Group, the text of which is set out in Appendix III to this joint circular;
(f) the unaudited pro forma financial information of the Enlarged Aptus Group prepared by W.H. Tang, the text of which is set out in Appendix IV to this joint circular;
(g) the valuation report on the properties held by the Target Group prepared by Castores, the text of which is set out in Appendix VI to this joint circular;
(h) the valuation report on the land and building of the Enlarged Aptus Group prepared by Castores HK, the text of which is set out in Appendix VIII to this joint circular;
(i) the annual reports of Aptus for each of the two financial years ended 30 June 2008 and 2009; and
(j) this joint circular.

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GENERAL INFORMATION OF CHINA VANGUARD

APPENDIX XI

1. RESPONSIBILITY STATEMENT

This joint circular, for which the China Vanguard Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the China Vanguard Group. The China Vanguard Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief:

(a) the information contained in this joint circular is accurate and complete in all material respects and is not misleading;
(b) there are no other matters or facts the omission of which would make any statement in this joint circular misleading; and
(c) all opinions expressed in this joint circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable.

2. SHARE CAPITAL

The authorised and issued and fully paid up share capital of China Vanguard as at the Latest Practicable Date were as follows:

Authorised: 20,000,000,000 China Vanguard Shares Issued and fully paid: 3,211,893,839 China Vanguard Shares	HK$ 200,000,000.00

	32,118,938.39

The authorised and issued and fully paid up share capital of China Vanguard upon the allotment and issue of conversion shares assuming full exercise of the Grand Promise convertible bonds will be as follows:

Authorised: 20,000,000,000 China Vanguard Shares Issued and fully paid: 3,211,893,839 China Vanguard Shares 118,567,716 Issue of the conversion shares assuming full exercise of the Grand Promise convertible bonds 3,330,461,555 China Vanguard Shares	HK$ 200,000,000.00

	32,118,938.39 1,185,677.16
	33,304,615.55

XI – 1

APPENDIX XI

GENERAL INFORMATION OF CHINA VANGUARD

As at the Latest Practicable Date, there were 83,050,000 outstanding options entitling the holders thereof to subscribe for new China Vanguard Shares based on the respective prevailing exercise prices of the options. Further, there were outstanding the Grand Promise convertible bonds entitling the holder(s) thereof to convert into 118,567,716 new China Vanguard Shares. Save for the aforesaid, there were no other outstanding securities of China Vanguard. All the China Vanguard Shares in issue and the new China Vanguard Shares which will fall to be issued upon the exercise of the options and on conversion of the Grand Promise convertible bonds shall rank pari passu with each other in all respects, including dividend and voting rights.

3. DISCLOSURE OF INTERESTS IN CHINA VANGUARD SHARES, UNDERLYING CHINA VANGUARD SHARES AND DEBENTURES

(a) China Vanguard Directors’ and chief executives’ interests and short positions in shares, underlying shares and debentures of China Vanguard or any associated corporation

As at the Latest Practicable Date, the interests and short positions of the China Vanguard Directors in the shares, underlying shares and debentures of China Vanguard or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) (“SFO”)) which were required to be notified to China Vanguard and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO) or as recorded in the register required to be kept by China Vanguard under Section 352 of the SFO, or otherwise notified to China Vanguard and the Stock Exchange pursuant to the required standard of dealings by China Vanguard Directors as referred to in Rules 5.46 to 5.67 of the GEM Listing Rules, were as follows:

(i) Long positions in the ordinary shares of China Vanguard or any of its associated corporation:

			Number	of shares held
						Approximate
	China Vanguard/					percentage or
	Name of	Interest in				attributable
Name of China	associated	controlled	Beneficial	Family	Total	percentage of
Vanguard Director	corporation	corporation	owner	interest	interests	shareholding
						(%)
Cheung Kwai Lan	China Vanguard	2,095,857,322	2,070,000	–	2,097,927,322	65.32
		(Note 1)	(Note 2)
Chan Tung Mei	China Vanguard	–	–	2,097,927,322	2,097,927,322	65.32
				(Notes 1 & 2)
Lau Hin Kun	China Vanguard	–	1,410,000	–	1,410,000	0.04
Cheung Kwai Lan	Best Frontier	–	909	1	910	–
				(Note 3)

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APPENDIX XI

GENERAL INFORMATION OF CHINA VANGUARD

Number of Shares held

						Approximate
	China Vanguard/					percentage or
	Name of	Interest in				attributable
Name of China	associated	controlled	Beneficial	Family	Total	percentage of
Vanguard Director	corporation	corporation	owner	interest	interests	shareholding
						(%)
Chan Tung Mei	Best Frontier	–	1	909	910	–
				(Note 3)
Cheung Kwai Lan	Aptus	700,596,428	–	–	700,596,428	33.95
		(Note 4)
Chan Tung Mei	Aptus	–	–	700,596,428	700,596,428	33.95
				(Note 4)

Notes:

The 2,095,857,322 China Vanguard Shares are held by Best Frontier Investments Limited (“Best Frontier”) which is owned as to 99.89% and 0.11% by Madam Cheung Kwai Lan and Mr. Chan Tung Mei respectively who are spouse to each other. Accordingly, Madam Cheung Kwai Lan is deemed to be interested in the China Vanguard Shares held by Best Frontier and Mr. Chan Tung Mei is deemed to be interested in all 2,097,927,322 China Vanguard Shares by virtue of being the spouse of Madam Cheung Kwai Lan under the SFO.
The 2,070,000 China Vanguard Shares are owned by Madam Cheung Kwai Lan who is the sponse of Mr. Chan Tung Mei. Accordingly, Mr. Chan Tung Mei is deemed to be interested in the China Vanguard Shares under the SFO.
The 1 share and 909 shares of US$1 each in Best Frontier is owned respectively by Mr. Chan Tung Mei and Madam Cheung Kwai Lan who are spouse to each other. Accordingly, Madam Cheung Kwai Lan and Mr. Chan Tung Mei are deemed to be interested in the shares held by each other under the SFO.
Madam Cheung Kwai Lan and Mr Chan Tung Mei have equity interests of 99.89% and 0.11% respectively of the issued share capital of Best Frontier. Madam Cheung Kwai Lan and Mr. Chan Tung Mei are spouse to each other. Accordingly, Madam Cheung Kwai Lan is deemed to be 100% interested in the shares of Best Frontier, and Mr. Chan Tung Mei is also deemed to be interested in the shares of Best Frontier by virtue of being the spouse of Madam Cheung Kwai Lan under the SFO. As at the Latest Practicable Date, Best Frontier is interested in approximately 65.25% of the issued share capital of China Vanguard which in turn holds directly 100% shareholding of China Success Enterprises Limited and holds indirectly 100% shareholding of Precise Result, the company directly holding 700,596,428 Aptus Shares of which, 48,750,000 Aptus Shares has been lent to Evolution Master Fund Ltd. SPC, Segregated Portfolio M (“Evolution”) pursuant to a stock lending agreement dated 22 November 2006.

XI – 3

APPENDIX XI

GENERAL INFORMATION OF CHINA VANGUARD

(ii) Share options of China Vanguard:

Name of China	Date of	Exercisable	Exercise price	Number of share
Vanguard Director	grant	period	per share	options granted
			HK$	(Note)
Cheung Kwai Lan	23/11/2006	23/11/2006 –	0.62	1,560,000
		17/10/2012
	23/11/2006	23/5/2007 –	0.62	1,560,000
		17/10/2012
	23/11/2006	23/11/2007 –	0.62	3,120,000
		17/10/2012
Chan Tung Mei	23/11/2006	23/11/2006 –	0.62	1,560,000
		17/10/2012
	23/11/2006	23/5/2007 –	0.62	1,560,000
		17/10/2012
	23/11/2006	23/11/2007 –	0.62	3,120,000
		17/10/2012
Chan Ting	23/11/2006	23/11/2006 –	0.62	1,560,000
		17/10/2012
	23/11/2006	23/5/2007 –	0.62	1,560,000
		17/10/2012
	23/11/2006	23/11/2007 –	0.62	3,120,000
		17/10/2012
Lau Hin Kun	23/11/2006	23/11/2006 –	0.62	350,000
		17/10/2012
	23/11/2006	23/5/2007 –	0.62	350,000
		17/10/2012
	23/11/2006	23/11/2007 –	0.62	700,000
		17/10/2012

XI – 4

GENERAL INFORMATION OF CHINA VANGUARD

APPENDIX XI

Name of China	Date of	Exercisable	Exercise price	Number of share
Vanguard Director	grant	period	per share	options granted
			HK$	(Note)
Tian He Nian	23/11/2006	23/11/2006 –	0.62	260,000
		17/10/2012
	23/11/2006	23/5/2007 –	0.62	260,000
		17/10/2012
	23/11/2006	23/11/2007 –	0.62	530,000
		17/10/2012
To Yan Ming Edmond	23/11/2006	23/11/2006 –	0.62	260,000
		17/10/2012
	23/11/2006	23/5/2007 –	0.62	260,000
		17/10/2012
	23/11/2006	23/11/2007 –	0.62	530,000
		17/10/2012
				22,220,000

Note: As of the Latest Practicable Date, all the options referred to in the table above remain outstanding and have not been exercised.

Save as disclosed herein, as at the Latest Practicable Date, none of the China Vanguard Directors and chief executives of China Vanguard had any interests or short positions in any shares, underlying shares or debentures of China Vanguard or any of its associated corporations (within the meaning of Part XV of the SFO), which were notified to China Vanguard and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or which were required pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules, to be notified to China Vanguard and the Stock Exchange.

XI – 5

GENERAL INFORMATION OF CHINA VANGUARD

APPENDIX XI

(b) Substantial China Vanguard Shareholders’ interests and short positions in the China Vanguard Shares, underlying China Vanguard Shares and debentures of China Vanguard

As at the Latest Practicable Date, the interests and short positions of persons, other than the China Vanguard Directors or chief executives of China Vanguard, in the shares and underlying shares of the China Vanguard which would fall to be disclosed to China Vanguard under the provisions of Divisions 2 and 3 of Part XV of the SFO or, who are, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the China Vanguard Group, or substantial shareholders as recorded in the register required to be kept by China Vanguard under Section 336 of the SFO were as follows:

(1) Long positions in the China Vanguard Shares

	Number
	or attributable		Approximate
	number of		percentage or
	China Vanguard		attributable
Name of China	Shares held or		percentage of
Vanguard Shareholder	short positions	Nature of interests	shareholding
			(%)
Best Frontier	2,095,857,322 (L)	Beneficial owner	65.25
	(Note 1)

L: Long Position

Note:

The 2,095,857,322 China Vanguard Shares are held by Best Frontier which is owned as to approximately 99.89% and 0.11% by Madam Cheung Kwai Lan and Mr. Chan Tung Mei, who are spouse to each other. Each of Madam Cheung Kwai Lan, Mr. Chan Tung Mei and Mr. Chan Ting being a China Vanguard Director, is also a director of Best Frontier.

4. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have been entered into by the Enlarged China Vanguard Group within the two years immediately preceding the date of this joint circular and are, or may be, material. The material contracts can be summarised into the following: (i) the agreements in relation to the acquisition of Grand Promise; (ii) the deeds of undertaking, amendments deeds, arrangement fee letter and extension letter in relation to the Grand Promise convertible bonds which were taken up by China Vanguard upon the acquisition of Grand Promise; (iii) the agreements in relation to the acquisition of Best Delight Group Limited (“Best Delight”); (iv) the deeds of undertaking and amendment deeds in relation to the Aptus Bond(s); (v) the agreements in relation to the termination of the profit sharing rights with respect to the Xin Jiang Oilfield and the disposals of Changde Huayou Gas Co., Limited (“Changde”) equity interest and Hunan Huayou Natural Gas Transportation and Distribution Company Lmited (“Hunan”) equity interest held by Aptus; (vi) the agreements in relation to the Acquisition; (vii) the Loan Capitalisation documents; (viii) the placing of new Aptus Shares by

XI – 6

GENERAL INFORMATION OF CHINA VANGUARD

APPENDIX XI

Aptus; (ix) the placing of existing Aptus Shares by Precise Result; and (x) the construction consultancy agreement in relation to the decoration and improvement of existing buildings in the lots in Yuen Long. Details as follows:

(a) the Grand Promise notes purchase agreement (“Grand Promise Notes Purchase Agreement”) dated 28 November 2007 entered into among Grand Promise, Best Frontier, Madam Cheung Kwai Lan and Evolution and Liberty Harbor Master Fund I, L.P. (“Liberty Harbor”, together the “Grand Promise Investors”) pursuant to which, amongst other things, Grand Promise would issue, and the Grand Promise Investors would purchase, the Grand Promise convertible bonds at the consideration of US$35,000,000;
(b) the Grand Promise convertible bonds, collectively (a) the senior convertible redeemable note dated 30 November 2007 in the principal amount of US$25,000,000 issued by Grand Promise to Liberty Harbor (“Liberty Harbor convertible bond”) and (b) the senior convertible redeemable note dated 30 November 2007 in the principal amount of US$10,000,000 issued by Grand Promise to Evolution (“Evolution convertible bond”) pursuant to which, amongst other things, the Grand Promise convertible bonds might, at the options of the Grand Promise Investors, be exchangeable into a maximum number of 480,687,974 new China Vanguard Shares (of which 137,339,420 China Vanguard Shares representing approximately 3.7% of the entire issued share capital of China Vanguard as enlarged by such shares may be allotted and issued to Evolution upon exercise of the rights to exchange for new China Vanguard Shares by Evolution, at a strike price of HK$0.80 after completion of the Grand Promise SPA (as defined in paragraph (d) below));
(c) the Birdview share charge dated 30 November 2007 made by Grand Promise in favour of the Grand Promise Investors pursuant to which all of the issued and outstanding shares of Birdview Group Limited and all proceeds deriving therefrom had been charged to the Grand Promise Investors as first priority security, such deed being made in pursuance of the Grand Promise Notes Purchase Agreement;
(d) the Grand Promise sales and purchase agreement (“Grand Promise SPA”) dated 17 January 2008 entered into between China Vanguard and Best Frontier, Mega Capital International Limited, Kiree Group Limited, Ms. Lo Wai Kwan Anna, Mr. Tang Ping Fai Rocky, Integrated Asset Management (Asia) Limited, Mr. Chan Ka Yin and Mr. Wong Sze Chuen (together the “Grand Promise Vendors”) pursuant to which, amongst other things, the Grand Promise Vendors agreed to sell and China Vanguard agreed to acquire the entire issued share capital of Grand Promise represented by 10,000 shares of US$1.00 each for the consideration of US$200,000,000;

XI – 7

GENERAL INFORMATION OF CHINA VANGUARD

APPENDIX XI

(e) 8 sets of instrument of transfer all dated 11 April 2008 entered into between (i) China Vanguard as purchaser/transferee and (ii) the respective Grand Promise Vendor as vendor/ transferor whereby such number of shares in Grand Promise set out below was transferred by the respective Grand Promise Vendor to China Vanguard for the respective consideration set out below pursuant to the Grand Promise SPA:

	Number of	Consideration
	shares in	(Number of China
Name of the Grand Promise Vendor	Grand Promise	Vanguard Shares)
Best Frontier	8,000	1,809,739,130
Mega Capital International Limited	720	162,876,520
Kiree Group Limited	340	76,913,912
Lo Wai Kwan Anna	300	67,865,216
Tang Ping Fai Rocky	200	45,243,478
Integrated Asset Management (Asia) Limited	200	45,243,478
Chan Ka Yin	140	31,670,434
Wong Sze Chuen	100	22,621,738

(f) the deed of adherence dated 11 April 2008 executed by China Vanguard for the benefit of Evolution pursuant to which China Vanguard agreed, subject to the terms and conditions thereof, to be bound by the terms and conditions of the Evolution convertible bond jointly and severally (to the extent practicable) with Grand Promise, such deed being made in pursuance of the Grand Promise SPA;
(g) the deed of adherence dated 11 April 2008 executed by China Vanguard for the benefit of Liberty Harbor pursuant to which China Vanguard agreed, subject to the terms and conditions thereof, to be bound by the terms and conditions of the Liberty Harbor convertible bond jointly and severally (to the extent practicable) with Grand Promise, such deed being made in pursuance of the Grand Promise SPA;
(h) the loan assignment deed dated 11 April 2008 entered into between China Vanguard and Best Frontier pursuant to which a shareholder’s loan in the amount of HK$13,816,003 owing to Best Frontier by Grand Promise was assigned by Best Frontier to China Vanguard for the consideration of 20,023,192 China Vanguard Shares, such deed being made in pursuance of the Grand Promise SPA;
(i) the agreement dated 8 May 2008 between Capital Day Investments Limited (“Capital Day”) as vendor and China Success Enterprises Limited (“China Success”) as purchaser whereby Capital Day agreed to sell and China Success agreed to purchase the entire issued share capital of Best Delight represented by 1 share of US$1.00 for the consideration of HK$139,000,000;
(j) an instrument of transfer dated 30 June 2008 between Capital Day as transferor and China Success as transferee whereby Capital Day transferred 1 share in Best Delight to China Success for the consideration of HK$139,000,000 pursuant to the agreement referred to in (i) above;

XI – 8

APPENDIX XI

GENERAL INFORMATION OF CHINA VANGUARD

(k) a set of bought and sold notes dated 30 June 2008 between Capital Day as transferor and China Success as transferee whereby Capital Day transferred 1 share in Best Delight to China Success for the consideration of HK$139,000,000 pursuant to the agreement referred to in (i) above;
(l) the deed of waiver dated 22 October 2008 executed and delivered by Aptus pursuant to which, amongst other things, Aptus agreed to waive certain of its right under the terms and conditions of the Aptus Bond(s);
(m) the deed of amendment dated 23 October 2008 entered into between Aptus, Bank of New York Mellon (“Trustee”) and the BNY Corporate Trustee Services Limited (“Security Trustee”) amending the trust deed constituting the Aptus Bond(s), amongst other things, the first put option dated of 21 November 2008 was replaced with 21 February 2009;
(n) the deed of amendment dated 30 December 2008 entered into between Aptus, the Trustee and the Security Trustee further amending the trust deed constituting the Aptus Bond(s), amongst other things, permitting Aptus to dispose of the charged property for the purpose of redeeming the outstanding Aptus Bonds provided that sufficient funds to redeem the Bonds and pay related fees and expenses are held in escrow; limiting the bondholders’ rights to convert the Aptus Bonds during the period ending 21 November 2009; revising the conversion price to HK$0.5756 and the minimum reset reference price, and amending the provisions pursuant to which Aptus and the bondholder(s) may redeem the Aptus Bond(s);
(o) the master agreement dated 24 April 2009 entered into between Aptus, CNPC Huayou CU Energy Investment Co., Ltd. (“CNPC CU Energy”), CNPC Kunlun Natural Gas Company Limited (“Kunlun”) and China Huayou Group Corporation (“Huayou”) pursuant to which, the parties agreed that:
i. CNPC CU Energy and Huayou agreed to enter into the Termination Agreement (as defined in paragraph (p) below); and
ii. Aptus agreed to enter into the Changde Sale Agreement (as defined in paragraph (q) below) and the Hunan Sale Agreement (as defined in paragraph (r) below) with Kunlun;
(p) the termination agreement dated 24 April 2009 entered into between CNPC CU Energy and Huayou in relation to the termination of the profit sharing rights with respect to the Xin Jiang Oilfield for returns of monies provided to Huayou and compensatory interest for an amount of approximately RMB39,856,000 (equivalent to approximately HK$45,226,000) (“Termination Agreement”);
(q) the sale agreement dated 24 April 2009 entered into between Aptus and Kunlun in relation to the disposal of the 48.33% Changde equity interest held by the Aptus Group for the consideration of RMB255,000,000 (equivalent to approximately HK$289,350,000) (“Changde Sale Agreement”);

XI – 9

APPENDIX XI

GENERAL INFORMATION OF CHINA VANGUARD

(r) the sale agreement dated 24 April 2009 entered into between Aptus and Kunlun in relation to the disposal of the 33% Hunan equity interest held by the Aptus Group for the consideration of approximately RMB100,144,000 (equivalent to approximately HK$113,634,000) (“Hunan Sale Agreement”);
(s) the deed of amendment dated 17 June 2009 between China Vanguard, Grand Promise and Evolution amending the Evolution convertible bond, amongst other things, the existing put options have been replaced by (i) an obligation on the Evolution to request for redemption of a specified amount of the outstanding Evolution convertible bond on 24 June 2009; and (ii) an option exercisable by Evolution in respect of all or any part of the outstanding Evolution convertible bond during the option period;
(t) the deed of amendment dated 17 June 2009 between China Vanguard, Grand Promise and Liberty Harbor amending the Liberty Harbor convertible bond, amongst other things, the existing put options have been replaced by (i) an obligation on the Liberty Harbor to request for redemption of a specified amount of the outstanding Liberty Harbor convertible bond on 24 June 2009; and (ii) an option exercisable by Liberty Harbor in respect of all or any part of the outstanding Liberty Harbor convertible bond during the option period;
(u) the deed of undertaking dated 17 June 2009 between China Vanguard, Grand Promise, Evolution and Liberty Harbor in relation to the Grand Promise convertible bonds, amongst other things, (i) certain restrictions will be imposed on withdrawals or transfers from the bank accounts maintained or controlled by any China Vanguard Group member (other than Aptus or its subsidiaries, China Culture Development Digital Technology Co., Ltd. (“CCDDT”) and Excellent Union Communication Group Co., Ltd. (“Excellent Union”) during the undertaking period upon the terms and conditions of the Undertaking; (ii) Grand Promise and China Vanguard undertake to use reasonable endeavours to ensure that similar restrictions on withdrawals or transfers from the bank accounts maintained or controlled by Aptus and its subsidiaries are complied with; and (iii) Grand Promise agrees that it shall on or prior to 15 July 2009, enter into definitive legally binding and enforceable documentation (in form and substance reasonably satisfactory to each of Grand Promise, Liberty Harbor and Evolution) required to implement the restructuring of all amounts outstanding under the Grand Promise convertible bonds (the “Undertaking”);
(v) the deed of acknowledgement and undertaking dated 19 June 2009 between Aptus and Evolution in relation to (i) the acknowledgement that Aptus would not be able to redeem the Aptus Bond(s) until the redemption amount is available for redemption; (ii) the undertaking to consult with Aptus prior to issuing any notice to redeem the Aptus Bond(s) before the redemption amount is available for redemption and take into account all reasonable requirements of Aptus, having regard to the logistics and timing of the redemption amount being available for redemption; and (iii) Aptus agreed in favour of Evolution that it would use its best efforts to convert the redemption amount from RMB into HK$ in freely disposable cleared funds in Hong Kong as soon as possible;

XI – 10

APPENDIX XI

GENERAL INFORMATION OF CHINA VANGUARD

(w) the amendment and undertaking agreement dated 15 July 2009 between China Vanguard, Grand Promise, Evolution and Liberty Harbor in relation to the Grand Promise convertible bonds, amongst other things, (i) the term “Undertaking Period” under the Undertaking is amended by replacing “15 July 2009” with “5 August 2009”; and (ii) each of Evolution and Liberty Harbor undertakes not to exercise the holder put option under the Evolution convertible bond or the Liberty Harbor convertible bond (as the case may be) prior to 5 August 2009 (“Amendment and Undertaking Agreement”);
(x) the deed of amendment dated 4 August 2009 between China Vanguard, Grand Promise and Evolution further amending the Evolution convertible bond, amongst other things, the period during which the Evolution may require redemption of the outstanding principal amounts of the Evolution convertible bond has been changed from “the period from 15 July 2009 to the date falling 15 business days thereafter (inclusive)” to “the period from 31 August 2009 to the date falling 15 business days thereafter (inclusive)”;
(y) the deed of amendment dated 4 August 2009 between China Vanguard, Grand Promise and Liberty Harbor further amending the Liberty Harbor convertible bond, amongst other things, the period during which the Liberty Harbor may require redemption of the outstanding principal amounts of the Liberty Harbor convertible bond has been changed from “the period from 15 July 2009 to the date falling 15 business days thereafter (inclusive)” to “the period from 31 August 2009 to the date falling 15 business days thereafter (inclusive)”;
(z) the second amendment and undertaking agreement dated 4 August 2009 between China Vanguard, Grand Promise, Evolution and Liberty Harbor in relation to the Grand Promise convertible bonds, amongst other things, with effect from the date of the second amendment and undertaking agreement: (a) the term “Undertaking Period” under the Amendment and Undertaking Agreement is amended by replacing “5 August 2009” with “31 August 2009”; and (b) the reference to “HK$8,000,000” in the Amendment and Undertaking Agreement in relation to certain permitted withdrawal or transfer from bank accounts by any China Vanguard Group member (other than Aptus or its subsidiaries, CCDDT or Excellent Union) during the Undertaking Period is changed to “HK$12,000,000”;
(aa) the third amendment and undertaking agreement dated 28 August 2009 between China Vanguard, Grand Promise, Evolution and Liberty Harbor in relation to the Grand Promise convertible bonds, amongst other things, (i) with effect from the date of the third amendment and undertaking agreement the term “Undertaking Period” under the Amendment and Undertaking Agreement is amended by replacing “31 August 2009” with “15 September 2009” and (ii) each of Evolution and Liberty Harbor undertakes not to exercise the holder put option to require for redemption under the Evolution Note or the Liberty Note (as the case may be) prior to 15 September 2009;

XI – 11

APPENDIX XI

GENERAL INFORMATION OF CHINA VANGUARD

(bb) the deed of undertaking dated 28 August 2009 entered into between Aptus and Evolution in relation to (i) Evolution undertook to Aptus that it will not exercise its conversion right under the Aptus Bond(s), and Aptus undertook to Evolution that when the consideration payable under the Changde Sale Agreement and Hunan Sale Agreement and has been converted from RMB into HK$ and received by Aptus in full in freely disposable cleared funds in Hong Kong and is available for payment to redeem the Aptus Bond(s), it will be applied to redeem the Aptus Bond(s);
(cc) the fourth amendment and undertaking agreement dated 14 September 2009 between China Vanguard, Grand Promise, Evolution and Liberty Harbor in relation to the Grand Promise convertible bonds, amongst other things, (i) with effect from the date of the fourth amendment and undertaking agreement the term “Undertaking Period” under the Amendment and Undertaking Agreement is amended by replacing “15 September 2009” with “the 15th business day after 31 August 2009; and (ii) each of Evolution and Liberty Harbor undertakes not to exercise the holder put option to require for redemption under the Evolution Note or the Liberty Note (as the case may be) prior to the 15th business day after 31 August 2009;
(dd) the deed of amendment dated 22 September 2009 between China Vanguard, Grand Promise and Evolution further amending the Evolution convertible bond, amongst other things, the period during which Evolution may require redemption of the outstanding principal amounts of the Evolution convertible bond has been changed from “the period from 31 August 2009 to the date falling 15 business days thereafter (inclusive)” to “the period from 30 September 2009 to the date falling 15 business days thereafter (inclusive);
(ee) the deed of amendment dated 22 September 2009 between China Vanguard, Grand Promise and Liberty Harbor further amending the Liberty Harbor convertible bond, amongst other things, the period during which Liberty Harbor may require redemption of the outstanding principal amounts of the Liberty Harbor convertible bond has been changed from “the period from 31 August 2009 to the date falling 15 business days thereafter (inclusive)” to “the period from 30 September 2009 to the date falling 15 business days thereafter (inclusive);
(ff) the fifth amendment and undertaking agreement dated 22 September 2009 between China Vanguard, Grand Promise, Evolution and Liberty Harbor in relation to the Grand Promise convertible bonds, amongst other things, with effect from the date of the fifth amendment and undertaking agreement the term “Undertaking Period” under the Amendment and Undertaking Agreement is amended by replacing “the 15th business day after 31 August 2009” with “30 September 2009”;
(gg) the arrangement fee letter dated 22 September 2009 between China Vanguard, Evolution and Liberty Harbor in relation to the Grand Promise convertible bonds, amongst other things, whereby China Vanguard agrees to pay HK$2,500,000 to Liberty Harbor and HK$1,000,000 to Evolution as a fee for their assistance in arranging refinancing of the Grand Promise convertible bonds;

XI – 12

APPENDIX XI

GENERAL INFORMATION OF CHINA VANGUARD

(hh) the sixth amendment and undertaking agreement dated 29 September 2009 between China Vanguard, Grand Promise, Evolution and Liberty Harbor in relation to the Grand Promise convertible bonds, amongst other things, (i) with effect from the date of the sixth amendment and undertaking agreement the term “Undertaking Period” is amended by replacing “30 September 2009” with “17 October 2009”; and (ii) each of Evolution and Liberty Harbor undertakes not to exercise the holder put option to require redemption under the Grand Promise convertible bonds prior to 17 October 2009;
(ii) the deed of waiver dated 19 October 2009 executed and delivered by Aptus pursuant to which, amongst other things, Aptus agreed to waiver its certain right under the terms and conditions of the Aptus Bond(s);
(jj) the deed of amendment dated 30 October 2009 between China Vanguard, Grand Promise and Evolution further amending the Evolution convertible bond, amongst other things, the period during which Evolution may require redemption of the outstanding principal amounts of the Evolution convertible bond has been changed from “the period from 30 September 2009 to the date falling 15 business days thereafter (inclusive)” to “the period from 30 November 2009 to 13 January 2010 (inclusive)”;
(kk) the deed of amendment dated 30 October 2009 between China Vanguard, Grand Promise and Liberty Harbor further amending the Liberty Harbor convertible bond, amongst other things, the period during which Liberty Harbor may require redemption of the outstanding principal amounts of the Liberty Harbor convertible bond has been changed from “the period from 30 September 2009 to the date falling 15 business days thereafter (inclusive)” to “the period from 30 November 2009 to 13 January 2010 (inclusive)”;
(ll) the seventh amendment and undertaking agreement dated 30 October 2009 between China Vanguard, Grand Promise, Evolution and Liberty Harbor in relation to the Grand Promise convertible bonds, amongst other things, with effect from the date of the seventh amendment and undertaking agreement the definition of term “Undertaking Period” is amended by replacing “17 October 2009” with “13 January 2010”and the terms governing restrictions on withdrawals or transfers from bank accounts maintained or controlled by China Vanguard Group member or Aptus under the Amendment and Undertaking Agreement were amended;
(mm) the extension letter dated 30 October 2009 between China Vanguard, Evolution and Liberty Harbor in relation to the Grand Promise convertible bonds, amongst other things, in consideration for Evolution and Liberty Harbor agreeing not to exercise the noteholder put option before 30 November 2009, the extension fees and the daily extension fees are payable by China Vanguard upon the terms of the extension letter. The extension letter also provides that China Vanguard will be entitled to require, and Evolution and Liberty Harbor will be obliged to accept, redemption of the current Grand Promise convertible bonds provided that China Vanguard may not exercise such option in respect of any Grand Promise convertible bonds which are the subject of an outstanding exercise of the holder put option;

XI – 13

APPENDIX XI

GENERAL INFORMATION OF CHINA VANGUARD

(nn) the construction consultancy contract dated 30 October 2009 for HK$45,000,000 entered into between Rammon Renovation Limited and the Target for project management services for decoration and improvement of existing buildings in the lots in Yuen Long;
(oo) the placing agreement dated 2 November 2009 between Aptus and Convoy Investment Services Limited of the placing of up to a total of 160,000,000 new Aptus Shares at the placing price of HK$0.25 each by Convoy Investment Services Limited for and on behalf of Aptus;
(pp) the deed of amendment dated 16 November 2009 entered in to between Aptus, the Trustee and the Security Trustee further amending the trust deed constituting the Aptus Bond(s), amongst other things, amendments were made to the terms of the Aptus Bond(s) relating to the timing of the right of the bondholder(s) to require full or partial redemption of the Aptus Bond(s) to the effect that the bondholder(s) now may require redemption of all or some only of the Aptus Bond(s) at their early redemption amount together with interest accrued to the put option date on (i) any date during the period from 21 November 2009 to 14 January 2010 (both dates inclusive) (the “Period”); (ii) 15 January 2010; and (iii) 21 November 2010, provided that in the case of a put option date during the Period, the redemption amount shall have been converted from RMB into HK$ and received by Aptus in full in freely disposable cleared funds in Hong Kong and is available to redeem the Aptus bond(s). Amendment has also been made to the requisite notice period for Aptus to require full redemption of the Aptus Bond(s) on or at any time after 21 November 2008 and prior to 11 November 2011 so that “not less than five business days’ notice” is required. In addition, (i) the Evolution confirms and undertakes to Aptus that it will not exercise its conversion right under the Aptus Bond(s); and (ii) Aptus confirms and undertakes to the Evolution that after the redemption amount has been converted from RMB into HK$ and received by Aptus in full in freely disposable cleared funds in Hong Kong and is available for payment to redeem the Aptus Bond(s), it will notify the Evolution as soon as possible and the redemption amount will be applied to redeem the Aptus Bond(s);
(qq) the deed of undertaking dated 16 November 2009 entered into between Aptus and Evolution in relation to (i) Evolution confirmed and undertook to Aptus that it will not exercise the conversion right under Aptus Bond(s); (ii) Aptus confirmed and undertook to Evolution that after the redemption amount has been converted from RMB into HK$ and received by Aptus in full in freely disposable cleared funds in Hong Kong and is available for payment to redeem the Aptus Bond(s), it will notify Evolution as soon as possible and the redemption amount will be applied to redeem the Aptus Bond(s);
(rr) the S&P Agreement;
(ss) the Convertible Bonds;
(tt) the Secured Promissory Note;
(uu) the Unsecured Promissory Note;
(vv) the Subscription Agreement I;

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(ww) the Subscription Agreement II;

(xx) the placing agreement dated 14 December 2009 between Precise Result and Convoy Investment Services Limited in relation to the placing of up to a total 120,000,000 existing Aptus Shares owned by Precise Result at the placing price of HK$0.25 each by Convoy Investment Services Limited for and on behalf of Precise Result;
(yy) the placing agreement dated 16 December 2009 between Precise Result and Kingston Securities Ltd., in relation to the placing of up to a total 200,000,000 existing Aptus Shares owned by Precise Result at the placing price of HK$0.25 each by Kingston Securities Ltd., for and on behalf of Precise Result;
(zz) the deed of amendment dated 13 January 2010 between China Vanguard, Grand Promise and Evolution amending the Evolution convertible bond, amongst other things, the period during which Evolution may require redemption of the outstanding principal amounts of the Evolution convertible bond has been changed from “the period from 30 November 2009 to 13 January 2010 (inclusive)” to “the period from 14 January 2010 to 26 February 2010 (inclusive)”;
(aaa) the deed of amendment dated 13 January 2010 between China Vanguard, Grand Promise and Liberty Harbor amending the Liberty Harbor convertible bond, amongst other things, the period during which Liberty Harbor may require redemption of the outstanding principal amounts of the Liberty Harbor convertible bond has been changed from “the period from 30 November 2009 to 13 January 2010 (inclusive)” to “the period from 14 January 2010 to 26 February 2010 (inclusive)”;
(bbb) the amendment and restatement agreement dated 13 January 2010 between China Vanguard, Grand Promise, Evolution and Liberty Harbor in relation to the Grand Promise convertible bonds, amongst other things, with effect from the date of the Amendment and Restatement Agreement, the definition of the term “Undertaking Period” is amended by replacing “13 January 2010” with “26 February 2010” and imposing certain new terms regarding no disposal from China Vanguard Group during the Undertaking Period;
(ccc) the variation letter dated 13 January 2010 between China Vanguard, Evolution and Liberty Harbor in relation to the Grand Promise convertible bonds, amongst other things, varying the terms of the extension letter dated 30 October 2009 with effect from 13 January 2010 to effect that the obligation of China Vanguard to pay a daily extension fee has been amended;
(ddd) the deed of undertaking dated 12 February 2010 between Aptus and Evolution in relation to the Aptus Bond(s), pursuant to which, amongst other things, Evolution undertook to Aptus that it will not, and will procure that the Bondholder(s), the Trustee and/or the Security Trustee do not: (i) treat the non-payment by 14 February 2010 of the outstanding principal amounts, interest and other amounts payable on the Aptus Bond(s) (the “Non-Payment”) as an event of default (the “Event of Default”) or potential event of default (the “Potential Event of Default”) under the trust deed constituting the Aptus Bond(s); or (ii) exercise

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GENERAL INFORMATION OF CHINA VANGUARD

any rights under the trust deed constituting the Aptus Bond(s) or any security document which Evolution, the Trustee or the Security Trustee may otherwise have in respect of the Non-Payment including without limitation any rights in respect of any Event of Default or Potential Event of Default, unless and until Aptus has failed to redeem the Aptus Bond(s) in full by 12 March 2010 or such later date as Evolution may agree in writing from time to time;

(eee) the placing agreement dated 19 February 2010 between Precise Result and VC Brokerage Limited, in relation to the placing of up to a total 140,000,000 existing Aptus Shares owned by Precise Result at the placing price of HK$0.28 each by VC Brokerage Limited, for and on behalf of Precise Result;
(fff) the deed of amendment dated 25 February 2010 between China Vanguard, Grand Promise and Evolution amending the Evolution convertible bond, amongst other things, the period during which Evolution may require redemption of the outstanding principal amounts of the Evolution convertible bond has been changed from “the period from 14 January 2010 to 26 February 2010 (inclusive)” to “the period from 27 February 2010 to 31 March 2010 (inclusive)”;
(ggg) the deed of amendment dated 25 February 2010 between China Vanguard, Grand Promise and Liberty Harbor amending the Liberty Harbor convertible bond, amongst other things, the period during which Liberty Harbor may require redemption of the outstanding principal amounts of the Liberty Harbor convertible bond has been changed from “the period from 14 January 2010 to 26 February 2010 (inclusive)” to “the period from 27 February 2010 to 31 March 2010 (inclusive)”;
(hhh) the second amendment and restatement agreement dated 25 February 2010 between China Vanguard, Grand Promise, Evolution and Liberty Harbor in relation to the Grand Promise convertible bonds, amongst other things, with effect from the date of the second amendment and restatement agreement, the definition of the term “Undertaking Period” is amended by replacing “26 February 2010” with “31 March 2010”;
(iii) the letter dated 12 March 2010 issued by Evolution in relation to the Aptus Bond(s), notifying the “later date” referred to in paragraph (ddd) above shall be “26 March 2010”;
(jjj) the Supplemental Agreement;
(kkk) the letter dated 24 March 2010 issued by Evolution in relation to the Aptus Bond(s), notifying the “later date” referred to in paragraph (iii) above shall be “16 April 2010”;
(lll) the deed of amendment dated 31 March 2010 between China Vanguard, Grand Promise and Evolution amending the Evolution convertible bond, amongst other things, the period during which Evolution may require redemption of the outstanding principal amounts of the Evolution convertible bond has been changed from “the period from 27 February 2010 to 31 March 2010 (inclusive)” to “the period from 1 April 2010 to 30 April 2010 (inclusive)”;

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(mmm) the deed of amendment dated 31 March 2010 between China Vanguard, Grand Promise and Liberty Harbor amending the Liberty Harbor convertible bond, amongst other things, the period during which Liberty Harbor may require redemption of the outstanding principal amounts of the Liberty Harbor convertible bond has been changed from “the period from 27 February 2010 to 31 March 2010 (inclusive)” to “the period from 1 April 2010 to 30 April 2010 (inclusive)”;
(nnn) the third amendment and restatement agreement dated 31 March 2010 between China Vanguard, Grand Promise, Evolution and Liberty Harbor in relation to the Grand Promise convertible bonds, amongst other things, with effect from the date of the third amendment and restatement agreement, the definition of the term “Undertaking Period” is amended by replacing “31 March 2010” with “30 April 2010”;
(ooo) the placing agreement dated 13 April 2010 between Precise Result and VC Brokerage Limited, in relation to the placing of up to a total 280,000,000 existing Aptus Shares owned by Precise Result at the placing price of HK$0.28 each by VC Brokerage Limited, for and on behalf of Precise Result; and
(ppp) the letter dated 16 April 2010 issued by Evolution in relation to the Aptus Bond(s), notifying the “later date” referred to in paragraph (kkk) above shall be “29 April 2010” or “11 June 2010” if certain criteria is met.

5. CHINA VANGUARD DIRECTORS’ SERVICE CONTRACTS

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

6. LITIGATION

As at the Latest Practicable Date, no litigation, arbitration or claim of material importance is known to the Directors to be pending or threatened against any member of the Enlarged China Vanguard Group.

7. COMPETING INTERESTS

As at the Latest Practicable Date, none of the China Vanguard Directors or substantial China Vanguard Shareholders or any of their respective associates has any interest in business which competes with or may compete with the business of the China Vanguard Group or has any other conflict of interests which any person has or may have with the China Vanguard Group.

8. EXPERTS AND CONSENTS

The following is the qualifications of the expert who have given an opinion or advice contained in this joint circular:

Name Qualification Castores Magi Asia Limited Independent valuer (“ Castores ”)

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Castores Magi (Hong Kong) Limited (“ Castores HK ”) Goldin Financial Limited (“ Goldin Financial ”)

Independent property valuer

a corporation licensed to carry out type 6 (advising on corporate finance) regulated activity under the SFO
W.H. Tang & Partners CPA Limited (“ W.H.Tang ”)

Certified public accountants

As at the Latest Practicable Date, each of Castores, Castores HK, Goldin Financial and W.H.Tang did not have any direct or indirect interest in any asset which had been acquired, or disposed of by, or leased to any member of the China Vanguard Group, or was proposed to be acquired, or disposed of by, or leased to any member of the China Vanguard Group since 31 October 2009, being the date to which the latest published audited financial statements of the China Vanguard Group were made up.

As at the Latest Practicable Date, each of Castores, Castores HK, Goldin Financial and W.H.Tang was not interested beneficially or non-beneficially in any shares in China Vanguard or any of its subsidiaries or any right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the China Vanguard Group.

Each of Castores, Castores HK, Goldin Financial and W.H.Tang has given and has not withdrawn its written consent to the issue of this joint circular with the inclusion of its respective letter and/or report and/or reference to its name in the form and context in which it respectively appears.

9. INTEREST IN ASSETS

As at the Latest Practicable Date, none of the China Vanguard Directors had any direct or indirect interest in any asset which had been acquired, or disposed of by, or leased to any member of the Enlarged China Vanguard Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Enlarged China Vanguard Group since 31 October 2009, being the date to which the latest published audited financial statements of the China Vanguard Group were made up.

10. CHINA VANGUARD DIRECTORS’ INTEREST IN CONTRACTS

As at the Latest Practicable Date, none of the China Vanguard Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Enlarged China Vanguard Group subsisting at the Latest Practicable Date which was significant in relation to the business of the Enlarged China Vanguard Group.

11. GENERAL

(a) The registered office of China Vanguard is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

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(b) The head office and principal place of business of China Vanguard in Hong Kong is at Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(c) The branch share registrar and transfer office of China Vanguard in Hong Kong is Tricor Standard Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(d) The company secretary of China Vanguard is Mr. Kwan Yiu Ming Patrick, who is a fellow member of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants and an associate member of the Institute of Chartered Accountants in England and Wales.
(e) The compliance officer of China Vanguard is Mr. Chan Ting, an executive director and the Chief Executive Officer of China Vanguard.
(f) China Vanguard established an audit committee with written terms of reference in compliance with Rules 5.28 to 5.29 of the GEM Listing Rules. The primary duties of the audit committee are to review China Vanguard’s annual reports and accounts, half-year reports and quarterly reports and to provide advice and comments thereon to the China Vanguard Board. The audit committee comprises three members, all are independent nonexecutive directors. Set below are their background and directorships (present and past) of other companies, the securities of which are listed on the GEM, the Main Board of the Stock Exchange or other stock exchanges.

Mr. Zhang Xiu Fu, aged 76, is also a member of each of the audit committee and remuneration committee of China Vanguard. He devoted himself to the Chinese Revolution in August 1948 and joined in the Communist Party in March 1950. He had served as the Head of the Municipal Police of Hangzhou City, Zhejiang Province, the Chief Officer of the Provincial Police of Zhejiang Province, a member of the Communist Party’s Provincial Standing Committee in Zhejiang Province and the Secretary of the Political and Legislative Affairs Committee. He had also served as the Commissar of the Chinese People’s Armed Police, the Vice Minister and the Vice Head of the party organization of the Chinese Ministry of Legislation, a representative of the Nine National People’s Congress, a member of the Legislation Committee of the National People’s Congress and the Vice President of China Law Science Association. He currently serves as the President of the China Legal Aid Foundation. He is also an independent non-executive director, a member of the audit committee and remuneration committee of Aptus. He joined the China Vanguard in January 2008.

Mr. To Yan Ming Edmond, aged 38, is also the chairman of the audit committee and a member of the remuneration committee. Mr. To holds a bachelor degree in Commerce in Accounting from Curtin University of Technology in Western Australia. He is a practicing accountant and presently the director of Fortitude C.P.A. Limited, Edmond To CPA Limited

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APPENDIX XI

and Zhonglei (HK) CPA Company Limited. He is a member of both the CPA Australia and Hong Kong Institute of Certified Public Accountants. He worked for one of the international accounting firms, Deloitte Touche Tohmatsu and has over 10 years of experience in auditing, accounting, floatation and taxation matters. Mr. To was appointed as an independent non-executive director and members of the audit and remuneration committee of BEP International Holdings and Theme International Holdings Limited (the securities of both companies are listed on the Main Board of the Stock Exchange) on 5 June 2009 and 5 November 2009 respectively. Mr. To was appointed as an independent non-executive director, member and chairman of the audit committee, and member of remuneration and nomination committee of Wai Chun Group Holdings Limited (the securities of which are listed on the Main Board of the Stock Exchange) on 29 September 2009. Mr. To is also an independent non-executive director, chairman of the audit committee and member of the remuneration committee of Aptus. Mr. To joined China Vanguard in January 2006.

(g) The China Vanguard Board comprises five executive directors, being Madam Cheung Kwai Lan, Mr. Chan Tung Mei, Mr. Chan Ting, Ms. Chan Siu Sarah and Mr. Lau Hin Kun; and three independent non-executive directors, being Mr. Tian He Nian, Mr. Zhang Xiu Fu and Mr. To Yan Ming Edmond.

12. CORPORATE INFORMATION

Directors

Madam Cheung Kwai Lan (“Madam Cheung”), aged 71, is the Chairman, one of the founders of China Vanguard Group, the executive director and Authorized Representative of China Vanguard. She has served China Vanguard Group for more than 9 years and is the director of various subsidiaries of China Vanguard Group. Madam Cheung Kwai Lan is responsible for business development, strategic planning and marketing for China Vanguard Group. She is the Vice President of the Zhang Xueliang Foundation （張學良基金會）. She graduated from Shanxi Tai Yuan Medical School in 1960 and was a researcher at Shanxi Province Tai Yuan (Atomic Energy) Research Institute（山西省太原（原子能）研究所）,which was one of the institutions of the Chinese Academy of Science. She also participated in the research and development of the radioactive material Cobalt 60 for imaging and cancer treatment. She is an executive director and chairman of Aptus, an indirect non-wholly owned subsidiary listed on the GEM. She is the mother of Ms. Chan Siu Sarah and Mr. Chan Ting and the spouse of Mr. Chan Tung Mei, all being executive directors of China Vanguard.

Madam Cheung’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Mr. Chan Tung Mei, aged 73, is one of the founders of China Vanguard Group and an executive director of China Vanguard. He has served China Vanguard Group for more than 9 years and is the director of various subsidiaries of China Vanguard Group. He is responsible for the overall management and operation of China Vanguard Group. He graduated from Shanxi Industrial University in the PRC and received a bachelor’s degree in Civil Engineering in August 1960. Mr. Chan Tung Mei has over 13 years of experience in establishing and managing companies. He is the father of Ms. Chan Siu Sarah and Mr. Chan Ting and the spouse of Madam Cheung Kwai Lan, all being executive directors of China Vanguard.

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GENERAL INFORMATION OF CHINA VANGUARD

Mr. Chan Tung Mei’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Mr. Chan Ting, aged 40, is an executive director, Authorised Representative, Chairman of the remuneration committe, compliance officer and the chief executive officer of China Vanguard. He has served China Vanguard Group for more than 8 years and is the director of various subsidiaries of China Vanguard Group. He is responsible for the marketing and business development of China Vanguard Group. He was awarded a bachelor degree in Economics from Macquarie University in Australia in 1993. Mr. Chan has over 16 years of solid working experience in establishing and managing companies in the PRC. He is also an executive director, chairman of the remuneration committee, authorized representative and chief executive officer of Aptus. He is the son of Madam Cheung Kwai Lan and Mr. Chan Tung Mei, and the brother of Ms. Chan Siu Sarah, all being executive directors of China Vanguard. He joined China Vanguard Group in July 2001.

Mr. Chan Ting’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Ms. Chan Siu Sarah (“Ms. Chan”), aged 45, is an executive director and the General Counsel of China Vanguard and its subsidiaries. She obtained her law degree from the London School of Economics and Political Science in 1989 and was qualified to practice law as solicitor in Hong Kong in 1992 and England and Wales in 1993. She did her solicitor’s training with the international firm of Baker & McKenzie in Hong Kong and, after qualification, worked for 4 years at the international firm of Linklaters in Hong Kong specializing in projects and project finance with a particular focus on China. She then spent the next 7 years as corporate counsel with the Asia Pacific regional headquarter of Lucent Technologies in Hong Kong attending legal matters in the region. From 2004 to 2007, she was appointed the regional general counsel for the Asia Pacific region of Avon Products Inc., leading its legal, government and regulatory affair teams in the region. Ms. Chan has been an executive director of Avon Products Co., Ltd., the securities of which are listed on the JASDAQ Securities Exchange, Inc. for the period from March 2006 to December 2007. Ms. Chan is the daughter of Madam Cheung Kwai Lan and Mr. Chan Tung Mei, and the sister of Mr. Chan Ting, all being executive directors of China Vanguard. She joined China Vanguard Group in May 2008.

Ms. Chan’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Mr. Lau Hin Kun (“Mr. Lau”), aged 51, is an executive director. He has served China Vanguard Group for more than 8 years and is the director of certain subsidiaries of China Vanguard. He has over 20 years of experience in the banking sector and accounting experience of both Hong Kong and the PRC and he previously worked in Nanyang Commercial Bank Limited, Charlio International Holdings Limited and Chiyu Banking Corporation Limited. He joined China Vanguard Group in July 2001.

Mr. Lau’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

The business address of Mr. Tian He Nian, Mr. Zhang Xiu Fu and Mr. To Yau Ming Edmond is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong. Please refer to section “11. General” of this appendix for their respective details.

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Senior Managements

Mr. Kwan Yiu Ming Patrick (“Mr. Kwan”), aged 44, is the Chief Financial Officer of China Vanguard Group and the company secretary of China Vanguard. He has served China Vanguard Group for more than 8 years and is the director of certain subsidiaries of China Vanguard Group. He holds a bachelor degree of Commerce in Accounting from the Curtin University of Technology in Australia. Mr. Kwan is a fellow member of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants and an associate member of the Institute of Chartered Accountants in England and Wales. He has over four years of experience in auditing and over 18 years of experience in accounting and financial management. He joined China Vanguard Group in August 2001.

Mr. Kwan’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Mr. Fung King Him Daniel (“Mr. Fung”), aged 40, is a Director of Corporate Strategy of China Vanguard Group and the director of various subsidiaries of the Group. Mr. Fung is responsible for business development of China Vanguard Group. He holds a bachelor degree from the University of Wisconsin in the United States of America with double majors in Mathematics and Computer Science. He previously worked in Lehman Brothers Asia Limited, HSBC Asset Management Limited and Platinum Securities Company Limited. Mr. Fung is also an executive director, compliance officer and authorized representative of Aptus. He joined China Vanguard Group in February 2002.

Mr. Fung’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Mr. Young Russell (“Mr. Young”), aged 47, is a Director of Corporate Strategy of China Vanguard Group. Mr. Young is involved in the corporate strategy and business development of China Vanguard Group. He holds a Bachelor of Commerce and Administration from Victoria University, New Zealand and a Masters in Business Studies from Massey University, New Zealand. He has over 16 years experience in the finance industry and has held senior positions in a number of reputable investment banks. Prior to joining China Vanguard Group, he was Regional Head of Mid-Cap Research for Nomura International (Hong Kong) Ltd. after having been Head of Energy and Basic Material Research and Regional Head of Utilities Research. Mr. Young was also formerly an independent non-executive director of one of Asia’s largest downstream aluminium products producers. He joined China Vanguard Group in April 2006.

Mr. Young’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Mr. Chan Kin Kee, aged 40, is the Chief Technical Officer of the Group. He holds a bachelor degree from Macquarie University in Australia. He previously worked in IBM Australia as Technical Consultant, in Aeon Credit Services Co., Ltd. as Manager and in EVI Services Ltd. as IT Development Manager. He joined China Vanguard Group in April 2008.

Mr. Chan Kin Kee’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

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Ms. Ho Ping Ping (“Ms. Ho”), aged 60, is the sales and marketing joint director of China Vanguard Group, the personal assistant to the chairman of China Vanguard Group and the director of certain subsidiaries of the China Vanguard Group. Ms. Ho holds a bachelor degree in Foreign Trade from Shanghai Institute of Foreign Trade (now refers to Shanghai Foreign Trade University), and has the title of Economist and International Economist. Prior to joining China Vanguard Group, she was the manager of a third party company, after having been the department manager of Anhui Import and Export Group. She joined China Vanguard Group in July 2001.

Ms. Ho’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

Ms. Kwok Shuk Yi (“Ms. Kwok”), aged 33, is the Human Resources Manager of China Vanguard Group. She holds a bachelor degree of Human Resources Management from The Royal Melbourne Institute of Technology University in Australia. She has 10 years of experience in human resources and administration management. Prior to joining China Vanguard Group in July 2008, she worked as human resources managerial positions with a listed company and a sizeable investment company in the PRC.

Ms. Kwok’s business address is Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the principal place of business of China Vanguard in Hong Kong at Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong during normal business hours on any Business Day from the date of this joint circular up to and including the date of the China Vanguard EGM:

(a) the memorandum and articles of association of China Vanguard;
(b) the material contracts referred to in the paragraph headed “Material contracts” in this appendix;
(c) the written consents of experts referred to in the paragraph headed “Experts and Consents” in this appendix;
(d) the accountants’ report on the China Vanguard Group prepared by W.H. Tang & Partners CPA Limited, the text of which is set out in Appendix II to this joint circular;
(e) the unaudited pro forma financial information of the Enlarged China Vanguard Group prepared by W.H. Tang, the text of which is set out in Appendix V to this joint circular;

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(f) the valuation report on the properties held by the Target Group prepared by Castores, the text of which is set out in Appendix VI to this joint circular;
(g) the valuation report on the land and building (including all rented properties) of the Enlarged Aptus Group and the Enlarged China Vanguard Group prepared by Castores HK, the text of which is set out in Appendix VIII and Appendix IX to this joint circular;
(h) the annual reports of China Vanguard for each of the two financial years ended 30 June 2008 and 2009;
(i) this joint circular.

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NOTICE OF APTUS EGM

==> picture [56 x 61] intentionally omitted <==

APTUS HOLDINGS LIMITED 問博控股有限公司

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 8212)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT an extraordinary general meeting of the shareholders of Aptus Holdings Limited 問博控股有限公司 (the “ Company ”) will be held at Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong on Friday, 7 May 2010 at 10:00 a.m. for the purpose of considering and, if thought fit, passing, with or without modification, the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTIONS

“ THAT
(a) the conditional sale and purchase agreement dated 20 November 2009 entered into between Sea Marvel Limited (the “ Purchaser ”), a wholly-owned subsidiary of the Company as purchaser, Red Rabbit Capital Limited (the “ Vendor ”) as vendor and Mr. Kong Lung Cheung (the “ Guarantor ”) as guarantor as supplemented by a supplemental agreement dated 19 March 2010 made between the same parties to the said conditional sale and purchase agreement (the said conditional sale and purchase agreement as supplemented as aforesaid is referred to below as the “ Sale and Purchase Agreement ”) in relation to the sale and purchase of the entire issued share capital (the “ Sale Share ”) of Casdon Management Limited upon the terms and conditions thereof (a copy of the Sale and Purchase Agreement has been signed by the chairman of the meeting and for the purpose of identification purpose marked “A”) and all the transactions contemplated thereunder (among others, including but not limited to the issue of the Promissory Notes (as defined in the joint circular of the Company dated 22 April 2010) (the “ Joint Circular ”)) be and are hereby ratified, confirmed and approved;
(b) conditional upon resolutions numbered 1 (a) above being passed, the creation and issue by the Company of the convertible bonds (the “ Convertible Bonds ”) in the aggregate principal amount of HK$850,000,000, convertible into new shares (the “ Shares ”) of HK$0.01 each in the share capital of the Company on the terms and conditions (the “ Convertible Bonds Conditions ”) contained in the Bond Instrument annexed to Schedule 5 of the Sale and Purchase Agreement, be and is hereby generally and unconditionally approved in all respects and the transaction contemplated therein be and are hereby approved in all respects;

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NOTICE OF APTUS EGM

(c) conditional upon resolutions numbered 1 (a) and (b) above being passed, the directors of the Company (the “ Directors ”) be and they are hereby generally and specifically authorised to allot and issue such number of new Shares (the “ Special Mandate ”) as may be required to be allotted and issued upon the exercise of the conversion right attaching to the Convertible Bonds approved to be issued under resolution numbered 1 (b) above (or to the extent necessary) on and subject to the terms and conditions of the Convertible Bonds Conditions, and that the Special Mandate is in addition to, and shall not prejudice nor revoke the existing general mandate granted to the Directors by the shareholders of the Company in the annual general meeting of the Company held on 3 November 2009 or such other general or special mandate(s) which may from time to time be granted to the Directors prior to the passing of this resolution;
(d) the granting of the put option (the “ Put Option ”) by the Vendor and the Guarantor exercisable by the Purchaser to require the Vendor and the Guarantor (or any of them) (the “ Put Option Seller ”) to purchase the Sale Share on terms and conditions (the “ Put Option Terms and Conditions ”) relating to the Put Option as contained in the Sale and Purchase Agreement (brief details of which terms and conditions are set out in the paragraph headed “The Put Option” in the Letter from the Aptus Board of the Joint Circular) be and it is hereby generally and unconditionally approved, confirmed and ratified in all respects and that all the transactions contemplated thereunder be and they are hereby approved; and
(e) conditional upon resolutions numbered 1 (a), (b), (c) and (d) above being passed the Directors be and they are hereby authorised to do all such acts and things (including, without limitation, signing, execution (under hand or under seal), perfection and delivery of all documents) which are in their opinion necessary, appropriate, desirable or expedient to implement or to give effect to the terms of the Sale and Purchase Agreement and all transactions contemplated thereunder and all other matters incidental thereto or in connection therewith and to agree to and make such variation, amendment and waiver of any of the matters relating thereto or in connection therewith that are, in the opinion of the Directors, not material to the terms of the Sale and Purchase Agreement and all transactions contemplated thereunder and are in the interests of the Company.”
“ THAT
(a) in the event the Put Option is exercised by the Purchaser pursuant to and in accordance with the Put Option Terms and Conditions, the sale of the Sale Share to the Put Option Seller at a consideration of HK$1,085,000,000 (subject to set-off in accordance with the Put Option Terms and Conditions) be and it is hereby approved; and

AEGM – 2

NOTICE OF APTUS EGM

(b) the Directors be and they are hereby authorised to do all such acts and things (including, without limitation, signing, execution (under hand or under seal), perfection and delivery of all documents) which are in their opinion necessary, appropriate, desirable or expedient to implement or to give effect to the Put Option and all transactions contemplated thereunder and all other matters incidental thereto or in connection therewith and to agree to and make such variation, amendment and waiver of any of the matters relating thereto or in connection therewith that are, in the opinion of the Directors, not material to the Put Option and all transactions contemplated thereunder and are in the interests of the Company.”

For and on behalf of the Board of Aptus Holdings Limited 問博控股有限公司 Fung King Him Daniel Director

Hong Kong, 22 April 2010

Registered Office: Head office and principal place of Cricket Square business in Hong Kong: Hutchins Drive Room 2201, 22nd Floor P.O. Box 2681 Hopewell Centre Grand Cayman KY1-1111 183 Queen’s Road East Cayman Islands Wanchai, Hong Kong

Notes:

A form of proxy for use at the extraordinary general meeting of the Company (the “EGM”) has been despatched to the shareholders of the Company together with a copy of this notice.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney authorised in writing, or if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person duly authorised to sign the same.
Any member of the Company entitled to attend and vote at the EGM shall be entitled to appoint another person (who must be an individual) as his proxy to attend and vote instead of him and a proxy so appointed shall have the same right as the member to speak at the EGM. On a poll, votes may be given either personally or by proxy. A proxy need not be a member of the Company. A member may appoint any number of proxies to attend in his stead at the EGM.
In order to be valid, the form of proxy, together with the power of attorney (if any) under which it is signed, or a notarially certified copy of such power or authority, must be delivered at the branch share registrar and transfer office of the Company in Hong Kong, Tricor Tengis Ltd. at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the EGM or any adjourned meeting.
Delivery of an instrument appointing a proxy shall not preclude a member from attending and voting in person at the EGM or any adjournment thereof and in such event, the instrument appointing a proxy shall be deemed to be revoked.
Where there are joint registered holders of any share, any one of such persons may vote at the EGM, either personally or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders be present at the EGM personally or by proxy, that one of the said persons so present being the most or, as the case may be, the more senior shall alone be entitled to vote in respect of the relevant joint holding and, for this purpose, seniority shall be determined by reference to the order in which the names of the joint holders stand on the register in respect of the relevant joint holding. Several executors or administrators of a deceased member in whose name any share stands shall for the purposes of the articles of association of the Company be deemed joint holders thereof.
Voting at the EGM will be taken by way of poll.

AEGM – 3

NOTICE OF CHINA VANGUARD EGM

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 8156)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT an extraordinary general meeting (the “ EGM ”) of China Vanguard Group Limited 眾彩科技股份有限公司 (the “ Company* ”) will be held at Room 2201, 22nd Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong on Friday, 7 May 2010 at 10:30 a.m. for the purpose of considering and, if thought fit, passing, with or without modification, the following resolutions as an ordinary resolution of the Company:

ORDINARY RESOLUTIONS

“ THAT
(a) the conditional sale and purchase agreement dated 20 November 2009 entered into between Sea Marvel Limited (the “ Purchaser ”), a wholly-owned subsidiary of Aptus Holdings Limited as purchaser, Red Rabbit Capital Limited (the “ Vendor ”) as vendor and Mr. Kong Lung Cheung (the “ Guarantor ”) as guarantor as supplemented by a supplemental agreement dated 19 March 2010 made between the same parties to the said conditional sale and purchase agreement (the said conditional sale and purchase agreement as supplemented as aforesaid is referred to below as the “ Sale and Purchase Agreement ”) in relation to the sale and purchase of the entire issued share capital (the “ Sale Share ”) of Casdon Management Limited upon the terms and conditions thereof (a copy of Sale and Purchase Agreement has been signed by the chairman of the meeting and for the purpose of identification purpose marked “A”) and all the transactions contemplated thereunder (including but not limited to the issue of the Convertible Bonds (as defined in the joint circular of the Company dated 22 April 2010 (the “Joint Circular”)), the allotment and issue of the conversion shares upon exercise of the Convertible Bonds and issue of the Promissory Notes (as defined in the Joint Circular) be and are hereby ratified, confirmed and approved;
(b) the dilution of the equity interest held by the Company in Aptus Holdings Limited as a result of the partial or full conversion of the Convertible Bonds into Conversion Shares be and is hereby approved (the “Deemed Disposal”);
(c) the granting of the put option (the “ Put Option ”) by the Vendor and the Guarantor exercisable by the Purchaser to require the Vendor and the Guarantor (or any of them) (the “ Put Option Seller ”) to purchase the Sale Share on terms and conditions (the “ Put Option Terms and Conditions ”) relating to the Put Option as contained in the Sale and Purchase Agreement (brief details of which terms and conditions are set out in the paragraph headed “The Put Option” in the Letter from the Aptus Board of the

* for identification purpose only

CVEGM – 1

NOTICE OF CHINA VANGUARD EGM

Joint Circular) be and it is hereby generally and unconditionally approved, confirmed and ratified in all respects and that all the transactions contemplated thereunder be and they are hereby approved; and

(d) and the directors of the Company (the “Directors”) be and they are hereby authorised to do all such acts and things (including, without limitation, signing, execution (under hand or under seal), perfection and delivery of all documents) which are in their opinion necessary, appropriate, desirable or expedient to implement or to give effect to the terms of the Sale and Purchase Agreement and all transactions contemplated thereunder, the Deemed Disposal and all other matters incidental thereto or in connection therewith and to agree to and make such variation, amendment and waiver of any of the matters relating thereto or in connection therewith that are, in the opinion of the Directors, not material to the terms of the Sale and Purchase Agreement and all transactions contemplated thereunder and are in the interests of the Company.”
“ THAT
(a) in the event the Put Option is exercised by the Purchaser pursuant to and in accordance with the Put Option Terms and Conditions, the sale of the Sale Share to the Put Option Seller at a consideration of HK$1,085,000,000 (subject to set-off in accordance with the Put Option Terms and Conditions) be and it is hereby approved; and
(b) the Directors be and they are hereby authorised to do all such acts and things (including, without limitation, signing, execution (under hand or under seal), perfection and delivery of all documents) which are in their opinion necessary, appropriate, desirable or expedient to implement or to give effect to the Put Option and all transactions contemplated thereunder and all other matters incidental thereto or in connection therewith and to agree to and make such variation, amendment and waiver of any of the matters relating thereto or in connection therewith that are, in the opinion of the Directors, not material to the Put Option and all transactions contemplated thereunder and are in the interests of the Company.”

For and on behalf of the Board of China Vanguard Group Limited 眾彩科技股份有限公司 * Chan Siu Sarah Director

Hong Kong, 22 April 2010

Registered office:

Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands

Head office and principal place of business in Hong Kong: Room 2201, 22nd Floor Hopewell Centre 183 Queen’s Road East Wanchai, Hong Kong

CVEGM – 2

NOTICE OF CHINA VANGUARD EGM

Notes:

(1) A form of proxy for use at the EGM has been despatched to the shareholders of the Company together with a copy of this notice.
(2) The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney authorised in writing, or if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person duly authorised to sign the same.
(3) Any member of the Company entitled to attend and vote at the EGM shall be entitled to appoint another person (who must be an individual) as his proxy to attend and vote instead of him and a proxy so appointed shall have the same right as the member to speak at the EGM. On a poll, votes may be given either personally or by proxy. A proxy need not be a member of the Company. A member may appoint any number of proxies to attend in his stead at the EGM.
(4) In order to be valid, the form of proxy, together with the power of attorney (if any) under which it is signed, or a notarially certified copy of such power or authority, must be delivered at the branch share registrar and transfer office of the Company in Hong Kong, Tricor Standard Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the EGM or any adjourned meeting.
(5) Delivery of an instrument appointing a proxy shall not preclude a member from attending and voting in person at the EGM or any adjournment thereof and in such event, the instrument appointing a proxy shall be deemed to be revoked.
(6) Where there are joint registered holders of any share, any one of such persons may vote at the EGM, either personally or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders be present at the EGM personally or by proxy, that one of the said persons so present being the most or, as the case may be, the more senior shall alone be entitled to vote in respect of the relevant joint holding and, for this purpose, seniority shall be determined by reference to the order in which the names of the joint holders stand on the register in respect of the relevant joint holding. Several executors or administrators of a deceased member in whose name any share stands shall for the purposes of the articles of association of the Company be deemed joint holders thereof.
(7) Voting at the EGM will be by way of poll.

CVEGM – 3

AI assistant

Sinopharm Tech Holdings Limited — Proxy Solicitation & Information Statement 2010

51300_rns_2010-04-21_0060e65e-7323-4794-9791-4e5bbceb73d4.pdf

APTUS HOLDINGS LIMITED 問博控股有限公司

CHARACTERISTICS OF GEM

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

APTUS HOLDINGS LIMITED 問博控股有限公司

Executive Directors:

Registered Office:

Independent non-executive Directors:

VERY SUBSTANTIAL ACQUISITION REGARDING ACQUISITION OF THE ENTIRE EQUITY INTERESTS OF CASDON MANAGEMENT LIMITED

INTRODUCTION

LETTER FROM THE APTUS BOARD

THE S&P AGREEMENT (AS SUPPLEMENTED BY THE SUPPLEMENTAL AGREEMENT)

Assets to be acquired

LETTER FROM THE APTUS BOARD

Consideration

Conditions precedent

LETTER FROM THE APTUS BOARD

LETTER FROM THE APTUS BOARD

Long stop date

Completion and refund of the Deposit

THE CONVERTIBLE BONDS

LETTER FROM THE APTUS BOARD

LETTER FROM THE APTUS BOARD

LETTER FROM THE APTUS BOARD

THE PROMISSORY NOTES

THE PUT OPTION

LETTER FROM THE APTUS BOARD

LETTER FROM THE APTUS BOARD

LETTER FROM THE APTUS BOARD

INFORMATION OF THE VENDOR

INFORMATION ON THE TARGET GROUP

LETTER FROM THE APTUS BOARD

Industry overview on the business of the Target Group

LETTER FROM THE APTUS BOARD

Legal and regulatory requirements

Board representation of Aptus

REASONS FOR THE ACQUISITION

LETTER FROM THE APTUS BOARD

FINANCIAL EFFECTS

1. Net asset

2. Working capital

3. Earnings

LETTER FROM THE APTUS BOARD

RISK FACTORS

1. Investments in new business

2. Short operating history of the Target Group

3. Disputes with the minority shareholder of the land and buildings

LETTER FROM THE APTUS BOARD

4. Uncertainty of public acceptance of the Enlarged Aptus Group’s services in repsect of the Business

5. Changes in law, regulations and policies

6. Title of the Owned Properties

LETTER FROM THE APTUS BOARD

7. Use of Owned Properties for the Business

LETTER FROM THE APTUS BOARD

GEM LISTING RULES IMPLICATIONS

LETTER FROM THE APTUS BOARD

APTUS EGM

VOTING AT APTUS EGM

RECOMMENDATION

LETTER FROM THE APTUS BOARD

ADDITIONAL INFORMATION

VERY SUBSTANTIAL ACQUISITION REGARDING ACQUISITION OF THE ENTIRE EQUITY INTERESTS OF CASDON MANAGEMENT LIMITED AND VERY SUBSTANTIAL DISPOSAL REGARDING DISPOSAL OF APTUS HOLDINGS LIMITED BY POTENTIAL DILUTION

INTRODUCTION

THE S&P AGREEMENT (AS SUPPLEMENTED BY THE SUPPLEMENTAL AGREEMENT)

INFORMATION ON THE TARGET GROUP

Board representation of China Vanguard

REASONS FOR THE ACQUISITION AND THE DISPOSAL

LETTER FROM THE CHINA VANGUARD BOARD

FINANCIAL EFFECTS

1. Net asset

2. Working capital

3. Earnings

Sinopharm Tech Holdings Limited Proxy Solicitation & Information Statement 2010