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Stock Exchange Announcement

30 June 2008

For release at: 07:00 hours.

Arko Holdings plc ('the Company' or 'Arko')

Results of the Company

for the year ended 31 December 2007

The Board of Arko announces the results of the Company for the year ended 31 December 2007, which are set out below. These have today been published and will be despatched to shareholders.

Copies of these financial statements will be available from the offices of Nabarro Wells & Co. Limited, Old Change House, 128 Queen Victoria Street, London EC4V 4BJ.

The AGM will be held at the offices of Baker Tilly LLP at 2 Bloomsbury Street, London WC1B 3ST on 21 July 2008 at 12:00 noon.

RESULTS

I am pleased to present the results for the financial year ended 31 December 2007. It has been a difficult year for the Group but, despite the short-term challenges, we have come through with a strong business focus that is well positioned for the longer term.

The results for the year were disappointing. Group revenue for the year increased by 16.5% to US$10.86m. However, operating cost of sales increased by 55% to US$7.97m. As a result the gross profit margin has dropped from 44.9% to 26.6%. Within the operating cost of sales of US$7.97m were included depreciation charges of US$0.79m. The increase in fuel costs as well as the reduction of the average price per TEU of 16% also contributed to the fall in the profit margin. 

The loss for the year (after taxation) was US$32.24m, which took account of an impairment of property, plant and equipment of US$13.19m, of which Hubei Changzhou Power Development Co. Ltd, a subsidiary operating the coal-fired power plant, amounted to US$12.06m and an impairment of goodwill in the power plant of US$9.97m. These impairments represented a complete write-down to nil of goodwill in the power plant as a result of the operational problems and consequent decline in value of the power plant, and the elimination of historic goodwill which arose from prior acquisition of a number of trading subsidiaries. 

Cash balances at the year end were US$0.43m. Subsequent to the year end, such cash was used primarily to pay for part of the purchase of new machinery for the container terminal of US$3m. 

Due to the significant write downs determined to be necessary, the Board made an announcement on 4 June 2008 to update the market about the substantial loss of the Group to appear in the 2007 accounts.

DIVIDENDS

The Board does not recommend the payment of a dividend (2006: nil).

PROBLEMS ENCOUNTERED IN THE POWER PLANT

The power plant commenced electricity generation in 1995 and became a subsidiary of the Group after the reverse takeover in 2002. Due to government policy in China over the last few years, the government did not encourage the operation of small coal-fired power plants. Despite the high demand for electricity, the increase in the sales price of electricity from this plant was not in line with the sales price achieved by larger power plants. In addition, the inflation in the coal price had a significant adverse effect on the profit margin of the power plant. As a result, in July 2005, the operation of the power plant was contracted to an unrelated PRC privately-owned enterprise for a term of five years. However, the underlying performance of the power plant has not altered and its continuing loss affected the whole performance of the Group adversely. Following the policy implemented and announced by the State Council of the People's Republic of China in January 2007, the power plant entered into an agreement with the local government in June 2007 in relation to shutting down and demolishing the power plant before December 2010. Since the PRC operator had ceased operation of the plant in the beginning of third quarter of 2007, the management decided to shut down the plant accordingly. The management believed that the operation of the power plant would not make any contribution to the Group and agreed to a complete write-down of the power plant in this financial year so as to reflect its true value to the Group.

OPERATIONAL REVIEW

Despite the loss suffered from the power plant, the Group has improved its sales performance, mainly in the container terminal operation and the shipping logistics business, being the areas on which the Group now concentrates its efforts, although margins have reduced for the reasons referred to above. Subsequent to the completion of the construction of the new rail and the renovation of the quayside, two new gantry cranes and two new 45t/45m rail-mounted gantry cranes were delivered and started operation in the third and final quarters of 2007. The annual throughput has increased by 5.41% compared to the year 2006.

OUTLOOK

Arko's aim and development strategy is to continue with the expansion of the terminal and shipping logistics business, and the Board believes that this will be the major business of the Group in the coming years. As result of the write-down of the power plant, the Board is of the view that the result of 2008 will become positive. In the coming year Arko hopes to benefit from key operational and infrastructure projects, potentially doubling our capital expenditure for the period of time. They will be financed partly from our own resources and partly through shareholders' loans. It is also foreseen that the increase in consumption demand in China will enhance the river trade activity. Therefore, the Group will spend more resources on the shipping logistics business by means of chartering and buying new river trade vessels. It is also expected that with the increase in the machinery and equipment in the container terminal, the throughput will increase steadily. In fact, the two brand new 45t quayside container cranes will be delivered by the last quarter of year 2008 and the first quarter of year 2009 respectively.

However, with the possible slowing economic growth in China and the slowdown in the world economy, the Board's view is its optimism on the performance of the Group in 2008 should also be tempered with caution.  

APPRECIATION

The Board would again like to thank all staff for the commitment, professionalism and loyalty they have shown during the last twelve months.

Qin Shun Chao

Chairman

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2007

(Expressed in United States dollars)

	Notes	2007 US$ '000	2006 US$ '000
REVENUE	5	10,860	9,323
Cost of sales		(7,972)	(5,139)
GROSS PROFIT		2,888	4,184
Other income	6	605	34
Administrative expenses		(4,041)	(2,218)
Impairment of property, plant and equipment		(1,131)	-
Impairment of goodwill		(9,010)	-
(LOSS)/PROFIT FROM OPERATIONS		(10,689)	2,000
Finance costs	7(a)	-	(96)
(LOSS)/PROFIT BEFORE TAXATION	7	(10,689)	1,904
Tax	8	(142)	(321)
LOSS FOR THE YEAR FROM CONTINUING OPERATIONS		(10,831)	1,583
LOSS FOR THE YEAR DISCONTINUED OPERATIONS	5	(21,408)	(3,308)
LOSS FOR THE YEAR		(32,239)	(1,725)
Attributable to:
Equity holders of the parent Company		(31,275)	(2,121)
Minority interest - continuing operations		(964)	396
		(32,239)	(1,725)
		US cents	US cents
Loss per share
Basic and fully diluted	11
- From continuing operations		(0.50)	0.048
- From discontinued operations		(1.08)	(0.155)
		(1.58)	(0.107)

BALANCE SHEETS

AS AT 31 DECEMBER 2007

(Expressed in United States dollars)

	Notes	2007 US$'000	Group 2006 US$'000	2007 US$'000	Company 2006 US$'000
Non-current assets
Goodwill	12	1,834	20,812	-	-
Property, plant and equipment	13	24,376	32,843	-	-
Investments in subsidiaries	14	-	-	24,218	56,015
Available-for-sale investments	15	12	12	-	-
		26,222	53,667	24,218	56,015
Current assets
Inventories	16	124	77	-	-
Trade and other receivables	17	8,312	10,148	63	44
Cash and cash equivalents	18	428	838	1	-
		8,864	11,063	64	44
Current liabilities
Trade and other payables	19	3,606	2,591	200	123
Amount due to a subsidiary		-	-	2,299	1,937
Taxation		1,134	1,592	-	-
		4,740	4,183	2,499	2,060
Net current assets/(liabilities)		4,124	6,880	(  2,435)	(  2,016)
Total assets less current liabilities		30,346	60,547	21,783	53,999
Non current liabilities
Bank loans	20	1,915	1,915	-	-
Loans from fellow    investors in subsidiary
companies	21	787	787	-	-
		27,644	57,845	21,783	53,999
EQUITY
Share capital	22	14,922	14,922	14,922	14,922
Reserves		687	29,991	6,861	39,077
Total equity attributable to    equity shareholders		15,609	44,913	21,783	53,999
Minority interest - continuing operations		12,035	12,932	-	-
TOTAL EQUITY		27,644	57,845	21,783	53,999

Approved and authorised for issue by the board on 25 June 2008.

QIN Shun Chao	ZHANG Jing
Director	Director

STATEMENT OF CHANGES IN EQUITY - CONSOLIDATED

FOR THE YEAR ENDED 31 DECEMBER 2007

(Expressed in United States dollars)

Group			Share capital				Share premium	(note i) Statutory surplus reserve	(note ii) Merger reserve	Exchange reserve	Retained profit	Total attributable  to equity holders  of the parent	Minority interest	Total
			US$'000				US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
			___________________________________________________________________________________________________________________
Balance at 1 January 2006			14,922				15,662	1,681	26,043	-	(10,742)	47,566	12,544	60,110
Loss for the year			-				-	-	-	-	(2,122)	(2,122)	396	(1,726)
Exchange movements			-				-	-	-	(531)	-	(531)	(8)	(539)
Total recognised income and expense					-		-	-	-	(531)	(2,122)	(2,653)	388	(2,265)
			___________________________________________________________________________________________________________________
Balance at 31 December 2006			14,922				15,662	1,681	26,043	(531)	(12,864)	44,913	12,932	57,845
Loss for the year			-				-	-	-	-	(31,275)	(31,275)	(964)	(32,239)
Exchange movements			-				-	-	-	1,971	-	1,971	67	2,038
Total recognised income and expense						-	-	-	-	1,971	(31,275)	(29,304)	(897)	(30,201)
			___________________________________________________________________________________________________________________
Balance at 31 December 2007			14,922				15,662	1,681	26,043	1,440	(44,139)	15,609	12,035	27,644

Note:

(i)    Statutory surplus reserve:

In accordance with the law of the People's Republic of China and the articles of association of certain of the Company's subsidiaries, directors of these subsidiaries may at their discretion make appropriations to a statutory surplus reserve equivalent to 10% of the subsidiaries' net profits. Appropriations may also be made to statutory public welfare reserve equivalent to 5 to 10% of the net profits of these operating subsidiaries. Distribution of profits to shareholders can only be made after such appropriations.

The statutory surplus reserve may be used to reduce any losses incurred or be capitalised as paid up capital. The use of the statutory public welfare reserve is restricted to capital expenditure incurred for staff welfare facilities. The statutory public welfare reserve is not available for distribution.

 

STATEMENT OF CHANGES IN EQUITY - COMPANY

FOR THE YEAR ENDED 31 DECEMBER 2007

(Expressed in United States dollars)

Company						Share capital	Share premium	Merger reserve	Retained profits	Total
						US$'000	US$'000	US$'000	US$'000	US$'000
		__________________________________________________________
Balance at 1 January 2006						14,922	15,662	26,043	(2,029)	54,598
Loss for the year						-	-	-	(599)	(599)
Total recognised income and expense						-	-	-	(599)	(599)
					__________________________________________________________
Balance at 31 December 2006						14,922	15,662	26,043	(2,628)	53,999
Loss for the year						-	-	-	(32,216)	(32,216)
Total recognised income and expense						-	-	-	(32,216)	(32,216)
		__________________________________________________________
Balance at 31 December 2007						14,922	15,662	26,043	(34,844)	21,783

CASH FLOW STATEMENT - CONSOLIDATED

FOR THE YEAR ENDED 31 DECEMBER 2007

(Expressed in United States dollars)

		2007 US$'000	2006 US$'000
Cash flow from operating activities
(Loss)/profit before taxation
Continuing operations		(10,689)	1,904
Discontinued operation		(21,408)	(3,308)
Discontinued operation		(32,097)	(1,404)
Adjustments for:
- Interest expense		120	210
- Interest income		(14)	-
- Depreciation		1,579	2,127
- Loss on disposal of property, plant and equipment		95	11
- Impairment loss - goodwill		18,977	2,000
- Impairment loss - property, plant and equipment		13,194	-
- Exchange adjustments		728	(298)
Operating profit before working capital changes		2,582	2,646
(Increase)/decrease in inventories		(47)	68
Decrease/(increase) in receivables		1,836	(1,338)
Increase in payables		567	689
Net cash flow generated from operations		4,938	2,065
Interest paid		(120)	(211)
Taxes paid		(152)	(383)
Net cash generated from operating activities		4,666	1,471
Investing activities
Purchase of property, plant and equipment		(5,187)	(1,777)
Sales proceeds of property, plant and equipment		97	491
Interest income		14	-
Net cash used in investing activities		(5,076)	(1,286)
Net (decrease)/increase in cash and cash equivalents		(410)	185
Cash and cash equivalents at 1 January		838	653
Cash and cash equivalents at 31 December		428	838

CASH FLOW STATEMENT - COMPANY

FOR THE YEAR ENDED 31 DECEMBER 2007

(Expressed in United States dollars)

		2007 US$'000	2006 US$'000
Cash flow from operating activities
Loss after taxation and before working capital changes		(32,216)	(599)
Adjustment for:
-Impairment loss on investments in subsidiaries		31,797	-
Operating loss before working capital changes		(419)	(599)
Increase in trade and other receivables		(19)	(18)
Increase in trade and other payables		77	26
Increase in amount due to subsidiary		362	444
Net increase/(decrease) in cash and cash equivalents		1	(147)
Cash and cash equivalents at 1 January		-	147
Cash and cash equivalents at 31 December		1	-

1.    PRINCIPAL ACCOUNTING POLICIES

General information

The Company is a public limited company incorporated and domiciled in the United Kingdom and its shares are listed on the AIM Market of the London Stock Exchange ('LSE'). The principal place of business of the Company is in the People's Republic of China ('PRC'). 

At 31 December 2007, the directors consider the immediate parent and ultimate controlling party of the company to be Keen Lloyd Holdings Limited and Chin Dynasty Foundation Limited respectively, both of which are incorporated in the British Virgin Islands. Neither produces financial statements available for public use.

2.    SIGNIFICANT ACCOUNTING POLICIES

a)    Statement of compliance

Commencing on 1 January 2007, the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted for use in the European Union(IFRS), and comparative figures for the year ended 31 December 2006 have been restated in accordance with IFRS.

The Group has adopted the following transitional exemption:

IFRS 2: The Group has elected to apply the share-based payment exemption and accordingly it has applied IFRS 2 Share-based payment from 1 January 2006 only to share options that were granted after 7 November 2002, but which had not vested by 1 January 2006.

IFRS 3: The Group has elected not to restate business combinations which occurred prior to the IFRS transition date of 1 January 2006.

IAS 21: the Group has elected not to apply retrospectively to fair value adjustments and goodwill arising in business combinations that accrued prior to the IFRS transition date.

The consolidated statement of cash flows prepared under IFRS presents substantially the same information as that required under UK GAAP. Under IFRS only three categories of cash flow activity are required to be reported: operating, investing and financing. Cash flows from returns on investments and servicing of finance under UK GAAP are including as operating activities and investing activities respectively under IFRS. There are no other material differences between the cash flow statement presented under IFRS and the cash flow statement presented under UK GAAP.

Income and equity reconciliation statements are stated below so as to reflect the effect of the adoption of IFRS. The sole adjustment represents the non-amortisation of goodwill as recognised by IFRS 3 Business Combinations.

	UK GAAP	Adjustment	IFRS
Year ended 31 December 2006	US$'000	US$'000	US$'000
______________________________________________________________________________________________
Revenue	9,323	-	9,323
Cost of sales	(5,139)	-	(5,139)
	_______________________________________________
Gross profit	4,184	-	4,184
Other income	760	-	760
Administrative expenses	(4,138)	-	(4,138)
Impairment loss of goodwill	(2,000)	-	(2,000)
Amortisation	(1,400)	1,400	-
	_______________________________________________
Operating loss	(2,594)	1,400	(1,194)
Finance costs	(210)	-	(210)
	_______________________________________________
Loss before taxation	(2,804)	1,400	(1,404)
Tax	(321)	-	(321)
	_______________________________________________
Loss for the year	(3,125)	1,400	(1,725)
	_______________________________________________
Attributable to :
Equity holders of the parent Company	(3,521)	1,400	(2,121)
Minority interest	396	-	396
	_______________________________________________
	(3,125)	1,400	(1,725)
	_______________________________________________

	UK GAAP			Adjustment		IFRS
Balance sheet as at 31 December 2006	US$'000			US$'000		US$'000
____________________________________________________________________________________________
Non-current assets
Goodwill		19,412		1,400		20,812
Property, plant and equipment		32,843		-		32,843
Available-for-sale investments		12		-		12
		______________________________________
		52,267		1,400		53,667
		______________________________________
Current assets
Inventories		77		-		77
Trade and other receivables		10,148		-		10,148
Cash and cash equivalents		838		-		838
		______________________________________
		11,063		-		11,063
		______________________________________
Current liabilities
Trade and other payables		3,534		-		3,534
Current tax liabilities		649		-		649
		______________________________________
		4,183	-		4,183
		______________________________________
Current assets		6,880	-		6,880
		______________________________________
Total assets less current liabilities		59,147		1,400		60,547
		______________________________________
Non-current liabilities
Bank loans		1,915	-		1,915
Advances from fellow investors in subsidiary companies		787	-		787
		______________________________________
		2,702	-		2,702
		______________________________________
		56,445	1,400		57,845
		______________________________________
EQUITY
Issued capital		14,922		-		14,922
Share premium		15,662		-		15,662
Merger reserve		26,043		-		26,043
Retained earnings		(14,264)		1,400		(12,864)
Other reserves		1,150		-		1,150
		______________________________________
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY		43,513		1,400		44,913
MINORITY INTEREST		12,932		-		12,932
		______________________________________
TOTAL EQUITY		56,445		1,400		57,845
		______________________________________

	UK GAAP			Adjustment		IFRS
Balance sheet as at 31 December 2005	US$'000			US$'000		US$'000
____________________________________________________________________________________________
Non-current assets
Goodwill		22,807		-		22,807
Property, plant and equipment		33,878		-		33,878
Available-for-sale investments		12		-		12
		______________________________________
		56,697		-		56,697
		______________________________________
Current assets
Inventories		145		-		145
Trade and other receivables		8,810		-		8,810
Cash and cash equivalents		653		-		653
		______________________________________
		9,608		-		9,608
		______________________________________
Current liabilities
Trade and other payables		2,783		-		2,783
Current tax liabilities		711		-		711
		______________________________________
		3,494	-		3,494
		______________________________________
Current assets		6,114	-		6,114
		______________________________________
Total assets less current liabilities		62,811		-		62,811
		______________________________________
Non-current liabilities
Bank loans		1,915	-		1,915
Advances from fellow investors in subsidiary companies		786	-		786
		______________________________________
		2,701	-		2,701
		______________________________________
		60,110	-		60,110
		______________________________________
EQUITY
Issued capital		14,922		-		14,922
Share premium		15,662		-		15,662
Merger reserve		26,043		-		26,043
Retained earnings		(10,742)		-		(10,742)
Other reserves		1,681		-		1,681
		______________________________________
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY		47,566		-		47,566
MINORITY INTEREST		12,544		-		12,544
		______________________________________
TOTAL EQUITY		60,110		-		60,110
		______________________________________

b)        Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as enclosed by the EU for the first time. The disclosures required by IFRS, concerning the transition from UK GAAP to IFRS are given in note 2(a). The financial statements have been prepared on the historical cost basis, as modified for the revaluation of available-for-sale investments.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving in a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.

c)        Basis of consolidation

On the acquisition of a subsidiary, the assets and liabilities of that subsidiary are recorded at their fair value, reflecting their condition at the date of acquisition. 

The consolidated income statement and consolidated balance sheet include the financial statements of the Company and its subsidiary undertakings up to 31 December. The results of subsidiaries acquired are included in the consolidated income statement from the date on which control passes. Intra-group sales and profits are eliminated on consolidation.

As permitted by Section 230 of the Companies Act 1985, a separate income statement is not presented in respect of the Company.

d)        Revenue

Revenue comprises the value of sales in the year in respect of the operation of the terminal and provision of shipping logistic services.

e)        Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary companies.

Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units and is annually tested for impairment. In respect of associated companies, the carrying amount of goodwill is included in the carrying amount of the interests in the associated companies.

If the cost of acquisition is less than the fair value of net identifiable assets of the acquired subsidiary company, associated company, the difference is recognised immediately in the consolidated income statement.

Any gain or loss on disposal of a subsidiary company and an associated company includes the carrying amount of goodwill relating to the entity sold.

f)        Property, plant and equipment

Expenditure on additions and improvements is capitalised as incurred. Non-current assets are included at historical cost less accumulated depreciation and any impairment losses.

Property, plant and equipment, other than construction in progress, are depreciated over their estimated useful lives on a straight line basis. The following annual rates of depreciation have been used.

Land and buildings                                                         20-30 years

Plant and machinery                                                       10-20 years

Furniture, fixtures and equipment                                 5-10 years

Motor vehicles                                                                 5-10 years

Oil storage tanks                                                              15 years

Vessels                                                                              10 years

Construction in progress represents a building under construction, which is stated at cost less any impairment. Cost comprises the direct cost of construction. 

Both the useful life of an asset and its residual value, if any, are reviewed annually.

The carrying amounts of other property, plant and equipment are reviewed for indications of impairment at each balance sheet date. An impairment loss is recognised to the extent that the carrying amount of an asset, or the cash-generating unit to which it belongs, is more than its recoverable amount. The recoverable amount of an asset, or of the cash generating unit to which it belongs, is the greater of its net selling price 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 time value of money and the risks specific to the assets. An impairment loss is reversed if there has been a favourable change in estimates used to determine the recoverable amount.

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

g)        Subsidiary companies

A company where more than 50 per cent of the issued share capital is held by the Company for the long term or where 50 per cent of the issued share capital is held for the long term and where the Company controls the composition of the board of directors is deemed to be a subsidiary.

The Company's investments in subsidiary companies are stated at cost less any provision for diminution in value.

h)        Available-for-sale investments

Investments being those held for non-trading purposes, are classified as available-for-sale investments. At each balance sheet date the fair value is remeasured, with any resultant gain or loss being recognised directly in equity in the fair value reserve, except foreign exchange gains and losses in respect of monetary items such as debt securities which are recognised directly in profit or loss. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in profit or loss. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in profit or loss.

When there is objective evidence that available-for-sale investments are impaired, the cumulative loss that has been recognised directly in equity is removed from equity and is recognised in profit or loss. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that asset previously recognised in profit or loss.  

Impairment losses recognised in profit or loss in respect of available-for-sale investments are not reversed through profit or loss. Any subsequent increase in the fair value of such assets is recognised directly in equity.

Impairment losses in respect of available-for-sale debt investments are reversed if the subsequent increase in fair value can be objectively related to an event occurring after the impairment loss was recognised. Reversals of impairment losses in such circumstances are recognised in profit or loss.

i)        Inventories

Inventories are carried at the lower of cost and net realisable value.

Cost is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

j)         Trade and other receivables

Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less impairment losses for bad and doubtful receivables, except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less impairment losses for bad and doubtful debts.

Impairment losses for bad and doubtful debts are measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted where the effect of discounting is material.

k)        Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Company's cash management are also included as a component of cash and cash equivalents for the purpose of the cash flow statement.

l)        Trade and other payables

Trade and other payables are initially recognised at fair value. Trade and other payables are subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

m)        Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

 

n)        Employee benefits

 

Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

 

o)        Translation of foreign currencies

           (a)    Functional and presentation currency

    

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in United States Dollars which is the Company's presentation currency.

 

           (b)   Transactions and balances

 

Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the balance sheet date. Exchange gains and losses are recognised in profit or loss. 

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was determined.

 

           (c)    Group companies

 

The results of the subsidiary company in the PRC are translated into Hong Kong dollars at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Balance sheet items are translated into Hong Kong dollars at the foreign exchange rates ruling at the balance sheet date. The resulting exchange differences are recognised directly in a separate component of equity.

On disposal of a foreign operation, the cumulative amount of the exchange differences recognised in equity which relate to that foreign operation is included in the calculation of the profit or loss on disposal.

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to items recognised directly in equity, in which case they are recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits. Apart from differences which arise on initial recognition of assets and liabilities, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised.  

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.

q)    Share-based payments

The Company has taken advantage of the exemption in IFRS2 Share-based payment from recognising a charge in respect of share options which were fully vested before 31 December 2005.

r)    Provisions and contingent liabilities

       Provisions and contingent liabilities

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

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

s)    Related parties

    For the purposes of these financial statements, a party is considered to be related to the Company if:

Close family members of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.

3.    CHANGES IN ACCOUNTING POLICIES

In the current year, the Group has adopted IFRS 7 Financial instruments: disclosures which is first effective for the current accounting period of the Company.

There have been no significant changes to the accounting policies applied in these financial statements for the years presented as a result of the adoption of IFRS 7. However, some additional disclosures are provided as follows:

As a result of the adoption of IFRS 7, the financial statements include expanded disclosures relating to the Group's financial instruments and the nature and extent of risks arising from those instruments, compared with the information previously required to be disclosed by IAS 32, Financial instruments: Disclosure and presentation. These disclosures are provided throughout these financial statements, and in particular in note 23.

IFRS 7 does not have any material impact on the classification, recognition and measurements of the amounts recognised in the financial statements.

The Group has not applied any new Standard or interpretations that are not yet effective for the current accounting period (see note 28).

4.    CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are currently evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Apart from information disclosed elsewhere in these financial statements, the following disclosures summarise : (1) estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year and (2) significant judgements made in the process of applying the Group's accounting policies.

           (i)             Income taxes

 

The Group is subject to income taxes in the People's Republic of China (the 'PRC'), Hong Kong and the United Kingdom. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

           (ii)            Provision for doubtful receivables

 

The Group provides for doubtful receivables based on an assessment of the collectibility of trade receivables. Provisions for doubtful receivables are applied to trade receivables where events or changes in circumstances indicate that the balance may not be collectible. The identification of doubtful receivables requires the use of judgments and estimates. Where the expectation is different from the original estimates, such difference will impact carrying value of receivables and doubtful debt expenses in the period in which such estimate has been changed.

5.    REVENUE AND SEGMENT INFORMATION

The principal activities of the Group are the provision of logistics and other related services including sea freight forwarding and barge hire.

Revenue represents income earned from the provision of logistic and other related services.  Business (primary) segment information is as follows:

	Revenue		Segment profit/(loss)
i)    Segment revenue and result	2007	2006	2007	2006
	US$'000	US$'000	US$'000	US$'000
Continuing operations
Terminal and shipping logistics	10,860	9,298	(820)	4,772
Trading and others	-	25	(8,776)	(3,189)
Mining	-	-	(1,235)	-
	10,860	9,323	(10,831)	1,583
Discontinued operations
Power plant	-	-	(21,408)	(3,308)
	10,860	9,323	(32,239)	(1,725)

An analysis of the results of discontinued operation, after elimination of intra company transactions, is as follows:

		2007 US$'000	2006 US$'000
Revenue		-	-
Other income		1,142	726
Administrative expenses		(401)	(1,920)
Impairment of property, plant and equipment		(12,062)	-
Impairment of goodwill		(9,967)	(2,000)
		_______	_______
Loss from operations		(21,288)	(3,194)
Finance costs		(120)	(114)
		_______	_______
Loss before taxation		(21,408)	(3,308)
Income tax		-	-
		_______	_______
Loss for the year		(21,408)	(3,308)
		_______	_______

	Assets		Liabilities
ii)    Segment assets and liabilities	2007	2006	2007	2006
	US$'000	US$'000	US$'000	US$'000
Continuing operations
Terminal and shipping logistics	34,739	31,635	4,040	2,978
Trading and others	7,196	8,026	271	294
Mining	(9)	1,210	137	123
	41,926	40,871	4,448	3,395
Discontinued operations
Power plant	(1,982)	28,717	2,994	3,490
Trading and others	(4,858)	(4,858)	-	-
	(6,840)	23,859	2,994	3,490
Total	35,086	64,730	7,442	6,885
	Assets		Liabilities
	2007	2006	2007	2006
Represents in balance sheet	US$'000	US$'000	US$'000	US$'000
Non-current	26,222	53,667	2,702	2,072
Current	8,864	11,063	4,740	4,813
Total	35,086	64,730	7,442	6,885

iii)    Other information
	Continuing operations				Discontinued operations
	Terminal	Trading				Trading
	shipping	and			Power	and
	and logistics	others	Mining		plant	others	Total
	US$'000	US$'000	US$'000		US$'000	US$'000	US$'000
Additions to property,
plant and equipment	4,354	833	-		-	-	5,187
Depreciation	881	297	-		401	-	1,579
Impairment losses on
property, plant and
equipment	-	-	1,131		12,063	-	13,194
Loss on disposal of
vessel	-	95	-		-	-	95
Impairment losses on
goodwill	-	9,010	-		9,967	-	18,977

iv)    Geographical (secondary) segment information
	Revenue			Segment assets
	2007		2006	2007	2006
	US$'000		US$'000	US$'000	US$'000
Analysis by origin:
Hong Kong	944		1,327	23,872	23,636
People's Republic of China,
excluding Hong Kong	9,916		7,996	5,406	35,591
United Kingdom	-		-	(1,634)	(1,382)
	10,860		9,323	27,644	57,845

6.	OTHER INCOME	2007 US$'000	2006 US$'000
	Rental income	224	34
	Exchange gains	269	-
	Other	112	-
		605	34

7.	LOSS BEFORE TAXATION
	Loss before taxation is stated after charging:
		2007 US$'000	2006 US$'000
a)	Finance costs
	Bank loans	-	-
	Other loans	-	96
		-	96
b)	Staff costs
	Wages and salaries     - included in cost of sales	957	739
	- included in administrative expenses	434	407
	Other pension costs	14	13
	Other staff welfare	23	30
		1,428	1,189
	Employees	2007 No.	2006 No.
	The average monthly number of persons (including directors) employed by the Group during the year was:
	Management and administration	31	58
	Sales and distribution	7	7
	Operations	282	503
		320	568

Staff costs are included within administrative expenses in the income statement.

			2007 US$'000				2006 US$'000
c)		Other items
		Fees payable to Baker Tilly UK Audit LLP (2006 : Baker Tilly)   for the audit of Company's annual financial statements	36		39
		Fees payable to associates of company's auditors
		for other services:
		The audit of the Company's subsidiaries	49		36
		Taxation services	-		32
		Depreciation of property, plant and equipment	1,178		1,004
		Loss on disposal of property, plant and equipment	95		11
		Rentals under operating leases - land and buildings	77		75
		- barges and containers	222		262
		- motor vehicles	8		27
		Directors' remuneration (note 9)
		- Directors' emoluments - salaries	176		83
		- pension costs	6		6
		Exceptional items
		Impairment of goodwill	9,010		-
		Impairment loss on property, plant and equipment	1,131		-
			10,141		-
8.	TAXATION		2007 US$'000		2006 US$'000
	Overseas tax:
	Current year		142		321
	Factors affecting tax charge for the year:		2007 US$'000		2006 US$'000
	The tax assessed differs from the standard rate of corporation tax in the UK (30%). The differences are explained below:
	(Loss)/profit before tax		(10,689)		1,904
	(Loss)/profit before tax multiplied by standard rate of corporation tax in the UK of 30% (2006: 30%)		(3,207)		571
	Effects of:
	Different tax rates on overseas earnings		93		(31)
	Expenses not deductible for tax purposes		4,813		563
	Non-taxable income		(1,564)		(821)
	Utilisation of tax losses previously not recognised		7		(9)
	Addition to tax losses		-		48
	Tax charge for the year		142		321

In respect of subsidiary companies operating in Hong Kong, provisions for Hong Kong profits tax are calculated at 17.5% (2006: 17.5%) of the estimated assessable profits for the year.

Subsidiary companies operating in the People's Republic of China are subject to Enterprise Income Tax ('EIT') at rates ranging from 15% to 33%. However, certain subsidiaries are subject to tax holidays from the local tax authorities under income tax law. Others had tax losses brought forward from previous years.

No deferred tax is recognised on the unremitted earnings of the overseas subsidiary companies, as no dividend payments due to UK parent company are expected to be made in the foreseeable future. A deferred tax asset of approximately US$879,000 (2006: approximately US$109,000) has not been recognised in respect of tax losses carried forward due to the uncertainty of the timing of future taxable profits against which these losses can be offset.

9.    DIRECTORS' REMUNERATION

Fees of US$47,494 (2006: US$47,876) were paid to certain directors through Winbest Resources Limited, a company which is ultimately controlled by Chin Dynasty Foundation Limited. These fees are in addition to fees of US$181,821 (2006: US$89,360) that were paid to the directors by Group companies, as disclosed in note 7. For the purpose of this disclosure, the directors are considered to be key management of the group.

10.    DIVIDEND

    The directors do not recommend the payment of any dividend.

11.    LOSS PER SHARE - BASIC AND DILUTED

i)      From continuing operations

The calculation of basic and diluted earnings per share is based on the loss attributable to equity shareholders of the Group of US$9.875 million (2006: profit of US$0.953 million) and the weighted average number of shares in issue of 1,978,895,097 (2006: 1,978,895,097).

ii)      From discontinued operations

The calculation of basic and diluted earnings per share is based on the loss attributable to equity shareholder of the Group of US$21.4 million (2006: loss of US$3.074 million) and the weighted average number of shares in issue of 1,978,895,097 (2006: 1,978,895,097).

12.    GOODWILL	Goodwill on acquisition of subsidiaries
	2007	2006
	US$'000	US$'000
Cost At 1 January	22,807	22,807
Exchange realignment	(1)	5
At 31 December	22,806	22,812
Provision At 1 January	1,995	-
Impairment charge for the year	18,977	2,000
At 31 December	20,972	2,000
Net book value At 31 December	1,834	20,812
At 1 January	20,812	22,807

Commencing from 1 January 2006, no amortisation of goodwill is provided and an annual impairment test is made to assess the fair value of goodwill.

The impairment charge in the year ended 31 December 2007 is in respect of the cessation of the Group's power plant operation and other discontinued activities during the year. The goodwill balance at 31 December 2007 relates to the Group's remaining operations.

13.    PROPERTY, PLANT AND EQUIPMENT	Land and buildings	Plant and machinery	Furniture, fixtures and equipment	Oil storage tanks	Vessels	Motor vehicles	Construction in progress	Total
GROUP	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Cost
At 1 January 2006	22,065	21,040	7,947	173	2,446	687	466	54,824
Exchange realignment	(300)	1,029	175	-	150	16	-	1,070
Transfers	-	88	-	-	-	-	(88)	-
Additions	140	1,250	47	-	-	12	327	1,776
Disposals	-	-	(4)	-	(871)	-	-	(875)
At 1 January 2007	21,905	23,407	8,165	173	1,725	715	705	56,795
Exchange realignment	787	1,239	519	-	-	17	-	2,562
Additions	932	3,010	104	-	831	136	174	5,187
Disposals	-	-	-	-	(430)	-	-	(430)
At 31 December 2007	23,624	27,656	8,788	173	2,126	868	879	64,114
Depreciation
At 1 January 2006	6,584	9,471	4,581	13	1,079	515	-	22,243
Exchange realignment	(39)	(65)	33	-	20	6	-	(45)
Charge for the year	416	930	546	-	183	52	-	2,127
Disposals	-	-	(3)	-	(370)	-	-	(373)
At 1 January 2007	6,961	10,336	5,157	13	912	573	-	23,952
Exchange realignment	292	607	339	-	(5)	16	-	1,249
Charge for the year	546	509	272	-	177	75	-	1,579
Disposals	-	-	-	-	(236)	-	-	(236)
Impairment charge	2,999	7,891	2,257	-	-	27	20	13,194
At 31 December 2007	10,798	19,343	8,025	13	848	691	20	39,738
Net book value
At 31 December 2007	12,826	8,313	763	160	1,278	177	859	24,376
At 31 December 2006	14,944	13,071	3,008	160	813	142	705	32,843
At 31 December 2005	15,481	11,569	3,366	160	1,367	172	466	32,581

Of the depreciation charge for the year, US$788,000 (2006: US$618,000) is included in cost of sales, US$390,000 (2006: US$386,000) is included in administrative expenses and US$401,000 (2006: US$1,123,000) is included in exceptional item, in the income statement.

The impairment charge has been made as a result of the cessation of the Group's power plant operation during the year.

At 31 December 2007, the net book values of land and buildings, plant and machinery, fixtures and equipment are further analysed as follows:

                

	Terminal US$'000	Power plant US$'000	Mining zone US$'000	Others US$'000	Total US$'000
Land - short lease	2,757	-	-	-	2,757
- unspecified leases	1,378	-	-	-	1,378
	4,135	-	-	-	4,135
Buildings	8,691	-	-	-	8,691
Land and buildings	12,826	-	-	-	12,826
Plant and machinery	8,286	-	27	-	8,313
Furniture, fixtures and equipment	183	-	-	580	763

On 31 December 2003, a guarantee was given by the Company's subsidiary, Keen Chance Terminal (GZ) Company Limited ('KCT') for banking facilities granted to a fellow investor, Miaotou Economic Development Company Limited ('MEDCL'), in KCT (see note 27(b)).

The Group has obtained land use right and real estates certificates on the terminal's land under short leases from the local land authority. Land with a value of US$ 1,378,309 held under unspecified leases of the terminal is land held for industrial use for which the relevant land use right certificate has not been obtained and thus the term of the lease has yet to be agreed.

Included in land and buildings is short lease land on which the power plant, related ash storage pools and ancillary facilities are located. In addition, they also include land held for industrial use in respect of which the Group has not obtained the relevant land use right certificate.

Under the law of the People's Republic of China, land held for industrial use and the buildings without building ownership certificates can only be used for identified industrial purposes. The Group has not obtained any building ownership certificates in respect of the buildings of the Group. The Group cannot legally sell or mortgage such properties until the relevant land taxes have been paid to the local land authority. However there is no binding agreement for the taxes to be paid.

14.	INVESTMENTS IN SUBSIDIARIES COMPANY	2007 US$'000	2006 US$'000
	Unlisted shares, at cost
	At 1 January 2007 and 31 December 2007	56,015	56,015
	Provision for impairment
	At 1 January	-	-
	Charge for the year	31,797	-
	At 31 December	31,797	-
	Net book value
	At 31 December	24,218	56,015
	At 1 January	56,015	56,015

At 31 December 2007, the Company held 100% of the ordinary shares of Arko Offshore Holdings Limited, a company incorporated in the British Virgin Island ('BVI'), whose principal activity was that of a holding company. Arko Offshore Holdings Limited had the following subsidiary undertakings:

Name	Holding ordinary shares/registered capital	Business activities	Country of incorporation
Arko Energy Limited	100%	Investment holding	British Virgin Islands
Arko Consultants Limited	100%	Providing management services	British Virgin Islands
Arko Pacific Limited	100%	Investment holding	British Virgin Islands
Long Prosperity Industrial Limited*	100%	Investment holding	Republic of Seychelles
Arko Silicon (Hubei) Limited*	100%	Dormant	People's Republic  of China
Sanko Mineral Limited*	100%	Sub-letting of yachts, ships and vessels	British Virgin Islands
Arko Logistics Limited*	100%	Providing logistics  and related services	Hong Kong
Arko Satellite Limited*	100%	Dormant	British Virgin Islands
Arko Terminal Limited ('ATL')*	100%	Investment holding	Republic of Seychelles
Changzhou Power Development Company Limited*	59.2%	Operating a coal-fired thermal power plant	People's Republic  of China
Keen Chance Terminal (GZ) Company Limited*	40%	Investing in and operation of a terminal and providing logistics services	People's Republic of China
Fujian Sanko Mining Limited*	70%	Dormant	People's Republic  of China
* held by a subsidiary of Arko Offshore Holdings Limited

The 40% equity interest in Keen Chance Terminal (GZ) Company Limited ('KCT') previously held by Keen Lloyd Energy Limited ('KLEL'), a subsidiary of Keen Lloyd Holdings Limited ('KLHL'), has been transferred to ATL. The transfer has been submitted for registration to the relevant PRC authorities. 

Pursuant to an agreement dated 5 April 2002 entered into between KLEL and Miaotou Economic Development Company Limited ('MEDCL'), (a shareholder of KCT who held a 30% equity interest in KCT), MEDCL agreed to vote in accordance with the instructions of KLEL at board meetings in view of its indebtedness to KLEL, for an approximate sum of RMB78 million (equivalent to US$9.4 million), and KLEL intended to convert the outstanding loan into registered capital of KCT.

On 22 April 2003, KLEL entered into a shareholder agreement with MEDCL and Harbour Economic Development Company Limited ('HEDCL'), another shareholder in KCT, whereby all parties agreed that MEDCL has unconditionally transferred the authority empowered to its directors representative (including their rights and obligations) to KLEL until KLEL transferred the 40% equity interests in KCL to ATL to reiterate the aforesaid agreement dated 5 April 2002.

On 16 May 2003, a supplemental agreement was entered into between ATL, KLEL, MEDCL and HEDCL by which all parties agreed that the above authority transferred to KLEL would be vested in ATL after KLEL completed the transfer of equity interests in KCT to ATL.

In accordance with the terms and conditions set out in the above agreements, KLEL effectively controls the board of KCT and this arrangement has been confirmed by the shareholders of KCT. In 2002, a Hong Kong lawyer expressed his view that KCT is a subsidiary of KLEL under Hong Kong Company Law. Control of KLEL has been transferred to ATL and therefore in the opinion of the directors, KCT is a subsidiary of ATL under the Companies Act 1985.

KCT will be a legal subsidiary of ATL immediately upon the registration of the transfer of the 40% of equity in KCT from KLEL to ATL.

During the second half of 2007, pursuant to an agreement signed with the Hubei Provincial Economic Committee Bureau, Suizhou City Government and the Hubei Provincial Electricity Co., Ltd. on 30 June 2007, the power plant factory of Changzhou Power Development Company Limited has been ordered to close down its operation from July 2007 onwards owing to the macroeconomic and administrative measures imposed by the order of State Council to clear off those ineffective coal-fired power plants in Hubei Province.

15.    AVAILABLE-FOR-SALE INVESTMENTS		2007 US$'000	2006 US$'000
Unlisted in PRC		12	12

The above investment represents 20% of the ordinary shares in a company incorporated in the People's Republic of China, Guangzhou Keen Lloyd Shipping Agents Limited, at consideration of RMB 100,000 (approximately US$12,000). The associate is principally engaged in provision of logistics and related services. It is not treated as an investment in associate on the ground of its immaterial amount.

16.    INVENTORIES

Inventories represent consumables. There was no significant difference between the replacement cost and the value shown in the balance sheet.

 

17.    TRADE AND OTHER RECEIVABLES

			Group		Company
	2007 US$'000		2006 US$'000	2007 US$'000	2006 US$'000
Amounts falling due within one year:
Trade receivables	1,689		1,985	-	-
Deposits	700		652	-	-
Prepayments	3		-	-	-
Other receivables	2,528		3,116	63	44
Amount due from shareholders	1,656		3,585	-	-
Amount due from related companies	64		645	-	-
Amount due from immediate holding company		1,672	165	-	-
	8,312		10,148	63	44

Trade receivables are due within 30 days from the date of billing. Further details on the Company's credit policy are set out in note 23(a).

The ageing analysis of trade debtors and that are neither individually nor collectively considered to be impaired are as follows:

	2007	2006
	US$'000	US$'000
Neither past due nor impaired	751	896
Less than one month past due	443	515
1 to 3 months past due	495	574
Total amounts past due	938	1,089
Total	1,689	1,985

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

Receivables that were past due but not impaired relate to a number of customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are considered fully recoverable. The Group does not hold any collateral over these balances.

Note:

Included in other receivables at 31 December 2007 are amounts due from (non-group) related companies as follows:

-   Tanko Electronics Limited - US$Nil (2006: US$38,687)

-   Guangzhou Tung Lloyd Shipping Agency Company Limited - US$351,874 (2006: US$328,723)

-   Guangzhou Winko Investment Limited - US$Nil (2006: US$91,680) 

-   Guangzhou Keen Lloyd Copper Industry Company Limited - US$42,148 (2006: US$81,126)

-   Keen Lloyd Holdings Limited - US$1,671,947 (2006: US$165,166)

The amounts are of the nature of current account, interest free, unsecured and repayable on demand.

18.    CASH AND CASH EQUIVALENTS

		2007	2006
		US$'000	US$'000
Cash in hand and at bank		428	838
			Floating rate
		2007	2006
Currency		US$'000	US$'000
Hong Kong Dollars		405	517
Chinese RMB		22	321
UK Pound Sterling		1	-
		________	________
		428	838

19.    TRADE AND OTHER PAYABLES

	Group		Company
	2007 US$'000	2006 US$'000	2007 US$'000	2006 US$'000
Amounts falling due within one year:
Trade payables	991	492	105	65
Other payables	529	364	-	-
Accruals	737	882	95	58
Amount due to related companies	77	499	-	-
Deferred income	1,272	354	-	-
	3,606	2,591	200	123

20.	Bank LOANS, other loans and financial instruments		2007 US$'000	2006 US$'000
	Analysis of debt maturity
	Amounts payable and due within
	- Two to five years	1,915		1,915

The bank loan is unsecured, with interest accruing at the fixed rate of 5.85% per annum.

The Company had no other financial liabilities.

The Group holds financial instruments in order to finance its operations and to manage interest rate and currency risks. Group operations are financed by means of retained profits and a mixture of both short and medium term debts. The Group borrows, through banks and from related parties, in local currencies at fixed rates. The Group does not trade in any way in financial instruments.

21.    ADVANCE FROM FELLOW INVESTORS IN SUBSIDIARY

An amount was advanced from Miaotou Economic Development Company Limited of US$718,004 (2006 : US$718,004) and a further amount from Walton Enterprises Limited of US$68,673 (2006 : US$68,673). These amounts are unsecured, interest free and no fixed term of repayment.

22.    share capital	2007		2006
	Number	£		Number	£
a)    Authorised:  Ordinary shares of 0.5p each	30,000,000,000	150,000,000		30,000,000,000	150,000,000
Equivalent to:		US$  265,395,280			US$ 265,395,280
Allotted, called up and fully paid: Ordinary shares of 0.5p each	1,978,895,097	US$  14,921,520		1,978,895,097	US$ 14,921,520

Share options

The Company operates a share option scheme. During the year ended 31 December 2002, the Company granted share options to its advisers as part of payment for services provided. Details of share options transactions during the year ended 31 December 2007 are set out below:

				Number of	Number of	Number of
Date granted	Exercisable period		Exercise	shares	shares	shares
	From	To	price	At 1 January  2007	granted/(lapsed)	At 31 December  2007
10.5.2002	27.6.2002	10.5.2007	2p	300,000	(300,000)	-

b)    Capital management

The Group's main objective when managing capital is to provide returns to shareholders by ensuring the Group will continue to trade in the foreseeable future. The Group also aims to maximise its capital structure of debt and equity so as to minimise its cost of capital.

The Group manages its capital with regard to the risks inherent in the business and the sector within which it operates by monitoring its gearing ratio on a regular basis.

The Group considers its capital to include share capital, share premium, translation reserve and retained earnings.

Net debt includes short and long-term borrowings net of cash and cash equivalents.

		2007 US$'000	2006 US$'000
	Total debt	7,442	6,885
	Less cash and cash equivalents	(428)	( 838)
	Net debt
		7,014	6,047
	Total equity	27,644	57,845
	Debt to capital ratio	25%	10%

The Group does not have any externally imposed capital requirements.

23.    FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The principal risks arising from the Group's financial instruments are credit risk, interest rate risk, liquidity risk and exchange rate risk. The Group board reviews and agrees policies for managing each of these risks and these are summarised below. These policies have been developed during the current accounting period as a consequence of the Group's expansion.

a)    Credit risk

Credit risk is the potential financial loss resulting from the failure of a customer or counterparty in setting their financial and contractual obligations to the Group, as and when they fall due.

The Group's primary exposure to credit risk arises through its trade receivables. The management has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Other financial assets of the Group with exposure to credit risk include cash and deposits that are placed with financial institutions which are regulated.

At the balance sheet date, there was no significant concentration of credit risk.

b)    Liquidity risk

The Group's policy is to regularly monitor current and expected liquidity requirements and its compliance with lending covenants, to ensure that it maintains sufficient reserves of cash and readily realisable marketable securities and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.

b)    Liquidity risk

The following table details the remaining contractual maturities at the balance sheet date of the Group's financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the balance sheet date) and the earliest date the Group can be required to pay:

	Group							Group
	2007							2006
			Total		More than				Total		More than
			contractual	Within 1	1 year but				contractual	Within 1	1 year but
	Carrying		undiscounted	year or on	less than	More than		Carrying	undiscounted	year or on	less than	More than
	amount		cash flow	demand	2 years	5 years		amount	cash flow	demand	2 years	5 years
	US$'000		US$'000	US$'000	US$'000	US$'000		US$'000	US$'000	US$'000	US$'000	US$'000
Trade payables	991		991	991	-	-		492	492	492	-	-
Other payables		529	529	529	-	-		364	364	364	-	-
Accruals	737		737	737	-	-		882	882	882	-	-
Bank loans	1,915		1,915	-	-	1,915		1,915	1,915	-	-	1,915
Loan from fellow investors in
subsidiary companies	787		787	-	-	787		787	787	-	-	787
Amount due to related companies	77		77	77	-	-		499	499	499	-	-
	5,036		5,036	2,334	-	2,702		4,939	4,939	2,237	-	2,702
	======		======	======	=====	======		======	======	=======	=====	======

Company

Company

2007

2006

Total

More than

Total

More than

contractual

Within 1

1 year but

contractual

Within 1

1 year but

Carrying

undiscounted

year or on

less than

More than

Carrying

undiscounted

year or on

less than

More than

amount

cash flow

demand

2 years

5 years

amount

cash flow

demand

2 years

5 years

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Trade and other payables

200

200

200

-

-

123

123

123

-

-

Amount due to subsidiary

2,299

2,299

2,299

-

-

1,937

1,937

1,937

-

-

2,499

2,499

2,499

-

-

2,060

2,060

2,060

-

-

======

======

======

=====

=====

======

======

======

=====

=====

c)    Foreign exchange risk

The Group's businesses include revenue and expenses which are principally conducted in Chinese Renminbi ('RMB') through its subsidiaries in PRC. The Group is largely exposed to foreign currency risk with respect to United States dollars. Foreign exchange risk mainly arises from recognised assets and liabilities and net investments in foreign operations.

The Group did not use any forward contract or currency borrowing to hedge its exposure to foreign currency risk. However, the directors will monitor the related foreign currency exposure closely and will consider hedging significant foreign currency exposures should the need arise in the future.

No entity in the Group has material assets and liabilities denominated in currency other than functional currency of that entity, therefore no material foreign exchange risk arises.

d)    Interest rate risk

Group borrowings are held in local currencies. Current loans are at fixed rates. The Group's policy for future borrowings will be to take floating rates unless fixed rate finance is available at particularly attractive rates. There is no material exposure to interest rate risk at 31 December 2007 (2006:nil)

Summary of financial instruments by category

The carrying amounts of the Group's financial assets are categorised as loans and receivables

Financial assets				2007 US$'000			2007 US$'000			2006 US$'000		2006 US$'000
				Group			Company			Group		Company
Trade receivables				1,689			-			1,985		-
Deposits				700			-			652		-
Other receivables				2,528			63			3,116		44
Cash and cash equivalents				428			1			838		-
				5345			64			6,591		44
Financial liabilities
Group	2007								2006
	Financial liabilities at amortised cost								Financial liabilities at amortised cost
	US$'000								US$'000
Trade payables	991								492
Other payables			529						364
Accruals		737							882
Amount due to related companies			77						499
Bank loan		1915							1915
Loans from fellow investors in a subsidiary
		787							787
		5,036							4,939
Company		2007							2006
		Financial liabilities at amortised cost							Financial liabilities at amortised cost
		US$'000							US$'000
Trade and other payables		200							123
Amount due to a subsidiary		2,299							1,937
		2,499							2,060

Sensitivity analysis

The Group is not exposed to interest rate risk as its bank borrowings are at a fixed rate and that from fellow investors in subsidiaries on an interest free basis. The Group monitors closely its interest rate exposure and will consider hedging significant interest rate exposure should the need arise in the future.

The interest rate risk profile of the Group's financial liabilities as stated in note 23(b) are as follows:

Group
Currency	Total	Interest-free	Fixed rate	Fixed rate weighted average interest rate at	Fixed rate weighted average period for which rate is fixed
	US$'000	US$'000	US$'000	%	Years
2007
RMB	2,702	787	1,915	5.85	1
	2,702	787	1,915
2006
RMB	2,702	787	1,915	5.85	1
	2,702	787	1,915

All financial liabilities with maturity of less than 5 years bear no interest.

The Company incurs no interest rate risk as it does not have any liability of bank or other borrowings.

e)    Fair value estimation

The fair value of the Group's trade receivables is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

The carrying amounts of the Group's financial assets, including cash and cash equivalents, other receivables and financial liabilities, including trade and other payables and bank borrowings approximate their fair values as at 31 December 2007 and 2006.

24.    RELATED PARTY TRANSACTIONS

Other than transactions otherwise disclosed in the financial statements, the Group and the Company had the following material transactions which were carried out on an arm's length basis with related parties during the year:

Name of company	Note	Nature	2007	2006
			US$'000	US$'000
Guangzhou Tung Lloyd Shipping Agency Limited	(a)	Agency charges	77	74
Winko Metal Limited	(b)	Hiring charges for Motor Vehicle	8	23
Tanko Electronics Limited	(b)	Management fee received	-	25

Notes:

(a)  A company in which the Chairman, Mr Qin Shun Chao, is a director.

(b)  Companies which are controlled by Keen Lloyd Holdings Limited.

25.    OPERATING LEASE COMMITMENTS

At 31 December 2007, the Group had total commitments in respect of land and building under operating leases:

	2007	2006
	US$'000	US$'000
Leases which expire:
in the next year	171	116
in the second to fifth years	741	57
	912	173

26.    CAPITAL COMMITMENTS

At 31 December 2007, the Group had a capital commitment contracted for as follows:

The Company had no other significant capital commitments.

27.    CONTINGENT LIABILITIES

(a)    On 23 July 1998, a subsidiary of the Company, Keen Chance Terminal (GZ) Company Limited ('KCT'), gave a guarantee for RMB50 million (equivalent to approximately US$5.9 million) in favour of the Huangpu Branch of the Industry and Commercial Bank of China for banking facilities granted to Harbour Economic Development Company Limited ('HEDCL'), a fellow investor in KCT and its ultimate controlling party, Guangzhou Huangpu Foreign Trade Group Company Limited and secured over their equity interests in KCT. HEDCL was unable to repay the loans due to the bank. The bank took action against KCT to enforce the guarantee for the outstanding loan.

(b)    On 9 November 1999, KCT gave a guarantee for RMB18 million (equivalent to approximately US$2.1 million) in favour of Nangang Rural Credit Co-operation Bank for banking facilities granted to Miaotou Economic Development Company Limited ('MEDCL'), a fellow investor in KCT, secured over its equity interests in KCT. MEDCL was unable to repay the outstanding loan.

On 27 September 2001, the Guangzhou Law Court delivered an order and notice that the guarantees above were invalid and MEDCL's equity interest in KCT was frozen.

Based on legal advice, the equity interests had no material impact on the operations of KCT and the directors consider that no provision is required.

KCT maintains that the guarantee given was invalid on the following grounds:

The legal proceedings are still in progress. Based on legal advice, the directors are of the opinion that, the loan agreement was void because it was illegal and accordingly, the guarantee contract was also invalid.

Furthermore, Keen Lloyd Holdings Limited, the Company's parent company, has indemnified the Group against any loss KCT will suffer should the guarantee be enforceable.

Accordingly, the directors are of the opinion that no provision should be made in the financial statements for any possible claim from the bank in respect of the litigation.

(c)    Following the closure of the power plant on 30 June 2007, the Group may be required to incur decommissioning costs in respect of the power plant site. The Group is unable to estimate such costs since the power plant can be sold to other larger power plant companies in China before 31 December of 2010 (the date at which the plant is required to be demolished). If a sale is achieved, no decommissioning costs will be incurred. Accordingly, no provision is made in respect of these costs in these financial statements.

28.    ADOPTION OF NEW AND REVISED STANDARDS

In the current year, the Group has applied all the standards, amendment and interpretations ('New IFRSs') issued by the International Accounting Standards Board (the 'IASB') and the International Financial Reporting Interpretations Committee (the 'IFRIC') of the IASB that are effective for the Group's financial year beginning on 1 January 2007.

The Group has not early applied the following new and revised standards or interpretations that have been issued at the date of this report but are not yet effective.

IAS 1 (Revised)	Presentation of Financial Statements1
IAS 23 Revised)	Borrowing Costs1
IAS 27 (Revised)	Consolidated and Separate Financial Statements2
IAS 32 and IAS 1 (Amendment)	Putable Financial Instruments and Obligations Arising on Liquidation1
IFRS 2 (Amendment)	Vesting Condition and Cancellations1
IFRS 3 (Revised)	Business Combinations2
IFRS 8	Operating Segments1
IFRIC 11	IFRS 2: Group and Treasury Share Transactions3
IFRIC 12	Service Concession Arrangements4
IFRIC 13	Customer Loyalty Programmes5
IFRIC 14	IAS 19: The Limit on a Defined Benefit Asset, Minimum Funding
	Requirements and their interaction4

1  Effective for annual periods beginning on or after 1 January 2009

2  Effective for annual periods beginning on or after 1 July 2009

3  Effective for annual periods beginning on or after 1 March 2007

4  Effective for annual periods beginning on or after 1 January 2008

5  Effective for annual periods beginning on or after 1 July 2008

The Group is in the process of making an assessment of what the impact of the above new amendments, standards and interpretations will be on the Group's financial statements but are not yet in a position to state whether they would have a material financial impact on the Group's consolidated financial statements.

29.    EXCHANGE RATE

The US Dollar to Pound Sterling exchange rate at 31 December 2007 was US$1.9994/£ (2006: US$1.9585/£).

30.    ULTIMATE CONTROLLING PARTY

The directors consider that Chin Dynasty Foundation Limited ('CDFL'), a company incorporated in the British Virgin Islands is the ultimate holding company. CDFL is controlled by the Chin Dynasty Fund. No group financial statements for CDFL are published.

The Chin Dynasty Fund is a discretionary trust where Mr. Qin Shun Chao is the settlor. Members of Mr. Qin's family are the potential beneficiaries of the trust.

The Company's immediate parent company is Keen Lloyd Holdings Limited, a company incorporated in the British Virgin Islands.

The announcement set out above does not constitute a full financial statement of the Company's affairs for the year ended 31 December 2007. The Company's auditors have reported on the full accounts for the said year and have accompanied them with an unqualified report. The accounts have yet to be delivered to the Registrar of Companies. The annual report and accounts will be available from the Company's nominated adviser, Nabarro Wells & Co. Limited, Old Change House, 128 Queen Victoria Street, London EC4V 4BJ.

Enquiries:

Angela Leung - Arko Holdings plc

Tel: 00 852 2219 9999. Email: angelal@arkoholdings.com

Robert Lo / Marc Cramsie - Nabarro Wells & Co. Limited

Tel: 020 7634 4705. Email: robertlo@nabarro-wells.co.uk / marccramsie@nabarro-wells.co.uk

ENDFR FLMRTMMATBRP