Prestige Safe Limited 威 全 有 限 公 司

Transcription

1 THIS COMPOSITE DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to any aspect of the Offers, this Composite Document and/or the accompanying Form(s) of Acceptance or as to the action to be taken, you should consult a licensed securities dealer or registered institution in securities, a bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in Integrated Waste Solutions Group Holdings Limited, you should at once hand this Composite Document and the accompanying Form(s) of Acceptance to the purchaser(s) or the transferee(s) or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s). This Composite Document should be read in conjunction with the accompanying Form(s) of Acceptance, the contents of which form part of the terms and conditions of the Offers. Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this Composite Document and the accompanying Form(s) of Acceptance, make no representation as to their accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Composite Document and the accompanying Form(s) of Acceptance. Prestige Safe Limited 威 全 有 限 公 司 (Incorporated in the British Virgin Islands with limited liability) Integrated Waste Solutions Group Holdings Limited Integrated Waste Solutions Group Holdings Limited 綜 合 環 保 集 團 有 限 公 司 (Incorporated in the Cayman Islands with limited liability) (stock code: 923) COMPOSITE OFFER AND RESPONSE DOCUMENT RELATING TO MANDATORY CONDITIONAL CASH OFFERS BY HALCYON SECURITIES LIMITED FOR AND ON BEHALF OF PRESTIGE SAFE LIMITED FOR ALL THE ISSUED SHARES AND FOR CANCELLATION OF ALL OUTSTANDING SHARE OPTIONS OF INTEGRATED WASTE SOLUTIONS GROUP HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY PRESTIGE SAFE LIMITED AND PARTIES ACTING IN CONCERT WITH IT) Financial Adviser to Prestige Safe Limited Halcyon Capital Limited Independent Financial Adviser to the Independent Board Committee Capitalised terms used in this cover page shall have the same meanings as those defined in the section headed Definitions in this Composite Document. A letter from Halcyon Securities containing, among other things, details of the terms and conditions of the Offers is set out on pages 6 to 13 of this Composite Document. A letter from the Board is set out on pages 14 to 19 of this Composite Document. A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders and the Independent Optionholders in respect of the Offers is set out on pages 20 to 21 of this Composite Document. A letter from Veda Capital containing its advice to the Independent Board Committee in respect of the Offers is set out on pages 22 to 43 of this Composite Document. The procedures for acceptance and other information relating to the Offers are set out in Appendix I to this Composite Document and in the accompanying Form(s) of Acceptance. Acceptances of the Offers should be received by the Registrar in accordance with those procedures by no later than 4:00 p.m. (Hong Kong time) on Wednesday, 24 February 2016 or such later time and/or date as the Offeror may decide and announce, with the consent of the Executive, in accordance with the Takeovers Code. Persons receiving copies of this Composite Document, the accompanying Form(s) of Acceptance and any related documents, including, without limitation, custodians, nominees and trustees, who would, or otherwise intend to, forward such documents to any jurisdiction outside Hong Kong, should read the details in this regard which are contained in this Composite Document before taking any action. It is the responsibility of each Overseas Shareholder and Overseas Optionholder wishing to accept the Offers to satisfy himself, herself or itself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including but not limited to the obtaining of any governmental, exchange control or other consents which may be required and the compliance with other necessary formalities or regulatory or legal requirements. The Overseas Shareholders and the Overseas Optionholders are advised to seek their own professional advice on deciding whether or not to accept the Offers. The Composite Document will remain on the websites of the Stock Exchange at and the Company at as long as the Offers remain open. 3 February 2016

2 CONTENTS Page Expected timetable ii Definitions Letter from Halcyon Securities Letter from the Board Letter from the Independent Board Committee Letter from Veda Capital Appendix I Further terms of the Offers I-1 Appendix II Financial information of the Group II-1 Appendix III Property valuation report of the Group III-1 Appendix IV General information IV-1 Accompanying document(s) Form(s) of Acceptance i

3 EXPECTED TIMETABLE The timetable set out below is indicative only and may be subject to changes. Further announcement(s) will be made in the event of any changes to the timetable as and when appropriate. Unless otherwise expressly stated, all time and date references contained in this Composite Document refer to Hong Kong time and dates Despatch date of this Composite Document and the accompanying Form(s) of Acceptance (Note 1) Wednesday, 3 February Offers open for acceptance (Note 1) Wednesday, 3 February First Closing Date (Notes 1 and 2) Wednesday, 24 February Latest time and date for acceptance of the Offers (Notes 2 and 7) :00 p.m. on Wednesday, 24 February Announcement of the results of the Offers as at the First Closing Date to be posted on the Stock Exchange s website (Note 3) by 7:00 p.m. on Wednesday, 24 February Latest date for posting of remittances for the amounts due under the Offers in respect of valid acceptances received on or before 4:00 p.m. on the First Closing Date assuming the Offers become or are declared unconditional on the First Closing Date (Notes 4 and 7) Friday, 4 March Latest time and date for acceptance of the Offers assuming the Offers become or are declared 4:00 p.m. on unconditional on the First Closing Date (Notes 5 and 7) Wednesday, 9 March Announcement of the results of the Offers to be posted on the Stock Exchange s website (Note 3) by 7:00 p.m. on Wednesday, 9 March Latest date for posting of remittances for the amounts due under the Offers in respect of valid acceptances received on or before 4:00 p.m. on 9 March 2016 (Note 4) Friday, 18 March Latest time and date by which the Offers can become or be declared unconditional as to acceptances (Note 6) :00 p.m. on Tuesday, 5 April ii

4 EXPECTED TIMETABLE Notes: 1. The Offers, which are conditional, are made on the date of posting of this Composite Document, and are capable of acceptance on and from that date until 4:00 p.m. on the First Closing Date unless the Offeror revises or extends the Offers in accordance with the Takeovers Code. Subject to the condition of the Offers as set out in the paragraph headed Condition of the Offers in the Letter from Halcyon Securities in this Composite Document, acceptance of the Offers shall be irrevocable and are not capable of being withdrawn, except in the circumstances as set out in paragraph headed 6. Right of withdrawal in Appendix I to this Composite Document. 2. The Offers must initially be open for acceptance for at least 21 days following the date on which this Composite Document is posted in accordance with the Takeovers Code. The latest time and date for acceptance of the Offers is 4:00 p.m. on Wednesday, 24 February 2016, unless the Offeror revises or extends the Offers, with the consent of the Executive, in accordance with the Takeovers Code. Beneficial owners of Share(s) who hold their Share(s) in CCASS directly as an investor participant or indirectly via a broker or custodian participant should note the timing requirements (set out in Appendix I to this Composite Document) for causing instructions to be made to CCASS in accordance with the General Rules of CCASS and CCASS Operational Procedures. 3. An announcement will be issued on the website of the Stock Exchange by 7:00 p.m. on Wednesday, 24 February 2016 and Wednesday, 9 March 2016 stating whether the Offers have been revised or extended, have expired or have become or been declared unconditional. In any announcement of an extension of the Offers, either the next closing date must be stated or, if the Offers are unconditional as to acceptances, a statement will be made that the Offers will remain open until further notice. In any event, where the Offers become or are declared unconditional, the Offers will remain open for acceptance for not less than 14 days thereafter in accordance with the Takeovers Code. 4. Remittances in respect of the cash consideration (after deducting the seller s ad valorem stamp duty in case of the Share Offer) payable for the Offer Shares or the Share Options tendered under the Offers (as the case may be) will be posted to the accepting Independent Shareholders or Independent Optionholders (as the case may be) at his/her/its own risk as soon as possible but in any event within 7 Business Days following the later of (a) the Unconditional Date and (b) the date of the receipt by the Registrar of all the relevant documents to render the acceptance under the Offers complete and valid. 5. Assuming the Offers become or are declared unconditional on the First Closing Date, the Offers should remain open for acceptance for not less than 14 days thereafter in accordance with the Takeovers Code. 6. In accordance with the Takeovers Code, except with the consent of the Executive, the Share Offer may not become or be declared unconditional as to acceptances after 7:00 p.m. on the 60th day after posting of this Composite Document. Where a period laid down by the Takeovers Code ends on a day which is not a Business Day, the period is extended until the next Business Day. Accordingly, unless the Share Offer has previously become or been declared unconditional as to acceptances, the Offers will lapse after 7:00 p.m. on Tuesday, 5 April 2016 unless extended with the consent of the Executive. 7. If there is a tropical cyclone warning signal number 8 or above, or a black rainstorm warning: (a) (b) in force in Hong Kong at any local time before 12:00 noon but no longer in force after 12:00 noon on the latest time and date for acceptance of the Offers or the latest date for posting of remittances for the amounts due under the Offers in respect of valid acceptances, the latest time and date for acceptance of the Offers or the posting of remittances, as the case may be, will remain at 4:00 p.m. on the same Business Day; or in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on the latest time and date for acceptance of the Offers or the latest date for posting of remittances for the amounts due under the Offers in respect of valid acceptances, the latest time and date for acceptance of the Offers or the posting of remittances, as the case may be, will be rescheduled to 4:00 p.m. on the following Business Day which does not have either of those warnings in force at any time between 9:00 a.m. and 4:00 p.m. or such other day as the Executive may approve. All Optionholders should note that under the rules of the share option scheme adopted by the Company on 11 March 2010, subject to the Offers becoming unconditional, all Share Options that remained unexercised (whether vested or not) before 4:00 p.m. on the First Closing Date as notified by the Company to the Optionholders will lapse automatically and shall not be exercisable (to the extent not already exercised) at or after 4:00 p.m. on the First Closing Date. iii

5 DEFINITIONS In this Composite Document, unless otherwise defined or the context otherwise requires, the following expressions shall have the meanings set out below: acting in concert Articles of Association associate(s) Board Business Day BVI CCASS Change in Control Company Composite Document controlling shareholder(s) CTF Holding CTF Nominee has the meaning ascribed thereto under the Takeovers Code the articles of association of the Company has the meaning ascribed thereto under the Takeovers Code the board of Directors a day on which the Stock Exchange is open for the transaction of business British Virgin Islands the Central Clearing and Settlement System established and operated by HKSCC the change in control of CTF Nominee from Dato Dr. Cheng Yu Tung to CTF Holding for a consideration of HK$99,800, which took place on 21 December 2015 Integrated Waste Solutions Group Holdings Limited (stock code: 923), a company incorporated in the Cayman Islands with limited liability, and the issued Shares of which are listed on the Main Board of the Stock Exchange this composite offer and response document dated 3 February 2016 jointly issued by the Offeror and the Company to the Shareholders and the Optionholders in connection with the Offers in compliance with the Takeovers Code has the meaning ascribed thereto under the Listing Rules Chow Tai Fook (Holding) Limited, an investment holding company incorporated in the BVI with limited liability and owned as to approximately 78.58% by Chow Tai Fook Capital Limited, which in turn is owned as to approximately 48.98% and 46.65% by Cheng Yu Tung Family (Holdings) Limited and Cheng Yu Tung Family (Holdings II) Limited, respectively as at the Latest Practicable Date Chow Tai Fook Nominee Limited ( 周 大 福 代 理 人 有 限 公 司 ), a company incorporated in Hong Kong with limited liability and the controlling shareholder of the Company 1

6 DEFINITIONS Director(s) Executive First Closing Date Form(s) of Acceptance Group director(s) of the Company the Executive Director of the Corporate Finance Division of the SFC or any of his delegates the first closing date of the Offers which is 21 days after the date on which this Composite Document is posted the WHITE Form of Acceptance and/or the PINK Form of Acceptance (as the context may require) which accompany(ies) this Composite Document the Company and its subsidiaries Halcyon Capital Halcyon Capital Limited, a corporation licensed to conduct type 6 (advising on corporate finance) of the regulated activities under the SFO, and the financial adviser to the Offeror Halcyon Securities HKSCC Hong Kong Independent Board Committee Halcyon Securities Limited, a corporation licensed to conduct type 1 (dealing in securities), type 2 (dealing in futures contracts) and type 4 (advising on securities) of the regulated activities under the SFO, which makes the Offers for and on behalf of the Offeror Hong Kong Securities Clearing Company Limited Hong Kong Special Administrative Region of the PRC a committee of the Board, comprising two non-executive Directors, namely, Mr. Lau Sai Cheong and Mr. To Chun Wai; and three independent non-executive Directors, namely, Messrs. Nguyen Van Tu, Peter, Chow Shiu Wing, Joseph and Wong Man Chung, Francis, established to advise the Independent Shareholders and the Independent Optionholders regarding the terms of the Offers and as to their acceptances Independent Financial Veda Capital Limited, a corporation licensed to conduct type 6 Adviser or Veda Capital (advising on corporate finance) of the regulated activities under the SFO, and the independent financial adviser to the Independent Board Committee, the Independent Shareholders and the Independent Optionholders in respect of the Offers and as to their acceptances Independent Optionholders Optionholders other than the Offeror and parties acting in concert with it 2

7 DEFINITIONS Independent Shareholders Shareholders other than the Offeror and parties acting in concert with it Joint Announcement the joint announcement of the Company and the Offeror dated 31 December 2015 in relation to, among other things, the Change in Control and the Offers Last Trading Day Latest Practicable Date Listing Rules Offer Period Offer Share(s) Offeror Offers Option Offer Option Offer Price Optionholder(s) Overseas Optionholders 18 December 2015, being the last full Trading Day of the Shares immediately prior to the trading halt of the Shares on the Stock Exchange pending the release of the Joint Announcement 29 January 2016, being the latest practicable date prior to the printing of this Composite Document for the purpose of ascertaining certain information contained herein the Rules Governing the Listing of Securities on the Stock Exchange the period commencing from 31 December 2015, being the date of publication of the Joint Announcement, until the latest of: (i) the time when the Offers are closed for acceptances; and (ii) the date when the Offers lapse Share(s) in issue, other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it Prestige Safe Limited, a company incorporated in the BVI with limited liability and a wholly-owned subsidiary of CTF Holding collectively the Share Offer and the Option Offer the mandatory conditional cash offer made by Halcyon Securities for and on behalf of the Offeror for cancellation of all Share Options (other than those already held by the Offeror and parties acting in concert with it) pursuant to Rule 13 of the Takeovers Code HK$0.001 for each Share Option payable by the Offeror to the Independent Optionholders accepting the Option Offer holder(s) of the Share Option(s) Independent Optionholders whose addresses as shown on the register of Optionholders of the Company are outside Hong Kong 3

8 DEFINITIONS Overseas Shareholders PINK Form(s) of Acceptance PRC Registrar Relevant Period SFC SFO Share(s) Share Offer Share Offer Price Share Option(s) Shareholder(s) Stock Exchange Takeovers Code Independent Shareholders whose addresses as shown on the register of members of the Company are outside Hong Kong the PINK form of acceptance and cancellation of Share Options in respect of the Option Offer the People s Republic of China which, for the purpose of this Composite Document, shall exclude Hong Kong, Macau Special Administrative Regions of PRC and Taiwan Tricor Investor Services Limited, the branch share registrar and transfer office of the Company in Hong Kong, being the agent to receive the WHITE Form of Acceptance under the Share Offer and the PINK Form of Acceptance under the Option Offer the period commencing on 30 June 2015, being the date falling six months before the date of the Joint Announcement, up to and including the Latest Practicable Date the Securities and Futures Commission of Hong Kong the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) ordinary share(s) of HK$0.10 each in the share capital of the Company the mandatory conditional cash offer made by Halcyon Securities for and on behalf of the Offeror for all the issued Shares (other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it) pursuant to Rule 26.1 of the Takeovers Code the price at which the Share Offer is made, being HK$0.158 per Offer Share the outstanding share options (whether vested or not) granted under the share option scheme adopted by the Company on 11 March 2010 holder(s) of the issued Shares The Stock Exchange of Hong Kong Limited The Hong Kong Code on Takeovers and Mergers 4

9 DEFINITIONS Trading Day Unconditional Date WHITE Form(s) of Acceptance HK$ RMB US$ a day on which securities can be freely traded on the Stock Exchange during whole of the normal trading hours of the Stock Exchange regardless of whether any trades actually occur the date on which the Offers become or are declared unconditional in accordance with the Takeovers Code the WHITE form of acceptance and transfer of the Offer Shares in respect of the Share Offer Hong Kong dollars, the lawful currency of Hong Kong Renminbi, the lawful currency of the PRC United States dollars, the lawful currency of the United States of America % per cent. The English texts of this Composite Document and accompanying Form(s) of Acceptance shall prevail over their respective Chinese texts in case of inconsistency. Reference to any statute or statutory provision includes a statute or statutory provision which amends, consolidates or replaces the same whether before or after the date of this Composite Document. Certain amounts and percentage figures in this Composite Document have been subject to rounding adjustments. 5

10 LETTER FROM HALCYON SECURITIES Halcyon Securities Limited 11/F, 8 Wyndham Street, Central, Hong Kong 3 February 2016 To the Independent Shareholders and the Independent Optionholders Dear Sir or Madam, MANDATORY CONDITIONAL CASH OFFERS BY HALCYON SECURITIES LIMITED FOR AND ON BEHALF OF PRESTIGE SAFE LIMITED FOR ALL THE ISSUED SHARES AND FOR CANCELLATION OF ALL OUTSTANDING SHARE OPTIONS OF INTEGRATED WASTE SOLUTIONS GROUP HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY PRESTIGE SAFE LIMITED AND PARTIES ACTING IN CONCERT WITH IT) INTRODUCTION Reference is made to the Joint Announcement in relation to, among other things, the Change in Control and the Offers. As a result of the Change in Control, CTF Holding has become the controlling shareholder of CTF Nominee and is deemed to be interested in 2,263,151,835 Shares, representing approximately 46.93% of the entire issued share capital of the Company as at the Latest Practicable Date. Pursuant to Rule 26.1 of the Takeovers Code, the Offeror is required to make the Share Offer for all the issued Shares (other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it). In addition, under Rule 13 of the Takeovers Code, the Offeror is also required to make a comparable cash offer for cancellation of all Share Options (other than those already held by the Offeror and parties acting in concert with it). The purpose of this letter is to provide you with, among other things, details of the Offers, information on the Offeror and the intention of the Offeror regarding the Group. The terms of the Offers and procedures of acceptances are set out in this letter, Appendix I to this Composite Document and the Forms of Acceptance. Independent Shareholders and Independent Optionholders are strongly advised to consider carefully the information contained in the Letter from the Board, the Letter from the Independent Board Committee, the Letter from Veda Capital and the appendices as set out in this Composite Document and to consult their own professional advisers before reaching a decision as to whether or not to accept the Offers. 6

11 LETTER FROM HALCYON SECURITIES THE OFFERS As at the Latest Practicable Date, there were 4,822,334,000 Shares in issue and 66,221,654 Share Options. Save for the Share Options, the Company had no other outstanding options, warrants, derivatives or securities convertible or exchangeable into Shares. Principal terms of the Offers Halcyon Securities is making the Offers for and on behalf of the Offeror in compliance with the Takeovers Code on the following basis: Share Offer For every Offer Share HK$0.158 in cash The Offer Shares to be acquired under the Share Offer shall be fully paid and free from all liens, charges, encumbrances, right of pre-emption and any other third party rights of any nature and together with all rights attaching to them as at the date of the Joint Announcement or subsequently becoming attached to them, including the rights to receive in full all dividends and distributions, if any, declared, made or paid on or after the date of the Joint Announcement. Option Offer For cancellation of each Share Option (whether vested or not and other than those already held by the Offeror and parties acting in concert with it) with exercise price at HK$ HK$0.001 in cash Pursuant to Rule 13 of the Takeovers Code, the offer price for cancellation of each share option should normally represent the difference between the exercise price of the respective share options and the offer price for shares. As the exercise price of each of the Share Options is HK$0.444, which is above the Share Offer Price, the Option Offer Price for cancellation of each Share Option is nominal. Comparison of value The Share Offer Price of HK$0.158 was determined with reference to the then prices of the Shares traded on the Stock Exchange, the financial conditions of the Group and the market conditions, and represents: (i) (ii) the closing price of HK$0.158 per Share as quoted on the Stock Exchange on the Last Trading Day; a premium of approximately 2.60% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the 5 trading days up to and including the Last Trading Day of approximately HK$0.154 per Share; 7

12 LETTER FROM HALCYON SECURITIES (iii) (iv) (v) a premium of approximately 1.28% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the 10 trading days up to and including the Last Trading Day of approximately HK$0.156 per Share; a discount of approximately 0.63% to the closing price of HK$0.159 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and a discount of approximately 36.80% to the unaudited consolidated net asset value attributable to equity shareholders of the Company of approximately HK$0.250 per Share as at 30 September 2015 (based on the unaudited accounts of the Company as at 30 September 2015 and the number of Shares in issue as at the Latest Practicable Date). Highest and lowest Share prices The highest and lowest closing prices of the Shares as quoted on the Stock Exchange during the Relevant Period were HK$0.310 per Share (on 30 June 2015) and HK$0.152 per Share (on 11 December 2015 and 14 December 2015), respectively. Value of the Offers As at the Latest Practicable Date, there were 4,822,334,000 Shares in issue and 66,221,654 Share Options in respect of 66,221,654 Shares. As at the Latest Practicable Date, (i) the Offeror was interested in 2,263,151,835 Shares and therefore, 2,559,182,165 Offer Shares are subject to the Share Offer; and (ii) Mr. Cheng Chi Ming, Brian and Mr. Tsang On Yip, Patrick (being parties acting in concert with the Offeror) were interested in 10,986,486 and 8,789,189 Share Options, respectively and therefore, 46,445,979 Share Options are subject to the Option Offer. The Share Offer for 2,559,182,165 Shares is valued at HK$404,350, on the basis of the Share Offer Price of HK$0.158 per Offer Share. Assuming that all 46,445,979 Share Options are tendered for cancellation at the Option Offer Price, the aggregate amount payable by the Offeror under the Option Offer is approximately HK$46, Assuming that all 46,445,979 Share Options are fully exercised prior to closing of the Offers, an aggregate of 2,605,628,144 Shares would be subject to the Share Offer and be valued at HK$411,689, on the basis of the Share Offer Price of HK$0.158 per Offer Share. Financial resources available to the Offeror The Offeror will finance the Offers from its internal resources and Halcyon Capital is satisfied that sufficient financial resources are available to the Offeror to satisfy full acceptances of the Offers. 8

13 LETTER FROM HALCYON SECURITIES Condition of the Offers The Offers are conditional upon valid acceptances of the Share Offer having been received by 4:00 p.m. on the First Closing Date (or such later time and/or date as the Offeror may determine and announce in accordance with the requirements of the Takeovers Code) in respect of such number of Shares, which together with the Shares already owned or agreed to be acquired by the Offeror and parties acting in concert with it, will result in the Offeror and parties acting in concert with it holding more than 50% of the voting rights in the Company. The Option Offer is subject to and conditional upon the Share Offer becoming unconditional. Independent Shareholders and Independent Optionholders should note that if the total number of Shares in respect of which the Offeror receives valid acceptances under the Share Offer together with those Shares already owned or agreed to be acquired by the Offeror and parties acting in concert with it before or during the Offer Period, will result in the Offeror and parties acting in concert with it holding 50% or less of the voting rights of the Company, the Offers will not become unconditional and will lapse. In such circumstances, pursuant to Rule 20.2 of the Takeovers Code, the Offeror must, as soon as possible but in any event within 10 days thereof, post the certificates of the Shares or Share Options (as the case may be) lodged with the relevant Forms of Acceptance to, or make such certificates of the Shares or Share Options (as the case may be) available for collection by, those Independent Shareholders or Independent Optionholders who have accepted the Offers. Effect of accepting the Offers By accepting the Share Offer, the Independent Shareholders will sell their Shares to the Offeror free from all encumbrances together with all rights attached thereto, including but not limited to all rights to any dividend or other distribution declared, made or paid on or after the date on which the Share Offer is made, which is the date of the Joint Announcement. Acceptance of the Option Offer by the Independent Optionholders will result in the cancellation of their Share Options and all rights attached thereto with effect from the date on which the Option Offer is made, being the date of the Joint Announcement. Acceptance of the Offers by any Independent Shareholder or Independent Optionholder will constitute a warranty by such person that all Shares or Share Options sold by such person under the Offers are free from all liens, charges, options, claims, equities, adverse interests, third-party rights or encumbrances whatsoever and together with all rights accruing or attaching thereto, including, without limitation, the right to receive dividends and distributions recommended, declared, made or paid, if any, on or after the date on which the Offers are made. Acceptances of the Offers shall be irrevocable and not capable of being withdrawn, except as permitted under the Takeovers Code. 9

14 LETTER FROM HALCYON SECURITIES Hong Kong stamp duty In Hong Kong, seller s ad valorem stamp duty arising in connection with acceptances of the Share Offer will be payable by the relevant Independent Shareholders at a rate of 0.1% of the market value of the Offer Shares or the consideration payable by the Offeror in respect of the relevant acceptances of the Share Offer, whichever is higher, and will be deducted from the cash amount payable by the Offeror to the relevant Independent Shareholder accepting the Share Offer. The Offeror will arrange for payment of the seller s ad valorem stamp duty on behalf of the relevant Independent Shareholders accepting the Share Offer and will pay the buyer s ad valorem stamp duty in connection with the acceptance of the Share Offer and the transfer of the Offer Shares. No stamp duty is payable in connection with the acceptances of the Option Offer. Payment Payment in cash in respect of acceptances of the Offers will be made as soon as possible but in any event within 7 Business Days of the date on which the relevant documents of title are received by the Offeror to render each such acceptance complete and valid or the Offers have become or have been declared unconditional, whichever is later. Settlement of the amounts due to the Independent Shareholders and the Independent Optionholders who accept the Offers will be implemented in full in accordance with the terms of the Offers without regard to any lien, right of set-off, counterclaim or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such Independent Shareholders or Independent Optionholders. Other arrangements The Offeror confirms that, as at the Latest Practicable Date: (i) save for the 2,263,151,835 Shares which CTF Nominee was interested in and the 10,986,486 and 8,789,189 Share Options held by Mr. Cheng Chi Ming, Brian and Mr. Tsang On Yip, Patrick (being parties acting in concert with the Offeror) respectively, the Offeror and parties acting in concert with it did not own, control or had direction over any voting rights or rights over the Shares or convertible securities, options, warrants or derivatives of the Company; (ii) (iii) (iv) there was no arrangement (whether by way of option, indemnity or otherwise) of the kind referred to in Note 8 to Rule 22 of the Takeovers Code in relation to the shares of the Offeror or the Shares and which might be material to the Offers; other than those set out in the paragraph headed Condition of the Offers above, there was no agreement or arrangement to which the Offeror was a party which related to circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Offers; the Offeror and parties acting in concert with it had not received any irrevocable commitment to accept the Offers; and 10

15 LETTER FROM HALCYON SECURITIES (v) the Offeror and parties acting in concert with it had not borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company. Taxation advice Independent Shareholders and Independent Optionholders are recommended to consult their own professional advisers if they are in doubt as to the taxation implications of their acceptance or non-acceptance of the Offers. It is emphasised that none of the Offeror and parties acting in concert with it, the Company, Halcyon Capital, Halcyon Securities, Veda Capital, the Registrar and their respective ultimate beneficial owners, directors, officers, agents or professional advisers or any other person involved in the Offers accepts any responsibility for any taxation effects on, or liabilities of, any person or persons as a result of their acceptance(s) or non-acceptance(s) of the Offers. Dealing and interest in the Company s securities None of the Offeror, its ultimate beneficial owner nor parties acting in concert with any of them has dealt for value in any Shares, options, derivatives, warrants or other securities convertible into Shares during the Relevant Period. Overseas Shareholders and Overseas Optionholders The Offers made are in respect of securities of a company incorporated in the Cayman Islands and are subject to the procedural and disclosure requirements of Hong Kong, which may be different from other jurisdictions. Overseas Shareholders and Overseas Optionholders who wish to participate in the Offers will also be subject to, and may be limited by, the laws and regulations of their respective jurisdictions in connection with their participation in the Offers. Overseas Shareholders and Overseas Optionholders should observe any applicable legal and regulatory requirements and, where necessary, consult their own professional advisers. It is the responsibility of Overseas Shareholders and Overseas Optionholders who wish to accept the Offers to satisfy themselves as to the full observance of the laws and regulations of the relevant jurisdictions in connection with the acceptance of the Offers (including the obtaining of any governmental, exchange control or other consent which may be required or the compliance with other necessary formalities or legal and/or regulatory requirements and the payment of any issue, transfer or other taxes due in such jurisdictions). Overseas Shareholders and Overseas Optionholders shall be fully responsible for the payment of any transfer or other taxes and duties due by such Overseas Shareholders or Overseas Optionholders in respect of the relevant jurisdictions. Acceptance of the Offers by any such person will be deemed to constitute a representation and warranty from such person that such person is permitted under, and has complied with, all applicable laws and regulations to receive and accept the Offers, and any revision thereof, and such acceptance is valid and binding in accordance with all applicable laws and regulations. The Overseas Shareholders and Overseas Optionholders are recommended to seek professional advice on deciding whether or not to accept the Offers. 11

16 LETTER FROM HALCYON SECURITIES INFORMATION ON THE OFFEROR The Offeror is an investment holding company incorporated in the BVI and a wholly-owned subsidiary of CTF Holding. The Offeror has not carried on any business since its incorporation, other than matters in connection with the Offers. As a result of the Change in Control, CTF Holding has become the controlling shareholder of CTF Nominee. As at the Latest Practicable Date: (a) (b) CTF Holding was owned as to approximately 78.58% by Chow Tai Fook Capital Limited, which in turn was owned as to approximately 48.98% and 46.65% by Cheng Yu Tung Family (Holdings) Limited and Cheng Yu Tung Family (Holdings II) Limited, respectively; and Dr. Cheng Kar Shun, Mr. Cheng Kar Shing, Mrs. Sun Cheng Lai Ha, Cecilia and Mrs. Doo Cheng Sau Ha, Amy collectively held controlling interest in each of Cheng Yu Tung Family (Holdings) Limited and Cheng Yu Tung Family (Holdings II) Limited. OFFEROR S INTENTION ON THE GROUP Following the close of the Offers, the Offeror intends to continue with the existing principal businesses of the Group. The Offeror does not intend to introduce any major changes to the existing operations and business of the Group or terminate the employment of any employees of the Group or propose any change to the members of the Board immediately after the Offers. As at the Latest Practicable Date, the Offeror had no intention or plans for any acquisition or disposal of assets and/or business by the Group. COMPULSORY ACQUISITION The Offeror does not intend to exercise any power of compulsory acquisition of any Offer Shares outstanding and not acquired under the Offers after the close of the Offers. MAINTAINENCE OF THE LISTING STATUS OF THE COMPANY The Stock Exchange has stated that if, at the close of the Offers, less than the minimum prescribed percentage applicable to the Company, being 25% of the issued Shares, are held by the public, or if the Stock Exchange believes that (i) a false market exists or may exist in the trading of the Shares; or (ii) there are insufficient Shares in public hands to maintain an orderly market, it will consider exercising its discretion to suspend dealings in the Shares. The Offeror intends the Company to remain listed on the Stock Exchange after the close of the Offers. The directors of the Offeror will jointly and severally undertake to the Stock Exchange to take appropriate steps to ensure that the sufficient public float exists in the Shares. 12

17 LETTER FROM HALCYON SECURITIES ACCEPTANCE AND SETTLEMENT Your attention is drawn to the further details regarding further terms and conditions of the Offers, the procedures for acceptance and settlement and the acceptance period as set out in Appendix I to this Composite Document and the accompanying Form(s) of Acceptance. GENERAL This Composite Document has been prepared for the purposes of complying with the laws of Hong Kong, the Takeovers Code and the Listing Rules and the information disclosed may not be the same as which would have been disclosed if this Composite Document had been prepared in accordance with the laws of jurisdictions outside Hong Kong. To ensure equality of treatment of all Independent Shareholders and Independent Optionholders, those registered Independent Shareholders and Independent Optionholders who hold Offer Shares and Share Options as nominee on behalf of more than one beneficial owner should, as far as practicable, treat the holding of such beneficial owner separately. It is essential for the beneficial owners of the Offer Shares and Share Options whose investments are registered in the names of nominees to provide instructions to their nominees of their intentions with regard to the Offers. The attention of the Overseas Shareholders and Overseas Optionholders is drawn to paragraph 7(h) in Appendix I to this Composite Document. All documents and remittances to be sent to the Independent Shareholders and the Independent Optionholders will be sent to them by ordinary post at their own risk. Such documents and remittances will be sent to the Independent Shareholders and the Independent Optionholders at their respective addresses as they appear in the register of the members of the Company or register of Optionholders (as the case may be) and in the case of joint Independent Shareholders or joint Independent Optionholders (as the case may be), to such Independent Shareholders or Independent Optionholders whose name appears first in the register of members of the Company or register of Optionholders (as the case may be). The Offeror and parties acting in concert with any of them, the Company, Halcyon Capital, Halcyon Securities, Veda Capital, the Registrar or professional advisers or any of their respective directors or any other parties involved in the Offers will not be responsible for any loss or delay in transmission or any other liabilities that may arise as a result thereof or in connection therewith. ADDITIONAL INFORMATION Your attention is drawn to the additional information set out in the appendices to this Composite Document which form part of this Composite Document. You are reminded to carefully read the Letter from the Board, the advice of the Independent Board Committee, the recommendation of Veda Capital and other information about the Group, which are set out in this Composite Document before deciding whether or not to accept the Offers. 13 Yours faithfully, For and on behalf of Halcyon Securities Limited Gilbert Lam Executive Director

18 LETTER FROM THE BOARD Integrated Waste Solutions Group Holdings Limited Integrated Waste Solutions Group Holdings Limited 綜 合 環 保 集 團 有 限 公 司 (Incorporated in the Cayman Islands with limited liability) (stock code: 923) Executive Directors: Mr. Suen Wing Yip Mr. Tam Sui Kin, Chris Non-executive Directors: Mr. Cheng Chi Ming, Brian (Chairman) Mr. Tsang On Yip, Patrick Mr. Lau Sai Cheong Mr. To Chun Wai Independent non-executive Directors: Mr. Nguyen Van Tu, Peter Mr. Chow Shiu Wing, Joseph Mr. Wong Man Chung, Francis Registered Office: Clifton House 75 Fort Street PO Box 1350 Grand Cayman KY Cayman Islands Principal Place of Business in Hong Kong: Integrated Waste Solutions Building 8 Chun Cheong Street Tseung Kwan O Industrial Estate New Territories Hong Kong 3 February 2016 To the Independent Shareholders and the Independent Optionholders Dear Sir or Madam, INTRODUCTION MANDATORY CONDITIONAL CASH OFFERS BY HALCYON SECURITIES LIMITED FOR AND ON BEHALF OF PRESTIGE SAFE LIMITED FOR ALL THE ISSUED SHARES AND FOR CANCELLATION OF ALL OUTSTANDING SHARE OPTIONS OF INTEGRATED WASTE SOLUTIONS GROUP HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY PRESTIGE SAFE LIMITED AND PARTIES ACTING IN CONCERT WITH IT) Reference is made to the Joint Announcement in relation to, among other things, the Change in Control and the Offers. 14

19 LETTER FROM THE BOARD As a result of the Change in Control, CTF Holding has become the controlling shareholder of CTF Nominee and is deemed to be interested in 2,263,151,835 Shares, representing approximately 46.93% of the entire issued share capital of the Company as at the Latest Practicable Date. Pursuant to Rule 26.1 of the Takeovers Code, the Offeror is required to make the Share Offer for all the issued Shares (other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it). In addition, under Rule 13 of the Takeovers Code, the Offeror is also required to make a comparable cash offer for cancellation of all Share Options (other than those already held by the Offeror and parties acting in concert with it). The purpose of this Composite Document is to provide you with, among other things, information relating to the Group and the Offers and to set out the letter from the Independent Board Committee containing its recommendation to the Independent Shareholders and the Independent Optionholders in respect of the terms of the Offers and as to their acceptances and the letter from the Veda Capital containing its advice to the Independent Board Committee, the Independent Shareholders and the Independent Optionholders in respect of the terms of the Offers and as to their acceptances. THE OFFERS As at the Latest Practicable Date, there were 4,822,334,000 Shares in issue and 66,221,654 Share Options. Save for the Share Options, the Company had no other outstanding options, warrants, derivatives or securities convertible or exchangeable into Shares. Principal terms of the Offers Halcyon Securities is making the Offers for and on behalf of the Offeror in compliance with the Takeovers Code on the following basis: Share Offer For every Offer Share HK$0.158 in cash The Offer Shares to be acquired under the Share Offer shall be fully paid and free from all liens, charges, encumbrances, right of pre-emption and any other third party rights of any nature and together with all rights attaching to them as at the date of the Joint Announcement or subsequently becoming attached to them, including the rights to receive in full all dividends and distributions, if any, declared, made or paid on or after the date of the Joint Announcement. Option Offer For cancellation of each Share Option (whether vested or not and other than those already held by the Offeror and parties acting in concert with it) with exercise price at HK$ HK$0.001 in cash Pursuant to Rule 13 of the Takeovers Code, the offer price for cancellation of each share option should normally represent the difference between the exercise price of the respective share options and the offer price for shares. As the exercise price of each of the Share Options is HK$0.444, which is above the Share Offer Price, the Option Offer Price for cancellation of each Share Option is nominal. 15

20 LETTER FROM THE BOARD Further Details of the Offers Further details of the Offers, including, among other things, their extension to the Overseas Shareholders and the Overseas Optionholders, information on taxation, the terms and conditions and the procedures for acceptance and settlement and acceptance period are set out in the Letter from Halcyon Securities, Appendix I to this Composite Document and the accompanying Form(s) of Acceptance. INFORMATION ON THE GROUP The Company is an investment holding company incorporated in the Cayman Islands and through its subsidiaries, is principally engaged in the trading of recovered paper and materials, trading of tissue paper products, provision of confidential materials destruction services and provision of logistics services. The Group recorded audited loss and total comprehensive income attributable to equity shareholders of the Company of approximately HK$ million and approximately HK$ million for the two financial years ended 31 March 2014 and 2015, respectively. The unaudited consolidated net assets value attributable to equity shareholders of the Company as at 30 September 2015 was approximately HK$1, million. ISSUED SHARES AND SHARE OPTIONS Date: The table below sets out the shareholding structure of the Company as at the Latest Practicable Name of Shareholders As at the Latest Practicable Date Approximate % Number of Shares of issued Shares CTF Nominee (Notes 1, 2 and 3) 1,530,601, % Smart On Resources Ltd. (Note 1) 732,550, % Subtotal of the Offeror and parties 2,263,151, % acting in concert with it (Notes 2 and 3) City Legend International Limited (Note 4) 785,100, % Public Shareholders 1,774,082, % Total 4,822,334, % Notes: 1. As at the Latest Practicable Date, CTF Nominee was the beneficial owner of 1,530,601,835 Shares and was interested in 732,550,000 Shares through its interest in its wholly-owned subsidiary, Victory Day Investments Limited, which in turn wholly-owned Smart On Resources Ltd.. 16

21 LETTER FROM THE BOARD 2. Immediately after the Change in Control, CTF Holding has become the controlling shareholder of CTF Nominee and is deemed to be interested in an aggregate of 2,263,151,835 Shares by virtue of the SFO. 3. As at the Latest Practicable Date, CTF Holding was held as to approximately 78.58% by Chow Tai Fook Capital Limited which in turn was owned as to approximately 48.98% and 46.65% by Cheng Yu Tung Family (Holdings) Limited and Cheng Yu Tung Family (Holdings II) Limited, respectively. As such, Chow Tai Fook Capital Limited, Cheng Yu Tung Family (Holdings) Limited and Cheng Yu Tung Family (Holdings II) Limited were deemed to be interested in the 2,263,151,835 Shares by virtue of the SFO. 4. As at the Latest Practicable Date, Mr. Leung Kai Kuen was deemed to be interested in the 785,100,000 Shares held by City Legend International Limited, a corporation wholly-owned by Mr. Leung Kai Kuen. The table below sets out the details of the Share Options (whether vested or not) as at the Latest Practicable Date: Number of Exercise price for Share Options Date of grant Exercisable period each Share Option 66,221, April 2014 From 25 July 2014 HK$0.444 to 24 April 2020 The Share Options may be exercised from 25 July 2014 to 24 April 2020 (both dates inclusive) subject to the vesting periods as stipulated in the offer letter. Vesting period: Tranche 1: 20% are exercisable from 25 July 2014 to 24 April 2020 Tranche 2: 50% are exercisable from 25 April 2016 to 24 April 2020 Tranche 3: 30% are exercisable from 25 April 2018 to 24 April 2020 As at the Latest Practicable Date, save as disclosed above, the Company had no other outstanding options, warrants derivatives or securities convertible or exchangeable into Shares. OFFEROR S INTENTION ON THE GROUP The Directors has noted the intentions of the Offeror in respect of the Group and its employees from the Letter from Halcyon Securities, including that the Offeror intends that the Group will continue its existing principal business. Your attention is drawn to the section headed Offeror s intention on the Group in the Letter from Halcyon Securities as set out on page 12 of this Composite Document. 17

22 LETTER FROM THE BOARD MAINTAINENCE OF THE LISTING STATUS OF THE COMPANY The Stock Exchange has stated that if, at the close of the Offers, less than the minimum prescribed percentage applicable to the Company, being 25% of the issued Shares, are held by the public, or if the Stock Exchange believes that (i) a false market exists or may exist in the trading of the Shares; or (ii) there are insufficient Shares in public hands to maintain an orderly market, it will consider exercising its discretion to suspend dealings in the Shares. The Offeror intends the Company to remain listed on the Stock Exchange after the close of the Offers. The directors of the Offeror will jointly and severally undertake to the Stock Exchange to take appropriate steps to ensure that the sufficient public float exists in the Shares. THE INDEPENDENT BOARD COMMITTEE AND THE INDEPENDENT FINANCIAL ADVISER The Independent Board Committee comprising two non-executive Directors, namely, Mr. Lau Sai Cheong and Mr. To Chun Wai; and three independent non-executive Directors, namely, Messrs. Nguyen Van Tu, Peter, Chow Shiu Wing, Joseph and Wong Man Chung, Francis, has been established to advise the Independent Shareholders and the Independent Optionholders as to whether the Offers are fair and reasonable and as to their acceptances. Mr. Cheng Chi Ming, Brian and Mr. Tsang On Yip, Patrick, each a non-executive Director, are not appointed as members of the Independent Board Committee. Mr. Cheng Chi Ming, Brian and Mr. Tsang On Yip, Patrick, being directors of the Offeror, are parties acting in concert with the Offeror. Veda Capital, with the approval of the Independent Board Committee, has been appointed as the independent financial adviser to advise the Independent Board Committee, the Independent Shareholders and the Independent Optionholders in respect of the Offers and as to their acceptances. RECOMMENDATION Your attention is drawn to (i) the letter from the Independent Board Committee as set out on pages 20 to 21 of this Composite Document, which contains its advice and recommendations to the Independent Shareholders and the Independent Optionholders in respect of the Offers; and (ii) the letter from Veda Capital as set out on pages 22 to 43 of this Composite Document, which contains its advice to the Independent Board Committee, the Independent Shareholders and the Independent Optionholders in relation to the Offers and the principal factors considered by it before arriving at its recommendations. 18

23 LETTER FROM THE BOARD ADDITIONAL INFORMATION You are also advised to read this Composite Document together with the accompanying Form(s) of Acceptance in respect of the acceptance and settlement procedures of the Offers. Your attention is drawn to the additional information contained in the appendices to this Composite Document. Yours faithfully By order of the Board of Integrated Waste Solutions Group Holdings Limited Cheng Chi Ming, Brian Chairman 19

24 LETTER FROM THE INDEPENDENT BOARD COMMITTEE Set out below is the text of the letter of recommendation from the Independent Board Committee in respect of the Offers. Integrated Waste Solutions Group Holdings Limited Integrated Waste Solutions Group Holdings Limited 綜 合 環 保 集 團 有 限 公 司 (Incorporated in the Cayman Islands with limited liability) (stock code: 923) 3 February 2016 To the Independent Shareholders and the Independent Optionholders Dear Sir or Madam, MANDATORY CONDITIONAL CASH OFFERS BY HALCYON SECURITIES LIMITED FOR AND ON BEHALF OF PRESTIGE SAFE LIMITED FOR ALL THE ISSUED SHARES AND FOR CANCELLATION OF ALL OUTSTANDING SHARE OPTIONS OF INTEGRATED WASTE SOLUTIONS GROUP HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY PRESTIGE SAFE LIMITED AND PARTIES ACTING IN CONCERT WITH IT) We refer to the composite offer and response document (the Composite Document ) dated 3 February 2016 jointly issued by the Offeror and the Company, of which this letter forms part. Unless the context requires otherwise, capitalised terms used herein have the same meanings as those defined in the Composite Document. We have been appointed by the Board to consider the terms of the Offers and to advise you as to whether, in our opinion, the terms of the Offers are fair and reasonable so far as the Independent Shareholders and the Independent Optionholders are concerned and as to acceptance thereof. Veda Capital has been appointed as the independent financial adviser to the Independent Board Committee to advise the Independent Board Committee in respect of the terms of the Offers and as to acceptance thereof. Details of its advice and the principal factors taken into consideration in arriving at its recommendations are set out in the Letter from Veda Capital on pages 22 to 43 of the Composite Document. 20

25 LETTER FROM THE INDEPENDENT BOARD COMMITTEE We also wish to draw your attention to the sections headed Letter from the Board, Letter from Halcyon Securities and the additional information set out in the appendices to the Composite Document. Having taken into account the terms of the Offers, and the advice and recommendation of the Independent Financial Adviser and the principal factors taken into account in arriving at its recommendations, in respect of the Offers, we are of the opinion that the Offers are fair and reasonable so far as the Independent Shareholders and the Independent Optionholders are concerned and recommend the Independent Shareholders and the Independent Optionholders to accept the Offers. Notwithstanding our recommendations, the Independent Shareholders and the Independent Optionholders are strongly advised that the decision to realise or to hold your investment in the Offer Shares and Share Options is subject to individual circumstances and investment objectives and you should consider carefully the terms of the Offers. If in doubt, the Independent Shareholders and the Independent Optionholders should consult their own professional advisers for professional advice. Furthermore, the Independent Shareholders and the Independent Optionholders who wish to accept the Offers are recommended to read carefully the procedures for accepting the Offers as detailed in the Composite Document. Yours faithfully, For and on behalf of the Independent Board Committee Mr. Lau Sai Cheong Mr. To Chun Wai Non-executive Directors Mr. Nguyen Van Tu, Peter Mr. Chow Shiu Wing, Joseph Mr. Wong Man Chung, Francis Independent non-executive Directors 21

26 LETTER FROM VEDA CAPITAL The following is the full text of a letter of advice from Veda Capital to the Independent Board Committee in relation to the Offers, which has been prepared for the purpose of inclusion in this Composite Document. To the Independent Board Committee and the Independent Shareholders of Integrated Waste Solutions Group Holdings Limited Dear Sir/Madam, 22 Veda Capital Limited Room 1106, 11/F Wing On Centre 111 Connaught Road Central Hong Kong 3 February 2016 MANDATORY CONDITIONAL CASH OFFERS BY HALCYON SECURITIES LIMITED FOR AND ON BEHALF OF PRESTIGE SAFE LIMITED FOR ALL THE ISSUED SHARES AND FOR CANCELLATION OF ALL OUTSTANDING SHARE OPTIONS OF INTEGRATED WASTE SOLUTIONS GROUP HOLDINGS LIMITED (OTHER THAN THOSE ALREADY OWNED OR AGREED TO BE ACQUIRED BY PRESTIGE SAFE LIMITED AND PARTIES ACTING IN CONCERT WITH IT) INTRODUCTION We refer to our appointment to advise the Independent Board Committee in connection with the mandatory conditional cash offers by Halcyon Securities Limited for and on behalf of the Offeror for all the issued shares and for cancellation of all outstanding share options of the Company (other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it). Details of the Offers are set out in the Composite Document to the Independent Shareholders and Independent Optionholders dated 3 February 2016, of which this letter forms a part. Terms used in this letter shall have the same meanings as those defined in the Composite Document unless the context otherwise requires. On 21 December 2015, CTF Holding had become the controlling shareholder of CTF Nominee holding 99.80% of its entire issued share capital in place of Dato Dr. Cheng Yu Tung. As a result of the Change in Control, CTF Holding has become the controlling shareholder of CTF Nominee and is deemed to be interested in 2,263,151,835 Shares, representing approximately 46.93% of the entire issued share capital of the Company as at the Latest Practicable Date. Pursuant to Rule 26.1 of the Takeovers Code, the Offeror is required to make the Share Offer for all the issued Shares (other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it). In addition, under Rule 13 of the Takeovers Code, the Offeror is also required to make a comparable cash offer for cancellation of all Share Options (other than those already held by the Offeror and parties acting in concert with it).

27 LETTER FROM VEDA CAPITAL Pursuant to Rule 2.1 and Rule 2.8 of the Takeovers Code, the Independent Board Committee, comprising two non-executive Directors, namely, Mr. Lau Sai Cheong and Mr. To Chun Wai; and three independent non-executive Directors, namely, Messrs. Nguyen Van Tu, Peter, Chow Shiu Wing, Joseph and Wong Man Chung, Francis, has been established to advise the Independent Shareholders and the Independent Optionholders as to whether the Offers are fair and reasonable and as to their acceptances. The Independent Board Committee has approved the appointment of Veda Capital as the Independent Financial Adviser to the Independent Board Committee in the same regard. Mr. Cheng Chi Ming, Brian and Mr. Tsang On Yip, Patrick, each a non-executive Director, are not appointed as members of the Independent Board Committee. Mr. Cheng Chi Ming, Brian and Mr. Tsang On Yip, Patrick, being directors of the Offeror, are parties acting in concert with the Offeror. We are independent from and not connected with the Company, the Offeror, any of their respective substantial shareholders, or any party acting, or presumed to be acting, in concert with any of them. Accordingly, we are considered eligible to give independent advice on the Offers. Apart from the normal advisory fee payable to us in connection with our appointment as the Independent Financial Adviser to advise the Independent Board Committee, no arrangement exists whereby we shall receive any other fees or benefits from the Offeror and the Company or any of its substantial shareholders or any person acting, or deemed to be acting, in concert with any of them. BASIS OF OUR ADVICE In formulating our advice and recommendation to the Independent Board Committee, we have relied on the statements, information, opinions and representations contained or referred to in the Composite Document and the information and representations as provided to us by the Directors and the management of the Company. We have assumed that all information and representations that have been provided by the Directors and the management of the Company are true, complete and accurate in all material respects at the time when they were made and up to the date throughout the Offer Period and should there be any material changes thereto, Shareholders would be notified as soon as possible in accordance with Rule 9.1 of the Takeovers Code. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors and the Offeror in the Composite Document were reasonably made after due enquiries and careful considerations. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Composite Document, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors and the management of the Company, which have been provided to us. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our recommendation. The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Composite Document (other than the information relating to the Offeror and its concert parties), and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Composite Document (other than the opinions expressed by the Offeror and its concert parties) have been arrived at after due and careful consideration and there are no material facts not contained in the Composite Document, the omission of which would make any statement contained in the Composite Document misleading. We consider that we 23

28 LETTER FROM VEDA CAPITAL have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our recommendation. We have not, however, conducted any independent in-depth investigation into the business and affairs, financial condition and future prospects of the Group or the Offeror or associates of any of them. We have not considered the tax consequences on the Independent Shareholders and Independent Optionholders in respect of their acceptance or non-acceptance of the Offers since they vary depending on respective individual circumstances. The Independent Shareholders and Independent Optionholders who are overseas residents or subject to overseas taxes or Hong Kong taxation on securities dealings should consider their own tax positions and, if in any doubt, should consult their own professional advisers. PRINCIPAL FACTORS AND REASONS CONSIDERED In arriving at our opinion and recommendation to the Independent Board Committee in relation to the Offers, we have considered the principal factors and reasons as set out below: 1. Background of the Offers As announced in the Joint Announcement, the Change in Control of CTF Nominee from Dato Dr. Cheng Yu Tung to CTF Holding for a consideration of HK$99,800 took place on 21 December As a result of the Change in Control, CTF Holding has become the controlling shareholder of CTF Nominee and is deemed to be interested in 2,263,151,835 Shares, representing approximately 46.93% of the entire issued share capital of the Company as at the Latest Practicable Date. Pursuant to Rule 26.1 of the Takeovers Code, the Offeror is required to make the Share Offer for all the issued Shares (other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it). In addition, under Rule 13 of the Takeovers Code, the Offeror is also required to make a comparable cash offer for cancellation of all Share Options (other than those already held by the Offeror and parties acting in concert with it). As at the Latest Practicable Date, there were 4,822,334,000 Shares in issue and 66,221,654 Share Options. Save for the Share Options, the Company had no other outstanding options, warrants, derivatives or securities convertible or exchangeable into Shares. 2. Background information of the Group (a) Principal Business The Company is an investment holding company incorporated in the Cayman Islands and through its subsidiaries, is principally engaged in the trading of recovered paper and materials, trading of tissue paper products, provision of confidential materials destruction services and provision of logistics services. 24

29 LETTER FROM VEDA CAPITAL (b) Historical financial information Set out below is the financial information of the Group for (i) the six months ended 30 September 2015; (ii) the year ended 31 March 2015; and (iii) the year ended 31 March (i) For the six months ended 30 September 2015 As set out in the interim report of the Company for the six months ended 30 September 2015 (the IR 2015 ), the Group s revenue of approximately HK$155.2 million for the six months ended 30 September 2015 has decreased by approximately 36.5% as compared to the revenue of approximately HK$244.4 million for the six months ended 30 September The main reason for the decrease in revenue was due to the sales of tissue paper dropped significantly by approximately 88.9%. As stated in the IR 2015, the underlying causes for the drop included the market shakeout in tissue paper trading, intensive market competition, overcapacity and strong Hong Kong dollars relative to other Asian currencies which, in turn, eroded the competitive position of the Group. In addition, the increase in the cost of production resulting from, among others, compliance with PRC environmental regulations has also eaten into the gross profit margin of the Group. The gross profit of the Group for the six months ended 30 September 2015 of approximately HK$9.1 million has decreased by approximately 61.1% as compared to the gross profit of approximately HK$23.4 million for the six months ended 30 September As noted from the IR 2015, a slowdown in the global economy, especially in the PRC, had significantly reduced the sales of recovered paper, which in turn, affected the profit margin of this business segment. The loss attributable to equity shareholders of the Company for the six months ended 30 September 2015 amounted to approximately HK$53.8 million, represents a decrease of approximately 16.9% when compared to that of approximately HK$64.8 million for the six months ended 30 September The reduction in loss was due to an impairment loss of approximately HK$36.6 million recognised for the six months ended 30 September 2014 in respect of the Sale Transaction (as defined below). As at 30 September 2015, the total assets of the Group amounted to approximately HK$1,311.4 million, comprising mainly, among other things, (i) property, plant and equipment of approximately HK$743.7 million; (ii) land use rights of approximately HK$32.5 million; (iii) trade and bills receivables of approximately HK$62.6 million; (iv) other receivables, deposits and prepayments of approximately HK$44.4 million; and (v) unrestricted bank deposits and cash of approximately HK$344.5 million. As compared to the total assets of the Group amounted to approximately HK$1,332.9 million as at 31 March 2015, this represents a decrease of approximately 1.6%. As noted from the IR 2015, although there was an increase in non-current assets of HK$79.8 million representing an increment of approximately 10.9%, this was offset by a relatively higher decrease in current assets of approximately HK$101.4 million. Total liabilities of the Group amounted to 25

30 LETTER FROM VEDA CAPITAL approximately HK$109.0 million, mainly consisting of, among other things, trade payables of approximately HK$25.1 million and other payables and accruals of approximately HK$83.9 million. As compared to the total liabilities of the Group amounted to approximately HK$74.6 million as at 31 March 2015, this represents an increase of approximately 46.1%. As noted from the IR 2015, the significant increase in the total liabilities of the Group was resulted from the significant increase in other payables and accruals of approximately HK$29.5 million and this represents an increase of approximately 54.2%. The Group recorded net current assets and net assets attributable to equity shareholders of the Company of approximately HK$387.5 million and HK$1,203.7 million, respectively. (ii) For the financial year ended 31 March 2015 As noted from the annual report of the Company for the year ended 31 March 2015 (the AR 2015 ), the Group recorded revenue of approximately HK$443.5 million for the year ended 31 March 2015, representing a decrease of approximately 7.7% as compared to the revenue of approximately HK$480.6 million for the year ended 31 March As further noted from the AR 2015, the total sales revenue of recovered paper segment, which represented approximately 54.6% of total revenue for the year ended 31 March 2015 dropped approximately 8.4% as compared to the revenue of recovered paper segment for the year ended 31 March The revenue of recovered paper was affected by the overall reduction in demand for recovered paper, especially in the PRC coupled with a general decline in selling prices. Moreover, the increase in the cost of sales in terms of soared labour costs and rental expenses has significantly reduced the gross profit margin of recovered paper sales. The sales revenue of tissue paper segment, which represented approximately 39.1% of total revenue for the year ended 31 March 2015 dropped approximately 18.0% as compared to the revenue of tissue paper segment for the year ended 31 March As stated in the AR 2015, the underlying causes for the drop included the market shakeout in tissue paper trading, dynamic movements by competitors, drop-off in usage, and strong HK dollars relative to other Asian currencies which, in turn, eroded the competitive position of the Group. The Group s gross profit for the year ended 31 March 2015 of approximately HK$24.3 million decreased by approximately 40.4% as compared to approximately HK$40.9 million for the year ended 31 March The increase in the cost of sales in terms of soared labour costs and rental expenses has significantly reduced the gross profit margin of recovered paper sales as well as the gross profit of tissue paper. The loss attributable to equity shareholders of the Company for the year ended 31 March 2015 amounted to approximately HK$149.6 million, representing a decrease of approximately 69.1% as compared to the loss attributable to equity shareholders of the Company for the year ended 31 March 2014 of approximately HK$484.9 million. As illustrated in the AR 2015, the improvement was due to an impairment loss of approximately HK$431.6 million recognised for the year ended 31 March 2014 in respect of the Sale Transaction (as defined below). 26

31 LETTER FROM VEDA CAPITAL As at 31 March 2015, the total assets of the Group amounted to approximately HK$1,332.9 million, comprising mainly, among other things, (i) property, plant and equipment of approximately HK$682.0 million; (ii) land use rights of approximately HK$27.5 million; (iii) trade and bills receivables of approximately HK$77.4 million; (iv) other receivables, deposits and prepayments of approximately HK$53.0 million; and (v) unrestricted bank deposits and cash of approximately HK$455.9 million. As compared to the total assets of the Group amounted to approximately HK$1,062.1 million as at 31 March 2014, this represents an increase of approximately 25.5%. As noted from the AR 2015, the increase in the total assets of the Group mainly resulted from the increase in property, plant and equipment of approximately HK$276.3 million and this represents an increase of approximately 68.1%. Total liabilities of the Group amounted to approximately HK$74.6 million, mainly consisting of, among other things, trade payables of approximately HK$20.2 million and other payables and accruals of approximately HK$54.4 million. As compared to the total liabilities of the Group amounted to approximately HK$133.3 million as at 31 March 2014, this represents a decrease of approximately 44.0%. As noted from the AR 2015, the decrease in the total liabilities of the Group was mainly resulted from the significant decrease in other payables and accruals of approximately HK$62.7 million and this represents a decrease of approximately 53.6%. As at 31 March 2015, the Group recorded net current assets and net assets attributable to equity shareholders of the Company of approximately HK$523.2 million and HK$1,256.3 million, respectively. (iii) For the financial year ended 31 March 2014 As noted from the annual report of the Company for the year ended 31 March 2014 (the AR 2014 ), the Group recorded revenue of approximately HK$480.6 million for the year ended 31 March 2014, representing a decrease of approximately 16.2% as compared to the revenue of approximately HK$573.3 million for the year ended 31 March As further noted from the AR 2014, the total sales revenue of recovered paper segment, which represents approximately 55.0% of total revenue for the year ended 31 March 2014 dropped approximately 22.0% as compared to the revenue of recovered paper segment for the year ended 31 March Sales revenue of recovered paper continued to be affected by the overall reduction in demand for recovered paper, especially in Mainland China. More stringent controls on importing waste materials were imposed by the Mainland authorities and coupled with a general decline in selling prices, the revenue of recovered paper has reduced substantially. The Group s gross profit for the year ended 31 March 2014 of approximately HK$40.9 million decreased by approximately 54.4% as compared to approximately HK$89.5 million for the year ended 31 March The increase in the cost of sales in terms of soared labour costs and rental expenses has significantly eaten into the gross profit margin of recovered paper sales. 27

32 LETTER FROM VEDA CAPITAL The loss attributable to equity shareholders of the Company for the year ended 31 March 2014 amounted to approximately HK$484.9 million, representing a substantial increase of HK$479.3 million when compared to the loss attributable to equity shareholders of the Company of approximately HK$5.6 million for the year ended 31 March As illustrated in the AR 2014, the substantial loss for the year ended 31 March 2014 was primarily due to the recognition of an impairment loss of HK$431.6 million in respect of the Sale Transaction (as defined below). As at 31 March 2014, the total assets of the Group amounted to approximately HK$1,062.1 million, comprising mainly, among other things, (i) property, plant and equipment of approximately HK$405.8 million; (ii) land use rights of approximately HK$28.3 million; (iii) trade and bills receivables of approximately HK$77.5 million; (iv) other receivables, deposits and prepayments of approximately HK$47.2 million; and (v) un-restricted bank deposits and cash of approximately HK$276.3 million. As compared to the total assets of the Group amounted to approximately HK$1,504.6 million as at 31 March 2013, this represents a decrease of approximately 29.4%. As stated in the AR 2014, the decrease was due to the significant decrease in the current assets of HK$675.7 million, representing approximately 52.2%. As further noted from the AR 2014, this was due to the decrease in estimated recoverable amount in respect of the amounts due from the De-consolidated Subsidiaries (as defined below) together with a decrease in bank deposits and cash in aggregate of HK$703.2 million. Total liabilities of the Group amounted to approximately HK$133.3 million, mainly consisting of, among other things, trade payables of approximately HK$12.1 million and other payables and accruals of approximately HK$117.1 million. As compared to the total liabilities of the Group amounted to approximately HK$91.0 million as at 31 March 2013, this represents an increase of approximately 46.6%. As noted from the AR 2014, the increase in the total liabilities of the Group was mainly resulted from the significant increase in other payables and accruals of approximately HK$50.4 million and this represents an increase of approximately 75.6%. As at 31 March 2014, the Group recorded net current assets and net assets attributable to equity shareholders of the Company of approximately HK$486.0 million and HK$928.8 million, respectively. (iv) Qualified opinion As noted from the AR2014 and the AR2015, the independent auditor of the Company expressed a qualified opinion on the consolidated financial statements of the Group for the years ended 31 March 2014 and 31 March 2015 respectively, both of them were caused by the exclusion of the results and cash flows of the Deconsolidated Subsidiaries (as defined below) from the Group s consolidated financial statements (the Subject Matter ). As noted from the AR2015, in November 2011, the Directors were made aware of evidence indicating the existence of potential irregularities with respect to certain accounting records and transactions recorded in the books of 惠 州 福 和 紙 業 有 限 公 司 ( Huizhou Fook Woo ), an indirect wholly owned subsidiary of the Company. As a result, in December 2011 the Board established an independent special committee (the Special Committee ) to 28

33 LETTER FROM VEDA CAPITAL investigate these potential irregularities. Based on the Special Committee s investigation, the Directors concluded that, among other things, a substantial portion of the accounting books and records of Huizhou Fook Woo for the year ended 31 March 2012 and prior periods were missing. It was resolved on 23 January 2013 that a member s voluntary winding up be commenced in respect of Wealthy Peaceful Company Limited ( Wealthy Peaceful ), the intermediate holding company of Huizhou Fook Woo and an indirect wholly owned subsidiary of the Company incorporated in the British Virgin Islands and the voluntary liquidators were appointed on the same day. In April 2014, the Company was informed by the liquidators of Wealthy Peaceful that a sale and purchase agreement (the Sale Transaction ) was entered into between Wealthy Peaceful and an independent third party, pursuant to which Wealthy Peaceful would dispose of its entire equity interests in Golddoor Company Limited ( Golddoor ), which is the holder of the entire registered capital of Huizhou Fook Woo. The Sale Transaction was completed in July Given these circumstances, in preparing the consolidated financial statements for the years ended 31 March 2014 and 31 March 2015, the Directors had excluded Wealthy Peaceful, together with its wholly owned subsidiaries Golddoor and Huizhou Fook Woo (collectively referred to as the De-consolidated Subsidiaries ) from the Group s consolidated financial position, consolidated financial results and consolidated cash flows as from the earliest periods presented. Given the abovementioned, we are of the view that the qualified opinion expressed by the independent auditor on the consolidated financial statements of the Group for the years ended 31 March 2014 and 31 March 2015 respectively were resulted from the events happened in the previous years and the effect of the Subject Matter on the consolidated financial results of the Group was not able to be ascertained due to the missing of substantial portion of the accounting books and records of Huizhou Fook Woo as mentioned above. Also, given the Sale Transaction was completed in July 2014, the Subject Matter will no longer bring any effect on the consolidated financial results of the Group after the year ended 31 March Nevertheless, as noted from the IR 2015, a qualified conclusion was issued by the independent auditor because of the effect of the qualified opinions in prior years on the comparability of the figures of both periods under review. Accordingly, it is expected that the qualified opinion will only be cleared in the consolidated financial statements of the Group for the year ending 31 March Prospects and outlook of the Group The Company is an investment holding company incorporated in the Cayman Islands and through its, is principally engaged in the trading of recovered paper and materials, trading of tissue paper products, provision of confidential materials destruction services and provision of logistics services. The Group recorded audited loss and total comprehensive income attributable to equity shareholders of the Company of approximately HK$484.9 million and approximately HK$149.6 million for the two financial years ended 31 March 2014 and 2015, respectively. 29

34 LETTER FROM VEDA CAPITAL As stated in the paragraph headed Offeror s intention on the Group as set out in the Letter from Halcyon Securities in the Composite Document, we noted that the Offeror intends to continue with the Group s existing principal business following the close of the Offers. As stated in both AR 2014 and AR 2015, the recovery of the global economy remains slow in general as does the market demand growth. The Group has been facing intense market competition which results in further tightening of the profit margins of the Group s businesses. The Group had encountered two challenging years and it is expected that the operating environment remains tough in the coming years. We have reviewed the 全 國 人 大 常 委 會 專 題 詢 問 水 污 染 防 治 法 實 施 情 況 國 務 院 下 一 步 將 從 抓 源 頭 抓 治 理 抓 改 革 抓 保 障 抓 落 實 五 方 面 加 大 力 度 防 治 水 污 染 (The National People s Congress for Water Pollution Control Act to Intensify the Combat on Water Pollution at its Source, Control Management, Focus on Reform, Ensure the Security*) (source: 中 華 人 民 共 和 國 環 境 保 護 部 (Ministry of Environmental Protection of the People s Republic of China*), which states the objectives and plans for the implementation of the water pollution control in five areas. In the report, the PRC government stated to focus on paper production industry as one of the key industries for special rectification. At the same time, the PRC government will eliminate companies in the paper production industry through competition under new environmental standard set by the government with mandatory law enforcement. Before the end of 2016, small companies which do not meet the state s industrial policy will be eliminated. The PRC government will also strengthen pollution control in key sectors to promote the transformation and upgrade of the industrial sectors. Before the end of 2017, it is expected transformation of paper production industry in the PRC will be completed and companies which do not meet the standard will either be eliminated or relocated. As noted from the above strict pollution control policy to be imposed by the PRC government on the manufacturing industry, especially the paper production industry which is one of the main targeted industries to tackle the water pollution problem, it is anticipated that paper production companies will face unfavorable conditions of increasing the cost of implementing the pollution control measure under the mandatory law enforcement imposed by the PRC government. The sales of recovered paper, which is the major revenue driver of the Group, is highly affected by the continual stringent control on the inspection of importing waste materials imposed by the PRC government which impacts the supply and demand of recovered paper. In 2013, the PRC government issued a policy called 綠 籬 行 動 (Green Fence Action*) (the Green Fence Action ). According to an article named 海 關 總 署 解 讀 綠 籬 專 項 行 動 (Interpretation of the Green Fence Action by the General Administration of Customs of the People s Republic of China*) (the Article ) issued on 24 May 2013, the Green Fence Action requires companies to strictly implement the provisions of imported solid waste shipment so that a complete standard of imported solid wastes management can be built. The tightened controls imposed by the PRC government has reduced the demand of recovered paper. As further stated in the article called 2012 年 來 我 國 將 萬 噸 洋 垃 圾 拒 之 門 外 (385,900 tons of unqualified imported waste has been rejected since 2012*) released on 13 January 2015, the representative of the Customs of the PRC stated that after a series of actions, including but not limited to the Green Fence Action, 385,900 tons of unqualified imported wastes were rejected to enter the PRC from 2012 to The Customs of the PRC also expressed that they will continue to combat smuggling unqualified import wastes and more actions might be carried out in the future. 30

35 LETTER FROM VEDA CAPITAL We have also made reference to the website of ICIS ( a global information services provider of energy, chemical, fertilizer and paper industries to corporate clients (the ICIS ) and noted that from January 2015 to December 2015, the selling prices of all types of recycled paper (i.e. industrial recycled paper, office paper and wasted newspaper) have decreased by approximately 7% in the Guangdong province. Furthermore, we made reference to the report named 2015 年 上 半 年 中 國 紙 業 發 展 報 告 (The first half of 2015 China Paper Industry Report*) provided by the China Paper Net ( on 18 August 2015, an information services provider specifically for papers and related products. For the first half of 2015, the assets values and profits of the paper industry still maintained a certain growth rate however the growth rate was in decline as compared to the first half of 2014 and product prices were basically still in a downward trend since the end of According to the China Outlook 2015 research report dated 29 January 2015 (the KPMG Research Report ) conducted by KPMG, a global network of professional firms providing audit, tax and advisory services, the Gross Domestic Products (the GDP ) growth of China in 2014 was approximately 7.4%, which is slightly below the PRC Government indicative target of 7.5% and being the slowest growth rate since This was resulted from slower fixed asset investment growth and a challenging environment in the manufacturing sector. At the same time, the GDP growth in PRC is expected to decelerate to 7.1% in 2015 and 6.9% by As stated in the AR 2014, AR2015 and IR 2015, the Group has been facing a high pressure on the rising labor costs which eroded the Group s gross profit margin for the years. We have reviewed the articles named 十 三 五 時 期 高 技 術 產 業 展 望 ( Thirteen Five high-tech industry outlook period*) and 別 老 盯 着 7%, 中 國 經 濟 正 在 發 生 新 變 化 (Changes On the PRC s Economy and Expect No 7% Economic Growth*) released by The State Council of The People s Republic of China on 21 January 2016 and 19 January 2015 respectively. In the articles, the PRC government stated that the shortage problems of domestic labors, capital, technology and other elements are becoming more obvious. The labor supply, which the PRC used to take advantage on the demographic dividend based on the population of the PRC, will be gradually disappearing in the coming ten years. The labor costs will obviously rise in the future due to the population aging problem and labor shortages in the market. From 2012 to 2015, the number of the PRC s workingage population has shrunk for four consecutive years. At the end of 2015, the PRC s working-age population of 16 years of age to 60 years of age recorded a decrease in 4.87 million people as compared to the previous year and was the largest decline in four years. Having considered that (i) the continuous weak financial performance of the Group for two financial years ended 31 March 2014 and 31 March 2015 and six months ended 30 September 2015; (ii) sales of recovered paper and tissue paper which are the major revenue drivers of the Group were affected by the overall reduction in demand as well as their selling prices; (iii) the continual stringent control by the PRC government on the import of recycled materials to the PRC which highly influences, among others, the import of recovered paper to the PRC which adversely affects the major business segment of sales of recovered paper of the Group; and (iv) the continuing increase in labor cost in the PRC which further erodes the Company s gross profit margin, we agree that the Group will continue to operate in a challenging environment in coming years and we remain cautious about the outlook and prospects of the Group. 31

36 LETTER FROM VEDA CAPITAL 4. Principal terms of the Offers Halcyon Securities is making the Offers for and on behalf of the Offeror in compliance with the Takeovers Code on the following basis: Share Offer For every Offer Share HK$0.158 in cash The Offer Shares to be acquired under the Share Offer shall be fully paid and free from all liens, charges, encumbrances, right of pre-emption and any other third party rights of any nature and together with all rights attaching to them as at the date of the Joint Announcement or subsequently becoming attached to them, including the rights to receive in full all dividends and distributions, if any, declared, made or paid on or after the date of the Joint Announcement. Option Offer For cancellation of each Share Option (whether vested or not and other than those already held by the Offeror and parties acting in concert with it) with exercise price at HK$ HK$0.001 in cash Pursuant to Rule 13 of the Takeovers Code, the offer price for cancellation of each share option should normally represent the difference between the exercise price of the respective share options and the offer price for shares. As the exercise price of each of the Share Options is HK$0.444, which is above the Share Offer Price, the Option Offer Price for cancellation of each Share Option is nominal. The Option Offer is subject to and conditional upon the Share Offer becoming unconditional. Acceptance of the Option Offer by the Independent Optionholders will result in the cancellation of their Share Options and all rights attached thereto with effect from the date on which the Option Offer is made, being the date of the Joint Announcement. As at the Latest Practicable Date, there were 66,221,654 Share Options of which 10,986,486 and 8,789,189 Share Options are held by Mr. Cheng Chi Ming, Brian and Mr. Tsang On Yip, Patrick (being parties acting in concert with the Offeror) respectively and therefore 46,445,979 Share Options are subject to the Option Offer. As noted from the Letter from the Board in the Composite Document, the Share Options were granted on 25 April 2014 with exercisable period from 25 July 2014 to 24 April The exercise price of each Share Option is HK$ As at the Latest Practicable Date, save as disclosed above, the Company had no other outstanding options, warrants, derivatives or securities convertible or exchangeable into Shares. 32

37 LETTER FROM VEDA CAPITAL According to Practice Note 6 titled Appropriate offers for convertibles or warrants under Rule 13 and calculation of see-through price issued by the SFC, the see-through value of each option would be the difference between the offer price for each ordinary share and the exercise price of each option. The Share Offer Price of each Offer Share is HK$ As the exercise price of each of the Share Options is HK$0.444, all Share Options are out-of-money. In respect of the out-of-money options, the exercise prices of these Share Options are higher than the Share Offer Price and thus the see-through price of the out-of-money option is zero. For the out-of-money Share Options, the see-through price is zero while their Option Offer Price is of a nominal value, we consider that the terms of the Option Offer are fair and reasonable so far as the Independent Optionholders are concerned. Your attention is drawn to the further terms of the Offers, including procedures for acceptance, settlement and the acceptance period, as set out in Appendix I to the Composite Document and the Forms of Acceptance. The Share Offer Price The Share Offer Price of HK$0.158 per Offer Share represents: (i) (ii) (iii) (iv) (v) the closing price of HK$0.158 per Share as quoted on the Stock Exchange on the Last Trading Day; a premium of approximately 2.60% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the 5 trading days up to and including the Last Trading Day of approximately HK$0.154 per Share; a premium of approximately 1.28% over the average of the closing prices of the Shares as quoted on the Stock Exchange for the 10 trading days up to and including the Last Trading Day of approximately HK$0.156 per Share; a discount of approximately 0.63% to the closing price of HK$0.159 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and a discount of approximately 36.80% to the unaudited consolidated net asset value attributable to equity shareholders of the Company of approximately HK$0.250 per Share as at 30 September 2015 (based on the unaudited accounts of the Company as at 30 September 2015 and the number of Shares in issue as at the Latest Practicable Date). 33

38 LETTER FROM VEDA CAPITAL In order to assess the fairness and reasonableness of the Share Offer Price, we have conducted the following analysis: (a) Historical performance of the Shares Share Price The chart of daily closing price of the Shares during the Review Period (as defined below) is as follows: Source: Bloomberg Note: Trading in the Shares was suspended from 21 December 2015 to 31 December 2015 (both days inclusive) pending the publication of the Joint Announcement in relation to the Offers. For details, please refer to the Joint Announcement. We have reviewed the movements in the closing price of the Shares for the period commencing from 18 December 2014, being the 12-month period prior to the Last Trading Day and up to and including the Latest Practicable Date (the Review Period ). We consider that the length of the Review Period to be reasonably long enough to illustrate the relationship between the historical trend of the closing price of the Shares and the Offers. The chart above represents the daily movement in the closing prices of the Shares against the Share Offer Price during the Review Period. 34

39 LETTER FROM VEDA CAPITAL (i) Pre Joint Announcement Period Prior to the release of the Joint Announcement on 31 December 2015, the lowest and highest closing price of the Shares during the Review Period were HK$0.152 per Share recorded on 11 December 2015 and 14 December 2015 and HK$0.415 per Share recorded on 29 April 2015 respectively, as quoted on the Stock Exchange. The average daily closing price of the Shares during the Review Period before the release of the Joint Announcement is HK$0.267 per Share. The Share Offer Price of HK$0.158 per Share represents (i) a premium of approximately 3.95% from the lowest closing price; (ii) a discount of approximately 61.93% from the highest closing price; and (iii) a discount of approximately 40.82% from the average daily closing price during the Review Period before the release of the Joint Announcement. Concerning the high closing price of the Shares in April 2015, we noted that on 15 April 2015, the Company issued an announcement that ALBA Integrated Waste Solutions (Hong Kong) Limited, a joint venture of the Group, agreed to design, construct, operate and maintain a waste electrical and electronic equipment (the WEEE ) treatment plant, and an ancillary collection network to collect and recycle WEEE for a period of 10 years commencing from the operation of the treatment plant. The estimated awarded sum including capital value and total operation fee is approximately HK$1,727 million. As advised by the Company, the construction of the treatment plant will be rescheduled to commence in the first quarter of This new waste treatment business might have a positive effect on the business development of the Company. Also, we have reviewed and compared the Share price movement with the Hang Seng Index (the HSI ) movement for the period from 15 April 2015 to December We noted that, apart from the drop on 20 April 2015, the HSI had risen from 27,619 on 15 April 2015 to the peak of 28,443 on 28 April 2015 while the Share price also rose to the peak of HK$0.415 on 29 April 2015 which followed a similar pattern as the trend of HSI. After the HSI reached the peak, the HSI continued to drop to approximately 20,584 on 7 September 2015 due to the weak market sentiment and the Share price also followed the same declining trend of the HSI and the Share price started from HK$0.39 on 30 April 2015 to HK$0.158 on 4 September From September 2015 to December 2015, the HSI hovered in a range of approximately 20,500 to 22,500 and the Share price had a similar movement that it hovered at a range between HK$0.152 and HK$0.202 in the same period of time. Given the abovementioned, we believe that the movement of the closing price of the Shares immediately before the publication of the Joint Announcement was mainly aligned with the market conditions. 35

40 LETTER FROM VEDA CAPITAL (ii) Post Joint Announcement Period At the request of the Company, trading in the Shares was suspended from 21 December 2015 to 31 December 2015 (both days inclusive) pending the publication of the Joint Announcement. Following the resumption of trading of Shares on 4 January 2016, the closing price of the Shares increased by approximately 17.09% to HK$0.185 per Share on 4 January 2016 (being the first trading day after the publication of the Joint Announcement) as compared to that of HK$0.158 per Share on the Last Trading Day. We have enquired with the Directors regarding the possible reasons for the increase in the Share price immediately after the publication of the Joint Announcement and were advised that save for the Offers, they were not aware of any other matters which might have impact on the Share price. Therefore, we believe that the surge in the closing prices of the Shares immediately after the release of the Joint Announcement was probably due to market reaction towards the Change in Control. Nevertheless, during the period from 4 January 2016 to the Latest Practicable Date (the Post Joint Announcement Period ), the closing price of the Shares demonstrated a downward trend since the release of the Joint Announcement from HK$0.185 per Share on 4 January 2016 and then hovered at a level slightly above and close to the Share Offer Price of HK$ The closing price of the Shares was HK$0.159 per Share on the Latest Practicable Date, representing a drop of approximately 14.1% as compared to the highest closing price of the Shares during the Post Joint Announcement Period. We also note that during the Post Joint Announcement Period, the HSI decreased from 21,327 as at 4 January 2016 to 19,683 as at the Latest Practicable Date, representing a decrease of approximately 7.7%. Thus, we believe that the movement of the closing price of the Shares during the Post Joint Announcement Period was mainly aligned with the market conditions. Based on Global Economics Prospects published by the World Bank Group (the WBG ) ( in January 2016, the upturn in 2016 and 2017 is projected to be shallower than previously anticipated. Weakening prospects are most visible among key commodity exporters, pointing to a significantly lower contribution to global growth than in the past. China s gradual slowdown and rebalancing continues. Deteriorating growth prospects for developing countries have been accompanied by weakening global trade, capital flows, and commodity prices. As stated in the report, the global business environment is deteriorating and becoming volatile and especially for China, the growth rate of the country has decreased to a new low level. 36

41 LETTER FROM VEDA CAPITAL Liquidity of the Shares The chart of daily trading volume of the Shares during the Review Period is as follows: Source: Bloomberg Note: Trading in the Shares was suspended from 21 December 2015 to 31 December 2015 (both days inclusive) pending the publication of the Joint Announcement in relation to the Offers. For details, please refer to the Joint Announcement. 37

42 LETTER FROM VEDA CAPITAL A table showing the average daily trading volume of the Shares per month and the respective percentages of the average daily trading volume as compared to the total number of issued Shares and total number of issued Shares held by public Shareholders respectively during the Review Period is as follows: Total monthly trading volume (number of shares) Number of trading days during the month (days) Average daily trading volume (Note 1) (number of shares) Percentage of average daily trading volume to total number of Shares in issue as at the Latest Practicable Date (%) (Note 2) Percentage of average daily trading volume to total number of Shares held by public Shareholders as at the Latest Practicable Date (%) (Note 3) 2014 December (Note 4) 25,642, ,205, January 214,570, ,217, February 80,596, ,477, March 325,796, ,808, April 893,976, ,051, May 498,614, ,242, June 328,086, ,913, July 145,226, ,601, August 49,256, ,345, September 26,830, ,341, October 44,583, ,229, November 19,399, , December (Note 6) 10,898, , January (up to and including the Latest Practicable Date) 114,000, ,700, Source: website of the Stock Exchange ( 38

43 LETTER FROM VEDA CAPITAL Notes: 1. Average daily trading volume is calculated by dividing the total trading volume for the month/period by the number of trading days during the month/period which excludes any trading day on which trading of the Shares on the Stock Exchange was suspended for the whole trading day. 2. Based on 4,822,334,000 Shares in issue as at the Latest Practicable Date. 3. Based on 1,774,082,165 Shares held by public Shareholders as at the Latest Practicable Date. 4. The Review Period commenced on 18 December The Review Period ended on the Latest Practicable Date. 6. Trading of the Shares was suspended from 21 December 2015 to 31 December 2015 during the Review Period. The average daily trading volume of the Shares per month during the Review Period was ranging from approximately 0.02% in November 2015 and December 2015 to 0.98% in April 2015 of the total number of issued Shares as at the Latest Practicable Date. If only Shares held by public Shareholders, i.e. the free float, are considered in calculating the percentage of average daily trading volume of the Shares per month during the Review Period, the percentage was ranging from approximately 0.04% in December 2015 to 2.65% in April The average daily trading volume during the period from 4 January 2016 to the Latest Practicable Date was 5,700,014 Shares, representing 0.12% of the Shares in issue as at the Latest Practicable Date and 0.32% of the Shares held by public Shareholders. Such percentages were higher in January 2016 following the publication of the Joint Announcement and such higher trading volume may not be sustainable. Accordingly, the Independent Shareholders may find it difficult to dispose of a large volume of Shares in the open market in a short period of time without exerting downward pressure on the price of the Shares. Therefore, the Share Offer provides a viable alternative exit for the Independent Shareholders, particularly for those who hold a large volume of Shares, to realise their investments in the Company. The average daily trading volume of Shares during the Review Period was generally thin. The average daily trading volume during the Review Period was 10,059,725 Shares, representing approximately 0.21% of the total number of Shares in issue. Despite the fact that the closing price of the Shares generally exceeds the Share Offer Price, given (i) the recent price level of the Shares in the Post Joint Announcement Period demonstrated a decreasing trend; (ii) the weakening economic environment and the decreasing trend of the HSI; (iii) that the trading volume of the Shares fluctuated and was generally thin during the Review Period and thus it is uncertain as to whether there would be sufficient liquidity in the Shares for the Independent Shareholders to dispose of a significant number of the Shares in the open market without depressing the Share price. Accordingly, the market trading price of the Shares may not necessarily reflect the proceeds that the Independent Shareholders can receive by the disposal of their Shares in the open market; and (iv) the uncertainty associated with the financial performance and prospects of the Group as discussed in the section headed Prospects and outlook of the Group above, we are of the view that the Share Offer represents an opportunity for the Independent Shareholders, particularly for those who hold a large volume of the Shares, to dispose 39

44 LETTER FROM VEDA CAPITAL of part or all of their Shares at the Share Offer Price if they so wish to. The Independent Shareholders who wish to realize their investment in the Group are reminded that they should carefully and closely monitor the market price of the Shares during the Offer Period. (b) Comparable analysis In order to further assess the fairness and reasonableness of the Share Offer Price, we have considered three commonly adopted approaches in evaluation of a company, namely price-to earning ratio (the PER ), dividend yield and price-to-book ratio (the PBR ), which are commonly adopted trading multiple analyses. Given the Group was loss-making for the years ended 31 March 2014 and 31 March 2015 and no dividend were distributed for the years ended 31 March 2014 and 31 March 2015, we consider PER and dividend yield are not applicable. Having considered the above and taking into account the loss-making position and business nature of the Group, we considered that the PBR would be the most appropriate and relevant approach. We also consider that using the net asset value of the Group as the basis of determination of the Share Offer is a fair reference. Based on the Share Offer Price of HK$0.158 per Offer Share and the total number of issued Shares of 4,822,334,000 as at the Latest Practicable Date, the Company is valued at approximately HK$761,928,772. The P/B Ratio of the Company implied by the Share Offer Price is approximately 0.63 times (the Implied P/B Ratio ) based on the equity attributable to equity Shareholders of the Company of approximately HK$1,203,742,000 as at 30 September We have attempted to identify the comparable companies which are (i) listed on the Stock Exchange; (ii) principally engaged in same or similar business as the Group i.e. sales of recovered paper and tissue paper, provision of confidential materials destruction services and sales of waste materials; and (iii) with comparable scale of size with the Group. However, based on our selection criteria, only one comparable company can be identified. In this regard, we have extended the selection criteria of the comparable companies to those which are principally engaged in manufacturing and trading of paper and/or paper products, which are similar to the principal businesses of the Group, and six comparable companies (the Comparables ) are identified, which are exhaustive under our selection criteria. Details of our analysis are listed below: 40

45 LETTER FROM VEDA CAPITAL Stock Code Company name Company business Market capitalisation: (HK$) Net Assets attributable to equity holders of the company PB (HK$) Ratio (Note 1) (Note 1) No. of issued shares 2314 Lee & Man Paper Manufacturing Ltd China Sunshine Paper Holdings Co. Ltd Hop Fung Group Holdings Ltd Youyuan International Holdings Ltd Shandong Chenming Paper Holdings Ltd. H Shares 794 Come Sure Group (Holdings) Ltd. Procurement of raw materials; manufacturing and trading of paper, pulp and tissue products. P r o d u c t i o n a n d s a l e o f p a p e r products. M a n u f a c t u r e a n d s a l e o f containerboard, and corrugated packaging. Manufacturing and trading of wrapping tissue paper, wall paper backing paper, copy paper and other products. Process & sale of paper products, paper making raw materials & machinery; generation & sale of electric power & thermal power; forestry, saplings growing, process & sale of timber & wood products, equipment financial and operating leasing. Manufacture and sale of corrugated board, corrugated paper-based p a c k i n g a n d o f f s e t p r i n t e d corrugated products; properties leased. 20,376,550,000 17,594,265, ,579,000, ,277,440 1,757,412, ,588, ,356,500 1,525,442, ,713,000 2,740,205,943 2,767,125, ,186,236,339 1,662,400,520 16,447,610, ,203, ,249, ,428, ,300,000 Maximum 1.16 Minimum 0.10 Average the Company Trading of recovered paper and materials, trading of tissue paper products, provision of confidential materials destruction services and provision of logistics services. 761,928,772 1,203,742, ,822,334,000 Source: website of the Stock Exchange ( 41

46 LETTER FROM VEDA CAPITAL Notes: 1. The P/B ratios of the Comparable are calculated based on the market capitalisation of the respective Comparables as at the Latest Practicable Date divided by the net assets attributable to equity holders of the respective Comparables as extracted from their respective latest published annual or interim results. 2. For the purpose of this table, the translation of RMB into HK$ is based on the average exchange rate of RMB1.00 to HK$1.18 for the purpose of illustration only. As illustrated in the table above, the P/B Ratios of the Comparables ranged from approximately 0.1 times to approximately 1.16 times, with an average of approximately 0.55 times. The Implied P/B Ratio of approximately 0.63 times lies within range of the P/B Ratios of the Comparables and the Implied P/B Ratio lies even above the average of the Comparables, hence we are of the view that the Share Offer Price is fair and reasonable. 5. Background and intention of the Offeror RECOMMENDATION Background of the Offeror The Offeror is an investment holding company incorporated in the BVI and a whollyowned subsidiary of CTF Holding. The Offeror has not carried on any business since its incorporation, other than matters in connection with the Offers. As a result of the Change in Control, CTF Holding has become the controlling shareholder of CTF Nominee. CTF Holding is owned as to approximately 78.58% by Chow Tai Fook Capital Limited, which in turn is owned as to approximately 48.98% and 46.65% by Cheng Yu Tung Family (Holdings) Limited and Cheng Yu Tung Family (Holdings II) Limited, respectively. Dr. Cheng Kar Shun, Mr. Cheng Kar Shing, Mrs. Sun Cheng Lai Ha, Cecilia and Mrs. Doo Cheng Sau Ha, Amy collectively hold controlling interest in each of Cheng Yu Tung Family (Holdings) Limited and Cheng Yu Tung Family (Holdings II) Limited. Intention of the Offeror Following the close of the Offers, the Offeror intends to continue with the existing principal businesses of the Group. The Offeror does not intend to introduce any major changes to the existing operations and business of the Group or terminate the employment of any employees of the Group or propose any change to the members of the Board immediately after the Offers. As at the Latest Practicable Date, the Offeror had no intention or plans for any acquisition or disposal of assets and/or business by the Group. Having considered the abovementioned principal factors, in particular that: (a) the uncertainties associated with the financial performance and prospects of the Group as discussed in the section headed Prospects and outlook of the Group above, including but not limited to (i) the overall reduction in demand for and the selling prices of recovered paper and tissue papers; (ii) the continual stringent control by the PRC government on the import of recycled materials to the PRC which highly influences, among others, the import of recovered paper to the PRC which adversely affects the major business segment of sales of recovered paper of the Group; and (iii) the continual increase in labor cost in the PRC which further erodes the Group s gross profit margin; 42

47 LETTER FROM VEDA CAPITAL (b) (c) (d) the recent trading price level of the Shares during the Post Joint Announcement Period demonstrated a decreasing trend and then hovered at a level close to the Share Offer Price, the weakening economic environment and the decreasing trend of the HSI; the trading volume of the Shares fluctuated and was generally thin during the Review Period and thus it is uncertain as to whether there would be sufficient liquidity in the Shares for the Independent Shareholders to dispose of a significant number of the Shares in the open market without depressing the Share price. Accordingly, the market trading price of the Shares may not necessarily reflect the proceeds that the Independent Shareholders can receive by the disposal of their Shares in the open market; and the Implied P/B Ratio is within range and lies above the average of the Comparables; we are of the opinion that the terms of the Share Offer are fair and reasonable so far as the Independent Shareholders are concerned. In addition, given that all the outstanding Share Options are out-of-money options, which the see-through price is zero, while the Option Offer Price to cancel all the outstanding Share Options is of a nominal value, we consider the terms of the Option Offer are fair and reasonable so far as the Independent Optionholders are concerned Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders and the Independent Optionholders to accept the Share Offer and the Option Offer respectively. The Independent Shareholders who wish to realize their investment in the Group are reminded that they should carefully and closely monitor the market price of the Shares during the Offer Period and consider selling their Shares in the open market during the Offer Period, rather than accepting the Share Offer, if the net proceeds from the sales of such Shares in the open market would exceed the net amount receivable under the Share Offer. In any event, the Independent Shareholders and the Independent Optionholders should note that there is no certainty that the current trading volume and/or current trading price level of the Shares will be sustainable during or after the Offer Period. Note: Yours faithfully, For and on behalf of Veda Capital Limited Hans Wong Julisa Fong Chairman Managing Director Mr. Hans Wong is a responsible officer under the SFO to engage in Type 6 (advising on corporate finance) regulated activity and has over 21 years of experience in investment banking and corporate finance. Ms. Julisa Fong is a responsible officer under the SFO to engage in Type 6 (advising on corporate finance) regulated activity and has over 19 years of experience in investment banking and corporate finance. * For identification purpose only 43

48 APPENDIX I FURTHER TERMS OF THE OFFERS 1. PROCEDURES FOR ACCEPTANCE 1.1 The Share Offer (a) (b) If the share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/ or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Shares is/are in your name, and you wish to accept the Share Offer, you must send the completed WHITE Form of Acceptance together with the relevant share certificate(s) and/ or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) to the Registrar, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong, by post or by hand, marked Integrated Waste Solutions Group Holdings Limited Share Offer on the envelop. If the share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/ or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Shares is/are in the name of a nominee company or a name other than your own, and you wish to accept the Share Offer whether in full or in part of your Shares, you must either: (i) (ii) (iii) lodge your share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Shares with the nominee company, or other nominee, with instructions authorising it to accept the Share Offer on your behalf and requesting it to deliver in an envelope marked Integrated Waste Solutions Group Holdings Limited Share Offer with the completed WHITE Form of Acceptance together with the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) to the Registrar; or arrange for the Shares to be registered in your name by the Company through the Registrar, and deliver in an envelope marked Integrated Waste Solutions Group Holdings Limited Share Offer with the completed WHITE Form of Acceptance together with the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) to the Registrar; or if your Shares have been lodged with your licensed securities dealer/registered institution in securities/custodian bank through CCASS, instruct your licensed securities dealer/registered institution in securities/custodian bank to authorise HKSCC Nominees Limited to accept the Share Offer on your behalf on or before the deadline set out by HKSCC Nominees Limited. In order to meet the deadline set out by HKSCC Nominees Limited, you should check with your licensed securities dealer/ registered institution in securities/custodian bank for the timing on the processing of your instruction, and submit your instruction to your licensed securities dealer/ registered institution in securities/custodian bank as required by them; or I-1

49 APPENDIX I FURTHER TERMS OF THE OFFERS (iv) if your Shares have been lodged with your licensed participant s account maintained with CCASS, give your instruction via the CCASS Phone System or CCASS Internet System on or before the deadline set by HKSCC Nominees Limited. (c) (d) (e) If the share certificate(s) and/or transfer receipts and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) in respect of your Shares is/are not readily available and/or is/are lost and you wish to accept the Share Offer in respect of your Shares, the WHITE Form of Acceptance should nevertheless be completed and delivered in an envelope marked Integrated Waste Solutions Group Holdings Limited Share Offer to the Registrar together with a letter stating that you have lost one or more of your share certificate(s) and/or transfer receipts and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) or that it/they is/are not readily available. If you find such document(s) or if it/they become(s) available, it/they should be forwarded to the Registrar as soon as possible thereafter. If you have lost your share certificate(s) and/or transfer receipts and/or other document(s) of title in respect of your Shares, you should also write to the Registrar for a letter of indemnity which, when completed in accordance with the instructions given, should be returned to the Registrar. If you have lodged transfer(s) of any of your Shares for registration in your name and have not yet received your share certificate(s), and you wish to accept the Share Offer in respect of your Shares, you should nevertheless complete the WHITE Form of Acceptance and deliver it in an envelope marked Integrated Waste Solutions Group Holdings Limited Share Offer to the Registrar together with the transfer receipt(s) duly signed by yourself. Such action will be deemed to be an irrevocable instruction and authority to each of Halcyon Securities and/or the Offeror and/or any of their respective agent(s) to collect from the Company or the Registrar on your behalf the relevant share certificate(s) when issued and to deliver such certificate(s) to the Registrar and to authorise and instruct the Registrar to hold such share certificate(s), subject to the terms and conditions of the Share Offer, as if it was/ they were delivered to the Registrar with the WHITE Form of Acceptance. Acceptance of the Share Offer will be treated as valid only if the completed WHITE Form of Acceptance is received by the Registrar by no later than 4:00 p.m. on the First Closing Date or such later time and/or date as the Offeror may determine and announce in accordance with the Takeovers Code and the Registrar has recorded that the WHITE Form of Acceptance and any relevant documents required have been so received, and is: (i) accompanied by the relevant share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and, if that/those share certificate(s) and/or transfer receipt(s) and/or other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) is/are not in your name, such other documents (e.g. a duly stamped transfer of the relevant Share(s) in blank or in your favour executed by the registered holder) in order to establish your right to become the registered holder of the relevant Shares; or I-2

50 APPENDIX I FURTHER TERMS OF THE OFFERS (ii) (iii) from a registered Shareholder or his/her personal representative (but only up to the amount of the registered holding and only to the extent that the acceptance relates to the Shares which are not taken into account under the other sub-paragraph of this paragraph (e)); or certified by the Registrar or the Stock Exchange. If the WHITE Form of Acceptance is executed by a person other than the registered Shareholder, appropriate documentary evidence of authority (such as grant of probate or certified copy of power of attorney) to the satisfaction of the Registrar must be produced. (f) (g) In Hong Kong, seller s ad valorem stamp duty arising in connection with acceptances of the Share Offer will be payable by relevant Independent Shareholders at a rate of 0.1% of the market value of the Offer Shares or consideration payable by the Offeror in respect of the relevant acceptances of the Share Offer, whichever is higher, will be deducted from the cash amount payable by the Offeror to the relevant Independent Shareholder accepting the Share Offer. The Offeror will arrange for payment of the seller s ad valorem stamp duty on behalf of relevant Independent Shareholders accepting the Share Offer and will pay the buyer s ad valorem stamp duty in connection with the acceptance of the Share Offer and the transfer of the Shares. No acknowledgement of receipt of any WHITE Form of Acceptance, Share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) will be given. (h) If the Share Offer lapses, the Offeror shall, as soon as possible but in any event within 10 days thereof, return by ordinary post the share certificate(s) lodged with the WHITE Form of Acceptance to the relevant Shareholder(s). 1.2 The Option Offer (a) (b) If you accept the Option Offer, you should complete the PINK Form of Acceptance in accordance with the instructions printed thereon, which instructions form part of the terms and conditions of the Option Offer. The completed PINK Form of Acceptance should be forwarded, together with the relevant document(s) of title of the Share Option(s) (if any) stating the number of Share Options for not less than the number of Share(s) exercisable pursuant to the Share Options in respect of which you intend to accept the Option Offer, by post or by hand to the Registrar, Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong, marked Integrated Waste Solutions Group Holdings Limited Option Offer on the envelope, as soon as possible and in any event so as to reach the Registrar at the aforesaid address by no later than 4:00 p.m. on the First Closing Date or such later time and/ or date as the Offeror may determine and announce in accordance with the Takeovers Code. I-3

51 APPENDIX I FURTHER TERMS OF THE OFFERS (c) If the Option Offer lapses, the Offeror shall, as soon as possible but in any event within 10 days thereof, return by hand or by ordinary post the document(s) of title of the Share Option (if any) lodged with the PINK Form of Acceptance to the relevant Optionholder(s). (d) (e) No stamp duty will be deducted from the amount paid or payable to the Independent Optionholder who accepts the Option Offer. No acknowledgement of receipt of any PINK Form of Acceptance and/or document(s) of title of the Share Option(s) (if any) will be given. 2. SETTLEMENT 2.1 The Share Offer (a) (b) Provided that the relevant WHITE Form of Acceptance and the relevant share certificate(s) and/or transfer receipt(s) and/or any other document(s) of title (and/or any satisfactory indemnity or indemnities required in respect thereof) are in complete and good order in all respects and have been received by the Registrar by no later than 4:00 p.m. on the First Closing Date or such later time and/or date as the Offeror may determine and announce in accordance with the Takeovers Code, a cheque for the amount representing the cash consideration due to each accepting Independent Shareholder in respect of the Offer Shares tendered by him under the Share Offer, less seller s ad valorem stamp duty payable by him, will be despatched to each accepting Independent Shareholder by ordinary post at his own risk as soon as possible but in any event within 7 Business Days of the later of (i) the Unconditional Date; and (ii) the date on which all the relevant documents which render such acceptance complete and valid are received by the Registrar. Settlement of the consideration to which any Independent Shareholder is entitled under the Share Offer will be implemented in full in accordance with the terms of the Share Offer, without regard to any lien, right of set-off, counterclaim or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such Independent Shareholder. 2.2 The Option Offer (a) Provided that the relevant PINK Form of Acceptance and the relevant document(s) of title of the Share Option(s) (if any) are in complete and good order in all respects and have been received by the Registrar by no later than 4:00 p.m. on the First Closing Date or such later time and/or date as the Offeror may determine and announce in accordance with the Takeovers Code, a cheque for the amount representing the cash consideration due to each accepting Independent Optionholder in respect of the Share Options surrendered by him under the Option Offer will be despatched to each accepting Independent Optionholder by ordinary post at his own risk as soon as possible but in any event within 7 Business Days of the later of (i) the Unconditional Date; and (ii) the date on which all the relevant documents which render such acceptance complete and valid are received by the Registrar. I-4

52 APPENDIX I FURTHER TERMS OF THE OFFERS (b) Settlement of the consideration to which any Independent Optionholder is entitled under the Option Offer will be implemented in full in accordance with the terms of the Option Offer, without regard to any lien, right of set-off, counterclaim or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such Independent Optionholder. 3. ACCEPTANCE PERIOD AND REVISIONS (a) (b) (c) (d) Unless the Offers have previously been revised or extended, with the consent of the Executive or have previously become or been declared unconditional, all acceptances of the Offers must be received by the Registrar by 4:00 p.m. on the First Closing Date. In accordance with Rule 15.3 of the Takeovers Code, where the Offers become or are declared unconditional, they should remain open for acceptance for not less than 14 days thereafter. If the next closing date is not stated in the announcement announcing the unconditionality of the Offers, at least 14 days notice in writing must be given before the Offers are closed to those Independent Shareholders and those Independent Optionholders who have not accepted the Offers. The Offeror will make an announcement as and when the Offers become or are declared unconditional. The Offeror reserves the right to revise the Offers in accordance with the relevant provisions of the Takeovers Code. If the Offers are extended or revised, the announcement of such extension or revision will state the next closing date and the Offers will remain open for acceptance for a period of not less than 14 days from the posting of the written notification of the extension or revision to the Independent Shareholders and Independent Optionholders and, unless previously extended or revised, shall be closed on the subsequent closing date. If the Offeror revises the terms of the Share Offer and/or the Option Offer, all Independent Shareholders and/or Independent Optionholders, whether or not they have already accepted the Share Offer or the Option Offer (as the case may be), will be entitled to accept the revised Offers under the revised terms. The benefit of any revision of the Offers will be available to any Independent Shareholder and/or any Independent Optionholder who has/have previously accepted the Share Offer and/or the Option Offer (as the case may be). The execution by or on behalf of any Independent Shareholder who has previously accepted the Share Offer or any Independent Optionholder who has previously accepted the Option Offer (as the case may be) of any WHITE Form of Acceptance or any PINK Form of Acceptance (as the case may be) shall be deemed to constitute acceptance of the revised Share Offer or Option Offer (as the case may be) unless such holder becomes entitled to withdraw his or her acceptance and duly does so. The Offeror may introduce new conditions to be attached to any revision to the terms of the Offers, or any subsequent revision thereof, but only to the extent necessary to implement the revised Offers and subject to the consent of the Executive. I-5

53 APPENDIX I FURTHER TERMS OF THE OFFERS (e) If the closing date of the Offers is extended, any reference in this Composite Document and in the Form(s) of Acceptance to the closing date shall, except where the context otherwise requires, be deemed to refer to the closing date of the Offers as so extended. 4. NOMINEE REGISTRATION To ensure equality of treatment to all Independent Shareholders, those registered Independent Shareholders who hold the Offer Shares as nominees for more than one beneficial owner should, as far as practicable, treat the holding of each beneficial owner separately. It is essential for the beneficial owners of the Offer Shares whose investments are registered in the names of nominees to provide instructions to their nominees of their intentions with regard to the Share Offer. 5. ANNOUNCEMENTS (a) By 6:00 p.m. on the First Closing Date (or such later time and/or date as the Executive may in exceptional circumstances permit), the Offeror must inform the Executive and the Stock Exchange of its decision in relation to the revision, or extension, expiry or unconditionality of the Offers. The Offeror must publish an announcement on the Stock Exchange s website by 7:00 p.m. on the First Closing Date stating the results of the Offers and whether the Offers have been revised or extended, have expired or have become or been declared unconditional. The announcement must state the total number of Shares and rights over Shares: (i) (ii) (iii) for which acceptances of the Offers have been revised; held, controlled or directed by the Offeror or parties acting in concert with it before the Offer Period; and acquired or agreed to be acquired during the Offer Period by the Offeror or parties acting in concert with it. The announcement must also include details of any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company which the Offeror or any parties acting in concert with it has borrowed or lent (save for any borrowed securities which have been either on-lent or sold) and specify the percentages of the issued share capital of the Company and the percentages of voting rights of the Company represented by these numbers. (b) In computing the total number of Shares and Share Options represented by acceptances, for announcement purposes, acceptances which are not in all respects in complete and good order or that are subject to verification may only be included where they could be counted towards fulfilling the acceptances condition under paragraph 1.1(e) of this appendix. I-6

54 APPENDIX I FURTHER TERMS OF THE OFFERS (c) As required under the Takeovers Code, all announcements in respect of the Offers will be made in accordance with the requirements of the Takeovers Code and the Listing Rules. 6. RIGHT OF WITHDRAWAL (a) (b) Subject to the condition of the Offers as set out in the paragraph headed Condition of the Offers in the Letter from Halcyon Securities in this Composite Document, acceptance of the Offers tendered by the Independent Shareholders and the Independent Optionholders, as the case may be, shall be irrevocable and cannot be withdrawn, except in the circumstances set out in sub-paragraph (b) below or in compliance with Rule 17 of the Takeovers Code which provides that an acceptor shall be entitled to withdraw his acceptances within 21 days from the First Closing Date, if the Offers have not by then become unconditional as to acceptances. In circumstances set out in Rule 19.2 of the Takeovers Code, which provides that if the Offeror is unable to comply with any of the requirements of Rule 19 of the Takeovers Code, the Executive may require that the Independent Shareholders and the Independent Optionholders who have tendered acceptances to the Offers be granted a right of withdrawal on terms that are acceptable to the Executive until the requirements set out in that paragraph are met. 7. GENERAL (a) (b) (c) (d) All communications, notices, Form(s) of Acceptance, certificates of Shares or Share Options (if any), transfer receipts, other documents of title (and/or any satisfactory indemnity or indemnities required in respect thereof) and remittances to settle the consideration payable under the Offers to be delivered by or sent to or from the Independent Shareholders and the Independent Optionholders will be delivered by or sent to or from them, or their designated agents by post at their own risk, and none of the Company, the Offeror, Halcyon Capital, Halcyon Securities, Veda Capital, the Registrar nor any of their respective directors, officers, agents or professional advisers or other parties involved in the Offers accepts any liability for any loss or delay in postage or any other liabilities that may arise as a result thereof. The provisions set out in the accompanying Form(s) of Acceptance form part of the terms and conditions of the Offers. The accidental omission to despatch this Composite Document and/or Form(s) of Acceptance or any of them to any person to whom the Offers are made will not invalidate the Offers in any way. The Offers and all acceptances are governed by and shall be construed in accordance with the laws of Hong Kong. I-7

55 APPENDIX I FURTHER TERMS OF THE OFFERS (e) (f) (g) (h) (i) Due execution of the Form(s) of Acceptance will constitute an authority to the Offeror, Halcyon Securities or such person or persons as the Offeror may direct to complete, amend and execute any document on behalf of the person or persons accepting the Offers and to do any other act that may be necessary or expedient for the purposes of vesting in the Offeror, or such person or persons as it may direct, the Offer Shares and the Share Options (as the case may be) in respect of which such person or persons has/have accepted the Offers. Acceptance of the Offers by any person or persons will be deemed to constitute a warranty by such person or persons to the Offeror that the Offer Shares acquired under the Share Offer, and the Share Options accepted and cancelled under the Option Offer, are sold by such person or persons free from all liens, charges, options, claims, equities, adverse interests, third party rights or encumbrances whatsoever and together with all rights accruing or attaching thereto including the rights to receive all future dividends or other distributions declared, paid or made on the Offer Shares, on or after the date of the Joint Announcement. References to the Offers in this Composite Document and the Form(s) of Acceptance shall include any revision and/or extension thereof. The making of the Offers to the Overseas Shareholders and the Overseas Optionholders may be prohibited or affected by the laws of the relevant jurisdictions. The Overseas Shareholders and the Overseas Optionholders should inform themselves about and observe any applicable legal or regulatory requirements. It is the responsibility of each Overseas Shareholder and Overseas Optionholder who wishes to accept the Offers to satisfy himself/ herself/itself as to the full observance of the laws and regulations of all relevant jurisdictions in connection therewith, including, but not limited to the obtaining of any governmental, exchange control or other consents and any registration or filing which may be required and the compliance with all necessary formalities, regulatory and/or legal requirements. Such Overseas Shareholders and Overseas Optionholders shall be fully responsible for the payment of any transfer or other taxes and duties due by such Overseas Shareholders or Overseas Optionholders in respect of the relevant jurisdictions. The Overseas Shareholders and the Overseas Optionholders are recommended to seek professional advice on deciding whether or not to accept the Offers. Acceptance of the Offers by any person will be deemed to constitute a representation and warranty from such person that such person is permitted under, and has complied with, all applicable laws and regulations to receive and accept the Offers, and any revision thereof, and such acceptance is valid and binding in accordance with all applicable laws and regulations. Any such person will be responsible for any such issue, transfer and other applicable taxes or other governmental payments payable by such person. I-8

56 APPENDIX I FURTHER TERMS OF THE OFFERS (j) (k) (l) Subject to the Takeovers Code, the Offeror reserves the right to notify any matter (including the making of the Offers) to all or any Independent Shareholders and Independent Optionholders with registered address(es) outside Hong Kong or whom the Offeror or Halcyon Securities knows to be nominees, trustees or custodians for such persons by announcement in which case such notice shall be deemed to have been sufficiently given notwithstanding any failure by any such Independent Shareholders or Independent Optionholders to receive or see such notice, and all references in this Composite Document to notice in writing shall be construed accordingly. In making their decision, the Independent Shareholders and the Independent Optionholders must rely on their own examination of the Offeror, the Group and the terms of the Offers, including the merits and risks involved. The contents of this Composite Document, including any general advice or recommendation contained herein, together with the Form(s) of Acceptance shall not be construed as any legal or business advice on the part of the Offeror, the Company or Halcyon Securities or their respective professional advisers. The Independent Shareholders and Independent Optionholders should consult their own professional advisers for professional advice. The English texts of this Composite Document and the Forms of Acceptance shall prevail over their respective Chinese texts for the purpose of interpretation in case of inconsistency. I-9

57 1. SUMMARY OF FINANCIAL INFORMATION The following is the summary of the consolidated financial results and financial information of the Group for the three years ended 31 March 2013, 2014 and 2015 and the six months ended 30 September 2014 and 2015 ( Financial Summary ). The consolidated financial statements for the financial years ended 31 March 2013, 2014 and 2015 were audited by KPMG. The qualifications in the auditor s reports for the years ended 31 March 2013, 2014 and 2015 are set out on pages II-93 to II-101 in this Composite Document. The summary of the consolidated financial results and financial information of the Group for the year ended 31 March 2013 has been presented to reflect the effects of the discontinued operations. Details of the reclassification adjustments are set out in the notes to the Financial Summary. Financial Summary Consolidated Statement Of Profit Or Loss And Other Comprehensive Income (Expressed in Hong Kong Dollars) For the year ended For the six months 31 March ended 30 September $ 000 $ 000 $ 000 $ 000 $ 000 (audited) (audited) (audited) (unaudited) (unaudited) Continuing operations Revenue 443, , , , ,438 Cost of sales (419,207) (439,729) (483,766) (146,092) (221,004) Gross profit 24,335 40,858 89,508 9,120 23,434 Other revenue 9,129 27,507 7,538 1,482 4,295 Other net (loss)/gain (4,403) 2,283 6,315 (1,351) 100 Selling and distribution expenses (58,650) (52,800) (34,281) (25,250) (32,653) Administrative and other operating expenses (100,794) (79,232) (81,375) (43,228) (37,606) Operating loss (130,383) (61,384) (12,295) (59,227) (42,430) Finance income 3,119 10,202 14,397 2,538 1,523 Finance costs (216) Share of loss of an associate (844) (56) (456) (Loss)/profit before taxation (127,264) (52,026) 1,830 (57,145) (40,907) Income tax 1,113 (1,224) (4,952) (351) Indemnity receipt of tax in respect of prior years 13,071 13,071 Loss from continuing operations (113,080) (53,250) (3,122) (57,145) (28,187) II-1

58 For the year ended For the six months 31 March ended 30 September $ 000 $ 000 $ 000 $ 000 $ 000 (audited) (audited) (audited) (unaudited) (unaudited) Discontinued operations Impairment loss on amounts due from De-consolidated Subsidiaries (Note 1) (36,572) (431,638) (2,500) (36,572) Loss and total comprehensive income for the year/period (149,652) (484,888) (5,622) (57,145) (64,759) Attributable to Equity shareholders of the Company (149,607) (484,888) (5,622) (53,802) (64,759) Non-controlling interests (45) (3,343) (149,652) (484,888) (5,622) (57,145) (64,759) Attributable to equity shareholders of the Company Continuing operations (113,035) (53,250) (3,122) (53,802) (28,187) Discontinued operations (36,572) (431,638) (2,500) (36,572) (149,607) (484,888) (5,622) (53,802) (64,759) Basic and diluted loss per share Continuing operations (3.2) cents (2.2) cents (0.1) cents (1.1) cents (1.2) cents Discontinued operations (1.0) cents (17.9) cents (0.1) cents (1.5) cents (4.2) cents (20.1) cents (0.2) cents (1.1) cents (2.7) cents II-2

59 Consolidated Statement Of Financial Position (Expressed in Hong Kong Dollars) As at 31 March As at 30 September $ 000 $ 000 $ 000 $ 000 $ 000 (audited) (audited) (audited) (unaudited) (unaudited) Non-current assets Property, plant and equipment 682, , , , ,951 Land use rights 27,478 28,330 28,244 32,520 27,903 Interests in an associate/joint venture ,647 Prepayments and other receivables 25,552 9,818 5,640 14,967 32, , , , , ,276 Current assets Inventories 6,086 5,345 8,095 19,492 5,754 Trade and bills receivables 77,436 77,453 57,545 62, ,488 Other receivables, deposits and prepayments 53,000 47,180 36,924 44,358 59,631 Amounts due from related companies Amount due from joint venture 1,587 Amounts due from De-consolidated Subsidiaries 641,089 Bank deposits and cash 455, , , , ,566 Restricted and pledged bank deposits 2,225 2,400 1,650 20,727 2,403 Taxation recoverable 3,249 3, , ,298 1,293, , ,436 Assets and liabilities of disposal group classified as held for sale 208, , ,198 1,293, , ,436 Current liabilities Trade payables 20,223 12,058 14,397 25,149 35,394 Other payables and accruals 54, ,115 66,688 83,880 93,313 Amounts due to related companies , Taxation payable 3,035 2,704 3,677 74, ,218 89, , ,394 Net current assets 523, ,980 1,204, , ,042 Total assets less current liabilities 1,258, ,898 1,415,587 1,202, ,318 Non-current liabilities Deferred tax liabilities 1,116 1, NET ASSETS 1,258, ,782 1,413,670 1,202, ,493 II-3

60 CAPITAL AND RESERVES As at 31 March As at 30 September $ 000 $ 000 $ 000 $ 000 $ 000 (audited) (audited) (audited) (unaudited) (unaudited) Share capital 482, , , , ,117 Reserves 774, ,665 1,172, , ,376 Total equity attributable to Equity shareholders of the Company 1,256, ,782 1,413,670 1,203, ,493 Non-controlling interests 1,955 (1,388) TOTAL EQUITY 1,258, ,782 1,413,670 1,202, ,493 Notes: 1. Impairment of the amounts due from De-consolidated Subsidiaries As at 31 March 2014, the Group was made aware of the fact that the liquidators of Wealthy Peaceful Limited had initiated a tender process to locate a buyer to acquire the entire equity interests in Golddoor Company Limited. In April 2014, the liquidator of Wealthy Peaceful Limited entered into a binding agreement with an independent third party, pursuant to which Wealthy Peaceful Limited agreed to dispose of its entire equity interests in Golddoor Company Limited (together with its subsidiary, 惠 州 福 和 紙 業 有 限 公 司 ( Huizhou Fook Woo )) for a consideration of HK$200,000,000 (the Sale Transaction ). Details of the Sale Transaction are set out in note 25(b) to the annual reports of the Company for the two financial years ended 31 March 2014 (the 2014 Annual Report ) and 31 March 2015 (the 2015 Annual Report ). At 31 March 2014, the Group s and the Company s amounts due from Wealthy Peaceful Limited, Golddoor Company Limited and Huizhou Fook Woo (collectively referred to as the De-consolidated Subsidiaries ) and the Company s interests in subsidiaries were determined to be impaired. Impairment losses on amounts due from De-consolidated Subsidiaries of approximately HK$431,638,000 were recognised as the result of Discontinued operations in the consolidated statement of profit or loss and other comprehensive income for the year ended 31 March The impairment losses were measured as the difference between the carrying amount and the estimated recoverable amount. To conform with the presentation in the 2014 Annual Report, the impairment of the amounts due from De-consolidated Subsidiaries of HK$2,500,000 for the year ended 31 March 2013 has been reclassified under Discontinued operations in the summary of the consolidated financial results. In September 2014, the Group considered the previously estimated amount receivable from the De-consolidated Subsidiaries of approximately HK$36,572,000 to be irrecoverable and further provision for impairment loss was made for the year ended 31 March No dividend was declared for the years ended 31 March 2013, 2014 and 2015 and for the six months ended 30 September 2014 and Save ad disclosed in Note 1 above, there was no item which was exceptional because of size, nature or incidence for the years ended 31 March 2013, 2014 and 2015 and for the six months ended 30 September 2014 and II-4

61 2. UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015 The unaudited consolidated financial statements as of and for the six months ended 30 September 2015 set out herein have been reproduced and extracted from pages 18 to 50 of the interim report of the Company for the six months ended 30 September 2015, with the exception that the pages have been renumbered. CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015 UNAUDITED (Expressed in Hong Kong dollars) Continuing operations Six months ended 30 September Note HK$ 000 HK$ 000 Revenue 5 155, ,438 Cost of sales (146,092) (221,004) Gross profit 9,120 23,434 Other revenue 1,482 4,295 Other net (losses)/gains (1,351) 100 Selling and distribution expenses (25,250) (32,653) Administrative and other operating expenses (43,228) (37,606) Operating loss (59,227) (42,430) Finance income 6 2,538 1,523 Share of loss of joint venture (456) Loss before taxation 6 (57,145) (40,907) Income tax 7 (351) Indemnity receipt of tax in respect of prior years 7(a) 13,071 Loss from continuing operations (57,145) (28,187) Discontinued operations Impairment loss on amounts due from De-consolidated Subsidiaries 15 (36,572) Loss and total comprehensive income for the period (57,145) (64,759) II-5

62 Six months ended 30 September Note HK$ 000 HK$ 000 Attributable to: 9 Equity shareholders of the Company (53,802) (64,759) Non-controlling interests (3,343) (57,145) (64,759) Attributable to equity shareholders of the Company 9 Continuing operations (53,802) (28,187) Discontinued operations (36,572) (53,802) (64,759) Basic and diluted loss per share 9 Continuing operations (1.1) cents (1.2) cents Discontinued operations (1.5) cents (1.1) cents (2.7) cents II-6

63 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 SEPTEMBER 2015 (Expressed in Hong Kong dollars) 30 September 31 March Note HK$ 000 HK$ 000 (Unaudited) (Audited) Non-current assets Property, plant and equipment , ,027 Land use rights 32,520 27,478 Interests in joint venture 11 23,647 Other receivables and prepayments 14,967 25, , ,057 Current assets Inventories 19,492 6,086 Trade and bills receivables 12 62,631 77,436 Other receivables, deposits and prepayments 44,358 53,000 Amounts due from related companies Amount due from joint venture 11 1,587 Bank deposits and cash 344, ,869 Restricted and pledged bank deposits 20,727 2,225 Taxation recoverable 3,249 3, , ,877 Current liabilities Trade and bills payables 13 25,149 20,223 Other payables and accruals 83,880 54,397 Amounts due to related companies ,039 74,630 Net current assets 387, ,247 NET ASSETS 1,202,354 1,258,304 II-7

64 30 September 31 March Note HK$ 000 HK$ 000 (Unaudited) (Audited) CAPITAL AND RESERVES Share capital , ,234 Reserves 721, ,115 Total equity attributable to equity shareholders of the Company 1,203,742 1,256,349 Non-controlling interests (1,388) 1,955 TOTAL EQUITY 1,202,354 1,258,304 II-8

65 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015 UNAUDITED (Expressed in Hong Kong dollars) Attributable Share- to equity based shareholders Non- Share Share Capital capital Accumulated of the controlling capital Premium reserve reserve losses Company interests Total Note HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1 April ,117 2,862,358 (964,044) (1,210,649) 928, ,782 Changes in equity for the six months ended 30 September 2014: Loss and total comprehensive income for the period (64,759) (64,759) (64,759) Equity settled share-based transactions 14(c) 2,470 2,470 2,470 At 30 September ,117 2,862,358 (964,044) 2,470 (1,275,408) 866, ,493 At 1 April ,234 3,092,881 (964,044) 5,534 (1,360,256) 1,256,349 1,955 1,258,304 Changes in equity for the six months ended 30 September 2015: Loss and total comprehensive income for the period (53,802) (53,802) (3,343) (57,145) Equity settled share-based transactions 14(c) 1,195 1,195 1,195 At 30 September ,234 3,092,881 (964,044) 6,729 (1,414,058) 1,203,742 (1,388) 1,202,354 II-9

66 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015 UNAUDITED (Expressed in Hong Kong dollars) Six months ended 30 September Note HK$ 000 HK$ 000 Cash flows from operating activities Cash used in operations (26,764) (51,074) Net cash used in operating activities (26,764) (51,074) Cash flows from investing activities Purchase of property, plant and equipment (36,557) (273,188) Prepayments for purchase of property, plant and equipment (630) (21,707) Proceeds from disposal of property, plant and equipment Payment for purchase of land use right (5,497) Advance to joint venture 11 (24,103) Increase in amount due from joint venture (759) Proceeds from disposal of entire interest in De-consolidated Subsidiaries ,000 Interest received 1,908 2,013 Proceeds received from deposits with maturity greater than 3 months 23,766 Net cash used in investing activities (65,165) (73,694) Cash flows from financing activities Increase in restricted and pledged bank deposits (18,502) (3) Net cash used in financing activities (18,502) (3) II-10

67 Six months ended 30 September HK$ 000 HK$ 000 Net decrease in cash and cash equivalents (110,431) (124,771) Cash and cash equivalents at the beginning of the period 455, ,560 Exchange difference on cash and cash equivalents (978) (223) Cash and cash equivalents at the end of the period 344, ,566 II-11

68 NOTES TO THE UNAUDITED INTERIM FINANCIAL REPORT (Expressed in Hong Kong dollars unless otherwise indicated) 1 GENERAL INFORMATION Integrated Waste Solutions Group Holdings Limited ( the Company ) was incorporated and registered as an exempted company with limited liability in the Cayman Islands on 11 November 2009 under the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. The Company is an investment holding company and was listed on The Stock Exchange of Hong Kong Limited (the Stock Exchange ). The registered address of the Company is Clifton House, 75 Fort Street, PO Box 1350, Grand Cayman, KY1-1108, Cayman Islands. The Company and its subsidiaries are collectively referred to as the Group. The subsidiaries of the Group are principally engaged in the trading of recovered paper and materials, trading of tissue paper products, provision of confidential materials destruction services and provision of logistics services. These consolidated financial statements are presented in Hong Kong dollars (HK$). 2 BASIS OF PREPARATION This interim financial report has been prepared in accordance with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, including compliance with International Accounting Standard ( IAS ) 34, Interim financial reporting, promulgated by the International Accounting Standards Board ( IASB ). The interim financial report has been prepared in accordance with the same accounting policies adopted in the 2015 annual financial statements, except for the accounting policy changes that are expected to be reflected in the 2016 annual financial statements. Details of any changes in accounting policies are set out in note 3. The preparation of an interim financial report in conformity with IAS 34, requires management to make judgements, estimates and assumptions that affect the application of policies and reported amount of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates. The interim financial report contains condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the 2015 annual financial statements. The condensed consolidated interim financial statements and notes thereon do not include all of the information required for full set of financial statements prepared in accordance with International Financial Reporting Standards ( IFRSs ). The annual financial statements for the year ended 31 March 2015 are available from the Company s registered office. The auditors have expressed a qualified opinion on those financial statements in their report dated 26 June II-12

69 The interim financial report is unaudited, but has been reviewed by KPMG in accordance with International Standards on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the International Auditing and Assurance Standards Board. In the course of preparing its interim financial report for the six months ended 30 September 2011, the Board of Directors of the Company (the Board ) were made aware of evidence indicating the potential existence of irregularities with respect to a deposit of RMB100,000,000 (approximately HK$120,000,000) recorded in the books of 惠 州 福 和 紙 業 有 限 公 司 ( Huizhou Fook Woo ), a wholly owned subsidiary of the Group (the Incident ). Accordingly, in the interest of the Company and its shareholders, on 28 November 2011, the Company applied for suspension of trading in the Company s shares on the Stock Exchange. On 29 November 2011, the Company received a cash deposit of HK$120,000,000 (approximately RMB100,000,000) (the Deposit ). The Board represented that the Deposit was placed by a former Director of the Company. The Deposit was recorded as amount due to Huizhou Fook Woo in the consolidated statement of financial position and the Company s statement of financial position as at 31 March On 2 December 2011, the Board established an independent special committee (the Special Committee ) to conduct an investigation into the Incident and the Deposit and to review the internal control system of the Company with the assistance of an independent accounting firm. On 27 April 2012, the Special Committee engaged another independent accounting firm to conduct a forensic review into the Incident and the Deposit (the Forensic Review ) following the preliminary investigation results of the previous independent accounting firm. Based on the results of the Forensic Review, the Board concluded that the payment relating to the Incident was not in fact made and the amount was not transferred out of accounts of Huizhou Fook Woo and a number of documents related to the Incident were fabricated. In addition, the Forensic Review has revealed, among other things, certain irregular transactions entered into by Huizhou Fook Woo. Based on the results of the Forensic Review, the Board further concluded that, among other things, a substantial portion of the accounting books and records of Huizhou Fook Woo for the year ended 31 March 2012 and prior periods were missing. Given the loss of a substantial portion of the accounting books and records and the fact that most of the key accounting personnel and previous management left the Group and are now not contactable, the Board believes that, it is almost impossible, and not practical, to ascertain the transactions and balances of Huizhou Fook Woo for inclusion in the consolidated financial statements of the Group. On 31 January 2013, Wealthy Peaceful Company Limited ( Wealthy Peaceful ), a wholly owned subsidiary of the Group, commenced voluntary liquidation by a resolution of the members and the voluntary liquidators were appointed on the same date. Wealthy Peaceful, and its wholly owned subsidiaries, namely Golddoor Company Limited ( Golddoor ) and Huizhou Fook Woo are collectively referred to as the De-consolidated Subsidiaries. Given these circumstances, the Directors have not consolidated the financial statements of the De-consolidated Subsidiaries in the Group s consolidated financial statements since 1 April II-13

70 On 24 April 2014, the Company was informed by the liquidators of Wealthy Peaceful, that a sale and purchase agreement was entered into between Wealthy Peaceful and an independent third party pursuant to which Wealthy Peaceful agreed to dispose of the entire issued share capital of Golddoor at a consideration of HK$200,000,000 (the Sale Transaction ). Golddoor was interested in the entire registered capital of Huizhou Fook Woo. Given these circumstances, the Group presented the amounts due from De-consolidated Subsidiaries as assets and liabilities of disposal group classified as held for sale which were measured at the lower of the carrying amounts and the estimated recoverable amount from the disposal of Golddoor at 31 March The Group recognised an impairment loss of the amounts due from De-consolidated Subsidiaries amounting to HK$431,638,000 for the year ended 31 March 2014 following the assessment of the recoverable amounts due from De-consolidated Subsidiaries. On 27 June 2014, the liquidators of Wealthy Peaceful informed the Company that the purchaser had remitted the consideration and the Sale Transaction was completed in July The exclusion of the results and cash flows of the De-consolidated Subsidiaries from the consolidated financial statements for the period prior to the completion of the Sale Transaction in July 2014 is a departure from the requirements of International Financial Reporting Standard 10 Consolidated financial statements ( IFRS 10 ) and International Financial Reporting Standard 5 Non-current Assets Held for Sale and Discontinued Operations ( IFRS 5 ). Given the loss of certain accounting books and records of Huizhou Fook Woo mentioned above, the Directors are unable to ascertain the financial impact of the non-consolidation of the De-consolidated Subsidiaries on the consolidated financial statements. Except for the matters referred to above, including the non-consolidation of the De-consolidated Subsidiaries, the interim financial report of the Group has been prepared in accordance with IAS ACCOUNTING POLICIES The IASB has issued a number of new IFRSs and amendments to IFRSs that are first effective for the current accounting period of the Group and the Company. Of these, the following developments are relevant to the Group s financial statements: Amendments to IAS 19, Employee benefits: Defined benefit plans: Employee contributions Annual Improvements to IFRSs Cycle Annual Improvements to IFRSs Cycle None of these developments have had a material effect on how the Group s results and financial position for the current or prior periods have been prepared or presented. The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period. II-14

71 4 FINANCIAL RISK MANAGEMENT Financial risk factors The Group s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The interim financial report does not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group s annual financial statements for the year ended 31 March There have no changes in the risk management department since 31 March 2015 or in any risk management policies. Fair value measurement The carrying amounts of financial assets and liabilities which are due to be received or settled within one year are reasonable approximation of their respective fair values, and accordingly, no disclosure of the fair values of these financial instruments is made. For other non-current financial assets and liabilities, their carrying amounts are not significantly different to their respective fair values, therefore no disclosure of the fair values of these financial instruments is made. 5 SEGMENT INFORMATION The Board of Directors of the Company, which is the chief operating decision maker of the Group, reviews the Group s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. The Group is organised into four business segments: Recovered paper and materials: sales of recovered papers and materials Tissue paper products: sales of tissue paper products Confidential materials destruction services ( CMDS ): provision of confidential materials destruction services Logistics services: provision of logistics services II-15

72 Although the Group s products and services are sold/rendered to Hong Kong, the PRC and overseas markets, the chief operating decision maker of the Group regularly reviews the financial information by business segments to assess performance and make resources allocation decisions. It assesses the performance of the operating segments based on a measure of segment gross profits. The Group s revenue consists of the following: Unaudited Six months ended 30 September HK$ 000 HK$ 000 Sales of recovered paper and materials 135, ,467 Sales of tissue paper products 11, ,217 Provision of CMDS 7,729 6,329 Provision of logistics services 972 1, , ,438 The analysis of the Group s revenue from external customers attributed to the locations in which the sales originated during the period consists of the following: Unaudited Six months ended 30 September HK$ 000 HK$ 000 Hong Kong 155, ,438 II-16

73 The segment results and other segment items included in the loss for the six months ended 30 September 2015 are as follows: Segment revenue: Six months ended 30 September 2015 Recovered Tissue paper and paper Logistics materials products CMDS services Group HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Sales to external customers 135,048 11,463 7, ,212 Inter-segment sales 11,371 11,371 Reportable segment revenue 135,048 11,463 7,729 12, ,583 Elimination of inter-segment revenue (11,371) 155,212 Segment results: Reportable segment profit 6, ,113 1,906 13,576 Elimination of intersegment profits (4,456) Reportable segment profit derived from group s external customers 9,120 Unallocated operating costs (68,347) Share of loss of joint venture (456) Finance income 2,538 Loss for the period (57,145) II-17

74 Six months ended 30 September 2014 Recovered Tissue paper and paper Logistics materials products CMDS services Group HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Continuing operations Segment revenue: Sales to external customers 133, ,217 6,329 1, ,438 Inter-segment sales 18,550 18,550 Reportable segment revenue 133, ,217 6,329 19, ,988 Elimination of inter-segment revenue (18,550) 244,438 Segment results: Reportable segment profit 13,807 14,749 (1,905) 9,323 35,974 Elimination of inter-segment profits (12,540) Reportable segment profit derived from group s external customers 23,434 Unallocated operating costs (65,864) Finance income 1,523 Loss before taxation (40,907) Income tax (351) Indemnity receipt of tax in respect of prior years 13,071 Loss for continuing operations (28,187) Discontinuing operations Impairment loss on amounts due from De-consolidated Subsidiaries (36,572) Loss for the period (64,759) Note: During 2015, certain logistics fees in relation to the provision of confidential materials destruction services has been reclassified from the logistics services segment to the CMDS segment to better reflect the nature of the expenses. The segment information for the six months ended 30 September 2014 has been adjusted to conform with current year s presentation. II-18

75 6 LOSS BEFORE TAXATION Loss before taxation is stated after charging/(crediting) of the following: Unaudited Six months ended 30 September HK$ 000 HK$ 000 Other items Cost of inventories sold 109, ,665 Amortisation of land use rights Depreciation of property, plant and equipment 18,095 10,051 Impairment losses: Trade and bills receivables (note 12) 1,508 Written down of inventories 2,557 Loss/(gain) on disposal of property, plant and equipment 373 (323) Operating lease charges in respect of land and buildings 11,060 19,300 Equity share-based payments (note 14(c)) 1,195 2,470 Exchange loss, net Interest income from bank deposits (1,711) (1,523) Interest income from loan to joint venture (827) 7 INCOME TAX Unaudited Six months ended 30 September HK$ 000 HK$ 000 Current income tax Hong Kong Profits Tax 642 Deferred tax Origination and reversal of temporary differences (291) Income tax expense 351 No provision for Hong Kong Profits Tax for the six months ended 30 September 2015 as the subsidiaries of the Group incurred taxable loss. The provision for Hong Kong Profits Tax is calculated by applying the estimated annual effective tax rate of 16.5% on the estimated assessable profit for the six months ended 30 September II-19

76 (a) Indemnity receipt of tax in respect of prior years Mr. Leung Kai Kuen, the former director and one of the substantial shareholders of the Company and Ms. Tam Ming Luen, the then substantial shareholder of the Company, have entered into a deed of indemnity with the Group under which they have agreed to indemnify on a joint and several basis each member of the Group in respect of the cash payment for any additional tax assessment for the year of assessment 2002/2003 and any other notices of additional assessment that may be received by any member of the Group for and including the years of assessment from 2003/2004 to 2009/2010 in respect of the Additional Tax Assessments referred in note 9(a)(ii) of the annual report of the Group for the year ended 31 March 2014 (the Deed of Indemnity ). Given the uncertainties about the likelihood of recovering such payments from Mr. Leung Kai Kuen and Ms. Tam Ming Luen, the incremental tax liability arose from the Additional Tax Assessments was recorded as the Group s income tax liabilities as at 31 March 2012 and 31 March 2013 and charged to the consolidated statement of profit or loss and other comprehensive income of the Group in prior years despite the above-mentioned indemnity arrangement. On 15 April 2014, the Group received a total sum of HK$13,070,705 from Ms. Tam Ming Luen for full and final settlement of the above matter arrangement (the Indemnity Receipt ). The Indemnity Receipt was recorded in the consolidated statement of profit or loss and other comprehensive income for the six months ended 30 September DIVIDENDS No dividends had been paid or declared by the Company for the six months ended 30 September 2015 (2014: Nil). II-20

77 9 BASIC AND DILUTED LOSS PER SHARE Basic loss per share is calculated by dividing the loss for the period attributable to the equity shareholders of the Company by the weighted average number of ordinary shares in issue during the period. Unaudited Six months ended 30 September HK$ 000 HK$ 000 Loss attributable to equity shareholders of the Company Continuing operations (53,802) (28,187) Discontinued operations (36,572) (53,802) (64,759) Weighted average number of ordinary shares in issue (thousand shares) 4,822,334 2,411,167 Basic loss per share (in cents) Continuing operations (1.1) cents (1.2) cents Discontinued operations (1.5) cents (1.1) cents (2.7) cents The calculation of the basic and diluted loss per share is based on the loss attributable to equity shareholders of the Company from continuing and discontinued operations of approximately HK$53,802,000 and HK$Nil respectively (2014: HK$28,187,000 and HK$36,572,000 respectively) and on the weighted average number of 4,822,334,000 (2014: 2,411,167,000) ordinary shares in issue during the interim period. Diluted loss per share The computation of diluted loss per share does not assume the exercise of the Company s share options because the exercise price of those options was higher than the average market price of shares for the six months ended 30 September 2015 and 2014 and the effect of loss per share is anti-dilutive. 10 PROPERTY, PLANT AND EQUIPMENT During the six months ended 30 September 2015, the Group acquired items of property, plant and equipment with aggregate costs of HK$80,814,000 (six months ended 30 September 2014: HK$233,676,000). II-21

78 11 INTERESTS IN JOINT VENTURE 30 September 31 March HK$ 000 HK$ 000 (Unaudited) (Audited) Share of net liabilities (453) Loans to joint venture (Note 11(b)) 24,100 23,647 Amount due from joint venture (current) (Note 11(c)) 1,587 In April 2015, the Group and independent third parties set up a joint venture, ALBA Integrated Waste Solutions (Hong Kong) Limited ( ALBA ) and injected capital of HK$2,500 and advanced loans to ALBA of HK$24,100,000. The Group held 25% equity interests in ALBA. (a) Details of the Group s interest in the joint venture, which is accounted for using the equity method in the consolidated financial statements, are as follows: Particulars Proportion of ownership interest Form of Place of of issued Group s Name of business incorporation and paid effective Held by the Held by a Principal joint venture structure and business up capital interest Company subsidiary activity ALBA Integrated Incorporated Hong Kong HK$10,000 25% 25% Treatment of Waste Solutions waste electrical (Hong Kong) and electronic Limited ( ALBA ) equipment The Group is entitled to share 25% of the financial results of ALBA. Notwithstanding the 25% of paid up capital and the profit sharing arrangements of ALBA, the Group accounts for the investment in ALBA as a joint venture as the Group has joint control over the financial and operating decisions of ALBA. (b) (c) The loans to joint venture of HK$24,100,000 are unsecured, interest-free and have no fixed terms of repayment except for the loan of HK$2,500,000 which was repayable on or before 14 May The loans of HK$21,600,000 was advanced to the joint venture as a security of bank deposits placed by the joint venture for the issue of bank guarantee to the HKSAR Government in connection with the project development on the treatment of waste electrical and electronic equipment. The loans to joint venture are classified as non-current as these are not expected to be recoverable within the next twelve months. The amount due from the joint venture at 30 September 2015 are unsecured, interest-free and have no fixed terms of repayment. II-22

79 12 TRADE AND BILLS RECEIVABLES 30 September 31 March HK$ 000 HK$ 000 (Unaudited) (Audited) Trade and bills receivables 69,453 82,750 Less: Provision for impairment (6,822) (5,314) Trade and bills receivables, net 62,631 77,436 Payment terms granted to customers are mainly cash on delivery and on credit. The average credit period ranges from 10 days to 90 days. The ageing analysis of trade and bills receivables based on transaction date are as follows: 30 September 31 March HK$ 000 HK$ 000 (Unaudited) (Audited) 0 30 days 31,915 23, days 9,492 19, days 8,230 15, days 4,363 6,112 Over 120 days 15,453 18,481 69,453 82,750 Less: Provision for impairment (6,822) (5,314) 62,631 77, TRADE AND BILLS PAYABLES 30 September 31 March HK$ 000 HK$ 000 (Unaudited) (Audited) Trade and bills payables 25,149 20,223 II-23

80 The ageing analysis of the Group s trade and bills payables based on due date at the end of the reporting period are as follows: 30 September 31 March HK$ 000 HK$ 000 (Unaudited) (Audited) Current 18,831 3, days 1,483 11, days 819 3, days 1, days Over 120 days 2,980 1,291 25,149 20, SHARE CAPITAL AND RESERVES (a) Authorised share capital of the Company 30 September 31 March HK$ 000 HK$ 000 (Unaudited) (Audited) Authorised: 5,000,000,000 ordinary shares of HK$0.10 each 500, ,000 (b) Issued share capital of the Company Number of ordinary shares Ordinary shares HK$ Issued and fully paid: At 1 April ,411,167, ,116,700 Issue of share under the Open Offer (Note) 2,411,167, ,116,700 At 31 March 2015, 1 April 2015 and 30 September ,822,334, ,233,400 II-24

81 Note: On 25 July 2014, the Company announced that it proposed to issue not less than 2,411,167,000 shares and not more than 2,424,216,600 shares of HK$0.10 each by way of an open offer issue in the proportion of one offer share for every one ordinary share then held by qualifying shareholders at a subscription price of HK$0.20 per offer share (the Open Offer ). On 14 October 2014, the Company completed the Open Offer and issued 2,411,167,000 shares for gross proceeds of HK$482,233,000. The difference of HK$230,523,000 between the net proceeds of HK$471,640,000 (after deduction of related expenses of approximately HK$10,593,000) and the par value of shares issued of HK$241,117,000 has been credited to the share premium account of the Company. These newly issued shares rank pari passu in all respects with the existing shares. (c) Equity settled share-based transactions Pursuant to the resolutions in writing passed by all shareholders of the Company on 11 March 2010, the Company adopted a share option scheme on 11 March 2010 (the Share Option Scheme ). The purpose of the share option scheme is to provide incentives to the Group s employees including the executive directors and non-executive directors and any advisers, consultants, suppliers, customers and agents (each eligible participant ). The Board of Directors of the Company may, at any time within 10 years after the date of adoption of the Share Option Scheme, make an offer to any participant. The subscription price for shares granted pursuant to the Share Option Scheme shall be determined by the Board of Directors of the Company in its absolute discretion but shall not be less than the highest of: the closing price of the shares of the Company stated in the Stock Exchange s daily quotations sheet on the business day on which an offer is made to a participant; the average of the closing prices of the shares stated in the Stock Exchange s daily quotations sheets for the five business days immediately preceding the date on which such offer is made; and the nominal value of a share of the Company. On 25 April 2014, the Group announced that a total of 71,110,000 options under the Share Option Scheme to subscribe for the Company s shares were granted, subject to acceptance of the grantee(s). Each option shall entitle the holder to subscribe for one share upon exercise of such option at an initial exercise price of HK$0.542 per share. These options may be exercised from 25 July 2014 to 24 April 2020 (both dates inclusive) subject to the vesting periods. Pursuant to the Share Option Scheme, the number of unexercised share options and exercise price may be subject to adjustment in case of alteration in the capital structure of the Company. On 14 October 2014, the Board announced that as a result of the completion of the Open Offer, adjustments have been made to the exercise price of the options and the number of shares falling to be issued under the outstanding options granted under the Share Option Scheme. The adjustments (the Adjustments ) to the exercise price and the number of the shares falling to be issued under the outstanding options took effect from 15 October As at 15 October 2014, the number of shares falling to be issued under the outstanding options after the Adjustments was 76,746,711 and the exercise price of the options after the Adjustments was HK$0.444 per share. II-25

82 The movements in the number of share options under the Share Option Scheme during the period were as follows: Number of share options (after adjustment) Initial Cancelled/ Outstanding at Exercisable at Remaining exercise Exercisable Outstanding at lapsed during 30 September 30 September contractual Date of grant price period 1 April 2015 the period life (HK$) Directors 25 April July ,223,422 53,223,422 10,644, years to 24 April 2020 Employees 25 April July ,248,781 (3,901,423) 13,347,358 2,790, years to 24 April 2020 Other eligible participants 25 April July ,955,138 (3,955,138) 4.6 years to 24 April ,427,341 (7,856,561) 66,570,780 13,435,253 No share options were granted or exercised during the period. Vesting period: Tranche 1: 20% are exercisable form 25 July 2014 to 24 April 2020 Tranche 2: 50% are exercisable from 25 April 2016 to 24 April 2020 Tranche 3: 30% are exercisable from 25 April 2018 to 24 April 2020 Share option expenses charged to the consolidated statement of profit or loss and other comprehensive income are determined using the binomial lattice model based on the following assumptions: Date of grant 25 April 2014 Fair value at measurement date HK$0.190 Share price at measurement date HK$0.328 Exercise price HK$0.542 Expected volatility 52.10% Risk-free interest rate (based on Exchange Fund Notes) 1.34% Expected average life of options 2.2 years Expected dividend yield 0% The expected volatility is based on the historic volatility on comparable companies listed on the same stock exchange (calculated based on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility based on publicly available information. Expected dividends are based on historic dividends. Changes in the subjective input assumptions could materially affect the fair value estimate. II-26

83 15 DISPOSAL OF ENTIRE EQUITY INTERESTS IN GOLDDOOR COMPANY LIMITED ( GOLDDOOR ) As at 31 March 2014, the Group was made aware of the fact that the liquidators of Wealthy Peaceful Limited had initiated a tender process to locate a buyer to acquire the entire equity interests in Golddoor. In April 2014, the liquidators of Wealthy Peaceful Limited entered into a binding agreement with an independent third party, pursuant to which Wealthy Peaceful Limited agreed to dispose of its entire equity interests in Golddoor (together with its subsidiary, Huizhou Fook Woo) for a consideration of HK$200,000,000 (the Sale Transaction ). On 27 June 2014, the liquidators of Wealthy Peaceful Limited informed the Company that the purchaser had remitted the consideration. The Sale Transaction was completed in July 2014 and the consideration was fully settled by the purchaser. In September 2014, the Group has entered into agreement with the De-consolidated Subsidiaries pursuant to which the Group decided not to demand for the De-consolidated Subsidiaries of the monthly repayment of HK$3,800,000. Accordingly, the Group considered the previously estimated amount expected to be receivable from the Deconsolidated Subsidiaries of HK$49,242,000, of which the Group has subsequently recovered the amounts of HK$12,670,000 and the remaining amounts of HK$36,572,000 are considered to be irrecoverable and further provision for impairment loss was made for the six months ended 30 September Further details of the Sale Transaction were set out in note 25(b) of the 2015 annual report of the Company. 16 CAPITAL COMMITMENTS 30 September 31 March HK$ 000 HK$ 000 (Unaudited) (Audited) Contracted but not provided for Property, plant and equipment 1,875 60, CONTINGENT LIABILITIES At 30 September 2015, the Group has lodged certain claims against its former directors and employees. In the opinion of the legal counsel, it is too early to evaluate the outcome of these claims and the recovery of loss and damages from these claims cannot as yet be reliably estimated. II-27

84 18 RELATED PARTY TRANSACTIONS (a) The following transactions were carried out with related parties during the period: Unaudited Six months ended 30 September Note HK$ 000 HK$ 000 Rental expenses in respect of land and buildings paid to E&I Development Limited ( E&I ) (i) 1,650 Purchase from De-consolidated Subsidiaries 41,456 Logistics fee paid and payable to De-consolidated Subsidiaries 214 Management fee paid and payable to De-consolidated Subsidiaries 2,640 Sales to Fook Fung Loi Co., Limited ( Fook Fung Loi ) 94 Management fee income received and receivable from Fook Fung Loi 870 Interest income received and receivable from Fook Fung Loi 120 Note: (i) These represented the rental expenses for leasing of office space paid to E&I. The controlling shareholders of E&I are the son and daughter of Mr. Leung Kai Kuen, one of the substantial shareholders of the Company. The rental expenses were charged at pre-determined rates mutually agreed between both parties. II-28

85 (b) Year-end balances with related parties The amounts due from/(to) related companies were denominated in HK$. The balances are unsecured, interest-free and repayable upon demand. The carrying values of these balances approximate their fair values. Amounts due from related companies, net of impairment provisions are disclosed as follows: 30 September 31 March Name Relationship HK$ 000 HK$ 000 (Unaudited) (Audited) E&I Controlling shareholders are the son and daughter of Mr. Leung Kai Kuen, one of the substantial shareholders of the Company Amounts due to related companies are disclosed as follows: 30 September 31 March Name Relationship HK$ 000 HK$ 000 (Unaudited) (Audited) Lai Wah Sole proprietor is Mr. Leung Kai Kuen, Shipping one of the substantial shareholders Company of the Company (c) Key management compensation During the six months ended 30 September 2015, no transactions have been entered into with the directors of the Company other than the emoluments paid to them (six months ended 30 September 2014: Nil). 19 APPROVAL OF INTERIM FINANCIAL REPORT The interim financial report was approved by the Board on 27 November II-29

86 INDEPENDENT AUDITOR S REVIEW REPORT Review report to the board of directors of Integrated Waste Solutions Group Holdings Limited (Incorporated in the Cayman Islands with limited liability) INTRODUCTION We have reviewed the interim financial report set out on pages 18 to 47 which comprises the consolidated statement of financial position of Integrated Waste Solutions Group Holdings Limited (the Company ) and its subsidiaries (together, the Group ) as of 30 September 2015 and the related consolidated statement of profit or loss and other comprehensive income and consolidated statement of changes in equity and condensed consolidated statement of cash flows for the six months period then ended and explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of an interim financial report to be in compliance with the relevant provisions thereof and International Accounting Standard 34, Interim financial reporting, issued by the International Accounting Standards Board. The directors are responsible for the preparation and presentation of the interim financial report in accordance with International Accounting Standard 34. Our responsibility is to form a conclusion, based on our review, on the interim financial report and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. SCOPE OF REVIEW We conducted our review in accordance with International Standard on Review Engagements 2410 Review of interim financial information performed by the independent auditor of the entity. A review of the interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. II-30

87 BASIS FOR QUALIFIED CONCLUSION Our review conclusion on the Group s interim financial report for the six months ended 30 September 2014 was qualified, given the circumstances as described in note 2 to the consolidated financial statements in respect of the departure from International Financial Reporting Standard 10, Consolidated financial statements ( IFRS 10 ) and International Financial Reporting Standard 5, Noncurrent assets held for sale and discontinued operations ( IFRS 5 ). Had the financial results of the De-consolidated Subsidiaries (as defined in the 2015 annual report) been consolidated as required by IFRS 10 and IFRS 5, the Group would have consolidated and presented the financial results of the De-consolidated Subsidiaries as Discontinued operations until the date of disposal in July 2014 and the net cash flows attributable to operating, investing and financing activities of the discontinued operations prior to disposal would have been presented separately in the consolidated statement of cash flows. In our auditor s report dated 26 June 2015 on the consolidated financial statements for the year ended 31 March 2015, we reported the same matter which resulted in a qualified opinion. Our conclusion on the current period s interim financial report is also modified because of the effect of this matter on the comparability of the current period s figures and the corresponding figures. QUALIFIED CONCLUSION Based on our review, except for the effects on the corresponding figures of the matter described in the Basis for qualified conclusion paragraph, nothing has come to our attention that causes us to believe that the interim financial report as at 30 September 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34. KPMG Certified Public Accountants 8th Floor, Prince s Building 10 Chater Road Central, Hong Kong 27 November 2015 II-31

88 3. AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2015 The audited consolidated financial statements as of and for the year ended 31 March 2015 set out herein have been reproduced and extracted from pages 48 to 133 of the 2015 Annual Report, with the exception that the pages have been renumbered. Independent auditor s report to the shareholders of Integrated Waste Solutions Group Holdings Limited (Incorporated in the Cayman Islands with limited liability) We have audited the consolidated financial statements of Integrated Waste Solutions Group Holdings Limited ( the Company ) and its subsidiaries (together the Group ) set out on pages 52 to 133, which comprise the consolidated and company statements of financial position as at 31 March 2015, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. DIRECTORS RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the disclosure requirements of the Hong Kong Companies Ordinance and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. AUDITOR S RESPONSIBILITY Our responsibility is to express an opinion on these consolidated financial statements based on our audit. This report is made solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements. II-32

89 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. BASIS FOR QUALIFIED OPINION As disclosed in note 2(a) to the consolidated financial statements, in November 2011, the directors of the Company were made aware of evidence indicating the existence of potential irregularities with respect to certain accounting records and transactions recorded in the books of 惠 州 福 和 紙 業 有 限 公 司 ( Huizhou Fook Woo ), a wholly owned subsidiary of the Group. As a result, in December 2011 the Board of Directors established an independent special committee (the Special Committee ) to investigate these potential irregularities. Based on the Special Committee s investigation, the directors concluded that, among other things, a substantial portion of the accounting books and records of Huizhou Fook Woo for the year ended 31 March 2012 and prior periods were missing. These events led, among other things, to the decision by the directors of the Company that Wealthy Peaceful Company Limited ( Wealthy Peaceful ), the intermediate holding company of Huizhou Fook Woo and itself a wholly owned subsidiary of the Group incorporated in the British Virgin Islands, would commence voluntary liquidation by a resolution of members on 31 January 2013, and the voluntary liquidators were appointed on the same date. In April 2014, the Company was informed by the liquidators of Wealthy Peaceful, that a sale and purchase agreement was entered into between Wealthy Peaceful and an independent third party (the Purchaser ), pursuant to which Wealthy Peaceful agreed to dispose of its entire equity interests in Golddoor Company Limited ( Golddoor ) (the Sale Transaction ). Golddoor holds the entire registered capital of Huizhou Fook Woo. On 27 June 2014, the liquidators of Wealthy Peaceful informed the Company that the Purchaser had remitted the consideration and the Sale Transaction was completed in July Given these circumstances, in preparing the consolidated financial statements for the years ended 31 March 2014 and 31 March 2015, the directors of the Company have excluded Wealthy Peaceful, together with its wholly owned subsidiaries Golddoor and Huizhou Fook Woo (collectively referred to as the De-consolidated Subsidiaries ) from the Group s consolidated financial position, consolidated financial results and consolidated cash flows as from the earliest periods presented. II-33

90 These events and actions taken by the directors of the Company, further details of which are set out in note 2(a), have given rise to the following matters which form the basis for our qualified opinion: (a) Departure from International Financial Reporting Standard 10, Consolidated financial statements Given these circumstances as described in note 2(a) to the consolidated financial statements, the Group presented the amounts due from De-consolidated Subsidiaries as assets and liabilities of disposal group classified as held for sale which were measured at the lower of the carrying amounts and the estimated recoverable amount from the disposal of Golddoor at 31 March The Group recognised an impairment loss of the amounts due from De-consolidated Subsidiaries amounting to HK$431,638,000 for the year ended 31 March 2014 following the assessment of the recoverable amount of amounts due from De-consolidated Subsidiaries. The exclusion of results and cash flows of the De-consolidated Subsidiaries from the consolidated financial statements is a departure from the requirements of International Financial Reporting Standard 10 Consolidated financial statements ( IFRS 10 ) and International Financial Reporting Standard 5 Non-current Assets Held for Sale and Discontinued Operations ( IFRS 5 ). In our auditor s report dated 30 June 2014 on the consolidated financial statements of the Group for the year ended 31 March 2014, we reported the same matter which resulted in qualified opinion. Had the financial results of the De-consolidated Subsidiaries been consolidated as required by IFRS 10 and IFRS 5, the Group would have consolidated and presented the financial results of the De-consolidated Subsidiaries as Discontinued operations for the year ended 31 March 2014 and from 1 April 2014 until the date of disposal in July 2014 and the net cash flows attributable to operating, investing and financing activities of the discontinued operations would have been presented separately in the consolidated statement of cash flows. Given the loss of certain accounting books and records of Huizhou Fook Woo mentioned above, we are unable to ascertain the financial impact of the non-consolidation of the De-consolidated Subsidiaries on the consolidated financial statements. (b) Insufficient audit evidence in respect of balances and transactions with the Deconsolidated Subsidiaries in respect of prior years Because of the loss of certain accounting books and records of Huizhou Fook Woo and the de-consolidation of the De-consolidated Subsidiaries and details as set out in note 2(a) to the consolidated financial statements, in our auditor s report dated 23 August 2013 on the consolidated financial statements of the Group for the year ended 31 March 2013 we reported that we were unable to obtain sufficient appropriate audit evidence to determine whether the balances with the De-consolidated Subsidiaries as at 31 March 2012 and 31 March 2013 and transactions with the De-consolidated Subsidiaries for the years then ended were free from material misstatement. In addition, we were not able to obtain sufficient appropriate audit evidence to determine whether the impairment losses of the amounts due from De-consolidated Subsidiaries and the loss on deconsolidation for the year ended 31 March 2012 were free from material misstatement. In our auditor s report dated 30 June 2014 on the consolidated financial statements of the Group for the year ended 31 March 2014, we reported that this matter remained unresolved and therefore our audit for that year was subject to the same limitation of scope. II-34

91 Our opinion on the current year s financial statements is also modified because of the possible effect of this matter on the comparability of the current year s figures and the corresponding figures. QUALIFIED OPINION In our opinion, except for the effect on the consolidated financial statements of the matters described in part (a) of the Basis for qualified opinion paragraph and except for the possible effects on the corresponding figures of the matters described in part (b) of the Basis for qualified opinion paragraph, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2015, and of the Group s loss and cash flows for the year then ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance. KPMG Certified Public Accountants 8th Floor, Prince s Building 10 Chater Road Central, Hong Kong 26 June 2015 II-35

92 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 March 2015 (Expressed in Hong Kong dollars) Note $ 000 $ 000 Revenue 5 443, ,587 Cost of sales (419,207) (439,729) Gross profit 24,335 40,858 Other revenue 6 9,129 27,507 Other net (loss)/gain 7 (4,403) 2,283 Selling and distribution expenses (58,650) (52,800) Administrative and other operating expenses (100,794) (79,232) Operating loss (130,383) (61,384) Finance income 8(b) 3,119 10,202 Share of loss of an associate 16 (844) Loss before taxation 8 (127,264) (52,026) Income tax 9 1,113 (1,224) Indemnity receipt of tax in respect of prior years 9(b) 13,071 Loss from continuing operations (113,080) (53,250) Discontinued operations Impairment loss on amounts due from De-consolidated Subsidiaries 25(b) (36,572) (431,638) Loss and total comprehensive income for the year (149,652) (484,888) II-36

93 Note $ 000 $ 000 Attributable to: Equity shareholders of the Company (149,607) (484,888) Non-controlling interests (45) (149,652) (484,888) Attributable to equity shareholders of the Company Continuing operations (113,035) (53,250) Discontinued operations (36,572) (431,638) (149,607) (484,888) Basic and diluted loss per share 13 Continuing operations (3.2) cents (2.2) cents Discontinued operations (1.0) cents (17.9) cents (4.2) cents (20.1) cents II-37

94 Consolidated Statement of Financial Position As at 31 March 2015 (Expressed in Hong Kong dollars) Note $ 000 $ 000 Non-current assets Property, plant and equipment , ,770 Land use rights 15 27,478 28,330 Prepayments and other receivables 19 25,552 9, , ,918 Current assets Inventories 17 6,086 5,345 Trade and bills receivables 18 77,436 77,453 Other receivables, deposits and prepayments 19 53,000 47,180 Amounts due from related companies 30(b) Bank deposits and cash , ,326 Restricted and pledged bank deposits 20 2,225 2,400 Taxation recoverable 22(a) 3, , ,298 Assets and liabilities of disposal group classified as held for sale 25(b) 208, , ,198 Current liabilities Trade payables 21 20,223 12,058 Other payables and accruals 21 54, ,115 Amounts due to related companies 30(b) Taxation payable 22(a) 3,035 74, ,218 Net current assets 523, ,980 Total assets less current liabilities 1,258, ,898 II-38

95 Note $ 000 $ 000 Non-current liabilities Deferred tax liabilities 22(b) 1,116 NET ASSETS 1,258, ,782 CAPITAL AND RESERVES Share capital , ,117 Reserves , ,665 Total equity attributable to equity shareholders of the Company 1,256, ,782 Non-controlling interests 1,955 TOTAL EQUITY 1,258, ,782 II-39

96 Statement of Financial Position As at 31 March 2015 (Expressed in Hong Kong dollars) Note $ 000 $ 000 Non-current assets Interests in subsidiaries 25 1,442, ,727 Current assets Receivables and prepayments 9,052 1,018 Amounts due from De-consolidated Subsidiaries 25 56,668 Bank deposits and cash , ,439 Taxation recoverable , ,299 Current liabilities Payables and accruals 21 13,864 12,313 Amounts due to subsidiaries , ,812 12,534 Net current assets 172, ,765 NET ASSETS 1,614,425 1,221,492 CAPITAL AND RESERVES Share capital , ,117 Reserves 24 1,132, ,375 TOTAL EQUITY 1,614,425 1,221,492 II-40

97 Consolidated Statement of Changes in Equity For the year ended 31 march 2015 (Expressed in Hong Kong dollars) Attributable to equity Share-based shareholders Non- Share Share Capital capital Accumulated of the controlling capital premium reserve reserve losses Company interests Total Note $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 At 1 April ,117 2,862,358 (964,044) (725,761) 1,413,670 1,413,670 Changes in equity for 2014: Loss and total comprehensive income for the year (484,888) (484,888) (484,888) At 31 March 2014 and 1 April ,117 2,862,358 (964,044) (1,210,649) 928, ,782 Changes in equity for 2015: Loss and total comprehensive income for the year (149,607) (149,607) (45) (149,652) Capital injection by non-controlling interest shareholders upon incorporation of a newly set up subsidiary 2,000 2,000 Shares issued under the open offer 23(b) 241, , , ,640 Equity settled share-based transactions 23(c) 5,534 5,534 5,534 At 31 March ,234 3,092,881 (964,044) 5,534 (1,360,256) 1,256,349 1,955 1,258,304 II-41

98 Consolidated Statement of Cash Flows For the year ended 31 March 2015 (Expressed in Hong Kong dollars) Note $ 000 $ 000 Cash flows from operating activities Cash used in operations 26(a) (115,325) (82,700) Income tax paid (6,287) (1,694) Net cash used in operating activities (121,612) (84,394) Cash flows from investing activities Purchase of property, plant and equipment (372,394) (199,292) Prepayments for purchase of property, plant and equipment (18,234) Payment for purchase of land use right (919) Proceeds from disposal of property, plant and equipment 26(b) 2, Interest received 4,721 10,757 Proceeds received from deposits with maturity greater than 3 months 20 23, ,152 Net cash used in investing activities (359,758) (82,401) Cash flows from financing activities Proceeds from new shares issued upon the open offer 23(b) 471,640 Proceeds from disposal of entire interest in De-consolidated Subsidiaries 25(b) 197,200 Capital contribution by non-controlling interest shareholder 2,000 Indemnity receipt of tax in respect of prior years 9(b) 13,071 Decrease/(Increase) in restricted and pledged bank deposits 175 (750) Net cash generated from/(used in) financing activities 684,086 (750) II-42

99 Note $ 000 $ 000 Net increase/(decrease) in cash and cash equivalents 202,716 (167,545) Cash and cash equivalents, net of bank overdrafts at the beginning of the year 252, ,123 Exchange difference on cash and cash equivalents 593 1,982 Cash and cash equivalents, net of bank overdrafts at the end of the year , ,560 II-43

100 Notes to the Consolidated Financial Statements For the year ended 31 March GENERAL INFORMATION Integrated Waste Solutions Group Holdings Limited (the Company ) was incorporated and registered as an exempted company with limited liability in the Cayman Islands on 11 November 2009 under the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. The Company is an investment holding company and is listed on The Stock Exchange of Hong Kong Limited (the Stock Exchange ). The registered address of the Company is Clifton House, 75 Fort Street, PO Box 1350, Grand Cayman, KY1 1108, Cayman Islands. The Company and its subsidiaries are collectively referred to as the Group. The subsidiaries of the Group are principally engaged in the trading of recovered paper and materials, trading of tissue paper products, provision of confidential materials destruction services and provision of logistics services. These consolidated financial statements are presented in Hong Kong dollars (HK$). 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented. In the course of preparing its interim financial report for the six months ended 30 September 2011, the Board of Directors of the Company (the Board ) were made aware of evidence indicating the potential existence of irregularities with respect to a deposit of RMB100,000,000 (approximately HK$120,000,000) recorded in the books of 惠 州 福 和 紙 業 有 限 公 司 ( Huizhou Fook Woo ), a wholly owned subsidiary of the Group (the Incident ). Accordingly, in the interest of the Company and its shareholders, on 28 November 2011, the Company applied for suspension of trading in the Company s shares on the Stock Exchange. On 29 November 2011, the Company received a cash deposit of HK$120,000,000 (approximately RMB100,000,000) (the Deposit ). The Board represented that the Deposit was placed by a former director of the Company. The Deposit was recorded as amount due to Huizhou Fook Woo in the consolidated statement of financial position and the Company s statement of financial position as at 31 March On 2 December 2011, the Board established an independent special committee (the Special Committee ) to conduct an investigation into the Incident and the Deposit and to review the internal control system of the Company with the assistance of an independent accounting firm. On 27 April 2012, the Special Committee engaged another accounting firm to conduct a forensic review into the Incident and the Deposit (the Forensic Review ) following the preliminary investigation results of the previous independent accounting firm. Based on the results of the Forensic Review, the Board concluded that the payment related to the Incident was not in fact made and the amount was not transferred out of the accounts of Huizhou Fook Woo and a number of documents related to the Incident were fabricated. In addition, the Forensic Review revealed, among other things, certain irregular transactions entered into by Huizhou Fook Woo. Based on the results of the Forensic Review, the Board further concluded that, among other things, a substantial portion of the accounting books and records of Huizhou Fook Woo for the year ended 31 March 2012 and prior periods were missing. Given the loss of a substantial portion of books and records and the fact that most of the key accounting personnel and previous management left the Group and are now not contactable, the Board believes that, as at the date of this annual report, it is almost impossible, and not practical, to ascertain the transactions and balances of Huizhou Fook Woo for inclusion in the consolidation financial statements of the Group. II-44

101 On 31 January 2013, Wealthy Peaceful Company Limited ( Wealthy Peaceful ), a wholly owned subsidiary of the Group, commenced voluntary liquidation by a resolution of the members and the voluntary liquidators were appointed on the same date. Wealthy Peaceful, and its wholly owned subsidiaries, namely Golddoor Company Limited ( Golddoor ) and Huizhou Fook Woo, are collectively referred to as the De-consolidated Subsidiaries. Given these circumstances, the directors have not consolidated the financial statements of the Deconsolidated Subsidiaries in the Group s consolidated financial statements since 1 April A resulting loss on de-consolidation of approximately HK$415,549,000, which was determined based on the net asset value of the De-consolidated Subsidiaries as at 1 April 2011, was recognised in the consolidated statement of profit or loss and other comprehensive income for the year ended 31 March As at 31 March 2012, the total amounts due from De-consolidated Subsidiaries to the Group and the Company, as recorded in the books and records before any impairment provision, amounted to approximately HK$2,262,677,000 and HK$1,157,845,000 respectively. The directors assessed the recoverability of these balances based on the valuation of the plant and machinery, properties and land use rights of Huizhou Fook Woo performed by independent valuers as at 30 September 2012 which was assessed to be HK$532,172,000, as the Directors considered this to be the earliest practicable date for such a valuation given the aforementioned circumstances. Accordingly, impairment losses on balances due from the De-consolidated Subsidiaries of approximately HK$1,730,505,000 and HK$625,673,000 were recognised in the consolidated statement of profit or loss and other comprehensive income and the Company s financial statements for the year ended 31 March 2012 respectively. During the year ended 31 March 2013, the Group waived amounts due from De-consolidated Subsidiaries of HK$2,500,000 and accordingly, this amount was written off and charged to the consolidated statement of profit or loss and other comprehensive income of the Group for the year ended 31 March On 24 April 2014, the Company was informed by the liquidators of Wealthy Peaceful, that a sale and purchase agreement was entered into between Wealthy Peaceful and an independent third party pursuant to which Wealthy Peaceful agreed to dispose of the entire issued share capital of Golddoor at a consideration of HK$200,000,000 (the Sale Transaction ). Golddoor was interested in the entire registered capital of Huizhou Fook Woo. Given these circumstances, the Group presented the amounts due from Deconsolidated Subsidiaries as assets and liabilities of disposal group classified as held for sale which were measured at the lower of the carrying amounts and the fair value less costs to sell at 31 March The Group recognised an impairment loss of the amounts due from De-consolidated Subsidiaries amounting to HK$431,638,000 for the year ended 31 March 2014 following the assessment of the recoverable amount of amounts due from De-consolidated Subsidiaries. On 27 June 2014, the liquidators of Wealthy Peaceful informed the Company that the Purchaser had remitted the consideration and the Sale Transaction was completed in July The exclusion of the results and cash flows of the De-consolidated Subsidiaries from the consolidated financial statements is a departure from the requirements of International Financial Reporting Standard 10 Consolidated financial statements ( IFRS 10 ) and International Financial Reporting Standard 5 Noncurrent Assets Held for Sale and Discontinued Operations ( IFRS 5 ). Given the loss of certain accounting books and records of Huizhou Fook Woo mentioned above, the Directors are unable to ascertain the financial impact of the non-consolidation of the De-consolidated Subsidiaries on the consolidated financial statements. Except for the matters referred to above, including the non-consolidation of the De-consolidated Subsidiaries, the consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ( IFRSs ), promulgated by the International Accounting Standards Board ( IASB ), which include International Accounting Standards ( IAS ) and related Interpretations. These consolidated financial statements also comply with the applicable disclosure requirements of the Hong Kong Companies Ordinance, which for this financial year and the comparative period, as permitted by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, continue to be those of the predecessor Companies Ordinance (Cap. 32). These consolidated financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. II-45

102 The consolidated financial statements have been prepared under the historical cost convention, except as otherwise stated in the accounting policies set out below. The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The IASB has issued a number of new IFRSs and amendments to IFRSs that are first effective for the current accounting period of the Group and the Company. Of these, the following developments are relevant to the Group s financial statements. Amendments to IAS 32, Offsetting financial assets and financial liabilities Amendments to IAS 36, Recoverable amount disclosures for non-financial assets Amendments to IAS 32, Offsetting financial assets and financial liabilities The amendments to IAS 32 clarify the offsetting criteria in IAS 32. The amendments do not have an impact on these financial statements as they are consistent with the policies already adopted by the Group. Amendments to IAS 36, Recoverable amount disclosures for non-financial assets The amendments to IAS 36 modify the disclosure requirements for impaired non-financial assets. Among them, the amendments expand the disclosures required for an impaired asset or cash-generating unit whose recoverable amount is based on fair value less costs of disposal. The Group early adopted the amendments in the annual financial statements for the year ended 31 March (b) Subsidiaries and non-controlling interests Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered. An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances, transactions and cashflows and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment. Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Company, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. For each business combination, the Group can elect to measure any non-controlling interests either at fair value or at the non-controlling interests proportionate share of the subsidiary s net identifiable assets. Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from equity attributable to the equity shareholders of the Company. Non-controlling interests in the results of the Group are presented on the face of the consolidated statement of profit or loss and other comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests and the equity shareholders of the Company. II-46

103 Changes in the Group s interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or loss is recognised. Except for the De-consolidated Subsidiaries as further explained in note 25, subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial recognition of an investment in an associate or joint venture. In the Company s statement of financial position, an investment in a subsidiary is accounted for at cost less impairment losses (see note 2(g)). (c) Associates and joint ventures An associate is an entity in which the Group or Company has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions. A joint venture is an arrangement whereby the Group or Company and other parties contractually agree to share control of the arrangement, and have rights to the net assets of the arrangement. An investment in an associate or a joint venture is accounted for in the consolidated financial statements under the equity method, unless it is classified as held for sale. Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group s share of the acquisition-date fair values of the investee s identifiable net assets over the cost of the investment (if any). Thereafter, the investment is adjusted for the post acquisition change in the Group s share of the investee s net assets and any impairment loss relating to the investment. Any acquisition-date excess over cost, the Group s share of the post-acquisition, post-tax results of the investees and any impairment losses for the year are recognised in the consolidated statement of profit or loss and other comprehensive income, whereas the Group s share of the post-acquisition post-tax items of the investees other comprehensive income is recognised in the consolidated statement of profit or loss and other comprehensive income. When the Group s share of losses exceeds its interest in the associate or a joint venture, the Group s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investee. For this purpose, the Group s interest is the carrying amount of the investment under the equity method together with the Group s long-term interests that in substance form part of the Group s net investment in the associate or the joint venture. Unrealised profits and losses resulting from transactions between the Group and its associates and the joint ventures are eliminated to the extent of the Group s interest in the investee, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or loss. II-47

104 (d) Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses (see note 2(g)). Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the repaired part is derecognised. All other repairs and maintenance are charged to the consolidated statement of profit or loss and other comprehensive income during the financial period in which they are incurred. Depreciation of property, plant and equipment is calculated using the straight-line method to allocate their costs to their residual values over their estimated useful lives, as follows: Buildings 3%-4.5% 4.5% Leasehold improvements 20% or unexpired 20% or unexpired lease term, whichever lease term, whichever is shorter is shorter Plant and machinery 7%-30% 7%-30% Furniture, fixtures and equipment 18%-30% 18%-30% Motor vehicles 6.67%-30% 18%-30% The useful lives of certain property, plant and equipment were revised with effect from 1 April 2014 (refer to note 14). Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually. 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. Construction in progress is stated at historical cost less impairment losses. The cost of self-constructed items of property, plant and equipment include expenditure that is directly attributable to the construction and comprises the cost of material, direct labour and construction costs and applicable borrowing costs incurred during the construction period. On completion, the construction in progress is transferred to other categories within property, plant and equipment. No depreciation is provided for construction in progress. The carrying amount of construction in progress is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount. (e) Land use rights Land use rights are up-front payments to acquire long-term interest in leasehold land, which are stated at cost less accumulated amortisation and accumulated impairment losses. Cost represents consideration paid for the rights to use the land from the date when the respective rights were granted. Amortisation of land use rights is calculated on a straight-line basis over the period of the lease and is recognised in the consolidated statement of profit or loss and other comprehensive income within administrative and other operating expenses. II-48

105 (f) Financial assets The Group classifies its financial assets as loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for the amounts that are settled or expected to be settled more than 12 months after the end of the reporting period. These are classified as non-current assets. The Group s loans and receivables comprise trade and bills receivables, Other receivables, deposits and prepayments, amounts due from related companies, bank deposits and cash and restricted and pledged bank deposits in the consolidated statement of financial position. Regular way purchases and sales of financial assets are recognised on the trade-date the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortised cost using the effective interest method. The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired (see note 2(g)). Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. (g) Impairment of assets (i) Impairment of investments in equity securities and receivables Investment in equity securities and other current and non-current receivables that are stated at cost or amortised cost are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events: significant financial difficulty of the debtor; a breach of contract, such as a default or delinquency in interest or principal payments; it becoming probable that the debtor will enter bankruptcy or other financial reorganisation; significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost. If any such evidence exists, any impairment loss is determined and recognised as follows: For investments in associates and joint ventures accounted for under the equity method in the consolidated financial statements, the impairment loss is measured by comparing the recoverable amount of the investment with its carrying amount in accordance with note 2(g)(ii). The impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount in accordance with note 2(g)(ii). II-49

106 For trade and other current receivables and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the financial asset s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where these financial assets share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group. If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years. Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade debtors and bills receivable included within trade and other receivables, whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors and bills receivable directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss. (ii) Impairment of other assets Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or an impairment loss previously recognised no longer exists or may have decreased: property, plant and equipment (other than properties carried at revalued amounts); pre-paid interests in leasehold land classified as being held under an operating lease; and investments in subsidiaries, associates and joint ventures in the Company s statement of financial position. If any such indication exists, the asset s recoverable amount is estimated. Calculation of recoverable amount The recoverable amount of an asset is the greater of its fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit). II-50

107 Recognition of impairment losses An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal (if measureable) or value in use (if determinable). Reversals of impairment losses In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed. A reversal of an impairment loss is limited to the asset s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised. (h) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average basis. It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. (i) Trade and other receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment (see note 2(g)), 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 allowance for impairment of doubtful debts. (j) Cash and cash equivalents In the consolidated statement of cash flows, cash and cash equivalents include cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts. (k) Trade and other payables Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. (l) 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 in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognised in other comprehensive income or directly in equity, respectively. II-51

108 Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting period, 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 certain limited exceptions, 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. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised. The carrying amount of a deferred tax asset is reviewed at the end of the reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profit will be available. Additional income taxes that arise from the distribution of dividends are recognised when the liability to pay the related dividends is recognised. Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Company or the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met: in the case of current tax assets and liabilities, the Company or the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously; or in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either: the same taxable entity; or different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously. (m) Employee benefits (i) Employee leave entitlements Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long service leave as a result of services rendered by employees up to the reporting period end date. Employee entitlements to sick leave and maternity leave are not recognised until the time of leave. II-52

109 (ii) Pension obligations The Group participates in defined contribution plan. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The contributions are recognised as employee benefit expense when they are due and are reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions, where applicable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. (iii) Share-based payments The fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in a capital reserve within equity. The fair value is measured at grant date using the binomial lattice model, taking into account the terms and conditions upon which the options were granted. Where the employees have to meet vesting conditions before becoming unconditionally entitled to the options, the total estimated fair value of the options is spread over the vesting period, taking into account the probability that the options will vest. During the vesting period, the number of share options that is expected to vest is reviewed. Any resulting adjustment to the cumulative fair value recognised in prior years is charged/credited to the profit or loss for the year of the review, unless the original employee expenses qualify for recognition as an asset, with a corresponding adjustment to the capital reserve. On vesting date, the amount recognised as an expense is adjusted to reflect the actual number of options that vest (with a corresponding adjustment to the capital reserve) except where forfeiture is only due to not achieving vesting conditions that relate to the market price of the Company s shares. The equity amount is recognised in the capital reserve until either the option is exercised (when it is included in the amount recognised in share capital for the shares issued) or the option expires (when it is released directly to retained profits). (iv) Termination benefits Termination benefits are recognised at the earlier of when the Group can no longer withdraw the offer of those benefits and when it recognises restructuring costs involving the payment of termination benefits. (n) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Where any group company purchases the Company s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to owners of the Company until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company s equity holders. (o) Provisions and contingent liabilities Provisions are recognised for other liabilities of uncertain timing or amount when the Group or the Company 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. II-53

110 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. (p) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivables for the sale of goods and services in the ordinary course of the Group s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue can be reliably measured, when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group s activities as described below. The Group bases its estimates of returns on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. (i) Sales of goods Sales of goods are recognised when the Group has delivered the products to the customer, the customer has accepted the products and collectability of the related receivables is reasonably assured. Delivery does not occur until the products have been shipped to the specified location, the risks of obsolescence and loss have been transferred to the customer, and the customer has accepted the products in accordance with sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied. (ii) Service income Revenue is recognised when services are rendered. (iii) Franchise fee and management fee income Franchise fee and management fee income are recognised when services are rendered. (iv) Government grants/subsidy income Government grants are recognised in the statement of financial position initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognised as income in profit or loss on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively recognised in profit or loss over the useful life of the asset by way of reduced depreciation expense. Subsidies which are not government grants are recognised as income in profit or loss when they are received and that the Group comply with the conditions attaching to them. (v) Interest income Interest income is recognised using the effective interest method. (q) Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor), including upfront payment made for leasehold land and land use rights, are charged to the consolidated statement of profit or loss and other comprehensive income on a straight-line basis over the period of the lease. II-54

111 The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the consolidated statement of profit or loss and other comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term. (r) Non-current assets held for sale and discontinued operation (i) Non-current assets held for sale A non-current asset (for disposal group) is classified as held for sale if it is highly probable that its carrying amount will be recovered through a sale transaction rather than through continuing use and the asset (or disposal group) is available for sale in its present condition. A disposal group is a group of assets to be disposed of together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction. When the Group is committed to a sale plan involving loss of control of a subsidiary, all the assets and liabilities of that subsidiary are classified as held for sale when the above criteria for classification as held for sale are met, regardless of whether the Group will retain a non-controlling interest in the subsidiary after the sale. Immediately before classification as held for sale, the measurement of the non-current assets (and all individual assets and liabilities in a disposal group) is brought up-to-date in accordance with the accounting policies before the classification. Then, on initial classification as held for sale and until disposal, the non-current assets (except for certain assets as explained below), or disposal groups, are recognised at the lower of their carrying amount and fair value less costs to sell. The principal exceptions to this measurement policy so far as the financial statements of the Group and the Company are concerned are deferred tax assets, assets arising from employee benefits, financial assets (other than investments in subsidiaries, associates and joint ventures) and investment properties. These assets, even if held for sale, would continue to be measured in accordance with the policies set out elsewhere in note 2. Impairment losses on initial classification as held for sale, and on subsequent remeasurement while held for sale, are recognised in profit or loss. As long as a non-current asset is classified as held for sale, or is included in a disposal group that is classified as held for sale, the non-current asset is not depreciated or amortised. (ii) Discontinued operations A discontinued operation is a component of the Group s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which represents a separate major line of business or geographical area of operations, or is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale (see (i) above), if earlier. It also occurs if the operation is abandoned. II-55

112 Where an operation is classified as discontinued, a single amount is presented on the face of the statement of profit or loss and other comprehensive income, which comprises: the post-tax profit or loss of the discontinued operation; and the post-tax gain or loss recognised on the measurement to fair value less costs to sell, or on the disposal, of the assets or disposal group(s) constituting the discontinued operation. (s) Related parties (a) A person, or a close member of that person s family, is related to the Group if that person: (i) (ii) (iii) has control or joint control over the Group; has significant influence over the Group; or is a member of the key management personnel of the Group or the Group s parent. (b) An entity is related to the Group if any of the following conditions applies: (i) (ii) (iii) (iv) (v) (vi) (vii) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). Both entities are joint ventures of the same third party. One entity is a joint venture of a third entity and the other entity is an associate of the third entity. The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group. The entity is controlled or jointly controlled by a person identified in (a). A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity. (t) Segment reporting Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the financial information provided regularly to the Group s most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Group s various lines of business and geographical locations. Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria. II-56

113 (u) Foreign currency translation (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 Hong Kong dollars ( HK$ ), which is the Company s functional and the Group s presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of profit or loss and other comprehensive income. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the consolidated statement of profit or loss and other comprehensive income within finance income or costs. All other foreign exchange gains and losses are presented in the consolidated statement of profit or loss and other comprehensive income within net loss/gain. (iii) Group companies The results and financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (1) assets and liabilities in the statement of financial position are translated at the end of the reporting period; (2) income and expenses for each statement of profit or loss and other comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and (3) all resulting exchange differences are recognised in other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income. (iv) Disposal of foreign operation and partial disposal On the disposal of a foreign operation (that is, a disposal of the Group s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a joint venture that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the equity holders of the Company are reclassified to profit or loss. II-57

114 3 FINANCIAL RISK MANAGEMENT (a) Financial risk factors The Group s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Group s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group s financial performance. (i) Foreign currency risk The Group is exposed to foreign currency risk as some of its business transactions, assets and liabilities are denominated in various foreign currencies primarily Renminbi ( RMB ), HK$ and United States dollar ( USD ). The Group currently does not have a foreign currency hedging policy. Since HK$ is pegged to USD, management considers that there is no significant foreign currency risk between these two currencies to the Group. The exchange rate of RMB to HK$ is subject to the rules and regulations of foreign exchange control promulgated by the PRC government. The Group manages its foreign currency risk by closely monitoring the movement of foreign currency rates. As at 31 March 2015, if RMB had weakened/strengthened by 5% against HKD with all other variables held constant, pre-tax loss for the year would have been approximately HK$1,958,000 higher/lower (2014: HK$9,599,000 higher/lower on pre-tax loss), mainly as a result of the foreign exchange losses/gains (2014: same) on translation of RMB denominated cash and bank deposits and trade and bills receivables. (ii) Credit risk The Group s credit risk is primarily attributable to its trade and other receivables, amounts due from related companies and De-consolidated Subsidiaries as well as deposits placed with banks. The Group has no significant concentrations of credit risk. Management has policies in place to monitor the exposures to these credit risks on an on-going basis. For banks and financial institutions, deposits are only placed with banks with good credit ratings. For credit exposures to customers, the Group has policies in place to ensure that sales are made to reputable and credit-worthy customers with an appropriate financial strength and credit history. It also has other monitoring procedures to ensure that follow up action is taken to recover overdue debts. In addition, the Group reviews regularly recoverable amount of each individual trade and other receivable to ensure that adequate impairment losses are made for irrecoverable amounts. II-58

115 (iii) Liquidity risk The Group s policy is to regularly monitor current and expected liquidity requirements and its compliance with borrowing covenants, to ensure that it maintains sufficient cash from operating activities and the availability of funding through an adequate amount of committed credit facilities. The table below analyses the Group s financial liabilities into relevant maturity groupings based on the remaining period from the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows (including interest payments computed using contractual rates or, if the contracting rates are floating, based on rates at the reporting period end date). Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant. Group Less than Between 1 year 1 and 2 years Total $ 000 $ 000 $ 000 At 31 March 2015 Trade payables 20,223 20,223 Other payables and accruals 50,452 50,452 Amounts due to related companies ,685 70,685 Company Payables and accruals 13,864 13,864 Amounts due to subsidiaries 228, , , ,812 Group Less than Between 1 year 1 and 2 years Total $ 000 $ 000 $ 000 At 31 March 2014 Trade payables 12,058 12,058 Other payables and accruals 114, ,339 Amounts due to related companies , ,407 Company Payables and accruals 12,313 12,313 Amounts due to subsidiaries ,534 12,534 II-59

116 (iv) Interest rate risk The Group s exposure to interest rate risk arises mainly from its bank deposits. The Group has not used any interest rate swaps to hedge its exposure to interest rate risk. As at 31 March 2015 and 2014, the Group had no interest bearing bank borrowings. The Group monitors its interest rate exposure on a dynamic basis and will consider the interest rate exposure when entering into any financing, renewal of existing positions and alternative financing transactions. (b) Capital risk management The Group regards its shareholders equity as capital. The Group s objectives when managing capital are to safeguard the Group s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents, deposits with maturity greater than 3 months and restricted and pledged bank deposits. Total capital is calculated as equity, as shown in the consolidated statement of financial position, plus net debt. At 31 March 2015 and 2014, the Group had net cash of HK$458,094,000 and HK$278,726,000 respectively, which are analysed as follows: $ 000 $ 000 Cash and cash equivalents (note 20) 455, ,560 Deposits with maturity greater than 3 months (note 20) 23,766 Bank deposits and cash 455, ,326 Restricted and pledged bank deposits (note 20) 2,225 2,400 Net cash 458, ,726 4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The 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 are addressed below. II-60

117 (a) Estimate of useful lives of property, plant and equipment and impairment provisions The Group determines the estimated useful lives and residual values in order to ascertain the amount of depreciation charges for each reporting period. These estimates are based on the historical experience of the actual useful lives and residual values of property, plant and equipment of similar nature and functions. The Group will revise the depreciation charge where useful lives or residual values are different from those previously estimated, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold. The Group also assesses the adequacy of impairment provisions with reference to the sales proceeds from disposals subsequent to the year end. (b) Provision for impairment of inventories The Group reviews the carrying value of its inventories to ensure that they are stated at the lower of cost and net realisable value. In assessing the net realisable value and making appropriate provisions, management identifies, using their judgement, inventories that are slow moving or obsolete, and considers their physical conditions, age, market conditions and market price for similar items. (c) Provision for impairment of receivables Management determines the provision for impairment of trade and other receivables. This estimate is based on the credit history of its customers and the current market condition. Management reassesses the provision at the end of each reporting period. Significant judgement is exercised on the assessment of the collectability of trade receivables from each customer. In making the judgement, management considers a wide range of factors such as results of follow-up procedures performed by sales personnel, customer payment trends including subsequent payments and customers financial positions. If the financial conditions of the customers of the Group were to deteriorate, resulting in an impairment of their abilities to make payments, additional provision may be required. (d) Income taxes The Group is subject to income tax in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. 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 current and deferred income tax assets and liabilities in the period in which such determination is made. Deferred tax assets relating to certain temporary differences and tax losses are recognised when management considers it probable that future taxable profit will be available against which the temporary differences or tax losses can be utilised. The outcome of their actual utilisation may be different. II-61

118 5 SEGMENT INFORMATION The Board of Directors of the Company, which is the chief operating decision maker of the Group, reviews the Group s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. The Group is organised into four business segments: Recovered paper and materials: sales of recovered papers and materials Tissue paper products: sales of tissue paper products Confidential materials destruction service ( CMDS ): provision of confidential materials destruction services Logistics services: provision of logistics services Although the Group s products and services are sold/rendered to Hong Kong, the PRC and overseas markets, the chief operating decision maker of the Group regularly reviews the financial information by business segments to assess performance and make resources allocation decisions. It assesses the performance of the operating segments based on a measure of segment gross profits. The Group s revenue consists of the following: $ 000 $ 000 Sales of recovered paper and materials 257, ,431 Sales of tissue paper products 173, ,264 Provision of CMDS 11,689 4,892 Provision of logistics services 1, , ,587 The analysis of the Group s revenue from external customers attributed to the locations in which the sales originated during the year consists of the following: $ 000 $ 000 Hong Kong 443, ,587 For the year ended 31 March 2015, revenues of approximately HK$53,261,000 and HK$52,704,000 are derived from two external customers which accounted for greater than 10% of the Group s total revenue. For the year ended 31 March 2014, revenues of approximately HK$76,368,000 and HK$56,977,000 are derived from an external customer and Golddoor which accounted for greater than 10% of the Group s total revenue. The geographical location of non-current assets other than deferred tax assets are determined based on the countries of domicile of the subsidiaries, which were all located in Hong Kong as at 31 March 2014 and II-62

119 The segment results and other segment items included in the loss for the year ended 31 March 2015 are as follows: Continuing operations Segment revenue: Recovered Tissue paper and paper Logistics materials products CMDS services Group $ 000 $ 000 $ 000 $ 000 $ 000 Sales of external customers 257, ,241 11,689 1, ,542 Inter-segment sales 34,381 34,381 Reportable segment revenue 257, ,241 11,689 35, ,923 Elimination of inter-segment revenue (34,381) (34,381) Segment results: 257, ,241 11,689 1, ,542 Reportable segment profit 22,829 14,511 (3,691) 12,350 45,999 Elimination of inter-segment profits (21,664) Reportable segment profit derived from group s external customers 24,335 Unallocated operating costs (154,718) Finance income, net 3,119 Loss before taxation (127,264) Income tax 1,113 Indemnity receipt of tax in respect of prior years 13,071 Loss from continuing operations (113,080) Discontinued operations Impairment loss on amounts due from De-consolidated Subsidiaries (36,572) Loss for the year (149,652) II-63

120 The segment results and other segment items included in the loss for the year ended 31 March 2014 are as follows: Continuing operations Segment revenue: Recovered paper and Tissue paper materials products CMDS Group $ 000 $ 000 $ 000 $ 000 Sales of external customers 264, ,264 4, ,587 Segment results: Reportable segment profit 2,492 40,805 (2,439) 40,858 Unallocated operating costs (102,242) Share of loss of an associate (844) Finance income, net 10,202 Loss before taxation (52,026) Income tax (1,224) Loss from continuing operations (53,250) Discontinued operations Impairment loss on amounts due from De-consolidated Subsidiaries (431,638) Loss for the year (484,888) 6 OTHER REVENUE $ 000 $ 000 Recovered/forfeited deposits (note) 1,576 18,000 Service income 1,304 5,132 Franchise income 1,604 1,643 Subsidy income 1,930 Sales of shredded electronic materials 1,727 Sales of scrapped materials 309 Management fee receivable from an associate 1,305 Others 1, ,129 27,507 II-64

121 Note: During the year ended 31 March 2014, the Group granted an independent third party the right to use Fook Woo name to operate its recycling operation facilities in northern China for 5 years and received a nonrefundable fee of HK$18,000,000. In January 2014, the third party decided not to continue the recycling operation in northern China and signed a termination agreement with the Group. Accordingly, the Group recorded the full amount of the non-refundable fee as other revenue to the consolidated profit or loss and other comprehensive income for the year ended 31 March OTHER NET (LOSS)/GAIN $ 000 $ 000 Foreign exchange (losses)/gains, net (593) 1,982 Gain on disposals of property, plant and equipment, net (note 26(b)) 1, Write off of property, plant and equipment (4,879) (147) (4,403) 2,283 8 LOSS BEFORE TAXATION Loss before taxation is stated after charging/(crediting) of the following: $ 000 $ 000 (a) Staff costs (excluding directors emoluments) Salaries, wages and other benefits 80,912 68,295 Contributions to defined contribution retirement plan 3,114 2,516 Equity-settled share-based payment expenses 1,485 85,511 70,811 Staff costs included in: Cost of sales 33,959 33,169 Selling and distribution expenses 22,209 9,778 Administrative and other operating expenses 29,343 27,864 85,511 70,811 II-65

122 $ 000 $ 000 (b) Other items Amortisation of land use rights (note 15) Depreciation of property, plant and equipment (note 14) 21,840 14,380 Impairment losses: trade receivables (note 18) (56) 388 loan to and amount due from an associate (note (i)) 5,613 Operating lease charges in respect of land and buildings 32,926 38,371 Provision for loss on onerous contracts in respect of land and buildings (note (ii)) 8,236 Cost of inventories sold (note 17) 333, ,262 Auditor s remuneration Audit services 2,650 3,060 Other services 1,234 1,114 Interest income from bank deposits (3,119) (10,202) Notes: (i) In January 2015, an associate of the Group announced to commence a voluntary liquidation. The Directors of the Group determined that the likehood of recovering the loan to and amounts due from the associate of HK$5,613,000 was remote following the assessment of the recoverable amount of the loan to and amounts due from the associate. Accordingly, a full provision for impairment loss of HK$5,613,000 was made and charged to the consolidated statement of profit or loss and other comprehensive income for the year ended 31 March In June 2015, the board of the associate resolved that the associate will enter into a voluntary liquidation. (ii) In January 2014, the Group terminated certain operating lease arrangements in respect of properties having considered the utilisation rate on these properties. Accordingly, the Group made a provision for onerous contracts in the amounts of HK$8,236,000 to the profit or loss which was estimated based on rental payments over the non-cancellable period, in accordance with International Accounting Standard 37, Provision, contingent liabilities and contingent assets. II-66

123 9 INCOME TAX (a) Taxation in the consolidated statement of profit or loss and other comprehensive income represents: $ 000 $ 000 Current income tax Hong Kong profits tax 3,026 Under/(over) provision in respect of prior years Current income tax 3 (1,260) Penalty surcharge and interest ,025 Deferred tax Origination and reversal of temporary differences (note 22(c)) (1,116) (801) Income tax (credit)/expense (1,113) 1,224 Hong Kong profits tax has been provided at the rate of 16.5% on the estimated assessable profit for the year ended 31 March 2015 (2014: 16.5%). (b) Indemnity receipt of tax in respect of prior years Mr. Leung Kai Kuen, the former director and one of the substantial shareholders of the Company and Ms. Tam Ming Luen, the then substantial shareholder of the Company, have entered into a deed of indemnity with the Group under which they have agreed to indemnify on a joint and several basis each member of the Group in respect of the cash payment for any additional tax assessment for the year of assessment 2002/2003 and any other notices of additional assessment that may be received by any member of the Group for and including the 2003/2004, 2004/2005 and 2005/2006 tax years through the year of assessment 2009/2010. Given the circumstances as disclosed in note 2(a) to the consolidated financial statements and the uncertainties about the likelihood of recovering such payments from Mr. Leung Kai Kuen and Ms. Tam Ming Luen, the incremental tax liability was recorded as the Group s income tax liabilities as at 31 March 2012 and 31 March 2013 and charged to the consolidated statement of profit or loss and other comprehensive income of the Group in the prior years despite the above-mentioned indemnity arrangement. On 15 April 2014, a total sum of HK$13,070,705 was received by the Group from Ms. Tam Ming Luen for full and final settlement of the above matter arrangement (the Indemnity Receipt ). The Indemnity Receipt was recorded in the consolidated statement of profit or loss and other comprehensive income for the year ended 31 March II-67

124 (c) Reconciliation between tax expense and loss before taxation at applicable tax rates: $ 000 $ 000 Loss before taxation (127,264) (52,026) Tax calculated at tax rates of 16.5% (2014: 16.5%) (20,998) (8,584) Tax effect of non-taxable income (1,192) (2,092) Tax effect of non-deductible expenses 4,237 4,916 Tax effect of tax losses not recognised 16,043 8,947 Tax effect of unrecognised tax losses utilised (1,392) Penalty surcharge and interest 259 Under/(over) provision in respect of prior years 3 (1,260) Others Income tax (credit)/expense (1,113) 1, EMOLUMENTS FOR DIRECTORS AND FIVE HIGHEST PAID INDIVIDUALS AND SENIOR MANAGEMENT (a) Directors emoluments Directors remuneration disclosed, with reference to section 161 of the predecessor Hong Kong Companies Ordinance (Cap. 32), is as follows: For the year ended 31 March 2015 Salaries, allowance Share-based Retirement and benefits Discretionary payments schemes Fees in kind bonus (note (i)) contributions Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Executive directors Mr. Suen Wing Yip 420 2, ,323 Mr. Lau Sai Cheong (a) 338 1, ,073 Mr. To Chun Wai (b) 360 1, ,050 Mr. Tam Sui Kin, Chris (c) 360 1, ,545 Non-executive directors Mr. Cheng Chi Ming, Brian ,556 Mr. Tsang On Yip, Patrick ,029 Mr. Lau Sai Cheong (a) Independent non-executive directors Mr. Nguyen Van Tu, Peter (d) Mr. Chow Shiu Wing, Joseph (e) Mr. Wong Man Chung, Francis (e) ,660 7,453 2,071 4, ,305 II-68

125 For the year ended 31 March 2014 Salaries, allowance Retirement and benefits Discretionary schemes Fee in kind bonus contributions Total $ 000 $ 000 $ 000 $ 000 $ 000 Executive directors Mr. Suen Wing Yip 300 2, ,098 Mr. Lau Sai Cheong (a) 300 1, ,337 Mr. To Chun Wai (b) 296 1, ,690 Mr. Tam Sui Kin, Chris (c) Mr. Lai Hau Yin (f) Non-executive directors Mr. Cheng Chi Ming, Brian Mr. Tsang On Yip, Patrick Independent non-executive directors Mr. Nguyen Van Tu, Peter (d) Mr. Chow Shiu Wing, Joseph (e) Mr. Wong Man Chung, Francis (e) Mr. Chung Wai Kwok, Jimmy (g) Mr. Lau Shun Chuen (g) Mr. Lee Kwok Chung (h) ,790 7,214 1, ,206 Notes: (a) Re-designed as non-executive director on 9 March 2015 (b) Appointed on 8 April 2013 (c) Appointed on 30 September 2013 (d) Appointed on 21 June 2013 (e) Appointed on 10 October 2013 (f) Resigned on 30 September 2013 (g) Resigned on 10 October 2013 (h) Retired on 21 June 2013 (i) These represent the estimate value of share options granted to the directors under the Company s share option scheme. The value of these share options is measured according to the Group s accounting policies for share-based payment transactions as set out in note 2(m)(iii) and in accordance with that policy, includes adjustments to reverse amount accrued in previous years where grants of equity instruments are forfeited prior to vesting. The details of these benefits in kind, including the principal terms and number of options granted, are disclosed under paragraph Share option scheme in the report of the directors. During the year, no director received any emoluments from the Group as an inducement to join or leave the Group or as compensation for loss of office. No director waived or has agreed to waive any emoluments. II-69

126 (b) Five highest paid individuals The five individuals whose emoluments were the highest in the Group during the year included 4 directors (2014: 4). Their emoluments are reflected in the analysis presented above. The emoluments payable to the remaining 1 individual are as follows: $ 000 $ 000 Salaries, allowance and benefits in kind 1,221 1,007 Discretionary bonus Retirement schemes contributions Share-based payments 223 1,699 1,244 The emoluments fell within the following bands: Number of individuals ,000,001 to 2,000, (c) Emoluments of senior management The emoluments of the senior management whose profiles are set out in the section headed Directors and Senior Management of the annual report (of which these financial statements form a part) have been included in note 10(a) and 10(b). 11 LOSS ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS OF THE COMPANY The consolidated loss attributable to equity shareholders of the Company of HK$149,607,000 (2014: HK$484,888,000) included a loss of HK$84,241,000 (2014: HK$1,257,831,000) which is dealt with in the financial statements of the Company. 12 DIVIDENDS No dividends had been paid or declared by the Company for the year ended 31 March 2015 (2014: Nil). II-70

127 13 BASIC AND DILUTED LOSS PER SHARE Basic loss per share is calculated by dividing the loss for the year attributable to the equity shareholders of the Company by the weighted average number of ordinary shares in issue during the year $ 000 $ 000 Loss attributable to the equity shareholders of the Company Continuing operations (113,035) (53,250) Discontinued operations (36,572) (431,638) (149,607) (484,888) Weighted average number of ordinary shares ( 000): Issued ordinary shares at 1 April 2,411,167 2,411,167 Effect of shares issued under the open offer 1,105,118 Weighted average number of ordinary shares at 31 March 3,516,285 2,411,167 Basic loss per share (in cents) Continuing operations (3.2) cents (2.2) cents Discontinued operations (1.0) cents (17.9) cents (4.2) cents (20.1) cents The calculation of the basic and diluted loss per share is based on the loss attributable to equity shareholders of the Company from continuing and discontinued operations of approximately HK$113,035,000 and HK$36,572,000 respectively (2014: HK$53,250,000 and HK$431,638,000 respectively) and on the weighted average number of 3,516,285,000 (2014: 2,411,167,000) ordinary shares in issue during both years. Diluted loss per share The computation of diluted loss per share does not assume the exercise of the Company s share options because the exercise price of those options was higher than the average market price of shares for the year ended 31 March 2015 and the effect of loss per share is anti-dilutive. II-71

128 14 PROPERTY, PLANT AND EQUIPMENT GROUP Furniture, Leasehold Plant and fixtures and Motor Construction Buildings improvements machinery equipment vehicles in progress Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Year ended 31 March 2015 Net book amount: At 1 April ,797 14,635 5,508 29, , ,770 Additions 7,551 1,240 14,627 5,062 18, , ,290 Disposals (1,314) (1,314) Write off (4,259) (19) (402) (199) (4,879) Transfer 603,267 (603,267) Depreciation (4,670) (2,923) (6,737) (1,961) (5,549) (21,840) At 31 March ,148 4,855 22,506 8,207 40, ,027 At 31 March 2015 Cost 610,818 9,924 49,250 12,949 59, ,437 Accumulated depreciation and impairment (4,670) (5,069) (26,744) (4,742) (19,185) (60,410) Net book amount 606,148 4,855 22,506 8,207 40, ,027 Year ended 31 March 2014 Net book amount: At 1 April ,273 11,475 5,194 9, , ,976 Additions 7,138 8,230 2,135 25, , ,774 Disposals (196) (166) (91) (453) Write off (147) (147) Depreciation (2,467) (4,874) (1,655) (5,384) (14,380) At 31 March ,797 14,635 5,508 29, , ,770 At 31 March 2014 Cost 14,672 38,035 9,119 48, , ,558 Accumulated depreciation and impairment (3,875) (23,400) (3,611) (19,902) (50,788) Net book amount 10,797 14,635 5,508 29, , ,770 II-72

129 Depreciation of the Group s property, plant and equipment has been charged to the consolidated statement of profit or loss and other comprehensive income as follows: $ 000 $ 000 Cost of sales 11,827 9,571 Selling and distribution expenses 3,497 1,067 Administrative and other operating expenses 6,516 3,742 21,840 14,380 Following a review of the actual utilisation of the Group s property, plant and equipment, the Group revised the estimated useful lives of certain of its property, plant and equipment with effect from 1 April 2014 (see note 2(d)). The effect of these changes on the depreciation expense for the year ended 31 March 2015 and the expected effect for future periods is as follows: Year ended 31 March Thereafter $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Decrease/(increase) in depreciation expenses 3,652 3,447 3,195 2, (13,438) 15 LAND USE RIGHTS GROUP The Group s interests in land use rights represent prepaid operating lease payments. Their net book values are analysed as follows: $ 000 $ 000 In Hong Kong, held on medium term 27,478 28,330 The movements of land use rights are as follows: $ 000 $ 000 At 1 April 28,330 28,244 Additions 919 Amortisation (852) (833) At 31 March 27,478 28,330 Amortisation of land use rights has been included in administrative and other operating expenses in the consolidated statement of profit or loss and other comprehensive income. II-73

130 16 INTERESTS IN AN ASSOCIATE At 31 March 2015, the Group held 30% equity interests in Fook Fung Loi Co., Limited ( FFL ). In June 2015, the board of FFL resolved that FFL will enter into a voluntary liquidation. Details of the associate at 31 March 2015 are as follows: Proportion of ownership interest Particulars of Form of Place of issued and Group s Held Name of business incorporation paid up effective by the Held by a Principal associate structure and operation capital interest Company subsidiary activity Fook Fung Loi Incorporated Hong Kong 3,000,000 ordinary 30% 30% Manufacturing Co., Limited shares (2014: 30%) (2014: 30%) and sale of paper products (a) Summary financial information on the associate Assets Liabilities Equity Revenue Loss $ 000 $ 000 $ 000 $ 000 $ per cent 153 (18,522) (18,369) 69 (9,530) Group s effective interest 46 (5,557) (5,511) 21 (2,859) per cent 14,519 (18,222) (3,703) 291 (6,654) Group s effective interest 4,356 (5,467) (1,111) 87 (1,995) (b) At 31 March 2015, the Group s unrecognised share of losses of an associate, for the year and cumulatively, amounted to HK$2,859,000 (2014: HK$1,151,000) and HK$4,010,000 (2014: HK$1,151,000) respectively. 17 INVENTORIES GROUP $ 000 $ 000 Finished goods, at cost 6,086 5,345 The cost of inventories recognised as expense and included in cost of sales amounted to approximately $333,050,000 for the year ended 31 March 2015 (2014: $344,262,000). II-74

131 18 TRADE AND BILLS RECEIVABLES GROUP $ 000 $ 000 Trade and bills receivables 82,750 82,823 Less: Provision for impairment (5,314) (5,370) Trade and bills receivables net 77,436 77,453 Payment terms granted to customers are mainly cash on delivery or on credit. The average credit period ranges from 10 days to 90 days. The ageing analysis of trade and bills receivables based on transaction date is as follows: $ 000 $ days 23,064 33, days 19,331 18, days 15,762 12, days 6,112 5,299 Over 120 days 18,481 13,376 82,750 82,823 Less: Provision for impairment (5,314) (5,370) 77,436 77,453 As at 31 March 2015, trade receivables of approximately HK$46,072,000 (2014: HK$36,085,000) were past due but not impaired. These relate to a number of independent customers with no history of credit default. Based on past experience, management believes that no provision for impairment is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered as fully recoverable. The ageing analysis of these trade receivables based on due date is as follows: $ 000 $ days 15,620 14, days 6,269 6, days 4,786 8, days 4,470 3,188 Over 120 days 14,927 3,501 46,072 36,085 II-75

132 As at 31 March 2015, trade receivables of approximately HK$5,314,000 (2014: HK$5,370,000) were impaired and fully provided for. The individually impaired receivables mainly related to smaller customers which were aged over 120 days and considered to be irrecoverable. The ageing analysis of these non-recoverable receivables based on due date is as follows: $ 000 $ 000 Over 120 days 5,314 5,370 The movement of provision for impaired receivables have been included in administrative and other operating expenses in the consolidated statement of profit or loss and other comprehensive income (note 8). Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. Movements on the provision for impairment of trade receivables are as follows: $ 000 $ 000 At 1 April 5,370 4,992 (Reversal of)/provision for impairment loss recognised (56) 388 Exchange difference (10) At 31 March 5,314 5,370 The carrying amounts of trade and bills receivables are denominated in the following currencies: $ 000 $ 000 HK$ 55,340 51,895 USD 22,096 25,558 77,436 77,453 At 31 March 2015, the fair values of the trade and bills receivables approximate their carrying amounts. The maximum exposure to credit risk at the end of each reporting period is the carrying value of the receivables. The Group does not hold any collateral as security. II-76

133 19 OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS $ 000 $ 000 Non-current portion Prepayments for purchase of property, plant and equipment 25,552 5,318 Loan to an associate (note 8(b)(ii)) 4,500 25,552 9,818 Current portion Deposits placed with suppliers 14,121 13,764 Utility and other deposits 26,649 21,923 Prepayments 10,884 9,216 Interest receivable Other receivables Others 1,243 Total 53,000 47,180 At 31 March 2015, the fair values of other receivables, deposits and prepayments, approximate their carrying amounts. The maximum exposure to credit risk at the end of each reporting period is the carrying value of each class of receivables mentioned above. The Group does not hold any collateral as security (2014: Nil). At 31 March 2015, no other receivables, deposits or prepayments were impaired (2014: Nil). 20 BANK DEPOSITS AND CASH AND RESTRICTED AND PLEDGED BANK DEPOSITS Group Company $ 000 $ 000 $ 000 $ 000 Deposits 278, , , ,415 Cash at bank 176,871 85, ,034 19,024 Cash in hand , , , ,439 Restricted and pledged bank deposits 2,225 2, , ,726 Less: Deposits with maturity greater than 3 months (23,766) Restricted and pledged bank deposits (2,225) (2,400) Cash and cash equivalents in the consolidated statement of cash flows 455, ,560 II-77

134 Bank deposits and cash and restricted and pledged bank deposits are denominated in the following currencies: Group Company $ 000 $ 000 $ 000 $ 000 RMB 39, ,981 38, ,218 HK$ 404,334 39, ,493 14,189 USD 14,596 47, , , , , ,439 As at 31 March 2015, the restricted bank deposits were mainly pledged with banks for issuing guarantees to suppliers to secure supply. The conversion of RMB denominated balances into foreign currencies and the remittance of such bank balances and cash out of PRC are subject to the relevant rules and regulations of foreign exchange control promulgated by the PRC government. Cash at bank earns interest at floating rates based on prevailing bank deposit rates. 21 PAYABLES AND ACCRUALS Group Company $ 000 $ 000 $ 000 $ 000 Trade payables 20,223 12,058 Other payables and accruals: Construction costs payable 16,420 81,489 Accrued expenses 24,656 24,073 13,849 12,313 Receipts in advance from customers 3,945 2, Others 9,376 8,777 54, ,115 13,864 12,313 74, ,173 13,864 12,313 II-78

135 The aging analysis of trade payables based on due date at the end of the reporting period is as follows: Group $ 000 $ 000 Current 3,252 2, days 11,839 6, days 3, days days 15 2 Over 120 days 1,291 2,715 20,223 12,058 The carrying amounts of payables and accruals are denominated in the following currencies: Group $ 000 $ 000 HK$ 61, ,271 USD 13, , ,173 As at 31 March 2015, the fair values of the trade and other payables approximate their carrying amounts (2014: same). (a) Current taxation in the consolidated statement of financial position represents: $ 000 $ 000 Provision for Hong Kong Profits Tax for the year 3,026 Balance of Profits Tax provision relating to prior years (3,249) 9 Taxation (recoverable)/payable (3,249) 3,035 (b) Deferred tax assets and liabilities recognised: The analysis of deferred tax assets and deferred tax liabilities is as follows: $ 000 $ 000 Deferred tax liabilities 1,116 II-79

136 (c) The components of deferred tax assets/(liabilities) recognised in the consolidated statement of financial position and the movement during the year are as follows: Accelerated tax Tax losses depreciation Total $ 000 $ 000 $ 000 At 1 April ,138 (3,055) (1,917) Credited to the consolidated statement of profit or loss and other comprehensive income (note 9(a)) At 31 March 2014 and 1 April ,472 (2,588) (1,116) (Credited)/charged to the consolidated statement of profit or loss and other comprehensive income (note 9(a)) 29,994 (28,878) 1,116 At 31 March ,466 (31,466) (d) Deferred tax assets not recognised Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group has not recognised the deferred tax assets attributable to the future benefit of tax losses of $35,026,000 (2014: $64,067,000). The tax losses do not expire under current tax legislation. 23 SHARE CAPITAL (a) Authorised share capital of the Company $ 000 $ 000 Authorised: 5,000,000,000 ordinary shares of $0.10 each 500, ,000 (b) Issued share capital of the Company Number of ordinary shares Ordinary shares $ Issued and fully paid: At 1 April 2013, 31 March 2014 and 1 April ,411,167, ,116,700 Issue of share under the Open Offer (Note) 2,411,167, ,116,700 At 31 March ,822,334, ,233,400 II-80

137 Note: On 25 July 2014, the Company announced its proposal to issue not less than 2,411,167,000 shares and not more than 2,424,216,600 shares of HK$0.10 each by way of an open offer issue in the proportion of one offer share for every one ordinary share then held by qualifying shareholders at a subscription price of $0.20 per offer share (the Open Offer ). On 14 October 2014, the Company completed the Open Offer and issued 2,411,167,000 shares for gross proceeds of HK$482,233,000. The difference of HK$230,523,000 between the net proceeds of HK$471,640,000 (after deduction of related expenses of approximately HK$10,593,000) and the par value of shares issued of HK$241,117,000 has been credited to the share premium account of the Company (Note 24(a)). These newly issued shares rank pari passu in all respects with the existing shares. (c) Equity settled share-based transactions Pursuant to the resolutions in writing passed by all shareholders of the Company on 11 March 2010, the Company adopted a share option scheme on 11 March 2010 (the Share Option Scheme ). The purpose of the share option scheme is to provide incentives to the Group s employees including the executive directors and non-executive directors and any advisers, consultants, suppliers, customers and agents (each eligible participant ). The Board of Directors of the Company may, at any time within 10 years after the date of adoption of the Share Option Scheme, make an offer to any participant. The subscription price for shares granted pursuant to the Share Option Scheme shall be determined by the Board of Directors of the Company in its absolute discretion but shall not be less than the highest of: the closing price of the shares of the Company stated in the Stock Exchange s daily quotations sheet on the business day on which an offer is made to a participant; the average of the closing prices of the shares stated in the Stock Exchange s daily quotations sheets for the five business days immediately preceding the date on which such offer is made; and the nominal value of a share of the Company. On 25 April 2014, the Group announced that a total of 71,110,000 options under the Share Option Scheme to subscribe for the Company s shares were granted, subject to acceptance of the grantee(s). Each option shall entitle the holder to subscribe for one share upon exercise of such option at an initial exercise price of HK$0.542 per share. These options may be exercised from 25 July 2014 to 24 April 2020 (both dates inclusive) subject to the vesting periods. During the year, 65,248,000 options were accepted by the grantees. II-81

138 Number of share options Balance in issue at Granted Cancelled/ Adjustment 31 March Initial and accepted Exercised lapsed due to 2015 exercise during the year during during Open (after Date of grant price Exercisable period (before adjustment) the year the year Offer adjustment) Directors 25 April July 2014 to 24 April ,600,000 9,623,422 53,223,422 Employees 25 April July 2014 to 24 April ,408,000 (4,697,370) 3,538,151 17,248,781 Other Eligible Participants 25 April July 2014 to 24 April ,240, ,138 3,955,138 65,248,000 (4,697,370) 13,876,711 74,427,341 Vesting period: Tranche 1: 20% are exercisable form 25 July 2014 to 24 April 2020 Tranche 2: 50% are exercisable from 25 April 2016 to 24 April 2020 Tranche 3: 30% are exercisable from 25 April 2018 to 24 April 2020 Share option expenses charged to the consolidated statement of profit or loss and other comprehensive income are determined using the binomial lattice model based on the following assumptions: Fair value at measurement date $0.190 Share price at measurement date $0.328 Exercise price $0.542 Expected volatility 52.10% Expected average life of options 2.2 years Expected dividend yield 0% Risk-free interest rate (based on Exchange Fund Notes) 1.34% The expected volatility is based on the historic volatility on comparable companies listed on the same stock exchange (calculated based on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility based on publicly available information. Expected dividends are based on historic dividends. Changes in the subjective input assumptions could materially affect the fair value estimate. II-82

139 24 RESERVES The reconciliation between the opening and closing balances of each component of the Group s consolidated equity is set out in the consolidated statement of changes in equity. Details of the changes in the Company s individual components of equity between the beginning and the end of the year are set out below: (a) Movements in components of equity Share-based Share Share capital Accumulated capital premium reserve losses Total $ 000 $ 000 $ 000 $ 000 $ 000 At 1 April ,117 2,862,358 (624,152) 2,479,323 Loss and total comprehensive income for the year (1,257,831) (1,257,831) At 31 March 2014 and 1 April ,117 2,862,358 (1,881,983) 1,221,492 Share issued under the Open Offer (Note 23(b)) 241, , ,640 Equity settled share-based transactions 5,534 5,534 Loss and total comprehensive income for the year (84,241) (84,241) At 31 March ,234 3,092,881 5,534 (1,966,224) 1,614,425 (b) Nature and purpose of reserves (i) Share premium The application of the share premium account is governed by the Companies Law of Cayman Islands (the Companies Law ). Under the Companies Law, the funds in the share premium account of the Company are distributable to the shareholders of the Company provided that immediately following the date on which the dividend is proposed to be distributed, the Company will be in a position to pay off its debts as they fall due in the ordinary course of the business. (ii) Capital reserve Capital reserve represents the difference between (i) the aggregate of the consideration for the acquisitions under common control upon the reorganisation during the year ended 31 March 2010 ( Reorganisation ); and (ii) the aggregate of the share capital and share premium of the entities transferred to the Group pursuant to the Reorganisation. (iii) Share-based capital reserve The share-based capital reserve represents the portion of the grant date fair value of unexercised share options granted to directors, employees and other eligible participants of the Group that has been recognised in accordance with the accounting policy adopted for share-based payments in note 2(m)(iii). (c) Distributable reserves The aggregate amounts of distributable reserves of the Company as at 31 March 2015 and 31 March 2014 were HK$1,126,657,000 and HK$980,375,000 respectively. II-83

140 25 INVESTMENTS IN SUBSIDIARIES AND DUE FROM/(TO) SUBSIDIARIES (a) Investment in subsidiaries and due from/(to) subsidiaries Company $ 000 $ 000 Consolidated subsidiaries Investments at cost, unlisted shares 967, ,944 Less: Provision (note 25(b)) (815,712) (815,712) 152, ,232 Due from subsidiaries 1,289, ,495 1,442, ,727 Group Company $ 000 $ 000 $ 000 $ 000 De-consolidated Subsidiaries Investments at cost, unlisted shares ($8) Due from De-consolidated Subsidiaries 2,371,043 1,113,979 Less: Provision for impairment (note 25(b)) (2,162,143) (1,057,311) 208,900 56,668 Less: Reclassified to assets and liabilities of disposal groups classified as held for sale (208,900) 56,668 Due to subsidiaries (228,948) (221) Amounts due from subsidiaries are unsecured, non-interest bearing with no fixed terms of repayment and hence are classified as non-current as these are not expected to be recoverable within the next twelve months. Amounts due to subsidiaries are unsecured and non-interest bearing with no fixed terms of repayment. (b) Disposal of entire equity interests in Golddoor Company Limited As at 31 March 2014, the Group was made aware of the fact that the liquidators of Wealthy Peaceful Limited had initiated a tender process to locate a buyer to acquire the entire equity interests in Golddoor. In April 2014, the liquidator of Wealthy Peaceful Limited entered into a binding agreement with an independent third party (the Purchaser ), pursuant to which Wealthy Peaceful Limited agreed to dispose of its entire equity interests in Golddoor (together with its subsidiary, Huizhou Fook Woo) for a consideration of HK$200,000,000 (the Sale Transaction ). On 27 June 2014, the liquidators of Wealthy Peaceful Limited informed the Company that the Purchaser had remitted the consideration. The Sale Transaction was completed in July 2014 and the consideration was fully settled by the Purchaser. II-84

141 Given the above circumstances, the Group presented the amounts due from De-consolidated Subsidiaries as assets and liabilities of disposal group classified as held for sale which were measured at the lower of the estimated recoverable amount and carrying amount of amounts due from De-consolidated Subsidiaries at 31 March The recoverable amount from the disposal was estimated by the Group as at 31 March 2014 as follows: $ 000 Consideration payable by the independent third party 200,000 Less: Legal and professional fees (2,500) 197,500 Amounts expected to be recoverable from De-consolidated Subsidiaries in respect of transactions with De-consolidated Subsidiaries from 1 April 2012 to 31 March 2014 (note) 49,242 Amounts expected to be payable to De-consolidated Subsidiaries in respect of transactions with De-consolidated Subsidiaries from 1 April 2012 to 31 March 2014 (37,842) Estimated recoverable amount 208,900 Note: The Group has received monthly repayment of HK$3,800,000 from the De-consolidated Subsidiaries in respect of the transactions with the De-consolidated Subsidiaries from 1 April 2012 to 31 March The carrying amounts of the amounts due from De-consolidated Subsidiaries as at 31 March 2014 comprised of: $ 000 Property, plant and machinery based on valuation at 30 September ,172 Net amounts due from De-consolidated Subsidiaries resulting from transactions with the De-consolidated Subsidiaries from 1 April 2012 to 31 March , ,538 At 31 March 2014, the Group s and the Company s amounts due from De-consolidated Subsidiaries and the Company s interests in subsidiaries were determined to be impaired. Impairment losses on amounts due from De-consolidated Subsidiaries of approximately HK$431,638,000 were recognised as the result of Discontinued operations in the consolidated statement of profit or loss and other comprehensive income for the year ended 31 March The impairment losses were measured as the difference between the carrying amount and the estimated recoverable amount from the disposal of Golddoor (together with its subsidiary, Huizhou Fook Woo). In September 2014, the Group entered into agreement with the De-consolidated Subsidiaries pursuant to which the Group decided not to demand for the De-consolidated Subsidiaries of the monthly repayment of HK$3,800,000. Accordingly, the Group considered the previously estimated amount expected to be receivable from the De-consolidated Subsidiaries of HK$49,242,000, of which the Group has subsequently recovered the amounts of HK$12,670,000 and the remaining amounts of HK$36,572,000 are considered to be irrecoverable and further provision for impairment loss was made for the year ended 31 March II-85

142 (c) Principal subsidiaries held by the group The following is a list of the principal subsidiaries which have been consolidated as at and for the year ended at 31 March 2015: Place and Principal date of Particulars activities and incorporation/ of issued Effective place of Name establishment paid-in capital interest held operation Directly held IWS Global Limited British Virgin Ordinary US$50, % Investment holding/ Islands ( BVI )/ Hong Kong 16 March 2007 Indirectly held IWS Waste Management BVI/ Ordinary US$1 100% Investment holding/ (Global) Company Limited 23 March 2009 Hong Kong IWS Assorted Paper (Global) BVI/ Ordinary US$1 100% Investment holding/ Company Limited 23 March 2009 Hong Kong IWS Environmental Technologies BVI/ Ordinary US$1 100% Investment holding/ (Global) Company Limited 23 March 2009 Hong Kong CMDS (Global) Company Limited BVI/ Ordinary US$1 100% Investment holding/ 23 March 2009 Hong Kong IWS Waste Management Hong Kong/ HK$1,000, % Trading of recovered Company Limited 28 September 1993 paper and materials/ Hong Kong IWS Assorted Paper Hong Kong/ HK$1,000, % Trading of tissue Company Limited 15 December 1997 paper products/ Hong Kong Confidential Materials Hong Kong/ HK$10, % Provision of Destruction Service Limited 22 June 1979 confidential materials destruction service/ Hong Kong IWS Environmental Hong Kong/ HK$1,000, % Procurement of waste Technologies Limited 23 October 2002 paper/hong Kong II-86

143 Place and Principal date of Particulars activities and incorporation/ of issued Effective place of Name establishment paid-in capital interest held operation IWS Promotion Limited Hong Kong/ HK$1 100% Development of 17 September 2010 recycling facilities at Tseung Kwan O/ Hong Kong IWS Paper Agency (Global) BVI/ Ordinary US$1 100% Investment holding/ Company Limited 28 November 2011 Hong Kong IWS Logistics Limited Hong Kong/ HK$1 100% Provision of logistic 26 February 2013 services/hong Kong Wealthy Peaceful BVI/ Ordinary US$1 100% Investment holding/ Company Limited 23 March 2009 Hong Kong (dissolved on 2 April 2015) Hong Kong Ying Cheung Hong Kong/ HK$5,000,000 60% Trading of high-density (International) Holdings 1 December 2014 polyethylene products/ Limited Hong Kong II-87

144 26 NOTE TO THE CONSOLIDATED CASH FLOW STATEMENTS (a) Reconciliation of loss before taxation to net cash used in operations Note $ 000 $ 000 Loss before income tax (127,264) (52,026) Adjustments for: Depreciation of property, plant and equipment 14 21,840 14,380 Amortisation of land use rights Gain on disposals of property, plant and equipment, net 7 (1,069) (448) Write off of property, plant and equipment 7 4, (Reversal of)/provision for impairment of trade receivables 18 (56) 388 Impairment of loan to and amount due from an associate 8(b) 5,613 Share-based payments 5,534 Interest income (3,119) (10,202) Unrealised foreign exchange gain (593) (1,982) Share of loss of associate 844 Operating loss before working capital changes (93,383) (48,066) Inventories (741) 2,750 Trade and bills receivables 73 (20,296) Other receivables, deposits and prepayments 4,200 (15,240) Amounts due from related companies Payables and accruals (26,056) (2,406) Amounts due from De-consolidated Subsidiaries 551 Cash used in operations (115,325) (82,700) (b) In the consolidated statement of cash flows, proceeds from disposals of property, plant and equipment comprises: $ 000 $ 000 Proceeds from disposal of property, plant and equipment 2, Net book amount (note 14) (1,314) (453) Gain on disposal of property, plant and equipment (note 7) 1, II-88

145 27 OPERATING LEASE COMMITMENTS The future aggregate minimum lease payments under non-cancellable operating leases in respect of land and buildings are as follows: $ 000 $ 000 Within one year 19,974 33,844 After one year but within five years 8,803 26,347 28,777 60, CAPITAL COMMITMENTS $ 000 $ 000 Contracted but not provided for Property, plant and equipment 60, , CONTINGENT LIABILITIES At 31 March 2015, the Group has lodged certain claims against its former director and employee. In the opinion of the legal counsel, it is too early to evaluate the outcome of these claims and the recovery of loss and damages from these claims cannot be reliably estimated. II-89

146 30 RELATED PARTY TRANSACTIONS (a) The following transactions were carried out with related parties during the year: $ 000 $ 000 (i) Transactions with related parties Rental expenses in respect of land and buildings paid to E&I Development Limited ( E&I ) (note (i)) 1,650* 3,300* Management fee paid and payable to Lai Wah Shipping Company ( Lai Wah ) (note (ii)) 624* Management fee paid and payable to Fook Woo Waste Paper Company (note (iii)) 447* Management fee income received and receivable from Fook Fung Loi Co., Limited ( Fook Fung Loi ) 1,305 2,040 Interest income received and receivable from Fook Fung Loi Sales of tissue to Fook Fung Loi 249 Underwriting commission paid to Chow Tai Fook Nominee Limited ( Chow Tai Fook ) (note (iv)) 5,807* (ii) Transactions with De-consolidated Subsidiaries Sales of waste paper to De-consolidated Subsidiaries 56,977 Purchase of tissue from De-consolidated Subsidiaries 41, ,888 Logistics fee paid and payable to De-consolidated Subsidiaries Management fee paid and payable to De-consolidated Subsidiaries 2,640 1,560 * These related party transactions also constitute connected transactions or continuing connected transactions pursuant to the Main Board Listing Rules of the Stock Exchange. Notes: (i) (ii) (iii) (iv) These represented the rental expenses for leasing of office space paid to E&I. The controlling shareholders of E&I are the son and daughter of Mr. Leung Kai Kuen, one of the substantial shareholders of the Company. The rental expenses were charged at predetermined rates mutually agreed between both parties. The amount represented waste loading services provided by Lai Wah. The sole proprietor of Lai Wah is Mr. Leung Kai Kuen, one of the substantial shareholders of the Company. These transactions were entered into in the normal course of business based on terms mutually agreed by both parties and terminated on 31 July The amount represented waste paper management services provided by Fook Woo Waste Paper Company, a company owned by Mr. Leung Tat Piu, an ex-director of the Company at the Tai Po packing station. These transactions were entered into in the normal course of business based on terms mutually agreed by both parties. The amount represented the underwriting commission paid to Chow Tai Fook, a company owned by Dato Dr. Cheng Yu Tung, one of the substantial shareholders of the Company. The transaction was entered into in the normal course of business based on terms mutually agreed by both parties on 25 July II-90

147 (b) Year-end balances with related parties The amounts due from/(to) related companies were denominated in HK$. The balances are unsecured, interest-free and repayable upon demand. The carrying values of these balances approximate their fair values. Amounts due from related companies, net of impairment provisions are disclosed as follows: Name Relationship $ 000 $ 000 E&I Controlling shareholders are the son and daughter of Mr. Leung Kai Kuen, one of the substantial shareholders of the Company Fook Fung Loi An associate of the Company 4,500 Huizhou Fook Woo A de-consolidated subsidiary of the Company 208,900 The information relating to the amounts due from related companies, disclosed pursuant to the Hong Kong Companies Ordinance, is as follows: Maximum amount outstanding during Name $ 000 $ 000 E&I Amounts due to related companies are disclosed as follows: Name Relationship $ 000 $ 000 Lai Wah Sole proprietor is Mr. Leung Kai Kuen, one of the substantial shareholders of the Company (c) Key management personnel Remuneration of key management personnel, including amounts paid to the directors, certain highest paid employees and senior management, are disclosed in note EVENTS AFTER THE REPORTING PERIOD Except for matters disclosed elsewhere in this annual report, the Group had no other events subsequent to the end of the reporting period to disclose. II-91

148 32 FUTURE CHANGES IN ACCOUNTING POLICIES Up to the date of issue of these financial statements, the IASB has issued a number of amendments and new standards which are not yet effective for the year ended 31 March 2015 and which have not been adopted in these financial statements. These include the following which may be relevant to the Group: Effective for accounting periods beginning on or after Amendments to IAS 19, Defined benefit plans: Employee contributions 1 July 2014 Annual improvements to IFRSs cycle 1 July 2014 Annual improvements to IFRSs cycle 1 July 2014 Amendments to IFRS 11, Accounting for acquisitions of interests in joint operations 1 January 2016 Amendments to IAS 16 and IAS 38, Clarification of acceptable methods of depreciation and amortisation 1 January 2016 IFRS 15, Revenue from contracts with customers 1 January 2017 IFRS 9, Financial instruments 1 January 2018 The Group is in the process of making an assessment of what the impact of these amendments is expected to be in the period of initial application. So far it has concluded that the adoption of the new standards is unlikely to have a significant impact on the Group s consolidated financial statements. II-92

149 4. QUALIFICATION CONTAINED IN THE AUDITOR S REPORT FOR THE YEARS ENDED 31 MARCH 2013, 2014 AND 2015 (a) Year ended 31 March 2013 The Company s auditor, KPMG, has issued an adverse opinion on the consolidated financial statements of the Company for the year ended 31 March 2013 in the auditor s report dated 23 August The detail of the auditor s adverse opinion is extracted below: BASIS FOR ADVERSE OPINION As disclosed in Note 2(a) to the consolidated financial statements, in November 2011, the directors of the Company were made aware of evidence indicating the existence of potential irregularities with respect to certain accounting records and transactions recorded in the books of 惠 州 福 和 紙 業 有 限 公 司 ( Huizhou Fook Woo ), a wholly owned subsidiary of the Group. As a result, in December 2011 the Board of Directors established an independent special committee (the Special Committee ) to investigate these potential irregularities. Based on the Special Committee s investigation, the directors concluded that, among other things, a substantial portion of the accounting books and records of Huizhou Fook Woo for the year ended 31 March 2012 and prior periods were missing. These events led, among other things, to the decision by the directors of the Company that Wealthy Peaceful Company Limited ( Wealthy Peaceful ), the intermediate holding company of Huizhou Fook Woo and itself a wholly owned subsidiary of the Group incorporated in the British Virgin Islands, would commence voluntary liquidation by a resolution of members on 31 January 2013, and the voluntary liquidators were appointed on the same date. Given these circumstances, in preparing these financial statements, the directors of the Company have excluded Wealthy Peaceful, together with its wholly owned subsidiaries Golddoor Company Limited ( Golddoor ) and Huizhou Fook Woo (collectively referred to as the De-consolidated Subsidiaries ) from the Group s consolidated financial position as at 31 March 2012 and 31 March 2013, consolidated financial results and consolidated cash flows for the years then ended. These events and actions taken by the directors of the Company, further details of which are set out in Note 2(a), have given rise to the following matters which form the basis for our adverse opinion: (a) Non-compliance with International Accounting Standard 27 In our opinion, the exclusion of the financial position, results and cash flows of the Deconsolidated Subsidiaries from the consolidated financial statements is a departure from the requirements of International Accounting Standard 27 Consolidated and Separate Financial Statements. Given the loss of certain accounting books and records of Huizhou Fook Woo mentioned above, we are unable to ascertain the financial impact of the potential irregularities with respect to the accounting records and transactions with the De-consolidated Subsidiaries, if any, and the non-consolidation of the De-consolidated Subsidiaries on the consolidated financial statements. However, had the De-consolidated Subsidiaries been consolidated, many elements in the consolidated financial statements would have been materially affected. II-93

150 (b) Limitation in the scope of the audit in respect of balances and transactions with the Deconsolidated Subsidiaries, impairment losses of balances due from the Deconsolidated Subsidiaries and loss on de-consolidation of the De-consolidated Subsidiaries As set out in Notes 2(a) and 27 to the consolidated financial statements of the Group for the year ended 31 March 2013, the Group and the Company recorded amounts due from the Deconsolidated Subsidiaries of approximately HK$532,172,000 as at 31 March Such receivables were recorded net of impairment provisions of approximately HK$1,730,505,000 and HK$625,673,000 in the consolidated and Company financial statements respectively, which were determined based on the valuation of the plant and machinery, properties and land use rights of Huizhou Fook Woo performed by independent valuers as at 30 September The Group undertook certain sales and purchases transactions with the De-consolidated Subsidiaries totalling HK$171,909,000 (2012: HK$243,942,000) and HK$202,367,000 (2012: HK$225,153,000) respectively during the year ended 31 March In addition, the Group recorded a loss on de-consolidation of approximately HK$415,549,000 in the consolidated income statement for the year ended 31 March As at 31 March 2013, the liquidation of Wealthy Peaceful is still in progress and the Directors were not able to obtain sufficient documentary information to satisfy themselves about the transactions and balances with the De-consolidated Subsidiaries in prior years. Accordingly, the Directors consider it to be more practicable to present the carrying value of the balances due from De-consolidated Subsidiaries at 31 March 2013 as the sum of the opening balance as at 1 April 2012 of HK$532,172,000 plus the net movement of the current account with the Deconsolidated Subsidiaries resulting from the transactions during the year ended 31 March Because of the loss of certain accounting books and records of Huizhou Fook Woo and the deconsolidation of the De-consolidated Subsidiaries, we have not been able to obtain sufficient appropriate audit evidence to determine whether these balances with the De-consolidated Subsidiaries at 31 March 2012 and 31 March 2013 and transactions with the De-consolidated Subsidiaries were free from material misstatement and whether any adjustments were necessary in respect of the amounts due from the Deconsolidated Subsidiaries as at 31 March 2012 and 31 March In addition, we have not been able to obtain sufficient appropriate audit evidence to determine whether the impairment losses of the amounts due from the De-consolidated Subsidiaries and the loss on de-consolidation were free from material misstatement. II-94

151 (c) Comparative information The comparative figures disclosed in the consolidated financial statements are based on the audited financial statements of the Group and the Company for the year ended 31 March 2012 in respect of which the predecessor auditor s report dated 22 March 2013 expressed an adverse opinion. The matters which resulted in that adverse opinion included (a) de-consolidation of certain subsidiaries and (b) balances due from De-consolidated Subsidiaries, being the same unresolved issues which are set out above. Therefore the comparative figures shown may not be comparable and any adjustments to the opening balances as at 1 April 2012 would have consequential effect on the loss for the year ended 31 March 2013 and/or the net assets of the Group and the Company as at 31 March ADVERSE OPINION Notwithstanding the above noted limitations in the scope of our audit, in our opinion, because of the significance of the matters discussed in the Basis for Adverse Opinion paragraphs, the consolidated financial statements do not give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2013, and of the Group s loss and cash flows for the year then ended in accordance with International Financial Reporting Standards. In all other respects, in our opinion the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance. KPMG Certified Public Accountants 8th Floor, Prince s Building 10 Chater Road Central, Hong Kong 23 August 2013 II-95

152 (b) Year ended 31 March 2014 The Company s auditor, KPMG, has issued a qualified opinion on the consolidated financial statements of the Company for the year ended 31 March 2014 in the auditor s report dated 30 June The detail of the auditor s qualified opinion is extracted below: BASIS FOR QUALIFIED OPINION As disclosed in note 2(a) to the consolidated financial statements, in November 2011, the directors of the Company were made aware of evidence indicating the existence of potential irregularities with respect to certain accounting records and transactions recorded in the books of 惠 州 福 和 紙 業 有 限 公 司 ( Huizhou Fook Woo ), a wholly owned subsidiary of the Group. As a result, in December 2011 the Board of Directors established an independent special committee (the Special Committee ) to investigate these potential irregularities. Based on the Special Committee s investigation, the directors concluded that, among other things, a substantial portion of the accounting books and records of Huizhou Fook Woo for the year ended 31 March 2012 and prior periods were missing. These events led, among other things, to the decision by the directors of the Company that Wealthy Peaceful Company Limited ( Wealthy Peaceful ), the intermediate holding company of Huizhou Fook Woo and itself a wholly owned subsidiary of the Group incorporated in the British Virgin Islands, would commence voluntary liquidation by a resolution of members on 31 January 2013, and the voluntary liquidators were appointed on the same date. In April 2014, the Company was informed by the liquidators of Wealthy Peaceful, that a sale and purchase agreement was entered into between Wealthy Peaceful and an independent third party, pursuant to which Wealthy Peaceful agreed to dispose of its entire equity interests in Golddoor Company Limited ( Golddoor ). Golddoor holds the entire registered capital of Huizhou Fook Woo. Given these circumstances, in preparing the consolidated financial statements for the years ended 31 March 2013 and 31 March 2014, the directors of the Company have excluded Wealthy Peaceful, together with its wholly owned subsidiaries Golddoor and Huizhou Fook Woo (collectively referred to as the De-consolidated Subsidiaries ) from the Group s consolidated financial position, consolidated financial results and consolidated cash flows from the earliest periods presented. II-96

153 These events and actions taken by the directors of the Company, further details of which are set out in note 2(a), have given rise to the following matters which form the basis for our qualified opinion: (a) Departure from International Financial Reporting Standard 10, Consolidated financial statements Given these the events and circumstances as described in note 2(a) to the financial statements, the Group presented the amounts due from De-consolidated Subsidiaries as assets and liabilities of disposal group classified as held for sale which were measured at the lower of the carrying amounts and the estimated recoverable amount from the disposal of Golddoor at 31 March The Group recognised an impairment loss of the amounts due from De-consolidated Subsidiaries amounting to HK$431,638,000 for the year ended 31 March 2014 following the assessment of the recoverable amounts due from De-consolidated Subsidiaries. The exclusion of the financial position, results and cash flows of the De-consolidated Subsidiaries from the consolidated financial statements and the presentation of the amounts due from the De-consolidated Subsidiaries is a departure from the requirements of International Financial Reporting Standard 10 Consolidated financial statements ( IFRS 10 ) and International Financial Reporting Standard 5 Noncurrent Assets Held for Sale and Discontinued Operations ( IFRS 5 ). Had the financial results of the Deconsolidated Subsidiaries been consolidated as required by IFRS 10 and IFRS 5, the Group would have consolidated and presented the financial results of the De-consolidated Subsidiaries as Discontinued operations for the year ended 31 March 2014 and the assets and liabilities of the disposal group classified as held for sale would have been presented separately from other assets and liabilities in the consolidated statement of financial position of the Group at 31 March 2014 and the net cashflows attributable to operating, investing and financing activities of the discontinued operations would have been presented separately in the consolidated statement of cashflows. Given the loss of certain accounting books and records of Huizhou Fook Woo mentioned above, we are unable to ascertain the financial impact of the non-consolidation of the De-consolidated Subsidiaries on the consolidated financial statements. (b) Insufficient audit evidence in respect of balances and transactions with the Deconsolidated Subsidiaries, impairment losses of balances due from the De-consolidated Subsidiaries and loss on de-consolidation of the De consolidated Subsidiaries As set out in notes 2(a) and 25 to the consolidated financial statements, the Group and the Company recorded amounts due from De-consolidated Subsidiaries which are computed as the opening balance brought forward as at 1 April 2012 of HK$532,172,000 plus the net movement on the current account with the De-consolidated Subsidiaries arising from transactions since that date, less impairment losses of the amounts due from De-consolidated Subsidiaries. II-97

154 Because of the loss of certain accounting books and records of Huizhou Fook Woo and the deconsolidation of the De-consolidated Subsidiaries, in our auditor s report dated 23 August 2013 on the consolidated financial statements of the Group for the year ended 31 March 2013 we reported that we were unable to obtain sufficient appropriate audit evidence to determine whether the balances with the De-consolidated Subsidiaries as at 31 March 2012 and 31 March 2013 and transactions with the Deconsolidated Subsidiaries for the years then ended were free from material misstatement. In addition, we were not able to obtain sufficient appropriate audit evidence to determine whether the impairment losses of the amounts due from De-consolidated Subsidiaries and the loss on de-consolidation for the year ended 31 March 2012 were free from material misstatement. Any adjustment found necessary to the carrying amount of the amounts due from Deconsolidated Subsidiaries as at 31 March 2013 would have a consequential impact on the impairment loss of the amounts due from De-consolidated Subsidiaries for the year ended 31 March 2014 and would have affected the net assets and retained earnings as at 31 March 2013 and loss for the years ended 31 March 2013 and 31 March (c) Comparative information The comparative figures disclosed in the consolidated financial statements are based on the audited consolidated financial statements of the Group for the year ended 31 March 2013 in respect of which our auditor s report dated 23 August 2013 expressed an adverse opinion. The matters which resulted in that adverse opinion included (a) de-consolidation of certain subsidiaries and (b) balances due from De-consolidated Subsidiaries, being the same unresolved issues which are set out above. Therefore the comparative figures shown may not be comparable and any adjustments to the opening balances as at 1 April 2013 would have consequential effect on the loss for the year ended 31 March 2014 and/or the net assets of the Group as at 31 March QUALIFIED OPINION In our opinion, except for the effect on the consolidated financial statements of the matters described in parts (a) and (c) of the Basis for Qualified Opinion paragraph and except for the possible effects of the matters described in part (b) of the Basis for Qualified Opinion paragraph, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2014, and of the Group s loss and cash flows for the year then ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance. KPMG Certified Public Accountants 8th Floor, Prince s Building 10 Chater Road Central, Hong Kong 30 June 2014 II-98

155 (c) Year ended 31 March 2015 The Company s auditor, KPMG, has issued a qualified opinion on the consolidated financial statements of the Company for the year ended 31 March 2015 in the auditor s report dated 26 June The detail of the auditor s qualified opinion is extracted below: BASIS FOR QUALIFIED OPINION As disclosed in note 2(a) to the consolidated financial statements, in November 2011, the directors of the Company were made aware of evidence indicating the existence of potential irregularities with respect to certain accounting records and transactions recorded in the books of 惠 州 福 和 紙 業 有 限 公 司 ( Huizhou Fook Woo ), a wholly owned subsidiary of the Group. As a result, in December 2011 the Board of Directors established an independent special committee (the Special Committee ) to investigate these potential irregularities. Based on the Special Committee s investigation, the directors concluded that, among other things, a substantial portion of the accounting books and records of Huizhou Fook Woo for the year ended 31 March 2012 and prior periods were missing. These events led, among other things, to the decision by the directors of the Company that Wealthy Peaceful Company Limited ( Wealthy Peaceful ), the intermediate holding company of Huizhou Fook Woo and itself a wholly owned subsidiary of the Group incorporated in the British Virgin Islands, would commence voluntary liquidation by a resolution of members on 31 January 2013, and the voluntary liquidators were appointed on the same date. In April 2014, the Company was informed by the liquidators of Wealthy Peaceful, that a sale and purchase agreement was entered into between Wealthy Peaceful and an independent third party (the Purchaser ), pursuant to which Wealthy Peaceful agreed to dispose of its entire equity interests in Golddoor Company Limited ( Golddoor ) (the Sale Transaction ). Golddoor holds the entire registered capital of Huizhou Fook Woo. On 27 June 2014, the liquidators of Wealthy Peaceful informed the Company that the Purchaser had remitted the consideration and the Sale Transaction was completed in July Given these circumstances, in preparing the consolidated financial statements for the years ended 31 March 2014 and 31 March 2015, the directors of the Company have excluded Wealthy Peaceful, together with its wholly owned subsidiaries Golddoor and Huizhou Fook Woo (collectively referred to as the De-consolidated Subsidiaries ) from the Group s consolidated financial position, consolidated financial results and consolidated cash flows as from the earliest periods presented. II-99

156 These events and actions taken by the directors of the Company, further details of which are set out in note 2(a), have given rise to the following matters which form the basis for our qualified opinion: (a) Departure from International Financial Reporting Standard 10, Consolidated financial statements Given these circumstances as described in note 2(a) to the consolidated financial statements, the Group presented the amounts due from De-consolidated Subsidiaries as assets and liabilities of disposal group classified as held for sale which were measured at the lower of the carrying amounts and the estimated recoverable amount from the disposal of Golddoor at 31 March The Group recognised an impairment loss of the amounts due from De-consolidated Subsidiaries amounting to HK$431,638,000 for the year ended 31 March 2014 following the assessment of the recoverable amount of amounts due from De-consolidated Subsidiaries. The exclusion of results and cash flows of the De-consolidated Subsidiaries from the consolidated financial statements is a departure from the requirements of International Financial Reporting Standard 10 Consolidated financial statements ( IFRS 10 ) and International Financial Reporting Standard 5 Non-current Assets Held for Sale and Discontinued Operations ( IFRS 5 ). In our auditor s report dated 30 June 2014 on the consolidated financial statements of the Group for the year ended 31 March 2014, we reported the same matter which resulted in qualified opinion. Had the financial results of the De-consolidated Subsidiaries been consolidated as required by IFRS 10 and IFRS 5, the Group would have consolidated and presented the financial results of the De-consolidated Subsidiaries as Discontinued operations for the year ended 31 March 2014 and from 1 April 2014 until the date of disposal in July 2014 and the net cash flows attributable to operating, investing and financing activities of the discontinued operations would have been presented separately in the consolidated statement of cash flows. Given the loss of certain accounting books and records of Huizhou Fook Woo mentioned above, we are unable to ascertain the financial impact of the non-consolidation of the De-consolidated Subsidiaries on the consolidated financial statements. (b) Insufficient audit evidence in respect of balances and transactions with the Deconsolidated Subsidiaries in respect of prior years Because of the loss of certain accounting books and records of Huizhou Fook Woo and the de-consolidation of the De-consolidated Subsidiaries and details as set out in note 2(a) to the consolidated financial statements, in our auditor s report dated 23 August 2013 on the consolidated financial statements of the Group for the year ended 31 March 2013 we reported that we were unable to obtain sufficient appropriate audit evidence to determine whether the balances with the De-consolidated Subsidiaries as at 31 March 2012 and 31 March 2013 and transactions with the De-consolidated Subsidiaries for the years then ended were free from material misstatement. In addition, we were not able to obtain sufficient appropriate audit evidence to determine whether the impairment losses of the amounts due from De-consolidated Subsidiaries and the loss on deconsolidation for the year ended 31 March 2012 were free from material misstatement. In our auditor s report dated 30 June 2014 on the consolidated financial statements of the Group for the year ended 31 March 2014, we reported that this matter remained unresolved and therefore our audit for that year was subject to the same limitation of scope. II-100

157 Our opinion on the current year s financial statements is also modified because of the possible effect of this matter on the comparability of the current year s figures and the corresponding figures. QUALIFIED OPINION In our opinion, except for the effect on the consolidated financial statements of the matters described in part (a) of the Basis for qualified opinion paragraph and except for the possible effects on the corresponding figures of the matters described in part (b) of the Basis for qualified opinion paragraph, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2015, and of the Group s loss and cash flows for the year then ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance. KPMG Certified Public Accountants 8th Floor, Prince s Building 10 Chater Road Central, Hong Kong 26 June 2015 II-101

158 5. INDEBTEDNESS As at the close of business on 30 November 2015, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this Composite Document, the Group had restricted bank deposits of HK$14.5 million. The restricted bank deposits were pledged with banks for issuing guarantees to suppliers to secure materials supply. Save as aforesaid and apart from intra-group liabilities and normal trade and other payables, at the close of business on 30 November 2015, the Group did not have any outstanding loan capital, bank overdrafts, loans, mortgages, charges or other similar indebtedness, hire purchase or finance lease commitments, liabilities under acceptances or acceptance credits, guarantees or other material contingent liabilities. 6. MATERIAL CHANGES The Directors confirm that there has been no material change in the financial or trading position or outlook of the Group since 31 March 2015, being the date to which the latest published audited consolidated financial statements of the Group were made up, up to and including the Latest Practicable Date. II-102

159 I PROPERTY VALUATION REPORT OF THE GROUP February 2016 The Board of Directors Integrated Waste Solutions Group Holdings Limited No. 8 Chun Cheong Street Tseung Kwan O Industrial Estate, New Territories, Hong Kong Dear Sirs, No. 8 Chun Cheong Street Tseung Kwan O Industrial Estate New Territories, Hong Kong In accordance with the instructions from Integrated Waste Solutions Group Holdings Limited (referred to as the Company ) to value the captioned property interests (referred to as the Property ) situated in Hong Kong, we confirm that we have carried out inspection of the Property, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the Property as at 31 December 2015 (the Valuation Date ). Basis of Valuation Our valuation of the Property represents the market value which we would define as intended to mean the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. By virtue of the Agreement of Lease (referred to the Lease ) entered into between The Hong Kong Science and Technology Parks Corporation (formerly known as The Hong Kong Industrial Estates Corporation) (the Lessor ) and IWS Promotion Limited (formerly known as Fook Woo Promotion Limited, the Lessee ), the Lessor agreed to lease the subject land parcel of the Property namely Subsection 3 of Section S of Tseung Kwan O Town Lot No. 39 and Extensions Thereto (the Lot ) to the Lessee for a lease term expiring on 27 June The formal lease agreement shall be executed by both parties upon the fulfillment of all positive covenants stated in the Lease by the Lessor within the prescribed period. During the said lease term, the Property is restricted for the use of comprehensive waste recovery centre comprising highly secured data erasure services centre, paper converting facility, sludge and wastewater treatment laboratory and education center and waste plastic recycling facility. III-1

160 I PROPERTY VALUATION REPORT OF THE GROUP As stipulated in the Lease, in the event that the Lessee is desirous to assign the premises during the lease term, the Lessee should first offer to the Lessor for the surrender of the Lease free from encumbrances and with vacant possession of the premises at one of the following two considerations payable by the Lessor whichever is lower: (i) (ii) 80% of the discounted land premium (the notional premium paid by the Lessee on the commencement of the lease term) for the unexpired term of the Lease plus the depreciated replacement costs of the buildings and structures erected thereon at the rate of depreciation of 5% per annum from the date of the occupation permit for the first building; the total of which reduced by ten percent (the Surrender Value A ); or The market value of the land and the buildings and structures erected thereon as at the date of the Lessor s acceptance of the surrender reduced by ten percent (the Surrender Value B ). In concluding the market value of the Property, we have taken into account the aforesaid surrender conditions as attached to the Company s leasehold interests in the Property. Valuation Methodology In assessing the Surrender Value A of the Property, we have taken into account the nature and scale of the buildings and structures of the Property and have made reference to the tender construction price as prevailing on the valuation date. Depreciated replacement cost of the Property is then arrived at by deducting the accumulated depreciation over the period from the date of the first occupation permit of the Property to the valuation date at a depreciation rate of 5% per annum. In assessing the market value of the Property for the determination of its Surrender Value B, the direct comparison has been employed in the valuation of the property interest by assuming sale of the property interest in its existing state with the benefit of immediate vacant possession and by making reference to comparable sale transactions as available in Hong Kong. This approach rest on the wide acceptance of market price as the best indicator of value and pre-supposes that evidence of recent transactions in the market place can be extrapolated to similar properties, subject to allowance for variable factors. Assumptions Our valuation of the market value of the Property has been made on the assumption that owners sell the Property on the market in its existing state without the benefit of deferred terms contracts, leaseback, joint ventures, management agreements or any similar arrangement which would serve to affect the value of the Property. As the Property is held by the owners by means of long term Government lease, we have assumed that the owners have free and uninterrupted rights to use the Property for the whole of the unexpired term of the Government lease. III-2

161 I PROPERTY VALUATION REPORT OF THE GROUP Other special assumptions for our valuation (if any) would be stated out in the footnotes of the valuation certificate attached herewith. Titleship We have been provided with the relevant documents in relation to the leasehold interests of the Property. We have also obtained land registration details of the Property in the Land Registry. However, we have not verified ownership of the Property and the existence of any encumbrances that would affect its ownership. Information in relation to land registration of the Property is disclosed herein for reference only. Site Inspection The Property was inspected by us on 18 January During the site inspection, we have ascertained the following matters of the Property: the general environment and development conditions of the area in which the Property is situated; the existing use of the Property; the occupancy of the Property; the facilities provided by the Property; the existence of any non-conformity use within the Property; the repair and maintenance conditions of the Property; and the existence of any closure order and resumption order affixed to the Property. Limiting Conditions No allowance has been made in our report for any charges, mortgages or amounts owing on the Property nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the Property is free from encumbrances, restrictions and outgoings of an onerous nature, which could affect its value. We have relied to a very considerable extent on the information given by the Company and have accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements, particulars of occupancy, lettings, and all other relevant matters of the Property. We have carried out inspection of the Property, both externally and internally. However, no structural survey has been made for the Property. In the course of our inspection, we did not note any serious defects. We are unable to report whether the buildings and structures of the Property are free of rot, infestation or any other structural defects. No test was carried out on any of the services of the buildings and structures of the Property. III-3

162 I PROPERTY VALUATION REPORT OF THE GROUP We have had no reason to doubt the truth and accuracy of the information provided to us by the Company. We have also sought confirmation from the Company that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and we have no reason to suspect that any material information has been withheld. Remarks As advised by the Company, the potential tax liabilities which would arise on the disposal of the Property include Hong Kong profits tax and Hong Kong stamp duty on property transactions. There is little likelihood that the potential tax liabilities will crystallize as the Property is held by the Company for business operations and the Company has no intention to sell the Property. In valuing the Property, we have complied with all the requirements contained in Chapter 5 to the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited, Rule 11 of the Codes on Takeovers and Mergers issued by the Securities and Futures Commission and The HKIS Valuation Standards (2012 Edition) published by The Hong Kong Institute of Surveyors. The Property has been valued in Hong Kong Dollar (HK$). Our valuation certificate is attached herewith. Yours faithfully, For and on behalf of Asset Appraisal Limited Tse Wai Leung MFin BSc MRICS MHKIS RPS (GP) Director Tse Wai Leung is a member of the Royal Institution of Chartered Surveyors, a member of The Hong Kong Institute of Surveyors, a Registered Professional Surveyor in General Practice and a qualified real estate appraiser in the PRC. He is on the list of Property Valuers for Undertaking Valuations for Incorporation or Reference in Listing Particulars and Circulars and Valuations in Connection with Takeovers and Mergers of the Hong Kong Institute of Surveyors, Registered Business Valuer under the Hong Kong Business Valuation Forum and has over ten (10) years experience in valuation of Property in Hong Kong, Macau and the PRC. III-4

163 I PROPERTY VALUATION REPORT OF THE GROUP VALUATION CERTIFICATE Leasehold Property held and occupied by the owners Property Description and tenure Particulars of occupancy Market Value in existing state as at 31 December 2015 HK$ No. 8 Chun Cheong Street Tseung Kwan O Industrial Estate New Territories Hong Kong Subsection 3 of Section S of Tseung Kwan O Town Lot No. 39 and Extensions Thereto The Property comprises a parcel of land with an area of 12,277 square metres (sq.m.) falling with the Tseung Kwan O Industrial Estate. It has been developed with a 5-storey workshop / warehouse building (with ancillary offices) completed in The total gross floor area (GFA) of the Property is 30, sq.m.. Floor heights and superimposed loading of each floor level are set out as follows: GFA Floor Height Loading (sq.m.) (metres) (Kpa) G/F 6, /F 5, /F 5, /F 5, /F 5, Roof As at the date of our inspection, the Property was being occupied by the owners as waste treatment plant. 591,558,000 (see note 7 below) A total of 1 container parking space, 18 lorry parking spaces, 29 private carparking spaces and 3 motorcycle parking spaces are provided within the Property. The Tseung Kwan O Industrial Estate which is stretching a total area of approximately 75 hectares is situated at the south-eastern part of Tseung Kwan O. Leveraging on its waterfront sites, the industrial estate is suitable for industries that require marine access. The Property is situated at the northern region within the industrial estate and is nearby the MTR (Lohas) Stations of the Tseung Kwan O line which provides mass transport linkage to various parts of Hong Kong. The Property is held by Company (via its wholly-owned subsidiary) under leasehold interests for a lease term expiring on 27 June 2047 at an annual Government rent charged at 3% of the rateable value of the Property. III-5

164 I PROPERTY VALUATION REPORT OF THE GROUP Notes: 1. The registered owners of the Property is Hong Kong Science and Technology Parks Corporation (formerly known as The Hong Kong Industrial Estates Corporation, the Lessor ) via New Grant No of Tseung Kwan O Town Lot No. 39 (registered via memorial no. SK dated 15 May 2001). 2. By virtue of the Proposal Form dated 8 November 2010 (the Proposal Form ) issued by the Lessee, the Agreement for Lease (registered via memorial no dated 8 November 2010), the Modification of Agreement for Lease (registered via memorial no dated 6 December 2013), the Second Modification of Agreement for Lease (registered via memorial no dated 18 September 2015) and the Second Modification of Proposal Form dated 18 September 2015 all entered into between the Lessor and the Lessee, the Lot is leased by the Lessor to the Lessee for a lease term expiring on 27 June 2047 at a land premium of HK$28,850,950 for the purpose as specified in the Proposal Form (see Note 4 below). 3. Upon completion of all building construction works, plant and machinery installation works and commencement of manufacturing processes in the Property by the Lessee as per the description set out in the Proposal Form within the prescribed period, a formal lease agreement of the Property shall be executed by the Lessor and the Lessee. 4. As stated in the Proposal Form as modified via Second Modification of Agreement for Lease dated 18 September 2015, the purpose of the Property is to set up a comprehensive waste recovery centre comprising highly secured data erasure services centre, paper converting facility, sludge and wastewater treatment laboratory and education center and waste plastic recycling facility. 5. An Occupation Permit No. NT 77/2014(OP) was issued by the Building Authority to the subject building on 17 October The Property is falling within an area zone Other Specified Uses under the Approved Tseung Kwan O Outline Zone Plan (Plan No. S/TKO/22). 7. As stipulated in the Lease, in the event that the Lessee is desirous to assign the premises during the lease term, the Lessee should first offer to the Lessor for the surrender of the Lease free from encumbrances and with vacant possession of the premises at one of the following two considerations payable by the Lessor whichever is lower: (i) (ii) 80% of the discounted land premium (the notional premium paid by the Lessee on the commencement of the lease term) for the unexpired term of the Lease plus the depreciated replacement costs of the buildings and structures erected thereon at the rate of depreciation of 5% per annum from the date of the occupation permit for the first building; the total of which reduced by ten percent (the Surrender Value A ); or The market value of the land and the buildings and structures erected thereon as at the date of the Lessor s acceptance of the surrender reduced by ten percent (the Surrender Value B ). Our opinion of market value of the Property represents the lower amount of the Surrender Value A and Surrender Value B. III-6

165 APPENDIX IV GENERAL INFORMATION 1. RESPONSIBILITY STATEMENT The Directors jointly and severally accept full responsibility for the accuracy of information contained in this Composite Document (other than information relating to the Offeror and parties acting in concert with it) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this Composite Document (other than those expressed by the Offeror and parties acting in concert with it) have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Document, the omission of which would make any statement in this Composite Document misleading. The directors of each of CTF Holding and the Offeror jointly and severally accept full responsibility for the accuracy of information contained in this Composite Document (other than information relating to the Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this Composite Document (other than those expressed by the Group) have been arrived at after due and careful consideration and there are no other facts not contained in this Composite Document, the omission of which would make any statement in this Composite Document misleading. 2. SHARE CAPITAL (a) Share capital of the Company The authorised and issued share capital of the Company as at the Latest Practicable Date was as follows: Authorised: HK$ 5,000,000,000 Shares 500,000, Issued and fully paid: 4,822,334,000 Shares 482,233, All the issued Shares are fully paid up and rank pari passu with each other in all respects including the rights to vote, dividends and return of capital. Since 31 March 2015, the date to which the latest audited consolidated accounts of the Company were made up, and up to the latest Practicable Date, there had not been any new issue of Shares. IV-1

166 APPENDIX IV GENERAL INFORMATION (b) Share Options As at the Latest Practicable Date, the Company had the following Share Options held by the Directors and other eligible participants of the Company: Name or category of participant (i) Directors Date of grant Exercisable period Exercise price per Share HK$ Number of Share Options as at the Latest Practicable Date Cheng Chi Ming, Brian 25 April July April ,197, April April April ,493, April April April ,295,946 Tsang On Yip, Patrick 25 April July April ,757, April April April ,394, April April April ,636,757 Suen Wing Yip 25 April July April ,562, April April April ,906, April April April ,343,784 Tam Sui Kin, Chris 25 April July April ,049, April April April ,624, April April April ,574,730 IV-2

167 APPENDIX IV GENERAL INFORMATION Name or category of participant Date of grant Lau Sai Cheong 25 April 2014 Exercisable period 25 July April 2020 Exercise price per Share HK$ Number of Share Options as at the Latest Practicable Date 1,318, April April April ,295, April April April ,977,568 To Chun Wai 25 April July April ,220, April April April ,051, April April April ,831,081 Nguyen Van Tu, Peter 25 April July April , April April April ,281, April April April ,054 Chow Shiu Wing, Joseph 25 April July April , April April April ,281, April April April ,054 Wong Man Chung, Francis 25 April July April , April April April ,281, April April April ,054 (ii) Other eligible participants 25 April April July April April April ,626,995 6,482, April April April ,889,217 Total 66,221,654 As at the Latest Practicable Date, save for the Share Options as disclosed above, the Company had no outstanding convertible securities, options or warrants in issue which confer any right to subscribe for, convert or exchange into Shares. IV-3

168 APPENDIX IV GENERAL INFORMATION 3. MARKET PRICES The table below shows the closing price of the Shares as recorded on the Stock Exchange on (i) the last trading day of each of the calendar months during the Relevant Period; (ii) the Last Trading Day; and (iii) the Latest Practicable Date: Date Closing price per Share HK$ 30 June July August September October November December 2015 (Last Trading Day) December 2015 suspended from trading 29 January 2016 (Latest Practicable Date) The highest and lowest closing prices of the Shares as quoted on the Stock Exchange during the Relevant Period were HK$0.310 per Share on 30 June 2015 and HK$0.152 per Share on 11 December 2015 and 14 December 2015 respectively. 4. DIRECTORS AND CHIEF EXECUTIVE S INTERESTS OR SHORT POSITIONS IN SHARES AND UNDERLYING SHARES OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS As at the Latest Practicable Date, the interests and short positions of the Directors in the Shares or underlying shares of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in which he was deemed or taken to have under such provisions of the SFO), or which were required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange were as follows: IV-4

169 APPENDIX IV GENERAL INFORMATION Long Position in Share Options Number of Shares Directors Date of grant subject to the Share Exercise price Options per Share HK$ Cheng Chi Ming, Brian 25 April ,986, Tsang On Yip, Partick 25 April ,789, Suen Wing Yip 25 April ,812, Tam Sui Kin, Chris 25 April ,249, Lau Sai Cheong 25 April ,591, To Chun Wai 25 April ,103, Nguyen Van Tu, Peter 25 April ,563, Chow Shiu Wing, Joseph 25 April ,563, Wong Man Chung, Francis 25 April ,563, Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interest and short positions in the shares, underlying shares and debentures of the Company or any associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including the interests and short positions in which they were deemed or taken to have under such provisions of the SFO), or which are required, pursuant to section 352 of the SFO, to be entered in the register maintained by the Company referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, to be notified to the Company and the Stock Exchange. 5. SUBSTANTIAL SHAREHOLDERS INTERESTS OR SHORT POSITIONS IN SHARES AND UNDERLYING SHARES OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS As at the Latest Practicable Date, according to the register kept by the Company pursuant to Section 336 of the SFO and, so far as is known to the Directors, the following persons, other than a director or chief executive of the Company, had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or were directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company: IV-5

170 APPENDIX IV GENERAL INFORMATION Number of Approximate Name of Shareholder Note Capacity Shares held % of interest (Note 5) Cheng Yu Tung Family 1 Interest in a controlled 2,263,151,835 (L) 46.93% (Holdings II) Limited corporation Cheng Yu Tung Family 1 Interest in a controlled 2,263,151,835 (L) 46.93% (Holdings) Limited corporation Chow Tai Fook Capital 1 Interest in a controlled 2,263,151,835 (L) 46.93% Limited corporation CTF Holding 1 Interest in a controlled 2,263,151,835 (L) 46.93% corporation CTF Nominee 1 Interest in a controlled 732,550,000 (L) 15.19% corporation 1 Beneficial owner 1,530,601,835 (L) 31.74% Victory Day Investments 1 Interest in a controlled 732,550,000 (L) 15.19% Limited corporation Smart On Resources Ltd. 1 Beneficial owner 732,550,000 (L) 15.19% City Legend International 2 Beneficial owner 785,100,000 (L) 16.28% Limited Mr. Leung Kai Kuen 2 Interest in a controlled 785,100,000 (L) 16.28% corporation Notes: 1. As at the Latest Practicable Date, CTF Nominee was the beneficial owner of 1,530,601,835 Shares and was interested in 732,550,000 Shares through its interest in its wholly-owned subsidiary, Victory Day Investments Limited, which in turn wholly-owned Smart On Resources Ltd.. CTF Nominee was 99.80% owned by CTF Holding, a 78.58% owned subsidiary of Chow Tai Fook Capital Limited which in turn was owned as to 48.98% and 46.65% by Cheng Yu Tung Family (Holdings) Limited and Cheng Yu Tung Family (Holdings II) Limited, respectively. As such, Cheng Yu Tung Family (Holdings) Limited and Cheng Yu Tung Family (Holdings II) Limited were deemed to be interested in an aggregate of 2,263,151,835 Shares by virtue of the SFO. 2. As at the Latest Practicable Date, Mr. Leung Kai Kuen ( Mr. Leung ) was deemed to be interested in these 785,100,000 Shares held by City Legend International Limited, a corporation wholly-owned by Mr. Leung. IV-6

171 APPENDIX IV GENERAL INFORMATION Save as disclosed above, so far as is known to the Directors, as at the Latest Practicable Date, no person had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, had a direct or indirect interests amounting to 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any members of the Group. 6. ADDITIONAL DISCLOSURE As at the Latest Practicable Date: (a) (b) (c) (d) (e) (f) (g) there was no agreement, arrangement or understanding pursuant to which the Shares and Shares Options to be acquired by the Offeror or any of its concert parties under the Offers would be transferred, charged or pledged to any other persons; no Independent Shareholder or Independent Optionholder prior to the posting of this Composite Document had irrevocably committed themselves to accept or reject the Offers; none of the Offeror and parties acting in concert with it had borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company; no benefit would be or had been given to any Director as compensation for loss of office or otherwise in connection with the Offers; there was (i) no agreement, arrangement or understanding (including any compensation arrangement) existed between the Offeror and parties acting in concert with it and any of the Directors, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Offers; and (ii) no agreement or arrangement between any Directors and any other person which was conditional on or dependent upon the outcome of the Offers or otherwise connected with the Offers; save for those set out in the paragraphs headed Condition of the Offers in the Letter from Halcyon Securities of this Composite Document, there was no agreement or arrangement to which the Offeror was a party which related to the circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Offers; no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or with any person who was an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate in the Takeovers Code or with the Offeror or any of its concert parties, and no such person had dealt for value in any securities in the Company or the Offeror during the Relevant Period; IV-7

172 APPENDIX IV GENERAL INFORMATION (h) (i) (j) (k) (l) none of the Company and the Directors held any shares, convertible securities, warrants, options and derivatives of the Offeror, and none of them had dealt for value in any shares, convertible securities, warrants, options or derivatives of the Offeror during the Relevant Period. Save as disclosed under the section headed Directors and chief executive s interests or short positions in shares and underlying shares of the Company and its associated corporations in this appendix, none of the Directors held any Shares, convertible securities, warrants, options and derivatives of the Company, and none of them had dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period; none of (i) subsidiaries of the Company; (ii) the pension fund of the Company or of a subsidiary of the Company; and (iii) any advisers to the Company (as specified in class (2) of the definition of associate under the Takeovers Code) owned or controlled any Shares, convertible securities, warrants, options or derivatives of the Company, and none of them had dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period; no Shares, convertible securities, warrants, options or derivatives of the Company were managed on a discretionary basis by fund managers connected with the Company and no such fund manager had dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period; none of the Company or the Directors had borrowed or lent any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company; there was no material contract entered into by the Offeror in which any Director had a material personal interest; (m) save for the 2,263,151,835 Shares which CTF Nominee was interested in and the 10,986,486 and 8,789,189 Share Options held by Mr. Cheng Chi Ming, Brian and Mr. Tsang On Yip, Patrick (being parties acting in concert with the Offeror) respectively, none of the directors of the Offeror and the Offeror and parties acting in concert with it owned or controlled or were interested in any Shares, convertible securities, warrants, options or derivatives of the Company and none of them had dealt for value in any Shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period; and (n) other than those Share Options held by Mr. Cheng Chi Ming, Brian and Mr. Tsang On Yip, Patrick (being parties acting in concert with the Offeror) which are not subject to the Option Offer, all the other Directors who are Optionholders intend to accept the Option Offer in respect of their own beneficial holdings of Share Options and none of the Directors were interested in any Shares. IV-8

173 APPENDIX IV GENERAL INFORMATION 7. DIRECTORS SERVICE CONTRACTS (a) (b) (c) Mr. Cheng Chi Ming, Brian has entered into a letter of appointment with the Company, and his current term of office is 3 years commencing on 1 January He is also subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Articles of Association. Pursuant to the said letter of appointment, Mr. Cheng is entitled to receive an annual director s fee and chairman s fee of HK$720,000 in total, which was determined by the Board by reference to his time commitment and responsibilities as well as the then prevailing market conditions. Mr. Cheng is also eligible to participate in the share option scheme of the Company. Mr. Tsang On Yip, Patrick has entered into a letter of appointment with the Company dated 27 October 2015 to renew his earlier letter of appointment dated 28 December 2012, which expired on 31 October 2015, and his current term of office is 3 years commencing on 1 November He is also subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Articles of Association. His annual director s fee remains unchanged at HK$360,000, which was determined by the Board by reference to his time commitment and responsibilities as well as the then prevailing market conditions. Mr. Tsang is also eligible to participate in the share option scheme of the Company. Mr. Suen Wing Yip has entered into a service agreement with the Company dated 12 March 2015 as supplemented by a supplemental agreement dated 31 December 2015, and his current term of office is 3 years commencing on 16 March He is also subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Articles of Association. His annual director s fee remains unchanged at HK$360,000 but his annual salary has been adjusted from HK$2,990,000 to HK$2,400,000 with effect from 1 January 2016, which was determined by the Board by reference to his time commitment and responsibilities as well as the then prevailing market conditions. Mr. Suen is also eligible to participate in the share option scheme of the Company. (d) Mr. Tam Sui Kin, Chris has entered into a service agreement with the Company dated 30 September 2013 as supplemented by a supplemental agreement dated 31 December 2015, and his current term of office is 3 years commencing on 30 September He is also subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Articles of Association. His annual director s fee remains unchanged at HK$360,000 but his annual salary has been adjusted from HK$1,664,000 to HK$1,920,000 with effect from 1 January 2016, which was determined by the Board by reference to his time commitment and responsibilities as well as the then prevailing market conditions. Mr. Tam is also eligible to participate in the share option scheme of the Company. IV-9

174 APPENDIX IV GENERAL INFORMATION (e) (f) Mr. Lau Sai Cheong has entered into a letter of appointment with the Company, his current term of office is 3 years commencing on 9 March He is also subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Articles of Association. Pursuant to the said letter of appointment, Mr. Lau is entitled to receive an annual director s fee of HK$360,000, which was determined by the Board by reference to his time commitment and responsibilities as well as the then prevailing market conditions. Mr. Lau is also eligible to participate in the share option scheme of the Company. Mr. To Chun Wai has entered into a letter of appointment dated 8 September 2015 ( Mr. To s Existing LOA ) in substitution of the service contract with the Company dated 8 April 2013 ( Mr. To s Previous Service Contract ), and his current term of office is 3 years commencing on 9 September He is also subject to retirement by rotation and reelection at the annual general meeting of the Company in accordance with the Articles of Association. Under Mr. To s Previous Service Contract, Mr. To as executive Director was entitled to receive an annual director s fee of HK$360,000 and an annual salary of HK$2,080,000. Pursuant to the Mr. To s Existing LOA, Mr. To as non-executive Director is entitled to receive an annual director s fee of HK$360,000, which was determined by the Board by reference to his time commitment and responsibilities as well as the then prevailing market conditions. Mr. To is also eligible to participate in the share option scheme of the Company. Save as disclosed above, as at the Latest Practicable Date, none of the Directors had any service contracts with the Company or any of its subsidiaries or associated companies in force (i) which (including both continuous and fixed term contracts) had been entered into or amended within 6 months before the date of the Joint Announcement; (ii) which is a continuous contract with a notice period of 12 months or more; or (iii) which is a fixed term contract with more than 12 months to run irrespective of the notice period. 8. LITIGATION Save as disclosed below, as at the Latest Practicable Date, the Group was not engaged in any litigation, claims or arbitration of material importance, and so far as the Directors are aware, no litigation, claim or arbitration of material importance is pending or threatened by or against the Group. (a) High Court Action 1764 of 2013 On 17 September 2013, the Company commenced legal proceedings against: (i) Leung Kai Kuen ( 梁 契 權 ), (ii) Leung Tat Piu ( 梁 達 標 ), (iii) Cheng Chun Keung, Thomas ( 鄭 振 強 ), (iv) Ing Alan ( 吳 礽 浩 ), (v) Mak Sau Ling and (vi) Wong Sze Chung Armstrong (the defendants set out above, together, the HCA1764/2013 Defendants ) in the Court of First Instance of the High Court of Hong Kong, claiming the sum of HK$30,712,531, alleged that the HCA1764/2013 Defendants were negligent and failed to perform their respective duties to inform, advise, remind and protect the Company to set up an affective financial monitoring system, causing loss and damages to the Company in the course of transferring monies to 惠 州 福 和 紙 業 有 限 公 司 ( Huizhou Fook Woo ), an indirect wholly-owned subsidiary of the Company at the material time, through two new agents which did not have any business connections with the Company or Huizhou Fook Woo. The Company has filed an amended-statement of claim on 7 July IV-10

175 APPENDIX IV GENERAL INFORMATION (b) High Court Action 1973 of 2013 On 16 October 2013, the Company commenced legal proceedings against Bai Li ( 白 俐 ) (the HCA1973/2013 Defendant ) in the Court of First Instance of the High Court of Hong Kong, claiming the sum of HK$34,219,658, in connection with the misappropriation of monies to be transferred to Huizhou Fook Woo by the HCA1973/2013 Defendant. As stated in the writ issued by the Company, between April 2011 and March 2012, the Company transferred and/or procured its subsidiary to transfer monies to the HCA1973/2013 Defendant s bank account in the PRC and subsequent to the said transfer by the Company, the HCA1973/2013 Defendant should transfer the relevant monies into the bank account of Huizhou Fook Woo. As such, the HCA1973/2013 Defendant was and is holding the monies on trust for the Company. However, upon receipt of the monies, the HCA1973/2013 Defendant has wrongfully refused and/or failed to transfer the said monies or any part thereof to Huizhou Fook Woo. (c) High Court Action 1974 of 2013 On 16 October 2013, the Company commenced legal proceedings against Liang Hui Zhen ( 梁 惠 珍 ) (the HCA1974/2013 Defendant ) in the Court of First Instance of the High Court of Hong Kong, claiming the sum of HK$92,844,401, in connection with the misappropriation of monies to be transferred to Huizhou Fook Woo by the HCA1974/2013 Defendant. As stated in the writ issued by the Company, between April 2011 and March 2012, the Company transferred and/or procured its subsidiary to transfer monies to the HCA1974/2013 Defendant s bank accounts in the PRC and subsequent to the said transfer by the Company, the HCA1974/2013 Defendant should transfer the relevant monies into the bank account of Huizhou Fook Woo. As such, the HCA1974/2013 Defendant was and is holding the monies on trust for the Company. However, upon receipt of the monies, the HCA1974/2013 Defendant has wrongfully refused and/or failed to transfer the said monies or any part thereof to Huizhou Fook Woo. (d) High Court Action 1976 of 2013 On 16 October 2013, the Company commenced legal proceedings against Cai Xiaoyun ( 蔡 曉 雲 ) (the HCA1976/2013 Defendant ) in the Court of First Instance of the High Court of Hong Kong, claiming the sum of HK$32,915,129, in connection with the misappropriation of monies to be transferred to Huizhou Fook Woo by the HCA1976/2013 Defendant. As stated in the writ issued by the Company, between April 2011 and March 2012, the Company transferred and/or procured its subsidiary to transfer monies to the HCA1976/2013 Defendant s bank account in the PRC and subsequent to the said transfer by the Company, the HCA1976/2013 Defendant should transfer the relevant monies into the bank account of Huizhou Fook Woo. As such, the HCA1976/2013 Defendant was and is holding the monies on trust for the Company. However, upon receipt of the monies, the HCA1976/2013 Defendant has wrongfully refused and/or failed to transfer the said monies or any part thereof to Huizhou Fook Woo. IV-11

176 APPENDIX IV GENERAL INFORMATION (e) High Court Action 2377 of 2013 On 6 December 2013, the Company commenced legal proceedings against: (i) Leung Kai Kuen ( 梁 契 權 ), (ii) Liang Huizhen ( 梁 惠 珍 ), (iii) Wong Sze Chung Armstrong, (iv) Tam Wai Ming ( 譚 偉 明 ) (Leung Kai Kuen, Liang Huizhen, Wong Sze Chung Armstrong and Tam Wai Ming, together, the 1st to 4th HCA2377/2013 Defendants ) and (v) Roma Appraisals Limited ( 羅 馬 國 際 評 估 有 限 公 司 ) (the 5th HCA2377/2013 Defendant ) in the Court of First Instance of the High Court of Hong Kong, claiming the sum of (i) HK$18,625,222 (against the 1st to 4th HCA2377/2013 Defendants); and (ii) HK$40,000 (against the 5th HCA2377/2013 Defendant). As stated in the writ issued by the Company, it was alleged that the 1st to 4th HCA2377/2013 Defendants were in breach of their respective duties and conspired to commit fraudulent acts leading to the suspension of trading of Shares causing loss and damages to the Company. The claim against, the 5th HCA2377/2013 Defendant had subsequently been settled. (f) High Court Action 1465 of 2014 On 31 July 2014, the Company commenced legal proceedings against: (i) Leung Kai Kuen ( 梁 契 權 ), (ii) Cheng Chun Keung, Thomas ( 鄭 振 強 ), (iii) Shiu Wai Chung ( 蕭 偉 忠 ), (iv) Suntex Paper Machinery Import & Export Company Limited ( 順 昌 紙 制 品 設 備 進 出 口 有 限 公 司 ) and (v) Leung Tat Piu ( 梁 達 標 ) (the defendants set out above, together, the HCA1465/2014 Defendants ) in the Court of First Instance of the High Court of Hong Kong, claiming the sum of HK$104,704,232. As stated in the writ issued by the Company, it was alleged that the HCA1465/2014 Defendants conspired to commit fraudulent acts defrauding and injuring the Company and were in breach of their respective duties leading the Company to transfer monies to its subsidiaries for the purchase of machinery from an Italian company specializing in the manufacture of machineries for processing/handling papers at an inflated price causing loss and damages to the Company. (g) High Court Action 2884 of 2015 On 5 December 2015, the Company as 1st Plaintiff together with Huizhou Fook Woo Paper Company Limited as 2nd Plaintiff commenced legal proceedings against Leung Kai Kuen ( 梁 契 權 ) (the HCA 2884/2015 Defendant ) in the Court of First Instance of the High Court of Hong Kong, claiming the sum of US$17,883, (or its equivalent at around to US$1.00). As stated in the writ issued by the Company and Huizhou Fook Woo Paper Company Limited, it was alleged that the HCA 2884/2015 Defendant under the Contract No entered between the 2nd Plaintiff and Burgeon Limited dated 27 May 2011 for the sale and purchase of a Waste Paper Sorting Machine procured the said sum to be paid by the Plaintiffs as a result of the HCA 2884/2015 Defendant s negligence, breach of his director/ fiduciary/employee s duties and/or equitable duty of fidelity. IV-12

177 APPENDIX IV GENERAL INFORMATION (h) High Court Action 734 of 2015 On 2 April 2015, IWS Waste Management Company Limited (an indirect wholly owned subsidiary of the Company) as Plaintiff commenced legal proceedings against Cheng Chun Keung, Thomas (the HCA 734/2015 Defendant ) in the Court of First Instance of the High Court of Hong Kong, claiming the sum of HK$1,600, As stated in the writ issued by the Plaintiff, it was alleged that the HCA 734/2015 Defendant wrongfully and with intent to injure the Plaintiff and/or cause loss to the Plaintiff, defrauded the Plaintiff and concealed such fraud and the proceeds of such fraud from the Plaintiff. (i) (2015) 深 寶 法 民 四 重 字 第 2 號 On or about 22 September 2015, IWS Waste Management Company Limited (an indirect wholly owned subsidiary of the Company) as Plaintiff commenced legal proceedings against 深 圳 市 濠 江 實 業 有 限 公 司 (the Defendant ) in the Shenzhen Baoan District People s Court, claiming the sum of RMB1,165, being the return of the balance of deposit paid by the Plaintiff to the Defendant under the sale and purchase contract dated 24 January As stated in the writ issued by the Plaintiff, it was alleged that the Plaintiff paid to the Defendant the sum of RMB1,500, being deposit for the purchase of waste paper from the Defendant for the period from 1 January 2013 to 31 December Subsequent to the expiration of the said sale and purchase contract, the Defendant refused to return the said sum to the Plaintiff after deducting the outstanding waste paper purchase money that owed by the Plaintiff to the Defendant. 9. MATERIAL CONTRACTS The following contracts (not being contracts entered into in the ordinary course of business carried on or intended to be carried on by the Company or any of its subsidiaries) were entered into by the members of the Group within the two years preceding the date of the Joint Announcement which are or may be material: (a) (b) the underwriting agreement dated 25 July 2014 entered into between the Company, CTF Nominees and VMS Securities Limited in relation to the underwriting arrangement in respect of the issue of not less than 2,411,167,000 Shares and not more than 2,424,216,000 Shares of HK$0.10 each by way of an open offer by the Company in the proportion of one offer share for every one Share then held by the qualifying shareholders at a subscription price of HK$0.20 per offer share (the Open Offer ); and the letter of undertaking dated 25 July 2014 given by CTF Nominee to the Company and VMS Securities Limited in relation to its irrevocable undertaking to accept the subscription and payment for 488,640,375 offer share under the Open Offer. IV-13

178 APPENDIX IV GENERAL INFORMATION 10. EXPERTS AND CONSENTS The following are the qualifications of the experts who have given opinion or advice contained or referred to in this Composite Document: Name Halcyon Securities Halcyon Capital Veda Capital Asset Appraisal Limited Qualification A corporation licensed to conduct type 1 (dealing in securities), type 2 (dealing in futures contracts) and type 4 (advising on securities) of the regulated activities under the SFO A corporation licensed to conduct type 6 (advising on corporate finance) of the regulated activities under the SFO A corporation licensed to conduct type 6 (advising on corporate finance) of the regulated activities under the SFO Independent professional valuer Each of the above experts has given and has not withdrawn its written consent to the issue of this Composite Document with the inclusion of its letter or report, and/or references to its name in the form and context in which it appears. 11. GENERAL (i) (ii) The registered office address of the Offeror is situated at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The principal members of the Offeror s concert group are: (i) the directors of the Offeror; (ii) CTF Nominee and its directors; (iii) CTF Holding and its directors. The names and addresses of the principal members are as follows: (a) (b) (c) (d) As at the Latest Practicable Date, the board of directors of the Offeror comprised Mr. Tsang On Yip, Patrick, Mr. Cheng Kam Biu, Wilson and Mr. Cheng Chi Ming, Brian. The correspondence address of the Offeror and its directors is 32/F, New World Tower, Queen s Road Central, Hong Kong. As at the Latest Practicable Date, the board of directors of CTF Nominee comprised Dato Dr. Cheng Yu Tung, Dr. Cheng Kar Shun, Mr. Cheng Yu Wai and Mr. Cheng Kam Biu, Wilson. The correspondence address of CTF Nominee and its directors is 31/F, New World Tower, Queen s Road Central, Hong Kong. IV-14

179 APPENDIX IV GENERAL INFORMATION (e) (f) As at the Latest Practicable Date, the board of directors of CTF Holding comprised Dato Dr. Cheng Yu Tung, Dr. Cheng Kar Shun, Mr. Cheng Kar Shing, Mrs. Sun Cheng Lai Ha, Cecilia, Mrs. Doo Cheng Sau Ha, Amy, Mr. Cheng Yu Wai, Mr. Ho Pak To, Dr. Cheng Chi Kong, Adrian, Mr. Cheng Chi Heng, Mr. Wong Kwok Ting, Mr. Cheng Sek Hung, Mr. Chan Sau Kit and Mr. Tsang On Yip, Patrick. The correspondence address of CTF Holding and its directors is 31/F, New World Tower, Queen s Road Central, Hong Kong. (iii) (iv) The registered address of the Company is situated at Clifton House, 75 Fort Street, PO Box 1350, Grand Cayman, KY1 1108, Cayman Islands. Its head office and principal place of business in Hong Kong is situated at Integrated Waste Solutions Building, 8 Chun Cheong Street, Tseung Kwan O Industrial Estate, New Territories, Hong Kong. The company secretary of the Company is Ms. Ng Sum Yu, Phyllis. She is an associate member of the Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Chartered Secretaries, and a lawyer of the Supreme Court of New South Wales, Australia. (v) The Registrar is Tricor Investor Services Limited of Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong. (vi) The registered office of Halcyon Capital and Halcyon Securities is situated at 11/F, 8 Wyndham Street, Central, Hong Kong. (vii) The registered office of Veda Capital is situated at Room 1106, 11/F, Wing On Centre, 111 Connaught Road Central, Hong Kong. 12. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents are available for inspection (i) at the principal place of business of the Company in Hong Kong at Integrated Waste Solutions Building, 8 Chun Cheong Street, Tseung Kwan O Industrial Estate, New Territories, Hong Kong during normal business hours from 9:00 a.m. to 6:00 p.m. on any Business Day; (ii) on the website of the SFC ( and (iii) on the Company s website ( from the date of this Composite Document up to and including the First Closing Date or the close of the Offers, whichever is later: (a) (b) the memorandum of association of the Company and the Articles of Association; the memorandum and articles of association of the Offeror; (c) the annual reports of the Company for the two years ended 31 March 2014 and 2015; (d) the interim report of the Company for the six months ended 30 September 2015; (e) the material contracts referred to in the paragraph headed Material contracts in this appendix; IV-15

180 APPENDIX IV GENERAL INFORMATION (f) (g) (h) (i) (j) (k) (l) the service contracts and letters of appointment referred to in the paragraph headed Directors service contracts in this appendix; the letter from Halcyon Securities, the text of which is set out on pages 6 to 13 of this Composite Document; the letter from the Board, the text of which is set out on pages 14 to 19 of this Composite Document; the letter of recommendation from the Independent Board Committee, the text of which is set out on pages 20 to 21 of this Composite Document; the letter of advice from Veda Capital, the text of which is set out on pages 22 to 43 of this Composite Document; the property valuation report prepared by Asset Appraisal Limited, the text of which is set out in Appendix III to this Composite Document; and the written consents referred to in the paragraph headed Experts and consents in this appendix. IV-16