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 you should take, you should consult your licensed securities dealer or registered institution in securities, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Unlimited Creativity Holdings Limited, you should at once hand this circular together with the enclosed proxy form to the purchaser or the transferee or to the bank manager, licensed securities dealer or registered institution in securities or other agent through whom the sale was effected for transmission to the purchaser or the transferee.

This circular appears for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of the Company.

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company 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.

UNLIMITED CREATIVITY HOLDINGS LIMITED 無限創意控股有限公司

(Continued in Bermuda with limited liability) (Stock Code : 8079)

(1) PROPOSED OPEN OFFER ON THE BASIS OF FOUR OFFER SHARES FOR EVERY SHARE HELD; AND

(2) APPLICATION FOR WHITEWASH WAIVER; AND

(3) NOTICE OF SPECIAL GENERAL MEETING

Financial Adviser

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Underwriters to the Open Offer

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Able Rich Consultants Limited

Independent Financial Adviser

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Capitalised terms used is this cover page shall have the same meanings as those defined in this circular.

A letter from the Board is set out on pages 11 to 30 of this circular. A letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders is set out on pages 32 to 64 of this circular. The recommendation of the Independent Board Committee to the Independent Shareholders is set out on page 31 of this circular.

A notice convening the SGM to be held at 7/F, Zung Fu Industrial Building, 1067 King’s Road, Quarry Bay, Hong Kong on Monday, 13 January 2014 at 4:30 p.m. is set out on pages 188 to 190 of this circular. A proxy form for use at the SGM is enclosed. Whether or not you intend to attend the SGM, you are requested to complete the accompanying proxy form in accordance with the instructions printed thereon and return the same to the branch share registrar of the Company in Hong Kong, Tricor Standard Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the proxy form shall not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so desire.

The Open Offer is subject to the satisfaction of certain conditions as described in the section headed “Conditions of the Underwriting Agreement” herein. In particular, it is subject to the approval of the Open Offer and the Whitewash Waiver by the Independent Shareholders at the SGM by way of poll, the Whitewash Waiver having been granted by the Executive, and the Underwriting Agreement having become unconditional and not having been terminated (see the section headed “Termination of the Underwriting Agreement” herein) on or before the Latest Time for Termination. Accordingly, the Open Offer may or may not proceed.

Any dealing in the Shares up to the date on which all the conditions of the Open Offer are fulfilled will accordingly bear the risk that the Open Offer may not become unconditional or may not proceed. The Shareholders and potential investors of the Company should therefore exercise extreme caution when dealing in the Shares, and if they are in any doubt about their positions, they should consult their own professional advisers.

27 December 2013

CHARACTERISTICS OF GEM

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

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

	Page
Characteristics of GEM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Expected timetable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Termination of the Underwriting Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Letter from the Independent Financial Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Appendix I — Financial information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Appendix II — Unaudited pro forma financial information of the Group. . . . . . . . . . . . . . . . 169
Appendix III — General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188

DEFINITIONS

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

“Able Rich”	Able Rich Consultants Limited, a company incorporated in Hong
	Kong with limited liability, which is wholly-owned by Rich
	Treasure
“acting in concert”	has the meaning ascribed thereto under the Takeovers Code
“Announcement”	the announcement of the Company dated 22 November 2013 in
	relation to, among other things, the Open Offer, the Underwriting
	Agreement and the Whitewash Waiver
“Application Form(s)”	the application form(s) for use by the Qualifying Shareholders to
	apply for the Offer Shares
“Board”	the board of Directors
“business day”	any day (other than a Saturday, Sunday or public holiday) on
	which licensed banks in Hong Kong are generally open for
	business throughout their normal business hours
“Bye-laws”	the bye-laws of the Company
“CCASS”	The Central Clearing and Settlement System established and
	operated by HKSCC
“China 3D”	China 3D Digital Entertainment Limited, a company incorporated
	in Bermuda with limited liability and the issued shares of which
	are listed on GEM (stock code: 8078), which is owned as to
	approximately 11.60% by the Company and approximately 0.12%
	by Mr. Shiu Stephen Junior
“Company”	Unlimited Creativity Holdings Limited, a company continued in
	Bermuda with limited liability and the issued Shares of which are
	listed on the GEM
“Companies Act”	the Companies Act 1981 of Bermuda, as amended from time to
	time
“Company Ordinance”	the Companies Ordinance, Chapter 32 of the Laws of Hong Kong
	(as amended from time to time)

DEFINITIONS

“Concert Group” Able Rich, its beneficial owner(s), and the parties acting in concert with any of them (including China 3D, New Smart International Creation Limited, Hau Lai Mei, Heavenly Blaze Limited, Leung Ge On Andy, Siu York Chee, Leung Kwok Kui, Shiu Stephen Junior, Siu Yeuk Bik Amy and Kingston Securities) “Director(s)” director(s) of the Company for the time being “Executive” the Executive Director of the Corporate Finance Division of the SFC or any of his delegate(s) “GEM” the Growth Enterprise Market operated by the Stock Exchange “GEM Listing Rules” the Rules Governing the Listing of Securities on GEM “Group” the Company and its subsidiaries “HKSCC” Hong Kong Securities Clearing Company Limited “Hong Kong” the Hong Kong Special Administrative Region of the PRC “Independent Board Committee” a committee of the Board (comprising Dr. Siu Yim Kwan, Sidney, Mr. Tsui Pui Hung and Mr. Kam Tik Lun, being all of the independent non-executive Directors) established to advise the Independent Shareholders on the Open Offer, the Underwriting Agreement and the Whitewash Waiver

“Independent Financial Adviser” VC Capital Limited, being a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO and the independent financial adviser appointed to advise the Independent Board Committee and the Independent Shareholders on the terms of the Open Offer, the Underwriting Agreement and the Whitewash Waiver “Independent Shareholder(s)” for the Whitewash Waiver, Shareholder(s) other than the Concert Group and parties acting in concert with any of them, and those who are involved in or interested in the Open Offer, the Underwriting Agreement or the Whitewash Waiver

for the Open Offer, the Independent Shareholder(s) shall also exclude Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates

DEFINITIONS

“Independent Third Party(ies)”
third party(ies) independent of and not connected with the Directors, chief executive and substantial shareholders of the Company or any of its subsidiaries, or any of their respective associates
“Kingston Securities” Kingston Securities Limited, a licensed corporation to carry out business in type 1 (dealing in securities) regulated activity under the SFO
“Last Trading Day” 18 November 2013, being the last trading day immediately before the publication of the Announcement
“Last Practicable Date” 24 December 2013, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein
“Latest Time for Acceptance” 4:00 p.m. Friday, 7 February 2014 or such later time or date as may be agreed between the Underwriters and the Company, being the latest time for acceptance of, and payment for, the Offer Shares
“Latest Time for Termination” 4:00 p.m. on the third business day after the Latest Time for Acceptance or such later time or date as may be agreed between the Underwriters and the Company, being the latest time to terminate the Underwriting Agreement
“Listing Committee”
has the meaning ascribed thereto in the GEM Listing Rules
“Macau SAR”
The Macau Special Administrative Region of the PRC
“Mr. Shiu” Mr. Shiu Yeuk Yuen, an existing Shareholder, an executive Director and the chairman of the Company, the trustee and sole Director of Rich Treasure
“Non-Qualifying Shareholders” Shareholders whose name(s) appear on the register of members of the Company on the Record Date and whose addresses are in jurisdictions outside Hong Kong and whom the Directors are of the view that it would be necessary or expedient to exclude from the Open Offer on the account either of the legal restrictions under the laws of the places of his/her/their registered address(es) or the requirements of the relevant regulatory body or stock exchange in that place
“Offer Share(s)” a total of not less than 503,358,524 new Shares and not more than 504,363,952 new Shares proposed to be offered to the Qualifying Shareholders pursuant to the Open Offer

DEFINITIONS

“Open Offer” the proposed issue of the Offer Shares by way of open offer to the Qualifying Shareholders on the basis of four (4) Offer Shares for every one (1) Share held on the Record Date on the terms to be set out in the Prospectus Documents “Outstanding Options” the options granted by the Company to subscribe for an aggregate of 251,357 Shares pursuant to the share option schemes of the Company, which are outstanding as at the Latest Practicable Date “Overseas Letter” a letter from the Company to the Non-Qualifying Shareholders explaining the circumstances in which the Non-Qualifying Shareholders are not permitted to participate in the Open Offer “Overseas Shareholders” Shareholders with registered addresses (as shown in the register of members of the Company on the Record Date) which are outside Hong Kong “PRC” People’s Republic of China “Prospectus” the prospectus to be issued by the Company in connection with the Open Offer “Prospectus Documents” the Prospectus and the Application Form “Prospectus Posting Date” Wednesday, 22 January 2014 or such later date as may be agreed between the Underwriters and the Company for the dispatch of the Prospectus Documents “Qualifying Shareholder(s)” the Shareholders, other than the Non-Qualifying Shareholders, whose names appear on the register of members of the Company as at the close of business on the Record Date “Record Date” Tuesday, 21 January 2014, being the date by reference to which entitlements to the Open Offer will be determined “Registrar” the Company’s branch share registrar and transfer office in Hong Kong, Tricor Standard Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong “Rich Treasure” Rich Treasure Group Limited, a company incorporated in the British Virgin Islands, which is wholly-owned by Mr. Shiu on trust for certain family members of Mr. Shiu “SFC” the Securities and Futures Commission of Hong Kong “SFO” The Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

DEFINITIONS

“SGM”	the special general meeting of the Company to be convened for
	the purpose of considering and, if thought fit, approving the
	resolutions in respect of the Open Offer (including the absence
	of any arrangement for excess application), the Underwriting
	Agreement, the Whitewash Waiver, and the respective
	transactions contemplated thereunder
“Share(s)”	ordinary share(s) of HK$0.01 each in the share capital of the
	Company
“Shareholder(s)”	holder(s) of issued Share(s)
“Specified Event”	an 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
“Stock Exchange”	the Stock Exchange of Hong Kong Limited
“Subscription Price”	the issue price of HK$0.10 per Offer Share
“Takeovers Code”	the Hong Kong Code on Takeovers and Mergers
“Underwriters”	Able Rich and Kingston Securities
“Underwriting Agreement”	the underwriting agreement dated 18 November 2013 entered
	into between the Company and the Underwriters in relation to the
	Open Offer, as supplemented by a side letter dated 12 December
	2013 entered into between the Company and the Underwriters to
	amend certain dates for the Open Offer
“Underwritten Shares”	not less than 503,358,524 Offer Shares (assuming no Outstanding
	Option is exercised on or before the Record Date) and not more
	than 504,363,952 Offer Shares (assuming all Outstanding Options
	are exercised in full on or before the Record Date)
“Untaken Shares”	those (if any) of the Underwritten Shares for which duly
	completed Application Forms (accompanied by cheques or
	banker’s cashier order for the full amount payable on application
	which are honoured on first or, at the option of the Company,
	subsequent presentation) have not been lodged for acceptance,
	or received, as the case may be, on or before Latest Time for
	Acceptance

DEFINITIONS

“Whitewash Waiver”	a waiver by the Executive to Able Rich pursuant to Note 1 on
	dispensations from Rule 26 of the Takeovers Code in respect of
	any obligation of Able Rich to make a mandatory general offer for
	all the securities of the Company not already owned and/or agreed
	to be acquired by the Concert Group which may otherwise arise
	as a result of the subscription of the Offer Shares by Able Rich
	pursuant to the underwriting obligation under the Underwriting
	Agreement
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“%”	per cent

EXPECTED TIMETABLE

All dates and times stated in this circular refer to Hong Kong dates and times. The expected timetable for the Open Offer set out below has been prepared on the assumption that all the conditions of the Open Offer will be fulfilled and is indicative only and may be extended or varied. Any change to the anticipated timetable for the Open Offer will be announced as appropriate.

2014

Latest time for lodging transfer of Shares in order to qualify for attendance and voting at the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 9 January Register of members closes (both days inclusive) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 10 January to Monday, 13 January Latest time for lodging proxy form for the SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:30 p.m. on Saturday, 11 January Record date for attending and voting at the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 13 January Expected date and time of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:30 p.m. on Monday, 13 January Announcement of the result of the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 13 January Last day of dealings in Shares on a cum-entitlement basis . . . . . . . . . . . . . . . . . . . . . Tuesday, 14 January First day of dealings in Shares on an ex-entitlement basis . . . . . . . . . . . . . . . . . . Wednesday, 15 January Latest time for lodging transfer of Shares in order to qualify for the Open Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:30 p.m. on Thursday, 16 January Register of members closes (both days inclusive) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 17 January to Tuesday, 21 January Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 21 January Register of members of the Company re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 22 January Dispatch of the Prospectus Documents to the Qualifying Shareholders (in case of Non-Qualifying Shareholders, the Prospectus, together with the Overseas Letter, for information only) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 22 January Latest time for acceptance and payment for Offer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Friday, 7 February

EXPECTED TIMETABLE

2014

Latest time for the Open Offer to become unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Wednesday, 12 February Announcement of results of the Open Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 13 February Dispatch of share certificates for Offer Shares and refund cheques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 14 February Expected first day of dealings in Offer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 17 February

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

The latest time for acceptance of and payment for the Offer Shares will be postponed if there is:

a tropical cyclone warning signal number 8 or above, or
a “black” rainstorm warning
(i) in force in Hong Kong at any local time before 12:00 noon and no longer in force after 12:00 noon on Friday, 7 February 2014. Instead, the latest time for acceptance of and payment for the Open Offer will be extended to 5:00 p.m. on the same business day;
(ii) in force in Hong Kong at any local lime between 12:00 noon and 4:00 p.m. on Friday, 7 February 2014. Instead, the latest time of acceptance of and payment for the Open Offer will be rescheduled to 4:00 p.m. on the following business day which does not have either of those warnings in force at any time between 9:00 a.m. and 4:00 p.m..

If the latest time for acceptance of and payment for the Offer Shares does not take place at the Latest Time for Acceptance, the dates mentioned in the section headed “Expected Timetable” in this circular may be affected. The Company will notify Shareholders by way of announcements on any change to the expected timetable as soon as practicable.

TERMINATION OF THE UNDERWRITING AGREEMENT

If, prior to the Latest Time for Termination:

(1) in the absolute opinion of any of the Underwriters, the success of the Open Offer would be materially and adversely affected by:
(a) the introduction of any new law or 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 absolute opinion of any 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 of the Underwriting Agreement) of a political, military, financial, economic or other nature (whether or not ejusdem generis with any of the foregoing), 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 absolute opinion of any of the Underwriters materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(2) any adverse change in market conditions (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction or trading in securities) occurs which in the absolute opinion of any of the Underwriters are likely to materially or adversely affect the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(3) there is any change in the circumstances of the Company or any member of the Group which in the absolute opinion of any of the Underwriters will adversely affect the prospects of the Company, including without limiting the generality of the foregoing the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any of member of the Group or the destruction of any material asset of the Group; or
(4) any event of force majeure including, without limiting the generality thereof, any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out; or
(5) any other material adverse change in relation to the business or the financial or trading position or prospects of the Group as a whole whether or not ejusdem generis with any of the foregoing; or
(6) any matter which, had it arisen or been discovered immediately before the date of the Prospectus and not having been disclosed in the Prospectus, would have constituted, in the absolute opinion of any of the Underwriters, a material omission in the context of the Open Offer; or

TERMINATION OF THE UNDERWRITING AGREEMENT

(7) any suspension in the trading of securities generally or the Company’s securities on the Stock Exchange for a period of more than ten consecutive business days, excluding any suspension in connection with the clearance of the Announcement or this circular or the Prospectus Documents or other announcements or circulars in connection with the Open Offer; or
(8) any moratorium, suspension or material restriction on trading of the Shares on the Stock Exchange due to exceptional financial circumstances or otherwise,

any of the Underwriters shall be entitled by notice in writing to the Company and the other Underwriter, served prior to the Latest Time for Termination, to terminate the Underwriting Agreement.

Any of the Underwriters shall be entitled by notice in writing to rescind the Underwriting Agreement if prior to the Latest Time for Termination:

any material breach of any of the representations, warranties or undertakings contained in the Underwriting Agreement comes to the knowledge of any of the Underwriters; or
any Specified Event comes to the knowledge of any of the Underwriters,

any such notice shall be served by any of the Underwriters prior to the Latest Time for Termination.

If prior to the Latest Time for Termination, any such notice as referred to above is given by any of the Underwriters, the obligations of all parties under the Underwriting Agreement shall terminate forthwith and no party shall have any claim against any other party for costs, damages, compensation or otherwise save for any antecedent breaches.

LETTER FROM THE BOARD

UNLIMITED CREATIVITY HOLDINGS LIMITED 無限創意控股有限公司

(Continued in Bermuda with limited liability)

(Stock Code : 8079)

Executive Directors: Mr. Shiu Yeuk Yuen Mr. Leung Ge On Andy

Independent non-executive Directors:

Dr. Siu Yim Kwan, Sidney, S.B.St.J. Mr. Tsui Pui Hung, LL.B. (Hons), LL.M, BSc (Hons)

Mr. Kam Tik Lun, CPA, ACCA, LL.M (ICFL), CIM

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

Head office and principal place of business in Hong Kong: 7th Floor Zung Fu Industrial Building 1067 King’s Road Quarry Bay, Hong Kong

27 December 2013

To the Qualifying Shareholders, and for information only, the Non-Qualifying Shareholders

Dear Sir/Madam,

(1) PROPOSED OPEN OFFER ON THE BASIS OF FOUR OFFER SHARES FOR EVERY SHARE HELD; AND

(2) APPLICATION FOR WHITEWASH WAIVER; AND

(3) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement dated 22 November 2013 and the announcement dated 12 December 2013 in relation to, among other things, the Open Offer, the Underwriting Agreement and the Whitewash Waiver.

The Company proposed to raise not less than approximately HK$50.33 million, but not more than HK$50.44 million, before expenses, by issuing not less than 503,358,524 Offer Shares and not more than 504,363,952 Offer Shares at a price of HK$0.10 per Offer Share to the Qualifying Shareholders by way of Open Offer on the basis of four (4) Offer Shares for every one (1) Share held on the Record Date and payable in full on acceptance. The Open Offer will not be extended to the Non-Qualifying Shareholders.

LETTER FROM THE BOARD

The Open Offer will be fully underwritten by the Underwriters on the terms and subject to the conditions of the Underwriting Agreement, details of which are set out in the section headed “Underwriting Agreement” in this circular. The Underwriting Agreement contains provisions granting the Underwriters the right, which may be exercised at any time prior to 4:00 p.m. on Wednesday, 12 February 2014, being the third business day after the Latest Time for Acceptance, to terminate the Underwriting Agreement on the occurrence of certain events. If the Underwriters terminates the Underwriting Agreement, the Open Offer will not proceed.

The purpose of this circular is to provide you with, among other things, (i) further details about the Open Offer, the Underwriting Agreement and the Whitewash Waiver; (ii) a letter from the Independent Board Committee to the Independent Shareholders setting out its advice in relation to the Open Offer, the Underwriting Agreement and the Whitewash Waiver; (iii) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Open Offer, the Underwriting Agreement and the Whitewash Waiver; (iv) the financial information and other general information of the Group; and (iv) the notice convening the SGM.

PROPOSED OPEN OFFER ON THE BASIS OF FOUR OFFER SHARES FOR EVERY SHARE HELD

Issue statistics

Basis of the Open Offer:

Four (4) Offer Shares for every one (1) Share held on the Record Date

Subscription Price: HK$0.10 per Offer Share

Number of Shares in issue as at 125,839,631 Shares the Latest Practicable Date:

Number of Offer Shares to be issued:

Not less than 503,358,524 new Shares (assuming no Outstanding Option is exercised on or before the Record Date); and not more than 504,363,952 new Shares (assuming all Outstanding Options are exercised in full on or before the Record Date)

Number of Underwritten Shares:

All of the Offer Shares, being not less than 503,358,524 Offer Shares (assuming no Outstanding Option is exercised on or before the Record Date) and not more than 504,363,952 Offer Shares (assuming all Outstanding Options are exercised in full on or before the Record Date)

Number of Shares in issue immediately upon completion of the Open Offer:
629,198,155 Shares (assuming no Outstanding Option is exercised on or before the Record Date) and not more than 630,454,940 Shares (assuming all Outstanding Options are exercised in full on or before the Record Date)

LETTER FROM THE BOARD

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 503,358,524 Offer Shares represent 400% of the issued share capital of the Company as at the Latest Practicable Date and 80% of the issued share capital of the Company as enlarged by the minimum number of Offer Shares.

Assuming that, save for all Outstanding Options are exercised in full, no other change in the issued share capital of the Company from the Latest Practicable Date up to the Record Date, the maximum aggregate number of 504,363,952 Offer Shares represent approximately 400.8% of the issued share capital of the Company as at the Latest Practicable Date and 80% of the issued share capital of the Company as enlarged by the maximum number of Offer Shares.

Outstanding Options

As at the Latest Practicable Date, the Company has Outstanding Options entitling the holders thereof to subscribe for up to an aggregate of 251,357 Shares with option exercise prices ranging from HK$3.832 to HK$4.232 per Share.

Save for the Outstanding Options, as at the Latest Practicable Date, there are no other outstanding convertible note, share option, warrant, derivative or other securities convertible into or exchangeable for any Shares.

Adjustments to the subscription prices of the Outstanding Options and/or the number of Shares to be allotted and issued upon exercise of the Outstanding Options will be made in accordance with the terms of the share option schemes of the Company and the GEM Listing Rules as a result of the Open Offer. The Company will make further announcement to set out details of the relevant adjustments to the Outstanding Options as and when appropriate.

Subscription Price of the Offer Shares

The Subscription Price is HK$0.10 per Offer Share, payable upon application. The Subscription Price represents:

(i) discount of approximately 65.52% to the closing price of HK$0.290 per Share as quoted on GEM on the Last Trading Day;
(ii) a discount of approximately 65.16% to the average of the closing prices of HK$0.287 per Share for the last five consecutive trading days as quoted on GEM including and up to the Last Trading Day;
(iii) a discount of approximately 27.54% to the theoretical ex-entitlement price of approximately HK$0.138 per Share as adjusted for the effects of the Open Offer, based on the closing price of HK$0.290 per Share as quoted on GEM on the Last Trading Day;
(iv) a discount of approximately 65.75% to the average of the closing prices of HK$0.292 per Share for the last ten consecutive trading days as quoted on GEM including and up to the Last Trading Day;
(v) a discount of approximately 60.00% to the closing price of HK$0.250 per Share as quoted on GEM on the Latest Practicable Date; and

LETTER FROM THE BOARD

(vi) a discount of approximately 94.55% to the net asset value per Share of approximately HK$1.836 based on the latest unaudited interim net asset value of the Group as at 30 June 2013 and the number of Shares in issue as at the Latest Practicable Date.

The Directors (including the independent non-executive Directors after taking into consideration the advice of the Independent Financial Adviser) consider the Subscription Price, which has been set at a relatively deep discount as described above to reflect the absence of the excess application arrangement to Shareholders with an objective to lower the further investment cost of Shareholders to encourage them to take up their entitlements and to participate in the potential growth of the Company, to be fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Status of the Offer Shares

The Offer Shares, when allotted, issued and fully paid, will rank pari passu in all respects with the Shares in issue on the date of allotment and issue of the Offer Shares. Holders of the Offer Shares will be entitled to receive all future dividends and distributions which are declared, made or paid on or after the date of allotment and issue of the Offer Shares.

Certificates for the Offer Shares

Subject to fulfillment of the conditions of the Open Offer set out in the section headed “Conditions of the Underwriting Agreement” below, certificates for all fully paid Offer Shares are expected to be posted on or before Friday, 14 February 2014 (or such other date as the Board may determine) to those who have validly applied and paid for the Offer Shares at their own risks.

Qualifying Shareholders

The Open Offer is only available to the Qualifying Shareholders. To qualify for the Open Offer, Qualifying Shareholders must be registered as members of the Company at the close of business on the Record Date and not be Non-Qualifying Shareholders. In order to be registered as a member of the Company on the Record Date, all transfers of Shares must be lodged for registration with the Company’s branch share registrar in Hong Kong, Tricor Standard Limited, 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong by 4:30 p.m. on Thursday, 16 January 2014.

Closure of register of members

The register of members of the Company will be closed from Friday, 17 January 2014 to Tuesday, 21 January 2014, both dates inclusive, to determine the eligibility of the Open Offer. No transfer of Shares will be registered during this period.

LETTER FROM THE BOARD

Rights of Overseas Shareholders

If, at the close of business on the Record Date, any Shareholder’s address on the register of members of the Company is in a place outside Hong Kong, that Shareholder may not be eligible to take part in the Open Offer as the Prospectus Documents will not be registered and/or filed under the applicable securities legislation of any jurisdictions other than Hong Kong.

Based on the advices provided by the legal advisers on the laws of Macau SAR, the offering of the Offer Shares by the Company to its Shareholders with registered addresses in Macau SAR pursuant to the Open Offer is not subject to any regulatory requirements or procedures in Macau SAR. It would be lawful and will not contravene laws of Macau SAR or regulations for the Company to offer the Offer Shares to those Shareholders with registered addresses in Macau SAR, even though the Prospectus Documents will not be registered in Macau SAR. Therefore, the Directors have decided to extend the Open Offer to such Overseas Shareholders with registered addresses located in Macau SAR as shown on the register of members of the Company as at the Record Date. As at the Latest Practicable Date, there was one Shareholder, whose registered address was in Macau SAR.

The Company will continue to ascertain whether there are any other Overseas Shareholders on the Record Date and will, if necessary, make further enquiries with legal adviser(s) in other overseas jurisdiction(s) regarding the feasibility of extending the Open Offer to such other Overseas Shareholders on the Record Date and make relevant disclosures in the Prospectus. Further information in this connection will be set out in the Prospectus Documents containing, among other things, details of the Open Offer, to be despatched to the Qualifying Shareholders on the Prospectus Posting Date.

The Company will send copies of the Prospectus and the Overseas Letter, but not the Application Form, to the Non-Qualifying Shareholders for their information only, if the Independent Shareholders approve the Open Offer and the Whitewash Waiver. As long as the Non-Qualifying Shareholder is an Independent Shareholder, such Shareholder will be entitled to vote on all resolutions at the SGM.

Fractional entitlements

Entitlement to the Open Offer will be rounded down to the nearest whole number. No fractional entitlements to the Offer Shares will be issued to the Qualifying Shareholders and no entitlements of the Non-Qualifying Shareholders to the Offer Shares will be issued to the Non-Qualifying Shareholders. The Offer Shares representing such fractional entitlements and entitlements of the Non-Qualifying Shareholders will be aggregated and taken up by the Underwriters.

Odd lots arrangement

There will be no odd lot arrangement in relation to and as a result of the Open Offer.

No application for excess Offer Shares

After arm’s length negotiation with the Underwriters, the Board has decided that the Qualifying Shareholders will not be entitled to subscribe for any Offer Shares in excess of their respective assured entitlements. Given that each Qualifying Shareholder will be given equal and fair opportunity to participate in the Open Offer, the Board considers that it will put in additional effort and costs estimated to be (approximately HK$200,000 to HK$500,000) to administer the excess application procedures, which is not cost effective from the viewpoint of the Company. Notwithstanding excess application arrangement will not be made available to Qualifying Shareholders, the Board considers that with a deeper discount to the Offer Price offered to Qualifying Shareholders would encourage them to participate the Open Offer and to participate in the potential growth of the Company. Any Offer Shares not taken up by the Qualifying Shareholders will be taken up by the Underwriters pursuant to the terms of the Underwriting Agreement.

As no excess application for the Offer Shares is available under the Open Offer and the Open Offer is underwritten by the Underwriters, pursuant to Rule 10.42(2) of the GEM Listing Rules, specific approval shall be obtained from the Independent Shareholders in respect of the absence of such excess application arrangement.

LETTER FROM THE BOARD

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 Offer Shares, together with the Shares, are expected to be remained trading in board lots of 20,000 Shares.

Subject to the granting of listing of, and permission to deal in, the Offer Shares on the Stock Exchange, the Offer 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 on the Stock Exchange or such other date 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.

UNDERWRITING AGREEMENT

Date: 18 November 2013 (after trading hours)

Underwriters: (i) Able Rich, and (ii) Kingston Securities

Total number of Offer Shares:

Not less than 503,358,524 Offer Shares (assuming no Outstanding Option is exercised on or before the Record Date) and not more than 504,363,952 Offer Shares (assuming all Outstanding Options are exercised in full on or before the Record Date)

Number of Underwritten Shares:

The Open Offer is fully underwritten. The total number of Offer Shares, being not less than 503,358,524 Offer Shares (assuming no Outstanding Option is exercised on or before the Record Date) and not more than 504,363,952 Offer Shares (assuming all Outstanding Options are exercised in full on or before the Record Date), will be underwritten severally by the Underwriters in the following manner:

(i) Able Rich:
in priority the first 386,203,800 Underwritten Shares, representing approximately 77% of the total number of Underwritten Shares; and
(ii) Kingston Securities:
the remaining of not less than 117,154,724 Offer Shares (assuming no Outstanding Option is exercised on or before the Record Date) and not more than 118,160,152 Offer Shares (assuming all Outstanding Options are exercised in full on or before the Record Date), if any, representing approximately 23% of the total number of Underwritten Shares.

LETTER FROM THE BOARD

The allocation of the Underwritten Shares amongst the Underwriters as stated above was determined on arm’s length basis. The obligations of the Underwriters under the Underwriting Agreement are several.

Commission:

Payable by the Company to Able Rich at 1.50% and to Kingston Securities at 2.50%, each of the aggregate Subscription Price of the respective portion of the maximum Underwritten Shares mentioned above. The commission rates were determined after arm’s length negotiations between the Company and the Underwriters with reference to, among other things, the scale of the Open Offer and the market rate, and the Board considers that given Able Rich is indirect wholly owned by a company held by Mr. Shiu; and Mr. Shiu is an existing Shareholder, and an executive Director and the chairman of the Company, lower underwriting commission payable to Able Rich as compared with Kingston Securities is fair and reasonable so far as the Company and the Shareholders are concerned.

In the event of the Underwriters being called upon to subscribe for or procure subscription for the Untaken Shares:

a. Kingston Securities shall not subscribe, for its own account, for such number of Untaken Shares which will result in the shareholding of it and parties acting in concert with it to exceed 19.9% of the voting rights of the Company upon the completion of the Open Offer; and
b. Kingston Securities shall use its best endeavours to ensure that each of the subscribers of the Untaken Shares procured by it (i) shall be an Independent Third Party and not acting in concert with the Directors or chief executive of the Company or substantial Shareholders of the Company or their respective associates; and (ii), none of such subscribers, together with their respective concert parties, will hold 10.0% or more of the voting rights of the Company upon completion of the Open Offer, such that the Company will be able to comply with the minimum public float requirement sets out under Rule 11.23(7) of the GEM Listing Rules.

As at the Latest Practicable Date, Able Rich confirmed that it had no intention to procure any Independent Third Parties to subscribe for the Untaken Shares (if any).

As at the Latest Practicable Date, Kingston Securities held 1 Share. In mid of 2013, the Company has conducted a capital reorganization involved, among other things, a share consolidation which went effective on 18 June 2013. As Kingston Securities was the agent of certain Shareholders, such one Share was the aggregate fractional entitlements of such clients under the said share consolidation. As fractional entitlements would not be distributed, such one Share is held by Kingston Securities as at the Latest Practicable Date.

On 25 November 2013, Kingston Securities has entered into sub-underwriting agreements with nine sub-underwriters and subscribers, who are Independent Third Parties and not acting in concert with the Directors or chief executive of the Company or substantial Shareholders of the Company or their respective associates, to sub-underwrite an aggregate of 51,000,000 Underwritten Shares. Of the nine subunderwriters, (i) eight of which have each subscribed for 6,000,000 Underwritten Shares, representing approximately 4.77% of the existing issued share capital of the Company or approximately 0.95% of the issued share capital as enlarged by the Offer Shares upon completion of the Open Offer (assuming none of the Outstanding Options are exercised on or before the Record Date); and one of which has subscribed for 3,000,000 Underwritten Shares, representing approximately 2.38% of the existing issued share capital of the Company or approximately 0.48% of the issued share capital as enlarged by the Offer Shares upon completion of the Open Offer (assuming none of the Outstanding Options are exercised on or before the Record Date). On this basis, Rule 11.23(7) of the GEM Listing Rules shall be met upon completion of the Open Offer.

LETTER FROM THE BOARD

The 51,000,000 Shares sub-underwritten by the sub-underwriters represent approximately 40.53% of the existing issued share capital of the Company, or approximately 8.11% of the share capital of the Company as enlarged by the Offer Shares (assuming none of the Outstanding Options are exercised on or before the Record Date), or approximately 8.09% of the share capital of the Company as enlarged by the Offer Shares (assuming all of the Outstanding Options are exercised in full on or before the Record Date).

As confirmed with Kingston Securities, none of those aforementioned sub-underwriters and subscribers, together with their respective concert parties will hold 10% or more of the voting rights of the Company upon completion of the Open Offer.

Undertaking

As at the Latest Practicable Date, the Board had not received any information or irrevocable undertakings from any Shareholder(s) of their intention to take up their assured entitlements under the Open Offer.

Conditions of the Underwriting Agreement

The Open Offer is conditional upon the following conditions being fulfilled or waived (as the case may be):

(1) the passing of all the necessary resolution(s) by the Board and the Independent Shareholders at the SGM by way of poll approving, confirming and ratifying (as appropriate):–
(a) the Open Offer (including Rule 10.42(2) of the GEM Listing Rules) and the transactions contemplated under the Underwriting Agreement and authorizing the Directors to allot and issue the Offer Shares;
(b) the Underwriting Agreement and the performance of the transactions contemplated thereunder by the Company; and
(c) the Whitewash Waiver,

each in accordance with the Bye-laws, the GEM Listing Rules and the Takeovers Code on or before the Record Date.

(2) the Executive granting to Able Rich the Whitewash Waiver and the satisfaction of all conditions (if any) attached thereto and such other necessary waiver or consent as may be required to be obtained from the Executive for the transactions contemplated under the Open Offer;
(3) the delivery to the Stock Exchange for authorization and the registration with the Registrar of Companies in Hong Kong respectively not later than the Prospectus Posting Date one copy of each of the Prospectus Documents duly signed by two Directors (or by their agents duly authorised in writing) in accordance with section 342C of the Companies Ordinance as having been approved by resolutions of the Directors (and all other documents required to be attached thereto) and otherwise in compliance with the GEM Listing Rules and the Companies Ordinance;
(4) if necessary, the delivery and filing of the Prospectus with the Registrar of Companies in Bermuda prior to or as soon as reasonably practicable after publication of the Prospectus in compliance with the Companies Act;
(5) the posting of the Prospectus Documents to the Qualifying Shareholders and the posting of the Prospectus and a letter in the agreed form to the Non-Qualifying Shareholders, if any, for information purpose only explaining the circumstances in which they are not permitted to participate in the Open Offer, on or before the Prospectus Posting Date;

LETTER FROM THE BOARD

(6) 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 the Offer Shares by no later than the first day of their dealings;
(7) the Underwriting Agreement not being terminated by any of the Underwriters pursuant to the terms thereof at or before the Latest Time for Termination;
(8) the compliance with and performance of all the undertakings and obligations of the Company under the Underwriting Agreement and the representations and warranties given by the Company under the Underwriting Agreement remaining true, correct and not misleading in all material respects;
(9) if required, the Bermuda Monetary Authority granting consent to the issue of the Offer Shares; and
(10) there being no Specified Event occurring prior to the Latest Time for Termination.

The conditions set out above (other than condition (8) which can only be waived jointly by the Underwriters) are incapable of being waived. If the above conditions are not satisfied and/or waived in whole (or waived where applicable) by the Latest Time for Termination or such other time and date as the Underwriters may agree with the Company in writing, the Underwriting Agreement shall terminate and (save for any antecedent breach of the Underwriting Agreement and any rights or obligations which may accrue under the Underwriting Agreement prior to such termination) no party shall have any claim against any other party for costs, damages, compensation or otherwise.

As at the Latest Practicable Date, none of the above conditions has been fulfilled.

Termination of the Underwriting Agreement

If, prior to the Latest Time for Termination:

(1) in the absolute opinion of any of the Underwriters, the success of the Open Offer would be materially and adversely affected by:
(a) the introduction of any new law or 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 absolute opinion of any 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 of the Underwriting Agreement) of a political, military, financial, economic or other nature (whether or not ejusdem generis with any of the foregoing), 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 absolute opinion of any of the Underwriters materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or

LETTER FROM THE BOARD

(2) any adverse change in market conditions (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction or trading in securities) occurs which in the absolute opinion of any of the Underwriters are likely to materially or adversely affect the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(3) there is any change in the circumstances of the Company or any member of the Group which in the absolute opinion of any of the Underwriters will adversely affect the prospects of the Company, including without limiting the generality of the foregoing the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any of member of the Group or the destruction of any material asset of the Group; or
(4) any event of force majeure including, without limiting the generality thereof, any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out; or
(5) any other material adverse change in relation to the business or the financial or trading position or prospects of the Group as a whole whether or not ejusdem generis with any of the foregoing; or
(6) any matter which, had it arisen or been discovered immediately before the date of the Prospectus and not having been disclosed in the Prospectus, would have constituted, in the absolute opinion of any of the Underwriters, a material omission in the context of the Open Offer; or
(7) any suspension in the trading of securities generally or the Company’s securities on the Stock Exchange for a period of more than ten consecutive business days, excluding any suspension in connection with the clearance of the Announcement or this circular or the Prospectus Documents or other announcements or circulars in connection with the Open Offer; or
(8) any moratorium, suspension or material restriction on trading of the Shares on the Stock Exchange due to exceptional financial circumstances or otherwise,

any of the Underwriters shall be entitled by notice in writing to the Company and the other Underwriter, served prior to the Latest Time for Termination, to terminate the Underwriting Agreement.

Any of the Underwriters shall be entitled by notice in writing to rescind the Underwriting Agreement if prior to the Latest Time for Termination:

any material breach of any of the representations, warranties or undertakings contained in the Underwriting Agreement comes to the knowledge of any of the Underwriters; or
any Specified Event comes to the knowledge of any of the Underwriters,

any such notice shall be served by any of the Underwriters prior to the Latest Time for Termination.

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

For illustration purpose only, the shareholding structure of the Company as at the Latest Practicable Date and immediately after the completion of the Open Offer is set out below:

(i) assuming no Outstanding Option is exercised on or before the Record Date

As at the Latest Practicable Date No. of Shares % Concert Group: Mr. Shiu and/or Able Rich (Notes 2 and 11) 7,796,200 6.20 Parties acting in concert China 3D_(Note 3) 10,170,900 8.08 New Smart International Creation Limited (“New Smart”)(Note 4) 1,031,100 0.82 Hau Lai Mei(Note 5) 16 0.00 Siu York Chee(Note 6) 63,609 0.05 Leung Kwok Kui(Note 7) 2 0.00 Siu Yeuk Bik, Amy(Note 8) 27 0.00 Heavenly Blaze Limited (Note 9) 127,140 0.10 Leung Ge On Andy(Note 10) 63,000 0.05 Kingston Securities(Note 11) 1 0.00 Sub-total: 19,251,995 15.30 Public Shareholders Sub-underwriter(s)(Note 11)_ – – Other public Shareholders 106,587,636 84.70 TOTAL: 125,839,631 100.00	Immediately after completion of the Open Offer (assuming all Qualifying Shareholders take up his/her/its entitlements under the Open Offer) No. of Shares % 38,981,000 6.20 50,854,500 8.08 5,155,500 0.82 80 0.00 318,045 0.05 10 0.00 135 0.00 635,700 0.10 315,000 0.05 5 0.00 96,259,975 15.30 – – 532,938,180 84.70 629,198,155 100.00	Immediately after completion of the Open Offer (assuming no Qualifying Shareholders take up his/her/its entitlements under the Open Offer) (Note 1) No. of Shares % 394,000,000 62.62 10,170,900 1.62 1,031,100 0.16 16 0.00 63,609 0.01 2 0.00 27 0.00 127,140 0.02 63,000 0.01 66,154,725 10.51 471,610,519 74.95 51,000,000 8.11 106,587,636 16.94 629,198,155 100.00	Immediately after completion of the Open Offer (assuming no Qualifying Shareholders take up his/her/its entitlements under the Open Offer) (Note 1) No. of Shares % 394,000,000 62.62 10,170,900 1.62 1,031,100 0.16 16 0.00 63,609 0.01 2 0.00 27 0.00 127,140 0.02 63,000 0.01 66,154,725 10.51 471,610,519 74.95 51,000,000 8.11 106,587,636 16.94 629,198,155 100.00
			74.95 8.11 16.94
			100.00

LETTER FROM THE BOARD

(ii) assuming all Outstanding Options are exercised in full on or before the Record Date

As at the Latest Practicable Date No. of Shares % Concert Group: Mr. Shiu and/or Able Rich (Notes 2 and 11) 7,796,200 6.18 Parties acting in concert China 3D_(Note 3) 10,170,900 8.07 New Smart(Note 4) 1,031,100 0.82 Hau Lai Mei(Note 5) 16 0.00 Siu York Chee(Note 6) 63,609 0.05 Leung Kwok Kui(Note 7) 2 0.00 Siu Yeuk Bik, Amy(Note 8) 27 0.00 Heavenly Blaze Limited (Note 9) 127,140 0.10 Leung Ge On Andy(Note 10) 63,000 0.05 Kingston Securities(Note 11) 1 0.00 Sub-total: 19,251,995 15.27 Public Shareholders Sub-underwriter(s)(Note 11) – – Other public Shareholders 106,838,993 84.73 TOTAL: 126,090,988 100.00 _Notes:	Immediately after completion of the Open Offer (assuming all Qualifying Shareholders take up his/her/its entitlements under the Open Offer) No. of Shares % 38,981,000 6.18 50,854,500 8.07 5,155,500 0.82 80 0.00 318,045 0.05 10 0.00 135 0.00 635,700 0.10 315,000 0.05 5 0.00 96,259,975 15.27 – – 534,194,965 84.73 630,454,940 100.00	Immediately after completion of the Open Offer (assuming no Qualifying Shareholders take up his/her/its entitlements under the Open Offer) (Note 1) No. of Shares % 394,000,000 62.49 10,170,900 1.61 1,031,100 0.16 16 0.00 63,609 0.01 2 0.00 27 0.00 127,140 0.02 63,000 0.01 67,160,153 10.65 472,615,947 74.96 51,000,000 8.09 106,838,993 16.95 630,454,940 100.00	Immediately after completion of the Open Offer (assuming no Qualifying Shareholders take up his/her/its entitlements under the Open Offer) (Note 1) No. of Shares % 394,000,000 62.49 10,170,900 1.61 1,031,100 0.16 16 0.00 63,609 0.01 2 0.00 27 0.00 127,140 0.02 63,000 0.01 67,160,153 10.65 472,615,947 74.96 51,000,000 8.09 106,838,993 16.95 630,454,940 100.00
			74.96 8.09 16.95
			100.00

The scenario is for illustrative purpose only. In any event, the Company will ensure the compliance with the public float requirements under Rule 11.23(7) of the GEM Listing Rules.
Able Rich, being one of the Underwriters, is wholly-owned by Rich Treasure, of which Mr. Shiu is the sole director and shareholder holding it on trust for certain family members. For ease of reference, the shareholding of Able Rich and Mr. Shiu are consolidated together for reference.
China 3D is owned as to approximately 11.60% by the Company and approximately 0.12% by Shiu Stephen Junior, the son of Mr. Shiu.
New Smart is wholly and beneficially owned by China 3D.
Ms. Hau Lai Mei is the spouse of Mr. Shiu.

LETTER FROM THE BOARD

Ms. Siu York Chee is the sister of Mr. Shiu and the director of certain subsidiaries of the Company.
Mr. Leung Kwok Kui is the spouse of Ms. Siu York Chee, brother-in-law of Mr. Shiu, and the director of certain subsidiaries of the Company.
Ms. Siu Yeuk Bik, Amy is the sister of Mr. Shiu.
As at the Latest Practicable Date, Heavenly Blaze Limited is beneficially owned as to (i) 46% by Mr. Shiu Stephen Junior, son of Mr. Shiu; (ii) 34% by Mr. Shiu and Ms. Siu York Chee (sister of Mr. Shiu) together hold on behalf of Ms. Shiu Yo Yo and Ms. Shiu Sound Sound, daughters of Mr. Shiu; (iii) 16% by Ms. Shiu Ting Yan, Denise, daughter of Mr. Shiu; (iv) 1% by Mr. Cheng Jut Si; and (v) 3% by Able Rich. For information only, Able Rich held the 3% equity interest in Heavenly Blaze Limited since 9 September 2013, which was transferred by One Dollar Productions Limited, an indirect wholly-owned subsidiary of China 3D to Able Rich.
Leung Ge On Andy is an executive Director.
Pursuant to the Underwriting Agreement, when the Underwriters being called upon to subscribe for or procure subscription for the Untaken Shares:
a. Kingston Securities shall not subscribe, for its own account, for such number of Untaken Shares which will result in the shareholding of it and parties acting in concert with it to exceed 19.9% of the voting rights of the Company upon the completion of the Open Offer; and
b. Kingston Securities shall use its best endeavours to ensure that each of the subscribers of the Untaken Shares procured by it (i) shall be an Independent Third Party and not acting in concert with the Directors or chief executive of the Company or substantial Shareholders of the Company or their respective associates; and (ii), none of such subscribers, together with their respective concert parties, will hold 10.0% or more of the voting rights of the Company upon completion of the Open Offer, such that the Company will be able to comply with the minimum public float requirement sets out under Rule 11.23(7) of the GEM Listing Rules.

Kingston Securities, a company incorporated in Hong Kong with limited liability and a licensed corporation to carry on Type 1 (dealing in securities) regulated activities under the SFO, which is an indirect wholly owned subsidiary of Kingston Financial Group Limited (stock code: 1031), a company listed on the Main Board of the Stock Exchange. Kingston Securities is principally engaged in securities dealing and brokerage business, margin and financing services for initial public offerings and capital market services in relation to equity fund raising exercises such as underwriting and placement of securities.

On 25 November 2013, Kingston Securities has entered into sub-underwriting agreements with nine subunderwriters, who are Independent Third Parties and not acting in concert with the Directors or chief executive of the Company or substantial Shareholders of the Company or their respective associates, to sub-underwrite an aggregate of 51,000,000 Underwritten Shares. Of the nine sub-underwriters, (i) eight of which have each subscribed for 6,000,000 Underwritten Shares, each representing approximately 4.77% of the existing issued share capital of the Company or approximately 0.95% of the issued share capital as enlarged by the Offer Shares upon completion of the Open Offer (assuming none of the Outstanding Options are exercised on or before the Record Date); and one of which has subscribed for 3,000,000 Underwritten Shares, representing approximately 2.38% of the existing issued share capital of the Company or approximately 0.48% of the issued share capital as enlarged by the Offer Shares upon completion of the Open Offer (assuming none of the Outstanding Options are exercised on or before the Record Date). On this basis, Rule 11.23(7) of the GEM Listing Rules shall be met upon completion of the Open Offer.

The percentages above may be subject to rounding errors.

LETTER FROM THE BOARD

Save as disclosed above, as at the Latest Practicable Date:

a. each of the members of the Concert Group does not own, control or have direction over any voting rights or rights over the Shares or convertible securities, options, warrants of the Company;
b. none of the members of the Concert Group has received any irrevocable commitment to vote for or against the Open Offer, the Underwriting Agreement and/or the Whitewash Wavier or to take up the Shares to be provisionally allotted under the Open Offer;
c. save for the Underwriting Agreement and the Shares and/or securities that are/will be pledged to Kingston Securities under the Facility (as defined and elaborated under the section headed “Implication under the Takeovers Code and application for Whitewash Waiver” below, there is no arrangement (whether by way of option, indemnity or otherwise) in relation to the Shares which might be material to the Open Offer, the Underwriting Agreement and/or the Whitewash Wavier;
d. the Open Offer, the Underwriting Agreement and the Whitewash Waiver are subject to the satisfaction or waiver of (where applicable) the relevant conditions set out under the paragraph headed “Conditions of the Underwriting Agreement” above, save for the aforesaid, there is no agreement or arrangement to which Able Rich is a party which relates to the circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Open Offer, the Underwriting Agreement and the Whitewash Waiver;
e. none of the members of the Concert Group has borrowed or lent any relevant securities (as defined in note 4 to Rule 22 of the Takeovers Code) in the Company; and
f. none of the members of the Concert Group has entered into any outstanding derivative in respect of any relevant securities (as defined in note 4 to Rule 22 of the Takeovers Code) of the Company.

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

Apart from the fund raising activities mentioned below, the Company had not conducted any other fund raising activities in the past 12 months immediately preceding the date of the Announcement or the Latest Practicable Date.

					Actual use of
Date of initial			Intended use of		proceeds as at the
announcement	Event	Net proceeds	net proceeds	Latest Practicable Date
24 July 2013	Placing of new	Approximately	For general working		Used as intended
	shares under	HK$4.49 million	capital of the Group
	general mandate

LETTER FROM THE BOARD

INFORMATION OF THE GROUP

The Company is principally engaged in money lending business, property investment, financial instruments, retail business and quoted shares investment in Hong Kong.

INFORMATION OF ABLE RICH

Able Rich, being one of the Underwriters, is a company incorporated in Hong Kong with limited liability and is wholly-owned by Rich Treasure. Able Rich is principally engaged in investment holdings since incorporation and its ordinary course of business does not include underwriting. Rich Treasure is a company incorporated in the British Virgin Islands, which is wholly-owned by Mr. Shiu on trust for certain family members of Mr. Shiu. As at the Latest Practicable Date, save for holding the equity interests in Able Rich, Rich Treasure has not engaged in any other business.

Able Rich will satisfy its financial obligation under the Underwriting Agreement partly by its own financial resources and partly by the HK$15,000,000 loan facility provided by Kingston Securities.

INTENTION OF THE ABLE RICH AND/OR THE COMPANY

As at the Latest Practicable Date, neither the Company nor Able Rich has: (a) any agreement, arrangement, understanding, intention or negotiation (concluded or otherwise) about any disposal/ termination/scaling-down of the existing business of the Group; and (b) proposed to make changes to the Board.

The Group will continue to look for possible investment opportunities in order to expand the source of income and prospects of the Group. As at the Latest Practicable Date, no specific investment target was identified, no definitive agreement had been entered into nor any form of involvement has been determined. Nevertheless, should any potential investment opportunities arise, the Company may consider further fund raising if needed. Appropriate announcement will be made as and when necessary in accordance with the GEM Listing Rules.

If Able Rich becomes the controlling Shareholder as a result of the performance of the underwriting obligations under the Underwriting Agreement, Able Rich intends to continue the existing businesses of the Group following the completion of the Open Offer.

Able Rich considered that the Open Offer is favourable to the Group as the Group will be able to obtain additional capital resources for further development and expansion of the Group’s business. If Able Rich becomes the controlling Shareholder as a result of the performance of the underwriting obligations under the Underwriting Agreement, Able Rich has no intention to introduce any material change to the existing businesses of the Group, the continued employment of the Group’s employees and has no intention to re-deploy the fixed assets of the Group other than in its ordinary course of business.

LETTER FROM THE BOARD

REASONS FOR THE OPEN OFFER AND USE OF PROCEEDS

The Company has been actively participating in the money lending business for over two years, and built a solid client base. For the two years ended 31 March 2013 and the six months ended 30 September 2013, the money lending business of the Group has been the key income driver of the Group and accounted for approximately 97.4%, 91.8% and 85.6% of the total revenue of the Group respectively.

The amount of revenue for this segment was approximately HK$21.2 million for the year ended 31 March 2013 (2012: HK$18.5 million), representing an increase of approximately 14.6% as compared with the corresponding period in year 2012. For the six months ended 30 September 2013, the unaudited revenue of the Group’s money lending business amounted to approximately HK$13.73 million (2012: HK$10.76 million), representing an increase of approximately 27.6%. The Board believes that the aforementioned figures are indicating that the Company has entered the money lending business successfully.

Meanwhile, the Group also engaged in the securities and bonds investment business, which was inevitably negatively affected by the sovereign debt crisis spread across Europe and concerns of a hard landing in economy of the PRC and recorded a “loss from equity to profit or loss upon disposal of available for sale financial assets” of approximately HK$10.3 million as at 30 June 2013. In June 2012, the Group has also branched out for retail business and recorded revenue of approximately HK$1.9 million for the six months ended 30 June 2013, representing an increase of approximately 334% as compared with the corresponding period in 2012. The management will continue to monitor the operation and development of this segment.

As the money lending business has shown satisfactory turnover and profit to the Group, the Company intends to expand its money lending business. Due to the increase in the amount of loans and advances to customer, the cash and bank balances of the Group was decreased from HK$55.0 million as at 31 March 2013 to HK$10.9 million as at 30 September 2013. In order to further expand the money lending business by increasing the amount of loans and advances to customers to generate more loan interests and at the same time to maintain a reasonable cash and bank balance for the healthy operation of the Company, additional financial resources is necessary for the Company so as not to limit the further expansion of the money lending business. The Board considers that the Open Offer represents an opportunity for the Company to develop its money lending business (further details of the business plan of the Group’s money lending business has been disclosed in the section headed “Financial and Trading Prospect of the Group” in appendix I of this circular) and enhance its working capital. Moreover, the Board is of the view that it is in the interests of the Company and its Shareholders as a whole to raise the capital through the Open Offer since it would allow the Qualifying Shareholders to maintain their respective pro rata shareholdings in the Company and participate in the future growth and development of the Company.

The Board has also considered other fund raising alternatives before resolving to the Open Offer, including but not limited to bank borrowings, share placement and rights issue. In the view that borrowings would result in additional interest burden and higher gearing ratio of the Group, share placement may necessarily dilute the shareholding in the Company of the existing Shareholders, rights issue will involve extra administrative work and cost for the trading arrangements in relation to the nil-paid rights, the Board considers raising funds by way of the Open Offer is more cost effective and efficient.

LETTER FROM THE BOARD

The net proceeds from the Open Offer are expected to be not less than approximately HK$48.3 million (assuming no Outstanding Options is exercised on or before the Record Date) and not more than approximately HK$48.4 million (assuming Outstanding Options are exercised in full on or before the Record Date), which will be used (i) as to approximately HK$38.7 million for expanding its money lending business; and (ii) the remaining of approximately HK$9.7 million for general working capital and/or for the development of the Group’s business. The usage of the general working capital includes the administrative expenses (such as salaries, office rentals and professional fees, etc.) in a total of approximately HK$2 million per month.

WARNING OF THE RISKS OF DEALING IN THE SHARES

The Open Offer is subject to the satisfaction of certain conditions as described in the section headed “Conditions of the Underwriting Agreement”. In particular, it is subject to the approval of the Open Offer and the Whitewash Waiver by the Independent Shareholders at the SGM by way of poll, the Whitewash Waiver having been granted by the Executive, and the Underwriting Agreement having become unconditional and not having been terminated (see the section headed “Termination of the Underwriting Agreement” below). Accordingly, the Open Offer may or may not proceed.

IMPLICATION UNDER THE GEM LISTING RULES IN CONNECTION WITH THE OPEN OFFER AND THE UNDERWRITING ARRANGEMENT

In accordance with Rule 10.39 of the GEM Listing Rules, the Open Offer must be made conditional on approval by Shareholders in general meeting by a resolution on which any controlling Shareholders and their associates or, where there are no controlling Shareholders, Directors (excluding independent nonexecutive Directors) and the chief executive of the Company and their respective associates shall abstain from voting in favour of the Open Offer. As there is no controlling Shareholder, the Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates shall abstain from voting in favour of the Open Offer according to Rule 10.39 of the GEM Listing Rules.

As no excess application for the Offer Shares is available under the Open Offer and the Open Offer is underwritten by an associate of Mr. Shiu, who is an existing Shareholder, and an executive Director and the chairman of the Company, pursuant to Rule 10.42(2) of the GEM Listing Rules, specific approval shall be obtained from the Independent Shareholders in respect of the absence of such excess application arrangement. Mr. Shiu and associates of Mr. Shiu shall abstain from voting on this matter at the SGM according to Rule 10.42(2) of the GEM Listing Rules.

Given that Able Rich is wholly-owned by Rich Treasure, in which is held by Mr. Shiu on trust for certain family members as beneficiaries, Able Rich is therefore an associate of Mr. Shiu and a connected person of the Company. The entering into of the Underwriting Agreement between Able Rich, Kingston

LETTER FROM THE BOARD

Securities and the Company therefore constitutes a connected transaction for the Company under the GEM Listing Rules. As the underwriting commission, which amounted to approximately HK$0.58 million, to be received by Able Rich pursuant to its obligation under the Underwriting Agreement is on normal commercial terms and all applicable percentage ratios (as defined in the GEM Listing Rules) are less than 5% and the commission amount is less than HK$1,000,000, the payment of underwriting commission by the Company to Able Rich is therefore exempted from the reporting, announcement and independent shareholders’ approval requirements under Rule 20.31(2) of the GEM Listing Rules.

The allotment and issue of the Untaken Shares to Able Rich in accordance with the Underwriting Agreement is, pursuant to Rule 20.31(3)(c) of the GEM Listing Rules, exempted from the reporting, announcement and independent shareholders’ approval requirements under Chapter 20 of the GEM Listing Rules. In any event, the Open Offer will be conducted in compliance with Rule 10.42 of the GEM Listing Rules.

IMPLICATION UNDER THE TAKEOVERS CODE AND APPLICATION FOR WHITEWASH WAIVER

As mentioned above, Able Rich is an associate of Mr. Shiu, who is an existing Shareholder and an executive Director. Kingston Securities, as one of the Underwriters, will provide a loan facility of HK$15,000,000 (“ Facility ”) for Able Rich to facilitate its underwriting obligation under the Underwriting Agreement, Kingston Securities is presumed to be acting in concert with Able Rich under the Takeovers Code. The Facility, which valid till 31 March 2014, shall be solely for the purpose of financing the subscription for the Offer Shares by Able Rich under the Open Offer. Pursuant to the terms of the Facility, the following Shares and/or securities are/will be pledged to Kingston Securities: (a) all the 7,796,200 Shares currently owned by him, which represent approximately 6.20% of the existing issued share capital of the Company, (b) all of the issued share capital of Able Rich beneficially owned by Rich Treasure; and (c) any other Shares owned by him under the Open Offer. Pursuant to the terms and conditions of such pledge arrangements, in the event of default by Able Rich, Kingston Securities will be entitled to enforce the pledged securities which may result in a transfer of voting rights in respect of such pledged securities. Save and except aforementioned, the terms and conditions of such pledge arrangements will not result in any transfer of voting rights.

As at the Latest Practicable Date, the Concert Group together are interested in 19,251,995 Shares, representing approximately 15.30% of the issued share capital of the Company. In the event that the Underwriters are called upon to subscribe or procure subscription for the Untaken Shares pursuant to their obligations under the Underwriting Agreement (net of those 51,000,000 Underwritten Shares that Kingston Securities has already sub-underwritten to its sub-underwriters, who are Independent Third Parties and not acting in concert with the Directors or chief executive of the Company or substantial Shareholders or their respective associates) (assuming none of the Qualifying Shareholders accept their respective provisional allotment of the Offer Shares), the shareholding of the Concert Group in aggregate would increase from approximately 15.30% of the issued share capital of the Company to a maximum of approximately 74.96% of the issued share capital of the Company as enlarged by the Offer Shares immediately upon completion of the Open Offer.

LETTER FROM THE BOARD

Under Rule 26 of the Takeovers Code, the acquisition of voting rights by Able Rich under such circumstances will result in Able Rich being obliged to make a mandatory general offer for all the securities of the Company not already owned or agreed to be acquired by Able Rich and other members of the Concert Group, unless, amongst others, the Whitewash Waiver is obtained from the Executive and approved by the Independent Shareholders at the SGM by way of poll. Accordingly, the Concert Group and parties acting in concert with any of them, and those who are involved in or interested in the Open Offer, the Underwriting Agreement or the Whitewash Waiver shall abstain from voting on the resolution to approve the Whitewash Waiver at the SGM. An application was made by Able Rich to the Executive for the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code. The Executive has agreed, subject to the approval of the Independent Shareholders on a vote taken by way of poll at the SGM and such other condition(s) as may be imposed by the Executive, to grant Whitewash Waiver. If the Whitewash Waiver is not granted by the Executive or not approved by the Independent Shareholders, the Open Offer will not become unconditional and will not proceed.

Shareholders and potential investors should be aware that there is a possibility that, upon completion of the Open Offer, Able Rich may hold more than 50% of the voting rights of the Company. Hence, Able Rich may increase its holdings of voting rights of the Company without incurring any further obligation under Rule 26 of the Takeovers Code to make a general offer.

DEALING IN SHARES BY THE CONCERT GROUP

During the six months prior to the date of the Underwriting Agreement, the Concert Group and those who are interested in, or involved in, the Open Offer, the Underwriting Agreement and the Whitewash Waiver had not dealt in any relevant securities (as defined in note 4 to Rule 22 of the Takeovers Code) of the Company.

SGM

A notice convening the SGM to be held at 7/F, Zung Fu Industrial Building, 1067 King’s Road, Quarry Bay, Hong Kong on Monday, 13 January 2014 at 4:30 p.m. is set out on pages 188 to 190 of this circular for the purpose of considering and, if thought fit for, approving, among other things, the Open Offer, the Underwriting Agreement and the Whitewash Waiver. The proxy form for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM in person, you are requested to complete the accompanying proxy form in accordance with the instructions printed thereon and return the same to the Registrar, Tricor Standard Limited, at 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 holding the SGM or any adjournment thereof (as the case may be). Completion and return of the proxy form will not preclude you from attending and voting in person at the SGM or any adjournment thereof (as the case may be) should you so wish.

The voting of the Independent Shareholders at the SGM of all necessary resolutions to approve the Open Offer, the Underwriting Agreement and the Whitewash Waiver will be taken by the way of poll. Subject to, among other things, the Open Offer, the Underwriting Agreement and the Whitewash Waiver being approved at the SGM, the Prospectus or Prospectus Documents, where appropriate, containing further information on the Open Offer will be dispatched to the Shareholders as soon as practicable.

LETTER FROM THE BOARD

RECOMMENDATION

An Independent Board Committee has been established to advise the Independent Shareholders as to whether the terms of the Open Offer, the Underwriting Agreement and the Whitewash Waiver are fair and reasonable and in the interest of the Company and the Shareholders as a whole and to advise the Independent Shareholders on how to vote at the SGM.

VC Capital Limited has been appointed as the Independent Financial Adviser to make recommendations to the Independent Board Committee and Independent Shareholders as to whether the terms of the Open Offer, the Underwriting Agreement and the Whitewash Waiver are fair and reasonable so far as the Independent Shareholders are concerned; and whether they are in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote at the SGM.

Your attention is drawn to the letter from the Independent Board Committee set out on page 31 of this circular which contains its recommendation to the Independent Shareholders, and the letter from the Independent Financial Adviser set out on pages 32 to 64 of this circular which contains its advice and recommendation to the Independent Board Committee and the Independent Shareholders in relation to the Open Offer, the Underwriting Agreement and the Whitewash Waiver.

Having taken into account the advice and recommendation of the Independent Financial Adviser, the Independent Board Committee consider that the terms of the Open Offer, the Underwriting Agreement and Whitewash Waiver are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned. Further, the Independent Board Committee consider that the Open Offer, the Underwriting Agreement and the Whitewash Waiver are in the interest of the Company and the Shareholders as a whole. Accordingly the Independent Board Committee recommend the Independent Shareholders to vote in favour of the proposed resolutions approving the Open Offer, the Underwriting Agreement and the Whitewash Waiver.

The Directors (other than the independent non-executive Directors) consider that the terms of the Open Offer, the Underwriting Agreement and the Whitewash Waiver are on normal commercial terms and fair and reasonable and are in the interest of the Company and the Shareholders as a whole, therefore, the Directors (other than the independent non-executive Directors) recommend the Independent Shareholders to vote in favour of the proposed resolutions approving the Open Offer, the Underwriting Agreement and the Whitewash Waiver at the SGM.

ADDITIONAL INFORMATION

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

By order of the Board Unlimited Creativity Holdings Limited Leung Ge On, Andy Executive Director

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

UNLIMITED CREATIVITY HOLDINGS LIMITED 無限創意控股有限公司

(Continued in Bermuda with limited liability)

(Stock Code : 8079)

27 December 2013

To the Independent Shareholders

Dear Sir or Madam,

(1) PROPOSED OPEN OFFER ON THE BASIS OF FOUR OFFER SHARES FOR EVERY SHARE HELD; AND

(2) APPLICATION FOR WHITEWASH WAIVER

We refer to the circular of the Company dated 27 December 2013 (the “Circular”) of which this letter forms part. Terms defined in the Circular shall have the same meanings when used herein unless the context requires otherwise.

We have been appointed by the Board as members of the Independent Board Committee to advise the Independent Shareholders in respect of the fairness and reasonableness of the Open Offer, the Underwriting Agreement and the Whitewash Waiver and to recommend whether or not the Independent Shareholders should vote on the relevant resolution(s) to be proposed at the SGM to approve the Open Offer, the Underwriting Agreement and the Whitewash Waiver. VC Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

Your attention is drawn to the letter from the Independent Financial Adviser as set out on pages 32 to 64 of this Circular which contains, inter alia, its advice and recommendation to the Independent Board Committee and the Independent Shareholders in respect of the terms and conditions of the Open Offer, the Underwriting Agreement and the Whitewash Waiver with the principle factors and reasons for its advice and recommendation.

Having taken into account the advice and recommendation of the Independent Financial Adviser, we consider that the terms of the Open Offer, the Underwriting Agreement and the Whitewash Waiver are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. Furthermore, the Open Offer, the Underwriting Agreement and the Whitewash Waiver are in the interest of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders to vote in favour of the relevant resolution(s) to approve the Open Offer, the Underwriting Agreement and the Whitewash Waiver.

Yours faithfully, Tsui Pui Hung

Independent Board Committee

Siu Yim Kwan, Sidney

Kam Tik Lun

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of a letter of advice to the Independent Board Committee and the Independent Shareholders from VC Capital Limited in respect of the terms of the Open Offer and the Whitewash Waiver prepared for the purpose of incorporation into this circular.

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27 December 2013

To: The Independent Board Committee and the Independent Shareholders of Unlimited Creativity Holdings Limited

Dear Sir or Madam,

PROPOSED OPEN OFFER ON THE BASIS OF FOUR OFFER SHARES FOR EVERY SHARE HELD AND APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Open Offer, the Underwriting Agreement and the Whitewash Waiver, details of which are set out in the Letter from the Board (the “ Letter from the Board ”) contained in the circular of the Company dated 27 December 2013 (the “ Circular ”), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires.

On 22 November 2013, the Company announced, among other things, the Open Offer and the Whitewash Waiver. The Company proposed to raise not less than approximately HK$50.33 million, but not more than HK$50.44 million, before expenses, by issuing not less than 503,358,524 Offer Shares (assuming no Outstanding Option is exercised on or before the Record Date) and not more than 504,363,952 Offer Shares (assuming all Outstanding Options are exercised in full on or before the Record Date) by way of Open Offer at the Subscription Price of HK$0.10 per Offer Share on the basis of four Offer Shares for every Share held by the Qualifying Shareholders on the Record Date. As at the Latest Practicable Date, save for the Outstanding Options entitling the holders thereof to subscribe for up to an aggregate of 251,357 Shares, there were no other outstanding convertible note, share option, warrant, derivative or other securities convertible into or exchangeable for any Shares. The Open Offer is not available to the Non-Qualifying Shareholders.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Open Offer will be fully underwritten by Able Rich and Kingston Securities (the “ Underwriters ”) subject to the terms and conditions set out in the Underwriting Agreement. In accordance with Rule 10.39 of the GEM Listing Rules, the Open Offer must be made conditional on approval by Shareholders in general meeting by a resolution on which any controlling Shareholders and their associates or, where there are no controlling Shareholders, Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates shall abstain from voting in favour of the Open Offer. As there is no controlling Shareholder, the Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates shall abstain from voting in favour of the Open Offer according to Rule 10.39 of the GEM Listing Rules.

Given that Able Rich is wholly-owned by Rich Treasure, in which is held by Mr. Shiu on trust for certain family members as the beneficiaries, Able Rich is an associate of Mr. Shiu and a connected person of the Company. The entering into of the Underwriting Agreement between Able Rich, Kingston Securities and the Company therefore constitutes a connected transaction for the Company under the GEM Listing Rules. As the underwriting commission, which amounted to approximately HK$0.58 million, to be received by Able Rich pursuant to its obligation under the Underwriting Agreement is on normal commercial terms and all applicable percentage ratios (as defined in the GEM Listing Rules) are less than 5% and the commission amount is less than HK$1,000,000, the payment of underwriting commission by the Company to Able Rich is therefore exempted from the reporting, announcement and independent shareholders’ approval requirements under Rule 20.31(2) of the GEM Listing Rules. The allotment and issue of the Untaken Shares to Able Rich in accordance with the Underwriting Agreement is, pursuant to Rule 20.31(3)(c) of the GEM Listing Rules, exempted from the reporting, announcement and independent shareholders’ approval requirements under Chapter 20 of the GEM Listing Rules. In any event, the Open Offer will be conducted in compliance with Rule 10.42(2) of the GEM Listing Rules.

Kingston Securities, as one of the Underwriters, will provide a loan facility of HK$15,000,000 for Able Rich to facilitate its underwriting obligation under the Underwriting Agreement, Kingston Securities is presumed to be acting in concert with Able Rich under the Takeovers Code. As at the Latest Practicable Date, Able Rich, its beneficial owner(s), and the parties acting in concert with any of them including, among others, Kingston Securities (the “ Concert Group ”) together are interested in 19,251,995 Shares, representing approximately 15.30% of the issued share capital of the Company. In the event that the Underwriters are called upon to subscribe or procure subscription for the Untaken Shares pursuant to their obligations under the Underwriting Agreement (net of those 51,000,000 Underwritten Shares that Kingston Securities has already sub-underwritten to certain sub-underwriters and subscribers, who are Independent Third Parties and not acting in concert with the Directors or chief executive of the Company or substantial Shareholders or their respective associates) (assuming none of the Qualifying Shareholders accept their respective provisional allotment of the Offer Shares and all Outstanding Options are exercised

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

in full on or before the Record Date), the shareholding of the Concert Group in aggregate would increase from approximately 15.30% of the issued share capital of the Company to a maximum of approximately 74.96% of the issued share capital of the Company as enlarged by the Offer Shares immediately upon completion of the Open Offer.

Under Rule 26 of the Takeovers Code, the acquisition of voting rights by Able Rich under such circumstances will result in Able Rich being obliged to make a mandatory general offer for all the securities of the Company not already owned or agreed to be acquired by Able Rich and other members of the Concert Group, unless, amongst others, the Whitewash Waiver is obtained from the Executive and approved by the Independent Shareholders at the SGM by way of poll. Accordingly, the Concert Group and parties acting in concert with any of them, and those who are involved in or interested in the Open Offer, the Underwriting Agreement or the Whitewash Waiver shall abstain from voting on the resolution to approve the Whitewash Waiver at the SGM. An application was made by Able Rich 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, will be subject to the approval of the Independent Shareholders on a vote taken by way of poll at the SGM and such other condition(s) as may be imposed by the Executive. If the Whitewash Waiver is not granted by the Executive or not approved by the Independent Shareholders, the Open Offer will not become unconditional and will not proceed.

An Independent Board Committee, comprising Dr. Siu Yim Kwan, Sidney, Mr. Tsui Pui Hung and Mr. Kam Tik Lun, being all of the independent non-executive Directors, has been established to make recommendation to the Independent Shareholders as to (i) whether the Open Offer, the Underwriting Agreement and the Whitewash Waiver which is to facilitate the implementation of the Open Offer are fair and reasonable so far as the Independent Shareholders are concerned; and in the interests of the Company and the Shareholders as a whole; and (ii) how the Independent Shareholders should vote in respect of the resolutions relating to the Open Offer, the Underwriting Agreement and the Whitewash Waiver at the SGM.

In our capacity as the independent financial adviser to the Independent Board Committee and the Independent Shareholders, our role is to give an independent opinion as to (i) whether the terms of the Open Offer, the Underwriting Agreement and the Whitewash Waiver which is to facilitate the implementation of the Open Offer are fair and reasonable so far as the Independent Shareholders are concerned, and whether they are in the interests of the Company and the Shareholders as a whole; and (ii) how the Independent Shareholders should vote in respect of the resolutions relating to the Open Offer, the Underwriting Agreement and the Whitewash Waiver at SGM. Our appointment as the independent financial adviser to advise the Independent Board Committee in respect of the Open Offer and the Whitewash Waiver has been approved by the Independent Board Committee.

VC Capital Limited (“ VC Capital ”) is not associated with the Company, the Underwriters or their respective substantial Shareholders or any party acting, or presumed to be acting, in concert with any of them and, accordingly, is considered eligible to give independent advice on the terms of the Open Offer, the Underwriting Agreement and the Whitewash Waiver. Apart from normal professional fees payable to us in connection with this engagement, no arrangement exists whereby VC Capital will receive any fees or benefits from the Company, the Underwriters or their respective substantial Shareholders or any party acting, or presumed to be acting, in concert with any of them.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In formulating our opinion, we have relied on the information and facts supplied and opinions expressed by the management of the Group. We have assumed that all information and representations provided by the management of the Group, for which they are solely responsible, were true and accurate at the time they were prepared or made and will continue to be so up to the Latest Practicable Date. Should there be any subsequent material changes which occurred during the period from the date of the Circular up to the date of the SGM and would affect or alter our opinion, we will notify the Independent Board Committee and the Independent Shareholders as soon as possible. We have no reason to doubt the truth, accuracy or completeness of the information and representations made to us by the management of the Group. We have been advised that no material facts have been omitted from the information supplied and opinions expressed. As such, we have no reason to suspect that any relevant information has been withheld or omitted from the information provided and referred to in the Circular or the reasonableness of the opinions and representations provided by the management of the Group to us, nor are we aware of any facts or circumstances which would render the information provided and representations made to us untrue, inaccurate or misleading.

We consider that we have reviewed sufficient information to reach an informed view, to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our opinion. We have not, however, conducted any independent investigation into the business and affairs or the future prospects of the Group, nor have we carried out any independent verification of the information provided by the management of the Group.

All Directors issuing the Circular jointly and severally accept full responsibility for the accuracy of information contained in the Circular and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and no other facts not contained in the Circular, the omission of which would make any statement in the Circular misleading.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion on the terms of the Open Offer, the Underwriting Agreement and the Whitewash Waiver, we have taken into consideration the following principal factors and reasons:

1. Background information of the Company

The Company is principally engaged in money lending business, property investment, sales of grocery products and securities and bonds investment which may comprise financial instruments and quoted shares investment in Hong Kong.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following table summarises the financial information of the Group for the two years ended 31 March 2013 and the six months ended 30 September 2013 as extracted from the annual report of the Company for the year ended 31 March 2013 (“ Annual Report 2013 ”) and the interim report of the Company for the six months ended 30 September 2013 (the “ Interim Report 2013 ”) respectively. Please refer to the “Financial information of the Group” set out in Appendix I to the Circular for details.

Revenue Beauty services and sale of beauty products# Clinical services# Money lending Rental income from investment properties Retails services income## Gross Profit Loss before income tax Profit for the year from discontinued operations# Loss for the year/period Other comprehensive income: Change in fair value of available-for-sale financial assets Change in fair value of land and buildings Release of investment revaluation reserve upon disposal of available-for-sale financial assets Other comprehensive profit/(loss) for the period, net of tax Total comprehensive profit/(loss) for the period	For the year ended 31 March 2012 2013 HK$’000 HK$’000 (Audited) (Audited) (Restated) – – – – 18,541 21,153 488 549 – 1,326 19,029 23,028 19,029 22,023 (17,992) (47,740) 8,978 12,598 (9,154) (35,450) 103 (14,202) 7,212 – (27) (46) 7,288 (14,248) (1,866) (49,698)	For the six months ended 30 September 2012 2013 HK$’000 HK$’000 (Unaudited) (Unaudited) (Restated) 3,452 – 9,981 – 10,760 13,731 250 370 447 1,943 24,890 16,044 19,621 14,746 (49,418) (4,535) – – (43,303) (4,535) (6,260) (2,802) – – 104 10,388 (6,156) 7,586 (49,459) 3,051

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Revenue generated from beauty services and sale of beauty products and clinical services of approximately HK$34.3 million and HK$18.6 million for the two years ended 31 March 2013 respectively had been reflected and classified as discontinuing operations and had been considered on arriving “profit for the year from discontinued operations” for the respective years.
This segment referred to as “sales of grocery products” for the two years ended 31 March 2013 and the six months ended 30 September 2013.
(a) For the year ended 31 March 2013

It was mentioned in the Annual Report 2013 that the competition within the beauty industry is keen and it is the Group’s business strategy to relocate its resources to other profitable segment. As a result, the turnover from the segment of beauty services, clinical services and sale of beauty products decreased by approximately 45.6% from approximately HK$34.3 million to approximately HK$18.6 million for the year ended 31 March 2013. In March 2013, the Group had disposed such segment so as to focus more financial resources and management effort on the other segments which generated more income to the Group.

Revenue of the Group from the continuing operations increased by approximately 21.0% to approximately HK$23.0 million for the year ended 31 March 2013. The increase in revenue was mainly as a result of the increase in revenue generated from the money lending business, which increased by approximately 14.1% from approximately HK$18.6 million to approximately HK$21.2 million for the year ended 31 March 2013. According to the Annual Report 2013, since more resources have been placed in money lending business, there was significantly increase in the revenue from this business and more than 1,000 clients had been served. The Group’s loans and advances amounted to approximately HK$115.5 million as at 31 March 2013.

In March 2013, one of the subsidiaries of the Group, namely Yvonne Credit Service Co. Limited, became a TransUnion member, who enables the company to obtain credit report in accordance with the Code of Practice on Consumer Credit Data issued by the Office of the Privacy Commissioner for Personal Data, Hong Kong. By virtues of the report, it enables the Group to make informed, reliable and objective decisions so as to approve loans efficiently, staying informed about credit status of the Group’s clients as well as alerting signs of potential fraud.

We were advised by the management of the Group that the Group has been developing retail business since June 2012. The retail store in Kwai Chung mentioned in the Annual Report 2013 was terminated by the Group in November 2013 in order to focus its financial and human resources to bloom up on-line sales of frozen food. The Group’s current retail office in Taikoo was opened in January 2013 for the purpose of catering on-line sales and its on-line shopping service in Hong Kong under the website address of http://commune.server239.com is for the sales of grocery products (including frozen seafood, personal care products, stationeries, electrical appliances and etc.) to the public. The Group generated nil and approximately HK$1.3 million from sales of grocery products for the two years ended 31 March 2013 respectively. The rental income generated from investment properties held by the Group, including industrial properties acquired during the year ended 31 March 2012, continued providing steady income to the Group for the year ended 31 March 2013. The Group’s rental income from investment properties amounted to approximately HK$0.5 million and HK$0.5 million for the two years ended 31 March 2013 respectively.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group’s loss before income tax from continuing operations deteriorated from approximately HK$18.0 million to approximately HK$47.7 million for the year ended 31 March 2013. This was mainly due to the substantial change in fair value losses on financial assets at fair value through profit or loss, which turned from a profit of approximately HK$10.6 million for the year ended 31 March 2012 to a loss of approximately HK$56.4 million for the year ended 31 March 2013. It was mentioned in the Annual Report 2013 that with the unpredictable economic situation, heightening concerns of sovereign debt crises spread across Europe and concerns of a hard lending in economy of the PRC, the stock market was in a downward trend for the year ended 31 March 2013. The result of this business segment was also negatively affected. Of approximately HK$56.3 million fair value losses on financial assets at fair value through profit or loss for the year ended 31 March 2013, approximately HK$43.9 million was a result of the change in market price of listed shares of China 3D. Profit from discontinued operations increased from approximately HK$9.0 million to approximately HK$12.6 million for the year ended 31 March 2013 mainly due to the gain on disposal of operations despite the decrease in revenue from the discontinued business segment.

(b) For the six months ended 30 September 2013

Revenue of the Group decreased by approximately 35.5% to approximately HK$16.0 million for the six months ended 30 September 2013 when compared with the same period last year as a result of disposal of beauty services and sales of beauty products and clinical services. It was mentioned in the Interim Report 2013 that after actively participating in money lending business for more than two years, a solid client base has been built. The Group generated approximately HK$13.7 million revenue from the money lending business for the six months ended 30 September 2013 as compared to approximately HK$10.8 million for the corresponding period in 2012. The Group’s loans and advances amounted to approximately HK$158.5 million as at 30 September 2013.

As mentioned in (a) above, the Group has been developing retail business since June 2012. It generated retails services income of approximately HK$1.9 million for the six months ended 30 September 2013 as compared to approximately HK$0.4 million for the corresponding period in 2012. The rental income generated from investment properties held by the Group continued providing steady income to the Group for the six months ended 30 September 2013. The Group’s rental income from investment properties amounted to approximately HK$0.4 million for the six months ended 30 September 2013 as compared to approximately HK$0.3 million for the corresponding period in 2012. The Group confirmed that as at the Latest Practicable Date, it had been earning rental income from certain properties including an industrial property in Hong Kong pursuant to a renewed tenancy agreement for two years term from 5 June 2013; and a residential property in Hong Kong pursuant to a new tenancy agreement for two years term from 1 March 2013; and steady rental income is therefore expected.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Group’s loss before income tax narrowed from approximately HK$49.4 million to approximately HK$4.5 million for the six months ended 30 September 2013 when compared with the same period last year. This was mainly due to the substantial change in fair value change on financial assets at fair value through profit or loss, which turned to a profit of approximately HK$4.1 million for the six months ended 30 September 2013 from a loss of approximately HK$56.8 million for the corresponding period in 2012. Loss of the Group was partly due to the loss from equity to profit or loss upon disposal of available for sale financial assets of approximately HK$10.3 million. According to the breakdown on investment in securities provided by the Company, as at 31 October 2013, the Group had strategic holding of 778,817,592 ordinary shares, being approximately 13.9% interest in the listed shares of China 3D with market value of approximately HK$23.4 million, close-end fund with market value of approximately HK$1.2 million and certain listed securities with market value of approximately HK$24.2 million.

Outlook

We were advised by the management of the Group that as money lending business was proved to bring to the Group satisfactory turnover and profit, the Group will continue actively develop this business. On the other hand, in view of the global economic environment, driven by the European sovereign debt crisis and the economic downturn in the United States continues, the Group will take more conservative step to invest in securities and bonds investment. Focus will be placed on corporate bonds with good credit rating instead of listed securities in the volatile stock market. The Group also expected that huge sales volumes with acceptable profit margin can be generated from the retail office in Taikoo with the on-line shopping services in Hong Kong, which allowed public to buy necessities at competitive pricing.

2. Reasons for the Open Offer and use of proceeds

(a) Use of proceeds

The estimated net proceeds of the Open Offer is expected to be not less than approximately HK$48.3 million (assuming no Outstanding Option is exercised on or before the Record Date) and not more than approximately HK$48.4 million (assuming Outstanding Options are exercised in full on or before the Record Date). The net proceeds will be used (i) as to approximately HK$38.7 million for expanding its money lending business; and (ii) as to the remaining of approximately HK$9.7 million for general working capital and/or for the development of the Group’s business. As set out in the Letter from the Board, as the money lending business has shown satisfactory turnover and profit to the Group, the Company intends to expand its money lending business. Please refer to “1. Background information of the Company” for the historical performance of the Group’s money lending business. Able Rich considered that the Group will be able to obtain additional capital resources for further development and expansion of its property development and investment business when suitable opportunity arises. The Group will continue to look for possible investment opportunities in order to expand the source of income and prospects of the Group. As at the Latest Practicable Date, no specific investment target was identified, no definitive agreement had been entered into nor any form of involvement has been determined. Nevertheless, should any potential investment opportunities arise, the Company may consider further fund raising if needed. The Board considers that the Open Offer represents an opportunity for the Company to develop its

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

money lending business and enhance its working capital. The usage of the general working capital includes the administrative expenses (such as salaries, office rentals and professional fees, etc.) in a total of approximately HK$2.0 million per month. We have reviewed the consolidated management accounts of the Group for the seven months ended 31 October 2013 and noted that the average monthly administrative expenses of the Group was approximately HK$1.7 million. Therefore, the Company’s estimation that the monthly administrative expenses of the Group will be around HK$2.0 million is reasonable.

We have reviewed the Interim Report 2013 to study the working capital requirements of the Group; and noted that the Group had cash and bank balances of approximately HK$10.9 million as at 30 September 2013 which was much less than cash and bank balances of approximately HK$55.0 million as at 31 March 2013. We made enquiry to the management of the Group and understood that the decrease in cash and bank balances was mainly due to the increase in the amount of loans and advances to customers of approximately HK$43.0 million, from approximately HK$115.5 million as at 31 March 2013 to approximately HK$158.5 million as at 30 September 2013. We agree that if the Group would like to further expand its money lending business by increasing the amount of loans and advances to customers to generate more loan interests, it will have difficulty to make such amount of loans and advances to a level that would be around or exceeded the available internal resources in cash and bank balances of the Group and at the same time to maintain a reasonable cash and bank balances for healthy operation; and additional funding may be needed so as not to limit the growth of its money lending business. We have also reviewed and noted from the consolidated management accounts of the Group for the seven months ended 31 October 2013 that the cash and bank balances of the Group remained at approximately HK$9.9 million as at 31 October 2013.

We understood from the management of the Group that the money lending business of the Group covers mortgage loans, personal loans and auto loans.

Money lending in Hong Kong

Loans granted by authorised institutions

						For nine
					months ended
		For the	year ended 31 December		30	September
	2008	2009	2010	2011	2012	2013
	HK$ billion	HK$ billion	HK$ billion HK$ billion		HK$ billion	HK$ billion
Licensed banks	3,197.19	3,210.56	4,170.10	5,020.49	5,503.85	6,328.30
Restricted License banks	58.96	52.89	31.14	34.35	35.47	42.43
Deposit taking companies	29.50	25.04	26.49	25.82	27.48	28.74
All authorised institutions	3,285.65	3,288.49	4,227.73	5,080.66	5,566.80	6,399.47

Source: HKMA Monthly Statistical Bulletin

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We noted from HKMA Monthly Statistical Bulletin that the loans amount granted by deposit taking companies experienced a steady growing trend over recent years/period. We have also reviewed and noted from the company website of Euromonitor International, an independent company in strategy research for consumer markets with network of strategic analysts in 80 countries, that uncertain market conditions in Hong Kong caused a slowdown in the consumer lending market in 2012. Card lending remained the largest proportion of consumer lending in terms of gross lending which saw a slowdown in growth as a result of worsening card spending. Within consumer credit, other personal lending saw the fastest growth, supported by the healthy growth of the credit line and tax loans; and they were forecasted to see the growth. Auto lending and education lending remained relatively small within the overall lending market. The government tightened mortgage regulations in June 2011 and September 2012, and limited the growth of mortgages from retail banks. Consumers cannot borrow sufficient amounts of money from retail banks to pay for property. Financial institutions and even pawn shops offered re-mortgage plans to address the needs of property buyers. Despite the company website of Euromonitor International mentioned that mortgages are likely to slow growth as consumers expect the prices of property to decrease, and are unlikely to put a lot of investment into buying property, we understood from the management of the Group that the Company does not anticipate its money lending business in relation to mortgage will be adversely affected because it mainly targets for customers in the second/third mortgage market who would like to obtain financing through re-mortgages of their existing properties; therefore, unfavourable atmosphere in the property trading market may not have direct impact on the relevant lending business of the Group. Other personal loans will continue to be another driver of the consumer credit market.

We consider that it is fair and reasonable and in the interest of the Company and the Shareholders a whole to raise funds through the Open Offer and apply the net proceeds of the Open Offer to finance its money lending business and/or development of its business and to enhance its working capital in view of:

(i) revenue of the Group generated from the money lending business in absolute amount was on a growing trend. Please refer to the paragraphs headed under “1. Background information of the Company” for details. As mentioned in the Letter from the Board, as the money lending business has shown satisfactory turnover and profit to the Group, the Company intends to expand its money lending business. The Group planned to continuously provide loans to certain existing customers, to provide loans to new corporate and individual customers and/or to increase the loan amount to customers (subject to loan approval limits determined with reference to customers’ credibility and financial background) in order to generate more revenue from the money lending business;
(ii) having reviewed the management accounts of the Group, we noted that the cash and bank balance of the Group only amounted to approximately HK$9.9 million as at 31 October 2013. We also understood from the management of the Group that historically, the decrease in cash and bank balances of the Group from approximately HK$55.0 million as at 31 March 2013 to approximately HK$10.9 million as at 30 September 2013 was mainly a result of the increase in the amount of loans and advances to customers of approximately HK$43.0 million. In order to further

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

expand the money lending business by increasing the amount of loans and advances to customers to generate more loan interests and at the same time to maintain a reasonable cash and bank balance for the healthy operation of the Company, additional financial resources is necessary for the Company so as not to limit the further expansion of the money lending business;

(iii) as mentioned in the Letter from the Board, usage of net proceeds from the Open Offer for general working capital includes the administrative expenses (such as salaries, office rentals and professional fees, etc.) in a total of approximately HK$2.0 million per month. We have reviewed the consolidated management accounts of the Group for the seven months ended 31 October 2013 and noted that such administrative expense items existed with monthly average closed to HK$2.0 million. The Group should have genuine needs for working capital to settle administrative expenses in its business operation; and
(iv) the Directors believe that the Open Offer would be the most appropriate method of fund raising as opposed to other alternative means of financing. Please refer to paragraphs below for details.

(b) Other financing alternatives

As mentioned in the Letter from the Board, the Board has considered other fund raising alternatives before resolving to the Open Offer, including but not limited to bank borrowings, share placement and rights issue. Borrowings would result in additional interest burden and higher gearing ratio of the Group. Share placement may necessarily dilute the shareholding in the Company of the existing Shareholders. Although rights issue can provide a way out to those Independent Shareholders who do not wish to take up the entitlements by selling nil-paid rights, rights issue will involve extra administrative work and cost for the trading arrangements in relation to the nil-paid rights. In addition, in view of the relatively inactive historical trading volume of the Shares, whether the nil-paid rights associated with a rights issue of the Company will develop an active market on the Stock Exchange may be questionable; as such, there is uncertainty of the existence of a market to trade the nil-paid entitlements. Please refer to the paragraph headed “3.1.2 Historical trading volume” under “3.1 Subscription Price” below for details. In view of the above, we considered that raising funds by way of the Open Offer is more cost effective and efficient; and there is no reasonable basis for us to believe that a rights issue will be more beneficial to the Company and its Shareholders as a whole than an open offer.

Having considered various financing alternatives available to the Group, the Board believes that the Open Offer would be the most appropriate method of fund raising and it is in the best interest of the Company and the Shareholders, as opposed to other alternative means of financing. We concur with the Board that open offer is a fair and reasonable fund raising method for the Company.

Although shareholding of Non-Qualifying Shareholders and Qualifying Shareholders who do not participate in the Open Offer will be diluted substantially, the Board considers that all Qualifying Shareholders are being offered the equal opportunity to make an informed decision

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

whether to participate in the Open Offer and all Shareholders may be benefited if there is any future growth of the Group as a result of of the expansion of the Group’s money lending business. Since the Open Offer will enable the Company to raise funds for general working capital for its business operations and expansion of its money lending business, it is in the interest of the Company and Shareholders as a whole to conduct such fund raising exercise.

Having taken into consideration of the above, we are of the view that it is reasonable for the Company to maintain a strong capital base and obtain funding for its business development and business operations through the Open Offer. Accordingly, we concur with the Board’s view that the Open Offer is in the interest of the Company and Shareholders as a whole.

3. Principal terms of the Open Offer

The Company proposed to raise not less than approximately HK$50.33 million, but not more than 50.44 million, before expenses, by way of Open Offer on the basis of four Offer Shares for every one Share held on the Record Date. The Open Offer is only available to the Qualifying Shareholders. No excess application for the Offer Shares is available under the Open Offer.

3.1 Subscription Price

The Subscription Price for the Offer Shares is HK$0.10 per Offer Share payable in full on acceptance. The Subscription Price represents:

(i) discount of approximately 65.52% to the closing price of HK$0.290 per Share as quoted on GEM on the Last Trading Day;
(ii) a discount of approximately 65.16% to the average of the closing prices of HK$0.287 per Share for the last five consecutive trading days as quoted on GEM including and up to the Last Trading Day;
(iii) a discount of approximately 27.54% to the theoretical ex-entitlement price of approximately HK$0.138 per Share as adjusted for the effects of the Open Offer, based on the closing price of HK$0.290 per Share as quoted on GEM on the Last Trading Day;
(iv) a discount of approximately 65.75% to the average of the closing prices of HK$0.292 per Share for the last ten consecutive trading days as quoted on GEM including and up to the Last Trading Day;
(v) a discount of approximately 60.00% to the closing price per Share of HK$0.25 as quoted on GEM on the Latest Practicable Date; and
(vi) a discount of approximately 94.55% to the net asset value per Share of approximately HK$1.836 based on the latest unaudited interim net asset value of the Group as at 30 June 2013 and the number of Shares in issue as at the Latest Practicable Date.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As set out in the Letter from the Board, the Subscription Price was arrived at after arm’s length negotiation between the Company and the Underwriters with reference to, among other things, the prevailing market price of the Shares, the financial positions of the Group, the absence of excess application arrangement to Shareholders and having considered the future development in respect of the money lending business of the Group. Each Qualifying Shareholder is entitled to subscribe for the Offer Shares at the Subscription Price in proportion to his/her/its existing shareholding in the Company. The Directors consider the Subscription Price to be fair and reasonable and in the interests of the Company and the Shareholders as a whole.

3.1.1 Historical closing prices

Set out below is the movements in the closing price of the Shares during the period from 1 November 2012, being the 12 months period prior to the date of the Underwriting Agreement, up to and including the Latest Practicable Date (the “ Review Period ”):

The daily closing price during the Review Period (HK$)

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Source: website of the Stock Exchange (www.hkex.com.hk)

Notes:

Trading in the Shares was halted with effect from 15:27 p.m. on 4 March 2013 pending the release of an announcement by the Company in relation to inside information, which may constitute a possible very substantial acquisition of the Company. An announcement was published after trading hours of 5 March 2013 and trading in the Shares resumed with effect from 9:00 a.m. on 6 March 2013
Trading in the Shares was suspended on 22 October 2013 pending release of an announcement in relation to a proposed open offer. An announcement in relation to the entering into and terminating of an underwriting agreement in connection with the possible open offer was published after trading hours of 22 October 2013 and trading in the Shares resumed with effect from 9:00 a.m. on 23 October 2013

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Trading in the Shares was suspended on 19 November 2013 pending the release of an announcement in relation to a proposed open offer. An announcement in relation to the Open Offer was published after the trading hours of 22 November 2013 and trading in the Shares resumed with effect from 9:00 a.m. on 25 November 2013
Share prices prior to 18 June 2013, being the effective date of capital reorganization of the Company which involve inter alia, share consolidation of every twenty shares into one consolidated Share, are adjusted closing prices of the Shares

During the Review Period, the lowest closing prices of the Shares was HK$0.248 per Share recorded on 28 November 2013 and 29 November 2013 and the highest closing price of the Shares was HK$3.80 per Share recorded on 7 March 2013 as quoted on the Stock Exchange. The average daily closing price of the Shares is approximately HK$0.687 per Share. The Subscription Price represents (i) a discount of approximately 97.4% from the highest closing price; (ii) a discount of approximately 85.4% from the average daily closing price; and (iii) a discount of approximately 59.7% from the lowest closing price during the Review Period.

The closing price of the Shares fluctuated in the range between HK$0.86 per Share to HK$1.30 per Share on an upward trend from 1 November 2012 to 10 December 2012; and increased by a relatively large extent of approximately 16.9% to HK$1.52 per Share on 11 December 2012. The Directors confirmed that they were not aware of any reasons for such increase in the closing price of the Shares on 11 December 2012. On 12 December 2012, the Company announced that the Board was not aware of any reasons for the increase in the trading price of the Shares, which surged further by approximately 34.2% to HK$2.04 per Share. However, it was mentioned in the announcement that the Board was informed by China 3D that 7,680,000 Shares, representing 1.10% of the then entire issued share capital of the Company were acquired in the market. After the acquisition, China 3D and its subsidiary held 6.84% of the entire issued share capital of the Company. The Board confirmed in the announcement that, save as disclosed, there were no negotiations or agreements relating to intended acquisitions or realizations which are discloseable under Chapters 19 and 20 of the GEM Listing Rules, neither was the Board aware of any matter discloseable under the general obligation imposed by Rule 17.10 of the GEM Listing Rules, which was or may be of a price-sensitive nature. On the same date after the trading hours, the Company also announced the entering into of a loan agreement for the grant of loan amount of HK$7,350,000 to an Independent Third Party. Thereafter, the closing price of the Shares fluctuated with gradual downward trend and returned to the similar level before the large upswing mentioned. The Directors confirmed that they were not aware of any reasons for such gradual downward trend in the closing price of the Shares.

The Company published an announcement after the trading hours of 25 January 2013 in relation to the proposed bonus issue of Shares on the basis of two bonus Shares for every one Share held by the qualifying shareholders on the record date. The closing price of the Shares increased by approximately 21.7% from HK$1.20 per Share on 25 January 2013 to HK$1.46 per Share on 28 January 2013 (being the first trading day after the publication of the announcement) and increased further to HK$1.52 per Share and HK$1.60 per Share on 29 January 2013 and 30 January 2013 respectively. Since then, the closing price of the Shares maintained a stable momentum until it started driving up on a relatively fast pace

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

since end of February 2013 from HK$1.56 per Share on 19 February 2013 to the highest of HK$3.80 on 7 March 2013. The Directors confirmed that they were not aware of any reasons for such increasing trend in the closing price of the Shares since end of February 2013. We noted that trading in Shares was halted with effect from 15:27 p.m. on 4 March 2013. The Company announced after the trading hours of 5 March 2013 that save for 4 March 2013 is the first day of dealings in the Shares on an ex-entitlement basis in respect of the bonus issue according to the timetable for the bonus issue of the Company; and the Company was in preliminary negotiations regarding a possible very substantial acquisition, the Board was not aware of any reasons for such increases. Following the resumption of trading in the Shares on 6 March 2013, the closing price of the Shares increased by approximately 27.8% to HK$3.22 per Share and increased further by approximately 18.0% to reach the highest closing price of HK$3.80 per Share on 7 March 2013. The rapid increasing trend of the closing price of the Shares then turned immediately to a sharp decreasing trend and was down to HK$0.34 on 5 April 2013. The Directors confirmed that they were not aware of any reasons for such sharp decreasing trend in the closing price of the Shares since 8 March 2013.

After the trading hours of 5 April 2013, the Company announced a discloseable transaction in relation to an acquisition of convertible bonds in an aggregate principal amount of HK$19,000,000 due 2015 at the consideration of HK$14,250,000. The closing price of the Shares increased by approximately 17.7% to HK$0.40 per Share on 8 April 2013, the first day of trading after the publication of the announcement and fluctuated on a steady trend. After the trading hours of 2 May 2013, the Company released an announcement in relation to proposed capital reorganization involving inter alia, share consolidation, capital reduction and capital increase. The closing price of the Shares decreased by approximately 15.8% to HK$0.32 per Share on 3 May 2013. From 3 May 2013 to the Latest Practicable Date, the closing price of the Shares fluctuated between HK$0.248 per Share to HK$0.36 per Share.

We note that it is a common market practice that, in order to enhance the attractiveness of an open offer and to encourage the existing shareholders to participate in the open offer, the subscription price of an open offer normally represents a discount to the prevailing market prices of the relevant shares. Having considered that save for the impacts due to the corporate actions of the Company mentioned above, the recent closing price of the Shares was in general on a decreasing trend, we considered that the Subscription Price being set at a discount to the prevailing market prices of the Shares is in line with the general practice and is acceptable.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3.1.2 Historical trading volume

The average daily trading volume of the Shares per month, and the respective percentages of the average daily trading volume as compared to the total number of issued Shares at the beginning of each calendar month during the Review Period are tabulated as follows:

The daily trading volume of the Shares during the Review Period

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Source: website of the Stock Exchange (www.hkex.com.hk)

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

			Percentage of the
			average daily
			trading volume to
		Number of issued	total number
		Shares at	of issued Shares
	Average Daily	the beginning	at the beginning
	Trading Volume	of each month	of each month
	Number of Shares	Number of Shares	Approximately %
2012
November	3,059,280	699,197,543	0.44%
December_(Note 9)_	6,423,156	699,197,543	0.92%
2013
January	11,860,937	699,197,543	1.70%
February	19,400,457	699,197,543	2.77%
March_(Note 1 & 2)_	184,313,425	699,197,543	26.36%
April	32,924,612	2,097,592,629	1.57%
May	26,089,762	2,097,592,629	1.24%
June_(Note 3)_	18,602,618	2,097,592,629	0.89%
July	1,019,711	104,879,631	0.97%
August_(Note 4 & 8)_	1,766,591	104,879,631	1.68%
September_(Note 8)_	2,086,446	125,839,631	1.66%
October_(Note 5)_	695,465	125,839,631	0.55%
November_(Note 6)_	1,656,386	125,839,631	1.32%
December_(Note 7 & 9)_	885,583	125,839,631	0.70%

Source: website of the Stock Exchange (www.hkex.com.hk)

Notes:

Trading in the Shares was halted with effect from 15:27 p.m. on 4 March 2013 and resumed with effect from 9:00 a.m. on 6 March 2013
Number of issued Shares increased to 2,097,592,629 subsequent to the issue of a total of 1,398,395,086 bonus shares on 18 March 2013
Number of issued Shares decreased to 104,879,631 subsequent to the capital reorganisation on 17 June 2013
Number of issued Shares increased to 125,839,631 subsequent to the placing of 20,960,000 new Shares on 7 August 2013
Trading in the Shares was suspended on 22 October 2013
Trading in Shares was suspended from 19 November 2013 to 22 November 2013, both days inclusive
Up to the Latest Practicable Date
No trading session for the full day of 14 August 2013 and the morning of 23 September 2013 due to issuance of Typhoon Signal No. 8
No trading session for the afternoon of 24 December 2012, 31 December 2012 and 24 December 2013 due to the eves of Christmas and New Year

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The above table illustrates that the average daily trading volume of the Shares per month was thin during the Review Period, which ranged from approximately 0.44% to 26.36% of the total number of issued Shares at the beginning of each month.

Trading volume of the Shares became relatively high and led to the halt of trading with effect from 15:27 p.m. on 4 March 2013. After the trading hours of 5 March 2013, the Company announced that save for 4 March 2013 is the first day of dealings in the Shares on an ex-entitlement basis in respect of the bonus issue according to the timetable for the bonus issue of the Company; and the Company was in preliminary negotiations regarding a possible very substantial acquisition, the Board was not aware of any reasons for such increases. The relatively large trading volume of the Shares persisted till mid March 2013 which was in line with the climbing up of the closing price of the Shares to the highest of HK$3.80 per Share on 7 March 2013 and the sharp decreasing trend of the closing price of the Shares mentioned above.

After the trading hours of 2 May 2013, the Company released an announcement in relation to proposed capital reorganization involving inter alia, share consolidation, capital reduction and capital increase; and daily trading volume of the Shares increased to approximately 11.02% of the total number of issued Shares on 3 May 2013. Trading of Shares was also active on 11 September 2013, representing approximately 17.46% of the total number of issued Shares, however, we were advised by the management of the Group that the Company was not aware of any reasons for the relatively high trading volume of the Share on that day.

Apart from March 2013, the percentage of the average daily trading volume to total number of issued Shares at the beginning of the month was relatively high at 26.36% as mentioned above, we noted that percentage of the average daily trading volume were generally below 2.80% of the total number of issued Shares at the beginning of each month, that is, trading in the Shares had been historically inactive and the Shares were hence rather illiquid.

Since the Shares were generally illiquid in the open market, we considered that it might be difficult to attract the Qualifying Shareholders to reinvest in the Company through the Open Offer if the Subscription Price was not set at a discount to the historical closing prices of the Shares. As Subscription Price being set at a discount could attract the Qualifying Shareholders to maintain their respective pro rata shareholdings in the Company and participate in the future growth of the Group (if any) as a result of the expansion of its money lending business, we consider that the Subscription Price being set as lower than the prevailing market prices of the Shares is in line with general market practice and the current market trend, which we consider is reasonable and acceptable.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3.1.3 Comparison with other open offer transactions

In order to assess the reasonableness of the Subscription Price, we have reviewed all open offers conducted by other companies listed on the Stock Exchange, which (i) announced the respective open offers in the six months preceding the date of the Underwriting Agreement, i.e. from 18 May 2013 and up to 17 November 2013 (being the date prior to the entering into of the Underwriting Agreement); and (ii) have not been suspended for trading for more than 12 months from the dates of the respective announcements, for reference.

To the best of our knowledge and as far as we are aware of, we have identified 11 listed companies (the “ Comparables ”), which is an exhaustive list of all companies listed on the Stock Exchange announced open offers within the aforesaid period, and have not been suspended for trading for more than 12 months from the dates of the respective announcements. Among the 11 Comparables, only three companies, namely Sun International Resources Limited (stock code: 8029), Carnival Group International Holdings Limited (stock code: 996) and Uni-Bio Science Group Limited (stock code: 690), (i) required shareholders’ approval and (ii) had shareholder/connected person act as the underwriter(s). Even though underwriting commission payable to a shareholder/connected person tends to be lower (Please refer to the paragraphs headed “3.2 Underwriting commission” below), the subscription prices of all Comparables (including the three companies) were determined on arm’s length basis with their underwriter(s) based on the then market conditions and/or sentiments; and elements (i) and (ii) mentioned above will not have direct effect on level of discount or extent of potential dilution in general, we consider that all Comparables are fair and representative samples and shall not be excluded. We consider also the selection of such six months period to be sufficient and appropriate for our analysis for fund raising exercises such as open offers, as the market sentiment at the relevant time in general plays an important role in the determination of the subscription price, while reasonable number of open offers could be included for reference purposes. Nevertheless, Shareholders should note that the businesses, operations and prospects of the Company are not exactly the same as the Comparables and we have not conducted any in-depth investigation into the businesses, operations and prospects of the Comparables. Details of our findings are summarized in the table below:

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

					Excess	application	(Yes/No)		No											Yes		No
						Principal	activities		Provision of embedded firmware	and turnkey solutions for consumer	electronics devices, with services	such as concept consultation,	technology feasibility study,	embedded firmware design and	development, industrial design,	intellectual property research,	manufacturing and packaging,	logistic management and after	sales support	Property investment and trading of	securities and investment holding	Manufacturing and sales of	environmentally friendly	air-conditioners and related	products in the PRC
					Approximate	estimated	net proceeds	(HK$ million)	64.00											88.50		42.00
Market	capitalisation	as at the	date of the	respective	announcement	Underwriting for the	Commission open offer	(%) (HK$)	2.50 212,895,000											2.00 279,000,000		2.50 173,162,400
					Maximum	Dilution	(Note 2)	(%)	54.55											33.33		33.33
		Discount of	subscription	price over/(to)	the theoretical	ex-entitlement	price	(%)	(55.99)											(26.85)		(39.29)
				Theoretical	ex-entitlement	price	(Note 1)	(HK$)	0.1136											0.1367		0.1153
	Closing price as	quoted on the Discount of	Stock Exchange subscription	on the last price over/(to)	trading day of the closing price	Subscription the open offer on the last	price conducted trading day	(HK$) (HK$) (%)	0.050 0.190 (73.68)											0.100 0.155 (35.48)		0.070 0.138 (49.28)
						Name of	Company Basis		Perception Digital 6 for 5	Holdings Limited										Oriental Explorer 1 for 2	Holdings Limited	Global Energy 1 for 2	Resources	International	Group Limited
						Stock	code		1822											430		8192
						Announcement	date		2013.11.14											2013.11.13		2013.11.11

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

					Excess	application	(Yes/No)		No								No			Yes		No
						Principal	activities		Film production, distribution of	film and television drama series,	sales of Chinese health products,	investing in operations which	receive the profit stream from	gaming promotion business,	property and hotel investment,	and property development	Hotel resort, information	technology service and mining		Provision of funeral services and	sales of funeral related products	Property development and	investment; trading and	investment; and retail-related	consultancy and management	services business
					Approximate	estimated	net proceeds	(HK$ million)	325.42 –	336.01							45.20			86.66 –	112.95	431.60
Market	capitalisation	as at the	date of the	respective	announcement	Underwriting for the	Commission open offer	(%) (HK$)	1.00 853,750,189								0.00 296,832,000	(Note 4)		3.50 67,086,575		1.50 1,318,836,290	(Note 4)
					Maximum	Dilution	(Note 2)	(%)	28.57								33.33			80.00		33.33
		Discount of	subscription	price over/(to)	the theoretical	ex-entitlement	price	(%)	(3.10)								(59.51)			(28.06)		(25.01)
				Theoretical	ex-entitlement	price	(Note 1)	(HK$)	0.129								0.247			0.139		0.267
	Closing price as	quoted on the Discount of	Stock Exchange subscription	on the last price over/(to)	trading day of the closing price	Subscription the open offer on the last	price conducted trading day	(HK$) (HK$) (%)	0.125 0.130 (3.85)								0.100 0.320 (68.75)			0.100 0.295 (66.10)		0.200 0.300 (33.33)
						Name of	Company Basis		China Star 2 for 5	Entertainment	Limited						Sun International 1 for 2	Resources	Limited	Fava International 4 for 1	Holdings Limited	Carnival Group 1 for 2	International	Holdings Limited
						Stock	code		326								8029			8108		996
						Announcement	date		2013.11.05								2013.10.28			2013.09.17		2013.09.16

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

					Excess	application	(Yes/No)		Yes												No
						Principal	activities		Bioscience related business with	focus on the research,	development and commercialization	of biopharmaceutical products	through recombinant DNA and	other technologies							Money lending business, property	investment, retail business and	securities and bonds investment	which comprises financial	instruments and quoted shares	investment in Hong Kong
					Approximate	estimated	net proceeds	(HK$ million)	243.00	– 256.00											48.30 –	48.40
Market	capitalisation	as at the	date of the	respective	announcement	Underwriting for the	Commission open offer	(%) (HK$)	2.50 247,245,714	(Note 4)							3.50 1,318,836,290	0.00 52,693,382	2.14 338,172,876	2.50 212,895,000	Able 36,493,493	Rich:	1.50	Kingston	Securities:	2.50
					Maximum	Dilution	(Note 2)	(%)	66.67								88.89	28.57	53.75	54.55	80.00
		Discount of	subscription	price over/(to)	the theoretical	ex-entitlement	price	(%)	(24.53)	(Note 3)							(3.10)	(59.51)	(30.68)	(26.85)	(27.54)
				Theoretical	ex-entitlement	price	(Note 1)	(HK$)	0.106								–	–	–	–	0.138
	Closing price as	quoted on the Discount of	Stock Exchange subscription	on the last price over/(to)	trading day of the closing price	Subscription the open offer on the last	Basis price conducted trading day	(HK$) (HK$) (%)	1 for 1 0.080 0.158 (49.37)	(bonus issue of (Note 3) (Note 3)	1 bonus share for	every 1 offer	share and 1	bonus warrant	for every 2	offer shares)	– – – (3.85)	– – – (73.68)	– – – (50.57)	– – – (50.00)	4 for 1 0.100 0.290 (65.52)
						Name of	Company		Uni-Bio Science	Group Limited							Maximum	Minimum	Average	Median	Unlimited	Creativity	Holdings	Limited
						Stock	code		690												8079
						Announcement	date		2013.07.10												2013.11.22
																55

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Source: website of the Stock Exchange (www.hkex.com.hk)

Notes:

1. The theoretical ex-entitlement is calculated by adding the market value of all the issued shares (based on the closing price of the shares on the last trading day) with the gross amount of subscription proceeds expected to be received from the open offer (before expenses), and then divided by the total number of issued shares as enlarged by the open offer; e.g. in the case of every 1 offered share for every 2 existing shares, (2 x closing price on the last trading day) + 1 x (the subscription price)/ (2+1)

2. 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. (i) for an open offer with basis of 1 offered share for every 1 existing share held with bonus issue on the basis of 1 bonus share for every 1 offered share taken up, the maximum dilution effect is calculated as ((1+1/(1+1+1))*100) = 66.66%; and (ii) for an open offer with basis of 1 offered share for every 2 existing shares held, the maximum dilution effect is calculated as 1/(1+2) = 33.3%

3. For illustrative purposes, the subscription price is the effective subscription price after taking into account of the bonus issue. The discounts of subscription price to the closing price on the last trading day and to the theoretical ex-entitlement price are calculated based on the effective price

4. The underwriter(s) of the open offer of the respective Comparables was/were the shareholder(s)/connected person(s) of such Comparables

As shown in the above table, the Comparables had subscription prices at a discount to their respective closing price per share on the last trading day prior to the release of the relevant announcement within a range from a discount of approximately 3.85% to a discount of approximately 73.68%, with a median discount of approximately 50.00%. The Subscription Price represented a discount of approximately 65.52% to the closing price per Share as quoted on the Stock Exchange on the Last Trading Day, which falls within the range of the Comparables but was greater than the median discount of the Comparables. With regard to the discount to the theoretical ex-entitlement price per share of the Comparables, they ranged from a discount of approximately 3.10% to a discount of approximately 59.51%, with a median discount of approximately 26.85%. The Subscription Price represented a discount of approximately 27.54% to the theoretical ex-entitlement price per Share, which also falls within the range of the Comparables and in line with the median discount of the Comparables.

Despite the respective range of the Comparables are wide, having taken into account that (i) in general, it is common for the listed issuers in Hong Kong to issue open offer at a discount to the market price in order to enhance the attractiveness of an open offer transaction; (ii) the discounts represented by the Subscription Price do not exceed the ranges of the Comparables; (iii) the interest of the Qualifying Shareholders will not be prejudiced by the discount of the Subscription Price so long as they are offered with an equal opportunity to participate in the Open Offer, we consider the discounts of the Subscription Price to the Last Trading Day and theoretical ex-entitlement price which is within the respective range of the Comparables are fair and reasonable.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Subscription Price was arrived at after arm’s length negotiation between the Company and the Underwriters with reference to, among other things, the prevailing market price of the Shares, the financial positions of the Group, the absence of excess application arrangement to Shareholders and having considered the future development of the Group. Having considered that (i) the discount represented by the Subscription Price to the closing price of the Shares on the Last Trading Day and the discount represented by the Subscription Price to the theoretical ex-entitlement prices fall within the respective range of the Comparables; (ii) save for the impacts from the corporate actions as mentioned under the section headed “Historical closing prices” above, the closing price of the Shares was in general on a decreasing trend; (iii) trading volume of the Shares was thin with average daily trading volume of the Shares per month around or below 2.80% of the total number of issued Shares at the beginning of the month in most of the Review Period; (iv) it is common for the listed companies in Hong Kong to price an open offer at a discount to the market price in order to enhance the attractiveness of the open offer; and (v) all Qualifying Shareholders are offered an equal opportunity to subscribe for the Open Offer, we consider the Subscription Price is fair and reasonable so far as the Independent Shareholders are concerned.

3.2 Underwriting commission

The Offer Shares will be underwritten severally by (i) Able Rich in priority the first 386,203,800 Underwritten Shares, representing approximately 77.0% of the total number of Underwritten Shares; and (ii) Kingston Securities, the remaining of not less than 117,154,724 Offer Shares (assuming no Outstanding Option is exercised on or before the Record Date) and not more than 118,160,152 Offer Shares (assuming all Outstanding Options are exercised in full on or before the Record Date), if any, representing approximately 23.0% of the total number of Unwritten Shares. The allocation of the Underwritten Shares amongst the Underwriters was determined on arm’s length basis. Kingston Securities shall not subscribe, for its own account, for such number of Undertaken Shares which will result in the shareholding of it and parties acting in concert with it to exceed 19.9% of the voting rights of the Company upon the completion of the Open Offer.

Pursuant to the Underwriting Agreement, the Company will pay (i) Able Rich an underwriting commission of 1.5% of the aggregate Subscription Price in priority of the first 386,203,800 Underwritten Shares; and (ii) Kingston Securities an underwriting commission of 2.5% of the aggregate Subscription Price of the remaining of not less than 117,154,724 Offer Shares (assuming no Outstanding Option is exercised on or before the Record Date) and not more than 118,160,152 Offer Shares (assuming all Outstanding Options are exercised in full on or before the Record Date), if any. The Board considers that given Able Rich is indirect wholly owned by a company held by Mr. Shiu; and Mr. Shiu is an existing Shareholder, and an executive Director and the chairman of the Company, lower underwriting commission payable to Able Rich as compared with Kingston Securities is fair and reasonable. As mentioned in the Letter from the Board, the commission rates were determined after arms’ length negotiations between the Company and the Underwriters with reference to, among other things, the scale of the Open Offer and the market rate, and the Board considers that the underwriting commission rate is fair and reasonable so far as the Company and the Shareholders are concerned.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Based on our review of the underwriting arrangements of the Comparables set out in the table under section 3.1.3 above, we noted that the rates of underwriting commissions paid by listed companies under the Comparables ranged from nil to 3.5% with an average of 2.1%. In view of the respective rates of underwriting commissions for the Open Offer are within the range of that of the Comparables, we consider that the underwriting commissions of 1.5% and 2.5% in the present case are in line with market practice and are fair and reasonable so far as the Independent Shareholders are concerned.

3.3 No application for excess Offer Shares

As stated in the Letter from the Board, Qualifying Shareholders will not be entitled to subscribe for any Offer Shares in excess of their respective entitlements after arm’s length negotiation with the Underwriters. Given that each Qualifying Shareholder will be given equal and fair opportunity to participate in the Open Offer, the Board considers that it will put in additional effort and costs estimated to be (approximately HK$200,000 to HK$500,000) to administer the excess application procedures, which is not cost effective from the viewpoint of the Company. Notwithstanding excess application arrangement will not be made available to Qualifying Shareholders, the Board considers that with a deeper discount to the Offer Price offered to Qualifying Shareholders would encourage them to participate the Open Offer and to participate in the potential growth of the Company. Any Offer Shares not taken up by the Qualifying Shareholders will be taken up by the Underwriters pursuant to the terms of the Underwriting Agreement.

Although the absence of the excess application arrangement may not be desirable from the point of view of those Qualifying Shareholders who wish to take up additional Offer Shares in excess of their assured entitlements, in light of (i) the absence of excess application should be balanced against the fact the Subscription Price has been set at discount to the closing price on the Last Trading Day which provides reasonable incentive for the Qualifying Shareholders who are positive about the future development of the Company to take up their respective assured entitlement of the Offer Shares and participate in the Open Offer; (ii) the terms of the Open Offer are structured with an intention to encourage all the Qualifying Shareholders to take up their respective assured entitlement of the Offer Shares as the Subscription Price is set a relatively deep discount to the prevailing market price of the Shares as an incentive to all the Qualifying Shareholders to participate in the Open Offer and to participate in the potential growth of the Company. The Qualifying Shareholders have the first right to decide whether to accept the Open Offer; (iii) the absence of excess application would lower the administrative costs (including printing of application forms, time costs of the Company’s employees and charges from the registrar and etc.) of the Open Offer to the Company; and (iv) we also found that amongst the Comparables, 7 companies did not adopt excess application when they conducted open offer. The absence of the excess application arrangement is not uncommon.

In view of the above, we consider that the Open Offer has already enable to the Qualifying Shareholders to maintain their proportionate interests in the Company should they so wish by applying the Offer Shares according to their shareholding in the Company, which we consider to be fair and reasonable. Therefore, the absence of the excess application arrangement, on balance, is acceptable.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Risk associated with conditions of the Open Offer

Shareholders and potential investors should note that the Open Offer is subject to the satisfaction of certain conditions as described in the section headed “Conditions of the Underwriting Agreement” in the Letter from the Board. In particular, it is subject to the approval of the Open Offer, the Underwriting Agreement and the Whitewash Waiver by the Independent Shareholders at the SGM by way of poll, the Whitewash Waiver having been granted by the Executive, and the Underwriting Agreement having become unconditional and not having been terminated in accordance with the terms thereof as set out in the paragraph headed “Termination of the Underwriting Agreement” in the Letter from the Board. Accordingly, the Open Offer may or may not proceed.

Having reviewed the circulars of the Comparables, we consider that provisions under the paragraph headed “Termination of the Underwriting Agreement” in the Letter from the Board are in line with common market practice.

5. Possible financial effects of the Open Offer

5.1 Adjusted net tangible assets

Based on the information set out in the “Unaudited pro forma financial information of the Group” contained in Appendix II to the Circular, the unaudited pro forma adjusted consolidated net tangible assets of the Group (“ Pro Forma NTA ”) would amount to approximately HK$278.5 million (assuming no Outstanding Option is exercised on or before the Record Date) as a result of the completion of the Open Offer and receipt of an estimated net proceeds from the Open Offer of approximately HK$48.3 million.

Assuming completion of the Open Offer, the Pro Forma NTA per Share would be approximately HK$0.44 per Share (based on the enlarged issued share capital of 629,198,155 Shares upon completion of the Open Offer assuming no Outstanding Option is exercised on or before the Record Date), representing a decrease of approximately 76.0% from the unaudited consolidated net tangible asset per Share of approximately HK$1.83 as at 30 September 2013.

Shareholders should take note of the assumptions made in the preparation of the unaudited pro forma financial information of the Group contained in Appendix II to the Circular, in particular, the pro forma financial information does not take into account any trading result or other transactions of the Group subsequent to 30 September 2013.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

5.2 Cash position

According to the Interim Report 2013, the Group had cash and bank balances of approximately HK$10.9 million as at 30 September 2013. As advised by the Directors, the decrease of the cash and bank balances of the Group as at 30 September 2013 from approximately HK$55.0 million as at 31 March 2013 was mainly due to the increase in the amount of loans and advances to customers of approximately HK$43.0 million, from approximately HK$115.5 million as at 31 March 2013 to approximately HK$158.5 million as at 30 September 2013. Upon the completion of the Open Offer, the cash and bank balances of the Group will increase as a result of the net proceeds of approximately HK$48.3 million (assuming no Outstanding Option is exercised on or before the Record Date). The Open Offer will provide additional liquidity in the form of equity to the Group and therefore, will enhance its financial position. We consider that it is in the interests of the Company and the Shareholders as a whole.

5.3 Gearing ratio

According to the Interim Report 2013, the Group’s gearing ratio, expressed as a percentage of total borrowings (comprising borrowings and amounts due to non-controlling interests) over total assets, was approximately 1.7% as at 30 September 2013. The expected net proceeds from the Open Offer of approximately HK$48.3 million (assuming no Outstanding Option is exercised on or before the Record Date) will enhance the cash position and enlarged capital base and total equity of the Group upon completion of the Open Offer, and therefore the Group’s gearing ratio is expected to be improved as a result of the enlarged total equity of the Group.

It should be noted that the aforementioned analyses are for illustrative purpose only and not purport to represent how the financial position of the Group will be upon completion of the Open Offer.

6. Potential dilution effect of the Open Offer on the shareholding interests

All Qualifying Shareholders are entitled to subscribe for the Offer Shares. For those Qualifying Shareholders who take up their entitlements in full under the Open Offer, their proportional shareholding interests in the Company will remain unchanged after the Open Offer. Assuming that no Qualifying Shareholder take up his/her/its entitlements under the Open Offer and no Outstanding Option is exercised on or before the Record Date, the shareholdings of the existing Independent Shareholders will be decreased from approximately 84.70% as at the Latest Practicable Date to approximately 16.94% upon completion of the Open Offer. The possible dilution effect of the Open Offer on shareholding interests is set out in the section headed “Shareholding structure of the Company” in the Letter from the Board. As in all other open offers, the dilution on the shareholding of non-qualifying shareholders and those qualifying shareholders who do not take up in full their assured entitlement under the Open Offer is inevitable. The dilution magnitude of any open offers depends mainly on the extent of the basis of entitlement under such exercise, where the higher the offering ratio of offer shares to existing shares is, the greater the dilution on the existing shareholding would be.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

After taking into account that (i) the Open Offer would enhance the Group’s financial position, strengthen its capital base for expanding its money lending business and provide additional working capital to the Group (please also refer to the paragraph headed “2. Reasons for the Open Offer and use of proceeds” above for details); (ii) the Qualifying Shareholders are free to choose to participate in the Open Offer; (iii) 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 and allows the Qualifying Shareholders to participate in any future growth and development of the Company; (iv) the inherent dilutive nature of open offer in general. The dilution effect will not be prejudicial to the Independent Shareholders’ interests in the Company as long as they choose to subscribe for their full allotment entitlements of the Offer Shares; and (v) the discount of the Subscription Price to the closing price of the Shares on the Last Trading Day and the discount of the Subscription Price to the theoretical ex-entitlement price, both fall within the range of that of the Comparables, we consider that such potential dilution to the shareholding interests of the Shareholders, which may only happen to the Non-Qualifying Shareholders (if any) and Qualifying Shareholders who decide not to accept their assured entitlements in full, as a result of the Open Offer is acceptable.

7. Whitewash Waiver

As at the Latest Practicable Date, the Concert Group together are interested in 19,251,995 Shares, representing approximately 15.30% of the issued share capital of the Company. In the event that the Underwriters are called upon to subscribe or procure subscription for the Untaken Shares pursuant to their obligations under the Underwriting Agreement (net of those 51,000,000 Underwritten Shares that Kingston Securities has already sub-underwritten to certain sub-underwriters and subscribers, who are Independent Third Parties and not acting in concert with the Directors or chief executive of the Company or substantial Shareholders or their respective associates) (assuming none of the Qualifying Shareholders accept their respective provisional allotment of the Offer Shares and all Outstanding Options are exercised in full on or before the Record Date), the shareholding of the Concert Group in aggregate would increase from approximately 15.27% of the issued share capital of the Company to a maximum of approximately 74.96% of the issued share capital of the Company as enlarged by the Offer Shares immediately upon completion of the Open Offer.

Under Rule 26 of the Takeovers Code, the acquisition of voting rights by Able Rich under such circumstances will result in Able Rich being obliged to make a mandatory general offer for all the securities of the Company not already owned or agreed to be acquired by Able Rich and other members of the Concert Group, unless, amongst others, the Whitewash Waiver is obtained from the Executive and approved by the Independent Shareholders at the SGM by way of poll. Accordingly, the Concert Group and parties acting in concert with any of them, and those who are involved in or interested in the Open Offer, the Underwriting Agreement or the Whitewash Waiver shall abstain from voting on the resolution to approve the Whitewash Waiver at the SGM. An application was made by Able Rich to the Executive for the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code, to waive the obligations of Able Rich to make such a mandatory general offer. The Whitewash Waiver, if granted, will be subject to, among other things, the approval of the Independent Shareholders at the SGM by way of poll.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The Executive has agreed that the Whitewash Waiver will be granted and will be conditional upon, among other things, the approval of the Independent Shareholders by way of poll at the SGM. As set out in the Letter from the Board, if the Whitewash Waiver is not granted by the Executive or not approved by the Independent Shareholders, the Open Offer will not become unconditional and will not proceed.

As mentioned in the Letter from the Board, if Able Rich becomes the controlling Shareholder as a result of the performance of the underwriting obligations under the Underwriting Agreement, Able Rich intends to continue the existing businesses of the Group following the completion of the Open Offer. Able Rich has no intention to introduce any material change to the existing businesses of the Group, the continued employment of the Group’s employees and has no intention to re-deploy the fixed assets of the Group other than in its ordinary course of business.

Based on our analysis of the historical financial performance of the Group’s money lending business and other businesses, terms of the Open Offer, reasons for and the use of proceeds of the Open Offer as set out above, we consider that the Open Offer is in the interests of the Company and the Shareholders as a whole and the terms of which are fair and reasonable. Given that (i) the financial position and equity base of the Group will be strengthened as a result of the Open Offer; (ii) the net proceeds from the Open Offer will be applied primarily for expanding the money lending business which contributed the largest portion of the Group in the past and generated increasing amount of revenue over the years/period; and also for general working capital and/or for the development of the Group’s business. As mentioned in the Letter from the Board, Able Rich considered that the Open Offer is favourable to the Group as the Group will be able to obtain additional capital resources for further development and expansion of the Group’s property development and investment business when suitable opportunity arises; (iii) all Qualifying Shareholders will have equal opportunity to take up the Offer Shares in accordance with their provisional entitlements under the Open Offer and their respespective interests in the Company will not be diluted if they elect to take up their provisional allotments under the Open Offer in full; and (iv) the terms and conditions of the Underwriting Agreement including the Subscription Price have been agreed between the Company and the Underwriters after arm’s length negotiations and are on normal commercial terms with reference to similar transactions, we consider that, for the purposes of facilitating the Open Offer without triggering a mandatory general offer as required by Rule 26.1 of the Takeovers Code, the approval of the Open Offer, the Underwriting Agreement and the Whitewash Waiver by the Independent Shareholders is in the interests of the Company and the Shareholders as a whole.

We wish to highlight that if the Whitewash Waiver is granted, the Concert Group together may hold more than 50% of the then issued share capital of the Company upon completion of the Open Offer. In this case, going forward, Able Rich may be free to acquire further voting rights in the Company without incurring any further obligations under Rule 26 of the Takeovers Code to make a general offer.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

We have considered the relatively deep discount of the Subscription Price to the closing price on the Last Trading Day, the potential dilution on the shareholding of the Independent Shareholders, the relatively large increase in the shareholding of Able Rich assuming no qualifying shareholder would take up its entitlement; no excess application such that the Independent Shareholders cannot take up more Shares to safeguard against the dilution and/or increase their investment in the Company at lower cost. However, having taken into account the above principal factors and reasons, in particular:

(i) the relatively deep discount reflects the absence of the excess application arrangement to the Shareholders with an objective to lower further investment cost of the Shareholders to encourage the Shareholders to take up their entitlements and to participate in any potential growth of the Group as a result of the expansion of money lending business;
(ii) the liquidity in the trading of Shares was thin and the recent closing price of the Shares was in general on a decreasing trend under the Review Period. The setting of the Subscription Price at relatively deep discount to prevailing market price would be able to enhance attractiveness of the Open Offer to the Shareholders;
(iii) the money lending business contributed the largest portion of revenue the Group in the past and recorded increases in revenue over the years/period. Please refer to the paragraphs headed under “1. Background information of the Company” for details. Net proceeds from the Open Offer will be mainly applied on the expansion of the Group’s money lending business. The Open Offer would allow the Qualifying Shareholders to maintain their respective pro rata shareholdings in the Company and participate in the future growth and development (if any) of the Group, including its money lending business;
(iv) the Subscription Price was arrived at after arm’s length negotiations between the Company and the Underwriters and the discount represented by the Subscription Price to the closing price of the Shares on the Last Trading Day and the discount represented by the Subscription Price to the theoretical ex-entitlement prices fall within the respective range of the Comparables. The discount represented by the Subscription Price to the theoretical ex-entitlement prices is in line with the median discount of the Comparables;
(v) the absence of excess application may not be desirable from the point of view of those Qualifying Shareholders who wish to take up additional Offer Shares in excess of their assured entitlements; however, this should be balanced against the fact that the Subscription Price has been set at relatively deep discount to the closing price of the Shares on the Last Trading Day which provides reasonable incentive for the Qualifying Shareholders who are positive about the future development of the Company to take up their respective assured entitlement of the Offer Shares and participate in the Open Offer. It would also lower the administrative costs of the Open Offer to the Company. Please also refer to paragraph “3.3 No application for excess Offer Shares” above. The absence of excess application must be approved by the Independent Shareholders at the SGM;

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(vi) the potential dilution on the shareholding interests of those Qualifying Shareholders who do not take up their provisional allotments under the Open Offer in full is the inherent nature of open offer in general. The dilution effect will not be prejudicial to the Independent Shareholders’ interests in the Company as long as they choose to subscribe for their full allotment entitlements of the Offer Shares. After taking into account that the Open Offer would have positive impact on the liquidity position of the Group, strengthen the Group’s capital base for expanding its money lending business and provide additional working capital to the Group (please also refer to the paragraph headed “2. Reasons for the Open Offer and use of proceeds” above for details), the potential dilution on the shareholding of the Independent Shareholders will be acceptable; and
(vii) the underwriting arrangements for the Open Offer (including the underwriting by a connected person of the Company, namely Able Rich) are in line with the common market practice. We noted that certain Comparables required shareholders’ approval for the relevant open offer and had shareholder(s)/connected person(s) act as underwriter;

we consider that the terms of Open Offer (including the absence of excess application arrangement), the Underwriting Agreement and the Whitewash Waiver which is to facilitate the implementation of the Open Offer, are fair and reasonable and are in the interests of the Company and the Shareholders as a whole and, are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we recommend the Independent Board Committee to recommend that the Independent Shareholders to vote in favour of the resolutions relating to the Open Offer, the Underwriting Agreement and the Whitewash Waiver at the SGM.

Yours faithfully, For and on behalf of

VC Capital Limited

Philip Chau

Managing Director

Susanna Ho Director

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL INFORMATION

Set out below is a summary of the financial results and assets and liabilities of the Group for the three financial years ended 31 March 2013 and the six months ended 30 September 2013.

The financial results and assets and liabilities of the Group for the three financial years ended 31 March 2013 were extracted from the annual reports of the Company for the year ended 31 March 2012 and 2013 respectively. The financial results and assets and liabilities of the Group for the six months ended 30 September 2013 were extracted from the interim report of the Company for the six months ended 30 September 2013. The said annual reports and interim report of the Company are available on the website of the Stock Exchange (http://www.hkex.com.hk) and the website of the Company (http://www.ulcreativity.com).

The financial statements for the three financial years ended 31 March 2013 were auditedby HLB Hodgson Impey Cheng Limited, the independent auditors of the Company. No qualification was made by the auditors of the Company in the issued statutory accounts for the three financial years ended 31 March 2011, 2012 and 2013.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Results

For the three years ended 31 March 2011, 2012 and 2013 and the six months ended 30 September 2013:

	Unaudited
	For the six
	months
	ended 30		Audited
	September	For the	year ended 31 March
	2013	2013	2012	2011
	HK$’000	HK$’000	HK$’000	HK$’000
		(Note 1)	(Note 1)	(Note 2)
Revenue	16,044	23,028	19,029	69,917
Investment and other income	395	815	634	–
Other gains and losses, net	4,129	(51,196)	(11,757)	(15,702)
Profit/(loss) before income tax	(4,535)	(47,740)	(17,992)	(61,845)
Income tax credit/(expenses)	–	(308)	(140)	(5,470)
Profit/(Loss) for the period/year
from continuing operations	(4,535)	(48,048)	(18,132)	(67,315)
Profit/(Loss) for the period/year
from discontinued operations	–	12,598	8,978	–
Profit/(Loss) for the period/year	(4,535)	(35,450)	(9,154)	(67,315)
Profit/(Loss) attributable to:–
Owners of the Company	(4,440)	(35,091)	(8,998)	(68,299)
Non-controlling interests	(95)	(359)	(156)	984
Earnings/(Loss) per share from
continuing and discontinued
operations
– Basic and diluted	HK$(0.0399)	HK$(0.33)	HK$(0.10)	HK$(0.65)
Earnings/(Loss) per share from
continuing operations
– Basic and diluted	HK$(0.0399)	HK$(0.45)	HK$(0.20)	HK$(0.65)
Dividend	Nil	Nil	Nil	Nil
Dividend per share	Nil	Nil	Nil	Nil

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes:

The financial results for the year ended 31 March 2013 and 2012 are extracted from the annual report of the Company for the year ended 31 March 2013, in which the figures of 2012 have been restated. As the Group had disposed of its entire interest in beauty services and sales of beauty products during the year ended 31 March 2013, such restatement was done mainly to reflect the results of the continuing and discontinued operations of the Group for the year ended 31 March 2013 and the relevant comparison throughout the years of 2011, 2012 and 2013. Further details of such disposal are set out on page 64 of the annual report of the Company for the year ended 31 March 2013.
The financial results for the year ended 31 March 2011 are extracted from the annual report of the Company for the year ended 31 March 2012.

Assets and Liabilities

As at 1 April 2011, 31 March 2012 and 2013 and 30 September 2013:

Unaudited As at 30 September 2013 HK$’000 Total assets 240,435 Total liabilities (9,398) Non-controlling interests (886) Equity attributable to owners of the Company 230,151	As at 31 March 2013 HK$’000 (Note) 234,150 (10,340) (981) 222,829	Audited As at 31 March 2012 HK$’000 (Restated) (Note) 305,567 (32,177) (1,304) 272,086	As at 1 April 2011 HK$’000 (Restated) (Note) 204,812 (32,908) (1,214) 170,690

Note:

The assets and liabilities as at 31 March 2013, 31 March 2012 and 1 April 2011 are extracted from the annual reports of the Company for the year ended 31 March 2013, in which the figures of 2012 and 2011 have been restated. As the Group had disposed of its entire interest in beauty services and sales of beauty products during the year ended 31 March 2013, such restatement was done mainly to reflect the results of the continuing and discontinued operations of the Group for the year ended 31 March 2013 and the relevant comparison throughout the years of 2011, 2012 and 2013. Further details of such disposal are set out on page 64 of the annual report of the Company for the year ended 31 March 2013.

There were no dividends declared or paid for the three years ended 31 March 2011, 2012 and 2013 and for the six months ended 30 September 2013. There were no items that are exceptional because of size, nature or incidence during each of the three years ended 31 December 2011, 2012 and 2013 and the six months ended 30 September 2013.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED FINANCIAL STATEMENTS 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.

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2013

Notes Continuing operations Revenue 4 Cost of sales Gross profit Investment and other income 5 Other gains and losses, net 7 Servicing, selling and distribution costs Administrative expenses Gains on disposal of property, plant and equipment Net gains on disposals of subsidiaries 38 Cumulative gains reclassified from equity to profit or loss upon disposal of available-for-sales financial assets Operating loss Finance costs 9 Share of losses of associates 18 Loss before income tax 8 Income tax expenses 10 Loss for the year from continuing operations Discontinued operations 11 Profit for the year from discontinued operations Loss for the year Other comprehensive (loss)/income: Change in fair value – available-for-sale financial assets – land and buildings 15 Release of investment revaluation reserve upon disposal of available-for-sales financial assets Other comprehensive (loss)/income for the year, net of tax Total comprehensive loss for the year	2013 HK$’000 23,028 (1,005) 22,023 815 (51,196) (2,459) (23,524) 7,000 – 46 (47,295) (445) – (47,740) (308) (48,048) 12,598 (35,450) (14,202) – (46) (14,248) (49,698)	2012 HK$’000 (Restated) 19,029 – 19,029 634 (11,757) (410) (24,502) – 13 27 (16,966) (344) (682) (17,992) (140) (18,132) 8,978 (9,154) 103 7,212 (27) 7,288 (1,866)

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes Loss attributable to: Owners of the Company Non-controlling interests Total comprehensive loss attributable to: Owners of the Company Non-controlling interests Loss per share 13 From continuing and discontinued operations – Basic and diluted From continuing operations – Basic and diluted	2013 HK$’000 (35,091) (359) (35,450) (49,339) (359) (49,698) HK$(0.33) HK$(0.45)	2012 HK$’000 (Restated) (8,998) (156) (9,154) (1,710) (156) (1,866) HK$(0.10) HK$(0.20)

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Financial Position

At 31 March 2013

Notes ASSETS Non-current assets Property, plant and equipment 15 Investment properties 16 Interests in associates 18 Held-to-maturity investments 19 Available-for-sale financial assets 20 Prepayments, deposits and other receivables 22 Loans and advances 23 Current assets Held-to-maturity investments 19 Available-for-sale financial assets 20 Trade receivables 21 Prepayments, deposits and other receivables 22 Loans and advances 23 Inventories 24 Financial assets at fair value through profit or loss 25 Amount due from a related company 26 Cash and bank balances 27 Tax recoverable Assets classified as held for sale 28 LIABILITIES Current liabilities Accruals, receipts in advance and other payables 29 Amounts due to non-controlling interests 30 Borrowings 32 Obligations under finance leases 34 Provision for tax Net current assets Total assets less current liabilities	31 March 2013 HK$’000 2,949 22,100 – – 24,006 32 38,648 87,735 – – 62 8,883 72,176 263 5,604 262 54,980 85 142,315 4,100 146,415 2,574 150 6,395 195 112 9,426 136,989 224,724	31 March 2012 HK$’000 (Restated) 72,399 14,200 – – 6,024 213 32,997 125,833 778 5,395 1,046 6,100 64,265 – 66,132 611 35,322 85 179,734 – 179,734 7,622 447 21,699 – 2,024 31,792 147,942 273,775	1 April 2011 HK$’000 (Restated) 67,231 5,000 10,282 817 – 2,841 11,482
			97,653
			1,855 6,240 787 4,339 25,424 – 25,104 1,606 35,504 85
			100,944 6,215
			107,159
			5,949 297 24,363 – 2,054
			32,663
			74,496
			172,149

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes Non-current liabilities Deferred tax liabilities 33 Obligations under finance leases 34 Net assets EQUITY Equity attributable to owners of the Company Share capital 35 Reserves Non-controlling interests Total equity	31 March 2013 HK$’000 199 715 914 223,810 20,975 201,854 222,829 981 223,810	31 March 2012 HK$’000 (Restated) 385 – 385 273,390 6,991 265,095 272,086 1,304 273,390	1 April 2011 HK$’000 (Restated) 245 –
			245
			171,904

			5,264 165,426
			170,690 1,214
			171,904

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Statement of Financial Position

At 31 March 2013

Notes ASSETS Non-current assets Investments in subsidiaries 17 Available-for-sale financial assets 20 Current assets Amounts due from subsidiaries 17 Amount due from a related company 26 Prepayments, deposits and other receivables 22 Financial assets at fair value through profit or loss 25 Cash and bank balances 27 LIABILITIES Current liabilities Accruals, receipts in advance and other payables 29 Amounts due to subsidiaries 17 Amount due to a related company 31 Provision for tax Net current assets Net assets EQUITY Equity attributable to owners of the Company Share capital 35 Reserves 37 Total equity	2013 HK$’000 1,097 4,199 5,296 218,191 262 210 5,214 34,593 258,470 515 41,345 12 57 41,929 216,541 221,837 20,975 200,862 221,837	2012 HK$’000 1,097 –
		1,097
		228,998 611 1,810 56,715 437
		288,571
		311 30,098 12 117
		30,538
		258,033
		259,130

		6,991 252,139
		259,130

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity

For the year ended 31 March 2013

		Equity attributable to owners of the parent	Equity attributable to owners of the parent	Equity attributable to owners of the parent	Equity attributable to owners of the parent			Total equity HK$’000 165,718 6,186
Share capital HK$’000 5,264 – 5,264 – – – – – 1,050 – 6,356 – 42 (5,721) – 1,727 6,991 6,991 – 6,991 – – – – – 13,984 – – – – 13,984 20,975	Share premium* HK$’000 116,612 – 116,612 – – – – – 9,975 (279) 88,989 (3,345) 1,016 – – 96,356 212,968 212,968 – 212,968 – – – – – (13,984) (184) – – – (14,168) 198,800	Capital redemption Accumulated reserve losses** HK$’000 HK$’000 278 (169,534) – 6,186 278 (163,348) – (8,998) – – – – – – – (8,998) – – – – – – – – – – – – – – – – 278 (172,346) 278 (180,474) – 8,128 278 (172,346) – (35,091) – – – – – 14,040 – (21,051) – – – – – – – – – – – – 278 (193,397)	Capital reserve* HK$’000 28,526 – 28,526 – – – – – – – – – – – (246) (246) 28,280 28,280 – 28,280 – – – – – – – – 461 (195) 266 28,546	Investment revaluation reserve* HK$’000 (224) – (224) – 103 – (27) 76 – – – – – – – – (148) (148) – (148) – (14,202) (46) – (14,248) – – – – – – (14,396)	Revaluation reserve* HK$’000 6,828 – 6,828 – – 7,212 – 7,212 – – – – – – – – 14,040 14,040 – 14,040 – – – (14,040) (14,040) – – – – – – –	Share option reserve* HK$’000 1,184 – 1,184 – – – – – – – – – (452) – – (452) 732 732 – 732 – – – – – – – – – – – 732	Contributed surplus* HK$’000 175,570 – 175,570 – – – – – – – – – – 5,721 – 5,721 181,291 181,291 – 181,291 – – – – – – – – – – – 181,291
								171,904
								(9,154) 103 7,212 (27)
								(1,866)
								11,025 (279) 95,345 (3,345) 606 – –
								103,352
								273,390

								265,262 8,128
								273,390
								(35,450) (14,202) (46) –
								(49,698)
								– (184) (148) 450 –
								118
								223,810

These reserve accounts comprise the consolidated reserves of HK$201,854,000 (2012: HK$265,095,000 (Restated)) in the consolidated statement of financial position.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Share premium

The application of share premium account is governed by Section 40 of the Companies Act 1981 of Bermuda.

Capital redemption reserve

Capital redemption reserve arose on the cancellation of repurchased shares and accordingly reduction of nominal value of share capital of the Company.

Capital reserve

Capital reserve represented (i) the difference between the nominal value of the shares of subsidiaries acquired and the nominal value of share issued by the Company as consideration thereof pursuant to the reorganisation and (ii) the difference between the consideration paid/ received to obtain/release non-controlling interests in certain subsidiaries and their respective carrying amount on the date of acquisition or disposal.

Investment revaluation reserve

The investment revaluation reserve represents accumulated gains and losses arising on the revaluation of available-for-sale investments that have been recognised in other comprehensive income, net of amounts reclassified to profit or loss when those investments have been disposed of or determined to be impaired.

Revaluation reserve

Revaluation reserve represents accumulated gains and losses arising on the revaluation of land and buildings that have been recognised in other comprehensive income.

Share option reserve

Share option reserve represents the fair value of services estimated to be received in exchange for the grant of the relevant share options over the relevant vesting periods, the total of which is based on the fair value of the share options at grant date. The amount for each reporting period is determined by spreading the fair value of the options over the relevant vesting period (if any) and is recognised as staff costs and related expenses with a corresponding increase in the share-based payment reserve.

Contributed surplus

Contributed surplus represented the reduction of issued share capital by an amount of approximately HK$135,319,000, HK$8,181,000, HK$32,070,000 and HK$5,721,000 pursuant to a special resolution passed at the special general meeting of the Company on 2 April 2008, 14 January 2009, 8 September 2010 and 24 August 2011 respectively.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Cash Flows

For the year ended 31 March 2013

		2013	2012
	Notes	HK$’000	HK$’000
Cash flows from operating activities
Loss before income tax from continuing operations		(47,740)	(17,992)
Profit before income tax from discontinued
operations		3,126	8,978
Adjustments for:
– Cumulative gains reclassified from equity to
profit or loss upon disposal of
available-for-sales financial assets		(46)	(27)
– Depreciation		1,728	2,991
– Dividend income from available-for-sale
financial assets		–	(55)
– Dividend income from financial assets at
fair value through profit or loss		(63)	(258)
– Fair value losses/(gains) on financial assets at
fair value through profit or loss		56,393	(10,611)
– Fair value gains on investment properties		(7,515)	(973)
– Interest expenses		445	344
– Interest income from available-for-sale
financial assets		(590)	(128)
– Interest income from held-to-maturity
investments		(20)	(40)
– Interest income from banks		(3)	(127)
– Written off of property, plant and equipment		3,666	90
– Gains on disposal of property, plant and
equipment		(7,000)	–
– Net gains on disposals of subsidiaries	38	–	(13)
– Written off of loans and advances		1,375	–
– Provision for impairment of amounts due
from associates		–	9,600
– Provision for impairment of loans and advances		791	13,881
– Reversal of provision for impairment of loans
and advances		(1,767)	–
– Reversal of provision for impairment of
a loan to an associate		(1,000)	–
– Share of losses of associates		–	682

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes Changes in working capital (excluding the effects of acquisition and exchange differences on consolidation): Increase in inventories Increase in trade receivables (Increase)/decrease in prepayments, deposits and other receivables Dividend received from financial assets at fair value through profit or loss Increase in loans and advances Decrease in amount due from a related company Increase in accruals, receipts in advance and other payables Purchase of financial assets at fair value through profit or loss Proceeds from disposal of financial asset at fair value through profit or loss Cash used in operations Interest received from banks Refund of income tax Income tax paid Net cash used in operating activities Cash flows from investing activities Dividend received from available-for-sale financial assets Interest received from available-for-sale financial assets Interest received from held-to-maturity investments Net cash inflow of held-to-maturity financial assets Repayment from an associate Purchase of investment properties Purchase of property, plant and equipment Purchase of available-for-sale financial assets Proceeds from disposal of available-for-sale financial assets Proceeds from disposal of investment properties Net cash outflow of disposal of subsidiaries Proceeds from disposal of property, plant and equipment Net cash generated from/(used in) investing activities	2013 HK$’000 1,780 (263) (878) (1,419) 63 (13,961) 349 2,853 (61,537) 45,630 (27,383) 3 – (554) (27,934) – 519 20 760 1,000 (4,485) (1,973) (13,770) 7,114 – (136) 74,000 63,049	2012 HK$’000 6,342 – (259) 866 258 (74,237) 994 1,686 (79,243) 48,826 (94,767) 127 1 (31) (94,670) 55 128 40 1,896 – (13,465) (1,037) (6,101) 1,025 5,238 – 6,215 (6,006)

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes Cash flows from financing activities Interest paid Proceeds from allotment of shares Payment for transaction cost attributable to allotment of shares Proceeds on disposal of partial interest in a subsidiary Proceeds from exercise of share options Proceeds from exercise of rights issue Payment for transaction cost attributable to exercise of shares Payment for transaction cost attributable to bonus issue Advance from amounts due to non-controlling interests Repayments of obligations under finance leases Repayments of loans Drawdown of loans Net cash (used in)/generated from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 27 Analysis of balances of cash and cash equivalents Cash and bank balances	2013 HK$’000 (406) – – 450 – – – (136) – (61) (18,304) 3,000 (15,457) 19,658 35,322 54,980 54,980	2012 HK$’000 (344) 11,025 (279) – 606 95,345 (3,345) – 150 – (6,664) 4,000 100,494 (182) 35,504 35,322 35,322

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Consolidated Financial Statements

For the year ended 31 March 2013

1. GENERAL INFORMATION

Unlimited Creativity Holdings Limited (the “Company”) was an exempted company continued into Bermuda with limited liability. The address of its registered office is situated at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda.

The principal places of business of the Company and its subsidiaries (the “Group”) are in Hong Kong. The Company’s shares are listed on the Growth Enterprise Market (the “GEM”) of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The Group is principally engaged in the money lending business, groceries store business, property investment, and financial instruments and quoted shares investment in Hong Kong.

Pursuant to a special resolution passed by the Company’s shareholders on 8 November 2010, the name of the Company has been changed from “B.A.L. Holdings Limited” to “Unlimited Creativity Holdings Limited” and has registered “無限創意控股有限公司” as its secondary name.

These consolidated financial statements are presented in thousands of units of Hong Kong dollars (HK$’000), unless otherwise stated. These consolidated financial statements were approved and authorised for issue by the Board of Directors on 27 June 2013.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the GEM of the Stock Exchange (the “GEM Listing Rules”) and the disclosure requirements of the Hong Kong Companies Ordinance.

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

2.1.1 Changes in accounting policy and disclosures
(a) Application of new and revised HKFRSs

In the current year, the Group has applied, for the first time, the following amendments issued by the HKICPA, which are effective for the current accounting year of the Group. The amendments adopted by the Group in the consolidated financial statements are set out as below:

HKFRS 1 (Amendments) Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters HKFRS 7 (Amendments) Disclosures – Transfers of Financial Assets HKAS 12 (Amendments) Deferred Tax: Recovery of Underlying Assets

Other than the impact of amendments to HKAS 12 as further explained below, the adoption of the above revised HKFRSs has had no significant financial effect to the consolidated financial statements.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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.

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 none of the Group’s investment properties are held under a business model whose objective is to consume substantially all of the economic benefits embodied in the investment properties over time, rather than through sale. Therefore, the Directors of the Company have determined that the ‘sale’ presumption set out in the amendments to HKAS 12 is not rebutted.

Effects of the changes in the accounting policies on the consolidated statement of comprehensive income:

Income tax expenses
Loss for the year
Loss for the year attributable to:
Owners of the Company
Non-controlling interests
Loss per share
Basic and diluted

Year ended 31 March 2012
Effect on
As
adoption of
previously
HKAS 12
As
reported
amendments
restated
HK$’000
HK$’000
HK$’000
(2,082)
1,942
(140)
(11,096)
1,942
(9,154)
Year ended 31 March 2012
Effect on
As
adoption of
previously
HKAS 12
As
reported
amendments
restated
HK$’000
HK$’000
HK$’000
(10,940)
1,942
(8,998)
(156)
–
(156)
(11,096)
1,942
(9,154)
HK$(0.02)
HK$–
HK$(0.02)

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Effect of the changes in the accounting policies on the consolidated statement of financial position:

Deferred tax liabilities Reserves Deferred tax liabilities Reserves	At 31 March 2012 Effect on As adoption of previously HKAS 12 reported amendments HK$’000 HK$’000 8,513 (8,128) 256,967 8,128 At 1 April 2011 Effect on As adoption of previously HKAS 12 reported amendments HK$’000 HK$’000 6,431 (6,186) 159,240 6,186	As restated HK$’000 385 265,095

		As restated HK$’000 245 165,426

(b) New and revised HKFRSs in issue but not yet effective

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

Annual Improvements to HKFRSs 2009 – 2011 Cycle[2] Government Loans[2]

HKFRSs (Amendments) HKFRS 1 (Amendments) HKFRS 7 (Amendments)

HKFRS 7 (Amendments) Disclosures – Offsetting Financial Assets and Financial Liabilities[2] HKFRS 7 and HKFRS 9 Mandatory Effective Date of HKFRS 9 (Amendments) and Transition Disclosures[4] HKFRS 9 Financial Instruments[4] HKFRS 10 Consolidated Financial Statements[2] HKFRS 11 Joint Arrangements[2] HKFRS 12 Disclosure of Interests in Other Entities[2] HKFRS 13 Fair Value Measurement[2] HKFRS 10, HKFRS 11 and Consolidated Financial Statements, Joint Arrangements HKFRS 12 (Amendments) and Disclosure of Interests in Other Entities: Transition Guidance[2] HKFRS 10, HKFRS 12 and Investment Entities[3]

HKFRS 10, HKFRS 12 and HKAS 27 (Amendments) HKAS 1 (Amendments) HKAS 19 (as revised in 2011) HKAS 27 (as revised in 2011) HKAS 28 (as revised in 2011) HKAS 32 (Amendments) HKAS 36 (Amendments)

Presentation of Items of Other Comprehensive Income[1] Employee Benefits[2] Separate Financial Statements[2] Investments in Associates and Joint Ventures[2] Offsetting Financial Assets and Financial Liabilities[3] Recoverable Amount Disclosures for Non-Financial Assets[3] Stripping Costs in the Production Phase of a Surface Mine[2] Levies[3]

HK(IFRIC) – Int 20

HK(IFRIC) – Int 21

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1 Effective for annual periods beginning on or after 1 July 2012.

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

3 Effective for annual periods beginning on or after 1 January 2014.

4 Effective for annual periods beginning on or after 1 January 2015.

HKFRS 9 “Financial Instruments”

HKFRS 9 issued in 2009 introduced new requirements for the classification and measurement of financial assets. HKFRS 9 was amended in 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition.

Key requirements of HKFRS 9 are described below:

• All recognised financial assets that are within the scope of HKAS 39 “Financial Instruments: Recognition and Measurement” to be 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 flow, 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 reporting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods. In addition, under HKFRS 9, the Group 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 financials’ credit risk are not subsequently reclassified to profit or loss. Previously, 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 application of HKFRS 9 might affect the classification and measurement of the Group’s financial assets. The Directors of the Company are still in the process of assessing the impact of the adoption of HKFRS 9.

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).

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APPENDIX I

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 involvement 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 – Nonmonetary 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 all of these standards are applied at the same time.

The Directors of the Company anticipate that the application of these five standards may have a significant impact on amounts reported in the consolidated financial statements. The application of HKFRS 10 may result in the Group no longer consolidating some of its investees, and consolidating investees that were not previously consolidated (e.g. the Group’s investment in associates may become the Group’s subsidiaries based on the new definition of control and the related guidance in HKFRS 10). In addition, the application of HKFRS 11 may result in changes in the accounting of the Group’s jointly controlled entities that are currently accounted for using proportionate consolidation. Under HKFRS 11, those jointly controlled entities will be classified as a joint operation or joint venture, depending on the rights and obligations of the parties to the joint arrangement.

The Directors of the Company are currently assessing the impact of these new HKFRSs but it is expected that the overall impact of HKFRS 10 on the consolidated financial statements is immaterial.

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APPENDIX I

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 of the Company anticipate that the application of HKFRS 13 may affect certain amounts reported in the consolidated financial statements and result in more extensive disclosures in the consolidated financial statements.

HKAS 1 (Amendments) “Presentation of Items of Other Comprehensive Income”

The amendments to HKAS 1 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 in the other comprehensive income section: (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 the future accounting periods.

Amendments to HKFRS 7 and HKAS 32 “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.

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APPENDIX I

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 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 of the Company 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.

HKAS 19 (as revised in 2011) Employee Benefits

The amendments to HKAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of HKAS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus. Furthermore, the interest cost and expected return on plan assets used in the previous version of HKAS 19 are replaced with a ‘net-interest’ amount, which is calculated by applying the discount rate to the net defined benefit liability or asset.

The amendments to HKAS 19 are effective for annual periods beginning on or after 1 April 2013 for the Group and require retrospective application. The Directors of the Company anticipate that the application of the amendments to HKAS 19 may have an impact on the amounts reported in respect of the Groups’ defined benefit plans. The Directors of the Company are currently assessing the financial impact on the implication of the amendments to HKAS 19.

Annual Improvements to HKFRSs 2009 – 2011 Cycle issued in June 2012

The Annual Improvements to HKFRSs 2009 – 2011 Cycle include a number of amendments to various HKFRSs. The amendments are effective for annual periods beginning on or after 1 January 2013. Amendments to HKFRSs include:

amendments to HKAS 16 Property, Plant and Equipment; and
amendments to HKAS 32 Financial Instruments: Presentation.

Amendments to HKAS 16

The amendments to HKAS 16 clarify that spare parts, stand-by equipment and servicing equipment should be classified as property, plant and equipment when they meet the definition of property, plant and equipment in HKAS 16 and as inventory otherwise. The Directors of the Company do not anticipate that the amendments to HKAS 16 will have a significant effect on the Group’s consolidated financial statements.

Amendments to HKAS 32

The amendments to HKAS 32 clarify that income tax on distributions to holders of an equity instrument and transaction costs of an equity transaction should be accounted for in accordance with HKAS 12 Income Taxes. The Directors of the Company anticipate that the amendments to HKAS 32 will have no effect on the Group’s consolidated financial statements as the Group has already adopted this treatment.

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APPENDIX I

HK (IFRIC) – Int 20 Stripping Costs in the Production Phase of a Surface Mine

Mine applies to waste removal costs that are incurred in surface mining activity during the production phase of the mine (production stripping costs). Under the Interpretation, the costs from this waste removal activity (stripping) which provide improved access to ore is recognised as a non-current asset (stripping activity asset) when certain criteria are met, whereas the costs of normal on-going operational stripping activities are accounted for in accordance with HKAS 2 Inventories. The stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset and classified as tangible or intangible according to the nature of the existing asset of which it forms part.

HK (IFRIC) – Int 20 is effective for annual periods beginning on or after 1 January 2013. Specific transitional provisions are provided to entities that apply HK (IFRIC) – Int 20 for the first time. However, HK (IFRIC) – Int 20 must be applied to production stripping costs incurred on or after the beginning of the earliest period presented. The Directors of the Company anticipate that HK (IFRIC) – Int 20 will have no effect to the Group’s financial statements as the Group does not engage in such activities.

2.2 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose 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.

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

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.

2.2.1 Changes in the Group’s ownership interests in existing subsidiaries

Changes in the Group’s ownership interests in existing subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, it (i) derecognises the assets (including any goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost, (ii) derecognises the carrying amount of any non-controlling interest in the former subsidiary at the date when control is lost (including any components of other comprehensive income attributable to them), and (iii) recognises the aggregate of the fair value of the consideration received and the fair value of any retained interest, with any resulting difference being recognised as a gain or loss in profit or loss attributable to the Group. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Group had directly

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APPENDIX I

disposed of the related assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable HKFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under HKAS 39 “Financial Instruments: Recognition and Measurement” or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

2.2.2 Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 “Income Taxes” and HKAS 19 “Employee Benefits” respectively;
liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with HKFRS 2 “Share-based Payment” at the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” are measured in accordance with that standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisitiondate amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transactionby-transaction basis. Other types of non-controlling interests are measured at their fair value or, when applicable, on the basis specified in another HKFRS.

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APPENDIX I

2.2.3 Investment 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.

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 or 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 loses significant influence over that associate.

When 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.

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APPENDIX I

2.3 Foreign currencies

2.3.1 Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “Functional Currency”). The consolidated financial statements are presented in Hong Kong dollars (HK$), which is the Company’s functional and the Group’s presentation currency.

2.3.2 Transactions and balances

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at 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. Nonmonetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:

exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;
exchange differences on transactions entered into in order to hedge certain foreign currency risks; and
exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.

2.3.3 Group companies

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into presentation currency of the Group (i.e. HK$) using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates 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 the exchange reserve.

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, a disposal involving loss of joint control over a jointly controlled entity 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 relation to a partial disposal of a subsidiary that does not result in the Group losing control over a subsidiary, the proportionate share of accumulated exchange differences is re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. partial disposals of associates or jointly controlled entities that do not result in the Group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

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APPENDIX I

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

2.4 Property, plant and equipment

Properties, plant and equipment 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 assets less their residual values over their useful lives, using straight-line method, at the following rates per annum:

–	Land	Over period of the lease
–	Buildings	50 years
–	Leasehold improvements	20% or over the lease terms, if shorter
–	Equipment	20% to 30%
–	Furniture and fixtures	20%
–	Motor vehicles	20%
–	Equipment under finance leases	20%

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.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

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 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.

2.5 Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at fair value. Gains and losses arising from changes in the fair value of investment properties are included in profit or loss in the period in which they arise.

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

2.6 Impairment of tangible and intangible assets other than goodwill

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.

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APPENDIX I

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

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

2.7 Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a weighted-average basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

2.8 Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

2.8.1 Financial assets

Financial assets are classified into the following specified categories: held-to-maturity investments, financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets. 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.

Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at fair value through profit or loss.

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APPENDIX I

Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or it is designated as at fair value through profit or loss.

A financial asset is classified as held for trading if:

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

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

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

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. Any dividend or interest earned on the financial asset is included in the “Investment and other income” line item.

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Group has the positive intention and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method less any impairment.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Equity and debt securities held by the Group that are classified as available-for-sale financial assets and are traded in an active market are measured at fair value at the end of each reporting period. Changes in the carrying amount of available-for-sale monetary financial assets relating to interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognised in profit or loss.

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APPENDIX I

Other changes in the carrying amount of available-for-sale financial assets are recognised in other comprehensive income and accumulated under the heading of investment revaluation reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investment revaluation reserve is reclassified to profit or loss (see the accounting policy in respect of impairment loss on finance assets below).

Dividends on available-for-sale equity investments are recognised in profit or loss when the Group’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment losses at the end of each reporting period (see the accounting policy in respect of impairment loss on finance assets below).

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including loans and advances, trade receivables, deposits and other receivables, amount due from a related company and cash and bank balances) are measured at amortised cost using the effective interest method, less any impairment.

Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial.

2.8.2 Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each 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 investment have been affected.

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

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

significant financial difficulty of the issuer or counterparty; or
breach of contract, such as a default or delinquency in interest or principal payments; or
the Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
the disappearance of active market for that financial asset because of financial difficulties; or

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observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:
(i) adverse changes in the payment status of borrowers in the portfolio;
(ii) national or local economic conditions that correlate with defaults on the assets in the portfolio.

For certain categories of financial assets, such as trade 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, as well as 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 receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period.

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

In respect of available-for-sale equity investments, impairment losses previously recognised in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and accumulated under the heading of investment revaluation reserve. In respect of available-for-sale debt investments, impairment losses are subsequently reversed in profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2.8.3 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 an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

Other financial liabilities

Other financial liabilities (including accruals and other payables, amounts due to non-controlling interests and borrowings) are subsequently measured at amortised cost using the effective interest method.

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 than financial liabilities classified as at fair value through profit or loss.

2.8.4 Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.

Financial guarantee contracts issued by the Group are initially measured at their fair values and, if not designated as at fair value through profit or loss, are subsequently measured at the higher of:

the amount of the obligation under the contract, as determined in accordance with HKAS 37 “Provisions, Contingent Liabilities and Contingent Assets”; and
the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with the revenue recognition policies.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2.8.5 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 financial 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.

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 they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid or payable is recognised in profit or loss.

2.9 Non-current assets held for sale

Non-current assets and disposal group are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.

Non-current assets (or disposal group) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell except for investment properties which are measured at fair value under HKAS 40 “Investment Property”.

2.10 Borrowings

Borrowing costs directly attributable to the acquisition or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

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

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2.11 Taxation

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

2.11.1 Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the consolidated statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and 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.

2.11.2 Deferred tax

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

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.

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

For the purposes of measuring deferred tax liabilities or deferred tax assets for investment properties that are measured using the fair value model, the carrying amounts of such properties are presumed to be recovered entirely through sale, unless the presumption is rebutted. The presumption is rebutted when the investment property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale.

2.11.3 Current and deferred tax for the year

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. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2.12 Retirement benefit costs and short term employee benefit

2.12.1 Retirement benefits costs

Retirement benefits to employees are provided through a defined contribution plan.

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for those employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees’ basic salaries. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme, except for the Group’s employer voluntary contributions, which are refunded to the Group when the employee leaves employment prior to the contributions vesting fully, in accordance with the rules of the MPF Scheme.

The employees of the Group’s subsidiary which operates in the Macau are required to participate in a central pension scheme operated by the local municipal government. This subsidiary is required to contribute a certain percentage of its payroll costs to the central pension scheme.

Payments to defined contribution retirement benefit plans are recognised as an expense when employees have render service entitling them to the contributions.

2.12.2 Short-term employee benefits

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period.

Non-accumulating compensated absences such as sick leave and maternity leave are not recognised until the time of leave.

2.13 Share-based employee compensation

All share-based payment arrangements granted after 7 November 2002 and had not vested on 1 November 2005 are recognised in the consolidated financial statements. The Group operates equity-settled share-based compensation plans for remuneration of its employees.

For grants of share options that are conditional upon satisfying specified vesting conditions, the fair value of services received is determined by reference to the fair value of share options granted at the date of grant and is expensed on a straight-line basis over the vesting period, with a corresponding increase in equity (share options 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, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to share options reserve.

For share options that vest immediately at the date of grant, the fair value of the share options granted is expensed immediately to profit or loss.

When share options are exercised, the amount previously recognised in share options reserve will be transferred to share premium. When share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised in share options reserve will be transferred to retained earnings.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2.14 Provisions

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

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

2.15 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the Group’s activities as described below.

(a) Sales of goods are recognised upon transfer of the significant risks and rewards of ownership to the customer. This is usually taken as the time when the goods are delivered and the customer has accepted the goods;
(b) Provision of beauty and clinical services are recognised in the accounting period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided;
(c) Revenue arising from the sales of properties held for resale is recognised upon signing of the sale and purchase agreement or the issue of an occupation permit by the relevant government authorities, whichever is the later. Deposits received on properties sold prior to the date of revenue recognition are included in the statement of financial position under deposits received;
(d) Revenue arising from money lending is recognised on a time proportion basis taking into account the principal outstanding and the effective interest rate applicable;
(e) Rental income is recognised on a straight-line basis over the term of the lease;
(f) Management/franchisee fee income is recognised when services are rendered;
(g) Interest income is recognised on a time-proportion basis using the effective interest method; and
(h) Dividend is recognised when the right to receive payment is established.

2.16 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.

2.16.1 The Group as lessor

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

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2.16.2 The Group as lessee

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

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing costs.

Operating leases payments are recognised as an expense on a straight-line basis over the lease term. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis.

2.17 Dividend distribution

Dividend distribution to the shareholders of the Company is recognised as a liability in the Group’s and Company’s financial statements in the period in which the dividends are approved by the shareholders of the Company.

2.18 Related parties

(i) A person, or a close member of that person’s family, is related to the Group if that person:
(1) has control or joint control over the Group; or
(2) has significant influence over the Group; or
(3) is a member of the key management personnel of the Group or the Group’s parent.
(ii) An entity is related to the Group if any of the following conditions applies:
(1) the entity and the Group are members of the same group (which means that each parent, subsidiary and follow subsidiary is related to the others); or
(2) one entity is an associate or a joint venture of the other entity (or an associate or a joint venture of a member of a group of which the other entity is a member); or
(3) both entities are joint ventures of the same third party; or
(4) one entity is a joint venture of a third entity and the other entity is an associate of the third entity; or
(5) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group; or
(6) the entity is controlled or jointly controlled by a person identified in (i); or
(7) a person identified in (i)(1) 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 family members of an individual are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

In the application of the Group’s accounting policies, which are described in note 2, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

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

3.1 Critical accounting estimates and assumptions

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.

(a) Income tax expense

The Group is subject to income taxes in certain jurisdictions other than Hong Kong. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. 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.

(b) Estimated fair value of investment properties and land and buildings

The investment properties and land and buildings of the Group were stated at fair value. The fair value of the investment properties are determined by RHL Appraisal Limited (“RHL”), an independent qualified professional valuer. The valuations were based on certain assumptions, which are subject to uncertainty and might materially differ from the actual results.

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 data and actual transactions entered into by the Group.

(c) Deferred tax assets

Deferred tax assets are recognised for all temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available in the future against which the temporary differences, the carry forward of unused tax credits and unused tax losses could be utilised. Deferred tax is determined using tax rates and laws that have been enacted or substantially enacted at the end of the reporting period and which are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Where the actual or expected tax positions in future are different from the original estimate, such difference will impact the recognition of deferred tax assets and income tax expense in the period in which such estimate has been changed.

100

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(d) Useful lives of property, plant and equipment

The Group has significant property, plant and equipment. The Group is required to estimate the useful lives of property, plant and equipment in order to ascertain the amount of depreciation charges for each reporting period.

The useful lives are estimated at the time of purchase of these assets after considering future technology changes, business developments and the Group’s strategies. The Group performs annual reviews to assess the appropriateness of the estimated useful lives. Such review takes into account any unexpected adverse changes in circumstances or events, including declines in projected operating results, negative industry or economic trends and rapid advancement in technology. The Group extends or shortens the useful lives and/or makes impairment provisions according to the results of the review.

3.2 Critical judgements in applying the entity’s accounting policies

The following are the critical judgements, apart from those involving estimates, that management has made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements.

(a) Impairment of other non-financial assets

The Group assesses at each reporting period whether there is any indication that other non-financial assets with finite lives may be impaired. If any such indication exists, the Group estimates the recoverable amount of the assets. In assessing whether there is any indication that other nonfinancial assets may be impaired, the Group considers indications from both internal and external sources of information such as evidence of obsolescence or decline in economic performance of the assets, changes in market conditions, economic environment and customers’ tastes. These assessments are subjective and require management’s judgements and estimations.

(b) Impairment loss in respect of receivables

The policy for impairment loss in respect of receivables of the Group is based on the evaluation of collectability and ageing analysis of the receivables 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/ debtor. If the financial conditions of the customers/debtors of the Group were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

4. REVENUE

Revenue, which is also the Group’s turnover, comprised of (i) rental income based on the terms of the lease of investment properties, (ii) interest income from rendering money lending services and (iii) invoiced sales value of grocery products to customers.

Continuing operations Revenue Rental income from investment properties Money lending services Sales of grocery products	2013 HK$’000 549 21,153 1,326 23,028	2012 HK$’000 488 18,541 –
		19,029

101

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. INVESTMENT AND OTHER INCOME

Dividend income from available-for-sale financial assets Dividend income from financial assets at fair value through profit or loss Interest income from available-for-sale financial assets Interest income from held-to-maturity investments Interest income from banks Rental income from sublet of office premises Others	2013 HK$’000 – 63 590 20 3 6 133 815	2012 HK$’000 55 258 128 40 127 – 26
		634

6. SEGMENT INFORMATION

The chief operating decision makers have been identified as the executive directors of the Company (the “Executive Directors”). The Executive Directors review the Group’s internal reporting in order to assess performance and allocate resources. Management determined the operating segments based on these reports.

Management assesses the performance based on the nature of the Group’s businesses which are principally located in Hong Kong and Macau, and comprises (i) money lending; (ii) property investment; (iii) securities investment; and (iv) retail business.

During the year, the Group discontinued reportable and operating segments regarding the provision of clinical services and provision of beauty services and sale of beauty products. Detail of the discontinued operations were set out in note 11.

The following is an analysis of the Group’s revenue and results from continuing operations by reportable segment.

102

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2013

Segment revenue Revenue from external customers Investment and other income Other gains and losses, net Segment results Unallocated income Unallocated expenses Gains on disposal of property, plant and equipment Cumulative gains reclassified from equity to profit or loss upon disposal of available-for-sale financial assets Operating loss Finance costs Loss before income tax Income tax expenses Loss for the year from continuing operations	Money lending HK$’000 21,153 133 (399) 20,887 11,577 – – (118)	Property investment HK$’000 549 1 7,273 7,823 3,735 7,000 – (280)	Securities investment HK$’000 – 673 (56,396) (55,723) (55,993) – 46 (47)	Retail business HK$’000 1,326 – – 1,326 (536) – – –	Total HK$’000 23,028 807 (49,522) (25,687) (41,217) 8 (13,132) 7,000 46 (47,295) (445) (47,740) (308) (48,048)

Loss for the year from continuing operations

103

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Financial Position

As at 31 March 2013

Money Property Securities Retail lending investment investment business HK$’000 HK$’000 HK$’000 HK$’000 Segment assets 124,246 24,735 30,625 946 Unallocated assets Assets classified as held for sale Total assets Segment liabilities 3,402 3,993 40 132 Unallocated liabilities Total liabilities Other segment information Capital expenditure – 1,501 – 28 Unallocated portion Total capital expenditure Interest income – 1 611 – Unallocated portion Total interest income Depreciation and amortisation 14 74 – 5 Unallocated portion Total depreciation and amortisation Other non-cash expenses other than depreciation and amortisation: – Provision for impairment of loans and advances 791 – – – – Written off of property, plant and equipment – 242 – – – unallocated expenses – Written off of loans and advances 1,375 – – – Total other non-cash expenses other than depreciation and amortisation	Total HK$’000 180,552 49,498 4,100
	234,150

	7,567 2,773
	10,340

	1,529 1,415
	2,944

	612 1
	613

	93 1,004
	1,097

	791 242 2,668 1,375
	5,076

104

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2012 (Restated)

Segment revenue Revenue from external customers Investment and other income Other gains and losses, net Segment results Unallocated income Unallocated expenses Net gains on disposal of a subsidiary Cumulative gains reclassified from equity to profit or loss upon disposal of available- for-sale financial assets Operating loss Finance costs Share of losses of associates Loss before income tax Income tax expenses Loss for the year from continuing operations	Money lending HK$’000 18,541 7 (13,881) 4,667 (1,953) – –	Property investment HK$’000 488 6 973 1,467 2,232 – (330)	Securities investment HK$’000 – 484 10,547 11,031 7,856 27 (14)	Total HK$’000 19,029 497 (2,361) 17,165 8,135 137 (25,278) 13 27 (16,966) (344) (682) (17,992) (140) (18,132)

105

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Financial Position

As at 31 March 2012 (Restated)

Money Property Securities lending investment investment HK$’000 HK$’000 HK$’000 Segment assets 107,117 82,374 99,008 Unallocated assets Total assets Segment liabilities 617 21,822 200 Unallocated liabilities Total liabilities Other segment information Capital expenditure 70 328 – Unallocated portion Total capital expenditure Interest income – – 168 Unallocated portion Total interest income Depreciation and amortisation 11 249 – Unallocated portion Total depreciation and amortisation Other non-cash expenses other than depreciation and amortisation: – Written off of property, plant and equipment – – – – unallocated expenses – Provision for impairment of loans and advances 13,881 – – – Provision for impairment of amounts due from associates – – – – unallocated expenses Total other non-cash expenses other than depreciation and amortisation	Total HK$’000 288,499 8,082
	296,581

	22,639 4,196
	26,835

	398 522
	920

	168 127
	295

	260 1,208
	1,468

	– 26 13,881 – 9,600
	23,507

Revenue reported above represents revenue generated from external customers. There were no inter-segment sales for the year ended 31 March 2013 (2012: nil).

Segment results represents the loss generated by each segment without allocation of central administration costs, share-based payments, share of losses of associates, cumulative gains reclassified from equity to profit or loss upon disposal of available-for-sale financial assets, finance costs, gains on disposal of property, plant and equipment and income tax expenses. This is the measure reported to the Executive Directors for the purposes of resources allocation and assessment of segment performance.

106

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

All assets other than unallocated corporate assets and asset held for sale are allocated to reportable segments; and
All liabilities other than unallocated corporate liabilities, provision for tax and deferred tax liabilities are allocated to reportable segments.

Information about major customers

No single customers contributed 10% or more to the Group’s revenue for both years ended 31 March 2013 and 2012.

Geographical information

The Group’s operations are located in one main geographical area. The following table provides an analysis of the Group’s revenue by geographical market based on the geographical location of customers, irrespective of the origin of the goods and services.

Revenue from external customers by geographical market:

			2013	2012
			HK$’000	HK$’000
Continuing operations
Hong Kong			23,028	19,029

	2013		2012
	Segment	Capital	Segment	Capital
	assets	expenditures	assets	expenditures
	HK$’000	HK$’000	HK$’000	HK$’000
Continuing operations
Hong Kong	234,150	2,944	296,581	920

107

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

7. OTHER GAINS AND LOSSES, NET

Net exchange (losses)/gains Written off of property, plant and equipment Fair value (losses)/gains on financial assets at fair value through profit or loss Fair value gains on investment properties_(note 16) Written off of loans and advances Provision for impairment of loans and advances(note 23) Provision for impairment of a loan to an associate(note 18) Reversal of provision for impairment of loans and advances(note 23) Reversal of provision for impairment of a loan to an associate(note 18) 8. LOSS BEFORE INCOME TAX Loss before income tax is arrived at after charging/(crediting): Continuing operations Auditor’s remuneration Cost of inventories recognised as expenses Depreciation Net gains on disposals of subsidiaries Minimum lease payments under operating leases in respect of land and buildings Rental income net of outgoings in respect of investment properties Employee benefit expenses (including directors’ remuneration)(note 14)_ Basic salaries and allowances Retirement benefit scheme contributions Total employee benefit expenses 9. FINANCE COSTS Continuing operations Interest expense on: – bank borrowings not wholly repayable within five years – other loans wholly repayable within five years – bank overdrafts – finance leases	2013 HK$’000 (9) (2,910) (56,393) 7,515 (1,375) (791) – 1,767 1,000 (51,196) 2013 HK$’000 380 1,005 1,097 – 1,437 (449) 11,597 314 11,911 2013 HK$’000 280 118 38 9 445	2012 HK$’000 164 (24) 10,611 973 – (13,881) (9,600) – – (11,757) 2012 HK$’000 305 – 1,468 (13) 784 (364) 12,113 233 12,346 2012 HK$’000 330 2 12 – 344

108

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. INCOME TAX EXPENSES

Hong Kong Profits Tax is calculated at 16.5% (2012: 16.5%) of the estimated assessable profit for the year. No provision for Hong Kong Profits Tax has been made for the companies in the Group as they either have no assessable profits or have available tax losses brought forward from prior years to offset against current period’s estimated assessable profits. Taxation on overseas profits has been calculated on the estimated assessable profit for the year at the rates of taxation prevailing in the countries in which the Group operates.

Continuing operations Current tax: Hong Kong – Charge for the year – Under provision in prior years Deferred tax:(note 33) – (Credit)/charge for the year Income tax expenses	2013 HK$’000 – 494 494 (186) (186) 308	2012 HK$’000 (Restated) – –
		–
		140
		140
		140

Included in other comprehensive income, no income tax expense was relating to each component of other comprehensive income for the years ended 31 March 2013 and 2012.

The tax charge for the years can be reconciled to the loss before income tax per the consolidated statement of comprehensive income as follows:

Continuing operations Loss before income tax Tax on loss before income tax, calculated at the rates applicable to loss in the tax jurisdiction concerned Tax effect of non-taxable revenue Tax effect of non-deductible expenses Tax effect of unused tax loss not recognised Utilisation of tax losses previously not recognised Tax effect of temporary difference previously not recognised Tax effect of unrecognised deferred tax items Tax effect of share of losses of associates Underprovision in prior years Income tax expenses	2013 HK$’000 (47,740) (7,877) (3,477) 2,973 8,403 (147) 125 (186) – 494 308	2012 HK$’000 (Restated) (17,992)
		(2,969) (460) 4,670 644 (1,880) (117) 140 112 –
		140

109

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. DISCONTINUED OPERATIONS

During the year ended 31 March 2013, the Group disposed of its entire interest in (i) Be A Lady (Macau) Limited and Be A Lady (Site 1) Medical Limited (collectively referred to as the “Be A Lady Group”) and (ii) The Specialists Limited (“The Specialists”). Following the disposal of the Be A Lady Group and The Specialists, the Group ceased its business in clinical services and provision of beauty services and sale of beauty products and accordingly they were presented as discontinued operations. The consolidated statements of comprehensive income and the consolidated statements of cash flow of the discontinued operations were set out below and details of disposal of the above subsidiaries were set out in note 38 respectively.

Revenue Cost of sales Gross profit Investment and other income Other gains and losses, net Servicing, selling and distribution costs Administrative expenses Profit before income tax Income tax expenses Gain on disposal of operations_(note 38)_ Profit for the year from discontinued operations Profit for the year from discontinued operations attributable to: Owners of the Company Non-controlling interests	2013 HK$’000 18,637 (7,876) 10,761 1,847 (802) (6,820) (1,860) 3,126 – 3,126 9,472 12,598 12,671 (73) 12,598	2012 HK$’000 34,273 (9,621) 24,652 18 (305) (10,609) (4,778) 8,978 – 8,978 – 8,978 9,075 (97) 8,978

110

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FINANCIAL INFORMATION OF THE GROUP

Loss before income tax from discontinued operations is arrived at after charging/(crediting):

Auditor’s remuneration Depreciation Net exchange losses Written off of property, plant and equipment Management fee (income)/expense Minimum lease payments under operating leases in respect of land and buildings Employee benefit expenses (including directors’ remuneration)(note 14) Basic salaries and allowances Retirement benefit scheme contributions Total employee benefit expenses The consolidated cash flows from discontinued operations are set out as below: Net cash (used in)/generated from operating activities Net cash used in investing activities Net cash (outflow)/inflow	2013 HK$’000 – 631 45 756 (1,847) 4,393 1,433 37 1,470 2013 HK$’000 (102) (136) (238)	2012 HK$’000 84 1,523 240 66 1,481 5,306 3,518 61 3,579 2012 HK$’000 130 (117) 13

12. (LOSS)/PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY

The loss attributable to owners of the Company is dealt with in the financial statements of the Company to the extent of approximately HK$32,529,000 (2012: profit of HK$3,914,000).

13. LOSS PER SHARE

From continuing and discontinued operations

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

Loss for the year attributable to owners of the Company Number of ordinary shares Weighted average number of ordinary shares for the purpose of basic and diluted loss per share	2013 HK$’000 (35,091) 2013 ’000 104,880	2012 HK$’000 (Restated) (8,998) 2012 ’000 (Restated) 91,822

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The weighted average number of shares for the purposes of calculating basis and diluted loss per share for both years has been adjusted to reflect the bonus issue occurred during the year and share consolidation occurred subsequent to the end of the reporting period. Details of the bonus issue and share consolidation are set out in notes 35 and 46 to the consolidated financial statements respectively.

Diluted loss per share for the years ended 31 March 2013 and 2012 were the same as the basic loss per share. The Company’s outstanding share options were not included in the calculation of diluted loss per share because the effects of the exercise of the Company’s outstanding share options were anti-dilutive.

From continuing operations

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

	2013	2012
	HK$’000	HK$’000
		(Restated)
Loss for the year from continuing operations	(47,762)	(18,073)

The denominators used are the same as those detailed above for both basic and diluted earnings per share from continuing and discontinued operations.

From discontinued operations

Basic and diluted earnings per share for discontinued operations is HK$0.12 per share (2012: HK$0.10 per share (Restated)), based on the profit for the year from discontinued operations attributable to owners of the Company of approximately HK$12,671,000 (2012: HK$9,075,000) and the denominators as detailed above for both basic and diluted earnings per share.

112

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APPENDIX I

14. DIRECTORS’ REMUNERATION AND SENIOR MANAGEMENT’S EMOLUMENTS

Directors’ emoluments

The remuneration of each director for the year ended 31 March 2013 is set out below:

Notes Executive Directors – Mr. Shiu Yeuk Yuen, the Chief Executive – Mr. Leung Ge On, Andy Independent non-executive directors – Dr. Siu Yim Kwan, Sidney – Mr. Tsui Pui Hung – Mr. Kam Tik Lun (ii)	For the year ended 31 March 2013 Salaries, Retirement allowances, benefit and benefits scheme Fees in kind contributions Total HK$’000 HK$’000 HK$’000 HK$’000 – 622 15 637 – 505 15 520 – 1,127 30 1,157 100 – – 100 100 – – 100 100 – – 100 300 – – 300 300 1,127 30 1,457	For the year ended 31 March 2013 Salaries, Retirement allowances, benefit and benefits scheme Fees in kind contributions Total HK$’000 HK$’000 HK$’000 HK$’000 – 622 15 637 – 505 15 520 – 1,127 30 1,157 100 – – 100 100 – – 100 100 – – 100 300 – – 300 300 1,127 30 1,457
		1,157
		100 100 100
		300
		1,457

The remuneration of each director for the year ended 31 March 2012 is set out below:

Notes Executive Directors – Mr. Shiu Yeuk Yuen, the Chief Executive – Mr. Leung Ge On, Andy Independent non-executive directors – Mr. Hung Yau Keung, Anckes (i) – Dr. Siu Yim Kwan, Sidney – Mr. Tsui Pui Hung – Mr. Kam Tik Lun (ii)	For the year ended 31 March 2012 Salaries, Retirement allowances, benefit and benefits scheme Fees in kind contributions Total HK$’000 HK$’000 HK$’000 HK$’000 – 624 12 636 – 500 12 512 – 1,124 24 1,148 69 – – 69 100 – – 100 100 – – 100 6 – – 6 275 – – 275 275 1,124 24 1,423	For the year ended 31 March 2012 Salaries, Retirement allowances, benefit and benefits scheme Fees in kind contributions Total HK$’000 HK$’000 HK$’000 HK$’000 – 624 12 636 – 500 12 512 – 1,124 24 1,148 69 – – 69 100 – – 100 100 – – 100 6 – – 6 275 – – 275 275 1,124 24 1,423
		1,148
		69 100 100 6
		275
		1,423

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Notes:

(i) Deceased on 12 December 2011.
(ii) Appointed on 9 March 2012.

Except as disclosed above, there was no remuneration paid to other Directors of the Company for the years ended 31 March 2013 and 2012.

During the year, no emolument was paid by the Group to its Directors of the Company as an inducement to join or upon joining the Group or as compensation for loss of office (2012: nil).

None of the Directors of the Company has waived any emoluments during the year (2012: none).

Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year included one Director of the Company (2012: one) whose emoluments are reflected in the analysis presented above. The emoluments payable to the remaining four (2012: four) individuals in which three of them were senior management during the year are as follows:

Salaries, allowances and benefits in kind Retirement benefit scheme contributions	2013 HK$’000 5,777 40 5,817	2012 HK$’000 8,103 30
		8,133

The emoluments of the highest paid four individuals (2012: four) for the year fell within the following bands:

Emoluments bands Nil – HK$1,000,000 HK$1,000,001 – HK$1,500,000 HK$1,500,001 – HK$3,000,000 HK$3,000,001 – HK$4,500,000 HK$4,500,001 – HK$6,000,000 HK$6,000,001 – HK$7,500,000	Number of individuals 2013 2012 2 1 1 2 – – 1 – – 1 – – 4 4	Number of individuals 2013 2012 2 1 1 2 – – 1 – – 1 – – 4 4
		4

114

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. PROPERTY, PLANT AND EQUIPMENT – GROUP

Cost/valuation At 1 April 2011 Additions Disposals/written off Change in fair value At 31 March 2012 and 1 April 2012 Additions Disposals/written off At 31 March 2013 Accumulated depreciation and impairment At 1 April 2011 Reversal upon disposal/written off Depreciation At 31 March 2012 and 1 April 2012 Reversal upon disposal/written off Depreciation At 31 March 2013 Carrying amounts Representing: At cost At valuation At 31 March 2013 Representing: At cost At valuation At 31 March 2012	Land and Leasehold buildings improvements HK$’000 HK$’000 60,088 9,786 – 606 – (1,587) 7,212 – 67,300 8,805 – 1,501 (67,300) (8,805) – 1,501 88 7,165 – (1,587) 212 826 300 6,404 (300) (6,866) – 487 – 25 – 1,476 – – – 1,476 – 2,401 67,000 – 67,000 2,401	Equipment HK$’000 12,929 386 (2,276) – 11,039 40 (11,001) 78 8,862 (2,257) 1,706 8,311 (9,292) 1,001 20 58 – 58 2,728 – 2,728	Furniture and fixtures HK$’000 585 45 (434) – 196 432 (164) 464 426 (363) 79 142 (146) 37 33 431 – 431 54 – 54	Motor vehicles HK$’000 1,177 – – – 1,177 – (178) 999 793 – 168 961 (178) 106 889 110 – 110 216 – 216	Equipment under finance lease HK$’000 – – – – – 971 – 971 – – – – – 97 97 874 – 874 – – –	Total HK$’000 84,565 1,037 (4,297) 7,212
						88,517 2,944 (87,448)
						4,013
						17,334 (4,207) 2,991
						16,118 (16,782) 1,728
						1,064
						2,949 –
						2,949

						5,399 67,000
						72,399

Notes:

(i) On 25 May 2012, Top Euro Limited entered into a provisional sale and purchase agreement with an independent third party in relation to the disposal of a property at a consideration of HK$74,000,000. The disposal of the property was completed on 31 January 2013.

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FINANCIAL INFORMATION OF THE GROUP

(ii) At 31 March 2012, the Group has pledged its land and buildings at valuation of approximately HK$67,000,000 to bank to secure the Group’s bank borrowings. Following the Group disposed its land and buildings in the year, the Group’s relating bank borrowings were also released accordingly (note 32).
(iii) The fair value of the Group’s land and buildings at 31 March 2012 has been arrived at on the basis of valuation carried out on that date by RHL, an independent qualified professional valuer not connected with the Group. RHL is members of The Hong Kong Institute of Surveyors (“HKIS”), and has appropriate qualifications and recent experiences in the valuation of similar properties in the relevant locations. The valuation, which conform to The HKIS Valuation Standards on Properties (1st Edition 2005), was arrived by reference to market evidence of recent transaction prices for similar properties.
(iv) If the land and buildings had not been revalued, they would have been included in these consolidated financial statements at cost less accumulated depreciation at HK$nil (2012: HK$52,960,000).
(v) The land is located in Hong Kong and held under long-term lease.

16. INVESTMENT PROPERTIES – GROUP

At fair value Balance at the beginning of the year Additions Disposals Transfer to assets classified as held for sale_(note 28) Net increase in fair value recognised in profit or loss(note 7)_ Balance at the end of the year	2013 HK$’000 14,200 4,485 – (4,100) 7,515 22,100	2012 HK$’000 5,000 13,465 (5,238) – 973
		14,200

All of the Group’s property interests held under operating lease to earn rental or for capital appreciation purpose are measured using the fair value model and are classified and accounted for as investment properties.

The carrying amounts of investment properties shown above comprise:

In Hong Kong Long-term lease Medium-term lease	2013 HK$’000 16,500 5,600 22,100	2012 HK$’000 11,700 2,500
		14,200

The fair value of the Group’s investment properties at 31 March 2013 have been arrived at on the basis of valuations carried out on that date by RHL, an independent qualified professional valuer not connected with the Group. RHL is members of HKIS, and has appropriate qualifications and recent experiences in the valuation of similar properties in the relevant locations. The valuations, which conform to The HKIS Valuation Standards on Properties (2nd Edition 2012), were arrived by reference to market evidence of transaction prices for similar properties for similar properties at similar locations and the current rents passing and the reversionary income potential of tenancies.

The fair value of the Group’s investment properties at 31 March 2012 had been arrived at on the basis of valuations carried out on that date by RHL. The valuations, which conform to HKIS Valuation Standards on properties (1st Edition 2005), were arrived by reference to market evidence of recent transaction prices for similar properties.

The investment properties held by the Group are leased to third parties under operating leases. Summary of details are included in note 41 to the consolidated financial statements.

116

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APPENDIX I

At 31 March 2013, the Group has pledged its investment properties with carrying value of approximately HK$16,500,000 (2012: HK$11,700,000) to banks to secure the Group’s bank borrowings (note 32).

17. INVESTMENTS IN SUBSIDIARIES – COMPANY

	2013	2012
	HK$’000	HK$’000
Investment at cost
– Unlisted shares	1,097	1,097

The amounts due from/(to) subsidiaries are unsecured, interest free and recoverable/repayable on demand.

Particulars of the principal subsidiaries at 31 March 2013 and 2012 are as follows:

	Place/country of	Particulars of		Percentage of issued/	Percentage of issued/		Principal activities
	incorporation and	issued/registered		registered capital held			and place
Name of subsidiaries	kind of legal entity	capital		by the Company			of operations
				Directly	Indirectly
			2013	2012	2013	2012
Rainbow Cosmetic	British Virgin Island,	50,000 ordinary	100%	100%	–	–	Investment holding,
(BVI) Limited	limited liability company	shares of USD1 each					Hong Kong
Be A Lady (Macau)	Macau, limited liability	60,000 ordinary	–	–	–	100%	Provision of beauty
Limited#	company	shares of MOP1 each					services and sale of
							beauty products, Macau
Be A Lady (Site 1)	Macau, limited liability	30,000 ordinary	–	–	–	90%	Provision of clinical
Medical Limited#	company	shares of MOP1 each					services, Macau
Be Cool Ltd	Hong Kong, limited liability	1 ordinary share of	–	–	100%	100%	Securities investment,
	company	HK$1 each					Hong Kong
Bright Zone Corporation	Hong Kong, limited liability	90 ordinary shares of	–	–	66.67%	100%	Sales of grocery
Limited	company	HK$1 each					products, Hong Kong
Perfect Top Corporation	Hong Kong, limited liability	1 ordinary share of	–	–	100%	100%	Property investment,
Limited	company	HK$1 each					Hong Kong
Nutriplus (Asia) Limited	Hong Kong, limited liability	10,000 shares of	–	–	100%	100%	Provision for management
	company	HK$1 each					services to the Group,
							Hong Kong
Thailand (HK) Plastic	Hong Kong, limited liability	1 ordinary share of	–	–	100%	100%	Property investment,
Surgery Service Ltd	company	HK$1 each					Hong Kong
The Specialists Limited*	Hong Kong, limited liability	1,000 ordinary	–	–	–	100%	Provision of clinical
	company	shares of HK$1 each					services, Hong Kong
Top Empire Limited	Hong Kong, limited liability	1,000 ordinary	–	–	100%	100%	Investment holding,
	company	shares of HK$1 each					Hong Kong
Top Euro Limited	Hong Kong, limited liability	1 ordinary share of	–	–	100%	100%	Property investment,
	company	HK$1 each					Hong Kong
Top Legend Investment	Hong Kong, limited liability	1 ordinary share of	–	–	100%	100%	Securities investment,
Limited	company	HK$1 each					Hong Kong
Yvonne Credit Service	Hong Kong, limited liability	10,000 ordinary	–	–	100%	100%	Provision of money
Co. Limited	company	shares of HK$1 each					lending business,
							Hong Kong

117

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APPENDIX I

Disposed by the Group as set out on the Company’s announcement dated 26 March 2013
Disposed by the Group as set out on the Company’s announcement dated 28 March 2013

The above table lists the subsidiaries of the Group which, in the opinion of the Directors of the Company, principally affected the results for the period or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the Directors of the Company, result in particulars of excessive length.

No debt securities have been issued by any of the subsidiaries during the reporting period.

18. INTERESTS IN ASSOCIATES – GROUP

Cost of investment in associates – Unlisted Share of post-acquisition profits and other comprehensive income, net of dividend received Loans to associates	2013 HK$’000 – – – – –	2012 HK$’000 682 (682)
		–
		–
		–

The amounts due from/(to) associate are unsecured, interest fee and recoverable/repayable on demand.

Particulars of the associate at 31 March 2013 and 2012 are as follows:

	Particulars of		Proportion of	Proportion of
	issued and	Country of	voting
Name of associates	fully paid capital	incorporation	power	held	Principal activities
			Directly	Indirectly
One Dollar Movies	10 ordinary shares	Hong Kong	40%	–	Movies production
Productions Limited	of HK$1 each
One Dollar	10,000 ordinary shares	Hong Kong	40%	–	Movies distribution
Distribution Limited	of HK$1 each
Perfect Talent	1 ordinary share	Hong Kong	–	40%	Movies production
Limited	of HK$1 each

The movement in loans to associates during the year is as follows:

Loans to associates: Balance at the beginning of the year Repayment of a loan Balance at the end of the year	2013 HK$’000 13,600 (1,000) 12,600	2012 HK$’000 13,600 –
		13,600

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FINANCIAL INFORMATION OF THE GROUP

The movement in the provision for impairment of loans to associates is as follows:

Balance at the beginning of the year Reversal of provision for impairment of a loan to an associate_(note 7) Provision for impairment of a loan to an associate(note 7)_ Balance at the end of the year	2013 HK$’000 13,600 (1,000) – 12,600	2012 HK$’000 4,000 – 9,600
		13,600

The summarised financial information of the Group’s associates extracted from their management accounts are as follows:

Total assets Total liabilities Net liabilities The Group’s share of net liabilities of associates Total revenue Total loss for the year The Group’s share of losses of associates The Group’s share of other comprehensive income	2013 HK$’000 3,926 (19,243) (15,317) (6,127) 260 (273) – –	2012 HK$’000 5,228 (20,235)
		(15,007) (6,003)

		4,320

		(2,232) (682)

		–

During the year ended 31 March 2013, the Group has discontinued recognition of its share of losses of the associates amounted to approximately HK$109,000 (2012: HK$211,000). At 31 March 2013, the accumulated losses of the associates not recognised by the Group amounted to approximately HK$320,000 (2012: HK$211,000).

19. HELD-TO-MATURITY INVESTMENTS – GROUP

Debt securities listed outside Hong Kong – Non-current portion – Current portion	2013 HK$’000 – – –	2012 HK$’000 – 778
		778

The debt securities represented bonds with fixed interest rates of 5.625% per annum, and matured on 27 August 2012. The Group received related interest payments semi-annually.

119

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APPENDIX I

20. AVAILABLE-FOR-SALE FINANCIAL ASSETS – GROUP AND COMPANY

Listed equity securities: – listed in Hong Kong_(note iii) Listed debt securities: – listed outside Hong Kong(notes i and ii) Investment funds – listed – unlisted(note iv)_ Total Analysed for reporting purposes as: – Current assets – Non-current assets	Group 2013 2012 HK$’000 HK’000 11,309 – 11,423 6,024 – 4,099 1,274 1,296 24,006 11,419 – 5,395 24,006 6,024 24,006 11,419	Company 2013 2012 HK$’000 HK$’000 4,199 – – – – – 4,199 – – – 4,199 – 4,199 –	Company 2013 2012 HK$’000 HK$’000 4,199 – – – – – 4,199 – – – 4,199 – 4,199 –
			–

			– –
			–

For the listed investment funds, listed equity securities and listed debt securities, the fair values are determined based on the quoted market bid prices available on the relevant stock exchanges and the industry group.

Notes:

(i) For the year ended 31 March 2013, the debt securities listed outside Hong Kong and denominated in the United States dollar (“USD”) comprised of bonds (i) amounted to approximately HK$3,508,000 carrying at fixed rates ranging from 6.625% to 10.25% per annum with maturity date ranging from September 2015 to April 2017; (ii) amounted to approximately HK$3,097,000 carrying at fixed rate from 7.875% to 10.125% with perpetual maturity date; and (iii) amounted to approximately 1,623,000 bond initially carrying at fixed interest rates at 7.25% per annum till May 2016 and later carrying at floating interest rate per annum with maturity date in November 2099.

The debt securities listed outside Hong Kong and denominated in Renminbi (“RMB”) comprised of bonds amounted to approximately HK$3,195,000 carrying at fixed rates ranging from 5.875% to 7.625% per annum with maturity date ranging from January 2015 to March 2016.

As such, they were classified as non-current assets. The Group is entitled to the interest income from the above debt securities semi-annually.

(ii) For the year ended 31 March 2012, the debt securities comprised of (i) amounted to approximately HK$4,496,000 bonds carrying at fixed interest rates ranging from 7.625% to 9.5% per annum with maturity date ranging from January 2015 to April 2017 and (ii) amounted to approximately HK$1,528,000 bond initially carrying at fixed interest rates at 7.25% per annum till May 2016 and later carrying at floating interest rate per annum with maturity date in November 2099.
As such, they were classified as non-current assets. The Group is entitled to the interest income from the above debt securities semi-annually.

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(iii) During the year ended 31 March 2013, due to a reformation of the Group’s strategic investment planning, certain equity securities previously recognised in financial assets at fair value through profit or loss are no longer held for the purpose of selling in the near term and therefore transferred and recognised as availablefor-sale financial assets category accordingly.

As at 31 March 2013, the fair value of equity securities transferred during the reporting period is approximately HK$11,309,000.

If the Group had not transferred the equity securities during the reporting period, fair value loss recognised for the year in the consolidated statement of comprehensive income will increase by approximately HK$14,456,000.

(iv) The unlisted investment fund represent the Group’s investment in China Real Estate Development II Fund, which invest in private equity real estate development projects in the People’s Republic of China through CapitaLand China Development Fund II Limited, managed by CapitaLand China Development Fund Management PTE Ltd. The fair value of the investment is determined by reference to the fund net asset values at the end of the reporting period.

21. TRADE RECEIVABLES – GROUP

Trade receivables Less: provision for impairment of trade receivables Trade receivables – net	2013 HK$’000 62 – 62	2012 HK$’000 1,046 –
		1,046

Included in trade receivables are the following amounts denominated in a currency other than the functional currency of the entity to which they relate:

	2013	2012
	HK$’000	HK$’000
Macao Pataca (“MOP”)	–	1,019

The Group maintains credit terms of cash on delivery (2012: one month). At the end of the reporting period, the ageing analysis of the trade receivables based on the invoice dates is as follows:

Within three months Over three months but within six months Over six months and within one year Over one year	2013 HK$’000 60 2 – – 62	2012 HK$’000 1,046 – – –
		1,046

At the end of each reporting period, the Group reviews trade receivables for evidence of impairment on both an individual and collective basis. Based on these assessments, no impairment loss has been recognised for both years.

The Group did not hold any collateral as security or other credit enhancements over the impaired trade receivables whether determined on an individual or collective basis.

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FINANCIAL INFORMATION OF THE GROUP

The ageing analysis of the Group’s trade receivables that were past due as at the end of the reporting period but not impaired, based on due date is as follows:

Neither past due nor impaired Within three months past due Over three months but within six months past due Over six months but within one year past due	2013 HK$’000 – 60 2 – 62	2012 HK$’000 1,046 – – –
		1,046

Trade receivables disclosed above include amounts which are past due at the end of the reporting period for which the Group has not recognised an allowance for doubtful debts because the amounts are still considered recoverable.

22. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES – GROUP AND COMPANY

Prepayments Deposits_(note i) Other receivables(note ii)_ Less: Non–current portion Deposits Non-current portion Current portion	Group 2013 2012 HK$’000 HK’000 195 2,649 6,406 1,456 2,314 2,208 8,915 6,313 (32) (213) (32) (213) 8,883 6,100	Company 2013 2012 HK$’000 HK$’000 195 1,797 15 8 – 5 210 1,810 – – – – 210 1,810	Company 2013 2012 HK$’000 HK$’000 195 1,797 15 8 – 5 210 1,810 – – – – 210 1,810
			1,810 –
			–

			1,810

Notes:

(i) As at 31 March 2013, included in deposits was a deposit of HK$6,000,000 paid to an independent third party for providing financial information and advice, making investment referrals and providing relating investment analysis to the Group.
(ii) As at 31 March 2013, included in other receivables was the consideration receivable amounted to HK$2,094,000 for the disposal of a subsidiary during the year. Details of the disposal are shown in note 38(b).

As at 31 March 2012, the other receivables mainly represents the management fee related to beauty and clinical services.

(iii) As at 31 March 2013 and 2012, the amount of prepayments, deposits and other receivables that were expected to be recovered within twelve months from the end of the reporting period and were classified as current asset. The remaining balances were classified as non-current assets.

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23. LOANS AND ADVANCES – GROUP

Loans and advances to customers Term loans Less: impairment allowances Loans and advances to customers – net Analysed for reporting purpose as: – Current portion – Non-current portion	2013 HK$’000 115,511 (4,687) 110,824 72,176 38,648 110,824	2012 HK$’000 108,611 (11,349)
		97,262

		64,265 32,997
		97,262

At 31 March 2013, certain term loans amounted to approximately HK$86,766,000 (2012: HK$76,300,000) are secured by customers’ pledged properties at fair value of approximately HK$371,450,000 (2012: HK$263,153,000).

All term loans and advances are denominated in HK$. The loans and advances carry fixed effective interest ranging from 5% to 48% (2012: 3% to 57%) per annum. An ageing analysis of loans and advances net of impairment loss at the end of reporting period, based on the repayment terms is as follows:

Ageing analysis of loans and advances to customers:

Within one year Over one year but within five years Over five years	2013 HK$’000 72,176 20,903 17,745 110,824	2012 HK$’000 64,265 22,642 10,355
		97,262

Reconciliation of provision for impairment on loans and advances to customers:

Balance at the beginning of the year Provision for impairment recognised during the year_(note 7) Reversal of impairment recognised in prior years(note 7)_ Amount written off as uncollectible Balance at the end of the year	2013 HK$’000 11,349 791 (1,767) (5,686) 4,687	2012 HK$’000 2,134 13,881 – (4,666)
		11,349

The impaired loans and advances relate to clients that were in financial difficulties and only a portion of the receivable is expected to be recovered. Accordingly, the Directors of the Company consider the provision for impairment of loans and advances would be made on loans outstanding over 60 days.

Loan and advances disclosed above include amounts which are past due at the end of the reporting period for which the Group has not provided impairment loss because, in the opinion of the Directors of the Company, there has not been a significant change in credit quality and the amounts are still considered recoverable.

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APPENDIX I

24. INVENTORIES

	2013	2012
	HK$’000	HK$’000
Finished goods	263	–

25. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS – GROUP AND COMPANY

Listed equity securities – held-for-trading – Hong Kong – Overseas	Group 2013 2012 HK$’000 HK’000 5,379 63,333 225 2,799 5,604 66,132	Company 2013 2012 HK$’000 HK$’000 5,214 54,607 – 2,108 5,214 56,715	Company 2013 2012 HK$’000 HK$’000 5,214 54,607 – 2,108 5,214 56,715
			56,715

The fair value of all equity securities is based on their current bid prices in an active market.

26. AMOUNT DUE FROM A RELATED COMPANY – GROUP AND COMPANY

Particulars of the amount due from a related company is as follows:

		Group			Company
	Highest			Highest
	balance			balance
	outstanding			outstanding
	during			during
	the year	2013	2012	the year	2013	2012
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Name
One Dollar
Productions Limited	611	262	611	611	262	611

Amount due from a related company is unsecured, interest free and recoverable on demand. The related company is beneficially owned and controlled by certain family members of Mr. Shiu Yeuk Yuen, an Executive Director.

27. CASH AND BANK BALANCES – GROUP AND COMPANY

Cash at banks Cash on hand	Group 2013 2012 HK$’000 HK’000 54,948 35,289 32 33 54,980 35,322	Company 2013 2012 HK$’000 HK$’000 34,593 437 – – 34,593 437	Company 2013 2012 HK$’000 HK$’000 34,593 437 – – 34,593 437
			437

At 31 March 2013 and 2012, cash at banks carry interest at floating rates based on daily bank deposit rates. The effective interest rate on short-term time deposits at 0.09% (2012: 0.09% to 1.4%) per annum. At 31 March 2013, all deposits were matured (2012: deposits had a maturity of 3 days).

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FINANCIAL INFORMATION OF THE GROUP

At 31 March 2013, the Group had cash and bank balances of approximately HK$20,000 (2012: HK$21,000) denominated in RMB and placed with banks in Hong Kong and the PRC. RMB is not a freely convertible currency. Under the PRC’s Foreign Exchange Control Regulations and Administration of Settlement, Sales and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for foreign currencies through banks that are authorised to conduct foreign exchange business.

Cash and cash equivalents with aggregate amount of approximately HK$2,000 and HK$51,000 were held on trust for the Group by Madam Siu York Chee, Mr. Leung Kwok Kui and Ms. Leung Ge Yau at 31 March 2013 and 2012, respectively.

28. ASSETS CLASSIFIED AS HELD FOR SALE – GROUP

Balance at the beginning of the year Transfer from investment properties_(note i) and (note 16) Disposals(note (ii))_ Balance at the end of the year	2013 HK$’000 – 4,100 – 4,100	2012 HK$’000 6,215 – (6,215)
		–

Notes:

(i) On 4 February 2013, Top Euro Limited, a wholly-owned subsidiary of the Company, entered into a preliminary sale and purchase agreement with an independent third party in relation to the disposal of an investment property at a consideration of HK$4,100,000.

As at the date of approval of the consolidated financial statements, the disposal of the investment property has not been completed. The disposal of the investment property is expected to be completed within the next 12 months. In accordance with HKFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”, the investment property has been presented as assets classified as held for sale in the consolidated statement of financial position as at 31 March 2013.

For the year ended 31 March 2012, no impairment loss was recognised on reclassification of investment property to assets classified as held for sale.

(ii) At 19 April 2011 and 28 April 2011, the Group disposed the investment properties at cash considerations of HK$2,135,000 and HK$4,080,000 respectively.

29. ACCRUALS, RECEIPTS IN ADVANCE AND OTHER PAYABLES – GROUP AND COMPANY

Accruals Receipts in advance Deposits received and other payables	Group 2013 2012 HK$’000 HK’000 1,833 3,240 587 2,340 154 2,042 2,574 7,622	Company 2013 2012 HK$’000 HK$’000 515 311 – – – – 515 311	Company 2013 2012 HK$’000 HK$’000 515 311 – – – – 515 311
			311

30. AMOUNTS DUE TO NON-CONTROLLING INTERESTS – GROUP

Amounts due to non-controlling interests are unsecured, interest-free and repayable on demand.

125

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APPENDIX I

31. AMOUNT DUE TO A RELATED COMPANY – COMPANY

Amount due to a related party is unsecured, interest-free and repayable on demand.

32. BORROWINGS – GROUP

Bank borrowings – Portion of term loans from bank due for repayment within one year – Portion of term loans from bank due for repayment after one year which contain a repayment on demand clause Other loan due for repayment within one year	2013 HK$’000 377 3,018 3,395 3,000 6,395	2012 HK$’000 1,745 19,954
		21,699 –
		21,699

At 31 March 2013, the bank borrowings of the Group were secured by the charges over the Group’s investment properties (note 16) and corporate guarantees executed by the Company (note 42). At 31 March 2012, the bank borrowings of the Group were secured by the charges over the Group’s land and buildings (note 15), investment properties (note 16) and corporate guarantees (note 42).

For the year ended 31 March 2013, the Group’s entire bank borrowings are denominated in HK$, bearing floating interest rate ranging from 1.23% to 2.30% (2012: 1.19% to 2.36%) per annum.

The maturity of the Group’s borrowings is as follows:

Portion of term loans due for repayment within one year Term loans due for repayment after one year_(note i) After one year but within two years After two years but within five years After five years Other loan due for repayment within one year(note ii)_	2013 HK$’000 377 385 1,208 1,425 3,018 3,000 6,395	2012 HK$’000 1,745
		1,772 5,479 12,703
		19,954
		–
		21,699

Notes:

(i) The amounts due are based on the scheduled repayment dates set out in the loan agreements and ignore the effect of any repayment on demand clause.

(ii) The loan is denominated in HK$ and is borrowed from an independent third party. The loan is unsecured, bearing interest rate of 16% per annum and repayable within one year.

126

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

33. DEFERRED TAX LIABILITIES – GROUP

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

Revaluation of investment properties HK$’000 At 1 April 2011 (as originally stated) (6,431) Effect of change in accounting policy_(note 2) 6,431 At 1 April 2011 (as restated) – Charged to the consolidated statement of comprehensive income (as restated)(note 10) – At 31 March 2012 (as restated) – At 1 April 2012 (as originally stated) (8,513) Effect of change in accounting policy(note 2) 8,513 At 1 April 2012 (as restated) – Credited to the consolidated statement of comprehensive income(note 10)_ – At 31 March 2013 –	Accelerated tax depreciation HK$’000 (571) (245) (816) (140) (956) (571) (385) (956) 186 (770)	Tax losses HK$’000 571 – 571 – 571 571 – 571 – 571	Total HK$’000 (6,431) 6,186 (245) (140) (385) (8,513) 8,128 (385) 186 (199)

At the end of the reporting period, the Group has unused tax losses of approximately HK$122,718,000 (2012: HK$72,681,000) available for offset against future profits that may be carried forward indefinitely. No deferred tax asset has been recognised in respect of the tax losses due to the unpredictability of future profit streams.

34. OBLIGATIONS UNDER FINANCE LEASES

During the year ended 31 March 2013, the Group leased certain of its office equipment under finance leases. The average lease term is 5 years (2012: nil) and carrying interest rate fixed at 1.92% per annum. The Group has options to purchase the equipment for a nominal amount at the end of the lease terms. No arrangements have been entered into for contingent rental payments.

		Present value
	Minimum	of minimum
	lease payments	lease payments
	2013	2013
	HK$’000	HK$’000
Amounts payable under finance leases:
Within one year	211	195
In more than one year and not more than five years	739	715
	950	910
Less: future finance charges	(40) –
Present value of lease obligations	910	910
Less: Amount due from settlement within 12
months (shown under current liabilities)		(195)
Amount due for settlement after 12 months		715

127

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FINANCIAL INFORMATION OF THE GROUP

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

Financial lease obligations are denominated in HK$.

35. SHARE CAPITAL – GROUP AND COMPANY

Notes Authorised: At 1 April 2011 Ordinary shares of HK$0.1 each Share consolidation (iv) Ordinary shares of HK$0.01 each Capital reduction (v) Ordinary shares of HK$0.01 each Capital increase (vi) At 31 March 2012, 1 April 2012 and 31 March 2013 Issued and fully paid: At 1 April 2011 Ordinary shares of HK$0.1 each Share consolidation (iv) Ordinary shares of HK$0.01 each Capital reduction (v) Issue of shares upon exercise of share option (i),(ii) Issue of shares upon rights issue (vii) Issue of shares upon placing (iii) At 31 March 2012 and 1 April 2012 Issue of shares upon bonus issue (viii) At 31 March 2013 Notes:	Number of share 30,000,000,000 (27,000,000,000) – 27,000,000,000 30,000,000,000 526,434,130 (572,070,717) – 4,200,000 635,634,130 105,000,000 699,197,543 1,398,395,086 2,097,592,629	HK$’000 300,000 – (270,000) 270,000 300,000 5,264 – (5,721) 42 6,356 1,050 6,991 13,984 20,975

For the year ended 31 March 2012

(i) 1,300,000 new ordinary shares of HK$0.01 each were issued upon the exercise of 1,300,000 units of share option on 14 April 2011 at the subscription price of HK$0.1542.
(ii) 2,900,000 new ordinary shares of HK$0.01 each were issued upon the exercise of 2,900,000 units of share option on 20 April 2011 at the subscription price of HK$0.1396.
(iii) On 13 May 2011, 105,000,000 new ordinary shares of HK$0.01 each were allotted and issued at a price of HK$0.105 per share under general mandate. The net proceeds of approximately HK$10,746,000 were intended to be used for daily financing.
(iv) By a special resolution dated 24 August 2011, authorised share capital for ordinary shares of HK$0.01 each (the “Reorganised Shares”) was consolidated on the basis of every ten into one from 30,000,000,000 ordinary shares of HK$0.01 each to 3,000,000,000 ordinary shares of HK$0.10 each. The issued share capital was consolidated on the basis of ten into one from 635,634,130 ordinary shares of HK$0.01 each to 63,563,413 ordinary shares of HK$0.10 each.

128

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(v) By a special resolution dated 24 August 2011, the nominal value of each share in issue was reduced from HK$0.10 to HK$0.01 by cancelling paid up capital to the extent of HK$0.09 on each issued share and the authorised share capital of the Company was reduced to HK$30,000,000 divided into 3,000,000,000 Reorganised Shares of HK$0.01 each.
(vi) By a special resolution dated 24 August 2011, the authorised share capital from HK$30,000,000 dividend into 3,000,000,000 Reorganised Shares of HK$0.01 each increased to HK$300,000,000 dividend into 30,000,000,000 Reorganised Shares of HK$0.01 each.
(vii) On 26 September 2011, 635,634,130 new ordinary shares of HK$0.01 each were allotted and issued at a price of HK$0.15 per share by way of rights issue to qualifying shareholders on the basis of ten right shares for every one adjusted share. The net proceeds of approximately HK$92,000,000 were intended to be used for future developing the business of the Group.

For the year ended 31 March 2013

(viii) By an ordinary resolution passed on 28 February 2013, the Company issued two bonus shares for every one share held. The issued share capital of the Company was therefore increased from 699,197,543 shares of HK$0.01 each to 2,097,592,629 shares of HK$0.01 each accordingly.

The bonus shares had been credited as fully paid by way of capitalisation of an amount of approximately HK$14,168,000 in the share premium account of the Company.

36. SHARE-BASED EMPLOYEE COMPENSATION

The shareholders of the Company approved a share option scheme (the “2001 Share Option Scheme”) under which its Board of the Directors may, at its discretion, offer full-time or part time employees and Executive, Nonexecutive and Independent Non-executive Directors of the Company and/or any its subsidiaries, options to subscribe for shares in the Company. The maximum number of shares in respect of which options may be granted under the Scheme shall not exceed 30% of the issued share capital of the Company. The subscription price will be determined by the Company’s Board of Directors and will be the highest of (i) the nominal value of the shares, (ii) the quoted closing price of the Company’s shares on the date of offer of the options, and (iii) the average of the quoted closing prices of the Company’s shares on the five trading days immediately preceding the date of offer of the options. The 2001 Share Option Scheme become effective on 24 September 2001 was terminated by shareholders of the Company on 4 January 2011.

An ordinary resolution was passed by the shareholders at the special general meeting of the Company held on 4 January 2011 to adopt a new share option scheme (the “2011 Share Option Scheme”) and terminate the 2001 Share Option Scheme.

The purpose of the 2011 Share Option Scheme is to enable the Group to grant share options to the participants as incentives or rewards for their contribution to the Group.

Eligible participants of the 2011 Share Option Scheme (“Eligible Participants”) include (i) any full-time employees of the Group and Directors (including Executive Directors, Non-executive Directors and Independent Non-executive Directors) of the Company; (ii) any supplier of goods or services to any member of the Group or any entity in which any member of the Group holds an equity interest (the “Invested Entity”); (iii) any customer of any member of the Group or any Invested Entity; (iv) any person or entity that provides research, development or other technological support to any member of the Group or any Invested Entity; (v) 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; (vi) 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 (vii) any other group or classes of Eligible Participants who have contributed or may contribute by way of joint venture, business alliance or other business arrangement to the development and growth of the Group.

129

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The 2011 Share Option Scheme became effective on 4 January 2011 and, unless otherwise cancelled or amended, will remain in force for 10 years from that date.

The maximum number of share options permitted to be granted under the 2011 Share Option Scheme is an amount equivalent, upon their exercise, to 10% of the shares of the Company in issue at the date of approval of the 2011 Share Option Scheme.

The maximum number of share issuable under share options to each eligible participant in the 2011 Share Option Scheme within any 12-month period is limited to 1% of the shares of the Company in issue at any time. Any further grant of share options in excess of this limit is subject to shareholders’ approval in a general meeting.

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

The offer of a grant of share options may be accepted within 21 days from the date of offer, upon payment of a nominal consideration of HK$1 in total by the grantee. The exercise period of the share options granted is determinable by the Directors of the Company, and commences after a vesting period and ends on a date which is not later than ten years from the date of offer of the share options.

The exercise price of share options is determinable by the Directors of the Company, but shall not be less than the highest of (i) the closing price of the Company’s shares as stated in the Stock Exchange’s daily quotation sheets on the date of grant of the share options; (ii) the average closing price of the Company’s share as stated in the Stock Exchange’s daily quotation sheets for the five trading days immediately preceding the date of grant; and (iii) the nominal value of the Company’s share. Share options do not confer rights on the holders to dividends or to vote at shareholders’ meetings.

All share-based employee compensation will be settled in equity. The Group has no legal or constructive obligation to repurchase or settle the options.

Share options and respective exercise prices are as follows for the reporting periods presented:

For the year ended 31 March 2013

Type of grantee Employees – In aggregate Other eligible persons – In aggregate Total Weighted average exercise price	At 1 April 2012 1,335,714 340,000 1,675,714 0.5870	Granted – – – –	Outstanding adjustment Exercised Bonus issue – 2,671,428 – 680,000 – 3,351,428 – 0.1957	Expired/ cancelled/ lapsed – – – –	Exercise At period of Exercise 31 March the share price per 2013 Date of grant options share* HK$ 4,007,142 23 February 23 February 0.1916 2011 2011 to 22 February 2014 1,020,000 15 February 15 February 0.2116 2011 2011 to 14 February 2014 5,027,142 0.1957

This reflects the adjusted exercise prices and number of share options which have been granted and remained outstanding after the completion of bonus issue on 18 March 2013.

130

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 March 2012

Type of grantee Employees – In aggregate Other eligible persons – In aggregate Total Weighted average exercise price	At 1 April 2011 8,400,000 2,700,000 11,100,000 0.5894	Granted – – – –	Outstanding adjustment Exercised Consolidated Rights issue *(2,900,000)* (4,950,000) 785,714 (1,300,000)**** (1,260,000) 200,000 (4,200,000) (6,210,000) 985,714 0.5934 0.5870 0.5870	Expired/ cancelled/ lapsed – – – –	Exercise At period of Exercise 31 March the share price per 2012 Date of grant options share** HK$ 1,335,714 23 February 23 February 0.5748 2011 2011 to 22 February 2014 340,000 15 February 15 February 0.6349 2011 2011 to 14 February 2014 1,675,714 0.5870

This reflects the adjusted number of share options which have been granted and remain outstanding after the completion of share consolidation on 24 August 2011 (the “adjustment I”).
** This reflects the adjusted exercise prices and number of share options which have been granted and remain outstanding after the completion of rights issue on 26 September 2011 (the “adjustment II”).
*** For the year ended 31 March 2012, the weighted average closing price of the share immediately before the date on which the option was exercised was HK$0.149. The weighted average closing share price on date of exercise was HK$0.145 (before the adjustment I & II).
**** For the year ended 31 March 2012, the weighted average closing price of the share immediately before the date on which the option being exercised was HK$0.147. The weighted average closing share price on date of exercise was HK$0.139 (before the adjustment I & II).

For the years ended 31 March 2013 and 2012, no employee compensation expenses has been included in the consolidated statement of comprehensive income. No liabilities were recognised due to these share-based payment transactions.

131

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

37. RESERVES – GROUP AND COMPANY

Group

The amounts of the Group’s reserves and the movements therein for the current year and prior years are presented in the consolidated statement of changes in equity on page 27 of the consolidated financial statements.

Company

At 1 April 2011 Profit for the year_(note 12) Issue of shares upon placing Transaction cost attributable to issue of shares upon placing Issue of shares upon rights issue Transaction cost attributable to issue shares upon rights issue Issue of shares upon exercise of share options Capital reduction At 31 March 2012 and 1 April 2012 Loss for the year(note 12)_ Other comprehensive income Change in fair value on available-for-sale financial assets Total comprehensive loss Issue of shares upon bonus issue Transaction cost attributable to issue of shares upon bonus issue At 31 March 2013	Share premium HK$’000 116,612 – 9,975 (279) 88,989 (3,345) 1,016 – 212,968	Capital redemption Accumulated reserve losses HK$’000 HK$’000 278 (147,044) – 3,914 – – – – – – – – – – – – 278 (143,130)	Capital redemption Accumulated reserve losses HK$’000 HK$’000 278 (147,044) – 3,914 – – – – – – – – – – – – 278 (143,130)	Investment revaluation reserve HK$’000 – – – – – – – – –	Share option Contribution reserve surplus HK$’000 HK$’000 (note i) 1,184 175,570 – – – – – – – – – – (452) – – 5,721 732 181,291	Share option Contribution reserve surplus HK$’000 HK$’000 (note i) 1,184 175,570 – – – – – – – – – – (452) – – 5,721 732 181,291	Total HK$’000 146,600 3,914 9,975 (279) 88,989 (3,345) 564 5,721 252,139
	– –	– –	(32,529) –	– (4,580)	– –	– –	(32,529) (4,580)
	– (13,984) (184) 198,800	– – – 278	(32,529) – – (175,659)	(4,580) – – (4,580)	– – – 732	– – – 181,291	(37,109) (13,984) (184) 200,862

Note:

(i) Pursuant to a special resolution passed at the special general meeting of the Company on 24 August 2011, the Company reduced its issue of share capital by an amount of approximately HK$5,721,000 (note 35) and transferred the same amount to the contributed surplus account of the Company.

132

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

38. DISPOSAL OF SUBSIDIARIES

(a) As disclosed in note 11, on 26 March 2013, Rainbow Cosmetic (BVI) Limited, a direct wholly-owned subsidiary of the Company, and an independent third party of and not connected with the Company and its connected persons entered into a sales and purchase agreement (the “Agreement”) in relation to disposal of the Be A Lady Group. Pursuant to the Agreement, the Group disposed of its entire interest in the Be A Lady Group at a cash consideration of approximately HK$2,396,000.

Details of the disposal of the Be A Lady Group were set out in the announcement of the Company dated 26 March 2013.

The net liabilities of the Be A Lady Group as at the disposal date were as follows:

Trade receivables
Prepayments, deposits and other receivables
Cash and bank balances
Accruals, receipts in advance and other payables
Amount due to a shareholder
Provision for tax
Net liabilities disposal of
Non-controlling interests
Gain on disposal of subsidiaries
Total cash consideration
Satisfied by:
Cash consideration
Net cash inflow arising from disposal:
Cash consideration received
Cash and bank balances disposed

HK$’000
1,732
294
1,271
(7,645)
(297)
(1,852)
(6,497)
(148)
9,041
2,396
2,396
2,396
(1,271)
1,125

133

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b)
As disclosed in note 11, on 28 March 2013, Top Empire Limited, an indirect wholly-owned subsidiary of the Company, and an independent third party of and not connected with the Company and its connected persons entered into an agreement in relation to the disposal of entire issued share capital of The Specialists at a consideration of HK$2,094,000.

Details of the disposal of The Specialists were set out in the announcement of the Company dated 28 March 2013.

The net assets of The Specialists as at the disposal date were as follows:

Prepayments, deposits and other receivables Cash and bank balances Accruals, receipts in advance and other payables Net assets disposal of Gain on disposal of a subsidiary Total cash consideration Satisfied by: Cash receivable_(note 22)_ Net cash outflow arising from disposal: Cash and bank balances disposed	HK$’000 615 1,261 (213) 1,663 431 2,094 2,094 (1,261)

(c) On 2 February 2012, the Group entered into an agreement to dispose of the entire issued share capital of Quick Money Finance Limited, a wholly owned subsidiary of the Company, at a cash consideration of HK$1. The disposal was completed on 2 February 2012.

The net liabilities of Quick Money Finance Limited as at the disposal date were as follows:

Amounts due to fellow subsidiaries Net liabilities disposal of Gain on disposal of a subsidiary Total cash consideration Net cash inflow arising from disposal: Cash consideration	HK$’000 (13) (13) 13 – –

134

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

39. RELATED PARTY TRANSACTIONS

(i) Save as disclosed elsewhere in these consolidated financial statements, during the year, the Group had transactions with related parties as follows:

		2013	2012
	Notes	HK$’000	HK$’000
Trade sales	(a),(b)	15	–
Rental income	(c)	6	–

Notes:

(a) For the year ended 31 March 2013, trade sales of approximately HK$15,000 was received from the family member of Mr. Leung Ge On, Andy, an Executive Director.
(b) Sales of good to related parties were made at the Group’s usual list prices.
(c) For the year ended 31 March 2013 rental income of approximately HK$6,000 was received from the Company controlled by the family member of Mr. Leung Ge On, Andy, an Executive Director.
(ii) Key management compensation

Short term employee benefits Share-based payments Other long term benefits	2013 HK$’000 6,904 – 70 6,974	2012 HK$’000 9,227 – 54
		9,281

(iii) At 31 March 2013, certain financial assets, including cash and cash equivalents of approximately HK$2,000 (2012: HK$51,000) which are held by certain Directors of the subsidiaries on trust for the Group.

40. TRANSACTIONS WITH NON-CONTROLLING INTERESTS

Disposal of partial interests in a subsidiary

(a) During the year ended 31 March 2013, the Company disposed of 33.33% of interests in Bright Zone Corporation Limited at a consideration of HK$450,000. The carrying amount of the 33.33% interests in Bright Zone Corporation Limited on the date of disposal was approximately a deficit of HK$11,000. The Group recognised a decrease in non-controlling interests of approximately HK$11,000 and an increase in equity attributable to owners of the parent of approximately HK$461,000. The effect of change in the ownership interests of Bright Zone Corporation Limited on the equity attributable to owners of the Company during the year is summarised as follows:

Carrying amount of non-controlling interests disposed of Consideration received Movement in parent equity	HK$’000 11 450
	461

135

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Acquisition of additional interests in subsidiaries

(b) During the year ended 31 March 2013, the Company acquired of 10% of interests in Top Empire Limited and its subsidiary (the “Top Empire Group”) at a consideration of HK$nil. The carrying amount of the 10% interests in Top Empire Group on the date of acquisition was approximately a deficit of HK$195,000. The Group recognised an increase in non-controlling interests of approximately HK$195,000 and a decrease in equity attributable to owners of the parent of approximately HK$195,000. The effect of change in the ownership interests of Top Empire Group on the equity attributable to owners of the Company during the year is summarised as follows:

Carrying amount of non-controlling interests acquired of Consideration paid Movement in parent equity	HK$’000 (195) –
	(195)

(c) During the year ended 31 March 2012, the Company acquired of 2.5% of interests in The Specialists at a consideration of HK$nil. The carrying amount of the 2.5% interests in The Specialists on the date of acquisition was approximately a deficit of HK$246,000. The Group recognised an increase in noncontrolling interests of approximately HK$246,000 and a decrease in equity attributable to owners of the parent of approximately HK$246,000. The effect of change in the ownership interest of The Specialists on the equity attributable to owners of the Company during the year is summarised as follows:

Carrying amount of non-controlling interests acquired of Consideration paid Movement in parent equity	HK$’000 (246) –
	(246)

41. COMMITMENTS – GROUP

(a) Operating lease commitments – where the Group is the lessee

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

Within one year In the second to fifth year, inclusive	2013 HK$’000 2,383 2,412 4,795	2012 HK$’000 6,427 2,024
		8,451

136

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) Operating lease commitments – where the Group is the lessor

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

Within one year In the second to fifth year, inclusive	2013 HK$’000 267 165 432	2012 HK$’000 500 163
		663

(c) Operating lease commitments – where the Group is the sub-lessor

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

	2013	2012
	HK$’000	HK$’000
Within one year	3	–

Property rental income earned during the year was HK$549,000 (2012: HK$488,000). The properties are expected to generate rental yield of 2.61% (2012: 3.52%) on an ongoing basis. The Group leases its investment properties (note 16) under operating lease arrangement which runs for an average term of two years. The terms of the leases generally also require the tenants to pay security deposits.

42. CORPORATE GUARANTEES – COMPANY

At 31 March 2013, the Company has executed general banking facilities granted to certain subsidiaries of the Company of approximately HK$4,679,000 (2012: HK$39,000,000).

In the opinion of the Directors of the Company, no material liabilities will arise from the above guarantees which arose in the ordinary course of business and the fair value of the corporate guarantees granted by the Group is immaterial.

43. CAPITAL MANAGEMENT

The Group’s capital management objectives are to ensure the Group’s ability to continue as a going concern and to provide an adequate return to shareholders by pricing goods and services commensurately with the level of risk.

The Group actively and regularly reviews its capital structure and makes adjustments in light of changes in economic conditions. The Group monitors its capital structure on the basis of the net debt to adjusted capital ratio. For this purpose net debt is defined as borrowings and obligations under finance leases less cash and bank balances. Adjusted capital comprises all components of equity other than amounts recognised in equity. In order to maintain or adjust the ratio, the Group may adjust the amount of dividends paid to shareholders, issue new shares, return capital to shareholders, raise new debt financing or sell assets to reduce debt.

137

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Borrowings_(note i) Obligations under finance leases(note i) Cash and bank balances Net debt Total equity(note ii)_ Net debt to equity ratio	2013 HK$’000 6,395 910 (54,980) (47,675) 223,810 N/A	2012 HK$’000 (Restated) 21,699 – (35,322)
		(13,623)

		273,390

		N/A

Notes:

(i) Borrowings and obligations under finance leases are detailed in notes 32 and 34 respectively.

(ii) Total equity includes all capital, reserves and non-controlling interests at the end of the reporting period.

44. FINANCIAL INSTRUMENTS

44.1 Financial instruments by category

Held-to- maturity investments HK$’000 31 March 2013 Financial assets Held-to-maturity investments – Available-for-sale financial assets – Trade receivables – Loans and advances – Deposits and other receivables – Held for trading investments – Amount due from a related company – Cash and bank balances – –	Available- for-sale financial assets HK$’000 – 24,006 – – – – – – 24,006	Loans and receivables HK$’000 – – 62 110,824 8,720 – 262 54,980 174,848	Financial assets at fair value through profit or loss HK$’000 – – – – – 5,604 – – 5,604	Total HK$’000 – 24,006 62 110,824 8,720 5,604 262 54,980
				204,458

138

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

31 March 2013 Financial liabilities Accruals and other payables Amounts due to non-controlling interests Borrowings Obligations under finance leases Held-to- maturity investments HK$’000 31 March 2012 Financial assets Held-to-maturity investments 778 Available-for-sale financial assets – Trade receivables – Loans and advances – Deposits and other receivables – Held for trading investments – Amount due from a related company – Cash and bank balances – 778 31 March 2012 Financial liabilities Accruals and other payables Amounts due to non-controlling interests Borrowings	Available- for-sale financial assets HK$’000 – 11,419 – – – – – – 11,419	Financial liabilities measured at amortised cost HK$’000 1,987 150 6,395 910 9,442 Financial assets at fair value through Loans and profit or receivables loss HK$’000 HK$’000 – – – – 1,046 – 97,262 – 3,664 – – 66,132 611 – 35,322 – 137,905 66,132 Financial liabilities measured at amortised cost HK$’000 5,282 447 21,699 27,428		Total HK$’000 1,987 150 6,395 910
				9,442

				Total HK$’000 778 11,419 1,046 97,262 3,664 66,132 611 35,322
				216,234

				Total HK$’000 5,282 447 21,699
				27,428

139

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

44.2 Financial risk factors

The Group is exposed itself to variety of financial risks: market risk (including foreign currency risk, cash flow and fair value interest rate risk and price risk), credit risk and liquidity risk.

Financial risk management is coordinated at the Group’s headquarters, in close co-operation with the Directors of the Company. The overall objective 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.

The Group identifies ways to access financial markets and monitors the Group’s financial risk exposures. Regular reports are provided to the Directors of the Company.

(a) Market risk

(i) Foreign currency risk

Foreign currency risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposures to foreign currency risk arise from investments in equity and debt securities and cash and bank balances, which are primarily denominated in RMB, New Taiwan Dollar (“NTD”) and USD. These are not the functional currencies of the Group entities to which these transactions relate. The Group currently does not have a foreign currency hedging policy.

Summary of exposure

Foreign currency denominated financial assets and liabilities, translated into HK$ at the closing rates, are as follows:

	At	31 March 2013		At	31 March 2012
	Financial	Financial	Net	Financial	Financial	Net
	assets	liabilities	exposure	assets	liabilities	exposure
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
RMB	3,416	–	3,416	1,406	–	1,406
NTD	–	–	–	2,106	–	2,106
USD	10,938	–	10,938	11,221	–	11,221

Sensitivity analysis

In view of the fact that the HK$ is pegged to the USD, the Group’s exposure of foreign currency risk is minimal.

At 31 March 2013, the Group’s sensitivity to a 3% (2012: 1%) and 1% (2012: 3%) increase and decrease in HK$ against NTD and RMB respectively. With all other variable held constant, each of loss after income tax for the year and other components of equity would increase/decrease by approximately HK$nil (2012: HK$21,000) and HK$34,000 (2012: HK$42,000).

The management adjusted the sensitivity rate from 1% to 3% and 3% to 1% for the purpose of assessing foreign currency risk against NTD and RMB. Hence, 3% and 1% (2012: 1% and 3%) are the sensitivity rates used in the current year when reporting foreign currency risk internally to key management personnel and represent management’s assessment of the reasonable possible change in foreign exchange rates.

140

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) Cash flow and fair value interest rate risk

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 certain derivative financial instruments, bank deposits and borrowings. Borrowings bearing variable rates expose the Group to cash flow interest rate risk and fair value interest rate risk. The Group has not used any interest rate swaps in order to mitigate its exposure associated with the cash flow interest rate risk. However, management monitors interest rate exposure and will consider hedging significant interest rate exposure should the need arises.

Sensitivity analysis

The following table illustrates the sensitivity of the Group’s loss after income tax and other components of equity to a possible change in interest rates of +/- 0.5% (2012: +/- 0.5%) higher/lower, 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.

		Increase/
		(decrease)	Increase/
	Higher/(lower)	in profit after	(decrease)
	in interest rate	income tax	in equity
	%	HK$’000	HK$’000
Year ended 31 March 2013	0.5	258	258
	(0.5)	(258)	(258)
Year ended 31 March 2012	0.5	68	68
	(0.5)	(68)	(68)

(iii) Price risk

Equity and debt security price risk relates to the risk that the fair values or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than changes in interest rates and foreign exchange rates). The Group is exposed to equity and debt security price risk arising from individual equity and debt investments classified as financial assets at fair value through profit or loss (note 25) and available-for-sale financial assets (note 20) at 31 March 2013.

The Group’s listed investments are primarily listed in Hong Kong, the United States and Taiwan. Listed investments held in the available-for-sale portfolio have been chosen based on their long term growth potential and are monitored regularly for performance against expectations. The portfolio is diversified in terms of industry distribution, in accordance with the limits set by the Group.

141

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Sensitivity analysis

The following table indicates the approximate change in the Group’s loss after income tax and other components of equity in response to the reasonably possible changes in the relevant stock market prices, to which the Group has significant exposure at the end of the reporting period.

In response to the reasonably possible change in the market price of the listed securities and the underlying shares, the Group’s investment in equity and debt securities has the following exposures:

Year	ended 31 March 2013	ended 31 March 2013	Year	ended 31 March 2012	ended 31 March 2012
Increase/			Increase/
(decrease)	Effect on		(decrease)	Effect on
in securities	profit/loss Effect on other		in securities	profit/loss Effect on other
market	after	components	market	after	components
price	income tax	of equity	price	income tax	of equity
%	HK$’000	HK$’000	%	HK$’000	HK$’000
10	560	2,401	10	6,613	1,142
(10)	(560)	(2,401)	(10)	(6,613)	(1,142)

(b) Credit risk

Credit risk refers to the risk that the borrowers or counterparties may default on their payment obligations due to the Group. These obligations arise from the Group’s lending and investment activities. Generally, the maximum credit risk exposure of financial assets is the carrying amount of the financial assets as shown on the face of the consolidated statement of financial positions which are summarised in note 44.1.

In order to minimise the credit risk, the Group has established policies and systems for the monitoring and control of credit risk. The management has delegated different divisions responsible for determination of credit limits, credit approvals and other monitoring processes to ensure that follow-up action is taken to recover overdue debts. In addition, management reviews the recoverable amount of loans and advances individually and collectively at the end of each reporting period to ensure that adequate provision for impairment are made for irrecoverable amounts. In this regard, management considers that the Group’s credit risk is significantly reduced.

For the year ended 31 March 2013, all the Group’s bank balances are deposited with major banks located in Hong Kong (2012: Hong Kong and Macau).

Sales to customers are made in cash or via major credit cards. The maximum exposure to credit risk is represented by the carrying amount of each trade receivable in the reporting date after deducting any provision for impairment of trade receivables, if any. The Group’s exposure of credit risk arising from trade receivables is set out in note 21 to the consolidated financial statements.

142

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) 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 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.

The Group maintains cash and marketable securities to meet its liquidity requirements for up to 30days 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.

Analysed below is the Group’s remaining contractual maturities for its non-derivative and derivative financial liabilities at 31 March 2013 and 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. Bank loans with a repayment on demand clause are included in the earliest time band regardless of the probability of the banks choosing to exercise their rights within one year after the reporting period. The maturity analysis for other non-derivative financial liabilities is prepared based on the scheduled repayment dates.

The analysis is based on the contractual undiscounted cash flows of the financial liabilities.

Weighted average effective interest rate % At 31 March 2013 Non-derivative financial instruments – Accruals and other payables – – Amounts due to non-controlling interests – – Borrowings – Bank – – Other loan 16.00 – Obligations under finance leases 1.92 Weighted average effective interest rate % At 31 March 2012 Non-derivative financial instruments – Accruals and other payables – – Amounts due to non-controlling interests – – Borrowings – Bank –	On demand HK$’000 1,987 150 3,395 – – 5,532 On demand HK$’000 5,282 447 21,699 27,428	Within one year HK$’000 – – – 3,363 211 3,574 Within one year HK$’000 – – – –	Over one year HK$’000 – – – – 739 739 Over one year HK$’000 – – – –	Total undiscounted cash flows HK$’000 1,987 150 3,395 3,363 950 9,845 Total undiscounted cash flows HK$’000 5,282 447 21,699 27,428	Carrying amount HK$’000 1,987 150 3,395 3,000 910
					9,442

					Carrying amount HK$’000 5,282 447 21,699
					27,428

143

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

44.3 Fair value estimation

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

The fair values of financial assets and financial liabilities with standard terms and conditions are traded in active markets are determined with reference to quoted market bid and ask prices respectively.
The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, a discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives. Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts. Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates.
The fair values of other financial assets and financial liabilities (excluding those described above) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

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

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

At 31 March 2013

Assets Available-for-sale financial assets Financial assets at fair value through profit or loss Total assets At 31 March 2012 Assets Available-for-sale financial assets Financial assets at fair value through profit or loss Total assets	Level 1 HK$’000 22,732 5,604 28,336 Level 1 HK$’000 10,123 66,132 76,255	Level 2 HK$’000 1,274 – 1,274 Level 2 HK$’000 1,296 – 1,296	Level 3 HK$’000 – – – Level 3 HK$’000 – – –	Total HK$’000 24,006 5,604
				29,610

				Total HK$’000 11,419 66,132
				77,551

144

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The fair value of financial instruments traded in active markets is based on quoted market price at the end of the reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those price represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. Instruments included in level 1 comprise primarily trading securities and available-for-sale financial assets.

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and reply as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

There were no transfers between levels 1 and 2 in both years.

The Directors of the Company consider that that carrying amounts of other financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximately their fair values.

45. DIVIDEND

The Board does not recommend the payment of a final dividend for the year ended 31 March 2013 (2012: nil).

46. EVENTS AFTER THE REPORTING PERIOD

(i) On 5 April 2013, the Group entered into a subscription agreement with Crosby Capital Limited (“Crosby Capital”) in relation to the proposed subscription of convertible bonds to be issued by Crosby Capital in the principal amount of HK$19,000,000 at its face value with a cash consideration of HK$14,250,000. The convertible bonds are unsecured, non-interest bearing and maturing on the fifth anniversary of the date of their issue which is 4 October 2015. The convertible bonds carry rights entitling the Company to convert their principal amount into shares in Crosby Capital at conversion price reset on 4 April 2013 at HK$0.78 per share (subject to further adjustment for the end of every 6-month period). The Company may request Crosby Capital to redeem the convertible bonds at the early redemption amount on or after the third anniversary year from the date of their issue. Details of the subscription of convertible bonds were set out in the announcement of the Company dated 5 April 2013.
(ii) On 2 May 2013, the Company proposed to seek approvals from the shareholders for capital reorganisation which comprised of share consolidation of every 20 issued and unissued shares of par value of HK$0.01 each in the share capital of the Company into 1 consolidated share of par value of HK$0.20 each. Details of the capital reorganisation were set out in the announcement and circular of the Company dated 2 May 2013 and 24 May 2013 respectively. On 17 June 2013, the abovesaid capital reorganisation was approved by a special resolution. Details of the approval of capital reorganisation were set out in the announcement of the Company dated 17 June 2013.

47. COMPARATIVE FIGURES

Certain comparative figures have been reclassified to comply with the new requirements of the new and revised HKFRSs and to separately reflect the results of the continuing operations and discontinued operations in order to conform with the current year’s presentation.

145

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. UNAUDITED FINANCIAL STATEMENTS OF THE GROUP FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

Set out below are the audited financial statements of the Group for the six months ended 30 September 2013 together with the accompanying notes as extracted from the interim report of the Company for the six months ended 30 September 2013.

Unaudited Condensed Consolidated Statement of Comprehensive Income

Notes Revenue 2 Cost of sales Gross profit Investment and other income 2 Other gains and losses, net 2 Servicing, selling and distribution costs Administrative expenses Cumulative (losses)/gains reclassified from equity to profit or loss upon disposal of available-for-sale financial assets Other operating expenses Operating profit/(loss) Finance costs Share of results of associate 19 Profit/(Loss) before income tax 4 Income tax credit (expenses) 5 Profit/(Loss) for the period Other comprehensive income/(loss): Changes in fair value of available- for-sale financial assets Release of investment revaluation reserve upon disposal of available- for-sale financial assets Other comprehensive income/(loss) for the period Total comprehensive income/(loss) for the period	For the three months ended 30 September 2013 2012 (Restated) HK$’000 HK$’000 9,449 15,233 (955) (3,830) 8,494 11,403 244 169 702 1,053 (1,217) (1,312) (5,325) (4,924) (289) 49 (479) 5,586 2,130 12,024 (197) (88) 56 (1,000) 1,989 10,936 – (494) 1,989 10,442 (9,479) (6,101) 289 (49) (9,190) (6,150) (7,201) 4,292	For the six months ended 30 September 2013 2012 (Restated) HK$’000 HK$’000 16,044 24,890 (1,298) (5,269) 14,746 19,621 395 357 4,129 (56,798) (2,339) (3,942) (10,354) (11,395) (10,388) (104) (513) 3,039 (4,324) (49,222) (300) (196) 89 – (4,535) (49,418) – 6,115 (4,535) (43,303) (2,802) (6,260) 10,388 104 7,586 (6,156) 3,051 (49,459)	For the six months ended 30 September 2013 2012 (Restated) HK$’000 HK$’000 16,044 24,890 (1,298) (5,269) 14,746 19,621 395 357 4,129 (56,798) (2,339) (3,942) (10,354) (11,395) (10,388) (104) (513) 3,039 (4,324) (49,222) (300) (196) 89 – (4,535) (49,418) – 6,115 (4,535) (43,303) (2,802) (6,260) 10,388 104 7,586 (6,156) 3,051 (49,459)
			19,621 357 (56,798) (3,942) (11,395) (104) 3,039
			(49,222) (196) –
			(49,418) 6,115
			(43,303)
			(6,260) 104
			(6,156)
			(49,459)

146

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes Profit/(Loss) attributable to:– Owners of the Company Non-controlling interests Total comprehensive income/(loss) attributable to:– Owners of the Company Non-controlling interests Earnings/(Loss) per share attributable to owners of the Company Basic and Diluted 7	For the three months ended 30 September 2013 2012 (Restated) HK$’000 HK$’000 2,051 10,559 (62) (117) 1,989 10,442 (7,139) 4,409 (62) (117) (7,201) 4,292 HK1.85 cents HK10.07 cents	For the six months ended 30 September 2013 2012 (Restated) HK$’000 HK$’000 (4,440) (43,037) (95) (266) (4,535) (43,303) 3,146 (49,193) (95) (266) 3,051 (49,459) HK(3.99) cents HK(41.03) cents	For the six months ended 30 September 2013 2012 (Restated) HK$’000 HK$’000 (4,440) (43,037) (95) (266) (4,535) (43,303) 3,146 (49,193) (95) (266) 3,051 (49,459) HK(3.99) cents HK(41.03) cents
			(43,303)

			(49,193) (266)
			(49,459)

			HK(41.03) cents

147

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Unaudited Condensed Consolidated Statement of Financial Position

Notes ASSETS Non-current assets Property, plant and equipment 8 Investment properties Interests in associates 19 Available-for-sale investments 16 Prepayments, deposits and other receivables Loans and advances 10 Current assets Available-for-sale investments 16 Trade receivables 9 Prepayments, deposits and other receivables Loans and advances 10 Inventories Financial assets at fair value through profit or loss Amount due from a related company 17 Cash and bank balances Tax recoverable Assets classified as held for sale 18	As at 30 September 2013 (Unaudited) HK$’000 3,188 22,100 83 19,955 – 66,954 112,280 22,709 129 7,184 86,537 327 – 262 10,923 84 128,155 – 128,155	As at 31 March 2013 (Audited) HK$’000 2,949 22,100 – 24,006 32 38,648
		87,735
		– 62 8,883 72,176 263 5,604 262 54,980 85
		142,315 4,100
		146,415

148

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes LIABILITIES Current liabilities Accruals, receipts in advance and other payables Loan from associates 19 Amounts due to non-controlling interests Borrowings Provision for tax Obligations under finance leases Net current assets Total assets less current liabilities Non-current liabilities Deferred tax liabilities Obligations under finance leases Net assets EQUITY Equity attributable to owners of the Company Share capital 11 Reserves Non-controlling interests Total equity	As at 30 September 2013 (Unaudited) HK$’000 4,751 175 150 3,209 112 214 8,611 119,544 231,824 188 599 787 231,037 1,258 228,893 230,151 886 231,037		As at 31 March 2013 (Audited) HK$’000 2,574 – 150 6,395 112 195
			9,426
			136,989
			224,724
			199 715
			914
			223,810

			20,975 201,854
			222,829 981
			223,810

149

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Statement of Changes in Equity (Unaudited)

For the six months ended 30 September 2013

		Equity attributable to the owners of the Company	Equity attributable to the owners of the Company	Equity attributable to the owners of the Company	Equity attributable to the owners of the Company			Total equity HK$’000 265,262 (43,303) (6,260) 104
Share capital HK$’000 6,991 – – – – – 6,991 20,975 – – – – – – (19,927) – 210 1,258	Share premium HK$’000 212,968 – – – – – 212,968 198,800 – – – – – – 19,927 (249) 4,215 222,693	Capital redemption Accumulated reserve losses HK$’000 HK$’000 278 (180,474) – (43,037) – – – – – (43,037) – 498 278 (223,013) 278 (193,397) – – – (4,440) – – – – – – – (4,440) – – – – – – 278 (197,837)	Capital reserves HK$’000 28,280 – – – – – 28,280 28,546 – – – – – – – – – 28,546	Investment revaluation reserve HK$’000 (148) – (6,260) 104 (6,156) – (6,304) (14,396) – – – (2,802) 10,388 7,586 – – – (6,810)	Revaluation reserve HK$’000 14,040 – – – – – 14,040 – – – – – – – – – – –	Share option reserve HK$’000 732 – – – – – 732 732 – – – – – – – – – 732	Contributed surplus HK$’000 181,291 – – – – – 181,291 181,291 – – – – – – – – – 181,291
								(49,459) –
								215,803

								223,810 – (4,535) – (2,802) 10,388
								3,051 – (249) 4,425
								231,037

150

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Statement of Cash Flow

Net cash generated from/(used in) operating activities Net cash (used in) investing activities Net cash used before financing activities Net cash generated from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at the end of period	For the six months ended 30 September 2013 2012 (Unaudited) (Unaudited) HK$’000 HK$’000 (25,595) 27,507 (22,970) (34,284) (48,565) (6,777) 4,508 (758) (44,057) (7,535) 54,980 35,322 10,923 27,787

151

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Condensed Consolidated Interim Accounts

1. BASIS OF PREPARATION

This interim financial report has been prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the GEM of the Stock Exchange (the “GEM Listing Rules”) and the Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

This interim financial report contains condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the Group’s financial statements for the year ended 31 March 2013. The condensed consolidated interim financial statements and notes thereon do not include all of the information required for full set of financial statements prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which include all Hong Kong Financial Reporting Standards, HKASs and Interpretations).

Application of new and revised HKFRSs

HKFRS 1 (Amendment)	Severe Hyperinflation and Removal of
	Fixed Dates for First-time Adopters
HKFRS 7 (Amendment)	Disclosures – Transfer of Financial Assets
HKAS 12 (Amendment)	Deferred Tax: Recovery of Underlying Asset

The adoption of the above amendments has had no material impact on the Group’s results of operations and financial position.

The Group has not adopted earlier or applied the following amendments, new and revised HKFRSs that have been issued but not yet effective, in this interim financial report.

HKFRSs (Amendments) Annual Improvements to HKFRSs 2009 – 2011 Cycle[2] HKFRS 1 (Amendments) Government Loans[2] HKFRS 7 (Amendments) Disclosures – Offsetting Financial Assets and Financial Liabilities[2] HKFRS 7 and HKFRS 9 Mandatory Effective Date of HKFRS 9 and Transition Disclosures[4] (Amendments) HKFRS 9 Financial Instruments[4] HKFRS 10 Consolidated Financial Statements[2] HKFRS 11 Joint Arrangements[2] HKFRS 12 Disclosure of Interests in Other Entities[2] HKFRS 13 Fair Value Measurement[2] HKFRS 10, HKFRS 11 and Consolidated Financial Statements, Joint Arrangements and Disclosure of HKFRS 12 (Amendments) Interests in Other Entities: Transition Guidance[2] HKFRS 10, HKFRS 12 and Investment Entities[3] HKAS 27 (Amendments) HKAS 1 (Amendments) Presentation of Items of Other Comprehensive Income[1] HKAS 19 (as revised in 2011) Employee Benefits[2] HKAS 27 (as revised in 2011) Separate Financial Statements[2] HKAS 28 (as revised in 2011) Investments in Associates and Joint Ventures[2] HKAS 32 (Amendments) Offsetting Financial Assets and Financial Liabilities[3] HKAS 36 (Amendments) Recoverable Amount Disclosures for Non-Financial Assets[3] HK(IFRIC) – Int 20 Stripping Costs in the Production Phase of a Surface Mine[2] HK(IFRIC) – Int 21 Levies[3]

152

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1 Effective for annual periods beginning on or after 1 July 2012.

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

3 Effective for annual periods beginning on or after 1 January 2014.

4 Effective for annual periods beginning on or after 1 January 2015.

The Group is the process of assessing the potential impact of these new HKFRSs but is not yet in position to determine whether these new HKFRSs will have a significant impact on how its results of operations and financial position are prepared and presented.

2. REVENUE, OTHER REVENUE AND OTHER GAINS/(LOSSES) – NET

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.

Sales of goods are recognised upon transfer of the significant risks and rewards of ownership to the customer. This is usually taken as the time when the goods are delivered and the customer has accepted the goods.

Revenue arising from money lending is recognised on a time proportion basis taking into account the principal outstanding and the effective interest rate applicable.

Rental income is recognised on a straight-line basis over the term of the lease.

Interest income is recognised on a time-proportion basis using the effective interest method.

Corporate bonds coupon is accrued on a time basis, by reference to the notional amount at the annual coupon rate.

Dividend is recognised when the right to receive payment is established.

Change in fair value of financial assets at fair value through profit or loss is based on the current market price (mark-to-market).

Revenue Beauty services and sale of beauty products Clinical services Money lending Rental income from investment properties Retails services income	For the three months ended 30 September 2013 2012 (Unaudited (Unaudited) and restated) HK$’000 HK$’000 – 2,711 – 6,650 7,811 5,300 185 125 1,453 447 9,449 15,233	For the six months ended 30 September 2013 2012 (Unaudited (Unaudited) and restated) HK$’000 HK$’000 – 3,452 – 9,981 13,731 10,760 370 250 1,943 447 16,044 24,890	For the six months ended 30 September 2013 2012 (Unaudited (Unaudited) and restated) HK$’000 HK$’000 – 3,452 – 9,981 13,731 10,760 370 250 1,943 447 16,044 24,890
			24,890

153

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Other revenue and other gains/(losses), plus unallocated income – net Dividend income from listed investments Fair value gains/(losses) on financial assets at fair value through profit or loss Corporate Bonds Coupon Banks interest income Retails income Retailing service consignment income Others	For the three months ended 30 September 2013 2012 (Unaudited (Unaudited) and restated) HK$’000 HK$’000 9 21 702 1,053 128 158 17 – – (15) 6 2 84 3 946 1,222	For the six months ended 30 September 2013 2012 (Unaudited (Unaudited) and restated) HK$’000 HK$’000 59 61 4,129 (56,798) 131 290 18 1 – – 16 2 171 3 4,524 (56,441)

3. SEGMENT INFORMATION

The Group determines its operating segments based on the reports reviewed by the chief executive directors and the management staff that are used to make strategic decisions.

An analysis of the Group’s reportable operating segments results before income tax for the period is as follows:

For the six months ended 30 September 2013

(Unaudited)

Beauty services and sale of beauty products HK$’000 Segment revenue: Revenue from external customers – Other revenue and other gains/(losses) – net – – Segment results – Unallocated income Unallocated expenses Cumulative (loss) reclassified from equity to profit or loss upon disposal of available-for- sale financial assets – Operating loss Finance costs Share of results of associates Loss before income tax Income tax credit Loss for the period	Clinical services HK$’000 – – – – –	Property investment HK$’000 370 – 370 333 –	Securities and bonds investment HK$’000 – 4,115 4,115 968 (10,388)	Money lending HK$’000 13,731 – 13,731 9,620 –	Retail services HK$’000 1,943 16 1,959 398 –	Total HK$’000 16,044 4,131 20,175 11,319 380 (5,635) (10,388) (4,324) (300) 89 (4,535) – (4,535)

154

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2012

(Unaudited and restated)

Beauty services and sale of beauty products HK$’000 Segment revenue: Revenue from external customers 3,452 Other revenue and other gains/(losses) – net – 3,452 Segment results 3,272 Unallocated income Unallocated expenses Cumulative (loss) reclassified from equity to profit or loss upon disposal of available-for- sale financial assets – Operating loss Finance costs Share of results of associates Loss before income tax Income tax credit Loss for the period	Clinical services HK$’000 9,981 – 9,981 (1,062) –	Property investment HK$’000 250 – 250 55 –	Securities and bonds investment HK$’000 – (56,447) (56,447) (56,839) (104)	Money lending HK$’000 10,760 3 10,763 11,268 –	Retail services HK$’000 447 2 449 (280) –	Total HK$’000 24,890 (56,442)
						(31,552)

						(43,586)

						1 (5,533) (104)
						(49,222) (196) –
						(49,418) 6,115
						(43,303)

Geographical information

Revenue from external customers by geographical markets:

Hong Kong Macau	For the six months ended 30 September 2013 2012 (Unaudited (Unaudited) and restated) HK$’000 HK$’000 16,044 19,001 – 5,889 16,044 24,890	For the six months ended 30 September 2013 2012 (Unaudited (Unaudited) and restated) HK$’000 HK$’000 16,044 19,001 – 5,889 16,044 24,890
		24,890

155

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. PROFIT/(LOSS) BEFORE INCOME TAX

Profit/(Loss) before income tax is stated after charging/(crediting) the following:

	For the three months	For the three months	For the six months	For the six months
	ended 30 September		ended 30 September
	2013	2012	2013	2012
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	HK$’000	HK$’000	HK$’000	HK$’000
Auditors’ remuneration	104	104	208	207
Cost of inventories recognised
as expenses	955	321	1,297	321
Depreciation	199	500	398	1,064
Net exchange (gain)/loss	(34)	(3)	26	73
Minimum lease payments under
operating lease	572	1,694	1,120	3,263
Provision/(Reversal of) for
impairment on loans	284	(3,953)	284	(1,490)
Written back of impairment on
Loan to associate	–	(1,000)	–	(1,000)
Rental income net of outgoings in
respect of investment properties	167	(94)	333	(170)
Bad debts written off	–	1,362	–	1,369

5. INCOME TAX (CREDIT)/EXPENSES

Current tax Hong Kong – Charge for the period – Under/(Over) provision in prior years Deferred tax – Current period – Under/(Over) provision in prior years Income tax (credit)/expenses	For the three months ended 30 September 2013 2012 (Unaudited) (Unaudited) HK$’000 HK$’000 – – – 494 – – – – – 494	For the six months ended 30 September 2013 2012 (Unaudited) (Unaudited) HK$’000 HK$’000 – – – 494 – – – (6,609) – (6,115)

156

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. INTERIM DIVIDEND

The directors do not recommend the payment of an interim dividend for the six months ended 30 September 2013 (2012: HK$Nil).

7. EARNINGS/(LOSS) PER SHARE

The calculation of basic earnings per share for the three months ended 30 September 2013 is based on the profit attributable to shareholders of approximately HK$2,051,000 (2012: approximately HK$10,559,000) and the weighted average number of 111,051,187 ordinary shares in issue during the period (2012: 104,879,631 (restated)).

The calculation of basic loss per share for the six months ended 30 September 2013 is based on the loss attributable to shareholders of approximately HK$4,440,000 (2012: approximately HK$43,037,000) and the weighted average number of 111,051,187 ordinary shares in issue during the period (2012: 104,879,631 (restated) shares in issue).

The calculation of diluted earnings per share for the three months ended 30 September 2013 is based on the profit attributable to shareholders of approximately HK$2,051,000 (2012: approximately HK$10,559,000) and the weighted average number of 111,051,187 ordinary shares for the purpose of diluted earnings per share during the period (2012: 104,879,631 (restated)).

The calculation of diluted loss per share for the six months ended 30 September 2013 is based on the loss attributable to shareholders of approximately HK$4,440,000 (2012: approximately HK$43,037,000) and the weighted average number of 111,051,187 ordinary shares for the purpose of diluted loss per share during the period (2012: 104,879,631 (restated) shares).

8. PROPERTY, PLANT AND EQUIPMENT

At beginning of the period Additions Changes in fair value of land and building Disposals Depreciation	As at 30 September 2013 (Unaudited) HK$’000 2,949 637 – – (398) 3,188	As at 31 March 2013 (Audited) HK$’000 88,517 2,944 – (87,448) (1,064)
		2,949

9. TRADE RECEIVABLES

The aging analysis of trade receivables is as follows:

Neither past due nor impaired	At 30 September 2013 (Unaudited) HK$’000 129 129	At 31 March 2013 (Audited) HK$’000 62
		62

157

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. LOANS AND ADVANCES

Loans and advances to customers Term loans Less: impairment allowances Loans and advances to customers – net Ageing analysis of loans and advances to customers: Within one year Over one year but within five years Over five years	At 30 September 2013 (Unaudited) HK$’000 158,462 (4,971) 153,491 At 30 September 2013 (Unaudited) HK$’000 86,537 47,772 19,182 153,491	At 31 March 2013 (Audited) HK$’000 115,511 (4,687) 110,824 At 31 March 2013 (Audited) HK$’000 72,176 20,903 17,745 110,824

Reconciliation of provision for impairment on loans and advances to customers:

Balance at the beginning of the period Provision for impairment on loans Reversal of impairment recognised in prior year Amount written off during the year Balance at the end of the period	At 30 September 2013 (Unaudited) HK$’000 4,687 284 – – 4,971	At 31 March 2013 (Audited) HK$’000 11,349 791 (1,767) (5,686) 4,687

158

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. ISSUED CAPITAL

Authorized: Ordinary shares of HK$0.01 each Issued and fully paid: Ordinary shares of HK$0.01 each	At 30 September 2013 (Unaudited) No. of shares HK$’000 30,000,000,000 300,000 125,839,631 1,258	At 31 March 2013 (Audited) No. of shares HK$’000 30,000,000,000 300,000 2,097,592,629 20,975	At 31 March 2013 (Audited) No. of shares HK$’000 30,000,000,000 300,000 2,097,592,629 20,975

			20,975

12. SHARE OPTION SCHEMES

On 24 September 2001, the shareholders of the Company approved a share option scheme (the “Scheme”) under which its board of directors may, at its discretion, offer full-time or part time employees and executive, nonexecutive and independent non-executive directors of the Company and/or any of its subsidiaries, options to subscribe for shares in the Company. The maximum number of shares in respect of which options may be granted under the Scheme shall not exceed 30% of the issued share capital of the Company. The subscription price will be determined by the Company’s board of directors and will be the highest of (i) the nominal value of the shares, (ii) the quoted closing price of the Company’s shares on the date of offer of the options, and (iii) the average of the quoted closing prices of the Company’s shares on the five trading days immediately preceding the date of offer of the options.

On 4 January 2011, the shareholders of the Company approved to terminate the Scheme and adopted a new share option scheme (“the New Scheme”) under which its Board of Directors may, at its discretion, offer full-time or part time employees and executive, non-executive and independent non-executive directors of the Company and/or any of its subsidiaries, suppliers, customers, advisors or consultants options to subscribe for shares of the Company. The maximum number of shares which may be allotted and issued upon exercise of all outstanding options granted and yet to be exercised under the New Scheme and any other share option scheme adopted by the Group shall not exceed 30 per cent. of the share capital of the Company in issue from time to time. The subscription price will be determined by the Company’s Board of Directors and will be the highest of (i) the nominal value of the shares, (ii) the quoted closing price of the Company’s shares on the date of offer of the options, and (iii) the average of the quoted closing prices of the Company’s shares on the five trading days immediately preceding the date of offer of the options.

The New Scheme is valid for ten years from the date of adoption.

All share-based employee compensation will be settled in equity. The Group has no legal or constructive obligation to repurchase or settle the options.

159

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Share options and respective exercise prices are as follows for the reporting period presented:

Type of grantee Eligible person – In aggregate Employees – In aggregate	At 1 April 2013 1,020,000 4,007,142 5,027,142	Adjustments Adjustments for share for rights 30 Exercised consolidation issue – (969,000) – – (3,806,785) – – (4,775,785) –	At Exercise Exercise September period of the price 2013 Date of grant share options per share* HK$ 51,000 15 Feb 2011 15/2/2011 – 4.232 14/2/2014 200,357 23 Feb 2011 23/2/2011 – 3.832 22/2/2014 251,357

These reflect the adjusted exercise prices and number of share options which have been granted and are outstanding after the completion of the share consolidation of every twenty existing share into one consolidated share on 17 June, 2013.

The fair values of options granted were determined using the Black-Scholes valuation model.

For the period ended 30 September 2013, no employee compensation expense has been include in the consolidated statement of comprehensive income (31 March 2013: Nil).

No liabilities were recognised due to share-based payment transactions.

13. COMMITMENTS

(i) Operating lease commitments – where the Group as lessee

As at 30 September 2013, the Group’s total future minimum lease payments under non-cancellable operating leases are payable as follows:

Within one year In the second to fifth years inclusive	As at 30 September 2013 (Unaudited) HK$’000 5,847 5,211 11,058	As at 31 March 2013 (Audited) HK$’000 2,383 2,412
		4,795

160

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) Operating lease commitments – where the Group as lessor

As at 30 September 2013, the Group’s total future minimum lease receipts under non-cancellable operating leases are receivable as follows:

Within one year In the second to fifth year, inclusive	As at 30 September 2013 (Unaudited) HK$’000 706 425 1,131	As at 31 March 2013 (Audited) HK$’000 267 165
		432

(iii) Operating lease commitments – where the Group is the sub-lessor

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

		As at	As at
	30	September	31 March
		2013	2013
		(Unaudited)	(Audited)
		HK$’000	HK$’000
Within one year		3	3

14. RELATED PARTIES TRANSACTIONS

During the financial period under review, the Group had transactions with related parties as follows:

	For the three months	For the three months	For the six months	For the six months
	ended 30 September		ended 30 September
	2013	2012	2013	2012
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
	HK$’000	HK$’000	HK$’000	HK$’000
Rental income	9	–	18	–

For the financial period ended 30 September 2013, rental income of approximately HK$18,000 was received from the Company controlled by the family member of Mr. Leung Ge On, Andy, an Executive Director.

161

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. COMPARATIVE FIGURES

Certain comparative figures have been re-stated to conform with the current period presentation to align with the financial statements presentation of the Group.

16. AVAILABLE-FOR-SALE INVESTMENTS

Listed shares, at fair value_(Note a) Real Estate funds, at fair value(Note b) Corporate bonds, at fair value(Note c)_ Analysed for reporting purposes as: – Current assets – Non-current assets	As at 30 September 2013 (Unaudited) HK$’000 41,401 1,263 – 42,664 22,709 19,955 42,664	As at 31 March 2013 (Audited) HK$’000 11,309 1,274 11,423
		24,006

		– 24,006
		24,006

Note a: The amount represents 13.93% equity interests in the issued ordinary shares of China 3D Digital Entertainment Limited (“China 3D”). The principal activities of China 3D and its subsidiaries are engaged in the entertainment business, with a focus in television programme and film production, distribution, distribution licensing, cinema operation and management in both Hong Kong and the PRC, artists management, money lending activities and acquisition of corporate bonds, preference shares as well as investment in securities.
Note b: The unlisted investment fund represent the Group’s investment in China Real Estate Development II Fund, which invest in private equity real estate development projects in the People’s Republic of China through CAPITALAND China Development Fund II Limited, managed by CAPITALAND China Development Fund Management PTE Ltd. The fair value of the investment is determined by reference to the fund net asset values at the end of the reporting period.
Note c: For the year ended 31 March 2013, the debt securities listed outside Hong Kong and denominated in the United States dollar (“USD”) comprised of bonds (i) amounted to approximately HK$3,508,000 carrying at fixed rates ranging from 6.625% to 10.25% per annum with maturity date ranging from September 2015 to April 2017; (ii) amounted to approximately HK$3,097,000 carrying at fixed rate from 7.875% to 10.125% with perpetual maturity date; and (iii) amounted to approximately 1,623,000 bond initially carrying at fixed interest rates at 7.25% per annum till May 2016 and later carrying at floating interest rate per annum with maturity date in November 2099.

As such, they were classified as non-current assets. The Group is entitled to the interest income from the above debt securities semi-annually.

For the year ended 31 March 2012, the debt securities comprised of (i) amounted to approximately HK$4,496,000 bonds carrying at fixed interest rates ranging from 7.625% to 9.5% per annum with maturity date ranging from January 2015 to April 2017 and (ii) amounted to approximately HK$1,528,000 bond initially carrying at fixed interest rates at 7.25% per annum till May 2016 and later carrying at floating interest rate per annum with maturity date in November 2099.

162

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17. AMOUNT DUE FROM A RELATED COMPANY

Particulars of the amount due from a related company is as follows:

Name One Dollar Productions Limited	Highest balance outstanding during 30 September the Period 2013 HK$’000 HK$’000 262 262 262 262	31 March 2013 HK$’000 262
		262

Amount due from a related company is unsecured, interest free and repayable on demand.

18. ASSETS HELD FOR SALE

Balance at the beginning of the year Transfer from investment properties (Note 8) Disposals Balance at the end of the period	At 30 September 2013 (Unaudited) HK$’000 4,100 – (4,100) –	At 31 March 2013 (Audited) HK$’000 – 4,100 –
		4,100

On 4 February 2013, Top Euro Limited, a wholly-owned subsidiary of the Company, entered into a preliminary sale and purchase agreement with an independent third party in relation to the disposal of an investment property at a consideration of HK$4,100,000.

Up to 31 March 2013, the disposal of the investment property has not been completed. The disposal of the investment property is expected to be completed within the next 12 months. In accordance with HKFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”, the investment property has been presented as assets classified as held for sale in the consolidated statement of financial position as at 31 March 2013.

163

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

19. INTERESTS IN ASSOCIATES

Cost of investment in associates – Unlisted Share of post-acquisition profits and other comprehensive income, net of dividend received Loans from associates	As at 30 September 2013 (Unaudited) HK$’000 38 45 83 (175)	As at 31 March 2013 (Audited) HK$’000 – –
		–
		–

The amounts due from/(to) associate are unsecured, interest fee and recoverable/repayable on demand.

Particulars of the associates at 30 September 2013 are as follows:

	Particulars of		Proportion of	Proportion of
	issued and	Country of	voting
Name of associates	fully paid capital	incorporation	power	held	Principal activities
			Directly	Indirectly
One Dollar Movies	10 ordinary shares	Hong Kong	40%	–	Movies production
Productions Limited	of HK$1 each
One Dollar	10,000 ordinary shares	Hong Kong	40%	–	Movies distribution
Distribution Limited	of HK$1 each
Perfect Talent	1 ordinary share	Hong Kong	–	40%	Movies production
Limited	of HK$1 each
中山市偉常企業諮詢	30 ordinary shares	the PRC	–	30%	Consultancy service
有限公司	of HK$1 each				on finance assistance

The movement in loans to associates during the year is as follows:

Loans to associates: Balance at the beginning of the year Additions Repayment of a loan Balance at the end of the period/year	As at 30 September 2013 (Unaudited) HK$’000 12,600 – – 12,600	As at 31 March 2013 (Audited) HK$’000 13,600 – (1,000)
		12,600

164

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The movement in the provision for impairment of loans to associates is as follows:

Balance at the beginning of the year Reversal of provision for impairment of a loan to an associate Provision for impairment of a loan to an associate Balance at the end of the period/year	2013 HK$’000 12,600 – – 12,600	2012 HK$’000 13,600 (1,000) – 12,600

The summarised financial information of the Group’s associates extracted from their management account is as follows:

Total revenue Total profit/(loss) for the year The Group’s share of profit of associate The Group’s share of other comprehensive income	2013 HK$’000 486 276 89 –	2012 HK$’000 260 (273) – –

20. CONTINGENT LIABILITIES

As at 30 September 2013, the Company has executed corporate guarantees to third parties with respect to general banking facilities granted to the subsidiaries of the Company of approximately HK$4,679,000 (2012: $39,000,000).

On 9 October 2012, a Tenancy Agreement was jointly entered into between Wit Way, as landlord and Top Euro Limited, an indirect wholly-owned subsidiary of the Company and Mark Glory International Enterprise Limited, an indirect wholly-owned subsidiary of China 3D Digital Entertainment Limited, both as tenants, in relation to the lease of the Premises. The duration of the Tenancy Agreement is for three years commencing from 1 November 2012 to 31 October 2015 with a monthly rental of HK$220,000 inclusive of management charges (equivalent to HK$2,640,000 per annum), but exclusive of government rates and all other outgoings. The rent, government rates and all outgoings of the Premises shall be paid by the Tenants in equal shares.

If either party fails to fulfill their leasing obligations under the agreement, the other party will obligate to pay the other’s party outstanding Contingent Rental Liability amounting to HK$1,320,000 per annum. The taking up of the Contingent Rental Liability constitutes a provision of financial assistance under the GEM Listing Rules.

21. EVENTS AFTER THE REPORTING PERIOD

On 23 October 2013, the Group has exercised the conversion rights attached to a short term investment of Crosby Capital Limited’s convertible bonds due 2015 in an aggregate principal amount of HK$19 million, which was acquired on 5 April 2013. After such conversion, 24,358,974 ordinary shares of Crosby Capital Limited (representing approximately 8% of the entire issued share capital of Crosby Capital Limited) were held by the Group.

165

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. INDEBTEDNESS STATEMENT

As at the close of business on 31 October 2013 (being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular), the Group had outstanding indebtedness denominated in Hong Kong dollars of approximately HK$15 million. The indebtedness comprised of secured bank loan of approximately HK$3.2 million, unsecured loans of HK$6 million from independent third parties, unsecured loans of HK$5 million from related parties, and obligations under finance leases of approximately HK$0.8 million.

As at the close of business on 31 October 2013, the Company provided a corporate guarantee up to a maximum amount of HK$25 million to a bank for general banking facilities granted to Top Euro Limited, an indirect wholly owned subsidiary of the Group. As at 31 October 2013, no facilities had been utilised as the pledge had been disposal of in January 2013 and the relevant bank facility is in the process to be withdrawn by the bank. Moreover, the investment property of Thailand (HK) Plastic Surgery Service Limited had been pledged to a bank for a bank guarantee up to a maximum amount of HK$700,000. As at 31 October 2013, an amount of HK$678,600 had been utilised as a security deposit for a 3-year lease agreement for an office premises at 7/F., Zung Fu Industrial Building, 1067 King’s Road, Quarry Bay, Hong Kong.

As at 31 October 2013, the Group had no material contingent liabilities arising in the ordinary course of business.

Save as aforesaid and apart from intra-group liabilities and normal trade and other payables, the Group did not, at as the close of business on 31 October 2013, have any mortgage, charges, debt securities issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptance credits, hire purchase or finance lease commitments, guarantees or other material contingent liabilities.

Save as disclosed above, the Directors have confirmed that there have been no material changes in the indebtedness and contingent liabilities of the Group since 31 October 2013, up to and including the Latest Practicable Date.

5. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the financial resources available to the Group, including the existing cash and bank balances, the estimated net proceeds from the Open Offer and other internal resources available to the Group such as interest income and any repayment of loan receivables from borrowers, the Group has sufficient working capital for its present requirements and for at least 12 months from the date of publication of this circular.

166

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. MATERIAL CHANGE

The Directors confirm that there had been 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 consolidated financial statements of the Group were made up, up to and including the Latest Practicable Date.

The Directors also confirm that they are not aware of any material adverse change to the financial or trading position of the Group since 31 March 2013, being the date to which the latest published audited financial statements of the Company have been made up to.

7. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

As mentioned in the annual report 2013, the Group’s turnover for the financial year ended 31 March 2013 was approximately HK$41.7 million, representing a decrease of approximately 21.8% when compared with the corresponding period in 2012. The loss attributable to owners of the Company for the year ended 31 March 2013 was approximately HK$35.1 million whilst the loss attributable to owners of the Company was approximately HK$9.0 million in 2012.

The Group’s turnover for the six months ended 30 September 2013 was approximately HK$16 million, representing a decrease of approximately 35.5% when compared with the corresponding period in 2012. The loss attributable to owners of the Company for the six months ended 30 September 2013 and the corresponding period in 2012 was approximately HK$4.4 million and HK$43 million respectively.

Property Investment

The turnover of this business segment was approximately HK$0.6 million for the financial year ended 31 March 2013 and approximately HK$0.4 million for the six months ended 30 September 2013.

The rental income generated from industrial properties acquired last financial year continued provide steady income stream to the Group for the financial year ended 31 March 2013. The Company expects the turnover from this business segments will steadily contribute to the Group’s revenue.

Securities and bonds Investments

An amount of approximately HK$56.3 million has recorded as fair value losses on financial assets at fair value through profit or loss for the year ended 31 March 2013. An amount of approximately HK$10.3 million has recorded as loss from equity to profit or loss up on disposal of available for sale financial assets for the six months ended 30 September 2013.

With the unpredictable economic situation, heightening concerns of sovereign debt crisis spread across Europe and concerns of a hard landing in economy of the PRC, the stock market was adversely affected. The result of this business segment for the six months ended 30 September 2013 was therefore negatively affected.

167

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

In view of the volatility of the global economic environment, driven by the European sovereign debt crises and the economic downturn in the United States continues in the financial year, the Company will take more conservative step to invest in securities and bonds investment. Focus will be placed on corporate bonds with good credit rating instead of listed in the volatile stock market.

Money Lending

The turnover of this business segment was approximately HK$21.2 million for the year ended 31 March 2013 and approximately HK$13.7 million for the six months ended 30 September 2013. As at 31 March 2013 and 30 September 2013, loans receivable of the Group was approximately HK$115.5 million and HK$158.5 million respectively. The default rates for the year ended 31 March 2013 and for the six months ended 30 September 2013 were 1.2% and 0.0% respectively. The loan interest income for the year ended 31 March 2013 and six months ended 30 September 2013 was approximately HK$21.2 million and HK$13.7 million respectively.

As money lending business was proved to bring to the Group satisfactory turnover and profit, the Group will continue actively develop this business. The Company intends to expand this business segment by continuing to provide loans to corporate and individual customers such as car loans and mortgage loans. Customers of this segment are principally sourced from cold calls to customers by consultant agents, walk-in customers and advertising via various websites, etc.

In March 2013, one of the Group’s subsidiaries became a TransUnion member, who enables the company to obtain credit report in accordance with the Code of Practice on Consumer Credit Data issued by the Office of the Privacy Commissioner for Personal Data, Hong Kong. By virtues of such services, it enables the Company to make informed, reliable and objective decisions so as to approve loans efficiently, staying informed about our clients’ credit status as well as alerting signs of potential fraud. Moreover, the Company also performs litigation checks against potential customers to minimise the risk of default in the money lending business.

The loan approval limits are subject to customers’ credibility as well as their financial background, which loan-to-value ratios are usually ranging from 60% to 80%, depending on the quality of the collaterals. The Company will determine the loan interest rates by reference to borrowers’ existing liabilities, creditability, and the latest collateral value.

Retail Business

The Turnover for this business segment was approximately HK$1.3 million for the year ended 31 March 2013 and approximately HK$1.9 million for the six months ended 30 September 2013.

The retail services business has been developed since June 2012. The Company will continue to monitor the operation and develop new market in order to increase the turnover and market share.

The Group is looking for ways to further improve its existing business and also searching for new investment opportunities to broaden the business scope of the Group in order to maximize the return to Shareholders.

168

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

A. UNAUDITED FRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

Scenario I Issue of Offer Shares Based on 503,358,524 Offer Shares at subscription price of HK$0.10 per Offer Share_(Note 1) Scenario II Issue of Offer Shares Based on 504,363,952 Offer Shares at subscription price of HK$0.10 per Offer Share(Note 2)_	Unaudited pro Unaudited pro forma adjusted forma adjusted consolidated consolidated Unaudited net tangible net tangible Unaudited consolidated assets of assets of consolidated net tangible the Group upon the Group upon net assets assets of completion of completion of of the Group the Group the Open Offer the Open Offer attributable to attributable to attributable to attributable to the owners of the owners of the owners of the owners of the Company the Company the Company the Company as at per Share as at Estimated net as at per Share as at 30 September 30 September proceeds from 30 September 30 September 2013 2013 the Open Offer 2013 2013 HK$’000 HK$ HK$’000 HK$’000 HK$ Note 3 Note 4 Note 5 Note 6 Note 7 230,151 1.83 48,300 278,451 0.44 230,151 1.83 48,400 278,551 0.44	Unaudited pro Unaudited pro forma adjusted forma adjusted consolidated consolidated Unaudited net tangible net tangible Unaudited consolidated assets of assets of consolidated net tangible the Group upon the Group upon net assets assets of completion of completion of of the Group the Group the Open Offer the Open Offer attributable to attributable to attributable to attributable to the owners of the owners of the owners of the owners of the Company the Company the Company the Company as at per Share as at Estimated net as at per Share as at 30 September 30 September proceeds from 30 September 30 September 2013 2013 the Open Offer 2013 2013 HK$’000 HK$ HK$’000 HK$’000 HK$ Note 3 Note 4 Note 5 Note 6 Note 7 230,151 1.83 48,300 278,451 0.44 230,151 1.83 48,400 278,551 0.44

		0.44

169

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Notes:

The Open Offer of 503,358,524 Offer Shares is calculated on the basis of four Offer Shares for every one existing Share held on the Record Date. It is based on 125,839,631 shares in issue as at 30 September 2013 assuming no Outstanding Option would be exercised on or prior to the Record Date.
The Open Offer of 504,363,952 Offer Shares is calculated on the basis of four Offer Shares for every one existing Share held on the Record Date. It is based on 125,839,631 shares in issue as at 30 September 2013 assuming all Outstanding Options are exercised on or prior to the Record Date.
The unaudited consolidated net assets of the Group attributable to the owners of the Company as at 30 September 2013 is extracted from the published unaudited interim report of the Group for the six months ended 30 September 2013.
The calculation of consolidated net tangible assets of the Group attributable to the owners of the Company per share is based on 125,839,631 Shares in issue as at 30 September 2013.
The estimated net proceeds from the Open Offer are calculated based on of 503,358,524 Offer Shares for Scenario I or 504,363,952 Offer Shares for Scenario II to be issued at the subscription price of HK$0.10 per Offer Share and after deduction of the estimated related expenses which are directly attributable to the Open Offer of approximately HK$2,000,000 and HK$2,000,000 for Scenario I and Scenario II respectively.
No adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets of the Group to reflect any trading results or other transactions of the Group entered into subsequent to 30 September 2013, including the proceeds from the potential exercise of Outstanding Options under Scenario II.
The unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to the owners of the Company per Share immediately after completion of the Open Offer is calculated based on (i) 629,198,155 Shares for Scenario I which comprise 125,839,631 Shares in issue as at 30 September 2013 and 503,358,524 Offer Shares expected to be issued on the completion of the Open Offer and assuming no Outstanding Option would be exercised; or (ii) 630,454,940 Shares for Scenario II which comprise 125,839,631 Shares in issue as at 30 September 2013, 504,363,952 Offer Shares expected to be issued on the completion of the Open Offer and assuming all Outstanding Options of 251,357 Shares would be exercised.

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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

B. ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report received from the independent reporting accountants, Ting Ho Kwan & Chan Certified Public Accountants, Hong Kong, prepared for the sole purpose of incorporation in this circular, in respect of the unaudited pro forma financial information of the Company.

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27 December 2013

The Board of Directors Unlimited Creativity Holdings Limited 7th Floor, Zung Fu Industrial Building 1067 King’s Road Quarry Bay, Hong Kong

Dear Sirs

INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION

TO THE DIRECTORS OF UNLIMITED CREATIVITY HOLDINGS LIMITED

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Unlimited Creativity Holdings Limited (the “Company”) and its subsidiaries (collectively the “Group”) by the directors for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma statement of adjusted consolidated net tangible assets of the Group as at 30 September 2013 and related notes (the “Unaudited Pro Forma Financial Information”) as set out in Section A of Appendix II to the circular issued by the Company (the “Circular”). The applicable criteria on the basis of which the directors have compiled the Unaudited Pro Forma Financial Information are described in Section A of Appendix II to the Circular.

The Unaudited Pro Forma Financial Information has been compiled by the directors to illustrate the impact of the proposed open offer on the Group’s financial position as at 30 September 2013 as if the transaction had taken place at 30 September 2013. As part of this process, information about the Group’s financial position has been extracted by the directors from the Group’s financial statements for the six months ended 30 September 2013, on which no audit or review report has been published.

171

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The directors are responsible for compiling the Unaudited Pro Forma Financial Information in accordance with paragraph 7.31 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Rules”) and with reference to AG 7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 7.31(7) of the GEM 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.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements (HKSAE) 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus, issued by the HKICPA. This standard requires that the reporting accountant comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the directors have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 7.31 of the GEM Rules and with reference to AG 7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Unaudited Pro Forma Financial Information.

The purpose of Unaudited Pro Forma Financial Information included in the Circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at 30 September 2013 would have been as presented.

A reasonable assurance engagement to report on whether the Unaudited Pro Forma Financial Information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the Unaudited Pro Forma Financial Information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

The related pro forma adjustments give appropriate effect to those criteria; and
The Unaudited Pro Forma Financial Information reflects the proper application of those adjustments to the unadjusted financial information.

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The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the Group, the event or transaction in respect of which the Unaudited Pro Forma Financial Information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the Unaudited Pro Forma Financial Information.

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

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled 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 7.31(1) of the GEM Rules.

Yours faithfully,

TING HO KWAN & CHAN

Certified Public Accountants (Practising)

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GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the GEM Listing Rules and the Takeovers Code for the purpose of giving information with regard to the Group.

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular 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 misleading.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinion 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.

2. SHARE CAPITAL

(a) Share capital of the Company as at the Latest Practicable Date

Authorised: 30,000,000,000 Shares Issued and fully paid: 125,839,631 Shares	HK$ 300,000,000.00

	1,258,396.31

(b) Share capital of the Company immediately after completion of the Open Offer (assuming no Outstanding Option is exercised on or before the Record Date)

Authorised: 30,000,000,000 Shares Issued and fully paid: 125,839,631 Shares as at the Latest Practicable Date 503,358,524 Offer Shares to be issued pursuant to the Open Offer 629,198,155 Shares following the completion of the Open Offer	HK$ 300,000,000.00

	1,258,396.31 5,033,585.24
	6,291,981.55

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APPENDIX III

(c) Share capital of the Company immediately after completion of the Open Offer (assuming all Outstanding Options are exercised in full on or before the Record Date)

Authorised: 30,000,000,000 Shares Issued and fully paid: 126,090,988 Shares as at the Latest Practicable Date 504,363,952 Offer Shares to be issued pursuant to the Open Offer 630,454,940 Shares following the completion of the Open Offer	HK$ 300,000,000.00

	1,260,909.88 5,043,639.52
	6,304,549.40

As at the Latest Practicable Date, the Company has Outstanding Options entitling the holders there of to subscribe for up to an aggregate of 251,357 Shares with option exercise prices ranging from HK$3.832 to HK$4.232 per Share.

Save for the Outstanding Options, the Company has no other outstanding derivatives, warrants, options and conversion rights or other similar rights which are convertible or exchangeable into Shares, and no share or loan capital of the Company or any of its subsidiaries had been put under option or agreed conditionally or unconditionally to be put under option as at the Latest Practicable Date.

Since 31 March 2013, being the date to which the latest published audited consolidated financial statements of the Group were made up, and up to the Latest Practicable Date, 20,960,000 new Shares have been issued by the Company as a result of completion of placing of new shares on 7 August 2013.

All issued Shares rank pari passu with each other in all respects including the rights as to voting, dividends and return of capital. The Offer Shares to be allotted and issued will, when issued and fully paid, rank pari passu in all respects with the Shares then in issue.

No part of the share capital or any other securities of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed or sought for the Shares or Offer Shares or any other securities of the Company to be listed or dealt in on any other stock exchange.

As at the Latest Practicable Date, there was no arrangement under which future dividends are waived or agreed to be waived.

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APPENDIX III

3. DISCLOSURE OF INTERESTS BY DIRECTORS

Save as disclosed below, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to the Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by directors, to be notified to the Company and the Stock Exchange.

					Approximate
					percentage of
					the issued
	Personal	Family	Other		share capital
Name	Interests	Interests	Interests	Total	of the Company
Mr. Shiu	7,796,200	16	127,140	7,923,356	6.3%
		(note 1)	(note 2)
Mr. Leung Ge On, Andy	63,000	–	–	63,000	0.05%

Notes:

16 shares are held by Ms. Hau Lai Mei, the spouse of Mr. Shiu.
127,140 shares are held by Heavenly Blaze Limited. Heavenly Blaze Limited is beneficially owned as to (i) 46% by Mr. Shiu Stephen Junior, son of Mr. Shiu; (ii) 34% by Mr. Shiu and Ms. Siu York Chee (sister of Mr. Shiu) together hold on behalf of Ms. Shiu Yo Yo and Ms. Shiu Sound Sound, daughters of Mr. Shiu; (iii) 16% by Ms. Shiu Ting Yan, Denise, daughter of Mr. Shiu; (iv) 1% by Mr. Cheng Jut Si; and (v) 3% by Able Rich. For information only, Able Rich held the 3% equity interest in Heavenly Blaze Limited since 9 September 2013, which was transferred by One Dollar Productions Limited, an indirect wholly-owned subsidiary of China 3D to Able Rich.

4. INTERESTS OF SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as is known to the Directors or chief executives of the Company, the following person (other than a Director or chief executives of the Company) had interests or short positions in the shares or underlying shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group.

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APPENDIX III

GENERAL INFORMATION

				Approximate
				percentage of
			Number of	the issued
		Long position/	Shares	share capital
Name of Shareholder	Capacity	short position	interested	of the Company	Notes
Able Rich	Beneficial owner	Long position	386,203,800	61.26%	1
Kingston Securities	Beneficial owner	Long position	118,160,153	18.74%	2
Galaxy Sky Investments	Interest in controlled	Long position	118,160,153	18.74%	2
Limited	corporation
Kingston Capital Asia	Interest in controlled	Long position	118,160,153	18.74%	2
Limited	corporation
Kingston Financial	Interest in controlled	Long position	118,160,153	18.74%	2
Group Limited	corporation
Active Dynamic Limited	Interest in controlled	Long position	118,160,153	18.74%	2
	corporation
Ms. Chu Yuet Wah	Interest in controlled	Long position	118,160,153	18.74%	2
	corporation

Notes:

Pursuant to the Underwriting Agreement, Able Rich is to underwrite 386,203,800 Offer Shares.
The total of 118,160,153 Shares include (i) 1 ordinary Share; and (ii) 118,160,152 Offer Shares which Kingston Securities is interested under the Underwriting Agreement on the assumption of no acceptance by the Qualifying Shareholders under the Open Offer. Kingston Securities is a wholly-owned subsidiary of Galaxy Sky Investments Limited, which is wholly owned by Kingston Capital Asia Limited. Kingston Capital Asia Limited is wholly owned by Kingston Financial Group Limited. Active Dynamic Limited owns 40.24% interest in Kingston Financial Group Limited. Ms. Chu Yuet Wah owns 100% interest in Active Dynamic Limited.

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GENERAL INFORMATION

APPENDIX III

5. INTEREST OF DIRECTORS

As at the Latest Practicable Date, none of the Directors was materially interested, directly or indirectly, in any contract or arrangement subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Group.

As at the Latest Practicable Date, none of the Directors has or had any direct or indirect interest in any assets which have been acquired or disposed by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2013, being the date to which the latest published audited consolidated financial statements of the Group were made up.

6. DIRECTORS’ INTERESTS IN COMPETING BUSINESSES

As at the Latest Practicable Date, none of the Directors or their respective associates were interested in any business which competes or is likely to compete, whether directly or indirectly, with the businesses of the Group.

7. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered, or proposed to enter, into a service contract with any member of the Group (excluding contracts expiring or determinable by the relevant member of the Group within one year without payment of compensation (other than statutory compensation)), nor has any of the Directors entered into any service contract with any member of the Group or associated companies of the Company in force which:

(a) (including both continuous and fixed term contracts) have been entered into or amended within 6 months before 22 November 2013, being the date of the Announcement;
(b) are continuous contracts with a notice period of 12 months or more; or
(c) are fixed term contracts with more than 12 months to run irrespective of the notice period.

8. LITIGATION

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

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GENERAL INFORMATION

APPENDIX III

9. EXPERTS AND CONSENTS

The following is the qualifications of the expert who has given opinions or advice, which is contained in this circular:

Name Qualifications VC Capital Limited a licensed corporation to carry on Type 6 (advising on corporate finance) regulated activity under the SFO Ting Ho Kwan & Chan Certified Public Accountants Kingston Corporate Finance a licensed corporation to carry on Type 6 (advising on Limited corporate finance) regulated activity under the SFO

Each of VC Capital Limited, Ting Ho Kwan & Chan and Kingston Corporate Finance Limited has given and has not withdrawn their written consent to the issue of this circular with the inclusion therein of their letters and references to their name and/or their advice in the form and context in which they respectively appear.

As at the Latest Practicable Date, each of the experts:

(a) did not have any direct or indirect interest 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 were proposed to be acquired or disposed of by or leased to any member of the Group; and
(b) did not have any shareholding in any member of the Group or any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

10. MATERIAL CONTRACTS

The following contracts have been entered into by any member of the Group (not being contracts entered into in the ordinary course of business of the Company) within the two years immediately preceding the issue of the Announcement and up to the Latest Practicable Date and are or may be material:

The Underwriting Agreement, as supplemented by a side letter dated 12 December 2013 entered into between the Company and the Underwriters to amend certain dates for the Open Offer;
Placing agreement dated 24 July 2013 entered into between the Company and FT Securities Limited (as placing agent) in relation to the placing of a maximum of 20,960,000 new Shares at the placing price of HK$0.225 each. Gross and net proceeds from such placing were approximately HK$4.71 million and HK$4.49 million respectively;
Supplemental placing agreement dated 26 July 2013 entered into between the Company and FT Securities Limited in relation to the amendment to the placing period of the placing referred to in paragraph 2 above;

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GENERAL INFORMATION

APPENDIX III

Agreement dated 7 January 2013 entered into between Top Euro Limited as the seller (an indirect wholly-owned subsidiary of the Company) and Sure Power Limited as the purchaser (an independent third party) in relation to disposal of a property located at 1st Floor and 2nd Floor, Morrison Plaza, No. 9 Morrison Hill Road, Wanchai, Hong Kong together with the External Wall Area I, External Wall Area II and External Wall Area III for a consideration of HK$74,000,000.

11. CORPORATE INFORMATION AND PARTIES INVOLVED

Registered Office Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda Headquarters and principal place 7th Floor of business in Hong Kong and Zung Fu Industrial Building office address of all Directors 1067 King’s Road Quarry Bay, Hong Kong Authorised representative Mr. Shiu Yeuk Yuen 7th Floor Zung Fu Industrial Building 1067 King’s Road Quarry Bay, Hong Kong Mr. Leung Ge On Andy 7th Floor Zung Fu Industrial Building 1067 King’s Road Quarry Bay, Hong Kong Executive Directors Mr. Shiu Yeuk Yuen Mr. Leung Ge On Andy Independent non-executive Dr. Siu Yim Kwan, Sidney Directors Mr. Tsui Pui Hung Mr. Kam Tik Lun Company secretary Ms. Mak Suk Fan, CPA (Aust.,) AHKSA, MBA Compliance officer Mr. Leung Ge On, Andy Principal share registrar and Appleby Management (Bermuda) Ltd transfer office in Bermuda Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

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GENERAL INFORMATION

APPENDIX III

Branch share registrar

Branch share registrar Tricor Standard Limited 26th Floor, Tesbury Centre 28 Queen’s Road East Wanchai Hong Kong Principal Banker Bank of China (Hong Kong) Limited 409-415 Hennessy Road, Wanchai Hong Kong DBS Bank (Hong Kong) Limited 16th Floor, The Center 99 Queen’s Road Central Hong Kong Legal advisor as to Hong Kong Jun He Law Offices Laws (in relation to the Open Suite 2008, 20/F Offer) Jardine House, 1 Connaught Place Central Hong Kong Underwriters Able Rich Consultants Limited 7th Floor Zung Fu Industrial Building 1067 King’s Road Quarry Bay Hong Kong Kingston Securities Limited Suite 2801 28th Floor, One IFC 1 Harbour View Street Central, Hong Kong Financial advisor to the Kingston Corporate Finance Limited Company Suite 2801 28th Floor, One IFC 1 Harbour View Street Central, Hong Kong Independent Financial Adviser VC Capital Limited 28th Floor, The Centrium 60 Wyndham Street Central, Hong Kong Reporting accountants Ting Ho Kwan & Chan Certified Public Accountants (Practising) 9th Floor, Tung Ning Building 249-253 Des Voeux Road Central Hong Kong

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GENERAL INFORMATION

APPENDIX III

12. PROFILE OF DIRECTORS

Executive Directors

Mr. Shiu Yeuk Yuen (“Mr. Shiu”), aged 63, is the executive director since December 2010 and appointed as the Chairman of the Group in January 2011. Mr. Shiu has over 35 years’ experience in the ceramic tile and marble and granite products industry and over 10 year’s experience in securities investment.

Mr. Shiu was one of the founders and has been the executive director of Companion Building Material International Holdings Limited (together with its subsidiaries, the “ CBMI Group ”, currently known as Pacific Century Premium Developments Ltd, stock code: 432), a company listed on The Stock Exchange of Hong Kong Limited, for the period from September 1993 to January 2002 during which he was responsible for the development of the CBMI Group’s corporate strategies.

Mr. Leung Ge On, Andy (“Mr. Leung”), aged 44, is the executive director of the Company. Mr. Leung joined the Group since 2005 and was appointed as an executive director in December 2010. Mr. Leung obtained a Bachelor of Arts degree in Economics at York University in Canada. Mr. Leung has extensive experience in business development, operation and marketing management. Mr. Leung is the nephew of Mr. Shiu.

Independent Non-executive Directors

Dr. Siu Yim Kwan, Sidney (“Dr. Siu”), S.B.St.J. , aged 66, was appointed as an independent non-executive director and member of Audit Committee of the Company in December 2004. Dr. Siu is also the non-executive director of Wang On Group Limited, a listed company in Hong Kong since November 1993.

Dr. Siu is a director of The Association of The Directors & Former Directors of Pok Oi Hospital Limited and Chiu Yang Residents Association of Hong Kong Limited, those companies are non-profitable association and providing community services in Hong Kong.

Dr. Siu is also a director and chairman of The Hong Kong Tae Kwon Do Association Limited, a sport association in Hong Kong and also an executive member of a number of charitable organisations and sports associations.

Mr. Tsui Pui Hung (“Mr. Tsui”), LL.B. (Hons), LL.M, BSc (Hons) , aged 38, a practicing solicitor of the High Court of Hong Kong, was appointed as an independent non-executive director and member of Audit Committee of the Company in June 2007. Mr. Tsui holds the degrees of a Master in Laws from University of London, Bachelor of Laws (with Honours) from Manchester Metropolitan University, Bachelor of Science (with Honours) from the Chinese University of Hong Kong, Postgraduate Certificate in Laws from the University of Hong Kong and Diploma in Translation from the Chinese University of Hong Kong. Mr. Tsui has years of management experience and is familiar with internal control issues and regulatory rules of listed company. Mr. Tsui is also an independent non-executive director of China Mandarin Holdings Limited, a company listed on the Main Board of Stock Exchange.

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APPENDIX III

GENERAL INFORMATION

Mr. Kam Tik Lun (“Mr. Kam”), CPA, ACCA, LL.M (ICFL), CIM , aged 37, joined the Company in March 2012. Mr. Kam is the Chairman of the Audit Committee of the Company. Mr. Kam holds a Bachelor of Commerce from Concordia University, Canada and a Postgraduate Diploma in International Corporate and Financial Law from The University of Wolverhampton, UK and a Master of Laws in International Corporate and Financial Law from The University of Wolverhampton, UK. He is a member of The Hong Kong Institute of Certified Public Accountants and The Association of Chartered Certified Accountants. Mr. Kam has over 9 years of experience in the financial markets. He has vast experience in providing pre-IPO consultancy, business valuation services, financial analysis and corporate advisory. Mr. Kam is also an independent non-executive director of China 3D Digital Entertainment Limited, a company listed on the GEM Board of Stock Exchange.

The Company has set up an audit committee, comprising all independent non-executive Directors, with written terms of reference in compliance with the GEM Listing Rules. The principal duties of the audit committee included reviewing the Company’s financial controls, internal control and risk management system, annual report, accounts and quarterly and half yearly report.

13. MARKET PRICES

The table below shows the closing prices of the Shares as recorded on the Stock Exchange on (i) the last day on which dealings took place in each of the six months immediately preceding the date of the Announcement; (ii) the Last Trading Day; and (iii) the Latest Practicable Date.

Date	Closing price of the Shares	Closing price of the Shares
		(HK$)
31 May 2013	0.280 (Adjusted as a result
	of capital reorganisation)
28 June 2013		0.315
31 July 2013		0.295
30 August 2013		0.250
30 September 2013		0.275
31 October 2013		0.300
18 November 2013 (being the last trading day)		0.290
29 November 2013		0.248
24 December 2013 (being the Latest Practicable Date)		0.250

The highest and lowest closing prices of the Shares as quoted on the Stock Exchange during the period commencing from 22 May 2013, being the date six months preceding the date of the Announcement, and ending on the Latest Practicable Date were HK$0.360 (adjusted as a result of capital reorganisation as quoted on 5 June 2013 and 6 June 2013 and HK$0.248 as quoted on 28 November 2013 and 29 November 2013.

14. MISCELLANEOUS

(i) The business address of the Directors is 7th Floor, Zung Fu Industrial Building, 1067 King’s Road, Quarry Bay, Hong Kong.
(ii) The expenses in connection with the Open Offer, including the underwriting commission and professional fees payable to financial advisors, lawyers and financial printer, are estimated to be not more than approximately HK$2.1 million and will be payable by the Company.

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(iii) As at the Latest Practicable Date, there was no restriction affecting the remittance of profits or repatriation of capital of the Company into Hong Kong from outside of Hong Kong and the Group has no exposure to foreign exchange liabilities.
(iv) The principal members of the Concert Group are Able Rich and its beneficial owner(s). Mr. Shiu is the sole director of Able Rich.
(v) The registered office address of Able Rich is 7th Floor, Zung Fu Industrial Building, 1067 King’s Road, Quarry Bay, Hong Kong. The correspondence address of Able Rich is 7th Floor, Zung Fu Industrial Building, 1067 King’s Road, Quarry Bay, Hong Kong. Able Rich is wholly-owned by Rich Treasure, of which Mr. Shiu is the sole director and shareholder holding it on trust for certain family members. The registered address of Rich Treasure is OMC Chambers, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands.
(vi) The correspondence address of Mr. Shiu Yeuk Yuen is 7th Floor, Zung Fu Industrial Building, 1067 King’s Road, Quarry Bay, Hong Kong.
(vii) The English text of this circular shall prevail over the Chinese text in case of any inconsistency.

15. ADDITIONAL DISCLOSURE

As at the Latest Practicable Date,

(i) save as disclosed in the paragraph headed “Shareholding Structure of the Company” in the “Letter from the Board” of this circular and in the paragraphs headed “Disclosure of Interests by Directors” and “Interests of Substantial Shareholders” in this appendix, none of the sole director of Able Rich, Able Rich or any member of the Concert Group owned or controlled or were interested in any Shares, convertible securities, warrants, options or derivatives of the Company;
(ii) none of the sole director of Able Rich, Able Rich, any member of the Concert Group or those who are interested in, or involved in the Open Offer, the Underwriting Agreement and the Whitewash Waiver had dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company during the six months prior to the date of the Underwriting Agreement and up to the Latest Practicable Date;
(iii) none of the members of the Concert Group or the Company has received any irrevocable commitment to vote for or against the Open Offer, the Underwriting Agreement and/or the Whitewash Wavier or to take up the Shares to be provisionally allotted under the Open Offer;
(iv) save for the Underwriting Agreement and the Shares and/or securities that are/will be pledged to Kingston Securities under the Facility (as defined and elaborated under the section headed “Implication under the Takeovers Code and application for Whitewash Waiver” in the “Letter from the Board” of this circular), no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with any member of the Concert Group; neither had they dealt for value in any Shares, convertible securities, warrants, options or derivatives of Able Rich or the Company during the six months prior to the date of the Underwriting Agreement and up to the Latest Practicable Date;

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(v) none of the members of the Concert Group has borrowed or lent any Shares, convertible securities, warrants, options or derivatives of the Company;
(vi) Able Rich was wholly-owned by Rich Treasure, which is held by Mr. Shiu on trust for certain family members as the beneficiaries, none of the Company and the Directors were interested in or owned or controlled any shares, convertible securities, warrants, options or derivatives of Able Rich. None of the Company and the Directors had dealt for value in any shares, convertible securities, warrants, options or derivatives of Able Rich during the six months prior to the date of the Underwriting Agreement and up to the Latest Practicable Date;
(vii) save as disclosed in the paragraph headed “Disclosure of Interests by Directors” in this appendix, none of the Directors were interested in or owned or controlled any Shares, convertible securities, warrants, options or derivatives of the Company. Save for the entering into of the Underwriting Agreement, none of the Directors had dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company during the six months prior to the date of the Underwriting Agreement and up to the Latest Practicable Date;
(viii) none of the subsidiaries of the Company, or pension fund of the Company or of a subsidiary of the Company or the advisers to the Company as specified in class (2) of the definition of associate in the Takeovers Code owned or controlled any Shares, convertible securities, warrants, options or derivatives of the Company; neither had they dealt for value in any Shares, convertible securities, warrants, options or derivatives of Able Rich or the Company during the six months prior to the date of the Underwriting Agreement and up to the Latest Practicable Date;
(ix) no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or with any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate under the Takeovers Code; neither had they dealt for value in any Shares, convertible securities, warrants, options or derivatives of Able Rich or the Company during the six months prior to the date of the Underwriting Agreement and up to the Latest Practicable Date;
(x) no fund managers connected with the Company managed on a discretionary basis any Shares, convertible securities, warrants, options or derivatives of the Company; neither had they dealt for value in any Shares, convertible securities, warrants, options or derivatives of Able Rich or the Company during the six months prior to the date of the Underwriting Agreement and up to the Latest Practicable Date;
(xi) all the Directors (excluding the independent non-executive Directors) and their respective associates shall abstain from voting in favour of the Open Offer and the Underwriting Agreement at the SGM; Mr. Shiu and Mr. Leung Ge On Andy, being interested in the Whitewash Waiver, shall abstain from voting in the resolution in relation to the Whitewash Waiver at the SGM; save for Mr. Shiu and Mr. Leung Ge On Andy, none of the Directors had any interests in the Shares or relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company as at the Latest Practicable Date and therefore none of them had any voting rights in the Company to vote for or against the Open Offer, the Underwriting Agreement and the Whitewash Wavier at the SGM;
(xii) none of the Company and the Directors had borrowed or lent any Shares, convertible securities, warrants, options or derivatives of the Company;

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APPENDIX III

GENERAL INFORMATION

(xiii) save for the Underwriting Agreement, and the Shares and/or securities that are/will be pledged to Kingston Securities under the Facility (as defined and elaborated under the section headed “Implication under the Takeovers Code and application for Whitewash Waiver” in the “Letter from the Board” of this circular), there was no agreement, arrangement or understanding(including any compensation arrangement) between any member of the Concert Group and any Director, recent Director, Shareholder or recent Shareholder which had any connection with or dependence upon the Open Offer, the Underwriting Agreement and/or the Whitewash Waiver;
(xiv) save for the underwriting commission (details of which are set out in the paragraph headed “Underwriting Agreement” in the “Letter from the Board” of this circular) payable to Able Rich and Kingston Securities pursuant to the Underwriting Agreement, no benefit had been or would be given to any Director as compensation for loss of office or otherwise in connection with the Open Offer and/or the Underwriting Agreement and/or the Whitewash Waiver;
(xv) save for the Underwriting Agreement, there was no agreement or arrangement between any Director and any other person which was conditional on or dependent upon the outcome of the Open Offer, the Underwriting Agreement and/or the Whitewash Waiver or otherwise connected with the Open Offer, the Underwriting Agreement and/or the Whitewash Waiver;
(xvi) save for the Underwriting Agreement, no material contracts had been entered into by Able Rich in which any Director had a material personal interest; and
(xvii) save for the Underwriting Agreement and the Facility (as defined and elaborated under the section headed “Implication under the Takeovers Code and application for Whitewash Waiver” in the “Letter from the Board” of this circular), there was no agreement, arrangement or understanding between Able Rich and any other persons whereby the Offer Shares subscribed and acquired under the Open Offer would be transferred, charged or pledged to any persons. The registered office of Kingston Securities, where the shares and/ or securities are/will be pledged to pursuant to the Facility (as defined and elaborated under the section headed “Implication under the Takeovers Code and application for Whitewash Waiver” in the “Letter from the Board” of this circular), is Suite 2801, One International Finance Centre, 1 Harbour View Street, Central, Hong Kong.

186

GENERAL INFORMATION

APPENDIX III

16. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection (i) during normal business hours from 10:00 a.m. to 6:00 p.m. on any weekday (except for public holidays) at the principal place of business of the Company in Hong Kong at 7th Floor, Zung Fu Industrial Building, 1067 King’s Road, Quarry Bay, Hong Kong, (ii) on the website of the Company (http://www.ulcreativity.com), and (iii) on the website of the SFC (www.sfc.hk) from the date of this circular up to and including the date of the SGM:

(i) this circular;
(ii) the memorandum of continuance and bye-laws of the Company;
(iii) the first quarterly report of the Company for the three months period ended 30 June 2013, the interim report of the Company for the six months period ended 30 September 2013 and the annual reports of the Company for the three financial years ended 31 March 2013;
(iv) the written consents as referred to in the paragraph headed “Experts and Consents” in this Appendix;
(v) the material contracts as referred to in this paragraph headed “Material Contracts” in this Appendix;
(vi) the unaudited pro forma statement of adjusted consolidated net tangible assets of the Group, the text of which is set out in Appendix II to this circular;
(vii) the letter from Ting Ho Kwan & Chan in respect of the unaudited pro forma consolidated net tangible assets of the Group, the text of which is set out on pages 171 to 173 of this circular;
(viii) the letter from the Independent Board Committee, the text of which is set out on page 31 of this circular;
(ix) the letter of advice from the Independent Financial Adviser, the text of which is set out on pages 32 to 64 of this circular;
(x) the letter from the Board, the text of which is set out on pages 11 to 30 of this circular; and
(xi) the memorandum and articles of association of Able Rich.

187

NOTICE OF SPECIAL GENERAL MEETING

UNLIMITED CREATIVITY HOLDINGS LIMITED 無限創意控股有限公司

(Continued in Bermuda with limited liability)

(Stock Code : 8079)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting (the “ SGM ”) of Unlimited Creativity Holdings Limited (the “ Company ”) will be held at 7th Floor, Zung Fu Industrial Building, 1067 King’s Road, Quarry Bay, Hong Kong on Monday, 13 January 2014 at 4:30 p.m. for the purposes of considering and, if thought fit, passing with or without modification, the following resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT subject to and conditional upon: (i) the passing of each of the ordinary resolutions numbered 2 and 3 as set out in the notice convening this meeting; (ii) the Executive (as defined in the circular of the Company dated 27 December 2013 (the “ Circular ”), a copy of which has been produced to this meeting marked “A” and signed by the chairman of the meeting for the purpose of identification) granting to Able Rich Consultants Limited (“ Able Rich ”) 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); (iv) the necessary filing and registration of all documents relating to the Open Offer (as defined below) under applicable laws; (v) the obligations of Able Rich 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 and the transactions contemplated therein be and are hereby confirmed, approved and ratified;
(b) the issue by way of open offer (the “ Open Offer ”) of not less than 503,358,524 shares of the Company (the “ Shares ”) and not more than 504,363,952 Shares of HK$0.10 each in the share capital of the Company (the “ Offer Shares ”) to the shareholders of the Company (the “ Shareholders ”) whose names appear on the register of members of the Company on 21 January 2014 (the “ Record Date ”) in the proportion of four Offer Shares for every Share then held at the subscription price of HK$0.10 per Offer Share excluding those Shareholders whose registered address as shown on such register are outside Hong Kong on the Record Date whom the directors of the Company (the “ Directors ”) consider necessary or expedient to exclude after making the relevant enquiries regarding the legal restrictions under the laws of the relevant place and the requirements of the relevant regulatory body or stock exchange in the place where those Shareholders reside (the “ Non-Qualifying Shareholders ”), and on the terms and conditions as set out in the Circular and on such other terms and conditions as may be determined by the Directors be and are hereby approved;

188

NOTICE OF SPECIAL GENERAL MEETING

(c) the Directors be and are hereby authorised to allot and issue the Offer Shares pursuant to or in connection with the Open Offer, and in particular, the Directors be and are hereby authorised to make such exclusions or other arrangements in relation to fractional entitlements, odd lots or the entitlements of the Non-Qualifying Shareholders as they deem necessary or expedient having regard to any restriction or obligation under the laws of, or the requirements of any regulatory body or stock exchange in any territory outside Hong Kong;
(d) the Directors be and are hereby authorised to sign and execute such documents and do all such acts and things incidental to the Open Offer or as they consider necessary, desirable, or expedient in connection with the implementation of or giving effect to the Open Offer, the Underwriting Agreement and the transactions contemplated thereunder;
“ THAT subject to the passing of each of the ordinary resolutions numbered 1 and 3 as set out in the notice convening this meeting, the absence of arrangements for application for the Offer Shares by the Qualifying Shareholders in excess of their entitlements under the Open Offer as referred to in Rule 10.42(2) of the GEM Listing Rules (as defined in the Circular) be and is hereby approved.”
“ THAT subject to (i) the passing of each of the ordinary resolutions numbered 1 and 2 as set out in the notice convening this meeting, and (ii) the Executive granting to Able Rich the Whitewash Waiver and the satisfaction of any conditions attached to the Whitewash Waiver imposed by the Executive, the Whitewash Waiver pursuant to Note 1 on dispensation from Rule 26 of the Takeovers Code (as defined in the Circular) waiving any obligation on the part of Able Rich, to make a mandatory general offer to the holders of securities to acquire all securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company other than those already owned by Able Rich 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 Able Rich’s underwriting obligations under the Underwriting Agreement and all of the terms set out therein, be and are hereby approved.”

Your faithfully,

By the Order of the board of Directors Unlimited Creativity Holdings Limited Leung Ge On, Andy Executive Director

Hong Kong, 27 December 2013.

Registered office Canon’s Street 22 Victoria Street Hamilton HM 12 Bermuda

Principal Place of Business 7th Floor, Zung Fu Industrial Building 1067 King’s Road Quarry Bay, Hong Kong

189

NOTICE OF SPECIAL GENERAL MEETING

Notes:

A form of proxy for use at the Meeting is enclosed herewith.
The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of any officer or attorney duly authorised.
Any shareholder of the Company entitled to attend and vote at the Meeting convened by the above notice shall be entitled to appoint another person as his proxy to attend and vote instead of him. A proxy need not be a shareholder of the Company. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed,
In order to be valid, the form of proxy, together with the power of attorney or other authority (if any) under which it is signed, or a certified copy of such power of attorney or authority, must be deposited at the Company’s branch share registrar in Hong Kong, Tricor Standard Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding of the above Meeting or any adjournment thereof (as the case may be).
Completion and return of the form of proxy will not preclude a shareholder of the Company from attending and voting in person at the Meeting convened or at any adjourned meeting (as the case may be) and in such event, the form of proxy will be deemed to be revoked.
Where there are joint holders of any share of the Company, any one of such joint holders may vote, either in person or by proxy, in respect of such share as if he/she were solely entitled thereto, but if more than one of such joint holders are present at the Meeting, whether in person or by proxy, priority shall be determined by the order in which the names stand on the register of members of the Company in respect of the joint holding.
The directors of the Company as at the date of this notice are Mr. Shiu Yeuk Yuen and Mr. Leung Ge On Andy, being executive Directors, Dr. Siu Yim Kwan, Sidney, Mr. Tsui Pui Hung and Mr. Kam Tik Lun, being independent non-executive Directors.

As at the date of this notice, the Board comprises Mr. Shiu Yeuk Yuen and Mr. Leung Ge On Andy as executive Directors; Dr. Siu Yim Kwan, Sidney, Mr. Tsui Pui Hung and Mr. Kam Tik Lun as independent non-executive Directors.

190

AI assistant

Wisdomcome Group Holdings Ltd. — Proxy Solicitation & Information Statement 2013

51257_rns_2013-12-26_57bc35b8-a28e-4c38-8e8d-af54c57513f5.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

UNLIMITED CREATIVITY HOLDINGS LIMITED 無限創意控股有限公司

(1) PROPOSED OPEN OFFER ON THE BASIS OF FOUR OFFER SHARES FOR EVERY SHARE HELD; AND

(3) NOTICE OF SPECIAL GENERAL MEETING

Financial Adviser

Underwriters to the Open Offer

Able Rich Consultants Limited

Independent Financial Adviser

CHARACTERISTICS OF GEM

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

EXPECTED TIMETABLE

2014

EXPECTED TIMETABLE

2014

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

TERMINATION OF THE UNDERWRITING AGREEMENT

UNLIMITED CREATIVITY HOLDINGS LIMITED 無限創意控股有限公司

(1) PROPOSED OPEN OFFER ON THE BASIS OF FOUR OFFER SHARES FOR EVERY SHARE HELD; AND

(2) APPLICATION FOR WHITEWASH WAIVER; AND

(3) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

PROPOSED OPEN OFFER ON THE BASIS OF FOUR OFFER SHARES FOR EVERY SHARE HELD

Issue statistics

LETTER FROM THE BOARD

Outstanding Options

Subscription Price of the Offer Shares

LETTER FROM THE BOARD

Status of the Offer Shares

Certificates for the Offer Shares

Qualifying Shareholders

Closure of register of members

LETTER FROM THE BOARD

Rights of Overseas Shareholders

Fractional entitlements

Odd lots arrangement

No application for excess Offer Shares

LETTER FROM THE BOARD

Application for listing

UNDERWRITING AGREEMENT

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Undertaking

Conditions of the Underwriting Agreement

LETTER FROM THE BOARD

Termination of the Underwriting Agreement

LETTER FROM THE BOARD

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

INFORMATION OF THE GROUP

INFORMATION OF ABLE RICH

INTENTION OF THE ABLE RICH AND/OR THE COMPANY

LETTER FROM THE BOARD

REASONS FOR THE OPEN OFFER AND USE OF PROCEEDS

LETTER FROM THE BOARD

WARNING OF THE RISKS OF DEALING IN THE SHARES

IMPLICATION UNDER THE GEM LISTING RULES IN CONNECTION WITH THE OPEN OFFER AND THE UNDERWRITING ARRANGEMENT

LETTER FROM THE BOARD

IMPLICATION UNDER THE TAKEOVERS CODE AND APPLICATION FOR WHITEWASH WAIVER

LETTER FROM THE BOARD

DEALING IN SHARES BY THE CONCERT GROUP

SGM

LETTER FROM THE BOARD

RECOMMENDATION

ADDITIONAL INFORMATION

UNLIMITED CREATIVITY HOLDINGS LIMITED 無限創意控股有限公司

(1) PROPOSED OPEN OFFER ON THE BASIS OF FOUR OFFER SHARES FOR EVERY SHARE HELD; AND

Wisdomcome Group Holdings Ltd. Proxy Solicitation & Information Statement 2013