Arko Holdings PLC: Correction re Final Results | Company Announcements

Tuesday 23 June, 2009

Arko Holdings PLC

Correction re Final Results

RNS Number : 3433U

Arko Holdings PLC

23 June 2009

Arko Holdings plc

('the Company' or 'Arko')

Correction re Annual Results

The Annual Results released on 22 June 2009 omitted the Independent Auditors' Report. This information has now been included. There have not been any other changes to the original announcement. The full text of the announcement, including the Independent Auditors' Report, is below.

The Board of Arko announces the results of the Company for the year ended 31 December 2008, which are set out below. These have today been published and despatched to shareholders.

Copies of these financial statements will be available from the offices of Daniel Stewart & Company Plc, Becket House, 36 Old Jewry, London EC2R 8DD. A copy will also be available on the Company's website www.arkoholdings.com.

The AGM will be held at the offices of Baker Tilly LLP at 2 Bloomsbury Street, London WC1B 3ST on 7 August 2009 at 12:00 noon.

For further information:

Angela Leung Tel: + 852 2219 9999

Arko Holdings plc

www.arkoholdings.com

Paul Shackleton
Daniel Stewart & Company plc Tel: + 44 (0) 207 776 6550
www.danielstewart.co.uk

CHAIRMAN'S STATEMENT

I am pleased to report that 2008 was a year of progress. Despite the global recession, I am delighted to report to shareholders a profitable result for the financial year ended 31 December 2008.

Overall revenues from continuing operations, which are now made up exclusively of terminal operations and barging services grew to US$14.3m from US$10.9m in 2007, a 31.7% increase. Keen Chance Terminal revenues grew by 23.6% to US$12.3m (2007: US$9.9m) and Arko Shipping grew its revenues by 75.8% to US$2m (2007:US$1m). Keen Chance Terminal maintained its long term average of approximately 23% of the revenue generated by the Group in the period. Our gross margin was US$4.5m (2007: US$2.9m), representing a 54.1% increase in spite of difficult economic conditions. Depreciation charges of US$0.6m (2007: US$0.8m) exclusive of those charged to cost of sales, have decreased as no depreciation has been charged in respect of the power plant. Consequently, the profit for the year for continuing operations before taxation was US$1m (2007: loss of US$11m).

During 2008, the Company's net assets increased by US$2.4m to US$30m (2007: US$27.6m). The most significant contribution to this increase was the acquisition of new plant and equipment with a value of US$3.2m.

As of 31 December 2008, the cash position continued to improve at US$0.8m (2007: US$0.4m). Net cash generated from operating activities for the period was US$2.8m. Net cash of US$0.3m was applied in the repayment on finance leases and the interest incurred and this is expected to recur in the next financial year

DIVIDENDS

The Board does not recommend the payment of a dividend (2007: US$nil).

OPERATIONAL REVIEW

Despite the global recession, and with a modest level of revenue growth from our core businesses, we have now established solid foundations enabling us to progress towards our strategic goal of expanding our barge services provision in the Pearl River Delta and the diversified operation of the container terminal. Since the shutdown of the power plant, the overall performance of the Group has improved due to the fact that the loss contributed by the power plant has now been eliminated. I believe that we are now benefiting from being able to focus solely on the achievement of our strategic goal.

Keen Chance Terminal

In the early part of the second quarter of 2008, Keen Chance Terminal rented a new depot near the container terminal with an area of approximately 13,000m2. The new depot has a handling capacity of 3,500TEU which enables the terminal to increase its handling efficiency at the main depot and results in the overall increase in throughput during 2008, which was 0.34m TEU (2007: 0.27m TEU), representing an increase of 26% on 2007.

Keen Chance Terminal continues to invest in infrastructure, machinery and facilities with the aim of increasing its handling efficiency. In 2008, a new rail-mounted gantry, three sets of front loaders and two sets of reach stackers commenced operation. In early 2009, the management decided to demolish the oil tanks located in the adjacent quay so as to expand the area of the main depot as well as to allow the extension of the adjacent quay. As a result of its efforts Keen Chance Terminal is now the third busiest terminal of the Second Class Harbour (non Deep River Harbour) within Huangpu District.

Arko Shipping

The barging service business performed well in 2008. The reduction in bunker prices as well as the successful pursuit of container cargo agreements with worldwide liner companies such as K-Line, NYK and Wan Hai Lines, were the major reasons for the growth in turnover and profit margin. As I said in my Chairman's Statement for 2007, the Group will continue to invest in the shipping logistics business by means of chartering and buying new river trade vessels. In September 2008, a container vessel with deadweight and carrying capacity of 1,157 MT and 1,350 MT respectively commenced operation.

OUTLOOK

The current global economic environment continues to impact import and export activity and demand is likely to continue to be weak. Arko is not immune to these factors, in particular the export cargo handling in Keen Chance Terminal. We anticipate a challenging period ahead in the remainder of 2009 and 2010 for all our businesses, but our relative success in 2008 leads us to believe we are well placed to meet these challenges.

Existing Businesses

We face the challenges of the current economic situation with a much better balanced business, efficiently managed and with stronger positions in our chosen sectors, where long term growth will continue. In response to the downturn in the container export trade, we have reduced our reliance on export customers and expanded our customer base in domestic trading. In recent months, the Chinese government has implemented a number of measures and incentives to stimulate domestic demand, from which we expect to benefit.

As I have said, we will continue to invest in infrastructure, machinery and facilities in the terminal. The extension of the adjacent quay is now underway. After completion we will have a quay length of about 500 meters providing berths for 8 ships with a capacity of up to 1,000MT, served by existing and new quay cranes. Additionally, we expect to continue the procurement of front loaders and reach stackers by means of lease finance so as to satisfy the handling capacity in the depot. It is anticipated that the existing depot will expand to cover the area adjacent to the entrance of the main depot and we hope to conclude negotiations with the relevant party by the end of 2009. When completed a total area of approximately 50,000 m2 could be used as our backup depot which will significantly increase our handling capacity, in particular it will strengthen our ability to pursue the empty container handling business with the worldwide liner companies. In my interim report for 2007, I told shareholders that a delay for the delivery of the new 45 tonne quayside container crane was anticipated. We now expect that the crane will be delivered to us by no later than end of July 2009.

Our past experience has shown that the terminal operation business has brought a synergistic effect to the barging service business. In 2010, our focus will be on expanding the feeder service to different districts within the Pearl River Delta and to reduce reliance on the Huangpu to Hong Kong and return route. To achieve this objective, we expect to increase from five container vessels to ten by way of chartering. In view of the uncertain economic climate, the Board does not intend to invest its capital in building new vessels in the short term.

The Board believes Arko's progress in recent years, together with its reputation in efficiency in the market, an excellent team, and ongoing tight cost control will position the Group well for continuing success.

The Quarry Mine in Fujian, China

In my Chairman's Statement for 2004, I told shareholders the quarry mine project in Fujian could not move ahead due to a shortage of funds. In recent months, greatly improved relations between Taiwan and mainland China has provided opportunities for increased commercial activities within the Strait. Taking advantage of the quarry`s location, the management has decided to resume this project and has successfully renewed its business license and its mining rights. The board will keep shareholders updated on the progress of the project.

Changing the Company and its subsidiaries' name

Since the container vessels now in operation were named by numbering as Ying Gao 301, 302 etc, a resolution will be proposed at the Annual General Meeting to change the name of the Company to 'Yinggao Holdings plc'. Similar name changes will be made in subsidiary companies. The Board believes that the change will help the Group to build up a brand name and establish a strong image in the market.

The Board will continue to act in the best interests of our shareholders and ensure the Group is positioned to continue to grow. The Board believes the Group is well placed to meet the challenges ahead and views the outlook for the remainder of 2009 with confidence.

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

INDEPENDENT AUDITORS' REPORT

TO THE MEMBERS OF ARKO HOLDINGS PLC

We have audited the group and parent company financial statements on pages 15 to 59 [in the Annual Report 2008].

This report is made solely to the company's members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

The directors' responsibilities for preparing the Annual Report and the financial statements in accordance with applicable law and International Financial Reporting Standards as adopted by the European Union ('IFRS') are set out in the Statement of Directors' Responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Directors' Report is consistent with the financial statements.

In addition we report to you if, in our opinion, the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other transactions is not disclosed.

We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. The other information comprises only the Directors' Report and the Chairman's Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

BASIS OF AUDIT OPINION

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board, except that the scope of our work was limited as explained below.

An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the group's and company's circumstances, consistently applied and adequately disclosed.

We planned our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. However, we were unable to obtain sufficient appropriate audit evidence in respect of the bank loan of US$1,915,000 included in non-current liabilities in the balance sheet at 31 December 2008, nor in respect of interest of US$133,000 included in finance costs in the income statement for the year then ended.

In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

QUALIFIED OPINION ARISING FROM LIMITATION IN AUDIT SCOPE

Except for the financial effects of such adjustments, if any, as might have been determined to be necessary had we been able to satisfy ourselves as to the carrying value of the bank loan and related interest charge, in our opinion:

the group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the group's affairs as at 31 December 2008 and of its profit for the year then ended;

the parent company financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Act 1985, of the state of the parent company's affairs as at 31 December 2008;

the financial statements have been properly prepared in accordance with the Companies Act 1985.

In respect solely of the limitation on our work relating to the bank loan and related interest charge:

• we have not obtained all the information and explanations that we considered necessary for the purpose of our
audit; and

• we were unable to determine whether proper accounting records had been maintained.

In our opinion the information given in the Directors' Report is consistent with the financial statements.

BAKER TILLY UK AUDIT LLP

Registered Auditor

Chartered Accountants

2 Bloomsbury Street

London WC1B 3ST

17 June 2009

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2008

(Expressed in United States dollars)


	Notes	2008 US$ '000	2007 US$ '000

REVENUE	4	14,300	10,860

Cost of sales		(9,850)	(7,972)

GROSS PROFIT		4,450	2,888

Other income	5	155	605

Administrative expenses		(3,114)	(4,041)

Impairment of property, plant and equipment		-	(1,131)

Impairment of goodwill		-	(9,010)

PROFIT/(LOSS) FROM OPERATIONS		1,491	(10,689)

Finance costs	6(a)	(176)	(120)

PROFIT/(LOSS) BEFORE TAXATION	6	1,315	(10,809)

Taxation	7	(247)	(142)

PROFIT/ (LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS		1,068	(10,951)

LOSS FOR THE YEAR FROM DISCONTINUED OPERATION	4	-	(21,288)

PROFIT/(LOSS) FOR THE YEAR		1,068	(32,239)

Attributable to:

Equity holders of the parent Company		360	(31,275)

Minority interest		708	(964)

		1,068	(32,239)


		US cents	US cents
EARNINGS/(LOSS) PER SHARE - Basic and fully diluted	10
- From continuing operations		0.02	(0.50)
- From discontinued operation		(0.00)	(1.08)

		0.02	(1.58)

BALANCE SHEETS

AS AT 31 DECEMBER 2008

(Expressed in United States dollars)


	Notes	2008 US$'000	Group 2007 US$'000	2008 US$'000	Company 2007 US$'000
NON-CURRENT ASSETS
Goodwill	11	1,835	1,834	-	-
Property, plant and equipment	12	27,375	24,376	-	-
Investments in subsidiaries	13	-	-	18,756	24,218
Available-for-sale investments	14	12	12	-	-
		29,222	26,222	18,756	24,218
CURRENT ASSETS
Inventories	15	137	124	-	-
Trade and other receivables	16	8,103	8,312	1	63
Amounts due from subsidiaries		-	-	120	-
Cash and cash equivalents	17	780	428	2	1
		9,020	8,864	123	64
CURRENT LIABILITIES
Trade and other payables	18	3,907	3,606	31	200
Amounts due to subsidiaries		-	-	1,916	2,299
Obligations under finance leases	19	599	-	-	-
Taxation		695	1,134	-	-
		5,201	4,740	1,947	2,499

NET CURRENT ASSETS / (LIABILITIES)		3,819	4,124	(1,824)	(2,435)

TOTAL ASSETS LESS CURRENT LIABILITIES		33,041	30,346	16,932	21,783

NON CURRENT LIABILITIES
Bank loan	20	1,915	1,915	-	-
Obligations under finance leases	19	330	-	-	-
Loans from fellow		-	-	-	-
investors in subsidiaries	21	787	787	-	-
		3,032	2,702	-	-

NET ASSETS		30,009	27,644	16,932	21,783

EQUITY
Share capital	22	14,922	14,922	14,922	14,922
Reserves		2,010	687	2,010	6,861
Total equity attributable to equity shareholders		16,932	15,609	16,932	21,783
Minority interest		13,077	12,035	-	-
TOTAL EQUITY		30,009	27,644	16,932	21,783

STATEMENT OF CHANGES IN EQUITY - CONSOLIDATED

FOR THE YEAR ENDED 31 DECEMBER 2008

(Expressed in United States dollars)

Group	Share premium	(note i) Statutory surplus reserve	(note ii) Merger reserve	Exchange reserve	Retained profits	Total reserve	Share capital	Total attributable to equity holders of the parent	Minority interest	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'00	US$'000	US$'000	US$'000

Balance at 1 January 2007	15,662	1,681	26,043	(531)	(12,864)	29,991	14,922	44,913	12,932	57,845

Loss for the year	-	-	-	-	(31,275)	(31,275)	-	(31,275)	(964)	(32,239)

Exchange movements	-	-	-	1,971	-	1,971	-	1,971	67	2,038

Total recognised income and expense	-	-	-	1,971	(31,275)	(29,304)	-	(29,304)	(897)	(30,201)

Balance at 31 December 2007	15,662	1,681	26,043	1,440	(44,139)	687	14,922	15,609	12,035	27,644

Profit for the year	-	-	-	-	360	360	-	360	708	1,068

Overprovision in surplus reserve	-	(158)	-	-	158	-	-	-	-	-

Exchange movements	-	26	-	937	-	963	-	963	334	1,297

Total recognised income and expense	-	(132)	-	937	518	1,323	-	1,323	1,042	2,365

Balance at 31 December 2008	15,662	1,549	26,043	2,377	(43,621)	2,010	14,922	16,932	13,077	30,009

Notes:

(i) Statutory surplus reserve:

In accordance with the law of the People's Republic of China (the 'PRC') 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.

(ii) The merger reserve represents the difference between the nominal value of shares of the subsidiary company acquired, and the nominal value of the Company's shares issued in 2002.

STATEMENT OF CHANGES IN EQUITY - COMPANY

FOR THE YEAR ENDED 31 DECEMBER 2008

(Expressed in United States dollars)



Company	Share capital	Share premium	Merger reserve	Exchange reserve	Retained profits	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000


Balance at 1 January 2007	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

Loss for the year	-	-	-	-	(5,551)	(5,551)

Exchange movement	-	-	-	700	-	700

Total recognised income and expense	-	-	-	700	(5,551)	(4,851)


Balance at 31 December 2008	14,922	15,662	26,043	700	(40,395)	16,932

CASH FLOW STATEMENT - CONSOLIDATED

FOR THE YEAR ENDED 31 DECEMBER 2008

(Expressed in United States dollars)

	2008 US$'000	2007 US$'000

Cash flow from operating activities

Profit/(loss) before taxation
Continuing operations	1,315	(10,689)
Discontinued operation	-	(21,288)

	1,315	(31,977)
Adjustments for:
- Interest on finance leases	43	120
- Interest on bank loan	133	-
- Interest income	(1)	(14)
- Depreciation	1,748	1,579
- Loss on disposal of property, plant and equipment	3	95
- Impairment loss - goodwill	-	18,977
- Impairment loss - property, plant and equipment	-	13,194
- Exchange adjustments	(291)	728

Operating profit before working capital changes	2,950	2,702
Decrease in trade and other receivables	209	1,836
Increase in inventories	(13)	(47)
Increase in trade and other payables	301	567

Net cash flow generated from operations	3,447	5,058
Interest paid	-	(120)
Taxes paid	(686)	(152)

Net cash generated from operating activities	2,761	4,786

Cash flows from investing activities
Purchase of property, plant and equipment	(1,959)	(5,187)
Proceeds from disposal of property, plant and equipment	-	97
Interest income	1	14

Net cash used in investing activities	(1,958)	(5,076)

Cash flows from financing activities
Repayment on finance lease obligations	(275)	-
Interest on finance leases	(43)	-
Interest on bank loan	(133)	(120)

Net cash used in financing activities	(451)	(120)


Net increase / (decrease) in cash and cash equivalents	352	(410)

Cash and cash equivalents at 1 January	428	838

Cash and cash equivalents at 31 December	780	428

CASH FLOW STATEMENT - COMPANY

FOR THE YEAR ENDED 31 DECEMBER 2008

(Expressed in United States dollars)

	2008 US$'000	2007 US$'000

Cash flow from operating activities

Loss after taxation and before working capital changes	(89)	(32,216)
Adjustments for:
- Impairment loss on investments in subsidiaries	-	31,797
- Exchange difference	700	-

Operating profit/ (loss) before working capital changes	611	(419)

Decrease / (increase) in trade and other receivables	62	(19)
Increase in amount due from subsidiaries	(120)	-
(Decrease) / increase in trade and other payables	(169)	77
(Decrease) / increase in amount due to subsidiaries	(383)	362

Net increase in cash and cash equivalents	1	1

Cash and cash equivalents at 1 January	1	-


Cash and cash equivalents at 31 December	2	1

1. PRINCIPAL ACCOUNTING POLICIES

General information

The Company is a public limited company incorporated and domiciled in the United Kingdom. The registered office of the Company is located at 2 Bloomsbury Street, London WC1B 3ST. Its principal place of business is in Hong Kong and the PRC.

The principal activities of the Company and its subsidiaries (hereinafter collectively referred to as the 'Group') are terminal operation and barging services provision.

The Company's shares were admitted to trading on the AIM Market of the London Stock Exchange. These consolidated financial statements are presented in United States Dollars, unless otherwise stated, and were reviewed by the Audit Committee and approved for issue by the Board of Directors on 17 June 2009.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation and statement of compliance

The financial statements are presented in United States dollars ('USD'), rounded to the nearest thousand, which is the presentation currency of the Group.

The financial statements have been prepared in accordance with all applicable International Financial Reporting Standards ('IFRSs'), which comprise International Financial Reporting Standards, International Accounting Standards ('IAS') and Interpretations ('IFRIC'), issued by the International Accounting Standards Board ('IASB') and the International Financial Reporting Interpretations Committee ('IFRIC'), and the AIM Rules issued by the London Stock Exchange.

Impact of recently issued IFRSs

The Group has adopted certain new and revised IFRSs that are relevant to its operations and effective for the current accounting year. There have been no significant changes to the accounting policies applied in these consolidated financial statements for the years presented as a result of these developments.

The IASB and the IFRIC have issued certain new and revised IFRSs and Interpretations that are first effective or available for early adoption for the current accounting period of the Group. The Group has not applied any new standard or interpretation that is not yet effective for the current accounting year (see note 28).

(b) Significant accounting policies

The consolidated financial statements have been prepared under the historical cost convention except for certain financial assets and liabilities which are stated at fair values.

The accounting policies and methods of computation used in the preparation of these consolidated financial statements are consistent with those used in the annual financial statements for the year ended 31 December 2007 except for the adoption of standards, amendments and interpretations issued by the IASB mandatory for annual financial year beginning 1 January 2008.

The adoption of these standards, amendments and interpretations was not material to the Group's results of operations or financial position.

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 barging 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

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) Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

In the Company's balance sheet, investments in subsidiaries are stated at cost less impairment losses.

(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.

(h) Available for sale investments

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

i) 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.

ii) 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.

iii) Group companies

The results of the subsidiary company in the PRC are translated into United States dollars at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Balance sheet items are translated into United States 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.

(p) Income tax

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) 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.

(q) Provisions and contingent liabilities

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.

(r) Related parties

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

the party has the ability, directly or indirectly through one or more intermediaries, to control the Company or exercise significant influence over the Company in making financial and operating policy decisions, or has joint control over the Company;
the Company and the party are subject to common control;
the party is a subsidiary, an associate of the Company or a joint venture in which the Company is a venturer;
the party is a member of key management personnel of the Company or the Company's parent, or a close family member of such an individual, or is an entity under the control, joint control or significant influence of such individuals;
the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or significant influence of such individuals; or
the party is a post-employment benefit plan which is for the benefit of employees of the Company or of any entity that is a related party of the Company.

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. 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 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 and other 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.

4. 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	2008	2007	2008	2007
	US$'000	US$'000	US$'000	US$'000
Continuing operations

Terminal and barging services	14,300	10,860	1,068	(820)
Trading and others	-	-	-	(8,776)
Mining	-	-	-	(1,235)
	14,300	10,860	1,068	(10,831)
Discontinued operation

Power plant	-	-	-	(21,408)

	14,300	10,860	1,068	(32,239)

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

	2008 US$'000	2007 US$'000

Other income	-	1,142
Administrative expenses	-	(401)
Impairment of property, plant and equipment	-	(12,062)
Impairment of goodwill	-	(9,967)

Loss for the year	-	(21,288)

	Assets		Liabilities
ii) Segment assets and liabilities	2008	2007	2008	2007
	US$'000	US$'000	US$'000	US$'000
Continuing operations

Terminal and barging services	35,015	34,739	4,784	4,040
Trading and others	3,224	2,338	117	271
Mining	-	(9)	150	137
	38,239	37,068	5,051	4,448

Discontinued operations
Power plant	3	(1,982)	3,182	2,994

Total	38,242	35,086	8,233	7,442

	Assets		Liabilities
	2008	2007	2008	2007
Represents in balance sheet	US$'000	US$'000	US$'000	US$'000

Non-current	29,222	26,222	5,201	2,702
Current	9,020	8,864	3,032	4,740

Total	38,242	35,086	8,233	7,442

iii) Other information
	Continuing Operations
	Terminal	Trading
	and	and
	barging services	others	Total
	US$'000	US$'000	US$'000

Capital expenditure	2,811	352	3,163
Depreciation	1,431	317	1,748
Loss on disposal of property, plant and equipment	-	3	3

iv) Geographical (secondary) segment information
	Revenue		Segment assets
	2008	2007	2008	2007
	US$'000	US$'000	US$'000	US$'000
Analysis by origin:

Hong Kong	2,048	944	3,242	23,872
Mainland China	12,252	9,916	26,796	5,406
United Kingdom	-	-	(29)	(1,634)

	14,300	10,860	30,009	27,644

5.	OTHER INCOME	2008 US$'000	2007 US$'000

	Exchange gains	44	269
	Rental income	-	224
	Others	111	112

		155	605

6.	PROFIT/(LOSS) BEFORE TAXATION

	Profit/(loss) before taxation is stated after charging:
		2008 US$'000	2007 US$'000
a)	Finance costs
	Interest on
	- Finance leases	43	-
	- Bank loan	133	120

		176	120
b)	Staff costs (including directors' remuneration)
	Wages and salaries - included in cost of sales	1,681	957
	- included in administrative expenses	635	610
	Other pension costs	19	20
	Other staff welfare	3	23

		2,338	1,610
	Employees
		2008	2007
		Number of staff	Number of staff

	The average monthly number of persons (including directors) employed by the Group during the year was:
	Management and administration	40	31
	Sales and distribution	17	7
	Operations	379	282

		436	320

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

		2008 US$'000		2007 US$'000
c)	Other items

	Fees payable to Baker Tilly UK Audit LLP for the audit of Company's annual financial statements	34	36
	Fees payable to associates of company's auditors
	for other services:
	The audit of the Company's subsidiaries	41	49
	Depreciation	1,748	1,178
	Loss on disposal of property, plant and equipment	3	95
	Rentals under operating leases - land and buildings	151	77
	- barges and containers	-	222
	- motor vehicles	-	8
	Directors' remuneration (note 8)
	- Directors' emoluments - salaries	130	176
	- Directors' emoluments - pension costs	1	6

	Exceptional items
	Impairment of goodwill	-	9,010
	Impairment loss on property, plant and equipment	-	1,131

		-	10,141

7.	TAXATION
	The amount of income tax expense charged to the consolidated income statement represents:

		2008 US$'000	2007 US$'000

	Overseas tax: current year	247	142

The actual tax expense can be reconciled to the profit/(loss) before taxation in the consolidated income statement as follows:
	2008 US$'000	2007 US$'000

Profit/(loss) before tax	1,315	(10,809)

Notional tax at the standard rate of corporation tax in the UK of 28% (2007: 30%)	368	(3,243)
Effects of:
Different tax rates on overseas earnings	(173)	93
Expenses not deductible for tax purposes	134	4,849
Non-taxable income	(31)	(1,564)
Temporary differences	(14)	-
Utilisation of tax losses previously not recognised	(43)	7
Addition to tax losses	7	-
Change in tax rate	(1)	-

Tax charge for the year	247	142

In respect of subsidiaries operating in Hong Kong, no provision for Hong Kong profits tax are provided as there are sufficient tax losses brought forward to set off against current year's assessable profit.

Subsidiaries operating in the PRC are subject to Enterprise Income Tax ('EIT') at a rate of 18%. 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.

On 16 March 2007, the National People's Congress passed the Corporate Income Tax Law of the PRC (the 'new tax law'). Under the new tax law, the statutory income tax rate applicable to the company's subsidiaries in Shenzhen is changed from 15% to 25% progressively within five years from 1 January 2008 (2008: 18%; 2009: 20%; 2010: 22%; 2011: 25%). The new tax law has been applied when measuring the group's current tax payable as at 31 December 2008.

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$665,000 (2007: approximately US$879,000) 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.

8. DIRECTORS' REMUNERATION

Apart from US$130,551 (2007: US$181,821), as disclosed in note 6(c), that were paid to the directors by Group companies, no additional fees (2007: US$47,494) were paid to directors through Winbest Resources Limited, a company which is ultimately controlled by Chin Dynasty Foundation Limited. For the purpose of this disclosure, the directors are considered to be key management of the Group.

9. DIVIDEND

The directors do not recommend the payment of any dividend.

10. EARNINGS/(LOSS) PER SHARE

i) From continuing operations

The calculation of basic earnings per share is based on the profit attributable to equity shareholders of the Parent Company of US$0.360 million (2007: loss of US$9.987 million) and the weighted average number of shares in issue of 1,978,895,139 for the two years ended 31 December 2008.

ii) From discontinued operations

The calculation of basic earnings per share is based on the loss attributable to equity shareholders of the Parent Company of US$ nil (2007: loss of US$21.288 million) and the weighted average number of shares in issue of 1,978,895,139 for the two years ended 31 December 2008.

11. GOODWILL

	Group
	2008	2007
	US$'000	US$'000
Cost: At 1 January	22,806	22,807
Exchange realignment	1	(1)

At 31 December	22,807	22,806

Provision: At 1 January	20,972	1,995
Impairment charge for the year	-	18,977

At 31 December	20,972	20,972

Net book value: At 31 December	1,835	1,834

At 1 January	1,834	20,812

Commencing from 1 January 2006, no amortisation of goodwill was 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 was in respect of the cessation of the Group's power plant operation and other discontinued activities during the prior year. The goodwill balance at 31 December 2008 relates to the Group's remaining operations.


12. 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 2007	21,905	23,407	8,165	173	1,725	715	705	56,795
Exchange realignment	787	1,239	519	-	-	17	-	2,562
Additions	239	3,010	104	-	831	136	867	5,187
Transfer	693	-	-	-	-	-	(693)	-
Disposals	-	-	-	-	(430)	-	-	(430)

At 1 January 2008	23,624	27,656	8,788	173	2,126	868	879	64,114
Reclassification	9	138	(65)	-	-	(82)	-	-
Additions	1,313	779	39	-	324	60	648	3,163
Disposals	(27)	-	(4)	-	-	-	-	(31)
Transfer	-	965	-	-	-	-	(965)	-
Exchange realignment	2,705	468	(109)	-	-	36	32	3,132

At 31 December 2008	27,624	30,006	8,649	173	2,450	882	594	70,378

Depreciation
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 (Note)	546	509	272	-	177	75	-	1,579
Disposals	-	-	-	-	(236)	-	-	(236)
Impairment charge	2,999	7,891	2,257	-	-	27	20	13,194

At 1 January 2008	10,798	19,343	8,025	13	848	691	20	39,738
Reclassification	(87)	126	(13)	-	-	(26)	-	-
Charge for the year (Note)	631	704	142	-	213	58	-	1,748
Written-back on disposal	(27)	-	(1)	-	-	-	-	(28)
Exchange realignment	1,852	(106)	(197)	-	(1)	17	(20)	1,545

At 31 December 2008	13,167	20,067	7,956	13	1,060	740	-	43,003

Net book value
At 31 December 2008	14,457	9,939	693	160	1,390	142	594	27,375
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

Note: Of the depreciation charge for the year, US$1,087,000 (2007: US$788,000) is included in cost of sales, US$661,000 (2007: US$390,000) is included in administrative expenses and US$Nil (2007:US$401,000) is included in exceptional item, in the income statement. The impairment charge was made as a result of the cessation of the Group's power plant operation during the prior year.

At 31 December 2008, the net book values of land and buildings, plant and machinery, furniture, fixtures and equipment are further analysed as follows:

	Terminal US$'000	Others US$'000	Total US$'000
Land - short lease	2,530	-	2,530
- unspecified leases	1,378	-	1,378

	3,908	-	3,908
Buildings	10,549	-	10,549

Land and buildings	14,457	-	14,457

Plant and machinery	9,939	-	9,939

Furniture, fixtures and equipment	125	568	693

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 PRC, 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.

13.	INVESTMENTS IN SUBSIDIARIES
		Company
		2008 US$'000	2007 US$'000
	Unlisted shares, at cost:
	At 1 January 2008 and 31 December 2008	56,015	56,015

	Provision for impairment:
	At 1 January	31,797	-
	Charge for the year	5,462	31,797
	At 31 December	37,259	31,797

	Net book value:
	At 31 December	18,756	24,218

	At 1 January	24,218	56,015

At 31 December 2008, 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 subsidiaries undertakings:

		Equity interests
		attributable				Place of
Name		to the group		Principal activities		incorporation

Arko Energy Limited.* #		100%		Investment holding		BVI
Arko Consultants Limited* #		100%		Providing management services		BVI
Arko Pacific Limited* #		100%		Investment holding		BVI
Long Prosperity Industrial Limited.		100%		Investment holding		Republic of Seychelles
Arko Silicon (Hubei) Limited 1		100%		Dormant		PRC
Sanko Mineral Limited		100%		Sub-letting of yachts, ships and vessels		BVI
Arko Shipping Limited. # (Formerly known as Arko Logistics Limited.)		100%		Providing logistics and related services		Hong Kong
Arko Satellite Limited .2		100%		Dormant		BVI
Arko Terminal Limited ('ATL') #		100%		Investment holding		Republic of Seychelles
Changzhou Power Development Company Limited		59.2%		Inactive		PRC
Keen Chance Terminal (GZ) Company Limited ('KCT')		40%		Investing in and operation of a terminal and providing logistics services		PRC
Fujian Sanko Mining Limited.		70%		Dormant		PRC

1 Subsequently deregistered in March 2009

2 Subsequently disposed on 23 March 2009

* Directly held by Arko Offshore Holdings Limited. All other subsidiaries are indirectly held.

# Subsequent to the balances sheet date, the management of the Group recommended a change of name for certain of its subsidiaries as listed below by passing relevant board resolutions in each of the group companies to match their core businesses with present operating activities in terminal operation and barging service operation in mainland china:
Present names			New names		Board resolution date
1.	Arko Offshore Holdings Limited		Yinggao Investments Limited		18 May 2009
2.	Arko Energy Limited		Yinggao Energy Limited		18 May 2009
3.	Arko Consultants Limited		Yinggao Consultants Limited		18 May 2009
4.	Arko Pacific Limited		Yinggao Pacific Limited		18 May 2009
5.	Arko Terminal Limited		Yinggao Terminal Limited		18 May 2009
6.	Arko Shipping Limited		Yinggao Shipping (H.K.) Limited		8 June 2009

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.

14. AVAILABLE-FOR-SALE INVESTMENTS
	Group
	2008 US$'000	2007 US$'000

Unlisted in the PRC	12	12

The above investment represents 20% of the ordinary shares in a company incorporated in the PRC of China, Guangzhou Tonglai Shipping Agents Company 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.

15. INVENTORIES

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

16. TRADE AND OTHER RECEIVABLES

	Group		Company
	2008 US$'000	2007 US$'000	2008 US$'000	2007 US$'000

Trade receivables	2,656	1,689	-	-
Deposits	811	700	-	-
Prepayments	585	3	1	-
Other receivables	1,069	2,198	-	63
Amount due from fellow investor of subsidiary	2,039	1,656	-	-
Amount due from related companies (note)	943	394	-	-
Amount due from immediate holding company	-	1,672	-	-

	8,103	8,312	1	63

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:

	2008	2007
	US$'000	US$'000

Neither past due nor impaired	990	751

Less than one month past due	761	443
1 to 3 months past due	892	-
>3 months past due	13	495
Total amounts past due	1,666	938

Total	2,656	1,689

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

The balances with related companies are analysed as follows:

			Maximum amount outstanding during the year
	Group
	2008	2007
	US$'000	US$'000	US$'000

Guangzhou Keen Lloyd Copper Industry Company Limited	12	42	221
Guangzhou Tonglai Shipping Agency Company Limited	360	352	360
Guangdong Yinggao Investment Limited	42	-	42
Guangdong Yinggao Shipping Limited	529	-	529

	943	394	1,152

These amounts are interest free, unsecured and repayable on demand.

17. CASH AND CASH EQUIVALENTS

	Group		Company
	2008	2007	2008	2007
	US$'000	US$'000	US$'000	US$'000

Cash in hand and at bank	780	428	2	1


	2008	2007	2008	2007
Currency	US$'000	US$'000	US$'000	US$'000

Hong Kong Dollars	38	405	-	-
Chinese RMB	740	22	-	-
UK Pound Sterling	2	1	2	1

	780	428	2	1

18. TRADE AND OTHER PAYABLES

	Group		Company
	2008 US$'000	2007 US$'000	2008 US$'000	2007 US$'000

Trade payables	960	991	28	105
Other payables and sundry creditors	1,422	1,801	-	-
Accruals	746	737	3	95
Amount due to related companies	413	77	-	-
Amount due to immediate holding company	366	-	-	-

	3,907	3,606	31	200

19. OBLIGATIONS UNDER FINANCE LEASES

	2008		2007
	Present value of the minimum lease payments US$'000	Total minimum lease payments US$'000	Present value of the minimum lease payments US$'000	Total minimum lease payments US$'000

Within 1 year	599	645	-	-
After 1 year but within 5 years	330	356	-	-
	929	1,001	-	-
Less : total future interest expenses		(72)	-	-
Present value of lease obligations		929	-	-

20.	Bank LOAN
		Group
		2008 US$'000		2007 US$'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 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. LOANS FROM FELLOW INVESTORS IN SUBSIDIARIES

These amounts are advanced from Miaotou Economic Development Company Limited of US$718,004 (2007: US$718,004) and a further amount from Walton Enterprises Limited of US$68,673 (2007: US$68,673). These amounts are unsecured, interest free and have no fixed term of repayment.

22. share capital

	2008		2007
	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	1,978,895,139	US$ 14,921,520	1,978,895,139	US$ 14,921,520

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.


	2008 US$'000	2007 US$'000

Total debt	8,233	7,442
Less: cash and cash equivalents	(780)	(428)
Net debt	7,453	7,014

Total equity	30,009	27,644

Debt to capital ratio	25%	25%

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.

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
	2008					2007
	Carrying amount	Total contractual undiscounted cash flow	Within 1 year or on demand	More than 1 year but less than 2 years	More than 5 years	Carrying amount	Total contractual undiscounted cash flow	Within 1 year or on demand	More than 1 year but less than 2 years	More than 5 years
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000

Trade payables	960	960	960	-	-	991	991	991	-	-

Other payables	1,422	1,422	1,422	-	-	529	529	529	-	-

Accruals	746	746	746	-	-	737	737	737	-	-

Finance Lease
- within 1 year	599	599	599	-	-	-	-	-	-	-
- 2 to 5 years	330	330	-	330	-	-	-	-	-	-

Bank loan	1,915	1,915	-	-	1,915	1,915	1,915	-	-	1,915

Loans from fellow investors in
subsidiary companies	787	787	-	-	787	787	787	-	-	787

Amount due to related companies	413	413	413	-	-	77	77	77	-	-
Amount due to immediate holding company	366	366	366	-	-	-	-	-	-	-

	7,538	7,538	4,506	330	2,702	5,036	5,036	2,334	-	2,702

		Group					Group
		2008					2007
	Carrying amount		Total contractual undiscounted cash flow	Within 1 year or on demand	More than 1 year but less than 2 years	More than 5 years	Carrying amount	Total contractual undiscounted cash flow	Within 1 year or on demand	More than 1 year but less than 2 years	More than 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	31		31	31	-	-	200	200	200	-	-

Amount due to subsidiary	1,916		1,916	1,916	-	-	2,299	2,299	2,299	-	-

	1,947		1,947	1,947	-	-	2,499	2,499	2,499	-	-

c) Foreign exchange risk

The Group's businesses include revenue and the expenses which are principally conducted in Chinese Renminbi ('RMB') through its subsidiaries in the 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.

Sensitivity analysis

The Group is exposed to fair value interest rate risk as its bank borrowings and finance leases are at a fixed rate. Borrowings from fellow investors in subsidiaries are 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 for the two years ended 31 December 2008 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
2008
RMB	2,702	787	1,915	5.85	1
RMB	921	-	921	4	2
HKD	8	8	-	-	-

	3,631	795	2,836

2007
RMB	2,702	787	1,915	5.85	1

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

Summary of financial instruments by category

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

Financial assets		Group		Company
		2008 US$'000	2007 US$'000	2008 US$'000	2007 US$'000

Trade receivables		2,656	1,689	-	-
Deposits		811	700	-	-
Other receivables		1,069	2,198	-	63
Amount due from subsidiary		-	-	120	-
Amount due from fellow investor of subsidiary	2,039		1,656	-	-
Amount due from related companies		943	394	-	-
Amount due from immediate holding company	-		1,672	-	-
Cash and cash equivalents		780	428	2	1
Total		8,298	8,737	122	64

Financial liabilities
Group	Other financial liabilities
	2008	2007
	US$'000	US$'000

Trade payables	960	991
Other payables	1,422	529
Accruals	746	737
Amount due to related companies	413	77
Amount due to immediate holding company	366	-

Obligation under finance lease
- Within 1 year	599	-
- 2 to 5 years	330	-
Bank loan	1,915	1,915
Loans from fellow investors in subsidiaries	787	787
Total	7,538	5,036

Financial liabilities
Company	Other Financial liabilities
	2008	2007
	US$'000	US$'000

Trade and other payables	28	200
Accruals	3	-
Amount due to a subsidiary	1,916	2,299

Total	1,947	2,499

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, obligations under finance leases and bank borrowings approximate to their fair values as at 31 December 2008 and 2007.

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	Notes	Nature	2008	2007
			US$'000	US$'000

Guangzhou Tonglai Shipping Agency Company Limited	(a)	Agency charges	82	77
Winko Metal Limited	(b)	Hiring charges for motor vehicle	-	8

Notes:

A company in which the Chairman, Mr Qin Shun Chao, is a director.
Companies which are controlled by Keen Lloyd Holdings Limited.

25. OPERATING LEASE COMMITMENTS

At 31 December 2008, the Group had total commitments in respect of land and building under operating leases:

	2008	2007
	US$'000	US$'000
Leases which expire:
- in the next year	354	171
- in the second to fifth years	1,089	741

	1,443	912

26. CAPITAL COMMITMENTS

Capital commitments outstanding at 31 December 2008 in respect of the acquisition of a quayside container crane from a non-related supplier in the financial statements were as follows:


	Group
	2008	2007
	US$'000	US$'000

Contracted, but not provided for	740	8,438

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:

(1) such guarantee did not have approval from the board of directors of KCT;

(2) in accordance with the law of the People's Republic of China, the board of directors and the management of
KCT cannot give KCT's properties for guarantee to its shareholder; and

(3) the controlling party of HEDCL has not held a valid business licence since 1998 and ceased operations in

1999. In accordance with the banking regulations of the People's Republic of China, the bank cannot lend
money to enterprises which do not have a valid business licence.

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 the end 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

At the date of authorisation of these financial statements, the following standards and interpretations, which are issued but not yet effective, have not been applied:

IFRS 1 Revised IFRS 1 First-time adoption of IFRS
IFRS 2 Share-based payments - Amendment, vesting conditions and cancellations
IFRS 3 Business combinations - Comprehensive revision on applying the acquisition method
IFRS 7 Financial Instruments: Disclosures - Amendment; Reclassification of Financial Assets
IFRS 8 Operating segments
IAS 1 Presentation of Financial Statements - comprehensive revision including requiring a statement of comprehensive income
IAS 23 Borrowing Costs - Comprehensive revision to prohibit immediate expensing
IAS 27 Consolidated and Separate Financial Statements - Amendments arising from IFRS 3
IAS 27 Consolidated and Separate Financial Statements - Amendment; Cost of an investment in a subsidiary, jointly controlled entity or associate
IAS 28 Investment in Associates - Consequential amendments arising from IFRS 3
IAS 39 Financial Instruments: Recognition and Measurement - Amendment; Reclassification of Financial Assets
IAS 39 Financial Instruments: Recognition and Measurement - Amendment; Eligible hedged items

Amendments to IFRSs arising from Annual Improvements Project

IFRS 7 Financial Instruments: Disclosures
IAS 1 Presentation of Financial Statements
IAS 7 Statement of Cash Flows
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
IAS 10 Events after the Reporting Period
IAS 16 Property, Plant and Equipment
IAS 18 Revenue
IAS 23 Borrowing Costs
IAS 27 Consolidated and Separate Financial Statements
IAS 28 Investment in Associates
IAS 32 Financial Instruments: Presentation
IAS 36 Impairment of Assets
IAS 38 Intangible Assets
IAS 39 Financial Instruments: Recognition and Measurement
IFRIC 16 Hedges of a Net Investment in a Foreign Operation

The directors anticipate that the adoption of these Standards and Interpretations as appropriate in future periods will have no material impact on the financial statements of the Group when the relevant standards come into effect for periods commencing after 1 January 2009.

29. EXCHANGE RATE

The US Dollar to Pound Sterling exchange rate at 31 December 2008 was US$1.44056/£ (2007: US$1.9994/£).

30. COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform to the current year's presentation. The new classification of the accounting items was considered to provide a more appropriate presentation of the state of affairs of the Group.

31. 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 settler. 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.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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