About PALADIN Company

Property development The Peak Road project is located at 8, 10 and 12 Peak Road, Hong Kong. It consists of 34 apartment units and a 3-storey detached house with a floor area of about 119,000 square feet. Fourteen condominium units have been sold in the previous year. The Group has not sold any apartments in the six months ended December 31, 2010. Over the past few years, management adopted a policy of centralizing the completion of the Hilltop Road project. Looking forward to the future, management is confident that the returns from the Hilltop Road project will greatly improve the Group's financial situation and bring stable returns to the Group. General trade and order trade The Company's management is currently concentrating the Group's resources on developing and promoting the Hilltop Road project. As a result, for the six months ended December 31, 2010, the turnover for this portion was only HK$1,000,000. Research and development Sensing System Technology Co., Ltd., a wholly-owned subsidiary of the Group, has plans to research and develop digital cameras, camera cameras, surveillance devices, and image capture and processing technology. The plan is still in its preliminary stages and has not yet generated any revenue for the Group. Liquidity, financial resources and capital structure As at December 31, 2010, the Group's net current liabilities were approximately HK$381,000,000, while the current ratio was 0.68. The secured bank deposit is approximately HK$21,000,000. As at December 31, 2010, the Group's outstanding loans amounted to approximately HK$1,107,000,000, including: (i) bank overdrafts and secured bank loans of approximately HK$945,000,000; (ii) tax payable of approximately HK$43,000,000; (iii) litigation preparation of approximately HK$34,000,000; and (iv) other payables and bills payable of approximately HK$85,000,000. Interest on bank loans is calculated at a variable interest rate. Most of the Group's assets and loans are denominated in Hong Kong dollars or US dollars, so the risk of adverse exchange rate fluctuations can be avoided. In view of the stability of the exchange rate between the Hong Kong dollar and the US dollar, the directors believe that the Group has no significant risk of exchange rate fluctuations, so there is no hedging against foreign exchange risk. The Group's bank loans are secured by investment properties, properties for sale, rental properties and bank deposits of approximately HK$1,081,000,000. The directors believe that it is not meaningful to publish the capital-to-debt ratio of the Group until the shareholders' capital level of the Group returns to a positive number.