Youzan Technology Limited - Proxy Solicitation & Information Statement 2011

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in China Innovationpay Group Limited (the “Company”), you should at once hand this circular and the enclosed form of proxy to the purchaser, the transferee or to the bank, stockbroker or other agent through whom the sale or the transfer was effected for onward transmission to the purchaser or the transferee.

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

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China Innovationpay Group Limited 中國創新支付集團有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 8083)

VERY SUBSTANTIAL DISPOSAL AND NOTICE OF SPECIAL GENERAL MEETING

Financial Adviser

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A notice convening the special general meeting of the Company (the “SGM”) to be held at Yue Function Room II, First Floor, City Garden Hotel, 9 City Garden Road, North Point, Hong Kong at 10:00 a.m. on 16 December 2011 is set out on pages 57 to 58 of this circular.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the meeting, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same to the Company c/o the Company Secretary at the Company’s principal place of business and head office in Hong Kong at Unit 2708, 27/F., The Center, 99 Queen’s Road Central, Hong Kong as soon as possible and in any event not later than 48 hours before the time of the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting at the SGM or any adjournment thereof should you so wish.

This circular will remain on the page of ‘‘Latest Company Announcements’’ on the GEM website for at least 7 days from the date of its posting and the website of the Company at www.innovationpay.com.hk.

29 November 2011

CONTENTS

					Page
Characteristics of GEM . . . . . . . . . . . . . . . . .			. . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	ii
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . .		. . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . .			. . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	5
Appendix I		— Financial information of the Group		. . . . . . . . . . . . . . . . .	16
Appendix II		— Financial information of SHL Group		. . . . . . . . . . . . . . . .	22
Appendix III		— Unaudited pro forma	financial information of the
		Remaining Group	. . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	34
Appendix IV		— General information	. . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	48
Notice of SGM		. . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . .	. . . . . . . . . . . . . . . . .	57

– i –

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.

– ii –

DEFINITIONS

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

“Agreement” the sale and purchase agreement dated 21 October 2011 (as supplemented by a supplemental agreement dated 23 November 2011) entered into between the Company and the Purchaser in relation to the Disposal
“Application” an application for the Certificate
“associate(s)” has the meaning ascribed thereto in the GEM Listing Rules
“BJST” 北京矽感溯源科技有限公司, a company established in the PRC with limited liability and owned as to 95% by SST
“Board” the board of Directors
“Business Day” a day (other than a Saturday, Sunday or public holiday) on which banks are open for general banking business in Hong Kong
“Certificate” the certificate for approval for payment business pursuant to the Payment Service Rules
“Circular” the circular of the Company dated 24 January 2011 in relation to the acquisition of the entire issued shares of Country Praise Enterprises Limited
“Company” or “Vendor” China Innovationpay Group Limited (中國創新支付集團有限公司), a company incorporated in Bermuda with limited liability, the issued Shares of which are listed on GEM (stock code: 8083)
“Completion”
completion of the Disposal in accordance with the terms and conditions of the Agreement
“connected person(s)”
has the meanings ascribed thereto in the GEM Listing Rules
“Director(s)”
director(s) of the Company
“Disposal”

the disposal of the Sale Shares and the Sale Loan as contemplated under the Agreement

– 1 –

DEFINITIONS

“GEM”
the Growth Enterprise Market of the Stock Exchange
“GEM Listing Rules” the Rules Governing the Listing of Securities on GEM
“Group” the Company and its subsidiaries
“GYB”
乾元貝盟科技有限公司, a company established in the PRC with limited liability and owned as to 30% by HSB
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“HSB” Shenzhen Chengzhixinhao Trading Co. Ltd (深圳市誠志新浩貿易有限公司), a company established in the PRC with limited liability and owned as to 91.43% by SST
“Latest Practicable Date” 28 November 2011, being the latest practicable date prior to the printing of this circular for inclusion of certain information in this circular
“Loan Agreements”
the two loan agreements dated 8 March 2011 and 22 March 2011 (as amended by respective supplemental agreements thereto) entered into, among others, between New Smart (as lender) and SHL (as borrower) relating to term loans of an aggregate of HK$36,000,000
“Long Stop Date”
31 December 2011 or such other date as the parties may agree in writing
“New Smart” or “Purchaser”
New Smart Version Limited, a company incorporated in the British Virgin Islands with limited liability
“Payment Service Rules”
Administrative Measures of Payment Services for Non-Financial Institutions 《非金融機構支付服務管理辦法》and the Detailed Rules for the Implementation of the Administrative Measures of Payment Services for Non-Financial Institutions《非金融機構支付服務管理辦法實施細則》
“PRC”
the People’s Republic of China
“Previous Disposal”
the disposal of the 44.99% equity interests in WHS directly owned by SHL as contemplated under the Previous Disposal Agreement

– 2 –

DEFINITIONS

“Previous Disposal Agreement” the sale and purchase agreement dated 19 August 2011 entered into between SHL and New Smart in relation to the disposal of the 44.99% equity interests in WHS directly owned by SHL, the details of which were set out in the Company’s announcement dated 19 August 2011
“Remaining Group” the Group immediately after Completion
“Sale Loan” all liabilities owing or incurred by SHL to the Company at any time prior to Completion which amounted to approximately HK$36,316,000 as at the date of the Agreement and as at 30 June 2011. As at the Latest Practicable Date, the balance is approximately HK$36,316,000
“Sale Shares” three ordinary shares of US$1.00 each in the issued share capital of SHL, representing the entire issued share capital of SHL, legally and beneficially owned by the Company
“SDS” SYSCAN Digital Systems Co. Limited, a company incorporated in the British Virgin Islands with limited liability and wholly owned by SIV
“SFO”
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
“SGM”
the special general meeting of the Company to be convened and held to consider the Agreement and the 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 the issued Share(s)
“SHL”
SYSCAN Holdings Limited, a company incorporated in the British Virgin Islands with limited liability and wholly owned by the Company
“SHL Group” SHL and its subsidiaries
“SIV”
SYSCAN InterVision Limited (矽感數碼科技有限公司), a company incorporated in Hong Kong with limited liability and wholly owned by SHL

– 3 –

DEFINITIONS

“SLL”

SYSCAN Lab., Limited, a company incorporated in Hong Kong with limited liability and wholly owned by SHL
“SST” Shenzhen SYSCAN Technology Co., Ltd. (深圳矽感科技有限公司), a company established in the PRC with limited liability and beneficially owned as to 100% by SHL
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Technical Service Agreement”
the agreement to be entered into between the Company or its subsidiary and SST before Completion relating to the provision of 2D barcode technical services by SST to the Remaining Group
“WHS” Wuhan SYSCAN Ltd. (武漢矽感數碼有限公司), a company established in the PRC with limited liability and owned as to 11.79% by SST after the completion of the Previous Disposal
“XJST” Xinjiang SYSCAN Technology Co. Limited (新疆矽感科技有限公司), a company established in the PRC with limited liability and owned as to 14.82% by SST
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“US$” United States dollars, the lawful currency of the United States of America
“%” per cent

– 4 –

LETTER FROM THE BOARD

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China Innovationpay Group Limited 中國創新支付集團有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 8083)

Executive Directors: Guan Guisen Lei Chunxiong

Non-Executive Director: Li Yuezhong

Independent Non-Executive Directors: Fong Chi Wah Wang Zhongmin Gu Jiawang

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

Principal place of business and head office in Hong Kong: Unit 2708, 27/F The Center 99 Queen’s Road Central Hong Kong

29 November 2011

To the Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL DISPOSAL AND

NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Pursuant to the Agreement, the Company conditionally agreed to sell and the Purchaser conditionally agreed to purchase the Sale Shares and the Sale Loan at a total consideration of HK$5,700,000. The Sale Shares represented the entire issued share capital of SHL and the Sale Loan represented all amounts due to the Company by SHL as at the date of the Agreement.

– 5 –

LETTER FROM THE BOARD

THE AGREEMENT

Details of the Agreement are set out below:

Date

21 October 2011 (as supplemented by a supplemental agreement dated 23 November 2011)

Parties

(i) Vendor: the Company; and (ii) Purchaser: New Smart.

The Purchaser is an investment holding company incorporated in the British Virgin Islands with limited liability. To the best knowledge, information and belief of the Directors and having made all reasonable enquiries, the Purchaser and its ultimate beneficial owners are third parties independent of and are not connected with the Company or its connected persons. On 19 August 2011, SHL entered into the Previous Disposal Agreement with New Smart, whereby, conditionally, SHL agreed to sell and New Smart agreed to purchase the 44.99% equity interest in WHS at a consideration of HK$38,000,000. The Previous Disposal was duly completed on 5 September 2011. Upon completion of the Previous Disposal, the term loans of an aggregate of HK$36,000,000 in relation to the two loan agreements dated 8 March 2011 and 22 March 2011 (as amended by respective supplemental agreements thereto) entered into, among others, between New Smart (as lender) and SHL (as borrower) were set off. The details of the Previous Disposal are set out in the announcements of the Company dated 19 August 2011, 22 August 2011 and 5 September 2011. As at the Latest Practicable Date, WHS was owned as to 11.79% by SST, an indirect wholly owned subsidiary of the Company, 44.99% by the Purchaser and 43.22% by Wuhan SYSCAN Technology Co, a third party independent of and is not connected with the Company or its connected persons (the “ WHS Shareholding ”). Save for the Previous Disposal, the WHS Shareholding and the Agreement, there is no other business association between the Group and the Purchaser.

Assets to be disposed of

(i) the Sale Shares, representing the entire issued share capital of SHL; and
(ii) the Sale Loan, representing all amounts due to the Company by SHL as at the date of the Completion.

Upon Completion, SHL will cease to be a subsidiary of the Company and the Company will no longer hold any interest in SHL.

– 6 –

LETTER FROM THE BOARD

Consideration

The total consideration of HK$5,700,000 consists of:

(i) HK$1,000,000 which shall be paid by the Purchaser to the Vendor upon Completion;
(ii) HK$2,000,000 which shall be paid by the Purchaser to the Vendor within three (3) months upon Completion; and
(iii) HK$2,700,000 which shall be paid by the Purchaser to the Vendor within six (6) months upon Completion.

The total consideration of HK$5,700,000 has been arrived at after arm’s length negotiations between the parties with reference to, amongst other things, (i) the unaudited consolidated pro forma net liabilities of SHL after taking into account the Previous Disposal and the pre-Completion adjustment for impairment of assets of SHL Group of approximately HK$70,171,000 as at 30 June 2011 as shown in the unaudited pro forma financial information of SHL; and (ii) the factors set out in the paragraph headed “Reasons for the Disposal” below.

Having considered the above and the factors set out in the paragraph headed “Reasons for the Disposal” below, the Directors consider that the terms of the Agreement and the Disposal are on normal terms, which are fair and reasonable, and are in the interests of the Company and the Shareholders as a whole.

Conditions Precedent

Completion is conditional upon the fulfillment (or, where relevant, waiver) of the following conditions:

(i) the passing of ordinary resolution(s) by the Shareholders at the SGM to approve the Agreement and the transactions contemplated thereunder in accordance with the GEM Listing Rules and applicable laws and regulations, if necessary;
(ii) all necessary consents, authorisations, licences and approvals required to be obtained on the part of the Purchaser and the Vendor in respect of the Agreement and the transactions contemplated thereunder having been obtained;
(iii) the Purchaser having completed to its satisfaction, which shall not be unreasonably withheld, a due diligence review on SHL and its subsidiaries; and
(iv) the Technical Service Agreement having been entered into between the Company or its subsidiary and SST.

– 7 –

LETTER FROM THE BOARD

The Purchaser may in writing waive any of the conditions specified above (save and except for conditions (i) and (iv)) on or before the Long Stop Date. If all the conditions specified above have not been satisfied or waived by 12:00 noon on the Long Stop Date (or such later date to be agreed between the parties to the Agreement in writing), then the Agreement shall automatically terminate and be deemed void and of no effect without any of the parties being liable to any other party in any way and neither the Company nor the Purchaser shall be obliged to complete the Agreement.

As at the Latest Practicable Date, none of the conditions precedent had been satisfied.

Completion

Completion shall take place within three Business Days after the date of fulfillment (or, where relevant, waiver) of the conditions above or such other date as the parties may mutually agree.

TECHNICAL SERVICE AGREEMENT

As announced by the Company in the Circular, the acquisition of Country Praise Enterprises Ltd. (“ CPE ”) and its subsidiaries (collectively the “ CPE Group ”) which is principally engaged in, amongst others, the development and operation of electronic payment tool, (the “ Acquisition ”) represented an excellent opportunity for the Group to deploy the application of the 2D barcode technology developed by SST to the fast-growing electronic payment service industry in the PRC. The application of the 2D barcode technology currently serves as a competitive advantage in the business of the Remaining Group as the 2D barcode technology can be applied as an effective means of authentication as well as an efficient, reliable and secure means of transmission and recording of transaction data in an electronic payment process. However, upon Completion, the Group shall cease to hold any interest in SHL, and SHL shall cease to be a subsidiary of the Company.

In order to ensure that the Remaining Group can continue to enjoy the business synergies brought about by the aforesaid 2D barcode technology, SST will enter into the Technical Service Agreement with the Company or its subsidiary before Completion. Pursuant to the Technical Service Agreement, SST shall provide to the Remaining Group for two years at nil consideration 2D barcode technical services which shall be applied solely to the Group’s third party payment business, including but not limited to the prepaid card business of the Company and its future development.

The management of the Company is of the view that upon the expiration of the Technical Service Agreement, the Company will reassess whether to renew the Technical Service Agreement or to adopt more advanced technology based on the market condition and technology development, and in the event that the Company decides to renew the Technical Service Agreement upon its expiration, the management of the Company perceives no difficulty in renewing the Technical Service Agreement after two years as it is expected that the business relationship between the Company and the Purchaser will be more solid and well-established during the two years of business cooperation under the Technical Service Agreement.

– 8 –

LETTER FROM THE BOARD

Furthermore, the management of the Company is of the view that there will be no material impact resulting from the Disposal on the Remaining Group’s pre-paid card business. Before the Acquisition, the operational statistics of the CPE Group, including but not limited to the number of prepaid cards sold, the sales of prepaid cards and the transaction amounts of prepaid cards, showed significant growth since August 2008 (being the date of the establishment of CPE Group’s first subsidiary) which demonstrated the prepaid card business of CPE Group is sound and viable even without the synergies brought by the 2D barcode technology.

INFORMATION ON THE GROUP

The Company is an investment holding company and its subsidiaries are principally engaged in (i) the development and operation of electronic payment tool; (ii) the design, research, development, manufacturing and sale of optical image capturing devices and related barcode reader equipment; (iii) trading of computers and communication equipment; and (iv) the operation of a prepaid card business in the PRC including the issue of different kinds of prepaid cards, some of which being multi-functional.

INFORMATION ON SHL GROUP

SHL

SHL is an investment holding company incorporated in the British Virgin Islands with limited liability and is wholly owned by the Company. Set out below is the shareholding structure of SHL Group as at the Latest Practicable Date:

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

SHL
100% 100%
SIV SLL
100% 100%
SST SDS
11.79% 91.43% 14.82% 95%
WHS HSB XJST BJST
30%
GYB
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– 9 –

LETTER FROM THE BOARD

SLL

SLL is a company incorporated in Hong Kong with limited liability and is wholly owned by SHL. It is currently dormant as at the Latest Practicable Date.

SIV

SIV is a company incorporated in Hong Kong with limited liability and is wholly owned by SHL. It is principally engaged in the trading of optical image capturing devices and modules.

SST

SST is a company established in the PRC with limited liability and is beneficially owned as to 100% by SHL. It is principally engaged in the design, development, manufacture and sale of optoelectronic products.

SDS

SDS is an investment holding company incorporated in the British Virgin Islands with limited liability and is wholly owned by SIV. It is currently dormant as at the Latest Practicable Date.

BJST

BJST is a company established in the PRC with limited liability and is owned as to 95% by SST. It is principally engaged in technology development and the sale of communication equipment.

XJST

XJST is a company established in the PRC with limited liability and is owned as to 14.82% by SST. It is principally engaged in the development of computer products.

HSB

HSB is a company established in the PRC with limited liability and is owned as to approximately 91.43% by SST. It is principally engaged in the design and development of bar code related hardware and software.

WHS

WHS is a company established in the PRC with limited liability and is owned as to 11.79% by SST after the completion of the Previous Disposal (please refer to the Company’s announcement on 19 August 2011 for details). It is principally engaged in the design and development of bar code related hardware and software.

– 10 –

LETTER FROM THE BOARD

GYB

GYB is a company established in the PRC with limited liability and is owned as to 30% by HSB. It is principally engaged in the design and development of Internet service.

GAIN ON THE DISPOSAL

Upon Completion, SHL will cease to be a subsidiary of the Company. As a result, the financial results of SHL will not be consolidated in the accounts of the Group subsequent to Completion.

Based on the unaudited consolidated pro forma net liabilities of SHL of approximately HK$70,171,000 (after taking into account of the Previous Disposal and the pre-Completion adjustment for the impairment of assets of SHL Group) as at 30 June 2011, there is an expected gain of approximately HK$44,078,000 from the Disposal which is calculated with reference to the consideration of HK$5,700,000, the unaudited consolidated pro forma net liabilities of SHL of approximately HK$70,171,000 (after taking into account of the Previous Disposal and the pre-Completion adjustment for the impairment of assets of SHL Group), the Sale Loan of approximately HK$36,316,000, the payment of fees and expenses in connection with the Disposal of approximately HK$2,000,000 and the release of foreign currency translation reserves of approximately HK$6,523,000. The exact amount of gain from the Disposal will be calculated on the basis of the relevant figures as at the date of Completion and therefore will be different from the above amount. It is expected that the gain from the Disposal will be reflected in the consolidated accounts of the Group for the year ending 31 December 2011.

INFORMATION ON THE PURCHASER

The Purchaser is an investment holding company incorporated in the British Virgin Islands with limited liability. To the best knowledge, information and belief of the Directors and having made all reasonable enquiries, the Purchaser and its ultimate beneficial owners are third parties independent of and are not connected with the Company or its connected persons. On 19 August 2011, SHL entered into the Previous Disposal Agreement with New Smart, whereby, conditionally, SHL agreed to sell and New Smart agreed to purchase the 44.99% equity interest in WHS at a consideration of HK$38,000,000. The Previous Disposal was duly completed on 5 September 2011. Upon completion of the Previous Disposal, the term loans of an aggregate of HK$36,000,000 in relation to the two loan agreements dated 8 March 2011 and 22 March 2011 (as amended by respective supplemental agreements thereto) entered into, among others, between New Smart (as lender) and SHL (as borrower) were set off. The details of the Previous Disposal are set out in the announcements of the Company dated 19 August 2011, 22 August 2011 and 5 September 2011. As at the Latest Practicable Date, WHS was owned as to 11.79% by SST, an indirect wholly owned subsidiary of the Company, 44.99% by the Purchaser and 43.22% by Wuhan SYSCAN Technology Co, a third party independent of and is not connected with the Company or its connected persons. Save for the Previous Disposal, the WHS Shareholding and the Agreement, there is no other business association between the Group and the Purchaser.

– 11 –

LETTER FROM THE BOARD

REASONS FOR THE DISPOSAL

The reasons for the Disposal are as follows:

(i) Financial position of SHL

SHL has unaudited consolidated pro forma net liabilities of approximately HK$70,171,000 (after taking into account of the Previous Disposal and the pre-Completion adjustment for the impairment of assets of SHL Group) as at 30 June 2011. In addition, for the two years ended 31 December 2010, SHL suffered an unaudited consolidated net loss after tax of approximately HK$44,071,000 and HK$73,536,000 respectively. For the six months ended 30 June 2011, SHL suffered an unaudited consolidated net loss after tax of approximately HK$27,628,000. Disposing SHL will help the Group to dispose of a loss-making subsidiary.

(ii) Re-allocation of resources

As mentioned in its 2010 annual report and 2011 interim report, which were published after the date of the Circular, the Group would carefully assess and differentiate the performances of its various business lines. For those loss-making or less profit-making lines, the Group would review the situations and come up with appropriate remedial actions so as to strike for the most benefits to the Shareholders. The Group was also cautious towards its future business plan and would concentrate on the profitable businesses in order to establish a stable revenue stream and achieve profitable results for the Group. Given the fact that business carried out by SHL and its subsidiaries had recorded an unaudited consolidated net losses after tax of approximately HK$44,071,000 and HK$73,536,000 respectively for the two years ended 31 December 2010 and an unaudited consolidated net loss after tax of approximately HK$27,628,000 for the six months ended 30 June 2011, the management of the Company considers the Disposal as an appropriate remedial action to stop the Company from further loss-making.

Upon Completion, the principal activities of Remaining Group consist of (i) the development and operation of electronic payment tools; (ii) the trading of computers and communication equipment; and (iii) the operation of a prepaid card business in the PRC including the issue of different kinds of prepaid cards, some of which being multi-functional. Based on the unaudited consolidated management accounts of the Group as at 30 June 2011, the CPE Group had recorded an unaudited consolidated turnover and a net profit of approximately HK$52.7 million and HK$3.69 million respectively. As SST shall provide 2D barcode technical services to the Remaining Group under the Technical Service Agreement, the management of the Company believes that the Disposal could enable the Group to reallocate its resources from a loss-making business to the fast-growing third party payment service business in the PRC.

– 12 –

LETTER FROM THE BOARD

It is the intention of the management of the Company that the Company will continue its remaining business upon Completion. The Directors confirmed that the Company has not entered into, and will not enter into, any agreement, arrangement, understanding or negotiation to dispose or discontinue its existing business after Completion.

(iii) Removal of qualified audit opinion

The audited consolidated financial statements of the Company for the year ended 31 December 2010 were qualified solely due to the limitation of audit scope arising from the financial information of SHL Group. As such, the Disposal will be a step towards the removal of the qualified audit opinion of the Company.

The Disposal is determined after arm’s length negotiations between the Company and the Purchaser. Taking into account of the above reasons, the Directors are of the view that the Disposal represents an opportunity to streamline the Group’s business and re-allocate management resources after the Disposal to other business segments which may have better growth potential.

USE OF PROCEEDS

The Group intends to utilize the proceeds of HK$5,700,000 from the Disposal for the general working capital of the Remaining Group.

FINANCIAL EFFECTS ON ASSETS AND LIABILITIES

Based on the unaudited pro forma financial information of the Remaining Group as set out in Appendix III to this circular, the Group’s total assets would decrease by approximately HK$274,489,000 from approximately HK$1,636,552,000 to approximately HK$1,362,063,000 and the Group’s total liabilities would decrease by approximately HK$265,915,000 from approximately HK$1,292,471,000 to approximately HK$1,026,556,000 as if the Disposal had been completed on 30 June 2011.

FINANCIAL AND TRADING PROSPECTS OF THE REMAINING GROUP

Upon Completion, the Remaining Group is principally engaged in, amongst others, the development and operation of electronic payment tools, including the distribution and acceptance of the prepaid card, payment making via the internet and mobile phone network in the newly electronic payment process for provision of a safe and convenient payment platform for the community of the widely electronic business trading activities. Third party payment business is one of the most rapidly developing emerging industries in the recent years in the PRC. The Directors consider this is a very profitable business channel and provides tremendous opportunities available in the market of the foreseeable future. The Remaining Group will further expand the operation and sales network of its electronic payment services across the PRC, aiming to build up a consolidated multi-channel payment platform in the PRC.

– 13 –

LETTER FROM THE BOARD

As mentioned in the paragraph headed “Reasons for the Disposal” above, the management of the Company considers the Disposal as an appropriate remedial action to stop the Company from further loss-making and the Directors are of the view that the Disposal represents an opportunity to streamline the business and re-allocate management resources to other business segments which may have better growth potential. It is expected that the Company will be a profit-making entity and will give the Shareholders a good return on investment in the future.

GEM LISTING RULES IMPLICATIONS

According to the 2011 interim report of the Company, the turnover attributable to the business of the Remaining Group was approximately HK$52.7 million for the six months ended 30 June 2011 which accounted for approximately 53.0% of the Group’s total turnover for the six months ended 30 June 2011. Furthermore, according to the Circular and the announcements made by the Company dated 22 July 2011 and 23 October 2011, the prepaid card business during the two periods from 1 October 2010 to 31 March 2011 and from 1 April 2011 to 30 September 2011 achieved the targets as specified in the paragraph headed “adjusted consideration scenario 1” and “adjusted consideration scenario 2” accordingly in the Circular which included (a) the monetary amounts of prepaid cards issued by CPE Group which exceeded RMB200,000,000 and RMB330,000,000 respectively; (b) the number of pre-paid cards issued by CPE Group which exceeded 185,000 and 380,000 respectively; and (c) the aggregate transaction amounts executed under the prepaid cards issued by CPE Group which exceeded RMB135,000,000 and RMB250,000,000 respectively. Accordingly, the Directors are of the view that the Remaining Group will have sufficient operations upon the Disposal as required under Rule 17.26 of the GEM Listing Rules.

Upon Completion, the principal activities of the Remaining Group consist of (i) the development and operation of electronic payment tools; (ii) the trading of computers and communication equipment; and (iii) the operation of a prepaid card business in the PRC including the issue of different kinds of prepaid cards, some of which being multi-functional. Based on the unaudited management accounts of the Remaining Group as at 30 June 2011, after taking into account of the Previous Disposal and the Disposal, the percentages of cash balances of approximately HK$155.6 million to the total assets of approximately HK$1,362.1 million and to the net assets of approximately HK$334.6 million of the Remaining Group for the six months ended 30 June 2011 were only approximately 11.4% and 46.5% respectively. Accordingly, the Board believes that the Company is not a cash company according to the provision of Rule 19.82 of the GEM Listing Rules.

As one of the applicable percentage ratios as defined under Rule 19.07 of the GEM Listing Rules in respect of the Disposal exceeds 75%, the Disposal constitutes a very substantial disposal for the Company under Chapter 19 of the GEM Listing Rules, and is therefore subject to the requirements of reporting, announcement and Shareholders’ approval. To the best knowledge, information and belief of the Directors and having made all reasonable enquiries, neither the Purchaser nor its ultimate beneficial owners hold any Shares and no Shareholder has a material interest in the Disposal. Accordingly, no Shareholder is required to abstain from voting on the relevant resolution to approve the Agreement and the transactions contemplated thereunder at the SGM.

– 14 –

LETTER FROM THE BOARD

SGM

The SGM will be held at Yue Function Room II, First Floor, City Garden Hotel, 9 City Garden Road, North Point, Hong Kong at 10:00 a.m. on 16 December 2011, the notice of which is set out on pages 57 to 58 of this circular, to consider and, if thought fit, pass the ordinary resolution(s) to approve the Agreement and the transactions contemplated thereunder.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the meeting, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same to the Company c/o the Company Secretary at the Company’s principal place of business and head office in Hong Kong at Unit 2708, 27/F, The Center, 99 Queen’s Road Central, Hong Kong as soon as possible and in any event not later than 48 hours before the time of the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting or any adjournment thereof should you so wish.

RECOMMENDATION

The Directors (including the independent non-executive Directors) are of the view that the Disposal and the terms of the Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the relevant resolution at the SGM.

ADDITIONAL INFORMATION

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

By order of the Board China Innovationpay Group Limited Guan Guisen Chairman

– 15 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

The audited consolidated financial statements of the Company: (i) for the year ended 31 December 2010 is disclosed in the 2010 annual report of the Company published on 31 March 2011; (ii) for the year ended 31 December 2009 is disclosed in the 2009 annual report of the Company published on 30 March 2010; and (iii) for the year ended 31 December 2008 is disclosed in the 2008 annual report of the Company published on 30 March 2009. The unaudited condensed consolidated financial statement of the Company for the six months ended 30 June 2011 is disclosed in the 2011 interim report of the Company published on 14 August 2011. All of the aforementioned reports have been published on the HKExnews website of the Stock Exchange (http://www.hkexnews.hk) and the website of the Company (www.innovationpay.com.hk).

2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

Upon Completion, the Remaining Group consists of the Company, an investment holding company, and the Country Praise Enterprises Ltd. (“ CPE ”) and its subsidiaries (collectively the “ CPE Group ”), and is principally engaged in, amongst others, the development and operation of electronic payment tools. As the acquisition of the CPE Group was completed on 28 February 2011, we hereby set out below the management discussion and analysis of the Remaining Group for the period from 28 February 2010 to 30 June 2011 (the “ Relevant Period ”). The following financial information is based on the financial information of the Remaining Group as set out in Appendix III to this circular.

Business Review

The Remaining Group is principally engaged in (i) the development and operation of electronic payment tools; (ii) the trading of computers and communication equipment; and (iii) the operation of a prepaid card business in the PRC including the issue of different kinds of prepaid cards, some of which being multi-functional. Just after the completion of the acquisition of the CPE Group on 28 February 2011, the CPE Group started to contribute to the Remaining Group’s performance positively. Reference is made to the Circular and the announcements made by the Company dated 22 July 2011 and 23 October 2011, the prepaid card business during the two periods from 1 October 2010 to 31 March 2011, and from 1 April 2011 to 30 September 2011 achieved the targets as specified in paragraph headed “adjusted consideration scenario 1” and “adjusted consideration scenario 2” accordingly in the Circular which included (a) the monetary amounts of prepaid cards issued by CPE Group exceeded RMB200,000,000 and RMB330,000,000 respectively; (b) the number of pre-paid cards issued by CPE Group exceeded 185,000 and 380,000 respectively; and (c) the aggregate transaction amounts executed under the prepaid cards issued by CPE Group exceeded RMB135,000,000 and RMB250,000,000 respectively. The overall profitability of the Company continuously improved and it is expected that the Company will be a pure profit making entity that will give the Shareholders a good return on investment in the future.

– 16 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Remaining Group is also in the process of making an Application. With reference to the announcement dated 31 August 2011, the Application has successfully passed the documents initial vetting process and accordingly accepted by the operations office of the People’s Bank of China. As at the Latest Practicable Date, the Company was waiting for the result of the Application.

As at the Latest Practicable Date, the Directors were not aware of any circumstance that the Payment Service Rules would restrict the continued operation of foreign invested payment institutions, including the Company, which have already been carrying on payment services and under the process of the Application. To their best knowledge, information and belief, the Directors are not aware that those companies whose Application has been accepted and is being processed are required to suspend its payment business or the sales of new prepaid cards until the Certificate is granted. In addition, the operations office (營業管理部) of the People’s Bank of China did not require such suspension of the Company, whether at the time of the Company’s submission of the Application, at the Company’s subsequent passing of the documents initial vetting process or in the published notice of acknowledgement of receipt of the Company’s Application.

The Directors are of the view that the Company has met the strict requirements of the Application and has not been subject to any penalty for its business activities in providing or utilizing payment services in the past three years. In addition, before accepting the Application, the operations office of the People’s Bank of China had reviewed the documents submitted by the Company. The Company has passed the documents initial vetting process without being notified of any outstanding matters to be followed up. Therefore, as at the Latest Practicable Date, the Directors were not aware of any material uncertainty which would preclude the Company from obtaining the Certificate.

However, there is no assurance that the Company will be successful in obtaining the Certificate in order to continue its provision of payment services in the PRC. In the event that the Company receives any negative feedback from the People’s Bank of China, it will be dealt with promptly and an announcement will be made as soon as practicable to inform the Shareholders and potential investors of the Company accordingly. In addition, increasing compliance standards in relation to permits, licences, approvals and/or certificates in general or change of interpretation of any existing laws or regulations will make it more restrictive for the Company to conduct any part of its business, which may adversely affect the Company’s operation and profitability.

As to the business segment of trading of computers and communication equipment, it accounts for a significant part of the Remaining Group’s total revenue as at the Latest Practicable Date and is expected to continue generating a stable revenue stream and achieving profitable results for the Remaining Group. The Remaining Group will further concentrate its resources on this profitable segment by leveraging its stable growth potential.

– 17 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Financial Review

Revenue

During the Relevant Period, the Remaining Group recorded a revenue of approximately HK$52,744,000, of which is mainly attributable as to (i) approximately HK$42,126,000 from trading of computers and communication equipment, representing approximately 79.87% of the total revenue of the Remaining Group; (ii) approximately HK$10,135,000 from the prepaid card businesses, representing approximately 19.22% of the total revenue of the Remaining Group; and (iii) approximately HK$483,000 from other business, representing approximately 0.92% of the total revenue of the Remaining Group.

Net loss

The Remaining Group recorded an unaudited loss after tax of approximately HK$4,333,000, mainly due to general and administrative expenses of the Company during the Relevant Period. The CPE Group had recorded an unaudited net profit of approximately HK$3.69 million during the Relevant Period.

Liquidity and Financial Resources

As at 30 June 2011, the Remaining Group’s cash and cash equivalents amounted to approximately HK$151,917,000.

As at 30 June 2011, the Remaining Group did not have any bank borrowings.

Capital Structure

As at 30 June 2011, the equity attributable to owners of the Remaining Group amounted to approximately HK$367,226,000.

Capital Commitments, Pledge of Assets and Contingent Liabilities

As at 30 June 2011, the Remaining Group did not have any capital commitments, substantial pledges on its assets and material contingent liabilities.

Foreign Exchange Exposure

Since the Remaining Group’s operations are mainly located in PRC and its transactions, monetary assets and liabilities are primarily denominated in Renminbi, there is minimal exposure to foreign currency risks. The Remaining Group monitors its foreign exchange exposure and will consider hedging significant currency exposure should the need arise.

– 18 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Significant Investment and Material Acquisitions and Disposals

(1) On 22 November 2010 (after trading hours), the Company entered into the new placing agreement (the “ New Placing Agreement ”) with Oriental Patron Asia Limited (the “ Placing Agent ”) pursuant to which the Company has conditionally agreed to place, through the Placing Agent, up to 625,000,000 placing shares at a price of HK$0.32 per placing share on a best effort basis.

The placing was completed on 9 March 2011 in accordance with the terms and conditions of the New Placing Agreement. An aggregate of 625,000,000 placing shares have been successfully placed by the Placing Agent to four investors who are and whose ultimate beneficial owners are third parties independent of, not connected with and not acting in concert with any connected person of the Company. None of the placees has become a substantial shareholder (as defined in the GEM Listing Rules) as a result of the placing. An aggregate of 625,000,000 placing shares represents approximately 17.93% of the issued share capital of 3,484,639,457 shares as at the date of completion of the placing. An amount of approximately HK$18,750,000, being expenses directly attributable to the said placing exercise, was capitalised and debited to the share premium account.

(2) On 22 November 2010, the Company entered into a sale and purchase agreement (the “ Sale and Purchase Agreement ”) with Mighty Advantage Enterprises Ltd. (“ MAE ”) and CPE pursuant to which the parties agreed to acquire the entire equity interest in the CPE, at an initial consideration of HK$150,000,000 (subject to adjustments), but in any event subject to a maximum consideration of HK$850,000,000. The consideration shall be satisfied in a combination of cash, the Shares and convertible bonds.

All the conditions precedent under the Sale and Purchase Agreement have been fulfilled and the Completion took place on 28 February 2011.

The Company has paid cash consideration of HK$80,000,000 and issued 218,750,000 consideration shares to MAE in accordance with the terms of the Sale and Purchase Agreement on the completion date. The 218,750,000 consideration shares, representing approximately 7.65% of the issued share capital of the Company at 28 February 2011, rank pari passu in all aspects amongst themselves and with the shares in issue on the date of the issue and allotment of the consideration shares.

(3) On 21 January 2011, the Company entered into a convertible bonds subscription agreement with MAE pursuant to which the Company will issue certain convertible bonds to MAE upon the satisfaction of certain conditions as adjustment to the consideration of the acquisition of the entire interest of CPE.

Save as aforesaid, the Remaining Group did not have any significant investment, material acquisitions or disposals during the Relevant Period.

– 19 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Future Plan of Material Investment

During the Relevant Period, the Remaining Group further expanded the operation and sales network of its electronic payment services across the PRC, aiming to build up a consolidated multi-channel payment platform in the PRC.

Employees and Remuneration Policies

As at 30 June 2011, there were around 280 staff members employed by the Remaining Group. The Directors believe that good quality of employees is a company asset which affects growth and improves profitability. Employees are remunerated according to their performance and work experience. In addition to basic salaries and retirement scheme, staff benefits include share options and performance bonus.

Subsequent Event after the Reporting Date

On 22 July 2011, the Company issued convertible bonds in an aggregate principal amount of HK$76,800,000 to MAE upon fulfillment of the requirements of “Adjusted Consideration Scenario 1” under the Sale and Purchase Agreement. On 26 July 2011, the Company issued 240,000,000 Shares upon the conversion of the aforesaid convertible bonds.

On 20 October 2011, the Company issued convertible bonds in an aggregate principal amount of HK$76,800,000 to MAE upon fulfillment of the requirements of “Adjusted Consideration Scenario 2” under the Sale and Purchase Agreement. On 24 October 2011, the Company issued 240,000,000 Shares upon the conversion of the aforesaid convertible bonds.

3. INDEBTEDNESS STATEMENT

As at the close of business on 30 September 2011, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Group had aggregate outstanding borrowings of approximately HK$23.6 million comprising (i) secured bank borrowings of approximately HK$10.3 million and other secured borrowings of approximately HK$13.3 million.

As at 30 September 2011, the Group had pledged bank deposits of approximately HK$10,000,000 to secure bank borrowings granted to the Group, and 75% of the equity shares of SST was pledged to a lender to secure the loan of approximately HK$13,276,000 granted to the Group.

– 20 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Contingent liabilities

As at the close of business on 30 September 2011, the Group had no contingent liabilities.

Save as aforesaid and apart from intra-group liabilities and normal trade payables in the ordinary course of the business, as at the close of business on 30 September 2011, the Group did not have other outstanding mortgages, charges, debentures or other loan capital, bank overdrafts or loans, other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptance or acceptance credits, guarantees or other material contingent liabilities.

4. WORKING CAPITAL SUFFICIENCY

The directors, after due and carefully enquiry, are of the opinion that following the completion of the Disposal, after taking into account the financial resources available to the Group, including internally generated funds and the expected cash flows and the available banking facilities, the Group has sufficient working capital for its present requirements and for at least the next 12 months from the date of this circular, in the absence of unforeseeable circumstances.

5. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial and trading position of the Group since 31 December 2010, being the date to which the latest published audited accounts of the Company were made up.

– 21 –

APPENDIX II

FINANCIAL INFORMATION OF SHL GROUP

A. ACCOUNTANTS’ REPORT

The following is the text of an accountants’ report on the SHL Group, prepared for the sole purpose of inclusion in this circular, received from the independent reporting accountants, KTC Partners CPA Limited, Certified Public Accountants (Practising).

KTC Partners CPA Limited

Certified Public Accountants (Practising)

��

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

The Board of Directors China Innovationpay Group Limited Unit 2708, 27/F., The Center, 99 Queen’s Road Central, Hong Kong

Dear Sirs,

Introduction

We have reviewed the accompanying consolidated statements of financial position of SYSCAN Holdings Limited (“ SHL ”) and its subsidiaries (hereinafter collectively referred to as the “ SHL Group ”) as at 31 December 2008, 31 December 2009, 31 December 2010, and 30 June 2010 and 30 June 2011, and the related consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the years/periods then ended. This financial information, which has been prepared under the same accounting policies of China Innovationpay Group Limited (the “ Company ”), is the responsibility of the directors of the Company. Our responsibility is to express a conclusion on this financial information based on our review.

Scope of review

Except as explained in the following paragraph, we conducted our review in accordance with Hong Kong Standard on Review Engagements 2400 “Engagements to Review Financial Statements” issued by the Hong Kong Institute of Certified Public Accountants. This Standard requires that we plan and perform the review to obtain moderate assurance as to whether the financial information is free of material misstatement. A review is limited primarily to inquiries of personnel of the Company and analytical procedures applied to financial data and thus provide less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

– 22 –

APPENDIX II

FINANCIAL INFORMATION OF SHL GROUP

Basis for disclaimer of conclusion

1. Limitation of scope – disposal of associates

(i) As explained in note 31(b) to the Company’s financial statements for the year ended 31 December 2008, on 30 April 2008 (the “ Disposal Date ”), the SHL Group disposed of its 40% equity interests in an associate, 深圳旭感和誠信息技術有限公司 (Shenzhen SYSCAN Hecheng Info-tech Co., Ltd., “ Shenzhen SYSCAN ”), to an independent third party (the “ Acquirer ”) in return for the Acquirer to assume the liability amount due from the SHL Group to Shenzhen SYSCAN of approximately HK$13,129,000, resulting in a loss on disposal of approximately HK$529,000 in the SHL Group’s consolidated statement of comprehensive income. We were not provided with sufficient and appropriate evidence, or were unable to carry out alternative audit procedures, on the value of the SHL Group’s share of net assets of Shenzhen SYSCAN, the amount due to Shenzhen SYSCAN as at the Disposal Date and the share of losses of Shenzhen SYSCAN of HK$Nil for the period ended the Disposal Date. Consequently, we were unable to satisfy ourselves as to whether the loss on disposal of approximately HK$529,000 arising thereon and the SHL Group’s share of Shenzhen SYSCAN’s profit or loss of HK$Nil for the period up to the Disposal Date were fairly stated. Any adjustments to the above figures might have a significant consequential effect on the results for the year ended 31 December 2008.
(ii) Assets classified as held for sale with carrying amount of approximately HK$99,488,000 included in the consolidated statement of financial position as at 31 December 2009 represented the SHL Group’s 45% equity interest in a then associate, SYSCAN Manufacturing Limited, and its subsidiary (collectively referred to as “ SML Group ”). The SHL Group’s 45% equity interest in SML Group was disposed of during the year ended 31 December 2010 and the details of this transaction were disclosed in the Company’s circular dated 8 February 2010. Gain on disposal of associates of approximately HK$1,414,000 included in the consolidated statement of comprehensive income for the period/year ended 30 June 2010 and 31 December 2010, was based on the net assets value of SML Group attributable to the SHL Group as at the date of disposal of approximately HK$99,488,000. The above-mentioned net assets value was calculated based on the management accounts of SML Group as at the date of disposal. As the SHL Group was unable to access the books and records subsequent to the disposal of SML Group, we were unable to obtain sufficient appropriate audit evidence relating to the financial information of SML Group and there were no other satisfactory audit procedures that we could adopt to satisfy ourselves whether assets classified as held for sale of approximately HK$99,488,000 as at 31 December 2009, the net assets value of SML Group attributable to the SHL Group as at the date of disposal of approximately HK$99,488,000, the SHL Group’s share of SML Group’s profit or loss of HK$Nil for the period up to the date of disposal and gain on disposal of associates of approximately HK$1,414,000 for the period/year ended 30 June 2010 and 31 December 2010

– 23 –

APPENDIX II

FINANCIAL INFORMATION OF SHL GROUP

were fairly stated. Any adjustments to the above figures might have a significant consequential effect on the results for the years/period ended 31 December 2009, 31 December 2010 and 30 June 2010 and net assets as at 31 December 2009, 31 December 2010 and 30 June 2010.

2. Limitation of scope – carrying amount of interest in associates

Included in the interests in associates in the consolidated statement of financial position as at 31 December 2008, 31 December 2009, 31 December 2010, and 30 June 2010 and 30 June 2011 were interests in an associate, namely 浙江矽感科技有限公司 of HK$19,960,000, HK$Nil, HK$Nil, HK$Nil and HK$Nil respectively. We were not provided with sufficient and appropriate evidence to satisfy ourselves as to whether the amounts were fairly stated and free from material misstatement and were unable to obtain sufficient evidence or carry out alternative audit procedures on the value of the share of net assets of associates as at 31 December 2008, 31 December 2009, 31 December 2010, and 30 June 2010 and 30 June 2011, and the share of losses of associates of HK$Nil, HK$623,000 for the year ended 31 December 2008 and 31 December 2009 respectively. Any adjustments found to be necessary to the above amounts would affect the amounts recorded in the consolidated statement of financial position and the consolidated statement of comprehensive income in respect of the share of losses of associates and for the years ended 31 December 2008 and 31 December 2009, and consequently the net carrying amount of interests in associates as at 31 December 2008, 31 December 2009, 31 December 2010, and 30 June 2010 and 30 June 2011.

3. Limitation of scope – consolidation adjustments brought forward from prior year

Included in opening consolidation adjustments as at 1 January 2008 and closing consolidation adjustments as at 31 December 2008, 31 December 2009, 31 December 2010, and 30 June 2010 and 30 June 2011 are entries with the following financial effects:

In relation to property, plant and equipment:

increase in cost of property, plant and equipment by approximately HK$13,791,000 as at 1 January 2008, 31 December 2008, 31 December 2009, 31 December 2010, and 30 June 2010 and 30 June 2011; and
increase in accumulated depreciation of property, plant and equipment by approximately HK$20,434,000 as at 1 January 2008, 31 December 2008, 31 December 2009, 31 December 2010, and 30 June 2010 and 30 June 2011.

In relation to prepayments, deposits and other receivables:

decrease in the carrying amount of prepayments, deposits and other receivables as at 1 January 2008, 31 December 2008, 31 December 2009, 31 December 2010, and 30 June 2010 and 30 June 2011 by approximately HK$1,407,000.

– 24 –

APPENDIX II

FINANCIAL INFORMATION OF SHL GROUP

We were unable to obtain sufficient appropriate audit evidence relating to these consolidation adjustments and there were no other satisfactory audit procedures that we could adopt to satisfy ourselves whether the property, plant and equipment and prepayments, deposits and other receivables included in the consolidated statements of financial position as at 31 December 2008, 31 December 2009, 31 December 2010, and 30 June 2010 and 30 June 2011 were fairly stated. Any adjustments to the above figures might have a significant consequential effect on the results for the years/periods ended 31 December 2008, 31 December 2009, 31 December 2010, and 30 June 2010 June and 30 June 2011 and net assets as at 31 December 2008, 31 December 2009, 31 December 2010, and 30 June 2010 and 30 June 2011.

4. Limitation of scope – other payables

Included in accruals and other payables in the consolidated statement of financial position as at 31 December 2010 and 30 June 2011 are the following balances:

(i) certain payable balances with aggregate amount of approximately HK$58,856,000; and
(ii) a net amount of payables of approximately HK$31,505,000 which represents the net unreconciled intra-group amounts on consolidation. We were unable to obtain sufficient appropriate audit evidence relating to these payables and there were no other satisfactory audit procedures that we could adopt to satisfy ourselves whether these payables included in the consolidated statement of financial position as at 31 December 2010 and 30 June 2011 were fairly stated. Any adjustments to the above figures might have a significant consequential effect on the results for the year/period ended 31 December 2010 and 30 June 2011 and net assets as at 31 December 2010 and 30 June 2011.

5. Limitation on scope – losses on disposals of subsidiaries

There were two subsidiaries of the SHL Group, 深圳市和浩源資發展有限公司 (formerly known as 深圳市矽感數碼系統有限公司) and 深圳市旭感信息工程監理有限公司 disposed of during the year ended 31 December 2010. The above-mentioned disposals resulted in losses on disposals of subsidiaries amounted to approximately HK$14,031,000. The aforesaid losses on disposals of subsidiaries were calculated based on the management accounts of the two disposed subsidiaries as at the respective dates of disposals.

As the SHL Group was unable to access the books and records of the two then subsidiaries subsequent to their disposals, we were unable to obtain sufficient appropriate audit evidence relating to the financial information of these disposed subsidiaries and there were no other satisfactory audit procedures that we could adopt to satisfy ourselves whether the related equity attributable to these two subsidiaries was properly eliminated upon disposals and the losses on disposals of subsidiaries of approximately HK$14,031,000 for the year ended 31 December 2010 was fairly stated. Any adjustments to the above figure might have a significant consequential effect on the results for the year ended 31 December 2010.

– 25 –

APPENDIX II

FINANCIAL INFORMATION OF SHL GROUP

6. Limitation on scope – loss on deemed disposal of a subsidiary

On 10 September 2010, 深圳市矽感高科投資管理有限公司 transferred an intangible asset of RMB70,000,000 to the SHL Group’s wholly owned subsidiary, 乾元貝盟科技有限公司 (“ GYB ”), as capital contribution. The above-mentioned transfer led to the reduction of the SHL Group’s interest in GYB from 100% to 30% and GYB became an associate of the SHL Group with carrying amount of approximately HK$29,906,000. Pursuant to the above, a loss on deemed disposal of a subsidiary of approximately HK$3,939,000 was recognised in the consolidated profit or loss for the year ended 31 December 2010. We were unable to obtain sufficient appropriate audit evidence relating to the financial information of GYB and there were no other satisfactory audit procedures that we could adopt to satisfy ourselves whether any impairment for the SHL Group’s interest in GYB of approximately HK$24,470,000 included in investments in associates in the consolidated statement of financial position as at 31 December 2010 should be made and the related equity attributable to GYB was properly eliminated upon deemed disposal, and whether the loss on deemed disposal of a subsidiary of approximately HK$3,939,000 and the SHL Group’s share of GYB’s loss of approximately HK$5,436,000 for the year ended 31 December 2010 were fairly stated. Any adjustments to the above figures might have a significant consequential effect on the results for the year ended 31 December 2010 and net assets as at 31 December 2010.

Disclaimer of conclusion

Because of the significance of the possible effects on the financial information of the matters as stated in paragraphs (1) to (6) in the basis for disclaimer of conclusion, we are unable to reach a review conclusion as to whether the accompanying financial information gives a true and fair view in accordance with Hong Kong Financial Reporting Standards.

KTC Partners CPA Limited

Certified Public Accountants (Practising) Hong Kong, 29 November 2011

Chow Yiu Wah, Joseph

Practising Certificate Number: P4686

– 26 –

APPENDIX II

FINANCIAL INFORMATION OF SHL GROUP

Unaudited Consolidated Statement of Financial Position of the SHL Group

As at 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 10,384 10,857 13,776 45,631 – – 57,160 3,536 1,066 – 226 – 24,555 495 119,999	As at 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 10,384 10,857 13,776 45,631 – – 57,160 3,536 1,066 – 226 – 24,555 495 119,999	As at 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 10,384 10,857 13,776 45,631 – – 57,160 3,536 1,066 – 226 – 24,555 495 119,999	As at 30 June 2011 2010 HK$’000 HK$’000 24,197 12,332 45,021 – 88,039 16,147 – 230 25,782 562 183,039 29,271 21,572 15,750 21,819 8,256 15,888 8,182 – – 434 – – 1,362 – – 24,074 – 11,363 11,514 95,150 45,064 36,398 9,389 112,510 39,927 – – 57,080 – 36,316 33,884 20 40 59,907 3,010 302,231 86,250 (207,081) (41,186) (24,042) (11,915) – – (58,126) (14,379) (58,126) (14,379) 34,084 2,464 (24,042) (11,915)	As at 30 June 2011 2010 HK$’000 HK$’000 24,197 12,332 45,021 – 88,039 16,147 – 230 25,782 562 183,039 29,271 21,572 15,750 21,819 8,256 15,888 8,182 – – 434 – – 1,362 – – 24,074 – 11,363 11,514 95,150 45,064 36,398 9,389 112,510 39,927 – – 57,080 – 36,316 33,884 20 40 59,907 3,010 302,231 86,250 (207,081) (41,186) (24,042) (11,915) – – (58,126) (14,379) (58,126) (14,379) 34,084 2,464 (24,042) (11,915)
137,730 24,083 10,887 13,326 – 599 – – 27,066 35,776 111,737 12,580 113,156 – 37,659 49,018 – 38,444 250,857 (139,120)	15,114 3,217 7,830 8,796 – – 982 99,488 – 20,936 141,249 8,154 17,564 20,761 319 110,021 – 3,399 160,218 (18,969)	134,841 3,073 3,361 3,521 1,139 1,584 530 – – 29,287 42,495 6,121 17,197 20,682 – 96,966 – – 140,966 (98,471)	183,039 21,572 21,819 15,888 – 434 – – 24,074 11,363 95,150 36,398 112,510 – 57,080 36,316 20 59,907 302,231 (207,081)	29,271
				15,750 8,256 8,182 – – 1,362 – – 11,514
				45,064
				9,389 39,927 – – 33,884 40 3,010
				86,250
				(41,186
(1,390)	(3,855)	36,370	(24,042)
– (44,402) (44,402) 43,012	– (5,916) (5,916) 2,061	– 36,370 36,370 –	– (58,126) (58,126) 34,084	– (14,379
				(14,379 2,464
(1,390)	(3,855)	36,370	(24,042)

– 27 –

APPENDIX II

FINANCIAL INFORMATION OF SHL GROUP

Unaudited Consolidated Statement of Comprehensive Income of the SHL Group

For the year ended 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 85,711 65,155 71,466 (71,164) (54,461) (58,706)	For the year ended 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 85,711 65,155 71,466 (71,164) (54,461) (58,706)	For the year ended 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 85,711 65,155 71,466 (71,164) (54,461) (58,706)	For the six months ended 30 June 2011 2010 HK$’000 HK$’000 46,714 39,338 (44,646) (31,992) 2,068 7,346 (3,013) (2,647) (8,589) (5,963) (5,616) (6,198) (17,218) (14,808) (15,150) (7,462) 2,237 – – – (846) – 1,227 – (9,812) – (4,377) – – – (907) – – – – 1,414 – – – – (27,628) (6,048) – (1) (27,628) (6,049)	For the six months ended 30 June 2011 2010 HK$’000 HK$’000 46,714 39,338 (44,646) (31,992) 2,068 7,346 (3,013) (2,647) (8,589) (5,963) (5,616) (6,198) (17,218) (14,808) (15,150) (7,462) 2,237 – – – (846) – 1,227 – (9,812) – (4,377) – – – (907) – – – – 1,414 – – – – (27,628) (6,048) – (1) (27,628) (6,049)
14,547 (8,866) (16,468) (11,327) (36,661) (22,114) 12,108 – (587) (5,495) – – – – (40,891) 1,414 (14,031) (3,939) (73,535) (1) (73,536)	10,694 (7,499) (25,935) (10,868) (44,302) (33,608) 10,331 (762) (146) (623) – – (19,960) – – – 502 195 (44,071) – (44,071)	12,760 (8,520) (15,308) (10,153) (33,981) (21,221) 1,813 (1,131) (12) (1,864) – – – – – (529) – – (22,944) – (22,944)	2,068 (3,013) (8,589) (5,616) (17,218) (15,150) 2,237 – (846) 1,227 (9,812) (4,377) – (907) – – – – (27,628) – (27,628)	7,346 (2,647 (5,963 (6,198
				(14,808
				(7,462 – – – – – – – – – 1,414 – –
				(6,048 (1
				(6,049

– 28 –

APPENDIX II

FINANCIAL INFORMATION OF SHL GROUP

Loss for the year/period, continuing operation Profit for the year/period from a discontinued operation (Loss)/profit for the year/period Other comprehensive income for the year/period, net of tax Exchange differences on translating foreign operations Total comprehensive (loss)/ income for the year/period, net of tax Attributable to: Owners of the Company Non-controlling interests	For the year ended 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 (73,536) (44,071) (22,944) – – 51,387	For the year ended 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 (73,536) (44,071) (22,944) – – 51,387	For the year ended 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 (73,536) (44,071) (22,944) – – 51,387	For the six months ended 30 June 2011 2010 HK$’000 HK$’000 (27,628) (6,049) – – (27,628) (6,049) 4,976 (2,011) (22,652) (8,060) (13,724) (8,463) (8,928) 403 (22,652) (8,060)	For the six months ended 30 June 2011 2010 HK$’000 HK$’000 (27,628) (6,049) – – (27,628) (6,049) 4,976 (2,011) (22,652) (8,060) (13,724) (8,463) (8,928) 403 (22,652) (8,060)
	(73,536) 3,471	(44,071) 1,435	28,443 512	(27,628) 4,976	(6,049 (2,011
	(70,065) (69,025) (1,040) (70,065)	(42,636) (42,286) (350) (42,636)	28,955 28,955 – 28,955	(22,652) (13,724) (8,928) (22,652)

– 29 –

APPENDIX II

FINANCIAL INFORMATION OF SHL GROUP

Unaudited Consolidated Statement of Changes in Equity of the SHL Group

Share capital HK$’000 – – –	Share premium HK$’000 – – –	Attributable to Capital reserves Statutory reserves fund HK$’000 HK$’000 191,973 439 – – 191,973 439	Attributable to Capital reserves Statutory reserves fund HK$’000 HK$’000 191,973 439 – – 191,973 439	owners of the SHL Group Exchange reserve Accu- mulated losses Total Non- controlling interests HK$’000 HK$’000 HK$’000 HK$’000 299 (185,296) 7,415 – 512 28,443 28,955 – 811 (156,853) 36,370 –	owners of the SHL Group Exchange reserve Accu- mulated losses Total Non- controlling interests HK$’000 HK$’000 HK$’000 HK$’000 299 (185,296) 7,415 – 512 28,443 28,955 – 811 (156,853) 36,370 –	owners of the SHL Group Exchange reserve Accu- mulated losses Total Non- controlling interests HK$’000 HK$’000 HK$’000 HK$’000 299 (185,296) 7,415 – 512 28,443 28,955 – 811 (156,853) 36,370 –	owners of the SHL Group Exchange reserve Accu- mulated losses Total Non- controlling interests HK$’000 HK$’000 HK$’000 HK$’000 299 (185,296) 7,415 – 512 28,443 28,955 – 811 (156,853) 36,370 –	Total equity HK$’000 7,415 28,955
								36,370

– – – –	– – – –	191,973 – – –	439 – – –	811 1,435 – –	(156,853) (43,721) – –	36,370 (42,286) – –	– (350) 2,606 (195)	36,370 (42,636 2,606 (195
–	–	191,973	439	2,246	(200,574)	(5,916)	2,061	(3,855

– – – – –	– – – – –	191,973 – 692 – –	439 – – – –	2,246 3,471 (326) – (714)	(200,574) (72,496) 30,887 – –	(5,916) (69,025) 31,253 – (714)	2,061 (1,040) – 44,456 (2,465)	(3,855 (70,065 31,253 44,456 (3,179
–	–	192,665	439	4,677	(242,183)	(44,402)	43,012	(1,390

– –	– –	192,665 –	439 –	4,677 4,976	(242,183) (18,700)	(44,402) (13,724)	43,012 (8,928)	(1,390 (22,652
–	–	192,665	439	9,653	(260,883)	(58,126)	34,084	(24,042

– –	– –	191,973 –	439 –	2,246 (2,011)	(200,574) (6,452)	(5,916) (8,463)	2,061 403	(3,855 (8,060
–	–	191,973	439	235	(207,026)	(14,379)	2,464	(11,915

– 30 –

APPENDIX II

FINANCIAL INFORMATION OF SHL GROUP

Unaudited Consolidated Statement of Cash Flows of the SHL Group

				For	the
	For the year ended			six months ended
	31	December		30 June
	2010	2009	2008	2011	2010
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
CASH FLOWS FROM
OPERATING ACTIVITIES
(Loss)/profit before tax	(73,535)	(44,071)	28,443	(27,628)	(6,048)
Adjustments for:
Amortisation of prepaid land lease
payments	946	–	–	610	–
Depreciation	2,554	4,643	3,490	925	714
Gain on disposal of property, plant
and equipment	(125)	(5,550)	(2,876)	–	–
Loss on disposals of subsidiaries	14,031	–	–	–	–
(Gain)/loss on deemed disposals
of subsidiaries	3,939	(195)	–	–	–
(Gain)/loss on disposals of
associates	(1,414)	(502)	529	–	(1,414)
Property, plant and equipment
written off	–	1,270	–	–	3,289
Interest income	(8)	(447)	–	(628)	(29)
Trade payable written back	–	–	(257)	–	(3,500)
Interest paid	595	146	12	556	–
Share of (gain)/loss of associates	5,495	623	1,864	(1,227)	–
Impairment loss on construction
in progress	–	–	–	9,812	–
Impairment loss on inventories	–	–	–	4,377	–
Impairment loss on trade
receivables	–	–	–	907	–
Impairment loss on other
receivables	40,891	–	–	–	–
Reversal of impairment loss on
trade receivable	–	(1,396)	–	–	–
Reversal of impairment loss on
other receivables	(2,885)	–	–	–	–
Reversal of write-down of
inventories to net realisable
value	–	(1,988)	–	–	–
Sales consideration forfeited, net	–	–	(51,387)	–	–
Impairment loss on interest in
an associate	–	19,960	–	–	–

– 31 –

APPENDIX II

FINANCIAL INFORMATION OF SHL GROUP

For the year ended 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 (9,516) (27,507) (20,182)	For the year ended 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 (9,516) (27,507) (20,182)	For the year ended 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 (9,516) (27,507) (20,182)	For the six months ended 30 June 2011 2010 HK$’000 HK$’000 (12,296) (6,988) 1,866 (12,533) (11,839) (426) – (4) (2,562) 614 (12,702) (76,137) 19,421 (319) 2,992 – – 99,488 23,818 1,235 (646) 22,363 165 (20,761) 8,217 6,532 – 38 628 – (556) (1,333) 8,289 5,237	For the six months ended 30 June 2011 2010 HK$’000 HK$’000 (12,296) (6,988) 1,866 (12,533) (11,839) (426) – (4) (2,562) 614 (12,702) (76,137) 19,421 (319) 2,992 – – 99,488 23,818 1,235 (646) 22,363 165 (20,761) 8,217 6,532 – 38 628 – (556) (1,333) 8,289 5,237
(20,866) (3,057) – (45,421) (61,003) 37,340 (27,066) – 4,426 95,592 20,162 (9,409) (1) 7 (595) (9,998)	1,844 (3,073) (226) (5,275) 13,055 319 – 1,139 2,033 367 1,663 (15,661) – 447 (146) (15,360)	(651) 1,588 – 1,386 32,119 – (1,584) (1,139) 63 15,040 (15,657) 10,983 76 257 (10,138) 1,178	1,866 (11,839) – (2,562) (12,702) 19,421 2,992 – 23,818 (646) 165 8,217 – 628 (556) 8,289	(12,533 (426 (4 614 (76,137 (319 – 99,488 1,235 22,363 (20,761
				6,532
				38 – (1,333
				5,237

– 32 –

APPENDIX II

FINANCIAL INFORMATION OF SHL GROUP

For the year ended 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 (7,188) (4,430) (7,347) (53,505) (2,471) (1,066) – (567) – – 7,071 8,524 (480) (39) – 168 – 15,600 3,175 – –	For the year ended 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 (7,188) (4,430) (7,347) (53,505) (2,471) (1,066) – (567) – – 7,071 8,524 (480) (39) – 168 – 15,600 3,175 – –	For the year ended 31 December 2010 2009 2008 HK$’000 HK$’000 HK$’000 (7,188) (4,430) (7,347) (53,505) (2,471) (1,066) – (567) – – 7,071 8,524 (480) (39) – 168 – 15,600 3,175 – –	For the six months ended 30 June 2011 2010 HK$’000 HK$’000 (14,738) (2,189) (40,691) (12,611) – – – – – – – – – – (47,140) (9,563) 21,463 (389) – – 21,463 (389) (25,677) (9,952) 1,264 530 35,776 20,936 11,363 11,514 11,363 11,514	For the six months ended 30 June 2011 2010 HK$’000 HK$’000 (14,738) (2,189) (40,691) (12,611) – – – – – – – – – – (47,140) (9,563) 21,463 (389) – – 21,463 (389) (25,677) (9,952) 1,264 530 35,776 20,936 11,363 11,514 11,363 11,514
(67,828) 35,045 44,456 79,501 11,673 3,167 20,936	(15,796) 3,399 2,606 6,005 (9,791) 1,440 29,287	16,889 (8,983) – (8,983) 7,906 (1,605) 22,986	(47,140) 21,463 – 21,463 (25,677) 1,264 35,776	(9,563
				(389 –
				(389
				(9,952 530 20,936
35,776 35,776	20,936 20,936	29,287 29,287	11,363 11,363

– 33 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Introduction

The following are the unaudited pro forma consolidated statement of financial position, the unaudited pro forma consolidated statement of comprehensive income and the unaudited pro forma consolidated statement of cash flows of the Remaining Group prepared by the Directors in accordance with Chapter 7 of the GEM Listing Rules for the purpose of illustrating the effect of the disposal (the “ Disposal ”) of the 100% interest in SYSCAN Holdings Limited (“ SHL ”) and its subsidiaries (collectively referred to as the “ SHL Group ”) which may have on the consolidated statement of financial position, the consolidated statement of comprehensive income and the consolidated statement of cash flows of the Remaining Group.

The preparation of the unaudited pro forma consolidated statement of financial position of the Remaining Group is based on the unaudited consolidated statement of financial position of the Group as at 30 June 2011 which has been extracted from the published interim report of the Group for the six months ended 30 June 2011 and adjusted only to reflect the pro forma adjustments described in the notes thereto as if the Disposal had been completed on 30 June 2011.

The preparation of the unaudited pro forma consolidated statement of comprehensive income and the unaudited pro forma consolidated statement of cash flows of the Remaining Group is based on the unaudited consolidated statement of comprehensive income and unaudited consolidated statement of cash flows of the Group for the six months ended 30 June 2011 which has been extracted from the published interim report of the Group for the six months ended 30 June 2011 and adjusted only to reflect the pro forma adjustments described in the notes thereto as if the Disposal had been completed on 1 January 2011. Furthermore, since the Company has completed the acquisition of the third party payment business (the “ Acquisition ”) on 28 February 2011, the details of which were set out in the Company’s circular dated 24 January 2011, a full-year results of the aforementioned third party payment business has not yet been fully reflected in the interim report of the Group for the six months ended 30 June 2011 and unaudited pro forma financial information set out in this appendix.

The unaudited pro forma consolidated statement of financial position, the unaudited pro forma consolidated statement of comprehensive income and the unaudited pro forma consolidated statement of cash flows of the Remaining Group have been prepared based on a number of assumptions, estimates and uncertainties and are provided for illustrative purpose only. Because of their hypothetical nature, the unaudited pro forma consolidated statement of financial position may not purport to describe the actual financial position of the Remaining Group that would have been attained had the Disposal been completed on 30 June 2011. Further, the unaudited pro forma consolidated statement of comprehensive income and the unaudited pro forma consolidated statement of cash flows does not purport to predict the Remaining Group’s future results of operations and cash flows for the six months ended 30 June 2011 had the Disposal been completed on 1 January 2011.

– 34 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

1. Unaudited Pro Forma Consolidated Statement of Financial Position of the Remaining Group

Non-current assets Property, plant and equipment Prepaid land lease payments Construction in progress Interest in associates Interest in jointly control entity Goodwill Current assets Inventories Trade receivables Prepayments, deposits and other receivables Pledge bank deposits Due from an associate Due from subsidiaries Cash and cash equivalents Current liabilities Trade payables Other payables and accruals Due to the ultimate holding company Due to a non-controlling shareholder of a subsidiary Other tax payable Borrowings Receipts in advance	The Group as at 30 June 2011 Pro forma adjustments Unaudited pro forma of the Remaining Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note 1) (Note 2) (Note 3) (Note 4) 34,286 (2,469) 31,817 45,021 45,021 88,039 88,039 25,782 (25,782) – 2,875 2,875 1,076,105 1,076,105	The Group as at 30 June 2011 Pro forma adjustments Unaudited pro forma of the Remaining Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note 1) (Note 2) (Note 3) (Note 4) 34,286 (2,469) 31,817 45,021 45,021 88,039 88,039 25,782 (25,782) – 2,875 2,875 1,076,105 1,076,105
	1,272,108 29,790 (4,066) 64,173 (15,693) 82,693 (10,808) 24,074 (24,074) 434 (434) – 36,316 (36,316) 163,280 (8,084) 3,700 364,444 36,398 (4,350) 171,724 (99,228) – (36,316) 36,316 57,080 23,421 20 (20) 59,907 (23,907) 92,342 417,471	1,243,857
		25,724 48,480 71,885 – – – 158,896
		304,985
		32,048 72,496 – 80,501 – 36,000 92,342
		313,387

– 35 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Net current liabilities Total assets less current liabilities Non-current liabilities Other payable Net assets Equity Share capital Reserves Equity attributable to the owners of the Company Non-controlling interests Total equity	The Group as at 30 June 2011 Pro forma adjustments Unaudited pro forma of the Remaining Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note 1) (Note 2) (Note 3) (Note 4) (53,027) (8,402) 1,219,081 1,235,455 875,000 875,000 344,081 360,455 34,846 34,846 274,254 16,322 290,576 309,100 325,422 34,981 52 35,033 344,081 360,455	The Group as at 30 June 2011 Pro forma adjustments Unaudited pro forma of the Remaining Group HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Note 1) (Note 2) (Note 3) (Note 4) (53,027) (8,402) 1,219,081 1,235,455 875,000 875,000 344,081 360,455 34,846 34,846 274,254 16,322 290,576 309,100 325,422 34,981 52 35,033 344,081 360,455
	1,219,081 875,000	1,235,455 875,000
	344,081 34,846 274,254 16,322 309,100 34,981 52 344,081

– 36 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

2. Unaudited Pro Forma Consolidated Statement of Comprehensive Income of the Remaining Group

Turnover Cost of sales Gross profit Selling and marketing expenses General and administrative expenses Research and development expenses Loss from operations Other revenue Share of loss of an associate Gain on disposal of subsidiaries Impairment loss on trade receivables Impairment loss on inventories Impairment loss on construction in progress Finance cost (Loss)/Profit before taxation Taxation (Loss)/Profit for the period	The Group for the six months ended 30 June 2011 Pro forma adjustments HK$’000 HK$’000 HK$’000 (Note 5) (Note 6) 99,458 (39,339) (90,434) 37,328	Unaudited pro forma of the Remaining Group HK$’000 (Note 7) 60,119 (53,106) 7,013 – (22,423) – (22,423) (15,410) 3,893 – 37,696 (907) (4,377) (4,216) (1,741) 14,938 (779) 14,159
	9,024 (2,011) (3,013) 3,013 (26,839) 4,416 (5,616) 5,616 (35,468) (26,444) 6,122 (2,229) 1,227 (1,227) – 37,696 (907) (4,377) (4,216) (2,587) 846 (31,182) (779)	7,013 – (22,423 –
		(22,423
		(15,410 3,893 – 37,696 (907 (4,377 (4,216 (1,741
		14,938 (779
	(31,961)

– 37 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Other comprehensive loss Exchange reserve release to profit or loss on disposal of subsidiaries Exchange differences on translating foreign operations Other comprehensive loss for the period, net of tax Total comprehensive (loss)/income for the period, net of tax Attributable to: Owners of the Company Non-controlling interests	The Group for the six months ended 30 June 2011 Pro forma adjustments HK$’000 HK$’000 HK$’000 (Note 5) (Note 6) – (4,677) (236) (2,936) (236) (32,197) (22,495) 3,978 33,019 (9,702) 1,510 (32,197)	Unaudited pro forma of the Remaining Group HK$’000 (Note 7) (4,677) (3,172) (7,849) 6,310 14,502 (8,192) 6,310

– 38 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

3. Unaudited Pro Forma Consolidated Statement of Cash Flows of the Remaining Group

Cash flow from operating activities (Loss)/Profit before taxation Adjustments for: Amortisation of prepaid land lease payments Finance costs Depreciation Gain on disposal of subsidiaries Interest income Share of loss of an associate Impairment loss on inventories Impairment loss on trade receivables Impairment loss on construction in progress Operating cash flows before changes in working capital Increase in inventories Increase in trade receivables Increase in prepayments, deposits and other receivables Increase in trade payables Increase in other payables and accruals Increase in received in advance Increase in ultimate holding company Increase in non-controlling shareholder of a subsidiary Increase in amount due to an associate	The Group for the six months ended 30 June 2011 Pro forma adjustments HK$’000 HK$’000 HK$’000 (Note 8) (Note 9) (31,182) 8,424 37,696 610 (610) 556 (556) 925 (295) – (37,696) (628) 620 (1,227) 1,227 4,377 907 4,216	Unaudited pro forma of the Remaining Group HK$’000 (Note 10) 14,938 – – 630 (37,696) (8) – 4,377 907 4,216 (12,636) (20,456) (48,480) (54,776) 32,408 114,754 92,342 – – –
	(21,446) (1,084) (19,372) (54,193) 5,713 (68,838) 1,360 12,702 23,818 8,590 63,602 51,152 92,342 – 12,702 (12,702) 19,421 (19,421) 165 (165)	(12,636 (20,456 (48,480 (54,776 32,408 114,754 92,342 – – –

– 39 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Cash flow generated from operations Income tax paid Interest received Interest paid Net cash generated from operating activities Cash flow from investing activities Purchases of property, plant and equipment Additions to construction in progress Decrease in pledged bank deposits Investment in jointly controlled entity Payments for acquisition of subsidiaries Net proceed from disposal of subsidiaries Net cash used in investing activities Cash flow from financing activities Net new bank loans raised Proceeds from placing of new shares Share premium Net cash generated from financing activities	The Group for the six months ended 30 June 2011 Pro forma adjustments HK$’000 HK$’000 HK$’000 (Note 8) (Note 9) 53,787 (759) 628 (620) (556) 556	Unaudited pro forma of the Remaining Group HK$’000 (Note 10) 103,156 (759) 8 – 102,405 (24,827) (40,691) – (2,875) (80,000) 3,700 (144,693) – 6,250 140,759 147,009
	53,100 (24,827) (40,691) 2,992 (2,992) (2,875) (80,000) – 3,700 (145,401) 21,463 (21,463) 6,250 140,759 168,472	102,405
		(24,827 (40,691 – (2,875 (80,000 3,700
		(144,693
		– 6,250 140,759
		147,009

– 40 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Net increase in cash and cash equivalents Effect of foreign exchange rate changes, net Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period	The Group for the six months ended 30 June 2011 Pro forma adjustments HK$’000 HK$’000 HK$’000 (Note 8) (Note 9) 76,171 5,079 (1,084) 82,030 (31,850) 163,280	Unaudited pro forma of the Remaining Group HK$’000 (Note 10) 104,721 3,995 50,180
		158,896

– 41 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

(1) The adjustment represents the exclusion of the assets and liabilities attributable to the SHL Group from the consolidated statement of financial position of the Group as at 30 June 2011, as if the Disposal had taken place on 30 June 2011.
(2) The adjustment represents disposal of sale loan owing by the SHL Group to the Company as at 30 June 2011 pursuant to the agreement to be entered into between the SHL Group and the Company and subject to the shareholders’ approval in the coming special general meeting regarding the Disposal whereby the Company is to be agreed to dispose the sale loan of HK$36,316,000 against the net liabilities of HK$58,126,000 attributable to the owners of the Company from the Group’s actions up to the Completion Date. The Group intends that the amount of sale loan will be disposed of upon completion of the Agreement.
(3) The adjustment represents the estimated total net consideration to be received from the Disposal, which is calculated as follows:

Sales consideration Less: Payment of fees and expenses in connection with the Disposal Estimated net cash proceeds	HK$’000 5,700 (2,000)
	3,700

The adjustment represents the estimated unaudited gain on disposal of the SHL Group, as if the Disposal had taken place on 30 June 2011 after taking into account of the adjustment for impairment of assets of HK$21,233,000 prior to the completion of the Disposal, which is calculated as follows:

Sales consideration Less: Net liabilities of the SHL Group as at 30 June 2011 Net liabilities in relation to the Previous Disposal (Note 4) Pre-completion adjustment for the impairment of assets * Disposal of sale loan to the SHL Group (Note (2)) Release of foreign currency translation reserves Payment of fees and expenses in connection with the Disposal Estimated unaudited gain on disposal, assuming that the Disposal had taken place on 30 June 2011	HK$’000 58,126 (9,188) 21,233	HK$’000 5,700 70,171
		(36,316) 6,523 (2,000)
		44,078

– 42 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Effect on reserves

Estimated unaudited gain on disposal Pre-completion adjustment for the impairment of assets * Release of foreign currency translation reserves	HK$’000 44,078 (21,233) (6,523)
	16,322

As the recoverable amounts of the following assets of the SHL Group were less than their carrying amounts, impairment loss of approximately HK$21,233,000 was recognised prior to the completion of the Disposal.

Property, plant and equipment Interest in an associate Available-for-sale financial assets Inventories Trade receivables Other receivables	HK$’000 2,469 5,156 4,644 4,066 3,147 1,751
	21,233

(4) The unaudited pro forma consolidated statement of the financial position of the Remaining Group as at 30 June 2011 did not reflect the results after taking into account of the Previous Disposal of the 44.99% equity interests in WHS directly owned by the SHL Group. Details of the Previous Disposal were set out in the Company’s announcement dated 19 August 2011. The assets and liabilities of WHS as at 30 June 2011 as noted below should be deconsolidated from the unaudited pro forma consolidated statement of the financial position of the Remaining Group as at 30 June 2011 as if the Previous Disposal had been taken into account.

Assets Property, plant and equipment Prepaid land lease payments Construction in progress Inventories Trade receivables Prepayments, deposits and other receivables Cash and cash equivalents Liabilities Trade payables Other payables Due to a non-controlling shareholder of a subsidiary Borrowings Non-controlling interests Net liabilities	HK$’000 21,728 45,021 88,039 17,506 6,126 5,080 3,279
	186,779
	(32,048) (13,282) (80,501) (36,000)
	(161,831)
	24,948
	(34,136)
	(9,188)

– 43 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

(5) The adjustment represents the exclusion of the income and expenses attributable to the SHL Group from the consolidated statement of comprehensive income of the Group for the six months ended 30 June 2011, as if the Disposal had taken place on 1 January 2011. This adjustment will not have continuing profit or loss effect to the Remaining Group.
(6) The adjustment represents the estimated unaudited gain on disposal of the SHL Group of approximately HK$37,696,000, after taking into account of the adjustment for impairment of assets of HK$21,233,000 prior to the completion of the Disposal, which is calculated based on the assumption that the Disposal had been completed on 1 January 2011.

Sales consideration Less: Net liabilities of the SHL Group as at 1 January 2011 Pre-completion adjustment for the impairment of assets (Note 3) Release of foreign currency translation reserves Disposal of sale loan to the SHL Group (Note 2) Payment of fees and expenses in connection with the Disposal Estimated unaudited gain on disposal, assuming that the Disposal had taken place on 1 January 2011	HK$’000 5,700 44,402 21,233 4,677 (36,316) (2,000)
	37,696

Sales consideration
Less:
Net liabilities of the SHL Group as at 1 January 2011
Pre-completion adjustment for the impairment of assets (Note 3)
Release of foreign currency translation reserves
Disposal of sale loan to the SHL Group (Note 2)
Payment of fees and expenses in connection with the Disposal
Estimated unaudited gain on disposal, assuming that the Disposal
had taken place on 1 January 2011

HK$’000
5,700
44,402
21,233
4,677
(36,316)
(2,000)

37,696

This adjustment will not have continuing profit or loss effect to the Remaining Group.

(7) The unaudited pro forma consolidated statement of comprehensive income of the Remaining Group for the six months ended 30 June 2011 did not reflect the results after taking into account of the Previous Disposal. The results of WHS for the six months ended 30 June 2011 as noted below should be deconsolidated from the unaudited pro forma consolidated statement of comprehensive income of the Remaining Group for the six months ended 30 June 2011 as if the Previous Disposal had been taken into account.

Turnover Cost of sales Gross profit General and administrative expenses Loss from operation Other revenue Impairment loss on trade receivables Impairment loss on inventories Impairment loss on construction in progress Loss for the period Other comprehensive loss Exchange differences on translating foreign operations Total comprehensive loss for the period, net of tax Attributable to: Owners of the Company Non-controlling interests	HK$’000 7,375 (7,318)
	57 (9,769)
	(9,712) 8 (907) (4,377) (4,216)
	(19,204) 2,040
	(17,164)

	(9,746) (7,418)
	(17,164)

– 44 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

(8) The adjustment represents the exclusion of the cash flows attributable to the SHL Group from the consolidated statement of cash flows of the Group for the six months ended 30 June 2011, as if the Disposal had taken on 1 January 2011. This adjustment will not have continuing cash flows effect to the Remaining Group.
(9) The adjustment represents the estimated unaudited gain on disposal of the SHL Group of approximately HK$37,696,000, net of cash consideration received of approximately HK$3,700,000 and reclassification of the effect of cash flows between the Remaining Group and the SHL Group for the six months ended 30 June 2011, assuming that the Disposal had taken place on 1 January 2011. For details, please refer to Note 6 above. This adjustment will not have continuing cash flows effect to the Remaining Group.
(10) The unaudited pro forma consolidated statement of cash flows of the Remaining Group for the six months ended 30 June 2011 did not reflect the results after taking into account of the Previous Disposal. The cash flows of WHS for the six months ended 30 June 2011 as noted below should be deconsolidated from the unaudited pro forma consolidated statement of cash flows of the Remaining Group for the six months ended 30 June 2011 as if the Previous Disposal had been taken into account.

Cash flow from operating activities Loss before taxation Adjustments for: Depreciation Interest income Impairment loss on inventories Impairment loss on trade receivables Impairment loss on construction in progress Operating cash flows before changes in working capital Increase in inventories Increase in trade receivables Increase in prepayments, deposits and other receivables Increase in trade payables Increase in other payables and accruals Cash flow generated from operations Interest income Net cash generated from operating activities Cash flow from investing activities Purchase of property, plant and equipment Additions to construction in progress Net cash used in investing activities Net decrease in cash and cash equivalents Effect of foreign exchange rate changes, net Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period	HK$’000 (19,204) 630 (8) 4,377 907 4,216
	(9,082) (17,506) (6,126) (1,202) 32,408 56,102
	54,594 8
	54,602
	(14,738) (40,691)
	(55,429)
	(827) 180 3,926
	3,279

– 45 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

KTC Partners CPA Limited

Certified Public Accountants (Practising)

��

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

29 November 2011

The Board of Directors

China Innovationpay Group Limited Unit 2708, 27/F., The Center 99 Queen’s Road Central Hong Kong

Dear Sirs,

We report on the unaudited pro forma financial information of China Innovationpay Group Limited (the “ Company ”) and its subsidiaries (hereinafter collectively referred to as the “ Group ”), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the very substantial disposal in relation to the disposal of 100% interest in SYSCAN Holdings Limited (“ SHL ”) and its subsidiaries (hereinafter collectively referred to as the “ SHL Group ”) might have affected the financial information presented, for inclusion in Appendix III to the circular of the Company dated 29 November 2011 (the “ Circular ”). The basis of preparation of the unaudited pro forma financial information is set out on page 34 to the Circular.

Respective responsibilities of directors of the Company and reporting accountants

It is the responsibility solely of the directors of the Company to prepare the unaudited pro forma financial information in accordance with paragraph 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 Listing Rules ”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”).

It is our responsibility to form an opinion, as required by paragraph 31(7) of Chapter 7 of the GEM Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

– 46 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 31(1) of Chapter 7 of the GEM Listing Rules.

The unaudited pro forma financial information is for illustrative purposes only, based on the judgments and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of:

the financial position of the Group at 30 June 2011 or any future date; or
the results and cash flows of the Group for the six months ended 30 June 2011 or any future periods.

Opinion

In our opinion:

(a) the unaudited pro forma financial information has been properly complied by the directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purpose of the unaudited pro forma financial information as disclosed pursuant to paragraph 7.31(1) of the GEM Listing Rules.

KTC Partners CPA Limited

Certified Public Accountants (Practising) Hong Kong

Chow Yiu Wah, Joseph

Practising Certificate Number: P4686

– 47 –

APPENDIX IV

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the 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.

2. DIRECTORS’ AND CHIEF EXECUTIVE’S INTEREST AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at the Latest Practicable Date, the interests or short positions of the Directors and the chief executive of the Company in the Shares, underlying shares and debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (iii) were required, pursuant to 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, were as follows:

Long position in Shares

			Approximate
			percentage
			of the
			Company’s
Name of Director/chief		Number of	issued share
executive	Capacity	Shares held	capital
Guan Guisen (Note)	Interest in controlled	698,750,000	17.62%
	corporation

Note: These Shares were held by Mighty Advantage Enterprises Limited which is wholly and beneficially owned by Mr. Guan Guisen.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests or short positions in any Shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to Section 352 of the SFO, to be entered into the register referred to therein; or (iii) were required, pursuant to Rules 5.46

– 48 –

APPENDIX IV

GENERAL INFORMATION

to 5.67 of the GEM Listing Rules relating to securities transactions by Directors to be notified to the Company and the Stock Exchange.

3. SUBSTANTIAL SHAREHOLDERS AND OTHER PERSONS WHO ARE REQUIRED TO DISCLOSE THEIR INTEREST

As at the Latest Practicable Date, so far as was known to the Directors or the chief executive of the Company, the following persons (other than the Directors or chief executive of the Company) had, or were deemed or taken to have interests or short positions in the Shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or, were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Remaining Group or which were recorded in the register required to be kept by the Company under Section 336 of the SFO, were as follows:

Long position in Shares

			Approximate
			percentage
			of the
			Company’s
		Number of	issued share
Name of Shareholder	Capacity	Shares held	capital
Mighty Advantage	Beneficial owner	698,750,000	17.62%
Enterprises Limited
Guan Guisen (Note 1)	Interest in controlled	698,750,000	17.62%
	corporation
CCB International Asset	Investment manager	300,000,000	7.57%
Management Limited
(Note 2)
Cheung Wai	Beneficial owner	237,180,000	5.98%

Notes:

These shares were held by Mighty Advantage Enterprises Limited which is wholly and beneficially owned by Mr. Guan Guisen. Details of the interests of Mr. Guan Guisen are duplicated in the section “Interests or short positions of Directors and chief executives in the share capital of the Company and its associated corporations” disclosed above.
These shares were held by CCB International Asset Management Limited which is wholly owned by CCB International Assets Management (Cayman) Limited which is in turn wholly owned by CCB International (Holdings) Limited which is in turn wholly owned by CCB Financial Holdings Limited which is in turn wholly owned by CCB International Group Holdings Limited which is in turn wholly owned by China Construction Bank Corporation which is owned as to 57.10% by Central Huijin Investment Ltd.

– 49 –

APPENDIX IV

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, so far as was known to the Directors or the chief executive of the Company, no other persons (not being a Director or chief executive of the Company) had, or deemed to have, any interests or short positions in the Shares or underlying shares of the Company which were required to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, nor were there any persons, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group or which were recorded in the register required to be kept under section 336 of the SFO.

4. DIRECTORS’ SERVICE CONTRACTS

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

5. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors, controlling shareholder of the Company (within the meaning of the GEM Listing Rules) or any of their respective associates had an interest in any business which competes or may compete with the business in which the Group is engaged.

6. LITIGATION

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

7. INTERESTS IN ASSETS OR CONTRACTS OR ARRANGEMENT

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets acquired or disposed of by or leased to any member of the Group or was proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2010, being the date to which the latest published audited accounts of the Company were made up.

As at the Latest Practicable Date, there was no contract or arrangement subsisting in which any Director was materially interested and which was significant in relation to the business of the Group.

– 50 –

APPENDIX IV

GENERAL INFORMATION

8. MATERIAL CONTRACTS

The following are contracts (not being contracts entered into in the ordinary course of business) entered into by the Group within the two years immediately preceding the Latest Practicable Date and which are or may be material:

The Group

(i) the share transfer agreement dated 8 December 2009 entered into between SHL, a direct wholly-owned subsidiary of the Company, as vendor and Build Up Capital Company Limited (“ Build Up ”) as purchaser in respect of the disposal of 45% of the entire issued share capital in SYSCAN Manufacturing Limited (“ SYSCAN Manufacturing ”), an associate of the Company, at a consideration of RMB90,000,000;
(ii) the loan agreement (the “ Previous Loan Agreement ”) dated 8 December 2009 entered into by Build Up as lender in favour of SHL as borrower for a sum equivalent to RMB30,000,000 in Hong Kong dollars (the “ Loan ”);
(iii) the share pledge dated 8 December 2009 entered into by SHL as pledgor in favour of Build Up as pledgee pursuant to which SHL agreed to pledge its 45% interest in the entire issued capital of SYSCAN Manufacturing to Build Up as a security of the Loan;
(iv) the letter of undertaking dated 8 December 2009 issued by the Company in favour of Build Up to guarantee SHL’s obligations under the Previous Loan Agreement;
(v) the conditional sale and purchase agreement in relation to the acquisition of the entire issued share capital of Country Praise Enterprises Limited entered into between the Company, Mighty Advantage Enterprises Limited and Country Praise Enterprises Limited on 22 November 2010, as amended and supplemented by a supplemental sale and purchase agreement dated 6 January 2011 entered into between the same parties, at a maximum consideration of HK$850,000,000 (the “ Sale and Purchase Agreement ”);
(vi) the conditional agreement entered into between the Company and Oriental Patron Asia Limited dated 22 November 2010 in respect of the placing of up to 625,000,000 new Shares at HK$0.32 per Share, as amended and supplemented by the supplemental placing agreement dated 6 January 2011 entered into between the same parties (the “ Placing Agreement ”);

– 51 –

APPENDIX IV

GENERAL INFORMATION

(vii) the conditional sale and purchase agreement dated 11 November 2010 in relation to the acquisition by the Group of the entire issued share capital of Country Praise Enterprises Limited entered into between the Company, Mighty Advantage Enterprises Limited and Country Praise Enterprises Limited at a maximum consideration of HK$850,000,000 and was terminated pursuant to the Sale and Purchase Agreement;
(viii) the agreement entered into between the Company and Oriental Patron Asia Limited dated 11 November 2010 in respect of a placing of up to 625,000,000 new Shares on a best effort basis and was terminated pursuant to the Placing Agreement;
(ix) the agreement for the subscription for convertible bonds of the Company in a maximum aggregate principal sum of HK$700,000,000 entered into between the Company and Mighty Advantage Enterprises Limited on 21 January 2011;
(x) the two loan agreements dated 8 March 2011 and 22 March 2011 (as amended by respective supplemental agreements thereto) entered into, among others, between New Smart (as lender) and SHL (as borrower) relating to term loans of an aggregate of HK$36,000,000;
(xi) the sale and purchase agreement dated 19 August 2011 entered into between SHL and New Smart in relation to the disposal of 44.99% equity interests in WHS directly owned by SHL at a consideration of HK$38,000,000;
(xii) the strategic cooperation framework agreement dated 8 September 2011 entered into between the Company and Shenzhen Golden Information Limited for joint development, distribution and sales of prepaid card – gold exchangeable gift card; and
(xiii) the Agreement.

– 52 –

APPENDIX IV

GENERAL INFORMATION

9. EXPERT AND CONSENT

The following is the qualification of the expert who has given opinion or advice contained in this circular.

Name

Qualification

KTC Partners CPA Limited Certified Public Accountants (Practising)

As at the Latest Practicable Date, KTC Partners CPA Limited:

(a) has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and reference to its name in the form and context in which it appears;
(b) did not have any direct or indirect interest in any asset which had been acquired, disposed of by, or leased to any member of the Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Group, since 31 December 2010, the date to which the latest audited financial statements of the Group was made up; and
(c) did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

10. GENERAL

(a) The company secretary of the Company is Mr. Fung Kwok Leung. Mr. Fung holds an Honours Degree in Accountancy from the Hong Kong Polytechnic University and is a fellow member of the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants.
(b) The compliance officer of the Company appointed pursuant to Rule 5.19 of the GEM Listing Rules is Mr. Guan Guisen, an executive Director.
(c) The registered office of the Company is situated at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda.
(d) The head office and principal business of the Company in Hong Kong is situated at Unit 2708, 27/F, The Center, 99 Queen’s Road Central, Hong Kong.
(e) The branch share registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited, at Units 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.
(f) In the event of any inconsistency, the English text of this circular shall prevail over the Chinese text.

– 53 –

APPENDIX IV

GENERAL INFORMATION

11. AUDIT COMMITTEE

Under its terms of reference which are aligned with the code provisions set out in the Code on Corporate Governance Practices, the audit committee is set up based on the guidelines recommended by the Hong Kong Institute of Certified Public Accountants to evaluate the overall effectiveness of the internal control and risk management frameworks, to review the accounting principles and practices adopted by the Group and other financial reporting matters and ensure the completeness, accuracy and fairness of the financial statements, to monitor compliance with statutory and listing requirements and to oversee the relationship with the external auditors.

The audit committee reviews the quarterly, interim and annual reports before submission to the Board. The audit committee focuses not only on the impact of the changes in accounting policies and practices but also on the compliance with accounting standards, the GEM Listing Rules and the legal requirements in the review of the Company’s quarterly, interim and annual reports.

The audit committee comprised one non-executive Director, namely Mr. Li Yuezhong, and three independent non-executive Directors namely Dr. Fung Chi Wah, Mr. Wang Zhongmin and Mr. Gu Jiawang. The Chairman of the audit committee is Dr. Fong Chi Wah. Further details of the members of the audit committee are set out below:

Mr. Li Yuezhong , aged 41, is a director of CCB International Asset Management Limited. He was appointed as the executive director of UB China Business Management Co., Limited, which is a wholly-owned subsidiary of Industrial and Commercial bank of China (Asia) Co. Ltd. (a licensed bank in Hong Kong, stock code: 0349) and was appointed as the assistant General Manager of China Merchants China Investment Management Co., Limited, which is a fund manager of China Merchants China Direct Investments Limited (a listed investment company of the Stock Exchange, stock code: 0133). He has comprehensive knowledge in the investment and restructuring business including the industries of financial services, energy, consumption and energy-savings. He obtained a master’s degree in finance from the Economics and Business School of The University of Hong Kong in 2004.

Dr. Fong Chi Wah , aged 49, is a Certified Practising Accountant (Australia), a Chartered Financial Analyst, a member of the Institute of Certified Management Accountants, Australia and a member of the Hong Kong Institute of Directors. Dr. Fong has over 21 years of extensive experience in various sectors of the financial industry, including direct investment, project and structured finance, and capital markets with a focus on the PRC and Hong Kong. Dr. Fong was previously a director of Baring Capital (China) Management Limited and held various management positions in ING Bank. Dr. Fong was also an executive director of Grant Investment International Limited, a company listed on the Stock Exchange. Dr. Fong is currently an executive director of National Investments Fund Limited and an independent non-executive director of Ruinian International Limited, and both companies are listed on the Stock Exchange.

– 54 –

APPENDIX IV

GENERAL INFORMATION

Dr. Fong holds a bachelor’s degree in management science (economics) from Lancaster University, United Kingdom, a master’s degree in business administration from Warwick University, United Kingdom, a master’ degree in investment management from The Hong Kong University of Science and Technology, a master’s degree in practicing accounting from Monash University, Australia and a doctorate in business administration from The Hong Kong Polytechnic University.

Mr. Wang Zhongmin , aged 62, has a diploma in industrial economic management from 中國人民大學函授學院 (The Correspondence School of Renmin University of China). Mr. Wang has over 40 years of experience in the coal industry. Mr. Wang worked as the deputy section head of 煤炭工業部財務司 (the Finance Department of the Ministry of Coal Industry) from 1981 to 1988, the section head of 中國統配煤礦總公司財務部 (the Finance Department in China National Coal Corporation) from 1988 to 1993, the section head and the deputy head of 煤炭工業部財務勞資司 (the Finance and Labor Department of Ministry of Coal Industry) from 1993 to 1995, the chairman and the general manager of 中煤信託投資有限責任公司 (China Coal Trust Co., Ltd.) from 1995 to 2002, the chairman of 中誠信託有限責任公司 (China Credit Trust Co., Ltd.) from 2002 to 2010 and the chairman of 嘉實基金管理有限公司 (Harvest Fund Management Co., Ltd.) from 2003 to 2011. Mr. Wang is currently the consultant of 嘉實基金管理有限公司 (Harvest Fund Management Co., Ltd.) after his retirement. He was the first chairman of 中國信託業協會 (China Trustee Association) and is currently a deputy chairman of 中國煤炭工業協會 (China National Coal Association). Mr. Wang was also appointed as the independent director of 上海大屯能源股份有限公司 (Shanghai Datun Energy Resources Co., Limited*) (stock code: 600508).

Mr. Gu Jiawang , aged 61, has accumulated profound knowledge and valuable experience in the mass media industry. Mr. Gu worked as a senior editor, commentator, person in charge of the editing section and the head of the business development department of 人民日報 (People’s Daily). He was also appointed as the chief executive officer of 中國華聞投資控股有限公司 (China Huawen Investment Holding Company Limited) which is held by 人民日報 (People’s Daily), the chairman of 中泰信託投資有限責任公司 (Zhongtai Trust and Investment Co., Ltd.), the chairman of 上海新黃浦（集團）有限責任公司 (Shanghai New Huang Pu (Group) Co., Ltd.) and the chairman of 深圳證券時報社有限公司 (Shenzhen Stock Times Newspaper Limited). Mr. Gu graduated from the Philosophy Department of Nanjing University. He also obtained a postgraduate diploma after studying two years at the Party School of the Central Committee of C.P.C.

For identification purpose only

– 55 –

APPENDIX IV

GENERAL INFORMATION

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours (except Saturdays and public holidays) from 10:00 a.m. to 1:00 p.m. and from 2:00 p.m. to 5:00 p.m. at the Company at Unit 2708, 27/F, The Center, 99 Queen’s Road Central, Hong Kong from the date of this circular up to and including the date of the SGM:

(a) the memorandum of association and bye-laws of the Company;
(b) the material contracts referred to in the paragraph headed “Material contracts” in this appendix IV;
(c) the annual reports of the Company for the two financial years ended 31 December 2009 and 2010 respectively;
(d) the interim report of the Company for the six months ended 30 June 2011;
(e) the financial information of SHL for the three years ended 31 December 2008, 2009 and 2010 and the six months ended 30 June 2011, the text of which is set out in appendix II to this circular;
(f) the report on the unaudited pro forma financial information of the Remaining Group, the text of which is set out in appendix III to this circular;
(g) the written consent referred to in the section headed ‘‘Expert and consent’’ in this appendix to this circular;
(h) the Agreement;
(i) the circular of the Company dated 24 January 2011 in relation to, among others, major acquisition, proposed issue of zero coupon redeemable and convertible bonds and placing of new shares; and
(j) this circular.

– 56 –

NOTICE OF SGM

==> picture [170 x 34] intentionally omitted <==

China Innovationpay Group Limited 中國創新支付集團有限公司

(Incorporated in Bermuda with limited liability)

(Stock Code: 8083)

NOTICE IS HEREBY GIVEN that a special general meeting (the “ SGM ”) of China Innovationpay Group Limited (the “ Company ”) will be held at Yue Function Room II, First Floor, City Garden Hotel, 9 City Garden Road, North Point, Hong Kong at 10:00 a.m. on 16 December 2011 for the purpose of considering and, if thought fit, passing with or without modification, the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT

the sale and purchase agreement dated 21 October 2011 (as supplemented by a supplemental agreement dated 23 November 2011) entered into between the Company and New Smart Version Limited (the “ Agreement ”) (a copy of which has been produced to the meeting and marked “A” and initialed by the chairman of the meeting for the purpose of identification) in relation to, among others, the sale and purchase of the entire issued share capital of SYSCAN Holdings Limited and shareholder’s loan be and is hereby approved, confirmed and ratified; and the directors of the Company be and are hereby authorised to do such acts and/or things and/or execute all such documents incidental to, ancillary to or in connection with matters contemplated in or relating to the Agreement as they may in their absolute discretion consider necessary, desirable or expedient to give effect to the Agreement and the implementation of all transactions contemplated thereunder and to agree to such variation, amendment or waiver as are, in the opinion of the directors of the Company, in the interest of the Company.’’

By order of the Board China Innovationpay Group Limited Guan Guisen

Chairman

Hong Kong, 29 November 2011

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

Head office and principal place of business in Hong Kong: Unit 2708, 27/F, The Center 99 Queen’s Road Central Central, Hong Kong

– 57 –

NOTICE OF SGM

Notes:

Any member entitled to attend and vote at the SGM is entitled to appoint one or more separate proxies to attend and vote instead of him/her. 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. A proxy need not be a member of the Company.
Where there are joint holders of any share, any one of such persons may vote at the SGM, either personally or by proxy, in respect of such share as if he/she were solely entitled thereto, provided that if more than one of such joint holders be present at the SGM personally or by proxy, the person whose name stands first in the register in respect of such share shall alone be entitled to vote in respect thereof.
To be valid, a form of proxy in the prescribed form together with the power of attorney or other authority (if any) under which it is signed (or a notarially certified copy thereof) must be deposited at the Company c/o the Company Secretary at the Company’s principal place of business and head office in Hong Kong at Unit 2708, 27/F., The Center, 99 Queen’s Road Central, Hong Kong not less than 48 hours before the time appointed for holding the SGM or any adjourned meeting. Delivery of the form of proxy shall not preclude a member of the Company from attending and voting in person at the SGM and any adjourned meeting and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
The form of proxy for use at the SGM is enclosed herewith.
As at the date of this notice, the Board comprises two executive Directors, namely Mr. Guan Guisen and Dr. Lei Chunxiong; one non-executive Director, namely Mr. Li Yuezhong and three independent non-executive Directors, namely Dr. Fong Chi Wah, Mr. Wang Zhongmin and Mr. Gu Jiawang.

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AI assistant

Youzan Technology Limited — Proxy Solicitation & Information Statement 2011

51261_rns_2011-11-28_1d97c109-85e9-4757-a5d8-c1d9f88f7b33.pdf

China Innovationpay Group Limited 中國創新支付集團有限公司

(Stock Code: 8083)

VERY SUBSTANTIAL DISPOSAL AND NOTICE OF SPECIAL GENERAL MEETING

Financial Adviser

DEFINITIONS

China Innovationpay Group Limited 中國創新支付集團有限公司

(Stock Code: 8083)

VERY SUBSTANTIAL DISPOSAL AND

NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

THE AGREEMENT

Date

Parties

Assets to be disposed of

Consideration

Conditions Precedent

Completion

TECHNICAL SERVICE AGREEMENT

INFORMATION ON THE GROUP

INFORMATION ON SHL GROUP

SHL

SLL

SIV

SST

SDS

BJST

XJST

HSB

WHS

GYB

GAIN ON THE DISPOSAL

INFORMATION ON THE PURCHASER

REASONS FOR THE DISPOSAL

(i) Financial position of SHL

(ii) Re-allocation of resources

(iii) Removal of qualified audit opinion

USE OF PROCEEDS

FINANCIAL EFFECTS ON ASSETS AND LIABILITIES

FINANCIAL AND TRADING PROSPECTS OF THE REMAINING GROUP

GEM LISTING RULES IMPLICATIONS

SGM

RECOMMENDATION

ADDITIONAL INFORMATION

1. FINANCIAL INFORMATION OF THE GROUP

2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

Business Review

Financial Review

Revenue

Net loss

Liquidity and Financial Resources

Capital Structure

Capital Commitments, Pledge of Assets and Contingent Liabilities

Foreign Exchange Exposure

Significant Investment and Material Acquisitions and Disposals

Future Plan of Material Investment

Employees and Remuneration Policies

Subsequent Event after the Reporting Date

3. INDEBTEDNESS STATEMENT

Contingent liabilities

4. WORKING CAPITAL SUFFICIENCY

5. MATERIAL ADVERSE CHANGE

A. ACCOUNTANTS’ REPORT

KTC Partners CPA Limited

Introduction

Scope of review

Basis for disclaimer of conclusion

2. Limitation of scope – carrying amount of interest in associates

4. Limitation of scope – other payables

Disclaimer of conclusion

KTC Partners CPA Limited

Chow Yiu Wah, Joseph

Unaudited Consolidated Statement of Financial Position of the SHL Group

Unaudited Consolidated Statement of Comprehensive Income of the SHL Group

Unaudited Consolidated Statement of Changes in Equity of the SHL Group

Unaudited Consolidated Statement of Cash Flows of the SHL Group

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Introduction

Youzan Technology Limited Proxy Solicitation & Information Statement 2011

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