Persistence Gold Group Ltd — Annual Report 2015

Oct 26, 2015

2015 Annual Report

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Contents

1 Corporate Information

• 6 CEO’s Message 8 Management Discussion and Analysis 14 Biographical Details of Directors and Management 19 Directors’ Report

• 26 Corporate Governance Report

• 36 Corporate and Social Responsibility

• 37 Independent Auditor’s Report

• 39 Consolidated Statement of Profit or Loss

• 40 Consolidated Statement of Profit or Loss and Other Comprehensive Income 41 Consolidated Statement of Financial Position 43 Consolidated Statement of Changes in Equity 44 Consolidated Statement of Cash Flows 46 Notes to the Consolidated Financial Statements 106 Financial Summary

Corporate Information

Board of Directors

Executive Directors

Ms. Chong Sok Un (Chairman) Mr. Andrew Ferguson (Chief Executive Officer) Mr. Kong Muk Yin

Legal Advisers

Addisons Conyers Dill & Pearman P. C. Woo & Co. Robertsons Steinepreis Paganin

Non-Executive Directors

Mr. Lee Seng Hui (Mr. Peter Anthony Curry as his alternate) Mr. So Kwok Hoo

Independent Non-Executive Directors

Dr. Wong Wing Kuen, Albert Mr. Chang Chu Fai, Johnson Francis Mr. Robert Moyse Willcocks

Audit Committee

Dr. Wong Wing Kuen, Albert (Chairman) Mr. Chang Chu Fai, Johnson Francis Mr. Robert Moyse Willcocks Mr. Lee Seng Hui

Remuneration Committee

Dr. Wong Wing Kuen, Albert (Chairman) Ms. Chong Sok Un Mr. Lee Seng Hui Mr. Chang Chu Fai, Johnson Francis Mr. Robert Moyse Willcocks

Nomination Committee

Ms. Chong Sok Un (Chairman) Mr. Lee Seng Hui Dr. Wong Wing Kuen, Albert Mr. Chang Chu Fai, Johnson Francis Mr. Robert Moyse Willcocks

Company Secretary

Mr. Wong Wai Keung, Frederick

Auditor

Deloitte Touche Tohmatsu

Stock Code

Principal Bankers

Bank of China (Hong Kong) Limited Bank of Communications Co., Ltd Hong Kong Branch Industrial and Commercial Bank of China (Asia) Limited

Head Office and Principal Place of Business

32/F China Online Centre 333 Lockhart Road Wanchai Hong Kong Tel: +852 2541 0338 Fax: +852 2541 9133

Registered Office

Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal Share Registrar and Transfer Office

MUFG Fund Services (Bermuda) Limited The Belvedere Building 69 Pitts Bay Road Pembroke HM08 Bermuda

Hong Kong Branch Share Registrar and Transfer Office

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

Website

www.apacresources.com apac.quamir.com

1104

We aim at building our Resource Investments to Primary Strategic Investments which will provide off-take to complement our Commodity Business in China

(Shareholding as at 30 June 2015)

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23.9%

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Metals X

Metals X Limited (ASX: MLX) is an Australian diversified mining company. It has production from the Higginsville and South Kalgoorlie gold projects and the Renison tin mine. It is developing the Central Murchison Gold Project and Rover Gold Project and owns the world scale Wingellina Nickel Project.

14.8%

26.6%

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ABM

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ABM Resources NL (ASX: ABU) is a gold production and exploration company. It has commenced operations at the Old Pirate Gold Mine and also owns the Buccaneer Porphyry Gold Deposit. ABM also holds the largest expanse of exploration licenses in the Central Desert region of the Northern Territory.

Mount Gibson

Mount Gibson Iron Limited (ASX: MGX) is an established iron ore producer of direct shipping hematite iron ore and has two mines in Western Australia — Extension Hill and Koolan Island.

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APAC Resources Limited

Principal listing of investments Commodity off-takes to China

Shareholder Structure

Ms. Chong Sok Un

Shougang Fushan Resources Group (HKSE Stock Code: 639)

Others

Source: Publicly available information (as at the date of this Annual Report)

Operation of investments Headquartered in Hong Kong with office in Shanghai

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59.6 %
15.6 [%]
24.8 %
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Annual Report 2015

A specialist in natural resource investment targetting on China’s commodities market

1 • Generated stock ideas • Analysis of trend • Initial screening Identify China Commodity Supply/ Demand Imbalance

• 2

Primary Strategic Investment

• 20% Stake in producers

• Cashflow, productivity assets & offtake opportunity

3

Commodity Trading Off-takes for shipments to the Chinese market

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Resource Investment Early positions incubating

CEO‘s Message

The outlook for the global economy remains extremely challenging. While strong US economic data suggests that it is on track for an interest rate rise later this year, the rest of the world is much less rosy. The risk of a Greek exit has fallen after a third bailout was negotiated, but Chinese concerns are increasing. Extreme share market volatility, coupled with ongoing weak economic data, appears to have prompted the government to devalue the Yuan. This has fueled concerns that the Chinese economy is even weaker than originally thought and makes all commodities more expensive for the world’s largest consumer. In the short term, we expect China will need to support its economy through further interest rate and Reserve Requirement Ratio (RRR) cuts.

Weakness in the global economy has driven metals and energy prices to multi-year lows and sentiment, quite fairly, remains very weak. This is an extremely difficult time for the industry as a whole, but we have seen it before and it is necessary and healthy. All of the excess of the super-cycle bull phase is unwound, costs are cut, and resources companies become increasingly leaner and meaner. When the cycle turns, companies will be strongly positioned for significant margin expansion from a base of

06

APAC Resources Limited

Dear Investor,

I would like to thank you, the shareholders, for your ongoing support during another challenging year for your company and many natural resources companies alike.

very low valuations. We continue to review select opportunities as we believe that low commodity prices will eventually result in a rebalance in the supply-demand dynamics, and prices will have to move higher in the medium term.

Our results for the year ended 30 June 2015 have been impacted by a significant impairment in our Primary Strategic Investments, leading to a net loss of HK$847,926,000. After the sharp fall in iron ore prices and the failure of the Koolan Island Main Pit seawall, Mount Gibson suspended the mine and has written off the value of the mine in full. This is clearly a disappointing result, however, the majority of this loss is driven by non-cash, accounting related adjustment, with no material impact to the company’s strong net cash position.

In July 2015, APAC Resources completed an oversubscribed open offer and raised net proceeds of HK$300 million. The open offer was completed during a period when the Hong Kong and China markets were particularly buoyant and the net proceeds coupled with our low gearing a significant undrawn banking and loan facilities leave the company in a strong position to take advantage of investment opportunities in the natural resources sector.

In light of the opportunities in the market, we have not declared a dividend, but will continue to reassess our dividend policy based on our expectations of the economic outlook.

As ever, I would like to thank you all for your continued faith and belief in APAC Resources.

Andrew Ferguson Chief Executive Officer 22 September 2015

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Annual Report 2015

Management Discussion and Analysis

Financial Results

Against a challenging economic environment, for the year ended 30 June 2015 (“FY 2015”), APAC Resources Limited (the “Company” or “APAC”) and its subsidiaries (collective, the “Group”) reported a net loss attributable to owners of HK$847,926,000 for FY 2015 compared with a net profit of HK$907,260,000 reported for the year ended 30 June 2014 (“FY 2014”). The loss includes principally the share of net loss of associates of HK$1,491,185,000 (FY 2014: Profit of HK$244,622,000), which is partially offset by the reversal of impairment loss of HK$735,326,000 (FY 2014: HK$673,647,000) against the carrying value of one of the Group’s two principal listed associates which is marked to its share price as of 30 June 2015.

FY 2015 VS FY 2014

Primary Strategic Investment

Our two Primary Strategic Investments are Mount Gibson Iron Limited (“Mount Gibson”) and Metals X Limited (“Metals X”), both located in Australia. The net attributable loss from our Primary Strategic Investments for the FY 2015 was HK$1,491,185,000 (FY 2014: Net profit of HK$244,622,000).

Mount Gibson

Mount Gibson is an Australian listed iron ore producer. Annual production capacity is 3.5 million tonnes to 4.0 million tonnes of Direct Shipping Ore (DSO) from its Extension Hill mine, which provides it with a substantial cost advantage over mines that require beneficiation prior to sale. Mount Gibson has undergone significant changes in the last six months following the unfortunate incident at the Koolan Island mine.

In November 2014, the Main Pit at Koolan Island was flooded after a failure of the seawall. As a result, all mining operations have been suspended at the Main Pit, while Mount Gibson completes a detailed evaluation of restart options. As part of the evaluation, Mount Gibson is in discussions with its insurers about its existing property damage and business interruption policies. After adjusting guidance to account for the Koolan Island pit wall failure, Mount Gibson delivered total ore sales of 5.8 million tonnes in FY 2015, comfortably exceeding company guidance of between 4.8 million tonnes and 5.2 million tonnes.

Mount Gibson sales guidance for the year ending 30 June 2016 (“FY 2016”) is 4.0 million tonnes to 4.5 million tonnes, at an average all-in cash cost of A$50 to A$54/wet metric tonne (“wmt”) Free On Board (“FOB”).

The iron ore price remains under pressure, and has trended downward over the last 12 months. At time of writing, the Platts 62% Fe price is trading around US$58/dry metric tonne (“dmt”) Cost and Freight (“CFR”) and has recently reached lows of US$45/dmt CFR. The low price has been driven by ongoing supply growth and a weaker outlook for steel demand in China. We remain cautious on the outlook for iron ore in FY 2016.

Mount Gibson continues to focus on cost reduction both at the operating and head office level. Corporate costs fell by more than 50% in FY 2015 and further cost savings are expected in FY2016. The company’s average cash operating expenditure fell from A$68/wmt FOB in FY 2014 to A$62/wmt FOB in FY 2015.

Mount Gibson delivered a FY 2015 net loss after tax of A$911 million which includes a pre-tax impairment of A$916 million related to the Koolan Island seawall failure and the fall in the iron ore price. The impairment is a non-cash item and Mount Gibson retains a strong cash balance of A$334 million or A$0.306 per share at the end of FY 2015, compared to its share price at the date of this Annual Report of A$0.175 per share.

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APAC Resources Limited

Management Discussion and Analysis

Mount Gibson is working to secure the necessary regulatory government approvals for the Extension Hill South project, which the company aims to bring online at the end of calendar year 2016 to extend the Extension Hill mine life.

Metals X

Metals X is an Australian based and listed emerging diversified resource group with exposure to gold with the Higginsville, South Kalgoorlie and Central Murchison projects, tin via its 50% interest in the producing Renison mine in Tasmania, and nickel through its world scale Wingellina nickel development project.

The Higginsville and South Kalgoorlie Project produced 150,902 ounces in FY 2015 and generated A$81 million of EBITDA despite the closure of the Chalice mine, which was replaced by the Lake Cowan open pits, leading to significantly higher throughput and gold production and lower grades. Metals X has started ore development at the HBJ underground mine which is expected to deliver higher grade tonnes to the South Kalgoorlie Project in FY 2016.

Development of the Central Murchison Gold Project (“CMGP”) is underway, with open pit mining started in late June 2015. Plant refurbishment has commenced and is expected to start up in October 2015. CMGP is expected to ramp up gradually over the next five years, and reach full capacity of greater than 200,000 ounces per annum.

In the past few months, Metals X has made several low cost acquisitions which are expected to underpin the next leg of growth for the company. Acquisitions include the Mt Henry Project (located 70km from Higginsville), Georges Reward Project, and Grosvenor Gold Project.

The gold price has fallen gradually over the last 12 months from US$1,325/oz in July 2014 to US$1,135/oz now. While the volatility in the gold price was somewhat unexpected, the general direction of the gold price is not a surprise given the market’s ongoing expectation that the US will deliver its first interest rate hike later in 2015.

During FY 2015, Renison mine produced 7,073 tonnes of tin in concentrate (100% basis), up 14% from FY 2014, driven by higher processed tonnes (up 16%) and higher grade (up 8%). Metals X received an average realised tin price of A$22,559 per tonne in FY 2015, down 8% compared to FY 2014 (A$24,471 per tonne). The tin price fell steadily throughout FY 2015 and hit a low of US$13,365 per tonne in July 2015 before rebounding to the current price of circa US$15,400 per tonne. In the short term, the market remains well supplied and Myanmar’s exports to China continued to rise in FY 2015 even as the tin price dropped. We remain bullish on the medium to long-term outlook for tin due to the limited supply growth as most development projects require a minimum tin price of US$30,000 to US$40,000 per tonne to be economically viable.

At the date of this Annual Report, closing share prices for Mount Gibson and Metals X were A$0.175 and A$1.20 respectively.

Resource Investment

The investments in this division comprise mostly minor holdings in various natural resource companies listed on major stock exchanges including Australia, Canada, Hong Kong, and the United Kingdom. A portion of our positions are exploration or development stage companies and this section of the market is particularly sensitive to risk aversion, lower commodity prices, and the difficult financing markets.

Commodity prices remained weak throughout FY 2015 with the ASX Small Resources Index down 26%; the FTSE AIM Basic Resources Index dropping 18%, and the TSX Venture Composite Index falling 35%.

Annual Report 2015 09

Management Discussion and Analysis

Resource Investment posted a loss of HK$133,286,000 in FY 2015 (FY 2014: Loss of HK$7,596,000). While a loss is always a disappointing result, we feel that our defensive strategy with a focus on producing companies with strong balance sheets and cash flows, and generally avoiding earlier stage explorers has minimised the quantum of the loss in an otherwise difficult market. We remain confident that our high quality core positions, many of which are well capitalised, will weather the challenging market conditions and deliver superior returns in the long run.

ABM

ABM Resources NL (“ABM”) is an Australian listed gold company with assets located in the Northern Territory. It has a large acreage footprint in the Tanami-Arunta region, and is currently focused on the Old Pirate project. Old Pirate is Australia’s highest grade open-pittable mine development, with a resource of 640,000 ounces of gold at 11.7g/t.

ABM has commenced ore mining at the Old Pirate Gold Mine after upgrading infrastructure, recommissioning the Coyote Plant, and processing 10,000 tonnes of commissioning ore. The company has started to access high grade gold in three of its four pits and expects the fourth to be ready to be mined during the September quarter of 2015.

In July 2014, Pacific Road Capital Management Pty Limited became a strategic investor after subscribing to A$20 million of new equity. ABM launched a rights issue and share placement to raise a total of A$15 million in February 2015. The proceeds will be used to cover working capital requirements until the mine reaches steady state. At the end of 30 June 2015, ABM had A$14 million cash and no debt.

Commodity Business

The Commodity Business mainly comprises two offtake agreements with Mount Gibson, and the shipments are sold on the spot market to steel mills and traders in China. We continue to look for new offtake opportunities across a range of commodities. For FY 2015, Commodity Business generated a modest profit of HK$7,176,000 (FY 2014: HK$51,353,000), amid a steadily declining iron ore price and lower shipments as a result of the failure of the seawall at the Koolan Island mine.

Money Lending

As part of our on-going treasury management arrangements, we have recently subscribed to loan notes and engaged in the provision of loans. This has provided us with a substantial interest income, and the Group has now developed this into a new business segment of financial services — money lending. This business segment alongside our existing businesses will provide good opportunities for us to diversify and enhance our existing revenue stream. In August 2015, we have been granted a money lenders license issued under the Money Lenders Ordinance of Hong Kong.

Liquidity, Financial Resources and Capital Structure

As at 30 June 2015, our non-current assets amounted to HK$1,393,662,000 (2014: HK$2,531,023,000) and net current assets amounted to HK$534,051,000 (2014: HK$598,178,000) with a current ratio of 7.8 times (2014: 3.9 times) calculated on the basis of its current assets over current liabilities. Included in non-current assets and current assets are loan notes of HK$313,976,000 (2014: HK$235,934,000) and loans receivable of HK$223,062,000 (2014: HK$218,320,000) respectively which form part of the on-going treasury management arrangements of the Group.

As at 30 June 2015, we had borrowings of HK$56,688,000 (2014: HK$126,217,000) and had undrawn banking and loan facilities amounting to HK$651,276,000 secured against certain of our interests in listed associates and term deposits and corporate guarantee of the Company. As at 30 June 2015, we had a gearing ratio of 0.03 (2014: 0.04), calculated on the basis of total borrowings over equity attributable to owners of the Company.

10

APAC Resources Limited

Management Discussion and Analysis

Through the successful completion of the open offer to issue not more than 3,063,883,995 shares of the Company to existing shareholders of the Company on the basis of one (1) offer share for every two (2) shares of the Company held, the issued share capital of the Group increased from 6,127,767,990 shares to 9,191,651,985 shares on 13 July 2015. Further details of the open offer are set out in the section headed “Subsequent Event” on page 12 of this Annual Report.

Foreign Exchange Exposure

For the year under review, the Group’s assets were mainly denominated in Australian Dollars while the liabilities were mainly denominated in Hong Kong Dollars. As a substantial portion of the assets is held as long-term investments, there would be no material immediate effect on the cash flows of the Group from adverse movements in foreign exchange. In light of this, the Group did not actively hedge for the risk arising from the Australian Dollars denominated assets.

Pledge of Assets

As at 30 June 2015, certain of the Group’s interests in listed associates of HK$606,106,000 (2014: HK$1,253,610,000) comprised the Group’s interests in listed associates were pledged to a stock-broking firm to secure against securities margin loan facilities made available to the Group. The Group’s bank deposits of HK$79,659,000 (2014: HK$80,010,000) were pledged to a bank to secure various trade and banking facilities granted to the Group.

Employees and Remuneration Policy

The Group ensured that its employees are remunerated according to the prevailing manpower market conditions and individual performance with its remuneration policies reviewed on a regular basis. All employees are entitled to participate in the Company’s benefit plans including medical insurance and Mandatory Provident Fund Scheme (subject to the applicable laws and regulations of the People’s Republic of China (the “PRC”) for its employees in the PRC).

As at 30 June 2015, the Group, including its subsidiaries but excluding associates, had 19 (2014: 18) employees. Total remuneration together with pension contributions incurred for the year ended 30 June 2015 amounted to HK$10,496,000 (2014: HK$17,100,000).

Significant Investments, Material Acquisitions and Disposals of Subsidiaries and Associated Companies, and Future Plans for Material Investments or Capital Assets

Save as disclosed in this Annual Report, during the year ended 30 June 2015, the Group had not held any other significant investments nor made any material acquisitions or disposals of subsidiaries or associated companies. Save as disclosed in this Annual Report, as at 30 June 2015, the Group does not have plan for any other material investments or acquisition of material capital assets.

Capital Commitments

As at 30 June 2015 and 30 June 2014, the Group had no material capital commitments contracted but not provided for.

Annual Report 2015 11

Management Discussion and Analysis

Contingent Liabilities

As at the date of this Annual Report and as at 30 June 2015, the board of directors of the Company (the “Board”) is not aware of any material contingent liabilities.

Company Strategy

APAC leverages its in-house natural resources expertise to identify and manage both Primary Strategic Investments and Resource Investments which drives growth in the business. We aim to profit from the value curve of resources projects from exploration to production, though currently see good risk-reward in select mid-tier producers. Value and cash flow can be generated through capital appreciation, direct project ownership and securing offtake agreements.

Subsequent Event

At its meeting held on 15 May 2015, the Board approved an open offer (the “Open Offer”) to raise approximately HK$306.4 million (before expenses) through the issuance of not more than 3,063,883,995 shares of the Company (the “Offer Shares”) to existing shareholders of the Company on the basis of one (1) Offer Share for every two (2) shares of the Company held at a subscription price of HK$0.10 per Offer Share. The Open Offer, which was over-subscribed by 65,837,695,192 Offer Shares, representing approximately 21.49 times of the total number of Offer Shares on offer, became unconditional on 6 July 2015. Trading of the Offer Shares commenced on 14 July 2015. The Open Offer allowed the Group to raise net cash proceeds of approximately HK$300 million. Such proceeds are intended to be applied as to HK$270 million for the Group’s investment business with a focus on the natural resources sector to be invested as and when such investing opportunities arise, with the remaining balance of HK$30 million as working capital of the Group. Details of the Open Offer are principally set out in the Company’s announcements dated 27 May 2015 and 10 July 2015 and prospectus dated 18 June 2015.

Forward Looking Observations

Concerns over the Chinese economy have come to the forefront in recent months. Economic data such as slower fixedasset investment, factory output, and housing starts suggests that Chinese GDP growth will be relatively weak this year. Further, China’s share market fell sharply from June 2015 which impacted consumer confidence and is likely to result in lower consumption. China’s share market remains volatile despite Beijing’s attempt to prop up the market and the People’s Bank of China recently devalued the Chinese Yuan by 2% which has been interpreted as an attempt to bolster exports. Europe is not out of the woods, even if a deal with Greece has allayed fears of a Greek exit. Growth slowed in June quarter 2015 and Eurozone unemployment remains high at 11%. US economic data is the rare bright spot in the global economy which underpins market expectations that there will be an interest rate rise later in 2015.

The commodity complex continues to be weak, partly because of the increase in the US dollar, and more recently, over concerns that a lower Chinese Yuan and weak Chinese economy would result in lower demand for commodities.

12

APAC Resources Limited

Management Discussion and Analysis

We still see an opportunity for margin expansion for select companies given lower commodity currencies, a halving in oil prices and general industry cost deflation. Our Primary Strategic Investments remain focused on sensible low risk acquisitions and cost cutting, leaving them well positioned for strong margin expansion when prices turn. Mount Gibson is focused on reducing costs, extending Extension Hill beyond the current mine life, and putting its A$334 million cash balance to good use via careful acquisition. Metals X is currently investing in gold mine near-term restarts at South Kalgoorlie and the Central Murchison Gold projects, while ABM is progressing to a full production scenario at Old Pirate and will start mining ore during the September quarter of 2015.

As usual, our investments and commodity trading operation are subject to risk and uncertainty in regards to commodity price volatility, particularly in gold and iron ore. However, we remain defensive and selective with our investments in the near term, and continue to look for deep value opportunities which will generate attractive returns over the long run.

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Annual Report 2015

Biographical Details of Directors and Management

Executive Directors

Ms. Chong Sok Un ( 莊舜而 ), MH, aged 60, was appointed as an Executive Director of the Company on 6 July 2007 and has been re-designated as the Chairman of the Company since 20 October 2009. Ms. Chong holds various directorships in subsidiaries of the Company. Ms. Chong is currently an executive director and the chairman of COL Capital Limited (Stock Code: 383), a company listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). Ms. Chong was awarded the Medal of Honour (MH) by the Government of the Hong Kong Special Administrative Region on 1 July 2011. She is a member of the National Committee of the Chinese People’s Political Consultative Conference, Guangdong Province, the Honorary Director of the Chinese Red Cross Foundation, Permanent Honorary Chairman of the Hong Kong Federation of Fujian Associations, Vice Chairman of the Hong Kong Federation of Fujian Associations Ladies Committee and Vice Chairman of Hong Kong Fujian Women Association. She is the namer and director of YOT Chong Sok Un Medical Fund (cancer aid) since 2007 and a member of Yan Oi Tong Advisory Board since 2011. Ms. Chong was the chairman of the 31st Term Board of Directors of Yan Oi Tong from 2010–2011 and a director of the 27th Term Board of Directors of Yan Oi Tong from 2006-2007. She was also a director of Po Leung Kuk from 2009–2010. From 25 June 2007 to 23 April 2009, she was a non-executive director of Alibaba Pictures Group Limited (formerly known as ChinaVision Media Group Limited) (Stock Code: 1060), a company listed on the Main Board of the Stock Exchange.

Mr. Andrew Charles Ferguson, aged 42, was appointed as an Executive Director and the Chief Executive Officer of the Company on 12 January 2010. Mr. Ferguson holds various directorships in subsidiaries of the Company. Mr. Ferguson holds a Bachelor of Science Degree in Natural Resource Development and worked as a mining engineer in Western Australia in the mid 90’s. In 2003, Mr. Ferguson co-founded New City Investment Managers in the United Kingdom. He has a proven track record in fund management and was the former co-fund manager of City Natural Resources High Yield Trust, which was awarded “Best UK Investment Trust” in 2006. In addition, he managed New City High Yield Trust Ltd. and Geiger Counter Ltd. He worked for New City Investment Managers CQS Hong Kong, a financial institution providing investment management services to a variety of investors. He has 20 years of experience in the finance industry specialising in global natural resources. Being a fund manager for assets in London and Hong Kong, he was responsible for day to day management of portfolios, risk management, business development, relationship management and working with independent boards, custodians and auditors to ensure that all shareholders’ funds were managed properly. He is currently a non-executive director of Metals X Limited (Stock Code: MLX) and ABM Resources NL (Stock Code: ABU); and an alternate director to Mr. Lee Seng Hui of Mount Gibson Iron Limited (Stock Code: MGX), all of which are listed on the Australian Stock Exchange. From 4 July 2012 to 28 June 2013, he was a non-executive director of Praetorian Resources Limited (now renamed as Duke Royalty Limited) (Stock Code: PRAE), a company listed on the AIM market of the London Stock Exchange.

Mr. Kong Muk Yin ( 江木賢 ), aged 49, was appointed as an Executive Director of the Company on 4 November 2009. Mr. Kong holds various directorships in subsidiaries of the Company. Mr. Kong graduated from City University of Hong Kong with a Bachelor’s Degree in Business Studies. He is a fellow member of The Association of Chartered Certified Accountants, a member of the Hong Kong Institute of Certified Public Accountants and a Chartered Financial Analyst. He has extensive experience in corporate finance, financial management, accounting and auditing. Mr. Kong is currently an executive director of COL Capital Limited (Stock Code: 383), a company listed on the Main Board of the Stock Exchange. From 4 July 2007 to 24 June 2014, he was an executive director and non-executive director of Alibaba Pictures Group Limited (formerly known as ChinaVision Media Group Limited) (Stock Code: 1060). He was also an executive director of Landing International Development Limited (formerly known as Greenfield Chemical Holdings Limited) (Stock Code: 582) from 13 October 2009 to 21 January 2010. These two companies are listed on the Main Board of the Stock Exchange. During September 2010 to September 2015, he was also a director of Mabuhay Holdings Corporation and IRC Properties, Inc., companies listed on the Philippine Stock Exchange, Inc..

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APAC Resources Limited

Biographical Details of Directors and Management

Non-Executive Directors

Mr. Lee Seng Hui ( 李成輝 ), aged 46, was appointed as a Non-Executive Director of the Company on 2 October 2009. Mr. Lee graduated with Honours from the Law School of the University of Sydney. Previously, he worked with Baker & McKenzie and N M Rothschild & Sons (Hong Kong) Limited. Mr. Lee is the chief executive and an executive director of Allied Group Limited (Stock Code: 373) and Allied Properties (H.K.) Limited (Stock Code: 56). He is also the chairman and a non-executive director of Tian An China Investments Company Limited (Stock Code: 28). These three companies are listed on the Main Board of the Stock Exchange. He is currently the chairman and a non-executive director of Mount Gibson Iron Limited (Stock Code: MGX), a company listed on the Australian Stock Exchange. Prior to being re-designated as the chairman of MGX on 19 February 2014, Mr. Lee was the deputy chairman of MGX since 14 December 2012. From 5 March 2008 to 7 November 2013, he was the non-executive director of Tanami Gold NL (Stock Code: TAM), a company which is listed on the Australian Stock Exchange.

Mr. So Kwok Hoo ( 蘇國豪 ), aged 61, was appointed as a Non-Executive Director of the Company on 20 October 2009. Mr. So has extensive experience in marketing of electrochemical and industrial products sales in Asia Pacific Region together with property investment experience in Hong Kong. Mr. So holds Bachelor degrees in Applied Science with major in Chemical Engineering and Business Administration obtained in Canada. He is currently an executive director and deputy managing director of Shougang Fushan Resources Group Limited (Stock Code: 639), a company listed on the Main Board of the Stock Exchange and a substantial shareholder of the Company.

Independent Non-Executive Directors

Dr. Wong Wing Kuen, Albert ( 王永權 ), aged 64, has been appointed as an Independent Non- Executive Director of the Company since 6 July 2004. Dr. Wong holds a Doctor of Philosophy in Business Administration degree from the Bulacan State University, Republic of the Philippines. He is a fellow member of The Institute of Chartered Secretaries and Administrators, The Hong Kong Institute of Chartered Secretaries, The Taxation Institute of Hong Kong, Association of International Accountants and Society of Registered Financial Planners. He is a member of Hong Kong Securities Institute, The Chartered Institute of Arbitrators and The Chartered Institute of Bankers in Scotland and a full member of Macau Society of Certified Practising Accountants. Currently, Dr. Wong is the principal consultant of KND & Co. CPA Limited, a private professional accounting firm in Hong Kong. He is also an independent non-executive director of Solargiga Energy Holdings Limited (Stock Code: 757), China Merchants Land Limited (Stock Code: 978) and China VAST Industrial Urban Development Company Limited (Stock Code: 6166). These three companies are listed on the Main Board of the Stock Exchange. He was a non-executive director of Rare Earths Global Limited, a company which was listed on the London Stock Exchange AIM Market, until the company was delisted on 2 May 2014.

Mr. Chang Chu Fai, Johnson Francis ( 鄭鑄輝 ), aged 61, was appointed as an Independent Non-Executive Director of the Company on 6 July 2007. Mr. Chang obtained a Bachelor’s Degree in Commerce from Concordia University in Montreal, Canada in 1976 and a Master’s Degree in Business Administration from York University in Toronto, Canada in 1977. He has over 37 years of experience in banking, corporate finance, investment and management and has held various executive positions at financial institutions and directorships of listed companies. Mr. Chang is currently the Managing Director of Ceres Consultancy Limited and a registered person under the Securities and Futures Ordinance. He is also an independent nonexecutive director of Tian An China Investments Company Limited (Stock Code: 28). He was the vice chairman and executive director of Royale Furniture Holdings Limited (Stock Code: 1198) and retired from the board at the conclusion of the company’s annual general meeting held on 5 June 2015. He was the deputy chairman and an independent non-executive director of SkyOcean International Holdings Limited (formerly known as Allied Overseas Limited) (Stock Code: 593) from 28 October 2004 to 27 January 2014. These three companies are listed on the Main Board of the Stock Exchange.

Annual Report 2015 15

Biographical Details of Directors and Management

Mr. Robert Moyse Willcocks, aged 66, was appointed an Independent Non-Executive Director of the Company on 27 July 2007. Mr. Willcocks holds a Bachelor’s Degree in Arts and a Bachelor’s Degree in Laws from the Australian National University in Australia and a Master’s Degree in Laws from the University of Sydney in Australia. He has been an advisor to companies in the mining and resources industry for more than 32 years. He is a former partner with the law firm now called King & Wood Mallesons. He is a former director of Ban-Pu Australia Pty Ltd, Oakbridge Pty Ltd and Bond University Limited and was a member of the Australian Government’s International Legal Advisory Committee for the term of its programme. He has held directorships in a number of companies listed on the Australian Stock Exchange, including Emperor Mines Limited, RIMCapital Limited (Chairman), eStar Online Trading Limited, Energy World Corporation Limited, CBH Resources Limited, Orion Petroleum Limited (Chairman) and Mount Gibson Iron Limited (Alternate Director). He is currently an independent director of Living Cell Technologies Limited (Stock Code: LCT) and a non-executive director of ARC Exploration Limited (Stock Code: ARX), both of which are listed on the Australian Stock Exchange. He is non-executive chairman of Trilogy Funds Management Limited, a Responsible Entity under Australian Law.

Alternate Director to Mr. Lee Seng Hui

Mr. Peter Anthony Curry, aged 63, was appointed as an Executive Director and the Chief Financial Officer of the Company on 1 March 2010, re-designated as a Non-Executive Director of the Company from 24 November 2010, until he resigned as a Non-Executive Director and appointed as an Alternate Director to Mr. Lee Seng Hui on 1 June 2014. Mr. Curry is currently an executive director and the group chief financial officer of Sun Hung Kai & Co. Limited (Stock Code: 86), which is listed on the Main Board of the Stock Exchange. Mr. Curry graduated from the University of New South Wales with a Bachelor’s Degree of Commerce in 1974 and a Bachelor’s Degree of Laws in 1976. He became a chartered accountant and a barrister (non-practising) in Australia in 1978. He was elected as a fellow of The Institute of Directors in Australia in 1989. In 2002, he completed the PS 146 Compliance Program organised by Securities Institute in Australia. Mr. Curry has over 40 years of business experience. He joined Peat Marwick Mitchell (now known as KPMG) in Australia in 1974 upon graduation and worked as Tax Partner in 1983. Since that time he has worked in different listed and unlisted companies in Australia as executive director/managing director specialising in natural resources, corporate finance, financial services investments and mergers and acquisitions. Since 1995, Mr. Curry has been a director and shareholder in a corporate advisory firm which holds an Australian Financial Services licence. He has been involved in a range of public and private capital raisings, initial public offering related services and providing corporate and financial advisory services in relation to a range of business transactions including a wide range of mining projects. Mr. Curry was an alternate director to Mr. Lee Seng Hui of Mount Gibson Iron Limited (Stock Code: MGX) from 11 February 2011 to 24 September 2012 and an executive director/nonexecutive director of Magnum Gas & Power Limited (formerly Ormil Energy Limited (Stock Code: OMX)) from August 2004 to 27 September 2012. These two companies are listed on the Australian Stock Exchange. He was also a non-executive director of East West Resources plc (Stock Code: EWR), a company listed on the AIM market of the London Stock Exchange from 18 July 2012 to 14 December 2012.

16 APAC Resources Limited

Biographical Details of Directors and Management

Senior Management

Hong Kong

Mr. Andrew Ferguson

Chief Executive Officer

Biographical details of Mr. Andrew Ferguson are set out on page 14 of this Annual Report.

Mr. Wong Wai Keung, Frederick ( 黃煒強 )

Chief Financial Officer and Company Secretary

Mr. Wong joined the Company in January 2011 as Chief Financial Officer of the Company and also acted as the Company Secretary of the Company between 21 April 2011 and 6 December 2011 before he was reappointed on 6 February 2013. Mr. Wong holds various directorships in subsidiaries of the Company. He is a fellow member of each of the Institute of Chartered Accountants in England and Wales and the Hong Kong Institute of Certified Public Accountants, and holds a master’s degree in electronic commerce. Mr. Wong has over 30 years of accounting, finance, audit, tax and corporate finance experience with international CPA firm and listed companies in the United Kingdom, New Zealand, Hong Kong and Thailand.

Other Management

Hong Kong

Mr. John Ellis

Investment Manager

Mr. Ellis joined the Company in July 2010 as Investment Manager. Prior to joining APAC, he was Portfolio Manager — Global Resources with Colonial First State in Sydney, and Director — Mining Research Sales with the Royal Bank of Canada in Sydney and London. Mr. Ellis has over 15 years of experience in resources investments and holds a Bachelor of Arts degree as well as a number of industry accreditations including the Canadian Securities Course, the ASX/ACH Responsible Executive, and the Finsia Graduate Certificate of Applied Finance and Investment.

Ms. Jenny Wong ( 黃靜琳 )

Vice President, Corporate and Investment

Ms. Wong joined the Company in February 2012 as Vice President of Corporate and Investment. Prior to joining APAC, she was an Oil & Gas Research Analyst at Renaissance Capital Hong Kong, and prior to that, was at Credit Suisse Melbourne for over 4 years also as an Oil & Gas Analyst. Ms. Wong is a Chartered Financial Analyst and completed a Bachelor of Commerce and Bachelor of Information Systems degrees at the University of Melbourne.

Mr. To Yung Kan, Kenneth ( 杜容根 ) Financial Controller

Mr. To joined the Company as Financial Controller and Company Secretary in January 2007. He resigned in July 2008 and joined COL Capital Limited (Stock Code: 383), a company listed on the Stock Exchange. Mr. To then re-joined the Company in January 2011 as Financial Controller. He is a fellow member of the Association of Chartered Certified Accountants and a member of the Hong Kong Institute of Certified Public Accountants. Mr. To has extensive experience in corporate finance, financial management, accounting and auditing.

17

Annual Report 2015

Biographical Details of Directors and Management

Shanghai, the PRC

Mr. Zhou Luyong ( 周魯勇 )

General Manager, Shanghai Commodity Business

Mr. Zhou joined the Company in July 2007 and is currently the General Manager, Shanghai Commodity Business. Mr. Zhou has more than 25 years experience within the natural resource sector, including commodity trading and bulk carrier chartering. Prior to APAC, Mr. Zhou was the Manager of Baosteel’s overseas subsidiaries (in both Hong Kong and Europe), and worked as the General Manager of Coal & Coke Department at Shanghai Baosteel International Economic and Trading Co., Ltd. from 2002, responsible for coal & coke purchase and sales for Baosteel Group. He also established Shanghai Baoding Energy Co., Ltd., a subsidiary of Baosteel Group.

18 APAC Resources Limited

Directors’ Report

The directors of the Company (the “Directors”) present their report and the consolidated financial statements of the Group for the year ended 30 June 2015.

Principal Activities

The Company is an investment holding company. The principal activities of its subsidiaries are set out in note 39 to the consolidated financial statements.

Results

The results of the Group for the year ended 30 June 2015 are set out in the consolidated statement of profit or loss on page 39.

Dividend

The Board does not recommend the payment of a dividend for the year ended 30 June 2015 (2014: Nil).

Closure of Register

The annual general meeting of the Company will be held on Monday, 7 December 2015.

To ascertain shareholders’ eligibility to attend and vote at the annual general meeting to be held on 7 December 2015, the register of members of the Company will be closed from Thursday, 3 December 2015 to Monday, 7 December 2015, both days inclusive, during which period no transfer of shares of the Company will be effected. In order to qualify to attend and vote at the annual general meeting, all transfers of share ownership, accompanied by the relevant share certificates, must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Secretaries Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong not later than 4:30 p.m. on Wednesday, 2 December 2015.

Business review

Schedule 5 of the Companies Ordinance of Hong Kong (the “Companies Ordinance”) requires companies to include a business review in the directors’ report. Specifically, the Companies Ordinance requires a business review to cover a number of areas which are also approved by the Board and included in the section headed “Management Discussion and Analysis” of this Annual Report as follows:

1. A fair review of the Group’s business Pages 8 to 10 of this Annual Report 2. Principal risks and uncertainties facing the Group Pages 6 to 12 of this Annual Report 3. Important events after the reporting date affecting the Group Page 12 of this Annual Report 4. Indication of likely development of the Group Pages 12 to 13 of this Annual Report

Annual Report 2015 19

Directors’ Report

Segment Information

An analysis of the Group’s turnover and contribution to results by business activities for the year ended 30 June 2015 is set out in note 6 to the consolidated financial statements.

Share Capital

Details of movements in share capital of the Company during the year ended 30 June 2015 are set out in note 28 to the consolidated financial statements.

Reserves

Details of movements in reserves of the Company and of the Group during the year ended 30 June 2015 are set out in note 29 to the consolidated financial statements and in the consolidated statement of changes in equity on page 43 respectively.

Property, Plant and Equipment

Details of movements in property, plant and equipment during the year ended 30 June 2015 are set out in note 15 to the consolidated financial statements.

Directors

The Directors during the year ended 30 June 2015 and up to the date of this Annual Report were:

Executive Directors

Ms. Chong Sok Un (Chairman)

Mr. Andrew Ferguson (Chief Executive Officer) Mr. Kong Muk Yin

Non-Executive Directors

Mr. Lee Seng Hui (Mr. Peter Anthony Curry as his alternate) Mr. So Kwok Hoo

Independent Non-Executive Directors

Dr. Wong Wing Kuen, Albert Mr. Chang Chu Fai, Johnson Francis Mr. Robert Moyse Willcocks

In accordance with Bye-law 87 of the Bye-laws of the Company (the “Bye-laws”), Ms. Chong Sok Un, Mr. Kong Muk Yin and Mr. Lee Seng Hui will retire at the forthcoming annual general meeting and, being eligible, offer themselves for reelection.

20

APAC Resources Limited

Directors’ Report

No Director being proposed for re-election at the forthcoming annual general meeting has a service contract with the Company or any of its subsidiaries which is not determinable by the Company within one year without payment of compensation, other than statutory compensation.

Directors’ Interests in Shares, Underlying Shares and Debentures

As at 30 June 2015, the interests and short positions held by the Directors and chief executive of the Company in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance, the “SFO”) as recorded in the register required to be kept by the Company under Section 352 of the SFO or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Rules Governing the Listing of Securities on the Stock Exchange (the “Listing Rules”) were as follows:

Long positions in shares and underlying shares of the Company

Name of Director Capacity in which interests are held	Number of shares/ underlying shares held Interests in shares Total interests Approximate percentage of shareholding (Note 1) 4,583,644,844 (Notes 2 and 3) 4,583,644,844 74.80% 25,000,000 25,000,000 0.41%
Ms. Chong Sok Un Beneficial owner and interest of controlled corporations Mr. Andrew Ferguson Beneficial owner

Notes:

1. The percentage of shareholding is calculated on the basis of the Company’s issued share capital of 6,127,767,990 shares as at 30 June 2015.

2. The interest in these shares are held by (i) Vigor Online Offshore Limited (“Vigor Online”) as to 4,504,085,671 shares, a wholly-owned subsidiary of China Spirit Limited (“China Spirit”) in which Ms. Chong Sok Un maintains a 100% beneficial interest; and (ii) Taskwell Limited (“Taskwell”) as to 79,559,173 shares, a wholly-owned subsidiary of Besford International Limited which in turn is a wholly-owned subsidiary of COL Capital Limited (“COL”). As at 30 June 2015, COL was 74.34% owned by Vigor Online. Therefore, Ms. Chong Sok Un is deemed to have interest in the shares in which COL is interested through her 100% interest in China Spirit.

3. The interests in these shares include deemed interest of 3,063,883,995 (50.00%) shares arising from the undertaking to subscribe for an aggregate of 759,880,424 shares by Vigor Online and Taskwell and the underwriting of 2,304,003,571 shares by Vigor Online pursuant to the proposed offer of shares to shareholders of the Company on the basis of one (1) offer share for every two (2) shares held on the record date at the subscription price of HK$0.10 per offer share, details of which are principally set out in the Company's announcement dated 27 May 2015 and 10 July 2015 and in prospectus dated 18 June 2015. Excluding such deemed interests, the interests in shares of Ms. Chong Sok Un, China Spirit and Vigor Online are 1,519,760,849 shares (24.80%).

Save as disclosed above, as at 30 June 2015, none of the Directors or chief executive of the Company had any interests or short positions in shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

Annual Report 2015 21

Directors’ Report

Arrangements to Purchase Shares or Debentures

Save as disclosed under the section headed DIRECTORS’ INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES and notes 12 and 30 to the consolidated financial statements, at no time during the year ended 30 June 2015 was the Company or any of its subsidiaries a party to any arrangements to enable the Directors, their respective spouse or children under 18 years of age to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

Directors’ Interests in Contracts of Significance

On 25 November 2013, APAC Resources Treasury Management Limited (“APAC Resources BVI”, a direct wholly-owned subsidiary of the Company), Mulpha SPV Limited (“Mulpha SPV”) and Mulpha International Bhd. (“Mulpha”) entered into an agreement, pursuant to which APAC Resources BVI agreed to subscribe for the loan note (the “2013 Mulpha Loan Note”) of nominal amount of US$30 million issued by Mulpha SPV and Mulpha agreed to act as the guarantor to the 2013 Mulpha Loan Note issued by Mulpha SPV.

On 4 September 2014, APAC Resources BVI, Mulpha SPV and Mulpha entered into an agreement, pursuant to which APAC Resources BVI agreed to subscribe for the loan note (the “2014 Mulpha Loan Note”, together with the 2013 Mulpha Loan Note are collectively referred to as the “Mulpha Loan Notes”) of nominal amount of US$10 million issued by Mulpha SPV and Mulpha agreed to act as the guarantor to the 2014 Mulpha Loan Note issued by Mulpha SPV. Mulpha SPV was a wholly-owned subsidiary of Mulpha. Mr. Lee Seng Hui (“Mr. Lee”), a non-executive director of the Company was deemed to be interested in the Mulpha Loan Notes by virtue of his brother, Mr. Lee Seng Huang, a non-independent executive chairman of Mulpha, who had a deemed interest of 40.55% in the issued share capital of Mulpha as at 30 June 2015. Details of the Mulpha Loan Notes were disclosed as a discloseable transaction in the announcements dated 26 November 2013 and 4 September 2014 of the Company.

Pursuant to facility letters dated 16 December 2011, 19 March 2012, 11 April 2014 and 4 September 2014, Sun Hung Kai Investment Services Limited (“SHKIS”) provided several security margin loans (the “Security Margin Loan Facilities”) in an aggregate sum of HK$553 million to the Group. The Security Margin Loan Facilities are secured against certain marketable securities of the Group. As at 30 June 2015, the outstanding amount under the Security Margin Loan Facilities was approximately HK$57 million. Mr. Lee, a non-executive director, was interested in the provision of the Security Margin Loan Facilities to the Group by virtue of his interest in Sun Hung Kai & Co. Limited, which indirectly holds a 30% interest in the issued share capital of SHKIS as at 30 June 2015.

Save as disclosed above, no other contracts of significance, to which the Company or any of its subsidiaries was a party and in which a Director had a material interest, whether directly or indirectly, subsisted at the end of or at any time during the year ended 30 June 2015.

Changes in Information of Directors

Save for the changes in the Biographical Details of Directors and Management of this Annual Report, there was no other change in the information of the Directors required to be disclosed pursuant to Rule 13.51(B) of the Listing Rules subsequent to the date of the Interim Report 2014 of the Company.

22

APAC Resources Limited

Directors’ Report

Substantial Shareholders

As at 30 June 2015, the following persons, other than the Directors or chief executive of the Company, were interested or had short positions in more than 5% of the shares and underlying shares of the Company as recorded in the register required to be kept by the Company under Section 336 of the SFO:

Long positions in shares and underlying shares of the Company

Name of Shareholder Capacity in which interests are held	Number of shares/ underlying shares held Interests in shares Total interests Approximate percentage of shareholding (Note 1) 956,000,000 956,000,000 15.60% 956,000,000 956,000,000 15.60% 4,583,644,844 4,583,644,844 74.80% 4,583,644,844 4,583,644,844 74.80%
Benefit Rich Limited Beneficial owner_(Note 2) Shougang Fushan Resources Group Limited Interest of a controlled corporation(Note 2) China Spirit Limited Interest of controlled corporations(Notes 3 and 4) Vigor Online Offshore Limited Beneficial owner and interest of controlled corporations (Notes 3 and 4)_

Notes:

1. The percentage of shareholding is calculated on the basis of the Company’s issued share capital of 6,127,767,990 shares as at 30 June 2015.

2. These shares are held by Benefit Rich Limited (“Benefit Rich”), a wholly-owned subsidiary of Shougang Fushan Resources Group Limited (“Shougang Fushan”). Accordingly, Shougang Fushan is deemed to have the same long position as Benefit Rich under the SFO.

3. The interest in these shares are held by (i) Vigor Online Offshore Limited (“Vigor Online”) as to 4,504,085,671 shares, a wholly-owned subsidiary of China Spirit Limited (“China Spirit”) in which Ms. Chong Sok Un maintains a 100% beneficial interest; and (ii) Taskwell Limited (“Taskwell”) as to 79,559,173 shares, a wholly-owned subsidiary of Besford International Limited which in turn is a wholly-owned subsidiary of COL Capital Limited (“COL”). As at 30 June 2015, COL was 74.34% owned by Vigor Online. Therefore, Ms. Chong Sok Un is deemed to have interest in the shares in which COL is interested through her 100% interest in China Spirit.

4. The interests in these shares include deemed interest of 3,063,883,995 (50.00%) shares arising from the undertaking to subscribe for an aggregate of 759,880,424 shares by Vigor Online and Taskwell and the underwriting of 2,304,003,571 shares by Vigor Online pursuant to the proposed offer of shares to shareholders of the Company on the basis of one (1) offer share for every two (2) shares held on the record date at the subscription price of HK$0.10 per offer share, details of which are principally set out in the Company's announcements dated 27 May 2015 and 10 July 2015 and in the prospectus dated 18 June 2015. Excluding such deemed interests, the interests in shares of China Spirit and Vigor Online are 1,519,760,849 shares (24.80%).

Save as disclosed above and in the section headed DIRECTORS’ INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES, as at 30 June 2015, the Company was not notified of any other person having any interests or short positions in the shares or underlying shares of the Company as recorded in the register required to be kept by the Company under section 336 of the SFO.

23

Annual Report 2015

Directors’ Report

Directors’ Interests in Competing Businesses

The Directors are of the opinion that during the year ended 30 June 2015, none of the Directors had any interest in any businesses which compete or are likely to compete, either directly or indirectly, with the businesses of the Group.

Purchase, Sale or Redemption of the Company’s Listed Securities

During the year ended 30 June 2015, the Company repurchased its own shares on the Stock Exchange as follows:

	Number of shares	Price per share	Price per share	Aggregate
Month of repurchase/cancellation	repurchased/cancelled	Highest	Lowest	amount paid
		(HK$)	(HK$)	(HK$’000)
July 2014/ August 2014	4,160,000	0.180	0.173	745

Save as disclosed above, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities during the year ended 30 June 2015.

Major Customers and Supplier

For the year ended 30 June 2015, the Group’s five largest customers in aggregate accounted for 100% of the turnover of the Group and the largest customer accounted for approximately 30% of the total turnover of the Group.

For the year ended 30 June 2015, the entire purchases of the Group were attributable to the sole supplier.

At no time during the year ended 30 June 2015 did a Director, an associate of a Director or a shareholder of the Company, which to the knowledge of the Directors owns more than 5% of the Company’s issued share capital, have an interest in any of the five largest customers and the sole supplier of the Group.

Emolument Policy

The Group’s employees are selected, remunerated and promoted based on their merit, qualifications and competence.

The Company adopted the model set out in Code Provision B.1.2(c)(ii) of Appendix 14 to the Listing Rules as its remuneration model for determining the emoluments of the Directors. This model stipulates that the remuneration committee shall make recommendations to the Board on the remuneration packages of individual executive Directors and senior management. The remuneration committee of the Company would take into consideration, among other things, the duties and responsibilities of the Directors and senior management and prevailing market conditions when determining their remuneration.

24

APAC Resources Limited

Directors’ Report

Related Party Transactions

During the year ended 30 June 2015, the Group entered into transactions with related parties, details of which are set out in note 32 to the consolidated financial statements. None of these related party transactions constitutes a connected transaction or a continuing connected transaction of the Group as defined in and required to be disclosed under Chapter 14A of the Listing Rules.

Pre-Emptive Rights

There are no provisions for pre-emptive rights under the Bye-Laws, or the Companies Act 1981 of Bermuda (the “Act”), which would oblige the Company to offer new shares on a pro-rata basis to existing shareholders.

Public Float

As at the date of this Annual Report, the Company has maintained a sufficient public float under the Listing Rules, based on the information that is publicly available to the Company and within the knowledge of its Directors.

Auditor

The consolidated financial statements of the Group for the year ended 30 June 2015 were audited by Messrs. Deloitte Touche Tohmatsu. Messrs. Deloitte Touche Tohmatsu will retire and a resolution for reappointment of Messrs. Deloitte Touche Tohmatsu as auditor of the Company will be proposed at the forthcoming annual general meeting of the Company.

Review of Results by Audit Committee

The Group’s final results for the year ended 30 June 2015 have been reviewed by the audit committee of the Company.

On behalf of the Board

Chong Sok Un Chairman

Hong Kong, 22 September 2015

25

Annual Report 2015

Corporate Governance Report

The Company strives to attain and maintain a high standard of corporate governance as it believes that effective corporate governance practices are fundamental to enhancing shareholders’ value and safeguarding interests of shareholders and other stakeholders. Accordingly, the Board attributes a high priority to identifying and implementing appropriate corporate governance practices to ensure transparency, accountability and effective internal controls.

Corporate Governance Practices

The Company has adopted the Code on Corporate Governance Practices (the “CG Code”) as contained in Appendix 14 to the Listing Rules which sets out the principles of good corporate governance. During the year ended 30 June 2015, the Company has fully complied with the code provisions of the CG Code, other than the deviation in respect of the appointment of Non-Executive Directors for a specific term during the period from 1 June 2015 to 30 June 2015 in accordance with Code Provision A.4.1 of the CG Code. The reason for the above deviation is set out in the section headed NON-EXECUTIVE DIRECTORS AND LETTERS OF APPOINTMENT below.

Directors’ Securities Transactions

The Company has adopted the Model Code as set out in Appendix 10 to the Listing Rules as its code for securities transactions by the Directors. Having made specific enquiry of all Directors, the Company confirmed that all Directors had complied with the required standards set out in the Model Code during the year ended 30 June 2015.

Board of Directors

The Board is charged with the responsibility of the leadership and control of the Group. The Board promotes the success of the Group and makes decisions objectively in the best interests of the Group. The Board’s role is mainly to direct and supervise the affairs of the Group, establishing its strategic direction and setting objectives and business development plans. In addition, the Board has also delegated various responsibilities to the Board committees.

The Board currently comprises eight Directors, with three Executive Directors, two Non-Executive Directors and three Independent Non-Executive Directors. During the year ended 30 June 2015, the attendance of each Director at the Board, committee and general meeting is set out below:

Board (Note 1)	Committee General Meeting Audit Remuneration Nomination (Note 2) — 0/1 0/1 1/1 — — — 1/1 — — — 1/1 2/2 1/1 1/1 0/1 — — — 0/1 2/2 1/1 1/1 1/1 1/2 1/1 1/1 0/1 2/2 1/1 1/1 1/1
Executive Directors Ms. Chong Sok Un 4/5 Mr. Andrew Ferguson 5/5 Mr. Kong Muk Yin 5/5 Non-Executive Directors Mr. Lee Seng Hui 4/5 Mr. So Kwok Hoo 4/5 Independent Non-Executive Directors Dr. Wong Wing Kuen, Albert 5/5 Mr. Chang Chu Fai, Johnson Francis 3/5 Mr. Robert Moyse Willcocks 4/5

Notes:

1. During the year ended 30 June 2015, the Board held four regular meetings and one additional meeting.

2. The annual general meeting of the Company was held on 3 December 2014 (the “2014 AGM”).

26

APAC Resources Limited

Corporate Governance Report

Every Director is entitled to have access to Board papers and related materials, and the advice and services of the company secretary of the Company (the “Company Secretary”), and has the liberty to seek independent professional advice at the Company’s expense if so reasonably required. Directors will be continuously updated on the major development of the Listing Rules and other applicable regulatory requirements to ensure compliance and upkeep of good corporate governance practices.

The biographical details of the Directors are set out on pages 14 to 16 of this Annual Report, which demonstrates a diversity of skills, experience and qualifications. Save as disclosed therein, the Board members have no financial, business, family or other material/relevant relationships with each other. The Company appointed three Independent Non-Executive Directors. At least one of them has appropriate professional qualifications, or accounting or related financial management expertise as required under Rule 3.10 of the Listing Rules. The Board has received annual confirmation of independence from the Independent Non-Executive Directors and considers all of them to be independent pursuant to Rule 3.13 of the Listing Rules.

The Company encourages the Directors to attend any relevant programme to further enhance their knowledge to enable them to discharge their duties and responsibilities more effectively. During the year ended 30 June 2015, all Directors have attended relevant training programmes. The training programmes attended include participation in conferences, seminars or courses of formal education, participation in in-house seminars, attending training relevant to the Company’s business conducted by lawyers, private study of material relevant to the director’s duties and responsibilities and giving talks at conferences or seminars. The training received by each Director is set out below:

Training Received	C	H	L	P	T
Ms. Chong Sok Un	—	—	—		—
Mr. Andrew Ferguson		—	—		
Mr. Kong Muk Yin	—	—		—	—
Mr. Lee Seng Hui	—		—	—	—
Mr. So Kwok Hoo		—	—		—
Dr. Wong Wing Kuen, Albert		—	—	—	—
Mr. Chang Chu Fai, Johnson Francis	—		—	—	—
Mr. Robert Moyse Willcocks	—	—			—

Codes:

• C Participation in conferences, seminars or courses of formal education

• H Participation in in-house seminars

• L Attending training relevant to the Company’s business conducted by lawyers

• P Private study of material relevant to director’s duties and responsibilities

• T Giving talks at conferences or seminars

Annual Report 2015 27

Corporate Governance Report

Chairman and Chief Executive Officer

The Chairman and the Chief Executive Officer of the Company are Ms. Chong Sok Un and Mr. Andrew Ferguson respectively. The roles of the Chairman and the Chief Executive Officer are segregated and assumed by two separate individuals who have no relationship with each other to strike a balance of power and authority so that the job responsibilities are not concentrated on any one individual. The Chairman of the Board is responsible for the leadership and effective running of the Board, while the Chief Executive Officer is delegated with the authorities to manage the business of the Group in all respects effectively.

Non-Executive Directors and Letters of Appointment

All Non-Executive Directors and Independent Non-Executive Directors had entered into letters of appointment with the Company for a term of three years from 1 June 2012 to 31 May 2015. These letters of appointment had not been renewed since 31 May 2015 as such matter had not been put to the Board for consideration. Although subsequent to 31 May 2015, all Non-Executive Directors and Independent Non-Executive Directors were not appointed for a specific term, these Directors are subject to retirement by rotation and re-election at least once every three years at the annual general meeting of the Company in accordance with the Bye-laws of the Company. As such, the Company considers that sufficient measures have been taken to ensure the Company’s corporate governance practices are no less exacting than those set out in the CG Code.

Board Committees

The Company’s Board has established four committees, namely remuneration committee (the “Remuneration Committee”), audit committee (the “Audit Committee”), nomination committee (the “Nomination Committee”) and executive committee (the “Executive Committee”). All committees are provided with sufficient resources to perform their duties and have access to independent professional advice at the Company’s expense if so reasonably required.

Remuneration Committee

The Remuneration Committee comprises Dr. Wong Wing Kuen, Albert (Chairman), Mr. Chang Chu Fai, Johnson Francis and Mr. Robert Moyse Willcocks, all Independent Non-Executive Directors, Ms. Chong Sok Un, an Executive Director and the Chairman of the Board and Mr. Lee Seng Hui, a Non-Executive Director.

The Remuneration Committee shall meet at least once a year. During the year ended 30 June 2015, one meeting of the Remuneration Committee was held and the attendance of the members is set out in the section headed BOARD OF DIRECTORS.

The terms of reference of the Remuneration Committee are available on the websites of the Stock Exchange and the Company. The Company adopted the model set out in Code Provision B.1.2(c)(ii) of the CG Code as its remuneration model, under which the Remuneration Committee shall make recommendations to the Board on the remuneration packages of individual Executive Directors and senior management.

28

APAC Resources Limited

Corporate Governance Report

The primary duties of the Remuneration Committee are:

1. to make recommendations to the Board on the Company’s policy and structure for all remuneration of Directors and senior management and on the establishment of a formal and transparent procedure for developing remuneration policy;

2. to review and approve the management’s remuneration proposals with reference to the Board’s corporate goals and objectives;

3. to make recommendations to the Board on the remuneration of Non-Executive Directors;

4. to consider salaries paid by comparable companies, time commitment and responsibilities and employment conditions elsewhere in the Group;

5. to review and approve compensation payable to Executive Directors and senior management for any loss or termination of office or appointment to ensure that it is consistent with contractual terms and is otherwise fair and not excessive;

6. to review and approve compensation arrangements relating to dismissal or removal of Directors for misconduct to ensure that they are consistent with contractual terms and are otherwise reasonable and appropriate; and

7. to ensure that no Director or any of his associates is involved in deciding his own remuneration.

During the year ended 30 June 2015, the Remuneration Committee has reviewed the remuneration proposals of the Directors and senior management and made recommendations thereon to the Board .

Details of the Directors’ emoluments and remuneration payable to members of senior management by band are set out in notes 12 and 32 to the consolidated financial statements.

Audit Committee

The Audit Committee comprises Dr. Wong Wing Kuen, Albert (Chairman), Mr. Chang Chu Fai, Johnson Francis and Mr. Robert Moyse Willcocks, all Independent Non-Executive Directors and Mr. Lee Seng Hui, a Non-Executive Director. The Audit Committee is chaired by an Independent Non-Executive Director with appropriate professional qualifications, or accounting or related financial management expertise.

The Audit Committee shall meet at least twice a year. During the year ended 30 June 2015, two meetings of the Audit Committee were held and attended by the external auditor of the Company. The attendance of the members is set out in the section headed BOARD OF DIRECTORS.

The terms of reference of the Audit Committee, which have been modelled off the CG Code, are available on the websites of the Stock Exchange and the Company.

The primary duties of the Audit Committee are:

1. to recommend to the Board on the appointment, reappointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external auditor, and any questions of its resignation or dismissal;

2. to review and monitor the external auditor’s independence, objectivity and effectiveness and discuss with it the nature and scope of the audit;

29

Annual Report 2015

Corporate Governance Report

1. to monitor the integrity of the financial statements of the Company, including the interim and annual accounts, interim reports and annual reports before submission to the Board and to discuss any problems and reservations arising therefrom;

2. to review the Group’s financial controls, internal control and risk management systems;

3. to consider major investigation findings on internal control matters as delegated by the Board and management’s response to these findings; and

4. to review the external auditor’s management letters and management’s response.

During the year ended 30 June 2015, the Audit Committee has reviewed and discussed the financial reporting matters, including the review of the interim and annual financial statements. The Audit Committee established a procedure by which the employees of the Company may raise concerns about possible improprieties in financial reporting, internal control or other matters. The Audit Committee shall ensure that proper arrangements are in place for fair and independent investigation of the reporting matters and for appropriate follow-up action.

Nomination Committee

The Nomination Committee comprises Ms. Chong Sok Un (Chairman), an Executive Director and the Chairman of the Board, Dr. Wong Wing Kuen, Albert, Mr. Chang Chu Fai, Johnson Francis and Mr. Robert Moyse Willcocks, all Independent NonExecutive Directors and Mr. Lee Seng Hui, a Non-Executive Director.

The Nomination Committee shall meet at least once a year. During the year ended 30 June 2015, one meeting of Nomination Committee was held and the attendance of the members is set out in the section headed BOARD OF DIRECTORS.

The terms of reference of the Nomination Committee, which include the code provisions set out in the CG Code and adopted with effect from 1 March 2012 and revised on 1 September 2013, are available on the websites of the Stock Exchange and the Company.

The primary duties of the Nomination Committee are:

1. to review the structure, size diversity, and composition (including but not limited to gender, age, cultural background, educational background, skills, knowledge, professional experience, time for performing director’s duties and/or length of service) of the Board at least annually and make recommendations on any proposed changes to the Board to complement the Company’s corporate strategy;

2. to identify individuals suitably qualified to become Board members and select or make recommendations to the Board on the selection of individuals nominated for directorships;

3. to assess the independence of Independent Non-Executive Directors; and

4. to make recommendations to the Board on the appointment or re-appointment of Directors and succession planning for Directors, in particular the chairman and the chief executive.

30 APAC Resources Limited

Corporate Governance Report

Executive Committee

The Executive Committee has been established by the Board with specific terms of reference. It comprises Ms. Chong Sok Un (Chairman), Mr. Andrew Ferguson and Mr. Kong Muk Yin, all being Executive Directors. The Executive Committee is responsible for reviewing and approving, inter alia, any matters arising from the day-to-day activities of the Group and any matters to be delegated by the Board from time to time.

Corporate Governance Function

The Board has delegated the corporate governance duties to the Executive Committee. The primary corporate governance duties performed by the Executive Committee are:

1. to develop and review the Company’s policies and practices on corporate governance and make recommendations to the Board;

2. to review and monitor the training and continuous professional development of Directors and senior management;

3. to review and monitor the Company’s policies and practices on compliance with legal and regulatory requirements;

4. to develop, review and monitor the code of conduct and compliance manual (if any) applicable to employees and Directors; and

5. to review the Company’s compliance with the code and disclosure in the Corporate Governance Report.

During the year ended 30 June 2015, the Board and the Executive Committee has continued to develop and review the Company’s corporate governance practices.

Accountability and Audit

The Directors acknowledge their responsibility for preparing the consolidated financial statements for the year ended 30 June 2015. The Directors aim to present a clear and understandable assessment of the Group’s position and prospects. The Board is not aware of any material uncertainties relating to events or conditions that may cast significant doubt upon the Group’s ability to continue as a going concern, the Board therefore continues to adopt the going concern approach in preparing the consolidated financial statements of the Group. The Board acknowledges its responsibility to present a balanced, clear and understandable assessment in the Company’s annual and interim reports, inside information announcements and other financial disclosures required by the Listing Rules, and reports to the regulators.

The responsibilities of the external auditor with respect to the financial reporting are set out in the Independent Auditor’s Report of this Annual Report.

Annual Report 2015 31

Corporate Governance Report

Disclosure of Long Term Basis for Generating or Preserving Business Value

A discussion and analysis of the Group’s corporate strategy and long term business model is set out in the Management Discussion and Analysis of this Annual Report.

Internal Controls

The Board is responsible for overseeing the Group’s internal control system and reviewing its effectiveness. However, such a system is designed to manage the Group’s risks within an acceptable risk profile, rather than to eliminate the risk of failure, to achieve the business objectives of the Group. Accordingly, it can only provide reasonable assurance but not absolute assurance against material misstatement of management and financial information and records or against financial losses or fraud.

The Board, through the Audit Committee, conducted an annual review of the effectiveness of the internal control system of the Group. The review covers all material controls, including financial, operational and compliance controls and risk management functions. The Board is of the view that the internal control system in place for the year ended 30 June 2015 is sufficient to safeguard the interests of the shareholders and the Group’s assets.

Auditor’s Remuneration

During the year ended 30 June 2015, the remuneration paid or payable to the Company’s auditor, Deloitte Touche Tohmatsu is set out below:

	Fee paid or
Services rendered	payable
	HK$’000
Audit services	893
Non-audit services
— review of interim report and preliminary annual results announcement	192
— as reporting accountant in respect of the Open Offer	228
	1,313

32

APAC Resources Limited

Corporate Governance Report

Company Secretary

Mr. Wong Wai Keung, Frederick, the Chief Financial Officer of the Company, has also assumed the role of the Company Secretary.

Shareholders’ Rights

How Shareholders Can Convene a Special General Meeting

Pursuant to Bye-law 58 of the Bye-laws, shareholders holding at the date of deposit of the requisition not less than one-tenth of the paid up capital of the Company carrying the right of voting at general meetings of the Company shall at all times have the right, by written requisition to the Board or the Company Secretary, to require a special general meeting to be called by the Board for the transaction of any business specified in such requisition; and such meeting shall be held within two months after the deposit of such requisition. If within twenty-one days of such deposit the Board fails to proceed to convene such meeting the requisitionists themselves may do so in accordance with the provisions of Section 74(3) of the Act.

The written requisition must state the purposes of the general meeting, signed by the shareholder(s) concerned and may consist of several documents in like form, each signed by one or more of those shareholders. Such written requisition can be addressed to the Board or the Company Secretary in writing by mail to the Company’s registered office in Bermuda at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda and preferably with a copy to its principal office in Hong Kong at 32/F, China Online Centre, 333 Lockhart Road, Wanchai, Hong Kong.

If the requisition is in order, the Company Secretary will ask the Board to convene a special general meeting by serving sufficient notice in accordance with the statutory requirements to all the registered shareholders. On the contrary, if the requisition is invalid, the shareholder(s) concerned will be advised of this outcome and accordingly, a special general meeting will not be convened as requested.

Pursuant to Section 74(3) of the Act, if the directors do not within twenty-one days from the date of the deposit of the requisition proceed duly to convene a meeting, the requisitionists, or any of them representing more than one half of the total voting rights of all of them, may themselves convene a meeting, but any meeting so convened shall not be held after the expiration of three months from the said date.

Procedures by which Enquiries may be Put to the Board

Shareholders may, at any time, direct enquiries to the Board. Such enquiries can be addressed to the Company Secretary in writing by mail to the Company’s registered office in Bermuda at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda or its principal office in Hong Kong at 32/F, China Online Centre, 333 Lockhart Road, Wanchai, Hong Kong.

Procedures for Putting Forward Proposals at Shareholders’ Meetings

For putting forward a proposal at shareholders’ meeting, shareholders are requested to follow the requirements and procedures as set out in the Bye-laws and the Act.

According to Sections 79(1) and 79(2) of the Act, shareholder(s) of the Company holding (i) not less than one-twentieth of the total voting rights of all shareholders having the right to vote at the general meeting of the Company; or (ii) not less than 100 shareholders, can submit a written request stating the resolution intended to be moved at the annual general meeting; or a statement of not more than 1,000 words with respect to the matter referred to in any proposed resolution or the business to be dealt with at a particular general meeting.

Annual Report 2015 33

Corporate Governance Report

The written request/statements must be signed by the shareholder(s) concerned and deposited at the Company’s registered office in Bermuda at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda and preferably with a copy deposited at its principal office in Hong Kong at 32/F, China Online Centre, 333 Lockhart Road, Wanchai, Hong Kong, for the attention of the Company Secretary, not less than six weeks before the annual general meeting in the case of a requisition requiring notice of a resolution and not less than one week before the general meeting in the case of any other requisition.

If the written request is in order, the Company Secretary will ask the Board (i) to include the resolution in the agenda for the general meeting; or (ii) to circulate the statement for the general meeting, provided that the shareholder(s) concerned have deposited a sum of money reasonably determined by the Board sufficient to meet the Company’s expenses in serving the notice of the resolution and/or circulating the statement submitted by the shareholder(s) concerned in accordance with the statutory requirements to all the registered shareholders. On the contrary, if the requisition is invalid or the shareholder(s) concerned have failed to deposit sufficient money to meet the Company’s expenses for the said purposes, the shareholder(s) concerned will be advised of this outcome and accordingly, the proposed resolution will not be included in the agenda for the annual general meeting; or the statement will not be circulated for the general meeting.

Procedures for Shareholders to Propose a Person for Election as a Director

Pursuant to Bye-law 88 of the Bye-laws, if a shareholder, who is duly qualified to attend and vote at the general meeting convened to deal with appointment or election of director(s), wishes to propose a person (other than a retiring Director and the shareholder himself/herself) for election as a Director at that general meeting, such shareholder can deposit a notice in writing of the intention to propose that person for election as a Director and a notice in writing by that person of his willingness to be elected at the registered office of the Company in Bermuda at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda or at the principal office in Hong Kong at 32/F, China Online Centre, 333 Lockhart Road, Wanchai, Hong Kong at least seven days before the date of the general meeting. The period for lodging such notice will commence no earlier than the day after the despatch of the notice of the meeting appointed for such election and no later than seven days prior to the date of such meeting.

If a shareholder wishes to nominate a person to stand for election as a Director, the following documents must be validly served on the Company Secretary, namely (i) notice of intention to propose a resolution to elect a person as a Director (the “Nominated Candidate”) at the general meeting; (ii) notice in writing executed by the Nominated Candidate of his/her willingness to be elected and (iii) the information as required to be disclosed under Rule 13.51(2) of the Listing Rules and such other information as required by the Listing Rules, the Bye-laws and the Act from time to time.

Investor Relations

The Board recognises the importance of good communication with shareholders. Information in relation to the Group is disseminated to shareholders in a timely manner through a number of formal channels, including interim and annual reports, announcements and circulars.

The Company’s general meetings are valuable forum for the Board to communicate directly with the shareholders. Shareholders are encouraged to attend the general meetings of the Company.

34

APAC Resources Limited

Corporate Governance Report

During the year ended 30 June 2015, the 2014 AGM was held on 3 December 2014. All the resolutions proposed at the 2014 AGM were duly passed by the shareholders by way of poll. The results of the poll were published on the websites of the Stock Exchange and the Company. Ms. Chong Sok Un, Chairman of the Board and member of the Remuneration Committee chaired the 2014 AGM. Ms. Chong together with other members of the Remuneration Committee, namely Dr. Wong Wing Kuen, Albert and Mr. Robert Moyse Willcocks who also attended the 2014 AGM were available to answer questions thereat. The external auditor of the Company, Messrs. Deloitte Touche Tohmatsu attended the 2014 AGM to answer questions about the conduct of the audit, the preparation and content of the auditor’s report, the accounting policies and auditor independence.

The forthcoming annual general meeting of the Company will be held on 7 December 2015 (the “2015 AGM”). Notice convening the 2015 AGM will be published on the websites of the Stock Exchange and the Company and despatched to shareholders of the Company before 31 October 2015.

Significant Changes in Constitutional Documents

During the year ended 30 June 2015, there were no changes made to the constitutional documents of the Company.

Share Interests of Senior Management

Senior management of the Company comprises Mr. Andrew Ferguson and Mr. Wong Wai Keung, Frederick. As at 30 June 2015, Mr. Ferguson was interested in 25,000,000 shares of the Company as set out in the section headed DIRECTORS’ INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES of the Directors’ Report while Mr. Wong held no interest in shares of the Company.

Annual Report 2015 35

Corporate and Social Responsibility

Environment

The Group is committed to promoting an environmentally conscious work place and places significant emphasis on paper saving and recycling initiatives. We aim to minimize our environmental impact and to create a more sustainable future for future generations.

People

We believe that our employees are our most valuable asset. We encourage, support and fully fund opportunities for further job and personal development through attendance of external training courses and seminars; and further education.

Employee loyalty is a key element to the Group’s success. We aim to foster a friendly and safe environment of respect, trust and communication with emphasis placed on staff satisfaction and team work.

Community

The Group believes in making a positive contribution to society through participation in charitable activities. In the year ended 30 June 2015, the Group contributed to the Polar Museum Foundation via the sponsorship of its gala dinner (極地30情獻晚會) and continued to support the Youth Diabetes Action with ongoing donations.

36 APAC Resources Limited

Independent Auditor’s Report

==> picture [119 x 57] intentionally omitted <==

TO THE MEMBERS OF APAC RESOURCES LIMITED

(incorporated in Bermuda with limited liability)

We have audited the consolidated financial statements of APAC Resources Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) set out on pages 39 to 105, which comprise the consolidated statement of financial position as at 30 June 2015, and the consolidated statement of profit or loss, consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Directors’ Responsibility for the Consolidated Financial Statements

The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with Section 90 of the Bermuda Companies Act, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.

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

Annual Report 2015 37

Independent Auditor’s Report

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at 30 June 2015, and of its financial performance and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong 22 September 2015

38

APAC Resources Limited

Consolidated Statement of Profit or Loss

For the year ended 30 June 2015

	Notes	2015 HK$’000	2014 HK$’000
Revenue from sales of goods	5	256,372	774,512
Cost of sales		(248,471)	(721,416)
		7,901	53,096
Other gains and losses	7	585,591	629,752
Other income	8	84,756	48,222
Administrative expenses		(30,540)	(55,647)
Finance costs	9	(6,915)	(7,392)
Share of results of associates		(1,491,185)	244,622
(Loss) profit before taxation	10	(850,392)	912,653
Income tax credit (expense)	11	2,466	(5,393)
(Loss) profit for the year attributable to owners of the Company		(847,926)	907,260
(Loss) earnings per share (expressed in HK cents)
— basic	13	(13.84)	13.53

Annual Report 2015 39

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the year ended 30 June 2015

	2015 HK$’000	2014 HK$’000
(Loss) profit for the year	(847,926)	907,260
Other comprehensive (expense) income, net of tax
Items that may be subsequently reclassified to profit or loss:
Exchange difference arising from translation of associates	(354,808)	78,923
Exchange difference arising from translation of other foreign operations	44	(3,418)
Fair value change of available-for-sale investments	—	584
Reclassification adjustment for the cumulative gain included in profit or
loss upon disposal of available-for-sale investments	—	(617)
Reclassification adjustment upon deemed disposal of partial interests in associates	(30)	(23)
Share of investment revaluation reserve of associates	1,977	10,259
	(352,817)	85,708
Total comprehensive (expense) income for the year attributable
to owners of the Company	(1,200,743)	992,968

40

APAC Resources Limited

Consolidated Statement of Financial Position

At 30 June 2015

	Notes	2015 HK$’000	2014 HK$’000
ASSETS
Non-current assets
Property, plant and equipment	15	907	2,395
Interests in associates	16	1,035,383	2,241,023
Available-for-sale investments	17	42,475	26,794
Financial assets designated at fair value through profit or loss	18	—	3,522
Loans receivable	19	—	20,434
Loan notes	20	313,976	235,934
Deposits	21	921	921
		1,393,662	2,531,023
Current assets
Inventories	22	—	39,798
Trade receivables, other receivables and deposits	21	13,587	77,017
Financial assets designated at fair value through profit or loss	18	—	70,200
Investments held for trading	23	194,760	225,199
Loans receivable	19	223,062	218,320
Tax recoverable		725	693
Pledged bank deposits	24	79,659	80,010
Bank balances and cash	24	101,308	94,776
		613,101	806,013
Total assets		2,006,763	3,337,036

Annual Report 2015 41

Consolidated Statement of Financial Position

At 30 June 2015

	Notes	2015 HK$’000	2014 HK$’000
EQUITY AND LIABILITIES
Capital and reserves
Share capital	28	612,777	613,193
Reserves		300,765	3,153,495
Accumulated profits (losses)		1,014,171	(637,487)
		1,927,713	3,129,201
Current liabilities
Trade and other payables	25	15,964	74,984
Derivative financial instruments	27	3,627	873
Borrowings	26	56,688	126,217
Tax payable		2,771	5,761
		79,050	207,835
Total equity and liabilities		2,006,763	3,337,036
Net current assets		534,051	598,178
Total assets less current liabilities		1,927,713	3,129,201

The consolidated financial statements on pages 39 to 105 were approved and authorised for issue by the Board of Directors on 22 September 2015 and are signed on its behalf by:

Chong Sok Un DIRECTOR

Andrew Ferguson DIRECTOR

42

APAC Resources Limited

Consolidated Statement of Changes in Equity

For the year ended 30 June 2015

	Attributable to owners of the Company
	Investment Capital Contributed Accumulated
	Share capital Share premium Special reserve revaluation reserve Exchange reserve redemption reserve surplus reserve (losses) profits Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (note 29(a)) (note 29(b)) (note 29(c))
At 1 July 2013	681,193 2,769,729 (14,980) 19,503 268,915 11,020 — (1,476,747) 2,258,633
Profit for the year Other comprehensive income for the year	— — — — — — — 907,260 907,260 — — — 10,218 75,490 — — — 85,708
Total comprehensive income for the year	— — — 10,218 75,490 — — 907,260 992,968
Shares repurchased and cancelled	(68,000) (54,400) — — — 68,000 — (68,000) (122,400)
At 30 June 2014	613,193 2,715,329 (14,980) 29,721 344,405 79,020 — (637,487) 3,129,201
Loss for the year Other comprehensive income (expense) for the year	— — — — — — — (847,926) (847,926) — — — 1,967 (354,784) — — — (352,817)
Total comprehensive income (expense) for the year	— — — 1,967 (354,784) — — (847,926) (1,200,743)
Transfer upon reduction of share premium_(note) Transfer(note)_ Shares repurchased and cancelled	— (2,500,000) — — — — 2,500,000 — — — — — — — — (2,500,000 ) 2,500,000 — (416) (329) — — — 416 — (416) (745)
At 30 June 2015	612,777 215,000 (14,980) 31,688 (10,379) 79,436 — 1,014,171 1,927,713

Note: On 30 October 2014, the directors of the Company proposed for the reduction of the share premium of the Company amounting of HK$2,500,000,000 and transfer such amount to contributed surplus reserve of the Company. On 3 December 2014, the reduction of share premium was approved by the shareholders at the Company’s annual general meeting. On the same date, the directors of the Company resolved to transfer the amount of HK$2,500,000,000 from the contributed surplus reserve to set off the accumulated losses of the Company.

Annual Report 2015 43

Consolidated Statement of Cash Flows

For the year ended 30 June 2015

	2015 HK$’000	2014 HK$’000
OPERATING ACTIVITIES
(Loss) profit before taxation	(850,392)	912,653
Adjustments for:
Depreciation of property, plant and equipment	564	949
Net loss on deemed disposal of partial interests in associates	763	305
Loss on written off of property, plant and equipment	924	—
Fair value change of investments held for trading	51,337	12,268
Fair value change of financial assets designated at fair value through profit or loss	3,504	2,046
Impairment losses on financial assets designated at fair value through profit or loss	44,467	9,032
Gain on disposal of an available-for-sale investment	—	(617)
Fair value change in derivative financial instruments	2,754	873
Interest income	(81,337)	(45,044)
Interest expenses	6,915	7,392
Impairment losses on available-for-sale investments	24,000	11,214
Impairment loss on loan receivable	1,610	9,129
Impairment loss on interest receivable	188	—
Share of results of associates	1,491,185	(244,622)
Reversal of impairment losses on interests in associates	(735,326)	(673,647)
Impairment losses on interests in associates	4,048	26,190
Exchange difference	1,559	—
Operating cash flows before movements in working capital	(33,237)	28,121
Decrease (increase) in trade and other receivables	55,176	(46,579)
(Decrease) increase in trade and other payables	(59,020)	49,603
Increase in investments held for trading	(20,898)	(4,377)
Decrease (increase) in inventories	39,798	(40,309)
Cash used in operations	(18,181)	(13,541)
Income tax paid	(556)	(1,131)
Net cash used in operating activities	(18,737)	(14,672)

44

APAC Resources Limited

Consolidated Statement of Cash Flows

For the year ended 30 June 2015

	2015 HK$’000	2014 HK$’000
INVESTING ACTIVITIES
Purchase of available-for-sale investments	—	(24,000)
Purchase of property, plant and equipment	—	(1,268)
Investment in loan notes	(77,509)	(232,599)
Increase in loans receivable	—	(219,270)
Repayment of loans receivable	18,824	—
Investment in an associate	(4,021)	—
Investment in financial assets designated at fair value through profit or loss	(2,285)	(9,032)
Disposal of financial assets designated at fair value through profit or loss	—	2,273
Placement of pledged bank deposits	(487,057)	(595,626)
Withdrawal of pledged bank deposits	487,408	861,118
Proceeds from disposal of available-for-sale investments	—	5,263
Dividend received from associates	96,130	41,912
Interest received	70,467	38,841
Net cash from (used in) investing activities	101,957	(132,388)
FINANCING ACTIVITIES
Payments on repurchase of shares	(745)	(122,400)
Interest paid	(6,915)	(7,392)
New borrowings raised	371,146	399,463
Repayments of borrowings	(440,675)	(515,746)
Net cash used in financing activities	(77,189)	(246,075)
Net increase (decrease) in cash and cash equivalents	6,031	(393,135)
Effect of foreign exchange rate change	501	(4,874)
Cash and cash equivalents at beginning of the year	94,776	492,785
Cash and cash equivalents at end of the year, represented by bank balances and cash	101,308	94,776

Annual Report 2015 45

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

1. General

The Company is incorporated in Bermuda as an exempted company with limited liability under the Companies Act 1981 of Bermuda (as amended) and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The addresses of the registered office and principal place of business of the Company are disclosed in the corporate information section of the annual report.

The Company is an investment holding company. The principal activities of its subsidiaries are set out in note 39.

The consolidated financial statements are presented in Hong Kong dollars (“HK$”), which is also the functional and presentation currency of the Company. All values are rounded to the nearest thousand except when otherwise indicated.

2. Application of New and Revised Hong Kong Financial Reporting Standards (“HKFRSs”)

In the current year, the Group has applied the following amendments and interpretations (“new and revised HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

Amendments to HKFRS 10,	Investment entities
HKFRS 12 and HKAS 27
Amendments to HKAS 19	Defined benefit plans: Employees contributions
Amendments to HKAS 32	Offsetting financial assets and financial liabilities
Amendments to HKAS 36	Recoverable amount disclosures for non-financial assets
Amendments to HKAS 39	Novation of derivatives and continuation of hedge accounting
Amendments to HKFRSs	Annual improvement to HKFRSs 2010–2013 cycle
Amendments to HKFRSs	Annual improvement to HKFRSs 2011–2014 cycle
HK(IFRIC)-Int 21	Levies

The application of these new and revised amendments to HKFRSs in the current year has had no material effect on the Group’s financial performance and positions for the current year and prior years and/or on the disclosures set out in these consolidated financial statements.

46

APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

1. Application of New and Revised Hong Kong Financial Reporting Standards (“HKFRSs”) (Continued)

The Group has not early applied the following new and revised HKFRSs that have been issued but are not yet effective.

HKFRS 9 Financial instruments1 HKFRS 15 Revenue from contracts with customers1 Amendments to HKFRS 10 and Sale or contribution of assets between an investor and its associate or HKAS 28 joint venture3 Amendments to HKFRS 10, Investment entities: Applying the consolidation exception3 HKFRS 12 and HKAS 28 Amendments to HKFRS 11 Accounting for acquisitions of interests in joint operations3 Amendments to HKAS 1 Disclosure initiative3 Amendments to HKAS 16 and Clarification of acceptable methods of depreciation and amortisation3 HKAS 38 Amendments to HKAS 16 and Agriculture: Bearer plants3 HKAS 41 Amendments to HKAS 27 Equity method in separate financial statements3 Amendments to HKFRSs Annual improvements to HKFRSs 2012–2014 cycle3

1 Effective for annual periods beginning on or after 1 January 2018

2 Effective for annual periods beginning on or after 1 January 2017 3

Effective for annual periods beginning on or after 1 January 2016

HKFRS 9 Financial instruments

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 amended in 2011 includes the requirements for the classification and measurement of financial liabilities and for derecognition, and further amended in 2013 to include the new requirements for hedge accounting. Another revised version of HKFRS 9 was issued in September 2014 mainly to include (a) impairment requirements for financial assets; (b) limited amendments to the classification and measurement requirements by introducing a ’fair value through other comprehensive income’ measurement category for certain simple debt instruments.

All recognised financial assets that are within the scope of HKAS 39 “Financial instruments: Recognition and measurement” are subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured at fair value through other comprehensive income ("FVTOCI"). All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

Annual Report 2015 47

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

2. Application of New and Revised Hong Kong Financial Reporting Standards (“HKFRSs”)

• (Continued)

HKFRS 9 Financial instruments (Continued)

In relation to the impairment of financial assets, HKFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under HKAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised.

The directors of the Company anticipate that the adoption of HKFRS 9 in the future may have significant impact on amounts reported in respect of the Group’s financial assets. Regarding the Group’s financial assets, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

HKFRS 15 Revenue from contracts with customers

In July 2014, HKFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. HKFRS 15 will supersede the current revenue recognition guidance including HKAS 18 “Revenue”, HKAS 11 “Construction contracts” and the related Interpretations when it becomes effective.

The core principle of HKFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, HKFRS 15 introduces a 5-step approach to revenue recognition:

• Step 1: Identify the contract(s) with a customer

• Step 2: Identify the performance obligations in the contract

• Step 3: Determine the transaction price

• Step 4: Allocate the transaction price to the performance obligations in the contract

• Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

Under HKFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ’control’ of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in HKFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by HKFRS 15.

The directors of the Company will assess the impact on the application of HKFRS 15. For the moment, it is not practicable to provide a reasonable estimate of the effect of HKFRS 15 until the Group performs a detailed review.

Except for above, the directors of the Company anticipate that the application of the other new and revised HKFRSs will have no material impact on the consolidated financial statements.

48 APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

3. Significant Accounting Policies

Statement of compliance

The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange and by the disclosure requirements of the Hong Kong Companies Ordinance.

Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values, as explained in the accounting policies set out below. Historical cost is generally based on the fair value of the consideration given in exchange for goods.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. For non-financial assets, the Group takes into account the Group’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another parties that would use the asset in its highest and best use. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2 “Share-based payments”, leasing transactions that are within the scope of HKAS 17 “Leases”, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 “Inventories” or value in use in HKAS 36 “Impairment of assets”.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

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

• Level 3 inputs are unobservable inputs for the asset or liability.

The principal accounting policies are set out below.

49

Annual Report 2015

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

3. Significant Accounting Policies (Continued)

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company:

• has power over the investee;

• has exposed, or rights, to variable returns from its involvement with the investee; and

• has the ability to use its power over the investee to affect its returns.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Investments in associates

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. The financial statements of associates used for equity accounting purposes are prepared using uniform accounting policies as those of the Group for like transactions and events in similar circumstances. Under the equity method, investments in associates are initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associates. When the Group’s share of losses of an associate exceeds the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate.

An investment in an associate is accounted for using the equity method from the date on which the investee becomes an associate. On acquisition of the investment in an associate, any excess of the cost of investment over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment.

50

APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

3. Significant Accounting Policies (Continued)

Investments in associates (Continued)

Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 “Impairment of assets” as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases.

When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate that are not related to the Group.

Associate acquired in stages

When an associate is acquired in stages, any previously held equity interest, being an available-for-sale investment measured at cost, is remeasured to fair value at the date on which the Group obtains significant influence over the investee and is treated as a disposal of the previously held equity interest for fair value with a gain or loss on such disposal being recognised in profit or loss. The fair value of the previously held equity interest and convertible bonds issued by the investee upon conversion, at the date on which the Group obtains significant influence over the investee is the deemed cost of the investment in the associate.

Acquisition of additional interests in associates

Goodwill is recognised at acquisition date if there is excess of the consideration paid over the share of carrying amount of net assets attributable to the additional interests in associates acquired.

Disposal of partial interests in associates

For disposal of partial interests in an associate that does not result in the Group losing significant influence over the associate, the difference between the carrying amount of the associate attributable to the interests disposed of and its fair value is included in the determination of the gain or loss on the disposal of partial interests. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate on the same basis as would be required if the associate had directly disposed of the related assets or liabilities. Therefore, the proportion of the gain or loss that had previously been recognised in other comprehensive income (i.e. exchange reserve and investment revaluation reserve) relating to that reduction in ownership interest is reclassified to profit or loss as if the associate has disposed of the related assets or liabilities proportionately.

Annual Report 2015 51

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

3. Significant Accounting Policies (Continued)

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold in the normal course of business, net of discounts and sales related taxes.

Sales of goods

Revenue from the sale of goods is recognised when the goods are delivered and title has passed, at which time all the following conditions are satisfied:

• the Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

• the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits associated with the transaction will flow to the Group; and

• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Dividend and interest income

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established (provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably).

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

52 APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

3. Significant Accounting Policies (Continued)

Foreign currencies (Continued)

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. HK$) using exchange rates prevailing at the end of each reporting period. Income and expenses items are translated at the average exchange rates for the year. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of exchange reserve.

On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, a disposal involving loss of control over a subsidiary that includes a foreign operation, or a partial disposal of an interest in an associate that includes a foreign operation or which the retained interest becomes a financial asset, all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss. In addition, in relation to a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. partial disposal of associates that do not result in the Group losing significant influence), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from ’profit/loss before taxation’ as reported in the consolidated statement of profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

53

Annual Report 2015

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

3. Significant Accounting Policies (Continued)

Taxation (Continued)

Deferred tax (Continued)

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax for the year

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.

Leasing

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

Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease.

Retirement benefit costs

Payments to the Mandatory Provident Fund Scheme and local municipal government retirement scheme in the Peoples’ Republic of China (the “PRC”) are recognised as an expense when employees have rendered service entitling them to the contributions.

Property, plant and equipment

Property, plant and equipment are stated in the consolidated statement of financial position at cost less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of items of property, plant and equipment less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

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 the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

54 APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

3. Significant Accounting Policies (Continued)

Impairment losses on assets

At the end of the reporting period, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cashgenerating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

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 a cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or a cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are calculated using the weighted average method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statement of financial position when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets or financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Annual Report 2015 55

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

3. Significant Accounting Policies (Continued)

Financial instruments (Continued)

Financial assets

The Group’s financial assets are classified into one of the three categories, including financial assets at fair value through profit or loss (“FVTPL”), loans and receivables and available-for-sale financial assets. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases and sales of financial assets are recognised and derecognised on the trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL, of which interest income is included in net gains or losses.

Financial assets at fair value through profit or loss

Financial assets at FVTPL has two subcategories, including financial assets held for trading and those designated as at FVTPL at initial recognition.

A financial asset is classified as held for trading if:

• it has been acquired principally for the purpose of selling in the near term; or

• it is a part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

56

APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

3. Significant Accounting Policies (Continued)

Financial instruments (Continued)

Financial assets (Continued)

Financial assets at fair value through profit or loss (Continued)

A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and HKAS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL.

In addition, if the Group is required to separate an embedded derivative from its host contract, but is unable to measure the embedded derivative separately either at acquisition or at a subsequent financial reporting date, the entire hybrid contract is designated as at fair value through profit or loss.

Financial assets at FVTPL are measured at fair value, with changes in fair value arising from remeasurement recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial assets.

For FVTPL financial asset that does not have a quoted market price in an active market and contains embedded derivative that is linked to and will be settled by delivery of unquoted equity instruments in which the fair value cannot be reliably measured, the entire instrument is measured at cost plus accrued contractual interest less any identified impairment losses if the derivative component of such FVTPL financial asset is sufficiently significant to preclude it from obtaining a reliable estimate of the entire financial asset (see the accounting policy in respect of impairment loss on financial assets below).

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity investments.

Equity securities held by the Group that are classified as available-for-sale financial assets and are traded in an active market are measured at fair value at the end of each reporting period. Dividends on available-for-sale equity investments are recognised in profit or loss. Changes in the carrying amount of available-for-sale financial assets are recognised in other comprehensive income and accumulated under the heading of investment revaluation reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investment revaluation reserve is reclassified to profit or loss (see the accounting policy in respect of impairment loss on financial assets below).

The fair value of available-for-sale monetary financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate prevailing at the end of the reporting period. The foreign exchange gains and losses that are recognised in profit or loss are determined based on the amortised cost on monetary asset. Other foreign exchange gains and losses are recognised in other comprehensive income.

57

Annual Report 2015

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

3. Significant Accounting Policies (Continued)

Financial instruments (Continued)

Financial assets (Continued)

Available-for-sale financial assets (Continued)

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified impairment losses at the end of each reporting period (see the accounting policy in respect of impairment loss on financial assets below).

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables, deposits, loan receivable, loan notes, pledged bank deposits and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy in respect of impairment loss on financial assets below).

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of financial asset, the estimated future cash flows of the investment have been affected.

For an available-for-sale equity investment, a significant or prolonged decline in the fair value of that investment below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• breach of contract, such as default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial asset, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost or at cost plus accrued contractual interest, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

58 APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

3. Significant Accounting Policies (Continued)

Financial instruments (Continued)

Financial assets (Continued)

Impairment of financial assets (Continued)

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period in which the impairment takes place.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent 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.

Impairment losses on available-for-sale equity investments will not be reversed through profit or loss. Any increase in fair value subsequent to impairment loss is recognised directly in other comprehensive income and accumulated in investment revaluation reserve. For available-for-sale debt investments, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

Financial liabilities and equity instruments

Debt and equity instruments issued by a group entity are classified as either financial liability or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

Annual Report 2015 59

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

3. Significant Accounting Policies (Continued)

Financial instruments (Continued)

Financial liabilities and equity instruments (Continued)

Financial liabilities

Financial liabilities including trade and other payables and bank borrowings are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

Derivative financial instruments

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of the reporting period. The resulting gain or loss is recognised in profit or loss immediately.

Embedded derivatives

Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss.

Derecognition

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expires.

On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

60

APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

4. Capital Risk Management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The directors of the Company consider share capital and accumulated profits/losses are the capital of the Group. The Group’s overall strategy remains unchanged from prior year.

The directors of the Company review the capital structure by taking into account the cost and risk associated with the capital. Based on recommendations of the directors of the Company, the Group will balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the redemption of existing debt.

5. Revenue

	2015	2014
	HK$’000	HK$’000
Revenue from trading of commodities	256,372	774,512

6. Segment Information

Information regularly reviewed by the chief operating decision maker, represented by the executive directors of the Company, for the purpose of allocating resources to segments and assessing their performance focuses on nature of the Group’s businesses and operations. The Group’s reportable and operating segments under HKFRS 8 are therefore as follows:

• (i) Commodity business (trading of commodities); and

• (ii) Resource investment (trading of and investment in listed and unlisted securities).

The accounting policies of the reportable and operating segments are the same as the Group’s accounting policies described in note 3. Segment results represent the profit (loss) by each segment without allocation of central administration costs, directors’ salaries, share of results of associates, reversal of impairment losses on interests in associates, impairment loss on interest in an associate, loss on deemed disposal of partial interests in associates and finance costs. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and performance assessment.

61

Annual Report 2015

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

6. Segment Information (Continued)

Information regarding the Group’s reportable and operating segments is presented below.

Segment revenue and result

The following is an analysis of the Group’s revenue and results by reportable and operating segment.

For year ended 30 June 2015

Commodity business Resource investment HK$’000 HK$’000	Total HK$’000 256,372 88,480 (126,110) (1,491,185) 735,326 (4,048) (763) 76,631 (33,328) (6,915) (850,392) 2,466 (847,926)
Revenue 256,372 —
Gross sales proceeds from resource investment — 88,480
Segment profit (loss) 7,176 (133,286) Share of results of associates Reversal of impairment loss on interest in an associate Impairment loss on interest in an associate Loss on deemed disposal of partial interests in associates Unallocated corporate income Unallocated corporate expenses Finance costs Loss before taxation Income tax credit Loss for the year

62 APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

6. Segment Information (Continued)

Segment revenue and result (Continued)

For year ended 30 June 2014

Commodity business Resource investment HK$’000 HK$’000	Total HK$’000
Revenue 774,512 —	774,512
Gross sales proceeds from resource investment — 106,749	106,749
Segment profit (loss) 51,353 (7,596) Share of results of associates Reversal of impairment losses on interests in associates Impairment loss on interest in an associate Loss on deemed disposal of partial interest in an associate Unallocated corporate income Unallocated corporate expenses Finance costs Profit before taxation Income tax expense Profit for the year	43,757 244,622 673,647 (26,190) (305) 42,324 (57,810) (7,392)
	912,653 (5,393)
	907,260

Revenue reported above represents revenue generated from external customers. There were no inter-segment sales during both years.

Annual Report 2015 63

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

6. Segment Information (Continued)

Other segment information

Other segment information included in the consolidated statement of profit or loss for the year ended 30 June 2015 are as follows:

Amounts included in the measure of segment profit or loss or segment assets:

	Commodity	Resource
	business	investment	Unallocated	Total
	HK$’000	HK$’000	HK$’000	HK$’000
Interest income	988	4,082	76,267	81,337
Fair value change of investments held for trading	—	(61,956)	—	(61,956)
Fair value change of financial assets designated at
fair value through profit or loss	—	(3,504)	—	(3,504)
Impairment loss on an available-for-sale investment	—	(24,000)	—	(24,000)
Impairment loss on financial assets designated at
fair value through profit or loss	—	(44,467)	—	(44,467)

Amounts regularly provided to the chief operating decision maker but not included in the measure of segment profit or loss or segment assets:

Interests in associates	—	—	1,035,383	1,035,383
Loan notes	—	—	313,976	313,976
Loans receivable	—	—	223,062	223,062
Share of results of associates	—	—	(1,491,185)	(1,491,185)
Reversal of impairment loss on interest in
an associate	—	—	735,326	735,326
Impairment loss on interest in an associate	—	—	(4,048)	(4,048)
Interest income from loan notes	—	—	24,940	24,940
Interest income from loans receivable	—	—	51,287	51,287

64 APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

6. Segment Information (Continued)

Other segment information (Continued)

Other segment information included in the consolidated statement of profit or loss for the year ended 30 June 2014 are as follows:

Amounts included in the measure of segment profit or loss or segment assets:

	Commodity	Resource
	business	investment	Unallocated	Total
	HK$’000	HK$’000	HK$’000	HK$’000
Interest income	5,647	6,088	33,309	45,044
Fair value change of investments held for trading	—	13,363	—	13,363
Fair value change of financial assets designated at
fair value through profit or loss	—	(2,046)	—	(2,046)
Impairment loss on an available-for-sale investment	—	(11,214)	—	(11,214)
Impairment loss on financial assets designated at
fair value through profit or loss	—	(9,032)	—	(9,032)

Amounts regularly provided to the chief operating decision maker but not included in the measure of segment profit or loss or segment assets:

Interests in associates	—	—	2,241,023	2,241,023
Loan notes	—	—	235,934	235,934
Loans receivable	—	—	238,754	238,754
Share of results of associates	—	—	244,622	244,622
Reversal of impairment losses on interests in
associates	—	—	673,647	673,647
Impairment loss on interest in an associate	—	—	(26,190)	(26,190)
Interest income from loan notes	—	—	11,879	11,879
Interest income from loans receivable	—	—	21,357	21,357

Annual Report 2015 65

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

6. Segment Information (Continued)

Segment assets and liabilities

An analysis of the Group’s assets and liabilities by reportable and operating segment is set out below:

	2015	2014
	HK$’000	HK$’000
Commodity business	153,055	262,064
Resource investment	261,855	342,687
Total segment assets	414,910	604,751
Interests in associates	1,035,383	2,241,023
Loan notes	313,976	235,934
Loans receivable	223,062	238,754
Unallocated	19,432	16,574
Consolidated assets	2,006,763	3,337,036
Commodity business	2,837	128,425
Resource investment	66,088	73,764
Total segment liabilities	68,925	202,189
Unallocated	10,125	5,646
Consolidated liabilities	79,050	207,835

For the purposes of monitoring segment performance and allocating resources between segments:

• all assets are allocated to reportable segments other than interests in associates, property, plant and equipment, loan notes, loans receivable, other receivables and certain bank balances and cash.

• all liabilities are allocated to reportable segments other than certain other payables and tax payable.

• borrowings are allocated while the finance costs are not allocated to respective reportable segments.

66

APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

6. Segment Information (Continued)

Geographical information

The Group’s revenue from external customers and information about non-current assets (excluding financial instruments) by geographical location of the customers and assets (where the property, plant and equipment are located and where the associates are incorporated/listed) respectively are detailed below.

	Revenue from	Revenue from
	external customers		Non-current	assets
	2015	2014	2015	2014
	HK$’000	HK$’000	HK$’000	HK$’000
Australia	—	—	998,252	2,204,046
Hong Kong	210,947	701,725	1,442	2,000
The PRC	45,425	72,787	37,517	37,369
United Kingdom	—	—	—	924
	256,372	774,512	1,037,211	2,244,339

Information about major customers

Revenue from customers of the corresponding year contributing over 10% of the total sales of the Group are under segment of commodity business and as follows:

	2015	2014
	HK$’000	HK$’000
Customer A	62,409	241,965
Customer B	N/A 1	278,736
Customer C	N/A 1	90,801
Customer D	74,301	90,223
Customer E	45,425	N/A 1
Customer F	45,937	N/A 1
Customer G	28,300	N/A 1

1 The transactions with the customer did not contribute over 10% of the total sales of the Group during the relevant year.

Annual Report 2015 67

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

7. Other Gains and Losses

	2015 HK$’000	2014 HK$’000
Fair value change of investments held for trading_(Note)_	(61,956)	13,363
Fair value change of derivative financial instruments	(2,754)	(873)
Fair value change of financial assets designated at fair value through
profit or loss	(3,504)	(2,046)
Impairment loss on an available-for-sale investment	(24,000)	(11,214)
Reversal of impairment losses on interests in associates	735,326	673,647
Impairment loss on interest in an associate	(4,048)	(26,190)
Impairment loss on loan receivable	(1,610)	(9,129)
Impairment loss on financial assets designated at fair value through
profit or loss	(44,467)	(9,032)
Loss on deemed disposal of partial interests in associates	(763)	(305)
Net foreign exchange (loss) gain	(5,521)	914
Gain on disposal of an available-for-sale investment	—	617
Loss on written-off of property, plant and equipment	(924)	—
Impairment loss on interest receivable	(188)	—
	585,591	629,752

Note: Net realised loss of HK$16,019,000 (2014: net realised gain of HK$25,631,000) on disposal of investments held for trading are included in fair value change of investments held for trading.

8. Other Income

	2015	2014
	HK$’000	HK$’000
Dividend income from investments held for trading	1,955	375
Interest income from bank deposits	1,056	6,728
Interest income from loan notes	24,940	11,879
Interest income from financial assets designated at fair value
through profit or loss	4,054	5,080
Interest income from loans receivable	51,287	21,357
Others	1,464	2,803
	84,756	48,222

68 APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

9. Finance Costs

10.	2015 2014 HK$’000 HK$’000
	Interest on borrowings wholly repayable within five years: Bank borrowings 235 4,571 Securities margin financing 6,680 1,628 Other borrowing — 1,193
	6,915 7,392
	(Loss) Profit Before Taxation

	2015	2014
	HK$’000	HK$’000
(Loss) profit before taxation has been arrived at after charging (crediting):
Staff costs, including directors’ emoluments
— salaries and allowances	16,003	21,985
— staff quarters	1,006	882
— retirement benefits schemes contributions	235	891
Total staff costs	17,244	23,758
Auditor’s remuneration	895	850
Cost of goods recognised as an expense	214,512	599,381
Depreciation of property, plant and equipment	564	949

Annual Report 2015 69

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

11. Income Tax Credit (Expense)

	2015 HK$’000	2014 HK$’000
Current tax
Hong Kong Profits Tax	—	(5,213)
PRC Enterprise Income Tax	(140)	—
	(140)	(5,213)
Over (under) provision in prior periods	2,606	(180)
Total income tax credit (expense)	2,466	(5,393)

Hong Kong Profits Tax is calculated at 16.5% on the estimated assessable profit. No provision for Hong Kong Profits Tax was made for the year ended 30 June 2015 as the companies of the Group operated in Hong Kong incurred a tax losses for the year.

Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% for both years.

The tax credit (charge) for the year can be reconciled to the (loss) profit before taxation per the consolidated statement of profit or loss as follows:

	2015	2014
	HK$’000	HK$’000
(Loss) profit before taxation	(850,392)	912,653
Tax at Hong Kong profits tax rate of 16.5%	140,315	(150,588)
Tax effect of expenses not deductible for tax purpose	(25,918)	(15,972)
Tax effect of income not taxable for tax purpose	135,300	123,785
Tax effect of tax losses not recognised	(3,996)	(4,570)
Tax effect of utilisation of tax losses previously not recognised	173	1,807
Tax effect of share of results of associates	(246,046)	40,363
Over(under)provision in prior periods	2,606	(180)
Effect of different tax rate of subsidiaries operating in other jurisdictions	127	(76)
Others	(95)	38
Tax credit (charge) for the year in respect of Hong Kong and the PRC	2,466	(5,393)

At 30 June 2015, the Group had unused tax losses of HK$157,272,000 (2014: HK$134,108,000) available for offset against future profits. No deferred tax asset has been recognised in respect of such losses due to the unpredictability of future profit streams. The tax losses may be carried forward indefinitely.

70 APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

12. Directors’ and Employees’ Emoluments

An analysis of emoluments paid and payable to directors of the Company for the years ended 30 June 2015 and 2014 is set out as follows:

Year ended 30 June 2015

		Salaries	Retirement
		and other	benefits
		benefits	schemes
	Fee	in kind	contributions	Total
	HK$’000	HK$’000	HK$’000	HK$’000
Executive directors
Ms. Chong Sok Un	40	1,200	—	1,240
Mr. Andrew Ferguson_(Note a)_	—	4,250	18	4,268
Mr. Kong Muk Yin	360	—	—	360
Non-executive directors
Mr. Lee Seng Hui	190	—	—	190
Mr. So Kwok Hoo	120	—	—	120
Mr. Peter Anthony Curry, alternate director of
Mr. Lee Seng Hui_(Note b)_	—	—	—	—
Independent non-executive directors
Dr. Wong Wing Kuen, Albert	190	—	—	190
Mr. Chang Chu Fai, Johnson Francis	190	—	—	190
Mr. Robert Moyse Willcocks	190	—	—	190
	1,280	5,450	18	6,748

Annual Report 2015 71

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

12. Directors’ and Employees’ Emoluments (Continued)

Year ended 30 June 2014

		Salaries	Retirement
		and other	benefits
		benefits	schemes
	Fee	in kind	contributions	Total
	HK$’000	HK$’000	HK$’000	HK$’000
Executive directors
Ms. Chong Sok Un	40	1,200	—	1,240
Mr. Andrew Ferguson_(Note a)_	—	4,113	15	4,128
Mr. Kong Muk Yin	300	—	—	300
Non-executive directors
Mr. Lee Seng Hui	190	—	—	190
Mr. So Kwok Hoo	120	—	—	120
Mr. Peter Anthony Curry_(Note b)_	110	—	—	110
Independent non-executive directors
Dr. Wong Wing Kuen, Albert	190	—	—	190
Mr. Chang Chu Fai, Johnson Francis	190	—	—	190
Mr. Robert Moyse Willcocks	190	—	—	190
	1,330	5,313	15	6,658

Notes:

(a) Mr. Andrew Ferguson is also the chief executive of the Company and his emoluments disclosed above include those for services rendered by him as chief executive.

(b) Mr. Peter Anthony Curry resigned as non-executive director on 1 June 2014. On the same date, Mr. Peter Anthony Curry was appointed as an alternate director of Mr. Lee Seng Hui.

There was no arrangement under which a director waived or agreed to waive any remuneration during the years ended 30 June 2015 and 2014.

No emoluments were paid by the Group to any of the directors or the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office during the years ended 30 June 2015 and 2014.

72

APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

12. Directors’ and Employees’ Emoluments (Continued)

Employees’ emoluments

Of the five individuals with the highest emoluments in the Group, one (2014: one) was director of the Company whose emoluments are included in the disclosures set out above. The emoluments of the remaining four (2014: four) individuals were as follows:

	2015	2014
	HK$’000	HK$’000
Salaries and allowances	6,616	6,616
Retirement benefits schemes contributions	72	61
	6,688	6,677
Their emoluments were within the following bands:
	2015	2014
	No. of	No. of
	employees	employees
HK$1,000,001 to HK$2,000,000	4	4

13. (Loss) Earnings Per Share

The calculation of the basic (loss) earnings per share attributable to owners of the Company is based on the following data:

(Loss) earnings per share

The calculation of basic (loss) earnings per share is based on the loss for the year ended 30 June 2015 attributable to owners of the Company of HK$847,926,000 (2014: profit for the year of HK$907,260,000).

Number of shares

Number of shares
	2015	2014
Weighted average number of ordinary shares used in the calculation
of basic (loss) earnings per share	6,128,258,072	6,705,736,209

For the year ended 30 June 2015 and 2014, no separate diluted earnings per share information has been presented as there was no potential ordinary shares outstanding.

73

Annual Report 2015

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

14. Dividends

No dividend was paid or proposed during the year ended 30 June 2015, nor has any dividend been proposed since the end of the reporting period (2014: nil).

15. Property, Plant and Equipment

	Leasehold
	improvements,
	furniture and	Office		Motor
	fixtures	equipment	Computers	vehicles	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
COST
At 1 July 2013	2,017	119	1,631	1,797	5,564
Additions	1,179	70	19	—	1,268
Exchange adjustments	37	4	41	(8)	74
At 30 June 2014	3,233	193	1,691	1,789	6,906
Written off	(803)	(86)	(402)	—	(1,291)
At 30 June 2015	2,430	107	1,289	1,789	5,615
DEPRECIATION
At 1 July 2013	1,380	50	672	1,451	3,553
Charge for the year	362	64	326	197	949
Exchange adjustments	7	2	8	(8)	9
At 30 June 2014	1,749	116	1,006	1,640	4,511
Charge for the year	228	18	205	113	564
Eliminated on written off	(183)	(48)	(136)	—	(367)
At 30 June 2015	1,794	86	1,075	1,753	4,708
CARRYING AMOUNTS
At 30 June 2015	636	21	214	36	907
At 30 June 2014	1,484	77	685	149	2,395

74

APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

15. Property, Plant and Equipment (Continued)

The above items of property, plant and equipment are depreciated on a straight-line basis over the following years per annum:

Leasehold improvements, furniture and fixtures	Over the lease terms–5 years
Office equipment	5 years
Computers	5 years
Motor vehicles	5 years

16. Interests in Associates

	2015	2014
	HK$’000	HK$’000
Cost of investments in associates
Listed in Australia	2,223,339	2,223,339
Unlisted	54,708	50,687
Share of post-acquisition (losses) profits and other comprehensive income,
net of dividends received	(436,737)	1,504,202
Impairment losses recognised	(805,927)	(1,537,205)
	1,035,383	2,241,023
Fair value of listed investments	1,161,014	2,217,823

75

Annual Report 2015

For the year ended 30 June 2015

Notes to the Consolidated Financial Statements

16. Interests in Associates (Continued)

Details of the Group’s associates at 30 June 2015 and 2014 are as follows:

		Country of
		incorporation/	Class of	Proportion
	Listed/	establishment	shares	of ownership interest
Name of entity	unlisted	and operation	held	and voting power held		Principal activities
				2015	2014
Mount Gibson Iron	Listed	Australia	Ordinary	26.61%	26.61%	Mining of direct shipping hematite iron
Limited (“MGX”)						ore from two mines in Western
(Note a)						Australia — Extension Hill and
						Koolan Island.
Metals X Limited (“MLX”)	Listed	Australia	Ordinary	23.89%	24.02%	Mining of gold from the Higginsville
(Note b)						and South Kalgoorlie gold projects
						and tin from the Renison tin mine;
						developing the Central Murchison
						Gold Project and Rover Gold
						Project; and exploration of the
						Wingellina Nickel Project.
Alufer Mining Limited	Unlisted	Bailiwick of	Ordinary	25.83%	26.17%	Mineral exploration and development
(“Alufer”)(Note c)		Guernsey				of bauxite in the Republic of
						Guinea.
平港(上海)貿易	Unlisted	The PRC	N/A	40%	40%	Wholesales, import and export,
有限公司						agency service and relevant service
						for coal, coke, material for
						metallurgy, mineral products,
						chemical engineering products,
						mechanical and electrical equipment
						and spare parts, steel and steel
						products, construction material and
						related products and technology.

Notes:

• (a) During the year, the Group’s shareholdings in MGX is diluted as MGX issued total number of 220,853 (2014: nil) new shares and thus, a loss on deemed disposal of partial interest of HK$451,000 (2014: nil) was recognised in profit or loss.

• (b) During the year, the Group’s shareholdings in MLX decreased from 24.02% to 23.89% (2014: 24.07% to 24.02%) as a result of 4 to 1 share consolidation and issuance of new shares by MLX, a loss on deemed disposal of partial interest of HK$312,000 (2014: HK$305,000) was recognised in profit or loss.

• (c) During the year, the Group made additional investment of HK$4,021,000 (2014: HK$26,190,000) into Alufer. The Group’s interest in Alufer decreased from 26.71% to 25.83% due to the issue of new shares to other shareholders of Alufer.

76

APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

16. Interests in Associates (Continued)

Impairment assessment for the year ended 30 June 2015

At 30 June 2015, management of the Group carried out review on impairment on the carrying amount of its interests in MGX by comparing its recoverable amount (higher of the value in use and fair value less cost of disposal (market value)) with its carrying amount. In determining the value in use of the investment, the Group estimated the present value of the estimated future cash flows expected to arise from the operations of the investment and from the ultimate disposal, by using a discount rate of 11% to discount the cash flow projection to the net present value. The market value of MGX was determined based on the closing price as at 30 June 2015. At 30 June 2015, the recoverable amount of the Group’s interest in MGX which represented the fair value less cost of disposal was higher than the carrying amount, accordingly, impairment loss of HK$735,326,000 recognised in prior years was reversed in profit or loss during the year ended 30 June 2015. The fair value of MGX is with reference to its closing share price as at 30 June 2015.

Due to the insolvent financial position of Alufer and uncertainty of Alufer in raising new funds to continue with the exploration of its projects, the directors of the Company determined to recognise an impairment loss of HK$4,048,000 during the year ended 30 June 2015.

Impairment assessment for the year ended 30 June 2014

At 30 June 2014, the respective market values of listed associates determined based on the closing prices as at 30 June 2014 were higher than the carrying amount of the Group’s interests in listed associates. Management of the Group carried out review on impairment on the carrying amounts of its interests in listed associates individually as a single asset by comparing their recoverable amounts (higher of the value in use and fair value less cost of disposal) with their respective carrying amounts. In determining the value of use of the investments, the Group estimated the present value of the estimated future cash flows expected to arise from the operations of the investments and from the ultimate disposal, by using discount rate of 11% to discount the cash flow projections to net present values. During the year ended 30 June 2014, the recoverable amounts of the Group’s listed associates which represented the fair value less cost of disposal were higher than their carrying amounts, accordingly, impairment losses of HK$287,495,000 and HK$386,152,000 recognised in prior years for MGX and MLX respectively were reversed in profit or loss. The fair values of MGX and MLX were with reference to their respective closing share prices as at 30 June 2014.

Due to the insolvent financial position and the uncertainty of Alufer in raising new funds to continue with the exploration of its projects, the directors of the Company determined to recognise an impairment loss against the entire carrying value of HK$26,190,000 of the investment.

Annual Report 2015 77

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

16. Interests in Associates (Continued)

The summarised consolidated financial information in respect of each of the Group’s material associates is set out below.

MGX

	2015	2014
	HK$’000	HK$’000
Non-current assets	224,316	4,790,653
Current assets	2,228,307	6,915,511
Current liabilities	(394,012)	(1,079,313)
Non-current liabilities	(236,717)	(1,408,756)
Net assets	1,821,894	9,218,095
Revenue	2,015,149	6,371,502
(Loss) profit for the year	(5,922,694)	686,660
Other comprehensive (expense) income for the year	(1,213,365)	278,957
Total comprehensive (expense) income for the year	(7,136,059)	965,617
Dividend paid by MGX	260,142	157,505
Group’s share of (loss) profit of MGX for the year	(1,553,463)	181,214
Group’s share of other comprehensive (expense) income of MGX for the year	(335,285)	75,226
Exchange differences in goodwill and accumulated impairment included in interests
in MGX	116,244	—
Total	(1,772,504)	256,440
Dividend paid by MGX attributable to the Group	78,911	41,912

78 APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

16. Interests in Associates (Continued)

MGX (Continued)

Reconciliation of the above summarised consolidated financial information to the carrying amount of MGX recognised in the consolidated financial statements:

	2015	2014
	HK$’000	HK$’000
Net assets of MGX attributable to owners of MGX	1,821,894	9,218,095
Proportion of the Group’s ownership interest in MGX	26.61%	26.61%
Goodwill	424,966	520,760
Impairment loss recognised	(563,651)	(1,511,015)
Carrying amount of the Group’s interest in MGX	346,121	1,462,681
MLX
	2015	2014
	HK$’000	HK$’000
Non-current assets	942,546	854,217
Current assets	1,963,054	2,295,098
Current liabilities	(376,960)	(267,547)
Non-current liabilities	(464,127)	(605,333)
Net assets	2,064,513	2,276,435
Revenue	2,048,589	1,692,976
Profit for the year	266,099	265,825
Other comprehensive (expense) income for the year	(414,429)	62,798
Total comprehensive (expense) income for the year	(148,330)	328,623
Dividend paid by MLX	73,034	—
Group’s share of profit of MLX for the year	62,143	63,875
Group’s share of other comprehensive (expense) income of MLX for the year	(98,089)	14,398
Exchange difference on goodwill included in interest in MLX	(35,748)	—
Total	(71,694)	78,273
Dividend paid by MLX attributable to the Group	17,219	—

79

Annual Report 2015

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

16. Interests in Associates (Continued)

MLX (Continued)

Reconciliation of the above summarised consolidated financial information to the carrying amount of MLX recognised in the consolidated financial statements:

	2015	2014
	HK$’000	HK$’000
Net assets of MLX attributable to owners of MLX	2,064,513	2,276,435
Proportion of the Group’s ownership interest in MLX	23.89%	24.02%
Goodwill	158,812	194,560
Carrying amount of the Group’s interest in MLX	652,131	741,366

Aggregate information of associates that are not individually material

	2015	2014
	HK$’000	HK$’000
The Group’s share of profit (loss)	135	(467)
The Group’s share of other comprehensive income (expense)	20	(465)
The Group’s share of total comprehensive income (expense)	155	(932)
Aggregate carrying amount of the Group’s interests in these associates	37,131	36,976

80 APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

17. Available-For-Sale Investments

	2015 HK$’000	2014 HK$’000
Unlisted investments:
Unlisted equity securities, at cost_(Note a)_	37,551	38,008
Less: impairment losses recognised	(35,214)	(11,214)
	2,337	26,794
Unlisted equity securities, at fair value_(Note b)_	40,138	—
	42,475	26,794

Notes:

• (a) These unlisted equity investments represent investments in unlisted equity securities issued by five (2014: five) private entities incorporated in the British Virgin Islands, the United Kingdom, the United States of America and Australia (2014: the British Virgin Islands, the United Kingdom, the United States of America and Australia). They are measured at cost less impairment at the end of the reporting period because of the range of reasonable fair value estimates is so significant that the directors of the Company are of the opinion that their fair values cannot be reliably measured.

During the year ended 30 June 2014, the Group acquired 7.23% equity interest in an entity incorporated in British Virgin Islands at a consideration of HK$24,000,000 in cash. During the year ended 30 June 2015, due to the insolvent financial position of this private investee entity, the directors of the Company determined to recognise an impairment loss of HK$24,000,000 against the entire carrying value of this investment.

During the year ended 30 June 2014, due to the uncertainty in raising new funds by a private investee entity to continue with the development of its project, the directors of the Company determined to recognise an impairment loss of HK$11,214,000 against the entire carrying value of this investment.

• (b) During the year ended 30 June 2015, the Group acquired 7% equity interest in an entity incorporated in the British Virgin Islands through the settlement arrangement of an unlisted convertible bonds, details of which are disclosed in note 18. The investment is carried at fair value. Details of the fair value measurement of this investment are disclosed in note 35.

Annual Report 2015 81

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

18. Financial Assets Designated at Fair Value Through Profit or Loss

	2015 HK$’000	2014 HK$’000
Investment in convertible bonds designated at fair value through profit or loss	—	73,722
Listed investments:
— Convertible bonds listed in the United Kingdom (“Bond A”)	—	3,522
Unlisted investments:
— Convertible bonds	11,317	79,232
— Impairment recognised	(11,317)	(9,032)
	—	70,200
	—	73,722
The following is the analysis of financial assets designated at fair value through profit or loss for financial		reporting
purposes:

	2015	2014
	HK$’000	HK$’000
Non-current assets	—	3,522
Current assets	—	70,200
	—	73,722

82 APAC Resources Limited

For the year ended 30 June 2015

Notes to the Consolidated Financial Statements

18. Financial Assets Designated at Fair Value Through Profit or Loss (Continued)

The listed investments are measured at their quoted market prices at 30 June 2015 and 2014. During the year ended 30 June 2015, Bond A issuer did not make interest payment due in April 2015 and received an order of protection pursuant to the Companies Creditors Arrangement Act (“CCAA”), Canada. A monitor has been appointed to pursue a process for the solicitation process in the Bond A issuer’s business, property and assets pursuant to the CCAA. Thus, the carrying value of these investments was nil at 30 June 2015 and the change in fair value of HK$3,504,000 was recognised in profit or loss during the year. Major terms of the listed investments are as follows:

Date of maturity (Note a) 6 April 2017 Coupon rate per annum (payable semi-annually) 8% Conversion period 5 August 2012 to 6 April 2017 Conversion price US$0.665 Face value US$1,000,000

Note a: To the extent not previously repurchased and cancelled, repaid or converted by the date of maturity, each bond shall be redeemed at its principal amount in cash.

The unlisted investments represented investments in unlisted convertible bonds issued by Alufer amounting to HK$11,317,000 (2014: HK$9,032,000) (“Alufer Bonds”) as at 30 June 2015 and a private entity incorporated in the British Virgin Islands amounting to HK$70,200,000 (“Bond B”) as at 30 June 2014. For the convertible bonds which contain embedded derivatives that are linked to and will be settled by delivery of unquoted equity instruments in which the fair value cannot be reliably measured, and the directors of the Company are of the opinion that the conversion option component of these hybrid instruments may be sufficiently significant to preclude them from obtaining a reliable estimate of the entire instrument, they are measured at cost plus accrued contractual interest less impairment at the end of the reporting period.

The followings are the major terms of the unlisted investments:

	Alufer Bonds	Alufer Bonds	Bond B
Date of maturity	30 September 2016_(Note b)_		4 June 2015_(Note c)_
Coupon rate per annum	6%		6%
Conversion price	Principal amount thereon can be converted into		10% to 20% discount to the exchange price
	ordinary shares at the same issue or sale		upon the occurrence of qualifying events
	price upon either of:
	(a)	A “Qualifying Financing” event, which
		means the issuance or sale by Alufer, in a
		single round of financing, of at least
		US$3,000,000 worth of ordinary shares in
		aggregate following the date of the
		issuance of the Alufer Bonds; or
	(b)	An “Admission”, which means the
		successful admission of listing of the
		ordinary shares of Alufer on the AIM
		Market of the London Stock Exchange or
		any other recognised investment
		exchange.
Conversion period	From	subscription dates to 30 September 2016	4 June 2013 to 4 June 2015
Face value	US$1,453,000 (2014: US$1,158,000)		US$9,000,000

83

Annual Report 2015

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

18. Financial Assets Designated at Fair Value Through Profit or Loss (Continued)

Note b : Unless converted or disposed of prior to maturity, the bonds would be redeemed on the maturity date at the redemption amount which is the principal amount of the bond outstanding.

Due to the insolvent financial position and the uncertainty of Alufer in raising new funds to continue with the exploration of its project, the directors of the Company determined to recognise an impairment loss against the entire carrying value of HK$2,285,000 (2014: HK$9,032,000) of the bonds.

Note c : Bond B was matured on 4 June 2015. Pursuant to the settlement agreement entered into between the Group, Bond B issuer and an independent third party (“Party A”) dated 19 June 2015 and the sale and purchase agreement entered into between the Group and Party A dated 19 June 2015, in lieu of the cash payment of the principal of Bond B together with accrued interest amounting to approximately US$10.62 million (approximately HK$82,320,000) to the Group, Party A transferred 7% equity interest of a private company (the “Target Company”) to the Group as settlement of the principal of Bond B together with accrued interest. The principal activity of the Target Company is its holding of 100% interest in a property development project in the PRC. The directors of the Company designated its investment in the Target Company as an available-for sale investment (see note 17).

The difference of HK$42,182,000 between the fair value of 7% equity interest in the Target Company of HK$40,138,000 and the carrying amount of Bond B and related interest receivable in aggregate of HK$82,320,000 are then charged to the profit or loss during the year ended 30 June 2015.

19. Loans Receivable

	2015	2014
	HK$’000	HK$’000
Fixed-rate loan_(Note a)_	223,062	218,320
Interest-free loan_(Note b)_	—	20,434
	223,062	238,754
The following is the analysis of loans receivable for financial reporting purpose:
Non-current assets	—	20,434
Current assets	223,062	218,320
	223,062	238,754

Notes:

(a) The loan receivable amounting to HK$218,320,000 bears fixed-rate interests of 24% per annum and will mature on 28 January 2016 pursuant to the supplemental loan agreement dated 30 April 2015. The loan is secured by a floating charge on the assets of the borrower, mortgage of shares of the borrower and one of the borrower’s subsidiaries incorporated in the PRC (“PRC CoA”), mortgage of a parcel of land and properties held by the PRC CoA, assignment of loan due by a company incorporated in the PRC (“PRC CoB”), in which the PRC CoA has a non-controlling interest, to the PRC CoA and the pre-sale agreement in relation to certain properties signed between the Group and the PRC CoB which will be cancelled upon repayment of the loan.

84

APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

19. Loans Receivable (Continued)

Notes: (Continued)

• (a) (Continued)

The interest receivable on this loan from 28 May 2015 to 30 June 2015 has been overdue. The borrower has requested and the Company agreed that interest from 28 May 2015 to 27 October 2015 will be settled on 28 November 2015.

Having considered the values of the collaterals obtained, the directors of the Company are in the opinion that no impairment is required.

• (b) The loan receivable from an investee amounting to HK$20,434,000 was non-interest bearing as at 30 June 2014. As at 30 June 2014, taking into consideration of the financial information of the investee, impairment loss of HK$9,129,000 was recognised in profit or loss. During the year ended 30 June 2015, the investee only repaid HK$18,824,000 to the Group. The directors of the Company consider the remaining outstanding balance due of HK$1,610,000 from the investee is doubtful and thus an impairment loss of HK$1,610,000 was recognised in profit or loss.

20. Loan Notes

The Group subscribed loan notes with a nominal value of US$30,000,000 which bear 8.5% coupon interest per annum and will mature on 26 November 2016 from Mulpha SPV Limited (“Mulpha”), a limited liability company incorporated in Malaysia. The Group subscribed another loan notes from Mulpha in September 2014 with a nominal value of US$10,000,000 which bear 8.0% coupon interest per annum and will mature on 5 September 2016.

These loan notes are guaranteed by Mulpha International Bhd., a company incorporated in Malaysia whose shares are listed on the Main Market of Bursa Malaysia Securities Berhad. These loan notes can be early redeemed by Mulpha before the maturity date at the nominal amount of the loan notes plus accrued unpaid interest up to the date of redemption. The early redemption option by Mulpha is closely related to the host debt and is therefore not separately accounted for.

The movement of loan notes during the year is as follows:

	HK$’000
At 1 July 2013	—
Investment in loan notes	232,599
Interest income	1,934
Exchange difference	1,401
At 30 June 2014	235,934
Investment in loan notes	77,509
Interest income	24,940
Interest received	(22,867)
Exchange difference	(1,540)
At 30 June 2015	313,976

85

Annual Report 2015

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

21. Trade Receivables, Other Receivables and Deposits

	2015 HK$’000	2014 HK$’000
Trade receivables	—	65,787
Other deposits and prepayments	14,508	12,151
	14,508	77,938
Presented as non-current assets	921	921
Presented as current assets	13,587	77,017
	14,508	77,938

The Group allows an average credit period of 90 days to its trade customers. The Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by senior management.

The following is an aged analysis of trade receivables presented based on the invoice date at the end of the reporting period, which approximated to the respective revenue recognition dates:

		2015	2014
		HK$’000	HK$’000
	0 to 90 days	—	65,787
	Inventories
		2015	2014
		HK$’000	HK$’000
	Iron ores, at cost	—	39,798

22. Inventories

86

APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

23. Investments Held for Trading

	2015 HK$’000	2014 HK$’000
Listed securities:
— Equity securities listed in Hong Kong	60,388	504
— Equity securities listed in the United Kingdom	9,353	16,840
— Equity securities listed in Australia	121,262	184,674
— Equity securities listed in Canada	3,757	23,181
	194,760	225,199

As at 30 June 2015 and 2014, in the opinion of directors of the Company, particulars of the Group’s significant investments included in investments held for trading are as follows:

				Percentage of
			Number of	issued share
	Country of	Class of	shares held	capital held
Name of company	incorporation	shares	by the Group	by the Group
ABM Resources NL (“ABM”)	Australia	Ordinary	50,872,914	14.82%
			(2014: 43,194,067)	(2014: 17.11%)

The Group has less than one-fifth of the voting power of ABM and has the intention to hold it for trading. Subsequent to the Group’s acquisition of ABM, ABM has invited and appointed Mr. Andrew Ferguson (Chief Executive Officer and an executive director of the Company) to the board of directors of ABM as a non-executive director. As the Group does not have any right to appoint directors to the board of directors of ABM either at the acquisition date or at the end of the reporting period, and the appointment of Mr. Andrew Ferguson is solely at the discretion of the nomination committee of ABM due to his industry experience, ABM has not been regarded as an associate of the Group despite Mr. Andrew Ferguson’s appointment by ABM.

24. Pledged Bank Deposits and Bank Balances and Cash

Cash at banks earns interest at floating rates based on daily bank deposit rates, ranging from 0.01% to 1.15% (2014: 0.01% to 1.15%) per annum.

Pledged bank deposits represent deposits pledged to banks to secure the Group’s trade and banking facilities, and carry variable interest rate with 0.18% (2014: 0.06% to 0.13%) per annum.

87

Annual Report 2015

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

25. Trade and Other Payables

	2015 HK$’000	2014 HK$’000
Trade payables	—	58,839
Other payables	15,964	16,145
	15,964	74,984

The following is an aged analysis of trade payables presented based on the invoice date at the end of the reporting period:

				2015	2014
				HK$’000	HK$’000
0	to	90	days	—	58,839

26. Borrowings

	2015	2014
	HK$’000	HK$’000
Securities margin loans repayable on demand_(Note a)_	56,688	68,639
Secured bank borrowings repayable within one year_(Note b)_	—	57,578
	56,688	126,217

Notes:

(a) Securities margin loans

These represent securities margin financing received from a stock broking, futures and options broking house. Additional funds or collateral are required if the balance of the borrowings exceeds the eligible margin value of securities pledged to the broking house. When the Group is unable to repay securities margin loans on demand, the collateral can be sold at the broking house’s discretion to settle any outstanding borrowings owed by the Group. The entire loans are secured by the Group’s interests in associates as disclosed in note 33, repayable on demand and bear variable interest with an average of 6.25% (2014: 6.25%) per annum. The securities margin loans are denominated in HK$.

(b) Secured bank borrowings

The borrowings was denominated in HK$ and interest bearing at Hong Kong Interbank Offered Rate plus 2.5% per annum. The entire loans were secured by the Group’s pledged bank deposits as disclosed in note 33.

88

APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

27. Derivative Financial Instruments

	2015 HK$’000	2014 HK$’000
Gross-settled option contracts linked with equity securities	3,627	873

The amount represents the fair value of gross-settled option contracts linked with equity securities listed in Hong Kong. The Group shall acquire equity securities at a contracted price if the spot price is between the cap and the contracted price. Where the spot price is higher than the cap, the contracts will then be terminated. Where the spot price is lower than the contracted price, the Group shall acquire the equity securities based on the contracted quantity multiplied by two. These contracts will be settled monthly throughout the contract term.

28. Share Capital

Authorised and issued share capital

	2015		2014
	Number of		Number of
	shares	Amount	shares	Amount
		HK$’000		HK$’000
Ordinary shares of HK$0.10 each
Authorised	20,000,000,000	2,000,000	20,000,000,000	2,000,000
Issued and fully paid:
At beginning of the year	6,131,927,990	613,193	6,811,927,990	681,193
Shares repurchased and cancelled_(Note a)_	(4,160,000)	(416)	(680,000,000)	(68,000)
At end of the year	6,127,767,990	612,777	6,131,927,990	613,193

Note:

(a) Repurchase of shares

On 23 January 2014, the Company announced a conditional cash offer to the shareholders of the Company to repurchase 680,000,000 shares of the Company at an offer price of HK$0.18 per share. Details of this repurchase of shares are set out in the Company’s announcement dated 23 January 2014. The repurchase of the Company’s shares was approved by the shareholders of the Company on 4 April 2014. On 5 May 2014, the Company completed the repurchase of 680,000,000 of its own shares at an aggregate amount of HK$122,400,000. The repurchased shares were cancelled on 5 May 2014 and the issued share capital of the Company was reduced by the nominal value thereof.

Annual Report 2015 89

For the year ended 30 June 2015

Notes to the Consolidated Financial Statements

28. Share Capital (Continued)

Authorised and issued share capital (Continued)

Note: (Continued)

(a) Repurchase of shares (Continued)

During the year ended 30 June 2015, the Company repurchased its own shares through the Stock Exchange for cancellation as follows:

		Number of
		ordinary			Aggregate
		shares of	Price per share		amount
Month	of cancellation	HK$0.10 each	Highest	Lowest	paid
			HK$	HK$	HK$’000
August	2014	4,160,000	0.180	0.173	745

The repurchase of the Company’s shares during the year were effected by the directors of the Company, pursuant to the mandate from the shareholders, with a view to benefiting shareholders as a whole by enhancing the net asset value per share of the Group.

The premium payable on repurchase of the shares of HK$329,000 (2014: HK$54,400,000) was charged to the share premium account. An amount equivalent to the nominal value of the shares cancelled was transferred from the accumulated profits/losses to the capital redemption reserve.

29. Reserves

(a) Special reserve

The special reserve represents the difference between the nominal value of aggregate share capital of the subsidiaries acquired and the nominal value of the share capital of the Company issued for the acquisition at the time of a group reorganisation in 1998.

(b) Investment revaluation reserve

Investment revaluation reserve
	2015	2014
	HK$’000	HK$’000
At beginning of the year	29,721	19,503
Share of investment revaluation reserve of associates	1,977	10,259
Reclassification adjustment for the cumulative gain included in profit or loss
upon disposal of available-for-sale investments	—	(617)
Reclassification adjustment upon deemed disposal of partial interests in
associates	(10)	(8)
Fair value change of available-for-sale investments	—	584
At ending of the year	31,688	29,721

90

APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

29. Reserves (Continued)

(c) Exchange reserve

Exchange reserve
	2015	2014
	HK$’000	HK$’000
At beginning of the year	344,405	268,915
Exchange difference arising from translation of associates	(354,808)	78,923
Exchange difference arising from translation of other foreign operations	44	(3,418)
Reclassification adjustment upon deemed disposal of partial interests
in associates	(20)	(15)
At ending of the year	(10,379)	344,405

30. Share Option Scheme

The Company had a share option scheme (the “Scheme”) which was adopted on 22 September 2004 whereby the board of directors of the Company might grant options to eligible persons, including directors, employees and consultants of the Company and its subsidiaries, as incentives to these eligible persons to subscribe for shares in the Company. The Scheme expired on 21 September 2014. There was no share option granted under this scheme outstanding as at 30 June 2015 and 2014.

31. Commitments

Operating lease — The Group as lessee

Operating lease — The Group as lessee
	2015	2014
	HK$’000	HK$’000
Minimum lease payments under operating leases in respect of rented premises and
equipment during the year	4,275	4,802

At the end of the reporting period, the Group had commitments for future minimum lease payments under noncancellable operating leases in respect of rented premises and equipment, which fall due as follows:

	2015	2014
	HK$’000	HK$’000
Within one year	3,274	4,370
After one year but not more than five years	2,457	3,862
	5,731	8,232

Operating lease payments represent rental payable by the Group for its office premises, car parking space, director’s quarters and a photocopying machine. Leases are negotiated for the terms of between six months to five years.

91

Annual Report 2015

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

32. Related Party Transactions

(a) During the year, the Group entered into the following material related party transactions.

	2015	2014
	HK$’000	HK$’000
Subsidiaries of an associate, MGX
Purchase of commodities	181,324	633,870
	2015	2014
	HK$’000	HK$’000
Trade payables	—	62,254
Other receivable	768	—

(b) In November 2008, the Group entered into certain commodity forward contracts with MGX to purchase iron ores from MGX representing approximately 20% of total production of the remaining mines lives of the two relevant mines in Australia for which the forward price was determined with reference to the Hamersley Benchmark Iron Ore Prices. In November 2010, the commodity forward contracts were revised as the Hamersley Benchmark Iron Ore Prices were no longer available in the market and the iron ore forward price was then revised to be determined with reference to Platts Iron Ore Price, less operating adjustments and market commission.

(c) Compensation of key management personnel

The remuneration of key management who are directors and members of the senior management of the Group during the year is as follows:

	2015	2014
	HK$’000	HK$’000
Short-term employee benefits	8,511	8,424
Post-employment benefits	36	31
	8,547	8,455

The remuneration of key management is determined by the remuneration committee having regard to the position, experience, qualification and performance of the individuals and market trends.

92

APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

32. Related Party Transactions (Continued)

(d) Compensation of senior management personnel

Included in the key management personnel of the Group are two (2014: two) senior management personnel of which one (2014: one) is also a director of the Company. An analysis of remuneration paid and payable to the senior management personnel of the Group during the year is set out as follows:

	2015	2014
	HK$’000	HK$’000
Short-term employee benefits	6,031	5,894
Post-employment benefits	36	31
	6,067	5,925
Their emoluments were within the following bands:
	2015	2014
	No. of	No. of
	employees	employees
HK$1,000,001 to HK$2,000,000	1	1
HK$4,000,001 to HK$5,000,000	1	1

33. Pledge of Assets

At the end of reporting period, the following assets of the Group were pledged to banks and a securities broker to secure credit facilities.

	2015	2014
	HK$’000	HK$’000
Interests in associates	606,106	1,253,610
Pledged bank deposits	79,659	80,010
	685,765	1,333,620

Annual Report 2015 93

For the year ended 30 June 2015

Notes to the Consolidated Financial Statements

34. Retirement Benefits Scheme

The Group operates a Mandatory Provident Fund Scheme for all qualifying employees of its Hong Kong incorporated subsidiaries. The assets of the scheme are held separately from those of the Group in funds under the control of trustees. The Group contributed 5% of the relevant payroll costs to the scheme. The Group’s contributions to each employee are subject to a cap of monthly relevant payroll cost of HK$30,000 (2014: HK$30,000).

In addition, the Group’s contributions to local municipal government retirement scheme in the PRC are expensed as they fall due at the rates specified in the rules of the scheme while the local municipal government in the PRC undertakes to assume the retirement benefit obligations of all existing and future retirees of the qualified staff in the PRC.

The total cost charged to profit or loss of HK$235,000 (2014: HK$891,000) represents contributions payable to the schemes by the Group at rates specified in the rules of the respective schemes.

35. Financial Instruments

Categories of financial instruments

Categories of financial instruments
	2015	2014
	HK$’000	HK$’000
Financial assets
Financial assets designated at fair value through profit or loss	—	73,722
Investments held for trading	194,760	225,199
Available-for-sale investments	42,475	26,794
Loans and receivables (including cash and cash equivalents)	725,131	726,668
Financial liabilities
Amortised cost	71,603	201,128
Derivative financial instruments	3,627	873

Financial risk management objectives

The Group’s major financial instruments include financial assets designated at fair value through profit or loss, investments held for trading, available-for-sale investments, trade and other receivables, deposits, loans receivable, loan notes, pledged bank deposits, bank balances and cash, trade and other payables, derivative financial instruments and borrowings. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

There has been no change to the Group’s risk exposure relating to financial instruments or the manner in which it manages and measures the risks.

94

APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

35. Financial Instruments (Continued)

Market risk

Foreign currency risk

The Group has foreign currency sales and purchases, which expose the Group to foreign currency risk. The Group has trading activities denominated in United States dollars (“USD”) and with pledged bank deposits of USD10 million at 30 June 2015 and 2014 to secure trade finance facilities. As HK$ is pegged to USD, the Group does not expect any significant movements in the USD/HK$ exchange rate.

The Group currently does not have a foreign currency hedging policy. However, management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period mainly included pledged bank deposits, bank balances, trade and other receivables and trade and other payables are as follows:

		Assets		Liabilities	Liabilities
	2015		2014	2015	2014
	HK$’000		HK$’000	HK$’000	HK$’000
USD	82,235		156,020	—	122,608
Australian dollars (“AUD”)	12,978		3,492	—	933

Sensitivity analysis

As HK$ is pegged to USD, the Group does not expect any significant movements in the USD/HK$ exchange rates and thus USD is not included in sensitivity analysis.

The following table details the Group’s sensitivity to a 10% (2014: 10%) increase and decrease in HK$ against AUD and all other variables were held constant. 10% (2014: 10%) is the sensitivity rate used by management in the assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only AUD denominated monetary items and adjusts its translation at the period end for a 10% (2014: 10%) change in post-tax profit foreign currencies rates. A positive number below indicates a decrease in post-tax loss (2014: an increase in post-tax profit for the year) where AUD strengthen 10% (2014: 10%) against HK$. For a 10% (2014: 10%) weakening of AUD against HK$ there would be an equal and opposite impact on the post-tax loss (2014: post-tax profit) for the year.

	AUD	Impact
	2015	2014
	HK$’000	HK$’000
Decrease in post-tax loss (2014: increase in post-tax profit) for the year	1,084	214

95

Annual Report 2015

For the year ended 30 June 2015

Notes to the Consolidated Financial Statements

35. Financial Instruments (Continued)

Market risk (Continued)

Interest rate risk

The Group is exposed to cash flow interest rate risk in relation to variable-rate bank borrowings and bank deposits at 30 June 2015 and 2014 (see note 24 for details of bank balances and note 26 for details of borrowings). The Group is exposed to fair value interest rate risk in relation to fixed-rate loan receivable and fixed-rate loan notes as at 30 June 2015 and 2014. The Group currently does not have any interest rate hedging policy. The directors of the Company monitor the interest rate exposure and will consider other necessary actions when significant interest rate exposure is anticipated.

No interest rate sensitivity is disclosed as in the opinion of the directors of the Company, the interest rate sensitivity does not give additional value in view of insignificant exposure of interest bearing bank balances and borrowings as at the end of the reporting period.

The Group’s exposure to interest rates on financial liabilities is detailed in the liquidity risk management section of this note.

Other price risk

Foreign currency price risk

The Group is engaged in equity securities trading and investments which are denominated in foreign currencies and is therefore exposed to foreign currency price risk. Approximately 75% (2014: 99%) of the Group’s equity investments are denominated in currencies other than the functional currency of the group entities.

The carrying amounts of the Group’s foreign currency denominated equity investments classified as held for trading and available-for-sale at the end of the reporting period are as follows:

		Assets
	2015		2014
	HK$’000		HK$’000
USD	46,134		81,760
AUD	122,752		186,616
Pound sterling (“GBP”)	4,130		9,580
Canadian dollars (“CAD”)	3,757		23,181

The Group is also exposed to foreign currency price risk through equity securities held by an associate of the Group. The equity securities held by this associate are mainly denominated in AUD.

96

APAC Resources Limited

For the year ended 30 June 2015

Notes to the Consolidated Financial Statements

35. Financial Instruments (Continued)

Market risk (Continued)

Other price risk (Continued)

Foreign currency price risk (Continued)

Sensitivity analysis

The following table details the Group’s sensitivity to a 10% (2014: 10%) increase and decrease in HK$ against foreign currencies and all other variables were held constant. USD is not included in sensitivity analysis, as HK$ is pegged to USD, the Group does not expect any significant movements in the USD/HK$ exchange rate. 10% (2014: 10%) is the sensitivity rate used by management in the assessment of the reasonably possible change in foreign exchange rates. A positive number below indicates a decrease in profit-tax loss (2014: an increase in post-tax profit) for the year or increase in investment revaluation reserve where foreign currencies strengthen 10% (2014: 10%) against HK$. For a 10% (2014: 10%) weakening of foreign currencies against HK$ there would be an equal and opposite impact on the post-tax loss (2014: post-tax profit) for the year and the investment revaluation reserve.

	2015	2014
	HK$’000	HK$’000
Decrease in post-tax loss (2014: increase in post-tax profit) for the year	12,393	18,156
Increase in investment revaluation reserve	450	249

Equity price risk

The Group is exposed to equity price risk through its investments, including available-for-sale investments, financial assets designated at fair value through profit or loss, investments held for trading and derivative financial instruments. Management manages this exposure by maintaining a portfolio of investments with different risk and return profiles.

Sensitivity analysis

The sensitivity analyses below have been determined based on the listed investments’ exposure to price risk at the end of the reporting period. If equity price (in the relevant currencies in which the investments are denominated) had been 30% higher/lower (2014: 30% higher/lower):

• post-tax loss for the year ended 30 June 2015 would decrease/increase by HK$48,787,000 (2014: post-tax profit would increase/decrease by HK$57,295,000). This is mainly due to the changes in fair value of listed financial instruments (exclude listed available-for-sale investments);

• investment revaluation reserve would increase/decrease by HK$1,172,000 as a result of the changes in fair value of listed available-for-sale investments during the year ended 30 June 2014; and

• post-tax loss for the year ended 30 June 2015 would decrease/increase by HK$909,000 (2014: post-tax profit would increase/decrease by HK$219,000) as a result of the changes in fair value of derivative instruments.

Annual Report 2015 97

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

35. Financial Instruments (Continued)

Credit risk

The Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position.

In order to minimise the credit risk, management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

The credit risk on liquid funds is limited because the counterparties are banks with good reputation.

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. As at 30 June 2015 , the Group had concentration risk on pledged bank deposits of HK$79,659,000 (2014: HK$80,010,000) in a bank in Hong Kong and bank balance of HK$69,485,000 (2014: HK$74,306,000) in a PRC bank. Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade and other receivables are set out in note 21.

The Group also had concentration of credit risk in respect of loans receivable of HK$223,062,000 as at 30 June 2015 (2014: HK$238,754,000). Taking into consideration of the assets pledged to the Group and the financial information of the counterparty, there was no impairment recognised during the year. In the opinion of the directors, the risk of nonrecoverability of the carrying amount is minimal.

Moreover, there is a concentration of credit risk in respect of loan notes of HK$313,976,000 as at 30 June 2015 (2014: HK$235,934,000). Management of the Group reviewed the public announcements and financial information of the counterparty in order to assess their credit quality. In this regard, the directors of the Company considered that the Group’s credit risk was significantly reduced.

As at 30 June 2014, the Group also had concentration of credit risk on trade receivables over two customers.

Liquidity risk

In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. Management manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities.

As at 30 June 2015, the Group had available unutilised trade finance facilities and margin facilities of HK$154,964,000 (2014: HK$16,823,000) and HK$496,312,000 (2014: HK$484,360,000) respectively.

98

APAC Resources Limited

For the year ended 30 June 2015

Notes to the Consolidated Financial Statements

35. Financial Instruments (Continued)

Liquidity risk (Continued)

Liquidity tables

For derivative financial instruments, the Group has approximately HK$38,390,000 (2014: HK$32,939,000) contractual cash outflow in return with listed securities within 1 year. The nature of the derivative financial instruments is disclosed in note 27.

The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. Such non-derivative financial liabilities outstanding at the end of the reporting period are considered as if outstanding for the whole period. The table includes both interest and principal cash flows.

As at 30 June 2015

				Total
	Weighted			contractual
	average	Repayable	Within one	undiscounted	Carrying
	interest rate	on demand	year	cash flow	amount
	%	HK$’000	HK$’000	HK$’000	HK$’000
Non-derivative financial liabilities
Trade and other payables	—	—	14,915	14,915	14,915
Securities margin loans	Prime rate	56,688	—	56,688	56,688
	plus spread
		56,688	14,915	71,603	71,603
As at 30 June 2014
				Total
	Weighted			contractual
	average	Repayable	Within one	undiscounted	Carrying
	interest rate	on demand	year	cash flow	amount
	%	HK$’000	HK$’000	HK$’000	HK$’000
Non-derivative financial liabilities
Trade and other payables	—	—	74,911	74,911	74,911
Securities margin loans	Prime rate	68,639	—	68,639	68,639
	plus spread
Bank borrowings	2.50%	—	57,838	57,838	57,578
		68,639	132,749	201,388	201,128

The amounts included above for variable interest rate instruments for non-derivative financial liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.

99

Annual Report 2015

For the year ended 30 June 2015

Notes to the Consolidated Financial Statements

35. Financial Instruments (Continued)

Fair value measurements of financial instruments

This note provides information about how the Group determines fair values of various financial assets and financial liabilities

Fair value of the Group’s financial assets and financial liabilities that are measured at fair value on a recurring basis

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

Financial assets/			Fair value	Valuation technique(s)
financial liabilities	Fair value as at 30.6.2015	Fair value as at 30.6.2014	hierarchy	and key input(s)
Financial assets designated at	—	Listed convertible bonds	Level 1	Quoted bid price in an
fair value through profit or		— HK$3,522,000		active market
loss
Investments held for trading	Listed equity securities	Listed equity securities	Level 1	Quoted bid prices in
	— HK$194,760,000	— HK$225,199,000		active markets
Available-for-sale investments	Unlisted equity securities	—	Level 3	Asset approach (key
	— HK$40,138,000			input: financial
				position of the
				investee with adjusted
				fair value of properties
				under development
				for sale_(Note)_and
				lack of control and
				marketability discount
				of 20%)
Derivative financial instruments	Liabilities	Liabilities	Level 3	Quoted from financial
	— HK$3,627,000	— HK$873,000		institutions

Note: The fair value of properties under development for sale is based on residual approach with key inputs of market unit prices with expected profit margin of 10%

There were no transfers between Level 1 and 2 during both years.

Reconciliation of Level 3 fair value measurements of financial assets and financial liabilities

		Derivative
	Available-for-sale	financial
	investments	instruments
	HK$’000	HK$’000
At 1 July 2013	—	—
Unrealised loss in profit or loss	—	873
At 30 June 2014	—	873
Realised during the year	—	(873)
Unrealised loss in profit or loss	—	3,627
Acquisition	40,138	—
At 30 June 2015	40,138	3,627

100 APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

35. Financial Instruments (Continued)

Fair value measurements of financial instruments (Continued)

Reconciliation of Level 3 fair value measurements of financial liabilities (Continued)

Fair value of the Group’s financial assets and financial liabilities that are not measured at fair value on a recurring basis

Management of the Group estimates the fair value of its financial assets and financial liabilities measured at amortised cost using the discounted cash flows analysis and considers that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated statement of financial position approximate their fair values.

Fair value measurement and valuation process

The chief financial officer of the Company is responsible to determine the appropriate valuation techniques and inputs for fair value measurements.

In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent it is available or bases on the quotes by the financial institutions on derivative financial instruments.

36. Offsetting Financial Assets and Financial Liabilities

The Group has financial assets and financial liabilities that:

• are offset in the Group’s consolidated statement of financial position; or

• are subject to an enforceable master netting arrangement or similar agreement that covers similar financial instruments, irrespective of whether they are offset in the consolidated statements of financial position.

The Group does not have any financial assets and financial liabilities that are offset in its consolidated statement of financial position.

The Group has entered into International Swaps and Derivatives Master Agreements (“ISDA”) in respect of its dealings in derivatives.

Annual Report 2015 101

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

37. Critical Accounting Judgement and Key Source of Estimation Uncertainty

In the application of the Group’s accounting policies, which are described in note 3, the directors of the Company are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years.

Critical judgments

The following is the critical judgment, apart from those involving estimation (see below), that the directors of the Company have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements.

Commodity forward contracts

The Group has entered into certain commodity forward contracts with MGX to purchase iron ores for which the forward price was based on the respective lump and fines Platts Iron Ore Price in which the Group is required to take physical delivery and has no history for similar contracts of settling net in cash or of taking delivery of the iron ores and selling them within a short period after delivery for the purpose of generating a profit from short-term fluctuations in price or dealer’s margin. The directors of the Company considered that the commodity forward contracts were entered into and continue to be held for with the purpose of the receipt of the iron ores in accordance with the Group’s expected purchase. Accordingly, the commodity forward contracts are considered as executory contracts and are not within the scope of HKAS 39 “financial instruments: recognition and measurement”. Details of these contracts are set out in note 32(b).

Key source of estimation uncertainty

The following is the key assumption concerning the key source of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amount of interests in associates within the next financial year.

102

APAC Resources Limited

For the year ended 30 June 2015

Notes to the Consolidated Financial Statements

37. Critical Accounting Judgement and Key Source of Estimation Uncertainty (Continued)

Key source of estimation uncertainty (Continued)

Impairment of interests in associates

Determining whether interests in associates are impaired requires an estimation of the recoverable amount of the respective associates which is the higher of value in use and fair value less cost of disposal. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the associates, suitable discount rates and the proceeds on ultimate disposal of the associates. Where the actual future cash flows are less than or more than expected or upon the management’s revision of estimated cash flows due to change in conditions, facts and circumstances, such as the estimated future prices, production volume, an impairment loss or reversal of impairment loss may arise.

The projected discount future cash flows conducted to determine the value in use calculation as at 30 June 2015 and 30 June 2014 for the respective associates are no longer attainable as a result of the expected generally lower materials prices, accordingly, the recoverable amounts of the respective associates were determined as the fair value less cost of disposal, the fair values were determined based on the listed closing prices as at 30 June 2015.

As at 30 June 2015, the carrying amount of interests in associates is HK$1,035,383,000, net of impairment losses of HK$805,927,000 (2014: carrying amount of interests in associates is HK$2,241,023,000, net of impairment losses of HK$1,537,205,000). Details of the impairment assessment are disclosed in note 16.

Allowance for loans receivable

In determining the allowance for loans receivable, the Group considers any change in credit quality of the loans receivable from the date credit was initially granted, the values of underlying collaterals obtained and the past collection history and on management’s judgment. A considerable amount of judgment is required in assessing the ultimate realisation of the loans receivables, including the current creditworthiness and the past collection history of clients in default of settlement. If the financial conditions of the debtors and their ability to make payments worsen, additional allowance may be required. As at 30 June 2015, the aggregate carrying amount of loans receivable is HK$223,062,000 (2014: HK$218,320,000).

Fair value of available-for-sale unlisted equity investments

The directors of the Company use their judgment in selecting an appropriate valuation technical for the financial instruments not quoted in an active market. Valuation techniques commonly used by market practitioners are applied. The available-for-sale unlisted equity investments are valued using asset approach that incorporated certain assumptions, which are subject to uncertainty and might materially differ from the actual results. Where there are any changes in the assumptions due to the market conditions, the estimate of fair value of unlisted investment may be significantly affected. As at 30 June 2015, the fair value of available-for-sale unlisted equity investment measured at fair value was approximately HK$40,138,000 (2014: nil). Details of the valuation methodology are disclosed in note 35.

38. Event After the Reporting Date

On 27 May 2015, the Company announced an open offer on the basis of one new share of the Company for every two existing shares of the Company held on 17 June 2015 at a subscription price of HK$0.10 per share. The open offer became unconditional on 6 July 2015. The Company issued 3,063,883,995 new shares on 13 July 2015 and raised net proceeds of approximately HK$300 million.

Annual Report 2015 103

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

39. Particulars of Principal Subsidiaries

	Country of		As at 30 June 2015 Proportion of ownership interest	As at 30 June 2015 Proportion of ownership interest	As at 30 June 2015 Proportion of ownership interest	As at 30 June 2014 Proportion of ownership interest	As at 30 June 2014 Proportion of ownership interest	As at 30 June 2014 Proportion of ownership interest
	incorporation/	Particulars of	Group’s	Held	Held	Group’s	Held	Held
	establishment	issued and	effective	by the	by a	effective	by the	by a
Name of company	and operation	paid up capital	interest	Company	subsidiary	interest	Company	subsidiary	Principal activities
Accardo Investments Limited	British Virgin	US$1 ordinary	100%	100%	—	100%	100%	—	Investment holding
	Islands	share
APAC Resources Assets Limited	British Virgin	US$1 ordinary	100%	100%	—	100%	100%	—	Investment holding
	Islands	share
APAC Resources Capital Limited	British Virgin	US$1 ordinary	100%	100%	—	100%	100%	—	Investment holding
	Islands	share
APAC Resources Investments	British Virgin	US$1 ordinary	100%	100%	—	100%	100%	—	Investment holding
Limited	Islands	share
APAC Resources Management	Hong Kong	HK$1 ordinary	100%	100%	—	100%	100%	—	Provision of management
Limited		share							services
APAC Resources Strategic	British Virgin	US$1 ordinary	100%	100%	—	100%	100%	—	Investment holding
Holdings Limited	Islands	share
APAC Resources Treasury	British Virgin	US$1 ordinary	100%	100%	—	100%	100%	—	Treasury management
Management Limited	Islands	share
Asia Cheer Trading Limited	Hong Kong	HK$1 ordinary	100%	100%	—	100%	100%	—	Investment holding
		share
Fortune Arm Limited	British Virgin	US$1 ordinary	100%	—	100%	100%	—	100%	Treasury management
	Islands	share
Fortune Desire Investments Limited	British Virgin	US$1 ordinary	100%	100%	—	100%	100%	—	Investment holding
	Islands	share
Mount Sun Investments Limited	British Virgin	US$1 ordinary	100%	100%	—	100%	100%	—	Investment holding
	Islands	share
Sino Chance Trading Limited	Hong Kong	HK$1 ordinary	100%	100%	—	100%	100%	—	Trading in commodities
		share
Super Grand Investments Limited	British Virgin	US$1 ordinary	100%	100%	—	100%	100%	—	Investment holding
	Islands	share
Ultra Effort Limited	British Virgin	US$1 ordinary	100%	100%	—	100%	100%	—	Investment holding
	Islands	share
亞太資源(青島)有限公司 (Note a)	The PRC	US$29,800,000	100%	—	100%	100%	—	100%	Trading in commodities
瑞域(上海)投資諮詢有限公司	The PRC	US$3,600,000	100%	100%	—	100%	100%	—	Provision of consultancy
(Note a)									service in corporate
									management, metallurgy
									technology, investment
									and development in
									mineral resources

Notes:

• (a) 亞太資源(青島)有限公司 and 瑞域(上海)投資諮詢有限公司 are wholly-owned foreign investment enterprises registered in the PRC.

(b) The above list contains only the particulars of subsidiaries which, in the opinion of directors, principally affected the results, assets or liabilities of the Group.

104

APAC Resources Limited

Notes to the Consolidated Financial Statements

For the year ended 30 June 2015

40. Statement of Financial Position of the Company

THE COMPANY 2015 2014 Note HK$’000 HK$’000	THE COMPANY 2015 2014 Note HK$’000 HK$’000
ASSETS Investment in an associate 22,716 22,716 Investments in subsidiaries 5,383 6,086 Amounts due from subsidiaries 1,852,653 2,614,370 Other receivables and prepayments 7,344 535 Bank balances 2,262 1,142
Total assets 1,890,358 2,644,849
EQUITY AND LIABILITIES Capital and reserves Share capital 612,777 613,193 Other reserves a 354,577 2,854,490 Accumulated profit (losses) a 913,959 (863,117)
1,881,313 2,604,566
Liabilities Other payables 9,045 2,644 Amounts due to subsidiaries — 37,639
	9,045 40,283
Total	equity and liabilities 1,890,358 2,644,849
Note: a.	Movement of the Company’s reserves Other reserves Accumulated (losses) profit 2015 2014 2015 2014 HK$’000 HK$’000 HK$’000 HK$’000
	At beginning of the year 2,854,490 2,840,890 (863,117) (1,511,439) (Loss) profit for the year — — (722,508) 716,322 Shares repurchased and cancelled 87 13,600 (416) (68,000) Transfer upon reduction of share premium (2,500,000) — 2,500,000 —
	At end of the year 354,577 2,854,490 913,959 (863,117)

105

Annual Report 2015

Financial Summary

The results and the assets and liabilities of the Group for the past five financial years, as extracted from the Group’s published consolidated financial statements are set out below:

Results

					18 months
					ended
		Year ended 30 June			30 June
	2015	2014	2013	2012	2011
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Revenue	256,372	774,512	1,104,617	1,050,205	1,147,494
(Loss) profit before taxation	(850,392)	912,653	(2,077,032)	(241,077)	1,465,177
Income tax credit (expense)	2,466	(5,393)	(2,655)	(1,890)	(3,108)
(Loss) profit for the year/period attributable to
owners of the Company	(847,926)	907,260	(2,079,687)	(242,967)	1,462,069

Assets and Liabilities

			As at 30 June
	2015	2014	2013	2012	2011
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Total assets	2,006,763	3,337,036	2,527,311	4,759,693	6,108,171
Total liabilities	(79,050)	(207,835)	(268,678)	(117,878)	(709,571)
Equity attributable to owners of
the Company	1,927,713	3,129,201	2,258,633	4,641,815	5,398,600

106

APAC Resources Limited