Central Development Holdings Limited — Interim / Quarterly Report 2017

Nov 29, 2017

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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CHINA RESOURCES AND TRANSPORTATION GROUP LIMITED 中國資源交通集團有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 269)

ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

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 2017 and the unaudited consolidated statement of financial position of the Group as at 30 September 2017.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the six months ended 30 September 2017

Notes Revenue 3 Cost of sales and other direct operating costs Gross profit/(loss) Other income and other gains or losses 5 Selling and administrative expenses Finance costs 6 Gain on bargain purchase arising from acquisition of subsidiaries 13 Share of results of associates Loss before income tax credit 7 Income tax credit 8 Loss for the period	Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) 362,097 408,175 (344,851) (481,882) 17,246 (73,707) 432 (5,155) (70,735) (74,205) (463,494) (509,198) 3,702 – (1,143) 7,169 (513,992) (655,096) 1,681 125 (512,311) (654,971)

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Notes Loss for the period attributable to: – Owners of the Company – Non-controlling interests Loss per share attributable to owners of the Company Basic and diluted 10	Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) (469,798) (599,733) (42,513) (55,238) (512,311) (654,971) HK$ HK$ (Unaudited) (Unaudited) (0.06) (0.09)

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CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For the six months ended 30 September 2017

Loss for the period Other comprehensive income: Items that may be reclassified subsequently to profit or loss: – Exchange differences on translation of financial statements of foreign operations – Share of other comprehensive income of associates – Release of translation reserve – upon disposal of a subsidiary – upon disposal of an associate – upon disposal of assets of a disposal group classified as held for sale – Net movements in fair value reserve for available-for-sale investments Other comprehensive income for the period, net of tax Total comprehensive income for the period Total comprehensive income for the period attributable to: – Owners of the Company – Non-controlling interests	Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) (512,311) (654,971) (13,342) (11,141) (306) (373) – 901 – 2,434 5,624 – – 7,450 (8,024) (729) (520,335) (655,700) (475,134) (600,729) (45,201) (54,971) (520,335) (655,700)	Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) (512,311) (654,971) (13,342) (11,141) (306) (373) – 901 – 2,434 5,624 – – 7,450 (8,024) (729) (520,335) (655,700) (475,134) (600,729) (45,201) (54,971) (520,335) (655,700)
		(11,141) (373) 901 2,434 – 7,450
		(729) (655,700) (600,729) (54,971) (655,700)

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 September 2017

At 30 September 2017 Notes HK$’000 (Unaudited) NON-CURRENT ASSETS Investment property 27,735 Property, plant and equipment 1,082,944 Prepaid lease payments and use of right of farmland 232,937 Concession intangible asset 14,656,302 Goodwill and other intangible assets 48,969 Biological assets 59,671 Forest concession rights – Long term deposits 46,482 Available-for-sale investments 80,025 TOTAL NON-CURRENT ASSETS 16,235,065 CURRENT ASSETS Inventories 72,947 Trade and other receivables 11 250,458 Prepaid lease payments and use of right of farmland 2,766 Amounts due from non-controlling shareholders of subsidiaries 15,249 Cash and cash equivalents 63,073 404,493 Assets of a disposal group classified as held for sale – TOTAL CURRENT ASSETS 404,493 TOTAL ASSETS 16,639,558

At 31 March 2017 HK$’000 (Audited) 26,975 952,245 33,520 14,501,267 47,069 55,818 – 44,680 78,296 15,739,870 63,556 205,625 857 14,658 53,735 338,431 214,231 552,662 16,292,532

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Notes CURRENT LIABILITIES Trade and other payables 12 Promissory note Amount due to a non-controlling shareholder of a subsidiary Borrowings Non-convertible debt securities TOTAL CURRENT LIABILITIES NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrowings Deferred tax liabilities Acreage fees payable TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET LIABILITIES CAPITAL AND RESERVES Share capital Reserves Equity attributable to owners of the Company Non-controlling interests TOTAL DEFICIT	At 30 September 2017 HK$’000 (Unaudited) 1,853,763 313,825 5 650,861 4,395,648 7,214,102 (6,809,609) 9,425,456 11,302,458 42,776 10,454 11,355,688 18,569,790 (1,930,232) 1,488,479 (3,621,811) (2,133,332) 203,100 (1,930,232)	At 31 March 2017 HK$’000 (Audited)
		1,553,668 311,483 – 744,581 4,395,648
		7,005,380 (6,452,718) 9,287,152
		10,871,494 1,636 10,454
		10,883,584 17,888,964 (1,596,432) 1,350,479 (3,132,877) (1,782,398) 185,966 (1,596,432)

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NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

As at 30 September 2017, the Group had net current liabilities and net liabilities of HK$6,809,609,000 and HK$1,930,232,000, respectively, and the Group incurred a loss of HK$512,311,000 for the six months ended 30 September 2017. The Company was in default in the repayment of the promissory note of HK$313,825,000 and non-convertible debt securities of HK$4,395,648,000 (including the matured convertible bonds), together with the outstanding interests and default interests accrued thereon of HK$517,998,000, amounted to HK$5,227,471,000 which are immediately repayable (the “ Repayable Amount ”). The Group is still undergoing negotiations with the holders ( “Bondholders” ) of nonconvertible debt securities (including the matured convertible bonds) for possible debt restructuring. These conditions indicate the existence of material uncertainties which may cast significant doubt on the Group’s ability to continue as a going concern and in consequence, 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 its liquidity position which include:

• (i) The Group is currently in discussions with the Bondholders of debts due by the Group of HK$4,395,648,000 at 30 September 2017, for a possible debt restructuring arrangement which, the directors of the Company believe, if successfully made, the Group could have sufficient time to implement the plans for realisation of its assets and to raise adequate funds for repaying the debts payable to the Bondholders. Up to the date of approval of the unaudited condensed interim consolidated financial statements of the Group for the six months ended 30 September 2017 (the “ Interim Financial Statements ”), the Group is still in the progress of finalizing the formal debt restructuring agreement to be entered into with the Bondholders;

• (ii) On 28 December 2016 and 30 December 2016, the Company, its wholly-owned subsidiary, Cheer Luck Technology Limited (“ Cheer Luck ”) and four independent third party purchasers (which are state-owned enterprises incorporated in the PRC) entered into four separate disposal agreements (the “Disposal Agreements” ), pursuant to which, Cheer Luck has conditionally agreed to sell, and (i) Purchaser A has conditionally agreed to acquire 25% equity interests of Inner Mongolia Zhunxing Heavy Haul Expressway Company Limited ( “Zhunxing” ) at Consideration A of RMB1,125 million (equivalent to HK$1,260 million) (subject to the adjustment, representing 25% of the net assets of Zhunxing as at 31 December 2016 based on a valuation to be prepared by an independent valuer appointed by Purchase A) and (ii) Purchaser B, Purchaser C and Purchaser D have conditionally agreed to acquire 18%, 18% and 10%, at Consideration B, Consideration C and Consideration D, respectively, each of which is determined with reference to the respective share of net assets of Zhunxing at 31 December 2016 based on another valuation to be prepared by another independent valuer jointly appointed by Purchaser B, C and D. The completion of each disposal under each of the Disposal Agreements is also subject to satisfaction of certain conditions precedent. Based on the terms of each of the Disposal Agreements, the Group shall have an obligation to buy back from Purchaser A and an option to buy back from each of Purchaser B, C and D, within five years after the respective date of completion of each of these disposals, all the 71% equity interests in Zhunxing at a consideration same as the proceeds of each of these disposals to be received by the Group with

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a guaranteed return to each of these purchasers of 4.5% per annum for the period commencing from the date of completion of each of these disposals to the date when each of the buy-back obligation or buy-back options is exercised by the Group. The disposals are considered as financing in nature and the Group shall continue to exercise control over Zhunxing which will continue to be consolidated into the consolidated financial statements of the Group after the completion of these disposals.

As at the date of approval of the Interim Financial Statements, the Company is in the process of finalizing the payment schedule of Consideration A and the amount of Consideration B, Consideration C and Consideration D and fulfilling the conditions precedent to each of these disposals under the Disposal Agreements. The directors of the Company considered that if the financing arrangements through disposals and buy-backs of the 71% equity interest of Zhunxing under the Disposal Agreements were successfully completed, the Group would have sufficient funds to partially settle the debts payable to the Bondholders and to meet its financial requirements in the foreseeable future;

• (iii) On 11 July 2017, the Company and 11 independent third party vendors (the “ Vendors ”) entered into a sale and purchase agreement in which the Company has conditionally agreed to acquire the pawn loan business (the “ Business ”) from the Vendors (the “ Proposed Acquisition ”). If the Proposed Acquisition materializes, the Company will satisfy the consideration of the Proposed Acquisition through the issuance of 14,268,559,826 new shares of the Company at the issue price of HK$0.23 per share to the Vendors. As the Proposed Acquisition constitutes a very substantial acquisition of the Company and results in a change in control (as defined under the Hong Kong Code on Takeovers and Mergers (the “ Takeovers Code ”)), the Proposed Acquisition constitutes a reverse takeover which is subject to the approval by the Listing Committee of the Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) of a new listing application to be made by the Company under the Listing Rules. Up to the date of approval of the Interim Financial Statements, the Company is preparing the new listing application and the Proposed Acquisition has not yet been completed.

On 11 July 2017, the Company and 5 independent third parties (the “ Subscribers ”) entered into the subscription agreement that the Subscribers intend to subscribe for 3,521,738,478 new shares of the Company at the issue price of HK$0.23 per share with an aggregate consideration of HK$809,999,850 (the “ Proposed Subscription ”). The net proceeds of the Proposed Subscriptions will be used to expand the Business or to be used in the ordinary business operation of the Company. Completion of the Proposed Subscription is scheduled to take place contemporaneously with completion of the Proposed Acquisition. Accordingly, up to the date of approval of the Interim Financial Statements, the Proposed Subscription has not yet been completed.

It is proposed that the Company will conduct a placing of 3,478,260,869 new shares of the Company at the issue price of HK$0.23 per share with an aggregate consideration of HK$800,000,000 (the “ Proposed Placing ”) to independent third parties to raise funds to repay part of the Repayable Amount. The details and terms of the Proposed Placing are still subject to negotiation and finalization.

Completion of the Proposed Acquisition, the completion of the Proposed Subscription and the completion of the Proposed Placing are inter-conditional. If the Proposed Acquisition, the Proposed Subscriptions and the Proposed Placing materialize, the Group’s cashflow and financial position will be strengthened to meet its liquidity requirement in the short and long term; and

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• (iv) The Company is contemplating the issue of convertible bonds with a principal amount of HK$1,200,000,000 to the existing holders of the non-convertible debt securities and/or institutional investors at a conversion price of HK$0.25 per share for a term of 2 years (the “ Convertible Bonds ”). The details and terms of the Convertible Bonds are still subject to negotiation and finalization.

Assuming the successful implementation of the above measures, 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 next twelve months from 30 September 2017. Accordingly, the Interim Financial Statements have been prepared on a going concern basis.

Should the Group be unable to continue in business as a going concern, adjustments would have to be made to restate the value of assets to their recoverable amounts, to reclassify non-current assets and liabilities as current assets and liabilities respectively, and to provide for any further liabilities that may arise. The effects of these potential 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 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 2017 (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.

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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.

Amendments to HKAS 7	Statement by Cash Flows: Disclosure Initiative
Amendments to HKAS 12	Income Taxes: Recognition of Deferred Tax Assets
	for Unrealised Losses
Amendments to HKFRSs	Annual Improvements to HKFRSs 2014-2016 Cycle
	(relating to Amendments to HKFRS 12 Disclosure of Interests
	in Other Entities)

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 following new standards, new interpretations and amendments to standards have been issued but are not effective for the financial periods beginning on or later periods and have not been early adopted by the Group:

		Effective accounting periods
		beginning on or after
HKAS 40 (Amendment)	Transfer of Investment Property	1 January 2018
HKFRSs (Amendment)	Annual Improvements to HKFRSs	1 January 2017 or 1 January 2018,
	2014-2016 Cycle	as appropriate
HKFRS 2 (Amendment)	Classification and Measurement of	1 January 2018
	Share-based Payment Transaction
HKFRS 4 (Amendment)	Applying HKFRS 9 “Financial	1 January 2018
	Instruments” with HKFRS 4
	Insurance Contracts
HKFRS 9	Financial Instruments	1 January 2018(i)
HKFRS 10 and HKAS 28	Sale or Contribution of Assets between	Effective date to be determined
(Amendments)	an Investor and its Associate or
	Joint Venture
HKFRS 15	Revenue from Contracts with Customers	1 January 2018(ii)
HKFRS 16	Leases	1 January 2019(iii)
HK (IFRIC) 22	Foreign Currency Transactions and	1 January 2018
	Advance Consideration
HK (IFRIC) 23	Uncertainty over income tax treatments	1 January 2019

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Notes:

(i) HKFRS 9 “Financial Instruments”

The new standard addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets.

Based on the Group’s financial instruments and risk management policies as at 30 September 2017, application of HKFRS 9 in the future may have a material impact on the classification and measurement of the Group’s financial assets. The Group’s available-for-sale investments, including those currently stated at cost less accumulated impairment, will either be measured as fair value through profit or loss or be designated as a fair value through other comprehensive income (“ FVOCI ”) (subject to fulfillment of the designation criteria).

In addition, the new impairment model requires the recognition of impairment provisions based on expected credit losses rather than only incurred credit losses as is the case under HKAS 39. It applies to financial assets classified at amortised cost, debt instruments measured at FVOCI, contract assets under HKFRS 15 “Revenue from Contracts with Customers”, lease receivables, loan commitments and certain financial guarantee contracts. While the Group has not yet completed a detailed assessment of how its impairment provisions would be affected by the new model, it may result in an earlier recognition of credit losses.

The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group’s disclosures about its financial instruments particularly in the year of the adoption of the new standard.

There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting for non-derivative financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. The derecognition rules have been transferred from HKAS 39 “Financial Instruments: Recognition and Measurement” and have not been changed.

(ii) HKFRS 15 “Revenue from Contracts with Customers”

This new standard will replace HKAS 18 which covers contracts for goods and services and HKAS 11 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The standard permits either a full retrospective or a modified retrospective approach for the adoption.

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The Group is currently assessing the impact of adopting HKFRS 15 on the Group’s consolidated financial statements, by identifying the separate performance obligations in the contracts with customers and allocating the transactions price, if applicable, which could affect the timing of the revenue recognition, the recognition of significant financing component and the recognition of sales with right of return.

However, the directors of the Company do not anticipate that the application of HKFRS 15 will have a material impact on the timing and amounts of revenue recognised in the respective reporting periods.

(iii) HKFRS 16 “Leases”

HKFRS 16 will result in almost all leases being recognised on the consolidated statement of financial position, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low value leases.

The accounting for lessors will not significantly change.

HKFRS 16 will primarily affect the Group’s accounting as a lessee of leases for properties, plant and equipment which are currently classified as operating leases. The application of the new accounting model is expected to lead to an increase in both assets and liabilities and to impact on the timing of the expense recognition in the consolidated statement of profit or loss over the period of the lease. As at 30 September 2017, the Group’s future minimum lease payments under non-cancellable operating leases amounted to approximately HK$47,487,000. Some of these amounts may therefore need to be recognised as lease liabilities, with corresponding right-of-use assets, once HKFRS 16 is adopted. The Group will need to perform a more detailed analysis to determine the amounts of new assets and liabilities arising from operating lease commitments on adoption of HKFRS 16, after taking into account the applicability of the practical expedient and adjusting for any leases entered into or terminated between now and the adoption of HKFRS 16 and the effects of discounting.

The standard is mandatory for annual periods beginning on or after 1 January 2019. At this stage, the Group does not intend to adopt the standard before its effective date.

Other than the above, the Group is in the process of making an assessment of the potential impact of these new/revised HKFRSs and the directors of the Company so far concluded that the application of these new/revised HKFRSs will have no material impact on the Group’s consolidated financial statements.

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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:

Toll income from toll road operations Trading of petroleum and related products CNG gas station service income Sales of seedlings Sales of plant-oil	Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) 347,667 258,152 – 137,200 14,214 12,651 12 49 204 123 362,097 408,175	Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) 347,667 258,152 – 137,200 14,214 12,651 12 49 204 123 362,097 408,175
		408,175

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 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 2016: 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, available-for-sale investments, amounts due from non-controlling shareholders of subsidiaries, cash and cash equivalents and other unallocated head office and corporate assets as these assets are managed on a group basis.

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

(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 2017 and 2016 is set out below:

Revenue from external customers and reportable segment revenue Reportable segment loss Amortisation of concession intangible asset Reportable segment assets Reportable segment liabilities	Expressway operations Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) 347,667 258,152 (13,224) (96,566) 277,000 279,991 At 30 September 2017 At 31 March 2017 HK$’000 HK$’000 (Unaudited) (Audited) 15,637,372 15,471,337 (13,118,756) (12,575,758)	Petroleum business Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) 14,214 149,851 (2,397) (12,134) – – At 30 September 2017 At 31 March 2017 HK$’000 HK$’000 (Unaudited) (Audited) 141,577 136,912 (24,304) (189,834)	Timber operations Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) 216 172 (7,685) (7,194) – – At 30 September 2017 At 31 March 2017 HK$’000 HK$’000 (Unaudited) (Audited) 246,071 236,350 (23,100) (22,373)	Total Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) 362,097 408,175 (23,306) (115,894) 277,000 279,991 At 30 September 2017 At 31 March 2017 HK$’000 HK$’000 (Unaudited) (Audited) 16,025,020 15,844,599 (13,166,160) (12,787,965)	Total Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) 362,097 408,175 (23,306) (115,894) 277,000 279,991 At 30 September 2017 At 31 March 2017 HK$’000 HK$’000 (Unaudited) (Audited) 16,025,020 15,844,599 (13,166,160) (12,787,965)
					(115,894)
					279,991
					At 31 March 2017 HK$’000 (Audited) 15,844,599
					(12,787,965)

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(b) Reconciliation of reportable segment loss

Reportable segment loss before income tax credit Net loss on disposal of assets of a disposal group classified as held for sale Other income and other gains or losses Finance costs Gain on bargain purchase arising from acquisition of subsidiaries Loss on disposal of subsidiaries Share of results of associates Unallocated corporate expenses Consolidated loss before income tax credit 5. OTHER INCOME AND OTHER GAINS OR LOSSES Loss on disposal of available-for-sale investments Loss on disposal of subsidiaries Loss on disposal of an associate Gain on disposal of property, plant and equipment Interest income Exchange gain, net Net loss on disposal of assets of a disposal group classified as held for sale Rental income Others

Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) (23,306) (115,894) (3,549) – 1,893 (7,378) (463,494) (509,198) 3,702 – – (627) (1,143) 5,547 (28,095) (27,546) (513,992) (655,096) Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) – (6,166) – (627) – (3,267) 26 300 2,057 2,609 80 14 (3,549) – 140 136 1,678 1,846 432 (5,155)

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6. FINANCE COSTS

Interest and finance costs on bank and other borrowings Interest expenses on convertible bonds and non-convertible debt securities Interest expenses on promissory note Default interest on convertible bonds and non-convertible debt securities Default interest on promissory note 7. LOSS BEFORE INCOME TAX CREDIT Loss before income tax credit is stated after charging: Auditor’s remuneration – Non-audit services Depreciation of property, plant and equipment Amortisation of prepaid lease payments and use of right of farmland Amortisation of concession intangible asset included in cost of sales Amortisation of customer relationships Cost of inventories sold Operating lease payments recognised as expenses Staff costs (excluding directors’ remuneration) – Salaries and allowances – Defined contributions pension costs

Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) 322,461 326,723 – 116,138 2,342 2,302 110,192 35,956 28,499 28,079 463,494 509,198 Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) – 230 46,818 45,036 8,983 489 277,000 279,991 – 812 9,551 146,472 7,364 8,073 27,020 31,832 4,448 5,325 31,468 37,157

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8. INCOME TAX CREDIT

Current tax – PRC enterprise income tax Deferred tax credit Total	Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) 103 123 (1,784) (248) (1,681) (125)

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.

Inner Mongolia Zhunxing Heavy Haul Expressway Company Limited (“ 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 2017, 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 2016: 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.

The statutory tax rate for Hong Kong profits tax is 16.5% (six months ended 30 September 2016: 16.5%) on the estimated assessable profits arising in Hong Kong during the period. No provision for the Hong Kong profits tax had been made as the Group did not earn any income subject to Hong Kong profits tax during the six months ended 30 September 2017 and 2016.

The subsidiaries in Guyana are liable to Guyana income tax at a rate of 45% (six months ended 30 September 2016: 45%). No provision for Guyana income tax had been made as the subsidiaries in Guyana sustained losses for taxation purposes for the six months ended 30 September 2017 and 2016.

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The subsidiaries in Australia are liable to Australian income tax at a rate of 30% (six months ended 30 September 2016: 30%). No provision for Australian income tax had been made as the subsidiaries in Australia sustained losses for taxation purposes for the six months ended 30 September 2017 and 2016.

9. DIVIDEND

The directors of the Company do not recommend the payment of a dividend for the six months ended 30 September 2017 (six months ended 30 September 2016: 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

Loss for the purpose of basic and diluted loss per share Number of shares: Weighted average number of ordinary shares for the purpose of basic and diluted loss per share	Six months ended 30 September 2017 2016 HK$’000 HK$’000 (Unaudited) (Unaudited) (469,798) (599,733) ’000 ’000 (Unaudited) (Unaudited) 7,442,396 6,752,396

For the six months ended 30 September 2017 and 2016, the computation of diluted loss per share does not assume the exercise of the Company’s outstanding share options as the exercise prices of those options are higher than the average market price of shares.

For the six months ended 30 September 2016, 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.

– 17 –

11. TRADE AND OTHER RECEIVABLES

Trade receivables Less: Provision for impairment loss Trade receivables, net Other receivables Loan to non-controlling shareholder of a subsidiary Loan receivables Less: Provision for impairment loss Other receivables, net Deposits paid Prepayments	At 30 September 2017 HK$’000 (Unaudited) 40,351 (10,292) 30,059 147,863 103,340 63,113 (129,726) 184,590 5,113 30,696 250,458	At 31 March 2017 HK$’000 (Audited) 17,983 (10,154) 7,829 145,331 99,331 60,665 (125,376) 179,951 3,583 14,262 205,625

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:

At 1 April 2017 and 1 April 2016 Impairment loss recognised Exchange differences At 30 September 2017 and 31 March 2017	At 30 September 2017 HK$’000 (Unaudited) 135,530 – 4,488 140,018	At 31 March 2017 HK$’000 (Audited) 33,804 104,323 (2,597) 135,530

– 18 –

Details of the ageing analysis of trade receivables of the Group (net of impairment loss) are as follows:

Outstanding balances aged: 0 to 30 days 31 to 60 days 61 to 180 days	At 30 September 2017 HK$’000 (Unaudited) 22,909 6,865 285 30,059	At 31 March 2017 HK$’000 (Audited) 6,654 1,077 98 7,829

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

Neither past due nor impaired 30 to 90 days past due	At 30 September 2017 HK$’000 (Unaudited) 22,909 7,150 30,059	At 31 March 2017 HK$’000 (Audited) 6,654 1,175 7,829

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.

– 19 –

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

Neither past due nor impaired Over 90 days past due	At 30 September 2017 HK$’000 (Unaudited) 153,033 31,557 184,590	At 31 March 2017 HK$’000 (Audited) 144,577 35,374 179,951

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 was unsecured, interest-free and repayable on demand.

An advance to a third party of HK$31,557,000 (31 March 2017: HK$30,332,000) was included in the loan receivables. It is unsecured, bearing interest at the rate of 14% per annum and is repayable on or before 31 December 2017.

12. TRADE AND OTHER PAYABLES

Trade payables_(Note c) Other payables and accruals(Note a)_ Deposits received from customers	At 30 September 2017 HK$’000 (Unaudited) 3,698 1,848,329 1,736 1,853,763	At 31 March 2017 HK$’000 (Audited) 130 1,551,896 1,642 1,553,668

– 20 –

Notes:

(a) Analysis of other payables and accruals is as follows:

Construction costs payable Retention and guarantee deposit Accrued interest on the bank borrowings Accrued default interest on promissory note Accrued default interest on convertible bonds and non-convertible debts securities Other accruals	At 30 September 2017 HK$’000 (Unaudited) 904,829 194,259 96,277 294,328 223,670 134,966 1,848,329	At 31 March 2017 HK$’000 (Audited) 765,299 181,423 71,461 265,829 113,478 154,406 1,551,896

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

• (c) Details of the ageing analysis of trade payables of the Group are as follows:

Outstanding balances aged: 0 to 30 days Over 30 days	At 30 September 2017 HK$’000 (Unaudited) 1,928 1,770 3,698	At 31 March 2017 HK$’000 (Audited) – 130 130

– 21 –

13. BUSINESS COMBINATION

Red Sino

On 10 May 2017, the Group acquired a forage and agriculture products business in the PRC through the acquisition of (i) 60% of the equity interests in Red Sino Investments Limited (“ Red Sino ”), a company incorporated in the British Virgin Islands, and (ii) an advance owed by the Red Sino Group (as defined below) to a shareholder (the “ Red Sino’s Loan ”) (collectively referred to as the “ Acquisition ”) for a nominal consideration of HK$138,000,000 which was satisfied by the allotment and issue of 690,000,000 ordinary shares of HK$0.20 each of the Company (the “ Purchase Consideration Shares ”). Red Sino owns the entire equity interest in Profit Great Development Limited, which in turn owns 100% equity interest in 阿魯科爾沁旗鑫澤農牧業有限公司 (“ Xinze ”) (collectively referred to as the “ Red Sino Group ”). The Acquisition was made by the Group to develop and expand in to a new business, the forage and agriculture business, which diversifies its revenue streams and strengthen its financial position.

Fair value of identifiable assets and liabilities of the Red Sino Group as at the date of Acquisition: Property, plant and equipment Use of right of farmland Trade and other receivables Cash and cash equivalents Inventories Trade and other payables The Red Sino’s Loan Deferred tax liabilities Non-controlling interests Total identifiable net assets at fair value Assignment of the Red Sino’s Loan Gain on bargain purchase_(note a) Satisfied by: Purchase Consideration Shares(note b)_ As analysis of the cash flow in respect of the Acquisition: Cash consideration paid Cash and cash equivalents acquired Net cash inflow on the Acquisition

HK$’000 36,787 200,847 462 156 8,696 (15,713) (34,401) (40,998) 155,836 (62,335) 93,501 34,401 (3,702) 124,200 – 156 156

– 22 –

Notes:

• (a) The Group recognised a gain on bargain purchase of HK$3,702,000 in the condensed consolidated statement of comprehensive income for the six months ended 30 September 2017, which was primarily attributable to the consideration determined based on the carrying amount of the net assets of the Red Sino Group that was mutually agreed between the parties.

• (b) The balance represents the fair value of consideration settled by the issue of 690,000,000 ordinary shares of the Company with nominal value of HK$138,000,000 for the Acquisition in accordance with the equity transfer agreement. The fair value of the Purchase Consideration Shares amounted to HK$124,200,000 for the Acquisition was determined using the published price available at the date of the Acquisition. The Purchase Consideration Shares have been allotted and issued during the six months ended 30 September 2017. Such shares rank pari passu with the existing issued shares.

The fair values of the Red Sino Group’s identifiable assets and liabilities were determined by the directors of the Company with reference to professional valuations performed by the valuer, who has among their staff members of the Hong Kong Institute of Surveyors with recent experience in the category of assets and liabilities being valued.

The Group elected to measure the non-controlling interests in the Red Sino’s Group at the proportionate share of fair values of the Red Sino Group’s identifiable net assets at the date of Acquisition.

Since the Acquisition date, the Red Sino Group had not contributed any revenue and contributed a net profit of HK$3,001,000 to the Group for the six months ended 30 September 2017. Had the Acquisition taken place at the beginning of the current period, the Red Sino Group would not have contributed any revenue and contributed a net profit of HK$2,190,000 to the Group for the six months ended 30 September 2017. This pro forma information was for illustrative purposes only and was not necessarily an indication of revenue and results of operations of the Group that actually would have been achieved had the acquisitions been completed on 1 April 2017, nor is it intended to be a projection of future performance.

The related cost of the Acquisition amounted to approximately HK$287,000. The amount has been expensed and is included in selling and administrative expenses in the condensed consolidated statement of comprehensive income for the six months ended 30 September 2017.

– 23 –

MANAGEMENT DISCUSSION AND ANALYSIS

Business Review

For the six months ended 30 September 2017, 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 Group’s revenue was mainly 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.

Following the slow recovery of the national economy and restrictions imposed on coal import in 2017, coal prices have gradually resurged since the end of April 2017. The stable increase in coal demand has led to an upturn in the transportation industry, triggering a steady rise in traffic volume of Zhunxing Expressway during the period. For the six months ended 30 September 2017, Zhunxing Expressway recorded an accumulated toll income of approximately RMB300.55 million (approximately HK$347.33 million), i.e. an average daily toll income of approximately RMB1.64 million (approximately HK$1.90 million) and an average daily traffic volume of approximately 6,008 vehicles (for the six months ended 30 September 2016, the average daily toll income was approximately RMB1.20 million (approximately HK$1.41 million) and the average daily traffic volume was approximately 4,301 vehicles).

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 tended to restrain the growth of both traffic volume and toll income of Zhunxing Expressway during the period:

• (1) coal prices resurged following the implementation of coal capacity reduction policy, yet the crude oil prices for the year 2016-2017 were relatively low. As a result, a majority of coal chemical companies cut their production or became discontinued, which posed negative impacts on the number of coal transport vehicles; and

– 24 –

• (2) under the influence of the national macroeconomic environment and environmental policy, new measures to control air pollution in the Beijing-Tianjin-Hebei region were introduced in early 2017. Before the end of September 2017, coals from all the distribution ports in Tianjin and Hebei must be transported by rail.

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 toll collection network. Zhunxing continues to fine-tune its business strategies to seek revenue growth in this tough market environment:

• (i) promoting certain advantageous features of Zhunxing Expressway including its tunnel-free nature and the absence of hazardous chemical transport restrictions to attract specific customers;

• (ii) offering discount plans to major customers to enhance the usage of Zhunxing Expressway;

• (iii) brand building with quality auxiliary services in catering and vehicle maintenance with the objective to retain and grow customer loyalty and recognition;

• (iv) executing effective road maintenance program to preserve Zhunxing Expressway in its originally constructed condition, protect road users’ safety and provide efficient and convenient travel along the route; and

• (v) reinforcing a safe and expedient driving environment by implementing 24-hour patrol service which aims to swiftly resolve spontaneous traffic incidents and minimise the time to restore traffic fluency on Zhunxing Expressway;

• (2) continue to carry out various marketing activities to explore new customers on the basis of maintaining existing customers. Zhunxing proactively liaises with the neighboring logistic bases and coal trading companies to understand their developments and promotes Zhunxing Expressway’s advantageous position in contributing to a coal transport process that reinforces traffic fluency, cost-saving and high efficiency; and

• (3) give full play to the advantages of the scenic spots along the Zhunxing Expressway by strengthening the cooperation with the related units of the tourism bureau along the route, aiming to increase the flow of passenger cars.

– 25 –

Petroleum and Related Products Business

For the six months ended 30 September 2017, 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* ”) focused on the development of the new energy business sector based on CNG.

For the six months ended 30 September 2017, the Group’s wholly-owned subsidiary Leshan Zhongshun Oil and Gas Company Limited* (樂山中順油汽有限公司) realised sales of CNG of approximately 4,633 km[3] in total (for the six months ended 30 September 2016: 4,085 km[3] ), amounted to approximately HK$14.21 million (for the six months ended 30 September 2016: HK$12.65 million).

Forest Operation

As set out in the annual report of the Company for the year ended 31 March 2017 (“ 2017 Annual Report ”), the Group ceased its forest operation in Guyana, South America (“ Guyana ”) in order to narrow the Group’s business losses and conserve resources.

With an aim to increase the cashflows of the Group, the Company will continue to look for opportunity to dispose its forestry related businesses in the PRC.

Financial Review

Revenue

The Group’s unaudited revenue for the six months ended 30 September 2017 was approximately HK$362.10 million, representing a decrease of about 11.3% from approximately HK$408.18 million for the last corresponding period. The Group’s income was recognised under three reportable segments of the Group, namely expressway operations, petroleum business and timber operations, contributing approximately HK$347.67 million (96.01%), HK$14.21 million (3.93%) and HK$0.22 million (0.06%) (for the six months ended 30 September 2016: HK$258.15 million (63.25%), HK$149.85 million (36.71%) and HK$0.17 million (0.04%)) respectively to the Group’s consolidated revenue.

– 26 –

Toll income from expressway operations of approximately HK$347.33 million (for the six months ended 30 September 2016: HK$258.15 million) constituted the main stream of the Group’s revenue for the six months ended 30 September 2017. The income recorded under the Group’s petroleum business sector during the period dropped by about 91% compared to the last corresponding period as the Group’s petroleum trading business was ceased as part of the Group’s business strategy subsequent to 31 March 2017 to improve its liquidity. Nonetheless, the toll income from the expressway operations during the period increased by about 34.5% as compared to the last corresponding period as coal prices gradually recovered.

Cost of Sales

The Group’s cost of sales for the six months ended 30 September 2017 was approximately HK$344.85 million, representing a decrease of about 28.4% from approximately HK$481.88 million for the last corresponding period. The decrease in cost of sales was due to the reduction in the cost of petroleum trading products following the cessation of the Group’s petroleum trading business during the period. The Group’s cost of sales during the period was mainly attributable to (i) the amortization of concession intangible asset arising from the expressway operations of approximately HK$277.00 million (for the six months ended 30 September 2016: HK$279.99 million) and (ii) the depreciation of fixed assets arising from the expressway operations of approximately HK$38.85 million (for the six months ended 30 September 2016: HK$38.89 million).

Gross Profit

During the period, the Group recorded a gross profit amounted to approximately HK$17.25 million as compared to a gross loss of approximately HK$73.71 million for the corresponding period in 2016.

EBITDA

For the six months ended 30 September 2017, the Group recorded an increased EBITDA (defined as earnings before interest, tax, depreciation, amortization and non-cash changes in values of assets and liabilities) amounted to approximately HK$272.09 million compared to the EBITDA of approximately HK$179.92 million for the last corresponding period. The 51.2% increase in EBITDA was primarily driven by the increased revenue from the expressway operations of the Group as discussed above. Detailed segment revenue and contribution to loss before income tax credit of the Group are shown in Note 4 to the financial statement in this announcement.

– 27 –

Loss for the period

The Group’s net loss for the six months ended 30 September 2017 was approximately HK$512.31 million, representing a drop of about 21.8% from approximately HK$654.97 million for the six months ended 30 September 2016. The Group’s net loss for the period was primarily contributed by (i) the reduced finance cost of the Group amounted to approximately HK$463.49 million (for the six months ended 30 September 2016: HK$509.20 million) mainly due to the interest expense on the outstanding non-convertible debt securities being accrued at default rate after the respective contractual maturity and (ii) the reduced Group’s selling and administrative expenses amounted to approximately HK$70.74 million (for the six months ended 30 September 2016: HK$74.21 million). The Group’s 4.7% drop in selling and administrative expenses during the period was primarily contributed by the reduced petroleum products freight charges to HK$0.25 million (for the six months ended 30 September 2016: HK$2.63 million) as the trading activities in petroleum products were reduced.

The loss attributable to owners of the Company for the period was approximately HK$469.80 million (for the six months ended 30 September 2016: HK$599.73 million). Both the basic and diluted loss per share attributable to owners of the Company for the period were HK$0.06 as compared with HK$0.09 for the last corresponding period.

Liquidity Review

The Group’s policy is to regularly monitor its liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and long term. The Group’s assets portfolio is mainly financed by its borrowings and debt securities.

As at 30 September 2017, the Group was in a net liabilities position of approximately HK$1,930.23 million as compared to a net liabilities position of approximately HK$1,596.43 million as at 31 March 2017. The gearing ratio of the Group, measured as total liabilities to total assets, was 111.6% (31 March 2017: 109.8%).

As at 30 September 2017, the Group had cash and bank balances of approximately HK$63.07 million (31 March 2017: HK$53.74 million) and its available banking facilities were amounted to approximately HK$11,961.04 million (31 March 2017: HK$11,704.72 million), out of which approximately HK$11,953.32 million (31 March 2017: HK$11,616.08 million) has been utilised.

– 28 –

Borrowings

The Group’s outstanding borrowings, all being dominated in RMB, amounted to approximately HK$11,953.32 million (31 March 2017: HK$11,616.08 million), represented approximately 64% of the Group’s total liabilities. Approximately HK$468.63 million (31 March 2017: HK$614.64 million) of the Group’s outstanding borrowings were charged at fixed rates. Approximately 5% of the Group’s outstanding borrowings were repayable with one year (31 March 2017: 6%).

As expressway operation is a capital intensive industry, all of the Group’s outstanding borrowings amounted to RMB10,190.04 million (approximately HK$11,953.32 million), were obtained and drawn down primarily for the construction of Zhunxing Expressway as at 30 September 2017. The syndicated loan facilities of RMB8,758.48 million (approximately HK$10,274.04 million) granted by several PRC banks in December 2012, including short term loans of RMB79.99 million (approximately HK$93.83 million) and long term loans of RMB8,678.49 million (approximately HK$10,180.21 million), were secured by Zhunxing’s receivables of toll income. Furthermore, Zhunxing obtained and drawn down short term loans of RMB512.82 million (approximately HK$601.56 million) and long term loans of RMB1,461.16 million (approximately HK$1,714.00 million) from several authorized financial institutions in the PRC, of which approximately RMB1,574.48 million (approximately HK$1,846.93 million) was secured by a combination of (i) Zhunxing’s receivables of toll income, (ii) the Group’s equity interests in Zhunxing and/or (iii) certain Zhunxing’s investments.

Capital Commitments

Apart from the acquisition of the pawn loan business as discussed further below, the Group’s capital commitments outstanding as at 30 September 2017 dropped by approximately 91% to approximately HK$21.05 million (31 March 2017: HK$236.69 million), representing the capital expenditure arising from the acquisition of property, plant and equipment under the expressway operations sector.

– 29 –

Going Concern

During the period, the Group suffered a loss of HK$512.31 million (for the six months ended 30 September 2016: HK$654.97 million) and at the end of the reporting period, the Group had net current liabilities of HK$6,809.61 million (31 March 2017: HK$6,452.72 million) and net liabilities of HK$1,930.23 million (31 March 2017: HK$1,596.43 million). As at 30 September 2017, the Company’s outstanding non-convertible debt securities were as follows:

Holder of non-convertible debt securities	Principal amount	Maturity date
	(HK$)
China Life Insurance (Overseas) Company Limited	800,000,000	10 February 2016
China Life Insurance (Overseas) Company Limited	700,000,000	24 January 2017
Cross-Strait Capital Limited	32,000,000	10 February 2016
Dr. Lo Ka Shui	36,000,000	3 March 2016
Dr. Lo Ka Shui	35,000,000	3 September 2016
Li Ka Shing (Canada) Foundation	464,000,000	3 March 2016
Li Ka Shing (Canada) Foundation	465,000,000	3 September 2016
Strait Capital Service Limited	800,000,000	24 January 2017
Strait CRTG Fund, L.P.	700,000,000	24 January 2017
Total	4,032,000,000

As at 30 September 2017, the Company was due to repay the promissory note and all the above outstanding non-convertible debt securities. In aggregate, the carrying amount of the non-convertible debt securities and promissory note with the accrued default interests which are immediately repayable amounted to approximately HK$5,227.47 million (31 March 2017: HK$5,086.44 million). 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 statement in this announcement and the section headed “Updates on Remedial Measures on Going Concern” below, the Board is of the view that, upon successful implementation of the measures, the Group will have sufficient working capital to meet its financial obligations as and when they fall due in the foreseeable future.

Treasury Policy

The Group’s business operations, assets and liabilities are denominated mainly in Hong Kong dollars, Renminbi, Australian dollars 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.

– 30 –

Material Events

Disposal of 45% Interest in Associates

On 28 April 2017, the Company and Shuren Wood (Shenzhen) Company Limited (樹人木業 （深圳）有限公司 ), a wholly-owned subsidiary of the Company, as vendors and Zhongxiang Zhengxing (Beijing) Technology Development Company Limited ( 中翔正興（北京）科 技發展有限公司 ), as a purchaser, entered into a sale and purchase agreement in relation to the disposal of 45% of the issued share capital of Beijing Kaiyuanwanjia Management Consulting Company Limited ( 北京開元萬嘉管理諮詢有限公司 ) (“ Beijing KMCC* ”) and its subsidiaries together with any shareholder’s loan at the total consideration of RMB200.0 million (equivalent to HK$226.0 million).

Beijing KMCC and its subsidiaries are principally engaged in property development, asset management and building management. The primary assets of Beijing KMCC is its 100% equity interests in Yichang Xinshougang Property Development Company Limited (宜昌 新首鋼房地產開發有限公司) and 70% equity interests in Yichang Zhongxiang Building Management Company Limited (宜昌中翔物業管理有限公司).

The said disposal was completed on 1 June 2017 with the sale proceeds being fully settled. The net proceeds from the said disposal, after deducting the expenses directly attributable thereto, was approximately RMB190.0 million (equivalent to approximately HK$214.7 million) and approximately HK$164 million of the net proceeds was applied for repaying the Group’s bank borrowings, and the remaining net proceeds has been applied for general working capital of the Group.

Details on the disposal are set out in the announcement of the Company dated 28 April 2017.

Completion of Acquisition of 60% Interest in Red Sino Investments Limited

On 16 March 2017, Cheer Luck Innovest Limited, a wholly-owned subsidiary of the Company acting as purchaser (“ Cheer Luck ”), and Epoch Luck Investments Limited as vendor (“ Epoch ”) entered into a sale and purchase agreement pursuant to which Cheer Luck acquired 60% of the entire issued share capital of Red Sino Investments Limited (“ Red Sino ”) from Epoch, for an aggregate consideration of HK$138,000,000, which was satisfied in full by the allotment and issue of 690,000,000 consideration shares at the issue price of HK$0.20 per share by the Company to Epoch on 10 May 2017.

– 31 –

The operating subsidiary of Red Sino is Ar Horqin Banner Xinze Agricultural & Animal Husbandry Company Limited* (阿魯科爾沁旗鑫澤農牧業有限公司), which is principally engaged in growing and sales of forage and agriculture products.

Details on the acquisition are set out in the announcements of the Company dated 16 March 2017 and 10 May 2017.

Very Substantial Acquisition being a Reverse Takeover involving a New Listing Application, Issue of Consideration Shares and Subscription Shares, and Proposed Placing of Shares under Specific Mandate

Sale and Purchase Agreement

On 11 July 2017, the Company entered into a sale and purchase agreement (the “ SPA ”) with certain independent third party vendors (the “ Vendors ”) for the acquisition of rights and power to control over, and the right to enjoy the economic benefits in, the pawn loan business operated by ZhongAn XinBang Asset Management Corporation Ltd (中安信邦資產管理有限公司) (the “ Target Company ”), its subsidiaries and branch companies (the “ Target Group ”), through a series of contracts including exclusive option agreement, exclusive management consultancy services agreement, equity pledge agreement, and shareholder rights entrustment agreement and power of attorney (the “ Structured Contracts ”). CITIC Asset Management Corporation Ltd. (中信資產管理有限公司) (“ CITIC AMC ”), has been the controlling shareholder of the Target Company since 2008 whom holds approximately 60.03% equity interest in the Target Company as at the date of the SPA.

The consideration for the acquisition is HK$3,281,768,760 which shall be satisfied by the allotment and issue of the 14,268,559,826 new shares (the “ Consideration Shares ”), representing (i) approximately 191.72% of the issued share capital of the Company as at the date of the SPA; and (ii) approximately 49.63% of the total shares in issue of the Company as enlarged by the allotment and issue of the Consideration Shares, the Subscription Shares (defined herein below), the Placing Shares (defined herein below) and after conversion or exercise in full of all convertible securities, share options and warrants or other derivatives in issue as at the date of the SPA, at the issue price of HK$0.23 per share of the Company (the “ Issue Price ”) to the Vendors and/or their nominee(s). The Consideration Shares will be allotted and issued at completion under the specific mandate proposed to be granted by shareholders of the Company (the “ Shareholders ”) at an extraordinary general meeting (the “ EGM ”).

The acquisition constitutes a very substantial acquisition for the Company under Chapter 14 of the Rules Governing the Listing of Securities on the Stock Exchange (the “ Listing Rules ”) and is subject to the approval by the Shareholders at the EGM.

– 32 –

Reverse Takeover and New Listing

The acquisition constitutes a reverse takeover for the Company under Rule 14.06(6)(a) of the Listing Rules, on the basis that the acquisition (i) constitutes a very substantial acquisition for the Company under Chapter 14 of the Listing Rules; and (ii) results in a change in control (as defined under the Takeovers Code) of the Company as the Vendors and parties acting in concert with any of them, will hold an aggregate of more than 30% of the voting rights of the Company upon completion, although none of the Vendors would be a controlling shareholder (as defined under the Listing Rules) entitled to exercise or control the exercise of 30% or more of the voting rights of the Company upon completion.

Under Rule 14.54 of the Listing Rules, the Company will be treated as if it were a new listing applicant. The acquisition is subject to the approval by the Listing Committee of the Stock Exchange (the “ Listing Committee ”) of a new listing application to be made by the Company (the “ New Listing Application ”). Such New Listing Application is required to comply with all the requirements under the Listing Rules and, in particular, the requirements under Chapters 8 and 9 of the Listing Rules.

The Company will initiate the new listing application process as soon as practicable. It is a condition precedent to completion of the acquisition that the approval of the New Listing Application by the Listing Committee has been obtained. In the event that the approval for the New Listing Application is not granted by the Listing Committee, the SPA will not become unconditional and the acquisition will not proceed.

Further, the acquisition constitutes a connected transaction of the Company under Rule 14A.28 of the Listing Rules, as CITIC AMC, being one of the Vendors and a substantial shareholder of the Target Company, proposes to nominate 7 directors of the Company (the “ Directors ”) out of a total of 12 Directors in the Board upon completion.

Whitewash Waiver

The Vendors, being shareholders of the Target Company and the holders of the Consideration Shares upon completion of the acquisition, are acting in concert under the Takeovers Code.

– 33 –

Immediately following the allotment and issue of the Consideration Shares, the shareholding of the Vendors and parties acting in concert with any of them will be approximately 49.70% of the shares of the Company in issue as enlarged by the allotment and issue of the Consideration Shares, the Subscription Shares (defined herein below) and the Placing Shares (defined herein below) but before conversion or exercise of any convertible securities, share options, warrants or other derivatives of the Company in issue as at the date of the SPA. Under Rule 26.1 of the Takeovers Code, the Vendors and parties acting in concert with any of them would be required to make an unconditional mandatory general offer for all the issued shares not already owned or agreed to be acquired by the Vendors and parties acting in concert with any of them, unless a waiver from strict compliance with Rule 26.1 of the Takeovers Code has been obtained from the Executive Director of the Corporate Finance Division of the Securities and Futures Commission of Hong Kong or any delegate of the Executive Director (the “ Executive ”).

An application will be made by CITIC AMC for and on behalf of the Vendors to the Executive for a waiver pursuant to Note 1 on dispensation from Rule 26 of the Takeovers Code in respect of the obligation of the Vendors to make a mandatory general offer for all the shares not already owned or acquired by the Vendors and parties acting in concert with any of them under Rule 26 of the Takeovers Code which would otherwise arise as a result of the acquisition (the “ Whitewash Waiver ”). The Whitewash Waiver, if granted, will be subject to the approval of the independent shareholders of the Company in respect of the Whitewash Waiver at the EGM.

The Whitewash Waiver will be a condition precedent to completion of the acquisition. The Executive may or may not grant the Whitewash Waiver. In the event that the Whitewash Waiver is not granted by the Executive or the Whitewash Waiver is not approved by the independent shareholders of the Company, CITIC AMC will consider whether to waive the condition precedent and complete the acquisition by making a general offer for the shares of the Company under the Takeovers Code.

Continuing Connected Transactions

The transactions contemplated under the Structured Contracts will constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules upon completion of the acquisition.

Proposed Change of Directors

It is a condition precedent to completion of the acquisition that the appointment of 7 individuals nominated by CITIC AMC as Directors shall be approved at the EGM and some existing Directors shall resign at completion of the acquisition. Upon completion of the acquisition, the Board will comprise 12 members, including 4 executive directors, 1 non-executive director and 2 independent non-executive directors nominated by CITIC AMC and 3 executive directors and 2 independent non-executive directors from the existing Board.

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Subscription Agreement

On 11 July 2017, the Company and certain independent third party subscribers entered into a subscription agreement (the “ Subscription Agreement ”) pursuant to which the subscribers have conditionally agreed to subscribe for (on a several but not joint basis) 3,521,738,478 new shares of the Company (the “ Subscription Shares ”), representing (i) approximately 47.32% of the issued share capital of the Company as at the date of the Subscription Agreement; and (ii) approximately 12.25% of the total shares in issue as enlarged by the allotment and issue of the Consideration Shares, the Subscription Shares, the Placing Shares (defined herein below) and after conversion or exercise in full of all convertible securities, share options and warrants or other derivatives in issue as at the date of the Subscription Agreement, at the issue price of HK$0.23 per share of the Company with an aggregate consideration of HK$809,999,850.

The Company intends to apply all of the net proceeds from the issue of Subscription Shares to expand the pawn loan business to be operated by the Target Group or to be used in the ordinary business operation of the Company.

Placing Agreement

It is further proposed that the Company will conduct a placing of 3,478,260,869 new shares (the “ Placing Shares ”) at the issue price of HK$0.23 per share (the “ Placing ”) which will be completed at the same time as completion of the acquisition and the subscription to raise funds to repay part of existing non-convertible debt securities of the Company with a principal outstanding amount of HK$4.032 billion. The Placing Shares will be issued under specific mandate and the aggregate proceeds from the Placing would amount to approximately HK$800,000,000.

The Company intends to enter into a placing agreement (the “ Placing Agreement ”) before the despatch of the circular to the Shareholders in respect of the SPA. Further details about the Placing will be contained in the announcement to be issued by the Company upon the signing of the placing agreement in compliance with the Listing Rules.

The Placing would be inter-conditional with the completion of the acquisition and the subscription. Completion of the Placing would be conditional upon all the conditions precedent in relation to the SPA and the Subscription Agreement having been fulfilled or otherwise waived.

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Potential Issue of Convertible Bonds

The Company is contemplating the issue of convertible bonds with a principal amount of HK$1,200 million to the existing holders of the non-convertible debt securities and/or institutional investors at the conversion price of HK$0.25 per share of the Company for a term of two years (the “ Proposed Convertible Bonds ”). Assuming full conversion of the Proposed Convertible Bonds, an aggregate of 4,800,000,000 new shares would be allotted and issued by the Company (the “ Conversion Shares ”). The Proposed Convertible Bonds is expected to bear interest from its issue date at the rate of 9.0% per annum of the principal amount of the Proposed Convertible Bonds outstanding.

The net proceeds from the issue of the Proposed Convertible Bonds will be applied to repay the remaining outstanding non-convertible debt securities of the Company.

Increase of Authorised Share Capital

The Board proposes to increase the authorised share capital of the Company from HK$4,000,000,000 divided into 20,000,000,000 shares to HK$8,000,000,000 divided into 40,000,000,000 shares in order to satisfy the issue of Consideration Shares, Subscription Shares, Placing Shares and the Conversion Shares.

Further details on the transactions contemplated under the SPA, the Placing Agreement and the Subscription Agreement are set out in the announcements of the Company dated 1 August 2017, 22 August 2017, 22 September 2017, 20 October 2017 and 20 November 2017.

Prospects

At present, measures on coal output cuts are imposed in the PRC to rebalance the supply and demand of the commodity. Following the improvements on the macroeconomy and the effective implementation of coal capacity reduction policy in the PRC, the coal price is expected to gradually resurge, and along with the forthcoming developments of Zhunxing Expressway and power plant operation in the Qingshuihe area as set forth in the 2017 Annual Report, the traffic volume and toll income of the Zhunxing Expressway are expected to grow, bringing a turnaround to profit in the long run.

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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 shortterm financial obligations, the Board believes that the financing arrangement of the proposed disposals and buy-backs of its 71% equity interest in Zhunxing, if fully materialise during this financial year, will realise cash to partially repay the principal amount of the Company’s outstanding non-convertible debt securities, and hence improve the financial and cash flow position of the Group. The Company will continue to explore different avenues (including but not limited to disposal of remaining interests in Zhunxing) to generate sufficient funds to fully repay the outstanding non-convertible debt securities.

During the period, the Company has identified the potential acquisition of a pawn loan business in the PRC, which is a valuable opportunity for the Group to diversify its existing business portfolio into new line of business with growth potential, to broaden its income source and eventually enhance the value of the Group. It is expected that, upon completion of the potential acquisition, the introduction of CITIC AMC as a substantial shareholder of the Company will not only broaden the Company’s shareholding base, but also create opportunities in other new sectors to be explored in the future.

The Board will continue to look out for opportunities to make investments in any new business when suitable opportunities arise to diversify the revenue streams of the Group and strengthen the Group’s financial position, and therefore maximising the benefits of the Shareholders as a whole.

Updates on Remedial Measures on Going Concern

Further to the remedial measures as set out in the section headed “Updates on Remedial Measures on Going Concern” in the 2017 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 announcement to improve the Company’s financial position.

Debt restructuring

The Company is due to repay the non-convertible debt securities with an aggregate principal amount of HK$4,032 million as at 30 September 2017 (the “ Outstanding Debt Securities ”).

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With the assistance of the financial advisors and legal counsel, the Company has been in discussion with these debt holders for a potential restructuring arrangement of the Outstanding Debt Securities. As at the date of this announcement, management of the Company is still in the process of finalizing the formal debt restructuring agreement to be entered into with the holders of the Outstanding Debt Securities. The Board is of the opinion that a new repayment schedule could be agreed and default on partial settlement could be rectified.

Proposed financing arrangement through disposals and buy-backs of 71% equity interest in Zhunxing

In late December 2016, the Company as guarantor and its wholly-owned subsidiary Cheer Luck Technology Limited acting as vendor, entered into a disposal agreement with each of the four purchases in relation to the disposals and buy-backs of 71% equity interest in Zhunxing in aggregate. Details on the arrangement of the proposed disposals and buy-backs are set out in the section headed “Material Events” of the 2017 Annual Report and the announcements of the Company dated 9 January 2017, 30 March 2017, 30 June 2017 and 29 September 2017.

As at the date of this announcement, the Company is in the process of finalizing the payment schedule of Consideration A in respect of the disposal of 25% equity interests in Zhunxing and the amount of Consideration B, Consideration C and Consideration D in respect of the disposal of 46% equity interests in Zhunxing in aggregate, and fulfilling the conditions precedent to each of these disposals under the Disposal Agreements. The expected total proceeds from the disposals would be less than HK$4,032 million and therefore the entire proceeds from the disposals will be applied to repay the Outstanding Debt Securities. In the event that the net proceeds from the disposals exceed HK$4,032 million, the surplus, if any, will be applied as general working capital of the Group. The Group will continue to explore different avenues (including but not limited to disposal of the Group’s remaining interests in Zhunxing) to generate sufficient funds to fully repay the Outstanding Debt Securities.

The board believes that if the financing arrangement through disposals and buy-backs of the 71% equity interest in Zhunxing under the disposal agreements were successfully completed, the indebtedness level of the Group will be reduced, and therefore enhancing the Group’s financial position to meet its financial requirements in the foreseeable future.

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Very substantial acquisition being a reverse takeover involving a new listing application, issue of Consideration Shares and Subscription Shares, and proposed placing of shares under specific mandate

During the period under review, the Company has identified the acquisition of a pawn loan business in the PRC as a good opportunity to diversify its existing business portfolio into new line of business growth opportunity, and to broaden the Group’s income sources. Details on the transactions contemplated under the SPA, the Subscription Agreement and the Placing Agreement are set forth in the previous section headed “Material Events” and the announcements of the Company dated 1 August 2017, 22 August 2017, 22 September 2017, 20 October 2017 and 20 November 2017.

As at the date of this announcement, the Company is working closely with the Target Group and all professional parties in preparing the New Listing Application under the Listing Rules.

Assuming successful completion of the proposed acquisition, the Board expects that the introduction of CITIC AMC as a substantial shareholder of the Company will broaden the Company’s shareholding base, and create opportunities for cooperation with CITIC AMC and other new sectors to be explored in the future. The Board is also of the view that the proposed subscription represents a good opportunity to raise additional funds for the expansion of the newly acquired pawn loan business and broaden the Company’s shareholder base and capital base. Furthermore, the Board intends to reduce the indebtedness level of the Group by repaying the remaining Outstanding Debt Securities using the funds arising from the Placing or/and the potential issue of the Convertible Bonds, and if successfully materialise, will strengthen the Group’s cashflow and financial position to meet its liquidity requirement in the short and long term.

CHARGES ON ASSETS

As at 30 September 2017, 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); (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.

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CONTINGENT LIABILITIES

As at 30 September 2017, the Group did not have any material contingent liabilities.

DIVIDEND

The Directors do not recommend any dividend for the six months ended 30 September 2017 (for the six months ended 30 September 2016: HK$Nil).

EMPLOYEES

The Group had approximately 462 employees in Hong Kong and the PRC as at 30 September 2017. The Group implements remuneration policy, bonus and share options schemes to ensure that its employees are rewarded on performance-related 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 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 2017, the options to subscribe for 37,833,324 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 2017.

As at 30 September 2017, no share option has been granted, exercised, cancelled or lapsed under the New Scheme.

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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 2017.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

Save for the deviation as reported and discussed in the Corporate Governance Report as set forth in the Company’s 2017 Annual Report, none of the Directors are aware of any information that would reasonably indicate that the Company was not throughout the period ended 30 September 2017, in compliance with the Corporate Governance Code as set out in Appendix 14 (the “ CG Code ”) of 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, 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 2017.

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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 announcement.

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, 29 November 2017

As at the date of this announcement, 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.

• For identification purpose only

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