2016.09 WINSWAY

Company Name: E-Commodities Holdings Limited
Stock Code: 01733
Year end: June 30, 2016

Basis for Qualified Conclusion

(a)  Impairment of other investments in equity securities

As disclosed in note 12 to the interim financial report, as of 30 June 2016, the Group continues to make a full impairment provision of $245,700,000(31 December2015:$250,656,000)against the Group’s investments in certain of these companies, having taken into account the investees’ poor financial performance since 2015, worsening of financial results during the six months ended 30 June 2016, and other indicators of impairment.  We qualified our auditor’sreportdated22 April2016on the Group’s financial statements for the year ended 31 December 2015 in respect of a limitation in the scope of our audit relating to this impairment loss provision.  Given the inherent limitations in the scope of our review, which is by definition substantially less than an audit, we continue to be unable to reach a conclusion as to whether the directors’ judgement in this matter is appropriate and therefore whether the amount of this impairment loss provision is, or is not, in accordance with the applicable accounting framework.

Any decrease in the impairment losses recognised against other investments in equity securities would affect the net assets of the Group as at 30 June 2016 and could also affect the Group’s profit for the six months then ended, opening balance of accumulated losses as at 1 January 2016 and net liabilities as at 31 December 2015 and the related disclosures in the interim financial report.

(b)  Impairment of loan due from a third party

As disclosed in note 13 to the interim financial report, as at 30 June 2016, the Group had an outstanding loan due from Moveday Enterprises Limited (“Moveday”) of US$15.5 million (equivalent to approximately $120,316,000) (31 December 2015: US$20.4 million (equivalent to approximately $158,075,000)). As at 30 June 2016, the Group continues to make an impairment provision of $120,316,000(31 December2015:$120,189,000)having taken into account information about the adverse financial and operating circumstances of Moveday since 2015, and lack of significant improvement over its financial and operating circumstances during the six months ended 30 June 2016, but not the possibility of any recovery that may be achieved in future through re-negotiation of the terms of the loan or alternative forms of settlement in kind. We qualified our auditor’sreportdated22 April2016 on the Group’s financial statements for the year ended31December 2015 in respect of a limitation in the scope of our audit relating to this impairment loss provision.   Given the inherent limitations in the scope of our review, which is by definition substantially less than an audit, we continue to be unable to reach a conclusion as to whether the directors’ judgement in this matter is appropriate and therefore whether the amount of this impairment provision is, or is not, in accordance with the applicable accounting framework.

Any decrease in the impairment losses recognised against this loan balance due from Moveday would affect the net assets of the Group as at 30 June 2016 and could also affect the Group’s profit for the six months then ended, opening balance of accumulated losses as at 1 January 2016 and net liabilities as at 31 December 2015, and the related disclosures in the interim financial report.

Qualified Conclusion

Based on our review, except for the possible effects of the matters 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 June 2016 is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34, Interim financial reporting.

Emphasis of Matter

Without further qualifying our conclusion, we draw attention to note 2 to the interim financial report which describes that the Group has a net cash outflow of $736,740,000 in respect of operating activities for the six months ended 30 June 2016. These conditions, along with other matters as set forth in note 2 to the interim financial report, indicate the existence of a material uncertainty which may cast significant doubt on the Group’s ability to continue as a going concern. The interim financial report has been prepared on a going concern basis, the validity of which depends upon the Group’s ability to generate sufficient cash flows from future operations to cover the Group’s operating costs and to meet its financing commitments. The interim financial report does not include any adjustments that would result should the Group be unable to continue to operate as a going concern.