Ulferts International Limited - Proxy Solicitation & Information Statement 2010

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Shougang Concord Grand (Group) Limited, you should at once hand this circular accompanying with the form of proxy to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for onward transmission to the purchaser or transferee.

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

首長四方（集團）有限公司[*] SHOUGANG CONCORD GRAND (GROUP) LIMITED (Incorporated in Bermuda with limited liability) (Stock Code: 730)

MAJOR TRANSACTION IN RELATION TO THE DISPOSAL OF GRAND AWARD LIMITED

A letter from the Board is set out on pages 4 to 8 of this circular.

A notice convening the Special General Meeting to be held at 10:25 a.m. on Tuesday, 8 June 2010 at JW Marriott Ballroom, Level 3, JW Marriott Hotel Hong Kong, Pacific Place, 88 Queensway, Hong Kong is set out on pages 98 to 99 of this circular. Whether or not you are able to attend the Special General Meeting in person, please complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s Hong Kong branch share registrars and transfer office, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as practicable but in any event not less than 48 hours before the time appointed for holding the Special General Meeting or any adjourned meeting thereof (as the case may be). Completion and return of the accompanying form of proxy will not preclude you from attending and voting in person at the Special General Meeting or any adjourned meeting thereof (as the case may be) should you so wish.

4 May 2010

For identification purpose only

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . . . . . . . . . . .	9
APPENDIX II – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	86
NOTICE OF THE SPECIAL GENERAL MEETING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	98

DEFINITIONS

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

“associates”	has the same meaning ascribed to it under the Listing Rules
“Board”	the board of Directors
“Capital Steel”	首方投資管理（深圳）有限公司(Capital Steel Investment (China)
	Ltd.*), a company established in the PRC and an indirect wholly-
	owned subsidiary of the Company
“Company”	Shougang Concord Grand (Group) Limited, a company
	incorporated in Bermuda with limited liability, the shares of which
	are listed on the main board of the Stock Exchange
“Completion Date”	the third business day following the fulfilment of the condition in
	the Share Transfer Agreement
“connected person(s)”	has the same meaning ascribed to it under the Listing Rules
“Director(s)”	the director(s) of the Company
“Disposal”	the sale of the Sale Share and the assignment of the Loan by the
	Group pursuant to the Share Transfer Agreement
“Grand Award”	Grand Award Limited, a company incorporated in the British
	Virgin Islands and an indirect wholly-owned subsidiary of the
	Company
“Grand Award Group”	Grand Award and its subsidiaries, which are the subject of the
	Disposal
“Grand Perfect”	Grand Perfect Investment Limited, a company incorporated in
	Hong Kong, a wholly-owned subsidiary of Grand Award and an
	indirect wholly-owned subsidiary of the Company
“Group”	the Company and its subsidiaries
“Guarantor”	Ms. Fan Wen Zhen, the beneficial owner of the Purchaser and the
	guarantor to the Purchaser’s obligations under the Share Transfer
	Agreement
“HK$”	Hong Kong dollar, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC

DEFINITIONS

“Latest Practicable Date”	28 April 2010, being the latest practicable date prior to the
	printing of this circular for the purpose of ascertaining certain
	information contained in this circular
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“Loan”	the aggregate outstanding amount as at the date of the Share
	Transfer Agreement of HK$251,285,339.39 advanced by the
	Vendor to Grand Award
“PRC”	the People’s Republic of China and for the purpose of this
	circular, excludes Hong Kong, Taiwan and the Macau Special
	Administrative Region of the PRC
“Purchaser”	Best China Enterprises Limited, a company incorporated in
	the British Virgin Islands, an independent third party and the
	purchaser of the Sale Share and the assignee of the Loan
“Remaining Group”	the Group excluding the Grand Award Group
“RMB”	Renminbi, the lawful currency of the PRC
“Sale Share”	1 share of US$1.00 in the share capital of Grand Award,
	representing the entire issued share capital of Grand Award
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong)
“Share(s)”	ordinary share(s) of HK$0.01 each in the issued share capital of
	the Company
“Shareholders(s)”	shareholder(s) of the Company
“Share Transfer Agreement”	the share transfer agreement dated 16 March 2010 entered into
	between the Vendor, the Purchaser and the Guarantor in relation to
	the sale of the Sale Share and the assignment of the Loan by the
	Vendor to the Purchaser
“Special General Meeting”	the special general meeting of the Company to be convened at
	10:25 a.m. on Tuesday, 8 June 2010 at JW Marriott Ballroom,
	Level 3, JW Marriott Hotel Hong Kong, Pacific Place, 88
	Queensway, Hong Kong for the purpose of approving the Disposal
“Stock Exchange”	The Stock Exchange of Hong Kong Limited

DEFINITIONS

“Vendor”	SCG Investment (BVI) Limited, a company incorporated in the
	British Virgin Islands, a wholly-owned subsidiary of the Company
“US$”	United States dollar, the lawful currency of the United States of
	America
“%”	per cent.

Unless otherwise specified in this circular, translations of HK$ into US$ are made in this circular at the rate of US$1.00 to HK$7.75, and translations of HK$ into RMB are made in this circular at the rate of HK$1.00 to RMB0.88. The exchange rates used herein are for illustrations only, no representation is made that any amounts in HK$ or foreign currencies could have been or could be converted at the relevant rate or at any other rate or at all.

LETTER FROM THE BOARD

**首長四方（集團）有限公司[*] SHOUGANG CONCORD GRAND (GROUP) LIMITED** (Incorporated in Bermuda with limited liability)

(Stock Code: 730)

Directors:

Wang Qinghai (Chairman)

Cao Zhong (Vice Chairman and Managing Director) Chen Zheng (Managing Director of Operations) Wang Tian (Deputy Managing Director) Yuan Wenxin (Deputy Managing Director) Leung Shun Sang, Tony (Non-executive Director) Tam King Ching, Kenny (Independent Non-executive Director) Zhou Jianhong (Independent Non-executive Director) Yip Kin Man, Raymond (Independent Non-executive Director)

Registered Office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Principal Place of Business in Hong Kong: Rooms 1101-4, 11th Floor Harcourt House 39 Gloucester Road Wanchai Hong Kong

4 May 2010

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION IN RELATION TO THE DISPOSAL OF GRAND AWARD LIMITED

INTRODUCTION

The Board announced that on 16 March 2010 (after trading hours), the Vendor, a wholly-owned subsidiary of the Company, entered into the Share Transfer Agreement with the Purchaser and the Guarantor pursuant to which the Vendor agreed to sell to the Purchaser the Sale Share for US$1.00 (equivalent to approximately HK$7.75) and to assign the Loan to the Purchaser for HK$247,920,000. After completion of the Disposal, the Group will not have any interest in Grand Award and its subsidiaries.

The Disposal constitutes a major transaction for the Company under the Listing Rules and is subject to the approval by the Shareholders in a general meeting.

The purpose of this circular is to provide you with information in respect of, among other things, the details of the Disposal, and the notice convening the Special General Meeting.

LETTER FROM THE BOARD

THE SHARE TRANSFER AGREEMENT

Date: 16 March 2010

Parties to the agreement:

Vendor: SCG Investment (BVI) Limited, a wholly-owned subsidiary of the Company. Purchaser: Best China Enterprises Limited, a company incorporated in the British Virgin Islands and is principally engaged in investment holding. Guarantor: Ms. Fan Wen Zhen, who is a merchant and is the beneficial owner of the Purchaser.

To the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, each of the Purchaser and the Guarantor is independent of and not connected with the Company or any of its connected persons.

The Company has not entered into any transaction with the Purchaser or the Guarantor in the past 12 months that would need to be aggregated with the Share Transfer Agreement pursuant to Rule 14.22 of the Listing Rules.

The Disposal

Pursuant to the Share Transfer Agreement, the Vendor has agreed to sell to the Purchaser the Sale Share, which represents the entire issued share capital of Grand Award, and to assign the Loan to the Purchaser. The Guarantor has agreed to guarantee the due and punctual discharge by the Purchaser of its obligations under the Share Transfer Agreement.

Grand Award is an investment holding company incorporated in the British Virgin Islands and its sole asset is its interest in the entire issued share capital of Grand Perfect, an investment holding company incorporated in Hong Kong which in turn holds the entire registered capital of Capital Steel.

90% interest in 天津首方投資管理有限公司 (Tianjin Capital Steel Investment Management Co. Ltd.*), a limited liability company established in the PRC, which was mainly engaged in the development and management of finance and assets investments; and
80% interest in 四方源創國際影視文化傳播（北京）有限公司 (Concord Creation International (Beijing) Company Limited*), a limited liability company established in the PRC, which, together with its subsidiaries, were mainly engaged in production of films and television programme series.

LETTER FROM THE BOARD

Consideration

The aggregate consideration for the Disposal is a sum of approximately HK$247,920,007.75, representing the consideration of US$1.00 (equivalent to approximately HK$7.75) for the sale of the Sale Share and the consideration of HK$247,920,000 for the assignment of the Loan to the Purchaser. The consideration was determined after arm’s length negotiations between the parties with reference to the unaudited consolidated net assets of the Grand Award Group, excluding the Loan to be assigned as at 31 December 2009. The Directors, including the independent non-executive Directors, are of the view that the terms of the Share Transfer Agreement were concluded after arm’s length negotiations under normal commercial terms and are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

The consideration will be payable in cash by the Purchaser to the Vendor in accordance with the following schedule:

HK$73,920,000 would be paid by the Purchaser to the Vendor within 15 days from the signing of the Share Transfer Agreement;
US$1.00 (equivalent to approximately HK$7.75) will be payable by the Purchaser to the Vendor within 7 days from the Completion Date; and
HK$174,000,000 will be payable by the Purchaser to the Vendor within 6 months from the Completion Date.

A delay payment interest of 3% per annum will be charged and be payable by the Purchaser if it fails to pay the relevant instalment of the consideration when it falls and becomes due.

Before the full settlement of the aggregate consideration for the Disposal, the Vendor has the right to withhold bank balances and cash and other assets of Grand Award and/or its subsidiaries with carrying values equivalent to the unsettled balance.

The first instalment payment of HK$73,920,000 has been received by the Vendor and its designated company.

Condition

Completion of the Disposal is conditional upon the compliance by the Company of the requirements of the Listing Rules, including the obtaining the approval by the Shareholders in respect of the Disposal where necessary.

If the above condition cannot be fulfilled before 5:00 p.m. on 30 June 2010 or such other date as may be agreed between the parties, the Share Transfer Agreement will become null and void and cease to have any effect and none of the parties may claim the other for costs, damages, compensations or otherwise (save for antecedent breach).

LETTER FROM THE BOARD

REASONS FOR THE TRANSACTION

The Company is an investment holding company and its subsidiaries are principally engaged in provision and distribution of cultural recreations content, provision of financial services and property investment and management.

Since the Grand Award Group has incurred losses continuously for the previous years, the Directors consider that the Disposal represents a good opportunity for the Group to realise its investment in Grand Award at a fair and reasonable price, and reallocate the resources of the Group to other investments which might generate higher returns for the Company.

Accordingly, the Directors, including the independent non-executive Directors, consider that it would be in the interest of the Company and the Shareholders as a whole to dispose of the Sale Share and to assign the Loan and focus in other areas which would offer better return to the Shareholders and/or with better development potentials. As the Disposal was being carried out on an arm’s length basis and under normal commercial terms, the Directors, including the independent non-executive Directors, also consider that the terms of the Disposal are fair and reasonable.

FINANCIAL EFFECT OF THE TRANSACTION

The unaudited consolidated net assets of the Grand Award Group, excluding the Loan to be assigned as at 31 December 2009 was approximately HK$247.9 million. The unaudited consolidated financial results of the Grand Award Group for the two years ended 31 December 2008 and 2009 are as follows:

	Year ended	Year ended
	31 December	31 December
	2008	2009
	HK$’000	HK$’000
Loss before taxation attributable to owners of Grand Award	1,817	8,925
Loss after taxation attributable to owners of Grand Award	2,850	8,970

Based on (i) the unaudited consolidated net assets of the Grand Award Group, excluding the Loan to be assigned as at 31 December 2009 of approximately HK$247.9 million; and (ii) the aggregate consideration for the Disposal of approximately HK$247.9 million, the Group would not recognise any gain or loss from the Disposal. However, Shareholders should note that the actual financial effects on the Disposal will be determined mainly based on the consolidated net assets of the Grand Award Group, excluding the Loan to be assigned, immediately upon completion of the Disposal.

Immediately after completion of the Disposal, the Group will cease to have any interest in the Grand Award Group. Accordingly, the financial results of the Grand Award Group will not be consolidated in the accounts of the Group after completion of the Disposal. Based on the results of the Group as at 31 December 2009, the total assets and total liabilities of the Group will be reduced by approximately HK$270.6 million and HK$8.2 million, respectively, as a result of the Disposal, while earning for the year ended 31 December 2009 would be increased by approximately HK$9.0 million.

LETTER FROM THE BOARD

After completion of the Disposal, the Company will no longer be involved in the segment of film and television program production but will continue to engage in the asset management segment.

The Directors currently intend to apply the proceeds from the Disposal as general working capital of the Group and for other investments which might generate higher returns for the Company. As at the Latest Practicable Date, the Company had not identified any particular investment. After completion of the Disposal, the Group will no longer be interested in Grand Award and its underlying subsidiaries.

GENERAL

The Disposal constitutes a major transaction for the Company under the Listing Rules and is subject to the approval by the Shareholders in a general meeting. To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, no Shareholder is interested in the Share Transfer Agreement and accordingly, no Shareholder is required to abstain from voting for the resolution to approve the Disposal in the Special General Meeting.

SPECIAL GENERAL MEETING

A notice convening the Special General Meeting is set out on page 98 to page 99 of this circular. A form of proxy for use at the Special General Meeting is enclosed. At the Special General Meeting, resolution will be proposed for Shareholders to consider and, if thought fit, to approve the Disposal.

Whether or not you are able to attend the Special General Meeting in person, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company’s Hong Kong branch share registrars and transfer office, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for holding the Special General Meeting or any adjourned meetings thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the Special General Meeting or any adjourned meetings thereof (as the case may be) should you so wish.

Pursuant to Rule 13.39(4) of the Listing Rules, all votes at the Special General Meeting must be taken by poll and the Company will announce the results of the poll in the manner set out in Rule 13.39(5) of the Listing Rules.

RECOMMENDATION

The Directors, including the independent non-executive Directors, consider that the terms of the Share Transfer Agreement and the transactions contemplated thereunder are fair and reasonable so far as the Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole, and accordingly recommend that all Shareholders should vote in favour of the ordinary resolution in the notice of Special General Meeting.

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

By order of the Board

Shougang Concord Grand (Group) Limited Cao Zhong

Vice Chairman and Managing Director

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

I. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP FOR THE THREE FINANCIAL YEARS ENDED 31 DECEMBER 2007, 2008 AND 2009

The table set out below is the summary of the financial information of the Group for the year ended 31 December 2007, 2008 and 2009, as extracted from, the annual report of the Company for the year ended 31 December 2008 and 2009.

Results

Revenue
Cost of sales
Gross profit
Profit (loss) before tax
Income tax expense
Profit (loss) for the year
Attributable to:
Owners of the Company
Minority interests
Earnings (loss) per share
Basic
Diluted

For the year ended 31 December
2007
2008
2009
HK$’000
HK$’000
HK$’000
284,303
308,181
494,541
(193,371)
(262,550)
(358,142)
90,932
45,631
136,399
447,998
(156,209)
71,552
(6,785)
(1,540)
(13,013)
441,213
(157,749)
58,539
425,661
(119,446)
38,696
15,552
(38,303)
19,843
441,213
(157,749)
58,539
HK37.19 cents
(HK10.38 cents)
HK3.36 cents
HK35.99 cents
(HK10.38 cents)
HK3.36 cents

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial position

Total assets Total liabilities Equity attributable to owners of the Company Share options reserve of subsidiaries Minority interests	As at 31 December 2007 2008 HK$’000 HK$’000 2,566,391 2,418,299 (1,598,035) (1,547,125) 968,356 871,174 635,814 551,644 55,249 54,603 277,293 264,927 968,356 871,174	2009 HK$’000 2,108,075 (1,210,703) 897,372 608,995 33,120 255,257 897,372

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

II. EXTRACT FROM THE ANNUAL REPORT OF THE COMPANY FOR THE YEAR ENDED 31 DECEMBER 2009

The following is an extract of the latest published audited consolidated financial statements of the Group for the year ended 31 December 2009 together with the notes therein, from the annual report of the Company for the year ended 31 December 2009.

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2009

Notes Revenue 7 Cost of sales Gross profit Interest income from entrusted loan receivables Other income 9 Distribution costs and selling expenses Administrative expenses Increase (decrease) in fair value of investment properties Changes in fair value of held-for-trading investments Finance costs 10 Share of loss of associates Other expense 11 Discount on acquisition of additional interest in a subsidiary 12 Loss on dilution of interests in a subsidiary 13 Profit (loss) before tax Income tax expense 14 Profit (loss) for the year 15 Other comprehensive income: Exchange differences on translation of foreign operations Total comprehensive income (expense) for the year	2009 HK$’000 494,541 (358,142) 136,399 5,686 26,967 (12,674) (118,286) 24,961 10,436 (3,639) (287) – 2,154 (165) 71,552 (13,013) 58,539 (55) 58,484	2008 HK$’000 308,181 (262,550) 45,631 3,674 12,035 (14,240) (128,233) (15,960) (30,011) (6,046) (857) (22,202) – – (156,209) (1,540) (157,749) 34,468 (123,281)

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes Profit (loss) for the year attributable to: Owners of the Company Minority interests Total comprehensive income (expense) for the year attributable to: Owners of the Company Minority interests Earnings (loss) per share 17 Basic and diluted	2009 HK$’000 38,696 19,843 58,539 38,677 19,807 58,484 HK3.36 cents	2008 HK$’000 (119,446) (38,303) (157,749) (96,095) (27,186) (123,281) (HK10.38 cents)

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Financial Position

At 31 December 2009

Notes Non-current assets Property, plant and equipment 18 Prepaid lease payments 19 Investment properties 20 Goodwill 21 Intangible asset 23 Interests in associates 24 Other receivables 25 Advances 26 Finance lease receivables 27 Entrusted loan receivables 28 Restricted bank deposits 33 Pledged bank deposit 33 Available-for-sale investments 36 Current assets Inventories 29 Production work in progress 30 Amounts due from customers for contract work 31 Finance lease receivables 27 Entrusted loan receivables 28 Trade receivables 32 Prepayments, deposits and other receivables 33 Prepaid lease payments 19 Convertible loan receivable 34 Held-for-trading investments 35 Pledged bank deposit 33 Bank balances and cash 33 Current liabilities Amounts due to customers for contract work 31 Trade payables 37 Other payables and accruals Income received in advance 38 Rental and management fee deposits received Amount due to an associate 39 Tax liabilities Security deposits received Secured bank borrowings – due within one year 40 Net current assets Total assets less current liabilities	2009 HK$’000 144,696 5,799 152,450 52,935 – 21,569 20,657 – 429,347 227 56,958 1,956 37,477 924,071 34,947 – 5,795 464,519 25,873 41,477 93,746 125 119,255 25,420 – 372,847 1,184,004 366 32,969 58,316 43,427 1,248 20,874 19,526 50,168 539,326 766,220 417,784 1,341,855	2008 HK$’000 60,510 7,512 125,200 52,935 244,111 21,856 – 126,547 827,138 25,499 66,069 665 –
		1,558,042
		21,904 3,875 16,935 463,170 26,879 20,524 22,957 156 – 85,668 2,808 195,381
		860,257
		1,763 8,117 53,492 38,108 1,189 – 9,506 – 427,048
		539,223
		321,034
		1,879,076

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes Capital and reserves Share capital 42 Retained earnings Other reserves Equity attributable to owners of the Company Share options reserve of subsidiaries Minority interests Total equity Non-current liabilities Income received in advance 38 Secured bank borrowings – due after one year 40 Security deposits received Deferred tax liabilities 41 Total equity and liabilities	2009 HK$’000 11,514 438,708 158,773 608,995 33,120 255,257 897,372 7,754 425,053 10,000 1,676 444,483 1,341,855	2008 HK$’000 11,514 382,689 157,441
		551,644 54,603 264,927
		871,174
		16,393 930,248 60,168 1,093
		1,007,902
		1,879,076

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the year ended 31 December 2009

Share capital HK$’000 At 1 January 2008 11,504 Exchange differences on translation of foreign operations – Loss for the year – Total comprehensive income (expense) for the year – Recognition of share-based payments – Exercise of share options 10 Reduction of share premium (Note (e)) – Elimination of accumulated losses_(Note (e))_ – Cancellation of share options granted by subsidiaries – Capital contribution from a minority shareholder – At 31 December 2008 and 1 January 2009 11,514 Exchange differences on translation of foreign operations – Profit for the year – Total comprehensive (expense) income for the year – Exercise of share option of a subsidiary – Transfer to statutory reserve – Lapse/cancellation of share options – Cancellation of share options granted by subsidiaries – Capital contribution from a minority shareholder – Acquisition of additional interest in a subsidiary – At 31 December 2009 11,514	Capital Contributed Share contribution surplus Translation premium reserve reserve reserve HK$’000 HK$’000 HK$’000 HK$’000 (Note (a)) (Note (b)) 425,259 445 2,135 17,502 – – – 23,351 – – – – – – – 23,351 – – – – 559 – – – (425,259) – 425,259 – – – (311,818) – – – – – – – – – 559 445 115,576 40,853 – – – (19) – – – – – – – (19) – – – – – – – – – – – – – – – – – – – – – – – – 559 445 115,576 40,834	Share options reserve HK$’000 12,794 – – – 10,869 (159) – – – – 23,504 – – – – – (1,528) – – – 21,976	Statutory reserve HK$’000 (Note (c)) – – – – – – – – – – – – – – – 2,879 – – – – 2,879	Special reserve HK$’000 (Note (d)) (23,496) – – – – – – – – – (23,496) – – – – – – – – – (23,496)	Share Attributable options to owners reserve Retained of the of a earnings Company subsidiary HK$’000 HK$’000 HK$’000 189,671 635,814 55,249 – 23,351 – (119,446) (119,446) – (119,446) (96,095) – – 10,869 – – 410 – – – – 311,818 – – 646 646 (646) – – – 382,689 551,644 54,603 – (19) – 38,696 38,696 – 38,696 38,677 – – – (6) (5,682) (2,803) – 1,528 – – 21,477 21,477 (21,477) – – – – – – 438,708 608,995 33,120	Minority interests HK$’000 277,293 11,117 (38,303) (27,186) – – – – – 14,820 264,927 (36) 19,843 19,807 236 2,803 – – 5,816 (38,332) 255,257	Total HK$’000 968,356
							34,468 (157,749)
							(123,281)
							10,869 410 – – – 14,820
							871,174 (55) 58,539
							58,484
							230 – – – 5,816 (38,332)
							897,372

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes:

(a) Capital contribution reserve represents accumulated effect of imputed interest on amount due to other related party.
(b) The contributed surplus reserve represents the difference between the nominal value of the shares of the subsidiaries acquired pursuant to the Group reorganisation in 1991 over the nominal value of the Company’s shares issued in exchange, and the transfers as mentioned in note (e) below.
(c) As stipulated by the rules and regulations in the People’s Republic of China (the “PRC”, for the purpose of this report does not include Hong Kong, Macau and Taiwan), the subsidiaries of the Company established in the PRC are required to appropriate 10% of their after-tax profit (after offsetting prior years’ losses) to a general reserve fund until the balance of the fund reaches 50% of their registered capital thereafter any further appropriation is optional and is determinable by the companies’ boards of directors.
(d) Special reserve represents the difference between the fair value and the carrying amount of the net assets attributable to the additional interest in a subsidiary being acquired from minority shareholders during the year ended 31 December 2008.
(e) A special resolution was passed by shareholders of the Company at the special general meeting of the Company held on 6 June 2008 and completed thereafter that an amount of approximately HK$425,259,000 standing to the credit of the share premium account of the Company as at 31 December 2007 be reduced, with the credit arising there from being transferred to the contributed surplus reserve of the Company. Upon the said transfer becoming effective, an amount of approximately HK$311,818,000 standing to the credit of the contributed surplus reserve of the Company has been applied to eliminate the accumulated losses of the Company as at 31 December 2007. The Company has complied with the requirements of section 46(2) of The Companies Act 1981 of Bermuda (as amended). Details of which were set out in the circular of the Company dated 9 May 2008.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Cash Flows

For the year ended 31 December 2009

OPERATING ACTIVITIES Profit (loss) before tax Adjustments for: Depreciation of property, plant and equipment Allowance for inventories Allowance for production work in progress Interest expenses (included in finance costs and cost of sales) Allowance for bad and doubtful debts, net Amortisation of intangible asset Share of loss of associates Loss on dilution of interest in a subsidiary Amortisation of prepaid lease payments Loss on disposal of property, plant and equipment Decrease (increase) in fair value of investment properties Changes in fair value of held-for-trading investments Interest income Interest income from entrusted loan receivables Gain on disposal of intangible asset Discount on acquisition of additional interest in a subsidiary Dividend income from held-for-trading investments Share-based payments expenses Impairment loss in respect of goodwill Operating cash flows before movements in working capital (Increase) decrease in inventories (Increase) decrease in production work in progress Decrease (increase) in amounts due from customers for contract work Decrease in finance lease receivables Increase in trade receivables (Increase) decrease in prepayments, deposits and other receivables Decrease (increase) in held-for-trading investments Increase in amounts due to customers for contract work Increase in trade payables Increase in other payables and accruals Increase in rental and management fee deposits received (Decrease) increase in income received in advance Decrease in security deposits received Cash generated from operations Dividend received from held-for-trading investments Income tax paid Interest paid NET CASH GENERATED FROM OPERATING ACTIVITIES	2009 HK$’000 71,552 8,328 6,368 4,811 73,404 3,309 633 287 165 148 21 (24,961) (10,436) (17,335) (5,686) (2,543) (2,154) (91) – – 105,820 (19,411) (936) 13,719 396,442 (24,271) (87,689) 70,684 1,182 24,852 4,823 59 (3,320) – 481,954 91 (2,410) (73,404) 406,231	2008 HK$’000 (156,209) 7,857 1,031 – 112,495 6,386 28,491 857 – 161 50 15,960 30,011 (5,190) (3,674) (104) – (3,118) 10,869 10,397 56,270 4,043 7,965 (13,549) 170,090 (7,314) 20,985 (85,275) 338 2,971 7,707 145 8,172 (17,954) 154,594 3,118 (848) (112,495) 44,369

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

INVESTING ACTIVITIES Proceeds from disposal of intangible asset, net of transaction costs Decrease (increase) in entrusted loan receivables Decrease in restricted bank deposits Interest received Decrease in pledged bank deposits Proceeds from disposal of property, plant and equipment Purchases of property, plant and equipment Investment in a convertible note receivable Acquisition of additional interest in a subsidiary Investment in available-for-sale investments Advances to a third party Acquisition of intangible asset Interest received from entrusted loan receivables Investment in an associate Prepaid lease payments Repayment from associates NET CASH GENERATED FROM (USED IN) INVESTING ACTIVITIES FINANCING ACTIVITIES Repayment of bank loans New bank loans raised Advance from an associate Capital contribution from a minority shareholder Proceeds from issue of shares of a subsidiary upon exercise of its share options Issue of shares from exercise of share options Repayment to related parties NET CASH USED IN FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR EFFECT OF FOREIGN EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS AT END OF THE YEAR, represented by bank balances and cash	2009 HK$’000 249,148 20,592 9,111 10,542 1,517 340 (98,750) (45,454) (9,949) (5,341) – – 5,686 – – – 137,442 (702,008) 309,091 20,874 5,816 65 – – (366,162) 177,511 195,381 (45) 372,847	2008 HK$’000 1,250 (52,378) 10,976 5,190 5,379 – (20,670) – – – (126,547) (548) 3,674 (21,084) (87) 1,053 (193,792) (440,820) 296,773 – 14,820 – 410 (455) (129,272) (278,695) 463,561 10,515 195,381

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Consolidated Financial Statements

For the year ended 31 December 2009

1. GENERAL

The Company is a public limited company incorporated in Bermuda as an exempted company with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). Its controlling shareholder, which is defined under the Rules Governing the Listing of Securities on the Stock Exchange as a person who is entitled to exercise or control the exercise of 30% or more of the voting power at general meetings of the issuer, is Shougang Holding (Hong Kong) Limited (“Shougang Holding”), a company incorporated in Hong Kong with limited liability. The addresses of the registered office and principal place of business of the Company are disclosed in the “Corporate Information” section to the annual report.

The Company is an investment holding company. The principal activities of its principal subsidiaries are set out in note 50.

The functional currency of the Company is Renminbi. The consolidated financial statements are presented in Hong Kong dollars for the convenience of the readers.

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

In the current year, the Group has applied a number of new and revised Standards, Amendments to Standards and Interpretations (“new and revised HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

Except as described below that affecting presentation and disclosure only, the adoption of the new and revised HKFRSs had no material effect on the consolidated financial statements of the Group for the current or prior accounting periods.

HKAS 1 (revised in 2007) “Presentation of Financial Statements”

HKAS 1 (revised in 2007) has introduced a number of terminology changes (including revised titles for the consolidated financial statements) and changes in the format and content of the consolidated financial statements.

HKFRS 8 Operating Segments

HKFRS 8 is a disclosure standard that has resulted in a redesignation of the Group’s reportable segments and changes in measurement of segment profit or loss, segment assets and segment liabilities (see note 8).

Improving Disclosures about Financial Instruments

(Amendments to HKFRS 7 “Financial Instruments: Disclosures”)

The amendments to HKFRS 7 expand the disclosures required in relation to fair value measurements in respect of financial instruments which are measured at fair value. The Group has not provided comparative information for the expanded disclosures in accordance with the transitional provision set out in the amendments.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group has not early applied the following new and revised Standards, Amendments to Standards or Interpretations that have been issued but are not yet effective.

HKFRSs (Amendments) Amendment to HKFRS 5 as part of Improvements to HKFRSs 2008[1] HKFRSs (Amendments) Improvements to HKFRSs 2009[2] HKAS 24 (Revised) Related Party Disclosures[6] HKAS 27 (Revised) Consolidated and Separate Financial Statements[1] HKAS 32 (Amendment) Classification of Rights Issues[4] HKAS 39 (Amendment) Eligible Hedged Items[1] HKFRS 1 (Amendment) Additional Exemptions for First-time Adopters[3] HKFRS 1 (Amendment) Limited Exemption from Comparative HKFRS 7 Disclosures for First-time Adopters[5] HKFRS 2 (Amendment) Group Cash-settled Share-based Payment Transactions[3] HKFRS 3 (Revised) Business Combinations[1] HKFRS 9 Financial Instruments[7] HK(IFRIC) – Int 14 (Amendment) Prepayments of a Minimum Funding Requirement[6] HK(IFRIC) – Int 17 Distributions of Non-cash Assets to Owners[1] HK(IFRIC) – Int 19 Extinguishing Financial Liabilities with Equity Instruments[5]

1 Effective for annual periods beginning on or after 1 July 2009.
2 Amendments that are effective for annual periods beginning on or after 1 July 2009 and 1 January 2010, as appropriate.
3 Effective for annual periods beginning on or after 1 January 2010.
4 Effective for annual periods beginning on or after 1 February 2010.
5 Effective for annual periods beginning on or after 1 July 2010.
6 Effective for annual periods beginning on or after 1 January 2011.
7 Effective for annual periods beginning on or after 1 January 2013.

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 a parent’s ownership interest in a subsidiary.

HKFRS 9 Financial Instruments introduces new requirements for the classification and measurement of financial assets and will be effective from 1 January 2013, with earlier application permitted. The Standard requires all recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement to be measured at either amortised cost or fair value. Specifically, debt investments that (i) are held within a business model whose objective is to collect the contractual cash flows and (ii) have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost. All other debt investments and equity investments are measured at fair value. The application of HKFRS 9 might affect the classification and measurement of the Group’s financial assets.

In addition, as part of Improvements to HKFRSs issued in 2009, HKAS 17 Leases has been amended in relation to the classification of leasehold land. The amendments will be effective from 1 January 2010, with earlier application permitted. Before the amendments to HKAS 17, leasees were required to classify leasehold land as operating leases and presented as prepaid lease payments in the consolidated statement of financial position. The amendments have removed such a requirement. Instead, the amendments require the classification of leasehold land to be based on the general principles set out in HKAS 17, that are based on the extent to which risks and rewards incidental to ownership of a leased asset lie with the lessor or the lessee. The application of the amendments to HKAS 17 might affect the classification and measurement of the Group’s leasehold land.

The directors of the Company (the “Directors”) anticipate that the application of the other new and revised Standards, Amendments to Standards or Interpretations will have no material impact on the consolidated financial statements.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards 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.

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

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 benefit from its activities.

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

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

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

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.

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 the 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.

Acquisition of additional interest in a subsidiary

Goodwill arising on acquisition of additional interest in a subsidiary represents the excess of the cost of the acquisition over the fair value of the net assets attributable to the additional interest in a subsidiary. If, after reassessment, the fair value of the net assets attributable to the additional interest in a subsidiary by the Group exceeds the cost of the acquisition, the excess is recognised immediately in profit and loss. The difference between the fair value and the carrying value of the underlying assets and liabilities attributable to the additional interest in a subsidiary is debited directly to special reserve.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Goodwill

Goodwill arising on an acquisition of a subsidiary, for which the agreement date is before 1 January 2005 represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of the relevant subsidiary, at the date of acquisition.

For previously capitalised goodwill arising on acquisition of a subsidiary, an associate or a jointly controlled entity for which the agreement date is 1 January 2005, the Group has discontinued amortisation from 1 January 2005 onwards, and such goodwill is tested for impairment annually, and whenever there is an indication that the cash generating unit (“CGU”) to which the goodwill relates may be impaired.

Goodwill arising on an acquisition of a business, 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.

Capitalised goodwill arising on an acquisition of a business is carried at cost less any accumulated impairment losses and is presented separately in the consolidated statement of financial position.

For the purposes of impairment testing, goodwill arising from an acquisition is allocated to each of the relevant CGUs, or groups of CGUs, that are expected to benefit from the synergies of the acquisition. A CGU 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 CGU to which goodwill has been allocated is tested for impairment before the end of that financial year. When the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss 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 loss for goodwill is recognised directly in profit or loss. An impairment loss for goodwill is not reversed in subsequent periods.

On disposal of the relevant CGU, the attributable amount of goodwill capitalised is included in the determination of the amount of profit or loss on disposal.

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. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

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 statement of financial position at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, less any identified impairment loss. 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.

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

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

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Revenue recognition

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

Interest income from the finance leasing business and other financial assets 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 finance lease business and other financial assets to that asset’s net carrying amount on initial recognition.

Revenue from sales of goods is recognised when goods are delivered and title has passed.

Distribution income for films and television programme is recognised when the films and/or television programme are delivered to the customers.

Training fee income is recognised over the period of the training course on a straight-line basis. Unearned training fee income received is recorded as income received in advance.

Rental income from property and equipment leasing is recognised on a straight-line basis over the relevant lease terms.

Royalty income from share of box office receipts is recognised when the digital motion pictures are exhibited using the digital cinema equipment sold by the Group and the right to receive certain percentage of the relevant box office receipts has been established.

Receipts from exhibition of digital motion pictures are recognised when the motion pictures are exhibited.

Technical service income and management fee income are recognised when services are provided.

Revenue from provision of assembly and integration services in connection with deployment of digital cinema equipments under Virtual Print Fee (“VPF”) Arrangement (details of which are set out in note 25) is recognised when the services have been rendered and the equipments are installed and ready for their intended use.

Dividend income from investments is recognised when the Group’s rights to receive payment have been established.

Deposits received from sale of goods or services to be provided prior to meeting the above criteria for revenue recognition are included in the consolidated statement of financial position under current liabilities.

Subcontracting revenue from computer graphic (“CG”) creation and production

Where the outcome of a subcontracting contract of CG creation and production can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the end of the reporting period, as measured by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs.

Where the outcome of a subcontracting contract cannot be estimated reliably, subcontracting revenue is recognised to the extent of contract costs incurred that it is probable to be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.

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

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Where contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is shown as amounts due to customers for contract work. Amounts received before the related work is performed are included in the consolidated statement of financial position, as a liability, as income received in advance. Amounts billed for work performed but not yet paid by the customer are included in the consolidated statement of financial position under trade receivables.

Property, plant and equipment

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

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

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

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 profit or loss in the period in which the item is derecognised.

If an item of property, plant and equipment becomes an investment of property because its use has charged as evidenced by end of owner-occupation, any excess of fair value over the carrying amount of that item at the date of transfer is recognised in other comprehensive income and accumulated in property revaluation reserve. On the subsequent sale or retirement of the asset, the revaluation reserve will be transferred directly to retained profit.

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 measured at their fair values using the fair value model. Gains or losses arising from changes in fair value of investment property are included in the profit or loss for the period in which they arise.

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 profit or loss in the period in which the item is derecognised.

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.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group as lessor

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

Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease.

The Group as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight-line basis.

Leasehold land and building

The land and building elements of a lease of land and building are considered separately for the purpose of 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, plant and equipment. To the extent the allocation of the lease payments can be made reliably, interest in leasehold land is accounted for as operating leases and amortised over the lease term on a straight-line basis except for those which are classified and accounted as investment properties under the fair value model.

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 the end of reporting period, monetary items denominated in foreign currencies are re-translated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not re-translated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s entities are translated into the presentation currency of the Group (i.e. Hong Kong dollars) at the rate of exchange prevailing at the end of the reporting period, and their income and expenses are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (the translation reserve).

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

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

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

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Government grants

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Government grants related to depreciable assets are recognised as income received in advance in the consolidated statement of financial position and transferred to profit or loss over the useful lives of the related assets. Other government grants are recognised as revenue over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable.

Retirement benefits costs

Payments to the state-managed retirement benefit schemes and Mandatory Provident Fund Scheme are charged as expenses when employees have rendered service entitling them to the contributions.

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 statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such asset and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in the 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 and associates, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

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

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax and tax law rates that have been enacted or substantially enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would flow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is recognised in the profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity respectively.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately and 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 (see accounting policy on impairment loss on financial assets below).

Gains or losses arising from derecognition of an intangible asset are measured at the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the profit or loss in the period when the asset is derecognised.

Research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally-generated intangible asset is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is charged to profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible asset is measured at cost less accumulated amortisation and accumulated impairment losses (if any), on the same basis as intangible assets acquired separately.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method.

Production work in progress

Production work in progress is stated at the lower of cost and net realisable value. Costs include all direct costs associated with the production of films or television programme. The cost associated with the production of films and programme would be transferred to inventories upon the completion of films or television programme.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statement of financial position when a group entity 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 (“FVTPL”)) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognised immediately in profit or loss.

Financial assets

The Group’s financial assets are classified into one of the three categories: including financial assets at FVTPL, loans and receivables and available-for-sale financial assets. 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 to the net carrying amount on initial recognition.

Interest income is recognised on an effective interest basis for debt instruments, other than financial assets classified at FVTPL, of which interest income is included in net gains or losses.

Financial Assets at fair value through profit or loss

Financial assets at FVTPL represents financial assets held-for-trading.

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.

Financial assets at FVTPL are measured at fair value, with changes in fair value arising from remeasurement 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.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including convertible loan receivable, entrusted loan receivables, trade receivables, other receivables, amount due from an associate, restricted bank deposits, pledged bank deposits and 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 of financial assets below).

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at FVTPL, loans and receivables or held-to-maturity investments.

For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, they are measured at cost less any identified impairment losses at the end of the reporting period (see accounting policy on impairment loss of financial assets below).

Impairment of financial assets

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

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

For loans and receivables, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial asset, such as trade 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 given and observable changes in national or local economic conditions that correlate with default on receivables.

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 original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets, with the exception of trade receivables, finance lease receivables and entrusted loan 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 receivable, finance lease receivable or entrusted loan 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.

Impairment losses on available-for-sale equity investments will not be reversed in profit or loss in subsequent periods. Any increase in fair value subsequent to impairment loss is recognised directly in other comprehensive income and accumulated in reserve.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

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 (including all fee 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 liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

Other financial liabilities

Other financial liabilities including trade payables, other payables, loan to an associate and secured bank borrowings are subsequently measured at amortised cost, using the effective interest rate method.

Equity instruments

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

Embedded derivatives

Derivatives embedded in non-derivative host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss.

Derivative financial instruments

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of the reporting period. The resulting gain or loss is recognised in profit or loss immediately.

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 in other comprehensive income 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.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Equity settled share-based payment transactions

Share options granted to the Directors and employees of the Group

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). For share options which are vested at the date of grant, the fair value of the share options granted is expensed immediately to profit or loss.

At the end of the reporting period, 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 profits or losses.

For share options granted on or before 7 November 2002 and share options granted after 7 November 2002 but vested before 1 January 2005, the Group did not recognise any financial effect of these share options in accordance with the transitional provisions of HKFRS 2.

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 profit or loss in respect of the value of options granted. Upon the exercise of the share options, the resulting shares issued 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. Options which lapse or are cancelled prior to their exercise date are deleted from the register of outstanding options.

Share options granted to other participants

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

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

At the end of the reporting period, 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 loss. If any such indication exists, the recoverable amount of the assets is estimated in order to determine the extent of the impairment loss, if any. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at revalued amount under another standard, in which case the impairment loss is treated as a revaluation decrease under that standard.

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, unless the relevant asset is carried at revalued amount under another standard, in which case the impairment loss is treated as a revaluation decrease under that standard.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

Key sources of estimation uncertainty

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

Provision for litigations

The management of the Group monitor any litigation against the Group closely. Provision for the litigations is made based on the estimates of the possible outcome and liability of the Group. As at 31 December 2009 and 2008, there is no foreseeable financial impact to the Group and no provision for litigations has been made. Details are set out in note 44.

Estimated impairment of finance lease receivables

When there is objective evidence of impairment loss, the Group takes into consideration the estimation of future cash flows and fair value of the pledged assets less cost to sell. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and higher of the present value of 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) or the fair value of the pledged assets less cost to sell. Where the actual future cash flows or the net selling price of the pledged assets are less than expected, a material impairment loss may arise.

As at 31 December 2009, the carrying amount of finance lease receivables is approximately HK$893,866,000 (2008: HK$1,290,308,000).

Write-down of production work in progress

The policy for write-down of production work in progress of the Group is based on the evaluation of the certainty in finalising the distribution/license agreements in the potential markets and on management’s judgement. Where the net realisable value is less than the cost, a material impairment loss may arise. The Group has made an allowance for production work in progress of HK$4,811,000 for the year ended 31 December 2009 (2008: Nil) as the management estimates the net realisable value for such production work in progress was nil as at 31 December 2009 (2008: HK$3,875,000).

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. FINANCIAL INSTRUMENTS

a. Categories of financial instruments

	2009	2008
	HK$’000	HK$’000
Financial assets
Financial assets at FVTPL
Held-for-trading investments	25,420	85,668
Loan and receivables (including cash and
cash equivalents)	708,955	355,172
Available-for-sale investments	37,477	–
Finance lease receivables	893,866	1,290,308
Financial liabilities
Amortised cost	1,101,444	1,458,214

b. Financial risk management objectives and polices

The Group’s major financial instruments include available-for-sale investments, convertible loan receivable, finance lease receivables, entrusted loan receivables, trade receivables, other receivables, held-for-trading investments, restricted bank deposits, pledged bank deposits and bank balances, amount due from an associate, secured bank borrowings, trade payables and other payables. The risks associated with these financial instruments include market risk (currency 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.

Market risk

(i) Currency risk

The normal operations and investments of the Group are mainly in Hong Kong and the People’s Republic of China (“the PRC”, for the purpose of this consolidated financial statement, does not include Hong Kong, Macau and Taiwan), with revenue and expenditure denominated in Hong Kong dollars, Renminbi and United States dollars which are primarily transacted using functional currencies of the respective group entities. The Group is mainly exposed to currency risk in relation to Hong Kong dollar (HK$) denominated secured bank borrowings as at 31 December 2009 and 2008. The Directors believe that the Group does not have significant foreign exchange exposures. However, if necessary, the Group will consider using forward exchange contracts to hedge against foreign currency exposures.

Sensitivity analysis

The sensitivity analysis below has been determined based on 5% (2008:5%) increase and decrease in Renminbi, the functional currency of the entity against HK$.

For a 5% (2008:5%) weakening of HK$ against Renminbi, there would be an increase in post-tax profit by HK6,384,000 (2008: post-tax loss would decrease by HK$6,531,000).

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) Interest rate risk

The Group is exposed to fair value interest rate risk in relation to its fixed-rate convertible loan receivable as at 31 December 2009 as disclosed in note 34, certain entrusted loan receivables for the year ended 31 December 2009 and 2008, as disclosed in note 28.

The Group is exposed to cash flow interest rate risk due to the fluctuation of market interest rate on certain other receivables as disclosed in note 25, variable-rate finance lease receivables as disclosed in note 27, certain entrusted loan receivable as disclosed in note 28, bank balances and secured variable-rate bank borrowings as disclosed in note 40. It is the Group’s policy to keep majority of its finance lease receivables, entrusted loan receivable and borrowings at floating rates of interest so as to minimise the fair value interest rate risk.

The Group’s cash flow interest rate risk is mainly concentrated on the fluctuation of the People’s Bank of China Renminbi Lending Rate (“PBC Rate”) arising from the Group’s variable-rate finance lease receivables, entrusted loan receivables, other receivable and secured bank borrowings. The Group currently does not use any derivative contracts to hedge its exposure to interest rate risk. However, the management will consider hedging significant interest rate exposure should the need arise.

Sensitivity analysis

The sensitivity analyses below has been determined based on the exposure to interest rates for variable-rate finance lease receivables, entrusted loan receivable, other receivables, secured bank borrowings and bank balances at the end of reporting period. The analysis is prepared assuming these outstanding balances at the end of the reporting period was outstanding for the whole year. A 50 basis points (2008: 100 basis points) increase or decrease is used which represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 50 basis points (2008: 100 basis points) higher/lower and all other variables were held constant, the Group’s post-tax profit for the year ended 31 December 2009 would increase/decrease by approximately HK$1,721,000 (2008: post-tax loss would increase/ decrease by approximately HK$8,921,000).

(iii) Other price risk

The Group is exposed to equity price risk through its investments in listed equity securities classified as held-for-trading investments. The management manages this exposure by maintaining a portfolio of investments with different risks. The Group’s equity price risk is mainly concentrated on equity instruments of entities operating in the PRC which are quoted in stock exchanges in the PRC and Hong Kong. The Group currently does not use any derivative contracts to hedge its exposure to other price risk. However, the management has appointed a team to monitor the price risk and will consider hedging the risk exposure should that needs arise.

Sensitivity analysis

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

If the prices of the respective equity instruments had been 10% (2008: 10%) higher/lower, posttax profit for the year ended 31 December 2009 would increase/decrease by approximately HK$2,123,000 (2008: post-tax loss would decrease/increase by approximately HK$7,153,000) as a result of the changes in fair value of held-for-trading investments.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Credit risk

As at 31 December 2009 and 2008, 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 arises from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position.

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 the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the Directors consider that the Group’s credit risk is significantly reduced.

The Group’s credit risk is also attributable to convertible loan receivable due from a third party as disclosed in note 34. The management of the Group reviews the recoverability of these amounts at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regards, the Directors consider that the Group’s credit risk is significantly reduced. Furthermore, the Group received approximately HK$113.6 million from the settlement of part of the convertible loan receivable subsequent to the end of the reporting period.

Before accepting any new finance lease and entrusted loan borrower, the Group assesses the credit quality of each potential finance lease or entrusted loan borrower and defined limits for each finance lease borrower or entrusted loan borrower. The Group also demands certain finance lease borrowers to place security deposits with the Group at the time the finance lease arrangement is entered into. In addition, the Group has reviewed the repayment history of finance lease payments from each finance lease borrower or repayment from each entrusted loan borrower with reference to the repayment schedule from the date of finance lease or entrusted loan was initially granted up to the reporting date to determine the recoverability of a finance lease receivable and entrusted loan receivable.

The credit risk on restricted bank deposits, pledged bank deposits and bank balances is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.

The Group’s concentration of credit risk by geographical locations is mainly in the PRC, which accounted for 72% (2008: 81%) of the total trade receivables as at 31 December 2009, 100% (2008: 100%) of the financial lease receivables as at 31 December 2009 and 100% (2008: 100%) of the entrusted loan receivables as at 31 December 2009.

The Group has concentration of credit risk on its trade receivables as 26% (2008: 8%) and 62% (2008: 33%) of the total trade receivables was due from the Group’s largest customer and the five largest customers, respectively. The customers are mainly engaged in the media business.

The Group also has concentration of credit risk from finance leasing business as 35% (2008: 35%) and 94% (2008: 72%) of the total finance lease receivables was due from the Group’s largest finance lease borrower and the five largest finance lease borrowers, respectively. The Group’s five largest finance lease borrowers are spread across diverse industries such as airline and utility industries. Of the five finance lease borrowers, four of them are listed or group companies of listed companies located in the PRC. Over 94% (2008: 70%) of the five largest finance lease customers have good repayment history with no record of late payment.

The Group also has concentration of credit risk from entrusted loan business as 89% (2008: 44%) and 100% (2008: 90%) of the total entrusted loan receivables was due from the Group’s largest entrusted loan borrower and two entrusted loan borrowers respectively. The customers are from different industry sectors.

The Group has a concentration of credit risk arising from the convertible loan receivable due from a single counterparty as disclosed in note 34.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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. The management monitors the utilisation of borrowings from time to time.

The following table details the Group’s remaining contractual maturity for its financial liabilities based on the agreed repayments term. 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. To the extent that interest flows are floating rate, the undiscounted cash flows are estimated by using interest rate at the end of reporting period.

Liquidity table

Weighted average effective interest rate % Non-derivative financial liabilities Trade payables – Other payables – Security deposits received – Rental and management fee deposits received – Amount due to an associate – Secured bank borrowings 7 Weighted average effective interest rate % Non-derivative financial liabilities Trade payables – Other payables – Security deposits received – Rental and management fee deposits received – Secured bank borrowings 8	Less than 1 month HK$’000 13,273 2,599 3,977 – – 1,914 21,763 Less than 1 month HK$’000 4,929 8,480 – – 20,649 34,058	1 – 3 months HK$’000 17,880 2,634 45,455 – – 257,280 323,249 1 – 3 months HK$’000 1,639 14,208 – – 97,711 113,558	3 months to 1 year HK$’000 1,816 16,573 736 1,248 20,874 293,058 334,305 3 months to 1 year HK$’000 1,549 8,756 – 1,189 317,229 328,723	1 – 5 years HK$’000 – – 10,000 – – 417,628 427,628 1 – 5 years HK$’000 – – 60,168 – 997,239 1,057,407	Over 5 years HK$’000 – – – – – 51,984 51,984 Over 5 years HK$’000 – – – – 52,976 52,976	Total undiscounted cash flows as at 31.12.2009 HK$’000 32,969 21,806 60,168 1,248 20,874 1,021,864 1,158,929 Total undiscounted cash flows as at 31.12.2008 HK$’000 8,117 31,444 60,168 1,189 1,485,804 1,586,722	Carrying amount at 31.12.2009 HK$’000 32,969 21,806 60,168 1,248 20,874 964,379
							1,101,444

							Carrying amount at 31.12.2008 HK$’000 8,117 31,444 60,168 1,189 1,357,296
							1,458,214

The amounts scheduled above for variable interest rate instruments for non-derivative financial liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

c. Fair value

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

the fair value of financial assets with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices; and
the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

The Directors consider that the carrying amounts of financial assets and financial liabilities in the consolidated financial statements approximate their fair values.

Fair value measurements recognised in the statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

		2009
	Level 1	Level 2	Level 3	Total
	HK$’000	HK$’000	HK$’000	HK$’000
Financial assets at FVTPL
Held-for-trading investments	25,420	–	–	25,420
Available-for-sale investments	–	–	32,136	32,136

There were no transfers between Level 1 and 2 in the current year.

There were no transfer into or out of Level 3 and there was no gain or loss recognised in profit or loss or other comprehensive income for the year.

6. CAPITAL RISK MANAGEMENT

The Group’s objectives to manage its capital are to ensure that entities of the Group will be able to continue as a going concern while maximising the return to shareholders, to support the Group’s stability and growth, and to strengthening the Group’s financial management capability. The Group’s overall strategy remains unchanged from the prior year.

The capital structure of the Group consists of net debt, which includes borrowings disclosed in note 40 net of restricted bank deposits, pledged bank deposits, bank balances and cash, and total equity.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Directors review the capital structure regularly and manage its capital structure to ensure an optimal capital structure and shareholders’ returns, taking into consideration the future capital requirements of the Group, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities. The Directors monitor capital mainly using net debt to total equity ratio and current ratio. These ratios as at 31 December 2009 and 2008 were as follows:

Net debt(1) Total equity(2) Net debt to total equity ratio (%) Current assets Current liabilities Current ratio (%)	2009 HK$’000 532,618 897,372 59 1,184,004 766,220 155	2008 HK$’000 1,092,373 871,174
		125

		860,257 539,223
		160

The Directors considered that the Group maintained healthy capital as at 31 December 2009 as the Group had excess of current assets over current liabilities.

Notes:

(1) Net debt equals borrowings less restricted bank deposits, pledged bank deposits and bank balances and cash.

(2) Total equity equals to all capital and reserves of the Group.

7. REVENUE

An analysis of the Group’s revenue is as follows:

Sales of goods Finance lease income Revenue from contracts for CG creation and production Training fee Technical service income Property leasing and management fee income Service income from deployment of digital cinema network Films and television programme distribution income Receipts from exhibition of digital motion pictures Rental income from equipment leasing Royalty income from share of box office receipts	2009 HK$’000 286,932 102,929 55,558 19,031 13,526 6,318 4,703 2,177 1,454 1,343 570 494,541	2008 HK$’000 51,984 128,467 42,542 14,420 2,652 6,702 – 52,832 3,024 40 5,518
		308,181

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. SEGMENT INFORMATION

The Group has adopted HKFRS 8 “Operating Segments” with effect from 1 January 2009. HKFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker (“CODM”) in order to allocate resources to segments and to assess its performance. In contrast, the predecessor Standard (HKAS 14 “Segment Reporting”) required an entity to identify two sets of segments (business and geographical), using a risks and rewards approach, with the entity’s “system of internal financial reporting to key management personnel” serving only as the starting point for the identification of such segments.

In prior years, segment information reported externally was analysed on five operating divisions (i.e. property leasing and building management services, digital content distribution and exhibitions, CG creation and films and television programme production, CG training courses and finance leasing). However, information reported to the CODM, for the purposes of resources allocation and assessment of performance is analysed further on each subgroup level. The Group’s operating and reportable segments under HKFRS 8 are therefore classified into eight operating divisions as follows:

Property leasing and building management services
Digital content distribution and exhibitions – (i) sales of digital cinema equipments; (ii) provision of technical service; (iii) leasing of digital cinema equipments; and (iv) holding of contractual rights to share box office receipts (note 23)
Deployment of digital cinema network in Asia (a new division in 2009) – provision of assembly and integration services
CG creation and production – CG production and exhibition of motion pictures
CG training courses – provision of CG and animation training
Films and television programme production – distribution of films and television programme
Finance leasing – leasing income
Assets management – asset management services income (No income derived in 2009 and 2008)

As a result, following the adoption of HKFRS 8, the identification of the Group’s reportable segments has changed.

Segment revenue and results

Information regarding these segments is reported below. Amounts reported for the prior year have been restated to confirm the requirement of HKFRS 8.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the year ended 31 December 2009

Property Digital Deployment leasing and content of digital building distribution cinema management and network services exhibitions in Asia HK$’000 HK$’000 HK$’000 Segment revenue from external customers 6,318 302,371 4,703 Segment result 30,108 46,225 845 Investment income Central administration costs Changes in fair value of held-for-trading investments Finance costs Share of loss of an associate Loss on dilution of interest in a subsidiary Profit before tax	CG creation and production HK$’000 57,012 739	Films and CG television training programme courses production HK$’000 HK$’000 19,031 2,177 5,117 (14,199)	Finance Assets leasing management Consolidated HK$’000 HK$’000 HK$’000 102,929 – 494,541 28,863 5,821 103,519 5,659 (43,971) 10,436 (3,639) (287) (165) 71,552	Finance Assets leasing management Consolidated HK$’000 HK$’000 HK$’000 102,929 – 494,541 28,863 5,821 103,519 5,659 (43,971) 10,436 (3,639) (287) (165) 71,552

				103,519 5,659 (43,971) 10,436 (3,639) (287) (165)
				71,552

For the year ended 31 December 2008

Segment revenue from external customers Segment result Investment income Central administration costs Changes in fair value of held-for-trading investments Finance costs Share of loss of an associate Loss before tax	Property leasing and building management services HK$’000 6,702 (10,883)	Digital content distribution and exhibitions HK$’000 60,194 (77,108)	CG creation and production HK$’000 45,566 5,121	CG training courses HK$’000 14,420 2,510	Films and television programme production HK$’000 52,832 (4,346)	Finance leasing HK$’000 128,467 20,369	Assets management HK$’000 – (7,427)	Consolidated HK$’000 308,181

								(71,764) 5,751 (53,282) (30,011) (6,046) (857)
								(156,209)

The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 3. Segment result represents the profit earned or loss incurred by each segment without allocation of investment income, central administration costs, changes in fair value of held-for-trading investments, finance costs, share of loss of an associate and loss on dilution of interest in a subsidiary. This is the measure reported to the CODM of the Company for the purposes of resources allocation and assessment of segment performance.

All of the segment revenue reported above is from external customers.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Segment assets and liabilities

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

At 31 December 2009

	Property	Digital	Deployment
	leasing and	content	of digital	CG		Films and
	building	distribution	cinema	creation	CG	television
	management	and	network	and	training	programme	Finance	Assets
	services	exhibitions	in Asia	production	courses	production	leasing	management	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Assets
Segment assets	157,627	172,045	26,063	192,276	22,694	4,324	1,168,536	194,805	1,938,370
Interests in associates									21,569
Held-for-trading investments									25,420
Convertible loan receivable									119,255
Corporate assets									3,461
Consolidated total assets									2,108,075
Liabilities
Segment liabilities	2,867	85,814	–	15,874	11,238	3,956	880,726	978	1,001,453
Amount due to an associate									20,874
Tax liabilities									19,526
Secured bank borrowings									163,151
Corporate liabilities									5,699
Consolidated total liabilities									1,210,703

At 31 December 2008

	Property	Digital
	leasing and	content			Firms and
	building	distribution	CG creation	CG	television
	management	and	and	training	programme	Finance	Assets
	services	exhibitions	production	courses	production	leasing	management	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Assets
Segment assets	146,225	374,957	23,883	4,267	27,746	1,577,527	144,307	2,298,912
Interests in associates								21,856
Held-for-trading investments								85,668
Corporate assets								11,863
Consolidated total assets								2,418,299
Liabilities
Segment liabilities	3,194	32,253	16,921	4,864	12,048	1,278,449	6,329	1,354,058
Secured bank borrowings								171,199
Tax liabilities								9,506
Corporate liabilities								12,362
Consolidated total liabilities								1,547,125

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the purpose of monitoring segment performances and allocating resources between segments:

all assets are allocated to reportable segments other than interests in associates, convertible loan receivable, held-for-trading investments and corporate assets.
all liabilities are allocated to reportable segments other than tax liabilities, secured bank borrowings and corporate liabilities.

Other segment information

For the year ended 31 December 2009

	Property	Digital	Deployment
	leasing and	content	of digital	CG		Films and
	building	distribution	cinema	creation	CG	television
	management	and	network	and	training	programme	Finance	Assets
	services	exhibitions	in Asia	production	courses	production	leasing	management	Unallocated	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Amount included in the measure
of segment profit or loss or
segment assets:
Additions to non-current
assets_(Note)_	–	2,462	–	93,370	2,849	6	–	39	24	98,750
Depreciation of property,
plant and equipment	14	1,749	3	2,532	1,383	292	408	964	983	8,328
Reversal of doubtful debts	–	–	–	(227)	–	–	–	–	–	(227)
Allowance for bad and
doubtful debts	–	–	–	–	–	3,536	–	–	–	3,536
Allowance for inventories	–	3,581	–	–	–	2,787	–	–	–	6,368
Allowance for production
work in progress	–	–	–	–	–	4,811	–	–	–	4,811
Amortisation of intangible asset
(included in cost of sales)	–	633	–	–	–	–	–	–	–	633
Amortisation of prepaid
lease payments	23	–	–	125	–	–	–	–	–	148
Discount on acquisition of additional
interest in a subsidiary	–	–	–	–	–	–	2,154	–	–	2,154
Gain on disposal of
intangible asset	–	2,543	–	–	–	–	–	–	–	2,543
Loss (gain) on disposal of property,
plant and equipment	–	–	–	24	–	–	–	–	(3)	21
Increase in fair value of
investment properties	24,961	–	–	–	–	–	–	–	–	24,961
Interest income	–	3,417	–	359	21	8	447	10,562	5,648	20,462

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the year ended 31 December 2008

	Property	Digital
	leasing and	content			Films and
	building	distribution	CG creation	CG	television
	management	and	and	training	programme	Finance	Assets
	services	exhibitions	production	courses	production	leasing	management	Unallocated	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Amount included in the
measure of segment
profit or loss or
segment assets:
Additions to non-current
assets_(Note)_	–	39,345	17,750	1,453	12	10	29	527	59,126
Other expense_(note 11)_	–	22,202	–	–	–	–	–	–	22,202
Depreciation of property,
plant and equipment	21	1,442	2,475	736	718	619	979	867	7,857
Allowance for bad and
doubtful debts	–	–	–	386	6,000	–	–	–	6,386
Allowance for inventories	–	1,031	–	–	–	–	–	–	1,031
Amortisation of intangible
asset (included in
cost of sales)	–	28,491	–	–	–	–	–	–	28,491
Amortisation of prepaid
lease payments	–	–	125	–	–	–	–	36	161
Gain on disposal of
intangible asset	–	104	–	–	–	–	–	–	104
Impairment loss in respect
of goodwill	–	10,397	–	–	–	–	–	–	10,397
Loss on disposal of property,
plant and equipment	–	–	40	–	10	–	–	–	50
Decrease in fair value of
investment properties	15,960	–	–	–	–	–	–	–	15,960
Interest income	–	2,078	136	6	15	1,080	1,875	–	5,190

Geographical information

The Group’s reportable segments operate in five main geographical areas, namely the PRC, the United States, Europe, Hong Kong and other regions. The head office of the Group, deployment of digital cinema in Asia division, assets management and property leasing and building management services are located in Hong Kong. The Group’s CG creation and production centres, CG training facilities, film and television programme production centres and finance leasing are located in the PRC. Customers of the Group’s digital content distribution and exhibitions business are mainly located in the PRC, the United States and other regions.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group’s revenue by geographical market based on geographical location of customers, irrespective of the origin of the goods, and information about its non-current assets by geographical location of the assets are detailed below:

The PRC The United States Europe Hong Kong Other regions_(note 2)_	Revenue from external customers 2009 2008 HK$’000 HK$’000 367,444 236,822 48,288 36,434 17,716 12,076 20,207 3,330 40,886 19,519 494,541 308,181	Non-current assets(note 1) 2009 2008 HK$’000 HK$’000 199,414 358,524 243 245 – – 153,187 128,840 3,036 2,659 355,880 490,268	Non-current assets(note 1) 2009 2008 HK$’000 HK$’000 199,414 358,524 243 245 – – 153,187 128,840 3,036 2,659 355,880 490,268
			490,268

Note:

Non-current assets exclude available-for-sale investments, interests in associates, other receivables finance lease receivables, entrusted loan receivable, restricted bank deposits, pledged bank deposit and advances.
Other regions includes Singapore and Korea which individually account for less than 10% of the Group’s revenue from external customers and the Group’s non-current assets.

Information about major customers

Revenue from a customer contributing over 10% of the total revenue of the Group for the year ended 31 December 2009 is approximately HK$50,899,000 under reportable segment of digital content distribution and exhibitions. For the year ended 31 December 2008, no customer contributed over 10% of the total revenue of the Group.

9. OTHER INCOME

Interest income from loans and receivables Dividend income from held-for-trading investments Gain on disposal of intangible assets_(Note) Imputed interest income derived from deferred consideration of disposal of intangible asset(note 23)_ Others	2009 HK$’000 17,335 91 2,543 3,127 3,871 26,967	2008 HK$’000 5,190 3,118 – – 3,727 12,035

Note: The intangible asset was disposed to China Film Group Corporation (“CFGC”), the majority shareholder of an associate of the Group, details of which are set out in note 23.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. FINANCE COSTS

Interest on bank and other borrowings wholly repayable within five years Interest on bank and other borrowings not wholly repayable within five years Other finance costs	2009 HK$’000 1,755 1,884 – 3,639	2008 HK$’000 5,047 335 664
		6,046

Included in cost of sales is interest on bank borrowings wholly repayable within five years amounting to HK$69,765,000 (2008: HK$106,449,000) under finance leasing segment.

11. OTHER EXPENSE

Other expense for the year ended 31 December 2008 represented a one-off payment to CFGC for the acquisition of certain of its film distribution rights in the PRC.

12. DISCOUNT ON ACQUISITION OF ADDITIONAL INTEREST IN A SUBSIDIARY

On 20 August 2008, the Group entered into a conditional agreement with the minority shareholder of South China International Leasing Co. Ltd. (“South China Leasing”), a then 80% indirect owned subsidiary of the Company, pursuant to which the minority shareholder agreed to transfer its 20% equity interest in the registered capital of South China Leasing to the Group for a consideration of RMB31,755,150 (equivalent to approximately HK$36,085,000). Details of this acquisition are set out in the circular of the Company dated 3 September 2008.

This acquisition was completed in April 2009 upon receiving the approval by the appropriate authority in the PRC and South China Leasing became an indirect wholly-owned subsidiary of the Company. The advance paid and direct transaction costs incurred in relation to this acquisition of approximately HK$26,229,000 as at 31 December 2008 (note 26) formed part of the consideration thereafter and the Group paid the remaining consideration of approximately HK$9,949,000 to the minority shareholder during the year ended 31 December 2009.

The Group has ascertained the fair value of the net assets of South China Leasing in relation to the acquisition of additional interest in South China Leasing at the date of completion and concluded that the fair values of assets and liabilities of South China Leasing at that time did not have significant difference from their respective carry amounts. Accordingly, discount on acquisition of additional interest in South China Leasing of approximately HK$2,154,000 arose, which represented the excess of the Group’s additional interest in the fair value of the net assets of South China Leasing over the consideration paid at the date of completion.

13. LOSS ON DILUTION OF INTERESTS IN A SUBSIDIARY

The amount for the year ended 31 December 2009 represents loss on dilution of the Group’s interest in GDC Technology Limited (“GDC Technology”), a subsidiary of the Company, upon exercise of share options of GDC Technology during the year.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. INCOME TAX EXPENSE

The income tax expense comprises: Current tax: Hong Kong Provision for the year Under(over)provision in prior year PRC Enterprise Income Tax (“EIT”) Provision for the year Overprovision in prior year Deferred taxation_(note 41)_: Current year	2009 HK$’000 137 31 168 12,263 (1) 12,262 583 13,013	2008 HK$’000 63 (431) (368) 4,401 (2,246) 2,155 (247) 1,540

On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2009 which reduced corporate profits tax rate from 17.5% to 16.5% effective from the year of assessment 2008/2009. Therefore, Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profit for both years.

Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the EIT rate of certain subsidiaries of the Group operating in the PRC was either reduced from 33% to 25% or was increased from 15% to 25% progressively from 1 January 2008 onwards. For the year ended 31 December 2009, the relevant tax rates for the Group’s subsidiaries in the PRC ranged from 20% to 25% (2008: 18% to 25%).

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

No provision for income tax in Singapore and the United States has been made in the consolidated statement of comprehensive income for both years as the Group had no assessable profit arising in these jurisdictions.

During the year ended 31 December 2008, a PRC subsidiary was granted two years tax exemption for the financial years ended 2007 and 2008, followed by a 50% reduction for the financial years ended 2009, 2010 and 2011. A provision for PRC EIT of approximately HK$2,246,000 made in 2007 was therefore reversed in the consolidated statement of comprehensive income.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The income tax expense for the year can be reconciled to the profit (loss) before tax in the consolidated statement of comprehensive income as follows:

Profit (loss) before tax Tax calculated at PRC EIT rate of 25% Tax effect on share of result of associates Tax effect of expenses not deductible for tax purposes Tax effect of income not taxable for tax purposes Under(over)provision in prior year Tax effect of deferred tax assets not recognised Tax effect of utilisation of deferred tax assets previously not recognised Utilisation of temporary differences arising from unrealised profits resulting from intra-group transactions previously not recognised Effect of different tax rates of subsidiaries operating in other jurisdictions Effect of tax exemptions granted to a subsidiary in the PRC Decrease in opening deferred tax liabilities resulting from a decrease in applicable tax rate Others Income tax expense for the year	2009 HK$’000 71,552 17,888 72 11,829 (5,695) 30 14,046 (6,979) (3,808) (3,841) (7,600) – (2,929) 13,013	2008 HK$’000 (156,209) (39,052) 214 18,449 (920) (2,677) 15,951 (317) (423) 13,205 (1,618) (66) (1,206) 1,540

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. PROFIT (LOSS) FOR THE YEAR

Profit (loss) for the year has been arrived at after charging: Staff costs, including Directors’ remuneration_(note 16)_: – Salaries, wages and other benefits – Retirement benefit scheme contributions – Share-based payments Total staff costs Less: amounts included in contracts cost Allowance for doubtful debts Allowance for inventories Allowance for production work in progress Amortisation of intangible asset (included in cost of sales) Amortisation of prepaid lease payments Auditor’s remuneration Cost of inventories recognised as an expense Contract costs recognised as an expense Depreciation Less: amounts included in contracts cost government grants Impairment loss in respect of goodwill Loss on disposal of property, plant and equipment Research and development costs recognised as an expense and after crediting: Gain on disposal of intangible asset Exchange gain, net Reversal of allowance for doubtful debts Gross rent from investment properties Less: direct operating expenses from investment properties that generated rental income during the year	2009 HK$’000 114,446 3,389 – 117,835 (21,095) 96,740 3,536 6,368 4,811 633 148 1,416 180,015 49,711 13,486 (5,158) – 8,328 – 21 8,043 2,543 1,429 227 6,318 (684) 5,634	2008 HK$’000 94,028 2,905 10,869 107,802 (10,526) 97,276 6,386 1,031 – 28,491 161 3,433 35,574 28,953 10,329 (1,904) (568) 7,857 10,397 50 2,843 104 406 – 6,702 (580) 6,122

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

(a) Directors’ emoluments

The emoluments paid or payable to each of the 9 (2008: 9) Directors were as follows:

2009

Fees Other emoluments Salaries and other benefits Retirement benefit scheme contributions Total emoluments 2008 Fees Other emoluments Salaries and other benefits Retirement benefit scheme contributions Share-based payments Total emoluments	Wang Qinghai HK$’000 150 – – 150 Wang Qinghai HK$’000 150 – – – 150	Cao Zhong HK$’000 – 2,100 12 2,112 Cao Zhong HK$’000 – 1,950 12 2,979 4,941	Chen Zheng HK$’000 – 1,680 72 1,752 Chen Zheng HK$’000 – 1,560 72 1,813 3,445	Wang Tian HK$’000 – 1,680 72 1,752 Wang Tian HK$’000 – 1,560 72 1,555 3,187	Leung Yuan Shun Sang, Wenxin Tony HK$’000 HK$’000 – 190 1,680 – 72 – 1,752 190 Leung Yuan Shun Sang, Wenxin Tony HK$’000 HK$’000 – 190 1,560 – 72 – 1,555 2,073 3,187 2,263	Tam King Ching, Kenny HK$’000 240 – – 240 Tam King Ching, Kenny HK$’000 240 – – 298 538	Zhou Jianhong HK$’000 240 – – 240 Zhou Jianhong HK$’000 240 – – 298 538	Yip Kin Man, Raymond HK$’000 240 – – 240 Yip Kin Man, Raymond HK$’000 240 – – 298 538	Total HK$’000 1,060 7,140 228
									8,428

									Total HK$’000 1,060 6,630 228 10,869
									18,787

No Director of the Company waived any emoluments in both years.

For the year ended 31 December 2009, Mr. Cao Zhong waived emoluments of approximately HK$1,800,000 (2008: HK$604,000) in relation to his service to Global Digital Creations Holdings Limited.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Employees’ Emoluments

Of the five individuals with the highest emoluments in the Group, four (2008: four) are the Directors whose emoluments are included in the disclosures above. The emoluments of the remaining one (2008: one) individual are as follows:

Salaries and other benefits Retirement benefits schemes contributions	2009 HK$’000 2,769 12 2,781	2008 HK$’000 2,680 12
		2,692

17. EARNINGS (LOSS) PER SHARE

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

Earnings (loss) Earnings (loss) for the purposes of basic and diluted earnings (loss) per share (Profit (loss) for the year attributable to owners of the Company) Number of shares Weighted average number of ordinary shares for the purposes of basic and diluted earnings (loss) per share	2009 HK$’000 38,696 2009 ’000 1,151,392	2008 HK$’000 (119,446)

		2008 ’000 1,151,206

The computation of diluted earnings per share for the year ended 31 December 2009 does not assume the exercise of the Company’s share options as the exercise prices of the share options are higher than the average market price of the shares of the Company for the year.

The computation of diluted loss per share for the year ended 31 December 2008 did not assume the exercise of the Company’s share options since their exercise would result in a decrease in the loss per share for that year.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

18. PROPERTY, PLANT AND EQUIPMENT

COST At 1 January 2008 Exchange realignment Additions Disposals At 31 December 2008 Additions Disposals Reclassified to investment properties At 31 December 2009 DEPRECIATION AND IMPAIRMENT At 1 January 2008 Exchange realignment Provided for the year Eliminated on disposals At 31 December 2008 Provided for the year Eliminated on disposals Eliminated on reclassification to investment properties At 31 December 2009 CARRYING VALUES At 31 December 2009 At 31 December 2008	Leasehold Buildings improvements HK$’000 HK$’000 28,974 7,439 1,755 1,641 – 1,825 – (104) 30,729 10,801 – 2,938 – – (1,043) – 29,686 13,739 419 4,142 12 1,543 694 1,572 – (104) 1,125 7,153 694 2,656 – – (350) – 1,469 9,809 28,217 3,930 29,604 3,648	Computer equipment HK$’000 22,174 1,415 10,134 (13,898) 19,825 11,862 (3,264) – 28,423 13,883 1,038 5,593 (13,898) 6,616 7,888 (2,885) – 11,619 16,804 13,209	Other Construction fixed in assets progress HK$’000 HK$’000 12,959 1,519 543 96 1,343 7,368 (278) – 14,567 8,983 1,473 82,477 (53) – – – 15,987 91,460 6,987 – 272 – 2,470 – (228) – 9,501 – 2,248 – (47) – – – 11,702 – 4,285 91,460 5,066 8,983	Total HK$’000 73,065 5,450 20,670 (14,280)
				84,905 98,750 (3,317) (1,043)
				179,295
				25,431 2,865 10,329 (14,230)
				24,395 13,486 (2,932) (350)
				34,599
				144,696

				60,510

Depreciation is provided to write off the cost of items of property, plant and equipment other than the construction in progress over their estimated useful lives and after taking into account their estimated residual value, using the straight-line method, at the following rates per annum:

Buildings Over the shorter of term of the lease of the land or 50 years Leasehold improvements Over the shorter of term of the lease or 5 years Computer equipment 33[1] /3% Other fixed assets 20% – 30%

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The construction in progress represents a building in the PRC for the Group’s own use in the course of construction.

At 31 December 2008, the Group has pledged buildings with a carrying value of approximately HK$29,604,000 to secure bank borrowings of the Group.

The related bank borrowings have been fully repaid during the year ended 31 December 2009.

At 31 December 2009, all of the Group’s construction in progress have been pledged to secure banking facility granted to the Group (see note 40).

19. PREPAID LEASE PAYMENTS

COST At 1 January Exchange realignment Addition during the year Reclassified to investment properties_(note 20) At 31 December AMORTISATION At 1 January Exchange realignment Charge for the year Eliminated on reclassification to investment properties(note 20)_ At 31 December CARRYING VALUE At 31 December The Group’s prepaid lease payments comprise: Long-term leasehold land in Hong Kong Medium-term leasehold land in the PRC Analysed for reporting purposes as: Current Non-current	2009 HK$’000 8,346 – – (2,100) 6,246 678 – 148 (504) 322 5,924 – 5,924 5,924 125 5,799 5,924	2008 HK$’000 7,894 365 87 –
		8,346
		518 4 156 –
		678
		7,668

		1,619 6,049
		7,668

		156 7,512
		7,668

As at 31 December 2009, all of Group’s prepaid lease payments have been pledged to secure banking facilities granted to the Group (see note 40).

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

20. INVESTMENT PROPERTIES

FAIR VALUE At 1 January 2008 Net decrease in fair value recognised in profit or loss At 31 December 2008 Reclassified from property, plant and equipment_(note 18) Reclassified from prepaid lease payment(note 19)_ Net increase in fair value recognised in profit or loss At 31 December 2009	HK$’000 141,160 (15,960)
	125,200 693 1,596 24,961
	152,450

Note: During the year ended 31 December 2009, property, plant and equipment and prepaid lease payments with a carrying amount of approximately HK$2,289,000 which approximated to its fair value at the date of transfer, were reclassified to investment properties. The property was used by the Group as directors’ quarters for the year ended 31 December 2008. During the year ended 31 December 2009, the property was leased to an independent third party and therefore reclassified to investment properties.

The fair value of the Group’s investment properties at 31 December 2009 and 2008 have been arrived at on the basis of a valuation carried out on that date by AA Property Services Limited, an independent qualified professional valuer not connected with the Group. AA Property Services Limited is a registered firm of the Hong Kong Institute of Surveyors, and has appropriate qualifications and experiences. The valuation was arrived at by reference to market evidence of transaction prices for similar properties in the same location and conditions and where appropriate by capitalisation of rental income from properties.

All of the Group’s property interests held under operating leases to earn rentals are measured using the fair value model and are classified and accounted for as investment properties.

At 31 December, 2009, all of the Group’s investment properties are located in Hong Kong and held under long leases with the lease terms of 52 to 126 years. All of the Group’s investment properties have been pledged to banks to secure general banking facilities granted to the Group.

21. GOODWILL

COST At 31 December 2008 and 2009 IMPAIRMENT At 31 December 2008 and 2009 CARRYING VALUE At 31 December 2008 and 2009	HK$’000 254,789
	201,854
	52,935

Particulars regarding impairment testing on goodwill are disclosed in note 22.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

22. IMPAIRMENT TESTING ON GOODWILL

For the purposes of impairment testing, goodwill set out in note 21 has been allocated to CGUs represented by finance leasing division.

The recoverable amount of the CGU arising from finance leasing division has been determined on the basis of value in use calculations. The recoverable amount is based on certain key assumptions. For the purpose of impairment testing, the value in use calculations use cash flow projections based on financial budgets approved by management covering a 5-year period, and discount rates of 9% (2008: 9%) for finance leasing division. Cash flow projections during the budget period for the CGU are based on the expected revenue and gross margins during the budget period. Budgeted revenue and gross margins have been determined based on past performance and management’s expectations for the market development. Management believes that any reasonably possible change in any of these assumptions would not cause the carrying amount of the above CGU to exceed the recoverable amount of the above CGU.

23. INTANGIBLE ASSET

COST At 1 January 2008 Exchange realignment Acquisition Disposal At 31 December 2008 Disposal At 31 December 2009 AMORTISATION At 1 January 2008 Charge for the year Eliminated on disposal As at 31 December 2008 Charge for the year Eliminated on disposal At 31 December 2009 CARRYING VALUE At 31 December 2009 At 31 December 2008	HK$’000 221,545 13,834 38,369 (1,250) 272,498 (272,498) – – 28,491 (104) 28,387 633 (29,020) – – 244,111

As at 31 December 2008, the intangible asset represented the contractual rights to share a specified percentage of the box office receipts from certain cinemas in the PRC using the digital cinema equipment installed by the Group for exhibition of digital contents. It had finite useful life and was amortised on a straight-line basis over the relevant contract up to 10 years. In 2009, the Group disposed the intangible asset to CFGC for a consideration of RMB223,791,600 (equivalent to approximately HK$254,227,000). The consideration was payable by CFGC in following manner:

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(i) a sum of RMB100,000,000 (equivalent to approximately HK$113,600,000) was payable within 3 days upon the agreement became effective; and
(ii) the remaining balance of RMB123,791,600 (equivalent to approximately HK$140,627,000) was payable in three installments in accordance with the following schedule:
RMB50,000,000 (equivalent to approximately HK$56,800,000) should be payable on or before 1 June 2009;
RMB50,000,000 (equivalent to approximately HK$56,800,000) should be payable on or before 1 September 2009; and
RMB23,791,600 (equivalent to approximately HK$27,027,000) should be payable on or before 1 December 2009.

The difference between the fair value of consideration of approximately HK$251,100,000, estimated by using the People’s Bank of China Renminbi Lending Rate, transaction costs directly attributable to the disposal of approximately HK$5,079,000 and the carrying amount of the intangible assets at the date of disposal is recognised in profit or loss for the year and included in other income. Imputed interest income derived from the deferred consideration of the disposal of approximately HK$3,127,000 is recognised for the year and included in other income.

The disposal was approved by shareholders of the Company at the special general meeting on 17 February 2009. Details of the disposal were set out in the circular of the Company dated 23 January 2009.

24. INTERESTS IN ASSOCIATES

Cost of investment in unlisted associates Share of post-acquisition translation difference recognised in other comprehensive income Share of post-acquisition losses Less: Impairment loss recognised	2009 HK$’000 22,586 1,205 (1,442) (780) 21,569	2008 HK$’000 22,586 1,205 (1,155) (780) 21,856

Details of the Group’s principal associates at 31 December 2009 and 2008 are as follows:

			Proportion of
		Place of	nominal value of
	Form of	incorporation/	issued share capital	Proportion
	business	establishment	/registered capital	of voting
Name of entity	structure	and operation	held by the Group	power held	Principal activities
Top Pearl International	Incorporated	BVI/	50%	50%	Property development
Development Ltd.		The PRC		(Note 1)	and became inactive
(“Top Pearl”)
中影首鋼環球數碼數字	Sino-foreign	The PRC/	49%	40%	Deployment of digital
影院建設（北京）	equity joint	The PRC		(Note 2)	cinema network in
有限公司	venture				2008 and become
CFGDC Digital Cinema					inactive in 2009
Company Limited
(“CFGDC”)

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note:

In the opinion of the Directors, the investment in Top Pearl of approximately HK$780,000, together with loan to Top Pearl amounting to HK$31,489,000 are considered to be fully impaired at 31 December 2009 and 2008 as Top Pearl has become inactive.
The Group holds 49% of the registered capital of CFGDC and holds 2 out of 5 votes (representing 40% of the votes) in the meeting of the board of directors of CFGDC. Pursuant to the Articles of Association of CFGDC, over 50% vote is required to pass a resolution in relation to the financial and operating policies of CFGDC. The Directors consider the Group does not control CFGDC but the Group can exercise significant influence over CFGDC. Hence, CFGDC is classified as an associate of the Group.

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

Total assets Total liabilities Net assets The Group’s share of net assets of associates Revenue Loss for the year The Group’s share of loss of associates for the year	2009 HK$’000 44,018 – 44,018 21,569 60 (586) (287)	2008 HK$’000 44,639 (35) 44,604 21,856 611 (1,749) (857)

25. OTHER RECEIVABLES

During the year, a subsidiary of the Company signed VPF agreements and exhibition agreements (collectively referred to as “VPF Arrangement”) with distributors and exhibitors of digital contents (collectively referred to as “Third Parties”) in connection with the deployment of digital cinema equipment in cinemas in Asia. Under the VPF Arrangement, the Group would provide (i) assembly and integration services in respect of digital cinema equipment and install the equipments in the exhibitors’ cinemas as well as (ii) financing to the Third Parties for a portion of the agreed purchase prices of the digital cinema equipments. These receivables, which are to be settled based on the usage of the digital cinema equipment within 10 years from the date of installation, bear interest at the cost of funds incurred by that subsidiary arising from the VPF Arrangement but subject to a cap of 10% per annum.

The Directors expect that approximately HK$4,153,000 will be settled within one year after the end of the reporting period and this amount is therefore classified as current asset.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

26. ADVANCES

Advances paid for: Agreement for a term loan facility and call options_(note 34) Agreements for acquisition of non-performing loans and interests(note 36) Agreement for acquisition of additional interest in a subsidiary(note 12)_	2009 HK$’000 – – – –	2008 HK$’000 68,182 32,136 26,229
		126,547

27. FINANCE LEASE RECEIVABLES

Variable-interest rate finance lease receivables comprise: Within one year In more than one year but not more than two years In more than two years but not more than three years In more than three years but not more than four years In more than four years but not more than five years More than five years Less: Unearned finance income Present value of minimum lease receipts Analysed as: Current finance lease receivables (receivable within 12 months) Non-current finance lease receivables (receivable after 12 months)	Minimum lease receipts 2009 2008 HK$’000 HK$’000 509,737 543,315 220,935 530,174 210,666 209,746 31,414 115,246 705 33,278 248 943 973,705 1,432,702 (79,839) (142,394) 893,866 1,290,308	Present value of minimum lease receipts 2009 2008 HK$’000 HK$’000 464,519 463,170 197,595 492,351 200,882 193,068 30,014 108,464 615 32,409 241 846 893,866 1,290,308 N/A N/A 893,866 1,290,308 464,519 463,170 429,347 827,138 893,866 1,290,308	Present value of minimum lease receipts 2009 2008 HK$’000 HK$’000 464,519 463,170 197,595 492,351 200,882 193,068 30,014 108,464 615 32,409 241 846 893,866 1,290,308 N/A N/A 893,866 1,290,308 464,519 463,170 429,347 827,138 893,866 1,290,308
			1,290,308 N/A
			1,290,308

			463,170 827,138
			1,290,308

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Effective interest rates per annum of the above finance lease receivables for the year are as follows:

		2009		2008
Effective interest rates	5% to	16%	6% to	16%

For the year ended 31 December 2009, finance lease receivables of approximately HK$827,855,000 (2008: HK$1,258,941,000) have been pledged against specific bank borrowings granted to the Group. As at 31 December 2009, finance lease receivables amounting to approximately HK$6,034,000 (2008: HK$39,393,000) were past due but not impaired. The finance lease receivables past due but not impaired are all overdue for 90 to 180 days. The Directors considered that those receivables are with good credit quality according to their past repayment history. The Directors have assessed the estimated fair value of the leased assets of receivables which are past due but not impaired to determine whether adequate collateral has been held for these finance lease borrowers and considered that the estimated fair value of these leased assets held is in excess of the carrying amount of the receivables. The leased assets for those past due receivables mainly include machineries and vessels.

For the finance lease receivables which are neither past due nor impaired, the Directors assessed that the balances are with good credit quality according to their past repayment history.

Security deposits of approximately HK$60,168,000 (2008: HK$60,168,000) has been received by the Group to secure the finance lease receivables. In addition, the finance lease receivables are secured over the leased asset as at 31 December 2009 and 2008. The Group is not permitted to sell or repledge the collateral in the absence of default by the lessee.

Security deposits received have been classified into current liabilities and non-current liabilities based on the final lease instalment due date stipulated in the finance lease agreements.

All the Group’s finance lease receivables are denominated in Renminbi, the functional currency of the relevant group entity.

28. ENTRUSTED LOAN RECEIVABLES

Two of the PRC subsidiaries of the Company entered into entrusted loan arrangements with banks, in which the subsidiaries acted as the entrusting parties and the banks acted as the lenders to provide funding to specified borrowers. Details of the entrusted loan receivables are as follows:

Entrusted loan receivables comprise: Within one year In more than one year, but not more than two years In more than two years, but not more than three years Less: Amounts due within one year shown under current assets Amounts due after one year	2009 HK$’000 25,873 227 – 26,100 (25,873) 227	2008 HK$’000 26,879 25,272 227
		52,378 (26,879)
		25,499

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As at 31 December 2009, the exposure of the Group’s fixed-rate receivables and the contractual maturity dates are as follows:

Fixed-rate receivables which are due: Within one year In more than one year, but not more than two years In more than two years, but not more than three years	2009 HK$’000 2,554 227 – 2,781	2008 HK$’000 26,879 2,545 227
		29,651

As at 31 December 2009, the Group’s variable-rate receivable amounted to approximately HK$23,319,000 (2008: HK$22,727,000) is due within one year.

The ranges of effective interest rates (which are equal to contractual interest rates) on the Group’s entrusted loan receivables are as follows:

	2009	2008
Effective interest rate:
Fixed-rate receivables	13%	13% to 15%
Variable-rate receivable	PBC Rate up by a	PBC Rate up by a
	premium of 5%	premium of 5%

For the year ended 31 December 2009 and 2008, no entrusted loan receivables have been past due but not impaired. The Directors considered that the entrusted loan borrowers have good credit quality according to their past repayment history.

All the Group’s entrusted loan receivables are denominated in Renminbi, the functional currency of the relevant group entities.

The entrusted loan receivables are mainly secured by properties and vessels pledged by the specified borrowers or their related parties. The Group is not permitted to sell or repledge the collateral in the absence of default by the entrusted loan borrower.

29. INVENTORIES

Raw materials, net of allowance of approximately HK$1,974,000 (2008: approximately HK$650,000) Finished goods, net of allowance of approximately HK$5,984,000 (2008: approximately HK$940,000)	2009 HK$’000 7,059 27,888 34,947	2008 HK$’000 6,345 15,559
		21,904

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

30. PRODUCTION WORK IN PROGRESS

	2009	2008
	HK$’000	HK$’000
Movie and television series	–	3,875

31. AMOUNTS DUE FROM (TO) CUSTOMERS FOR CONTRACT WORK

The following are details of contracts from CG production in progress at the end of the reporting period:

Contract costs incurred plus recognised profits less recognised losses Less: progress billings Analysed for reporting purposes as: Amounts due from customers for contract work Amounts due to customers for contract work 32. TRADE RECEIVABLES Trade receivables Less: Allowance for doubtful debts	2009 HK$’000 49,991 (44,562) 5,429 5,795 (366) 5,429 2009 HK$’000 51,172 (9,695) 41,477	2008 HK$’000 28,574 (13,402)
		15,172

		16,935 (1,763)
		15,172

		2008 HK$’000 26,910 (6,386)
		20,524

The Group allows an average credit period of 90 days to its trade customers. The following is an aged analysis of the trade receivables net of allowance for doubtful debts presented based on the invoice date at the end of the reporting period:

0 – 90 days 91 – 180 days Over 180 days	2009 HK$’000 39,670 1,484 323 41,477	2008 HK$’000 8,302 8,527 3,695
		20,524

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Included in the Group’s trade receivable balances are debtors with an aggregate carrying amount of approximately HK$1,807,000 (2008: HK$12,222,000) which are past due at the reporting date for which the Group has not provided for impairment loss. The Directors assessed that the balances will be recovered as these receivables have good credit quality according to their past repayment history. The Group does not hold any collateral over these balances.

The following is an aged analysis of trade receivables based on invoice date which are past due but not impaired:

91 – 180 days 181 – 270 days 271 – 360 days Over 360 days Total Movement in the allowance for doubtful debts At 1 January Allowance for impairment losses Amounts recovered during the year At 31 December	2009 HK$’000 1,484 140 156 27 1,807 2009 HK$’000 6,386 3,536 (227) 9,695	2008 HK$’000 8,527 1,446 2,046 203
		12,222

		2008 HK$’000 230 6,386 (230)
		6,386

Included in the allowance for doubtful debts as at 31 December 2009 and 2008 were individually impaired trade receivables with an aggregate balance of approximately HK$9,695,000 and HK$6,386,000, respectively, in respect of which the customers were not fully satisfied with the quality of products provided by CG creation and production division, films and television programme production division and the services provided by CG training division and the amount was considered uncollectible.

33. OTHER FINANCIAL ASSETS

Prepayments, deposits and other receivables

Other receivables Prepayments Deposits	2009 HK$’000 69,706 13,160 10,880 93,746	2008 HK$’000 17,347 3,336 2,274
		22,957

Other receivables as at 31 December 2009 included a receivable of approximately HK$61,177,000 due from an independent third party for the assets management division. The amount is secured by a listed security in the PRC with market value of approximately HK$134,903,000 as at 31 December 2009, interest bearing at 15% per annum and is expected to be realised in the next twelve months from the end of the reporting period. Therefore the whole carrying amount is classified as a current asset.

Included in the other receivable was HK$4,153,000 (2008: nil) arising from VPF agreement with distributors and exhibitors of digital contents. Details of which are disclosed in note 25.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Restricted bank deposits

The amounts as at 31 December 2009 and 2008 represented bank deposits restricted and the restricted bank deposits will be released upon the full settlement of the relevant bank borrowings. Therefore, they are classified as noncurrent assets.

The deposits carried interest at average interest rate of 3.60% (2008: 3.60%) per annum.

Pledged bank deposit

As at 31 December 2009, the pledged bank deposit represents deposit of approximately HK$1,956,000 (2008: HK$665,000) pledged to a bank to secure a construction agreement (classified as non-current asset) entered into with an independent third party which carries interest rate at 1.98% (2008: 3.22%) per annum. The pledged bank deposit will be released upon the settlement of the agreement.

As at 31 December 2008, the Group also pledged another deposit of approximately HK$2,808,000 to a bank to secure a purchase of raw materials agreement (classified as current asset) which carried interest rate at 0.10% per annum.

Bank balances and cash

The Group’s deposits carry interest rate at prevailing bank saving deposits rate ranging from 0.05% to 0.39% (2008: 0.18% to 1.69%) per annum.

34. CONVERTIBLE LOAN RECEIVABLE

On 23 December 2008, the Group entered into a conditional agreement with Southern International Limited (the “Borrower”) and its holding company whereby the Group agreed to advance a loan facility in the maximum principal amount of RMB100 million (equivalent to approximately HK$113.6 million) (the “Loan Receivable”) and the Borrower agreed to grant to the Group the exclusive rights and options to subscribe for an aggregate of up to 60% of the enlarged issued capital of the Borrower (the “Conversion Option”). Details of the transaction were set out in the circular of the Company dated 23 January 2009.

The transaction was approved by shareholders of the Company at the special general meeting of the Company on 17 February 2009, the advance of approximately HK$68.2 million as at 31 December 2008 formed part of the Loan Receivable thereafter and the Group advanced the remaining approximately HK$45.4 million to the Borrower during the year ended 31 December 2009.

The Conversion Option was granted to the Group pursuant to the Loan Facility Arrangement. Accordingly, the Group assessed the fair value of the Loan Receivable with reference to the prevailing market interest of similar nonconvertible loans and appointed Messrs. Jones Lang LaSalle Sallmanns (“Sallmanns”), an independent qualified professional valuer not connected with the Group, to ascertain the fair value of the Conversion Option as at 17 February 2009 and 30 June 2009. The fair value of the Conversion Option as at 31 December 2009 has been estimated by the Directors using the same valuation methodology adopted by Sallmanns and the performance of the Borrower since 1 July 2009. The Group concluded that the principal amount of the Loan Receivable approximates to its fair value at initial recognition and the fair value of the Conversion Option is insignificant at both initial recognition and 31 December 2009.

As at 31 December 2009, the carrying amount of the convertible loan receivable of approximately HK$119.3 million comprises principal amount of RMB100 million (equivalent to approximately HK$113.6 million) and the accrued interest thereon. The convertible loan receivable is stated at amortised cost using the effective interest method at 6% per annum less any identified impairment losses.

Subsequent to the end of the reporting period, the Borrower repaid part of the principal amount of Loan Receivable and the accrued interest thereon amounting to approximately HK$113.6 million. The remaining amount of approximately HK$5.7 million is expected to be settled within one year after the end of reporting period and therefore the whole amount of approximately HK$119.3 million is classified as current assets.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

35. HELD-FOR-TRADING INVESTMENTS

Held-for-trading investments as at 31 December 2009 and 2008 represented equity securities as follows:

Listed in the PRC Listed in Hong Kong	2009 HK$’000 2,154 23,266 25,420	2008 HK$’000 73,588 12,080
		85,668

The fair values of the held-for-trading investments were determined based on the quoted market bid prices available on the relevant exchanges.

36. AVAILABLE-FOR-SALE INVESTMENTS

Notes Unlisted non-performing loans and interests (i) Unlisted equity interests (ii)	2009 HK$’000 32,136 5,341 37,477	2008 HK$’000 – –
		–

Notes:

(i) On 30 January 2009, the Group entered into two agreements with 中國東方資產管理公司石家莊辦事處 (China Orient Asset Management Corporation Shijiazhuang Branch) (the “Vendor”), an independent third party pursuant to which the Group acquired two non-performing loans and interests accrued thereon with principal amounts of RMB23 million (equivalent to approximately HK$26.1 million) and RMB30.54 million (equivalent to approximately HK$34.7 million) for considerations of RMB9 million (equivalent to approximately HK$10.2 million) and RMB19 million (equivalent to approximately HK$21.6 million), respectively. The investment is pledged by land and wine in the PRC held by borrower with estimated fair value above the carrying amount of investment. Details of which were set out in the announcement of the Company dated 4 February 2009.

The advance of approximately RMB28 million (equivalent to approximately HK$32.1 million) as at 31 December 2008 (note 26) to the Vendor became the investment costs which were then designated as available-for-sales investments thereafter and the fair value of the investment as at 31 December 2009 is estimated to approximate its cost. Only after such time as the interest-in-suspense is no longer required, interest income will then be subsequently recognised using the effective interest method.

(ii) The investment represents equity interest in private entities established in the PRC.

The investment is measured at cost less impairment at the end of the reporting period because the range of the reasonable fair value estimates is so variable that the Directors are of the opinion that their fair values cannot be measured reliably.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

37. TRADE PAYABLES

The following is an aged analysis of trade payables presented based on the invoice date at the end of the reporting period:

0 – 90 days 91 – 180 days Over 180 days	2009 HK$’000 31,153 1,816 – 32,969	2008 HK$’000 6,568 76 1,473
		8,117

The average credit period on purchases of goods is 60 days. The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame.

38. INCOME RECEIVED IN ADVANCE

As at 31 December 2009 and 2008, the income received in advance represented handling fee income received from finance lease borrowers for administrative services provided over the relevant lease term, deposits received in advance before sales of goods are completed, training fee income received in advance before the training courses are completed and production and distribution income of films and television programme received before completion of production and distribution of films and television programme to the customers.

Analysed for reporting purposes: Current Non-current	2009 HK$’000 43,427 7,754 51,181	2008 HK$’000 38,108 16,393
		54,501

39. AMOUNT DUE TO AN ASSOCIATE

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

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

40. SECURED BANK BORROWINGS

Secured variable-rate bank borrowings Carrying amount repayable: On demand or within one year More than one year, but not exceeding two years More than two years, but not exceeding three years More than three years, but not exceeding four years More than four years, but not exceeding five years More than five years Less: Amounts due within one year shown under current liabilities Amounts due after one year	2009 HK$’000 964,379 539,326 174,246 178,307 16,448 4,068 51,984 964,379 (539,326) 425,053	2008 HK$’000 1,357,296

		427,048 568,735 181,320 100,915 33,454 45,824
		1,357,296 (427,048)
		930,248

The Group’s borrowings that are denominated in currencies other than the functional currency of the relevant group entities are set out below:

	2009	2008
	HK$’000	HK$’000
Hong Kong Dollar	152,924	156,426

The interest rate for the Group’s bank borrowings varies from different subsidiaries. The interest rates vary from prime rate minus 2.25%, HIBOR plus 1%, variable PBC rates plus a spread of 5% to 10% (2008: HIBOR plus 1% to 1.375% and variable PBC rate plus a spread of 5% to 10%). The interest rates for the Group ranged from 1.2%-9.0% per annum for the year ended 31 December 2009 (2008:1.3% to 9.0% per annum) The interest is repricing every month for secured bank borrowing of approximately HK$163,151,000 and repricing every quarter for secured bank borrowing of approximately HK$801,228,000. The proceeds were used as general working capital for the Group and construction of a building in the PRC.

As at 31 December 2009, the bank borrowings are secured by the Group’s pledge of construction in construction in progress (note 18), prepaid lease payment (note 19) and investment properties (note 20) and certain finance lease receivables (note 27).

As at 31 December 2008, the bank borrowings were secured by the Group’s building (note 18), prepaid lease payment (note 19), investment properties (note 20) and certain finance lease receivables (note 27). The pledge of building has been released during the year ended 31 December 2009 upon repayment of the relevant bank borrowing.

As at 31 December 2009, the Group has undrawn borrowing facilities of approximately RMB141,000,000 (equivalent to approximately HK$160,227,000), which is secured by pledge of construction in progress (see note 18) and prepaid lease payment (see note 19), carries interest at the People’s Bank of China Renminbi Lending Rate per annum and will be expired beyond one year.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

41. DEFERRED TAX LIABILITIES

For the purpose of presentation in the consolidated statement of financial position, certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances for financial reporting purposes:

Deferred tax liabilities Deferred tax assets	2009 HK$’000 10,884 (9,208) 1,676	2008 HK$’000 10,148 (9,055) 1,093

The following are the major deferred tax liabilities (assets) recognised and movements thereon during the current and prior years:

At 1 January 2008 Credit to profit or loss Effect of change in tax rate At 31 December 2008 Charge (credit) to profit or loss At 31 December 2009	Investment properties HK$’000 10,199 (120) (59) 10,020 634 10,654	Accelerated tax depreciation HK$’000 136 (8) – 128 102 230	Tax losses HK$’000 (8,995) (53) (7) (9,055) (153) (9,208)	Total HK$’000 1,340 (181) (66) 1,093 583 1,676

At the end of the reporting period, the Group has unused tax losses of approximately HK$246,361,000 (2008: HK$217,165,000) available for offset against future profits subject to approval from the relevant tax authority. A deferred tax asset has been recognised in respect of approximately HK$55,806,000 (2008: HK$54,878,000) of such losses. No deferred tax asset has been recognised in respect of the remaining HK$190,555,000 (2008: HK$162,287,000) due to the unpredictable of future profit streams.

Under the EIT Law of PRC, withholding tax is imposed on dividends declared in respect of profits earned by the Group’s PRC subsidiaries from 1 January 2008 onwards. Deferred taxation has not been provided for in the consolidated financial statements in respect of temporary difference attributable to the retained profits earned by the PRC subsidiaries amounting to HK$94 million as at 31 December 2009 (31 December 2008: HK$68 million) as the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

42. SHARE CAPITAL

Ordinary shares of HK$0.01 each Authorised: At 1 January and 31 December Issued and fully paid: At 1 January Exercise of share options_(Note)_ At 31 December	2009 Number Nominal of shares value HK$’000 2,000,000,000 20,000 1,151,392,469 11,514 – – 1,151,392,469 11,514	2008 Number Nominal of shares value HK$’000 2,000,000,000 20,000 1,150,392,469 11,504 1,000,000 10 1,151,392,469 11,514	2008 Number Nominal of shares value HK$’000 2,000,000,000 20,000 1,150,392,469 11,504 1,000,000 10 1,151,392,469 11,514
			11,504 10
			11,514

Note: For the year ended 31 December 2008, share option holders exercised their right to subscribe 1,000,000 ordinary shares of the Company at HK$0.41 per share.

43. CAPITAL COMMITMENTS

	2009	2008
	HK$’000	HK$’000
Capital expenditure contracted for but not provided in
the consolidated financial statements in respect of
acquisition of property, plant and equipment	125,733	8,350

44. LITIGATION

On 14 May 2003, GDC Entertainment Limited (“GDC Entertainment”), a subsidiary of the Company, entered into a co-production agreement (the “Co-production Agreement”) with Westwood Audiovisual and Multimedia Consultants, Inc. (“WAMC”) and Production and Partners Multimedia, SAS (“P&PM”) in relation to an animated television series.

In about November 2004, P&PM and WAMC commenced proceedings against GDC Entertainment in the Court of Commerce of Angouleme (France) alleging breaches on the part of GDC Entertainment of the Co-production Agreement.

In relation to the French proceedings, the Group’s French legal advisers had advised that the enforcement of P&PM’s and WAMC’s claims should only be limited to the assets of GDC Entertainment.

Further, arbitration proceedings were commenced by GDC Entertainment against P&PM and WAMC in Hong Kong by way of a notice of arbitration dated 16 June 2005 issued pursuant to the Co-production Agreement. In the arbitration, issues had been raised by GDC Entertainment as to whether P&PM and/or WAMC were in repudiatory breach of the Co-production Agreement which entitled GDC Entertainment to terminate the same claim of damages from P&PM and WAMC. Pleadings have not yet been exchanged in the arbitration. P&PM and WAMC have applied to the arbitrator for the determination of a preliminary issue as to whether the arbitrator has jurisdiction to hear the dispute which GDC Entertainment will refer to the arbitrator in the arbitration. The hearing of the application was held on 20 January 2006. Award of the arbitrator was published on the Issue of Jurisdiction on 23 March 2006 dismissing the application, and made an order for costs in GDC Entertainment’s favour in respect of the application. Since then, there has been no further step taken by the parties. GDC Entertainment has written to the arbitrator seeking directions for the further conduct of the arbitration, including the service of pleadings in the arbitration.

Effective from 1 May 2009, GDC Entertainment has been struck off but can be restored at any time up to ten years after the strike-off date.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

45. OPERATING LEASES

The Group as lessor

Property rental income earned during the year was approximately HK$6,318,000 (2008: HK$6,702,000). The remaining properties are expected to generate rental yield of 4.1% an ongoing basis. All of the properties held have committed tenants for the next one to two years.

At the end of the reporting period, the Group had contracted with tenants for the following future minimum lease payments:

Within one year In the second to fifth years inclusive	2009 HK$’000 3,206 701 3,907	2008 HK$’000 4,308 1,901
		6,209

The Group as lessee

Minimum lease payments paid under operating lease in respect of office premises during the year was approximately HK$7,889,000 (2008: HK$7,992,000).

At the end of the reporting period, the Group had commitments for future minimum lease payments under noncancellable operating leases which fall due as follows:

Within one year In the second to fifth years inclusive Over five years	2009 HK$’000 8,591 13,177 3,558 25,326	2008 HK$’000 9,407 8,093 2,754
		20,254

Operating lease payments represent rentals payable by the Group for certain of its office premises, production studios, training centers, warehouse and staff quarters. Leases for properties are negotiated for a term ranging from one to ten years with fixed rentals.

46. SHARE OPTIONS SCHEMES

a. Share Option Scheme of the Company

The Company operates the share option scheme (the “Scheme”) for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations and/or its associated companies. Eligible participants of the Scheme included Directors (including executive and non-executive directors), executives, officers, employees or shareholders of the Company or any of its subsidiaries or any of its associated companies and any suppliers, customers, consultants, advisers, agents, partners or business associates. The Scheme became effective on 7 June 2002, unless otherwise cancelled or amended, will remain in force for 10 years from that date.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The maximum number of unexercised share options currently permitted to be granted under the Scheme is an amount equivalent, upon their exercise, to 10% of the shares of the Company in issue at the date of the passing of such resolution. The maximum number of shares issuable under share options to each eligible participant in the Scheme within any 12-month period, is limited to 1% of the shares of the Company in issue at any time. Any further grant of share options in excess of this limit is subject to shareholders’ approval in a general meeting.

Share options granted to a Director, executive or substantial shareholder of the Company, or to any of their associates, are subject to approval in advance by the Independent Non-executive Directors. In addition, any share options granted to a substantial shareholder or an Independent Non-executive Director of the Company, or to any of their associates, in excess of 0.1% of the shares of the Company in issue at any time and with an aggregate value (based on the price of the Company’s shares at the date of the grant) in excess of HK$5 million, within any 12-month period, are subject to shareholders’ approval in advance in a general meeting.

The offer of a grant of share options may be accepted within 60 days from the date of the offer, upon payment of a nominal consideration of HK$1 in total by the grantee. An option may be exercised under the Scheme at any time within 10 years from the date of the options granted. All options granted would vest immediately on the date of grant of options.

The exercise price of the share options is determinable by the Directors, but may not be less than the highest of (i) the Stock Exchange’s closing price of the Company’s shares on the date of the offer of the share options; (ii) the average Stock Exchange’s closing price of the Company’s shares for the five trading days immediately preceding the date of the offer; and (iii) the nominal value of the Company’s ordinary shares.

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

The following table discloses the details of the share options and movements in such holdings during the years ended 31 December 2009 and 2008:

For the year ended 31 December 2009

Exercise Categories of Date of price grantees grant Exercisable period per share Directors 23.8.2002 23.8.2002 – 6.6.2012 HK$0.73 6.3.2003 6.3.2003 – 5.3.2013 HK$0.76 19.1.2007 19.1.2007 – 18.1.2017 HK$0.41 22.1.2008 22.1.2008 – 21.1.2018 HK$0.724 Employees 6.3.2003 6.3.2003 – 5.3.2013 HK$0.76 19.1.2007 19.1.2007 – 18.1.2017 HK$0.41 Other participants 19.1.2007 19.1.2007 – 18.1.2017 HK$0.41 (Note (c)) Totals		Number of share options	Number of share options	Number of share options
	At 1.1.2009 75 604 63,068,000 41,950,000 1,330,000 7,200,000 – 113,548,679	Transferred to other category during the year – – – – – (800,000) – (800,000)	Transferred from other category during the year – – – – – – 800,000 800,000	Cancelled/ lapsed during the year (Note (a)) – – – – – (500,000) – (500,000)	Balance as at 31.12.2009 75 604 63,068,000 41,950,000 1,330,000 5,900,000 800,000
					113,048,679

No share option was granted or exercised in accordance with the terms of the Scheme during the year 2009.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 December 2008

Exercise Categories of Date of price grantees grant Exercisable period per share Directors 23.8.2002 23.8.2002 – 6.6.2012 HK$0.73 6.3.2003 6.3.2003 – 5.3.2013 HK$0.76 19.1.2007 19.1.2007 – 18.1.2017 HK$0.41 22.1.2008 22.1.2008 – 21.1.2018 HK$0.724 Employees 6.3.2003 6.3.2003 – 5.3.2013 HK$0.76 19.1.2007 19.1.2007 – 18.1.2017 HK$0.41 22.1.2008 1.7.2008 – 30.6.2018 HK$0.724 Totals		Number of share options	Number of share options	Number of share options
	At 1.1.2008 75 604 63,068,000 – 1,330,000 8,200,000 – 72,598,679	Granted during the year – – – 41,950,000 – – 40,000,000 81,950,000	Exercised during the year – – – – – (1,000,000) – (1,000,000)	Cancelled/ lapsed during the year (Note (b)) – – – – – – (40,000,000) (40,000,000)	Balance as at 31.12.2008 75 604 63,068,000 41,950,000 1,330,000 7,200,000 –
					113,548,679

Notes:

(a) The share options were held by a grantee who ceased to be an employee of the Company during the year and such share options were lapsed on 13 December 2009.
(b) Such share options were granted to four grantees, who were employees of the Group, with the exercise period for 10 years commencing from 1 July 2008 at an exercise price of HK$0.724 per share, subject to a condition that the grantees shall procure that the Company and/or its subsidiaries successfully obtain bank financing of HK$100 million before 1 July 2008 (the “Condition”). As the Condition for each of the grantees was not satisfied, the 40,000,000 options lapsed on 1 July 2008 accordingly.
(c) Other participants include persons who will contribute or have contributed, to the Company or any subsidiaries or any associated companies of the Company. During the year ended 31 December 2009, 800,000 share options held by a grantee were re-classified from the category of “Employees” to “Other participants” due to resignation of the grantee in 2009. According to the terms of the Share Option Scheme of the Company, such options remain exercisable and shall lapse on 1 January 2010.

No consideration was received from employees for taking up the options granted for the year ended 31 December 2008.

The closing price of the Company’s shares on 22 January 2008, the grant date of the 41,950,000 was HK$0.68 per share. The fair value of the share options determined at the date of grant using the Binomial Option Valuation pricing model was approximately HK$10,869,000.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following assumptions were used to calculate the fair value of share options:

	22 January 2008
Grant date share price	HK$0.68
Exercise price	HK$0.724
Option life	10 years
Expected volatility	60%
Dividend yield	Nil
Risk-free interest rate	2.78%

Expected volatility of the Company was determined by using the historical volatility of the Company’s weekly average share prices over the past two years. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non transferability, exercise restrictions and behavioural considerations.

Share-based compensation expenses in respect of grant of the share options by the Company of approximately HK$10,869,000 was included in the administrative expenses for the year ended 31 December 2008 (2009: Nil).

b. Share option schemes of Global Digital Creations Holdings Limited (the “GDC Scheme”) and GDC Technology (the “GDC Technology Scheme”)

The GDC Scheme was adopted pursuant to a resolution passed at a special general meeting of GDC held on 18 July 2003 for the primary purpose of providing incentives or rewards to selected participants for their contribution to Global Digital Creations Holdings Limited (“GDC”) and its subsidiaries. The GDC Scheme will expire on 4 August 2013.

An option may be exercised at any time during the period to be determined and notified by the directors of GDC to the grantee but may not be exercised after the expiry of ten years from the date of offer of that opinion. Option is fully vested at the date of grant and a consideration of HK$1 is payable upon acceptance of the offer.

The exercise price is determined by the directors of GDC, and will not be less than the higher of the nominal value of the share on the date of offer, the closing price of GDC’s shares on the date of offer; and the average closing price of the shares for the five business days immediately preceding the date of offer.

The GDC Technology Scheme was adopted pursuant to a resolution passed at a special general meeting of GDC held on 19 September 2006 for the primary purpose of providing incentives or rewards to eligible participants for their contribution to GDC Technology, its subsidiaries and its holding companies (including intermediate and ultimate holding companies). The GDC Technology Scheme will remain in force for a period of 10 years to 18 September 2016.

Details of the GDC Scheme and the GDC Technology Scheme are disclosed in the section headed “Share Option Schemes” in the Report of the Directors.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following table sets out the movements in the share options of GDC during the year ended 31 December 2009:

Exercise Category of price grantees Date of grant Exercise period per share Directors of GDC 6.10.2006 6.10.2006 – 5.10.2009 HK$0.30 30.10.2007 30.10.2007 – 29.10.2012 HK$2.75 Employees of GDC 22.3.2007 22.3.2007 – 21.3.2010 HK$1.07 4.4.2007 4.4.2007 – 3.4.2010 HK$1.52 30.10.2007 30.10.2007 – 29.10.2012 HK$2.75 Other participants (Notes) 6.10.2006 6.10.2006 – 5.10.2009 HK$0.3 4.4.2007 4.4.2007 – 3.4.2010 HK$1.52 30.10.2007 30.10.2007 – 29.10.2012 HK$2.75 Totals		Number of share options	Number of share options	Number of share options
	Balance as at 1.1.2009 8,008,200 27,680,000 2,300,000 2,262,000 9,900,000 2,500,820 1,781,000 – 54,432,020	Transferred to other category during the year – (12,000,000)2 – – – – – – (12,000,000)	Transferred from other category during the year – – – – – – – 12,000,0002 12,000,000	Cancelled/ lapsed during the year (8,008,200)1 – – – – (2,500,820)1 – (12,000,000)2 (22,509,020)	Balance as at 31.12.2009 – 15,680,000 2,300,000 2,262,000 9,900,000 – 1,781,000 –
					31,923,000

Notes:

Such share options were lapsed on 6 October 2009 according to the Scheme.
The share options were held by Ms. Lu Yi, Gloria who resigned as a director of GDC during the year and such share options were re-classified from the category of “Directors of GDC” to “Other participants” during the year. According to the GDC Scheme, such share options shall lapse on the expiry of the three months period following the date of cessation as a director of GDC. Accordingly, such share options were lapsed on 5 December 2009.

The following table sets out the movements in the share options of GDC Technology during the year ended 31 December 2009:

Category of Exercise price grantees Date of grant Exercise period per share Directors of GDC 29.9.2006 29.9.2006 – 28.9.2009 HK$0.145 2.11.2007 2.11.2007 – 1.11.2012 HK$2 Employees of GDC 5.10.2006 5.10.2006 – 4.10.2009 HK$0.145 2.11.2007 2.11.2007 – 1.11.2012 HK$2 Other participants_(Note)_ 29.9.2006 29.9.2006 – 28.9.2009 HK$0.145 Totals		Number of share options	Number of share options
	Balance as at 1.1.2009 3,3331 17,280,000 3,913,332 1,650,000 853,333 23,699,998	Exercised during the year – – (130,000) – (320,000) (450,000)	Cancelled/ lapsed during the year (3,333)4 (12,000,000)2 (3,783,332)3 – (533,333)4 (16,319,998)	Balance as at 31.12.2009 – 5,280,000 – 1,650,000 –
				6,930,000

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes:

The number of share options granted to a director of GDC on 29 September 2006 exceeded the individual limit of 1% of the shares of GDC Technology then in issue and was approved by the shareholders of the Company and GDC on 19 September 2006 respectively.
Such share options were held by a director of GDC who resigned as a director of GDC during the year and such options were lapsed on 5 September 2009.
1,361,666 share options were lapsed upon two grantees ceased to be employees of GDC Technology during the year and the remaining 2,421,666 share options were lapsed on 5 October 2009 according to the GDC Technology Scheme.
Such share options were lapsed on 29 September 2009 according to the GDC Technology Scheme.

Note: Other participants mainly represent employees of the Group other than employees of GDC.

The following table sets out the movements in the share options of GDC during the year ended 31 December 2008:

Exercise Category of price grantees Date of grant Exercise period per share Directors of GDC 6.10.2006 6.10.2006 – 5.10.2009 HK$0.30 30.10.2007 30.10.2007 – 29.10.2012 HK$2.75 Employees of GDC 22.3.2007 22.3.2007 – 21.3.2010 HK$1.07 4.4.2007 4.4.2007 – 3.4.2010 HK$1.52 30.10.2007 30.10.2007 – 29.10.2012 HK$2.75 Other participants 6.10.2006 6.10.2006 – 5.10.2009 HK$0.30 (Note) 4.4.2007 4.4.2007 – 3.4.2010 HK$1.52 30.10.2007 30.10.2007 – 29.10.2012 HK$2.75 Totals		Number of share options	Number of share options	Number of share options
	Balance as at 1.1.2008 8,809,020 28,170,000 2,300,000 2,262,000 9,900,000 2,500,820 1,781,000 – 55,722,840	Transferred to other category during the year (800,820) (490,000) – – – – – – (1,290,820)	Transferred from other category during the year – – – – – 800,820 – 490,000 1,290,820	Cancelled/ lapsed during the year – – – – – (800,820) – (490,000) (1,290,820)	Balance as at 31.12.2008 8,008,200 27,680,000 2,300,000 2,262,000 9,900,000 2,500,820 1,781,000 –
					54,432,020

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following table sets out the movements in the share options of GDC Technology during the year ended 31 December 2008:

Category of Exercise price grantees Date of grant Exercise period per share Directors of GDC 29.9.2006 29.9.2006 – 28.9.2009 HK$0.145 2.11.2007 2.11.2007 – 1.11.2012 HK$2.00 Employees of GDC 5.10.2006 5.10.2006 – 4.10.2009 HK$0.145 2.11.2007 2.11.2007 – 1.11.2012 HK$2.00 Other participants_(Note)_ 29.9.2006 29.9.2006 – 28.9.2009 HK$0.145 Totals	Number of share options	Number of share options	Number of share options
	Balance as at 1.1.2008 3,333 17,445,000 4,563,332 1,650,000 1,173,333 24,834,998	Cancelled/ lapsed during the year – (165,000) (650,000) – (320,000) (1,135,000)	Balance as at 31.12.2008 3,333 17,280,000 3,913,332 1,650,000 853,333
			23,699,998

Note: Other participants mainly represent employees of the Group other than employees of GDC.

47. RETIREMENT BENEFIT SCHEMES

The Group contributes to defined contribution retirement schemes which are available to all employees in Hong Kong and Singapore. The assets of the schemes are held separately from those of the Group in independently administered funds.

Pursuant to the relevant regulations of the government in the PRC, the subsidiaries in the PRC participate in the municipal government contribution scheme whereby the subsidiaries are required to contribute to the scheme for the retirement benefit of eligible employees. The municipal government is responsible for the entire benefit obligations payable to the retired employees. The only obligation of the Group with respect to the scheme is to pay the ongoing contributions required by the scheme.

The retirement benefit costs represent gross contributions paid and payable by the Group to the schemes operated in Hong Kong, the PRC and Singapore (collectively the “Retirement Schemes”). Contributions totalling approximately HK$205,000 (2008: HK$105,000) payable to the Retirement Schemes at 31 December 2009 are included in other payables and accruals. There was no forfeited contribution throughout the year (2008: Nil).

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

48. EVENTS AFTER THE REPORTING PERIOD

Subsequent to the end of the reporting period, the following four events were noted:

(a) The Borrower repaid part of the principal amount of Loan Receivable and the accrued interest thereon amounting to approximately HK$113.6 million. Details of the Loan Receivable and accrued interest thereon which are classified as convertible loan receivables, are disclosed in note 34.
(b) On 16 March 2010, SCG Investment (BVI) Limited (“SCG Investment BVI”), a wholly-owned subsidiary of the Company, entered into a share transfer agreement with a purchaser and a guarantor, pursuant to which SCG Investment BVI agreed to sell to the purchaser the entire issued share capital of Grand Award Limited for US$1 and to assign the loan to the purchaser for HK$247,920,000 (“the Disposal”). The Disposal is subject to the approval by the shareholders of the Company at a general meeting of the Company and is not yet completed up to the date of this report.

The sole asset of Grand Award Limited is its interest in the entire issued share capital of Grand Perfect Investment Limited, an investment holding company incorporated in Hong Kong which in turn holds the entire registered capital of 首方投資管理（深圳）有限公司 (Capital Steel Investment (China) Ltd.) (“Capital Steel”).

Capital Steel is a wholly foreign-owned enterprise established in the PRC and is mainly engaged in investment holding and development and management of finance and assets investments. Capital Steel holds 90% equity interests in 天津首方投資管理有限公司 (Tianjin Capital Steel Investment Management Co. Ltd.) and 80% equity interests in 四方源創國際影視文化傳播（北京）有限公司 (Concord Creation International (Beijing) Company Limited).

Details of the Disposal are set out in the announcement of the Company dated 16 March 2010. The Directors are still estimating the potential impact of the transaction.

(c) On 30 March 2010, the Group entered into a sale and purchase agreement with an independent third party (the “Vendor”) pursuant to which the Vendor agreed to sell to the Group a 68% interest in 廣東時尚置業有限公司 (Guangdong Shishang Zhiye Investment Co., Ltd.) (the “Target”), a limited liability company established in the PRC for a consideration of RMB56,060,000 (equivalent to approximately HK$63,755,000). The assets held by Target are primarily the contractual right to lease 珠影文化產業園 (Pearl River Film Cultural Park). The Target entered into a framework agreement on 28 March 2007 (as supplemented on 3 April 2008) with 珠江電影製片有限公司 (Pearl River Film Production Company Limited) to redevelop 珠影文化產業園 (Pearl River Film Cultural Park). Pursuant to the arrangement, the Target and 珠江電影製片有限公司 (Pearl River Film Production Company Limited) will jointly redevelop 珠影文化產業園 (Pearl River Film Cultural Park) and the Target will obtain the leasing right of 珠影文化產業園 (Pearl River Film Cultural Park) for a term up to 31 December 2045 upon completion of the redevelopment work. Details of the transaction are set out in the announcement of the Company on 30 March 2010 (the “Announcement”).

The completion of the transaction is subject to fulfilment of conditions as set out in the Announcement. The transaction has not been completed at the date these consolidated financial statements are authorised for issuance.

(d) GDC, a subsidiary of the Company whose shares are listed on the Growth Enterprise Market of the Stock Exchange, announced on 15 April 2010 that on 7 April 2010, it received an original complaint for damages and injunctive relief, and demand for jury trial (the “Proceeding”) filed with the District Court, Central District of California Western Division of the United States by X6D Limited, X6D USA Inc. and XpanD, Inc. on 30 March 2010 against, among others, GDC and its subsidiaries namely GDC Technology, GDC Technology China Limited and GDC Technology (USA) LLC (collectively, the “Defendants”) for copyright infringement, design patent infringement, misrepresentation of origin of goods, misappropriation of trade secrets, unfair competition, breach of contract and tortuous interference with contractual and business relations in relation to the 3D glasses sold by the Defendants. Sale of 3D glasses is not a core business of the Group. GDC is seeking legal advice and in the process of collecting information in relation to the Proceeding. Since the Proceeding is in a preliminary stage, the Directors cannot assess the outcome of the litigation.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

49. RELATED PARTY TRANSACTIONS

(a) During the year, the Group entered into the following transactions with related parties:

Notes (i) Rental income received from Gold Regal Limited, an associate of Shougang Holding (a) (ii) Consultancy expense charged by Shougang Holding (b) (iii) Management fee charged by Shougang Concord International Enterprises Company Limited (“Shougang International”), an associate Shoungang Holding (b) (iv) Interest expense charged by Shougang (Hong Kong) Finance Company Limited, a wholly-owned subsidiary of Shougang Holding (b) Notes:	2009 HK$’000 142 960 4,085 –	2008 HK$’000 142 960 1,140 614

(a) The transaction was carried out in accordance with the relevant lease agreements.
(b) The transaction was carried out in accordance with the relevant agreements.

At 31 December 2009, the Group’s held-for-trading investments included listed securities of 13,870,000 shares (2008: 13,870,000 shares) of Shougang Concord Century Holdings Limited (“Shougang Century”), 40,000 shares (2008: 13,766,000 shares) of Shougang Concord Technology Holdings Limited (“Shougang Technology”) and 230,000 shares (2008: 230,000 shares) of Shougang International. Shougang Century, Shougang Technology and Shougang International are associates of Shougang Holding.

(b) Compensation of key management personnel

The remuneration of the Directors and other members of key management during the year was as follows:

Short-term benefits Share-based payments Post-employment benefit	2009 HK$’000 21,962 – 285 22,247	2008 HK$’000 19,251 10,869 296
		30,416

The remuneration of the Directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.

During the year ended 31 December 2008, 41,950,000 share options with an exercise price of HK$0.724 per share were granted to the Directors (2009: Nil).

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group operates in an economic environment currently predominated by entities directly or indirectly owned or controlled by the PRC government (“state-controlled entities”). In addition, the Group itself is a part of a larger group of companies under Shougang Corporation which is controlled by the PRC government. The Directors are of the opinion that transactions with other state-controlled entities are not significant to the Group’s operations.

The Group has entered into various transactions, including deposits placements, borrowings and other general banking facilities, with certain banks and financial institutions which are state-controlled entities in its ordinary course of business. In view of the nature of those banking transactions, the Directors are of the opinion that separate disclosure would not be meaningful. The Directors are of the opinion that transactions with other state-controlled entities are not significant to the Group’s operations.

Details of balances with related parties as at the end of the reporting period are set out in the consolidated statement of financial position and in notes 39.

50. PARTICULARS OF PRINCIPAL SUBSIDIARIES OF THE COMPANY

Details of principal subsidiaries at 31 December 2009 are as follows. The details of changes of subsidiaries as compared with 2008 are set out in Notes (f) and (h):

		Issued and
	Place of	fully paid	Effective
	incorporation	share capital/	equity interest
	or establishment/	contributed	attributable
Name of subsidiary	operation	capital	to the Group	Principal activities
		(Note (a))
Direct subsidiary
SCG Investment	BVI	HK$100,000	100%	Investment holding
(BVI) Limited
Indirect subsidiaries
首方投資管理（深圳）	PRC	HK$230,000,000	100%	Investment holding
有限公司	(Note (b))
Capital Steel Investment
(China) Ltd.*
Concord Grand TV & Movie	BVI	US$1	100%	Investment holding
Investment Limited
Dunley Developments Limited	BVI	US$1	100%	Investment holding
Durali Developments Limited	BVI	US$1	100%	Investment holding
GDC Asset Management Limited	BVI	US$1	53%	Investment holding
	(Note (g))
GDC China Limited	Hong Kong	HK$2	53%	Investment holding
	(Note (g))
GDC Digital Cinema	BVI	US$1	53%	Investment holding
Network Limited	(Note (g))

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Issued and
	Place of	fully paid	Effective
	incorporation	share capital/	equity interest
	or establishment/	contributed	attributable
Name of subsidiary	operation	capital	to the Group	Principal activities
		(Note (a))
GDC Digital Cinema Network	Hong Kong	HK$1	53%	Deployment of digital
Limited	(Note (g))			cinema equipment
GDC Holdings Limited	BVI	US$5,214,181	53%	Investment holding
	(Note (g))
GDC International Limited	Samoa	US$1	53%	Provision of CG animation
	(Note (g))			creation and production
				services
GDC Management Services	Hong Kong	HK$2	53%	Provision of administrative
Limited	(Note (g))			and management
				services
GDC Technology	BVI	HK$23,304,509	33%	Provision of computing
	(Note (i))			solutions for digital
				content distribution
				and exhibitions in
				a worldwide basis
GDC Technology (Hong Kong)	Hong Kong	HK$2	33%	Provision of computing
Limited	(Note (i))			solutions for digital
				content distribution
				and exhibitions
GDC Technology Pte. Ltd.	Singapore	S$900,000	33%	Provision of computing
	(Note (i))			solutions for digital
				content distribution
				and exhibitions in
				a worldwide basis
GDC Technology (USA),	United States	US$1,000	33%	Provision of computing
LLC	(Note (i))			solutions for digital
				content distribution
				and exhibitions
GDC_(Note (c))_	Bermuda	HK$12,952,455	53%	Investment holding
Grand Award Limited	BVI	US$1	100%	Investment holding
Grand Park Investment	Hong Kong	HK$2	100%	Property investment
Limited
Grand Phoenix Limited	BVI	US$1	100%	Investment holding

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Issued and
	Place of	fully paid	Effective
	incorporation	share capital/	equity interest
	or establishment/	contributed	attributable
Name of subsidiary	operation	capital	to the Group	Principal activities
		(Note (a))
環球數碼媒體科技	PRC	US$1,300,000	53%	Provision of CG animation
（上海）有限公司	(Note (b))			training in the PRC
Institute of Digital Media	(Note (g))
Technology (Shanghai)
Limited
環球數碼媒體科技研究	PRC	US$35,353,896	53%	Provision of CG and
（深圳）有限公司	(Note (b))			animation training,
Institute of Digital Media	(Note (g))			development of
Technology (Shenzhen)				multimedia software
Limited				and hardware, and
				provision of related
				technical consultancy
				services in the PRC
Jeckman Holdings Limited	BVI	US$100	100%	Investment holding
Linksky Limited	Hong Kong	HK$2	100%	Property holding
Long Cosmos Investment	Hong Kong	HK$2	100%	Provision of administrative
Limited				and management
				services
Lyre Terrace Management	Hong Kong	HK$1,000,000	100%	Investment holding
Limited				and property
				investment
On Hing Investment	Hong Kong	HK$1,000	100%	Property investment
Company, Limited		(ordinary)
		HK$2,000,000
		(non-voting
		deferred)
SCG Finance Corporation	Hong Kong	HK$20	100%	Provision of financial
Limited				services
SCG Financial	BVI	US$1,000	100%	Investment holding
Investment Limited
SCG Leasing	Hong Kong	HK$2	100%	Property investment
Corporation Limited
Shougang GDC Media Holding	Hong Kong	HK$1	53%	Investment holding
Limited	(Note (g))
South China Leasing	PRC	US$24,000,000	100%	Leasing of property, plant
	(Note (d))			and equipment
	(Note (h))

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Issued and
	Place of	fully paid	Effective
	incorporation	share capital/	equity interest
	or establishment/	contributed	attributable
Name of subsidiary	operation	capital	to the Group	Principal activities
		(Note (a))
Strenbeech Limited	BVI	HK$147,000,008	100%	Investment holding
天津首方投資管理有限公司	PRC	RMB130,000,000	90%	Development of finance
Tianjin Capital Steel Investment	(Note (d))			and assets investment
Management Co. Ltd.*				and management
Tin Fung Investment	Hong Kong	HK$975,000	100%	Property investment
Company, Limited		(ordinary)
		HK$210,000
		(non-voting
		deferred)
Upper Nice Assets Ltd.	BVI	US$1	100%	Investment holding
Valuework Investment Holdings	BVI	US$100	100%	Investment holding
Limited
四方源創國際影視文化傳播	PRC	RMB20,000,000	80%	Production of films and
（北京）有限公司	(Note (d))			television programme
Concord Creation International				series
(Beijing) Company Limited*
廣東四方源創動畫製作	PRC	RMB10,000,000	64%	Provision of graphic
有限公司	(Note (d))			animation creation
Concord Creation Animation
Production Guangdong
Company Limited*
東陽市四方源創影視製作	PRC	RMB1,000,000	80%	Production of films and
有限公司	(Note (d))			television programme
Dongyang Concord Creation Film				series
@TV Company Limited*
東陽方源影視製作有限公司	PRC	RMB1,000,000	80%	Products of films and
Dongyang Creation Film	(Note (d))			television programme
@TV Company Limited*				series
杭州四方源創動畫製作	PRC	RMB3,000,000	64%	Provision of graphic
有限公司	(Note (d))			animation creation
Concord Creation Animation
Production Hangzhou Company
Limited*
深圳市環球數碼科技	PRC	RMB3,000,000	33%	Provision of computing
有限公司	(Note (d))			solutions for digital
Shenzhen GDC Technology Limited*	(Note (i))			content distribution
				and exhibition
深圳市環球數碼影視文化	PRC	RMB3,000,000	53%	Animation investment
有限公司	(Note (d))
Shenzhen GDC Media Culture	(Note (g))
Limited*

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Issued and
	Place of	fully paid	Effective
	incorporation	share capital/	equity interest
	or establishment/	contributed	attributable
Name of subsidiary	operation	capital	to the Group	Principal activities
		(Note (a))
重慶環球數碼動畫有限公司	PRC	RMB10,000,000	53%	Provision of CG and
Chongqing GDC Animation Limited*	(Note (b))			animation training,
	(Note (g))			development of
				multimedia software
				and hardware, and
				provision of related
				technical consultancy
				services in the PRC
深圳市南山區環球數碼	PRC	RMB200,000	53%	Provision of CG and
培訓學校	(Note (e))			animation training
Shenzhen Nanshan GDC	(Note (g))			in the PRC
Training School*
上海環球數碼職業技能	PRC	RMB200,000	53%	Provision of CG and
培訓學校	(Note (e))			animation training
Shanghai GDC Vocation	(Note (g))			in the PRC
Training School*
北京科創環球數碼技術	PRC	RMB200,000	33%	Provision of computer
有限公司	(Note (d))			solutions for digital
Beijing GDC Technology Limited*	(Note (i))			content distribution
				and exhibition
重慶北部新區環球數碼	PRC	RMB100,000	53%	Provision of CG and
動畫職業培訓學校	(Note (e))			animation training
Chongqing New North GDC	(Note (f))			in the PRC
Animation Vocation Training School*	(Note (g))

Note:

(a) All issued share capital are ordinary shares unless otherwise stated.
(b) These entities are wholly foreign owned enterprises.
(c) This entity is listed on the Growth Enterprise Market of the Stock Exchange.
(d) These entities are sino-foreign equity joint venture/enterprises or limited liability enterprises.
(e) These entities are school.
(f) The subsidiary was newly established/incorporated in current year.
(g) 100% ownership interest of these subsidiaries are held by a 53% owned subsidiary of the Group.
(h) This entity became a wholly-owned subsidiary of the Group in 2009. As at 31 December 2008, the Group held 80% equity interest in this entity.
(i) 62% ownership interest of these subsidiaries are held by a 53% owned subsidiary of the Group.

The above table lists the subsidiaries of the Group which, in the opinion of the Directors, principally affected the results or assets and liabilities of the Group. To give details of other subsidiaries would, in the opinion of Directors, result in particulars of excessive length.

None of the subsidiaries had any debt securities subsisting at the end of the year or at any time during the year.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

III. INDEBTEDNESS

Borrowings

At the close of business on 31 March 2010, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Group had outstanding secured bank loans of approximately HK$801,751,000.

Pledge of assets and restricted bank deposits

At the close of business on 31 March 2010, the Group has pledged the following assets to banks as security for the Group’s secured banking facilities:

(i) the Group’s investment properties, prepaid lease payments and construction in progress;
(ii) the Group’s finance lease receivables; and
(iii) certain bank deposits restricted for the repayment of bank borrowings, which will be released upon full settlement of the relevant bank borrowings.

In addition, the Group pledged a bank deposit to a bank to secure for the performance of a construction agreement entered into with an independent third party. The pledged bank deposit will be released upon the settlement of the relevant agreement.

Debt securities

At the close of business on 31 March 2010, the Group had no debt securities.

Contingent liabilities

Save as disclosed in the section headed “Litigations” in Appendix II to this circular, the Group did not have any material contingent liabilities as at the close of business on 31 March 2010.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities, the Group did not have any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptable credits, debentures, mortgages, charges, finance lease commitments, guarantees or other material contingent liabilities at the close of business on 31 March 2010.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

IV. WORKING CAPITAL

After taking into account internal resources and the presently available banking facilities of the Remaining Group, the proceeds from the Disposal, and in the absence of unforeseen circumstances, the Directors are of the opinion that the Remaining Group will have sufficient working capital to meet its present requirements for the next twelve months from the date of this circular.

V. MATERIAL ADVERSE CHANGE

The Directors were not aware of any material adverse change to the financial or trading position of the Group since 31 December 2009, being the date to which the latest published audited accounts of the Company were made up.

VI. FUTURE PROSPECTS

Cultural Recreations Content Provision and Distribution

Digital content distribution and exhibitions

The recent success of 3D feature films drive the quick and great demand of installing digital equipment in cinemas for exhibiting digital contents, digitalisation become more popular. It is expected that the digital conversion will be completed in the coming 5 years and this brings ample business opportunities to the Group. To capture the potential opportunities, the Group not only continues to strengthen its production facilities and improve its production quality, but also advances its technology through research and development to provide superior digital delivery and display solutions to our customers.

The Group continues to promote its products through participating in international trade exhibitions and high profile demonstration projects, and develop products that aim at meeting more than the standard Digital Cinema Initiative (“DCI”) specifications. In April 2009, the Group completed the integration of a 3D EQ technology to its digital cinema server, which can provide film distributors with significant savings in millions by adopting DCI requirement of a single 3D DCP format for digital cinema distribution. In December 2009, the Group announced a new product, digital cinema Integrated Media Block (“IMB”), with one of the leading digital cinema projector manufacturer that can be seamlessly integrated into a brand new generation of projector, DLP Cinema[®] Series 2 projector. Recently, the Group also demonstrates its fifth generation digital cinema server which is capable of working with the DLP Cinema[®] Series 2 projector and begins shipping in the year 2010.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Deployment of digital cinema network in Asia

The Group’s cooperation with some major Hollywood studios for digital cinema deployment in Asia (except the PRC) under virtual print fee (“VPF”) arrangement signals the on-going commitment to Asian exhibitors as a trusted partner in digital conversion and enables both distributors and exhibitors to reap substantial benefits of digital cinema: high quality nondegradable prints, new programming opportunities such as premium digital 3D films, alternative content and live satellite events, vastly reduced print, production and logistics costs, and better protection against piracy. This shows that the Group has started a lead in the market and gained international recognition and reputation in digital content development industry, which strengthening the competitive edges to capture this growing market.

At present, the Group has signed up two major exhibitors in Hong Kong to participate in the VPF arrangement and endeavors to sign up with more in the coming future.

CG creation and production

In addition to nearly concluding production of several series two of successful projects with existing customers, the Group is actively looking for new customers, including world leading entertainment brands, for animated television series and films. Some new projects are under negotiations, one of these has commenced production in January 2010 while another two are in the testing stage.

Besides, the success of distribution of a Belgium 3D animation film “Fly Me to the Moon” in over 300 digital cinema multiplexes across the PRC results in continuous cooperation of another film with this Belgium distributor. The Group is also actively engaged in co-production and distribution deals with the world leading studios to accumulate more IP asset for long term financial upside, several international companies also approach the Group for production of 3D films, coproduction, distribution and other business. At the same time, because of growing in 3D film market worldwide and animation industry in the PRC, the Group also plans to produce more 3D animation projects in the future.

Furthermore, with the support of the local municipal government, the Group is constructing its headquarters building at Shenzhen High-tech Industrial Park and the construction is scheduled to be completed in second half of the year 2010. Upon completion, the Group can expand its research, development and production centre, the CG production capacity and efficiency will enhance further at that time.

CG training

CG training division continues to pursue, as a core component of its strategy, towards professionalism and strengthening of its training materials, it continuously recorded nearly 100% employment of graduates and received more support from the PRC government.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

After upgrading the existing training courses for the knowledge of CG production, online and other games, the Group will organise new professional training programmes in other areas, including after effects, virtual reality and case studies for animation, in response to the market needs. Besides, the Group continues to co-operate with prominent high schools in the PRC for organising “Skill and Qualification” training programme to their students in achieving “One Course, Several Certificates”, and to train up their practical skills to get ready for work immediately after graduation.

In addition to the Group’s training centres in Shanghai, Shenzhen, Wuxi, Chongqing and Guangzhou, the Group plans to set up one more site in the North to provide all-round coverage in the PRC, with a view to stimulating and promoting its training business to those areas with developed animation industry and expanding further its training network.

Financial Service Provision

Finance leasing

In view of the rebound of global and the PRC economies, the finance leasing business in the PRC is expected to expand continuously. The Group will focus on finance leasing of large development projects and explore different financing methods to lower its finance costs. Besides, the Group will further improve the current credit procedures to existing clients and new financing lease project and monitor the risks cautiously to response volatile market conditions and changes.

Property Investment and Management

The Group is receiving stable cash flow from rental income and expects that the investment properties in Hong Kong will continue to contribute stable cash return in the foreseeable future.

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

(a) Interests and short positions of the Directors in shares and underlying shares of the Company and its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which (a) 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 (b) were required, pursuant to Section 352 of the SFO, to be entered in the register of the Company referred to therein; or (c) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “ Model Code ”) contained in the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

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

Capacity in Name of which interests Director are held	Number of shares/underlying Total interests shares in the Company as to % of the Interests in issued share Interests underlying Total capital of the in shares shares interests Company*
Wang Qinghai Beneficial owner Cao Zhong Beneficial owner Chen Zheng Beneficial owner Wang Tian Beneficial owner Yuan Wenxin Beneficial owner Leung Shun Sang, Tony Beneficial owner Tam King Ching, Kenny Beneficial owner Zhou Jianhong Beneficial owner Yip Kin Man, Raymond Beneficial owner	– 11,368,000 11,368,000 0.98% – 22,868,000 22,868,000 1.98% – 18,368,000 18,368,000 1.59% 4,000,000 11,094,000 15,094,000 1.31% 4,000,000 15,094,000 19,094,000 1.65% 8,278,000 19,368,679 27,646,679 2.40% – 2,286,000 2,286,000 0.19% – 2,286,000 2,286,000 0.19% – 2,286,000 2,286,000 0.19%

The relevant interests are unlisted physically settled options granted pursuant to the Company’s share option scheme adopted on 7 June 2002 (the “ Scheme ”). Upon exercise of the share options in accordance with the Scheme, Shares are issuable. The share options are personal to the respective Directors.

APPENDIX II

GENERAL INFORMATION

(ii) Long positions in the shares and underlying shares of Global Digital Creations Holdings Limited (“ GDC ”), an associated corporation of the Company

Capacity in which interests Name of Director are held	Number of shares/underlying Total interests shares in GDC as to % of Interests in the issued Interests underlying Total share capital in shares shares interests of GDC*
Cao Zhong Beneficial owner Chen Zheng Beneficial owner Wang Tian Beneficial owner Leung Shun Sang, Tony Beneficial owner Zhou Jianhong Beneficial owner	26,942,000 4,900,000 31,842,200 2.45% 8,718,200 4,900,000 13,618,200 1.05% 820 – 820 0.00% 20,008,200 4,900,000 24,908,200 1.92% 500,615 – 500,615 0.03%

The relevant interests are unlisted physically settled options granted pursuant to GDC’s share option scheme adopted on 18 July 2003 (the “ GDC Scheme ”). Upon exercise of the share options in accordance with the GDC Scheme, ordinary shares of HK$0.01 each in the share capital of GDC are issuable. The share options are personal to the respective Directors.
(iii) Long positions in the shares and underlying shares of GDC Technology Limited (“ GDC Tech ”), an associated corporation of the Company

Capacity in which interests Name of Director are held	Number of shares/underlying Total interests shares in GDC Tech as to % of the Interests issued share Interests in underlying Total capital of in shares shares interests GDC Tech*
Cao Zhong Beneficial owner Chen Zheng Beneficial owner Leung Shun Sang, Tony Beneficial owner	8,533,334 1,650,000 10,183,334 4.36% 8,533,334 1,650,000 10,183,334 4.36% 2,130,000 1,650,000 3,780,000 1.62%

The relevant interests are unlisted physically settled options granted pursuant to GDC Tech’s share option scheme adopted on 19 September 2006 (the “ GDC Tech Scheme ”). Upon exercise of the share options in accordance with the GDC Tech Scheme, ordinary shares of HK$0.10 each in the share capital of GDC Tech are issuable. The share options are personal to the respective Directors.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporation (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to Section 352 of the SFO, to be entered in the register of the Company referred to therein; or (c) pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

GENERAL INFORMATION

APPENDIX II

Save as disclosed in this circular, none of the Directors or proposed Director is a director or employee of a company which has an interest in the shares and underlying shares of the Company which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO.

(b) Directors’ service contracts

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group or any associated company of the Company (excluding contracts expiring or determinable within one year without payment of compensation other than statutory compensation).

(c) As at the Latest Practicable Date:

(i) none of the Directors had any direct or indirect interest in any assets which have been, since the date to which the latest published audited accounts of the Group were made up, acquired or disposed of by, or leased to the Company or any of its subsidiaries, or are proposed to be acquired or disposed of by, or leased to, the Company or any of its subsidiaries; and
(ii) none of the Directors is materially interested in any contract or arrangement entered into by the Company or any of its subsidiaries which contract or arrangement is subsisting at the date of this circular and which is significant in relation to the business of the Group.

(d) Directors’ interests in competing businesses

As at the Latest Practicable Date, the interests of the Directors in the businesses (other than those businesses where the Directors were appointed as directors to represent the interests of the Company and/or any member of the Group) which were considered to compete or were likely to compete, either directly or indirectly, with the businesses of the Group were as follows:

	Name of entity whose	Description of businesses
	businesses were considered to	of the entity which were
	compete or likely to	considered to compete or	Nature of interest
Name of	compete with the businesses	likely to compete with the	of the Director in
Director	of the Group	businesses of the Group	the entity
Wang Qinghai	Shougang Corporation#	Property investment	Director
Cao Zhong	China Shougang International	Property investment	Director
	Trade and Engineering
	Corporation#
	Shougang Holding	Property investment	Director
	(Hong Kong) Limited
	(“Shougang Holding”)#

GENERAL INFORMATION

APPENDIX II

The Board is independent from the boards of the above-mentioned entities and is accountable to the Shareholders. Coupled with the diligence of its independent non-executive Directors whose views carry significant weight in the Board’s decisions, the Group is capable of carrying on its businesses independently of, and at arm’s length from, the businesses of these entities.

Save as disclosed above, as at the Latest Practicable Date, in so far as the Directors were aware, none of the Directors or their respective associates had any interest in a business that competed or was likely to compete with the business of the Group.

3. SUBSTANTIAL SHAREHOLDERS

(a) As at the Latest Practicable Date, according to the register kept by the Company pursuant to Section 336 of the SFO, the following persons and companies (other than the Directors or chief executive of the Company) had an interest or short position in the shares and the underlying shares of the Company which would fall to be disclosed to the Company under the provisions of the Divisions 2 and 3 of Part XV of the SFO:

Long positions in the Shares

			Interests as to
			% of the issued
	Capacity in which	Number of	share capital of
Name of Shareholder	interests are held	shares	the Company	*Note(s)*
Shougang Holding	Interests of controlled	430,491,315	37.37%	1
	corporations
Wheeling Holdings Limited	Beneficial owner	430,491,315	37.37%	1
(“Wheeling”)
Cheung Kong (Holdings)	Interests of controlled	133,048,717	11.55%	2, 3
Limited (“Cheung Kong”)	corporations
Max Same Investment Limited	Beneficial owner	91,491,193	7.94%	2
(“Max Same”)
Li Ka-shing	Interests of controlled	133,048,717	11.55%	3
	corporations, founder of
	discretionary trusts
Li Ka-Shing Unity Trustee	Trustee	133,048,717	11.55%	3
Company Limited (“TUT1”)
Li Ka-Shing Unity Trustee	Trustee, beneficiary	133,048,717	11.55%	3
Corporation Limited (“TDT1”)	of a trust
Li Ka-Shing Unity Trustcorp	Trustee, beneficiary	133,048,717	11.55%	3
Limited (“TDT2”)	of a trust

GENERAL INFORMATION

APPENDIX II

Notes:

Shougang Holding indicated in its disclosure form dated 18 February 2010 (being the latest disclosure form filed up to the Latest Practicable Date) that as at 12 February 2010, its interests were the Shares held by Wheeling, a wholly-owned subsidiary of Shougang Holding.
Cheung Kong indicated in its disclosure form dated 26 February 2005 (being the latest disclosure form filed up to the Latest Practicable Date) that as at 23 February 2005, its interests included 91,491,193 Shares held by Max Same, a wholly-owned subsidiary of Cheung Kong.
Li Ka-Shing Unity Holdings Limited (“ Unity Holdco ”), of which each of Mr. Li Ka-shing, Mr. Li Tzar Kuoi, Victor and Mr. Li Tzar Kai, Richard was interested in one-third of the entire issued share capital, owned the entire issued share capital of TUT1. TUT1 as trustee of The Li Ka-Shing Unity Trust (“ UT1 ”), together with certain companies which TUT1 as trustee of UT1 was entitled to exercise or control the exercise of more than one-third of the voting power at their general meetings, held more than one-third of the issued share capital of Cheung Kong.

In addition, Unity Holdco also owned the entire issued share capital of TDT1 as trustee of The Li Ka-Shing Unity Discretionary Trust (“ DT1 ”) and TDT2 as trustee of another discretionary trust (“ DT2 ”). Each of TDT1 and TDT2 held units in UT1.

By virtue of the SFO, each of Mr. Li Ka-shing, being the settlor and may being regarded as a founder of each of DT1 and DT2 for the purpose of the SFO, TUT1, TDT1 and TDT2 was deemed to be interested in the same block of Shares in which Cheung Kong was interested under the SFO.

(b) As at the Latest Practicable Date, so far as is known to any Director, the following persons and companies were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group or had any option in respect of such capital:

		Name of	% of
Name of registered	Name of	member of	attributable
shareholder(s)	beneficial owner	the Group	interest
Zhou Lin	Zhou Lin	四方源創國際影視文化傳播	20.00%
		(北京)有限公司
		(Concord Creation
		International (Beijing)
		Company Limited*)
		(“Concord Creation”)
Yang Yong	Yang Yong	廣東四方源創動畫製作有限公司	20.00%
		(Concord Creation Animation
		Production Guangdong
		Company Limited*)
		(“Guangdong Creation”)
Concord Creation	Zhou Lin	Guangdong Creation	16.00%
			(Note 1)

APPENDIX II

GENERAL INFORMATION

		Name of	% of
Name of registered	Name of	member of	attributable
shareholder(s)	beneficial owner	the Group	interest
Concord Creation	Zhou Lin	東陽市四方源創影視	20.00%
		製作有限公司	(Note 2)
		(Dongyang Concord Creation
		Film@TV Company
		Limited) (“Dongyang*
		Concord Creation”)
Cao Zhong and	Zhou Lin	東陽方源影視製作有限公司	20.00%
Zhou Lin		(Dongyang Creation	(Note 3)
		Film@TV Company Limited*)
		(“Dongyang Creation”)
Guangdong Creation	Zhou Lin	杭州四方源創動畫製作	16.00%
and Chen Zheng		有限公司	(Note 4)
		(Concord Creation Animation
		Production Hangzhou
		Company Limited*)
		(“Hangzhou Creation”)
Guangdong Creation	Yang Yong	Hangzhou Creation	20.00%
and Chen Zheng			(Note 5)
Greater Appeal	Greater Appeal	GDC Tech	22.47%
Investments Limited
(“Greater Appeal”)
GDC Tech	Greater Appeal	GDC Technology Pte Ltd	22.47%
			(Note 6)
GDC Tech	Greater Appeal	GDC Technology China Limited	22.47%
			(Note 6)
GDC Tech	Greater Appeal	GDC Technology	22.47%
		(Hong Kong) Limited	(Note 6)
GDC Tech	Greater Appeal	GDC Technology (USA), LLC	22.47%
			(Note 6)

APPENDIX II

GENERAL INFORMATION

		Name of	% of
Name of registered	Name of	member of	attributable
shareholder(s)	beneficial owner	the Group	interest
Chen Zheng and	Greater Appeal	深圳市環球數碼科技有限公司	22.47%
環球數碼媒體		(Shenzhen GDC Technology	(Note 7)
科技研究（深圳）		Limited*)
有限公司		(“Shenzhen GDC Tech”)
(Institute of Digital
Media Technology
(Shenzhen) Limited*)
(“Shenzhen IDMT”)
Shenzhen GDC Tech	Greater Appeal	北京科創環球數碼技術有限公司	22.47%
		(Beijing GDC Technology	(Note 8)
		Limited*)
		(“Beijing GDC Tech”)
天津渤海灣投資	Beihai Investment	天津首方投資管理有限公司	10.00%
管理有限公司		(Tianjin Capital Steel
(Tianjin Beihai		Investment Management
Bay Investment		Co. Ltd.*)
Management		(“Tianjin Capital Steel”)
Company Limited*)
(“Beihai Investment”)

Notes:

Guangdong Creation was held as to 80.00% by Concord Creation. As Concord Creation was beneficially held as to 20.00% by Zhou Lin, Guangdong Creation was deemed to be held as to 16.00% by Zhou Lin.
Dongyang Concord Creation was held as to 90.00% by Concord Creation. As Concord Creation was beneficially held as to 20.00% by Zhou Lin, Dongyang Concord Creation was deemed to be held as to 18.00% by Zhou Lin. Together with Zhou Lin’s beneficial interest of 2.00% held in Dongyang Concord Creation through another nominee, Zhou Lin has an aggregate interest of 20.00% in Dongyang Concord Creation.
Dongyang Creation was beneficially held as to 100.00% by Concord Creation which included its beneficial interests of 80.00% and 20.00% held in Dongyang Creation through its nominees, Cao Zhong and Zhou Lin, respectively. As Concord Creation was beneficially held as to 20.00% by Zhou Lin, Dongyang Creation was deemed to be held as to 20.00% by Zhou Lin.
Hangzhou Creation was beneficially held as to 100.00% by Guangdong Creation which included its beneficial interest of 10.00% held in Hangzhou Creation through its nominee, Chen Zheng. As Guangdong Creation was deemed to be beneficially held as to 16.00% by Zhou Lin, Hangzhou Creation was deemed to be held as to 16.00% by Zhou Lin.
Hangzhou Creation was beneficially held as to 100.00% by Guangdong Creation which included its beneficial interest of 10.00% held in Hangzhou Creation through its nominee, Chen Zheng. As Guangdong Creation was held as to 20.00% by Yang Yong, Hangzhou Creation was deemed to be held as to 20.00% by Yang Yong.

APPENDIX II

GENERAL INFORMATION

Each of GDC Technology Pte Ltd, GDC Technology China Limited, GDC Technology (Hong Kong) Limited and GDC Technology (USA), LLC was held as to 100.00% by GDC Tech. As GDC Tech was held as to 22.47% by Greater Appeal, each of GDC Technology Pte Ltd, GDC Technology China Limited, GDC Technology (Hong Kong) Limited and GDC Technology (USA), LLC was deemed to be held as to 22.47% by Greater Appeal.
Shenzhen GDC Tech was beneficially held as to 100.00% by GDC Tech which included its beneficial interests of 51.00% and 49.00% held in Shenzhen GDC Tech through its nominees, Chen Zheng and Shenzhen IDMT, respectively. As GDC Tech was held as to 22.47% by Greater Appeal, Shenzhen GDC Tech was deemed to be held as to 22.47% by Greater Appeal.
Beijing GDC Tech was beneficially held as to 100.00% by Shenzhen GDC Tech. As Shenzhen GDC Tech was deemed to be beneficially held as to 22.47% by Greater Appeal, Beijing GDC Tech was deemed to be held as to 22.47% by Greater Appeal.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company was aware of any other person or corporation who had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who/which was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group, or any options in respect of such capital.

4. MATERIAL CONTRACTS

The following material contracts (not being contracts entered into in the ordinary course of business) had been entered into by the Group within the two years preceding the date of this circular and up to the Latest Practicable Date:

(i) the agreement dated 30 January 2009 entered into between Tianjin Capital Steel, a 90% indirect subsidiary of the Company, and 中國東方資產管理公司石家莊辦事處 (China Orient Asset Management Corporation Shijiazhuang Branch) (“ China Orient Asset ”) in relation to the acquisition by Tianjin Capital Steel of non-performing loans extended to 河北長天集團有限公司 (Hebei Chang Tian Group Limited) (“ Chang Tian ”) and interests accrued thereon with a carrying amount of approximately RMB41.5 million (equivalent to approximately HK$47.1 million) for a consideration of RMB9 million (equivalent to approximately HK$10.2 million);
(ii) the agreement dated 30 January 2009 entered into between Tianjin Capital Steel and China Orient Asset in relation to the acquisition by Tianjin Capital Steel of the non-performing loans extended to 河北劉伶醉酒廠 (Hebei Liu Ling Zui Distillery*), an enterprise established in the PRC and a wholly-owned subsidiary of Chang Tian, and interests accrued thereon with a carrying amount of approximately RMB66.5 million (equivalent to approximately HK$75.6 million) for a consideration of RMB19 million (equivalent to approximately HK$21.6 million);

APPENDIX II

GENERAL INFORMATION

(iii) the agreement dated 9 January 2009 entered into between Shenzhen IDMT, a wholly foreign owned enterprise established in the PRC and an indirect non-wholly owned subsidiary of the Company, and 中國電影集團公司 (China Film Group Corporation) (“ China Film ”) in relation to the disposal of 445 units of digital cinema equipments by Shenzhen IDMT to China Film for cash at a total consideration of RMB223,791,600 (equivalent to approximately HK$254 million);
(iv) the agreement dated 23 December 2008 entered into between GDC Holdings Limited (“ GDC Holdings ”), an indirect non-wholly owned subsidiary of the Company, Southern International Limited (“ Southern International ”) and Keen Front Group Limited in relation to the granting of the facility of RMB100 million (equivalent to approximately HK$113.6 million) by GDC Holdings and/or its designated company to Southern International, and the granting of call options by Southern International to GDC Holdings and/or its designated company;
(v) the supplemental agreement dated 22 September 2008 entered into between Shougang GDC Media Holding Limited, an indirect non-wholly owned subsidiary of the Company, and China Film, in relation to the sale of digital cinema equipments to 中影首鋼環球數碼數字影院建設（北京）有限公司 (CFGDC Digital Cinema Company Limited), which was subsequently agreed to be terminated by both parties on 28 November 2008;
(vi) the share transfer agreement dated 20 August 2008 entered into between Capital Steel and 深圳市嘉殷達投資有限公司 (Shenzhen Jiayinda Investment Company Limited) (“ Shenzhen Jiayinda* ”) in respect of the transfer of 20% equity interest in the registered capital of South China International Leasing Co., Ltd. from Shenzhen Jiayinda to Capital Steel at a consideration of RMB31,755,150 (equivalent to approximately HK$36.1 million); and
(vii) the co-operation agreement dated 12 August 2008 entered into between the Company and 中國光大投資管理公司 (China Everbright Investment Management Corporation) for the establishment of a joint venture company in Tianjin, the PRC to engage in the acquisition and management of non-performing assets in the PRC.

Save as disclosed above, the Company has not entered into any material contracts (not being contracts entered into in the ordinary course of business) within the two years immediately preceding the date of this circular which are or may be material.

GENERAL INFORMATION

APPENDIX II

5. LITIGATIONS

As at the Latest Practicable Date, the Group was engaged in the following litigations of material importance:

(i) On 14 May 2003, GDC Entertainment Limited (“ GDC Entertainment ”), an indirect nonwholly owned subsidiary of the Company, entered into a co-production agreement (the “ Coproduction Agreement ”) with Westwood Audiovisual and Multimedia Consultants, Inc. (“ WAMC ”) and Production and Partners Multimedia, SAS (“ P&PM ”) in relation to an animated television series.

In relation to the French proceedings, the Group’s French legal advisers had advised that the enforcement of P&PM’s and WAMC’s claims should only be limited to the assets of GDC Entertainment.

P&PM and WAMC have applied to the arbitrator for the determination of a preliminary issue as to whether the arbitrator has jurisdiction to hear the dispute which GDC Entertainment will refer to the arbitrator in the arbitration. The hearing of the application was held on 20 January 2006. Award of the arbitrator was published on the Issue of Jurisdiction on 23 March 2006 dismissing the application, and made an order for costs in GDC Entertainment’s favour in respect of the application. Since then, there has been no further step taken by the parties. GDC Entertainment has written to the arbitrator seeking directions for the further conduct of the arbitration, including the service of pleadings in the arbitration.

Effective from 1 May 2008, GDC Entertainment had been struck off but can be restored at any time up to ten years after the strike off date.

APPENDIX II

GENERAL INFORMATION

(ii) On 7 April 2010, GDC, a subsidiary of the Company whose shares are listed on the Growth Enterprise Market of the Stock Exchange, received an original complaint for damages and injunctive relief, and demand for jury trial (the “Proceeding”) filed with the District Court, Central District of California Western Division of the United States by X6D Limited, X6D USA Inc. and XpanD, Inc. on 30 March 2010 against, among others, GDC and certain of its subsidiaries namely GDC Technology Limited, GDC Technology China Limited and GDC Technology (USA) LLC, (collectively, the “Defendants”) for copyright infringement, design patent infringement, misrepresentation of origin of goods, misappropriation of trade secrets, unfair competition, breach of contract and tortuous interference with contractual and business relations in relation to the 3D glasses sold by the Defendants. Sale of 3D glasses is not a core business of the Group. GDC is seeking legal advice and in the process of collecting information in relation to the Proceeding.

Save as disclosed above, neither the Company nor any other members of the Group was engaged in any litigation or arbitration of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against any member of the Group as at the Latest Practicable Date.

6. MISCELLANEOUS

(a) The registered office of the Company is at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda and the principal place of business of the Company in Hong Kong is at Rooms 1101-4, 11th Floor, Harcourt House, 39 Gloucester Road, Wanchai, Hong Kong.
(b) The Company’s Hong Kong branch share registrars and transfer office is Tricor Tengis Limited, 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
(c) The company secretary of the Company is Ms. Cheng Man Ching, who is a fellow member of each of The Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Chartered Secretaries and an associate member of the Hong Kong Institute of Bankers. She holds a master degree in business administration and a master degree in arts.
(d) The English text of this circular shall prevail over the Chinese text.

GENERAL INFORMATION

APPENDIX II

7. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the Company’s principal place of business in Hong Kong at Rooms 1101-4, 11th Floor, Harcourt House, 39 Gloucester Road, Wanchai, Hong Kong from the date of this circular up to and including 18 May 2010:

(a) the bye-laws of the Company;
(b) the material contracts referred to under the section headed “Material Contracts” in this appendix;
(c) the annual reports of the Company for years ended 31 December 2008 and 31 December 2009;
(d) the Share Transfer Agreement; and
(e) this circular.

NOTICE OF SPECIAL GENERAL MEETING

**首長四方（集團）有限公司[*] SHOUGANG CONCORD GRAND (GROUP) LIMITED** (Incorporated in Bermuda with limited liability)

(Stock Code: 730)

NOTICE IS HEREBY GIVEN that a special general meeting of Shougang Concord Grand (Group) Limited (the “ Company ”) will be held at 10:25 a.m. on Tuesday, 8 June 2010 at JW Marriott Ballroom, Level 3, JW Marriott Hotel Hong Kong, Pacific Place, 88 Queensway, Hong Kong for the purpose of considering and, if thought fit, passing with or without amendments, the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT

(a) the share transfer agreement dated 16 March 2010 (the “ Share Transfer Agreement ”) entered into between SCG Investment (BVI) Limited (“ SCG ”) as the vendor, a wholly-owned subsidiary of the Company, Best China Enterprises Limited (“ Best China ”) as the purchaser and Ms. Fan Wen Zhen as the guarantor, a copy of which is tabled at the meeting and marked A and initialled by the chairman of the meeting for identification purpose, pursuant to which SCG has agreed to sell 1 share of US$1.00, representing the entire issued share capital of Grand Award Limited, an indirect wholly-owned subsidiary of the Company, and to assign the loan with an outstanding amount of HK$251,285,339.39 to Best China for an aggregate consideration of HK$247,920,007.75 be and is hereby approved, confirmed and ratified; and
(b) any one director of the Company, or any two directors of the Company if the affixation of the common seal of the Company is necessary, be and is/are hereby authorised for and on behalf of the Company to execute all such other documents, instruments and agreements and to do all such acts or things deemed by him/her/them to be incidental to, ancillary to or in connection with the matters contemplated in and for completion of the transactions contemplated under the Share Transfer Agreement.”

By Order of the Board

Shougang Concord Grand (Group) Limited Cao Zhong

Vice Chairman and Managing Director

Hong Kong, 4 May 2010

NOTICE OF SPECIAL GENERAL MEETING

Notes:

Any member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote instead of him. Only a member of the Company may be appointed to act as a proxy.
The instrument appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorized in writing or, if the appointer is a corporation, either under its common seal or under the hand of any officer, attorney or other person duly authorised to sign the same.
In order to be valid, a form of proxy together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of that power or authority must be deposited with the Company’s Hong Kong branch share registrars and transfer office, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time fixed for holding the meeting or any adjourned meeting thereof (as the case may be).
Completion and return of the form of proxy will not preclude a member from attending and voting in person at the meeting or any adjourned meeting thereof (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoked.
Where there are joint registered holders of any share, any one of such joint holders may vote at the meeting, either in person or by proxy, in respect of such shares as if he/she was solely entitled thereto, but if more than one of such joint holders are present at the meeting, whether in person or by proxy, that one of the said persons so present whose name stands first on the register of members in respect of such shares shall be accepted to the exclusion of the votes of the other registered holders.

AI assistant

Ulferts International Limited — Proxy Solicitation & Information Statement 2010

50108_rns_2010-05-03_147701ad-d0a8-4deb-9f18-90271df373c9.pdf

MAJOR TRANSACTION IN RELATION TO THE DISPOSAL OF GRAND AWARD LIMITED

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LETTER FROM THE BOARD

首長四方（集團）有限公司[*] SHOUGANG CONCORD GRAND (GROUP) LIMITED (Incorporated in Bermuda with limited liability)

MAJOR TRANSACTION IN RELATION TO THE DISPOSAL OF GRAND AWARD LIMITED

INTRODUCTION

THE SHARE TRANSFER AGREEMENT

Parties to the agreement:

The Disposal

LETTER FROM THE BOARD

Consideration

Condition

LETTER FROM THE BOARD

REASONS FOR THE TRANSACTION

FINANCIAL EFFECT OF THE TRANSACTION

LETTER FROM THE BOARD

GENERAL

SPECIAL GENERAL MEETING

RECOMMENDATION

I. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP FOR THE THREE FINANCIAL YEARS ENDED 31 DECEMBER 2007, 2008 AND 2009

Results

APPENDIX I

Financial position

II. EXTRACT FROM THE ANNUAL REPORT OF THE COMPANY FOR THE YEAR ENDED 31 DECEMBER 2009

Consolidated Statement of Comprehensive Income

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Financial Position

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Changes in Equity

APPENDIX I

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Statement of Cash Flows

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

HKAS 1 (revised in 2007) “Presentation of Financial Statements”

HKFRS 8 Operating Segments

Improving Disclosures about Financial Instruments

(Amendments to HKFRS 7 “Financial Instruments: Disclosures”)

APPENDIX I

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidation

Business combinations

Acquisition of additional interest in a subsidiary

Goodwill

Investments in associates

Revenue recognition

APPENDIX I

Property, plant and equipment

Investment properties

Leasing

APPENDIX I

The Group as lessor

The Group as lessee

Leasehold land and building

Foreign currencies

Borrowing costs

APPENDIX I

Government grants

Retirement benefits costs

Taxation

APPENDIX I

Intangible assets

Research and development expenditure

Inventories

Production work in progress

Financial instruments

Ulferts International Limited Proxy Solicitation & Information Statement 2010

**首長四方（集團）有限公司[*] SHOUGANG CONCORD GRAND (GROUP) LIMITED** (Incorporated in Bermuda with limited liability)