Television Broadcasts Limited - Proxy Solicitation & Information Statement 2008

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold all your shares in China Conversational Power Holdings Limited (the “Company”), you should at once hand this circular to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 290)
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VERY SUBSTANTIAL ACQUISITION OF 51% INTEREST IN EXCALIBUR FUTURES LIMITED PROPOSED CHANGE OF COMPANY NAME AND NOTICE OF EXTRAORDINARY GENERAL MEETING

Financial Adviser to the Company

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The notice convening the extraordinary general meeting of the Company to be held at Room 3503, 35th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong on 3 November 2008 at 11:30 a.m. (the “EGM”) is set out on pages 204 to 206 of this circular. A form of proxy for the EGM is enclosed with this circular of the Company. Whether or not you propose to attend the EGM, you are requested to complete the form of proxy and return the same to the Company’s branch share registrar in Hong Kong, Union Registrars Limited at Rooms 1901-02, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong in accordance with the instructions printed thereon not less than 48 hours before the time appointed for the EGM. Completion and delivery of the form of proxy will not preclude you from attending and voting at the EGM if you so wish.

8 October 2008

		Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the	Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Appendix I	– Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Appendix IIA	– Accountants’ Report of Excalibur Futures . . . . . . . . . . . . . . . . . . . . . .	124
Appendix IIB	– Financial information of Excalibur Futures . . . . . . . . . . . . . . . . . . . . .	127
Appendix IIC	– Management discussion and analysis of Excalibur Futures. . . . . . . .	159
Appendix IIIA	– Accountants’ Report of Excalibur Securities . . . . . . . . . . . . . . . . . . . .	162
Appendix IIIB	– Management discussion and analysis of Excalibur Securities. . . . . .	165
Appendix IIIC	– Unaudited pro forma financial information
	of the enlarged Group with Excalibur Securities. . . . . . . . . . . . . . .	168
Appendix IV	– Unaudited pro forma financial information
	of the Enlarged Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	182
Appendix V	– General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	198
Notice of EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		204

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DEFINITIONS

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

“Announcements”	announcements of the Company dated 18 August and 24
	September 2008 respectively in relation to, among others,
	the EFL Acquisition and the proposed change of Company
	name
“Board”	the board of Directors
“Business Day”	a day (except Saturday, Sunday or public holiday) on which
	banks in Hong Kong are generally open for business
“Company”	China Conservational Power Holdings Limited, a company
	incorporated in the Cayman Islands with limited liability
	and the shares of which are listed on the Stock Exchange
“Director(s)”	the director(s) of the Company
“EFL Acquisition”	the proposed acquisition of 51% of the issued share capital
	of Excalibur Futures by the Purchaser pursuant to the
	Memorandum
“EFL Completion”	completion of EFL Acquisition
“EFL Consideration”	HK$10,200,000, being the consideration payable by the
	Purchaser to Pioneer for the acquisition of 51% of the issued
	share capital of Excalibur Futures, which shall be satisfied
	by the issue of the Promissory Note by the Purchaser to
	Pioneer on EFL Completion
“EGM”	an extraordinary general meeting of the Company to be
	convened and held to approve inter alia, among other things,
	the EFL Acquisition and the transactions contemplated
	thereunder and the proposed change of Company name
“Enlarged Group”	the Group immediately after EFL Completion
“Excalibur Futures”	Excalibur Futures Limited, a company incorporated in Hong
	Kong with limited liability

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	DEFINITIONS
“Excalibur Securities”	Excalibur Securities Limited, a company incorporated in
	Hong Kong with limited liability
“Formal Agreement”	the formal sale and purchase agreement dated 19 September
	2008 which is based on the principal terms of the
	Memorandum, entered into between the Purchaser and
	Pioneer for EFL Acquisition and EFL Profit Guarantee
“Futures Exchange”	Hong Kong Futures Exchange Limited
“Group”	the Company and its subsidiaries
“Hong Kong”	The Hong Kong Special Administrative Region of the PRC
“Independent Third Party(ies)”	third party(ies) independent of the Company and connected
	persons (as defined under the Listing Rules) of the Company
	and are not connected persons (as defined under the Listing
	Rules) of the Company
“Latest Practicable Date”	3 October 2008, being the latest practicable date prior to
	the printing of this circular for inclusion of certain
	information in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Memorandum”	a legally binding memorandum entered into between the
	Purchaser and Pioneer on 31 July 2008
“Mr. Lao”	Mr. Lao Chio Kuan
“Placing”	placing of an aggregate of 80,000,000 new Shares on fully
	underwritten basis pursuant to the terms and subject to the
	conditions set out in the Placing Agreement
“Placing Agreement”	the conditional placing agreement dated 10 September 2008
	entered into between the Company and the Get Nice
	Securities Limited in relation to the Placing
“Pioneer”	Pioneer (China) Limited, being the owner of the entire
	equity interest in Excalibur Securities and Excalibur Futures

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DEFINITIONS

“Preference Shares”	80,000,000 shares representing 3% non-voting cumulative
	convertible preference shares of China Sciences
	Conservational Power Limited (stock code: 351) held by
	the Company with a dividend of 3% per annum payable
	semi annually. China Sciences Conservational Power
	Limited can redeem all the outstanding Preference Shares
	at the issue price of HK$0.76 together with any cumulated
	dividends in arrears on the third anniversary of the issue
	date of 5 July 2005 from the Company
“Promissory Note”	a promissory note in the amount of HK$10.2 million to be
	issued by the Purchaser to Pioneer upon EFL Completion
“Purchaser”	Fortune Financial (Holdings) Limited (formerly known as
	Yew Sang Hong Investment Services Limited), a company
	incorporated in the British Virgin Islands and a wholly-
	owned subsidiary of the Company
“PRC”	People’s Republic of China which, for the purpose of this
	circular, excludes Hong Kong, the Macau Special
	Administrative Region of the PRC and Taiwan
“Sale Shares”	a total of 10,200,000 shares of Excalibur Futures, which
	represents 51% of the issued share capital of Excalibur
	Futures
“SFC”	Securities and Futures Commission
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws
	of Hong Kong)
“Share(s)”	share(s) of HK$0.10 each in the capital of the Company
	existing on the Latest Practicable Date and all other (if
	any) stock or shares from time to time and for the time
	being ranking pari passu therewith and all other (if any)
	shares or stock resulting from any sub-division,
	consolidation or re-classification thereof

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DEFINITIONS

“Shareholder(s)” holder(s) of the Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “HK$” Hong Kong dollars, the lawful currency of Hong Kong “%” per cent.

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LETTER FROM THE BOARD

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 290)

Executive Directors:

Mr. Sun Tak Yan, Desmond (Chairman) Mr. Ng Cheuk Fan, Keith (Managing Director) Mr. Yeung Kwok Leung

Registered office: P.O. Box 309, Ugland House South Church Street George Town, Grand Cayman Cayman Islands, British West Indies

Independent Non-executive Directors:

Mr. Ng Kay Kwok Mr. Tam B Ray Billy Mr. Lam Ka Wai, Graham

Head office and principal place of business in Hong Kong: 1702-3, 17th Floor Skyline Commercial Centre 71-77 Wing Lok Street Sheung Wan, Hong Kong

8 October 2008

To the Shareholders

Dear Sirs or Madams,

VERY SUBSTANTIAL ACQUISITION OF 51% INTEREST IN EXCALIBUR FUTURES LIMITED AND PROPOSED CHANGE OF COMPANY NAME

INTRODUCTION

Reference is made to the Announcements in relation to which, amongst other things, the entering into of the Memorandum and the Formal Agreement between Pioneer and the Purchaser, pursuant to which the Purchaser agreed to purchase and Pioneer agreed to sell 51% of the issued share capital of Excalibur Futures at HK$10,200,000. The EFL Consideration will be settled by the issue of the Promissory Note by the Purchaser to Pioneer on EFL Completion.

According to the Listing Rules, the EFL Acquisition constitutes a very substantial acquisition for the Company under chapter 14 of the Listing Rules and is subject to the approval of the Shareholders at the EGM.

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LETTER FROM THE BOARD

For the purpose of reflecting the business diversification and the Company goals, the Board proposed to change the name of the Company to “China Fortune Group Limited” and the Chinese name of the Company to “中國富強集團有限公司 ” subject to the passing of a special resolution at the EGM.

The purpose of this circular is to provide the Shareholders with, among other things, (i) further details of the EFL Acquisition and information of Excalibur Futures; (ii) the accountants’ report of Excalibur Futures; (iii) pro forma financial information of the Enlarged Group; (iv) details of the proposed change of Company name; and (v) a notice of the EGM for the purpose of, among other things, approving the EFL Acquisition and the proposed change of Company name in accordance with the Listing Rules.

THE EFL ACQUISITION

Date: 31 July 2008 (Memorandum) 19 September 2008 (Formal Agreement) Parties: (1) Pioneer (as the vendor) (2) The Purchaser (as the purchaser)

Pioneer is an investment holding company and is interested in the entire issued share capital of Excalibur Securities (of which the Purchaser has conditionally agreed to purchase 51% of the equity interest pursuant to the sale and purchase agreement dated 27 February 2008 (as amended on 30 May and 31 July 2008), completion of which has not been effected as at the Latest Practicable Date) and Excalibur Futures. Pioneer is owned as to approximately 50.92% by Mr. Lao and as to the remaining approximately 49.08% by an Independent Third Party (the “ Other Pioneer Shareholder ”). To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiry, Pioneer and its ultimate beneficial owners are Independent Third Parties.

Subject matter:

Pioneer agrees to sell and the Purchaser agrees to purchase 51% of the issued share capital of Excalibur Futures at HK$10,200,000.

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LETTER FROM THE BOARD

Consideration:

The EFL Consideration is HK$10,200,000, which shall be satisfied solely by way of issue of the Promissory Note by the Purchaser to Pioneer on EFL Completion. The EFL Consideration was determined after arm’s length negotiation between Pioneer and the Purchaser and the basis of determining and arriving at the EFL Consideration was by making reference to the latest financial position of Excalibur Futures, i.e. the unaudited net asset value of Excalibur Futures as at 30 June 2008 and performance of Excalibur Futures for the year ended 31 December 2007. It has also been taken into account of the improved profitability of Excalibur Futures for the first six months ended 30 June 2008 when compared to the financial performance of Excalibur Futures for the same period in 2007.

Conditions: EFL Completion is subject to satisfaction (or where appropriate, waiver) of the conditions set out below:

(a) the result of a legal and financial due diligence exercise to be carried out by the Purchaser on Excalibur Futures being satisfactory to the Purchaser (in its absolute discretion) and written notice to that effect having been given to Pioneer;
(b) all necessary consents, confirmations, permits, approvals, licences and authorisations having been obtained from all relevant governmental, regulatory and other authorities, agencies and departments in Hong Kong (including but not limited to the SFC, the Stock Exchange and Futures Exchange) in connection with the transactions contemplated under the EFL Acquisition, the implementation of and all other matters incidental to the EFL Acquisition;
(c) the resumption of trading in the Shares on the Stock Exchange having been agreed by the Stock Exchange;
(d) the passing by the Shareholders in the EGM of the necessary resolutions approving the EFL Acquisition in accordance with the Listing Rules;
(e) all other necessary waivers, consents and approvals (if required) in relation to the Purchaser, its holding company(ies) and its (their) shareholders and directors from the relevant governmental or regulatory authorities in Hong Kong (including the SFC, the Stock Exchange and the Futures Exchange) and other applicable jurisdictions required for the EFL Acquisition and the transactions contemplated herein being obtained;

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LETTER FROM THE BOARD

(f) all warranties of Pioneer remaining true and accurate as at EFL Completion and Pioneer shall have performed or complied, in all material respects, with its covenants and agreements at or prior to the EFL Completion; and
(g) other usual and customary closing conditions for a transaction of this nature.

EFL Completion is not inter-conditional upon the completion of the sale and purchase agreement in relation to the acquisition of Excalibur Securities dated 27 February 2008 (as amended on 30 May and 31 July 2008).

As at the Latest Practicable Date, the above conditions are yet to be fulfilled.

EFL Completion is to take place within 3 Business Days after the above conditions (other than conditions (f) and (g)) or such later date as the parties may agree. If the above conditions (other than conditions (f) and (g) shall not have been fulfilled or waived by 30 June 2009 (or such later date as the parties may agree) or if the above conditions (f) and (g) shall not have been fulfilled or waived on EFL Completion, the Formal Agreement shall terminate.

The Company has no current intention to appoint or propose Pioneer or any of its associates to nominate or act as a Director upon EFL Completion.

Promissory Note

For the purpose of settling the EFL Consideration in the amount of HK$10,200,000, the Purchaser shall upon EFL Completion, issue and execute the Promissory Note in favour of Pioneer.

The following is a summary of the key terms of the Promissory Note:

(1)	Principal amount	:	HK$10.2 million
(2)	Interest	:	Nil
(3)	Final payment date	:	the date falling 24 months from the date of EFL
			Completion
(4)	Prepayment	:	the Purchaser shall be entitled to redeem the Promissory
			Note (in whole or in part) at any time after EFL
			Completion

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LETTER FROM THE BOARD

EFL Profit Guarantee

Pursuant to the Formal Agreement, the Vendor covenants and guarantees (the “ EFL Profit Guarantee ”) to the Purchaser that the net profits after tax of Excalibur Futures attributable to the shareholders of Excalibur Futures as reflected in the audited financial statements of Excalibur Futures prepared in accordance with Hong Kong Financial Reporting Standards and disclosure requirements of the Companies Ordinance for each of the financial years ending on 31 December 2009 (“ 2009 EFL Net Profit ”) and 31 December 2010 (“ 2010 EFL Net Profit ”) shall not be less than HK$4.5 million and HK$5 million respectively.

The Vendor covenants with the Purchaser that in the event that the 2009 EFL Net Profit and/ or the 2010 EFL Net Profit is less than HK$4.5 million and HK$5 million respectively, the Vendor shall (in respect of each case of shortfall), within 10 days of the date on which the relevant financial statements are made available to the Vendor, pay to the Purchaser an amount in cash (in Hong Kong dollars) equivalent to such shortfall multiplied by 51%.

The Directors consider that the terms of the EFL Profit Guarantee are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

Reasons for and benefits of the EFL Acquisition

The Group is principally engaged in securities brokerage and margin financing; electrical engineering contracting; and sale of electrical goods.

Excalibur Futures was incorporated in Hong Kong in 1993 and provides brokerage services for futures and options traded on the Futures Exchange, including Hang Seng Index Futures and Hang Seng Index Options. Excalibur Futures is a licensed corporation under the SFO permitted to engage in type 2 regulated activity (dealing in futures contracts).

The Directors considered that the proposed acquisition of 51% of the issued share capital of Excalibur Futures could maintain the strategic partnership with Pioneer which is in turn owned by Mr. Lao and the Other Pioneer Shareholder which has the management experience in the futures brokerage services and thus the EFL Acquisition of 51% of Excalibur Futures is in the interests of the Shareholders and the Company as a whole. The Group may or may not further acquire the remaining 49% interest in Excalibur Futures and will comply with the relevant Listing Rules when appropriate.

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LETTER FROM THE BOARD

Excalibur Futures had an audited net asset value of approximately HK$24.16 million as at 31 December 2007 and audited net asset value of approximately HK$25.40 million as at 30 June 2008. The following table shows certain audited financial information of Excalibur Futures for the two years ended 31 December 2007 and six months ended 30 June 2008:

	Year ended	Year ended	Six months
	31 December	31 December	ended 30 June
	2006 (audited)	2007 (audited)	2008 (audited)
	HK$’000	HK$’000	HK$’000
Turnover	8,193	14,010	9,358
Net profit/(loss) before taxation
and extraordinary items	3,009	1,840	1,328
Net profit/(loss) after taxation
and extraordinary items	3,009	1,840	1,238

Upon EFL Completion, Excalibur Futures will become a non-wholly owned subsidiary of the Company. The financial statements of Excalibur Futures will be consolidated in the accounts of the Group after EFL Completion.

Upon EFL Completion, the Company can extend the scope of its securities business to futures brokerage service to prepare itself as a full range financial services company without incurring an immediate cash outflow. The EFL Acquisition of the majority interest in Excalibur Futures is in line with one of the existing principal business of the Group, i.e. securities brokerage and margin financing business, and with an expanded scope into the business of futures brokerage so that the EFL Acquisition is expected to strengthen the income flow, enhance the operation level and increase the client base of the Group. The Directors believe that the expanded scope of business of the Group into the futures brokerage business would provide an additional service to its clients for investment and hedging purposes while on the other hand could provide an extra income source to the Group. Given there will be no immediate impact on the cash outflow to the Company from the EFL Acquisition as the EFL Consideration will be payable by way of issuance of the Promissory Note. The Directors consider that the EFL Acquisition is an appropriate strategic expansion and beneficial to the Group.

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LETTER FROM THE BOARD

One of the responsible officers of Hong Tong Hai Securities Limited (a wholly-owned subsidiary of the Company engaging in the securities business), Mr. Chang Chih Ping, Tony, who has been under the employment of the Group since December 2006 until now and between February 2003 and March 2004 has approximately 10 years’ experience in brokerage service for futures contracts in commodities before joining the Group. Mr. Chang was registered with the SFC as a dealer under the Commodities Trading Ordinance for about 5 years. It is the intention of the Group to retain the existing management of Excalibur Futures after the EFL Completion.

The Directors consider that the Formal Agreement was entered into under normal commercial terms which are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Listing Rules implication

The EFL Acquisition constitutes a very substantial acquisition for the Company under the Listing Rules and is subject to the approval of Shareholders to pass an ordinary resolution at the EGM. There is no current intention to change the composition of the Board as a result of, or related to, the EFL Acquisition.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiry, as at the Latest Practicable Date no Shareholder have a material interest in the EFL Acquisition and accordingly no Shareholder is required to abstain from voting at the EGM.

BUSINESS PROSPECTS

It is expected that the Group will continue to focus on securities and brokerage and margin financing business. In addition, given the recent fluctuations in the global investment market, the Directors believe that the expanded business scope of the Group into the futures brokerage business through the EFL Acquisition would provide an additional service to its clients for investment and hedging purposes so that the Board is cautiously optimistic about investment in futures and financial industry in which Excalibur Futures is principally engaged. The Board is of the view that the EFL Acquisition will enrich the earning base of the Group.

There has been a decrease in overall turnover of the Group in all business segments with respect to the recent volatile Hong Kong stock market which affected the Group’s securities brokerage segment and the fact that no new contract was obtained for the Group’s electrical engineering contracting segment since last financial year ended 31 March 2008. The situation is expected to improve if all the transactions contemplated under the resumption proposal are completed since more resources would be available to expand the existing business of the Group so that the scale of operation of the Group would be enlarged and the capital base of the Group would be strengthened. The Stock Exchange is in the process of reviewing the resumption proposal which is subject to approval by the Stock Exchange and the result is unknown as at the Latest Practicable Date.

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LETTER FROM THE BOARD

Excalibur Securities has no future plan for material investments or in capital assets. It is the intention of Excalibur Securities to continue with the securities trading business. Given the results have been improving in the past few years, Excalibur Securities is looking to improve further of its results in the coming year. With its internally generated resources, Excalibur Securities will continue to develop the securities brokerage and margin financing business with the aim to broaden its client base including customers from the PRC who would like to invest in the stock market in Hong Kong. Excalibur Securities has also become more active in acting as underwriter and placing agent to fund raising activities of its listed clients.

Excalibur Futures has no immediate plan for material investments or in capital assets but is looking for investment opportunities in the PRC market. It is the intention of Excalibur Futures to continue with the futures broking business. Given the positive results in the last couple of years, Excalibur Futures is looking at stabilize and improve further its results in the coming year.

FINANCIAL EFFECTS OF THE EFL ACQUISITION

The EFL Consideration is in the amount of HK$10,200,000, which shall be satisfied by the issue of the Promissory Note by the Purchaser to Pioneer on EFL Completion.

Upon EFL Completion, Excalibur Futures will become a non-wholly owned subsidiary of the Company and the financial results of Excalibur Futures will be consolidated with those of the Group.

Net assets

The audited consolidated net assets of the Group as at 31 March 2008, as extracted from the annual report of the Company for the year ended 31 March 2008 was approximately HK$21,036,000. As set out in Appendix IV to this circular, assuming EFL Completion had taken place on 31 March 2008, the unaudited pro forma net assets of the Enlarged Group would have been increased to approximately HK$36,731,000.

Earnings

Following the EFL Completion, Excalibur Futures will become a non-wholly owned subsidiary of the Company and the Group will be able to consolidate revenue from the business of provision of brokerage services for futures and options traded on Futures Exchange from Excalibur Futures. The audited net loss for the year ended 31 March 2008 as extracted from the annual report of the Group was approximately HK$5,827,000. According to the unaudited pro forma income statement of the Enlarged Group for the year ended 31 March 2008 as if the EFL Completion had taken place on 31 March 2008, the unaudited pro forma net loss of the Enlarged Group would have been increased to approximately HK$8,823,000.

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LETTER FROM THE BOARD

Gearing ratio

As at 31 March 2008, the Group’s gearing ratio calculated as a percentage of total debts over total assets was approximately 40.29%. The gearing ratio of the Enlarged Group upon EFL Completion would decrease to approximately 23.36%.

Given net asset will increase and the gearing ratio would decrease and in view of the prospect of the business of the futures and options brokerage services by Excalibur Futures, the Directors consider the EFL Acquisition to be in the interests of the Company and the Shareholders as a whole. Although net loss of the Enlarged Group would increase if the EFL Completion had taken place on 31 March 2008, such increase in net loss was after giving effect to the pro forma adjustments of (i) negative goodwill arising from the acquisition of approximately HK$3,855,000; and (ii) the adjustment of approximately HK$981,000 represents the yearly imputed interest expenses on the promissory note issued for the proposed acquisition. The audited results of EFL were profitable for the two financial years ended 31 December 2006 and 2007 and the six months ended 30 June 2008, the Directors are of the view that the EFL Acquisition will bring positive contribution to the results of the Group.

PROPOSED CHANGE OF COMPANY NAME

The Board proposed to change the name of the Company to “China Fortune Group Limited” and the Chinese name of the Company to “中國富強集團有限公司 ” subject to the passing of a special resolution at the EGM.

Subject to the passing of a special resolution at the EGM, the change of the Company’s name will take effect upon the new name is entered on the register by the Registrar of Companies in the Cayman Islands in place of the existing name. Upon the receipt of the Certificate of Incorporation on Change of Name issued by the Registrar of Companies in the Cayman Islands, the Company will make necessary filings with the Companies Registry in Hong Kong regarding the change of name of the Company.

Reasons for the proposed change of Company name

As mentioned in the 2008 annual report of the Company, the Group is envisioned to become a renowned full range financial services provider in long term. The corporate strategy of the Company is maintaining a healthy growth in its securities brokerage and margin financing business while in a ready position to broaden its business scope. With a view to focus on financial service industry, the Company is expected to acquire a majority stake of a local securities firm, Excalibur Securities, subject to resumption of trading of Shares on the Stock Exchange. In addition, as mentioned in the Announcements, the Company is in course of further diversifying its businesses in futures brokerage business by way of the EFL Acquisition. The Directors believed that the

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LETTER FROM THE BOARD

expanded scope of businesses of the Group into the futures brokerage business would provide an additional service to its clients for investment and hedging purposes while on the other hand could provide an extra income source to the Group. Although the aforesaid proposed acquisitions have yet to be completed, it is intended that the existing business will be operated in parallel with the new businesses so as to create a synergy effect to the Group upon completion. As such, the Board considers it appropriate to change the name of the Company to reflect the diversification and the Company goal.

Effect on the change of Company name

The change of name of the Company will not affect any of the rights of the Shareholders. The existing share certificates in issue bearing the current name of the Company will continue to be evidence of title to the shares of the Company and will continue to be valid for trading, settlement and registration purpose.

Trading arrangements and share certificates

The stock name of the Company on the Stock Exchange will be changed and the Shares will commence to trade under the new name on the Main Board of the Stock Exchange upon the relevant statutory documents notifying the change of name of the Company have been lodged and the registration process to be completed with the Companies Registry in Hong Kong. Further announcement(s) will be made by the Company informing the new stock name of the Company on the Stock Exchange, the effective date of the change of name of the Company and when the Certificate of Incorporation on Change of Name and the Certificate of Incorporation on Change of Name of Non-Hong Kong Company are issued.

If the Shareholders so wish, they may, during the period of one month from the date of issue of the Certificate of Incorporation on Change of Name by the Registrar of Companies in Cayman Islands and the Certificate of Incorporation on Change of Name of Non-Hong Kong Company issued by the Registrar of Companies in Hong Kong, deliver existing share certificates in respect of the Shares held by them to the Company’s branch registrar and transfer office in Hong Kong, Union Registrars Limited at Rooms 1901-02, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong, to exchange at the expense of the Company, for the new share certificates bearing the new name of the Company. The new share certificate of the Company will be issued under the new name of the Company upon the proposed change of name of the Company becoming effective. After the expiry of such one month period, share certificates of the Company will be accepted for exchange at the expense of the Shareholders. Such exchanges will incur a fee of HK$2.50 (or such higher amount as may from time to time be charged) for each of such certificate to be issued.

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LETTER FROM THE BOARD

CONTINUED SUSPENSION OF TRADING IN THE SHARES

Trading in the Shares was suspended with effect from 9:30 a.m. on 29 September 2005 at the request of the Company and will continue to be suspended until further notice.

The release of this circular is not an indication that the EFL Acquisition will be successfully implemented and completed or that the resumption of trading in the Shares has been or will be approved by the Stock Exchange.

The Company has submitted a resumption proposal to the Stock Exchange on 15 April 2008, which is being reviewed by the Stock Exchange. The Company is providing the Stock Exchange further information in respect of the resumption proposal. The resumption proposal of the Company should demonstrate the Company’s compliance with the Listing Rules and all applicable laws and regulations. The resumption proposal should also include sufficient details to demonstrate the Company’s compliance with Rule 13.24 of the Listing Rules. Meanwhile, the Company is in the process of furnishing further information to the Stock Exchange to demonstrate, among other things, that upon completion of the transactions contemplated under the resumption proposal, the Company will have sufficient level of operations or assets of sufficient value under Listing Rule 13.24. The release of this circular is not an indication that the resumption proposal has been or will be approved by the Stock Exchange. Accordingly, the resumption proposal will or will not proceed. Further announcement(s) on the latest development will be released when appropriate.

EGM

The notice of EGM is set out on pages 204 to 206 of this circular.

A form of proxy for the EGM is enclosed with this circular. Whether you intend to attend the EGM or not, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Union Registrars Limited at Rooms 1901-02, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong not less than 48 hours before the time fixed for the EGM. Completion and delivery of the form of proxy will not preclude you from attending and voting at the EGM in person if you so wish.

To the best knowledge of the Directors, none of Pioneer and its associates holds any Shares as at the Latest Practicable Date. On such basis, no Shareholder is required to abstain from voting on the EFL Acquisition. All Shareholders are eligible to vote on the resolution for the change of name of the Company.

– 15 –

LETTER FROM THE BOARD

PROCEDURES FOR DEMANDING A POLL BY SHAREHOLDERS

Pursuant to article 80 of the articles of association of the Company (the “Articles”), all resolutions to be proposed at the EGM will be put to the vote of the Shareholders on a show of hands. It is further provided in article 80 that a poll may be demanded before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll, by:

(a) the chairman of the meeting; or
(b) at least five members present in person or in case of a corporation, by its duly authorised corporate representative or by proxy for the time being entitled to vote at the meeting; or
(c) any member or members present in person or in case of a corporation, by its duly authorised corporate representative or by proxy and representing not less than onetenth of the total voting rights of all the members having the right to attend and vote at the meeting; or
(d) any member or members present in person or by a duly authorised corporate representative or by proxy holding shares conferring a right to attend and vote at the meeting on which there have been paid up sums in the aggregate equal to not less than one-tenth of the total sum paid up on all the shares conferring that right,

Notwithstanding any other provision of these Articles, (a) if the aggregate proxies held by the chairman of a particular meeting and the Directors account for 5 per cent. or more of the total voting rights at that meeting, and (b) if on a show of hands in respect of any resolution the members at the meeting vote in the opposite manner to that instructed in the proxies referred in (a) above, then the chairman of the meeting and/or any Director holding the proxies referred to above shall demand a poll. However, if it is apparent from the total proxies held by the persons referred to in (a) above that a vote taken on a poll will not reverse the vote taken on a show of hands, then no poll shall be required.

A poll which is duly demanded shall be then held in such manner prescribed by the Articles.

RECOMMENDATIONS

The Directors consider that the EFL Acquisition was entered into under normal commercial terms which are fair and reasonable and in the interests of the Company and the Shareholders as a whole. The change of name of the Company is also considered appropriate to reflect the business diversification and the Company goal. Accordingly, the Directors recommend the Shareholders to vote in favour of the resolutions to approve the EFL Acquisition, the change of name of the Company and the transactions contemplated thereunder at the EGM.

– 16 –

LETTER FROM THE BOARD

PROPOSED ACQUISITION OF EXCALIBUR SECURITIES

Reference is made to the announcements of the Company dated 30 May and 24 September 2008 and circular of the Company dated 30 June 2008 respectively.

On 27 February 2008, Mr. Lao and the Purchaser entered into a conditional sale and purchases agreement (as amended on 30 May and 31 July 2008) whereby Mr. Lao agreed to sell or procure the sale to the Purchaser and the Purchaser agreed to purchase 51% equity interest in Excalibur Securities at HK$20,000,000. The Consideration will be settled by way of the Company issuing upon completion date of such acquisition a zero coupon convertible notes due three years from the date of issue for a principal amount of HK$20 million to Mr. Lao. Excalibur Securities is principally engaged in securities brokerage and margin financing and is an Exchange Participant and a licensed corporation under the SFO permitted to engage in type 1 regulated activity (dealing in securities). The aggregate of the remuneration payable to and benefits in kind receivable by the directors of Excalibur Securities will not be varied in consequence of the acquisition of 51% equity interest in Excalibur Securities.

As at the Latest Practicable Date, completion of the acquisition of 51% equity interest in Excalibur Securities which is subject to, amongst other things, the resumption of trading in the Shares on the Stock Exchange having been agreed by the Stock Exchange, is not effected.

ADDITIONAL INFORMATION

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

Yours faithfully,

For and on behalf of The board of directors of

China Conservational Power Holdings Limited

Ng Cheuk Fan, Keith

Managing Director

– 17 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

A. SUMMARY OF FINANCIAL INFORMATION

A summary of the published results and the assets and liabilities of the Group for the last three financial years, as extracted from the audited financial statements, is set out below.

RESULTS

Turnover Cost of sales Gross profit Reversal of impairment loss on investment deposits Reversal of/(charge for) provision for doubtful debts Other income Administrative expenses Loss from operations Finance costs (Loss)/gain on disposal of subsidiaries Loss before taxation Taxation Loss for the year attributable to equity holders of the Company Dividends Loss per share – basic	2008 HK$’000 12,355 (4,944) 7,411 8,000 699 1,056 (18,638) (1,472) (4,093) (262) (5,827) – (5,827) – (1.3 cents)	2007 HK$’000 6,504 (3,711) 2,793 – (1,684) 250 (20,420) (19,061) (2,573) 9,196 (12,438) (792) (13,230) – (2.9 cents)	2006 HK$’000 29,690 (21,687) 8,003 – (2,562) 4,720 (42,477) (154,734) (2,285) 25,927 (131,092) (159) (131,251) – (28.5 cents)

– 18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

ASSETS AND LIABILITIES

Total assets less current liabilities brought forward Non-current liabilities Retention money payables Obligations under finance leases Deferred taxation Net assets Equity Share capital Reserves Equity attributable to equity holders of the parent Minority interests Total equity	As at 31 March 2008 2007 HK$’000 HK$’000 21,215 27,332	As at 31 March 2008 2007 HK$’000 HK$’000 21,215 27,332	As at 31 March 2008 2007 HK$’000 HK$’000 21,215 27,332	As at 31 March 2008 2007 HK$’000 HK$’000 21,215 27,332	2006 HK$’000 42,089
	– 179 –		– 469 –		1,385 646 2
	179 21,036 46,407 (25,371) 21,036 – 21,036		469 26,863 46,407 (19,544) 26,863 – 26,863		2,033 40,056 46,407 (6,351) 40,056 – 40,056

– 19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED INCOME STATEMENT

For the year ended 31 March 2008 (Expressed in Hong Kong dollars)

Notes Turnover 5 Cost of sales Gross profit Reversal of impairment loss on investment deposits 28 Reversal of/(charge for) provision for doubtful debts 22 Other income 7 Administrative expenses Loss from operations Finance costs 8 (Loss)/gain on disposal of subsidiaries 41 Loss before taxation 9 Taxation 11 Loss for the year attributable to equity holders of the Company 12 Dividends 13 Loss per share – basic 14	2008 HK$’000 12,355 (4,944) 7,411 8,000 699 1,056 (18,638) (1,472) (4,093) (262) (5,827) – (5,827) – (1.3 cents)	2007 HK$’000 6,504 (3,711) 2,793 – (1,684) 250 (20,420) (19,061) (2,573) 9,196 (12,438) (792) (13,230) – (2.9 cents)

– 20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

At 31 March 2008 (Expressed in Hong Kong dollars)

Notes ASSETS AND LIABILITIES Non-current assets Property, plant and equipment 15 Intangible asset 16 Other non-current assets 17 Associates 19 Jointly-controlled entity 20 Current assets Investments held for trading 21 Inventories – finished goods Accounts receivable 23 Progress payment receivables 24 Other receivables, deposits and prepayments 25 Retention money receivables 26 Loans receivable 27 Investment deposits 28 Amounts due from related companies 45(c) Amount due from a director 29 Pledged bank deposits 30 Cash and cash equivalents 31 Current liabilities Bank overdraft (secured) 32 Other borrowings (unsecured) 33 Accounts payable, other payables and accrued charges 34 Retention money payables 35 Loans payable Amount due to a related company 45(c) Amount due to a director 45(e) Obligations under finance leases 36 Taxation payable Net current assets Total assets less current liabilities	2008 HK$’000 425 – 240 – – 665	2008 HK$’000 425 – 240 – – 665	2007 HK$’000 954 – 205 – – 1,159
	38,784 – 10,303 1 515 375 – – 25 426 2,196 26,530		38,816 213 9,504 1,417 800 1,773 – – 51 – 2,134 7,284
	79,155		61,992
	1,963 29,735 24,511 958 – 890 – 290 258		1,926 14,113 15,874 1,252 687 890 529 290 258
	58,605 20,550 21,215		35,819 26,173 27,332

– 21 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes Total assets less current liabilities Non-current liabilities Obligations under finance leases 36 Deferred taxation 37 Net assets EQUITY Share capital 38 Reserves Total equity	2008 HK$’000 21,215 179 – 179 21,036 46,407 (25,371) 21,036	2007 HK$’000 27,332
		469 –
		469 26,863 46,407 (19,544) 26,863

– 22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

BALANCE SHEET

At 31 March 2008 (Expressed in Hong Kong dollars)

Notes ASSETS AND LIABILITIES Non-current assets Property, plant and equipment 15 Subsidiaries 18 Associates 19 Current assets Investments held for trading 21 Other receivables, deposits and prepayments 25 Loans receivable 27 Amount due from a related company 45(c) Cash and cash equivalents 31 Current liabilities Other borrowings (unsecured) 33 Other payables and accrued charges 34 Amounts due to subsidiaries 18 Net current assets Net assets EQUITY Share capital 38 Reserves 40 Total equity	2008 HK$’000 – 3,741 – 3,741	2008 HK$’000 – 3,741 – 3,741	2007 HK$’000 – 6,210 – 6,210
	38,756 16 – 12 1,181		38,756 16 – 12 3
	39,965		38,787
	10,618 2,425 41		– 1,281 2,148
	13,084 26,881 30,622 46,407 (15,785) 30,622		3,429 35,358 41,568 46,407 (4,839) 41,568

– 23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2008 (Expressed in Hong Kong dollars)

		Reserves	Reserves	Total HK$’000 40,056 37 (13,230)
Share premium HK$’000 233,184 – – – – 233,184 – 233,184	Share option reserve HK$’000 Note (a) 1,694 – – – (486) 1,208 – 1,208	Special reserve HK$’000 Note (b) 13,524 – – – – 13,524 – 13,524	Capital reserve HK$’000 Note (c) 1,863 – – – – 1,863 – 1,863
				(13,193) –
				26,863 (5,827)
				21,036

Notes:

(a) Share option reserve

The share option reserve represents the fair value of the actual or estimated number of unexercised share options granted to employees of the Group recognised in accordance with the accounting policy adopted for share-based payments in Note 3(u)(iii).

(b) Special reserve

The special reserve represents the difference between the nominal value of the shares of the subsidiaries acquired and the nominal value of the Company’s shares issued for the acquisition under the corporate reorganisation of the Group.

(c) Capital reserve

The capital reserve represents the contributions made by the then controlling shareholder under the corporate reorganisation of the Group.

(d) Translation reserve

The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. The reserve is dealt with in accordance with the accounting policies set out in Note 3(t).

– 24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 March 2008 (Expressed in Hong Kong dollars)

Operating activities Loss before taxation Adjustments for: Reversal of impairment loss for investment deposits Depreciation of property, plant and equipment Interest income Interest expense Interest on obligations under finance leases (Reversal of)/charge for provision for doubtful debts Bad debts written off Fair value change of investment held for trading Loss/(gain) on disposal of subsidiaries Loss on disposal of property, plant and equipment Amortisation of intangible asset Provision for obsolete inventories Operating cash outflows before movements in working capital Increase in other non-current assets Decrease/(increase) in inventories (Increase)/decrease in accounts receivable Decrease in amounts due from customers for contract work Decrease/(increase) in progress payment receivables (Increase)/decrease in other receivables, deposits and prepayments Decrease in retention money receivables Decrease/(increase) in amounts due from related companies Increase in amount due from a director Decrease in bills payable Increase/(decrease) in accounts payable, other payables and accrued charges Decrease in retention money payables (Decrease)/increase in amount due to a director Cash generated from/(used in) operations Interest received Interest paid Interest on obligations under finance leases Hong Kong profits tax paid Net cash used in operating activities	2008 HK$’000 (5,827) (8,000) 608 (331) 4,059 34 (699) 34 32 262 – – – (9,828) (35) 213 (634) – 1,416 (50) 1,398 26 (426) – 8,907 (294) (529) 164 331 (4,059) (34) – (3,598)	2007 HK$’000 (12,438) – 918 (166) 2,542 31 1,684 – – (9,196) 64 251 238 (16,072) – (199) 10,387 657 (1,208) 2,069 3,471 (39) – (91) (6,495) (580) 29 (7,571) 166 (2,542) (31) (650) (10,628)

– 25 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Investing activities Purchase of property, plant and equipment Refund of investment deposits Placement of pledged bank deposits (Decrease)/increase in loans payable Proceeds from disposal of property, plant and equipment Disposal of subsidiaries_(Note 41)_ Net cash generated from investing activities Financing activities New borrowings obtained Repayment of other borrowings Repayment of obligations under finance leases Net cash generated from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of year Cash and cash equivalents at end of year Analysis of the balance of cash and cash equivalents Bank balances and cash Bank overdraft (secured)	2008 HK$’000 (911) 8,000 (62) (687) – 1,135 7,475 22,424 (6,802) (290) 15,332 19,209 5,358 24,567 26,530 (1,963) 24,567	2007 HK$’000 (180) – (71) 367 214 (3) 327 2,395 – (282) 2,113 (8,188) 13,546 5,358 7,284 (1,926) 5,358

– 26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE FINANCIAL STATEMENTS

(Expressed in Hong Kong dollars)

1. Organisation and operations

China Conservational Power Holdings Limited (the “Company”) was incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Law (2000 Revision) of the Cayman Islands. Its registered office and principal place of business are located at P.O. Box 309, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies and at 1702-3, 17th Floor, Skyline Commercial Centre, 71-77 Wing Lok Street, Sheung Wan, Hong Kong respectively.

The Group engages in electrical engineering contracting, trading of electrical equipment and materials, investment holding and securities brokerage and financing. The Group operates primarily in Hong Kong. The Company is an investment holding company. The activities of the principal subsidiaries are set out in Note 46 to the financial statements. The Company’s shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”), but have been suspended for trading on the Stock Exchange since 29 September 2005.

2. Adoption of new and revised Hong Kong Financial Reporting Standards

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

The impact of the adoption of HKFRS 7 “Financial Instruments: Disclosures” and HKAS 1 Amendment: “Capital Disclosures” has been to expand the disclosures provided in these financial statements regarding the Group’s financial instruments and management of capital.

– 27 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At the date of authorisation of these financial statements, the following standards and interpretations were in issue but not yet effective:

Effective for annual periods beginning on or after

HKAS 1 (Revised) Presentation of financial statements 1 January 2009 HKAS 23 (Revised) Borrowing costs 1 January 2009 HKAS 27 (Revised) Consolidated and separate 1 July 2009 financial statements HKASs 32 & 1 Puttable financial instruments and 1 January 2009 (Amendments) obligations arising on liquidation HKFRS 2 Share-based payment-vesting 1 January 2009 (Amendment) conditions and cancellation HKFRS 3 (Revised) Business combinations 1 July 2009 HKFRS 8 Operating segments 1 January 2009 HK(IFRIC) – Int 12 Service concession arrangements 1 January 2008 HK(IFRIC) – Int 13 Customer loyalty programmes 1 July 2008 HK(IFRIC) – Int 14 HKAS 19 – The limit on a defined 1 January 2008 benefit asset, minimum funding requirements and their interaction

1 January 2009 1 January 2009 1 July 2009

The Group has not early adopted any of these new or revised standards and interpretations, and is in the process of making an assessment of what the impact of these new or revised standards or interpretations is expected to be in the period of their initial application.

3. Principal accounting policies

(a) Statement of compliance

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

These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

– 28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Basis of preparation of financial statements and material uncertainties in respect of going concern
(i) These financial statements have been prepared under the historical cost convention, as modified for the revaluation of certain financial instruments which are carried at fair value.
(ii) HKAS 1 “Presentation of Financial Statements” requires management to make an assessment of an entity’s ability to continue as a going concern in preparing financial statements, and when management is aware, in making this assessment, of material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern, management is required to disclose these uncertainties.

In preparing these financial statements, the Directors are aware of the following conditions and uncertainties which may cast significant doubt about the ability of the Group to continue as a going concern:

The Group incurred a loss of HK$5,827,000 for the year ended 31 March 2008 and had accumulated losses of HK$275,150,000 as at 31 March 2008.
The Group had net current assets of HK$20,550,000 and net assets of HK$21,036,000 as at 31 March 2008. However, a significant proportion of the Group’s net current assets and net assets is the Group’s investments held for trading (comprising both Preference Shares and Ordinary Shares) in China Sciences Conservational Power Limited (“CSCPL”), the details of which are set forth in Note 21 to the financial statements. CSCPL is a company listed on the Stock Exchange but the trading of its ordinary shares has been suspended since 29 September 2005. The investment in the CSCPL Preference Shares was valued by the Directors at HK$36,000,000 as at 31 March 2008 after deducting an impairment loss of HK$24,800,000, with reference to a valuation of the fair value of the investment carried out by a professional firm of independent valuers as at 31 March 2006. The professional valuation assumed, inter alia, that CSCPL will be able to continue to carry on business as a going concern. The investment in the CSCPL Ordinary Shares was valued by the Directors at HK$2,756,000 as at 31 March 2008 after deducting an impairment loss of HK$2,944,000 estimated by the Directors.

– 29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As set out in Note 21 to the financial statements, the Company has served a notice with CSCPL to redeem the CSCPL Preference Shares in full. The recoverability of the final amount of the CSCPL Preference Shares redemption proceeds from CSCPL is uncertain as it is dependent upon CSCPL’s financial position which is largely affected by the outcome of CSCPL’s application to resume trading of its ordinary shares on the Stock Exchange so that it can proceed with various financing transactions to raise cash. The Group’s ability to dispose of its investment in the CSCPL Ordinary Shares is also subject to the abovementioned uncertainty.

Despite the above conditions and the existence of the above uncertainties on the recovery of the CSCPL Preference Shares redemption proceeds and the ability to dispose of the CSCPL Ordinary Shares, which indicate the existence of material uncertainties which may cast significant doubt about the ability of the Group to continue as a going concern, the Directors have prepared these financial statements on the assumption that the Group will continue as a going concern. The Directors are of the view that it is appropriate for these financial statements to be prepared on a going concern basis on the basis of the following:

the Directors’ critical assessment of CSCPL’s ability to proceed with various financing transactions to raise cash to repay the CSCPL Preference Shares redemption proceeds to the Company.
the Directors’ critical assessment of the outcome of the Company’s fund raising exercise. As set out in the Company’s circular dated 30 June 2008 and Note 42 to the financial statements, the Company had entered into a placing agreement on 27 February 2008 as amended on 30 May 2008 for the placing of convertible bonds of principal amount of HK$50 million with zero coupon rate due in three years from the date of issue to provide funds for the repayment of the Group’s outstanding indebtedness, expansion of the margin financing business and general working capital. The placing is conditional upon, inter alia, the resumption of trading of the Company’s shares on the Stock Exchange. The Directors confirm that they are working closely with the Stock Exchange and all the professional advisers on its application for a resumption of trading of its shares on the Stock Exchange.

– 30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

after the year end, as set out in Note 33 to the financial statements, a lender has renewed the interest bearing loans of HK$10 million and HK$12 million outstanding as at 31 March 2008 to 25 May 2009 and 15 June 2009 respectively, on similar terms and conditions. This lender has also agreed in principle to extend the loan facilities to the Group beyond June 2009 in the event that the placing of the convertible bonds does not materialise.

Should the Group be unable to continue in business as a going concern, adjustments would have to be made to restate the values of the assets to their immediate recoverable amounts, to provide for any further liabilities which might arise, and to reclassify non-current assets and liabilities as current assets and liabilities, respectively. The effects of these adjustments have not been reflected in these financial statements.

(c) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31 March each year.

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

All significant intercompany transactions, balances and unrealised gains on transactions between group enterprises are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of impairment on the asset transferred.

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

The gain or loss on disposal of subsidiaries represents the difference between the proceeds of the sale and the Group’s share of their net assets together with any attributable goodwill and exchange difference which was not previously charged or recognised in profit or loss.

– 31 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(d) Business combinations

Acquisition of subsidiaries 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 assumed in a business combination are recognised at their fair values at the acquisition date.

Goodwill arising on acquisition is recognised in accordance with the accounting policy for goodwill in note 3(h) below.

(e) Subsidiaries

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

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

(f) Associates

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

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Under the equity method, interests in associates are stated in the consolidated balance sheet at the Group’s share of the net assets of the associate, less impairment in the value of individual investments. The Group’s share of the post-acquisition results and reserves of associates is include in the consolidated income statement and consolidated reserves respectively. Losses of an associate in excess of the Group’s interest in that associate are not recognised.

– 32 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where a Group entity transacts with an associate of the Group, unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant associate, except where unrealised losses provide evidence of an impairment of the assets transferred, in which case they are recognised immediately in profit or loss.

(g) Jointly-controlled entities

A jointly-controlled entity is a joint venture that is subject to joint control, resulting in none of the participating parties having unilateral control over the economic activity of the jointly-controlled entity.

The Group’s interests in jointly-controlled entities are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses. The Group’s share of the post-acquisition results and reserves of jointly-controlled entities is include in the consolidated income statement and consolidated reserves, respectively. Where the profit sharing ratio is different to the Group’s equity interest, the share of post-acquisition results of the jointly-controlled entities is determined based on the agreed profit sharing ratio. Unrealised gains and losses resulting from transactions between the Group and its jointly-controlled entities are eliminated to the extent of the Group’s interest in the jointly-controlled entities, except where unrealised losses provide evidence of an impairment of the asset transferred. Goodwill arising from the acquisition of jointly-controlled entities, which was not previously eliminated or recognised in the consolidated reserves, is include as part of the Group’s interests in jointly-controlled entities. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

– 33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(h) Goodwill

Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to other asset of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Where the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, after reassessment, the excess is recognised immediately in profit or loss.

On the disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

The Group’s policy for goodwill arising on the acquisition of associates and jointly-controlled entities is described in Notes 3(f) and (g).

(i) Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses.

– 34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Depreciation is charged so as to write off the cost of assets, over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at each balance sheet date, with the effect of any changes in estimate accounted for on a prospective basis. The principal annual rates are as follows:

Leasehold improvements	20%
Furniture and fixtures	25%
Office equipment	25%
Motor vehicles	25%

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

The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

(j) Intangible assets (other than goodwill)

Intangible assets are recorded at cost less accumulated amortisation and accumulated impairment losses. Amortisation is charged on a straight-line basis over the estimated useful lives of intangible assets. The estimated useful life and amortisation method are reviewed at the end of each balance sheet date, with the effect of any changes in estimate being accounted for on a prospective basis.

(k) Impairment of assets excluding goodwill

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

– 35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

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

(l) Installation contracts

When the outcome of an installation contract can be estimated reliably, contract revenue and costs are recognised in the income statement by reference to the stage of completion of the contract activity at the balance sheet date, as measured by surveys on works performed.

When the outcome of an installation contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred when it is probable that they will be recoverable and contract costs are recognised as an expense in the period in which they are incurred.

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

– 36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(m) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost includes cost of purchase of materials computed using the weighted average cost method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and cost necessary to make the sale.

(n) Financial assets

Financial assets are recognised and derecognised on trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. These financial assets are subsequently accounted for as follows, depending on their classification:

(i) Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss where the financial asset is either held for trading or it is designated as at fair value through profit or loss. Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial assets.

(ii) Loans and receivables

Accounts receivable, progress payments receivable, retention money receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

– 37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iii) Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

For equity securities, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

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

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

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

For unquoted equity securities carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for equity securities are not reversed.

– 38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

–

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

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

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of secured margin loans and cash clients receivables included in accounts and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against accounts receivable, progress payment receivables, retention money receivables, loans and other receivables directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss.

– 39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iv) Effective interest method

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

(v) Derecognition of financial assets

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

(o) Financial liabilities and equity instrument issued by the Group

(i) Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

(ii) Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

– 40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iii) Financial liabilities

Financial liabilities, including accounts payable, other payables and accrued charges, retention money payables, loans payable, bank overdraft, other borrowings and obligations under finance leases are initially measured at fair value, net of transaction costs.

The financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis, unless the effect of discounting would be immaterial, in which case they are stated at cost.

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.

(iv) Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.

(p) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents for the purpose of the cash flow statement.

(q) Leases

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.

– 41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(r) Provisions and contingent liabilities

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

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

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

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or nonoccurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

– 42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(s) Taxation

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

tax.

(i) Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expenses 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 balance sheet date.

(ii) Deferred tax

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

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

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

– 43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the balance sheet date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

(t) Foreign currencies

The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (“functional currency”). For the purpose of the consolidated financial statements, the results and financial position of each Group entity are expressed in Hong Kong dollar which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in currencies other than the Company’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at 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 are recognised in profit or loss in the period in which they arise except for exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation, and which are recognised in the translation reserve and recognised in profit or loss on disposal of the net investment.

– 44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are expressed in Hong Kong dollar using exchange rates prevailing at the balance sheet date. Income and expenses items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during the period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

(u) Employees’ benefits

(i) Short term benefits

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

(ii) Pension obligation

The Group has participated in an approved Mandatory Provident Fund (“MPF”) scheme effective from 1 December 2000 to provide MPF scheme to all eligible employees in Hong Kong. The contributions borne by the Group are calculated at 5% of the salaries and wages (monthly contribution limited to 5% of HK$20,000 for each eligible employee) as calculated under the MPF legislation. Contributions to MPF scheme are recognised as an expense in the income statement as incurred. There were no forfeited contributions used to reduce future contributions as at 31 March 2008.

(iii) Share-based payments

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date.

– 45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The fair value determined at the grant date of the equity-settled sharebased payments is expensed on granting the share options as the grantees do not have to meet any vesting conditions before becoming unconditionally entitled to the options.

Equity-settled share-based payment transactions with other parties are measured at the fair value of the goods or services received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the Group obtains the goods or the counterparty renders the service.

(v) Borrowing costs

All borrowing costs are recognised in profit or loss in the period in which they are incurred.

(w) Related parties

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

(x) Revenue recognition

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

(i) Revenue from the sale of electrical products is recognised when the Group entity has delivered products to the customer, the customer has accepted the products and collectibility of the related receivable is reasonably assured.
(ii) Revenue on installation contracts is recognised using the percentage of completion method by reference to the value of work carried out during the year.

– 46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iii) Interest income is accrued on a time-apportioned basis by reference to the principal outstanding using the effective interest method.
(iv) Brokerage commission income is recognised on a trade date basis when the services are rendered.
(v) Income from securities handling charges and service income is recognised when the services are rendered.
(vi) Dividend on the investment in the CSCPL preference shares is not accrued as the Directors are of the view that the chance of receiving it is slim.

(y) Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

In accordance with the Group’s internal financial reporting system, the Group has chosen business segment information as the primary reporting format and geographical segment information as the secondary reporting format for the purposes of these financial statements.

Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. Segment revenue, expenses, assets and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between Group entities within a single segment. Inter-segment pricing is based on similar terms as those available to other external parties.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets (both tangible and intangible) that are expected to be used for more than one period.

Unallocated items mainly comprise financial and corporate assets, interestbearing loans, borrowings, tax balances, corporate and financing expenses.

– 47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. Critical accounting estimates and judgements

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(a) Useful lives of property, plant and equipment

The Group’s management determines the estimated useful lives and related depreciation charges for its property, plant and equipment. This estimate is based on the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. Management will increase the depreciation charge where useful lives are less than previously estimated lives, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

(b) Impairment of accounts receivable, retention money receivables, progress payment receivables, loans and other receivables (“loans and receivables”)

The Group makes provision for impairment of loans and receivables based on an estimate of their recoverability. Provisions are applied to loans and receivables where events or changes in circumstances indicate that they may not be collectible. The identification of impairment of loans and receivables requires the use of estimates. Where the expectation is different from the original estimates, such difference will impact the carrying value of loans and receivables and provision for impairment losses in the period in which such estimate has been changed.

– 48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) Impairment of investments held for trading

The management exercises its judgement in the estimation of the impairment losses on the Group’s investments in CSCPL Preference Shares and CSCPL Ordinary Shares. The management’s valuation is subject to the limitations and uncertainties of the estimates used by management. There would be material changes in the amount of impairment losses recognised in the income statement and accumulated impairment losses if the estimates used by management are changed.

(d) Fair value of share options

Share option expense is subject to the limitations of the option pricing models adopted and the uncertainties in estimates used by management in the assumptions. Should the relevant parameters of the share option model be changed, there may be material changes in the amount of share option expense recognised in the income statement and share option reserve.

5. Turnover

Turnover represents:

Electrical engineering-value of contract work Brokerage income from securities dealings Sale of electrical goods Margin interest income from securities brokerage business Interest income from unsecured loans	2008 HK$’000 2,809 6,636 1,621 1,289 – 12,355	2007 HK$’000 2,934 1,519 1,430 618 3
		6,504

No income is accrued on the impaired investments held for trading during the years ended 31 March 2008 and 2007.

– 49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. Business and geographical segments

(a) Business segments

For management purposes, the Group is currently organised into three operating divisions. These divisions are the basis on which the Group reports its primary segment information. The principal activities are as follows:

(i) Electrical engineering contracting
(ii) Sale of electrical goods
(iii) Securities brokerage and financing

For the year ended 31 March 2008 Turnover External sales Results Segment profit/(loss) Unallocated operating income and expenses Loss from operations Finance costs Loss on disposal of subsidiaries Loss before taxation Taxation Loss for the year	Electrical engineering contracting HK$’000 2,809 (3,904)	Sale of electrical goods HK$’000 1,621 (140)	Securities brokerage and financing Consolidated HK$’000 HK$’000 7,925 12,355 1,064 (2,980) 1,508 (1,472) (4,093) (262) (5,827) – (5,827)

– 50 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

			Securities
	Electrical	Sale of	brokerage
	engineering	electrical	and
	contracting	goods	financing	Unallocated	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
As at 31 March 2008
Assets
Segment assets	2,686	655	36,006	–	39,347
Unallocated corporate assets					40,473
Consolidated total assets					79,820
Liabilities
Segment liabilities	16,923	1,671	20,632	–	39,226
Unallocated corporate
liabilities					19,558
Consolidated total liabilities					58,784
Other information
Additions to property, plant
and equipment	14	–	–	897	911
Depreciation of property,
plant and equipment	8	63	74	463	608
Bad debts written off	–	24	10	–	34
Reversal of impairment loss
on investment deposits	–	–	–	(8,000)	(8,000)
Reversal of provision for
doubtful debts	–	–	(199)	(500)	(699)

– 51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 March 2007 Turnover External sales Results Segment loss Unallocated operating income and expenses Loss from operations Finance costs Gain on disposal of subsidiaries Loss before taxation Taxation Loss for the year	Electrical engineering contracting HK$’000 2,934 (4,153)	Sale of electrical goods HK$’000 1,430 (3,861)	Securities brokerage and financing HK$’000 2,140 (2,393)	Sea freight forwarding and others Consolidated HK$’000 HK$’000 – 6,504 (160) (10,567) (8,494) (19,061) (2,573) 9,196 (12,438) (792) (13,230)

– 52 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Securities Sea freight Electrical Sale of brokerage forwarding engineering electrical and and contracting goods financing others Unallocated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 As at 31 March 2007 Assets Segment assets 5,587 1,427 14,480 13 – Unallocated corporate assets Consolidated total assets Liabilities Segment liabilities 8,747 2,533 6,451 99 – Unallocated corporate liabilities Consolidated total liabilities Other information Additions to property, plant and equipment 11 250 39 – – Amortisation of trading right – – 251 – – Depreciation of property, plant and equipment 73 86 188 6 565 (Gain)/loss on disposal of property, plant and equipment – (92) – – 156 Provision for doubtful debts 145 1,336 82 7 114	Consolidated HK$’000 21,507 41,644
	63,151

	17,830 18,458
	36,288

	300 251 918 64 1,684

(b) Geographical segments

The Group’s electrical engineering contracting, sale of electrical goods and securities brokerage and financing operations are located in Hong Kong.

Over 90% of the Group’s revenues during the years ended 31 March 2008 and 2007 were derived from Hong Kong. Accordingly, no geographical information on revenue is presented.

– 53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following is an analysis of the carrying amount of consolidated total assets and additions to property, plant and equipment analysed by the geographical area in which the assets are located.

Carrying amount of consolidated total assets At 31 March 2008 2007 HK$’000 HK$’000 Hong Kong 39,822 24,203 Others 39,998 38,948 79,820 63,151 7. Other income Write back of accrued contract costs Interest income Write back of accrued professional fees Handling charges Sundry income 8. Finance costs Interest on bank borrowings and overdraft wholly repayable within five years Interest on obligations under finance leases Interest on other borrowings	Carrying amount of consolidated total assets At 31 March 2008 2007 HK$’000 HK$’000 Hong Kong 39,822 24,203 Others 39,998 38,948 79,820 63,151 7. Other income Write back of accrued contract costs Interest income Write back of accrued professional fees Handling charges Sundry income 8. Finance costs Interest on bank borrowings and overdraft wholly repayable within five years Interest on obligations under finance leases Interest on other borrowings	Additions to property, plant and equipment For the year ended 31 March 2008 2007 HK$’000 HK$’000 911 300 – – 911 300 2008 2007 HK$’000 HK$’000 337 – 331 166 234 – 100 46 54 38 1,056 250 2008 2007 HK$’000 HK$’000 120 97 34 31 3,939 2,445 4,093 2,573	Additions to property, plant and equipment For the year ended 31 March 2008 2007 HK$’000 HK$’000 911 300 – – 911 300 2008 2007 HK$’000 HK$’000 337 – 331 166 234 – 100 46 54 38 1,056 250 2008 2007 HK$’000 HK$’000 120 97 34 31 3,939 2,445 4,093 2,573	Additions to property, plant and equipment For the year ended 31 March 2008 2007 HK$’000 HK$’000 911 300 – – 911 300 2008 2007 HK$’000 HK$’000 337 – 331 166 234 – 100 46 54 38 1,056 250 2008 2007 HK$’000 HK$’000 120 97 34 31 3,939 2,445 4,093 2,573
				300

				2007 HK$’000 – 166 – 46 38
				250

				2007 HK$’000 97 31 2,445
				2,573

– 54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. Loss before taxation

	2008	2007
	HK$’000	HK$’000
Loss before taxation has been arrived
at after charging/(crediting):
(Reversal of)/charge for provision
for doubtful debts_(Note 22)_	(699)	1,684
Amortisation of trading right included
in administrative expenses_(Note 16)_	–	251
Auditor’s remuneration:
Current year	620	580
Under-provision in prior years	19	100
Reversal of impairment loss
on investment deposits_(Note 28)_	(8,000)	–
Bad debts written off	34	–
Cost of inventories expensed	1,447	1,198
Cost of services provided	3,144	666
Depreciation of property, plant and equipment:
Owned assets	269	642
Assets held under finance leases	339	276
Exchange losses, net	26	2
Fair value change of investments held
for trading_(Note 21)_	32	–
Provision for obsolete inventories	–	238
Loss on disposal of property, plant and equipment	–	64
Operating lease rentals in respect of
rented premises	919	1,310
Staff costs excluding directors’ remuneration:
Salaries and allowances	5,988	9,115
Retirement benefit scheme contributions	248	295

– 55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. Directors’ and senior executives’ emoluments

(a) The emoluments paid or payable to each of the Directors of the Group during the year are as follows:

Executive Directors Ng Cheuk Fan, Keith (Note 1) Sun Tak Yan, Desmond Ng Khai Wain_(Note 4) You Wei(Note 4) Yeung Kwok Leung _Independent Non-executive Directors Shane Phillips_(Note 5) Cai Zhixu(Note 6) Ho Albert(Note 5) Lam Ka Wai, Graham (Note 2) Ng Kay Kwok(Note 2) Tam B Ray Billy(Note 3)_ Total	Fees HK$’000 644 330 200 200 130 46 68 46 54 54 32 1,804	Salaries, allowances Retirement and benefit benefits scheme in kind contributions HK$’000 HK$’000 – – – – – – – – 543 12 – – – – – – – – – – – – 543 12	2008 Total HK$’000 644 330 200 200 685 46 68 46 54 54 32
			2,359

Notes:

Appointment effective on 4 April 2007.
Appointment effective on 14 September 2007. 3. Appointment effective on 4 December 2007.
Resigned on 14 August 2007.
Resigned on 14 September 2007.
Resigned on 4 December 2007.

– 56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(a) The emoluments paid or payable to each of the Directors of the Group during the year ended 31 March 2007 are as follows:

Executive Directors You Wei Ng Khai Wain Yeung Kwok Leung Sun Tak Yan, Desmond Szeto Chak Wah, Michael Lai Man Leung Independent Non-executive Directors Cai Zhixu Ho Albert Shane Phillips Chong Yiu Kan, Sherman Tsoi Wai Kwong Au Tin Fung Law Mun Yee Total	Fees HK$’000 601 601 90 75 – – 89 89 89 9 9 6 6 1,664	Salaries, allowances Retirement and benefit benefits scheme in kind contributions HK$’000 HK$’000 – – – – 797 12 – – 180 1 108 1 – – – – – – – – – – – – – – 1,085 14	2008 Total HK$’000 601 601 899 75 181 109 89 89 89 9 9 6 6
			2,763

– 57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year include three (2007: three) Directors whose emoluments are reflected in the analysis presented in Note 10(a) above. The emoluments payable to the remaining two (2007: two) individuals during the year are as follows:

Salaries and other benefits Retirement benefit scheme contributions	2008 HK$’000 1,884 70 1,954	2007 HK$’000 3,486 52
		3,538

The emoluments fell within the following emolument bands:

HK$ 0 – 1,000,000 1,000,001 – 2,000,000 2,000,001 – 3,000,000	Number of individuals 2008 2007 1 1 1 – – 1	Number of individuals 2008 2007 1 1 1 – – 1

		–

		1

(c) There were no arrangements under which a director or senior management waived or agreed to waive any emoluments, and no incentive payment nor compensation for loss of office was paid or payable to any Director or senior management during the year (2007: Nil).

– 58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. Taxation

(a) Income tax in the consolidated income statement represents:

2008 HK$’000 Underprovision of Hong Kong profits tax in respect of prior years – Deferred taxation_(Note 37)_ – – No provision for Hong Kong profits tax has been made in statements as the Group entities operating in Hong Kong had profit for the year ended 31 March 2008 (2007: Nil).	2007 HK$’000 790 2
	792

	the financial no assessable

The taxation charge for the year can be reconciled to the accounting loss as	The taxation charge for the year can be reconciled to the accounting loss as	The taxation charge for the year can be reconciled to the accounting loss as
follows:
	2008	2007
	HK$’000	HK$’000
Loss before taxation	(5,827)	(12,438)

Tax credit at Hong Kong profits tax rate of
17.5% (2007: 17.5%)	(1,020)	(2,177)
Tax effect of expenses that are not deductible
in determining taxable profit	1,224	255
Tax effect of income that is not taxable
in determining taxable profit	(1,484)	(951)
Utilisation of tax losses previously
not recognised	(63)	–
Deferred tax asset on tax losses and
other timing differences not recognised	1,343	2,873
Underprovision in prior years	–	792
Taxation charge for the year	–	792

Details of deferred taxation are disclosed in Note 37 to the financial statements.

– 59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. Loss attributable to equity holders of the Company

The loss attributable to equity holders of the Company includes a loss of HK$10,946,000 (2007: profit of HK$1,512,000) which has been dealt with in the financial statements of the Company.

13. Dividends

No dividend has been paid, declared or proposed by the Company during the year and up to the date of approval of these financial statements (2007: Nil).

14. Loss per share – basic

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

Loss for the purpose of basic loss per share Weighted average number of ordinary shares for the purpose of basic loss per share	2008 HK$’000 (5,827) ’000 464,070	2007 HK$’000 (13,230) ’000 464,070

Diluted loss per share is not presented for both years as the potential dilutive ordinary shares resulting from the exercise of the Company’s outstanding share options are antidilutive.

– 60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. Property, plant and equipment

Leasehold improvements HK$’000 The Group Cost: At 1 April 2006 615 Additions – Disposals – At 31 March 2007 615 Additions 604 Disposal of subsidiaries_(Note 41) (604) At 31 March 2008 615 Accumulated depreciation: At 1 April 2006 501 Charge for the year 98 Written back on disposal – At 31 March 2007 599 Charge for the year 54 Disposal of subsidiaries(Note 41)_ (40) At 31 March 2008 613 Net book value: At 31 March 2008 2 At 31 March 2007 16	Furniture and fixtures HK$’000 4,297 – (2,639) 1,658 – – 1,658 3,973 120 (2,471) 1,622 22 – 1,644 14 36	Office equipment HK$’000 4,279 50 (855) 3,474 307 (293) 3,488 3,733 296 (780) 3,249 193 (25) 3,417 71 225	Motor vehicles HK$’000 1,860 250 (278 ) 1,832 – – 1,832 994 404 (243 ) 1,155 339 – 1,494 338 677	Total HK$’000 11,051 300 (3,772) 7,579 911 (897) 7,593 9,201 918 (3,494) 6,625 608 (65) 7,168 425 954

Notes: The Group leases motor vehicles under finance leases expiring from one to two years. None of the leases includes contingent rentals.

At the balance sheet date, the net book value of motor vehicles held under finance leases of the Group was HK$338,000 (2007: HK$677,000). The related depreciation charge was HK$339,000 (2007: HK$276,000).

– 61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

During the year, apart from the leased assets, the Group did not have any material pledge of property, plant and equipment (2007: Nil).

The Company Cost: At 1 April 2006, 31 March 2007 and 31 March 2008 Accumulated depreciation: At 1 April 2006 Charge for the year At 31 March 2007 Charge for the year At 31 March 2008 Net book value: At 31 March 2008 At 31 March 2007	Office equipment HK$’000 157
	134 23
	157 –
	157
	–

	–

– 62 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

16. Intangible asset

Cost: At 1 April 2006, 31 March 2007 and 31 March 2008 Accumulated amortisation: At 1 April 2006 Charge for the year_(Note 9)_ At 31 March 2007 Charge for the year At 31 March 2008 Net carrying amount: At 31 March 2008 At 31 March 2007	The Group HK$’000 2,380
	2,129 251
	2,380 –
	2,380
	–

	–

Note: The intangible asset represents the trading right on the Stock Exchange. The trading right is amortised over its estimated useful life of 10 years. The amortisation charge for the trading right for the prior year is included in “administrative expenses” in the consolidated income statement.

17. Other non-current assets

The Stock Exchange – Compensation fund deposits – Fidelity fund deposits – Stamp duty deposits Hong Kong Securities Clearing Company Limited – Guarantee fund contribution – Admission fees At 31 March	The Group 2008 2007 HK$’000 HK$’000 50 50 50 50 30 5 60 50 50 50 240 205	The Group 2008 2007 HK$’000 HK$’000 50 50 50 50 30 5 60 50 50 50 240 205
		205

– 63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. Subsidiaries

Unlisted shares, at cost Amounts due from subsidiaries _Less:_Impairment losses	The Company 2008 2007 HK$’000 HK$’000 15,186 15,186 198,674 254,619 213,860 269,805 (210,119) (263,595) 3,741 6,210	The Company 2008 2007 HK$’000 HK$’000 15,186 15,186 198,674 254,619 213,860 269,805 (210,119) (263,595) 3,741 6,210
		269,805 (263,595)
		6,210

The amounts due from subsidiaries are unsecured, interest free and in substance represent the Company’s interest in the subsidiaries in the form of quasi-equity loans.

The Directors assessed that the investments in subsidiaries and the amounts due from subsidiaries are impaired due to sustained losses incurred. Consequently, a provision for impairment loss was made.

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

Particulars of the Company’s principal subsidiaries at the balance sheet date are set out in Note 46.

19. Associates

	The	Group
	2008	2007
	HK$’000	HK$’000
Share of net assets	–	–

– 64 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Unlisted shares, at cost Amounts due from associates _Less:_Impairment losses	The Group 2008 2007 HK$’000 HK$’000 35,000 35,000 33,428 33,428 68,428 68,428 (68,428) (68,428) – –	The Group 2008 2007 HK$’000 HK$’000 35,000 35,000 33,428 33,428 68,428 68,428 (68,428) (68,428) – –
		68,428 (68,428)
		–

The Directors assessed that the interests in associates are totally impaired due to sustained losses incurred. Consequently, a full provision for impairment was made.

Particulars of the Group’s associates as at the balance sheet date are as follows:

				Effective
				percentage
	Form of	Place of		of equity
	business	incorporation/	Class of	interest held
Name of associate	structure	operation	shares held	by the Group	Principal activities
Bright Rich International	Incorporated	Hong Kong/	Ordinary	50%	Inactive
Limited		Hong Kong
Sharpway Enterprises	Incorporated	The British Virgin	Ordinary	50%	Inactive
Limited		Islands/
		The PRC
United Asia Terminal	Incorporated	The British Virgin	Ordinary	40%	Investment holding
Holdings Limited		Islands/
		The PRC
Shanghai Fortune Limited	Incorporated	Hong Kong/	Ordinary	40%	Investment holding
		The PRC
Fortune Union Investment	Incorporated	Hong Kong/	Ordinary	40%	Investment holding
Limited		The PRC
Shanghai United Asia	Sino-foreign	The PRC/	Registered	36%	Inactive
Container Services	equity joint	The PRC	capital
Co., Ltd.	venture
上海聯亞集裝箱
服務有限公司

– 65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

20. Jointly-controlled entity

	The	Group
	2008	2007
	HK$’000	HK$’000
Share of net assets	–	–

The Directors assessed that the interest in the jointly-controlled entity is totally impaired due to sustained loss incurred.

Particulars of the Group’s jointly-controlled entity as at the balance sheet date are as follow:

				Attributable
	Form of	Place of		equity
	business	incorporation	Class of	interest held
Name of company	structure	and operation	capital held	by the Group	Principal activities
Dagong Credit Information	Incorporated	The PRC	Registered	50%	Provision of credit
Service Co., Ltd.			Capital		information rating
大公信用信息服務					services in the PRC
有限公司

– 66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. Investments held for trading

Investments in CSCPL (Notes) Non-voting cumulative redeemable convertible preference shares (“Preference Shares”) – unlisted, at cost Ordinary Shares – listed, at cost Less:_Impairment losses Other listed investment at fair value(Note 9)_	The Group 2008 2007 HK$’000 HK$’000 60,800 60,800 5,700 5,700 66,500 66,500 (27,744) (27,744) 38,756 38,756 28 60 38,784 38,816	The Company 2008 2007 HK$’000 HK$’000 60,800 60,800 5,700 5,700 66,500 66,500 (27,744) (27,744) 38,756 38,756 – – 38,756 38,756

Notes:

(a) The Preference Shares were issued by China Sciences Conservational Power Limited (“CSCPL”) and carry a fixed preferential dividend at 3% per annum. The trading of the Ordinary Shares of CSCPL on the Stock Exchange (Code: 351) has been suspended since 29 September 2005. No quoted market prices in the Ordinary Shares of CSCPL have been available and the fair values of the Preference Shares and Ordinary Shares could not be reliably measured since that date.

As at 31 March 2008, the carrying value of the 80,000,000 CSCPL Preference Shares was estimated by the Directors based on a professional valuation carried out as at 31 March 2006. The CSCPL Preference Shares as at 31 March 2006 were valued by a firm of independent professional valuers at HK$36,000,000 using the discounted cash flow model, based on a specific pricing model and parameters. Accordingly, an impairment loss of HK$24,800,000 was made.

– 67 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The CSCPL Preference Shares matured on 4 July 2008 and the Company has served a notice with CSCPL to redeem the CSCPL Preference Shares in full. The Directors understand that CSCPL has already put in place a number of financing transactions which, if implemented, will inter alia, provide CSCPL with sufficient working capital to redeem the CSCPL Preference Shares in full. The financial transactions are conditional upon the Stock Exchange allowing CSCPL to proceed with the proposal for the resumption of trading of its ordinary shares, which was submitted to the Stock Exchange on 27 February 2008. On 6 June 2008, CSCPL was notified by the Stock Exchange that the resumption of trading in the shares is subject to the prior fulfilment of certain conditions. Details of the conditions and the financing transactions contemplated by CSCPL are set out in the circular of that company dated 4 July 2008.

Whilst the Directors are optimistic that the Group will be able to receive the CSCPL Preference Share redemption proceeds in full from CSCPL, the Directors are of the view that it is prudent not to write back in the year ended 31 March 2008 any of the impairment loss recognised in prior years.

(b) The carrying value of 7,500,000 CSCPL Ordinary Shares is estimated by the Directors at cost of HK$5,700,000 less impairment loss of HK$2,944,000 as at 31 March 2008 (2007: HK$2,944,000).
(c) No dividend on the CSCPL Preference Shares was accrued by the Directors as they are of the view that the chance of receiving the dividend is slim.

22. (Reversal of)/charge for provision for doubtful debts

Accounts receivable_(Note 23) Progress payment receivables(Note 24) Other receivables, deposits and prepayments(Note 25)_	The Group 2008 2007 HK$’000 HK$’000 (199) 181 – 145 (500) 1,358 (699) 1,684	The Group 2008 2007 HK$’000 HK$’000 (199) 181 – 145 (500) 1,358 (699) 1,684
		1,684

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23. Accounts receivable

Accounts receivable Less:_Provision for doubtful debts Accounts receivable from the business of dealing in securities: – Clearing houses and cash clients – Secured margin loans(Note (iii)(b))_ _Less:_Impairment allowance on accounts receivable from the business of dealing in securities – Secured margin loans	The Group 2008 2007 HK$’000 HK$’000 850 1,260 (551) (551) 299 709 2,635 4,645 7,420 4,400 (51) (250) 10,004 8,795 10,303 9,504

The settlement terms of accounts receivable arising from the business of dealing in securities are two days after trade date.

– 69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

i) The movement in the provision for doubtful debts for accounts receivable during the year, including both specific and collective loss components, is as follows:

At 1 April (Reversal of)/charge for provision for doubtful debts_(Note 22)_ At 31 March	The Group 2008 2007 HK$’000 HK$’000 801 620 (199) 181 602 801	The Group 2008 2007 HK$’000 HK$’000 801 620 (199) 181 602 801
		801

The provision for doubtful debts has been made for the estimated irrecoverable amounts from the sale of goods and secured margin loans. These provisions have been determined by the Directors with reference to past default experience.

ii) The ageing analysis of the accounts receivable at the balance sheet date is as follows:

Current and up to 30 days 31 to 60 days 61 to 90 days Over 90 days	The Group 2008 2007 HK$’000 HK$’000 1,730 4,899 38 61 123 89 1,043 305 2,934 5,354	The Group 2008 2007 HK$’000 HK$’000 1,730 4,899 38 61 123 89 1,043 305 2,934 5,354
		5,354

– 70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

iii) The ageing analysis of accounts receivable which are neither individually nor collectively considered to be impaired is as follows:

Neither past due nor impaired Less than 1 month past due 1 to 3 months past due Over 3 months past due	The Group 2008 2007 HK$’000 HK$’000 1,824 2,640 14 2,391 56 18 849 – 919 2,409 2,743 5,049	The Group 2008 2007 HK$’000 HK$’000 1,824 2,640 14 2,391 56 18 849 – 919 2,409 2,743 5,049
		2,391 18 –
		2,409
		5,049

(a) Accounts receivable that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, management believes that no impairment is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable.
(b) Loans to margin clients are secured by clients’ pledged securities, bear variable interest at commercial rates and repayable on demand. No ageing analysis is disclosed as in the opinion of the Directors of the Company, the ageing analysis does not give additional value in view of the nature of business of share margin financing.

As at 31 March 2008, the total market value of securities pledged as collateral in respect of the loans to margin clients were approximately HK$48,506,000 (2007: HK$12,374,000), with no collateral pledged from other accounts receivable.

The Directors consider that the carrying amount of accounts receivable approximates their fair value.

– 71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. Progress payment receivables

Current and up to 30 days Over 90 days Less:_Provision for doubtful debts(Note 22)_	The Group 2008 2007 HK$’000 HK$’000 1 1,417 145 145 146 1,562 (145) (145) 1 1,417	The Group 2008 2007 HK$’000 HK$’000 1 1,417 145 145 146 1,562 (145) (145) 1 1,417
		1,562 (145)
		1,417

i) The movement in the provision for doubtful debts for progress payments receivables during the year, including both specific and collective loss components, is as follows:

At 1 April Charge for provision for doubtful debts_(Note 22)_ At 31 March	The Group 2008 2007 HK$’000 HK$’000 145 – – 145 145 145	The Group 2008 2007 HK$’000 HK$’000 145 – – 145 145 145
		145

The provision for doubtful debts has been made for the estimated irrecoverable amounts from value of contract work. These provisions have been determined by the Directors with reference to past default experience.

The Directors consider that the carrying amount of progress payment receivables approximates their fair value.

– 72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

25. Other receivables, deposits and prepayments

Other receivables Deposits and prepayments	The Group 2008 2007 HK$’000 HK$’000 – 125 515 675 515 800	The Company 2008 2007 HK$’000 HK$’000 – – 16 16 16 16	The Company 2008 2007 HK$’000 HK$’000 – – 16 16 16 16
			16

At 31 March 2008 and 2007, certain of the Group’s and the Company’s other receivables and deposits and prepayments were determined to be impaired. The impaired receivables related to other receivables that the debtors were in financial difficulties and management assessed that only a portion of the receivables is expected to be recoverable. Consequently, a provision for doubtful debts was made. The Group and the Company do not hold any collateral over these balances.

Gross amounts _Less:_Provision for doubtful debts Net amounts	The Group Other receivables 2008 2007 HK$’000 HK$’000 10,614 11,188 (10,614) (11,063) – 125	The Group Deposits and prepayments 2008 2007 HK$’000 HK$’000 515 726 – (51) 515 675	The Group Deposits and prepayments 2008 2007 HK$’000 HK$’000 515 726 – (51) 515 675
			675

– 73 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The movement in the provision for doubtful debts for other receivables during the year, including both specific and collective loss components, is as follows:

At 1 April (Reversal of)/charge for impairment loss provision_(Note 22)_ At 31 March	The Group 2008 2007 HK$’000 HK$’000 11,114 9,756 (500) 1,358 10,614 11,114	The Group 2008 2007 HK$’000 HK$’000 11,114 9,756 (500) 1,358 10,614 11,114
		11,114

The Directors consider that the carrying amounts of other receivables, deposits and prepayments approximate their fair values.

26. Retention money receivables

	The	Group
	2008	2007
	HK$’000	HK$’000
Retention money receivables, receivable
within one year included in current assets	375	1,773

The amount represents monies retained by the clients on progress payments on contract

work.

The Directors consider that the carrying amount of retention money receivables approximates their fair value.

– 74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

27. Loans receivable

Interest bearing loans receivable _Less:_Impairment losses	The Group 2008 2007 HK$’000 HK$’000 69,019 69,019 (69,019) (69,019) – –	The Company 2008 2007 HK$’000 HK$’000 6,256 – (6,256) – – –	The Company 2008 2007 HK$’000 HK$’000 6,256 – (6,256) – – –
			–

The Directors assessed that loan receivables are impaired as the amounts are irrecoverable. Consequently, a full provision for impairment was made.

In the opinion of the Directors, ageing analysis of loans receivable does not give additional value and is therefore not presented.

No interest receivable is accrued during the years ended 31 March 2008 and 2007 as the Directors consider that the chance of receiving the interest is slim.

28. Investment deposits

Deposit for formation of a joint venture_(Note (a)) Earnest money for acquisition of an interest in a PRC company engaged in software development(Note (b)) _Less:_Impairment losses(Note (b))_	The Group 2008 2007 HK$’000 HK$’000 5,000 5,000 12,000 20,000 17,000 25,000 (17,000) (25,000) – –	The Group 2008 2007 HK$’000 HK$’000 5,000 5,000 12,000 20,000 17,000 25,000 (17,000) (25,000) – –
		25,000 (25,000)
		–

– 75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes:

(a) A deposit of HK$10,000,000 was paid to a PRC party in May 2002 for the formation of a sinoforeign joint venture in the PRC in which the Group would own 49%. The joint venture was to be principally engaged in construction engineering consultancy and advisory services. The joint venture could not obtain the business licence and half of the deposit amounting to HK$5,000,000 was refunded to the Group on 18 July 2005. Based on the Directors’ assessment, full provision was made in respect of the balance of HK$5,000,000.
(b) On 15 July 2005, the Group entered into a letter of intent with an independent third party and a guarantor in relation to the proposed acquisition of certain equity interests in a PRC company, which is principally engaged in the design and distribution of application software specifically for hospitals and clinics in the PRC. Pursuant to the terms of the letter of intent, the Group paid HK$20,000,000 as earnest money.

Pursuant to the termination agreement of the letter of intent dated 28 September 2007, the earnest money paid of HK$20,000,000 was agreed to be fully refunded by the end of July 2008. At 31 March 2008, part of the earnest money amounting to HK$8,000,000 was refunded. Accordingly, this amount of the provision for impairment was reversed and credited to profit or loss. The Directors are of the view that it would be prudent for the Group to continue to provide for the remaining deposit in full.

– 76 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

29. Amount due from a director

Amount due from a director, which is disclosed pursuant to section 161B of the Hong Kong Companies Ordinance, is as follows:–

Secured margin loan made by the Group

Name of borrower: Yeung Kwok Leung Position: Executive Director

Terms of the loan:

– Duration and repayment terms Repayable on demand – Interest rate 8.5% per annum – Security Pledged securities

Balance of the loan:

– at 1 April 2006 HK$Nil – at 31 March 2007 HK$Nil – at 31 March 2008 HK$426,000

Maximum balance outstanding:

– during year ended 31 March 2008 HK$2,255,759 – during year ended 31 March 2007 HK$Nil

There was no amount due but unpaid, nor any provision made against the principal or interest on this loan as at 31 March 2008 (2007: Nil).

As at 31 March 2008, the total market value of securities pledged as collateral in respect of the loan to a director were HK$1,683,300 (2007: Nil).

30. Pledged bank deposits

At the balance sheet date, the Group had pledged bank deposits of HK$2,196,000 (2007: HK$2,134,000) to secure certain bank facilities granted to the Group.

– 77 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

31. Cash and cash equivalents

Bank balances and cash – trust_(Note (a)) Bank balances and cash – general(Note (b))_	The Group 2008 2007 HK$’000 HK$’000 11,140 2,739 15,390 4,545 26,530 7,284	The Company 2008 2007 HK$’000 HK$’000 – – 1,181 3 1,181 3	The Company 2008 2007 HK$’000 HK$’000 – – 1,181 3 1,181 3
			3

(a) The Group maintains segregated trust accounts with licensed banks to hold clients’ monies arising from its securities brokerage and financing business. The Group has classified the clients’ monies as bank balances and cash – trust under the current assets section of the balance sheet and recognised the corresponding accounts payable to respective clients on the grounds that it is liable for any loss or misappropriation of clients’ monies. The Group is not allowed to use the clients’ monies to settle its own obligations.
(b) Bank balances and cash – general earn interest at floating rates based on daily bank deposit rates.
(c) The Directors consider that the carrying amounts of cash and cash equivalents approximate their fair values.

32. Bank overdraft (secured)

			The	Group
			2008	2007
			HK$’000	HK$’000
At	31	March	1,963	1,926

The bank overdraft is denominated in Hong Kong dollars, repayable on demand and secured by the bank deposits of the Group (Note 30) .

– 78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The average interest rate paid on bank overdraft ranges from prime rate to prime rate less 1% (2007: prime rate less 1%).

The Directors consider that the carrying amount of bank overdraft approximates its fair value due to its short term nature.

33. Other borrowings (unsecured)

			The	Group	The Company	The Company
			2008	2007	2008	2007
			HK$’000	HK$’000	HK$’000	HK$’000
At	31	March	29,735	14,113	10,618	–

The Group has four unsecured loans:

(i) a loan of HK$10,000,000 (2007: Nil) which was raised on 25 May 2007. The loan was unsecured and borne interest at prime rate per annum. On 29 May 2008, the lender renewed the loan to the Group to be repaid in full on 25 May 2009. The new loan is unsecured and bears interest at prime rate plus 3% per annum.
(ii) a loan of HK$12,000,000 (2007: HK$20,000,000) which was raised on 15 June 2007. The loan was unsecured and borne interest at 24% per annum. On 13 June 2008, the lender renewed the loan to the Group to be repaid in full on 15 June 2009. The new loan is unsecured and bears interest at 24% per annum.
(iii) a loan of HK$4,000,000 (2007: Nil) which was raised on 4 July 2007. The loan was unsecured and borne interest at 4% per annum. The amount was fully repaid on 15 May 2008.
(iv) a loan of HK$5,000,000 (2007: Nil) which was raised on 7 November 2007. The loan was unsecured and borne interest at 4.5% per annum. The Group repaid part of the loan amounting to HK$2,000,000 on 7 March 2008. The amount was fully repaid on 11 April 2008.

The Directors consider that the carrying amounts of other borrowings approximate their fair values.

– 79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

34. Accounts payable, other payables and accrued charges

Accounts payable_(Note (a)) Accounts payable from the business of dealing in securities: – Margin and cash clients (Note (b))_ Other payables and accrued charges	The Group 2008 2007 HK$’000 HK$’000 3,665 3,705 12,051 5,268 8,795 6,901 24,511 15,874	The Company 2008 2007 HK$’000 HK$’000 – – – – 2,425 1,281 2,425 1,281	The Company 2008 2007 HK$’000 HK$’000 – – – – 2,425 1,281 2,425 1,281
			1,281

(a) The ageing analysis of accounts payable as at the balance sheet date is as follows:

Current and up to 30 days 31 to 60 days 61 to 90 days Over 90 days	The Group 2008 2007 HK$’000 HK$’000 56 477 71 38 53 62 3,485 3,128 3,665 3,705	The Group 2008 2007 HK$’000 HK$’000 56 477 71 38 53 62 3,485 3,128 3,665 3,705
		3,705

– 80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Included in accounts payable amounts of HK$12,051,000 and HK$5,268,000 as at 31 March 2008 and 2007 respectively were payable to clients in respect of the trust and segregated bank balances received and held for clients in the course of the conduct of regulated activities. However, the Group does not have a currently enforceable right to offset these payables with the deposits placed.
Accounts payable to margin and cash clients arising from the business of dealing in securities bear variable interest at commercial rates, and repayable on demand subsequent to settlement date. No ageing analysis is presented as in the opinion of the Directors, the ageing analysis does not give additional value in view of the nature of this business.

The settlement terms of accounts payable arising from the business of dealing in securities are two days after trade date.

The Directors consider that the carrying amounts of accounts payable, other payables and accrued charges approximate their fair values.

35. Retention money payables

	The	Group
	2008	2007
	HK$’000	HK$’000
Retention money payables, payable within one year
included in current liabilities	958	1,252

The amount represents monies retained by the Group on payments to subcontractors on contract work.

The Directors consider that the carrying amount of retention money payables approximates their fair value.

– 81 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

36. Obligations under finance leases

At the balance sheet date, the Group had obligations under finance leases repayable as follows:

		The Group	The Group
	Minimum		Present value of
	lease payments		minimum lease payments
	2008	2007	2008	2007
	HK$’000	HK$’000	HK$’000	HK$’000
Amounts payable under
finance leases:
Within one year	324	324	290	290
More than one year but not
exceeding two years	200	324	179	290
More than two years but not
exceeding five years	–	200	–	179
	524	848	469	759
_Less:_Future finance charges	(55)	(89)
Present value of lease obligations	469	759

_Less:_Amounts due for settlement
within one year included
in current liabilities			(290)	(290)
Amounts due for settlement
after one year included
in non-current liabilities			179	469

It is the Group’s policy to lease certain of its motor vehicles under finance leases. The average lease term is two to three years (2007: two to three years). All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

The Group’s obligations under finance leases are secured by the lessors’ title to the leased assets.

– 82 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

37. Deferred taxation

The movements in deferred tax liabilities are as follows:

The Group

tax At 1 April 2006 Credit to profit and loss for the year ended 31 March 2007 (Note 11) At 31 March 2007 and 31 March 2008	Accelerated depreciation HK$’000 2 (2)
	–

At the balance sheet date, the Group had unused tax losses of approximately HK$185,957,000 (2007: HK$179,418,000) available for offset against future profits. No deferred tax asset has been recognised in respect of the tax losses due to the unpredictability of future profit streams. Unrecognised tax losses may be carried forward indefinitely.

38. Share capital

Authorised: 1,000,000,000 ordinary shares of HK$0.10 each Issued and fully paid: 464,070,000 ordinary shares of HK$0.10 each	The Company 2008 2007 HK$’000 HK$’000 100,000 100,000 46,407 46,407	The Company 2008 2007 HK$’000 HK$’000 100,000 100,000 46,407 46,407

		46,407

– 83 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

39. Share options

The Company had a share option scheme (the “2001 share option scheme”) which was adopted on 3 April 2001. Pursuant to a shareholders’ resolution dated 12 February 2003, the 2001 share option scheme enabling the Directors to grant options to employees, including Executive Directors of the Company and its subsidiaries, to subscribe for shares of the Company was terminated.

A new share option scheme (the “New Option Scheme”) was approved and adopted by the shareholders of the Company on 12 February 2003. The New Option Scheme is valid and effective for a period of 10 years after the date of adoption.

Under the terms of the New Option Scheme, the Directors of the Company may, at their discretion, grant options to the full-time employees, including Executive Directors of the Company and its subsidiaries, to subscribe for shares of the Company for recognition of their contribution as incentives or rewards. Options granted must be taken up within 30 days of the date of grant. A nominal consideration of HK$1 is payable on acceptance of the grant of an option which will entitle the holders to subscribe for shares of the Company during a period of 5 years commencing on the date of acceptance of the option at a price not less than the higher of (i) the nominal value of the shares of the Company; (ii) the closing price of the shares of the Company on the Stock Exchange on the date of grant; and (iii) the average of the closing prices of the shares of the Company on the Stock Exchange for the five trading days immediately preceding the date of the grant of the option. The maximum number of shares which may be issued upon the exercise of all outstanding options granted and yet to be exercised under the New Option Scheme and any other schemes of the Company must not exceed 30% of the shares of the Company in issue from time to time. Subject to the shareholders’ approval, the maximum number of shares in respect of which options may be granted under the New Option Scheme shall not exceed 10% of the shares in issue as at the date of the approval, or the maximum number of shares in respect of which options may be granted to any employee may not exceed 1% of the shares in issue from time to time in a 12-month period. Except for the entitlements of dividends, bonus, rights declared before the exercise of options, any shares allotted and issued on the exercise of an option will rank pari passu with the other shares in issue at the date of exercise of the relevant option.

At 31 March 2008, 13,700,000 (2007: 13,700,000) options had been granted and remained outstanding under the New Option Scheme of the Company, representing approximately 2.95% (2007: approximately 2.95%) of the shares of the Company in issue at that date.

– 84 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following table discloses details of the Company’s share options held by employees, and movements in such holdings during the year:

For the year ended 31 March 2008

Option type 2004B 2004C 2006A Total For the year ended 31 March 2007 Option type 2004B 2004C 2005A 2006A Total	Outstanding at 1 April 2007 200,000 2,100,000 11,400,000 13,700,000 Outstanding at 1 April 2006 6,400,000 2,630,000 500,000 15,992,600 25,522,600	Lapsed during the year – – – – Lapsed during the year (6,200,000) (530,000) (500,000) (4,592,600) (11,822,600)	Outstanding at 31 March 2008 200,000 2,100,000 11,400,000
			13,700,000

			Outstanding at 31 March 2007 200,000 2,100,000 – 11,400,000
			13,700,000

At 31 March 2008 and 2007, no share options were held by the Directors.

– 85 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Details of specific categories of share options are as follows:

			Closing price
			immediately	Exercise
			before/on the	price
Option type	Date of grant	Exercise period	date of grant	per share
			HK$	HK$
2004B	27 August 2003	27 August 2003 to	1.170	1.3060
		26 August 2008
2004C	16 January 2004	16 January 2004 to	0.840	0.8520
		15 January 2009
2005A	1 April 2004	1 April 2004 to	0.700	0.700
		31 March 2009
2006A	2 August 2005	2 August 2005 to	0.340	0.3520
		1 August 2010

Options which lapsed or are cancelled prior to their exercise date have been deleted from the register of outstanding options.

– 86 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

40. Reserves

The Company

At 1 April 2006 Profit for the year and total recognised income for the year Share options lapsed At 31 March 2007 Loss for the year and total recognised expenses for the year At 31 March 2008	Share premium HK$’000 233,184 – – 233,184 – 233,184	Share option reserve HK$’000 1,694 – (486) 1,208 – 1,208	Contributed Accumulated surplus losses HK$’000 HK$’000 (Note (a)) 80,657 (321,886) – 1,512 – 486 80,657 (319,888) – (10,946) 80,657 (330,834)	Total HK$’000 (6,351) 1,512 – (4,839) (10,946) (15,785)

The Company did not have any reserves available for distribution to shareholders as at 31 March 2008 and 2007. The Company’s share premium account may be distributed in the form of fully paid bonus shares.

Notes:

(a) The contributed surplus of the Company represents the difference between the fair value of the underlying net assets of the subsidiaries on the date they were acquired by the Company and the nominal amount of the Company’s shares issued under the corporate reorganisation of the Group.
(b) Other reserves are dealt with in accordance with the relevant accounting policies set out in Note 3.

– 87 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

41. Disposal of subsidiaries

2008

On 19 February 2008, the Group disposed of its holding of 100% in the equity interest of Ever Ace Investment Limited and Wellink Shipping Limited for a consideration of HK$1,170,000 in cash.

The net assets of the subsidiaries disposed of at the date of disposal and the loss of disposal based on the audited financial information of the subsidiaries as at 19 February 2008 were as follows:

	HK$’000
Net assets disposed of:
Property, plant and equipment_(Note 15)_	832
Other receivables, deposits and prepayments	835
Bank balances and cash	35
Accounts payable, other payables and accrued charges	(270)
	1,432
Loss on disposal of subsidiaries	(262)
Cash consideration received	1,170

Net inflow of cash and cash equivalents on disposal of subsidiaries:
Bank balances and cash disposed of	(35)
Cash consideration received	1,170
	1,135

– 88 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2007

During the year ended 31 March 2007, the Group disposed of its holding of 60% in the equity interest of Cyber Touch Limited for a consideration of HK$1 in cash. Cyber Touch Limited in turn holds 100% in the equity interest in 北京易行商盟在線網絡技術有限公司 .

The net assets of the subsidiaries disposed of at the date of disposal and the gain of disposal based on the unaudited financial information of the subsidiaries as at 31 December 2005 were as follows:

	HK$’000
Net assets disposed of:
Accounts receivable	19
Other receivables and prepayments	812
Bank balances and cash	3
Trade and other payables	(10,067)
Translation reserve	37
	(9,196)
Gain on disposal of subsidiaries	9,196
Cash consideration received_(HK$1)_	–

Net outflow of cash and cash equivalents on disposal of subsidiaries:
Bank balances and cash disposed of	(3)
Cash consideration received_(HK$1)_	–
	(3)

– 89 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

42. Capital and other commitments

At the balance sheet date, the Group and the Company had the following commitments in respect of:–

Contracted but not provided for: – acquisition of a subsidiary_(Note (a)) – placing of Convertible Bonds(Note (b))_	The Group and the Company 2008 2007 HK$’000 HK$’000 20,000 – 50,000 – 70,000 –	The Group and the Company 2008 2007 HK$’000 HK$’000 20,000 – 50,000 – 70,000 –
		–

Notes:

(a) On 27 February 2008, the Group entered into the Sale and Purchase Agreement (as amended on 30 May 2008) whereby the Group agreed to purchase a 51% of the issued share capital of a target company at a consideration of HK$20,000,000. The consideration shall be satisfied by the issue of the Consideration Convertible Bonds at a fair value of HK$21,600,000 by the Company upon completion. The acquisition is conditional on, among other things, the Stock Exchange having agreed in principle for the resumption of trading of the Company’s shares on the Stock Exchange.

The acquisition constitutes a very substantial acquisition for the Company under Chapter 14 of the Listing Rules. Details of the acquisition are set out in the Company’s circular dated 30 June 2008.

(b) On 27 February 2008, the Company entered into the Placing Agreement (as amended on 30 May 2008) with the Placing Agent in respect of the conditional placing of the Placing Convertible Bonds of principal amount of HK$50,000,000 with zero coupon rate due in three years from the date of issue. The Placing Agreement is conditional on, among other things, the Stock Exchange having agreed in principle for the resumption of trading of the Company’s shares on the Stock Exchange. Details of the placement are set out in the Company’s circular dated 30 June 2008.

– 90 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

43. Operating lease commitments

The Group is the lessee in respect of its office premises held under operating leases, with leases negotiated for terms ranging from one to two years. None of the leases includes contingent rentals.

	The	Group
	2008	2007
	HK$’000	HK$’000
Minimum lease payments under operating leases
charged as expenses for the year	919	1,310

At the balance sheet date, the Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:

Operating leases which expire: – within one year – in the second to fifth year inclusive	The Group 2008 2007 HK$’000 HK$’000 552 742 – 295 552 1,037	The Group 2008 2007 HK$’000 HK$’000 552 742 – 295 552 1,037
		1,037

44. Contingent liabilities

At the balance sheet date, the Group and the Company did not have any significant contingent liabilities except that the Company had the following contingent liabilities not provided for in the financial statements in respect of:

	The Company	The Company
	2008	2007
	HK$’000	HK$’000
Guarantee given to a licensed money lender
to secure a loan granted to a subsidiary	12,000	–

The Directors consider that the fair value of the above guarantee is not material to the Company.

– 91 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

45. Related party transactions

(a) At the balance sheet date, the Company had provided a guarantee to a lender of its subsidiary in the amount of HK$12,000,000 (2007: Nil).
(b) Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.
(c) The amounts due from/(to) related companies are unsecured, interest free and have no fixed terms of repayment.
(d) During the year, the Group charged interest of HK$34,440 (2007: Nil) at 8.5% per annum to one of its Directors (Note 29) .
(e) The amount due to a Director is unsecured, interest free and has no fixed terms of repayment.
(f) Members of key management during the year comprised only of the Directors whose remuneration is set out in Note 10 to the financial statements.

46. Principal subsidiaries

Details of the Company’s principal subsidiaries as at 31 March 2008 are as follows:

		Issued and fully paid	Issued and fully paid
	Place of	share capital/
Name of subsidiary	incorporation	registered capital		Principal activities
		Ordinary/
		registered	Deferred
Brongham Park Limited	Hong Kong	HK$20	HK$1,000,000	Trading in diesel
			(Note (c))	generating sets
Charmview International	Hong Kong	HK$1	–	Inactive
Trading Limited
China Legend International	Hong Kong	HK$10,000	–	Investment holding
Limited
Country Super Limited	Hong Kong	HK$1,000,000	–	Investment holding

– 92 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Issued and fully paid	Issued and fully paid
	Place of	share capital/
Name of subsidiary	incorporation	registered capital		Principal activities
		Ordinary/
		registered	Deferred
Hong Tong Hai Capital	Hong Kong	HK$10,000	–	Personal and
Limited				commercial lending
Hong Tong Hai Consultants	Hong Kong	HK$2	–	Investment holding
Limited
Hong Tong Hai Logistics	The British Virgin	US$100	–	Investment holding
Limited	Islands
Hong Tong Hai Securities	Hong Kong	HK$21,000,000	–	Securities brokerage
Limited
Honsda (HK) Electronics	Hong Kong	HK$1	–	Trading of electronic
Limited				products
Jetcom Limited	The British Virgin	US$1	–	Investment holding
	Islands
MindGenius Secretarial	Hong Kong	HK$10,000	–	Provision of company
Services Limited				secretarial services
Oriental Overseas Group	The British Virgin	US$50,000	–	Investment holding
Limited	Islands
Sinogear Enterprises Limited	The British Virgin	US$1	–	Investment holding
	Islands
TopStar Enterprises	The British Virgin	US$1	–	Investment holding
(Holdings) Limited	Islands
Tribest Investments Limited	The British Virgin	US$1	–	Investment holding
	Islands
Yew Sang Hong (China)	The British Virgin	US$1	–	Investment holding
Limited	Islands
Yew Sang Hong (BVI)	The British Virgin	US$1	–	Investment holding
Limited	Islands

– 93 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Issued and fully paid	Issued and fully paid
	Place of	share capital/
Name of subsidiary	incorporation	registered capital		Principal activities
		Ordinary/
		registered	Deferred
Yew Sang Hong Trading	Hong Kong	HK$2	–	Trading in electrical
(China) Limited				equipment and
				materials
Yew Sang Hong Building	Hong Kong	HK$2	–	Building maintenance
Services (Maintenance)
Engineering Limited
Yew Sang Hong Investment	The British Virgin	US$1	–	Investment holding
Services Limited	Islands
Yew Sang Hong Limited	Hong Kong	HK$20	HK$12,524,000	Electrical engineering
			(Note (c))	contracting
Yew Sang Hong Trading	Hong Kong	HK$2	HK$2	Trading in electrical
Limited			(Note (c))	equipment and
				materials

Notes:

(a) Other than Yew Sang Hong (BVI) Limited, Yew Sang Hong (China) Limited, Yew Sang Hong Investment Services Limited, Hong Tong Hai Logistics Limited and Oriental Overseas Group Limited which are directly held by the Company, all other subsidiaries are indirectly held by the Company.
(b) Other than those subsidiaries incorporated in the British Virgin Islands, whose place of operations are basically in Hong Kong, the places of operations of all other subsidiaries are the same as their places of incorporation.
(c) The deferred shares are shares whose shareholders are neither entitled to receive notices, attend or vote at any general meetings nor to receive any dividend out of operating profit and have very limited rights on return of capital of the subsidiaries.
(d) None of the subsidiaries had issued any debt securities at the end of the year.
(e) The above table lists the subsidiaries of the Group which, in the opinion of the Directors, principally affected the results or assets and liabilities of the Group. To give details of other subsidiaries would, in the opinion of the Directors, result in particular excessive length.

– 94 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

47. Capital risk management

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

The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustment to the capital structure in light of changes in economic conditions.

Consistent with industry practice, the Group monitors its capital structure on the basis of the gearing ratio. This ratio is calculated as total debts divided by total assets. Total debts are calculated as total borrowings including bank overdraft (secured), other borrowings (unsecured) and obligations under finance leases, as shown in the balance sheet. Total assets are calculated as total non-current assets, as shown in the balance sheet, plus total current assets.

During the years ended 31 March 2008 and 2007, the Group’s strategy was to continue to maintain a gearing ratio of the range 27% to 40%.

– 95 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The gearing ratios of the Group as at 31 March 2008 and 2007 were as follows:

Current liabilities Bank overdraft (secured) Other borrowings (unsecured) Obligations under finance leases Non-current liabilities Obligations under finance leases Total debts Non-current assets Current assets Total assets Gearing ratio	2008 HK$’000 1,963 29,735 290 31,988 179 32,167 665 79,155 79,820 40%	2007 HK$’000 1,926 14,113 290
		16,329 469
		16,798

		1,159 61,992
		63,151

		27%

48. Financial risk management

Exposure to credit, liquidity, interest rate and currency risks arises in the normal course of the Group’s business.

The main risks arising from the Groups’ financial instruments in the normal course of the Group’s business are credit risk, liquidity risk, interest rate and currency risk.

The Group does not consider it necessary to use derivative financial instruments to hedge these risk exposures. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

– 96 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

These risks are limited by the Group’s financial management policies and practices described below:

(a) Credit risk

Accounts receivable, which include trade receivables, secured margin loans, clearing houses and cash receivables, other receivables and loans receivable represent the Group’s major exposure to the credit risk arising from the default of the counterparty, with a maximum exposure equal to the carrying amounts of these financial assets in the consolidated balance sheet. The Group’s secured margin loans arising from the ordinary course of business of dealing in securities are secured by the underlying pledged securities. In addition, all receivable balances are monitored on an ongoing basis.

The credit risk of the Group’s other financial assets, which comprise bank balances and other receivables, arises from default of the counterparty, with a maximum exposure equal to the carrying amounts of these instruments.

The Group has appointed authorised persons who are charged with the responsibility of approving credit limit of each margin customer. The Group is responsible for approval of stock acceptable for margin lending at a specified ratio. The approved stock list is updated regularly, and will be revised as and when deemed necessary by the Group. The Group will prescribe from time to time lending limit on individual stock or on any individual customer and his/her associates.

The authorised persons of the Group are responsible for making margin calls to customers whose trades exceed their respective limits. Any such excess is required to be made good with two days for securities. The deficiency report will be monitored daily by the Group’s finance director and responsible officers.

(b) Liquidity risk

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

– 97 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

The Group

2008 Bank overdraft (secured) Other borrowings (unsecured) Accounts payable, other payables and accrued charges Retention money payables Amount due to a related company Obligations under finance leases Taxation payable 2007 Bank overdraft (secured) Other borrowings (unsecured) Accounts payable, other payables and accrued charges Retention money payables Loans payable Amount due to a related company Amount due to a director Obligations under finance leases Taxation payable	Carrying amount HK$’000 1,963 29,735 24,511 958 890 469 258	Total More than contractual Within 1 year but undiscounted 1 year or less than cash flow on demand 2 years HK$’000 HK$’000 HK$’000 1,963 1,963 – 30,534 30,534 – 24,511 24,511 – 958 958 – 890 890 – 524 324 200 258 258 – 59,638 59,438 200 Total More than contractual Within 1 year but undiscounted 1 year or less than More than cash flow on demand 2 years 2 years HK$’000 HK$’000 HK$’000 HK$’000 1,926 1,926 – – 14,624 14,624 – – 15,874 15,874 – – 1,252 1,252 – – 687 687 – – 890 890 – – 529 529 – – 848 324 324 200 258 258 – – 36,888 36,364 324 200	More than 1 year but less than 2 years HK$’000 – – – – – 200 –	More than 1 year but less than 2 years HK$’000 – – – – – 200 –
	58,784			200

	Carrying amount HK$’000 1,926 14,113 15,874 1,252 687 890 529 759 258 36,288			More than 2 years HK$’000 – – – – – – – 200 –
				200

– 98 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Company

2008 Other payables and accrued charges Other borrowings (unsecured) 2007 Other payables and accrued charges	Total contractual Carrying undiscounted amount cash flow HK$’000 HK$’000 2,425 2,425 10,618 10,711 13,043 13,136 Total contractual Carrying undiscounted amount cash flow HK$’000 HK$’000 1,281 1,281	Within 1 year or on demand HK$’000 2,425 10,711
		13,136

		Within 1 year or on demand HK$’000 1,281

– 99 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(c) Interest rate risk

The Group’s interest rate risk arises primarily from its borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk. Details of the Group’s borrowings have been disclosed in Notes 32 and 33. The Group’s interest rate profile as monitored by management is set out below:

		The Group
	2008		2007
	Effective		Effective
	Interest		Interest
	Rate %	HK$’000	Rate %	HK$’000
Fixed rate borrowings:
Other borrowings
(unsecured)	4% to 24%	19,117	24%	14,113
Loans payable	N/A	–	N/A	687
Obligations under
finance leases	4.5%	469	4.5%	759
		19,586		15,559
Variable rate borrowings:
Bank overdraft
(secured)	4.5%	1,963	7%	1,926
Other borrowings
(unsecured)	5.5%	10,618	N/A	–
		12,581		1,926
Total borrowings		32,167		17,485

Fixed rate borrowings
as a percentage of
total borrowings		61%		89%

		The Company
	2008		2007
	Effective		Effective
	Interest		Interest
	Rate %	HK$’000	Rate %	HK$’000
Variable rate borrowings:
Other borrowings
(unsecured)	5.5%	10,618	N/A	–

– 100 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At 31 March 2008, it is estimated that a general increase or decrease of 100 basis points in interest rates, with all other variables held constant, would increase or decrease the Group’s loss for the year and accumulated losses by approximately HK$263,000 (2007: HK$171,000).

The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the balance sheet date and had been applied to the exposure to interest rate risk for non-derivative financial instruments in existence at that date. The 100 basis point increase or decrease represents management’s assessment of a reasonably possible change in interest rates over the period until the next annual balance sheet date. The analysis is performed on the same basis for 2007.

(d) Currency risk

The Group mainly operates in Hong Kong with most of the transactions settled in Hong Kong dollars and did not have significant exposure to risk resulting from changes in foreign currency exchange rates.

All the Group’s borrowings are denominated in the functional currency of the entity taking out the loan. Given this, management does not expect that there will be any significant currency risk associated with the Group’s borrowings.

(e) Fair values

All financial instruments are carried at amounts not materially different from their fair values as at 31 March 2008 and 2007.

Fair value estimates are made at a specific point in time and based on relevant market information and information about the financial instruments. These estimates are subjective in nature, involve uncertainties and matters of significant judgement and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

– 101 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

49. Summary of financial assets and financial liabilities by category

The carrying amounts of the Group’s financial assets and financial liabilities as recognised at 31 March 2008 and 2007 may be categorised as follows:

Financial assets At fair value through profit or loss – investments held for trading Loans and receivables (including cash and bank balances) Financial liabilities Financial liabilities measured at amortised cost	2008 HK$’000 38,784 40,371 79,155 58,526	2007 HK$’000 38,816 22,963
		61,779

		36,030

50. Post balance sheet events

(a) On 15 April 2008, the Company submitted to the Stock Exchange a resumption proposal with a view to seeking resumption of trading in the ordinary shares of the Company. The Company is waiting to hear the outcome from the Stock Exchange and the conditions, if any, the Company will have to be fulfilled before trading of the Company’s shares can be resumed.
(b) On 11 June 2008, the Company served a notice with CSCPL, the issuer of the Group’s investments held for trading in the Preference Shares (Note 21 to the financial statements) that the Company will exercise the redemption right on 5 July 2008 to redeem the Preference Shares held by the Company.

– 102 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

B. MANAGEMENT DISCUSSION AND ANALYSIS OF THE ENLARGED GROUP INCLUDING EXCALIBUR SECURITIES AND EXCALIBUR FUTURES

(I) The Group

(i) For the year ended 31 March 2008

Review of Operations

During the year, the Group recorded an audited loss attributable to shareholders of approximately HK$5,827,000 (2007: loss of approximately HK$13,230,000). The decrease in loss was mainly attributable to the recovery of certain investment deposits previously provided for and a better performance of the securities brokerage and margin financing business. The management had tried hard to keep the operating cost of the Group relatively stable under economic climate of inflation.

Electrical Engineering Contracting Business

During the year, the Group had completed all the contracts on hand and no new contracts signed. By recognizing the retention money on the completed contracts, the electrical engineering contracting business generated a turnover of approximately HK$2,809,000, representing a decline of 4.2% from HK$2,934,000 last year. Turnover from electrical engineering contracting business accounted for 22.7% (2007: 45.1%) of the total turnover.

Electrical Materials & Component Trading Business

The electrical materials and components trading business generated a turnover of approximately HK$1,621,000, representing an increase of 13.3% from HK$1,430,000 last year. Turnover from electrical materials & components trading business accounted for 13.1% (2007: 22.0%) of the total turnover.

Securities Brokerage and Financing Business

The securities brokerage and margin financing business generated a turnover of approximately HK$7,925,000, representing an increase of 270.8% from HK$2,137,000 last year. The increase was mainly attributable to the buoyant stock markets in Hong Kong throughout 2007. Turnover from securities brokerage and financing business accounted for 64.2% (2007: 32.9%) of the total turnover.

– 103 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Sea Freight Forwarding Services Business

The management noted that there is a downturn for the sea freight forwarding services business sector as reflected by Baltic Dry Index and upward trend in the price of petroleum in 2007. After due consideration, the management decided to discontinue the sea freight forwarding services business in January 2008.

Financial Review and Analysis

Financing

Liquidity, Financial Resources and Gearing

The Group’s total current assets and current liabilities were approximately HK$79,155,000 (as at 31 March 2007: HK$61,992,000) and approximately HK$58,605,000 (as at 31 March 2007: HK$35,819,000) respectively, while the current ratio was about 1.35 times (as at 31 March 2007: 1.73 times).

As at 31 March 2008, the Group’s aggregate cash balance amounted to approximately HK$15,390,000 (as at 31 March 2007: HK$4,545,000), representing 19.4% (as at 31 March 2007: 7.3%) of total current assets. Barring unforeseen circumstances and with the financial support from a lender of the Group, the Directors believe that the Group should have adequate funds and liquidity for its business operations.

As shown in the Group’s consolidated balance sheet as at 31 March 2008, consolidated shareholders’ funds amounted to approximately HK$21,036,000 (as at 31 March 2007: HK$26,863,000); whereas the Group’s total borrowing was about approximately HK$32,167,000 (as at 31 March 2007: HK$16,798,000) only, which mainly comprised of a HK dollar overdraft, other borrowings and finance lease obligations. Bank overdraft carries interest calculated on the prime lending rate, other borrowings carry interests calculated at fixed rate and finance charges are fixed at the time the finance leases are entered.

As at 31 March 2008, the gearing ratio, defined as total debts over total assets, was approximately 40.29% (as at 31 March 2007: 26.59%). The increase in the gearing ratio was mainly due to a new unsecured loan the Group obtained in May 2007 for the purpose of general working capital.

– 104 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Foreign Exchange Management

The Group’s purchases from overseas suppliers are always subject to foreign currency fluctuations. The Group monitors the risks in foreign exchange by way of placing forward foreign exchange contracts. Since the Company’s shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”), the Group basically has not changed its foreign exchange management policy. The risks in foreign exchange this year were reduced as overseas purchases decreased at times of reduced trade activities. As at 31 March 2008, the Group had no significant outstanding forward foreign exchange contracts on hand.

Material acquisitions and disposals

A wholly owned subsidiary of the Group had entered into a sale and purchase agreement (as amended on 30 May 2008) with a third party on 27 February 2008 to acquire a 51% of the issued share capital of Excalibur Securities Limited upon resumption of trading of Company’s shares. Details can be referred to Company’s circular dated 30 June 2008.

Based on the decision made by the management to discontinue the operation of sea freight forwarding services business in January 2008, two wholly owned subsidiaries were disposed to a third party in February 2008. The two wholly owned subsidiaries disposed of mainly hold a tenancy agreement in a class A office premise and office decoration and equipments in this premise.

Contingent Liabilities and Capital Commitments

At 31 March 2008, the Company did not have any significant contingent liabilities except that the Company had contingent liabilities of HK$12 million in respect of guarantee given to a licensed money lender to secure a loan granted to a subsidiary.

At 31 March 2008, the Group and the Company had capital commitments of HK$70 million in respect of amount contracted but not provided for on the acquisition of a subsidiary and placing of convertible bonds.

– 105 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Pledge of Assets

At 31 March 2008, the Group had pledged bank deposits of approximately HK$2 million (At 31 March 2007: approximately HK$2 million) to secure certain bank facilities available to the Group.

Employees and Remuneration Policy

At 31 March 2008, the Group had a total of 21 full time employees (2007: 26). The Group remunerated employees based on the industry practice and individual’s performance. Staff benefits include contributions to retirement benefit scheme, medical allowances and other fringe benefits.

Prospects

The Group is principally engaged in (i) securities brokerage and margin financing; (ii) electrical engineering contracting and (iii) sale of electrical goods.

During the period under review, in light of the fact that there is no new contract on hand, the fierce market condition and the keen competition from the PRC, the Board believes that the situation will be unlikely to improve in the short-term and the electrical engineering contracting and sale of electrical goods businesses will continue to shrink. Seeing that, the management does not intend to put extra resources for its electrical engineering contracting and sale of electrical goods businesses.

On the contrary, viewing that as both the PRC government and Hong Kong government have shown strong confidence and active support to further strengthen Hong Kong as one of the world-class financial centre, the Directors are prudently optimistic about the future of the Hong Kong stock market and strongly believe that it will continue to grow with tremendous opportunity. In addition, taking into account the PRC economy will remain relatively robust and valuations of local blue chips and quality second-liners remain in demand, the PRC stocks are still attractive from a long term investment perspective. The Board has proposed to allocate more resources of the Group to her securities brokerage and margin financing business in near future.

– 106 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

In line with this strategic plan, the Group proposed to acquire Excalibur Securities Limited (“Excalibur”), a licensed corporation under the Securities and Futures Ordinance permitted to engage in type 1 regulated activity (dealing in securities) by entering into a conditional sale and purchase agreement on 27 February 2008. The proposed acquisition is yet to be completed. Upon completion of the proposed acquisition, the Directors consider that the income from securities brokerage and margin financing from Excalibur will provide an additional flow of income stream to the enlarged Group, enhance the operation level and expand the scale of business of the enlarged Group within a reasonable time.

The aforesaid acquisition is one of the key steps of the Company’s resumption proposal project. As trading in the shares of the Company was suspended since September 2005, the Board takes the view that resumption of trading of the shares on the Stock Exchange is its prime goal and is determined to use its best endeavor to achieve resumption of trading so as to protect the interest of the shareholders of the Company.

On 15 April 2008, upon engaging financial advisor, the Company submitted a resumption proposal to the Stock Exchange which is still being reviewed by the Stock Exchange. The Company is in course of providing the Stock Exchange further information in relation thereto, particularly: (i) investigating and addressing the issues concerning the arrest of three former Directors of the Company by the Independent Commission Against Corruption for alleged corruption over the misappropriation of funds as well as clarifying the impact on the operations and financial position of the Group; (ii) addressing any concerns issued by the Company’s auditors through qualification of their audit report on the financial statements of the Group published after suspension; and (iii) demonstrating that the Company has in place adequate financial reporting system and internal control procedures to enable the Company to meet its obligations under the Listing Rules. Meanwhile, the Company has to demonstrate to the Stock Exchange that it will have sufficient level of operations or assets of sufficient value under the Listing Rule 13.24.

In order to show competence, the Board has, inter alias, engaged and appointed an independent accounting firm to review the financial affairs of the Company during the period from October 2003 to December 2005, and a separate exercise to review the financial reporting system and internal control procedures of the Company.

– 107 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Directors believe that by implementing the above strategic plans, the Group could anticipate a healthy growth in its securities brokerage and margin financing business while in a ready position to broaden its business scope.

(ii) For the year ended 31 March 2007

Review of Operations

During the year, the Group recorded an audited net loss attributable to shareholders of approximately HK$13,230,000 (2006: loss of approximately HK$131,251,000). Provisions on interest in associates, investment deposits, loans and margin receivable, loans interest receivable and investment held for trading in the amount of approximately HK$122,418,000 had been made by the Group in the financial year ended 31 March 2006. During the year, no material provision had been made, thus the loss decreased sharply.

Electrical Engineering Contracting Business

During the year, the electrical engineering contracting business had completed all the contracts on hand. The business generated a turnover of approximately HK$2,934,000, representing a decline of 83.4% from HK$17,737,000 last year. Turnover from the business accounted for 45.1% (2006: 59.8%) of the total turnover of the Group for the year.

Electrical Materials & Component Trading Business

The sales from electrical materials and components trading of the Group decreased by 23.3% to approximately HK$1,430,000 as compared to HK$1,865,000 in the corresponding period of last year.

Securities Brokerage and Financing Business

Hong Tong Hai Securities Limited is engaged in securities brokerage and margin financing business. The income from these operations decreased to approximately HK$2,137,000 from approximately HK$5,011,000 in the corresponding period of last year, representing a decrease of 57.3%. The decrease is mainly due to the resignation of several senior staff of Hong Tong Hai Securities Limited during the year. The Group had already recruited a number of experienced staff to fill the vacancies for smooth operation.

– 108 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Hong Tong Hai Capital Limited did not grant any new loan during the year under review. The money lender licence expired on 15th June 2006 and had not been renewed.

Other Businesses

The Group recorded a realised gain of approximately HK$9,196,000 during the year from the disposal of two subsidiaries.

Financial Review and Analysis

Financing

Liquidity, Financial Resources and Gearing

The Group’s total current assets and current liabilities were approximately HK$61,992,000 (as at 31 March 2006: HK$89,335,000) and approximately HK$35,819,000 (as at 31 March 2006: HK$50,661,000) respectively, while the current ratio was about 1.73 times (as at 31 March 2005: 1.76 times).

As at 31 March 2007, the Group’s aggregate cash balance amounted to approximately HK$7,284,000 (as at 31 March 2006: HK$16,045,000), representing 11.7% (as at 31 March 2006: 18%) of total current assets. Barring unforeseen circumstances and with the continued financial support from the substantial shareholder and a lender of the Group, the Directors believe that the Group has adequate funds and liquidity for its business operations.

As shown in the Group’s consolidated balance sheet as at 31 March 2007, consolidated shareholders’ funds amounted to approximately HK$26,863,000 (as at 31 March 2006: HK$40,056,000); whereas the Group’s total borrowing was approximately HK$16,798,000 (as at 31 March 2006: HK$16,737,000) only, which mainly comprised of HK dollar overdrafts, borrowings and finance lease obligations. Bank overdrafts carry interests calculated on the prime lending rate, other borrowings carry interests calculated at fixed rate and finance charges are fixed on the date the finance leases are entered.

As at 31 March 2007, the gearing ratio, defined as total debts over total assets, was approximately 26.59% (as at 31 March 2006: 18.04%). The increase in the gearing ratio was mainly due to the decrease in total assets of the Group during the year.

– 109 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Foreign Exchange Management

The Group’s purchases from overseas suppliers are always subject to foreign currency fluctuations. The Group monitors the risks in foreign exchange by way of placing forward foreign exchange contracts. Since the Company’s shares listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”), the Group basically has not changed its foreign exchange management policy. The risks in foreign exchange within this year were reduced accordingly because of the decrease in oversea purchases at times of reduced trade activities. As at 31 March 2007, the Group had no significant outstanding forward foreign exchange contracts on hand.

Contingent Liabilities and Capital Commitments

At 31 March 2007, the Group had no material contingent liabilities and capital commitments.

Pledge of Assets

At 31 March 2007, the Group had pledged bank deposits of approximately HK$2 million (as at 31 March 2006: approximately HK$2 million) to secure certain bank facilities available to the Group.

Prospects

It is the Board’s intention to continue with the existing business operations of the Group including electrical engineering contracting business, trading in electrical materials and components, investment holding, securities brokerage and margin financing, while at the same time looking for new business opportunities. For sea freight forwarding services business, the Board is in the course of formulating a strategic plan to restart this business.

The Board is determined to use their best endeavor to maintain a high standard of corporate governance.

Trading in the shares of the Company has been suspended since 29 September 2005. The Board will use its best endeavor to formulate a plan for the resumption of trading of the shares of the Company so as to protect the interest of the shareholders of the Company.

– 110 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iii) For the year ended 31 March 2006

Review of Operations

During the year, the Group recorded an audited loss attributable to shareholders of approximately HK$131,251,000 (2005: loss of approximately HK$94,376,000). The loss attributable to shareholders was mainly due to the making of provisions on investment deposits (HK$25,000,000), loans and margin receivable (HK$63,550,000), loans interest receivable (approximately HK$5,637,000) and investments held for trading (approximately HK$27,764,000).

Electrical Engineering Contracting Business

During the year, the Group continued the work in progress without any addition of new projects. The electrical engineering contracting business generated a turnover of approximately HK$17,737,000, representing a decline of 59.0% from HK$43,307,000 last year. Turnover from electrical engineering contracting business accounted for 59.7% (2005: 42.3%) of the total turnover of the Group.

During the year under review, various contracts, including the contracts for electrical engineering work at Tseung Kwan O Area 74 phase 4 and Tin Shui Wai Area 102-phase 2 and the term contract for electrical maintenance work for Hong Kong Housing Authority and Architectural Services Department were completed.

As at 31 March 2006, the value of the Group’s outstanding electrical engineering contracts on hand amounted to approximately HK$779,000.

Electrical Materials & Component Trading Business

Given the continued unfavourable market condition of local construction industry, the external sales from electrical materials and components trading of the Group decreased by 43.6% from approximately HK$3,306,000 in the previous year to approximately HK$1,865,000. In addition, with the increasing import of electrical appliances from Mainland China, it is believed that the competitive environment for the electrical materials and components trading will not improve in the near future.

– 111 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Securities Brokerage and Financing Business

Hong Tong Hai Securities Limited and Hong Tong Hai Capital Limited are engaged in asset management, financing, money-lending, and securities brokerage business. The income from these operations increased to approximately HK$10,078,000 from approximately HK$5,458,000 in the last financial year, representing an increase of 84.6%, as a result of the increased transactions in the financing and money-lending operations.

Hong Tong Hai Capital Limited is currently seeking legal and professional advice for the recovery of the overdue loans.

Sea Freight Forwarding Services

The sea freight forwarding services has been temporarily suspended after several senior management staff resigned at the beginning of the year under review. The Group has not yet identified suitable staff for the recommencement of the sea freight forwarding business up to the date of this report and will continue to look for suitable candidates.

Other Businesses

The Group recorded a realised gain of approximately HK$25,927,000 during the year for the disposal of three subsidiaries and made a provision for an associate company in the amount of approximately HK$467,000.

In addition, by exercising prudence, the Group has made provisions for impairment in the total of approximately HK$121,951,000 in respect of investment deposits, investments held for trading, loans receivable and loan interest receivables.

– 112 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial Review and Analysis

Financing

Liquidity, Financial Resources and Gearing

As at 31 March 2006, the Group’s total current assets and current liabilities were approximately HK$89,335,000 (as at 31 March 2005: HK$118,585,000) and approximately HK$50,661,000 (as at 31 March 2005: HK$53,042,000) respectively, while the current ratio was about 1.76 times (as at 31 March 2005: 2.24 times).

As at 31 March 2006, the Group’s aggregate cash balance amounted to approximately HK$19,707,000 (as at 31 March 2005: HK$13,303,000), representing 22.06% (as at 31 March 2005: 11.22%) of total current assets. Barring unforeseeable circumstances and with the financial support from a substantial shareholder of the Company, the Directors believe that the Group should have adequate funds and liquidity for its business operations.

As shown in the Group’s consolidated balance sheet as at 31 March 2006, total equity amounted to approximately HK$40,056,000 (as at 31 March 2005: HK$139,937,000); whereas the Group’s total borrowings was approximately HK$16,737,000 (as at 31 March 2005: HK$10,723,000) only, which mainly comprised of HK dollar overdrafts, borrowings and finance lease obligations. Bank overdrafts carry interest on the prime lending rate, other borrowings carry interest at fixed rate and finance charges are fixed on the date finance leases are entered into. Compared with the level of inventory level in the last financial year, the inventory level as at the end of this period decreased by 46.6%, which was mainly attributed to the shrinking of the electrical materials and components trading business.

As at 31 March 2006, the gearing ratio, defined as total debts over total assets, was approximately 18.04% (as at 31 March 2005: 4.38%). The increase in the gearing ratio was mainly due to new borrowing obtained from financial institutions.

– 113 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Placing of New Shares and Use of Proceeds

On 21 April 2005, the Company placed a total of 77,344,000 new shares of HK$0.10 each at a consideration HK$0.40 per share, with Kingston Securities Limited as a placing agent, to independent investors pursuant to the placing underwriting agreement dated 22 March 2005, further details of which are set out in the announcement of the Company dated 22 March 2005. The placing of shares was completed on 21 April 2005.

The net proceeds of the abovementioned placing of shares amounted to approximately HK$30.1 million was intended to be used for making future investments including, inter alia, the proposed acquisition of up to 49% of the equity interest of a pharmaceutical product and investment company in the People’s Republic of China. As the proposed acquisition did not proceeded, the entire amount of the net proceeds has been retained as the Group’s general working capital.

Major Investments

During the year under review, the Group made no major investment except for the investment in the non-voting cumulative redeemable convertible preference shares of China Sciences Conservational Power Limited (“CSCPL”), which were issued by CSCPL to the Group as consideration for the disposal of the Group’s investment in the waste incineration processing plant in Dongguan. Details of this disposal are set out in notes 25(a), 45 and 49 of the notes to the financial statements.

Foreign Exchange Management

The Group’s purchases from overseas suppliers are always subject to foreign currency fluctuations. The Group monitors the risks in foreign exchange by way of placing forward foreign exchange contracts. Since the Company’s shares are listed on The Stock Exchange of Hong Kong Limited, the Group basically has not changed its foreign exchange management policy. The risks in foreign exchange this year were reduced because of the decrease in overseas purchases at times of reduced trade activities. As at 31 March 2006, the Group had no significant outstanding forward foreign exchange contracts on hand.

Contingent Liabilities and Capital Commitments

Details of contingent liabilities and capital commitments are set out in notes 42 and 43 to the financial statements respectively.

– 114 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Pledge of Assets

Details of the pledge of assets are set out in note 47 to the financial statements.

Prospects

On 29 September 2005, the Independent Commission Against Corruption issued a press release in relation to the arrest of 22 individuals for alleged corruption over the misappropriation of funds from listed companies and it was subsequently mentioned in certain press articles that several former directors of the Company had been arrested. As a result, the Company requested a suspension in the trading of its shares with the effect from 9:30 a.m. on 29 September 2005. Trading of the shares of the Company remains suspended.

Since October 2005, the composition of the Board of the Company has undergone substantial changes. The Special Board Committee, comprising two former directors of the Company, was formed on 31 October 2005 to review the existing financial and business position of the Group. On 13 December 2005, CCIF CPA Limited, a firm of certified public accountants which is an independent third party, was appointed at the recommendation of the Special Board Committee to conduct a review of the financial affairs of the Group for the period from 1 April 2005 to 31 December 2005 (the “Financial Due Diligence Review”). Subsequent to the change in most of the Directors of the Board in May 2006 as a result of the change in substantial shareholder of the Company, the current Board is in the course of reviewing the draft reports on the Financial Due Diligence Review. The current Board will also review the existing businesses of the Group with the intention to formulate a proposal to submit to the Stock Exchange for the resumption of trading of the shares of the Company.

With the termination of a number of proposed acquisition, the current Board intends to continue for the time being with the existing business operation of the Group including electrical engineering contracting business, trading in electrical materials and components, investment holding, securities brokerage, financing, money-lending and sea freight forwarding services. For the electrical engineering contracting business, the current Board is currently negotiating an electrical engineering contract in a development site in Tseung Kwan O but no contracts have been signed up to the date of this report.

– 115 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(II) Excalibur Securities Limited – For the three years ended 31 December 2005, 2006 and 2007

	2007	2006	2005
	HK$’000	HK$’000	HK$’000
Revenue	17,609	17,875	13,611
Profit for the year	5,675	2,472	523

The principal activities of Excalibur are securities brokerage and margin financing.

Amount due to an ultimate holding company

As at 31 December 2007, there was no amount due to an ultimate holding company.

As at 31 December 2006, there was no amount due to an ultimate holding company.

As at 31 December 2005, the amount due to an ultimate holding company were unsecured, interest free and had no fixed term of repayment.

Liquidity, financial resources and gearing

Net Assets/Liabilities

Set out below is a summary of the audited accountants’ report of Excalibur as at 31 December 2005, 31 December 2006 and 31 December 2007 which was prepared on the bases as set out on page 134 of this circular and details of which are set out in Appendix IIB this circular.

– 116 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	2007	2006	2005
	HK$’000	HK$’000	HK$’000
Total assets	150,407	53,226	39,625
Total liabilities	120,357	28,851	17,722
Net assets	30,050	24,375	21,903
Amount due to an ultimate
shareholder	–	–	73
*Gearing ratio	0%	0%	0%

* The gearing ratio is defined as total debts over total assets.

Cash & Bank Balances

As at 31 December 2005, 31 December 2006 and 31 December 2007, Excalibur’s aggregate cash and bank balances amounted to approximately HK$24,852,000, HK$21,144,000 and HK$98,723,000 respectively, representing 65.9%, 41.1% and 66.5% of total current assets respectively.

Borrowings

As at 31 December 2005, 31 December 2006 and 31 December 2007, there was no other borrowing from bank or financial institution during the period.

Significant investments held

As at 31 December 2005, 31 December 2006 and 31 December 2007, Excalibur did not hold any significant investments during the period.

Acquisition and disposals

Excalibur had not made any acquisition or disposal during the periods under review.

Segmental information

No business segment analysis and geographical segment analysis was presented since substantially all the turnover and contribution to results were derived from the commission and brokerage of securities dealing on The Stock Exchange of Hong Kong Limited.

– 117 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Foreign Exchange Management

Excalibur does not hedge its foreign currency risk, as the management does not expect any significant movements in exchange rate between, U.S. dollars, Hong Kong dollars and Renminbi. During the relevant periods under review, as the impact of foreign exchange exposure has been insignificant, no hedging or other alternatives have been implemented.

Contingent Liabilities

As at 31 December 2005, 31 December 2006 and 31 December 2007, Excalibur did not have any contingent liabilities.

Pledge of Assets

As at 31 December 2005, 31 December 2006 and 31 December 2007, Excalibur had no interest-bearing borrowings and no assets were pledged.

Prospects and material investments

Excalibur has no future plan for material investments or in capital assets. It is the intention of Excalibur to continue with the securities trading business. Given the results have been improving in the past few years, Excalibur is looking to improve further of its results in the coming year. With its internally generated resources, Excalibur will continue to develop the securities brokerage and margin financing business with the aim to broaden its client base including customers from the PRC who would like to invest in the stock market in Hong Kong. Excalibur has also become more active in acting as underwriter and placing agent to fund raising activities of its listed clients.

– 118 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(III) Excalibur Futures Limited – For the three years ended 31 December 2005, 2006 and six months ended 30 June 2008

	2008	2007	2006	2005
	HK$’000	HK$’000	HK$’000	HK$’000
Revenue	10,031	20,830	15,728	15,746
Profit for the year	1,238	1,840	3,009	(4,904)

The Principal activities of Excalibur Futures are engaged in futures broking and securities trading.

Amount due to an ultimate holding company

As at 31 December 2007 and 30 June 2008, there was no amount due to an ultimate holding company.

As at 31 December 2005 and 31 December 2006, the amount due to an ultimate holding company was unsecured, interest free and had no fixed term of repayment.

Liquidity, financial resources and gearing

Net Assets/Liabilities

Set out below is a summary of the audited accountants’ report of Excalibur Futures Limited as at 31 December 2005, 31 December 2006, 31 December 2007 and 30 June 2008 which was prepared on the bases as set out on page 134 of this circular and details of which are set out in Appendix IIB this circular.

– 119 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	2008	2007	2006	2005
	HK$’000	HK$’000	HK$’000	HK$’000
Total assets	63,806	57,947	39,295	45,342
Total liabilities	38,404	33,783	16,971	26,027
Net assets	25,402	24,164	22,324	19,315
Amount due to
an ultimate
holding company	–	–	477	897
Amount due to
a related company	–	–	–	107
* Gearing ratio	0%	0%	0%	0%

* The gearing ratio is defined as total debts over total assets.

Cash & Bank Balances

As at 31 December 2005, 31 December 2006, 31 December 2007 and 30 June 2008, the Company’s aggregate cash and bank balances amounted to approximately HK$37,392,000, 23,894,000, 41,761,000 and 43,363,000 respectively, representing 90.0%, 66.8%, 76.6% and 71.6% of total current assets respectively.

Borrowings

As at 31 December 2005, 31 December 2006, 31 December 2007 and 30 June 2008, there was no other borrowing from bank or financial institution during the period.

Significant investments held

As at 31 December 2005, 31 December 2006, 31 December 2007 and 30 June 2008, Excalibur Futures did not hold any significant investments during the period.

Acquisition and disposals

Excalibur Futures had not made any acquisition or disposal during the periods under review.

– 120 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Segmental information

No business segment analysis and geographical segment analysis was presented since substantially all the turnover and contribution to results were derived from the commission and brokerage of commodity dealing on The Hong Kong Futures Exchange Limited.

Foreign exchange management

Excalibur Futures does not hedge its foreign currency risk, as the management does not expect any significant movements in exchange rate between, U.S. dollars, Hong Kong dollars and Renminbi. During the relevant periods under review, as the impact of foreign exchange exposure has been insignificant, no hedging or other alternatives have been implemented.

Contingent liabilities

As at 31 December 2005, 31 December 2006, 31 December 2007 and 30 June 2008, Excalibur Futures did not have any contingent liabilities.

Pledge of assets

As at 31 December 2005, 31 December 2006, 31 December 2007 and 30 June 2008, Excalibur Futures had no interest-bearing borrowings and no assets were pledged.

Prospects and material investments

– 121 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

C. INDEBTEDNESS STATEMENT OF THE ENLARGED GROUP

As at the close of business on 31 July 2008, being the latest practicable date for the purpose of ascertaining information contained in this indebtedness statement prior to the printing of this circular, the Enlarged Group had outstanding borrowings of approximately HK$24,465,000, comprising secured bank overdrafts of approximately HK$1,971,000; unsecured other borrowings HK$22,122,000 and obligation under finance lease HK$372,000 (of which approximately HK$40,000 were long-term obligation under finance lease repayable more than 1 year but less than 5 years). The bank overdrafts were secured by certain pledged bank deposits of the Enlarged Group.

The Enlarged Group’s banking facilities of approximately HK$2,000,000 were secured by pledged bank deposits of approximately HK$2,203,000 of the Enlarged Group.

Details of the issue of the Promissory Note are set out in the circular. The Promissory Note in the principal amount of HK$10,200,000 shall not carry interest and the final payment date of the Promissory Note is the date falling 24 months from the completion of acquisition of Excalibur Futures, provided that the Enlarged Group shall be entitled to redeem the Promissory Note (in whole or in part) at any time after the completion.

Save as aforesaid and apart from intra-group liabilities, the Enlarged Group did not have any mortgages, charges, debentures, loan capital, bank loans and overdrafts, term loans, debt securities or other similar indebtedness, finance leases or hire purchase commitment, liabilities under acceptances or acceptance credits, or any guarantees, or other material contingent liabilities outstanding at the close of business on 31 July 2008.

For the purpose of this indebtedness statement, foreign currency amounts have been translated into Hong Kong dollars at the approximate rates of exchange prevailing as at 31 July 2008.

The Directors are not aware of any material adverse changes in the Enlarged Group’s indebtedness position and contingent liabilities since 31 July 2008.

– 122 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

D. WORKING CAPITAL

The Directors, after due and careful consideration, are of the opinion that should the transactions contemplated under the resumption proposal (including obtaining the proceeds from the placing of convertible bonds of a principal amount of HK$50 million (the “Placing CB”)) be completed within twelve months from the date of this circular, with or without taking into account of the net proceeds from the redemption of the Preferences Shares, the Group will have sufficient working capital for at least twelve months from the date of this circular.

Should the transactions contemplated under the resumption proposal (including obtaining the proceeds from the Placing CB) not be completed, the Directors are of the opinion that the Group would not have sufficient working capital for at least twelve months from the date of this circular and the Directors would endeavour to negotiate with the creditors to extend the repayment terms of the outstanding debts so that the Group will have sufficient working capital for at least twelve months from the date of this circular. A creditor has agreed in principal to extend the loan facilities to the Group beyond June 2009 in the event that the Placing CB does not materialize.

E. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 March 2008, being the date of which the latest audited financial statements of the Group were made up.

– 123 –

ACCOUNTANTS’ REPORT OF EXCALIBUR FUTURES

APPENDIX IIA

The following is the text of a report, prepared for the purpose of inclusion in this circular, received from EFL’s reporting accountants, K. H. Chan & Company, Certified Public Accountants (Practising), Hong Kong.

K. H. Chan & Company

Certified Public Accountants (Practising) 陳健衡會計師事務所

Room 2301 Ginza Square 565-567 Nathan Road Kowloon, Hong Kong

8 October 2008

The Directors

China Conservational Power Holdings Limited 1702-3, 17th Floor, Skyline Commercial Centre, 71-77 Wing Lok Street, Sheung Wan, Hong Kong.

Dear Sirs,

We set out below our report on the financial information regarding Excalibur Futures Limited （駿溢期貨有限司）(“EFL”) including the balance sheets of EFL as at 31 December 2005, 2006 and 2007 and six months ended 30 June 2008, and the related income statements, statements of changes in equity and statements of cash flows of EFL for each of the years ended 31 December 2005, 2006 and 2007 and six months ended 30 June 2008 (the “Relevant Periods”) and the summary of significant accounting policies and other explanatory notes thereto (collectively the “Financial Information”), for inclusion in a Circular dated 31 October 2008 (the “Circular”) issued by China Conservational Power Holdings Limited (the “Company”) in connection with its proposed investment of 51% interest in EFL. The Financial Information has been prepared on a basis consistent with the accounting policies adopted by the Company.

EFL was incorporated in Hong Kong on 18 November 1993 and is engaged principally as commodity dealer for Hang Seng Index Futures and Hang Seng Index Options in the Futures Exchange. As at 30 June 2008, the directors of EFL consider the immediate holding company to be Pioneer (China) Limited, a company incorporated in Hong Kong and the ultimate holding company to be Kademan Limited, a company incorporated in British Virgin Islands.

We have acted as auditors of EFL throughout the Relevant Periods covered by this report.

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ACCOUNTANTS’ REPORT OF EXCALIBUR FUTURES

APPENDIX IIA

DIRECTORS’ RESPONSIBILITIES FOR THE FINANCIAL INFORMATION

The directors of EFL during the Relevant Periods, are responsible for preparing the respective financial statements which give a true and fair view of the financial condition and results of operations of EFL, in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of financial statements that are 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. In addition, the directors of EFL also have a responsibility to ensure that the financial statements are in accordance with the records kept under the Securities and Futures (Keeping of Records) Rules and satisfy the requirements of the Securities and Futures (Accounts and Audit) Rules. The directors of EFL are responsible for the contents of the Circular in which this report is included.

REPORTING ACCOUNTANTS’ RESPONSIBILITIES

For the Financial Information for each of the years ended 31 December 2005, 2006 and 2007 and six months ended 30 June 2008, it is our responsibility to express an independent opinion, based on our examination, on the Financial Information and to report our opinion solely to you, for no other purpose. For the Financial Information for the six months ended 30 June 2007, it is our responsibility to form an independent conclusion, based on our review, on the financial information and to report our conclusion to you.

BASIS OF OPINION AND REVIEW WORK PERFORMED

As a basis for forming an opinion on the Financial Information of EFL, for the purpose of this report, we have carried out appropriate audit procedures in respect of the Financial Information for the Relevant Periods in accordance with Hong Kong Standards on Auditing and with reference to Practice Note 820 “The audit of licensed corporations and associated entities of intermediaries” Issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and have carried out such procedures as we considered necessary in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA. We have not audited any financial statements of EFL in respect of any period subsequent to 30 June 2008.

An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Financial Information. It also includes an assessment of significant estimates and judgements made by the directors of EFL in the preparation of the Financial Information, and of whether the accounting policies are appropriate to EFL’s circumstances, consistently applied and adequately disclosed.

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ACCOUNTANTS’ REPORT OF EXCALIBUR FUTURES

APPENDIX IIA

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the Financial Information is free from material misstatement. In forming our opinion, we also evaluated the overall adequacy of the preparation of the Financial Information. We believe that our audit provides a reasonable basis for our opinion.

For the Financial Information for the six months ended 30 June 2007, we conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the HKICPA. A review of the Financial Information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

OPINION AND REVIEW CONCLUSION

In our opinion, for the purpose of this report, all adjustments considered necessary have been made and the Financial Information gives a true and fair view of the state of affairs of EFL as at 31 December 2005, 2006 and 2007 and 30 June 2008, and of its combined results and cash flows for the years/period then ended.

Based on our review, for the purpose of this report, nothing has come to our attention that causes us to believe that the Financial Information does not give a true and fair view of the combined financial performance and cash flows of EFL for the six months ended 30 June 2007 in accordance with Hong Kong Financial Reporting Standards.

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

A. FINANCIAL INFORMATION

COMBINED INCOME STATEMENTS

Note Turnover 7 Other income Administrative expenses Other operating expenses (Loss)/Profit from operations Finance costs (Loss)/Profit before taxation 8 Taxation 10 (Loss)/Profit for the year/period	Six months ended Year ended 31 December 30 June 2005 2006 2007 2007 2008 (audited) (audited) (audited) (unaudited) (audited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 6,127 8,193 14,010 5,836 9,358 9,619 7,535 6,820 5,562 673 15,746 15,728 20,830 11,398 10,031 (16,734) (11,930) (17,887) (11,610) (8,273) (3,633) (634) (1,103) (334) (430) (4,621) 3,164 1,840 (546) 1,328 (407) (155) – – – (5,028) 3,009 1,840 (546) 1,328 124 – – – (90) (4,904) 3,009 1,840 (546) 1,238	Six months ended Year ended 31 December 30 June 2005 2006 2007 2007 2008 (audited) (audited) (audited) (unaudited) (audited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 6,127 8,193 14,010 5,836 9,358 9,619 7,535 6,820 5,562 673 15,746 15,728 20,830 11,398 10,031 (16,734) (11,930) (17,887) (11,610) (8,273) (3,633) (634) (1,103) (334) (430) (4,621) 3,164 1,840 (546) 1,328 (407) (155) – – – (5,028) 3,009 1,840 (546) 1,328 124 – – – (90) (4,904) 3,009 1,840 (546) 1,238
	2005 (audited) HK$’000 6,127 9,619 15,746 (16,734) (3,633) (4,621) (407) (5,028) 124 (4,904)	2006 (audited) HK$’000 8,193 7,535 15,728 (11,930) (634) 3,164 (155) 3,009 – 3,009

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

COMBINED BALANCE SHEETS

As	at 31 December 2006 2007 (audited) (audited) HK$’000 HK$’000 1,555 1,429 10 – 480 480 1,500 1,500 3,545 3,409 414 – 5,959 9,022 3,330 2,838 1,532 – 621 600 23,894 41,761 – 317 35,750 54,538	As at 30 June
2005 (audited) HK$’000 1,780 51 480 1,500 3,811 458 – 3,064 – 615 37,392 2 41,531	2006 (audited) HK$’000 1,555 10 480 1,500 3,545 414 5,959 3,330 1,532 621 23,894 – 35,750	2008 (audited) HK$’000 1,277 – 480 1,500
		3,257
		– 11,000 3,737 2,204 18 43,363 227
		60,549

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

As	– – 477 – 14,457 33,036 739 747 1,216 – 82 – 16,971 33,783 18,779 20,755 22,324 24,164 – – 22,324 24,164 20,000 20,000 2,324 4,164 22,324 24,164 at 31 December 2006 2007 (audited) (audited) HK$’000 HK$’000	As at 30 June
107 897 14,241 700 – 82 16,027 25,504 29,315 10,000 19,315 20,000 (685) 19,315 2005 (audited) HK$’000	– 477 14,457 739 1,216 82 16,971 18,779 22,324 – 22,324 20,000 2,324 22,324 2006 (audited) HK$’000	– – 37,729 675 – – 2008 (audited) HK$’000
		38,404
		22,145
		25,402
		–
		25,402

		20,000 5,402
		25,402

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

STATEMENTS OF CHANGES IN EQUITY

At 1 January 2005 Share allotted during the year Loss for the year At 31 December 2005 Profit for the year At 31 December 2006 Profit for the year At 31 December 2007 At 1 January 2008 Profit for the period At 30 June 2008	Share capital HK$’000 10,000 10,000 – 20,000 – 20,000 – 20,000 20,000 – 20,000	Retained profits HK$’000 4,219 – (4,904) (685) 3,009 2,324 1,840 4,164 4,164 1,238 5,402	Total HK$’000 14,219 10,000 (4,904) 19,315 3,009 22,324 1,840 24,164 24,164 1,238 25,402

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

COMBINED CASH FLOW STATEMENTS

OPERATING ACTIVITIES (Loss)/Profit before taxation Adjustments for Interest income Loss on disposal of investment Revaluation surplus on trading right Impairment loss on trading right Impairment loss on property, plant and equipment Loan interest Depreciation on property, plant and equipment Loss on scrap property, plant and equipment Amortisation of restatement cost Reversal of provision for restatement cost Operating (loss)/profit before changes in working capital Decrease in deposit with HKFE Clearing Corporation Limited Decrease/(increase) in amount due from a related company (Increase)/decrease in amounts receivable arising from the ordinary course of business of trading in futures contracts and options	Six months ended Year ended 31 December 30 June 2005 2006 2007 2007 2008 (audited) (audited) (audited) (unaudited) (audited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (5,028) 3,009 1,840 (546) 1,328 (255) (477) (322) (165) (33) 276 – – – – (224) – – – – 70 – – – – 2,512 – – – – 407 155 – – – 967 593 881 334 430 – – 212 – – 31 41 10 – – – – (82) – – (1,244) 3,321 2,539 (377) 1,725 566 44 414 414 – 2,340 (5,959) (3,063) (3,541) (1,978) (372) (266) 492 464 (899)	Six months ended Year ended 31 December 30 June 2005 2006 2007 2007 2008 (audited) (audited) (audited) (unaudited) (audited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (5,028) 3,009 1,840 (546) 1,328 (255) (477) (322) (165) (33) 276 – – – – (224) – – – – 70 – – – – 2,512 – – – – 407 155 – – – 967 593 881 334 430 – – 212 – – 31 41 10 – – – – (82) – – (1,244) 3,321 2,539 (377) 1,725 566 44 414 414 – 2,340 (5,959) (3,063) (3,541) (1,978) (372) (266) 492 464 (899)
	2005 (audited) HK$’000 (5,028) (255) 276 (224) 70 2,512 407 967 – 31 – (1,244) 566 2,340 (372)	2006 (audited) HK$’000 3,009 (477) – – – – 155 593 – 41 – 3,321 44 (5,959) (266)

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

(Increase)/decrease in other receivables Decrease/(increase) in deposits and prepayments Increase/(decrease) in amount due to a related company Increase/(decrease) in amount due to an ultimate holding company Increase in amounts payable arising from the ordinary course of business of trading in futures contracts and options Increase/(decrease) in accounts payable and accruals Increase/(decrease) in other payables Cash generated from/(used in) operations TAX PAID Hong Kong profits tax (paid)/refunded NET CASH FROM/(USED IN) OPERATING ACTIVITIES	– (1,532) 1,532 1,532 (2,204) 639 (6) 21 31 582 107 (107) – (220) – 897 (420) (477) – – 3,068 216 18,579 2,836 4,693 558 39 8 (288) (72) – 1,216 (1,216) (1,216) – 6,559 (3,454) 18,829 (365) 1,847 (2) 2 (317) (70) – 6,557 (3,452) 18,512 (435) 1,847 Six months ended Year ended 31 December 30 June 2005 2006 2007 2007 2008 (audited) (audited) (audited) (unaudited) (audited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	– (1,532) 1,532 1,532 (2,204) 639 (6) 21 31 582 107 (107) – (220) – 897 (420) (477) – – 3,068 216 18,579 2,836 4,693 558 39 8 (288) (72) – 1,216 (1,216) (1,216) – 6,559 (3,454) 18,829 (365) 1,847 (2) 2 (317) (70) – 6,557 (3,452) 18,512 (435) 1,847 Six months ended Year ended 31 December 30 June 2005 2006 2007 2007 2008 (audited) (audited) (audited) (unaudited) (audited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
	– 639 107 897 3,068 558 – 6,559 (2) 6,557 2005 (audited) HK$’000	(1,532) (6) (107) (420) 216 39 1,216 (3,454) 2 (3,452) 2006 (audited) HK$’000

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

INVESTING ACTIVITIES Interest income Loan interest Payment for the purchase of property, plant and equipment Proceeds from sale of listed securities NET CASH (USED IN)/FROM INVESTING ACTIVITIES FINANCING ACTIVITIES Subordinated loan obtained Repayment of subordinated loan Allotment of share capital NET CASH GENERATED FROM/ (USED IN) FINANCING ACTIVITIES NET CASH INCREASE/ (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT THE END OF YEAR, REPRESENTED BY BANK BALANCES AND CASH	255 477 322 165 33 (407) (155) – – – (5,259) (368) (967) (3) (278) 5,245 – – – – (166) (46) (645) 162 (245) 10,000 – – – – – (10,000) – – – 10,000 – – – – 20,000 (10,000) – – – 26,391 (13,498) 17,867 (273) 1,602 11,001 37,392 23,894 23,894 41,761 37,392 23,894 41,761 23,621 43,363 Six months ended Year ended 31 December 30 June 2005 2006 2007 2007 2008 (audited) (audited) (audited) (unaudited) (audited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	255 477 322 165 33 (407) (155) – – – (5,259) (368) (967) (3) (278) 5,245 – – – – (166) (46) (645) 162 (245) 10,000 – – – – – (10,000) – – – 10,000 – – – – 20,000 (10,000) – – – 26,391 (13,498) 17,867 (273) 1,602 11,001 37,392 23,894 23,894 41,761 37,392 23,894 41,761 23,621 43,363 Six months ended Year ended 31 December 30 June 2005 2006 2007 2007 2008 (audited) (audited) (audited) (unaudited) (audited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
	255 (407) (5,259) 5,245 (166) 10,000 – 10,000 20,000 26,391 11,001 37,392 2005 (audited) HK$’000	477 (155) (368) – (46) – (10,000) – (10,000) (13,498) 37,392 23,894 2006 (audited) HK$’000

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

NOTES TO THE FINANCIAL INFORMATION

1. General information

EFL was incorporated in Hong Kong on 18 November 1993 under the Companies Ordinance. The registered office and principal place of business is located at Room 2512, Cosco Tower, 183 Queen’s Road Central, Sheung Wan, Hong Kong. The ultimate holding company of EFL is Sun Hung Kai Securities Limited, a company incorporated in Hong Kong. However, Sun Hung Kai Securities Limited disposed all its ordinary shares on 28 December 2007. As at 31 December 2007, the directors of EFL consider the immediate holding company to be Pioneer (China) Limited, a company incorporated in Hong Kong and the ultimate holding company to be Kademan Limited, a company incorporated in British Virgin Islands.

EFL is engaged principally as commodity for Hang Seng Index Futures and Hang Seng Index Options in the Futures Exchange. There were no significant changes in the nature of EFL’s principal activities during the Relevant Periods.

The Financial Information is presented in Hong Kong Dollars which is the functional currency of EFL.

2. Basis of preparation of financial information

The Financial Information has been prepared on the historical cost basis and in accordance with 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 requirements of the Hong Kong Companies Ordinance. In addition, the Financial Information has been prepared in accordance with the records kept under the Securities and Futures (Keeping of Records) Rules and satisfy the requirements of the Securities and Futures (Accounts and Audit) Rules.

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

3. Application of new and Revised Hong Kong Financial Reporting Standards

The HKICPA has issued certain new and revised HKFRSs that are effective for accounting periods beginning on or after either 1 January 2005, 1 December 2005, 1 January 2006 or 1 January 2007. For the purposes of preparing and presenting the Financial Information for the Relevant Periods, EFL has consistently adopted all the new HKFRSs.

EFL has not yet early adopted the following new standards, interpretations or amendments that have been issued but are not yet effective for EFL’s financial year beginning on 1 January 2007. The directors of EFL anticipate that the application of these standards, interpretations or amendments will have no material impact on the results of operations and financial position of EFL.

Hong Kong Accounting Standards Presentation of Financial Statements [1] (“HKAS”) 1 (Revised) HKAS 27 (Revised) Consolidated and Separate Financial Statements [2] HKFRS 23 (Revised) Borrowing costs [1] HKFRS 8 Operating Segments [1] HKFRS 2 (Amendment) Share-based Payment-Vesting Conditions and Cancellations [1] HKFRS 3 (Revised) Business Combinations [2] HK(IFRIC) – Interpretation HKFRS 2: Group and Treasury Share (“Int”) 11 Transactions [3] HK(IFRIC) – Int 12 Service Concession Arrangements [4] HK(IFRIC) – Int 13 Customer Loyalty Programmes [5] HK(IFRIC) – Int 14 HKAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their interaction [4]

1 Effective for annual periods beginning on or after 1 January 2009.

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

3 Effective for annual periods beginning on or after 1 March 2007.

4 Effective for annual periods beginning on or after 1 January 2008.

5 Effective for annual periods beginning on or after 1 July 2008.

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

4. Significant accounting policies

Basis of preparation of the Financial Information

The measurement basis used in the preparation of the Financial Information is historical cost.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to EFL and when the revenue and costs, if applicable, can be measured reliably on the following bases.

Brokerage and commission income recognized in the financial statements represents brokerage income accrued on all broking transactions traded during the Relevant Periods; and

Interest income is recognized on a time proportion basis taking into account the principal outstanding and the effective rate of interest applicable.

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the income statement or in equity if it relates to items recognised directly to equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from temporary differences at balance sheet date between the carrying amounts of assets and liabilities for financial reporting purposes and the tax bases respectively. Deferred tax assets also arise from unused tax losses and unused tax credits.

All deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised except for the initial recognition of assets or liabilities that affect neither accounting nor taxable profit.

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

The amount of deferred tax provided is based on the expected manner of realisation or the settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profit will be available.

in the case of current tax assets and liabilities, EFL intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or
in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on the same taxable entity.

Stock Exchange Trading Right

The eligibility right to trade on or through The Stock Exchange of Hong Kong Limited is stated in the balance sheet at cost less impairment losses.

Translation of foreign currencies

Items included in EFL’s financial statements are measured using the currency of the primary economic environment in which EFL operates (“functional currency”).

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment loss. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. Expenditure incurred after the property, plant and equipment have been put into operation, such as repairs and maintenance and overhaul costs, is 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 the property, plant and equipment.

When assets are sold or retired, their costs, accumulated depreciation and accumulated impairment loss are eliminated from the balance sheet and any gain or loss resulting from their disposal or retirement is included in the income statement.

Depreciation on property, plant and equipment is provided to write off the costs over their estimated useful lives as follows:–

Leasehold improvement	33-1/3% (over the lease term)
Computer equipment	33-1/3% on straight-line method
Office equipment	20% on straight-line method
Furniture and fixtures	20% on straight-line method

A monthly charge for depreciation is made in the month of purchase, while no charge is made in the year of disposal or retirement.

Impairment of non-financial assets

Internal and external sources of information are reviewed at each balance sheet date to identify indications that the following assets may be impaired or an impairment loss previously recognised no longer exists or may have decreased:

property, plant and equipment (other than properties carried at revalued amounts); and
intangible assets

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

If any such indication exists, the asset’s recoverable amount is estimated. In addition, for intangible assets that are not yet available for use and intangible assets that have indefinite useful lives, the recoverable amount is estimated annually whether or not there is any indication of impairment.

– Calculation of recoverable amount

The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash flows independently.

–

Recognition of impairment losses

An impairment loss is recognised in profit or loss whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then, to reduce the carrying amount of the other assets in the unit on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable.

– Reversals of impairments losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

Provisions

Provisions are recognised when EFL has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of obligation can be made. Expenditures for which a provision has been recognised are charged against the related provision in the year in which the expenditures are incurred. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount provided is the present value of the expenditures expected to be required to settle the obligation. Where EFL expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of EFL’s cash management are also included as a component of cash and cash equivalents for the purpose of the cash flow statement.

Employee benefits

Salaries, annual bonuses, paid annual leave, leave passage and the cost to EFL of non-monetary are accrued in the year in which the associated services are rendered by employees of EFL. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present value.

Contributions to Mandatory Provident Funds are required under the Hong Kong Mandatory Provident Fund Schemes Ordinance, are recognised as an expense in the income statement as incurred, except to the extent that they are included in the cost of intangible assets and inventories not yet recognised as an expense.

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

Leases

As lessor

Amounts due from lessees under finance leases are recorded as receivables at the amount of EFL’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on EFL’s net investment outstanding in respect of the leases.

As lessee

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

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

Lease incentives are recognised in the income statement as an integral part of the net consideration agreed for the use of the leased asset. Contingent rentals are recognised as expenses in the accounting period in which they are incurred.

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

Related parties

A party is related to EFL if:

(i) directly, or indirectly through one or more intermediaries, the party controls, is controlled by, or is under common control with, EFL; or has an interest in EFL that gives it significant influence over EFL; or has joint control over EFL;
(ii) the party is an associate of EFL;
(iii) the party is a joint venture in which EFL is a venturer;
(iv) the party is a member of the key management personnel of EFL 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 EFL, or of any entity that is a related party of EFL.

Financial instruments

Financial assets and financial liabilities are recognised when EFL becomes a party to the contractual provisions of the instruments and on a trade date basis. A financial asset is derecognised when EFL’s contractual rights to future cash flows from the financial asset expire or when EFL transfers the contractual rights to future cash flows to a third party. A financial liability is derecognised only when the liability is extinguished.

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FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

Loans and receivables

Loans and receivables including trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are not held for trading. They are measured at amortised cost using the effective interest method, except where receivables are interest-free loans and without any fixed repayment term or the effect of discounting would be insignificant. In such case, the receivables are stated at cost less impairment loss. Amortised cost is calculated by taking into account any discount or premium on acquisition, over the year to maturity. Gains and losses arising from derecognition, impairment or through the amortisation process are recognised in the income statement.

Impairment of financial assets

At each balance sheet date, EFL assesses whether there is objective evidence that financial assets, other than those at fair value through profit or loss, are impaired. The impairment loss of financial assets carried at amortised cost is measured as the difference between the assets’ carrying amount and the present value of estimated future cash flow discounted at the financial asset’s original effective interest rate.

Financial liabilities

EFL’s financial liabilities include trade and other payables, bank loans and other borrowings and obligations under finance leases. All financial liabilities except for derivatives are recognised initially at their fair value and subsequently measured at amortised cost, using effective interest method, unless the effect of discounting would be insignificant, in which case they are stated at cost.

Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer of the contract to make specified payments to reimburse the holder of the contract for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee contract is initially recognised as deferred income within trade and other payable at fair value, where such information is available, otherwise, it is recognised at consideration received and receivable. Subsequently, it is measured at the higher of the amount initially recognised, less accumulated amortisation, and the amount of the provision, if any, that is required to settle the commitment at the balance sheet date.

– 143 –

FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

Restatement cost

Restatement cost acquired by EFL is stated in the balance sheet at cost less accumulated amortisation. Amortisation of restatement cost is charged to profit or loss on a straight-line basis over the operating lease.

5. Critical accounting judgements and key sources of esimation uncertainty

In the application of EFL’s accounting policies which are described in note 4, the directors of EFL are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various 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 are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Depreciation and amortisation

EFL’s net carrying value of property, plant and equipment as at 31 December 2005, 2006 and 2007 and 30 June 2008 were approximately HK$1,780,000, HK$1,555,000, HK$1,429,000 and HK$1,277,000 respectively. EFL depreciates the property, plant and equipment on a straight-line basis over the estimated useful life, and after taking into account of their estimated residual value, at the rate of 20% to 33-1/3% per annum, commencing from the date the asset is placed into productive use. The estimated useful life and dates that EFL places the equipment into productive use reflects the directors’ estimate of the periods that EFL intend to derive future economic benefits from the use of EFL’s property, plant and equipment.

– 144 –

FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

Allowances for bad and doubtful debts

The policy for allowance of bad and doubtful debts of EFL is based on the evaluation of collectability and aging analysis of accounts and on management’s judgement. A considerable amount of judgment is required in assessing the ultimate realisation of these receivables, including the current creditworthiness and the past collection history of each debtor. If the financial conditions of debtor of EFL were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

6. Financial risk management objectives and policies

EFL’s principal financial instruments comprise of cash and bank balances. The main purpose of these financial instruments is to raise and maintain finance for EFL’s operations. EFL has various other financial instruments such as trade receivables and trade payables, which arise directly from its business activities.

The main risks arising from EFL’s financial instruments are credit risk. EFL does not have any written risk management policies and guidelines. However, the board of directors generally adopts conservative strategies on its risk management and limit EFL’s exposure to these risks to a minimum.

Credit risk

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

EFL’s credit risk is primarily attributable to its trade receivables. EFL’s maximum exposure to credit risk in the event of counterparties failure to perform their obligations as at 31 December 2005, 2006 and 2007 and 30 June 2008 in relation to each class of recognised financial assets is the carrying amounts of these assets as stated in the balance sheet. The management, based on prior experience and assessment of the current economic environment reviews the recoverable amount of each individual balance at the balance sheet date to ensure that adequate impairment loss is made for irrecoverable amounts. In this regard, the directors of EFL consider that EFL’s credit risk is significantly reduced.

– 145 –

FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

Capital management

The objectives of EFL’s capital management are to safeguard the entity’s ability to continue as a going concern and to provide returns for shareholders. EFL manages its capital structure and makes adjustments, including payment of dividend to shareholders, return capital to shareholders or issue new shares or sell assets to reduce debts. No changes were made in the objectives, policies or processes during the years ended 31 December 2005, 2006 and 2007 and for the six months ended 30 June 2008.

7. Turnover

EFL is engaged principally as commodity dealer for Hang Seng Index Futures and Hang Seng Index Options in the Futures Exchange.

Turnover represents the commission and brokerage of securities dealing on The Stock Exchange of Hong Kong Limited.

Commission and brokerage	Six months ended Year ended 31 December 30 June 2005 2006 2007 2007 2008 (audited) (audited) (audited) (unaudited) (audited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 6,127 8,193 14,010 5,836 9,358	Six months ended 30 June

– 146 –

FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

8. (Loss)/Profit before taxation

(Loss)/Profit before taxation is arrived at after charging/(crediting):–

					Six months ended	Six months ended	Six months ended
	Year ended 31 December				30	June
	2005	2006	2007		2007		2008
	(audited)	(audited)	(audited)	(unaudited)		(audited)
	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
Finance costs
Loan interest	407	155	–		–		–

Staff costs
Contributions to defined
contribution plan	–	–		–	–		117
Salaries, wages and
other benefits	64	743	884		799		2,658
	64	743	884		799		2,775

Other items
Auditors’ remuneration	34	33	33		–		30
Commission expenses	4,051	1,492	3,431		1,785		1,546
Management fee	5,076	2,634	2,669		1,465		–
Bad debts	54	–	–		–		–
Depreciation on property,
plant and equipment	967	593	881		334		430
Loss on scrap of property,
plant and equipment	–	–	212		–		–
Operating lease rental –
office premises	2,047	1,504	1,749		812		1,034
Impairment loss on
Trading Right	70	–	–		–		–
Interest income	(255)	(477)	(322)		(165)		(33)
Profit on trading in securities	–	–	–		(4,594)		–
Sundry income	(4,379)	(4,115)	(1,792)		(763)		(640)
Profit from written off related
company outstanding balance	(937)	–	–		–		–
Revaluation surplus on
trading right	(224)	–	–		–		–

– 147 –

FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

9. Directors’ and employees’ emoluments

EFL has paid the directors of EFL other emoluments amounted to HK$720,000 during the year ended 31 December 2007. No other emoluments were paid or payable to any of the directors of EFL for the year ended 31 December 2005 and 2006 and for the six months ended 30 June 2008.

During the Relevant Periods, no emoluments were paid by the Company to any of the directors and employees as an inducement to join or upon joining the Company or as compensation for loss of office. None of the directors waived any emoluments during the Relevant Periods.

10. TAXATION

Hong Kong Profits Tax has been provided at the rate of 17.5% (2008: 16.5%) on EFL’s estimated assessable profits arising from Hong Kong during the year.

Tax charged represents:

Current tax – Hong Kong Profits Tax Deferred tax – Current period	Six months ended Year ended 31 December 30 June 2005 2006 2007 2007 2008 (audited) (audited) (audited) (unaudited) (audited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 – – – – 90 (124) – – – – (124) – – – 90	Six months ended Year ended 31 December 30 June 2005 2006 2007 2007 2008 (audited) (audited) (audited) (unaudited) (audited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 – – – – 90 (124) – – – – (124) – – – 90	Six months ended 30 June	Six months ended 30 June
	2005 (audited) HK$’000 – (124) (124)	2006 (audited) HK$’000 – – –		2008 (audited) HK$’000 90 –
				90

– 148 –

FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

The taxation for the Relevant Period can be reconciled to the (loss)/profit before taxation as follows:

					Six months ended	Six months ended	Six months ended
	Year ended 31 December				30	June
	2005	2006	2007		2007		2008
	(audited)	(audited)	(audited)	(unaudited)		(audited)
	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
(Loss)/Profit before tax	(5,028)	3,009	1,840		(546)		1,328

Income tax at applicable
rate of 17.5% (2008: 16.5%)	(879)	526	322		(95)		219
Tax effect of temporary
differences	(39)	5	(199)		27		10
Tax effect on non-taxable
revenue	(16)	(57)	(41)		(22)		(3)
Tax effect of non-deductible
expenditure	48	70	–		–		–
Tax effect of unused tax losses
not recognised/(recognised)	762	(544)	(82)		90		(136)
Tax expense for the
year/period	(124)	–	–		–		90

*Deferred tax*

At the balance sheet date, the major components of the deferred taxation assets unprovided are as follow:

				Six months ended	Six months ended
	Year	ended 31 December		30	June
	2005	2006	2007	2007	2008
	(audited)	(audited)	(audited)	(unaudited)	(audited)
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Depreciation allowance
in excess of related
depreciation	(112)	(117)	(220)	(144)	67
Tax losses	(771)	(227)	(145)	(317)	–
	(883)	(344)	(365)	(461)	67

– 149 –

FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

11. Property, plant and equipment

Leasehold improvement HK$’000 Costs: Additions – At 31 December 2005 – Additions – At 31 December 2006 – Additions 587 Scrapped – At 31 December 2007 587 Accumulated deprecation and impairment losses: Charge for the year – Impairment losses – At 31 December 2005 – Charge for the year – At 31 December 2006 – Charge for the year 196 Written off – At 31 December 2007 196 Net carry values: At 31 December 2005 – At 31 December 2006 – At 31 December 2007 391	Computer equipment HK$’000 2,140 2,140 366 2,506 380 – 2,886 481 236 717 521 1,238 614 – 1,852 1,423 1,268 1,034	Office equipment HK$’000 1,834 1,834 2 1,836 – (791) 1,045 288 1,538 1,826 2 1,828 2 (789) 1,041 8 8 4	Furniture and fixtures HK$’000 1,285 1,285 – 1,285 – (1,285) – 198 738 936 70 1,006 69 (1,075) – 349 279 –	Total HK$’000 5,259 5,259 368 5,627 967 (2,076) 4,518 967 2,512 3,479 593 4,072 881 (1,864) 3,089 1,780 1,555 1,429

– 150 –

APPENDIX IIB

FINANCIAL INFORMATION OF EXCALIBUR FUTURES

Costs: At 31 December 2007 587 Additions 14 At 30 June 2008 601 Accumulated deprecation and impairment losses: At 31 December 2007 196 Charge for the period 36 At 30 June 2008 232 Net carry values: At 31 December 2007 391 At 30 June 2008 369 Leasehold improvement HK$’000	2,886 257 3,143 1,852 393 2,245 1,034 898 Computer equipment HK$’000	1,045 7 1,052 1,041 1 1,042 4 10 Office equipment HK$’000	– – – – – – – – Furniture and fixtures HK$’000	4,518 278 Total HK$’000
				4,796
				3,089 430
				3,519
				1,429

				1,277

– 151 –

FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

12. Restatement cost

Costs:
At 1 January 2005,
At 31 December 2005 and 31 December 2006
Written off
At 31 December 2007 and 30 June 2008
Accumulated amortisation and impairment losses:
At 1 January 2005 and At 31 December 2005
Charge for the year
At 31 December 2006
Impairment loss
Written off
At 31 December 2007 and 30 June 2008
Net carry values:
At 31 December 2005
At 31 December 2006
At 31 December 2007
At 30 June 2008

HK$’000
82
(82)
–
31
41
72
10
(82)
–
51
10
–
–

The cost comprises the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that year/period.

– 152 –

FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

13. Stock exchange trading right

Costs:
At 1 January 2005
Opening balance adjustment to eliminate accumulated amortisation
Revaluation surplus
At 31 December 2005, 2006 and 2007 and 30 June 2008
Accumulated amortisation and impairment losses:
At 1 January 2005
Eliminated against cost at 1 January 2005
Impairment loss
At 31 December 2005, 2006 and 2007 and 30 June 2008
Net carry values:
At 31 December 2005
At 31 December 2006
At 31 December 2007
At 30 June 2008
14.
Amount due from a related company

HK$’000
652
(326)
224
550
326
(326)
70
70
480
480
480
480

The amount due was unsecured, interest free and had no fixed term of repayment.

– 153 –

FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

15. Cash and bank balances

General accounts Trust accounts Cash	As at 31 December 2005 2006 2007 (audited) (audited) (audited) HK$’000 HK$’000 HK$’000 25,617 12,758 11,386 11,770 11,134 30,373 5 2 2 37,392 23,894 41,761	As at 31 December 2005 2006 2007 (audited) (audited) (audited) HK$’000 HK$’000 HK$’000 25,617 12,758 11,386 11,770 11,134 30,373 5 2 2 37,392 23,894 41,761	As at 30 June
	2005 (audited) HK$’000 25,617 11,770 5 37,392	2006 (audited) HK$’000 12,758 11,134 2 23,894	2008 (audited) HK$’000 8,586 34,304 473
			43,363

16. Income tax in the balance sheet

Current taxation in the balance sheet represents:

As at 31 December 2005 2006 2007 (audited) (audited) (audited) HK$’000 HK$’000 HK$’000 – – – (2) 2 (317) (2) 2 (317) – (2) – (2) – (317)	As at 31 December 2005 2006 2007 (audited) (audited) (audited) HK$’000 HK$’000 HK$’000 – – – (2) 2 (317) (2) 2 (317) – (2) – (2) – (317)	As at 30 June
2005 (audited) HK$’000 – (2) (2) – (2)	2006 (audited) HK$’000 – 2 2 (2) –	2008 (audited) HK$’000 90 –
		90 (317)
		(227)

– 154 –

FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

17. Amount due to a related company/ultimate holding company

The amount due was unsecured, interest free and had no fixed term of repayment.

18. Share capital

As at 31 December 2005 2006 2007 (audited) (audited) (audited) HK$’000 HK$’000 HK$’000 100,000 100,000 100,000 20,000 20,000 20,000	As at 31 December 2005 2006 2007 (audited) (audited) (audited) HK$’000 HK$’000 HK$’000 100,000 100,000 100,000 20,000 20,000 20,000	As at 30 June
2005 (audited) HK$’000 100,000 20,000	2006 (audited) HK$’000 100,000 20,000	2008 (audited) HK$’000 100,000

		20,000

On 5 August 2005, EFL authorised share capital had been increased to $100,000,000 by the creation of 90,000,000 ordinary shares of $1 each. At the same date, the aforesaid 10,000,000 ordinary shares of $1 each were issued and allotted at par for cash.

– 155 –

FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

19. Related party transactions

As at 31 December	As at 31 December	As at 31 December
2005 (audited) HK$’000 407 3,476 1,600 – –	2006 (audited) HK$’000 155 2,634 – – –	2007 (audited) HK$’000 – 2,669

		– 2,038

		500

There were no related party transactions for the six months ended 30 June 2008.

Sun Hung Kai Securities Limited is the ultimate holding company. However, Sun Hung Kai Securities Limited disposed all its ordinary shares on 28 December 2007.
** During the year ended 31 December 2005, EFL’s director Mr. POON Kwok Wah, Allan was also the director of the related company. However, he resigned from the related company on 27 October 2005.
*** Director of EFL.

– 156 –

FINANCIAL INFORMATION OF EXCALIBUR FUTURES

APPENDIX IIB

20. Commitments under operating leases

At the balance sheet date, EFL had the total of future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Land and buildings Within one year In the second to fifth years inclusive At the balance sheet date	As at 31 December 2005 2006 2007 (audited) (audited) (audited) HK$’000 HK$’000 HK$’000 2,998 1,220 63 500 – – 3,498 1,220 63	As at 31 December 2005 2006 2007 (audited) (audited) (audited) HK$’000 HK$’000 HK$’000 2,998 1,220 63 500 – – 3,498 1,220 63	As at 30 June
	2005 (audited) HK$’000 2,998 500 3,498	2006 (audited) HK$’000 1,220 – 1,220	2008 (audited) HK$’000 1,983 2,359
			4,342

21. Ultimate holding company

As at 30 June 2008, the directors of EFL consider the immediate holding company to be Pioneer (China) Limited, a company incorporated in Hong Kong and the ultimate holding company to be Kademan Limited, a company incorporated in British Virgin Islands.

22. Subsequent event

On 31 July 2008, Yew Sang Hong Investment Services Limited (“Purchaser”) has entered into the legally binding Memorandum with Pioneer, under which, the Purchaser agrees to purchase and Pioneer agrees to sell 51% of the issued share capital of Excalibur Futures. The Purchaser is a company incorporated in the British Virgin Islands and is a wholly-owned subsidiary of China Conservational. Pursuant to the S&P agreement, the Purchaser wishes to purchase and Pioneer wishes to sell 51% of the issued capital of Excalibur Futures Limited (the “EFL Acquisition”). The consideration of the EFL Acquisition shall be HK$10.2 million, which shall be satisfied by the issue by the Purchaser to Pioneer of a promissory note in the amount of HK$10.2 million on completion of the EFL Acquisition.

– 157 –

APPENDIX IIB FINANCIAL INFORMATION OF EXCALIBUR FUTURES

B. DISTRIBUTABLE RESERVES

Loss attributable to equity owners of EFL

The loss attributable to equity owners of EFL is dealt with in the financial statements of EFL to the extent of HK$685,000 for the year ended 31 December 2005.

Reserve attributable to equity owners of EFL

The reserve attributable to equity owners of EFL is dealt with in the financial statements of EFL to the extent of HK$2,324,000, HK$4,164,000 and HK$5,402,000 for the years ended 31 December 2006 and 2007 and for the six months ended 30 June 2008 respectively.

C. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by EFL in respect of any period subsequent to 30 June 2008. No dividend or distribution has been declared, made or paid by EFL in respect of any period subsequent to 30 June 2008.

Yours faithfully, K. H. Chan & Co.

Certified Public Accountants (Practising) Hong Kong

– 158 –

APPENDIX IIC

MANAGEMENT DISCUSSION AND ANALYSIS OF EXCALIBUR FUTURES

MANAGEMENT DISCUSSION AND ANALYSIS OF EXCALIBUR FUTURES LIMITED

FINANCIAL SUMMARY

Set out below is the management discussion and analysis on Excalibur Futures Limited for the year ended 31 December 2005, 31 December 2006 and 31 December 2007 and six months ended 30 June 2008.

For the year ended 31 December 2005, 31 December 2006 and 31 December 2007 and six months ended 30 June 2008

	2008	2007	2006	2005
	HK$’000	HK$’000	HK$’000	HK$’000
Revenue	10,031	20,830	15,728	15,746
Profit for the year	1,238	1,840	3,009	(4,904)

The Principal activities of Excalibur Futures are engaged in futures broking and securities trading.

Amount due to an ultimate holding company

As at 31 December 2007 and 30 June 2008, there was no amount due to an ultimate holding company.

As at 31 December 2005 and 31 December 2006, the amount due to an ultimate holding company was unsecured, interest free and had no fixed term of repayment.

– 159 –

MANAGEMENT DISCUSSION AND ANALYSIS OF EXCALIBUR FUTURES

APPENDIX IIC

LIQUIDITY, FINANCIAL RESOURCES AND GEARING

Net Assets/Liabilities

	2008	2007	2006	2005
	HK$’000	HK$’000	HK$’000	HK$’000
Total assets	63,806	57,947	39,295	45,342
Total liabilities	38,404	33,783	16,971	26,027
Net assets	25,402	24,164	22,324	19,315
Amount due to an ultimate
holding company	–	–	477	897
Amount due to a related
company	–	–	–	107
* Gearing ratio	0%	0%	0%	0%

* The gearing ratio is defined as total debts over total assets.

Cash & Bank Balances

Borrowings

As at 31 December 2005, 31 December 2006, 31 December 2007 and 30 June 2008, there was no other borrowing from bank or financial institution during the period.

SIGNIFICANT INVESTMENTS HELD

As at 31 December 2005, 31 December 2006, 31 December 2007 and 30 June 2008, Excalibur Futures did not hold any significant investments during the period.

– 160 –

MANAGEMENT DISCUSSION AND ANALYSIS OF EXCALIBUR FUTURES

APPENDIX IIC

ACQUISITION AND DISPOSALS

Excalibur Futures had not made any acquisition or disposal during the periods under review.

SEGMENTAL INFORMATION

No business segment analysis and geographical segment analysis was presented since substantially all the turnover and contribution to results were derived from the commission and brokerage of commodity dealing on The Hong Kong Futures Exchange Limited.

FOREIGN EXCHANGE MANAGEMENT

CONTINGENT LIABILITIES

As at 31 December 2005, 31 December 2006, 31 December 2007 and 30 June 2008, Excalibur Futures did not have any contingent liabilities.

PLEDGE OF ASSETS

As at 31 December 2005, 31 December 2006, 31 December 2007 and 30 June 2008, Excalibur Futures had no interest-bearing borrowings and no assets were pledged.

PROSPECTS AND MATERIAL INVESTMENTS

– 161 –

APPENDIX IIIA ACCOUNTANTS’ REPORT OF EXCALIBUR SECURITIES

The following is the text extracted from the circular of the Company dated 30 June 2008.

The following is the text of a report, prepared for the purpose of inclusion in this circular, received from Excalibur Securities’ reporting accountants, K. H. Chan & Company, Certified Public Accountants (Practising), Hong Kong.

K. H. Chan & Company

Certified Public Accountants (Practising) 陳健衡會計師事務所

Room 2301 Ginza Square 565-567 Nathan Road Kowloon, Hong Kong

30 June 2008

The Directors

China Conservational Power Holdings Limited

1702-3, 17th Floor, Skyline Commercial Centre, 71-77 Wing Lok Street, Sheung Wan, Hong Kong.

Dear Sirs,

We set out below our report on the financial information regarding Excalibur Securities Limited（駿溢証券有限公司）(“Excalibur Securities”) including the balance sheets of Excalibur Securities as at 31 December 2005, 2006 and 2007, and the related income statements, statements of changes in equity and statements of cash flows of Excalibur Securities for each of the years ended 31 December 2005, 2006 and 2007 (the “Relevant Periods”) and the summary of significant accounting policies and other explanatory notes thereto (collectively the “Financial Information”), for inclusion in a Circular dated 30 June 2008 (the “Circular”) issued by China Conservational Power Holdings Limited (the “Company”) in connection with its proposed investment of 51% interest in Excalibur Securities. The Financial Information has been prepared on a basis consistent with the accounting policies adopted by the Company.

Excalibur Securities was incorporated in Hong Kong under the Companies Ordinance. The principal activities of Excalibur Securities are securities brokerage and margin financing. As at 31 December 2007, the directors of Excalibur Securities consider the immediate holding company to be Pioneer (China) Limited, a company incorporated in Hong Kong and the ultimate holding company to be Kademan Limited, a company incorporated in British Virgin Islands.

We have acted as auditors of Excalibur Securities throughout the Relevant Periods covered by this report.

– 162 –

ACCOUNTANTS’ REPORT OF EXCALIBUR SECURITIES

APPENDIX IIIA

DIRECTORS’ RESPONSIBILITIES FOR THE FINANCIAL INFORMATION

The directors of Excalibur Securities during the Relevant Periods, are responsible for preparing the respective financial statements which give a true and fair view of the financial condition and results of operations of Excalibur Securities, in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of financial statements that are 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. In addition, the directors of Excalibur Securities also have a responsibility to ensure that the financial statements are in accordance with the records kept under the Securities and Futures (Keeping of Records) Rules and satisfy the requirements of the Securities and Futures (Accounts and Audit) Rules. The directors of Excalibur Securities are responsible for the contents of the Circular in which this report is included.

REPORTING ACCOUNTS’ RESPONSIBILITIES

It is our responsibility to express an independent opinion, based on our examination, on the Financial Information and to report our opinion solely to you, for no other purpose.

BASIS OF OPINION

As a basis for forming an opinion on the Financial Information of Excalibur Securities, for the purpose of this report, we have carried out appropriate audit procedures in respect of the Financial Information for the Relevant Periods in accordance with Hong Kong Standards on Auditing and with reference to Practice Note 820 “The audit of licensed corporations and associated entities of intermediaries” Issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and have carried out such procedures as we considered necessary in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA. We have not audited any financial statements of Excalibur Securities in respect of any period subsequent to 31 December 2007.

An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the Financial Information. It also includes an assessment of significant estimates and judgements made by the directors of Excalibur Securities in the preparation of the Financial Information, and of whether the accounting policies are appropriate to Excalibur Securities’ circumstances, consistently applied and adequately disclosed.

– 163 –

ACCOUNTANTS’ REPORT OF EXCALIBUR SECURITIES

APPENDIX IIIA

OPINION

In our opinion, for the purpose of this report, all adjustments considered necessary have been made and the Financial Information gives a true and fair view of the state of affairs of Excalibur Securities as at 31 December 2005, 2006 and 2007 and of its results and cash flows for each of the three years ended 31 December 2005, 2006 and 2007.

– 164 –

APPENDIX IIIB MANAGEMENT DISCUSSION AND ANALYSIS OF EXCALIBUR SECURITIES

The following is the text extracted from the circular of the Company dated 30 June 2008.

MANAGEMENT DISCUSSION AND ANALYSIS OF EXCALIBUR SECURITIES LIMITED

Financial summary

Set out below is the management discussion and analysis on Excalibur for the three years ended 31 December 2005, 31 December 2006 and 31 December 2007.

For the three years ended 31 December 2005, 31 December 2006 and 31 December 2007

	2007	2006	2005
	HK$’000	HK$’000	HK$’000
Revenue	17,609	17,875	13,611
Profit for the year	5,675	2,472	523

The principal activities of Excalibur are securities brokerage and margin financing.

Amount due to an ultimate holding company

As at 31 December 2007, there was no amount due to an ultimate holding company.

As at 31 December 2006, there was no amount due to an ultimate holding company.

As at 31 December 2005, the amount due to an ultimate holding company were unsecured, interest free and had no fixed term of repayment.

Liquidity, financial resources and gearing

Net Assets/Liabilities

Set out below is a summary of the audited accountants’ report of Excalibur as at 31 December 2005, 31 December 2006 and 31 December 2007 which was prepared on the bases as set out on page 153 of this circular and details of which are set out in Appendix IIB this circular.

– 165 –

MANAGEMENT DISCUSSION AND ANALYSIS OF EXCALIBUR SECURITIES

APPENDIX IIIB

	2007	2006	2005
	HK$’000	HK$’000	HK$’000
Total assets	150,407	53,226	39,625
Total liabilities	120,357	28,851	17,722
Net assets	30,050	24,375	21,903
Amount due to an ultimate shareholder	–	–	73
*Gearing ratio	0%	0%	0%

* The gearing ratio is defined as total debts over total assets.

Cash & Bank Balances

Borrowings

As at 31 December 2005, 31 December 2006 and 31 December 2007, there was no other borrowing from bank or financial institution during the period.

Significant investments held

As at 31 December 2005, 31 December 2006 and 31 December 2007, Excalibur did not hold any significant investments during the period.

Acquisition and disposals

Excalibur had not made any acquisition or disposal during the periods under review.

Segmental information

– 166 –

APPENDIX IIIB MANAGEMENT DISCUSSION AND ANALYSIS OF EXCALIBUR SECURITIES

Foreign Exchange Management

Contingent Liabilities

As at 31 December 2005, 31 December 2006 and 31 December 2007, Excalibur did not have any contingent liabilities.

Pledge of Assets

As at 31 December 2005, 31 December 2006 and 31 December 2007, Excalibur had no interest-bearing borrowings and no assets were pledged.

Prospects and material investments

– 167 –

APPENDIX IIIC UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP WITH EXCALIBUR SECURITIES

The following is the text extracted from the circular of the Company dated 30 June 2008.

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Introduction to the unaudited Pro Forma Financial Information of the Enlarged Group

The following is the unaudited pro forma financial statements of the Enlarged Group for the purpose of illustrating the effects of (i) the proposed acquisition of 51% equity interest in Excalibur Securities Limited (“Excalibur”) (the “Proposed Acquisition”), (ii) placing of convertible bonds of a principal amount of HK$50 million with zero coupon due in three years from the date of issue (the “Placing CB”) and the repayment of the outstanding borrowings from Kingston Finance Limited ; and (iii) the proposed issue of remuneration shares and remuneration warrants (the “Proposed Remuneration Shares and Remuneration Warrants”) as settlement of the professional fees charged by the financial adviser on the financial position of the Enlarged Group as at 31 March 2007 and the results and cash flows of the Enlarged Group for the year ended 31 March 2007. As it is prepared for illustrative purpose only, and because of its nature, it may not give a true picture of the financial position of the Enlarged Group following the completion of the Proposed Acquisition, Placing CB and Proposed Remuneration Shares and Remuneration Warrants.

The unaudited pro forma consolidated balance sheet of the Enlarged Group has been prepared using accounting policies materially consistent with that of the Group and based upon the historical audited consolidated balance sheet of the Group as at 31 March 2007 as per the published annual report included in the financial information as set out in Appendix I of this Circular and the audited balance sheet of Excalibur as at 31 December 2007 as set out in Appendix II of this Circular, after giving effect to the pro forma adjustments described in the accompanying notes, as if the Proposed Acquisition, Placing CB and Proposed Remuneration Shares and Remuneration Warrants had been completed on 31 March 2007.

The unaudited pro forma consolidated income statement and consolidated cash flow statement of the Enlarged Group have been prepared using accounting policies materially consistent with that of the Group and based upon the historical audited consolidated income statement and consolidated cash flow statement of the Group for the year ended 31 March 2007 as per the published annual report of the Group as set out in Appendix I and the audited income statement and cash flow statement of Excalibur for the year ended 31 December 2007 as set out in Appendix I of this Circular, after giving effect to the pro forma adjustments described in the accompanying notes, as if the Proposed Acquisition, Placing CB and Proposed Remuneration Shares and Remuneration Warrants had been completed at the beginning of the year ended 31 March 2007.

The unaudited pro forma financial information of the Enlarged Group should be read in conjunction with the historical information of the Group as set out in the published annual report of the Company and other financial information included elsewhere in this circular.

– 168 –

APPENDIX IIIC UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP WITH EXCALIBUR SECURITIES

(I) Unaudited Pro Forma Consolidated Balance Sheet of the Enlarged Group

Audited consolidated balance sheet of the Group as at 31 March 2007 HK$’000 Non-current assets Property, plant and equipment 954 Intangible assets – Other assets 205 Goodwill – 1,159 Current assets Bank balances and cash 7,284 Pledged bank deposits 2,134 Investments held for trading 38,816 Inventories 213 Accounts receivable 5,405 Progress payments receivable 1,417 Other receivables, deposits and prepayments 800 Loans receivable 4,099 Retention money receivables 1,773 Amounts due from related companies 51 61,992 Current liabilities Bank overdrafts (secured) 1,926 Other borrowings (unsecured) 14,113 Accounts payable, other payables and accrued charges 15,874 Loans payable 687 Retention money payables 1,252 Amount due to a related company 890 Amount due to a director 529 Obligations under finance leases 290 Taxation payable 258 35,819 Net current assets 26,173 Total assets less current liabilities 27,332	Unaudited pro forma consolidated balance sheet of the Enlarged Group (upon Audited completion of balance sheet Acquisition of the Acquisition Remuneration of Excalibur 51% equity alone) Placing of CB shares and as at 31 interest in as at 31 and repayment Remuneration December 2007 Excalibur Notes March 2007 of borrowings Notes Warrants Note HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 624 1,578 880 880 532 737 – 6,775 1(iii) 6,775 2,036 9,970 98,723 106,007 48,050 6 (14,113) 6 – 2,134 – 38,816 – 213 14,209 19,614 – 1,417 604 1,404 34,835 38,934 – 1,773 – 51 148,371 210,363 – 1,926 – 14,113 (14,113) 6 110,488 500 3 126,862 – 687 – 1,252 9,022 9,912 – 529 – 290 847 1,105 120,357 156,676 28,014 53,687 30,050 63,657	Unaudited pro forma consolidated balance sheet of the Enlarged Group as at 31 s March 2007 HK$’000 1,578 880 737 6,775
		9,970
		139,944 2,134 38,816 213 19,614 1,417 1,404 38,934 1,773 51
		244,300
		1,926 – 126,862 687 1,252 9,912 529 290 1,105
		142,563
		101,737
		111,707

– 169 –

APPENDIX IIIC

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP WITH EXCALIBUR SECURITIES

Non-current liabilities Obligations under finance leases Convertible notes Net assets Equity Share capital Reserves Total equity attributable to equity holders of the Company Minority interests	469 – (469) 26,863 46,407 (19,544) 26,863 – 26,863 Audited consolidated balance sheet of the Group as at 31 March 2007 HK$’000	– 469 – 14,208 2 14,208 34,128 6 – (14,677) 30,050 48,980 20,000 (20,000) 1(iv) 46,407 1,200 8 10,050 (10,050) 1(iv) 13,922 6 (1,200) 8 7,392 2 (12,152) 30,050 34,255 – 14,725 1(iii) 14,725 30,050 48,980 Unaudited pro forma consolidated balance sheet of the Enlarged Group (upon Audited completion of balance sheet Acquisition of the Acquisition Remuneration of Excalibur 51% equity alone) Placing of CB shares and as at 31 interest in as at 31 and repayment Remuneration December 2007 Excalibur Notes March 2007 of borrowings Notes Warrants Note HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	469 48,336 Unaudited pro forma consolidated balance sheet of the Enlarged Group as at 31 s March 2007 HK$’000
			(48,805)
			62,902

			47,607 570
			48,177 14,725
			62,902

– 170 –

APPENDIX IIIC

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP WITH EXCALIBUR SECURITIES

(II) Unaudited Pro Forma Consolidated Income Statement Of The Enlarged Group

Turnover Cost of sales Gross profit Other operating income Selling expenses Administrative expenses Provision for doubtful debts (Loss)/profit from operations Finance costs Gain in disposal of subsidiaries (Loss)/profit before taxation Taxation (Loss)/profit for the year Attributable to: Equity holder of the Company Minority interest	Audited consolidated income statement of the Group for the year ended 31 March 2007 HK$’000 6,504 (3,711) 2,793 250 (12) (20,408) (1,684) (19,061) (2,573) 9,196 (12,438) (792) (13,230) (13,230) – (13,230)	Audited income statement of Excalibur Acquisition of for the year 51% equity ended 31 interest in December 2007 Excalibur Note HK$’000 HK$’000 16,371 (3,964) 12,407 1,238 – (6,684) – 6,961 (127) (1,716) 4 – 6,834 (1,159) 5,675 5,675 – 2,781 5 5,675	Unaudited pro forma consolidated income statement of the Enlarged Group (upon completion of the Acquisition alone) Remuneration for the year Placing of CB Shares and ended 31 and repayment Remuneration s March 2007 of borrowings Notes Warrants Note HK$’000 HK$’000 HK$’000 22,875 (7,675) 15,200 1,488 (12) (27,092) (1,200) 8 (1,684) (12,100) (4,416) (4,633) 7 9,196 (7,320) (1,951) (9,271) (12,052) 2,781 (9,271)	Unaudited pro forma consolidated income statement of the Enlarged Group for the year ended 31 s March 2007 HK$’000 22,875 (7,675)
				15,200 1,488 (12) (28,292) (1,684)
				(13,300) (9,049) 9,196
				(13,153) (1,951)
				(15,104)

				(17,885) 2,781
				(15,104)

– 171 –

APPENDIX IIIC UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP WITH EXCALIBUR SECURITIES

(III) Unaudited Pro Forma Consolidated Cash Flow Statement Of The Enlarged Group

Audited consolidated cash flow statement of the Group for the year ended 31 March 2007 HK$’000 Operating activities Loss before taxation (12,438) Adjustments for: Impairment loss recognised in respect of loan, margin and loan interest receivables 82 Depreciation 918 Interest income (166) Interest expenses 2,542 Interest on obligations under finance leases 31 Interest on convertible notes – Share-based payment expense – Provision for doubtful debts 1,602 Gain on disposal of subsidiaries (9,196) Loss on disposal of property, plant and equipment 64 Amortisation of intangible assets 251 Provision for obsolete inventories 238 Operating cash flows before working capital changes (16,072) Increase in inventories (199) Decrease/(increase) in accounts receivable 5,130 Decrease in amounts due from customers for contract work 657 Increase in progress payments receivable (1,208) Decrease/(increase) in other receivables, deposits and prepayments 2,069 Decrease in retention money receivables 3,471 Increase in amount due from a related company (39) Decrease in bills payable (91) (Decrease)/increase in accounts payable, other payables and accrued charges (6,495) Decrease in retention money payables (580) Increase in amounts due to a related company – Increase in amount due to a director 529	Audited cash flow statement of Acquisition of Excalibur for the 51% equity year ended interest in 31 December 2007 Excalibur Note HK$’000 HK$’000 6,834 (1,716) 4 – 349 (3,574) 127 – – 1,716 4 – – – – – – 3,736 – (10,211) – – (599) – – – 87,635 – 3,063 –	Unaudited pro forma consolidated cash flow statement of the Enlarged Group (upon completion of the Acquisition Remuneration alone) for the Placing of CB Shares and year ended and repayment Remuneration s 31 March 2007 of borrowings Notes Warrants Note HK$’000 HK$’000 HK$’000 (7,320) (4,633) 7 (1,200) 8 82 1,267 (3,740) 2,669 31 1,716 4,633 7 – 1,200 8 1,602 (9,196) 64 251 238 (12,336) (199) (5,081) 657 (1,208) 1,470 3,471 (39) (91) 81,140 (580) 3,063 529	Unaudited pro forma consolidated cash flow statement of the Enlarged Group for the year ended s 31 March 2007 HK$’000 (13,153) 82 1,267 (3,740) 2,669 31 6,349 1,200 1,602 (9,196) 64 251 238
			(12,336) (199) (5,081) 657 (1,208) 1,470 3,471 (39) (91) 81,140 (580) 3,063 529

– 172 –

APPENDIX IIIC

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP WITH EXCALIBUR SECURITIES

Cash (used in)/generated from operations Interest received Interest paid Interest on obligations under finance leases Hong Kong profits tax paid Net cash (used in)/generated from operating activities Investing activities Purchase of property, plant and equipment Placement of pledged bank deposits Increase in other assets Decrease/(increase) in loans receivable Increase in loans payable Proceeds from disposal of property, plant and equipment Disposal of subsidiaries Net cash generated from/ (used in) investing activities	(12,828) 166 (2,542) (31) (650) (15,885) (180) (71) – 5,257 367 214 (3) 5,584 Audited consolidated cash flow statement of the Group for the year ended 31 March 2007 HK$’000	83,624 3,574 (127) – (212) 86,859 (586) – (18) (8,676) – – – (9,280) Audited cash flow statement of Acquisition of Excalibur for the 51% equity year ended interest in 31 December 2007 Excalibur Note HK$’000 HK$’000	70,796 3,740 (2,669) (31) (862) 70,974 (766) (71) (18) (3,419) 367 214 (3) (3,696) Unaudited pro forma consolidated cash flow statement of the Enlarged Group (upon completion of the Acquisition Remuneration alone) for the Placing of CB Shares and year ended and repayment Remuneration s 31 March 2007 of borrowings Notes Warrants Note HK$’000 HK$’000 HK$’000	70,796 3,740 (2,669) (31) (862) Unaudited pro forma consolidated cash flow statement of the Enlarged Group for the year ended s 31 March 2007 HK$’000
				70,974
				(766) (71) (18) (3,419) 367 214 (3)
				(3,696)

– 173 –

APPENDIX IIIC

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP WITH EXCALIBUR SECURITIES

Financing activities New borrowings obtained Repayment of borrowings Repayment of obligations under finance leases Issue of convertible notes Net cash generated from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Analysis of the balances of cash and cash equivalents Bank balances and cash Bank overdrafts (secured)	Audited consolidated cash flow statement of the Group for the year ended 31 March 2007 HK$’000 2,395 – (282) – 2,113 (8,188) 13,546 5,358 7,284 (1,926) 5,358	Audited cash flow statement of Acquisition of Excalibur for the 51% equity year ended interest in 31 December 2007 Excalibur Note HK$’000 HK$’000 – – – – – 77,579 21,144 98,723 98,723 – 98,723	Unaudited pro forma consolidated cash flow statement of the Enlarged Group (upon completion of the Acquisition Remuneration alone) for the Placing of CB Shares and year ended and repayment Remuneration s 31 March 2007 of borrowings Notes Warrants Note HK$’000 HK$’000 HK$’000 2,395 – (14,113) 6 (282) – 48,050 6 2,113 69,391 34,690 104,081 106,007 48,050 6 (14,113) 6 (1,926) 104,081	Unaudited pro forma consolidated cash flow statement of the Enlarged Group for the year ended s 31 March 2007 HK$’000 2,395 (14,113) (282) 48,050
				36,050
				103,328 34,690
				138,018

				139,944 (1,926)
				138,018

– 174 –

APPENDIX IIIC UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP WITH EXCALIBUR SECURITIES

Notes to unaudited pro forma financial information of the Enlarged Group

Under HKFRS 3 Business Combinations (“HKFRS 3”), the Group applied the purchase method to account for the acquisitions of Excalibur. In applying the purchase method, the identifiable assets, liabilities and contingent liabilities of Excalibur are recorded on the consolidated balance sheet of the Group at their fair values at the date of completion. Goodwill arising on the acquisition is determined as the excess or deficit of the consideration payable by the Group over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of Excalibur at the date of completion. Excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of Excalibur over consideration is recognised immediately in the consolidated income statement.

Since the net fair value of the identifiable assets, liabilities, and contingent liabilities of Excalibur and the share price of the Target Company (which form part of the consideration given by the Company for the Acquisition) as at the date of completion of the Acquisition may be different from their values used in the preparation of the unaudited pro forma consolidated balance sheet above, the amount of excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of acquisition arising from the Acquisition will be reassessed at time of actual completion.

The adjustments reflect the following:

(i) The consideration of the Proposed Acquisition will be satisfied by issue of convertible notes of HK$20,000,000 which are convertible into ordinary shares of the Company at a conversion price of HK$0.10.
(ii) The fair value of the convertible notes is determined by reference to the valuation (the “Valuation”) of the 51% equity interest in Excalibur at HK$21,600,000. The Valuation was carried out by BMI Appraisals Limited, an independent firm of professional valuers.

– 175 –

APPENDIX IIIC UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP WITH EXCALIBUR SECURITIES

(iii) Goodwill of approximately HK$6,775,000 arising from the Transaction, which is derived from the calculation as follows:

Consideration_(Note 1(ii)) Fair value of net assets of Excalibur _Less:_Minority interests _Add:_Professional expense incurred for the Proposed Acquisition(Note 3)_ Goodwill	HK$’000 21,600 30,050 (14,725) 15,325 500 6,775

All identifiable assets, liabilities and considerations are assumed to be at their fair values.

On completion, the fair value of the net identifiable assets and liabilities of Excalibur will have to be reassessed. As a result of the reassessment, the amount of goodwill may be different from that estimated on the basis stated above for the purpose of preparation of the unaudited pro forma financial information. Accordingly, the actual goodwill at the date of completion may be different from the above.

iv) Elimination of share capital and reserve of Excalibur of HK$20,000,000 and HK$10,050,000 respectively on consolidation of the 51% equity interest in Excalibur.
The adjustment represents the liability and equity components of the convertible notes issued for the Proposed Acquisition as if it was issued on 31 March 2007. The estimated fair value of the liability component of the convertible notes is approximately HK$14,208,000 determined using the discounted cash flow method. The equity component, being the residual amount of fair value of convertible notes after deducting the fair value of liability component, is approximately HK$7,392,000.

– 176 –

APPENDIX IIIC UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP WITH EXCALIBUR SECURITIES

The adjustment represents professional expenses to be incurred by the Company in relation to the Proposed Acquisition.
The adjustment of approximately HK$1,716,000 represents the yearly imputed interest expenses on the convertible notes issued for the Proposed Acquisition to be expensed in the consolidated income statement of the Enlarged Group by assuming that the acquisition had been completed at the beginning of the year ended 31 March 2007. These interest expenses shall have a continuing effect on the financial statements of the Group in the subsequent years.
The adjustment represents the share of profit of Excalibur for the year ended 31 December 2007 by the minority shareholders of this company (HK$5,675,000 x 49%). The share of profit for the year by the minority shareholders shall have a continuing effect on the financial statements of the Group in the subsequent years.
The Company entered into a Placing Agreement with the Placing Agent in respect of the conditional placing of the Placing CB of a principal amount of HK$50 million with zero coupon due in three years from the date of issue. The adjustment represents the liability and equity components of the convertible notes issued for the Placing CB, which are stated net of the issue costs of HK$1,950,000 as if they were issued on 31 March 2007. The estimated fair value of the liability component of the convertible note is approximately HK$34,128,000 determined using the discounted cash flow method. The equity component, being the residual amount of fair value of convertible notes after deducting the fair value of liability component, is approximately HK$13,922,000. Part of the proceeds of the convertible notes is to repay the outstanding other borrowings from Kingston Finance Limited which amounted to approximately HK$14,113,000 as at 31 March 2007. Consequently, the net increase in bank balances and cash in the consolidated pro forma balance sheet is approximately HK$33,937,000 (HK$50,000,000 less HK$1,950,000 less HK$14,113,000). The Placing CB shall have a continuing effect on the financial statements of the Group in the subsequent years.
The adjustment of approximately HK$4,633,000 represents the yearly imputed interest expenses on the Placing CB to be expensed in the consolidated income statement of the Enlarged Group by assuming that the Placing CB had been issued at the beginning of the year ended 31 March 2007. These yearly interest expenses shall have a continuing effect on the financial statements of the Group in the subsequent years.

– 177 –

APPENDIX IIIC UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP WITH EXCALIBUR SECURITIES

Veda Capital is the financial adviser to the Company regarding the resumption proposal. Pursuant to the engagement letter entered into between the Company and Veda Capital and having considered the financial position of the Company, it was agreed between the Company and Veda Capital that the professional fees of HK$1,200,000 charged by Veda Capital may be settled by the issue of Remuneration Shares to Veda Capital (or its nominee(s)) at an issue price of HK$0.10 per new Share upon the approval by the Stock Exchange on the resumption of trading in the Shares, which is equivalent to the Consideration Conversion Price and Placing Conversion Price. The Company also agreed to grant Remuneration Warrants to Veda Capital (or its nominee(s)) upon the approval by the Stock Exchange on the resumption of trading in the Shares, which entitle Veda Capital (or its nominee(s) to subscribe for 12,000,000 new Shares at the exercise price of HK$0.10 per Share (subject to adjustments), at any time between the date of issue of the Remuneration Warrants and 36 months thereafter. This administrative expense shall not have a continuing effect on the financial statements of the Group in the subsequent years.
No adjustment has been made to reflect any trading result or other transactions of the Group entered into subsequent to 31 March 2007.

– 178 –

APPENDIX IIIC UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP WITH EXCALIBUR SECURITIES

B. COMFORT LETTER ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a letter from Shu Lun Pan Horwath Hong Kong CPA Limited, the reporting accountants of the Company, in respect of the unaudited pro forma financial information of the Enlarged Group as set out in this Appendix and prepared for the sole purpose of inclusion in this circular.

Shu Lun Pan Horwath Hong Kong CPA Limited

2001 Central Plaza 18 Harbour Road Wanchai, Hong Kong Telephone: (852) 2526 2191 Facsimile: (852) 2810 0502 [email protected] www.horwath.com.hk

30 June 2008

The Directors

China Conservational Power Holdings Limited Room 1702-3, 17/F Skyline Commercial Centre 71-77 Wing Lok Street Sheung Wan Hong Kong

Dear Sirs,

We report on the unaudited pro forma financial information (“Unaudited Pro Forma Financial Information”) of China Conservational Power Holdings Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) and Excalibur Securities Limited (“Excalibur”) (together with the Group hereinafter referred to as the “Enlarged Group”) as set out on pages 178 to 188 under the heading of “Unaudited Pro Forma Financial Information of the Enlarged Group” in Appendix III to the Company’s circular (the “Circular”) dated 30 June 2008, which have been prepared by the directors of the Company, solely for illustrative purposes only, to provide information about how the proposed acquisition of 51% of equity interest in Excalibur (the “Excalibur Acquisition”), placing of convertible bonds of a principal amount of HK$50 million, repayment of the outstanding borrowings from Kingston Finance Limited and proposed issue of remuneration shares and remuneration warrants as set out in Part A of this Appendix might have affected the financial information of the Group. The basis of preparation of the Unaudited Pro Forma Financial Information is set out on pages 190 and 191 of the Circular.

– 179 –

APPENDIX IIIC UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP WITH EXCALIBUR SECURITIES

Respective Responsibilities of Directors of the Company and Reporting Accountants

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

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

Basis of Opinion

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

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

– 180 –

APPENDIX IIIC UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP WITH EXCALIBUR SECURITIES

The Unaudited Pro Forma Financial Information is 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 the future and may not be indicative of:

the financial position of the Enlarged Group as at 31 March 2007 or any future date; or
the financial results and cash flows of the Enlarged Group for the year ended 31 March 2007 or for any future period.

Opinion

In our opinion:

a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;
b) such basis is consistent with the accounting policies of the Group; and
c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Yours faithfully,

For and on behalf of

Shu Lun Pan Horwath Hong Kong CPA Limited Certified Public Accountants

Hong Kong

Shiu Hong NG

Director

Practising Certificate number P03752

– 181 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Introduction to the unaudited Pro Forma Financial Information of the Enlarged Group

The following is the unaudited pro forma financial statements of the Enlarged Group for the purpose of illustrating the effects of (i) the proposed acquisitions of 51% equity interest in each of Excalibur Futures Limited (“EFL”) (the “Proposed EFL Acquisition”) and Excalibur Securities Limited (“ESL”) (the “Proposed ESL Acquisition”) (collectively the “Proposed Acquisitions”), (ii) placing of convertible bonds of a principal amount of HK$50 million with zero coupon due in three years from the date of issue (the “Placing CB”) and the repayment of the outstanding borrowings from Kingston Finance Limited; (iii) the proposed issue of remuneration shares and remuneration warrants (the “Proposed Remuneration Shares and Remuneration Warrants”) as settlement of the professional fees charged by the financial adviser; and (iv) placing of new shares (the “Placing Shares”) on the financial position of the Enlarged Group as at 31 March 2008 and the results and cash flows of the Enlarged Group for the year ended 31 March 2008. As it is prepared for illustrative purpose only, and because of its nature, it may not give a true picture of the financial position or results of operations of the Enlarged Group following the completion of the Proposed Acquisitions, Placing CB, Proposed Remuneration Shares and Remuneration Warrants and Placing Shares.

The unaudited pro forma consolidated balance sheet of the Enlarged Group has been prepared using accounting policies materially consistent with that of the Group and based upon the historical audited consolidated balance sheet of the Group as at 31 March 2008 as per the published annual report included in the financial information as set out in Appendix I of this Circular and the audited balance sheets of EFL and ESL as at 31 December 2007 as set out in Appendix II of this Circular, after giving effect to the pro forma adjustments described in the accompanying notes, as if the Proposed Acquisitions, Placing CB, Proposed Remuneration Shares and Remuneration Warrants and Placing Shares had been completed on 31 March 2008.

The unaudited pro forma consolidated income statement and consolidated cash flow statement of the Enlarged Group have been prepared using accounting policies materially consistent with that of the Group and based upon the historical audited consolidated income statement and consolidated cash flow statement of the Group for the year ended 31 March 2008 as per the published annual report of the Group as set out in Appendix I and the audited income statements and cash flow statements of EFL and ESL for the year ended 31 December 2007 as set out in Appendix II of this Circular, after giving effect to the pro forma adjustments described in the accompanying notes, as if the Proposed Acquisitions, Placing CB and Proposed Remuneration Shares and Remuneration Warrants and Placing Shares had been completed at the beginning of the year ended 31 March 2008.

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APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The unaudited pro forma financial information of the Enlarged Group should be read in conjunction with the historical	information of the Group as set out in the published annual report of the Company and other financial information included	elsewhere in this circular.	*(I)* *Unaudited Pro Forma Consolidated Balance Sheet of The Enlarged Group*	Unaudited pro Unaudited pro	forma consolidated forma consolidated	balance sheet of balance sheet of	the Enlarged the Enlarged	Audited Group (upon Group (upon Unaudited pro	consolidated Audited completion of Audited completion of the forma consolidated	balance balance sheet Acquisition of the Acquisition balance sheet Acquisition of Acquisitions of Placing of Remuneration balance sheet of	sheet of the of EFL as at 51% equity of EFL of ESL as at 51% equity EFL and ESL CB and Shares and the Enlarged	Group as at 31 December interest alone) as at 31 December interest alone) as at repayment of Remuneration Placing of Group as at	31 March 2008 2007 in EFL 31 March 2008 2008 in ESL 31 March 2008 borrowings Warrants Placing Shares 31 March 2008	HK$’000 HK$’000 HK$’000 Notes HK$’000 HK$’000 HK$’000 Notes HK$’000 HK$’000 Notes HK$’000 Notes HK$’000 Notes HK$’000	*Control* – – – – – –	Non-current assets	Property, plant and equipment 425 1,429 1,854 624 2,478 2,478	Intangible assets – 480 480 880 1,360 1,360	Other non-current assets 240 1,500 1,740 532 2,272 2,272	Goodwill – – – – 6,775 1(iv) 6,775 6,775	665 3,409 4,074 2,036 12,885 12,885	Current assets	Investments held for trading 38,784 – 38,784 – 38,784 38,784	Accounts receivable 10,303 2,787 13,090 49,044 62,134 62,134	Progress payments receivable 1 – 1 – 1 1	Other receivables, deposits and	prepayments 515 917 1,432 604 2,036 2,036	Retention money receivables 375 – 375 – 375 375	Amounts due from related companies 25 9,022 9,047 – (9,022) 4 25 25	Amount due from a director 426 – 426 – 426 426	Pledged bank deposits 2,196 – 2,196 – 2,196 2,196	Cash and cash equivalents 26,530 41,761 68,291 98,723 167,014 48,050 9	(22,735) 9 19,300 14 211,629

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

				Unaudited pro	forma consolidated	balance sheet of	the Enlarged	Group as at	31 March 2008	HK$’000	317,606		1,963	7,000		169,581	958	890	290	1,105	181,787	135,819	148,704		179	48,336	8,119	56,634	92,070		55,607		9,898		65,505	26,565	92,070
										Notes																					14	14
								Placing of	Placing Shares	HK$’000																					8,000	11,300
										Notes																					11	11
						Remuneration	Shares and	Remuneration	Warrants	HK$’000																					1,200	(1,200)
										Notes				9												9						9
						Placing of	CB and	repayment of	borrowings	HK$’000				(22,735)												34,128						13,922
Unaudited pro	forma consolidated	balance sheet of	the Enlarged	Group (upon	completion of the	Acquisitions of	EFL and ESL	alone) as at	31 March 2008	Notes HK$’000	272,991		1,963	29,735		5 169,581	958	4 890	290	1,105	204,522	68,469	81,354		179	3 14,208	8,119	22,506	58,848		1(vii) 46,407	1(vii)	3 (14,124)		32,283	1(iv) 26,565	58,848
						Acquisition of	51% equity	interest	in ESL	HK$’000						500		(9,022)								14,208					(20,000)	(10,050)	7,392			14,725
					Audited	balance sheet	of ESL as at	31 December	2008	HK$’000	148,371		–	–		110,488	–	9,022	–	847	120,357	28,014	30,050		–	–	–	–	30,050		20,000	10,050			30,050	–	30,050
Unaudited pro	forma consolidated	balance sheet of	the Enlarged	Group (upon	completion of	the Acquisition	of EFL	alone) as at	31 March 2008	Notes HK$’000	133,642		1,963	29,735		5 58,593	958	890	290	258	92,687	40,955	45,029		179	–	2 8,119	8,298	36,731		1(vi) 46,407	1(vi)	1(v) (21,516)		24,891	1(v) 11,840	36,731
						Acquisition of	51% equity	interest	in EFL	HK$’000						350											8,119				(20,000)	(4,164)	3,855			11,840
					Audited	balance sheet	of EFL as at	31 December	2007	HK$’000	54,487		–	–		33,732	–	–	–	–	33,732	20,755	24,164		–	–	–	–	24,164		20,000	4,164			24,164	–	24,164
				Audited	consolidated	balance	sheet of the	Group as at	31 March 2008	HK$’000	79,155	Current liabilities	Bank overdrafts (secured) 1,963	Other borrowings (unsecured) 29,735	Accounts payable, other payables	and accrued charges 24,511	Retention money payables 958	Amount due to a related company 890	Obligations under finance leases 290	Taxation payable 258	58,605	Net current assets 20,550	Total assets less current liabilities 21,215	Non-current liabilities	Obligations under finance leases 179	Convertible notes –	Promissory note –	179	Net assets 21,036	Equity	Share capital 46,407	Reserves (25,371)		Total equity attributable to equity	holders of the Company 21,036	Minority interests –	21,036

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

					Unaudited pro	forma consolidated	income statement	of the Enlarged	Group as at	31 March 2008	Notes HK$’000	43,058	(16,336)	26,722		8,000		699	8,792	(38,084)	6,129	(11,550)		(3,855)	(262)	(9,538)	(1,159)	(10,697)		(14,380)	3,683	(10,697)
									Placing of	Placing Shares	HK$’000
											Notes									11
							Remuneration	Shares and	Remuneration	Warrants	HK$’000									(1,200)
											Notes											10
							Placing of	CB and	repayment of	borrowings	HK$’000											(4,633)
Unaudited pro	forma consolidated	income statement	of the Enlarged	Group (upon	completion of the	Acquisitions of	EFL and	ESL alone) for	the year ended	31 March 2008	Notes HK$’000	43,058	(16,336)	26,722		8,000		699	8,792	(36,884)	7,329	7 (6,917)		(3,855)	(262)	(3,705)	(1,159)	(4,864)		(8,547)	8 3,683	(4,864)
								Acquisition of	51% equity	interest in ESL	HK$’000											(1,716)									2,781
		Unaudited pro	forma consolidated	income statement	of the Enlarged Audited income	Group (upon statement of	completion of the ESL for the	Acquisition of year ended	EFL alone) as at 31 December	31 March 2008 2007	Notes HK$’000 HK$’000	26,687 16,371	(12,372) (3,964)	14,315 12,407		8,000 –		699 –	7,554 1,238	(30,200) (6,684)	368 6,961	6 (5,074) (127)		2 (3,855) –	(262) –	(8,823) 6,834	– (1,159)	(8,823) 5,675		(9,725) 5,675	8 902 –	(8,823) 5,675
								Acquisition of	51% equity	interest in EFL	HK$’000											(981)		(3,855)							902
				Audited	income	statement of	EFL for the	year ended	31 December	2007	HK$’000	14,332	(7,428)	6,904		–		–	6,498	(11,562)	1,840	–		–	–	1,840	–	1,840		1,840	–	1,840
			Audited	consolidated	income	statement of	the Group for	the year ended	31 March	2008	HK$’000	Turnover 12,355	Cost of sales (4,944)	Gross profit 7,411	Reversal of impairment loss	on investment deposits 8,000	Reversal of provision for	doubtful debts 699	Other income 1,056	Administrative expenses (18,638)	(Loss)/ profit from operations (1,472)	Finance costs (4,093)	Negative goodwill arising from	acquisition of a subsidiary –	Gain on disposal of subsidiaries (262)	(Loss)/profit before taxation (5,827)	Taxation –	(Loss)/ profit for the year (5,827)	Attributable to:	Equity holder of the Company (5,827)	Minority interest –	(Loss)/ profit for the year (5,827)

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

					Unaudited	pro forma	consolidated	cash flow	statement of	the Enlarged	Group as at	31 March 2008	HK$’000		(9,538)			(8,000)		(82)		1,848	(4,226)	4,186		34	6,349	981	1,200		(699)	34		32	262		212		3,855
													Notes
											Placing of	Placing Shares	HK$’000
													Notes		11														11
									Remuneration	Shares and	Remuneration	Warrants	HK$’000		(1,200)														1,200
													Notes		10												10
									Placing of	CB and	repayment of	borrowings	HK$’000		(4,633)												4,633
Unaudited	pro forma	consolidated	cash flow	statement of	the Enlarged	Group (upon	completion of the	Acquisitions of	EFL and ESL	alone) for the	year ended	31 March 2008	HK$’000		(3,705)			(8,000)		(82)		1,848	(4,226)	4,186		34	1,716	981	–		(699)	34		32	262		212		3,855
													Notes		7												7
										Acquisition of	51% equity	interest in ESL	HK$’000		(1,716)												1,716
					Audited	cash flow	statement of	the ESL	for the	year ended	31 December	2007	HK$’000		6,834			–		–		349	(3,573)	127		–	–	–	–		–	–		–	–		–		–
	Unaudited	pro forma	consolidated	cash flow	statement of	the Enlarged	Group (upon	completion of	the Acquisition	of EFL	alone) as at	31 March 2008	HK$’000		(8,823)			(8,000)		(82)		1,499	(653)	4,059		34	–	981	–		(699)	34		32	262		212		3,855
													Notes		2, 6													6											2
										Acquisition of	51% equity	interest in EFL	HK$’000		(4,836)													981											3,855
					Audited	consolidated	cash flow	statement of	EFL for the	year ended	31 December	2007	HK$’000		1,840			–		(82)		891	(322)	–		–	–	–	–		–	–		–	–		212		–
					Audited	consolidated	cash flow	statement of	the Group	for the	year ended	31 March 2008	HK$’000		(5,827)			(8,000)		–		608	(331)	4,059		34	–	–	–		(699)	34		32	262		–		–
														Operating activities	Loss before taxation	Adjustments for:	Reversal of impairment loss	for investment deposits	Reversal of provision for	restatement cost	Depreciation of property,	plant and equipment	Interest income	Interest expense	Interest on obligations under	finance leases	Interest on convertible notes	Interest on promissory note	Share-based payment expense	Reversal of provision for	doubtful debts	Bad debts written off	Fair value change of investment	held for trading	Loss on disposal of subsidiaries	Loss on disposal of property,	plant and equipment	Negative goodwill arising from	acquisition of a subsidiary

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

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– 187 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Notes to unaudited pro forma financial information of the Enlarged Group

Under HKFRS 3 Business Combinations (“HKFRS 3”), the Group applied the purchase method to account for the acquisitions of EFL and ESL. In applying the purchase method, the identifiable assets, liabilities and contingent liabilities of EFL and ESL are recorded on the consolidated balance sheet of the Group at their fair values at the date of completion. Goodwill arising on the acquisition is determined as the excess of the consideration payable by the Group over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of ESL at the date of completion. Excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of EFL over consideration is recognised immediately in the consolidated income statement.

Since the net fair values of the identifiable assets, liabilities, and contingent liabilities of EFL and ESL as at the date of completion of the Acquisitions may be different from their values used in the preparation of the unaudited pro forma consolidated balance sheet above, the amount of excess and deficit of the acquirer’s interest in the net fair value of acquirees’ identifiable assets, liabilities and contingent liabilities over the costs of acquisition arising from the Acquisitions will be reassessed at time of actual completion.

The adjustments reflect the following:

(i) The consideration of the Proposed ESL Acquisition will be satisfied by issue of convertible notes of HK$20,000,000 which are convertible into ordinary shares of the Company at a conversion price of HK$0.10.
(ii) The consideration of the Proposed EFL Acquisition will be satisfied by issue of a promissory note of HK$10,200,000 which shall not carry interest and shall be due for payment on the day falling 24 months after the completion, provided that the acquirer shall be entitled to redeem the promissory note (in whole or in part) at any time after completion of the Acquisition.
(iii) The fair value of the convertible notes is determined by reference to the valuation (the “Valuation”) of the 51% equity interest in ESL at HK$21,600,000. The Valuation was carried out by BMI Appraisals Limited, an independent firm of professional valuers.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(iv) Goodwill of approximately HK$6,775,000 arising from the Transaction, which is derived from the calculation as follows:

Consideration_(Note 1(iii)) Fair value of net assets of ESL _Less:_Minority interests _Add:_Professional expense incurred for the Proposed Acquisition(Note 5)_ Goodwill	HK$’000 21,600 30,050 (14,725) 15,325 500 6,775

All identifiable assets, liabilities and considerations are assumed to be at their fair values.

On completion, the fair value of the net identifiable assets and liabilities of ESL will have to be reassessed. As a result of the reassessment, the amount of goodwill may be different from that estimated on the basis stated above for the purpose of preparation of the unaudited pro forma financial information. Accordingly, the actual goodwill at the date of completion may be different from the above.

– 190 –

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(v) Negative goodwill arising from acquisition of a subsidiary of approximately HK$3,855,000 arising from the Transaction, which is derived from the calculation as follows:

Consideration_(Note 2) Fair value of net assets of EFL _Less:_Minority interests _Add:_Professional expense incurred for the Proposed Acquisition(Note 5)_ Negative goodwill arising from acquisition of a subsidiary	HK$’000 8,119 24,164 (11,840) 12,324 350 (3,855)

All identifiable assets, liabilities and considerations are assumed to be at their fair values.

On completion, the fair value of the net identifiable assets and liabilities of EFL will have to be reassessed. As a result of the reassessment, the amount of negative goodwill may be different from that estimated on the basis stated above for the purpose of preparation of the unaudited pro forma financial information. Accordingly, the actual negative goodwill at the date of completion may be different from the above. This negative goodwill arising from acquisition of a subsidiary shall not have a continuing effect on the financial statements of the Group in subsequent years.

(vi) Elimination of share capital and reserve of EFL of HK$20,000,000 and HK$4,164,000 respectively on consolidation of the 51% equity interest in EFL
(vii) Elimination of share capital and reserve of ESL of HK$20,000,000 and HK$10,050,000 respectively on consolidation of the 51% equity interest in ESL.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The adjustment represents a promissory note issued and executed by the Group with the principal value of HK$10,200,000 to the vendor, for the Proposed EFL Acquisition as if it was issued on 31 March 2008. The promissory note is classified as a financial liability and should be initially measured at fair value, and subsequently measured at amortised cost, using the effective interest rate method. The fair value of the promissory note is determined at approximately HK$8,119,000 at the date of issue using the discount rate of 12% per annum, which is within the range of the effective interest rates of the Group’s existing financing facilities, over the entire term of the promissory note, i.e. 2 years. The shortfall of HK$2,081,000 of the fair value of HK$8,119,000 below the principal value of HK$10,200,000 will be recognised as an interest expense of the Group over a term of 2 years using the effective interest rate method.
The adjustment represents the liability and equity components of the convertible notes issued for the Proposed ESL Acquisition as if it was issued on 31 March 2008. The estimated fair value of the liability component of the convertible notes is approximately HK$14,208,000 determined using the discounted cash flow method. The equity component, being the residual amount of fair value of convertible notes after deducting the fair value of liability component, is approximately HK$7,392,000.
The adjustment represents the elimination of inter-company balances of ESL and EFL as they become group enterprises within a group upon the completion of the Proposed Acquisitions. The inter-company balances of HK$9,022,000 was the amount due to EFL by ESL.
The adjustments represent professional expenses to be incurred by the Company in relation to the Proposed Acquisitions. These professional expenses shall not have a continuing effect on the financial statements of the Group in subsequent years.
The adjustment of approximately HK$981,000 represents the yearly imputed interest expenses on the promissory note issued for the Proposed EFL Acquisition to be expensed in the consolidated income statement of the Enlarged Group by assuming that the promissory note had been issued at the beginning of the year ended 31 March 2008. These yearly interest expenses shall have a continuing effect on the financial statements of the Group in subsequent years.
The adjustment of approximately HK$1,716,000 represents the yearly imputed interest expenses on the convertible notes issued for the Proposed ESL Acquisition to be expensed in the consolidated income statement of the Enlarged Group by assuming that the acquisition had been completed at the beginning of the year ended 31 March 2008. These interest expenses shall have a continuing effect on the financial statements of the Group in subsequent years.

– 192 –

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The adjustments represent the share of profits of EFL and ESL for the year ended 31 December 2007 by the minority shareholders of these companies. (Approximately HK$1,840,000 x 49% = HK$902,000 and approximately HK$HK$5,675,000 x 49% = HK$2,781,000 respectively). The share of profits for the year by the minority shareholders shall have a continuing effect on the financial statements of the Group in subsequent years.
The Company entered into a Placing Agreement with the Placing Agent in respect of the conditional placing of the Placing CB of a principal amount of HK$50 million with zero coupon due in three years from the date of issue. The adjustment represents the liability and equity components of the convertible notes issued for the Placing CB, which are stated net of the issue costs of HK$1,950,000 as if they were issued on 31 March 2008. The estimated fair value of the liability component of the convertible note is approximately HK$34,128,000 determined using the discounted cash flow method. The equity component, being the residual amount of fair value of convertible notes after deducting the fair value of liability component, is approximately HK$13,922,000. Part of the proceeds of the convertible notes is to repay the outstanding other borrowings from Kingston Finance Limited which amounted to approximately HK$22,735,000 as at 31 March 2008. Consequently, the net increase in bank balances and cash in the consolidated pro forma balance sheet is approximately HK$25,315,000 (HK$50,000,000 less HK$1,950,000 less HK$22,735,000). The Placing CB shall have a continuing effect on the financial statements of the Group in subsequent years.
The adjustment of approximately HK$4,633,000 represents the yearly imputed interest expenses on the Placing CB to be expensed in the consolidated income statement of the Enlarged Group by assuming that the Placing CB had been issued at the beginning of the year ended 31 March 2008. These yearly interest expenses shall have a continuing effect on the financial statements of the Group in subsequent years.

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APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Veda Capital is the financial adviser to the Company regarding the resumption proposal. Pursuant to the engagement letter entered into between the Company and Veda Capital and having considered the financial position of the Company, it was agreed between the Company and Veda Capital that part of the professional fees of HK$1,200,000 charged by Veda Capital may be settled by the issue of Remuneration Shares to Veda Capital (or its nominee(s)) at an issue price of HK$0.10 per new Share upon the approval by the Stock Exchange on the resumption of trading in the Shares, which is equivalent to the Consideration Conversion Price and Placing Conversion Price. The Company also agreed to grant Remuneration Warrants to Veda Capital (or its nominee(s)) upon the approval by the Stock Exchange on the resumption of trading in the Shares, which entitle Veda Capital (or its nominee(s) to subscribe for 12,000,000 new Shares at the exercise price of HK$0.10 per Share (subject to adjustments), at any time between the date of issue of the Remuneration Warrants and 36 months thereafter. This administrative expense shall not have a continuing effect on the financial statements of the Group in subsequent years.
The adjustment represents the reallocation of decrease of HK$477,000 in amount due to ultimate holding company as decrease in accounts payable, other payables and accrued charges since the ultimate holding company of EFL is no longer related to EFL upon the completion of the Proposed EFL Acquisition and the balance is therefore reclassified as other payables. This reallocation of inter-company balance shall not have a continuing effect on the financial statements of the Group in subsequent years.
No adjustment has been made to reflect any trading result or other transactions of the Group entered into subsequent to 31 March 2008.
The adjustment represents the effect of the placing of 80,000,000 new shares of the Company. Upon completion, the share capital and share premium of the Company were increased by approximately HK$8,000,000 and HK$11,300,000 (being excess of consideration over par value less professional fees of HK$700,000 incurred).

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APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. COMFORT LETTER ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Shu Lun Pan Horwath Hong Kong CPA Limited

20th Floor, Central Plaza 18 Harbour Road Wanchai, Hong Kong Telephone: (852) 2526 2191 Facsimile: (852) 2810 0502 [email protected] www.horwath.com.hk

8 October 2008

The Directors

China Conservational Power Holdings Limited Room 1702-3, 17/F Skyline Commercial Centre 71-77 Wing Lok Street Sheung Wan Hong Kong

Dear Sirs,

We report on the unaudited pro forma financial information (“Unaudited Pro Forma Financial Information”) of China Conservational Power Holdings Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) and Excalibur Futures Limited (“EFL”) and Excalibur Securities Limited (“ESL”) (together with the Group hereinafter referred to as the “Enlarged Group”) as set out on pages 182 and 197 under the heading of “Unaudited Pro Forma Financial Information of the Enlarged Group” in Appendix IV to the Company’s circular (the “Circular”) dated 8 October 2008, which have been prepared by the directors of the Company, solely for illustrative purposes only, to provide information about how (i) the proposed acquisitions of 51% equity interest in each of Excalibur Futures Limited (“EFL”) (the “Proposed EFL Acquisition”) and Excalibur Securities Limited (“ESL”) (the “Proposed ESL Acquisition”) (collectively the “Proposed Acquisitions”), (ii) placing of convertible bonds of a principal amount of HK$50 million with zero coupon due in three years from the date of issue (the “Placing CB”) and the repayment

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

of the outstanding borrowings from Kingston Finance Limited; (iii) the proposed issue of remuneration shares and remuneration warrants (the Proposed Remuneration Shares and Remuneration Warrants”); and (iv) placing of new shares (the “Placing Shares”) as set out in Part A of this Appendix might have affected the financial information of the Group. The basis of preparation of the Unaudited Pro Forma Financial Information is set out on pages 196 and 197 of the Circular.

Respective Responsibilities of Directors of the Company and Reporting Accountants

Basis of Opinion

– 196 –

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

the financial position of the Enlarged Group as at 31 March 2008 or any future date; or
the financial results and cash flows of the Enlarged Group for the year ended 31 March 2008 or for any future period.

Opinion

In our opinion:

a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;
b) such basis is consistent with the accounting policies of the Group; and
c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Yours faithfully,

For and on behalf of

Shu Lun Pan Horwath Hong Kong CPA Limited Certified Public Accountants

Hong Kong

Shiu Hong NG

Director

Practising Certificate number P03752

– 197 –

GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

Directors’ interests in Shares and underlying shares of the Company

As at the Latest Practicable Date, none of the Directors or chief executive of the Company and their associates had any interest or short positions in any shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO), or which were required pursuant to Section 352 of the SFO to be entered in the register maintained by the Company referred to therein, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (“Model Code”).

Substantial Shareholders’ interests in Shares and underlying shares of the Company

As at the Latest Practicable Date, so far as known to the Directors or chief executive of the Company, the following persons (other than the Directors or chief executive of the Company) had, or were deemed or taken to have interests or short position in the Shares or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying the rights to vote in all circumstances at general meetings of the Company or any other member of the Enlarged Group:

			Approximate
		Number of	shareholding
Name of Shareholders	Capacity	Shares held	percentage
Good Treasure	Beneficial owner	108,000,000	23.27%
Holdings Limited		(Long position)
(Note 1)
Mr. Li Chun Sing,	Interest of controlled	108,000,000	23.27%
Andrew	corporation	(Long position)
AWH Fund Ltd.	Beneficial owner	27,366,000	5.90%
(Note 2)

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GENERAL INFORMATION

APPENDIX V

Notes: (1) Good Treasure Holdings Limited is a company incorporated in the British Virgin Islands and whose entire equity interests is beneficially wholly-owned by Mr. Li Chun Sing, Andrew.
(2) The interest of AWH Fund Ltd. in the Company is based on the information available on the website of the Stock Exchange as at the Latest Practicable Date.

Save as disclosed above, as at the Latest Practicable Date and so far as known to the Directors or chief executive of the Company, no other person (other than the Directors or chief executive of the Company) had any interests or short position in the Shares or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under provisions of Divisions 2 and 3 of Part XV of the SFO, or recorded in the register kept by the Company pursuant to Section 336 of the SFO, or who were, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying the rights to vote in all circumstances at general meetings of the Company or any other member of the Enlarged Group and none of the Directors held any directorship or employment in a company which has an interest or short position in the Shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 or Part XV of the SFO.

3. COMPETING BUSINESS

As at the Latest Practicable Date, so far as the Directors were aware, none of the Directors or their respective associates had any interest in any business which competes or may compete, either directly or indirectly, with the business of the Enlarged Group or have or may have any other conflicts of interest with the Enlarged Group pursuant to the Listing Rules.

4. DIRECTORS’ SERVICE CONTRACTS

Mr. Yeung Kwok Leung, the qualified accountant of the Company and an executive Director, entered into a service agreement with the Company commencing from 1 August 2006 for a term of one year and subject to provisions on removal, re-election and retirement by rotation in accordance with the articles of association of the Company. He also entered into an employment contract with one of the subsidiary in the Group.

Save as disclosed herein, as at the Latest Practicable Date, none of the Directors have entered into any service contract with the Company or any member of the Enlarged Group or any of its subsidiaries or associated companies in force, which was entered into or amended within six months prior to the Latest Practicable Date, or is continuous with a notice period of 12 months to run irrespective of the notice period (excluding contracts expiring or determinable by the employer within one year without payment of compensation, other than statutory compensation).

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GENERAL INFORMATION

APPENDIX V

5. MATERIAL CONTRACTS

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

(a) the sale and purchase agreement dated 27 February 2008 (as amended on 30 May and 31 July 2008) and the supplemental agreement dated 19 September 2008 entered into between Mr. Lao and the Purchaser in relation to the acquisition of 51% of the issued share capital of Excalibur Securities at the consideration of HK$20 million, to be satisfied by the issue of convertible notes by the Company to Mr. Lao;
(b) the conditional placing agreement dated 27 February 2008 (as amended on 30 May and 31 July 2008) entered into between the Company and Kingston Securities Limited in relation to the placing of a principal amount of HK$50 million convertible notes;
(c) the engagement letter dated 15 April 2008 entered into between the Company and Veda Capital Limited pursuant to which, among others, the Company agreed to issue certain remuneration shares and remuneration warrants to Veda Capital Limited as more particularly set out in the circular of the Company dated 30 June 2008;
(d) the placing agreement entered into between the Company and Get Nice Securities Limited in relation to the placing of 80,000,000 placing shares on a fully underwritten basis;
(e) the Memorandum; and
(f) the Formal Agreement.

6. EXPERTS AND CONSENTS

(a) The following are the qualifications of the expert who has given its opinions and advice which are included in this circular:

Name Qualification Shu Lun Pan Horwath Hong Kong Certified Public Accountants CPA Limited (“SLP Horwath”) K. H. Chan & Company Certified Public Accountants (“KHChan & Co.”)

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GENERAL INFORMATION

APPENDIX V

(b) None of SLP Horwath and KHChan & Co. has any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.
(c) Each of SLP Horwath and KHChan & Co. has given and has not withdrawn its written consent to the issue of this circular, with the inclusion of the references to its name and/or its opinion in the form and context in which they are included.

7. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened by or against any member of the Group.

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

None of the Directors has any direct or indirect interests in any assets which have been acquired or disposed of by or leased to any member of the Enlarged Group or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group since 31 March 2008, being the date to which the latest published audited consolidated accounts of the Group were made up.

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

As at the Latest Practicable Date, none of Directors or their respective associates was interested in any business apart from the business of the Enlarged Group, which competed or was likely to compete, either directly or indirectly, with that of the Enlarged Group.

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GENERAL INFORMATION

APPENDIX V

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours on any weekday (public holidays excepted) at the office of the Company at 1702-3, 17th Floor, Skyline Commercial Centre, 71-77 Wing Lok Street, Sheung Wan, Hong Kong from the date of this circular up to and including the date of the EGM:

(a) the articles of association of the Company;
(b) the annual reports of the Company for the two years ended 31 March 2007 and 2008 as set out in Appendix I;
(c) the annual report of Excalibur Futures for the two years ended 31 December 2006 and 2007 and the accountants’ report of Excalibur Futures for the year ended 31 December 2007 issued by KHChan & Co. as set out in Appendix IIA and IIB to this circular;
(d) the accountants’ report of Excalibur Securities for the year ended 31 December 2007 issued by KHChan & Co. as set out in Appendix IIIA to this circular;
(e) the unaudited pro forma financial information of the enlarged Group with Excalibur Securities;
(f) the unaudited pro forma financial information of the Enlarged Group issued by SLP Horwath as set out in Appendix IV to this circular;
(g) the working capital comfort letter as provided by SLP Horwath to the Board pursuant to the requirements of rule 14.66(4) of the Listing Rules;
(h) the letters of consent from SLP Horwath and KHChan & Co. referred to under “Experts and Consents” in this appendix;
(i) the material contracts referred to in the paragraph headed “Material Contracts” in this appendix;
(j) the service contracts referred to in the paragraph headed “Directors’ Service Contracts” in this appendix; and
(k) the circular of the Company dated 8 October 2008.

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GENERAL INFORMATION

APPENDIX V

10. MISCELLANEOUS

(a) The registered office of the Company is located at P.O. Box 309, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies.
(b) The head office and principal place of business of the Company in Hong Kong is at 1702-3, 17th Floor, Skyline Commercial Centre, 71-77 Wing Lok Street, Sheung Wan, Hong Kong.
(c) The Hong Kong branch share registrar and transfer office of the Company is Union Registrars Limited of Rooms 1901-02, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong.
(d) The qualified accountant is Mr. Yeung Kwok Leung who is a fellow member of the Association of Chartered Certified Accountants and an associate member of the Hong Kong Institute of Certified Public Accountants.
(e) The company secretary of the Company is Ms. Chow Man Ngan who is a member of The Hong Kong Institute of Chartered Secretaries.
(f) The English text of this circular shall prevail over the Chinese text in the event of inconsistency.

– 203 –

NOTICE OF EGM

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 290)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (“ EGM ”) of China Conservational Power Holdings Limited (“ Company ”) will be held at Room 3503, 35th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong on Monday, 3 November 2008 at 11:30 a.m. for the purposes of considering and, if thought fit, passing, with or without amendments or modifications, the following resolutions of the Company:

SPECIAL RESOLUTION

“ THAT , subject to the necessary approval of the Registrar of Companies in the Cayman Islands, the name of the Company be changed to “ China Fortune Group Limited ” and the Chinese name of the Company be changed to “ 中國富強集團有限公司 ””.

ORDINARY RESOLUTION

“ THAT :
(a) the formal agreement dated 19 September 2008 (“ Formal Agreement ”) entered into between Pioneer (China) Limited (“ Pioneer ”) as vendor and Fortune Financial (Holdings) Ltd. (formerly known as Yew Sang Hong Investment Services Limited) (“ Purchaser ”), a wholly-owned subsidiary of the Company, as purchaser, in respect of the acquisition of 51% of the issued share capital of Excalibur Futures Limited by the Purchaser at the consideration of HK$10.2 million, to be satisfied by the issue of a promissory note in the amount of HK$10.2 million by the Purchaser to Pioneer (“ EFL Acquisition ”), a copy of which has been produced to the meeting marked “A” and signed by the Chairman of the meeting for the purpose of identification, and the execution thereof and implementation of all transactions thereunder be and are hereby approved, ratified and confirmed; and

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NOTICE OF EGM

(b) the directors of the Company be and are hereby authorised to sign, execute, perfect and deliver all such documents and do all such deeds, acts, matters and things (including under seal where applicable) as they may in their absolute discretion consider necessary or desirable for the purpose of or in connection with the implementation of the Formal Agreement and the EFL Acquisition, including, without limitation, the entering into of all other documents in connection thereunder and all transactions and other matters contemplated thereunder or ancillary thereto, to waive compliance from and/or agree to any amendment or supplement to any of the provisions of the Formal Agreement and all other documents and transactions in connection thereunder which in their opinion is necessary or desirable to effect or implement any other matters referred to in this resolution.”

By order of the Board

China Conservational Power Holdings Limited Ng Cheuk Fan, Keith Managing Director

Hong Kong, 8 October 2008

Principal Place of Business in Hong Kong: Registered Office: 1702-3, 17th Floor P.O. Box 309 Skyline Commercial Centre Ugland House 71-77 Wing Lok Street South Church Street Sheung Wan George Town, Grand Cayman Hong Kong Cayman Islands British West Indies

– 205 –

NOTICE OF EGM

Notes:

Any member of the Company entitled to attend and vote at the EGM may appoint one or more than one proxy to attend and to vote in his stead. A proxy need not be a member of the Company.
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 of the Company as if he was solely entitled thereto; but if more than one or such joint holders be present at the EGM personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such share shall alone be entitled to vote in respect thereof.
In order to be valid, the proxy form duly completed and signed in accordance with the instructions printed thereon together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof must be delivered to the Company’s branch registrar and transfer office in Hong Kong, Union Registrars Limited, at Rooms 1901-02, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof.
Whether or not you propose to attend the EGM in person, you are strongly urged to complete and return the proxy form in accordance with the instructions printed thereon. Completion and return of the proxy form will not preclude you from attending the EGM and voting in person if you so wish. In the event that you attend the EGM after having lodged the proxy form, it will be deemed to have been revoked.

As at the date of this notice, the Company’s Board of Directors consists of three Executive Directors, namely Mr. Sun Tak Yan, Desmond (Chairman), Mr. Ng Cheuk Fan, Keith (Managing Director) and Mr. Yeung Kwok Leung; and three Independent Non-executive Directors, namely Mr. Tam B Ray Billy, Mr. Ng Kay Kwok and Mr. Lam Ka Wai, Graham.

– 206 –

AI assistant

Television Broadcasts Limited — Proxy Solicitation & Information Statement 2008

49261_rns_2008-10-06_67287ef1-c43d-4863-a5ca-51db290c0d8a.pdf

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

VERY SUBSTANTIAL ACQUISITION OF 51% INTEREST IN EXCALIBUR FUTURES LIMITED PROPOSED CHANGE OF COMPANY NAME AND NOTICE OF EXTRAORDINARY GENERAL MEETING

Financial Adviser to the Company

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM THE BOARD

VERY SUBSTANTIAL ACQUISITION OF 51% INTEREST IN EXCALIBUR FUTURES LIMITED AND PROPOSED CHANGE OF COMPANY NAME

INTRODUCTION

LETTER FROM THE BOARD

THE EFL ACQUISITION

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Promissory Note

LETTER FROM THE BOARD

EFL Profit Guarantee

Reasons for and benefits of the EFL Acquisition

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Listing Rules implication

BUSINESS PROSPECTS

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE EFL ACQUISITION

Net assets

Earnings

LETTER FROM THE BOARD

Gearing ratio

PROPOSED CHANGE OF COMPANY NAME

Reasons for the proposed change of Company name

LETTER FROM THE BOARD

Effect on the change of Company name

Trading arrangements and share certificates

LETTER FROM THE BOARD

CONTINUED SUSPENSION OF TRADING IN THE SHARES

EGM

LETTER FROM THE BOARD

PROCEDURES FOR DEMANDING A POLL BY SHAREHOLDERS

RECOMMENDATIONS

LETTER FROM THE BOARD

PROPOSED ACQUISITION OF EXCALIBUR SECURITIES

ADDITIONAL INFORMATION

China Conservational Power Holdings Limited

A. SUMMARY OF FINANCIAL INFORMATION

RESULTS

ASSETS AND LIABILITIES

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

BALANCE SHEET

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Notes:

(a) Share option reserve

(b) Special reserve

(c) Capital reserve

(d) Translation reserve

CONSOLIDATED CASH FLOW STATEMENT

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

NOTES TO THE FINANCIAL STATEMENTS

1. Organisation and operations

2. Adoption of new and revised Hong Kong Financial Reporting Standards

Effective for annual periods beginning on or after

3. Principal accounting policies

(a) Statement of compliance

APPENDIX I

APPENDIX I

(c) Basis of consolidation

(d) Business combinations

(e) Subsidiaries

(f) Associates

(g) Jointly-controlled entities

(h) Goodwill

(i) Property, plant and equipment

(j) Intangible assets (other than goodwill)

(k) Impairment of assets excluding goodwill

Television Broadcasts Limited Proxy Solicitation & Information Statement 2008