Basic Information Chairman's Statement
Management Discussion and Analysis Corporate Governance Report
Directors' and Senior Management's Profile Notices (Replacement of Lost Certificates)

Year 2013 First six months of 2013 Year 2012 First six months of 2012

BUSINESS REVIEW

Tinplating

Zhongshan Zhongyue Tinplate Industrial Co., Ltd. ("Zhongyue Tinplate") is a wholly-owned subsidiary of the Company. The Company holds a 66% interest in Zhongyue Posco (Qinhuangdao) Tinplate Industrial Co., Ltd. ("Zhongyue Posco") while the remaining 34% is held by POSCO Co., Ltd., an internationally renowned iron and steel enterprise. Currently, the annual production capacity of tinplate products and blackplates of the Group is 470,000 tonnes and 150,000 tonnes respectively, of which 220,000 tonnes of tinplate products and 150,000 tonnes of blackplates are from Zhongyue Tinplate's capacity, whereas 250,000 tonnes of tinplate products are from Zhongyue Posco's capacity.

In 2013, the Group produced 381,936 tonnes of tinplate products, representing an increase of 6.3% as compared to that in 2012. Among which, Zhongyue Tinplate and Zhongyue Posco produced 209,643 tonnes and 172,293 tonnes respectively. In addition, the blackplate manufacturing plant of Zhongyue Tinplate produced 140,092 tonnes of blackplates, a decrease of 3.1% as compared to that in 2012, providing a steady supply of raw materials (i.e. blackplates) for its production of tinplate products. The Group's tinplating plants in northern and southern China sold 387,235 tonnes of tinplate products, an increase of 8.1% as compared to that in 2012, of which, Zhongyue Tinplate and Zhongyue Posco sold 209,937 tonnes and 177,298 tonnes of tinplate products respectively, an increase of 1.2% and 17.5% respectively as compared to that in 2012. Turnover was HK$3,136,356,000, an increase of 4.8% as compared to that in 2012 and profit from operations was HK$91,402,000, an increase of HK$25,443,000 or 38.6% as compared to that in 2012. The tinplating business accounted for 89.8% and 49.1% of the Group's turnover and profit from operations respectively.

The excess supply over demand in the iron and steel industry and intense competition placed pressure on the price of iron and steel products. In 2013, the selling price of tinplate products continued to remain at a relatively low level. On the other hand, the price of hot-rolled plates, which is one of the major raw materials for the production of blackplates, was volatile. Through modifying and integrating the sales and marketing capacities of the tinplating plants in northern and southern China, the Group increased its sales to customers in northern China. Sales volume of Zhongyue Posco increased by 17.5% as compared to that in 2012, which created a basis for the Group to leverage from the effect of economies of scale. This in turn effectively mitigated the impact on the Group's profit regarding the surge in the cost of raw materials and hence increased gross profit. Besides, as a result of the faster appreciation of Renminbi against the Hong Kong Dollar and the United States Dollar, exchange gains for the year increased significantly, which contributed to the substantial increase in operating profit of the Group's tinplating business as compared to that in 2012. Meanwhile, through the pursuit of more flexible payment methods with its suppliers, the Group successfully increased liquidity of its working capital and bank deposits. Interest income was enhanced accordingly. Sales were also stabilised by capitalising on the favourable position in capital management and adopting effective control in trade receivables management. The Group will review its human resources situation, increase its effectiveness and efficiency, and continue to strengthen the internal control. Furthermore, it will also deploy Six Sigma methodology for implementing projects for technological improvements in order to accelerate the progress in new scientific and technological R&D initiatives and applications to refine electroplating techniques and to promote energy saving, waste reduction and efficiency optimisation, incubating new strengths for the future development of our tinplating business.

As the tinplating factory in Zhongshan is operating at full capacity, in order to accelerate the transformation and upgrade of our business, the Group re-occupied certain plant in our factory area in Zhongshan, which was previously let out, to construct a new tinplating production line with an annual production capacity of 150,000 tonnes, together with expansion of the relevant coating and printing production lines. Besides, Zhongyue Posco is also preparing to acquire coating and printing production lines. It is estimated that the total investment cost of these production lines will be approximately RMB265 million (equivalent to approximately HK$337 million). These new production lines will enable the Group to improve the standard of production equipment and product quality and refine the product mix. It will also facilitate the development of new products and strengthen our core competitiveness. It is expected that these production lines will commence operation consecutively around the end of 2014. By that time, the annual production capacity of tinplate products, blackplates, and coated and printed tinplates of the Group's factories in northern and southern China will become 620,000 tonnes, 150,000 tonnes and 100,000 tonnes respectively.

Fresh and Live Foodstuffs

Guangnan Hong Company Limited ("Guangnan Hong") is a wholly-owned subsidiary of the Company. Guangnan Hong holds a 51% interest in Guangnan Live Pigs Trading Limited, a 15.20% (31 December 2012: 18.66%) interest in an associate, Hubei Jinxu Agriculture Development Co., Ltd. ("Hubei Jinxu"), and a 34% interest in an associate, Guangdong Zijin Baojin Livestock Co., Ltd. ("Guangdong Baojin").

In 2013, the turnover of the fresh and live foodstuffs business amounted to HK$330,375,000, representing an increase of 0.9% as compared to that in 2012. Together with the share of losses less profits of associates, Hubei Jinxu and Guangdong Baojin, of HK$549,000, profit from operations was HK$94,557,000, representing an increase of 0.6% as compared to that in 2012. Although the price of live pigs went down in the first half of the year, it stabilised in the second half of the year. Through continuous optimisation of the business workflow, the Group proactively strengthened its communication with governmental authorities, suppliers, industry participants and customers. Service standards were enhanced. The Group also actively contributed to maintaining the supply in the market. The overall market share in the live pigs supply into Hong Kong was about 45%. This provided a steady contribution to the earnings of the Group. For Hubei Jinxu and Guangdong Baojin, expansion in the scope of pig farming is being gradually implemented, in order to consolidate premium quality sources of live pigs and build a solid business chain for the fresh and live foodstuffs business.

Property Leasing

The Group's leasing properties mainly include the plant and staff dormitories of Zhongyue Tinplate and Zhongyue Posco and the office units in Hong Kong.

In 2013, turnover from the property leasing business of the Group was HK$27,203,000, a decrease of 0.7% as compared to that in 2012. Profit from operations of leasing properties amounted to HK$17,277,000, an increase of 3.2% as compared to that in 2012. In line with the increase in the valuation of office units in Hong Kong in 2013, net valuation gains on investment properties of HK$45,846,000 (2012: HK$16,845,000) were recorded by the Group.

Yellow Dragon

In 2013, Yellow Dragon Food Industry Co., Ltd. ("Yellow Dragon"), an associate of the Group, recorded a sales volume of 422,555 tonnes of its major product, corn starch, approximately the same as that in 2012. Turnover was HK$2,147,600,000, a decrease of 5.8% as compared to that in 2012. Through various control measures on costs and expenses implemented by Yellow Dragon, its loss was significantly reduced from HK$40,678,000 in 2012 to HK$10,058,000 in 2013. As the Company holds a 40% interest in Yellow Dragon, the Group's share of loss was HK$4,023,000 (2012: HK$16,271,000).

FINANCIAL POSITION

As at 31 December 2013, the Group's total assets and total liabilities amounted to HK$3,305,974,000 and HK$803,528,000, representing an increase of HK$281,159,000 and HK$76,020,000 respectively when compared with the positions at the end of 2012. Net current assets decreased from HK$1,014,167,000 at the end of 2012 to HK$1,011,345,000. The current ratio (current assets divided by current liabilities) decreased from 2.9 at the end of 2012 to 2.3.

Liquidity and Financial Resources

As at 31 December 2013, the Group maintained cash and cash equivalents of HK$668,972,000, of which an amount of HK$464,047,000 was denominated in Renminbi and HK$121,874,000 was denominated in United States Dollars while the remaining balance was denominated in Hong Kong Dollars. Cash and cash equivalents increased by 42.0% from the end of 2012. Interest income also increased from HK$11,299,000 in 2012 by 44.5% to HK$16,322,000 in 2013.

As at 31 December 2013, the Group's borrowings comprised 1) unsecured bank borrowings of HK$172,523,000 (2012: HK$209,492,000); and 2) loans from a related company of HK$79,560,000 (2012: HK$79,560,000). 63.5% (2012: 55.4%) of the Group's borrowings was guaranteed by the Company. As at 31 December 2013, all of the Group's borrowings was repayable within 1 year, while as at 31 December 2012, 44.6% of the Group's borrowings was repayable within 1 year, and the remaining balance was repayable within 2 years. All borrowings were subject to annual interest rates ranging from 1.74% to 2.16% (2012: 0.91% to 2.28%). 95.0% (2012: 82.9%) of the Group's borrowings bears interest at floating rates. The management pays attention to variations in interest rates.

As at 31 December 2013, the Group's gearing ratio, calculated by dividing the net borrowings (being borrowings less cash and cash equivalents) of the Group by total equity attributable to equity shareholders of the Company, was -18.1% (2012: -8.6%).

As at 31 December 2013, the Group's available banking facilities which are used for working capital and trade finance purposes, amounted to HK$441,152,000, of which HK$219,412,000 was utilised and HK$221,740,000 was unutilised. 36.3% of the Group's banking facilities was guaranteed by the Company. Currently, the cash reserves and available banking facilities, as well as the steady cash flow from operations, are sufficient to meet the Group's debt obligations and business operations.

Capital Commitments and Capital Expenditure

The Group's capital expenditure in 2013 amounted to HK$43,035,000 (2012: HK$22,506,000). Capital commitments outstanding at 31 December 2013 not provided for in the financial statements amounted to HK$254,599,000 (2012: HK$252,143,000), mainly for the construction of a new tinplating production line in Zhongshan, together with expansion of the relevant coating and printing production lines. It is expected that the capital expenditure for 2014 will be approximately HK$220 million.

Acquisitions and Disposals of Investments

During the year of 2013, the Group has no material acquisitions, while the Group's associate, Hubei Jinxu, issued new shares to other parties. After the issuance of the new shares, the Group's equity interest in Hubei Jinxu was diluted from 18.66% to 15.20% (2012: 19.53% to 18.66%), which resulted in a gain on deemed disposal of HK$5,086,000 (2012: HK$503,000).

Charges on Assets

As at 31 December 2013, none of the assets of the Group was pledged.

Contingent Liabilities

In April 2013, a PRC third party filed a claim against a subsidiary of the Group in the Court of Zhongshan City to recover an outstanding trade debt of approximately RMB2,060,000 (equivalent to HK$2,620,000) and a penalty of approximately RMB4,962,000 (equivalent to HK$6,311,000) for non-payment. Currently, the court proceedings are still in progress.

In prior years, this PRC third party had also filed claims in respect of the same matter but the claims were denied. Based on the information currently available, the Group considers that no provision is required to be made in respect of this claim because the likelihood of an adverse outcome is remote.

Except for the abovementioned matter, the Group had no material contingent liabilities as at 31 December 2013.

Exchange Rate and Interest Rate Exposures

The majority of the Group's business operations are in Mainland China and Hong Kong. The Group is exposed to foreign currency risk primarily through import purchases from overseas suppliers and export sales to overseas customers that are denominated in a currency other than the functional currency of the operations to which they relate. The currency giving rise to this risk is mainly the United States Dollar against Renminbi. In respect of trade receivables and payables denominated in currencies other than the functional currency of the operations to which they relate, the Group ensures that the net exposure is kept to an acceptable level, by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances.

In respect of unforeseen fluctuations in exchange rates, the Group will hedge the exposure as and when necessary. As at 31 December 2013, forward foreign exchange contracts of JPY234,000,000 (equivalent to HK$17,222,000) and RMB169,614,000 (equivalent to HK$215,732,000) against United States Dollar were entered into by the Group to hedge against currency risks in respect of an equipment purchase contract and export sales respectively. As at 31 December 2012, the Group had not entered into any forward foreign exchange contracts.

EMPLOYEES AND REMUNERATION POLICIES

As at 31 December 2013, the Group had a total of 1,236 full-time employees, a decrease of 46 from the end of 2012. 180 employees were based in Hong Kong and 1,056 were based in Mainland China. Staff remuneration is determined in accordance with the duties, workload, skill requirements, hardship, working conditions and individual performance with reference to the prevailing industry practices. In 2013, the Group continued to implement controls over the headcount, organisation structure and total salaries of each subsidiary. The performance bonus incentive scheme for the management remained effective. Through performance assessment of each subsidiary, a performance bonus was accrued according to various profit rankings and with reference to net cash inflow from operations and profit after taxation. In addition, bonuses will be rewarded to the management, key personnel and outstanding staff through assessment of individual performance. These incentive schemes have effectively improved the morale of our staff members. The Company has also adopted share option schemes to encourage excellent participants to continue their contribution to the Group.