2017.08 GDC

Company Name: Global Digital Creations Holdings Limited
Stock Code: 08271
Year end: June 30, 2017

Basis for Disclaimer of Conclusion

As disclosed in Note 12 to the interim financial information, according to the framework agreement, the Group has completed properties representing Phase I of 珠影文化產業園(the “Pearl River Film Cultural Park”) which amounted to HK$422,465,000 as at 30 June 2017 and has properties interest under construction to redevelop Phase II of the Pearl River Film Cultural Park in respect of which the original period during which construction was to be completed in accordance with the framework agreement governing the lease of the related land has expired.

As further disclosed in Note 26 to the interim financial information, 珠江電影製片有限公司(“Pearl River Film Production”) as the plaintiff (the “Plaintiff”) has initiated legal proceedings against 廣東環球數碼創意產業有限公司(“Guangdong Cultural Park”), a subsidiary of the Company, in respect of an alleged breach of the framework agreement governing the lease and reconstruction of the related land (the “Alleged Breach”). The Plaintiff has claimed for compensation of damages in the form of economic loss resulting from the Alleged Breach and also demanded to terminate the framework agreement. Guangdong Cultural Park has also filed a counterclaim against the Plaintiff to demand the Plaintiff to continue executing the framework agreement and compensate Guangdong Cultural Park’s damages in the form of economic loss.

Guangdong Cultural Park received the civil judgment issued on 11 October 2016 by 中國廣東省廣州市中級人民法院(the “Civil Judgment”), which declared that the framework

agreement governing the lease and reconstruction of the Pearl River Film Cultural Park was terminated as of 22 March 2016and Guangdong Cultural Park shall pay late payment surcharges for the overdue rental of approximately RMB2,722,000 (equivalent to approximately HK$3,172,000) and Pearl River Film Production, the landlord of the Pearl River Film Cultural Park, is entitled to keep the construction deposit of RMB20,000,000 (equivalent to approximately HK$23,310,000) paid by Guangdong Cultural Park. All other claims made by Pearl River Film Production and the counterclaim made by Guangdong Cultural Park were dismissed.

In November 2016, Guangdong Cultural Park lodged an appeal with 中國廣東省廣州市中級人民法院urging for an order that the civil judgment be set aside and that judgment be entered in favour of Guangdong Cultural Park with costs (the “Appeal”).

During the year ended 31 December 2016, in light of the Civil Judgment, the Group recognised an impairment loss on properties interest under construction and wrote off the construction deposit in respect of the Pearl River Film Cultural Park which amounted to approximately HK$84,467,000 and HK$23,310,000, respectively. Guangdong Cultural Park continues to operate the completed properties. Therefore, for the completed properties and its related rental business representing Phase I of the Pearl River Film Cultural Park, the Group has continued to account for these assets as investment properties which are stated at their fair value of approximately HK$422,465,000 as at 30 June 2017 and record the rentals receivable from lessees as the Group’s revenue of approximately HK$22,835,000 for the six-month period then ended, on the assumption that the legal contractual right to receive the rental income from the lessees and the rental payable to Pearl River Film Production will remain unchanged and the terms and conditions of the framework agreement governing Phase I of the Pearl River Film Cultural Park will continue to be enforceable.

The first court hearing of the Appeal was conducted on 30 March 2017. Subsequent to the first court hearing of the Appeal, both of the Plaintiff’s and Guangdong Cultural Park’s lawyers had further submitted supplementary documents as requested by 中國廣東省高級人民法院.

As of the date of our review report, the Appeal is still in progress and no conclusion has been reached. Depending on the ultimate outcome of the Appeal, there may be significant impacts on multiple elements of the Group’s interim financial information. Amongst other impacts, the Group might be required to derecognise the investment properties, derecognise rental income already reflected as revenue and make provisions for compensation in respect of damages and other costs. However, the ultimate outcome of the Appeal cannot be assessed at this stage. In view of the significant uncertainty relating to the ultimate outcome of the Appeal and its pervasive impact, we disclaim our conclusion in this respect. This also caused us to disclaim our opinion on the consolidated financial statements in respect of the year ended 31 December 2016.

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 interim financial information. Accordingly, we do not express a conclusion on this interim financial information.

We draw attention to the fact that the condensed consolidated statements of profit or loss and other comprehensive income for each of the three-month periods ended 30 June 2017 and 2016 and the relevant explanatory notes disclosed in this interim financial information have not been reviewed in accordance with HKSRE 2410.

2017.07 BAOFENGMODERN

Company Name: Baofeng Modern International Holdings Company Limited
Stock Code: 01121
Year end: December 31, 2016

Basis for disclaimer of opinion

Limitation of Scope – Recognition of certain of the Group’s intangible assets in accordance with International Accounting Standard 38 (IAS 38), “Intangible Assets” issued by the International Accounting Standard Board (the “IASB”)

As disclosed in note 17 to the consolidated financial statements, the Group had incurred certain amount of costs of RMB92,378,000 during the year ended 31 December 2016 and capitalized these costs as intangible assets (labelled as “deferred development costs” in note 17 to the consolidated financial statements) (the “Deferred Development Costs”). The management of the Company represented to us that the Deferred Development Costs were incurred in relation to the research and development of manufacturing and application technology of graphene material on sterilizing chips, energy storage materials for batteries and pressure sensitive lighting devices for shoes and that the payments made in respect of these costs were made during the year ended 31 December 2016 to parties not considered as related parties in accordance with IAS 24 Related Parties Disclosures.

During the course of our audit of the consolidated financial statements of the Group for the year ended 31 December 2016, we were not provided with sufficient appropriate documentary evidence to satisfy ourselves about the bona fide nature of the costs incurred and details of the related development projects for which the costs were incurred. We wer enot provided with satisfactory explanations about the commercial substance of why such development costs were necessary to be incurred and the nature of the related development projects. Furthermore, IAS 38 requires a number of criteria to be satisfied before an entity can recognise development costs as an intangible asset (e.g. technical feasibility of completing the related project and how the costs incurred will generate probable future economic benefits etc.). Due to the lack of supporting documentary evidence, we were not provided with sufficient appropriate evidence regarding how the specified criteria set out in IAS 38 to justify the recognition of the Deferred Development Costs as an intangible asset had been satisfied and hence were not able to justify whether the Deferred Development Costs should be recognised as an intangible asset in accordance with IAS 38. There were no alternative audit procedures to satisfy ourselves concerning these matters.

Any adjustments that might have been found necessary in respect thereof would have a consequential effect on the net assets of the Group as at 31 December 2016, the results of the Group for the year ended 31 December 2016 and the related disclosures thereof in the consolidated financial statements.

Limitation of scope – Impairment assessment of the Group’s intangible assets under International Accounting Standard 36 (IAS 36), “Impairment of assets” issued by the IASB

During the year ended 31 December 2016, an impairment loss of approximately RMB325,616,000 in respect of technology know-how intangible assets was recognised by the Group. The recoverable amounts of the Technology Knowhow and O2O distribution vending system intangible assets were determined based on the management’s estimate of the value-in-use of the cash generating unit in which the technology knowhow and O2O distribution vending system intangible assets belonged, taking into account a valuation using a discounted cash flow approach. The recoverable amount of the Deferred Development Costs was determined based on the management’s own estimate of the value-in-use of the Deferred Development Costs, as described in note 17 to the consolidated financial statements. After the impairment loss recognised by the Group, the aggregate carrying amount of the Group’s intangible assets (labelled as “technology know-how”, “O2O distribution vending system” and “Deferred Development Costs”) as at 31 December 2016 amounted to RMB1,302,378,000 with the impairment loss of RMB325,616,000 being fully allocated by the management of the Company to the technology know-how.

During the year ended 31 December 2016, as represented by the management of the Company, the business models on how to realise the technology knowhow intangible assets had been changed from manufacturing and supplying of EVA foam materials to shoes, slippers and luggage manufacturers, to manufacturing and sales of plastic slippers through O2O distribution vending machines. We have not been able to obtain sufficient appropriate audit evidence to satisfy ourselves that the key assumptions (e.g. bases regarding the related forecasted revenue including the estimated sales prices and estimated sales quantity) adopted in the valuation of the cash generating unit referred to above were reasonable and supportable. The forecasted revenue was based on limited market data and in our view the other key assumptions used in the valuation did not adequately take into account the challenges in the operating environment that the Group will be facing in the future. Also, details on feasibility aspects of the marketing plans of the Intangible Assets provided to us were very limited.

Any deficit of recoverable amount compared to carrying amount would represent an impairment loss in accordance with IAS 36. However, in the absence of sufficient appropriate evidence regarding whether the key assumptions adopted were reasonable and supportable, we were unable to satisfy ourselves as to the appropriateness and sufficiency of the amount of impairment loss made in the consolidated financial statements as well as the allocation of the impairment losses to different classes of intangible assets. Any adjustments that might have been found necessary in respect thereof would have a consequential effect on the net assets of the Group as at 31 December 2016, the results of the Group for the year ended 31 December 2016 and the related disclosures thereof in the consolidated financial statements.

In addition, as the Intangible Assets as stated above were held by various subsidiaries of the Company, any adjustment on the carrying amounts of these assets found to be necessary would also affect the carrying amounts of the Company’s interests in subsidiaries, which amounted to RMB893,338,000 as at 31 December 2016 as disclosed in note 39 to the consolidated financial statements and the amount of the Company’s loss for the year then ended as disclosed in the Company’s statement of changes in equity disclosed in note 39 to the consolidated financial statements.

Material uncertainty in relation to going concern

We draw attention to note 3 to the consolidated financial statements which indicates that the Group incurred a net loss of approximately RMB317,578,000 for the year ended 31 December 2016 and, as of that date, the Group’s current liabilities exceeded its current assets by approximately RMB107,196,000. As explained in note 3 to the consolidated financial statements, these conditions indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not disclaimed on this matter.

Disclaimer of opinion

We do not express an opinion on the consolidated financial statements of the Group. Because of the significance of the matters described in the basis for disclaimer of opinion paragraphs, we are unable to form an opinion as to whether the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2016 and of the Group’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRSs”) issued by the International Accounting Standards Board (the “IASB”). 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.

2017.07 LUMENA NEWMAT

Company Name: China Lumena New Materials Corp.
Stock Code: 00067
Year end: December 31, 2013

Basis for disclaimer of opinion

Scope limitation due to incomplete books and records

Up to the date of this report, given the incomplete books and records and serious doubts over the reliability of the Group’s accounting and other records, the Provisional Liquidators of the Company, acting as agents of the Company (without liability and recourse) believe that, it is almost impossible, and not practical, to ascertain the correct revenue and profit or loss (and the resultant assets and liabilities) for the current year for inclusion in the consolidated financial statements of the Group. Also, due to incomplete books and records, the Provisional Liquidators of the Company could not prepare the consolidated statement of cash flows and calculate the diluted earnings per share for the year ended 31 December 2013 and they believe that it is almost impossible, and not practical, to verify the financial information as reported in the consolidated financial statements of the Group and financial statements of the Company for the past years and, in particular prior to the appointment of the Provisional Liquidators on 25 February 2015. We were therefore unable to carry out satisfactory audit procedures to obtain reasonable assurance regarding the completeness, accuracy, existence, valuation, classification and disclosures of the transactions of the Group and the Company.

Given these circumstances, which are more fully disclosed in note 3 to the consolidated financial statements, there were no practicable audit procedures that we could perform to satisfy ourselves that the information 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 adjustments that might be necessary in respect of the Group’s and the Company’s financial information.

As a result, in performing our audit on the consolidated financial statements of the Group for the year ended 31 December 2013, there were no practicable audit procedures that we could perform to satisfy ourselves whether the balances of assets, liabilities, contingent liabilities, commitments and reserves as at 1 January 2012 and 31 December 2013 were fairly stated.

Included in the Company’s statement of financial position are interests in subsidiaries of RMB9,095,812,000 and RMB10,613,432,000 and loans to subsidiaries of RMB2,385,848,000 and RMB2,424,270,000 as at 31 December 2013 and 31 December 2012 respectively. Due to the scope limitations as mentioned above, we are unable to satisfy ourselves as to the fairness of the amounts carried as interests in subsidiaries and loans to subsidiaries in the Company’s financial statements 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 December 2013 and 31 December 2012 and of its net loss for the years then ended and the related disclosures in the Company’s financial statements.

Any adjustments found to be necessary in respect thereof had we obtained sufficient appropriate audit evidence would have had a consequential effect on the net assets of the Group as at 1 January 2012, 1 January 2013 and 31 December 2013, and on its profit for the years ended 31 December 2013 and 2012, and the related disclosures thereof in the consolidated financial statements.

Non-compliance with IFRSs and omission of disclosures

As explained in note 3 to the consolidated financial statements, as the consolidated financial statements of the Group have been prepared by the Company’s former management and the Provisional Liquidators have presented these financial statements based on incomplete books and records, the Provisional Liquidators believe it is almost impossible and not practicable to ascertain the correct amounts and prepare the consolidated statement of cash flows and calculate the diluted earnings per share. Consequently, the provisional liquidators of the Company were unable to confirm that the consolidated financial statements comply with IFRSs, or that the disclosure requirements of the Hong Kong Companies Ordinance and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited have been complied with. Given these circumstances, which are more fully described in note 3, 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 consolidated financial statements.

Material uncertainty related to going concern basis

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 uncertainty relating to the completion of the restructuring, we disclaim our opinion in respect of the material uncertainty relating to the going concern basis of preparation of these consolidated financial statements.

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 they give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2013, and of the Group’s profit for the year then ended in accordance with IFRSs and as to whether the consolidated financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

2017.07 LOGAN PPT

Company Name: Logan Property Holdings Company Limited
Stock Code: 03380
Year end: December 31, 2016

Basis for qualified opinion

Reference is made the paragraph headed “Basis for qualified opinion” set forth in the section headed “Extract of Independent Auditor’s Report” in the Results Announcement and the Independent Auditor’s Report contained in the Annual Report. KPMG, the external auditor of the Company, raised two issues in its basis for the qualified opinion (collectively, the “Audit Qualifications”) as follows:

(a) Receivables of JVs and subsidiaries: there was insufficient audit evidence to ascertain the nature of the payments of approximately RMB900 million incurred by certain joint ventures (50:50) and paid to third parties to fund the costs for the acquisition of certain urbanization projects, which have been included as receivables as at 31 December 2016. KPMG cannot satisfy itself as to the appropriateness of accounting for these payments as receivables as at 31 December 2016; and

(b) Capital contributions by Pingan Dahua: in the Group’s consolidated financial statements as at 31 December 2016 and 2015, the Company had recognised the transactions relating to the capital contribution agreements entered into by the Group with Shenzhen Pingan Dahua Huitong Wealth Management Co., Ltd. (“Pingan Dahua”) in 2015 and 2016 in relation to the capital contributions made by Pingan Dahua to two subsidiaries of the Group, namely 深圳市龍光駿景房地產開發有限公司(ShenzhenLogan Junjing Real Estate Development Co., Ltd.*) (“

Shenzhen Logan Junjing”) and 惠州大亞灣東圳房地產有限公司(Huizhou Daya Bay Dongzhen Property Co., Ltd.*) (“Huizhou Dongzhen”) as equity transactions. In KPMG’s opinion, this accounting treatment is not in accordance with the requirements of Hong Kong Accounting Standard Financial Statements: Presentation (HKAS32).

2017.07 PRIMEVIEW HLDG

Company Name: Primeview Holdings Limited
Stock Code: 00789
Year end: March 31, 2017

Basis for Disclaimer of Opinion

(a) Scope limitation – Revenue and expenses of E-commerce Business

During the year ended 31 March 2017, the Group has acquired the entire equity interest in Primeview Technology Limited (“PVT”), whose principal activity is developing and selling software related applications which can be purchased by businesses to facilitate e-commerce of their products and services (the “E-commerce Business”).

The revenue generated from the E-commerce Business for the year ended 31 March 2017 amounted to approximately HK$6,117,000 (“Revenue of E-commerce Business”). During the course of our audit, we were informed by the management of PVT that due to most of the communications between the staff of PVT and the customers were conducted verbally, the management did not maintain the supporting documents, in particular, relating to the final form of the user-interface. Accordingly, the directors of the Company were unable to provide us with the relevant supporting documents for the Revenue of E-commerce Business for the year ended 31 March 2017.

Due to lack of supporting documents of the Revenue of E-commerce Business, we were unable to obtain sufficient appropriate audit evidence relating to the Revenue of E-commerce Business included in the profit or loss of the Group. Specifically, we were unable to carry out satisfactory audit procedures to obtain reasonable assurance regarding the occurrence of the Revenue of E-commerce Business recognised as revenue by the Group. 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 financial performance for the year ended 31 March 2017 and the related elements making up the consolidated statement of financial position as at 31 March 2017.

In addition, the Group has recognised certain advertising expenses amounting to approximately HK$21,426,000 and subsequently reversed the same during the year ended 31 March 2017. Due to the inconsistencies in the representation from the management in relation to the above advertising expenses, we were unable to satisfy ourselves regarding the occurrence and completeness of the advertising expenses. Any adjustments that might have been found to be necessary in respect of the above would have a significant effect on the Group’s financial performance for the year ended 31 March 2017 and consequently, the Group’s financial position as at 31 March 2017, and the related disclosures thereof in the consolidated financial statements.

(b) Scope limitation – Valuation and recoverability of goodwill and interests in subsidiaries, and related contingent liabilities

As mentioned above, during the year ended 31 March 2017, the Group has acquired the E-commerce Business. The details of the acquisition of PVT are set out in Note 14. The goodwill arising from the acquisition of PVT, amounting to approximately HK$149,647,000, has been allocated to the E-commerce Business cash-generating unit (“E-commerce Business CGU”).

In accordance with Hong Kong Accounting Standard 36 Impairment of Assets, the management carried out assessment of impairment of the Group’s goodwill and the Company’s interests in subsidiaries as at the reporting date. The impairment assessment has been performed by comparing the carrying amount and the recoverable amount of the E-commerce Business CGU. The recoverable amount of the E-commerce Business CGU has been determined based on a value in use calculation with reference to a professional valuation performed by an independent firm of professionally qualified valuers. The calculation uses cash flow projection based on financial budgets approved by the management (the “Cash Flow Projection”), the historical data and the management experience. As a result of the impairment assessment, impairment loss was recognised by the Group to write down the goodwill to its recoverable amount of HK$141,000,000. Details of which are set out in Note 11.

However, as i) the E-commerce Business only commenced in 2014; ii) the management still experiences certain difficulties in executing the business plan, as budgeted, to achieve their targeted performance; and iii) under the circumstances of limited supporting information and documents to provide us with sufficient appropriate audit evidence regarding the occurrence of the Revenue of E-commerce Business recognised as revenue by the Group, we were unable to satisfy ourselves about the reasonableness of the assumptions made by the management and the feasibility of the business plan applied in the Cash Flow Projection.

In addition, as can be seen from Note 14, no identifiable intangible assets, other assets or liabilities were identified during the purchase price allocation process, other than those already recognised as assets and liabilities by PVT prior to the acquisition date. Due to limited supporting information as described above, we were unable to satisfy ourselves about the reasonableness of the assumptions made by the management of the Group during the purchase price allocation process in arriving at the goodwill arising from the acquisition of PVT.

As a result, we were unable to satisfy ourselves as to whether the carrying amount of the Group’s goodwill of approximately HK$141,000,000 and of the Company’s interests in subsidiaries, which included the cost of investment in PVT amounting to approximately HK$160,000,000, as at 31 March 2017 and whether the impairment of goodwill of HK$8,647,000 recognised in the Group’s profit or loss for the year ended 31 March 2017, were free from material misstatements. In addition, we were unable to satisfy ourselves as to whether the carrying amounts of the Group’s other assets and liabilities were free from material misstatements due to non-recognition of identifiable assets and liabilities of PVT during the purchase price allocation process. Any adjustments that might have been found to be necessary in respect of the above would have a significant effect on the Group’s and the Company’s financial position as at 31 March 2017 and consequently, the Group’s financial performance for the year then ended, and the related disclosures thereof in the consolidated financial statements.

In addition, as disclosed in Note 15, PVT has not registered at the People’s Republic of China local authority for its E-commerce Business (the “PRC Operating Registration Breach”). In this regard, the Group has disclosed the PRC Operating Registration Breach as contingent liabilities. However, the management of the Group is unable to provide us with appropriate evidence as to whether the contingent liabilities were properly assessed and accounted for.

We were unable to perform appropriate audit procedures to satisfy ourselves as to whether the contingent liabilities should have been provided for in the consolidated financial statements of the Group as at the date of acquisition and as at 31 March 2017. 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 financial performance for the year ended 31 March 2017, the related elements making up the consolidated statement of financial position as at 31 March 2017 and the related disclosures thereof in the consolidated financial statements.

(c) Scope limitation – Agency fee income

During the year ended 31 March 2017, the Group has made some sales of fashion accessories and considered that in substance the Group has been acting as an agent in these sales transactions (“Agency Fee Income”). Due to the directors of the Company considered that the Group fulfilled its responsibilities as an agent upon lining up the customers and suppliers, the management did not maintain any relevant supporting documents relating to the delivery and receiptof the goods. Accordingly, the directors were unable to locate the supporting documents for the Agency Fee Income for the year ended 31 March 2017. For the purpose of preparing the consolidated financial statements for the year ended 31 March 2017, there were Agency Fee Income of approximately HK$764,000 included as part of other income in the profit or loss.

Due to lack of supporting documents of the above, we were unable to obtain sufficient appropriate audit evidence and explanations in relation to the above Agency Fee Income included in the profit or loss of the Group for the year ended 31 March 2017, and the related net receivables of approximately HK$11,251,000 as at 31 March 2017 (the “Agency Fee Net Receivables”). Specifically, we were unable to carry out satisfactory audit procedures to obtain reasonable assurance regarding the completeness, accuracy, occurrence, valuation, ownership, classification, disclosures and presentation of the Agency Fee Income for the year ended 31 March 2017 undertaken by the Group. 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 financial performance for the year ended 31 March 2017 and the related elements making up the consolidated statement of financial position as at 31 March 2017.

In addition, we were also unable to satisfy ourselves about the classification and presentation of the corresponding figures of revenue and cost of sales amounting to approximately HK$45,958,000 and HK$44,910,000, respectively, for the year ended 31 March 2016 and trade receivables and trade payables of approximately HK$35,248,000 and HK$35,156,000, respectively, as at 31 March 2016, for the business segment of concurrent design manufacturing of fashion accessories.

(d) Scope limitation – Deposits paid for acquisition of the trademarks

Included in the non-current deposits as at 31 March 2017 was a deposit paid, amounting to approximately HK$31,000,000 (31 March 2016: approximately HK$31,000,000), (the “Deposit”) for the acquisition of trademarks (the “Trademarks”) which were registered in the People’s Republic of China (the “PRC”) in relation to the retailing and distribution business. Pursuant to the agreement dated 27 August 2015 and supplemental agreements dated 24 June 2016 and 1 August 2016 entered into between the Group and the vendor (the “Vendor”), in the event that the titles of the Trademarks are not transferred to the Group, the Vendor shall refund the Deposit in full to the Group. As at 31 March 2017 and up to the date of this preliminary announcement, titles of the Trademarks have not yet been transferred to the Group.

We were unable to obtain sufficient appropriate audit evidence regarding the impairment assessment of the Deposit performed by the management because there was insufficient documentary evidence available for us to satisfy ourselves as to the recoverability of the Deposit. Any adjustments that might have been found to be necessary in respect of the above would have a significant effect on the Group’s financial position as at 31 March 2017 or 31 March 2016 and the Group’s financial performance for the year then ended, and the related disclosures thereof in the consolidated financial statements.

(e) Scope limitation – Certain unknown other receivables and trade and other payables

Included in other receivables and trade and other payables as at 31 March 2016 were certain unknown other receivables amounting to approximately HK$2,687,000, trade payables amounting to approximately HK$2,604,000 and other payables amounting to approximately HK$4,757,000 (collectively, the “Unknown Receivables and Payables”). During the year ended 31 March 2017, the management considered that the Unknown Receivables and Payables were no longer recoverable and payable, respectively. As a result, among the Unknown Receivables and Payables, the unknown other receivables and unknown trade and other payables have been fully written off as expenses and written back as income, respectively, and recorded as part of other gains and losses, net in the profit or loss during the year ended 31 March 2017 (the “Written Off and Written Back”). However, the management was unable to provide any relevant supporting documents and explanations relating to the Unknown Receivables and Payables. We were unable to obtain sufficient appropriate audit evidence regarding the Written Off and Written Back because we were unable to carry out satisfactory audit procedures to obtain reasonable assurance regarding the accuracy and occurrence of the Written Off and Written Back. Any adjustments that might have been found to be necessary in respect of the above would have a significant effect on the Group’s financial position as at 31 March 2017 or 31 March 2016 and on the Group’s financial performance for the year ended 31 March 2017.

In view of the above scope limitations identified, we were unable to determine the reliability of the management representations received by us and relied upon for our audit testing purposes in other areas of our audit procedures and hence of the audit evidence in general.

Disclaimer of Opinion

We were engaged to audit the consolidated financial statements of Primeview Holdings Limited (formerly known as “Artini China Co. Ltd.”) (the “Company”) and its subsidiaries (together, the “Group”) which comprise the consolidated statement of financial position as at 31 March 2017, and the consolidated statement of profit or loss, 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 notes to the consolidated financial statements, including a summary of significant accounting policies.

We do not express an opinion on the consolidated financial statements of the Group. Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these consolidated financial statements, and whether the consolidated financial statements have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

2017.06 INNOVATIVE PHAR

Company Name: nnovative Pharmaceutical Biotech Limited
Stock Code: 00399
Year end: March 31, 2017

BASIS FOR DISCLAIMER OF OPINION

Intangible asset in respect of the in-process research and development project (“In-process R&D”)

As detailed in note 19 of the consolidated financial statements, an impairment assessment was carried out by the management of the Group on the Group’s intangible asset in respect of the In-process R&D involving an oral insulin product (“Product”) with the carrying amount of HK$1,373,224,000 as at 31 March 2017. The carrying amount of the In-process R&D is determined based on the management’s key assumptions which are made with high degree of estimation uncertainties. This carrying amount is highly dependent upon further research and development work that is required to be carried out, results of clinical trials, successful launching of the Product and key assumptions to be applied in preparing a cash flow projection for the sales of the Product.

One of the major assumptions relied on in assessing the carrying amount is the directors’ opinion that the Group will be successful in obtaining the regulatory approvals from the relevant government bodies and launching the Product by the end of 2019. These assumptions are the fundamental factors upon which the entire valuation exercise as to the recoverable amount of the Group’s intangible asset is based.

However, we are unable to obtain sufficient and appropriate audit evidence to support the probability of the Group successfully launching the Product, that is, specifically, the likelihood and timing in obtaining the regulatory approvals from the relevant government bodies to launch the Product by the end of 2019. In the absence of sufficient audit evidence for these fundamental assumptions, we are unable to ascertain the reasonableness of the key assumptions relied on by the management in assessing the recoverable amount of the intangible asset as at 31 March 2017, and to determine whether any impairment on the intangible asset should be recognised.

Any further adjustments to the carrying amount of the intangible asset as described above might have a significant consequential effect on the Group’s consolidated financial position as at 31 March 2017 and of its financial performance for the year then ended, and the related disclosures thereof in the consolidated financial statements.

In addition, included in the amounts due from group companies as shown in note 36 to the consolidated financial statements, the Company has an amount due from its subsidiary, Clear Rich International Limited, amounting to HK$435,200,000 as at 31 March 2017. Clear Rich International Limited indirectly holds 51% equity interest in the subsidiary, Fosse-Bio Engineering Development Limited, which owns the above-mentioned intangible asset as at 31 March 2017. In the absence of sufficient audit evidence supporting that the carrying amount of the intangible asset was fairly stated, we are similarly unable to satisfy ourselves as to whether the carrying amount of the amount due from Clear Rich International Limited as included in the Company’s statement of financial position as at 31 March 2017 can be recoverable, and whether any impairment on the amount due from Clear Rich International Limited should be recognised in the Company’s loss for the year.

DISCLAIMER OF OPINION

We do not express an opinion on the consolidated financial statements of the Group. Because of the significance of the matters described in the “Basis of Disclaimer of Opinion” section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide the basis for an audit opinion on these consolidated financial statements. 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.

2017.06 CHINA HEALTH

Company Name: China Health Group Limited
Stock Code: 00673
Year end: March 31, 2017

BASIS FOR DISCLAIMER OF OPINION

Opening balances, corresponding figures and comparative financial statements

The auditors’ report dated 3 April 2017 in respect of the audit of the consolidated financial statements of the Group for the year ended 31 March 2016 was disclaimed as a result of scope limitation (i) de-consolidation of the De-consolidated Subsidiaries during the year ended 31 March 2016; (ii) lack of supporting documents for certain transactions entered into during the year ended 31 March 2016; (iii) no sufficient appropriate audit evidence for the deposit for the possible acquisition and its recoverability; (iv) lack of supporting documents for dividend payable on redeemable convertible cumulative preference shares; (v) no sufficient appropriate audit evidence and explanations for contingent liabilities and commitment; (vi) no sufficient appropriate audit evidence and explanations for events after the reporting period; and (vii) no sufficient appropriate audit evidence and explanations for related parties transactions. As a result, we were unable to obtain sufficient appropriate audit evidence regarding the opening balances and corresponding figures and there were no alternative audit procedures to satisfy ourselves as to whether the opening balances and corresponding figures were free from material misstatement. Any adjustments that might have been found necessary may have an effect on the Group’s assets and liabilities as at 31 March 2016 and 2017 and its results for the years ended 31 March 2016 and 2017, and the presentation and disclosure thereof in the consolidated financial statements.

As disclosed in note 13, certain subsidiaries of the Group were deconsolidated in prior years due to the change in the Board composition in prior year. Due to circumstances that the consequential effect of the deconsolidated subsidiaries was qualified in prior year and such limitation of audit scope was still unresolved, the Group therefore did not have adequate information as to whether any contingent liabilities, related parties transaction and events after the reporting period should be accounted for and disclosed in the consolidated financial statements of the Group for the year ended 31 March 2017.

We were unable to obtain sufficient appropriate audit evidence regarding contingent liabilities, related parties transaction and events after the reporting period and there were no alternative audit procedures to satisfy ourselves as to whether the contingent liabilities, related parties transaction and events after the reporting period were free from material misstatement.

  1. Transactions of the Group during the year ended 31 March 2017

Following the substantial change in the composition of the board of the Company with effective from 18 June 2016 as disclosed in note 2, the Directors were unable to locate the supporting documents for (i) certain transactions for the year ended 31 March 2017 and (ii) a bank account held by a subsidiary of the Group (“Transactions”). For the purpose of preparing the consolidated financial statements, the Transactions were charged/(credited) to profit or loss for the year ended 31 March 2017 and summarized below:

Transactions included in the consolidated statement of profit or loss

HK$’000
Other income 2,670
Administrative expenses 13,155

Due to the lack of supporting documents of the Transactions, we were unable to obtain sufficient appropriate audit evidence and explanation to the above transactions included in the consolidated financial statements of the Group and the resulting movement in the reserves. We were unable to obtain sufficient appropriate audit evidence regarding the Transactions and bank balances because (i) we were unable to carry out satisfactory audit procedures to obtain reasonable assurance regarding the completeness, accuracy, existence or occurrence, valuation, ownership, classification and disclosures of the Transactions undertaken by the Group; (ii) we were unable to carry out effective confirmation procedure in relation to certain bank balances for the purpose of our audit and no alternative audit procedures that we could perform to satisfy ourselves as to whether certain bank balances were free from material misstatement; and (iii) we were unable to carry out audit procedures that we consider necessary to satisfy ourselves as to the completeness and existence or occurrence of any other significant transactions, inter-group transactions, contingent liabilities, commitments, related party transactions and subsequent events relating to the Group. 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 March 2017 and the financial performance and cash flows of the Group for the year ended 31 March 2017 and may have resulted in additional information being disclosed in the consolidated financial statements as to the nature of the transactions.

  1. Deposit for possible acquisition

Included in the Group’s prepayment, deposits and other receivables as at 31 March 2017 was an earnest money paid for the possible acquisition with a total amount of approximately HK$10,000,000 (the “Earnest Money”).

As disclosed in the announcement of the Company dated 22 January 2016, the Company entered a framework agreement (the “Framework Agreement”) for the possible acquisition on 30 April 2015. Pursuant to the Framework Agreement, the Company has paid the Earnest Money to the procurers under the Framework Agreement, which was intended to be applied to set off part of the cash consideration of the possible acquisition if the formal agreement was concluded. According to the terms of the Framework Agreement, in the event that the formal agreement is not concluded dueto reasons caused by the procurers or the vendors, the Earnest Money shall be refunded to the Company and the procurers shall pay an additional compensation of HK$10,000,000 to the Company. In case the formal agreement is not concluded due to reasons caused by the purchaser or the Company, the Earnest Money shall be forfeited. If the formal agreement is not concluded due to reasons caused by other third parties, the Earnest Money shall be refunded to the Company. On 31 December 2015, the Framework Agreement lapsed. The Company has been in negotiation with the vendors and the procurers for a mutually acceptable settlement for the Earnest Money. Up to the date of the approval of the consolidated financial statement, no conclusion on the settlement of the Earnest Money has been reached by the parties to the Framework Agreement yet.

We were unable to obtain sufficient appropriate audit evidence regarding the Earnest Money because: (i) we were unable to carry out effective confirmation procedures in relation to the Earnest Money for the purpose of our audit; (ii) there was inadequate documentary evidence available for us to satisfy ourselves as to the recoverability of the Earnest Money was appropriate; and (iii) there were no alternative audit procedures that we could perform to satisfy ourselves as to whether the Earnest Money were free from material misstatement.

Any adjustments found to be necessary would have an effect on the Group’s net position as at 31 March 2017 and consequently, the net loss and cash flows of the Group for the year then ended, and the related disclosures thereof in the consolidated financial statements.

  1. Dividend payable on redeemable convertible cumulative preference shares

Included in other payables and accrued expenses was a dividend payable on redeemable convertible cumulative preference shares (the “Dividend Payable”) of approximately HK$30,894,000. As disclosed in note 14 to the Company’s interim report dated 30 November 2015, the Company issued a promissory note in the principal amount of US$4,000,000 (equivalent to approximately HK$30,894,000) to settle the balance of the Dividend Payable (the “Promissory Note”). However, following the substantial change in the composition of the Board effective from 18 June 2016, the Directors were unable to locate and verify the supporting documents for the issuance of the Promissory Note as well as the settlement of the Dividend Payable. Accordingly, the Company reclassified the Promissory Note as the Dividend Payable (the “Re-classification”). As at 31 March 2017, the Company did not recognise any liability in respect of the Promissory Note.

Due to the (i) lack of relevant documentation of the issuance of the Promissory Note, we were unable to validate the existence and validity of the Promissory Note and (ii) justify whether the Re-classification are properly accounted for.

No alternative audit procedures in relation to the Dividend Payable could be performed to satisfy ourselves as to whether the accuracy, classification and disclosures of Dividend Payable as at 31 March 2017 were free from material misstatement. Any adjustments that might have been found necessary may have an effect on the balance of the Group’s net financial position as at 31 March 2017 and the financial performance and cash flows of the Group for the year ended 31 March 2017, and the related disclosures thereof in the consolidated financial statements.

  1. Litigation

As disclosed in note 2, the former Directors and legal representative of Beijing Zhongwei KangHong Hospital Management Co Ltd. (the “Beijing Zhongwei”), an indirect wholly owned subsidiary of the Group, have not handed over all the licenses, stamps and books and records of Beijing Zhongwei to the Existing Management, accordingly the Group was unable to obtain appropriate evidence and explanations as to whether (i) any contingent liabilities and commitments committed by the Group were properly recorded and accounted for; and (ii) any related party disclosures and events after the reporting period were properly recorded, accounted for and disclosed in the consolidated financial statements of the Group for the year ended 31 March 2017

We were unable to perform appropriate audit procedures to satisfy ourselves as to whether (i) the contingent liabilities and commitments; (ii) related parties transactions; and (iii) event after the reporting period for the year ended 31 March 2017 were free from material misstatements. Any adjustments that might have been found necessary may have a consequential effect on the Group’s net assets as at 31 March 2017 and consequently the financial performance and cash flows of the Group for the year ended 31 March 2017, and the related disclosures thereof in the consolidated financial statements.

Had we been able to satisfy ourselves in respect of the matters mentioned in the items (1) to (5) above, adjustments might have been found to be necessary which would have had a consequential impact on the net assets of the Group as at 31 March 2017 and its net loss for the year ended 31 March 2017 and/or the comparative information, and may have resulted in additional information being disclosed in the financial statements as to the nature of these transactions and any material non-adjusting post balance sheet events.

DISCLAIMER OF OPINION

We do not express an opinion on the consolidated financial statements of the Group. Because of the significance of the matters described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these consolidated financial statements. 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.

2017.06 RONGZHONG FIN

Company Name: China Rongzhong Financial Holdings Company Limited
Stock Code: 03963
Year end: March 31, 2017

Basis for Disclaimer of Opinion

We draw attention to note 1 to the consolidated financial statements, which indicates that (a) the Group reported a net loss attributable to the owners of the Company of HK$277,160,000 and had a net operating cash outflow of approximately HK$22,466,000 during the year ended 31 March 2017; (b) the Group’s bank borrowings of RMB87,326,000 (equivalent to HK$98,119,000) were overdue as at 31 March 2017; and (c) if this condition were to be identified as an act of default under the relevant cross-default terms contained in the Group’s other borrowing agreements, this situation would cause an aggregate amount of borrowings up to RMB479,485,000 (equivalent to HK$538,747,000) to become immediately repayable.

In order to improve its liquidity and financial position, the Group has negotiated with the relevant bank to refinance its existing debts and estimates to obtained a sufficient new banking facility in the near future. The Group has also been negotiating with its other bank to avoid cross-default.

However, written and binding new banking facility letter and written agreement of waivers from cross-default have not been executed or received by the Group as at the date of this report.

In addition, we also draw attention to note 16 to the consolidated financial statements which indicates that the majority of the Group’s finance lease receivables were past due as at 31 March 2017. The Group has experienced a significant slow-down in the collection of these receivables and an impairment of HK$373,682,000 has been recognised in respect of the receivables. Although the Group has implemented active collection measures, most of the past due receivables as at 31 March 2017 have not yet been collected as at the date of this report. In the event that the Group is unable to collect these receivables, it may not have sufficient resources to repay its borrowings that fall due in the foreseeable future.

As stated in note 1 to the consolidated financial statements, should the Group be unable to obtain banking facilities to refinance its existing debt; to obtain a formal waiver of cross-default and to collect a substantial amount of the financial lease receivables, the Group would be unable to meet its financial commitments based on the current level of its cash resources. Due to the significance of the uncertainties associated with this matter, we disclaim our opinion in this regard.

Disclaimer of Opinion

We were engaged to audit the consolidated financial statements of China Rongzhong Financial Holdings Company Limited (the “Company”) and its subsidiaries (collectively referred to as “the Group”), which comprise the consolidated statement of financial position as at 31 March 2017, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

We do not express an opinion on the consolidated financial statements of the Group. Because of the significance of the matter described in the Basis for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these consolidated financial statements. 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.

2017.06 BAN LOONG HOLD

Company Name: Ban Loong Holdings Limited
Stock Code: 00030
Year end: March 31, 2017

Bases for Disclaimer of Opinion

(a) De-consolidation of subsidiaries

As disclosed in notes 3 and 36 to the consolidated financial statements, the management of the Company became aware during the current financial year of a civil ruling dated 9 January 2017 (the “First Civil Ruling”) and a civil judgement dated 10 October 2016 (the “Second Civil Judgement”). The First Civil Ruling ordered, inter alia, the freezing of the entire equity holding of Tong Bai County Yin Di Mining Company Limited (“Yin Di Mining”), an indirect subsidiary of the Company, and the mining license owned by Yin Di Mining. The Second Civil Judgement ordered, inter alia, that the equity transfer agreement dated 28 February 2011 signed between Zhengzhou Jinfuyuan Mining Company Limited (“Jinfuyuan Mining”), an indirect subsidiary of the Company, and Henan Guiyuan Industry Co. Ltd (“Henan Guiyuan”) for the transfer of equity of Yin Di Mining for the consideration of RMB28,000,000 payable in cash (the “Equity Transfer Agreement”) be terminated and all equity holding of Yin Di Mining be re-transferred to Henan Guiyuan.

Also, upon searches of public records conducted by the Group’s legal advisers, the management of the Company became aware of a ruling enforcement order dated 23 November 2016 (the “Enforcement Order”) issued by Henan Province Zhengzhou City Intermediate People’s Court (“Zhengzhou Court”) ordering Jinfuyuan Mining to transfer the entire equity holding in Yin Di Mining to Henan Guiyuan. Subsequently, according to the public record searches, the 90% equity interest in Yin Di Mining held by Jinfuyuan Mining was purportedly transferred to Henan Guiyuan on 17 January 2017.

As revealed in the Second Civil Judgement, Henan Guiyuan alleged that Jinfuyuan Mining only paid RMB3,000,000 by way of deposit to Henan Guiyuan between March and November 2011 even though Henan Guiyuan had completed the transfer of the 95% equity of Yin Di Mining to Jinfuyuan Mining in April 2011 in performance of the terms of the Equity Transfer Agreement and that on 30 May 2011, both parties signed a supplemental agreement such that if Jinfuyuan Mining failed to pay the balance of RMB25,000,000 within 60 days, then it shall, inter alia, re-transfer the equity holding in Yin Di Mining to Henan Guiyuan unconditionally and allow the RMB3,000,000 deposit to be forfeited. Henan Guiyuan further alleged that on 18 December 2015, Jinfuyuan Mining signed a declaration and gave it to Henan Guiyuan, confirming that it owed the outstanding consideration to Henan Guiyuan and agreed to re-transfer its equity holding in Yin Di Mining to Henan Guiyuan.

Given the above circumstances, the Group faced obstructions in exercising control over, and gathering information and documents regarding, the De-consolidated Subsidiaries and the Group regards that it has lost control over the entire operations of Yin Di Mining and its subsidiary (collectively, the “De-consolidated Subsidiaries”) and the directors of the Company have determined to exclude the financial position, results and cash flows of the De-consolidated Subsidiaries from the Group’s consolidated financial statements as at and for the year ended 31 March 2017 (the “2017 Consolidated Financial Statements”). Hence the De-consolidated Subsidiaries have been deconsolidated with effect from 1 April 2016 in the 2017 Consolidated Financial statements. The resulting loss arising from the deconsolidation of HK$115,847,836 has been recognised in the consolidated statement of profit or loss and other comprehensive income and the resulting adjustments of approximately HK$908,026 and HK$99,376,259 have been made to the exchange reserve and non-controlling interests respectively.

Under Hong Kong Financial Reporting Standard 10 “Consolidated Financial Statements”, the carrying amounts of assets and liabilities of, and non-controlling interests in, the De-consolidated Subsidiaries should be derecognised from the consolidated financial statements of the Group at the date when control over the De-consolidated Subsidiaries was lost. As at the date of approval for issuance of the 2017 Consolidated Financial Statements, the investigations by the PRC legal advisers into, inter alia, the factual circumstances and the claims and allegations of Henan Guiyuan, as instructed by the Company, was still in progress and the Company is not yet in a position to assess the impact of the First Civil Ruling and Second Civil Judgement on the operations and financial position of the Group. Further, we were unable to gain access to the books and records of the De-consolidated Subsidiaries. Consequently, we were unable to obtain sufficient appropriate audit evidence and explanation to assess the appropriateness of the accounting treatment adopted by the Group of treating the De-consolidated Subsidiaries as subsidiaries of the Group from 2011 onwards and until the date of their deconsolidation. We were also unable to obtain sufficient appropriate audit evidence and explanation to satisfy ourselves as to the date when the Group lost control over the De-consolidated Subsidiaries. Had we been able to assess these matters, many elements in the consolidated financial statements for the current financial year and previous financial years might have been materially affected, including the assets and liabilities of the Group as at 31 March 2016 and 2017, the loss and cash flows of the Group for the years ended 31 March 2016 and 2017, and the related disclosures thereof in the consolidated financial statements.

(b) Amounts due from the De-consolidated Subsidiaries

During the year ended 31 March 2017, the Group recorded an impairment of amounts due from the De-consolidated Subsidiaries of HK$71,145,551 due to the circumstances described in (a) above. We were unable to obtain sufficient appropriate audit evidence regarding the validity, existence and impairment assessment of the amounts due from the De-consolidated Subsidiaries because: (i) there was inadequate documentary evidence available for us to verify the validity, existence and nature of the amounts due from the De-consolidated Subsidiaries; (ii) we were unable to carry out any effective confirmation procedures in relation to the amounts due from the De-consolidated Subsidiaries for the purpose of our audit; (iii) there was inadequate documentary evidence available for us to satisfy ourselves as to whether the impairment testing in respect of the amounts due from the De-consolidated Subsidiaries were properly recorded and accounted for and in compliance with the requirements of applicable Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards (“HKFRSs”), including Hong Kong Accounting Standard 39 “Financial Instruments: Recognition and Measurement”; and (iv) there were no alternative audit procedures that we could perform to satisfy ourselves as to whether the amounts due from the De-consolidated Subsidiaries were free from material misstatement. In addition, the scope limitation explained in (a) above as to the date when the Group lost control over the De-consolidated Subsidiaries would also affect the appropriate accounting period in which the impairment loss should be recognised. Any adjustments that might have been found necessary may have a significant consequential effect on the carrying amount of, and impairment loss on, the amounts due from the De-consolidated Subsidiaries, the net assets of the Group as at 31 March 2017 and the loss and cash flows of the Group for the year ended 31 March 2017, and the related disclosures thereof in the consolidated financial statements.

(c) Contingent liabilities and commitments

As disclosed in notes 3 and 36 to the consolidated financial statements, due to circumstances described in (a) above, we have not been able to obtain sufficient appropriate audit evidence and explanations as to whether the contingent liabilities and commitments committed by the Group were properly recorded and accounted for and in compliance with the requirements of applicable HKFRSs, including Hong Kong Accounting Standard 37 “Provisions, Contingent Liabilities and Contingent Assets”. There were no alternative audit procedures that we could perform to satisfy ourselves as to whether the contingent liabilities and commitments were free from material misstatements. Any adjustment that would be required may have a consequential significant effect on the net assets of the Group and the loss and cash flows of the Group for the year ended 31 March 2017, and the related disclosures thereof in the consolidated financial statements.

(d) Related party transactions

The scope limitation explained in (a) above as to the date when the Group lost control over the De-consolidated Subsidiaries would affect the disclosures of related party transactions in the 2017 Consolidated Financial Statements in the event that the date of loss of control is actually after 1 April 2016. Accordingly, we have not been able to obtain sufficient appropriate audit evidence as to whether the related party transactions disclosures were properly recorded and accounted for and in compliance with the requirements of applicable HKFRSs including Hong Kong Accounting Standard 24 “Related Party Disclosures”. There were no practical alternative procedures that we could perform over the related party transactions which occurred during the year ended 31 March 2017.

(e) Opening balances and comparative information

As disclosed in notes 3 and 36 to the consolidated financial statements, due to circumstances described in (a) above, we have not been able to obtain sufficient appropriate audit evidence as to whether the opening balances as at 1 April 2016 and the comparative figures for the year ended 31 March 2016 were properly recorded and accounted for and in compliance with the requirements of applicable HKFRSs including Hong Kong Accounting Standard 1 “Presentation of Financial Statements”. There were no alternative audit procedures that we could perform to satisfy ourselves as to whether the opening balances and the comparative figures were free from material misstatement.

Any adjustments that would be required may have a consequential significant effect on the Group’s assets and liabilities as at 31 March 2016 and 2017 and its results and cash flows for the years ended 31 March 2016 and 2017, and the presentation and disclosure thereof in the consolidated financial statements.

Disclaimer of Opinion

We were engaged to audit the consolidated financial statements of Ban Loong Holdings Limited (the “Company”) and its subsidiaries (collective referred to as the “Group”) which comprise the consolidated statement of financial position as at 31 March 2017, and 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 the notes to the consolidated financial statements, including a summary of the significant accounting policies.

We do not express an opinion on the consolidated financial statements of the Group. Because of the significance of the matters described in the Bases for Disclaimer of Opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these consolidated financial statements and as to whether the consolidated financial statements have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

2017.06 SUSTAIN FOREST

Company Name: Sustainable Forest Holdings Limited
Stock Code: 00723
Year end: March 31, 2017

Basis for disclaimer of opinion

Scope limitation – Opening balance and corresponding figures

Our audit opinion dated 30 June 2016 on the Group’s financial statements for the year ended 31 March 2016 was disclaimed, as we were unable to obtain sufficient information and appropriate audit evidence or perform alternative audit procedures for us to verify the existence, quantities and conditions of biological assets carried at HK$Nil, to ascertain the reasonableness of assumptions and the feasibility of the business plans based on which valuations for the biological assets carried at HK$Nil and related deferred tax liabilities carried at HK$29,025,000, goodwill carried at HK$Nil and the recoverability assessment of the freehold land carried at HK$85,508,000 and interests in subsidiaries HK$122,308,000 were performed, or to verify the completeness and accuracy of trade and accrued interest payables carried at HK$22,410,000, or whether the impairment of freehold land amounting to HK$9,700,000 and the reversal of deferred tax liabilities of approximately HK$5,545,000 in the profit or loss, and the impairment of amounts due from subsidiaries of approximately HK$6,024,000 recognised in the Company level profit or loss for the year ended 31 March 2016 were free from material misstatement.

Any adjustments that might have been found to be necessary in respect of the above matters would have material consequential effects on the net assets of the Group and the Company as at 31 March 2016, and the Group’s loss and cash flows for the year then ended and the related disclosures in the consolidated financial statements.

Scope limitation – fair value of sustainable forest management segment

As mentioned in Note 21, the Group’s harvesting operation in Brazil, being its sustainable forest management segment, has been suspended since 2012. The Group has to change its operation model from self-harvesting to leasing out.

Under such circumstances, whether the sustainable forest management segment could generate future economic benefits to the Group is dependent on the feasibility of the future business plan provided by the management. The future business plan is prepared by the management based on the historical data and management experience. However, as the business on leasing just commenced recently and the management still experiences certain difficulties in exercising the business plan to achieve their targeted level and under the circumstances of limited comparable information, we were unable to verify the reasonableness of the assumptions and the feasibility of the business plan.

As a result, we are unable to satisfy ourselves as to whether the carrying amount of intangible assets of HK$9,841,000, the reversal of deferred tax liabilities of approximately HK$30,493,000, and interest in subsidiaries of approximately HK$152,673,000 as at 31 March 2017, and whether the impairment of intangible assets of HK$89,674,000, and impairment of amounts due from subsidiaries of approximately HK$161,000 recognised in the Group and Company level profit or loss for the year ended 31 March 2017 were free from material misstatement.

Disclaimer of opinion

We do not express an opinion on the consolidated financial statements of the Group. Because of the significance of the matters described in the basis for disclaimer of opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these consolidated financial statements. In all other respects, in our opinion the consolidated financial statements have been properly prepared in compliance with the Hong Kong Companies Ordinance.