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 or transferred all your shares in China Fortune Group Limited (the “Company”), you should at once hand this circular together with the enclosed form of proxy to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

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

==> picture [184 x 130] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 290)

Website: http://www.290.com.hk

(I) VERY SUBSTANTIAL ACQUISITION PROPOSED ACQUISITION OF 49% INTEREST IN A COMPANY ENGAGED IN BROKERAGE SERVICES FOR DEALING IN FUTURES CONTRACTS IN THE PRC AND

(II) NOTICE OF EXTRAORDINARY GENERAL MEETING

A notice convening an extraordinary general meeting (the “EGM”) of the Company to be held on 13 January 2010 at 12:00 noon at 13/F, Sunning Plaza, 10 Hysan Avenue, Causeway Bay, Hong Kong is set out on pages 199 to 200 of this circular. A form of proxy for the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are encouraged to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the branch share registrar of the Company in Hong Kong, Union Registrars Limited at 18/F, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong as soon as possible and in any event no later than 48 hours before the time appointed for the holding of the EGM. Completion and return of the enclosed form of proxy will not preclude you from attending and voting in person at such meeting or any adjournment meeting should you so wish.

24 December 2009

			Page
DEFINITIONS. . .		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1-4
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			5-13
APPENDIX I	–	FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . .	14-106
APPENDIX II	–	ACCOUNTANT’S REPORT OF
		THE TARGET COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . .	107-143
APPENDIX III	–	UNAUDITED PRO FORMA FINANCIAL
		INFORMATION OF THE ENLARGED GROUP. . . . . . . . .	144-156
APPENDIX IV	–	ADDITIONAL FINANCIAL INFORMATION OF
		THE GROUP AND THE TARGET COMPANY. . . . . . . . . .	157-175
APPENDIX V	–	VALUATION REPORT ON PROPERTIES HELD BY
		THE ENLARGED GROUP. . . . . . . . . . . . . . . . . . . . . . . . . . .	176-187
APPENDIX VI	–	GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . .	188-198
NOTICE OF EGM		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	199-200

– i –

DEFINITIONS

Unless the context otherwise requires, terms or expressions used in this circular shall have the meanings ascribed to them below:

“Acquisition”	the proposed acquisition of the Sale Shares by the Purchaser
	from the Vendor pursuant to the Share Transfer Agreement;
“Announcement”	announcement of the Company dated 27 May 2009 in relation
	to, among others, the Acquisition;
“associate”	has the meaning ascribed thereto in the Listing Rules;
“Board”	the board of Directors;
“Business Day”	A day (other than Saturday and days on which a tropical
	cyclone warning No. 8 or above or a “black rainstorm warning
	signal” is hoisted in Hong Kong at any time between 9:00 a.m.
	and 5:00 p.m.) on which banks are open in Hong Kong for
	general banking business;
“Conditions Precedent”	Conditions for completion of the Share Transfer Agreement
	and the transactions contemplated thereunder;
“Company”	China Fortune Group Limited, a company incorporated in the
	Cayman Islands with limited liability and the Shares of which
	are listed on the Stock Exchange;
“connected person”	Has the meaning ascribed thereto in the Listing Rules;
“Directors”	the directors of the Company;
“EGM”	an extraordinary general meeting of the Company to be held on
	13 January 2010 at 12:00 noon to approve the Acquisition and
	the transactions contemplated thereunder;
“Enlarged Group”	the Group immediately after the completion of the Acquisition;
“First Deposit”	a deposit of RMB3.00 million (equivalent to approximately
	HK$3.41 million) paid by the Purchaser pursuant to the terms
	of the First Memorandum;

– 1 –

DEFINITIONS

“First Memorandum”	A non-legally binding memorandum entered into between the
	Purchaser and the Vendor on 9 December 2008;
“Group”	the Company and its subsidiaries;
“Hong Kong”	The Hong Kong Special Administrative Region of the PRC;
“Independent Third	third party(ies) independent of the Company and connected
Party(ies)”	persons (as defined under the Listing Rules) of the Company
	and are not connected persons (as defined under the Listing
	Rules) of the Company;
“Last Trading Day”	22 May 2009, being the last trading day before the publication
	of the Announcement;
“Latest Practicable Date”	18 December 2009, being the latest practicable date prior to
	the printing of this circular for inclusion of certain information
	in this circular;
“Listing Committee”	the listing committee of the Stock Exchange for considering
	applications for listing and the granting of listing;
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange;
“Purchaser”	Fortune Financial (Holdings) Limited, a company incorporated
	in 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;
“PRC Audited Report”	the audit report of the Target Company for the financial year
	ended 31 December 2008;
“Sale Shares”	the 49% equity interest in the Target Company;

– 2 –

DEFINITIONS

“Second Deposit” a deposit of RMB30.04 million (equivalent to approximately HK$34.14 million) paid by the Purchaser pursuant to the terms of the Second Memorandum; “Second Memorandum” a non-legally binding memorandum entered into between the Purchaser and the Vendor on 4 March 2009; “SFC” the Securities and Futures Commission;

“SFC” “Share(s)”

“Share(s)” share(s) of HK$0.10 each in the capital of the Company; “Shareholder(s)” holder(s) of the Shares; “Share Transfer Agreement” the share transfer agreement dated 22 May 2009 entered into among the Purchaser and the Vendor in relation to the Acquisition; “Share Transfer Completion” Completion of the Share Transfer Agreement;

“Share Transfer Date”

the date on which all Conditions Precedent have been fulfilled and the Purchaser or its nominated person becomes the only legally registered owner of the Sale Shares in the Target Company and which has properly been recorded on the new memorandum and articles of association of the Target Company and its register of members;

“Stock Exchange” The Stock Exchange of Hong Kong Limited; “Target Company” 新紀元期貨有限公司 (New Era Futures Co., Ltd[#] ), a company established in the PRC engaged in brokerage services for dealing in financial and commodity futures contracts in the PRC;
“Third Deposit” a deposit of RMB5.00 million (equivalent to HK$5.68 million) paid by the Purchaser to the Vendor in cash within 5 business days upon the signing of the Share Transfer Agreement;

– 3 –

DEFINITIONS

“Transfer” the transfer of the Sale Shares from the Vendor to the Purchaser under the Share Transfer Agreement;
“Valuation Date” 31 October 2009, the date on which the valuation on the assets and liabilities of the Target Company as set out in the Valuation Report;
“Valuation Report” the report dated 9 November 2009 on the valuation on the property interests owned by the Target Company as at 31 October 2009;
“Vendor” 深圳市華德石油化工有限公司 ( S h e n z h e n H u a d e Petrochemical Company Limited[#] ), a company established in the PRC;
“HK$” Hong Kong dollars, the lawful currency of Hong Kong; “RMB” Renminbi, the lawful currency of the PRC; and “%” per cent.

For the purpose of this circular, unless otherwise indicated, conversions of RMB into HK$ is calculated at the approximate exchange rate of RMB0.88 to HK$1.00. This exchange rate is adopted for the purpose of illustration only and does not constitute a representation that any amounts have been, could have been, or may be, exchanged at this or any other rate at all.

the English translation of the Chinese name is for information purpose only and should not be regarded as the official English translation of such Chinese name.

– 4 –

LETTER FROM THE BOARD

==> picture [184 x 129] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 290)

Website: http://www.290.com.hk

Non-executive Director: Mr. Wong Kam Fat, Tony (Chairman)

Executive Directors:

Mr. Ng Cheuk Fan, Keith (Managing Director) Mr. Yeung Kwok Leung

Independent Non-executive Directors: Mr. Ng Kay Kwok Mr. Lam Ka Wai, Graham Mr. Tam B Ray Billy

Registered office: P.O. Box 309, Ugland House Grand Cayman, KY1-1104 Cayman Islands

Head office and principal place of business in Hong Kong: 13/F, Sunning Plaza 10 Hysan Avenue Causeway Bay, Hong Kong

24 December 2009

To the Shareholders and for information purpose only, holders of convertible securities

Dear Sirs or Madams,

VERY SUBSTANTIAL ACQUISITION PROPOSED ACQUISITION OF 49% INTEREST IN A COMPANY ENGAGED IN BROKERAGE SERVICES FOR DEALING IN FUTURES CONTRACTS IN THE PRC

INTRODUCTION

Reference is made to the announcements of the Company dated 9 December 2008 and 4 March 2009 as well as the Announcement, in relation to, among others, the entering into of the First Memorandum, the Second Memorandum and the Share Transfer Agreement pursuant to which the Company had made payments of the First Deposit, the Second Deposit and the Third Deposit, respectively, in respect of the proposed purchase of the Sale Shares, representing 49% equity interest of the Target Company, at a Consideration of RMB58.83 million (equivalent to approximately HK$66.85 million). The Acquisition is conditional upon fulfillment of all Conditions Precedent.

– 5 –

LETTER FROM THE BOARD

In accordance with the Listing Rules, the Acquisition constitutes a very substantial acquisition for the Company and is subject to the approval of the Shareholders at the EGM. The purpose of this circular is to provide the Shareholders with, among other things, (i) further details of the Acquisition and information of the Target Company; (ii) the accountants’ report of the Target Company; (iii) pro forma financial information of the Enlarged Group; and (iv) a notice of the EGM convened for the purpose of, among others, approving the Acquisition and the transactions contemplated thereunder as required under the Listing Rules.

SHARE TRANSFER AGREEMENT

Date: 22 May 2009

Parties: (1) the Purchaser (2) the Vendor

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, the Vendor and its ultimate beneficial owners are third parties independent of the Company and its connected persons. The Vendor is principally engaged in the production and sales of petrochemical products. The Target Company is legally and beneficially owned as to 49% by the Vendor and as to 24.14%, 18.9% and 7.96% by three other respective registered owners. All the registered owners are Independent Third Parties to the Company, independent of and not connected with the Company and its associates.

Consideration:

The aggregate consideration payable by the Purchaser for the Sale Shares is RMB58.83 million (equivalent to approximately HK$66.85 million) (the “Consideration”). The Consideration for the Acquisition was determined after arm’s length negotiations between the Vendor and the Purchaser and the basis of determining and arriving at the Consideration was by making reference to the PRC Audited Report, the completion of capital injection of RMB33.04 million (equivalent to approximately HK$37.55 million) by the Vendor to the Target Company, the future prospects of the Target Company as discussed in the section headed “Management Discussion and Analysis of the

– 6 –

LETTER FROM THE BOARD

Target Company”, the futures brokerage business in the PRC and the comparison of the price-toearnings ratios (“PER”) of those market comparable companies (“Comparable Companies”), which have similar principal business as the Target Company’s business. Details of the findings on the Comparable Companies are summarized in the following table:–

		Earnings per
		share set out
		in the latest
		published
		audited
		financial
		statements
	Closing price	available
	as at	as at	PER as at
	the Last	the Last	the Last
Company (stock code)	Trading Day	Trading Day	Trading Day
	(HK$)	(HK$)	(times)
Celestial Asia Securities Holdings
Limited (1049)	1.500	(1.9800)	N/A
China Everbright Limited (165)	16.800	0.6390	26.29
Emperor Capital Group Limited (717)	0.420	0.0739	5.68
First Shanghai Investments Limited (227)	1.050	(0.0799)	N/A
Get Nice Holdings Limited (64)	0.375	(0.0060)	N/A
Cinda International Holdings Limited (111)	1.800	(0.0264)	N/A
South China Financial Holdings
Limited (619)	0.068	(0.0371)	N/A
Sun Hung Kai & Co. Limited (86)	5.150	0.2040	25.25
SW Kingsway Capital Holdings
Limited (188)	0.171	(0.0190)	N/A
Taifook Securities Group Limited (665)	2.110	0.2761	7.64
Tanrich Financial Holdings Limited (812)	0.260	(0.0560)	N/A
Upbest Group Limited (335)	0.730	0.0900	8.11
Quam Limited (952)	0.370	(0.0104)	N/A
REXLot Holdings Limited (555)	0.580	0.0368	15.76
Shenyin Wanguo (H.K.) Limited (218)	4.150	0.0271	153.14
Value Convergence Holdings Limited (821)	0.780	0.0205	38.05
Average			34.99
Maximum			153.14
Minimum			5.86

Source: The website of the Stock Exchange.

Note: The Last Trading Day is the date of the Share Transfer Agreement.

– 7 –

LETTER FROM THE BOARD

Based on the above table, the PERs of the Comparable Companies ranged from approximately 5.68 times (Emperor Capital Group Limited) to 153.14 times (Shenyin Wanguo (HK) Limited) with an average of approximately 34.99 times as at the date of the Share Transfer Agreement.

Based on the profit of the Target Company for the year ended 31 December 2008, the Consideration of RMB58.83 million represents a price earnings multiple of approximately 22.49 times which is within the range and below the average of the PERs of the Comparable Companies.

The Consideration has been settled by way of setting off the First Deposit, the Second Deposit, and the Third Deposit has been paid by cash within five business days upon signing the Share Transfer Agreement, and the remaining balance of RMB20.79 million (equivalent to approximately HK$23.63 million) is to be paid by cash, within five business days of the Share Transfer Date.

Conditions Precedent for Share Transfer Completion:

Completion of the Acquisition shall be conditional upon fulfillment of the following conditions on or before 30 June 2010 (the “Long-stop Date”) (or such later date as the parties may agree in writing):

a) completion of the due diligence review on the affairs of the Target Company, including but not limited to the shareholding structure, legal, financial, licences, taxation, staffing arrangements and other aspects, to the satisfaction of the Purchaser or its nominee(s);
b) all necessary consents, confirmations, permits, approval, licences and authorizations having been obtained from the holding company of the Purchaser’s board of directors, shareholders, the Stock Exchange, the SFC and all other relevant governmental or regulatory and other authorities in connection with the Acquisition and the transactions contemplated under the Share Transfer Agreement;
c) all necessary consents, confirmations, permits, approval, licences and authorizations having been obtained from the Vendor’s board of directors, shareholders, China Securities Regulatory Commission, Future Supervision and Management Institutions of State Council, and all other relevant governmental or regulatory and other authorities, agencies and departments in connection with the Acquisition and the transactions contemplated under the Share Transfer Agreement;
d) the Vendor obtaining the unconditional and irrevocable waiver from the other shareholders of the Target Company on the pre-emptive rights on the Transfer, and the approval of all shareholders of the Target Company approving the Transfer; and

– 8 –

LETTER FROM THE BOARD

e) the Vendor completes the register of changes and transfer formalities with the State Industrial and Commercial Administration and any other related regulatory authorities and covenants that the Purchaser or its nominated person becomes the only legally registered owner of the Sale Shares, and which has been properly recorded on the new memorandum and articles of association of the Target Company and its register of members.

The Company has engaged Kangda Law Firm (“Kangda”), a PRC law firm, to advise on the Acquisition. The Company are advised by Kangda, that among others, to be qualified as a shareholder of a futures company in the PRC, the Hong Kong intermediary must be a licensed corporation under the SFO and permitted to engage in regulated activities and must not hold more than 49% of the sino-foreign jointly owned entity.

Both the Purchaser and the Vendor agreed that none of the Conditions Precedent can be waived. In the event that any of the above Conditions Precedent cannot be fulfilled on or before the Long-stop Date or such later date as the parties may agree in writing, the Share Transfer Agreement will be terminated automatically. Save for the defaulting party’s failure to satisfy the Conditions Precedent, no party has any further legal liability under the Share Transfer Agreement and the Vendor has to refund and return to the Purchaser all the deposits received.

The Third Deposit was and the remaining balance of the Consideration are to be financed by the internal resources of the Group. The deposit payments form part of a mechanism agreed at arms length between the Purchaser and the Vendor to secure the performance of the contracting parties under the Share Transfer Agreement before the Share Transfer Completion. The Directors consider such arrangements to be fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Share Transfer Completion:

Completion of the Share Transfer Agreement shall take place upon the fulfillment of all Conditions Precedents.

Undertaking:

As mentioned in the Announcement, the Purchaser is to conduct an audit on the assets and liabilities of the Target Company for the period from 31 December 2008 to 30 April 2009 (the “April Audit”). The Purchaser and the Vendor subsequently agreed to modify such undertaking so that an audit on the assets and liabilities of the Target Company for the period from 31 December 2008 to 30 June 2009 (the “June Audit”) is to be conducted instead. In this connection, the Purchaser has appointed SHINEWING (HK) CPA Limited (“SHINEWING”) to conduct the June Audit the text of which is set out in Appendix II to this circular.

– 9 –

LETTER FROM THE BOARD

Should the net asset value as set out in the June Audit be lower than the net asset value as at 31 December 2008, the parties agreed that the Vendor shall deposit cash representing 49% of such shortfall to the Target Company so as to sustain the Target Company’s net asset value as well as to provide with additional reserve as the Target Company intends to actively pursue its PRC business (“Shortfall”). Based on the June Audit, there was no Shortfall.

Breach of Contract:

It was agreed that if the Share Transfer Agreement cannot be completed due to the default of any party, the party in default shall pay liquidated damages of RMB2.00 million (equivalent to approximately HK$2.27 million) to the counter party (the “Indemnity”). Should the Share Transfer Agreement lapse, the Vendor has to refund and return all the deposits paid, in accordance with the Purchaser’s instruction.

INFORMATION ON THE TARGET COMPANY

The Target Company was established in the PRC in 1995 and provides brokerage services for dealing in financial and commodity futures contracts in the PRC and is owned as to 49% by the Vendor and as to 24.14%, 18.9% and 7.96% by 徐州新世紀經濟發展有限公司 (Xuzhou New Era Economic Development Company Limited[#] ), 徐州市勝券投資有限公司 (Xuzhou City Shengquan Investment Company Limited[#] ), and 徐州潤東實業集團有限公司 (Xuzhou Rundong Industry Group Company Limited[#] ), respectively. The Target Company is a licensed broker approved by the China Securities Regulatory Commission.

Based on the PRC Audited Report prepared in accordance with 財政部2006年頒布的《企業會計準則》(Accounting Standard for Business Enterprises (2006 revised)[#] ), as at 31 December 2008, the Target Company has an audited net asset value of approximately RMB35.70 million (equivalent to approximately HK$40.57 million). The following table shows certain financial information of the Target Company for the two years ended 31 December 2008 and 31 December 2007:

	For the	For the
	year ended	year ended
	31 December	31 December
	2008	2007
	RMB	RMB
Net Profit before taxation	7,193,894	471,044
Net Profit after taxation	5,235,564	272,138

the English translation of the Chinese names are for information purpose only and should not be regarded as the official English translation of such Chinese names.

– 10 –

LETTER FROM THE BOARD

RECONCILIATION STATEMENT

Disclosure of the reconciliation of the interest in the properties of the Enlarged Group and the valuation of such property interest as required under Rule 5.07 of Listing Rules is set out below:

Net book value of the properties of the Enlarged Group as at 30 June 2009 Movement for the period from 30 June 2009 to 31 October 2009 Depreciation Net book value of the properties of the Enlarged Group as at 31 October 2009 Valuation of the properties of the Enlarged Group as at 31 October 2009 Valuation surplus	RMB 4,460,000 (42,000) 4,418,000 8,100,000 3,682,000

REASONS FOR THE ACQUISITION

The Group is principally engaged in the provision of brokerage services for securities, futures and options and margin financing; electrical engineering contracting; and sale of electrical goods.

By entering into of the Share Transfer Agreement, the Company can extend the scope of its securities business to financial and commodity futures contracts dealings in the PRC to prepare itself as a full range financial services company. The Acquisition is in line with one of the existing principal business of the Group, being provision of brokerage services for securities, futures and options and margin financing. The Directors believe that the expanded scope of business of the Group into the futures brokerage business in the PRC would provide an extra income source for the Group. The Directors consider that the Acquisition is an appropriate strategic expansion and beneficial to the Group.

The Directors considered that the Acquisition could maintain the strategic partnership with the other shareholders of the Target Company, which possesses management experience in the futures brokerage services in the PRC and thus is in the interests of the Shareholders and the Company as a whole.

– 11 –

LETTER FROM THE BOARD

The Directors consider that the terms of the Share Transfer Agreement are fair and reasonable and on normal commercial terms and that the Acquisition is in the interests of Company and the Shareholders as a whole.

FINANCIAL EFFECTS OF THE ACQUISITION

Assets

The audited consolidated total assets of the Group as at 31 March 2009, as extracted from the annual report of the Company for the year ended 31 March 2009, was approximately HK$242,706,000. As set out in Appendix III to this circular, assuming Completion had taken place on 31 March 2009, the unaudited pro forma total assets of the Enlarged Group would have been increased to approximately HK$280,872,000, in which, the increase relating to the Acquisition is approximately HK$28,809,000.

Earnings

Following Completion, the Company will indirectly hold 49% equity interest in the Target Company through the Purchaser and the Taget Company will therefore become an associate of the Group. The Group will apply the equity method to account for the Acquisition.

The audited net profit for the year ended 31 March 2009 as extracted from the annual report of the Group was approximately HK$15,713,000. According to the unaudited pro forma income statement of the Enlarged Group for the year ended 31 March 2009 as if the Completion had taken place on 1 April 2008, the unaudited pro forma net profit of the Enlarged Group would have been decreased to approximately HK$13,801,000 after taking into account the share of profits of the Target Company of HK$2,898,000 arising from the Acquisition and the yearly inputed interest expenses on the convertible notes issued for the acquisition of 49% equity interest in each of Excalibur Securities Limited and Excalibur Futures Limited of HK$4,810,000.

Gearing ratio

As at 31 March 2009, the Group’s gearing ratio calculated as a percentage of total borrowings over total shareholder’s equity was approximately 21.98%. As set out in Appendix III to this circular, the gearing ratio of the Enlarged Group will increase to 35% upon completion of the Acquisition.

– 12 –

LETTER FROM THE BOARD

LISTING RULES REQUIREMENTS

The Acquisition constitutes a very substantial acquisition of the Company under Chapter 14 of the Listing Rules. The Acquisition and the transactions contemplated thereunder will be subject to, amongst other things, the approval of the Shareholders at the EGM.

Pursuant to Rule 13.39(4) of the Listing Rules, all votes at the EGM will be taken by poll. Furthermore, any Shareholder with a material interest in the proposed transaction(s) and his associates will abstain from voting on resolution(s) approving that transaction(s). As far as the Directors are aware of, as at the Latest Practical Date, no Shareholders are required to abstain from voting at the EGM. The Company will announce the results of the poll in the manner set out in Rule 13.39(5) of the Listing Rules.

EGM

The notice of EGM is set out from 199 to 200 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 18/F, 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.

RECOMMENDATION

In light of the aforesaid, in particular, the benefits of the proposed Acquisition as discussed, the Board considers that the terms of the Acquisition are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favor of the resolution(s) as set out in the notice of the EGM attached thereto.

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 Fortune Group Limited Ng Cheuk Fan, Keith Managing Director

– 13 –

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 Reversal of impairment loss on investment deposits Reversal of/(charge for) provision for doubtful debts Other revenue Administrative expenses Finance costs Change in fair value of financial assets designated as fair value through profit or loss Decrease in fair value of investments held for trading Discount on acquisitions of subsidiaries Gain (loss) on disposal of subsidiaries Gain on deemed disposal of partial interests in a subsidiary Profit/(loss) before taxation Taxation Profit/(loss) for the year attributable to equity holders of the Company Dividends Earning/(loss) per share – basic	2009 HK$’000 15,562 (5,362) 8,500 – 2,386 (24,524) (4,162) 24,800 (2,313) 863 61 17 15,828 (115) 15,713 – 3.23 cents	2008 HK$’000 12,355 (4,944) 8,000 699 1,056 (18,638) (4,093) – (32) – (262) – (5,827) – (5,827) – (1.3 cents)	2007 HK$’000 6,504 (3,711) – (1,684) 250 (20,420) (2,573) – – – 9,196 – (12,438) (792) (13,230) – (2.9 cents)

– 14 –

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 Convertible loan notes Net assets Equity Share capital Reserves Equity attributable to equity holders of the parent Minority interests Total equity	2009 HK$’000 111,635 – – – 23,066 23,066 134,701 75,607 29,313 104,920 29,781 134,701	As at 31 March 2008 HK$’000 21,215 – 179 – – 179 21,036 46,407 (25,371) 21,036 – 21,036	2007 HK$’000 27,332
			– 469 – –
			469 26,863 46,407 (19,544) 26,863 – 26,863

– 15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

B. AUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following is the audited consolidated financial statements of the Group together with accompanying notes as extracted from the annual report of the Company for the year ended 31 March 2009.

CONSOLIDATED INCOME STATEMENT

For the year ended 31 March 2009

Notes Turnover 7 Cost of sales on securities and futures brokerage and margin financing Cost of sales on engineering contracting work Cost of sales on trading of electrical materials Other revenue 9 Depreciation on property, plant and equipment Salaries and allowances Reversal of impairment losses on investment deposits Change in fair value of financial assets designated as fair value through profit or loss Decrease in fair value of investments held for trading Discount on acquisitions of subsidiaries 42 Gain (loss) on disposal of subsidiaries 43 Gain on deemed disposal of partial interests in a subsidiary 44 Other operating and administrative expenses Finance costs 10 Profit (loss) before taxation Taxation 11 Profit (loss) for the year 12 Attributable to: Equity holders of the Company Minority interests Dividend 14 Earnings (loss) per share 15 Basic Diluted	2009 HK$’000 15,562 (3,590) (1,081) (691) 2,386 (800) (8,514) 8,500 24,800 (2,313) 863 61 17 (15,210) (4,162) 15,828 (115) 15,713 16,224 (511) 15,713 – 3.23 cents 3.19 cents	2008 HK$’000 12,355 (3,144) (354) (1,446) 1,755 (608) (8,595) 8,000 – (32) – (262) – (9,403) (4,093) (5,827) – (5,827) (5,827) – (5,827) – (1.26 cents) N/A

– 16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

As at 31 March 2009

Notes Non-current assets Property, plant and equipment 16 Intangible assets 17 Other non-current assets 18 Interests in associates 19 Investment in a jointly controlled entity 20 Deferred tax assets 37 Goodwill 21 Current assets Investments held for trading 22 Financial assets designated at fair value through profit or loss 23 Trade receivables 24 Other receivables, deposits and prepayments 25 Loan receivables 26 Investment deposits 27 Amount due from a minority shareholder of a subsidiary 28 Amount due from a related company 29 Amount due from a director 30 Pledged bank deposits 31 Bank balances and cash – trust 31 Bank balances and cash – general 31 Current liabilities Bank overdrafts – secured 31 Other borrowings – unsecured 32 Trade payables, other payables and accruals 33 Amount due to a related company 34 Amount due to a director 34 Obligations under finance leases 35 Tax payables Provisions 36 Net current assets	2009 HK$’000 4,792 980 2,262 – – 61 2,554 10,649 442 – 90,320 15,638 – 42,407 125 – 776 – 60,211 22,138 232,057 – – 83,139 – 10 – 850 940 84,939 147,118 157,767	2008 HK$’000 425 – 240 12 – – –
		677
		2,784 36,000 10,679 515 – – – 13 426 2,196 11,140 15,390
		79,143
		1,963 29,735 25,469 890 – 290 258 –
		58,605
		20,538
		21,215

– 17 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Capital and reserves Share capital 39 Reserves Equity attributable to equity holders of the Company Minority interests Total equity Non-current liabilities Obligations under finance leases 35 Convertible loan notes 38 Notes	75,607 29,313 104,920 29,781 134,701 – 23,066 23,066 157,767 2009 HK$’000	46,407 (25,371) 21,036 – 21,036 179 – 179 21,215 2008 HK$’000

– 18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year Ended 31 March 2009

			At	tributable to equity holders	tributable to equity holders	of the Company	of the Company	Total HK$’000 26,863 (5,827)
Share capital HK$’000 46,407 – 46,407 – 8,000 – – 20,000 – – – 1,200 75,607	Share premium HK$’000 233,184 – 233,184 – 12,000 (550) – – – – – – 244,634	Share options reserve HK$’000 1,208 – 1,208 – – – – – – – – – 1,208	Share warrants reserve HK$’000 – – – – – – – – – – – 552 552	Convertible loan notes equity reserve HK$’000 – – – – – – 32,250 (5,792) – – – – 26,458	Special reserve HK$’000 13,524 – 13,524 – – – – – – – – – 13,524	Capital reserve HK$’000 1,863 – 1,863 – – – – – – – – – 1,863	Accumulated losses HK$’000 (269,323) (5,827) (275,150) 16,224 – – – – – – – – (258,926)
								21,036 15,713 20,000 (550) 32,250 14,208 30,059 250 (17) 1,752
								134,701

– 19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

For the year Ended 31 March 2009

	2009	2008
	HK$’000	HK$’000
Operating activities
Profit (loss) before taxation	15,828	(5,827)
Adjustments for:
Finance costs	4,162	4,093
Decrease in fair value of investments
held for trading	2,313	32
Equity-settled share based payment	1,752	–
Depreciation of property, plant and equipment	800	608
Impairment losses recognised (reversed)
in respect of trade receivables	66	(199)
Impairment losses recognised in respect of
amount due from a related company	13	–
Impairment losses recognised in respect of
amount due from an associate	12	–
Impairment losses recognised (reversed)
in respect of other receivables	108	(500)
Reversal of impairment loss on investment
deposits	(8,500)	(8,000)
Bad debts written off	–	34
Gain on disposal of investments held for
trading	(1)	–
Gain on deemed disposal of partial interests
in a subsidiary	(17)	–
(Gain) loss on disposals of subsidiaries	(61)	262
Gain on disposals property,
plant and equipment	(29)	–
Write back of long outstanding trade payables,
other payables and accruals	(95)	(571)
Interest income	(124)	(331)
Write back of long outstanding amount
due to a related company	(890)	–
Discount on acquisitions of subsidiaries	(863)	–
Change in fair value of financial assets
designated as fair value
through profit or loss	(24,800)	–

– 20 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Operating cash flow before movements in working capital Decrease (increase) in other non-current assets Decrease in inventories Increase in trade receivables (Increase) decrease in other receivables, deposits and prepayments Increase in amount due from a director Increase in bank balances and cash – trust Increase in trade payable, other payables and accruals Increase in provisions Cash used in operations Income taxes paid Net cash used in operating activities Investing activities Proceeds from disposal of financial assets designated at fair value though profit or loss Decrease (increase) in pledged bank deposits Net cash inflow in respect of the acquisitions of subsidiaries (Note 42) Proceeds from disposal of property, plant and equipment Interest received Proceeds from disposal of investments held for trading Increased in investment deposits Purchase of property, plant and equipment Advanced to a minority shareholder of a subsidiary Net cash (outflow) inflow in respect of the disposal of subsidiaries (Note 43) Repayment from a related company Refunded of investment deposits Decrease in loans payable Net cash from investing activities	(10,326) 10 – (41,130) (3,114) (350) (13,642) 13,753 940 (53,859) (27) (53,886) 60,800 2,196 1,711 250 124 30 (33,907) (3,349) (125) (1) – – – 27,729 2009 HK$’000	(10,399) (35) 213 (634) 2,764 (426) (8,401) 9,184 – (7,734) – (7,734) – (62) – – 331 – – (911) – 1,135 26 8,000 (687) 7,832 2008 HK$’000

– 21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financing activities Proceeds from issue of convertible loan notes Proceeds from issue of new shares Capital contribution from a minority shareholder of a subsidiary Advanced from (repayment to) a director Repayment of borrowings Interest paid Payment for convertible loan notes issue expenses Payment for share issue expenses Repayment of obligations under finance leases Interest paid on obligations under finance leases New borrowings raised Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year, represented by: Bank balances and cash – general Bank overdrafts	50,000 20,000 250 10 (29,735) (3,335) (1,250) (550) (469) (53) – 34,868 8,711 13,427 22,138 22,138 – 22,138 2009 HK$’000	– – – (529) (6,802) (4,059) – – (290) (34) 22,424 10,710 10,808 2,619 13,427 15,390 (1,963) 13,427 2008 HK$’000

– 22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 March 2009

1. General

China Fortune Group Limited (the “Company”) was incorporated in Cayman Islands as an exempted company with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The trading of the Company’s shares has been suspended since 29 September 2005. After the fulfillment of all the resumption conditions and approved by the Listing Committee of the Stock Exchange, the Company had resumed its trading on 20 February 2009. Details of the resumption conditions and trading resumption were set out in the Company’s announcement dated 10 December 2008.

The addresses of the registered office and principal place of business of the Company are disclosed in the corporate information section of the annual report.

The consolidated financial statements are presented in Hong Kong dollars (“HK$”), which is also the functional currency of the Company.

The principal activities of the Company and its subsidiaries (the “Group”) are securities, futures and insurance brokerage, margin financing, electrical engineering contracting and trading of electrical goods. There was no significant change in the nature of the Group’s principal activities during the year.

2. Application of new and revised Hong Kong Financial Reporting Standards (“HKFRSs”)

In the current year, the Group has applied the following amendments and interpretations (“new HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) which are or have become effective.

Hong Kong Accounting Standard Reclassification of Financial Assets (“HKAS”) 39 & HKFRS 7 (Amendments) HK(IFRIC) – Interpretation Service Concession Arrangements (“INT”) 12 HK(IFRIC) – INT 14 HKAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

– 23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

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

HKFRSs (Amendments) Improvements to HKFRSs[1] HKFRSs (Amendments) Improvements to HKFRSs 2009[2] HKAS 1 (Revised) Presentation of Financial Statements[3] HKAS 23 (Revised) Borrowing Costs[3] HKAS 27 (Revised) Consolidated and Separate Financial Statements[4] HKAS 32 & HKAS 1 Puttable Financial Instruments and Obligations (Amendments) Arising on Liquidation[3] HKAS 39 (Amendment) Eligible hedged items[4] HKFRS 1 (Revised) First-time Adoption of HKFRS[4] HKFRS 1 & HKAS 27 Cost of an Investment in a Subsidiary, (Amendments) Jointly Controlled Entity or Associate[3] HKFRS 2 (Amendment) Vesting Conditions and Cancellation[3] HKFRS 3 (Revised) Business Combinations[4] HKFRS 7 (Amendment) Financial Instrument Disclosures – Improving Disclosures about Financial Instruments[3] HKFRS 8 Operating Segments[3] HK(IFRIC) – INT 9 & Embedded Derivatives[5] HKAS 39 (Amendments) HK(IFRIC) – INT 13 Customer Loyalty Programmes[6] HK(IFRIC) – INT 15 Agreements for the Construction of Real Estate[3] HK(IFRIC) – INT 16 Hedges of a Net Investment in a Foreign Operation[7] HK(IFRIC) – INT 17 Distributions of Non-cash Assets to Owners[4] HK(IFRIC) – INT 18 Transfers of Assets from Customers[8]

1 Effective for annual periods beginning on or after 1 January 2009 except the amendments to HKFRS 5, effective for annual periods beginning on or after 1 July 2009.

2 Effective for annual periods beginning on or after 1 January 2009, 1 July 2009 and 1 January 2010, as appropriate.
3 Effective for annual periods beginning on or after 1 January 2009.
4 Effective for annual periods beginning on or after 1 July 2009.
5 Effective for annual periods ending on or after 30 June 2009.
6 Effective for annual periods beginning on or after 1 July 2008.
7 Effective for annual periods beginning on or after 1 October 2008.
8 Effective for transfers of assets from customers received on or after 1 July 2009.

– 24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The application of HKFRS 3 (Revised) may affect the accounting for business combination for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. HKAS 27 (Revised) will affect the accounting treatment for changes in parent’s ownership interest in a subsidiary. The directors of the Company anticipate that the application of the other new and revised standards, amendments or interpretations will have no material impact on the results and the financial position of the Group.

3. Significant accounting policies

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

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

(a) Basis of consolidation

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

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

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

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

– 25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

(b) Business combinations

The acquisition of businesses is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under HKFRS 3 “Business Combinations” are recognised at their fair values at the acquisition date.

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

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

(c) Goodwill

Goodwill arising on an acquisition of a business for which the agreement date is on or after 1 January 2005 represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the relevant business at the date of acquisition. Such goodwill is carried at cost less any accumulated impairment losses.

– 26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Capitalised goodwill arising on an acquisition of a subsidiary is presented separately in the consolidated balance sheet.

For the purposes of impairment testing, goodwill arising from an acquisition is allocated to each of the relevant cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the acquisition. A cashgenerating unit to which goodwill has been allocated is tested for impairment annually, and whenever there is an indication that the unit may be impaired. For goodwill arising on an acquisition in a financial year, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that financial year. When the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment losses is allocated to reduce the carrying amount of any goodwill allocated to the unit first, and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. Any impairment losses for goodwill is recognised directly in the consolidated income statement. An impairment losses for goodwill is not reversed in subsequent periods.

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

(d) Excess of an acquirer’s interest in the net fair value of an acquiree’s identifiable assets, liabilities and contingent liabilities over cost (“discount on acquisitions”)

Discount arising on an acquisition of a subsidiary for which the agreement date is on or after 1 January 2005 represents the excess of the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities on the relevant subsidiary over the cost of business combination, after reassessment. Such discount is recognised immediately in profit and loss.

(e) Investments in associates

An associate is an entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture.

– 27 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

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

(f) Investment in Jointly-controlled entities

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

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

When a group entity transacts with a jointly controlled entity of the Group, profits or losses are eliminated to the extent of the Group’s interest in the jointly controlled entity.

– 28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(g) Investments in subsidiaries

Investments in subsidiaries are included in the Company’s balance sheet at cost less any identified impairment losses.

(h) Intangible assets

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair value at the acquisition date.

Subsequent to initial recognition, intangible assets with finite useful lives are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is provided on a straight-line basis over their estimated useful lives. Alternatively, intangible assets with indefinite useful lives are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of impairment losses on tangible and intangible assets below).

(i) Property, plant and equipment

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

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

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.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated income statement in the year in which the item is derecognised.

– 29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(j) Other non-current assets

Other non-current assets represent the deposits paid to respective regulatory bodies in carrying out its principal activities, of which are stated at cost less any accumulated impairment loss.

(k) Financial instruments

Financial assets and financial liabilities are recognised on the balance sheet when a group entity becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified as financial assets at fair value through profit or loss and loans and receivables. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the 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 (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or where appropriate, a shorter period.

Interest income is recognised on an effective interest basis for debt instruments other than those financial assets designed as at financial assets through profit or loss, of which interest income is included in net gains or losses.

– 30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss has two subcategories, including financial assets held for trading and those designated as at financial assets through profit or loss as initial recognition.

A financial asset is classified as held for trading if:

it has been acquired principally for the purpose of selling in the near future; or
it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at fair value through profit or loss upon initial recognition if:

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
if forms part of a contract containing one or more embedded derivatives, and HKAS 39 permits the entire combined contract (asset or liability) to be designated as at fair value through profit or loss.

At each balance sheet date subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value, with changes in fair value recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial assets.

– 31 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables (including trade receivables, other receivables and deposits, loan receivables, investment deposits, amount(s) due from a related company/a director/a minority shareholder of a subsidiary/associates, pledged bank deposits and bank and cash balances – general) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment losses on financial assets below).

Impairment losses on 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 financial assets have been impacted.

For all the Group’s 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 reorganisation.

For certain categories of financial asset, such as trade and other receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the credit period, observable changes in national or local economic conditions that correlate with default on receivables.

– 32 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate.

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

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

Financial liabilities and equity

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

An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. The Group’s financial liabilities are classified as other financial liabilities.

– 33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Effective interest method

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

Interest expenses are recognised on an effective interest basis.

Other financial liabilities

Other financial liabilities are including trade payables, other payables and accruals, amount due to a related company/a director, bank overdrafts, other borrowings and obligations under finance leases are subsequently measured at amortised cost, using the effective interest rate method.

Convertible loan notes

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

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

– 34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

In subsequent periods, the liability component of the convertible loan notes is carried at amortised cost using the effective interest method. The equity component, representing the option to convert the liability component into ordinary shares of the Company, will remain in convertible loan notes equity reserve until the embedded option is exercised (in which case the balance stated in convertible loan notes equity reserve will be transferred to share premium). Where the option remains unexercised at the expiry date, the balance stated in convertible loan notes equity reserve will be released to accumulated losses. No gain or loss is recognised in profit or loss upon conversion or expiration of the option.

Transaction costs that relate to the issue of the convertible loan notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transactions costs relating to the equity component are charged directly to equity. Transaction costs relating to the liability component are included in the carrying amount of the liability portion and amortised over the period of the convertible loan notes using the effective interest method.

Equity instruments

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

Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. A financial guarantee contract issued by the Group and not designated as at fair value through profit or loss is recognised initially at its fair value less transaction costs that are directly attributable to the issue of the financial guarantee contract. Subsequent to initial recognition, the Group measures the financial guarantee contract at the higher of: (i) the amount determined in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets; and (ii) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18 Revenue.

– 35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Derecognition

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

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

(l) Impairment losses on tangible and intangible assets other than goodwill (see accounting policy in respect of goodwill above)

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment losses. In addition, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that they may be impaired. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment losses been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

(m) Revenue recognition

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

– 36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Commission income for broking business of securities and futures dealing are recognised on a trade date basis when the services are provided.

Insurance brokerage/commission income/underwriting commission income/ placing commission income and securities handling income are recognised when the services are provided.

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

Revenue from installation contracts is recognised when the work completed and confirmed by customers.

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

Sales of investments held for trading are recognised on a trade date basis.

Sub-letting income is recognised in the consolidated income statement on a straight-line basis over term of the relevant lease.

(n) Equity settled share-based payment transactions

Share options granted to directors and employees of the Company (on or before 7 November 2002, or granted after 7 November 2002 and vested before 1 January 2005)

The financial impact of share options granted is not recorded in the consolidated financial statements until such time as the options are exercised, and no charge is recognised in the consolidated income statement in respect of the value of options granted. Upon the exercise of the share options, the resulting shares issue are recorded as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded as share premium. Option which lapse of are cancelled prior to their exercise date are the register of outstanding options.

– 37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Share options granted to directors and employees of the Company (after 7 November 2002 and vested before 1 January 2005)

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

At each balance sheet date, the Group revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the estimates during the vesting period, if any, is recognised in profit or loss, with a corresponding adjustment to share options reserve.

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

(o) Share warrants granted to consultants

Share warrants issued in exchange for services are measured at the fair values of the services received, unless that fair value cannot be reliably measured, in which case the services received are measured by reference to the fair value of the share warrants granted. The fair values of the services received are recognised as expenses with a corresponding increase in equity (share warrants reserve) when the counterparties render services, unless the services qualify for recognition as assets.

(p) Remuneration shares

Remuneration shares were issued to the financial consultants of the Company with vesting conditions.

The fair value of shares granted at the grant date with vesting conditions was determined by the fair value of the services received by the Group. The remuneration shares expenditure is expensed and recognised in the consolidated income statement. At the time when the vesting conditions of these shares are fulfilled, share capital for the par value of the shares issued.

– 38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(q) Taxation

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

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

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

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, associates and jointly controlled entities except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each 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 is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

– 39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(r) Foreign currencies

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

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise. Exchange differences arising on the re-translation of non-monetary items carried at fair value are included in profit or loss for the period.

(s) Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

(t) Leasing

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

The Group as lessor

Sub-letting income from operating lease is recognised in the consolidated income statement on a straight-line basis over the term of the relevant lease.

– 40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group as lessee

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 consolidated 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.

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

(u) Borrowing costs

All borrowing costs are recognised as and included in finance costs in the consolidated income statement in the period in which they are incurred.

(v) Retirement benefit costs

Payments to the Mandatory Provident Fund Scheme (“MPF” Scheme) are charged as an expense when the employees have rendered service entitling them to the contributions.

4. Key sources of estimation uncertainty

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.

Impairment losses recognised in respect of trade receivables

The policy for impairment losses in respect of trade receivables of the Group is based on the evaluation of collectability and ageing analysis of accounts and on management’s judgment. A considerable amount of judgment is required in assessing the ultimate realisation of these receivables, including creditworthiness and the past collection history of each client. If the financial conditions of debtors and their ability to make payment worsen, additional allowance may be required. Impairment losses for trade receivables for the year ended 31 March 2009 of approximately HK$66,000 (2008: Nil) was recognised.

– 41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Impairment losses recognised in respect of other receivables

The policy for impairment losses in respect of other receivables of the Group are based on the estimation of future cash flow. The amount of the impairment losses is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). Where the actual future cash flows are less than expected, a material impairment losses may arise. Impairment losses for other receivables for the year ended 31 March 2009 of approximately HK$108,000 (2008: Nil) was recognised.

Useful lives and impairment assessment of property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and identified impairment losses. The estimation of useful lives impacts the level of annual depreciation expenses recorded. Property, plant and equipment are evaluated for possible impairment on a specific assets basis or in groups of similar assets, as applicable. This process requires management’s of future cash flows generated by each asset or group of assets. For any instance where this evaluation process indicates impairment, the relevant asset’s carrying amount is written down to the recoverable amount and the amount of the write-down is charged against the consolidated income statement.

Impairment of intangible assets

The Group determines whether an asset is impaired at least on an annual basis. This requires an estimation of the value-in-use of cash-generating units to which the asset is allocated. Estimated the value in use requires the Group to make an estimate of the expected future cash flows from cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. A change in the estimated future cash flows and/or the discount rate applied will result in an adjustment to the estimated impairment provision previously made. As at 31 March 2009, the carrying amounts of intangible assets was approximately HK$980,000.

– 42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the valuein-use of the cash-generating units to which goodwill has been allocated. The valuein-use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment losses may arise. As at 31 March 2009, the carrying amount of goodwill is HK$2,554,000. Details of the impairment testing on goodwill are set out in note 21.

Fair value of convertible loan notes

The fair values of the convertible loan notes involve assumptions on the Company’s credit spread, discount rate, expected credit rating and future cash flows. Should these assumptions change, there would be material changes to the valuation.

Fair value of share warrants

The fair value of the share warrants is subject to the limitation of the BlackScholes-Metron Option Pricing Model and the uncertainty in estimates used by management in the assumptions. The estimates include limited early exercise behaviour, expected interval and frequency of open exercise periods in the warrant life, and other relevant parameters of the valuation model. Should these assumption change, there would be material change to the valuation.

Impairment of assets

The management determines the impairment losses if circumstances indicate the carrying value of an asset may not be recoverable. The carrying amounts of assets are reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred, the carrying amount is reduced to recoverable amount.

– 43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The recoverable amount is the greater of the fair value less costs to sell and the value-in-use. In determining the value-in-use, expected cash flows generated by the assets are discounted to their present value, which requires significant judgment relating to level of sales revenue and related costs. The Group uses all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumptions and projections of sales revenue and amount of the related costs.

Provision in respect of litigation

The Group has been engaged in a ligation in respect of the compensation for damage incurred to the rented premise. Provisions on the possible obligation have been made based on management’s best estimates and judgements together with the legal advice.

5. Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balances.

The capital structure of the Group consists of debt, which includes convertible loan notes disclosed in note 38, cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued share capital and reserves.

The directors of the Company review the capital structure regularly. As part of this review, the directors of the Company consider the cost of capital and the associated risks, and take appropriate actions to adjust the Group’s capital structure. The overall strategy of the Group remained unchanged during the two years ended 31 March 2009 and 2008.

Several subsidiaries of the Group (the “Regulated Subsidiaries”) are licensed with Securities and Futures Commission (“SFC”) for the business they operate in. The Regulated Subsidiaries are subject to liquid capital requirements under Securities and Futures (Financial Resources) Rules (“SF(FR)R”) adopted by the SFC. Under the SF(FR)R, these Regulated Subsidiaries must maintain their liquid capital (assets and liabilities adjusted as determined by SF(FR)R in excess of HK$3,000,000 or 5% of their total adjusted liabilities, whichever is higher. The required information is filed with the SFC on a monthly basis.

– 44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Another subsidiary of the Group is a member of the Professional Insurance Brokers Association Limited and is required to maintain a minimum net asset value of HK$100,000 at all times.

The directors of the Company monitor the capital structure of the Group and ensure compliance with the above capital requirements.

6. Financial instruments

(a) Categories of financial instruments

Financial assets – Loans and receivables (including cash and cash equivalents) – Investments held for trading – Financial assets designated at fair value through profit or loss Financial liabilities – At amortised cost – Convertible loan notes	2009 HK$’000 128,302 442 – 83,149 23,066	2008 HK$’000 29,063 2,784 36,000 58,526 –

(b) Financial risk management objectives and policies

The Group’s major financial instruments include financial assets at fair value through profit or loss, trade receivables, other receivables and deposits, amount(s) due from (to) related companies/directors/a minority shareholder of a subsidiary/an associate, pledged bank deposits, trade payables, other payables and accruals, bank overdrafts, other borrowings, obligations under finance leases, convertible loan notes and bank and cash balances – general. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

– 45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Currency risk

Foreign exchange risk is the risk of loss due to adverse movements in foreign exchange rate relating to foreign currency denominated trade receivable with foreign brokers and bank balances. The Group’s exposure to currency risk is minimal. The Group currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign exposure should the need arise.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:

	Liabilities	Liabilities	Assets	Assets
	2009	2008	2009	2008
	HK$’000	HK$’000	HK$’000	HK$’000
United States
Dollars
(“USD”)	–	–	4,446	2

More than 90% of financial assets and financial liabilities of the Group are denominated in HK$ and the remaining is denominated in USD. As USD is not the functional currency of the Group entity and HK$ is pegged to USD, the Group does not expect any significant movements in the USD/HK$ exchange rates. In the opinion of directors of the Company, the foreign currency sensitivity does not give additional value in view of insignificant movement in the USD/HK$ exchange rates and insignificant exposure of other foreign currencies as at the balance sheet date. Accordingly, no foreign currency sensitivity is disclosed.

Interest rate risk

The Group is exposed to cash flow interest rate risk in relation to variable-rate assets and liabilities. For the year ended 31 March 2008, the Group has exposure to fair value interest rate risk in relation to fixed-rate other borrowings. For year ended 31 March 2009, the Group has no exposure to fair value interest rate risk.

– 46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group’s cash flow interest rate risk is mainly relating to the fluctuation of Hong Kong prime rate (the “prime rate”) arising from the Group’s interest bearing financial instruments. The Group’s exposure to interest rates on financial assets and financial liabilities are detailed below.

Financial instruments with variable interest rate in nature

Assets – Trade receivables – cash clients – margin clients – Amount due from a director (note 30) – Bank balances and cash – general Liabilities – Bank overdrafts – Other borrowings	2009 HK$’000 8,633 72,744 776 22,138 – –	2008 HK$’000 919 7,420 426 15,390

		1,963 10,618

Financial instruments with fixed interest rate in nature

Liabilities – Obligations under finance leases – Other borrowings	2009 HK$’000 – –	2008 HK$’000 469 19,117

– 47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The sensitivity analysis is prepared assuming the financial instruments outstanding with variable interest rate at the balance sheet date were outstanding for the whole year. As at 31 March 2009, if the interest rate of borrowings and trade receivables from cash and margin clients had been 100 (2008: 100) basis point higher/lower, the Group’s post-tax profit would increase/decrease by approximately HK$686,000. In 2008, the Group’s post-tax loss would increase/decrease by approximately HK$31,000 if the interest rate basis point had been 100 higher/lower.

Equity price risk

The Group is exposed to equity price risk through its investment in listed equity securities. The Group’s equity price risk is mainly concentrated on equity instruments quoted in the Stock Exchange.

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to equity price risks at the reporting date.

If the prices of the respective equity instruments had been 5% (2008:5%) higher/lower:

post-tax profit for the year ended 31 March 2009 would increase/ decrease by approximately HK$675,000 as a result of the changes in fair value of investments held for trading. In 2008, the Group’s post-tax loss would decrease/increase by approximately HK$7,000.

Liquidity risk

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

– 48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

The maturity portfolio of the Group’s financial liabilities as at the balance sheet date, based on the contracted undiscounted payments, the table include both interest and principal cash flow was as follows:

2009 Non-derivative financial liabilities Trade payables, other payables and accruals Amount due to a director Convertible loan notes	Within 1 year or on demand HK$’000 83,139 10 – 83,149	More than 1 year but less than 2 years HK$’000 – – – –	More than 2 years but less than 5 years HK$’000 – – 50,000 50,000	Total undiscounted cash flows HK$’000 83,139 10 50,000 133,149	Carrying amounts at 31 March HK$’000 83,139 10 23,066
					106,215

– 49 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2008 Non-derivative financial liabilities Bank overdraft – secured Other borrowings – unsecured Accounts payable, other payables and accruals Amount due to a related company Obligations under finance leases	Within 1 year or on demand HK$’000 1,963 30,534 25,469 890 324 59,180	More than 1 year but less than 2 years HK$’000 – – – – 200 200	More than 2 years but less than 5 years HK$’000 – – – – – –	Total undiscounted cash flows HK$’000 1,963 30,534 25,469 890 524 59,380	Carrying amounts at 31 March HK$’000 1,963 29,735 25,469 890 469
					58,526

Credit risk

At as the balance sheet date, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties or debtors which the Group has provided financial guarantees, is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated balance sheet and the amount of contingent liabilities as disclosed in Note 48.

In order to minimise the credit risk, the management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

– 50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Other than concentration of credit risk on liquid funds which are deposited with several banks with high credit ratings, the Group does not have any other significant concentration of credit risk. Trade receivables consist of a large number of customers, spreading across diverse industries and geographical areas.

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

(c) Fair value

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

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

The carrying amounts of financial assets and financial liabilities reported in the balance sheets of the Group approximate their fair value due to their immediate or short-term maturities.

– 51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. Turnover

Turnover represents the net amounts received and receivable for services provided and goods sold in the normal course of business. An analysis of the Group’s turnover for the year is as follows:

Income from securities, futures and insurance brokerage business Margin interest income from securities and futures brokerage business Electrical engineering-contracting income Sale of electrical goods	2009 HK$’000 8,731 1,829 4,280 722 15,562	2008 HK$’000 6,636 1,289 2,809 1,621
		12,355

8. Segment information

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) Securities, futures and insurance brokerage and margin financing
(ii) Electrical engineering contracting
(iii) Sale of electrical goods

– 52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(a) Business segments

The following tables’ present turnover, results and certain asset, liability and expenditure information for the Group’s business segments.

For the year ended 31 March 2009

Turnover Segment results Unallocated revenue Unallocated expenses Write back of long outstanding amount due to a related company Reversal of impairment losses on investment deposits Change in fair value of financial assets designated as fair value through profit or loss Discount on acquisitions of subsidiaries Gain on disposal of subsidiaries Gain on deemed disposal of partial interests in a subsidiary Decrease in fair value of investments held for trading Finance costs Profit before taxation Taxation Profit for the year	Securities, futures and insurance brokerage and margin financing HK$’000 10,560 (896) 24,800 863 (2,313)	Electrical engineering contracting HK$’000 4,280 54	Sale of electrical goods HK$’000 722 22	Total HK$’000 15,562 (820) 462 (12,470) 890 8,500 24,800 863 61 17 (2,313) (4,162) 15,828 (115) 15,713

– 53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 March 2008

Turnover Segment results Unallocated revenue Unallocated expenses Reversal of impairment losses on investment deposits Loss on disposal of a subsidiary Decrease in fair value of investments held for trading Finance costs Loss before taxation Taxation Loss for the year	Securities, futures and insurance brokerage and margin financing HK$’000 7,925 1,064 (32)	Electrical engineering contracting HK$’000 2,809 (3,886)	Sale of electrical goods HK$’000 1,621 (140)	Total HK$’000 12,355 (2,962) 1,117 (7,595) 8,000 (262) (32) (4,093) (5,827) – (5,827)

– 54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As at 31 March 2009

Securities, futures and insurance brokerage and margin financing Electrical engineering contracting Sale of electrical goods HK$’000 HK$’000 HK$’000 Assets Segment assets 170,890 120 3 Unallocated assets – – – Total assets Liabilities Segment liabilities 71,260 6,492 877 Unallocated liabilities – – – Total liabilities	Total HK$’000 171,013 71,693
	242,706

	78,629 29,376
	108,005

– 55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 March 2009

	Securities,
	futures and
	insurance
	brokerage	Electrical	Sale of
	and margin	engineering	electrical
	financing	contracting	goods	Unallocated	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Other segment information:
Additions to property,
plant and equipment	2,020	–	24	1,305	3,349
Depreciation of property,
plant and equipment	581	12	63	144	800
Impairment losses recognised
in respect of trade receivable	–	–	–	–	66
Impairment losses recognised
in respect of amount due
from a related company	–	–	–	–	13
Impairment losses recognised
in respect of amount due
from an associate	–	–	–	–	12
Impairment losses recognised
in respect of other receivables	–	–	–	–	108
Gain on disposal of investments
held for trading	–	–	–	–	(1)
Gain on disposal of property,
plant and equipment	–	–	–	–	(29)

– 56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As at 31 March 2008

Securities, futures and insurance brokerage and margin financing Electrical engineering contracting Sale of electrical goods HK$’000 HK$’000 HK$’000 Assets Segment assets 21,669 486 501 Unallocated assets – – – Total assets Liabilities Segment liabilities 12,655 7,476 1,272 Unallocated liabilities – – – Total liabilities	Total HK$’000 22,656 57,164
	79,820

	21,403 37,381
	58,784

For the year ended 31 March 2008

Other segment information: Additions to property, plant and equipment Depreciation of property, plant and equipment	Securities, futures and insurance brokerage and margin financing HK$’000 – 74	Electrical engineering contracting HK$’000 14 8	Sale of electrical goods HK$’000 – 63	Unallocated HK$’000 897 463	Total HK$’000 911 608

– 57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Geographical segments

All of the activities of the Group are based in Hong Kong and all of the Group’s revenue, capital expenditure and segment assets are derived from Hong Kong. Accordingly, no analysis by geographical segments is presented.

9. Other revenue

Handling charges Interest income Write back of long outstanding trade payables, other payables and accruals Net exchange gain Reversal of impairment losses on – trade receivables – other receivables Gain on disposal of property, plant and equipment Gain on disposal of investments held for trading Write back of long outstanding amount due to a related company Sub-letting income Sundry income	2009 HK$’000 154 124 95 717 – – 29 1 890 308 68 2,386	2008 HK$’000 100 331 571 – 199 500 – – – – 54 1,755

– 58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. Finance costs Interest on: Bank overdrafts wholly repayable within five years Obligations under finance lease Other borrowings Imputed interest expenses on convertible loan notes (note 38) 11. Taxation Current tax Hong Kong Profits tax – Provision for the year – Under-provision for prior years Deferred tax – Credit for the year Taxation for the year	2009 HK$’000 73 53 3,262 774 4,162 2009 HK$’000 92 27 (4) 115	2008 HK$’000 120 34 3,939 –
		4,093

		2008 HK$’000 – – –
		–

On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 which reduced corporate profit tax rate from 17.5% to 16.5% effective from the year of assessment 2008/2009. Hong Kong Profits Tax has not been provided for in the consolidated financial statements as there was no estimated assessable profits derived from Hong Kong for the year ended 31 March 2008.

– 59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Hong Kong Profits Tax was calculated at 16.5% (2008: 17.5%) of the estimated assessable profit for the year ended 31 March 2009.

Taxation arising in other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

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

Profit (loss) before taxation: Tax at domestic income tax rate of 16.5% (2008: 17.5%) Tax effect of expenses not deductible for tax purposes Tax effect of income not taxable for tax purpose Utilisation of tax losses previously not recognised Tax effect of tax losses not recognised Under-provision in prior years Taxation for the year	2009 HK$’000 15,828 2,612 2,425 (5,721) (15) 787 27 115	2008 HK$’000 (5,827) (1,020) 1,224 (1,484) (63) 1,343 – –

Details of deferred taxation are set out in note 37.

– 60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. Profit (loss) for the year

Profit (loss) for the year has been arrived at after charging:

Auditors’ remuneration – current year – under-provision in prior years Depreciation of property, plant and equipment – owned assets – assets held under finance lease Bad debts written off Operating lease in respect of rented premises Equity-settled share based payment – issue of remuneration shares – issue of share warrants Net exchange loss Impairment losses recognised in respect of – trade receivables – other receivables – amount due from an associate – amount due from a related company Total staff costs: – directors’ remuneration – salaries and allowance – retirement benefit scheme contributions (excluding directors)	2009 HK$’000 500 – 622 178 – 2,281 – 1,200 552 1,752 – 66 108 12 13 1,973 6,280 261 8,514	2008 HK$’000 620 19 269 339 34 919 – – –
		– 26 – – – – 2,359 5,988 248
		8,595

– 61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. Directors’ and senior executives emoluments

Directors’ emoluments

The emoluments of each director of the Group during the year are as follows:

For the year ended 31 March 2009

Executive directors: NG Cheuk Fan, Keith SUN Tak Yan, Desmond YEUNG Kwok Leung Independent non-executive directors: LAM Ka Wai, Graham NG Kay Kwok TAM B Ray Billy	Directors’ fees HK$’000 610 325 130 100 100 100 1,365	Other emoluments Salaries, allowances and other benefits in kind Retirement benefits scheme contributions HK$’000 HK$’000 60 – – – 536 12 – – – – – – 596 12	Total HK$’000 670 325 678 100 100 100
			1,973

– 62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 March 2008

Executive directors: NG Cheuk Fan, Keith1 SUN Tak Yan, Desmond NG Khai Wain4 YOU Wei4 YEUNG Kwok Leung Independent non-executive directors: SHANE Philips5 CAI Zhixu6 HO Albert5 LAM Ka Wai, Graham2 NG Kay Kwok2 TAM B Ray Billy3	Directors’ fees HK$’000 644 330 200 200 130 46 68 46 54 54 32 1,804	Other emoluments Salaries, allowances Retirement and other benefits benefits scheme in kind contributions HK$’000 HK$’000 – – – – – – – – 543 12 – – – – – – – – – – – – 543 12	Total HK$’000 644 330 200 200 685 46 68 46 54 54 32
			2,359

1 Appointed effective on 4 April 2007.

2 Appointed effective on 14 September 2007.

3 Appointed effective on 4 December 2007.

4 Resigned on 14 August 2007.

5 Resigned on 14 September 2007.

6 Resigned on 4 December 2007.

There was no arrangement under which directors waived or agreed to waive any emoluments during the two years ended 31 March 2009 and 2008. No emoluments were paid to the directors as inducement to join or upon joining the Group or as compensation for loss of office.

– 63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Five highest paid individuals

Of the five individuals with the highest emoluments in the Group, three (2008: three) was directors of the Company whose emoluments are set out above. The emoluments of the remaining two (2008: two) highest paid individuals were as follows:

Salaries, allowances and other benefits in kind Retirement benefits scheme contributions	2009 HK$’000 1,451 59 1,510	2008 HK$’000 1,884 70
		1,954

The emoluments of the two (2008: two) highest paid employees fall in the following bands

Emoluments bands Nil to HK$1,000,000 HK$1,000,001 to HK$2,000,000	Number of 2009 1 1 2	individuals 2008 1 1
		2

During the two years ended 31 March 2009 and 2008, no emoluments were paid to the five highest individuals as inducement to join or upon joining the Group or as compensation for loss of office.

– 64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. Dividend

The directors of the Company do not recommend the payment of a final dividend for the two years ended 31 March 2009 and 2008.

15. Earnings (loss) per share

The calculation of the basic and diluted earnings (loss) per share attributable to the ordinary equity holders of the Company is based on the following data.

	2009	2008
	HK$’000	HK$’000
Earnings (loss) for the purpose of
both basic and diluted earnings per share	16,224	(5,827)

The weighted average number of ordinary shares for the purpose of diluted earnings (loss) per share reconciled to the weighted average number of ordinary shares used in the calculation of basic earnings (loss) per share as follows:

Weighted average number of ordinary shares for the purpose of basic earnings (loss) per share Effect of dilutive potential ordinary shares: – Share warrants – Convertible loan notes Weighted average number of ordinary shares for the purpose of diluted earnings (loss) per share	2009 ’000 501,671 1,414 5,616 508,701	2008 ’000 464,070 – – 464,070

The calculation of diluted earnings (loss) per share for the two years ended 31 March 2009 and 2008 did not assume the exercise of the Company’s options as exercise price of the share options was higher than the average market price for shares.

– 65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. Property, plant and equipment

Leasehold improvements HK$’000 Cost At 1 April 2007 615 Additions 604 Arising on disposal of subsidiaries (604) At 31 March 2008 and 1 April 2008 615 Arising on acquisition of subsidiaries 864 Additions 1,331 Disposals/written off (251) At 31 March 2009 2,559 Accumulated depreciation At 1 April 2007 599 Provided for the year 54 Eliminated on disposal of a subsidiary (40) At 31 March 2008 and 1 April 2008 613 Provided for the year 94 Eliminated on disposal/written off (251) At 31 March 2009 456 Carrying values At 31 March 2009 2,103 At 31 March 2008 2	Furniture and fixtures HK$’000 1,658 – – 1,658 7 143 (595) 1,213 1,622 22 – 1,644 13 (581) 1,076 137 14	Office equipment HK$’000 3,474 307 (293) 3,488 1,168 217 (615) 4,258 3,249 193 (25) 3,417 101 (569) 2,949 1,309 71	Motor vehicles HK$’000 1,832 – – 1,832 – 1,658 (1,355) 2,135 1,155 339 – 1,494 592 (1,194) 892 1,243 338	Total HK$’000 7,579 911 (897)
				7,593 2,039 3,349 (2,816)
				10,165
				6,625 608 (65)
				7,168 800 (2,595)
				5,373
				4,792

				425

– 66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

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

The carrying value of assets held under finance leases included in the total amount of motor vehicles of the Group as at 31 March 2008 was HK$338,000 (2009: Nil).

17. Intangible assets

Cost At 1 April 2007, 31 March 2008 and 1 April 2008 Arising on acquisition of subsidiaries At 31 March 2009 Carrying values At 31 March 2009 At 31 March 2008	HK$’000 – 980
	980
	980

	–

The intangible assets represent the trading right on the Stock Exchange and the Hong Kong Futures Exchange Limited with indefinite useful life.

The directors of the Company carried out impairment test based on the recent market price of the trading right which indicate no impairment losses was necessary for the year ended 31 March 2009.

– 67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. Other non-current assets

At cost: Deposits paid to the Stock Exchange: – Compensation fund deposits – Fidelity fund deposits – Stamp duty deposits – Membership deposits – Statutory deposit Deposits paid to Hong Kong Securities Clearing Company Limited: – Guarantee fund contribution – Admission fees 19. Interests in associates Cost of investment in associates United shares, at cost Share of post-acquisition results and reserves Amounts due from associates Less: Impairment losses recognised	2009 HK$’000 202 150 60 1,500 50 150 150 2,262 2009 HK$’000 – – – – – – –	2008 HK$’000 50 50 30 – – 60 50 240 2008 HK$’000 35,000 – 35,000 33,440 68,440 (68,428) 12

The amount was unsecured, interest-free and repayable on demand.

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The directors of the Company assessed that the associates incurred significant losses continuously. Accordingly, the investment costs were fully impaired and substantial amounts of current accounts were impaired in previous years. During the year ended 31 March 2009, the directors of the Company further impaired the amount due from the associate of approximately HK$12,000 due to the remote recovered.

On 24 March 2009, the Company disposed of its entire equity interests on its subsidiaries, Hong Tong Hai Logistics Limited (“HTH Logistics”) and Transwell Investments Limited (“Transwell”) for a consideration of HK$10,000 each and totaling HK$20,000 to an independent third party. HTH Logistics and Transwell have direct interests in these associates. The Group’s interests in associates were derecognised upon disposal of the subsidiaries (note 43).

As at 31 March 2008, the Group had interests in the following associates:

				Percentage
		Place of	Class of	of equity
	Form of	incorporation/	shares	attributable	Principal
Name of associate	business structure	operations	held	to the Group	activities
Bright Rich International	Incorporated	Hong Kong	Ordinary	50%	Inactive
Limited
Sharpway Enterprises	Incorporated	The British Virgin	Ordinary	50%	Inactive
Limited		Islands
United Asia Terminal	Incorporated	The British Virgin	Ordinary	40%	Investment
Holdings Limited		Islands			holding
Shanghai Fortune Limited	Incorporated	Hong Kong	Ordinary	40%	Investment
					holding
Fortune Union Investment	Incorporated	Hong Kong	Ordinary	40%	Investment
Limited					holding
Shanghai United Asia	Sino-foreign equity	The People	Registered	36%	Inactive
Container Services Co.	joint venture	Republic of	Capital
Ltd. (Note)		China
上海聯亞集裝箱服務		(the “PRC”)
有限公司

Note: The English name of the associate represents management’s best effort at translating the Chinese name of the company as no English name has been registered.

– 69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

20. Investment in a jointly controlled entity

Cost of investment in a jointly controlled entity United shares, at cost Share of post-acquisition results and reserves Less: Impairment losses recognised	2009 HK$’000 – – – – –	2008 HK$’000 19,100 – 19,100 (19,100) –

The directors of the Company assessed that the jointly controlled entity is inactive and incurred significant losses continuously. Accordingly, the investment cost was fully impaired in previous years.

On 24 March 2009, the Company disposed of its entire equity interest on a subsidiary, TopStar Enterprises (Holdings) Limited (“TopStar”) to an independent third party for a consideration of HK$10,000. TopStar’s sole asset in this investment is a jointly controlled entity. The investment in a jointly controlled entity was derecognised upon disposal of the subsidiary (note 43).

Particulars of the Group’s jointly-controlled entity as at 31 March 2008 is as follows:

				Percentage
		Place of	Class of	of equity
	Form of	incorporation/	shares	attributable	Principal
Name of company	business structure	operations	held	to the Group	activities
Dagong Credit Information	Incorporated	The PRC	Registered	50%	Inactive
Service Company Limited
Capital
大公信用信息服務有限公司
(Note)

Note: The English name of the jointly controlled entity represents management’s best effort at translating the Chinese name of the company as no English name has been registered.

– 70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. Goodwill

Cost Goodwill arising on acquisition of a subsidiary during the year (Note 42) Net carrying value At 31 March 2009	HK$’000 – 2,554
	2,554

The goodwill was arising on acquisition of Excalibur Securities Limited (“the Excalibur Securities”) on 17 February 2009. For the purpose of impairment testing, goodwill has been allocated to the cash generating units (“the CGU”) of Excalibur Securities and is tested for impairment at least once annually.

The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable amount of the CGU, which covers the above goodwill is determined from a value-in-use calculation. The calculation is carried by BMI Appraisals Limited, an independent qualified valuer not connected with the Group. The key assumptions used in the basis of calculation are those regarding the discount rate and growth rate. The discount rate using the prevailing market rate of return of similar companies in the market adjusted with the specific risks relating to relevant subsidiaries. The growth rates are based on industry growth forecasts and expectations of future changes in the relevant markets.

The valuation covers for a five-year cash flow forecasts derived from the CGU’s financial budgets for 2009 to 2013, of which are approved by the management of the Excalibur Securities (the “Forecasts”). The rate used to discount the Forecasts is 12.88% per annum.

The directors of the Company expected the securities brokerage businesses has an average growth rate of 6% per annum are appropriate for the valuation review.

The results for the reviews undertaken as at 31 March 2009 indicated that no impairment losses was necessary for the year ended 31 March 2009.

– 71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

22. Investments held for trading

	2009	2008
	HK$’000	HK$’000
Listed investments
– Equity securities listed in Hong Kong	442	2,784

The fair values of the above listed securities are determined basing on the quoted market bid prices available on the Stock Exchange.

23. Financial assets designated at fair value through profit or loss

	2009	2008
	HK$’000	HK$’000
Unlisted securities
– Non-voting cumulative redeemable
convertible preference shares
(“Preference Shares”)	–	36,000

During the year ended 31 March 2009, the Group has received an amount of HK$60,800,000 from China Sciences Conservational Power Limited (the “CSCPL”) for the Preference Shares and the directors of the Company are of the opinion that the amount actually received from CSCPL approximates to the fair value of the Preference Shares. The change in fair value of HK$24,800,000 was credited to the consolidated income statement accordingly.

– 72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. Trade receivables

The followings are the balances of trade receivable, net of impairment losses:

Trade receivables from the business of dealing in securities – clearing houses and cash clients – margin clients Trade receivables from the business of dealing in futures – clearing houses and cash client Trade receivables from electrical engineering contract and trading of electrical goods	2009 HK$’000 10,879 71,504 7,923 14 90,320	2008 HK$’000 2,635 7,369 – 675
		10,679

As at 31 March 2009, the Group had trade receivables balance of approximately HK$4,436,000 (2008: Nil) was denominated in USD.

The settlement terms of trade receivable arising from the business of dealing in securities are two days after trade date and trade receivable arising from the business of dealing in futures are one day after trading date. The trade receivable from electrical engineering contract and trading of electrical goods business allow a credit period of 30 to 90 days. The Group does not hold any collateral over these balances.

No ageing analysis is disclosed for the Group’s margin clients as these margin clients were carried on an open account basis, the directors of the Company consider that the ageing analysis does not give additional value in the view of the nature of business of margin financing.

– 73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following is an ageing analysis of trade receivables (excluded margin clients), net of impairment losses, at the reporting date:

Less than 30 days 31 to 60 days 61 to 90 days Over 90 days	2009 HK$’000 16,650 893 407 866 18,816	2008 HK$’000 2,106 38 123 1,043
		3,310

Trade receivable to margin clients are secured by the clients’ pledged securities at fair values of approximately HK$319,189,000 (2008: HK$48,506,000) which can be sold at the Group’s direction to settle any margin call requirements imposed by their respective securities transactions. The trade receivables to cash and margin customers are repayable on demand and bear interest at commercial rates. As at 31 March 2009, included in the total trade receivables, HK$81,377,000 (2008: HK$8,339,000) were interest bearing whereas HK$10,541,000 (2008: HK$3,087,000) were non-interest bearing.

In determining the recoverability of the trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date.

Included in the Group’s trade receivable balance are debtors with aggregate carrying amount of approximately HK$2,992,000 (2008: HK$1,295,000) which are past due as at the reporting date for which the Group has not provided for impairment losses.

– 74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At 31 March 2009 and 2008, the ageing analysis of trade receivables that were past due but not impaired are as follows:

Less than 30 days 31 to 90 days Over 90 days	2009 HK$’000 825 1,301 866 2,992	2008 HK$’000 390 56 849
		1,295

Trade receivables 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 allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable.

Movements in the impairment losses of trade receivables in aggregate during the year are as follows:

Balance at beginning of the year Arising on acquisition of subsidiaries Amounts written off as uncollectible Recognised (reversal of) impairment losses during the year Balance at end of the year	2009 HK$’000 747 1,308 (523) 66 1,598	2008 HK$’000 946 – – (199)
		747

Included in the impairment losses of trade receivables with an aggregated balance of approximately HK$1,598,000 (2008: HK$747,000) were individually impaired of trade debtors who were in financial difficulties.

– 75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

25. Other receivables, deposits and prepayments

Other receivables Deposits paid Prepayments (Note) Less: Impairment losses recognised	2009 HK$’000 6,037 2,983 12,354 21,374 (5,736) 15,638	2008 HK$’000 5,645 347 168 6,160 (5,645) 515

Note: Included in prepayments of approximately HK$11,659,000 (2008: Nil) represents an amount prepaid for acquisition of an advanced specific software for futures contracts trading (Note 47).

Movements in the impairment losses of other receivables in aggregate during the year are as follows:

Balance at beginning of the year Amounts written off as uncollectable Recognised (reversed of) impairment losses during the year Balance at end of the year	2009 HK$’000 5,645 (17) 108 5,736	2008 HK$’000 6,145 – (500) 5,645

Included in impairment losses of other receivables are individually impaired who were in financial difficulties with an aggregate balance of approximately HK$5,736,000 (2008: HK$5,645,000).

– 76 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

26. Loan receivables

Interest bearing loan receivables Less: Impairment losses recognised	2009 HK$’000 6,256 (6,256) –	2008 HK$’000 69,019 (69,019)
		–

Movements in the impairment losses of loan receivables in aggregate during the year are as follows:

Balance at beginning of the year Amounts written off as uncollectible Balance at end of the year	2009 HK$’000 69,019 (62,763) 6,256	2008 HK$’000 69,019 –
		69,019

In previous year, one of the subsidiary was engaged in personal and commercial lending business. Loans were arising from its ordinary course of lending business. The amount of debts were individually assessed and impaired with an aggregate balance of approximately HK$6,256,000 (2008: HK$69,019,000) which have been long outstanding regardless of repetitive demands for repayment from the Group and the directors of the Company regarded that the amounts were irrecoverable and full impairment losses made in previous years.

No interest receivable is accrued during the two years ended 31 March 2009 and 2008.

– 77 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

27. Investment deposits

Deposit for formation of a joint venture (Note b) Earnest money for acquisition of an interest in the PRC company engaged in software development (Note c) Deposit paid for acquisition of an associate in the PRC engaged in brokerage services for dealing in financial and commodity futures (Note d) Deposit paid for acquisition of additional interests in a subsidiary engaged in brokerage for dealing in futures business (Note e) Deposit paid for acquisition of entire interests of a subsidiary engaged in investment and corporate finance advisory, trading of securities and money lending (Note f) Less: Impairment losses recognised	2009 HK$’000 5,000 3,500 37,307 5,000 100 50,907 (8,500) 42,407	2008 HK$’000 5,000 12,000 – – – 17,000 (17,000) –

Notes:

(a) The above deposits are refundable and classified as current assets in the consolidated financial statements.
(b) 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 license and half of the deposit amounting to HK$5,000,000 was refunded to the Group on 18 July 2005. Up to the date of this report, the Group is still taking steps to recover the deposits. As the amount has not yet received up to the report date and based on the assessment of the Company’s directors, impairment losses was made in respect of the balance of HK$5,000,000.

– 78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) 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 cancellation agreement of the letter of intent date 28 September 2007, the earnest money paid of HK$20,000,000 was agreed to be fully refunded by the end of July 2008. During the year ended 31 March 2009 and 2008, the Group has recovered HK$8,500,000 and HK$8,000,000 respectively. Accordingly, this amount of the provision for impairment was reversed and credited to the consolidated income statement. As the amount has not yet received up to the report date and based on the assessment of the Company’s directors, impairment losses was made in full.

(d) On 9 December 2008, Fortune Financial (Holdings) Limited (“Fortune Financial”), a wholly owned subsidiary of the Company entered into a non-legally binding memorandum with an independent third party, Shenzhen Huade Petrochemical Company Limited (the “Shenzhen Huade”)（深圳市華德石油化工有限公司）to acquire between 20% to 49% equity interests of New Era Futures Company Limited (the “New Era”)（新紀元期貨有限公司）at a consideration of RMB1,500,000 (equivalent to approximately HK$1,690,000) for every 1% equity interests of New Era. The total aggregate consideration would be ranged from RMB30,000,000 to RMB73,500,000 (equivalent to approximately HK$33,810,000 to HK$82,840,000).

New Era is a company established in the PRC and engaged in brokerage services for dealing in financial and commodity futures contracts in the PRC. The Group had paid RMB3,000,000 (equivalent to HK$3,400,000) as deposit on 9 December 2008.

On 4 March 2009, Fortune Financial entered into a second non-legally binding memorandum with Shenzhen Huade to increase its targeted acquisition percentage on New Era’s equity interests to not less than 40%. Correspondingly, the minimum total aggregated consideration would increased to RMB60,000,000. The Group had paid an additional deposit of RMB27,040,000 (equivalent to HK$33,907,000) on 5 March 2009. Details of the transaction had been set out in the Company’s announcement dated 27 May 2009.

(e) On 6 March 2009, Fortune Financial entered into a sales and purchase agreement with an independent third party, Pioneer (China) Limited (the “Pioneer China”), a minority shareholder of a subsidiary to acquire remaining 49% issued share capital on Excalibur Futures Limited (the “Excalibur Futures”) at a consideration of HK$9,800,000. Details of the transaction had been set out in the Company’s announcement dated 16 March 2009. As at 31 March 2009, the Group had paid HK$5,000,000 as a deposit for the acquisition. The transaction were approved by independent shareholders of the Company at an extraordinary general meeting held on 29 May 2009.

– 79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(f) On 6 March 2009, Fortune Financial entered into a conditional sales and purchase agreement with an independent third party, Ample Wealth Group Limited to acquire an entire interests in Wealthy Aim Group Limited which owns 70% equity interests in AMS Capital Limited at a consideration of HK$58,400,000. Details of the transaction had been set out in the Company’s announcement dated 16 March 2009. As at 31 March 2009, the Group had paid HK$100,000 as a deposit for the acquisition.
*: The English names of the companies represents management’s best effort at translating the Chinese names of companies as no English name had been registered.

28. Amount due from a minority shareholder of a subsidiary

The amount is unsecured, interest-free and repayable on demand.

29. Amount due from a related company

Amount due from a related company disclosed pursuant to section 161B of the Hong Kong Companies Ordinance are as follows:

			Maximum amount
			outstanding during year
	Balance as at 31 March		ended 31 March
	2009	2008	2009 2008
	HK$’000	HK$’000	HK$’000 HK$’000
Sharpway Enterprises Limited	–	13	13 13

The amount is unsecured and interest-free. As the amount is long outstanding and the Company’s directors consider that the recovery of the amount is remote, accordingly, the balance was fully impaired during year ended 31 March 2009. Mr. YEUNG Kwok Leung, a director of the Company, is the key management of the related company.

– 80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

30. Amount due from a director

Director’s current accounts disclosed pursuant to section 161B of the Hong Kong Companies Ordinance are as follows:

Mr. YEUNG Kwok Leung	Balance as at 31 March 2009 2008 HK$’000 HK$’000 776 426	Maximum amount outstanding during year ended 31 March 2009 2008 HK$’000 HK$’000 1,508 2,256

The amount due from Mr. YEUNG Kwok Leung, a director of the Company, bears interest at prime rate plus 5% (2008: prime rate plus 5%) per annum and repayable on demand.

The amount is secured by pledged of securities. As at 31 March 2009, the total market value of securities pledged as collateral in respect of the loan to a director were approximately HK$1,429,000 (2008: HK$1,683,000).

31. Bank balances and cash/pledged bank deposits/bank overdrafts

Bank balances and cash – trust

The Group maintains segregated trust accounts with a licensed bank to hold clients’ monies arising from its securities and futures brokerage and margin financing business. The Group has classified the clients’ monies as bank balances and cash – trust under the current assets of the consolidated balance sheet and recognised the corresponding account payables to respective clients on the grounds that it is liable for any loss or misappropriation of clients’ monies. The Group is restricted to use the clients’ monies to settle its own obligations.

– 81 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Bank balances and cash – general

The Group comprises bank balances and cash held by the Group amounting to approximately HK$22,138,000 (2008: HK$15,390,000) with an original maturity of three months or less. The bank balances and bank deposits carried interest at market rates ranging from 0.01% to 0.05% (2008: 0.05%) per annum.

As at 31 March 2009, the Group had bank balances of approximately HK$10,000 (2008: HK$2,000) were originally denominated in USD.

Pledged bank deposits

As at 31 March 2008, bank deposits had been pledged to secure bank overdrafts granted to the Group. The pledged bank deposits were released upon the settlement of relevant banking facilities. The pledged bank deposits at 31 March 2008 and 2009 carried fixed interest rate at 0.02% – 1.00% per annum.

Bank overdrafts – secured

Bank overdrafts carried interest at rates ranging from prime rate to the prime rate less 1% for the two years ended 31 March 2009 and 2008.

32. Other borrowings – unsecured

The Group had four unsecured borrowings:

(i) As at 31 March 2008, an outstanding balance of borrowing amounting of approximately HK$10,618,000 was unsecured and borne interest at the prime rate plus 3% per annum. The amount was fully repaid during the year ended 31 March 2009.
(ii) As at 31 March 2008, an outstanding balance of borrowing amounting of approximately HK$12,117,000 was unsecured and borne interest at 24% per annum. The amount was fully repaid during the year ended 31 March 2009.
(iii) As at 31 March 2008, an outstanding balance of borrowing amounting of approximately HK$4,000,000 was unsecured and borne interest at 4% per annum. The amount was fully during the year ended 31 March 2009.
(iv) As at 31 March 2008, an outstanding balance of borrowing amounting of approximately HK$3,000,000 was unsecured and borne interest at 4% per annum. The amount was fully during the year ended 31 March 2009.

– 82 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

33. Trade payables, other payables and accruals

Trade payables from the business of dealing in securities: – margin and cash clients Trade payables from the business of dealing in future contracts Trade payables arising from the business of electrical engineering contract work and trading of electrical goods Other payables and accruals	2009 HK$’000 28,878 40,637 4,034 9,590 83,139	2008 HK$’000 12,051 – 4,623 8,795
		25,469

For trade payables, no ageing analysis is disclosed for Group’s cash and margin clients as these clients were carried on an open account basis, the ageing analysis does not give additional value in the view of the nature of business of share margin financing.

At the balance sheet date, the ageing analysis of the trade payables arising from the business of electrical engineering contract work and trade of electrical goods was as follows:

0 – 30 days 31 – 60 days 61 – 90 days Over 90 days	2009 HK$’000 – – 7 4,027 4,034	2008 HK$’000 56 71 53 4,443
		4,623

– 83 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

34. Amounts due to a related company/a director

The amounts are unsecured, interest-free and repayable on demand.

35. Obligations under finance leases

The Group leased certain motor vehicles under finance leases. The lease term ranged from 2 to 3 years. For the year ended 31 March 2009, the average effective interest rate was 2.64% (2008: 2.64%) per annum. Interest rate was fixed at the contract date. All leases were on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

Amounts payable under finance leases Within one year More than one year but not exceeding two years Less: Future finance charges Present value of lease obligations Less: Amounts due for settlement within one year included in current liabilities Amounts due for settlement after one year included in non-current liabilities	Minimum lease payments 2009 2008 HK$’000 HK$’000 – 324 – 200 – 524 – (55) – 469	Present value of minimum lease payments 2009 2008 HK$’000 HK$’000 – 290 – 179 – 469 – (290) – 179

– 84 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group’s obligations under finance leases were secured by the Group’s charge over the leased assets.

Finance leases obligations are denominated in HK$.

36. Provisions

At 1 April 2007, 31 March 2008 and 1 April 2008 Additional provisions At 31 March 2009	Provisions for litigation HK$’000 – 940 940

Provisions were made based on management’s best estimates and judgments. The additional provision has been made during the year in respect of a charge as a defendant regarding to the compensation for the damage incurred for the rental premise (note 4).

37. Deferred taxation

The following are the major deferred tax assets recognised and movement thereof during the current and prior reporting periods.

At 31 March 2008 Arising on acquisition of subsidiaries Charged to consolidated income statement for the year At 31 March 2009	Decelerated depreciation allowance HK$’000 – 57 4 61

– 85 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

At 31 March 2009, the Group has unused tax losses of approximately HK$129,619,000 (2008: HK$124,943,000) available for offset against future profits. Tax losses may be carried forward indefinitely.

38. Convertible loan notes

On 17 February 2009, the Company issued convertible notes (the “2012 Convertible Notes A”) due on 16 February 2012 with an aggregate principal amount of HK$20,000,000. The 2012 Convertible Notes A can convert up to an aggregate 200,000,000 ordinary shares of the Company at HK$0.1 each. The 2012 Convertible Notes A were denominated in HK$. The effective interest rate of the liability component is 12.08%. The 2012 Convertible Notes A was fully converted into ordinary shares on 17 February 2009.

On 19 February 2009, the Company issued another convertible notes (the “2012 Convertible Notes B”) which due on 18 February 2012 with an aggregate amount of HK$50,000,000. The 2012 Convertible Notes B can convert up to an aggregate 500,000,000 ordinary shares of the Company at HK$0.1 each. The 2012 Convertible Notes B are denominated in HK$ and entitle the holders to convert them into ordinary shares of the Company at any time between the date of issue of the notes. The shares to be issued and allotted conversions shall rank pari passu in all respects among themselves and with all other ordinary shares in issue by the Company on the date of such allotment and issue. The effective interest rate of the liability components is 30%.

– 86 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Each of convertible notes is bifurcated into a liability component and an equity component. The equity component is presented in equity heading (“convertible loan notes equity reserve”). The movement of the liability and equity components of the convertible notes for the year is set out below:

Liability components Issue of convertible notes during the year Transfer to share capital upon conversion to ordinary shares Imputed interest expenses (note 10) At 31 March 2009 Equity components Issue of convertible notes during the year Transfer to share capital upon conversion to ordinary shares At 31 March 2009	2012 Convertible Notes A HK$’000 14,208 (14,208) – – 5,792 (5,792) –	2012 Convertible Notes B HK$’000 22,292 – 774 23,066 26,458 – 26,458	Total HK$’000 36,500 (14,208) 774 23,066 32,250 (5,792) 26,458

– 87 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

39. Share capital

Authorised: Ordinary shares of HK$0.1 each (Note a) Issued and fully paid: Ordinary shares of HK$0.1 each at 1 April 2007, 31 March 2008 and 1 April 2008 Issue of shares (Note b) Issue of remuneration shares (Note c) Conversion of convertible notes (Note d) At 31 March 2009	Number of shares 5,000,000,000 464,070,000 80,000,000 12,000,000 200,000,000 756,070,000	Amount HK$’000 500,000 46,407 8,000 1,200 20,000
		75,607

Notes:

(a) On 30 May 2008, the Company increased its authorised share capital from HK$100,000,000 to HK$500,000,000 by creation of 4,000,000,000 new ordinary shares with par value of HK$0.1 per each. The resolution was passed on EGM of shareholders held on 18 July 2008.
(b) Pursuant to a conditional placing agreement dated 10 September 2008 (as supplemented on 10 December 2008 and 31 January 2009 respectively) between the Company and Get Nice Securities Limited (the “Placing Agent”). The Placing Agent agreed to place 80,000,000 new shares on a fully underwritten basis, at the price of HK$0.25 per placing share. These new shares were issued under the general mandate granted on the annual general meeting of the Company held on 29 August 2008. All conditions of the placing agreement have been fulfilled and completion of placing agreement took place on 19 February 2009. Details of the transaction had been set out in the Company’s announcement dated 24 September 2008.
(c) Pursuant to a written resolution of the board of directors on 24 April 2008, the Company approved a remuneration warrants granted to Veda Capital Limited (the “Veda Capital”) for providing professional service amount to HK$1,200,000 in relation to the resumption of trading in the shares of the Company. On 18 February 2009, totalling 12,000,000 remuneration share at a price of HK$0.1 per share were issued. Details of the transaction had been set out in the Company’s circular dated 30 June 2008.

– 88 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(d) Pursuant to a sales and purchase agreement dated 27 February 2008 between the Company and Mr. Lao Chio Kuan, an independent third party. The Company agreed to purchase 51% equity interests of Excalibur Securities at a consideration of HK$20,000,000. The consideration was settled by way of issuing the convertible loan notes for a principal amount of HK$20,000,000 at the price of HK$0.1 per share to Mr. Lao Chio Kuan and totalling 200,000,000 shares were converted on 19 February 2009. Details of the transaction had been set out in the Company’s circular dated 30 June 2008.

All new shares issued during the year ended 31 March 2009 ranked pari passu in all respects with other shares in issue.

40. Share warrants

Pursuant to a written resolution of the board of directors on 17 February 2009, the Company approved to grant remuneration warrants to Veda Capital who provided the service in regarding of resumption of trading in shares of the Company in the Stock Exchange. On 18 February 2009, the Group granted remuneration warrants to Veda Capital to subscribe for 12,000,000 shares at an exercise price of HK$0.1 per share at any time between the issuance date of remuneration warrants and 36 months thereafter.

The registered holders of the warrants have not exercised the warrants as at the balance sheet date.

41. Share-based payment transactions

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 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 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

– 89 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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 2009, 11,400,000 (2008: 13,700,000) options had been granted and remained outstanding under the New Option Scheme of the Company, representing approximately 1.51% (2008: approximately 2.95%) of the shares of the Company in issue at that date.

Movements of the Company’s share options held by employees during the year are:

Option Type Date of grant 2004B 27 August 2003 2004C 16 January 2004 2005A 1 April 2004 2006A 2 August 2005 Total	Outstanding at 1 April 2007 6,400,000 2,630,000 500,000 15,992,600 25,522,600	Number of share options Cancelled during the year Outstanding at 31 March 2008 and 1 April 2008 Cancelled during the year (6,200,000) 200,000 (200,000) (530,000) 2,100,000 (2,100,000) (500,000) – – (4,592,600) 11,400,000 – (11,822,600) 13,700,000 (2,300,000)	Outstanding at 31 March 2009 – – – 11,400,000
			11,400,000

Note: During the two years ended 31 March 2009 and 2008, no share options were held by the directors.

– 90 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The detail information for the options granted by the Group as follow:

				Fair value at
Option type	Date of grant	Exercise period	Exercise price	grant date
2004B	27 August 2003	27 August 2003 to	HK$1.306	HK$1.170
		26 August 2008
2004C	16 January 2004	16 January 2004 to	HK$0.852	HK$0.840
		15 January 2009
2005A	1 April 2004	1 April 2004 to	HK$0.700	HK$0.700
		31 March 2009
2006A	2 August 2005	2 August 2005 to	HK$0.352	HK$0.340
		1 August 2010

42. Acquisitions of subsidiaries

(a) On 17 February 2009, the Group acquired 51% of the issued share capital of Excalibur Securities at a consideration of HK$20,061,000. The acquisition has been accounted for using the purchase method. The amount of goodwill as a result of acquisition was approximately HK$2,554,000.

– 91 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The fair value of net assets acquired in the transaction approximate to their carrying amounts and the goodwill arising are as follow:

Net assets acquired:
Property, plant and equipment
Intangible assets
Other non-current assets
Bank balance and cash – trust
Bank balance and cash – general
Trade receivables
Other receivables, deposits and prepayments
Tax recoverable
Deferred tax assets
Trade payables, other payables and accruals
Minority interests
Goodwill
Total consideration
Satisfied by:
Issue of convertible loan notes
Direct costs relating to the acquisition
Net cash inflow arising on acquisition:
Bank balance and cash acquired – general
Direct costs relating to the acquisition

HK$’000
245
500
532
5,036
6,038
33,006
46
12
57
(11,145)
(16,820)
17,507
2,554
20,061
20,000
61
20,061
6,038
(61)
5,977

Excalibur Securities contributed turnover and profit to the Group for the period between the date of acquisition and the balance sheet date of approximately HK$658,000 and HK$159,000 respectively.

If the acquisition had been completed on 1 April 2008, total Group’s turnover and profit for the year ended 31 March 2009 would have been increased by approximately HK$5,718,000 and HK$1,385,000 respectively. The pro forma information is for illustrative purposes only and is not necessarily an indication of turnover and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 April 2009, nor is it intended to be a projection of future results.

– 92 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) On 17 February 2009, the Group acquired 51% of the issued share capital of Excalibur Futures at a consideration of HK$12,944,000. The acquisition has been accounted for using the purchase method. The amount of discount arising as a result of acquisition was approximately HK$834,000.

The fair value of net assets acquired in the transaction approximate to their carrying amounts and the discount on acquisition arising are as follow:

Net assets acquired:
Property, plant and equipment
Intangible assets
Other non-current assets
Bank balance and cash – trust
Bank balance and cash – general
Trade receivables
Other receivables, deposits and prepayments
Trade payables, other payables and accruals
Tax payables
Minority interests
Discount on acquisition
Total consideration
Satisfied by:
Cash
Direct costs relating to the acquisition
Net cash outflow arising on acquisition:
Cash consideration paid
Bank balance and cash acquired – general
Direct costs relating to the acquisition

HK$’000
1,794
480
1,500
30,393
7,148
5,571
13,542
(32,899)
(512)
(13,239)
13,778
(834)
12,944
10,200
2,744
12,944
(10,200)
7,148
(14)
(3,066)

– 93 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Excalibur Futures contributed to turnover and loss of approximately HK$2,424,000 and HK$514,000 respectively to the Group for the period between the date of acquisition and the balance sheet date.

If the acquisition had been completed on 1 April 2008, total Group’s turnover for the year ended 31 March 2009 would have been increased by approximately HK$21,066,000 and profit for the year ended 31 March 2009 would have been decreased by approximately HK$4,464,000. The pro forma information is for illustrative purposes only and is not necessarily an indication of turnover and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 April 2009, nor is it intended to be a projection of future results.

(c) On 19 January 2009, the Group acquired the entire issued share capital of Money Holder Limited (the “Money Holder”) at a consideration of HK$1,200,000. The acquisition has been accounted for using the purchase method at the date of acquisition. The amount of discount acquisition arising as a result of acquisition was approximately HK$29,000.

The fair value of net assets acquired in the transaction approximate to their carrying amounts and the discount on acquisition arising are as follow:

Net assets acquired: Other receivables, deposit and prepayments Discount on acquisition Total consideration Satisfied by: Cash Net cash outflow arising on acquisition: Cash consideration paid	HK$’000 1,229 (29) 1,200 1,200 (1,200)

– 94 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Money Holder contributed approximately HK$161,000 loss to the Group’s profit for the period between the date of acquisition and the balance sheet date.

If the acquisition had been completed on 1 April 2008, total Group’s turnover for the year ended 31 march 2009 would remain unchanged and profit for year ended 31 March 2009 would have been decreased by approximately HK$1,367,000.

43. Disposal of subsidiaries

(a) On 24 March 2009, the Group disposed of the following subsidiaries at a consideration of HK$30,000 to an independent third party, the net liabilities of these subsidiaries at the date of disposals were as follows:

Net liabilities disposed of: Interests in associates Investment in jointly controlled entity Bank balances and cash – general Trade payables, other payables and accruals Total consideration, satisfied by: Other receivables Gain on disposals Net cash outflow from disposal of subsidiaries Bank balances and cash disposed of	HTH Logistics HK$’000 – – – (6) (6) 10 16 –	TopStar China Legend International Limited HK$’000 HK$’000 – – – – – 1 (22) (2) (22) (1) 10 – 32 1 – (1)	Transwell HK$’000 – – – (2) (2) 10 12 –	Total HK$’000 – – 1 (32)
				(31) 30
				61

				(1)

The subsidiaries disposed of during the year had no significant impact on the turnover, results and cash flow of the Group.

– 95 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) On 19 February 2008, the Group disposed of its 100% interests of Ever Ace Investment Limited and Wellink Shipping Limited at a consideration of HK$1,170,000 to an independent third party, 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:

Net assets disposed of: Property, plant and equipment Other receivables, deposits and prepayments Bank balances and cash – general Trade payable, other payables and accruals Loss on disposal of subsidiaries Cash consideration received Satisfied by: Cash Net inflow of cash and cash equivalents on disposal of subsidiaries: Cash consideration Bank balances and cash disposed of	HK$’000 832 835 35 (270) 1,432 (262) 1,170 1,170 1,170 (35) 1,135

The subsidiaries disposed of during the year had no significant impact on the turnover, results and cash flow of the Group.

– 96 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

44. Deemed disposal of partial interests in a subsidiary

On 23 September 2008, one of a subsidiary, Fortune Wealth Management Limited (the “Fortune Wealth”) allotted and issued 25,000 ordinary shares of HK$1 each to Leea Wealth Management Limited at a consideration of HK$25,000. As a result, the Company’s equity interests in Fortune Wealth decreased from 100% to 75% and a gain arising from this deemed disposal of partial interests in Fortune Wealth amounting of approximately HK$17,000.

45. Related party transactions

(i) Except as disclosed elsewhere in the consolidated financial statements, the significant related party transactions, which were carried out in the normal course of the Group’s business are as follows:

Brokerage commission received from a director Interest receivables received from a director Sale of motor vehicle to a key management personnel Deposits paid to a minority shareholder of a subsidiary for acquiring additional equity interests of the subsidiary (Note 27)	2009 HK$’000 12 44 30 5,000	2008 HK$’000 84

		34

		–

		–

– 97 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) Compensation of key management personnel

The remuneration of directors during the year was as follows:

Short-term benefits Post-employment benefits	2009 HK$’000 1,961 12 1,973	2008 HK$’000 2,347 12
		2,359

The remuneration of directors was determined by the remuneration committee having regard to the performance of individuals and market trends.

46. Retirement benefit scheme

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

The total cost charged to the consolidated income statement of approximately HK$261,000 (2008: HK$248,000) represents contributions payable to the schemes by the Group in respect of the year ended 31 March 2009.

– 98 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

47. Commitments

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

(a) Capital commitments

Contracted but not provided for: – acquisition of subsidiaries (Note i) – acquisition of property, plant and equipment (Note ii)	2009 HK$’000 82,400 8,341 90,741	2008 HK$’000 20,000 –
		20,000

Notes:

(i) On 6 March 2009, the Group entered into a sale and purchase agreement whereby the Group agreed to purchase the entire interest in Wealthy Aim Group Limited from Ample Wealth Group Limited, an independent third party, at a consideration of HK$58,500,000. The Group paid HK100,000 deposit as at 31 March 2009 and the balance of the consideration will be settled by the issuance of zero coupon convertible loan notes at conversion price of HK$0.16 each. The acquisition is conditional upon fulfillment of all conditions precedent in the sales and purchase agreement and the transaction has not yet completed up to the report date. Details of which are set out in the Company’s announcement dated on 16 March 2009.

On 6 March 2009, the Group entered into two sale and purchase agreements to acquire 49% equity interests in Excalibur Securities and Excalibur Futures from Pioneer China, a minority shareholder of the Group. The consideration of HK$19,200,000 and HK$9,800,000 respectively of which are settled by issuance of zero coupon convertible loan notes at conversion price of HK$0.16 each, subjected to the profit guarantee for Excalibur Securities for its net profits not less than HK$10,000,000 and HK$12,000,000 in 2009 and 2010 and Excalibur Futures for its net profits not less than HK$4,500,000 and HK$5,000,000 respectively. The transactions were approved by independent shareholders of the Company at an extraordinary general meeting held on 29 May 2009 and details of which are set out in the Company’s circular dated 8 May 2009. As at 31 March 2009, a deposit of HK$5,000,000 was paid.

(ii) On 18 February 2009, the Group has acquired 51% of the issued share capital of Excalibur Futures which had previously entered into a project agreement with an independent third party to acquire an advanced specific software for futures contracts trading at a consideration of HK$20,000,000. As at year end date, the Group has prepaid HK$11,659,000 for the project cost.

– 99 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Other commitment

Contracted but not provided for: – placing of convertible notes (c) Operating lease commitments	2009 HK$’000 –	2008 HK$’000 50,000

The Group as lessee

The Group leases certain of its offices premises under operating lease arrangements. Lease for properties are negotiated for a term ranging from two years and rental are fixed at the inception of lease. No provision for contingent rent and terms of renewal were established in the lease.

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

Within one year In the second to fifth years, inclusive	2009 HK$’000 8,385 3,697 12,082	2008 HK$’000 552 –
		552

– 100 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

48. Contingent liabilities

At the balance sheet date, the Group had the following contingent liabilities not provided for in the consolidated financial statements in respect of:

Guarantee given to a licensed money lender to secure a loan granted to a subsidiary	2009 HK$’000 –	2008 HK$’000 12,000

49. Post balance sheet events

(a) On 6 March 2009, the Group entered into two sale and purchase agreements to acquire 49% equity interests in Excalibur Securities and Excalibur Futures from Pioneer China, a minority shareholder of the Group. The consideration of HK$19,200,000 and HK$9,800,000 respectively will be settled by issuance of zero coupon convertible notes at conversion price of HK$0.16 each, subjected to the profits guarantee for Excalibur Securities Limited for its net profits not less than HK$10,000,000 and HK$12,000,000 in 2009 and 2010 and Excalibur Futures for its net profits not less than HK$4,500,000 and HK$5,000,000 respectively. The transactions were approved by independent shareholders of the Company at an extraordinary general meeting held on 29 May 2009 and details of which are set out in the Company’s circular dated 8 May 2009.
(b) On 16 March 2009, the Group entered into a subscription agreement to issue zero coupon convertible notes in the principal amount of HK$32,000,000 due on three years from the date of issue at the exercise price of HK$0.16 per conversion share. The convertible notes attached with an option for the subscriber to subscribe for convertible notes up to a maximum of 200,000,000 shares and extraordinary meeting was passed on 8 May 2009. The transaction was completed by an extraordinary general meeting held on 29 May 2009 and details of which is set out in the Company’s circular dated 8 May 2009.

– 101 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) On 6 March 2009, the Group entered into a sales and purchase transaction to acquire the entire equity interests in Wealthy Aim Group Limited from Ample Wealth Group Limited, an independent third party, at a consideration of HK$58,500,000. The acquisition is conditional upon fulfilment of all conditions precedent in the sales and purchase agreement and the transaction was terminated on 2 November 2009. Details of the transaction and the termination are set out in the Company’s announcement dated on 16 March 2009 and 3 November 2009 respectively.
(d) On 22 May 2009, the Group proposed to issue a zero coupon convertible bond in the principal amount of HK$128,000,000 due on 31 December 2012 at the exercise price of HK$0.16 per conversion share. The convertible bond attached with an option for the subscriber to subscribe for convertible bond up to a maximum principal amount of HK$128,000,000 convertible into a maximum of 800,000,000 shares and extraordinary meeting was held on 3 July 2009. The transaction has not yet completed up to the report date and details of which are set out in the Company’s announcement dated 27 May 2009.
(e) On 22 May 2009, the Group entered into a share transfer agreement with Shenzhen Huade, an independent third party, to acquire 49% equity interests in New Era at a consideration of RMB58,830,000 (approximately HK$66,850,000) which will be settled by way of setting the first deposit, the second deposit, the third deposit and the remaining balance of totalling RMB20,790,000 to be paid by cash, within five business days upon the share transfer date. The acquisition is conditional upon fulfilment of all conditions precedent.

– 102 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

50. Principal subsidiaries

Details of the principal subsidiaries held by the Company as at 31 March 2009 are as follows:

	Place of				Percentage of
	incorporation/				equity value
	registration and	Nominal	of issued		attributable
Name of subsidiary	operations	share/registered capital			to the Group	Principal activities
		Ordinary/
		registered	Deferred
			(Note	a)
Fortune (HK) Securities	Hong Kong	HK$41,000,000		–	100%	Provision of securities
Limited (Formerly						brokerage and
known as Hong Tong						financing services
Hai Securities Limited)
Excalibur Securities	Hong Kong	HK$20,000,000		–	51%	Provision of securities
(Note b)						brokerage and
						financing services
Excalibur Futures	Hong Kong	HK$20,000,000		–	51%	Provision of futures
(Note b)						brokerage services
Fortune Wealth Management	Hong Kong	HK$1,000,000		–	75%	Provision for insurance
(Formerly known as						brokerage service
Charmview International
Trading Limited)
Yew Sang Hong Limited	Hong Kong	HK$20	HK$12,524,000		100%	Electrical engineering
						contracting
Yew Sang Hong Trading	Hong Kong	HK$2	HK$2		100%	Trading in electrical
Limited						equipment and
						materials
Hong Tong Hai Consultants	Hong Kong	HK$2		–	100%	Investment holding
Limited
Jetcom Limited	The British	US$1		–	100%	Investment holding
	Virgin Islands
Sinogear Enterprises Limited	The British	US$1		–	100%	Investment holding
	Virgin Islands

– 103 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	Place of				Percentage of
	incorporation/				equity value
	registration and	Nominal of	issued		attributable
Name of subsidiary	operations	share/registered capital			to the Group	Principal activities
		Ordinary/
		registered	Deferred
			(Note	a)
Yew Sang Hong (China)	The British	US$1		–	100%	Investment holding
Limited	Virgin Islands
Yew Sang Hong (BVI)	The British	US$1		–	100%	Investment holding
Limited	Virgin Islands
Yew Sang Hong Trading	Hong Kong	HK$2		–	100%	Trading in electrical
(China) Limited						equipment and
						materials
Yew Sang Hong Building	Hong Kong	HK$2		–	100%	Building maintenance
Services (Maintenance)
Engineering Limited
Fortune Financial (Formerly	The British	US$1		–	100%	Investment holding
known as Yew Sang	Virgin Islands
Hong Investment
Services Limited)
Money Holder (Note b)	Hong Kong	HK$10,000		–	100%	Sub-letting of premises

(a) 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.
(b) Acquired during the year ended 31 March 2009.
(c) None of the subsidiaries had issued any debt securities at the end of the year or at any time during the year.
(d) The above table lists the subsidiaries of the Group which, in the opinion of the directors of the Company, principally affected the results or assets and liabilities of the Group. To give details of other subsidiaries would, in the opinion of the directors of the Company, result in particular excessive length.

– 104 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

51. Balance sheet of the company Non-current asset Investments in subsidiaries Current assets Investments held for trading Other receivables, deposits and prepayments Loan receivables Amounts due from subsidiaries (Note) Amount due from a related company (Note) Bank balances and cash Current liabilities Other borrowings – unsecured Trade payables, other payables and accruals Amounts due to subsidiaries (Note)	2009 HK$’000 – – 442 479 – 27,491 – 1,689 30,101 – 2,516 4,919 7,435 22,666	2008 HK$’000 –
		–
		38,756 16 – 3,741 12 1,181
		43,706
		10,618 2,425 41
		13,084
		30,622

– 105 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Capital and reserves Share capital Share premium Share options reserve Share warrants reserve Convertible loan notes reserve Contributed surplus Accumulated losses Total (capital deficits) equity Non-current liability Convertible loan notes	2009 HK$’000 75,607 244,634 1,208 552 26,458 80,657 (429,516) (400) 23,066 22,666	2008 HK$’000 46,407 233,184 1,208 – – 80,657 (330,834) 30,622 – 30,622

Note: The amount(s) due from/to subsidiaries and a related company are unsecured, interest-free and repayable on demand.

52. Comparative figures

Certain comparative amounts have been reclassified to conform with the current year’s presentation.

– 106 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

The following is the text of a report received from the reporting accountant of the Company, SHINEWING (HK) CPA Limited in respect of the financial information of the Target Group for the purpose of incorporation in this circular.

==> picture [232 x 62] intentionally omitted <==

24 December 2009

To the Board of Directors China Fortune Group Limited 13/F, Sunning Plaza 10 Hysan Avenue Causeway Bay Hong Kong

Dear Sirs,

We set out below our report on the financial information (“Financial Information”) of 新紀元期貨有限公司 New Era Futures Co., Ltd.* (“New Era”) for each of the three years ended 31 December 2008 and the six months ended 30 June 2009 (the “Relevant Periods”), for inclusion in the circular of China Fortune Group Limited (the “Company”) dated 24 December 2009 in connection with the proposed acquisition of 49% equity interest in New Era (the “Circular”).

New Era was established in the Peoples’ Republic of China (the “PRC”) with limited liability on 15 March 1995. The principal activity of New Era is the provision of brokerage services for dealing in commodity futures contracts in the PRC.

The financial year end of New Era is 31 December and the statutory audited financial statements of New Era for each of the three years ended 31 December 2008 were prepared in accordance with accounting principles and regulations applicable in the PRC and audited by 江蘇天華大彭會計師事務所有限公司 Jiangsu Tian Hua Da Peng Certified Public Accountants Limited*, certified public accountants registered in the PRC.

For identification purposes only

– 107 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

For the purpose of this report, the directors of New Era have prepared the management accounts of New Era for the Relevant Periods in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) (the “Underlying Financial Statements”). We have undertaken an independent audit of the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA. The Financial Information of New Era for the Relevant Periods set out in this report has been prepared from the Underlying Financial Statements without making any adjustments.

We have examined the Underlying Financial Statements for the Relevant Periods in accordance with Auditing Guidelines 3.340 “Prospectuses and the Reporting Accountant” as recommended by the HKICPA.

The directors of New Era are responsible for preparing the Underlying Financial Statements and the Financial Information which give a true and fair view. In preparing the Financial Information, it is fundamental that appropriate accounting policies are selected and applied consistently, that the judgements and estimates made are prudent and reasonable and that the reasons for any significant departure from applicable accounting standards are stated. The directors of the Company are responsible for the contents of the Circular in which this report is included.

OPINION

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of New Era as at 31 December 2006, 2007 and 2008 and 30 June 2009, and of the results and cash flows of New Era for the Relevant Periods.

COMPARATIVE FINANCIAL INFORMATION

The comparative statement of comprehensive income, statement of cash flows and statement of changes in equity of New Era for the six months ended 30 June 2008 together with the notes thereon (the “30 June 2008 Financial Information”) have been extracted from New Era’s unaudited financial information for the same period, which were prepared by the directors of New Era solely for the purpose of this report. We have reviewed the 30 June 2008 Financial Information in accordance with Hong Kong Standard on Review Engagements 2410 “Engagements to Review Financial Statements” issued by the HKICPA.

– 108 –

ACCOUNTANT’S REPORT OF THE TARGET COMPANY

APPENDIX II

Our review of the 30 June 2008 Financial Information consists principally of making enquires of New Era’s management and applying analytical procedures to the 30 June 2008 Financial Information and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as test of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the 30 June 2008 Financial Information.

REVIEW CONCLUSION

On the basis of our review which does not constitute an audit, we are not aware of any material modifications that should be made to the 30 June 2008 Financial Information.

– 109 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

A. FINANCIAL INFORMATION OF NEW ERA

STATEMENT OF COMPREHENSIVE INCOME

NOTES Turnover 7 Cost of sales on futures brokerage Other revenue 8 (Loss) gain on fair value changes in investments held for trading Administrative expenses Other operating expenses Profit before taxation Income tax expense 9 (Loss) profit for the year/period and total comprehensive (expenses) income for the year/period 10	Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 20,617 41,776 64,120 (15,933) (33,487) (47,584) 888 1,164 2,870 (14) 153 149 (5,415) (7,481) (12,255) (10) (72) (150) 133 2,053 7,150 (308) (712) (1,830) (175) 1,341 5,320	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 29,414 36,028 (20,874) (24,289) 1,601 1,376 245 6,622 (5,705) (6,645) (150) (1,969) 4,531 11,123 (1,143) (2,789) 3,388 8,334	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 29,414 36,028 (20,874) (24,289) 1,601 1,376 245 6,622 (5,705) (6,645) (150) (1,969) 4,531 11,123 (1,143) (2,789) 3,388 8,334
			11,123 (2,789)
			8,334

– 110 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

STATEMENT OF FINANCIAL POSITION

NOTES Non-current assets Property and equipment 14 Investment properties 15 Prepaid lease payments 16 Other non-current assets 17 Current assets Prepaid lease payments 16 Investments held for trading 18 Accounts receivable 19 Other receivables, deposits and Prepayments Bank balances and cash – trust 20 Bank balances and cash – general 20 Current liabilities Accounts payable, other payables and accruals 21 Tax payables Net current assets Total assets less current liabilities Capital and reserves Paid-up capital 23 Reserves Total Equity Non-current liabilities Deferred tax liabilities 22	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 10,339 10,186 12,298 4,765 4,649 4,523 1,972 1,924 1,871 1,600 1,600 1,600 18,676 18,359 20,292 53 53 53 88 – 217 77,897 43,108 100,832 469 1,734 413 24,937 119,776 93,302 5,040 9,756 21,638 108,484 174,427 216,455 98,403 162,284 200,604 308 599 928 98,711 162,883 201,532 9,773 11,544 14,923 28,449 29,903 35,215 30,000 30,000 30,000 (1,551) (210) 5,110 28,449 29,790 35,110 – 113 105 28,449 29,903 35,215	As at 30 June 2009 RMB’000 12,036 4,460 1,845 1,400
		19,741
		53 19,179 71,518 406 193,834 44,569
		329,559
		274,079 3,176
		277,255
		52,304
		72,045

		58,820 13,033
		71,853
		192
		72,045

– 111 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

STATEMENT OF CHANGES IN EQUITY

At 1 January 2006 Loss for the year and total comprehensive expenses for the year At 31 December 2006 Profit for the year and total comprehensive income for the year Transfer of reserve At 31 December 2007 Profit for the year and total comprehensive income for the year Transfer of reserve At 31 December 2008 Profit for the period and total comprehensive income for the period Increase in capital Dividend paid At 30 June 2009 Unaudited At 1 January 2008 Profit for the period and total comprehensive income for the year At 30 June 2008	Paid-up capital RMB’000 30,000 – 30,000 – – 30,000 – – 30,000 – 28,820 – 58,820 30,000 – 30,000	Capital reserve (Note i) RMB’000 – – – – – – – – – – 4,220 – 4,220 – – –	Statutory reserve (Note ii) (Accumulated losses) retained earnings RMB’000 RMB’000 86 (1,462) – (175) 86 (1,637) – 1,341 201 (201) 287 (497) – 5,320 532 (532) 819 4,291 – 8,334 – – – (4,631) 819 7,994 287 (497) – 3,388 287 2,891	Total RMB’000 28,624 (175) 28,449 1,341 – 29,790 5,320 – 35,110 8,334 33,040 (4,631) 71,853 29,790 3,388 33,178

Notes:

(i) The capital reserve represents premium over the paid-up capital received from a shareholder of New Era.

(ii) The statutory reserve represents the appropriations from the profit after tax of New Era under the laws and regulations of the PRC.

– 112 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

STATEMENT OF CASH FLOWS

OPERATING ACTIVITIES Profit before taxation Adjustments for: Depreciation of property and equipment Depreciation of investment properties Amortisation of prepaid lease payments Loss (gain) on disposal of property and equipment Loss (gain) on fair value changes in investments held for trading Bank interest income Operating cashflows before movements in working capital (Increase) decrease in accounts receivable Decrease (increase) in other receivables, deposits and prepayments (Increase) decrease in bank balances and cash – trust Increase in accounts payable, other payables and accruals Cash (used in) from operation Tax paid NET CASH (USED IN) FROM OPERATING ACTIVITIES INVESTING ACTIVITIES Purchase of investments held for trading Purchase of property and equipment Prepaid lease payments Refund of other non-current assets Bank interest income received Proceeds from disposal of investments held for trading Proceeds from disposal of property and equipment NET CASH (USED IN) FROM INVESTING ACTIVITIES	Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 133 2,053 7,150 894 956 1,128 126 116 126 51 48 53 10 72 (54) 14 (153) (149) (776) (1,102) (2,504) 452 1,990 5,750 (60,424) 34,789 (57,724) 583 (1,265) 1,321 (11,439) (94,839) 26,474 70,454 63,881 38,320 (374) 4,556 14,141 (22) (308) (1,509) (396) 4,248 12,632 – (154) (59,236) (2,673) (881) (3,316) (66) – – – – – 776 1,102 2,504 – 395 59,168 8 6 130 (1,955) 468 (750)	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 4,531 11,123 416 617 63 63 26 26 – – (245) (6,622) (1,321) (1,346) 3,470 3,861 (94,432) 29,314 (177) 7 11,275 (100,532) 84,515 73,475 4,651 6,125 (164) (454) 4,487 5,671 (55,044) (156,768) (1,106) (355) – – – 200 1,321 1,346 55,289 144,428 – – 460 (11,149)

– 113 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE TARGET COMPANY

FINANCING ACTIVITIES Capital injection Dividend paid NET CASH FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR/PERIOD CASH AND CASH EQUIVALENTS AT END OF THE YEAR/PERIOD, representing bank balances and cash – general	– – – – – – – – – (2,351) 4,716 11,882 7,391 5,040 9,756 5,040 9,756 21,638 Year ended 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000	– 33,040 – (4,631) – 28,409 4,947 22,931 9,756 21,638 14,703 44,569 Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited)

– 114 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

NOTES TO THE FINANCIAL INFORMATION

1. General information

New Era is a limited company established in the PRC. The address of the registered office and principal place of business of New Era is at No. 153, East Huaihai Road, Xuzhou, Jiangsu Province, PRC.

The Financial Information is presented in Renminbi, which is the same as the functional currency of New Era.

The principal activity of New Era is the provision of brokerage services for dealing in commodity futures contracts in the PRC.

2. Application of Hong Kong Financial Reporting Standards (“HKFRSs”)

For the purpose of preparing and presenting the Financial Information, New Era has consistently applied all the new and revised standards, amendments and interpretations issued by the HKICPA that are relevant to its operations and effective for the annual period beginning on or after 1 January 2009 throughout the Relevant Periods.

New Era has not early applied the following new Hong Kong Accounting Standards (“HKASs”), HKFRSs, amendments or interpretations that have been issued but are not yet effective as at the date of this report. The directors of New Era anticipate that the application of these new standards, amendments or interpretations will have no material impact on the results and the financial position of New Era.

HKFRSs (Amendments) Improvements to HKFRSs May 2008[1] HKFRSs (Amendments) Improvements to HKFRSs April 2009[2] HKAS 24 (Revised) Related Party Disclosures[3] HKAS 27 (Revised) Consolidated and Separate Financial Statements[4] HKAS 32 (Amendment) Classification of Rights Issues[5] HKAS 39 (Amendment) Eligible Hedged Items[4] HKFRS 1 (Revised) First-time Adoption of HKFRSs[4] HKFRS 1 (Amendments) First-time Adoption of HKFRSs[6] HKFRS 2 (Amendments) Share-based Payment – Group Cash-settled Share-based Payment Transactions[6] HKFRS 3 (Revised) Business Combinations[4] HKFRS 9 Financial Instruments[7] HK(IFRIC) – INT 9 and Embedded derivatives[8] HKAS 39 (Amendments) HK(IFRIC) – INT 14 HKAS 19 – The Limit of a Defined Benefit Asset, (Amendments) Minimum Funding Requirements and their Interaction[3] HK(IFRIC) – INT 17 Distributions of Non-cash Assets to Owners[4] HK(IFRIC) – INT 18 Transfers of Assets from Customers[9] HK(IFRIC) – INT 19 Extinguishing Financial liabilities with Equity Instruments[10]

– 115 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

1 Amendments to HKFRS 5, effective for annual periods beginning on or after 1 July 2009. 2 Effective for annual periods beginning on or after 1 July 2009 or 1 January 2010, as appropriate. 3 Effective for annual periods beginning on or after 1 January 2011.

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

5 Effective for annual periods beginning on or after 1 February 2010.

6 Effective for annual periods beginning on or after 1 January 2010.

7 Effective for annual periods beginning on or after 1 January 2013.

8 Effective for annual periods ending on or after 30 June 2009.

9 Effective for transfers of assets from customers received on or after 1 July 2009.

10 Effective for annual periods beginning on or after 1 July 2010.

3. Significant accounting policies

The Financial Information has been prepared on the historical cost basis, except for certain financial instruments, which are measured at fair value, as explained in the accounting policies set out below.

The Financial Information has been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the Financial Information include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

(a) Property and equipment

Property and equipment including buildings held for use in the supply of services, or for administrative purpose are stated at cost less subsequent depreciation and accumulated impairment losses.

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

An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the assets. Any gain or loss arising on derecognition of the assets (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the statement of comprehensive income in the period in which the item is derecognised.

(b) Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation.

On initial recognition, investment properties are measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are stated at cost less subsequent accumulated depreciation and any accumulated impairment losses. Depreciation is charged so as to write off the cost of investment properties over their estimated useful lives and after taking into account their estimated residual value, using the straight-line method.

– 116 –

ACCOUNTANT’S REPORT OF THE TARGET COMPANY

APPENDIX II

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income in the period in which the item is derecognised.

(c) Leasing

New Era as lessor

Rental income from operating lease is recognised in the statement of comprehensive income on a straight-line basis over the term of the relevant lease.

New Era as lessee

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

Leasehold land and buildings

The land and building elements of a lease of land and buildings are considered separately for the purpose of the lease classification, unless the lease payments cannot be allocated reliably between the land and building elements, in which case, the entire lease is generally treated as a finance lease and accounted for as property and equipment. To the extent the allocation of lease payments can be made reliably, leasehold interests in land are accounted for as operating leases.

– 117 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

(d) Prepaid lease payments

Upfront prepayments made for the land use rights and leasehold land are initially recognised on the statement of financial position as prepaid lease payments and are expensed in the statement of comprehensive income on a straight-line basis over the periods of the respective leases.

(e) Impairment losses on tangible assets

At the end of each of the reporting period, New Era reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

(f) Financial instruments

Financial assets and financial liabilities are recognised in the statement of financial position when New Era becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

– 118 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE TARGET COMPANY

Financial assets

New Era’s financial assets are classified as financial assets at fair value through profit or loss (“FVTPL”) and loans and receivables. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the 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 (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period.

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

Financial assets at fair value through profit or loss

A financial asset is classified as held for trading if:
it has been acquired principally for the purpose of selling in the near future; or
it is a part of an identified portfolio of financial instruments that New Era manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.

At the end of each of the reporting period subsequent to initial recognition, financial assets at FVTPL are measured at fair value, with changes in fair value recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss includes any dividend or interest earned on the financial assets.

– 119 –

ACCOUNTANT’S REPORT OF THE TARGET COMPANY

APPENDIX II

Loans and receivables

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

Impairment of financial assets

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

For 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 reorganisation.

For certain categories of financial asset, such as accounts and other receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include New Era’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the credit period, observable changes in national or local economic conditions that correlate with default on receivables.

– 120 –

ACCOUNTANT’S REPORT OF THE TARGET COMPANY

APPENDIX II

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

Financial liabilities and equity

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

An equity instrument is any contract that evidences a residual interest in the assets of New Era after deducting all of its liabilities. New Era’s financial liabilities are generally classified as other financial liabilities.

Effective interest method

Interest expense is recognised on an effective interest basis.

– 121 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

Other financial liabilities

Other financial liabilities including accounts and other payables are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

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

Derecognition

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

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

(g) Revenue recognition

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

Service income for broking business of securities and futures dealing are recognised on a trade date basis when the services are provided.

– 122 –

ACCOUNTANT’S REPORT OF THE TARGET COMPANY

APPENDIX II

Sales of investments held for trading are recognised on a trade date basis.

Rental income is recognised on a straight-line basis over the period of the relevant lease terms.

(h) Taxation

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

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

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

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

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

(i) Retirement benefit costs

Payments to the state-managed retirement benefit scheme are charged as an expense when employees have rendered service entitling them to the contributions.

– 123 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

4. Key sources of estimation uncertainty

In applying the accounting policies, which are described in note 3, the directors of New Era are required to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The followings are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Depreciation of property and equipment and investment properties

Property and equipment and investment properties are depreciated on a straightline basis over their estimated useful lives. The determination of the useful lives involves management’s estimation. New Era assesses annually the residual value and the useful lives of the property and equipment and investment properties and if the expectation differs from the original estimate, such a difference may impact the depreciation in the year and the estimate will be changed in the future period.

5. Capital risk management

New Era manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balances.

The capital structure of New Era consists of cash and cash equivalents and equity attributable to equity holders of New Era, comprising paid-up capital and reserves. The directors of New Era review the capital structure regularly. As part of this review, the directors of New Era consider the cost of capital and the associated risks, and take appropriate actions to adjust New Era’s capital structure. The overall strategy of New Era remained unchange during the Relevant Periods.

New Era is licensed with China Securities Regulatory Commission (“Regulatory Commission”) for the business it operates in. New Era is subject to liquid capital requirements under 期貨公司風險監管指標管理試行辦法 Provisional Measures on Risk Supervision Standards and Management of Futures Companies adopted by the Regulatory Commission. Under the 期貨公司風險監管指標管理試行辦法 Provisional Measures on Risk Supervision Standards and Management of Futures Companies, New Era must maintain its liquid capital so that assets and liabilities, adjusted as determined by China Securities Regulatory Commission, in excess of RMB15,000,000. The required information is filed with the Regulatory Commission on a monthly basis.

For identification purposes only

– 124 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

6. Financial instruments

(a) Categories of financial instruments

Financial assets – Investments held for trading, at fair value – Loan and receivables (including cash and cash equivalents) Financial liabilities – Amortised cost	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 88 – 217 108,283 174,333 216,136 96,656 158,393 193,367	As at 30 June 2009 RMB’000 19,179 310,279 264,952

(b) Financial risk management objectives and policies

New Era’s major financial instruments include investments held for trading, accounts receivable, other receivables and deposits, bank balances and cash, accounts and other payables. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments include market risk (interest rate risk and other price risk), credit risk and liquidity risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

– 125 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

Market risk

Interest rate risk

New Era is exposed to cash flow interest rate risk in relation to its variable-rate accounts receivable and bank balances. New Era currently does not have an interest rate hedging policy. However, the management monitors interest rate exposure and will consider hedging significant interest rate exposure should the need arise.

Sensitivity analysis

If interest rates had been 50 basis points higher/lower and all other variables were held constant, New Era’s post-tax loss for the year ended 31 December 2006 would decrease/increase by RMB361,000 and the profit for the two years ended 31 December 2007 and 2008 and the six months ended 30 June 2009 would increase/decrease by approximately RMB535,000, RMB755,000 and RMB1,085,000 respectively.

Other price risk

New Era was exposed to equity price risk through its investment in listed equity securities. The management manages this exposure by maintaining a portfolio of investments with different risk and return profiles. New Era’s equity price risk is mainly concentrated on equity securities operating in different industry sectors quoted in the Shenzhen Stock Exchange and Shanghai Stock Exchange.

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to other price risk if the equity prices in respect of the listed equity securities increased/decreased by 10% assuming other variables remain constant at the end of each of the reporting period.

If the equity prices in respect of the listed equity securities had been 10% higher/lower, New Era’s profit before taxation for the years ended 31 December 2006, 31 December 2008 and the six months ended 30 June 2009 would increase/decrease by approximately RMB9,000, RMB22,000 and RMB1,918,000 respectively, as a result of the change in fair value of investments held for trading.

– 126 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

Credit risk

As at the end of each of the reporting period, New Era’s maximum exposure to credit risk which will cause a financial loss to New Era due to failure to discharge an obligation by the counterparties provided by New Era is arising from the carrying amount of the respective recognised financial assets as stated in the statement of financial position.

In order to minimise the credit risk, New Era reviews the recoverable amount of each individual debt at the end of each of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of New Era consider that New Era’s credit risk is significantly reduced.

New Era has concentration of credit risk as all of the accounts receivable were due from three futures exchange companies at the end of each of the reporting periods.

The directors consider the credit risk on liquid funds is low because the counterparties are authorised institutions.

Liquidity risk

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

The financial liabilities of New Era are repayable on demand. Accordingly, no liquidity risk analysis is presented.

(c) Fair value

The fair value of financial assets with standard terms and conditions and traded in active liquid markets are determined with reference to quoted market bid prices.

The directors of New Era consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the Financial Information approximate to their fair values due to their immediate or short-term maturities.

– 127 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

7. Turnover and segment reporting

Turnover

Turnover represents fair value of amounts received and receivable for services provided to outside customers and interest income received and receivable on bank balances and accounts receivable, net of sales related taxes. An analysis of New Era’s turnover for the Relevant Periods and the six months ended 30 June 2008 is as follows:

Service income Interest income on accounts receivable Gross turnover Sales related taxes	Year 2006 RMB’000 21,252 446 21,698 (1,081) 20,617	ended 31 December 2007 2008 RMB’000 RMB’000 43,369 67,091 870 896 44,239 67,987 (2,463) (3,867) 41,776 64,120	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 30,780 37,709 413 490 31,193 38,199 (1,779) (2,171) 29,414 36,028	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 30,780 37,709 413 490 31,193 38,199 (1,779) (2,171) 29,414 36,028
				38,199 (2,171)
				36,028

Segment reporting

New Era currently operates in one business segment in providing brokerage services for dealing in the commodity futures contracts in the PRC. A single management team reports to the general manager, the chief operating decision-maker who comprehensively manages the entire business. Accordingly, New Era does not have separately reportable segments.

New Era’s major operations and markets are located in the PRC, no geographical information is provided.

– 128 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

8. Other revenue

Other revenue comprises of: Bank interest income Rental income, net of outgoings Gain on disposal of property and equipment Others	Year 2006 RMB’000 776 62 – 50 888	ended 31 December 2007 2008 RMB’000 RMB’000 1,102 2,504 60 60 – 54 2 252 1,164 2,870	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 1,321 1,346 30 30 – – 250 – 1,601 1,376	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 1,321 1,346 30 30 – – 250 – 1,601 1,376
				1,376

9. Income tax expense

Current tax: PRC Enterprise Income Tax Under provision in prior year: PRC Enterprise Income Tax Deferred tax (Note 23):	Year 2006 RMB’000 303 5 – 308	ended 31 December 2007 2008 RMB’000 RMB’000 599 1,838 – – 113 (8) 712 1,830	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 1,143 2,702 – – – 87 1,143 2,789	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 1,143 2,702 – – – 87 1,143 2,789
				2,789

New Era is subject to the PRC Enterprise Income Tax at the rate of 33% for the years ended 31 December 2006 and 2007.

On 16 March 2007, the PRC promulgated the Law of the PRC on Enterprise Income Tax (the “New Law”) by Order No. 63 of the President of the PRC. On 6 December 2007, the State Council of the PRC issued Implementation Regulation of the New Law. Under the New Law and Implementation Regulation, the Enterprise Income Tax rate of New Era was reduced from 33% to 25% from 1 January 2008 onwards. Accordingly, the relevant tax rate for New Era is 25% for the year ended 31 December 2008 and the period ended 30 June 2009.

– 129 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

The income tax expense for the year/period can be reconciled to the profit before taxation per the statement of comprehensive income as follows:

Profit before taxation Tax at the applicable tax rate of 33% for 2006 and 2007, 25% for 2008 and 2009 Tax effect of expenses not deductible for tax purposes Under provision in prior year Income tax expense	Year 2006 RMB’000 133 44 259 5 308	ended 31 December 2007 2008 RMB’000 RMB’000 2,053 7,150 677 1,788 35 42 – – 712 1,830	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 4,531 11,123 1,133 2,781 10 8 – – 1,143 2,789	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 4,531 11,123 1,133 2,781 10 8 – – 1,143 2,789

				2,781 8 –
				2,789

10. (Loss) profit for the year/period

(Loss) profit for the year/period is stated after charging: Staff costs (including directors’ emoluments): – salaries and allowances – retirement benefit scheme contributions Total staff costs Auditor’s remuneration Depreciation of property and equipment Depreciation of investment properties Amortisation of prepaid lease payments Loss on disposal of property and equipment Minimum lease payment under operating leases	Year 2006 RMB’000 1,349 104 1,453 20 894 126 51 10 768	ended 31 December 2007 2008 RMB’000 RMB’000 1,278 3,917 148 183 1,426 4,100 50 36 956 1,128 116 126 48 53 72 – 789 1,592	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 1,994 2,296 81 123 2,075 2,419 36 45 416 617 63 63 26 26 – – 700 837	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 1,994 2,296 81 123 2,075 2,419 36 45 416 617 63 63 26 26 – – 700 837
				2,419 45 617 63 26 – 837

– 130 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

11. Dividend

	Year	ended 31 December		Six months ended 30 June	Six months ended 30 June
	2006	2007	2008	2008	2009
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
				(unaudited)
Dividend recognised as distribution
during the year/period:
Final dividend for 2008	–	–	–	–	4,631

12. Directors’ and employees’ emoluments

(a) Directors’ emoluments

The emoluments paid or payable to each of the directors of New Era during the Relevant Periods and the six months ended 30 June 2008 are as follows:

For the year ended 31 December 2006

丁一民(“Ding Yi Min”) 馮莉莉(“Feng Li Li”) 鄭華(“Zheng Hua”) 張學慶 (“Zhang Xue Qing”) 楊鵬(“Yang Peng”)	Fees RMB’000 – – – – – –	Salaries and other benefits Retirement benefit scheme contributions RMB’000 RMB’000 68 17 68 17 66 – 33 – – – 235 34	Total RMB’000 85 85 66 33 –
			269

– 131 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

For the year ended 31 December 2007

Ding Yi Min Feng Li Li Zheng Hua Zhang Xue Qing Yang Peng For the year ended 31 Ding Yi Min Feng Li Li Zheng Hua Zhang Xue Qing Yang Peng	Fees Salaries and other benefits Retirement benefit scheme contributions RMB’000 RMB’000 RMB’000 – 115 17 – 115 17 – 131 – – 63 – – – – – 424 34 December 2008 Fees Salaries and other benefits Retirement benefit scheme contributions RMB’000 RMB’000 RMB’000 – 144 17 – 144 17 – 131 – – 75 – – – – – 494 34	Total RMB’000 132 132 131 63 –
		458

		Total RMB’000 161 161 131 75 –
		528

– 132 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

For the six months ended 30 June 2008 (unaudited)

Ding Yi Min Feng Li Li Zheng Hua Zhang Xue Qing Yang Peng	Fees RMB’000 (unaudited) – – – – – –	Salaries and other benefits Retirement benefit scheme contributions RMB’000 RMB’000 (unaudited) (unaudited) 42 9 42 9 36 – 27 – – – 147 18	Total RMB’000 (unaudited) 51 51 36 27 –
			165

For the six months ended 30 June 2009

Ding Yi Min Feng Li Li Zheng Hua Zhang Xue Qing Yang Peng	Fees RMB’000 – – – – – –	Salaries and other benefits Retirement benefit scheme contributions RMB’000 RMB’000 42 9 42 9 36 – 25 – – – 145 18	Total RMB’000 51 51 36 25 –
			163

– 133 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

(b) Employee’s emoluments

Out of the five highest paid individuals three were directors of New Era, whose emoluments are included in Note 12(a) above for the Relevant Periods and for the six months ended 30 June 2008. The aggregate emoluments of the remaining two individuals for the Relevant Periods and for the six months ended 30 June 2008 were as follows:

Salaries and other allowances Retirement benefit scheme contributions	Year 2006 RMB’000 63 15 78	ended 31 December 2007 2008 RMB’000 RMB’000 131 152 31 37 162 189	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 76 51 18 12 94 63	Six months ended 30 June 2008 2009 RMB’000 RMB’000 (unaudited) 76 51 18 12 94 63
				63

During the Relevant Periods and for the six months ended 30 June 2008, the emoluments for each of the above individuals was within the emoluments band of less than HK$1,000,000.

During the Relevant Periods and for the six months ended 30 June 2008, no emoluments were paid by New Era to the directors or employees as an inducement to join or upon joining New Era, or as compensation for loss of office. None of the directors has waived any emoluments during the Relevant Periods and for the six months ended 30 June 2008.

13. Earnings per share

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

– 134 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

14. Property and equipment

COST At 1 January 2006 Additions Disposals At 31 December 2006 and 1 January 2007 Additions Disposals At 31 December 2007 and 1 January 2008 Additions Disposals At 31 December 2008 and 1 January 2009 Additions At 30 June 2009 ACCUMULATED DEPRECIATION At 1 January 2006 Provided for the year Eliminated on disposal At 31 December 2006 and 1 January 2007 Provided for the year Eliminated on disposal At 31 December 2007 and 1 January 2008 Provided for the year Eliminated on disposal At 31 December 2008 and 1 January 2009 Provided for the period At 30 June 2009 CARRYING VALUES At 31 December 2006 At 31 December 2007 At 31 December 2008 At 30 June 2009	Buildings Leasehold improvements RMB’000 RMB’000 6,995 961 1,550 170 – (337) 8,545 794 – 2 – – 8,545 796 – 543 – (625) 8,545 714 – – 8,545 714 384 335 171 242 – (337) 555 240 188 159 – – 743 399 204 336 – (625) 947 110 103 73 1,050 183 7,990 554 7,802 397 7,598 604 7,495 531	Motor vehicles RMB’000 489 395 (49) 835 – (62) 773 1,549 (378) 1,944 – 1,944 245 70 (31) 284 99 (61) 322 135 (302) 155 135 290 551 451 1,789 1,654	Office equipment RMB’000 2,485 558 – 3,043 879 (1,312) 2,610 1,224 – 3,834 355 4,189 1,388 411 – 1,799 510 (1,235) 1,074 453 – 1,527 306 1,833 1,244 1,536 2,307 2,356	Total RMB’000 10,930 2,673 (386)
				13,217 881 (1,374)
				12,724 3,316 (1,003)
				15,037 355
				15,392

				2,352 894 (368)
				2,878 956 (1,296)
				2,538 1,128 (927)
				2,739 617
				3,356

				10,339

				10,186

				12,298

				12,036

– 135 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

The above items of property and equipment are depreciated on a straight-line basis after taking into account their estimated residual values at the following rates per annum:

Buildings 2.5% Leasehold improvements Over the term of the lease, or 20%, whichever is the higher Motor vehicles 14% Office equipment 10% to 20%

Buildings were erected on lands in the PRC under medium-term lease.

15. Investment properties

COST At 1 January 2006, 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009 ACCUMULATED DEPRECIATION At 1 January 2006 Provided for the year At 31 December 2006 and 1 January 2007 Provided for the year At 31 December 2007 and 1 January 2008 Provided for the year At 31 December 2008 and 1 January 2009 Provided for the period At 30 June 2009 CARRYING VALUES At 31 December 2006 At 31 December 2007 At 31 December 2008 At 30 June 2009	RMB’000 5,262

	371 126
	497 116
	613 126
	739 63
	802

	4,765

	4,649

	4,523

	4,460

– 136 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

The fair values of New Era’s investment properties at 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009 were RMB6,500,000, RMB6,700,000, RMB7,400,000 and RMB8,100,000, respectively. The fair values have been arrived at based on a valuation carried out by Roma Appraisals Limited, an independent valuer not connected with New Era. The valuation was determined by reference to recent market prices for similar properties in the same locations and conditions.

The above investment properties are depreciated on a straight-line basis over 40 years after taking into account their estimated residual values.

Investment properties were erected on lands in the PRC under medium-term lease.

16. Prepaid lease payments

New Era’s prepaid lease payments comprise: Leasehold land in the PRC under Medium-term lease Analysed for reporting purpose: Current portion Non-current portion	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 2,025 1,977 1,924 53 53 53 1,972 1,924 1,871 2,025 1,977 1,924	As at 30 June 2009 RMB’000 1,898 53 1,845 1,898

17. Other non-current assets

Other non-current assets represent membership deposits paid to various futures exchanges in the PRC. They are non-interest bearing.

– 137 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

18. Investments held for trading

Listed investments, at fair value: Equity securities listed in the Shenzhen Stock Exchange Equity securities listed in the Shanghai Stock Exchange Accounts receivable Accounts receivable from futures exchanges arising from the business of dealing in commodity futures contracts	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 – – 217 88 – – 88 – 217 As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 77,897 43,108 100,832	As at 30 June 2009 RMB’000 – 19,179 19,179 As at 30 June 2009 RMB’000 71,518

19. Accounts receivable

The accounts receivable are repayable on demand and bear interest at the rates of 0.72%, 0.72%, 0.36% and 0.36% as at 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009, respectively.

The settlement terms of accounts receivable arising from the business of dealing in futures are on the trade date. New Era does not hold any collateral over these balances.

No ageing analysis is disclosed as accounts receivable were carried on an open account basis, the directors of New Era consider that the ageing analysis does not give additional value in the view of the nature of business of dealing in commodity futures contracts in the PRC.

– 138 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

20. Bank balances and cash

Bank balances and cash – trust

New Era maintains segregated trust accounts with various banks to hold clients’ monies arising from its futures brokerage business. New Era has classified the clients’ monies as bank balances and cash – trust under the current assets of the statement of financial position and recognised the corresponding account payables to respective clients on the grounds that it is liable for any loss or misappropriation of clients’ monies. New Era is restricted to use the clients’ monies to settle its own obligations.

Bank balances and cash – general

Bank balances and cash comprise cash held by New Era and short-term bank deposits with an original maturity of three months or less.

Bank balances carry interest at market rates per annum which ranged from 0.72% to 1.44%, 0.72% to 1.56%, 0.36% to 1.68% and 0.36% to 1.68% as at 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009 respectively.

21. Accounts payable, other payables and accruals

Accounts payable Other payables and accruals	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 93,966 152,922 184,926 4,437 9,362 15,678 98,403 162,284 200,604	As at 30 June 2009 RMB’000 258,788 15,291 274,079

For accounts payable, no ageing analysis is disclosed as these accounts payable were carried on an open account basis, the directors of New Era consider that the ageing analysis does not give additional value in the view of the nature of business of dealing in commodity futures contracts in the PRC.

– 139 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

22. Deferred taxation

The following are the major deferred tax liabilities (assets) recognised and movements thereon during the Relevant Periods:

At 1 January 2006, 31 December 2006 and 1 January 2007 Charge to statement of comprehensive income for the year At 31 December 2007 and 1 January 2008 Credit to statement of comprehensive income for the year At 31 December 2008 and 1 January 2009 Charge to statement of comprehensive income for the period At 30 June 2009	Accelerated tax depreciation RMB’000 – 113 113 – 113 – 113	Changes in fair value for investments held for trading RMB’000 – – – (8) (8) 87 79	Total RMB’000 – 113 113 (8) 105 87 192

– 140 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

23. Paid-up capital

Registered and fully paid-up: As at 1 January 2006, 31 December 2006, 2007, 2008 and 1 January 2009 Capital injection As at 30 June 2009	RMB’000 30,000 28,820
	58,820

On 9 March 2009, approval was obtained from the relevant government authority to increase the registered and paid-up capital of New Era from RMB30,000,000 to RMB58,820,000. As per the capital injection verification report dated 10 March 2009, the capital increase was satisfied by injection of cash.

24. Operating leases

New Era as lessee

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

Within one year In the second to fifth year, inclusive	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 362 550 1,359 75 429 3,663 437 979 5,022	As at 30 June 2009 RMB’000 1,430 3,129
		4,559

Certain office properties occupied by New Era are under operating lease arrangements. Leases are negotiated for terms of one to five years with fixed rentals.

– 141 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

New Era as lessor

At the end of each of the reporting period, New Era had contracted with tenants for the following future minimum lease payments.

Within one year In the second to fifth year, inclusive	As at 31 December 2006 2007 2008 RMB’000 RMB’000 RMB’000 63 63 50 113 50 – 176 113 50	As at 30 June 2009 RMB’000 18 – 18

Operating lease payments represent rental payable by tenants for the use of New Era’s investment properties. Properties held at each of the reporting date are expected to generate rental yield of 1.4% on an ongoing basis. Leases are negotiated for terms of three years.

25. Retirement benefit scheme

The employees employed in New Era are members of the state-managed retirement benefit scheme operated by the PRC government. New Era is required to contribute a certain percentage of its payroll to the retirement benefit scheme to fund the benefits. The only obligation of New Era with respect to the retirement benefit scheme is to make the required contributions under the scheme.

– 142 –

APPENDIX II ACCOUNTANT’S REPORT OF THE TARGET COMPANY

B. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared for New Era in respect of any period subsequent to 30 June 2009.

Yours faithfully,

SHINEWING (HK) CPA Limited

Certified Public Accountants

Chan Wing Kit

Practicing Certificate Number: P03224

Hong Kong

– 143 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report received from the reporting accountants of the Company, SHINEWING (HK) CPA Limited, in respect of the unaudited pro forma financial information of the Enlarged Group for the purpose of incorporation in this circular.

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

On 22 May 2009, the Company entered into a conditional sale and purchase agreement in respect of the proposed acquisition of 49% interest in New Era Futures Co., Ltd (“New Era”) (“Proposed Acquisition”) (“Acquisition Agreement”) for a total consideration of RMB58,830,000, to be satisfied in cash.

The accompanying unaudited pro forma consolidated statement of financial position, unaudited pro forma consolidated statement of comprehensive income and unaudited pro forma consolidated statement of cash flows of New Era and the Group (the “Unaudited Pro Forma Financial Information”) have been prepared to illustrate the effect of the Proposed Acquisition might have affected the financial information of the Group. The Group immediately after the completion of the Proposed Acquisition is referred to as the “Enlarged Group”.

The Unaudited Pro Forma Financial Information on the Enlarged Group has also been prepared to illustrate the effect of:

(i) the acquisition of additional 49% equity interest in Excalibur Securities Limited (“ESL”) and Excalibur Futures Limited (“EFL”);
(ii) issuance of convertible bonds of principal amounts of HK$19.2 million and HK$9.8 million both with zero coupon due in three years from the date of issue, to settle the consideration for the acquisition of ESL and EFL respectively.

Details of the above transactions (the “Other Transactions”) are set out in the Company’s circular dated 8 May 2009 (“8 May Circular”). The related pro forma adjustments of the Other Transactions are extracted from Appendix IV to the 8 May Circular.

– 144 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The unaudited pro forma consolidated statement of financial position of the Enlarged Group as at 31 March 2009 is prepared based on (i) the audited consolidated balance sheet of the Group as at 31 March 2009 as extracted from the published annual report of the Group as set out in Appendix I; and (ii) the audited statement of financial position of New Era as at 30 June 2009 as set out in Appendix II to this Circular and adjusted in accordance with pro forma adjustments described in the notes thereto as if the Proposed Acquisition and the Other Transactions had been completed on 31 March 2009.

The unaudited pro forma consolidated statement of comprehensive income and unaudited pro forma consolidated statement of cash flows of the Enlarged Group for the year ended 31 March 2009 are prepared based on (i) the audited consolidated income statement and audited consolidated statement of cash flows of the Group for the year ended 31 March 2009 which has been extracted from the published annual report of the Group; and (ii) the audited statement of comprehensive income and audited statement of cash flows of New Era for the year ended 31 December 2008 as set out in Appendix II to this Circular and adjusted in accordance with pro forma adjustments described in the notes thereto, as if the Proposed Acquisition and the Other Transactions had been completed on 1 April 2008.

The Unaudited Pro Forma Financial Information has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial position, results of operations or cash flow of the Enlarged Group had the Proposed Acquisition and the Other Transactions been completed as at the respective dates to which it is made up to or at any future dates.

– 145 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE ENLARGED GROUP

Non-current assets Property, plant and equipment Intangible assets Other non-current assets Interest in an associate Deferred tax assets Goodwill Current assets Investments held for trading Trade receivables Other receivables, deposits and prepayments Investment deposits Amount due from a minority shareholder of a subsidiary Amount due from a director Bank balances and cash – trust Bank balances and cash – general Current liabilities Trade payables, other payables and accruals Consideration payable for acquisition of an associate Amount due to a director Tax payables Provisions Net current assets Capital and reserves Share capital Reserves Equity attributable to equity holders of the Company Minority interests Total equity Non-current liability Convertible loan notes	Audited consolidated balance sheet of the Group as at 31 March 2009 Acquisition of 49% equity interest in EFL Notes Acquisition of 49% equity interest in ESL Notes HK$’000 HK$’000 HK$’000 4,792 980 2,262 – 61 2,554 1,660 (f) 7,697 (g) 10,649 442 90,320 15,638 42,407 125 776 60,211 22,138 232,057 83,139 400 (j) 400 (j) – 10 850 940 84,939 147,118 157,767 75,607 29,313 7,220 (i) 10,976 (i) 104,920 29,781 (12,745) (h) (16,973) (h) 134,701 23,066 6,785 (i) 13,294 (i) 157,767	Unaudited pro forma consolidated balance sheet of the Group as at 31 March 2009 after taking into account the acquisition of 49% equity interest in EFL and ESL Pro forma adjustments relating to the Proposed Acquisition Notes HK$’000 HK$’000 4,792 980 2,262 – 66,116 (b) 61 11,911 20,006 442 90,320 15,638 42,407 (37,307) (a) 125 776 60,211 22,138 232,057 83,939 – 28,809 (a) 10 850 940 85,739 146,318 166,324 75,607 47,509 123,116 63 123,179 43,145 166,324	Unaudited pro forma consolidated statement of financial position of the Enlarged Group as at 31 March 2009 HK$’000 4,792 980 2,262 66,116 61 11,911
			86,122
			442 90,320 15,638 5,100 125 776 60,211 22,138
			194,750
			83,939 28,809 10 850 940
			114,548
			80,202
			166,324

			75,607 47,509
			123,116 63
			123,179
			43,145
			166,324

– 146 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME OF THE ENLARGED GROUP

Turnover Cost of sales on securities and futures brokerage and margin financing Cost of sales on engineering contracting work Cost of sales on trading of electrical materials Other revenue Depreciation on property, plant and equipment Salaries and allowances Reversal of impairment losses on investment deposits Change in fair value of financial assets designated as fair value through profit or loss Decrease in fair value of investments held for trading Discount on acquisitions of subsidiaries Gain on disposal of subsidiaries Gain on deemed disposal of partial interests in a subsidiary Other operating and administrative expenses Share of results of an associate Finance costs Profit before taxation Taxation Profit for the year Attributable to: Owners of the parent Minority interest Profit for the year	Audited consolidated income statement of the Group for the year ended 31 March 2009 Acquisition of 49% equity interest in EFL Notes Acquisition of 49% equity interest in ESL Notes HK$’000 HK$’000 HK$’000 15,562 (3,590) (1,081) (691) 2,386 (800) (8,514) 8,500 24,800 (2,313) 863 61 17 (15,210) – (4,162) (1,855) (k) (2,955) (l) 15,828 (115) 15,713 16,224 (2,349) (2,802) (511) 494 (m) (153) (m) 15,713	Unaudited pro forma consolidated income statement of the Group for the year ended 31 March 2009 after taking into account the acquisition of 49% equity interest in EFL and ESL Pro forma adjustments relating to the Proposed Acquisition Notes HK$’000 HK$’000 15,562 (3,590) (1,081) (691) 2,386 (800) (8,514) 8,500 24,800 (2,313) 863 61 17 (15,210) – 2,898 (c) (8,972) 11,018 (115) 10,903 11,073 2,898 (170) 10,903	Unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group for the year ended 31 March 2009 HK$’000 15,562 (3,590) (1,081) (691) 2,386 (800) (8,514) 8,500 24,800 (2,313) 863 61 17 (15,210) 2,898 (8,972)
			13,916 (115)
			13,801

			13,971 (170)
			13,801

– 147 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS OF THE ENLARGED GROUP

OPERATING ACTIVITIES Profit before taxation Adjustments for: Finance costs Decrease in fair value of investments held for trading Equity settled share based payment Depreciation of property, plant and equipment Impairment losses recognised in respect of trade receivables Impairment losses recognised in respect of amount due from a related company Impairment losses recognised in respect of amount due from an associate Impairment losses recognised in respect of other receivables Reversal of impairment loss on investment deposits Share of results of associates Gain on disposal of investments held for trading Gain on deemed disposal of partial interests in a subsidiary Gain on disposal of subsidiaries Gain on disposals of property, plant and equipment Write back of long outstanding trade payables, other payables and accruals Interest income Write back of long outstanding amount due to a related company Discount on acquisitions of subsidiaries Change in fair value of financial assets designated as fair value through profit or loss Operating cash flows before movements in working capital Decrease in other non-current assets Increase in trade receivables Increase in other receivables, deposits and prepayments Increase in amount due from a director Increase in bank balances and cash – trust Increase in trade payables, other payables and accruals Increase in provisions Cash used in operations Income tax paid NET CASH USED IN OPERATING ACTIVITIES	Audited consolidated statement of cash flows of the Group for the year ended 31 March 2009 Acquisition of 49% equity interest in EFL Notes Acquisition of 49% equity interest in ESL Notes HK$’000 HK$’000 HK$’000 15,828 (1,855) (k) (2,955) (l) 4,162 1,855 (k) 2,955 (l) 2,313 1,752 800 66 13 12 108 (8,500) – (1) (17) (61) (29) (95) (124) (890) (863) (24,800) (10,326) 10 (41,130) (3,114) (350) (13,642) 13,753 940 (53,859) (27) (53,886)	Unaudited consolidated statement of cash flows of the Group for the year ended 31 March 2009 after taking into account the acquisition of 49% equity interest in EFL and ESL Pro forma adjustments relating to the Proposed Acquisition Notes HK$’000 HK$’000 11,018 2,898 (c) 8,972 2,313 1,752 800 66 13 12 108 (8,500) – (2,898) (c) (1) (17) (61) (29) (95) (124) (890) (863) (24,800) (10,326) 10 (41,130) (3,114) (350) (13,642) 13,753 940 (53,859) (27) (53,886)	Unaudited pro forma consolidated statement of cash flows of the Enlarged Group for the year ended 31 March 2009 HK$’000 13,916 8,972 2,313 1,752 800 66 13 12 108 (8,500) (2,898) (1) (17) (61) (29) (95) (124) (890) (863) (24,800)
			(10,326) 10 (41,130) (3,114) (350) (13,642) 13,753 940
			(53,859) (27)
			(53,886)

– 148 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

INVESTING ACTIVITIES Proceeds from disposal of financial assets designated at fair value through profit or loss Decrease in pledged bank deposits Net cash inflow in respect of the acquisitions of subsidiaries Proceeds from disposal of property, plant and equipment Interest received Proceeds from disposal of investments held for trading (Increase) decrease of investment deposits Acquisition of an associate Purchase of property, plant and equipment Advanced to a minority shareholder of a subsidiary Net cash outflow in respect of the disposal of subsidiaries NET CASH FROM INVESTING ACTIVITIES FINANCING ACTIVITIES Proceeds from issue of convertible loan notes Proceeds from issue of new shares Capital contribution from a minority shareholder of a subsidiary Advanced from a director Repayment of borrowings Interest paid Payment for convertible loan notes issue expenses Payment for share issue expenses Repayment of obligations under finance leases Interest paid on obligation under finance leases NET CASH FROM FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR, represented by bank balances and cash	Audited consolidated statement of cash flows of the Group for the year ended 31 March 2009 Acquisition of 49% equity interest in EFL Notes Acquisition of 49% equity interest in ESL Notes HK$’000 HK$’000 HK$’000 60,800 2,196 1,711 250 124 30 (33,907) – (3,349) (125) (1) 27,729 50,000 20,000 250 10 (29,735) (3,335) (1,250) (550) (469) (53) 34,868 8,711 13,427 22,138	Unaudited consolidated statement of cash flows of the Group for the year ended 31 March 2009 after taking into account the acquisition of 49% equity interest in EFL and ESL Pro forma adjustments relating to the Proposed Acquisition Notes HK$’000 HK$’000 60,800 2,196 1,711 250 124 30 (33,907) 37,307 (d) – (37,307) (d) (3,349) (125) (1) 27,729 50,000 20,000 250 10 (29,735) (3,335) (1,250) (550) (469) (53) (34,868) 8,711 13,427 22,138	Unaudited pro forma consolidated statement of cash flows of the Enlarged Group for the year ended 31 March 2009 HK$’000 60,800 2,196 1,711 250 124 30 3,400 (37,307) (3,349) (125) (1)
			27,729
			50,000 20,000 250 10 (29,735) (3,335) (1,250) (550) (469) (53)
			34,868
			8,711 13,427
			22,138

– 149 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Notes:

a) The total consideration for the acquisition is RMB58,830,000 (equivalent to HK$66,116,000) which is to be satisfied by (i) setting off deposits of RMB33,040,000 (equivalent to HK$37,307,000) already paid by the Group to the Vendor; (ii) further deposit of RMB5,000,000 (equivalent to HK$5,585,000); and (iii) cash of RMB20,790,000 (equivalent to HK$23,224,000).
i) Pursuant to a non-legally binding memorandum entered into between the Group and the Vendor on 9 December 2008, a deposit of RMB3,000,000 (equivalent to HK$3,400,000) has been paid by the Group to the Vendor. Pursuant to a second non-legally binding memorandum entered into between the Group and the Vendor on 4 March 2009, an additional deposit of RMB30,040,000 (equivalent to HK$33,907,000) has been paid by the Group to the Vendor.
ii) Pursuant to the Acquisition Agreement, a further deposit of RMB5,000,000 (equivalent to HK$5,585,000) is to be paid by the Group to the Vendor.
iii) Pursuant to the Acquisition Agreement, the remaining balance of the consideration of RMB20,790,000 (equivalent to HK$23,224,000) will be settled by cash within five business days upon the share transfer date.
b) Upon completion of the acquisition, New Era will be accounted for as an associate of the Group. The Group will apply the equity method to account for the acquisition of New Era as an associate as the directors of the Company consider that the Group will have significance influence over New Era to obtain benefits from its activities after the completion of the Proposed Acquisition.

In applying the equity method, the investment in an associate is initially recognised at cost and the carrying amount is increased or decreased to recognise the Group’s share of the profit or loss of New Era after the date of acquisition. The Group’s share of profit or loss of New Era is recognised in the Group’s profit or loss. Distributions receive from New Era will reduce the carrying amount of the investment.

For the purpose of preparing the Unaudited Pro Forma Financial Information of the Group after the Proposed Acquisition, the carrying value of the net assets of New Era as per the Accountants’ Report as set out in Appendix II of this Circular are taken to be the fair values.

The amount of the excess of the cost of acquisition incurred by the Group over its interest in the fair value of the identifiable assets, liabilities and contingent liabilities of New Era is recognised as goodwill and included in the interest in an associate in the Unaudited Pro Forma Financial Information as if the acquisition was completed on 31 March 2009.

– 150 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Consideration Share of net assets Goodwill The net assets acquired in the transaction are as follows: Net assets acquired: Net assets of New Era as at 30 June 2009 Share of net assets (49%)	HK$’000 66,116 39,568
	26,548

	HK$’000 80,752

	39,568

On completion of the acquisition of New Era, the fair value of the consideration and the net identifiable assets and liabilities of New Era will have to be assessed. As a result of the assessment, the amount of goodwill may be different from that estimated amount presented above.

The adjustment represents the Group’s share of 49% of New Era’s profit for the year ended 31 December 2008 as per the Accountants’ Report of New Era as set out in Appendix II of this Circular under the equity method. The unaudited pro forma adjustment will have continuing effect on consolidated statement of comprehensive income of the Enlarged Group.

d) The adjustment represents investment deposits totaling RMB33,040,000 (equivalent to HK$37,307,000) paid by the Group to the Vendor in respect of the Proposed Acquisition during the year ended 31 March 2009. This unaudited pro forma adjustment will not have continuing effect on consolidated statement of cash flows of the Enlarged Group.

e) No adjustment has been made to reflect the costs of the Proposed Acquisition as, in the opinion of the Directors, such costs are not considered to be material.

– 151 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following notes to the pro forma adjustments are extracted from Appendix IV to the 8 May Circular.

f) Goodwill of approximately HK$1,660,000 arising from the acquisitions of 49% equity interests in EFL (“EFL Acquisition”), which is calculated as follows:

Consideration Less: Fair value of net assets of EFL in 49% equity interest Add: Professional expenses to be incurred for the EFL Acquisition Goodwill All identifiable assets, liabilities and considerations are assumed to be at their fair values.	HK$’000 14,005 (12,745) 1,260 400 1,660

g) Goodwill of approximately HK$7,697,000 arising from the acquisitions of 49% equity interests in ESL (“ESL Acquisition”) is calculated as follows:

Consideration Less: Fair value of net assets of ESL in 49% equity interest Add: Professional expenses to be incurred for the ESL Acquisition Goodwill	HK$’000 24,270 (16,973) 7,297 400 7,697

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

h) Elimination of minority interests of EFL and ESL of approximately HK$12,745,000 and HK$16,973,000 respectively upon completion on acquisitions of the remaining 49% of equity interests in EFL and ESL. EFL and ESL were deemed to have become wholly-owned subsidiaries of the Company as at 31 March 2009.

– 152 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

i) The adjustments represent the liability and equity components of the convertible notes issued for the acquisitions of the 49% EFL and ESL as if they were issued on 31 March 2009. The estimated fair values of the liabilities components of the convertible notes are approximately HK$6,785,000 and HK$13,294,000 respectively, which are determined using the discounted cash flow method. The equity components, being the residual amounts of fair values of convertible notes after deducting the estimated fair values of liability components, are approximately HK$7,220,000 and HK$10,976,000 respectively. Such convertible notes will mature in the third anniversary since their issuance date and the holder of the convertible notes was entitled to convert them into shares of the Company at anytime between their issuance date and the maturity date.
j) The adjustments represent professional expenses incurred or to be incurred by the company in relation to the acquisitions of the 49% equity interests in EFL and ESL. These professional expenses shall not have a continuing effect on the consolidated financial statements of the Enlarged Group in the subsequent years.
k) The adjustment of approximately HK$1,855,000 represents the yearly imputed interest expenses on the convertible notes issued for the acquisitions of 49% equity interests in EFL, which is to be expensed in the consolidated statement of comprehensive income of the Enlarged Group by assuming that the convertible notes had been issued at the beginning of the year ended 31 March 2009. These interest expenses shall have a continuing effect on the consolidated financial statements of the Enlarged Group in the subsequent years.
l) The adjustment of approximately HK$2,955,000 represents the yearly imputed interest expenses on the convertible notes issued for the acquisitions of 49% equity interests in ESL, which is to be expensed in the consolidated statement of comprehensive income of the Enlarged Group by assuming that the convertible notes had been issued at the beginning of the year ended 31 March 2009. These interest expenses shall have a continuing effect on the consolidated financial statements of the Enlarged Group in the subsequent years.
m) The share of losses/profits of EFL and ESL for the year ended 31 March 2009 by the minority shareholders of these companies were fully reversed on acquisitions of the 49% of equity interests in these companies which were deemed to have been completed at the beginning of the year ended 31 March 2009.

– 153 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

==> picture [232 x 61] intentionally omitted <==

24 December 2009

The Board of Directors China Fortune Group Limited 13/F, Sunning Plaza 10 Hysan Avenue Causeway Bay Hong Kong

Dear Sirs,

We report on the unaudited pro forma financial information of China Fortune Group Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) and New Era Futures Co., Ltd. (together with the Group hereinafter referred to as the “Enlarged Group”) set out in Appendix III of the circular dated 24 December 2009 (the “Circular”) in connection with the proposed acquisition of 49% equity interest in New Era Futures Co., Ltd. (the “Proposed Acquisition”), which has been prepared by the directors of the Company (the “Directors”), for illustrative purpose only, to provide information about how the Proposed Acquisition might have affected the financial information presented. The basis of preparation of the unaudited pro forma financial information is set out in section A of Appendix III to the Circular.

Respective responsibilities of Directors and reporting accountants

It is the responsibility solely of the Directors to prepare the unaudited pro forma financial information in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants.

– 154 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 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 work 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 Hong Kong Institute of Certified Public Accountants. Our work 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. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma financial information has been properly compiled by the Directors on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purpose of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

The unaudited pro forma financial information is for illustrative purpose only, based on the judgments and assumptions of the Directors, 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 2009 or any future date; and
the results and cash flows of the Enlarged Group for year ended 31 March 2009 or any future period.

– 155 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Opinion

In our opinion:

a) the unaudited pro forma financial information has been properly compiled by the Directors 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 29(1) of Chapter 4 of the Listing Rules.

Your faithfully,

SHINEWING (HK) CPA Limited

Certified Public Accountants

Chan Wing Kit

Practicing Certificate Number: P03224

Hong Kong

– 156 –

APPENDIX IV

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

1. INDEBTEDNESS STATEMENT OF THE ENLARGED GROUP

As at the close of business on 31 October 2009, being the latest practicable date for the purpose of ascertaining information contained in this indebtedness statement prior to printing of this circular, the Enlarged Group had (i) zero coupon convertible bonds in principal amount of HK$28 million due on 18 February 2012 which may be convertible into ordinary shares of the Company at an initial convertible price of HK$0.10 per share during its conversion period up to 18 February 2012, being the maturity date of the convertible bonds on the third anniversary from the date of issue; (ii) zero coupon convertible bonds in principal amount of HK$32 million due on 29 June 2012 which may be convertible into ordinary shares of the Company at an initial convertible price of HK$0.16 per share during the conversion period up to 29 June 2012, being the maturity date of the convertible bonds on the third anniversary from the date of issue; (iii) zero coupon convertible bonds in principal amount of HK$128 million due on 31 December 2012 which may be convertible into ordinary shares of the Company at an initial convertible price of HK$0.16 per share during the conversion period up to 31 December 2012; (iv) zero coupon convertible bonds in principal amount of HK$9.8 million due on 23 August 2012 which may be convertible into ordinary shares of the Company at an initial convertible price of HK$0.16 per share during the conversion period up to 23 August 2012, being the maturity date of the convertible bonds on the third anniversary from the date of issue; and (v) zero coupon convertible bonds in principal amount of HK$19.2 million due on 23 August 2012 which may be convertible into ordinary shares of the Company at an initial convertible price of HK$0.16 per share during the conversion periods up to 23 August 2012, being the maturity date of the convertible bonds on the third anniversary from the date of issue. Also, the Group has unsecured borrowings of approximately HK$30 million bearing interest at 7% per annum due for repayment on or before 9 February 2010.

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 October 2009.

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 October 2009.

The directors are not aware of any material adverse changes in the Group’s indebtedness position and contingent liabilities since 31 October 2009.

– 157 –

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

APPENDIX IV

2. WORKING CAPITAL

The Directors, after due and careful enquiry, are of the opinion that, taking into account its internal resources of the Enlarged Group, the Enlarged Group will have sufficient working capital for its pursuant requirements, that is for at least the next twelve months from the date of this circular.

3. 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 2009, being the date of which the latest audited financial statements of the Group were made up.

4. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Group is cautious about its business outlook. During the first half of this year, the financial markets have been adversely affected by fears of a global slowdown and inflationary pressure. The average daily turnover of the Hong Kong stock market for first and second quarters of year 2009 were approximately 44.6 billion and 71.3 billion respectively. Turning to the third quarter, the average daily turnover of Hong Kong stock market was approximately HK$66.3 billion (third quarter of 2008: 63.4 billion).

In view of the recent economic performance globally, in particular, the rebound of the securities market in Hong Kong and the PRC, the Directors believe that the future prospect of the securities and futures markets in Hong Kong and the PRC is promising. The Company reiterates its beliefs that the PRC’s economy should retain its resilience and that Hong Kong’s advantageously close integration with the PRC will enhance its exclusive accessibility to this mass market. The Company acquires the Target Group with a view that financial and commodity futures contracts dealings in the PRC is in a growing trend with immense potential. Such acquisition would diversify the Group into a new territory with significant growth potential.

The Group is envisioned to become a renowned full range financial services provider in the financial industry in the long run. Following the Completion, the Enlarged Group will continue its existing business of securities, futures and insurance brokerage and margin financing.

– 158 –

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

APPENDIX IV

5. MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Set out below is the management discussion and analysis extracted from the respective annual reports of the Company for the three years ended 31 March 2009.

For the year ended 31 March 2009

Results

During the year ended 31 March 2009, the total revenue for the group was approximately HK$15,562,000 (2008: approximately HK$12,355,000) and profit attributed to shareholders was approximately HK$16,224,000 (2008: loss of approximately HK$5,827,000). The profit was mainly attributable to change in fair value of investment in amount of HK$24,800,000.

Market Overview

As expected, the Hong Kong stock market performed poorly during the year under review. The Hong Kong stock market was adversely affected by uncertainties in major financial markets around the world resulting from US sub-prime mortgage crisis, the global liquidity crunch and the bankruptcy of Lehman Brothers. Average daily turnover of Hong Kong stock market was approximately HK$76.1 billion in the second quarter 2008 and shrank to approximately HK$44.6 billion in the first quarter 2009.

Review of Operations

Securities Broking Business

The Group focused its securities broking business on the stocks market in Hong Kong. After the completion of acquisition of 51% equity interest in a local securities company on 17 February 2009, the Group had totally two securities companies which operated independently. During the year, revenue for the Group’s securities broking business and the underwriting commission as well as placing commission, which accounted for 40% of total revenue, was approximately HK$6,294,000 (2008: approximately HK$6,636,000).

Securities Financing Business

During the year, interest income generated from securities margin loan portfolio which accounted for 12% of the Group’s revenue was approximately HK$1,829,000 (2008: approximately HK$1,289,000). The group had injected more internal resources into securities financing business in order to meet the demands from our customers.

– 159 –

APPENDIX IV

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

The Group will continue to exercise caution in the granting of securities financing to clients, closely monitor its credit policy and perform regular reviews and assessment on the gearing level, investment portfolio and credit record of individual borrowers.

Futures Broking Business

After the completion of acquisition of 51% equity interest in a local futures company on 17 February 2009, income generated from futures broking business accounted for 16% of the Group’s revenue was approximately HK$2,424,000. The management expects that the futures broking business will be the key drivers of the Group’s revenue in the coming year.

Electrical Engineering Contracting Business

By recognizing the retention money on the completed contracts, income from electrical engineering contracting business which accounted for 28% of the Group’s revenue was approximately HK$4,280,000 (2008: approximately HK$2,809,000). As the Group is envisioned to become a renowned full range financial services provider in the financial industry in the long run, no new electrical engineering contract signed during the year.

Electrical Materials and Component Trading Business

Income from electrical materials and component trading business accounted for 4% of the Group’s turnover was approximately HK$722,000 (2008: approximately HK$1,621,000).

Prospects

Turned to the second quarter of 2009, the average daily turnover of Hong Kong stock market was approximately HK$71.3 billion and the market sentiment seemed slightly recovered. Though a global economic recession is expected to continue in 2009, we remain hopeful that the PRC’s economy will retain its resilience. We believe Hong Kong will be able to withstand the challenges ahead on the back of its closer integration with the mainland and the considerable hidden wealth in the economy.

The Group will focus on further opportunities to invest in financial service provider in China. Pursuant to the announcement of the Company on 27 May 2009, the Group will acquire 49% equity interest in a company engaged in brokerage services for dealing in futures contracts in PRC.

– 160 –

APPENDIX IV

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

Capital Structure

Pursuant to an engagement letter dated 15 April 2008 entered into between the Company and Veda Capital Limited (“Veda”), it was agreed that part of the professional fees charged by Veda of HK$1,200,000 were settled by the issue of remuneration shares upon approval by the Stock Exchange on the resumption of trading in the shares of the Company. As all conditions for the issuance of the remuneration shares had been fulfilled on 17 February 2009, 12,000,000 shares of HK$0.1 each had been issued to Veda on the same day.

On 19 February 2009, the Company allotted and issued 80,000,000 shares of HK$0.1 each to independent third parties for cash at a price of HK$0.25 per share, and a net proceed of approximately HK$19,300,000 was raised by the Company.

Pursuant to a conditional sale and purchase agreement (as amended) entered into between a wholly owned subsidiary of the Company (being the purchaser) and the vendor on 27 February 2008, the vendor agreed to sell or procure the sale to the purchaser and the purchaser agreed to purchase 51% issued share capital of Excalibur Securities Limited at a consideration of HK$20,000,000. The consideration was settled by way of the Company issuing the zero coupon convertible notes due three years from the date of issue for a principal amount of HK$20,000,000 in accordance with the terms as set out in the conditional sale and purchase agreement upon completion. All conditions as set out in the conditional sale and purchase agreement had been fulfilled and completion of acquisition took place on 17 February 2009. On the same day, the vendor converted the convertible notes in full and 200,000,000 shares of HK$0.1 each of the Company were duly issued.

As at 31 March 2009, the total issued share capital of the Company stood at HK$75,607,000, comprising 756,070,000 shares of HK$0.1 each.

Liquidity, Financial Resources and Gearing Ratio

The financial position of the Group remained healthy during the year under review. At 31 March 2009, the Group’s cash balance totaled approximately HK$22,138,000, compared with approximately HK$15,390,000 as at 31 March 2008. Cash held on behalf of customers stood at approximately HK$60,211,000, increased from approximately HK$11,140,000 as at 31 March 2008. The current ratio was healthy at 2.73 times.

As at 31 March 2009, the Group’s gearing ratio, measured on the basis of total borrowings as a percentage of total shareholders’ equity, was 21.98% (2008: 152.91%). The Group had issued zero coupon convertible notes in the aggregate principal amount of HK$50 million due in three years on 19 February 2009. As the total shareholders’ equity increased by issuing new shares during the year, the gearing ratio dropped.

– 161 –

APPENDIX IV

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

Material Acquisitions and Disposals

During the year, the Group had completed acquisition of 51% equity interest in Excalibur Securities Limited (“ESL”) at a consideration HK$20,000,000. The consideration had been settled by issuing a zero coupon convertible note of the Company due three years from the date of issue for a principal amount of HK$20,000,000. ESL is a corporation licensed to carry on type 1 (dealing in securities) regulated activity under Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

During the year, the Group had also completed acquisition of 51% equity interest in Excalibur Futures Limited (“EFL”) at a consideration HK$10,200,000. The consideration had been settled by issuing a promissory note in the amount of HK$10,200,000 without interest by the Company. EFL is a corporation licensed to carry on type 2 (dealing in futures contract) regulated activity under Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

Contingent Liabilities

As at 31 March 2009, the Group does not have any material contingent liability.

Charge on the Group’s Asset

During the year, the bank deposits previously pledged to bank for securing certain bank facilities had been released. As at 31 March 2009, the Group had not charged or pledged any of its assets.

Risk Management

The Group has properly put in place credit management policies which cover the examination of the approval of client’s trading and credit limits, regular review of facilities granted, monitoring of credit exposures and the follow up of credit risks associated with overdue debts. The policies are reviewed and updated regularly.

Foreign Currency Fluctuation

During the year, the Group mainly uses Hong Kong dollars to carry out its business transactions. The Board considers the foreign currency exposure is insignificant.

Human Resources

Employees’ remuneration are fixed and determined with reference to the market remuneration.

– 162 –

APPENDIX IV

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

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.

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.

– 163 –

APPENDIX IV

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

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.

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.

– 164 –

APPENDIX IV

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

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.

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.

– 165 –

APPENDIX IV

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

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.

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.

– 166 –

APPENDIX IV

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET 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.

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.

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.

– 167 –

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

APPENDIX IV

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.

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.

– 168 –

APPENDIX IV

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

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.

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.

– 169 –

APPENDIX IV

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

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.

– 170 –

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

APPENDIX IV

6. MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY

Set out below is the management discussion and analysis on New Era Futures Co., Ltd (“New Era”) for the year ended 31 December 2006, 31 December 2007, 31 December 2008 and 6 months ended 30 June 2009.

Financial summary

For the year ended 31 December 2006, 31 December 2007 and 31 December 2008 and 6 months ended 30 June 2009

Turnover Cost of sales (Loss) gain on fair value changes in investments held for trading Other revenue Administrative expenses Other operating expenses Profit before taxation Income tax expense Loss/(Profit) for the year/period	31 Dec. 2006 RMB’000 20,617 (15,933) (14) 888 (5,415) (10) 133 (308) (175)	31 Dec. 2007 RMB’000 41,776 (33,487) 153 1,164 (7,481) (72) 2,053 (712) 1,341	31 Dec. 2008 RMB’000 64,120 (47,584) 149 2,870 (12,255) (150) 7,150 (1,830) 5,320	30 June 2009 RMB’000 36,028 (24,289) 6,622 1,376 (6,645) (1,969) 11,123 (2,789) 8,334

Turnover

The principal activity of New Era is the provision of brokerage services for dealing in commodity futures in the PRC. New Era was established in the PRC with limited liability on 15 March 1995.

During the financial year 2006, New Era recorded a turnover of RMB20,617,000.

During the financial year 2007, New Era recorded a turnover of RMB41,776,000 represented an increase of approximately 103% as compared to the financial year 2006.

– 171 –

APPENDIX IV

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

During the financial year 2008, New Era recorded a turnover of RMB64,120,000 represented an increase of approximately 54% as compared to the financial year 2006.

For the six months ended 30 June 2009, New Era recorded a turnover of RMB36,028,000 represented an increase of approximately 22% as compared to the corresponding period in 2008.

Liquidity, financial resources and gearing

Net Assets/Liabilities

Set out below is a summary of the audited accountants’ report of the New Era as at 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009 which was prepared on the bases as set out in Appendix II this circular.

	31 Dec.	31 Dec.	31 Dec.	30 June
	2006	2007	2008	2009
	RMB’000	RMB’000	RMB’000	RMB’000
Total Assets	127,160	192,786	236,747	349,300
Total Liabilities	98,711	162,996	201,637	277,447
Net assets/(liabilities)	28,449	29,790	35,110	71,853
*Gearing ratio	0%	0%	0%	0%

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

Cash & Bank Balances

As at 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009, New Era’s aggregate cash and bank balances amounted approximately to RMB5,040,000, RMB9,756,000, RMB21,638,000 and RMB44,569,000 respectively, representing 4.64%, 5.59%, 9.99% and 13.52% of total current assets respectively.

Borrowings

There is no bank borrowing as at 31 December 2006, 2007, 2008 and 30 June 2009.

– 172 –

APPENDIX IV

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

Significant investments held

As at 31 December 2006, New Era has investment properties in the amount of RMB4,765,000 and investment held for trading in the amount of RMB88,000.

As at 31 December 2007, New Era has investment properties in the amount of RMB4,649,000 and no investment held for trading.

As at 31 December 2008, New Era has investment properties in the amount of RMB4,523,000 and investment held for trading in the amount of RMB217,000.

As at 30 June 2009, New Era has investment properties in the amount of RMB4,460,000 and investment held for trading in the amount of RMB19,179,000.

Acquisition and disposals

New Era 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 provision of brokerage services for dealing in the commodity futures contracts in the PRC.

Foreign exchange management

New Era does not have any foreign exchange activities. 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 2006, 31 December 2007, 31 December 2008 and 30 June 2009,New Era did not have any contingent liabilities.

– 173 –

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

APPENDIX IV

Pledge of assets

As at 31 December 2006, 31 December 2007, 31 December 2008 and 30 June 2009, New Era had no asset pledged.

Capital Structure

New Era was a domestic enterprise established in the PRC on 15 March 1995 with a registered capital of RMB1,000,000.

As at 1 January 2006, 31 December 2006, 2007, 2008 and 1 January 2009, New Era’s registered and fully paid-up capital was RMB30,000,000.

Employment, retirement benefit scheme, share option schemes and training schemes

As at 31 December 2006, 2007 and 2008 and 30 June 2009, New Era had a workforce of 116, 134, 119 and 196 employees respectively, and the total staff cost were approximately RMB1,453,000, RMB1,426,000, RMB4,100,000 and RMB2,419,000 respectively. Consistent review will be conducted on human resource requirements, level of remuneration packages and on the job training will be provided so as to promote the overall quality of its staff. The employees employed in New Era are members of the state-managed retirement benefit scheme operated by the PRC government. New Era is required to contribute a certain percentage of its payroll to the retirement benefit scheme to fund the benefits. During the relevant periods under review, no share option was adopted.

– 174 –

APPENDIX IV

ADDITIONAL FINANCIAL INFORMATION OF THE GROUP AND THE TARGET COMPANY

Future plan and material investments

It is the intention of New Era to continue with the provision of brokerage services for dealing in commodity futures contracts in the PRC. In view of the rebound of the world’s economy, New Era perceives there would be an increase demand for its brokerage services in the commodity futures contract.

Looking forward, New Era is anticipating the introduction of financial futures. New Era is currently reviewing its systems to see if any modification and/or improvements required when the financial futures market is open.

New Era has made investments in the equity securities listed in the Shanghai Stock Exchange after the capital injection by a new shareholder in March 2009. New Era will continue using its funding with caution and monitor this investment carefully by maintaining an investment portfolio with different risk and return profiles in a view to maximize its return to its shareholders.

– 175 –

APPENDIX V

VALUATION REPORT ON PROPERTIES HELD BY THE ENLARGED GROUP

The existing Group does not have any interest in land or building. The following is the text of a letter, summary of value and valuation certificate, prepared for the purpose of incorporation in this circular received from Roma Appraisals Limited, an independent valuer, in connection with its valuation as at 31 October 2009 of the property interests held by the Enlarged Group.

==> picture [145 x 61] intentionally omitted <==

Room 1603, Tung Chiu Commercial Centre, 193 Lockhart Road, Wan Chai, Hong Kong Tel (852) 2529 6878 Fax (852) 2529 6806 E-mail [email protected] http://www.roma-international.com

The Directors

China Fortune Group Limited

13/F, Sunning Plaza, 10 Hysan Avenue, Causeway Bay, Hong Kong

Dear Sirs/Madam,

1. INSTRUCTIONS

In accordance with your instruction for us to value the property interests owned by 新紀元期貨有限公司 (New Era Futures Co. Ltd.[#] ) (hereinafter referred to as “the Company”) located in Xuzhou in the Jiangsu Province in the People’s Republic of China (“the PRC”), we confirm that we have carried out inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the property interests as at 31st October, 2009.

2. BASIS OF VALUATION

Our valuation is our opinion of the Market Value which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

– 176 –

APPENDIX V

VALUATION REPORT ON PROPERTIES HELD BY THE ENLARGED GROUP

3. VALUATION METHODOLOGY

The property interests have been valued on open market basis assuming sale with the benefit of vacant possession by the market approach whereby sales of property of nature and character similar to the property under consideration are collated and analysed in order to arrive at a value appropriate to the property interests and where appropriate on the basis of capitalization of the net rental income receivable with due allowance for reversionary potential. Comparisons are made in respect of the locations, sizes and characters between the property and the comparable property in order to arrive at a value appropriate to the property interests.

4. VALUATION ASSUMPTIONS

Our valuation has been made on the assumption that the owner sells the property interests in the open market without the benefit of deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangements which would serve to increase the value of such property interests. In addition, no account has been taken of any option or right of pre-emption concerning or affecting the sale of the property interests and no allowance has been made for the property interests to be sold in one lot or to a single purchaser.

The property is situated in the PRC. In valuing the property interests, we have assumed that the land use rights under which the property interests are held are transferable for the residue of the term as granted. We have further assumed that the property interests are freely disposable and transferable in their existing conditions in the open market to both local and overseas purchasers. The owner has the right to transfer the land use rights to any third parties at nominal land use fees and no premium or any fee of substantial amount has to be made to the relevant authority.

We have relied to a very considerable extent on the information provided by the Company and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, particulars of occupation, site area, floor area and all other relevant matters which can affect the value of the property interests.

5. VALUATION CONSIDERATIONS

We have not carried out detailed on-site measurement to verify the site area and floor area of the property. We have assumed that the site area and floor area supplied to us or as shown on the documents handed to us are correct. We have no reason to doubt the truth and accuracy of the information provided to us. We have also been advised that no material facts have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and have no reason to suspect that any material information has been withheld.

– 177 –

APPENDIX V

VALUATION REPORT ON PROPERTIES HELD BY THE ENLARGED GROUP

We have been provided with copies of the title documents regarding the title of the property interests under consideration. However, no investigations have been made to verify ownership or to ascertain the existence of any amendments which may not appear on the copies handed to us. All documents and title deeds have been used as reference only. All dimensions, measurements and areas are approximate.

We have relied upon the legal opinion furnished by Guangda Law Firm, the legal adviser on the law of PRC, regarding the title of the owner to the property interests. Based on the legal opinion as supplied, the owner has proper legal title to the property interests and has free and uninterrupted right to sell the property interests in their existing condition to any third parties for the residue of the term of the land use rights granted in respect of the property interests.

We have inspected the property included in the attached valuation certificate, in respect of which we have been provided with such information as we have required for the purpose of our valuation.

No structural survey has been made. However, in the course of our inspection, we did not note any serious defects. We are not, however, able to report that the property is free from rot, infestation or any other structural defects. No tests were carried out on any of the services.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property interests nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property interests are free from encumbrances, restrictions and outgoings of an onerous nature which could affect their value.

In this valuation, we have complied with all the requirements contained in Chapter 5 and Practice Note 12 of the rules governing the listing of securities issued by the Stock Exchange of Hong Kong Limited; and the HKIS Valuation Standards on Properties (1st Edition) published by the Hong Kong Institute of Surveyors and effective from 1st January, 2005.

Our Summary of Valuation and Valuation Certificate are attached.

Yours faithfully, For and on behalf of ROMA APPRAISALS LIMITED

Patrick W. C. Lai

MRICS, MHKIS, MCIArb., RPS Director

Note: Patrick W C Lai, Chartered Valuation Surveyor, has been a qualified valuer since 1984 and has over 20 years of experience in the valuation of property located in Hong Kong and the People’s Republic of China. Mr. Lai is on the List of Property Valuers for Undertaking Valuations for Incorporation or Reference in Listing Particulars and Circulars and Valuations in connection with Takeovers and Mergers under the listing rules of the Hong Kong Stock Exchange.

– 178 –

APPENDIX V

VALUATION REPORT ON PROPERTIES HELD BY THE ENLARGED GROUP

SUMMARY OF VALUATION

Group I – Property held by the Company for Investment purpose:–

		Capital value in
		existing state as at
No.	Property	31st October, 2009
1.	Office spaces and 21 guest rooms	RMB8,100,000
	on 10th Floor, 11th Floor and 12th Floor,
	“新紀元大酒店” (New Era Hotel#)
	at No. 153 East Huaihai Road,
	Xuzhou,
	Jiangsu Province,
	The People’s Republic of China
Group II – Property held by the Company for own uses:–
		Capital value in
		existing state as at
No.	Property	31st October, 2009
2.	Office spaces on 13th Floor,	RMB1,900,000
	“新紀元大酒店” (New Era Hotel#)
	at No. 153 East Huaihai Road,
	Xuzhou,
	Jiangsu Province,
	The People’s Republic of China
3.	Whole block of Annexed Building,	RMB8,100,000
	at No. 153 East Huaihai Road,
	Xuzhou,
	Jiangsu Province,
	The People’s Republic of China
4.	Two Generator Buildings located at	RMB700,000
	No. 155 East Huaihai Road,
	Xuzhou,
	Jiangsu Province,
	The People’s Republic of China

the English translation to the Chinese names are for information purpose only and should not be regarded as the official English translation of such Chinese names.

– 179 –

APPENDIX V

VALUATION REPORT ON PROPERTIES HELD BY THE ENLARGED GROUP

VALUATION CERTIFICATE

Group I – Property owned by the Company for Investment purpose:

				Capital value in
			Particulars of	existing state as at
No.	Property	Description	Occupancy	31st October, 2009
1.	Office spaces and	The property consists of office	The property was, as at	RMB8,100,000
	21 guest rooms	spaces and 21 guest rooms within a	31st October, 2009, subject
	on 10th Floor,	13-storeyed office cum hotel building.	to three various tenancies
	11th Floor and		with the latest expiry date
	12th Floor,	The ground floor is occupied for	on 30th April, 2010 at
	“新紀元大酒店”	commercial uses and hotel reception	a total yearly rent of about
	(New Era Hotel#)	area whilst the upper floors are	RMB246,600 inclusive of
	at No. 153	occupied for office and guest rooms	management fees and
	East Huaihai Road,	purposes.	other outgoings.
	Xuzhou,
	Jiangsu Province,	The building was completed in about	The property was occupied
	The People’s	1996.	for office and guest rooms
	Republic of China		purposes.
		The property contains a total gross
		floor area of approximately 14,596
		square feet (or approximately 1,355.99
		square metres).

The land use right has been granted for commercial uses for a term expiring on 29th March, 2045.

Notes:

Pursuant to 徐房權証鼓樓字第76675號 (the Certificate of Real Estate Ownership Xu Fang Quan Zheng Gu Lou Zi Di 76675 Hao[#] ) dated 20th March 2009 issued by the Housing Management Bureau of Xuzhou County, the ownership of the property with a gross floor area of 1,666.84 square metres is vested in “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ).
Pursuant to Business Licence No. 320000000013847 issued by the Industrial and Commercial Administrative and Management Bureau of Jiangsu Province on 30th March, 2009, “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ) was established with a registered capital of RMB58,820,000 and is authorised to carry on business commencing on 15th March, 1995 and expiring on 14th March, 2025. The company is permitted to carry on the business of brokerage of futures and commodities.

– 180 –

APPENDIX V

VALUATION REPORT ON PROPERTIES HELD BY THE ENLARGED GROUP

We have been provided with the legal opinion on the title to the property by Guangda Law Firm, a professional PRC registered legal adviser on the law of the People’s Republic of China. The legal opinion contains, inter alia, the following information:–
(a) “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ) is in possession of a proper legal title to the property interests and has full legal right to transfer the title to the property interests to both local and overseas purchasers for the residual term of the land use right granted in respect of the property interest at no extra land premium or other payment of onerous nature chargeable by government authorities;
(b) “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ) has been incorporated in accordance with the law of the People’s Republic of China and the business licence of the company is valid and has full force; and
(c) The land use right in respect of the property has been granted for commercial uses for a term expiring on 29th March, 2045.
The status of title and major approvals in accordance with the information provided to us and the opinion of the legal adviser on the law of the People’s Republic of China is as follows:–

Type of Document	Status
Certificate of Real Estate Ownership	Obtained
Business Licences	Obtained

the English translation to the Chinese names are for information purpose only and should not be regarded as the official English translation of such Chinese names.

– 181 –

APPENDIX V

VALUATION REPORT ON PROPERTIES HELD BY THE ENLARGED GROUP

Group II – Property held by the Company for own uses:–

No. Property Description

Particulars of Occupancy

Capital value in existing state as at 31st October, 2009

Office spaces The property comprises office spaces on 13th Floor, within a 13-storeyed office cum hotel “新紀元大酒店” building. (New Era Hotel[#] ) at No. 153 The ground floor is occupied for East Huaihai Road, commercial uses and hotel reception Xuzhou, area whilst the upper floors are Jiangsu Province, occupied for office and guest rooms The People’s purposes. Republic of China

The property comprises office spaces within a 13-storeyed office cum hotel building.

The property was owner RMB1,900,000 occupied as at 31st October, 2009

The property was occupied for office purposes.

The building was completed in about 1996.

The property contains a total gross floor area of approximately 3,346 square feet (or approximately 310.85 square metres).

The land use right has been granted for commercial uses for a term expiring on 29th March, 2045.

Notes:

Pursuant to 徐房權証鼓樓字第76675號 (the Certificate of Real Estate Ownership Xu Fang Quan Zheng Gu Lou Zi Di 76675 Hao[#] ) dated 20th March 2009 issued by the Housing Management Bureau of Xuzhou County, the ownership of the property with a gross floor area of 1,666.84 square metres is vested in “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ).
Pursuant to Business Licence No. 320000000013847 issued by the Industrial and Commercial Administrative and Management Bureau of Jiangsu Province on 30th March, 2009, “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ) was established with a registered capital of RMB58,820,000 and is authorised to carry on business commencing on 15th March, 1995 and expiring on 14th March, 2025. The company is permitted to carry on the business of brokerage of futures and commodities.

– 182 –

APPENDIX V

VALUATION REPORT ON PROPERTIES HELD BY THE ENLARGED GROUP

We have been provided with the legal opinion on the title to the property by Guangda Law Firm, a professional PRC registered legal adviser on the law of the People’s Republic of China. The legal opinion contains, inter alia, the following information:–
(a) “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ) is in possession of a proper legal title to the property interests and has full legal right to transfer the title to the property interests to both local and overseas purchasers for the residual term of the land use right granted in respect of the property interest at no extra land premium or other payment of onerous nature chargeable by government authorities;
(b) “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ) has been incorporated in accordance with the law of the People’s Republic of China and the business licence of the company is valid and has full force; and
(c) The land use right in respect of the property has been granted for commercial uses for a term expiring on 29th March, 2045.
The status of title and major approvals in accordance with the information provided to us and the opinion of the legal adviser on the law of the People’s Republic of China is as follows:–

Type of Document	Status
Certificate of Real Estate Ownership	Obtained
Business Licences	Obtained

the English translation to the Chinese names are for information purpose only and should not be regarded as the official English translation of such Chinese names.

– 183 –

APPENDIX V

VALUATION REPORT ON PROPERTIES

HELD BY THE ENLARGED GROUP

No. Property Description

Capital value in Particulars of existing state as at Occupancy 31st October, 2009

Whole block of The property comprises a 3-storeyed Annexed Building building. at No. 153 East Huaihai Road, The building was completed in about Xuzhou, 1996. Jiangsu Province, The People’s The property contains a total gross Republic of China floor area of approximately 12,500 square feet (or approximately 1,161.25 square metres).

The property was owner RMB8,100,000 occupied as at 31st October, 2009

The property was occupied for office purposes.

The land use right was granted for a term expiring on 29th March, 2045 for commercial uses.

Notes:

Pursuant to 徐土國用(2009)第03471號 (the Certificate for the State-owned Land Use Right Xu Tu Guo Yong (2009) Di 03471 Hao[#] ) dated 10th March, 2009 issued by the Land Resources Bureau of Xuzhou County, the land use right of a piece of land comprising a site area of 462.3 sq.m. was granted to “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ) for a term expiring on 29th March, 2045 for commercial uses.
Pursuant to 徐房權証鼓樓字第74761號 (the Certificate of Real Estate Ownership Xu Fang Quan Zheng Gu Lou Zi Di 74761 Hao[#] ) dated 19th November, 2008 issued by the Housing Management Bureau of Xuzhou County, the ownership of the property with a gross floor area of 1,161.25 square metres is vested in “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ).
Pursuant to Business Licence No. 320000000013847 issued by the Industrial and Commercial Administrative and Management Bureau of Jiangsu Province on 30th March, 2009, “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ) was established with a registered capital of RMB58,820,000 and is authorised to carry on business commencing on 15th March, 1995 and expiring on 14th March, 2025. The company is permitted to carry on the business of brokerage of futures and commodities.

– 184 –

APPENDIX V

VALUATION REPORT ON PROPERTIES HELD BY THE ENLARGED GROUP

We have been provided with the legal opinion on the title to the property by Guangda Law Firm, a professional PRC registered legal adviser on the law of the People’s Republic of China. The legal opinion contains, inter alia, the following information:–
(a) “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ) is in possession of a proper legal title to the property interests and has full legal right to transfer the title to the property interests to both local and overseas purchasers for the residual term of the land use right granted in respect of the property interest at no extra land premium or other payment of onerous nature chargeable by government authorities; and
(b) “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ) has been incorporated in accordance with the law of the People’s Republic of China and the business licence of the company is valid and has full force.
The status of title and major approvals in accordance with the information provided to us and the opinion of the legal adviser on the law of the People’s Republic of China is as follows:–

Type of Document	Status
Certificate for State-owned Land Use Right	Obtained
Certificate of Real Estate Ownership	Obtained
Business Licences	Obtained

the English translation to the Chinese names are for information purpose only and should not be regarded as the official English translation of such Chinese names.

– 185 –

APPENDIX V

VALUATION REPORT ON PROPERTIES

HELD BY THE ENLARGED GROUP

No. Property Description

Capital value in Particulars of existing state as at Occupancy 31st October, 2009

Two Generator The property comprises two Buildings located generator buildings. at No. 155 East Huaihai Road, The buildings were completed in about Xuzhou, 1996. Jiangsu Province, The People’s The property contains a total gross Republic of China floor area of approximately 1,840 square feet (or approximately 171 square metres).

The property was owner RMB700,000 occupied as at 31st October, 2009 The property was occupied for generator room purpose.

The land use right was granted for a term of 40 years for commercial uses expiring on 31st July, 2043.

Notes :

Pursuant to the Certificate for the State-owned Land Use Right Xu Tu Guo Yong (2009) Di 06458 Hao（徐土國用(2009)第06458號）dated 7th April, 2009 issued by the Land Resources Bureau of Xuzhou County, the land use right of a piece of land comprising a site area of 41.2 sq.m. was granted to “新紀元期貨有限公司” (New Era Futures Co., Ltd.) for a term expiring on 31st July, 2043 for commercial uses.
Pursuant to 徐房權証鼓樓字第76676號 (the Certificate of Real Estate Ownership Xu Fang Quan Zheng Gu Lou Zi Di 76676 Hao[#] ) issued by the Housing Management Bureau of Xuzhou County, the ownership of the property with a gross floor area of 170.94 square metres is vested in “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ).
Pursuant to Business Licence No. 320000000013847 issued by the Industrial and Commercial Administrative and Management Bureau of Jiangsu Province on 30th March, 2009, “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ) was established with a registered capital of RMB58,820,000 and is authorised to carry on business commencing on 15th March, 1995 and expiring on 14th March, 2025. The company is permitted to carry on the business of brokerage of futures and commodities.

– 186 –

APPENDIX V

VALUATION REPORT ON PROPERTIES HELD BY THE ENLARGED GROUP

We have been provided with the legal opinion on the title to the property by Guangda Law Firm, a professional PRC registered legal adviser on the law of the People’s Republic of China. The legal opinion contains, inter alia, the following information:–
(a) “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ) is in possession of a proper legal title to the property interests and has full legal right to transfer the title to the property interests to both local and overseas purchasers for the residual term of the land use right granted in respect of the property interest at no extra land premium or other payment of onerous nature chargeable by government authorities; and
(b) “新紀元期貨有限公司” (New Era Futures Co., Ltd[#] ) has been incorporated in accordance with the law of the People’s Republic of China and the business licence of the company is valid and has full force.
The status of title and major approvals in accordance with the information provided to us and the opinion of the legal adviser on the law of the People’s Republic of China is as follows:–

Type of Document Status Certificate for State-owned Land Use Right Obtained Certificate of Real Estate Ownership Obtained Business Licences Obtained

the English translation to the Chinese names are for information purpose only and should not be regarded as the official English translation of such Chinese names.

– 187 –

GENERAL INFORMATION

APPENDIX VI

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Enlarged 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

So far as is known to the Directors, as at the Latest Practicable Date, the interests and short positions of each of the Directors or chief executive of the Company and their associates in the Shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which were required 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”) were as follows.

Interests in Shares

Name of Director Wong Kam Fat, Tony (Note)	Number of underlying shares held through controlled corporations 1,600,000,000	Percentage of the Company’s issued share capital 114.38

Note

Pursuant to a subscription agreement (the “Subscription Agreement”) entered into between the Company as issuer and Jadehero Limited (“Jadehero”) as subscriber on 22 May 2009, the Company will issue convertible bonds in the principal amount of HK$128 million due on 31 December 2012 at an exercise price of HK$0.16 per conversion share with the option for the Jadehero to further subscribe convertible bonds up to a maximum principal amount of HK$128 million convertible into a maximum of 800 million Shares of the Company.

– 188 –

GENERAL INFORMATION

APPENDIX VI

Jadehero Limited is a company incorporated in the British Virgin Islands with limited liability, and is owned as to 40% by Southlead Limited and as to 60% by Marvel Steed Limited of which its entire issued share capital are held by Mr. Wong Kam Fat, Tony, the Chairman and Non-executive Director of the Company.

Accordingly, Mr. Wong Kam Fat, Tony is deemed to be interested in 1,600,000,000 shares of the Company which was beneficially owned by Jadehero.

Save as disclosed above, as at the Latest Practicable Date, so far as is known to the directors and the chief executive of the Company, none of the Directors nor chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company and 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 Part XV of the SFO (including interests and short positions which they were taken or deemed to have taken under such provisions of the SFO); or were required, pursuant to section 352 of the SFO, to be recorded in the register referred to therein; or were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

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:

				Total number	Approximate
		Number of		of Shares and	percentage
Name of			underlying	underlying	of issued
Shareholders	Capacity	Shares	Shares	Shares	share capital
Good Treasure Holdings	Beneficial owner	108,000,000	9,000,000	117,000,000	8.36
Ltd (Note 1)
Li Chun Sing, Andrew	Interest of controlled	108,000,000	9,000,000	117,000,000	8.36
(Note 1)	corporation
Pioneer (China) Limited	Beneficial owner	–	181,250,000	181,250,000	12.96
(Note 2)
Mr. Lao Chio Kuan	Beneficial owner	200,000,000	181,250,000	381,250,000	27.25
(Note 2)

– 189 –

APPENDIX VI

GENERAL INFORMATION

				Total number	Approximate
		Number of		of Shares and	percentage
Name of			underlying	underlying	of issued
Shareholders	Capacity	Shares	Shares	Shares	share capital
Kademan Ltd	Interest of controlled	–	181,250,000	181,250,000	12.96
(Note 2)	corporation
Chan Hoel Len	Interest of controlled	–	181,250,000	181,250,000	12.96
(Note 2)	corporation
Top Good Holdings	Beneficial owner	263,738,000	230,000,000	493,738,000	35.30
Limited (Note 3)
PME Group Limited	Interest of controlled	263,738,000	230,000,000	493,738,000	35.30
(Note 3)	corporation
Jadehero Limited	Beneficial owner	419,000,000	1,181,000,000	1,600,000,000	114.38
(Note 4)
Marvel Steed Limited	Interest of controlled	419,000,000	1,181,000,000	1,600,000,000	114.38
(Note 4)	corporation
Southlead Limited	Interest of controlled	419,000,000	1,181,000,000	1,600,000,000	114.38
(Note 4)	corporation
Wong Kam Fat, Tony	Interest of controlled	419,000,000	1,181,000,000	1,600,000,000	114.38
(Note 4)	corporation
Xia Ying Yan (Note 4)	Interest of controlled	419,000,000	1,181,000,000	1,600,000,000	114.38
	corporation

Notes:

(1) Good Treasure Holdings Ltd (“Good Treasure”) is a company incorporated in the British Virgin Islands and whose entire equity interest is beneficially wholly-owned by Mr. Li Chun Sing, Andrew.

In addition to the 108,000,000 Shares, Good Treasure has also been granted a call option to acquire the entire 9,000,000 Shares at an exercise price of HK$1 in total pursuant to a Deed of Assignment entered into between Good Treasure, Highworth Venture Limited and Billion Boom Investments Limited on 5 November 2007. The share certificates in respect of the 9,000,000 Shares were reported to have been lost and the replacement certificates were being applied for.

Good Treasure is therefore deemed to be interested in an aggregate of 117,000,000 Shares (representing approximately 8.36% of the issued share capital of the Company) under the SFO.

– 190 –

GENERAL INFORMATION

APPENDIX VI

(2) Pursuant to the sale and purchase agreement dated 6 March 2009 entered into between Pioneer (China) Limited (the “ESL vendor”) and Fortune Financial (Holdings) Limited, a wholly-owned subsidiary of the Company (the “ESL Purchaser”) in relation to the acquisition of 9.8 million shares in Excalibur Securities Limited (“ESL”) which represents 49% of the issued share capital of ESL (“ESL Acquisition”), ESL Purchaser is to procure the Company to issue to ESL Vendor the zero coupon convertible bonds for a principal amount of HK$19.2 million due three years from the date of issue (that is, 23 August 2012) at an initial conversion price of HK$0.16 per Share.

Pursuant to the sale and purchase agreement dated 6 March 2009 entered into between Pioneer (China) Limited (the “EFL vendor”) and Fortune Financial (Holdings) Limited, a wholly-owned subsidiary of the Company (the “EFL Purchaser”) in relation to the acquisition of 9.8 million shares in Excalibur Futures Limited (“EFL”) which represents 49% of the issued share capital of EFL (“EFL Acquisition”), the EFL Purchaser is to procure the Company to issue to EFL Vendor the zero coupon convertible bonds for a principal amount of HK$9.8 million due three years from the date of issue (that is, 23 August 2012) at an initial conversion price of HK$0.16 per Share.

Pioneer (China) Limited is owned as to 50.92% by Mr. Lao Chio Kuan, who does not hold any role/position in the Company save for being a Shareholder. Mr. Lao is also the registered owner of 200,000,000 Shares.

The balance of 49.08% equity interest in Pioneer (China) Limited is owned by Kademan Limited, a company incorporated in the British Virgin Islands and whose entire equity interest is beneficially and wholly-owned by Mr. Chan Hoel Len.

(3) Top Good Holdings Limited, a wholly-owned subsidiary of PME Group Limited, a company whose shares are listed on the main board of the Stock Exchange, is the registered beneficial owner of 263,738,000 Shares (representing approximately 18.85% of the issued share capital of the Company) and owns as to 30,000,000 other convertible bonds in the principal amount of HK$3,000,000 with zero coupon rate and conversion price of HK$0.10 due on 18 February 2012. Pursuant to the subscription agreement dated 6 May 2009, the Company procures to issue the Top Good Convertible Bonds in the principal amount of HK$32,000,000 with zero coupon rate and conversion price of HK$0.16 due three years from date of issue upon Top Good CB Completion, that is, 29 June 2012.
(4) Pursuant to a subscription agreement entered into between the Company as issuer and Jadehero Limited (“Jadehero”) as subscriber on 22 May 2009, the Company will issue convertible bonds in the principal amount of HK$128 million due on 31 December 2012 at an exercise price of HK$0.16 per conversion share with the option for the Jadehero to further subscribe convertible bonds up to a maximum principal amount of HK$128 million convertible into a maximum of 800 million Shares.

Jadehero Limited is a company incorporated in the British Virgin Islands with limited liability, and is owned as to 40% by Southlead Limited and as to 60% by Marvel Steed Limited. Marvel Steed Limited is 100% owned by Mr. Wong Kam Fat Tony, the Chairman and Non-executive Director of the Company. Accordingly, Mr. Wong Kam Fat, Tony is deemed to be interested in the 1,600,000,000 Shares which that held by Jadehero.

Southlead Limited is 100% owned by Mr. Xia Ying Yan. Accordingly, Mr. Xia Ying Yan is also deemed to be interested in the 1,600,000,000 Shares held by Jadehero.

– 191 –

GENERAL INFORMATION

APPENDIX VI

Save as disclosed above, as at the Latest Practicable Date, the Company had not been notified by any person (other than the Directors or chief executives of the Company) who had interests or short positions in the shares, underlying shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or 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 any member of the Enlarged Group.

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

None of the Directors has any direct or indirect interest 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 2009, 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.

4. 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.

5. DIRECTORS’ SERVICE CONTRACTS

Mr. Wong Kam Fat, Tony, the Chairman and non-executive director of the Company, entered into letter of appointment with the Company on 14 October 2009 for a term of one year commencing from 11 September 2009, subject to the provisions on removal, re-election and retirement by rotation provisions in accordance with the articles of association of the Company.

Mr. Ng Cheuk Fan, Keith, the Managing Director and an executive Director, entered into a service agreement with the Company commencing from 4 April 2007 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.

– 192 –

GENERAL INFORMATION

APPENDIX VI

Mr. Yeung Kwok Leung, 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.

Mr. NG Kay Kwok, an independent non-executive Director, entered into a letter of appointment with the Company on 14 September 2007 for a term of one year and can be terminated by the Company by giving one month written notice to him, subject to provisions on removal, re-election and retirement by rotation in accordance with the articles of association of the Company.

Mr. Lam Ka Wai, Graham, an independent non-executive Director, entered into a letter of appointment with the Company on 14 September 2007 for a term of one year and can be terminated by the Company by giving one month written notice to him, subject to provisions on removal, re-election and retirement by rotation in accordance with the articles of association of the Company.

Mr. Tam B Ray Billy, an independent non-executive Director, entered into a letter of appointment with the Company on 4 December 2007 for a term of one year and can be terminated by the Company by giving one month written notice to him, subject to provisions on removal, re-election and retirement by rotation in accordance with the articles of association of the Company.

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 (excluding contracts expiring or determinable by the employer within one year without payment of compensation, other than statutory compensation).

6. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) having been entered into by the Enlarged 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, 31 July, 19 September, 31 October 2008 and 31 January 2009) entered into between Mr. Lao Chio Kuan (“Mr. Lao”) and the Fortune Financial (Holdings) Limited, a whollyowned subsidiary of the Company (the “Purchaser”), in relation to the acquisition of 51% of the issued share capital of Excalibur Securities Limited (“ESL”) at the consideration of HK$20 million, to be satisfied by the issue of convertible notes by the Company to Mr. Lao (“Original Agreements”);

– 193 –

GENERAL INFORMATION

APPENDIX VI

(b) the conditional placing agreement dated 27 February 2008 (as amended on 30 May, 31 July, 31 October 2008 and 31 January 2009) entered into between the Company and Kingston Securities Limited in relation to the placing of a principal amount of HK$50 million convertible notes at a conversion price of HK$0.1 per Share;
(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 conditional placing agreement entered into between the Company and Get Nice Securities Limited on 10 September 2008 (as supplemented on 10 December 2008 and 31 January 2009) in relation to the placing of 80,000,000 placing shares on a fully underwritten basis;
(e) the formal sale and purchase agreement dated 19 September 2008 which is based on the principal terms of the memorandum entered into between Fortune Financial (Holdings) Limited, a wholly-owned subsidiary of the Company (the “Purchaser”), and Pioneer (China) Limited (“EFL Vendor”) for the acquisition of 51% of the issued share capital of Excalibur Futures Limited (“EFL”) at the consideration of HK$10.2 million to be satisfied by the issue of promissory note by the Purchaser (“Secondary Agreement”);
(f) a conditional sale and purchase agreement dated 6 March 2009 entered into between Ample Wealth Group Limited and the Purchaser for the acquisition for 100% issued share capital of Wealthy Aim Group Limited (“Wealthy Aim”) at a consideration of HK$58.5 million (subject to adjustment), which shall be satisfied by the Purchaser paid an initial non-refundable deposit of HK$100,000 in cash and the remaining balance of HK$58.4 million (subject to adjustment) by the issue of convertible bonds. Wealthy Aim is an investment holding company and subject to reorganization, it will own 70% of the issued share capital of AMS Capital Limited. This agreement was terminated on 2 November 2009 as announced in an announcement of the Company dated 3 November 2009;
(g) the subscription agreement entered into between the Company as issuer and Top Good Holdings Limited as subscriber on 6 May 2009 in relation to the subscription and issuance of zero coupon convertible bonds at principal amount of HK$32 million due three years from the date of issue at an exercise price of HK$0.16 per conversion share;

– 194 –

GENERAL INFORMATION

APPENDIX VI

(h) the conditional sale and purchase agreement entered into on 6 March 2009 between Pioneer (China) Limited (“ESL Vendor”) and Fortune Financial (Holdings) Limited, a wholly-owned subsidiary of the Company (the “Purchaser”), in relation to the sale and purchase of a total of 9,800,000 ordinary shares of Excalibur Securities Limited (“ESL”) which represent 49% of the issued share capital of ESL at HK$19.2 million that to be settled by way of issuing the ESL Convertible Bonds by the Company for a principal amount of HK$19.2 million to the ESL Vendor on the ESL Completion Date;
(i) the conditional sale and purchase agreement entered into on 6 March 2009 between EFL Vendor and Fortune Financial (Holdings) Limited, a wholly-owned subsidiary of the Company (the “Purchaser”), in relation to the sale and purchase of a total of 9,800,000 ordinary shares of Excalibur Futures Limited (“EFL”) which represent 49% of the issued share capital of EFL at HK$9.8 million that to be settled by way of issuing the EFL Convertible Bonds by the Company for a principal amount of HK$9.8 million to the EFL Vendor on the EFL Completion Date;
(j) the subscription agreement entered into between the Company as issuer and Top Good Holdings Limited as subscriber on 6 May 2009 in relation to the subscription and issuance of zero coupon convertible bonds at principal amount of HK$32 million due three years from the date of issue at an exercise price of HK$0.16 per conversion share;
(k) the subscription agreement entered into between the Company as issuer and Jadehero Limited as subscriber on 22 May 2009 in relation to the subscription and issuance of zero coupon convertible bonds at principal amount of HK$128 million due on 31 December 2012 at an exercise price of HK$0.16 per conversion share.
(l) the Share Transfer Agreement;
(m) the Subscription Agreement dated 18 September 2009 (as amended on 4 December 2009) entered into between Jetgain, a wholly-owned subsidiary of the Company (as subscriber) and Value Convergence Holdings Limited (as issuer) in relation to the subscription for the Convertible Bonds in a principal amount of HK$100,000,000 with an initial conversion price of HK$1.00 per Conversion Share;
(n) the conditional sale and purchase agreement dated 16 October 2009 entered into among Fortune Financial (Holdings) Limited (as vendor) (“Fortune Finance”), a wholly-owned subsidiary of the Company, Faith Star Asia Limited (as purchaser) and Excalibur Securities Limited (“ESL”) and in relation to the disposal of 20,000,000 ordinary shares in ESL, representing the entire issued share capital of ESL; and the conditional deed of settlement dated 16 October 2009 entered into among Pioneer (China) Limited (“Pioneer”), Mr. Lao Chio Kuan and Fortune Finance in relation to the settlement of certain outstanding obligations of the Original Agreements and the Secondary Agreement mentioned above in this section; and

– 195 –

GENERAL INFORMATION

APPENDIX VI

(o) the conditional sale and purchase agreement entered into between the Company (as vendor) and Mr. Lai Sai Sang (as purchaser) on 24 November 2009 in relation to the Disposal of one (1) ordinary share of US$1.00 each in the capital of Yew Sang Hong (BVI) Limited (“YSH”), a wholly-owned subsidiary of the Company representing 100% of the entire equity interest in YSH.

7. EXPERTS AND CONSENTS

(a) The following are the qualifications of the experts who have given their opinions and advice which are included in this circular (“Experts”):

Name Qualification SHINEWING (HK) CPA Limited Certified Public Accountants (“SHINEWING”) Kangda Law Firm (“Kangda”) PRC law firm Roma Appraisals Limited (“Roma”) Registered Professional Surveyor Guangda Law Firm PRC law firm

(b) None of the Experts 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 the Experts 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.

8. LITIGATION

On 17 August 2009, Yew Sang Hong Limited, a wholly-owned subsidiary in the Group, received a Winding-Up Petition issued by the Hong Kong Housing Authority (“HKHA”) demanding repayment of (i) the Judgment Debts of HK$1,094,252.20; (ii) accrued interest of HK$167,719.89 for the Judgment Debts up to 14 July 2009; and (iii) further interest on the Judgment Debits accruing from 15 July 2009 until full repayment. The case was been settled by an mutually agreed amount of HK$400,000.00 and the Winding-Up Petition was withdrawn on 19 October 2009.

One of the Company’s subsidiary had claimed for rental deposit in the sum of HK$130,000 and was counterclaimed by the landlord in the sum of approximately HK$940,000 for alterations made, chattels removed and loss of rental. The Company is currently seeking legal advice for further course of action.

– 196 –

GENERAL INFORMATION

APPENDIX VI

Save as disclosed, as at the Latest Practicable Date, no member of the Enlarged 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 Enlarged Group.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours (9 a.m. to 5 p.m.) on any weekday (public holidays excepted) at the office of the Company at 13/F., Sunning Plaza, 10 Hysan Avenue, Causeway Bay, 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 three years ended 31 March 2007, 31 March 2008 and 31 March 2009 and the interim report of the Company for the six months ended 30 September 2008 as set out in Appendix I of this circular;
(c) the report from SHINEWING on the financial information of the Target Company for the three years ended 31 December 2006, 31 December 2007 and 31 December 2008 and six months ended 30 June 2009, the text of which is set out in Appendix II of this circular;
(d) the report from SHINEWING on unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix III of this circular;
(e) the working capital comfort letter as provided by SHINEWING to the Board pursuant to the requirements of rule 14.66(4) of the Listing Rules;
(f) the valuation report from Roma on properties held by the Target Company as at 31 October 2009, the text of which is set out in Appendix V of this circular;
(g) the written consents referred to in the section headed “Experts and Consents” in this appendix;
(h) all material contracts referred to in the section headed “Material Contracts” in this appendix;
(i) all service contracts referred to in the section headed “Directors’ Services Contracts” in this appendix; and

– 197 –

GENERAL INFORMATION

APPENDIX VI

(j) the following circulars of the Company:–
(i) the circular dated 30 June 2008 in relation to, among others, the very substantial acquisition of 51% interest in Excalibur Securities Limited.
(ii) the circular dated 8 October 2008 in relation to, among others, the very substantial acquisition of 51% interest in Excalibur futures Limited.
(iii) the circular dated 8 May 2009 in relation to, among others, the very substantial acquisitions and connected transactions of 49% interests in Excalibur Securities Limited and Excalibur Futures Limited respectively.
(iv) the circular dated 12 June 2009 in relation to, among others, the issuance of convertible bonds in the principal amount of HK$128 million.
(v) the circular dated 22 December 2009 in relation to, among others, the disposals of 100% interests in Excalibur Securities Limited and 100% interests in Yew Sang Hong (BVI) Limited.

10. MISCELLANEOUS

(a) The registered office of the Company is located at P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.
(b) The head office and principal place of business of the Company in Hong Kong is at 13/F, Sunning Plaza, 10 Hysan Avenue, Causeway Bay, Hong Kong.
(c) The Hong Kong branch share registrar and transfer office of the Company is Union Registrars Limited of 18th Floor, Fook Lee Commercial Centre, Town Place, 33 Lockhart Road, Wanchai, Hong Kong.
(d) The company secretary of the Company is Mr. Yeung Kwok Leung who is a fellow member of the Association of Chartered Certified Accountants and as associate member of the Hong Kong Institute of Certified Public Accountants.
(e) The English text of this circular shall prevail over the Chinese text in the event of inconsistency.

– 198 –

NOTICE OF EGM

==> picture [184 x 129] intentionally omitted <==

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 290)

Website: http://www.290.com.hk

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (“ EGM ”) of China Fortune Group Limited (“ Company ”) will be held at 13/F, Sunning Plaza, 10 Hysan Avenue, Causeway Bay, Hong Kong on 13 January 2010 at 12:00 noon for the purposes of considering and, if thought fit, passing, with or without amendments or modifications, the following resolutions of the Company:

ORDINARY RESOLUTIONS

“(1) THAT the share transfer agreement dated 22 May 2009 (the “Share Transfer Agreement”) entered into between 深圳市華德石油化工有限公司 (Shenzhen Huade Petrochemical Company Limited[#] ) (the “Vendor”) as vendor and Fortune Financial (Holdings) Limited, a wholly owned subsidiary of the Company (the “Purchaser”), as purchaser, in respect of the acquisition of 49% of the issued share capital of 新紀元期貨有限公司 (New Era Futures Co., Ltd[#] ) at a consideration of RMB 58.83 million (equivalent to approximately HK$66.85 million) subject to the terms and conditions stipulated therein, 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

– 199 –

NOTICE OF EGM

(2) THAT any directors of the Company be and hereby authorized to enter into any agreement, deed or instrument and/or to execute and deliver all such documents and/or to do all such acts on behalf of the Company as he may consider necessary, desirable or expedient for the purpose of, or in connection with, (i) the implementation and completion of the Share Transfer Agreement and transactions contemplated thereunder.”
the English translation to the Chinese names are for information purpose only and should not be regarded as the official English translation of such Chinese names.

By order of the Board China Fortune Group Limited Ng Cheuk Fan, Keith Managing Director

Hong Kong, 24 December 2009

Principal Place of Business in Hong Kong: Registered Office: 13/F, Sunning Plaza P.O. Box 309 10 Hysan Avenue Ugland House Causeway Bay, Hong Kong Grand Cayman KY1-1104 Cayman Islands

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 18/F, 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 Board consists of two Executive Directors, namely Mr. Ng Cheuk Fan, Keith (Managing Director) and Mr. Yeung Kwok Leung; one Non-Executive Director, Mr. Wong Kam Fat, Tony (Chairman), and three Independent Non-Executive Directors, namely Mr. Tam B Ray Billy, Mr. Ng Kay Kwok and Mr. Lam Ka Wai, Graham.

– 200 –

AI assistant

Television Broadcasts Limited — Proxy Solicitation & Information Statement 2009

49261_rns_2009-12-23_893bf262-57fa-4432-afc9-2c49dedc6664.pdf

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

(Stock Code: 290)

(I) VERY SUBSTANTIAL ACQUISITION PROPOSED ACQUISITION OF 49% INTEREST IN A COMPANY ENGAGED IN BROKERAGE SERVICES FOR DEALING IN FUTURES CONTRACTS IN THE PRC AND

(II) NOTICE OF EXTRAORDINARY GENERAL MEETING

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

the English translation of the Chinese name is for information purpose only and should not be regarded as the official English translation of such Chinese name.

LETTER FROM THE BOARD

(Stock Code: 290)

VERY SUBSTANTIAL ACQUISITION PROPOSED ACQUISITION OF 49% INTEREST IN A COMPANY ENGAGED IN BROKERAGE SERVICES FOR DEALING IN FUTURES CONTRACTS IN THE PRC

INTRODUCTION

LETTER FROM THE BOARD

SHARE TRANSFER AGREEMENT

Consideration:

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Conditions Precedent for Share Transfer Completion:

LETTER FROM THE BOARD

Share Transfer Completion:

Undertaking:

LETTER FROM THE BOARD

Breach of Contract:

INFORMATION ON THE TARGET COMPANY

the English translation of the Chinese names are for information purpose only and should not be regarded as the official English translation of such Chinese names.

LETTER FROM THE BOARD

RECONCILIATION STATEMENT

REASONS FOR THE ACQUISITION

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE ACQUISITION

Assets

Earnings

Gearing ratio

LETTER FROM THE BOARD

LISTING RULES REQUIREMENTS

EGM

RECOMMENDATION

ADDITIONAL INFORMATION

A. SUMMARY OF FINANCIAL INFORMATION

RESULTS

ASSETS AND LIABILITIES

B. AUDITED CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED CASH FLOW STATEMENT

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. General

2. Application of new and revised Hong Kong Financial Reporting Standards (“HKFRSs”)

3. Significant accounting policies

(a) Basis of consolidation

(b) Business combinations

(c) Goodwill

(d) Excess of an acquirer’s interest in the net fair value of an acquiree’s identifiable assets, liabilities and contingent liabilities over cost (“discount on acquisitions”)

(e) Investments in associates

(f) Investment in Jointly-controlled entities

(g) Investments in subsidiaries

(h) Intangible assets

(i) Property, plant and equipment

(j) Other non-current assets

(k) Financial instruments

Financial assets

Effective interest method

Loans and receivables

Impairment losses on financial assets

Financial liabilities and equity

Effective interest method

Other financial liabilities

Convertible loan notes

APPENDIX I

Equity instruments

Television Broadcasts Limited Proxy Solicitation & Information Statement 2009