Uni-Bio Science Group Limited - Proxy Solicitation & Information Statement 2013

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Uni-Bio Science Group Limited (“ Company ”), you should at once hand this circular and the accompanying form of proxy to the purchaser, the transferee or to the bank, licensed securities, dealer registered institution in securities, or other agent through whom the sale or transfer was effected for 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.

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(incorporated in the Cayman Islands with limited liability)

(stock code: 690)

(1) PROPOSED OPEN OFFER OF NOT LESS THAN 1,564,846,293 OFFER SHARES AND NOT MORE THAN 1,644,023,148 OFFER SHARES AT HK$0.16 PER OFFER SHARE ON THE BASIS OF 1 OFFER SHARE FOR EVERY 1 EXISTING SHARE HELD ON THE RECORD DATE WITH THE BONUS ISSUE ON THE BASIS OF 1 BONUS SHARE FOR EVERY 1 OFFER SHARE TAKEN UP AND 1 BONUS WARRANT FOR EVERY 2 OFFER SHARES TAKEN UP UNDER THE OPEN OFFER; (2) APPLICATION FOR WHITEWASH WAIVER; (3) CONNECTED TRANSACTION IN RESPECT OF UNDERWRITING AGREEMENT; AND (4) NOTICE OF EXTRAORDINARY GENERAL MEETING

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

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Fortune Financial Capital Limited

Underwriters

Lord Profit Limited and Prominence Financials Limited

A letter of advice from the Independent Financial Adviser, to the Independent Board Committee and the Independent Shareholders of the Company is set out on pages 40 to 67 of this circular. The recommendation of the Independent Board Committee to the Independent Shareholders is set out on pages 38 to 39 of this circular.

It should be noted that the Underwriting Agreement contains provisions granting the Underwriters the right to terminate the obligations of the Underwriter thereunder on the occurrence of certain events. These certain events are set out in the section headed “Termination of the Underwriting Agreement” on pages 10 to 11 of this circular. If the Underwriting Agreement is terminated by the Underwriters or does not become unconditional, the Open Offer and the Bonus Issue will not proceed.

A notice convening the EGM to be held at Montparnasse Room I-II, 2/F, Regal Kowloon Hotel, 71 Mody Road, Tsimshatsui, Hong Kong at 11:00 a.m. on Thursday, 29 August 2013 is set out on pages EGM-1 to EGM-4 of this circular. A form of proxy for use at the meeting is enclosed. Whether or not you intend to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Hong Kong branch share registrar and transfer office of the Company, Tricor Abacus Limited, 26/F, 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 the holding of the meeting or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so desire. In such event, the instrument appointing a proxy will be deemed to be revoked.

13 August 2013

For identification purpose only

CONTENTS

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		8
Termination of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .		10
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		12
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . .		38
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . .		40
Appendix IA	– Financial information of the Group . . . . . . . . . . . . . . . .	IA-1
Appendix IB	– Financial information of the Group
	for the year ended 31 March 2013 . . . . . . . . . . . . . . . .	IB-1
Appendix IC	– Financial information of the Group
	for the year ended 31 March 2012 . . . . . . . . . . . . . . . .	IC-1
Appendix ID	– Financial information of the Group
	for the year ended 31 March 2011 . . . . . . . . . . . . . . . .	ID-1
Appendix II	– Unaudited pro forma financial information
	of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
Appendix III	– Summary of terms of Bonus Warrants . . . . . . . . . . . . . .	III-1
Appendix IV	– General information . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		EGM-1

– i –

DEFINITIONS

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

“acting in concert”
has the meaning ascribed to it by the Takeovers Code
“Announcement”
the announcement of the Company dated 10 July 2013 in relation to, among other matters, the Underwriting Agreement, the Open Offer with the Bonus Issue and the Whitewash Waiver
“Application Form(s)”
the form(s) of application in respect of the Offer Shares and in respect of the excess Offer Shares
“ARL Undertaking”
the undertaking in relation to the acceptance of the Committed Shares to be signed by Automatic Result and delivered to the Company as one of the conditions precedent to the obligations of the Underwriters to underwrite the Underwritten Shares under the Underwriting Agreement pursuant to the Underwriting Agreement
“Articles of Association”
the articles of association of the Company, as amended from time to time
“associate(s)”
has the meaning ascribed to it under the Listing Rules
“Automatic Result”
Automatic Result Limited, a company incorporated in the British Virgin Islands with limited liability, which is solely owned by Mr. Tong and of which Mr. Liu is the sole director
“Board”
the board of Directors
“Bonus Issue”

the issue of the Bonus Shares and the Bonus Warrants pursuant to the terms and conditions of the Underwriting Agreement

“Bonus Share(s)”

the bonus Share(s) to be issued (for no additional payment) to the first holder of the Offer Shares on the basis of one Bonus Share for every one Offer Share taken up under the Open Offer subject to the terms and conditions set out in the Underwriting Agreement

– 1 –

DEFINITIONS

“Bonus Warrant(s)”
the bonus warrant(s) to be issued by the Company to the first holder of the Offer Shares on the basis of one Bonus Warrant for every two Offer Shares taken up under the Open Offer, conferring rights on the holder(s) thereof to subscribe for the Warrant Share(s) at the Exercise Price
“Business Day”
a day, other than Saturday or a day on which a tropical cyclone warning signal No. 8 or above or a black rainstorm warning signal is hoisted in Hong Kong at any time between 9:00 a.m. and 4:00 p.m. on which banks generally are open for business in Hong Kong
“CCASS”
the Central Clearing and Settlement System established and operated by HKSCC
“Committed Shares”
being the 302,918,844 Offer Shares which Automatic Result irrevocably undertakes to accept as assured allotment under the Open Offer pursuant to the ARL Undertaking (representing the Open Offer to be allotted to Automatic Result on assured basis)
“Company”
Uni-Bio Science Group Limited, an exempted company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Main Board of the Stock Exchange
“Completion”
completion of the Open Offer
“Director(s)” the director(s) of the Company
“Effective Price”
HK$0.08 per Offer Share, being the effective price for each Offer Share taking into account of one nil paid Bonus Share being issued with one fully paid Offer Share
“EGM”
the extraordinary general meeting of the Company to be convened to consider and, if thought fit, approve (i) the Underwriting Agreement, the Open Offer with the Bonus Issue and (ii) the Whitewash Waiver (or any adjournment thereof)

– 2 –

DEFINITIONS

“Excluded Shareholders”
“Executive”
“Exercise Price”
“Existing Share Options”
“Group”
“HKSCC”
“Hong Kong”
“Independent Board Committee”
the Overseas Shareholders whom the Board, based on legal opinions provided by legal advisers if the Board considers it necessary or expedient not to offer the Offer Shares to such Shareholders on account either of legal restrictions under the laws of relevant place or the requirements of the relevant regulatory body or stock exchange in that place
the Executive Director of the Corporate Finance Division of the Securities and Futures Commission or any of his delegates
the price payable for each Warrant Share on exercise of the subscription rights attaching to the Bonus Warrants, which is initially set at HK$0.20 per Warrant Share (subject to adjustments)
collectively, (a) the share options granted to certain eligible participants under the Share Option Scheme conferring the holders thereof the right to subscribe for up to 5,676,855 Shares at a subscription price of HK$4.51 per Share (subject to adjustments) as at the Latest Practicable Date; and (b) the share options granted to certain eligible participants under the Share Option Scheme conferring the holders thereof the right to subscribe for up to 73,500,000 Shares at a subscription price of HK$1.00 per Share (subject to adjustments) as at the Latest Practicable Date
the Company and its subsidiaries from time to time
Hong Kong Securities Clearing Company Limited
the Hong Kong Special Administrative Region of the PRC
a committee of the Board comprising Mr. Tsao Hoi Ho, Terry, Mr. Lou Iok Kuong, Mr. Ng Pak Kin, Danny and Mr. Leung Wai Chung, Vincent, all being independent non-executive Directors, constituted to advise the Independent Shareholders on the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and the Whitewash Waiver

– 3 –

DEFINITIONS

“Independent Financial Adviser”
“Independent Shareholders”
“Independent Third Party”
“Last Trading Day”
“Latest Practicable Date”
“Latest Time for Acceptance”
“Latest Time for Termination”
“Listing Committee”

Fortune Financial Capital Limited, a corporation licensed to carry on Type 6 (advising on corporate finance) regulated activity under the SFO, the independent financial adviser to the Independent Board Committee and the Independent Shareholders appointed by the Company and approved by the Independent Board Committee in respect of the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and the Whitewash Waiver

Shareholders other than Lord Profit and persons acting in concert with it (including Automatic Result) and those who are involved in or interested in the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and/or the Whitewash Waiver and their respective associates
party who is independent of and not connected with the Company and any of the directors, chief executive and substantial shareholders of the Company or any of its subsidiaries, or any of their respective associates
10 July 2013, being the date of the Underwriting Agreement
9 August 2013, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information referred to in this circular
4:00 p.m. on Tuesday, 24 September 2013 or such later time as may be agreed between the Company and the Underwriters, being the latest time for acceptance of the offer of the Offer Shares and application for the excess Offer Shares
4:00 p.m. on Friday, 27 September 2013 or such later time to be agreed between the Company and the Underwriters, being the latest time for the Underwriters to terminate the Underwriting Agreement
the Listing Committee of the Stock Exchange

– 4 –

DEFINITIONS

“Listing Rules”
“Lord Profit”
“Mr. Liu”
“Mr. Tong”
“Offer Shares”
“Open Offer”
“Overseas Shareholder(s)”
“PRC”
“Prominence”
“Prospectus”
the Rules Governing the Listing of Securities on the Stock Exchange
Lord Profit Limited, a company incorporated in the British Virgin Islands with limited liability
Mr. Liu Guoyao, an executive Director and the sole director of Automatic Result
Mr. Tong Kit Shing, an executive Director, the chairman of the Board and the sole beneficial owner of Automatic Result
not less than 1,564,846,293 new Shares and not more than 1,644,023,148 new Shares to be issued by the Company pursuant to the Open Offer and each, an “Offer Share”
the proposed issue of Offer Shares by way of open offer on the basis of one Offer Share for every one existing Share to the Qualifying Shareholders on the terms to be set out in the Prospectus Documents
the Shareholders with registered addresses (as shown in the register of members of the Company on the Record Date) which are outside Hong Kong
the People’s Republic of China
Prominence Financials Limited, a company incorporated in Hong Kong with limited liability and a licensed corporation to carry on business in Type 1 (dealing in securities) regulated activity under the SFO. Based on the information provided by Prominence, Prominence is owned as to 99% by Beta Breakers Holdings Limited, a company incorporated in the British Virgin Islands, and as to 1% by Mr. Lam Wing Chak Victor. Beta Breakers Holdings Limited is wholly and ultimately beneficially owned by Mr. Lam Wing Chak Victor. The directors of Prominence are Mr. Lam Wing Chak Victor, Mr. Zhu Qianghong and Mr. Li Pou Hing Paul

the prospectus to be issued by the Company in relation to the Open Offer

– 5 –

DEFINITIONS

“Prospectus Documents”
“Prospectus Posting Date”
“Qualifying Shareholder(s)”
“Record Date”
“Relevant Period”
“SFO”
“Share(s)”
“Share Option Scheme”
“Shareholder(s)”
“Stock Exchange”
“Subscription Price”
“Supplemental Underwriting Agreement”
“Takeovers Code”
“Underwriters”
the Prospectus and the Application Form(s)
Monday, 9 September 2013 or such later date as may be agreed between the Company and the Underwriters, being the date of despatch of the Prospectus Documents
the Shareholder(s), other than the Excluded Shareholders, whose name(s) appear(s) on the register of members of the Company on the Record Date
Friday, 6 September 2013 (or such other date as may be agreed between the Company and the Underwriters to determine entitlements to the Open Offer)
the period beginning six months immediately prior to the date of the Announcement and ending on the Latest Practicable Date
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
the existing ordinary share(s) of HK$0.01 each in the capital of the Company
the share option scheme of the Company adopted on 22 September 2006
holder(s) of the Shares
The Stock Exchange of Hong Kong Limited
the subscription price of HK$0.16 per Offer Share
the supplemental agreement dated 31 July 2013 entered into between the Company and the Underwriters to amend certain terms of the Underwriting Agreement, details of which are set out in the announcement of the Company dated 31 July 2013
the Code on Takeovers and Mergers of Hong Kong
Lord Profit and Prominence

– 6 –

DEFINITIONS

“Underwriting Agreement”
“Underwritten Shares”
“Warrant Share(s)”
“Whitewash Waiver”
“HK$”
“%”
the underwriting agreement dated 10 July 2013 entered into between the Company and the Underwriters in relation to the Open Offer, as amended by the Supplemental Underwriting Agreement
the Offer Shares other than the Committed Shares, being not less than 1,261,927,449 Offer Shares and not more than 1,341,104,304 Offer Shares, to be underwritten by the Underwriters pursuant to the Underwriting Agreement
the new Share(s) to be issued by the Company upon exercise of the subscription rights attaching to the Bonus Warrant(s)
a waiver from the Executive pursuant to Note 1 on the dispensations from Rule 26 of the Takeovers Code in respect of the obligation of Lord Profit and parties acting in concert with it (including Mr. Tong, Mr. Liu and Automatic Result) to make a mandatory offer under Rule 26 of the Takeovers Code which would otherwise arise as a result of Lord Profit subscribing for and taking up of the Offer Shares and the Bonus Shares under the terms of the Underwriting Agreement and where applicable, the exercise of the subscription rights attaching to the Bonus Warrants

Hong Kong dollars, the lawful currency of Hong Kong

per cent.

– 7 –

EXPECTED TIMETABLE

The expected timetable for the Open Offer set out below is indicative only and it has been prepared on the assumption that the Whitewash Waiver and the Open Offer will be approved by the Independent Shareholders at the EGM. The expected timetable is subject to change, and any such change will be announced in a separate announcement by the Company as and when appropriate.

Event	Time and Date
Date of despatch of this circular with
notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 13 August 2013
Latest time for lodging forms of proxy
for the purpose of the EGM (not less than
48 hours before the EGM) . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . 11:00 a.m. on Tuesday,
	27 August 2013
Date of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . 11:00 a.m. on Thursday,
	29 August 2013
Announcement of results of EGM . . . . . . . . . . . . . . . . . . . . . . . Thursday, 29 August 2013
Last day of dealing in Shares on a cum-entitlement basis .	. . . . . . Friday, 30 August 2013
First day of dealing in Shares on ex-entitlement basis . . . . . . Monday, 2 September 2013
Latest time for lodging transfer of Shares
in order to be qualify for the Open Offer . . . . . . . . . . . .	. . . . . . . 4:30 p.m. on Tuesday,
	3 September 2013
Register of members of the Company closed . . . . . . . . . . .	Wednesday, 4 September 2013
	to Friday, 6 September 2013
	(both dates inclusive)
Record Date to determine entitlements under
the Open Offer with the Bonus Issue . . . . . . . . . . . . . . .	. . . . Friday, 6 September 2013
Register of members of the Company re-opens . . . . . . . . . . . . Monday, 9 September 2013
Despatch of the Prospectus Documents . . . . . . . . . . . . . . . . . Monday, 9 September 2013
Latest Time for Acceptance of and payment
for Offer Shares and for the excess Offer Shares . . . . . .	. . . . . . . 4:00 p.m. on Tuesday,
	24 September 2013
Expected time for the Open Offer with the Bonus Issue
to become unconditional . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . 4:00 p.m. on Friday,
	27 September 2013

– 8 –

EXPECTED TIMETABLE

Event

Time and Date

Announcement of results of the Open Offer
with the Bonus Issue to be published
on the Stock Exchange website . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 3 October 2013
Despatch of certificates for the Offer Shares,
the Bonus Shares and the Bonus Warrants . . . . . . . . . . . . . . . . . Friday, 4 October 2013
Despatch of refund cheques in respect of wholly
or partly unsuccessful excess applications
expected to be on or before . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 4 October 2013

Dealings in the Offer Shares and

the Bonus Shares commence . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 7 October 2013

Note: All references to time in this circular are references to Hong Kong time.

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE OFFER SHARES

All times in this circular refer to Hong Kong time. If there is a ‘black’ rainstorm warning or a tropical cyclone warning signal number 8 or above in force in Hong Kong on Tuesday, 24 September 2013, being the date of the Latest Time of Acceptance:

(i) at any time before 12:00 noon and no longer in force after 12:00 noon, the Latest Time for Acceptance will be postponed to 5:00 p.m. on the same Business Day; or
(ii) at any time between 12:00 noon and 4:00 p.m., the Latest Time for Acceptance will be rescheduled to 4:00 p.m. on the next Business Day which does not have either of those warnings in force in Hong Kong at any time between 9:00 a.m. and 4:00 p.m..

Under such circumstances, the dates mentioned in the expected timetable above (including, without limitation, the Latest Time for Termination) may be affected.

Dates or deadlines stated in this circular for events in the timetable are indicative only and may be extended or varied between the Company and the Underwriters. Any changes to the anticipated timetable for the Open Offer will be announced as appropriate.

– 9 –

TERMINATION OF THE UNDERWRITING AGREEMENT

TERMINATION OF THE UNDERWRITING AGREEMENT

The Underwriting Agreement contains provisions granting the Underwriters, by notice in writing, the right to terminate the Underwriters’ obligations thereunder on the occurrence of certain events. The Underwriters may terminate the Underwriting Agreement on or before the Latest Time for Termination if prior to the Latest Time for Termination:

(1) in the reasonable opinion of the Underwriters, the success of the Open Offer would be materially and adversely affected by:
(a) the introduction of any new regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the reasonable opinion of the Underwriters materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Open Offer; or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date hereof), of a political, military, financial, economic or other nature, or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the reasonable opinion of the Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or
(c) any material adverse change in the business or in the financial or trading position of the Group as a whole; or
(d) there occurs or comes into effect the imposition of any moratorium, suspension or material restriction on trading in the Shares generally on the Stock Exchange due to exceptional financial circumstances or otherwise; or
(2) any material adverse change in market conditions (including, without limitation, a change in fiscal or monetary policy or foreign exchange or currency markets, suspension or restriction of trading in securities, and a change in currency conditions for the purpose of this clause includes a change in the system under which the value of the Hong Kong currency is pegged with that of the currency of the United States of America) occurs in Hong Kong, the United States or the PRC which in the reasonable opinion of the Underwriters makes it inexpedient or inadvisable to proceed with the Open Offer.

– 10 –

TERMINATION OF THE UNDERWRITING AGREEMENT

If the Underwriting Agreement is terminated by the Underwriters on or before the aforesaid deadline or does not become unconditional, the Underwriting Agreement shall terminate (save in respect of any rights and obligations which may accrue under the Underwriting Agreement prior to such termination) and neither the Company nor the Underwriters shall have any claim against the other party for costs, damages, compensation or otherwise and the Open Offer and the Bonus Issue will not proceed.

Pursuant to the Underwriting Agreement, the Underwriters are entitled by notice in writing to rescind the Underwriting Agreement if prior to the Latest Time for Termination:

(1) any material breach of any of the warranties or undertakings contained in the Underwriting Agreement comes to the knowledge of the Underwriters; or
(2) any event occurring or matter arising on or after the date of the Underwriting Agreement and prior to the Latest Time for Termination which if it had occurred or arisen before the date of the Underwriting Agreement would have rendered any of the warranties contained in the Underwriting Agreement untrue or incorrect in any material respect comes to the knowledge of the Underwriters.

If the Underwriting Agreement is terminated by the Underwriters on or before the aforesaid deadline or does not become unconditional, the Open Offer and the Bonus Issue will not proceed.

– 11 –

LETTER FROM THE BOARD

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(incorporated in the Cayman Islands with limited liability)

(stock code: 690)

Executive Directors: Mr. Tong Kit Shing (Chairman) Mr. Liu Guoyao Mr. Leung Ka Chun

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

Independent non-executive Directors: Mr. Tsao Hoi Ho, Terry Principal place of Mr. Lou Iok Kuong business in Hong Kong: Mr. Ng Pak Kin, Danny 13th Floor, Public Bank Centre Mr. Leung Wai Chung, Vincent 120 Des Voeux Road Central Hong Kong

13 August 2013

To the Shareholders

Dear Sir or Madam,

(1) PROPOSED OPEN OFFER OF NOT LESS THAN 1,564,846,293 OFFER SHARES AND NOT MORE THAN 1,644,023,148 OFFER SHARES AT HK$0.16 PER OFFER SHARE ON THE BASIS OF 1 OFFER SHARE FOR EVERY 1 EXISTING SHARE HELD ON THE RECORD DATE WITH THE BONUS ISSUE ON THE BASIS OF 1 BONUS SHARE FOR EVERY 1 OFFER SHARE TAKEN UP AND 1 BONUS WARRANT FOR EVERY 2 OFFER SHARES TAKEN UP UNDER THE OPEN OFFER; (2) APPLICATION FOR WHITEWASH WAIVER; AND (3) CONNECTED TRANSACTION IN RESPECT OF UNDERWRITING AGREEMENT

INTRODUCTION

Reference is made to the Announcement in relation to, among other matters, the Underwriting Agreement, the Open Offer with the Bonus Issue and the Whitewash Waiver.

The purpose of this circular is to provide you with further details regarding the Underwriting Agreement, the Open Offer with the Bonus Issue and the Whitewash Waiver, including, amongst others, (i) a letter from the Independent Board Committee to the Independent Shareholders setting out their advice in relation to the Underwriting

For identification purpose only

– 12 –

LETTER FROM THE BOARD

Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and the Whitewash Waiver; (ii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and the Whitewash Waiver; together with (iii) a notice of the EGM.

PROPOSED OPEN OFFER WITH THE BONUS ISSUE

Issue statistics

Basis of the Open Offer

One Offer Share for every one existing Share held on the Record Date and payable in full on acceptance, together with one Bonus Share for every one Offer Share taken up and one Bonus Warrant for every two Offer Shares taken up

Subscription Price

HK$0.16 per Offer Share

Number of Shares in issue as at 1,564,846,293 Shares the Latest Practicable Date
Outstanding derivatives, options, warrants, conversion rights or other similar rights which are convertible or exchangeable into Shares as at the Latest Practicable Date

Existing Share Options attaching subscription right to subscribe for up to 79,176,855 Shares

Number of Offer Shares

Not less than 1,564,846,293 Offer Shares and not more than 1,644,023,148 Offer Shares

The aggregate nominal value of the total Offer Shares will be not less than HK$15,648,462.93 and not more than HK$16,440,231.48

The net subscription price for each Offer Share is approximately HK$0.155

Number of Bonus Shares

Not less than 1,564,846,293 Bonus Shares and not more than 1,644,023,148 Bonus Shares to be issued to the first registered holder of the Offer Shares on the basis of one Bonus Share for every one Offer Share taken up under the Open Offer

The aggregate nominal value of the total Bonus Shares will be not less than HK$15,648,462.93 and not more than HK$16,440,231.48

– 13 –

LETTER FROM THE BOARD

Number of Bonus Warrants

Not less than 782,423,146 Bonus Warrants and not more than 822,011,574 Bonus Warrants to be issued to the first registered holder of the Offer Shares on the basis of one Bonus Warrant for every two Offer Shares taken up under the Open Offer

Number of Shares in issue upon completion of the Open Offer with the Bonus Issue
Not less than 4,694,538,879 Shares and not more than 4,932,069,444 Shares

Amount raised before expenses Not less than approximately HK$250.4 million and not more than approximately HK$263.0 million

The number of Offer Shares which may be issued pursuant to the Open Offer will be increased in proportion to any additional Shares which may be allotted and issued pursuant to the exercise of the Existing Share Options on or before the Record Date. As at the Latest Practicable Date, there were Existing Share Options attaching thereto the subscription rights to subscribe for up to 79,176,855 Shares.

Based on 1,564,846,293 Shares in issue as at the Latest Practicable Date and assuming that there is no change in the issued share capital of the Company from the Latest Practicable Date up to the Record Date and no exercise of the Existing Share Options before the Record Date, upon completion of the Open Offer, 1,564,846,293 Offer Shares and 1,564,846,293 Bonus Shares will be issued. If the Existing Share Options were exercised in full on or before the Record Date, upon completion of the Open Offer, 1,644,023,148 Offer Shares and 1,644,023,148 Bonus Shares would be issued.

Assuming that there is no change in the issued share capital of the Company from the Latest Practicable Date up to the Record Date, the minimum aggregate number of 1,564,846,293 Offer Shares and 1,564,846,293 Bonus Shares proposed to be allotted pursuant to the Open Offer with the Bonus Issue represent: (i) 200% of the issued share capital of the Company as at the Latest Practicable Date; (ii) approximately 66.67% of the enlarged issued share capital of the Company as enlarged by the allotment and issue of the Offer Shares and the Bonus Shares; and (iii) approximately 57.14% of the issued share capital of the Company as enlarged by the allotment and issue of the Offer Shares, the Bonus Shares and all the Warrant Shares.

Assuming that the Existing Share Options were exercised in full on or before the Record Date and there is no other change to the issued share capital of the Company from the Latest Practicable Date up to the Record Date, the maximum aggregate number of 1,644,023,148 Offer Shares and 1,644,023,148 Bonus Shares proposed to be allotted pursuant to the Open Offer with the Bonus Issue represent: (i) 200% of the issued share capital of the Company as enlarged by the Shares allotted and issued pursuant to the exercise of the Existing Share Options in full; (ii) approximately 66.67% of the enlarged issued share capital of the Company as enlarged by the allotment and issue of the Offer Shares and the Bonus Shares; and (iii) approximately 57.14% of the issued share capital of the Company as enlarged by the allotment and issue of the Offer Shares, the Bonus Shares and all the Warrant Shares.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, other than the Existing Share Options, the Company had no derivatives, options, warrants and conversion rights or other similar rights which would be convertible or exchangeable into Shares.

Subscription Price

The Subscription Price is HK$0.16 per Offer Share, payable in full when a Qualifying Shareholder accepts his/her/its allotment under the Open Offer.

Taking into account the Bonus Shares being issued with the Offer Shares, the Effective Price is HK$0.08 for each Offer Share.

The Subscription Price and the Effective Price respectively represent:

(1) a premium of approximately 1.27% and a discount of approximately 49.37% respectively to the closing price of HK$0.158 per Share as quoted on the Stock Exchange on the Last Trading Day;
(2) a premium of approximately 0.88% and a discount of approximately 49.56% respectively to the average closing price of HK$0.1586 per Share quoted on the Stock Exchange for the five trading days up and including the Last Trading Day;
(3) a discount of approximately 0.68% and a discount of approximately 50.34% respectively to the average closing price of HK$0.1611 per Share as quoted on the Stock Exchange for the 10 consecutive trading days up to and including the Last Trading Day;
(4) a discount of approximately 70.15% and a discount of approximately 85.07% respectively to the audited consolidated net asset value per Share of approximately HK$0.536 as at 31 March 2013 (based on the audited consolidated net asset value of the Group over the number of Shares in issue as at 31 March 2013); and
(5) a premium of approximately 15.11% and a discount of approximately 42.45% respectively to the closing price of HK$0.139 per Share as at the Latest Practicable Date.

Taking into account the entitlement to the Bonus Shares, the Effective Price also represents a discount of approximately 24.53% to the theoretical ex-entitlement price of HK$0.106 based on the closing price of HK$0.158 per Share as quoted on the Stock Exchange on the Last Trading Day.

The Subscription Price was arrived at after arm’s length negotiation between the Company and the Underwriters with reference to the prevailing market conditions and the recent trading price of the Shares.

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LETTER FROM THE BOARD

Bonus Warrants

Subject to the conditions of the Open Offer, the Bonus Warrants will be issued to the first registered holder of the Offer Shares on the basis of one Bonus Warrant for every two Offer Shares taken up under the Open Offer.

On the basis of not less than 1,564,846,293 Offer Shares and not more than 1,644,023,148 Offer Shares, there will be not less than 782,423,146 Bonus Warrants (entitling the holders thereof to subscribe for 782,423,146 Warrant Shares at the Exercise Price of HK$0.20 (subject to adjustments) for each Warrant Share) and not more than 822,011,574 Bonus Warrants (entitling the holders thereof to subscribe for 822,011,574 Warrant Shares at the Exercise Price of HK$0.20 (subject to adjustments) for each Warrant Share) to be issued.

The subscription rights attaching to the Bonus Warrants may be exercised at any time between the date of issue of the Bonus Warrants and 3 years after the date of issue of the Bonus Warrants.

The Warrant Shares to be issued upon full exercise of the Bonus Warrants represent: (i) approximately 50% of the issued share capital of the Company as at the Record Date; (ii) approximately 16.67% of the issued share capital of the Company as enlarged by the issue and allotment of the Offer Shares and the Bonus Shares; and (iii) approximately 14.29% of the issued share capital of the Company respectively as enlarged by the issue and allotment of the Offer Shares, the Bonus Shares and all the Warrant Shares.

The initial Exercise Price of HK$0.20 represents:

(1) a premium of approximately 26.58% over the closing price of HK$0.158 per Share as quoted on the Stock Exchange on the Last Trading Day;
(2) a premium of approximately 26.10% over the average closing price of HK$0.1586 per Share quoted on the Stock Exchange for the five trading days up and including the Last Trading Day;
(3) a premium of approximately 24.15% over the average closing price of HK$0.1611 per Share as quoted on the Stock Exchange for the 10 consecutive trading days up to and including the Last Trading Day;
(4) a premium of approximately 88.68% over the theoretical ex-entitlement price of HK$0.106 based on the closing price of HK$0.158 per Share as quoted on the Stock Exchange on the Last Trading Day;
(5) a discount of approximately 62.7% to the audited net asset value per Share as at 31 March 2013 of approximately HK$0.536 per Share; and
(6) a premium of approximately 43.88% to the closing price of HK$0.139 per Share as at the Latest Practicable Date.

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LETTER FROM THE BOARD

The Exercise Price was determined after arm’s length negotiations between the Company and the Underwriters with reference to the prevailing market conditions and the recent trading price of the Shares, with a premium.

The Exercise Price and the aggregate number of Warrant Shares falling to be issued upon exercise of the Bonus Warrants are subject to adjustment upon occurrence of usual adjustment events arising as a result of changes in the share capital of the Company including consolidation or subdivision of Shares, capitalisation of profits or reserves, capital distributions or subsequent issue of securities in the Company at a discount to the then market price of the Shares. For details of the adjustment events, please refer to Appendix III to this circular.

Assuming all the Bonus Warrants are exercised, the estimated net proceeds of not less than approximately HK$156.5 million and not more than HK$164.4 million will be raised. The net price per Warrant Share is approximately HK$0.20. It is intended that such net proceeds, if any, will be applied towards the general working capital of the Group.

A summary of the terms of the Bonus Warrants is set out in Appendix III to this circular.

Conditions of the Open Offer with the Bonus Issue

The Open Offer and the Bonus Issue are conditional upon the following conditions being fulfilled:

(1) the passing by the Independent Shareholders at the EGM by way of poll of an ordinary resolution to approve (i) the Open Offer (including, but not limited to, the exclusion of the offer of the Open Offer to the Excluded Shareholders); (ii) the Bonus Issue; (iii) the creation of the Bonus Warrants and the issue of the Warrant Shares by no later than the Prospectus Posting Date;
(2) the Executive granting the Whitewash Waiver to Lord Profit and the satisfaction of any condition attached to the Whitewash Waiver granted;
(3) the passing by the Independent Shareholders at the EGM by way of poll of an ordinary resolution to approve the Whitewash Waiver by no later than the Prospectus Posting Date;
(4) the Company obtaining the ARL Undertaking from Automatic Result on the date of the Underwriting Agreement;
(5) the Listing Committee of the Stock Exchange granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked listing of and permission to deal in all the Offer Shares (in their fully-paid forms), the Bonus Shares and the Warrant Shares by no later than the Prospectus Posting Date;
(6) the filing and registration of all relevant documents with the Registrar of Companies in Hong Kong by no later than the Prospectus Posting Date;

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LETTER FROM THE BOARD

(7) the posting of the Prospectus Documents to Qualifying Shareholders on the Prospectus Posting Date; and
(8) the Underwriting Agreement not being terminated by the Underwriters pursuant to the terms thereof on or before the Latest Time of Termination.

None of the conditions precedent as set out above are capable of being waived by any party to the Underwriting Agreement. As at the Latest Practicable Date, except for condition (4) above, none of the above conditions precedent had been fulfilled.

If the conditions precedent as set out above are not satisfied by the Latest Time for Acceptance (or such later time and/or date as the Underwriters may agree with the Company in writing), the Underwriting Agreement shall terminate (save for any rights or obligations which may accrue under the Underwriting Agreement prior to such termination) and no party will have any claim against any other party for costs, damages, compensation or otherwise.

Status of the Offer Shares, Bonus Shares and Warrant Shares

Each of the Offer Shares (when allotted, issued and fully paid), the Bonus Shares (when allotted, issued and credited as fully paid) and the Warrant Shares (when allotted, issued and fully paid upon exercise of the Bonus Warrants) will rank equally in all respects with the Shares in issue on the date of their respective allotment and issue and upon entering into the register of members of the Company. Holders of the Offer Shares, Bonus Shares and Warrant Shares will be entitled to receive all future dividends and distributions which are declared after the date of their respective allotment and issue and upon entering into the register of members of the Company (as the case may be).

Fractions of the Bonus Warrants

Fractional entitlements to the Bonus Warrants to the Shareholders taking up the Offer Shares not in an integral multiple of two will not be issued pursuant to the Underwriting Agreement.

Application for listing

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Offer Shares, the Bonus Shares and the Warrant Shares.

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

None of the securities of the Company is listed or dealt in on any other stock exchange other than the Stock Exchange and no such listing or permission to deal is proposed to be sought.

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LETTER FROM THE BOARD

Subject to the grant of the listing of, and permission to deal in, the Offer Shares, the Bonus Shares and the Warrant Shares on the Stock Exchange as well as compliance with the stock admission requirements of HKSCC, the Offer Shares, the Bonus Shares and the Warrant Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Offer Shares, the Bonus Shares and the Warrant Shares on the Stock Exchange or such other dates as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

The Offer Shares, the Bonus Shares and the Warrant Shares will be traded in the same board lot size of the Shares, currently comprising 10,000 Shares per board lot.

All necessary arrangements will be made to enable the Offer Shares, the Bonus Shares and the Warrant Shares in their fully-paid form to be admitted into CCASS.

Qualifying Shareholders

The Record Date is Friday, 6 September 2013. The last day of dealings in the Shares on a cum-entitlement basis is Friday, 30 August 2013. The Shares will be dealt in on an ex-entitlement basis from Monday, 2 September 2013. To qualify for the Open Offer, Shareholders must be registered as a member of the Company as at the Record Date and not be an Excluded Shareholder.

Save for Automatic Result, who has irrevocably undertaken to the Company to accept and pay for the Committed Shares to be allotted to it on an assured basis under the Open Offer, as at the Latest Practicable Date the Board has not received any information from any substantial Shareholders of their intention to take up the Offer Shares under the Open Offer.

Closure of register of members

The register of members of the Company will be closed from Wednesday, 4 September 2013 to Friday, 6 September 2013, both dates inclusive, to determine the eligibility of the Open Offer. No transfer of Shares will be registered during the book closure period.

Certificates of the Offer Shares, Bonus Shares, Bonus Warrants and refund cheques

Subject to the fulfilment of the conditions of the Open Offer, share certificates for the Offer Shares and the Bonus Shares and the certificates for the Bonus Warrants are expected to be posted on or before Friday, 4 October 2013 to those entitled thereto by ordinary post at their own risk. Refund cheques in respect of wholly or partially unsuccessful applications for excess Offer Shares are also expected to be posted on or before Friday, 4 October 2013 by post at their own risk.

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LETTER FROM THE BOARD

Excluded Shareholders

If there are Overseas Shareholders at the close of business on the Record Date, the Overseas Shareholders may not be eligible to take part in the Open Offer as explained below.

The Directors will comply with Rule 13.36(2)(a) of the Listing Rules and make enquiries regarding the feasibility of extending the Open Offer to the Overseas Shareholders. If, after making such enquiries, the Directors are of the opinion that it would be necessary or expedient, on account either of the legal restrictions under the laws of the relevant place or any requirement of the relevant regulatory body or stock exchange in that place, not to offer the Offer Shares to such Overseas Shareholders, the Open Offer will not be available to such Overseas Shareholders. The Excluded Shareholders, so long as they are Independent Shareholders, shall be entitled to attend the EGM and vote on the proposed resolutions in relation to the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and the Whitewash Waiver.

The result of the enquiries and the basis of the exclusion will be included in the Prospectus. The Prospectus Documents are not intended to be registered or filed under the applicable securities legislation of any jurisdiction other than Hong Kong.

Application for excess Offer Shares

If application forms for excess Offer Shares have been lodged in accordance with the terms of the Prospectus Documents, together with cheques or banker’s cashier orders or other remittances for the full amount payable in connection with the relevant applications which are honoured on first presentation, the Company shall accept such applications which are honoured on first presentation, provided that the Company shall only be obliged to accept applications for the aggregate number of the Underwritten Shares which shall not have been accepted and, if that aggregate number is less than the number of Shares applied for under the relevant application forms for excess Offer Shares, the Company shall be entitled to determine on a fair and equitable basis (in accordance with the requirements of the Stock Exchange) which applications are to be accepted or rejected, after consulting with the Underwriters and on the following principles:

(1) preference will be given to applications for less than a board lot of Offer Shares where they appear to the Directors that such applications are made to round up odd-lot holdings to whole-lot holdings and that such applications are not made with intention to abuse the mechanism; and

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LETTER FROM THE BOARD

(2) subject to availability of excess Offer Shares after allocation under principle (1) above, the excess Offer Shares will be allocated to the Qualifying Shareholders based on a sliding scale with reference to the number of the excess Offer Shares applied by them (i.e. Qualifying Shareholders applying for smaller number of Offer Shares will be allocated a higher percentage of the excess Offer Shares they have applied for whereas Qualifying Shareholders applying for larger number of Offer Shares will be allocated a lower percentage of the excess Offer Shares they have applied for (although they will still receive a greater number of Offer Shares than those applying for a smaller number) with board lot allocations to be made on a best effort basis. No reference will be made to Offer Shares comprised in applications by the application form for the Offer Shares or the existing number of Shares held by Qualifying Shareholders.

Shareholders with their Shares held by a nominee company should note that the Board will regard the nominee company as a single Shareholder according to the register of members of the Company. Accordingly, the Shareholders should note that the aforesaid arrangement in relation to the allocation of the excess Offer Shares will not be extended to beneficial owners individually. Shareholders with their Shares held by a nominee company are advised to consider whether they would like to arrange for the registration of the relevant Shares in the name of the beneficial owner(s) prior to the Record Date. Shareholders and investors should consult their professional advisers if they are in any doubt as to their status.

Shareholders whose Shares are held by their nominee(s) and who would like to have their names registered on the register of members of the Company prior to the Record Date must lodge all necessary documents with the branch share registrar of the Company in Hong Kong, Tricor Abacus Limited, at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong for completion of the relevant registration by 4:30 p.m. on Tuesday, 3 September 2013.

Any Offer Shares not taken up by the Qualifying Shareholders and not taken by excess applications will be taken up by the Underwriters pursuant to the terms and conditions of the Underwriting Agreement.

Qualifying Shareholders who do not take up the Offer Shares to which they are entitled should note that their shareholdings in the Company will be diluted.

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LETTER FROM THE BOARD

UNDERWRITING AGREEMENT

Date

10 July 2013 (the original Underwriting Agreement)

31 July 2013 (the Supplemental Underwriting Agreement)

Parties

(1) the Company; and
(2) Lord Profit and Prominence (as the Underwriters).

Prominence is a company incorporated in Hong Kong with limited liability, and a licensed corporation to carry on business in Type 1 (dealing in securities) regulated activity under the SFO. As at the Latest Practicable Date, Prominence does not hold any Shares. Each of Prominence and its ultimate beneficial owner is, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, an independent third party independent of the Company and its connected persons.

Prominence is not a party acting in concert with Lord Profit.

For details of Lord Profit, please refer to the paragraph headed “Information on Lord Profit and parties acting in concert with it” below.

Commitment of Lord Profit under the Underwriting Agreement
Commitment of Prominence under the Underwriting Agreement

Number of Underwritten Shares

Not less than 1,135,734,705 Offer Shares and not more than 1,206,993,874 Offer Shares.

Not less than 126,192,744 Offer Shares and not more than 134,110,430 Offer Shares.

The Offer Shares other than the Committed Shares, being not less than 1,261,927,449 Offer Shares (Note 1) and not more than 1,341,104,304 Offer Shares (Note 2) .

The aggregate nominal value of the Underwritten Shares will be not less than HK$12,619,274.49 and not more than HK$13,411,043.04.

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LETTER FROM THE BOARD

Notes:

This figure assumes that no further Shares will be allotted and issued before the Record Date from the Latest Practicable Date.
This figure assumes that the Existing Share Options have been exercised in full and new Shares have been allotted and issued pursuant thereto on or before the Record Date (but otherwise, no Shares have been allotted and issued on or before the Record Date).

Commission and expenses

The Company shall pay:

(a) to each Underwriter a commission of 2.5% of the aggregate Subscription Price in respect of the Underwritten Shares underwritten by such Underwriter; and
(b) to each of the Underwriters of reasonable legal fees and other reasonable out-of-pocket expenses of the Underwriters in respect of the Open Offer save that Lord Profit shall pay and bear all costs and expenses incurred in connection with the seeking of the Whitewash Waiver from the Executive.

The commission to be received by and the expenses payable to the Underwriters will be not less than approximately HK$5.0 million and not more than approximately HK$5.4 million. The commission payable to the Underwriters was determined after arm’s length negotiations between the Company and the Underwriters. The Directors (excluding the independent non-executive Directors) consider that such amount is on normal commercial terms and is comparable with market rate.

Under the Underwriting Agreement, if the conditions of the Open Offer are fulfilled on or before the Latest Time for Acceptance (or such later time and/or date as the Company and the Underwriters may determine in writing) and the Underwriting Agreement becomes unconditional and is not terminated in accordance with the terms thereof, and in the event that by the Latest Time for Acceptance any of the Underwritten Shares have not been taken up (“ Untaken Shares ”), the Company shall as soon as practicable thereafter and in any event before 12:00 noon on the second Business Day after the Latest Time for Acceptance, notify or procure the branch share registrar and transfer office of the Company in Hong Kong on behalf of the Company to notify the Underwriters in writing of the number of Underwritten Shares not taken up and:

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LETTER FROM THE BOARD

(a) if the number of the Untaken Shares is equal to or less than 1,135,734,705 Offer Shares, Lord Profit shall subscribe or procure subscription (so far as the same are applicable) for such Untaken Shares;
(b) if the number of Untaken Shares is more than 1,135,734,705 Offer Shares:
(i) Lord Profit shall first subscribe or procure subscription (so far as the same are applicable) for 1,135,734,705 Untaken Shares; and
(ii) Prominence shall subscribe or procure subscription for the remaining Untaken Shares.

Pursuant to the Underwriting Agreement:

(1) Lord Profit has undertaken with the Company that it will not and will procure parties acting in concert with it will not, without first having obtained the prior written consent of the Company:
(a) transfer or otherwise dispose of (including without limitation the agreement to dispose of, or the creation of any option or derivative) or acquire any Share or any interest therein between the date of the Underwriting Agreement and the Record Date; nor
(b) transfer or otherwise dispose of (including without limitation the agreement to dispose of, or the creation of any option or derivative) or acquire (except by taking up Offer Shares allotted to it on assured basis and the relevant Bonus Shares pursuant to the Open Offer and pursuant to the Underwriting Agreement and/or the ARL Undertaking) any Share or any interest therein between the Record Date and the Latest Time for Acceptance;
(2) Lord Profit represented, warranted and confirmed to the Company that it and parties acting in concert with it have not acquired any voting rights in the Company in the six months prior to the date of the Underwriting Agreement; and
(3) Lord Profit has undertaken that in the event that the public float of the Company shall fall below the prescribed percentage applicable to the Company under the Listing Rules at the time of the allotment of the Offer Shares and the Bonus Shares, Lord Profit shall, immediately after completion of the Open Offer, dispose of such number of Shares to independent third parties not connected or associated with the Directors, substantial Shareholders or chief executive of the Company and its subsidiaries, or any of their respective associates in order to maintain the public float of the Company to not less than the prescribed percentage applicable to the Company under the Listing Rules.

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LETTER FROM THE BOARD

The undertaking contained in paragraph (3) above will be performed immediately after completion of the Open Offer and before the commencement of trading of the Shares on the immediately following trading day.

Under the Underwriting Agreement, the Open Offer and the Bonus Issue are conditional upon certain conditions being fulfilled. Please refer to the sub-section headed “Conditions of the Bonus Offer with the Bonus Issue” under the section headed “Proposed Open Offer with the Bonus Issue” above.

The basis of the Underwritten Shares between Lord Profit and Prominence under the Underwriting Agreement was determined after arm’s length negotiations between the Company and the Underwriters under commercial consideration. As confirmed by the Underwriters, there will be no sub-underwriting arrangements in connection with the Open Offer.

As confirmed by Lord Profit, its intention to the Underwritten Shares will be for long term investment and as regards the Underwritten Shares to be underwritten by Prominence, it will procure subscribers to subscribe for such Underwritten Shares (to the extent it is required to perform its underwriting commitment).

ARL UNDERTAKING

As one of the conditions precedent to the obligations of the Underwriters to underwrite the Underwritten Shares under the Underwriting Agreement, the Company had obtained the ARL Undertaking pursuant to which Automatic Result had irrevocably confirmed, undertaken and warranted to the Company that:

(1) Automatic Result shall accept and pay for the Committed Shares and undertake to lodge or procure to be lodged with the Company, acceptance in respect of such Committed Shares, with payment in full therefor in cash by no later than the Latest Time for Acceptance;
(2) the aggregate of 302,918,844 Shares currently beneficially owned by Automatic Result will remain beneficially owned by Automatic Result at the close of business on the Record Date as they are as at the date thereof and that it will not:
(i) transfer or otherwise dispose of (including without limitation the agreement to dispose of, or the creation of any option or derivative) or acquire any Shares or any interest therein between the date thereof and the Record Date; nor
(ii) transfer or otherwise dispose of (including without limitation the agreement to dispose of, or the creation of any option or derivative) or acquire (except by taking up the Committed Shares and the relevant Bonus Shares pursuant to the Open Offer or pursuant to the excess application forms in connection with the Open Offer) any Share or any interest therein between the Record Date and the Latest Time for Acceptance; and

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LETTER FROM THE BOARD

(iii) for the period from the date thereof until the date when dealings in the Offer Shares in their fully-paid form commence on the Stock Exchange, it shall refrain from taking any action or making any statement to the public which is or may be prejudicial to the success of the Open Offer, unless otherwise required by law or the Stock Exchange or any other regulatory requirements or competent authority.

REASONS FOR THE OPEN OFFER

The Company is an investment holding company. The Group is principally engaged in bio-science related business, with focus on the research, development and commercialization of biopharmaceuticals through recombinant DNA and other technologies.

As disclosed in the annual report of the Company for the year ended 31 March 2013, the Group will concentrate on biological pharmaceutical products. The Group will continue to maintain the existing market for chemical pharmaceutical products but the Group does not have specific plans to further expand this segment. As disclosed in the annual report of the Company for the year ended 31 March 2012, the management had decided to discontinue the distribution of pharmaceutical products segment of the Group in the year ended 31 March 2013. The Group considered that the commercialisation of new pharmaceutical products of the Group will have a positive effect on the Company in terms of revenue and profit, but that intensive marketing strategy is necessary to promote and market new pharmaceutical products.

Of the four self-development projects of the Group, namely, for the pharmaceutical products rhPTH 1-34, rExtendin-4, rhEPO-Fc and rhIL-11 respectively, trial production for rhPTH 1-34 has already commenced and that the launch of the product is expected to be at around August 2014, subject to the trial production feedback/cool down period (by around February 2014) and final approval from the China Food and Drug Administration (“ CFDA ”) (by around June 2014). For rExtendin-4, clinical trial, test and medical reports are expected to complete at around January 2014 and that the launch of the product is expected to be at or around August 2015, subject to its trial production (by around June 2014), feedback/cool down period (by around December 2014) and final approval from the CFDA (by around June 2015).

For rhIL-11, phase I of the clinical trial has already been completed and the final approval from the CFDA is currently expected to be obtained at around 2019, subject to the completion of phases II and III of the clinical trial (by around 2017) and registration of the pharmaceutical product (by around 2018). For rhEPO-Fc, phase I of clinical trial is expected to be completed at around June 2014 and the final approval from the CFDA is currently expected to be obtained at around June 2017, subject to completion of phases II and III of the clinical trial (by around June 2016) and registration of the pharmaceutical product (by around June 2016). Given that the project development progress for rhPTH 1-34 and rExtendin-4 are more closer to completion, the Group has decided to allocate more resources on such projects and that progress for the projects involving rhEPO-Fc and

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LETTER FROM THE BOARD

rhIL-11 the progress has been slowed down for the Group to allocate more resources on the projects involving rhPTH 1-34 and rExtendin-4.

The costs in preparation and follow up actions in commercialisation and marketing in the relevant markets of the Group’s bio-science related business will involve large amount of expenses, in particular shortly before and at the beginning of the launch of pharmaceutical products. As such, additional funds for the finalisation of research and development, commercialisation, and marketing would speed up the launch of the Group’s products.

In addition, the Board has considered other alternative fund raising methods such as issue of new shares, bank borrowings and rights issue and consider that the Open Offer would allow the Company to strengthen its capital base and provide an opportunity to all Qualifying Shareholders to participate in the growth of the Company in proportion to their shareholdings. Considering (i) the low trading volume of the Shares and (ii) the low monetary value per board lot, the Board is of the opinion that the trading of nil paid rights will either incur a high transaction cost for trading of small board of Shares, which is not economical. Furthermore, compared to a rights issue, the absence of trading nil paid rights in the Open Offer reduces associated administrative work and costs thus requiring less time for completion. The Board is of the opinion that as each Qualifying Shareholder is entitled to subscribe for the Offer Shares at the same price in proportion to its existing shareholding in the Company, Shareholders are treated equally and fairly under the Open Offer. Accordingly, the executive Directors consider that the terms of the Underwriting Agreement are fair and reasonable and that the Underwriting Agreement and the proposed Open Offer with Bonus Issue are in the interests of the Company and the Shareholders as a whole. The views of the independent non-executive Directors are set out in the “Letter from the Independent Board Committee” of this circular.

USE OF PROCEEDS FROM THE OPEN OFFER

The Company will raise not less than approximately HK$250 million and not more than HK$263 million before expenses from the Open Offer. The Company intends to use the net proceeds from the Open Offer, being not less than approximately HK$243 million and not more than approximately HK$255 million in the following manner:

(1) as to approximately HK$120 million for the commercialisation and for marketing in the relevant markets of the Group’s bio-science related business, in particular two new drugs, namely rhPTH 1-34 (as to approximately HK$51 million) and rExtendin-4 (as to approximately HK$69 million), in each case,

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LETTER FROM THE BOARD

covering expenses in the trial production period, feedback period, on obtaining approval, for preparation of launching and for continue marketing of the two drugs which include preliminary introduction and presentation to medical practitioners on the new pharmaceutical products, conducting market survey and review before launching of the products, formulating formal marketing plans and public promotion on the new pharmaceutical products;

(2) as to approximately HK$60 million for general working capital of the Group (as to approximately HK$10 million as operating expenses of the Group in Hong Kong, as to approximately HK$15 million as operating expenses of the Group in Shenzhen; as to approximately HK$25 million as operating expenses of the Group in Beijing; and as to approximately HK$10 million as operating expenses of Group’s Dongguan Taili Biotech Co., Ltd. research and development centre (excluding costs for research and development)) ; and
(3) the balance of the net proceeds, being not less than approximately HK$63 million and not more than approximately HK$76 million, for the research and development of the pharmaceutical products by the Group, of which the Company intended to allocate as to more than 70% of the balance of the net proceeds to research and development of the projects involving the pharmaceutical products rhEPO-Fc and rhIL-11, and the remaining portion of the balance of the net proceeds to research and development of the projects involving the pharmaceutical products rhPTH 1-34 and rExtendin-4 for further fine tuning of the pharmaceutical product may be necessary, for example, to refine the packaging for easier usage, to enhance the design for better safety, and to respond to users’ initial feedback and suggestion to improve the products. Such proceeds is intended to be used not entirely in the current financial year of the Group but also for the future financial years of the Group, as the Company considers it prudent to have the funds readily available such that the Company will not be required to conduct any fund raising exercise when such funds are required for research and development and hence result in hampering the progress in research and development of the Company due to the need of such funds as and when required.

The estimated expenses in relation to the Open Offer with the Bonus Issue, including underwriting commission, financial, legal and other professional expenses, of approximately HK$7.8 million to HK$8.1 million, will be borne by the Company.

WARNING OF THE RISKS OF DEALING IN SHARES

The Open Offer with the Bonus Issue is conditional, among other things, upon the obligations of the Underwriters under the Underwriting Agreement having become unconditional and the Underwriters not having terminated the Underwriting Agreement in accordance with the terms thereof. Accordingly, the Open Offer with the Bonus Issue may or may not proceed. Shareholders and potential investors should therefore exercise caution when dealing in Shares. Any Shareholders or other persons contemplating dealing in the Shares are recommended to consult their own professional advisers.

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LETTER FROM THE BOARD

CHANGES IN SHAREHOLDING STRUCTURE

For illustrative purposes:

(1) If the Open Offer is to proceed, set out below is the shareholding structure of the Company assuming that there is no change in the shareholding structure of the Company from the Latest Practicable Date up to the Record Date:

Shareholder Lord Profit Automatic Result Sub-total of Lord Profit and parties acting in concert with it: Prominence or subscribers procured by it Overseas Capital Assets Limited (Note) Other Shareholders Total:	(1) As at the Latest Practicable Date and up to the Record Date No. of Shares % – – 302,918,844 19.36	(1) As at the Latest Practicable Date and up to the Record Date No. of Shares % – – 302,918,844 19.36	(2) Immediately upon completion of the Open Offer (assuming all Shareholders have taken up the Offer Shares with the Bonus Issue and without taking into account any Warrant Shares that may be issued) No. of Shares % – – 908,756,532 19.36	(2) Immediately upon completion of the Open Offer (assuming all Shareholders have taken up the Offer Shares with the Bonus Issue and without taking into account any Warrant Shares that may be issued) No. of Shares % – – 908,756,532 19.36	(3) Immediately upon completion of the Open Offer (assuming no Shareholder (other than Automatic Result) has taken up the Offer Shares with the Bonus Issue and without taking into account any Warrant Shares that may be issued) No. of Shares % 2,271,469,410 48.39 908,756,532 19.36	(3) Immediately upon completion of the Open Offer (assuming no Shareholder (other than Automatic Result) has taken up the Offer Shares with the Bonus Issue and without taking into account any Warrant Shares that may be issued) No. of Shares % 2,271,469,410 48.39 908,756,532 19.36	(4) Immediately upon completion of the Open Offer (assuming all Shareholders have taken up the Offer Shares with the Bonus Issue) and the subscription rights of all the Bonus Warrants have been exercised in full No. of Shares % – – 1,060,215,954 19.36	(4) Immediately upon completion of the Open Offer (assuming all Shareholders have taken up the Offer Shares with the Bonus Issue) and the subscription rights of all the Bonus Warrants have been exercised in full No. of Shares % – – 1,060,215,954 19.36	(5) Immediately upon completion of the Open Offer (assuming no Shareholder (other than Automatic Result) has taken up the Offer Shares with the Bonus Issue) and the subscription rights of all the Bonus Warrants have been exercised in full No. of Shares % 2,839,336,762 51.84 1,060,215,954 19.36	(5) Immediately upon completion of the Open Offer (assuming no Shareholder (other than Automatic Result) has taken up the Offer Shares with the Bonus Issue) and the subscription rights of all the Bonus Warrants have been exercised in full No. of Shares % 2,839,336,762 51.84 1,060,215,954 19.36
	302,918,844 – 219,060,000 1,042,867,449	19.36 – 14.00 66.64	908,756,532 – 657,180,000 3,128,602,347	19.36 – 14.00 66.64	3,180,225,942 252,385,488 219,060,000 1,042,867,449	67.74 5.38 4.67 22.21	1,060,215,954 – 766,710,000 3,650,036,071	19.36 – 14.00 66.64	3,899,552,716 315,481,860 219,060,000 1,042,867,449	71.20 5.76 4.00 19.04
	1,564,846,293	100.00	4,694,538,879	100.00	4,694,538,879	100.00	5,476,962,025	100.00	5,476,962,025	100.00

Note: Based on the individual substantial shareholder notice of Overseas Capital Assets Limited filed on 25 July 2013, Overseas Capital Assets Limited held 219,060,000 Shares and was wholly-owned by Hu Rufeng.

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LETTER FROM THE BOARD

(2) If the Open Offer is to proceed, set out below is the shareholding structure of the Company assuming that the Existing Share Options have been exercised in full on or before the Record Date and that there is no other change in the shareholding structure of the Company from the Latest Practicable Date up to the Record Date:

Shareholder Lord Profit Automatic Result Sub-total of Lord Profit and parties acting in concert with it: Prominence or subscribers procured by it Overseas Capital Assets Limited (Note) Other Shareholders Total	(1) As at the Latest Practicable Date and up to the Record Date No. of Shares % – – 302,918,844 18.43	(1) As at the Latest Practicable Date and up to the Record Date No. of Shares % – – 302,918,844 18.43	(2) Immediately upon completion of the Open Offer (assuming all Shareholders have taken up the Offer Shares with the Bonus Issue and without taking into account any Warrant Shares that may be issued) No. of Shares % – – 908,756,532 18.43	(2) Immediately upon completion of the Open Offer (assuming all Shareholders have taken up the Offer Shares with the Bonus Issue and without taking into account any Warrant Shares that may be issued) No. of Shares % – – 908,756,532 18.43	(3) Immediately upon completion of the Open Offer (assuming no Shareholder (other than Automatic Result) has taken up the Offer Shares with the Bonus Issue and without taking into account any Warrant Shares that may be issued) No. of Shares % 2,413,987,748 48.95 908,756,532 18.43	(3) Immediately upon completion of the Open Offer (assuming no Shareholder (other than Automatic Result) has taken up the Offer Shares with the Bonus Issue and without taking into account any Warrant Shares that may be issued) No. of Shares % 2,413,987,748 48.95 908,756,532 18.43	(4) Immediately upon completion of the Open Offer (assuming all Shareholders have taken up the Offer Shares with the Bonus Issue) and the subscription rights of all the Bonus Warrants have been exercised in full No. of Shares % – – 1,060,215,954 18.43	(4) Immediately upon completion of the Open Offer (assuming all Shareholders have taken up the Offer Shares with the Bonus Issue) and the subscription rights of all the Bonus Warrants have been exercised in full No. of Shares % – – 1,060,215,954 18.43	(5) Immediately upon completion of the Open Offer (assuming no Shareholder (other than Automatic Result) has taken up the Offer Shares with the Bonus Issue) and the subscription rights of all the Bonus Warrants have been exercised in full No. of Shares % 3,017,484,685 52.44 1,060,215,954 18.43	(5) Immediately upon completion of the Open Offer (assuming no Shareholder (other than Automatic Result) has taken up the Offer Shares with the Bonus Issue) and the subscription rights of all the Bonus Warrants have been exercised in full No. of Shares % 3,017,484,685 52.44 1,060,215,954 18.43
	302,918,844 – 219,060,000 1,122,044,304	18.43 – 13.32 68.25	908,756,532 – 657,180,000 3,366,132,912	18.43 – 13.32 68.25	3,322,744,280 268,220,860 219,060,000 1,122,044,304	67.37 5.44 4.44 22.75	1,060,215,954 – 766,710,000 3,927,155,064	18.43 – 13.32 68.25	4,077,700,639 335,276,075 219,060,000 1,122,044,304	70.87 5.83 3.80 19.50
	1,644,023,148	100.00	4,932,069,444	100.00	4,932,069,444	100.00	5,754,081,018	100.00	5,754,081,018	100.00

Pursuant to the Underwriting Agreement, Lord Profit has undertaken that in the event that the public float of the Company shall fall below the prescribed percentage applicable to the Company under the Listing Rules at the time of the allotment of the Offer Shares and the Bonus Shares, Lord Profit shall, immediately after completion of the Open Offer and before the commencement of trading of the Shares on the immediately following trading day, dispose of such number of Shares to independent third parties not connected or associated with the Directors, substantial Shareholders or chief executive of the Company and its subsidiaries, or any of their respective associates in order to maintain the public float of the Company to not less than the prescribed percentage applicable to the Company under the Listing Rules.

The Company will take all reasonable steps to monitor the public float of the Company from time to time.

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LETTER FROM THE BOARD

Shareholders and public investors should note that the above shareholding changes are for illustration purposes only and the actual changes in the shareholding structure of the Company upon completion of the Open Offer with the Bonus Issue and the Warrant Shares to be issued upon exercise of the subscription rights attaching to the Bonus Warrants are subject to various factors, including the results of acceptance of the Open Offer with the Bonus Issue. Further announcements will be made by the Company in accordance with the Listing Rules and/or the Takeovers Codes following the conclusion of the EGM and the completion of the Open Offer with the Bonus Issue upon which the Offer Shares and the Bonus Shares are allotted and issued.

INFORMATION OF LORD PROFIT AND PARTIES ACTING IN CONCERT WITH IT

Lord Profit is a company incorporated in the British Virgin Islands with limited liability. As at the Latest Practicable Date, neither Lord Profit nor Mr. Kingsley Leung, the sole director of Lord Profit, held any Shares. The entire issued share capital of Lord Profit is owned as to 90% by Mr. Kingsley Leung, who is a cousin of Mr. Tong, and as to 10% by Mr. Tong, the chairman of the Board and an executive Director. The ordinary course of business of Lord Profit is investment holding and does not include underwriting.

Mr. Tong is the sole owner of Automatic Result, a substantial Shareholder. As at the Latest Practicable Date, Automatic Result is interested in approximately 19.36% of the existing issued share capital of the Company. Mr. Liu, an executive Director, is the sole director of Automatic Result.

Lord Profit, Automatic Result, Mr. Kingsley Leung and Mr. Tong are parties acting in concert for the purpose of the Company.

APPLICATION FOR WHITEWASH WAIVER

(A) Assuming that no Shareholder has taken up any Offer Shares and there has been no exercise of the Existing Share Options and the Bonus Warrants, upon completion of the Open Offer with the Bonus Issue, the taking up of (i) the Offer Shares to which Automatic Result is entitled under the Open Offer; and (ii) the Underwritten Shares would result in the aggregate shareholding of Lord Profit and parties acting in concert with it in the Company being increased from approximately 19.36% to approximately 67.74% and would therefore give rise to a mandatory offer obligation on the part of Lord Profit and parties acting in concert with it under Rule 26 of the Takeovers Code; and (B) in the event that the aggregate shareholding of Lord Profit and parties acting in concert with it in the Company upon completion of the Open Offer with the Bonus Issue is between 30% and 50%, any exercise of the subscription rights attaching to the Bonus Warrants resulting in an increase in more than 2% voting rights in the Company in any 12 months’ period would also give rise to a mandatory offer obligation on the part of Lord Profit and parties acting in concert with it under Rule 26 of the Takeovers Code, in each case, unless the Whitewash Waiver is obtained.

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LETTER FROM THE BOARD

For illustrative purpose only, (a) if Lord Profit and parties acting in concert with it, in aggregate, hold 30% of the voting right of the Company upon completion of the Open Offer with the Bonus Issue, Lord Profit and parties acting in concert with it will be issued with 276,360,705 Bonus Warrants and upon exercise of the subscription rights attaching to such Bonus Warrants in full (and assuming the other Shareholders will not exercise the subscription rights attaching to their respective Bonus Warrants), the aggregate voting rights of Lord Profit and parties acting in concert with it in the Company will be increased to approximately 33.89%; and (b) if Lord Profit and parties acting in concert with it, in aggregate, hold 50% of the voting right of the Company upon completion of the Open Offer with the Bonus Issue, Lord Profit and parties acting in concert with it will be issued with 511,087,648 Bonus Warrants and upon exercise of the subscription rights attaching to such Bonus Warrants in full (and assuming the other Shareholders will not exercise the subscription rights attaching to their respective Bonus Warrants), the aggregate voting rights of Lord Profit and parties acting in concert with it in the Company will be increased to approximately 54.91%.

A formal application has been made by Lord Profit to the Executive for the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code.

The Whitewash Waiver, if granted, would be subject to, among other things, the approval of the Independent Shareholders at the EGM by way of poll, which Lord Profit and parties acting in concert with it and (if applicable) Shareholders who are involved in or interested in the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and/or the Whitewash Waiver will abstain from voting on the relevant resolutions.

Completion of the Open Offer with the Bonus Issue is conditional upon, among other things, the granting of the Whitewash Waiver by the Executive. Accordingly, if the Whitewash Waiver is not obtained, the Open Offer and the Bonus Issue will lapse and will not proceed.

Upon completion of the Open Offer with the Bonus Issue, Lord Profit and parties acting in concert with it may hold more than 50% of the enlarged issued share capital of the Company, in which case, Lord Profit may acquire further voting rights in the Company without incurring any further obligation under Rules 26 of the Takeovers Code to make a general offer.

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LETTER FROM THE BOARD

DEALINGS OF THE SHARES BY LORD PROFIT AND PARTIES ACTING IN CONCERT WITH IT

There has been no dealing of Shares and other relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company by Lord Profit and parties acting in concert with it during the Relevant Period.

As at the Latest Practicable Date, other than the approximately 19.36% interest of the issued share capital of the Company held by Automatic Result, Lord Profit and parties acting in concert with it (including Automatic Result):

(1) did not hold, control or direct any other shares, convertible securities, warrants or options of the Company, or any outstanding derivative in respect of securities of the Company;
(2) other than the ARL Undertaking and the Underwriting Agreement, there is no arrangement (whether by way of option, indemnity or otherwise) in relation to shares of Lord Profit or the Company and which may be material to the Whitewash Waiver and the Open Offer with the Bonus Issue;
(3) other than the ARL Undertaking and the Underwriting Agreement, there was no agreements or arrangements to which the Underwriters is a party which related to the circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Whitewash Waiver and the Open Offer with the Bonus Issue;
(4) did not receive any irrevocable commitment or arrangements to vote in favour of or against the resolutions in respect of the Open Offer with the Bonus Issue or the Whitewash Waiver; and
(5) did not borrow or lend any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company.

Under such circumstances, the dates mentioned in the expected timetable above (including, without limitation, the Latest Time for Termination) may be affected.

INTENTION OF LORD PROFIT

It is the intention of Lord Profit that the Group will continue its current business. Lord Profit has no intention to make any major changes to the business or employment of the employees of the Group or redeploy the fixed assets of the Group.

The Underwriters shall not be able to nominate directors to the Company, other than as in their capacity as a Shareholder in accordance with the Articles of Association in the event of them holding the Underwritten Shares.

The decision to support the Open Offer with the Bonus Issue by way of acting as one of the Underwriters to the Open Offer with the Bonus Issue was mainly because Lord Profit believed that the Open Offer with the Bonus Issue would strengthen the Group’s financial position and enlarge its capital base.

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LETTER FROM THE BOARD

ADJUSTMENTS RELATING TO SHARE OPTIONS UPON COMPLETION OF THE OPEN OFFER AND THE BONUS ISSUE

Pursuant to the terms of the Share Option Scheme, adjustments to the Existing Share Options may also be made upon the Open Offer and the Bonus Issue becoming unconditional. The Company will instruct its auditors or an independent financial adviser to certify in writing the adjustments (if any) that ought to be made to the Existing Share Options and an announcement will be made on the adjustments to the Existing Share Options after completion of the Open Offer with the Bonus Issue.

FUND RAISING ACTIVITIES OF THE COMPANY WITHIN 12 MONTHS TO THE LATEST PRACTICABLE DATE

Apart from the fund raising activity mentioned below, the Company has not carried out other fund raising activities during the 12 months immediately preceding the Latest Practicable Date:

		Net proceeds		Actual use of
Date of	Fund raising	raised	Proposed use of	the net
announcement	activity	(approximately)	the net proceeds	proceeds
19 April 2013	Placing of	HK$38 million	For general	Used as
	260,000,000 new		working capital	intended
	Shares at		of the Group	(Note)
	HK$0.15 per
	Share

Note: Such net proceeds were used for general working capital of the Group in the following manner: (a) as to approximately HK$3.50 million for general working capital including operating expenses for companies in Hong Kong; (b) as to approximately HK$10.0 million for settlement of renovation of factories in the PRC; and (c) as to of approximately HK$24.5 million for the general working capital for the subsidiaries of the Group in the PRC.

IMPLICATIONS UNDER THE LISTING RULES

Lord Profit is owned as to 90% by Mr. Kingsley Leung and as to 10% by Mr. Tong, where Mr. Kingsley Leung is a cousin of Mr. Tong. Automatic Result is wholly owned by Mr. Tong and Mr. Liu is the sole director of Automatic Result. As each of Mr. Tong and Mr. Liu is an executive Director, each of Lord Profit and Automatic Result (together with Mr. Tong and Mr. Liu) is therefore a connected person of the Company. Accordingly, the transaction contemplated under the Underwriting Agreement constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules.

Pursuant to Rule 14A.31(3)(c) of the Listing Rules, provided that Rule 7.26A(2) of the Listing Rules has been complied with, the allotment and issue of the Underwritten Shares to Lord Profit (as one of the Underwriters) pursuant to the Underwriting Agreement will be exempt from the reporting, announcement and independent shareholders’ approval requirements of Chapter 14A of the Listing Rules. As the Company has made arrangement to apply for the Offer Shares by the Qualifying Shareholders in

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LETTER FROM THE BOARD

excess of their entitlements under the Open Offer as referred to in Rule 7.26A(1) of the Listing Rules, Rule 7.26A(2) of the Listing Rules has been complied with and the allotment and issue of the Underwritten Shares to Lord Profit (as one of the Underwriters) pursuant to the Underwriting Agreement will be exempt from the reporting, announcement and independent shareholder’s approval requirements under Chapter 14A of the Listing Rules.

In addition, the payment of the underwriting commission to Lord Profit (as one of the Underwriters) constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. As the maximum underwriting commission to be received by the Underwriters pursuant to the Underwriting Agreement is approximately HK$5.4 million and the relevant percentage ratios (other than the profits ratio) as defined in the Listing Rules are less than 5% and the total underwriting commission payable is less than HK$10,000,000, it is therefore subject to reporting and announcement requirements but exempt from the independent shareholders’ approval requirement under Rule 14A.32 of the Listing Rules. Each of Mr. Tong and Mr. Liu has not voted on the resolution approving the payment of the underwriting commission, the Underwriting Agreement, the Open Offer with the Bonus Issue and the Whitewash Waiver at the Board meeting as each of Mr. Tong and Mr. Liu is a party acting in concert with Lord Profit.

Pursuant to Rule 7.24(5) of the Listing Rules, the Open Offer is conditional on, among other things, the approval by the Shareholders at the EGM at which any controlling Shareholders and their associates or, where there are no controlling Shareholders, the Directors (excluding the independent non-executive Directors) and the chief executive of the Company and their respective associates shall abstain from voting in favour. Given the Company has no controlling Shareholder, Automatic Result (being an associate of Mr. Tong) and the other associates of the Directors who are Shareholders shall abstain from voting in favour of the resolution in relation to the Open Offer at the EGM.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, save for Lord Profit and persons acting in concert with it (including Mr. Tong, Mr. Liu and Automatic Result), no Shareholders have material interest in the Underwriting Agreement and/or the ARL Undertaking and/or the Whitewash Waiver and/or the Open Offer with the Bonus Issue would be required to abstain from voting on the relevant resolutions to approve the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and/or the Whitewash Waiver at the EGM.

INDEPENDENT BOARD COMMITTEE

The Company has established an Independent Board Committee (which comprises all the independent non-executive Directors, namely Mr. Tsao Hoi Ho, Terry, Mr. Lou Iok Kuong, Mr. Ng Pak Kin, Danny and Mr. Leung Wai Chung, Vincent) to advise the Independent Shareholders as to whether the terms of the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and the Whitewash Waiver are fair and reasonable and are in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote, taking into account the recommendations of the independent financial adviser.

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LETTER FROM THE BOARD

INDEPENDENT FINANCIAL ADVISER

Fortune Financial Capital Limited had been appointed by the Company as the Independent Financial Adviser (the appointment of which had been approved by the Independent Board Committee) to advise the Independent Board Committee and the Independent Shareholders as to whether the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and the Whitewash Waiver are fair and reasonable and are in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote.

EGM

A notice convening the EGM at Montparnasse Room I-II, 2/F, Regal Kowloon Hotel, 71 Mody Road, Tsimshatsui, Hong Kong on Thursday, 29 August 2013 at 11:00 a.m. is set out on pages EGM-1 to EGM-4 of this circular. Whether or not you are able to attend the meeting in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the Hong Kong branch share registrars and transfer office of the Company, Tricor Abacus Limited, 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as practicable but in any event not later than 48 hours before the time appointed for the holding of the meeting or the adjourned meeting (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting at the meeting or any adjourned meeting thereof (as the case may be) should you so desire. In such event, the instrument appointing a proxy will be deemed to be revoked.

In accordance with the Takeovers Code and the Listing Rules, Lord Profit and parties acting in concert with it (including Automatic Result) and their respective associates (as defined under the Listing Rules) and those who are involved in and/or interested in the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and/or the Whitewash Waiver shall abstain from voting on the relevant resolutions in respect of Underwriting Agreement, the Open Offer with the Bonus Issue and/or the Whitewash Waiver at the EGM.

RECOMMENDATION

The Directors (including independent non-executive Directors after taking into account the advice of the Independent Financial Adviser) believe that the terms of the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and the Whitewash Waiver are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including independent non-executive Directors after taking into account the advice of the Independent Financial Adviser) recommend the Independent Shareholders to vote in favour of all resolutions to be proposed at the EGM. Mr. Tong and Mr. Liu, being the sole owner and sole director of Automatic Result respectively, who have a material interest in the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and the Whitewash Waiver, have abstained from voting on the Board resolutions regarding the same.

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LETTER FROM THE BOARD

Shareholders are advised to read carefully the letter from the Independent Board Committee on pages 38 to 39 of this circular. The Independent Board Committee, having taken into account the advice of the Independent Financial Adviser, the text of which is set out on pages 40 to 67 of this circular, considers that although the Open Offer with the Bonus Issue, the Underwriting Agreement and the ARL Undertaking are not in an ordinary course of business of the Company, the terms of the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and the Whitewash Waiver are on normal commercial terms and are fair and reasonable insofar as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the resolutions to approve the Underwriting Agreement, the Open Offer with the Bonus Issue and the Whitewash Waiver at the EGM.

ADDITIONAL INFORMATION

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

On behalf of the Board Uni-Bio Science Group Limited TONG Kit Shing Chairman

– 37 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of the letter from the Independent Board Committee setting out its recommendation to the Independent Shareholders in relation to the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and the Whitewash Waiver.

==> picture [316 x 59] intentionally omitted <==

(incorporated in the Cayman Islands with limited liability)

(stock code: 690)

13 August 2013

To the Independent Shareholders

Dear Sir or Madam,

(1) PROPOSED OPEN OFFER OF NOT LESS THAN 1,564,846,293 OFFER SHARES AND NOT MORE THAN 1,644,023,148 OFFER SHARES AT HK$0.16 PER OFFER SHARE ON THE BASIS OF 1 OFFER SHARE FOR EVERY 1 EXISTING SHARE HELD ON THE RECORD DATE WITH THE BONUS ISSUE ON THE BASIS OF 1 BONUS SHARE FOR EVERY 1 OFFER SHARE TAKEN UP AND 1 BONUS WARRANT FOR EVERY 2 OFFER SHARES TAKEN UP UNDER THE OPEN OFFER; (2) APPLICATION FOR WHITEWASH WAIVER; AND (3) CONNECTED TRANSACTION IN RESPECT OF UNDERWRITING AGREEMENT

We refer to the circular of the Company dated 13 August 2013 (“ Circular ”) of which this letter forms part. Unless the context specifies otherwise, capitalised terms used herein have the same meanings as defined in the Circular.

We have been appointed by the Board to advise the Independent Shareholders as to whether the terms of the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and the Whitewash Waiver are fair and reasonable insofar as the Independent Shareholders are concerned. Fortune Financial Capital Limited has been appointed as the Independent Financial Adviser to advise you and us in this respect.

For identification purpose only

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the principal reasons and factors considered by, and the advice of, the Independent Financial Adviser as set out in its letter of advice to you and us on pages 40 to 67 of the Circular, we are of the opinion that the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and the Whitewash Waiver are on normal commercial terms, are in the interests of the Company and the Shareholders as a whole and the terms of which are fair and reasonable insofar as the Company and the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Underwriting Agreement, the Open Offer with the Bonus Issue and the Whitewash Waiver.

Yours faithfully,

For and on behalf of the Independent Board Committee

Mr. Tsao Hoi Ho, Mr. Lou Iok Kuong Mr. Ng Pak Kin, Mr. Leung Wai Terry Danny Chung, Vincent Independent Independent Independent Independent non-executive Director non-executive Director non-executive Director non-executive Director

– 39 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to the Open Offer (including the Underwriting Agreement, the ARL Undertaking and the Bonus Issue) and the Whitewash Waiver prepared for the purpose of inclusion in this circular.

==> picture [159 x 33] intentionally omitted <==

Fortune Financial Capital Limited

35th Floor

Office Tower Convention Plaza 1 Harbour Road, Wanchai Hong Kong

13 August 2013

To the Independent Board Committee and the Independent Shareholders of Uni-Bio Science Group Limited

(1) PROPOSED OPEN OFFER OF NOT LESS THAN 1,564,846,293 OFFER SHARES AND NOT MORE THAN 1,644,023,148 OFFER SHARES AT HK$0.16 PER OFFER SHARE ON THE BASIS OF 1 OFFER SHARE FOR EVERY 1 EXISTING SHARE HELD ON THE RECORD DATE WITH THE BONUS ISSUE ON THE BASIS OF 1 BONUS SHARE FOR EVERY 1 OFFER SHARE TAKEN UP AND 1 BONUS WARRANT FOR EVERY 2 OFFER SHARES TAKEN UP UNDER THE OPEN OFFER; (2) APPLICATION FOR WHITEWASH WAIVER; AND (3) CONNECTED TRANSACTION IN RESPECT OF UNDERWRITING AGREEMENT

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee and the Independent Shareholders in respect of the Open Offer (including the Underwriting Agreement, the ARL Undertaking and the Bonus Issue) and the Whitewash Waiver, details of which are set out in the section headed “Letter from the Board” (the “ Board Letter ”) in the Company’s circular dated 13 August 2013 (the “ Circular ”) to the Shareholders, of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

On 10 July 2013, the Company announced, among other things, that the Company proposes to raise not less than approximately HK$250 million before expenses by issuing not less than 1,564,846,293 Offer Shares and not more than approximately HK$263 million before expenses by issuing not more than 1,644,023,148 Offer Shares at the Subscription Price of HK$0.16 per Offer Share on the basis of one Offer Share for every one Share in issue on the Record Date with the Bonus Issue on the basis of one Bonus Share for every one Offer Share taken up under the Open Offer and one Bonus Warrant for every two Offer Shares taken up under the Open Offer.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at the Latest Practicable Date, Lord Profit, together with its beneficial owners and parties acting in concert with any one of them, is beneficially interested in 302,918,844 Shares, representing approximately 19.36% of the issued share capital of the Company. All such Shares are held through Automatic Result. (A) In the event that no Qualifying Shareholder (other than Automatic Result) takes up any Offer Shares and there has been no exercise of the Existing Share Options and the Bonus Warrants, the Underwriters will be required to subscribe for and take up all the Underwritten Shares, and upon completion of the Open Offer with the Bonus Issue, the taking up of (i) the Offer Shares to which Automatic Result is entitled under the Open Offer; and (ii) the Underwritten Shares would result in the aggregate shareholding of Lord Profit and parties acting in concert with it in the Company being increased from approximately 19.36% to approximately 67.74% and would therefore trigger an obligation for Lord Profit and parties acting in concert with it to make an unconditional mandatory general offer under Rule 26 of the Takeovers Code for all the Shares not already held by them; and (B) in the event that the aggregate shareholding of Lord Profit and parties acting in concert with it in the Company upon completion of the Open Offer with the Bonus Issue is between 30% and 50%, any exercise of the subscription rights attaching to the Bonus Warrants resulting in an increase in more than 2% voting rights in the Company in any 12 months’ period would also trigger an obligation for Lord Profit and parties acting in concert with it to make an unconditional mandatory general offer under Rule 26 of the Takeovers Code for all the Shares not already held by them, in each case, unless the Whitewash Waiver is obtained.

A formal application has been made by Lord Profit to the Executive for the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code. The Whitewash Waiver, if granted, would be subject to, among other things, the approval of the Independent Shareholders at the EGM by way of poll, which Lord Profit and parties acting in concert with it and (if applicable) Shareholders who are involved in or interested in the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and/or the Whitewash Waiver will abstain from voting on the relevant resolutions.

The Independent Board Committee, comprising all the independent non-executive Directors, has been established to make recommendations to the Independent Shareholders as to whether the terms of the Open Offer (including the Underwriting Agreement, the ARL Undertaking and the Bonus Issue) and the Whitewash Waiver are fair and reasonable and are in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Our role as the Independent Financial Adviser is to give our independent opinion to the Independent Board Committee and Independent Shareholders as to (i) whether the Open Offer (including the Underwriting Agreement, the ARL Undertaking and the Bonus Issue) and the Whitewash Waiver are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Independent Shareholders as a whole; and (ii) advise the Independent Shareholders on how to vote on the resolutions at EGM in relation to the Underwriting Agreement and the Open Offer with the Bonus Issue and the Whitewash Waiver.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the accuracy of the statements, information, opinions and representations contained or referred to in the Circular and the information and representations provided to us by the Company, the Directors and the management of the Company. We have no reason to believe that any information and representations relied on by us in forming our opinion is untrue, inaccurate or misleading, nor are we aware of any material facts the omission of which would render the information provided and the representations made to us untrue, inaccurate or misleading. We have assumed that all information, representations and opinions contained or referred to in the Circular, which have been provided by the Company, the Directors and the management of the Company and for which they are solely and wholly responsible, were true and accurate at the time when they were made and continue to be true up to the Latest Practicable Date and should there be any material changes after the despatch of the Circular, Shareholders would be notified as soon as possible.

The Directors have jointly and severally accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed in the Circular, having made all reasonable inquiries, that to the best of their knowledge, opinion expressed in the Circular have been arrived at after due and careful consideration and there are no other facts the omission of which would make any statement in the Circular misleading. We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-depth investigation into the business and affairs of the Company, or its subsidiaries or associated companies.

We have not considered the tax consequences on the Qualifying Shareholders arising from the subscription for, holding of or dealing in the Offer Shares or otherwise, since these are particular to their own circumstances. We will not accept responsibility for any tax effect on, or liabilities of, any person resulting from the subscription for, holding of or dealing in the Offer Shares or the exercise of any rights attaching thereto or otherwise. In particular, Qualifying Shareholders subject to overseas taxes or Hong Kong taxation on securities dealings should consider their own tax positions with regard to the Open Offer and, if in any doubt, should consult their own professional advisers.

This letter is issued for the information for the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the Open Offer, the Bonus Issue and the Whitewash Waiver and, except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our recommendation in relation to the Open Offer, the Bonus Issue and the Whitewash Waiver, we have considered the following principal factors and reasons.

1. Background information of the Company

For the year ended 31 March 2012

As set out in the annual report of the Company for the year ended 31 March 2012 (“ AR 2012 ”), the Group recorded turnover of approximately HK$57.03 million for the year ended 31 March 2012, representing a decrease of approximately 25.70% as compared with the turnover for the year ended 31 March 2011 of approximately HK$76.76 million. As advised by the Company, the decrease in turnover was mainly due to the increasing competition which result in lower sales volume.

The Group recorded loss attributable to Shareholders of approximately HK$102.86 million for the year ended 31 March 2012, representing a decrease in loss of approximately 44.45% as compared with the loss attributable to Shareholders of approximately HK$185.16 million for the year ended 31 March 2011. As advised by the Company, the higher loss in 2011 was mainly due to impairment loss on purchased goodwill of Dongguan Po Kong Jian Pharmaceutical Technology Co., Ltd. of approximately HK$90.00 million, impairment loss on intangible assets of approximately HK$9.76 million and impairment loss on property, plant and equipment of approximately HK$8.82 million while these impairment losses were nil for the year ended 31 March 2012.

We note from AR 2012 that auditors of the Company, even though without qualifying its opinion, had expressed a material uncertainty opinion concerning the going concern basis of the Group because, among others, the Group incurred a loss attributable to Shareholders of approximately HK$102,864,000 for the year ended 31 March 2012 and, as of that date, the Group had significant accumulated losses of approximately HK$1,004,126,000.

For the year ended 31 March 2013

As set out in the annual report of the Company for the year ended 31 March 2013 (“ AR 2013 ”), the Group recorded turnover of approximately HK$83.33 million for the year ended 31 March 2013, representing an increase of approximately 46.12% as compared with the turnover for the year ended 31 March 2012 of approximately HK$57.03 million. As advised by the Company, the increase in turnover was mainly due to the better marketing strategy and executive team which lead to increase in sales of in-house biological pharmaceutical products and increase in demand for the in-house chemical pharmaceutical products.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group recorded loss attributable to Shareholders of approximately HK$69.31 million for the year ended 31 March 2013, representing a decrease in loss of approximately 32.62% as compared with the loss attributable to Shareholders of approximately HK$102.86 million for the year ended 31 March 2012. As advised by the Company, the improvement on the financial result was mainly due to (i) the decrease in production cost as a result of tightening cost control by the management; and (ii) the Group recorded loss on disposal of property, plant and equipment of approximately HK$19.24 million for the year ended 31 March 2012 while the Group only incurred a loss on disposal of property, plant and equipment of approximately HK$0.03 million for the year ended 31 March 2013.

We note from AR 2013 that auditors of the Company, even though without qualifying its opinion, had expressed a material uncertainty opinion concerning the going concern basis of the Group because, among others, the Group incurred a loss attributable to owners of the Company of approximately HK$69,308,000 for the year ended 31 March 2013 and, as of that date, its current liabilities exceeded its current assets by approximately HK$6,849,000 (the “ Uncertainty Opinion ”).

2. Reasons for the Open Offer and the use of proceeds

As disclosed in the AR 2013, the Group will concentrate on biological pharmaceutical products. The Group will continue to maintain the existing market for chemical pharmaceutical products but the Group does not have specific plans to further expand this segment. As disclosed in the AR 2012, the management had decided to discontinue the distribution of pharmaceutical products segment of the Group in the year ended 31 March 2013. The Group considered that the commercialisation of new pharmaceutical products of the Group will have a positive effect on the Company in terms of revenue and profit, but that intensive marketing strategy is necessary to promote and market new pharmaceutical products.

As noted from the Board Letter, of the four self-development projects of the Group, namely, for the pharmaceutical products rhPTH 1-34, rExtendin-4, rhEPO-Fc and rhIL-11 respectively, trial production for rhPTH 1-34 has already commenced and that the launch of the product is expected to be at around August 2014, subject to the trial production feedback/cool down period (by around February 2014) and final approval from the China Food and Drug Administration (“ CFDA ”) (by around June 2014). For rExtendin-4, clinical trial, test and medical reports are expected to complete at around January 2014 and that the launch of the product is expected to be at or around August 2015, subject to its trial production (by around June 2014), feedback/cool down period (by around December 2014) and final approval from the CFDA (by around June 2015).

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For rhIL-11, phase I of the clinical trial has already been completed and the final approval from the CFDA is currently expected to be obtained at around 2019, subject to the completion of phases II and III of the clinical trial (by around 2017) and registration of the pharmaceutical product (by around 2018). For rhEPO-Fc, phase I of clinical trial is expected to be completed at around June 2014 and the final approval from the CFDA is currently expected to be obtained at around June 2017, subject to completion of phases II and III of the clinical trial (by around June 2016) and registration of the pharmaceutical product (by around June 2016). As advised by the Company, given that the project development progress for rhPTH 1-34 and rExtendin-4 are closer to completion, the Group has decided to allocate more resources on such projects and thus, progress for the projects involving rhEPO-Fc and rhIL-11 has been slowed down as a result that the Group has allocated more resources on the projects involving rhPTH 1-34 and rExtendin-4.

Also noted from the Board Letter, the costs in preparation and follow up actions in commercialisation and marketing in the relevant markets of the Group’s bio-science related business will involve large amount of expenses (the “ Preparation and Follow-up Expense ”), in particular shortly before and at the beginning of the launch of pharmaceutical products. As such, additional funds for the finalisation of research and development, commercialisation, and marketing would speed up the launch of the Group’s products.

The Directors are of the view that taking into account the audited consolidated net current liabilities of the Group of approximately HK$6,849,000 as at 31 March 2013, the Open Offer with the Bonus Issue will enable the Company to improve the Group’s current ratio and to raise funds and provide the Company with the financial flexibility necessary for the Group’s future development and investment purposes as and when suitable opportunities arise and which are relevant to the principal business of the Group in the bio-science related business. As at the Latest Practicable Date, no specific investment targets have been identified by the Group. In addition, the Open Offer would allow the Company to strengthen its capital base and provide an opportunity to all Qualifying Shareholders to participate in the growth of the Company in proportion to their shareholdings. Accordingly, the executive Directors consider that the terms of the Underwriting Agreement are fair and reasonable and that the Underwriting Agreement and the proposed Open Offer with the Bonus Issue are in the interests of the Company and the Shareholders as a whole.

As set out in the Board Letter, the Company will raise not less than approximately HK$250 million and not more than HK$263 million before expenses from the Open Offer. The Company intends to use the net proceeds from the Open Offer, being not less than approximately HK$243 million and not more than approximately HK$255 million in the following manner:

(1) as to approximately HK$120 million for the commercialisation and for marketing in the relevant markets of the Group’s bio-science related business, in particular two new drugs, namely rhPTH 1-34 (as to approximately HK$51 million) and rExtendin-4 (as to approximately HK$69 million), in each case, covering expenses in the trial production period, feedback period, on obtaining approval, for preparation of launching and for continue marketing

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

of the two drugs which include preliminary introduction and presentation to medical practitioners on the new pharmaceutical products, conducting market survey and review before launching of the products, formulating formal marketing plans and public promotion on the new pharmaceutical products;

(2) as to approximately HK$60 million for general working capital of the Group (as to approximately HK$10 million as operating expenses of the Group in Hong Kong, as to approximately HK$15 million as operating expenses of the Group in Shenzhen; as to approximately HK$25 million as operating expenses of the Group in Beijing; and as to approximately HK$10 million as operating expenses of Group’s Dongguan Taili Biotech Co., Ltd. research and development centre (excluding costs for research and development)); and
(3) the balance of the net proceeds, being not less than approximately HK$63 million and not more than approximately HK$76 million, for the research and development of the pharmaceutical products by the Group, of which the Company intended to allocate as to more than 70% of the balance of the net proceeds to research and development of the projects involving the pharmaceutical products rhEPO-Fc and rhIL-11, and the remaining portion of the balance of the net proceeds to research and development of the projects involving the pharmaceutical products rhPTH 1-34 and rExtendin-4 for further fine tuning of the pharmaceutical product may be necessary, for example, to refine the packaging for easier usage, to enhance the design for better safety, and to respond to users’ initial feedback and suggestion to improve the products. Such proceeds is intended to be used not entirely in the current financial year of the Group but also for the future financial years of the Group, as the Company considers it is prudent to have the funds readily available such that the Company will not be required to conduct any fund raising exercise when such funds are required for research and development and hence result in hampering the progress in research and development of the Company due to the need of such funds as and when required.

As noted from AR 2013, the Company resumed trading on the Stock Exchange on 2 April 2013 since suspension from 2:30 p.m. on 9 March 2010 and upon resumption, the Company could then concentrate on further develop its self-developed projects so as to commercialize the research results. We also noted from AR 2013 that the Class II prescription new drugs Recombinant Human Parathyroid Hormone (1-34) (rhPTH 1-34) has completed its clinical trial process. Trial production had been made and test applied in some hospitals in early 2013. The Board expects that the final approval by the CFDA would be obtained by middle of 2014. As set out in AR 2013, the self-developed bio-logical products, rExtendin-4, is near to completion and as advised by the Company, the Board expects approval from the CFDA would be obtained in 2015.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As set out in AR 2013, the Company recorded bank balances and cash of approximately HK$14.13 million, borrowing of approximately HK$129.81 million and net current liabilities of approximately 6.85 million as at 31 March 2013. As noted from the Company’s announcement dated 19 April 2013, the Company has carried out share placing to raise net proceeds of approximately HK$38 million (the “ Placing Net Proceeds ”) and as advised by the Company, such net proceeds has been utilized in full as to approximately HK$3.50 million for general working capital including operating expenses for companies in Hong Kong, as to approximately HK$10.0 million for settlement of renovation of factories in the PRC and as to the remaining balance of approximately HK$24.5 million for the general working capital for the subsidiaries of the Group in the PRC. We also noted from AR 2012 and AR 2013, the Company has been loss-making since the financial year ended 31 March 2009.

In view of (i) the cash position of the Group with bank balances and cash of approximately HK$14.13 million, borrowing of approximately HK$129.81 million and net current liabilities of approximately 6.85 million as at 31 March 2013, the Uncertainty Opinion as set out in AR 2013 and the Placing Net Proceeds has been utilised in full as at the Latest Practicable Date; (ii) the Open Offer would enable the Group to strengthen its capital base and enhance its financial resources on the commercialisation and marketing (including the Preparation and Follow-up Expense) of its two new drugs and its bio-science related business; (iii) the Open Offer would enhance the financial flexibility of the Company for its future development and investment purposes as and when suitable opportunities arise; and (iv) the Open Offer is on the basis that all Qualifying Shareholders have been offered the same opportunity to maintain their proportional interests in the Company, we consider the Open Offer is fair and reasonable and is in the interests of the Company and the Independent Shareholders as a whole.

3. Principal terms of the Open Offer

Basis of the Open Offer

Qualifying Shareholders will be offered one Offer Share for every one existing Share held on the Record Date and payable in full on acceptance, together with one Bonus Share for every one Offer Share taken up and one Bonus Warrant for every two Offer Shares taken up.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Subscription Price/Effective Price

The Subscription Price is HK$0.16 per Offer Share, payable in full when a Qualifying Shareholder accepts his/her/its provisional allotment under the Open Offer. Taking into account the Bonus Shares being issued with the Offer Shares, the Effective Price is HK$0.08 for each Offer Share.

The Subscription Price and the Effective Price respectively represent:

(1) a premium of approximately 1.27% and a discount of approximately 49.37% respectively to the closing price of HK$0.158 per Share as quoted on the Stock Exchange on the Last Trading Day;
(2) a premium of approximately 0.88% and a discount of approximately 49.56% respectively to the average closing price of HK$0.1586 per Share quoted on the Stock Exchange for the five trading days up and including the Last Trading Day;
(3) a discount of approximately 0.68% and a discount of approximately 50.34% respectively to the average closing price of HK$0.1611 per Share as quoted on the Stock Exchange for the 10 consecutive trading days up to and including the Last Trading Day;
(4) a premium of approximately 50.94% and a discount of approximately 24.53% to the theoretical ex-entitlement price of HK$0.106 (taking into account the entitlement of the Bonus Shares) respectively based on the closing price of HK$0.158 per Share as quoted on the Stock Exchange on the Last Trading Day;
(5) a discount of approximately 70.15% and a discount of approximately 85.07% respectively to the audited consolidated net asset value per Share of approximately HK$0.536 (the “ NAV PER SHARE ”) as at 31 March 2013 (based on the audited consolidated net asset value of the Group over the number of Shares in issue as at 31 March 2013); and
(6) a premium of approximately 15.11% and a discount of approximately 42.45% respectively to the closing price of HK$0.139 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

As set out in the Board Letter, the Subscription Price was arrived at after arm’s length negotiation between the Company and the Underwriters with reference to the prevailing market conditions and the recent trading price of the Shares.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(i) Historical price

In order to assess the fairness and reasonableness of the Subscription Price, we have reviewed the trading price of the Shares for the period from 10 July 2012, being the 12-month period prior to the Underwriting Agreement, up to and including the Last Trading Day (the “ Review Period ”). The chart below illustrates the daily closing prices of the Shares versus the Subscription Price and the Effective Price during the Review Period:

==> picture [339 x 197] intentionally omitted <==

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

Subscription Price = HK$0.16
Effective Price = HK$0.08
----- End of picture text -----

Source: the website of the Stock Exchange

Note: Shares have been suspended from trading from 2:30 p.m. on 9 March 2010 up to and including 28 March 2013.

Since the resumption of trading in Shares on 2 April 2013 and up to the Last Trading Day, the highest closing price and the lowest closing price of the Shares were HK$0.231 on 5 April 2013 and HK$0.153 on 7 June, 10 June and 4 July 2013 respectively. The Subscription Price represents a discount of approximately 30.74% and a premium of approximately 4.58% respectively to such highest and lowest closing prices of the Shares during such period. The Effective Price represents discounts of approximately 65.37% and approximately 47.71% respectively to such highest and lowest closing prices of the Shares during such period.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) Historical trading volume

We have also reviewed (i) the percentage of average daily trading volume to the total number of issued Shares as at the Last Trading Day; and (ii) the percentage of average daily trading volume to the total number of issued Shares held by the public as at the Last Trading Day for each month during the Review Period. Details are tabulated as follows:

				Average Volume
		Approximate	Average Volume	to total number
		average daily	to total number	issued Shares
	Number of	trading volume	of issued Shares	held by public
	trading days in	(the “Average	as at the Last	as at the Last
	each month	Volume”)	Trading Day	Trading Day
	(days)	(in number	(Approximate %)	(Approximate %)
Month	(Note 1)	of Shares)	(Note 2)	(Note 3)
2012
July	suspended	suspended	suspended	suspended
August	suspended	suspended	suspended	suspended
September	suspended	suspended	suspended	suspended
October	suspended	suspended	suspended	suspended
November	suspended	suspended	suspended	suspended
December	suspended	suspended	suspended	suspended
2013
January	suspended	suspended	suspended	suspended
February	suspended	suspended	suspended	suspended
March	suspended	suspended	suspended	suspended
April	20	17,754,648	1.14	1.68
May	21	4,851,489	0.31	0.46
June	19	2,161,089	0.14	0.20
July (Up to and
including the
Last Trading
Day)	7	897,200	0.06	0.09

Source: the website of the Stock Exchange

Notes:

1. Shares have been suspended from trading from 2:30 p.m. on 9 March 2010 up to and including 28 March 2013.

2. Based on 1,564,846,293 Shares in issue as at the Last Trading Day.

3. Based on 1,056,927,449 Shares held by public as at the Last Trading Day.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We noted that the Average Volume in April 2013 is relatively high as compared with the Average Volume in May, June and July 2013 and as advised by the Company, the relatively high Average Volume in April 2013 may due to the long suspension of trading in Shares for more than three years. Save for the Average Volume in April 2013, the highest Average Volume during the Review Period to the total number of issued Shares as at the Last Trading Day was approximately 0.31% and to the Shares held by public as at the Last Trading Day was approximately 0.46%. Since the Shares were generally illiquid in the open market, we concur with the Directors that it would be difficult to attract the Qualifying Shareholders to reinvest in the Company through the Open Offer (with the Bonus Issue) if the Effective Price was not set at discount to the historical closing prices of the Shares. With this being the case, we are of the view that the discount to the Share price as represented by the Effective Price is justifiable.

(iii) Comparison with recent open offers

We also consider a broader comparison with the open offers conducted by other companies listed on the Main Board and the Growth Enterprise Market of the Stock Exchange to provide a more general reference for the Subscription Price and the Effective Price. We have identified all open offers (the “ Comparables ”) (i) announced by other companies that are listed on the Stock Exchange from 10 July 2012 up to and including 10 July 2013, being the date of the Underwriting Agreement (the “ Comparable Period ”); and (ii) have not been suspended for trading for more than 12 months from the dates of the respective announcements in relation to the open offer transactions, for reference. Though there was no other listed companies in Hong Kong which engaged in similar principal business as the Company has conducted open offer during the Comparable Period, we consider that the terms of the Comparables are determined under similar market conditions and sentiments as the Open Offer and we believe that the Comparables may reflect the recent trend of the open offer transactions in the market and consider the Comparables are fair and representative samples. Details of the Comparables are summarized in the following table:

			Premium/	Premium/
			(discount) of	(discount) of
			subscription	subscription
			price over/(to)	price over/(to)
			the closing	the theoretical		Maximum	Excess
Comparable	Date of	Basis of	price on the	ex-entitlement	Underwriting	dilution	application
(stock code)	announcement	entitlement	last trading day	price	commission	(Note 2)	(Y/N)
			(%)	(%)	(%)	(%)
Sustainable Forest Holdings	5-Jul-13	1 for 12,	(90.34)	(82.34)	2.50	50.00	N
Limited (723)(Note 1)		bonus issue
		of 11 bonus
		shares for
		every offer
		share

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			Premium/	Premium/
			(discount) of	(discount) of
			subscription	subscription
			price over/(to)	price over/(to)
			the closing	the theoretical		Maximum	Excess
Comparable	Date of	Basis of	price on the	ex-entitlement	Underwriting	dilution	application
(stock code)	announcement	entitlement	last trading day	price	commission	(Note 2)	(Y/N)
			(%)	(%)	(%)	(%)
Larry Jewelry International	5-Apr-13	3 for 10	(54.36)	(47.87)	1.50	23.08	N
Company Limited (8351)
Sustainable Forest Holdings	18-Mar-13	1 for 6, bonus	(9.49)	(8.25)	3.00	14.29	N
Limited (723)(Note 1)		issue of 1
		bonus
		warrant for
		1 offer
		share
Eternity Investment Limited	13-Mar-13	1 for 2	(9.09)	(6.25)	1.00	33.33	N
(764)
Summit Ascent Holdings	28-Feb-13	3 for 10	(59.46)	(53.01)	1.25	23.08	N
Limited (102)
TLT Lottotainment Group	7-Feb-13	2 for 1	49.25	12.36	3.00	66.67	N
Limited (8022)
Perception Digital Holdings	30-Jan-13	1 for 2	(37.27)	(28.36)	3.00	33.33	N
Limited (1822)
Solargiga Energy Holdings	15-Jan-13	1 for 5	(12.07)	(10.26)	1.00	16.67	Y
Limited (757)
Far East Holdings	14-Dec-12	1 for 2	(39.39)	(30.24)	4.50	33.33	Y
International Limited (36)
China Neng Xiao Technology	11-Dec-12	1 for 2	(73.40)	(64.79)	3.50	33.33	N
(Group) Limited (8047)
TeleEye Holdings Limited	15-Nov-12	1 for 2	(58.20)	(48.10)	2.00	33.33	Y
(8051)(Note 3)
Solargiga Energy Holdings	2-Nov-12	1 for 9	(16.67)	(15.25)	1.50	10.00	N
Limited (757)
Yunbo Digital Synergy Group	31-Oct-12	1 for 4	(44.44)	(39.02)	0.00	20.00	Y
Limited (8050)(Note 3)

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			Premium/	Premium/
			(discount) of	(discount) of
			subscription	subscription
			price over/(to)	price over/(to)
			the closing	the theoretical		Maximum	Excess
Comparable	Date of	Basis of	price on the	ex-entitlement	Underwriting	dilution	application
(stock code)	announcement	entitlement	last trading day	price	commission	(Note 2)	(Y/N)
			(%)	(%)	(%)	(%)
Charming Future Holdings	26-Oct-12	1 for 2	(38.55)	(29.46)	2.50	33.33	N
Limited (1198)
C Y Foundation Group	19-Oct-12	1 for 2	(35.90)	(27.17)	2.00	33.33	N
Limited (1182)
New Universe International	28-Sep-12	1 for 5	(4.76)	(4.00)	0.00	16.67	Y
Group Limited (8068)
(Note 3)
Sun Century Group Limited	5-Sep-12	6 for 1	(78.26)	(34.21)	0.00	85.71	N
(1383)(Note 3)
Computech Holdings	22-Aug-12	3 for 1	(81.82)	(52.94)	2.50	75.00	N
Limited (8081)
C Y Foundation Group	15-Aug-12	1 for 2	(55.56)	(45.95)	2.00	33.33	N
Limited (1182)
MelcoLot Limited (8198)	14-Aug-12	3 for 1	(21.20)	(6.00)	0.00	75.00	N
(Note 3)

Comparables with subscription prices represented discount to the closing price of the shares on the last trading days and represented discount to the to the theoretical ex-entitlement prices of the shares (the “ Subset Comparable ”).

Maxium		(4.76)	(4.00)	4.50	85.71
Minimum		(81.82)	(64.79)	0.00	10.00
Mean		(42.38)	(31.93)	1.66	35.99
Company	Effective	(49.37)	(24.53)	2.50	66.66
	Price				(Note 2)
	Subscription	1.27	50.94
	Price

Sources: www.hkex.com.hk

Notes:

In view of the different nature of open offer transactions with bonus issue of shares/warrants conducted by this Comparable as compared with other Comparables, the open offer transactions conducted by this Comparable have been excluded from the comparison analyses. For illustrative purpose, in respect of the open offer transaction announced by Sustainable Forest Holdings Limited on 5 July 2013, the discounts of subscription price to the closing price on the last trading day and to the theoretical

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

ex-entitlement price are calculated based on the effective price after taking into consideration of the bonus issue of shares.

Maximum dilution effect of each open offer is calculated as: (number of offer shares and (if any) bonus shares to be issued under the basis of entitlement)/(number of existing shares held for the entitlement for the offer shares under the basis of entitlement + number of offer shares and (if any) bonus shares to be issued under the basis of entitlement) x 100%, e.g. for an open offer with basis of 1 offer share for every 1 existing share held with bonus issue on the basis of 1 bonus share for every 1 offer share taken up, the maximum dilution effect is calculated as ((1+1/(1+1+1))*100) = 66.66%.
The underwriters for the open offer transactions conducted by these Comparables are connected persons to the Comparables.

We note that it is a common market practice that, in order to enhance the attractiveness of an open offer exercise and to encourage the existing shareholders to participate in an open offer, the subscription price of an open offer normally represents a discount to the prevailing market prices of the relevant shares. Although the Subscription Price represents a premium to the closing price of the Share as at the Last Trading Day, given the Qualifying Shareholders who would take up their respective entitlements under the Open Offer with the Bonus Issue would be entitled to be allotted and issued with two Shares (being one Offer Share and one Bonus Share) at the Subscription Price of HK$0.16 per Offer Share and in other words, the cost of the Qualifying Shareholders for taking up their respective entitlements would be HK$0.08 per Share under the Open Offer with the Bonus Issue. Hence, we consider comparison with the Effective Price which taken into the effect of Bonus Share would be a more relevant approach.

In view that the Effective Price represented discounts to closing price of the Shares on the Last Trading Day and to the theoretical ex-entitlement prices of the Shares, we consider it is more relevant to compare the discounts represented by the Effective Price to the Subset Comparable to assess the fairness and reasonableness of the discounts represented by the Effective Price. As shown in the above table, the discounts represented by the subscription prices to the closing prices of shares of the Subset Comparables on the last trading days prior to the release of the respective announcements ranged from approximately 4.76% to approximately 81.82% (the “ LTD Market Range ”). The discount of approximately 49.37% as represented by the Effective Price to the closing price of the Shares on the Last Trading Day falls within the LTD Market Range and depicts a deeper discount than the mean of approximately 42.38% of the LTD Market Range.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The discounts represented by the subscription prices to the theoretical ex-entitlement prices of the shares of the Subset Comparables ranged from approximately 4.00% to approximately 64.79% (the “ TEP Market Range ”). The discount of approximately 24.53% as represented by the Effective Price to the theoretical ex-entitlement price of the Shares falls within the TEP Market Range and represented a smaller discount than the mean of approximately 31.93% of the TEP Market Range.

We are aware that the Effective Price represented a discount to the NAV PER SHARE and the discount represented by the Effective Price to the closing price of the Shares on the Last Trading Day represented a discount depicts a deeper discount than the mean of the LTD Market Range, however, having taken into consideration that (i) it is common for the listed issuers in Hong Kong to issue offer shares at a discount to the market price in order to enhance the attractiveness of an open offer transaction and the Effective Price is lower than the market price of the Shares as at the Last Trading Day is in line with general practice in the market; (ii) the discount represented by the Effective Price to the closing price of the Shares on the Last Trading Day falls within the LTD Market Range; (iii) the discount represented by the Effective Price to the theoretical ex-entitlement price of the Shares falls within the TEP Market Range and represented a smaller discount than the mean of TEP Market Range; and (iv) all Qualifying Shareholders are offered an equal opportunity to subscribe for the Offer Shares at the Subscription Price, we consider the Subscription Price is fair and reasonable so far as the Independent Shareholders are concerned.

Bonus Issue

The Company also proposed to issue the Bonus Shares and the Bonus Warrant to the Qualifying Shareholders on the basis of one Bonus Share for every one Offer Share taken up and one Bonus Warrant for every two Offer Shares taken up under the Open Offer.

The subscription rights attaching to the Bonus Warrants may be exercised at any time between the date of issue of the Bonus Warrants and 3 years after the date of issue of the Bonus Warrants (the “ Warrant Exercise Period ”).

The initial Exercise Price of HK$0.20 represents:

(1) a premium of approximately 26.58% over the closing price of HK$0.158 per Share as quoted on the Stock Exchange on the Last Trading Day;
(2) a premium of approximately 26.10% over the average closing price of HK$0.1586 per Share quoted on the Stock Exchange for the five trading days up and including the Last Trading Day;
(3) a premium of approximately 24.15% to the average closing price of HK$0.1611 per Share as quoted on the Stock Exchange for the 10 consecutive trading days up to and including the Last Trading Day;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(4) a premium of approximately 88.68% over the theoretical ex-entitlement price of HK$0.106 based on the closing price of HK$0.158 per Share as quoted on the Stock Exchange on the Last Trading Day;
(5) a discount of approximately 62.7% to the NAV PER SHARE as at 31 March 2013 of approximately HK$0.536 per Share; and
(6) a premium of approximately 43.88% to the closing price of HK$0.139 per Share as at the Latest Practicable Date.

As set out in the Board Letter, the Exercise Price was determined after arm’s length negotiations between the Company and the Underwriters with reference to the prevailing market conditions and the recent trading price of the Shares, with a premium. Assuming all the Bonus Warrants are exercised, the estimated net proceeds of not less than approximately HK$156.5 million and not more than HK$164.4 million will be raised.

In order to evaluate the fairness and reasonableness of the Exercise Price, we have tried to identify open offer transactions with bonus warrants issue during the Comparable Period by companies listed on the Main Board and the Growth Enterprise Market of the Stock Exchange (the “ BI Comparable ”). However, we only found one company which met the aforementioned criteria. The BI Comparable is Sustainable Forest Holdings Limited (Stock code: 723) with its transaction announced on 18 March 2013. We note that the exercise price of the bonus warrants of the BI Comparable represented discounts to the closing price of shares on the last trading day and to the theoretical ex-entitlement price of the shares of approximately 9.49% and approximately 8.25% respectively. Given there is only one BI Comparable, we consider it is irrelevant to make reference with the BI Comparable. We are aware that the Exercise Price represented a discount to the NAV PER SHARE, however, in view that (i) the Bonus Warrants would provide a free option for the Qualifying Shareholders who have taken up their respective entitlements under the Open Offer to exercise the Bonus Warrant at the Exercise Price to further participate in the development of the Company before the end of the Warrant Exercise Period; (ii) the Exercise Price of the Bonus Warrants is offered to all Qualifying Shareholders who have taken up their respective entitlement under the Open Offer on the same basis; (iii) the holders of the Bonus Warrants have full discretion on whether or not to subscribe for the Shares at the Exercise Price during the Warrant Exercise Period; and (iv) the Exercise Price represents a premium over the closing price of Share on the Last Trading Day, we consider the Exercise Price is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As set out in Appendix III to the Circular, the Bonus Warrant instrument contains detailed provisions relating to the adjustment of the Exercise Price, a summary of the events which would trigger the adjustment of the Exercise Price has been set out in points (i) to (vii) (the “ Adjustment Events ”) in part (A) under section headed “3. ADJUSTMENT OF SUBSCRIPTION PRICE” in such appendix. In order to access the fairness of the Adjustment Events, we tried to review resent issue of unlisted warrants by listed companies in Hong Kong from 10 March 2013 to 10 July 2013 (the “ Potential Adjustment Comparables ”). Although not all the Potential Adjustment Comparables have made full disclosure on their respective adjustment events in the announcements/circulars, we have reviewed all those Potential Adjustment Comparables which have made full disclosure on their adjustment events in their respective announcements/circulars (the “ Adjustment Comparables ”) and based on the available information in announcement/circulars, we have identified 7 Adjustment Comparables with their adjustment events similar to the Adjustment Events of the Bonus Warrants. The 7 Adjustment Comparables are set out as follows:

Adjustment Comparables Date of (Stock Code) Announcement Date of Circular UKF (Holdings) Limited (8168) 26-May-13 13-Jun-13 Modern Beauty Salon Holdings 21-May-13 Circular not available Limited (919) Sino Resources Group Limited (223) 12-May-13 Circular not available Wealth Glory Holdings Limited (8269) 3-May-13 29-Jun-13 Phoenitron Holdings Limited (8066) 23-Apr-13 Circular not available New Smart Energy Group Limited 8-Apr-13 30-Apr-13 (91) China Zenith Chemical Group 12-Mar-13 Circular not available Limited (362)

Sources: www.hkex.com.hk

We noted that from points (iv) to (vi) of the Adjustment Events and the adjustment events of the Adjustment Comparables, adjustments may be required when there are issue of, among others, Shares and/or convertible securities of the Company and the effective consideration of such issue is less than a certain percentage as compared with the market price of the Shares (the “ Market Price Percentage ”), details of (iv) to (vi) of the Adjustment Events are extracted as follows:

(iv) an offer or grant being made by the Company to holders of its Shares by way of rights or of options or warrants to subscribe for new Shares at a price which is less than 80 per cent. of the market price (calculation as provided in the Instrument);

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(v) an issue wholly for cash being made by the Company or any other company of securities convertible into or exchangeable for or carrying rights of subscription for new Shares, if in any case the total Effective Consideration (as defined in the Instrument) per Share is less than 80 per cent. of the market price (calculated as provided in the Instrument), or the terms of any such issue being altered so that the said total Effective Consideration is less than 80 per cent. of the market price; and
(vi) an issue being made wholly for cash of Shares other than pursuant to a Share Incentive Scheme (as defined in the Instrument) at a price less than 80 per cent. of the market price (calculated as provided in the Instrument).

We noted that the Market Price Percentage of the Adjustment Comparables is ranging from 70% to 90% in the Adjustment Comparables. In view of (i) the Adjustment Events are not uncommon terms as compared with the recent issue of unlisted warrants by listed companies in Hong Kong and the Market Price Percentage of the Adjustment Events of 80% falls within the range of the Adjustment Comparables; and (ii) the Adjustment Events allow the adjustment on the Exercise Price take place when there is adjustment events arising from the share capital of the Company, we consider the Adjustment Events of the Bonus Warrants are normal commercial terms and fair and reasonable.

In light of the abovementioned and having considered (i) the Bonus Issue of the Bonus Shares and the Bonus Warrants would enhance the attractiveness of the Open Offer by serving as an additional incentive for Qualifying Shareholders to take part in the Open Offer; and (ii) additional proceeds would be raised for the Company to strengthen its capital base upon exercise of the Bonus Warrants, we consider the Bonus Issue (including the Exercise Price and Adjustment Events of the Bonus Warrants) is fair and reasonable and in the interests of the Company and Independent Shareholders as a whole.

Underwriting Commission

The Company will pay each Underwriter a commission of 2.5% of the aggregate Subscription Price in respect of the Underwritten Shares underwritten by such Underwriter. As advised by the Company, the underwriting commission is determined at after arm’s length negotiation between the Company and the Underwriters and the Directors consider that the underwriting commission is on normal commercial terms and is comparable with market rate. Taking into account the Uncertainty Opinion as set out in AR 2013 and the net current liabilities position of the Company as at 31 March 2013, we consider the underwriting commission of 2.5% is fair and reasonable as far as the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

ARL Undertaking

As set out in the Board Letter, pursuant to the ARL Undertaking, Automatic Result had irrevocably confirmed, undertaken and warranted to the Company that:

Automatic Result shall accept and pay for the Committed Shares and undertake to lodge or procure to be lodged with the Company, acceptance in respect of such Committed Shares, with payment in full therefor in cash by no later than the Latest Time for Acceptance;
the aggregate of 302,918,844 Shares currently beneficially owned by Automatic Result will remain beneficially owned by Automatic Result at the close of business on the Record Date as they are as at the date thereof and that it will not:
(i) transfer or otherwise dispose of (including without limitation the agreement to dispose of, or the creation of any option or derivative) or acquire any Shares or any interest therein between the date thereof and the Record Date; nor
(ii) transfer or otherwise dispose of (including without limitation the agreement to dispose of, or the creation of any option or derivative) or acquire (except by taking up the Offer Shares and the relevant Bonus Shares pursuant to the Open Offer or pursuant to the excess application forms in connection with the Open Offer) any Share or any interest therein between the Record Date and the Latest Time for Acceptance; and
(iii) for the period from the date thereof until the date when dealings in the Offer Shares in their fully-paid form commence on the Stock Exchange, it shall refrain from taking any action or making any statement to the public which is or may be prejudicial to the success of the Open Offer, unless otherwise required by law or the Stock Exchange or any other regulatory requirements or competent authority.

In view the ARL Undertaking is an undertaking given by Automatic Result, as a Shareholder to confirm its acceptance on its entitlement under the Open Offer, we consider the ARL Undertaking is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Application for excess Offer Shares

As set out in the Board Letter, if application forms for excess Offer Shares have been lodged in accordance with the terms of the Prospectus Documents, together with cheques or banker’s cashier orders or other remittances for the full amount payable in connection with the relevant applications which are honoured on first presentation, the Company shall accept such applications which are honoured on first presentation, provided that the Company shall only be obliged to accept applications for the aggregate number of the Underwritten Shares which shall not have been accepted and, if that aggregate number is less than the number of Shares applied for under the relevant application forms for excess Offer Shares, the Company shall be entitled to determine on a fair and equitable basis (in accordance with the requirements of the Stock Exchange) which applications are to be accepted or rejected, after consulting with the Underwriters and on the following principles:

(1) preference will be given to applications for less than a board lot of Offer Shares where they appear to the Directors that such applications are made to round up odd-lot holdings to whole-lot holdings and that such applications are not made with intention to abuse the mechanism; and
(2) subject to availability of excess Offer Shares after allocation under principle (1) above, the excess Offer Shares will be allocated to the Qualifying Shareholders based on a sliding scale with reference to the number of the excess Offer Shares applied by them (i.e. Qualifying Shareholders applying for smaller number of Offer Shares will be allocated a higher percentage of the excess Offer Shares they have applied for whereas Qualifying Shareholders applying for larger number of Offer Shares will be allocated a lower percentage of the excess Offer Shares they have applied for (although they will still receive a greater number of Offer Shares than those applying for a smaller number) with board lot allocations to be made on a best effort basis. No reference will be made to Offer Shares comprised in applications by the application form for the Offer Shares or the existing number of Shares held by Qualifying Shareholders.

The Company considered that the allocation mechanism for the excess Offer Shares on the above principles is fair and equitable as it is likely for a larger number of potential and qualifying applicants for excess Offer Shares to have the opportunity to be successfully allocated with the excess Offer Shares.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We are of the view that the above excess application mechanism is fair and reasonable to Independent Shareholders as Qualifying Shareholders are given the first rights to subscribe for any Offer Shares not taken up before the Underwriters.

Taking into account the above terms of the Open Offer, we consider the terms of the Open Offer (including the Underwriting Agreement, the ARL Undertaking and the Bonus Issue) are fair and reasonable so far as the Independent Shareholders are concerned.

Risk associated with the Open Offer

Shareholders and potential investors should note that the Open Offer is conditional, inter alia, upon the fulfilment of the conditions set out in the section headed “Conditions of the Open Offer with the Bonus Issue” in the Board Letter. In particular, the Open Offer is conditional upon, among others, the Whitewash Waiver having been granted by the Executive and the approval of the Open Offer and the Whitewash Waiver by the Independent Shareholders at the EGM by way of poll. Accordingly, the Open Offer may or may not proceed.

Shareholders and potential investors should exercise extreme caution when dealing in the Shares, and if they are in any doubt about their position, they should consult their professional advisers.

4. Alternatives to the Open Offer

As set out in the Board Letter, the Board has considered other alternative fund raising methods such as issue of new shares, bank borrowings and rights issue and consider that the Open Offer would allow the Company to strengthen its capital base and provide an opportunity to all Qualifying Shareholders to participate in the growth of the Company in proportion to their shareholdings. Considering (i) the low trading volume of the Shares and (ii) the low monetary value per board lot, the Board is of the opinion that the trading of nil paid rights will incur a high transaction cost for trading of small board lot of Shares, which is not economical. Furthermore, compared to a rights issue, the absence of trading nil paid rights in the Open Offer reduces associated administrative work and costs thus requiring less time for completion. The Board is of the opinion that as each Qualifying Shareholder is entitled to subscribe for the Offer Shares at the same price in proportion to its existing shareholding in the Company, Shareholders are treated equally and fairly under the Open Offer.

Having considered (i) debt financing may incur interest burden to the Company; (ii) rights issue may incur relatively higher costs and longer time to complete as compared with open offer; and (iii) all Qualifying Shareholders are offered an equal opportunity to participate in the Open Offer and to take up their entitlement in full at the same price to maintain their respective shareholdings in the Company, we consider that the Open Offer is an equitable means to raise capital for the Company under the existing circumstances.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

5. Potential dilution

As the Open Offer is offered to all Qualifying Shareholders on the same basis, Qualifying Shareholders will be able to maintain their proportional interests in the Company if they take up their allotments under the Open Offer in full. As set out under the section headed “CHANGES IN SHAREHOLDING STRUCTURE” in the Board Letter, assuming that no Qualifying Shareholder (other than Automatic Result) take up his/her/its entitlements under the Open Offer, the shareholdings of the existing Independent Shareholders will be decreased from approximately 80.64% as at the Latest Practicable Date to approximately 26.88% upon completion of the Open Offer with the Bonus Issue and subsequently to approximately 23.04% upon all Bonus Warrants have been exercised in full.

Having considered:

(i) the cash position of the Group with bank balances and cash of approximately HK$14.13 million, borrowing of approximately HK$129.81 million and net current liabilities of approximately 6.85 million as at 31 March 2013, the Uncertainty Opinion as set out in AR 2013 and the Placing Net Proceeds has been utilised in full as at the Latest Practicable Date;
(ii) the Open Offer would enable the Group to strengthen its capital base and enhance its financial resources on the commercialisation and marketing (including the Preparation and Follow-up Expense) of its two new drugs and its bio-science related business;
(iii) the Open Offer would enhance the financial flexibility of the Company for its future development and investment purposes as and when suitable opportunities arise;
(iv) the Open Offer are on the basis that all Qualifying Shareholders have been offered the same opportunity to maintain their proportional interests in the Company;
(v) the discount represented by the Effective Price to the closing price of the Shares on the Last Trading Day falls within the LTD Market Range; and
(vi) the discount represented by the Effective Price to the theoretical ex-entitlement price of the Shares falls within the TEP Market Range and represented a smaller discount than the mean of the TEP Market Range;
(vii) the Bonus Issue would enhance the attractiveness of the Open Offer by serving as an additional incentive for Qualifying Shareholders to take part in the Open Offer;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(viii) the Bonus Warrants would provide a free option for the Qualifying Shareholders who have taken up their respective entitlements under the Open Offer to exercise the Bonus Warrant at the Exercise Price to further participate in the development of the Company before end of the Warrant Exercise Period;
(ix) the holders of the Bonus Warrants have full discretion on whether or not to subscribe for the Shares at the Exercise Price during the Warrant Exercise Period;
(x) the Exercise Price represents a premium over the closing price of Share on the Last Trading Day;
(xi) additional proceeds would be raised for the Company to strengthening its capital base upon exercise of the Bonus Warrants; and
(xii) the inherent dilutive nature of Open Offer in general,

we consider the potential dilution effect on the shareholding which may happen to the Qualifying Shareholders who decide not to accept the Open Offer is acceptable.

6. Financial effects of the Open Offer

(a) Net tangible assets

According to the unaudited pro forma financial information of the Group as set out in Appendix II of the Circular (the “ Pro forma Financial Information ”), the audited consolidated net tangible assets of the Group attributable to Shareholders is approximately HK$124.68 million as at 31 March 2013. As set out in the Pro forma Financial Information, under Scenario I (based on 1,564,846,293 Share in issue as at 30 June 2013), the unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to Shareholders would be approximately HK$523.74 million as a result of the inflow of the estimated net proceeds of approximately HK$242.58 million and approximately HK$156.49 million from the Open Offer and from exercising the Bonus Warrants respectively upon completion of the Open Offer and assuming the Bonus Warrants have been exercised in full. According to Pro forma Financial Information, under Scenario II (based on 1,564,846,293 Shares in issue as at 30 June 2013 and assuming 79,176,855 Shares were issued upon the exercise in full of all Existing Share Options and (i) no repurchase of Shares; and (ii) no other Shares were allotted or issued on or before the Record Date), the unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to Shareholders would be approximately HK$544.02 million as a result of the inflow of the estimated net proceeds of approximately HK$254.94 million and approximately HK$164.40 million from the Open Offer and from exercising the Bonus Warrants in full respectively upon completion of the Open Offer and assuming the Bonus Warrants have been exercised in full.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As set out in the Pro forma Financial Information, the audited consolidated net tangible assets per Share attributable to the Shareholder before the Open offer is approximately HK$0.0797 (based on 1,564,846,293 Shares in issue as at 30 June 2013 which include the placement of 260,000,000 Shares on 8 May 2013). As set out in the Pro forma Financial Information, under Scenario I, the unaudited pro forma adjusted consolidated net tangible assets per Share attributable to the Shareholder would be increased by approximately HK$0.0159 to approximately HK$0.0956 upon completion of the Open Offer and assuming the Bonus Warrants have been exercised in full (based on 5,476,962,025 Shares in Scenario I, comprising 1,564,846,293 Shares in issue as at 30 June 2013, 1,564,846,293 Offer Shares to be issued, 1,564,846,293 Bonus Shares to be issued and 782,423,146 Shares expected to be issued upon exercise of the Bonus Warrants in full). Also set out in the Pro forma Financial Information, under Scenario II, the consolidated net tangible assets per Share attributable to the Shareholder would be increased by approximately HK$0.0148 to approximately HK$0.0945 upon completion of the Open Offer and assuming the Bonus Warrants have been exercised in full (based on 5,754,081,018 Shares in Scenario II, comprising 1,564,846,923 Shares in issue as at 30 June 2013, 79,176,855 Shares to be issued upon the exercise in full of all Existing Share Options, 1,644,023,148 Offer Shares to be issued, 1,644,023,148 Bonus Shares to be issued and 822,011,574 Shares expected to be issued upon exercise of the Bonus Warrants in full).

(b) Gearing

According to AR 2013, the total assets and total liabilities were approximately HK$873.94 million and approximately HK$174.43 million respectively as at 31 March 2013. Based on the above, the gearing ratio (as defined by total liabilities divided by total assets) is approximately 0.20. Immediately upon completion of the Open Offer, assuming the Bonus Warrants have been exercised in full and none of the Existing Share Options have been exercised, as a result of the inflow of the estimated net proceeds of approximately HK$242.58 million and approximately HK$156.49 million from the Open Offer and from the exercising of the Bonus Warrants respectively, the total assets is expected to be increased to approximately HK$1,273.01 million and it is expected that there is no material changes to the total liabilities immediately upon completion of the Open Offer. Accordingly, the gearing ratio (as defined by total liabilities divided by total assets) is expected to be decreased to approximately 0.14 immediately upon completion of the Open Offer assuming the Bonus Warrants have been exercised in full.

(c) Working capital

Upon completion of the Open Offer, the cash and bank balance of the Group will be increased as a result of the net proceeds from the Open Offer. Accordingly, the working capital and liquidity position of the Group will be improved as a result of the Open Offer.

In light of above, we consider the Open Offer is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

7. Whitewash Waiver

(A) In the event that no Qualifying Shareholder (other than Automatic Result) takes up any Offer Shares and there has been no exercise of the Existing Share Options and the Bonus Warrants, the Underwriters will be required to subscribe for and take up all the Underwritten Shares, and upon completion of the Open Offer with the Bonus Issue, the taking up of (i) the Offer Shares and the Bonus Shares to which Automatic Result is entitled under the Open Offer; and (ii) the Underwritten Shares would result in the aggregate shareholding of Lord Profit and parties acting in concert with it in the Company being increased from approximately 19.36% to approximately 67.74% and would therefore trigger an obligation for Lord Profit and parties acting in concert with it to make an unconditional mandatory general offer under Rule 26 of the Takeovers Code for all the Shares not already held by them; and (B) in the event that the aggregate shareholding of Lord Profit and parties acting in concert with it in the Company upon completion of the Open Offer with the Bonus Issue is between 30% and 50%, any exercise of the subscription rights attaching to the Bonus Warrants resulting in an increase in more than 2% voting rights in the Company in any 12 months’ period would also trigger an obligation for Lord Profit and parties acting in concert with it to make an unconditional mandatory general offer under Rule 26 of the Takeovers Code for all the Shares not already held by them, in each case, unless the Whitewash Waiver is obtained.

As set out in the Board Letter, for illustrative purpose only, (a) if Lord Profit and parties acting in concert with it, in aggregate, hold 30% of the voting right of the Company upon completion of the Open Offer with the Bonus Issue, Lord Profit and parties acting in concert with it will be issued with 276,360,705 Bonus Warrants and upon exercise of the subscription rights attaching to such Bonus Warrants in full (and assuming the other Shareholders will not exercise the subscription rights attaching to their respective Bonus Warrants), the aggregate voting rights of Lord Profit and parties acting in concert with it in the Company will be increased to approximately 33.89%; and (b) if Lord Profit and parties acting in concert with it, in aggregate, hold 50% of the voting right of the Company upon completion of the Open Offer with the Bonus Issue, Lord Profit and parties acting in concert with it will be issued with 511,087,648 Bonus Warrants and upon exercise of the subscription rights attaching to such Bonus Warrants in full (and assuming the other Shareholders will not exercise the subscription rights attaching to their respective Bonus Warrants), the aggregate voting rights of Lord Profit and parties acting in concert with it in the Company will be increased to approximately 54.91%.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

A formal application has been made by Lord Profit to the Executive for the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code. The Whitewash Waiver, if granted, and would be subject to, among other things, the approval of the Independent Shareholders at the EGM by way of poll, which Lord Profit and parties acting in concert with it and (if applicable) Shareholders who are involved in or interested in the Underwriting Agreement, the ARL Undertaking, the Open Offer with the Bonus Issue and/or the Whitewash Waiver will abstain from voting on the relevant resolutions.

Upon completion of the Open Offer with the Bonus Issue, Lord Profit and parties acting in concert with it may hold more than 50% of the enlarged issued share capital of the Company, in which case, Lord Profit and parties acting in concert with it may acquire further voting rights in the Company without incurring any further obligation under Rules 26 of the Takeovers Code to make a general offer.

As set out in the Board Letter, it is the intention of Lord Profit that the Group will continue its current business. Lord Profit has no intention to make any major changes to the business or employment of the employees of the Group or redeploy the fixed assets of the Group (the “ Intention ”). The decision to support the Open Offer with the Bonus Issue by way of acting as one of the Underwriters to the Open Offer with the Bonus Issue was mainly because Lord Profit believed that the Open Offer with the Bonus Issue would strengthen the Group’s financial position and enlarge its capital base.

Based on our analysis of the terms of the Open Offer with the Bonus Issue, we consider that the Open Offer with the Bonus Issue are in the interests of the Company and the Independent Shareholders as a whole. If the Whitewash Waiver is not approved by the Independent Shareholders at the EGM, the Open Offer and the Bonus Issue will not proceed and the Company will lose all the benefits that are expected to be brought by the completion of the Open Offer with the Bonus Issue. Accordingly, for the purposes of implementing the Open Offer with the Bonus Issue and taking into consideration of the above-mentioned Intention of Lord Profit, we consider the Whitewash Waiver is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

Taking into account the factors and reasons as mentioned above, although the Open Offer (including the Underwriting Agreement, the ARL Undertaking and the Bonus Issue) is not ordinary course of business of the Company, we consider that the terms of the Open Offer (including the Underwriting Agreement, the ARL Undertaking and the Bonus Issue) are normal and commercial and fair and reasonable so far as the Independent Shareholders are concerned and the Open Offer (including the Underwriting Agreement, the ARL Undertaking and the Bonus Issue) is in the interests of the Company and the Independent Shareholders as a whole. We would therefore advise the Independent Shareholders and the Independent Board Committee to recommend the Independent Shareholders to vote in favour of the resolution to approve the Underwriting Agreement and the Open Offer with the Bonus Issue to be proposed at the EGM.

The Open Offer is conditional upon the approval of the Whitewash Waiver. If the Whitewash Waiver is not approved, the Open Offer will not proceed. Having taken into account our recommendation on the Open Offer above, we consider the Whitewash Waiver is fair and reasonable so far as the Independent Shareholders are concerned and the Whitewash Waiver is in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we would advise the Independent Shareholders and the Independent Board Committee to recommend to the Independent Shareholders to vote in favour of the resolution to approve the Whitewash Waiver to be proposed at the EGM.

Yours faithfully, For and on behalf of

Fortune Financial Capital Limited Abpy So Assistant Director

– 67 –

APPENDIX IA

FINANCIAL INFORMATION OF THE GROUP

1. SUMMARY OF FINANCIAL RESULTS

The following is a summary of certain financial information of the audited consolidated results for the three financial years ended 31 March 2011, 2012 and 2013 as extracted from the annual reports of the Company for each of the three years ended 31 March 2011, 2012 and 2013. Save as disclosed on the face of the financial information below, there were no items which were extraordinary or exceptional because of size, nature or incidence for the consolidated statement of comprehensive income of the Group for each of the years ended 31 March 2011, 2012 and 2013. The auditors of the Company were KTC Partners CPA Limited for the years ended 31 March 2011, 2012 and 2013 respectively and there was no audit qualification contained in the auditors’ report in respect of each of the years ended 31 March 2011, 2012 and 2013.

Turnover Loss before taxation Income tax expense Loss for the year attributable to owners of the Company Loss per share Basic and diluted (HK’ cents per share)	For the 2013 HK$’000 83,333 (68,263) (1,045) (69,308) (5.31)	year ended 31 March 2012 2011 HK$’000 HK$’000 57,026 76,764 (102,408) (182,750) (456) (2,406) (102,864) (185,156) (7.88) (14.19)

In accordance with the Group’s accounting policy, the computation of diluted loss per share did not assume the exercise of the Company’s outstanding share options as the exercise price of those options was higher than the average market price of the Company’s shares for the three financial years ended 31 March 2013.

– IA-1 –

APPENDIX IA

FINANCIAL INFORMATION OF THE GROUP

Non-current assets Current assets Current liabilities Total assets less current liabilities Non-current liabilities Net assets	2013 HK$’000 805,600 68,339 (75,188) 798,751 (99,243) 699,508	At 31 March 2012 HK$’000 838,154 58,541 (76,983) 819,712 (52,410) 767,302	2011 HK$’000 817,205 104,629 (71,701) 850,133 (2,329) 847,804

As all of the subsidiaries of the Company were directly or indirectly wholly owned by the Company for the three years ended 31 March 2013, no minority interests were recorded in the financial statements of the Company during such period. No dividend was paid, declared or proposed during each of the years ended 31 March 2011, 2012 and 2013.

2. INDEBTEDNESS

Borrowings

At the close of business on 30 June 2013, being the latest practicable date prior to the printing of this indebtedness statement, the Group had outstanding secured bank loans of approximately HK$23,218,000, secured other loans of approximately HK$74,000,000, unsecured other loans of approximately HK$1,632,000, amount due to an associate of approximately HK$7,075,000, which is unsecured, non-interest bearing and repayment on demand and amount due to a director of approximately HK$16,221,000, which is unsecured, non-interest bearing and repayable on demand.

Security and guarantees

At the close of business on 30 June 2013, the Group’s secured bank loans are secured by the Group’s leasehold buildings in the People’s Republic of China of approximately HK$16,212,000, investment properties of approximately HK$7,395,000, certain prepaid lease payments with a carrying value of approximately HK$10,985,000 (being their carrying values as at 31 March 2013 as disclosed in the published annual report of the Company for the year ended 31 March 2013).

At the close of business on 30 June 2013, the Group’s secured other loans are secured against shares in certain subsidiaries of the Company in favour of an independent third party in respect of certain other loan facilities granted to the Group.

– IA-2 –

APPENDIX IA

FINANCIAL INFORMATION OF THE GROUP

Commitments

At the close of business on 30 June 2013, the Group had capital commitments for expenditure contracted but not provided for in the consolidated financial statements in respect of the purchase of property, plant and equipment amounting to approximately HK$6,579,000.

At the close of business on 30 June 2013, the Group had total future minimum lease payments under non-cancelable operating leases in respect of rented premises amounting to approximately HK$2,461,000.

Save as aforesaid and apart from intra-group liabilities and normal trade payables, the Group did not, at the close of business on 30 June 2013, have outstanding 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 or hire purchases commitments, guarantees or other material contingent liabilities.

3. WORKING CAPITAL STATEMENT

The Directors are of the opinion that, after taking into account (i) the internal resources of the Group; (ii) the Group’s presently available loan facilities from an independent third party of approximately HK$300 million; and (iii) the estimate net proceeds from the Open Offer, the Group has sufficient working capital for its present requirements, that is, for at least the next twelve months following the date of this circular.

4. MATERIAL CHANGE

As at the Latest Practicable Date, save for the placing of 260,000,000 new Shares as disclosed in the Company’s announcement dated 19 April 2013, the Directors confirm that there is no material change in the financial or trading position or outlook of the Group since 31 March 2013, being the date to which the latest published audited financial statements of the Company were made up.

5. BUSINESS PROSPECTS

Trading and financial prospects of the Group

The Group has continuously strengthened its management team which has been committed to rationalizing and reengineering its work flow and processes to reduce costs and increase efficiency. Moreover, the government of the PRC continued to support a series of policies, in particular, loosening of credit restrictions and stimulation of domestic consumption to drive up the GDP growth. These policies helped to ease certain negative impact, such as increased costs and market competition, on our operations. The Group is optimistic of the business opportunities in the pharmaceutical and healthcare industry in the PRC.

– IA-3 –

APPENDIX IA

FINANCIAL INFORMATION OF THE GROUP

For the year ended 31 March 2013, the Group recorded an audited consolidated turnover of approximately HK$83,333,000 representing an increase of 46% compared with approximately HK$57,026,000 recorded in the year ended 31 March 2012. The audited gross profit for the year ended 31 March 2013 was approximately HK$66,290,000 representing an increase of 73% as compared with approximately HK$38,338,000 recorded in the year ended 31 March 2012. The Group recorded an audited net loss of approximately HK$69,308,000 for the year ended 31 March 2013 compared to an audited net loss of approximately HK$102,864,000 in the year ended 31 March 2012. The Group attributed the increase in the turnover and profitability of the Group between the two years ended 31 March 2013 as a result of the better marketing strategy and executive team. The expenditures to be spent on research and development are expected to be lower than before as two out of four of our self-developing projects are near to completion.

Trading of the Shares on the Stock Exchange had been suspended since March 2010. The Company fulfilled all the resumption conditions as required by the Stock Exchange, and the Company resumed trading on the Stock Exchange on 2 April 2013. Upon resumption, the Company could then concentrate on further develop its self-developed projects so as to commercialize the research results and promoting the Group’s products to existing and potential customers.

6. EVENTS AFTER 31 MARCH 2013 BEING THE DATE ON WHICH THE LATEST PUBLISHED AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP WERE MADE UP

As disclosed in the announcement of the Company dated 19 April 2013, the Company entered into the placing agreement with Prominence to place a maximum of 260,000,000 Shares (“ Placing Shares ”) at HK$0.15 per Share on a best endeavour basis. The Placing Shares were to be issued under the general mandate granted to the Directors at the annual general meeting of the Company held on 2 November 2012. As disclosed in the announcement of the Company dated 8 May 2013, all the conditions of the placing have been fulfilled and completion of the placing took place on 8 May 2013 and an aggregate of 260,000,000 Placing Shares have been successfully placed at the placing price of HK$0.15 per Placing Share to not less than six independent institutional and professional investors, who and whose ultimate beneficial owners are independent of and not connected with the Company and its connected persons (as defined in the Listing Rules). The Placing Shares represent (i) approximately 19.93% of the issued share capital of the Company as at the date of placing agreement; and (ii) approximately 16.62% of the issued share capital of the Company as enlarged by the allotment and issue of the Placing Shares. The Company received net proceeds of approximately HK$38 million from the placing.

– IA-4 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

Set out below are the audited financial statements of the Group for the year ended 31 March 2013 together with the accompanying notes as extracted from the annual report of the Company for the year ended 31 March 2013 (as amended by the announcement of the Company dated 29 July 2013).

Independent Auditor’s Report

KTC Partners CPA Limited

Certified Public Accountants (Practising)

Tel (852) 2770 8232 Fax : (852) 2770 8378 E-mail : [email protected] Room 501, 502 & 508, 5/F., Mirror Tower, 61 Mody Road, Tsimshatsui East, Kowloon, Hong Kong

TO THE SHAREHOLDERS OF UNI-BIO SCIENCE GROUP LIMITED

(Incorporated in the Cayman Islands with limited liability)

We have audited the consolidated financial statements of Uni-Bio Science Group Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 31 to 86, which comprise the consolidated and company statements of financial position as at 31 March 2013, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

AUDITORS’ RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

– IB-1 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

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

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

OPINION

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2013, and of the Group’s loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

EMPHASIS OF MATTER

Without qualifying our opinion, we draw attention to Note 2 to the consolidated financial statements which indicates that the Group incurred a loss attributable to owners of the Company of approximately HK$69,308,000 for the year ended 31 March 2013 and, as of that date, its current liabilities exceeded its current assets by approximately HK$6,849,000. These conditions, along with other matters as set forth in Note 2 to the consolidated financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern.

KTC Partners CPA Limited

Certified Public Accountants

Chow Yiu Wah, Joseph

Practising Certificate Number: P04686

Hong Kong 28 June 2013

– IB-2 –

APPENDIX IB

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2013

Notes Turnover 10 Cost of sales Gross profit Change in fair value of investment properties 20 Other income 10 Selling and distribution expenses General and administrative expenses Loss on disposal of property, plant and equipment Property, plant and equipment written off Loss from operations Finance costs 12 Share of results of associates Loss before taxation 13 Income tax expense 14 Loss for the year Exchange differences arising on translation of financial statements of foreign operations and total other comprehensive income for the year Total comprehensive expenses for the year Loss per share Basic and diluted (HK’ cents per share) 15	2013 HK$’000 83,333 (17,043) 66,290 1,120 5,580 (41,708) (92,182) (28) (162) (61,090) (7,670) 497 (68,263) (1,045) (69,308) 1,514 (67,794) (5.31)	2012 HK$’000 57,026 (18,688) 38,338 3,041 5,056 (27,141) (93,390) (19,235) (3,255) (96,586) (5,184) (638) (102,408) (456) (102,864) 22,362 (80,502) (7.88)

– IB-3 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 March 2013

Notes Non-current assets Property, plant and equipment 19 Investment properties 20 Prepaid lease payments 21 Goodwill 22 Intangible assets 23 Interests in associates 25 Deposit paid for the acquisition of intangible assets 26 Deposit paid for the acquisition of property, plant and equipment 26 Current assets Inventories 27 Trade and other receivables 28 Prepaid lease payments 21 Amounts due from associates 29 Bank balances and cash 30 Current liabilities Trade and other payables 31 Amounts due to associates 29 Amounts due to directors 32 Borrowings 33 Income tax payable Net current liabilities Total assets less current liabilities	2013 HK$’000 160,390 24,632 16,436 259,416 315,417 6,861 – 22,448 805,600 4,924 48,194 1,087 – 14,134 68,339 24,473 7,359 8,706 32,012 2,638 75,188 (6,849) 798,751	2012 HK$’000 163,653 23,558 17,553 259,416 292,973 10,375 51,998 18,628 838,154 7,807 27,082 1,089 290 22,273 58,541 20,919 8,001 9,464 36,137 2,462 76,983 (18,442) 819,712

– IB-4 –

APPENDIX IB

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

Notes Non-current liabilities Borrowings 33 Deferred tax liabilities 34 Net assets Capital and reserves Share capital 35 Reserves Total equity	2013 HK$’000 97,801 1,442 99,243 699,508 13,048 686,460 699,508	2012 HK$’000 51,133 1,277
		52,410
		767,302

		13,048 754,254
		767,302

– IB-5 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

STATEMENT OF FINANCIAL POSITION

At 31 March 2013

Notes Non-current asset Investments in subsidiaries 24 Current assets Amounts due from subsidiaries 24 Other receivables 28 Bank balances and cash 30 Current liabilities Other payables 31 Amounts due to directors 32 Net current assets Total assets less current liabilities Net assets Capital and reserves Share capital 35a Reserves 35b Total equity	2013 HK$’000 – 737,918 512 362 738,792 2,861 5,769 8,630 730,162 730,162 730,162 13,048 717,114 730,162	2012 HK$’000 –
		740,539 507 1,036
		742,082
		903 5,811
		6,714
		735,368
		735,368
		735,368

		13,048 722,320
		735,368

– IB-6 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2013

At 1 April 2011 Share option lapsed during the year Total comprehensive income (expenses) for the year At 31 March 2012 Total comprehensive income (expenses) for the year At 31 March 2013	Share capital HK$’000 13,048 – – 13,048 – 13,048	Share premium HK$’000 250,889 – – 250,889 – 250,889	Capital reserve HK$’000 (Note a) (267) – – (267) – (267)	Statutory reserve Share-based payments reserve Distributable reserve HK$’000 HK$’000 HK$’000 (Note b) (Note c) 6,289 48,147 1,291,798 – (6,610) – – – – 6,289 41,537 1,291,798 – – – 6,289 41,537 1,291,798	Exchange reserve Accumulated losses HK$’000 HK$’000 145,772 (907,872) – 6,610 22,362 (102,864) 168,134 (1,004,126) 1,514 (69,308) 169,648 (1,073,434)	Total HK$’000 847,804 – (80,502)
						767,302 (67,794)
						699,508

Notes:

a) Capital reserve

The capital reserve represents the equity component of the convertible bonds.

b) Statutory reserve

In accordance with the Company Law of the People’s Republic of China (the “PRC”), companies in the PRC are required to allocate 10% of their profit after taxation to the statutory reserve (the “SR”) until such reserve reaches 50% of the registered capital of the companies. Subject to certain restrictions set out in the Company Law of the PRC, part of the SR may be converted to increase paid-in capital, provided that the remaining balance after the capitalisation is not less than 25% of the registered capital.

c) Distributable reserves

The distributable reserve represents credit arising from Capital Reorganisation effected by the Company during the year ended 31 March 2010.

Under the Companies Law (revised) of the Cayman Islands, share premium is distributable to shareholders, subject to the condition that the Company cannot declare or pay a dividend, or make a distribution out of share premium if (i) it is, or would after the payment be, unable to pay its liabilities as they become due, or (ii) the realisable value of its assets would thereby be less than the aggregate of its liabilities and its issued share capital accounts.

– IB-7 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 March 2013

OPERATING ACTIVITIES Loss before taxation Adjustments for: Amortisation of intangible assets Amortisation of prepaid lease payments Amounts waived by creditors Bad debts directly written off Change in fair value of investment properties Depreciation of property, plant and equipment Effect of foreign exchange rate changes Impairment loss on trade receivables Impairment loss on deposit paid for acquisition of intangible assets Interest expenses Interest income Loss on disposal of property, plant and equipment Property, plant and equipment written off Share of results of associates Reversal of impairment of trade and other receivables Reversal of impairment loss on deposit paid for acquisition of property, plant and equipment Operating cash flows before changes in working capital Decrease (increase) in inventories Increase in trade and other receivables Decrease (increase) in amounts due from associates Increase in trade payables and other payables Increase (decrease) in amounts due to associates (Decrease) increase in amounts due to directors Cash used in operations Income taxes (paid) refunded NET CASH USED IN OPERATING ACTIVITIES	2013 HK$’000 (68,263) 30,481 1,092 – – (1,120) 30,474 – – 1,761 7,670 (155) 28 162 (497) (3,399) (5,362) 7,128 2,883 (21,752) 290 3,554 3,369 (758) (19,542) (701) (20,243)	2012 HK$’000 (102,408) 28,958 1,074 (1,210) 575 (3,041) 34,531 2,149 1,097 – 4,560 (205) 19,235 3,255 638 (1,638) – (12,430) (1,907) (16,608) (290) 1,143 (8,212) 692 (37,612) 104 (37,508)

– IB-8 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

INVESTING ACTIVITIES Purchase of property, plant and equipment Purchase of intangible assets Interest received Proceeds from disposal of property, plant and equipment NET CASH USED IN INVESTING ACTIVITIES FINANCING ACTIVITIES Others borrowings raised Interest paid Repayment of other borrowings Bank borrowings raised NET CASH FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR EFFECT OF CHANGE IN FOREIGN EXCHANGE RATE CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR, represented by bank balances and cash	2013 HK$’000 (24,105) (1,295) 155 14 (25,231) 50,000 (7,670) (7,387) – 34,943 (10,531) 22,273 2,392 14,134	2012 HK$’000 (13,644) (2,085) 205 677 (14,847) 46,200 (4,560) (23,708) 39,467 57,399 5,044 16,545 684 22,273

– IB-9 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 March 2013

1. GENERAL

Uni-Bio Science Group Limited (the “Company”) is an exempted company incorporated with limited liability in the Cayman Islands and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The address of the registered office and principal place of business of the Company are disclosed in the “Corporate Information” section to the annual report.

The functional currency of the Company and its subsidiaries (collectively referred to as the “Group”) is Hong Kong dollars (“HK$”) and for those subsidiaries established in the People’s Republic of China (“PRC”) is Renminbi (“RMB”). The consolidated financial statements are presented in Hong Kong dollars (“HK$”) for the convenience of users of the consolidated financial statements as the Company is listed in Hong Kong.

The Company is engaged in investment holding and the principal activities of its subsidiaries are set in Note 24.

2. BASIS OF PREPARATION

The Group incurred a loss for the year attributable to owners of the Company of approximately HK$69,308,000 and its current liabilities exceeded its current assets by approximately HK$6,849,000 as at 31 March 2013. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern.

As noted in Note 43 to the consolidated financial statement, the Company completed the placing of 260,000,000 ordinary shares and raised net proceeds of approximately HK$38,000,000 after the end of the reporting period which will help to recline the pressures on the working capital of the Company.

The consolidated financial statements have been prepared on a going concern basis, the validity of which depends upon the financial supports from the substantial shareholders to cover the Group’s operating costs and meet its financial commitments. The substantial shareholders have confirmed their intention and ability to provide continuing financial support to the Group so as to enable it to meets its liabilities as and when they fall due and to carry on its business for the foreseeable future.

In light of the measures described above, the directors are confident that the Group will have sufficient working capital to meet its financial obligations as and when they fall due. Accordingly, the directors are of opinion that it is appropriate to prepare these financial statements on a going concern basis. These financial statements do not include any adjustments relating to the carrying amount and reclassification of assets and liabilities that might be necessary should the Group be unable to continue as a going concern.

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

In the current year, the Group has applied the following new and revised HKFRSs issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

Amendments to Hong Kong Deferred Tax: Recovery of Underlying Asset; Accounting Standard (“HKAS”) 12 Amendments to HKFRS 7 Financial Instruments: Disclosures – Transfers of Financial Assets; and Amendments to HKAS 1 As part of the Annual Improvements to HKFRSs 2009-2011 Cycle issued in 2012.

– IB-10 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

The application of the amendments to HKFRSs in the current year has had no material impact on the Group’s financial performance and positions for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

Amendments to HKAS 12 Deferred Tax: Recovery of Underlying Assets

The Group has applied for the first time the amendments to HKAS 12 Deferred Tax: Recovery of Underlying Assets in the current year. Under the amendments, investment properties that are measured using the fair value model in accordance with HKAS 40 Investment Property are presumed to be recovered entirely through sale for the purposes of measuring deferred taxes, unless the presumption is rebutted in certain circumstances.

The Group measures its investment properties using the fair value model. As a result of the application of the amendments to HKAS 12, the directors of the Company reviewed the Group’s investment property portfolios and concluded that the Group’s investment properties located in the PRC are held under a business model whose objective is to consume substantially all of the economic benefits embodied in the investment properties over time, and that the presumption set out in the amendments to HKAS 12 is rebutted. Accordingly, there will be no effect of changes in accounting policies on deferred tax liabilities on changes in fair value of investment properties located in the PRC.

New and revised HKFRSs issued but not yet effective

The Group has not early applied the following new and revised HKFRSs that have been issued but are not yet effective:

Amendments to HKFRSs Annual Improvements to HKFRSs 2009 – 2011 Cycle, except for the amendments HKAS 1[1] Amendments to HKFRS 1 Government Loans[1] Amendments to HKFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities[1] Amendments to HKFRS 9 and Mandatory Effective Date of HKFRS 9 and Transition HKFRS 7 Disclosures[3] Amendments to HKFRS 10, Consolidated Financial Statements, Joint Arrangements and HKFRS 11 and HKFRS 12 Disclosure of Interests in Other Entities: Transition Guidance[1] Amendments to HKFRS 10, Investment Entities[2] HKFRS 12 and HKAS 27 HKFRS 9 Financial Instruments[3] HKFRS 10 Consolidated Financial Statements[1] HKFRS 11 Joint Arrangements[1] HKFRS 12 Disclosure of Interests in Other Entities[1] HKFRS 13 Fair Value Measurement[1] HKAS 19 (as revised in 2011) Employee Benefits[1] HKAS 27 (as revised in 2011) Separate Financial Statements[1] HKAS 28 (as revised in 2011) Investments in Associates and Joint Ventures[1] Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income[4] Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities[2] HK(IFRIC)-Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine[1]

1 Effective for annual periods beginning on or after 1 January 2013. 2 Effective for annual periods beginning on or after 1 January 2014. 3 Effective for annual periods beginning on or after 1 January 2015.
4 Effective for annual periods beginning on or after 1 July 2012.

– IB-11 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities and amendments to HKFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities

The amendments to HKAS 32 clarify existing application issues relating to the offset of financial assets and financial liabilities requirements. Specifically, the amendments clarify the meaning of “currently has a legally enforceable right of set-off” and “simultaneous realisation and settlement”.

The amendments to HKFRS 7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement.

The amendments to HKFRS 7 are effective for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods. The disclosures should also be provided retrospectively for all comparative periods. However, the amendments to HKAS 32 are not effective until annual periods beginning on or after 1 January 2014, with retrospective application required.

The directors anticipate that the application of these amendments to HKAS 32 and HKFRS 7 may result in more disclosures being made with regard to offsetting financial assets and financial liabilities in the future.

HKFRS 9 Financial Instruments

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 amended in 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

Key requirements of HKFRS 9 are described as follows:

All recognised financial assets that are within the scope of HKAS 39 “ Financial Instruments: Recognition and Measurement ” are subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.
With regard to the measurement of financial liabilities designated as at fair value through profit or loss, HKFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value of financial liabilities attributable to changes in the financial liabilities’ credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss.

HKFRS 9 is effective for annual periods beginning on or after 1 January 2015, with earlier application permitted.

The directors anticipate that the adoption of HKFRS 9 in the future may have significant impact on amounts reported in respect of the Group’s financial assets. Regarding the Group’s financial assets, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

– IB-12 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

New and revised standards on consolidation, joint arrangements, associates and disclosures

In June 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued, including HKFRS 10, HKFRS 11, HKFRS 12, HKAS 27 (as revised in 2011) and HKAS 28 (as revised in 2011).

Key requirements of these five standards are described below.

HKFRS 10 replaces the parts of HKAS 27 “ Consolidated and Separate Financial Statements ” that deal with consolidated financial statements. HK(SIC) – Int 12 “ Consolidation – Special Purpose Entities ” will be withdrawn upon the effective date of HKFRS 10. Under HKFRS 10, there is only one basis for consolidation, that is, control. In addition, HKFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvements with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. Extensive guidance has been added in HKFRS 10 to deal with complex scenarios.

HKFRS 11 replaces HKAS 31 “ Interests in Joint Ventures ”. HKFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified. HK(SIC) – Int 13 “ Jointly Controlled Entities – Non-monetary Contributions by Venturers ” will be withdrawn upon the effective date of HKFRS 11. Under HKFRS 11, joint arrangements are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the arrangements. In contrast, under HKAS 31, there are three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled operations. In addition, joint ventures under HKFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under HKAS 31 can be accounted for using the equity method of accounting or proportionate consolidation.

HKFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in HKFRS 12 are more extensive than those in the current standards.

In July 2012, the amendments to HKFRS 10, HKFRS 11 and HKFRS 12 were issued to clarify certain transitional guidance on the application of these five HKFRSs for the first time.

These five standards, together with the amendments relating to the transitional guidance, are effective for annual periods beginning on or after 1 January 2013 with earlier application permitted provided that all of these standards are applied at the same time.

The directors anticipate the that application of these five standards may have significant impact on amounts reported in the consolidated financial statements. However, the directors of the Company have not yet performed a detailed analysis of the impact of the application of these standards and hence have not yet quantified the extent of the impact.

Amendments to HKFRS 10, HKFRS 12 and HKAS 27 Investment Entities

The amendments to HKFRS 10 introduce an exception to consolidating subsidiaries for an investment entity, except where the subsidiaries provide services that relate to the investment entity’s investment activities. Under the amendments to HKFRS 10, an investment entity is required to measure its interests in subsidiaries at fair value through profit or loss.

To qualify as an investment entity, certain criteria have to be met. Specifically, an entity is required to:

obtain funds from one or more investors for the purpose of providing them with professional investment management services;
commit to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and

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APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

measure and evaluate performance of substantially all of its investments on a fair value basis.

Consequential amendments to HKFRS 12 and HKAS 27 have been made to introduce new disclosure requirements for investment entities.

The amendments to HKFRS 10, HKFRS 12 and HKAS 27 are effective for annual periods beginning on or after 1 January 2014, with early application permitted. The directors anticipate that the application of the amendments will have no effect on the Group as the Company is not an investment entity.

HKFRS 13 Fair Value Measurement

HKFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of HKFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other HKFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in HKFRS 13 are more extensive than those in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under HKFRS 7 Financial Instruments: Disclosures will be extended by HKFRS 13 to cover all assets and liabilities within its scope.

HKFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

The directors anticipate that the application of the new standard may affect certain amounts reported in the consolidated financial statements and result in more extensive disclosures in the consolidated financial statements.

Amendments to HKAS 1 Presentation of Items of Other Comprehensive Income

The amendments to HKAS 1 “ Presentation of Items of Other Comprehensive Income ” introduce new terminology for the statement of comprehensive income and income statement. Under the amendments to HKAS 1, a ‘statement of comprehensive income’ is renamed as a ‘statement of profit or loss and other comprehensive income’ and an ‘income statement’ is renamed as a ‘statement of profit or loss’. The amendments to HKAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to HKAS 1 require items of other comprehensive income to be grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis – the amendments do not change the option to present items of other comprehensive income either before tax or net of tax.

The amendments to HKAS 1 are effective for annual periods beginning on or after 1 July 2012. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in future accounting periods.

The directors of the Company anticipate that application of the other new or revised HKFRSs will have no material impact on the consolidated financial statements.

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APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

4. SIGNIFICANT ACCOUNTING POLICIES

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

The consolidated financial statements have been prepared on the historical cost basis except for investment properties, that are measured at fair values, as explained in the accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange for goods.

The principal accounting policies are 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 benefits from its activities.

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 in full on consolidation.

Investments in subsidiaries

Investments in subsidiaries are included in the Company’s statement of financial position at cost less impairment loss, if any.

Investments in associates

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but 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 initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associates. When the Group’s share of losses of an associate exceeds the Group’s 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. Additional losses are 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 cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment.

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

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APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases.

Upon disposal of an associate that results in the Group losing significant influence over that associate, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset in accordance with HKAS 39. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets and liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when it losses significant influence over that associate.

Where a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate that are not related to the Group.

Goodwill

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

For the purposes of impairment testing, goodwill is allocated to each of the cash-generating units (or groups of cash-generating units), that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually or more frequently when there is indication that the unit may be impaired. For goodwill arising on an acquisition in a reporting period, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that reporting period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro rata basis based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.

Revenue recognition

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

i) Sale of goods

Revenue from Sale of goods is recognised when goods are delivered and title has passed, at which time the Group has transferred to the buyer the significant risks and rewards of ownership of the goods.

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APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

ii) Interest income

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Investment properties

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

Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured at their fair values. Gains or losses arising from changes in the fair value of investment properties are included in profit or loss for the period in which they arise.

Property, plant and equipment

Property, plant and equipment including leasehold land (classified as finance leases) and buildings held for use in the production or supply of goods, or for administrative purposes (other than construction in progress) are stated in the consolidated statement of financial position at cost less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of items of property, plant and equipment less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Construction in progress includes property, plant and equipment in the course of construction for production or for its own use purpose. 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.

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

Leasing

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

The Group as lessor

Rental income from operating 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 lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

– IB-17 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

Leasehold land and building

When a lease includes both land and building elements, the Group assesses the classification of each element as a finance or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Group, unless it is clear that both elements are operating leases in which case the entire lease is classified as an operating lease. Specifically, the minimum lease payments (including any lump-sum upfront payments) are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of the lease.

To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as “prepaid lease payments” in the consolidated statement of financial position and is amortised over the lease term on a straight-line basis. When the lease payments cannot be allocated reliably between the land and building elements, the entire lease is generally classified as a finance lease and accounted for as property, plant and equipment.

Intangible assets

i) Intangible assets acquired separately

Intangible assets with finite useful lives acquired separately are carried at cost 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. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less any subsequent accumulated impairment losses (see the accounting policy in respect of impairment losses on tangible and intangible assets below).

ii) Internally-generated intangible assets – research and development expenditures

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 activities (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.

– IB-18 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

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 recognised in 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.

iii) Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are recognised separately from goodwill and are initially recognised at their fair value at the acquisition date (which is regarded as their cost).

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

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are calculated using the weighted average method. Net realisable value represents the estimated selling prices for inventories less all estimated costs of completion and costs necessary to make the sale.

Foreign currencies

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

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

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. Hong Kong dollars) using exchange rates prevailing at the end of each reporting period. Income and expenses items 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 under the heading of exchange reserve.

– IB-19 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss. In addition, in relation to a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are reattributed to non-controlling interest and are not recognised in profit or loss.

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

Borrowing costs

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

Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Retirement benefit costs

Payments to state-managed retirement benefit schemes and the Mandatory Provident Fund Scheme are recognised 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 before taxation” 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 base 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 those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, 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 each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

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APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.

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 are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

The Group’s financial assets are classified as loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. 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 debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, 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.

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 trade and other receivables, amounts due from associates and bank balances and cash) are measured at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment loss on financial assets below).

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APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

Impairment loss on financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when 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 all financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
breach of contract, such as default or delinquency in interest and principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
disappearance of an active market for that financial asset because of financial difficulties.

For certain categories of financial asset, such as trade and other receivables, assets that are assessed not to be impaired individually are, in addition, 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 average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate.

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 and other receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit and loss. When a trade or other receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

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

Financial liabilities and equity instruments

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

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

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APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

Financial guarantees

Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the “holder”) for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Where the Group issues a financial guarantee, the fair value of the guarantee (being the transaction price, unless the fair value can otherwise be reliably estimated) is initially recognised as deferred income within trade and other payables. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Group’s policies applicable to that category of asset. When no such consideration is received or receivable, an immediate expense is recognised in profit or loss on initial recognition of any deferred income. The amount of the guarantee initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognised if and when (i) it becomes probable that the holder of guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognised, less accumulated amortisation.

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 fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial 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 and other payables, amounts due to associates, amounts due to directors and borrowings are subsequently measured at amortised cost, using the effective interest method.

Derecognition

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

On derecognition of a financial asset in its entirety, 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 and accumulated in equity is recognised in profit or loss.

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APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

On derecognition of a financial asset other than in its entirety, the Group allocates the previous carrying amount of the financial asset between the part it continues to recognise, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Cash and cash equivalents

Bank balances and cash in the consolidated statement of financial position comprise cash at bank and on hand and short-term deposits with a maturity of three months or less. For the purpose of the consolidated statement of cash flows, cash and cash equivalent consist of cash and short-term deposits as defined above.

Share-based payment transactions

Equity-settled share-based payment transactions

Share options granted to employees

The fair value of services received is 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-based payments reserve).

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 original estimates during the vesting period, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to share-based payments reserve.

When the share options are exercised, the amount previously recognised in share-based payments 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-based payments reserve will be transferred to accumulated losses.

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 with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

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

– IB-24 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

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

5. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in Note 4, the directors of the Company are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

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

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the 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.

Impairment of property, plant and equipment

This requires an estimation of the value in use of the asset. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the assets and also to choose a suitable discount rate in order to calculate the present value of those cash flows. In determining whether an asset is impaired or the event previously causing the impairment no longer exists, the Group has to exercise judgement in the area of asset impairment, particularly in assessing: (i) whether an event has occurred that may affect the asset value or such event affecting the asset value has not been in existence; (ii) whether the carrying value of an asset can be supported by the net present value of future cash flows which are estimated based upon the continued use of the asset or derecognition; and (iii) the appropriate key assumptions to be applied in preparing cash flow projections are discounted using an appropriate rate. Changing the assumptions selected by management to determine the level of impairment, including the discount rates or the growth rate assumptions in the cash flow projections, could materially affect the net present value used in the impairment test. The Group determines whether an asset is impaired at least on an annual basis or where an indication of impairment exists. At 31 March 2013, the carrying amount of property, plant and equipment is HK$160,390,000 (2012: 163,653,000), and management of the Group determined that there was no impairment on property, plant and equipment (2012: Nil).

Depreciation of property, plant and equipment

Management determines the estimated useful lives and residual values for the Group’s property, plant and equipment. The Group will revise the depreciation charge where useful lives and residual values are different to previous estimates, or will write off or write down technically obsolete or on-strategic assets that have been abandoned or sold.

– IB-25 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

Fair value of investment properties

At the end of the reporting period, investment properties are stated at fair value based on the valuation performed by independent professional valuers. In determining the fair value, the valuers have based on a method of valuation which involves certain estimates of market conditions. In relying on the valuation report, the directors of the Company have exercised their judgement and are satisfied that the assumptions used in the valuation have reflected the current market conditions. Changes to these assumptions would result in changes in the fair values of the Group’s investment properties being recognised in profit or loss. The carrying amount of investment properties measured at fair value at 31 March 2013 was approximately HK$24,630,000 (2012: HK$23,558,000).

Estimated impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the recoverable amount which is higher of the fair value less cost to sell or value in use of the cash-generating units to which goodwill has been allocated. The calculation of value in use requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, or there is downward revision of future estimated cash flows due to unfavourable changes in facts and circumstances, a further impairment loss may arise. At 31 March 2013, the carrying amount of goodwill is HK$259,416,000 (2012: HK$259,416,000), net of accumulated impairment loss of HK$314,136,000 (2012: HK$314,136,000).

Amortisation of intangible assets

Intangible assets are amortised over their useful economic lives. The assessment of estimated useful lives is a matter of judgment based on the experience of the Group, taking into account factors such as the ability to legally renew the technical know-how, technological progress and changes in market demand. Useful lives are periodically reviewed for continued appropriateness. Due to long lives of assets, changes to the estimates used can result in variations in their carrying value in the period in which the change take places. At 31 March 2013, the carrying amount of intangible assets is HK$315,417,000 (2012: HK$292,973,000), amortisation of the intangible assets amounting to HK$30,481,000 (2012: HK$28,958,000) is charged to profit or loss.

Estimated impairment of intangible assets

Determining whether intangible assets are impaired requires an estimation of the recoverable amount which is higher of the fair value less cost to sell or value in use of the cash-generating units to which intangible asset has been allocated. The calculation of value in use requires the Group to estimate the future cash flows expected to arise from the relevant assets or the cash-generating unit in which the relevant intangible assets belong and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, or there is downward revision of future estimated cash flows due to unfavourable changes in facts and circumstances, an impairment loss may arise. At 31 March 2013, the carrying amount of intangible assets is HK$315,417,000 (2012: HK$292,973,000), and management of the Group determined that there was no impairment on other intangible assets.

Estimated impairment loss on trade and other receivables

The policy for impairment loss on trade and other receivables is based on the evaluation of collectability and aging analysis which is based management’s judgement. A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including the current creditworthiness and the past collection history of each customer. If the financial conditions of customers of the Group were to deteriorate, resulting in an impairment in their ability to make payments, additional impairment may be required.

At 31 March 2013, the carrying amounts of trade receivables was HK$20,401,000 (2012: HK$17,241,000). No impairment loss has been recognised in respect of trade receivables during the two years ended 31 March 2013.

– IB-26 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

At 31 March 2013, the carrying amounts of other receivables was HK$50,241,000 (2012: HK$80,467,000). No impairment loss has been recognised in respect of other receivables during the two years ended 31 March 2013.

Allowance for inventories

The Group performs regular review of the carrying amounts of inventories with the aged inventories analysis expected future consumption and management judgment. Based on this review, write down of inventories will be made when the carrying amount of inventories decline below the estimated net realisable value. However, actual consumption may be different from estimation and profit or loss could be affected by differences in this estimation. At 31 March 2013, the carrying amount of inventories is HK$4,924,000 (2012: HK$7,807,000), and management of the Group determined that there was no allowance for inventories.

Taxation

The Group is subject to income taxes in the PRC. Judgment is required in determining the provision for income taxes. There are transactions and calculations during the ordinary course of business for which the ultimate tax determination is uncertain. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

6. CAPITAL RISK MANAGEMENT

The Group’s objectives when managing capital is to safeguard the Group’s ability to continue as going concern in order to provide returns for the shareholders and to maintain an optimal capital structure to reduce the cost of capital and to support the Group’s stability and growth.

The capital structure of the Group consists of net debt, which includes borrowings disclosed in Note 33, net of cash and cash equivalents and equity attributable to owners of the Company, comprising issued share capital and reserves.

The Group monitors its capital structure and make adjustments to it in the light of changes in economic conditions and the risk characteristic of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, issue new shares, raise new debt financing or sell assets to reduce debts. No changes were made in the objectives, policies or processes during the years ended 31 March 2013 and 2012.

The gearing ratio at the end of the reporting was as follows:

Debts (i) Bank balances and cash Net debt Total equity (ii) Net debt-to-equity ratio	2013 HK$’000 129,813 (14,134) 115,679 699,508 16.54%	2012 HK$’000 87,270 (22,273)
		64,997

		767,302

		8.47%

i) Debts are defined as long and short-term borrowings.

ii) Equity includes all capital and reserves of the Group.

– IB-27 –

APPENDIX IB

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

7. FINANCIAL INSTRUMENTS

Categories of financial instruments

Loans and receivables (including cash and cash equivalents) Financial liabilities at amortised cost	The Group 2013 2012 HK$’000 HK$’000 61,022 42,703 170,351 125,654	The Company 2013 2012 HK$’000 HK$’000 738,284 741,575 8,630 6,714	The Company 2013 2012 HK$’000 HK$’000 738,284 741,575 8,630 6,714

			6,714

8. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s major financial instruments include trade and other receivables, amounts due from (to) associates, bank balances and cash, trade and other payables, amounts due to directors and borrowings. Details of the financial instruments are disclosed in respective notes. The risks associated with these financial instruments include market risk (currency risk and interest rate 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 Group mainly operates in the People’s Republic of China (“PRC”), and did not have significant sales or purchases denominated in currencies other than the functional currency of the relevant group entities. However, the Group has certain bank balances and borrowings that are denominated in Hong Kong dollars (“HK$”). As a result, the Group is exposed to fluctuations in exchange rates of HK$ against Renminbi (“RMB”). The Group did not enter into any derivative contracts nor did it have a foreign currency hedging policy aimed at minimising exchange rate risks during the year. However, the management closely monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arises.

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

	Liabilities	Liabilities	Assets
	2013	2012	2013	2012
	HK$’000	HK$’000	HK$’000	HK$’000
HK$	99,061	48,473	1,363	2,501

– IB-28 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

Sensitivity analysis

The Group is mainly exposed to exchange rate fluctuations of HK$. The following table details the Group’s sensitivity to a 5% (2012: 5%) increase in RMB against the HK$ while all other variables are held constant. 5% (2012: 5%) is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the reporting period for a 5% (2012: 5%) change in foreign currency rates.

The sensitivity analysis includes monetary items where the denomination of the balances is in a currency other than the functional currency of the respective group entities. A positive number below indicates a decrease in loss for the year where RMB strengthen 5% (2012: 5%) against the relevant currency while a negative number represents an increase in loss for the year. For a 5% (2012: 5%) weakening of RMB against the relevant currency, there would be an equal and opposite impact on the result for the year.

				2013	2012
				HK$’000	HK$’000
Loss	for	the	year	4,885	2,299

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent currency risk as the year end exposure does not reflect the exposure during the year.

ii) Interest rate risk

Exposures to interest rate risk and the Group’s risk management policies

Interest rate risk relates to the risk that the fair value or cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s interest rate risk arises primarily from bank borrowings. Borrowings bearing variable rates and fixed rates expose the Group to cash flow interest rate risk and fair value interest rate risk respectively. The exposure to interest rates for the Group’s short term bank deposits is considered immaterial.

The Group will review whether bank loans bearing floating rates should be drawn from time to time with reference to the trend of changes in interest rates. The interest rates and repayment terms of borrowings and bank balances and cash of the Group are disclosed in Note 33 and 30 respectively. The Group currently does not have an interest rate hedging policy. However, the directors monitor interest rate change exposure and will consider hedging significant interest rate exchange exposure should the need arises. The policies to management interest rate risk have been followed by the Group since prior year and are considered to be effective.

Sensitivity analysis

As of 31 March 2013, it is estimated that a general 100 basis point increase or decrease in interest rates, with all other variables held constant, would increase or decrease the Company’s loss for the year ended 31 March 2013 and accumulated losses by approximately HK$320,000 (2012: HK$395,000).

The above sensitivity analysis has been determined assuming that a change in interest rates had occurred at the end of the reporting period and had been applied to the exposure to interest rate risk for financial instruments in existence at that date. The 100 basis point increase or decrease represents directors’ assessment of a reasonably possible change in interest rates over the period until the next reporting period. The analysis was performed on the same basis for the year ended 31 March 2012.

– IB-29 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

Credit risk

At 31 March 2013 and 2012, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to the failure to discharge an obligation by the counterparties and financial guarantees provided by the Group is arising from:

the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position; and
the amount of contingent liabilities in relation to financial guarantee issued by the Group as disclosed in Note 41.

In addition, the Group reviews the recoverable amount of each individual trade and other receivables, amounts due from associates, amounts due from subsidiaries and amount due from the ultimate holding company at the end of each reporting period to ensure that adequate impairment losses are made for irrecoverable amounts.

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 of the Company consider that the Group’s credit risk is significantly reduced.

The credit risk on liquid funds is limited because the counterparties are authorised banks in Hong Kong and the PRC with high credit ratings.

At 31 March 2013, the Group has concentration of credit risk as 20% (2012: 31%) and 21% (2012: 39%) of the total trade receivables was due from the Group’s largest customer and the five largest customers respectively.

At 31 March 2013 and 2012, all trade receivables were from customers located in the PRC.

Liquidity risk

Liquidity risk relates to the risk that the Group will not be able to meet its obligations associated with its financial liabilities. The Group is exposed to liquidity risk in respect of settlement of trade payables and its financing obligations, and also in respect of its cash flow management. The Group’s objective is to maintain an appropriate level of liquid assets and committed lines of funding to meet its liquidity requirements in the short and longer term.

The Group manages its liquidity needs on a consolidated basis by carefully monitoring scheduled debt servicing payments for long term financial liabilities as well as forecast cash inflows and outflows due in day to day business. Liquidity needs are monitored in various time bands, on a day to day and week to week basis, as well as on the basis of a rolling 30 day projection. Long term liquidity needs for a 90-day and 180-day lookout period are identified monthly. Net cash requirements are compared to available borrowing facilities in order to determine headroom or any shortfalls. This analysis shows if available borrowing facilities are expected to be sufficient over the lookout period.

The Group maintains cash and short-term bank deposits to meet its liquidity requirements for 30 day periods at a minimum. Funding for longer-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell longer-term financial assets.

The liquidity policies have been followed by the Group since prior years and are considered to have been effective in managing liquidity risks.

– IB-30 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The maturity dates for non-derivative financial liabilities are based on the agreed repayment dates.

The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curve at the end of the reporting period.

At 31 March 2013

The Group Trade and other payables Amounts due to associates Amounts due to directors Bank loans and other borrowings The Company Other payables Amounts due to directors At 31 March 2012	Within 1 year or On demand HK$’000 24,473 7,359 8,706 33,933 74,471 2,861 5,769 8,630	Between 1 and 2 years HK$’000 – – – 103,669 103,669 – – –	Between 2 and 5 years Total contractual undiscounted cash flow HK$’000 HK$’000 – 24,473 – 7,359 – 8,706 – 137,602 – 178,140 – 2,861 – 5,769 – 8,630	Total carrying amount HK$’000 24,473 7,359 8,706 129,813
				170,351

				2,861 5,769
				8,630

The Group Trade and other payables Amounts due to associates Amounts due to directors Bank loans and other borrowings The Company Other payables Amounts due to directors	Within 1 year or On demand HK$’000 20,919 8,001 9,464 38,324 76,708 903 5,811 6,714	Between 1 and 2 years HK$’000 – – – 5,249 5,249 – – –	Between 2 and 5 years Total contractual undiscounted cash flow HK$’000 HK$’000 – 20,919 – 8,001 – 9,464 48,972 92,545 48,972 130,929 – 903 – 5,811 – 6,714	Total carrying amount HK$’000 20,919 8,001 9,464 87,270
				125,654

				903 5,811
				6,714

– IB-31 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

9. FAIR VALUE

The fair value of financial assets and financial liabilities is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions.

The directors of the Company consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate to their fair values due to their short-term maturities.

The directors of the Company also consider that the fair value of the long-term portion of financial assets and financial liabilities approximates to their carrying amount as they are carried at amortised cost by using an effective interest rate method.

10. TURNOVER AND OTHER INCOME

Turnover represents the gross invoiced value of goods sold, net of value added tax, sales returns and discounts, to outside customers.

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

Turnover Sales of pharmaceutical products Other income Interest income Rental income Government grants for research and development project Reversal of impairment on trade and other receivable Amounts waived by creditors Sundry income Total revenues	2013 HK$’000 83,333 155 1,903 5 3,399 – 118 5,580 88,913	2012 HK$’000 57,026
		205 1,625 8 1,638 1,210 370
		5,056
		62,082

11. SEGMENT INFORMATION

Information reported to the board of directors of the Company, being the chief operating decision maker, for the purposes of resource allocation and assessment of segment performance focuses on the types of goods sold or services delivered or provided.

Specifically, the Company’s reportable segments under HKFRS 8 are as follows:

Third party – Distribution of third party pharmaceutical products. pharmaceutical products

In-house chemical – Manufacture and sale of in-house chemical pharmaceutical pharmaceutical products. products

In-house biological – Manufacture and sale of in-house biological pharmaceutical pharmaceutical products. products

– IB-32 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

a) Segment revenues and result

For the year ended

				In-house	In-house	In-house	In-house	In-house
	Third party			chemical			biological
	pharmaceutical			pharmaceutical			pharmaceutical
	products			products			products		Total
	2013		2012	2013		2012	2013	2012	2013	2012
	_HK$’000 _	_HK$’000 _		_HK$’000 _	_HK$’000 _		_HK$’000 _	_HK$’000 _	_HK$’000 _	HK$’000
Segment revenue:
Sales to external customers	–		7,443	29,435		21,429	53,898	28,154	83,333	57,026
Inter-segment sales	–		–	–		–	–	513	–	513
Total	–		7,443	29,435		21,429	53,898	28,667	83,333	57,539

Segment results	(8,528)		(12,050)	(9,501)		(29,637)	(32,729) (44,216)		(50,758) (85,903)

Unallocated income and unallocated
expenses									(10,332) (10,683)
Finance costs									(7,670) (5,184)
Share of results of associates									497	(638)
Loss before taxation									(68,263) (102,408)

The accounting policies of the operating segments are the same as the Group’s accounting policies described in Note 4. Segment results represents the results of each segment without allocation of interest income, central administration costs, directors’ remuneration, share of results of associates and finance costs. This is the measure reported to the chief operating decision maker of the Group for the purposes of resource allocation and performance assessment.

Inter-segment sales are charged with reference to market prices.

– IB-33 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

b) Segment assets and liabilities

At 31 March

==> picture [342 x 247] intentionally omitted <==

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

In-house In-house
Third party chemical biological
pharmaceutical pharmaceutical pharmaceutical
products products products Total
2013 2012 2013 2012 2013 2012 2013 2012
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Segment assets
Segment assets 36,742 51,513 97,984 91,736 693,514 672,401 828,241 815,650
Unallocated assets 45,698 81,045
Total assets 873,939 896,695
Segment liabilities
Segment liabilities 937 5,932 5,077 2,424 8,336 21,120 14,350 29,476
Unallocated liabilities 160,081 99,917
Total liabilities 174,431 129,393
----- End of picture text -----

For the purposes of monitoring segment performance and allocating resources between segments:

all assets are allocated to operating segments other than investment properties, interests in associates, amounts due from associates and bank balances and cash. Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable segments; and
all liabilities are allocated to operating segments other than amounts due to associates, amounts due to directors, borrowings, income tax payable and deferred tax liabilities. Liabilities for which reportable segments are jointly liable are allocated in proportion to segment assets.

– IB-34 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

c) Other segment information

At 31 March

			In-house	In-house	In-house	In-house
	Third	party	chemical		biological
	pharmaceutical		pharmaceutical		pharmaceutical
	products		products		products		Total
	2013	2012	2013	2012	2013	2012	2013	2012
	_HK$’000 _	_HK$’000 _	_HK$’000 _	_HK$’000 _	_HK$’000 _	_HK$’000 _	_HK$’000 _	HK$’000
Additions to non-current assets_(Note)_	–	–	26,047	13,241	55,171	2,488	81,218	15,729
Amortisation of intangible assets	–	–	3,340	2,269	27,141	26,690	30,481	28,958
Amortisation of prepaid lease
payments	–	–	315	310	777	764	1,092	1,074
Depreciation for property, plant and
equipment	10,395	10,324	8,611	8,197	11,807	15,977	30,813	34,498
Finance costs	1,757	1,936	11	8	901	1,379	2,669	3,323
Impairment loss on trade receivables	–	1,097	–	–	–	–	–	1,097
Impairment loss on deposit paid for
acquisition of intangible assets	–	–	1,761	–	–	–	–	–
Reversal of impairment loss on deposit
paid for acquisition of property,
plant and equipment	–	–	(5,362)	–	–	–	–	–
Reversal of impairment loss on trade
receivables	(1,862)	–	–	–	(1,537)	(1,638)	(3,399)	(1,638)

Note: Non-current assets included property, plant and equipment and intangible assets.

d) Geographical segments

For the two years ended 31 March 2013, all of the Group’s revenue were derived from the PRC. Information about the Group’s sales to external customers presented based on the locations of customers and distributors, and information about the Group’s assets presented based on the geographical location of the assets are summarised below.

Hong Kong PRC	Sales to external customers 2013 2012 HK$’000 HK$’000 – – 83,333 57,026 83,333 57,026	Total assets 2013 2012 HK$’000 HK$’000 260,920 340,461 613,019 556,234 873,939 896,695	Total assets 2013 2012 HK$’000 HK$’000 260,920 340,461 613,019 556,234 873,939 896,695
			896,695

e) Information about major customers

For the two years ended 31 March 2013, no single customer contributed over 10% of the total revenue of the Group.

– IB-35 –

APPENDIX IB

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

12. FINANCE COSTS

Interest expenses on bank borrowings wholly repayable within five years Interest expenses on other borrowings wholly repayable within five years	2013 HK$’000 2,676 4,994 7,670	2012 HK$’000 3,325 1,859
		5,184

13. LOSS BEFORE TAXATION

Loss before taxation is arrived at after charging:

Staff costs (including directors’ emoluments) Salaries, wages and other benefits Retirement benefit scheme contribution Less: Staff costs included in research and development costs Total staff cost Amortisation of intangible assets Amortisation of prepaid lease payments Auditor’s remuneration Bad debts directly written-off Cost of inventories recognised as an expense Impairment loss on trade receivables Impairment loss on deposit paid for acquisition of intangible assets Depreciation Less: Depreciation included in research and development costs Operating lease rentals in respect of offices Research and development costs Less: Capitalisation on intangible assets	2013 HK$’000 15,308 1,301 16,609 (60) 16,549 30,481 1,092 1,000 – 15,595 – 1,761 30,846 (372) 30,474 1,172 4,195 (2,320) 1,875	2012 HK$’000 13,802 757
		14,559 (343)
		14,216

		28,958 1,074 900 575 18,133 1,097 –
		34,531 (405)
		34,126 66 4,649 (2,085)
		2,564

– IB-36 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

14. INCOME TAX EXPENSE

PRC Enterprise Income Tax (“EIT”) – Current year Deferred taxation (Note 34) – Current year	2013 HK$’000 877 168 1,045	2012 HK$’000 –
		456
		456

No provision for Hong Kong profits tax has been made since the entities operating in Hong Kong had no assessable profit for the two years ended 31 March 2013.

Under the Law of the People’s Republic of China on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% from 1 January 2008 onwards.

Pursuant to the relevant laws and regulations in the PRC, one of the Group’s PRC subsidiary, Shenzhen Watsin Genetech Pharmaceutical Co., Limited, was approved as a “high-new technology enterprises” and become eligible to enjoy a preferential EIT rate of 15% for the two years ended 31 March 2013.

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

Loss before taxation Notional tax on loss before taxation, calculated at the rates applicable to loss in the countries concerned Tax effect of non-taxable income Tax effect of non-deductible expenses Effect of tax concessionary rates granted to the PRC subsidiaries Tax effect of unused tax losses not recognised Income tax expense for the year	2013 HK$’000 (68,263) (15,805) (1,359) 7,454 (1,127) 11,882 1,045	2012 HK$’000 (102,408)

		(24,537) (744) 16,347 (304) 9,694
		456

– IB-37 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

15. LOSS PER SHARE

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

Loss Loss for the year attributable to owners of the Company for the purpose of basic and diluted loss per share Number of shares Weighted average number of ordinary shares for basic loss per share calculation	2013 HK$’000 (69,308) 2013 ’000 1,304,846	2012 HK$’000 (102,864)

		2012 ’000 1,304,846

The computation of diluted loss per share for the year ended 31 March 2013 does not assume the exercise of the Company’s outstanding share options as the exercise price of those options was higher than the average market price of the Company’s shares.

Diluted loss per share was the same as the basic loss per share for the year ended 31 March 2012 as the effect of the conversion of the Company’s share options shares was anti-dilutive.

16. DIVIDEND

No dividend was paid, declared or proposed during the year ended 31 March 2013 (2012: Nil), nor has any dividend been proposed since the end of the reporting period.

– IB-38 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

17. DIRECTORS’, CHIEF EXECUTIVE’S AND EMPLOYEES’ EMOLUMENTS

a) Director’s and chief executive’s remuneration

Executive Directors Tong Kit Shing Liu Guoyao (Chief Executive Officer) Leung Ka Chun (appointed on 1 December 2012) Independent Non-executive Directors Zhou Yaoming (resigned on 1 April 2012) Lin Jian (resigned on 1 April 2012) Tsao Hoi Ho Lou Iok Kuong Ng Pak Kin (appointed on 1 December 2012) Leung Wai Chung, Vincent (appointed on 1 December 2012)	For the year ended 31 March 2013 Fees Other emoluments and other benefits Retirement benefit scheme contributions Total emoluments HK$’000 HK$’000 HK$’000 HK$’000 145 – 7 152 – – – – 200 – 5 205 50 – – 50 50 – – 50 120 – – 120 120 – – 120 40 – – 40 40 – – 40 765 – 12 777	For the year ended 31 March 2013 Fees Other emoluments and other benefits Retirement benefit scheme contributions Total emoluments HK$’000 HK$’000 HK$’000 HK$’000 145 – 7 152 – – – – 200 – 5 205 50 – – 50 50 – – 50 120 – – 120 120 – – 120 40 – – 40 40 – – 40 765 – 12 777
		777

– IB-39 –

APPENDIX IB

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

Executive Directors Tong Kit Shing Liu Guoyao (Chief Executive Officer) Independent Non-executive Directors Zhou Yaoming (resigned on 1 April 2012) Lin Jian (resigned on 1 April 2012) Tsao Hoi Ho Lou Iok Kuong Leung Ka Chun	For the year ended 31 March 2012 Fees Other emoluments and other benefits Retirement benefit scheme contributions Total emoluments HK$’000 HK$’000 HK$’000 HK$’000 120 13 6 139 – – – – 50 – – 50 50 – – 50 120 – – 120 120 – – 120 110 – – 110 570 13 6 589	For the year ended 31 March 2012 Fees Other emoluments and other benefits Retirement benefit scheme contributions Total emoluments HK$’000 HK$’000 HK$’000 HK$’000 120 13 6 139 – – – – 50 – – 50 50 – – 50 120 – – 120 120 – – 120 110 – – 110 570 13 6 589
		589

Liu Guoyao is also the Chief Executive Officer of the Company and his emoluments disclosed above include those rendered by him as Chief Executive.

b) Senior management’s remuneration

Of the five individuals with highest emoluments in the Group, none (2012: none) were directors of the Company whose emoluments are set out above. The emoluments of the five (2012: five) highest paid individuals were as follows:

Salaries and other benefits Retirement benefit scheme contributions Their emoluments were within the following bands: Nil to HK$1,000,000	2013 HK$’000 2,365 59 2,424 2013 5	2012 HK$’000 2,107 68
		2,175

		2012 5

c) No emoluments have been paid by the Group to the directors of the Company or the five highest paid individuals as an inducement to join or upon joining the Company, or as compensation for loss of office during the two years ended 31 March 2013.

– IB-40 –

APPENDIX IB

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

18. STAFF COSTS (EXCLUDING DIRECTORS’ AND CHIEF EXECUTIVE’S REMUNERATION)

Salaries and other benefits Retirement benefit scheme contributions	2013 HK$’000 14,483 1,289 15,772	2012 HK$’000 12,876 751
		13,627

Hong Kong

The Group operates a Mandatory Provident Fund Scheme (“the MPF scheme”) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF scheme is a defined contribution retirement plan administered by independent trustees. Under the MPF scheme, the employer and its employees are each required to make contributions to the plan at 5% of the employee’s relevant income, subject to a cap of monthly relevant income of HK$25,000 (2012: HK$20,000). Apart from the mandatory contributions, the employer would make monthly voluntary contributions. The aggregate of the mandatory and voluntary contributions made by the employer represents 5% of the basic salary of the employees. Mandatory contributions to the plan vest immediately. Where there are employees who leave the Group prior to vesting fully in the voluntary contributions, the contributions payable by the Group are reduced by the amount of forfeited contributions.

PRC

The employees employed in PRC subsidiaries are members of the state-managed retirement benefits schemes operated by the China government. The PRC subsidiaries are required to contribute to the retirement benefits schemes based on a certain percentage of their payroll to fund the benefits. The only obligation of the Group with respect to these retirement benefits schemes is to make the required contributions under the schemes.

The Group has no other material obligation for payment of retirement benefits beyond the annual contributions as described above.

– IB-41 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

19. PROPERTY, PLANT AND EQUIPMENT

The Group

COST At 1 April 2011 Additions Disposals Written off Exchange realignment At 31 March 2012 Additions Disposals Written off Exchange realignment At 31 March 2013 ACCUMULATED DEPRECIATION AND IMPAIRMENT At 1 April 2011 Provided for the year Eliminated on disposals Eliminated on written off Exchange realignment At 31 March 2012 Provided for the year Eliminated on disposals Eliminated on written off Exchange realignment At 31 March 2013 CARRYING VALUES At 31 March 2013 At 31 March 2012	Leasehold buildings HK$’000 44,382 – – – 2,118 46,500 – – – 151 46,651 19,764 2,890 – – 243 22,897 2,939 – – 151 25,987 20,664 23,603	Plant and machinery HK$’000 280,101 9,181 (35,303) (7,220) 6,552 253,311 15,883 (6) (285) 821 269,724 131,944 26,468 (14,911) (3,890) 1,228 140,839 26,659 (6) (240) 931 168,183 101,541 112,472	Furniture, fixtures and equipment Leasehold improvements HK$’000 HK$’000 33,401 48,099 989 131 – – (520) – 316 813 34,186 49,043 1,940 4,374 – – (7) – 111 159 36,230 53,576 28,861 25,705 1,516 2,984 – – (487) – 243 738 30,133 29,427 805 244 – – (6) – 199 195 31,131 29,866 5,099 23,710 4,053 19,616	Motor vehicles HK$’000 4,984 107 – – 131 5,222 – (417) (512) 17 4,310 4,067 673 – – 103 4,843 199 (375) (497) 33 4,203 107 379	Construction in progress HK$’000 284 3,236 – – 10 3,530 5,728 – – 11 9,269 – – – – – – – – – – – 9,269 3,530	Total HK$’000 411,251 13,644 (35,303) (7,740) 9,940
						391,792 27,925 (423) (804) 1,270
						419,760

						210,341 34,531 (14,911) (4,377) 2,555
						228,139 30,846 (381) (743) 1,509
						259,370

						160,390

						163,653

– IB-42 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

a) The leasehold buildings are held in the PRC under medium-term leases.
b) The above items of property, plant and equipment, except for construction in progress, are depreciated on a straight-line basis, less their estimated residual value, if any, at the following rates per annum:

Buildings Over 5% or the term of the lease or land use rights, if shorter Plant and machinery 6.6% – 20% Furniture, fixtures and equipment 10% – 20% Leasehold improvements 5% – 18% Motor vehicles 15% – 20%

c) Certain properties as at 31 March 2013 with carrying amount of HK$20,664,000 (2012: HK$23,603,000) were pledged as collateral of the Group’s bank borrowings (Note 33).

20. INVESTMENT PROPERTIES

FAIR VALUE At the beginning of the year Exchange realignment Change in fair value At the end of the year	The Group 2013 2012 HK$’000 HK$’000 23,558 19,728 (46) 789 1,120 3,041 24,632 23,558	The Group 2013 2012 HK$’000 HK$’000 23,558 19,728 (46) 789 1,120 3,041 24,632 23,558
		23,558

a) The carrying value of investment properties shown above were situated in the PRC and held under medium-term lease.
b) All of the Group’s property interests held under operating leases to earn rentals or for capital appreciation purposes were measured using the fair value model and were classified and accounted for as investment properties.
c) The fair value of the investment properties of the Group as at 31 March 2013 and 2012 has been arrived at on an open market value basis assuming sale with existing tenancies by using the income approach by capitalising the net rental income receivable from the existing tenancies and the reversionary rental income potentials. The valuations were carried out by an independent qualified professional valuer not connected with the Group, Roma Appraisals Limited, who had among its staff members of the Hong Kong Institute of Surveyors with recent experience in the location and category of property being valued.
d) Certain of the Group’s investment properties with carrying amount of HK$9,849,000 (2012: HK$9,268,000) were pledged as collateral for the Group’s bank borrowings (Note 33).

– IB-43 –

APPENDIX IB

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

21. PREPAID LEASE PAYMENTS

The Group’s prepaid lease payments are held under in the PRC as follows: Medium-term lease Short-term lease Analysed for reporting purposes as: Current assets Non-current assets	The Group 2013 2012 HK$’000 HK$’000 6,538 7,323 10,985 11,319 17,523 18,642 The Group 2013 2012 HK$’000 HK$’000 1,087 1,089 16,436 17,553 17,523 18,642	The Group 2013 2012 HK$’000 HK$’000 6,538 7,323 10,985 11,319 17,523 18,642 The Group 2013 2012 HK$’000 HK$’000 1,087 1,089 16,436 17,553 17,523 18,642
		18,642

At 31 March 2013, the carrying value of the Group’s prepaid lease payments amounted to approximately HK$14,217,000 (2012: HK$14,939,000) was pledged as security for the banking facilities granted to the Group (Note 33).

22. GOODWILL

a)

COST At 1 April 2011, 31 March 2012 and 31 March 2013 IMPAIRMENT At 1 April 2011, 31 March 2012 and 31 March 2013 CARRYING VALUES At 31 March 2013 At 31 March 2012	HK$’000 573,552
	(314,136)
	259,416

	259,416

b) Impairment testing

Goodwill is allocated to one CGU-Pharmaceutical products in the PRC. The Group’s cash-generating units (“CGU”) identified according to country of operation and business segment as follows:

					2013	2012
					HK$’000	HK$’000
Pharmaceutical	products	–	the	PRC	259,416	259,416

– IB-44 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

At 31 March 2013, the fair value of the CGU of goodwill is determined taking into account the valuation performed by Roma Appraisals Limited (2012: Roma Appraisals Limited), independent professional valuers not connected to the Group, based on the cash flow forecasts derived from the most recent financial budgets for the next 5 years approved by the management using the discount rate of 15.23% (2012: 17%) which reflects current market assessments of the time value of money and the risk specific to the CGU. The cash flows beyond the 2-year-period are extrapolated for 3 years assuming no growth. The recoverable amount of the CGU is determined from value in use calculations or fair value less cost to sell of the CGU.

Key assumptions used for value-in-use calculations:

	2013	2012
	%	%
Gross margin	90	90
Growth rate	12–150	30–125
Discount rate	15.23	17

Management determined the budgeted gross margin based on past performance and its expectation for market development. The weighted average growth rates used are consistent with the forecast included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the relevant segments.

The recoverable amount of the CGU were assessed by an independent professional firm of valuers, Roma Appraisals Limited. According to their results of valuations, no impairment loss was recognised for the year ended 31 March 2013 (2012: Nil).

23. INTANGIBLE ASSETS

The Group

Trademarks and certificates HK$’000 (Note a) COST At 1 April 2011 364,226 Additions – Exchange realignment 13,791 Written off (114,418) At 31 March 2012 263,599 Exchange realignment (454) Additions – At 31 March 2013 263,145	Technical know-how Product development in progress HK$’000 HK$’000 (Note b) (Note c) 70,320 186,079 – 2,085 2,663 7,046 – – 72,983 195,210 (126) (337) 50,973 2,320 123,830 197,193	Total HK$’000 620,625 2,085 23,500 (114,418)
		531,792 (917) 53,293
		584,168

– IB-45 –

APPENDIX IB

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

Trademarks and certificates HK$’000 (Note a) AMORTISATION At 1 April 2011 290,174 Exchange realignment 11,294 Provided for the year 21,761 Eliminated on written off (114,418) At 31 March 2012 208,811 Exchange realignment (465) Provided for the year 23,162 At 31 March 2013 231,508 CARRYING VALUES At 31 March 2013 31,637 At 31 March 2012 54,788	Technical know-how Product development in progress HK$’000 HK$’000 (Note b) (Note c) 21,881 – 930 – 7,197 – – – 30,008 – (84) – 7,319 – 37,243 – 86,587 197,193 42,975 195,210	Total HK$’000 312,055 12,224 28,958 (114,418)
		238,819 (549) 30,481
		268,751

		315,417

		292,973

(a) Trademarks and certificates represent costs in obtaining trademarks and registration certificates for medicines.
(b) Technical know-how mainly represents techniques and formulas acquired for the development of products and production technology.
(c) Product development in progress mainly represent costs generated internally for the development of products and product technology.
(d) The above intangible assets have definite useful lives and are amortised on a straight line basis over their remaining estimated useful life of five to ten years.
(e) The amortisation charge for the year is included in “general and administrative expense” in the consolidated statement of comprehensive income.
(f) According to the results of review of the valuations carried out by an independent professional firm of valuers, Roma Appraisals Limited, the management determined that no impairment loss was recognised for the year ended 31 March 2013 (2012: Nil) because the recoverable amount of the trademark with reference to the value in use or fair value less cost to sell as at 31 March 2013 performed by Roma Appraisals Limited was estimated to be less than its carrying value.

– IB-46 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

24. INVESTMENTS IN SUBSIDIARIES

Cost of unlisted investments in subsidiaries Amounts due from subsidiaries Less: Impairment loss	The Company 2013 2012 HK$’000 HK$’000 – – 1,568,870 1,571,491 (830,952) (830,952) 737,918 740,539	The Company 2013 2012 HK$’000 HK$’000 – – 1,568,870 1,571,491 (830,952) (830,952) 737,918 740,539

		1,571,491 (830,952)
		740,539

a) Amounts due from subsidiaries are unsecured, interest-free and repayable on demand.

b) Movement of impairment loss:

At the beginning of the year Recognised for the year At the end of the year	The Company 2013 2012 HK$’000 HK$’000 830,952 786,849 – 44,103 830,952 830,952	The Company 2013 2012 HK$’000 HK$’000 830,952 786,849 – 44,103 830,952 830,952
		830,952

During the year ended 31 March 2013, an impairment loss of approximately Nil (2012: HK$44,103,000) was recognised because the recoverable amount of the amounts due was estimated to be less than their carrying amounts and the possibility of the recovery was too remote.

c) The details of all the subsidiaries at 31 March 2013 and 2012 are as follows:

	Place of		Particulars of
	incorporation/		issued and
	establishment	Principal	paid up share	Interest
Name	and operation	activities	capital	held
Lelion Holdings Limited	British Virgin	Investment	2 Ordinary	100%*
	Islands/	holding	shares of
	Hong Kong		US$1 each
Joint Peace Limited	British Virgin	Dormant	2 Ordinary	100%
	Islands/		shares of
	Hong Kong		US$1 each
Uni-Bio Management Limited	Hong Kong	Provision of	1 Ordinary	100%
		management	share of
		services	HK$1 each
Figures Up Trading Limited	British Virgin	Investment	100 Ordinary	100%
	Islands/	holding	shares of
	Hong Kong		US$1 each

– IB-47 –

APPENDIX IB

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

	Place of		Particulars of
	incorporation/		issued and
	establishment	Principal	paid up share	Interest
Name	and operation	activities	capital	held
Nan Hoo Properties Limited	British Virgin	Investment	50,000	100%
	Islands/	holding	Ordinary
	Hong Kong		shares of
			US$1 each
Zethanel Properties Limited	British Virgin	Investment	10,000	100%
	Islands/	holding	Ordinary
	Hong Kong		shares of
			US$1 each
Dongguan Taili Biotech Co., Limited	The PRC	Research and	Contributed	100%
東莞太力生物工程有限公司		development,	capital of
		manufacture	HK$100,458,126
		and sales of
		medical and
		biological
		products
Dongguan Shi Bo Kang Jian Pharmaceutical	The PRC	Trading of	Contributed	100%
Technology Co., Limited		medical and	capital of
東莞市博康健醫藥科技有限公司		biological	RMB1,000,000
		products
Beijing Genetech Pharmaceutical	The PRC	Manufacture	Contributed	100%
Co., Limited		and sales of	capital of
北京博康健基因科技有限公司		medical and	RMB91,000,000
		biological
		products
Shenzhen Watsin Genetech Limited	The PRC	Manufacture	Contributed	100%
深圳市華生元基因工程發展有限公司		and sales of	capital of
		biological	RMB100,060,960
		products

Shares held directly by the Company.

25. INTERESTS IN ASSOCIATES

Unlisted shares, at cost Share of post-acquisition results Amount due to an associate Deregistration of an associate	The Group 2013 2012 HK$’000 HK$’000 15,390 15,417 (4,538) (5,042) 10,852 10,375 (3,854) – (137) – 6,861 10,375	The Group 2013 2012 HK$’000 HK$’000 15,390 15,417 (4,538) (5,042) 10,852 10,375 (3,854) – (137) – 6,861 10,375
		10,375 – –
		10,375

– IB-48 –

APPENDIX IB

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

a) At 31 March 2013 and 2012, the Group had interests in the following associates:

	Place of		Particulars of
	incorporation	Principal	issued and paid	Interest held
Name of associates	and operation	activities	up capital	(Indirect)
				2013	2012
Guangdong Lian Kang	The PRC	Research and	Contributed	45%*	45%*
Biological and		development of	capital of
Pharmaceutical Limited		pharmaceutical	RMB20,000,000
廣東聯康生物與		products
醫藥研究院
Dongguan Kang An	The PRC	Research and	Contributed	–	35%
Biological Limited		development of	capital of
東莞市康安生物		pharmaceutical	RMB10,000,000
技術開發有限公司		products

At 31 March 2013, Dongguan Kang An Biological Limited was deregistered.

b) The results of Guangdong Lian Kang Biological and Pharmaceutical Limited (“the associate”) incorporated into the Group’s consolidated financial statements made up to 31 December 2012. This was the financial reporting date established when the associate established. For the purpose of applying equity accounting, the financial statements of the associate for the year ended 31 December 2012 have been used, and appropriate adjustments have been made for the effects of significant transactions between that date and 31 March 2013.
c) The amount due to an associate was unsecured, non-interest bearing and repayable on demand.

The summarised financial information in respect of the Group’s interest in an associate which are accounted for using the equity method is set out below:

Total assets Total liabilities Net assets Group’s share of net assets of associates Total revenue for the year Total profit (loss) for the year Group’s share of results of associates	2013 HK$’000 19,292 4,046 15,246 6,861 – 1,030 497	2012 HK$’000 32,277 6,609
		25,668

		10,735

		–

		(4,399)

		(638)

– IB-49 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

26. DEPOSIT PAID FOR THE ACQUISITION OF INTANGIBLE ASSETS/PROPERTY, PLANT AND EQUIPMENT

At 31 March 2013, deposits paid for the acquisition of intangible assets relates to the purchase of technical know-how. The carrying amount at 31 March 2013 was approximately Nil (2012: HK$51,998,000), net of accumulated impairment losses of approximately HK$8,513,000 (2012: HK$6,812,000).

At 31 March 2013, the carrying amounts of deposits paid for the acquisition of property, plant and equipment relates to the purchase of plant and equipment for the expansion of production facilities. The carrying amount at 31 March 2013 was approximately HK$22,448,000 (2012: HK$18,628,000), net of accumulated impairment losses of approximately Nil (2012: HK$5,362,000).

27. INVENTORIES

Raw materials Work in progress Finished goods	The Group 2013 2012 HK$’000 HK$’000 1,030 2,630 2,560 902 1,334 4,275 4,924 7,807	The Group 2013 2012 HK$’000 HK$’000 1,030 2,630 2,560 902 1,334 4,275 4,924 7,807
		7,807

28. TRADE AND OTHER RECEIVABLES

Trade receivable Less: Impairment loss recognised Other receivables and prepayments Less: Impairment loss recognised	The Group 2013 2012 HK$’000 HK$’000 23,795 24,030 (3,394) (6,789) 20,401 17,241 28,568 10,616 (775) (775) 27,793 9,841 48,194 27,082	The Company 2013 2012 HK$’000 HK$’000 – – – – – – 512 507 – – 512 507 512 507	The Company 2013 2012 HK$’000 HK$’000 – – – – – – 512 507 – – 512 507 512 507
			–
			507 –
			507
			507

i) The Group allows an average credit period of 120 days to its customers. In addition, for certain customers with long-established relationship and good past repayment histories, a longer credit period may be granted.

– IB-50 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

ii) An aged analysis of trade receivables, net of impairment loss recognised, presented based on transaction date is as follows:

Within 30 days 31 – 60 days 61 – 90 days Over 90 days	The Group 2013 2012 HK$’000 HK$’000 5,803 4,142 4,934 4,644 4,314 4,055 5,350 4,400 20,401 17,241	The Group 2013 2012 HK$’000 HK$’000 5,803 4,142 4,934 4,644 4,314 4,055 5,350 4,400 20,401 17,241
		17,241

iii) Aging analysis of trade receivables which were past due but not impaired are as follows:

					The	Group
						Past due	but	not
						impaired
					Neither	Not more
					past due	than one	Over one
					nor	month		month
				Total	impaired	past due	past due
				HK$’000	HK$’000	HK$’000		HK$’000
At	31	March	2013	20,401	16,893	2,503		1,005
At	31	March	2012	17,241	13,898	1,218		2,125

Trade receivables that were neither past due nor impaired relate to a wide range of customers for whom there was no recent history of default.

Included in the Group’s trade receivables are debtors with aggregate carrying amount of approximately HK$3,508,000 (2012: HK$3,343,000) which were past due at the reporting date for which the Group has not provided for impairment loss as there has not been a significant change in credit quality and the amounts are still considered fully recoverable. The Group does not hold any collateral over these balances.

iv) Movements in the impairment losses recognised in respect of trade receivables are as follows:

At the beginning of the year Recognised during the year Reversal of impairment losses Exchange realignment At the end of the year	The Group 2013 2012 HK$’000 HK$’000 6,789 7,071 – 1,097 (3,399) (1,638) 4 259 3,394 6,789	The Group 2013 2012 HK$’000 HK$’000 6,789 7,071 – 1,097 (3,399) (1,638) 4 259 3,394 6,789
		6,789

– IB-51 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

v) Movements in the impairment losses recognised in respect of other receivables are as follows:

At the beginning of the year Exchange realignment At the end of the year	The Group 2013 2012 HK$’000 HK$’000 775 748 – 27 775 775	The Group 2013 2012 HK$’000 HK$’000 775 748 – 27 775 775
		775

29. AMOUNTS DUE FROM (TO) ASSOCIATES

The amounts due are unsecured, non-interest bearing and repayable on demand.

30. BANK BALANCES AND CASH

The Group and the Company

i) For the two years ended 31 March 2013, bank balances represented short-term deposits with a maturity of three months or less. The interest rates ranged from 0.01% to 0.4% per annum (2012: 0.01% to 0.5% per annum).
ii) The carrying amounts of the Group’s and the Company’s bank balances and cash denominated in currencies other than the functional currency of the relevant group entities are set out below:

	The	Group	The Company	The Company
	2013	2012	2013	2012
	HK$’000	HK$’000	HK$’000	HK$’000
HK$	1,363	362	2,020	1,036

31. TRADE AND OTHER PAYABLES

Trade payables Accrued charges and other payables	The Group 2013 2012 HK$’000 HK$’000 1,015 5,897 23,458 15,022 24,473 20,919	The Company 2013 2012 HK$’000 HK$’000 – – 2,861 903 2,861 903	The Company 2013 2012 HK$’000 HK$’000 – – 2,861 903 2,861 903
			903

(i) The average credit period on purchases of goods is 120 days (2012: 120 days). The Group has in place financial risk management policies in place to ensure that all payables are settled within the credit timeframe.

– IB-52 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

(ii) An aged analysis of the trade payables at the end of the reporting period based on transaction date is as follows:

Within 30 days 31–60 days 61–90 days Over 90 days	The Group 2013 2012 HK$’000 HK$’000 315 886 99 357 266 289 335 4,365 1,015 5,897	The Group 2013 2012 HK$’000 HK$’000 315 886 99 357 266 289 335 4,365 1,015 5,897
		5,897

32. AMOUNTS DUE TO DIRECTORS

The amounts due are unsecured, non-interest bearing and repayable on demand.

33. BORROWINGS

Secured Bank loans Other loans Unsecured Other loans	The Group 2013 2012 HK$’000 HK$’000 32,012 39,467 96,200 46,200 1,601 1,603 129,813 87,270	The Group 2013 2012 HK$’000 HK$’000 32,012 39,467 96,200 46,200 1,601 1,603 129,813 87,270
		87,270

At 31 March 2013 and 2012, total current and non-current bank loans and other borrowings were repayable as follows:

Bank loans repayable: Within 1 year or on demand After 1 year but within 2 years Other loans repayable: Within 1 year or on demand After 1 year but within 2 years After 2 years but within 5 years Less: Amount due within 1 year shown under current liabilities	The Group 2013 2012 HK$’000 HK$’000 32,012 34,534 – 4,933 32,012 39,467 – 1,603 97,801 – – 46,200 129,813 87,270 (32,012) (36,137) 97,801 51,133	The Group 2013 2012 HK$’000 HK$’000 32,012 34,534 – 4,933 32,012 39,467 – 1,603 97,801 – – 46,200 129,813 87,270 (32,012) (36,137) 97,801 51,133
		39,467 1,603 – 46,200
		87,270 (36,137)
		51,133

– IB-53 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

(i) Bank loans bear interest at variable rates by reference to the People’s Bank of China’s lending rate, ranging from 5.9% to 6.9% per annum.
(ii) Except for the other loan of HK$1,601,000 (2012: HK$1,603,000), which is interest-free, unsecured and will be repayable within one year, the other loan of HK$96,200,000 (2012: HK$46,200,000) is bearing interest at 6% (2012: 6%) per annum, secured and will be repayable in May 2014.

At 31 March 2013, the other loan amounted to HK$96,200,000 (2012: HK$46,200,000) are guaranteed by the Company and its subsidiaries, Figures Up Trading Limited (“Figures up”), Nan Hoo Properties Limited (“Nan Hoo”) and Zethanel Properties Limited (“Zethanel”) as guarantors and secured by way of first fixed charges on the entire equity shares of Figures up, Nan Hoo and Zethanel in favour of an independent third party as the collateral to the loan facility of HK$300,000,000 (2012: HK$300,000,000) provided to the Group (Note 41).

(iii) In the opinion of the directors, the carrying amounts of the Group’s current and non-current bank loans and other borrowings approximate their fair values.
(iv) Included in bank loans and other borrowings are the following amounts denominated in a currency other than the functional currency of the Group to which they relate.

	The
	2013	2012
	HK$’000	HK$’000
HK$	96,200	46,200

34. DEFERRED TAX LIABILITIES

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

At the beginning of the year Exchange realignment Charged to the consolidated statement of comprehensive income At the end of the year	The Group Fair value adjustment on investment properties 2013 2012 HK$’000 HK$’000 1,277 784 (3) 37 168 456 1,442 1,277	The Group Fair value adjustment on investment properties 2013 2012 HK$’000 HK$’000 1,277 784 (3) 37 168 456 1,442 1,277
		1,277

At 31 March 2013, the Group has unrecognised tax loss of HK$659,453,000 (2012: HK$610,882,000) available for offset against future profits. No deferred tax asset has been recognised in respect of the unused tax losses due to the unpredictability of future profits streams. The losses will expire within five years.

Under the EIT Law of PRC, withholding tax is imposed on dividends in respect of profits earned by PRC subsidiaries from 1 January 2008 onwards (the “Post-2008 Earnings”). Deferred taxation has not been provided for in the consolidation financial statements in respect of temporary

– IB-54 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

difference attributable to the “Post-2008 Earnings” 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.

35. SHARE CAPITAL

(a)

Ordinary share of HK$0.01 each Authorised: At 1 April 2011 and 31 March 2012 and 2013 Issued and fully paid: At 1 April 2011 and 31 March 2012 and 2013	Number of shares 500,000,000,000 1,304,846,293	Value HK$’000 5,000,000

		13,048

(b) Reserves of the Company

At 1 April 2011 Share option lapsed during the year Total comprehensive expenses for the year At 31 March 2012 Total comprehensive expenses for the year At 31 March 2013	Share premium Share-based payments reserve Distributable reserve Accumulated losses HK$’000 HK$’000 HK$’000 HK$’000 322,492 48,147 1,291,798 (890,880) – (6,610) – 6,610 – – – (49,237) 322,492 41,537 1,291,798 (933,507) – – – (5,206) 322,492 41,537 1,291,798 (938,713)	Total HK$’000 771,557 – (49,237)
		722,320 (5,206)
		717,114

36. SHARE OPTIONS

Under the share option scheme (the “2001 Scheme”) approved by the shareholders on 22 October 2001, the directors of the Company may, as its discretion, invite directors and employees of the Group to take up options to subscribe for shares in the Company representing up to 30 per cent of the issued share capital of the Company from time to time.

The subscription price for the shares in relation to options to be granted under the 2001 Scheme shall be determined by the Board and shall be at least the highest of (i) the nominal value of shares of the Company; (ii) the closing price of shares on the date of grant (the “Offer Date”); and (iii) the average closing price of the shares for the five business days immediately preceding the Offer Date. The options are exercisable within 10 years from the Offer Date.

Pursuant to ordinary resolutions passed by the shareholders of the Company on 22 September 2006, the Company terminated the 2001 Scheme and adopted a new share option scheme (the “2006 Scheme”).

– IB-55 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

Under the 2006 Scheme, which is valid for a period of ten years, the board of directors of the Company may, at its discretion grant options to subscribe for shares in the Company to eligible participants (“Eligible Participants”) who contribute to the long-term growth and profitability of the Company. Eligible Participants include (i) any employee (whether full-time or part-time including any executive director but excluding any non-executive director) (the “Eligible Employee”) of the Company, any of its subsidiaries or any entity (“Invested Entity”) in which any member of the Group holds an equity interest; (ii) any non-executive director (including independent non-executive director) of the Company, any of its subsidiaries or any Invested Entity; (iii) any supplier of goods or services to any member of the Group or any Invested Entity; (iv) any customer of any member of the Group or any Invested Entity; (v) any person or entity that provides research, development or other technological support to any member of the Group or any Invested Entity; (vi) any shareholder of any member of the Group or any Invested Entity or any holder of any securities issued by any member of the Group or any Invested Entity; (vii) any adviser (professional or otherwise) or consultant to any area of business or business development of any member of the Group or any Invested Entity; and (viii) any other group or class of participants who has contributed or may contribute by way of joint venture, business alliance or other business arrangement to the development and growth of the Group. The subscription price for the Company’s shares shall be a price at least equal to the highest of the nominal value of the Company’s shares, the average of the closing prices of the Company’s shares quoted on the Stock Exchange on the 5 trading days immediately preceding the date of an offer of the grant of the options and the closing price of the Company’s shares quoted on the Stock Exchange on the date of an offer of the grant of the options. The options must be taken up within 28 days from the date of grant upon payment of HK$1 and are exercisable over a period to be determined and notified by the directors to each grantee, which period may commence from the date of acceptance of the offer of the grant of the options but shall end in any event not later than 10 years from the date of adoption of the 2006 Scheme.

The total number of the Company’s shares which may be issued upon exercise of all options to be granted under the 2006 Scheme and any other schemes of the Group (excluding options lapsed in accordance with the terms of the 2006 Scheme and any other schemes of the Group) must not in aggregate exceed 10% of the Company’s shares in issue as at the date of adoption of the 2006 Scheme. The limit on the number of the Company’s shares which may be issued upon exercise of all outstanding option granted any yet to be exercised under the 2006 Scheme and any other schemes of the Group must not exceed 30% of the Company’s shares in issue from time to time. The total number of the Company’s shares issued and to be issued upon exercise of the options granted to each grantee (including both exercised and outstanding options) under the 2006 Scheme or other schemes of the Group in any 12-month period up to the date of grant must not exceed 1% of the Company’s shares in issue at the date of grant unless approved by the Company’s shareholders in general meeting.

The directors consider the 2006 Scheme, with its broadened basis of participation, will enable the Group to reward the employees, directors and other selected participants for their contributions to the Group and will also assist the Group in its recruitment and retention of high caliber professionals, executives and employees who are instrumental to the growth and stability of the Group. The share options are vested immediately on the date of grant.

Total consideration received during the year from eligible participants for taking up the options granted during the year is Nil (2012: Nil). The consideration is required to be settled within 21 days from the issue of the share option offer.

– IB-56 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

Details of the share option movements during the year ended 31 March 2013 under 2006 Scheme are as follows:

Employees
Others
Others
Exercisable at the end
of the year
Weighted average
exercise price (HK$)

Number of
share options
outstanding at
1 April 2011,
31 March 2012
and 2013
Exercise price
Date of grant
Exercise period
Remaining
contractual
life
‘000
1,551
4.5100
28 January 2008
28 January 2008 to
21 September 2016
3.48 years
4,126
4.5100
28 January 2008
28 January 2008 to
21 September 2016
3.48 years
73,500
1.000
26 May 2009
26 May 2009 to
21 September 2016
3.48 years
79,177
79,177
1.2517

37. PLEDGE OF ASSETS

At the end of the reporting period, the details of assets of the Group pledged to secure borrowing facilities were as follows:

a) Bank loans

Leasehold buildings in the PRC Investment properties Prepaid lease payments	The Group 2013 2012 HK$’000 HK$’000 20,664 23,603 9,849 9,268 14,217 14,939 44,730 47,810	The Group 2013 2012 HK$’000 HK$’000 20,664 23,603 9,849 9,268 14,217 14,939 44,730 47,810
		47,810

b) Other loans

The entire issued shares of Nan Hoo, Zethanel and Figures Up were pledged to an independent third party to secure the loan amount of HK$96,200,000 (2012: HK$46,200,000).

– IB-57 –

APPENDIX IB

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

38. CAPITAL COMMITMENTS

The Group 2013 2012 HK$’000 HK$’000

Capital expenditure contracted for but not provided in the consolidated financial statements in respect of: – purchase of technical know-how – purchase of property, plant and equipment	– 6,293 6,293	4,132 12,324
		16,456

39. OPERATING LEASE

The Group as lessor

Property rental income earned during the year ended 31 March 2013 was approximately HK$1,903,000 (2012: HK$1,625,000). The investment properties generated rental yield of 8% (2012: 7%) on an ongoing basis. The investment properties held have committed tenants for the next one to two years (2012: one to two years).

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

Within one year In the second to fifth years inclusive	2013 HK$’000 1,522 916 2,438	2012 HK$’000 1,436 2,125
		3,561

The Group as lessee

The Group leases certain of its office premises under operating lease arrangements. Leases are negotiated for a term ranging from one to two years. The Group does not have an option to purchase the leased asset at the expiry of the lease period.

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

Within one year In the second to fifth years inclusive	2013 HK$’000 671 1,923 2,594	2012 HK$’000 1,606 1,932
		3,538

– IB-58 –

APPENDIX IB FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2013

40. RELATED PARTY TRANSACTIONS

(a) The balances with related parties at the end of the reporting period are disclosed elsewhere in the consolidated financial statements.

(b) Key management compensation

The key management personnel of the Group comprises all the directors of the Company and the five highest paid individuals. Details of compensation of directors and the five highest paid individuals are included in Note 17.

41. CONTINGENT LIABILITIES

At 31 March 2013, contingent liabilities were as follows:

Guarantee given to an independent third party for the loan facility provided to: Subsidiaries and utilised by: Subsidiaries	2013 HK$’000 300,000 96,200	2012 HK$’000 300,000

		46,200

The Group has not recognised any deferred income for the guarantee given in respect of other borrowings for subsidiaries as their fair value cannot be reliably measured and their transaction price was Nil (2012: Nil).

42. COMPARATIVE INFORMATION

The comparative figures of the consolidated statement of financial position at 31 March 2012 were restated due to the reclassification of deposit paid for the acquisition of intangible assets of approximately HK$51,998,000 and deposit paid for acquisition of property, plant and equipment of approximately HK$18,628,000 from other receivables which by nature should be non-current.

43. EVENTS AFTER THE REPORTING PERIOD

On 8 May 2013, the Company completed the placement of 260,000,000 ordinary shares at a placing price of HK$0.15 per share. The net proceeds from the placement of approximately HK$38,000,000 will be used as general working capital of the Group.

– IB-59 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Set out below are the audited financial statements of the Group for the year ended 31 March 2012 together with the accompanying notes as extracted from the annual report of the Company for the year ended 31 March 2012.

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2012

Note Turnover 5 Cost of sales Gross profit Valuation gains on investment properties 16 Other revenue and net income 6 Selling and distribution expenses General and administrative expenses Impairment loss on trade receivables Impairment loss on goodwill Impairment loss on intangible assets Impairment loss on property, plant and equipment Loss on disposal of property, plant and equipment Property, plant and equipment written off Bad debts written off Loss from operation Finance costs 7(a) Share of losses of associates Loss before taxation 7 Income tax 8 Loss for the year Other comprehensive income for the year Exchange differences arising on translation of financial statements of subsidiaries in the PRC Total comprehensive loss for the year	2012 HK$’000 57,026 (18,688) 38,338 3,041 5,056 (27,141) (91,718) (1,097) – – – (19,235) (3,255) (575) (96,586) (5,184) (638) (102,408) (456) (102,864) 22,362 (80,502)	2011 HK$’000 76,764 (29,112) 47,652 3,408 11,894 (32,496) (94,030) (700) (90,000) (9,756) (8,819) – (572) (4,163) (177,582) (1,938) (3,230) (182,750) (2,406) (185,156) 8,302 (176,854)

– IC-1 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Note Loss attributable to: Equity shareholders of the Company 13 Total comprehensive loss attributable to: Equity shareholders of the Company Loss per share Basic (cents per share) Diluted (cents per share)	2012 HK$’000 (102,864) (80,502) (7.88) (7.88)	2011 HK$’000 (185,156) (176,854) (14.19) (14.19)

– IC-2 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Consolidated Statement of Financial Position

As at 31 March 2012

Note Non-current assets Property, plant and equipment 15 Investment properties 16 Leasehold land and land use rights 17 Goodwill 18 Intangible assets 19 Interests in associates 21 Current assets Leasehold land and land use rights 17 Inventories 22 Trade receivables 23 Other receivables, deposits and prepayments 24 Amounts due from associates 25 Cash and cash equivalents 26 Current liabilities Trade payables 27 Accrued charges and other payables Amounts due to associates 25 Amounts due to directors 25 Bank loans 28 Other borrowings 28 Current tax payable 30(a) Net current assets Total assets less current liabilities Non-current liabilities Bank loans 28 Other borrowings 28 Deferred tax liabilities 30(b) NET ASSETS CAPITAL AND RESERVES Share capital 31 Reserves 32 TOTAL EQUITY	2012 HK$’000 163,653 23,558 17,553 259,416 292,973 10,375 767,528 - - - - - - - - - - - - 1,089 7,807 17,241 80,467 290 22,273 129,167 5,897 15,022 8,001 9,464 34,534 1,603 2,462 76,983 52,184 - - - - - - - - - - - - 819,712 4,933 46,200 1,277 52,410 767,302 13,048 754,254 767,302	2011 HK$’000 200,910 19,728 17,962 259,416 308,570 10,619
		817,205 - - - - - - - - - - - - 1,050 5,900 16,710 64,424 – 16,545
		104,629
		5,345 15,527 15,819 8,772 23,766 – 2,472
		71,701
		32,928 - - - - - - - - - - - -
		850,133
		– 1,545 784
		2,329
		847,804

		13,048 834,756
		847,804

– IC-3 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Statement of Financial Position

As at 31 March 2012

Note Non-current assets Investments in subsidiaries 20 Current assets Amounts due from subsidiaries 20 Other receivables, deposits and prepayments 24 Cash and cash equivalents 26 Current liabilities Accrued charges and other payables Amounts due to directors 25 Net current assets Total assets less current liabilities NET ASSETS CAPITAL AND RESERVES Share capital 31 Reserves 32 TOTAL EQUITY	2012 HK$’000 – - - - - - - - - - - - - 740,539 507 1,036 742,082 903 5,811 6,714 735,368 - - - - - - - - - - - - 735,368 735,368 13,048 722,320 735,368	2011 HK$’000 – - - - - - - - - - - - - 787,994 507 1,634
		790,135
		1,103 4,427
		5,530
		784,605 - - - - - - - - - - - -
		784,605
		784,605

		13,048 771,557
		784,605

– IC-4 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Consolidated Statement of Changes in Equity

For the year ended 31 March 2012

		Attributable to equity shareholders of the Company	Attributable to equity shareholders of the Company	Attributable to equity shareholders of the Company
Share capital HK$’000 13,048 – 13,048 – – 13,048	Share premium HK$’000 250,889 – 250,889 – – 250,889	Capital reserve HK$’000 (267) – (267) – – (267)	Statutory reserve Share-based payments reserve Distributable reserve HK$’000 HK$’000 HK$’000 6,289 48,147 1,291,798 – – – 6,289 48,147 1,291,798 – (6,610) – – – – 6,289 41,537 1,291,798	Exchange reserve Accumulated losses HK$’000 HK$’000 137,470 (722,716) 8,302 (185,156) 145,772 (907,872) – 6,610 22,362 (102,864) 168,134 (1,004,126)	Total equity HK$’000 1,024,658 (176,854)
					847,804 – (80,502)
					767,302

– IC-5 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Consolidated Statement of Cash Flows

For the year ended 31 March 2012

Operating activities Loss before taxation Adjustments for: Amortisation of intangible assets Amortisation of leasehold land and land use rights Depreciation Interest expenses Interest income Amounts waived by creditors Share of losses of associates Loss/(Gain) on disposal of property, plant and equipment Impairment loss on trade receivables Impairment loss on goodwill Impairment loss on intangible assets Impairment loss on property, plant and equipment Valuation gains on investment properties Property, plant and equipment written off Bad debts written off Reversal of impairment of inventories Reversal of impairment of trade and other receivables Effect of foreign exchange rate changes Operating loss before changes in working capital Movement in: Increase in inventories (Increase)/decrease in trade and other receivables, deposits and prepayments Increase in amounts due from associates Increase/(decrease) in trade payables, accrued charges and other payables Decrease in amounts due to associates Increase in amounts due to directors Cash used in operations Interest paid PRC tax refunded Net cash used in operating activities	2012 HK$’000 (102,408) 28,958 1,074 34,531 4,560 (205) (1,210) 638 19,235 1,097 – – – (3,041) 3,255 575 – (1,638) 2,149 (12,430) (1,907) (16,608) (290) 1,143 (8,212) 692 (37,612) – 104 (37,508) - - - - - - - - - - - -	2011 HK$’000 (182,750) 30,219 1,628 35,318 1,683 (132) (3,002) 3,230 (276) 700 90,000 9,756 8,819 (3,408) 572 4,163 (168) (3,540) (18,287) (25,475) (1,458) 3,474 – (5,438) (2,623) 2,844 (28,676) (1,683) 376 (29,983) - - - - - - - - - - - -

– IC-6 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Investing activities Payment for the purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Payment for the purchase of intangible assets Interest received Net cash used in investing activities Financing activities New borrowing raised from other borrowings New borrowing raised from bank loans Repayment of other borrowings Interest paid on bank loans and other borrowings Net cash generated from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of changes in foreign exchange rate Cash and cash equivalents at end of year	2012 HK$’000 (13,644) 677 (2,085) 205 (14,847) - - - - - - - - - - - - 46,200 39,467 (23,708) (4,560) 57,399 - - - - - - - - - - - - 5,044 16,545 684 22,273	2011 HK$’000 (3,932) 813 (7,514) 132 (10,501) - - - - - - - - - - - - 1,545 23,766 (32,075) – (6,764) - - - - - - - - - - - - (47,248) 62,943 850 16,545

– IC-7 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Notes to the Financial Statements

For the year ended 31 March 2012

1 GENERAL INFORMATION

The Company is an exempted company incorporated with limited liability in the Cayman Islands and its shares listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and have been suspended for trading since 9 March 2010. Automatic Result Limited, a company incorporated in the British Virgin Islands with limited liability, is the single largest shareholder of the Company. The Company’s registered office is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands and its principal place of business in Hong Kong is at 13/F., Public Bank Building, 120 Des Voeux Road Central, Central, Hong Kong.

The principal activity of the Company is investment holding and its subsidiaries are principally engaged in bioscience related business (with focus on the research, development and commercialisation of biopharmaceuticals through recombinant DNA and other technologies), and the manufacture, sale and trading of pharmaceutical products.

The consolidated financial statements are presented in Hong Kong dollars, which is different from the functional currency of the Group, being Renminbi (“RMB”). As the Company is a public company with the shares listed on the Hong Kong Stock Exchange with most of its investors located in Hong Kong, the directors consider that Hong Kong dollars is preferable in presenting the operating results and financial position of the Group.

2 SIGNIFICANT ACCOUNTING POLICIES

a) Statement of compliance

These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange. A summary of the significant accounting policies adopted by the Group is set out below.

The HKICPA has issued certain new and revised HKFRSs that are first effective or available for early adoption for current accounting period of the Group and the Company. Note 3 provides information on the changes in accounting policies resulting from initial application of these developments to the extent they are relevant to the Group for the current and prior accounting periods reflected in these financial statements.

b) Basis of preparation of the financial statements

The consolidated financial statements for the year ended 31 March 2012 comprise the Company and its subsidiaries (collectively referred to as the “Group”) and the Group’s interests in associates.

The Group incurred a loss for the year attributable to equity shareholders of the Company of approximately HK$102,864,000 and had significant accumulated losses approximately HK$1,004,126,000 as at 31 March 2012. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern.

– IC-8 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

The measurement basis used in the preparation of the financial statements is the historical cost basis except that the investment properties which are stated at their fair value as explained in the accounting policies set out below:

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

The estimates and underlying assumptions are reviewed o n 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.

Judgements made by management in the application of HKFRSs that have significant effect on the financial statements and major sources of estimation uncertainty are discussed in note 4.

c) Subsidiaries and non-controlling interests

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

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

Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. For each business combination, the Group can elect to measure any non-controlling interests either at fair value or at their proportionate share of the subsidiary’s net identifiable assets.

– IC-9 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated statement of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the equity shareholders of the Company. Loans from holders of non-controlling interests and other contractual obligations towards these holders are presented as financial liabilities in the consolidated statement of financial position in accordance with notes 2(n) or (o) depending on the nature of the liability.

Changes in the Group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised.

When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset (see note 2(f)) or, when appropriate, the cost on initial recognition of an investment in an associate (see note 2(d)).

In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less impairment losses (see note 2(k)).

d) Associates

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

An investment in an associate is accounted for in the consolidated financial statements under the equity method, unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group’s share of the acquisition-date fair values of the investee’s identifiable net assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post acquisition change in the Group’s share of the investee’s net assets and any impairment loss relating to the investment (see notes 2(e) and (k)). Any acquisition-date excess over cost, the Group’s share of the post-acquisition, post-tax results of the investees and any impairment losses for the year are recognised in the consolidated statement of comprehensive income, whereas the Group’s share of the post-acquisition post-tax items of the investees’ other comprehensive income is recognised in the consolidated statement of comprehensive income.

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

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

– IC-10 –

APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

When the Group ceases to have significant influence over an associate, it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former investee at the date when significant influence or joint control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset (see note 2(f)) or, when appropriate, the cost on initial recognition of an investment in an associate.

In the Company’s statement of financial position, investments in associates are stated at cost less impairment losses (see note 2(k)).

e) Goodwill

Goodwill represents the excess of

i) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest in the acquiree; over
ii) the Group’s interest in the net fair value of the acquiree’s identifiable assets and liabilities measured as at the acquisition date.

When ii) is greater than i), then this excess is recognised immediately in profit or loss as a gain on a bargain purchase.

Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating unit, or groups of cash generating units, that is expected to benefit from the synergies of the combination and is tested annually for impairment (see note 2(k)).

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

f) Other investments in equity securities and other financial instruments

The Group’s and the Company’s policies for investments in equity securities and other financial instruments, other than investments in subsidiaries, are classified as available-for-sale securities, which are initially stated at fair value, which is their transaction price unless fair value can be more reliably estimated using valuation techniques whose variables include only data from observable markets. These investments are subsequently accounted for as follows:

Investments in equity securities that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are recognised in the statement of financial position at cost less impairment losses (see note 2(k)).

Other investments in equity securities and other financial instruments are remeasured at fair value at the end of the reporting period with any resultant gain or loss being recognised in other comprehensive income and accumulated separately in equity in the fair value reserve. Dividend income from these investments is recognised in profit or loss in accordance with the policy set out in note 2(t)(iii). When these investments are derecognised or impaired (see note 2(k)), the cumulative gain or loss is reclassified from equity to profit or loss.

Investments are recognised/derecognised on the date the Group commits to purchase/sell the investments or they expire.

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APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

g) Investment properties

Investment properties are land and/or buildings which are owned or held under a leasehold interest (see note 2(i)) to earn rental income and/or for capital appreciation. These include land held for a currently undetermined future use and property that is being constructed or developed for future use as investment property.

Investment properties are stated in the statement of financial position at fair value, unless they are still in the course of construction or development at the end of the reporting period and their fair value cannot be reliably determined at that time. Any gain or loss arising from a change in fair value or from the retirement or disposal of an investment property is recognised in profit or loss. Rental income from investment properties is accounted for as described in note 2(t)(ii).

When the Group holds a property interest under an operating lease to earn rental income and/or for capital appreciation, the interest is classified and accounted for as an investment property on a property-by-property basis. Any such property interest which has been classified as an investment property is accounted for as if it were held under a finance lease (see note 2(i)), and the same accounting policies are applied to that interest as are applied to other investment properties leased under finance leases. Lease payments are accounted for as described in note 2(i).

h) Property, plant and equipment

The following items of property, plant and equipment are stated in the statement of financial position at cost less accumulated depreciation and impairment losses (see note 2(k)):

buildings held for own use which are situated on leasehold land, where the fair value of the building could be measured separately from the fair value of the leasehold land at the inception of the lease (see note 2(i)); and
other items of plant and equipment.

The cost of self-constructed items of property, plant and equipment includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads and borrowing costs (see note 2(v)).

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal.

Depreciation is calculated to write off the cost or valuation of items of property, plant and equipment, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows:

–	Building held for own use	5%
–	Leasehold improvements	5–18%
–	Plant and machinery	6.6–20%
–	Furniture, fixtures and equipment	10–20%
–	Motor vehicles	15–20%
–	Construction in progress	Nil

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APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Where parts of an item of property, plant equipment have different useful lives, the cost or valuation of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

i)

Leased assets

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

i) Classification of assets leased to the Group

Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases, with the following exceptions:

property held under operating leases that would otherwise meet the definition of an investment property is classified as investment property on a property-by-property basis and, if classified as investment property, is accounted for as if held under a finance lease (see note 2(g)); and
land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. For these purposes, the inception of the lease is the time that the lease was first entered into by the Group, or taken over from the previous lessee.

ii) Assets acquired under finance leases

Where the Group acquires the use of assets under finance leases, the amounts representing the fair value of the leased asset, or, if lower, the present value of the minimum lease payments, of such assets are included in property, plant and equipment and the corresponding liabilities, net of finance charges, are recorded as obligations under finance leases. Depreciation is provided at rates which write off the cost or valuation of the assets over the term of the relevant lease or, where it is likely the Group will obtain ownership of the asset, the life of the asset, as set out in note 2(h). Impairment losses are accounted for in accordance with the accounting policy as set out in note 2(k). Finance charges implicit in the lease payments are charged to profit or loss over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

iii) Operating lease charges

Where the Group has the use of assets held under operating leases, payments made under the leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

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APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

The cost of acquiring land held under an operating lease is amortised on a straight-line basis over the period of the lease term except where the property is classified as an investment property (see note 2(g)).

j)

Intangible assets (other than goodwill)

Expenditure on research activities is recognised as an expense in the period in which it is incurred. Expenditure on development activities is capitalised under the category of “product development in progress” if the product or process is technically and commercially feasible and the Group has sufficient resources and the intention to complete development and the cost can be reliably measured. Upon commencement of the commercial production of a product, the expenditure on development activities is transferred to “deferred development costs” and amortised on a straight line basis over the period of its expected benefit. Research and development costs comprise costs that are directly attributable to research and development activities or that can be allocated on a reasonable basis to such activities. Deferred development costs are stated at cost less accumulated amortisation and impairment losses (see note 2(k)). Other development expenditure is recognised as an expense in the period in which it is incurred.

Other intangible assets that are acquired by the Group are stated in the statement of financial position at cost less accumulated amortisation (where the estimated useful life is finite) and impairment losses (see note 2(k)). Expenditure on internally generated goodwill and brands is recognised as an expense in the period in which it is incurred.

Amortisation of intangible assets with finite useful lives is charged to profit or loss on a straight-line basis over the assets’ estimated useful lives. The following intangible assets with finite useful lives are amortised from the date they are available for use and their estimated useful lives are as follows:

–	Trademark and certificates	5–10 years
–	Technical know-how	5–10 years

Both the period and method of amortisation are reviewed annually.

Intangible assets are not amortised while their useful lives are assessed to be indefinite. Any conclusion that the useful life of an intangible asset is indefinite is reviewed annually to determine whether events and circumstances continue to support the indefinite useful life assessment for that asset. If they do not, the change in the useful life assessment from indefinite to finite is accounted for prospectively from the date of change and in accordance with the policy for amortisation of intangible assets with finite lives as set out above.

k) Impairment of assets

i) Impairment of investments in equity securities and trade and other receivables

Investments in equity securities and trade and other receivables that are stated at cost or amortised cost or are classified as available-for-sale securities are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events:

significant financial difficulty of the debtor;
a breach of contract, such as a default or delinquency in interest or principal payments;
it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;

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APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and
a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

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

For investments in subsidiaries and associates (including those recognised using the equity method (see note 2(d)), the impairment loss is measured by comparing the recoverable amount of the investment with its carrying amount in accordance with note 2(k)(ii). The impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount in accordance with note 2(k)(ii).
For unquoted equity securities carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for equity securities carried at cost are not reversed.
For trade and other current receivables and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

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

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

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FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

ii) Impairment of other assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or, except in the case of goodwill, an impairment loss previously recognised no longer exists or may have decreased:

property, plant and equipment (other than properties carried at revalued amounts);
investment properties;
pre-paid interests in leasehold land classified as being held under an operating lease;
intangible assets; and
goodwill.

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

Calculation of recoverable amount

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

Recognition of impairment losses

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

Reversal of impairment losses

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

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

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APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

iii) Interim financial reporting and impairment

Under the Rules Governing the Listing of Securities on the Stock Exchange, the Group is required to prepare an interim financial report in compliance with HKAS 34, Interim financial reporting, in respect of the first six months of the financial year. At the end of the interim period, the Group applies the same impairment testing, recognition, and reversal criteria as it would at the end of the financial year (see notes 2 (k)(i) and (ii)).

Impairment losses recognised in an interim period in respect of goodwill and available-for-sale equity securities and unquoted equity securities carried at cost are not reversed in a subsequent period. This in the case even if no loss, or a smaller loss, would have been recognised had the impairment been assessed only at the end of the financial year to which the interim period relates. Consequently, if the fair value of an available-for-sale equity security increases in the remainder of the annual period, or in any other period subsequently, the increase is recognised in other comprehensive income and not in profit or loss.

l) Inventories

Inventories are carried at the lower of cost and net realisable value.

Cost is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

m) Trade and other receivables

Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less allowance for impairment of doubtful debts (see note 2(k)), except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts.

n)

Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

o)

Trade and other payables

Trade and other payables are initially recognised at fair value. Except for financial guarantee liabilities measured in accordance with note 2(s)(i), trade and other payables are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

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APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

p) Cash and cash equivalents

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

q) Employee benefits

i) Short term employee benefits and contributions to defined contribution retirement plans

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

ii) Contributions to appropriate local defined contribution retirement schemes pursuant to the relevant labour rules and regulations in the PRC are recognised as an expenses in profit or loss as incurred, except to the extent that they are included in the cost of inventories not yet recognised as an expenses.

iii) Share-based payments

The fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in a share-based payments reserve within equity. The fair value is measured at grant date using the Black-Scholes-Merton Option Pricing Model, taking into account the terms and conditions upon which the options were granted. Where the employees have to meet vesting conditions before becoming unconditionally entitled to the options, the total estimated fair value of the options is spread over the vesting period, taking into account the probability that the options will vest.

During the vesting period, the number of share options that is expected to vest is reviewed. Any resulting adjustment to the cumulative fair value recognised in prior years is charged/credited to the profit or loss for the year of the review, unless the original employee expenses qualify for recognition as an asset, with a corresponding adjustment to the share-based payments reserve. On vesting date, the amount recognised as an expense is adjusted to reflect the actual number of options that vest (with a corresponding adjustment to the share-based payments reserve) except where forfeiture is only due to not achieving vesting conditions that relate to the market price of the Company’s shares. The equity amount is recognised in the share-based payments reserve until either the option is exercised (when it is transferred to the share premium account) or the option expires (when it is released directly to retained profits).

iv) Termination benefits

Termination benefits are recognised when, and only when, the Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

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APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

r) Income tax

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to items recognised in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognised in other comprehensive income or directly in equity, respectively.

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

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

Where investment properties are carried at their fair value in accordance with the accounting policy set out in note 2(g), the amount of deferred tax recognised is measured using the tax rates that would apply on sale of those assets at their carrying value at the end of the reporting period unless the property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the property over time, rather than through sale. In all other cases, the amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period. Deferred tax assets and liabilities are not discounted.

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

Additional income taxes that arise from the distribution of dividends are recognised when the liability to pay the related dividends is recognised.

– IC-19 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Company or the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

in the case of current tax assets and liabilities, the Company or the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or
in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:
the same taxable entity; or
different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

s) Financial guarantees issued, provisions and contingent liabilities

i) Financial guarantees issued

Where the Company issues a financial guarantee, the fair value of the guarantee (being the transaction price, unless the fair value can otherwise be reliably estimated) is initially recognised as deferred income within trade and other payables. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Company’s policies applicable to that category of asset. When no such consideration is received or receivable, an immediate expenses is recognised in profit or loss on initial recognition of any deferred income.

The amount of the guarantee initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognised in accordance with note 2(s)(ii) if and when (i) it becomes probable that the holder of guarantee will call upon the company under the guarantee, and (ii) the amount of that claim on the Company is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognised, less accumulated amortisation.

ii) Other provisions and contingent liabilities

Provisions are recognised for other liabilities of uncertain timing or amount when the Group or the Company has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

– IC-20 –

APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

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

t) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in statement of comprehensive income as follows:

i) Sale of goods

Revenue is recognised when goods are delivered at the customers’ premises which is taken to be the point in time when the customer has accepted the goods and the related risks and rewards of ownership. Revenue excludes value added tax or other sales taxes and is after deduction of any trade discounts.

ii) Rental income from operating leases

Rental income receivable under operating leases is recognised in statement of comprehensive income in equal instalments over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognised in profit and loss as an integral part of the aggregate net lease payments receivable. Contingent rentals are recognised as income in the accounting period in which they are earned.

iii) Dividends

Dividend income from unlisted investments is recognised when the shareholder’s right to receive payment is established.
Dividend income from listed investments is recognised when the share price of the investment goes ex-dividend.

iv) Interest income

Interest income is recognised as it accrues using the effective interest method.

v) Service income

Revenue from the provision of accounting services and management services are recognised when the services are provided.

vi) Government grants

Government grants are recognised in the statement of financial position initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognised as revenue in profit or loss on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively recognised in profit or loss over the useful life of the asset by way of reduced depreciation expense.

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APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

u) Translation of foreign currencies

Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the end of the reporting period. Exchange gains and losses are recognised in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was determined.

The results of foreign operations are translated into Hong Kong dollars at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. The statement of financial position items, including goodwill arising on consolidation of foreign operations acquired on or after 1 January 2005, are translated into Hong Kong dollars at the closing foreign exchange rates at the end of the reporting period. The resulting exchange differences are recognised in other comprehensive income and accumulated separately in equity in the exchange reserve. Goodwill arising on consolidation of a foreign operation acquired before 1 January 2005 is translated at the foreign exchange rate that applied at the date of acquisition of the foreign operation.

On disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation is reclassified from statement of change in equity to statement of comprehensive income when the profit or loss on disposal is recognised.

v) Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of that asset. Other borrowing costs are expensed in the period in which they are incurred.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

w) Related parties

a) A person, or a close member of that person’s family, is related to the Group if that person:
i) has control or joint control over the Group;
ii) has significant influence over the Group; or
iii) is a member of the key management personnel of the Group or the Group’s parent.

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FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

b) An entity is related to the Group if any of the following conditions applies:
i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
iii) Both entities are joint ventures of the same third party.
iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group.
vi) The entity is controlled or jointly controlled by a person identified in (a).
vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include:

i) that person’s children and spouse or domestic partner;
ii) children of that person’s spouse or domestic partner; and
iii) dependents of that person or that person’s spouse or domestic partner.

x)

Segment reporting

Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly to the Group’s most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Group’s various lines of business and geographical locations.

Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

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APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

3 CHANGES IN ACCOUNTING POLICIES

The HKICPA has issued a number of amendments to HKFRSs and one new Interpretation that are first effective for the current accounting period of the Group and the Company. Of these, the following developments are relevant to the Group’s financial statements:

HKAS 24 (revised), Related party disclosures
Improvements to HKFRSs 2010

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period.

The impact of these developments are discussed below:

HKAS 24 (revised) revises the definition of a related party. As a result, the Group has re-assessed the identification of related parties and concluded that the revised definition does not have any material impact on the Group’s related party disclosures in the current and previous periods. HKAS 24 (revised) also introduces modified disclosure requirements for government-related entities. This does not impact the Group because the Group is not a government-related entity.
Improvements to HKFRSs 2010 omnibus standard introduces a number of amendments to the disclosure requirements in HKFRS 7, Financial instruments: Disclosures. These amendments do not have any material impact on the classification, recognition and measurement of the amounts recognised in the financial statements in the current and previous periods.

4 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

a) Impairment of property, plant and equipment

– IC-24 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

b) Useful lives and residual values of property, plant and equipment

c) Investment properties

The fair values of investment properties are determined by the Group’s management on an open market basis.

In making the judgement, consideration has been given to assumptions that are mainly based on market conditions existing at the end of the reporting period and appropriate capitalisation rates. These estimates are regularly compared to actual market date and actual transactions entered into by the Group.

d) Impairment of intangible assets and goodwill

The Group performs annual tests on whether there has been impairment of intangible assets and goodwill in accordance with the accounting policy stated in note 2(e) and 2(j). The recoverable amounts of cash generating units are determined based on value-in-use calculations. These calculations require the use of estimates and assumptions made by management on the future operation of the business, pre-tax discount rates, and other assumptions underlying the value-in-use calculations.

e) Amortisation of intangible assets

Intangible assets are amortised on a straight-line basis over their estimated useful lives. The determination of the useful lives involves management’s estimation. The Group re-assesses the useful life of the intangible assets and if the expectation differs from the original estimate, such a difference may impact the amortisation in the year and the estimate will be changed in the future period.

f) Inventories

The Group performs regular review of the carrying amounts of inventories with the aged inventories analysis expected future consumption and management judgement. Based on this review, write down of inventories will be made when the carrying amount of inventories decline below the estimated net realisable value. However, actual consumption may be different from estimation and profit or loss could be affected by differences in this estimation.

g) Impairment of receivables

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

– IC-25 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

h) Taxation

The Group is subject to income taxes in Mainland China. Judgement is required in determining the provision for income taxes. There are transactions and calculations during the ordinary course of business for which the ultimate tax determination is uncertain. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Deferred income tax assets relating to certain temporary differences and tax losses are recognised when management considers it is likely that future taxable profits will be available against which the temporary differences or tax losses can be utilised. When the expectations are different from the original estimates, such differences will impact the recognition of deferred income tax assets and income tax charges in the period in which such estimates have been changed.

5 TURNOVER

The Group is principally engaged in bioscience related business (with focus on the research, development and commercialisation of biopharmaceuticals through recombinant DNA and other technologies).

Turnover represents the gross invoiced value of goods sold, net of value added tax, sales returns and discounts.

				2012	2011
				HK$’000	HK$’000
Sales	of	pharmaceutical	products	57,026	76,764

Details of the main business segments of the Group are set out in note 14 to the financial statements.

6 OTHER REVENUE AND NET INCOME

Interest income Rental income from investment properties Government grants for research and development project Exchange gain Reversal of impairment on trade and other receivables Amounts waived by creditors Gain on disposal of property, plant and equipment Reversal of impairment on inventories Sundry income	2012 HK$’000 205 1,625 8 – 1,638 1,210 – – 370 5,056	2011 HK$’000 132 974 2,150 84 3,540 3,002 276 168 1,568
		11,894

– IC-26 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

7 LOSS BEFORE TAXATION

Loss before taxation is arrived at after charging:

a) Finance costs Interest on bank and other borrowings wholly repayable within five years Bank handling charges Total borrowing costs b) Staff costs (including directors’ emoluments) Salaries, wages and other benefits Contributions to defined contribution retirement plans Less: Staff costs included in research and development costs c) Other items Auditor’s remuneration Cost of inventories Amortisation of intangible assets Amortisation of leasehold land and land use rights Depreciation Less: Depreciation included in research and development costs Minimum lease payments – property rentals Operating lease charges: Research and development costs Less: Capitalisation on intangible assets	2012 HK$’000 4,560 624 5,184 13,802 757 14,559 (343) 14,216 900 18,133 28,958 1,074 34,531 (405) 34,126 66 4,649 (2,085) 2,564	2011 HK$’000 1,683 255
		1,938

		13,250 848
		14,098 (323)
		13,775

		1,100 29,112 30,219 1,628
		35,318 (438)
		34,880 71 12,968 (7,514)
		5,454

– IC-27 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

8 INCOME TAX IN THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Income tax in the consolidated statement of comprehensive income represents:

Current tax – Overseas PRC enterprise income tax for the year Overprovision in prior years Deferred tax Change in fair value of investment property (note 30(b))	2012 HK$’000 – – – 456 456	2011 HK$’000 1,941 (300)
		1,641 765
		2,406

a) No provision for Hong Kong profits tax has been made in the consolidated financial statements as the Group did not have any assessable profits arising in Hong Kong during the year (2011: Nil).

Pursuant to the Corporate Income Tax Law of PRC, the statutory tax rate applicable to the Group’s PRC subsidiaries is 25%, except for Shenzhen Watsin Genetech Pharmaceutical Co., Limited, which was recognised as advanced and new technology enterprises to enjoy a preferential enterprise income tax rate of 15%.

Pursuant to the Corporate Income Tax Law of the PRC and its relevant regulations, PRC-resident enterprises are levied withholding income tax at 10% on dividends to their non-PRC-resident corporate investors for earnings accumulated beginning on 1 January 2008. Undistributed earnings generated prior to 1 January 2008 are exempted from such withholding tax. Under the Sino-Hong Kong Double Tax Arrangement and its relevant regulations, a qualified Hong Kong tax resident which is the “beneficial owner” and holds 25% or more of the equity interest of a PRC-resident enterprise is entitled to a reduced withholding tax rate of 5%. The Group is subject to withholding tax rate of 5% on retained earnings beginning on 1 January 2008.

b) Reconciliation between tax expense and accounting loss at applicable tax rates:

2012 HK$’000 Loss before taxation (102,408) Notional tax on loss before taxation, calculated at the rates applicable to loss in the countries concerned (24,537) Tax effect of non-taxable income (744) Tax effect of non-deductible expenses 16,347 Effect of tax concessionary rates granted to the PRC subsidiaries (304) Overprovision in prior years – Tax effect of unused tax losses not recognised 9,694 Actual tax expense 456	2011 HK$’000 (182,750)

	(36,928) (4,196) 33,544 (1,295) (300) 11,581
	2,406

– IC-28 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

9 DIRECTORS’ REMUNERATION

Directors’ remuneration disclosed pursuant to section 161 of the Hong Kong Companies Ordinance is as follows:

For the year ended 31 March 2012

Executive Directors Tong Kit Shing Liu Guoyao Independent Non-executive Directors Zhou Yaoming (resigned on 1 April 2012) Lin Jian (resigned on 1 April 2012) Tsao Hoi Ho Lou Iok Kuong Leung Ka Chun	Directors’ fees HK$’000 120 – 50 50 120 120 110 570	Salaries, allowances and benefits in kind Share-based payments Retirement scheme contributions HK$’000 HK$’000 HK$’000 13 – 6 – – – – – – – – – – – – – – – – – – 13 – 6	Total HK$’000 139 – 50 50 120 120 110
			589

For the year ended 31 March 2011

Executive Directors Tong Kit Shing Liu Guoyao Independent Non-executive Directors Zhou Yaoming Lin Jian Tsao Hoi Ho Lou Iok Kuong Leung Ka Chun	Directors’ fees HK$’000 120 – 50 50 108 92 92 512	Salaries, allowances and benefits in kind Share-based payments Retirement scheme contributions HK$’000 HK$’000 HK$’000 13 – 6 – – – – – – – – – – – – – – – – – – 13 – 6	Total HK$’000 139 – 50 50 108 92 92
			531

– IC-29 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

During the two years, no emoluments were paid by the Group to the five highest paid individuals (including directors and employees) as an inducement to join or upon joining the Group or as compensation for loss of office. None (2011: Nil) of the directors has waived any emoluments during the year.

10 INDIVIDUALS WITH HIGHEST EMOLUMENTS

Of the five individuals with the highest emoluments, none (2011: Nil) is director whose emoluments are disclosed in note 9. The aggregate of the emoluments in respect of the other five (2011: five) individuals are as follows:

Salaries and other emoluments Retirements schemes contributions	2012 HK$’000 2,107 68 2,175	2011 HK$’000 2,207 40
		2,247

The emoluments of the five (2011: five) individuals with the highest emoluments are within the following bands:

Their emoluments were all within HK$Nil to HK$1,000,000.

11 LOSS ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE COMPANY

The consolidated loss attributable to equity shareholders of the Company includes a loss of approximately HK$49,237,000 (2011: HK$338,646,000) which has been dealt with in the financial statements of the Company.

12 DIVIDENDS

No dividend was paid or proposed during the year ended 31 March 2012 (2011: Nil), nor has any dividend been proposed since the end of the reporting period (2011: Nil).

13 LOSS PER SHARE

The calculation of basic and diluted loss per share attributable to equity shareholders of the Company is based on the following data:

	2012	2011
	HK$’000	HK$’000
Loss for the year attributable to equity shareholders
of the Company for the purpose of basic and
diluted loss per share	(102,864)	(185,156)

– IC-30 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Weighted average number of ordinary shares for the purpose of calculating basic loss per share Effect of dilutive potential ordinary shares – Share options* Weighted average number of ordinary shares for the purpose of calculating diluted loss per share	2012 Number of shares 1,304,846,293 – 1,304,846,293	2011 Number of shares 1,304,846,293
		–
		1,304,846,293

The share options have an anti-dilutive effects on basic loss per share of the Group for the years ended 31 March 2012 and 2011. Accordingly, the effect of share options was not included in the calculation of diluted loss per share for years ended 31 March 2012 and 2011.

14 SEGMENT REPORTING

Segment revenues and results

Segment information is presented in respect of the Group’s business and geographical segments. Business segment information is chosen as the primary reporting format because this is more relevant to the Group’s internal financial reporting.

Business segments

The Group comprises the following main business segments:

Distribution of third party pharmaceutical products – Distribution of third party pharmaceutical products.

In-house chemical pharmaceutical products – Manufacture and sale of in-house chemical pharmaceutical products.

In-house biological pharmaceutical products – Manufacture and sale of in-house biological pharmaceutical products.

– IC-31 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Primary reporting format – business segments

For the year ended 31 March 2012

Distribution of third party pharmaceutical products In-house chemical pharmaceutical products In-house biological pharmaceutical products HK$’000 HK$’000 HK$’000 Revenue from external customers 7,443 21,429 28,154 Inter-segment sales – – 513 Reportable segment revenue 7,443 21,429 28,667 Reportable segment results – gross 795 16,585 20,958 Operating income and expenses (11,748) (23,190) (68,182) Valuation gains on investment properties – – 3,041 Impairment loss on trade receivables (1,097) – – Loss on disposal of property, plant and equipment – (19,235) – Property, plant and equipment written off – (3,222) (33) Bad debts written off – (575) – Segment results (12,050) (29,637) (44,216) Unallocated operating income and expenses – – – Operating loss Finance costs Share of losses of associates Loss before taxation Income tax Loss for the year Segment assets 51,513 91,736 412,985 Unallocated corporate assets Total assets Segment liabilities 32,202 2,424 35,920 Unallocated corporate liabilities Total liabilities Capital expenditure – 13,241 403 Amortisation – 2,579 27,453 Depreciation 10,324 8,197 15,977 Loss on disposal of property, plant and equipment – 19,235 –	Total HK$’000 57,026 513
	57,539

	38,338 (103,120) 3,041 (1,097) (19,235) (3,255) (575)
	(85,903) (10,683)
	(96,586) (5,184) (638)
	(102,408) (456)
	(102,864)
	556,234 340,461
	896,695

	70,546 58,847
	129,393

	13,644 30,032 34,498 19,235

– IC-32 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

For the year ended 31 March 2011

Distribution of third party pharmaceutical products In-house chemical pharmaceutical products In-house biological pharmaceutical products HK$’000 HK$’000 HK$’000 Revenue from external customers 20,459 14,159 42,146 Inter-segment sales – – 4,959 Reportable segment revenue 20,459 14,159 47,105 Reportable segment results – gross 5,307 9,046 33,299 Operating income and expenses (13,208) (20,441) (68,314) Valuation (losses)/gain on investment properties – (1,693) 5,101 Impairment loss on trade receivables (700) – – Impairment loss on intangible assets – (2,258) (7,498) Impairment loss on property, plant and equipment – (8,819) – Property, plant and equipment written off – (514) – Bad debts written off (4,163) – – Segment results (12,764) (24,679) (37,412) Unallocated operating income and expenses – – – Operating loss Finance costs Share of losses of associates Loss before taxation Income tax Loss for the year Segment assets 65,453 109,289 484,592 Unallocated corporate assets Total assets Segment liabilities 31,961 3,204 28,640 Unallocated corporate liabilities Total liabilities Capital expenditure – 1,539 9,826 Amortisation – 3,692 28,155 Depreciation 9,841 10,135 15,314 Gain on disposal of property, plant and equipment – 269 7	Total HK$’000 76,764 4,959
	81,723

	47,652 (101,963) 3,408 (700) (9,756) (8,819) (514) (4,163)
	(74,855) (102,727)
	(177,582) (1,938) (3,230)
	(182,750) (2,406)
	(185,156)
	659,334 262,500
	921,834

	63,805 10,225
	74,030

	11,365 31,847 35,290 276

– IC-33 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Geographical segments

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets and capital expenditure are based on the geographical location of the assets.

The Group’s operations are located in the PRC and Hong Kong. The following table provides an analysis of the Group’s geographical segment information:

For the year ended 31 March 2012

Hong Kong PRC For the year ended 31 March 2011 Hong Kong PRC	Turnover HK$’000 – 57,026 57,026 Turnover HK$’000 – 76,764 76,764	Total assets HK$’000 340,461 556,234 896,695 Total assets HK$’000 579,090 342,744 921,834	Capital expenditure HK$’000 – 13,644
			13,644

			Capital expenditure HK$’000 81 11,365
			11,446

Information about major customers

There is no customer who represents more than 10% of the sales of the Group.

– IC-34 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

15 PROPERTY, PLANT AND EQUIPMENT

The Group

Cost At 1 April 2010 Additions Disposals Reclassified to investment properties Exchange differences At 31 March 2011 Additions Disposals Written off Exchange differences At 31 March 2012 Accumulated depreciation and impairment At 1 April 2010 Charge for the year Written back on disposals Impairment for the year Reclassified to investment properties Exchange differences At 31 March 2011 Charge for the year Written back on disposals Written off Exchange differences At 31 March 2012 Net book value At 31 March 2012 At 31 March 2011	Leasehold building in the PRC HK$’000 52,145 – – (9,729) 1,966 44,382 – – – 2,118 46,500 - - - - 19,497 2,747 – – (2,811) 331 19,764 2,890 – – 243 22,897 - - - - 23,603 24,618	Plant and machinery Furniture, fixtures and equipment Leasehold improvements HK$’000 HK$’000 HK$’000 287,440 32,152 49,874 1,502 127 1,751 (16,509) (90) (5,406) – – – 7,668 1,212 1,880 280,101 33,401 48,099 9,181 989 131 (35,303) – – (7,220) (520) – 6,552 316 813 253,311 34,186 49,043 - - - - - - - - - - - - 110,015 26,813 27,231 27,628 1,639 2,649 (16,072) (48) (5,353) 8,105 – 714 – – – 2,268 457 464 131,944 28,861 25,705 26,468 1,516 2,984 (14,911) – – (3,890) (487) – 1,228 243 738 140,839 30,133 29,427 - - - - - - - - - - - - 112,472 4,053 19,616 148,157 4,540 22,394	Motor vehicles Construction in progress HK$’000 HK$’000 4,234 546 311 241 (404) (528) – – 843 25 4,984 284 107 3,236 – – – – 131 10 5,222 3,530 - - - - - - - - 3,704 – 655 – (355) – – – – – 63 – 4,067 – 673 – – – – – 103 – 4,843 – - - - - - - - - 379 3,530 917 284	Total HK$’000 426,391 3,932 (22,937) (9,729) 13,594
				411,251 13,644 (35,303) (7,740) 9,940
				391,792 - - - - 187,260 35,318 (21,828) 8,819 (2,811) 3,583
				210,341 34,531 (14,911) (4,377) 2,555
				228,139 - - - -
				163,653

				200,910

Certain properties as at 31 March 2012 were pledged as collateral of the Group’s bank borrowings (Note 28 and 34(a)).

– IC-35 –

APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

16 INVESTMENT PROPERTIES

Balance at beginning of year Exchange differences Reclassified from property, plant and equipment Reclassified from leasehold land and land use rights Gains on revaluation Balance at end of year	2012 HK$’000 19,728 789 – – 3,041 23,558	2011 HK$’000 4,925 307 6,918 4,170 3,408
		19,728

The fair values of the Group’s investment properties at 31 March 2012 have been arrived at on the basis of a valuation carried out at that date by Roma Appraisals Limited, independent qualified valuers not connected to the Group. The valuation was arrived at by reference to market evidence of transaction prices for similar properties.

Certain of the Group’s investment properties were pledged as collateral for the Group’s bank borrowings (Note 28 and 34(a)).

The Group leases out investment properties under operating lease. The lease typically run for an initial period of 1 to 2 years, with an option to renew after that date at which time all terms are renegotiated. None of the leases includes contingent rentals.

The Group’s total future minimum lease payments receivable under non-cancellable operating leases are as follows:

Within 1 year After 1 year but within 5 years	2012 HK$’000 1,436 2,125 3,561	2011 HK$’000 1,254 544
		1,798

– IC-36 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

17 LEASEHOLD LAND AND LAND USE RIGHTS

The Group’s interests in leasehold land and land use rights represent prepaid lease payments and their net book value is analysed as follows:

Balance at beginning of year Amortisation Reclassified to investment properties Exchange differences Balance at end of year Analysed for reporting purposes as: Current assets Non-current assets The Group’s leasehold land and land use rights payments comprise: – Medium-term lease in the PRC – Short-term lease in the PRC	2012 HK$’000 19,012 (1,074) – 704 18,642 1,089 17,553 18,642 7,323 11,319 18,642	2011 HK$’000 23,785 (1,628) (4,170) 1,025
		19,012

		1,050 17,962
		19,012

		7,803 11,209
		19,012

Leasehold land and land use rights were pledged as collateral for bank borrowings (Note 28 and 34(a)).

– IC-37 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

18 GOODWILL

Cost At 1 April 2010, 31 March 2011 and 31 March 2012 Accumulated impairment losses At 1 April 2010 Impairment for the year At 31 March 2011 Impairment for the year At 31 March 2012 Carrying amount At 31 March 2012 At 31 March 2011	HK$’000 573,552 - - - - - - - - - (224,136) (90,000)
	(314,136) –
	(314,136) - - - - - - - - -
	259,416

	259,416

Goodwill is allocated to the Group’s cash-generating units (“CGU”) identified according to country of operation and business segment as follows:

					2012	2011
					HK$’000	HK$’000
Pharmaceutical	products	–	the	PRC	259,416	259,416

The recoverable amount of the CGU is determined based on value-in-use calculations.

Key assumptions used for value-in-use calculations:

	2012	2011
	%	%
Gross margin	90	24-40
Growth rate	30-125	0-40
Discount rate	17	20-24

– IC-38 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

19 INTANGIBLE ASSETS

The Group

Trademarks and certificates HK$’000 Cost At 1 April 2010 348,607 Additions – Exchange differences 15,619 At 31 March 2011 364,226 Additions – Written off (114,418) Exchange differences 13,791 At 31 March 2012 263,599 - - - - - - - Accumulated amortisation and impairment At 1 April 2010 245,476 Charge for the year 23,359 Impairment for the year 9,756 Exchange differences 11,583 At 31 March 2011 290,174 Charge for the year 21,761 Written off (114,418) Exchange differences 11,294 At 31 March 2012 208,811 - - - - - - - Carrying amount At 31 March 2012 54,788 At 31 March 2011 74,052	Technical know-how Product development in progress HK$’000 HK$’000 67,305 170,908 – 7,514 3,015 7,657 70,320 186,079 – 2,085 – – 2,663 7,046 72,983 195,210 - - - - - - - - - - - - - - 14,212 – 6,860 – – – 809 – 21,881 – 7,197 – – – 930 – 30,008 – - - - - - - - - - - - - - - 42,975 195,210 48,439 186,079	Total HK$’000 586,820 7,514 26,291
		620,625 2,085 (114,418) 23,500
		531,792 - - - - - - - 259,688 30,219 9,756 12,392
		312,055 28,958 (114,418) 12,224
		238,819 - - - - - - -
		292,973

		308,570

Trademarks and certificates represent costs in obtaining trademarks and registration certificates for medicines.

Technical know-how mainly represents techniques and formulas acquired for the development of products and production technology.

Product development in progress mainly represent costs generated internally for the development of products and product technology.

The above intangible assets have definite useful lives and are amortised on a straight line basis over their remaining estimated useful life of five to ten years.

– IC-39 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

The amortisation charge for the year is included in “general and administrative expense” in the consolidated statement of comprehensive income.

According to the results of review of the valuations carried out by an independent professional firm of valuers, Roma Appraisals Limited, the Group recognised an impairment loss of HK$Nil for the year ended 31 March 2012 (2011: HK$9,756,000).

20 INVESTMENTS IN SUBSIDIARIES

Unlisted shares, at cost Amounts due from subsidiaries Less: Impairment loss	The Company 2012 2011 HK$’000 HK$’000 – – 1,571,491 1,574,843 (830,952) (786,849) 740,539 787,994	The Company 2012 2011 HK$’000 HK$’000 – – 1,571,491 1,574,843 (830,952) (786,849) 740,539 787,994
		1,574,843 (786,849)
		787,994

a) Amounts due from subsidiaries are unsecured, interest-free and repayable on demand.
b) The details of the subsidiaries at 31 March 2012 are as follows:

	Place of		Particulars of
	incorporation/		issued and
	establishment	Principal	paid up	Interest
Name	and operation	activities	share capital	held
Lelion Holdings	British Virgin	Investment	2 Ordinary shares	100%*
Limited	Islands/	holding	of US$1 each
	Hong Kong
Joint Peace	British Virgin	Dormant	2 Ordinary shares	100%
Limited	Islands/		of US$1 each
	Hong Kong
Uni-Bio	Hong Kong	Provision of	1 Ordinary share	100%
Management		management	of HK$1 each
Limited		services
Figures Up	British Virgin	Investment	100 Ordinary	100%
Trading	Islands/	holding	shares
Limited	Hong Kong		of US$1 each
Nan Hoo	British Virgin	Investment	50,000 Ordinary	100%
Properties	Islands/	holding	shares
Limited	Hong Kong		of US$1 each
Zethanel	British Virgin	Investment	10,000 Ordinary	100%
Properties	Islands/	holding	shares
Limited	Hong Kong		of US$1 each

– IC-40 –

APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

	Place of		Particulars of
	incorporation/		issued and
	establishment	Principal	paid up	Interest
Name	and operation	activities	share capital	held
Dongguan Taili	The PRC	Research and	Contributed	100%
Biotech Co.,		development,	capital of
Limited		manufacture	HK$100,458,126
		and sales of
		medical and
		biological
		products
Dongguan Shi Bo	The PRC	Trading of	Contributed	100%
Kang Jian		medical and	capital of
Pharmaceutical		biological	RMB1,000,000
Technology		products
Co., Limited
Beijing Genetech	The PRC	Manufacture and	Contributed	100%
Pharmaceutical		sales of medical	capital of
Co., Limited		and biological	RMB91,000,000
		products
Shenzhen Watsin	The PRC	Manufacture and	Contributed	100%
Genetech		sales of	capital of
Limited		biological	RMB100,060,960
		products

Shares held directly by the Company.

21 INTERESTS IN ASSOCIATES

Share of net assets Unlisted shares, at cost	The Group 2012 2011 HK$’000 HK$’000 10,375 10,619 15,417 14,854	The Group 2012 2011 HK$’000 HK$’000 10,375 10,619 15,417 14,854

		14,854

The following list contains only the particulars of associates, all of which are unlisted corporate entities, which principally affected the results or assets of the Group.

	Place of
	incorporation		Particulars of	Interest
Name of	and		issued and	held
associates	operation	Principal activity	paid up capital	(Indirect)
廣東聯康生物與	The PRC	Research and	Contributed capital of	45%
醫藥研究院		development of	RMB20,000,000
		pharmaceutical
		products

– IC-41 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

	Place of
	incorporation		Particulars of	Interest
Name of	and		issued and	held
associates	operation	Principal activity	paid up capital	(Indirect)
東莞市康安生物	The PRC	Research and	Contributed capital of	35%
技術開發		development of	RMB10,000,000
有限公司		pharmaceutical
		products

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

100% Total assets Total liabilities Net assets Group’s share of net assets of associates 100% Total revenue Loss for the year Group’s share of losses of associates 22 INVENTORIES Raw materials Work in progress Finished goods 23 TRADE RECEIVABLES Trade receivables	2012 2011 HK$’000 HK$’000 32,277 29,529 6,609 4,124 25,668 25,405 10,375 10,619 – – (4,399) (4,626) (638) (3,230) The Group 2012 2011 HK$’000 HK$’000 2,630 1,811 902 743 4,275 3,346 7,807 5,900 The Group 2012 2011 HK$’000 HK$’000 17,241 16,710	2011 HK$’000 29,529 4,124
		25,405

		10,619

		– (4,626)
		(3,230)

At 31 March 2012, trade receivables of the Group amounting to approximately HK$6,789,000 (2011: HK$7,071,000) were determined to be impaired. These receivables were due from companies with financial difficulties.

– IC-42 –

APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

The ageing analysis of the trade receivables is as follows:

Within 30 days 31 – 60 days 61 – 90 days Over 90 days Less: Provision for impairment loss	The Group 2012 2011 HK$’000 HK$’000 4,142 5,872 4,644 1,418 4,055 4,104 11,189 12,387 24,030 23,781 (6,789) (7,071) 17,241 16,710	The Group 2012 2011 HK$’000 HK$’000 4,142 5,872 4,644 1,418 4,055 4,104 11,189 12,387 24,030 23,781 (6,789) (7,071) 17,241 16,710
		23,781 (7,071)
		16,710

Customers are generally granted with credit terms of 120 days (2011: 120 days). Longer payment terms are granted to those customers which have good payment history and long-term business relationship with the Group. All of the trade receivables are expected to be recovered within one year.

At the end of the reporting period, the Group first assesses whether objective evidence of impairment exists individually for trade receivables that are individually significant, and individually or collectively for trade receivables that are not individually significant. The Group also assesses collectively for trade receivables with similar credit risk characteristics for impairment. The impaired receivables, if any, are recognised based on the credit history of its customers, such as financial difficulties or default in payments, and current market conditions. Consequently, specific impairment provision is recognised if the amount is determined to be irrecoverable.

The following is an ageing analysis of the Group’s trade receivables that are not impaired at the end of the reporting period:

Neither past due nor impaired Past due and not impaired Not more than one month past due Over one month past due	The Group 2012 2011 HK$’000 HK$’000 13,898 14,861 - - - - - - - - - - - - - - - - - - 1,218 810 2,125 1,039 3,343 1,849 - - - - - - - - - - - - - - - - - - 17,241 16,710	The Group 2012 2011 HK$’000 HK$’000 13,898 14,861 - - - - - - - - - - - - - - - - - - 1,218 810 2,125 1,039 3,343 1,849 - - - - - - - - - - - - - - - - - - 17,241 16,710
		1,849 - - - - - - - - -
		16,710

– IC-43 –

APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

The movements in the allowance for doubtful debts during the year are as follows:

At 1 April Impairment loss recognised Amounts written off as uncollectible Reversal of impairment Exchange differences At 31 March	The Group 2012 2011 HK$’000 HK$’000 7,071 29,022 1,097 700 – (21,186) (1,638) (2,485) 259 1,020 6,789 7,071	The Group 2012 2011 HK$’000 HK$’000 7,071 29,022 1,097 700 – (21,186) (1,638) (2,485) 259 1,020 6,789 7,071
		7,071

Included in trade receivables are the following amounts denominated in a currency other than the reporting currency of the Group to which they relate:

	The
	2012	2011
	HK$’000	HK$’000
RMB	17,241	16,710

24 OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Deposits for purchases of technical know-how (note a) Deposits and prepayments for purchases of property, plant and equipment (note a) Other receivables and prepayments Less: Provision for impairment loss	The Group 2012 2011 HK$’000 HK$’000 58,810 47,712 23,990 10,535 10,616 32,805 93,416 91,052 (12,949) (26,628) 80,467 64,424	The Company 2012 2011 HK$’000 HK$’000 – – – – 507 507 507 507 – – 507 507	The Company 2012 2011 HK$’000 HK$’000 – – – – 507 507 507 507 – – 507 507
			507 –
			507

a) Capital commitments of the Group in respect of the remaining unpaid balances of approximately HK$16,456,000 (2011: HK$13,256,000) for the purchases of technical know-how and property, plant and equipment are disclosed in note 35(a) to the financial statements.
b) The carrying amounts of other receivables, deposits and prepayments approximate their fair value.

– IC-44 –

APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

The movements in the allowance for doubtful debts during the year are as follows:

At 1 April Amounts written off as uncollectible Reversal of impairment Exchange differences At 31 March	The Group 2012 2011 HK$’000 HK$’000 26,628 26,509 (14,687) – – (1,055) 1,008 1,174 12,949 26,628	The Group 2012 2011 HK$’000 HK$’000 26,628 26,509 (14,687) – – (1,055) 1,008 1,174 12,949 26,628
		26,628

Included in other receivables, deposits and prepayments are the following amounts denominated in a currency other than the reporting currency of the Group to which they relate:

	The
	2012	2011
	HK$’000	HK$’000
RMB	79,544	63,566

25 AMOUNTS DUE FROM/(TO) ASSOCIATES AND DUE TO DIRECTORS

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

26 CASH AND CASH EQUIVALENTS

Cash at bank and in hand Cash and cash equivalents in the statement of financial position Cash and cash equivalents in the consolidated statement of cash flows	The Group 2012 2011 HK$’000 HK$’000 22,273 16,545 22,273 16,545 22,273 16,545	The Company 2012 2011 HK$’000 HK$’000 1,036 1,634 1,036 1,634 – –	The Company 2012 2011 HK$’000 HK$’000 1,036 1,634 1,036 1,634 – –
			1,634

			–

Included in cash and cash equivalents in the statement of financial position are the following amounts denominated in a currency other than the reporting currency of the Group to which they relate:

	The	Group	The Company	The Company
	2012	2011	2012	2011
	HK$’000	HK$’000	HK$’000	HK$’000
RMB	20,272	13,640	–	–

– IC-45 –

APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

27 TRADE PAYABLES

		The
		2012	2011
		HK$’000	HK$’000
Trade	payables	5,897	5,345

At 31 March 2012, all the trade payables are expected to be settled within one year and the ageing analysis of the trade payables is analysed as follows:

Within 30 days 31 – 60 days 61 – 90 days Over 90 days	The Group 2012 2011 HK$’000 HK$’000 886 389 357 168 289 753 4,365 4,035 5,897 5,345	The Group 2012 2011 HK$’000 HK$’000 886 389 357 168 289 753 4,365 4,035 5,897 5,345
		5,345

Included in trade payables are the following amounts denominated in a currency other than the reporting currency of the Group to which they relate:

	2012	2011
	HK$’000	HK$’000
RMB	5,897	5,345

– IC-46 –

APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

28 BANK LOANS AND OTHER BORROWINGS

Bank loans repayable: Within 1 year or on demand After 1 year but within 2 years Other loans repayable: Within 1 year or on demand After 1 year but within 2 years After 2 years but within 5 years Less: Amount due within 1 year shown under current liabilities Secured Unsecured	The Group 2012 2011 HK$’000 HK$’000 34,534 23,766 4,933 – 39,467 23,766 1,603 – – 1,545 46,200 – 87,270 25,311 (36,137) (23,766) 51,133 1,545 85,667 23,766 1,603 1,545 87,270 25,311	The Group 2012 2011 HK$’000 HK$’000 34,534 23,766 4,933 – 39,467 23,766 1,603 – – 1,545 46,200 – 87,270 25,311 (36,137) (23,766) 51,133 1,545 85,667 23,766 1,603 1,545 87,270 25,311
		23,766 – 1,545 –
		25,311 (23,766)
		1,545

		23,766 1,545
		25,311

Included in bank loans and other borrowings are the following amounts denominated in a currency other than the reporting currency of the Group to which they relate.

	2012	2011
	HK$’000	HK$’000
RMB	41,070	25,311

All the bank loans bear interest at variable rates by reference to the People’s Bank of China’s lending rate, ranging from 6.0% to 6.4% per annum.

Except for the other loan of HK$1,603,000 (2011: HK$1,545,000), which is interest-free, unsecured and will be repayable within one year, the other loan of HK$46,200,000 (2011: Nil) is bearing interest at 6% (2011: Nil) per annum, secured and will be repayable in May 2014.

As at 31 March 2012, the other loan amounted to HK$46,200,000 (2011: Nil) are guaranteed by the Company and its subsidiaries, Figures Up Trading Limited (“Figures up”), Nan Hoo Properties Limited (“Nan Hoo”) and Zethanel Properties Limited (“Zethanel”) as guarantors and secured by way of first fixed charges on the entire equity shares of Figures up, Nan Hoo and Zethanel in favour of an independent third party as the collateral to the loan facility of HK$300,000,000 (2011: Nil) provided to the Group (Note 34(b)).

– IC-47 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

As at 31 March 2012, the bank loans amounted to HK$39,467,000 (2011: HK$23,766,000) are secured by leasehold buildings in the PRC, investment properties and leasehold land and land use rights of the Group with carrying amounts of HK$23,603,000 (2011: HK$18,788,000), HK$9,268,000 (2011: HK$7,137,000) and HK$14,939,000 (2011: HK$11,209,000) respectively (Note 34(a)).

In the opinion of the directors, the carrying amounts of the Group’s current and non-current bank loans and other borrowings approximate their fair values.

29 EMPLOYEES RETIREMENT BENEFITS

The Group operates a Mandatory Provident Fund Scheme (“the MPF scheme”) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF scheme is a defined contribution retirement plan administered by independent trustees. Under the MPF scheme, the employer and its employees are each required to make contributions to the plan at 5% of the employee’s relevant income, subject to a cap of monthly relevant income of $20,000. Apart from the mandatory contributions, the employer would make monthly voluntary contributions. The aggregate of the mandatory and voluntary contributions made by the employer represents 5% of the basic salary of the employees. Mandatory contributions to the plan vest immediately. Where there are employees who leave the Group prior to vesting fully in the voluntary contributions, the contributions payable by the Group are reduced by the amount of forfeited contributions.

Employees in the Group’s PRC subsidiaries are members of the state-managed retirement scheme. The PRC subsidiaries are required to contribute a specified percentage of the payroll to the scheme. The only obligation of the Group with respect to the retirement scheme is to make the specified contributions.

The Group has no other material obligation for payment of retirement benefits beyond the annual contributions as described above.

30 INCOME TAX IN THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION

a) Current taxation in the consolidated statement of financial position represents:

				The
				2012	2011
				HK$’000	HK$’000
PRC	enterprise	income	tax	2,462	2,472

b) Deferred tax liabilities recognised

The components of deferred tax liabilities recognised in the consolidated statement of financial position and the movements during the year are as follows:

Deferred tax arising from:

At 1 April Charged to profit or loss Exchange differences At 31 March	The Group Revaluation of investment properties 2012 2011 HK$’000 HK$’000 784 – 456 765 37 19 1,277 784	The Group Revaluation of investment properties 2012 2011 HK$’000 HK$’000 784 – 456 765 37 19 1,277 784
		784

– IC-48 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

c) Deferred tax assets not recognised

The Group has unrecognised tax loss of HK$610,882,000 (2011: HK$545,311,000) at the end of the reporting period. No deferred tax assets have been recognised for such tax losses due to unpredictability of future profits streams.

Losses to expire are shown as below:

2013/14 2014/15 2015/16 2016/17	The Group HK$’000 284,927 238,580 48,599 38,776
	610,882

31 SHARE CAPITAL

Authorised: 500,000,000,000 ordinary shares of HK$0.01 each Issued and fully paid: 1,304,846,293 ordinary shares of HK$0.01 each	2012 HK$’000 5,000,000 13,048	2011 HK$’000 5,000,000

		13,048

a) The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.
b) Terms of unexpired and unexercised share options at the end of the reporting period

Exercise period Exercise price 19 June 2006 to 21 October 2011 HK$1.963 28 January 2008 to 21 September 2016 HK$4.51 26 May 2009 to 21 September 2016 HK$1.00	2012 Number of shares ’000 – 5,677 73,500 79,177	2011 Number of shares ’000 7,159 5,677 73,500
		86,336

Each option entitles the holders to subscribe for one ordinary share in the Company. Further details of these options are set out in note 33 to the financial statements.

– IC-49 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

c) Capital management

The Group’s objectives when managing capital are to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The management reviews the capital structure by considering the cost of capital and the risks associated with each class of capital. In view of this, the Group will balance its overall capital structure through the payment of dividends, new share issues as well as the issue of new debt or the redemption of existing debt as it sees fit and appropriate.

During the year, the gearing ratios at 31 March 2012 and 2011 were as follows:

Debts Less: Cash and cash equivalents (Note 26) Net debts Total equity Gearing ratio	2012 HK$’000 87,270 (22,273) 64,997 767,302 8.47%	2011 HK$’000 25,311 (16,545)
		8,766

		847,804

		1.03%

Debts comprise the bank loans and other borrowings.

32 RESERVES

The Group

		Attributable to equity shareholders of the Company	Attributable to equity shareholders of the Company	Attributable to equity shareholders of the Company
Share premium HK$’000 250,889 – 250,889 – – 250,889	Capital reserve HK$’000 (267) – (267) – – (267)	Statutory reserve HK$’000 6,289 – 6,289 – – 6,289	Share-based payments reserve Distributable reserve HK$’000 HK$’000 48,147 1,291,798 – – 48,147 1,291,798 (6,610) – – – 41,537 1,291,798	Exchange reserve Accumulated losses HK$’000 HK$’000 137,470 (722,716) 8,302 (185,156) 145,772 (907,872) – 6,610 22,362 (102,864) 168,134 (1,004,126)	Total HK$’000 1,011,610 (176,854)
					834,756 – (80,502)
					754,254

– IC-50 –

APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

The Company

At 1 April 2010 Total comprehensive loss for the year At 31 March 2011 Share option lapsed during the year Total comprehensive loss for the year At 31 March 2012	Share premium Share-based payments reserve Distributable reserve Accumulated losses HK$’000 HK$’000 HK$’000 HK$’000 322,492 48,147 1,291,798 (552,234) – – – (338,646) 322,492 48,147 1,291,798 (890,880) – (6,610) – 6,610 – – – (49,237) 322,492 41,537 1,291,798 (933,507)	Total HK$’000 1,110,203 (338,646)
		771,557 – (49,237)
		722,320

Notes:

a) Share premium

In accordance with the Companies Law (revised) of the Cayman Islands, the share premium account of the Company is distributable to its shareholders provided that immediately following the date on which the dividend is proposed to be distributed, the Company will be in a position to pay off its debts as they fall due in the ordinary course of business. The share premium may also be distributed in the form of fully paid bonus shares.

b) Statutory reserve

In accordance with the Company Law of the PRC, companies are required to allocate 10% of their profit after tax to the statutory reserve (the “SR”) until such reserve reaches 50% of the registered capital of the companies, respectively. Subject to certain restrictions set out in the Company Law of the PRC, part of the SR may be converted to increase paid-in capital, provided that the remaining balance after the capitalisation is not less than 25% of the registered capital.

c) Share-based payment reserve

The share-based payment reserve relates to share option granted to employees and others under the Company’s share option scheme. Further information about share-based payments to employees and others is set out in note 33.

d) Exchange reserve

The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations as well as the effective portion of any foreign exchange differences arising from the hedges of the net investment in these foreign operations. The reserve is dealt with in accordance with the accounting policies set out in note 3(u).

e) Distributable reserves

The distributable reserve represents credit arising from Capital Reorganisation effected by the Company during the year ended 31 March 2010.

– IC-51 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

At 31 March 2012, the aggregate amount of the Company’s reserve available for distribution to shareholders was approximately HK$680,783,000 (2011: HK$723,410,000) computing in accordance with the Companies Law (Revised) of the Cayman Islands and the Company’s articles of association. This includes the Company’s share premium of approximately HK$322,492,000 (2011: HK$322,492,000) and distributable reserve of approximately HK$1,291,798,000 (2011: HK$1,291,798,000) less accumulated losses of approximately HK$933,507,000 (2011: HK$890,880,000), which is available for distribution provided that immediately following the date on which the dividend is proposed, the Company will be able to pay off its debts as they fall due in the ordinary course of business.

33 SHARE OPTIONS

Pursuant to ordinary resolutions passed by the shareholders of the Company on 22 September 2006, the Company terminated the 2001 Scheme and adopted a new share option scheme (the “2006 Scheme”).

– IC-52 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Total consideration received during the year from eligible participants for taking up the options granted during the year is Nil (2011: Nil). The consideration is required to be settled within 21 days from the issue of the share option offer.

– IC-53 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Details of the share option movements during the year ended 31 March 2012 under 2006 Scheme are as follows:

Outstanding at 31 March 2011 and 1 April 2011 ’000 Employees 7,159 Employees 1,551 Others 4,126 Others 73,500 86,336 Exercisable at the end of the year Weighted average exercise price (HK$) 1.3107		Number of share options	Number of share options	Number of share options	Lapsed during the year Outstanding at 31 March 2012 Exercise price Date of grant Exercise period Remaining contractual life ’000 ’000 (7,159) – 1.9630 19 June 2006 19 June 2006 to 21 October 2011 – – 1,551 4.5100 28 January 2008 28 January 2008 to 21 September 2016 4.48 years – 4,126 4.5100 28 January 2008 28 January 2008 to 21 September 2016 4.48 years – 73,500 1.0000 26 May 2009 26 May 2009 to 21 September 2016 4.48 years (7,159) 79,177 79,177 N/A 1.2517
		Granted during the year ’000 – – – – – N/A	Adjusted during the year ’000 – – – – – N/A	Exercised during the year ’000 – – – – – N/A

– IC-54 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Details of the share option movements during the year ended 31 March 2011 under the 2006 Scheme are as follows:

Outstanding at 31 March 2010 and 1 April 2010 ’000 Employees 7,159 Employees 1,551 Others 4,126 Others 73,500 86,336 Exercisable at the end of the year Weighted average exercise price (HK$) 1.3107		Number of share options	Number of share options	Number of share options	Lapsed during the year Outstanding at 31 March 2011 Exercise price Date of grant Exercise period Remaining contractual life ’000 ’000 – 7,159 1.9630 19 June 2006 19 June 2006 to 21 October 2011 0.56 years – 1,551 4.5100 28 January 2008 28 January 2008 to 21 September 2016 5.48 years – 4,126 4.5100 28 January 2008 28 January 2008 to 21 September 2016 5.48 years – 73,500 1.0000 26 May 2009 26 May 2009 to 21 September 2016 5.48 years – 86,336 86,336 N/A 1.3107
		Granted during the year ’000 – – – – – N/A	Adjusted during the year ’000 – – – – – N/A	Exercised during the year ’000 – – – – – N/A

34 PLEDGE OF ASSETS

At the end of the reporting period, the details of assets of the Group being pledged to secure borrowing facilities were as follows:

a) Bank loans

Leasehold buildings in the PRC (Note 15) Investment properties (Note 16) Leasehold land and land use rights (Note 17)	The Group 2012 2011 HK$’000 HK$’000 23,603 18,788 9,268 7,137 14,939 11,209 47,810 37,134	The Group 2012 2011 HK$’000 HK$’000 23,603 18,788 9,268 7,137 14,939 11,209 47,810 37,134
		37,134

b) Other loans

The entire issued shares of Nan Hoo, Zethanel and Figures Up were pledged to an independent third party to secure the loan amount of HK$46,200,000 (2011: Nil).

– IC-55 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

35 COMMITMENTS

a) Capital commitments

At the end of the reporting period, the Group had capital commitments contracted but not provided for in the financial statements as follows:

Contracted for: – Purchases of technical know-how – Purchases of property, plant and equipment	The Group 2012 2011 HK$’000 HK$’000 4,132 3,981 12,324 9,275 16,456 13,256	The Group 2012 2011 HK$’000 HK$’000 4,132 3,981 12,324 9,275 16,456 13,256
		13,256

b) Operating lease commitments

At the end of the reporting period, the Group had future aggregate minimum lease payments under non- cancellable operating leases in respect of interest in leasehold land and buildings which expires as follows:

Within 1 year After 1 year but within 5 years	The Group 2012 2011 HK$’000 HK$’000 1,606 1,439 1,932 404 3,538 1,843	The Group 2012 2011 HK$’000 HK$’000 1,606 1,439 1,932 404 3,538 1,843
		1,843

36 RELATED PARTY TRANSACTIONS

a) Key management personnel remuneration

Remuneration for key management personnel of the Group, including amounts paid to the Directors as disclosed in note 9 and certain of the highest paid employees as disclosed in note 10, is as follows:

Short-term employee benefits Post-employment benefits	2012 HK$’000 583 6 589	2011 HK$’000 525 6
		531

Total remuneration is included in “staff costs” (see note 7(b)).

b) There were no material related party transactions during the year (2011: Nil).

c) Balances with the related parties as at 31 March 2012 are stated in notes 20, 21 and 25.

– IC-56 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

37 CONTINGENT LIABILITIES

As at 31 March 2012, contingent liabilities were as follows:

Guarantee given to an independent third party for the loan facility provided to: Subsidiaries and utilised by: Subsidiaries	2012 HK$’000 300,000 46,200	2011 HK$’000 –

		–

38 MAJOR NON-CASH TRANSACTION

There was no major non-cash transaction during the year ended 31 March 2012 and 2011.

39 FINANCIAL RISK MANAGEMENT

The Group is exposed to financial risk through its use of financial instruments in its ordinary course of operations and its investment activities. The financial risks include market risk (including currency risk and interest risk), credit risk and liquidity risk.

Financial risk management is coordinated at the Group’s headquarters, in close co-operation with the board of directors. The overall objectives in managing financial risks focus on securing the Group’s short to medium term cash flows by minimising its exposure to financial markets. Long term financial investments are managed to generate lasting returns with acceptable risk levels.

It is not the Group’s policy to actively engage in the trading of financial instruments for speculative purposes. The directors regularly monitors the Group’s financial risk exposures.

– IC-57 –

APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

a) Summary of financial assets and liabilities by category

The carrying amounts presented in the statement of financial position relate to the following categories of financial assets and financial liabilities.

Financial assets Loans and receivables: Trade receivables Other receivables, deposits and prepayments Amounts due from associate Amounts due from subsidiaries Cash and cash equivalents Financial liabilities Financial liabilities measured at amortised costs: Trade payables Accrued charges and other payables Amounts due to associates Amounts due to directors Bank loans Other borrowings	Group 2012 2011 HK$’000 HK$’000 17,241 16,710 2,899 23,933 290 – – – 22,273 16,545 42,703 57,188 5,897 5,345 12,572 14,843 8,001 15,819 9,464 8,772 39,467 23,766 47,803 1,545 123,204 70,090	Company 2012 2011 HK$’000 HK$’000 – – – – – – 740,539 787,994 1,036 1,634 741,575 789,628 – – 903 1,103 – – 5,811 4,427 – – – – 6,714 5,530	Company 2012 2011 HK$’000 HK$’000 – – – – – – 740,539 787,994 1,036 1,634 741,575 789,628 – – 903 1,103 – – 5,811 4,427 – – – – 6,714 5,530
			789,628

			– 1,103 – 4,427 – –
			5,530

b) Foreign currency risk

(i) The Group operates mainly in both the PRC and Hong Kong and majority of transactions are denominated in HK$ and RMB. Therefore, the Group is exposed to foreign exchange risk arising from these currency exposures.

RMB is not freely convertible currency. Future exchange rates of RMB could vary significant from the current or historical exchange rates as a result of controls that could be imposed by the government of the PRC. The exchange rates may also be affected by economic development and political changes domestically and internationally, and supply and demand of RMB. The appreciation or devaluation of RMB against HK$ may have positive or negative impacts on the result of operations of the Group.

Some of trade receivables of the Group are denominated in RMB. The Group currently does not have a foreign exchange hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

The polices to manage foreign currency risk have been followed by the Group since prior years and are considered to be effective.

– IC-58 –

APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

The carrying amount of the Group’s foreign currency denominated (all in RMB) financial assets and liabilities, translated into Hong Kong dollars at the closing rates, are as follows:

Financial assets Trade receivables Other receivables, deposits and prepayments Amounts due from associates Cash and cash equivalents Financial liabilities Trade payables Accrued charges and other payables Amounts due to associates Bank loans and other borrowings	2012 HK$’000 17,241 79,544 290 20,272 117,347 (5,897) (11,851) (8,001) (41,071) 50,527	2011 HK$’000 16,710 63,566 – 13,640
		93,916 (5,345) (14,014) (15,819) (25,311)
		33,427

(ii) Sensitivity analysis

The following table illustrates the sensitivity of the Group’s loss after tax for the year and equity in regards to a 5% (2011: 5%) depreciation in the group entities’ reporting currencies against RMB. These percentages are the rates used when reporting foreign currency risk internally to key management personnel and represents management’s best assessment of the possible change in foreign exchange rates.

The sensitivity analysis of the Group’s exposure to foreign currency risk at the end of the reporting period been determined based on the assumed percentage changes in foreign currency exchange rates taking place at the beginning of the financial year and held constant throughout the year.

							2012	2011
							HK$’000	HK$’000
Loss	for	the	year	and	accumulated	losses	2,526	1,671

A 5% appreciation in the group entities’ reporting currencies against RMB would have the same magnitude on the Group’s loss for the year and equity but of opposite effect.

These are the same method and assumption used in preparing the sensitivity analysis included in the financial statements for the year ended 31 March 2011.

Exposures to foreign exchange rates vary during the year depending on the volume of transactions in RMB. Nevertheless, the analysis above is considered to be representative of the Group’s exposure to foreign currency risk.

– IC-59 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

c) Interest rate risk

(i) Exposures to interest rate risk and the Group’s risk management policies

The Group will review whether bank loans bearing floating rates should be drawn from time to time with reference to the trend of changes in interest rates. The interest rates and repayment terms of bank borrowings and cash and bank balances of the Group are disclosed in note 28 and 26 respectively. The Group currently does not have an interest rate hedging policy. However, the directors monitor interest rate change exposure and will consider hedging significant interest rate exchange exposure should the need arises. The policies to management interest rate risk have been followed by the Group since prior year and are considered to be effective.

(ii) Sensitivity analysis

The following table illustrates the sensitivity of the Group’s loss for the year and equity to a possible change in interest rates of +/-1% (2011:+/-1%), with effect from the beginning of the year. The calculations are based on the Group’s financial assets and liabilities held at the end of the reporting period. All other variables are held constant.

		2012			2011
		Increase/	Increase/		Increase/	Increase/
	Change in	(Decrease)	(Decrease)	Change in	(Decrease)	(Decrease)
	interest	loss for the	accumulated	interest	loss for the	accumulated
	rate	year	losses	rate	year	losses
		HK$’000	HK$’000		HK$’000	HK$’000
Variable rate
borrowings:
Bank loans	+1%	395	395	+1%	238	238
	-1%	(395)	(395)	–1%	(238)	(238)

The assumed changes in interest rates are considered to be reasonably possible based on observation of current market conditions and represents the management’s assessment of a reasonably possible change in interest rate over the period until the next annual end of the reporting period.

The sensitivity analysis included in the financial statements for the year ended 31 March 2011 has been prepared on the same basis.

d) Credit risk

(i) Summary of exposure

– IC-60 –

APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

Except for the financial guarantees given by the Company as set out in note 37, the Group does not provide any other guarantee which would expose the Group or the Company to material credit risk.

The Group’s exposure to credit risk mainly arises from granting credit to customers in the ordinary course of its operations and its investing activities.

The Group’s maximum exposure to credit risk on recognised financial assets is limited to the carrying amount at the end of the reporting period as summarised below:

Financial assets – carrying amounts Trade receivables Other receivables and deposits Amounts due from associates Amounts due from subsidiaries Cash and cash equivalents	Group 2012 2011 HK$’000 HK$’000 17,241 16,710 2,418 10,997 290 – – – 22,273 16,545 42,222 44,252	Company 2012 2011 HK$’000 HK$’000 – – – – – – 740,539 787,994 1,036 1,634 741,575 789,628	Company 2012 2011 HK$’000 HK$’000 – – – – – – 740,539 787,994 1,036 1,634 741,575 789,628
			789,628

(ii) Risk management objective and policies

The Group limits its exposure to credit risk by rigorously selecting the counterparties. Credit risk on cash and cash equivalents is mitigated as cash is deposits in banks of high credit rating. Credit risk on receivables is minimised as the Group performs ongoing evaluation on the financial condition of its debtors and tightly monitors the ageing of the receivable balances. Follow up action is taken in case of overdue balances. In addition, the management reviews the recoverability of receivables individually and collectively at each end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts.

A significant portion of Group’s sales are made to several major customers and as at 31 March 2012, these major customers have trade receivables of approximately HK$6,811,000 (2011: HK$3,286,000) out of the total trade receivables of HK$17,241,000 (2011: HK$16,710,000) as stated on the consolidated statement of financial position. These customers made continuous settlements with the Group and therefore, the management believes that the credit risk on the amounts due is minimal. The remaining amount of trade receivables are attributable to number of counterparties and customers and therefore, the Group has no significant concentration of credit risk on these remaining amounts.

e) Liquidity risk

– IC-61 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

The liquidity policies have been followed by the Group since prior years and are considered to have been effective in managing liquidity risks.

Analysed below is the Group’s and Company’s remaining contractual maturities for its non-derivative financial liabilities as at 31 March 2012. When the creditor has a choice of when the liability is settled, the liability is included on the basis of the earliest date on when the Group can be required to pay. Where the settlement of the liability is in instalments, each instalment is allocated to the earliest period in which the Group is committed to pay.

At 31 March 2012:

Group Trade payables Accrued charges and other payables Amounts due to associates Amounts due to directors Bank loans Other borrowings Company Accrued charges and other payables Amounts due to directors	Within 1 year or on demand HK$’000 5,897 15,022 8,001 9,464 36,721 1,603 76,708 Within 1 year or on demand HK$’000 903 5,811 6,714	Between 1 and 2 years HK$’000 – – – – 5,249 – 5,249 Between 1 and 2 years HK$’000 – – –	Between 2 and 5 years Total contractual undiscounted cash flow HK$’000 HK$’000 – 5,897 – 15,022 – 8,001 – 9,464 – 41,970 48,972 50,575 48,972 130,929 Between 2 and 5 years Total contractual undiscounted cash flow HK$’000 HK$’000 – 903 – 5,811 – 6,714	Total carrying amount HK$’000 5,897 15,022 8,001 9,464 39,467 47,803
				125,654

				Total carrying amount HK$’000 903 5,811
				6,714

– IC-62 –

APPENDIX IC

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

At 31 March 2011:

Group Trade payables Accrued charges and other payables Amounts due to associates Amounts due to directors Bank loans Other borrowings Company Accrued charges and other payables Amounts due to directors	Within 1 year or on demand HK$’000 5,345 14,843 15,819 8,772 24,233 – 69,012 Within 1 year or on demand HK$’000 1,103 4,427 5,530	Between 1 and 2 years HK$’000 – – – – – 1,545 1,545 Between 1 and 2 years HK$’000 – – –	Between 2 and 5 years Total contractual undiscounted cash flow HK$’000 HK$’000 – 5,345 – 14,843 – 15,819 – 8,772 – 24,233 – 1,545 – 70,557 Between 2 and 5 years Total contractual undiscounted cash flow HK$’000 HK$’000 – 1,103 – 4,427 – 5,530	Total carrying amount HK$’000 5,345 14,843 15,819 8,772 23,766 1,545
				70,090

				Total carrying amount HK$’000 1,103 4,427
				5,530

f) Fair values

The management consider that the carrying amounts of the Group’s and the Company’s financial assets and liabilities carried at cost or amortised cost are not materially different from their fair value as at 31 March 2012 and 2011.

– IC-63 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

g) Economic risk

The Group’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the government of the PRC has been pursuing economic reform policies for the past years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered.

h) Business risk

A substantial portion of the Group’s operations is conducted in the PRC. This includes risks associated with, among others, the political, economic and legal environment in the PRC.

40 CAPITAL MANAGEMENT POLICIES AND PROCEDURES

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

The capital structure of the Group consists of net debt, which includes the bank loans and other borrowings disclosed in note 28, net of cash and cash equivalents and equity attributable to equity shareholders of the Company, comprising issued share capital and reserves.

– IC-64 –

APPENDIX IC FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2012

41 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED 31 MARCH 2012

Up to the date of issue of these financial statements, the HKICPA has issued the following amendments, new standards and new interpretations which are not yet effective for the year ended 31 March 2012 and which have not been early adopted in these financial statements. These include the following which may be relevant to the Group.

	Effective for
	accounting
	periods
	beginning on
	or after
Amendments to HKAS 12, Deferred tax – Recovery of underlying assets	1 January 2012
Amendments to HKAS 1 Presentation of financial statements
– Presentation of items of other comprehensive income	1 July 2012
HKFRS 10, Consolidated financial statements	1 January 2013
HKFRS 12, Disclosure of interests in other entities	1 January 2013
HKFRS 13, Fair value measurement	1 January 2013
Amendments to HKFRS 7, Disclosures – Offsetting financial assets and
financial liabilities	1 January 2013
HKAS 19 (2011), Employee benefits	1 January 2013
HKAS 27 (2011), Separate financial statements	1 January 2013
HKAS 28 (2011), Investments in associates and joint ventures	1 January 2013
Annual improvements project, Annual improvement 2009–2011 Cycle	1 January 2013
Amendments to HKFRS 10 and HKFRS 12, Consolidated financial statements,
and Disclosure of interests in other entities: Transition Guidance	1 January 2014
Amendments to HKAS 32, Financial instruments: Presentation
– Offsetting financial assets and financial liabilities	1 January 2014
HKFRS 9, Financial instruments	1 January 2015
Amendments to HKFRS 9 and HKFRS 7, Mandatory effective date of
HKFRS 9 and transition guidance	1 January 2015

The Group is in the process of making an assessment of what the impact of these amendments is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the Group’s results of operations and financial position.

– IC-65 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

Set out below are the audited financial statements of the Group for the year ended 31 March 2011 together with the accompanying notes as extracted from the annual report of the Company for the year ended 31 March 2011.

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2011

Note Turnover 5 Cost of sales Gross profit Valuation gains on investment property Other revenue and net income 6 Selling and distribution expenses General and administrative expenses Impairment loss on trade receivables Impairment loss on goodwill Impairment loss on other receivables, deposit and prepayments Impairment loss on intangible assets Impairment loss on property, plant and equipment Loss on disposal of intangible assets Loss on disposal of property, plant and equipment Property, plant and equipment written off Bad debts written off Inventories written off Loss from operation Finance costs 7(a) Share of loss of associates Loss before taxation 7 Income tax 8 Loss for the year Other comprehensive income Exchange differences arising on translation of financial statements of foreign entities Total comprehensive loss for the year	2011 HK$’000 76,764 (29,112) 47,652 3,408 11,894 (32,496) (94,030) (700) (90,000) – (9,756) (8,819) – – (572) (4,163) – (177,582) (1,938) (3,230) (182,750) (2,406) (185,156) 8,302 (176,854)	2010 HK$’000 148,286 (71,074) 77,212 – 5,497 (36,021) (162,937) (83) (30,510) (24,877) (123,969) (22,215) (13,159) (47,434) (65,572) – (3,062) (447,130) (2,455) (886) (450,471) (4,182) (454,653) 8,986 (445,667)

– ID-1 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

Note Loss attributable to: Equity shareholders of the Company Total comprehensive loss attributable to: Equity shareholders of the Company Loss per share Basic (cents per share) Diluted (cents per share)	2011 HK$’000 (185,156) (176,854) (14.19) N/A	2010 HK$’000 (454,653) (445,667) (8.00) N/A

– ID-2 –

APPENDIX ID

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

Consolidated Statement of Financial Position

As at 31 March 2011

Note Non-current assets Property, plant and equipment 15 Investment property 16 Leasehold land and land use rights 17 Goodwill 18 Intangible assets 19 Interests in associates 21 Current assets Leasehold land and land use rights 17 Inventories 22 Trade receivables 23 Other receivables, deposits and prepayments 24 Cash and cash equivalents 25 Current liabilities Trade payables 26 Accrued charges and other payables Amounts due to directors 27 Amounts due to associates 27 Bank loans 28 Other borrowings 28 Tax payables 30(a) Net current assets Total assets less current liabilities Non-current liabilities Other borrowings 28 Deferred tax liabilities 30(b) NET ASSETS CAPITAL AND RESERVES Share capital 31 Reserves 32 TOTAL EQUITY	2011 HK$’000 200,910 19,728 17,962 259,416 308,570 10,619 817,205 - - - - - - - - - - - - 1,050 5,900 16,710 64,424 16,545 104,629 5,345 15,527 8,772 15,819 23,766 – 2,472 71,701 32,928 - - - - - - - - - - - - 850,133 1,545 784 2,329 847,804 13,048 834,756 847,804	2010 HK$’000 239,131 4,925 22,188 349,416 327,132 13,333
		956,125 - - - - - - - - - - - - 1,597 4,274 14,288 71,643 62,943
		154,745
		13,169 16,143 5,928 18,442 15,355 16,720 455
		86,212
		68,533 - - - - - - - - - - - -
		1,024,658
		– –
		–
		1,024,658

		13,048 1,011,610
		1,024,658

– ID-3 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

Statement of Financial Position

As at 31 March 2011

Note Non-current assets Investments in subsidiaries 20 Current assets Amounts due from subsidiaries 20 Other receivables, deposits and prepayments 24 Cash and cash equivalents 25 Current liabilities Accrued charges and other payables Amounts due to directors 27 Net current assets Total assets less current liabilities NET ASSETS CAPITAL AND RESERVES Share capital 31 Reserves 32 TOTAL EQUITY	2011 HK$’000 – - - - - - - - - - - - - 787,994 507 1,634 790,135 1,103 4,427 5,530 784,605 - - - - - - - - - - - - 784,605 784,605 13,048 771,557 784,605	2010 HK$’000 – - - - - - - - - - - - - 1,089,592 207 36,201
		1,126,000
		322 2,427
		2,749
		1,123,251 - - - - - - - - - - - -
		1,123,251
		1,123,251

		13,048 1,110,203
		1,123,251

– ID-4 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

Consolidated Statement of Changes in Equity

For the year ended 31 March 2011

		Attributable to equity shareholders of the Company	Attributable to equity shareholders of the Company	Attributable to equity shareholders of the Company
Share capital HK$’000 869,898 - - - - - – 144,982 289,966 – (1,291,798) (856,850) - - - - - 13,048 – 13,048	Share premium HK$’000 540,855 - - - - - – – (289,966) – – (289,966) - - - - - 250,889 – 250,889	Capital reserve HK$’000 (267) - - - - - – – – – – – - - - - - (267) – (267)	Statutory reserve Share-based payments reserve Distributable reserve HK$’000 HK$’000 HK$’000 6,289 11,851 – - - - - - - - - - - - - - - - – – – – – – – – – – 36,296 – – – 1,291,798 – 36,296 1,291,798 - - - - - - - - - - - - - - - 6,289 48,147 1,291,798 – – – 6,289 48,147 1,291,798	Exchange reserve Accumulated losses HK$’000 HK$’000 128,484 (268,063) - - - - - - - - - - 8,986 (454,653) – – – – – – – – 8,986 (454,653) - - - - - - - - - - 137,470 (722,716) 8,302 (185,156) 145,772 (907,872)	Total HK$’000 1,289,047 - - - - - (445,667) 144,982 – 36,296 –
					(264,389) - - - - -
					1,024,658

					(176,854)
					847,804

Note: The distributable reserve represents credit arising from Capital Reorganisation effected by the Company during the year ended 31 March 2010.

– ID-5 –

APPENDIX ID

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

Consolidated Statement of Cash Flows

For the year ended 31 March 2011

Operating activities Loss before taxation Adjustments for: Amortisation of intangible assets Amortisation of leasehold land and land use rights Depreciation Equity settled share-based payment expenses Interest expenses Interest income Amount waived by a creditor Share of loss of associates (Gain)/loss on disposal of property, plant and equipment Impairment loss on trade receivables Impairment loss on goodwill Impairment loss on other receivables, deposits and prepayments Impairment loss on property, plant and equipment Impairment loss on intangible assets Valuation gains on investment property Loss on disposal of intangible assets Property, plant and equipment written off Bad debts written off Inventories written off Reversal of impairment of inventories Reversal of impairment of trade and other receivables Effect of foreign exchange rate changes Operating cash flows before movements in working capital Movement in: (Increase)/decrease in inventories Decrease in trade and other receivables, deposits and prepayments Increase/(decrease) in amounts due to directors (Decrease)/increase in amounts due to associates (Decrease) in trade payables, accrued charges and other payables Cash (used in)/generated from operations Interest paid Income taxes refunded/(paid) Net cash (used in)/generated from operating activities	2011 HK$’000 (182,750) 30,219 1,628 35,318 – 1,683 (132) (3,002) 3,230 (276) 700 90,000 – 8,819 9,756 (3,408) – 572 4,163 – (168) (3,540) (18,287) (25,475) (1,458) 3,474 2,844 (2,623) (5,438) (28,676) (1,683) 376 (29,983) - - - - - - - - - - - -	2010 HK$’000 (450,471) 43,247 1,596 44,534 36,296 2,323 (226) – 886 47,434 83 30,510 24,877 22,215 123,969 – 13,159 65,572 – 3,062 – – 7,984 17,050 1,234 121,730 (6,144) 18,442 (44,820) 107,492 (2,323) (24,021) 81,148 - - - - - - - - - - - -

– ID-6 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

Investing activities Net cash outflow from acquisition of an associate Payment for the purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Payment for the purchase of intangible assets Proceed from disposal of intangible assets Interest received Net cash used in investing activities Financing activities New borrowing raised from other borrowings New borrowing raised from bank loans Repayment of bank loans and other borrowings Proceeds from issue of new shares Net cash (used in)/generated from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of changes in foreign exchange rate Cash and cash equivalents at end of year	2011 HK$’000 – (3,932) 813 (7,514) – 132 (10,501) - - - - - - - - - - - - 1,545 23,766 (32,075) – (6,764) - - - - - - - - - - - - (47,248) 62,943 850 16,545	2010 HK$’000 (3,980) (1,003) 341 (190,715) 1,867 226 (193,264) - - - - - - - - - - - - 16,720 – (36,691) 144,982 125,011 - - - - - - - - - - - - 12,895 50,009 39 62,943

– ID-7 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

Notes to the Financial Statements

For the year ended 31 March 2011

1 GENERAL INFORMATION

The Company is an exempted company incorporated with limited liability in the Cayman Islands with its securities listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). Automatic Result Limited, a company incorporated in the British Virgin Islands with limited liability, is the single largest shareholder of the Company. The Company’s registered office is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands and its principal place of business in Hong Kong is at 13/F., Public Bank Building, 120 Des Voeux Road Central, Central, Hong Kong.

The principal activities of the Company are investment holding and its subsidiaries are principally engaged in bioscience related business (with focus on the research, development and commercialisation of biopharmaceuticals through recombinant DNA and other technologies); the manufacture, sale and trading of pharmaceutical products.

Trading in the Shares on the Stock Exchange has been suspended since 9 March 2010 at the request of the Company.

2 SIGNIFICANT ACCOUNTING POLICIES

a) Statement of compliance

These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. A summary of the significant accounting policies adopted by the Group is set out below.

b) Basis of preparation of the financial statements

The consolidated financial statements for the year ended 31 March 2011 comprise the Company and its subsidiaries (collectively referred to as the “Group”).

The Group incurred a loss for the year attributable to equity shareholders of the Company of approximately HK$185,156,000 and had significant accumulated losses of approximately HK$907,872,000 as at 31 March 2011. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern.

– ID-8 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

In light of the measures described above, the directors are confident that the Group will have sufficient working capital to meet its financial obligation as and when they fall due. Accordingly, the directors are of opinion that it is appropriate to prepare these financial statements on a going concern basis. These financial statements do not include any adjustments relating to the carrying amount and reclassification of assets and liabilities that might be necessary should the Group be unable to continue as a going concern.

The measurement basis used in the preparation of the financial statements is the historical cost basis except the investment property which are stated at their fair value as explained in the accounting policies set out below:

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.

Judgements made by management in the application of HKFRSs that have significant effect on the financial statements and major sources of estimation uncertainty are discussed in note 4.

c) Subsidiaries and non-controlling interests

Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, which the Group has not agreed any additional terms with the holders of those interests and in respect of which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. For each business combination, the Group can elect to measure any non-controlling interests either at fair value or at their proportionate share of the subsidiary’s net identifiable assets.

– ID-9 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

In the Company’s statement of financial position, an investment in a subsidiary is stated at cost less impairment losses (see note 2(k)).

d) Associates

An investment in an associate or a jointly controlled entity is accounted for in the consolidated financial statements under the equity method, unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group’s share of the acquisition-date fair values of the investee’s identifiable net assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post acquisition change in the Group’s share of the investee’s net assets and any impairment loss relating to the investment (see notes 2(e) and (k)). Any acquisition-date excess over cost, the Group’s share of the post-acquisition, post-tax results of the investees and any impairment losses for the year are recognised in the consolidated income statement, whereas the Group’s share of the post-acquisition post-tax items of the investees’ other comprehensive income is recognised in the consolidated statement of comprehensive income.

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

Unrealised profits and losses resulting from transactions between the Group and its associates and jointly controlled entities are eliminated to the extent of the Group’s interest in the investee, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or loss.

– ID-10 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

When the Group ceases to have significant influence over an associate or joint control over a jointly controlled entity, it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former investee at the date when significant influence or joint control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset (see note 2(f)) or, when appropriate, the cost on initial recognition of an investment in an associate.

In the Company’s statement of financial position, investments in associates and jointly controlled entities are stated at cost less impairment losses (see note 2(k)).

e) Goodwill

Goodwill represents the excess of

(i) the aggregate of the fair value of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest in the acquiree; over
(ii) the net fair value of the acquiree’s identifiable assets and liabilities measured as at the acquisition date.

When (ii) is greater than (i), then this excess is recognised immediately in profit or loss as a gain on a bargain purchase.

f) Other investments in equity securities and other financial instruments

Investments are recognised/derecognised on the date the Group commits to purchase/sell the investments or they expire.

– ID-11 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

g) Investment property

h) Property, plant and equipment

The following items of property, plant and equipment are stated in the statement of financial position at cost less accumulated depreciation and impairment losses (see note 2(k)):

buildings held for own use which are situated on leasehold land, where the fair value of the building could be measured separately from the fair value of the leasehold land at the inception of the lease (see note 2(i)); and
other items of plant and equipment.

–	Building held for own use	5%
–	Leasehold improvements	5 – 18%
–	Plant and machinery	6.6 – 20%
–	Furniture, fixtures and equipment	10 – 20%
–	Motor vehicles	15 – 20%
–	Construction in progress	Nil

– ID-12 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

i)

Leased assets

i) Classification of assets leased to the Group

property held under operating leases that would otherwise meet the definition of an investment property is classified as investment property on a property-by-property basis and, if classified as investment property, is accounted for as if held under a finance lease (see note 2(g)); and
land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. For these purposes, the inception of the lease is the time that the lease was first entered into by the Group, or taken over from the previous lessee.

ii) Assets acquired under finance leases

Where the Group acquires the use of assets under finance leases, the amounts representing the fair value of the leased asset, or, if lower, the present value of the minimum lease payments, of such assets are included in fixed assets and the corresponding liabilities, net of finance charges, are recorded as obligations under finance leases. Depreciation is provided at rates which write off the cost or valuation of the assets over the term of the relevant lease or, where it is likely the Group will obtain ownership of the asset, the life of the asset, as set out in note 2(h). Impairment losses are accounted for in accordance with the accounting policy as set out in note 2(k). Finance charges implicit in the lease payments are charged to profit or loss over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

iii) Operating lease charges

– ID-13 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

j)

Intangible assets (other than goodwill)

–	Trademark and certificates	5 – 10 years
–	Technical know-how	5 – 10 years

Both the period and method of amortisation are reviewed annually.

k) Impairment of assets

i) Impairment of investments in equity securities and trade and other receivables

Investments in equity securities and other current and non-current receivables that are stated at cost or amortised cost or are classified as available-for-sale securities are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events:

significant financial difficulty of the debtor;
a breach of contract, such as a default or delinquency in interest or principal payments;
it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;

– ID-14 –

APPENDIX ID

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and
a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

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

– For investments in subsidiaries, associates and jointly controlled entities (including those recognised using the equity method (see note 2(d)), the impairment loss is measured by comparing the recoverable amount of the investment with its carrying amount in accordance with note 2(k). The impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount in accordance with note 2(k)(ii). For investments in subsidiaries, associates and jointly controlled entities (including those recognised using the equity method (see note 2(d)), the impairment loss is measured by comparing the recoverable amount of the investment with its carrying amount in accordance with note 2(k)(ii). The impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount in accordance with note 2(k)(ii).

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

For trade and other current receivables and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective Group.

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

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APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

ii) Impairment of other assets

property, plant and equipment (other than properties carried at revalued amounts);
investment property;
pre-paid interests in leasehold land classified as being held under an operating lease;
intangible assets; and
goodwill.

Calculation of recoverable amount

Recognition of impairment losses

Reversal of impairment losses

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APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

iii) Interim financial reporting and impairment

Under the Rules Governing the Listing of Securities on the Stock Exchange, the Group is required to prepare an interim financial report in compliance with HKAS 34, interim financial reporting, in respect of the first six months of the financial year. At the end of the interim period, the Group applies the same impairment testing, recognition, and reversal criteria as it would at the end of the financial year (see notes 2 (k)(i) and (ii)).

l)

Inventories

Inventories are carried at the lower of cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

m) Trade and other receivables

n)

Interest-bearing borrowings

o) Trade and other payables

Trade and other payables are initially recognised at fair value and are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

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APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

p) Cash and cash equivalents

q) Employee benefits

i) Short term employee benefits and contributions to defined contribution retirement plans

salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

ii) Share-based payments

The fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in a capital reserve within equity. The fair value is measured at grant date using the Black-Scholes-Merton Option Pricing Model, taking into account the terms and conditions upon which the options were granted. Where the employees have to meet vesting conditions before becoming unconditionally entitled to the options, the total estimated fair value of the options is spread over the vesting period, taking into account the probability that the options will vest.

During the vesting period, the number of share options that is expected to vest is reviewed. Any resulting adjustment to the cumulative fair value recognised in prior years is charged/credited to the profit or loss for the year of the review, unless the original employee expenses qualify for recognition as an asset, with a corresponding adjustment to the capital reserve. On vesting date, the amount recognised as an expense is adjusted to reflect the actual number of options that vest (with a corresponding adjustment to the capital reserve) except where forfeiture is only due to not achieving vesting conditions that relate to the market price of the Company’s shares. The equity amount is recognised in the capital reserve until either the option is exercised (when it is transferred to the share premium account) or the option expires (when it is released directly to retained profits).

iii) Termination benefits

– ID-18 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

r) Income tax

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period. Deferred tax assets and liabilities are not discounted.

Additional income taxes that arise from the distribution of dividends are recognised when the liability to pay the related dividends is recognised.

– ID-19 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

in the case of current tax assets and liabilities, the Company or the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or
in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:
the same taxable entity; or
different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

s) Provisions and contingent liabilities

t) Revenue recognition

(i) Sale of goods

(ii) Rental income from operating leases

– ID-20 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

(iii) Dividends

Dividend income from unlisted investments is recognised when the shareholder’s right to receive payment is established.
Dividend income from listed investments is recognised when the share price of the investment goes ex-dividend.
(iv) Interest income

Interest income is recognised as it accrues using the effective interest method.

(v) Service income

Revenue from the provision of accounting services and management services are recognised when the services are provided.

(vi) Government grants

u)

Translation of foreign currencies

– ID-21 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

v) Borrowing costs

w) Related parties

For the purposes of these financial statements, a party is considered to be related to the Group if:

(i) the party has the ability, directly or indirectly through one or more intermediaries, to control the Group or exercise significant influence over the Group in making financial and operating policy decisions, or has joint control over the Group;
(ii) the Group and the party are subject to common control;
(iii) the party is an associate of the Group or a joint venture in which the Group is a venturer;
(iv) the party is a member of key management personnel of the Group or the Group’s parent, or a close family member of such an individual, or is an entity under the control, joint control or significant influence of such individuals;
(v) the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or significant influence of such individuals; or
(vi) the party is a post-employment benefit plan which is for the benefit of employees of the Group or of any entity that is a related party of the Group.

Close family members of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.

x) Segment reporting

– ID-22 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

3 CHANGES IN ACCOUNTING POLICIES

The HKICPA has issued two revised HKFRS, a number of amendments to HKFRSs and two new Interpretations that are first effective for the current accounting period of the Group and the Company. Of these, the following developments are relevant to the Group’s financial statements:

HKFRS 3 (revised 2008), Business combinations
Amendments to HKAS 27, Consolidated and separate financial statements
Amendment to HKAS 39, Financial Instruments: Recognition and measurement – eligible hedged items

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period.

The amendment to HKAS 39 has had no material impact on the Group’s financial statements as the amendment’s conclusions were consistent with policies already adopted by the Group. The other developments resulted in changes in accounting policy but none of these changes in policy have a material impact on the current or comparative periods, for the following reasons:

The impact of the majority of the revisions to HKFRS 3 and other revision of HKAS 27 have not yet had a material effect on the Group’s financial statements as these changes will first be effective as and when the Group enters into a relevant transaction (for example, a business combination or a disposal of a subsidiary) and there is no requirement to restate the amounts recorded in respect of previous such transactions.
The impact of the amendments to HKFRS 3 (in respect of recognition of acquiree’s deferred tax assets) and HKAS 27 (in respect of allocation of losses to non-controlling interests have had no material impact as there is no requirement to restate amounts recorded in previous period and no such deferred tax assets or losses arose in the current period.

4 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

a) Impairment of property, plant and equipment

– ID-23 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

selected by management to determine the level of impairment, including the discount rates or the growth rate assumptions in the cash flow projections, could materially affect the net present value used in the impairment test. The Group determines whether an asset is impaired at least on an annual basis or where an indication of impairment exists.

b) Useful lives and residual values of property, plant and equipment

c)

Investment properties

The fair values of investment properties are determined by the Group’s management on an open market basis.

d) Impairment of intangible assets and goodwill

The Group performs annual tests on whether there has been impairment of intangible assets and goodwill in accordance with the accounting policy stated in note 2(e). The recoverable amounts of cash generating units are determined based on value-in-use calculations. These calculations require the use of estimates and assumptions made by management on the future operation of the business, pre-tax discount rates, and other assumptions underlying the value-in-use calculations.

e)

Amortisation of intangible assets

f)

Inventories

g)

Impairment of receivables

– ID-24 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

h) Taxation

i) Fair values of share options granted and/or modified by the Company

As described in note 33, the directors of the Company use their judgement in selecting appropriate valuation techniques for share options granted and/or modified by the Company. Valuation technique, namely Black- Scholes-Merton Pricing Model, which is commonly used by market practitioners, has been applied for estimating the fair value of share options. The estimation of fair values of the share options are derived after taking into account the input parameters, such as the Company’s share price, exercise price of the share options, expected volatility of the Company’s share price, risk-free interest rates and expected dividend yield of the shares, etc. Details of the inputs and parameters for estimating the fair values of options are disclosed in note 33.

5 TURNOVER

The Group is principally engaged in bioscience related business (with focus on the research, development and commercialisation of biopharmaceuticals through recombinant DNA and other technologies).

Turnover represents the gross invoiced value of goods sold, net of value added tax, sales returns and discounts.

				2011	2010
				HK$’000	HK$’000
Sales	of	pharmaceutical	products	76,764	148,286

Details of the main business segments of the Group are set out in note 14 to the financial statements.

– ID-25 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

6 OTHER REVENUE AND NET INCOME

Interest income Rental income from investment property Government grants for research and development project Exchange gain/(loss), net Reversal of impairment on trade and other receivables Amount waived by a creditor Gain on disposal of property, plant and equipment Reversal of impairment on inventories Sundry income	2011 HK$’000 132 974 2,150 84 3,540 3,002 276 168 1,568 11,894	2010 HK$’000 226 512 1,171 (5) 226 – – – 3,367
		5,497

7 LOSS BEFORE TAXATION

Loss before taxation is arrived at after charging:

a) Finance costs Interest on bank borrowings wholly repayable within five years Bank handling charges Total borrowing costs b) Staff costs (including directors’ emoluments) Contributions to defined contribution retirement plans Salaries, wages and other benefits Equity settled share-based payments expenses Less: Staff costs included in research and development costs	2011 HK$’000 1,683 255 1,938 662 13,250 – 13,912 (323) 13,589	2010 HK$’000 2,323 132
		2,455

		438 9,787 36,296
		46,521

		(333)
		46,188

– ID-26 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

c) Other items Auditor’s remuneration Cost of inventories Amortisation of intangible assets Amortisation of land use rights Depreciation Less: Depreciation included in research and development costs Minimum lease payments – property rentals Operating lease charges: Research and development costs Less: Capitalisation on intangible assets	2011 HK$’000 1,100 33,933 30,219 1,628 35,318 (438) 34,880 71 12,968 (7,514) 5,454	2010 HK$’000 1,100 70,572 43,247 1,596
		44,534 (13,089)
		31,445 376 360,814 (170,908)
		189,906

8 INCOME TAX IN THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Income tax in the consolidated statement of comprehensive income represents:

Current tax – Overseas PRC enterprise income tax for the year Overprovision in prior years Deferred tax Origination and reversal of temporary differences	2011 HK$’000 1,941 (300) 1,641 765 2,406	2010 HK$’000 4,555 (373)
		4,182 –
		4,182

a) No provision for Hong Kong profits tax has been made in the consolidated financial statements as the Group did not have any assessable profits arising in Hong Kong during the year (2010: Nil).

– ID-27 –

APPENDIX ID

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

b) Reconciliation between tax expense and accounting loss at applicable tax rates:

2011 HK$’000 Loss before income tax (182,750) Notional tax on loss before income tax, calculated at the rate applicable to loss in the countries concerned (36,928) Tax effect of non-taxable income (4,196) Tax effect of non-deductible expenses 33,544 Effect of tax concessionary rates granted to the PRC subsidiaries (1,295) Overprovision in prior years (300) Tax effect of unused tax losses not recognised 11,581 Actual tax expense 2,406	2010 HK$’000 (450,471)

	(105,992) (66,018) 121,419 (608) (373) 55,754
	4,182

9 DIRECTORS’ REMUNERATION

Directors’ remuneration disclosed pursuant to section 161 of the Hong Kong Companies Ordinance is as follows:

For the year ended 31 March 2011

Executive Directors Tong Kit Shing Liu Guoyao Independent Non-executive Directors Zhou Yaoming Lin Jian Tsao Hoi Ho (appointed on 7 May 2010) Lou Iok Kuong (appointed on 25 June 2010) Leung Ka Chun (appointed on 25 June 2010)	Directors’ fees HK$’000 120 – 50 50 108 92 92 512	Salaries, allowances and benefits in kind Share-based payments Retirement scheme contributions HK$’000 HK$’000 HK$’000 13 – 6 – – – – – – – – – – – – – – – – – – 13 – 6	Total HK$’000 139 – 50 50 108 92 92
			531

– ID-28 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

For the year ended 31 March 2010

Executive Directors Tong Kit Shing Liu Guoyao Cheng Wai Man (resigned on 4 September 2009) Independent Non-executive Directors Zhou Yaoming Lin Jian So Yin Wai (resigned on 15 March 2010)	Directors’ fees HK$’000 120 – – 50 50 50 270	Salaries, allowances and benefits in kind Share-based payments Retirement scheme contributions HK$’000 HK$’000 HK$’000 1 – 12 – – – – – – – – – – – – – – – 1 – 12	Total HK$’000 133 – – 50 50 50
			283

During the year, no (2010: Nil) emolument was paid by the Group to the five highest paid individuals (including directors and employees) as an inducement to join or upon joining the Group or as compensation for loss of office. None (2010: Nil) of the directors has waived any emoluments during the year.

10 INDIVIDUALS WITH HIGHEST EMOLUMENTS

Of the five individuals with the highest emoluments, none (2010: Nil) is director whose emoluments are disclosed in note 9. The aggregate of the emoluments in respect of the other five (2010: five) individuals are as follows:

Salaries and other emoluments Share-based payments Retirements schemes contributions	2011 HK$’000 2,207 – 40 2,247	2010 HK$’000 1,365 – 51
		1,416

– ID-29 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

The emoluments of the five (2010: five) individuals with the highest emoluments are within the following bands:

Their emoluments were within the following bands:

	2011	2010
	No. of	No. of
	employees	employees
HK$Nil – HK$1,000,000	5	5
HK$1,000,001 – HK$2,000,000	–	–
HK$2,000,001 – HK$3,000,000	–	–

11 LOSS ATTRIBUTABLE TO EQUITY SHAREHOLDERS OF THE COMPANY

The consolidated loss attributable to equity shareholders of the Company includes a loss of approximately HK$338,646,000 (2010: HK$339,113,000) which has been dealt with in the financial statements of the Company.

12 DIVIDENDS

No dividend was paid or proposed during the year ended 31 March 2011 (2010: Nil), nor has any dividend been proposed since the end of the reporting period (2010: Nil).

13 LOSS PER SHARE

The calculation of basic and diluted loss per share attributable to equity shareholders of the Company is based on the following data:

Loss for the year attributable to equity shareholders of the Company for the purpose of basic and diluted loss per share Weighted average number of ordinary shares for the purpose of calculating basic loss per share Effect of dilutive potential ordinary shares – Share options Weighted average number of ordinary shares for the purpose of calculating diluted loss per share	2011 HK$’000 (185,156) 2011 Number of shares 1,304,846,000 59,854,951 1,364,700,951	2010 HK$’000 (454,653)

		2010 Number of shares 5,671,016,718

		68,546,605
		5,739,563,323

– ID-30 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

14 SEGMENT REPORTING

Segment revenues and results

Business segments

The Group comprises the following main business segments:

Distribution of third party pharmaceutical products – Distribution of third party pharmaceutical products.

In-house chemical pharmaceutical products – Manufacture and sale of in-house chemical pharmaceutical products.

In-house biological pharmaceutical products – Manufacture and sale of in-house biological pharmaceutical products.

– ID-31 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

Primary reporting format – business segments

For the year ended 31 March 2011

Distribution of third party pharmaceutical products In-house chemical pharmaceutical products In-house biological pharmaceutical products HK$’000 HK$’000 HK$’000 Revenue from external customers 20,459 14,159 42,146 Inter-segment sales – – 4,959 Reportable segment revenue 20,459 14,159 47,105 Reportable segment results – gross 5,307 9,046 33,299 Operating income and expenses (13,208) (20,441) (68,314) Impairment loss on trade receivables (700) – – Valuation (loss)/gain on investment property – (1,693) 5,101 Impairment loss on intangible assets – (2,258) (7,498) Impairment loss on property, plant and equipment – (8,819) – Property, plant and equipment written off – (514) – Bad debts written off (4,163) – – Segment results (12,764) (24,679) (37,412) Unallocated operating income and expenses Operating loss Finance costs Share of loss of associates Loss before taxation Income tax Loss for the year Segment assets 65,453 109,289 484,592 Unallocated corporate assets Total assets Segment liabilities 31,961 3,204 28,640 Unallocated corporate liabilities Total liabilities Capital expenditure – 1,539 9,826 Amortisation – 3,692 28,155 Depreciation 9,841 10,135 15,314 Gain on disposal of property, plant and equipment – 269 7	Total HK$’000 76,764 4,959
	81,723

	47,652 (101,963) (700) 3,408 (9,756) (8,819) (514) (4,163)
	(74,855) (102,727)
	(177,582) (1,938) (3,230)
	(182,750) (2,406)
	(185,156)

	659,334 262,500
	921,834

	63,805 10,225
	74,030

	11,365 31,847 35,290 276

– ID-32 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

For the year ended 31 March 2010

Distribution of third party pharmaceutical products In-house chemical pharmaceutical products In-house biological pharmaceutical products HK$’000 HK$’000 HK$’000 Revenue from external customers 83,847 10,418 54,021 Inter-segment sales 4,089 – – Reportable segment revenue 87,936 10,418 54,021 Reportable segment results – gross 32,884 3,843 40,485 Operating income and expenses (16,966) (26,967) (106,115) Impairment loss on trade receivables – (83) – Impairment loss on other receivables, deposits and prepayments – (24,759) (118) Impairment loss on intangible assets – (123,969) – Impairment loss on property, plant and equipment – (22,215) – Loss on disposal of intangible assets – – (13,159) Loss on disposal of property, plant and equipment (47,434) – – Property, plant and equipment written off – (63,790) (827) Inventories written off – – (3,062) Segment results (31,516) (257,940) (82,796) Unallocated operating income and expenses – – – Operating loss Finance costs Share of loss of associates Loss before taxation Income tax Loss for the year Segment assets 73,962 136,878 733,863 Unallocated corporate assets Total assets Segment liabilities 26,599 2,490 53,133 Unallocated corporate liabilities Total liabilities	Total HK$’000 148,286 4,089
	152,375

	77,212 (150,048) (83) (24,877) (123,969) (22,215) (13,159) (47,434) (64,617) (3,062)
	(372,252) (74,878)
	(447,130) (2,455) (886)
	(450,471) (4,182)
	(454,653)

	944,703 166,167
	1,110,870

	82,222 3,990
	86,212

– ID-33 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

	Distribution	In-house	In-house
	of third party	chemical	biological
	pharmaceutical	pharmaceutical	pharmaceutical
	products	products	products	Total
	HK$’000	HK$’000	HK$’000	HK$’000
Capital expenditure	8	638	195,053	195,699
Amortisation	–	9,744	35,099	44,843
Depreciation	12,677	15,556	16,301	44,534
Loss on disposal of property, plant and
equipment	47,434	–	–	47,434

Geographical segments

The Group’s operations are located in the PRC and Hong Kong. The following table provides an analysis of the Group’s geographical segment information:

For the year ended 31 March 2011

Hong Kong PRC For the year ended 31 March 2010 Hong Kong PRC	Turnover HK$’000 – 76,764 76,764 Turnover HK$’000 – 148,286 148,286	Total assets HK$’000 579,090 342,744 921,834 Total assets HK$’000 166,167 944,703 1,110,870	Capital expenditure HK$’000 81 11,365
			11,446

			Capital expenditure HK$’000 – 195,699
			195,699

Information about major customers

There is no customer who represents more than 10% of the sales of the Group.

– ID-34 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

15 PROPERTY, PLANT AND EQUIPMENT

The Group

Cost At 1 April 2009 Additions Disposals Exchange differences At 31 March 2010 Additions Disposals Reclassified to investment property Exchange differences At 31 March 2011 Accumulated depreciation and impairment At 1 April 2009 Charge for the year Written back on disposals Impairment for the year Exchange differences At 31 March 2010 Charge for the year Written back on disposals Impairment for the year Reclassified to investment property Exchange differences At 31 March 2011 Net book value At 31 March 2011 At 31 March 2010	Leasehold building in the PRC HK$’000 52,091 – – 54 52,145 – – (9,729) 1,966 44,382 - - - - 16,748 2,740 – – 9 19,497 2,747 – – (2,811) 331 19,764 - - - - 24,618 32,648	Plant and machinery Furniture, fixtures and equipment Leasehold improvement HK$’000 HK$’000 HK$’000 409,238 31,722 49,674 416 397 149 (122,541) – – 327 33 51 287,440 32,152 49,874 1,502 127 1,751 (16,509) (90) (5,406) – – – 7,668 1,212 1,880 280,101 33,401 48,099 - - - - - - - - - - - - 77,943 21,428 11,410 30,885 5,374 4,896 (10,149) – – 11,296 – 10,919 40 11 6 110,015 26,813 27,231 27,628 1,639 2,649 (16,072) (48) (5,353) 8,105 – 714 – – – 2,268 457 464 131,944 28,861 25,705 - - - - - - - - - - - - 148,157 4,540 22,394 177,425 5,339 22,643	Motor vehicles Construction in-progress HK$’000 HK$’000 5,184 504 – 41 (955) – 5 1 4,234 546 311 241 (404) (528) – – 843 25 4,984 284 - - - - - - - - 3,062 – 639 – – – – – 3 – 3,704 – 655 – (355) – – – – – 63 – 4,067 – - - - - - - - - 917 284 530 546	Total HK$’000 548,413 1,003 (123,496) 471
				426,391 3,932 (22,937) (9,729) 13,594
				411,251 - - - - 130,591 44,534 (10,149) 22,215 69
				187,260 35,318 (21,828) 8,819 (2,811) 3,583
				210,341 - - - -
				200,910

				239,131

– ID-35 –

APPENDIX ID

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

16 INVESTMENT PROPERTY

Balance at beginning of year Exchange differences Reclassified from property, plant and equipment Reclassified from leasehold land and land use right Gains on revaluation Balance at end of year	The Group 2011 2010 HK$’000 HK$’000 4,925 4,920 307 5 6,918 – 4,170 – 3,408 – 19,728 4,925	The Group 2011 2010 HK$’000 HK$’000 4,925 4,920 307 5 6,918 – 4,170 – 3,408 – 19,728 4,925
		4,925

The fair values of the Group’s investment properties at 31 March 2011 have been arrived at on the basis of a valuation carried out at that date by Messrs. AA Property Services Limited, independent qualified valuers not connected to the Group. The valuation was arrived at by reference to market evidence of transaction prices for similar properties.

Investment properties are located in the PRC and certain of them were pledged as collateral for the Group’s bank borrowings (Note 28 and 34).

The Group’s total future minimum lease payments receivable under non-cancellable operating leases are as follows:

Within 1 year After 1 year but within 5 years	2011 HK$’000 1,254 544 1,798	2010 HK$’000 563 88
		651

– ID-36 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

17 LEASEHOLD LAND AND LAND USE RIGHTS

The Group’s interests in leasehold land and land use rights represent prepaid lease payments and their net book value is analysed as follows:

	The	Group
	2011	2010
	HK$’000	HK$’000
Balance at beginning of year	23,785	25,359
Amortisation	(1,628)	(1,596)
Reclassified to investment property	(4,170)	–
Exchange differences	1,025	22
Balance at end of year	19,012	23,785

Analysed for reporting purposes as:
Current assets	1,050	1,597
Non-current assets	17,962	22,188
	19,012	23,785

The Group’s leasehold land and land use rights	payments comprise:
– Medium-term lease in the PRC	7,803	9,001
– Short-term lease in the PRC	11,209	14,784
	19,012	23,785

Certain leasehold land and land use rights were pledged as collateral for bank borrowings (Note 28 and 34).

– ID-37 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

18 GOODWILL

Cost At 1 April 2009, 31 March 2010 and 31 March 2011 Accumulated impairment losses At 1 April 2009 Impairment for the year At 31 March 2010 Impairment for the year At 31 March 2011 Carrying amount At 31 March 2011 At 31 March 2010	HK$’000 573,552 - - - - - - - - - (193,626) (30,510)
	(224,136) (90,000)
	(314,136)

	259,416

	349,416

Goodwill is allocated to the Group’s cash-generating units (“CGU”) identified according to country of operation and business segment as follows:

					2011	2010
					HK$’000	HK$’000
Pharmaceutical	products	–	the	PRC	259,416	349,416

The recoverable amount of the CGU is determined based on value-in-use calculations.

Key assumptions used for value-in-use calculations:

	2011	2010
	%	%
Gross margin	24-40	20-29
Growth rate	0-40	0-15
Discount rate	20-24	28

The recoverable amount of value-in-use of the CGU were assessed by an independent professional firm of valuers, AA Property Services Limited. According to their results of valuations, the Group recognised an impairment loss of HK$90,000,000 for the year ended 31 March 2011 (2010: HK$30,510,000).

– ID-38 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

19 INTANGIBLE ASSETS

The Group

Trademarks and certificates HK$’000 Cost At 1 April 2009 361,927 Additions – Disposals (13,462) Exchange differences 142 At 31 March 2010 348,607 Additions – Exchange differences 15,619 At 31 March 2011 364,226 - - - - - - - Accumulated amortisation and impairment At 1 April 2009 100,858 Charge for the year 34,157 Impairment for the year 123,969 Written back on disposals (13,650) Exchange differences 142 At 31 March 2010 245,476 Charge for the year 23,359 Impairment for the year 9,756 Exchange differences 11,583 At 31 March 2011 290,174 - - - - - - - Carrying amount At 31 March 2011 74,052 At 31 March 2010 103,131	Technical know-how Product development in progress HK$’000 HK$’000 64,500 – 19,807 170,908 (17,061) – 59 – 67,305 170,908 – 7,514 3,015 7,657 70,320 186,079 - - - - - - - - - - - - - - 6,959 – 9,090 – – – (1,847) – 10 – 14,212 – 6,860 – – – 809 – 21,881 – - - - - - - - - - - - - - - 48,439 186,079 53,093 170,908	Total HK$’000 426,427 190,715 (30,523) 201
		586,820 7,514 26,291
		620,625 - - - - - - - 107,817 43,247 123,969 (15,497) 152
		259,688 30,219 9,756 12,392
		312,055 - - - - - - -
		308,570

		327,132

Trademarks and certificates represent costs in obtaining trademarks and registration certificates for medicines.

Technical know-how mainly represents techniques and formulas acquired for the development of products and production technology.

Product development in progress mainly represent costs generated internally for the development of products and product technology.

The above intangible assets have definite useful lives and are amortised on a straight line basis over their remaining estimated useful life of five to ten years.

– ID-39 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

The amortisation charge for the year is included in “general and administrative expense” in the consolidated statement of comprehensive income.

According to the results of review of the valuations carried out by an independent professional firm of valuers, AA Property Services Limited, the Group recognised an impairment loss of HK$9,756,000 for the year ended 31 March 2011 (2010: HK$123,969,000).

20 INVESTMENTS IN SUBSIDIARIES

Unlisted shares, at cost Amounts due from subsidiaries Less: Impairment loss	The Company 2011 2010 HK$’000 HK$’000 – – 1,574,843 1,546,592 (786,849) (457,000) 787,994 1,089,592	The Company 2011 2010 HK$’000 HK$’000 – – 1,574,843 1,546,592 (786,849) (457,000) 787,994 1,089,592

		1,546,592 (457,000)
		1,089,592

a) Amounts due from and due to subsidiaries are unsecured, interest-free and repayable on demand.
b) The details of the subsidiaries at 31 March 2011 are as follows:

		Principal
	Place of	activities and	Particulars of
	incorporation/	place of	issued and paid	Interest
Name	establishment	operation	up share capital	held
Lelion Holdings	British Virgin	Investment	2 Ordinary shares	100%*
Limited	Islands	holding/ Hong	of US$1 each
		Kong
Joint Peace	British Virgin	Dormant/	2 Ordinary shares	100%
Limited	Islands	Hong Kong	of US$1 each
Uni-Bio	Hong Kong	Provision of	1 Ordinary share	100%
Management		management	of HK$1 each
Limited		services/
		Hong Kong
Figures Up	British Virgin	Investment	100 Ordinary	100%
Trading	Islands	holding/	shares of US$1
Limited		Hong Kong	each
Nan Hoo	British Virgin	Investment	50,000 Ordinary	100%
Properties	Islands	holding/	shares of US$1
Limited		Hong Kong	each
Zethanel	British Virgin	Investment	10,000 Ordinary	100%
Properties	Islands	holding/ Hong	shares of US$1
Limited		Kong	each

– ID-40 –

APPENDIX ID

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

		Principal
	Place of	activities and	Particulars of
	incorporation/	place of	issued and paid	Interest
Name	establishment	operation	up share capital	held
Dongguan Taili	The PRC	Research and	Contributed	100%
Biotech Co.,		development,	capital of
Limited		manufacture	HK$100,458,126
		and sales of
		medical and
		biological
		products/PRC
Dongguan Shi Bo	The PRC	Trading of	Contributed	100%
Kang Jian		medical and	capital of
Pharmaceutical		biological	RMB1,000,000
Technology		products/PRC
Co., Limited
Beijing Genetech	The PRC	Manufacture and	Contributed	100%
Pharmaceutical		sales of medical	capital of
Co., Limited		and biological	RMB91,000,000
		products/PRC
Shenzhen Watsin	The PRC	Manufacture and	Contributed	100%
Genetech		sales of	capital of
Limited		biological	RMB100,060,960
		products/PRC

Shares held directly by the Company.

21 INTERESTS IN ASSOCIATES

Share of net assets Unlisted shares, at cost	The Group 2011 2010 HK$’000 HK$’000 10,619 13,333 14,854 14,217	The Group 2011 2010 HK$’000 HK$’000 10,619 13,333 14,854 14,217

		14,217

The following list contains only the particulars of associates, all of which are unlisted corporate entities, which principally affected the results or assets of the Group.

	Place of
	incorporation			Interest
	and	Principal	Particulars of issued	held
Name of associates	operation	activity	and paid up capital	(Indirect)
廣東聯康生物與醫藥研究院	The PRC	Inactive	Contributed capital of	45%
			RMB20,000,000
東莞市康安生物技術開發	The PRC	Inactive	Contributed capital of	35%
有限公司			RMB10,000,000

– ID-41 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

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

Total assets Total liabilities Net assets Group’s share of net assets of associates Total revenue Loss for the year Group’s share of loss of associates 22 INVENTORIES Raw materials Work in progress Finished goods 23 TRADE RECEIVABLES Trade receivables	2011 2010 HK$’000 HK$’000 29,529 33,447 4,124 1,293 25,405 32,154 10,619 13,333 – – (4,626) (1,975) (3,230) (886) The Group 2011 2010 HK$’000 HK$’000 1,811 786 743 657 3,346 2,831 5,900 4,274 The Group 2011 2010 HK$’000 HK$’000 16,710 14,288	2010 HK$’000 33,447 1,293
		32,154

		13,333

		– (1,975)

		(886)

At 31 March 2011, trade receivables of the Group amounting to approximately HK$7,071,000 (2010: approximately HK$29,022,000) were determined to be impaired. These receivables were due from companies with financial difficulties. The Group does not hold any collateral over these balances.

– ID-42 –

APPENDIX ID

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

The ageing analysis of the trade and bills receivables is as follows:

Within 30 days 31 – 60 days 61 – 90 days Over 90 days Less: Provision for impairment	The Group 2011 2010 HK$’000 HK$’000 5,872 5,268 1,418 3,590 4,104 3,567 12,387 30,885 23,781 43,310 (7,071) (29,022) 16,710 14,288	The Group 2011 2010 HK$’000 HK$’000 5,872 5,268 1,418 3,590 4,104 3,567 12,387 30,885 23,781 43,310 (7,071) (29,022) 16,710 14,288
		43,310 (29,022)
		14,288

Customers are generally granted with credit terms of 120 days (2010: 120 days). Longer payment terms are granted to those customers which have good payment history and long-term business relationship with the Group. All of the trade receivables are expected to be recovered within one year.

The following is an ageing analysis of the Group’s trade receivables that are not impaired at the end of the reporting period:

Neither past due nor impaired Past due and not impaired Not more than one month past due Over one month past due	The Group 2011 2010 HK$’000 HK$’000 14,861 11,303 - - - - - - - - - - - - - - - - - - 810 1,181 1,039 1,804 1,849 2,985 - - - - - - - - - - - - - - - - - - 16,710 14,288	The Group 2011 2010 HK$’000 HK$’000 14,861 11,303 - - - - - - - - - - - - - - - - - - 810 1,181 1,039 1,804 1,849 2,985 - - - - - - - - - - - - - - - - - - 16,710 14,288
		2,985 - - - - - - - - -
		14,288

– ID-43 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

The movement in the allowance for doubtful debts during the year is as follows:

At 1 April Impairment loss recognised Bad debts written off Reversal of impairment Exchange differences At 31 March	The Group 2011 2010 HK$’000 HK$’000 29,022 28,997 700 83 (21,186) – (2,485) (226) 1,020 168 7,071 29,022	The Group 2011 2010 HK$’000 HK$’000 29,022 28,997 700 83 (21,186) – (2,485) (226) 1,020 168 7,071 29,022
		29,022

Included in trade receivables are the following amounts denominated in a currency other than the functional currency of the Group to which they relate:

	The
	2011	2010
	HK$’000	HK$’000
RMB	16,710	14,288

24 OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Deposits for purchases of technical know-how (note a) Deposits and prepayments for purchases of plant and machinery (note a) Other receivables and prepayments (note b) Less: impairment	The Group 2011 2010 HK$’000 HK$’000 47,712 44,529 10,535 – 32,805 53,623 91,052 98,152 (26,628) (26,509) 64,424 71,643	The Company 2011 2010 HK$’000 HK$’000 – – – – 507 207 507 207 – – 507 207	The Company 2011 2010 HK$’000 HK$’000 – – – – 507 207 507 207 – – 507 207
			207 –
			207

a) Capital commitments of the Group in respect of the remaining unpaid balances of approximately HK$13,256,000 (2010: HK$4,948,000) for the purchases of technical know-how and plant and machinery are disclosed in note 35 to the financial statements.
b) The carrying amount of other receivables and prepayment is considered a reasonable approximation of fair value.

– ID-44 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

The movement in the allowance for doubtful debts during the year is as follows:

At 1 April Impairment loss recognised Reversal of impairment Exchange differences At 31 March	The Group 2011 2010 HK$’000 HK$’000 26,509 1,628 – 24,877 (1,055) – 1,174 4 26,628 26,509	The Group 2011 2010 HK$’000 HK$’000 26,509 1,628 – 24,877 (1,055) – 1,174 4 26,628 26,509
		26,509

Included in other receivables, deposits and prepayments are the following amounts denominated in a currency other than the functional currency of the Group to which they relate:

	The
	2011	2010
	HK$’000	HK$’000
RMB	63,566	61,715

25 CASH AND CASH EQUIVALENTS

Cash at bank and in hand Cash and cash equivalents in the statement of financial position Cash and cash equivalents in the consolidated statement of cash flows	The Group 2011 2010 HK$’000 HK$’000 16,545 62,943 16,545 62,943 16,545 62,943	The Company 2011 2010 HK$’000 HK$’000 1,634 36,201 1,634 36,201 – –	The Company 2011 2010 HK$’000 HK$’000 1,634 36,201 1,634 36,201 – –
			36,201

			–

Included in cash and cash equivalents in the statement of financial position are the following amounts denominated in a currency other than the reporting currency of the entity to which they relate:

	The	Group	The Company	The Company
	2011	2010	2011		2010
	HK$’000	HK$’000	HK$’000	HK$’000
RMB	13,640	22,557	–		–

– ID-45 –

APPENDIX ID

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

26 TRADE PAYABLES

		The
		2011	2010
		HK’000	HK’000
Trade	payables	5,345	13,169

At 31 March 2011, all the trade payables are expected to be settled within one year and the ageing analysis of the trade payables is analysed as follows:

Within 30 days 31-60 days 61-90 days Over 90 days	The Group 2011 2010 HK’000 HK’000 389 2,974 168 1,806 753 3,591 4,035 4,798 5,345 13,169	The Group 2011 2010 HK’000 HK’000 389 2,974 168 1,806 753 3,591 4,035 4,798 5,345 13,169
		13,169

Included in trade payables are the following amounts denominated in a currency other than the reporting currency of the Group to which they relate:

	2011	2010
	HK’000	HK’000
RMB	5,345	13,169

27 AMOUNTS DUE TO DIRECTORS/ASSOCIATES

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

– ID-46 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

28 BANK LOANS AND OTHER BORROWINGS

	The	Group
	2011	2010
	HK’000	HK’000
Bank loans repayable:
Within 1 year or on demand	23,766	15,355
After 1 year but within 2 years	–	–
	23,766	15,355
Other loans repayable:
Within 1 year or on demand	–	16,720
After 1 year but within 2 years	1,545	–
	25,311	32,075
Less: Amount due within 1 year shown under
current liabilities	(23,766)	(32,075)
	1,545	–

Secured	23,766	15,355
Unsecured	1,545	16,720
	25,311	32,075

Included in bank loans and other borrowings, the following denominated in a currency other than
the functional currency of the Group to which they relate.
	2011	2010
	HK’000	HK’000
RMB	25,311	32,075

All the bank loans bear interest at variable rates by reference to the People’s Bank of China’s lending rate, ranging from 5.6% to 6.2% per annum.

The other loans are interest-free, unsecured and will be repayable in May 2012.

Bank loans amounted to HK$23,766,000 (2010: HK$15,355,000) are secured by investment properties and leasehold land and land use rights of the Group with carrying amount of HK$7,137,000 (2010: HK$4,925,000) and HK$11,209,000 (2010: HK$23,785,000) respectively (Note 34).

In the opinion of the directors, carrying amounts of the Group’s current and non-current bank loans and other borrowings approximate their fair values. The fair values of the non-current other loans are calculated by discounting their expected future cash flows at market rates.

– ID-47 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

29 EMPLOYEES RETIREMENT BENEFITS

The Group operates a Mandatory Provident Fund Scheme (“the MPF scheme”) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF scheme is a defined contribution retirement plan administered by independent trustees. Under the MPF scheme, the employer and its employees are each required to make contributions to the plan at 5% of the employee’s relevant income, subject to a cap of monthly relevant income of HK$20,000. Apart from the mandatory contributions, the employer would make monthly voluntary contributions. The aggregate of the mandatory and voluntary contributions made by the employer represents 5% of the basic salary of the employees. Mandatory contributions to the plan vest immediately. Where there are employees who leave the Group prior to vesting fully in the voluntary contributions, the contributions payable by the Group are reduced by the amount of forfeited contributions.

The Group has no other material obligation for payment of retirement benefits beyond the annual contributions as described above.

30 INCOME TAX IN THE STATEMENT OF FINANCIAL POSITION

(a) Current taxation in the consolidated statement of financial position represents:

				The
				2011	2010
				HK’000	HK’000
PRC	enterprise	income	tax	2,472	455

(b) Deferred tax liabilities recognised

The components of deferred tax liabilities recognised in the consolidated statement of financial position and the movements during the year are as follows:

Deferred tax arising from:

At 1 April 2010 Charged to profit or loss Exchange differences At 31 March 2011	The Group Revaluation of investment property HK’000 – 765 19
	784

(c) Deferred tax assets not recognised

The Group has unrecognised tax losses of HK$545,311,000 (2010: HK$498,988,000) at the end of the reporting period. No deferred tax assets have been recognised for such tax losses due to unpredictability of future profits streams.

– ID-48 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

Losses to expire are shown as below:

2013/14 2014/15 2015/16	The Group HK’000 271,582 227,406 46,323
	545,311

31 SHARE CAPITAL

Note a) Authorised: At 1 April 2009 Consolidation of shares (b)(i) Reduction of share capital (b)(iii) Increased (b)(iv) At 31 March 2010 and 31 March 2011 Issued and fully paid: At 1 April 2009 Issue of shares upon open offer with bonus issue (a) Consolidation of shares (b)(i) Reduction of capital (b)(ii) At 31 March 2010 and 31 March 2011	Nominal value per share HK$ 0.10 1.00 0.01 0.01 0.01 0.10 0.10 0.10 1.00 0.01	Number of shares ‘000 50,000,000 (45,000,000) 5,000,000 – 5,000,000 495,000,000 500,000,000 8,698,975 4,349,488 13,048,463 (11,743,617) 1,304,846 – 1,304,846	Amount HK$’000 5,000,000 –
			5,000,000 (4,950,000)
			50,000 4,950,000
			5,000,000

			869,898 434,948
			1,304,846 –
			1,304,846 (1,291,798)
			13,048

– ID-49 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

a) On 15 May 2009, the Company allotted 1,449,829,215 offer shares of HK$0.10 each at the subscription price of HK$0.10 per offer share on the basis of 1 offer share for every 6 then existing ordinary shares held and allotted 2,899,658,430 bonus shares of HK$0.10 each on the basis of 2 bonus shares for every 1 offer share taken up out of the share premium account (collectively referred to as the “Open Offer with Bonus Issue”). The Company raised approximately HK$141.9 million (net of expenses) for the research and development of its biological pharmaceutical products.
b) As announced by the Company on 18 March 2009, the Company proposed to effect (i) a share consolidation pursuant to which every one 10 issued and unissued then existing shares of HK$0.10 each were consolidated into 1 consolidated share of HK$1.00 each; (ii) reduction of the nominal value of each issued share from HK$1.00 each to HK$0.01 each by cancelling HK$0.99 paid up share capital for each share in issue (“Issued Capital Reduction”); (iii) reduction of the nominal value of all shares in the authorised share capital of the Company from HK$1.00 each to HK$0.01 each, resulting in the reduction of the authorised share capital from HK$5,000,000,000 to HK$50,000,000 divided into 5,000,000,000 shares of HK$0.01 each; (iv) increase of the authorised share capital from HK$50,000,000 divided into 5,000,000,000 consolidated shares of HK$0.01 each to HK$5,000,000,000 divided into 500,000,000,000 consolidated shares of HK$0.01 each by the creation of 495,000,000,000 new consolidated shares; and (v) transfer of credit arising from the Issued Capital Reduction with the amount of HK$1,291,797,830 to the distributable reserve account. The above are collectively referred to as the “Capital Reorganisation”. Details of the Capital Reorganisation are set out, inter alia, in the circular of the Company dated 28 March 2009. A special resolution approving the Capital Reorganisation was passed at the extraordinary general meeting of the Company held on 20 April 2009. The Capital Reorganisation became effective on 31 August 2009.
c) All new shares issued rank pari passu with the existing shares in all material respects.
d) Terms of unexpired and unexercised share options at the end of the reporting period

Exercise period Exercise price 19 June 2006 to 21 October 2011 HK$1.963 28 January 2008 to 21 September 2016 HK$4.51 26 May 2009 to 21 September 2016 HK$1.00	2011 Number of shares ’000 7,159 5,677 73,500 86,336	2010 Number of shares ’000 7,159 5,677 73,500
		86,336

Each option entitles the holders to subscribe for one ordinary share in the Company. Further details of these options are set out in note 33 to the financial statements.

e) Capital management

– ID-50 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

During the year, the gearing ratios at 31 March 2011 and 2010 were as follows:

Debts Less: Cash and cash equivalents (Note 25) Net debts Total equity Gearing ratio	2011 HK’000 25,311 (16,545) (8,766) 847,804 N/A	2010 HK’000 32,075 (62,943)
		(30,868)

		1,024,658

		N/A

Debts comprise the bank loans and other borrowings.

32 RESERVES

The Group

		Attributable to equity shareholders of the Company	Attributable to equity shareholders of the Company	Attributable to equity shareholders of the Company
Share premium HK$’000 540,855 - - - - - – (289,966) – – - - - - - (289,966) 250,889 – 250,889	Capital reserve HK$’000 (267) - - - - - – – – – - - - - - – (267) – (267)	Statutory reserve HK$’000 6,289 - - - - - – – – – - - - - - – 6,289 – 6,289	Share-based payments reserve Distributable reserve HK$’000 HK$’000 11,851 – - - - - - - - - - - – – – – 36,296 – – 1,291,798 - - - - - - - - - - 36,296 1,291,798 48,147 1,291,798 – – 48,147 1,291,798	Exchange reserve Accumulated losses HK$’000 HK$’000 128,484 (268,063) - - - - - - - - - - 8,986 (454,653) – – – – – – - - - - - - - - - - 8,986 (454,653) 137,470 (722,716) 8,302 (185,156) 145,772 (907,872)	Total HK$’000 419,149 - - - - - (445,667)
					(289,966) 36,296 1,291,798 - - - - -
					592,461

					1,011,610 (176,854)
					834,756

Note: The distributable reserve represents credit arising from Capital Reorganisation effected by the Company during the year ended 31 March 2010.

– ID-51 –

APPENDIX ID

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

The Company

At 1 April 2009 Total comprehensive loss for the year Issue of shares – bonus share Equity settled share-base payment transaction Capital reorganisation At 31 March 2010 Total comprehensive loss for the year At 31 March 2011	Share premium Share-based payments reserve Distributable reserve Accumulated losses HK$’000 HK$’000 HK$’000 HK$’000 612,458 11,851 – (213,121) - - - - - - - - - - - - - - - - - - - - - - - - – – – (339,113) (289,966) – – – – 36,296 – – – – 1,291,798 – (289,966) 36,296 1,291,798 (339,113) - - - - - - - - - - - - - - - - - - - - - - - - 322,492 48,147 1,291,798 (552,234) – – – (338,646) 322,492 48,147 1,291,798 (890,880)	Total HK$’000 411,188 - - - - - - (339,113) (289,966) 36,296 1,291,798
		699,015 - - - - - -
		1,110,203 (338,646)
		771,557

Note: The distributable reserve represents credit arising from Capital Reorganisation effected by the Company during the year ended 31 March 2010.

a) Share premium

b) Statutory reserve

– ID-52 –

APPENDIX ID

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

c) Exchange reserve

d) Distributable reserves

At 31 March 2011, the aggregate amount of the Company’s reserve available for distribution to shareholders was approximately HK$723,410,000 (2010: HK$1,062,056,000) computing in accordance with the Companies Law (Revised) of the Cayman Islands and the Company’s articles of association. This includes the Company’s share premium of approximately HK$322,492,000 (2010: HK$322,492,000) and distributable reserve of approximately HK$1,291,798,000 (2010: HK$1,291,798,000) less accumulated losses of approximately HK$890,880,000 (2010: HK$552,234,000), which is available for distribution provided that immediately following the date on which the dividend is proposed, the Company will be able to pay off its debts as they fall due in the ordinary course of business.

33 SHARE OPTIONS

Pursuant to ordinary resolutions passed by the shareholders of the Company on 22 September 2006, the Company terminated the 2001 Scheme and adopted a new share option scheme (the “2006 Scheme”).

– ID-53 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

Total consideration received during the year from eligible participants for taking up the options granted during the year is Nil (2010: less than HK$1,000). The consideration is required to be settled within 21 days from the issue of the share option offer.

– ID-54 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

Details of the share option movements during the year ended 31 March 2011 under 2006 Scheme are as follows:

Outstanding at 31 March 2010 and 1 April 2010 ‘000 Employees 7,159 Employees 1,551 Others 4,126 Others 73,500 86,336 Exercisable at the end of the year Weighted average exercise price (HK$) 1.3107	Number of share options Granted during the year Adjusted during the year Exercised during the year ‘000 ‘000 ‘000 – – – – – – – – – – – – – – – N/A N/A N/A	Lapsed during the year Outstanding at 31 March 2011 Exercise price Date of grant Exercise period Remaining contractual life ‘000 ‘000 HK$ – 7,159 1.9630 19 June 2006 19 June 2006 to 21 October 2011 0.56 years – 1,551 4.5100 28 January 2008 28 January 2008 to 21 September 2016 5.48 years – 4,126 4.5100 28 January 2008 28 January 2008 to 21 September 2016 5.48 years – 73,500 1.0000 26 May 2009 26 May 2009 to 21 September 2016 5.48 years – 86,336 86,336 N/A 1.3107

– ID-55 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

Details of the share option movements during the year ended 31 March 2010 under the 2006 Scheme are as follows:

Outstanding at 31 March 2009 and 1 April 2009 ‘000 Employees 63,050 Employees 13,658 Others 36,342 Others – 113,050 Exercisable at the end of the year Weighted average exercise price (HK$) 0.3508	Number of share options Granted during the year Adjusted during the year Exercised during the year Lapsed during the year Outstanding at 31 March 2010 Exercise price Adjusted exercise price Date of grant Exercise period Remaining contractual life ‘000 ‘000 ‘000 ‘000 ‘000 HK$ HK$ – (55,891) – – 7,159 0.2229 1.9630 19 June 2006 19 June 2006 to 21 October 2011 1.56 years – (12,107) – – 1,551 0.5120 4.5100 28 January 2008 28 January 2008 to 21 September 2016 6.48 years – (32,216) – – 4,126 0.5120 4.5100 28 January 2008 28 January 2008 to 21 September 2016 6.48 years 735,000 (661,500) – – 73,500 0.1000 1.0000 26 May 2009 26 May 2009 to 21 September 2016 6.48 years 735,000 (761,714) – – 86,336 86,336 0.1000 N/A N/A N/A 1.3107	Number of share options Granted during the year Adjusted during the year Exercised during the year Lapsed during the year Outstanding at 31 March 2010 Exercise price Adjusted exercise price Date of grant Exercise period Remaining contractual life ‘000 ‘000 ‘000 ‘000 ‘000 HK$ HK$ – (55,891) – – 7,159 0.2229 1.9630 19 June 2006 19 June 2006 to 21 October 2011 1.56 years – (12,107) – – 1,551 0.5120 4.5100 28 January 2008 28 January 2008 to 21 September 2016 6.48 years – (32,216) – – 4,126 0.5120 4.5100 28 January 2008 28 January 2008 to 21 September 2016 6.48 years 735,000 (661,500) – – 73,500 0.1000 1.0000 26 May 2009 26 May 2009 to 21 September 2016 6.48 years 735,000 (761,714) – – 86,336 86,336 0.1000 N/A N/A N/A 1.3107	Number of share options Granted during the year Adjusted during the year Exercised during the year Lapsed during the year Outstanding at 31 March 2010 Exercise price Adjusted exercise price Date of grant Exercise period Remaining contractual life ‘000 ‘000 ‘000 ‘000 ‘000 HK$ HK$ – (55,891) – – 7,159 0.2229 1.9630 19 June 2006 19 June 2006 to 21 October 2011 1.56 years – (12,107) – – 1,551 0.5120 4.5100 28 January 2008 28 January 2008 to 21 September 2016 6.48 years – (32,216) – – 4,126 0.5120 4.5100 28 January 2008 28 January 2008 to 21 September 2016 6.48 years 735,000 (661,500) – – 73,500 0.1000 1.0000 26 May 2009 26 May 2009 to 21 September 2016 6.48 years 735,000 (761,714) – – 86,336 86,336 0.1000 N/A N/A N/A 1.3107	Number of share options Granted during the year Adjusted during the year Exercised during the year Lapsed during the year Outstanding at 31 March 2010 Exercise price Adjusted exercise price Date of grant Exercise period Remaining contractual life ‘000 ‘000 ‘000 ‘000 ‘000 HK$ HK$ – (55,891) – – 7,159 0.2229 1.9630 19 June 2006 19 June 2006 to 21 October 2011 1.56 years – (12,107) – – 1,551 0.5120 4.5100 28 January 2008 28 January 2008 to 21 September 2016 6.48 years – (32,216) – – 4,126 0.5120 4.5100 28 January 2008 28 January 2008 to 21 September 2016 6.48 years 735,000 (661,500) – – 73,500 0.1000 1.0000 26 May 2009 26 May 2009 to 21 September 2016 6.48 years 735,000 (761,714) – – 86,336 86,336 0.1000 N/A N/A N/A 1.3107
113,050	735,000	(761,714)	–	–

0.3508	0.1000	N/A	N/A	N/A

Note: The number of shares issuable upon exercise of share options and their exercise price were adjusted during the year ended 31 March 2010 as a result of the open offer, Bonus issue and Capital Reorganisation.

The fair value of services received in return for share options granted during the year ended 31 March 2010 under the 2006 Scheme are measured by reference to the fair value of share options granted under the 2006 Scheme. The estimate of the fair value of the services received is measured based on Black-Scholes-Merton option pricing model, taking into account the terms and conditions upon which the share options were granted. The following table lists the inputs to the model used for the share options granted on 26 May 2009 (the “26 May 2009 Grant”).

	26 May 2009
	Grant
Number of share issuable under options granted	735,000,000
Option value	36,296,178
Expected dividend yield (%)	0.0%
Expected volatility (%)	97.179%
Risk-free interest (%)	1.009%
Expected life of options (years)	3
Subscription price (HK$)	0.100
Share price at date of grant (HK$)	0.097

– ID-56 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

34 PLEDGE OF ASSETS

At the end of the reporting period, the details of assets of the Group at their carrying amounts being pledged to secure borrowing facilities were as follows:

Investment properties (Note 16) Leasehold land and land use rights (Note 17)	The Group 2011 2010 HK$’000 HK$’000 7,137 4,925 11,209 23,785 18,346 28,710	The Group 2011 2010 HK$’000 HK$’000 7,137 4,925 11,209 23,785 18,346 28,710
		28,710

35 COMMITMENTS

a) Capital commitments

At the end of the reporting period, the Group had capital commitments contracted but not provided for in the financial statements as follows:

Contracted for: – Purchases of technical know-how – Purchases of property, plant and equipment – Capital injection to a subsidiary	The Group 2011 2010 HK$’000 HK$’000 3,981 4,948 9,275 – – 22,748 13,256 27,696	The Group 2011 2010 HK$’000 HK$’000 3,981 4,948 9,275 – – 22,748 13,256 27,696
		27,696

b) Operating lease commitments

Within 1 year After 1 year but within 5 years	The Group 2011 2010 HK$’000 HK$’000 1,439 679 404 358 1,843 1,037	The Group 2011 2010 HK$’000 HK$’000 1,439 679 404 358 1,843 1,037
		1,037

– ID-57 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

36 RELATED PARTY TRANSACTIONS

a) Key management personnel remuneration

Short-term employee benefits Post-employment benefits	2011 HK$’000 525 6 531	2010 HK$’000 271 12
		283

Total remuneration is included in “staff costs” (see note 7(b)).

b) There were no material related party transactions during the year (2010: Nil).
c) Balances with the related parties as at 31 March 2011 are stated in notes 20, 21 and 27.

37 CONTINGENT LIABILITIES

There were no significant contingent liabilities as at 31 March 2011 and 2010.

38 MAJOR NON-CASH TRANSACTION

There was no major non-cash transaction during the year ended 31 March 2011 and 2010.

39 FINANCIAL RISK MANAGEMENT

The Group is exposed to financial risk through its use of financial instruments in its ordinary course of operations and its investment activities. The financial risks include market risk (including foreign currency risk and interest risk), credit risk and liquidity risk.

It is not the Group’s policy to actively engage in the trading of financial instruments for speculative purposes. The directors regularly monitors the Group’s financial risk exposures.

– ID-58 –

APPENDIX ID

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

a) Summary of financial assets and liabilities by category

The carrying amounts presented in the statement of financial position relate to the following categories of financial assets and financial liabilities.

Financial assets Loans and receivables: Trade receivables Other receivables, deposits and prepayments Amounts due from subsidiaries Cash and cash equivalents Financial liabilities Financial liabilities measured at amortised costs: Trade payables Accrued charges and other payables Amounts due to associates Amounts due to directors Bank loans Other borrowings	Group 2011 2010 HK$’000 HK$’000 16,710 14,288 23,933 19,125 – – 16,545 62,943 57,188 96,356 5,345 13,169 14,843 9,260 15,819 118,442 8,772 5,928 23,766 15,355 1,545 16,720 70,090 178,874	Company 2011 2010 HK$’000 HK$’000 – – 507 207 787,994 1,089,592 1,634 36,201 790,135 1,126,000 – – 1,103 322 – – 4,427 2,427 – – – – 5,530 2,749	Company 2011 2010 HK$’000 HK$’000 – – 507 207 787,994 1,089,592 1,634 36,201 790,135 1,126,000 – – 1,103 322 – – 4,427 2,427 – – – – 5,530 2,749
			1,126,000

			– 322 – 2,427 – –
			2,749

b) Foreign currency risk

(i) The Group operates mainly in both the PRC and Hong Kong and majority of transactions are denominated in HK$ and RMB. Therefore, the Group is exposed to foreign exchange risk arising from these currency exposures.

The policies to manage foreign currency risk have been followed by the Group since prior years and are considered to be effective.

– ID-59 –

APPENDIX ID

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

The carrying amount of the Group’s foreign currency denominated (all in RMB) financial assets and liabilities, translated into Hong Kong dollars at the closing rates, are as follows:

Financial assets Trade receivables Other receivables, deposits and prepayments Cash and cash equivalents Financial liabilities Trade payables Accrued charges and other payables Bank loans and other borrowings	2011 HK$’000 16,710 63,566 13,640 93,916 (5,345) (14,014) (25,311) 49,246	2010 HK$’000 14,288 25,664 22,557
		62,509 (13,169) (14,011) (32,075)
		3,254

(ii) Sensitivity analysis

The following table illustrates the sensitivity of the Group’s loss after tax for the year and equity in regards to a 5% (2010: 5%) depreciation in the group entities’ reporting currencies against RMB. These percentages are the rates used when reporting foreign currency risk internally to key management personnel and represents management’s best assessment of the possible change in foreign exchange rates.

							2011	2010
							RMB	RMB
							HK$’000	HK$’000
Loss	for	the	year	and	accumulated	losses	(2,462)	(163)

A 5% appreciation in the group entities’ reporting currencies against RMB would have the same magnitude on the Group’s loss for the year and equity but of opposite effect.

These are the same method and assumption used in preparing the sensitivity analysis included in the financial statements of the year ended 31 March 2010.

– ID-60 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

c) Interest rate risk

(i) Exposures to interest rate risk and the Group’s risk management policies

The Group will review whether bank loans bearing floating rates should be drawn from time to time with reference to the trend of changes in interest rates. The interest rates and repayment terms of bank borrowings and cash and bank balances of the Group are disclosed in note 28 and 25 respectively. The Group currently does not have an interest rate hedging policy. However, the directors monitor interest rate change exposure and will consider hedging significant interest rate exchange exposure should the need arises. The policies to management interest rate risk have been followed by the Group since prior year and are considered to be effective.

(ii) Sensitivity analysis

The following table illustrates the sensitivity of the Group’s loss of the year and equity to a possible change in interest rates of +/-1% (2010: +/-1%), with effect from the beginning of the year. The calculations are based on the Group’s bank loan at the end of the reporting period. All other variables are held constant.

		2011			2010
		Increase/	Increase/		Increase/	Increase/
	Change in	(Decrease)	(Decrease)	Change in	(Decrease)	(Decrease)
	interest	loss for the	accumulated	interest	loss for the	accumulated
	rate	year	losses	rate	year	losses
		HK$’000	HK$’000		HK$’000	HK$’000
Bank loans	+1%	238	238	+1%	154	154
	–1%	(238)	(238)	–1%	(154)	(154)

The sensitivity analysis included in the financial statements of the year ended 31 March 2010 has been prepared on the same basis.

d) Credit risk

(i) Summary of exposure

Credit risk refers to the risk that the counterparty to a financial instrument would fail to discharge its obligation under the terms of the financial instrument and cause a financial loss to the Group. The Group’s exposure to credit risk mainly arises from granting credit to customers in the ordinary course of its operations and its investing activities.

– ID-61 –

APPENDIX ID

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

The Group’s maximum exposure to credit risk on recognised financial assets is limited to the carrying amount at the end of the reporting period as summarised below:

Financial assets – carrying amounts Trade receivables Other receivables and deposits Amount due from subsidiaries Cash and cash equivalents	Group 2011 2010 HK$’000 HK$’000 16,710 14,288 23,933 24,648 – – 16,545 62,943 57,188 101,879	Company 2011 2010 HK$’000 HK$’000 – – 507 207 787,994 1,089,592 1,634 36,201 790,135 1,126,000	Company 2011 2010 HK$’000 HK$’000 – – 507 207 787,994 1,089,592 1,634 36,201 790,135 1,126,000
			1,126,000

(ii) Risk management objective and policies

A significant portion of Group’s sales are made to several major customers and as at 31 March 2011, these major customers have trade receivables of approximately HK$3,286,000 (2010: HK$4,990,000) out of the total trade receivables of HK$16,710,000 (2010: HK$14,288,000) as stated on the consolidated statement of financial position. These customers made continuous settlements with the Group and therefore, the management believes that the credit risk on the amounts due is minimal. The remaining amount of trade receivables are attributable to number of counterparties and customers and therefore, the Group has no significant concentration of credit risk on these remaining amounts.

e) Liquidity risk

– ID-62 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

The liquidity policies have been followed by the Group since prior years and are considered to have been effective in managing liquidity risks.

Analysed below is the Group’s and Company’s remaining contractual maturities for its non-derivative financial liabilities as at 31 March 2011. When the creditor has a choice of when the liability is settled, the liability is included on the basis of the earliest date on when the Group can be required to pay. Where the settlement of the liability is in instalments, each instalment is allocated to the earliest period in which the Group is committed to pay.

At 31 March 2011:

Group Trade payables Accrued charges and other payables Amounts due to associates Amounts due to directors Bank loans Other borrowings Company Accrued charges and other payables Amounts due to directors	Within 1 year or on demand HK$’000 5,345 14,843 15,819 8,772 24,233 – 69,012 Within 1 year or on demand HK$’000 1,103 4,427 5,530	Between 1 and 2 years Total undiscounted cash flow HK$’000 HK$’000 – 5,345 – 14,843 – 15,819 – 8,772 – 24,233 1,545 1,545 1,545 70,557 Between 1 and 2 years Total undiscounted cash flow HK$’000 HK$’000 – 1,103 – 4,427 – 5,530	Total carrying amount HK$’000 5,345 14,843 15,819 8,772 23,766 1,545
			70,090

			Total carrying amount HK$’000 1,103 4,427
			5,530

– ID-63 –

APPENDIX ID

FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

At 31 March 2010:

Group Trade payables Accrued charges and other payables Amounts due to associates Amounts due to directors Bank loans Other borrowings Company Accrued charges and other payables Amounts due to directors	Within 1 year or on demand HK$’000 13,169 9,260 118,442 5,928 16,276 16,720 179,795 Within 1 year or on demand HK$’000 322 2,427 2,749	Between 1 and 2 years Total undiscounted cash flow HK$’000 HK$’000 – 13,169 – 9,260 – 118,442 – 5,928 – 16,276 – 16,720 – 179,795 Between 1 and 2 years Total undiscounted cash flow HK$’000 HK$’000 – 322 – 2,427 – 2,749	Total carrying amount HK$’000 13,169 9,260 118,442 5,928 15,355 16,720
			178,874

			Total carrying amount HK$’000 322 2,427
			2,749

f) Fair values

g) Economic risk

h) Business risk

A substantial portion of the Group’s operations is conducted in the PRC. This includes risks associated with, among others, the political, economic and legal environment in the PRC.

– ID-64 –

APPENDIX ID FINANCIAL INFORMATION OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2011

40 CAPITAL MANAGEMENT POLICIES AND PROCEDURES

The capital structure of the Group consists of net debts, which includes the bank loans and other borrowings disclosed in note 31, net of cash and cash equivalents and equity attributable to equity shareholders of the Company, comprising issued share capital and reserves.

41 APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Board on 30 June 2011.

42 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE YEAR ENDED 31 MARCH 2011

Up to the date of issue of these financial statements, the HKICPA has issued the following amendments, new standards and new interpretations which are not yet effective for the year ended 31 March 2011 and which have not been early adopted in these financial statements:

	Effective for
	accounting
	periods
	beginning on
	or after
Revised HKAS 24, Related party disclosures	1 January 2011
HKFRS 9, Financial Instruments	1 January 2013
	1 July 2010 or
Improvements to HKFRSs 2010	1 January 2011
Amendments to HKAS 12, Income tax	1 January 2012

– ID-65 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The following is the unaudited pro forma statement of adjusted consolidated net tangible assets of the Group which has been prepared to illustrate the effect of the Open Offer and Bonus Warrant Issue on the net tangible assets of the Group as if the Open Offer and Bonus Warrant Issue had been completed on 31 March 2013. As it is prepared for illustrative purposes only, and because of its nature, it may not give a true picture of the financial position of the Group upon completion of the Open Offer and the Bonus Warrant Issue.

Consolidated net tangible assets Scenario I(Note 1) Scenario II(Note 2) Audited consolidated net tangible assets per Share of the Group attributable to the owners of the Company before the Open Offer_(Note 6) Unaudited pro forma adjusted consolidated net tangible assets per Share of the Group attributable to the owners of the Company after the Open Offer and Bonus Warrant Issue(Note 7)_ Scenario I Scenario II	Audited consolidated net tangible assets of the Group attributable to owners of the Company as at 31 March 2013 HK$’000 (Note 3) 124,675 124,675 HK7.97 cents	Estimated net proceeds from the Open Offer HK$’000 (Note 4) 242,575 254,944	Estimated net proceeds from the Bonus Warrant Issue HK$’000 (Note 5) 156,485 164,402	Unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the Company after the Open Offer and Bonus Warrant Issue HK$’000 523,735

				544,021

				HK9.56 cents

				HK9.45 cents

– II-1 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

Notes:

Scenario I is based on 1,564,846,293 Shares in issue as at 30 June 2013.
Scenario II is based on 1,564,846,293 Shares in issue as at 30 June 2013 and assuming 79,176,855 Shares were issued upon the exercise in full of all Existing Share Options and (i) no repurchase of Shares; and (ii) no other Shares were allotted or issued on or before the Record Date.
The audited consolidated net tangible assets of the Group as at 31 March 2013 is extracted from the published annual report of the Company for the year ended 31 March 2013 as set out in Appendix IB to this circular and is based on the audited consolidated net assets of the Group attributable to the owners of the Company as at 31 March 2013, and adjusted for goodwill of approximately HK$259,416,000 and intangible assets of approximately HK$315,417,000.
The estimated net proceeds from the Open Offer of approximately HK$242,575,000 in Scenario I is based on 1,564,846,293 Offer Shares to be issued (in the proportion of 1 offer Share for every 1 existing Share held as at the Record Date) at the subscription price of HK$0.16 per Offer Share and after deduction of estimated related expenses of approximately HK$7,800,000.

The estimated net proceeds from the Open Offer of approximately HK$254,944,000 in Scenario II is based on 1,644,023,148 Offer Shares to be issued (in the proportion of 1 offer Share for every 1 existing Share held as at the Record Date) at the subscription price of HK$0.16 per Offer Share and after deduction of estimated related expenses of approximately HK$8,100,000.

The estimated net proceeds of the Bonus Warrant Issue in the sum of approximately HK$156,485,000 in Scenario I, is calculated based on 782,423,146 Bonus Warrants (in the proportion of 1 Bonus Warrant for every 2 Offer Shares) to be issued at the initial exercise price of HK$0.20 per Warrant Share and after deduction of estimated related expenses of approximately nil.

The estimated net proceeds of the Bonus Warrant Issue in the sum of approximately HK$164,402,000 in Scenario II, is calculated based on 822,011,574 Bonus Warrants (in the proportion of 1 Bonus Warrant for every 2 Offer Shares) to be issued at the initial exercise price of HK$0.20 per Warrant Share and after deduction of estimated related expenses of approximately nil.

The calculation of audited consolidated net tangible assets per Share of the Group attributable to the owners of the Company is based on 1,564,846,293 Shares in issue as at 30 June 2013 which include the placement of 260,000,000 ordinary shares on 8 May 2013.
The calculation of the unaudited pro forma adjusted consolidated net tangible assets per share is based on 5,476,962,025 shares in Scenario I comprise 1,564,846,293 Shares in issue as at 30 June 2013, 1,564,846,293 Offer Shares to be issued, 1,564,846,293 Bonus shares to be issued and 782,423,146 shares expected to be issued on exercise of the Bonus Warrants expected to be issued on the completion of the Bonus Warrant Issue.

The calculation of the unaudited pro forma adjusted consolidated net tangible assets per share is based on 5,754,081,018 shares in Scenario II comprise 1,564,846,293 Shares in issue as at 30 June 2013, 79,176,855 Shares to be issued upon the exercise in full of all Existing Share Options, 1,644,023,148 Offer Shares to be issued, 1,644,023,148 Bonus Shares to be issued and 822,011,574 shares expected to be issued on exercise of the Bonus Warrants expected to be issued on the completion of the Bonus Warrant Issue.

No adjustment has been made to reflect any trading results or other transactions of the Group entered into subsequent to 31 March 2013 except for the placement of shares noted on 8 May 2013. The unaudited pro forma adjusted consolidated net tangible assets does not take into account the changes in net tangible assets arising from the exercise in full of the all Existing Share Options.

– II-2 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

REPORT TO THE BOARD OF DIRECTORS ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the independent reporting accountants, KTC Partners CPA Limited, in respect of the unaudited pro forma financial information of the Group.

KTC Partners CPA Limited

Certified Public Accountants (Practising)

Tel (852) 2770 8232 Fax : (852) 2770 8378 E-mail : [email protected] Room 501, 502 & 508, 5/F., Mirror Tower, 61 Mody Road, Tsimshatsui East, Kowloon, Hong Kong

The Board of Directors Uni-Bio Science Group Limited 13/F, Public Bank Centre, 120 Des Voeux Road Central, Central, Hong Kong

Dear Sirs,

RE: UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS

We report on the unaudited pro forma statement of adjusted consolidated net tangible assets (“Unaudited Pro Forma Financial Information”) of Uni-Bio Science Group Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”), which has been prepared by the directors of the Company (the “Directors”) for illustrative purposes only, to provide information about how the proposed open offer on the basis of one offer share for every existing share of the Company held on the record date (the “Open Offer”) with the bonus issue on the basis of one bonus share for every one offer share taken up and one bonus warrant for every two offer shares taken up under the Open Offer might have affected the consolidated net tangible assets of Group presented, for inclusion in Appendix II to the open offer circular of the Company dated 13 August 2013 (the “Circular”). The basis of preparation of the Unaudited Pro Forma Financial Information is set out in Appendix II to the Circular.

Respective Responsibilities of the Directors and Reporting Accountants

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

– II-3 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of Opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the Directors. This engagement did not involve independent examination of any of the underlying financial information.

Our work did not constitute an audit or review made in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the Hong Kong Institute of Certified Public Accountants, and accordingly, we do not express any such audit or review assurance on the Unaudited Pro Forma Financial Information.

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

The Unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgments and assumptions of the Directors, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position of the Group as at 31 March 2013 or at any future date.

– II-4 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

Opinion

In our opinion:

(a) The Unaudited Pro Forma Financial Information has been properly compiled by the Directors on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Yours faithfully,

KTC Partners CPA Limited

Certified Public Accountants Chow Yiu Wah, Joseph Practising Certificate Number: P04686

Hong Kong 13 August 2013

– II-5 –

APPENDIX III

SUMMARY OF TERMS OF BONUS WARRANTS

The Bonus Warrants will be issued subject to and with benefit of an instrument by way of deed poll (“ Instrument ”) and they will be issued in registered form and will form one class and rank pari passu in all respects with each other.

The principal terms and conditions of the Bonus Warrants (“ Conditions ”) will be set out in the certificate(s) for the Bonus Warrant (“ Warrant Certificate(s) ”) and will include provisions to the effect set out below. Holders of the Bonus Warrant (“ Warrantholders ”) will be entitled to the benefit of, be bound by, and be deemed to have notice of the Conditions, copies of which will be available at the principal place of business for the time being of the Company in Hong Kong.

1. DEFINITIONS

In this Appendix, unless otherwise stipulated, the following terms shall have the following meanings:

“Equity Share Capital”
the issued share capital of the Company excluding any part thereof which does not either as respects dividends or as respects capital carry the right to participate beyond a specified amount or beyond an amount calculated by reference to a specified rate in a distribution
“Exercise Moneys”

in relation to any Bonus Warrant(s), the amount stated on the face of the Warrant Certificate issued in respect of such Bonus Warrant(s) as the amount in cash which the Warrantholder of such Bonus Warrant(s) is/are entitled to subscribe upon the exercise of the Subscription Rights represented thereby

“Registration Date”

the date on which the name of the relevant Warrantholder is entered on the register of members of the Company as holder of the Shares issued upon due exercise of the Subscription Rights

“Shares”

ordinary share(s) of HK$0.01 each in the share capital of the Company existing on the date of execution of the Instrument and all other (if any) shares or stock from time to time and for the time being ranking pari passu therewith and all other (if any) shares or stock in the Equity Share Capital of the Company resulting from any sub-division, consolidation or reclassification of Shares

– III-1 –

APPENDIX III

SUMMARY OF TERMS OF BONUS WARRANTS

“Special Resolution”
a resolution passed at a meeting of the Warrantholders duly convened and held and carried by a majority consisting of not less than three-fourths of the votes cast upon a show of hands or, if a poll is duly demanded, by a majority consisting of not less than three-fourths of the votes cast on a poll
“Subscription Date”
any business day falling during the Subscription Period on which any of the Subscription Rights are duly exercised by a Warrantholder
“Subscription Period”
the period commencing from the date of issue of the Bonus Warrants and expire at 4:00 on the Business Day being the third anniversary of the issue date (or, if that is not a business day, the first business day immediately preceding such date) (both dates inclusive)
“Subscription Price”
the sum payable in respect of each Share upon exercise of the Subscription Rights represented thereby, initially being HK$0.20 in cash per Share (subject to adjustments)
“Subscription Rights”
the rights of the Warrantholders represented by the Bonus Warrants to subscribe in a maximum aggregate amount (assuming all the Existing Share Options have been exercised in full and related Shares have been allotted, in each case, on or before the Record Date) of HK$164,402,314.80 for Shares pursuant to the Bonus Warrants and, in relation to each Bonus Warrant, means the right of the relevant Warrantholder to subscribe the Exercise Moneys for Shares upon and subject to the Conditions

2. EXERCISE OF SUBSCRIPTION RIGHTS

(A) Subject to the provisions hereof and to compliance with all fiscal and other laws and regulations applicable thereto the registered holder of the Bonus Warrants will have the right, which may be exercised in whole or in part at any time during the Subscription Period, to subscribe at the Exercise Moneys for one fully paid Share at the Subscription Price per Share. After 4:00 p.m. on the last day of the Subscription Period (or such other date as provided in the Instrument) any Subscription Rights which have not been exercised will lapse and the Bonus Warrants will cease to be valid for any purpose.
(B) Each Warrant Certificate will contain a Subscription Form (as defined in the Instrument). In order to exercise in whole or in part the Subscription Rights, the Warrantholder must complete and sign the Subscription Form (which shall be irrevocable) and deliver the Warrant Certificate to the Registrar (as defined in the Instrument), together with a remittance for the Exercise Moneys

– III-2 –

APPENDIX III

SUMMARY OF TERMS OF BONUS WARRANTS

(or, in the case of a partial exercise, the relevant portion of the Exercise Moneys). In each case compliance must also be made with any exchange control, fiscal or other laws or regulations for the time being applicable.

(C) The number of Shares to be allotted on exercise of the Subscription Rights shall be the number of the Bonus Warrants subject to exercise as specified in the relevant Subscription Form. No fraction of a Share will be allotted and any balance representing fractions of the Exercise Moneys paid on exercise of the Subscription Rights represented will be retained by the Company for its own benefit.
(D) The Company will undertake in the Instrument that Shares falling to be issued upon the exercise of the Subscription Rights will be allotted and issued not later than 10 business days (or, if applicable, such other period as prescribed by the Stock Exchange) after the relevant Subscription Date and will rank pari passu with the fully paid Shares in issue on the relevant Registration Date and accordingly shall entitle the holders to participate in all dividends or other distributions paid or made after the relevant Registration Date other than any dividend or other distribution previously declared or recommended or resolved to be paid or made if the record date therefor shall be on or before the relevant Registration Date and notice of the amount and record date for which shall have been given to the Stock Exchange prior to the relevant Registration Date.
(E) As soon as practicable after the relevant allotment of Shares (and not later than 15 business days or, if applicable, such other period as prescribed by the Stock Exchange, after the relevant Subscription Date) there will be issued free of charge to the Warrantholder(s), amongst other documents (if applicable):
(i) a certificate (or certificates) for the relevant Shares in the name(s) of such Warrantholder(s); and
(ii) (if applicable) a balancing Warrant Certificate in registered form in the name(s) of such Warrantholder(s) in respect of any Subscription Rights and remaining unexercised.

The certificate(s) for Shares arising on the exercise of Subscription Rights and the balancing Warrant certificate (if any) will be sent by post at the risk of such Warrantholder(s) to the address of such Warrantholder or (in the case of a joint holding) to that one of them whose name stands first on the register of Warrantholders. If the Company agrees, such certificates may by prior arrangement be retained by the Registrar (as defined in the Instrument) to await collection by the relevant Warrantholder(s)of such Warrantholder(s).

– III-3 –

APPENDIX III SUMMARY OF TERMS OF BONUS WARRANTS

3. ADJUSTMENTS OF SUBSCRIPTION PRICE

The Instrument contains detailed provisions relating to the adjustment of the Subscription Price. The following is a summary of, and is subject to, the adjustment provisions of the Instrument:

(A) The Subscription Price shall (except as mentioned in the proviso to (v) below and in paragraph (B) below) be adjusted as provided in the Instrument in each of the following cases:
(i) an alteration of the nominal amount of the Shares by reason of any consolidation or subdivision;
(ii) an issue (other than in lieu of a cash dividend) by the Company of Shares credited as fully paid by way of capitalisation of profits or reserves (including any share premium account or capital redemption reserve);
(iii) a Capital Distribution (as defined in the Instrument) being made by the Company, whether on a reduction of capital or otherwise, to holders of its Shares in their capacity as such;
(iv) an offer or grant being made by the Company to holders of its Shares by way of rights or of options or warrants to subscribe for new Shares at a price which is less than 80 per cent. of the market price (calculation as provided in the Instrument);
(v) an issue wholly for cash being made by the Company or any other company of securities convertible into or exchangeable for or carrying rights of subscription for new Shares, if in any case the total Effective Consideration (as defined in the Instrument) per Share is less than 80 per cent. of the market price (calculated as provided in the Instrument), or the terms of any such issue being altered so that the said total Effective Consideration is less than 80 per cent. of the market price;
(vi) an issue being made wholly for cash of Shares other than pursuant to a Share Incentive Scheme (as defined in the Instrument) at a price less than 80 per cent. of the market price (calculated as provided in the Instrument); and
(vii) a cancellation of any Shares repurchased by the Company (other than on the Stock Exchange or any stock exchange recognised for such purpose) in circumstances where the directors of the Company consider that it may be appropriate to make an adjustment to the Subscription Price, provided that the directors of the Company shall have appointed an approved merchant bank to consider whether, for any reason whatever as a result of such purchases, an adjustment should be made to the

– III-4 –

APPENDIX III

SUMMARY OF TERMS OF BONUS WARRANTS

Subscription Price fairly and appropriately to reflect the relative interests of the persons affected by such purchases by the Company and, if such approved merchant bank shall consider in its opinion that it is appropriate to make an adjustment to the Subscription Price, the directors of the Company shall make an adjustment to the Subscription Price in such manner as such approved merchant bank shall certify to be, in its opinion, appropriate.

(B) No such adjustment as referred to in paragraph (A) shall be made in respect of:
(i) an issue of fully paid Shares upon the exercise of any conversion rights attached to securities convertible into Shares or upon the exercise of any rights (including the Subscription Rights) to acquire Shares;
(ii) an issue of Shares or other securities of the Company or any subsidiary wholly or partly convertible into, or rights to acquire Shares to such eligible participants or their personal representatives pursuant to a share incentive scheme or share option schemes of the Company approved by the Shareholders;
(iii) an issue by the Company of Shares or by the Company or any subsidiary of securities convertible into or rights to acquire Shares, in any such case in consideration or part consideration for the acquisition of any other securities, assets or business;
(iv) an issue of fully paid Shares by way of capitalisation of all or part of the Subscription Right Reserve (as defined in the Instrument) to be established in certain circumstances pursuant to the terms and conditions contained in the Instrument (or any similar reserve which has been or may be established pursuant to the terms of any other securities convertible into or rights to acquire Shares);
(v) an issue of Shares in lieu of a cash dividend where an amount not less than the nominal amount of the Shares so issued is capitalised and the market value (calculated as provided in the Instrument) of such Shares is not more than 110 per cent. of the amount of dividend which holders of Shares could elect to or would otherwise receive in cash;
(vi) the issue of the Bonus Warrants; or
(vii) the issue of Shares pursuant to Open Offer and the Bonus Issue (to the extent such Shares are issued after the signing of the Instrument and/or the creation of the Bonus Warrants).

– III-5 –

APPENDIX III

SUMMARY OF TERMS OF BONUS WARRANTS

(C) Any adjustment to the Subscription Price shall be made to the nearest one cent so that any amount under half a cent shall be rounded down and any amount of half a cent or more shall be rounded up. No adjustment shall be made to the Subscription Price in any case in which the amount by which the same would be reduced would be less than the then per value of the Shares and any adjustment which would otherwise then be required shall not be carried forward. No adjustment shall be made (except on a consolidation of Shares) which would increase the Subscription Price.
(D) Every adjustment to the Subscription Price will be certified by the auditors of the Company for the time being or an approved merchant bank and notice of each adjustment (giving the relevant particulars) will be given to the Warrantholders. Any such certificates of the auditors and/or approved merchant bank will be available at the principal place of business of the Company in Hong Kong, where copies may be obtained without charge.

When there is an adjustment to the Subscription Price, a notice of adjustment will be given to the Warrantholders and an announcement will be made by the Company in this regard.

4. REGISTERED WARRANTS

The Bonus Warrants will be issued in registered form. The Company shall be entitled to treat the registered holder of any Bonus Warrant as the absolute owner thereof and accordingly shall not, except as ordered by a Court of competent jurisdiction or required by law, be bound to recognise any equitable or other claim to or interest in such Bonus Warrant on the part of any other person, whether or not it shall have express or other notice thereof.

5. TRANSFER, TRANSMISSION AND REGISTER

(A) The Subscription Rights are transferable in whole amounts or multiples of units of Subscription Rights of HK$100,000, by instrument of transfer in any usual or common form or in any other form which may be approved by the Directors. The Company shall maintain a register of Warrantholders accordingly. Transfers of the Bonus Warrants must be executed by both the transferor and the transferee. The provisions of the Company’s articles of association from time to time in force relating to the registration, transfer and transmission of Shares and the register of members shall, mutatis mutandis, apply (unless inconsistent with the provisions of these Conditions or the Instrument) to the registration, transfer and transmission of the Bonus Warrants and the register of Warrantholders, save that the Company shall not be obliged (but may if the directors of the Company so resolve) to maintain any register of Warrantholders at any place outside Hong Kong.

– III-6 –

APPENDIX III

SUMMARY OF TERMS OF BONUS WARRANTS

(B) The Instrument contains provisions which incorporate by reference certain provisions of the Company’s articles of association from time to time in force to regulate the maximum number of holders of a Bonus Warrant, the appointment of proxies, attorneys and corporate representatives by Warrantholders, the signing and delivery of instruments appointing proxies, attorneys and corporate representatives of Warrantholders, voting and the right to speak at meetings of Warrantholders by Warrantholders, their proxies, attorneys and corporate representatives, the rights of joint holders of a Bonus Warrant and the destruction of documents which have been registered or cancelled.
(C) Any transfer of the Bonus Warrants to any connected person of the Company (as such expression is defined in the Listing Rules) shall be subject to the requirements that the Stock Exchange may impose from time to time.
(D) The registration of transfers of the Bonus Warrants may be suspended and the register of Warrantholders may be closed for such period as the directors of the Company may from time to time direct, provided that registration may not be suspended or such register of Warrantholders be closed for a period of more than 30 days or, with the approval of an ordinary resolution of Warrantholders, for a longer period not exceeding 60 days in any one year. Any transfer or exercise of the Subscription Rights attached to the Bonus Warrants made while the register of Warrantholders is so closed shall, as between the Company and the person claiming under the relevant transfer of the Bonus Warrants or, as the case may be, as between the Company and the Warrantholder who has so exercised the Subscription Rights attached to his Warrants (but not otherwise), be considered as made immediately after the reopening of the register of Warrantholders.

6. MEETINGS OF WARRANTHOLDERS AND MODIFICATION OF RIGHTS

(A) The Instrument contains provisions for convening meetings of Warrantholders to consider any matter affecting the interests of Warrantholders, including the modification by a Special Resolution of the provisions of the Instrument and/or the Conditions. A Special Resolution duly passed at any such meeting shall be binding on the Warrantholders, whether present or not.
(B) All or any of the rights for the time being attached to the Bonus Warrants (including any of the provisions of the Instrument) may from time to time (whether or not the Company is being wound up) be altered or abrogated (including but without prejudice to that generality by waiving compliance with, or by waiving or authorising any past or proposed breach of, any of the provisions of these Conditions and/or the Instrument) and the sanction of a Special Resolution shall be necessary and sufficient to effect such alteration or abrogation.

– III-7 –

APPENDIX III

SUMMARY OF TERMS OF BONUS WARRANTS

7. REPLACEMENT OF WARRANT CERTIFICATES

If a Warrant Certificate is mutilated, defaced, lost or destroyed, it may, at the discretion of the Company, be replaced at the principal office of the register of Warrantholders for the time being maintained in Hong Kong on payment of such costs as may be incurred in connection therewith and on such terms as to evidence, indemnity and/or security as the Company may require and on payment of such fee as the Company may determine. Mutilated or defaced Warrant Certificates must be surrendered before replacements will be issued.

In the case of lost Warrant certificates, section 71A of the Companies Ordinance (Chapter 32 of the Laws of Hong Kong) shall apply as if “shares” referred to therein included the Bonus Warrants.

8. PROTECTION OF SUBSCRIPTION RIGHTS

The Instrument contains certain undertakings by and restrictions on the Company designed to protect the Subscription Rights.

9. CALL

If at any time the Bonus Warrants which have not been exercised carry rights to subscribe for Shares are equal to or less than HK$100,000 of Subscription Rights, the Company may, on giving not less than three months’ notice, require Warrantholders either to exercise their Subscription Rights or to allow them to lapse. On expiry of such notice, all unexercised Warrant(s) will be automatically cancelled.

10. FURTHER ISSUES

The Company shall be at liberty to issue further subscription warrants. Such issue of further subscription warrants is, however, subject to the Listing Rules. The Warrantholders will not be entitled to participate in any distributions or further issues of securities by the Company as a result of them being Warrantholders.

11. UNDERTAKINGS BY THE COMPANY

In addition to the undertakings given by it in relation to the grant and exercise of the Subscription Rights and the protection thereof the Company will undertake in the Instrument that:

(i) it will use its best endeavours to ensure that all Shares allotted on the exercise of Subscription Rights shall be admitted to listing on the Stock Exchange; and
(ii) it will pay all Hong Kong and, if applicable, the Cayman Islands stamp duties, registration fees or similar charges in respect of the execution of this Instrument, the creation and initial issue of the Bonus Warrants in registered form, the exercise of the Subscription Rights and the issue of Shares upon exercise of the Subscription Rights.

– III-8 –

APPENDIX III

SUMMARY OF TERMS OF BONUS WARRANTS

12. NOTICES

The Instrument contains provisions relating to notices to be given to Warrantholders. Every Warrantholder shall register with the Company an address either in in Hong Kong or elsewhere to which notices can be sent and if any Warrantholder shall fail so to do notice may be given to such Warrantholder by sending the same in any of the manners hereinafter mentioned to his last known place of business or residence or, if there be none, by posting up the same for three days at the principal place of business and the registered office for the time being of the Company.

A notice may be given by delivery, prepaid letter (airmail in the case of an overseas address to where airmail service is available). All notices with respect to the Bonus Warrants standing in the names of joint holders shall be given to whichever of such persons is named first on the register of Warrantholders and notice so given shall be sufficient notice to all the holders of such Bonus Warrants. Notices sent by personal delivery or prepaid letter or the posting of the same at the registered office of the Company as provided in the above paragraph shall be deemed to have been served on the first day after such delivery or the deposit of the letter in a postbox or, as the case may be, the first day after the first posting up of such notice.

13. OVERSEAS WARRANTHOLDERS

No Subscription Rights represented by a Bonus Warrant may be exercised by any person who is resident in or a national of a Restricted Jurisdiction (as hereinafter defined), and the exercise of any Subscriptions Rights represented by a Bonus Warrant by a Warrantholder shall constitute a confirmation, representation and warranty by the exercising Warrantholder that such Warrantholder is not a resident or a national of a Restricted Jurisdiction and that all necessary governmental, regulatory or other consents or approvals and all formalities have been obtained and observed by such Warrantholder to enable him to legally and validly exercise the relevant Subscription Rights and the Company to legally and validly allot Shares in consequence thereof. For the purposes of this Condition a “ Restricted Jurisdiction ” includes the United States of America, any of its territories or possessions, the United Kingdom, Canada, any jurisdiction under the laws of which an exercise of Subscription Rights by a Warrantholder who is a national or resident thereof or the performance by the Company of the obligations expressed to be assumed by it under the Instrument or the Conditions cannot be carried out lawfully or cannot be carried out lawfully without the Company first having to take certain actions in such jurisdiction, and any other country, state or territory nominated by the Directors from time to time. Warrantholders shall be notified of any such nomination as soon as practicable after the Directors have nominated the same.

– III-9 –

APPENDIX III

SUMMARY OF TERMS OF BONUS WARRANTS

14. WINDING UP OF THE COMPANY

(a) If an effective resolution is passed for the voluntary winding up of the Company and if such winding up is for the purpose of reconstruction or amalgamation pursuant to a scheme of arrangement to which the Warrantholders, or some person designated by them for such purpose by Special Resolution, will be a party or in conjunction with which a proposal is made to the Warrantholders and is approved by Special Resolution, the terms of such scheme of arrangement or (as the case may be) proposal will be binding on all the Warrantholders.
(b) In the event a notice is given by the Company to its shareholders to convene a shareholders’ meeting for the purpose of considering and, if thought fit, approving a resolution to voluntarily wind-up the Company during the Subscription Period, the Company shall give notice thereof to each Warrantholder and, thereupon every Warrantholder shall be entitled to, at any time up to close of business on the second business day before the general meeting convened for the purpose of passing the necessary resolution for the voluntary winding up of the Company, by irrevocable surrender of his Warrant Certificate(s) to the Company with the Subscription Form(s) duly completed, together with payment of the Exercise Moneys or the relative portion thereof (which must be a whole multiple of units of Subscription Rights of HK$100,000 in the case of a partial exercise), exercise the Subscription Rights represented by such Warrant Certificate to the extent specified in the Subscription Form(s) and the Company shall as soon as possible and in any event no later than the day immediately prior to the date of the proposed shareholders’ meeting allot such number of Shares to the Warrantholders which fall to be issued pursuant to the exercise of the Subscription Rights represented by such Bonus Warrants and update the register of members of the Company accordingly.

The Company shall give notice to the Warrantholders of the proposing of any such resolution referred to in paragraph (b) above within seven days after the notice of the general meeting at which such resolution will be proposed is despatched to shareholders of the Company. The notice to Warrantholders shall contain a reminder to Warrantholders of their rights under paragraph (b) above.

– III-10 –

APPENDIX III SUMMARY OF TERMS OF BONUS WARRANTS

The Company shall give notice to the Warrantholders of the passing of any resolution referred to in paragraph (b) above within seven days after the passing thereof.

Subject to the foregoing, if the Company is wound up, all Subscription Rights which have not been exercised at the commencement of the winding up will lapse and each Warrant Certificate will cease to be valid for any purpose.

15. GOVERNING LAW

The Instrument and the Bonus Warrants are governed by and will be construed in accordance with the laws of Hong Kong.

– III-11 –

APPENDIX IV

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular (other than information relating to Lord Profit) is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular (other than those expressed by Lord Profit) misleading.

All Directors jointly and severally accept full responsibility for the accuracy of information contained in this circular and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

The sole director of Lord Profit accepts full responsibility for the accuracy of the information contained in this circular (other than that in relation to the Group) and confirm, having made all reasonable enquiries, that to the best of his knowledge, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained herein the omission of which would make any statement herein misleading.

2. SHARE CAPITAL

(a) The authorised and issued share capital of the Company as at the Latest Practicable Date and immediately following completion of the Open Offer with the Bonus Issue were/will be as follows:
(i) As at the Latest Practicable Date

Authorised: HK$ 500,000,000,000 Shares of HK$0.01 each 5,000,000,000.00 Issued and fully paid: 1,564,846,293 Shares of HK$0.01 each 15,648,462.93

– IV-1 –

APPENDIX IV

GENERAL INFORMATION

(ii) Immediately following the completion of the Open Offer with the Bonus Issue (assuming no exercise of the Existing Share Options and no other Shares are allotted and issued on or before the Record Date)

Authorised:					HK$
500,000,000,000	Shares	of	HK$0.01	each	5,000,000,000.00

Issued and fully paid/to be issued:

1,564,846,293 Shares as at the Latest Practicable Date 1,564,846,293 Offer Shares to be allotted and issued under the Open Offer 1,564,846,293 Bonus Shares to be allotted and issued under the Bonus Issue 4,694,538,879 Shares upon completion of the Open Offer with the Bonus Issue	15,648,462.93 15,648,462.93 15,648,462.93
	46,945,388.79

(iii) Immediately following the completion of the Open Offer with the Bonus Issue (assuming exercise of all the Existing Share Options but no other Shares are allotted and issued before the Record Date)

Authorised:					HK$
500,000,000,000	Shares	of	HK$0.01	each	5,000,000,000.00

Issued and fully paid/to be issued:

1,644,023,148 Shares as at the Latest Practicable Date 1,644,023,148 Offer Shares to be allotted and issued under the Open Offer 1,644,023,148 Bonus Shares to be allotted and issued under the Bonus Issue 4,932,069,444 Shares upon completion of the Open Offer with the Bonus Issue	16,440,231.48 16,440,231.48 16,440,231.48
	49,320,694.44

– IV-2 –

APPENDIX IV

GENERAL INFORMATION

260,000,000 Shares had been issued by the Company since 31 March 2013, being the date of the latest published audited financial statements of the Company.

Upon completion of the Open Offer with the Bonus Issue, Bonus Warrants in the maximum aggregate exercise moneys of HK$164,402,314.86 will be created and issued and such Bonus Warrants will entitle the holders thereof to subscribe for 822,011,574 Warrant Shares at an initial price of HK$0.20 (subject to adjustments) per Warrant Share.

All the existing Shares in issue are fully-paid and rank pari passu in all respects including all rights as to dividends, voting and return of capital. The Offer Shares and the Bonus Shares (when allotted, issued and fully-paid) and the Warrant Shares (when issued upon exercise of the Bonus Warrants) will rank pari passu with the then existing Shares in issue in all respects. Holders of fully-paid Offer Shares, the Bonus Shares and the Warrant Shares will be entitled to receive all future dividends and distributions which may be declared, made or paid on or after the date of allotment of Offer Shares, the Bonus Shares and the Warrant Shares (as the case may be). As at the Latest Practicable Date, there were no arrangement under which future dividends are waived or agreed to be waived.

(b) Share Option Scheme

Details of the Existing Share Options granted by the Company pursuant to the Share Option Scheme are as follows:

Name/ Category of Participants Employees Other eligible persons Other eligible persons In aggregate	As at 31 March 2013 1,551 4,126 5,677 73,500 73,500 79,177	Exercised – – – – – –	Lapsed – – – – – –	As at Latest Practicable Date Date of grant Exercise period Exercise price (HK$ per Share) 1,551 28 January 2008 28 January 2008 to 21 September 2016 4.51 4,126 28 January 2008 28 January 2008 to 21 September 2016 4.51 5,677 73,500 26 May 2009 26 May 2009 to 21 September 2016 1.00 73,500 79,177

– IV-3 –

APPENDIX IV

GENERAL INFORMATION

Adjustments to the exercise prices of the Existing Share Options and/or the number of Shares to be allotted and issued upon exercise of the Existing Share Options will be made in accordance with the rules of the share option schemes of the Company and the Listing Rules as a result of the Open Offer. Holders of the Existing Share Options will be notified about the adjustments to the Existing Share Options after completion of the Open Offer with the Bonus Issue.

As at the Latest Practicable Date, save for the Existing Share Options, the Company had no outstanding convertible securities, options or warrants in issue which confer any right to subscribe for, convert or exchange into Shares.

3. DIRECTORS’ INTERESTS

(a) As at the Latest Practicable Date, the interests and short positions of each Director in the shares or underlying shares of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in which he was deemed or taken to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

Long position

			Number and
			class of shares
	The		in the
	Company/Name		Company/	Number of	Approximate
	of associated		associated	underlying	percentage of
Name of Director	corporations	Nature of interest	corporations	Shares	interest
Tong Kit Shing	The Company	Interest of controlled	908,753,532	151,459,422	67.75%
		corporation	Shares		(Note 1)
		(Note 2)
Liu Guoyao	The Company	Interest of controlled	908,753,532	151,459,422	67.75%
		corporation	Shares		(Note 1)
		(Note 2)

Notes:

The percentage shareholding in the Company is calculated by reference to the number of Shares in issue as at the Latest Practicable Date, that is, 1,564,846,293 Shares.
These Shares comprise (i) 302,918,844 Shares held by Automatic Result; and (ii) 302,918,844 Committed Shares and the 302,918,844 Bonus Shares to be allotted and issued to Automatic Result in connection with the taking up of the Committed Shares. Automatic Result is a company wholly-owned by Mr. Tong and of which Mr. Liu is the sole director.

– IV-4 –

APPENDIX IV

GENERAL INFORMATION

(b) Save as disclosed in this circular, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interest and short positions in the shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including the interests and short positions in which they were deemed or taken to have under such provisions of the SFO), or which are required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

4. SUBSTANTIAL SHAREHOLDERS’ INTERESTS

(a) As at the Latest Practicable Date, so far as is known to the Directors, the following persons, other than a director or chief executive of the Company, had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or 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 the Company:

Long position in the Shares

			Approximate
			percentage of
Name of Shareholder	Nature of interest	Number of Shares	interest
			(Note 1)
Automatic Result	Beneficial owner	1,060,215,954	67.75%
		(Note 2)
Lord Profit	Beneficial owner	3,017,484,685	192.83%
		(Note 3)
Kingsley Leung	Interest of controlled	3,017,484,685	192.83%
	corporation_(Note 4)_
Prominence	Beneficial owner	335,276,075	21.43%
		(Note 5)
Beta Breakers Holdings Limited	Beneficial owner	335,276,075	21.43%
		(Note 5)
Lam Wing Chak Victor	Beneficial owner	335,276,075	21.43%
		(Note 5)
Overseas Capital Assets Limited	Beneficial owner	219,060,000	14.00%
		(Note 6)

– IV-5 –

APPENDIX IV

GENERAL INFORMATION

Notes:

  1. The percentage shareholding in the Company is calculated by reference to the number of Shares in issue as at the Latest Practicable Date, that is, 1,564,846,293 Shares.

  2. These Shares comprise (i) 302,918,844 Shares directly held by Automatic Result; and (ii) 302,918,844 Committed Shares and the 302,918,844 Bonus Shares to be allotted and issued to Automatic Result in connection with the taking up of the Committed Shares. Automatic Result is a company wholly-owned by Mr. Tong and of which Mr. Liu is the sole director. The interests in the Company of each of Mr. Tong and Mr. Liu are set out in the paragraph headed “Directors’ interests” in this Appendix above.

  3. These Shares comprise (i) 1,206,993,874 Underwritten Shares to be underwritten by Lord Profit under the Underwriting Agreement; and (ii) 1,206,993,874 Bonus Shares to be allotted and issued to Lord Profit with the 1,206,993,874 Underwritten Shares under the Open Offer.

  4. These interests are held by Lord Profit, which is owned as to 90% by Mr. Kingsley Leung and as to 10% by Tong Kit Shing, an executive Director.

  5. These Shares comprise (i) 134,110,430 Underwritten Shares to be underwritten by Prominence under the Underwriting Agreement; and (ii) 134,110,430 Bonus Shares to be allotted and issued to Prominence with the 134,110,430 Underwritten Shares under the Open Offer. Prominence is owned as to 99% by Beta Breakers Holdings Limited and as to 1% by Lam Wing Chak Victor. Beta Breakers Holdings Limited is wholly and beneficially owned by Lam Wing Chak Victor.

  6. Based on the individual substantial shareholder notice of Overseas Capital Assets Limited filed on 25 July 2013, Overseas Capital Assets Limited is wholly-owned by Hu Rufeng.

(b) Save as disclosed in this circular, so far as is known to the Directors, there is no other person who had an interest or short position in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, had a direct or indirect interests amounting to 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 members of the Group.
(c) Mr. Liu Guoyao, an executive Director, is the sole director of Automatic Result Limited.

5. OTHER DISCLOSURE OF INTEREST

(a) As at the Latest Practicable Date and during the Relevant Period, none of the Shareholders had irrevocably committed itself to vote for or against the resolutions to be proposed at the EGM to approve the Open Offer with the Bonus Issue and/or the Whitewash Waiver.
(b) As at the Latest Practicable Date, there was no agreement, arrangement or understanding between the Underwriters and any parties acting in concert with it and other persons in relation to the transfer, charge or pledge of the Shares that may be allotted and issued to the underwriter or any of its concert parties under the Open Offer with the Bonus Issue.

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GENERAL INFORMATION

(c) As at the Latest Practicable Date and during the Relevant Period, no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with (i) Lord Profit or parties acting in concert with it; or (ii) the Company, or with any person who is an associate of the Company by virtue of classes (1) to (4) of the definition of associate under the Takeovers Code.
(d) As at the Latest Practicable Date and during the Relevant Period, none of (i) the subsidiaries of the Company; (ii) the pension fund of the Company or of a subsidiary of the Company; (iii) any advisers to the Company (as specified in class (2) of the definition of “associate” under the Takeovers Code) had any interest in the Shares, convertible securities, warrants, options or derivatives of the Company and none of them had dealt for value in any such securities of the Company.
(e) As at the Latest Practicable Date and during the Relevant Period, no Shares, convertible securities, warrants, options or derivatives of the Company were managed on a discretionary basis by fund managers connected with the Company.
(f) As at the Latest Practicable Date, none of (i) Mr. Kingsley Leung or Lord Profit; (ii) Automatic Result; and (iii) the Company or the Directors had borrowed or lent the Shares.
(g) As at the Latest Practicable Date, save for the underwriting commission payable under the Underwriting Agreement, no benefit would be given to any Director as compensation for loss of office in any member of the Group or otherwise in connection with the Open Offer with the Bonus Issue and/or the Whitewash Waiver.
(h) As at the Latest Practicable Date, save for the Underwriting Agreement and the ARL Undertaking, there was no agreement or arrangement between any Director and any other person which is conditional on or dependent upon the outcome of the Open Offer with the Bonus Issue and/or the Whitewash Waiver or otherwise connected with the Open Offer with the Bonus Issue and/or the Whitewash Waiver.
(i) As at the Latest Practicable Date, save for the Underwriting Agreement, there was no material contract entered into by the Underwriters in which any Director had a material personal interest.
(j) As at the Latest Practicable Date, save for the Underwriting Agreement and the ARL Undertaking, there was no agreement, arrangement or (understanding (including any compensation arrangement) existed between Lord Profit or any person acting in concert with it and any of the Directors,

– IV-7 –

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GENERAL INFORMATION

recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Open Offer with the Bonus Issue and/or the Whitewash Waiver.

(k) Save for Automatic Result (of which Mr. Tong is the sole beneficial owner and Mr. Liu is the sole director), who pursuant to the ARL Undertaking has irrevocably undertaken to accept the Committed Shares, the Directors do not own/control/direct any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company. As Automatic Result is a party acting in concert with Lord Profit and not an Independent Shareholder, it shall abstain from voting on the resolutions to be proposed at the EGM to approve the Open Offer with the Bonus Issue and/or the Whitewash Waiver.
(l) As at the Latest Practicable Date, the Company did not hold any shares, convertible securities, warrants, options or derivatives of Lord Profit and it did not have any dealing in any relevant securities (as defined in note 4 to Rule 22 of the Takeovers Code) of Lord Profit during the Relevant Period.
(m) As at the Latest Practicable Date, save for Mr. Tong who owned 10% of the issued share capital of Lord Profit, none of the Director held any shares, convertible securities, warrants, options or derivatives of Lord Profit and none of the Directors had any dealing in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of Lord Profit during the Relevant Period.
(n) As at the Latest Practicable Date, save for Mr. Tong and Mr. Liu, who is the sole beneficial owner and sole director of Automatic Result respectively (which owned approximately 19.36% of the existing issued share capital of the Company), none of the Directors held any Share, convertible securities, warrants, options or derivatives of the Company and none of the Directors had any dealing in any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company during the Relevant Period.

6. INTERESTS IN CONTRACT OR ARRANGEMENT

Save for the Underwriting Agreement and the ARL Undertaking, as at the Latest Practicable Date, none of the Directors was materially interested in contract or arrangement subsisting which is significant in relation to the business of the Group, nor had any Director had any direct or indirect interest in any assets which have been acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2013, the date to which the latest published audited consolidated financial statements of the Group were made up.

7. LITIGATION

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

– IV-8 –

APPENDIX IV

GENERAL INFORMATION

8. MATERIAL CHANGE

9. SERVICE CONTRACTS

(a) Mr. Leung Ka Chun, an executive Director, had entered into a service agreement with the Company and the appointment of Mr. Leung Ka Chun as an executive Director is for a term of two years commencing from 1 December 2012 and expiring on 30 November 2014. Mr. Leung Ka Chun is entitled to a fixed remuneration of director’s fee of HK$30,000 per month and there is no variable remuneration payable under such service agreement with the Company. For the year ended 31 March 2013, Mr. Leung Ka Chun received a director’s fee of HK$200,000 from the Company. Except for the director’s fee and the HK$5,000 retirement scheme contributions made by the Company for Mr. Leung Ka Chun, he did not receive any bonus payments, whether fixed or discretionary in nature, or other emoluments for the year ended 31 March 2013.
(b) Mr. Tsao Hoi Ho, Terry, an independent non-executive Director, had entered into an appointment letter with the Company and the appointment of Mr. Tsao Hoi Ho, Terry as an independent non-executive Director for a term of two years commencing from 1 May 2012 and expiring on 30 April 2014. Mr. Tsao Hoi Ho, Terry is entitled to a fixed remuneration of director’s fee of HK$120,000 per annum and there is no variable remuneration payable under such appointment letter with the Company. For the year ended 31 March 2013, Mr. Tsao Hoi Ho, Terry received a director’s fee of HK$120,000 from the Company.
(c) Mr. Lou Iok Kuong, an independent non-executive Director, had entered into an appointment letter with the Company and the appointment of Mr. Lou Iok Kuong as an independent non-executive Director for a term of two years commencing from 1 May 2012 and expiring on 30 April 2014. Mr. Lou Iok Kuong is entitled to a fixed remuneration of director’s fee of HK$120,000 per annum and there is no variable remuneration payable under such appointment letter with the Company. For the year ended 31 March 2013, Mr. Lou Iok Kuong received a director’s fee of HK$120,000 from the Company.

– IV-9 –

APPENDIX IV

GENERAL INFORMATION

(d) Mr. Ng Pak Kin, Danny, an independent non-executive Director, had entered into an appointment letter with the Company and the appointment of Mr. Ng Pak Kin, Danny as an independent non-executive Director for a term of two years commencing from 1 December 2012 and expiring on 30 November 2014. Mr. Ng Pak Kin, Danny is entitled to a fixed remuneration of director’s fee of HK$120,000 per annum and there is no variable remuneration payable under such appointment letter with the Company. For the year ended 31 March 2013, Mr. Ng Pak Kin, Danny received a director’s fee of HK$40,000 from the Company.
(e) Mr. Leung Wai Chung, Vincent, an independent non-executive Director, had entered into an appointment letter with the Company and the appointment of Mr. Leung Wai Chung, Vincent as an independent non-executive Director is for a term of two years commencing from 1 December 2012 and expiring on 30 November 2014. Mr. Leung Wai Chung, Vincent is entitled to a fixed remuneration of director’s fee of HK$120,000 per annum and there is no variable remuneration payable under such appointment letter with the Company. For the year ended 31 March 2013, Mr. Leung Wai Chung, Vincent received a director’s fee of HK$40,000 from the Company.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group or associated companies of the Company (i) which has been entered into or amended within 6 months before the date of the Announcement; (ii) which is a continuous contract with a notice period of 12 months or more; or (iii) which is a fixed term contract with more than 12 months to run irrespective of the notice period. None of the existing service contracts or, as the case may be, letters of appointment, between Directors and the Company has been replaced or amended within the six months before the Latest Practicable Date and there has not been any material increase in any remuneration of the Director within the six months before the Latest Practicable Date. None of the Directors has a service contract with the Company which is not determinable by the Company within one year without payment of compensation other than statutory compensation.

10. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business of the Company) have been entered into by members of the Group within two years immediately preceding the date of the Announcement and up to the Latest Practicable Date which are or may be material:

(a) the placing agreement dated 19 April 2013 entered into between the Company and Prominence Financials Limited in relation to the placing, on a best endeavour basis, of a maximum of 260,000,000 new Shares, further details of which are set out in the announcement of the Company dated 19 April 2013; and
(b) the Underwriting Agreement and the Supplemental Underwriting Agreement.

– IV-10 –

APPENDIX IV

GENERAL INFORMATION

11. COMPETING BUSINESS

As at the Latest Practicable Date, none of the Directors nor his associates (as defined in the Listing Rules) was interested in any business apart from the business of the Group, which competes or is likely to compete, either directly or indirectly, with that of the Group.

12. EXPERTS AND CONSENTS

The following is the qualifications of the experts whose statements have been included in this circular:

Name Qualification KTC Partners CPA Limited Certified Public Accountants Fortune Financial Capital Limited a corporation licensed to carry on Type 6 (advising on corporate finance) regulated activity under the SFO

Each of KTC Partners CPA Limited and Fortune Financial Capital Limited has given and has not withdrawn their written consents to the issue of this circular with the inclusion herein of its letters or opinions or reports or references to its name in the form and context in which it appear.

As at the Latest Practicable Date, each of KTC Partners CPA Limited and Fortune Financial Capital Limited had not had any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, each of KTC Partners CPA Limited and Fortune Financial Capital Limited had not had any direct or indirect interests in any assets which have been, since 31 March 2013 (being the date to which the latest published audited accounts of the Company were made up), acquired or disposed of by or leased to any member of the Group, or which are proposed to be acquired or disposed of by or leased to any member of the Group.

– IV-11 –

APPENDIX IV

GENERAL INFORMATION

13. PARTIES INVOLVED IN THE OPEN OFFER AND CORPORATE INFORMATION

Registered office	Cricket Square, Hutchins Drive
	P.O. Box 2681
	Grand Cayman KY1-1111
	Cayman Islands
Principal place of	13th Floor, Public Bank Centre
business in Hong Kong	120 Des Voeux Road Central
	Hong Kong
Underwriters	Lord Profit Limited
	P.O. Box 957
	Offshore Incorporations Centre
	Road Town, Tortola
	British Virgin Islands
	Prominence Financials Limited
	Room 603
	6/F, Low Block, Grand Millennium Plaza
	181 Queen’s Road Central
	Hong Kong
Legal adviser to the	As to Hong Kong laws
Company	Leung & Lau
	3rd Floor
	Agricultural Bank of China Tower
	50 Connaught Road C., Central
	Hong Kong
Auditor	KTC Partners CPA Limited
	Rooms 501-2 & 508
	5/F, Mirror Tower
	61 Mody Road
	Tsim Sha Tsui East
	Hong Kong
Independent Financial	Fortune Financial Capital Limited
Adviser to the	35/F Office Tower
Independent Board	Convention Plaza
Committee and the	1 Harbour Road, Wanchai
Independent	Hong Kong
Shareholders

– IV-12 –

APPENDIX IV

GENERAL INFORMATION

Principal bankers Bank of China (Hong Kong) Limited 21 Ma Tau Wai Road Hung Hom Kowloon Hong Kong Bank of Communication Co., Ltd, Hong Kong Branch No. 563 Nathan Road Kowloon Hong Kong Principal share registrar HSBC Trustee (Cayman) Limited and transfer agent P.O. Box 484 HSBC House 68 West Bay Road Grand Cayman KY1-1106 Cayman Islands Hong Kong branch share Tricor Abacus Limited registrar and transfer 26/F, Tesbury Centre office 28 Queen’s Road East, Wanchai Hong Kong Authorised Mr. Tong Kit Shing representatives Room 6A, Block 10 Garden City 3 Shekou, Shenzhen PRC Mr. Liu Guoyao Sap Tai Tong Chuen Shing Sai Heung Chuk Kai Yuen, Guangdong PRC Company secretary Mr. Fung Kwok Leung, FCPA, FCCA, CTAHK, FITHK, BA (Hons.)

– IV-13 –

APPENDIX IV

GENERAL INFORMATION

14. DIRECTORS AND SENIOR MANAGEMENT PROFILE

Particulars of the Directors and senior management of the Company:

Name Residential address Executive Directors Mr. Tong Kit Shing Room 6A, Block 10 (Chairman) Garden City 3 Shekou, Shenzhen PRC Mr. Liu Guoyao Sap Tai Tong Chuen Shing Sai Heung Chuk Kai Yuen, Guangdong PRC Mr. Leung Ka Chun 23/F., Flat 6, Block 6 Harbour Place Hunghom, Kowloon Hong Kong Independent Non-Executive Directors

Mr. Tsao Hoi Ho, Terry Flat C, 7/F., Block 8 Bauhinia Mansion Whampoa Garden Hunghom, Kowloon Hong Kong Mr. Lou Iok Kuong Room 1512, 15/F., Pok On House Pok Hong Estate Shatin, New Territories Hong Kong Mr. Ng Pak Kin, Danny 20/F, Mei Foo Sun Chuen 3A Nassau Street Kowloon Hong Kong Mr. Leung Wai Chung, Flat C, 19/F., Tower 4 Vincent Jubilant Place 99 Pau Chung Street To Kwa Wan, Kowloon Hong Kong

– IV-14 –

APPENDIX IV

GENERAL INFORMATION

Senior management

Mr. Fung Kwok Leung Unit F, 41/F, Tower 3 Metro Town 8 King Ling Road Tiu King Leng Hong Kong Mr. Chan Shun Tai, Flat F, 23/F Edward Chai Kung Mansion Tai Koo Shing Hong Kong

Executive Directors

(1) Mr. Tong Kit Shing

Mr. Tong Kit Shing (“ Mr. Tong ”), aged 52, was appointed as an executive Director with effect from 22 September 2005. He is the chairman and one of the two authorised representatives of the Company and a member of the remuneration committee and nomination committee of the Board. Mr. Tong is responsible for the formulation of corporate strategy and the future direction of the Group, and the overall management of the Group. He has been engaged in metal trading business in the PRC since 1997. Mr. Tong also has extensive investment experience in water treatment business in the PRC using biotechnology and has also been investing in a company engaged principally in the development of water treatment system in the PRC.

As at the Latest Practicable Date, Mr. Tong was interested in 302,918,844 Shares which were held by Automatic Result Limited, of which Mr. Tong is the owner of Automatic Result Limited.

Save as disclosed above, as at the Latest Practicable Date, Mr. Tong did not (i) hold any directorships in other listed company in the last three years; (ii) have any other major appointments and professional qualifications; (iii) hold any other position with the Company or other members of the Group; and (iv) have any relationship with any other Directors, senior management, substantial or controlling Shareholders.

(2) Mr. Liu Guoyao

Mr. Liu Guoyao (“ Mr. Liu ”), aged 48, was appointed as an executive Director with effect from 22 September 2005. He is one of the two authorised representatives of the Company. He is responsible for the general management and marketing of the Group. He has extensive experience in the management and business administration of entities in the PRC. Mr. Liu owns a hotel in Dongguan, the PRC and has participated in the day-to-day operation and management thereof as a general manager since 1999.

As at the Latest Practicable Date, Mr. Liu was interested in 302,918,844 Shares which were held by Automatic Result Limited by virtue of Part XV of the SFO. Mr. Liu is the sole director of Automatic Result Limited.

– IV-15 –

APPENDIX IV

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, Mr. Liu did not (i) hold any directorships in other listed company in the last three years; (ii) have any other major appointments and professional qualifications; (iii) hold any other position with the Company or other members of the Group; and (iv) have any relationship with any other Directors, senior management, substantial or controlling Shareholders.

(3) Mr. Leung Ka Chun

Mr. Leung Ka Chun (“ Mr. Leung ”), aged 35, was appointed as an executive Director with effect from 1 December 2012. Mr. Leung is a member of the audit committee and the remuneration committee and the chairman of the nomination committee of the Board. Mr. Leung has over 11 years of working experience in legal profession and commerce especially in the marketing and management field. Mr. Leung holds a Law Diploma from The University of Hong Kong and a China Law Diploma from The Chinese University of Hong Kong. Mr. Leung is currently a senior executive of a law firm. Mr. Leung is also experienced in the bio-chemical and environmental industry. He is a director of Fitwell Development Limited, a private company incorporated in the British Virgin Islands, which specializes in recycling of wasted oil, production and marketing of bio-diesel.

As at the Latest Practicable Date, Mr. Leung was not interested in any Shares within the meaning of Part XV of the SFO.

Save as disclosed above, as at the Latest Practicable Date, Mr. Leung did not (i) hold any directorships in other listed company in the last three years; (ii) have any other major appointments and professional qualifications; (iii) hold any other position with the Company or other members of the Group; and (iv) have any relationship with any other Directors, senior management, substantial or controlling Shareholders.

Independent non-executive Directors

(1) Mr. Tsao Hoi Ho, Terry

Mr. Tsao Hoi Ho, Terry (“ Mr. Tsao ”), aged 48, was appointed as an independent non-executive Director with effect from 7 May 2010. Mr. Tsao is the chairman of the audit committee and a member of the remuneration committee and nomination committee of the Board. Mr. Tsao is a Certified Public Accountant (Practising) of the Hong Kong Institute of Certified Public Accountants, an associate of The Institute of Chartered Secretaries and Administrators, an associate of the Australasian Institute of Banking & Finance, a member of the Institute of Chartered Accountants of New Zealand and an associate of the Bankers’ Institute of New Zealand. Mr. Tsao graduated from the University of Warwick with a Master of Business Administration degree. He has over 20 years’ extensive experience in auditing, corporate finance and company secretarial practice. He has worked for international accounting firms for 5 years and is currently the financial controller, company secretary and authorized representative of Ningbo WanHao Holdings Company Limited (formerly known as Ningbo Yidong Electronic Company Limited), a joint stock limited company incorporated in the People’s Republic of China whose shares are listed on the Growth Enterprise Market of the Stock Exchange (Stock Code: 8249).

– IV-16 –

APPENDIX IV

GENERAL INFORMATION

As at the Latest Practicable Date, Mr. Tsao was not interested in any Shares within the meaning of Part XV of the SFO.

Save as disclosed above, as at the Latest Practicable Date, Mr. Tsao did not (i) hold any directorships in other listed company in the last three years; (ii) have any other major appointments and professional qualifications; (iii) hold any other position with the Company or other members of the Group; and (iv) have any relationship with any other Directors, senior management, substantial or controlling Shareholders.

(2) Mr. Lou Iok Kuong

Mr. Lou Iok Kuong (“ Mr. Lou ”), aged 43, was appointed as an independent non-executive Director with effect from 25 June 2010. Mr. Lou is the chairman of the remuneration committee and a member of the audit committee and nomination committee of the Board. Mr. Lou is a Hong Kong lawyer having over 16 years of experience in the profession. He was admitted as a solicitor in Hong Kong in 1995. He holds a Master degree in Business Administration from the Chinese University of Hong Kong and a Bachelor of Laws degree from The University of Hong Kong. Mr. Lou is an honorary Legal Advisor of the Hong Kong SAR Government Drivers’ Union; the Government Chauffeurs Union and The Hong Kong Allergy Association. Mr. Lou had worked for several law firms as a solicitor or a consultant and currently Mr. Lou is a partner of Edward Lau, Wong & Lou.

As at the Latest Practicable Date, Mr. Lou was not interested in any Shares within the meaning of Part XV of the SFO.

Save as disclosed above, as at the Latest Practicable Date, Mr. Lou did not (i) hold any directorships in other listed company in the last three years; (ii) have any other major appointments and professional qualifications; (iii) hold any other position with the Company or other members of the Group; and (iv) have any relationship with any other Directors, senior management, substantial or controlling Shareholders.

(3) Mr. Ng Pak Kin, Danny

Mr. Ng Pak Kin, Danny (“ Mr. Ng ”), aged 35, was appointed as an independent non-executive Director with effect from 1 December 2012. Mr. Ng is a member of the audit committee and remuneration committee of the Board. Mr. Ng is a practicing Barrister-at-Law, has over 11 years of working experience in the legal profession. Mr. Ng holds a Law Degree (LLB) and a Postgraduate Certificate in Laws (PCLL) from the University of Hong Kong. His legal practice mainly rests on civil litigation including tort, contract and commercial law. He is also familiar with other legal matters in relation to the Securities and Futures Commission.

As at the Latest Practicable Date, Mr. Ng was not interested in any Shares within the meaning of Part XV of the SFO.

Save as disclosed above, as at the Latest Practicable Date, Mr. Ng did not (i) hold any directorships in other listed company in the last three years; (ii) have any other major appointments and professional qualifications; (iii) hold any other position with the Company or other members of the Group; and (iv) have any relationship with any other Directors, senior management, substantial or controlling Shareholders.

– IV-17 –

APPENDIX IV

GENERAL INFORMATION

(4) Mr. Leung Wai Chung, Vincent

Mr. Leung Wai Chung, Vincent (“ Mr. Leung ”), aged 27, was appointed as an independent non-executive Director with effect from 1 December 2012. Mr. Leung is a member of the audit committee and remuneration committee of the Board. Mr. Leung is a Registered Pharmacist (General Pharmaceutical Council, United Kingdom). Mr. Vincent Leung obtained his Master Degree in Pharmacy (MPharm) from University of Nottingham in 2011. He was appointed by several pharmaceutical companies in the United Kingdom as Pharmacy Assistant and Pre-registered Pharmacist from 2006 to 2011.

As at the Latest Practicable Date, Mr. Leung was not interested in any Shares within the meaning of Part XV of the SFO.

Senior management of the Group

(1) Mr. Fung Kwok Leung

Mr. Fung Kwok Leung (“ Mr. Fung ”), aged 47, holds an Honour Degree in Accountancy from the Hong Kong Polytechnic University, is a fellow member of both of the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants. Mr. Fung is the company secretary and the chief financial officer of the Company. He has over 20 years of extensive experience in accounting and related fields.

As far as the Directors are aware, Mr. Fung does not have any relationships with any other Directors, senior management, substantial Shareholders (as defined in the Listing Rules) or controlling Shareholders (as defined in the Listing Rules) of the Company.

(2) Mr. Chan Shun Tai, Edward

Mr. Chan Shun Tai, Edward (“ Mr. Chan ”), aged 51, is the General Manger of Shenzhen Watsin Genetech Co., Ltd (an indirect wholly-owned subsidiary of the Company). Mr. Chan is a professional pharmacist and he obtained Pharmacist licenses in Canada and Hong Kong since 1985 and 1987 respectively. Mr. Chan has over 24 years of extensive sales and marketing experiences especially in the pharmaceutical industry. Before joining the Company on 5 March 2012, he was the Director of New Business Development of Xian-Janssen Pharmaceutical Ltd and a general manager of Jacobson Medical Limited.

As far as the Directors are aware, Mr. Chan does not have any relationships with any other Directors, senior management, substantial Shareholders (as defined in the Listing Rules) or controlling Shareholders (as defined in the Listing Rules) of the Company.

– IV-18 –

APPENDIX IV

GENERAL INFORMATION

15. MARKET PRICES

The table below shows the closing prices of the Shares as recorded on the Stock Exchange on (i) the last trading day of each of the calendar months during the Relevant Period; (ii) the Last Trading Day and (iii) the Latest Practicable Date.

	Closing price
Date	of the Shares
	(HK$)
31 January 2013	Suspended
28 February 2013	Suspended
28 March 2013	Suspended
30 April 2013	0.162
31 May 2013	0.166
28 June 2013	0.167
Last Trading Day	0.158
Latest Practicable Date	0.139

The highest and lowest closing prices of the Shares as quoted on the Stock Exchange during the Relevant Period were HK$0.231 (on 5 April 2013) and HK$0.109 (on 17 July 2013 and 18 July 2013) respectively.

16. GENERAL

(a) The registered office of Lord Profit is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, BVI. The correspondence address of Lord Profit is at c/o Yuen & Partners, 10/F, Chiyu Bank Building, 78 Des Voeux Road Central, Hong Kong. Lord Profit is owned as to 90% by Mr. Kingsley Leung and as to 10% by Mr. Tong, an executive Director. The sole director of Lord Profit, Mr. Kingsley Leung, is a cousin of Mr. Tong. The address of Mr. Kingsley Leung is at 39A, Tower 2, Regence Royale, No.2 Bowen Road, Mid-levels, Hong Kong. The address of Mr. Tong is at Room 6A, Block 10, Garden City 3, Shekou, Shenzhen, PRC. As at the Latest Practicable Date, Mr. Kingsley Leung did not hold any Shares, convertible securities, warrants, options or derivatives of the Company.
(b) The registered office of Automatic Result is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, BVI. The correspondence address of Automatic Result is at 13/F, Public Bank Centre, 120 Des Voeux Road Central, Hong Kong. Automatic Result is wholly-owned by Mr. Tong, an executive Director and Mr. Liu, an executive Director is the sole director. The address of Mr. Liu is at Sap Tai Tong Chuen, Shing Sai Heung, Chuk Kai Yuen, Guangdong, PRC.

– IV-19 –

APPENDIX IV

GENERAL INFORMATION

(c) The registered office of Prominence is at Room 603, 6/F, Low Block, Grand Millennium Plaza 181 Queen’s Road Central, Hong Kong. Based on the information provided by Prominence, Prominence is owned as to 99% by Beta Breakers Holdings Limited, a company incorporated in the British Virgin Islands, and as to 1% by Mr. Lam Wing Chak Victor. Beta Breakers Holdings Limited is wholly and ultimately beneficially owned by Mr. Lam Wing Chak Victor. As at the Latest Practicable Date, each of Prominence and its ultimate beneficial owner is, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, an independent third party independent of the Company and its connected persons. The directors of Prominence are Mr. Lam Wing Chak Victor, Mr. Zhu Qianghong and Mr. Li Pou Hing Paul.
(d) In the event of inconsistency, the English text of this circular and the accompanying form of proxy shall prevail over the Chinese text.

17. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours (i) at Room 406A, 4th Floor, Empire Centre, 68 Mody Road, Tsim Sha Tsui East, Kowloon, Hong Kong; (ii) on the website of the Company at http://www.uni-bioscience.com; and (iii) on the website of the Securities and Futures Commission at http://www.sfc.hk from the date of this circular up to and including 29 August 2013:

(a) the memorandum of association and the articles of association of the Company;
(b) the memorandum of association and the articles of association of Lord Profit;
(c) the annual reports of the Company for the two financial years ended 31 March 2013;
(d) the accountants’ report from KTC Partners CPA Limited on the unaudited pro forma financial information of the Group, the text of which is set out in Appendix II to this circular;
(e) the letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and Independent Shareholders, the text of which is set out in the section headed “Letter from the Independent Financial Adviser” on pages 40 to 67 of this circular;
(f) the letter of recommendation from the Independent Board Committee to the Independent Shareholders, the text of which is set out in the section headed “Letter from the Independent Board Committee” on pages 38 to 39 of this circular;

– IV-20 –

APPENDIX IV

GENERAL INFORMATION

(g) the written consents as referred to in the paragraph headed “Experts and Consents” in this appendix;
(h) the material contracts referred to under the section headed “Material Contracts” in this appendix;
(i) the service contract(s) or appointment letter(s) (as the case may be) entered into between the Company with the Directors referred to in the paragraph headed “Service contracts” in this appendix;
(j) the ARL Undertaking; and
(k) the circular of the Company dated 28 June 2013 and this circular.

– IV-21 –

NOTICE OF EXTRAORDINARY GENERAL MEETING

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(incorporated in the Cayman Islands with limited liability)

(stock code: 690)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (“ Meeting ”) of Uni-Bio Science Group Limited (“ Company ”) will be held at 11:00 a.m. on Thursday, 29 August 2013 at Montparnasse Room I-II, 2/F, Regal Kowloon Hotel, 71 Mody Road, Tsimshatsui, Hong Kong, for the purpose of considering and, if thought fit, passing the following resolutions which will be proposed as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT subject to and conditional upon: (i) the passing of ordinary resolution numbered 2 as set out in the notice convening this meeting; (ii) the Executive (as defined in the circular of the Company dated 13 August 2013 (“ Circular ”), a copy of which has been produced to this meeting marked “A” and signed by the chairman of this meeting for the purpose of identification) granting to Lord Profit Limited and parties acting in concert with it the Whitewash Waiver (as defined in the Circular) and the satisfaction of any condition attached to the Whitewash Waiver imposed by the Executive; (iii) the Listing Committee of The Stock Exchange of Hong Kong Limited granting the listing of, and permission to deal in, the Offer Shares (as defined below), the Bonus Shares (as defined below) and the Warrant Shares (as defined below); (iv) the necessary filing and registration of all documents relating to the Open Offer (as defined below) and/or the Bonus Issue (as defined in the Circular) under applicable laws; and (v) the obligations of Lord Profit Limited and Prominence Financials Limited (collectively, the “ Underwriters ”) under the Underwriting Agreement (as defined in the Circular) becoming unconditional and not being terminated in accordance with the terms of that agreement:
(a) the Underwriting Agreement be and is hereby confirmed, approved and ratified;
(b) the issue by way of open offer (“ Open Offer ”) of not less than 1,564,846,293 shares (“ Shares ”) of HK$0.01 each in the share capital of the Company (“ Offer Shares ”) and not more than 1,644,023,148 Offer Shares to the shareholders of the Company (“ Shareholders ”) whose names appear on the register of members of the Company at 4:00 p.m. on 6 September 2013 (“ Record Date ”) in the proportion of one Offer Share for every one existing Share then held at the subscription price of HK$0.16 per Offer Share excluding those Shareholders whose registered

For identification purpose only

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NOTICE OF EXTRAORDINARY GENERAL MEETING

addresses as shown on such register are outside Hong Kong on the Record Date whom the directors (“ Directors ”) of the Company, based on the legal advice provided by legal advisers and on account of either of legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange of that place, consider it necessary or expedient not to offer the Offer Shares, and on the terms and conditions set out in the Circular and on such other terms and conditions as may be determined by the Directors be and is hereby approved;

(c) subject to the allotment and issue of the Offer Shares, upon the recommendation of the Directors, the capitalisation of an amount standing to the credit of the share premium account of the Company and the application of such amount in paying up in full at par of not less than 1,564,846,293 new Shares and not more than 1,644,023,148 Shares (“ Bonus Shares ”) for the allotment and issue, credited as fully paid at par, to the first registered holder of the Offer Shares be and is hereby approved;
(d) subject to the allotment and issue of the Offer Shares, the Directors be and are hereby authorised to create and issue warrants (“ Bonus Warrants ”), by way of bonus issue, to the first registered holder of the Offer Shares on the basis of one Bonus Warrant for every two Offer Shares taken up under the Open Offer entitling the holders of the Bonus Warrants to subscribe in cash up to an aggregate of HK$164,402,314.80 for new shares of the Company (“ Warrant Shares ”) at the initial exercise price of HK$0.20 per Warrant Share (subject to adjustments) and exercisable at any time between the date of the issue of the Bonus Warrant(s) and the date which is 3 years after the date of issue of the Bonus Warrants (or if that is not a business day, the first business day immediately preceding such date) on the terms and conditions set out in the warrant instrument (the execution copy of which has been produced to this meeting marked “B” and signed by the chairman of this meeting for the purpose of identification) and the warrant instrument be and is hereby approved; and
(e) the Directors be and are hereby authorised to allot and issue the Offer Shares, the Bonus Shares, the Bonus Warrants and upon the exercise of the subscription rights attaching to the Bonus Warrants, the Warrant Shares and to do all such acts and things, to sign and execute all such further documents and to take such steps as the Directors may in their absolute discretion consider necessary, appropriate, desirable or expedient; to give effect to or in connection with the Open Offer, the issue of the Bonus Shares, the issue of the Bonus Warrants, the issue of the Warrant Shares upon the exercise of the subscription rights attaching to the Bonus Warrants, the warrant instrument, the Underwriting Agreement and any of the transactions contemplated thereunder.”

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NOTICE OF EXTRAORDINARY GENERAL MEETING

“ THAT subject to the Executive (as defined in the circular of the Company dated 13 August 2013 (“ Circular ”), a copy of which has been produced to this meeting marked “A” and signed by the chairman of this meeting for the purpose of identification) granting to Lord Profit Limited and parties acting in concert with it the Whitewash Waiver (as defined in the Circular) and the satisfaction of any condition attached to the Whitewash Waiver imposed by the Executive, the waiver pursuant to Note 1 on dispensations from Rule 26 of the Hong Kong Code on Takeovers and Mergers (“ Takeovers Code ”) waiving any obligation on the part of Lord Profit Limited and parties acting in concert with it to make a mandatory general offer to the holders of securities of the Company to acquire securities of the Company other than those already owned by Lord Profit Limited and parties acting in concert with it which would otherwise arise under Rule 26.1 of the Takeovers Code as a result of the fulfilment of Lord Profit Limited’s underwriting obligations under the Underwriting Agreement, be and is hereby approved.”

On behalf of the Board Uni-Bio Science Group Limited TONG Kit Shing Chairman

Hong Kong, 13 August 2013

Principal place of business in Hong Kong:

13th Floor, Public Bank Centre

120 Des Voeux Road Central

Hong Kong

Notes:

(a) Any member of the Company entitled to attend and vote at the meeting is entitled to appoint another person as his/her/its proxy to attend and vote instead of him/her/it. A member who is the holder or two or more shares of the Company may appoint more than one proxy to represent him/her/it to attend and vote on his/her/its behalf. A proxy need not be a member of the Company. In addition, a proxy or proxies representing either a member who is an individual or a member which is a corporation shell be entitled to exercise the same powers on behalf of the member which he or she or they represent as such Member could exercise.
(b) In the case of joint holders of a share, any one of such joint holder may vote, either in person or by proxy, in respect of such share as if he/she/it were solely entitled thereto, but if more than one of such joint holders be present at any meeting the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.
(c) To be valid, the form of proxy duly completed and signed in accordance with the instructions printed thereon together with a certified copy of the power of attorney or other authority, if any, must be delivered to the office of the branch share registrar of the Company in Hong Kong, Tricor Abacus Limited, 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof.

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NOTICE OF EXTRAORDINARY GENERAL MEETING

(d) Whether or not you propose to attend the meeting in person, you are strongly urged to complete and return the form of proxy in accordance with the instructions printed thereon. Completion and return of the form of proxy will not preclude you from attending the meeting and voting in person if you so wish. In the event that you attend the meeting after having lodged the form of proxy, it will be deemed to have been revoked.
(e) In compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and The Code on Takeovers and Mergers, all resolutions to be proposed at the meeting convened by this notice will be voted on by way of poll.

As at the date hereof, the executive Directors are Mr. TONG Kit Shing (Chairman), Mr. LIU Guoyao and Mr. LEUNG Ka Chun; the independent non-executive Directors are Mr. TSAO Hoi Ho, Terry, Mr. LOU Iok Kuong, Mr. NG Pak Kin, Danny and Mr. LEUNG Wai Chung, Vincent.

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AI assistant

Uni-Bio Science Group Limited — Proxy Solicitation & Information Statement 2013

49397_rns_2013-08-12_8ca35685-10cc-4a4e-9f68-08c9567877f8.pdf

Fortune Financial Capital Limited

Underwriters

Lord Profit Limited and Prominence Financials Limited

DEFINITIONS

EXPECTED TIMETABLE

Event

Time and Date

Dealings in the Offer Shares and

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE OFFER SHARES

TERMINATION OF THE UNDERWRITING AGREEMENT

INTRODUCTION

PROPOSED OPEN OFFER WITH THE BONUS ISSUE

Issue statistics

Subscription Price

Bonus Warrants

Conditions of the Open Offer with the Bonus Issue

Status of the Offer Shares, Bonus Shares and Warrant Shares

Fractions of the Bonus Warrants

Application for listing

Qualifying Shareholders

Closure of register of members

Certificates of the Offer Shares, Bonus Shares, Bonus Warrants and refund cheques

Excluded Shareholders

Application for excess Offer Shares

UNDERWRITING AGREEMENT

ARL UNDERTAKING

REASONS FOR THE OPEN OFFER

USE OF PROCEEDS FROM THE OPEN OFFER

WARNING OF THE RISKS OF DEALING IN SHARES

CHANGES IN SHAREHOLDING STRUCTURE

INFORMATION OF LORD PROFIT AND PARTIES ACTING IN CONCERT WITH IT

APPLICATION FOR WHITEWASH WAIVER

DEALINGS OF THE SHARES BY LORD PROFIT AND PARTIES ACTING IN CONCERT WITH IT

INTENTION OF LORD PROFIT

ADJUSTMENTS RELATING TO SHARE OPTIONS UPON COMPLETION OF THE OPEN OFFER AND THE BONUS ISSUE

FUND RAISING ACTIVITIES OF THE COMPANY WITHIN 12 MONTHS TO THE LATEST PRACTICABLE DATE

IMPLICATIONS UNDER THE LISTING RULES

INDEPENDENT BOARD COMMITTEE

INDEPENDENT FINANCIAL ADVISER

EGM

RECOMMENDATION

ADDITIONAL INFORMATION

Yours faithfully,

Fortune Financial Capital Limited

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background information of the Company

For the year ended 31 March 2012

For the year ended 31 March 2013

2. Reasons for the Open Offer and the use of proceeds

3. Principal terms of the Open Offer

Basis of the Open Offer

Subscription Price/Effective Price

(i) Historical price

(ii) Historical trading volume

(iii) Comparison with recent open offers

Bonus Issue

Underwriting Commission

ARL Undertaking

Application for excess Offer Shares

Risk associated with the Open Offer

4. Alternatives to the Open Offer

5. Potential dilution

6. Financial effects of the Open Offer

(a) Net tangible assets

(b) Gearing

(c) Working capital

7. Whitewash Waiver

RECOMMENDATION

1. SUMMARY OF FINANCIAL RESULTS

FINANCIAL INFORMATION OF THE GROUP

2. INDEBTEDNESS

Borrowings

Security and guarantees

Commitments

3. WORKING CAPITAL STATEMENT

Uni-Bio Science Group Limited Proxy Solicitation & Information Statement 2013