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INTERIM REPORT 2016

CORPORATE INFORMATION

BOARD OF DIRECTORS

Executive Directors

Mr. Cao Zhong (Chairman)

Mr. Fung Tsun Pong (Vice-Chairman) Mr. Jiang Tao (Chief Executive Officer) (appointed on 12 August 2016)

Mr. Tsang Kam Ching, David (Finance Director)

Mr. Gao Zhiping Mr. Duan Jingquan

Non-executive Director

Mr. Suo Suo Stephen

Independent Non-executive Directors

Mr. Yip Tak On Mr. Jing Baoli Mr. Bao Liang Ming Mr. Xue Baozhong (appointed on 12 August 2016)

Audit Committee

Mr. Yip Tak On (Chairman) Mr. Jing Baoli Mr. Bao Liang Ming Mr. Xue Baozhong

Remuneration Committee

Mr. Yip Tak On (Chairman) Mr. Cao Zhong Mr. Jing Baoli Mr. Bao Liang Ming Mr. Xue Baozhong

PRINCIPAL BANKERS

Bank of China (Hong Kong) Limited The Bank of East Asia Limited The Hong Kong and Shanghai Banking Corporation Limited

REGISTERED OFFICE

Sterling Trust (Cayman) Limited Whitehall House 238 North Church Street P.O. Box 1043 George Town Grand Cayman KY1-1102 Cayman lslands

PRINCIPAL PLACE OF BUSINESS

Room 1801-07, 18/F China Resources Building 26 Harbour Road Wanchai Hong Kong

SHARE REGISTRARS & TRANSFER OFFICE

Tricor Progressive Limited Level 22 Hopewell Centre 183 Queen’s Road East Hong Kong

Nomination Committee

Mr. Cao Zhong (Chairman) Mr. Yip Tak On Mr. Jing Baoli Mr. Bao Liang Ming Mr. Xue Baozhong

COMPANY SECRETARY

Miss Ngan Wai Kam, Sharon

STOCK CODE AT HONG KONG STOCK EXCHANGE 269

CONTACT DETAILS

Telephone no. : (852) 3176 7100 Facsimile no. : (852) 3176 7122

AUDITOR

BDO Limited

COMPANY WEBSITE

http://www.crtg.com.hk

LEGAL ADVISOR

Sidley Austin Louis K.Y. Pau & Company

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 1

HIGHIGHTS

Unaudited turnover for the six months ended 30 September 2016 amounted to approximately HK$408,175,000 (mainly including toll income from toll road operations of approximately HK$258,152,000, revenue from trading of petroleum and related products of approximately HK$137,200,000 and CNG dispensing station service income of approximately HK$12,651,000), whereas an unaudited turnover of approximately HK$1,490,772,000 (mainly including toll road operations of approximately HK$250,117,000, revenue from trading of petroleum and related products of approximately HK$1,225,801,000 and CNG dispensing station service income of approximately HK$8,024,000) was recorded in the corresponding period of last year.
The Group recorded an unaudited positive EBITDA (defined as earnings before interest, tax, depreciation, amortisation and non-cash changes in values of assets and liabilities) of approximately HK$179,917,000 for the six months ended 30 September 2016, whereas an unaudited positive EBITDA of approximately HK$239,002,000 was recorded for the six months ended 30 September 2015.
Unaudited net loss attributable to owners of the Company for the six months ended 30 September 2016 amounted to approximately HK$599,733,000, whereas the amount was approximately HK$762,611,000 in the corresponding period of last year.
The directors of the Company do not declare any dividend for the six months ended 30 September 2016.

INTERIM RESULTS

The board of directors (the “Board”) of China Resources and Transportation Group Limited (the “Company”) announces the unaudited condensed consolidated results of the Company and its subsidiaries (the “Group”) for the six months ended 30 September 2016 and the unaudited consolidated statement of financial position of the Group as at 30 September 2016.

2 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the six months ended 30 September 2016

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Six months ended
30 September
2016 2015
Notes HK$’000 HK$’000
(Unaudited) (Unaudited)
Revenue 3 408,175 1,490,772
Cost of sales and other direct operating
costs (481,882) (1,590,465)
Gross loss (73,707) (99,693)
Gain on settling convertible bonds and
non-convertible debt securities – 38,182
Change in fair value of derivative financial
instruments – 26,423
Other income and other gains or losses 5 (5,155) 125,722
Selling and administrative expenses (74,205) (170,280)
Finance costs 6 (509,198) (771,139)
Share of results of associates 7,169 1,279
Loss before income tax credit 7 (655,096) (849,506)
Income tax credit 8 125 617
Loss for the period (654,971) (848,889)
Loss for the period attributable to:
– Owners of the Company (599,733) (762,611)
– Non-controlling interests (55,238) (86,278)
(654,971) (848,889)
HK cents HK cents
(Unaudited) (Unaudited)
Loss per share attributable to owners
of the Company
Basic and diluted 10 (8.88) (56.47)
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INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 3

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 September 2016

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Six months ended
30 September
2016 2015
HK$’000 HK$’000
(Unaudited) (Unaudited)
Loss for the period (654,971) (848,889)
Other comprehensive income:
Items that may be reclassified subsequently to
profit or loss:
– Exchange differences on translation of
financial statements of foreign operations (11,141) (114,322)
– Share of other comprehensive income of
associates (373) 152
– Release of translation reserve upon disposal
of a subsidiary 901 (4,015)
– Release of translation reserve upon disposal
of an associate 2,434 –
– Net movements in fair value reserve for
available-for-sale investments 7,450 32,242
Other comprehensive income for the period,
net of tax (729) (85,943)
Total comprehensive income for the period (655,700) (934,832)
Total comprehensive income for the period
attributable to:
– Owners of the Company (600,729) (842,567)
– Non-controlling interests (54,971) (92,265)
(655,700) (934,832)
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4 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 September 2016

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At At
30 September 31 March
2016 2016
Notes HK$’000 HK$’000
(Unaudited) (Audited)
(Restated)
NON-CURRENT ASSETS
Investment property 31,694 31,689
Property, plant and equipment 11 975,283 1,047,430
Prepaid lease payments 36,850 38,513
Goodwill and other intangible assets 95,321 99,158
Biological assets 51,658 51,784
Forest concession rights 12 – –
Concession intangible asset 13 15,116,708 15,763,277
Long term deposits and prepayments 14 286,613 291,247
Interests in associates 454,920 480,551
Available-for-sale investments 79,620 109,750
TOTAL NON-CURRENT ASSETS 17,128,667 17,913,399
CURRENT ASSETS
Inventories 66,693 87,465
Trade and other receivables 15 451,933 366,677
Prepaid lease payments 884 912
Amounts due from non-controlling
shareholders of subsidiaries 23,360 15,588
Amounts due from associates 140,661 145,098
Cash and cash equivalents 109,059 116,225
792,590 731,965
Assets of a disposal group classified as held
for sale – 58,042
TOTAL CURRENT ASSETS 792,590 790,007
TOTAL ASSETS 17,921,257 18,703,406
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INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 5

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 September 2016

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At At
30 September 31 March
2016 2016
Notes HK$’000 HK$’000
(Unaudited) (Audited)
(Restated)
CURRENT LIABILITIES
Trade and other payables 16 1,823,963 1,813,083
Promissory note 17 309,194 306,892
Borrowings 18 899,396 843,578
Convertible bonds 19 3,268,399 3,189,853
Non-convertible debt securities 20 1,064,378 1,048,403
7,365,330 7,201,809
Liabilities of a disposal group classified as
held for sale – 40,364
TOTAL CURRENT LIABILITIES 7,365,330 7,242,173
NET CURRENT LIABILITIES (6,572,740) (6,452,166)
TOTAL ASSETS LESS CURRENT LIABILITIES 10,555,927 11,461,233
NON-CURRENT LIABILITIES
Borrowings 18 10,996,094 11,229,008
Deferred tax liabilities 10,293 10,811
Acreage fees payable 10,454 10,454
TOTAL NON-CURRENT LIABILITIES 11,016,841 11,250,273
TOTAL LIABILITIES 18,382,171 18,492,446
NET (LIABILITIES)/ASSETS (460,914) 210,960
CAPITAL AND RESERVES
Share capital 21 1,350,479 1,350,479
Reserves (2,053,662) (1,452,933)
Equity attributable to owners of the
Company (703,183) (102,454)
Non-controlling interests 242,269 313,414
TOTAL (DEFICIT)/EQUITY (460,914) 210,960
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6 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2016

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Total HK$’000 3,123,016 (130) 3,122,886 (848,889) (114,322) 152 32,242 (4,015) – (934,832) 90,983 (12,475) – 2,266,562
Non– controlling interests HK$’000 654,549 – 654,549 (86,278) (5,987) – – – – (92,265) 90,983 (12,828) – 640,439
Sub–total HK$’000 2,468,467 (130) 2,468,337 (762,611) (108,335) 152 32,242 (4,015) – (842,567) – 353 – 1,626,123
Accumulated losses HK$’000 (1,338,370) (130) (1,338,500) (762,611) – – – – 25,849 (736,762) – 353 201,893 (1,873,016)
Translation reserve HK$’000 (Note (vii)) 115,618 – 115,618 – (108,335) 152 – (4,015) – (112,198) – – – 3,420
Convertible bonds reserve HK$’000 (Note (vi)) 617,363 – 617,363 – – – – – – – – – (201,893) 415,470
Available– for-sale financial assets reserve HK$’000 (Note (v)) (19,272) – (19,272) – – – 32,242 – – 32,242 – – – 12,970
Assets revaluation reserve HK$’000 (Note (iv)) 41,752 – 41,752 – – – – – (25,849) (25,849) – – – 15,903
Capital reserve HK$’000 (Note (iii)) 795,363 – 795,363 – – – – – – – – – – 795,363
Capital redemption reserve HK$’000 3,800 – 3,800 – – – – – – – – – – 3,800
Share options reserve HK$’000 (Note (ii)) 31,012 – 31,012 – – – – – – – – – – 31,012
Warrants reserve HK$’000 (Note (i)) 21,630 – 21,630 – – – – – – – – – – 21,630
Share premium HK$’000 1,929,475 – 1,929,475 – – – – – – – – – – 1,929,475
Share capital HK$’000 270,096 – 270,096 – – – – – – – – – – 270,096
(Note 2)
statements of foreign operations associates sale investments a subsidiary upon disposal of a subsidiary the Group (Unaudited) (Restated)
At 1 April 2015 (Audited) Adjustments At 1 April 2015 (Restated) Loss for the period Exchange differences on translation of financial Share of other comprehensive income of Net movements in fair value for available-for- Release of translation reserve upon disposal of Release of assets revaluation reserve Total comprehensive income for the period Disposal of a subsidiary Share of non-controlling interests transferred to Settlement of convertible bonds At 30 September 2015
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INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 7

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2016

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Total HK$’000 210,321 639 210,960 (654,971) (11,141) (373) 901 2,434 7,450 (655,700) (17,611) – 1,437 (460,914)
Non– controlling interests HK$’000 313,414 – 313,414 (55,238) 267 – – – – (54,971) (17,611) – 1,437 242,269
Sub– Total HK$’000 (103,093) 639 (102,454) (599,733) (11,408) (373) 901 2,434 7,450 (600,729) – – – (703,183)
Accumulated losses HK$’000 (4,524,309) 639 (4,523,670) (599,733) – – – – – (599,733) – 448 – (5,122,955)
Translation reserve HK$’000 (Note (vii)) (59,556) – (59,556) – (11,408) (373) 901 2,434 – (8,446) – – – (68,002)
Convertible bonds reserve HK$’000 (Note (vi)) 395,546 – 395,546 – – – – – – – – – – 395,546
Available– for-sale financial assets reserve HK$’000 (Note (v)) (7,450) – (7,450) – – – – – 7,450 7,450 – – – –
Assets revaluation reserve HK$’000 (Note (iv)) 15,903 – 15,903 – – – – – – – – – – 15,903
Capital reserve HK$’000 (Note (iii)) 795,363 – 795,363 – – – – – – – – – – 795,363
Capital redemption reserve HK$’000 3,800 – 3,800 – – – – – – – – – – 3,800
Share options reserve HK$’000 Note (ii)) ( 31,012 – 31,012 – – – – – – – – (448) – 30,564
Warrants reserve HK$’000 (Note (i)) – – – – – – – – – – – – – –
Share premium HK$’000 1,896,119 – 1,896,119 – – – – – – – – – – 1,896,119
Share capital HK$’000 1,350,479 – 1,350,479 – – – – – – – – – – 1,350,479
(Note 24)
(Note 24) (Note 22)
(Note 2)
statements of foreign operations associates equity interest in a subsidiary equity interest in an associate sale investments subsidiary
At 1 April 2016 (Audited) Adjustments At 1 April 2016 (Restated) Loss for the period Exchange differences on translation of financial Share of other comprehensive income of Release of translation reserve upon disposal of Release of translation reserve upon disposal of Net movements in fair value for available-for- Total comprehensive income for the period Disposal of a subsidiary Lapse of share options Contribution from non-controlling interest of a At 30 September 2016 (Unaudited)
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8 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2016

Notes:

(i) The warrants reserve represents the conditional warrants issued in relation to the Financing Arrangement as detailed in Note 23.
(ii) The share options reserve represents the cumulative expenses recognised on the granting of share options.
(iii) The capital reserve represented capitalisation of payables to non-controlling interests.
(iv) The assets revaluation reserve represents gains/losses arising on the revaluation of property.
(v) The available-for-sale financial assets reserve represents gains/losses arising on recognising financial assets classified as available for sale at fair value.
(vi) The convertible bonds reserve represents the equity component of outstanding convertible bonds issued by the Company recognised in accordance with the accounting policy adopted for convertible bonds.
(vii) Translation reserve represents all exchange differences arising from the translation of financial statements of operations outside Hong Kong.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 9

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 September 2016

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Six months ended
30 September
2016 2015
HK$’000 HK$’000
(Unaudited) (Unaudited)
Operating activities
Operating profit before changes in working capital 181,605 114,664
Net changes in working capital (274,422) 504
Cash (used in)/generated from operations (92,817) 115,168
PRC tax paid (123) (404)
Net cash (used in)/generated from operating
activities (92,940) 114,764
Investing activities
Net cash (outflow)/inflow from disposal of
subsidiaries (176) 40,922
Proceeds from disposal of available-for-sale
investments 30,021 221,314
Other cash flows arising from investing activities 52,502 74,787
Net cash generated from investing activities 82,347 337,023
Financing activities
Proceeds from new borrowings 697,404 399,676
Repayment of borrowings (506,905) (480,039)
Repayment of convertible bonds and
non-convertible debt securities (21,617) –
Interest paid (155,485) (577,132)
–
Other cash flows arising from financing activities (8,318)
Net cash generated from/(used in) financing
activities 5,079 (657,495)
Net decrease in cash and cash equivalents (5,514) (205,708)
Effect of foreign exchange rate changes (1,956) (11,256)
Cash and cash equivalents at the beginning of
the period 116,529 298,458
Cash and cash equivalents at the end of
the period 109,059 81,494
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10 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

During the six months ended 30 September 2016, the Group suffered a loss of HK$654,971,000 and at the end of reporting period, the Group’s current liabilities exceeded its current assets by approximately HK$6,572,740,000. In addition, the convertible bonds and non-convertible debt securities of HK$832,000,000 and HK$1,000,000,000 respectively were overdue as at 30 September 2016. The Company’s default on settlement is a breach of the relevant loan covenants which caused the remaining balances of the convertible bonds and non-convertible debt securities to become also repayable on demand. In aggregate, the carrying amount of these convertible bonds and non-convertible debt securities which are immediately repayable was HK$4,332,777,000 (the “Repayable Amount”). These conditions indicate the existence of a material uncertainty which may cast doubt on the Group’s ability to continue as a going concern and therefore, the Group may not be able to realise its assets and discharge its liabilities in the normal course of business.

In view of the above, the directors of the Company have undertaken the following measures to improve the financial position of the Group which include:

i) As of 30 September 2016, the Group is required to repay the Repayable Amount. The Group has been actively discussing with the holders of convertible bonds and non-convertible debt securities (the “Notes”)(the “Note Holders”) on rectifying the default on partial settlement and to agree on the repayment schedule of the Repayable Amount. The directors of the Company maintain regular discussions with the financial advisers and the Note Holders. These discussions remain constructive, and the directors of the Company are of the opinion that the default on partial settlement could be rectified and new repayment schedule could be agreed; and
ii) Up to the date of this report, the Group is currently discussing with a potential buyer to dispose of the entire equity interests in one of its subsidiaries, Inner Mongolia Zhunxing Heavy Haul Expressway Company Limited (“Zhunxing”), which is the legal owner of the Group’s property, plant and equipment and concession intangible asset with carrying amounts of HK$756,641,000 and HK$15,116,708,000, such that sales proceeds would be available before the Note Holders would demand for repayment on the borrowings in default above (the “Disposal”). The final terms and conditions of the agreement of the Disposal are still under negotiation. Moreover, the successfulness of the Disposal will be subject to the results of financial due diligence work to be performed on Zhunxing and the approvals by the government authorities. If the Disposal is materialised, the Group’s cashflow will be strengthened and have sufficient reserve of cash to meet its liquidity requirement in the short and long term.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 11

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Based on the above, the directors of the Company are of the opinion that the Group will have sufficient working capital to meet its financial obligations as and when they fall due in the foreseeable future and therefore the unaudited condensed interim consolidated financial statements of the Group for the six months ended 30 September 2016 (the “Interim Financial Statements”) are prepared on a going concern basis.

Should the going concern basis be considered inappropriate, adjustments would have to be made to write down the carrying amounts of the Group’s assets to their estimated realisable values, to provide for any further liabilities which might arise and to reclassify non-current assets and non-current liabilities as current assets and current liabilities respectively. The effects of these adjustments have not been reflected in the Interim Financial Statements.

The Interim Financial Statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and with Hong Kong Accounting Standard (the “HKAS”) 34 – Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

The preparation of the Interim Financial Statements in conformity with HKAS 34 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.

The Interim Financial Statements contain unaudited condensed consolidated financial statements and selected explanatory notes. These notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and performance of the Group since the annual financial statements of the Group for the year ended 31 March 2016 (the “Annual Financial Statements”). The Interim Financial Statements thereon do not include all of the information required for full set of financial statements prepared in accordance with Hong Kong Financial Reporting Standards (the “HKFRSs”) (which in collective term includes all applicable HKFRSs, Hong Kong Accounting Standards (the “HKASs”) and Interpretations) issued by the HKICPA.

The accounting policies adopted for preparation of the Interim Financial Statements are consistent with those applied in the preparation of the Annual Financial Statements, except for the adoption of the new and revised HKFRSs as disclosed in Note 2 to these Interim Financial Statements. The Interim Financial Statements are unaudited, but have been reviewed by the audit committee of the Company.

The Interim Financial Statements should be read in conjunction with the Annual Financial Statements.

12 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

2. ADOPTION OF NEW AND REVISED STANDARDS

The HKICPA has issued the following amendments to HKFRSs that are first effective for the current accounting period of the Group and the Company.

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HKFRSs (Amendments) Annual Improvements 2012-2014 cycle
Amendments to HKAS 1 Disclosure Initiative
Amendments to HKAS 16 Clarification of Acceptable Methods of
and HKAS 38 Depreciation and Amortisation
Amendments to HKAS 16 Agriculture: Bearer Plants
and HKAS 41
Amendments to HKAS 27 Equity Method in Separate Financial
Statements
Amendments to HKFRS 11 Accounting for Acquisitions of Interests in
Joint Operations
HKFRS 14 Regulatory Deferral Accounts
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Except as described below, the accounting policies and methods of computation used in the Interim Financial Statements are the same as those followed in the preparation of the Annual Financial Statements.

Amendments to HKAS 16 and HKAS 41 “Agriculture: Bearer Plants”

The Group has applied the Amendments to HKAS 16 and HKAS 41 “Agriculture: Bearer Plants” for the first time in the current interim period. The Amendments to HKAS 16 “Property, Plant and Equipment” and HKAS 41 “Agriculture” define a bearer plant and require biological assets that meet the definition of a bearer plant to be accounted for as property, plant and equipment in accordance with HKAS 16, instead of HKAS 41. The produce growing on bearer plants continue to be accounted for in accordance with HKAS 41. The camellia trees of the Group have met the definition of bearer plant and are needed to be accounted for under property, plant and equipment since 1 April 2016 and the seedlings and standing trees of the Group continue to be accounted for under biological assets.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 13

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Summary of the effects of the above change in Amendments to HKAS 16 and HKAS 41

The effects of the change in Amendments to HKAS 16 and HKAS 41 described above on the unaudited consolidated statement of financial position of the Group as at the end of the immediately preceding financial year, i.e. 31 March 2016, are as follow:

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As at
31 March As at
2016 31 March
(Originally 2016
stated) Adjustments (Restated)
HK$‘000 HK$‘000 HK$‘000
Property, plant and equipment 1,023,891 23,539 1,047,430
Biological assets 74,684 (22,900) 51,784
Total effect on net assets 1,098,575 639 1,099,214
Accumulated losses and
total effect on equity (4,524,309) 639 (4,523,670)
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The effects of the change in Amendments to HKAS 16 and HKAS 41 described above on the unaudited consolidated statement of financial position of the Group as at the beginning of the comparative period. i.e. 1 April 2015, are as follow:

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As at
1 April As at
2015 1 April
(Originally 2015
stated) Adjustments (Restated)
HK$‘000 HK$‘000 HK$‘000
Property, plant and equipment 1,420,561 23,642 1,444,203
Biological assets 79,710 (23,772) 55,938
Total effect on net assets 1,500,271 (130) 1,500,141
Accumulated losses and
total effect on equity (1,338,370) (130) (1,338,500)
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14 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

There are no material effects of the change in Amendments to HKAS 16 and HKAS 41 described above on the (i) unaudited consolidated statement of profit or loss and other comprehensive income and (ii) unaudited basic and diluted loss per share for the six months ended 30 September 2016 and 2015.

Other than the above, the adoption of the new HKFRSs had no material effect on the results and financial position for the current or prior accounting periods which have been prepared and presented. The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period.

3. REVENUES

Revenues are derived from the principal activities of the Group, net of any sales taxes. The amounts of each significant category of revenue recognised during the period are as follows:

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Six months ended
30 September
2016 2015
HK$’000 HK$’000
(Unaudited) (Unaudited)
Toll income from toll road operations 258,152 250,117
Trading of petroleum and related products 137,200 1,225,801
CNG dispensing station service income 12,651 8,024
Income from timber logging and trading – 143
Sales of seedlings 49 5,388
Sales of plant-oil 123 1,299
408,175 1,490,772
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INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 15

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

4. SEGMENT INFORMATION

The chief operating decision makers have been identified as executive directors of the Company. They review the Group’s internal reporting in order to assess performance and allocate resources, and determine the operating segments.

The Group has three reportable segments. These segments are managed separately as each business offers different products or provides different services and requires different business strategies. The following summary describes the operations in each of the Group’s reportable segments:

Expressway operations – the operations, management, maintenance and auxiliary facility investment of Zhunxing Expressway;
Petroleum business – trading of petroleum and related products, provision of petroleum storage and ancillary services, and operations of CNG dispensing stations; and
Timber operations – sales of timber logs from forest concession, tree plantation area and outside suppliers, sales of seedlings and refined plant oil.

There was no inter-segment sale or transfer during the period (six months ended 30 September 2015: HK$Nil). Central revenue and expenses are not allocated to the operating segments as they are not included in the measure of the segments’ results that is used by the chief operating decision makers for assessment of segment performance. The measure used for reportable segment profit or loss is loss before interest and tax.

Segment assets exclude investment property in Australia, assets of a disposal group classified as held for sale, interest in associates – 北京開源萬嘉管理咨詢有限公司 and its subsidiaries, available-for-sale investments, amounts due from non-controlling shareholders of subsidiaries, amounts due from associates, cash and cash equivalents and other unallocated head office and corporate assets as these assets are managed on a group basis.

Segment liabilities exclude promissory note, convertible bonds, non-convertible debt securities, liabilities of a disposal group classified as held for sale, deferred tax liabilities and other unallocated head office and corporate liabilities as these liabilities are managed on a group basis.

16 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(a) Reportable Segment

Information regarding the Group’s reportable segments as provided regularly to the Group’s chief operating decision makers for the purposes of resource allocation and assessment of segment performance for the six months ended 30 September 2016 and 2015 is set out below:

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Expressway operations Petroleum business Timber operations Total
Six months ended Six months ended Six months ended Six months ended
30 September 30 September 30 September 30 September
2016 2015 2016 2015 2016 2015 2016 2015
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue from external
customers and
reportable segment
revenue 258,152 250,117 149,851 1,233,825 172 6,830 408,175 1,490,772
Reportable segment
loss (96,566) (148,757) (12,134) (46,614) (7,194) (21,613) (115,894) (216,984)
Amortisation of
concession
intangible asset 279,991 308,571 – – – – 279,991 308,571
Finance costs 472,829 691,039 5,988 21,272 – – 478,817 712,311
Unallocated finance
costs 30,381 58,828
Total finance costs 509,198 771,139
At At At At At At At At
30 September 31 March 30 September 31 March 30 September 31 March 30 September 31 March
2016 2016 2016 2016 2016 2016 2016 2016
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited)
(Restated) (Restated)
Reportable segment
assets 16,473,049 17,082,906 288,713 352,897 270,411 279,017 17,032,173 17,714,820
Reportable segment
liabilities (13,162,806) (13,338,359) (244,167) (296,677) (30,418) (30,031) (13,437,391) (13,665,067)
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INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 17

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(b) Reconciliation of reportable segment loss

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Six months ended
30 September
2016 2015
HK$’000 HK$’000
(Unaudited) (Unaudited)
Reportable segment loss before
income tax credit (115,894) (216,984)
Gain on settling convertible bonds and
non-convertible debt securities – 38,182
Change in fair value of derivative
financial instruments – 26,423
Other income and other gains or losses (7,378) 85,208
Finance costs (509,198) (771,139)
(Loss)/gain on disposal of subsidiaries (627) 46,752
Share of results of associates 5,547 1,746
Unallocated corporate expenses (27,546) (59,694)
Consolidated loss before income tax
credit (655,096) (849,506)
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5. OTHER INCOME AND OTHER GAINS OR LOSSES

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Six months ended
30 September
2016 2015
HK$’000 HK$’000
(Unaudited) (Unaudited)
(Loss)/gain on disposal of available-for-sale
investments (6,166) 61,945
(Loss)/gain on disposal of subsidiaries (627) 46,752
Loss on disposal of an associate (3,267) –
Gain on disposal of property, plant and
equipment 300 –
Interest income 2,609 7,279
Dividend income – 5,325
Exchange gain, net 14 29
Amortisation of deferred government grants – 1,259
Rental income 136 1,915
Others 1,846 1,218
(5,155) 125,722
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18 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

6. FINANCE COSTS

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Six months ended
30 September
2016 2015
HK$’000 HK$’000
(Unaudited) (Unaudited)
Interest and finance costs on bank and
other borrowings 326,723 434,419
Interest expenses on convertible bonds and
non-convertible debt securities 116,138 306,784
Interest expenses on promissory note 2,302 2,273
Default interest on convertible bonds and
non-convertible debt securities 35,956 –
Default interest on promissory note 28,079 27,663
509,198 771,139
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7. LOSS BEFORE INCOME TAX CREDIT

Loss before income tax credit is stated after charging:

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Six months ended
30 September
2016 2015
HK$’000 HK$’000
(Unaudited) (Unaudited)
Auditor’s remuneration 230 265
Depreciation of property, plant and equipment 45,036 56,029
Amortisation of prepaid lease payments 489 222
Amortisation of forest concession rights
included in selling and administrative
expenses – 13,793
Amortisation of concession intangible asset
included in cost of sales 279,991 308,571
Amortisation of customer relationships 812 2,860
Cost of inventories sold 146,472 1,202,237
Operating lease payments recognised as
expenses 8,073 9,756
Staff costs (excluding directors’ remuneration)
– Salaries and allowances 31,832 43,762
– Defined contributions pension costs 5,325 4,040
37,157 47,802
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INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 19

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

8. INCOME TAX CREDIT

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Six months ended
30 September
2016 2015
HK$’000 HK$’000
(Unaudited) (Unaudited)
Current tax
– PRC enterprise income tax 123 404
Deferred tax credit (248) (1,021)
Total (125) (617)
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The PRC State Council released the Implementation Rules to the Corporate Income Tax Law on 6 December 2007 (the “Implementation Rules”). According to the Implementation Rules, an entity engaged in forestry business is entitled to full exemption from PRC enterprise income tax commencing from 1 January 2008.樹人木業(大埔)有限公司 and 樹人苗木組培(大埔)有限公司, subsidiaries of the Company, are qualified as forestry operation enterprise by the local tax authorities and so they are fully exempted from PRC enterprise income tax.

Zhunxing, a subsidiary of the Company, is entitled to a three-year exemption from PRC enterprise income tax followed by a 50% reduction in PRC enterprise income tax for subsequent three years (the “Tax Holiday”). As Zhunxing has started operations during the year ended 31 March 2014, the Tax Holiday has been started in 2014. Consequently, Zhunxing is exempted from PRC enterprise income tax rate from 2014 to 2016 and is subject to a 12.5% PRC enterprise income tax rate from 2017 to 2019.

For the six months ended 30 September 2016, the statutory PRC enterprise income tax rate applicable to all other subsidiaries established and operating in the PRC is 25% (six months ended 30 September 2015: 25%).

According to the PRC Corporate Income Tax Law and its implementation rules, dividends receivable by non-PRC resident corporate investors from PRC-resident enterprises are subject to withholding income tax at a rate of 10%, unless reduced by tax treaties or arrangements, for profits earned since 1 January 2008. Since the Group can control the quantum and timing of distribution of profits of the Group’s subsidiaries in the PRC, deferred tax liabilities are only provided to the extent that such profits are expected to be distributed in the foreseeable future.

20 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The statutory tax rate for Hong Kong profits tax is 16.5% (six months ended 30 September 2015: 16.5%) on the estimated assessable profits arising in Hong Kong during the period. No provision for the Hong Kong profits tax has been made as the Group did not earn any income subject to Hong Kong profits tax during the six months ended 30 September 2016 and 2015.

The subsidiaries in Guyana are liable to Guyana income tax at a rate of 45% (six months ended 30 September 2015: 45%). No provision for Guyana income tax has been made as the subsidiaries in Guyana sustained losses for taxation purposes for the six months ended 30 September 2016 and 2015.

The subsidiaries in Australia are liable to Australian income tax at a rate of 30% (six months ended 30 September 2015: 30%). No provision for Australian income tax has been made as the subsidiaries in Australia sustained losses for taxation purposes for the six months ended 30 September 2016 and 2015.

9. DIVIDEND

The directors of the Company do not recommend the payment of a dividend for the six months ended 30 September 2016 (six months ended 30 September 2015: HK$Nil).

10. LOSS PER SHARE

The calculation of the basic and diluted loss per share attributable to the owners of the Company is based on the following data:

Loss attributable to owners of the Company

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Six months ended
30 September
2016 2015
HK$’000 HK$’000
(Unaudited) (Unaudited)
Loss for the purpose of basic and diluted loss
per share (599,733) (762,611)
‘000 ‘000
(Unaudited) (Unaudited)
Number of shares:
Weighted average number of ordinary shares
for the purpose of basic and diluted loss
per share 6,752,396 1,350,479
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INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 21

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended 30 September 2016 and 2015, the computation of diluted loss per share does not assume the conversion of the Company’s outstanding convertible bonds as they had an anti-dilutive effect on the loss per share calculation.

For the six months ended 30 September 2016 and 2015, the computation of diluted loss per share does not assume the exercise of the Company’s outstanding share options (six months ended 30 September 2015: share options and warrants) as the exercise prices of those options (six months ended 30 September 2015: share options and warrants) are higher than the average market price of shares.

As a result of the Share Consolidation (as defined in Note 21(a)(i)), being after the reporting period but before the 2015 Interim Financial Statements are authorised for issue, the weighted average number of ordinary shares for the purpose of basic and diluted loss per share for the six months ended 30 September 2015 have been adjusted to include the effect of the Share Consolidation.

For the six months ended 30 September 2015, there is no retrospective adjustment of the weighted average number of ordinary shares in issue after taking into account the effect of bonus elements in the rights issue (Note 21(a)(iii)).

11. PROPERTY, PLANT AND EQUIPMENT

No impairment losses were recognised in respect of property, plant and equipment for both periods. During the six months ended 30 September 2016, additions to property, plant and equipment amounted to HK$573,000 (six months ended 30 September 2015: HK$1,220,000) and disposal of property, plant and equipment amounted to a net carrying amount of HK$4,000 (six months ended 30 September 2015: including those property, plant and equipment disposed of during disposal of subsidiaries amounting to a net carrying amount of HK$130,853,000).

22 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

12. FOREST CONCESSION RIGHTS

The forest concession rights in Guyana are stated at cost less accumulated amortisation and any accumulated impairment losses. The costs of forest concession rights include the acreage fees payable to Guyana Forestry Commission, costs of necessary exploration, geological, geophysical and other research studies incurred prior to the grant of the forest concession rights.

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At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
Cost:
At 1 April 2016/30 September 2016 and
at 1 April 2015/31 March 2016 534,429 534,429
Accumulated impairment and amortisation:
At 1 April 2016 and at 1 April 2015 534,429 396,012
Impairment loss – 110,831
Amortisation for the period/year – 27,586
At 30 September 2016 and
at 31 March 2016 534,429 534,429
Net carrying amount:
At 30 September 2016 and
at 31 March 2016 – –
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INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 23

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Forest concession rights held by Jaling Forest Industries Inc., a subsidiary of the Company (“Jaling Concession Rights”)

On 22 August 2003, Jaling Forest Industries Inc. (“Jaling”) was granted a State Forest Exploratory Permit (1/2003) by the Commissioner of Forests, the Guyana Forestry Commission, to carry out exploratory work on an area of 167,000 hectares (approximately 412,000 acres) for a period of 3 years. Pursuant to the Timber Sales Agreement (TSA 02/2005) dated 25 January 2005, Jaling was granted with an exclusive timber concession right by the Commissioner of Forests, the Guyana Forestry Commission, for a period of 25 years, commencing on 25 January 2005 and until 24 January 2030 (both dates inclusive) to occupy, cut and remove timber from an area of approximately 136,900 hectares (approximately 338,000 acres) in the State Forest of Guyana, South America, which includes a block (“Block A”) based on the natural surrounding and is bounded on the North by the Amakura River, on the South by the Baramita Amerindian Reserves and Whana River, on the East by the Whannamaparu and Whana River, and on the West by the common border of Guyana and Venezuela. It lies within the Northwest border of Guyana, South America and another block (“Block B”) is bounded on the North by WCL 6/93, on the South by the Kaituma River, (TSA 04/91-BCL) and Sebai River, on the East by the Aruka River and Sebai Amerindian Reserves and on the West by Sand Creek and Waiamu River, being the concession boundary of BCL-TSA 04/91. Under the Jaling Concession Rights, Jaling shall pay a total acreage fee of approximately HK$9,000,000 charged on all forestry area as prescribed by the Forest Act and Regulations of Guyana. The logging operation in Block B has been completed during the year ended 31 March 2010.

Forest concession rights held by Garner Forest Industries Inc., a subsidiary of the Company (“Garner Concession Rights”)

On 18 August 2004, Garner Forest Industries Inc. (“Garner”), a subsidiary of the Company, was granted a State Forest Exploratory permit (3/2004) by the Commissioner of Forests, the Guyana Forestry Commission, to carry out exploratory work on an area of 90,469 hectares (approximately 223,552 acres) for a period of 3 years. Pursuant to the Timber Sales Agreement (TSA 03/2005) dated 11 June 2005, Garner was granted with an exclusive concession right by the Commissioner of Forests, the Guyana Forestry Commission for a period of 25 years, commencing on 11 June 2005 and until 10 June 2030 (both dates inclusive) to occupy, cut and remove timber from an area of approximately 92,737 hectares (approximately 229,158 acres) in the State Forest of Guyana, South America, which includes a block located on the left bank of Mazaruni River, right bank of Puruni River, and left bank of Putareng River of Guyana, South America. Under the Garner Concession Rights, Garner shall pay a total acreage fee of approximately HK$5,375,000 charged on all forestry area as prescribed by the Forest Act and Regulations of Guyana. Garner has completed the necessary exploratory studies and obtained the Garner Concession Rights.

24 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

13. CONCESSION INTANGIBLE ASSET

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At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
Cost:
At 1 April 2016 and at 1 April 2015 18,992,675 19,827,031
Exchange differences (467,112) (834,356)
At 30 September 2016 and at 31 March 2016 18,525,563 18,992,675
Accumulated amortisation:
At 1 April 2016 and at 1 April 2015 3,229,398 825,100
Amortisation for the period/year 279,991 617,143
Impairment loss – 1,877,027
Exchange differences (100,534) (89,872)
At 30 September 2016 and at 31 March 2016 3,408,855 3,229,398
Net carrying amount:
At 30 September 2016 and at 31 March 2016 15,116,708 15,763,277
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Zhunxing entered into a service concession arrangement with the local government whereby Zhunxing is required to build the infrastructure of Zhunxing Expressway and is granted an exclusive operating right for collecting tolls from drivers using the Zhunxing Expressway for a term of 30 years.

According to the relevant government’s approval documents and the relevant regulations, Zhunxing is responsible for the construction of the toll road and the acquisition of the related facilities and equipment and it is also responsible for the operations and management, maintenance and overhaul of the toll roads during the approved operating period. Zhunxing is entitled to operate the toll road upon completion for a specified concession period of 30 years by charging drivers, which amounts are contingent on the extent that the public uses the expressway. The relevant toll road assets are required to be returned to the local government authorities when the operating rights periods expire without any payments to be made to Zhunxing. As such, the arrangement is accounted for as a concession intangible asset under Hong Kong (IFRIC) Interpretation 12 “Service Concession Arrangement”.

The right to charge the users of the public service was recognised as an intangible asset. Zhunxing estimates the fair value of the intangible asset to be equal to the construction costs plus certain margin by management estimation with reference to the information in similar industry and management’s experience.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 25

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

14. LONG TERM DEPOSITS AND PREPAYMENTS

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At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
Prepayments for construction of
expressway and related facilities 192,047 197,687
Deposits paid for acquisition of
property, plant and equipment 94,566 93,560
286,613 291,247
15. TRADE AND OTHER RECEIVABLES
At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
Trade receivables 118,763 14,369
Less: Provision for impairment loss (9,048) (9,103)
Trade receivables, net 109,715 5,266
Other receivables 172,158 161,011
Loan to non-controlling shareholder of
a subsidiary 86,672 83,629
Loan receivables 85,786 97,444
Less: Provision for impairment loss (24,483) (24,701)
Other receivables, net 320,133 317,383
Deposits paid 4,318 4,390
Prepayments 17,767 39,638
451,933 366,677
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26 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The Group’s trading terms with its customers are mainly on credit, except for new customers, where payment in advance is normally required. The credit period is generally two months, extending up to over three months or more for major customers. Each customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables and has a credit control department to minimise credit risk. Overdue balances are reviewed regularly by senior management.

The below table reconciles the impairment loss of trade and other receivables for the period/year:

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At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
At 1 April 2016 and at 1 April 2015 33,804 13,527
(Reversal of)/impairment loss recognised (242) 20,760
Exchange differences (31) (483)
At 30 September 2016 and
at 31 March 2016 33,531 33,804
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Details of the ageing analysis of trade receivables of the Group (net of impairment loss) are as follows:

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At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
Outstanding balances aged:
0 to 30 days 30,290 3,819
31 to 60 days 59,542 –
61 to 180 days 18,079 42
Over 180 days 1,804 1,405
109,715 5,266
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INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 27

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The ageing analysis of trade receivables that are neither individually nor collectively considered to be impaired are as follows:

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At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
Neither past due nor impaired 30,290 3,819
30 to 90 days past due 77,621 42
Over 90 days past due 1,804 1,405
109,715 5,266
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Trade receivables that were neither past due nor impaired related to a number of independent customers for whom there was no recent history of default.

The ageing analysis of other receivables that are neither individually nor collectively considered to be impaired are as follows:

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At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
Neither past due nor impaired 291,844 279,414
Over 90 days past due 28,289 37,969
320,133 317,383
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Other receivables that were neither past due nor impaired related to a number of other debtors for whom there was no recent history of default.

Loan to non-controlling shareholder of a subsidiary is unsecured, interest free and repayable on demand.

An advance to a third party of HK$62,539,000 (31 March 2016: HK$65,754,000) was included in the loan receivables, and was made on 1 August 2015. It is unsecured, bearing interest at the rate of 14% per annum and is repayable on or before 31 August 2016. On 31 August 2016, the Group agreed to extend the loan receivables to 28 February 2017 at 14% per annum.

28 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

16. TRADE AND OTHER PAYABLES

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At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
Trade payables 1,112 1,505
Other payables and accruals (Note (i)) 1,813,034 1,776,591
Deposits received from customers 9,817 34,987
1,823,963 1,813,083
----- End of picture text -----

Note:

(i) As at 30 September 2016, other payables mainly comprised construction costs payable of HK$1,087,588,000 (31 March 2016: HK$1,253,815,000) and retention and guarantee deposit of HK$194,002,000 (31 March 2016: HK$203,108,000).

Accruals of the Group also included accumulated default interest of the promissory note, convertible bonds and non-convertible debt securities amounted to HK$281,654,000 (31 March 2016: HK$217,619,000).

The carrying amounts of other payables and accruals at the end of reporting period approximate their fair values.

Details of the ageing analysis of trade payables of the Group are as follows:

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At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
Outstanding balances aged:
0 to 30 days 978 850
31 to 60 days 70 589
Over 60 days 64 66
1,112 1,505
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INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 29

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

17. PROMISSORY NOTE

The movement on the promissory note during the six months ended 30 September 2016 and year ended 31 March 2016 are as follows:

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At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
Carrying value at 1 April 2016 and at
1 April 2015 306,892 302,345
Interest expense for the period/year 2,302 4,547
Carrying value at 30 September 2016 and
at 31 March 2016 309,194 306,892
18. BORROWINGS
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At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
Bank borrowings 11,164,946 11,429,309
Other borrowings 730,544 643,277
11,895,490 12,072,586
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At 30 September 2016, borrowings of the Group were repayable as follows:

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At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
Within 1 year or on demand 899,396 843,578
After 1 year but within 2 years 477,788 626,157
After 2 years but within 5 years 888,810 573,952
After 5 years 9,629,496 10,028,899
10,996,094 11,229,008
11,895,490 12,072,586
----- End of picture text -----

30 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

At 30 September 2016, borrowings of the Group were secured as follows:

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----- Start of picture text -----

At At
30 September 31 March
2016 2016
Notes HK$’000 HK$’000
(Unaudited) (Audited)
Secured (i) 11,056,223 11,137,942
Unsecured (ii) 839,267 934,644
11,895,490 12,072,586
----- End of picture text -----

Notes:

(i) At 30 September 2016, the secured borrowings of the Group were secured by (a) Zhunxing’s receivables rights of toll income of the Zhunxing Expressway; (b) the Group’s equity interests in 內蒙古博源新型能源有限公司 with the carrying amount of HK$44,170,000 (recognised as available-for-sale investments of the Group); (c) the equity interests of the Project Company as defined in Note 23, (d) the equity interests of Zhunxing and (e) certain assets of Zhunxing.

The borrowings of the Group were also guaranteed by (a) the Company; (b) a non-controlling shareholder of Zhunxing and (c) a director of the Company and his spouse.

At 31 March 2016, the secured borrowings of the Group were secured by (a) Zhunxing’s receivables rights of toll income of the Zhunxing Expressway; (b) the Group’s equity interests in 內蒙古博源新型能源有限公司 with the carrying amount of HK$45,563,000 (recognised as available-for-sale investments of the Group); (c) the equity interests of the Project Company and (d) the equity interests of Zhunxing.

The borrowings of the Group were also guaranteed by (a) the Company; (b) a non-controlling shareholder of Zhunxing and (c) a director of the Company and his spouse.

(ii) At 30 September 2016, unsecured borrowings of the Group were guaranteed by (a) the Company; (b) a director of the Company; (c) the wholly-owned subsidiaries of the Company and (d) a director of a wholly-owned subsidiary.

At 31 March 2016, unsecured borrowings of the Group were guaranteed by (a) the Company; (b) a director of the Company; (c) the wholly-owned subsidiaries of the Company and (d) a director of wholly-owned subsidiary.

(iii) The Group’s available credit facilities as at 30 September 2016 amounted to approximately HK$13,131,660,000 (31 March 2016: HK$12,769,821,000), out of which HK$11,895,490,000 (31 March 2016: HK$12,072,586,000) has been utilised.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 31

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

19. CONVERTIBLE BONDS

(a) Description of convertible bonds

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Definition CB2016B CB2016C CB2018
Issue dates 10 February 10 February 10 February
2015 2015 2015
Principal amounts as at HK$ HK$ HK$
1 April 2016 and 832,000,000 1,500,000,000 700,000,000
30 September 2016
Maturity date 10 February 24 January 12 February
2016 2017 2018
(Note (vii))
Interest rates (Note (i)) 9% 9% 9%
Conversion price per share HK$1.07 HK$0.20 HK$1.07
(Note (ii)) (Note (v) (Note (v), (vi) (Note (v)
& (vi)) & (vii)) & (vi))
Embedded derivative financial N/A If the market price N/A
instruments (Note (iii)) of the Company’s
shares is higher
than HK$2.14 for 15
consecutive trading
days, a repayment
premium of 100%
of the outstanding
principal amount
of CB2016C as at
the maturity date
will be payable by
the Company on
the maturity date
(the “Repayment
Adjustment”).
Effective interest rate at initial 10.99% 11.3% 11.89%
recognition
(Note (iv))
----- End of picture text -----

32 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Notes:

(i) Interests are payable by the Company annually in arrears, upon conversion or redemption.
(ii) Conversion prices are subject to normal adjustments pursuant to the terms and conditions of the convertible bonds. The bondholders can convert at the respective conversion price at any time from issuance of the convertible bonds until maturity.
(iii) Repayment Adjustment is an embedded derivative and is recognised as derivative financial instrument at fair value by Monte Carlo model at the time of issue of the CB2016C and subsequently measured at fair value at the end of each of the reporting periods in accordance with the Group’s accounting policy on embedded derivatives. The valuation of fair value of Repayment Adjustment is performed independently by LCH (Asia-Pacific) Surveyors Limited (the “Valuer”).

The market price mentioned herein represented the closing prices published in the Stock Exchange Daily Quotations Sheet for one share for 60 consecutive trading days.

(iv) At issuing dates, the Company determined the fair value of liability component based on the valuation performed by the Valuer using discounted cash flow approach. The residual amount was assigned as the equity component and was included in the convertible bonds reserve of the Group. The liability component is carried at amortised cost until extinguished on conversion or redemption.
(v) Subject to and forthwith upon the Share Consolidation (as defined in Note 21(a)(i)) taking effect, the conversion price of the CB2016B, CB2016C and CB2018 has been adjusted from HK$0.20 per share to HK$4.00 per share with effect from 5 November 2015.
(vi) Subject to and forthwith upon the Rights Issue (as defined in Note 21(a)(iii)) taking effect, the conversion price of the CB2016B, CB2016C and CB2018 has been adjusted from HK$4.00 per share to HK$1.07 per share with effect from 9 December 2015.
(vii) Pursuant to the amendment agreements dated 13 June 2016 and 10 August 2016 entered by the Company and two bondholders of CB2016C, the maturity date and the conversion right were extended from 24 October 2016 to 24 January 2017 and the conversion price was reset at HK$0.20 per share. The amendments were approved by the shareholders and the Stock Exchange and became effective on 21 July 2016 and 12 September 2016 respectively.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 33

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(b) Movement of convertible bonds

The movement of the liability component and equity component of the convertible bonds during the six months ended 30 September 2016 were as follows:

==> picture [274 x 330] intentionally omitted <==

----- Start of picture text -----

Liability Equity
component component Total
HK$’000 HK$’000 HK$’000
CB2016B
At 1 April 2016 834,880 103,608 938,488
Interest paid (412) – (412)
At 30 September 2016 834,468 103,608 938,076
CB2016C
At 1 April 2016 1,583,194 243,257 1,826,451
Interest expense 65,458 – 65,458
Interest paid (9,000) – (9,000)
At 30 September 2016 1,639,652 243,257 1,882,909
CB2018
At 1 April 2016 771,779 48,681 820,460
Interest expense 31,500 – 31,500
Interest paid (9,000) – (9,000)
At 30 September 2016 794,279 48,681 842,960
Total
At 30 September 2016
(Unaudited) 3,268,399 395,546 3,663,945
At 31 March 2016
(Audited) 3,189,853 395,546 3,585,399
----- End of picture text -----

34 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Notes:

The Group is due to repay CB2016B with a principal amount of HK$832 million on 10 February 2016 and the aggregate interests amounted to HK$65.8 million due under CB2016B and CB2018 on 10 February 2016 and 19 February 2016 respectively. Accordingly, an accrued default interest of HK$20,863,000 was charged during the six months ended 30 September 2016. Prior to 10 February 2016, the Group and the relevant bondholders entered into discussions regarding the re-borrowing of the principal amount under CB2016B and the rescheduling of all interest payments on CB2016B and CB2018 (the “Discussions”). On 25 April 2016, the Company made partial interest payments amounted to HK$9.4 million to the relevant bondholders based on the Discussions. The Company continues to maintain regular and constructive Discussions with the relevant bondholders.

The Group is also due to pay an aggregate interests amounted to HK$63.0 million due under CB2016C on 19 February 2016. On 25 April 2016, the Company made partial interest payments amounted to HK$9.0 million to the holders of CB2016C. The Company is in discussion with the two holders of CB2016C on the potential restructuring of the said bonds. Pursuant to the amendment agreements dated 13 June 2016 and 10 August 2016 entered by the Company and two bondholders of CB2016C, the maturity date and the conversion right were extended from 24 October 2016 to 24 January 2017 and the conversion price was reset at HK$0.20 per share. The amendments were approved by the shareholders as set out in the announcement dated 19 July 2016 and 8 September 2016 of the Company and became effective on 21 July 2016 and 12 September 2016 upon satisfying all the conditions precedent as set out in the respective amendment agreements.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 35

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

20. NON-CONVERTIBLE DEBT SECURITIES

(a) Description of non-convertible debt securities

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----- Start of picture text -----

Definition Debt 1a Debt 1b
Issue dates 3 September 3 September
2015 2015
Principal amounts as at 1 April 2016 HK$ HK$
and 30 September 2016 500,000,000 500,000,000
Maturity date 3 March 3 September
2016 2016
Interest rates (Note (i)) 9% 9%
Effective interest rate at initial
recognition 10.74% 10.74%
----- End of picture text -----

Notes:

(i) Interests are payable by the Company annually in arrears.
(ii) At initial recognition date, the Company determined the fair value of the non-convertible debt securities based on the valuation performed by the Valuer using discounted cash flow approach.
(iii) Mr. Cao Zhong has provided the holders of Debt 1a and Debt 1b his personal guarantee as to the due performance of all the obligations of the respective debt securities.

36 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(b) The movement on the non-convertible debt securities during the six months ended 30 September 2016 is as follows:

==> picture [272 x 121] intentionally omitted <==

----- Start of picture text -----

Debt 1a Debt 1b Total
HK$’000 HK$’000 HK$’000
At 1 April 2016
(Audited) 522,500 525,903 1,048,403
Interest expense – 19,180 19,180
Settlement during the
period (3,205) – (3,205)
At 30 September
2016 (Unaudited) 519,295 545,083 1,064,378
----- End of picture text -----

Note:

(i) The Group is due to repay Debt 1a with a principal amount of HK$500 million and the interest of HK$22.5 million on 3 March 2016. Accordingly, an accrued default interest of HK$13,082,000 was charged during the six months ended 30 September 2016. Since 1 March 2016, the Group and the relevant debt holders have entered into initial negotiations regarding the restructuring of outstanding debts (the “Negotiations”). On 25 April 2016, the Company made partial interest payments amounted to HK$3.2 million to the relevant debt holders based on the Negotiations. The Company continues to maintain regular and constructive Negotiations with the relevant debt holders.

(ii) The Group is due to repay Debt 1b with a principal amount of HK$500 million and the interest of HK$45.1 million on 3 September 2016. Accordingly, an accrued default interest of HK$2,011,000 was charged during the period ended 30 September 2016. Since 1 March 2016, the Group and the relevant debt holders have entered into initial negotiations regarding the restructuring of outstanding debts. The Company continues to maintain regular and constructive negotiations with the relevant debt holders.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 37

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

21. SHARE CAPITAL

==> picture [302 x 84] intentionally omitted <==

----- Start of picture text -----

At 30 September 2016 At 31 March 2016
No. of No. of
Notes shares Amount shares Amount
‘000 HK$’000 ‘000 HK$’000
(Unaudited) (Audited)
Authorised:
----- End of picture text -----

	At 1 April 2016 and at 1 April 2015, ordinary shares of HK$0.20 and HK$0.01 each respectively 15,000,000 3,000,000 70,000,000 700,000 Share Consolidation (a)(i) – – (66,500,000) – Increased in Authorised Share Capital 2016 (a)(ii) – – 11,500,000 2,300,000
	At 30 September 2016 and at 31 March 2016, ordinary shares of HK$0.20 each 15,000,000 3,000,000 15,000,000 3,000,000
	Issued and fully paid: At 1 April 2016 and at 1 April 2015, ordinary shares of HK$0.20 and HK$0.01 each respectively 6,752,396 1,350,479 27,009,584 270,096 Share Consolidation (a)(i) – – (25,659,105) – Issue of shares upon Rights Issues (a)(iii) – – 5,401,917 1,080,383
	At 30 September 2016 and at 31 March 2016, ordinary shares of HK$0.20 each 6,752,396 1,350,479 6,752,396 1,350,479

38 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Note:

(a) A ordinary resolution was passed at the extraordinary general meeting of the Company held on 4 November 2015 approving the capital reorganisation on the basis that:
(i) Every twenty issued and unissued share of HK$0.01 each in the share capital of the Company be consolidated into one share of HK$0.20 (the “Share Consolidation”) which effected on 5 November 2015. Following the implementation of the Share Consolidation, the Company’s authorised share capital becomes HK$700,000,000 divided into 3,500,000,000 shares of HK$0.20 each, and its issued share capital becomes HK$270,095,839 divided into 1,350,479,194 shares of HK$0.20 each.
(ii) Subject to and forthwith upon the Share Consolidation taking effect, the authorised share capital of the Company was increased from HK$700,000,000 divided into 3,500,000,000 shares of HK$0.20 each, to HK$3,000,000,000 by the creation of an additional 11,500,000,000 new shares (the “Increase in Authorised Share Capital 2016”).
(iii) Subject to and forthwith upon the Share Consolidation and Increase in Authorised Share Capital 2016 taking effect, the Company issued 5,401,916,776 new ordinary shares under rights issue at an issue price of HK$0.20 per share on the basis of four shares for every one ordinary share (the “Rights Issue”). The Rights Issue was completed on 9 December 2015 and the Company raised gross proceeds of approximately HK$1,080,383,000 before deduction of incidental share issuance expenses.

22. EQUITY-SETTLED SHARE-BASED PAYMENT

The Share Option Scheme adopted on 16 July 2004 (the “Old Scheme”) shall remain in force for 10 years from the adoption date unless otherwise terminated or amended. No further options can be granted under the Old Scheme; howsoever, the options granted under the Old Scheme before 15 July 2014 remains exercisable.

A new share option scheme of the Company was adopted on 28 August 2014 (the “New Scheme”) pursuant to the approval by the shareholders of the Company at the annual general meeting held on 28 August 2014. The New Scheme shall remain in force for 10 years from the adoption date unless otherwise terminated or amended.

The exercise price of the options shall be determined by the directors of the Company, but may at least the highest of (i) the Stock Exchange closing price of the Company’s share on the date of the grant of the share options; (ii) the average Stock Exchange closing price of the Company’s shares for the five trading days immediately preceding the date of the grant of the share options; and (iii) the nominal value of an ordinary share. The maximum number of shares in respect of which options may be granted under the New Scheme shall not exceed 10% of the issued share capital of the Company from time to time.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 39

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Movements in the number of share options outstanding and their exercise prices are as follows:

For the six months ended 30 September 2016 (unaudited):

==> picture [303 x 131] intentionally omitted <==

----- Start of picture text -----

Weighted
average
exercise
price Directors Employees Total
HK$ ‘000 ‘000 ‘000
Outstanding at the
beginning of the period 4.05 11,000 27,500 38,500
Lapsed during the period 4.05 – (555) (555)
Outstanding at the end of
the period 4.05 11,000 26,945 37,945
----- End of picture text -----

For the year ended 31 March 2016 (audited):

==> picture [303 x 144] intentionally omitted <==

----- Start of picture text -----

Weighted
average
exercise
price Directors Employees Total
HK$ ‘000 ‘000 ‘000
Outstanding at the
beginning of the year 0.45 99,000 247,500 346,500
Adjustments arising from
Share Consolidation
and Right Issue 3.60 (88,000) (220,000) (308,000)
Outstanding at the end of
the year 4.05 11,000 27,500 38,500
----- End of picture text -----

The exercise price of the above equity-settled share options during the period is HK$4.05 (Year ended 31 March 2016: HK$4.05) per share. These share options vested immediately at the date of grant and are valid up to 15 October 2018. No share options were exercised during the period (Year ended 31 March 2016: Nil). The share options lapsed during the six months ended 30 September 2016 were attributable to the resignation of the relevant employees during the period (Year ended 31 March 2016: Nil).

40 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

23. CONDITIONAL WARRANTS

On 20 December 2012, the Company and Joint Gain Holdings Limited (“Joint Gain”) entered into the agreement pursuant to which:

(1) the Group sold to Joint Gain the equity interests of 內蒙古准興高速服務區管理責任有限公司 (the “Project Company”) which holds the development and operating rights to the petrol and gas stations in the service areas of the Zhunxing Expressway for the aggregate consideration of RMB301,000,000 (equivalent to approximately HK$374,143,000); and
(2) after completion of the construction of the petrol and gas stations in the service areas of the Zhunxing Expressway, the Company may reacquire the Project Company, and the Company agreed to issue conditional warrants to Joint Gain.

The arrangement was accounted as financing from Joint Gain for the construction of petrol and gas stations in the service areas of Zhunxing Expressway and it was not a disposal of operating rights as the repurchase of the Project Company was almost certain to be exercised. Zhunxing would operate the petrol and gas stations together with the expressway under the terms of the service concession arrangements with the local government.

The conditional warrants issued was considered as the return to Joint Gain on the financing and recognised approximately HK$21.6 million as warrant reserve at 31 March 2014 accordingly.

In addition, Zhunxing repurchased the Project Company during the year ended 31 March 2015 and construction costs incurred for petrol and gas stations in the services areas of Zhunxing Expressway of HK$134 million (31 March 2016: HK$134 million) was included under constructions in progress as at 30 September 2016.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 41

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Details of conditional warrants are as follow:

Date of issue: 19 April 2013 Exercise period: From the date when the Project Company is reacquired by the Group to 20 December 2015 Subscription price: HK$0.48

Subject to and forthwith upon the Share Consolidation taking effect, the subscription price of the warrants has been adjusted from HK$0.48 per share to HK$9.60 per share with effect from 5 November 2015. There is no change of subscription price upon Rights Issue.

Movement of the conditional warrants in issue during the six months ended 30 September 2016 and year ended 31 March 2016 is as follow:

==> picture [302 x 110] intentionally omitted <==

----- Start of picture text -----

At At
30 September 31 March
2016 2016
’000 ’000
(Unaudited) (Audited)
At 1 April 2016 and 1 April 2015 – 2,000,000
Expired during the period/year – (2,000,000)
– –
At 30 September 2016 and 31 March 2016
----- End of picture text -----

No conditional warrants were exercised during the year ended 31 March 2016.

42 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

24. DISPOSAL OF A SUBSIDIARY

寧波中油石油銷售有限公司(“Ningbo Zhongyou”)

In March 2016, the Group entered into share transfer agreement for the disposal of its 51% equity interests in Ningbo Zhongyou and its aggregate advance owed by Ningbo Zhongyou (the “Ningbo Zhongyou’s Loan”) to the independent third party at nil consideration (collectively the “Disposal”). The assets and liabilities of Ningbo Zhongyou were re-classified as assets and liabilities of a disposal group classified as held for sale during the year ended 31 March 2016. The Disposal was completed on 24 May 2016.

The net assets of Ningbo Zhongyou at the date of the Disposal were as follows:

==> picture [303 x 309] intentionally omitted <==

----- Start of picture text -----

HK$’000
Amount due from a non-controlling shareholder of a subsidiary 11,443
Ninbgo Zhongyou’s Loan 18,603
Cash and cash equivalents 176
Trade and other receivables 5,996
Trade and other payables (278)
Net assets 35,940
Net assets 35,940
Release of translation reserve upon disposal 901
Release of non-controlling interests upon disposal (17,611)
Assignment of Ningbo Zhongyou’s Loan (18,603)
Loss on disposal of the subsidiary (627)
Total consideration –
Satisfied by:
Cash –
Net cash outflows arising on the Disposal – for the six months
ended 30 September 2016:
Cash consideration received –
Cash and bank balances disposed of (176)
Net cash outflow (176)
----- End of picture text -----

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 43

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

25. RELATED PARTY TRANSACTIONS

(a) Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.

(b) Save as disclosed elsewhere in these financial statements, the Group had the following major transactions with related parties during the six months ended 30 September 2016 and 2015:

==> picture [274 x 181] intentionally omitted <==

----- Start of picture text -----

Six months ended 30 September
2016 2015
Related party relationship Type of transactions HK$’000 HK$’000
(Unaudited) (Unaudited)
Glory Era Limited (a related Purchase of property,
company of the Company plant and equipment
under common director) from the Group 300 –
Mr. Cao Zhong Guarantee given to banks
(a substantial shareholder in respect of credit facilities
of the Company) granted to subsidiaries
of the Company 726,032 303,975
Mr. Cao Zhong Guarantee given to
(a substantial shareholder outstanding non-convertible
of the Company) debt securities 1,064,378 1,558,970
----- End of picture text -----

(c) Members of key management during the six months ended 30 September 2016 and 2015 comprised of the directors only and their remuneration are set out as follows:

==> picture [274 x 134] intentionally omitted <==

----- Start of picture text -----

Six months ended
30 September
2016 2015
HK$’000 HK$’000
(Unaudited) (Unaudited)
Fees, basic salaries, allowances and
other benefits 8,529 7,680
Retirement benefit scheme
contributions 107 45
8,636 7,725
----- End of picture text -----

44 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

26. OPERATING LEASES

Operating lease commitments – as a lessee

During the six months ended 30 September 2016 and year ended 31 March 2016, the Group leased part of its properties with lease terms from 1 to 2 years under operating lease arrangement.

As at 30 September 2016, the Group had total future minimum lease payments under non-cancellable operating leases due at the end of reporting period as follows:

==> picture [303 x 111] intentionally omitted <==

----- Start of picture text -----

At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
Within one year 6,719 11,111
In the second to fifth year, inclusive 1,520 303
8,239 11,414
----- End of picture text -----

Operating lease receivables – as a lessor

The Group’s investment properties are leased to tenants with lease term of 1 year. The rental income during the six months ended 30 September 2016 was HK$136,000 (six months ended 30 September 2015: HK$1,915,000).

The minimum rent receivables under non-cancellable operating leases at the end of the reporting period are as follows:

==> picture [303 x 78] intentionally omitted <==

----- Start of picture text -----

At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
Within one year – 21
----- End of picture text -----

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 45

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

27. CAPITAL COMMITMENTS

Capital commitments outstanding as at 30 September 2016 and 31 March 2016 not provided for in the financial statements were as follows:

==> picture [303 x 88] intentionally omitted <==

----- Start of picture text -----

At At
30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
Contracted but not provided for acquisition of
property, plant and equipment 21,146 25,044
----- End of picture text -----

28. FAIR VALUE MEASUREMENT OF FINANCIAL ASSETS AND LIABILITIES

The carrying amounts of the Group’s financial assets and financial liabilities as at 30 September 2016 and 31 March 2016 are categorised as follows:

==> picture [302 x 190] intentionally omitted <==

----- Start of picture text -----

At At
30 September 31 March
2016 2016
HK$’000 HK$’000
Notes (Unaudited) (Audited)
Financial assets
Loans and receivables (i) 707,246 603,950
Available-for-sale investments
– Listed investments (ii) – 28,737
– Unlisted equity shares, at cost (i) 79,620 81,013
Financial liabilities
Financial liabilities measured at
amortised cost (i) 18,362,061 18,406,284
Financial liabilities at fair value
through profit or loss
– Held for trading (ii) – –
----- End of picture text -----

(i) Financial assets and liabilities not measured at fair value

The carrying amounts of the Group’s financial instruments carried at cost or amortised cost are not materially different from their fair values at 30 September 2016 and 31 March 2016.

46 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(ii) Financial assets measured at fair value

The fair value of financial assets with standard terms and conditions and traded on active liquid markets are determined with reference to their quoted market prices.

The valuation techniques and significant unobservable inputs used in determining the fair value measurement of level 2 financial instruments, as well as the relationship between key observable inputs and fair value are set out below.

(a) Summary of fair value of financial instruments

The following table presents the fair value of the Group’s financial instruments measured at the end of the reporting period on a recurring basis, categorised into the three-level fair value hierarchy as defined in HKFRS 13 “Fair Value Measurement”. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique, details of which are listed below:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs)

==> picture [246 x 108] intentionally omitted <==

----- Start of picture text -----

Fair value at
Recurring fair value 30 September
measurements 2016 Level 1 Level 2 Level 3
HK$’000 HK$’000 HK$’000 HK$’000
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Assets:
Available-for-sale
investments, listed
– – – –
equity securities
----- End of picture text -----

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 47

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

==> picture [246 x 109] intentionally omitted <==

----- Start of picture text -----

Fair value at
Recurring fair value 31 March
measurements 2016 Level 1 Level 2 Level 3
HK$’000 HK$’000 HK$’000 HK$’000
(Audited) (Audited) (Audited) (Audited)
Assets:
Available-for-sale
investments, listed
equity securities 28,737 28,737 – –
----- End of picture text -----

There were no transfers between levels during the six months ended 30 September 2016 and year ended 31 March 2016.

(b) Movements of financial liabilities at fair value through profit or loss based on level 3

The movements of the balance of financial liabilities measured at fair value through profit or loss based on Level 3 are as follows:

==> picture [246 x 179] intentionally omitted <==

----- Start of picture text -----

30 September 31 March
2016 2016
HK$’000 HK$’000
(Unaudited) (Audited)
At 1 April 2016 and at 1 April 2015 – (26,423)
Total gain recognised in profit or loss
during the period/year – 26,423
At 30 September 2016 and at 31 March
2016 – –
Gain recognised in consolidated
statement of profit or loss relating to
those financial liabilities held at the
end of the reporting period – 26,423
----- End of picture text -----

48 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

29. SUBSEQUENT EVENTS

Proposed amendments to the terms and conditions of the Convertible Bonds due 2018

On 18 November 2016, the Company and China Life Insurance (Overseas) Company Limited (“China Life”) entered into an amendment agreement in respect of the HK$700,000,000 convertible bonds maturing on 12 February 2018, pursuant to which the maturity date and conversion rights were amended to 24 January 2017 with the conversion price being reset as HK$0.20 per share.

The proposed amendments are subject to the approval by shareholders of the Company and the Stock Exchange approving the proposed amendments and the listing on the Stock Exchange of conversion shares arising from the convertible bonds.

Proposed increase in authorised share capital

In order to ensure that the authorised share capital of the Company will be sufficient for the issue of the conversion shares upon full conversion of the existing convertible bonds of the Company (as amended by the respective amendment agreements) and any potential issue of new shares in the future, the Company announced on 18 November 2016 with a proposal to increase the Company’s authorised share capital from HK$3,000,000,000 to HK$4,000,000,000 by the creation of additional 5,000,000,000 new shares (the “Proposed Increase in Authorised Share Capital”). The Proposed Increase in Authorised Share Capital is subject to the approval by the shareholders in an upcoming extraordinary general meeting of the Company.

30. APPROVAL OF INTERIM FINANCIAL STATEMENTS

The Interim Financial Statements were approved and authorised for issue by the Board on 24 November 2016.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 49

MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

For the six months ended 30 September 2016, the Group was principally engaged in expressway operations, trading of petroleum and related products, compressed natural gas (“CNG”) gas stations operations and timber operations.

Operation of Zhunxing Expressway

During the period, the Company’s turnover was partly contributed by toll income from the 265-kilometre heavy-haul toll expressway in Inner Mongolia (“Zhunxing Expressway”) operated by Inner Mongolia Zhunxing Heavy Haul Expressway Company Limited (內蒙古准興重載高速公路有限責任公司) (“Zhunxing”) which is indirectly held as to 86.87% by the Company.

For the six months ended 30 September 2016, Zhunxing recorded an accumulated toll fee of approximately RMB220.25 million (approximately HK$258.15 million), i.e. an average daily income of RMB1.20 million (approximately HK$1.41 million) (for the six months ended 30 September 2015: an average daily income of RMB1.09 million (approximately HK$1.37 million)).

Upon traffic opening and commencement of toll collection of Zhunxing Expressway on 21 November 2013, the Group actively introduced measures and promotions to build client base. Yet, a number of factors have retarded the growth of traffic volume of Zhunxing Expressway during the period:

(1) The implementation of capacity reduction in the coal industry has commenced in Inner Mongolia, targeting to close a number of coal mines by 2020 to curb overcapacity in the sector. The initial output cuts have posed negative impacts on the number and loading of coal transport vehicles;
(2) the opening of the Shanxi section of the Beijing-Lhasa Expressway (“G109”) has diverted some coal transportation vehicles travelling to Shanxi to run on G109 at lower cost, instead of using the entire Zhunxing Expressway; and
(3) the auxiliary facilities of some service areas and major petrol and gas stations were not in operation, which caused inconvenience to some users of Zhunxing Expressway.

50 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

MANAGEMENT DISCUSSION AND ANALYSIS

In order to accelerate the growth in traffic volume and toll income of Zhunxing Expressway, Zhunxing is actively implementing a number of measures to promote and attract more coal transport vehicles to run on Zhunxing Expressway on a regular basis:

(1) closely keep track with competitors to cope with any new market changes brought by the openings of new competitive road sections. Zhunxing continues to fine-tune its business strategy to seek breakthrough in raising toll fee income in this sluggish market environment. One business strategy is to continue offering discount plans to major customers to enhance the usage of Zhunxing Expressway;
(2) timely update on any new market changes brought by the developments of the neighboring logistic bases. Zhunxing proactively liaise with the neighboring logistic bases to understand their new developments and assure Zhunxing Expressway’s advantageous position in contributing to a coal transport process that reinforces traffic fluency, cost-saving and high efficiency; and
(3) push forward the licensing process of auxiliary facilities of service areas and major petrol and gas stations. Following the launching of the auxiliary facilities in the Wulanchabu section in October 2016, the petrol and gas stations in the Hohhot section are expected to officially commence operation in June 2017. The additional services, such as petrol and gas dispensing and supply of food and beverages, are expected to bring convenience to road users and attract a steady flow of customers.

Petroleum and Related Products Business

For the six months ended 30 September 2016, the Group through its wholly owned subsidiary, Shenzhenshi Qianhai Zitong Energy Company Limited (深圳市前海資通能源有限公司) (“Zitong Energy”) continued to focus on the development of the three ancillary business sectors under the petroleum business segment, namely (1) the traditional energy business sector based on refined petroleum trading, (2) the clean energy business sector based on contemporary coal chemicals, and (3) the new energy business sector based on CNG.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 51

MANAGEMENT DISCUSSION AND ANALYSIS

(1) Refined Petroleum Trading Business:

For the six months ended 30 September 2016, Zitong Energy and Guangdong Jinjing Energy Company Limited (廣東金晶能源股份有限公司) (“Jinjing”) recorded sales of petroleum products of approximately 35,000 tons in total (for the six months ended 30 September 2015: 218,000 tons), whereas revenue from principal business was approximately HK$137.20 million (for the six months ended 30 September 2015: approximately HK$1,218.83 million).

During the period, the international crude petroleum market has slightly improved. Yet, in light of the Group’s imminent funding needs to meet its short-term financial obligations, Zitong Energy and Jinjing limited their purchases on petroleum products for trading activities, leading to a reduction in trade volume of approximately 84%, and hence a decrease in income of approximately 89% recorded under the petroleum trading business as compared to the corresponding period in 2015.

(2) Clean Energy Business:

For the six months ended 30 September 2016, the Group’s 85% owned subsidiary Shenzhenshi Qianhai Zitong Clean Energy Company Limited (深圳市前海資通清潔能源有限公司) (“Zitong Clean Energy”) continued to focus on technological coordination and business negotiation for the cooperation project with CNOOC Oil & Petrochemicals Company Limited (中海石油煉化有限責任公司) (“CNOOC”) in relation to the partial oxidation coal-tohydrogen plant (the “POX Project”) under the Huizhou petrochemicals phase II project. Zitong Clean Energy will continue to take proactive approach in the preliminary works including optimization of technologies, selection of equipment and construction, and formation of the related joint venture.

(3) New Energy Business:

For the six months ended 30 September 2016, the Group’s wholly owned subsidiary Sichuan Leshan Zhongshun Oil and Gas Company Limited (四川樂山中順油汽有限公司) (“Leshan Zhongshun”) has realized sales of CNG of approximately 4,085,340 m[3] in total (for the six months ended 30 September 2015: 1,967,440 m[3] ), amounted to approximately HK$12.65 million (for the six months ended 30 September 2015: HK$8.02 million).

52 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

MANAGEMENT DISCUSSION AND ANALYSIS

Forest Operation

In order to narrow the Group’s business losses and conserve resources, the Group has ceased its forest operation in Guyana, South America. The Group will continue to look for opportunity to dispose its forestry related businesses with an aim to focus its resources and manpower on other main businesses of the Group.

Financial Review

For the six months ended 30 September 2016, the Group recorded an unaudited turnover of approximately HK$408.18 million (for the six months ended 30 September 2015: HK$1,490.77 million), which was recognised under three reportable segments of the Group, namely expressway operations, petroleum business and timber operations, contributing approximately HK$258.15 million (63.25%), HK$149.86 million (36.71%) and HK$0.17 million (0.04%) (for the six months ended 30 September 2015: HK$250.12 million (16.78%), HK$1,233.83 million (82.76%) and HK$6.83 million (0.46%)) respectively to the Group’s consolidated turnover.

Turnovers from the two core businesses, i.e. HK$258.15 million toll income from expressway operations (for the six months ended 30 September 2015: HK$250.12 million) and HK$137.20 million income from trading of petroleum and related products (for the six months ended 30 September 2015: HK$1,225.80 million), constituted the main streams of the Group’s revenue for the six months ended 30 September 2016. The income recorded under the Group’s petroleum trading business dropped by about 89% during the six months ended 30 September 2016 due to the reduced petroleum products trading activities as mentioned in the above “Business Review” section. Nonetheless, the toll income from the expressway operations increased by about 3% during the period as coal prices began to slightly recover.

During the period, the Group recorded a gross loss amounted to approximately HK$73.71 million as compared to a gross loss of HK$99.69 million recorded for the corresponding period in 2015. Cost of sales for the six months ended 30 September 2016 was approximately HK$481.88 million, representing a decrease of approximately 70% from HK$1,590.47 million for the corresponding period in 2015, which was primarily driven by (i) the reduced cost of sales of petroleum and related products amounted to HK$138.11 million (for the six months ended 30 September 2015: HK$1,192.09 million), (ii) the reduced amortisation of the concession intangible asset arising from expressway operations to approximately HK$279.99 million (for the six months ended 30 September 2015: HK$308.57 million), and (iii) the reduced depreciation of property, plant and equipment arising from expressway operations to HK$38.89 million (for the six months ended 30 September 2015: HK$45.75 million).

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 53

MANAGEMENT DISCUSSION AND ANALYSIS

For the six months ended 30 September 2016, the Group recorded a decreased EBITDA (defined as earnings before interest, tax, depreciation, amortization and non-cash changes in values of assets and liabilities) amounted to approximately HK$179.92 million compared to the EBITDA of approximately HK$239.00 million for the last corresponding period. The 25% decline in EBITDA was primarily driven by the reduced revenue from the petroleum business of the Group as discussed above. Detailed segment turnover and contribution to loss before income tax credit of the Group are shown in Note 4 to the financial statements.

The loss before income tax credit was approximately HK$655.10 million (for the six months ended 30 September 2015: HK$849.51 million) and net loss was approximately HK$654.97 million (for the six months ended 30 September 2015: HK$848.89 million) for the six months ended 30 September 2016. The 23% reduction in net loss during the period was mainly attributable to (i) a 34% drop in the Group’s finance cost to approximately HK$509.20 million (for the six months ended 30 September 2015: HK$771.14 million) following the disposal of a subsidiary under the petroleum business and the repayment of certain convertible bonds and non-convertible debt securities by the Company during the last financial year; and (ii) a 56% drop in the Group’s selling and administrative expenses to approximately HK$74.21 million (for the six months ended 30 September 2015: HK$170.28 million) mainly due to (a) the reduced petroleum products freight charges to HK$2.63 million (for the six months ended 30 September 2015: HK$50.60 million) following the reduction in petroleum products trading activities and (b) the reduced depreciation and amortisation to HK$7.18 million (for the six months ended 30 September 2015: HK$27.65 million) following the recognition of impairment loss under the expressway operations business during the last financial year.

The loss attributable to owners of the Company for the period was approximately HK$599.73 million (for the six months ended 30 September 2015: HK$762.61 million). Both the basic and diluted loss per share attributable to owners of the Company for the period were 8.88 HK cents as compared with 56.47 HK cents for the last corresponding period.

Liquidity Review

As at 30 September 2016, the Group was in a net liabilities position of approximately HK$460.91 million as compared with a net assets position of approximately HK$210.96 million as at 31 March 2016. The gearing ratio of the Group, measured as total liabilities to total assets, was 102.6% (31 March 2016: 98.9%).

54 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

MANAGEMENT DISCUSSION AND ANALYSIS

As at 30 September 2016, the Group’s available banking facilities amounted to approximately HK$13,131.66 million (31 March 2016: HK$12,769.82 million), of which HK$11,895.49 million (31 March 2016: HK$12,072.59 million) has been utilised. The Group’s outstanding borrowings, all being dominated in RMB, amounted to approximately HK$11,895.49 million (31 March 2016: HK$12,072.59 million), represented approximately 65% of the Group’s total liabilities. Approximately HK$1,015.95 million (31 March 2016: HK$1,151.67 million) of the Group’s outstanding borrowings were charged at fixed rates. Approximately 7.6% of the Group’s outstanding borrowings were repayable within one year (31 March 2016: 7.0%).

As expressway operation is a capital intensive industry, approximately 98% of the Group’s outstanding borrowings amounted to RMB10,044.91 million (approximately HK$11,675.80 million), were obtained and drawn down primarily for the construction of Zhunxing Expressway as at 30 September 2016. The syndicated loan facilities of RMB8,795.88 million (approximately HK$10,223.98 million) granted by several PRC banks in December 2012, including short term loans of RMB37.05 million (approximately HK$43.07 million) and long term loans of RMB8,758.83 million (approximately HK$10,180.91 million), were secured by Zhunxing’s receivables of toll income. Furthermore, Zhunxing obtained and drawn down short term loans of RMB547.72 million (approximately HK$636.65 million) and long term loans of RMB701.32 million (approximately HK$815.19 million) from several authorized financial institutions in the PRC, of which (i) RMB212.00 million (approximately HK$246.42 million) was secured by Zhunxing’s receivables of toll income and the equity interests of Zhunxing; (ii) RMB176.00 million (approximately HK$204.58 million) was secured by Zhunxing’s receivables of toll income and certain Zhunxing’s investments; and (iii) RMB200.00 million (approximately HK$232.47 million) was secured by certain Zhunxing’s investments.

The remaining 2% of the Group’s outstanding borrowings as at 30 September 2016 were unsecured and utilised primarily to finance the petroleum business of the Group.

The Group’s capital commitments outstanding as at 30 September 2016 dropped by approximately 16% to approximately HK$21.15 million (31 March 2016: HK$25.04 million), representing the capital expenditure arising from the acquisition of property, plant and equipment under the expressway operations sector.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 55

MANAGEMENT DISCUSSION AND ANALYSIS

During the period, the Group suffered a loss of HK$654.97 million and at the end of the reporting period, the Group’s current liabilities exceeded its current assets by approximately HK$6,572.74 million. As at 30 September 2016, the Company’s outstanding convertible bonds and non-convertible debt securities are as follows:

==> picture [330 x 278] intentionally omitted <==

----- Start of picture text -----

Convertible Bonds/ Principal
Non-Convertible Debt Securities Holder amount Maturity date
(HK$)
Convertible Bonds China Life Insurance (Overseas)
Company Limited 800,000,000 10 February 2016
Cross-Strait Capital Limited 32,000,000 10 February 2016
Strait Capital Service Limited 800,000,000 24 January 2017
Strait CRTG Fund, L.P. 700,000,000 24 January 2017
China Life Insurance (Overseas)
Company Limited 700,000,000 12 February 2018
Sub-total 3,032,000,000
Non-Convertible Debt Securities Li Ka Shing (Canada) Foundation 464,000,000 3 March 2016
Li Ka Shing (Canada) Foundation 465,000,000 3 September 2016
Dr. Lo Ka Shui 36,000,000 3 March 2016
Dr. Lo Ka Shui 35,000,000 3 September 2016
Sub-total 1,000,000,000
Total 4,032,000,000
----- End of picture text -----*

subject to the shareholders approving the proposed amendments as set out in the section headed “Material Events”, the maturity date will be changed to 24 January 2017.

56 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

MANAGEMENT DISCUSSION AND ANALYSIS

As at 30 September 2016, the Group was due to repay the principal amounts of HK$832.00 million of convertible bonds payable on 10 February 2016 and the HK$1,000.00 million of non-convertible debt securities in two tranches payable on 3 March 2016 and 3 September 2016 respectively and the related interests. In aggregate, the carrying amount of the convertible bonds and non-convertible debt securities which are immediately repayable on demand was approximately HK$4,332.78 million if requested by the respective holders as a result of the potential cross-default events. These conditions indicate the existence of a material uncertainty which may cast doubt on the Group’s ability to continue as a going concern and therefore, the Group may not be able to realise its assets and discharge its liabilities in the normal course of business. However, having considered the measures set out in Note 1 to the financial statements and the section headed “Updates on Remedial Measures on Going Concern” below, the Board is of the view that the Group will have sufficient working capital to meet its financial obligations as and when they fall due in the foreseeable future.

The Group’s business operations, assets and liabilities are denominated mainly in Hong Kong dollars, Renminbi and US dollars. There was no significant foreign exchange gain or loss recognised during the period. The management will review from time to time of potential foreign exchange exposure and will take appropriate measures to minimise the risk of foreign exchange exposure in the future.

The Group did not use any financial instruments for hedging purposes and did not have foreign currency investments being hedged by foreign currency borrowings and other hedging instruments.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 57

MANAGEMENT DISCUSSION AND ANALYSIS

Material Events

Proposed Amendments to the Terms and Conditions of the Convertible Bonds due 2016

On 10 February 2016, the Company issued 9% convertible bonds in the principal amount of HK$700 million and HK$800 million, maturing 24 October 2016 to Strait CRTG Fund, L.P. (“Strait Fund”) and Strait Capital Service Limited (“Strait Capital”), respectively.

a) On 13 June 2016, the Company and Strait Fund entered into an amendment agreement, pursuant to which the maturity date and conversion rights were extended to 24 January 2017 with the conversion price being reset as HK$0.20 per Share. The proposed amendments became effective on 21 July 2016 upon satisfying all the conditions precedent set out in the amendment agreement, including (1) the shareholders’ approval and (2) the Stock Exchange approving (i) the proposed amendments and (ii) the listing on the Stock Exchange of conversion shares arising from the convertible bonds during the extended period. Further details on the proposed amendments are set out in the announcements dated 13 June 2016 and 19 July 2016, and the circular dated 29 June 2016 of the Company.
b) On 10 August 2016, the Company and Strait Capital entered into an amendment agreement, pursuant to which the maturity date and conversion rights were extended to 24 January 2017 with the conversion price being reset as HK$0.20 per Share. The proposed amendments were subject to (1) the approval by the shareholders, (2) all necessary consents and approvals required to be obtained on part of Strait Capital in respect of the proposed amendments, and (3) the Stock Exchange approving (i) the proposed amendments and (ii) the listing on the Stock Exchange of conversion shares arising from the convertible bonds during the extended period. Upon satisfying all the conditions precedent, the proposed amendments came into effect on 12 September 2016. Details on the proposed amendments are set out in the announcements dated 10 August 2016 and 8 September 2016, and the circular dated 23 August 2016 of the Company.

The Board considers that the extended time for the repayment to Strait Fund and Strait Capital will be beneficial to the Company and its operation by alleviating the pressure on its cash flows and profits. Furthermore, the amendment of conversion price will incentivise the two bondholders to convert all or part of the convertible bonds not previously converted by bringing it closer to the current market level of the share price.

58 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

MANAGEMENT DISCUSSION AND ANALYSIS

Proposed Amendments to the Terms and Conditions of the Convertible Bonds due 2018

On 10 February 2016, the Company issued 9% convertible bonds in the principal amount of HK$700 million, maturing 12 February 2018 to China Life Insurance (Overseas) Company Limited (“China Life”).

On 18 November 2016, the Company and China Life entered into an amendment agreement, pursuant to which the maturity date and conversion rights were amended to 24 January 2017 with the conversion price being reset as HK$0.20 per Share. The proposed amendments are subject to (1) the approval by the shareholders and (2) the Stock Exchange approving (i) the proposed amendments and (ii) the listing on the Stock Exchange of conversion shares arising from the convertible bonds. Further details on the proposed amendments are set out in the announcement dated 18 November 2016 of the Company.

The Board considers that the amendment of conversion price will incentivise China Life to convert all or part of the convertible bonds not previously converted by bringing it closer to the current market level of the share price. The agreement to shorten the conversion period was agreed between China Life and the Company to align the interest of China Life with Strait Fund and Strait Capital, both of which amended the maturity date of their respective convertible bonds to 24 January 2017 as aforesaid. The Board is of the view that the amendment agreement and the convertible bonds due in 2018 (as amended by the amendment agreement) are fair and reasonable and are in the interest of the Company and its shareholders as a whole.

Proposed Increase In Authorised Share Capital

As at the date of this report, the existing authorised share capital of the Company is HK$3,000,000,000, divided into 15,000,000,000 Shares of HK$0.20 each, of which 6,752,395,970 Shares have been issued and credited as fully paid up in the amount of HK$1,350,479,194.

In order to ensure that the authorised share capital of the Company will be sufficient for the issue of the conversion shares upon full conversion of the existing convertible bonds of the Company (as amended by the respective amendment agreements) and any potential issue of new Shares in the future, the Company announced on 18 November 2016 with a proposal to increase the Company’s authorised share capital from HK$3,000,000,000 to HK$4,000,000,000 by the creation of additional 5,000,000,000 new Shares (the “Proposed Increase in Authorised Share Capital”). The Proposed Increase in Authorised Share Capital is subject to the approval by the shareholders in an upcoming extraordinary general meeting of the Company.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 59

MANAGEMENT DISCUSSION AND ANALYSIS

Prospects

At present, the domestic coal sector is struggling with overcapacity. Output cuts are implemented in Inner Mongolia to rebalance the supply and demand of the commodity. Following the improvements on the macroeconomy and coal market, the traffic volume and toll income of Zhunxing Expressway are expected to gradually recover, bringing a turnaround to profit in the long run.

The Board is committed to protect the interests of all stakeholders of the Company. Given the fluctuating market conditions and the Company’s imminent funding needs to meet its short-term financial obligations, the Company intends to dispose of its 86.87% equity interest in Zhunxing, the proceeds of which is intended to be used for the repayment of the principal amount of the Company’s loans and borrowings together with accrued interests. The Board is of the view that if the potential disposal of the Group’s interest in its toll expressway operation is successfully materialised during the financial year ending 31 March 2017, the Group’s cash flow will be strengthened and the financial position of the Group will be improved.

The Board will continue to look out for opportunities to push forward the expansion on petroleum business as set forth in the Company’s annual report for the year ended 31 March 2016 (“Annual Report 2016”) to achieve sustainable growth of the Group and maximise the benefits of the shareholders as a whole.

Updates on Remedial Measures on Going Concern

The consolidated financial statements of the Group for the year ended 31 March 2016 were subject to a disclaimer of opinion of the independent auditor of the Company on the basis detailed in the section headed “Basis for Disclaimer of Opinion” in the independent auditor’s report in the 2016 Annual Report. Further to remedial measures as set out in the section headed “Remedial Measures on Going Concern” in the 2016 Annual Report, the Company wishes to update on the relevant remedial measures taken or to be taken by the management up to the date of this report to improve the Company’s financial position.

Proposed amendments of the convertible bonds due in 2016 and 2018

Particulars of the proposed amendments of the convertible bonds due in 2016 and 2018 are set out in the above section headed “Material Events”.

60 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

MANAGEMENT DISCUSSION AND ANALYSIS

Potential restructuring of convertible bonds and non-convertible debt securities

The Company is due to redeem the convertible bonds with an aggregate principal amount of HK$832 million and non-convertible debt securities with a principal amount of HK$1,000 million as at 30 September 2016. Besides, the remaining outstanding convertible bonds with aggregate principal amounts of approximately HK$2,200 million would be immediately repayable if requested by the respective bondholders as a result of the potential cross-default events.

With the assistance of the financial advisers and legal counsel, the Company has been actively seeking for the potential restructuring of the convertible bonds and non-convertible debt securities with aggregate principal amounts of HK$4,032 million. Up to the date of this report, management of the Company has maintained ongoing dialogues with the financial advisers and all holders of the convertible bonds and non-convertible debt securities. These discussions remain constructive, and the Board is of the opinion that the default on partial settlement could be rectified and new repayment schedule could be agreed.

Proposed disposal of 86.87% equity interest in Zhunxing

Up to the date of this report, the Group is still in discussion with a potential purchaser to dispose the 86.87% equity interest of Zhunxing owned by the Company through its wholly-owned subsidiaries. The sales proceeds of the proposed disposal are intended to repay the Company’s loans and borrowings as set out in the above section headed “Potential restructuring of convertible bonds and non-convertible debt securities”.

The final terms and conditions of the agreement of the proposed disposal are still under negotiation. Moreover, the successfulness of the proposed disposal will be subject to the results of financial due diligence work to be performed on Zhunxing and the approvals by the government authorities. If the proposed disposal is materialised, the Group’s cashflow will be strengthened and have sufficient reserve of cash to meet its liquidity requirement in the short and long term.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 61

MANAGEMENT DISCUSSION AND ANALYSIS

CHARGES ON ASSETS

As at 30 September 2016, the Group has pledged the equity interests of (i) Inner Mongolia Berun New Energy Company Limited (內蒙古博源新型能源有限公司) with a carrying amount of HK$44.17 million; (ii) Inner Mongolia Zhunxing Expressway Service Areas Management Company Limited (內蒙古准興高速服務區管理有限責任公司); and (iii) Zhunxing to secure part of the Group’s borrowings.

CONTINGENT LIABILITIES

As at 30 September 2016, the Group did not have any material contingent liabilities.

DIVIDENDS

The Directors do not recommend any dividend for the six months ended 30 September 2016 (for the six months ended 30 September 2015: HK$Nil).

EMPLOYEES

The Group has approximately 537 employees in Hong Kong and PRC as at 30 September 2016. The Group ensures that the pay scales of its employees are rewarded on a performance rated basis within the general framework of the Group’s remuneration policy.

SHARE OPTION SCHEME

The share option scheme adopted by the Company on 16 July 2004 (the “Old Scheme”) expired on 15 July 2014. No further options can be granted under the Old Scheme; howsoever, the options granted under the Old Scheme before 15 July 2014 remains exercisable.

A new share option scheme of the Company was adopted on 28 August 2014 (the “New Scheme”) pursuant to the approval by the shareholders of the Company at the annual general meeting held on 28 August 2014. The New Scheme shall remain in force for a period of 10 years ending on 27 August 2024, unless otherwise terminated or amended.

As at 30 September 2016, the options to subscribe for 37,944,435 shares are valid, outstanding and exercisable till 15 October 2018 under the Old Scheme. The number of securities to be issued upon exercise of the options approved to each grantee is less than 1% of the Company’s ordinary shares in issue. No options under the Old Scheme were exercised and thus no securities were issued during the period ended 30 September 2016.

62 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

MANAGEMENT DISCUSSION AND ANALYSIS

Details of the options under the Old Scheme for the period ended 30 September 2016 are as follows:

										Market
										value
		No. of								per share
		options			No. of				Exercise	at date of
	Date of	outstanding	No. of	No. of	options	No. of options			price	approval of
	grant being	as of	options	options	cancelled/	outstanding as			per share	grant
	approved	01/04/2016	granted	exercised	lapsed	of	30/09/2016	Exercise period	(HK$)	(HK$)
					(Note 2)				(Note 1)	(Note 1)
Directors
Duan Jingquan	16 October 2013	3,111,111	–	–	–		3,111,111	23 May 2014 to	4.05	8.40
								15 October 2018
Tsang Kam Ching,	16 October 2013	3,111,111	–	–	–		3,111,111	23 May 2014 to	4.05	8.40
David								15 October 2018
Gao Zhiping	16 October 2013	3,111,111	–	–	–		3,111,111	23 May 2014 to	4.05	8.40
								15 October 2018
Jing Baoli	16 October 2013	555,555	–	–	–		555,555	23 May 2014 to	4.05	8.40
								15 October 2018
Yip Tak On	16 October 2013	555,555	–	–	–		555,555	23 May 2014 to	4.05	8.40
								15 October 2018
Bao Liang Ming	16 October 2013	555,555	–	–	–		555,555	23 May 2014 to	4.05	8.40
								15 October 2018
Employees	16 October 2013	27,499,992	–	–	(555,555)		26,944,437	23 May 2014 to	4.05	8.40
								15 October 2018
		38,499,990	–	–	(555,555)		37,944,435

Note:

Each option entitles a grantee to subscribe for one ordinary share of HK$0.20 each of the Company (market value per share as at 30 September 2016 was HK$0.146) at the subscription price of HK$4.05 per share. The options are unlisted.
Options to subscribe for 555,555 shares had lapsed during the period ended 30 September 2016 following the cessation of a grantee to be an employee of the Company.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 63

MANAGEMENT DISCUSSION AND ANALYSIS

Save as aforesaid, no share option had been granted, exercised, cancelled or lapsed under the Old Scheme and the New Scheme as at 30 September 2016.

Particulars of the above share options offered are set out in Note 22 to the financial statements.

SALE AND PURCHASE OF SHARES

There were no purchases, sales or redemptions of the Company’s listed securities by the Company or any of its subsidiaries during the six months ended 30 September 2016.

DIRECTORS’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES, AND DEBENTURES

Save as disclosed below, as at 30 September 2016, according to the register of interest kept by the Company under Section 336 of the Securities and Futures Ordinance (the “SFO”) and so far as was known to the Directors, none of the Directors and chief executive of the Company held any interest or short positions on the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning or Part XV of the SFO) which (i) where required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 Part XV of the SFO (including interests and short positions which they were taken or deemed to have taken under such provisions of the SFO); or (ii) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (iii) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) contained in Appendix 10 of the Listing Rules, to be notified to the Company and the Stock Exchange.

64 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

MANAGEMENT DISCUSSION AND ANALYSIS

(i) Long positions in issued shares and underlying shares of the Company

==> picture [302 x 311] intentionally omitted <==

----- Start of picture text -----

Approximate
percentage
(%) of
issued
Total number Approximate Shares upon
Number of
of Shares percentage full conversion
Number of Shares underlying Shares
and (%) of of outstanding
Personal Corporate Personal Corporate underlying issued convertible
Name of Director interests interests interests interests Shares held Shares bonds
(Note 5) (Note 6)
Mr. Cao Zhong 33,800,000 948,325,000 NIL 2,000,000,000 2,982,125,000 44.16 19.01
(“Mr. Cao”) (Note 1) (Note 2)
Mr. Fung Tsun Pong 310,590,610 647,755,000 NIL NIL 958,345,610 14.19 6.11
(“Mr. Fung”) (Note 3)
Mr. Tsang Kam 7,581,224 NIL 3,111,111 NIL 10,692,335 0.15 0.06
Ching, David (Note 4)
Mr. Duan Jingquan NIL NIL 3,111,111 NIL 3,111,111 0.04 0.01
(Note 4)
Mr. Gao Zhiping NIL NIL 3,111,111 NIL 3,111,111 0.04 0.01
(Note 4)
Mr. Yip Tak On NIL NIL 555,555 NIL 555,555 0.01 –
(Note 4)
Mr. Jing Baoli NIL NIL 555,555 NIL 555,555 0.01 –
(Note 4)
Mr. Bao Liang Ming NIL NIL 555,555 NIL 555,555 0.01 –
(Note 4)
----- End of picture text -----

Notes:

Champion Rise International Limited (“Champion Rise”) being wholly owned by Mr. Cao was interested in 948,325,000 Shares, representing approximately 14.04% in the issued share capital of the Company. Champion Rise is a substantial shareholder of the Company and its shareholding in the Company is set out in the section headed “Substantial Shareholders”.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 65

MANAGEMENT DISCUSSION AND ANALYSIS

On 25 January 2016, Cottonfield Enterprises Limited (“Cottonfield”) as the lender entered into a loan agreement with Leftover Most Holdings Limited (“Leftover Most”) and Strait Capital Service Limited (“Strait Capital”) as the borrowers (the “Loan”). To secure the Loan, Strait Capital has charged an aggregate principal amount of HK$400 million of the convertible bonds due 24 January 2017 (as amended by the amendment agreement dated 10 August 2016) issued by the Company which are convertible into 2,000,000,000 Shares at HK$0.20 per Share (the “Charged Convertible Bonds”) in favour of Cottonfield and Leftover Most.

Mr. Cao being the sole shareholder of Leftover Most was deemed to be interested in the Charged Convertible Bonds.

Leftover Most, Cottonfield and Strait Capital are substantial shareholders of the Company and their shareholdings in the Company are set out in the section headed “Substantial Shareholders”.

Ocean Gain Limited (“Ocean Gain”) being wholly owned by Mr. Fung was interested in 647,755,000 Shares, representing approximately 9.59% in the issued share capital of the Company. Ocean Gain is a substantial shareholder of the Company and its shareholding in the Company is set out in the section headed “Substantial Shareholders”.
The interests in underlying shares of the Company represent interests in options granted to the directors to subscribe for ordinary shares of HK$0.20 each of the Company at the subscription price of HK$4.05 per Share, further details of which are set out in the section headed “Share Option Scheme”.
Based on 6,752,395,970 shares of HK$0.20 each in issue as at 30 September 2016.
The outstanding convertible bonds as at 30 September 2016 included HK$3,032 million of the convertible bonds issued on 10 February 2015. Full conversion of the outstanding convertible bonds at their respective conversion price would result in the issue of 8,931,775,700 Shares, equivalent to 132.2% of the existing shares in issue as at 30 September 2016. It is only for illustrative purpose and has not taken into account the effect of the exercise of share options issued by the Company.

(ii) Long position in debentures of the Company

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Amount of
Name of director Capacity debentures held
(HK$)
Mr. Cao Corporate interest 400,000,000 of
the Charged
Convertible Bonds
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66 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

MANAGEMENT DISCUSSION AND ANALYSIS

SUBSTANTIAL SHAREHOLDERS

Save as disclosed below, as at 30 September 2016, according to the register of interest kept by the Company, under section 336 of the SFO and so far as was known to the Directors, no other person or companies had an interest or short positions in the shares or underling shares which fall to be disclosed to the Company under the provision of Divisions 2 and 3 of part XV of the SFO or who were, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any other members of the Group.

Long position in Shares

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Approximate
percentage (%) of
issued Shares
Total number Approximate upon full
Number of Shares Number of underlying Shares of Shares and percentage conversion of
Personal Corporate Personal Corporate underlying (%) of outstanding
Name of shareholder interests interests interests interests Shares held issued Shares convertible bonds
(Note k) (Note l)
Champion Rise (Note a) NIL 948,325,000 NIL NIL 948,325,000 14.04 6.04
Mr. Miao Zhenguo 693,000,000 24,500,000 NIL NIL 717,500,000 10.62 4.57
(“Mr. Miao”) (Note b)
Bondic International Holdings NIL 650,000,000 NIL NIL 650,000,000 9.62 4.14
Limited (Note c)
Ocean Gain (Note d) NIL 647,755,000 NIL NIL 647,755,000 9.59 4.12
Turbo View Investment Limited NIL 375,000,000 NIL NIL 375,000,000 5.55 2.39
(Note e)
China Life (Note f) NIL 50,000,000 NIL 1,401,869,159 1,451,869,159 21.50 9.25
Strait Capital (Notes g, h) NIL NIL NIL 7,500,000,000 7,500,000,000 111.07 47.81
Cottonfield (Notes h, i) NIL NIL NIL 2,000,000,000 2,000,000,000 29.62 12.75
Leftover Most (Note h,j) NIL NIL NIL 2,000,000,000 2,000,000,000 29.62 12.75
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INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 67

MANAGEMENT DISCUSSION AND ANALYSIS

Notes:

a. Champion Rise is wholly owned by Mr. Cao, the Chairman and an executive Director of the Company whose interest in shares or underlying shares of the Company is set out in the above section headed “Directors’ Interests and Short Positions in Shares, Underlying Shares and Debentures”.
b. The 24,500,000 Shares, representing 0.36% in the issued share capital of the Company was owned by Goldtex Group Limited which is wholly owned by Mr. Miao.
c. Bondic International Holdings Limited is wholly owned by Mr. Cheung Chung Kiu.
d. Ocean Gain is wholly owned by Mr. Fung, an executive Director and the Vice Chairman of the Company whose interest in shares or underlying shares of the Company is set out in the above section headed “Directors’ Interests and Short Positions in Shares, Underlying Shares and Debentures”
e. Turbo View Investment Limited is wholly owned by Mr. Gao Xiao Rui.
f. China Life was interested in an aggregate of HK$1,500,000,000 convertible bonds issued by the Company on 10 February 2015 which are convertible into 1,401,869,161 Shares at HK$1.07 per Share. China Life Insurance (Group) Company is the holding company of China Life and is deemed to be interested in the Shares and underlying Shares held by China Life.
g. Strait Capital was interested in HK$1,500,000,000 convertible bonds issued on 10 February 2015 by the Company which are convertible into 7,500,000,000 Shares at HK$0.20 per Share (as amended by the amendment agreements dated 13 June 2016 and 10 August 2016). Strait Capital is the general partner of Strait Fund and is deemed to be interested in the HK$700,000,000 convertible bonds issued on 10 February 2015 by the Company to Strait Fund which are convertible into 3,500,000,000 Shares at HK$0.20 per Share (as amended by the amendment agreement dated 13 June 2016), representing approximately 51.83% in the issued share capital of the Company.
h. On 25 January 2016, Strait Capital charged the Charged Convertible Bonds (as defined in Note 2 of the above section headed “Directors’ Interests and Short Positions in Shares, Underlying Shares, and Debentures”) in favour of Cottonfield and Leftover Most.
i. Cottonfield was deemed to be interested in the Charged Convertible Bonds. Cottonfield is wholly owned by Linewear Assets Limited (“Linewear”), which is a wholly-owned subsidiary of Huarong International Financial Holdings Limited (“HIFHL”). HIFHL is owned as to 51.0% by Camellia Pacific Investment Holding Limited (“Camellia”), which is 100% held by China Huarong International Holdings Limited (“CHIFL”). CHIFL is owned as to 88.1% by Huarong Real Estate Co., Ltd (“HRECL”), which is in turn wholly owned by China Huarong Asset Management Co., Ltd (“CHAMCL”). Therefore, Linewear, HIFHL, Camellia, CHIFL, HRECL and CHAMCL were deemed to be interested in 2,000,000,000 Shares held by or deemed to be interested by Cottonfield.

68 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

MANAGEMENT DISCUSSION AND ANALYSIS

j. Leftover Most was deemed to be interested in the Charged Convertible Bonds. Leftover Most is wholly owned by Mr. Cao, the Chairman and an executive Director of the Company whose interest in shares or underlying shares of the Company is set out in the above section headed “Directors’ Interests and Short Positions in Shares, Underlying Shares and Debentures”.
k. Based on 6,752,395,970 shares of HK$0.20 each in issue as at 30 September 2016.

l. The outstanding convertible bonds as at 30 September 2016 included HK$3,032 million of the convertible bonds issued on 10 February 2015. Full conversion of the outstanding convertible bonds at their respective conversion price would result in the issue of 8,931,775,700 Shares, equivalent to 132.2% of the existing shares in issue as at 30 September 2016. It is only for illustrative purpose and has not taken into account the effect of the exercise of share options issued by the Company.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

Save for the deviations as reported and discussed in the Corporate Governance Report as set forth in the Company’s 2016 Annual Report, none of the Directors are aware of any information that would reasonably indicate that the Company is not, or was not throughout the period, in compliance with the Corporate Governance Code as set out in Appendix 14 (the “CG Code”) of the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”). The Board will review the corporate governance practice of the Company regularly and effect changes if necessary.

THE MODEL CODE

The Company has adopted a code of conduct regarding directors’ securities transactions on terms no less than the required standard set out in the Model Code in Appendix 10 of the Listing Rules and the Directors of the Company have confirmed that they have complied with the required standard set out in the Model Code and the Company’s code of conduct regarding directors’ securities transactions.

AUDIT COMMITTEE

The terms of reference of the Audit Committee was revised on 28 November 2011 and 30 June 2016 to bring them in line with the revised CG Code. The Audit Committee comprising all independent non-executive directors of the Company (“INEDs”), namely Mr. Yip Tak On (Chairman), Mr. Jing Baoli, Mr. Bao Liang Ming and Mr. Xue Baozhong, is responsible for reviewing the Group’s accounting practices and policies, the external audit, internal controls and risk evaluation. The Audit Committee of the Company has reviewed and discussed with the management the financial reporting matters and the unaudited interim financial results for the six months ended 30 September 2016.

INTERIM REPORT 2016 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 69

MANAGEMENT DISCUSSION AND ANALYSIS

OTHER CHANGES IN DIRECTORS’ INFORMATION

Subsequent to the publication of the latest annual report of the Company, other changes in Directors’ information of the Company with effect from 12 August 2016 are set out below:

i) Mr. Jiang Tao, the chief executive officer of the Company, was appointed as an executive Director; and
ii) Mr. Xue Baozhong was appointed as an INED, a member of the Audit Committee, the Remuneration Committee and Nomination Committee of the Company.

Save for those disclosed above, there is no other information in respect of Directors required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules.

OTHER DISCLOSURE

Save as disclosed, the Group either has had no material changes form the information disclosed in the latest annual report of the Company or are considered not significant to the Group’s operations, thus no additional disclosure has been made in this report.

PUBLICATION OF RESULTS ON THE STOCK EXCHANGE’S WEBSITE

All the information required by paragraphs 46 of Appendix 16 to the Listing Rules will be published on the website of The Stock Exchange of Hong Kong Limited and the Company’s website (www.crtg.com.hk) in due course.

By order of the Board China Resources and Transportation Group Limited Cao Zhong Chairman

Hong Kong, 24 November 2016

As at the date of this report, the Board comprises six executive Directors, namely Messrs Cao Zhong, Fung Tsun Pong, Duan Jingquan, Tsang Kam Ching, David, Gao Zhiping and Jiang Tao; a non-executive Director, namely Mr. Suo Suo Stephen and four independent non-executive Directors, namely Messrs Yip Tak On, Jing Baoli, Bao Liang Ming and Xue Baozhong.

70 CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED INTERIM REPORT 2016

AI assistant

Central Development Holdings Limited — Interim / Quarterly Report 2016

49236_rns_2016-12-07_966fb329-268c-4c2a-bcc6-d15d74c6a38b.pdf

INTERIM REPORT 2016

CORPORATE INFORMATION

BOARD OF DIRECTORS

Executive Directors

Non-executive Director

Independent Non-executive Directors

Audit Committee

Remuneration Committee

PRINCIPAL BANKERS

REGISTERED OFFICE

PRINCIPAL PLACE OF BUSINESS

SHARE REGISTRARS & TRANSFER OFFICE

Nomination Committee

COMPANY SECRETARY

STOCK CODE AT HONG KONG STOCK EXCHANGE 269

CONTACT DETAILS

AUDITOR

COMPANY WEBSITE

LEGAL ADVISOR

HIGHIGHTS

INTERIM RESULTS

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

2. ADOPTION OF NEW AND REVISED STANDARDS

Amendments to HKAS 16 and HKAS 41 “Agriculture: Bearer Plants”

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Summary of the effects of the above change in Amendments to HKAS 16 and HKAS 41

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

3.

REVENUES

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

4. SEGMENT INFORMATION

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(a) Reportable Segment

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(b) Reconciliation of reportable segment loss

5. OTHER INCOME AND OTHER GAINS OR LOSSES

6. FINANCE COSTS

7.

LOSS BEFORE INCOME TAX CREDIT

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

8. INCOME TAX CREDIT

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

9.

DIVIDEND

10. LOSS PER SHARE

Loss attributable to owners of the Company

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

11. PROPERTY, PLANT AND EQUIPMENT

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

12. FOREST CONCESSION RIGHTS

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Forest concession rights held by Jaling Forest Industries Inc., a subsidiary of the Company (“Jaling Concession Rights”)

Forest concession rights held by Garner Forest Industries Inc., a subsidiary of the Company (“Garner Concession Rights”)

13. CONCESSION INTANGIBLE ASSET

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

14. LONG TERM DEPOSITS AND PREPAYMENTS

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

16. TRADE AND OTHER PAYABLES

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

17. PROMISSORY NOTE

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

19. CONVERTIBLE BONDS

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Notes:

NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(b) Movement of convertible bonds

Central Development Holdings Limited Interim / Quarterly Report 2016