Lee Kee Holdings Limited — Proxy Solicitation & Information Statement 2014

Aug 22, 2014

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in 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 LEE KEE HOLDINGS LIMITED (the “ Company ”), you should at once hand this circular to the purchaser(s) or the transferee(s) or to the bank, the licensed securities dealer or registered institution or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the 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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(Incorporated in the Cayman Islands with limited liability) (Stock Code: 637)

MAJOR TRANSACTION PROPOSED ACQUISITION OF THE REMAINING 50% SHAREHOLDING INTEREST AND SHAREHOLDER’S LOAN IN GENESIS BVI

22nd August 2014

CONTENTS

			Page
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
**LETTER FROM **	**THE **	BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
APPENDIX I	–	FINANCIAL INFORMATION OF THE GROUP . . . . . . . .	I-1
APPENDIX II	–	ACCOUNTANT’S REPORT OF THE GENESIS GROUP . .	II-1
APPENDIX III	–	MANAGEMENT DISCUSSION AND
		ANALYSIS OF THE PERFORMANCE
		OF THE GENESIS GROUP . . . . . . . . . . . . . . . . . . . . . . .	III-1
APPENDIX IV	–	UNAUDITED PRO FORMA FINANCIAL
		INFORMATION OF THE ENLARGED GROUP . . . . . . .	IV-1
APPENDIX V	–	GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . .	V-1

– i –

DEFINITIONS

In this circular, the following expressions have the meanings as set out below unless the context requires otherwise:

• “Agreement for Sale and Purchase”

• the agreement for sale and purchase dated 26th June 2014 entered into between the Vendor and Lee Kee HK in relation to, among others, the Proposed Acquisition

• “Board”

• the board of Directors

• “Company”

• Lee Kee Holdings Limited, a company incorporated in the Cayman Islands whose shares are listed on the Main Board of the Stock Exchange

• “Completion”

• the completion of the Proposed Acquisition

• “Deed of Assignment of Indebtedness”

• the deed of assignment to be entered into among the Vendor, Lee Kee HK and Genesis BVI, Genesis HK or Genesis Ningbo (where applicable) in relation to, among others, the assignment of the Shareholder’s Loan and Other Indebtedness from the Vendor to Lee Kee HK

• “Deed of Novation”

• the deed(s) of novation to be entered into among the Vendor, Lee Kee HK and Genesis BVI, Genesis Alloys Ltd or Genesis Ningbo (where applicable) in relation to, among others, the novation of the Outstanding Debt from the Vendor to Lee Kee HK

• “Directors”

• the directors of the Company

• “Enlarged Group”

• the Group upon Completion

• “Genesis BVI”

• Genesis Recycling Technology (BVI) Limited, a company incorporated in the British Virgin Islands and is owned as to 50% by Lee Kee HK and 50% by the Vendor immediately before the completion of the Proposed Acquisition

• “Genesis Group”

• Genesis BVI and its subsidiaries

• “Genesis HK”

• Genesis Alloys Limited, a company incorporated in Hong Kong and is wholly-owned by Genesis BVI

• “Genesis Ningbo”

• Genesis Alloys (Ningbo) Limited, a wholly foreign owned enterprise established in the PRC and is an indirect wholly-owned subsidiary of Genesis BVI

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DEFINITIONS

• “Gold Alliance”

• Gold Alliance Global Services Limited, the controlling Shareholder of the Company which is interested in approximately 72.40% of the issued share capital of the Company as at the Latest Practicable Date

• “Group”

• the Company and its subsidiaries

• “HKD”

• Hong Kong dollars, the lawful currency of Hong Kong

• “Hong Kong”

• Hong Kong Special Administrative Region of the People’s Republic of China

• “Latest Practicable Date”

• 18th August 2014, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

• “Lee Kee HK”

• Lee Kee Group Limited, a company incorporated in Hong Kong, a wholly owned subsidiary of the Company

• “Listing Rules” the Rules Governing the Listing of the Securities on the Stock Exchange

• “Other Indebtedness”

• the aggregate sum of accounts payable due from the Genesis Group to the Vendor as at Completion

• “Outstanding Debt”

• the aggregate sum of accounts payable due from the Vendor to the Genesis Group as at Completion

• “PRC”

• The People’s Republic of China and, except where the context otherwise requires and for the purpose of this circular only, does not include Hong Kong, the Macau Special Administrative Region and Taiwan

• “Proposed Acquisition”

• the proposed acquisition of 50% shareholding interest in Genesis BVI (comprising 157,500 B shares and 892,500 C shares) by Lee Kee HK from the Vendor pursuant to the terms and conditions of the Agreement for Sale and Purchase

• “Renminbi”

• Renminbi, the lawful currency of the PRC

• “Shareholder(s)”

• shareholder(s) of the Company

– 2 –

DEFINITIONS

“Shareholder’s Loan” the shareholder’s loans in the sum of approximately HKD27,100,000 extended by the Vendor to Genesis BVI which will remain outstanding as at Completion ‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited “US$” United States dollars, the lawful currency of the United States of America “Vendor” Nyrstar Netherlands (Holdings) BV, a limited liability company incorporated in the Netherlands “%” per cent.

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LETTER FROM THE BOARD

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(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 637)

Executive Directors:

Mr. CHAN Pak Chung (Chairman of the Board) Ms. CHAN Yuen Shan, Clara (Vice-Chairman, Chief Executive Officer) Ms. MA Siu Tao

Registered Office: P.O. Box 309 GT, Ugland House South Church Street George Town Grand Cayman Cayman Islands

Independent non-executive Directors:

Mr. CHUNG Wai Kwok, Jimmy Mr. LEUNG Kwok Keung Mr. HU Wai Kwok Mr. HO Kwai Ching, Mark

Head Office and Principal Place of Business in Hong Kong: 16 Dai Fat Street Tai Po Industrial Estate New Territories Hong Kong 22nd August 2014

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION PROPOSED ACQUISITION OF THE REMAINING 50% SHAREHOLDING INTEREST AND SHAREHOLDER’S LOAN IN GENESIS BVI

1 INTRODUCTION

As announced by the Company in its announcements dated 26th June 2014, 4th July 2014 and 7th July 2014, Lee Kee HK, a wholly-owned subsidiary of the Company, as purchaser, had entered into the Agreement for Sale and Purchase with the Vendor on 26th June 2014, pursuant to which Lee Kee HK has agreed to purchase, and the Vendor has agreed to sell 50% shareholding interest in Genesis BVI (comprising 157,500 B shares and 892,500 C shares) at a consideration of US$649,999. At Completion, Lee Kee HK, the Vendor and Genesis BVI, Genesis HK or Genesis Ningbo (where applicable) will enter into the Deed of Assignment of Indebtedness for the assignment of the Shareholder’s Loan and Other Indebtedness to Lee Kee HK at a consideration of US$1.00 and the Deed of Novation for the novation of the Outstanding Debt to Lee Kee HK.

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LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, (i) further details of the Agreement for Sale and Purchase and the Proposed Acquisition; (ii) further information of the Genesis Group; (iii) financial information of the Genesis Group; (iv) unaudited pro forma financial information of the Enlarged Group; and (v) other information as required under the Listing Rules.

2 THE AGREEMENT FOR SALE AND PURCHASE AND THE DEED OF ASSIGNMENT OF INDEBTEDNESS

Sale and Purchase of Shares in Genesis BVI

The principal terms of the Agreement for Sale and Purchase are as follows:

Date of the Agreement for 26th June 2014 Sale and Purchase:

Parties:

• (1) Lee Kee HK, as purchaser

• (2) Nyrstar Netherlands (Holdings) BV, as vendor

Consideration and payment:

US$649,999 and payable by Lee Kee HK on Completion by way of bank remittance.

Conditions precedent:

Completion is conditional upon:-

• (1) the approval of the Agreement for Sale and Purchase and all the transactions contemplated thereunder has been obtained from the Shareholders by way of either (a) the passing of resolution(s) in general meeting of such Shareholders as are not required to abstain from voting under the Listing Rules; or (b) if allowed under the Listing Rules, a written approval of the Shareholders acceptable to the Stock Exchange;

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LETTER FROM THE BOARD

• (2) (if required) all other approvals, consents and acts to be obtained or completed before the Completion as required under the Listing Rules or as otherwise required by the Stock Exchange in connection with the Agreement for Sale and Purchase and all the transactions contemplated thereunder have been obtained and completed or, as the case may be, the relevant waiver from compliance with any of such requirements has been obtained from the Stock Exchange; and

	(3) all approvals, consents, filings and
	necessary procedures in relation to
	the resignation of the directors
	and/or officers appointed by the
	Vendor in Genesis BVI and/or its
	subsidiaries have been completed,
	including but not limited to the
	changing of authorised signatories
	and bank signatories.
Other major terms:	Between the date of the Agreement for
	Sale and Purchase and Completion, all
	material decisions in relation to Genesis
	Ningbo must be jointly made by the
	general manager of Genesis Ningbo and
	the representatives of Lee Kee HK.
Completion:	On the seventh business day after the date
	on which the conditions precedent is
	satisfied or otherwise waived by Lee Kee
	HK.

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LETTER FROM THE BOARD

As at the Latest Practicable Date, conditions precedent (1) and (2) as mentioned above have been satisfied. In respect of condition precedent (3) as mentioned above, as at the Latest Practicable Date, the directors appointed by the Vendor to the board of directors of Genesis Ningbo has tendered their resignation letters and the relevant filing procedures with the relevant government authorities have commenced. Although Lee Kee HK did not have any intention to waive condition precedent (3) as at the Latest Practicable Date, if the filing procedures with the relevant government authorities take a longer time than expected, Lee Kee HK may consider waiving this condition precedent on the precondition that such waiver will not cause any material adverse impact on the Proposed Acquisition and/or the Group as a whole.

Termination:

If Completion does not take place within three months from the date of the Agreement for Sale and Purchase, Lee Kee HK and the Vendor shall use their reasonable endeavours to negotiate amicably, including but not limited to, postponing the Completion to a later date or terminating the Agreement for Sale and Purchase (without prejudice to the rights and interests of the party which has fulfilled its obligations under the Agreement for Sale and Purchase).

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LETTER FROM THE BOARD

Treatment of Shareholder’s Loan and Other Indebtedness between the Vendor and the Genesis Group

At Completion, Lee Kee HK, the Vendor and Genesis BVI, Genesis HK or Genesis Ningbo (where applicable) will enter into:

• (1) the Deed of Assignment of Indebtedness, pursuant to which the Vendor has agreed to assign to Lee Kee HK absolutely all its rights, benefits and interests in the Shareholder’s Loan and Other Indebtedness at a consideration of US$1.00; and

• (2) the Deed of Novation, pursuant to which the Vendor has agreed to novate to Lee Kee HK the Outstanding Debt such that at Completion the Vendor be discharged and released from all payment obligations under or in respect of the Outstanding Debt.

The total consideration for the Proposed Acquisition and the assignment of the Shareholder’s Loan and Other Indebtedness, being US$650,000, was arrived at after arm’s length negotiation between Lee Kee HK and the Vendor. Pursuant to a shareholders’ agreement between Lee Kee HK and the Vendor in relation to Genesis BVI, Lee Kee HK has a pre-emptive right to require the Vendor to sell its shares to Lee Kee HK before the Vendor could transfer its shares to third parties. As far as the Company is aware, the Vendor is eager to exit its participation in the Genesis Group (the “ Exit ”) as soon as possible. The options available to the Vendor for the Exit are either to liquidate Genesis BVI which is a lengthy process or to sell its shares in Genesis BVI. In view of such background and the pre-emptive right granted to Lee Kee HK pursuant to the shareholders’ agreement, Lee Kee HK started the negotiation for the Proposed Acquisition with the Vendor by offering a mutually acceptable price which was gradually adjusted to the final price of US$650,000 (equivalent to 70% discount to a 50% share of the total assets less current liabilities which amounted to approximately HK$35,017,000 of the Genesis Group as at 31st December 2013).

3 REASONS FOR THE PROPOSED ACQUISITION

The Company believes that the Genesis Group with its production of zinc alloy in Ningbo, the PRC would maximize the synergy within the Group and enhance the supply chain and logistics hub in the Eastern China region with the Group’s existing Wuxi sales and distribution centre. The Genesis Group will also strengthen the Group’s own brand production capability.

The Directors believe that the terms of the Agreement for Sale and Purchase and the Deed of Assignment of Indebtedness are fair and reasonable to the Group and are in the interests of the Shareholders as a whole.

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LETTER FROM THE BOARD

4 INFORMATION ON THE VENDOR

The Directors are informed that the Vendor is a limited liability company incorporated in the Netherlands. The holding company of the Vendor, Nyrstar NV, is a company listed on NYSE Euronext Brussels under the symbol NYR. Nyrstar NV is an integrated mining and metals business, with market leading positions in zinc and lead, and growing positions in other base and precious metals. Nyrstar NV has mining, smelting, and other operations located in Europe, the Americas, China and Australia. Nyrstar NV is incorporated in Belgium and has its corporate office in Switzerland.

5 INFORMATION ON THE GROUP AND GENESIS BVI

The Group principally engages in the business of processing, sourcing and distribution of nonferrous metals, primarily zinc alloy and zinc, nickel and nickel-related products, aluminium alloy and aluminium, stainless steel and other electroplating chemicals. The Group also provides related value-added and ancillary services from procurement of raw metal materials to after-sales services.

Genesis BVI principally engages in the processing, production and sale of zinc alloy through its indirect wholly-owned subsidiary in the PRC, Genesis Ningbo. As at the date of this circular, Genesis BVI has an authorised share capital of US$2,100,000 divided into 892,500 A shares, 315,000 B shares and 892,500 C shares of US$1.00 each. The shareholders of Genesis BVI are (1) Lee Kee HK, holding 892,500 A shares and 157,500 B shares; and (2) the Vendor, holding 157,500 B shares and 892,500 C shares.

The profit/(loss) and net liabilities of the Genesis Group for the years ended 31st December 2013 and 2012 prepared in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants are as follows:

Net profit/(loss) (both before and after taxation) Total assets less current liabilities Shareholders’ loan Net liabilities	For the years ended 31st December 2013 2012 HK$’000 HK$’000 1,503 (4,339) 35,017 32,429 (54,263) (54,263) (19,246) (21,834)

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LETTER FROM THE BOARD

The Board noted that in the opinion of Mazars CPA Limited, the reporting accountant of Genesis BVI, without qualifying its opinion, has stated in their report an emphasis of matter in relation to the capital deficiency of the Genesis Group in an amount of approximately HK$19,845,000 as at 31st March 2014 which may cast significant doubt on its ability to continue as a going concern. Please refer to Appendix II to this circular for further details. The Board wishes to emphasise that the total assets less current liabilities of the Genesis Group as at 31st March 2014 amounted to approximately HK$34,418,000. The Genesis Group only recorded a capital deficiency if shareholders’ loan in the amount of approximately HK$54,263,000 is taken into consideration. Upon Completion, the entire sum of shareholders’ loan will be owed by the Genesis Group to Lee Kee HK. Based on the current business and operation of the Genesis Group, the Directors are of the view that the Genesis Group is able to self-maintain. Therefore, the Group does not have any current intention to call the shareholders’ loan that will have negative impact to the Genesis Group’s ability to continue as a going concern. The Proposed Acquisition will not only bring synergy to the Group’s existing operations and production capabilities but will also strengthen the Group’s supply chain in Eastern China. Therefore, the Board believes that the Proposed Acquisition will benefit the Enlarged Group as a whole.

Genesis BVI is owned as to 50% by Lee Kee HK and 50% by the Vendor and is treated as a joint venture of the Company immediately before the completion of the Proposed Acquisition. Upon Completion, Genesis BVI will be an indirect wholly-owned subsidiary of the Company.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, the Vendor and its ultimate beneficial owner are third parties independent of the Company and connected persons of the Company.

6 FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION

Upon Completion, the Genesis Group will become the wholly-owned subsidiary of the Company and the financial results of the Genesis Group will be consolidated into the financial statements of the Group. In addition, after the Completion, the Proposed Acquisition will bring a total gain of approximately HK$13 million to the Group.

Earnings

For the fifteen months ended 31st March 2014, the Group recorded audited consolidated profit of HK$3,868,000. Meanwhile the Genesis Group recorded audited consolidated profits of HK$1,503,000 and HK$388,000 for the year ended 31st December 2013 and the three months period ended 31st March 2014 respectively. Hence, the Directors consider that the Genesis Group will contribute positively to the revenue and earnings base of the Enlarged Group.

The unaudited pro forma financial information has been prepared for illustrative purpose only, based on the judgements and assumptions of the Directors, and, because of its hypothetical nature, it may not reflect the true financial position of the Enlarged Group as at the date of Completion or any future date. Moreover, since the fair values and carrying amounts of the identifiable net assets of the Genesis Group as at the date of Completion may be materially different from their respective values used in the preparation of the unaudited pro forma financial information, the actual amounts of the assets, liabilities and negative goodwill/goodwill to be recorded in the consolidated financial statements of the Group upon Completion may be materially different from the estimated amounts shown in Appendix IV to this circular.

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LETTER FROM THE BOARD

Assets

As at 31st March 2014, the audited consolidated total assets of the Group amounted to HK$1,390,217,000.

As set out in Appendix IV to this circular, assuming completion of the Proposed Acquisition had taken place on 31st March 2014, the unaudited pro forma consolidated total assets of the Enlarged Group would be approximately HK$1,391,900,000.

Liabilities

As at 31st March 2014, the audited consolidated total liabilities of the Group amounted to approximately HK$268,720,000.

As set out in Appendix IV to this circular, assuming the completion of the Proposed Acquisition had taken place on 31st March 2014, the unaudited pro forma consolidated total liabilities of the Enlarged Group would be approximately HK$258,412,000.

7 LISTING RULES IMPLICATIONS

As certain percentage ratios under Rule 14.07 of the Listing Rules in respect of the Proposed Acquisition are more than 25% while all applicable percentage ratios are less than 100%, the Proposed Acquisition constitutes a major transaction for the Company and is subject to the Shareholders’ approval requirement under the Listing Rules.

To the best knowledge, information and belief of the Directors having made all reasonable enquiries, as at the Latest Practicable Date, no Shareholder had a material interest in the Proposed Acquisition, and therefore no Shareholder would be required to abstain from voting on the proposed resolution(s) to approve the Agreement for Sale and Purchase and the transactions contemplated thereunder in a general meeting of the Shareholders. Accordingly, the Company has obtained written Shareholder’s approval for the Proposed Acquisition from Gold Alliance, in lieu of holding an extraordinary general meeting. Gold Alliance is, as at the Latest Practicable Date, interested in approximately 72.40% of the issued share capital of the Company.

8 ADDITIONAL MATTERS

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

Yours faithfully By Order of the Board Lee Kee Holdings Limited CHAN Pak Chung

Chairman

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1 FINANCIAL SUMMARY

The audited financial information of the Group for the financial years ended 31st December 2011 and 31st December 2012 and the 15 months ended 31st March 2014 are disclosed in the following documents which have been published on the websites of the Stock Exchange (http://www.hkexnews.hk) and the Company (www.leekeegroup.com), respectively:

• (a) annual report of the Company for the year ended 31st December 2011 published on 13th April 2012 (pages 31 to 95);

• (b) annual report of the Company for the year ended 31st December 2012 published on 19th April 2013 (pages 31 to 83); and

• (c) annual report of the Company for the 15 months ended 31st March 2014 published on 8th July 2014 (pages 36 to 100).

2 WORKING CAPITAL

The Directors are of the opinion that, taking into account the business prospects of the Enlarged Group, the internal resources and the existing available credit facilities of the Enlarged Group, upon Completion, the Enlarged Group has sufficient working capital for its present requirements, that is for at least the next 12 months from the date of this circular.

3 STATEMENT OF INDEBTEDNESS

At the close of business on 30th June 2014, being the latest practicable date for the purpose of the statement of indebtedness prior to the printing of this circular, the Enlarged Group had outstanding short-term bank loans of HK$274,664,000. The bank borrowings were secured by a corporate guarantee given by the Company.

Save as aforesaid, and apart from intra-group liabilities, none of the companies in the Enlarged Group had any material debt securities, borrowings or indebtedness in the nature of borrowing including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or other similar indebtedness, debentures, mortgages, charges, hire purchase commitments, guarantees or other material contingent liabilities at the close of business on 30th June 2014.

– I-1 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

4 FINANCIAL AND TRADING PROSPECTS

The Group will continue to take advantage of its status as the Associate Trade Member of London Metal Exchange (the “ LME ”) to boost its marketing in these markets, as well as ASEAN, and further expand the value provided by its solutions. The Group will also take advantage of the global reach of the LME platform to explore new opportunities and avenues for growth. In addition, the Group, after the Completion, will further maximize the synergy with the Genesis Group, especially enhancing the supply chain and logistics hub in the Eastern China region and a more reliable supply of high quality zinc alloy products. The Eastern China customers may be able to enjoy more flexible logistic arrangement and support.

Being part of “powering growth”, the Genesis Group will also strengthen the Group’s own brand production capability and further enhance customers’ confidence on the Group’s mission to create value solutions for metals.

Upon the Completion, the Genesis Group will maintain its core zinc alloy production and operation with a minimal additional financial resources from the Group and is expected to be able positively contribute to the Group.

– I-2 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

The following is the text of a report, for the purpose of inclusion in this circular, received from the reporting accountant of Genesis Recycling Technology (BVI) Limited, Mazars CPA Limited, Certified Public Accountants.

瑪澤 會計師事務所有限公司

42nd Floor, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong 香港灣仔港灣道18號中環廣場42樓 Tel電話: (852) 2909 5555 Fax傳真: (852) 2810 0032 Email電郵: info@mazars.hk Website網址: www.mazars.cn

22nd August 2014

The Directors Lee Kee Holdings Limited

Dear Sirs,

We set out below our report on the financial information of Genesis Recycling Technology (BVI) Limited (“ Genesis BVI ”) and its subsidiaries (hereinafter collectively referred to as “ Genesis Group ”) comprising the consolidated statements of financial position of Genesis Group as at 31st December 2011, 2012 and 2013 and 31st March 2014, and the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows of Genesis Group for each of the years ended 31st December 2011, 2012 and 2013 and the three months ended 31st March 2014 (the “ Relevant Periods ”), together with a summary of significant accounting policies and other explanatory information, (the “ Financial Information ”) for inclusion in the circular of Lee Kee Holdings Limited (the “ Company ”) dated 22nd August 2014 (the “ Circular ”) in connection with the proposed acquisition of 50% interest and shareholder’s loan in Genesis BVI as disclosed in the Company’s announcement dated 26th June 2014.

Genesis BVI was incorporated in the British Virgin Islands on 12th February 2001 as a limited liability company under the British Virgin Islands Business Companies Act Cap.291. The principal activity of Genesis BVI is investment holding. All companies now comprising Genesis Group have adopted 31st December as their financial year end for statutory financial reporting purpose.

As at the date of this report, Genesis BVI has direct and indirect interests in the subsidiaries as set out in Note 13 of Section B below. All of these companies are private companies.

As at the date of this report, no separate audited financial statements have been prepared for Genesis BVI as it is not subject to statutory audit requirements under the rules and regulations in its jurisdiction of incorporation. The audited financial statements of other companies comprising Genesis Group as at the date of this report for which there

– II-1 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

are statutory audit requirements have been prepared in accordance with the relevant accounting principles generally accepted in their place of incorporation. The details of the statutory auditors of these companies are set out in Note 13 of Section B below.

The directors of Genesis BVI have prepared the consolidated financial statements of Genesis Group for the Relevant Periods (the “ Underlying Financial Statements ”) in accordance with the same basis in respect of the preparation of the Financial Information as set out in Section B below. The Underlying Financial Statements for each of the years ended 31st December 2011, 2012 and 2013 and the three months ended 31st March 2014 were audited by us under separate terms of engagement with the Company in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”).

The Financial Information has been prepared by the directors of Genesis BVI for inclusion in the Circular in connection with the Company’s acquisition of 50% interest and shareholder’s loan in Genesis BVI based on the Underlying Financial Statements, with no adjustments made thereon and in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”) issued by the HKICPA, the disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”).

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL INFORMATION

The directors of Genesis BVI is responsible for the preparation of the Financial Information that gives a true and fair view in accordance with HKFRSs issued by the HKICPA, the disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Listing Rules, and for such internal control as the directors of Genesis BVI determine is necessary to enable the preparation of the Financial Information that is free from material misstatement, whether due to fraud or error.

REPORTING ACCOUNTANTS’ RESPONSIBILITY FOR THE FINANCIAL INFORMATION

Our responsibility is to form an opinion on the Financial Information based on our procedures performed in accordance with Auditing Guideline No. 3.340 “ Prospectuses and the Reporting Accountant ” issued by the HKICPA.

OPINION

In our opinion, the Financial Information, for the purpose of this report and prepared on the basis as set out in Note 2 of Section B below, gives a true and fair view of the state of affairs of Genesis Group as at 31st December 2011, 2012 and 2013 and 31st March 2014 and of Genesis Group’s consolidated results and cash flows for the Relevant Periods then ended.

– II-2 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

Without qualifying our report, we draw your attention to Note 2 of Section B below which indicates that Genesis Group had capital deficiency of HK$19,845,000 as at 31st March 2014. This matter, along with other matters as set forth in Note 2 below, indicate the existence of a material uncertainty which may cast significant doubt on Genesis Group’s ability to continue as a going concern. The Company has confirmed its intention to make available adequate funds to Genesis Group as and when required to maintain Genesis Group as a going concern.

CORRESPONDING FINANCIAL INFORMATION

For the purpose of this report, we have also reviewed the unaudited corresponding financial information of Genesis Group comprising the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the three months ended 31st March 2013, together with the notes thereon (the “ Corresponding Financial Information ”), for which the directors of Genesis BVI are responsible, in accordance with Hong Kong Standard on Review Engagement 2410 “ Review of Interim Financial Information Performed by the Independent Auditor of the Entity ” issued by the HKICPA.

The directors of Genesis BVI are responsible for the preparation of the Corresponding Financial Information in accordance with the same basis adopted in respect of the Financial Information. Our responsibility is to express a conclusion on the Corresponding Financial Information based on our review.

A review consists of making enquires, 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 on the Corresponding Financial Information.

Based on our review, for the purpose of this report, nothing has come to our attention that causes us to believe that the Corresponding Financial Information is not prepared, in all material respects, in accordance with the same basis adopted in respect of the Financial Information.

– II-3 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

A. FINANCIAL INFORMATION OF GENESIS GROUP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Section B Note Turnover 4 Cost of sales Gross profit Other revenue 4 Other income 5 Distribution costs General and administrative expenses Finance costs 6 (Loss) Profit before tax 6 Income tax expense 8 (Loss) Profit for the year/ period attributable to equity holders of Genesis BVI Other comprehensive (loss) income for the year/ period, net of tax Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation Total comprehensive (loss) income for the year/period attributable to equity holders of Genesis BVI	Year ended 31st December 2011 2012 2013 HK$’000 HK$’000 HK$’000 262,221 193,410 237,203 (254,067) (186,893) (229,211) 8,154 6,517 7,992 112 165 35 2,364 721 1,094 (3,021) (1,809) (2,306) (5,634) (5,278) (5,134) (5,070) (4,656) (178) (3,095) (4,340) 1,503 – – – (3,095) (4,340) 1,503 (705) 666 1,085 (3,800) (3,674) 2,588	Three months ended 31st March 2013 2014 HK$’000 HK$’000 (unaudited) 49,443 52,137 (48,084) (50,000) 1,359 2,137 11 9 756 101 (441) (517) (1,357) (1,342) (151) – 177 388 – – 177 388 149 (987) 326 (599)	Three months ended 31st March 2013 2014 HK$’000 HK$’000 (unaudited) 49,443 52,137 (48,084) (50,000) 1,359 2,137 11 9 756 101 (441) (517) (1,357) (1,342) (151) – 177 388 – – 177 388 149 (987) 326 (599)
			2,137 9 101 (517) (1,342) –
			388 –
			388 (987)
			(599)

– II-4 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Section B Note Non-current assets Property, plant and equipment 11 Prepaid lease payments 12 Current assets Prepaid lease payments 12 Inventories 14 Trade and other receivables 15 Bank balances and cash Current liabilities Trade and other payables 16 Bank borrowings 17 Net current (liabilities) assets Total assets less current liabilities Non-current liabilities Loan from shareholders 18 NET LIABILITIES Capital and reserves Share capital 19 Capital reserve 20(a) Exchange reserve Surplus reserve 20(b) Accumulated losses TOTAL DEFICITS	At 31st December 2011 2012 2013 HK$’000 HK$’000 HK$’000 16,675 15,611 14,378 1,072 1,060 1,061 17,747 16,671 15,439 28 29 29 5,168 6,726 11,247 6,933 9,892 10,277 21,442 36,402 8,650 33,571 53,049 30,203 7,574 12,137 10,625 61,904 25,154 – 69,478 37,291 10,625 (35,907) 15,758 19,578 (18,160) 32,429 35,017 – 54,263 54,263 (18,160) (21,834) (19,246) 16,380 16,380 16,380 2,211 2,211 2,211 2,645 3,311 4,396 1,541 1,541 1,541 (40,937) (45,277) (43,774) (18,160) (21,834) (19,246)	At 31st March 2014 HK$’000 13,609 1,028
		14,637
		29 10,358 14,201 5,266
		29,854
		10,073 –
		10,073
		19,781
		34,418
		54,263
		(19,845)
		16,380 2,211 3,409 1,541 (43,386)
		(19,845)

– II-5 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

At 1st January 2011 Loss for the year Other comprehensive loss for the year Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation Total comprehensive loss for the year At 31st December 2011 At 1st January 2012 Loss for the year Other comprehensive income for the year Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation Total comprehensive loss for the year At 31st December 2012 At 1st January 2013 Profit for the year Other comprehensive income for the year Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation Total comprehensive income for the year At 31st December 2013	Share capital HK$’000 16,380 – – – 16,380 16,380 – – – 16,380 16,380 – – – 16,380	Capital reserve HK$’000 2,211 – – – 2,211 2,211 – – – 2,211 2,211 – – – 2,211	Exchange reserve HK$’000 3,350 – (705) (705) 2,645 2,645 – 666 666 3,311 3,311 – 1,085 1,085 4,396	Surplus reserve HK$’000 1,541 – – – 1,541 1,541 – – – 1,541 1,541 – – – 1,541	Accumulated losses HK$’000 (37,842) (3,095) – (3,095) (40,937) (40,937) (4,340) – (4,340) (45,277) (45,277) 1,503 – 1,503 (43,774)	Total HK$’000 (14,360)
						(3,095) (705)
						(3,800)
						(18,160)
						(18,160)
						(4,340) 666
						(3,674)
						(21,834)
						(21,834)
						1,503 1,085
						2,588
						(19,246)

– II-6 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

At 1st January 2014 Profit for the period Other comprehensive loss for the period Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation Total comprehensive loss for the period At 31st March 2014 At 1st January 2013 Profit for the period (unaudited) Other comprehensive income for the period Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation (unaudited) Total comprehensive income for the period (unaudited) At 31st March 2013 (unaudited)	Share capital HK$’000 16,380 – – – 16,380 16,380 – – – 16,380	Capital reserve HK$’000 2,211 – – – 2,211 2,211 – – – 2,211	Exchange reserve HK$’000 4,396 – (987) (987) 3,409 3,311 – 149 149 3,460	Surplus reserve HK$’000 1,541 – – – 1,541 1,541 – – – 1,541	Accumulated losses HK$’000 (43,774) 388 – 388 (43,386) (45,277) 177 – 177 (45,100)	Total HK$’000 (19,246)
						388 (987)
						(599)
						(19,845)
						(21,834)
						177 149
						326
						(21,508)

– II-7 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

CONSOLIDATED STATEMENTS OF CASH FLOWS

Section B Note OPERATING ACTIVITIES Cash generated from (used in) operations 22 Interest paid Net cash from (used in) operating activities INVESTING ACTIVITIES Interest received Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Net cash (used in) from investing activities FINANCING ACTIVITIES Repayment of bank loan Loan from shareholders Net cash from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year/period Effect on exchange rate changes Cash and cash equivalents at end of year/period, represented by bank balances and cash	Year ended 31st December 2011 2012 2013 HK$’000 HK$’000 HK$’000 9,282 3,048 (2,659) (5,070) (4,656) (178) 4,212 (1,608) (2,837) 112 165 35 (178) (479) (101) 1 10 1 (65) (304) (65) – (37,731) (25,873) – 54,263 – – 16,532 (25,873) 4,147 14,620 (28,775) 16,385 21,442 36,402 910 340 1,023 21,442 36,402 8,650	Three months ended 31st March 2013 2014 HK$’000 HK$’000 (unaudited) (6,669) (3,188) (151) – (6,820) (3,188) 11 9 – (3) – – 11 6 (25,272) – – – (25,272) – (32,081) (3,182) 36,402 8,650 167 (202) 4,488 5,266	Three months ended 31st March 2013 2014 HK$’000 HK$’000 (unaudited) (6,669) (3,188) (151) – (6,820) (3,188) 11 9 – (3) – – 11 6 (25,272) – – – (25,272) – (32,081) (3,182) 36,402 8,650 167 (202) 4,488 5,266
			(3,188)
			9 (3) –
			6
			– –
			–
			(3,182) 8,650 (202)
			5,266

– II-8 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

B. NOTES TO THE FINANCIAL INFORMATION OF GENESIS GROUP

1. CORPORATE INFORMATION

Genesis Recycling Technology (BVI) Limited (“ Genesis BVI ”) is a limited liability company incorporated in the British Virgin Islands on 12th February 2001. The Company’s principal place of business is located at 16 Dai Fat Street, Tai Po Industrial Estate, N.T, Hong Kong. The principal activity of the Company is investment holding and the subsidiaries are mainly engaged in manufacturing and trading of alloy products.

2. PRINCIPAL ACCOUNTING POLICIES

Basis of preparation

The Financial Information set out in this report has been prepared in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”), which collective term includes all applicable Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“ HKASs ”) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”), accounting principles generally accepted in Hong Kong. The Financial Information also complies with the disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”).

The HKICPA has issued a number of new and revised HKFRSs during the Relevant Periods. For the purpose of preparing the Financial Information, Genesis Group has throughout the Relevant Periods consistently adopted all applicable new and revised HKFRSs that are relevant to Genesis Group and are effective for the Relevant Periods.

A summary of the principal accounting policies adopted by Genesis Group in the preparation of the Financial Information is set out below.

Going concern

The Financial Information has been prepared in conformity with the principles applicable to a going concern basis. The applicability of these principles is dependent upon continued availability of adequate finance or attaining profitable operations in the future in view of the excess of liabilities over assets. The directors of Genesis BVI are aware that, due to the above conditions, a material uncertainty exists which may cast doubt upon Genesis Group’s ability to continue as a going concern. However, the directors of Genesis BVI are of the opinion that there is a reasonable expectation that Genesis Group will be able to continue as going concerns on the basis that the Company has confirmed its intention to make available adequate funds to Genesis Group as and when required to maintain Genesis Group as a going concern.

Basis of measurement

The measurement basis used in the preparation of the Financial Information is historical

cost.

Basis of consolidation

The Financial Information comprises the financial statements of Genesis BVI and all of its subsidiaries. The financial statements of the subsidiaries are prepared for the same reporting period as that of Genesis BVI using consistent accounting policies.

All intra-group balances, transactions, incomes and expenses and profits and losses resulting from intra-group transactions are eliminated in full. The results of subsidiaries are consolidated from the date on which Genesis Group obtains control and continue to be consolidated until the date that such control ceased.

– II-9 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

Subsidiaries

A subsidiary is an entity that is controlled by Genesis Group. Genesis Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Genesis Group reassesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of control.

In Genesis BVI’s statement of financial position, the investment in subsidiaries is stated at cost less impairment losses. The carrying amount of the investment is reduced to its recoverable amount on an individual basis. The results of subsidiaries are accounted for by Genesis BVI on the basis of dividends received and receivable.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and 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 the profit or loss during the year in which they are incurred.

Depreciation is provided to write off the cost less accumulated impairment losses of property, plant and equipment over their estimated useful lives as set out below from the date on which they are available for use and after taking into account their estimated residual values, using the straight-line method, at the following rates per annum:

Buildings 5% Plant and machinery 10% – 20% Office equipment 20% Motor vehicles 20%

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.

Prepaid lease payments

Prepaid lease payments are up-front payments to acquire fixed-term interests in lessee-occupied land. The premiums are stated at cost and are amortised over the period of the lease on a straight-line basis to profit or loss.

Impairment of non-financial assets

At the end of each reporting period, Genesis Group reviews internal and external sources of information to assess whether there is any indication that its property, plant and equipment 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 to sell and value in use. Where it is not possible to estimate the recoverable amount of an individual asset, Genesis Group estimates the recoverable amount of the smallest group of assets that generates cash flows independently (i.e. 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 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 years. Reversal of impairment loss is recognised as income in profit or loss immediately.

– II-10 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

Inventories

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

Financial instruments

Recognition and derecognition

Financial assets and financial liabilities are recognised when and only when Genesis Group becomes a party to the contractual provisions of the instruments and on a trade date basis.

A financial asset is derecognised when and only when (i) Genesis Group’s contractual rights to future cash flows from the financial asset expire or (ii) Genesis Group transfers the financial asset and either (a) Genesis Group transfers substantially all the risks and rewards of ownership of the financial asset, or (b) Genesis Group 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.

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 assets or financial liabilities are initially recognised at their fair value plus, in the case of financial assets or financial liabilities not carried at fair value through profit or loss, transaction costs that are direct attributable to the acquisition or issue of the financial assets or financial liabilities.

Loans and receivables

Loans and receivables including trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are not held for trading. They are measured at amortised cost using the effective interest method, except where receivables are interest-free loans and without any fixed repayment term or the effect of discounting would be insignificant. In such case, the receivables are stated at cost less impairment loss. Amortised cost is calculated by taking into account any discount or premium on acquisition over the period to maturity. Gains and losses arising from derecognition, impairment or through the amortisation process are recognised in profit or loss.

Financial liabilities

Genesis Group’s financial liabilities include trade and other payables, bank borrowings and loan from shareholders. All financial liabilities except for derivatives 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

At the end of each reporting period, Genesis Group assesses whether there is objective evidence that financial assets, other than those at fair value through profit or loss, are impaired. The impairment loss of financial assets carried at amortised cost is measured as the difference between the assets’ carrying amount and the present value of estimated future cash flow discounted at the financial assets’ original effective interest rate. Such impairment loss is reversed in subsequent periods through profit or loss when an increase in the asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

– II-11 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

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 changes in value, net of bank overdrafts.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to Genesis Group and when the revenue and costs, if applicable, can be measured reliably and on the following bases.

Sale of goods is recognised on transfer of risks and rewards of ownership, which generally coincides with the time when the goods are delivered to customers and title is passed.

Interest income from financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Foreign currency translation

Items included in the Financial Information of each of Genesis Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “ functional currency ”). The Financial Information is presented in the currency of Hong Kong dollars (“ HK$ ”), which is Genesis BVI’s functional currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

The results and financial position of all the group entities that have a functional currency different from the presentation currency (“ foreign operations ”) are translated into the presentation currency as follows:

• Assets and liabilities for each statement of financial position presented are translated at the closing rate at the end of the reporting period;

• Income and expenses for each statement of comprehensive income are translated at average exchange rate;

• All resulting exchange differences arising from the above translation and exchange differences arising from a monetary item that forms part of Genesis Group’s net investment in a foreign operation are recognised as a separate component of equity.

• On the disposal of a foreign operation, the cumulative amount of the exchange differences deferred in the separate component of equity relating to that foreign operation is recognised in profit or loss when the gain or loss on disposal is recognised.

Borrowing costs

Borrowing 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 an expense in the period in which they are incurred.

– II-12 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

Employee benefits

Defined contribution plan

The obligations for contributions to defined contribution retirement scheme are recognised as an expense in profit or loss as incurred. The scheme is provided for based on total actual salaries and wages payable to Chinese employees in accordance with the Regulations for Provision of Various Employee Funds and Allowances issued by the relevant Finance Bureau and the Labour and Social Security Bureau in Mainland China. The assets of the scheme are held separately from those of Genesis Group in an independently administered fund.

Leases

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.

As lessee

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease.

Taxation

The charge for current income tax is based on the results for the year 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 arising from initial recognition of an asset or liability in a transaction other than a business consolidation that at the time of the transaction affects neither the accounting profit nor taxable profit or loss is not recognised.

The deferred tax liabilities and assets are measured at the tax rates that are expected to apply to the period when the asset is recovered or the liability is settled, based on tax rates and 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.

Related parties

A related party is a person or entity that is related to Genesis Group.

• (a) A person or a close member of that person’s family is related to Genesis Group if that person:

• (i) has control or joint control over Genesis Group;

• (ii) has significant influence over Genesis Group; or

• (iii) is a member of the key management personnel of Genesis Group or of the parent of Genesis Group.

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

• (i) The entity and Genesis Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

– II-13 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

• (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 Genesis Group or an entity related to Genesis Group. If Genesis Group is itself such a plan, the sponsoring employers are also related to Genesis Group.

• (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 parent of the entity).

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.

Segment Reporting

Operating segments, and the amounts of each segment item reported in the Financial Information, are identified from the financial information provided regularly to Genesis Group’s chief operating decision makers for the purpose of allocating resources to, and assessing the performance of, Genesis Group’s various lines of business and geographical locations.

Individual material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products, the nature of production processes, the type or class of customers, the methods used to distribute the products, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

Critical accounting estimates and judgements

Estimates and assumptions concerning the future and judgements are made by Genesis Group’s management in the preparation of the Financial Information. They affect the application of Genesis Group’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.

– II-14 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

Allowance for bad and doubtful debts

The provisioning policy for bad and doubtful debts of Genesis Group is based on the evaluation by management of the collectability of the accounts receivable. A considerable amount of judgment is required in assessing the ultimate realisation of these receivables, including assessing the current creditworthiness and the past collection history of each customer. If the financial conditions of these customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowance will be required.

Allowance for inventories

Genesis Group’s management reviews the condition of inventories at the end of each reporting period, and makes allowance for inventories that are identified as obsolete, slow-moving or no longer recoverable or suitable for use in production. Genesis Group carries out the inventory review on a product-by-product basis and makes allowances by reference to the latest market prices and current market conditions.

Depreciation

Genesis Group depreciates the property, plant and equipment over their estimated useful lives from the date on which they are available for use and after taking into consideration their estimated residual value, using straight line method. The estimated useful life reflects the directors’ estimate of the periods that Genesis Group intends to derive future economic benefits from the use of the property, plant and equipment.

Impairment of investments and receivables

Genesis Group assesses annually if investment in subsidiaries has suffered any impairment in accordance with HKAS 36 and follows the guidance of HKAS 39 in determining whether amounts due from those entities are impaired. Details of the approach are stated in the respective accounting policies. The assessment requires an estimation of future cash flows, including expected dividends, from the assets and the selection of appropriate discount rates. Future changes in financial performance and position of these entities would affect the estimation of impairment loss and cause the adjustments of their carrying amounts.

Future changes in HKFRS

At the date of issuance of this Financial Information, the HKICPA has issued a number of new/revised HKFRSs that are not yet effective for the Relevant Periods, which Genesis Group has not early adopted. The management does not anticipate that the adoption of these new/revised HKFRSs, in future periods will have any material impact on the results and financial position of Genesis Group.

3. SEGMENT INFORMATION

Business Segment

The directors of Genesis BVI have been identified as the chief operating decision maker to evaluate the performance of operating segments based on Genesis Group’s internal reporting in respect of these segments. For the purpose of internal reporting, Genesis Group has only one business segment, namely, the manufacturing and trading alloy products business. Business segment information, which is Genesis Group’s primary basis of segment reporting, is not presented as Genesis Group’s turnover, contribution to operating profit and assets and liabilities are attributable to this only segment.

Geographical information

Genesis Group’s operations and operating assets are substantially located in the People’s Republic of China (the “ PRC ”). Accordingly, no geographical segment information is presented.

– II-15 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

Information about major customers

Details of the entities accounting for 10% or more of aggregate revenue of Genesis Group during the Relevant Periods are as follows:

Customer A Customer B Customer C Customer D	Year ended 31st December Three months ended 31st March 2011 2012 2013 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 154,490 103,394 98,680 18,310 21,956 N/A 22,594 36,057 7,784 5,879 N/A N/A N/A 5,291 N/A N/A N/A N/A 5,240 N/A 154,490 125,988 134,737 36,625 27,835	Year ended 31st December Three months ended 31st March 2011 2012 2013 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 154,490 103,394 98,680 18,310 21,956 N/A 22,594 36,057 7,784 5,879 N/A N/A N/A 5,291 N/A N/A N/A N/A 5,240 N/A 154,490 125,988 134,737 36,625 27,835
		27,835

4. TURNOVER AND REVENUE

Turnover and revenue recognised by categories are as follows:

Turnover Sale of goods, net of value added tax Other revenue Bank interest income Total revenue	Year ended 31st December Three months ended 31st March 2011 2012 2013 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 262,221 193,410 237,203 49,443 52,137 112 165 35 11 9 262,333 193,575 237,238 49,454 52,146	Year ended 31st December Three months ended 31st March 2011 2012 2013 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 262,221 193,410 237,203 49,443 52,137 112 165 35 11 9 262,333 193,575 237,238 49,454 52,146
		52,146

– II-16 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

5. OTHER INCOME

Exchange gain, net Recovery of allowance of doubtful debts Sales of scrap Sundry income Write back of advance from customers Write back of amount due to ex-shareholder	Year ended 31st December Three months ended 31st March 2011 2012 2013 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 283 – – – 1 1,102 – – – – 740 324 393 181 100 239 32 119 – – – 365 – – – – – 582 575 – 2,364 721 1,094 756 101	Year ended 31st December Three months ended 31st March 2011 2012 2013 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 283 – – – 1 1,102 – – – – 740 324 393 181 100 239 32 119 – – – 365 – – – – – 582 575 – 2,364 721 1,094 756 101
		101

6. (LOSS) PROFIT BEFORE TAX This is stated after charging:

Finance costs Interests on bank loans wholly repayable within five years Staff costs Salaries and allowances Contributions to defined contribution plans Total staff costs, including remunerations of key management personnel Other items Auditor’s remuneration Cost of inventories sold Depreciation and amortisation – included in general and administrative expenses – included in cost of sales Exchange (gain) loss, net Loss on disposal of property, plant and equipment Written-off of other receivables	Year ended 31st December Three months ended 31st March 2011 2012 2013 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 5,070 4,656 178 151 – 2,971 3,438 3,628 876 890 245 246 238 66 73 3,216 3,684 3,866 942 963 264 161 162 – – 252,548 185,406 227,615 47,691 49,603 454 218 189 45 33 1,519 1,487 1,596 393 397 (283) 110 343 317 (1) 3 92 – – – 108 20 – – –	Year ended 31st December Three months ended 31st March 2011 2012 2013 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 5,070 4,656 178 151 – 2,971 3,438 3,628 876 890 245 246 238 66 73 3,216 3,684 3,866 942 963 264 161 162 – – 252,548 185,406 227,615 47,691 49,603 454 218 189 45 33 1,519 1,487 1,596 393 397 (283) 110 343 317 (1) 3 92 – – – 108 20 – – –
		890 73
		963
		– 49,603 33 397 (1) – –

– II-17 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

7. DIRECTORS’ EMOLUMENTS AND FIVE HIGHEST PAID INDIVIDUALS

(a) Directors’ emoluments

The directors did not receive any remuneration from Genesis Group during the Relevant Periods.

There was no amount paid during the Relevant Periods to the directors in connections with their retirement from employment or compensation for loss of office with Genesis Group, or inducement to join. There was no arrangement under which the directors waived or agreed to waive any remuneration during the Relevant Periods.

(b) Five highest paid individuals

Of the five individuals with the highest emoluments for the Relevant Periods, none of them is a director. The aggregate of the emoluments in respect of these five individuals are as follows:

Salaries and allowances Contributions to defined contribution plans	Year ended 31st December Three months ended 31st March 2011 2012 2013 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 1,409 1,439 1,510 370 379 45 44 49 12 15 1,454 1,483 1,559 382 394	Year ended 31st December Three months ended 31st March 2011 2012 2013 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) 1,409 1,439 1,510 370 379 45 44 49 12 15 1,454 1,483 1,559 382 394
		394

The emoluments fell within the following bands:

				Three months ended	Three months ended
	Year ended 31st December			**31st **	March
	2011	2012	2013	2013	2014
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
				(unaudited)
HK$Nil to
HK$1,000,000	5	5	5	5	5

No emoluments were paid or payable to these employees as an inducement to join or upon joining Genesis Group or as compensation for loss of office during the Relevant Periods.

– II-18 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

8. INCOME TAX EXPENSE

Income taxes

In respect of Genesis BVI and its subsidiary in Hong Kong, Hong Kong Profits Tax has not been provided as Genesis BVI had no assessable profits and the subsidiary in Hong Kong incurred a loss for taxation purposes for the Relevant Periods.

The income tax provision in respect of operations in the PRC is calculated at the applicable tax rate of 25% on the estimated assessable profits for the year based on existing legislation, interpretation and practices in respect thereof.

For the years ended 31st December 2011 and 2012, PRC enterprise income tax had not been provided as the subsidiary in the PRC incurred a loss for taxation purposes. PRC enterprise income tax had not been provided as the estimated assessable profits for the year ended 31st December 2013 and three months ended 31st March 2014 of the subsidiary in the PRC are wholly absorbed by unrelieved tax losses brought forward from previous years.

Reconciliation of income tax expense

(Loss) Profit before tax Income tax at applicable tax rate at 25% Different tax rate of a subsidiary operating in other jurisdiction Non-deductible expenses Tax exempt revenue Unrecognised tax losses Unrecognised temporary differences Utilisation of unrecognised tax losses Others Income tax expense	Year ended 31st December Three months ended 31st March 2011 2012 2013 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) (3,095) (4,340) 1,503 177 388 (774) (1,085) 376 44 97 18 14 14 1 1 218 224 229 61 56 (10) (85) – – – 520 983 28 – – (33) (34) (35) (9) (9) – – (656) (96) (135) 61 (17) 44 (1) (10) – – – – –	Year ended 31st December Three months ended 31st March 2011 2012 2013 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) (3,095) (4,340) 1,503 177 388 (774) (1,085) 376 44 97 18 14 14 1 1 218 224 229 61 56 (10) (85) – – – 520 983 28 – – (33) (34) (35) (9) (9) – – (656) (96) (135) 61 (17) 44 (1) (10) – – – – –
		97 1 56 – – (9) (135) (10)
		–

– II-19 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

Unrecognised deferred tax assets arising from items analysed in gross amount as follows:

Deductible temporary differences Tax losses arising from – Hong Kong – PRC At the end of the reporting period	2011 HK$’000 2,149 1,262 39,453 40,715 42,864	At 31st December 2012 2013 HK$’000 HK$’000 2,048 1,969 1,431 1,599 43,901 16,932 45,332 18,531 47,380 20,500	At 31st March 2014 HK$’000 1,887
			1,605 15,974
			17,579
			19,466

The deductible temporary differences represented losses on disposal of leasehold improvement of the PRC subsidiary which have been allowed for tax deduction over 20 years since the year 2006. Genesis Group had unused tax losses incurred by the Hong Kong subsidiary which do not expire under current tax legislation in Hong Kong and the unused tax losses incurred by the PRC subsidiary can be carried forward for five years starting from the year when the loss was incurred under current PRC tax legislation, interpretation and practices. Deferred tax assets have not been recognised in respect of these items because it is not probable that sufficient future taxable profit will be available against which Genesis Group can utilise the benefits therefrom.

These unused tax losses incurred by the PRC subsidiary at each end of reporting periods will expire as follows:

At 31st December 2013 At 31st December 2014 At 31st December 2015 At 31st December 2016 At 31st December 2017 Exchange differences	2011 HK$’000 24,724 6,290 3,500 1,939 – 3,000 39,453	At 31st December 2012 2013 HK$’000 HK$’000 24,724 – 6,290 6,290 3,500 3,500 1,939 1,939 3,822 3,822 3,626 1,381 43,901 16,932	At 31st March 2014 HK$’000 – 5,750 3,500 1,939 3,822 963
			15,974

9. (LOSS) EARNINGS PER SHARE

(Loss) Earnings per share have not been presented as its inclusion is not considered meaningful for the purpose of the Financial Information.

10. DIVIDENDS

Genesis Group did not declare any dividends or distributions during the Relevant Periods.

– II-20 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

11. PROPERTY, PLANT AND EQUIPMENT

Reconciliation of carrying amount – year ended 31st December 2011 At beginning of the year Exchange differences Additions Disposals Depreciation At the end of the reporting period Reconciliation of carrying amount – year ended 31st December 2012 At beginning of the year Exchange differences Additions Disposals Depreciation At the end of the reporting period Reconciliation of carrying amount – year ended 31st December 2013 At beginning of the year Exchange differences Additions Disposals Depreciation At the end of the reporting period Reconciliation of carrying amount – period ended 31st March 2014 At beginning of the period Exchange differences Additions Depreciation At the end of the reporting period	Buildings HK$’000 9,425 516 – – (532) 9,409 9,409 140 – – (543) 9,006 9,006 250 – – (560) 8,696 8,696 (213) – (140) 8,343	Plant and machinery HK$’000 7,333 388 19 – (1,025) 6,715 6,715 90 466 (94) (973) 6,204 6,204 163 80 – (1,088) 5,359 5,359 (128) – (269) 4,962	Office equipment HK$’000 645 29 159 (4) (337) 492 492 6 13 (8) (131) 372 372 9 21 (1) (108) 293 293 (7) 3 (14) 275	Motor vehicle HK$’000 105 5 – – (51) 59 59 – – – (30) 29 29 1 – – – 30 30 (1) – – 29	Total HK$’000 17,508 938 178 (4) (1,945)
					16,675
					16,675 236 479 (102) (1,677)
					15,611
					15,611 423 101 (1) (1,756)
					14,378
					14,378 (349) 3 (423)
					13,609

– II-21 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

At 1st January 2012 Cost Accumulated depreciation and impairment losses Net carrying amount At 1st January 2013 Cost Accumulated depreciation and impairment losses Net carrying amount At 1st January 2014 Cost Accumulated depreciation and impairment Net carrying amount At 31st March 2014 Cost Accumulated depreciation and impairment Net carrying amount	Buildings HK$’000 12,076 (2,667) 9,409 12,267 (3,261) 9,006 12,618 (3,922) 8,696 12,307 (3,964) 8,343	Plant and machinery HK$’000 12,122 (5,407) 6,715 12,308 (6,104) 6,204 12,697 (7,338) 5,359 12,384 (7,422) 4,962	Office equipment HK$’000 1,510 (1,018) 492 1,465 (1,093) 372 1,517 (1,224) 293 1,483 (1,208) 275	Motor vehicle HK$’000 286 (227) 59 291 (262) 29 299 (269) 30 292 (263) 29	Total HK$’000 25,994 (9,319)
					16,675
					26,331 (10,720)
					15,611
					27,131 (12,753)
					14,378
					26,466 (12,857)
					13,609

– II-22 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

12. PREPAID LEASE PAYMENTS

Prepaid lease payments represent cost paid for medium-term leasehold land in PRC. The cost is amortised over the leasehold period.

Net carrying amount At beginning of the reporting period Exchange differences Amortisation At the end of the reporting period Current portion Non-current portion	2011 HK$’000 1,068 60 (28) 1,100 28 1,072 1,100	At 31st December 2012 2013 HK$’000 HK$’000 1,100 1,089 17 30 (28) (29) 1,089 1,090 29 29 1,060 1,061 1,089 1,090	At 31st March 2014 HK$’000 1,090 (26) (7)
			1,057
			29 1,028
			1,057

13. INTERESTS IN SUBSIDIARIES

Genesis BVI

Unlisted shares, at cost Impairment losses Due from subsidiaries Impairment losses	2011 HK$’000 10 (10) – 19,742 (19,742) – –	At 31st December 2012 2013 HK$’000 HK$’000 10 10 (10) (10) – – 74,005 74,005 (19,742) (19,742) 54,263 54,263 54,263 54,263	At 31st March 2014 HK$’000 10 (10)
			–
			74,005 (19,742)
			54,263
			54,263

As at 31st December 2012 and 2013 and 31st March 2014, included in the amounts due from subsidiaries, there is a loan to a Hong Kong subsidiary of United States Dollar (“ US$ ”) 7 million (approximately HK$54,263,300) which is unsecured, interest-free and repayable in 3 years from the drawdown date.

The remaining amounts due from subsidiaries are unsecured, interest-free and have no fixed term of repayment. The directors of Genesis Group expected the amount will not be realised in the next twelve months at the end of the reporting period.

– II-23 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

As at the date of this report, Genesis BVI had direct or indirect interests in the following subsidiaries, all of which are private companies. The particulars of these subsidiaries are set out below:

	Place of	Particulars of
	incorporation/	registered/issued	Proportion of nominal value
	Date of	and paid up	of issued/registered capital
Name of subsidiary	registration	capital	held by Genesis BVI		Principal activities
			Directly Indirectly
Genesis Alloys Limited	Hong Kong	10,000 ordinary	100%	–	Investment holding
(“Genesis HK”)	on 30th June 2000	shares of HK$1			and trading of
					alloy products
金利合金制造工業（寧波）	The PRC	US$9,000,000	–	100%	Manufacturing and
有限公司Genesis	on 15th September				trading of alloy
Alloys (Ningbo)	2000				products
Limited (“Genesis*
Ningbo”)

All companies comprising Genesis Group have adopted 31st December as their financial year end date.

The financial statements of Genesis BVI’s subsidiaries that fall into the Relevant Periods have been audited as follows:

Name of
subsidiary	Financial Period	Auditors
Genesis HK	Years ended 31st December 2011, 2012 and 2013	Mazars CPA Limited
Genesis Ningbo	Years ended 31st December 2011, 2012 and 2013	Ningbo Kexin Certified
		Public Accountants
		Limited* (寧波科信會計
		師事務所有限公司)

• The English translation name is for identification purpose only

14. INVENTORIES

Raw materials Work-in-progress Finished goods Low value consumables	2011 HK$’000 1,170 37 3,892 69 5,168	At 31st December 2012 2013 HK$’000 HK$’000 287 1,306 32 38 6,268 9,843 139 60 6,726 11,247	At 31st March 2014 HK$’000 663 16 9,554 125
			10,358

All inventories are stated at cost.

– II-24 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

15. TRADE AND OTHER RECEIVABLES

Note Trade receivables From related parties 15(a) From third parties Allowance for doubtful debts 15(c) 15(b) Other receivables Deposits, prepayments and other receivables	2011 HK$’000 2,153 9,729 11,882 (6,853) 5,029 1,904 6,933	At 31st December 2012 2013 HK$’000 HK$’000 4,418 2,063 4,068 6,399 8,486 8,462 – – 8,486 8.462 1,406 1,815 9,892 10,277	At 31st March 2014 HK$’000 7,804 5,071
			12,875 –
			12,875
			1,326
			14,201

15(a). TRADE RECEIVABLES FROM RELATED PARTIES

Trade receivables from related parties are unsecured, interest-free and have no fixed repayment term. At the end of the reporting period, no provision had been made for non-repayment of the amounts due and the carrying amounts of the amounts due approximate their fair values.

15(b). AGEING ANALYSIS OF TRADE RECEIVABLES NET OF ALLOWANCE

At the end of the reporting period, the ageing analysis of trade receivables net of allowance for doubtful debts is as follows:

								At
					**At **	31st December		31st March
				2011		2012	2013	2014
				HK$’000		HK$’000	HK$’000	HK$’000
0	–	30	days	5,029		8,486	8,462	12,875

– II-25 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

15(c). ALLOWANCE FOR DOUBTFUL DEBTS

At beginning of reporting period Amount recovered Amount written off Exchange difference At the end of reporting period	2011 HK$’000 7,556 (1,102) – 399 6,853	At 31st December 2012 2013 HK$’000 HK$’000 6,853 – – – (6,849) – (4) – – –	At 31st March 2014 HK$’000 – – – –
			–

Impairment losses in respect of trade receivables are recorded using an allowance account unless Genesis Group considered that recovery of the amount is remote, in which case the bad debt is written off against trade receivables directly. In 2012, a trade receivable of Genesis Group amounting to HK$6,849,000 was determined to be impaired. The individually impaired receivable related to customers that were in financial difficulties and management assessed that the whole amount of the receivable was not expected to be recovered. Consequently, specific allowance for doubtful debt of HK$6,849,000 was written off in 2012.

15(d). PAST DUE BUT NOT IMPAIRED TRADE RECEIVABLES

The majority of Genesis Group’s trade receivables are due upon the date of delivery of goods or 7 days after delivery of goods. At 31st December 2012 and 2013 and 31st March 2014, included in Genesis Group’s trade receivable balance are debtors with a carrying amount of HK$8,486,000, HK$8,462,000 and HK$12,875,000 respectively, which are past due for which Genesis Group has not impaired as there has not been a significant change in credit quality of the debtors and the directors of Genesis Group believe that the amounts are still considered receivable. These relate to major customers for whom there is no recent history of default. Genesis Group does not hold any collateral over these receivables.

The ageing analysis of trade receivables which are past due but not impaired is as follows:

				At
		At 31st December		31st March
	2011	2012	2013	2014
	HK$’000	HK$’000	HK$’000	HK$’000
Past due:
Within 1 month	–	8,486	8,462	12,875

– II-26 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

16. TRADE AND OTHER PAYABLES

Note Trade payables Trade payables to third parties Other payables Accrued charges and other payables Due to a related company 16(a) Due to shareholders 16(a)	2011 HK$’000 44 3,940 1,156 2,434 7,530 7,574	At 31st December 2012 2013 HK$’000 HK$’000 36 14 8,473 7,398 1,314 1,458 2,314 1,755 12,101 10,611 12,137 10,625	At 31st March 2014 HK$’000 269
			6,556 1,493 1,755
			9,804
			10,073

16(a). DUE TO A SUBSIDIARY/A RELATED COMPANY/SHAREHOLDERS

The amounts due are unsecured, interest-free and have no fixed repayment term. The carrying amounts of the amounts due approximate their fair values at the end of the reporting period.

17. BANK BORROWINGS

At 31st December 2011 and 2012, the bank loans of RMB50,000,000, equivalent to approximately HK$61,904,000, and RMB20,000,000, equivalent to approximately HK$25,154,000, respectively were secured by a corporate guarantee given by a shareholder of Genesis BVI. The bank loans were rollover bi-weekly. Interest was charged at 10% below the prevailing annual lending rate stipulated by the People’s Bank of China. The bank loans were fully repaid in January and February 2013.

The weighted average effective interest rates on the bank loans are as follows:

									At
						**At **	31st December		31st March
					2011		2012	2013	2014
Effective	interest	rate	per	annum	8.37%		8.06%	N/A	N/A

18. LOAN FROM SHAREHOLDERS

In 2012, the shareholders of Genesis BVI have granted a long-term loan to Genesis BVI for capital injection to the PRC subsidiary and to finance the daily operation of the subsidiaries.

The loan is unsecured, interest-free and repayable in 3 years from the drawdown date and shall be automatically extended for another 3 years upon expiry.

– II-27 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

19. SHARE CAPITAL

Authorised, issued and fully paid: 892,500 Class “A” shares of US$1 each 315,000 Class “B” shares of US$1 each 892,500 Class “C” shares of US$1 each	US$ 892,500 315,000 892,500 2,100,000	At 31st December At 31st March 2011 2012 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 6,961 6,961 6,961 6,961 2,458 2,458 2,458 2,458 6,961 6,961 6,961 6,961 16,380 16,380 16,380 16,380	At 31st December At 31st March 2011 2012 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 6,961 6,961 6,961 6,961 2,458 2,458 2,458 2,458 6,961 6,961 6,961 6,961 16,380 16,380 16,380 16,380
			16,380

Each class of shares in issue ranks pari passu with other classes of shares in all respects.

20. CAPITAL RESERVE AND SURPLUS RESERVE

(a) Capital reserve

The capital reserve of Genesis Group represents the additional capital paid up by the shareholders of Genesis BVI for enhancement of the production facilities of Genesis Group.

(b) Surplus reserve

Pursuant to the PRC regulations, Genesis Group’s PRC subsidiary is required to transfer 10% of its profits after tax to a surplus reserve. The transfer is also subject to the approval of the board of directors of the subsidiary, in accordance with the articles of association.

21. ACCUMULATED LOSSES

At beginning of the reporting period Loss for the year/period At the end of the reporting period		Genesis BVI
	At 2011 HK$’000 (19,900) (12) (19,912)	31st December 2012 2013 HK$’000 HK$’000 (19,912) (19,934) (22) (11) (19,934) (19,945)	At 31st March 2014 HK$’000 (19,945) (2)
			(19,947)

– II-28 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

22. CASH GENERATED FROM (USED IN) OPERATIONS

(Loss) Profit before tax Amortisation Depreciation Exchange difference arising on translation Interest expenses Interest income Loss on disposal of property, plant and equipment Recovery of allowance for doubtful debts Write-back of amount due to ex-shareholder Write-off of other receivables Changes in working capital: Inventories Trade and other receivables Trade and other payables Cash generated from (used in) operations	Year ended 31st December Three months ended 31st March 2011 2012 2013 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) (3,095) (4,340) 1,503 177 388 28 28 29 7 7 1,945 1,677 1,756 431 423 (83) 924 160 (5) (139) 5,070 4,656 178 151 – (112) (165) (35) (11) (9) 3 92 – – – (1,102) – – – – – – (582) (575) – 108 20 – – – 3,185 (1,476) (4,329) (2,015) 613 7,164 (2,869) (18) (2,683) (4,176) (3,829) 4,501 (1,321) (2,146) (295) 9,282 3,048 (2,659) (6,669) (3,188)	Year ended 31st December Three months ended 31st March 2011 2012 2013 2013 2014 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (unaudited) (3,095) (4,340) 1,503 177 388 28 28 29 7 7 1,945 1,677 1,756 431 423 (83) 924 160 (5) (139) 5,070 4,656 178 151 – (112) (165) (35) (11) (9) 3 92 – – – (1,102) – – – – – – (582) (575) – 108 20 – – – 3,185 (1,476) (4,329) (2,015) 613 7,164 (2,869) (18) (2,683) (4,176) (3,829) 4,501 (1,321) (2,146) (295) 9,282 3,048 (2,659) (6,669) (3,188)
		(3,188)

23. RELATED PARTY TRANSACTIONS

In addition to the transactions/information disclosed elsewhere in the Financial Information, during the Relevant Periods, Genesis Group had the following transactions with related parties:

(a) Transactions with shareholders of Genesis BVI and related companies under the control of the shareholders of Genesis BVI

				Three months ended	Three months ended
	Year ended 31st December			**31st **	March
	2011	2012	2013	2013	2014
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
				(unaudited)
Management fee paid
to shareholders of
Genesis BVI	275	273	277	67	69
Sales of finished goods
to related parties	154,894	103,394	120,314	23,412	26,268
Provision for corporate
guarantee by
a shareholder of
Genesis BVI in
respect of Genesis
Group’s bank loan	61,904	25,154	–	–	–

– II-29 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

(b) Key management personnel remuneration

Remuneration for key management personnel of Genesis Group during the Relevant Periods, including the highest paid employee of Genesis Group as disclosed in Section B Note 7b, is as follows:

						Three months ended	Three months ended
			**Year **	ended 31st December		31st March
			2011	2012	2013	2013	2014
			HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
						(unaudited)
Salaries	and	allowances	911	930	961	237	241

The remuneration for key management is determined by Genesis Group having regard to the performance to individuals and market trends.

Total remuneration is included in “ Staff costs ” as disclosed in Section B Note 6.

24. FINANCIAL RISK MANAGEMENT OBJECTIVE AND POLICIES

Genesis Group’s principal financial instruments comprise of bank balances and cash, bank borrowings and amounts due to a related company/shareholders. The main purpose of these financial instruments is to raise and maintain finance for Genesis Group’s operations. Genesis Group has various other financial instruments, such as trade and other receivables and payables, which arise directly from its business activities.

The main risks arising from Genesis Group’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. Genesis Group does not have any written risk management policies and guidelines. However, the board of directors of Genesis Group generally adopts conservative strategies on Genesis Group’s risk management and limits Genesis Group’s exposure to these risks to a minimum.

Interest rate risk

Genesis Group’s exposure to market risk for changes in interest rates relates primarily to Genesis Group’s floating-rate short-term bank loan. At 31st December 2011, 2012 and 2013 and 31st March 2014, if interest rates had been 100 basic point higher/lower and all other variables were held constant, Genesis Group’s net profit/loss would increase/decrease by approximately HK$619,000, HK$252,000, HK$Nil and HK$Nil respectively. Genesis Group’s sensitivity to interest rates has decreased during the Relevant Periods mainly due to the full settlement of floating-rate short-term bank loan during the Relevant Periods.

The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the end of reporting period and had been applied to the exposure to interest rate risk for all financial instruments in existence at that date. The 100 basis point increase or decrease represents management of Genesis Group’s assessment of a reasonably possible change in interest rates over the period until the next annual end of the reporting period.

– II-30 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

Foreign currency risk

Genesis Group is exposed to foreign currency risk primarily on the loan from shareholders. The currency giving rise to this risk is US$. Genesis Group does not hedge its foreign currency risk because the rate of exchange between HK$ and US$ is stable under current market condition and the existing currency exchange policies adopted by the Government of Hong Kong Special Administration Region.

Credit risk

Credit risk refers to the risk that debtors will default on their obligations to repay the amounts due to Genesis Group, resulting in a loss to Genesis Group. The credit risk of Genesis Group is primarily attributable to trade receivables and bank balances.

The management considers the credit risk in respect of bank balances is minimal because Genesis Group’s bank balances are placed with creditworthy banks in both Hong Kong and PRC.

Genesis Group mainly trades with recognised, creditworthy third parties other than related parties. It is Genesis Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that Genesis Group’s exposure to bad debts is not significant.

Genesis Group’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. At 31st December 2011, 2012 and 2013 and 31st March 2014, Genesis Group had a concentration of credit risk as 24%, 50%, 43% and 32% respectively of the total trade receivables are due from Genesis Group’s largest customer; and 79%, 65%, 80% and 93% respectively of the total trade receivables are due from Genesis Group’s five largest customers.

– II-31 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

Liquidity risk

Liquidity risk refers to the risk in which Genesis Group is unable to meet its short-term obligations. Genesis Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of advance from shareholders and bank borrowings. The maturity profile of Genesis Group’s financial liabilities at the end of reporting period based on contractual undiscounted payments are summarised below:

At 31st December 2011 Bank borrowings, unsecured Trade payable Other payable Due to a related company Due to shareholders Loan from shareholders At 31st December 2012 Bank borrowings, unsecured Trade payable Other payable Due to a related company Due to shareholders Loan from shareholders At 31st December 2013 Trade payable Other payable Due to a related company Due to shareholders Loan from shareholders At 31st March 2014 Trade payable Other payable Due to a related company Due to shareholders Loan from shareholders		Genesis Group	Genesis Group
	On demand HK$’000 – 44 3,940 1,156 2,434 – 7,574 – 36 8,473 1,314 2,314 – 12,137 14 7,398 1,458 1,755 – 10,625 269 6,556 1,493 1,755 – 10,073	Less than 3 months HK$’000 62,133 – – – – – 62,133 25,171 – – – – – 25,171 – – – – – – – – – – – –	1-3 years HK$’000 – – – – – – – – – – – – 54,263 54,263 – – – – 54,263 54,263 – – – – 54,263 54,263	Total HK$’000 62,133 44 3,940 1,156 2,434 –
				69,707
				25,171 36 8,473 1,314 2,314 54,263
				91,571
				14 7,398 1,458 1,755 54,263
				64,888
				269 6,556 1,493 1,755 54,263
				64,336

Genesis Group will consistently apply a prudent liquidity risk management and ensure that it maintains sufficient cash and cash equivalents to meets its liquidity requirements with reference to the above maturity analysis.

– II-32 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

Fair value estimation

The fair value of financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis or using prices from observable current market transactions. The directors of Genesis BVI consider that the carrying amounts of financial assets and financial liabilities in the financial statements approximate their fair values.

25. CAPITAL MANAGEMENT

The objectives of Genesis Group’s capital management are to safeguard the entity’s ability to continue as a going concern and to provide returns for shareholders. Genesis Group manages its capital structure and makes adjustments, including payment of dividend to shareholders, return of capital to shareholders or issue of new shares or sale of assets to reduce debts. No changes were made in the objectives, policies or processes during the Relevant Periods.

26. COMMITMENTS

At the end of the reporting period, Genesis Group had total future minimum lease payments under non-cancellable operating lease which are repayable as follows:

							At
				**At **	31st December		31st March
			2011		2012	2013	2014
			HK$’000		HK$’000	HK$’000	HK$’000
Within	one	year	109		111	78	94

27. EVENTS AFTER THE REPORTING PERIOD

There was no material subsequent event undertaken by Genesis Group after 31st March 2014.

– II-33 –

APPENDIX II

ACCOUNTANT’S REPORT OF THE GENESIS GROUP

C. STATEMENT OF FINANCIAL POSITION OF GENESIS BVI

Section B Note Non-current assets Interests in subsidiaries 13 Current assets Bank balances and cash Current liabilities Accrued charges and other payables Due to a subsidiary 16(a) Due to a related company 16(a) Due to a shareholder 16(a) Net current liabilities Total assets less current liabilities Non-current liabilities Loan from shareholders 18 NET LIABILITIES Capital and reserves Share capital 19 Accumulated losses 21 TOTAL DEFICITS	2011 HK$’000 – 9 1,755 20 11 1,755 3,541 (3,532) (3,532) – (3,532) 16,380 (19,912) (3,532)	At 31st December 2012 2013 HK$’000 HK$’000 54,263 54,263 6 6 1,755 1,755 29 40 21 21 1,755 1,755 3,560 3,571 (3,554) (3,565) 50,709 50,698 54,263 54,263 (3,554) (3,565) 16,380 16,380 (19,934) (19,945) (3,554) (3,565)	At 31st March 2014 HK$’000 (unaudited) 54,263
			4
			1,755 40 21 1,755
			3,571
			(3,567)
			50,696
			54,263
			(3,567)
			16,380 (19,947)
			(3,567)

– II-34 –

APPENDIX II ACCOUNTANT’S REPORT OF THE GENESIS GROUP

D. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by Genesis Group in respect of any periods subsequent to 31st March 2014.

Certified Public Accountants Hong Kong,

Fung Shiu Hang

Practising Certificate number: P04793

– II-35 –

APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS OF THE PERFORMANCE OF THE GENESIS GROUP

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GENESIS GROUP

1. Financial Performance

The Genesis Group recorded a revenue of approximately HK$289 million during the 15 months ended 31st March 2014 (the “ 2013/14 Period ”) compared to approximately HK$193 million for the 12 months ended 31st December 2012 (“ 2012 ”) and approximately HK$262 million for the 12 months ended 31st December 2011 (“ 2011 ”). Tonnage sold was around 16,340, 11,280 and 14,410 for the 2013/14 Period, 2012 and 2011, respectively. Gross profit recorded by the Genesis Group for the 2013/14 Period was approximately HK$10.1 million compared to approximately HK$6.52 million and approximately HK$8.15 million for 2012 and 2011, respectively. The Genesis Group recorded a profit attributable to equity owners for the 2013/2014 Period of approximately HK$1.89 million compared with a loss approximately HK$4.34 million and approximately HK$3.09 million for 2012 and 2011, respectively.

During the 2013/14 Period, finance cost of the Genesis Group significantly decreased to approximately HK$178,000 from approximately HK$4.66 million for 2012 and approximately HK$5.07 million for 2011.

2. Liquidity, financial resources, capital structure and charge of asset

As at 31st March 2014, 31st December 2013, 2012 and 2011, the Genesis Group had cash and bank balances of approximately HK$5.26 million, HK$8.65 million, HK$36.4 million and HK$21.4 million, respectively. As at 31st March 2014 and 31st December 2013, the Genesis Group did not have any bank borrowings compared to approximately HK$25.1 million and approximately HK$61.9 million bank borrowing as at 31st December 2012 and 2011, respectively. The interest-free shareholders’ loan was mainly denominated in US$ as at 31st March 2014, 31st December 2013 and 2012 and was equivalent to approximately HK$54.2 million while there was no shareholders’ loan as at 31st December 2011. As at 31st March 2014, 31st December 2013, 2012 and 2011, the Genesis Group did not have any contingent liabilities.

As at 31st March 2014, 31st December 2013, 2012 and 2011, the total deficit of the Genesis Group was approximately HK$19.8 million, HK$19.2 million, HK$21.8 million and HK$18.2 million, respectively. The total deficit of the Genesis Group as at 31st March 2014 represented a decrease of approximately HK$1.99 million or by 9.11%, as compared to 31st December 2012.

There was no financial instrument for hedging purposes within the Genesis Group. The operations are located in the PRC and the transactions are mainly denominated in Renminbi that exposure to foreign exchange risks to the Genesis Group is minimum.

As at 31st March 2014, the Genesis Group did not charge any asset.

– III-1 –

APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS OF THE PERFORMANCE OF THE GENESIS GROUP

3. Funding and treasury policies and objectives

The Genesis Group has adopted the policy to maintain the sufficient funding and treasury for normal business and daily operations to target zero bank borrowings and additional shareholders’ injection.

4. Employee and remuneration policy

As at 31st March 2014, 31st December 2013, 2012 and 2011, the Genesis Group had approximately 40 to 50 employees. The remuneration, promotion and salary reviewed are assessed on job responsibilities, work performance and market conditions. The main operation arm of the Genesis Group is based in the PRC which follows the PRC requirements on the labour issues, including but not limited to the contributions to state-managed retirement benefits scheme, communication with labour representatives. Staff costs for the Genesis Group during 2013/14, 2012, 2011 were approximately HK$4.83 million, HK$3.68 million and HK$3.22 million, respectively.

5. Significant Investment, material acquisition/disposal and future plan

Save as the land and plant in the Ningbo, the PRC, the Genesis Group did not have any significant investment held nor acquisitions and disposals of subsidiaries and associated companies for the past three years.

Upon Completion and with no expected material change in the market conditions in the foreseeable future, the Genesis Group will continue to concentrate on the manufacturing and sales of zinc alloy. Currently, the Genesis Group does not have any specific future plans for material investments or capital assets nor new products/services. However, with the synergy from the Group, it is expected to further enhance its development in the eastern and southern PRC market.

– III-2 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(A) UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following unaudited pro forma statement of assets and liabilities of the Enlarged Group (the “ Unaudited Pro Forma Financial Information ”) has been prepared on the basis of the notes set out below and in accordance with paragraph 4.29 of the Listing Rules for the purpose of illustrating the effects on the assets and liabilities of the Enlarged Group as if the proposed acquisition of the remaining 50% shareholding interest of the Genesis Group, the assignment of a shareholder’s loan and certain other indebtedness, and the novation of certain outstanding debt (collectively, the “ Proposed Transactions ”) had been completed on 31st March 2014.

The Unaudited Pro Forma Financial Information as at 31st March 2014 has been prepared based on (i) the audited consolidated statement of financial position of the Group as at 31st March 2014, as set out in its published annual report for the fifteen months ended 31st March 2014; and (ii) the pro forma adjustments prepared to reflect the effects of the Proposed Transactions as explained in the notes set out below that are directly attributable to the Proposed Transactions, and do not relate to future events or decisions, and are factually supportable.

The Unaudited Pro Forma Financial Information should be read in conjunction with other financial information contained in this circular.

The Unaudited Pro Forma Financial Information has been compiled by the Directors of the Group for illustrative purposes only and is based on a number of assumptions, estimates and currently available information. Because of its hypothetical nature, the Unaudited Pro Forma Financial Information may not give a true picture of the financial position of the Enlarged Group had the Proposed Transactions been completed as at 31st March 2014 or any future date.

– IV-1 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(I) UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP AS AT 31ST MARCH 2014

ASSETS Non-current assets Leasehold land Property, plant and equipment Interest in a joint venture Deferred income tax assets Available-for-sale financial assets Total non-current assets Current assets Inventories Trade and other receivables Amounts due from related companies Income tax recoverable Derivative financial instruments Bank balances and cash Total current assets Total assets LIABILITIES Non-current liabilities Deferred income tax liabilities Other non-current liabilities Loans from shareholders Total non-current liabilities Current liabilities Trade and other payables Borrowings Income tax payable Total current liabilities Total liabilities NET ASSETS/(LIABILITIES)	The Group as at 31st March 2014 HK$’000 Note 1 14,567 35,336 19,137 2,856 21,855 93,751 852,505 198,534 1,493 517 1,972 241,445 1,296,466 1,390,217 1,617 1,299 – 2,916 - - - - - 80,732 184,995 77 265,804 - - - - - 268,720 1,121,497			Pro forma adjustments	Pro forma adjustments		HK$’000 Note 7 (1,356) - - - - - - - - - -	Unaudited Pro forma statement of assets and liabilities of the Enlarged Group as at 31st March 2014 HK$’000 Note 8 20,732 45,793 – 2,856 21,855
		The Genesis Group as at 31st March 2014 HK$’000 Note 2 1,028 13,609 – – – 14,637 10,358 14,230 – – – 5,266 29,854 44,491 – – 54,263 54,263 - - - - - 10,073 – – 10,073 - - - - - 64,336 (19,845)	HK$’000 Note 3 (5,059) - - - - - - - - - -	HK$’000 Note 4 745 - - - - - - - - - -	HK$’000 Note 5 5,137 (3,152) (19,882) (119) 496 (54,263) - - - - - (1,755) - - - - -	HK$’000 Note 6 (17,629) (1,493) - - - - - (19,122) - - - - -
								91,236
								862,863 195,016 – 517 1,972 240,296
								1,300,664
								1,391,900
								2,113 1,299 –
								3,412 - - - - - 69,928 184,995 77
								255,000 - - - - -
								258,412
								1,133,488

– IV-2 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(II) NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

• 1 The balances were extracted from the audited consolidated statement of financial position of the Group as at 31st March 2014 as set out in the Company’s published annual report for the fifteen months ended 31st March 2014.

• 2 The balances were extracted from the audited consolidated statement of financial position of the Genesis Group as at 31st March 2014 as set out in Appendix II to this circular. The Genesis Group had a capital deficiency of HK$19,845,000 as at 31st March 2014. This matter, along with the going concern matter as stated in Appendix II to this circular, indicate the existence of a material uncertainty which may cast significant doubt on Genesis Group’s ability to continue as a going concern. The financial information has been prepared in conformity with the principles applicable to a going concern basis.

• 3 Pursuant to the Agreement for Sale and Purchase and the Deed of Assignment of Indebtedness, the total consideration for the 50% shareholding interest in the Genesis Group and assignment of a shareholder’s loan and certain other indebtedness is in total US$650,000 (equivalent to approximately HK$5,059,000), payable by the Group on completion by way of bank remittance.

• 4 The Group has provisionally recognised a gain of HK$745,000 as a result of remeasuring at fair value its prior 50% interest in the Genesis Group. Such amount is estimated based on the aggregate fair value of net assets of the Genesis Group and the gain is mainly a result of the net fair value gain of Genesis Group’s leasehold land and property, plant and equipment, net of their deferred income tax impact.

• 5 Upon the completion of the proposed acquisition of the remaining 50% shareholding interest of the Genesis Group, the net identifiable assets of the Genesis Group will be accounted for by the Group at their fair values under the acquisition method in accordance with Hong Kong Financial Reporting Standard 3 (Revised) “Business Combinations” (“ HKFRS 3 (Revised) ”).

For the purpose of the Unaudited Pro Forma Financial Information, the Group has appointed Ascent Partners Valuation Service Limited, an independent qualified valuer, to estimate the fair value of the major acquired assets and liabilities of the Genesis Group as at 30th June 2014 (“ Estimated Fair Value ”) in order to assist the Group to carry out the purchase price allocation exercise in accordance with HKFRS 3 (Revised). The valuation report was signed by Stephen Y. W. Yeung, MHKIS, MCREA, RPS (GP Division) on behalf of Ascent Partners Valuation Service Limited. Fair values of leasehold land and

– IV-3 –

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

buildings, and other property, plant and equipment were determined based on market approach and depreciated replacement cost approach, respectively; deferred income tax impact has been adjusted accordingly. The illustrative financial impact of the transaction is analysed as follows:

Leasehold land Property, plant and equipment (including buildings) Inventories Trade and other receivables Bank balances and cash Deferred income tax liabilities Trade and other payables Loans from shareholders Net liabilities of the Genesis Group at 31st March 2014 Add: Assignment of Shareholder’s loan_(Note a) Add: Assignment of Other Indebtedness and novation of Outstanding Debt(Note b) Add: Elimination of loans to Genesis Group as equity contribution(Note c)_ Net assets acquired by the Group Cash consideration Fair value of previously held interests in the Genesis Group Negative goodwill credited to profit or loss	Carrying value Adjustment to Estimated Fair Value HK$’000 HK$’000 1,028 5,137 13,609 (3,152) 10,358 14,230 5,266 – (496) (10,073) (54,263) (19,845) 1,489	Fair value HK$’000 6,165 10,457 10,358 14,230 5,266 (496) (10,073) (54,263)
		(18,356) 26,958 (119) 29,060
		37,543 (5,059) (19,882)
		12,602

Notes:

• (a) It represents the assignment of the Vendor’s Shareholder’s loan to the Group under the Deed of Assignment of Indebtedness.

• (b) It represents the assignment of the Other Indebtedness and the novation of Outstanding Debt from the Vendor to the Group under the Deed of Assignment of Indebtedness and the Deed of Novation.

• (c) It represents the elimination of the Group’s Shareholder’s Loan to the Genesis Group amounting to HK$27,305,000 and balance with Genesis Group of HK$1,755,000 which are regarded as equity contribution by the Company. These balances had been regarded as liabilities by directors of Genesis BVI.

– IV-4 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Since the fair values and carrying amounts of the identifiable net assets of the Target Group and the fair value of the previously held interests as at the Completion Date may be materially different from their respective values used in the preparation of the Unaudited Pro Forma Financial Information, the actual amounts of the assets, liabilities and negative goodwill/goodwill to be recorded in the consolidated financial statements of the Group upon completion may be materially different from the estimated amounts shown in this Appendix.

• 6 The adjustment represents elimination of the balances between the Group and the Genesis Group.

• 7 The adjustment represents the estimated amounts regarding the legal and professional fees and other expenses incurred for the Proposed Transactions of approximately HK$1,356,000.

• 8 No other adjustments have been made to reflect any trading result or other transactions of the Group and the Genesis Group entered into subsequent to 31st March 2014.

– IV-5 –

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report received from PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

==> picture [67 x 48] intentionally omitted <==

INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION INCLUDED IN A CIRCULAR

TO THE DIRECTORS OF LEE KEE HOLDINGS LIMITED

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Lee Kee Holdings Limited (the “ Company ”) and its subsidiaries (collectively the “ Group ”) and Genesis Recycling Technology (BVI) Limited and its subsidiaries (the “ Target Group ”) (collectively the “ Enlarged Group ”) by the directors for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma statement of assets and liabilities as at 31st March 2014 and related notes (the “ Unaudited Pro Forma Financial Information ”) as set out on pages IV-1 to IV-5 of the Company’s circular dated 22nd August 2014, in connection with the proposed acquisition of the remaining 50% shareholding interest of the Target Group, the assignment of a shareholder’s loan and certain other indebtedness of the Target Group to the Group, and the novation of certain outstanding debt of the Target Group to the Group (collectively, the “ Proposed Transactions ”) by the Company. The applicable criteria on the basis of which the directors have compiled the Unaudited Pro Forma Financial Information are described on pages IV-1 to IV-5.

The Unaudited Pro Forma Financial Information has been compiled by the directors to illustrate the impact of the Proposed Transactions on the Group’s financial position as at 31st March 2014 as if the Proposed Transactions had taken place at 31st March 2014. As part of this process, information about the Group’s financial position has been extracted by the directors from the Group’s financial statements for the fifteen months ended 31st March 2014, on which an audit report has been published.

Directors’ Responsibility for the Unaudited 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 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” (“ AG 7 ”) issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”).

– IV-6 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Reporting Accountant’s 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 complies with ethical requirements and plans and performs 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 to 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 a circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction 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 Proposed Transactions at 31st March 2014 would have been as presented.

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 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 accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the Company, the event or transaction in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances.

– IV-7 –

APPENDIX IV

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

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 of the Company 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.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 22nd August 2014

– IV-8 –

APPENDIX V

GENERAL INFORMATION

1 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 not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2 DISCLOSURE OF DIRECTORS’ INTERESTS

As at the Latest Practicable Date, the interests and short positions of each Director and chief executive in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of the Securities and Futures Ordinance (the “ SFO ”), as recorded in the register required to be kept by the Company under Section 352 of Part XV of the SFO or as notified to the Company and the Stock Exchange under Division 7 and 8 of Part XV of the SFO or required pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers were as follows:

Long Position in the Shares of the Company

		Number of
		Shares in	Approximate
		which	percentage of
Name of Director	Capacity	interested	issued Shares
Mr. CHAN Pak Chung	Founder of a	600,000,000	72.40%
(Note 1)	discretionary
	trust
Ms. MA Siu Tao (Note 2)	Beneficiary of	600,000,000	72.40%
	a trust
Ms. CHAN Yuen Shan,	Beneficiary of	600,000,000	72.40%
Clara (Note 3)	a trust
Mr. HO Kwai Ching, Mark	Interest of	50,000	0.006%
(Note 4)	spouse

Notes:

1. The 600,000,000 Shares are held by Gold Alliance whose entire share capital is held by Gold Alliance International Management Limited (“ GAIML ”), which is in turn held by HSBC International Trustee Limited (“ HSBC Trustee ”) acting as the trustee of the P.C. CHAN Family Trust. The P.C. CHAN Family Trust is an irrevocable discretionary trust set up by Mr. CHAN Pak Chung as settlor and HSBC Trustee as trustee on 6th March 2006. The discretionary objects of which include Ms. MA Siu Tao and the other family members of Mr. CHAN Pak Chung. Mr. CHAN Pak Chung is the settlor of the P.C. CHAN Family Trust and is deemed to be interested in the 600,000,000 Shares held by Gold Alliance under the SFO.

– V-1 –

APPENDIX V

GENERAL INFORMATION

1. Ms. MA Siu Tao, the spouse of Mr. CHAN Pak Chung and an Executive Director, is deemed to be interested in the 600,000,000 Shares held by Gold Alliance as she is one of the discretionary objects under the P.C. CHAN Family Trust under the SFO.

2. Ms. CHAN Yuen Shan, Clara, the daughter of Mr. CHAN Pak Chung and an Executive Director and Chief Executive Officer, is deemed to be interested in the 600,000,000 Shares held by Gold Alliance as she is one of the discretionary objects under the P.C. CHAN Family Trust under the SFO.

3. The spouse of Mr. HO Kwai Ching, Mark is the registered owner of 50,000 Shares and therefore, Mr. HO Kwai Ching, Mark is deemed to be interested in the 50,000 Shares held by his spouse under the SFO.

Saved as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executives (including their spouse and children under 18 years of age) had any interest or short positions in the Shares or underlying shares of the Company recorded in the register to be kept under section 336 of the SFO.

3 SUBSTANTIAL SHAREHOLDERS’ INTERESTS

The register of substantial shareholders required to be kept under section 336 of Part XV of the SFO shows that as at the Latest Practicable Date, the Company had been notified of the following substantial shareholders’ interests and short positions, being 5% or more of the Company’s issued share capital. These interests are in addition to those disclosed in respect of the Directors and chief executive.

Long Position in the Shares of the Company

		Number of
		Shares in	Approximate
		which	percentage of
Name	Capacity	interested	issued Shares
Gold Alliance	Registered	600,000,000		72.40%
	owner
Gold Alliance International	Interest of	600,000,000		72.40%
Management Limited	controlled
(“GAIML”)	corporation
HSBC International Trustee	Trustee	600,000,000		72.40%
Limited (“HSBC Trustee”)

Note: The entire share capital of Gold Alliance is held by GAIML, which is in turn held by HSBC Trustee acting as the trustee of the P.C. CHAN Family Trust. The P.C. CHAN Family Trust is an irrevocable discretionary trust set up by Mr. CHAN Pak Chung as settlor and HSBC Trustee as trustee on 6th March 2006. The discretionary objects of which include Ms. MA Siu Tao and other family members of Mr. CHAN Pak Chung.

– V-2 –

APPENDIX V

GENERAL INFORMATION

Saved as disclosed above, as at the Latest Practicable Date, no person, other than the Directors and chief executives (including their spouse and children under 18 years of age) had any interest or short positions in the Shares or underlying Shares of the Company recorded in the register to be kept under section 336 of the SFO.

As at the Latest Practicable Date, no other persons had any interest or short positions in the Shares or underlying Shares of the Company recorded in the register to be kept under the SFO.

4 DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group (excluding contracts expiring or determinable by the Company within one year without payment of compensation (other than statutory compensation).

5 DIRECTORS’ INTEREST IN COMPETING BUSINESS

As at the Latest Practicable Date, none of the Directors and his/her respective associates had interests in the businesses which competes or was likely to compete, whether directly or indirectly, with the business of the Group.

6 DIRECTORS’ AND EXPERT’S INTEREST IN ASSETS AND/OR ARRANGEMENT

Apart from the payment of monthly rental expenses of HK$45,000 as directors’ quarters fees by the Group to Sonic Gold Limited, a company controlled by Ms. CHAN Yuen Shan Clara (an executive Director), none of the Directors and expert had any interest, direct or indirect, in any assets which had been acquired or disposed of by or leased to any members of the Group, or were proposed to be acquired or disposed of by or leased to any members of the Group since 31st March 2014, being the date to which the latest published audited consolidated financial statements of the Company were made up.

As at the Latest Practicable Date, there was no contract or arrangement subsisting in which a Director was materially interested and which was significant in relation to the business of the Group as a whole.

7 MATERIAL CONTRACT

Apart from the Agreement for Sale and Purchase, there had been no other contracts, not being a contract entered into in the ordinary course of business carried on or intended to be carried on by members of the Group, entered into by members of the Group within the two years preceding the Latest Practicable Date which is or may be material.

– V-3 –

APPENDIX V

GENERAL INFORMATION

8 EXPERTS AND CONSENT

The following are the qualification of the experts who have been named in this circular or have given opinions or advice which are contained in this circular:

Name Qualification Mazars CPA Limited Certified Public Accountants PricewaterhouseCoopers Certified Public Accountants

Each of Mazars CPA Limited and PricewaterhouseCoopers has confirmed that as at the Latest Practicable Date, it did not have any beneficial shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group; nor did it have any direct or indirect interests in any assets which have since 31st March 2014 (being the date to which the latest published audited consolidated financial statements of the Company were made up) been or proposed to be acquired or disposed of by or leased to any member of the Group.

Each of Mazars CPA Limited and PricewaterhouseCoopers has given and has not withdrawn, its written consent to the issue of this circular with the inclusion herein of its opinion prepared for the purpose of incorporation in this circular, and the references to its name and opinion in the form and context in which they respectively appear.

9 MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors confirmed that there is no material adverse change in the financial or trading position of the Group since 31st March 2014, being the date to which the latest published audited consolidated financial statements of the Group were made up.

10 LITIGATION

As at the Latest Practicable Date, no member of the Enlarged Group was engaged in any litigation or arbitration or claim of material importance and, so far as the Directors were aware, no litigation or claims of material importance are pending or threatened by or against any member of the Enlarged Group.

11 MISCELLANEOUS

• (a) The registered office of the Company is at P.O. Box 309 GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands.

• (b) The company secretary of the Company is Mr. CHEUK Wa Pang (CPA (HKICPA), FCCA, ACA).

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APPENDIX V

GENERAL INFORMATION

• (c) The principal share registrar and transfer office of the Company is Royal Bank of Canada Trust Company (Cayman) Limited at 4th Floor, Royal Bank House, 24 Shedden Road, George Town, Grand Cayman KY1-1110, Cayman Islands.

• (d) The Hong Kong branch share registrar and transfer office of the Company is Tricor Investor Services Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (e) In the event of inconsistency, the English text shall prevail over the Chinese text.

12 DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection as the Company’s head office and principal place of business in Hong Kong at 16 Dai Fat Street, Tai Po Industrial Estate, New Territories, Hong Kong during normal business hours for a period within 14 days from the date of this circular:

• (a) the memorandum and articles of association of the Company;

• (b) the material contract referred to under the section headed “Material Contract” in this appendix;

• (c) the accountant’s report of the Genesis Group prepared by Mazars CPA Limited, the text of which is set out in Appendix II to this circular;

• (d) the report from PricewaterhouseCoopers in respect of the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix IV to this circular;

• (e) the annual report of the Company for the 15 months ended 31st March 2014, the annual report of the Company for the year ended 31st December 2012 and the second interim report of the Company for the twelve months period ended 31st December 2013; and

• (f) this circular.

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