Dongjiang Environmental Company Limited — Proxy Solicitation & Information Statement 2021

Aug 19, 2021

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Dongjiang Environmental Company Limited, you should at once hand this circular, together with the enclosed reply slip and form of proxy to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

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DONGJIANG ENVIRONMENTAL COMPANY LIMITED[*] 東江環保股份有限公司

(a joint stock limited company incorporated in the People’s Republic of China)

(Stock code: 00895)

(1) MAJOR TRANSACTION

PROPOSED ACQUISITION OF 70% EQUITY INTEREST

IN THE TARGET COMPANY

AND

(2) NOTICE OF THE SECOND EXTRAORDINARY GENERAL MEETING IN 2021

Unless the context otherwise requires, capitalised terms used in this cover page have the same meanings as defined in this circular.

A letter from the Board is set out on pages 5 to 28 of this circular.

A notice convening the EGM to be held at 11th Floor, Dongjiang Environmental Building, No. 9 Langshan Road, Nanshan District, Shenzhen, the People’s Republic of China on Wednesday, 8 September 2021 at 3:00 p.m is set out on pages EGM-1 to EGM-2 of this circular. A form of proxy for use at the EGM is also enclosed with this circular. Such form of proxy is also published on the website of the Stock Exchange at www.hkexnews.hk.

Whether or not you are able to attend the EGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Company’s H share registrar, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong (for holders of H Shares) as soon as possible but in any event, not less than 24 hours before the time appointed for the holding of the EGM (i.e. 3:00 p.m. on Tuesday, 7 September 2021). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM should you so wish.

To facilitate the Company in making arrangements for the EGM, you are invited to complete the enclosed reply slip in accordance with the instructions printed thereon and return it to the Company’s H share registrar, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong (for holders of H Shares) as soon as possible, but in any event, before 3:00 p.m. on Tuesday, 7 September 2021. However, the completion and return of the reply slip or not will not affect your right to attend and/or vote at the EGM.

20 August 2021

• For identification purpose only

CONTENTS

			Page
DEFINITIONS.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			5
APPENDIX I	–	FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . . . .	I-1
APPENDIX II	–	FINANCIAL INFORMATION OF THE TARGET COMPANY. . .	II-1
APPENDIX III	–	UN AUDITED PRO FORMA FINANCIAL INFORMATION
		OF THE ENLARGED GROUP . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
APPENDIX IV	–	MA NAGEMENT DISCUSSION AND ANALYSIS
		OF THE TARGET COMPANY. . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
APPENDIX V	–	VALUATION REPORT ON THE TARGET COMPANY . . . . . . . .	V-1
APPENDIX VI	–	PROPERTY VALUATION REPORT. . . . . . . . . . . . . . . . . . . . . . . .	VI-1
APPENDIX VII	–	RE CONCILIATION STATEMENT FOR
		THE PROPERTY OF THE TARGET COMPANY. . . . . . . . . . .	VII-1
APPENDIX VIII	–	GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VIII-1
NOTICE OF THE SECOND EGM IN 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			EGM-1

– i –

DEFINITIONS

In this circular, unless the context otherwise requires, the following expressions have the following meanings:

“A Share(s)”	A share(s) in the share capital of the Company, with a par value of
	RMB1.00 each, which are subscribed for and traded in RMB on the
	Shenzhen Stock Exchange
“Acquisition”	the proposed acquisition of 70% of the equity interest in the Target
	Company by the Company from the Vendor pursuant to the Acquisition
	Agreement
“Acquisition Agreement”	the “Conditional Acquisition Agreement in relation to 70% of the Equity
	Interest in Chenzhou Xiongfeng Environment Technology Co., Ltd.” (《關
	於郴州雄風環保科技有限公司70%股權的附條件生效的股權
	轉讓協議書》) dated 15 July 2021 entered into between the Company
	and the Vendor in relation to the Acquisition
“Announcement”	the announcement of the Company dated 15 July 2021 in relation to the
	Acquisition Agreement and the transactions contemplated thereunder
“associate(s)”	has the meaning ascribed to it under the Listing Rules
“Board”	the board of Directors
“Business Day”	a day on which banks of the PRC are open for ordinary banking business
	(excluding Saturdays and Sundays)
“Charges”	charges over the Properties of the Target Company granted in favour
	of the Company as security for the Deposit paid by the Company, the
	registration of which shall be completed within three (3) Business Days
	from the date of the Acquisition Agreement
“close associate(s)”	has the meaning ascribed to it under the Listing Rules
“Company”	東江環保股份有限公司(Dongjiang Environmental Company
	Limited*), a joint stock limited company incorporated in the PRC, whose
	H Shares and A Shares are listed on the Stock Exchange and on the
	Shenzhen Stock Exchange, respectively
“Completion”	completion of the Acquisition, i.e. the completion of commercial and
	business registration of transfer of equity interest
“Completion Accounts”	has the meaning as defined in the sub-section headed “Acquisition
	Agreement – Arrangement for the Transition Period” of this circular
“Completion Accounts	the reference date of the Completion Accounts, being the end of the
Reference Date”	previous month if the Handover Confirmation Date falls on or before the
	15th day of the month; and being the end of the month if the Handover
	Confirmation Date falls after the 15th day of the month

– 1 –

DEFINITIONS

• “Consideration” the total consideration for the Acquisition of RMB429.00 million “connected person(s)” has the meaning ascribed to it under the Listing Rules

the total consideration for the Acquisition of RMB429.00 million

“Deposit” has the meaning as defined in the sub-section headed “Acquisition Agreement – Consideration” of this circular

• “Director(s)” the director(s) of the Company

• “Disposal Assets” the assets relating to the silver electrolysis workshop operations of the Target Company (not inclusive of the production facilities and land occupied for such operations) and other assets held by the Target Company as agreed by the parties (principally comprising certain inventory and accounts current), which are to be disposed of before Completion and within 50 days after the date of the Acquisition Agreement pursuant to the Acquisition Agreement

• “Disposal Business” the assets relating to the silver electrolysis workshop operations of the Target Company excluded for the purpose of the preparation of the historical financial information as set out in Appendix II to this circular. For further details on the basis of preparation of the historical financial information of the Target Company, please refer to the Note 1 to the historical financial information set out in Appendix II to this circular

• “EGM” the second extraordinary general meeting of the Company in 2021 to be convened and held for, among other things, considering, and, if thought fit, approving, inter alia, the Acquisition Agreement and the transactions contemplated thereunder

• “Enlarged Group” the Group as enlarged by the Target Company after Completion

• “Group” the Company and its subsidiaries

• “H Share(s)” the overseas listed foreign share(s) in the share capital of the Company, with a par value of RMB1.00 each, which are subscribed for and traded in HK$ on the Stock Exchange

• “Handover Confirmation the date of completion of handover in accordance with the Acquisition Date” Agreement and the execution of a handover confirmation/memorandum after the Acquisition having been approved by the Shareholders (the “ Handover ”)

• “Handover Period” the period from the Reference Date to the Handover Confirmation Date

• “Hong Kong” the Hong Kong Special Administrative Region of the PRC

• “HK$” Hong Kong dollar, the lawful currency of Hong Kong

– 2 –

DEFINITIONS

“IFRS” The International Financial Reporting Standards issued by the International Accounting Standards Board “Latest Practicable Date” 16 August 2021, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained in this circular “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

“PRC” the People’s Republic of China “PRC Qualified Valuer” Shenzhen Pengxin Assets Valuation and Land and Property Appraisal Co., Ltd. ( 深圳市鵬信資產評估土地房地產估價有限公司 ), an independent PRC qualified professional valuer “Properties” five (5) properties located at Bolin Industrial Park, Yongxing County, the PRC ( 永興縣柏林工業園 ) with a total gross floor area of 28,155.04 square metres, the valuation of which is approximately RMB102.75 million “Reference Date” 28 February 2021, being the reference date of the valuation contained in the Valuation Report and audit in accordance with the accounting principles generally accepted in the PRC of the Target Company in respect of the Acquisition “RMB” Renminbi, the lawful currency of the PRC “SFO” Securities and Futures Ordinance (Cap 571 of the laws of Hong Kong) “Share(s)” the share(s) of the Company, unless specified otherwise, including A Shares and H Shares “Shareholder(s)” the holder(s) of the Share(s) “Stock Exchange” The Stock Exchange of Hong Kong Limited “Supervisors” supervisors of the Company “Target Company” Chenzhou Xiongfeng Environment Technology Co., Ltd.* ( 郴州雄風環 保科技有限公司 ), a limited liability company established in the PRC “Transition Period” the period commencing on the Reference Date (inclusive) and ending on the date of Completion (not inclusive)

– 3 –

DEFINITIONS

“Valuation Report” the valuation report issued by Shenzhen Pengxin Assets Valuation and Land and Property Appraisal Co., Ltd. ( 深圳市鵬信資產評估土 地房地產估價有限公司 ), an independent PRC qualified valuer, in respect of 100% of the equity interest in the Target Company as at the Reference Date, the full text of which is set out in Appendix V to this circular “Vendor” Beijing Hanfeng United Technology Co., Ltd. ( 北京瀚豐聯合科技有 限公司 ), a company established in the PRC with limited liability “%” per cent

Words importing the singular shall, where applicable, include the plural and vice versa. Words importing the masculine gender shall, where applicable, include the feminine and neuter genders. References to persons shall, where applicable, include corporations.

Any reference in this circular to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the Listing Rules, the SFO or any modification thereof and used in this circular shall, where applicable, have the meaning assigned to it under the Listing Rules, the SFO or any modification thereof, as the case may be.

In this circular, the English names of the PRC entities are translation of their Chinese names, and are included herein for identification purpose only.

– 4 –

LETTER FROM THE BOARD

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DONGJIANG ENVIRONMENTAL COMPANY LIMITED[*] 東江環保股份有限公司

(a joint stock limited company incorporated in the People’s Republic of China)

(Stock code: 00895)

Executive Directors: Mr. Tan Kan (Chairman) Mr. Lin Peifeng

Non-executive Directors: Mr. Tang Yi Ms. Shan Xiaomin Mr. Jin Yongfu

Registered office: 1st Floor, 3rd Floor, North of 8th Floor, 9th-12th Floor Dongjiang Environmental Building No. 9 Langshan Road North Zone of Hi-tech Industrial Park Nanshan District, Shenzhen The People’s Republic of China

Independent non-executive Directors: Mr. Li Jinhui Mr. Siu Chi Hung Ms. Guo Suyi

Principal place of business in Hong Kong: 6th Floor, O.T.B. Building 259-265 Des Voeux Road Central Hong Kong

20 August 2021

To the Shareholders

Dear Sir or Madam,

(1) MAJOR TRANSACTION PROPOSED ACQUISITION OF 70% EQUITY INTEREST IN THE TARGET COMPANY AND

(2) NOTICE OF THE SECOND EXTRAORDINARY GENERAL MEETING IN 2021

INTRODUCTION

Reference is made to the Announcement in relation to the Acquisition Agreement and the Acquisition contemplated thereunder.

The primary purpose of this circular is to provide you with, among other matters, (i) further details of the Acquisition Agreement and the transactions contemplated thereunder; (ii) the notice convening the EGM; and (iii) other information required under the Listing Rules.

– 5 –

LETTER FROM THE BOARD

THE ACQUISITION AGREEMENT

Date

15 July 2021 (after trading hours)

Parties

1. The Company, as purchaser

2. Beijing Hanfeng United Technology Co., Ltd.* ( 北京瀚豐聯合科技有限公司 ), as Vendor

To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, as at the Latest Practicable Date, the Vendor and its ultimate beneficial owner(s) are third parties independent of and not connected with the Company and its connected persons.

Subject Matter

The Company and the Vendor entered into the Acquisition Agreement, pursuant to which the Company conditionally agreed to acquire 70% of the equity interest in the Target Company from the Vendor at the Consideration of RMB429.00 million.

As at the Latest Practicable Date, the entirety of the equity interest in the Target Company is owned by the Vendor. The Target Company has a registered capital of RMB822.89 million, the entirety of which has been paid up. Upon Completion (upon which the disposal of the Disposal Assets will be completed), the illustrative shareholding and registered capital of the Target Company is set out as follows:

Shareholders The Company The Vendor Total	Registered Capital (RMB) 287,965,916 123,413,964 411,379,880	Shareholding (%) 70.00 30.00
		100.00

– 6 –

LETTER FROM THE BOARD

Consideration

The Consideration for the Acquisition is RMB429.00 million, which shall be settled in cash by the internal resources of the Group and/or external financings. The Disposal Assets will not be acquired by the Company and thus were not taken into account in determining the Consideration. The Consideration shall be paid by the Company to the Vendor in the following manner:

• (i) a deposit of RMB85.80 million (representing 20% of the Consideration and inclusive of the previously paid earnest money of RMB20 million) to be paid within five (5) days from the successful registration of the Charges (which shall be completed within three (3) Business Days from the date of the Acquisition Agreement) (the “ Deposit ”);

• (ii) subject to the entering into of a handover confirmation/memorandum, a completion confirmation and the articles of association, and the completion of commercial and business registration of transfer of equity interest, RMB321.75 million (representing 75% of the Consideration) to be paid within five (5) days from the Completion;

• (iii) if there is no loss, deficits, disputes or other extraordinary expenditures arising in the course of operations of the Target Company from matters before Completion within six (6) months after Completion (the “ First Operating Period ”), RMB18.45 million to be paid within five (5) days after the First Operating Period. The Company is entitled to deduct the actual loss amount from this instalment, after which the remaining amount shall be paid to the Vendor; and

• (iv) if there is no loss, deficits, disputes or other extraordinary expenditures arising in the course of operations of the Target Company from matters before Completion within six (6) months after the First Operating Period (the “ Second Operating Period ”), RMB3.00 million to be paid within five (5) days after the Second Operating Period. The Company is entitled to deduct the actual loss amount from this instalment, after which the remaining amount shall be paid to the Vendor.

The Consideration was determined after arm’s length negotiations between the Company and the Vendor with reference to the appraised value of 100% equity interest in the Target Company of approximately RMB612.87 million as at the Reference Date as contained in the Valuation Report set out in Appendix V to this circular prepared by Shenzhen Pengxin Assets Valuation and Land and Property Appraisal Co., Ltd* ( 深圳市鵬信資產評估土地房地產估價有限公司 ), the independent PRC Qualified Valuer, using the asset-based approach. The valuation in the Valuation Report was prepared on the assumption that the disposal of the Disposal Assets has been completed as at the Reference Date.

– 7 –

LETTER FROM THE BOARD

The instalments of RMB18.45 million and RMB3.00 million (the “ Instalments ”) taken together represent 5% of the total Consideration. The Company considers that it is a common market practice in the PRC for transactions of similar nature to the Acquisition to contain a deferred payment in the amount of approximately 5% of the total consideration payable by the purchaser after completion, as a contingent arrangement catering for any unforeseeable events arising before completion. The percentage of the Instalments out of the total Consideration (i.e. 5%) and the amount of the Instalments were determined after arm’s length negotiation between the Company and the Vendor and were on normal commercial terms. Taking into account that the Company has conducted extensive due diligence (including but not limited to legal, financial, tax, business and compliance) and audit on the Target Company, the Company considers that it is unlikely to suffer from losses exceeding 5% of the Consideration due to unforeseeable events arising before Completion. Therefore, the Company is of the view that the percentage and amount of the Instalments are fair and reasonable and are appropriate for the mitigation of the level of risks associated with unforeseeable events arising before Completion. In addition, the Company considers that it will be able to gain substantial understanding in the operations and affairs of the Target Company during the First Operating Period (i.e. the six months immediately following the Completion, after which the Company will take over the control of the Target Company), and hence agreed after arm’s length negotiation with the Vendor to pay the majority of the Instalments of RMB18.45 million after the First Operating Period, and the remaining RMB3.00 million after the Second Operating Period, respectively.

In the unlikely event that the Company suffers from any post-Completion loss arising from unforeseeable events before Completion which exceeds the Instalments, the Company shall principally have, amongst others, recourse to the followings:

• i. it was agreed by the parties in the Acquisition Agreement that any loss of the Target Company arising from any contingent liability (i.e. liabilities, deficits, losses, disputes, other additional expenditures and/or any legal obligations of the Target Company arising on or before the date of Completion and not recorded in the statutory accounts of the Target Company and not confirmed by the parties, and the portion of liabilities exceeding the liabilities recorded in the statutory accounts of the Target Company) and all relevant expenses shall be compensated in full by the Vendor to the Target Company in cash within seven (7) days after the actual payment of the contingent liability;

• ii. the Vendor has undertaken to the Company in the Acquisition Agreement that all documents, financial data and information provided by the Vendor and the Target Company to the Company in relation to the Acquisition Agreement is true, accurate and effective, there having been no concealment, omission, falsification or misleading matters, and there having been no undisclosed legal obstacle, contravention or other material information affecting the execution of the Acquisition Agreement known or ought to be known by the Vendor; and

– 8 –

LETTER FROM THE BOARD

• iii. it was agreed in the Acquisition Agreement that any misrepresentation, breach of warranties or undertakings or non-performance of any obligations under the Acquisition Agreement shall constitute a breach of contract, in the event of which the conforming party may by notice in writing require the breaching party to rectify or remedy such breach(es) within 30 days, failing which the breaching party shall pay RMB5.00 million as penalty to the conforming party, except where the penalty is expressly agreed in the Acquisition Agreement. If the damages suffered by the conforming party exceed such agreed penalty, the breaching party shall compensate the conforming party in full and in a timely, sufficient and effective manner, including reasonable expenses incurred by the conforming party for the avoidance of losses.

The Company will (or will procure the Target Company to) take appropriate enforcement action(s) against the Vendor in respect of any damages suffered by it or the Target Company (including but not limited to a deduction of all or part of the Instalments) in accordance with the terms and conditions of the Acquisition Agreement.

Disposal of the Disposal Assets

As at the Latest Practicable Date, the Target Company holds the Disposal Assets which are mainly assets of the Target Company relating to its silver electrolysis workshop operations (not inclusive of the production facilities and land occupied for such operations) and other assets held by the Target Company as agreed by the parties (principally comprising certain inventory and accounts current).

The Vendor has undertaken to:

• (i) ensure that the Target Company disposes of its assets relating to the silver electrolysis workshop business (not inclusive of the production facilities and land occupied for such operations) to the Vendor or its designated nominee(s) before Completion at the Vendor’s costs. The Vendor has also undertaken that no liabilities will arise on the part of the Target Company from the Disposal Assets, and any such liabilities will be compensated by the Vendor to the Target Company in cash on a dollar-for-dollar basis.

• (ii) upon Completion, there shall not exist any abnormal accounts current, inventory and assets in the Target Company, except for indebtedness, loans, inventory and assets recognised by the Company.

– 9 –

LETTER FROM THE BOARD

The disposal of the Disposal Assets will be settled by a reduction of capital of the Target Company in the amount of approximately RMB411.51 million, and the Vendor has agreed to procure the Target Company to complete such capital reduction before Completion. The reduction of capital is to off-set the effect of the disposal of the Disposal Assets to the shareholders’ equity in the Target Company. As the assets and liabilities relating to the Disposal Assets will be disposed of to the Vendor, the equity in the Target Company (which is wholly-owned by the Vendor before Completion) shall be accordingly reduced to reflect the decrease in net assets of the Target Company. Completion will proceed on the condition that the disposal of the Disposal Assets and the reduction of capital having been completed, and the Disposal Assets will not be acquired by the Company. The Consideration was determined with reference to the valuation of the Target Company as contained in the Valuation Report prepared under the assumption that the disposal of the Disposal Assets and the reduction of capital have been completed, and the due diligence and audit work of the Company was conducted on an “as-excluded” basis assuming the disposal of the Disposal Assets and the capital reduction have been completed. For details of the assets and liabilities expected to be disposed of before Completion as at 28 February 2021, which have been classified as assets and liabilities held for distribution to the owner, please refer to Note 34 of the financial information of the Target Company as set out in Appendix II to this circular.

According to the Company Law of the PRC (《中華人民共和國公司法》), a company shall make a public announcement (the “ Capital Reduction Announcement ”) on a newspaper within 30 days after a shareholder’s resolution for a reduction of capital is passed. The registration procedures for a capital reduction may be completed 45 days (the “ Notice Period* ”) after the Capital Reduction Announcement to effectuate such capital reduction. A shareholder’s resolution of the Target Company for the reduction of capital has been passed and a Capital Reduction Announcement has been published in a local newspaper in late June 2021. As at the Latest Practicable date, the registration procedures for the capital reduction has not been completed pending the passing of the Notice Period and the capital reduction is expected to be completed by late August 2021.

In the event the disposal of the Disposal Assets is not completed within 50 days after the date of the Acquisition Agreement, the Company has the right to terminate the Acquisition Agreement. No liabilities will be borne by the Company and the Vendor shall bear all the Company’s costs (including but not limited to travelling fees, professional services fees etc.) in relation to the Acquisition and refund to the Company the earnest money of RMB20 million and any other payments made by the Company.

Upon the completion of the disposal of the Disposal Assets, the Disposal Assets will be held by the Vendor (or its designated nominee(s)). The Target Company will, after Completion, comply strictly with the suppliers’ selection or customers qualification screening procedures prescribed in the procurement and sale system of the Group. Should the actual circumstance require any operation or transaction between the Vendor and the Target Company after Completion, the Company will comply with Chapters 14 and 14A of the Listing Rules, the Rules Governing the Listing of Shares on Shenzhen Stock Exchange and all other external and internal regulations and policies as and when appropriate.

– 10 –

LETTER FROM THE BOARD

Conditions to the Taking Effect of Acquisition Agreement

The taking effect of the Acquisition Agreement (the “ Taking Effect of Acquisition Agreement ”) is conditional upon the fulfilment of the following conditions:

• (i) approvals from the Board and the Shareholders at a general meeting of the Company having been obtained in respect of the Acquisition, and the Stock Exchange having approved the circular to be despatched to the Shareholders in relation to the Acquisition and/or any other requirements of regulatory authorities having been fulfilled;

• (ii) approvals from the empowered decision-making body of the Vendor in respect of the Acquisition having been obtained; and

• (iii) the Acquisition having passed the anti-monopoly operators vetting by the Anti-monopoly Bureau of the State Administration for Market Regulation of the PRC.

If all the above conditions are not fulfilled by 30 September 2021, the Acquisition Agreement and the Acquisition thereunder shall forthwith terminate, except where the parties agree to an extension. Unless otherwise agreed in the Acquisition Agreement, none of the parties shall bear any liability for breach of agreement. None of the above conditions can be waived by either the Vendor or the Company.

If the Acquisition Agreement is terminated by reason of the failure to satisfy the conditions above, the Company exercising its right to terminate the Acquisition Agreement or other reasons, the Vendor shall within five (5) Business Days from receiving a written refund notice issued by the Company refund in full the funds paid by the Company.

Completion

Completion shall take place within seven (7) Business Days after the Taking Effect of Acquisition Agreement, subject to the completion of the Handover. Upon Completion, the Vendor shall ensure that the Target Company enters the Company into the register of members of the Target Company in respect of its shareholding, amends its articles of association, and changes its legal representative, director(s), supervisor(s) and general manager.

Upon Completion, the Company will hold 70% of the equity interest in the Target Company, which will become a subsidiary of the Company. Therefore, the Target Company’s financial results, assets and liabilities will be consolidated into the financial statements of the Group.

The Company and the Vendor agreed that an application for the registration of the release of the Charges shall be made to the supervising authority within five (5) Business Days after Completion.

– 11 –

LETTER FROM THE BOARD

Arrangement for the Transition Period

Within 30 days from Handover Confirmation Date, an accounting firm engaged by the Company shall conduct audit and issue a set of completion accounts (the “ Completion Accounts ”) confirming the profit and loss of the Target Company for the Handover Period.

The Vendor shall be entitled to the profits attributable to 70% equity interest of the Target Company (to be acquired by the Company after Completion) for the Handover Period, to be paid to the Vendor by the Target Company by way of distribution etc.. Pursuant to the Acquisition Agreement, Completion shall take place within seven (7) Business Days after the Taking Effect of Acquisition Agreement, subject to the completion of the Handover. The Handover Confirmation Date would be falling on a date before Completion but after the Taking Effect of Acquisition Agreement. Therefore, the interval between the Handover Confirmation Date and the date of Completion is expected to be a short period of time, and would in no event exceed seven (7) Business Days. The Handover represents a process in which Vendor hands over the seals, licenses, certificates, digital pass codes, title and financial documents of the Target Company to the Company, followed by stock-taking and verification conducted by the Company and finally the endorsement of a handover list and handover confirmation by the parties. As such, given that the Company will effectively take control over the assets and operations and relevant rights and obligations of the Target Company on the Handover Confirmation Date, the parties considered that the Handover Confirmation Date effectively represents the date on which the Company takes charge of and assumes rights and obligations over the Target Company and its operations. Completion was considered to be the satisfaction of administrative and procedural formalities, i.e. commercial and business registration of transfer of equity interest. In that regard, after arm’s length negotiation, the parties agreed that the Vendor shall be entitled to the profits attributable to 70% equity interest in the Target Company up to the Handover Confirmation Date to be paid to the Vendor by the Target Company by way of distribution etc..

The Vendor has undertaken to compensate the Target Company in cash for any loss of the Target Company recorded in the Completion Accounts computed in accordance with the formula below:

Audited net assets as at Completion Accounts Reference Date + total amortized amount of depreciation of fixed assets for Audited net assets of the the Handover Period + total amortized Compensation = Target Company as at – amount of intangible assets for the Handover the Reference Date Period + 50% of the salary of core personnel of the Target Company for the Handover Period

The Vendor has undertaken to, during the Transition Period, use its required endeavour to conduct the operations, manage, utilize and maintain the assets and relevant operations of the Target Company in a way consistent with its historical approach; and to use commercially reasonable effort to ensure the assets and operations of the Target Company are conducted in a satisfactory manner.

– 12 –

LETTER FROM THE BOARD

The Target Company is (and the Vendor shall procure that the Target Company is) subject to certain customary standstill obligations (including but not limited to restrictions on amendment to constitutional documents, internal management and operations, capital reorganization, creation of encumbrance, appointment or dismissal of core personnel, staff policy and arrangement, acquisitions and disposals, structure of empowered decision-making authority, amendment to, termination of or re-entry of material contracts, related party commitments and arrangements, accounting policies and actions which may have a material adverse effect on the Acquisition), failing which the Company is entitled to terminate the Acquisition Agreement and seek compensation from the Vendor.

Undertakings

The Vendor has undertaken to the Company that, except with the written consent of the Company, it will not create any pledge over all or part of the equity interest in the Target Company held by it after the entering into of the Acquisition Agreement. The Vendor has agreed that it shall not transfer the equity interest in the Target Company held by it to any third party (save for a transfer to the current employees of the Target Company as specified in the Acquisition Agreement) within three (3) years after the entering into of the Acquisition Agreement, unless with the consent of the Company.

The Vendor has agreed that, in the event the Company provides loan to the Target Company or grants guarantee for the financings of the Target Company after Completion, it shall provide loans to the Target Company or grant guarantee or counter-guarantee for the Target Company’s loan financings in proportion to its shareholding in the Target Company.

VALUATION OF THE TARGET COMPANY

The Board’s assessment on the basis and assumption of the valuation in the Valuation Report

According to the Valuation Report rendered by Shenzhen Pengxin Assets Valuation and Land and Property Appraisal Co., Ltd.* ( 深圳市鵬信資產評估土地房地產估價有限公司 ), the independent PRC Qualified Valuer appointed by the Company, the appraised value of the entirety of the shareholders’ equity of the Target Company has been valued at RMB612,871,500. Please refer to Appendix V to this circular for the full text of the Valuation Report.

– 13 –

LETTER FROM THE BOARD

The Board has reviewed the Valuation Report prepared by the PRC Qualified Valuer in respect of the Target Company and the underlying valuation methodology, and has discussed with the PRC Qualified Valuer in that regard, including but not limited to:

(i) the qualification and experience of the PRC Qualified Valuer;

• the PRC Qualified Valuer has sufficient experience and the relevant professional qualifications required to perform the valuation of the shareholders’ equity of the Target Company. The PRC Qualified Valuer is certified by the Ministry of Finance and the China Securities Regulatory Commission to carry out securities and futures related valuation business; and the valuation personnel in charge of the valuation possess relevant qualifications awarded by the China Appraisal Society as professional asset valuers. The PRC Qualified Valuer is independent of and not connected with the Company and its connected persons.

(ii) the standards and methodology of the valuation;

• the Valuation Report was prepared in accordance with the Asset Valuation Standards – Basic Standards issued by the Ministry of Finance and professional conduct standards and professional ethics for asset valuation issued by the China Appraisal Society, and on the basis of the Asset Appraisal Law of the PRC and other relevant laws, regulations and statutory documents.

• the Company notes that the PRC Qualified Valuer has conducted necessary on-site investigations on the appraised objects and the assets involved in the valuation under the Valuation Report and random checks on the legal ownership of the appraised objects and the assets involved. Any issues identified have been truthfully disclosed in the Valuation Report.

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LETTER FROM THE BOARD

(iii) the assumptions and basis used in the valuation

• In assessing the market value of the Target Company, the PRC Qualified Valuer has considered three generally accepted valuation approaches, namely the income approach, market approach and asset-based approach. Due to the lack of comparable enterprises in the current domestic capital market that are relatively similar or comparable to the Target Company; and the lack of or difficulty in obtaining cases of equity transactions of similar enterprises due to the underdeveloped equity transactions market, the market approach was concluded to be not appropriate for the valuation. Accordingly, the asset-based approach and income approach were initially selected for the valuation. The appraised value of all shareholders’ equity in the Target Company was RMB612,871,500 by using the asset-based approach and RMB615,000,000 by using the income approach, as at the Reference Date. The PRC Qualified Valuer has confirmed that the asset-based approach used in determining the valuation of the Target Company is one of the commonly adopted approaches for valuation of companies. It was concluded that in view of the purpose of the valuation and taking into account factors such as the quantity and quality of information used in different valuation methods, it was considered that the asset-based approach would objectively and reasonably reflect the value of the equity interest in the Target Company. Accordingly, the asset-based approach was adopted.

• the PRC Qualified Valuer has advised that the general assumptions of the valuation are those commonly adopted in other business valuations in the market. The Company has also considered the specific assumptions of the valuation as set out below:

• (a) the Target Company has obtained the recognition as a High-tech Enterprise ( 高 新技術企業 ), which is valid from 3 December 2018 to 3 December 2021. The valuation assumes that the Target Company will continue to obtain the recognition as a High-tech Enterprise ( 高新技術企業 ) and continue to enjoy the current income tax incentives after the expiry of the aforesaid recognition.

• (b) it is assumed that the sale prices of the Target Company’s products will remain stable in future years.

• (c) it is assumed for the valuation that, the Target Company had completed the disposal of the Disposal Assets, capital reduction and other restructuring matters as at the Reference Date, i.e. assuming that all assets and liabilities of the Target Company as at 28 February 2021, the Reference Date, will match those set out in the financial statements after similar adjustments in the audit report.

Taking into account the above factors, the Company considers that the valuation approaches adopted are common valuation methodologies in appraising the Target Company and the bases and assumptions adopted by the PRC Qualified Valuer are fair and reasonable.

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LETTER FROM THE BOARD

Analysis on the difference between the net asset value of the Target Company and the valuation of the Target Company

The net asset value of the Target Company as at the Reference Date (i.e. 28 February 2021) based on the financial information of the Target Company set out in Appendix II to this circular, and assuming the disposal of the Disposal Assets (including the Disposal Business of approximately RMB411.51 million) has been completed, is approximately RMB516.45 million (the “ Illustrative Net Asset Value ”), representing a difference of approximately RMB96.42 million (the “ Valuation Surplus ”) as compared to the appraised value of all the equity interest in the Target Company of approximately RMB612.87 million in the Valuation Report. The Valuation Surplus was primarily attributable to the value gain or loss in the fixed assets and intangibles assets of the Target Company, details of which are set out as follows:

	Net book value as
	at the Reference
	Date in the
	financial
	information of
	the Target	Appraised value
	Company set out	contained in
	in Appendix II	the Valuation
Assets of the Target Company	to this circular	Report	Valuation	Surplus	Remarks
	(RMB’million)	(RMB’million)	(RMB’million)
	(approximately)	(approximately)	(approximately)	(%)
Buildings and fixtures	379.20	426.42	47.22	12.46	The replacement value of the buildings
					increased compared to the time
					when the assets were constructed,
					due to inflation in construction
					materials and labour costs
Equipment	131.73	163.52	31.79	24.12	The economic useful life of the
					equipment considered for the
					appraisal of the equity interest in the
					Target Company was longer than
					the accounting depreciation life,
					resulting in a lower depreciation
					rate adopted in the Valuation Report
Intangible assets	0.93	10.93	10.00	1,075.27	The value of intangible assets such
					as patents etc. has been taken into
					account by the PRC Qualified
					Valuer, which has not been
					accounted for in the financial
					information of the Target Company
					set out in Appendix II to this
					circular
Land use rights	27.53	31.13	3.60	13.08	Due to the increase in market value of
					land

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LETTER FROM THE BOARD

The Illustrative Net Asset Value is set out for illustrative purpose only, for the sole purpose of setting out a comparison between the appraised value of the entirety of the equity interest in the Target Company (which was prepared on the assumption that the disposal of the Disposal Assets has been completed) and the Illustrative Net Asset Value (which was prepared on the assumption that the disposal of the Disposal Assets (including the Disposal Business of approximately RMB411.51 million) has been completed). The Illustrative Net Asset Value does not reflect the net asset value of the Target Company of approximately RMB927.96 million as at 28 February 2021 (the “ NAV ”) as stated in the financial information of the Target Company set out in Appendix II to this circular, which was prepared on the basis of excluding only the Disposal Business instead of excluding all of the Disposal Assets. The Illustrative Net Asset Value is an adjusted value reflecting the difference between the NAV computed on the basis of excluding the Disposal Business only and the net asset value of the Target Company computed on the basis of excluding the entirety of the Disposal Assets.

TITLE ISSUES WITH PROPERTIES OF THE TARGET COMPANY

Difference in valuation approach for buildings and structures with title issues

The valuation of the properties held by the Target Company as conducted by the PRC Qualified Valuer contained in the Valuation Report is approximately RMB457.55 million as at the Reference Date (i.e. 28 February 2021). Such valuation is different from the valuation of RMB442.90 million as at 30 June 2021 conducted by ValQuest Advisory (Hong Kong) Limited (the “ Property Valuer ”), a qualified independent professional valuer, as the Property Valuer has attributed no commercial value to four buildings and part of the structures (including east gate, simple structures in east gate and landscaping) with title defects (the “ Defective Properties ”) while the PRC Qualified Valuer included a valuation of the Defective Properties in the Valuation Report based on the asset-based approach.

The reason for the difference in the valuation approach between the Property Valuer and the PRC Qualified Valuer is that the Property Valuer prepared the property valuation report for the purpose of fulfilling the relevant requirements of the Listing Rules in which the definition of “Market Value” shall be strictly followed, and thus no commercial value was assigned to the Defective Properties as the Defective Properties could not be freely disposed of in the market due to the lack of title certificates as at the date of valuation (i.e. 30 June 2021). Such valuation approach adopted by the Property Valuer is in compliance with the Listing Rules and market conventions in Hong Kong. On the other hand, the PRC Qualified Valuer conducted its valuation on the Defective Properties in accordance with the relevant rules and regulations in the PRC, which are principally focusing on providing a reference price for the Acquisition. As the Defective Properties are used in the ordinary course of business of the Target Company, according to relevant PRC rules and regulations, properties with title defects should normally be attributed with value if the title defects do not affect the continuous utilization of such properties for their existing usage. As a result, the PRC Qualified Valuer’s valuation on the Defective Properties is made under the assumption that the Defective Properties have good titles so as to reflect their actual value for the determination of a fair Consideration.

However, for reference purpose, the Defective Properties were appraised by the Property Valuer at RMB14,600,000 as at the valuation date (i.e. 30 June 2021), which is similar to the valuation of the Defective Properties as conducted by the PRC Qualified Valuer at RMB14,639,100 as at the Reference Date (i.e. 28 February 2021).

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LETTER FROM THE BOARD

In view of the above, the Directors consider that despite there is a difference between the valuations conducted by the PRC Qualified Valuer and the Property Valuer due to their respective approach in respect of the Defective Properties, the assumptions and valuation methodologies adopted by the PRC Qualified Valuer are appropriate and the Consideration of RMB429.00 million determined based on the valuation conducted by the PRC Qualified Valuer is fair and reasonable and is in the interest of the Company and its Shareholders as a whole.

Implications of title issues

The Defective Properties comprise four buildings with a total gross floor area of 2,523.60 square meters and part of the structures (including east gate, rainwater harvesting tank, simple structures in east gate and landscaping). The said buildings are yet to be granted with proper title certificates, and part of these buildings and structures were built outside the boundary of the subject site.

The details of the Defective Properties, which were all constructed and built by the Target Company, are set out as follows:

No.	Type	Nature of property	Defect(s)
1.	Building	Rotary kiln raw material	Title certificates not obtained, partly located
		warehouse	outside the boundary of land parcel
2.	Building	36m×15m desulfurization plant	Title certificates not obtained, partly located
			outside the boundary of land parcel
3.	Building	9×24.8 fan workshop	Title certificates not obtained, completely
			located outside the boundary of land
			parcel
4.	Building	9×53.6 fan workshop	Title certificates not obtained
5.	Structure	Sewage treatment station	Partly located outside the boundary of land
			parcel
6.	Structure	Simple plant shed of the east gate	Wholly located outside the boundary of land
			parcel
7.	Structure	East gate of the plant zone	Wholly located outside the boundary of land
			parcel
8.	Structure	Ecological park project	Wholly located outside the boundary of land
			parcel
9.	Structure	Rainwater collection tank	Partly located outside the boundary of land
			parcel

Accordingly, as stated in the Valuation Report, the value of the Defective Properties is appraised as RMB14,639,100. The above appraised value represents approximately 2.26% and approximately 3.20%%, respectively, of the appraised value of the total assets of the Target Company (i.e. approximately RMB647.08 million) and of the appraised value of all properties of the Target Company (i.e. approximately RMB457.55 million) as extracted from the Valuation Report prepared by the PRC Qualified Valuer set out in Appendix V to this circular.

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LETTER FROM THE BOARD

For the part of Defective Properties built outside the boundary of the subject site, as confirmed by the Company’s PRC legal adviser, the Target Company has entered into land use agreements (the “ Land Use Agreements ”) with entitled entities in respect of the lands on which such part of the Defective Properties were built, pursuant to which, the underlying part of land parcels were leased to the Target Company for a term of approximately 20 years expiring in 2038.

As advised by the PRC legal adviser of the Company, in respect of buildings and fixtures constructed without obtaining relevant construction permits and approvals and hence without proper title certificates, according to relevant urban planning laws and regulations of the PRC, the buildings and fixtures may be subject to rectification demands to the extent possible with a monetary penalty, demolishment order, or confiscation of the buildings and fixtures and income derived therefrom with a monetary penalty. As at the Latest Practicable Date, the Company is not aware of any litigations, claims, regulatory actions or investigations in respect of the Defective Properties.

It was the view of the PRC legal adviser of the Company that despite the Land Use Agreements have been entered into, there is still risk associated with the use of the said buildings and structures under relevant PRC laws and regulations (including but not limited to a restoration of the land, confiscation of constructions erected on the land and monetary penalty). Despite there is no dispute between the entitled entities and users in respect of the use of the lands on which part of the Defective Properties were built beyond the boundary, the use of such part of the Defective Properties was not in compliance with the planned usage of the underlying land.

However, in view of the above, according to the confirmations issued by the Natural Resources Bureau of Yongxing County ( 永興縣自然資源局 ) dated 15 March 2021 and the Housing and City Rural Development Bureau of Yongxing County ( 永興縣住房和城鄉建設局 ) dated 28 March 2021 (the “ Confirmations ”), the Target Company has since 2018 to the date of such Confirmations been in compliance with the relevant requirements under laws, regulations and regulatory documents in respect of urban management and urban planning, no contravention of laws and regulations has been found, and the Target Company has not been penalised for any contravention of natural resources management or urban planning laws and regulations.

It was advised by the PRC legal adviser of the Company that the Target Company is ordinarily entitled to use the Defective Properties, but will be subject to restrictions on property transfer and registration of pledges. The Target Company is still entitled to lease the Defective Properties with title defects if the lessee so agrees. As at the Latest Practicable Date, it is the Group’s intention to continue to use the Defective Properties as ancillary operation facilities, the Group has no intention to and sees no need to, and thus is not expected to transfer the Defective Properties or to create any securities over them.

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LETTER FROM THE BOARD

In view of the title defects associated with the Defective Properties, upon the request of the Company, the Vendor has provided an undertaking in the Acquisition Agreement to: (i) procure that the Target Company complete relevant procedures in obtaining title certificates for the buildings erected on the lands held by it and bear relevant fees and taxes for the Target Company; (ii) ensure that the Target Company may continuously use the parts of land on which buildings and structures of the Target Company were built falling outside of the boundary of the subject site, and compensate the Target Company on a dollar-for-dollar basis for any sums (including rental payment etc.) demanded by the entitled entity of the parts of land falling outside of the boundary of the subject site as being payable by the Target Company before Completion; (iii) bear all such monetary penalties imposed by relevant supervising authorities on the Target Company arising from contraventions of the requirements of laws and regulations in respect of the Defective Properties without title certificate; and (iv) compensate the Target Company with an amount equivalent to the appraised value of the Defective Properties stated in the Valuation Report as at the Reference Date if the relevant Defective Properties are ordered to be demolished by the relevant supervising authorities.

In addition, it was agreed in the Acquisition Agreement that any loss arising from any contingent liability (i.e. liabilities of the Target Company arising on or before the date of Completion and not recorded in the statutory accounts of the Target Company and not confirmed by the parties, and the portion of liabilities exceeding the liabilities recorded in the statutory accounts of the Target Company) should be compensated by the Vendor or deducted from the Consideration by the Company.

As confirmed by the Target Company, the Defective Properties without title certificates are either not directly relating to or are merely of ancillary usage (principally for storage, ancillary production procedures and sewage treatment etc.) in the operations of the Target Company. The Target Company represented that there should be no material difficulty in re-planning and re-arranging such buildings and structures in the properties or on the lands held by the Target Company, should such buildings and structures be subject to demolishment or rectification demands.

According to the legal opinion issued by the Company’s PRC legal adviser, the Defective Properties without title certificate are not expected to cause any material adverse effect on the Target Company’s continuous operations, which is further mitigated by the above-mentioned undertakings and agreement of the Vendor in the Acquisition Agreement.

After taking into account (i) the fact that the appraised value of the Defective Properties without title certificates only constitute a relatively insignificant proportion of the appraised total assets and appraised value of all properties of the Target Company; (ii) the Confirmations obtained from the relevant authorities stating their views at the material time; (iii) the undertakings given by the Vendor under the Acquisition Agreement to compensate the Target Company in full for the loss, penalties or claims arising from the Defective Properties without title certificate; (iv) the irrelevance or ancillary usage of the Defective Properties without title certificate in the context of the operations of the Target Company and the Target Company’s confirmation that such buildings and structures may be re-planned or re-arranged on land and properties in which the Target Company has ownership; and (v) the PRC legal adviser’s opinion that there is no material adverse effect in respect of the above-mentioned title issues in the context of the continuous operations of the Target Company; the Company believes that the above-mentioned title issues would not have any material adverse effect on the continuing operations of the Target Company.

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LETTER FROM THE BOARD

INFORMATION ON THE TARGET COMPANY

The Target Company is a company established under the laws of the PRC with limited liability. As at the Latest Practicable Date, the Target Company is principally engaged in scientific research and development service within the environmental protection field, recycling, disposal and utilization of industrial solid waste and hazardous solid waste, production and sales of rare and precious metals, non-ferrous metals and ferrous metals.

The Target Company operates in the comprehensive utilization of waste resources industry, it is principally engaged in the recovery of rare metals such as silver, bismuth, lead, gold, and palladium from non-ferrous smelting slag. The main products of the Target Company currently are silver, bismuth, lead, gold, palladium and other rare and precious metals. The Target Company possesses a mature production craftsmanship in respect of recycling and reusing waste resources such as waste materials and residues containing non-ferrous metals and other materials; and is capable of comprehensively utilizing non-ferrous metals recycled from secondary resources in the non-ferrous metal recycling industry including zinc smelting, lead smelting, copper smelting, steel smelting enterprises and others. The Target Company was awarded the qualification of High-New Technology Enterprise ( 高新技術企業 ) in 2018, and was ranked 67th in the Top-100 private enterprises in Hunan Province ( 湖南省民營百強企業 ) in 2020.

FINANCIAL INFORMATION OF THE TARGET COMPANY

Set out below is the financial information of the Target Company for the three years ended 31 December 2020 and two months ended 28 February 2021 prepared in accordance with IFRS as extracted from Appendix II to this circular (assuming the disposal of the Disposal Business has been completed):

				For the
				two months
				ended
	For the	year ended 31 December		28 February
	2018	2019	2020	2021
	RMB’million	RMB’million	RMB’million	RMB’million
	(Audited)	(Audited)	(Audited)	(Audited)
Revenue	970.36	1,499.60	1,414.94	356.18
Net profit before taxation	75.78	30.42	52.05	6.74
Net profit after taxation	65.55	30.42	52.05	6.74

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LETTER FROM THE BOARD

As at the Reference Date (i.e. 28 February 2021) and based on the financial information of the Target Company prepared under IFRS as extracted from Appendix II to this circular, assuming the disposal of the Disposal Business has been completed, the audited NAV of the Target Company is approximately RMB927.96 million. As disclosed in the Announcement, the audited net asset value of the Target Company based on the financial information of the Target Company prepared in accordance with the accounting principles generally accepted in the PRC (“ PRC GAAP ”) is approximately RMB516.45 million as at the Reference Date (i.e. 28 February 2021) (the “ PRC GAAP NAV ”). The PRC GAAP NAV was prepared for the purpose of making relevant filings to the Shenzhen Stock Exchange, and was therefore prepared on the basis of excluding the entirety of the Disposal Assets, which was in accordance with the requirements of PRC GAAP. The NAV of the Target Company of approximately RMB927.96 million as stated in the financial information of the Target Company set out in Appendix II to this circular is different from the PRC GAAP NAV of approximately RMB516.45 million. The NAV was prepared on the basis of excluding the Disposal Business (which forms part of the Disposal Assets) only, while the PRC GAAP NAV was prepared on the basis of excluding the entirety of the Disposal Assets (which included the amount of the Disposal Business of approximately RMB411.51 million as disclosed in Note 34 to the financial information in Appendix II to this circular). The NAV was prepared in accordance with the “Hong Kong Standard on Investment Circular Reporting Engagements 200 – Accountants’ Reports on Historical Financial Information in Investment Circulars”, which states that historical financial information should record the events which actually occurred during the reporting period and it is inappropriate to make notional adjustments to balances (i.e. adjustment reflecting the expected disposal of the portion of Disposal Assets other than the Disposal Business) in order to make the historical financial information more consistent with the expected structure of the Target Company after the completion of the disposal of the Disposal Assets upon Completion. For further details of the basis of preparation of financial information, please refer to Note 1 of the financial information of the Target Company set out in Appendix II to this circular.

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LETTER FROM THE BOARD

THE STRUCTURE OF THE TARGET COMPANY BEFORE AND AFTER THE ACQUISITION

Set out below is the structure of the Target Company before Completion:

==> picture [108 x 148] intentionally omitted <==

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

Vendor
100%
Target Company
Disposal Assets (Note)
----- End of picture text -----

Set out below is the structure of the Target Company after Completion (excluding the Disposal Assets):

==> picture [339 x 123] intentionally omitted <==

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

Vendor The Company
30% 70%
Disposal Assets (Note) Target Company
----- End of picture text -----

Note: Pursuant to the Acquisition Agreement, the Vendor has undertaken to ensure that the Target Company disposes of the Disposal Assets to the Vendor or its designed nominee(s) before Completion and within 50 days after the date of the Acquisition Agreement at the Vendor’s costs. Please refer to the sub-section headed “The Acquisition Agreement – Disposal of the Disposal Assets” of this circular for further details.

• For identification purposes only

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LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Board believes that the Acquisition will bring commercial benefits to the Group for the following reasons:

1. Consistent with the national environmental protection strategy, optimise business layout and perfect the chain of operations

At present, the efficiency and level of comprehensive utilization of resources in the PRC still need improvement, and the year-on-year increase in the amount of waste has also led to increasing pressure on comprehensive utilization of resources. During the “14th Five-Year Plan” period, the construction of “waste-free cities” and the promotion of the strategy of “carbon peak and carbon neutrality” ( 碳達 峰、碳中和 ) will be accelerated and furthered, and resource-based business will have larger room for development. The Company’s current recycling business is concentrated on copper-containing waste and tin-containing waste. The Acquisition is conducive to the expedited entry into the field of rare and precious metal recycling, may facilitate optimization of the layout of the recycling segment, improvement of the solid waste and hazardous waste recycling chain of operations, acceleration of the Company’s business transformation and upgrade, actively responds to future changes in the competition landscape in the hazardous waste market, and is in line with the development trend in the industry.

2. Giving full play to business synergy and achieving complementarity of strengths

The business of the Target Company includes nine (9) categories and 28 subcategories of hazardous waste, and it possesses a mature production craftsmanship in respect of recycling and reusing waste resources such as waste materials and residues containing non-ferrous metals and other materials. The rare and precious metal recycling technique, facilities and technology of the Target Company can produce synergistic effects with the Company on the treatment of hazardous waste. It can also further integrate the resources in the Guangdong area and give full play to the Company’s market strength in the solid waste area, ensuring the procurement of raw materials and business expansion for the comprehensive utilization of resources business, and realise a complementary development.

3. Expanding the business scale, leading to a win-win situation

The industry in which the Target Company engages has the characteristics of high production value. Based on the financial statements of the Target Company in the past two years and after considering the industry standard, it is considered that the Acquisition can effectively expand the business scale of the Company, and at the same time, accelerate the business expansion of the Target Company by making use of the listing platform, enlarge operation scale and further enhance the Company’s overall competitiveness in facilitation of the Company’s achievement of its goal of “strengthening, enhancing and expanding”.

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LETTER FROM THE BOARD

Upon Completion, the equity interest in the Target Company will be held as to 70% by the Company and 30% by the Vendor. The percentage of equity interest in the Target Company to be acquired by the Company and retained by the Vendor in respect of the Acquisition is the result of the arm’s length negotiations between the Company and the Vendor. The Company considers such arrangement to be beneficial to and in the interest of the Group for the following reasons: (i) such arrangement would align the Target Company’s interest with that of the Vendor, hence enable the Target Company to leverage the rich experience of the Vendor and its controller(s) in the integrated re-use and recycling of rare and precious metal industry. This is expected to procure a synergistic effect and mutual cooperation and support amongst the aspects of strategic planning, customers resources, suppliers resources, business model development and operation and management, and enhance the overall competitiveness of the Target Company and the Enlarged Group; (ii) the retaining of partial interest in the Target Company by the Vendor is conducive to the gradual and stable handover of the control in the Target Company, which would in turn reduce the risks associated with the Acquisition and the integration of the Target Company’s business in the Group and safeguard the stable and sustainable development of the Target Company; and (iii) the Vendor is confident with the continued positive development of the Target Company and is supportive of the future development of the Target Company, therefore, it intends to retain a minority interest in the Target Company.

In view of the above, the Directors (including the independent non-executive Directors) are of the view that the Acquisition Agreement and the transactions contemplated thereunder are on normal commercial terms (which were arrived at after arm’s length negotiations) and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

INFORMATION ON THE PARTIES

Information on the Company and the Group

The Company is a joint stock limited company incorporated in the PRC. The Group is primarily engaged in (i) disposal and treatment of waste; (ii) production and sales of recycled products and renewable energy; (iii) construction and provision of environmental systems and services; (iv) renewable energy utilization; and (v) trading of chemical products and others.

Information on the Vendor

The Vendor is a company established in the PRC with limited liability and its ultimate beneficial owner and de facto controller is Mr. Zhao Meiguang ( 趙美光 ), who is a third party independent of and not connected with the Company and its connected persons and who has no business relationships with the Company or its connected persons as at the Latest Practicable Date, save for the Acquisition. The Vendor is principally engaged in the businesses of development, promotion and transfer of technology, technology advisory and services, corporate management, economic and trading consultation and property management.

FINANCIAL EFFECT OF THE ACQUISITION

Upon Completion, the Group will be interested in 70% of the equity interest in the Target Company and the Target Company will become a subsidiary of the Company. The financial results, assets and liabilities of the Target Company will be consolidated into the financial statements of the Group.

– 25 –

LETTER FROM THE BOARD

Earnings

Based on the financial information of the Target Company for the three years ended 31 December 2020 as set out in Appendix II to this circular (assuming the disposal of the silver electrolysis workshop business), revenue of the Target Company was approximately RMB970.36 million, RMB1,499.60 million and RMB1,414.94 million, respectively. The net profit after tax of the Target Company for the three years ended 31 December 2020 was approximately RMB65.55 million, RMB30.42 million and RMB52.05 million, respectively. Based on the above, the consolidation of the Target Company into the Group is expected to improve and continue to positively affect the revenue and profitability of the Group.

Assets and liabilities

As explained in the unaudited pro forma financial information contained in Appendix III to this circular, assuming the Acquisition has been completed on 31 December 2020, the total asset of the Enlarged Group on 31 December 2020 will increase from approximately RMB10,424.15 million to approximately RMB11,070.78 million on a pro forma basis, and the total liabilities of the Enlarged Group as at 31 December 2020 will increase from approximately RMB5,050.51 million to approximately RMB5,527.48 million on a pro forma basis. The net asset of the Enlarged Group will increase from approximately RMB5,373.64 million to approximately RMB5,543.30 million on a pro forma basis.

Upon Completion, it is expected that the revenue and profit of the Group will increase. Given that the business prospect of the Target Company has synergy with the business of the Company, and it has extensive experience in the integrated reuse and recycling of rare and precious metal, it is expected that the Acquisition will make a positive contribution to the financial performance and trading prospects of the Enlarged Group in the future.

Further details of the financial effect of the Acquisition together with the bases and assumptions taken into account in preparing the unaudited pro forma financial information of the Enlarged Group are set out, for illustration only, in Appendix III to this circular.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) in respect of the Acquisition exceed 25% but all are less than 100%, the Acquisition constitutes a major transaction of the Company and is subject to the reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

EGM

The EGM will be convened and held at 11th Floor, Dongjiang Environmental Building, No. 9 Langshan Road, Nanshan District, Shenzhen, the PRC on Wednesday, 8 September 2021 at 3:00 p.m for the Shareholders to consider and, if thought fit, approve the Acquisition Agreement and the Acquisition contemplated thereunder.

– 26 –

LETTER FROM THE BOARD

The form of proxy in connection with the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and deposit the same at the office of the Company’s H share registrar, Tricor Tengis Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong (for holders of H Shares) as soon as possible but in any event not less than 24 hours before the time appointed for the holding of the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

To facilitate the Company in making arrangements for the EGM, you are invited to complete the enclosed reply slip in accordance with the instructions printed thereon and return it to the Company’s H share registrar, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong (for holders of H Shares) as soon as possible, but in any event, before 3:00 p.m. on Tuesday, 7 September 2021. However, the completion and return of the reply slip or not will not affect your right to attend and/ or vote at the EGM.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, as at the Latest Practicable Date, no Shareholder has a material interest in the Acquisition, and thus no Shareholder is required to abstain from voting at the EGM.

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of shareholders at a general meeting must be taken by poll. Therefore, all resolutions proposed at the EGM shall be voted by poll in accordance with the Listing Rules and the articles of association of the Company. The poll results will be announced in accordance with Rule 13.39(5) of the Listing Rules after the conclusion of the EGM.

CLOSURE OF REGISTER OF MEMBERS OF H SHARES

The register of members of H Shares will be closed from Friday, 3 September 2021 to Wednesday, 8 September 2021 (both days inclusive), during which no transfer of H Shares will be registered, for the identification of Shareholders qualified to attend and vote at the EGM. In order to be entitled to attend and vote at the EGM, share transfer documents accompanied by relevant H Share certificates should be lodged with the Company’s H share registrar, Tricor Tengis Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as practicable and in any event not later than 4:30 p.m. on Thursday, 2 September 2021. Shareholders whose names appear on the register of members of the H Shares at 4:30 p.m. on Thursday, 2 September 2021 are entitled to attend and vote at the EGM.

RECOMMENDATION

The Directors (including the independent non-executive Directors) consider that the Acquisition is on normal commercial terms, and the terms of the Acquisition Agreement and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the independent non-executive Directors) recommend the Shareholders to vote in favour of the relevant resolution(s) to be proposed at the EGM to approve the Acquisition Agreement and the transactions contemplated thereunder.

– 27 –

LETTER FROM THE BOARD

FURTHER INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

Completion is conditional upon the satisfaction of, among others, the conditions to the Taking Effect of Acquisition Agreement, including the approval of the Acquisition Agreement and the transactions contemplated thereunder by the Shareholders at the EGM. Accordingly, the Acquisition may or may not proceed.

Shareholders and potential investors are therefore advised to exercise caution when dealing in the securities of the Company, and are recommended to consult their professional advisers if they are in any doubt about their position and as to actions that they should take.

Yours Faithfully,

For and on behalf of the board of directors of Dongjiang Environmental Company Limited* Tan Kan

Chairman

– 28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

Financial information of the Group for the years ended 31 December 2018, 2019, and 2020 is disclosed in the annual reports of the Company for the years ended 31 December 2018, 2019 and 2020, respectively, which are available on the website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (www.dongjiang.com.cn/).

Annual report for the year ended 31 December 2018 (pages 47 to 280): https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0425/ltn201904252149.pdf

Annual report for the year ended 31 December 2019 (pages 53 to 300): https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0514/2020051400555.pdf

Annual report for the year ended 31 December 2020 (pages 60 to 192): https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0428/2021042800061.pdf

2. INDEBTEDNESS

As at the close of business on 30 June 2021, being the latest practicable date prior to the printing of this circular for the purpose of this indebtedness statement, the Enlarged Group had the following indebtedness:

The Group

Indebtedness

Secured and unguaranteed bank loans Secured and guaranteed bank loans Unsecured and unguaranteed bank loans Unsecured and guaranteed bank loans Secured and unguaranteed loans from a related company Listed bonds, unsecured and unguaranteed Lease liabilities, secured and unguaranteed Amount due to controlling shareholder, unsecured and unguaranteed Provisions	RMB’000 365,749 591,511 2,097,823 109,733 72,930 602,851 7,465 326,640 27,734
	4,202,436

– I-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Borrowings

The Group had secured bank borrowings of approximately RMB957,260,000 from banks with maturity periods that fell within the range of 1 to 10 years, bearing an interest rate at a fixed rate of 3.00% to 4.75% and interest at a floating rate of loan prime rate increase/decrease by 0.10% to 0.37%. The secured bank loans are pledged by properties, plant and equipment of approximately RMB491,655,000, land use rights of approximately RMB324,746,000, construction in progress of approximately RMB118,472,000 and trade receivables of approximately RMB6,221,000. Certain secured bank loans are also covered by corporate guarantee arrangements amongst the Group’s entities.

The Group had unsecured bank borrowings of approximately RMB2,207,556,000 from banks with maturity periods that fell within the range of 1 to 5 years, bearing an interest rate at a fixed rate of 3.5% to 4.7% and interest at a floating rate of loan prime rate increase/decrease by 0.04% to 0.25%. Certain unsecured bank loans are covered by corporate guarantee arrangements amongst the Group’s entities.

The Group had secured other borrowing of approximately RMB72,930,000 from a related company, which is pledged by properties, plant and equipment of approximately RMB144,515,000, bearing interest at a floating rate by loan prime rate decrease by 0.3% and repayable up to 28 June 2026.

Bonds

As at 11 May 2020, the Group had issued the first phase of medium-term notes with an aggregate principal of RMB600,000,000 with an annual interest rate of 3.2% and maturity on 12 May 2023, subject to payment of interest on an annual basis.

Bank facilities

As at 30 June 2021, the Group had obtained bank facilities in an aggregate amount of approximately RMB11,513,880,000, of which approximately RMB5,297,880,000 were utilised.

Lease Liabilities

The Group leased certain premises for office and production purposes. On 30 June 2021, the Group have outstanding payment for these lease payables which are approximately RMB7,465,000.

Amount due to the controlling shareholder

The Group had an amount due to the controlling shareholder of approximately RMB326,640,000 are unsecured, bear the loan prime interest rate by reference of People’s Bank of China and repayable on 20 June 2022.

– I-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Provisions

The Group had provisions approximately RMB27,734,000 in respect of a legal case of which the Group was the defendant as at 30 June 2021.

Capital commitment

The Group had approximately RMB454,187,000 capital commitments contracted related to purchasing of property, plant and equipment and construction in progress as at 30 June 2021.

Contingent liabilities

On 9 December 2019, Jiangsu Guangxing Group Co., Ltd. sued the court on the ground that Dongheng Environmental, a group entity of the Group, failed to pay the project cost and investment return of RMB48,300,000 as stipulated in the agreement and made a legal claim to Dongheng Environmental for the project costs, the investment return and relevant losses arising from the suspension and delay. Both parties disagreed on the above-mentioned claim amounts and they are engaged in a legal proceeding. The legal proceeding was still in process. Due to the complexity of the case, in the opinion of the directors, the possible outcome for the potential compensation was unable to be reliably estimated after careful consideration of the legal advice dated 28 May 2020 and there was no further development up to the date of authorisation of these consolidated financial statements.

Other than as disclosed above, the Group had no other significant contingent matters as of 30 June 2021.

The Target Company

Indebtedness

Secured and guaranteed bank loans Lease liabilities, secured and unguaranteed	RMB’000 20,024 69
	20,093

Borrowings

As at 30 June 2021, the Target Company had a bank loan of approximately RMB20,024,000 from Shanghai Pudong Development Bank to be due in March 2022, bearing a floating rate of loan prime rate increase/decrease by 0.5% which is pledged by the real estate in the Bitang Factory Zone of the Target Company and guaranteed by Beijing Hanfeng United Technology Co., Limited.

– I-3 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Capital commitment

The Target Company had no capital commitments as at 30 June 2021.

Contingent liabilities

As at the close of business on 30 June 2021, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Target Company had no contingent liabilities.

Save as disclosed above and otherwise mentioned in this circular, none of the members of the Enlarged Group had, at the close of business on 30 June 2021, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, any outstanding mortgages, charges, debenture, loan capital issued and outstanding or agreed to be issued, bank loan and overdraft or other similar indebtedness, finance leases or hire purchase commitments, liabilities under acceptances or acceptance credits or any guarantee or other material contingent liabilities.

3. WORKING CAPITAL

The Directors, after due and careful enquiry, are of the opinion that, after taking into account the Acquisition Agreement, the Acquisition contemplated thereunder and the present financial resources available to the Enlarged Group, including internally generated funds, and other available banking and other facilities, the Enlarged Group will have sufficient working capital to meet its present requirements for at least 12 months from the date of this circular.

4. MATERIAL ADVERSE CHANGE

As disclosed in the announcement of the Company dated 29 March 2021 (the “ Provision for Impairment Announcement ”), according to the relevant requirements of the Accounting Standard for Business Enterprises and in order to truly reflect the financial position, asset value and operating results of the Company, the Company made provision for asset impairment in an aggregate amount of RMB80,452,600 in respect of the assets recorded in the consolidated financial statements for the year of 2020. Accordingly, the Company’s net profit attributable to shareholders of listed company in 2020 reduced by RMB80,452,600 and the owners’ equity attributable to shareholders of the listed company in 2020 of the Company declined by RMB80,452,600.

Save as those disclosed in the Provision for Impairment Announcement and the annual report of the Company published on 28 April 2021, the Directors confirm that there had been no material adverse change in the financial or trading position or outlook of the Group since 31 December 2020 (the date to which the latest audited consolidated financial statements of the Group were made up) and up to and including the Latest Practicable Date.

– I-4 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

The Group is principally engaged in the resource utilisation and harmless treatment and disposal of industrial and municipal waste, and the collaborative development of sewage treatment, environmental engineering, environmental testing businesses. As of March 2021, the Group holds qualifications for the operation of 44 hazardous wastes, qualifications for hazardous waste treatment and disposal with a capacity of over 2 million tonnes per year, and the qualification structure continues to be optimised. For the year ended 31 December 2020, the profit for the year attributable to the equity holders of the Company was approximately RMB303.16 million.

The Target Company is principally engaged in scientific and technological research and development services in the field of environmental protection, recycling, disposal and utilisation of industrial solid waste and hazardous solid waste, and production and sales of rare and precious metals, non-ferrous metals, and ferrous metals, with an annual disposal design capacity of 200,000 tonnes of rare and precious metals. For the year ended 31 December 2020, (assuming that the disposal of Disposal Assets has been completed), net profit after tax was approximately RMB52.05 million.

The Directors believe that the Acquisition will create synergy and achieve complementary advantages with the Group, and further enhance the competitiveness of the Group’s business, while facilitating rapid entry into the rare and precious metal recycling business, optimising the layout of the resource sector, and actively responding to changes in the future market competition landscape. The Company believes that the Enlarged Group will be able to strengthen its position in the industry and achieve better performance in the future.

Looking forward, the Acquisition will help the Group develop into a comprehensive one-stop environmental protection service provider to gain a larger market share. The Acquisition is a good opportunity for the Group to further expand its market share and strengthen its position in the market. As an enterprise focusing on the hazardous waste disposal industry, the Group, while adhering to its principal business, will strive to explore the development of diversified businesses to inject new impetus into the Group and increase its long-term growth potential and shareholder value, thus maximizing interests and returns of shareholders in the coming years.

– I-5 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The following is the text of a report received from KTC Partners CPA Limited, the reporting accountants of the Company, for the purpose of incorporation into this circular.

==> picture [316 x 92] intentionally omitted <==

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF DONGJIANG ENVIRONMENTAL COMPANY LIMITED

Introduction

We report on the historical financial information of Chenzhou Xiongfeng Environment Technology Company Limited (the “ Target Company ”, English translation of 郴州雄風環保科技有限公司 for identification purpose) set out on pages II-4 to II-64, which comprises the statements of financial position as at 31 December 2018, 2019 and 2020 and 28 February 2021, the statements of profit or loss and other comprehensive income, the statements of changes in equity and the statements of cash flows for each of the years ended 31 December 2018, 2019 and 2020, and the two months ended 28 February 2021 (together the “ Relevant Periods ”) and a summary of significant accounting policies and other explanatory information (together, the “ Historical Financial Information ”). The Historical Financial Information set out on pages II-4 to II-64 forms an integral part of this report, which has been prepared for inclusion in the circular of Dongjiang Environmental Company Limited (English translation of 東江環保股份有限 公司 for identification purpose) (the “ Company ”) dated 20 August 2021 (the “ Circular ”) in connection with the proposed acquisition (the “ Acquisition ”) by the Company of 70% equity interest in the Target Company.

Directors’ responsibilities for the historical financial information

The directors of the Target Company are responsible for the preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of preparation set out in Note 1 to the Historical Financial Information, and for such internal control as the directors of the Target Company determines is necessary to enable the preparation of the Historical Financial Information that is free from material misstatement, whether due to fraud or error.

Reporting accountants’ responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200 “Accountants’ Reports on Historical Financial Information in Investment Circulars” issued by the HKICPA. This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.

– II-1 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountants’ judgment, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity’s preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of preparation set out in Note 1 to the Historical Financial Information in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors of the Target Company, as well as evaluating the overall presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the Historical Financial Information gives, for the purposes of the accountants’ report, a true and fair view of the financial position of the Target Company as at 31 December 2018, 31 December 2019, 31 December 2020 and 28 February 2021 and of its financial performance and its cash flows for each of the Relevant Periods in accordance with the basis of preparation set out in Note 1 to the Historical Financial Information.

Review of Stub Period Comparative Financial Information

We have reviewed the stub period comparative financial information of the Target Company which comprises the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the two months ended 29 February 2020 and other explanatory information (the “ Stub Period Comparative Financial Information ”). The directors of the Target Company are responsible for the preparation of the Stub Period Comparative Financial Information in accordance with the basis of preparation set out in Note 1 to the Historical Financial Information. Our responsibility is to express a conclusion on the Stub Period Comparative Financial Information based on our review. We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the Stub Period Comparative Financial Information, for the purposes of the accountants’ report, is not prepared, in all material respects, in accordance with the basis of preparation set out in Note 1 to the Historical Financial Information.

– II-2 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Report on Matters Under the Rules Governing the Listing of Securities on the Main Board of the Stock Exchange of Hong Kong Limited

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page II-4 have been made.

Dividends

We refer to Note 11 to the Historical Financial Information which states that dividends have been declared and paid by the Target Company in respect of the Relevant Periods.

KTC Partners CPA Limited

Certified Public Accountants Hong Kong

Chow Yiu Wah, Joseph

Practising certificate number: P04686

20 August 2021

– II-3 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

HISTORICAL FINANCIAL INFORMATION OF THE TARGET COMPANY

Preparation of the Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part of this accountants’ report.

The financial statements of the Target Company for the Relevant Periods, on which the Historical Financial Information is based, have been prepared in accordance with accounting policies which conform with International Financial Reporting Standard (“ IFRS ”) issued by the International Accounting Standards Board (the “ IASB ”) (the “ Underlying Financial Statements ”).

The Historical Financial Information is presented in Renminbi (“ RMB ”) and all values are rounded to the nearest thousand (RMB’000) except when otherwise indicated.

– II-4 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Notes Revenue 5 Cost of sales Gross profit Other income 6 Selling expenses Administrative expenses Net provision for loss allowance on trade and other receivables Finance costs 7 Profit before taxation 8 Income tax expenses 9 Profit for the year/period Other comprehensive income Items that will not be reclassified to profit or loss Revaluation gains on financial assets at fair value through other comprehensive income Other comprehensive income for the year/period, net of tax Total comprehensive income for the year/period	Year ended 31 December 2018 2019 2020 RMB’000 RMB’000 RMB’000 970,359 1,499,604 1,414,942 (775,160) (1,300,176) (1,246,999) 195,199 199,428 167,943 43,968 14,599 56,688 (1,633) (362) (451) (108,241) (142,061) (148,620) 5,922 (3,450) 5,565 (59,434) (37,739) (29,072) 75,781 30,415 52,053 (10,235) – – 65,546 30,415 52,053 442 177 126 442 177 126 65,988 30,592 52,179	(unaudited) Two months ended 29 February 2020 RMB’000 113,820 (105,576) 8,244 4,170 (133) (7,482) 4 (2,168) 2,635 – 2,635 – – 2,635	Two months ended 28 February 2021 RMB’000 356,182 (320,080)
			36,102 7,839 (50) (36,749) 787 (1,189)
			6,740 –
			6,740 19
			19
			6,759

– II-5 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

STATEMENTS OF FINANCIAL POSITION

					As at
			As at 31 December		28 February
	Notes	2018	2019	2020	2021
		RMB’000	RMB’000	RMB’000	RMB’000
Non-current assets
Property, plant and equipment
(“PPE”)	13	555,968	597,427	556,059	510,925
Right-of-use assets	14	–	29,547	28,875	27,585
Prepaid lease payments	16	29,502	–	–	–
Intangible assets	15	1,251	1,105	959	935
Financial assets at fair value
through other comprehensive
income (“FVOCI”)	17	3,921	4,098	4,224	4,243
Prepayment, deposits and other
receivables	21	2,387	2,662	2,969	–
Other non-current assets	18	5,803	3,167	–	–
		598,832	638,006	593,086	543,688
Current assets
Inventories	19	1,465,144	1,443,911	693,189	6,931
Trade and bill receivables	20	16,764	99,866	2,388	–
Prepayment, deposits and other
receivables	21	48,425	91,677	69,154	1,436
Amount due from holding company	22	–	–	99,535	–
Prepaid lease payments	16	653	–	–	–
Prepaid income tax		2,563	2,563	–	–
Cash and cash equivalents	23	10,393	19,014	10,829	3,100
		1,543,942	1,657,031	875,095	11,467
Assets held for distribution to owner	34	–	–	–	710,749
		1,543,942	1,657,031	875,095	722,216

– II-6 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

						As at
			As	at 31 December		28 February
	Notes	2018		2019	2020	2021
		RMB’000		RMB’000	RMB’000	RMB’000
Current liabilities
Trade and bill payables	24	(38,766)		(22,821)	(14,891)	(2,822)
Contract liabilities	25	(16,449)		(11,062)	(33,735)	–
Lease liabilities	14	–		(13)	(22)	(22)
Current portion of interest-bearing
borrowings	26	(170,726)		(429,729)	(204,850)	(20,019)
Derivatives measured at fair value
through profit or loss	27	(204,912)		–	–	–
Amount due to holding company	22	(433,940)		(616,022)	–	–
Income tax payables		–		–	–	–
Other payables	28	(55,919)		(39,496)	(43,715)	(11,297)
		(920,712)		(1,119,143)	(297,213)	(34,160)
Liabilities held for distribution
to owner	34	–		–	–	(299,239)
		(920,712)		(1,119,143)	(297,213)	(333,399)
NET CURRENT ASSETS		623,230		537,888	577,882	388,817
TOTAL ASSETS LESS
CURRENT LIABILITIES		1,222,062		1,175,894	1,170,968	932,505
Non-current liabilities
Lease liabilities	14	–		(52)	(46)	(46)
Interest-bearing borrowings	26	(135,890)		(56,246)	–	–
Deferred income	29	(3,000)		(6,500)	(4,500)	(4,500)
		(138,890)		(62,798)	(4,546)	(4,546)
NET ASSETS		1,083,172		1,113,096	1,166,422	927,959
Capital and reserves
Paid-up capital	30	822,890		822,890	822,890	822,890
Reserve	31	260,282		290,206	343,532	105,069
TOTAL EQUITY		1,083,172		1,113,096	1,166,422	927,959

– II-7 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

STATEMENTS OF CHANGES IN EQUITY

As at 1 January 2018 Capital injection Withdrawn to other reserve Usage of other reserve Dividend (note 11) Fair value changes of FVOCI Total comprehensive income for the year As at 31 December 2018 Withdrawn to other reserve Usage of other reserve Fair value changes of FVOCI Total comprehensive income for the year As at 31 December 2019 Withdrawn to other reserve Usage of other reserve Fair value changes of FVOCI Total comprehensive income for the year As at 31 December 2020 Withdrawn to other reserve Usage of other reserve Dividend (note 11) Fair value changes of FVOCI Total comprehensive income for the period As at 28 February 2021	Paid-up capital RMB’000 322,890 500,000 – – – – – 822,890 – – – – 822,890 – – – – 822,890 – – – – – 822,890		Reserve	Reserve	Total reserves RMB’000 801,407 – 6,551 (23,664) (590,000) 442 65,546 260,282 7,694 (8,362) 177 30,415 290,206 7,521 (6,374) 126 52,053 343,532 3,497 (2,756) (245,963) 19 6,740 105,069	Total equity RMB’000 1,124,297 500,000 6,551 (23,664) (590,000) 442 65,546
		Capital reserve RMB’000 6,684 – – – – – – 6,684 – – – – 6,684 – – – – 6,684 – – – – – 6,684	Statutory reserve Other comprehensive income reserve RMB’000 RMB’000 77,247 1,479 – – – – – – – – – 442 6,554 – 83,801 1,921 – – – – – 177 3,041 – 86,842 2,098 – – – – – 126 5,205 – 92,047 2,224 – – – – – – – 19 682 – 92,729 2,243	Other reserve Accumulated profits RMB’000 RMB’000 19,306 696,691 – – 6,551 – (23,664) – – (590,000) – – – 58,992 2,193 165,683 7,694 – (8,362) – – – – 27,374 1,525 193,057 7,521 – (6,374) – – – – 46,848 2,672 239,905 3,497 – (2,756) – – (245,963) – – – 6,058 3,413 –
						1,083,172 7,694 (8,362) 177 30,415
						1,113,096 7,521 (6,374) 126 52,053
						1,166,422 3,497 (2,756) (245,963) 19 6,740
						927,959

– II-8 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Reserve

				Other
	Paid-up	Capital	Statutory	comprehensive	Other	Accumulated	Total	Total
	capital	reserve	reserve	income reserve	reserve	profits	reserves	equity
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
As at 31 December 2019	822,890	6,684	86,842	2,098	1,525	193,057	290,206	1,113,096
Withdrawn to other reserve
(unaudited)	–	–	–	–	1,339	–	1,339	1,339
Usage of other reserve
(unaudited)	–	–	–	–	(1,856)	–	(1,856)	(1,856)
Total comprehensive income
for the period (unaudited)	–	–	264	–	–	2,371	2,635	2,635
As at 29 February 2020
(unaudited)	822,890	6,684	87,106	2,098	1,008	195,428	292,324	1,115,214

– II-9 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

STATEMENTS OF CASH FLOWS

Notes Operating activities Cash generated from/(used in) operations 32(a) Income tax (paid)/refunded Net cash (used in)/generated from operating activities Investing activities Proceed from disposal of property, plant and equipment Proceed/(Payment) from derivatives Purchase of property, plant and equipment Payment for acquiring land use right Revaluation gain of financial asset at FVOCI and transfer from AFS Net cash (used in)/generated from investing activities Financing activities Bank and other loans raised Repayment of bank and other loans Payment for bond Interest paid Dividend paid Capital injection Proceeds from/(repayment to) holding company

(unaudited) Two months ended Two months ended Year ended 31 December 29 February 2020 28 February 2021 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 107,723 (22,152) 1,089,865 (79,519) 292,900 (9,591) – 2,563 2,563 – 98,132 (22,152) 1,092,428 (76,956) 292,900 3,719 1,262 272 – 3,482 10,126 (205,553) – – – (27,423) (88,642) (70,133) (785) – (2,708) – – – – 386 – – – – (15,900) (292,933) (69,861) (785) 3,482 236,376 379,050 158,028 38,183 – (125,122) (220,733) (456,688) (46,339) (184,831) (99,013) – – – – (19,867) (16,694) (11,534) (2,758) (1,189) (590,000) – – – – 500,000 – – – – (8,356) 182,082 (715,557) 74,699 (118,091)

– II-10 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

					(unaudited)
					Two months	Two months
					ended	ended
		Year	ended 31 December		29 February	28 February
		2018	2019	2020	2020	2021
	Notes	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Net cash (used in)/generated from
financing activities		(105,982)	323,705	(1,025,751)	63,785	(304,111)
Net (decrease)/increase in cash and
cash equivalents		(23,750)	8,620	(3,184)	(13,956)	(7,729)
Cash and cash equivalents at the
beginning of the year/period		29,143	5,393	14,013	14,013	10,829
Cash and cash equivalents at the end of
the reporting period, represented by
cash at banks	23	5,393	14,013	10,829	57	3,100

– II-11 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1. GENERAL INFORMATION

Background and description of the business

The Target Company was established in the People’s Republic of China (the “ PRC ”) on 30 July 2001 with limited liability. Its immediate holding company is Beijing Hanfeng United Technology Co., Limited (English translation of 北京 瀚豐聯合科技有限公司 for identification purpose) (“ Hanfeng United ”), a company established in the PRC. Its ultimate controlling shareholder (the “ Controlling shareholder ”) is Mr. Zhao Meiguang (“ Mr. Zhao ”). The address of its registered office is National Circular Economy Demonstration Park, Economic Development Zone, Yongxing County, Chenzhou City, Human Province.

The Target Company is principally engaged in scientific research and development service within the environmental protection field, recycling, disposal and utilization of industrial solid waste and hazardous solid waste, production and sales of rare and precious metals, non-ferrous metals and ferrous metals.

The Target Company operates in the comprehensive utilization of waste resources industry, it is principally engaged in the recovery of rare metals such as silver, bismuth, lead, gold, and palladium from non-ferrous smelting slag. The main products of the Target Company currently are silver, bismuth, lead, gold, palladium and other rare and precious metals. The Target Company possesses a mature production craftsmanship in respect of recycling and reusing waste resources such as waste materials and residues containing non-ferrous metals and other materials; and is capable of comprehensively utilizing non-ferrous metals recycled from secondary resources in the non-ferrous metal recycling industry including zinc smelting, lead smelting, copper smelting, steel smelting enterprises and others. The Target Company was awarded the qualification of High-New Technology Enterprise (English translation of 高新技術企業 for identification purpose) in 2018, and was ranked 67th in the Top-100 private enterprises in Hunan Province (English translation of 湖南省民營百強企業 for identification purpose) in 2020. The Target Company maintains strong relations with its major customers and suppliers over these three years.

Basis of preparation

The Historical Financial Information has been prepared on a “carve-out” basis from management accounts of the Target Company using the historical results from operations, assets, liabilities, and cash flows attributable to the Target Company.

Pursuant to the acquisition agreement dated 15 July 2021 entered into between the Company and Beijing Hanfeng United Technology Co., Limited (English translation of 北京瀚豐聯合科技有限公司 for identification purpose) (“ Hanfeng United, or the Vendor ”) in relation to the proposed acquisition of 70% equity interest in the Target Company (the “ Acquisition Agreement ”), the Vendor has undertaken to dispose of the silver electrolysis workshop business (the “ Disposal Business ”) and its related and other assets before completion of the Acquisition. As the Historical Financial Information aims to reflect only those relevant to the Target Company’s business during the Relevant Periods, the financial position and operating results directly attributable to the Disposal Business were excluded from the Historical Financial Information. For the purpose of this report, the Target Company had segregated relevant financial information of the Disposal Business, to the extent possible, from the historical financial information of the Target Company for the preparation of the Historical Financial Information to be included in this report. As a result, the movements and balances of net assets value attributable to, and the cash flows of the Disposal Business during each reporting period were reflected in the amount due to or from Hanfeng United, the holding company of the Target Company, as transactions with the holding company. The directors of the Target Company believe that the method of segregation and allocation presents a reasonable basis for the preparation of the Historical Financial Information of the Target Company. The position shown under the “carve-out” basis may not represent what the operating results and financial position of the Target Company would have been on a stand-alone basis.

– II-12 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Statement of compliance

The Historical Financial Information of the Target Company has been prepared for inclusion in the Circular in connection with the Acquisition.

The Historical Financial Information set out in this report has been prepared in accordance with International Financial Reporting Standards (“ IFRSs ”) which includes all applicable individual International Financial Reporting Standards, International Accounting Standards (“ IAS ”), amendments and interpretations issued by the International Accounting Standards Board (“ IASB ”) and the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“ Stock Exchange ”).

For the purpose of preparing and presenting the Historical Financial Information for the Relevant Periods, the Target Company has applied all IFRSs which are effective for the financial period beginning on or after 1 January 2020 consistently throughout the Relevant Periods, except that the Target Company adopted IFRS 16 “Leases” on 1 January 2019 based on the specific transitional provision and applied IAS 17 “Leases” prior to 1 January 2019. The adoption of new or amended IFRSs that are issued but not yet effective and their impact on Historical Financial Information, if any, are disclosed in Note 2.

The Historical Financial Information has been prepared on the historical cost basis, except for certain financial assets which are stated at fair value. The measurement bases are fully described in the accounting policies below.

The preparation of the Historical Financial Information in conformity with IFRSs requires the use of certain critical accounting estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Historical Financial Information are disclosed in Note 3 below.

The Historical Financial Information is presented in Renminbi (“ RMB ”), rounded to the nearest thousand (RMB ‘000), which is also the functional currency of the Target Company.

2.2 Issued but not yet effective IFRSs

The Target Company has not early adopted the following new and amended IFRSs which have been issued but are not yet effective.

IFRS 17	Insurance Contracts and related amendments2
Amendments to IFRS 3	Reference to the Conceptual Framework4
Amendments to IFRS 10 and IAS 28	Sale or Contribution of Assets between an Investor and its
	Associate or Joint Venture3
Amendments to IFRS 16	Covid-19-Related Rent Concessions beyond 30 June 20215
Amendments to IAS 1	Classification of Liabilities as Current or Non-current2
Amendments to IAS 1 and	Disclosure of Accounting Policies2
IFRS Practice Statement 2
Amendments to IAS 8	Definition of Accounting Estimates2
Amendments to IAS 12	Deferred Tax related to Assets and Liabilities arising from a
	Single Transaction2
Amendments to IAS 16	Property, Plant and Equipment – Proceeds before Intended Use1
Amendments to IAS 37	Onerous Contracts – Cost of Fulfilling a Contract1
Amendments to IFRSs	Annual Improvements to IFRS Standards 2018-20201

1 Effective for annual periods beginning on or after 1 January 2022

2 Effective for annual periods beginning on or after 1 January 2023

3 Effective date to be determine

• 4 Effective for business combinations for which the acquisition date is on or after the beginning of the first annual period beginning on or after 1 January 2022

• 5 Effective for annual periods beginning on or after 1 April 2021

– II-13 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The directors of the Target Company anticipate that all of the pronouncements will be adopted in the Target Company’s accounting policy for the first period beginning after the effective date of the pronouncement, and these are not expected to have a material impact on the Target Company’s Historical Financial Information.

2.3 Impacts and changes in accounting policies of application on IFRS 16 “Leases”

This note explains the impact of the adoption of IFRS 16 “Leases” since 1 January 2019 on the Target Company’s Historical Financial Information.

IFRS 16 “Leases” replaces IAS 17 “Leases” along with three Interpretations (IFRIC 4 “Determining whether an Arrangement contains a Lease”, SIC 15 “Operating Leases-Incentives” and SIC 27 “Evaluating the Substance of Transactions Involving the Legal Form of a Lease”). The Target Company has initially applied IFRS 16 at 1 January 2019 using the modified retrospective approach, with the cumulative effect of adopting IFRS 16 being recognised in equity as an adjustment to the opening balance of retained earnings for the year ended 31 December 2019. Prior periods have not been restated.

For contracts in place at the date of initial application (i.e. 1 January 2019), the Target Company has elected to apply the definition of a lease from IAS 17 and IFRIC 4 and has not applied IFRS 16 to arrangements that were previously not identified as lease under IAS 17 and IFRIC 4. The Target Company has already recognised the Prepaid lease payments where the Target Company is a lessee. The application of IFRS 16 does not have impact on these assets except for the whole balance is now presented as “Right-of-use assets” under non-current assets.

Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Target Company has relied on its historic assessment as to whether leases were onerous immediately before the date of initial application of IFRS 16.

The following summarises the impact of transitions to IFRS 16 on the Target Company’s statements of financial position as at 1 January 2019:

• ‧ Prepaid lease payments – decreased by approximately RMB30,155,000

• ‧ Right-of-use assets – increased by approximately RMB30,155,000

• ‧ Lease liabilities – increased by approximately RMB62,000

• ‧ There was no impact on retained earnings as at 1 January 2019

2.4 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the director of the Target Company, the chief operating decision-maker who is responsible for allocating resources and assessing performance of the operating segments that makes strategic decisions.

– II-14 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2.5 Property, plant and equipment

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Repairs and maintenance are charged to profit or loss during the period in which they are incurred.

Depreciation is provided to write off the cost less accumulated impairment losses of property, plant and equipment, other than construction in progress, over their estimated useful lives from the date on which they are available for use and after taking into account their estimated residual value, if any, using the straight-line method at the following rates per annum. Where parts of an item of property, plant and equipment have different useful lives, the cost or valuation of the item is allocated on a reasonable basis and depreciated separately:

Buildings	20 – 30 years
Machinery and other equipment	5 – 10 years
Transportation equipment	5 years
Other equipment	5 – 10 years

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the period in which the item is derecognised.

2.6 Prepaid lease payments

Prepaid lease payments (which meet the definition of right-of-use assets upon initial application of IFRS 16) represent the upfront payment for long-term land lease in which the payment can be reliably measured. Land use rights are stated at costs less accumulated amortisation (before the application of IFRS 16)/depreciation (upon the application of IFRS 16) on a straight-line basis to profit or loss over the lease terms.

2.7 Intangible assets

Emission rights that are acquired by the Target Company are stated at cost less accumulated amortisation (where the estimated useful life is finite) and impairment losses.

2.8 Financial instruments

Financial assets

Recognition and derecognition

Financial assets are recognised when and only when the Target Company becomes a party to the contractual provisions of the instruments and on a trade date basis, except for financial assets measured at amortised cost which are accounted for on the settlement date basis.

A financial asset is derecognised when and only when (i) the Target Company’s contractual rights to future cash flows from the financial asset expire or (ii) the Target Company transfers the financial asset and either (a) it transfers substantially all the risks and rewards of ownership of the financial asset, or (b) it neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset but it does not retain control of the financial asset.

Financial assets (except for trade receivables without a significant financing component) are initially recognised at their fair value plus, in the case of financial assets not carried at FVPL, transaction costs that are directly attributable to the acquisition of the financial assets. Such trade receivables are initially measured at their transaction price.

On initial recognition, a financial asset is classified as (i) measured at amortised cost; (ii) debt investment measured at fair value through other comprehensive income (“ Mandatory FVOCI ”); (iii) equity investment measured at fair value through other comprehensive income (“ Designated FVOCI ”); or (iv) measured at fair value through profit or loss (“ FVPL ”).

– II-15 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The classification of financial assets at initial recognition depends on the Target Company’s business model for managing the financial assets and the financial asset’s contractual cash flow characteristics. Financial assets are not reclassified subsequent to their initial recognition unless the Target Company changes its business model for managing them, in which case all affected financial assets are reclassified on the first day of the first annual reporting period following the change in the business model.

Financial assets measured at amortised cost

Financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVPL:

• (i) it is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

• (ii) its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses arising from impairment, derecognition or through the amortisation process are recognised in profit or loss.

The Target Company’s financial assets at amortised cost include cash and cash equivalents, trade and bills receivables and other receivables.

Financial liabilities

Recognition and derecognition

Financial liabilities are recognised when and only when the Target Company becomes a party to the contractual provisions of the instruments.

A financial liability is derecognised when and only when the liability is extinguished, that is, when the obligation specified in the relevant contract is discharged, cancelled or expires.

Classification and measurement

Financial liabilities are initially recognised at their fair value plus, in the case of financial liabilities not carried at FVPL, transaction costs that are direct attributable to the issue of the financial liabilities.

The Target Company’s financial liabilities include trade and bills payables, other payables, amounts due to holding company, interest-bearing borrowings and lease liabilities. All financial liabilities are recognised initially at their fair value and subsequently measured at amortised cost, using the effective interest method, unless the effect of discounting would be insignificant, in which case they are stated at cost.

Impairment of financial assets and other items

The Target Company recognises loss allowances for expected credit losses (“ ECL ”) on financial assets that are measured at amortised cost to which the impairment requirements apply in accordance with IFRS 9. At each reporting date, the Target Company measures a loss allowance for a financial asset at an amount equal to the lifetime ECL if the credit risk on that financial asset has increased significantly since initial recognition. If the credit risk on a financial asset has not increased significantly since initial recognition, the Target Company measures the loss allowance for that financial asset at an amount equal to 12-month ECL.

– II-16 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Measurement of ECL

ECL is a probability-weighted estimate of credit losses (i.e. the present value of all cash shortfalls) over the expected life of the financial instrument.

For financial assets, a credit loss is the present value of the difference between the contractual cash flows that are due to an entity under the contract and the cash flows that the entity expects to receive. For a lease receivable, the cash flows used for determining the ECL should be consistent with the cash flows used in measuring the lease receivable in accordance with IFRS 16.

Lifetime ECL represents the ECL that will result from all possible default events over the expected life of a financial instrument while 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

Where ECL is measured on a collective basis, the financial instruments are grouped based on the following one or more shared credit risk characteristics:

• (i) past due information

• (ii) nature of instrument

• (iii) nature of collateral

• (iv) industry of debtors

• (v) geographical location of debtors

• (vi) external credit risk ratings

Loss allowance is remeasured at each reporting date to reflect changes in the financial instrument’s credit risk and loss since initial recognition. The resulting changes in the loss allowance are recognised as an impairment gain or loss in profit or loss with a corresponding adjustment to the carrying amount of the financial instrument.

Definition of default

The Target Company considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that the Target Company may not receive the outstanding contractual amounts in full if the financial instrument that meets any of the following criteria.

• (a) information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Target Company, in full (without taking into account any collaterals held by the Target Company); or

• (b) there is a breach of financial covenants by the counterparty.

Irrespective of the above analysis, the Target Company considers that default has occurred when a financial asset is more than 90 days past due unless the Target Company has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.

– II-17 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Assessment of significant increase in credit risk

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Target Company compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Target Company considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort. In particular, the following information is taken into account in the assessment:

• ‧ the debtor’s failure to make payments of principal or interest on the due dates;

• ‧ an actual or expected significant deterioration in the financial instrument’s external or internal credit rating (if available);

• ‧ an actual or expected significant deterioration in the operating results of the debtor; and

• ‧ actual or expected changes in the technological, market, economic or legal environment that have or may have a significant adverse effect on the debtor’s ability to meet its obligation to the Target Company.

Irrespective of the outcome of the above assessment, the Target Company presumes that the credit risk on a financial instrument has increased significantly since initial recognition when contractual payments are more than 30 days past due.

Notwithstanding the foregoing, the Target Company assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date.

Low credit risk

A financial instrument is determined to have low credit risk if:

• (a) it has a low risk of default;

• (b) the borrower has a strong capacity to meet its contractual cash flow obligations in the near term; and

• (c) adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.

As detailed in Note 33 to the historical financial information, the following financial instruments are determined to have low credit risk:

• ‧ Cash and time deposits at banks and other financial institution;

• ‧ Trade receivables with government;

• ‧ Bills receivables; and

• ‧ Other receivables with government.

Simplified approach of ECL

For trade receivables and contract assets without significant financing components or otherwise for which the Target Company applies the practical expedient not to account for the significant financing components, and operating lease receivables, the Target Company applies a simplified approach in calculating ECL. The Target Company recognises a loss allowance based on lifetime ECL at each reporting date and has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

– II-18 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Credit-impaired financial asset

A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired include observable data about the following events:

• (a) significant financial difficulty of the issuer or the borrower.

• (b) a breach of contract, such as a default or past due event.

• (c) the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider.

• (d) it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation.

• (e) the disappearance of an active market for that financial asset because of financial difficulties.

• (f) the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.

Write-off

The Target Company writes off a financial asset when the Target Company has no reasonable expectations of recovering the contractual cash flows on a financial asset in its entirety or a portion thereof. The Target Company has a policy of writing off the gross carrying amount based on historical experience of recoveries of similar assets. The Target Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities under the Target Company’s procedures for recovery of amounts due, taking into account legal advice if appropriate. Any subsequent recovery is recognised in profit or loss.

2.9 Cash equivalents

For the purpose of the consolidated statement of cash flows, cash equivalents represent short-term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value.

2.10 Revenue recognition

Revenue from contracts with customers within IFRS 15

Nature of goods or services

The nature of the goods or services provided by the Target Company is as follows:

Trading and processing of recycled products from non-ferrous resources.

– II-19 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Identification of performance obligations

At contract inception, the Target Company assesses the goods or services promised in a contract with a customer and identifies as a performance obligation each promise to transfer to the customer either:

• (a) a good or service (or a bundle of goods or services) that is distinct; or

• (b) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.

A good or service that is promised to a customer is distinct if both of the following criteria are met:

• (a) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e. the good or service is capable of being distinct); and

• (b) the Target Company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e. the promise to transfer the good or service is distinct within the context of the contract).

Timing of revenue recognition

Revenue is recognised when (or as) the Target Company satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.

The Target Company transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met:

• (a) the customer simultaneously receives and consumes the benefits provided by the Target Company’s performance as the Target Company performs;

• (b) the Target Company’s performance creates or enhances an asset (for example, work in progress) that the customer controls as the asset is created or enhanced; or

• (c) the Target Company’s performance does not create an asset with an alternative use to the Target Company and the Target Company has an enforceable right to payment for performance completed to date.

If a performance obligation is not satisfied over time, the Target Company satisfies the performance obligation at a point in time when the customer obtains control of the promised asset. In determining when the transfer of control occurs, the Target Company considers the concept of control and such indicators as legal title, physical possession, right to payment, significant risks and rewards of ownership of the asset, and customer acceptance.

Sales of goods comprising industrial waste recycling, renewable energy utilisation, trading and others, and dismantled resource recycling is recognised at a point in time at which the customer obtains the control of the promised asset, which generally coincides with the time when the goods are delivered to customers and the title is passed.

Service income of waste treatment and disposal services is recognised over time when services are rendered.

For revenue recognised over time under IFRS 15, provided the outcome of the performance obligation can be reasonably measured, the Target Company applies the output method (i.e. based on the direct measurements of the value to the customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract) to measure the progress towards complete satisfaction of the performance obligation because the method provides a faithful depiction of the Target Company’s performance and reliable information is available to the Target Company to apply the method. Revenue is recognised only to the extent of the costs incurred until such time that it can reasonably measure the outcome of the performance obligation.

– II-20 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Transaction price: significant financing components

When the contract contains a significant financing component (i.e. the customer or the Target Company is provided with a significant benefit of financing the transfer of goods or services to the customer), in determining the transaction price, the Target Company adjusts the promised consideration for the effects of the time value of money. The effect of the significant financing component is recognised as an interest income or interest expense separately from revenue from contracts with customers in profit or loss.

The Target Company determines the interest rate that is commensurate with the rate that would be reflected in a separate financing transaction between the Target Company and its customer at contract inception by reference to, where appropriate, the interest rate implicit in the contract (i.e. the interest rate that discounts the cash selling price of the goods or services to the amount paid in advance or arrears), the prevailing market interest rates, the Target Company’s borrowing rates and other relevant creditworthiness information of the customer of the Target Company.

The Target Company has applied the practical expedient in paragraph 63 of IFRS 15 and does not adjust the consideration for the effect of the significant financing component if the period of financing is one year or less.

Dividend income

Dividend income from financial assets is recognised when the Target Company’s rights to receive dividend is established, it is probable that the economic benefits associated with the dividend will flow to the Target Company and the amount of the dividend can be measured reliably.

Interest income

Interest income from financial assets is recognised using the effective interest method. For financial assets measured at amortised cost that are not credit-impaired, the effective interest rate is applied to the gross carrying amount of the assets while it is applied to the amortised cost (i.e. the gross carrying amount net of loss allowance) in case of credit-impaired financial assets.

2.11 Contract assets and contract liabilities

If the Target Company performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, the contract is presented as a contract asset, excluding any amounts presented as a receivable. Conversely, if a customer pays consideration, or the Target Company has a right to an amount of consideration that is unconditional, before the Target Company transfers a good or service to the customer, the contract is presented as a contract liability when the payment is made or the payment is due (whichever is earlier). A receivable is the Target Company’s right to consideration that is unconditional or only the passage of time is required before payment of that consideration is due.

For a single contract or a single set of related contracts, either a net contract asset or a net contract liability is presented. Contract assets and contract liabilities of unrelated contracts are not presented on a net basis.

2.12 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost, which comprises all costs of purchase and, where applicable, other costs that have been incurred in bringing the inventories to their present location and condition, is calculated using the weighted average cost method. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period of the write-down or loss occurs. The amount of any reversal of any write-down of inventories is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

– II-21 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2.13 Impairment of non-financial assets

At the end of each reporting period, the Target Company reviews internal and external sources of information to assess whether there is any indication that its property, plant and equipment, intangible assets, right-of-use assets and other non-current assets may be impaired or impairment loss previously recognised no longer exists or may be reduced. If any such indication exists, the recoverable amount of the asset is estimated, based on the higher of its fair value less costs of disposal and value in use. Where it is not possible to estimate the recoverable amount of an individual asset, the Target Company estimates the recoverable amount of the smallest group of assets that generates cash flows independently (i.e. a cash-generating unit).

If the recoverable amount of an asset or a cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. Impairment losses are recognised as an expense in profit or loss immediately.

A reversal of impairment loss is limited to the carrying amount of the asset or cash-generating unit that would have been determined had no impairment loss been recognised in prior periods. Reversal of impairment loss is recognised as an income in profit or loss immediately.

2.14 Assets held for distribution to owner

Non-current assets and disposal assets are classified as held for sale/distribution to owner if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the asset (or disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such asset (or disposal group) and its sale is highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets (and disposal groups) classified as held for sale/distribution to owner are measured at the lower of their previous carrying amount and fair value less costs to sell, except for financial assets within the scope of IFRS 9 which continue to be measured in accordance with the accounting policies as set out in respective sections.

2.15 Foreign currency translation

Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (the “ functional currency ”). Since the Target Company’s main operation is carried out in the PRC, the amounts shown in the financial statements are presented in Renminbi (“ RMB ”).

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and the translation at year-end/period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign exchange gains and losses resulting from the retranslation of non-monetary items carried at fair value are recognized in profit or loss except for those arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity, in which cases, the gains or losses are also recognised directly in equity.

2.16 Borrowings costs

Borrowings costs incurred, net of any investment income on the temporary investment of the specific borrowings, that are directly attributable to the acquisition, construction or production of qualifying assets, i.e. assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised as and included in finance costs in profit or loss in the period in which they are incurred.

– II-22 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2.17 Provisions

Provisions are recognised when the Target Company has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable estimate of the amount of obligation can be made. Expenditures for which a provision has been recognised are charged against the related provision in the year in which the expenditures are incurred. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, the amount provided is the present value of the expenditures expected to be required to settle the obligation. Where the Target Company expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

2.18 Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the years necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to profit or loss over the expected useful life of the relevant asset or the construction period of the relevant asset by equal annual instalments.

2.19 Leases (upon application of IFRS 16 from 1 January 2019, date of initial application)

The Target Company assesses whether a contract is, or contains, a lease at inception of the contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

As lessee

The Target Company applies the recognition exemption to short-term leases and low-value asset leases. Lease payments associated with these leases are recognised as an expense on a straight-line basis over the lease term.

The Target Company accounts for each lease component within a lease contract as a lease separately. The Target Company allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component.

Amounts payable by the Target Company that do not give rise to a separate component are considered to be part of the total consideration that is allocated to the separately identified components of the contract.

The Target Company recognises a right-of-use asset and a lease liability at the commencement date of the lease.

The right-of-use asset is initially measured at cost, which comprises

• (a) the amount of the initial measurement of the lease liability;

• (b) any lease payments made at or before the commencement date, less any lease incentives received;

• (c) any initial direct costs incurred by the Target Company; and

• (d) an estimate of costs to be incurred by the Target Company in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories.

– II-23 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Subsequently, the right-of-use asset is measured at cost less any accumulated depreciation and any accumulated impairment losses and adjusted for any remeasurement of the lease liability. Depreciation is provided on a straight-line basis over the shorter of the lease term and the estimated useful lives of the right-of-use asset as follows:

Buildings 3 years Land use rights Over the remaining leasing terms

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date of the contract.

The lease payments comprise the following payments for the right to use the underlying asset during the lease term that are not paid at the commencement date:

• (a) fixed payments (including in-substance fixed payments), less any lease incentives receivable;

• (b) variable lease payments that depend on an index or a rate;

• (c) amounts expected to be payable under residual value guarantees;

• (d) exercise price of a purchase option if the Target Company is reasonably certain to exercise that option; and

• (e) payments of penalties for terminating the lease, if the lease term reflects the Target Company exercising an option to terminate the lease.

The lease payments are discounted using the interest rate implicit in the lease, or where it is not readily determinable, the incremental borrowing rate of the lessee.

Subsequently, the lease liability is measured by increasing the carrying amount to reflect interest on the lease liability and by reducing the carrying amount to reflect the lease payments made.

The lease liability is remeasured using a revised discount rate when there are changes to the lease payments arising from a change in the lease term or the reassessment of whether the Target Company will be reasonably certain to exercise a purchase option.

The lease liability is remeasured by using the original discount rate when there is a change in the residual value guarantee, the in-substance fixed lease payments or the future lease payments resulting from a change in an index or a rate (other than floating interest rate). In case of a change in future lease payments resulting from a change in floating interest rates, the Target Company remeasures the lease liability using a revised discount rate.

The Target Company recognises the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. If the carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, the Target Company recognises any remaining amount of the remeasurement in profit or loss.

A lease modification is accounted for as a separate lease if

• (a) the modification increase the scope of the lease by adding the right to use or more underlying assets; and

• (b) the consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract.

– II-24 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

When a lease modification is not accounted for as a separate lease, at the effective date of the lease modification,

• (a) the Target Company allocates the consideration in the modified contract on the basis of relative stand-alone price as described above.

• (b) the Target Company determines the lease term of the modified contract.

• (c) the Target Company remeasures the lease liability by discounting the revised lease payments using a revised discount rate over the revised lease term.

• (d) for lease modifications that decrease the scope of the lease, the Target Company accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease and recognising any gain or loss relating to the partial or full termination of the lease in profit or loss.

• (e) for all other lease modifications, the Target Company accounts for the remeasurement of the lease liability by making a corresponding adjustment to the right-of-use asset.

As lessor

The Target Company classifies each of its leases as either a finance lease or an operating lease at the inception date of the lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of the underlying asset. All other leases are classified as operating leases.

When the Target Company is an intermediate lessor, it accounts for the head lease and sublease as two separate contracts. The sublease is classified as an operating lease if the head lease is a short-term lease to which the Target Company has applied the recognition exemption. Otherwise, the sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.

The Target Company accounts for each lease component within a lease contract as a lease separately from non-lease components of the contract. The Target Company allocates the consideration in the contract to each lease component on a relative stand-alone price basis.

As lessor – operating lease

The Target Company applies the derecognition and impairment requirements in IFRS 9 to the operating lease receivables. A modification to an operating lease is accounted for as a new lease from the effective date of the modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease payments for the new lease.

2.20 Leases (prior to 1 January 2019)

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Operating lease payments, including the cost of acquiring land held under operating leases, are recognised as an expense on a straight-line basis over the lease term. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

Lease incentives relating to operating leases are considered as integral part of lease payments, the aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

– II-25 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2.21 Employee benefit

Short term employee benefits

Salaries, annual bonuses, paid annual leave and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees.

Defined contribution plans

The obligations for contributions to a defined contribution retirement scheme are recognised as an expense in profit or loss as incurred. The assets of the scheme are held separately from those of the Target Company in an independently administered fund.

Pursuant to the relevant PRC laws and regulations, each of the PRC subsidiaries of the Target Company is required to participate in a retirement benefit scheme organised by the local municipal government whereby the Target Company is required to contribute a certain percentage of the salaries of its employees to the retirement benefit scheme. The only obligation of the Target Company with respect to the retirement benefit scheme is to pay the ongoing required contributions. Contributions made to the defined contribution retirement benefit scheme are charged to profit or loss as incurred.

Termination benefits

Termination benefits are recognised when, and only when, the Target Company demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal.

2.22 Taxation

The charge for current income tax is based on the results for the period as adjusted for items that are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, any deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither the accounting profit nor taxable profit or loss is not recognised.

The deferred tax assets or liabilities are measured at the tax rates that are expected to apply to the period when the asset is recovered or liability is settled, based on the tax rates and the tax laws that have been enacted or substantively enacted at the end of the reporting period.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences, tax losses and credits can be utilised.

Deferred tax is provided on temporary differences arising on investments in subsidiaries, associate and joint ventures, except where the timing of the reversal of the temporary differences is controlled by the Target Company and it is probable that the temporary difference will not reverse in the foreseeable future.

For deferred tax assets or liabilities on investment properties that are measured using the fair value model, the carrying amounts of such properties are presumed to be recovered entirely through sale.

– II-26 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2.23 Related parties

A related party is a person or entity that is related to the Target Company.

• (a) A person or a close member of that person’s family is related to the Target Company if that person:

• (i) has control or joint control over the Target Company;

• (ii) has significant influence over the Target Company; or

• (iii) is a member of the key management personnel of the Target Company.

• (b) An entity is related to the Target Company if any of the following conditions applies:

• (i) the entity and the Target Company are members of the same Target Company (which means that each holding company, subsidiary and fellow subsidiary is related to the others).

• (ii) one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

• (iii) both entities are joint ventures of the same third party

• (iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity.

• (v) the entity is a post-employment benefit plan for the benefit of employees of either the Target Company or an entity related to the Target Company. If the Target Company is itself such a plan, the sponsoring employers are also related to the Target Company.

• (vi) the entity is controlled or jointly controlled by a person identified in (a).

• (vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a holding company of the entity).

• (viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Target Company.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include:

• (a) that person’s children and spouse or domestic partner;

• (b) children of that person’s spouse or domestic partner; and

• (c) dependants of that person or that person’s spouse or domestic partner.

In the definition of a related party, an associate includes subsidiaries of the associate and a joint venture includes subsidiaries of the joint venture.

– II-27 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and assumptions concerning the future and judgements are made by the management in the preparation of the consolidated financial statements. They affect the application of the Target Company’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. Where appropriate, revisions to accounting estimates are recognised in the period of revision and future periods, in case the revision also affects future periods.

Key sources of estimation uncertainty

(i) Loss allowance for ECL

The Target Company’s management estimates the loss allowance for financial assets at amortised cost including trade receivables and contract assets, loans receivables, and other receivables by using various inputs and assumptions including risk of a default and expected loss rate. The estimation involves high degree of uncertainty which is based on the Target Company’s historical information, existing market conditions as well as forward looking estimates at the end of each reporting period. Where the expectation is different from the original estimate, such difference will impact the carrying amount of financial assets at amortised cost. Details of the key assumption and inputs used in estimating ECL are set out in Note 33 to the historical financial information.

(ii) Useful lives and impairment of property, plant and equipment and right-of-use assets

The directors review the residual value, useful lives and depreciation/amortisation method of property, plant and equipment and right-of-use assets at the end of each reporting period, through careful consideration with regards to expected usage, wear-and-tear and potential technical obsolescence to usage of the assets.

In determining whether an asset is impaired or the event previously causing the impairment no longer exists, the directors have to assess whether an event has occurred that may affect the asset value or such event affecting the asset value has not been in existence. If any such indication exists, the recoverable amounts of the asset would be determined by reference to value in use and fair value less costs of disposal. Value in use is determined using the discounted cash flow method. Owing to inherent risk associated with estimations in the timing and magnitude of the future cash flows and fair value less costs of disposal, the estimated recoverable amount of the asset may be different from its actual recoverable amount and profit or loss could be affected by accuracy of the estimations.

(iii) Allowance for inventories

The Target Company’s management reviews the condition of inventories, as stated in Note 19 to the historical financial information, at the end of each reporting period, and makes allowance for inventories that are identified as obsolete, slow-moving or no longer recoverable. The Target Company carries out the inventory review on a product-by-product basis and makes basis.

(iv) Income tax

Determining income tax provisions involve judgment on the future tax treatment of certain transactions. The Target Company carefully evaluates tax implications of transactions and tax provisions are set up accordingly. The tax treatment of such transactions is reconsidered periodically to take into account all changes in tax legislations. Deferred tax assets are recognised for tax losses not yet used and temporary deductible differences. As those deferred tax assets can only be recognised to the extent that it is probable that future taxable profit will be available against which the unused tax credits can be utilised, management’s judgment is required to assess the probability of future taxable profits. Management’s assessment is constantly reviewed and additional deferred tax assets are recognised if it becomes probable that future taxable profits will anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

– II-28 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

4. SEGMENT INFORMATION

The Target Company is principally engaged in recycling of industrial and hazardous solid waste and production and sales of metals in the PRC. The director of the Target Company is identified as the chief operating decision maker for the purposes of resource allocation and performance assessment and considered the recycling of industrial and hazardous solid waste and production and sales of metals to be a single operating segment. Accordingly, no segment information is reported. For the Relevant Periods, all non-current non-financial assets of the Target Company were located in the PRC.

No geographical segment information of the Target Company is shown as all the assets are located in the PRC.

Information about major customers

Revenue from customers contributing over 10% of the total revenue of the Target Company are as follows:

				(unaudited)
				Two months	Two months
				ended	ended
	Year	ended 31 December		29 February	28 February
	2018	2019	2020	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Customer A	137,699	–	–	–	–
Customer B	–	–	205,719	–
Customer C	–	–	–	60,600	–
Customer D	–	–	–	19,623	–
Customer E	–	–	–	–	200,105

5. REVENUE

Revenue represents the consideration expected to be received in respect of the transfer of goods and services. An analysis of revenue is as follows:

Revenue from contracts with customers within IFRS 15 Recognised at point in time Revenue from other sources Rental income Utilities income	(unaudited) Year ended 31 December Two months ended 29 February 2020 Two months ended 28 February 2021 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 968,592 1,499,545 1,414,426 113,820 356,057 1,397 50 489 – 125 370 9 27 – – 1,767 59 516 – 125 970,359 1,499,604 1,414,942 113,820 356,182	(unaudited) Year ended 31 December Two months ended 29 February 2020 Two months ended 28 February 2021 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 968,592 1,499,545 1,414,426 113,820 356,057 1,397 50 489 – 125 370 9 27 – – 1,767 59 516 – 125 970,359 1,499,604 1,414,942 113,820 356,182
		125
		356,182

– II-29 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

6. OTHER INCOME

				(unaudited)
				Two months	Two months
				ended	ended
	Year	ended 31 December		29 February	28 February
	2018	2019	2020	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Amortisation of deferred government
grants (note)	1,000	1,500	2,000	–	–
Government subsidies	16,729	7,913	21,757	–	790
Value-added tax refund	24,439	14,302	29,129	4,170	7,001
Dividend income	100	–	–	–	–
Compensation income	–	3	3,211	–	–
(Loss)/gain on disposal of derivatives	(1,667)	(9,507)	1	–	–
Interest income	3,367	387	590	–	48
Sundry income	–	1	–	–	–
	43,968	14,599	56,688	4,170	7,839

Note: The amount mainly represents the amortisation of government grants received from environmental protection projects. The government grants are recognised as deferred income and credited to profit and loss in the period over the expected construction period of the relevant assets (Note 29).

7. FINANCE COSTS

				(unaudited)
				Two months	Two months
				ended	ended
	Year	ended 31 December		29 February	28 February
	2018	2019	2020	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Discount interest on bills	2,972	–	–	–	–
Interest on bank and other loans	26,681	37,736	29,069	2,168	1,189
Interest on loan from holding company	29,781	–	–	–	–
Interest on lease liabilities	–	3	3	–	–
	59,434	37,739	29,072	2,168	1,189

– II-30 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

8. PROFIT BEFORE TAX

				(unaudited)
				Two months	Two months
				ended	ended
	Year	ended 31 December		29 February	28 February
	2018	2019	2020	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Staff cost (including directors’ emoluments)
Salaries, bonus and other emoluments	5,714	7,956	8,584	2,911	1,949
Contribution to defined contribution
retirements schemes	163	874	238	84	129
Total staff cost	5,877	8,830	8,822	2,995	2,078
Auditor’s remuneration	158	1,930	–	–	–
Cost of sales	775,160	1,300,176	1,246,999	105,576	320,080
Depreciation and amortization
– Property, plant and equipment*	42,077	47,184	49,091	8,182	8,207
– Intangible assets	146	146	146	24	24
– Prepaid lease payment	619	–	–	–	–
– Right of use assets	–	672	672	53	53
Research and development expenses	32,119	45,513	51,372	3,455	322
(Reversal of)/Provision for loss
allowance on
– Trade and bills receivables	(3,294)	5,555	(5,575)	(4)	(780)
– Other receivables	(2,628)	(2,105)	10	–	(7)
Impairment loss on property, plant and
equipment	1,221	1,298	65,442	–	31,922
(Reversal of)/impairment loss on inventories	43,374	30,502	(64,646)	–	(14,185)
Loss/(Gain) on disposal of property, plant
and equipment	(138)	75	(137)	–	1,523

• These items are included in both cost of sales, selling expenses and administrative expenses in the statement of comprehensive income.

– II-31 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

9. INCOME TAX EXPENSES

					(unaudited)
					Two months	Two months
					ended	ended
	Year	ended 31 December			29 February	28 February
	2018	2019		2020	2020	2021
	RMB’000	RMB’000	RMB’000		RMB’000	RMB’000
Current tax
Enterprise Income Tax of the PRC
Underprovision in prior year	6,901	–		–	–	–
Deferred tax expenses	3,334	–		–	–	–
	10,235	–		–	–	–
					(unaudited)
					Two months	Two months
					ended	ended
	Year	ended 31 December			29 February	28 February
	2018	2019		2020	2020	2021
	RMB’000	RMB’000	RMB’000		RMB’000	RMB’000
Reconciliation of income tax expenses
Profit before taxation	75,781	30,415		52,053	2,635	6,740
	15%	15%		15%	15%	15%
Tax calculated at the rates applicable to
profits in the tax jurisdictions concerned	11,367	4,562		7,808	395	1,011
Non-deductible expenses	255	931		752	6	–
Non-taxable income	(14,929)	(9,750)		(15,142)	–	(1,869)
Underprovision in prior year	6,901	–		–	–	–
Unrecognised temporary differences	11,933	12,393		16,578	–	3,868
Utilisation of tax losses previously not
recognised	–	–		–	(11)	(2,664)
Others	(5,292)	(8,136)		(9,996)	(390)	(346)
	10,235	–		–	–	–

– II-32 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

At the end of the reporting period, the Target Company has the following unrecognised tax losses arising in the PRC that can be offset against future taxation profits for a maximum of 5 years from the year in which the tax loss was incurred:

					As at
		As at	31 December		28 February
	2018		2019	2020	2021
	RMB’000		RMB’000	RMB’000	RMB’000
Year of expiry
2023	43,116		43,116	43,116	43,116
2024	–		51,689	51,689	51,689
2025	–		–	90,650	90,650
	43,116		94,805	185,455	185,455

10. INFORMATION ABOUT THE BENEFITS OF DIRECTORS AND SENIOR EXECUTIVES

(a) Directors’ and supervisors’ remunerations

Details of directors’ and supervisors’ remunerations for the year, disclosed pursuant to the Listing Rules and the disclosure requirements of Hong Kong Companies Ordinance, are as follows:

Two months ended 29 February 2020

Directors’ fee RMB’000 Directors Mr. Zhang Pengcheng(c) – Mr. Ma Yifei – Supervisors Mr. Li Shengchun(b) – Mr. Lei Rihua – Mr. Liu Fangcheng(b) – –	Contributions to defined Salaries and other emoluments contributions retirement schemes RMB’000 RMB’000 70 1 42 – 53 – 41 1 46 – 252 2	Total RMB’000 71 42 53 42 46
		254

– II-33 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Two months ended 28 February 2021

Directors’ fee RMB’000 Directors Mr. Li Jinqian(a) – Mr. Zhang Pengcheng(c) – Mr. Ma Yifei – Supervisors Mr. Li Shengchun(b) – Mr. Lei Rihua – Mr. Liu Fangcheng(b) – – Year ended 31 December 2020 Directors’ fee RMB’000 Directors Mr. Li Jinqian(a) – Mr. Zhang Pengcheng(c) – Mr. Ma Yifei – Supervisors Mr. Li Shengchun(b) – Mr. Lei Rihua – Mr. Liu Fangcheng(b) – – Year ended 31 December 2019 Directors’ fee RMB’000 Directors Mr. Zhang Pengcheng(c) – Mr. Ma Yifei – Mr. Tan Xiongyue(d) – Supervisors Mr. Lei Rihua – –	Contributions to defined Salaries and other emoluments contributions retirement schemes RMB’000 RMB’000 – – 93 2 54 – 60 – 55 2 61 2 323 6 Contributions to defined Salaries and other emoluments contributions retirement schemes RMB’000 RMB’000 – – 619 2 376 – 408 – 358 2 409 1 2,170 5 Contributions to defined Salaries and other emoluments contributions retirement schemes RMB’000 RMB’000 268 – 359 – – – 356 10 983 10	Total RMB’000 – 95 54 60 57 63
		329
		Total RMB’000 – 621 376 408 360 410
		2,175
		Total RMB’000 268 359 – 366
		993

– II-34 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Year ended 31 December 2018

Directors’ fee RMB’000 Directors Mr. Ma Yifei – Mr. Tan Xiongyue(d) – Supervisors Mr. Lei Rihua – – Note (a) Appointed on 21 May 2020	Contributions to defined Salaries and other emoluments contributions retirement schemes RMB’000 RMB’000 51 – 265 – 166 12 482 12	Total RMB’000 51 265 178
		494

• (b) Appointed on 1 January 2020

• (c) Appointed on 1 October 2019

• (d) Resigned on 1 January 2019

There were no arrangements under which a director waived or agreed to waive any emoluments for the Relevant Periods. In addition, no emoluments were paid by the Target Company to any of the directors as an inducement to join, or upon joining the Target Company or as a compensation for loss of office for the Relevant Periods.

(i) Loans, quasi-loans and other dealings in favour of directors

There are no loans, quasi-loans or other dealings in favour of the directors of the Target Company, or bodies corporate controlled by such directors, or entities connected with such directors that were entered into or subsisted during the Relevant Periods.

(ii) Directors’ material interests in transactions, arrangements or contracts

After consideration, the directors are of the opinion that no transactions, arrangements and contracts of significance in relation to the Target Company’s business to which the Target Company was a party and in which a director of the Target Company, or a entities connected with the directors had a material interest, whether directly or indirectly, subsisted at the end of the period or at any time during the Relevant Periods.

– II-35 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(b) Individuals with highest emoluments

The five highest paid individuals of the Target Company during the Relevant Periods are analysed as follows:

Directors Non-director highest paid individuals	(unaudited) Year ended 31 December Two months ended 29 February 2020 Two months ended 28 February 2021 2018 2019 2020 Number of individuals Number of individuals Number of individuals Number of individuals Number of individuals 1 2 2 2 2 4 3 3 3 3 5 5 5 5 5	(unaudited) Year ended 31 December Two months ended 29 February 2020 Two months ended 28 February 2021 2018 2019 2020 Number of individuals Number of individuals Number of individuals Number of individuals Number of individuals 1 2 2 2 2 4 3 3 3 3 5 5 5 5 5
		5

Details of the emoluments of the above non-director individuals during the Relevant Periods are as follows:

				(unaudited)
				Two months	Two months
				ended	ended
	Year	ended 31 December		29 February	28 February
	2018	2019	2020	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Salaries and other emoluments	812	1,649	2,169	269	323
Contributions to defined retirement
scheme	22	11	6	1	5
	834	1,660	2,175	270	328

The number of non-director highest paid employees whose remuneration fell within the following band is as follows:

				(unaudited)
				Two months	Two months
				ended	ended
	Year ended	31 December		29 February	28 February
	2018	2019	2020	2020	2021
Nil to RMB1,000,000	4	3	3	3	3

– II-36 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

11. DIVIDEND

					(unaudited)
					Two months	Two months
					ended	ended
		Year	ended 31 December		29 February	28 February
		2018	2019	2020	2020	2021
	Note	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Dividend approved and paid during the year	(a)	590,000	–	–	–	–
Special dividend	(b)	–	–	–	–	245,963
		590,000	–	–	–	245,963

• (a) Pursuant to the resolution passed at the shareholder’s meeting on 21 November 2018, the payment of final dividend in respect of 2017 totaling to RMB590,000,000 was approved and paid during the year ended 31 December 2018.

• (b) The dividend represents a special dividend totalling approximately RMB245,963,000 to its shareholder and recognised for the two months ended 28 February 2021. The amount representing a major non-cash transaction, was settled through current account with the holding company of the Target Company.

12. EARNINGS PER SHARE

No earnings per share information is presented, for the purpose of this report as its inclusion, is not considered meaningful.

– II-37 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

13 PROPERTY, PLANT AND EQUIPMENT

Re-conciliation of carrying amount – year ended 31 December 2018 At beginning of the year Additions Depreciation Impairment Write-off/disposals At the end of the reporting period Re-conciliation of carrying amount – year ended 31 December 2019 At beginning of the year Additions Depreciation Impairment Write-off/disposals At the end of the reporting period Re-conciliation of carrying amount – year ended 31 December 2020 At beginning of the year Additions Depreciation Impairment Write-off/disposals At the end of the reporting period	Buildings RMB’000 (note) 419,093 – (21,446) – (3,293) 394,354 394,354 58,735 (24,786) (1,298) – 427,005 427,005 67,351 (24,969) (65,442) – 403,945	Machinery and other equipment RMB’000 157,026 18,137 (18,300) (1,221) – 155,642 155,642 30,880 (20,627) – (290) 165,605 165,605 5,573 (22,494) – – 148,684	Transportation equipment RMB’000 2,253 2,878 (1,632) – (288) 3,211 3,211 933 (914) – (1,047) 2,183 2,183 308 (726) – (135) 1,630	Other equipment RMB’000 2,699 761 (699) – – 2,761 2,761 730 (857) – – 2,634 2,634 68 (902) – – 1,800	Total RMB’000 581,071 21,766 (42,077) (1,221) (3,581) 555,968 555,968 91,278 (47,184) (1,298) (1,337) 597,427 597,427 73,300 (49,091) (65,442) (135) 556,059

– II-38 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Re-conciliation of carrying amount – period ended 28 February 2021 At beginning of the period Depreciation Impairment Write-off/disposals At the end of the reporting period As at 31 December 2018 Cost Accumulated depreciation Accumulated impairment loss As at 31 December 2019 Cost Accumulated depreciation Accumulated impairment loss As at 31 December 2020 Cost Accumulated depreciation Accumulated impairment loss As at 28 February 2021 Cost Accumulated depreciation Accumulated impairment loss	Buildings RMB’000 (note) 403,945 (4,151) (19,498) (1,105) 379,191 457,435 (59,969) (3,112) 394,354 516,170 (84,755) (4,410) 427,005 583,521 (109,724) (69,852) 403,945 582,416 (113,875) (89,350) 379,191	Machinery and other equipment RMB’000 148,684 (3,807) (12,380) (3,900) 128,597 301,461 (44,651) (101,168) 155,642 332,051 (65,278) (101,168) 165,605 337,624 (87,772) (101,168) 148,684 333,724 (91,579) (113,548) 128,597	Transportation equipment RMB’000 1,630 (101) (44) – 1,485 6,436 (3,225) – 3,211 6,322 (4,139) – 2,183 6,495 (4,865) – 1,630 6,495 (4,966) (44) 1,485	Other equipment RMB’000 1,800 (148) – – 1,652 4,848 (2,087) – 2,761 5,578 (2,944) – 2,634 5,646 (3,846) – 1,800 5,646 (3,994) – 1,652	Total RMB’000 556,059 (8,207) (31,922) (5,005) 510,925 770,180 (109,932) (104,280) 555,968 860,121 (157,116) (105,578) 597,427 933,286 (206,207) (171,020) 556,059 928,281 (214,414) (202,942) 510,925

Note:

As at 28 February 2021, 31 December 2020, 2019 and 2018, the application for property rights certificates of certain of the Target Company’s buildings with net carrying amount approximately of RMB13,125,000, RMB18,375,000, RMB19,448,000 and RMB20,522,000 respectively has not been processed or is in process. In light of the properties are constructed on the land use rights used according to related legal agreements, the directors believe that the transfer of property rights would not result in substantive legal obstacles or affect the Target Company’s normal operation to those buildings, significant implications to the Target Company’s business activities, impairment of the related properties, or significant additional costs.

– II-39 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

14. RIGHT-OF-USE ASSETS/LEASE LIABILITIES

Right-of-use assets

Re-conciliation of carrying amount – year ended 31 December 2019 At beginning of the year upon adoption of IFRS 16 Additions Depreciation At the end of the reporting period Re-conciliation of carrying amount – year ended 31 December 2020 At beginning of the year Depreciation At the end of the reporting period Re-conciliation of carrying amount – period ended 28 February 2021 At beginning of the period Depreciation Write-off/disposals At the end of the reporting period As at 31 December 2019 Cost Accumulated depreciation	Buildings RMB’000 – 64 (6) 58 58 (6) 52 52 (1) – 51 64 (6) 58	Land use rights RMB’000 30,155 – (666) 29,489 29,489 (666) 28,823 28,823 (52) (1,237) 27,534 33,305 (3,816) 29,489	Total RMB’000 30,155 64 (672) 29,547 29,547 (672) 28,875 28,875 (53) (1,237) 27,585 33,369 (3,822) 29,547

– II-40 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		Land use
	Buildings	rights	Total
	RMB’000	RMB’000	RMB’000
As at 31 December 2020
Cost	64	33,305	33,369
Accumulated depreciation	(12)	(4,482)	(4,494)
	52	28,823	28,875
As at 28 February 2021
Cost	64	32,068	32,132
Accumulated depreciation	(13)	(4,534)	(4,547)
	51	27,534	27,585

The Target Company leases buildings mainly for its daily operations. Lease terms is 10 years.

Land use rights represent the prepaid lease payments of land located in the PRC. The land use rights have a finite useful life and are depreciated on a straight-line basis of 50 years. The remaining useful life are ranged from 35 to 47 years as at 28 February 2021; 35 to 47 years as at 31 December 2020; 36 to 48 years as at 31 December 2019 and 37 to 49 years as at 31 December 2018.

Commitments under leases

As at 28 February 2021, 31 December 2020, 2019 and 2018, the Target Company has no commitment for short term leases.

Lease liabilities:

Lease payment: Current portion Non-current portion	As at 31 December As at 28 February 2021 2019 2020 RMB’000 RMB’000 RMB’000 13 22 22 52 46 46 65 68 68

– II-41 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

15. INTANGIBLE ASSETS

Re-conciliation of carrying amount – year ended 31 December 2018 At beginning of the year Amortization At the end of the reporting period Re-conciliation of carrying amount – year ended 31 December 2019 At beginning of the year Amortization At the end of the reporting period Re-conciliation of carrying amount – year ended 31 December 2020 At beginning of the year Amortization At the end of the reporting period

Emission rights RMB’000 1,397 (146) 1,251 1,251 (146) 1,105 1,105 (146) 959

– II-42 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Re-conciliation of carrying amount – period ended 28 February 2021 At beginning of the period Amortization At the end of the reporting period As at 31 December 2018 Cost Accumulated amortization As at 31 December 2019 Cost Accumulated amortization As at 31 December 2020 Cost Accumulated amortization As at 28 February 2021 Cost Accumulated amortization	Emission rights RMB’000 959 (24) 935 1,457 (206) 1,251 1,457 (352) 1,105 1,457 (498) 959 1,457 (522) 935

Emission rights represents the right for pollutants emission, which have a finite useful life and are amortised on a straight-line basis on an average of 10 years.

– II-43 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

16. PREPAID LEASE PAYMENTS

At cost At the beginning of year Additions At the end of year Accumulated amortisation and impairment loss At the beginning of year Amortisation during the year At the end of year Carrying amount Less: Amount to be amortised within 12 months Amounts to be amortised after 12 months	As at 31 December 2018 RMB’000 30,593 2,710
	33,303
	(2,529) (619)
	(3,148)
	30,155 (653)
	29,502

Upon the adoption of IFRS 16 on 1 January 2019, the prepaid lease payments are presented under right-of-use assets (note 14).

17. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

							As at
		As at	31	December		28	February
	2018			2019	2020		2021
	RMB’000			RMB’000	RMB’000		RMB’000
Unlisted equity securities:	3,921			4,098	4,224		4,243

Note:

At the end of each reporting period, the carrying amount mainly comprised investment in 4% of equity interest of a bank incorporated in the PRC.

18. OTHER NON-CURRENT ASSETS

							As at
		As at	31	December		28	February
	2018			2019	2020		2021
	RMB’000			RMB’000	RMB’000		RMB’000
Prepayments for acquisition of
equipment	5,803			3,167	–		–

– II-44 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

19. INVENTORIES

				As at
		As at 31 December		28 February
	2018	2019	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000
Goods in transit	11,387	–	7,848	–
Raw material	704,067	550,547	5,512	5,896
Work-in-progress	721,375	914,284	55,369	1,425
Finished goods	77,034	58,301	639,035	–
	1,513,863	1,523,132	707,764	7,321
Written down to net realisable value, net	(48,719)	(79,221)	(14,575)	(390)
	1,465,144	1,443,911	693,189	6,931

Inventories are stated at the lower of cost and net realisable value.

The substantial decrease in inventories as at 31 December 2020 was mainly due to an acceleration in production and inventory clearance during 2020, whereas as at 28 February 2021, the decrease in inventories was mainly due to the reclassification of approximately RMB390,347,000 which is grouped under assets held for distribution to the owner (see Note 34).

20. TRADE AND BILLS RECEIVABLES

					As at
			As at 31 December		28 February
		2018	2019	2020	2021
	Note	RMB’000	RMB’000	RMB’000	RMB’000
Trade receivables		16,008	103,722	3,168	–
Less: Loss allowance	33(b)(ii)	(800)	(6,355)	(780)	–
		15,208	97,367	2,388	–
Bills receivables	20(a)	1,556	2,499	–	–
		16,764	99,866	2,388	–

Information about the Target Company’s exposure to credit risks and loss allowance for trade and bills receivables is included in Note 33 to the financial statements.

The credit periods granted to third parties ranged generally from 30 days to 90 days.

– II-45 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The ageing analysis of trade receivables by invoice date is summarised as follows:

				As at
		As at 31 December		28 February
	2018	2019	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000
Within 90 days	11,331	98,953	1,786	–
91 to 180 days	–	92	–	–
181 to 365 days	4,677	–	–	–
1 to 2 years	–	4,677	–	–
2 to 3 years	–	–	1,382	–
	16,008	103,722	3,168	–

20(a) The bills receivables represent bank acceptance notes with remaining term within 180 days as at years ended 31 December 2019 and 2018 respectively.

21. PREPAYMENT, DEPOSIT AND OTHER RECEIVABLES

Prepayments Deposit and other receivables to third parties VAT receivables Less: Loss allowance Less: Non – current deposit	As at 31 December 2018 2019 RMB’000 RMB’000 24,525 91,157 6,771 3,232 21,671 – 52,967 94,389 (2,155) (50) 50,812 94,339 (2,387) (2,662) 48,425 91,677	2020 RMB’000 68,540 3,643 – 72,183 (60) 72,123 (2,969) 69,154	As at 28 February 2021 RMB’000 987 502 –
			1,489 (53)
			1,436 –
			1,436

22. AMOUNT DUE FROM/(DUE TO) HOLDING COMPANY

The amount due to holding company as at 31 December 2018 is unsecured with interest rate of 5.5% per annum and has no fixed term of repayment.

The amounts due from/to holding company as at 31 December 2019, 31 December 2020 and 28 February 2021 are unsecured, interest free and have no fixed term of repayment.

– II-46 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

23. CASH AND CASH EQUIVALENTS

Cash at banks Pledged deposits	As at 31 December 2018 2019 RMB’000 RMB’000 5,393 14,013 5,000 5,001 10,393 19,014	2020 RMB’000 10,829 – 10,829	As at 28 February 2021 RMB’000 3,100 –
			3,100

Cash at banks earns interest at floating rates based on daily deposits rates.

The Target Company has pledged deposits as securities to secure for the bank acceptance notes granted to the Target Company by banks.

24. TRADE AND BILLS PAYABLES

				As at
		As at 31 December		28 February
	2018	2019	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000
Trade payables to third parties	38,766	17,821	14,891	2,822
Bills payables	–	5,000	–	–
	38,766	22,821	14,891	2,822

The ageing analysis of trade payables by invoice date is summarised as follows:

				As at
		As at 31 December		28 February
	2018	2019	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000
Within 90 days	34,262	7,011	14,212	2,822
91 to 180 days	616	3,101	218	–
181 to 365 days	160	1,180	142	–
1 to 2 years	3,728	3,701	3	–
2 to 3 years	–	2,828	312	–
Over 3 years	–	–	4	–
	38,766	17,821	14,891	2,822

The Target Company is given a credit period within 30 – 90 days from its general trade creditors.

– II-47 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

25. CONTRACT LIABILITIES

The movements (excluding those arising from increases and decreases both occurred within the same year) of contract liabilities from contracts with customers within IFRS 15 during the Relevant Periods are as follows:

At the beginning of the year/period Receipt in advance Recognised as revenue At the end of the reporting period	As at 31 December 2018 2019 RMB’000 RMB’000 46,028 16,449 16,449 11,062 (46,028) (16,449) 16,449 11,062	2020 RMB’000 11,062 33,735 (11,062) 33,735	As at 28 February 2021 RMB’000 33,735 – (33,735)
			–

26. INTEREST-BEARING BORROWINGS

Bank loans Secured Unsecured	As at 31 December 2018 2019 RMB’000 RMB’000 213,732 155,979 92,884 329,996 306,616 485,975	2020 RMB’000 66,808 138,042 204,850	As at 28 February 2021 RMB’000 20,019 –
			20,019

The maturity of the interest-bearing borrowings and analysis of the amount due based on scheduled payment dates set out in the loan agreements (ignoring the effect of any repayment on demand clause) are as follows:

				As at
		As at 31 December		28 February
	2018	2019	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000
Current portion	170,726	429,729	204,850	20,019
Non-current portion	135,890	56,246	–	–
	306,616	485,975	204,850	20,019

– II-48 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The Target Company’s secured bank loans are pledged by the following assets:

				As at
		As at 31 December		28 February
	2018	2019	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000
Property, plant and equipment	135,065	127,001	118,938	117,594
Land use rights	15,608	15,279	14,949	14,922
	150,673	142,280	133,887	132,516

The unsecured bank loans are covered by guarantee provided by its holding company.

The weighted average effective interest rate on the interest-bearing borrowings is as follows:

							As at
		As at	31	December		28	February
	2018			2019	2020		2021
Bank loans	6.2%			6.3%	5.89%		4.63%

The analysis of the carrying amounts of the Target Company’s total borrowings by type is as follows:

				As at
		As at 31 December		28 February
	2018	2019	2020	2021
At fixed rates	188,416	288,148	74,823	–
At floating rates	118,200	197,827	130,027	20,019
	306,616	485,975	204,850	20,019

As at 31 December 2018, the secured bank loans bear interest at a floating rate of loan prime rate increase by 1.16% and fixed interest rate from 8.65% to 11.32%. As at 31 December 2018, the unsecured bank loans bear interest at a floating rate of loan prime rate increase by 10% and fixed interest rate from 8.65% to 3.00%.

As at 31 December 2019, the secured bank loans bear interest at a floating rate of loan prime rate increase by 0.5% to 1.16% and fixed interest rate from 8.65% to 11.32%. As at 31 December 2019, the unsecured bank loans bear interest at a floating rate of loan prime rate increase by 0.15% to 0.42% and fixed interest rate of 7.29%.

As at 31 December 2020, the secured bank loans bear interest at a floating rate of loan prime rate increase by 0.03%. As at 31 December 2020, the unsecured bank loans bear interest at a floating rate of loan prime rate increase by 0.03% to 0.15% and fixed interest rate of 4.90%.

As at 28 February 2021, the secured bank loans bear interest at a floating rate of loan prime rate increase by 0.03%.

The interest-bearing borrowings are all denominated in RMB.

Details of the Target Company’s interest risk discussion are set out in Note 33 to the financial statement.

– II-49 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

27. DERIVATIVES MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS

				As at
		As at 31 December		28 February
	2018	2019	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000
Derivatives measured at fair value
through profit or loss	204,912	–	–	–

• Note 1: On 31 Jan 2018, the Target Company signed a gold lease contract with Changsha Branch of China Everbright Bank Co., Ltd. for the period from 1 February 2018 to 31 January 2019 with annual interest rate of 2.8% to borrow 182 kg of gold which valued approximately of RMB51,797,000. The gold lease contract was guaranteed by the Chifeng Jilong Gold Mining Co., Ltd.

• Note 2: On 3 August 2018, the Target Company signed a gold lease contract with Beijing Branch of Evergrowing Bank Co., Ltd. for the period from 3 August 2018 to 21 February 2019 with annual interest rate of 4.2% to borrow 238 kg of gold which valued approximately of RMB67,733,000. The gold lease contract was guaranteed by the Chifeng Jilong Gold Mining Co., Ltd.

• Note 3: On 22 January 2018, the Target Company signed a gold lease contract with Changsha Branch of Shanghai Pudong Development Bank Co., Ltd. for the period from 22 January 2018 to 22 January 2019 with annual interest rate of 4% to borrow 300 kg of gold which valued approximately of RMB85,380,000. The gold lease contract was guaranteed by the Chifeng Jilong Gold Mining Co., Ltd.

28. OTHER PAYABLES

				As at
		As at 31 December		28 February
	2018	2019	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000
Accrued charges and other payables	50,239	8,152	22,973	1,444
Employee benefits payables	5,201	4,662	4,856	1,947
Value-added tax payables	–	25,107	15,698	7,346
Other taxes payables	479	1,575	188	560
	55,919	39,496	43,715	11,297

The other payables are unsecured and non-interest-bearing.

– II-50 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

29. DEFERRED INCOME

The following is the movements of deferred income during the Relevant Periods:

At the beginning of the year/period Additions Amount recognised as other income At the end of the reporting period	As at 31 December 2018 2019 RMB’000 RMB’000 4,000 3,000 – 5,000 (1,000) (1,500) 3,000 6,500	2020 RMB’000 6,500 – (2,000) 4,500	As at 28 February 2021 RMB’000 4,500 – –
			4,500

The deferred income mainly represents the government grants received from the local government to support the environment protection projects. The grants are amortised to profit or loss when constructions started depending on the natures of grants.

The grants are released to profit and loss over the expected construction period of the relevant assets by equal annual installment over the period from 5 to 10 years.

30. PAID-UP CAPITAL

Paid-up capital At beginning of the year/period Capital injection At the end of the reporting period	2018 RMB’000 322,890 500,000 822,890	As at 31 December 2019 RMB’000 822,890 – 822,890	2020 RMB’000 822,890 – 822,890	As at 28 February 2021 RMB’000 822,890 –
				822,890

Pursuant to the resolution of the shareholders of the Target Company, the Target Company’s registered and paid-up capital were increased from RMB322,890,000 to RMB822,900,000 on 13 December 2018. The additional capital of RMB500,000,000 was fully paid on 17 December 2018.

– II-51 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

31. RESERVE

(a) Reserve

Capital reserve (i) Statutory reserve (ii) Other comprehensive income reserve (iii) Other reserve (iv) Accumulated profits	As at 31 December 2018 2019 RMB’000 RMB’000 6,684 6,684 83,801 86,842 1,921 2,098 2,193 1,525 165,683 193,057 260,282 290,206	2020 RMB’000 6,684 92,047 2,224 2,672 239,905 343,532	As at 28 February 2021 RMB’000 6,684 92,729 2,243 3,413 –
			105,069

• (i) The balance represents the premium on issue of shares net of issuing expenses. In accordance with legal process and is approved to reduction in assets by repurchase of the Target Company’s shares, according to the share capital reduced by cancellation of face value of shares in total, the adjusting shareholders’ equity by difference between the consideration paid by repurchase of shares (including transaction fees) and the face value of shares. The portion which exceeds the face value in total shall be credited to share premium whereas the portion which is lower than the face value in total shall be written off in the order of share premium, surplus reserve and undistributed profit.

• (ii) In accordance with the relevant PRC regulations, the Target Company is required to appropriate to the statutory reserve an amount not less than 10% of the amount of profit after taxation. If the accumulated statutory reserve reaches 50% of the registered capital of the Target Company, the Target Company may not be required to make any further appropriation. The transfer to the statutory reserve must be made before distribution of dividends to shareholders. The statutory reserve can be utilised, upon approval by the relevant authorities, to offset accumulated losses or to increase registered capital of the Target Company, provided that the balance after such issue is not less than 25% of its registered capital.

• (iii) The other comprehensive income reserve represents cumulative gains and losses arising on the revaluation of equity instruments at FVOCI that have been recognised in other comprehensive income, net of amounts reclassified to profit or loss when those equity instruments at FVOIC are disposed of or are determined to be impaired.

• (iv) According to the regulations of “Management Measures of Extraction and Usage of Enterprise Safety Production Costs” (Cai Qi [2012]16) issued by Ministry of Finance and State Administration of Work Safety, the safety production fees of the Target Company, were extracted using excess regressive method every month.

– II-52 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

32. OTHER CASH FLOW INFORMATION

(a) Cash generated from operations

Profit before taxation Finance cost Dividend proposed (Loss)/Gain on disposal of derivatives (Loss)/Gain on fair value changes Amortisation of intangible assets Amortisation of prepaid lease payments Depreciation of PPE Impairment of PPE Loss/(Gain) on disposal of PPE Write-off of right-of-use assets Depreciation of right-of-use asset (Reversal of)/Provision for impairment of trade receivables (Reversal of)/Provision for impairment of other receivables Government grant (Reversal of)/Provision for inventory obsolescence Change in working capital: (Increase)/decrease in inventories (Increase)/decrease in trade and bill receivables (Increase)/decrease in prepayments, deposits and other receivables (Increase)/decrease in pledge deposits (Decrease)/increase in trade and bill payables (Decrease)/increase in contract liabilities (Decrease)/increase in other payables Increase in deferred income Cash generated from/(used in) operations

Year ended 31 December (unaudited) Two months ended 29 February 2020 Two months ended 28 February 2021 2018 2019 2020 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 75,781 30,415 52,053 2,635 6,740 59,434 37,739 29,072 2,168 1,189 – – – – (245,963) 1,667 9,057 (1) – – 11,890 (8,416) – – – 146 146 146 24 24 619 – – – – 42,077 47,184 49,091 8,182 8,207 1,221 1,298 65,442 – 31,922 (138) 75 (137) – 1,523 – – – – 1,237 – 672 672 53 53 (3,294) 5,555 (5,575) (4) (780) (2,628) (2,105) 10 – (7) (1,000) (1,500) (2,000) – – 43,374 30,502 (64,646) – (14,185) (195,350) (9,269) 815,368 (110,389) 310,096 76,703 (88,657) 103,053 76,199 (89,925) 129,667 (41,422) 22,206 (99,799) 61,011 (5,000) (1) 5,001 5,001 – (112,803) (15,945) (7,930) 6,998 73 (29,579) (5,387) 22,673 22,817 4,613 14,936 (17,093) 5,367 6,596 217,072 – 5,000 – – – 107,723 (22,152) 1,089,865 (79,519) 292,900

– II-53 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(b) Changes in liabilities arising from financing activities

Details of the changes in the Target Company’s liabilities from financing activities are as follows:

Two months ended 28 February 2021 At beginning of the year Interest expense Cash inflow/(outflow) in financing activities: Repayment of interest-bearing borrowings Interest paid At the end of the reporting period Year ended 31 December 2020 At beginning of the year Interest expense Cash inflow/(outflow) in financing activities: Proceeds from interest-bearing borrowings Repayment of interest-bearing borrowings and due to holding company Interest paid At the end of the reporting period	Interest- bearing borrowings RMB’000 204,850 1,189 (184,831) (1,189) 20,019 Interest- bearing borrowings RMB’000 485,975 29,069 158,028 (456,688) (11,534) 204,850	Lease liabilities RMB’000 68 – – – 68 Lease liabilities RMB’000 65 3 – – – 68	Due to holding company RMB’000 – – – – – Due to holding company RMB’000 616,022 – – (616,022) – –	Total RMB’000 204,918 1,189 (184,831) (1,189) 20,087 Total RMB’000 1,102,062 29,072 158,028 (1,072,710) (11,534) 204,918

– II-54 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Year ended 31 December 2019 At beginning of the year Addition Interest expense Cash inflow/(outflow) in financing activities: Proceeds from interest-bearing borrowings and due to holding company Repayment of interest-bearing borrowings Interest paid At the end of the reporting period Year ended 31 December 2018 At beginning of the year Interest expense Cash inflow/(outflow) in financing activities: Proceeds from interest-bearing borrowings Repayment of interest-bearing borrowings, bond payables and due to holding company Interest paid At the end of the reporting period	Interest- bearing borrowings RMB’000 306,616 – 37,736 379,050 (220,733) (16,694) 485,975 Interest- bearing borrowings RMB’000 178,768 26,681 236,376 (125,122) (10,087) 306,616	Lease liabilities RMB’000 – 62 3 – – – 65 Bond payables RMB’000 99,013 – – (99,013) – –	Due to holding company RMB’000 433,940 – – 182,082 – – 616,022 Due to holding company RMB’000 422,295 29,781 – (8,356) (9,780) 433,940	Total RMB’000 740,556 62 37,739 561,132 (220,733) (16,694) 1,102,062 Total RMB’000 700,076 56,462 236,376 (232,491) (19,867) 740,556

– II-55 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

33. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

(a) Categories of financial instruments

As at 31 December 2018 2019 RMB’000 RMB’000 3,921 4,098 26,287 3,183 16,764 99,866 – – 10,393 19,014 57,365 126,161 38,766 22,821 55,440 12,814 306,616 485,975 433,940 616,022 – 65 204,912 – 1,039,674 1,137,697	2020 RMB’000 4,224 3,584 2,388 99,535 10,829 120,560 14,891 27,829 204,850 – 68 – 247,638	As at 28 February 2021 RMB’000 4,243 449 – – 3,100
		7,792
		2,822 3,391 20,019 – 68 –
		26,300

The main purpose of these financial instruments is to raise and maintain finance for the Target Company’s operations. The Target Company has various other financial instruments such as other receivables and other payables which arise directly from its business activities.

The main risks arising from the Target Company’s financial instruments are interest rate risk, credit risk and liquidity risk.

The directors of the Target Company generally adopt conservative strategies on its risk management and limit the Target Company’s exposure to these risks to a minimum level. The directors of the Target Company review and agree policies for managing each risk as summarised below and they manage and monitor these exposures to ensure appropriate measures are implemented on a timely and effective manner.

– II-56 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(b) Financial risk management objectives and policies

(i) Interest rate risk

The Target Company’s exposure to the risk of changes in market interest rates relates primarily to the Target Company’s bank balances and interest-bearing borrowings. Bank balances and interest-bearing borrowings with floating interest rates expose the Target Company to cash flow interest rate risk. For interest-bearing borrowings, the Target Company’s policy is to manage its interest cost using a mix of fixed and floating rate debts, monitor closely its interest rate exposure and the level of fixed rate and floating rate borrowings in consideration of economic atmosphere and the strategies of the Target Company.

During the Relevant Periods, the Target Company had not entered into significant hedging activities to hedge against the exposure to cash flow and fair value interest rate risk. At 28 February 2021, the Target Company’s borrowings at fixed rate of interest were 4.35%-4.90% (2020: 4.00%-4.90%; 2019: 4.35%-11.32%; 2018: 3.00%11.32%).

At 28 February 2021, if interest rate had been 100 (2018 to 2020: 100) basis point higher/lower respectively and all other variables were held constant, the Target Company profit for the period and retained profits would decrease/increase by RMB Nil (2020: decrease/increase by RMB269,000; 2019: decrease/increase by RMB761,000; 2018: decrease/increase by RMB989,000).

The sensitivity analysis above has been determined assuming that the change in interest rates had occurred throughout the Relevant Periods and had been applied to the exposure to interest rate risk for bank balances and interest-bearing borrowings in existence during the Relevant Periods. The 100 (2018 to 2020: 100) basis point increase or decrease on the bank balances and interest-bearing borrowings dominated in RMB represent management’s assessment of a reasonably possible change in interest rates over the period until the next annual end of the reporting period. The analysis was performed on the same basis for 2018 to 2020.

(ii) Credit risk

The carrying amount of financial assets recognised on the statement of financial position, which is net of impairment losses, represents the Target Company’s exposure to credit risk without taking into account the value of any collateral held or other credit enhancements.

The Target Company reviews the recoverable amount of each individual financial assets at the end of each of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Target Company consider that the Target Company’s credit risk is significantly reduced during the Relevant Periods.

Trade and bills receivables

In order to mitigate credit risk, the directors of Target Company is responsible for determining credit limits, approving credit applications and carrying out other monitoring procedures to ensure necessary actions are taken to collect overdue debts. Besides, the Target Company reassesses the collectability of each amount receivable on an individual basis at each balance sheet date, in order to ensure sufficient bad debt provision is allocated for amounts that are not recoverable. As such, the management of the Target Company believes the credit risk assumed by the Target Company has been significantly reduced.

The Target Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of the industry and country in which customers operate also has an influence on credit risk but to a lesser extent. Credit quality of a customer is assessed based on an extensive credit rating and individual credit limit assessment which is mainly based on the Target Company’s own trading records.

– II-57 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

As at 28 February 2021, the Target Company had a concentration of credit risk as Nil (2020: 99%; 2019: 90%; 2018: 95%) of the total trade receivables were made up by the Target Company’s largest outstanding balance and the five largest outstanding balances respectively.

The Target Company’s customer base consists of a wide range of clients and the trade receivables are categorised by common risk characteristics that are representative of the customers’ abilities to pay all amounts due in accordance with the contractual terms. The Target Company applies a simplified approach in calculating ECL for trade receivables and recognises a loss allowance based on lifetime ECL at each reporting date and has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. The expected loss rate used in the provision matrix is calculated for each category based on actual credit loss experience and adjusted for current and forward-looking factors to reflect differences between economic conditions during the period over which the historical data has been collected, current conditions and the Target Company’s estimate on future economic conditions over the expected lives of the receivables. There was no change in the estimation techniques or significant assumptions made during the Relevant Periods.

The information about the exposure to credit risk and ECL for trade receivables using a provision matrix is summarised below.

Trade receivables

As at 31 December 2020

		Gross
	Expected	carrying	Loss	Credit	Net carrying
	loss rate	amount	allowances	impaired	amount
	%	RMB’000	RMB’000		RMB’000
Aging by due date
Past due
Within one year	5%	1,786	89	No	1,697
1 to 2 years		–	–		–
2 to 3 years	50%	1,382	691	No	691
Over 3 years		–	–		–
		3,168	780		2,388
As at 31 December 2019
		Gross
	Expected	carrying	Loss	Credit	Net carrying
	loss rate	amount	allowances	impaired	amount
	%	RMB’000	RMB’000		RMB’000
Aging by due date
Past due
Within one year	5%	99,045	4,952	No	94,093
1 to 2 years	30%	4,677	1,403	No	3,274
2 to 3 years		–	–		–
Over 3 years		–	–		–
		103,722	6,355		97,367

– II-58 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

As at 31 December 2018

		Gross
	Expected	carrying	Loss	Credit	Net carrying
	loss rate	amount	allowances	impaired	amount
	%	RMB’000	RMB’000		RMB’000
Aging by due date
Past due
Within one year	5%	16,008	800	No	15,208
1 to 2 years		–	–		–
2 to 3 years		–	–		–
Over 3 years		–	–		–
		16,008	800		15,208

The movement in the loss allowance for trade receivables during the year/period is summarised below:

Two months ended 28 February (unaudited) Two months ended 29 February 2021 2020 RMB’000 RMB’000 At beginning of the year/period 780 6,355 Provision/(reversal) during the year/period (780) (4) At the end of the reporting period – 6,351	Year ended 31 December 2020 2019 2018 RMB’000 RMB’000 RMB’000 6,355 800 4,094 (5,575) 5,555 (3,294) 780 6,355 800	Year ended 31 December 2020 2019 2018 RMB’000 RMB’000 RMB’000 6,355 800 4,094 (5,575) 5,555 (3,294) 780 6,355 800
		800

Other receivables

Management has credit risk policies in place for the amount due from other debtors and the exposure to the credit risk is monitored on an ongoing basis.

In estimating the ECL and in determining whether there is a significant increase in credit risk since initial recognition and whether the financial asset is credit-impaired, the Target Company has taken into account the historical actual credit loss experience for the debtors and the financial position of the counterparties by reference to, among others, their management or audited accounts and available press information, adjusted for forward-looking factors that are specific to the debtors and general economic conditions of the industry in which the counterparties operate, in estimating the probability of default of these financial assets, as well as the loss upon default in each case. There was no change in the estimation techniques or significant assumptions made during the Relevant Periods.

The Target Company considers its deposits and other tax receivables are subject to low credit risk and the expected loss rates of these receivables, which are assessed to be insignificant and taking into account their financial position and credit quality of the counterparties and therefore, no loss allowance is made for these receivables during the Relevant Periods.

The information about the ECL for the other receivables at the end of each of the Relevant Periods is summarised below.

– II-59 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Other receivables

	Gross		Loss
As at 28 February 2021	amount	ECL	allowance	Net amount
	RMB’000		RMB’000
Other receivables	502	lifetime	53	449
	Gross		Loss
As at 31 December 2020	amount	ECL	allowance	Net amount
	RMB’000		RMB’000
Other receivables	674	lifetime	60	614
	Gross		Loss
As at 31 December 2019	amount	ECL	allowance	Net amount
	RMB’000		RMB’000
Other receivables	570	lifetime	50	520
	Gross		Loss
As at 31 December 2018	amount	ECL	allowance	Net amount
	RMB’000		RMB’000
Other receivables	4,384	lifetime	2,155	2,229

The movement in the loss allowance for trade receivables during the year/period is summarised below:

		(unaudited)
	Two months	Two months
	ended	ended
	28 February	29 February	Year	ended 31 December
	2021	2020	2020	2019	2018
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
At beginning of the
year/period	60	50	50	2,155	4,783
Provision/(reversal)
during the period	(7)	–	10	(2,105)	(2,628)
At the end of the
reporting period	53	50	60	50	2,155

Cash and pledged deposits at banks and bill receivables

The credit risk on cash and pledged deposits at banks and bills receivables are limited because majority of the counterparties are financial institutions with high credit-ratings assigned by state-owned banks with good reputation. No loss allowance was recognised for the Relevant Periods.

(c) Liquidity risk

The Target Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank borrowings. To minimise liquidity risks, management of the Target Company regularly reviews the current and expected liquidity requirements of operating units to ensure they maintain sufficient reserves of cash to meet operational needs so that the Target Company does not breach borrowing limits or covenants on any of its borrowing facilities to meet their liquidity requirements in the short and longer terms.

– II-60 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The maturity profile of the financial liabilities at the end of the reporting periods based on contractual undiscounted payments is summarised below.

		More than	More than
	Within	1 year but	2 years but		Total
	1 year or	less than	less than	Over	undiscounted	Carrying
	on demand	2 years	5 years	5 years	cash flow	amount
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
At 28 February 2021
Other financial liabilities at amortised cost:
Trade payables	2,822	–	–	–	2,822	2,822
Bills payables
Other payables and accruals	3,391	–	–	–	3,391	3,391
Lease liabilities	31	8	23	16	78	68
Interest-bearing borrowings	20,080	–	–	–	20,080	20,019
	26,324	8	23	16	26,371	26,300
At 31 December 2020
Other financial liabilities at amortised cost:
Trade payables	14,891	–	–	–	14,891	14,891
Other payables and accruals	27,829	–	–	–	27,829	27,829
Lease liabilities	24	8	23	23	78	68
Interest-bearing borrowings	205,815	–	–	–	205,815	204,850
	248,559	8	23	23	248,613	247,638
At 31 December 2019
Other financial liabilities at amortised cost:
Trade payables	17,821	–	–	–	17,821	17,821
Bills payables	5,000	–	–	–	5,000	5,000
Other payables and accruals	12,814	–	–	–	12,814	12,814
Amount due to holding company	616,022	–	–	–	616,022	616,022
Lease liabilities	16	8	23	31	78	65
Interest-bearing borrowings	451,904	57,137	–	–	509,041	485,975
	1,103,577	57,145	23	31	1,160,776	1,137,697
At 31 December 2018
Other financial liabilities at amortised cost:
Trade payables	38,766	–	–	–	38,766	38,766
Other payables and accruals	55,440	–	–	–	55,440	55,440
Amount due to holding company	433,940	–	–	–	433,940	433,940
Interest-bearing borrowings	189,483	98,271	47,168	–	334,922	306,616
Derivatives measured at fair value through
profit or loss	204,912	–	–	–	204,912	204,912
	922,541	98,271	47,168	–	1,067,980	1,039,674

– II-61 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

34. ASSETS HELD FOR DISTRIBUTION TO OWNER

On 28 February 2021, the shareholders of the Target Company resolved to dispose of the assets relating to the Disposal Business, and certain assets and liabilities to its holding company before completion of the Acquisition. The disposal will be settled by a reduction in capital of the Target Company before completion of the Acquisition.

These assets and liabilities are expected to be disposed of within twelve months and have been classified as assets and liabilities held for distribution to the owner and are presented separately in the Target Company’s statement of financial position as at 28 February 2021.

The major classes of assets and liabilities held for distribution to the owner as at 28 February 2021, which have been presented separately in the Target Company’s statement of financial position, are as follows:

Assets held for distribution to owner Trade receivables Prepayment, deposits and other receivables Pledged deposits Inventories Amount due from holding company Liabilities held for distribution to owner Trade payables Contract liabilities Other payables Net assets held for distribution to owner	As at 28 February 2021 RMB’000 83,093 9,683 10,000 390,347 217,626
	710,749
	12,142 38,348 248,749
	299,239
	411,510

35. RELATED PARTY TRANSACTIONS

(a) Transactions with related party

Other than disclosed elsewhere in the financial statements, the Target Company had the following related party transactions during the Relevant Periods.

					(unaudited)
					Two months	Two months
					ended	ended
		Year	ended 31 December		29 February	28 February
Relationship	Nature of transactions	2018	2019	2020	2020	2021
		RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Holding company	Interest expenses	29,781	–	–	–	–
Holding company	Divided	590,000	–	–	–	245,963(1)
Note (1):	The dividend payable is	offsetting with	amount due from holding company.

(b) As at the ending Relevant Periods, the Target Company had the following balances with related party:

					As at
		As at	31 December		28 February
	2018		2019	2020	2021
	RMB’000		RMB’000	RMB’000	RMB’000
Amount due from/(to) holding company	(433,940)		(616,022)	99,535	217,626
					(see Note 34)

– II-62 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(ii) Remuneration for key management personnel (including directors) of the Target Company:

Salaries, allowances and other short-term benefits Contributions to defined contribution plans	As at 31 December 2018 2019 RMB’000 RMB’000 482 1,300 12 11 494 1,311	(unaudited) Two months ended 29 February Two months ended 28 February 2020 2020 2021 RMB’000 RMB’000 RMB’000 1,761 199 263 6 2 5 1,767 201 268	(unaudited) Two months ended 29 February Two months ended 28 February 2020 2020 2021 RMB’000 RMB’000 RMB’000 1,761 199 263 6 2 5 1,767 201 268
			268

36. CAPITAL MANAGEMENT

The objectives of the Target Company’s capital management are to safeguard its ability to continue as a going concern and to provide returns for shareholders. The Target Company manages its capital structure to maintain a balance between liquidity, investment and borrowings, and makes adjustments, including payment of dividends to shareholders or issues new shares in the light of changes in the economic environment. No changes were made in the Target Company’s objectives, policies or processes in managing capital during the Relevant Periods.

The Target Company monitors its capital, which comprises all equity components, using a gearing ratio which is calculated on the basis of net debt (trade and bills payables, other payables, due to holding company, interest-bearing borrowings, obligation under finance lease and lease liabilities net of cash and cash equivalents) as a ratio of the equity attributable to owners of the Target Company. The debt-to-equity ratio at the end of the reporting period was as follows:

				As at
		As at 31 December		28 February
	2018	2019	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000
Trade and bills payables	38,766	22,821	14,891	2,822
Other payables (excluding VAT payables and
other tax payables)	55,440	12,814	27,829	3,391
Due to holding company	433,940	616,022	–	–
Interest-bearing borrowings	306,616	485,975	204,850	20,019
Lease liabilities	–	65	68	68
Less: Cash and cash equivalent	(10,393)	(19,014)	(10,829)	(3,100)
Net debt	824,369	1,118,683	236,809	23,200
Total equity attributable to owners of the Target Company	1,083,172	1,113,096	1,166,422	927,959
Gearing ratio	76.11%	100.50%	20.30%	2.50%

– II-63 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

37. FAIR VALUE MEASUREMENTS

The following presents the assets and liabilities measured at fair value or required to disclose their fair value in the financial statements on a recurring basis across the three levels of the fair value hierarchy defined in IFRS 13, “Fair Value Measurement” with the fair value measurement categorised in its entirety based on the lowest level input that is significant to the entire measurement. The levels of inputs are defined as follows:

• Level 1 (highest level): quoted prices (unadjusted) in active markets for identical assets or liabilities that the Target Company can access at the measurement date;

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly;

• Level 3 (lowest level): unobservable inputs for the asset or liability.

Some of the Target Company’s financial assets and financial liabilities are measured at fair value at the end of the reporting period. The following table gives information about how the fair values of these financial assets and financial liabilities are determined (in particular, the valuation technique(s) and inputs used).

				Fair value		Valuation
				as at	Fair value	technique(s)
	Fair value as at 31 December			28 February	hierarchy	and key input(s)
Financial assets/(liabilities)	2018	2019	2020	2021
	RMB’000	RMB’000	RMB’000	RMB’000
Financial assets at FVOCI	3,921	4,098	4,224	4,243	Level 3	Discounted cash flow
Derivatives at FVTPL	(204,912)	–	–	–	Level 1	Quoted bid price in
						an active market

38. CONTINGENT LIABILITIES

As at 28 February 2021, the Target Company did not have any significant contingent liabilities.

39. COMMITMENTS

The Target Company did not have any significant capital commitment at each reporting period.

40. EVENTS AFTER THE REPORTING PERIOD

There is no significant events taken place subsequent to 28 February 2021.

41. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target Company in respect of any period subsequent to 28 February 2021 and up to the date of this report.

– II-64 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

I. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

• A. Basis of Preparation of the Unaudited Pro Forma Financial Information of the Enlarged Group

In connection with the Acquisition, the unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group, comprising the Company and its subsidiaries, (together with the “ Group ”) and the Target Group, has been prepared to illustrate the effect of the Acquisition on the Group’s financial position as at 31 December 2020 as if the Acquisition had taken place on 31 December 2020.

The unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group (the “ Unaudited Pro Forma Financial Information ”) is prepared based on (i) the unaudited consolidated assets and liabilities of the Group as at 31 December 2020 which has been extracted from the published annual report of the Group for the year ended 31 December 2020; and (ii) the audited assets and liabilities of the Target Company as at 28 February 2021, which has been extracted from the accountants’ report set out in Appendix II to this circular.

The Unaudited Pro Forma Financial Information has been prepared by the Directors in accordance with Rule 4.29 of the Listing Rules and is solely for the purpose to illustrate the assets and liabilities of the Enlarged Group as if the Acquisition had taken place on 31 December 2020.

The Unaudited Pro Forma Financial Information is prepared based on the aforesaid historical data after giving effect to the pro forma adjustments described below in the accompanying notes that are (i) directly attributable to the Acquisition; and (ii) factually supportable.

The Unaudited Pro Forma Financial Information has been prepared by the Directors based on certain assumptions and estimates and for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the assets and liabilities of the Enlarged Group had the Acquisition been completed as at 31 December 2020 or at any future dates.

– III-1 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

B. Unaudited Pro Forma Financial Information of the Enlarged Group

The Group at 31 December 2020 RMB’000 (Note 1) Non-current assets Investment properties 449,741 Property, plant and equipment 3,231,707 Construction in progress 1,088,214 Right-of-use assets 764,065 Intangible assets 675,323 Investment in a subsidiary – Goodwill 1,229,438 Interests in associates 196,978 Interests in joint ventures 95,156 Trade receivables and contract assets 9,058 Other non-current assets 76,786 Financial assets at fair value through other comprehensive income – Deferred tax assets 53,042 7,869,508 Current assets Inventories 267,105 Loans receivables 125,724 Trade receivables and contract assets 1,145,209 Prepayment, deposits and other receivables 351,176 Prepaid income tax 3,775 Cash and cash equivalents 661,657 2,554,646 Assets held for distribution to owner – 2,554,646	The Target Company at 28 February 2021 Pro forma adjustments of RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Note 2) (Note 3) (Note 4) (Note 5) (Note 6) 510,925 79,013 – 27,585 3,595 935 10,000 – 429,000 (429,000) – 18,866 – – – – 4,243 – 543,688 6,931 – – 1,436 – 3,100 (20,000) 11,467 710,749 (710,749) 722,216	Unaudited Pro forma the Enlarged Group RMB’000 449,741 3,821,645 1,088,214 795,245 686,258 – 1,248,304 196,978 95,156 9,058 76,786 4,243 53,042
		8,524,670
		274,036 125,724 1,145,209 352,612 3,775 644,757
		2,546,113 –
		2,546,113

– III-2 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

		The Target					Unaudited
	The Group at	Company at					Pro forma
	31 December	28 February					of the Enlarged
	2020	2021		Pro forma	adjustments		Group
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
	(Note 1)	(Note 2)	(Note 3)	(Note 4)	(Note 5)	(Note 6)
Current liabilities
Trade payables	729,967	2,822					732,789
Contract liabilities	131,915	–					131,915
Lease liabilities	8,461	22					8,483
Current portion of interest-bearing
borrowings	1,971,310	20,019					1,991,329
Bond payables	12,800	–					12,800
Due to controlling shareholder	430,637	–					430,637
Consideration payables	–	–		409,000			409,000
Income tax payables	33,068	–					33,068
Other payables	257,980	11,297				6,110	275,387
	3,576,138	34,160					4,025,408
Liabilities held for distribution to
owner	–	299,239	(299,239)				–
	3,576,138	333,399					4,025,408
Net current (liabilities)/assets	(1,021,492)	388,817					(1,479,295)
Total assets less current liabilities	6,848,016	932,505					7,045,375
Non-current liabilities
Lease liabilities	3,571	46					3,617
Interest-bearing borrowings	661,588	–					661,588
Bond payables	599,438	–					599,438
Provisions	27,734	–					27,734
Deferred income	161,769	4,500					166,269
Deferred tax liabilities	19,939	–			23,152		43,091
Other payables	337	–					337
	1,474,376	4,546					1,502,074
NET ASSETS	5,373,640	927,959					5,543,301

– III-3 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

C. Notes to the Unaudited Pro Forma Financial Information

1. The assets and liabilities of the Group as at 31 December 2020 are extracted from the Group’s audited consolidated statement of financial position at 31 December 2020 set out in the published annual report of the Company for the year ended 31 December 2020.

2. The assets and liabilities of the Target Company as at 28 February 2021 are extracted from the Target Company’s audited statement of the financial position included in the Accountants’ Report contained in Appendix II to this circular.

3. On 15 July 2021, the Company entered into the acquisition agreement (the “ Acquisition Agreement ”) with the vendor of the Target Company, Beijing Hanfeng United Technology Co., Limited (English translation of 北京瀚豐聯合科技有限公司 for identification purpose) (the “ Vendor ”) in relation to the proposed acquisition of 70% equity interest in the Target Company. Pursuant to the Acquisition Agreement, the Vendor has undertaken to dispose of certain assets and liabilities before completion of the acquisition of the Target Company. The pro forma adjustment represents the disposal of these assets and liabilities held for distribution to owner through settlement by a reduction in capital of the Target Company in the amount of approximately RMB411,510,000 as if the Acquisition had taken place on 31 December 2020.

4. Pursuant to the Acquisition Agreement, the Company conditionally agreed to acquire 70% of equity interest in the Target Company from the Vendor (the “ Acquisition ”) for a consideration of RMB429,000,000 which shall be settled in cash by the Company by 4 instalments in the following manner:

5. a deposit of RMB85.8 million (representing 20% of the Consideration and inclusive of the earnest money of RMB20 million which was paid in 14 January 2021) to be paid within five (5) days from the successful registration of the Charges (which shall be completed within three (3) Business Days from the date of the Acquisition Agreement);

6. subject to the entering into of a handover confirmation/memorandum, a completion confirmation and the articles of association, and the completion of commercial and business registration of transfer of equity interest, RMB321.75 million (representing 75% of the Consideration) to be paid within five (5) days from the Completion;

7. if there is no loss, deficits, disputes or other extraordinary expenditures arising in the course of operations of the Target Company from matters before Completion within six (6) months after Completion (the “ First Operating Period ”), RMB18.45 million to be paid within five (5) days after the First Operating Period. The Company is entitled to deduct the actual loss amount from this instalment, after which the remaining amount shall be paid to the Vendor; and

– III-4 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

• if there is no loss, deficits, disputes or other extraordinary expenditures arising in the course of operations of the Target Company from matters before Completion within six (6) months after the First Operating Period (the “ Second Operating Period ”), RMB3.00 million to be paid within five (5) days after the Second Operating Period. The Company is entitled to deduct the actual loss amount from this instalment, after which the remaining amount shall be paid to the Vendor.

The Vendor has undertaken to compensate the Target Company in cash for any loss of the Target Company recorded in the Completion Accounts computed in accordance with the formula below:

Compensation = Audited net assets of the – Audited net assets as at Completion Target Company as at Accounts Reference Date + total the Reference Date amortized amount of depreciation of fixed assets for the Handover Period + total amortized amount of intangible assets for the Handover Period + 50% of the salary of core personnel of the Target Company for the Handover Period

The Unaudited Pro Forma Financial Information has been prepared as if completion of the Acquisition had taken place on 31 December 2020. The consideration payable by the Company for the acquisition pursuant to the Acquisition Agreement is calculated as follows:

Cash consideration payable by the Company for the Acquisition Contingent consideration, at fair value (Note) Total cash consideration payable by the Company	RMB’000 429,000 –
	429,000

Note:

For the purpose of preparing the Unaudited Pro Forma Financial Information, the Directors are of the view that the loss, deficit, disputes or other extraordinary expenditures arising in the course of operation of the Target Company from matters before Completion are insignificant, and the fair value of the contingent consideration relating to the compensation from the Vendor as computed above is estimated by the Directors to be Nil.

The fair value of the contingent consideration, if any, is based on the Directors’ estimation as to whether there is actual loss amount deducted from the last 2 consideration instalments of RMB18.45 million and RMB3.00 million as noted above. On Completion, the fair value of the contingent consideration will have to be reassessed at the Completion Date.

Upon completion of the Acquisition, the Target Company will become a subsidiary of the Group.

– III-5 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

1. Upon completion of the Acquisition, 70% equity interest in the Target Company will be held by the Company. The fair value of identifiable assets and liabilities of the Target Company at the Completion Date will be accounted for in the consolidated financial statements of the Company under the acquisition method of accounting.

The pro forma goodwill arising from the Acquisition is calculated as follows: Notes RMB’000 Total cash consideration 4 Carrying amount of identifiable assets and liabilities of the Target Company as at 28 February 2021 after taking up the pro forma adjustment of disposal of assets/liabilities held for distribution to owner of approximately RMB411,510,000 Pro forma fair value adjustments on – Property, plant and equipment (a) 79,013 – Right-of-use assets (a) 3,595 – Intangible assets (a) 10,000 Deferred tax liabilities in respect of pro forma fair value adjustments (b) Non-controlling interests of the Target Company (c) Pro forma goodwill (d)

RMB’000 429,000 516,449 92,608 (23,152) 585,905 (175,771) 410,134 18,866

– III-6 –

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

For the purposes of the calculation of the pro forma goodwill arising from the Acquisition, the following bases and assumptions are adopted:

• (a) The pro forma adjustments related to the excess of the fair value, on a pro forma basis, of the property, plant and equipment, right-of-use assets relating to land use rights and intangible assets relating to patent and trademark, over their carrying amounts as at 28 February 2021, amounting to approximately RMB79,013,000, RMB3,595,000 and RMB10,000,000 respectively.

The fair values of the property, plant and equipment, right-of-use assets and intangible assets as at 28 February 2021 are estimated by the Directors, with reference to a valuation report set out in Appendix V to this circular, prepared by Shenzhen Pengxin Asset Appraisal and Land and Real Estate Valuation Co., Ltd. (“ Pengxin Asset Appraisal ”), an independent qualified professional valuer not connected with the Group.

For the purpose of preparing the Unaudited Pro Forma Financial Information, the Directors expect that, other than the property, plant and equipment, right-of-use assets and intangible assets, the carrying amounts of identifiable assets and liabilities of the Target Company as at 28 February 2021 approximate their respective fair values at that date.

• (b) The deferred tax liabilities relating to the pro forma fair value adjustments of the property, plant and equipment, right-of-use assets and intangible assets amounted to approximately RMB23,152,000, which is calculated based on the PRC Corporate Income Tax rate of 25%.

• (c) The non-controlling interests of the Target Company is measured at their proportionate share in the recognised fair values of the Target Company’s identifiable net assets as at 28 February 2021.

• (d) The Acquisition is accounted for using the acquisition method of accounting in accordance with International Financial Reporting Standard (“ IFRS ”) 3 (Revised) “Business Combinations”. The Directors believe that the Target Company constitutes a business in accordance with IFRS 3 (Revised). The recognition of goodwill of RMB18,866,000 arose from the Acquisition as if the Acquisition was completed on 31 December 2020.

– III-7 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

The Group’s accounting policies for goodwill are in accordance with the applicable accounting standards. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised for non-controlling interests and any fair value of the Group’s previously held equity interests in the acquiree over the identifiable net assets acquired and liabilities assumed. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets and liabilities of the Group are assigned to those units or groups of units.

The Directors confirm that the basis used in the preparation of the Unaudited Pro Forma Financial Information is consistent with the accounting policies of the Group. The Group will adopt accounting policies for goodwill to perform impairment test of the Enlarged Group’s goodwill during the future accounting periods of the Enlarged Group. If the goodwill allocated to a cash-generating unit is acquired in a business combination during the current annual period, that unit will be tested for impairment before the end of the current annual period. The Directors consider that the Group’s accounting treatment and principal assumptions used to assess the impairment of such goodwill will be the same as other acquisitions of similar nature. To the best knowledge of the Directors, the Group’s independent auditors will conduct the audit of the consolidated financial statements of the Group in accordance with Hong Kong Standards on Auditing issued by the HKICPA, including performing audit procedures on the impairment assessment of the Enlarged Group’s goodwill during the future annual audit of the Enlarged Group.

Even though the impairment test will be carried out in future accounting periods, for the purpose of the Unaudited Pro Forma Financial Information, the Group has assessed if there is any impairment indication of the pro forma goodwill arising from the proposed acquisition of the Target Company in accordance with IAS 36 “Impairment of Assets” which is consistent with the Group’s accounting policies. The Group has adopted the income approach in arriving at the recoverable amount of the Target Company which represents the business valuation set out in the valuation report contained in Appendix V to this circular.

– III-8 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

The recoverable amount of the cash-generating unit in which the Target Company is assigned (the “ CGU ”) is RMB615,000,000, which is determined based on the valuation conducted by Pengxin Asset Appraisal, whose valuation report is included in Appendix V to this circular. This recoverable amount exceeds the carrying amount of the CGU of RMB604,771,000, which comprises goodwill of RMB18,866,000 and the fair value of net asset value of the Target Company of RMB585,905,000. Therefore, the Directors are of the view that there is no indication of impairment of the pro forma goodwill arising from the proposed acquisition of the Target Company and consider that no goodwill impairment is necessary in the preparation of the Unaudited Pro Forma Financial Information. The Group will consider prevailing business circumstances and may not adopt the same key assumptions, accounting principal and valuation method to assess the impairment in the future. The Company’s Reporting Accountant has assessed the relevant information in respect of the impairment of the Enlarged Group’s goodwill under IAS36. As the recoverable amount of the CGU exceeds its carrying amount, the Company’s Reporting Accountant concurs with the Directors’ view that there is no indication of impairment on the pro forma goodwill.

Upon completion of the Acquisition, the actual goodwill, and property, plant and equipment, right-of-use assets and intangible assets of the Target Company acquired, for accounting purpose, will need to be recalculated based on the fair value of the purchase consideration and the fair value of the net identifiable assets and liabilities of the Target Company at the date of completion of the Acquisition. The actual financial effects may be materially different from the amounts presented above and potential impairment adjustment may be required when the carrying amount of the CGU (including the pro forma goodwill) exceeds its recoverable amounts.

1. The pro forma adjustment represents the recognition of other acquisition costs amounting to approximately RMB6,110,000 as estimated by the Directors which mainly comprises legal and professional fees.

2. No other adjustments have been made to reflect any trading results or other transactions of the Group and of the Target Company subsequent to 31 December 2020.

– III-9 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

II. INDEPENDENT REPORTING ACCOUNTANTS’ REPORT ON THE COMPILATION OF THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report received from the Company’s reporting accountant, KTC Partners CPA Limited, Certified Public Accountants, Hong Kong, which has been prepared for the purpose of incorporation in this circular.

==> picture [316 x 92] intentionally omitted <==

The Board of Directors

Dongjiang Environmental Company Limited 1st Floor, 3rd Floor, North Side of 8th Floor,

9th-12th Floors, Dongjiang Environmental Building,

No. 9 Langshan Road, North Area, High-tech Industrial Park, Nanshan District, Shenzhen City

Dear Sirs,

We have completed our assurance engagement to report on the compilation of Unaudited Pro Forma Financial Information of 東江環保股份有限公司 Dongjiang Environmental Company Limited (the “ Company ”) and its subsidiaries (hereinafter collectively referred to as the “ Group ”) by the directors of the Company (the “ Directors ”) for illustrative purposes only. The Unaudited Pro Forma Financial Information consists of the unaudited pro forma statement of financial position as at 31 December 2020 and related notes as set out in Part I of Appendix III of the circular (the “ Circular* ”) dated 20 August 2021 issued by the Company. The applicable criteria on the basis of which the Directors have compiled the Unaudited Pro Forma Financial Information are set out in Part I of Appendix III of the Circular.

The Unaudited Pro Forma Financial Information has been compiled by the Directors to illustrate the impact of the proposed acquisition of a 70% equity interest in 郴州雄風環保科技有限公司 , (Chenzhou Xiongfeng Environment Technology Co., Ltd.) (the “ Target Company ”) (the “ Acquisition* ”) on the Group’s financial position as at 31 December 2020. As part of this process, information about the Group’s financial position has been extracted by the Directors from the Company’s consolidated financial statements for year ended 31 December 2020 as set out in the annual report of the Company dated 29 March 2021, on which an independent auditor’s report has been published.

• For identification purpose only

– III-10 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Directors’ Responsibilities for the Pro Forma Financial Information

The Directors are responsible for compiling the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”) and with reference to Accounting Guideline (“ AG ”) 7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”).

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the “Code of Ethics for Professional Accountants” issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behavior.

The firm applies Hong Kong Standard on Quality Control 1 “Quality Control for Forms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements” issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards, and applicable legal and regulatory requirements.

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus” issued by the HKICPA. This standard requires that the reporting accountant plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the unaudited pro forma financial information in accordance with paragraph 4.29 of the Listing Rules and with reference AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the unaudited pro forma financial information.

The purpose of unaudited pro forma financial information included in the Circular is solely to illustrate the impact of the Acquisition on unadjusted financial information of the Group as if the Acquisition had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Acquisition would have been as presented.

– III-11 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

A reasonable assurance engagement to report on whether the Unaudited Pro Forma Financial Information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the unaudited pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

• the related unaudited pro forma adjustments give appropriate effect to those criteria; and

• the unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgment, having regard to the reporting accountants’ understanding of the nature of the Group, the Acquisition in respect of which the Unaudited Pro Forma Financial Information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the Unaudited Pro Forma Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

• (a) the Unaudited Pro Forma Financial Information has been properly compiled by the Directors on the basis stated;

• (b) such basis is consistent with the accounting policies of the Group; and

• (c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

KTC Partners CPA Limited

Certified Public Accountants (Practising)

Chow Yiu Wah, Joseph Practising Certificate Number: P04686

Hong Kong, 20 August 2021

– III-12 –

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY

Set out below is the management discussion and analysis on the Target Group for the three financial years ended 31 December 2020 and two months ended 28 February 2021 (the “ Relevant Period ”). The following financial information is based on the “Accountants’ Report on Historical Financial Information of the Target Company” as set out in Appendix II to this circular.

BUSINESS REVIEW AND FINANCIAL REVIEW OF THE TARGET COMPANY

The Target Company is a company established in the PRC. It operates in the comprehensive utilization of waste resources industry, and it principally engaged in the recovery of rare metals such as silver, bismuth, lead, gold, and palladium from non-ferrous smelting slag.

Revenue

For the three years ended 31 December 2020, two months ended 29 February 2020 and two months ended 28 February 2021, the Target Company recorded revenue of approximately RMB970.36 million, RMB1,499.60 million, RMB1,414.94 million, RMB113.82 million and RMB356.18 million respectively.

Since the Target Company was in the period of equity changes during the second half of 2020, it had a partial impact on production and sales in 2020, and had a greater impact on production and sales from January to February 2021, resulting in an increase of the revenue in January to February 2021 as compared to the same period last year. The operating revenue in 2019 and 2020 increased as compared to that in 2018, mainly due to the increase in sales volume and unit price of palladium, gold and other metals. Besides, the increase in sales and sales volume of lead, platinum and other metals contributed to the increase in revenue.

Operating costs

For the three years ended 31 December 2020, two months ended 29 February 2020 and two months ended 28 February 2021, the operating costs of the Target Company were approximately RMB775.16 million, RMB1,300.18 million, RMB1,247.00 million, RMB105.58 million and RMB320.08 million respectively. The reasons for the changes in each of the years were due to the same reasons for the changes in operating revenue.

Gross profit margin

During the Relevant Period, the gross profit margin of the Target Company decreased steadily. For the three years ended 31 December 2020, two months ended 29 February 2020 and two months ended 28 February 2021, the gross profit of the Target Company was approximately RMB195.20 million, RMB199.43 million, RMB167.94 million, RMB8.24 million and RMB36.10 million respectively, while the gross profit margin was approximately 20.12%, 13.3%, 11.87%, 7.24% and 10.14% respectively.

– IV-1 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY

APPENDIX IV

The substantial decrease in gross profit margin in 2019 as compared to that in 2018 was mainly due to the decrease in national hazardous waste codes obtained and the decrease in the range of purchasable similar materials by the Target Company.

The gross profit margin from 2019 to 2021, January to February 2020 and January to February 2021 remained relatively stable. Since part of the inventories was sold at lower gross profit in 2021 as a result of stock clearing, the gross profit margin from 2019 to 2021 represented a slight decreasing trend.

Expenses for the period

The expenses for the period of the Target Group mainly included administrative expenses and financial expenses.

For the three years ended 31 December 2020, two months ended 29 February 2020 and two months ended 28 February 2021, the administrative expenses (including research and development expenses) of the Target Company were RMB108.24 million, RMB142.06 million, RMB148.62 million, RMB7.48 million and RMB36.75 million respectively. The changes in administrative expenses in each of the years were insignificant.

The increase in administrative expenses was due to the scale of production and operation expanded and the number of research and development projects increased, the use of research and development materials has also increased significantly. Such bigger decrease in January to February 2021 compared with the same period last year is due to the equity changes undergoing in January to February 2021 which affected the production and operation of the Company.

For the three years ended 31 December 2020, two months ended 29 February 2020 and two months ended 28 February 2021, the financial cost of the Target Company were RMB39.43 million, RMB37.74 million, RMB29.07 million, RMB2.17 million and RMB1.19 million respectively. The substantial decrease in financial cost in 2019 as compared to that in 2018 was mainly due to the decrease in interest expenses payable to holding company. Chifeng Gold waived the interest of the Target Company in 2019, amounting to RMB27.2520 million. The financial cost in 2020 decreased by 22.97% as compared to that in 2019 was due to the interest of borrowings all the long-term borrowings were repaid in 2020 and the short-term borrowings in 2020 decreased by 52.33% (the decrease amounting to RMB224.88 million) as compared to that in 2019. The principal of the long-term payables also decreased year-by-year. As a result of the abovementioned factors, the interest expenses decreased.

Trade receivables

As at 31 December 2018, 2019 and 2020 and 28 February 2021, the trade receivables of the Target Company were approximately RMB15.21 million, RMB97.37 million, RMB2.39 million, and RMB0 respectively. The change in the balance at the end of each period was mainly due to the change in the unrecovered customer payment at the end of the period, instead of the change in the credit policy. Trade receivables were recovered in the following year. By the end of February 2021, the balance of trade receivables was RMB0, due to the relevant divestiture to Hanfeng United.

– IV-2 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY

APPENDIX IV

Prepayments

As at 31 December 2018, 2019 and 2020 and 28 February 2021, the prepayments of the Target Company were approximately RMB24.53 million, RMB91.16 million, RMB68.54 million, and RMB0.98 million respectively.

The increase in prepayments at the end of 2019 and in 2020 exceeds that in 2018, mainly due to the additions of prepayment of anode slime to Shaanxi Dongling Smelting Co., Ltd. ( 陝西東嶺冶煉有限 公司 ) and prepayment of lead-containing materials to Zhuzhou Smelter Group Co., Ltd. ( 株洲冶煉集 團股份有限公司 ). Upon investigation, the purchase of such materials is in the form of full prepayment, which is a general practice in the industry. By the end of February 2021, the prepayments decreased substantially, due to the relevant divestiture to Hanfeng United.

Other receivables

Other receivables represented the deposit, value added tax receivables and other receivables. As at 31 December 2018, 2019 and 2020 and 28 February 2021, the other receivable of the Target Company were approximately RMB26.29 million, RMB3.18 million, RMB3.58 million, and RMB0.45 million respectively.

The decrease in other receivables in 2019 as compared to that in 2018 was mainly due to the decrease of RMB21.67 million value added tax receivable in 2019. The balance in other receivable in 2020 remained constant as compared to that in 2019. By the end of February 2021, the balance of such item decreased substantially, due to the relevant divestiture to Hanfeng United.

Inventories

As at 31 December 2018, 2019 and 2020 and 28 February 2021, the inventories of the Target Company were approximately RMB1,465.14 million, RMB1,443.91 million, RMB693.19 million, and RMB6.93 million respectively.

Since the Company reached an intention of acquisition with the Target Company, the Target Company speeded up production and stock clearing of the inventories in the second half of 2020, leading to the substantial decrease in inventories at the end of 2020 and the end of February 2021.

Interest-bearing borrowings

As at 31 December 2018, 2019 and 2020 and 28 February 2021, the short-term and long-term borrowings of the Target Company were approximately RMB306.62 million, RMB485.98 million, RMB204.85 million and RMB20.02 million respectively.

– IV-3 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY

APPENDIX IV

The balance of interest-bearing borrowings during each of the periods varies greatly, representing the ordinary changes in financing in the course of normal business, which is due to the normal income and expenditure and bank loans. Of which, since the revenue increased significantly in 2019, as the need for cash flow to support the operation increased, the balance of interest-bearing borrowings at the end of 2019 is higher. From 2020 to February 2021, due to the drop in pressure of liquidity for the Target Company and the settlement of claims and debts, the balance of short-term borrowings dropped significantly.

Derivatives

As at 31 December 2018, the Target Company signed three gold lease contracts amounting to approximately RMB204.91 million, which were disposed of as at the year ended 31 December 2019.

Contract liabilities

As at 31 December 2018, 2019 and 2020 and 28 February 2021, the contract liabilities of the Target Company were approximately RMB16.45 million, RMB11.06 million, RMB33.73 million and RMB0 respectively.

The balance of contract liabilities in 2020 increased substantially as compared to that in 2019, representing the substantial increase in receipt in advance from individual customers. The balance of contract liabilities in 2021 has been divested to Hanfeng United.

Trade and bills payables

As at 31 December 2018, 2019 and 2020 and 28 February 2021, the trade payable of the Target Company were approximately RMB38.77 million, RMB22.81 million, RMB14.89 million and RMB2.82 million. The decrease of trade and bills payable during the years was mainly due to the Target Company had obtained funds from interest-bearing borrows to repay the trade and bills payables.

Other payables

As at 31 December 2018, 2019 and 2020 and 28 February 2021, the other payables of the Target Company were approximately RMB55.92 million, RMB39.50 million, RMB43.72 million and RMB11.30 million respectively.

The balance in other payables in 2019 decreased by RMB16.42 million as compared to that in 2018 was due to the repayment of accrued expenses. The balance in other payable in 2020 increased by RMB4.22 million as compared to that in 2019 was due to increase of accrued expenses. The other payables at the end of February 2021 decreased substantially, due to the relevant divestiture to Hanfeng United.

– IV-4 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY

APPENDIX IV

Gearing ratio

For the three years ended 31 December 2020, two months ended 29 February 2020 and two months ended 28 February 2021, the gearing ratio of the Target Company was approximately 49.51%, 51.50%, 27.02%, 53.33% and 6.97% respectively. Of which, the change in gearing ratio in 2018, 2019 and February 2020 was relatively stable. In the end of 2019, since the Target Company signed an agreement of acquisition intention with the Company, speeded up production and settlement of claims and debts, both the assets and liabilities decreased substantially without significant change in net assets, causing substantial drop in gearing ratio. The reasons for the change in February 2021 were the same as the end of 2020, being the acceleration in stock clearing and settlement of claims and debts.

Net return on equity

For the three years ended 31 December 2020, two months ended 29 February 2020 and two months ended 28 February 2021, the net return on equity of the Target Company was approximately 6.05%, 2.73%, 4.46%, 0.24% and 1.30% respectively. The overall net return on equity of the Target Company showed a decreasing trend, mainly due to the larger amount of provision for asset impairment losses during the reporting period. The equity changes from January to February 2021 had an impact on the sales of the Company, resulting in an increase in the net return on equity in February 2021 from the previous year.

Foreign exchange risk

The Target Company is a company established in the PRC with limited liability and most of its monetary assets, liabilities, income and expenses were and are denominated in RMB. Therefore, the management of the Target Company considers that the risks brought by the exchange rate fluctuation are relatively low.

Funding and treasury policy

The Target Company has adopted a prudent funding and treasury policy towards its overall business operations with an aim to minimize its financial risks. Future projects will be financed by cash flows from operations or capital raised by means of equity financing.

Contingent liabilities

During the Relevant Periods, the Target Company did not have any significant contingent liabilities.

Pledge of assets

On 25 March 2020, the Target Company and Chenzhou Branch of Shanghai Pudong Development Bank Co., Ltd. entered into the “Working Capital Loan Contract” numbered 14412021280022, with a loan amount of RMB20 million and a term from 25 March 2020 to 24 March 2021, for which Zhao Meiguang provided guarantee and the real estate in the Bitang Factory Zone of the Target Company has been pledged as security.

Save as disclosed above, the Target Company did not have any material pledges of assets.

– IV-5 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY

APPENDIX IV

Employee information

As at 28 February 2021, the Target Company had 261 regular employees (including 3 Directors). The Company has signed labor contracts with all regular employees.

Remuneration policy

During the Reporting Period, the Target Company recruits, employs, promotes and remunerates its employees based on their qualification, experience, skills, performance and contribution. Remuneration is also determined with reference to, among others, the market trend. Other benefits include social insurance and allowance. Bonus to the employees of the Target Company was determined after taking into account the results of the Target Company and the performance of its employees. The remuneration policy of the Target Company’s senior management is monitored by the Company’s remuneration committee after the Completion.

The Company will provide training (whether in-house or out-sourced) to the Target Company’s employees when necessary.

Business prospects

As a comprehensive non-ferrous metal recycling enterprise integrating R&D, production and sales, the Target Company has formed a mature production process for the recycling and utilization of waste resources such as refining waste of non-ferrous metals, and also has established source of raw materials and product markets. With the support of relevant national and regional policies, it has maintained a sustained profitability trend during the Reporting Period. Its major advantages are as follows:

(1) Technical advantages

Strong comprehensive recycling capacity. Most of the peers do not possess strong comprehensive recycling treatment capabilities, resulting in few types of recovered metals and low metal recovery rate. Thus, some valuable metals are discharged in the form of waste residues. The Target Company has a strong comprehensive metal recovery capability, and the metals that can be comprehensively recycled include bismuth, silver, palladium, gold, lead, copper, etc., basically achieving comprehensive recovery of valuable metals.

Wide application of raw materials. Peers are subject to the process they use, which generally applies materials with higher metal grades as raw materials. However, the comprehensive recycling system of the Target Company is able to adapt to various raw materials and process multi-metal materials with complicated elements. Such process can be adjusted with the grade of raw materials, and therefore the source of raw materials is more extensive.

– IV-6 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANY

APPENDIX IV

(2) R & D advantages

The Target Company is committed to “technology-driven, market-oriented, quality-guaranteed, and talent-based” research and development concept. The Target Company has always attached great importance to the investment in the R&D of new products and new technologies, established a research and development investment mechanism, and regarded the R&D of new products and new processes as an important guarantee for maintaining its core competitiveness. After years of independent R&D practice, the Target Company has cultivated a group of intermediate and senior technical talents who have accumulated extensive experience in improving the degree of enrichment and recovery rate of rare metals and dissipated metals, as well as in analysis and testing. In addition, the Target Company values collaboration between enterprises, universities and research institutes, and has established project cooperation with Central South University, CINF Engineering Corporation ( 長沙有色冶金設計研究 院 ), Changsha Longtai Microwave Thermal Engineering Co., Ltd. ( 長沙隆泰微波熱工有限公司 ), etc., providing technical support and intellectual resource for the clean extraction of secondary resources of rare and precious metals and technological progress in harmless treatment and comprehensive recovery of industrial solid waste.

(3) Geographical advantages

The raw materials applied in the production of the Target Company are mainly refining waste of non-ferrous metals containing various metal elements. The Target Company is located in Chenzhou City, Hunan Province, which is known as the “Hometown of Non-ferrous Metals in China”. Chenzhou possesses tungsten, neodymium, bismuth and molybdenum metals, ranking first in the PRC in terms of reserves, and tin, zinc and lead metals, ranking the third and fourth in the PRC in terms of reserves, respectively. Among the proven mineral resources, the reserves of lead, zinc, silver and bismuth are particularly abundant. Surrounding these mines, a large number of enterprises in the non-ferrous metal industry chain have formed from mining to refining. These enterprises have generated a large amount of tailings and refining waste, which provides extremely convenient conditions for the procurement of raw materials for the Target Company.

In view of the above characteristics of the Target Company, the completion of this transaction will help the Group to further deepen its business presence in related regions, enhance its comprehensive strengths and enhance its comprehensive market competitiveness.

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VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

Set out below is the asset valuation report on all shareholders’ equity in relation to the Acquisition issued by Shenzhen Pengxin Asset Appraisal and Land and Real Estate Valuation Co., Ltd. on 25 June 2021, which has been prepared in Chinese and whose English translation is for reference only. If there is any inconsistency between the Chinese and English versions, the Chinese version shall prevail.

STATEMENT OF APPRAISERS

• I. This asset valuation report was prepared in accordance with the Asset Valuation Standards – Basic Standards issued by the Ministry of Finance and professional conduct standards and professional ethics for asset valuation issued by China Appraisal Society.

• II. This asset valuation report shall only be used by the clients and the users of this asset valuation report under the provisions of laws and administrative regulations. Save for the above, any other institutions and individuals shall not be the users of this asset valuation report.

• III. The users of this asset valuation report shall use this asset valuation report in accordance with laws and administrative regulations within the scope of use specified in this asset valuation report. In the event that any user of this asset valuation report uses this asset valuation report in violation of the foregoing regulations, the Company and the asset appraiser who signed this asset valuation report shall not be held accountable.

• IV. The users of this asset valuation report should properly understand and use the appraisal conclusion. The appraisal conclusion shall not be indicative of the realizable price of the appraised object, and the appraisal conclusion should not be considered as a guarantee for the realizable price of the appraised object.

• V. The users of this asset valuation report should pay attention to the assumptions that the appraisal conclusion is established, the explanation of special matters and the explanation of the use restriction of the asset valuation report.

• VI. The Company and the asset appraiser who signed this asset valuation report shall abide by laws, administrative regulations and asset valuation standards and adhere to the principles of independence, objectivity and fairness, and shall be responsible for the issue of this asset valuation report by law.

• VII. Appraised objects and the declared valuation information, business data and information, financial reports and data and other important data involved in the respective appraisal scopes and contained in the asset valuation schedule shall be declared or provided by the clients and related parties (including the owners or de facto controllers of the appraised objects, the appraised company, the related parties of the appraised company, etc. and their managers or employees) and confirmed by signature, seal or other methods permitted by law. The relevant parties shall be responsible for the authenticity, completeness, legality and validity of the information they provide in accordance with the law.

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APPENDIX V

VALUATION REPORT ON THE TARGET COMPANY

• VIII. The asset appraiser who signed this asset value report (including the asset appraisal professionals who provided assistance) has conducted necessary on-site investigations on the appraised object and the assets involved in this asset valuation report. The appraiser has paid the necessary attention to the legal ownership of the appraised objects and the assets involved, and has also conducted a random check on the legal ownership of the appraised objects and the assets involved. Any issues identified have been truthfully disclosed, and the relevant parties have been requested to improve the property titles to meet the requirements of issuing an asset valuation report.

• IX. The Company and the asset appraiser who signed this asset valuation report have no existing or expected interest in the objects appraised in this asset valuation report, and there is no existing or expected interest in relevant parties and no prejudice against relevant parties.

• X. Without the written consent of the Company, the content of this asset valuation report shall not be excerpted, quoted or disclosed in the public media, unless otherwise stipulated in laws, administrative regulations and the asset valuation commission contract.

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APPENDIX V

SUMMARY OF THE ASSET VALUATION REPORT ON ALL SHAREHOLDERS’ EQUITY OF CHENZHOU XIONGFENG ENVIRONMENT TECHNOLOGY COMPANY LIMITED INVOLVED IN THE PROPOSED EQUITY ACQUISITION BY DONGJIANG ENVIRONMENTAL COMPANY LIMITED

Peng Xin Zi Ping Bao Zi [2021] No. S109

Shenzhen Pengxin Asset Appraisal and Land and Real Estate Valuation Co., Ltd. accepted the entrustment of Dongjiang Environmental Company Limited (“ Dongjiang Environmental ”) to assess the market value of all the shareholders’ equity of Chenzhou Xiongfeng Environment Technology Company Limited (“ Xiongfeng Environment ”) involved in the Equity Acquisition proposed by Dongjiang Environmental as at the valuation reference date. The asset valuation report is summarized as follows:

• I. Appraisal purpose: Dongjiang Environmental is contemplating an equity acquisition. To this end, Dongjiang Environmental entrusted the Company with appraising the market value of all shareholders’ equity of Xiongfeng Environment to provide a value reference for the above economic behaviour.

• II. Appraised object: The object of this valuation is all the shareholders’ equity of Xiongfeng Environment. The assessment scope corresponding to the appraised object is the relevant assets and liabilities of Xiongfeng Environment after the audit simulation adjustment on the valuation reference date, including current assets, non-current assets and related liabilities that are reflected in the book, and assets that are not reflected in the book.

• III. Valuation reference date: 28 February 2021.

• IV. Value type: the market value.

• V. Appraisal approach: the asset-based approach and income approach.

• VI. Appraisal conclusion:

• The appraised value of all shareholders’ equity of Xiongfeng Environment by using the asset-based approach as at the valuation reference date was RMB612,871,500.

• The appraised value of all shareholders’ equity of Xiongfeng Environment by using the income approach as at the valuation reference date was RMB615,000,000.

After comprehensive analysis, the appraisal result under the asset-based approach has been adopted as the appraisal conclusion of this valuation report, that is, the appraised value of all shareholders’ equity of Xiongfeng Environment as at the valuation reference date (i.e. 28 February 2021) was RMB612,871,500 .

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APPENDIX V

The appraisal conclusion contained in this asset valuation report does not take into account the possible impact of equity liquidity on the value of shareholders’ entire equity.

The validity period of the appraisal conclusion: The appraisal conclusion is only established on the valuation reference date stated in the valuation report. The validity period of the asset appraisal results is valid within one year from the valuation reference date (that is, from 28 February 2021 to 27 February 2022).

The users of this asset valuation report should be noted that, the above content is extracted from the text of the asset valuation report, and please read the text of the asset valuation report in order to find the details of this assessment engagement and properly understand the appraisal conclusion.

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APPENDIX V

THE ASSET VALUATION REPORT ON ALL SHAREHOLDERS’ EQUITY OF CHENZHOU XIONGFENG ENVIRONMENT TECHNOLOGY COMPANY LIMITED INVOLVED IN THE PROPOSED EQUITY ACQUISITION BY DONGJIANG ENVIRONMENTAL COMPANY LIMITED

Peng Xin Zi Ping Bao Zi [2021] No. S109

To Dongjiang Environmental Company Limited

Shenzhen Pengxin Asset Appraisal and Land and Real Estate Valuation Co., Ltd. (“ Shenzhen Pengxin ”) accepted the entrustment of the Company to appraise the market value of all shareholders’ equity of Chenzhou Xiongfeng Environment Technology Company Limited involved in the Equity Acquisition proposed by the Company as at 28 February 2021 in accordance with the provisions of laws, administrative regulations and asset valuation standards and by adhering to the principles of independence, objectivity and impartiality, adopting the asset-based approach and the income approach and following the necessary valuation procedures. The particulars of the asset valuation report are set out as follows:

• I. THE CLIENT, THE APPRAISED ENTERPRISE AND OTHER USERS OF THE ASSET VALUATION REPORT AGREED IN THE ASSET VALUATION COMMISSION CONTRACT

(I) The profile of client

The concise business information of the client is set out as follows:

Company name Dongjiang Environmental Company Limited (“ Dongjiang Environmental ”)

Stock abbreviation Dongjiang Environmental

Stock code 002672.SZ Legal representative Tan Kan

• Registered capital RMB879,267,102

Registered address 1st Floor, 3rd Floor, North of 8th Floor and 9th-12th Floor, Dongjiang Environmental Building, No. 9 Langshan Road, North of Hi-tech Park, Nanshan District, Shenzhen

Business address 1st Floor, 3rd Floor, North of 8th Floor and 9th-12th Floor, Dongjiang Environmental Building, No. 9 Langshan Road, North of Hi-tech Park, Nanshan District, Shenzhen

Unified social credit code 91440300715234767U

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APPENDIX V

Date of establishment as a 16 September 1999 limited company

Time of listing 26 April 2012

Type of enterprise Joint-stock limited company

Business scope

General business operations are: waste disposal and comprehensive utilization (licenses will be applied for separately); the treatment of wastewater, waste gas and noise; design, construction and operation of environmental protection facilities; sales of chemical products (dangerous goods can only be operated after obtaining relevant business licenses); the production, purchase and sale of environmentally friendly materials, environmentally friendly recycled products and environmentally friendly equipment (the business license of the production site will be applied for separately), and the development, promotion and application of new environmentally friendly products and technologies; investment holding (actual projects are to be separately submitted); goods and technology import and export business (excluding those distributed and operated exclusively by the State); property leasing; biomass power generation such as biogas.

Operating period

From 16 September 1999 to 1 January 5000

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APPENDIX V

• (II) The profile of the appraised enterprise

1. Basic information of the appraised enterprise as at the valuation reference date

Company name

Chenzhou Xiongfeng Environment Technology Company Limited (“ Xiongfeng Environment ”)

Legal representative Li Jinqian

Registered capital RMB822,890,000 Registered address National Circular Economy Demonstration Park, Economic Development Zone, Yongxing County, Chenzhou City, Hunan Province

Business address National Circular Economy Demonstration Park, Economic Development Zone, Yongxing County, Chenzhou City, Hunan Province

Unified social credit code 914310237305144769

Date of establishment as a 30 July 2001 limited company

Time of listing Limited liability company (wholly-owned legal person invested or controlled by natural persons)

Type of enterprise S c i e n t i f i c a n d t e c h n o l o g i c a l r e s e a r c h an d development services in the field of environmental protection; recycling, disposal and utilization of industrial solid waste and hazardous solid waste and other renewable resources; production and sales of rare and precious metals, non-ferrous metals and ferrous metals; the export of the company’s self-produced products and technologies; import of raw and auxiliary materials, instruments and meters, mechanical equipment, spare parts and technologies required for the production of the enterprise; the “Three-Plus-One” business.

Business scope

Perpetual period beginning on 30 July 2001

Note: The industrial and commercial registered capital of Xiongfeng Environment is RMB822,890,000, and its registered capital after auditing and simulation adjustment is RMB411,379,900.

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APPENDIX V

2. Changes in the shareholding structure of the appraised enterprise from the time of establishment to the valuation reference date

• (1) The shareholding structure of Xiongfeng Environment at the establishment time of 30 July 2001

Yongxing County Xiongfeng Nonferrous Metal Sales Co., Ltd. (“ Xiongfeng Metal ”, the predecessor of Xiongfeng Environment) is a limited liability company jointly initiated and established by four natural persons, namely Tan Xiongyu, Luo Jianyun, Guo Xiaoze and Wang Guoju, in July 2001. The basic information of Xiongfeng Metal at the establishment time is set out as follows:

Company name Yongxing County Xiongfeng Nonferrous Metals Co., Ltd. Type of company Limited liability company Registered capital RMB1,000,000 Legal representative Tan Xiongyu Business scope Sales of copper, lead, bismuth, aluminum and silver Date of establishment 30 July 2001 Domicile Bolin Town, Yongxing County Registration authority The Administration for Industry and Commerce of Yongxing County Registration number 431023200041

On 1 June 2001, Tan Xiongyu, Guo Xiaoze, Luo Jianyun and Wang Guoju jointly signed the Articles of Association of Yongxing County Xiongfeng Nonferrous Metals Co., Ltd. The articles of association stipulated the registered capital of RMB1,000,000, among which, Tan Xiongyu, Luo Jianyun, Guo Xiaoze and Wang Guoju shall contribute RMB400,000 (representing 40% of the registered capital), RMB200,000 (representing 20% of the registered capital), RMB300,000 (representing 30% of the registered capital) and RMB100,000 (representing 10% of the registered capital), respectively. The articles of association also stipulated the organizational structure, business period and liquidation methods.

On 15 July 2001, the Administration for Industry and Commerce of Yongxing County, Chenzhou City, Hunan Province issued the Notice of Pre-approval of Enterprise Name and approved the company name as “Yongxing County Xiongfeng Nonferrous Metals Co., Ltd.”.

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APPENDIX V

On 25 July 2001, Chenzhou Jinhua Co., Certified Public Accountants issued the asset valuation report (Chen Jin Hui Shi (2001) Ping Zi No.30), which adopted 20 July 2001 as the valuation reference date and appraised the value of RMB1,301,072.80 of assets declared by the shareholders of Xiongfeng Metal in kind/in cash (including buildings, machinery and equipment and inventory) as at the valuation reference date.

On 26 July 2001, Chenzhou Jinhua Co., Certified Public Accountants issued the capital verification report (Chen Jin Hui Shi [2001] Yong Yan Zi No.19), which verified that as of 20 July 2001, Xiongfeng Metal had received the assessed physical assets contributed by its shareholders, and the registered capital had been fully paid.

On 30 July 2001, Xiongfeng Metal had completed the industrial and commercial registration for its establishment, and obtained the Corporate Legal Person Business License issued by the Administration for Industry and Commerce of Yongxing County with the registration number 431023200041.

The amount and ratio (shareholding structure) of the shareholders’ capital contribution at the time of establishment of Xiongfeng Metal are shown in the following table:

No. Shareholder 1 Tan Xiongyu 2 Guo Xiaoze 3 Luo Jianyun 4 Wang Guoju Total	Currency Unit: RMB’0,000 Amount of contribution Shareholding ratio 40.00 40.00% 30.00 30.00% 20.00 20.00% 10.00 10.00% 100.00 100.00%

(2) The first capital increase in September 2003

On 8 August 2003, Xiongfeng Metal convened the sixth meeting of the first session of general meeting of shareholders, which reviewed and approved the increase of its registered capital from RMB1,000,000 to RMB4,890,000 and the corresponding amendments to its articles of association. Such increased registered capital would be subscribed for by Tan Xiongyu, Guo Xiaoze, Luo Jianyun and Wang Guoju in cash as to RMB1,400,000, RMB1,200,000, RMB680,000 and RMB610,000, respectively.

On the same date, Chenzhou Jinhua Co., Certified Public Accountants issued the capital verification report (Chen Jin Hui Shi [2003] Yan Zi No.05), which stated that as of 6 August 2003, Xiongfeng Metal had received the total registered capital of RMB4,890,000 from the above shareholders, including the newly-added registered capital of RMB3,890,000.

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APPENDIX V

On 1 September 2003, Xiongfeng Metal completed the industrial and commercial registration of changes for the above matters.

The shareholding structure of Xiongfeng Metal upon the completion of this capital increase is shown in the following table:

Currency Unit: RMB’0,000

No. Shareholder 1 Tan Xiongyu 2 Guo Xiaoze 3 Luo Jianyun 4 Wang Guoju Total	Amount of contribution 180.00 150.00 88.00 71.00 489.00	Shareholding ratio 36.81% 30.67% 18.00% 14.52% 100.00%

• (3) The first equity transfer in November 2003

On 6 November 2003, Xiongfeng Metal convened a shareholders meeting, which approved the transfer of the contribution of RMB300,000 made to Xiongfeng Metal by the shareholder Tan Xiongyu to Chen Jiashun and amended its articles of association accordingly.

On the same date, Tan Xiongyu and Chen Jiashun signed a share transfer agreement to make an agreement on the above-mentioned equity transfer.

On 20 November 2003, Xiongfeng Metal completed the industrial and commercial registration of changes for the above matters.

The shareholding structure of Xiongfeng Metal upon the completion of this equity transfer is shown in the following table:

Currency Unit: RMB’0,000

No. Shareholder 1 Tan Xiongyu 2 Guo Xiaoze 3 Luo Jianyun 4 Wang Guoju 5 Chen Jiashun Total	Amount of contribution 150.00 150.00 88.00 71.00 30.00 489.00	Shareholding ratio 30.67% 30.67% 18.00% 14.52% 6.13% 100.00%

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APPENDIX V

(4) The second equity transfer and the second capital increase in December 2004

On 21 November 2004, Xiongfeng Metal held a shareholders meeting and approved the shareholder Chen Jiashun to transfer all his contributions to Xiongfeng Metal of RMB300,000 to Tan Xiongyu, the shareholder Luo Jianyun to transfer all his contributions to Xiongfeng Metal of RMB880,000 to Tan Xiongyu and the shareholder Guo Xiaoze to transfer all his contributions to Xiongfeng Metal of RMB1,500,000 to Wang Guoju. Meanwhile, Xiongfeng Metal increased its registered capital by RMB6,000,000, in which, Tan Xiongyu and Wang Guoju subscribed for RMB5,000,000 and RMB1,000,000, respectively.

On 21 November 2004, Tan Xiongyu and Luo Jianyun signed a shareholders’ equity transfer agreement, agreeing that Luo Jianyun would transfer his 18% equity in Xiongfeng Metal to Tan Xiongyu at a price of RMB880,000, together with the payment method and time of payment for the equity transfer price. On the same date, Tan Xiongyu also signed a shareholders’ equity transfer agreement in respect of the above-mentioned equity transfer with Chen Jiashun, Wang Guoju and Guo Xiaoze.

On 26 December 2004, Chenzhou Bei’anxin Lianhe Accounting Firm issued the appraisal report (Chen Bei Hui Suo Ping Zi [2004] No.81), which adopted 16 December 2004 as the valuation reference date and appraised the value of RMB3,014,000 of machinery and equipment contributed by Tan Xiongyu in kind.

On the same date, Chenzhou Bei’anxin Lianhe Accounting Firm issued the capital verification report (Chen Bei Hui Suo Yan Zi [2004] No.119), which stated that as of 24 December 2004, Xiongfeng Metal had received the newly-added registered capital of RMB6,000,000 paid by Tan Xiongyu and Wang Guoju, including the capital contributed in cash of RMB1,000,000, the capital contributed in kind of RMB2,100,000 and the capital transferred from the capital reserve of RMB2,900,000.

On 28 December 2004, Xiongfeng Metal completed the industrial and commercial registration of changes for the above matters.

The shareholding structure of Xiongfeng Metal upon the completion of this equity transfer and capital increase is shown in the following table:

		Currency	Unit: RMB’0,000
		Amount of	Shareholding
No.	Shareholder	contribution	ratio
1	Tan Xiongyu	768.00	70.52%
2	Wang Guoju	321.00	29.48%
	Total	1,089.00	100.00%

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APPENDIX V

• (5) The third equity transfer in June 2006

On 22 June 2006, Xiongfeng Metal convened a shareholders meeting, which approved the transfer of the contribution of RMB5,000,000 made to Xiongfeng Metal by the shareholder Tan Xiongyu to Wang Guoju and amended its articles of association accordingly.

On 23 June 2006, Tan Xiongyu and Wang Guoju signed a shareholders’ equity transfer agreement to make an agreement on the above-mentioned equity transfer.

On 18 July 2006, Xiongfeng Metal completed the industrial and commercial registration of changes for the above matters.

The shareholding structure of Xiongfeng Metal upon the completion of this equity transfer is shown in the following table:

No. Shareholder 1 Wang Guoju 2 Tan Xiongyu Total	Currency Unit: RMB’0,000 Amount of contribution Shareholding ratio 821.00 75.39% 268.00 24.61% 1,089.00 100.00%

(6) The fourth equity transfer in May 2007

On 1 April 2007, Wang Guoju and Luo Jianyun (both being shareholders) signed a transfer agreement regarding the transfer of the capital contribution of RMB2,680,000 made to Xiongfeng Metal by Wang Guoju to Luo Jianyun.

On 5 April 2007, Xiongfeng Metal held a shareholders meeting to approve the above-mentioned equity transfer matters.

On 11 May 2007, Xiongfeng Metal completed the industrial and commercial registration of changes for the above matters.

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APPENDIX V

The shareholding structure of Xiongfeng Metal upon the completion of this equity transfer is shown in the following table:

		Currency	Unit: RMB’0,000
		Amount of	Shareholding
No.	Shareholder	contribution	ratio
1	Wang Guoju	553.00	50.78%
2	Tan Xiongyu	268.00	24.61%
3	Luo Jianyun	268.00	24.61%
	Total	1,089.00	100.00%

(7) The fifth equity transfer in August 2007

On 28 July 2007, Xiongfeng Metal held a shareholders meeting and approved the shareholder Luo Jianyun to transfer all his contributions to Xiongfeng Metal of RMB2,680,000 to Tan Xiongyu and the shareholder Wang Guoju to transfer all her contributions to Xiongfeng Metal of RMB193,900 to Tan Xiongyu.

On 28 August 2007, Tan Xiongyu signed a shareholders’ equity transfer agreement with each of Wang Guoju and Luo Jianyun to make an agreement on the above-mentioned equity transfer.

On 29 August 2007, Xiongfeng Metal completed the industrial and commercial registration of changes for the above matters.

The shareholding structure of Xiongfeng Metal upon the completion of this equity transfer is shown in the following table:

Currency Unit: RMB’0,000

No. Shareholder 1 Tan Xiongyu 2 Wang Guoju Total	Amount of contribution 555.39 533.61 1,089.00	Shareholding ratio 51.00% 49.00% 100.00%

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APPENDIX V

(8) The sixth equity transfer in October 2007

On 18 October 2007, Xiongfeng Metal held a shareholders meeting and approved the shareholder Wang Guoju to transfer part of his contributions to Xiongfeng Metal to Zhou Qibao.

On the same date, Wang Guoju and Zhou Qibao signed a shareholders’ equity transfer agreement regarding the transfer of Wang Guoju’s contributions to Xiongfeng Metal of RMB2,613,600 to Zhou Qibao.

On 23 October 2007, Xiongfeng Metal completed the industrial and commercial registration of changes for the above matters.

The shareholding structure of Xiongfeng Metal upon the completion of this equity transfer is shown in the following table:

Currency Unit: RMB’0,000

No. Shareholder 1 Tan Xiongyu 2 Wang Guoju 3 Zhou Qibao Total	Amount of contribution 555.39 272.25 261.36 1,089.00	Shareholding ratio 51.00% 25.00% 24.00% 100.00%

(9) The seventh equity transfer in March 2008

On 28 March 2008, Xiongfeng Metal held a shareholders meeting, on which, the shareholder Zhou Qibao had been approved to transferred his contributions to Xiongfeng Metal of RMB272,250, RMB163,350 and RMB272,250 to Wang Qiang, Wu Hui and Zhang Jian, respectively and the shareholder Wang Guoju had been approved to transferred her contributions to Xiongfeng Metal of RMB435,600, RMB163,350, RMB163,350, RMB1,089,000 and RMB217,800 to Shi Lei, Liu Bin, Wu Yonghong, Li Shuilin and Tan Guanghua, respectively.

On the same date, Zhou Qibao signed a shareholders’ equity transfer agreement with each of Zhang Jian, Wu Hui and Wang Qiang to make an agreement on the above-mentioned equity transfer; and Wang Guoju signed a shareholders’ equity transfer agreement with each of Tan Guanghua, Wu Yonghong, Shi Lei, Li Shuilin and Liu Bin to make an agreement on the above-mentioned equity transfer.

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APPENDIX V

According to the Legal Opinions on the Acquisition of Assets in Cash and Through the Issue of Shares and the Raise of Supporting Funds by Chifeng Jilong Gold Mining Co. Limited issued by Zhong Lun Law Firm on 29 September 2014, in this equity transfer, Wang Qiang and Wu Hui had not paid the equity transfer consideration to Zhou Qibao, and Li Shuilin had not yet paid the equity transfer consideration to Wang Guoju.

On 31 March 2008, Xiongfeng Metal completed the industrial and commercial registration of changes for the above equity transfer matters.

The shareholding structure of Xiongfeng Metal upon the completion of this equity transfer is shown in the following table:

Currency Unit: RMB’0,000

No. Shareholder 1 Tan Xiongyu 2 Zhou Qibao 3 Li Shuilin 4 Wang Guoju 5 Shi Lei 6 Wang Qiang 7 Zhang Jian 8 Tan Guanghua 9 Liu Bin 10 Wu Yonghong 11 Wu Hui Total	Amount of contribution 555.39 190.575 108.90 65.34 43.56 27.225 27.225 21.78 16.335 16.335 16.335 1,089.00	Shareholding ratio 51.00% 17.50% 10.00% 6.00% 4.00% 2.50% 2.50% 2.00% 1.50% 1.50% 1.50% 100.00%

(10) The eighth equity transfer in April 2008

On 28 April 2008, Xiongfeng Metal held a shareholders meeting, on which, the shareholder Wu Yonghong had been approved to transferred her contributions to Xiongfeng Metal of RMB163,350 to Li Gen and other shareholders waived the right of first refusal.

On 28 April 2008, Wu Yonghong and Li Gen signed a shareholders’ equity transfer agreement, pursuant to which, Wu Yonghong transferred all of her contributions to Xiongfeng Metal of RMB163,350 (accounting for 1.5% of the registered capital) to Li Gen.

On 28 April 2008, Xiongfeng Metal completed the industrial and commercial registration of changes for the above matters.

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APPENDIX V

The shareholding structure of Xiongfeng Metal upon the completion of this equity transfer is shown in the following table:

Currency Unit: RMB’0,000

		Amount of	Shareholding
No.	Shareholder	contribution	ratio
1	Tan Xiongyu	555.39	51.00%
2	Zhou Qibao	190.575	17.50%
3	Li Shuilin	108.90	10.00%
4	Wang Guoju	65.34	6.00%
5	Shi Lei	43.56	4.00%
6	Wang Qiang	27.225	2.50%
7	Zhang Jian	27.225	2.50%
8	Tan Guanghua	21.78	2.00%
9	Liu Bin	16.335	1.50%
10	Li Gen	16.335	1.50%
11	Wu Hui	16.335	1.50%
	Total	1,089.00	100.00%

(11) Conversion into a joint-stock limited company in May 2008

According to the audit report (Ning Xin Hui Shen Zi (2008) No. 0437) issued by BDO China Jiang Su Shu Lun Pan,. Certified Public Accountants on 21 April 2008, the net assets of Xiongfeng Metal as of 31 March 2008 were RMB50,872,900.

According to the asset valuation report (Su Zhong Zi Ping Bao Zi (2008) No. 51) issued by Jiangsu Zhongtian Asset Appraisal Office Co., Ltd. on 5 May 2008 which adopted 31 March 2008 as the valuation reference date, the book value of the net assets of Xiongfeng Metal was RMB50,872,900, and its appraised value amounted to RMB86,652,500.

On 21 May 2008, the Administration of Industry and Commerce of Chenzhou City issued the Notice on Approval of Change of Enterprise Name ((Chenzhou) Ming Si Zi (2008) No. 316), which approved the change of the name of Xiongfeng Metal to “Chenzhou Xiongfeng Rare and Precious Metal Materials Company Limited” (“ Xiongfeng Company ”, the predecessor of Xiongfeng Environment).

According to the Capital Verification Report (Ning Xin Hui Yan Zi (2008) No. 0037) issued by BDO China Jiang Su Shu Lun Pan,. Certified Public Accountants on 26 May 2008, as of 21 May 2008, Xiongfeng Company had received the registered capital of RMB500,000 from all shareholders.

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APPENDIX V

On 28 May 2008, Xiongfeng Company held the founding meeting and the first shareholders meeting. The meeting reviewed and approved the Proposal on the Conversion of Yongxing County Xiongfeng Nonferrous Metals Co., Ltd. into Chenzhou Xiongfeng Rare and Precious Metal Materials Company Limited, and approved the audited net assets of Xiongfeng Metal of RMB50,872,900 to be converted into 50,000,000 shares at a ratio of 1:0.98 in a bid to convert Xiongfeng Metal into a joint-stock limited company with the company name of “Chenzhou Xiongfeng Rare and Precious Metal Materials Company Limited”. The meeting also elected directors of the company’s board of directors and non-employee supervisors of the board of supervisors. On the same date, all the promoters jointly signed the articles of association which would be applicable after the conversion into a joint-stock company.

On 5 June 2018, Xiongfeng Company completed the industrial and commercial registration of changes for the above matters.

The shareholding structure of Xiongfeng Company upon this conversion is shown in the following table:

No. Shareholder 1 Tan Xiongyu 2 Zhou Qibao 3 Li Shuilin 4 Wang Guoju 5 Shi Lei 6 Wang Qiang 7 Zhang Jian 8 Tan Guanghua 9 Liu Bin 10 Li Gen 11 Wu Hui Total	Number of shares (0’000 Shares) 2,550.00 875.00 500.00 300.00 200.00 125.00 125.00 100.00 75.00 75.00 75.00 5,000.00	Shareholding ratio 51.00% 17.50% 10.00% 6.00% 4.00% 2.50% 2.50% 2.00% 1.50% 1.50% 1.50% 5,000.00

– V-17 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

(12) The ninth equity transfer in June 2009

On 15 June 2009, Wang Qiang and Zhou Qibao signed an equity transfer agreement, pursuant to which Wang Qiang transferred his 1,250,000 shares of Xiongfeng Company to Zhou Qibao. As Wang Qiang had not paid the consideration of equity transfer when he received the equity transferred by Zhou Qibao on 28 March 2008, the consideration of equity transfer that Zhou Qibao shall pay for this equity transfer was offset with the cash creditor’s rights of the previous equity transfer.

The shareholding structure of Xiongfeng Company upon the completion of this equity transfer is shown in the following table:

No. Shareholder 1 Tan Xiongyu 2 Zhou Qibao 3 Li Shuilin 4 Wang Guoju 5 Shi Lei 6 Zhang Jian 7 Tan Guanghua 8 Liu Bin 9 Li Gen 10 Wu Hui Total	Number of shares (0’000 Shares) 2,550.00 1,000.00 500.00 300.00 200.00 125.00 100.00 75.00 75.00 75.00 5,000.00	Shareholding ratio 51.00% 20.00% 10.00% 6.00% 4.00% 2.50% 2.00% 1.50% 1.50% 1.50% 100.00%

(13) The tenth equity transfer in September 2009

On 15 September 2009, Li Shuilin and Wang Guoju signed an equity transfer agreement, pursuant to which Li Shuilin transferred his 4,000,000 shares of Xiongfeng Company to Wang Guoju. As Li Shuilin had not paid the consideration of equity transfer when he received the equity transferred by Wang Guoju on 28 March 2008, the consideration of equity transfer that Wang Guoju shall pay for this equity transfer was offset with the cash creditor’s rights of the previous equity transfer.

On the same date, Li Gen and Li Mingyuan signed an equity transfer agreement, pursuant to which Li Gen transferred his 750,000 shares of Xiongfeng Company to Li Mingyuan at the transfer price of RMB763,080.

– V-18 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

On the same date, Wang Guoju signed an equity transfer agreement with each of 18 natural persons including Wu Hualan and Cao Xiaoyi, pursuant to which, Wang Guoju transfer 100,000 shares of Xiongfeng Company to Wu Hualan, 80,000 shares of Xiongfeng Company to Cao Xiaoyi, 50,000 shares of Xiongfeng Company to Wang Zhiyue, Wang Youwu, He Luhong, Tan Haiyan, Liu Sanpin, Wang Lei, Shen Xiaoan, Xu Guiying, Zhang Sheng, Lei Pingyan and Cao Fen, 30,000 shares of Xiongfeng Company to Li Zuogui, Wang Xianfeng, Li Juan and Li Yuelin and 20,000 shares of Xiongfeng Company to Wang Lannv, at the transfer price of RMB1 per share. According to the bank transfer certificates and the confirmation of the relevant parties, the payment for the equity transfer between the above-mentioned 18 natural persons and Wang Guoju had been fully settled.

The shareholding structure of Xiongfeng Company upon this equity transfer is shown in the following table:

		Number of	Shareholding
No.	Shareholder	shares	ratio
		(0’000 Shares)
1	Tan XiongYu	2,550.00	51.00%
2	Zhou Qibao	1,000.00	20.00%
3	Wang Guoju	613.00	12.26%
4	Shi Lei	200.00	4.00%
5	Zhang Jian	125.00	2.50%
6	Li Shuilin	100.00	2.00%
7	Tan Guanghua	100.00	2.00%
8	Liu Bin	75.00	1.50%
9	Wu Hui	75.00	1.50%
10	Li Mingyuan	75.00	1.50%
11	Wu Hualan	10.00	0.20%
12	Cao Xiaoyi	8.00	0.16%
13	Wang Zhiyue	5.00	0.10%
14	Wang Youwu	5.00	0.10%
15	He Luhong	5.00	0.10%
16	Tan Haiyan	5.00	0.10%
17	Liu Sanping	5.00	0.10%
18	Wang Lei	5.00	0.10%
19	Shen Xiaoan	5.00	0.10%
20	Xu Guiying	5.00	0.10%
21	Zhang Sheng	5.00	0.10%
22	Lei Pingyan	5.00	0.10%
23	Cao Fen	5.00	0.10%
24	Li Zuogui	3.00	0.06%
25	Wang Xianfeng	3.00	0.06%
26	Li Juan	3.00	0.06%
27	Li Yuelin	3.00	0.06%
28	Wang Lannv	2.00	0.04%
	Total	5,000.00	100.00%

– V-19 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

(14) The eleventh equity transfer in July 2010

On 26 July 2010, Shi Lei and Wang Guoju signed an equity transfer agreement, pursuant to which Shi Lei transferred his 2,000,000 shares of Xiongfeng Company to Wang Guoju at the transfer price of RMB2,034,900.

On 26 July 2010, Wu Hui and Zhou Qibao signed an equity transfer agreement, pursuant to which Wu Hui transferred his 750,000 shares of Xiongfeng Company to Zhou Qibao. The share transfer consideration that Zhou Qibao shall pay to Wu Hui for the equity transfer had been offset with the consideration of equity transfer that had been not paid by Wu Hui to Zhou Qibao for the equity transfer on 28 March 2008.

On 26 July 2010, Wang Guoju signed an equity transfer agreement with each of Du Jun, Gao Yunfei, Zhang Sheng and Liu Sanping, pursuant to which, Wang Guoju transferred 800,000 shares, 200,000 shares, 450,000 shares and 450,000 shares of Xiongfeng Company to Du Jun, Gao Yunfei, Zhang Sheng and Liu Sanping at a price of RMB3 per share. On the same date, Wang Guoju signed an equity transfer agreement with each of Li Juan, Shen Xiaoan and Xu Guiying, pursuant to which, Wang Guoju transferred 70,000 shares, 50,000 shares and 50,000 shares of Xiongfeng Company to Li Juan, Shen Xiaoan and Xu Guiying at a price of RMB2 per share.

The shareholding structure of Xiongfeng Company upon the completion of this equity transfer is shown in the following table:

		Number of	Shareholding
No.	Shareholder	shares	ratio
		(0’000 Shares)
1	Tan XiongYu	2,550.00	51.00%
2	Zhou Qibao	1,075.00	21.50%
3	Wang Guoju	606.00	12.12%
4	Zhang Jian	125.00	2.50%
5	Li Shuilin	100.00	2.00%
6	Tan Guanghua	100.00	2.00%
7	Du Jun	80.00	1.60%
8	Liu Bin	75.00	1.50%
9	Li Mingyuan	75.00	1.50%
10	Liu Sanping	50.00	1.00%
11	Zhang Sheng	50.00	1.00%
12	Gao Yunfei	20.00	0.40%
13	Wu Hualan	10.00	0.20%
14	Xu Guiying	10.00	0.20%
15	Shen Xiaoan	10.00	0.20%
16	Li Juan	10.00	0.20%
17	Cao Xiaoyi	8.00	0.16%
18	Wang Zhiyue	5.00	0.10%
19	Wang Youwu	5.00	0.10%

– V-20 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

No. Shareholder 20 He Luhong 21 Tan Haiyan 22 Wang Lei 23 Lei Pingyan 24 Cao Fen 25 Wang Zuogui 26 Wang Xianfeng 27 Li Yuelin 28 Wang Lannv Total	Number of shares (0’000 Shares) 5.00 5.00 5.00 5.00 5.00 3.00 3.00 3.00 2.00 5,000.00	Shareholding ratio 0.10% 0.10% 0.10% 0.10% 0.10% 0.06% 0.06% 0.06% 0.04% 100.00%

(15) Twelfth equity transfer and third capital injection in November 2010

On 30 December 2010, Zhou Qibao 與 Suzhou Gaoda Wutong Venture Capital Center (Limited Partnership) ( 蘇州高達梧桐創業投資中心 ( 有限合夥 )) (“ Gaoda Wutong ”) signed an Equity Transfer Agreement, pursuant to which, Zhou Qibao transferred 2 million shares it held in Xiongfeng Company to Gouda Wutong, with the price of RMB4.86 per share.

On 30 December 2010, the corporate shareholders (including Xiongfeng Company, Tan Xiongyu and Zhou Qibao) and 6 institutional investors (including Zhong Qi Gang (Tianjin) Equity Investment Fund Enterprise (Limited Partnership) ( 中企港 ( 天津 ) 股權投資基金合夥企業 ( 有限合夥 )) (“ Zhong Qi Gang ”) and Zhong Qi Huixin (Tianjin) Equity Investment Fund Enterprise (Limited Partnership) ( 中企匯鑫 ( 天津 ) 股權投資基金合夥企業 ( 有限合夥 ) (“ Zhong Qi Huixin ”)) (the “ 6 Institutional Investors ”) signed a Capital Injection Investment Contract numbered “Xiongfeng Capital Injection Zi No.2010-1”, pursuant to which, the above 6 Institutional Investors subscribed 18.5185 million newly added share capital of Xiongfeng Company, with the subscription price of RMB4.86 per share and total subscription price of RMB90 million, of which RMB18.5185 million and RMB71.4815 million shall be credited as share capital and reserved capital respectively.

In addition, according to the above Capital Injection Investment Contract, this investment was conducted under the prerequisite that the original shareholders would undergo initial public offering and listing of Xiongfeng Company. If the original shareholders failed to fulfill such condition precedent, the 6 Institutional Investors have the rights to terminate the contract and request the original shareholders of Xiongfeng Company to take the liability for breach of contract.

– V-21 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

On 15 July 2014, Xiongfeng Company, the original shareholders before this capital injection (namely Tan Xiongyu, Wang Guoju, Zhou Qibao, Zhang Jian, Tan Guanghua and Li Shuilin) and the 6 new institutional shareholders joined in November 2010 (namely Shanghai Yingheng Guanghui Investment Management Partnership (Limited Partnership) (上海贏恒光匯投資管理合夥企業（有限合夥）) (“ Yingheng Guanghui ”), Zhong Qi Gang, Ggaoda Wutong, Suzhou Gaoda Huifeng Venture Capital Co., Ltd. ( 蘇州高達滙豐創業投資有限公司 ) (“ Gaoda Huifeng ”), Zhong Qi Huixin and Jiangsu Xingke Venture Capital Co., Ltd. ( 江蘇興科創業投資有 限公司 ) (“ Xingke Venture ”)) signed a supplemental agreement named Chenzhou Xiongfeng Rare and Precious Metal Materials Company Limited Capital Injection Investment Contract, pursuant to which, the terms of earning commitment and listing commitment of Chenzhou Xiongfeng Rare and Precious Metal Materials Company Limited Capital Injection Investment Contract signed in November 2020 were terminated unconditionally with nil consideration. Neither parties did not bear any responsibility and obligation to each other for the termination of such commitments.

On 4 December 2010, Xiongfeng Company convened the first extraordinary general meeting of 2010, at which the Resolution on Capital Injection of the Company was considered and approved, agreeing to increase the share capital of the company by RMB18.5185 million. The newly added share capital was subscribed by the 6 Institutional Investors (including Zhong Qi Gang and Zhong Qi Huixin) respectively and the registered capital of the company was changed to RMB68.5185 million.

On 8 December 2010, according to the capital verification report “Ning Xin Hui Yan Zi No. (2010) 0089” issued by BDO China Jiang Su Shu Lun Pan, Certified Public Accountants, as of 6 December 2010, Xiongfeng Company had received newly added registered capital paid by the above 6 Institutional Investors amounting to RMB18.5185 million in total. All the capital contribution was made in cash.

On 24 December 2010, Xiongfeng Company completed the business change registration for the above capital injection.

– V-22 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

Upon the completion of this equity transfer and capital injection, the shareholding structure of Xiongfeng Company is shown in the table below:

		Number of	Shareholding
No.	Shareholder	shares	ratio
		(0’000 Shares)
1	Tan XiongYu	2,550.00	37.22%
2	Zhou Qibao	875.00	12.77%
3	Wang Guoju	606.00	8.84%
4	Suzhou Gaoda Wutong
	Venture Capital Center
	(Limited Partnership)	508.65	7.42%
5	Yingheng Guanghui
	Investment
	Management
	Partnership (Limited
	Partnership)	411.52	6.01%
6	Zhong Qi Gang (Tianjin)
	Equity Investment Fund
	Enterprise (Limited
	Partnership)	370.37	5.41%
7	Suzhou Gaoda Huifeng
	Venture Capital Co.,
	Ltd.	308.64	4.50%
8	Zhong Qi Huixin Equity
	Investment Fund
	Enterprise (Limited
	Partnership)	246.91	3.60%
9	Jiangsu Xingke Venture
	Capital Co., Ltd.	205.76	3.00%
10	Zhang Jian	125.00	1.82%
11	Tan Guanghua	100.00	1.46%
12	Li Shuilin	100.00	1.46%
13	Du Jun	80.00	1.17%
14	Liu Bin	75.00	1.09%
15	Li Mingyuan	75.00	1.09%
16	Liu Sanping	50.00	0.73%
17	Zhang Sheng	50.00	0.73%
18	Gao Yunfei	20.00	0.29%
19	Wu Hualan	10.00	0.15%
20	Xu Guiying	10.00	0.15%

– V-23 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

No. Shareholder 21 Shen Xiaoan 22 Li Juan 23 Cao Xiaoyi 24 Wang Zhiyue 25 Wang Youwu 26 He Luhong 27 Tan Haiyan 28 Wang Lei 29 Lei Pingyan 30 Cao Fen 31 Li Zuogui 32 Wang Xianfeng 33 Li Yuelin 34 Wang lannv Total	Number of shares (0’000 Shares) 10.00 10.00 8.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 3.00 3.00 3.00 2.00 6,851.85	Shareholding ratio 0.15% 0.15% 0.12% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.04% 0.04% 0.04% 0.03% 100.00%

(16) Thirteenth equity transfer in July 2011

On 19 July 2011, Wu Hualan, Xu Guiying and Cao Xiaoyi signed an Equity Transfer Agreement with Wang Guoju respectively, pursuant to which, Wu Hualan, Xu Guiying and Cao Xiaoyi transferred 100,000, 100,000 and 80,000 shares of Xiongfeng Company they held to Wang Guoju respectively.

Upon the completion of this equity transfer, the shareholding structure of Xiongfeng Company is shown in the table below:

		Number of	Shareholding
No.	Shareholder	shares	ratio
		(0’000 Shares)
1	Tan XiongYu	2,550.00	37.22%
2	Zhou Qibao	875.00	12.77%
3	Wang Guoju	634.00	9.25%
4	Suzhou Gaoda Wutong
	Venture Capital Center
	(Limited Partnership)	508.65	7.42%
5	Yingheng Guanghui
	Investment
	Management
	Partnership (Limited
	Partnership)	411.52	6.01%

– V-24 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

No. Shareholder 6 Zhong Qi Gang (Tianjin) Equity Investment Fund Enterprise (Limited Partnership) 7 Suzhou Gaoda Huifeng Venture Capital Co., Ltd. 8 Zhong Qi Huixin Equity Investment Fund Enterprise (Limited Partnership) 9 Jiangsu Xingke Venture Capital Co., Ltd. 10 Zhang Jian 11 Tan Guanghua 12 Li Shuilin 13 Du Jun 14 Liu Bin 15 Li Mingyuan 16 Liu Sanping 17 Zhang Sheng 18 Gao Yunfei 19 Shen Xiaoan 20 Li Juan 21 Wang Zhiyue 22 Wang Youwu 23 He Luhong 24 Tan Haiyan 25 Wang Lei 26 Lei Pingyan 27 Cao Fen 28 Li Zuogui 29 Wang Xianfeng 30 Li Yuelin 31 Wang lannv Total	Number of shares (0’000 Shares) 370.37 308.64 246.91 205.76 125.00 100.00 100.00 80.00 75.00 75.00 50.00 50.00 20.00 10.00 10.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 3.00 3.00 3.00 2.00 6,851.85	Shareholding ratio 5.41% 4.50% 3.60% 3.00% 1.82% 1.46% 1.46% 1.17% 1.09% 1.09% 0.73% 0.73% 0.29% 0.15% 0.15% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.04% 0.04% 0.04% 0.03% 100.00%

– V-25 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

(17) Fourteenth equity transfer in September 2012

On 22 September 2012, Liu Bin and Li Mingyuan signed an Equity Transfer Agreement with Zhongshan Jiufeng Equity Investment Center (Limited Partnership) ( 中山久豐股權投資中心 ( 有限合夥 )) (“ Zhongshan Jiufeng ”), pursuant to which, Liu Bin and Li Mingyuan transferred the equity interest of 750,000 shares of Xiongfeng Company each of them held respectively, i.e. a total of 1.5 million shares, to Zhongshan Jiufeng.

Upon the completion of this equity transfer, the shareholding structure of Xiongfeng Company is shown in the table below:

		Number of	Shareholding
No.	Shareholder	shares	ratio
		(0’000 Shares)
1	Tan XiongYu	2,550.00	37.22%
2	Zhou Qibao	875.00	12.77%
3	Wang Guoju	634.00	9.25%
4	Suzhou Gaoda Wutong
	Venture Capital Center
	(Limited Partnership)	508.65	7.42%
5	Yingheng Guanghui
	Investment
	Management
	Partnership (Limited
	Partnership)	411.52	6.01%
6	Zhong Qi Gang (Tianjin)
	Equity Investment Fund
	Enterprise (Limited
	Partnership)	370.37	5.41%
7	Suzhou Gaoda Huifeng
	Venture Capital Co.,
	Ltd.	308.64	4.50%
8	Zhong Qi Huixin Equity
	Investment Fund
	Enterprise (Limited
	Partnership)	246.91	3.60%
9	Jiangsu Xingke Venture
	Capital Co., Ltd.	205.76	3.00%
10	Zhongshan Jiufeng Equity
	Investment Center
	(Limited Partnership)	150.00	2.18%
11	Zhang Jian	125.00	1.82%
12	Tan Guanghua	100.00	1.46%
13	Li Shuilin	100.00	1.46%
14	Du Jun	80.00	1.17%

– V-26 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

No. Shareholder 15 Liu Sanping 16 Zhang Sheng 17 Gao Yunfei 18 Shen Xiaoan 19 Li Juan 20 Wang Zhiyue 21 Wang Youwu 22 He Luhong 23 Tan Haiyan 24 Wang Lei 25 Lei Pingyan 26 Cao Fen 27 Li Zuogui 28 Wang Xianfeng 29 Li Yuelin 30 Wang lannv Total	Number of shares (0’000 Shares) 50.00 50.00 20.00 10.00 10.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 3.00 3.00 3.00 2.00 6,851.85	Shareholding ratio 0.73% 0.73% 0.29% 0.15% 0.15% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.04% 0.04% 0.04% 0.03% 100.00%

(18) Fourth capital injection in December 2012

On 15 November 2012, Xiongfeng Company convened the second extraordinary general meeting of 2012, at which a resolution was approved to inject share capital of the company of RMB83.0815 million, of which the share capital was increased by RMB72.3544 million and RMB10.7271 million with reserved capital and undistributed profit respectively. The newly added share capital was held by the original shareholders on pro rata basis. Upon the completion of this increase by transfer, the total share capital of Xiongfeng Company has increased to RMB151.60 million.

On 30 November 2012, according to the capital verification report “Tian Heng Yan Zi No. (2012) 00100” issued by Talent Certified Public Accountants, as of 29 November 2012, Xiongfeng Company has transferred reserved capital of RMB72,354,390.15 and undistributed profit of RMB10,727,109.85, amounting to RMB83,081,500.00 in total, to share capital. Upon the change, the accumulated registered capital of Xiongfeng Company was RMB151,600,000.00 and the accumulated paid-in capital (share capital) was RMB151,600,000.00.

On 11 December 2012, Xiongfeng Company completed the business change registration for the above capital injection.

– V-27 –

APPENDIX V

VALUATION REPORT ON THE TARGET COMPANY

Upon the completion of this capital injection, the shareholding structure of Xiongfeng Company is shown in the table below:

		Number of	Shareholding
No.	Shareholder	shares	ratio
		(0’000 Shares)
1	Tan XiongYu	5,641.98	37.22%
2	Zhou Qibao	1,935.97	12.77%
3	Wang Guoju	1,402.75	9.25%
4	Suzhou Gaoda Wutong
	Venture Capital Center
	(Limited Partnership)	1,125.41	7.42%
5	Yingheng Guanghui
	Investment
	Management
	Partnership (Limited
	Partnership)	910.50	6.01%
6	Zhong Qi Gang (Tianjin)
	Equity Investment Fund
	Enterprise (Limited
	Partnership)	819.46	5.41%
7	Suzhou Gaoda Huifeng
	Venture Capital Co.,
	Ltd.	682.88	4.50%
8	Zhong Qi Huixin Equity
	Investment Fund
	Enterprise (Limited
	Partnership)	546.30	3.60%
9	Jiangsu Xingke Venture
	Capital Co., Ltd.	455.25	3.00%
10	Zhongshan Jiufeng Equity
	Investment Center
	(Limited Partnership)	331.88	2.19%
11	Zhang Jian	276.57	1.82%
12	Tan Guanghua	221.25	1.46%
13	Li Shuilin	221.25	1.46%
14	Du Jun	177.00	1.17%
15	Liu Sanping	110.63	0.73%
16	Zhang Sheng	110.63	0.73%
17	Gao Yunfei	44.25	0.29%
18	Shen Xiaoan	22.13	0.15%
19	Li Juan	22.13	0.15%
20	Wang Zhiyue	11.06	0.07%

– V-28 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

No. Shareholder 21 Wang Youwu 22 He Luhong 23 Tan Haiyan 24 Wang Lei 25 Lei Pingyan 26 Cao Fen 27 Li Zuogui 28 Wang Xianfeng 29 Li Yuelin 30 Wang lannv Total	Number of shares (0’000 Shares) 11.06 11.06 11.06 11.06 11.06 11.06 6.64 6.64 6.64 4.43 15,160.00	Shareholding ratio 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.04% 0.04% 0.04% 0.03% 100.00%

(19) Fifth capital injection in December 2012

On 12 December 2012, Xiongfeng Company convened the third extraordinary general meeting of 2012, at which a resolution was approved that the senior management personnel, middle management personnel and key technicians of the Company jointly establish an employee shareholding platform Yongxing County Bangde Investment Management Center (Limited Partnership) ( 永興縣邦德投資管 理中心 ( 有限合夥 )) (“ Bangde Investment ”), the Company injected share capital of 2 million shares, and Bangde Investment conducts share incentivization for the partnership shares of Bangde Investment held in cash with the subscription price of RMB1.77 per share.

According to the capital verification report “Tian Heng Yan Zi No. (2012) 00104” issued by Talent Certified Public Accountants, as of 17 December 2012, share subscription of RMB2 million in cash by Bangde Investment.

On 24 December 2012, Xiongfeng Company completed the business change registration for the above capital injection.

– V-29 –

APPENDIX V

VALUATION REPORT ON THE TARGET COMPANY

Upon the completion of this capital injection, the shareholding structure of Xiongfeng Company is shown in the table below:

		Number of	Shareholding
No.	Shareholder	shares	ratio
		(0’000 Shares)
1	Tan XiongYu	5,641.98	36.73%
2	Zhou Qibao	1,935.97	12.60%
3	Wang Guoju	1,402.75	9.13%
4	Suzhou Gaoda Wutong
	Venture Capital Center
	(Limited Partnership)	1,125.41	7.33%
5	Yingheng Guanghui
	Investment
	Management
	Partnership (Limited
	Partnership)	910.50	5.93%
6	Zhong Qi Gang (Tianjin)
	Equity Investment Fund
	Enterprise (Limited
	Partnership)	819.46	5.34%
7	Suzhou Gaoda Huifeng
	Venture Capital Co.,
	Ltd.	682.88	4.45%
8	Zhong Qi Huixin Equity
	Investment Fund
	Enterprise (Limited
	Partnership)	546.30	3.56%
9	Jiangsu Xingke Venture
	Capital Co., Ltd.	455.25	2.96%
10	Zhongshan Jiufeng Equity
	Investment Center
	(Limited Partnership)	331.88	2.16%
11	Zhang Jian	276.57	1.80%
12	Tan Guanghua	221.25	1.44%
13	Li Shuilin	221.25	1.44%
14	Bangde Investment	200.00	1.30%
15	Du Jun	177.00	1.15%
16	Liu Sanping	110.63	0.72%
17	Zhang Sheng	110.63	0.72%
18	Gao Yunfei	44.25	0.29%
19	Shen Xiaoan	22.13	0.14%
20	Li Juan	22.13	0.14%

– V-30 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

No. Shareholder 21 Wang Zhiyue 22 Wang Youwu 23 He Luhong 24 Tan Haiyan 25 Wang Lei 26 Lei Pingyan 27 Cao Fen 28 Li Zuogui 29 Wang Xianfeng 30 Li Yuelin 31 Wang lannv Total	Number of shares (0’000 Shares) 11.06 11.06 11.06 11.06 11.06 11.06 11.06 6.64 6.64 6.64 4.43 15,360.00	Shareholding ratio 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.04% 0.04% 0.04% 0.03% 100.00%

(20) Fifteenth equity transfer in March 2013

On 7 March 2013, Wang Guoju and He Luhong signed an Equity Transfer Agreement, pursuant to which, He Luhong transferred 110,600 shares of Xiongfeng Company that she held (respectively shareholding ratio of 0.072%) to Wang Guoju with a price of RMB117,264.62.

According to the Legal Opinion regarding the Purchase of Assets with Cash and Share Issuance and Ancillary Funds Raising by Chifeng Jilong Gold Mining Co., Limited issued by Beijing Zhong Lun Law Firm, the payment for this equity transfer has been completed.

Upon the completion of this equity transfer, the shareholding structure of Xiongfeng Company is shown in the table below:

		Number of	Shareholding
No.	Shareholder	shares	ratio
		(0’000 Shares)
1	Tan XiongYu	5,641.98	36.73%
2	Zhou Qibao	1,935.97	12.60%
3	Wang Guoju	1,413.81	9.20%
4	Suzhou Gaoda Wutong
	Venture Capital Center
	(Limited Partnership)	1,125.41	7.33%

– V-31 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

No. Shareholder 5 Yingheng Guanghui Investment Management Partnership (Limited Partnership) 6 Zhong Qi Gang (Tianjin) Equity Investment Fund Enterprise (Limited Partnership) 7 Suzhou Gaoda Huifeng Venture Capital Co., Ltd. 8 Zhong Qi Huixin Equity Investment Fund Enterprise (Limited Partnership) 9 Jiangsu Xingke Venture Capital Co., Ltd. 10 Zhongshan Jiufeng Equity Investment Center (Limited Partnership) 11 Zhang Jian 12 Tan Guanghua 13 Li Shuilin 14 Bangde Investment 15 Du Jun 16 Liu Sanping 17 Zhang Sheng 18 Gao Yunfei 19 Shen Xiaoan 20 Li Juan 21 Wang Zhiyue 22 Wang Youwu 23 Tan Haiyan 24 Wang Lei 25 Lei Pingyan 26 Cao Fen 27 Li Zuogui 28 Wang Xianfeng 29 Li Yuelin 30 Wang lannv Total	Number of shares (0’000 Shares) 910.50 819.46 682.88 546.30 455.25 331.88 276.57 221.25 221.25 200.00 177.00 110.63 110.63 44.25 22.13 22.13 11.06 11.06 11.06 11.06 11.06 11.06 6.64 6.64 6.64 4.43 15,360.00	Shareholding ratio 5.93% 5.34% 4.45% 3.56% 2.96% 2.16% 1.80% 1.44% 1.44% 1.30% 1.15% 0.72% 0.72% 0.29% 0.14% 0.14% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.04% 0.04% 0.04% 0.03% 100%

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VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

(21) Sixteenth equity transfer in May 2013

On 31 May 2013, Wang Guoju and Li Juan signed an Equity Transfer Agreement, pursuant to which, Li Juan transferred 221,300 shares of Xiongfeng Company that she held (respectively shareholding ratio of 0.14%) to Wang Guoju.

According to the Legal Opinion regarding the Purchase of Assets with Cash and Share Issuance and Ancillary Funds Raising by Chifeng Jilong Gold Mining Co., Limited issued by Beijing Zhong Lun Law Firm, the payment for this equity transfer has been completed.

Upon the completion of this equity transfer, the shareholding structure of Xiongfeng Company is shown in the table below:

		Number of	Shareholding
No.	Shareholder	shares	ratio
		(0’000 Shares)
1	Tan XiongYu	5,641.98	36.73%
2	Zhou Qibao	1,935.97	12.60%
3	Wang Guoju	1,435.94	9.35%
4	Suzhou Gaoda Wutong
	Venture Capital Center
	(Limited Partnership)	1,125.41	7.33%
5	Yingheng Guanghui
	Investment
	Management
	Partnership (Limited
	Partnership)	910.50	5.93%
6	Zhong Qi Gang (Tianjin)
	Equity Investment Fund
	Enterprise (Limited
	Partnership)	819.46	5.34%
7	Suzhou Gaoda Huifeng
	Venture Capital Co.,
	Ltd.	682.88	4.45%
8	Zhong Qi Huixin Equity
	Investment Fund
	Enterprise (Limited
	Partnership)	546.30	3.56%
9	Jiangsu Xingke Venture
	Capital Co., Ltd.	455.25	2.96%
10	Zhongshan Jiufeng Equity
	Investment Center
	(Limited Partnership)	331.88	2.16%

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VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

No. Shareholder 11 Zhang Jian 12 Tan Guanghua 13 Li Shuilin 14 Bangde Investment 15 Du Jun 16 Liu Sanping 17 Zhang Sheng 18 Gao Yunfei 19 Shen Xiaoan 20 Wang Zhiyue 21 Wang Youwu 22 Tan Haiyan 23 Wang Lei 24 Lei Pingyan 25 Cao Fen 26 Li Zuogui 27 Wang Xianfeng 28 Li Yuelin 29 Wang lannv Total	Number of shares (0’000 Shares) 276.57 221.25 221.25 200.00 177.00 110.63 110.63 44.25 22.13 11.06 11.06 11.06 11.06 11.06 11.06 6.64 6.64 6.64 4.43 15,360.00	Shareholding ratio 1.80% 1.44% 1.44% 1.30% 1.15% 0.72% 0.72% 0.29% 0.14% 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.04% 0.04% 0.04% 0.03% 100.00%

(22) Seventeenth equity transfer in July 2014

On 3 July 2014, Shenzhen Qianhai Kirin Xinding Investment Enterprise (Limited Partnership) ( 深圳前海麒麟鑫鼎投資企業（有限合夥）) (“ Kirin Xinding ”) and Yingheng Guanghui” signed an Equity Transfer Agreement, pursuant to which, Yingheng Guanghui transferred 3,642,020 shares of Xiongfeng Company that it held to Kirin Xinding, with a transfer price of RMB10.4160 million.

According to the Legal Opinion regarding the Purchase of Assets with Cash and Share Issuance and Ancillary Funds Raising by Chifeng Jilong Gold Mining Co., Limited issued by Beijing Zhong Lun Law Firm, the payment for this equity transfer has been completed.

– V-34 –

APPENDIX V

VALUATION REPORT ON THE TARGET COMPANY

Upon the completion of this equity transfer, the shareholding structure of Xiongfeng Company is shown in the table below:

		Number of	Shareholding
No.	Shareholder	shares	ratio
		(0’000 Shares)
1	Tan XiongYu	5,641.98	36.73%
2	Zhou Qibao	1,935.97	12.60%
3	Wang Guoju	1,435.94	9.35%
4	Suzhou Gaoda Wutong
	Venture Capital Center
	(Limited Partnership)	1,125.41	7.33%
5	Zhong Qi Gang (Tianjin)
	Equity Investment Fund
	Enterprise (Limited
	Partnership)	819.46	5.34%
6	Suzhou Gaoda Huifeng
	Venture Capital Co.,
	Ltd.	682.88	4.45%
7	Yingheng Guanghui
	Investment
	Management
	Partnership (Limited
	Partnership)	546.30	3.56%
8	Zhong Qi Huixin Equity
	Investment Fund
	Enterprise (Limited
	Partnership)	546.30	3.56%
9	Jiangsu Xingke Venture
	Capital Co., Ltd.	455.25	2.96%
10	Shenzhen Qianhai Kirin
	Xinding Investment
	Enterprise (Limited
	Partnership)	364.20	2.37%
11	Zhongshan Jiufeng Equity
	Investment Center
	(Limited Partnership)	331.88	2.16%
12	Zhang Jian	276.57	1.80%
13	Tan Guanghua	221.25	1.44%
14	Li Shuilin	221.25	1.44%
15	Bangde Investment	200.00	1.30%
16	Du Jun	177.00	1.15%
17	Liu Sanping	110.63	0.72%
18	Zhang Sheng	110.63	0.72%
19	Gao Yunfei	44.25	0.29%
20	Shen Xiaoan	22.13	0.14%

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VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

No. Shareholder 21 Wang Zhiyue 22 Wang Youwu 23 Tan Haiyan 24 Wang Lei 25 Lei Pingyan 26 Cao Fen 27 Li Zuogui 28 Wang Xianfeng 29 Li Yuelin 30 Wang lannv Total	Number of shares (0’000 Shares) 11.06 11.06 11.06 11.06 11.06 11.06 6.64 6.64 6.64 4.43 15,360.00	Shareholding ratio 0.07% 0.07% 0.07% 0.07% 0.07% 0.07% 0.04% 0.04% 0.04% 0.03% 100.00%

(23) Eighteenth equity transfer in February 2015

On 26 September 2014, Xiongfeng Company convened the second extraordinary general meeting of 2014, at which a resolution was approved and all the shareholders of the company agreed to transfer all the shares of Xiongfeng Company they held to Chifeng Jilong Gold Mining Co., Limited (“ Chifeng Gold ”). Upon the approval of the China Securities Regulatory Commission for this transaction, the company type changed from joint stock limited company to limited liability company, and the company name changed to “Chenzhou Xiongfeng Environment Technology Company Limited”.

On 29 September 2014, all the shareholders of Chifeng Gold and Xiongfeng Company signed the Purchase of Assets with Cash and Share Issuance Agreement, pursuant to which, Chifeng Gold the entire quity interest of Xiongfeng Company held by all the shareholders of Xiongfeng Company with cash and share issuance. Chifeng Gold issued shares to less than 10 specific investors in a non-public way to raise the ancillary funds for this reorganization, with the gross amount of proceeds raised not exceeding 25% of the total amount of this transaction. The price of the entire shares of Xiongfeng Company amounted to RMB905.8 million in total, of which 10% was paid in cash and the remaining 90% was paid with share issuance.

On 29 January 2015, the China Securities Regulatory Commission issued the “ZJXK [2015] No. 134” Reply to the Purchase of Assets to Tan Xiongyu and others by Chifeng Jilong Gold Mining Co., Limited and Ancillary Funds Raising, approving the purchase of assets to Tan Xiongyu, Wang Guoju and other original shareholders of the company by Chifeng Gold with share issuance.

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APPENDIX V

On 4 February 2015, Chifeng Gold, a shareholder of Xiongfeng Company, made a shareholder decision, that the company name is changed to “Chenzhou Xiongfeng Environment Technology Company Limited”, the corporate shareholder was changed to “Chifeng Gold”, and various changes to the directors of board of directors, supervisors and senior management personnel were made.

On 5 February 2015, Chenzhou Administration of Industry and Commerce of Shandong Province issued the Approval Letter of Change of Company Name “ (Chenzhou) Ming Si Zi [2015] Di 235”, approving the change of company name to “Chenzhou Xiongfeng Environment Technology Company Limited”.

On the same date, Xiongfeng Environment completed the business change registration for the above equity transfer.

Upon the completion of this equity transfer, the shareholding structure of Xiongfeng Environment is shown in the table below:

No. Shareholder 1 Chifeng Jilong Gold Mining Co., Limited Total	Currency Unit: RMB’0,000 Amount of contribution Shareholding ratio 15,360.00 100.00% 15,360.00 100.00%

(24) Sixth capital injection in April 2015

On 17 April 2015, Chifeng Gold, a shareholder of Xiongfeng Company, made a shareholder decision, that the registered capital of Xiongfeng Environment increased by RMB169.29 million from RMB153.60 million to RMB322.89 million, all subscribed in cash by the shareholders of Chifeng Gold.

According to the bank deposit receipt issued by the Bank of Communications, Xiongfeng Environment has received capital injection of RMB169.29 million invested by Chifeng Gold on 17 April 2015.

On 22 April 2015, Xiongfeng Environment completed the business change registration for the above capital injection.

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VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

Upon the completion of this capital injection, the shareholding structure of Xiongfeng Environment is shown in the table below:

Currency Unit: RMB’0,000

		Amount of	Shareholding
No.	Shareholder	contribution	ratio
1	Chifeng Jilong Gold
	Mining Co., Limited	32,289.00	100.00%
	Total	32,289.00	100.00%

(25) Seventh capital injection in December 2018

On 13 December 2018, Xiongfeng Environment made a shareholder decision, that the registered capital increased by RMB500.00 million from RMB322.89 million to RMB822.89 million, all subscribed in cash by the shareholders of Chifeng Gold.

According to the business receipt issued by Industrial and Commercial Bank of China Chifeng Hongshan Branch, as of 17 December 2018, Chifeng Gold has invested a capital injection amount of RMB500 million to Xiongfeng Environment.

On 20 December 2018, Xiongfeng Environment completed the business change registration for the above capital injection.

Upon the completion of this capital injection, the shareholding structure of Xiongfeng Environment is shown in the table below:

No. Shareholder 1 Chifeng Jilong Gold Mining Co., Limited Total	Currency Unit: RMB’0,000 Amount of contribution Shareholding ratio 82,289.00 100.00% 82,289.00 100.00%

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VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

(26) Nineteenth equity transfer in December 2020

On 29 June 2020, Chifeng Gold convened the twenty sixth meeting of the seventh board of directors and the sixteenth meeting of the sixth board of supervisors, at which the Resolution on Transferring the Entire Equity Interest of the Wholly-owned Subsidiary Chenzhou Xiongfeng Environment Technology Company Limited by way of Listing was considered and approved respectively, agreeing that Chifeng Gold conducted open listing transfer of the entire equity interest of Xiongfeng Environment it held in Beijing Equity Exchange with the appraised value RMB1,598.5678 million as the base price.

On 20 June 2020, according to the Asset Valuation Report “Zhong Tian Heng Ping Zi No.[2020]12022” issued by China Valuer International Co., Ltd., using 30 April 2020 as the reference date and revenue approach as the valuation method, the carrying amount and appraised value of the Xiongfeng Environment’s shareholder equity were RMB1,149.7444 million and RMB1,598.5678 million respectively.

On 1 July 2020, Xiongfeng Environment’s entire equity interest transfer project was listed on the Beijing Equity Exchange, with the listed project number of “CP2020BJ1000519”.

On 29 July 2020, the above listing expired, while Chifeng Gold received a Confirmation Letter of Transfer Eligibility issued by the Beijing Equity Exchange, confirming the qualification of the only intended transferee, namely Zhao Meiguang ( 趙美光 ). On the same date, Chifeng Gold and Zhao Meiguang signed the Equity Sale Agreement relating to the Effective Conditions attached to Chenzhou Xiongfeng Environment Technology Company Limited (the “ Equity Sale Agreement ”), pursuant to which, Chifeng Gold sold the entire equity interest of Xiongfeng Environment” to Zhao Meiguang, with a price of RMB1,598.5678 million. On the same date, Chifeng Gold, Zhao Meiguang and Beijing Hanfeng United Technology Co., Limited ( 北京 瀚豐聯合科技有限公司 ) (“ Hanfeng United ”) jointly signed an Arrangement Agreement, pursuant to which, Zhao Meiguang transferred all its rights and obligations under the above Equity Sale Agreement to Hanfeng United.

On 18 December 2020, Xiongfeng Environment made a shareholder decision, that the entire equity interest of Xiongfeng Environment held by Chifeng Gold, a shareholder, to Hanfeng United.

On 25 December 2020, Xiongfeng Environment completed the business change registration for the above equity transfer.

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VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

Upon the completion of this equity transfer, the shareholding structure of Xiongfeng Environment is shown in the table below:

Currency Unit: RMB’0,000

		Amount of	Shareholding
No.	Shareholder	contribution	ratio
1	Beijing Hanfeng United
	Technology Co.,
	Limited	82,289.00	100.00%
	Total	82,289.00	100.00%

• (27) The shareholding structure of Xiongfeng Environment as at 28 February 2021, the date of valuation

The shareholding structure of Xiongfeng Environment as at 28 February 2021, the date of valuation, is shown in the table below:

Currency Unit: RMB’0,000

		Amount of	Shareholding
No.	Shareholder	contribution	ratio
1	Beijing Hanfeng United
	Technology Co.,
	Limited	82,289.00	100.00%
	Total	82,289.00	100.00%

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VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

3. The condensed financial condition of the appraised enterprise as of the date of valuation

The balance sheet of Xiongfeng Environment during the historical years and as at the date of valuation is as followed:

Unit: RMB’0,000

Items Current assets Non-current assets Including: Available-for-sale financial assets Held-to-maturity investments Long-term receivables Long-term equity investments Investment properties Fixed assets Construction in progress Right-of-use assets Intangible assets Goodwill Long-term prepaid expenses Deferred income tax assets Other non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets	2019/12/31 165,703.06 63,800.43 409.79 – 266.21 – – 59,742.72 – 5.60 3,059.41 – – – 316.71 229,503.49 106,782.53 11,411.75 118,194.28 111,309.21	2020/12/31 100,509.22 59,308.32 422.36 – 296.92 – – 55,605.83 – 4.97 2,978.23 – – – – 159,817.54 42,719.28 456.75 43,176.04 116,641.50	2021/2/28 1,146.77 54,368.78 424.29 – – – – 51,092.54 – 4.87 2,847.08 – – – –
			55,515.55
			3,413.92 456.80
			3,870.71
			51,644.84

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APPENDIX V

The statement of profit of Xiongfeng Environment during the historical years and from January to February 2021 is as followed:

Unit: RMB’0,000

	January to	January to	January to
Items	December 2019	December 2020	February 2021
I. Operating revenue	149,960.38	141,494.22	35,618.17
Less: Operating costs	130,017.58	124,699.95	32,008.03
Tax and levies	687.04	1,197.09	446.05
Sales expenses	36.34	45.09	5.06
Administrative expenses	6,242.02	7,037.85	415.06
Finance costs	3,889.64	2,923.28	115.11
Impairment loss for assets	7,300.92	6,372.11	2,599.88
Credit impairment loss	344.95	-559.74	-78.69
Add: Gain on changes in fair value	841.61	–	–
Disposal gain on asset	-7.48	13.65	-152.31
Investment income	-950.73	0.09	–
Other income	2,371.55	5,288.53	779.14
II. Operating profit	3,696.85	5,080.87	734.49
Add: Non-operating income	0.29	321.10	–
Less: Non-operating expenses	655.67	196.96	60.63
III. Total profit	3,041.46	5,205.02	673.86
Less: Income tax	–	–	–
IV. Net profit	3,041.46	5,205.02	673.86

Note: The above financial information is extracted from the Analog Financial Statement Audit Report of Chenzhou Xiongfeng Environment Technology Company Limited for January to February 2021, Year 2020 and Year 2019 no. XYZH/2021GZAA60490 issued by SHINEWING Certified Public Accountants LLP. This valuation is conducted on the basis of audit.

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APPENDIX V

4. Major products and services of the appraised enterprise

Xiongfeng Environment is principally engaged in comprehensive recycling business of non-ferrous metal resources. Various kinds of metals (including silver, bismuth, lead, gold and palladium) are recovered comprehensively from non-ferrous metal smelting waste residues and other materials. Different treatment methods can be selected according to the composition of the raw materials, and most of the metal components contained in the raw materials can be separated and recycled through a combination of pyrometallurgy and hydrometallurgy. According to the acquisition proposal of Dongjiang Environmental to Xiongfeng Environment, Xiongfeng Environment intended to implement divestiture after the date of valuation. On the basis of the existing business operation, the business operation of Xiongfeng Environment after the divestiture will not include silver electrolysis business.

5. Relationship between the client and the appraised enterprise

The client of this valuation is the acquirer of the appraised object. The appraised enterprise is the subject of the transaction, i.e. the appraised enterprise is the subject company that the client intends to acquire equity interest from.

(III) Other users of the asset valuation report stipulated in the asset valuation engagement contract

According to the Asset Valuation Engagement Contract entered into between the Company and Shenzhen Pengxin, save for the Company and the users of the asset valuation report under the law and administrative rules and regulations, there are no other users of the asset valuation report.

II. PURPOSES OF VALUATION

Dongjiang Environmental intended to conduct equity interest acquisition. For that purpose, Dongjiang Environmental engaged Shenzhen Pengxin to evaluate the market value of the entire interest of the shareholders of Xiongfeng Environment, in order to provide a reference for value for the above economic behaviour.

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VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

III. SUBJECT AND SCOPE OF VALUATION

The subject of this engaged valuation is the entire equity interest of the shareholders of Xiongfeng Environment.

The corresponding scope of this valuation for the above appraised object is the relevant assets and liabilities of Xiongfeng Environment after adjustment of audit simulation as at the date of valuation, including the current assets, non-current assets and relevant liabilities reflected in the accounts as well as the assets not reflected in the accounts.

(I) The assets and liabilities of the appraised enterprise in the statement reported for valuation

The carrying amount of the total assets, the total liabilities and the entire shareholders’ equity of Xiongfeng Environment reported in the statement were RMB555.1555 million, RMB38.7071 million and RMB516.4484 million respectively. The balance sheet of Xiongfeng Environment reported as at the date of valuation is shown in the table below:

Unit: RMB’0,000

Assets Current assets: Money funds Financial assets of transaction nature Notes receivable Account receivables Prepayment Interest receivables Dividend receivables Other receivables Inventories Non-current assets due within one year Other current assets Total current assets	2021/2/28 Liabilities and shareholders’ equity Current liabilities: 310.02 Short-term borrowings – Financial liabilities of transaction nature – Notes payable – Account payables 98.67 Receipt in advance – Employee benefits payable – Taxes payable 44.95 Interest payables 693.13 Dividend payables – Other payables – Non-current liabilities due within one year Other current liabilities 1,146.77 Total current liabilities	2021/2/28 2,001.93 – – 282.18 – 194.68 790.65 – – 144.47 – –
		3,413.92

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VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

Assets Non-current assets: Available-for-sale financial assets Held-to-maturity investments Long-term receivables Long-term equity investments Investment properties Fixed assets Construction in progress Construction materials Disposal of fixed assets Productive biological assets Right-of-use assets Intangible assets Development expenses Goodwill Long-term prepaid expenses Deferred income tax assets Other non-current assets Total non-current assets Total assets	2021/2/28 Liabilities and shareholders’ equity Non-current liabilities: 424.29 Long-term borrowings – Bonds payable – Long-term payables – Specific payables – Lease liabilities 51,092.54 Deferred income tax liabilities – Other non-current liabilities – Total non-current liabilities – Total liabilities – Owners’ equity (or shareholders’ equity): 4.87 Paid-in capital (or share capital) 2,847.08 Reserved capital – Less: Treasury shares – Surplus reserve – Specific reserves – Undistributed profit – Other comprehensive income 54,368.78 Shareholders’ equity attributable to the parent Minority shareholders’ equity Total shareholders’ equity 55,515.55 Total liabilities and shareholders’ equity	2021/2/28 – – – – 6.80 – 450.00 456.80 3,870.71 41,137.99 668.38 – 9,272.13 342.05 – 224.29
		51,644.84 – 51,644.84
		55,515.55

The above financial information is extracted from the Analog Financial Statement Audit Report of Chenzhou Xiongfeng Environment Technology Company Limited for January to February 2021, Year 2020 and Year 2019 no. XYZH/2021GZAA60490 issued by SHINEWING Certified Public Accountants LLP. This valuation is conducted on the basis of audit.

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APPENDIX V

(II) The current conditions of the major assets under the scope of valuation

The major assets of Xiongfeng Environment reported involve buildings and properties, equipment assets, land use rights and other intangible assets.

1. Fixed assets – buildings and properties

(1) Overview of the assets

The buildings and properties reported by Xiongfeng Environment are located at Bolin Industrial Park, Yongxing County, Chenzhou City, Hunan Province (Baidong Factory Zone, with a site area of 150,185 m²) and Provincial highway S212, Bianjiang Town, Yongxing County (Bitang Factory Zone, with a site area of 29,470 m²) respectively. The aggregate area of the buildings and properties on the ground were 97,829.08 m² (Baidong Factory Zone) and 20,674.68 m² (Bitang Factory Zone) respectively.

There is a total of 53 reported buildings and properties, including 16 buildings in Bitang Factory Zone (such as dining room, office building, duty room and R&D department building) and 37 buildings in Baidong Factory Zone (such as furnace batching room, raw material warehouse for smelting furnace, raw material warehouse and lead electrolysis plant). As of the date of valuation, the net carrying amount of these assets was RMB213.7836 million. There is a total of 83 reported structures and their ancillary facilities, including chimney, high water pool, exhaust gas treatment desulfurization tower, liquid reservoir etc. As of the date of valuation, the net carrying amount was RMB165.4070 million.

(2) Property status

There is a total of 53 reported buildings and properties within this scope of valuation, of which the property status of the buildings with real estate title registration completed is shown in the table below:

					Year and
					month of
					completion/
		Name of			date of	Gross floor
No.	Certificate number	property	Structure	Usage	acquisition	area (m2)
1	Xiang (2018) Yongxing County Bu	Dining room	Mixed	Industrial	2007/01	1,140.00
	Dong Chan Quan No.0007033
2	Xiang (2018) Yongxing County Bu	Office building	Mixed	Industrial	2007/01	2,900.52
	Dong Chan Quan No.0007031
3	Xiang (2018) Yongxing County Bu	Duty room	Mixed	Industrial	2007/01	18.43
	Dong Chan Quan No.0007035
4	Xiang (2018) Yongxing County Bu	R&D department	Mixed	Industrial	2007/01	154.80
	Dong Chan Quan No.0007021	building

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APPENDIX V

					Year and
					month of
					completion/
		Name of			date of	Gross floor
No.	Certificate number	property	Structure	Usage	acquisition	area (m2)
5	Xiang (2018) Yongxing County Bu	Pretreatment	Mixed	Industrial	2007/01	4,369.20
	Dong Chan Quan No.0007024	workshop
6	Xiang (2018) Yongxing County Bu	Bismuth oxide	Mixed	Industrial	2007/01	1,763.20
	Dong Chan Quan No.0007025	workshop
7	Xiang (2018) Yongxing County Bu	Workshop office	Mixed	Industrial	2007/01	464.26
	Dong Chan Quan No.0007029	building
8	Xiang (2018) Yongxing County Bu	Warehouse	Framework	Industrial	2007/01	2,970.22
	Dong Chan Quan No.0007023
9	Xiang (2018) Yongxing County Bu	Quarter	Mixed	Industrial	2007/01	1,180.32
	Dong Chan Quan No.0007034
10	Xiang (2018) Yongxing County Bu	Quarter	Mixed	Industrial	2007/01	1,592.27
	Dong Chan Quan No.0007026
11	Xiang (2018) Yongxing County Bu	Expert building	Mixed	Industrial	2007/01	482.92
	Dong Chan Quan No.0007030
12	Xiang (2018) Yongxing County Bu	Quarter	Mixed	Industrial	2007/01	900.32
	Dong Chan Quan No.0007032
13	Xiang (2018) Yongxing County Bu	Silver material	Framework	Industrial	2007/01	836.92
	Dong Chan Quan No.0007022	processing
		workshop
14	Xiang (2020) Yongxing County Bu	Sewage treatment	Steel	Industrial	2007/01	709.70
	Dong Chan Quan No.0096638	room	structure
15	Xiang (2020) Yongxing County Bu	Boiler room	Steel	Industrial	2007/01	573.30
	Dong Chan Quan No.0096637		structure
16	Xiang (2020) Yongxing County Bu	Warehouse	Steel	Industrial	2007/01	618.30
	Dong Chan Quan No.0096636		structure
17	Xiang (2021) Yongxing County Bu	Furnace batching	Steel	Industrial	2015/09	4,874.85
	Dong Chan Quan No.0000825	room	structure +
			Framework
18	Xiang (2021) Yongxing County Bu	Raw material	Framework	Industrial	2015/09	4,345.79
	Dong Chan Quan No.0000836	warehouse for
		smelting furnace
19	Xiang (2021) Yongxing County Bu	Raw material	Steel	Industrial	2015/09	5,881.50
	Dong Chan Quan No.0000837	warehouse	structure
		42×139m
20	Xiang (2021) Yongxing County Bu	Raw material	Steel	Industrial	2015/09	2,183.10
	Dong Chan Quan No.0000842	warehouse	structure
		36×60m
21	Xiang (2021) Yongxing County Bu	Lead electrolysis	Framework	Industrial	2015/09	4,768.62
	Dong Chan Quan No.0000835	plant

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APPENDIX V

					Year and
					month of
					completion/
		Name of			date of	Gross floor
No.	Certificate number	property	Structure	Usage	acquisition	area (m2)
22	Xiang (2021) Yongxing County Bu	Hydrometallurgy	Framework	Industrial	2015/09	4,117.13
	Dong Chan Quan No.0000844	pretreatment
		workshop and rare
		and precious metal
		workshop
23	Xiang (2021) Yongxing County Bu	Scattered workshop	Framework	Industrial	2015/09	1,765.61
	Dong Chan Quan No.0000821
24	Xiang (2021) Yongxing County Bu	Precious metal	Framework	Industrial	2015/09	2,642.57
	Dong Chan Quan No.0000846	workshop
25	Xiang (2021) Yongxing County Bu	Raw material	Steel	Industrial	2015/04	6,097.02
	Dong Chan Quan No.0000839	warehouse	structure
		36×168m
26	Xiang (2021) Yongxing County Bu	Raw material	Steel	Industrial	2015/09	551.58
	Dong Chan Quan No.0000829	warehouse	structure
		18×30m
27	Xiang (2021) Yongxing County Bu	Raw material	Steel	Industrial	2015/09	551.58
	Dong Chan Quan No.0000830	warehouse	structure
		18×30m
28	Xiang (2021) Yongxing County Bu	Raw material	Steel	Industrial	2015/09	551.58
	Dong Chan Quan No.0000831	warehouse	structure
		18×30m
29	Xiang (2021) Yongxing County Bu	Raw material	Steel	Industrial	2015/09	551.58
	Dong Chan Quan No.0000832	warehouse	structure
		18×30m
30	Xiang (2021) Yongxing County Bu	Deep processing	Framework	Industrial	2016/12	5,658.95
	Dong Chan Quan No.0000880	technology
		research center
31	Xiang (2021) Yongxing County Bu	Xiongfeng –	Framework	Industrial	2015/12	4,244.81
	Dong Chan Quan No.0000828	acidizing
		roasting workshop
32	Xiang (2021) Yongxing County Bu	Xiongfeng –	Framework	Industrial	2015/12	2,916.99
	Dong Chan Quan No.0000824	microwave
		dearsenic workshop
33	Xiang (2021) Yongxing County Bu	Xiongfeng –	Framework	Industrial	2016/12	1,718.14
	Dong Chan Quan No.0000827	water station
		workshop
34	Xiang (2021) Yongxing County Bu	Cleaning center	Mixed	Industrial	2016/12	1,010.13
	Dong Chan Quan No.0000822
35	Xiang (2021) Yongxing County Bu	9# braising	Steel	Industrial	2017/01	2,183.10
	Dong Chan Quan No.0000833	workshop	structure

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APPENDIX V

					Year and
					month of
					completion/
		Name of			date of	Gross floor
No.	Certificate number	property	Structure	Usage	acquisition	area (m2)
36	Xiang (2021) Yongxing County Bu	30*48 raw material	Steel	Industrial	2016/12	1,458.78
	Dong Chan Quan No.0000838	warehouse	structure
37	Xiang (2021) Yongxing County Bu	30x117 raw material	Steel	Industrial	2017/03	3,545.34
	Dong Chan Quan No.0000834	warehouse	structure
38	Xiang (2021) Yongxing County Bu	Zinc sulfate	Steel	Industrial	2017/08	1,104.90
	Dong Chan Quan No.0000823	workshop	structure
39	Xiang (2021) Yongxing County Bu	Apartment building	Framework	Industrial	2016/12	6,007.40
	Dong Chan Quan No.0000840	C# and D#
40	Xiang (2021) Yongxing County Bu	Office building	Framework	Industrial	2016/12	5,400.50
	Dong Chan Quan No.0000847
41	Xiang (2021) Yongxing County Bu	60×86 raw material	Steel	Industrial	2016/09	5,195.10
	Dong Chan Quan No.0000845	warehouse	structure
42	Xiang (2021) Yongxing County Bu	18×84 raw material	Steel	Industrial	2016/12	1,536.54
	Dong Chan Quan No.0000841	warehouse	structure
43	Xiang (2021) Yongxing County Bu	66x18 raw material	Steel	Industrial	2017/03	1,208.22
	Dong Chan Quan No.0000820	warehouse	structure
		(logistics)
44	Xiang (2021) Yongxing County Bu	15×144m plant	Steel	Industrial	2016/01	2,198.22
	Dong Chan Quan No.0000851		structure
45	Xiang (2021) Yongxing County Bu	18×84m boiler room	Steel	Industrial	2016/01	1,532.44
	Dong Chan Quan No.0000850		structure
46	Xiang (2021) Yongxing County Bu	36x90 raw material	Steel	Industrial	2015/09	3,270.30
	Dong Chan Quan No.0000826	warehouse	structure
47	Xiang (2021) Yongxing County Bu	21X168 raw material	Framework	Industrial	2015/09	3,573.42
	Dong Chan Quan No.0000843	warehouse
48	Xiang (2021) Yongxing County Bu	18X138 raw material	Framework	Industrial	2015/09	2,521.50
	Dong Chan Quan No.0000849	warehouse
49	Xiang (2021) Yongxing County Bu	Fire pool room	Mixed	Industrial	2017/05	138.19
	Dong Chan Quan No.0000848

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APPENDIX V

Buildings and properties without real estate title registration are shown in the table below:

				Year and month
				of completion/
				date of	Gross floor
No.	Name of property	Structure	Usage	acquisition	area(m2)
1	Rotary kiln raw material	Steel structure +	Industrial	2017/06	1,278.00
	warehouse	Framework
2	36m×15m desulfurization plant	Steel structure	Industrial	2017/06	540.00
3	9×24.8 fan workshop	Steel structure	Industrial	2017/06	223.20
4	9×53.6 fan workshop	Steel structure	Industrial	2017/06	482.40

The basic status of the reported structure is shown in the table below:

			Year and	Gross
			month of	floor area/
No.	Name	Structure	completion	specifications
1	Steel structure plant	Steel	2012/08	980
2	Security sentry box	Framework 2×2×2	2013/12	8
3	Toilet in the guard room	Mixed 2×1.5×2.5	2014/01	8
4	Steel structure plant	Steel structure	2016/09	486
5	Bitang fence		2016/12
6	Elevator	Steel	2011/08	1
7	Stainless steel retractable door	Steel	2012/07	20
	(south gate of Bitang)
8	Renovation of the second floor		2014/10	1
	of the Bitang canteen
9	Chimney	Brick and	2017/05	75m
		concrete
10	Exhaust gas treatment		2017/05	454.96m2
	desulfurization tower
11	Public toilet	Framework	2017/05	51.46m2
12	18×138 power distribution room	Framework	2017/05	58m2
	at the end of the plant
13	VTS series vehicle scale		2017/05	129.2m2
	SCS-40/30 (3.4×18)
14	18×66 guard room near the raw	Brick and	2017/05	12m2
	material warehouse	concrete
15	70m smoky font		2017/05	70m
16	Feeding port lounge	Mixed	2016/01/31	4m2
17	Steel structure plant	Steel structure	2016/09/12	648m2
18	Boiler room	Mixed	2016/10/24	1,512m2

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APPENDIX V

			Year and	Gross
			month of	floor area/
No.	Name	Structure	completion	specifications
19	Guard room in the precious	Mixed	2017/09/27	9m2
	metal workshop
20	Office in the precious metal	Mixed	2017/09/27	24m2
	workshop
21	1# desulfurization tower stirring tank		2017/08	1
22	New office space for small	Brick and concrete	2018/06	18
	rotary kiln
23	Ancillary renovation for the farm	Brick and concrete	2020/04	1,440
		structure
24	40.2*9M warehouse work	Steel structure	2015/09	379.8
25	35.3M*20.4M warehouse work	Steel structure	2015/09	720.12
26	Steel membrane structure carport		2020/01
27	20.4*35.3 raw material warehouse		2020/11	720.12
28	Simple plant shed of the east gate	15000*111000	2017/06	1451
29	East gate of the plant zone		2017/09	80.4m2
30	Front and rear gates		2017/05	160.8m2
31	Greening work	Seedlings	2017/12	8,931m2
32	Ecological park project	Seedlings,	2019/09	29,245m2
		landscapes,
		fengshui ponds,
		sidewalk panels,
		retaining walls,
		etc.
33	Fire-proof door	Steel fire-proof	2019/10/31	16 units
		door
34	Small rotary kiln workshop	Steel structure	2016/06	1,034.15
35	Rainwater collection tank		2018/12
36	High water pool		2017/05	900m3
37	Mountain retaining wall of		2017/05	2,800m3
	high water pool
38	Hydrometallurgy pretreatment		2017/05	1,711m3
	workshop and 8 sets of outdoor
	liquid reservoir
39	Sedimentation tank next to the		2017/05	192m3
	boiler room
40	Pipeline renovation project		2017/05	192.5
	192.5m section

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VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

			Year and	Gross
			month of	floor area/
No.	Name	Structure	completion	specifications
41	Pipeline renovation project		2017/05	129
	129m extension section
42	Sewage treatment tank		2017/05	1,066m3
43	Box culvert		2017/05	167m
44	Yongan canal		2017/05	128m
45	Outdoor pump room and slag		2017/05	176.75m2
	washing tank
46	2# chlorine pool		2017/05	24.8m3
47	Regulating pool and integrated life		2017/05	488.6m3
	system
48	Sewage treatment station		2017/09	784.08m2
49	Sewage treatment station decoration		2017/09
50	Municipal sewage treatment tank		2017/05	3,785.9m3
51	Yongan main canal culvert		2017/05	608m
52	High water pool		2017/05	4,108m3
53	Chlorine pool	Reinforced	2019/10/31	24.8m3
		concrete pool
		body
54	No. 2 motor well		2019/10	’Φ170mm
55	Smelting area drainage work		2017/05
56	Retaining walls and roads of		2017/05	139m
	smelting workshop
57	Road in the plant		2017/05	800m
58	Road, pipe network part		2017/05	692m
59	Retaining wall		2017/05	18,860m3
60	Road pipe network		2017/05	12,766m2+
				1,182m
61	Outdoor work		2017/05	181m
62	Road, pipe network part		2017/05	1,109m
63	36×168m plant and equipment		2017/05
	foundation of silver converter
	workshop
64	Equipment foundation and	Plain concrete,	2017/05
	anti-corrosive work of rare and	reinforced
	precious metal workshop	concrete etc.
65	Lead electrolysis workshop	Plain concrete,	2017/05
	(equipment foundation and	reinforced
	anti-corrosive work)	concrete etc.

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VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

			Year and	Gross
			month of	floor area/
No.	Name	Structure	completion	specifications
66	Reinforced concrete partition wall	Reinforced	2019/10/31	10 pieces,
		concrete		10m long,
				3m high
67	Emergency road	Chips, gravel	2019/10/31	270
68	Road in the plant zone	Concrete	2008/12	4,000
69	60-86 raw material warehouse and		2016/12
	retaining wall
70	21x168 workshop renovation		2017/12
71	18x138 workshop renovation		2017/12
72	Lead electrolysis workshop		2017/08
	renovation
73	Hydrometallurgy workshop		2017/08
	renovation
74	Renovation work of scattered		2017/08
	workshop and melting fan room
75	Rare and precious metal workshop		2017/08
	renovation
76	Silver electrolysis workshop		2017/02
	renovation
77	Reduction furnace workshop		2017/08
78	Office building renovation		2016/12
79	18×30m warehouse floor		2016/01
	renovation (4)
80	15X144 raw material warehouse		2016/01
	(Steel structure)
81	Sporadic works		2019/01
82	Xiongfeng – melting workshop and	Steel structure	2015/12
	raw material warehouse
83	18×66m raw material warehouse	Steel structure	2017/06

– V-53 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

Xiongfeng Environment has provided the Real Estate Title Certificates, construction contracts of the buildings and properties, completion settlement information and other property certificate files related to the appraised buildings and properties. Among which, part of the buildings and properties in the Baidong Factory Zone is located outside the red line of land parcel or across the red line of land parcel, the condition of which is shown in the table below:

Unit: RMB’0,000

	Type of	Name of the asset	Date of	Carrying
No.	property	in the account	completion	amount	Defects of title
1	Building	Rotary kiln raw material	2017/6	952.44	Title certificates not provided, partly located
		warehouse			outside the red line of land parcel
2	Building	36m×15m desulfurization	2017/6	156.11	Title certificates not provided, partly located
		plant			outside the red line of land parcel
3	Building	9×24.8 fan workshop	2017/6	64.52	Title certificates not provided, wholly located
					outside the red line of land parcel
4	Building	9×53.6 fan workshop	2017/6	139.46	Title certificates not provided
5	Structure	Sewage treatment station	2017/9	119.91	Partly located outside the red line of land parcel
6	Structure	Simple plant shed of the	2017/6	16.86	Wholly located outside the red line of land parcel
		east gate
7	Structure	East gate of the plant zone	2017/9	21.88	Wholly located outside the red line of land parcel
8	Structure	Ecological park project	2019/9	2,685.65	Wholly located outside the red line of land parcel
9	Structure	Rainwater collection tank	2018/12	267.91	Partly located outside the red line of land parcel

According to the description of the appraised enterprise, Xiongfeng Environment will adopt the lease land use rights approach to explain the condition of titles involved in such parts of the buildings and properties.

(3) On-site investigation

The total gross floor area of the above-ground buildings in the Baidong Factory Zone is 97,829.08 m², and its surface buildings include the smelting furnace batching room, the smelting furnace weighing room, the smelting furnace raw material warehouse, and the pot room. The total gross floor area of the above-ground buildings in the Bitang Factory Zone is 20,674.68 m². Its surface buildings include dining room, comprehensive office building, duty room, R&D department building, etc.

The structures declared by Xiongfeng Environment mainly involve the auxiliary facilities for the production and operation of the plant, including chimneys, pools, desulfurization towers, road pipe networks, retaining walls, sewage treatment stations, etc.

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APPENDIX V

The architectural structure of the above buildings is mainly shell frame/bent frame, steel structure or mixed structure, with 1 to 5 floors in total; buildings for office and living purposes, such as office buildings and dormitories are mostly of ordinary decoration, and other buildings, such as plants and warehouses, are decorated in a basic and simple way.

During the on-site investigation, the buildings in the Bitang Factory Zone were in idle state, and there was no abnormality in the use of the buildings in the Baidong plant.

2. Fixed Assets – Equipment Assets

Xiongfeng Environment is a comprehensive recycling enterprise for non-ferrous metal resources. By applying a combination of pyrogenic process and wet process, for the industrial solid waste residue, it separates and recycles the metal components contained in the recycled raw materials, including silver, bismuth, indium, germanium, lead, gold, palladium.

(1) Machinery and equipment

A. Baidong Factory Zone

The Baidong production base of Xiongfeng Environment is located in Yongxing County, Chenzhou City, with the capacity to separate and recycle metal by pyrogenic process and wet process. The total treatment capacity of oxygen-enriched reduction melting furnace, fuming furnace, rotary kiln and reverberatory furnace is 6,000T/year, 30,000T/year, 32,000T/year and 12,000T/year (including 3,000T/year for polymetallic bismuth slag, 6,000T/ year for polymetallic anode slag and 3,000T/year for polymetallic copper slag), respectively. The treatment capacity of the bismuth refining workshop is 3,200T/year for crude bismuth; 12,000T/year for 45% sub-zinc oxide, 8,000T/ year for germanium-containing materials in the wet process plant; 3,000T/ year for copper anode sludge (containing lead, copper, gold, silver, etc.) in the acid roasting plant; and 1,000T/year for tellurium slag (3% tellurium) in the selenium and tellurium recycling plant. The electrolysis plant electrolyzes 30,000T/year of crude lead and treats 2T of gold mud.

The precious metal processing equipment declared by Xiongfeng Environment includes 4 sets of vacuum furnaces with a capacity of 8T/day, 4 sets of reverberatory furnaces, 1 batch of bismuth refining boilers, 2 sets of silver converters, 2 sets of intermediate frequency furnaces, 1 set of automatic bismuth ingot casting unit and 2 sets of oxygen-enriched pilot furnaces. The ancillary equipment includes surface coolers (flue gas coolers), bag-type dust removers, lifting equipment, exhaust gas absorption towers, screw-type air compressors and transformers, etc.

– V-55 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

Reduction furnace (side-blown melting furnace): including 1 set for each of 4 m[2] and 4.2 m[2] side-blown melting furnace. The auxiliary equipment involves 1 set of pulverised coal preparation system, 2 sets of fully automatic hydraulic block forming machine, 1 set for each of microwave dearsenization equipment, fully automatic hydraulic brick making machine and brick manipulator for brick making machine, single-roll crusher, cylinder mixer, sodium ion exchanger, 2.65m silver converter, microwave block making machine, hammer crusher, sedimentation pot, vibrating screen. The ancillary equipment includes cranes, submerged scraper conveyors, directly towed type batching belt scales, chain-plate feeders, skip winders, roots blowers and transformers, etc.

The declared environmental protection equipment includes 3 desulfurization towers, 1 set of waste water and reuse water treatment system, 1 set of crystal evaporator and heater, and two reinforced polypropylene chamber filter presses. The ancillary equipment includes transformers, electric single-beam cranes, online gas monitoring system, etc.

Rotary kiln equipment: including 1 large rotary kiln with a specification of Φ2.5×45m, 1 set of 16T heat recovery boiler, 1 set of bag-type dust remover, 1 set of cylinder mixing granulator. The ancillary equipment includes transformer, embedded scraper transporter, crane (grabbing), cylinder cooling machine, etc.

Lead electrolysis equipment: include 1 set for each of lead anode casting unit, starter plate manufacturing unit and electric lead ingot casting unit, 144 sets of inner electrolyzer and ancillary equipment, 7 lead melting furnace combustion systems and steel platforms, and one exhaust gas absorption tower, a batch of detaining and lead-melting pots, one filter press, and two bag-type dust removers. The ancillary equipment includes transformers and rectifiers, double-beam bridge cranes, air compressors, etc.

Wet process equipment: includes 11 units of 5m³ PP storage tanks, 15 PPH reaction tanks, 4 slurry tanks, 6 solution treatment tanks, 12 copper electrolysis tanks, 12 units of 1m³ stainless reactors, and 5 units of 5m³ steel-lined reactors, 3 units of 5m³ PP reactors, 8 units of 50m³PP plastic acid tanks, 6 sets of 6.65m³ airtight demercuration roasting furnaces, 1 set for each of triple-effect evaporator and single-effect evaporator, 7 crystallizing tanks, 1 set of Stade dryer and calcination unit, 2 small rotary kilns, 2 centrifuges, 2 dryers, 3 ball mills, 1 exhaust gas absorption tower, 31 filter presses. The ancillary equipment includes electric single-beam cranes, embedded scraper transporter, bucket elevators, FRP cooling towers, air compressors and fully automatic ultra-pure water equipment.

– V-56 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

Fuming furnace: includes fuming furnace, heat recovery boiler, 1 dust remover, two centrifugal blowers. The ancillary equipment includes smoke cooler (surface cooler), electric single-beam cranes, embedded scraper transporter, steel structure glass cooling tower, etc.

Indium and germanium extraction equipment: includes 1 indium production line, 24 sets of rectification tower reactors, two sets of briquetting machines and indium melting devices, two exhaust gas absorption towers, one PPH spray tower, 50 reactors of various types, 9 four-port altars, 2 filter presses, 14 various tanks, 1 set of refrigeration unit, 1 set of water treatment equipment, 6 high-temperature electric furnaces, 3 high-speed pulverizers and crushers.

Laboratory equipment: includes 1 set for each of ion spectrometer and energy dispersive X-ray fluorescence spectrometer, 3 atomic absorption spectrophotometers, as well as ventilation equipment and balance equipment.

The public area equipment in the Baidong Production Base, include 1 exhaust gas purification tower, 1 square constant flow cooling tower, 9 lead melting pots of various models, 1 refrigeration equipment of low-temperature screw unit (tunnel kiln), 2 mechanical drilling wells, 1 set of water supply system in the dormitory building, 2 electronic truck scales, 2 transformers, 2 intermediate frequency furnaces, 3 pulverizers, 2 boilers, 9 units of 5m³ steel-lined PP plastic reactors, and 1 steam lithium bromide refrigerator, some of which has been removed from the workshop and transferred to the warehouse for storage.

B. Bitang Factory Zone

Bitang production base has ceased production since early 2020, and its equipment assets are now left idle, and some equipment has been scrapped. Among the equipment declared for valuation, the production line of the silver electrolysis workshop has been scrapped; the remaining equipment includes 63 electrolytic cells, two vacuum cadmium removal furnaces, two cranes, two reactors, 14 filter presses, and 3 acid mist towers, 1 unit for each of boiler, ball mill, wastewater treatment equipment, and electronic ultrapure water treatment system. One existing laboratory in Bitang Factory Zone has been obsolete.

(2) Transportation equipment

The transportation equipment declared by Xiongfeng Environment includes: 1 large passenger car, 6 small cars and vans (of which 1 Foton van has been scrapped). There are 3 unlicensed dump trucks, 1 sprinkler, 1 wet sweeper, 6 loaders, 6 forklifts, and a batch of electric vehicles and electric tricycles in the plant.

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APPENDIX V

(3) Electronic equipment

The electronic equipment declared by Xiongfeng Environment includes measurement and testing equipment, computers, printers, air conditioners, shelves, office equipment, etc.

The above equipment assets were purchased during the period from April 2002 to December 2020.

During the on-site investigation, except for some of the declared equipment being no physical substance, scrapped or dismantled, and in idle state (see the Breakdown of Assets Inspection Valuation for details), the use of equipment assets within the scope of the random inspection showed no abnormalities.

3. Intangible assets-land use rights

• (1) General information

As of the valuation reference date, Xiongfeng Environment holds right of use for two parcels of land, namely the land use rights involved in Baidong Factory Zone and Bitang Plant. Relevant legal ownerships are as follows:

• A. Land in Baidong Factory Zone

Project Baidong Factory Zone City/County Yongxing County, Chenzhou City Land use right certificate Xiang (2021) Yong Xing Xian Bu Dong number Chan Quan No. 0000820, etc. Location Bailin Industrial Park, Yongxing County Acquisition method transfer Land use industrial land Land area (square meters) 150,185.00

Expiry date of land use right 10 December 2062

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VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

• B. Land in Bitang Factory Zone

Project Bitang Factory Zone City/County Yongxing County, Chenzhou City Land use right certificate Xiang (2018) Yong Xing Xian Bu Dong number Chan Quan No. 0007035, etc. Location S212 Provincial Highway, Bianjiang Town, Yongxing County Acquisition method transfer Land use industrial land Land area (square meters) 29,470.00

Expiry date of land use right 12 June 2055

• (2) On-site investigation

During the on-site investigation, the development of the lands involving above land use rights have achieved “Five Accesses and One Leveling”, with buildings and their auxiliary facilities erected thereon, such as office buildings, dormitories, factories, etc.

4. Other intangible assets

Other intangible assets declared by Xiongfeng Environment include the initial right of total pollutant discharge in the Bailin Industrial Park (Baidong Factory Zone) and the initial right of total pollutant discharge in Bitang Factory Zone, with an original carrying value of RMB1,457,000 and the total net carrying value of RMB934,900.

Among them: Bailin Industrial Park (Baidong Factory Zone) has obtained the “Pollutant Discharge Permit” with the certificate number of 914310237305144769001P and a specified valid period from 7 December 2018 to 6 December 2021.

Yongxing Base (Bitang Factory Zone) has obtained the “Pollutant Discharge Permit” with the certificate number 914310237305144769002V and a specified valid period from 18 June 2020 to 17 June 2023.

The management of Xiongfeng Environment have stated that they are able to continuously obtain the corresponding permit renewal after the above pollutant discharge permits expire.

– V-59 –

VALUATION REPORT ON THE TARGET COMPANY

APPENDIX V

(III) Off-balance sheet assets and liabilities declared and assessed by the appraised enterprise

As of the valuation reference date, the intangible assets in the off-balance sheet owned by the appraised enterprise include 28 invention patents, 1 utility model patent and 8 trademarks. The above intangible assets were not reflected in the balance sheet as at the valuation reference date.

1. Patent Rights

The general information of patent rights is set out in the following table:

			Patent	Application	Patent	Patent
No.	Patent Title	Patent No.	Type	Date	Term	Owner	Validity Condition
1	Process for selective preparation of	2009100436185	Invention	2009/6/3	20 years	Xiongfeng	Valid
	bismuth-based nanomaterials from crude					Environment
	bismuth by vacuum evaporation method
	(減壓蒸發法由粗鉍選擇性製備鉍
	基納米材料工藝)
2	Process for recycling valuable metals in	2009100436170	Invention	2009/6/3	20 years	Xiongfeng	Valid
	bismuth-containing materials by selective					Environment
	chlorination and volatilization (一種選擇
	性氯化揮發法回收含鉍物料中有價
	金屬的工藝)
3	A suspension device for chemical reactor	2010101814206	Invention	2010/5/24	20 years	Xiongfeng	Valid
	(一種化學反應釜懸掛裝置)					Environment
4	Process for extracting high-purity bismuth	2010102116254	Invention	2010/6/23	20 years	Xiongfeng	Valid
	from bismuth-containing materials					Environment
	produced by anode slime recycling (從陽
	極泥回收所產生的含鉍物料中提煉
	高純鉍的工藝)
5	Method for comprehensively recycling	2011100490488	Invention	2011/3/2	20 years	Xiongfeng	Valid
	various valuable metals from					Environment
	germanium-containing materials by wet
	process (從含鍺物料中濕法綜合回收
	各種有價金屬的方法)
6	Method for preparing silver rare and	2011100544632	Invention	2011/3/8	20 years	Xiongfeng	Valid
	refractory metal oxide electric contact					Environment
	material (一種銀稀有難熔金屬氧化物
	電接觸材料的製備方法)
7	Electronic silver paste and preparation	2011101469893	Invention	2011/5/20	20 years	Xiongfeng	Valid
	process thereof (一種電子銀漿及					Environment
	其製備工藝)
8	Comprehensive recycling process of high	2011103703452	Invention	2011/11/21	20 years	Xiongfeng	Valid
	arsenic polymetallic materials					Environment
	(一種高砷多金屬物料的綜合回收工藝)

– V-60 –

APPENDIX V

VALUATION REPORT ON THE TARGET COMPANY

			Patent	Application	Patent	Patent
No.	Patent Title	Patent No.	Type	Date	Term	Owner	Validity Condition
9	Process for extracting selenium from	2011103703611	Invention	2011/11/21	20 years	Xiongfeng	Valid
	low-grade selenium-containing materials					Environment
	(一種從低品位含硒物料中提取硒的
	工藝)
10	Process for comprehensively recycling	2015101485451	Invention	2015/4/1	20 years	Xiongfeng	Valid
	rare and precious metals of gold,					Environment
	silver, platinum and palladium from
	gold-containing waste materials
	(從含金廢料中綜合回收金銀鉑鈀稀
	貴金屬的工藝)
11	Method for harmless disposal of	2015101487071	Invention	2015/4/1	20 years	Xiongfeng	Valid
	arsenic-containing waste residue and					Environment
	comprehensively recycling valuable metals
	therein (一種無害化處置含砷廢渣及
	綜合回收其中有價金屬的方法)
12	Method and equipment for removing arsenic	2016104675698	Invention	2016/6/24	20 years	4 companies	Valid
	from high-arsenic polymetallic complex					including
	materials (高砷多金屬複雜物料脫砷的					Xiongfeng
	方法及其設備)					Environment
13	High-sulfur gold, silver and lead material wet	2018108460321	Invention	2018/7/27	20 years	Xiongfeng	Valid
	extraction process (高硫金銀鉛物料					Environment
	濕法提取工藝)
14	Process for reducing and smelting copper	2018108484152	Invention	2018/7/27	20 years	Xiongfeng	Valid
	scum by organic sodium-iron filings					Environment
	method (一種有機酸鈉-鐵屑法還原
	熔煉銅浮渣工藝)
15	Method for reducing quantity and efficiently	2019105942774	Invention	2019/7/3	20 years	Central South	Valid
	treating arsenic-containing soot					University,
	(一種減量化高效處理含砷煙灰的方法)					Xiongfeng
						Environment
16	Precious metal alloy purification and	2019201552943	Utility	2019/1/29	20 years	Xiongfeng	Valid
	enrichment oxidation refining furnace		Model			Environment
	(一種貴金屬合金提純富集氧化精煉爐)
17	Precious metal alloy purification and	201910086612X	Invention	2019.1.29	20 years	Xiongfeng	Pending for
	enrichment process and oxidation refining					Environment	scrutiny and
	furnace (一種貴金屬合金提純富集						submission
	工藝及氧化精煉爐)
18	Method for cleaning calcium sulphate scale	2019111039633	Invention	2019.11.13	20 years	Xiongfeng	Pending for
	of desulfurization tower by using double					Environment	scrutiny and
	alkali desulfurization method (一種清洗						submission
	雙堿脫硫法脫硫塔硫酸鈣垢的方法)
19	Precious metal alloy purification device	2019111935797	Invention	2019/11/13	20 years	Xiongfeng	Re-revision upon
	based on acid dissolution (一種基於酸性					Environment	passing in first
	溶解的貴金屬合金提純裝置)						review

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VALUATION REPORT ON THE TARGET COMPANY

			Patent	Application	Patent	Patent
No.	Patent Title	Patent No.	Type	Date	Term	Owner	Validity Condition
20	Equipment for simultaneously recycling	2019111943030	Invention	2019/11/13	20 years	Xiongfeng	Pending for
	precious metals and preparing high-purity					Environment	scrutiny and
	silicon (一種同時回收貴金屬和製備						submission
	高純矽的設備)
21	Device for separating and purifying precious	201911194305X	Invention	2019/11/13	20 years	Xiongfeng	Re-revision upon
	metals in solution (一種溶液中貴金屬					Environment	passing in first
	分離提純裝置)						review
22	Chlorine recycling device for dechlorination	2019111943257	Invention	2019/11/28	20 years	Xiongfeng	Pending for
	of high-chlorine lead silver slag					Environment	scrutiny and
	(一種高氯鉛銀渣脫氯用氯氣回收裝置)						submission
23	New type of process for separating silver,	2020108106527	Invention	2020/8/13	20 years	Xiongfeng	Pending for
	zinc and bismuth materials					Environment	scrutiny and
	(一種銀鋅鉍物料分離的新工藝)						submission
24	Method for treating high-arsenic and	2020108106546	Invention	2020/8/13	20 years	Xiongfeng	Pending for
	high-cadmium wastewater (一種高砷高					Environment	scrutiny and
	鎘廢水的處理方法)						submission
25	New type of process for wet separation of	2020108158199	Invention	2020/8/13	20 years	Xiongfeng	Pending for
	black slag (一種黑渣濕法分離的新工藝)					Environment	scrutiny and
							submission
26	A method to prevent freezing of liquid	2020108173767	Invention	2020/8/13	20 years	Xiongfeng	Pending for
	chlorine tank (一種防止液氯罐結冰的					Environment	scrutiny and
	方法)						submission
27	An inventive process for copper and tellurium	2020108173771	Invention	2020/8/13	20 years	Xiongfeng	Pending for
	removal by precious bismuth (一種發明					Environment	scrutiny and
	型貴鉍除銅、碲工藝)						submission
28	Method for purifying lead electrolyte by	2020108173786	Invention	2020/8/13	20 years	Xiongfeng	Pending for
	using columnar activated carbon (用柱狀					Environment	scrutiny and
	活性炭淨化鉛電解液的方法)						submission
29	A practical water quenching process for matte	2020108173790	Invention	2020/8/13	20 years	Xiongfeng	Pending for
	(一種實用型冰銅水淬工藝)					Environment	scrutiny and
							submission

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APPENDIX V

2. Trademarks

The general information of trademarks is set out in the following table:

	Certificate	Trademark	Approved
No.	Number	Sign	Class	Scope of Use	Registrant
1	No. 20084484		14	Precious metal alloy; unprocessed or	Xiongfeng Environment
				semi-processed precious metals;
				precious metal boxes; precious
				metal figurines; precious metal
				threads (jewelry); silver crafts;
				jewelry accessories; watches;
				alarm clocks
2	No. 10853120		1	Tellurium; palladium chloride;	Xiongfeng Environment
				nano-bismuth stearate; potassium
				chloroplatinate; bismuth nitrate
				for industrial use; bismuth
				carbonate; bismuth sulfide;
				silicon; silver nitrate; metalloid
3	No. 10824601		14	Precious metal ingots; unprocessed	Xiongfeng Environment
				or semi-processed precious
				metals; unprocessed gold or gold
				foil; palladium; platinum (metal);
				unprocessed, unwrought silver;
				precious metal alloy; precious
				metal boxes; precious metal
				artworks; silver crafts
4	No. 8461417		1	Bismuth; bismuth oxide; bismuth	Xiongfeng Environment
				nitrate; bismuth citrate
5	No. 750767		1	Bismuth oxide; bismuth nitrate;	Xiongfeng Environment
				bismuth citrate; bismuth

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APPENDIX V

	Certificate	Trademark	Approved
No.	Number	Sign	Class	Scope of Use	Registrant
6	No. 4000544		1	Bismuth; antimony; cesium; sponge	Xiongfeng Environment
				palladium; metalloid; metallic
				earth; earth alkali metal; arsenic;
				silicon; silver nitrate
7	No. 4000545		6	Copper: unprocessed or	Xiongfeng Environment
				semi-processed copper; lead seal;
				indium; common metal ingot;
				unprocessed or semi-processed
				lead; electrolytic lead; zinc;
				electrolytic copper; silver solder
8	No. 4000546		14	Precious metal ingots; unprocessed	Xiongfeng Environment
				or semi-processed precious
				metals; unprocessed gold or gold
				foil; palladium; platinum (metal);
				unprocessed, unwrought silver;
				silver crafts; gold and silver ware
				except knives, forks, and spoons;
				electroplated products (precious
				metal plating); household
				precious metal appliances

The appraised enterprise undertakes: except for the declared intangible assets that are not reflected in the balance sheet as at the valuation reference date, Xiongfeng Environment has no off-balance sheet assets that are related to the economic activities corresponding to the purpose of this valuation and have not been declared for valuation.

• (IV) Assets/Liabilities involved in reference to the conclusions of reports issued by other institutions

The valuation does not reference any assets or liabilities involved in the conclusions of reports issued by other institutions.

IV. VALUE TYPES

(I) Value types of this valuation and their definitions

The type of value of this valuation is determined to be market value.

Market value is the estimated value amount of the appraised object in an arm’s length transaction as at the valuation reference date between a willing buyer and a willing seller, each acting rationally and without any coercion.

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APPENDIX V

(II) Explanation of the selected value type

The economic behavior corresponding to the purpose of this valuation is an acquisition transaction related to the appraised object. The market conditions of such transaction are significantly similar to the conditions defined by the market value. Taking into account the own conditions of the appraised object, the value type selected in this valuation is the market value of Xiongfeng Environment as an ongoing concern.

V. VALUATION REFERENCE DATE

The valuation reference date for this valuation is 28 February 2021

The above valuation reference date is consistent with the valuation reference date agreed in the Asset Valuation Engagement Contract entered into by the Company and Shenzhen Pengxin.

In order that the implementation of the target economic activity can be as close to the valuation reference date as possible, the client determines the end of the aforementioned accounting period as the valuation reference date of this valuation, after taking into account various factors, such as the time for account settlement, assets examination, and financial report preparation of the appraised enterprise, as well as the overall plan of the target economic behavior.

VI. BASIS OF VALUATION

The guidelines with which this asset valuation complies mainly include basis of economic behavior, basis of laws and regulations, basis of valuation standards, basis of asset ownership, pricing basis for appraisal and estimates, and other references, with details as follows:

(I) Basis of economic behavior

“Resolutions of the second meeting of the seventh session of the Board of Dongjiang Environmental Company Limited” (on 31 December 2020, the second meeting of the seventh session of the Board of Dongjiang Environmental Company Limited passed the “Resolution on Planning of Material Asset Restructuring and Signing of the Agreement of Intent on Acquisition of Equity Interest”. It was approved that Dongjiang Environmental Company Limited entered into the Agreement of Intent on Acquisition of Equity Interest with Beijing Hanfeng United Technology Co., Limited ( 北京瀚豐聯合科技有限公司 ), to clarify matters related to the acquisition of the equity interest of Chenzhou Xiongfeng Environment Technology Company Limited ( 郴州雄風環 保科技有限公司 )).

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APPENDIX V

(II) Basis of laws and regulations

1. The Asset Appraisal Law of the People’s Republic of China (as adopted at the 21st Session of the Standing Committee of the Twelfth National People’s Congress on 2 July 2016, and implemented on 1 December 2016).

2. The Civil Code of the People’s Republic of China (Presidential Decree No. 45 of the People’s Republic of China, as adopted at the third Session of the Thirteenth National People’s Congress on 28 May 2020, and implemented on 1 January 2021).

3. The Company Law of the People’s Republic of China (as adopted at the 5th Session of the Standing Committee of the Eighth National People’s Congress on 29 December 1993; first amendment made according to the “Decision on Amending the Company Law of the People’s Republic of China” at the 13th Session of the Standing Committee of the Ninth National People’s Congress on 25 December 1999; second amendment made according to the “ Decision on the Amending the Company Law of the People’s Republic of China” at the 11th Session of the Standing Committee of the Tenth National People’s Congress on 28 August 2004; amended at the 18th Session of the Standing Committee of the Tenth National People’s Congress on 27 October 2005; third amendment made according to the “Decision on Amending Seven Laws including the Marine Environmental Protection Law of the People’s Republic of China” at the sixth Session of the Standing Committee of the Twelfth National People’s Congress on 28 December 2013; the Fourth amendment made according to the “Decision on Amending the Company Law of the People’s Republic of China” at the sixth Session of the Standing Committee of the 13th National People’s Congress on 26 October 2018).

4. The Law of the People’s Republic of China on State-owned Assets of Enterprises (as adopted at the 5th Session of the Standing Committee of the Eleventh National People’s Congress on 28 October 2008, and promulgated by Presidential Decree No. 5 of the People’s Republic of China on 28 October 2008).

5. The Enterprise Income Tax Law of the People’s Republic of China (as adopted at the 5th Session of the Tenth National People’s Congress on 16 March 2007; amended at the 26th Session of the Standing Committee of the Twelfth National People’s Congress on 24 February 2017).

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VALUATION REPORT ON THE TARGET COMPANY

1. The Land Management Law of the People’s Republic of China (as adopted at the 16th Session of the Standing Committee of the Sixth National People’s Congress on 25 June 1986; first amendment made according to the “Decision on Amending the Land Administration Law of the People’s Republic of China” at the 5th Session of the Standing Committee of the Seventh National People’s Congress on 29 December 1988; amended at the 4th Session of the Standing Committee of the Ninth National People’s Congress on 29 August 1998; second amendment made according to the “Decision on Amending the Land Administration Law of the People’s Republic of China” at the 11th Session of the Standing Committee of the Tenth National People’s Congress on 28 August 2004; third amendment made according to the “Decision on Amending the Land Administration Law of the People’s Republic of China” and the “Urban Real Estate Administration Law of the People’s Republic of China “at the 10th Session of the Standing Committee of the Thirteenth National People’s Congress on 26 August 2019).

2. The Urban Real Estate Management Law of the People’s Republic of China (as adopted at the 8th Session of the Standing Committee of the Eighth National People’s Congress on 5 July 1994; first amendment made according to the “Decision on Amending the Urban Real Estate Management Law of the People’s Republic of China” at the 29th Session of the Standing Committee of the Tenth National People’s Congress on 30 August 2007; second amendment made according to the “Decision on Amending Certain Laws” at the 10th Session of the Standing Committee of the Eleventh National People’s Congress on 27 August 2009; third amendment according to the “Decision On Amending the Land Administration Law of the People’s Republic of China and the Urban Real Estate Management Law of the People’s Republic of China “ at the 12th Session of the Standing Committee of the Thirteenth National People’s Congress on 26 August 2019).

3. Interim Measures on Administration of Appraisal of State-owned Assets of Enterprises (as considered and approved at the eighth Director Meeting of the State Council on 13 May 2003, and promulgated by Decree No. 378 of the State Council of the People’s Republic of China on 27 May 2003).

4. The Measures on the Supervision and Management of the Transactions of State-owned Assets of Enterprises (as promulgated by Decree No. 32 of the State-owned Assets Supervision and Administration Commission of the State Council and the Ministry of Finance on 24 June 2016).

5. Interim Measures on the Administration of State-owned Assets Appraisal of Enterprises (as promulgated by Decree No. 12 of the State-owned Assets Supervision and Administration Commission of the State Council on 25 August 2005).

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VALUATION REPORT ON THE TARGET COMPANY

1. Rules on the Implementation of the Provisional Regulations on Value-added Tax of the People’s Republic of China (as promulgated by Decree No. 134 of the State Council of the People’s Republic of China on 13 December 1993; amended and adopted at the 34th Director Meeting of the State Council on 5 November 2008, promulgated by Decree No. 538 of the State Council of the People’s Republic of China on 10 November 2008; adopted at the 119th Director Meeting of the State Council on 13 January 2016, and promulgated by Decree No. 666 of the State Council of the People’s Republic of China on 6 February 2016).

2. Detailed Rules for the Implementation of the Provisional Regulations on Value-Added Tax of the People’s Republic of China (as promulgated by Decree No. 50 of the Ministry of Finance and the State Taxation Administration on 18 December 2008; amended and promulgated by Decree No. 65 of the Ministry of Finance and the State Taxation Administration on 28 October 2011).

3. Comprehensively Promoting the Pilot Program of the Collection of Value-added Tax in Lieu of Business Tax” (Cai Shui [2016] No.36, Ministry of Finance and State Taxation Administration on 23 March 2016).

4. Other relevant laws, regulations and statutory documents.

(III) Basis of valuation standards

1. Asset Valuation Standards – Basic Standards (Cai Zi [2017] No. 43).

3. Professional Code of Ethics for Asset Valuation (Zhong Ping Xie [2017] No. 30);

4. Practicing Standards for Asset Valuation – Asset Valuation Procedures (Zhong Ping Xie [2018] No. 36).

5. Practicing Standards for Asset Valuation – Asset Valuation Report (Zhong Ping Xie [2018] No. 35).

6. Practicing Standards for Asset Valuation – Asset Valuation Methodology (Zhong Ping Xie [2019] No. 35).

7. Practicing Standards for Asset Valuation – Asset Valuation Engagement Contract (Zhong Ping Xie [2017] No. 33).

8. Practicing Standards for Asset Valuation – Enterprise Value (Zhong Ping Xie [2018] No. 38).

9. Practicing Standards for Asset Valuation – Intangible Assets (Zhong Ping Xie [2017] No. 37).

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APPENDIX V

1. Practicing Standards for Asset Valuation – Real Estate (Zhong Ping Xie [2017] No. 38).

2. Practicing Standards for Asset Valuation – Machinery and Equipment (Zhong Ping Xie [2017] No. 39).

3. Guidelines for Valuation Report of State-owned Assets of Enterprises (Zhong Ping Xie [2017] No. 42).

4. Guidelines for Valuation of Intellectual Property Rights (Zhong Ping Xie [2017] No.44).

5. Guidelines for Business Quality Control of Asset Valuation Agency (Zhong Ping Xie [2017] No. 46).

6. Guiding Opinions on Types of Value under Asset Valuation (Zhong Ping Xie [2017] No.47).

7. Guiding Opinions on Legal Ownership of Subject under Valuation (Zhong Ping Xie [2017] No.48).

8. Guiding Opinions on Valuation of Patent Assets (Zhong Ping Xie [2017] No.49).

9. Guiding Opinions on Valuation of Trademark Assets (Zhong Ping Xie [2017] No. 49).

10. Asset Valuation Expert Guidelines No. 12-Calculation of the Discount Rate in the Valuation of Enterprise Value Using the Income Method” (Zhong Ping Xie [2020] No. 38).

(IV) Basis of asset ownership

1. Business License and Articles of Association of the client and the appraised enterprise, as well as the resolutions of relevant authorities of the Company.

2. Industrial and business registration information of the client and the appraised enterprise.

3. Copies of the real property right certificate, land use right transfer contract, important equipment purchase contract, purchase invoice and other property right certificates provided by the appraised enterprise.

4. Other accounting vouchers and other materials related to the acquisition and use of assets of the appraised enterprise.

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APPENDIX V

(V) Pricing basis

1. Information and financial accounting records and financial reports provided by the appraised enterprise in relation to its operations.

2. Relevant materials such as future business forecasts provided by the appraised enterprise.

3. Treasury yield and other materials with effective on the valuation reference date.

4. Statistical analysis data of the national macroscopic and regional markets related to the industry where the appraised enterprise operates.

5. RoyalFlush iFinD information financial terminal.

6. Relevant price catalog or quotation information.

7. On-site investigation records of appraisers and other relevant price information collected.

8. Other references related to this valuation.

(VI) Other references

1. Asset valuation declaration form provided by the appraised enterprise.

2. Analog Financial Statement Audit Report of Chenzhou Xiongfeng Environment Technology Company Limited for January to February 2021, Year 2020 and Year 2019 no. XYZH/2021GZAA60490 issued by SHINEWING Certified Public Accountants LLP.

3. Other references.

VII. VALUATION APPROACH

(I) Selection of valuation approach

The valuation approach used herein are the asset-based approach and the income approach.

(II) Reasons for valuation approaches

The basic methods for enterprise value assessment include the income approach, market approach and asset-based approach.

The income approach in enterprise value assessment refers to the valuation approach that capitalises or discounts expected revenue to determine the value of the appraised object.

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APPENDIX V

The market approach in enterprise value assessment refers to the valuation approach that compares the appraised object with comparable listed companies or comparable transaction cases to determine the value of the appraised object.

The asset-based approach in enterprise value assessment refers to the valuation approach that uses the balance sheet of the appraised enterprise as at the valuation reference date as the basis for appraising the value of various on-balance sheet and off-balance sheet assets and liabilities to determine the value of the appraised object.

Based on the valuation purpose, appraised object, value type, information collection and other relevant conditions, as well as the conditions for application of the three basic valuation approaches, the asset-based approach and income approach are selected as the valuation approaches for this valuation. The reasons for the selection of the valuation approaches are summarized as follows:

Due to the lack of comparable enterprises in the current domestic capital market that are relatively similar or comparable to the appraised enterprise; and the lack of or difficulty in obtaining cases of equity transactions of similar enterprises due to the underdeveloped equity transactions market, therefore, the market approach is not appropriate for the valuation.

Through analysis of relevant national policies, national economic operating environment and related industry developments, and the operating conditions of Xiongfeng Environment, it is currently under normal operation and its management team, other chief officers, and operating environment are relatively stable. As the historical data of relevant income is available, under certain assumptions, the future income period of Xiongfeng Environment and the corresponding income and risks can be relatively predicted and estimated in a reasonable manner. Therefore, it is applicable to use the income approach for this valuation.

The appraised enterprise has complete accounting record in place, and the title of each asset and liability included within the scope of valuation is clearly defined. The relevant information is relatively complete and value of each asset and liability can be estimated in a reasonable manner. Therefore, it is applicable to use the asset-based approach this valuation.

Based on the analysis above, it is determined to adopt the asset-based approach and income approach in this valuation.

(III) Method of determining the valuation conclusion

Compare and analyze the preliminary conclusions drawn by two valuation approaches, and form a final valuation conclusion after comprehensively considering the rationality of different valuation approaches and the corresponding valuation results, and the quality and quantity of the information used.

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APPENDIX V

VIII. PROCESS AND IMPLEMENTATION OF VALUATION PROCEDURES

(I) Definition of the basic matters for the valuation

Expressly indicate the client, other users of the asset valuation report, the appraised enterprise, valuation purpose, appraised object and valuation scope, value type, valuation reference date, scope of use of the asset valuation report, valuation report submission date and manner and other basic matters for the assessment, through obtaining the overall plan from the client.

(II) Execute an assets valuation engagement contract

Shenzhen Pengxin will, based on the basic information on the asset valuation business obtained, conduct a comprehensive analysis and evaluation of its professional competence, independency and business risks, and will finally determine whether to enter into an Assets Valuation Engagement Contract with the client.

(III) Preparation of asset valuation plan

Based on the specific facts of the valuation project, the project manager will prepare an asset valuation plan, setting forth the detailed procedures, timing requirements and job responsibilities of members in connection with the valuation project, and submit the valuation plan to relevant personnel of Shenzhen Pengxin for consideration and approval.

(IV) On-site investigation

According to the approved asset valuation plan, the valuation personnel stationed in the appraised enterprise to conduct on-site investigations, mainly including obtaining the balance sheet of the appraised enterprise prepared in accordance with the Accounting Standards for Business Enterprises and the corresponding declaration assessment schedule of various assets and liabilities; verifying the relationship between the statements and the tables, the tables and the books on the basis of the balance sheet and the declaration assessment schedule; identifying relevant assets and liabilities declared for valuation; checking and verifying the accounting vouchers of related assets and liabilities declared for valuation and title certification materials; investigating and understanding the storage, operation, repair, and maintenance status of physical assets within the scope of the valuation; conducting investigation to understand the macro and regional economic factors that affect the operation of the appraised enterprise, the current status and development prospects of the industry where the appraised enterprise operates, and the business performance and financial condition of the appraised enterprise.

(V) Collection of documents required for valuation

On the basis of on-site investigation, the valuation personnel will collect all materials and information in connection with this valuation as required, including the financial information, property ownership certificates of the appraised enterprise, market transaction information of relevant assets, industry information, relevant market information, etc.

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APPENDIX V

(VI) Valuation conclusion after assessment and estimation

Pursuant to the on-site investigation and the collected valuation information, combined with the actual condition and characteristics of the appraised object, the corresponding evaluation method has been selected to assess the market value of the appraised object, so that form valuation conclusions thereon.

(VII) Preparation and submission of valuation report

The person in charge of the project (namely, the valuer who will sign on this report) will prepare a valuation report based on the work above, and will submit to the client after internal consideration and approval by Shenzhen Pengxin.

(VII) Organization and collection of valuation archives

The valuation personnel organize the working papers, asset valuation report and other relevant information to form asset valuation documents.

IX. VALUATION ASSUMPTIONS

The valuation conclusions contained in this Asset Valuation Report are established on the following valuation assumptions, including assumptions of valuation basis and assumptions of valuation conditions:

(I) Assumptions of valuation basis

1. Assumptions of transaction basis

Assuming that the appraised items or all the appraised assets are in the course of market transactions as at the valuation reference date, the asset valuation professionals carried out the corresponding value estimates or calculations based on the market conditions at the valuation reference date and comparable market conditions for the appraised items or all the appraised assets.

2. Assumptions of public market basis

It is assumed that the market on which the appraised object or all the assets under appraisal are traded as at the valuation reference date is an open market. An open market is a market in which at least the following conditions are met: (1) there are a sufficient number of purchasers in the market and they are of equal ranking and all purchasers are voluntary, rational and have sufficient expertise; (2) there are a sufficient number of sellers in the market and they are of equal ranking and all sellers are voluntary, rational and have sufficient expertise; (3) all purchasers and sellers in the market are of equal ranking; (4) all trading rules in the market are clear and open; (5) all purchasers and sellers in the market are well informed and have access to the same and sufficient trading information; and (6) all transactions in the market are conducted freely for a sufficient period of time and not under mandatory or unrestricted conditions.

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APPENDIX V

3. Going concern/continuous use basis assumption

It is assumed that the economy corresponding to the appraisal items continues to operate in accordance with its established business objectives based on the operating team, financial structure, business model, market environment, etc. at the valuation reference date; it is assumed that all assets/liabilities corresponding to the appraisal items continue to be used in the manner, scale, frequency, environment, etc. that they are currently used and utilised.

(II) Assumptions of valuation conditions

1. Assumptions of external conditions assessment

It is assumed that, there are no significant changes in the relevant laws, regulations and policies in force in the PRC, the macroeconomic situation in the PRC and no significant changes in the political, economic and social environment of the regions in which the parties to the transaction are located; it is assumed that, there are no significant changes in interest rates, exchange rates, tax bases and rates, policy levies, financing conditions, etc.; it is assumed that, there are no other act of God and unforeseen factors that would have a material adverse impact on the corporate; it is assumed that all licences, use permits, letters of consent or other legal or administrative authorisations issued by relevant local or national government agencies, private organisations or bodies that are required for the corporate under appraised for the valuation have been or can be obtained or renewed at any time; It is assumed that, all operation activities of the valued corporate can be carried out in accordance with the relevant laws, regulations and relevant industry standards and the relevant regulations on safe production and operation.

2. Assumptions of appraised object and ranges

The future management team of the valued corporate is dedicated and the management of the corporate is capable of assuming its duties and continues to operate under the existing operation management model. It is also assumed that the existing management, scope of operations, business direction and technical teams are relatively stable, or that the changed management, scope of operations, business direction and technical teams will not have a significant impact on the valued corporate; the valuation is only based on the Valuation reference date or the foreseeable operating capacity in the near future. Possible future expansion of operating capacity due to management, business strategies and ongoing additional investments were not taken into account; the current level of research and development capability and technological advancement of the corporate will be sustained after the valuation reference date; the products or services of the corporate will remain at the current competitive position in the market; it is assumed that the mode of acquisition and utilisation of the operation venues of the corporate under appraisal will remain consistent with that of the valuation reference date without any changes; each of the assets under appraisal will be valued on the basis of the actual assets as at the valuation reference date. The scope of the valuation was only based on the valuation return provided by the valued enterprise, without taking into account the possible existence of contingent assets and contingent liabilities outside the list provided by the valued corporate; it was assumed that the accounting policies to be adopted by the corporate in the future and the accounting policies adopted in the preparation of the valuation report were, in material respects substantially the same

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3. Assumption of information necessary for the assessment provided by the client and the related parties

It is assumed that, the information necessary for the valuation (including but not limited to the valuation information reported in the breakdown of asset valuation, operational information and information relating to the valued items and the assets and liabilities covered by the valued items and their corresponding scope of valuation or the valued corporate, relevant financial reports and information and other important information, etc.) provided by the client and the relevant parties (representing the entity and its staff who have the responsibility and obligation to provide the information necessary for the valuation in accordance with the relevant provisions of the relevant laws and regulations, valuation standards, etc. of the State and the economic activities corresponding to the purpose of the valuation, including but not limited to: the property rights holder of the valued items or their actual controllers; the valued corporate and its related parties; the actual owners, users, controllers, managers, creditors, debtors, etc. in relation to the valued items and their corresponding scope of valuation are true, complete, legal and valid. The valuation is true, complete, legal and valid.

The valuation relied heavily on the information provided by the client and the relevant parties as necessary for the valuation. Although the client and the relevant parties have undertaken to Shenzhen Pengxin that the information provided by them is true, complete, lawful and valid, and Shenzhen Pengxin’s valuation professionals have conducted such random verification as we consider appropriate in the course of the on-site investigation, including observation, enquiry, site investigation and inquiry, and have described the relevant circumstances in this Asset Valuation Report, which does not imply any warranty as to its accuracy.

4. Assumptions about information obtained from parties other than the Client and the relevant parties

It is assumed that the information obtained from parties other than the client and the relevant parties in this valuation can reasonably reflect the logic of the corresponding market transactions, or market trading quotations, or market operating conditions, or market development trends, etc. The standards and parameters relating to prices quoted in this valuation have been faithfully disclosed in this Asset Valuation Report.

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5. Assumptions of the legal ownership of the appraised items and the associated significant assets

Unless otherwise stated, described and considered in this Asset Valuation Report, the acquisition, use and holding of the appraised properties and all the appraised assets are assumed to be in compliance with the provisions of national laws, regulations and regulatory documents, i.e. their legal ownership is clear.

This valuation is an estimate of the value of the appraised items and a professional opinion is expressed. It is beyond the scope of practice of asset valuation professionals to confirm or express an opinion on the legal ownership of the appraised items and all the appraised assets. We do not provide any warranty as to the legal ownership of the appraised items and all the appraised assets.

6. Other assumptions and conditions

• (1) Unless otherwise stated in this Asset Valuation Report, the following are assumed to be in normal condition: (i) all assets or parts of assets that are invisible or inconvenient to observe, such as buried building foundations and pipeline networks, facilities and equipment placed near high voltage electricity, assets that are not suitable for unpacking and assets that are still operating off-site or not operating at the time of our on-site investigation are assumed to be in normal condition; (ii) all the internal structure, performance, quality, character and function of all physical assets are assumed to be normal; (iii) all assets under appraisal are assumed to be recorded, kept and stored in compliance with legal or professional regulations, etc., and are therefore in a safe, economical and reliable environment, and any possible risk factors are not included in the scope of this valuation.

Although the valuation procedures implemented have included on-site investigation of the assets under appraisal, such investigation is limited to observation of the visible parts of the assets under appraisal, as well as random inspection and limited understanding of relevant management, usage and maintenance records. We do not have the expertise to understand the internal structure, physical condition, safety and reliability of any physical assets, nor are we qualified to test, examine or express an opinion on these contents.

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• (2) The quantities of the various types of assets were verified on a sample basis and assessed on that basis. We measured the quantities of the following assets in the following manner: (i) for monetary funds, we projected the information as at the Valuation reference date based on the information obtained at the time of the survey; (ii) for inventories, we projected the information as at the Valuation reference date based on the situation at the time of random inspection and monitoring, combined with the incoming and outgoing information from the Valuation reference date to the time of random inspection and monitoring; (iii) for buildings and land use rights, we conducted the valuation based on the quantity listed in the relevant legal documents (such as property rights certificates, purchase contracts, etc.); (iv) for debts and liabilities, we determined their quantities based on the information contained in the relevant contracts, accounting records, etc.

7. Specific assumptions of the valuation

• (1) Xiongfeng Environment has obtained the recognition as a high-tech enterprise, which is valid from 3 December 2018 to 3 December 2021. This valuation assumes that Xiongfeng Environment will continue to obtain the recognition as a high-tech enterprise and continue to enjoy the current income tax incentives after the expiry of the aforesaid recognition.

• (2) It is assumed that the sale prices of Xiongfeng Environment products will remain stable in future years.

• (3) It is assumed for the valuation that, Xiongfeng Environment has completed the post-expected asset disposal, capital reduction and other restructuring matters as at the Valuation reference date, i.e. assuming that all assets and liabilities of Xiongfeng Environment as at 28 February 2021, the Valuation reference date, will match those set out in the financial statements after similar adjustments in the audit report.

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X. ASSESSMENT CONCLUSIONS

(I) Assessment results

1. The valuation conclusions by the asset based approach

The valuation conclusions of Xiongfeng Environment as at 28 February 2021, the Valuation reference date, using the asset based approach, are as follows:

The book value of total assets was RMB555,155,500 and the value was RMB647,078,600, representing a valued increment of RMB91,923,100, or 16.56%; the book value of total liabilities was RMB38,707,100 and the value was RMB34,207,100, representing a valued impairment of RMB4,500,000, or 11.63%; and the book value of net assets was RMB516,448,400 and the value was RMB612,871,500, representing a valued increment of RMB96,423,100, or 18.67%. The valuation results are shown in the table below:

Unit of amount: RMB’00,000

				Increment and
				impairment	Increment
		Book value	Valuation value	value	rate%
Item		Ａ	Ｂ	Ｃ=Ｂ–Ａ	Ｄ=Ｃ/Ａ×100%
Current assets	1	1,146.77	1,078.25	-68.52	-5.98
Non-current assets	2	54,368.78	63,629.62	9,260.84	17.03
Of which: Other equity instrument
investment	3	424.29	424.29	0.00	0.00
Held-to-maturity investment	4	–	–	–	–
Long term equity investment	5	–	–	–	–
Investment properties	6	–	–	–	–
Fixed assets	7	51,092.54	58,993.89	7,901.35	15.46
Intangible assets	8	2,847.08	4,206.57	1,359.49	47.75
Construction work in progress	9	–	–	–	–
Long term fees for amortization	10	–	–	–	–
Deferred income tax assets	11	–	–	–	–
Total assets	12	55,515.55	64,707.86	9,192.31	16.56
Current liabilities	13	3,413.92	3,413.92	0.00	0.00
Non-current liabilities	14	456.80	74.30	-450.00	-98.51
Total liabilities	15	3,870.71	3,420.71	-450.00	-11.63
Net assets (Owners’interests)	16	51,644.84	61,287.15	9,642.31	18.67

i.e. the market value of the entire equity interest of the shareholders of Xiongfeng Environment as at 28 February 2021, the valuation reference date, was RMB612,871,500, which was valued using the asset based approach.

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For details of the valuation results, please refer to the Summary of Asset Valuation Results and the Breakdown of Valuation.

The main reasons for the valuation of the increment and impairment are as follows:

			Unit of amount: RMB’00,000
Item	Increment	Increment	Reasons of changes
	amount	rate (%)
Prepayment	-85.59	-86.74	The amount assessment for the fee
			nature is nil.
Other receivables	-21.94	-48.80	The amount assessment for the fee
			nature is nil.
Inventories	39.00	5.63	The provision for decline in value of
			inventories was assessed to be nil.
Fixed assets	7,901.35	15.46	The economic useful life of the
			assets considered for assessment
			was longer than the accounting
			depreciation life of the corporate.
Intangible assets	1,359.49	47.75	Off-balance sheet intangible assets
			were assessed for increment.
Other non-current	-450.00	-100.00	Deferred revenue did not constitute
liabilities			an effective liability of the
			corporate.

2. Assessment results of income approach

The market value of the entire equity interest of the shareholders of Xiongfeng Environment as at 28 February 2021, the valuation reference date, assessed using the income approach, was RMB615,000,000, representing a valuation increment of RMB98,551,600 against its carrying value of RMB516,448,400 as at the valuation reference date.

3. Differences in valuation results between the asset based approach and the income approach, their causes and the determination of valuation conclusions

The asset based approach is a method of valuation that determines the value of an object on the basis of a reasonable assessment of the value of the various assets and liabilities of the corporate, i.e. adding up the valuation of the various elements of the corporate’s assets and subtracting the valuation of its liabilities to arrive at the value of the shareholders’ equity of the corporate.

The income approach is based on the future profitability of the corporate and reflects the combined profitability of the assets of the corporate. This profitability is the result of a combination of all environmental factors and internal conditions of the corporate, usually including the impact of macroeconomic, governmental control and the efficient use of assets.

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In view of the purpose of this valuation and taking into account factors such as the quantity and quality of information used in different valuation methods, we consider that the asset based approach can objectively and reasonably reflect the value of the appraised items and therefore the results of the asset based approach are adopted as the final appraisal conclusion.

(II) Valuation conclusions

In summary, we are of the view that, except for the particulars set out in the Valuation Report, the market value of the entire interest of the shareholders of Xiongfeng Environment as at the valuation reference date was RMB612,871,500 (in capital letters: Renminb six hundred and twelve million eight hundred and seventy one thousand and five hundred dollars) , subject to the going concern of “Xiongfeng Environment” and the purpose of valuation, price value type and valuation assumptions set out in the Report.

The valuation conclusions were only established on the valuation reference date as stated in the valuation Report. The use of the asset valuation results is valid for one year from the valuation reference date (i.e. from 28 February 2021 to 27 February 2022).

The valuation conclusions contained in this Asset Valuation Report have not taken into account the possible impact of equity liquidity factors on the value of the shareholders’ total equity.

XI. EXPLANATIONS OF PARTICULARS

The valuation conclusions contained in this Asset Valuation Report reflect only the market value of the valued objects as determined in accordance with the relevant economic principles for the purpose of this valuation, the price value type and the valuation assumptions. In our opinion: the following matters identified in the course of our valuation may affect the valuation conclusions, but we are unable to estimate the extent to which they will affect the valuation results in the current circumstances. We draw the attention of users of this Asset Valuation Report to the impacts of these matters on economic activities.

(I) Reference to the conclusions of reports issued by other organisations

There is no reference to the conclusions of reports issued by other organisations in this evaluation.

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(II) Incomplete or defective ownership information

Xiongfeng Environment has provided documents proving property rights, such as certificates of property rights, construction contracts of housing buildings and completion and settlement information in relation to the housing buildings under valuation. Of which, some of the housing buildings in the Baidong Factory Zone are located outside the red line of the lot or straddle the red line of the lot, as shown in the table below:

Unit of amount: RMB’00,000

	Construction	Name of assets	Date of
No.	type	in the book	completion	Book value	Defective ownership
1	Building	Rotary kiln raw material	2017/6	952.44	Title certificates not provided, partly
		warehouse			located outside the red line of land
					parcel
2	Building	36m×15m desulfurization	2017/6	156.11	Title certificates not provided, partly
		plant			located outside the red line of land
					parcel
3	Building	9×24.8 fan workshop	2017/6	64.52	Title certificates not provided, wholly
					located outside the red line of land
					parcel
4	Building	9×53.6 fan workshop	2017/6	139.46	Title certificates not provided
5	Structure	Sewage treatment station	2017/9	119.91	Partly located outside the red line of
					land parcel
6	Structure	Simple plant shed of the east	2017/6	16.86	Wholly located outside the red line of
		gate			land parcel
7	Structure	East gate of the plant zone	2017/9	21.88	Wholly located outside the red line of
					land parcel
8	Structure	Ecological park project	2019/9	2,685.65	Wholly located outside the red line of
					land parcel
9	Structure	Rainwater collection tank	2018/12	267.91	Partly located outside the red line of
					land parcel

According to the values corporate, Xiongfeng Environment will adopt the lease of land use rights to resolve the ownership status of some of the buildings.

In addition, although Xiongfeng Environment has provided the appraisal officers with the purchase contracts of some of the equipment assets included in the scope of valuation, most of the equipment valued could not provide their original purchase invoices, purchase contracts as well as the tender documents and construction cost documents in relation to the projects.

The valuation did not account for the possible impacts of the mentioned property defects on the valuation results.

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(III) Constraints of the valuation process

There is no constraint to the valuation process that may induced a significant impact on the valuation conclusions were identified in this valuation.

(IV) Incomplete assessment information

1. Due to historical reasons, some of the housings and buildings reported by Xiongfeng Environment did not provide information on the final account of the project or the bill of quantities of the project. In this valuation, the appraisal officers expressed their opinions on the value of the above project based on the on-site survey and reasonable cost levels for similar projects.

2. The carrying amount of financial assets available-for-sale reported by Xiongfeng Environment was RMB4,242,900, which specifically represented the valued corporate’s investment in Yongxing Shanghai Agricultural and Commercial Village Bank in June 2012, in which Xiongfeng Environment held a 4% equity interest.

In view of the fact that Yongxing Shanghai Agricultural and Commercial Village Bank was unable to respond substantively to the valuation work, it only provided the valuers with unaudited financial accounting statements as at the valuation reference date. The appraisal officers verified the relevant certificates and contracts and, having considered that the assets represented a relatively small proportion of the total assets of the valued corporate and did not have a material impact on the market value of the valued objects upon analysis, the value of the investment was recognised on the basis of the carrying value of the net assets as stated in the financial accounting statements of Yongxing Shanghai Agricultural and Commercial Village Bank multiplied by the percentage of shareholding.

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(V) Legal, economic and other outstanding issues at the valuation reference date

As at the valuation reference date, the legal disputes and litigation matters involving the valued corporate were as follows:

1. Contractual dispute between Zhuzhou Xiangxi Science and Trade Company Limited (“Zhuzhou Xiangxi”) and “Xiongfeng Environment”

On 22 February 2014, “Xiongfeng Environment” signed a contractual production contract with “Zhuzhou Xiangxian Company”, under which the defendant “Zhuzhou Xiangxian Company” was contracted to operate the wet production line of “Xiongfeng Environment” and was responsible for the technology and workmanship of the entire production line for the period from 22 April 2014 to 6 June 2017. The Company paid an integrity deposit of HK$1.5 million to Huang Xuanjun, the chairman and shareholder of “Zhuzhou Xiangxi Company”. As “Zhuzhou Xiangxi Company” failed to perform its obligations in accordance with the contract, “Xiongfeng Environment” requested “Zhuzhou Xiangxi Company” and Huang Xuanjun to assume responsibility for the breach of contract and return the HK$1.5 million integrity deposit. On 16 May 2016, the People’s Court of Yongxing County handed down a civil judgment, which ruled that “Zhuzhou Xiangxi Company” should return the deposit of HK$1.5 million to “Xiongfeng Environment” and that Huang Xuanjun and Yuan Dan were jointly and severally liable herein. According to the statement of “Xiongfeng Environment”, the case is being enforced.

2. Contractual dispute between “Xiongfeng Environment” and Hangzhou Neng Yun Technology Company Limited (“Neng Yun Technology”)

In March 2014, “Xiongfeng Environment” and “Neng Yun Technology” signed the “Chenzhou Xiongfeng Rare Metal Materials Company Limited Residual Heat Power Generation Project Contract (MEC)”. However, on 16 April 2017, the People’s Court of Yongxing County, Hunan Province, handed down a civil judgment “ (2016) Xiang 1023 Min Zhu No. 124”, which ruled that “Neng Yun Technology” returned the purchase price of RMB500,000 plus interest to “Xiongfeng Environment” and terminated the contract. On 24 November 2017, the Chenzhou Intermediate People’s Court of Hunan Province handed down a civil judgment “ (2017) Xiang 10 Min Zhong No. 1870”, which upheld the original judgment. On 17 September 2018, the Hunan High People’s Court handed down a civil ruling “ (2018) Xiang Min Shen No. 488”, ruling that the application for retrial was dismissed. According to the statement of “Xiongfeng Environment”, an amount of RMB230,000 was executed against “Neng Yun Technology”.

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3. Contractual Dispute between “Xiongfeng Environment” and Yongxing County Hengtai Silver Company Limited (hereinafter referred to as “Hengtai Silver”)

As a result of the failure of “Hengtai Silver” to return the silver borrowed from “Xiongfeng Environment”, the People’s Court of Yongxing County, Hunan Province issued a civil mediation letter “(2020) Xiang 1023 Min Chu No. 2218”, which resulted in the return of 309.65 kilograms of silver by “Hengtai Silver” to “Xiongfeng Environment” by instalments by 28 December 2021. According to the statement of “Xiongfeng Environment”, the aforesaid silver has not yet been returned by “Hang Tai Silver”.

This valuation has not taken into account the potential debt value that may arise from the above legal dispute.

(VI) Nature and amount of guarantees, leases and their contingent liabilities (contingent assets) and their relationship with the appraised object

As at the valuation reference date, the guarantees, leases and their contingent liabilities (or contingent assets) of the valued corporate are as follows:

1. According to the bank loan contract provided by “Xiongfeng Environment”, “Xiongfeng Environment” entered into a working capital loan contract “14412021280022” with Shanghai Pudong Development Bank Limited Chenzhou Branch on 25 March 2021 for a loan amount of RMB20 million with a term from 25 March 2021 to 24 March 2022. The loan was guaranteed by Zhao Meiguang and secured by a mortgage on the property at the Bitang Factory Zone of “Xiongfeng Environment”.

2. For the buildings exceeding the red line of the lot, the leases involved for the valued corporate are shown in the table below:

						Rent
No.	Lessor	Lessee	Location	Area (acres)	Lease term	(RMB/year)	Remarks
1	Mid-street Group,	Xiongfeng	Mid-street Group,	38.7495	10 June 2016 –	7,800.00	Pig farm
	Longwanshi	Environment	Longwanshi		31 December 2028
	Village, Berlin		Village
	Township
2	Wing Hing Pak	Xiongfeng	Front Group,	10.50	20 January 2018 –	Free of	East gate
	Tong Labour and	Environment	Longwanshi		20 January 2038	charge use
	Technical Services		Village
	Limited
3	Longwanshi Village,	Xiongfeng	Front Group,	62.369	18 January 2018 –	Free of	Ecological
	Berlin Township	Environment	Longwanshi		17 January 2038	charge use	plaza
			Village

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• (VII) Matters that may have affected the valuation conclusions between the Valuation reference date and the date of the Asset Valuation Report

As at the date of this Report, the asset disposal of “Xiongfeng Environment” has not yet commenced, the users of the Report are advised to pay attention to the progress of the asset disposal of “Xiongfeng Environment” as at the date of implementation of the economic activities and give due consideration to the impact of its actual progress on the valuation conclusions quoted.

(VIII) Defects in the economic activities corresponding to this asset valuation that may have a material impact on the valuation conclusions

According to the acquisition proposal of “Dongjiang Environment” for “Xiongfeng Environment”, “Xiongfeng Environment” intends to implement asset disposal and capital reduction after the Valuation reference date, including the disposal of non-operating inventories, non-operating transactions and silver electrolysis workshop equipment assets, etc. The net assets resulting from the mentioned assets and liabilities to be divested will be owned by Beijing Hanfeng United Technology Co., Limited, a wholly-owned shareholder of “Xiongfeng Environment”, and will be divested by “Xiongfeng Environment” through a capital reduction process. Ltd. will be divested from “Xiongfeng Environment” through a capital reduction process.

Based on the above transaction arrangement, the auditor has made a simulation adjustment to the assets/liabilities of “Xiongfeng Environment” as at 28 February 2021, the Valuation reference date, i.e. it is assumed that the restructuring of “Xiongfeng Environment”, such as the anticipated asset disposal and capital reduction, has been completed after the Valuation reference date. The auditor released an opinion of value based on the above audit basis for the valuation.

Shenzhen Pengxin would like to remind users of the Valuation Report to pay due attention to the implementation of the post-period asset disposal and capital reduction procedures of “Xiongfeng Environment” and to exercise caution in judging the risks involved in applying the valuation conclusions.

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(IX) Other matters that required explanations

1. In adopting the income approach in the valuation, information on the future profit forecast of the valued corporate is mainly provided by the operating management of “Xiongfeng Environment”; it is the responsibility of Shenzhen Pengxin to analyse and judge the reasonableness of the information on the basis of the aforesaid profit forecast in conjunction with the business model, development plan, resource allocation and other circumstances of “Xiongfeng Environment” as well as the market conditions of the industry in which it is located. The use of profit forecasts by the valuers is not a guarantee of the future profitability of “Xiongfeng Environment”

2. Although Shenzhen Pengxin has conducted the necessary due diligence on the industry in which “Xiongfeng” is located and the technical/resource advantages, operation model and profit model of the corporate, also has fully analysed the future development trend of the valued corporate. However, we are only professionals in the valuation methodology and are not technical professionals or technical experts in the industry. We cannot foresee the various technological innovations that may emerge in the future and cannot predict the impact of the emergence of new technologies on the industry in which “Xiongfeng Environment” operates and its profitability.

3. As there are joint owners of the off-balance sheet patents within the scope of this valuation other than “Xiongfeng Environment”, it is not expected that the valuation of the off-balance sheet intangible assets will be affected by the income approach adopted in the valuation of the off-balance sheet patents, in which the future profits are based on the corresponding information at the level of the patent holder “Xiongfeng Environment “, notwithstanding that there are joint owners of other rights in the aforesaid patents.

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XII. EXPLANATIONS ON THE RESTRICTIONS FOR THE USE OF THE ASSET VALUATION REPORT

(I) The scope of use of the Asset Valuation Report

1. Restrictions on the scope of users of this Asset Valuation Report: The users of this Asset Valuation Report shall be limited to and restricted to the Client and the users of this Asset Valuation Report as required by laws and administrative regulations, i.e. this Asset Valuation Report shall only be used by the Client and the users of this Asset Valuation Report as required by laws and administrative regulations; in addition to that, no other institution or individual shall become a user of this Asset Valuation Report.

2. Restrictions on the scope of use or purpose of use of this Asset Valuation Report: The users of this Asset Valuation Report shall use it in accordance with the provisions of laws and administrative regulations and the purpose of valuation set out in this Asset Valuation Report, i.e. this Asset Valuation Report shall only be used for the economic activities corresponding to the purpose of valuation set out in this Asset Valuation Report in accordance with the provisions of laws and administrative regulations, and in addition to that, the Asset Valuation Report shall not be used in any other circumstances.

3. Restrictions on the scope of validity of the use of the valuation conclusions contained in this Asset Valuation Report: The valuation conclusions are only valid on the Valuation reference date as stated in the Valuation Report. The use of the asset valuation results is valid for one year from the Valuation reference date (i.e. from 28 February 2021 to 27 February 2022).

4. Restrictions on extracts, quotations or disclosure of this Asset Valuation Report: The contents of this Asset Valuation Report shall not be extracted, quoted or disclosed in the public media without the written consent of Shenzhen Pengxin, except as otherwise provided in the laws and administrative regulations and the asset valuation engagement contract.

(II) Explanations of liability for the use of this Asset Valuation Report beyond the scope of use

If the users of the Asset Valuation Report do not use it in accordance with the laws, administrative regulations and the scope of use set out above, Shenzhen Pengxin and the undersigned asset valuers shall not be liable.

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(III) Explanations on the limitations on the use of the Asset Valuation Report

1. The valuation conclusions should be properly understood and used by the user of this the Asset Valuation Report. The assessment conclusion is not equivalent to the realizable price of the appraised object and should not be regarded as a guarantee of the realizable price of the appraised object.

2. The user of this Asset Valuation Report should pay attention to the assumptions under which the valuation conclusion is established and the valuation conclusion will not be established under general situation when the actual situation at the time of using the valuation conclusion contained in this Asset Valuation Report is no longer consistent with the situation at the Valuation reference date or the valuation assumptions contained in this Asset Valuation Report.

3. The user of this Asset Valuation Report should pay attention to the explanations of particulars and take corresponding measures in the course of implementing the economic activities corresponding to the purpose of the valuation.

XIII. ASSET VALUATION REPORTING DATE

Wu Xu and Shi Yonggang, the asset valuers of Shenzhen Pengxin, formed the final professional opinions and signed the Asset Valuation Report on 25 June 2021, being the date of the Asset Valuation Report.

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APPENDIX VI

The following is the full text of the letter, summary of values and valuation reports, prepared for the purpose of incorporation in this circular received from ValQuest Advisory (Hong Kong) Limited, an independent valuer, in connection with the valuation of the property to be acquired by Dongjiang Environmental Company Limited and/or its subsidiaries as of 30 June 2021.

ValQuest Advisory (Hong Kong) Limited

Unit 706, 7/F Podium Plaza, 5 Hanoi Road, Tsim Sha Tsui, Kowloon, Hong Kong SAR Tel: +852 2180 6460 www.valquestadvl.com

==> picture [91 x 50] intentionally omitted <==

20 August 2021

The Board of Directors

Dongjiang Environmental Company Limited

Dongjiang Environmental Building No. 9 Langshan Road North zone of High-tech Industrial Park Nanshan District Shenzhen City Guangdong Province The People’s Republic of China

Re: Valuations of two properties located in Chenzhou City, Hunan Province, the People’s Republic of China (the “Properties”)

Instructions, purpose We refer to the instructions from Dongjiang Environmental Company and valuation date Limited (the “ Company ”) to value the Properties held by Chenzhou Xiongfeng Environment Science and Technology Co., Ltd. (“ CZXF ”) which the Company and/or its subsidiaries (hereinafter together referred to as the “ Group ”) proposes to acquire in the People’s Republic of China (the “ PRC ”), we confirm that we have carried out physical site inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the Properties as of 30 June 2021 (the “ Valuation Date ”).

Basis of value

The Properties were valued on the basis of “market value” which is defined under The HKIS Valuation Standards 2020 published by The Hong Kong Institute of Surveyors (HKIS) as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently, and without compulsion”.

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APPENDIX VI

Market value is understood as the value of an asset or liability estimated without regard to costs of sale or purchase (or transaction), and without offset for any associated taxes or potential taxes.

Market value is also the best price reasonably obtainable by the seller and the most advantageous price reasonably obtainable by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by anyone associated with the sale, or any element of value available only to a specific owner or purchaser.

We confirm that the valuations and reports were undertaken in accordance with the requirements set out in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited; The HKIS Valuation Standards 2020 (effective from 31 January 2020) published by HKIS; and The RICS Valuation – Global Standards incorporating the IVSC International Valuation Standards (effective from 31 January 2020) published by the Royal Institution of Chartered Surveyors.

The outbreak of COVID-19, declared by the World Health Organization as a “Global Pandemic” on 11 March 2020 has affected global financial markets. Our valuations are reported on the basis of ‘material valuation uncertainty’ as per “VPS3 Valuation Reports” and “VPGA10 Matters that may give Rise to Material Valuation Uncertainty” of the RICS Valuation – Global Standards. Consequently, less certainty – and a higher degree of caution – should be attached to our valuations than would normally be the case. Given the unknown future impact that COVID-19 might have on the local real estate market, we recommend the instructing party keep the valuations of the Properties under frequent review.

General valuation assumptions

In the course of our valuations, we have assumed that transferrable land use rights or land title have been granted to the Properties with nominal annual land use fees, and that all requisite land premium has been fully settled. The owner of the Properties possesses legal and enforceable title to the Properties, and has free and uninterrupted rights to use, occupy or assign the Properties for the whole of the unexpired land tenure.

We have further assumed that all consents, approvals and licenses from the relevant government authorities for the development of the Properties have been obtained, and that the design, construction and occupation of the Properties are in compliance with the local planning regulations and have been approved by the relevant authorities.

– VI-2 –

APPENDIX VI

PROPERTY VALUATION REPORT

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the Properties or any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the Properties are free from encumbrances, restrictions and outgoings of any onerous nature which could affect their values.

Valuation methodology

Due to the specific nature of the buildings and structures of the Properties which there is no readily identifiable market comparable sale or rental data, we have valued the Properties using the depreciated replacement cost method.

Depreciated replacement cost is defined as “the current cost of replacing an asset with its modern equivalent asset less deduction for physical deterioration and all relevant forms of obsolescence and optimization.” It is based on an estimate of the market value of the land in its existing use, plus the current cost of replacement of the improvements less allowance for physical deterioration and all relevant forms of obsolescence and optimization. In arriving at the values of the land portion, reference has been made to the sales evidence as available in the subject locality. The depreciated replacement cost of the property is subject to adequate potential profitability of the business.

Source of information

We have relied to a considerable extent on the information provided by the Group in respect of the Properties, and have accepted advice on such matters as identification of the Properties, land use rights and land tenure, site areas, floor areas, year of completion, occupancy status, tenancy details, planning approvals, statutory notices, easements, development schemes, construction costs and all other relevant matters.

We have had no reason to doubt the truth and accuracy of the information furnished to us by the Group. We have also sought confirmation from the Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and we have no reason to suspect that any material information has been withheld.

Title investigation

We have been provided by the Group with extracts of title documents relating to the Properties in Mainland China. However, we have not inspected the original documents to ascertain any amendments which may not appear on the copies handed to us by the Group. In the course of our valuations, we have relied on the information given by the Group and the legal opinion of its legal adviser – Grandway Law Offices, concerning the title and other legal matters relating to the Properties.

– VI-3 –

APPENDIX VI

PROPERTY VALUATION REPORT

Site inspection

We have inspected the exterior and, where possible, the interior of the Properties. During the course of our inspections, we noted that the Properties appeared to be in a generally reasonable state of repair commensurate with their age and uses. However, no structural survey has been made, but in the course of our inspections, we did not note any serious defects. We are, however, unable to report whether the Properties are free of rot, infestation or any other structural defects. No tests were carried out on any of the services.

We have not carried out detailed on-site measurements to verify the correctness of the site areas or floor areas in respect of the Properties, but have assumed that the areas shown on the documents and/or official plans handed to us by the Group are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations.

• Currency & exchange rates Unless otherwise stated, all monetary sums stated in this report are in Renminbi (RMB).

Confirmation of independence

We hereby confirm that ValQuest Advisory (Hong Kong) Limited and the undersigned have no pecuniary or other interests that would conflict with the proper valuations of the Properties, or could reasonably be regarded as being capable of affecting our ability to give an unbiased opinion. We confirm that we are an independent qualified valuer as referred to Rule 5.08 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited.

Our valuations are summarized below and the valuation reports are attached.

Yours faithfully, for and on behalf of

ValQuest Advisory (Hong Kong) Limited Norris Z. Y. Nie MCIREA MRICS MHKIS Managing Director

Note: Mr. Norris Nie is a member of the China Institute of Real Estate Appraiser, a member of The Royal Institution of Chartered Surveyors and a member of the Hong Kong Institute of Surveyors. He has over 23 years of experience in the professional property valuation and advisory services in the Mainland China, Hong Kong and other overseas countries.

– VI-4 –

PROPERTY VALUATION REPORT

APPENDIX VI

SUMMARY OF VALUES

Properties to be acquired by the Group in the PRC

				Market value in
				existing state as
		Market value in	% Interest	of 30 June 2021
		existing state as	to be acquired	to be acquired
No.	Address	of 30 June 2021	by the Group	by the Group
		RMB		RMB
1.	An industrial facility located in
	Chenzhou Xiongfeng Environment
	Technology Co., Ltd. Bolin Industrial
	Park, Bolin Town, Yongxing County,
	Chenzhou City, Hunan Province, The
	PRC	398,800,000	70%	279,160,000
2.	An industrial facility located in
	Chenzhou Xiongfeng Environment
	Technology Co., Ltd. National
	Economic Demonstration Park along
	S212 Provincial Road, Bianjiang
	Town, Yongxing County, Chenzhou
	City, Hunan Province, The PRC	44,100,000	70%	30,870,000
	Grand-total:	442,900,000		310,030,000

– VI-5 –

PROPERTY VALUATION REPORT

APPENDIX VI

VALUATION REPORT

Properties to be acquired by the Group in the PRC

Property Description and tenure

Particulars of occupancy

Market value in existing state as of 30 June 2021 RMB

1. An industrial facility The property comprises an located in Chenzhou industrial facility with a site area Xiongfeng Environment of approximately 150,185 square Technology Co., Ltd. meters, on which were erected Bolin Industrial Park, various buildings and structures Bolin Town, Yongxing which were completed in various County, Chenzhou City, stages between 2015 to 2017. Hunan Province, The PRC The buildings mainly comprise workshops, warehouses, ancillary office, dormitories and canteen.

Portion of the 398,800,000 property with a total (70% interest gross floor area of to be acquired 3,033.77 square by the Group: meters is subject 279,160,000) to various leases with the latest expiry date being 16 August 2024 at a total monthly rent of RMB 23,466.

The total gross floor area of The remaining the property is approximately portion of 97,829.08 square meters. the property is currently The land use rights of the property owner-occupied were granted for a common term for production, of 50 years with the latest expiry warehouse, date being 28 February 2068 for ancillary office and industrial use. dormitories.

Notes:

• (1) Pursuant to 33 Real Estate Title Certificates – Xiang (2021) Yong Xing Xian Bu Dong Chan Quan Di Nos. 0000820 to 0000851 and 0000880 all dated 20 January 2021 and issued by the Planning and Natural Resources Bureau of Yongxing County, the land use rights of the property with a total site area of 150,185 square metres were legally vested in CZXF:

• (2) Pursuant to 33 Real Estate Title Certificates – Xiang (2021) Yong Xing Xian Bu Dong Chan Quan Di Nos. 0000820 to 0000851 and 0000880 all dated 20 January 2021 and issued by the Planning and Natural Resources Bureau of Yongxing County, the building ownership rights of portion of the property with a total gross floor area of 95,305.48 square metres are legally vested in CZXF.

• (3) We have attributed no commercial value to four buildings of the property with a total gross floor area of 2,523.60 square meters and part of the structures (including east gate, rainwater harvesting tank, simple structures in east gate and landscaping) as the buildings are yet to be granted with proper title certificates, and that part of these buildings and structures were built outside the boundary of the subject site. For reference purpose, the value of these buildings and structures (excluding the land, on a 100% basis) would be RMB14,600,000.

– VI-6 –

APPENDIX VI

PROPERTY VALUATION REPORT

• (4) Pursuant to the land use agreements entered into between CZXF and the Village Committee of Longwang City (being the land owner) and Yongxing Bodong Labor Technical Service Co. Ltd. (being the land user) respectively, the underlying land (on which part of the buildings and structures as mentioned in Note 3 above were built) was leased to CZXF for a term of 20 years commencing on 18 January 2018 and expiring on 17 January 2038; and commencing on 1 January 2018 and expiring on 1 January 2038, respectively at nil rental payment.

• (5) The property was inspected by Wu Jianteng, a valuer with 10 years of real estate valuation experience on 10 March 2021.

• (6) We have been provided with a legal opinion on the property prepared by the Company’s PRC legal advisor, which contains, inter alia, the following:

• a. CZXF legally owns the real estate ownership rights of the subject property (as mentioned in Notes 1 and 2) pursuant to the title certificates issued by the relevant government authorities, and there exist no property rights dispute as to the title of the subject property;

• b. For those buildings and structures as mentioned in Note 3, despite the land use agreement has been signed, there is still risk associated with the use of these buildings and structures prior to comply with the construction approval in accordance with the relevant laws and regulations and with the purpose of occupying the underlying land (on which part of the buildings and structures as mentioned in Note 3 above were built) not according to the relevant land management regulations. However, according to the confirmations issued by the Natural Resources Bureau of Yongxing County dated 15 March 2021 and the Housing and City Rural Development Bureau of Yongxing County dated 28 March 2021, CZXF has not been penalised for violating relevant natural resources, land management, housing and urban and rural planning laws, rules and regulatory files;

• c. As confirmed by CZXF, the buildings and structures as mentioned in Note 3 are immaterial to the property and Beijing Hanfeng United Technology Co., Ltd.(the shareholder of CZXF) has given several undertakings and agreement regarding to the property in the the “Conditional Acquisition Agreement in relation to 70% of the Equity Interest in Chenzhou Xiongfeng Environment Technology Co., Ltd.”, and hence their demolishment or relocation (if required) is not expected to materially affect CZXF’s operations.

– VI-7 –

PROPERTY VALUATION REPORT

APPENDIX VI

VALUATION REPORT

Property

Description and tenure

Market value Particulars of in existing state occupancy as of 30 June 2021 RMB

1. An industrial facility located in Chenzhou Xiongfeng Environment Technology Co., Ltd. National Economic Demonstration Park along S212 Provincial Road, Bianjiang Town, Yongxing County, Chenzhou City, Hunan Province, The PRC

The property comprises an industrial facility with a site area of approximately 29,470 square meters, on which were erected various buildings and structures which were completed in about 2007.

The buildings mainly comprise workshops, warehouses, ancillary office, dormitories and canteen.

The property is 44,100,000 currently vacant. (70% interest to be acquired by the Group: 30,870,000)

The total gross floor area of the property is approximately 20,674.68 square meters.

The land use rights of the property were granted for a term of 50 years expiring on 12 June 2055 for industrial use.

Notes:

• (1) Pursuant to 16 Real Estate Title Certificates – Xiang (2018) Yong Xing Xian Bu Dong Chan Quan Di Nos. 0007021 to 0007026, 0007029 to 0007035 all dated 15 November 2018; and Xiang (2020) Yong Xing Xian Bu Dong Chan Quan Di Nos. 0096636 to 0096638 dated 28 December 2020 and issued by the Planning and Natural Resources Bureau of Yongxing County, the land use rights of the property with a site area of 29,470 square metres; and the building ownership rights of the property with a total gross floor area of 20,674.68 square metres are legally vested in CZXF.

• (2) The property was inspected by Wu Jianteng, a valuer with 10 years of real estate valuation experience on 10 March 2021.

• (3) The property is subject to a mortgage in favour of SPD Bank, Chenzhou Branch for a term of 1 year commencing on 25 March 2021 and expiring on 25 March 2022 with a loan amount of RMB20,000,000. Other than the aforesaid mortgages, the property is not subject to any mortgage or other limitations for CZXF to enforce its rights over the property.

• (4) We have been provided with a legal opinion on the property prepared by the Company’s PRC legal advisor, which contains, inter alia, the following:

• a. CZXF legally owns the land use rights and building ownership rights of the subject property pursuant to the title certificates issued by the relevant government authorities, and there exist no property rights dispute as to the title of the subject property; and

• b. The property is subject to a mortgage for CZXF’s bank loan. Other than the aforesaid mortgages, the property is not subject to any mortgage.

– VI-8 –

APPENDIX VII RECONCILIATION STATEMENT FOR THE PROPERTY OF THE TARGET COMPANY

ValQuest Advisory (Hong Kong) Limited, an independent professional valuer, has valued the properties held by the Target Company and is of the opinion that the market value of the properties in aggregate amounted to RMB442.90 million as at 30 June 2021. Details of the property valuation report are set out in Appendix VI to this circular.

Pursuant to Rule 5.07 of the Listing Rules, the statement below shows the reconciliation of the net book value of the properties held by the Target Company as reflected in the financial information of the Target Company as at 28 February 2021 set out in Appendix II to this circular with the valuation of the properties held by Target Company as at 30 June 2021 as set out in the property valuation report contained in Appendix VI to this circular:

Net book value of the properties as at 28 February 2021 Valuation surplus (unaudited) Valuation of the properties as at 30 June 2021 as set out in the property valuation report	Total RMB million 362.48 80.42
	442.90

– VII-1 –

GENERAL INFORMATION

APPENDIX VIII

(A) RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and is not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

(B) DISCLOSURE OF INTERESTS

(a) Directors’, Supervisors’ and chief executive’s interests

As at the Latest Practicable Date, the interests and short positions of the Directors, proposed Directors, Supervisors, proposed supervisors and chief executives of the Company in the Shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), which were required to be (i) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest and short positions which were taken or deemed to have been taken under such provisions of the SFO); (ii) recorded in the register maintained by the Company pursuant to Section 352 of the SFO; or (iii) notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of the Listed Issuers (the “ Model Code ”) set out in Appendix 10 to the Listing Rules as adopted by the Company, were as follows:

				Approximate
				% of equity of
				the Company/
				shareholding
		Type of	Number of	in this class
Name	Capacity	interest	Shares	(Note)
Mr. Tan Kan	Beneficial owner	Long Position	120,000 A Shares	0.014%/0.018%

Note: The percentage is calculated on the basis of 879,267,102 Shares in issue as at the Latest Practicable Date.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors, proposed directors, Supervisors, proposed supervisors and chief executives of the Company had any interest or short position in the Shares, underlying shares or debentures of the Company and any of its associated corporations which were required to be (i) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which were taken or deemed to have been taken under such provisions of the SFO) or the Model Code adopted by the Company; or (ii) entered in the register required to be kept under Section 352 of the SFO.

– VIII-1 –

GENERAL INFORMATION

APPENDIX VIII

(b) Substantial shareholders’ and other persons’ interests in the Shares and underlying shares of the Company

As at the Latest Practicable Date, so far as was known to the Directors of the Company based on the register maintained by the Company pursuant to Part XV of the SFO, other than the interests of the Directors, proposed directors, Supervisors, proposed supervisors and chief executives of the Company as disclosed above, Shareholders who had interests or short positions in the Shares or underlying shares of the Company of 5% or more which need to be disclosed to the Company under the provisions of Divisions 2 and 3 of part XV of the SFO, or which were recorded in the register to be kept by the Company under Section 336 of the SFO, were as follows:

			Approximately
			percentage of equity
			of the Company/
		Number and class	shareholding
Name	Capacity	of Shares held	in the class
Guangdong Rising Holdings Group	Beneficial owner	166,068,501 A Shares	18.89%/24.45%
Co., Ltd. (“Guangdong Rising
Group”)	Interest of controlled	34,899,793 A Shares	3.97%/5.14%
	corporation	(Note 1)
	Interest of controlled	25,179,200 H Shares	2.86%/12.58%
	corporation	(Note 3)
Guangdong Rising Finance Holding	Beneficial owner	33,597,766 A Shares	3.82%/4.95%
Co., Ltd. (“Guangdong Rising		(Note 1)
Finance”)
	Interest of controlled	1,302,027 A Shares	0.15%/0.19%
	corporation	(Notes 1 and 2)
Shenzhen Rising Investment Development	Beneficial owner	1,302,027 A Shares	0.15%/0.19%
Co., Ltd.(“Shenzhen Rising”)		(Notes 1 and 2)
Rising Investment Development Co., Ltd.	Beneficial owner	22,283,200 H Shares	2.53%/11.13%
(“Rising Investment”)		(Note 3)
Guangdong Rising H.K. (Holding) Limited	Beneficial owner	2,896,000 H Shares	0.33%/1.45%
(“Guangdong Rising H.K.”)		(Note 3)

– VIII-2 –

GENERAL INFORMATION

APPENDIX VIII

			Approximately
			percentage of equity
			of the Company/
		Number and class	shareholding
Name	Capacity	of Shares held	in the class
Jiangsu High Hope International	Beneficial owner	50,087,669 A Shares	5.70%/7.38%
Group Co., Ltd.
	Interest of controlled	25,995,038 A Shares	2.96%/3.83%
	corporation	(Note 4)
	Interest of controlled	18,204,800 H Shares	2.07%/9.10%
	corporation	(Note 4)
Jiangsu High Hope Venture Capital	Beneficial owner	25,995,038 A Shares	2.96%/3.83%
Co., Ltd.		(Note 4)
	Beneficial owner	18,204,800 H Shares	2.07%/9.10%
		(Note 4)

Notes:

1. As at the Latest Practicable Date, Guangdong Rising Finance was a wholly-owned subsidiary of Guangdong Rising Group and Shenzhen Rising is a 89.71% owned subsidiary of Guangdong Rising Finance. Therefore, Guangdong Rising Group was deemed to be interested in the 34,899,793 A Shares in which Guangdong Rising Finance and Shenzhen Rising were interested under Part XV of the SFO. As at the Latest Practicable Date, (i) Mr. Tang Yi (a Director) was a designated director assigned to listed companies by the capital operation department of Guangdong Rising Group; and (ii) Ms. Jiang Ping (a Supervisor) was an assistant supervisor of the disciplinary office of Guangdong Rising Group.

2. As at the Latest Practicable Date, Guangdong Rising Finance owned 89.71% of the equity interest in Shenzhen Rising. Therefore, it was deemed to be interested in the 1,302,027 A Shares held by Shenzhen Rising under Part XV of the SFO.

3. As at the Latest Practicable Date, Rising Investment and Guangdong Rising H.K. were wholly-owned subsidiaries of Guangdong Rising Group. Therefore, Guangdong Rising Group was deemed to be interested in the 25,179,200 H Shares held by Rising Investment and Guangdong Rising H.K. under Part XV of the SFO.

4. As at the Latest Practicable Date, Jiangsu High Hope Venture Capital Co., Ltd. is a wholly-owned subsidiary of Jiangsu High Hope International Group Co., Ltd. Therefore, it was deemed to be interested in the 25,995,038 A Shares and 18,204,800 H Shares held by Jiangsu High Hope Venture Capital Co., Ltd. under Part XV of the SFO. As at the Latest Practicable Date, (i) Mr. Jin Yongfu (a Director) was the general manager of the investment management department of Jiangsu High Hope International Group Co., Ltd.; (ii) Ms. Shan Xiaomin (a Director) was a deputy general manager and a member of the party’s committee of Jiangsu High Hope International Group Co., Ltd. Mr. Jin Yongfu was also a director of Jiangsu High Hope Venture Capital Co., Ltd.

– VIII-3 –

APPENDIX VIII

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other persons or companies who had any interest or short position in the Shares or underlying shares of the Company that was required to be recorded in the register of interests required to be kept by the Company pursuant to Section 336 of the SFO, or which would fall to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO.

(C) DIRECTORS’ AND SUPERVISORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors or Supervisors had entered into or proposed to enter into a service contract with any member of the Enlarged Group which is not determinable by the employer within one year without payment of compensation (other than statutory compensation).

(D) COMPETING INTERESTS

As at the Latest Practicable Date, so far as the Directors are aware, none of the Directors, proposed directors of the Company or their respective close associates had any interests in a business which competes or may compete, either directly or indirectly, with the business of the Enlarged Group or any other conflicts of interests with the Enlarged Group.

(E) DIRECTORS’ AND SUPERVISORS’ INTERESTS IN ASSETS, CONTRACTS OR ARRANGEMENTS

As at the Latest Practicable Date:

• (a) none of the Directors nor Supervisors was materially interested, directly or indirectly, in any contract or arrangement subsisting, which was significant in relation to the business of the Enlarged Group; and

• (b) none of the Directors, Supervisors, nor their respective associates had any direct or indirect interests in any assets which had been acquired or disposed of by or leased to, or were proposed to be acquired or disposed of by or leased to, any member of the Enlarged Group since 31 December 2020, being the date to which the latest published audited consolidated financial statements of the Group were made up.

(F) LITIGATION

As disclosed in the announcement of the Company dated 4 December 2020, the Company received a notice of arbitration ((2020) Huzhonganzi No. 3835) issued by the Shanghai Arbitration Commission, under which Qidi Sustainable Resources Technology Development Co., Ltd ( 啟迪再生資源科技發 展有限公司 , the “ Applicant ”) had filed an application of arbitration with the Shanghai Arbitration Commission in relation to the disputes with the Company on an equity transfer agreement entered into between the Company and the Applicant on 12 April 2016, and the Shanghai Arbitration Commission has accepted such application (the “ Arbitration* ”).

– VIII-4 –

APPENDIX VIII

GENERAL INFORMATION

The Applicant seeks the following decisions under the Arbitration: (i) The Company shall pay to the Applicant damages after setting off debts of RMB28,972,858.68 and interest of RMB7,243,214.67 (accruing from 24 August 2016 to the actual payment date at the rate of 6% per annum (preliminarily calculated up to 31 October 2020)); (ii) the Company shall pay to the Applicant the interests on the loss resulting from the delayed payment of fund subsidies for 2014 of RMB1,632,747.90; (iii) the Company shall pay the legal fees of the Applicant of RMB700,000.00l and (iv) the Company shall bear the costs of the Arbitration.

As of the Latest Practicable Date, the Arbitration has not yet been heard, and the relevant matters may have certain effect on the profit of the Company for the current period or after the period, subject to the final decision of the Arbitration.

As at the Latest Practicable Date, save as disclosed above, no member of the Enlarged Group was engaged in any litigation, claims or arbitration of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened by or against the Enlarged Group.

(G) MATERIAL CONTRACTS

The following contracts, not being contracts entered in the ordinary course of business of the Enlarged Group, have been entered into by the members of the Enlarged Group within two years preceding the Latest Practicable Date and which are, or may be, material:

• (a) the shareholder investment agreement entered into between the Company and Jiangsu High Hope International Group Co., Ltd (“ High Hope Group ”) in relation to the establishment of a joint venture (the “ JV ”) on 26 August 2019 pursuant to which High Hope Group and the Company has agreed to make a capital contribution of RMB120 million and RMB80 million respectively, accounting for 60% and 40% of the total registered capital of the JV, respectively;

• (b) the capital increase agreement entered into between the Company, ALBA Rising Green Fuel (Hong Kong) Ltd (“ Hong Kong ALBA ”) and Jieyang Chuangyi Environmental Protection Technology Co., Ltd. ( 揭陽市創益環保科技有限公司 , “ Chuangyi Environmental ”) on 25 December 2019, pursuant to which the parties agreed that each of the Company, Hong Kong ALBA and Chuangyi Environmental shall increase their respective capital contribution to ALBA Rising Green Fuel (Jieyang) Ltd., ( 歐晟綠色燃料 ( 揭陽 ) 有限公司 ) in the total sum of RMB50 million;

• (c) the agreement on purchase and sale of industrial and mining products entered into between Qingyuan Xinlv Environmental Technology Ltd. ( 清遠市新綠環境技術有限公司 , “ Qingyuan Xinlv ”) and Danxia Smelter of Shenzhen Zhongjin Lingnan Nonfemet Co. Limited ( 深圳市中金嶺南有色金屬股份有限公司丹霞冶煉廠 ) on 11 February 2020, pursuant to which the parties agreed that Qingyuan Xinlv shall supply copper sulphate to Danxia Smelter. The annual cap for the year 2020 shall be not exceeding RMB4,500,000;

– VIII-5 –

APPENDIX VIII

GENERAL INFORMATION

• (d) the financial services agreement entered into between the Company and Rising Finance on 25 February 2020 in relation to the provision of deposit services, settlement services, credit facility services and other financial services by Rising Finance to the Group with a term of one year (the details of which (including annual caps) are set out in the announcement of the Company dated 25 February 2020) and the supplemental financial services agreement entered into between the Company and Rising Finance on 14 August 2020 pursuant to which the duration has been amended to two years and the maximum daily deposit amount has been revised (the details of which (including annual caps) are set out in the announcement of the Company dated 14 August 2020);

• (e) the construction contract entered into between Foshan City Fulong Environmental Technology Limited ( 佛山市富龍環保科技有限公司 , “ Fulong Environmental ”) and Guangdong Yixin Great Wall Construction Group Limited ( 廣東一新長城建築集團有 限公司 , “ Guangdong Yixin ”) on 9 July 2020, pursuant to which Fulong Environmental shall engage Guangdong Yixin as the contractor to carry out construction works of the exterior project of Foshan City Fulong Environmental Technology Limited* ( 佛山市富 龍環保科技有限公司 ) Industrial Solid Waste Comprehensive Utilization and Disposal Project, at the bid-wining price of RMB7,470,000;

• (f) the capitalisation of debt agreement dated 11 September 2020 entered into between Shaoguan Dongjiang Environmental Sustainable Resources Development Co., Ltd. (韶關東江環 保再生資源發展有限公司, “ Shaoguan Sustainable Resources* ”) and Guangdong Rising Group, pursuant to which a capital injection of RMB62,127,150 shall be made to Shaoguan Sustainable Resources by Guangdong Rising Assets by way of the settlement of debts of RMB62,127,150 owed by Shaoguan Sustainable Resources to Guangdong Rising Assets, which was terminated and superseded by the new capitalisation of debt agreement dated 11 December 2020 entered into between Shaoguan Sustainable Resources, Guangdong Rising Assets and the Company, pursuant to which Guangdong Rising Assets shall make capital injection of RMB62,668,700 to Shaoguan Sustainable Resources, to be settled by setting off the unsecured debts of RMB62,668,700 owed by Shaoguan Sustainable Resources to Guangdong Rising Assets;

• (g) the facility agreement dated 22 October 2020 entered into between Guangdong Rising Finance Co., Ltd. ( 廣東省廣晟財務有限公司 , “ Rising Finance* ”) and Shaoguaun Sustainable Resources pursuant to which Rising Finance has agreed to provide a facility of up to an aggregate principal amount of RMB200,000,000 to Shaoguan Sustainable Resources for a term of three years; and

• (h) the capital injection agreement dated 11 December 2020 entered into between the Company, Zhuhai Dongjiang Environmental Protection Technology Co., Ltd. ( 珠海市東江環保 科技有限公司 , “ Zhuhai Dongjiang* ”) and Guangdong Rising Assets, pursuant to which a capital injection of RMB70,178,500 shall be made to Zhuhai Dongjiang by Guangdong Rising Assets. Guangdong Rising Assets nominated the Company to inject on its behalf the capital injection amount of RMB70,178,500 to Zhuhai Dongjiang, and accordingly, the Company ceased to be bound by the obligation to repay Guangdong Rising Assets the principal amount of RMB67.19 million and interest amount of RMB2,988,500 under a loan owing to Guangdong Rising Assets.

– VIII-6 –

GENERAL INFORMATION

APPENDIX VIII

(H) EXPERTS’ QUALIFICATIONS AND CONSENTS

The following are the qualifications of the experts who have given its opinions and advices which are included in this circular:

NAME

QUALIFICATIONS

Shenzhen Pengxin Assets Valuation and Land and Property Appraisal Co., Ltd.* ( 深圳市鵬信資產 評估土地房地產估價有限公司 )

Independent PRC qualified valuer

KTC Partners CPA Limited

Certified Public Accountants, Hong Kong and Registered Public Interest Entity Auditor

ValQuest Advisory (Hong Kong) Limited

Beijing Grandway (Shenzhen) Law Offices

Independent professional valuer Legal adviser as to the laws of the PRC

The above experts have given and have not withdrawn their written consents to the issue of this circular with the inclusion of their letters/reports/opinions/advices dated 20 August 2021 (except for the Valuation Report prepared by the PRC Qualified Valuer, which is dated 25 June 2021) in the form and context in which they are included and all references to their names in the form and context in which they respectively appear.

As at the Latest Practicable Date, the above experts were not beneficially interested in the share capital of any member of the Enlarged Group nor did they have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Enlarged Group nor did they have any interest, either direct or indirect, in any assets which have been, since 31 December 2020, the date to which the latest published audited consolidated financial statements of the Group were made up, acquired, disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

(I) CORPORATE AND OTHER INFORMATION

The registered office of the Company is situated at 1/F, 3/F, North of 8/F, 9/F-12/F, Dongjiang Environmental Building, No. 9 Langshan Road, North Zone of Hi-tech Industrial Park, Nanshan District, Shenzhen, the PRC.

The principal place of business in Hong Kong of the Company is situated at 6th Floor, O.T.B. Building, 259-265 Des Voeux Road Central, Hong Kong.

The company secretary of the Company is Ms. So Shuk Yi Betty, she serves as a vice president of SWCS Corporate Services Group (Hong Kong) Limited ( 方圓企業服務集團（香港）有限公司 ), a corporate service provider. Ms. So was admitted as an associate of both The Chartered Governance Institute (formerly known as the Institute of Chartered Secretaries and Administrators) in the United Kingdom and The Hong Kong Chartered Governance Institute (formerly known as The Hong Kong Institute of Chartered Secretaries) in 1997. The primary corporate contact person of Ms. So Shuk Yi, Betty at the Company is Mr. Li Zehua, the secretary to the Board.

– VIII-7 –

GENERAL INFORMATION

APPENDIX VIII

The H Share registrar of the Company is Tricor Tengis Limited, whose address is at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

(J) DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours from 9:30 a.m. to 5:00 p.m. (except Saturdays and public holidays) at the principal place of business of the Company in Hong Kong at 6th Floor, O.T.B. Building, 259-265 Des Voeux Road Central, Hong Kong for a period from the date of this circular to the EGM (both days inclusive):

1. this circular;

2. the articles of association of the Company;

3. the published annual reports of the Company containing audited consolidated financial statements of the Company for the years ended 31 December 2019 and 2020;

4. the letter from the Board, the text of which is set out in the section headed “Letter from the Board” in this circular;

5. the audited consolidated financial information of the Target Company, the text of which is set out in Appendix II to this circular;

6. the letter on the unaudited pro forma financial information of the Enlarged Group issued by KTC Partners CPA Limited, the text of which is set out in Appendix III to this circular;

7. the Valuation Report on the Target Company issued by Shenzhen Pengxin Assets Valuation and Land and Property Appraisal Co., Ltd.* ( 深圳市鵬信資產評估土地房地產估價有 限公司 ), the text of which is set out in Appendix V to this circular;

8. the valuation report on the properties of the Target Company as set out in Appendix VI to this circular;

9. the legal opinion of Grandway Law Office, the Company’s PRC legal adviser, in respect of the title issues in relation to certain Defective Properties of the Target Company;

10. the written consents referred to in the paragraph headed “Experts’ Qualifications and Consents” in this appendix;

11. the material contracts referred to in the paragraph headed “Material Contracts” in this appendix; and

12. the Acquisition Agreement.

– VIII-8 –

NOTICE OF THE SECOND EGM IN 2021

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DONGJIANG ENVIRONMENTAL COMPANY LIMITED[*] 東江環保股份有限公司

(a joint stock limited company incorporated in the People’s Republic of China)

(Stock code: 00895)

NOTICE OF THE SECOND EXTRAORDINARY GENERAL MEETING IN 2021

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ EGM ”) of Dongjiang Environmental Company Limited (the “ Company* ”) will be held at 11th Floor, Dongjiang Environmental Building, No. 9 Langshan Road, Nanshan District, Shenzhen, the People’s Republic of China on Wednesday, 8 September 2021 at 3:00 p.m. for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolution.

Words and expressions that are not expressly defined in this notice of EGM shall bear the same meaning as those defined in the circular to the shareholders of the Company dated 20 August 2021 (the “ Circular ”).

ORDINARY RESOLUTION

1. To approve the resolution on the acquisition of 70% of the equity interest in Chenzhou Xiongfeng Environment Technology Co., Ltd.* ( 郴州雄風環保科技有限公司 ) in cash as more particularly described in the Circular, and to authorise the chairman of the Board or his/her authorised person(s) to execute relevant documents and handle relevant procedures.

By order of the Board Dongjiang Environmental Company Limited* Tan Kan Chairman

Shenzhen, the People’s Republic of China 20 August 2021

– EGM-1 –

NOTICE OF THE SECOND EGM IN 2021

Notes:

1. For the purpose of identification of Shareholders who are qualified to attend and vote at the EGM, the register of members of H shares of the Company will be closed from Friday, 3 September 2021 to Wednesday, 8 September 2021 (both days inclusive) during which period no transfer of H Shares can be effected. In order to be entitled to attend and vote at the EGM, all transfer document accompanied by the relevant share certificates must be lodged with the Company’s H share registrar, Tricor Tengis Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong (for holders of H Shares) not later than 4:30 p.m. on Thursday, 2 September 2021.

2. Holders of H Shares whose names appear on the register of members of H shares of the Company at 4:30 p.m. on Thursday, 2 September 2021 are entitled to attend and vote at the EGM.

3. Holders of Shares may appoint one or more proxies to attend and, in the event of a poll, vote on their behalves at the EGM. A proxy needs not be a member of the Company.

4. A form of proxy for use at the EGM is enclosed herewith. In the case of a joint holding, the form of proxy may be signed by any joint holder, but if more than one joint holder is present at the meeting, whether in person or by proxy, that one of the joint holders whose name stands first on the registers of members of the Company in respect of the relevant joint holding shall alone be entitled to vote in respect thereof.

5. In order to be valid, the form of proxy must be deposited by hand or post to the Company’s H share registrar, Tricor Tengis Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong (for holders of H Shares) not less than 24 hours before the time for holding the EGM (i.e. 3:00 p.m. on Tuesday, 7 September 2021). If the proxy form is signed by a person under a power of attorney or other authority, a notarially certified copy of that power of attorney or authority shall be deposited at the same time as mentioned in the proxy form.

6. Shareholders and their proxies should submit identity proof when attending the EGM.

7. The EGM is not expected to last for more than half a day. Shareholders and their proxies shall be responsible for their own travelling and accommodation expenses for attending the meeting

8. Pursuant to Rule 13.39(4) of the Listing Rules, the resolution as set out in this notice will be decided by poll at the EGM. Where the chairman in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted, such resolution will be decided by a show of hands.

9. To facilitate the Company in making arrangements for the EGM, you are invited to complete the enclosed reply slip in accordance with the instructions printed thereon and return it to the Company’s H share registrar, Tricor Tengis Limited at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong (for holders of H Shares) as soon as possible, but in any event, before 3:00 p.m. on Tuesday, 7 September 2021. However, the completion and return of the reply slip or not will not affect your right to attend and/or vote at the EGM.

– EGM-2 –