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 SYSCAN Technology Holdings Limited (the “ Company ”), you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

This circular, for which the directors of the Company (the “ Directors ”) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the Growth Enterprise Market (“ GEM ”) of The Stock Exchange of Hong Kong Limited 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.

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

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**SYSCAN Technology Holdings Limited 矽感科技控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

(Stock Code: 8083)

(1) MAJOR ACQUISITION;

(2) PROPOSED ISSUE OF ZERO COUPON REDEEMABLE AND CONVERTIBLE BONDS DUE 2015 CONVERTIBLE INTO ORDINARY SHARES OF THE COMPANY; AND

(3) PLACING OF NEW SHARES PURSUANT TO SPECIFIC MANDATE

Arranger, Financial Adviser and Placing Agent

A notice convening the special general meeting of the Company (the “ SGM ”) to be held at Yue Function Room, First Floor, City Garden Hotel, 9 City Garden Road, North Point, Hong Kong at 11:00 a.m., on 10 February 2011, is set out on pages 110 to 114 of this circular. A form of proxy for use at the SGM is also enclosed.

Whether or not you are able to attend the SGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the Company c/o the Company Secretary at the Company’s principal place of business and head office in Hong Kong at Unit C, 21/F, Seabright Plaza, 9-23 Shell Street, North Point, Hong Kong as soon as possible, but in any event not less than 48 hours before the time appointed for the holding of the SGM (or any adjournment thereof). Completion and return of the form of proxy will not preclude you from attending and voting at the SGM (or any adjournment thereof) in person if you so wish.

This circular will remain on the “Latest Company Announcements” page of the GEM website at www.hkgem.com and on the Company’s website at www.syscangroup.com for at least 7 days from the date of its publication.

24 January 2011

* For identification purposes only

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 and no assurance is given that there will be a liquid market in the securities traded on GEM.

– i –

CONTENTS

			Pages
DEFINITIONS	. . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		8
INFORMATION OF THE TARGET GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			36
APPENDIX I	–	FINANCIAL INFORMATION OF THE GROUP . . . . . . . . .	52
APPENDIX II	–	ACCOUNTANTS’ REPORT OF THE TARGET GROUP . . .	53
APPENDIX III	–	MANAGEMENT DISCUSSION AND ANALYSIS OF THE
		TARGET GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	87
APPENDIX IV	–	UNAUDITED PRO FORMA FINANCIAL INFORMATION
		OF THE ENLARGED GROUP . . . . . . . . . . . . . . . . . . . . . .	91
APPENDIX V	–	GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . .	99
NOTICE OF SGM		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	110

– ii –

DEFINITIONS

In this circular, unless the context requires otherwise, the expressions as stated below will have the following meanings:

“acting in concert”
has the meaning ascribed to it under the Takeovers Code and the expression “concert party(ies)” shall be construed accordingly
“Acquisition”
proposed acquisition of the Sale Shares by the Group
“Announcement”
the announcement of the Company dated 23 November 2010 in relation to the Acquisition and Placing
“associate(s)”
shall have the meaning ascribed to it under the GEM Listing Rules
“Beijing Gaohuitong Commercial”
北京高匯通商貿有限公司 (Beijing Gaohuitong Commercial Co., Ltd.*), a limited company incorporated in the PRC and an indirect wholly-owned subsidiary of the Target Company
“Beijing Gaohuitong Management”
北京高匯通商業管理有限公司 (Beijing Gaohuitong Commercial Management Co., Ltd.*), a limited company incorporated in the PRC and an indirect wholly-owned subsidiary of the Target Company
“Board”
the board of Directors
“Business Day(s)”
“Cash Consideration”
for the purposes of the New Sale and Purchase Agreement and the New Placing Agreement, a day (excluding Saturdays, Sundays and statutory holidays in Hong Kong and/or the PRC) on which licensed banks are generally open for business in Hong Kong and the PRC HK$80,000,000, being part of the initial consideration of HK$150,000,000 which is payable in cash by the Company
“CB Subscription Agreement”
the agreement for the subscription for Convertible Bonds entered into between the Company and the Vendor on 21 January 2011
“China Union Loyalty”
上海銀商資訊有限公司 (China Union Loyalty Co., Ltd.), a limited company incorporated in the PRC and an associated company of China Unionpay

– 1 –

DEFINITIONS

“China Unionpay”
“China Unionpay Entities”
“Completion”
“Completion Date”
“Company”
“connected person(s)”
“Consideration Shares”
“Convertible Bonds”
“Conversion Price”
“Conversion Restriction”
“Conversion Share(s)”
“Director(s)”
中國銀聯股份有限公司 (China Unionpay Co., Ltd.), a limited company incorporated in the PRC
China Union Loyalty and Shanghai Unionpay
the completion of the Acquisition in accordance with the terms and conditions of the New Sale and Purchase Agreement

the date on which Completion takes place

SYSCAN Technology Holdings Limited, a company incorporated in Bermuda with limited liability, the issued shares of which are listed on GEM
has the meaning ascribed to it under the GEM Listing Rules
218,750,000 new Shares to be allotted and issued at the Issue Price upon Completion to satisfy part of the initial consideration
the zero coupon redeemable and convertible bonds in a maximum aggregate principal sum of HK$700,000,000 to be issued by the Company to satisfy part of the consideration following the Adjusted Consideration Scenarios
initially at HK$0.32 per Conversion Share, subject to adjustments and reset as set out and in accordance with the terms and conditions of the Convertible Bonds
as set out in the principal terms of the Convertible Bonds in the paragraph headed “Principal Terms of the Convertible Bonds”
a maximum of 2,187,500,000 new Shares to be allotted and issued by the Company upon the exercise of the conversion rights attaching to the Convertible Bonds in full, based on the initial conversion price of HK$0.32 per Conversion Share
the director(s) of the Company

– 2 –

DEFINITIONS

“Dongsen Jinbi”
北京東森金碧投資諮詢有限公司 (Beijing Dongsen Jinbi Investment Consultancy Co., Ltd.*), the entire issued share capital of which is wholly-owned by Mr. Guan, which in turns owns 15% equity interest in China Union Loyalty
“Dr. Lei”
Dr. Lei Chun Xiong (雷純雄)
“Enlarged Group”
the Group immediately upon Completion
“GEM”
the Growth Enterprise Market of the Stock Exchange
“GEM Listing Rules”
the Rules Governing the Listing of Securities on the GEM
“Group” the Company and its subsidiaries
“Hainan Shanglian”
海南商聯匯通商務投資管理有限公司 (Hainan Shanglian Huitong Commercial Investment Management Co., Ltd.*), a limited company incorporated in the PRC and a non-wholly owned subsidiary of the Target Company, in which the Target Company indirectly owns 80% of its equity interest
“Hangzhou Gaohui”
杭州高匯科技有限公司 (Hangzhou Gaohui Technology Co., Ltd.*), a limited company incorporated in the PRC and an indirect wholly-owned subsidiary of the Target Company
“Hangzhou Qianbao”

杭州錢報高匯科技有限公司 (Hangzhou Qianbao Gaohui Technology Co., Ltd.*), a limited company incorporated in the PRC and a jointly-controlled entity of the Target Company, in which the Target Company indirectly owns 50% of its equity interest

“HKFRS”

Hong Kong Financial Reporting Standards

“Issue Price”
HK$0.32 per Consideration Share
“Kanghui E-Commerce”

康輝商融（北京）電子商務有限責任公司 (Kanghui Financial (Beijing) E-Commerce Co., Ltd.*), a limited company incorporated in the PRC and a jointly-controlled entity of the Target Company, in which the Target Company indirectly owns 50% of its equity interest

– 3 –

DEFINITIONS

“Last Trading Day”
“Latest Practicable Date”
“Listing Committee”
“Memorandum”
“Mr. Guan”
“New Placing Agreement”
“New Sale and Purchase Agreement”
“Non-refundable Deposit”
“Oriental Patron” or “Placing Agent”
“PBOC”
“Placing”
10 November 2010, being the last trading day on which the Shares were traded on the Stock Exchange prior to the publication of the Announcement
21 January 2011, being the latest practicable date prior to the printing of this circular for ascertaining certain information referred to in this circular
the listing sub-committee of the board of the Stock Exchange
a memorandum of understanding dated 10 September 2010 entered into between the Company and the Vendor in respect of the acquisition of the Sale Shares and certain shareholder loan then believed to be outstanding from the Target Company
Mr. Guan Gui Sen (關貴森)
the conditional agreement entered into between the Company and the Placing Agent dated 22 November 2010 in respect of the Placing, as amended and supplemented by the supplemental placing agreement dated 6 January 2011 entered into between the same parties
the conditional sale and purchase agreement in relation to the Acquisition entered into between the Company, the Vendor and the Target Company 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
a non-refundable payment of HK$30,000,000, which forms part of the Cash Consideration
Oriental Patron Asia Limited, a corporation licensed to carry on type 1 (dealing in securities), type 6 (advising on corporate finance) and type 9 (asset management) regulated activities under the SFO
the People’s Bank of China
a placing of up to 625,000,000 Placing Shares by the Company through the Placing Agent on a best effort basis

– 4 –

DEFINITIONS

“Placing Price”
“Placing Shares”
“PRC”
“Sale Shares”
“SFC”
“SFO”
“SGM”
“Shanghai Unionpay”
“Shangyin”
“Share(s)”
“Shareholder(s)”
“Shenyang Shanglian”

HK$0.32 per Placing Share

up to a maximum of 625,000,000 new Shares to be issued under the Placing

the People’s Republic of China

the entire issued share capital of the Target Company

the Securities and Futures Commission of Hong Kong

The Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

the special general meeting of the Company to be held at 11:00 a.m. on 10 February, 2011, at Yue Function Room, First Floor, City Garden Hotel, 9 City Garden Road, North Point, Hong Kong, for the purpose of considering and, if thought fit, approving by the Shareholders, amongst others, the transactions contemplated under New Sale and Purchase Agreement and the New Placing Agreement respectively

上海商銀資訊有限公司 (Shanghai Unionpay Data Services Co., Ltd.), a limited company incorporated in the PRC and a subsidiary of China Unionpay

商銀融通（北京）投資諮詢有限公司 (Beijing Shangyin Investment Consultancy Co., Ltd.*), a limited company incorporated in the PRC and an indirect wholly-owned subsidiary of the Target Company

ordinary share(s) of HK$0.01 each in the share capital of the Company
holder(s) of the Shares

瀋陽商聯匯通商業服務有限公司 (Shenyang Shanglian Huitong Commercial Services Co., Ltd.*), a limited company incorporated in the PRC and an indirect non-wholly owned subsidiary of the Target Company, in which the Target Company indirectly owns 51% of its equity interest

– 5 –

DEFINITIONS

“Shenzhen Shanglian”
深圳市商聯匯通商業管理有限公司 (Shenzhen Shanglian Huitong Commercial Management Co., Ltd.*), a limited company incorporated in the PRC and an indirect non-wholly owned subsidiary of the Target Company, in which the Target Company indirectly owns 51% of its equity interest
“Splendid Win” Splendid Win Enterprise Limited (錦勝企業有限公司), a limited company incorporated in Hong Kong and a wholly-owned subsidiary of the Target Company
“Stock Exchange”
the Stock Exchange of Hong Kong Limited
“Takeovers Code”
The Codes on Takeovers and Mergers and Share Repurchases of the SFC
“Target Company”
Country Praise Enterprises Limited, a company incorporated in the British Virgin Islands with limited liability whose issued share capital is wholly-owned by the Vendor
“Target Group” the Target Company and its subsidiaries
“Terminated Placing Agreement”
the agreement entered into between the Company and the Placing Agent 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 New Placing Agreement
“Terminated Sale and Purchase Agreement”
the conditional sale and purchase agreement dated 11 November 2010 in relation to the acquisition by the Group of the Sale Shares entered into between the Company, the Vendor and the Target Company and was terminated pursuant to the New Sale and Purchase Agreement
“Vendor”
Mighty Advantage Enterprises Limited, a company incorporated in the British Virgin Islands with limited liability, whose issued share capital is wholly-owned by Mr. Guan
“HK$”
Hong Kong dollars, the lawful currency of Hong Kong
“RMB”
Renminbi, the lawful currency of the PRC
“%”
per cent.

– 6 –

DEFINITIONS

For illustration purposes, unless otherwise specified, conversions of RMB into HK$ is calculated at the approximate exchange rate of RMB1 to HK$1.165. This exchange rate is adopted for illustration purpose only and do not constitute a representation that any amounts have been, could have been, or may be, exchanged at this rate or any other rates at all.

All English translations of Chinese names in this circular marked with “*” are not official English names and are for identification purposes only. In the event of any inconsistency between the Chinese names and their English translations, the Chinese names shall prevail.

– 7 –

LETTER FROM THE BOARD

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**SYSCAN Technology Holdings Limited 矽感科技控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

(Stock Code: 8083)

Executive Directors: Cheung Wai Frank Cheung

Independent Non-Executive Directors: Fong Chi Wah Wang Ruiping He Zhiyi

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

Head Office and Principal Place of Business: Unit C, 21st Floor Seabright Plaza 9-23 Shell Street North Point Hong Kong 24 January 2011

To the Shareholders

Dear Sir/Madam,

INTRODUCTION

Reference is made to the Announcement.

On 23 November 2010, the Board announced that (i) the Company, the Vendor and the Target Company entered into the New Sale and Purchase Agreement on 22 November 2010 pursuant to which the Company has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the Sale Shares, being the entire equity interest in the Target Company; and (ii) the Company and the Placing Agent entered into the New Placing Agreement on 22 November 2010, 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 purpose of this circular is to provide you with, among other things, (i) further particulars of the New Sale and Purchase Agreement and the New Placing Agreement; (ii) financial and other information of the Group; (iii) financial and other information of the Target Group; (iv) unaudited pro forma financial information of the Enlarged Group; and (v) a notice of SGM.

* For identification purpose only

– 8 –

LETTER FROM THE BOARD

THE ACQUISITION

1. THE NEW SALE AND PURCHASE AGREEMENT

Parties

(1) the Company as buyer;
(2) the Vendor as seller; and
(3) the Target Company.

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, the Vendor and its ultimate beneficial owner are third parties independent of the Company and its connected persons.

Assets to be acquired

The Sale Shares, representing 100% equity interest in the Target Company.

Consideration

The initial consideration is HK$150,000,000 (subject to adjustments as described in the paragraph headed “Adjustments to the consideration” below) and the maximum consideration payable by the Company to the Vendor for the Acquisition after adjustments is HK$850,000,000. The initial consideration shall consist of the Cash Consideration of HK$80,000,000 and HK$70,000,000 payable by way of issue and allotment of the Consideration Shares.

Within 2 Business Days of satisfaction of all conditions precedent (other than paragraph (e) as set out in the paragraph headed “Conditions precedent” below), the Company shall pay the Non-refundable Deposit, being HK$30,000,000, to Oriental Patron acting in the capacity as escrow agent for the Non-refundable Deposit. Such Non-refundable Deposit shall be released by the escrow agent, without interest, to the Vendor or as the Vendor may direct in writing on the earlier of (i) Completion or (ii) termination of the New Sale and Purchase Agreement, where in such case, the Non-refundable Deposit shall be paid to the Vendor within 3 Business Days thereof.

The balance of the Cash Consideration, being HK$50,000,000 and without interest, shall be paid by the Company to the Vendor, or as the Vendor may direct in writing, on the earlier of (i) 7 Business Days after completion of the Placing or (ii) 180 days after Completion.

Completion shall take place upon full satisfaction or waiver of all conditions precedent in the New Sale and Purchase Agreement (including paragraph (e) as set out in the paragraph headed “Conditions precedent” below). At Completion, the balance of the initial consideration after deduction of the Cash Consideration, being HK$70,000,000, shall be satisfied by the Company by issuing the Consideration Shares to the Vendor.

– 9 –

LETTER FROM THE BOARD

Adjustments to the consideration

The initial consideration of HK$150,000,000 is subject to adjustments after Completion upon the satisfaction of certain targets in different scenarios (“Adjusted Consideration Scenarios”, each an “Adjusted Consideration Scenario”) as set out below:

Adjusted Consideration Scenario 1

If during the period between 1 October 2010 and 31 March 2011:

(a) the monetary amounts of prepaid cards issued by the Target Group exceeds RMB200,000,000, as certified by the auditors of the Company, the consideration will be adjusted upward by HK$25,600,000, which will be satisfied by the Company issuing equivalent amount of Convertible Bonds to the Vendor attaching therewith conversion rights to convert into 80,000,000 Conversion Shares at the initial Conversion Price;
(b) the number of prepaid cards issued by the Target Group exceeds 185,000, as certified by the auditors of the Company, the consideration will be adjusted upward by HK$25,600,000, which will be satisfied by the Company issuing equivalent amount of Convertible Bonds to the Vendor attaching therewith conversion rights to convert into 80,000,000 Conversion Shares at the initial Conversion Price; and
(c) the aggregate transaction amounts executed under the prepaid cards issued by the Target Group exceeds RMB135,000,000, as certified by the auditors of the Company, the consideration will be adjusted upward by HK$25,600,000, which will be satisfied by the Company issuing equivalent amount of Convertible Bonds to the Vendor attaching therewith conversion rights to convert into 80,000,000 Conversion Shares at the initial Conversion Price.

Adjusted Consideration Scenario 2

If during the period between 1 April 2011 and 30 September 2011:

(a) the monetary amount of prepaid cards issued by the Target Group exceeds RMB330,000,000, as certified by the auditors of the Company, the consideration will be adjusted upward by HK$25,600,000, which will be satisfied by the Company issuing equivalent amount of Convertible Bonds to the Vendor attaching therewith conversion rights to convert into 80,000,000 Conversion Shares at the initial Conversion Price;

– 10 –

LETTER FROM THE BOARD

(b) the number of prepaid cards issued by the Target Group exceeds 380,000, as certified by the auditors of the Company, the consideration will be adjusted upward by HK$25,600,000, which will be satisfied by the Company issuing equivalent amount of Convertible Bonds to the Vendor attaching therewith conversion rights to convert into 80,000,000 Conversion Shares at the initial Conversion Price; and
(c) the aggregate transactions amounts executed of the prepaid cards issued by the Target Group exceeds RMB250,000,000, as certified by the auditors of the Company, the consideration will be adjusted upward by HK$25,600,000, which will be satisfied by the Company issuing equivalent amount of Convertible Bonds to the Vendor attaching therewith conversion rights to convert into 80,000,000 Conversion Shares at the initial Conversion Price.

Adjusted Consideration Scenario 3

If the audited consolidated financial statements of the Target Group, prepared based on HKFRS, show that the consolidated net profit of the Target Group for the financial year ended 31 December 2011 is not less than RMB35,000,000, the maximum consideration will be adjusted to HK$650,000,000 (inclusive of the Cash Consideration paid and the Consideration Shares issued on Completion and the Convertible Bonds issued under Adjusted consideration Scenario 1 and Adjusted Consideration Scenario 2 above (where applicable)), the balance of the outstanding adjusted consideration shall be satisfied by the Company issuing appropriate equivalent amount of Convertible Bonds to the Vendor. The maximum principal amount of Convertible Bonds to be issued after the adjustment in this Adjusted Consideration Scenario 3 shall be HK$500,000,000.

Adjusted Consideration Scenario 4

If the audited consolidated financial statements of the Target Group, prepared based on HKFRS, show that the consolidated net profit of the Target Group for the financial year ended 31 December 2011 is not less than RMB35,000,000 AND the consolidated net profit of the Target Group for the financial year ended 31 December 2012 is not less than RMB70,000,000, the maximum consideration will be adjusted to HK$850,000,000 (inclusive the Cash Consideration paid and the Consideration Shares issued on Completion and the Convertible Bonds issued under Adjusted Consideration Scenario 1, Adjusted Consideration Scenario 2 and Adjusted Consideration Scenario 3 above (where applicable)), the balance of the outstanding adjusted consideration shall be satisfied by the Company issuing appropriate equivalent amount of Convertible Bonds to the Vendor. The maximum principal amount of Convertible Bonds to be issued after the adjustment in this Adjusted Consideration Scenario 4 shall be HK$200,000,000.

– 11 –

LETTER FROM THE BOARD

Adjusted Consideration Scenario 5

If the audited consolidated financial statements of the Target Group, prepared based on HKFRS, show that the consolidated net profit of the Target Group for the financial year ended 31 December 2011 is less than RMB35,000,000 BUT the consolidated net profit of the Target Group for the financial year ended 31 December 2012 is not less than RMB70,000,000, the consideration shall be adjusted based on the average of the consolidated net profit of the Target Group for the said two financial years multiplied by a price-earning multiple of 12 times, provided that the maximum consideration adjusted pursuant to this scenario shall not be more than HK$850,000,000 (inclusive of the Cash Consideration paid and the Consideration Shares issued on Completion and the Convertible Bonds issued under Adjusted Consideration Scenario 1 and Adjusted Consideration Scenario 2 above (where applicable)), the balance of the outstanding adjusted consideration shall be satisfied by the Company issuing appropriate equivalent amount of Convertible Bonds to the Vendor. The maximum principal amount of Convertible Bonds to be issued after the adjustment in this Adjusted Consideration Scenario 5 shall be HK$700,000,000.

Notwithstanding the satisfaction of the targets in Adjusted Consideration Scenario 2, no consideration adjustment in Adjusted Consideration Scenario 1 will be made if none of the targets in Adjusted Consideration Scenario 1 is met.

The issue of the Convertible Bonds by the Company in each of the Adjusted Consideration Scenarios above shall be made on the seventh (7th) Business Day after the auditors have produced the relevant audited consolidated financial statements or have certified the amount or value (as the case may be). The audit of the consolidated financial statements of the Target Group and certification of the amounts under Adjusted Consideration Scenario 1 and Adjusted Consideration Scenario 2 shall be performed by the Company’s auditors or any other renowned international accounting firm with an office in Hong Kong.

The maximum number of Conversion Shares to which the Vendor and persons acting in concert with the Vendor are entitled shall be subject to the terms and conditions of the CB Subscription Agreement and the Convertible Bonds. The Vendor has undertaken not to convert any Convertible Bond which upon the issue of the Conversion Shares relating to such Convertible Bond to the Vendor or parties acting in concert with the Vendor would trigger the mandatory general offer obligations in the Takeovers Code on the part of the Vendor and parties acting in concert with the Vendor.

– 12 –

LETTER FROM THE BOARD

Set out below is a summary of the consideration upon (i) Completion; (ii) achievement of Adjusted Consideration Scenario 1; (iii) achievement of Adjusted Consideration Scenario 2; (iv) achievement of Adjusted Consideration Scenario 3: (v) achievement of Adjusted Consideration Scenario 4; and (vi) achievement of Adjusted Consideration Scenario 5:

Cash Consideration Consideration Shares HK$ No. of Shares Upon Completion 80,000,000 218,750,000 Adjusted Consideration Scenario 1 – monetary amounts issued – – – number of prepaid cards – – – transaction amounts executed – – – – Adjusted Consideration Scenario 2 – monetary amounts issued – – – number of prepaid cards – – – transaction amounts executed – – – – Adjusted Consideration Scenario 3 – – Adjusted Consideration Scenario 4 – – Adjusted Consideration Scenario 5 – –	Cash Consideration Consideration Shares HK$ No. of Shares Upon Completion 80,000,000 218,750,000 Adjusted Consideration Scenario 1 – monetary amounts issued – – – number of prepaid cards – – – transaction amounts executed – – – – Adjusted Consideration Scenario 2 – monetary amounts issued – – – number of prepaid cards – – – transaction amounts executed – – – – Adjusted Consideration Scenario 3 – – Adjusted Consideration Scenario 4 – – Adjusted Consideration Scenario 5 – –	Convertible Bonds HK$ – 25,600,000 25,600,000 25,600,000 76,800,000	Total consideration HK$ 150,000,000 25,600,000 25,600,000 25,600,000 76,800,000 25,600,000 25,600,000 25,600,000 76,800,000 N/A N/A N/A	Maximum cumulative consideration HK$ 150,000,000 175,600,000 201,200,000 226,800,000 252,400,000 278,000,000 303,600,000 650,000,000
– – –	– – –	25,600,000 25,600,000 25,600,000	25,600,000 25,600,000 25,600,000
– – – –	– – – –	76,800,000 500,000,000_(Note) 200,000,000(Note) 700,000,000(Note)_

				850,000,000

				850,000,000

Note: The amounts represent the maximum principal amount of Convertible Bonds that will be issued to the Vendor after each of the relevant Adjusted Consideration Scenarios.

The Consideration Shares will be issued at the Issue Price of HK$0.32 per Share, credited as fully paid. The Conversion Price of the Convertible Bonds is HK$0.32 per Conversion Share.

– 13 –

LETTER FROM THE BOARD

Conditions precedent

Completion is conditional upon the fulfillment of the following conditions pursuant to the New Sale and Purchase Agreement (unless otherwise waived by the Company, other than with respect to (c), (e), (g), (h), (i), (k) and (n) below):

(a) all representations and warranties of the Vendor are true, accurate, correct and not misleading on the Completion Date and there does not exist any event that could lead to the Vendor materially breaching its representations and warranties;
(b) the Vendor complies with all undertakings and performed all obligations under the New Sale and Purchase Agreement and has not breached the same;
(c) the New Sale and Purchase Agreement has not been terminated;
(d) the board of directors and shareholders of the Vendor passing the necessary resolutions to approve the transactions contemplated under the New Sale and Purchase Agreement, including the sale of the Sale Shares, execution of the New Sale and Purchase Agreement;
(e) in relation to the Placing, the Company having received a written confirmation from the Placing Agent confirming there are investors who have entered into binding agreements and agreeing to subscribe for not less than 375,000,000 Placing Shares;
(f) the Board passing the necessary resolutions to approve the transactions contemplated under the New Sale and Purchase Agreement, including the Acquisition, the execution of the New Sale and Purchase Agreement, issue and allotment of the Consideration Shares, the execution of the CB Subscription Agreement, issue of the Convertible Bonds and the issue of Conversion Shares upon conversion of the Convertible Bonds;
(g) the Shareholders (or as required by the GEM Listing Rules, the independent Shareholders) passing the resolutions at the SGM approving matters including but not limited to the execution of the New Sale and Purchase Agreement and the transactions contemplated thereunder, issue and allotment of the Consideration Shares, the execution of the CB Subscription Agreement, issue of the Convertible Bonds and the issue and allotment of Conversion Shares upon conversion of the Convertible Bonds;
(h) the Listing Committee having approved or agreed to approve the listing of and permission to deal in the Consideration Shares and the Conversion Shares;

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LETTER FROM THE BOARD

(i) the transactions contemplated under the New Sale and Purchase Agreement having complied with the GEM Listing Rules and the requirements of the Stock Exchange, SFC and other regulatory authorities;
(j) the Company, the legal or other advisers of the Company having completed legal, financial, business, litigation and assets due diligence review on the Target Group and are satisfied with the results of such reviews in all respects;
(k) the Acquisition having complied with the applicable laws of relevant jurisdictions (including but not limited to the PRC, Hong Kong and the British Virgin Islands) and approvals (if any) from all relevant government authorities (including but not limited to approval and regulatory authorities in the PRC, Hong Kong and the British Virgin Islands) having been obtained;
(l) the Company having received legal opinions in relation to the Acquisition issued by the PRC and the British Virgin Islands legal advisers and is satisfied as to the contents thereof;
(m) the Company having received all necessary waiver, third party approval and consents in relation to the Acquisition or change in ultimate ownership of the Target Group;
(n) Dongsen Jinbi and Mr. Guan having executed a deed in favour of the Company agreeing to grant a right of first refusal and a right of first offer to the Company upon any proposed disposal by Dongsen Jinbi of its 15% equity interest in China Union Loyalty; and
(o) there is no material adverse change to the business, financial condition or asset condition of the Target Group.

If any of the conditions is not satisfied on or before 31 March 2011 (instead of 31 January 2011 as disclosed in the Announcement) or such other date as agreed in writing between the parties to the New Sale and Purchase Agreement, any party to the New Sale and Purchase Agreement shall have the right to terminate the New Sale and Purchase Agreement.

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

Non-disposal undertaking

Pursuant to the New Sale and Purchase Agreement, the Vendor has irrevocably and unconditionally undertaken that it will not transfer or otherwise dispose of any Consideration Share for a period of six months from the date of issue of such Consideration Share without the prior written consent or waiver of the

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LETTER FROM THE BOARD

Company. Further, the Vendor has also irrevocably and unconditionally undertaken that it will not transfer or otherwise dispose of (i) any Convertible Bond (excluding the exercise of conversion right) for a period of six months from the date of issue of such Convertible Bond and (ii) any Conversion Share issued pursuant to the conversion of any Convertible Bond for a period of six months from the date of issue of the relevant Convertible Bonds.

Right of first refusal and right of first offer

As one of the conditions to Completion, Dongsen Jinbi shall execute a deed in favour of the Company pursuant to which Dongsen Jinbi will grant a right of first refusal and a right of first offer to the Company to acquire 15% of its equity interest in China Union Loyalty every time Dongsen Jinbi receives an offer from a third party to purchase or it proposes to dispose of the said equity interest in China Union Loyalty.

Particulars of the rights are set out below:

Whenever Dongsen Jinbi intends to dispose of or receives an offer from a third party to purchase all or part of its interest in China Union Loyalty (the “ Disposal Interest ”):

(a) Dongsen Jinbi shall issue a written notice to all other existing shareholders of China Union Loyalty (the “ China Union Loyalty Shareholders ”) and the Company, setting out detailed terms and conditions of the proposed disposal (the “ Disposal Terms ”) which it proposes to dispose of or third party offers to purchase the Disposal Interest, the China Union Loyalty Shareholders shall have a right of first refusal in respect of Disposal Interest as prescribed in the China Union Loyalty articles of association;
(b) if the China Union Loyalty Shareholders elect not to purchase all or part of the Disposal Interest, Dongsen Jinbi shall issue a further written notice to the Company informing the Company that it shall have the right to purchase the balance of the untaken Disposal Interest (the “ Untaken Interest ”) setting out the terms and conditions of the disposal of the Untaken Interest, which such terms shall not be less favourable than the Disposal Terms;
(c) the Company shall have 14 Business Days to decide whether to accept the right to purchase the Untaken Interest on the Disposal Terms. If the Company decides to accept the right, it shall notify Dongsen Jinbi in writing the amount of the Untaken Interest it is willing to purchase, otherwise if the Company fails to issue any written notice to Dongsen Jinbi within the said 14 Business Days, the Company shall be deemed to have waived its right to purchase the Untaken Interest;

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LETTER FROM THE BOARD

(d) subject to the Company being satisfied with the results of any due diligence conducted on the Untaken Interest, the Company shall complete the purchase of the Untaken Interest within 180 days or such longer period as required to comply with the GEM Listing Rules;
(e) if the Company waives its right to purchase all or part of the Untaken Interest, Dongsen Jinbi may within 60 days from the Company waiving its rights dispose of and complete the sale of such portion of the Untaken Interest to any third party on terms no more favourable than the Disposal Terms; and
(f) if Dongsen Jinbi fails to complete the sale of such Untaken Interest within the said 60 days, Dongsen Jinbi shall again comply with the disposal procedures set out above in respect of the disposal of the Untaken Interest.

Mr. Guan shall execute the deed in the capacity of a guarantor which guarantees the strict compliance by Dongsen Jinbi with the terms of the deed.

The acquisition of the 15% equity interest in China Union Loyalty from Dongsen Jinbi, if materialised, shall be made in accordance with the GEM Listing Rules.

Nomination right

Upon signing of the New Sale and Purchase Agreement, the Vendor has the right to nominate 2 persons to be appointed as executive Directors. The effective date of the appointment of the executive Directors shall not be earlier than the Completion Date. The nomination right of the Vendor can only be exercised once, if the appointment of any of the persons nominated by the Vendor is rejected or not accepted, the Vendor shall not be entitled to nominate any other person in replacement of the one rejected.

2. THE CB SUBSCRIPTION AGREEMENT

Parties

(1) the Vendor as investor; and
(2) the Company as Issuer.

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LETTER FROM THE BOARD

Subscription of the Convertible Bonds

Pursuant to the CB Subscription Agreement, the Vendor has conditionally agreed to subscribe and the Company has conditionally agreed to issue the Convertible Bonds in various tranches as adjustment to the consideration of the Acquisition.

Conditions precedent

The issue of any Convertible Bonds is conditional upon the satisfaction of the following general conditions:

(a) all representations and warranties made by the Company under the CB Subscription Agreement remaining true and accurate in all material respects and not misleading in any respect as of the date of the relevant completion as though such representations and warranties were made on and as of the date of the relevant completion, and all undertakings made by the Company not having been breached in any material aspect;
(b) where applicable, each of the relevant transaction documents having been duly executed by the parties thereto and all consents and approvals of, notices to and filings and registration with any approval authority or any other person in connection with the transactions contemplated under the transaction documents having been obtained or effected; and
(c) the Completion as contemplated under the New Sale and Purchase Agreement has taken place.

In addition, the issue of each tranche of the Convertible Bonds is subject to the satisfaction by the Target Group of each of the Adjusted Consideration Scenarios set out above. Failure by the Target Group to achieve the targets set out in all of the Adjusted Consideration Scenarios set out above will result in the Vendor not being entitled to any Convertible Bond.

Principal terms of the Convertible Bonds

Issuer: The Company

Aggregate maximum HK$700,000,000, which will be divided into various principal amount: tranches in accordance with the adjustments set out in the Adjusted Consideration Scenarios.

Issue and redemption price:

As part of the adjustment of the consideration for the Acquisition and the issue of the Convertible Bonds is subject to satisfaction of certain targets, as such, the issue price shall be zero.

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LETTER FROM THE BOARD

The redemption price shall be the principal amount of the Convertible Bonds.

Interest:

Nil

Conversion right: Holder of the Convertible Bonds are entitled to such conversion rights which allow holders to convert the Convertible Bonds into Shares during the conversion period at the Conversion Price of HK$0.32 per Conversion Share, subject to such adjustments as set out below.
Conversion period: The Convertible Bonds can be converted at any time before maturity, subject to the restriction set out below.
Conversion price:
HK$0.32 per Conversion Share, subject to adjustments as a result of issuance of new Shares (other than Conversion Shares) by way of capitalization issue, share consolidation or subdivision, rights issue or open offer which lead to changes in the issued share capital of the Company.
Conversion Restriction:
The Vendor and parties acting in concert with the Vendor shall not at any time, hold such number of Shares (including the Consideration Shares, Conversion Shares and Shares obtained through any other way) which would trigger the obligation on the part of the Vendor and its concert parties to make any mandatory general offer for the Shares pursuant to the Takeovers Code.
Ranking of Conversion Shares:
All Conversion Shares issued upon conversion will be fully paid and rank pari passu in all aspects with all other Shares in issue on the date the name of the holder of the Conversion Shares are entered into the register of members of the Company.
Redemption
Other than redemption at maturity and upon any events of defaults, the Convertible Bonds shall not be redeemed at any time prior to maturity.
Maturity

Unless previously converted, redeemed or cancelled as provided in the terms and conditions of the Convertible Bonds, the Company shall redeem each Convertible Bond on 31 December 2015.

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LETTER FROM THE BOARD

Voting rights

Holders of Convertible Bonds will not have any right to attend or vote at any general meeting of the Company by virtue of their holding the Convertible Bonds. Holders shall be entitled to attend or vote at general meetings only upon conversion of the Convertible Bonds and such right only relates to the Conversion Shares they hold.

Dividend rights Holders of Convertible Bonds will not be entitled to any form of dividends.

Transferability The Convertible Bonds are freely transferable. Listing No application will be made by the Company for the listing of the Convertible Bonds on the Stock Exchange or any other stock exchange.

The Conversion Shares to be issued and allotted pursuant to the exercise of the conversion right under the Convertible Bonds are subject to a non-disposal undertaking. The Vendor, on execution of the CB Subscription Agreement, will undertake that it will not transfer or otherwise dispose of any Convertible Bond (excluding the exercise of conversion right) or Conversion Share issued pursuant to the conversion of any Convertible Bonds for a period of six months from the date of issue of the relevant Convertible Bonds without the prior written consent or waiver of the Company.

MANDATE TO ISSUE THE CONSIDERATION SHARES AND THE CONVERSION SHARES

Upon Completion and subject to the adjustments to the consideration, the Company will issue up to a maximum of 2,406,250,000 new Shares, pursuant to a specific mandate to be granted by the Shareholders at the SGM.

APPLICATION FOR LISTING

Application will be made by the Company to the Listing Committee for the listing of, and permission to deal in, the Consideration Shares and the Conversion Shares which may fall to be allotted and issued upon Completion and upon exercise of the Convertible Bonds, respectively.

CONSIDERATION SHARES AND THE CONVERSION SHARES

Upon Completion, an aggregate of 218,750,000 Consideration Shares would be allotted and issued, representing (i) approximately 8.28% of the entire issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately 6.28% of the entire issued share capital of the Company as enlarged by the issue of a maximum of 625,000,000 Placing Shares and the issue of the Consideration Shares upon Completion. In this regard, the Directors are of the view the potential dilution effect of the Consideration Shares is minimal.

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LETTER FROM THE BOARD

Assuming the maximum adjusted consideration of HK$700,000,000 payable in the form of Convertible Bonds is issued, 2,187,500,000 Conversion Shares will fall to be issued upon full conversion of HK$700,000,000 Convertible Bonds. The aggregate of 218,750,000 Consideration Shares and 2,187,500,000 Conversion Shares (i) represent approximately 91.12% of the entire issued share capital of the Company as at the Latest Practicable Date; and (ii) will represent approximately 42.42% of the entire issued share capital of the Company as enlarged by the issue of a maximum of 625,000,000 Placing Shares, the issue of 218,750,000 Consideration Shares and the issue of a maximum of 2,187,500,000 Conversion Shares upon full conversion of the Convertible Bonds following the adjustments to the consideration after Completion. Given the Convertible Bonds will only be issued if and when pre-determined performance targets are met and that there is (i) no immediate dilution effect upon issuance of the Convertible Bonds; and (ii) a non-disposal undertaking arrangement with the Vendor. Based on these, the Directors are of the view that the potential dilution effect upon conversion of the Convertible Bonds is fair and reasonable.

The Consideration Shares and the Conversion Shares, when allotted and issued, shall rank pari passu in all aspects amongst themselves and with the Shares in issue on the date of issue and allotment of the Consideration Shares and the Conversion Shares and be entitled to dividends and other rights carried by the Shares.

The Issue Price and the Conversion Price of HK$0.32 was arrived at after arm’s length negotiation between the parties to the New Sale and Purchase Agreement and represents:

(i) a discount of approximately 14.67% to the closing price of HK$0.375 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a discount of approximately 11.11% to the closing price of HK$0.36 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iii) a discount of approximately 12.09% to the average closing price of approximately HK$0.364 per Share as quoted on the Stock Exchange for the last 5 consecutive trading days immediately preceding and including the Last Trading Day; and
(iv) a discount of approximately 11.60% to the average closing price of approximately HK$0.362 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days immediately preceding and including the Last Trading Day.

The closing prices of the Shares since the signing of the Memorandum up to the Last Trading Day range from HK$0.345 to HK$0.42 per Share (the “ Closing Price Range ”). After taking into account that (i) the Group has been operating at a loss since its listing on the GEM in year 2000; (ii) the unaudited consolidated net assets value per Share attributable to the Shareholders as at 30 June 2010 was just approximately HK$0.046; and (iii) the existing 2D barcode technology of the Group needs a new application for revitalisation, the Directors are of the view that the discounts of the Issue Price and the Conversion Price to the Closing Price Range are fair and reasonable.

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LETTER FROM THE BOARD

BASIS OF THE CONSIDERATION

The consideration for the Sale Shares was determined after arm’s length negotiations between the Company and the Vendor with reference to the following principal factors:

the potential business synergies that may bring about by the Acquisition in respect of the application of the Group’s two dimensional (“ 2D ”) barcode technology;
the growing recognition of the prepaid cards issued by the Target Group since its trial operation in August 2008 in terms of the number of cards issued, monetary amounts issued, aggregate transaction amounts executed and the number of point of sale and contracted merchants accepting the prepaid cards;
the maximum consideration of HK$650,000,000 in Adjusted Consideration Scenario 3 equals to an effective 2011 forward price-earnings multiple of approximately 15.94 times;
the maximum consideration of HK$850,000,000 in Adjusted Consideration Scenario 4 equals to an effective 2012 forward price-earnings multiple of approximately 10.42 times to a cap of approximately 15.94 times;
the maximum consideration of HK$850,000,000 and a price-earnings multiple of 12 times in Adjusted Consideration Scenario 5 equals to an effective average 2011 and 2012 earnings of not less than approximately RMB60,800,000;
the contingent nature of the settlement consideration which positively linked to the future success of the Target Group’s operation and profitability; and
the future prospects of the electronic payment industry in the PRC.

In determining the range of effective forward price-earnings multiples, the Directors have considered:

the Target Group’s business operation is in a high growth stage;
the growing recognition of the prepaid cards issued by the Target Group since its trial operation in August 2008 (as evidenced by its improving operational statistics and increasing number of contracted merchants accepting the prepaid cards issued by the Target Group as disclosed in the paragraph headed “Prepaid card operation” under the section headed “Information of the Target Group” of this circular); and

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LETTER FROM THE BOARD

the effective forward price-earnings multiples under Adjusted Consideration Scenarios 3 and 4 were fall within the price-earnings range of the Comparables (as defined below).

The Company has selected the comparable companies based on the following criteria: (i) they are listed on the Stock Exchange; and (ii) they are engaged in payment business in the PRC (the “ Comparables ”). Based on such criteria, the Company has identified 3 Comparables which accordingly to the Directors’ best knowledge and belief met such criteria.

		Price-earnings
		ratio as at the
		date of the
		New Sale and
		Purchase
Company name	Principal business	Agreement
Jian ePayment	development and operation of IC and	4.95
Systems Limited	smart cards, back end electronic
(8165. HK)	receipt/payment and data recording
	and processing software system; and
	manufacturing and distribution of the
	associated commercial application in
	the PRC
Palmpay China	Provision of mobile payment gateway	27.02
Holdings Limited	services in the PRC
(8047.HK)
Universal	Provision of payment solutions and	14.80
Technologies	related services
Holdings Limited
(1026.HK)
AVERAGE		15.59

Despite the Target Group currently is still not profitable and has reported an audited consolidated net liabilities of approximately RMB3.15 million as at 30 September 2010 (or an unaudited adjusted consolidated net assets of approximately RMB1.68 million after taking into account the capitalization of HK$5.61 million (equivalent to approximately RMB4.83 million) shareholders’ loan from the Vendor subsequent to 30 September 2010), after due consideration of the above principal factors, the Directors considered that the Target Group has built a viable third party payment operation in the PRC with growing recognition and the Acquisition is a fast track for the Group’s 2D barcode technology to penetrate into the PRC third party payment industry (for further details, please refer to the section headed “Financial and Trading Prospects of the Enlarged Group” of this circular). Hence, the Directors (including the independent non-executive Directors)

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LETTER FROM THE BOARD

consider that the Acquisition was entered into under normal commercial terms and the total maximum consideration of HK$850 million for the Acquisition are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

REASONS FOR THE ACQUISITION

The Company is an investment holding company and its subsidiaries are principally engaged in the design, research, development, manufacturing and sale of optical image capturing devices and related barcode reader equipment, and is gradually transforming into 2D barcode reader and laser spectrum identification device provider and laser system equipment provider. 2D barcode is a way to encode information, just like conventional barcodes, but 2D barcode can encode significantly more information, and with high reliability and strong security.

For the past few years, the Group has devoted substantial research and development efforts in exploring the barcode and laser reader equipment in different fields of business. Examples of some of the successful development of application of 2D barcode technology in the recent years include bank cards, ID card identification devices and food tracking and tracing systems in sourcing and tracking for food and medical products.

The Directors are of the view that the Acquisition represents an excellent opportunity for the Group to deploy its application of self-developed 2D barcode technology to the fast growing electronic payment service industry in the PRC. This is because the Group’s 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.

FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

Upon Completion, the Target Company will become a wholly-owned subsidiary of the Company and the financial results of the Target Group will be consolidated into the Group. Based on the unaudited pro forma financial information of the Enlarged Group as set out in Appendix IV to this circular, the unaudited pro forma net assets of the Enlarged Group immediately upon Completion would be approximately HK$329.93 million.

In addition to the existing prepaid cards operated by the Target Group, the Enlarged Group plans to deploy the application of the Group’s self-developed 2D barcode technology into other electronic payment tools via (i) telephone transactions; and (ii) internet transactions to be developed and operated by the Enlarged Group. In addition, the Group plans to promote the use of 2D barcode enhanced electronic payment services for (i) ticketing at popular tourist attractions and cinemas across the PRC; (ii) virtue online stores or via television direct sales; (iii) reservation of medical services at hospitals and clinics; and (iv) paying insurance premium in which orders/bookings requires immediate payments or deposits to be made via telephone or internet. Assuming that the minimum number of the Placing Shares is issued, the Group intends to allocate its net proceeds to be received of approximately HK$111 million for the development of the above plans.

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LETTER FROM THE BOARD

The following diagrams illustrate how the Group’s 2D barcode technology can be applied to the development of new payment link in the electronic payment process through telephone network or internet:

==> picture [442 x 211] intentionally omitted <==

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

Merchant
Group’s 2D barcode
operation platform
POS device equipped with the Group’s
2D barcode reader at merchant’s store
Telephone network/ Target Group’s Prepaid Card
Internet Operation platform
Prepaid card holder
----- End of picture text -----

1) Prepaid card holder purchases goods or services from merchant and makes payment via telephone network or internet.
2) The payment details (e.g. prepaid card number, payment authorisation code etc) together with order details (e.g. merchant identity number, type of goods or services, quantity, delivery date and location etc) (together, the “ Transaction Details ”) are processed by the Target Group’s Prepaid Card Operation (as defined in the section headed “Prepaid card operation” below) platform via telephone network or internet and then passed to the Group’s 2D barcode operation platform.
3) The Group encodes the Transaction Details into 2D barcode and sends the 2D barcode to the prepaid card holder via telephone network/internet.
4) The Group downloads the Transaction Details to the merchant’s POS device and the merchant simultaneously.
5) Prepaid card holder presents the encoded 2D barcode to the merchant’s POS device for decoding. Upon successful authentication, the prepaid card holder receives goods or services.

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LETTER FROM THE BOARD

The Directors believe that the Group’s self-developed 2D barcode technology can serve as a comparative advantage in the electronic payment process over other third party payment services providers as:

It records and transmits purchase orders and payment instruction securely and efficiently by using 2D barcodes.
It protects consumers that their payments will only be released by the third party payment service provider (in our case, the Target Group) when goods are delivered or services are rendered.
It protects the merchants by ensuring that consumers has the necessary funding or credit before goods are delivered and services are rendered.
It facilitates the inventory planning and estimates the risks of bad debts for the merchants and reduces the payment collection time.
It reduces the inconvenience of issuing paper receipt for merchants and carrying paper receipts for consumers.

Besides, the Enlarged 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.

The Directors consider that the implementation of the above plans will enhance the revenue streams of the Enlarged Group and strengthen the application of the Group’s 2D barcode technology and integrate such technology into the electronic payment tools of the Target Group.

Taking into account that the Group’s existing financial resources and the minimum net proceeds to be received under the Placing of approximately HK$111 million, the Directors consider that the Group has sufficient financial resources to satisfy the funding requirement of the Enlarged Group.

FINANCIAL EFFECTS OF THE ACQUISITION ON THE GROUP

It should be noted that the following estimations are for illustration purposes only and do not purport to represent how the financial position of the Enlarged Group will be upon Completion.

Earnings

Upon Completion, the Target Company will become a wholly-owned subsidiary of the Company and its results will be consolidated with that of the Group. In light of prospect of prepaid card industry in the PRC, the Directors are of the view that the Acquisition would widen the earnings base of the Enlarged Group.

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LETTER FROM THE BOARD

Goodwill

A goodwill of approximately HK$918.44 million will be recognized arising from the Acquisition, mainly due to (i) the goodwill of approximately HK$13.87 million on the book of the Target Group immediately before Completion; and (ii) the difference between (i) the fair value of the Consideration amounting to approximately HK$904.23 million; and (ii) the adjusted net liabilities of the Target Group of approximately HK$0.34 million, being the net liabilities of the Target Group approximately HK$5.95 million being adjusted by the capitalization of the loan of approximately HK$5.61 million due from the Target Company to the Vendor (“ Loan Capitalization ”).

The Directors have carried out an assessment on the goodwill deriving from the Acquisition in accordance with the applicable accounting standards and no impairment of goodwill is required as at the Latest Practicable Date.

Net asset

Based on the unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group as set out in Appendix IV to this circular, the Group has unaudited consolidated net assets attributable to the Shareholders of approximately HK$114.23 million immediately before the Completion and the Enlarged Group had an unaudited consolidated pro forma consolidated net asset attributable to the Shareholders of approximately HK$325.17 million immediately upon Completion. The increase in the net assets of approximately HK$210.94 million is mainly due to the recognition of goodwill arising from the Acquisition of approximately HK$904.57 million, the net proceeds from the Placing of approximately HK$191 million (assuming that the maximum number of 625,000,000 Placing Shares have been placed), the Loan Capitalization of approximately HK$5.61 million, less the professional fee directly attributable to the Acquisition of approximately HK$26 million, the cash portion of the Consideration of HK$80 million payable on the Completion Date, and the fair value of the Convertible Bonds of approximately HK$778.29 million which is to be issued upon the satisfaction of certain targets in different Adjusted Consideration Scenarios.

Working capital

Based on the unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group as set out in Appendix IV to this circular, the Group has unaudited consolidated net current assets of approximately HK$87.42 million prior to Completion and the Enlarged Group had an unaudited consolidated pro forma consolidated net current assets of approximately HK$154.99 million immediately upon Completion. The increase in working capital of approximately HK$67.57 million is mainly due to net proceeds raised from the Placing of approximately HK$191 million (assuming that the maximum number of 625,000,000 Placing Shares have been placed), the Loan Capitalization of approximately HK$5.61 million, less the professional fee directly attributable to the Acquisition of approximately HK$26 million, the cash portion of the Consideration of HK$80 million payable on the Completion Date, as well as the net current liabilities of the Target Group of approximately HK$23.04 million.

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LETTER FROM THE BOARD

INTENTION OF EXISTING BUSINESS OF THE GROUP

Upon Completion, the Group will continue its existing business and will apply its existing 2D barcode business through capitalising such 2D barcode technology by continuing the research and development of new products and services applicable to the third party payment service business in the PRC, particularly in the development of new payment tools for the Target Group’s business.

FINANCING OF THE ACQUISITION

1. THE NEW PLACING AGREEMENT

Parties

(1) The Company; and
(2) the Placing Agent.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, the Placing Agent and its ultimate beneficial owners are third parties independent of the Company and connected persons of the Company.

Termination of the Terminated Placing Agreement

The Terminated Placing Agreement was terminated upon signing of the New Placing Agreement.

The Placing

Pursuant to the New Placing Agreement, the Company has conditionally agreed to place, through the Placing Agent, up to 625,000,000 Placing Shares at a Placing Price of HK$0.32 per Placing Share on a best effort basis.

As a condition of the completion of the Placing, the number of Placing Shares being placed by the Placing Agent under the Placing shall not be less than 375,000,000 Placing Shares.

The placees

The Placing Shares under the New Placing Agreement shall be placed by the Placing Agent to not fewer than six placees who will be independent professional, and/or institutional investors, and who and whose ultimate beneficial owners are third parties independent of the Company and connected persons of the Company. It is expected by the Board that no individual placee will become a substantial Shareholder immediately after completion of the Placing.

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LETTER FROM THE BOARD

The Placing Price

The Placing Price of HK$0.32 per Placing Share is the same as the Issue Price per Consideration Share and was determined after arm’s length negotiations between the Company and the Placing Agent with reference to the Issue Price under the New Sale and Purchase Agreement. The closing price of the Shares as quoted on the Stock Exchange on the Last Trading Day was HK$0.36 per Share. The Directors consider that the Placing Price and the terms of the New Placing Agreement are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

The Placing Shares

The maximum of 625,000,000 new Shares to be placed represent approximately 23.67% of the existing issued share capital of the Company and will represent approximately 17.94% of the issued share capital of the Company as enlarged by the issue of the maximum of 625,000,000 Placing Shares and the issue of the Consideration Shares upon Completion. Each Placing Share has a nominal value of HK$0.01. The aggregate maximum nominal value of the Placing Shares amounts to HK$6,250,000.

Ranking of Placing Shares

The Placing Shares, when allotted and issued, shall rank pari passu in all aspects amongst themselves and with the existing Shares in issue on the date of the issue and allotment of such Placing Shares and be entitled to dividends and other rights carried by the Shares.

Placing commission

The Placing Agent will receive a placing commission of 4% of the amount which is equal to the Placing Price multiplied by the number of Placing Shares, which will be paid by the Company from the gross proceeds of the Placing. The said placing commission was arrived at after arm’s length negotiations between the Company and the Placing Agent.

Completion of the New Placing Agreement

The New Placing Agreement is conditional upon:

(i) the Listing Committee granting listing of, and permission to deal in, all of the Placing Shares either unconditionally or subject to such conditions to which the Company and the Placing Agent shall accept and such permission and listing not subsequently being revoked or withdrawn prior to the dispatch of definitive share certificate(s) representing the Placing Shares;

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LETTER FROM THE BOARD

(ii) all requisite consents or approvals (if necessary) from competent authorities for the Placing having been obtained by the Company;
(iii) from the date of the New Placing Agreement and at any time before the date of closing of the Placing, the representations, warranties and undertakings given by the Company under the New Placing Agreement remain true and accurate in all material respects and not misleading in any material respects and no events have occurred that would result in any breach of any warranties or provisions of the New Placing Agreement by the Company in any material respects;
(iv) the number of Placing Shares being placed by the Placing Agent under the Placing being not less than 375,000,000 Placing Shares;
(v) completion of the New Sale and Purchase Agreement; and
(vi) the Shareholders passing a resolution in a general meeting approving the issue and allotment of the Placing Shares under a specific mandate.

Completion of the Placing shall take place no later than 3 Business Days after fulfillment of all the above conditions and is expected to take place on or before 31 March 2011 (instead of 31 January 2011 as disclosed in the Announcement) or any other later date as the Company and the Placing Agent may agree in writing.

Mandate to issue the Placing Shares

Upon completion of the Placing, the Company will issue a total of up to 625,000,000 new Shares, pursuant to a specific mandate to be granted by the Shareholders at the SGM.

Application will be made by the Company to the Listing Committee for the grant of the listing of and permission to deal in the Placing Shares.

2. REASONS FOR THE PLACING AND USE OF PROCEEDS FROM THE PLACING

Pursuant to the New Sale and Purchase Agreement, in addition to the Consideration Shares, the Company is also required to pay the Cash Consideration of HK$80,000,000, which will be financed by the Placing.

The Directors consider that the Placing represents an appropriate means of financing to raise capital for the Company and broaden the Shareholder base and capital base of the Company.

The Directors (including the independent non-executive Directors) consider that the terms of the New Placing Agreement are fair and reasonable and that the Placing is in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

Assuming all the 625,000,000 Placing Shares are successfully placed by the Placing Agent, the gross proceeds from the Placing will be HK$200,000,000. After taking into account the estimated expenses of approximately HK$9,000,000 in relation to the Placing, the net proceeds from the Placing of approximately HK$191,000,000 is intended for financing part of consideration for the Acquisition and as working capital for the future development of the Target Group. The net price per Placing Share is expected to be approximately HK$0.31.

3. EQUITY FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

				Actual use of
				proceeds up to
				the Latest
Date of			Intended use	Practicable
announcement	Event	Net proceeds	of proceeds	Date
14 & 21 April 2010	Placing of an	Approximately	To be used as	Fully utilized as
	aggregate of	HK$64,350,000	the general	intended
	409,000,000		working
	placing shares at		capital of the
	HK$0.165 per		Group
	placing share

Save as disclosed above, the Company had not carried out any equity fund raising exercise in the 12-month period immediately preceding the Latest Practicable Date.

EFFECT ON THE SHAREHOLDING STRUCTURE

Assuming no Share will be issued and/or repurchased by the Company from the Latest Practicable Date up to Completion Date, set out below is a table illustrating the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) immediately after the issue of a maximum of 625,000,000 Placing Shares and the issue of the Consideration Shares upon Completion; (iii) immediately after the issue of a maximum of 625,000,000 Placing Shares, the issue of 218,750,000 Consideration Shares and the issue of a maximum of 2,187,500,000 Conversion Shares upon full conversion of the Convertible Bonds under the Conversion Restriction following the adjustments to the consideration after Completion; and (iv) immediately after the issue of a maximum of 625,000,000 Placing Shares, the issue of 218,750,000 Consideration Shares and the issue of

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LETTER FROM THE BOARD

a maximum of 2,187,500,000 Conversion Shares upon full conversion of the Convertible Bonds following the adjustments to the consideration after Completion:

Shareholders Cheung Wai_(Note 1) Frank Cheung(Note 2)_ Vendor Public Shareholders Placee(s) Other public shareholders Aggregate	As at the Latest Practicable Date Number of Shares % 863,112,045 32.68 7,500,000 0.28 – – – – 1,770,277,412 67.04	As at the Latest Practicable Date Number of Shares % 863,112,045 32.68 7,500,000 0.28 – – – – 1,770,277,412 67.04	Immediately after the issue of a maximum of 625,000,000 Placing Shares and the issue of the Consideration Shares upon Completion Number of Shares % 863,112,045 24.77 7,500,000 0.22 218,750,000 6.28 625,000,000 17.94 1,770,277,412 50.79	Immediately after the issue of a maximum of 625,000,000 Placing Shares and the issue of the Consideration Shares upon Completion Number of Shares % 863,112,045 24.77 7,500,000 0.22 218,750,000 6.28 625,000,000 17.94 1,770,277,412 50.79	Immediately after the issue of a maximum of 625,000,000 Placing Shares, the issue of 218,750,000 Consideration Shares and the issue of a maximum of 2,187,500,000 Conversion Shares upon full conversion of the Convertible Bonds under the Conversion Restriction following the adjustments to the consideration after Completion Number of Shares % 863,112,045 18.53 7,500,000 0.16 1,393,011,337 29.90 (Note 3) 625,000,000 13.41 1,770,277,412 38.00	Immediately after the issue of a maximum of 625,000,000 Placing Shares, the issue of 218,750,000 Consideration Shares and the issue of a maximum of 2,187,500,000 Conversion Shares upon full conversion of the Convertible Bonds under the Conversion Restriction following the adjustments to the consideration after Completion Number of Shares % 863,112,045 18.53 7,500,000 0.16 1,393,011,337 29.90 (Note 3) 625,000,000 13.41 1,770,277,412 38.00	Immediately after the issue of a maximum of 625,000,000 Placing Shares, the issue of 218,750,000 Consideration Shares and the issue of a maximum of 2,187,500,000 Conversion Shares upon full conversion of the Convertible Bonds following the adjustments to the consideration after Completion(Note 3) Number of Shares % 863,112,045 15.22 7,500,000 0.13 2,406,250,000 42.42 (Note 3) 625,000,000 11.02 1,770,277,412 31.21	Immediately after the issue of a maximum of 625,000,000 Placing Shares, the issue of 218,750,000 Consideration Shares and the issue of a maximum of 2,187,500,000 Conversion Shares upon full conversion of the Convertible Bonds following the adjustments to the consideration after Completion(Note 3) Number of Shares % 863,112,045 15.22 7,500,000 0.13 2,406,250,000 42.42 (Note 3) 625,000,000 11.02 1,770,277,412 31.21
	1,770,277,412	67.04	2,395,277,412	68.73	2,395,277,412	51.41	2,395,277,412	42.23
	2,640,889,457	100.00	3,484,639,457	100.00	4,658,900,794	100.00	5,672,139,457	100.00

Notes:

Mr. Cheung Wai is the chairman of the Group and an executive Director. He is also the father of Mr. Frank Cheung.
Mr. Frank Cheung is an executive Director and the son of Mr. Cheung Wai.
For illustration purpose only, the Vendor and its concert parties shall not in aggregate directly or indirectly control or be interested in 29.90% or more in the Shares pursuant to the terms of the New Sale and Purchase Agreement, the CB Subscription Agreement and the Convertible Bonds.

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LETTER FROM THE BOARD

PROPOSED NOMINATION OF DIRECTORS

Subject to Completion, the Vendor intends to nominate (i) Mr. Guan; and (ii) Dr. Lei as new executive Directors to the Board with effect from the Completion Date.

Biographies of the Directors to be nominated by the Vendor

Mr. Guan

Mr. Guan, aged 47, whose business address is at Unit 1401, Jia long International Building, No. 19 Chaoyang Park Road, Chaoyang District, Beijing, PRC. He obtained his bachelor degree from 中央財經大學 (China Central University of Finance and Economics) in 1984 and a master degree from 中國人民銀行研究生部 (Graduate School of the People’s Bank of China) in 1987. Mr. Guan has over twenty years of senior management experience in finance, property development and investment in the PRC. Mr. Guan was a deputy president of 海南科工集團 (Hainan Technology and Industry Group) from 1990 to 1994, a deputy president of 太合控股有限公司 (Thihe Holdings Co., Ltd.) from 2001 to 2003 and a director of 銀聯數據有限公司 (China Union Pay Data Services Co., Ltd.*) from 2002 to 2005. Since founding the Target Group in August 2008, Mr. Guan is the chairman of Shangyin and a director of China Union Loyalty. Mr. Guan owns the entire equity interest in Dongsen Jinbi, an investment company, which in turns owned 15% equity interest in China Union Loyalty.

As a result of the entering into of the New Sale and Purchase Agreement between the Company and the Vendor pursuant to which the Vendor would be issued an aggregate of 2,406,250,000 Shares, Mr. Guan is deemed to be interested in 2,406,250,000 Shares, representing approximately 91.12% of the existing issued share capital of the Company as at the Latest Practicable Date, assuming the Consideration Shares were issued and the maximum amount of Conversion Shares which would fall to be issued in full upon the conversion of all Convertible Bonds were issued to the Vendor. The Vendor and parties acting in concert with the Vendor (including Mr. Guan who is the ultimate beneficial owner of the Vendor) shall not at any time, hold 30% or more of the Shares (including the Consideration Shares, Conversion Shares and Shares obtained through any other way) (or such other percentage as may from time to time be specified in the Takeovers Code which would trigger the obligation on the part of the Vendor and its concert parties to make any mandatory general offer for the Shares pursuant to the Takeovers Code).

Dr. Lei

Dr. Lei, aged 45, whose business address is at Unit 1401, Jia long International Building, No. 19 Chaoyang Park Road, Chaoyang District, Beijing, PRC. He was graduated from 湖南郴州師專 (Hunan Binzhou Normal Institute) in 1983 and obtained a master degree from 天津師範大學 (Tianjin Normal University) in 1991 and a doctoral degree from 中國人民銀行研究生部 (Graduate School of People’s Bank of China) in 1996. Dr. Lei has over 20 years of experience in banking and electronic payment sectors. He worked as a deputy section head, section head and deputy department head of Bank of China, Hunan branch from 1991 to 1997. From February 1997 to July 2001, Dr. Lei worked for the head office of China Merchants Bank as an assistant general manager of treasury planning department, research department and an deputy general manager of individual banking department. He joined China Unionpay in August 2001 until March 2010 initially

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LETTER FROM THE BOARD

as its general manager of the strategic development department and later as its assistant president. In between his tenure with China Unionpay, Dr. Lei was also an executive director of 銀聯商務有限公司 (Unionpay Merchant Services Co., Ltd.), a director of 銀聯數據有限公司 (China Unionpay Data Services Co., Ltd.), 上海銀聯電子支付有限公司 (China Pay Co., Ltd.), China Union Loyalty, 廣州銀聯網絡支付有限公司 (Guangzhou Unionpay Network Payment Co., Ltd.) as well as a director and president of 上海卡友資訊服務有限公司 (Shanghai Kayou Information Services Co., Ltd.). Since joining the Target Group in April 2010, Dr. Lei is the president of Shangyin. He is also a committee member of 上海金融仲裁院諮詢委員會 (Shanghai Financial Arbitration Advising Committee).

The Directors consider that, given the experience and knowledge of the proposed new Directors in the business carried on by the Target Group, the appointment of the above proposed new Directors to be nominated by the Vendor will be beneficial to the future development of the Target Group. Subject to Completion and the satisfaction of all necessary formality of the appointments, the Directors have in principle given their approval to the nomination. Initial appointment period of the above new Directors will be up to next annual general meeting of the Company at which such new Directors will be eligible for re-election by the Shareholders.

GEM LISTING RULES IMPLICATION

As the applicable percentage ratios of the Acquisition under the GEM Listing Rules exceed 25% but are less than 100%, the Acquisition constitutes a major transaction of the Company and is therefore subject to the reporting, announcement and Shareholders’ approval requirements under Chapter 19 of the GEM Listing Rules.

To the best knowledge of the Directors, no Shareholder has material interest in the transactions contemplated under each of the New Sale and Purchase Agreement and the New Placing Agreement. Accordingly, no Shareholder will be required to abstain from voting at the SGM in respect of the resolution(s) relating to the Acquisition and the Placing.

SGM

The SGM will be held at Yue Function Room, First Floor, City Garden Hotel, 9 City Garden Road, North Point, Hong Kong at 11:00 a.m. on Thursday, 10 February 2011 to consider, and if thought fit, pass the requisite resolution(s) to approve the transactions contemplated under the New Sale and Purchase Agreement and the New Placing Agreement and the grant of a specific mandate to satisfy the issue and allotment of the Consideration Shares, Conversion Shares and the Placing Shares. A proxy form for use at the SGM is dispatched to you with this circular. Whether or not you are able to attend the SGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return it to the Company c/o the Company Secretary at the Company’s principal place of business and head office in Hong Kong at Unit C, 21/F, Seabright Plaza, 9-23 Shell Street, North Point, Hong Kong as soon as possible, but in any event not less than 48 hours before the time appointed for the holding of the SGM (or any adjournment thereof). Completion and return of the form of proxy will not preclude you from attending and voting at the SGM (or any adjournment thereof) in person if you so wish.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors (including the independent non-executive Directors) consider that each of the New Sale and Purchase Agreement and the New Placing Agreement has been entered into on normal commercial terms, and the terms and conditions of each of the New Sale and Purchase Agreement and the New Placing Agreement are fair and reasonable and each of the Acquisition and Placing is 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 ordinary resolution of the Company to be proposed at the SGM.

GENERAL

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

Yours faithfully, By Order of the Board SYSCAN Technology Holdings Limited Cheung Wai Chairman

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INFORMATION OF THE TARGET GROUP

1. INDUSTRY OVERVIEW

Overview of prepaid card business in the PRC

Prepaid cards in the PRC generally can be categorized into (i) “closed-loop”; and (ii) “open-loop” prepaid cards. Closed-loop prepaid cards are sold by merchants and are used exclusively for consumption at their own business establishments, while open-loop prepaid cards are issued by third party (either financial institution issuers or non-financial institution issuers such as the Target Group) and are used in the accepting merchants.

According to PBOC, as at 31 December 2009, there were 243 non-financial institutions that carrying on third party payment services and/or providing any money transfer services. In addition, as at the end of 2009, there were approximately 1.75 billion prepaid card transactions with a value of approximately RMB1,092.5 billion and a loaded value of approximately RMB39.7 billion.

According to the data from the China Statistical Yearbook for the year 2009, the compound annual growth rate of the GDP, per capital GDP and final consumption expenditure from year 2006 to year 2008 is approximately 19.11%, 18.50% and 16.12% respectively. It is reasonably to deduce that consumption growth rate is positively correlated to the GDP growth rate. In such ways, the prepaid cards or any other future payment tools to be developed are used for settlement of payment for consumption and companies engaging in the electronic payment business in the PRC are expected to benefit from such consumption growth.

In November 2008, the PRC government announced an estimated RMB4 trillion stimulus package, for boosting China’s overall economy, in the midst of the global financial crisis. In particular, the PRC government has implemented a series of coupon schemes in different provinces to boost local consumption and revive sluggish spending at the attractive tourist sites in the PRC. China has the largest population in the world with nearly 20% of the world’s population, the overall size of the market, along with the advancement of the online payment systems and information technology within the country, are some of the key factors attributing to the explosive growth of the PRC economy as well as the prepaid card markets over the last decade. In recent years, PBOC has been playing a leading role in the supervision of the prepaid card industry and the tightening of the prepaid card regulations will in turn increase entry barriers for smaller and newer competitors.

Prospects and future developments

Prepaid cards are emerging as potentially powerful tools for consumers to engage in a variety of financial transactions with greater convenience, however, most of the prepaid cards offer relatively limited functionality. Innovations in providing prepaid solutions to identify and serve the needs in developing markets bring lots of opportunities in the prepaid card business in the PRC. After years of development, China’s prepaid card industry has built up a solid foundation for its future development. Economic growth and

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INFORMATION OF THE TARGET GROUP

rising per capita income are fundamental factors to support the strong growth in the prepaid card industry in the years to come. Changing of the life style and spending structure of people in the PRC, along with the increasing popularity of the online payments and the use of prepaid cards to settle regular payments such as utility and phone bills, presenting a potential strong demand for prepaid card transactions together with the growth of merchant acceptance in the PRC. The prepaid card industry is expected to evolve very rapidly with the advancement of the technology to improve functionality for the holders of prepaid card. It is expected that more lifestyle prepaid cards will be issued with the cooperation of financial institution issuers and other large corporations in the near future. Development of other means of payment channels and a more comprehensive functionality of the prepaid cards are also expected so as to facilitate the use of the prepaid cards and other means of electronic payment in the PRC. In addition, there is a great potential for prepaid cards to be transformed into powerful alternatives to traditional bank accounts for provision of a platform for the cardholders for savings, building credits and financings, in which the prepaid cards may be transformed into multi-function prepaid cards to meet the current underserved markets in the future.

However, PBOC has been playing a leading role in the supervision of the prepaid card industry in the PRC with the tightening and implementation of a series of regulations on the prepaid card business operations in recent years. In the event that there is further introduction of stringent compliance standards, or the implementation of any new laws or regulations in the future, the Target Group’s results of operations may be materially and adversely affected. The uncertainty of the imposition of the PRC’s governmental regulations posed as one of the key challenges ahead in the third party payment services provider (including the prepaid card business) in the PRC.

Entry barriers

Extensive capital and/or time are required for merchant network development

Level of acceptance of the prepaid cards by merchants is one of the key elements for success in the prepaid card business in the PRC, and this requires a long time, substantial cost and good business network to establish.

Sourcing for a electronic data processing and clearing service provider and POS device suppliers

The services to be provided by the electronic data processing and clearing service provider involves frequent and substantial amount of money transfer between merchants and prepaid card issuers; whereas the POS device suppliers shall provide detailed and accurate transaction data (including the sales of prepaid cards and transaction amounts of prepaid cards), which is highly confidential in nature, to merchants and prepaid card issuers for clearing and settlement. Thus, each of electronic data processing and clearing service provider and POS device suppliers will impose stringent requirement and go through detailed screening procedures on each third party payment service provider before electronic data processing and clearing service provider such as China Unionpay Entities will agree to provide such services to them.

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INFORMATION OF THE TARGET GROUP

2. REGULATORY OVERVIEW

In May 2010, the PBOC promulgated the Administrative Method of Payment Services for Non-Financial Institutions (the “ Administrative Method ”) which took effect from 1 September 2010 (the “ Effective Date ”). The Administrative Method aims to regulate those non-financial institutions carrying on fund transfer services such as (i) network payment; (ii) issuing for profits prepaid cards for goods or services consumption from merchants other than the card issuer; (iii) collection of funds for bank cards at point of sales of contracted merchants; and (iv) such other alternate payment services as confirmed by PBOC.

In addition, according to the Administrative Method, the business scope, the qualification of offshore investor and investment proportion in relation to foreign invested payment institutions shall be determined by PBOC separately and are subject to the approval from the State Council (國務院).

The Company has been advised by its PRC legal counsel, King & Wood, that (i) as of the Latest Practicable Date, PBOC has not yet determined the administrative measures applicable to foreign invested payment institutions. The Administrative Method currently does not restrict the continued operation of foreign invested payment institutions which have already been carrying on payment services prior to the Effective Date. The administrative measures for foreign invested payment institutions shall apply to members of the Target Group currently carrying on payment services which are either foreign direct investment companies or indirect investment companies; (ii) currently there is no regulation in regional level governing the prepaid card business applicable to foreign invested payment institutions in the PRC; and, (iii) the Company would be lawful to operate the Target Group’s business after the Acquisition under the existing rules and regulations in the PRC. Once PBOC has promulgated the relevant administrative measures applicable to foreign invested payment institutions, the Target Group shall apply for the Certificate for Approval for Payment Business accordingly.

PBOC has not yet determined the business scope, the qualification of offshore investor and investment proportion in relation to foreign invested payment institutions. While the Target Group remains hopeful, as at the Latest Practicable Date, the Company is not in a position to confirm in any degree of certainty that the Target Group will be successful in obtaining the Certificate for Approval for Payment Business.

3. RISKS ASSOCIATED WITH THE PREPAID CARD BUSINESS OF THE TARGET GROUP

Investments in new business and country risks

Prior to the Acquisition, the Group is principally engaged in the design, research, development, manufacturing and sale of optical image capturing devices and related barcode reader equipment and has not been involved in the operation of electronic payment tools in the PRC. Therefore, the Group may encounter risks and uncertainties in operating a new business in a new area. In the event that the Group is unable to manage

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INFORMATION OF THE TARGET GROUP

the risks effectively, the Target Group’s business operation and its financial results may be materially and adversely affected.

The Target Group’s revenue from its prepaid card business is subject to seasonal fluctuations

The Target Group experiences seasonal fluctuations in its revenue relating to the prepaid card business in the PRC. It generally records higher sales revenue between December and February mainly due to heavier consumer spending during Christmas and the Lunar New Year holidays.

As a result of these fluctuations, sales and operating results for any particular period will not necessarily be indicative of the Target Group’s results for the full year or future periods. The seasonal nature of the Target Group’s prepaid card acceptance business would also affect the cash flows available to the Target Group.

Reliance on China Unionpay Entities

Currently, China Unionpay Entities are the only electronic data processing and clearing system providers to the Prepaid Card Operation of the Target Group. The cooperation agreements entered into between China Unionpay Entities and the Target Group will be automatically extended pursuant to the provisions of the agreement for a further term of 1 year upon expiry on 19 October 2013. To the Directors’ knowledge and information, the Target Group has maintained good business relationships with China Unionpay Entities who play a significant role in the business operation of the Target Group. However, there is no guarantee that China Unionpay Entities would agree to continue renewing their agreement with the Target Group on a timely basis upon their expiration and that the terms of such renewal may be the same or no less favourable than those of the existing agreements. If any of the agreement cannot be renewed on a timely basis upon expiry or if there is any major alteration in the terms of these agreements, the Target Group’s business operation and financial position may be materially and adversely affected.

China Unionpay Entities have nationwide network coverage in the PRC. If China Unionpay Entities cease to be the service providers of the Target Group, the Target Group may not be able to find a comparable substitute as a replacement in a short period of time or at all, and the Target Group’s business and its financial position would be materially and adversely affected.

The Target Group has no security control over the system functions and services provided by China Unionpay Entities. The Target Group’s ability to provide its services, especially the card acceptance services, depends on the continued performance and support of these third-party systems, including their software and equipment, and the connection with and among them. If these systems experience failures or connection defects, and the third party maintaining these systems fails to provide adequate remedial support, it may result in the interruption or unsatisfactory performance of the Target Group’s services.

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INFORMATION OF THE TARGET GROUP

Uncertainties in the regulatory environment

In May 2010, the PBOC promulgated the Administrative Method which took effect from 1 September 2010, aiming to regulate those non-financial institutions carrying on fund transfer services. The Company has been advised by its PRC legal counsel, King & Wood, that as of the Latest Practicable Date, PBOC has not yet determined the administrative measures applicable to foreign invested payment institutions and such administrative method currently does not restrict the continued operation of foreign invested payment institutions which have already been carrying on payment services prior to the Effective Date.

However, there is no assurance that the Target Group will be successful in obtaining such certificates, permits, licenses and regulatory approvals in order to continue its provision of payment services in the PRC. In addition, increasing compliance standards in relation to these permits, licences, approvals and/or certificates or change of interpretation of any existing laws or regulations will make it more restrictive for the Target Group to conduct any part of its business, in which the Target Group’s operation and profitability may be adversely affected.

Historical net liability position

The Target Group incurred a loss of approximately RMB5.99 million for the period from 8 February 2010 to 30 September 2010 and recorded net current liabilities and net liabilities of approximately RMB19.84 million and RMB3.15 million as at 30 September 2010 respectively. There is no guarantee that the Target Group will not incur net current liabilities and net liabilities in the future or that it will always be able to raise the necessary funding to meet its capital commitments. Should the Target Group incur further net current liabilities and net liabilities or be unable to raise sufficient funding for its capital needs, the Target Group’s business operation and financial position may be adversely affected.

Short operating period

In addition, the first operating subsidiary of the Target Group was only established in August 2008, the time of presence in the electronic payment business is relatively short and it is still in the developing stage which their market influences are still limited. There can be no assurance that the Target Group could sustain its successful operational results in the future. If the Target Group fails to grow successfully, the Target Group’s financial results may be materially and adversely affected.

4. BUSINESS OVERVIEW

Business activities

The Target Company was incorporated on 8 February 2010, it has not carried on any business activities other than establishing Splendid Win to reorganize the seven subsidiaries and two jointly-controlled companies in the PRC to form the existing group structure with effect from 21 July 2010.

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INFORMATION OF THE TARGET GROUP

The subsidiaries and the jointly-controlled entities of the Target Company are principally engaged in the development and operation of electronic payment tools and the Target Group is a cross-region, cross-industry consolidated payment services provider in the PRC in which cards issued and accepted in one region is also accepted by contracted merchants engaging in different industries in other regions where the Target Group has operations within the PRC.

Prepaid card operation

Currently, prepaid card is the key payment tool developed by the Target Group.

The prepaid card operation comprises the prepaid cards issued by the Target Group, data processing and clearing and point of sale (“ POS ”) devices at its contracted merchants (together, “ Prepaid Card Operation ”). The Prepaid Card Operation processes and records transaction data to:

enable the settlement of payments for the sale and provision of goods and services effected between contracted merchants and prepaid cardholders; and
provide the prepaid cardholders with a convenient alternative to cash payment.

The Prepaid Card Operation’s electronic data processing and clearing system function is processed by the nationwide network operated by China Unionpay (through a cooperation agreement with the China Unionpay Entities respectively, each of which being an associated company and a subsidiary of China Unionpay. Mr. Guan owns the entire equity interests in Dongsen Jinbi, an investment company, which in turns owns 15% equity interest in China Union Loyalty. The fee paid to China Unionpay Entities was determined based on certain percentages of the amounts spent using the prepaid cards.

The China Unionpay Entities are part of the China Unionpay Group. China Unionpay Group was established in year 2002. It is a bankcard association established under the approval of the State Council and the PBOC. It operates an inter-bank transaction settlement system for banks and other payment cards issuers in the PRC. The number of merchants and POS devices serviced by China Unionpay Group in the PRC reached approximately 2.13 million and 2.88 million respectively in year 2009. Based on this, the Directors consider that China Unionpay Entities are reliable service providers of its kind.

The Target Group has established a good working relationship with the China Unionpay Entities since its establishment in year 2008 and the Directors are confident that with Mr. Guan and Dr. Lei (whose biographical details has been disclosed under the section headed “Proposed nomination of Directors” of this circular) on Board upon Completion, such good business relationship can be maintained.

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INFORMATION OF THE TARGET GROUP

The following chart illustrates the principal business process of the Target Group’s Prepaid Card Operation:

==> picture [338 x 208] intentionally omitted <==

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

Card value & card revenue
Cardholder 1 Target Group
Issue prepaid card
Present Payment of
transaction
prepaid levies or
card for
commission
Goods settlement & Update
and update remaining processed
services 2 value of transaction
prepaid card Consumption value information
of transaction
(net of transaction 4
levies or commission)
Transactions for processing
Contracted Merchant China Unionpay Entities
3
5
----- End of picture text -----

1) The cardholder purchases the prepaid card from one of the nine sales offices established by the Target Group in nine different regions in the PRC. The settlement obligations of the Target Group are recognized upon sales of the prepaid card and receipt of respective funds.
2) The cardholder uses the prepaid card for settlement of his purchase of goods or services by presenting the prepaid cards to the contracted merchants. By swiping the prepaid card through the POS device installed at the accepting store of the contracted merchant, the consumption value will be deducted from the prepaid card and the remaining value of the prepaid card will be updated accordingly. Revenue in the form of transaction levies will be recognized on the book of the Target Group upon purchase settlement by using the prepaid card of the Target Group.
3) The transaction’s electronic data processing and clearing system functions are processed by the nationwide network operated by China Unionpay Entities.
4) The electronic data processing and clearing systems of the China Unionpay Entities will then update the processed transaction information in the Target Group’s prepaid cards operation platform: to calculate (i) the transaction levies or commission payable by the contracted merchants to the Target Group based on the consumption value; and (ii) the consumption value (net of transaction levies or commission payable to the Target Group) (“ Net Consumption Value ”) that will be credited to the designated account of the contracted merchants.
5) The transaction levies or commission payable by the contracted merchants to the Target Group based on the consumption value will be credited to the designated account of the Target Group and the Net Consumption Value will be credited to the designated account of the contracted merchants.

Revenue model

The revenue of the Target Group principally consists of three types:

(1) Transaction levies represent service fee charged by the Target Group to contracted merchants at specific rates on the monetary value of consumptions made by cardholder settled using the stored value cards in the merchants’ stores.

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INFORMATION OF THE TARGET GROUP

(2) Card revenues comprises maintenance fees, handling charges and other customer services charges.

Maintenance fees

Maintenance fees represent monthly charges deducted from unutilized monetary value of expired prepaid card (prepaid cards are issued normally for a valid period of 12 months). It is a certain percentage of the unutilized monetary value of the expired prepaid card.

The remaining value stored in the prepaid card is non-refundable upon expiry and a monthly maintenance fee will be deducted from the unutilized monetary value of the expired prepaid card till the unutilized monetary value reduces to zero.

Handling charges

Handling charges represents a one-off fee of a certain percentage of the face value of card payable by the cardholders when the prepaid card is sold, but in most of the cases, such charge is waived in practice as part of the Target Group’s marketing and promotion on its prepaid card.

Other customer services charges

Other customer services charges are deducted from the card balance when the Target Group provides services to the cardholders such as redemption of coupons for cardholders. The service charge is either a lump sum or a certain percentage of the redemption value.

The prepaid card can be reactivated upon expiry and the cardholder has to pay a lump-sum deferred activation fee for each time of card activation.

(3) Commission income represents sales rebates received from contracted merchants for issuing theme prepaid gift cards. The commission rate is a certain percentage on the monetary value of prepaid gift card being sold.

The theme prepaid gift cards are issued by the Target Group (not by the contracted merchants) for the purchase of the designated product from the contracted merchants, e.g. fresh water crabs during autumns. The collaboration between the contracted merchants and the Target Group was to capitalize the Group’s sales network and its Prepaid Card Operation. In this regard, the Target Group submits that the theme prepaid gift cards do not constitute a direct competition towards its business.

– 43 –

INFORMATION OF THE TARGET GROUP

Competitive strengths

The prepaid cards issued by the Target Group and its operations has the following competitive strengths:

it is a bearer card in that identity of cardholders are not recorded thus is ideally be used as an alternative of cash or gift vouchers;
it has an expiry date and is extendable till the end of the next month following the month when the card is being reloaded before expiry;
its cardholders enjoy special discounts from time to time during promotion programs from accepting stores of contracted merchant which may not be available to purchases being settled by other means of payment;
it is a cross-industry prepaid cards accepted by contracted merchants providing a variety of products and services across the PRC;
it is a cross-region prepaid card and the electronic data processing and clearing functions of which are processed by the nationwide network operated by the China Unionpay Entities; and
its prepaid card services are supported by the nine sales offices established by the Target Group in the PRC.

Potential customers

The potential customers of the prepaid cards include (i) individuals who purchase the prepaid cards for self consumption as a convenient means of payment and/or as gifts to friends and relatives particularly before and during festivals; and (ii) corporations which purchase prepaid cards for their staff as means of monitoring of expenses, staff benefits and/or gift to business partners and clients.

Existing contracted merchants

The existing contracted merchants include golf clubs, shopping centers, chain department stores, chain supermarkets, restaurant chains, travel agencies and beauty centers in the PRC.

5. INTERNAL CONTROL

Set out below is the internal control procedures implemented by the Target Group over the revenue and receivable processes:

Transaction levies

Designated personnel of the Target Group will review daily card consumption data summary provided by the China Unionpay Entities and compute the transaction levies payable to the Target Group.

– 44 –

INFORMATION OF THE TARGET GROUP

The monthly transaction levies so computed by the Target Group will match against data provided by the China Unionpay Entities and respective contracted merchants on a monthly basis and any discrepancies will be reconciled. Once the amount has been agreed in writing, the amount will be recognized as income accordingly.

Card revenues

Maintenance fees

Designated personnel of the Target Group will review expired prepaid cards and their remaining value data summary provided by the China Unionpay Entities and compute the maintenance fee.

The monthly maintenance fees so computed by the Target Group will match against data of the China Unionpay Entities on a monthly basis and any discrepancies will be reconciled. Once the amount has been agreed in writing, the amount will be deducted from the respective expired prepaid card and recognized as income accordingly.

Handling charges

For the new card handling charges, the Target Group’s card department prepares the data of prepaid cards being sold and the finance department will match data against amount being banked into the Target Group’s bank accounts and the amount will be recognized as income accordingly.

Other customer services charges

For other customer services charges, it will be deducted from the remaining value of the prepaid card upon provision of the services by the Target Group.

Commission income

Upon theme prepaid gift card being sold, the Target Group’s new product sales department records and prepares the relevant data and the finance department will match data against amount being banked into Target Group’s bank accounts and will compute the commission income as per respective contracted terms with the contracted merchants accordingly.

6. BACKGROUND AND CORPORATE STRUCTURE OF THE TARGET GROUP

The Target Group’s business was originally founded by Mr. Guan through the establishment of Beijing Gaohuitong Management in August 2008 and began a trial issue and operation of the prepaid card business in the PRC. To facilitate the capital raising with potential investors, the Target Group underwent a group reorganisation pursuant to which the entire registered share capital of Shangyin was transferred to Splendid Win on 21 July 2010 for a cash consideration of HK$6 million. The consideration was determined

– 45 –

INFORMATION OF THE TARGET GROUP

with reference to the registered capital of Shangyin of RMB5.33 million. The transfer consideration of HK$6 million (paid as to HK$5.7 million to Mr. Guan and the remaining HK$0.3 million to his associate) was an amount represented a nominal sum for the purpose of the reorganisation of the Target Group rather than a value of Shangyin which would be sold to a bona fide third party purchaser such as the Group. Upon completion of the reorganisation, Shangyin became an indirect wholly-owned subsidiary of the Target Company. As at the Latest Practicable Date, the Target Group has seven subsidiaries and two jointly-controlled entities in the PRC.

The diagram below sets out the shareholding structure of the Target Group as at the Latest Practicable Date:

==> picture [424 x 284] intentionally omitted <==

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

The Vendor
100%
Target Company
100%
Splendid Win
100%
Shangyin
100% 51% 80% 51% 100% 50%
Hangzhou
Beijing
Shenyang Hainan Shenzhen Gaohui Kanghui
Gaohuitong
Shanglian Shanglian Shanglian E-Commerce
Management (Note 2) (Note 2) (Note 2) 50% (Note 2)
(Note 1)
Hangzhou
100% Qianbao
(Note 2)
Beijing
Gaohuitong
Commercial
----- End of picture text -----

Notes:

(1) Beijing Gaohuitong Management also operates 4 branch offices in Wuhan, Shanghai, Chengdu and Hunan.
(2) To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, the minority shareholders of the non-wholly owned subsidiaries and other shareholders of the jointly-controlled entities are third parties independent of the Company and its connected persons.

– 46 –

INFORMATION OF THE TARGET GROUP

7. SALES AND MARKETING PLAN

Sales points

Currently, customers can purchase prepaid cards issued by the Target Group through its nine sales office located in nine different regions across the PRC, namely Beijing, Shenyang, Hangzhou, Shanghai, Shenzhen, Haikou, Chengdu, Wuhan and Changsha.

Marketing plan

The Target Group will identify the shopping districts and those locations where the consumers will more likely to use prepaid cards based on their survey and committed more marketing efforts in those locations. The sales and marketing staffs of the Target Group will promote the prepaid cards by making direct marketing and promotions in shopping malls to individual consumers, corporate visits for corporate clients, placing advertisements in media including magazines to enhance the public awareness of Target Group’s prepaid cards, and to organize promotional activities jointly with contracted merchants like offering extra discounts to cardholders who settle payment using the Target Group’s prepaid cards so to the boost the cardholders’ loyalty.

Pricing strategy

The price of each prepaid card is its face value plus new card handling charges which is a certain percentage of the card’s face value. For the newly established regions, the Target Group shall waive or reduce the new card handling charge in the early stage so as to promote the prepaid cards there.

After-sale services

Prepaid cardholders can call up the toll free phone numbers or log on to the websites of the Target Group for making enquiries about their prepaid cards, for information such as the remaining balance and its related expiry date, request for card replacement and other general trouble shooting enquires etc.

Formation of a joint venture with a travel agency in the PRC

The Target Group formed a 50% joint venture, Kanghui E-Commerce, with China Comfort International Travel Services Co., Ltd.(中國康輝旅行社集團有限責任公司) in July 2010 for the distribution of prepaid cards and online distribution of tickets to popular tourist attractions, air tickets and other travel related services. China Comfort International Travel Services Co., Ltd was ranked the first in the list of 2009年度全國十強旅行社集團 (Top 10 Travel Agencies Group in the PRC for the year 2009) as announced by 國家旅遊局 (National Tourism Administration of the PRC) and is one of the leading travel agencies in the PRC.

– 47 –

INFORMATION OF THE TARGET GROUP

8. OPERATIONAL STATISTICS

Since August 2008, the Target Group has issued over 240,000 prepaid cards and over 4,500 accepting stores throughout the PRC that accept the Target Group’s prepaid cards for payment of goods and services from cardholders.

For the past two years, the Target Group also made considerable efforts to market its prepaid cards and established a network of contracted merchants that accept the Target Group’s prepaid cards as a preferred payment option. Set out below is the key operational statistics of the prepaid cards business of the Target Group since 14 August 2008 (being the date of the establishment of Beijing Gaohuitong Management, the Target Group’s first subsidiary):

	For the
	period from		For the nine
	14 August	For the year	months
	2008 and 31	ended 31	ended 30
	December	December	September
	2008	2009	2010
Number of prepaid cards sold	72	51,643	190,382
Sales of prepaid cards
(in RMB’000) (Note 1)	61	57,634	184,213
Transaction amounts of prepaid
cards (in RMB’000) (Note 2)	2	23,463	135,925

Source: compiled from the monthly statistics provided by China Unionpay Entities.

Notes:

(1) Sales of prepaid cards represent the amounts in dollars value and did not represent the revenue generated by the Target Group during the period/year.
(2) Transaction amounts of prepaid cards represent the total consumption amounts settled using the prepaid cards of the Target Group.

	As at	As at	As at
	31 December	31 December	30 September
	2008	2009	2010
Number of contracted merchants	55	304	798
Number of accepting stores
(Note 1)	75	507	4,540
Number of accepting POS devices
(Note 2)	75	1,700	8,500

Notes:

(1) Accepting stores refers to stores operated by the contracted merchants.

– 48 –

INFORMATION OF THE TARGET GROUP

(2) POS refers to a point where a transaction is concluded and details of which captured. Accepting POS devices refer a card reader installed at cashier or checkout points of contracted merchants. It captures details of transactions and updates the database for settlement and clearing purposes.

The growing recognition of the Target Group’s prepaid cards is achieved by the following effort:

the engagement of the China Unionpay Entities to process the Prepaid Card Operation’s electronic data processing and clearing system function;
its cross-region and cross-industry functions of the prepaid cards being issued;
the growing numbers of merchants accepting the prepaid card as a settlement option;
the sales and promotional campaigns carried out by the Target Group, including cold call to potential clients, walk-in sales visit, direct mailing etc; and
the operation support from its nine offices in nine different regions of the PRC.

9. STRATEGIC ADVANTAGES OF THE TARGET GROUP

Extensive experience of the senior management of the Target Group in the electronic payment business in the PRC, including Mr. Guan and Dr. Lei (whose biographies are disclosed under the section headed” Proposed nomination of Directors” of the circular), both of whom are nominated to be the Directors by the Vendor.
Well established business relationship with China Unionpay Entities, which operates a nationwide network in the PRC that processes the electronic data processing and clearing system function. Since the incorporation of the Target Group in year 2008, there are no material dispute between the Target Group and China Unionpay Entities.
Some prepaid card issuers have presence in only one region in the PRC, or even though some have presence in more than one region in the PRC, the prepaid cards issued are accepted only in the region which it was issued. The Target Group has already established nine sales offices in nine different regions of the PRC, and has successfully developed prepaid cards which are issued and accepted in one region is also accepted by contracted merchants engaging in different industries in other regions where the Target Group has operations within the PRC.

– 49 –

INFORMATION OF THE TARGET GROUP

10. MANAGEMENT EXPERTISE

Currently, the Target Group employed 204 staff (inclusive of the two proposed Directors) in the PRC with appropriate experience and expertise in the electronic payment in the PRC. In order to ensure the smooth operation of the existing business of the Target Group, as at the Latest Practicable Date, the Group has no plan to re-deploy any existing staff of the Target Group. Based on the accountants’ report of the Target Group as disclosed in Appendix II to this circular, the staff cost incurred by the Target Group for the period from 8 February 2010 (being the date of incorporation of the Target Company) to 30 September 2010 was approximately RMB2.29 million. The Company will raise capital by way of Placing for net proceeds ranging from approximately HK$111 million to HK$191 million which is intended for financing part of the consideration of the Acquisition and as working capital for the development of the Target Group. In this regard, the staff cost will not have significant financial impact to the Enlarged Group.

11. FINANCIAL INFORMATION

The following table sets out the audited consolidated financial information of the Target Group since 8 February 2010 (being the date of incorporation of the Target Company) to 30 September 2010 prepared in accordance with HKFRS:

	For the period
	from the date of
	incorporation
	(8 February 2010)
	to 30 September
	2010
	RMB’000
Revenue	327
Loss before tax	5,990
Loss for the period	5,990

The audited consolidated total assets, total liabilities and net liabilities of the Target Group as at 30 September 2010 are set out below:

	As at
	30 September
	2010
	RMB’000
Total assets	92,789
Total liabilities	95,935
Net liabilities	3,147

– 50 –

INFORMATION OF THE TARGET GROUP

Upon Completion, the Target Company will become a wholly-owned subsidiary of the Company and the financial results of the Target Group will be consolidated into the Group.

Full set of the accountants’ report of the Target Group for the period from 8 February 2010 (being the date of incorporation of the Target Company) to 30 September 2010 is set out in Appendix II of this circular.

Report from RSM Nelson Wheeler on the Target Group and its opinion

In connection with the Acquisition which constitutes a major acquisition under the GEM Listing Rules for the Company, the Company has engaged RSM Nelson Wheeler (“ RSM ”) to prepare, among others, the accountants’ report on the financial information (the “ Financial Information ”) of the Target Group for period from 8 February 2010 (being the date of incorporation of the Target Company) to 30 September 2010 (the “ Relevant Period ”) pursuant to Rule 19.67(6)(a)(i) of the GEM Listing Rules, whose scope of work include examination of the consolidated financial statement of the Target Group for the Relevant Period, prepared by the director of the Target Company, and to form an independent opinion as to whether the Financial Information gives a true and fair view of the state of affairs of Target Company and of the Target Group as at 30 September 2010 and of the Target Group’s results and cash flows for the Relevant Period.

Without qualifying their opinion, RSM draws attention to note 2 to the Financial Information which mentions that the Target Group incurred a loss of RMB5,990,078 for the Relevant Period and as at 30 September 2010, the Target Group had net current liabilities and net liabilities of RMB19,837,654 and RMB3,146,637 respectively. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Target Group’s ability to continue as a going concern.

As disclosed in the note 2 to the Financial Information, the director of the Target Company is of the opinion that it is appropriate to prepare the Financial Information on a going concern basis.

The Company will raise capital by way of Placing for net proceeds ranging from approximately HK$111 million to HK$191 million which is intended for financing part of the consideration of the Acquisition and as working capital for the development of the Target Group. Also, as disclosed in the pro forma consolidated statement of assets and liabilities of the Enlarged Group in Appendix IV of this circular, the Enlarged Group will have a unaudited pro forma consolidated net current assets of approximately HK$154.99 million and an unaudited pro forma consolidated net asset position attributable to the Shareholders of approximately HK$325.17 million immediately upon Completion. Based on the above and barring any unforeseen circumstances, the Directors are of the view that (i) the Enlarged Group will not have any going concern issue upon Completion; and (ii) the first audited financial report of the Enlarged Group will not be qualified.

– 51 –

APPENDIX I

FINANCIAL INFORMAITON OF THE GROUP

1. AUDITED CONSOLIDATED FINANCIAL INFORMATION OF THE GROUP

The Company is required to set out in this circular the information for the last three financial years with respect to the profits and losses, financial record and position, set out as a comparative table and the latest published audited statement of financial position together with the notes on the annual accounts for the last financial year for the Group.

The audited consolidated financial statements of the Group for the year ended 31 December 2009 has been set out in the Annual Report 2009 of the Company which was posted on 30 March 2010 on the GEM website (http://www.hkgem.com/). Please also see below quick links to the Annual Report 2009:

http://gem.ednews.hk/listedco/listconews/gem/20100330/GLN20100330281.pdf

The audited consolidated financial statements of the Group for the year ended 31 December 2008 has been set out in the Annual Report 2008 of the Company which was posted on 30 March 2009 on the GEM website (http://www.hkgem.com/). Please also see below quick link to the Annual Report 2008:

http://gem.ednews.hk/listedco/listconews/gem/20090330/GLN20090330057.pdf

The audited consolidated financial statements of the Group for the year ended 31 December 2007 has also been set out in the comparative column of the Annual Report 2008 of the Company. Please refer to quick link to the Annual Report 2008 as above for more details.

2. UNAUDITED INTERIM FINANCIAL INFORMATION OF THE GROUP

The unaudited quarterly consolidated financial statements of the Group for the three months ended 31 March 2010 has been set out in the First Quarterly Report 2010 of the Company posted on 10 May 2010 on the GEM website (http://www.hkgem.com/). Please also see below quick link to the First Quarterly Report 2010:

http://gem.ednews.hk/listedco/listconews/gem/20100510/GLN20100510033.pdf

The unaudited interim consolidated financial statements of the Group for the six months ended 30 June 2010 has been set out in the Interim Report 2010 of the Company posted on 13 August 2010 on the GEM website (http://www.hkgem.com/). Please also see below quick link to the Interim Report 2010:

http://gem.ednews.hk/listedco/listconews/gem/20100813/GLN20100813049.pdf

The unaudited quarterly consolidated financial statements of the Group for the three months ended 30 September 2010 has been set out in the Third Quarterly Report 2010 of the Company posted on 11 November 2010 on the GEM website (http://www.hkgem.com/). Please also see below quick link to the Third Quarterly Report 2010:

http://gem.ednews.hk/listedco/listconews/gem/20101111/GLN20101111141.pdf

– 52 –

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, from the independent reporting accountants, RSM Nelson Wheeler, Certified Public Accountants, Hong Kong.

中瑞岳華（香港）會計師事務所

29th Floor Caroline Centre Lee Gardens Two 28 Yun Ping Road Hong Kong

24 January 2011

The Board of Directors SYSCAN Technology Holdings Limited

Dear Sirs,

We set out below our report on the financial information (the “ Financial Information ”) of Country Praise Enterprises Limited (the “ Target Company ”) and its subsidiaries (collectively referred to as the “ Target Group ”) for the period from 8 February 2010 (date of incorporation of the Target Company) to 30 September 2010 (the “ Relevant Period ”) for inclusion in the circular dated 24 January 2011 issued by SYSCAN Technology Holdings Limited (the “ Company ”) in connection with the proposed acquisition of the entire equity interest in the Target Company (the “ Circular ”).

The Target Company was incorporated on 8 February 2010 in the British Virgin Islands (the “ BVI ”) with limited liability and acts as an investment holding company. As at the date of this report, the Target Company has equity interests in the following entities:

		Place and
		date of	Issued and	Attributable equity
		incorporation/	paid up capital/	interest	of the
Name	of company	establishment	Registered capital	Target Company		Principal activities	Note
				Direct	Indirect
(a)	Subsidiaries
	Splendid Win Enterprise	Hong Kong	10,000 ordinary	100%	–	Investment holding	(i)
	Limited	8 March 2010	shares of
	(“Splendid Win”)		HK$1.00 each
	商銀融通（北京）投資諮詢	The People’s	Registered capital of	–	100%	Investment holding	(i),(iii)
	有限公司	Republic of China	RMB5,330,000
	Beijing Shangyin	(the “PRC”)
	Investment Consultancy	7 April 2010
	Co., Ltd. (“Shangyin”)
	北京高匯通商業管理有限公司	The PRC	Registered capital of	–	100%	Provision of stored	(ii)
	Beijing Gaohuitong	14 August 2008	RMB2,000,000			value card
	Commercial Management					payment services
	Co., Ltd. (“Beijing					and related
	Gaohuitong Commercial”)					customer services
						in the PRC

– 53 –

APPENDIX II

ACCOUNTANTS’ REPORT OF THE TARGET GROUP

		Place and
		date of	Issued and	Attributable equity
		incorporation/	paid up capital/	interest	of the
Name	of company	establishment	Registered capital	Target Company		Principal activities	Note
				Direct	Indirect
	北京高匯通商貿有限公司	The PRC	Registered capital of	–	100%	Inactive	(i)
	Beijing Gaohuitong	29 July 2010	RMB500,000
	Commercial Co., Ltd.
	深圳市商聯匯通商業管理	The PRC	Registered capital of	–	51%	Provision of stored	(i)
	有限公司	21 April 2010	RMB2,000,000			value card
	Shenzhen Shanglian					payment services
	Huitong Commercial					and related
	Management Co., Ltd.					customer services
						in the PRC
	杭州高匯科技有限公司	The PRC	Registered capital of	–	100%	Investment holding	(ii)
	Hangzhou Gaohui	18 March 2009	RMB2,000,000
	Technology Co., Ltd.
	(“Hangzhou Gaohui”)
	瀋陽商聯匯通商業服務	The PRC	Registered capital of	–	51%	Provision of stored	(i)
	有限公司	11 March 2009	RMB5,000,000			value card
	Shenyang Shanglian					payment services
	Huitong commercial					and related
	Services Co., Ltd.					customer services
	(“Shenyang Shanglian”)					in the PRC
	海南商聯匯通商務	The PRC	Registered capital of	–	80%	Provision of stored	(i)
	投資管理有限公司	19 June 2009	RMB2,000,000			value card
	Hainan Shanglian Huitong					payment services
	Commercial Investment					and related
	Management Co., Ltd.					customer services
	(“Hainan Shanglian”)					in the PRC
(b)	Jointly controlled entities
	杭州錢報高匯科技有限公司	The PRC	Registered capital of	–	50%	Provision of stored	(i)
	Hangzhou Qianbao Gaohui	18 August 2009	RMB4,000,000			value card
	Technology Co., Ltd.					payment services
						and related
						customer services
						in the PRC
	康輝商融（北京）電子商務	The PRC	Registered capital of	–	50%	Inactive	(i)
	有限責任公司	12 July 2010	RMB4,000,000
	Kanghui Financial (Beijing)
	E-Commerce Co., Ltd.

Notes:

(i) No audited financial statements have been prepared for these companies since their respective dates of incorporation/establishment as they are not yet due for statutory audit as at the date of this report.

– 54 –

APPENDIX II

ACCOUNTANTS’ REPORT OF THE TARGET GROUP

(ii) The statutory financial statements of the following companies have been prepared in accordance with the relevant accounting principles and financial regulations applicable to companies established in the PRC and were audited in accordance with Independent Auditing Standards for Chinese Certified Public Accountants by the following certified public accountants registered in the PRC.

Name of company	Financial period/year	Name of auditors
Beijing Gaohuitong	For the period from 14 August	BeijingZhongPuiHui Certified
Commercial	2008 (date of establishment)	Public Accountants Co. Ltd.
	to 31 December 2008 and year
	ended 31 December 2009
Hangzhou Gaohui	For the period from 18 March	HangZhouQianTang Certified
	2009 (date of establishment)	Public Accountants Co. Ltd.
	to 31 December 2009

(iii) Shangyin is a wholly-owned foreign enterprise established in the PRC.

All the companies of the Target Group have adopted 31 December as the financial year end date.

No audited financial statements of the Target Company have been prepared for the Relevant Period as there is no statutory audit requirement in the country of its incorporation.

For the purpose of this report, the director of the Target Company have prepared the consolidated financial statements of the Target Group for the Relevant Period in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”) issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”) (the “ HKFRS Financial Statements ”).

We have performed our independent audit on the HKFRS Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA and have examined the HKFRS Financial Statements in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

The Financial Information has been prepared from the HKFRS Financial Statements in accordance with HKFRSs. No adjustments were considered necessary for the purpose of preparing our report for inclusion in the Circular.

The director of the Target Company is responsible for the preparation of the HKFRS Financial Statements. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the HKFRS Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, for the purpose of this report, the Financial Information gives a true and fair view of the state of affairs of the Target Company and of the Target Group as at 30 September 2010 and of the Target Group’s results and cash flows for the Relevant Period.

– 55 –

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

Material uncertainty relating to the going concern basis

Without qualifying our opinion, we draw attention to note 2 to the Financial Information which mentions that the Target Group incurred a loss of RMB5,990,078 for the Relevant Period and as at 30 September 2010 the Target Group had net current liabilities and net liabilities of RMB19,837,654 and RMB3,146,637 respectively. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Target Group’s ability to continue as a going concern. The Financial Information has been prepared on a going concern basis, the validity of which depends on the Target Group’s funding plans and the attainment of profitable and positive cash flow operations of the Target Group to meet its future working capital and financial requirements. The Financial Information does not include any adjustments that would result from the failure to continue as a going concern.

We consider that the material uncertainty has been adequately disclosed in the Financial Information.

– 56 –

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD FROM 8 FEBRUARY 2010 (DATE OF INCORPORATION) TO 30 SEPTEMBER 2010

Note
Revenue
7
Other income
8
Sales and marketing expenses
Processing charges
Staff costs
Other general and administrative expenses
Loss from operations
Finance costs
10
Share of losses of jointly controlled entities
18
Loss before tax
Income tax expense
11
Loss for the period
12
Other comprehensive income for the period,
net of tax
Exchange differences on translating foreign operations
Total comprehensive income for the period
Loss for the period attributable to:
The shareholder of the Target Company
Non-controlling interests
Total comprehensive income for the period
attributable to:
The shareholder of the Target Company
Non-controlling interests

RMB
327,030
88,960
(869,135)
(153,402)
(2,289,856)
(2,202,583)
(5,098,986)
(319,333)
(571,759)
(5,990,078)
–
(5,990,078)
40,796
(5,949,282)
(5,508,596)
(481,482)
(5,990,078)
(5,467,800)
(481,482)
(5,949,282)

– 57 –

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

B. CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 SEPTEMBER 2010

Note
Non-current assets
Property, plant and equipment
15
Goodwill
16
Investments in jointly controlled entities
18
Current assets
Trade and other receivables
19
Held-to-maturity investment
20
Time deposits with original maturities
over three months
Due from related companies
21
Due from a jointly controlled entity
18
Cash and cash equivalents
6(b)
Current liabilities
Settlement obligations
22
Accruals and other payables
Due to ultimate holding company
23
Borrowing
24
Net current liabilities
NET LIABILITIES
Capital and reserves
Share capital
26
Reserves
27
Equity attributable to the shareholder
of the Target Company
Non-controlling interests
TOTAL EQUITY

RMB
2,440,032
11,942,254
2,308,731
16,691,017
33,001,121
5,000,000
15,000,000
10,433,547
25,105
12,637,851
76,097,624
72,094,582
4,011,566
4,829,130
15,000,000
95,935,278
(19,837,654)
(3,146,637)
–
(5,124,852)
(5,124,852)
1,978,215
(3,146,637)

– 58 –

APPENDIX II

ACCOUNTANTS’ REPORT OF THE TARGET GROUP

C. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to the shareholder of the Target Company

	Attributable to the shareholder of the Target Company	Attributable to the shareholder of the Target Company	Attributable to the shareholder of the Target Company	Attributable to the shareholder of the Target Company	Attributable to the shareholder of the Target Company	Attributable to the shareholder of the Target Company	Attributable to the shareholder of the Target Company

At 8 February 2010 (date of incorporation) Total comprehensive income for the period Acquisition of subsidiaries (note 28) At 30 September 2010	Share capital RMB – – –	Share premium (note 27(c)) RMB 342,948 – –	Foreign currency translation reserve (note 27(c)) RMB – 40,796 –	Accumulated losses RMB – (5,508,596) –	Total RMB 342,948 (5,467,800) –	Non- controlling interests RMB – (481,482) 2,459,697	Total equity RMB 342,948 (5,949,282) 2,459,697
	–	342,948	40,796	(5,508,596)	(5,124,852)	1,978,215	(3,146,637)

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

D. CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIOD FROM 8 FEBRUARY 2010

(DATE OF INCORPORATION) TO 30 SEPTEMBER 2010

Note CASH FLOWS FROM OPERATING ACTIVITIES Loss for the period Adjustments for: Depreciation Finance costs Interest income Gain on disposal of financial assets at fair value through profit or loss Share of loss in jointly controlled entities Operating loss before movements in working capital Increase in trade and other receivables Increase in settlement obligations Increase in accruals and other payables Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of subsidiaries 28 Purchases of property, plant and equipment Purchases of financial assets at fair value through profit or loss Sales proceeds from disposal of financial assets at fair value through profit or loss Repayment from a related company Interest received Net cash generated from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Advance from a jointly controlled entity Advance from ultimate holding company Proceeds from issue of shares Net cash generated from financing activities	RMB (5,990,078) 50,297 319,333 (75,991) (12,969) 571,759 (5,137,649) (23,363,812) 28,555,296 817,331 871,166 5,353,503 (1,558,135) (16,965) 29,934 2,500,000 15,589 6,323,926 229,885 4,829,130 342,948 5,401,963
	(5,137,649 (23,363,812 28,555,296 817,331
	871,166
	5,353,503 (1,558,135 (16,965 29,934 2,500,000 15,589
	6,323,926
	229,885 4,829,130 342,948
	5,401,963

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

		Note	RMB
	NET INCREASE IN CASH AND
	CASH EQUIVALENTS		12,597,055
	Effect of foreign exchange rate changes		40,796
	CASH AND CASH EQUIVALENTS AT BEGINNING
	OF PERIOD		–
	CASH AND CASH EQUIVALENTS AT END OF
	PERIOD		12,637,851

	ANALYSIS OF CASH AND CASH EQUIVALENTS
	Bank and cash balances		12,637,851

E.	STATEMENT OF FINANCIAL POSITION – THE TARGET COMPANY
	AT 30 SEPTEMBER 2010
		Note	RMB
	Non-current assets
	Investment in a subsidiary	17	8,608
	Current assets
	Due from a subsidiary	17	5,156,237
	Current Liabilities
	Due to ultimate holding company	23	4,829,130
	Net current assets		327,107
	NET ASSETS		335,715

	Capital and reserves
	Share capital	26	342,948
	Reserves	27	(7,233)
	TOTAL EQUITY		335,715

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

F. NOTES TO FINANCIAL INFORMATION

1. GENERAL INFORMATION

The Target Company was incorporated in the BVI on 8 February 2010 with limited liability under the International Business Companies Ordinance of the BVI. The Target Company has not carried out any business since the date of its incorporation other than acting as the holding company of its subsidiaries. The registered office address of the Target Company is Palm Grove House, P.O. Box 438, Road Town, Tortola, the BVI. The address of its principal place of business is Room 2102, Xin Ji Yuan Apartment, No. 180A, Guang An Men Wai Street, Xuan Wu District, Beijing, the PRC.

In the opinion of the director of the Target Company as at 30 September 2010, Mighty Advantage Enterprises Limited (“ Mighty ”), a company incorporated in the BVI, is the ultimate holding company and the ultimate controlling party of the Target Company is Mr. Guan Gui-Sen (“ Mr. Guan ”).

2. GOING CONCERN BASIS

The Target Group incurred a loss of RMB5,508,596 attributable to the shareholder of the Target Company for the period from 8 February 2010 (date of incorporation) to 30 September 2010 (the “ Relevant Period ”) and as at 30 September 2010 the Target Group had net current liabilities and net liabilities of RMB19,837,654 and RMB3,146,637 respectively.

These conditions indicate the existence of a material uncertainty which may cast significant doubt on the Target Group’s ability to continue as a going concern. Therefore, the Target Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

The Financial Information has been prepared on a going concern basis, the validity of which depends upon the Target Group’s funding plans and the attainment of profitable and positive cash flow operations of the Target Group to meet its future working capital and financial requirements. The director of the Target Company is of the opinion that it is appropriate to prepare the Financial Information on a going concern basis. Should the Target Group be unable to continue as a going concern, adjustments would have to be made to the Financial Information to adjust the value of the Target Group’s assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets as current assets. The effects of these potential adjustments have not been reflected in the Financial Information.

3. ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

The HKICPA has issued a number of new and revised HKFRSs that are effective for accounting periods beginning on or after 8 February 2010. For the purpose of preparing the Financial Information, the Target Group has adopted all these new and revised HKFRSs for the Relevant Period, except for those new standards or interpretations that are not yet effective for the Relevant Period.

The Target Group has not applied the new HKFRSs that have been issued but are not yet effective. The Target Group has already commenced an assessment of the impact of these new HKFRSs but is not yet in a position to state whether these new HKFRSs would have a material impact on its results of operations and financial position.

4. SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared in accordance with HKFRSs issued by the HKICPA and the applicable disclosures required by the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance.

These financial statements have been prepared under the historical cost convention.

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ACCOUNTANTS’ REPORT OF THE TARGET GROUP

The preparation of financial statements in conformity with HKFRSs requires the use of certain key assumptions and estimates. It also requires the director to exercise its judgements in the process of applying the accounting policies. The areas involving critical judgements and areas where assumptions and estimates are significant to these financial statements, are disclosed in note 5 to the Financial Information.

The significant accounting policies applied in the preparation of these financial statements are set out below.

(a) Consolidation

The consolidated financial statements include the financial statements of the Target Company and its subsidiaries made up to 30 September 2010. Subsidiaries are entities over which the Target Group has control. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Target Group has control.

Subsidiaries are consolidated from the date on which control is transferred to the Target Group. They are de-consolidated from the date the control ceases.

Intragroup transactions, balances and unrealised profits are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Target Group.

Non-controlling interests represent the equity in subsidiaries not attributable, directly or indirectly, to the Target Company. Non-controlling interests are presented in the consolidated statement of financial position and consolidated statement of changes in equity within equity. Non-controlling interests are presented in the consolidated statement of comprehensive income as an allocation of profit or loss and total comprehensive income for the period between the non-controlling shareholders and the shareholder of the Target Company.

Profit or loss and each component of other comprehensive income are attributed to the shareholder of the Target Company and to the non-controlling shareholders even if this results in the non-controlling interests having a deficit balance.

Changes in the Target Company’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions (i.e. transactions with the shareholder in their capacity as owners). The carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the shareholder of the Target Company.

In the Target Company’s statement of financial position the investments in subsidiaries are stated at cost less allowance for impairment losses. The results of subsidiaries are accounted for by the Target Company on the basis of dividends received and receivable.

(b) Business combination and goodwill

The acquisition method is used to account for the acquisition of a subsidiary in a business combination. The cost of acquisition is measured at the acquisition-date fair value of the assets given, equity instruments issued, liabilities incurred and contingent consideration. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received. Identifiable assets and liabilities of the subsidiary in the acquisition are measured at their acquisition-date fair values.

The excess of the cost of acquisition over the Target Company’s share of the net fair value of the subsidiary’s identifiable assets and liabilities is recorded as goodwill. Any excess of the Target Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognised in consolidated profit or loss as a gain on bargain purchase which is attributed to the Target Company.

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If the changes in the value of the previously held equity interest in the subsidiary were recognised in other comprehensive income (for example, available-for-sale investment), the amount that was recognised in other comprehensive income is recognised on the same basis as would be required if the previously held equity interest were disposed of.

Goodwill is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is measured at cost less accumulated impairment losses. The method of measuring impairment losses of goodwill is the same as that of other assets as stated in the accounting policy (q) below. Impairment losses of goodwill are recognised in consolidated profit or loss and are not subsequently reversed. Goodwill is allocated to cash-generating units that are expected to benefit from the synergies of the acquisition for the purpose of impairment testing.

The non-controlling interests in the subsidiary are initially measured at the non-controlling shareholders’ proportionate share of the net fair value of the subsidiary’s identifiable assets and liabilities at the acquisition date.

(c)

Joint venture

A joint venture is a contractual arrangement whereby the Target Group and other parties undertake an economic activity that is subject to joint control. Joint control is the contractually agreed sharing of control over the economic activity when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control (the “ venturers ”).

A jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest.

Investment in a jointly controlled entity is accounted for in the consolidated financial statements by the equity method and is initially recognised at cost. Identifiable assets and liabilities of the jointly controlled entity in an acquisition are measured at their fair values at the acquisition date. The excess of the cost of acquisition over the Target Group’s share of the net fair value of the jointly controlled entity’s identifiable assets and liabilities is recorded as goodwill. The goodwill is included in the carrying amount of the investment and is tested for impairment together with the investment at the end of each reporting period when there is objective evidence that the investment is impaired. Any excess of the Target Group’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognised in consolidated profit or loss.

The Target Group’s share of a jointly controlled entity’s post-acquisition profits or losses is recognised in consolidated profit or loss, and its share of the post-acquisition movements in reserves is recognised in the consolidated reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Target Group’s share of losses in a jointly controlled entity equals or exceeds its interest in the jointly controlled entity, including any other unsecured receivables, the Target Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the jointly controlled entity. If the jointly controlled entity subsequently reports profits, the Target Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

Unrealised profits on transactions between the Target Group and its jointly controlled entities are eliminated to the extent of the Target Group’s interests in the jointly controlled entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of jointly controlled entities have been changed where necessary to ensure consistency with the policies adopted by the Target Group.

(d) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Target Group’s entities are measured using the currency of the primary economic environment in which the

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ACCOUNTANTS’ REPORT OF THE TARGET GROUP

entity operates (the “ functional currency ”). The consolidated financial statements are presented in Renminbi (“ RMB ”), which is the Target Company’s presentation currency and the functional currency of the principal operating subsidiaries of the Target Group. The directors consider that choosing RMB as the presentation currency best suits the needs of the shareholders and investors.

(ii) Transactions and balances in each entity’s financial statements

Transactions in foreign currencies are translated into the functional currency on initial recognition using the exchange rates prevailing on the transaction dates. Monetary assets and liabilities in foreign currencies are translated at the exchange rates at the end of each reporting period. Gains and losses resulting from this translation policy are recognised in profit or loss.

Non-monetary items that are measured at fair values in foreign currencies are translated using the exchange rates at the dates when the fair values are determined.

When a gain or loss on a non-monetary item is recognised in other comprehensive income, any exchange component of that gain or loss is recognised in other comprehensive income. When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.

(iii) Translation on consolidation

The results and financial position of all the Target Group entities that have a functional currency different from the Target Company’s presentation currency are translated into the Target Company’s presentation currency as follows:

Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;
Income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the exchange rates on the transaction dates); and
All resulting exchange differences are recognised in the foreign currency translation reserve.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities and of borrowings are recognised in the foreign currency translation reserve. When a foreign operation is sold, such exchange differences are recognised in consolidated profit or loss as part of the gain or loss on disposal.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(e) Property, plant and equipment

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

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

with the item will flow to the Target Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised in profit or loss during the period in which they are incurred.

Depreciation of property, plant and equipment is calculated at rates sufficient to write off their cost less their residual values over the estimated useful lives on a straight-line basis. The principal useful lives are as follows:

Computer equipment 3–5 years Furniture and fixtures 4–5 years Leasehold improvement Over the remaining life of the lease but not exceeding 3 years Motor vehicles 4 years

The residual values, useful lives and depreciation method are reviewed and adjusted, if appropriate, at the end of each reporting period.

(f) Leases

Operating leases

Leases that do not substantially transfer to the Target Group all the risks and rewards of ownership of assets are accounted for as operating leases. Lease payments (net of any incentives received from the lessor) are recognised as an expense on a straight-line basis over the lease term.

(g) Recognition and derecognition of financial instruments

Financial assets and financial liabilities are recognised in the statement of financial position when the Target Group becomes a party to the contractual provisions of the instruments.

Financial assets are derecognised when the contractual rights to receive cash flows from the assets expire; the Target Group transfers substantially all the risks and rewards of ownership of the assets; or the Target Group neither transfers nor retains substantially all the risks and rewards of ownership of the assets but has not retained control on the assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and the cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

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

(h) Investments

Investments are recognised and derecognised on a trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus directly attributable transaction costs.

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

An impairment loss is recognised in profit or loss when there is objective evidence that the held-to-maturity investments are impaired, and is measured as the difference between the

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ACCOUNTANTS’ REPORT OF THE TARGET GROUP

investments’ carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate computed at initial recognition. Impairment losses are reversed in subsequent periods and recognised in profit or loss when an increase in the investments’ recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the investments at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.

(i)

Trade and other receivables

Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less allowance for impairment. An allowance for impairment of trade and other receivables is established when there is objective evidence that the Target Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the allowance is the difference between the receivables’ carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate computed at initial recognition. The amount of the allowance is recognised in profit or loss.

Impairment losses are reversed in subsequent periods and recognised in profit or loss when an increase in the receivables’ recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to the restriction that the carrying amount of the receivables at the date the impairment is reversed shall not exceed what the amortised cost would have been had the impairment not been recognised.

(j)

Cash and cash equivalents

For the purpose of the statement of cash flows, cash and cash equivalents represent cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term highly liquid investments which are readily convertible into known amounts of cash and subject to an insignificant risk of change in value. Bank overdrafts which are repayable on demand and form an integral part of the Target Group’s cash management are also included as a component of cash and cash equivalents.

(k)

Financial liabilities and equity instruments

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument under HKFRSs. An equity instrument is any contract that evidences a residual interest in the assets of the Target Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

(i) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method.

Borrowings are classified as current liabilities unless the Target Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

(ii) Other payables

Other payables are stated initially at their fair value and subsequently measured at amortised cost using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

(iii) Equity instruments

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

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APPENDIX II

ACCOUNTANTS’ REPORT OF THE TARGET GROUP

(l) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably.

(i) Transaction levies represent service fee charged by the Target Group to contracted merchants at specific rates on the monetary value of consumptions made by cardholder settled using the stored value cards in the merchants’ stores. Transaction levies are recognised as these transactions occur.
(ii) Card revenues consist of monthly maintenance fees on expiry unused balances, new card handling charges, net of discount or waivers, and other customer services charges. The monthly maintenance fees are recognised when the fees are deducted from the unused balances at each month end. The new card handling charges are recognised when a card buyer purchases a new card. Other customer services are recognised when the services are rendered.
(iii) Commission income is derived from sales of products and gift cards on behalf of the contracted parties. Commission income is recognised when services are rendered.
(iv) Interest income is recognised on a time-proportion basis using the effective interest method.

(m) Employee benefits

(i) Employee leave entitlements

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

Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Pension obligations

The Target Group contributes to defined contribution retirement schemes which are available to all employees. Contributions to the schemes by the Target Group and employees are calculated as a percentage of employees’ basic salaries. The retirement benefit scheme cost charged to profit or loss represents contributions payable by the Target Group to the funds.

(iii) Termination benefits

Termination benefits are ecognized when, and only when, the Target Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

(n) Borrowing costs

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

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

(o) Taxation

Income tax represents the sum of the current tax and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit ecognized in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Target Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

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

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

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

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based on tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred tax is recognised in profit or loss, except when it relates to items recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Target Group intends to settle its current tax assets and liabilities on a net basis.

(p) Related parties

A party is related to the Target Group if:

(i) directly or indirectly through one or more intermediaries, the party controls, is controlled by, or is under common control with, the Target Group; has an interest in the Target Group that gives it significant influence over the Target Group; or has joint control over the Target Group;
(ii) the party is an associate;
(iii) the party is a joint venture;
(iv) the party is a member of the key management personnel of the Target Company or its parent;
(v) the party is a close member of the family of any individual referred to in (i) or (iv);

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(vi) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or
(vii) the party is a post-employment benefit plan for the benefit of employees of the Target Group, or of any entity that is a related party of the Target Group.

(q)

Impairment of assets

At the end of each reporting period, the Target Group reviews the carrying amounts of its tangible and intangible assets except goodwill, investments and receivables to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of any impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Target Group estimates the recoverable amount of the cash generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

(r) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Target Group has a present legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow is remote.

(s)

Events after the reporting period

Events after the reporting period that provide additional information about the Target Group’s position at the end of the reporting period or those that indicate the going concern assumption is not appropriate are adjusting events and are reflected in the financial statements. Events after the reporting period that are not adjusting events are disclosed in the notes to the financial statements when material.

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

5. CRITICAL JUDGEMENTS AND KEY ESTIMATES

Critical judgements in applying accounting policies

In the process of applying the accounting policies, the directors have made the following judgements that have the most significant effect on the amounts recognized in the Financial Information (apart from those involving estimations, which are dealt with below).

Going concern basis

The Financial Information has been prepared on a going concern basis, the validity of which depends on the Target Group’s funding plans and the attainment of profitable and positive cash flow operations of the Target Group to meet its future working capital and financial requirements. Details are explained in note 2 to Financial Information.

Key sources of estimation uncertainty

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

(a) Property, plant and equipment and depreciation

The Target Group determines the estimated useful lives, residual values and related depreciation charges for the Target Group’s property, plant and equipment. This estimate is based on the historical experience of the actual useful lives and residual values of property, plant and equipment of similar nature and functions. The Target Group will revise the depreciation charge where useful lives and residual values are different to those previously estimated, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.

(b) Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating unit to which goodwill has been allocated. The value in use calculation requires the Target Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. The carrying amount of goodwill at the end of the reporting period was RMB11,942,254. Details of the impairment loss assessment are provided in note 16 to Financial Information.

(c) Impairment loss for bad and doubtful debts

The Target Group makes impairment loss for bad and doubtful debts based on assessments of the recoverability of the trade and other receivables, including the current creditworthiness and the past collection history of each debtor. Impairments arise where events or changes in circumstances indicate that the balances may not be collectible. The identification of bad and doubtful debts requires the use of judgment and estimates. Where the actual result is different from the original estimate, such difference will impact the carrying value of the trade and other receivables and doubtful debt expenses in the period in which such estimate has been changed. If the financial conditions of the debtors were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

6. FINANCIAL RISK MANAGEMENT

The Target Group’s activities expose it to a variety of financial risks: credit risk, liquidity risk and interest rate risk. The Target Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Target Group’s financial performance.

(a) Credit risk

The carrying amount of the bank balances, trade and other receivables, and held-to-maturity investment included in the statement of financial position represents the Target Group’s maximum exposure to credit risk in relation to the Target Group’s financial assets.

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

The credit risk on held-to-maturity investments is low because the counterparty is the PRC government.

The Target Group’s maximum exposure to credit risk in the event that counterparties fail to perform their obligations at 30 September 2010 in relation to each class of recognised financial assets is the carrying amounts of those assets as stated in the consolidated statement of financial position. The Target Group’s credit risk is primarily attributable to its trade and other receivables. In order to minimise credit risk, the directors review the recoverable amount of each individual debtor regularly to ensure that adequate impairment losses are recognised for irrecoverable debts.

(b)

Liquidity risk

As at 30 September 2010, the bank balances and cash of the Target Group denominated in RMB amounted to RMB12,634,508. Conversion of RMB into foreign currencies is subject to the PRC’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations.

The Target Group’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.

The maturity analysis of the Target Group’s financial liabilities is as follows:

	Less than
	1 year
	RMB
At 30 September 2010
Settlement obligations	72,094,582
Accruals and Other payables	4,011,566
Due to ultimate holding company	4,829,130
Borrowing	15,900,000

(c) Interest rate risk

The Target Group’s held-to-maturity investment, time deposits, due from a related company and borrowing bear interests at fixed interest rates and therefore are subject to fair value interest rate risks.

– 72 –

APPENDIX II

ACCOUNTANTS’ REPORT OF THE TARGET GROUP

(d) Categories of financial instruments at 30 September 2010

Financial assets: Held-to-maturity investments Loans and receivables (including cash and cash equivalents) Financial liabilities: Financial liabilities at amortised cost	RMB 5,000,000 58,921,118

	95,935,278

(e) Fair values

The carrying amounts of the Target Group’s financial assets and financial liabilities as reflected in the consolidated statement of financial position approximate their respective fair values.

(f) Other risk

Regulation regime on payment services in the PRC

In May 2010, the People’s Bank of China (“ PBOC ”) promulgated the Administrative Method of Payment Services for Non-Financial Institutions (the “ Administrative Method ”) which took effect from 1 September 2010 (the “ Effective Date ”). The Administrative Method aims to regulate those non-financial institutions carrying on fund transfer services such as (i) network payment; (ii) issuing for profits prepaid cards for goods or services consumption from merchants other than the card issuer; (iii) collection of funds for bank cards at point of sales of contracted merchants; and (iv) such other alternate payment services as confirmed by PBOC.

The Target Company has been advised by the PRC legal counsel that as of the date of this report, PBOC has not yet determined the administrative measures applicable to foreign invested payment institutions. The Administrative Method currently does not restrict the continued operation of foreign invested payment institutions which have already been carrying on payment services prior to the Effective Date. The administrative measures for foreign invested payment institutions shall apply to members of the Target Group currently carrying on payment services which are either foreign direct investment companies or indirect investment companies. Once PBOC has promulgated the relevant administrative measures applicable to foreign invested payment institutions, the Target Group should apply for the Certificate for Approval for Payment Business accordingly.

– 73 –

APPENDIX II

ACCOUNTANTS’ REPORT OF THE TARGET GROUP

7. REVENUE

The Target Group’s revenue which represents transaction levies and commission income from contracted merchants and card revenue are as follows:

Transaction levies Card revenues Commission income	8/2/2010 to 30/9/2010 RMB 137,924 148,499 40,607
	327,030

Transaction levies represent service fee charged by the Target Group to contracted merchants at specific rates on the monetary value of consumptions made by cardholder settled using the stored value cards in the merchants’ stores.

Card revenues consist of monthly maintenance fees on expiry unused balances, new card handling charges, net of discount or waivers, and other customer services charges.

Commission income is derived from sales of products and gift cards on behalf of the contracted parties.

8. OTHER INCOME

Bank interest income Gain on disposal of financial asset at fair value through profit or loss Interest income from a related company	8/2/2010 to 30/9/2010 RMB 15,589 12,969 60,402
	88,960

9. SEGMENT INFORMATION

The Target Group conducts its business within one business segment, that is the business of stored value cards payment services and related customer services in the PRC. Accordingly, no business and geographical information is presented.

10. FINANCE COSTS

			8/2/2010 to
			30/9/2010
			RMB
Interest	on	borrowing	319,333

– 74 –

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

11. INCOME TAX EXPENSE

No provision for Enterprise Income Tax is required since the Target Group has no assessable profit for the period.

The reconciliation between the income tax expense and the loss before tax multiplied by the PRC enterprise income tax rate is as follows:

Loss before tax Tax at the domestic income tax rate of 25% Tax effect of tax losses not recognised Income tax expense	8/2/2010 to 30/9/2010 RMB (5,990,078
	(1,497,520 1,497,520
	–

12. LOSS FOR THE PERIOD

The Target Group’s loss for the period is stated after charging the following:

Auditor’s remuneration Depreciation Directors’ emoluments – As directors – For management Operating lease charges – Land and buildings Staff costs including directors’ emoluments Salaries, bonus and allowances Retirement benefits scheme contributions	8/2/2010 to 30/9/2010 RMB – 50,297 – –
	–
	411,039 1,930,558 359,298
	2,289,856

– 75 –

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

13. RETIREMENT BENEFIT SCHEMES

The employees of the Target Group’s subsidiaries established in the PRC are members of a central pension scheme operated by the local municipal government. These subsidiaries are required to contribute certain percentage of the employees’ basic salaries and wages to the central pension scheme to fund the retirement benefits. The local municipal government undertakes to assume the retirement benefits obligations of all existing and future retired employees of these subsidiaries. The only obligation of these subsidiaries with respect to the central pension scheme is to meet the required contributions under the scheme.

14. LOSS FOR THE PERIOD ATTRIBUTABLE TO THE SHAREHOLDER OF THE TARGET COMPANY

The loss for the period attributable to the shareholder of the Target Company included loss of RMB7,233 which has been dealt with in the financial statements of the Target Company.

15. PROPERTY, PLANT AND EQUIPMENT

Computer equipment RMB 332,107 205,878	Furniture and fixtures RMB 118,434 32,634	Leasehold improvement RMB 133,638 1,319,623	Motor vehicles RMB 348,015 –	Total RMB 932,194 1,558,135
537,985 18,884 18,884	151,068 4,878 4,878	1,453,261 11,151 11,151	348,015 15,384 15,384	2,490,329
				50,297
				50,297
			332,631 28)	2,440,032

			28)	RMB 11,942,254
				11,942,254

16. GOODWILL

– 76 –

APPENDIX II

ACCOUNTANTS’ REPORT OF THE TARGET GROUP

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (“ CGUs ”) that are expected to benefit from that business combination. The carrying amount of goodwill had been allocated as follows:

Shangyin and its subsidiaries Shenyang Shanglian Hainan Shanglian	At 30 September 2010 RMB 10,474,961 633,348 833,945
	11,942,254

The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and budgeted gross margin and turnover during the period. The Target Group estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on long-term average economic growth rate of the geographical area in which the businesses of the CGUs operate. Budgeted gross margin and turnover are based on past practices and expectations on market development.

The director of the Target Company prepared cash flow projections derived from the most recent financial budgets approved for the next five years. The cash flow projections were prepared on the major assumption that the Target Group will be able to apply for the Certificate for Approval for Payment Business once PBOC has promulgated the relevant administrative measures applicable to foreign invested payment institutions.

The key assumptions used for cash flow projections are as follows:

	2011	2012	2013	2014	2015
Growth rate	100%	80%	60%	40%	20%
Discount rate	16.79%	16.79%	16.79%	16.79%	16.79%

17. INVESTMENT IN A SUBSIDIARY

The Target Company

					At
				30	September
					2010
					RMB
Unlisted	investments,	at	cost		8,608

The Target Company has a direct 100% interest in Splendid Win, which was incorporated in Hong Kong with an issued capital of HK$10,000. Splendid Win’s principal activity is investment holding and is the intermediate holding company of other companies in the Target Group.

The amount due from a subsidiary is unsecured, interest-free and repayable on demand.

– 77 –

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

18. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES

At 30 September 2010 RMB

Unlisted investments: Share of net assets

2,308,731

Details of the jointly controlled entities at 30 September 2010 are as follows:

			Percentage
Name of	Place of	Registered	of ownership
the company	establishment	capital	interest	Principal activities
杭州錢報高匯科技	The PRC	RMB4,000,000	50%	Provision of stored
有限公司	18 August 2009			value card payment
Hangzhou				services
Qianbao Gaohui				and related customer
Technology				services in the PRC
Co., Ltd.
康輝商融（北京）	The PRC	RMB4,000,000	50%	Inactive
電子商務	12 July 2010
有限責任公司
Kanghui Financial
(Beijing)
E-Commerce
Co., Ltd.

The following amounts are the Target Group’s share of the net assets of the jointly controlled entities that are accounted for by the equity method of accounting.

At 30 September 2010 Current assets Non-current assets Current liabilities Net assets Period ended 30 September 2010 Revenue Expenses	RMB 7,858,704 336,908 (5,886,881)
	2,308,731

	17,483

	(589,242)

The amount due from a jointly controlled entity is unsecured, interest-free and repayable on demand.

There are no capital commitment and contingent liabilities relating to the Target Group’s interests in the jointly controlled entities, and no capital commitment and contingent liabilities of the ventures themselves.

– 78 –

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

19. TRADE AND OTHER RECEIVABLES

Trade receivables (Note a) Deposits Prepayments Deposits to contracted merchants Funds prepaid to contracted merchants (Note b) Funds due from sale agents (Note c) Other receivables	At 30 September 2010 RMB 1,241 1,354,219 383,422 4,982,425 3,845,208 19,712,622 2,721,984
	33,001,121

Notes:

(a) There is no credit period granted to contracted merchants.
(b) The amounts represent funds remitted to the contracted merchants in advance for settlement of purchase transactions to be made by the cardholders, the prepaid amount are based on the historical consumption and expected transaction volume in the following months of individual contracted merchants.
(c) The amount represents funds collected by sale agents for stored value cards being sold on behalf of the Target Group. The funds are remitted to the Target Group by the sale agents are normally within 10 days.

The aging analysis of trade receivables, based on the invoice date is as follows:

0 to 30 days 31 to 60 days	At 30 September 2010 RMB 1,079 162
	1,241

As of 30 September 2010, trade receivables of RMB1,241 were past due but not impaired. These relate to an independent debtor for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:

					At
				30	September
					2010
					RMB
Up	to	3	months		1,241

– 79 –

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

20. HELD-TO-MATURITY INVESTMENT

The investment represents government bond issued by the PRC government for the term of 1 year and bearing interest rate of 2.6% per annum.

21. DUE FROM A RELATED COMPANY

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

		Target Group
	Name of directors	Balance	Maximum amount
	having beneficial	at 30 September	outstanding during
Name	interest	2010	the period
		RMB	RMB
嘉福瑞華房地產經紀
有限公司Beijing Jia Fu
Rui Hua Real Estate
Agent Co., Ltd	Mr.Guan	2,128,986	6,692,917
China Union Loyalty
Co., Ltd (“China
Union Loyalty”)	Mr.Guan	8,304,561	8,692,035

Notes:

(a) The amount is unsecured, interest bearing at 5% per annum and repayable one year after the date of advance.
(b) There are certain contracted merchants pay transaction levies and remit funds from the Target Group through China Union Loyalty in accordance with the terms detailed in notes 19(a), 19(b) and 22. The balance held by China Union Loyalty comprises transaction levies received from contracted merchants on behalf of the Target Group and prepayments to China Union Loyalty to meet settlement obligation to contracted merchants, net of the service charges due to China Union Loyalty. The settlement terms between the Target Group and China Union Loyalty are within 5 days after each month end. The amount is unsecured, interest-free and in trade nature.

22. SETTLEMENT OBLIGATIONS

The settlement obligations are recognised upon sales of stored value cards and receipt of respective funds. The amount represents unused fund balances of the stored value cards that the Target Group obligates to remit funds to the contracted merchants when cardholders make purchase transactions using the stored value cards, the settlement basis is normally the next business day of the transaction date, except for certain merchants where settlement term is negotiated on an individual basis.

23. DUE TO ULTIMATE HOLDING COMPANY

The amount was unsecured, interest-free and repayable on demand. The amount was subsequently capitalised as share capital of the Target Company (note 32).

24. BORROWING

The borrowing of the Target Group is repayable within one year and has fixed interest rate of 12% per annum, exposes the Target Group to fair value interest rate risk. The carrying amount of the borrowing is denominated in RMB.

– 80 –

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

The directors estimate the fair value of the Target Group’s borrowing, by discounting the future cash flows at the market rate and the fair value is approximately equal to the carrying amount.

The borrowing is guaranteed by 15% equity interest of a private company in the PRC in which Mr. Guan is the beneficial owner of that 15% equity interest.

25. DEFERRED TAX

At the end of the reporting period the Target Group has unused tax losses of RMB1,821,647 available for offset against future profits. No deferred tax asset has been recognised due to the unpredictability of future profit streams. The tax loss arising in the PRC will be expired in 2015.

26. SHARE CAPITAL

The Target Company

Authorised: 50,000 ordinary shares of no par value Issued and fully paid: 50,000 ordinary shares of no par value	At 30 September 2010 Nil

	Nil

The Target Group sets the amount of capital in proportion to risk. The Target Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Target Group may adjust the payment of dividends, issue new shares, buy-back shares, raise new debts, redeem existing debts or sell assets to reduce debts.

The Target Group is not subject to any externally imposed capital requirements.

– 81 –

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

27. RESERVES

(a) The Target Group

The amounts of the Target Group’s reserves and movements therein are presented in the consolidated statement of comprehensive income and consolidated statement of changes in equity.

(b) The Target Company

At 8 February 2010 (date of incorporation) Total comprehensive income for the period At 30 September 2010	Share premium (Note (c)) RMB 342,948 – 342,948	Foreign currency translation reserves (Note (c)) RMB – (7,233)
		(7,233)

(c) Nature and purpose of reserves

Share premium account

Share premium represents premium arising from the issue of shares at a price in excess of their par value per share and is not distributable but may be applied in paying up unissued shares of the Target Company to be issued to the shareholder of the Target Company as fully paid bonus shares or in providing for the premiums payable on repurchase of shares.

Foreign currency translation reserve

The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations. The reserve is dealt with in accordance with the accounting policies set out in note 4(d) to the Financial Information.

– 82 –

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

28. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

Acquisition of subsidiaries

On 21 July 2010, the Target Company obtained control of Shangyin and its subsidiaries (“ Shangyin Group ”) by acquiring 100% paid up capital of Shangyin for a cash consideration of HK$6,000,000 (equivalent to RMB5,212,858). Shangyin Group is principally engaged in stored value card payment services and related customer services in the PRC during the period.

The fair value of the identifiable assets and liabilities of Shangyin Group acquired as at its date of acquisition is as follows:

Net assets acquired: Property, plant and equipment Investments in jointly controlled entities Trade and other receivables Time deposits with original maturities over three months Bank and cash balances Due from a related company Due from a jointly controlled entity Due from a related party Held-to-maturity investment Settlement obligation Accruals and other payables Due to related companies Non-controlling interests Goodwill Total consideration Satisfied by: Cash Net cash inflow arising on acquisition: Cash and cash equivalents acquired	RMB 932,194 2,880,490 17,941,870 15,000,000 10,566,361 6,692,917 254,990 30,000 5,000,000 (43,539,286) (2,799,235) (17,230,000)
	(4,269,699) (2,459,697) 11,942,254
	5,212,858

	5,212,858

	5,353,503

The fair value of the trade and other receivables acquired is RMB17,941,870. The gross amount due under the contracts is RMB17,941,870, of which RMB Nil is expected to be uncollectible.

The goodwill arising on the acquisition of Shangyin Group is attributable to the anticipated profitability of stored value card payment services and related customer services in the PRC.

Shangyin Group has no contribution for the period between the date of acquisition and the end of the reporting period.

If the acquisition had been completed on 8 February 2010 (date of incorporation), total Target Group revenue for the period would have been approximately RMB829,000, and loss for the period would have been approximately RMB13,988,000. The proforma information is for illustrative purposes only and is not necessarily an indication of the revenue and results of operations of the Target Group that actually would have been achieved had the acquisition been completed on 8 February 2010 (date of incorporation), nor is intended to be a projection of future results.

– 83 –

APPENDIX II

ACCOUNTANTS’ REPORT OF THE TARGET GROUP

29. LEASE COMMITMENTS

At 30 September 2010 the Target Group’s total future minimum lease payments under non-cancellable operating leases are payable as follows:

Within one year In the second to fifth years inclusive	At 30 September 2010 RMB 2,666,839 3,769,869
	6,436,708

Operating lease payments represent rentals payable by the Target Group for certain of its offices. Leases are negotiated for an average term of three years and rentals are fixed over the lease terms and do not include contingent rentals.

30. CAPITAL COMMITMENT

The Target Group’s capital commitments at 30 September 2010 are as follows:

	At
	30 September
	2010
	RMB
Property, plant and equipment
Contracted but not provided for	90,500

31. RELATED PARTIES TRANSACTIONS

(a) In addition to those related party balances disclosed in notes 18, 21 and 24 to the Financial Information and elsewhere in the Financial Information, the Target Group had the following transactions with its related parties during the period:

						8/2/2010 to
						30/9/2010
						RMB
Interest	income	from	a	related	party	60,402

– 84 –

APPENDIX II

ACCOUNTANTS’ REPORT OF THE TARGET GROUP

(b) Compensation of members of key management personnel

The remuneration of key management during the period was as follows:

Short-term benefits Post-employment benefits	8/2/2010 to 30/9/2010 RMB 365,403 63,731
	429,134

(c) The Target Group received funds of RMB45,813 on sales of store value cards through the key management of the Target Group, Mr. Guan Guang-zhi. As at 30 September 2010, there was no outstanding amount due from Mr. Guan Guang-zhi.
(d) The borrowing detailed in note 24 is due to an independent lender (the “ Lender ”) at 30 September 2010. The borrowing was originally advanced to the Target Group from a related company, 北京東森金碧投資諮詢有限公司 (Beijing Dongsen Jinbi Investment Consultancy Co., Ltd) (“ Dongsen Jinbi ”), in which Mr. Guan has 100% beneficial interest. On 20 September 2010, the Target Group entered into a new loan agreement with Dongsen Jinbi and the Lender to transfer this entire borrowing from Dongsen Jinbi to the Lender.
(e) Shanghai Unionpay and China Union Loyalty, through a cooperation agreement with 中國銀聯股份有限公司(China Unionpay Co., Ltd.) (“ China Unionpay ”), provide nationwide electronic data processing and clearing system to the Target Group. Shanghai Unionpay Data Services Co., Ltd. and China Union Loyalty is a subsidiary and an associated company of China Unionpay respectively. Mr. Guan indirectly held 15% equity interest in China Union Loyalty and is also a director of China Union Loyalty.
(f) Prior to the acquisition of Shangyin Group by the Target Company, on 11 May 2010, Shangyin entered into an agreement with certain independent vendors (“Vendors”) and Mr. Guan to acquire 31% and 20% equity interests, respectively, in Shenyang Shanglian, at the consideration of RMB2,550,000. Pursuant to this agreement dated 11 May 2010 and supplementary agreement dated 16 September 2010, the Vendors and Mr. Guan have the call option to buy back the 31% and 20% equity interests, respectively, at the total consideration of RMB2,550,000 if Shenyang Shanglian could not be successfully acquired by other company and the fund raising exercise of that company could not completed by 31 December 2011.

– 85 –

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARGET GROUP

32. EVENT AFTER REPORTING PERIOD

On 10 July 2010, the Target Company entered into an agreement with Mighty to capitalise the loan of HK$5,610,000 (approximately RMB4,829,000) due to Mighty as share capital of the Target Company. On 5 November 2010, the capitalisation took place by the issuance and allotment of 719,231 ordinary share at a premium of US$1 each without par value.

33. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by Target Company or any of its subsidiaries in respect of any period subsequent to 30 September 2010.

34. APPROVAL OF FINANCIAL INFORMATION

The Financial Information was approved and authorised for issue by the Board of Directors of the Target Company on 24 January 2011.

Yours faithfully, RSM Nelson Wheeler Certified Public Accountants Hong Kong

– 86 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

FOR THE PERIOD FROM 8 FEBRUARY 2010 TO 30 SEPTEMBER 2010

Set out below is the management discussion and analysis of the Target Group for the period from 8 February 2010 (date of incorporation of the Target Company) to 30 September 2010. The following financial information is based on the financial information of the Target Group as set out in Appendix II to this circular.

Business Review

The Target Company was incorporated on 8 February 2010, it had not carried on any business activities other than establishing Splendid Win to reorganize the seven subsidiaries and two jointly-controlled companies in the PRC to form the existing group structure of the Target Group with effect from 21 July 2010. The principal business of the Target Group is the development and operation of electronic payment tools.

Financial Review

Revenue

During the Relevant Period, the Target Group recorded a revenue of approximately RMB327,000, of which is attributable as to (i) approximately RMB138,000 from transaction levies, representing approximately 42.17% of the total revenue of the Target Group; (ii) approximately RMB148,000 from card revenue, representing approximately 45.41% of the total revenue of the Target Group; and (iii) approximately RMB41,000 from commission income, representing approximately 12.41% of the total revenue of the Target Group.

Other income

During the Relevant Period, the Target Group recorded other income of RMB88,960 which comprised bank interest income of RMB15,589, gain on disposal of listed securities of RMB12,969 and interest income from a related company of RMB60,402.

Net loss

The Target Group recorded a loss after tax of approximately RMB5.99 million, mainly due to the staff costs of approximately RMB2.29 million and other general and administrative expenses of approximately RMB2.20 million (for further details of this item, please see below discussion on “other general and administrative expenses”) during the Relevant Period.

– 87 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

Liquidity and Financial Resources

Cash and cash equivalents

As at 30 September 2010, the Target Group’s cash and cash equivalents were amounted to approximately RMB12.64 million.

Borrowings

As at 30 September 2010, the total borrowings of the Target Group comprised of an amount due to the Vendor of approximately RMB4.83 million which has subsequently been capitalized as share capital of the Target Company (for further details, please refer to the discussion headed “Subsequent event after the reporting date” below) and the borrowing from a third party of RMB15 million which is repayable within one year and has fixed interest rate of 12% per annum.

Settlement obligations

As at 30 September 2010, the Target Group had settlement obligations of approximately RMB72.09 million. Settlement obligations represent unused fund balances of the prepaid card that the Target Group obligates to remit funds to the contracted merchants when cardholders make purchase using the prepaid cards. The settlement obligations are recognized upon sales of the prepaid card and receipt of respective funds. Out of the settlement obligation of approximately HK$72.09 million as at 30 September 2010, (i) approximately RMB20 million has been applied to treasury and management products such as time deposits with a maturity of 1 year or less and PRC government bond for a term of 1 year; (ii) approximately RMB8.83 million were deposits and prepaid funds to contracted merchants;(iii) approximately RMB8 million were prepayments to China Union Loyalty; and (iv) approximately RMB19.7 million were funds due from sales agents. All the above items could be readily turned into cash and be utilized to meet settlement obligations when fall due.

Net current liabilities

As at 30 September 2010, the Target Group had net current liabilities of approximately RMB19.84 million. The current assets of approximately RMB76.10 million comprised mainly (i) deposits to and funds prepaid to contracted merchants of approximately RMB8.83 million, (ii) funds due from sales agents for prepaid card being sold on behalf of the Target Group of approximately RMB19.72 million, (iii) held-to-maturity investment of RMB5 million in the form of PRC government bonds bearing an interest rate of 2.6% per annum; (iv) time deposit of RMB15 million; (v) amount due from China Union Loyalty of approximately RMB8.30 million; and (vi) cash and bank balances of approximately RMB12.64 million. The current liabilities of approximately RMB95.94 million comprised mainly of (i) settlement obligations of approximately RMB72.09 million; and (ii) borrowings from a third party of RMB15 million, repayable within one year and has a fixed interest rate of 12% per annum.

– 88 –

APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

Pledge of Assets

As at 30 September 2010, the Target Group did not have any charges or pledges on its assets.

Capital Structure

As at 30 September 2010, the Target Group had total assets of approximately RMB 92.79 million and total liabilities of approximately RMB95.94 million, resulting in net liabilities of approximately RMB3.15 million.

Gearing Ratio

The gearing ratio (which calculated based on the total debt to total assets) was approximately 0.21 as at 30 September 2010.

Capital Commitments

As at 30 September 2010, Shanyin had a leasehold improvement commitment of RMB90,500.

Contingent Liabilities

Based on the financial information of the Target Group as disclosed in Appendix II to this circular, it does not indicate that the Target Group has any contingent liabilities as at 30 September 2010.

Other general and administrative expenses

The other general and administrative expense of approximately RMB2.2 million incurred for the Relevant Period mainly comprises of rental expenses, entertainment expenses and travelling expenses of approximately RMB467,000, RMB223,000 and RMB256,000 respectively, representing approximately 21%, 10% and 12% of the total other general and administrative expense incurred during the Relevant Period.

Foreign Exchange Exposure

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

– 89 –

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET GROUP

Significant Investments and Material Acquisition and Disposals

On 21 July 2010, the Target Company completed the acquisition of the entire equity interest of Shangyin at a cash consideration of HK$6,000,000. Shangyin and its subsidiaries are principally engaged in stored value card payment services and related customer services in the PRC during the Relevant Period.

Prospects for New Business

As at 30 September 2010, the Target Group planned to develop business in other new electronic payment tools such as telephone payment other than its existing principal business in prepaid card.

Employees and remuneration policy

As at 30 September 2010, the Target Group had 204 employees. The aggregate employee benefits expenses excluding directors’ emoluments during the Relevant Period amounted to approximately RMB2.29 million. All employees were remunerated based on the industry practice and in accordance with the prevailing employment law.

Subsequent event after the reporting date

On 10 July 2010, the Target Company entered into an agreement with the Vendor to capitalise the loan of HK$5,610,000 (equivalent to approximately RMB4,829,000) due to the Vendor as share capital of the Target Company. On 5 November 2010, the capitalisation took place by the issuance and allotment of 719,231 ordinary share at a premium of US$1 each without par value.

– 90 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

A. UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

The accompanying unaudited pro forma statement of assets and liabilities of the Enlarged Group (as defined in this circular) (the “ Statement ”) has been prepared to illustrate the effect of the Acquisition, assuming the transaction had been completed as at 30 June 2010, might have affected the financial position of the Group.

The Statement is prepared based on the unaudited consolidated statement of financial position of the Group as at 30 June 2010 as extracted from the interim report of the Group for the six months ended 30 June 2010 and the audited consolidated statement of financial position of the Target Group as at 30 September 2010 as extracted from the Accountants’ Report set out in Appendix II of the Circular after making certain proforma adjustments resulting from the Acquisition.

The Statement is prepared based on a number of assumptions, estimates, uncertainties and currently available information, and is provided for illustrative purposes only. Accordingly, as a result of the nature of the Statement, it may not give a true picture of the actual financial position of the Group that would have been attained had the Acquisition actually occurred on 30 June 2010. Furthermore, the Statement does not purport to predict the Group’s future financial position.

The Statement should be read in conjunction with the financial information of the Group as set out in Appendix I of the Circular, the Financial Information of the Target Group as set out in the section “Information of the Target Group” of the Circular and other financial information included elsewhere in the Circular.

For the purpose of presenting the Statement, the audited consolidated statement of financial position of the Target Group as at 30 September 2010 is translated at the exchange rate of HK$1 = RMB0.8608.

		The Target
	The Group as	Group as at 30				Pro forma
	at 30 June	September		Pro forma		Enlarged
	2010	2010	Total	adjustments	Notes	Group
	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000
NON-CURRENT ASSETS
Property, plant and equipment	12,332	2,835	15,167			15,167
Investment in Target Company	–	–	–	80,000	3a	–
				45,938	3b
				778,293	3c
				(904,231)	4
Goodwill	–	13,873	13,873	904,574	4	918,447
Construction in progress	16,147	–	16,147			16,147
Interests in associates	562	–	562			562

– 91 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The Group as at 30 June 2010 HK$’000 – 230	The Target Group as at 30 September 2010 HK$’000 2,682 –	Total Pro forma adjustments Notes HK$’000 HK$’000 2,682 230	Pro forma Enlarged Group HK$’000 2,682 230
29,271 15,750 8,256 8,912 – – – – 1,362 108,918 143,198 172,469 9,389 – 43,338 40 – 3,010 – 55,777 87,421 116,692 –	19,390 – 416 47,569 5,809 17,426 2,473 29 – 14,681 88,403 107,793 – 83,752 4,660 – 5,610 – 17,426 111,448 (23,045) (3,655) –	48,661 15,750 8,672 56,481 5,809 17,426 2,473 29 1,362 123,599 191,000 1 (80,000) 3a 231,601 280,262 9,389 83,752 47,998 26,000 5 40 5,610 (5,610) 2 3,010 17,426 167,225 64,376 113,037 – 778,293 3c	953,235
			15,750 8,672 56,481 5,809 17,426 2,473 29 1,362 234,599
			342,601
			1,295,836
			9,389 83,752 73,998 40 – 3,010 17,426
			187,615
			154,986
			1,108,221
			778,293

– 92 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The Group as at 30 June 2010 HK$’000 55,777 116,692	The Target Group as at 30 September 2010 HK$’000 111,448 (3,655)	Total Pro forma adjustments Notes HK$’000 HK$’000 167,225 113,037	Pro forma Enlarged Group HK$’000 965,908
			329,928

24,913 89,315 114,228 2,464	389 (6,342) (5,953) 2,298	25,302 6,250 1 2,188 3b (389) 4 82,973 184,750 1 5,610 2 43,750 3b 732 4 (26,000) 5 108,275 4,762	33,351 291,815
			325,166 4,762
116,692	(3,655)	113,037	329,928

Notes:

On 22 November 2010, the Company and the Placing Agent entered into the New Placing Agreement pursuant to which the Company 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, but not less than 375,000,000 Placing Shares for the purpose of the Acquisition. The target proceeds from Placing are approximately HK$200,000,000 and the estimated issuance costs are approximately HK$9 million. The proceeds from the Placing are for the purpose of funding the Acquisition and the balance will be used as the general working capital for the future development of the Target Group.
On 10 July 2010, the Target Company entered into an agreement with its ultimate holding company to capitalise the loan of HK$5,610,000 due to its ultimate holding company as equity of the Target Company. On 5 November 2010, the capitalisation took place by the issuance and allotment of 769,231 ordinary share at a premium of US$1 each without par value. For the purpose of preparation of this Statement, the capitalisation is assumed to be effective on 30 June 2010. The adjusted carrying amount of the net liabilities of the Target Group would be decreased from HK$5,953,000 to HK$343,000 accordingly.
In accordance with the New Sale and Purchase Agreement dated 22 November 2010, the maximum consideration payable by the Company to the Vendor for the Acquisition is HK$850,000,000.

– 93 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Set out below is a summary of the consideration upon (i) Completion; (ii) Adjusted Consideration Scenario 1; (iii) Adjusted Consideration Scenario 2; (iv) Adjusted Consideration Scenario 3: (v) Adjusted Consideration Scenario 4; and (vi) Adjusted Consideration Scenario 5:

					Maximum
			Target assessment		cumulative
	Consideration	Payable upon	period	Consideration	consideration
				HK$’000	HK$’000
(i)	Cash	Completion		80,000	80,000
	Consideration Shares	Completion		70,000	150,000
(ii)	Convertible Bonds	Adjusted Consideration	Period from 1 October	76,800	226,800
		Scenario 1	2010 to 31 March 2011
(iii)	Convertible Bonds	Adjusted Consideration	Period from 1 April 2011	76,800	303,600
		Scenario 2	to 30 September 2011
(iv)	Convertible Bonds	Adjusted Consideration	Year ended 31 December	N/A	650,000
		Scenario 3	2011
(v)	Convertible Bonds	Adjusted Consideration	2 years ended 31	N/A	850,000
		Scenario 4	December 2012
(vi)	Convertible Bonds	Adjusted Consideration	2 years ended 31	N/A	850,000
		Scenario 5	December 2012

(a) The initial Cash Consideration of HK$80,000,000 payable upon Completion.
(b) The initial consideration of HK$70,000,000 payable by way of issue and allotment of 218,750,000 Consideration Shares upon Completion which results additional share capital of approximately HK$2,188,000 and share premium of approximately HK$43,750,000, for the acquisition of the Target Group as if the Acquisition had taken place on 30 June 2010. The fair value of the Consideration Shares is estimated to be approximately HK$45,938,000 based on the closing price of HK$0.21 per share of the Company as at 30 June 2010.

The fair value of the shares of the Company was HK$0.375 as at 21 January 2011 , being the Latest Practicable Date prior to the printing of this circular. If the consideration was based on the fair value of the shares of the Company on the Latest Practicable Date, it would be HK$82,031,000.

The fair value of the Consideration Shares will be adjusted at the date of Completion of the Acquisition with reference to the closing price of the share of the Company at that date.

(c) The Company and the Vendor entered into the CB Subscription Agreement, pursuant to which, the Company will issue the zero coupon redeemable and convertible bonds in a maximum aggregate principal amount of HK$700,000,000 to the Vendor to satisfy in part the consideration following the Adjusted Consideration Scenarios, as such, the Convertible Bonds will be issued in various tranches and the issue of each tranche is subject to the satisfaction by the Target Group of each of the Adjusted Consideration Scenarios set out above. Failure by the Target Group to achieve the targets set out in all of the Adjusted Consideration Scenarios set out above will result in the Vendor not being entitled to any Convertible Bond.

The Convertible Bonds will be matured on 31 December 2015 and can be converted at any time before maturity at an initial conversion price of HK$0.32 per share.

The fair value of the total contingent consideration is approximately HK$778,293,000 which is valued by an independent professional valuer, by using a probability model and the final valuation results to be recognised at actual Completion of the Acquisition may be different from the amounts stated herein.

Fair values of the liability component and the equity component of various tranche Convertible Bonds shall be assessed on the date of issue and the subsequent change in fair value of the contingent consideration will be recognised in profit or loss.

– 94 –

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

For the purpose of this Statement, the management applied Hong Kong Financial Reporting Standard 3 (Revised) ‘‘Business Combinations’’ for the Acquisition.

The adjustment represents the elimination of the Group’s investment in the Target Group and the recognition of goodwill arising from the acquisition of the Target Group. The fair value of the Target Group is determined as its net liabilities of HK$5,953,000 as at 30 September 2010 assuming the carrying amounts of the net liabilities of the Target Group approximate to its fair value. Subsequent to the capitalisation of the amount of HK$5,610,000 due to the Target Company’s ultimate holding company as set out in note 2, the adjusted net liabilities of the Target Group would be HK$343,000. The goodwill of approximately HK$904,574,000 is the difference between the fair value of the consideration amounting to approximately HK$904,231,000 as mentioned in note 3 and the adjusted net liabilities of the Target Group of HK$343,000.

The goodwill is derived from the calculation as follows:

Fair value of consideration – Cash – Consideration Shares – Convertible bonds Add: Fair value of net liabilities of the Target Group as at 30 September 2010 Goodwill arising from acquisition of Target Group	80,000 45,938 778,293	HK$’000 904,231
		343
		904,574

If the consideration was based on the fair value of the shares of the Company on the Latest Practicable Date, the Proposed Acquisition would result in a goodwill of approximately HK$940,324,000.

The fair value of the net assets of the Target Group will be adjusted at the date of completion of the Proposed Acquisition with reference to the fair value of the Target Group’s assets and liabilities at that date. As such, the goodwill to be recognised in connection with the Acquisition will be different from the amounts stated therein.

In according with the applicable accounting standards, the management of the Company determine whether goodwill is impaired based on the value in use of the cash-generating units to which the goodwill has been allocated. The value in use calculation requires the management of the Company to estimate the future cash flows expected to arise from the cash-generating units and a suitable discount rate in order to calculate the present value. The Company’s management prepared the discounted cash flows based on existing established businesses (i.e. prepaid card payment services) and newly established telephone payment services. Based on the current underlying assumptions for the preparation of the discounted cash flows projections (“ Cash Flows Projections ”), no impairment of goodwill is required as at the Latest Practicable Date. The independent reporting accountants reviewed the management of the Company’s impairment testing and concurred with the Company’s management’s opinion that no impairment of goodwill is required as at the Latest Practicable Date.

The Cash Flows Projections and the assumptions on which they are based relate to future events and actual cash flows may be different since anticipated events frequently do not occur as expected and the variation may be material. For this reason, if the actual cash flows do not correspond with the Cash Flows Projections, impairment may be required in subsequent period.

The accrual for the estimated legal and professional costs directly attributable to the Acquisition amounting to approximately HK$26,000,000 in accordance to HKFRS 3 (revised). The legal and professional costs will not have a continuing effect on the financial statements on the Enlarged Group in subsequent years.

– 95 –

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

中瑞岳華（香港）會計師事務所

29th Floor Caroline Centre Lee Gardens Two 28 Yun Ping Road Hong Kong

24 January 2011

The Board of Directors

SYSCAN Technology Holdings Limited

Dear Sirs,

We report on the unaudited pro forma statement of assets and liabilities (the “ Statement ”) of SYSCAN Technology Holdings 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 proposed acquisition of the entire equity interest in Country Praise Enterprise Limited might have affected the assets and liabilities of the Group presented, for inclusion in Appendix IV to the circular of the Company dated 24 January 2011 (the “ Circular ”). The basis of preparation of the Statement is set out on page 91 to the Circular.

Respective Responsibilities of Directors of the Company and Reporting Accountants

It is the responsibilities solely of the directors of the Company to prepare the Statement in accordance with paragraph 31 of Chapter 7 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 (the “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 Statement 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 Statement beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

– 96 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED 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 Statement with the directors of the Company. The 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 Statement 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 Statement as disclosed pursuant to paragraph 31(1) of Chapter 7 of the GEM Listing Rules.

The Statement is for illustrative purposes only, based on the judgements 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 as at 30 June 2010 or any future date.

Opinion

In our opinion:

(a) the Statement has been properly compiled 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 purposes of the Statement as disclosed pursuant to paragraph 31(1) of Chapter 7 of the GEM Listing Rules.

Yours faithfully, RSM Nelson Wheeler

Certified Public Accountants Hong Kong

– 97 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

INDEBTEDNESS STATEMENT

As at the close of business on 30 November 2010, being the latest practicable date for the purpose of ascertaining the indebtedness of the Enlarged Group prior to the printing of this circular, the Enlarged Group had total outstanding borrowings of approximately HK$52 million, comprising secured interest-bearing bank loans of approximately HK$16 million which was secured by a fixed deposit of HK$23 million, a secured interest-bearing loan of HK$18 million due to an independent third party which was secured by 15% equity interest in a private company in the PRC in which the ultimate controlling party of the Target Company, Mr. Guan, is the beneficial owner of that 15% equity interest, an unsecured interest-bearing loan of approximately HK$12 million due to an independent third party, and an unsecured loan of approximately HK$6 million due to the ultimate holding company of the Target Company.

The amount of approximately HK$6 million due to the ultimate holding company of the Target Company was capitalised as share capital of the Target Company by the issuance and allotment of 769,231 share at a premium of US$1 each without par value on 5 November 2010.

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 November 2010, the Enlarged 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.

WORKING CAPITAL

Assuming that all the 625,000,000 Placing Shares has been fully placed by the Placing Agent, as at the Latest Practicable Date, the Directors are of the opinion that taking into consideration the financial resources available to the Enlarged Group, including the internally generated funds, the Enlarged Group will have sufficient working capital for its present requirements.

– 98 –

APPENDIX V

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. SHARE CAPITAL

Assuming no Share will be issued and/or repurchased by the Company from the Latest Practicable Date to the Completion Date, the authorized and issued share capital of the Company (a) as at the Latest Practicable Date; (b) immediately after the issue of a maximum of 625,000,000 Placing Shares of HK$0.01 each and the issue of the Consideration Shares of HK$0.01 each upon Completion; (c) immediately after the issue of a maximum of 625,000,000 Placing Shares of HK$0.01 each, the issue of 218,750,000 Consideration Shares of HK$0.01 each and the issue of a maximum of 2,187,500,000 Conversion Shares of HK$0.01 each upon full conversion of the Convertible Bonds under the Conversion Restriction following the adjustments to the consideration after Completion; and (d) immediately after the issue of a maximum of 625,000,000 Placing Shares of HK$0.01 each, the issue of 218,750,000 Consideration Shares of HK$0.01 each and the issue of a maximum of 2,187,500,000 Conversion Shares of HK$0.01 each upon full conversion of the Convertible Bonds following the adjustments to the consideration after Completion.

(a) As at the Latest Practicable Date

Authorized: HK$ 20,000,000,000 Shares 200,000,000 Issued and fully paid: 2,640,889,457 Shares 26,408,894.57

– 99 –

APPENDIX V

GENERAL INFORMATION

(b) Immediately after the issue of a maximum of 625,000,000 Placing Shares and the issue of the Consideration Shares upon Completion

Authorized: HK$ 20,000,000,000 Shares 200,000,000 Issued and fully paid: 2,640,889,457 Existing Shares 26,408,894.57 625,000,000 Placing Shares 6,250,000 218,750,000 Consideration Shares 2,187,500 3,484,639,457 Shares 34,846,394.57

(c) Immediately after the issue of a maximum of 625,000,000 Placing Shares, the issue of 218,750,000 Consideration Shares and the issue of a maximum of 2,187,500,000 Conversion Shares upon full conversion of the Convertible Bonds under the Conversion Restriction following the adjustments to the consideration after Completion

Authorized: 20,000,000,000 Shares	HK$ 200,000,000

Issued and fully paid: 2,640,889,457 Existing Shares 625,000,000 Placing Shares 218,750,000 Consideration Shares 1,174,261,337 Conversion Shares	26,408,894.57 6,250,000 2,187,500 11,742,613.37
4,658,900,794 Shares	46,589,007.94

– 100 –

APPENDIX V

GENERAL INFORMATION

(d) Immediately after the issue of a maximum of 625,000,000 Placing Shares, the issue of 218,750,000 Consideration Shares and the issue of a maximum of 2,187,500,000 Conversion Shares upon full conversion of the Convertible Bonds following the adjustments to the consideration after Completion

Authorized: 20,000,000,000 Shares	HK$ 200,000,000

Issued and fully paid: 2,640,889,457 Existing Shares 625,000,000 Placing Shares 218,750,000 Consideration Shares 2,187,500,000 Conversion Shares	26,408,894.57 6,250,000 2,187,500 21,875,000
5,672,139,457 Shares	56,721,394.57

The Consideration Shares, the Conversion Shares and the Placing Shares, when allotted and issued, shall rank pari passu in all aspects amongst themselves and with the Shares in issue on the date of issue and allotment of the Consideration Shares, the Conversion Shares and the Placing Shares and be entitled to dividends and other rights carried by the Shares.

3. DISCLOSURE OF INTERESTS

(a) Interests or short positions of Directors and chief executives in the share capital of the Company and its associated corporations

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

– 101 –

APPENDIX V

GENERAL INFORMATION

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, are as follows:–

Long position in Shares

				Approximate
				percentage
				of the
				Company’s
Name of Director/		Nature of	Number of	issued share
chief executive	Capacity	interest	Shares held	capital
Cheung Wai	Beneficial	Personal	863,112,045	32.68%
	owner
Frank Cheung	Beneficial	Personal	7,500,000	0.28%
	owner

There were no debt securities nor debentures issued by the Group as at the Latest Practicable Date.

Long positions in underlying Shares of the Company (Share options granted to the Directors and chief executives)

On 2 March 2000, the Company adopted the share option scheme A (the “Share Option Scheme A”) and scheme B (the “Share Option Scheme B”) under which share options to subscribe for Shares may be granted under the terms and conditions stipulated in Share Option Scheme A and Share Option Scheme B.

Share Option Scheme A ceased to be effective (save for the options granted and not yet exercised or lapsed) upon the listing of the Company on 14 April 2000. At the annual general meeting of the Company held on 26 April 2002, Shareholders approved the adoption of a new share option scheme (the “Share Option Scheme C”) and the termination of Share Option Scheme B.

Since its adoption and up to the Latest Practicable Date, no option has been granted to the Directors under Share Option Scheme A and Share Option Scheme B.

– 102 –

APPENDIX V

GENERAL INFORMATION

Details of the options granted to the Directors under Share Option Scheme C since its adoption and up to the Latest Practicable Date are as follows:

Share Option Scheme C

Name Date of grant (dd/mm/yy) Exercise period (dd/mm/yy) Subscription price per share Frank Cheung 10/11/2009 10/11/2010 to 09/11/2019 HK$0.1026	No. of underlying Shares comprising the options granted 15,000,000 15,000,000	No. of underlying Shares comprising the options exercised 7,500,000 7,500,000	No. of underlying Shares comprising the options cancelled/ lapsed – –	No. of underlying Shares comprising the options outstanding 7,500,000
				7,500,000

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

– 103 –

APPENDIX V

GENERAL INFORMATION

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial Shareholders

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 Enlarged Group or had any option in respect of such capital:

Long position in Shares

			Approximate
			percentage
			of the
			Company’s
		Number of	issued share
Name of Shareholder	Capacity	Shares held	capital
Mr. Guan	Interest in	2,406,250,000	91.12%
	controlled	(Note 1)
	corporation
The Vendor (Note 2)	Beneficial	2,406,250,000	91.12%
	owner
Cheung Wai	Beneficial	863,112,045	32.68%
(Note 3)	owner

Notes:

The long position in these shares was held by the Vendor which is 100% beneficially owned by Mr. Guan.
The Vendor had long position in the Shares as a result of its entering into the New Sale and Purchase Agreement pursuant to which the Vendor would be issued an aggregate of 2,406,250,000 Shares assuming the Consideration Shares were issued and the maximum amount of Conversion Shares which would fall to be issued in full upon the conversion of all Convertible Bonds were issued to the Vendor.
Details of the interests of Mr. Cheung Wai 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.

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

– 104 –

APPENDIX V

GENERAL INFORMATION

deemed to have, any interests or short positions in the Shares or underlying Shares 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 SPO, 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 Enlarged Group or held any option in respect of such capital.

(c) Competing interests

The Directors are not aware of, as at the Latest Practicable Date, any business or interest of each Director, controlling shareholder and the respective associates of each of them that competes or may compete with the business of the Enlarged Group and any other conflicts of interest which any such person has or may have with the Enlarged Group.

(d) Other interests

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or expert (as named herein this circular) had any direct or indirect interest in any assets which have been, since 31 December 2009, being the date to which the latest published audited accounts of the Company were made up, acquired or disposed of by or leased to any member of the Enlarged Group, or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

Save as disclosed above, none of the Directors was materially interested in any contract or arrangement subsisting at the Latest Practicable Date which is significant in relation to the business of the Enlarged Group.

4. MATERIAL CONTRACTS

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

(a) The Group

(i) the share transfer agreement dated 8 December 2009 entered into between SYSCAN Holdings Limited (“ SYSCAN Holdings ”), 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;
(ii) the loan agreement (the “ Loan Agreement ”) dated 8 December 2009 entered into by Build Up as lender in favour of SYSCAN Holdings as borrower for a sum equivalent to RMB30,000,000 in Hong Kong dollars (the “ Loan ”);

– 105 –

APPENDIX V

GENERAL INFORMATION

(iii) the share pledge dated 8 December 2009 entered into by SYSCAN Holdings as pledgor in favour of Build Up as pledgee pursuant to which SYSCAN Holdings 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 2008 issued by the Company in favour of Build Up to guarantee SYSCAN Holdings’ obligations under the Loan Agreement;
(v) the New Sale and Purchase Agreement;
(vi) the New Placing Agreement;
(vii) the Terminated Sale and Purchase Agreement;
(viii) the Terminated Placing Agreement; and
(ix) the CB Subscription Agreement.

(b) The Target Group

The joint venture agreement dated 28 May 2010 between China Comfort International Travel Services Co., Ltd. and 商銀融通（北京）投資管理有限公司 (Beijing Shangyin Investment Management Co., Ltd.*) (currently known as “Shangyin”) in respect of the establishment of a joint venture, Kanghui E-Commerce.

5. CLAIMS AND LITIGATION

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

6. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Enlarged Group which does not expire or is not determinable by the Enlarged Group within one year without payment of compensation (other than statutory compensation).

7. QUALIFICATIONS AND CONSENTS OF EXPERTS

The following are the qualifications of the experts who have given opinions or advice which are contained in this circular:

Name	Qualification
RSM Nelson Wheeler	Certified public accountants
King & Wood	the legal advisers to the Company as to the PRC law

– 106 –

APPENDIX V

GENERAL INFORMATION

Each of RSM Nelson Wheeler and King & Wood has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and/or reference to its name or opinion in the form and context in which it appears.

As at the Latest Practicable Date, each of RSM Nelson Wheeler and King & Wood was not beneficially interested in the share capital of any member of the Group nor did it have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, each of RSM Nelson Wheeler and King & Wood did not directly or indirectly, have any interest in any assets which had since 31 December 2009 (being the date to which the latest published audited financial statements of the Company were made up) been acquired or disposed of by or leased to any member of the Enlarged Group, or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

8. NO 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 2009, being the date to which the latest published audited accounts of the Company were made up.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours of the Company’s head office and principal place of business in Hong Kong at Unit C, 21st Floor, Seabright Plaza, 9-23 Shell Street, North Point, Hong Kong, from the date of this circular and up to and including the date of the SGM:

(a) the bye-laws of the Company;
(b) the material contracts referred to in the paragraph headed “Material contracts” in this appendix;
(c) the published annual reports of the Company for each of the two financial years ended 31 December 2008 and 31 December 2009;
(d) the published interim report of the Company for the six months ended 30 June 2010;
(e) the accountants’ report on the Target Group, the text of which is set out in Appendix II to this circular;
(f) the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix IV to this circular;
(g) the letter from RSM Nelson Wheeler in relation to the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix IV to this circular;

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APPENDIX V

GENERAL INFORMATION

(h) the letter of consent referred to in the paragraph headed “Qualifications and consents of experts” in this appendix; and
(i) a copy of each circular issued pursuant to the requirements set out in Chapters 19 and 20 which has been issued since 31 December 2009, being the date of the latest published audited accounts.

10. MISCELLANEOUS

(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. Cheung Wai. Mr. Cheung holds a bachelor degree in electronic engineering from China Central Institute of Technology in the PRC.
(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 C, 21/F, Seabright Plaza, 9-23 Shell Street, North Point, Hong Kong.
(e) The branch share registrar and transfer office of the Company in Hong Kong is Computershare Hog Kong Investor Services Limited, at Shops 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.
(g) The Company established an audit committee on 2 May 2000 with written terms of reference in compliance with Rule 5.28 of the GEM Listing Rules. The duties of the audit committee include (i) reviewing, in draft form, the Company’s annual report and accounts, half-year report and quarterly reports and providing advice and comments thereon to the Board; and (ii) reviewing and supervising the Company’s financial reporting and internal control procedures. The audit committee comprises three independent non-executive Directors, namely, Dr. Fong Chi Wah, Mr. Wang Ruiping and Professor He Zhiyi. The chairman of the audit committee is Fong Chi Wah. Further details of the members of the audit committee are set out below:

Dr. Fong Chi Wah , aged 48, 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 financial industry, including direct investment, project and structured finance, and capital markets with focus on the PRC and Hong

– 108 –

APPENDIX V

GENERAL INFORMATION

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.

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’s 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 Ruiping , aged 48, is a managing director of TDR Capital International Limited and has been an independent non-executive director of China Huali Holding Limited during March 2003 and March 2009, a company listed in Shenzhen Stock Exchange. He is currently acting as a non-executive director of Vision Opportunity China Fund Ltd, a company listed on AIM, London Stock Exchange. He is also a non-executive director of China High Enterprises Limited, the Hong Kong parent company of Borun based in Shandong, PRC. Mr. Wang has over 15 years of investment banking and investment management experience. He also has profound experience of investments in China via listings on domestic and foreign stock exchanges. He has previously worked as executive director of Softbank Investment International (Strategic) Limited, vice president of Greater China Investment Banking of Deutsche Bank and assistant director of Standard Chartered (Asia) Limited in charge of investment banking business in mainland China. Mr. Wang was working for China International Trust and Investment Corporation before joining Standard Chartered Asia Limited. Mr. Wang holds a master degree in Economics from Nankai University of China.

Professor He Zhiyi , aged 54, holds a master degree in Economics from Xiamen University, a doctoral degree from School of Management, Fudan University and was a post-doctoral research fellow at Guanghua Management School, Peking University. He is currently the deputy dean of Antai College of Economics & Management, Shanghai JiaoTong University, the deputy dean of the Institute on Poverty Research, Peking University and the executive officer fo the Chinese Business Case Research Centre, Peking University. Professor He was a professor of Marketing, a doctoral adviser and the assistant dean of Guanghua Management School, Peking University. He also acted as the director of Management Case Studies Centre of Peking University. Professor He is currently an independent non-executive director of Shenzhen Accord Phamaceutical Co., Ltd., a subsidiary of Sinopharm Group Co. Ltd (Stock code: 1099) and whose A shares and B shares are listed on the Shenzhen Stock Exchange.

– 109 –

NOTICE OF SGM

==> picture [41 x 46] intentionally omitted <==

**SYSCAN Technology Holdings Limited 矽感科技控股有限公司[*]**

(Incorporated in Bermuda with limited liability)

(Stock Code: 8083)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting (the “ SGM ”) of SYSCAN Technology Holdings Limited (the “ Company ”) will be held at Yue Function Room, First Floor, City Garden Hotel, 9 City Garden Road, North Point, Hong Kong on Thursday, 10 February 2011 at 11:00 a.m. for the purpose of considering and, if thought fit, passing, with or without modifications, the following ordinary resolutions as Ordinary Resolutions:

ORDINARY RESOLUTIONS

“ THAT
(a) the sale and purchase agreement dated 22 November 2010 (as amended and supplemented by the supplemental sale and purchase agreement dated 6 January 2011) (the “ SPA ”) entered into by (i) the Company as purchaser; (ii) Mighty Advantage Enterprises Limited (the “ Vendor ”) as vendor and (iii) Country Praise Enterprises Limited (the “ Target Company ”) as the target company, a copy of which has been produced to the meeting marked “A” and signed by the chairman of the meeting for identification purposes, pursuant to which the Company conditionally agreed to acquire and the Vendor conditionally agreed to sell the entire equity interest in the Target Company (the “ Sale Shares ”), at an initial consideration of HK$150,000,000 (the “ Initial Consideration ”) (subject to adjustments), but in any event subject to a maximum consideration of HK$850,000,000 (the “ Acquisition ”) be and is hereby approved, confirmed and ratified in all respects;
(b) the issue and allotment of 218,750,000 ordinary shares of HK$0.01 each (the “ Consideration Shares ”) in the share capital of the Company at an issue price of HK$0.32 per Consideration Share for the settlement of part of the Initial Consideration pursuant to the terms and conditions of the SPA be and are hereby approved and confirmed;
(c) the subscription agreement dated 21 January 2011 (the “ Subscription Agreement ”) entered into between the Vendor as investor and the Company as issuer, a copy of which has been produced to the meeting marked “B” and signed by the chairman of the meeting for

* For identification purpose only

– 110 –

NOTICE OF SGM

identification purposes, for issuing certain zero coupon redeemable and convertible bonds in a maximum aggregate principal amount of HK$700,000,000 (the “ Convertible Bonds ”) for the settlement of the adjusted consideration for the Acquisition be and is hereby approved, confirmed and ratified;

(d) the issue of the Convertible Bonds having such rights and restrictions as set out below by the Company in various tranches in accordance with the terms and conditions of the Subscription Agreement be and is hereby approved and confirmed;

The Convertible Bonds shall have attached thereto the following rights and privileges and be subject to the following restrictions:-

Aggregate maximum : HK$700,000,000, which will be divided principal amount into various tranches in accordance with the terms and consideration of the SPA and the Subscription Agreement.
Issue and redemption : As part of the adjustment of the price consideration of the Acquisition and the issue of the Convertible Bonds is subject to satisfaction of certain targets, as such, the issue price shall be zero. The redemption price shall be the principal amount of the Convertible Bonds.
Interest : Nil Conversion right : Holders of the Convertible Bonds are entitled to such conversion rights which allow holders to convert the Convertible Bonds into ordinary shares of the Company of HK$0.01 each (the “ Shares ”) during the conversion period at the conversion price of HK$0.32 per Conversion Share, subject to such adjustments as set out below.
Conversion period : The Convertible Bonds can be converted at any time before maturity, subject to the restrictions set out below.
Conversion price : HK$0.32 per Conversion Share, subject to adjustments as a result of issuance of new Shares (other than the Conversion Shares) by way of capitalization issue, share consolidation or subdivision, rights issue or open offer which lead to changes in the issued share capital of the Company.

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NOTICE OF SGM

Conversion : The Vendor and parties acting in concert Restriction with the Vendor shall not at any time, hold such number of Shares (including the Consideration Shares, Conversion Shares and Shares obtained through any other way) which would trigger the obligation on the part of the Vendor and its concert parties to make any mandatory general offer for the Shares pursuant to The Codes on Takeovers and Mergers and Share Repurchases.
Ranking of : All Conversion Shares issued upon Conversion Shares conversion will be fully paid and rank pari passu in all respects with all other Shares in issue on the date the name of the holder of the Conversion Shares are entered into the register of members of the Company.
Redemption : Other than redemption at maturity and upon any events of default, the Convertible Bonds shall not be redeemed at any other time.
Maturity : Unless previously converted, redeemed or cancelled as provided in the terms and conditions of the Convertible Bonds, the Company shall redeem each Convertible Bond on 31 December 2015.
Voting rights : Holders of Convertible Bonds will not have any right to attend or vote at any general meeting of the Company by virtue of their holding the Convertible Bonds. Holders shall be entitled to attend or vote at general meetings only upon conversion of the Convertible Bonds and such right only relates to the Conversion Shares they hold.
Dividend rights : Holders of Convertible Bonds will not be entitled to any form of dividends.
Transferability : The Convertible Bonds are freely transferable.

– 112 –

NOTICE OF SGM

Listing

: No application will be made by the Company for the listing of the Convertible Bonds on The Stock Exchange of Hong Kong Limited or any other stock exchange.

The Conversion Shares to be issued and allotted pursuant to the exercise of the conversion right under the Convertible Bonds are subject to non-disposal undertakings. The Vendor, on execution of the Subscription Agreement, will undertake that it will not transfer or otherwise dispose of any Convertible Bond (excluding the exercise of conversion right) or Conversion Share issued pursuant to the conversion of any Convertible Bonds for a period of six months from the date of issue of the relevant Convertible Bonds without the prior written consent or waiver of the Company.

(e) the issue and allotment of a maximum of 2,187,500,000 ordinary shares of HK$0.01 each (the “ Conversion Shares ”) in the share capital of the Company which may fall to be issued upon the exercise of the conversion rights attaching to the Convertible Bonds in full at the initial conversion price of HK$0.32 per Conversion Share for the settlement of the adjusted consideration for the Acquisition be and are hereby approved and confirmed;
(f) the placing agreement dated 22 November 2010 (as amended and supplemented by the supplemental placing agreement dated 6 January 2011) (the “ Placing Agreement ”) entered into by (i) the Company; and (ii) Oriental Patron Asia Limited (the “ Placing Agent ”) as placing agent, a copy of which has been produced to the meeting marked “C” and signed by the chairman of the meeting for identification purposes, pursuant to which the Company agreed to place, and the Placing Agent agreed to procure not fewer than six placees for up to 625,000,000 Shares of HK$0.01 each (the “ Placing Shares ”) in the share capital of the Company at a placing price of HK$0.32 per Placing Share on a best effort basis, but in any event not less than 375,000,000 Placing Shares (the “ Placing ”), subject to the terms and conditions thereunder, and all the transactions contemplated thereunder, be and are hereby approved, confirmed and ratified;
(g) the issue and allotment of the Placing Shares by the Company in accordance with the terms and conditions of the Placing Agreement be and are hereby approved;
(h) the directors of the Company be and are hereby authorized to do all such acts and things, take all steps and execute all further documents which in their opinion may be necessary, desirable or expedient for the purpose of giving effect to and/or implementing the transactions contemplated under the SPA, the Subscription Agreement and the Placing Agreement; and

– 113 –

NOTICE OF SGM

(i) the board of directors of the Company be and is hereby generally and specifically authorized to issue and allot the Consideration Shares, the Conversion Shares and the Placing Shares upon and subject to the respective terms and conditions of the SPA, the Convertible Bonds and the Placing Agreement.”

By Order of the Board of SYSCAN Technology Holdings Limited Cheung Wai Chairman

Hong Kong, 24 January 2011

Principal place of business

and head office in Hong Kong:

Unit C, 21/F

Seabright Plaza

9-23 Shell Street

North Point, Hong Kong

Notes:

A member of the Company entitled to attend and vote at the SGM is entitled to appoint another person as his proxy to attend and vote in his stead. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at the SGM. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which such proxy is so appointed. A proxy need not be a member of the Company, but must attend in person to represent the member.
In order to be valid, the form of proxy must be deposited at the principal place of business and head office of the Company in Hong Kong at Unit C, 21/F, Seabright Plaza, 9-23 Shell Street, North Point, Hong Kong together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of such power of attorney or authority, not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof.
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 were solely entitled thereto, but if more than one of such joint holders be present at the SGM personally or by proxy, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of such joint holding.
A form of proxy for use in connection with the SGM is enclosed. Completion and delivery of the form of proxy will not preclude a member from attending and voting in person at the SGM if the member so desires and in such event, the instrument appointing a proxy shall be deemed to be revoked.
As required under the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited, the resolutions will be decided by way of poll.

– 114 –

AI assistant

Youzan Technology Limited — Proxy Solicitation & Information Statement 2011

51261_rns_2011-01-24_e1aad17b-48b4-469a-9f63-ea0e3a5c61a3.pdf

SYSCAN Technology Holdings Limited 矽感科技控股有限公司[*]

(1) MAJOR ACQUISITION;

(2) PROPOSED ISSUE OF ZERO COUPON REDEEMABLE AND CONVERTIBLE BONDS DUE 2015 CONVERTIBLE INTO ORDINARY SHARES OF THE COMPANY; AND

(3) PLACING OF NEW SHARES PURSUANT TO SPECIFIC MANDATE

Arranger, Financial Adviser and Placing Agent

DEFINITIONS

SYSCAN Technology Holdings Limited 矽感科技控股有限公司[*]

(Stock Code: 8083)

INTRODUCTION

THE ACQUISITION

Assets to be acquired

Consideration

Adjustments to the consideration

Adjusted Consideration Scenario 1

Adjusted Consideration Scenario 3

Adjusted Consideration Scenario 4

Adjusted Consideration Scenario 5

Conditions precedent

Non-disposal undertaking

Right of first refusal and right of first offer

Nomination right

2. THE CB SUBSCRIPTION AGREEMENT

Parties

Subscription of the Convertible Bonds

Conditions precedent

Principal terms of the Convertible Bonds

MANDATE TO ISSUE THE CONSIDERATION SHARES AND THE CONVERSION SHARES

APPLICATION FOR LISTING

CONSIDERATION SHARES AND THE CONVERSION SHARES

BASIS OF THE CONSIDERATION

REASONS FOR THE ACQUISITION

FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

FINANCIAL EFFECTS OF THE ACQUISITION ON THE GROUP

Earnings

Goodwill

Net asset

Working capital

INTENTION OF EXISTING BUSINESS OF THE GROUP

FINANCING OF THE ACQUISITION

1. THE NEW PLACING AGREEMENT

Parties

Termination of the Terminated Placing Agreement

The Placing

The placees

The Placing Price

The Placing Shares

Ranking of Placing Shares

Placing commission

Completion of the New Placing Agreement

Mandate to issue the Placing Shares

2. REASONS FOR THE PLACING AND USE OF PROCEEDS FROM THE PLACING

3. EQUITY FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

EFFECT ON THE SHAREHOLDING STRUCTURE

PROPOSED NOMINATION OF DIRECTORS

Biographies of the Directors to be nominated by the Vendor

Mr. Guan

Dr. Lei

GEM LISTING RULES IMPLICATION

SGM

RECOMMENDATION

GENERAL

1. INDUSTRY OVERVIEW

Overview of prepaid card business in the PRC

Prospects and future developments

INFORMATION OF THE TARGET GROUP

Entry barriers

Sourcing for a electronic data processing and clearing service provider and POS device suppliers

2. REGULATORY OVERVIEW

3. RISKS ASSOCIATED WITH THE PREPAID CARD BUSINESS OF THE TARGET GROUP

Investments in new business and country risks

The Target Group’s revenue from its prepaid card business is subject to seasonal fluctuations

Reliance on China Unionpay Entities

Uncertainties in the regulatory environment

Historical net liability position

Short operating period

4. BUSINESS OVERVIEW

Business activities

Youzan Technology Limited Proxy Solicitation & Information Statement 2011

**SYSCAN Technology Holdings Limited 矽感科技控股有限公司[*]**

**SYSCAN Technology Holdings Limited 矽感科技控股有限公司[*]**