2016.08 NOVO GROUP

Company Name: Novo Group Ltd.
Stock Code: 01048
Year end: April 30, 2016

BASIS FOR QUALIFIED OPINION

  1. Property, plant and equipment

As disclosed in Note 16 to the financial statements, the Group’s property, plant and equipment as at 30 April 2016 amounted to US$63,154,213 (2015: US$73,131,079). Management determined that no impairment is required on the Group’s property, plant and equipment as their recoverable amounts exceed the net carrying values as at 30 April 2016.

Based on the information available to us, we are unable to obtain sufficient appropriate audit evidence to satisfy ourselves on the reasonableness of the key assumptions and inputs used in the determination of the recoverable amounts of the Group’s property, plant and equipment. Consequently, we are unable to determine whether any adjustments in respect of the net carrying values of the Group’s property, plant and equipment as at 30 April 2016 are necessary.

This matter was similarly included in the Basis for Disclaimer of Opinion paragraphs in our independent auditor’s report on the financial statements for the financial year ended 30 April 2015 where we rendered a disclaimer of opinion on the financial statements.

In addition, a subsidiary, incorporated in The People’s Republic of China, did not translate its property, plant and equipment as at 30 April 2016 into the Group’s presentation currency using the closing rate at the end of the reporting period as required by FRS 21 The Effects of Changes in Foreign Exchange Rates. Had the afore mentioned property, plant and equipment been translated in accordance with FRS 21, the Group’s property, plant and equipment, currency translation reserve, net assets as at 30 April 2016 would decrease by US$4,207,500 respectively. The currency translation differences arising from consolidation and the total comprehensive loss for the financial year will also decrease by US$4,207,500 and increase by US$4,207,500 respectively.

  1. Investments in subsidiaries and amounts due from subsidiaries

As disclosed in Note 18 to the financial statements, the Company’s investments in subsidiaries and amounts due from subsidiaries are carried at cost amounting to US$79,463,169 (2015: US$79,460,123) and US$31,496,647 (2015: US$43,968,458) respectively. Management determined that no impairment is required on the Company’s investments in subsidiaries and amounts due from subsidiaries as their recoverable amounts exceed the net carrying values as at 30 April 2016.

Based on the information available to us, we are unable to obtain sufficient appropriate audit evidence about the recoverable amounts of the Company’s investments in subsidiaries and amounts due from subsidiaries as at 30 April 2016. Consequently, we are unable to determine whether any adjustments in respect of the net carrying values of the Company’s investments in subsidiaries and amounts due from subsidiaries as at 30 April 2016 are necessary.

This matter was similarly included in the Basis for Disclaimer of Opinion paragraphs in our independent auditor’s report on the financial statements for the financial year ended 30 April 2015 where we rendered a disclaimer of opinion on the financial statements.

QUALIFIED OPINION

In our opinion, except for the possible effects of the matters described in the Basis for Qualified Opinion paragraphs, the consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the financial position of the Group and the Company as at 30 April 2016 and the financial performance, changes in equity and cash flows of the Group and the changes in equity of the Company for the financial year ended on that date.

EMPHASIS OF MATTERS

We draw your attention to the following disclosures in the notes to the financial statements:

Going concern

We draw attention to Note 2(a) to the financial statements with respect to the Group’s and the Company’s ability to continue as going concerns. The Group incurred a net loss from continuing operations of US$16,019,142 (2015:US$20,338,181) and reported net cash outflows from operating activities of US$5,952,764 (2015: US$6,653,336), and the Company incurred net loss of US$1,202,737 (2015: US$810,411). At 30 April 2016, the Group’s and the Company’s current liabilities exceeded the current assets by US$23,498,828 (2015: US$55,920,042) and US$1,038,299 (2015: US$12,304,327) respectively.

As disclosed in Note 16 to the financial statements, a subsidiary within the tinplate manufacturing segment has suspended its operations since the previous financial year ended 30 April 2015 and yet to resume its operations as of the date of this report. The Group also breached the covenants clauses of certain borrowings and defaulted on the repayment of instalments of certain borrowings on their respective due dates during the financial year as disclosed in Note 23 to the financial statements. Management is in negotiations with the bank on the refinancing of the bank loan amounting to US$15,500,000 as at 30 April 2016. The Group also has several on-going litigations as at 30 April 2016 as disclosed in Note 30(c) to the financial statements.

These factors indicate the existence of material uncertainties that may cast significant doubt about the Group’s and the Company’s ability to continue as going concerns and to realise their assets and discharge their liabilities in the ordinary course of business. Nevertheless, the directors of the Company believe that the use of the going concern assumption in the preparation and presentation of the financial statements for the financial year ended 30 April 2016 is appropriate after taking into consideration the following factors:

(i) The continuing financial support from the immediate and ultimate holding company to procure the necessary finance and support for a period of not less than twelve months from the date of this report;

(ii) Management has prepared a cash flow forecast and is of the view that the Group will have sufficient cash resources to satisfy its working capital requirements and to meet its obligations as and when they fall due; and

(iii) As disclosed in Note 37 to the financial statements, subsequent to 30 April 2016:

(a) On 23 June 2016, the Company’s wholly-owned subsidiary, Novo Commodities Limited has completed the disposal of a leasehold property in Hong Kong with net carrying value of US$4,888,738 as at 30 April 2016 at the consideration of approximately US$9,010,000 (HK$70,280,000). The expected gain on the disposal of the leasehold property is approximately US$4,121,262; and

(b) On 1 August 2016, the Company has successfully completed the placing of an aggregate of 20,680,000 ordinary shares in the Company at HK$2.32 per ordinary share, with aggregate net proceeds of approximately US$6,008,000 (HK$46,860,000).

The financial statements have been prepared on the assumptions that the Group and the Company will continue as going concerns. If the Group and the Company are unable to continue in operational existence for the foreseeable future, the Group and the Company may be unable to realise their assets and discharge their liabilities in the normal course of business and adjustments may have to be made to reflect the situation that assets may need to be realised other than in the normal course of business and at amounts which could differ significantly from the amounts at which they are currently recorded in the statements of financial position. In addition, the Group and the Company may have to provide for further liabilities that might arise, and to reclassify non-current assets and liabilities as current assets and liabilities. No such adjustments have been made in these financial statements.

Disposal group assets classified as held-for-sale

We draw attention that a subsidiary made an advance of US$5,601,568 to a related party during the current financial year and the advance remained outstanding at the date of this report. As disclosed in Note 13 to the financial statements, this subsidiary has been classified as discontinued operations and disposal group classified as held-for-sale as at 30 April 2016. Accordingly, as at 30 April 2016, the outstanding non-trade advance of US$5,601,568 was included in trade and other receivables of the disposal group assets classified as held-for-sale as disclosed in Note 13(iii)(c) to the financial statements.

Our opinion is not further qualified in respect of the above matters.

Report on Other Legal and Regulatory Requirements

In our opinion, except for the possible effects of the matters described in the Basis for Qualified Opinion paragraphs, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries corporations incorporated in Singapore of which we are the independent auditor have been properly kept in accordance with the provisions of the Act.

2016.08 WUYI PHARMA

Company Name: Wuyi International Pharmaceutical Company Limited
Stock Code: 01889
Year end: June 30, 2016

BASIS FOR QUALIFIED CONCLUSION

As at 30 June 2016, the Group has paid a deposit of RMB52,875,000 for the acquisition of a subsidiary (the “Subsidiary”). The directors are of the opinion, based on the business valuation prepared by a PRC valuer engaged by the vendors, the market value of the Subsidiary as at 31 October 2015 was approximately RMB148,505,000 which exceeds the total consideration amount and that no impairment on deposit paid for the acquisition of a subsidiary is necessary.

The business development of the Subsidiary is still at the early stage and has not yet commenced any principal activities and generate sufficient operating cash flow associated with it. In the absence of information (a) used in the valuation as of 31 October 2015 provided by the vendors and their valuer and (b) update for changes up to date of deposit paid and at the end of the reporting period, we are unable to obtain sufficient reliable evidence to satisfy ourselves as to the (i) correctness of the calculation of the market value of the Subsidiary; (ii) reasonableness of the bases and assumptions used by the valuer in arriving at the business valuation; and (iii) any change considered necessary in the valuation from 31 October 2015 to the date of deposit paid and up to end of the reporting period and consequently as to whether the carrying amount of the deposit paid for the acquisition of a subsidiary is fairly stated and disclosed at the end of the reporting period. Given the inherent limitations in the scope of our review, which is by definition substantially less than an audit, we were unable to reach a conclusion as to whether the directors’ judgement in this matter is appropriate. Any adjustments that might be found to be necessary in respect of the carrying amount of the deposit paid for the acquisition of a Subsidiary as at 30 June 2016 would affect the net assets of the Group as at 30 June 2016 and the Group’s net loss for the six months ended 30 June 2016, and the related disclosures in the interim financial statements.

In our auditor’s report dated 6 April 2016 on the consolidated financial statements for the year ended 31 December 2015, we reported on the same matter which resulted in a qualified opinion. Our conclusion on the current period’s interim financial statements is also modified because of the effect of this matter on the comparative figures as at 31 December 2015 shown in these interim financial statements may not be comparable with the figures as at 30 June 2016.

2016.08 HNA HOLDING

Company Name: HNA Holding Group Co. Limited
Stock Code: 00521
Year end: June 30, 2016

Basis for Qualified Conclusion

As described in Note 7 to the condensed consolidated financial statements, the sales agreement entered into between the Group and Hong Kong Guang Hua Resources Investments Company Limited, an independent third party, in relation to the disposal of certain subsidiaries of the Group (collectively referred to as the “DTV Disposal Group”) lapsed on 30 June 2013. As at 30 June 2016, the directors of the Company were still seeking for a potential buyer for the disposal of the DTV Disposal Group and considered the disposal transaction remained highly probable, however, no formal sales agreement had been concluded as at 30 June 2016. The directors of the Company were of the view that the carrying amounts of the assets included in the DTV Disposal Group were measured in accordance with applicable Hong Kong Financial Reporting Standards (“HKFRSs”) taking into account of the potential disposal.

In the absence of a formal sales agreement and an appropriate valuation as at 30 June 2016 and 31 December 2015, we were unable to obtain sufficient information to assess, as at 30 June 2016 and 31 December 2015, (i) whether the disposal of the DTV Disposal Group was highly probable and the classification of the DTV Disposal Group as held-for-sale in the condensed consolidated financial statements was appropriate; and (ii) whether certain assets included in the DTV Disposal Group were measured in accordance with applicable HKFRSs. We were also unable to obtain sufficient information to assess whether the DTV Disposal Group in its entirety as at 31 December 2014 was measured at the lower of its net assets value and fair value less costs of disposal in accordance with HKFRS 5 “Non-current Assets Held-for-sale and Discontinued Operations” issued by the HKICPA as this could have an impact on the comparative figures reflected in the Group’s condensed consolidated statement of profit or loss and other comprehensive income. There were no other satisfactory procedures that we could adopt to satisfy ourselves as to the recoverable amounts of certain assets included in the DTV Disposal Group as at 31 December 2015 and 30 June 2016, and whether the DTV Disposal Group in its entirety as at 31 December 2014 was measured at the lower of its net assets value and fair value less costs of disposal in accordance with HKFRS 5. Any adjustment to the carrying amounts may have a consequential significant effect on the net assets and the performance of the Group for the relevant financial periods.

The above matters caused us to issue a qualified opinion in respect of the consolidated financial statements for the year ended 31 December 2015 and a disclaimer of review conclusion in respect of the condensed consolidated financial statements for the six months ended 30 June 2015 accordingly.

Qualified Conclusion

Based on our review, except for the possible effects of the matters described in the Basis for Qualified Conclusion paragraphs, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with HKAS 34.

Emphasis of Matter

Without qualifying our conclusion, we draw attention to Note 7(a) to the condensed consolidated financial statements which explains that the Group has entered into a formal sales agreement (the “Agreement”) subsequent to the end of the reporting period with Leader Concept Investments Limited (“Leader Concept”), a company ultimately controlled by the ultimate parent of the Company, to dispose of the DTV Disposal Group to Leader Concept (the “Disposal”). The directors of the Company consider the Disposal is highly probable and are confident that the net proceeds from the Disposal would not be less than the net assets value of the DTV Disposal Group of approximately HK$846,674,000 included in the condensed consolidated financial statements as at 30 June 2016. As at the date of this report, the Disposal is subject to the approval by the independent shareholders of the Company and accordingly, the ultimate outcome of the completion of the Disposal cannot be assessed at this stage. The ultimate outcome of completion of the Disposal may have a consequential impact on the recoverable amount of the DTV Disposal Group in its entirety.

2016.08 IMAGI INT’L

Company Name: Imagi International Holdings Limited
Stock Code: 00585
Year end: June 30, 2016

Basis for Disclaimer of Conclusion

(i) As explained in Note 13 to the condensed consolidated financial statements, the Group has not been able to access the books and records of a wholly owned subsidiary, 廈門盛福明德商務服務有限公司(Xiamen Sunflower Mingde Business Service Co. Ltd. (“Xiamen Sunflower”)) since November 2015 as a result of the loss of contact with a former executive director of the Company who was also the legal representative and sole director of Xiamen Sunflower. Against the background, the investment in Xiamen Sunflower is accounted for on a cost less impairment basis. Also, the Group has not consolidated the financial statements of Xiamen Sunflower for the year ended 31 December 2015 or the period from 1 January 2016 to 9 March 2016 (date of disposal). Under Hong Kong Financial Reporting Standard 10 “Consolidated Financial Statements” issued by the Hong Kong Institute of Certified Public Accountants, consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. The financial statements of Xiamen Sunflower should have been consolidated up to the date of disposal because it was controlled by the Company since its incorporation to the date of disposal and accordingly the condensed consolidated financial statements have not been prepared in all material respects in accordance with HKAS 34. Had Xiamen Sunflower been consolidated, many elements in the condensed consolidated financial statements would have been materially affected. In the absence of reliable financial information of Xiamen Sunflower for the period from 1 January 2016 to the date of disposal, it is not practicable for us to quantify the effects of the departure from this requirement on the condensed consolidated financial statements for the six months ended 30 June 2016, including the amount in relation to the gain or loss on disposal, or to assess whether the disclosures including the potential disclosure of additional contingent liabilities and commitments, with respect to Xiamen Sunflower in the notes to the condensed consolidated financial statements were appropriate.

(ii) As disclosed in Note 15 to the condensed consolidated financial statements, the Board has been unable to locate the agreement governing this purported loan or contact the fund recipient and as such have been unable to confirm the nature of the fund advance. The Group has commenced legal proceedings against the fund recipient for recovery of the fund. Given this circumstance, the Board has provided full provision in respect of this purported short-term loan. Due to the lack of records in respect of the transaction, we were unable to assess whether the fund advances are properly recorded, accounted for and disclosed in the condensed consolidated financial statements.

(iii) As explained in Note 14 to the condensed consolidated financial statements, the management of a joint venture in which the Group held 50% equity interest was unable to obtain sufficient and reliable financial information in respect of a borrower (the “Borrower”) or the guarantor (the “Guarantor”) of a loan receivable, together with its accrued interest acquired by the joint venture during the six months period ended 30 June 2016 for a consideration of HK$27,000,000 (the “Loan Receivable”) to assess the recoverability of the Loan Receivable and the related interest receivable. The Guarantor has received a winding up petition. The Borrower is a subsidiary of the Guarantor and the Guarantor is currently undergoing restructuring. No repayments in respect of the Loan Receivable and the related interest receivable have been received by the joint venture. We were therefore unable to obtain sufficient and reliable financial information in respect of the recoverability of the Loan Receivable and the related interest receivable of HK$29,591,000 as at 30 June 2016. Any adjustment to the carrying amount of the Loan Receivable and the related interest receivable may have consequential effect on the Group’s share of profits of the joint venture for the six months ended 30 June 2016 and the carrying amount of the investment in the joint venture as at 30 June 2016.

The above matters in (i) and (ii) caused auditor to disclaim their opinion on the consolidated financial statements in respect of the year ended 31 December 2015.

DISCLAIMER OF CONCLUSION

Because of the significance of the matters described in the Basis for Disclaimer of Conclusion paragraphs, we have not been able to obtain sufficient appropriate evidence to form a conclusion on the condensed consolidated financial statements. Accordingly, we do not express a conclusion on these condensed consolidated financial statements.

The aforesaid notes 13, 15 and 14 to the condensed consolidated financial statements in the extract from the Independent Auditor’s Report on Review of condensed consolidated financial statements are disclosed in notes 11, 13 and 12 respectively to this announcement.

2016.08 NVC LIGHTING

Company Name: NVC Lighting Holding Limited
Stock Code: 02222
Year end: June 30, 2016

BASIS FOR QUALIFIED CONCLUSION

(a) Impairment of other receivables and uncertainties relating to financial guarantee contracts

As set out in Note 18 to the interim condensed consolidated financial statements, a subsidiary of the Company (the “Subsidiary”) entered into several pledge and guarantee agreements in 2013 and 2014 (the “Pledge and Guarantee Agreements”) with certain banks in the People’s Republic of China (the “PRC”), providing guarantees to the banks for their loan facilities granted to certain borrowers. Counter guarantees were provided by one of the borrowers of the bank loans (the “Borrower”) to the Group. During 2014, aggregate pledged time deposits of RMB550,924,000 had been withdrawn by the banks due to default of the bank loans under the guarantees of the Subsidiary.

The Group initiated legal actions to claim the counter guarantees provided by the Borrower. As at 31 December 2015 and 30 June 2016, other receivables of RMB550,924,000 due from the Borrower were included in “Prepayments, deposits and other receivables” in the interim condensed consolidated statement of financial position as set out in Note 14 to the interim condensed consolidated financial statements. The directors are of the opinion that an amount of RMB265,564,000 (the “Recoverable Amount”) is recoverable as at 31 December 2015 and 30 June 2016, and accordingly a provision for the unrecoverable amount of RMB285,360,000 had been charged in profit or loss of the Group since 2014 and up to 30 June 2016.

As set out in Note 18 to the interim condensed consolidated financial statements, the Subsidiary also entered into guarantee agreements with another PRC bank in 2013 (the “Guarantee Agreement 1”) and a PRC finance company in 2014 (the “Guarantee Agreement 2”) respectively, providing guarantees to the PRC bank and the PRC finance company for their loan facilities granted to their borrowers. The outstanding loans of RMB35,497,000 and RMB34,000,000 in relation to the Guarantee Agreements 1 and 2 were in default in 2015 and 2014 respectively. The PRC bank and the PRC finance company have taken legal actions against the respective borrowers and the guarantors (including the Subsidiary and the Borrower as guarantors) to recover the loan balances and interests. The directors consider that the likelihood of the Group sustaining losses from the Guarantee Agreements 1 and 2 is remote as it is considered that the loans had sufficient underlying securities including the Borrower’s guarantees and the Subsidiary is only one of the guarantors for the loans. As a result, the directors consider that no provision thereon is considered necessary as at 31 December 2015 and 30 June 2016.

However, as the legal proceedings are still in progress, we are not able to assess the likely outcome of the legal proceedings in respect of the amount that the Group would recover from the Borrower’s assets as determined by the court and the amount ultimately to be recovered from the Borrower in connection with the Pledge and Guarantee Agreements, and to determine if any provision arising from the Guarantee Agreements 1 and 2 is necessary. As a result, we are not able to ascertain the recoverability of the Recoverable Amount due from the Borrower and appropriateness of the provision respectively as at 31 December 2015 and 30 June 2016.

Any adjustments to the Recoverable Amount due from the Borrower and any provision to be recognised as at 31 December 2015 and 30 June 2016 would have a consequential impact on the Group’s net assets as at 30 June 2016, and the Group’s financial performance for the six months ended 30 June 2016.

Had we been able to complete our review of the Recoverable Amount due from the Borrower and provision to be recognised as at 31 December 2015 and 30 June 2016, matters might have come to our attention indicating that adjustments might be necessary to the interim financial information.

(b) Provision for loss on financial guarantee contract

As set out in Note 18 to the interim condensed consolidated financial statements, in addition to the agreements as mentioned in the above paragraphs, the Subsidiary entered into a guarantee agreement (the “Guarantee Agreement 3”) with a PRC bank in 2014, providing guarantee to the bank for a loan facility granted to its borrower. The bank loan was in default in 2014 and the bank has taken legal actions against the borrower and the guarantors (including the Subsidiary) to recover the bank loan balance and interest. A court order was issued to freeze assets of the guarantors (including the Subsidiary) in the amount of RMB62,000,000. As a result of the court order, bank balance of the Subsidiary in the amount of RMB54,758,000 and RMB55,076,000 had been frozen by the bank as at 31 December 2015 and 30 June 2016 respectively. The directors consider that the likelihood of the Group sustaining losses from the guarantee is remote as it is considered that the bank loan had sufficient underlying securities and the Subsidiary is only one of the guarantors for the bank loan. The directors believe that the frozen bank balance as included in “Restricted bank balances and short-term deposits” will be released upon the conclusion of the legal proceedings and no provision is considered necessary as at 31 December 2015 and 30 June 2016. In addition, the directors are of the opinion that no provision on any shortfall between the amount to be ultimately settled by the Group under the Guarantee Agreement 3 and the Subsidiary’s frozen bank balance is considered necessary as at 31 December 2015 and 30 June 2016.

However, as the legal proceedings are still in progress, we are not able to assess the likely outcome of the legal proceedings, and accordingly, we are not able to ascertain whether any provision on the frozen bank balance as at 31 December 2015 and 30 June 2016, and any shortfall between the amount to be ultimately settled by the Group under the Guarantee Agreement 3 and the Subsidiary’s frozen bank balance is required to be made as at 31 December 2015 and 30 June 2016.

Any provisions that should have been made as at 31 December 2015 and 30 June 2016 would have a consequential impact on the Group’s net assets as at 30 June 2016, and the Group’s financial performance for the six months ended 30 June 2016.

Had we been able to complete our review of the provisions that should have been made as at 31 December 2015 and 30 June 2016, matters might have come to our attention indicating that adjustments might be necessary to the interim financial information.

QUALIFIED CONCLUSION

Except for the adjustments to the interim financial information that we might have become aware of had it not been for the situation described above, based on our review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with IAS 34.

OTHER MATTER

The comparative figures for the six months ended 30 June 2015 included in the interim financial information were not reviewed in accordance with HKSRE 2410.

2016.08 WISON ENGRG

Company Name: Wison Engineering Services Co. Ltd.
Stock Code: 02236
Year end: June 30, 2016

Basis for qualified conclusion

As set out in note 12 and 11 to the interim financial information, the Group had trade receivables of RMB58,933,000and RMB59,933,000 as at 30 June 2016 and 31 December2015, respectively, and amounts due from contract customers of RMB1,036,851,000 and RMB1,037,066,000 as at 30 June 2016 and 31 December 2015, respectively, which have been identified as overdue in accordance with the contract terms.  We were unable to obtain sufficient evidence on the recoverability of these overdue trade receivables of RMB58,933,000 and RMB59,933,000, and the overdue amounts due from contract customers of RMB1,036,851,000 and RMB1,037,066,000 as at 30 June 2016 and 31 December2015, respectively.  Accordingly, we were unable to satisfy ourselves regarding the adequacy of the impairment provision against the balance of trade receivables and amounts due from contract customers as at 30 June 2016 and 31 December 2015. Any under-provision for these balances would reduce the net assets of the Group as at 30 June 2016 and 31 December2015 and decrease the Group’s net profit for the six months ended 30 June 2016 and the year ended 31 December 2015, respectively.

Qualified conclusion

Except for the possible effects of the matters described in the basis for qualified conclusion paragraph, based on our review, nothing has come to our attention that caused us to believe that the interim financial information as at 30 June 2016 and for the six month then ended is not prepared, in all material respects, in accordance with International Accounting Standard 34 Interim Financial Reporting.

Emphasis of matter

Without further qualifying our conclusion, we draw attention to note 2.1 to the interim financial information.  As at 30 June 2016, the Group’s net current assets amounted to RMB928,481,000.  However, included in the Group’s current assets as at 30 June 2016 were overdue trade receivables and overdue amounts due from contract customers of RMB58,933,000and RMB1,036,851,000, respectively.  These conditions, along with other matters as set forth in note 2.1 to the interim financial information, indicate the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern.

2016.07 CHINA INV FUND

Company Name: China Investment Fund
Stock Code: 00612
Year end: December 31, 2015

BASIS FOR DISCLAIMER OF OPINION

(a) Deposit paid for acquisition of an investment

As set out in note 16(b) to the consolidated financial statement, on 10 September 2015, Grand Dragon Investment Development Limited (“Grand Dragon”), a wholly-owned subsidiary of the Company, entered into a memorandum of understanding (“MOU”) with Qianhai Yun Hui Equity Investment Fund Management Co. Limited (the “Target Company”) pursuant to which Grand Dragon would acquire the entire equity interest of the Target Company which held certain unlisted equity investments in the People’s Republic of China (the “PRC”). A deposit of HK$8,000,000 was paid on signing of the MOU. Subsequent to the MOU, Grand Dragon signed an undated acquisition contract (“Acquisition Contract”) with Ms. Yang Yan (“Ms. Yang”), the sole shareholder of the Target Company, for the acquisition of the Target Company, and another HK$2,000,000 was paid as deposit (in aggregate, the “Deposits”). However, the Group did not complete the due diligence work in the Target Company in accordance with the MOU and the Acquisition Contract and the Company’s management eventually decided to terminate the Acquisition Contract. In February 2016, the Company engaged a PRC lawyer to negotiate with Ms. Yang for the refund of the Deposits.

On 13 May 2016, Ms. Yang (the “Plaintiff”) issued a writ of summon against the Company and Grand Dragon (collectively the “Defendants”) claiming forfeiture of the Deposits on the ground that the Defendants failed to commence the process of due diligence for the Target Company despite repeated requests, and thus have wrongfully repudiated the Acquisition Contract.

As at the date of this report, the Deposits are subject to the litigation claims, details of which are disclosed in note 28 to the consolidated financial statements. Based on the advice from its legal advisor, who took the view that (i) the action initiated by the Plaintiff is at an early stage and (ii) the claim does not have any merit, the Company has not made any provision in respect of such claim in the consolidated financial statements.

As at the date of this report, the above litigation is still in progress and we are not aware of any legal opinion obtained by the Company providing a full analysis on the merits of the claim and the likely outcome of the litigation. In addition, we are unable to ascertain the financial viability of Ms. Yang. As a result, we are unable to obtain sufficient appropriate audit evidence concerning (i) the validity of the Acquisition Contract and therefore the right and obligations of Grand Dragon and the Company, and (ii) the recoverability of the Deposits from Ms. Yang.

In light of the above, we are unable to satisfy ourselves regarding the rights and obligations of Grand Dragon and the Company and the recoverability of the Deposits. There are no alternate audit procedures that we could perform to satisfy ourselves as to the carrying amount of the Deposits or to determine whether any provision for impairment loss is necessary. Any adjustments that might have been found to be necessary in respect of the above would have a consequential significant effect on the net assets of the Group as at 31 December 2015 and its net loss for the year then ended and the related note disclosures to the consolidated financial statements.

(b) Material uncertainty relating to the investigation and impairment loss on available-for-sale financial assets

As disclosed in note 3 to the consolidated financial statements, on 9 October 2015, Profit Winner Investment Holdings Limited (“Profit Winner”), a wholly-owned subsidiary of the Company, entered into a sale and purchase agreement for the acquisition of the entire share capital of Ultra Brave Company Limited (“Ultra Brave”). The sole asset of Ultra Brave was an investment in a commercial acceptance bill with a face value of RMB30,000,000 (the “RMB30M Bill”) and a carrying value of HK$29,232,240 (equivalent to RMB24,000,000). The investment in the RMB30M Bill was acquired by Ultra Brave from a factoring company in the PRC (the “Factoring Company”) pursuant to a transfer agreement (“Transfer Agreement”). It was understood that at the time of the acquisition of Ultra Brave, the RMB30M Bill was physically passed to the Company and kept in its safe. According to the terms of the Transfer Agreement, the Factoring Company was responsible for redeeming the RMB30M Bill on its maturity on 9 April 2016 and would repay Ultra Brave an amount of RMB24,000,000 together with interest calculated at 12% per annum.

On 17 December 2015, the Company made an announcement that the Company was carrying out an investigation into a suspected misappropriation of certain bills of exchange (the “Investigation”) and the Company had reported the matter to the Hong Kong Police. Pending the results of the Investigation, the Company suspended all duties of three non-executive directors of the Company with effect from 16 December 2015. The Company further announced on 23 December 2015 that a special investigation committee (“SIC”) was established for the purposes of addressing the matter of the misappropriation of the bills of exchange.

On 12 January 2016, the Company announced that the suspected misappropriation (the “Incident”) involved an alleged misappropriation of the RMB30M Bill which “took place via the replacement of the RMB30M Bill by three bills of exchange of RMB10 million denomination each” (the “Three RMB10M Bills”). It was also stated that the Company understood from the PRC based drawer bank that the chop of the legal representative appearing on the Three RMB10M Bills did not match with the bank’s records of the chop. In the view of the management of the Company, (i) the Incident appeared to be a standalone incident, (ii) the financial exposure of the Incident to the Company was limited to RMB30 million, (iii) insofar as operations of the Company were concerned the Incident had limited significance on the Company’s operations, and (iv) except for the Incident, there had been no other irregularity with the operations of the Company.

On 17 February 2016, the SIC, on behalf of the Company, engaged an independent accounting firm to conduct an investigation into the Incident. On 3 May 2016, the independent accounting firm submitted an interim report on the investigation (the “Investigation Report”) to the SIC. As at the date of this report, neither the RMB30M Bill nor the Three RMB10M Bills have been redeemed.

On 17 May 2016, the Company announced that, based on the findings of the Investigation Report, the directors of the Company (the “Board”) were of the view that the Three RMB10M Bills were likely to be forged. A summary of the key interim findings of the independent accounting firm is contained in the announcement. The Board further took the view that any action taken by the Company to transfer, redeem or dispose of the Three RMB10M Bills was likely to attract legal consequences. Furthermore, the Board, based on (i) a letter from the issuer of the RMB30M Bill dated 26 April 2016 and (ii) the Company’s understanding and belief, considered that the original RMB30M Bill which was removed from the Company’s possession on 2 November 2015 (and replaced by the Three RMB10M Bills) was likely to be genuine although the independent accounting firm could not ascertain the authenticity of the original RMB30M Bill as the Company currently only has in its possession a copy of the said bill. A majority of the Board also considered that further investigation by the independent accounting firm was unlikely to be able to identify the culprit(s) of the Incident and/or the creator(s) of the Three RMB10M Bills. In the circumstances, the Board considered that it was unnecessary to proceed with any further investigation into the Incident and the SIC should be dissolved. Two directors (who were also members of the SIC) disagreed with the dissolution of the SIC and resigned subsequently. According to the announcement on 17 May 2016, these two directors were concerned that “the contents of the Investigation Report is alarming and further investigation need to be carried out immediately to protect the interests of the Company and also to clarify whether there are any further misbehavior or breach of duty by senior management”. The two directors considered that the investigation should proceed.

The Board considered that the impact of the Incident was HK$29,232,240 (equivalent to RMB24 million) being the cost of investment of the RMB30M Bill as at 31 December 2015. The Board made an impairment loss on the cost of investment of the RMB30M Bill of HK$29,232,240 which was recognised in the consolidated statement of profit or loss for the year ended 31 December 2015.

According to the Company’s announcement on 17 May 2016, the Company had been approached by the legal adviser of the Factoring Company in relation to the redemption of the Three RMB10M Bills but due to possible legal consequences, the Company needed to seek professional advice before it takes any action in respect of the Three RMB10M Bills. It is uncertain whether the Company may be able to seek recovery from the Factoring Company or any third party in respect of the investment. We have not been able to obtain sufficient and satisfactory audit evidence to satisfy ourselves as to the amount, if any, of the impairment loss on available-for-sale financial assets made.

In addition, we were not able to carry out any effective confirmation procedures in relation to the RMB30M Bill or the Three RMB10M Bills. There were no alternate audit procedures that we could perform to satisfy ourselves as to whether the impairment loss of available-for-sale financial assets as recorded in the consolidated financial statements are free from material misstatement. The Board has resolved to dissolve the SIC and not to continue with further investigation. As noted above, two members of the SIC disagreed with the Board’s resolution and subsequently resigned, citing concerns that the findings of the Investigation Report were alarming and casted doubts on certain Directors. In light of the above, we consider that there are material uncertainties as to whether the interim findings by the independent accounting firm may have an impact on the results and the financial position of the Group.

(c) Valuation of available-for-sale investments in Galaxy Automotive MS Inc.

As disclosed in note 15(2)(a) to the consolidated financial statements, on 14 August 2015, the Group acquired 29% equity interest in Galaxy Automotive MS Inc. (“Galaxy AMS”) for a consideration of HK$27,975,000. The vendor had irrevocably and unconditionally guaranteed to the Group that audited consolidated gross profit of the Galaxy AMS for the year ended 31 December 2016 shall be no less than HK$6,500,000 (“Guaranteed Profit”). The Directors of the Company performed a valuation assessment on Galaxy AMS as at 31 December 2015. This was done with reference to a valuation report prepared by an independent valuer company using the income-based approach, profit forecast and financial data provided by the management of Galaxy AMS, and taking into account the Guaranteed Profit provided by the vendor of Galaxy AMS. On this basis, the Directors considered the fair value of the Group’s investment in Galaxy AMS as at 31 December 2015 was HK$15,923,000 and a fair value loss on revaluation of available-for-sale financial assets of HK$12,052,000 was recognised in the other comprehensive income.

We were not able to obtain sufficient appropriate audit evidence to establish the reasonableness of bases and assumptions in arriving at the valuation of Galaxy AMS. There were no other alternate audit procedures that we could perform to satisfy ourselves that the fair value of the Group’s investment in Galaxy AMS as at 31 December 2015 was free from material misstatement. Any adjustments that might have been found to be necessary in respect of the above would have a consequential significant effect on the Group’s net assets as at 31 December 2015 and the other comprehensive income for the year then ended and the related note disclosures to the consolidated financial statements.

(d) Valuation of available-for-sale investments in Mountain Gold Holdings Inc.

As disclosed in note 15(2)(b) to the consolidated financial statements, on 19 October 2015, the Group acquired 6.4% equity interest in Mountain Gold Holdings Inc. (“Mountain Gold”) at a consideration of HK$50,000,000. Mountain Gold indirectly holds a mining license called Jinping County Jinchangxi-Bize Gold Mine (“Mining License”) and an exploration license called Jinping County Shierpan Gold Detailed Exploration Property (“Exploration License”), both located in Guizhou Province, the PRC. These are the sole and only assets of Mountain Gold. However, the Mining License expired in July 2015 and Exploration License expired in May 2016. Mountain Gold’s operation is currently suspended as the mines are subject to the mine merger and consolidation plans as required by Guizhou Provincial Government. The management of Mountain Gold is in the process of applying for renewal of the Licenses with the relevant PRC government authorities, and up to the date of this report, the process has not been concluded and Mountain Gold has not yet been able to renew the Mining License and Exploration License. It is uncertain that the mining operation will be re-commenced in the near future. In accordance with the sale and purchase agreement between a wholly-owned subsidiary of the company, the vendor and the shareholder of the vendor, the shareholder of the vendor has agreed to guarantee the performance of the obligations of the vendor.

The directors of the Company performed a valuation assessment on its investment in Mountain Gold as at 31 December 2015, with reference to the valuation report prepared by an independent valuer company using the market approach. The fair value of the Group’s investment in Mountain Gold was valued at HK$52,214,634 and therefore a fair value gain on revaluation of available-for-sale financial assets of HK$2,214,634 was recognised in the other comprehensive income.

The valuation of Mountain Gold was based on the available information obtained and under the assumption that there are valid Mining License and Exploration License. We are not able to obtain sufficient appropriate audit evidence to satisfy ourselves in respect of (i) the prospect of renewing the Mining License and Exploration License, and (ii) whether the mining operation could be re-commenced in the near future. As a result, we are unable to ascertain the reasonableness of the assumptions used in the valuation of Mountain Gold as at the end of the reporting period. There are no other alternate audit procedures that we could perform to satisfy ourselves that the fair value of the Group’s investment in Mountain Gold is free from material misstatement. Any adjustments that might have been found to be necessary in respect of the above would have a consequential significant effect on the Group’s net assets as at 31 December 2015 and the other comprehensive income for the year then ended and the related note disclosures to the consolidated financial statements.

(e) Limitation in scope in respect of representations from the certain directors of the Company

In view of the fact that certain directors had been suspended duties and some had resigned from the Company during the year and up to the date of this report, and the non-response to our request for direct communication, we are unable to satisfy ourselves that information and documentation we had obtained for the purpose of our audit were complete and accurate in relation to above (a) to (d) and subsequent events of the Company. We are not able to quantify the extent of adjustments that might have been necessary, if any, and the impact on the Group’s consolidated financial statements for the year ended 31 December 2015.

DISCLAIMER OF OPINION

Based on the significant matters described in the Basis for Disclaimer of Opinion paragraphs, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the consolidated financial statements, in particular as to whether they give a true and fair view of the financial position of the Group as at 31 December 2015 and of its financial performance and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and as to whether the consolidated financial statements have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

2016.07 ACROSSASIA

Company Name: AcrossAsia Limited
Stock Code: 08061
Year end: December 31, 2015

Basis for adverse opinion

(a) Disagreement – control over PT First Media Tbk (“First Media”)

As stated in Note 5(b) to the consolidated financial statements, First Media, a 55.1% owned subsidiary of the Company, brought proceedings against the Company in Indonesia to recover the debt due under a facility agreement (the “Facility Agreement”) entered into between the Company and First Media on 30th June 2011. On 5th March 2013, the Indonesian Court issued a bankruptcy order (the “Indonesian Bankruptcy Order”) against the Company. On the same date, the Indonesian Court appointed three Indonesian Receivers as receivers and curators of the Company, in bankruptcy (the “Receivers”). However, as advised by the Company’s lawyers, the Company has not been wound up in the Cayman Islands where it is incorporated or in Hong Kong where it has its Head Office and principal place of business. Therefore, the Company’s board of directors continues to have authority to act for the Company outside Indonesia. There have been no significant developments regarding the Indonesian Bankruptcy Order since 2013.

The Company’s investment in First Media is the principal asset of the Company located in Indonesia. Subsequent to the appointment of the Receivers, all assets of the Company including its shares in First Media are vested with the Receivers pursuant to the Indonesian Bankruptcy Law. As a result, the Company is not permitted to sell, transfer, pledge, dispose of or otherwise deal in any manner whatsoever with its assets without obtaining prior approval from the Receivers.

Notwithstanding the aforesaid, the board of directors considers that the Company is still appropriate to consolidate First Media as the Indonesian Bankruptcy Order is yet to be finalised and the Company is vigorously objecting against the Indonesian Bankruptcy Order. Although the Company’s appeal to the Supreme Court of Indonesia against the Indonesian Bankruptcy Order was dismissed on 31st July 2013, the Company filed a final appeal by way of a petition for judicial review against the decision of the Supreme Court of Indonesia (the “Judicial Review”) on 2nd March 2016 which is pending for final determination. Based on the development of the proceedings as stated in Note 44 to the consolidated financial statements and a legal opinion obtained from the Company’s Indonesian lawyer, the board of directors of the Company is of the opinion that they have good grounds for the Company in its Judicial Review against the Indonesian Bankruptcy Order. In the event that the Company’s Judicial Review is successful, the Indonesian Bankruptcy Order will be set aside. Furthermore, even after the Receivers were appointed, the Company’s board of directors has been given full access to the books and records of First Media for purposes of preparation of the consolidated financial statements. In addition, First Media continues to recognise the Company as the parent in First Media’s financial statements. In view of the above, the board of directors considers that the Company should for the time being consolidate First Media despite the Indonesian Bankruptcy Order and the appointment of the Receivers. There have been no significant developments since 2013.

Under International Financial Reporting Standard 10 “Consolidated Financial Statements” (“IFRS 10”), an investor with majority voting rights in an investee cannot have power if the relevant activities are subject to direction by a receiver. Under the Indonesian Bankruptcy Order, all of the Company’s assets including its shares in First Media vest with the Receivers and the Company no longer has the power to deal in its assets without the approval of the Receivers.

We consider that the Company no longer has power over First Media therefore. While the Company is entitled to make a final appeal against the Indonesian Bankruptcy Order, under IFRS 10 the Company’s power over First Media would be reassessed if and when that appeal was successful. Accordingly, we are of the opinion that the Company has lost control over First Media upon the appointment of the Receivers on 5th March 2013. Consequently, First Media ceased to be the subsidiary of the Company with effect from the date of appointment of the Receivers. The assets and liabilities of First Media and its subsidiaries (collectively referred to as “First Media Group”) should have been deconsolidated from the date control of First Media Group ceased on 5th March 2013. However, the consolidated financial statements of the Company and its subsidiaries for the years ended 31st December 2014 and 2015 include the financial position of First Media Group as at 31st December 2014 and 2015 and the results of First Media Group for the years ended 31st December 2014 and 2015. Had First Media Group been deconsolidated, many elements in the consolidated financial statements of the Company and its subsidiaries would have been materially affected. The effects on the consolidated financial statements of the failure to deconsolidate First Media Group have not been determined and disclosed.

(b) Scope limitation – going concern

As disclosed in Note 2 to the consolidated financial statements, the Group incurred a loss of HK$830,680,000 for the year ended 31st December 2015 and as at 31st December 2015 the Group had net current liabilities of HK$1,356,741,000. Furthermore, there were pending garnishee and related proceedings in Hong Kong and Indonesia, details of which are disclosed in Note 44 to the consolidated financial statements.

Notwithstanding the aforesaid, the consolidated financial statements have been prepared on a going concern basis, the validity of which depends on the outcome of the pending garnishee and related proceedings in Hong Kong and Indonesia which materially affects the Group’s ability to secure adequate long term funding to meet its financial obligations as they fall due in the foreseeable future.

Pursuant to the Indonesian Bankruptcy Order, the Company has lost its right to control and manage its assets in Indonesia including its shares in First Media. The Company has filed a petition for Judicial Review to the Indonesian Supreme Court against the Indonesian Bankruptcy Order on 2nd March 2016 (Note 44). The petition is pending the final determination and decision of the Indonesian Supreme Court and the ultimate outcome is uncertain. Accordingly, we have been unable to obtain sufficient appropriate audit evidence to satisfy ourselves that the Group will be able to continue as a going concern.

In view of the above, we are unable to determine whether the directors’ use of the going concern assumption in preparing the consolidated financial statements is appropriate in the circumstances. Should the Group be unable to continue as a going concern, adjustments would have to be made to write down the Group’s assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets and liabilities as current assets and liabilities respectively.

Adverse opinion

In our opinion, because of the significance of the matters described above in the Basis for adverse opinion paragraph, the consolidated financial statements do not give a true and fair view of the financial position of the Company and its subsidiaries as at 31st December 2015, and their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and have not been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance. In all other respects, in our opinion, the consolidated financial statements have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

Other matters

Had we not issued an adverse opinion, we would have issued a disclaimer of opinion in respect of a scope limitation on going concern as set out in part (b) of the Basis for adverse opinion.

2016.07 Z-OBEE

Company Name: Z-Obee Holdings Limited
Stock Code: 00948
Year end: March 31, 2016

BASIS FOR DISCLAIMER OF OPINION

Scope limitation due to incomplete books and record

Up to the date of this report, given the loss of some books and records and serious doubts over the reliability of the Group’s accounting and other records, the directors of the Company believes that, it is almost impossible, and not practicable, to ascertain the correct revenue and profit or loss and the resultant assets and liabilities for the current year as included in the consolidated financial statements of the Group. Also, due to loss of some books and records, the directors of the Company believe that it is almost impossible, and not practicable, to verify the financial information as reported in the consolidated financial statements of the Group for past years. In addition, during the course of our audit, we were unable to satisfy ourselves that the internal control and documentation provided by the management for the purpose of our audit was accurate in all material respects. We have therefore unable to carry out satisfactory audit procedures to obtain reasonable assurance regarding the completeness, accuracy, existence, valuation, classification and disclosure of the transactions of the Group.

Given these circumstances, there were no practicable audit procedures that we could perform to satisfy ourselves that the information and explanations and documents presented to us for the purpose of our audit are complete and accurate in all material respects, nor to quantify the extent of any adjustments that might be necessary in respect of the Group’s financial information.

As a result, in performing our audit on the consolidated financial statements of the Group for the year ended 31 March 2016, there were no practicable audit procedures that we could perform to satisfy ourselves that whether the balances of assets, liabilities and reserves as at 1 April 2015 and 31 March 2016 were fairy stated.

Any adjustments found to be necessary in respect thereof had we been able to obtain sufficient appropriate audit evidence would have had a consequential effect on the net assets of the Group as at 1 April 2015 and 31 March 2016 and of its profit for the current year and loss for the prior years, and the related disclosures thereof in the consolidated financial statements.

Included in the Company’s statement of financial position is an investment in a subsidiary of US$2,622,935 and US$2,622,935 and due from subsidiaries of US$69,471,270 and US$69,471,270 as at 31 March 2016 and 31 March 2015 respectively. Due to the scope limitations as mentioned above, we are unable to satisfy ourselves as to the fairness of the amounts carried as investment in a subsidiary and the amount due from subsidiaries in the Company’s statements of financial position as at 31 March 2016 or to determine whether any provision for impairment loss is necessary in respect of the above. Any adjustments would have a consequential effect on the net assets of the Company as at 31 March 2016 and 31 March 2015 and of its net loss for the years then ended and the related disclosures in the consolidated financial statements.

Our audit opinion on the Group’s financial statements for the year ended 31 March 2015 was also disclaimed accordingly.

Non-compliance with International Financial Reporting Standards and omission of disclosures

As explained in note 2.2 to the financial statements, as the consolidated financial statements of the Group have been prepared by the directors based on incomplete books and records and the directors believe they are almost impossible and not practical to ascertain the correct amounts. Consequently, the directors of the Company were unable to represent that the financial statements comply with International Financial Reporting Standards (“IFRSs”), or that the disclosure requirements of the Hong Kong Companies Ordinance and the Listing Rules have been complied with. Given these circumstances, there were no practicable audit procedures that we could perform to quantify the extent of adjustments that might be necessary in respect of the Group’s financial statements.

Our audit opinion on the Group’s financial statements for the year ended 31 March 2015 was also disclaimed accordingly.

Material uncertainty related to going concern basis

In forming our opinion, we have considered the adequacy of the disclosures made in note 2.2 to the financial statements which explains that the Resumption Proposal was submitted to the Stock Exchange on 19 July 2015. On 14 August 2015, the Company received a decision letter from the Listing Committee that the Resumption Proposal was considered not viable and the Company was placed in the third delisting stage under Practice Note 17 to the Listing Rules. On 24 August 2015, the Company requested for a review hearing of the Listing (Review) Committee for a ruling of the Listing Committee’s decision.

The review hearing was held on 17 December 2015. On 29 December 2015, the Company received the decision letter of the Listing (Review) Committee advising that the Listing (Review) Committee decided to uphold the Listing Committee’s decision. An announcement was made by the Stock Exchange on 6 January 2016 to place the Company into the third delisting stage with effect on the same day for a period of nine months. The Stock Exchange intends to cancel the listing of the Company after the nine-month period (i.e. 5 October 2016) if the Company does not provide a viable resumption proposal.

The consolidated financial statements have been prepared on a going concern basis on the assumption that the proposed restructuring of the Company will be successfully completed, and that, following the restructuring, the Group will continue to meet in full its financial obligations as they fall due in the foreseeable future. The consolidated financial statements do not include any adjustments that would result from a failure to complete the restructuring. We consider that the disclosures are adequate. However, in view of the extent of the uncertainties relating to the completion of the restructuring, we disclaim our opinion in respect of the material uncertainty relating to the going concern basis.

DISCLAIMER OF OPINION

Because of the significance of the matters described in the basis for disclaimer of opinion paragraphs, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the consolidated financial statements as to whether the consolidated financial statements give a true and fair view of the financial position of the Company and its subsidiaries as at 31 March 2016 and of their financial performance and cash flows for the year then ended in accordance with IFRSs and as to whether the consolidated financial statements have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

2016.07 BAN LOONG HOLD

Company Name: Ban Loong Holdings Limited
Stock Code: 00030
Year end: March 31, 2016

BASIS FOR QUALIFIED OPINION

Limitation of audit scope in relation to impairment assessment of technical knowhow

As at 31 March 2015, the Group had a technical knowhow with a carrying amount of HK$29,000,000. As set out in our report dated 30 June 2015 on the Group’s consolidated financial statements for the year ended 31 March 2015, we were not provided with sufficient appropriate audit evidence to enable us to assess the recoverable amount of the technical knowhow as at 31 March 2015 and our opinion on the Group’s consolidated financial statements for the year ended 31 March 2015 was qualified in such respect.

As further detailed in notes 18 and 36(i), the technical knowhow was derecognised during the year upon the disposal of the subsidiary holding the technical knowhow.

Any adjustment found to be necessary to the carrying amount of the technical knowhow as at 31 March 2015 will have a consequential impact on the loss from discontinued operation of HK$12,384,759 for the year ended 31 March 2016 and the related note disclosures to the consolidated financial statements.

Qualified opinion

In our opinion, except for the possible effect of the matter described in the basis for qualified opinion paragraph above, the consolidated financial statements give a true and fair view of the financial position of the Company and its subsidiaries as at 31 March 2016, and of their financial performance and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.