THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this Offer Document or the offer contained herein, you should consult a licensed securities dealer or registered institution in securities, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in APAC Resources Limited (the ‘‘Company’’), you should at once hand this document, together with the accompanying form of proxy and Acceptance Form (as defined herein) to the purchaser(s) or transferee(s) or to the bank, licensed securities dealer or registered institution in securities, or other agent through whom the sale or the transfer was effected for onward transmission to the purchaser(s) or transferee(s).

This document should be read in conjunction with the accompanying Acceptance Form, the contents of which form part of the terms and conditions of the Offer (as defined herein).

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this Offer Document and the accompanying forms, make no representation as to their accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Offer Document and the accompanying Acceptance Forms.

APAC RESOURCES LIMITED

亞太資源有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock code: 1104)

CONDITIONAL CASH OFFER

BY

YU MING INVESTMENT MANAGEMENT LIMITED ON BEHALF OF APAC RESOURCES LIMITED TO BUY BACK UP TO 680,000,000 SHARES FOR HK$0.18 PER SHARE,

INVOLVING AN APPLICATION FOR WHITEWASH WAIVER

Financial Adviser

Independent Financial Adviser to the Independent Board Committee

A letter from the Board is set out on pages 7 to 15 of this Offer Document. A letter from Yu Ming Investment Management Limited containing, among other things, details of the terms of the Offer is set out on pages 16 to 23 of this Offer Document. A letter from the Independent Board Committee of the Company to the Independent Shareholders of the Company is set out on pages 24 to 25 of this Offer Document. A letter from Chanceton Capital Partners Limited containing its opinion and advice to the Independent Board Committee of the Company is set out on pages 26 to 48 of this Offer Document.

A notice convening the SGM of APAC Resources Limited to be held at Lower Lobby, Plaza 3, Novotel Century Hong Kong Hotel, 238 Jaffe Road, Wanchai, Hong Kong on 4 April 2014 at 2:30 p.m. is set out on pages 145 to 146 of this Offer Document. Whether or not you are able to attend the said meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions thereon and return the same to the branch share registrar of the Company in Hong Kong, Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong (which will be relocated to Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong with effect from 31 March 2014) as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the meeting or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the meeting or any adjourned meeting should you so desire.

For identification purpose only

13 March 2014

		Pages
Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	ii
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Letter from Yu Ming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Letter from the Independent Board Committee . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Letter from the Independent Financial Adviser . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Appendix I — Principal terms of the Offer . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	49
Appendix II — Financial information of the Group	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	61
Appendix III — Pro Forma Financial Information of	the Group . . . . . . . . . . . . . . . . . . . . .	132
Appendix IV — Comfort letter . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	135
Appendix V — Statutory and general information	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	138
Notice of Special General Meeting . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	145
Accompanying documents

— Form of proxy for Special General Meeting

— Acceptance Form

– i –

EXPECTED TIMETABLE

The timetable set out below is indicative only and is subject to change. Any changes to the expected timetable will be announced by the Company.

2014

Despatch of the Offer Document and notice of SGM . . . . . . . . . . . . . . . . . .Thursday, 13 March 2014 Latest time for lodging transfers of Shares to qualify for attendance at the SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:30 p.m., on Tuesday, 1 April 2014 Register of Member closes (both dates inclusive) . . . . . . . . . . . . . . . . . . . Wednesday, 2 April 2014 to Friday, 4 April 2014 Latest time for lodging proxy for the SGM . . . . . . . . . . . . . . . 2:30 p.m. on Wednesday, 2 April 2014 SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2:30 p.m. on Friday, 4 April 2014 Announcement of results of the SGM and whether the Offer has become unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 4 April 2014 Latest time and date for submitting Acceptance Forms (Note 2) . . . . . . . . . . . .4:00 p.m., on Tuesday, 22 April 2014 Closing date of the Offer (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 22 April 2014 Record date and time for determining Accepting Shareholders’ Assured Entitlement and Excess Tenders under the Offer (Note 2) . . . . . . . . . . . . . . . . 4:00 p.m., on Tuesday, 22 April 2014 Announcement of the results of the Offer through the website of the Stock Exchange (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . no later than 7:00 p.m., on Tuesday, 22 April 2014 Latest date for despatch of cheques to Accepting Shareholders and return of Share certificates to parties with unsuccessful tenders (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . .Friday, 2 May 2014

Notes:

The above timetable assumes that the Offer is approved by the Independent Shareholders at the SGM and the Conditions are satisfied resulting in the Offer becoming unconditional on 4 April 2014.
The Offer will remain open for acceptance for a further 14 days after it becomes unconditional. Where the Offer Period ends on a day which is not a Business Day, the Offer Period is extended until the next Business Day.
Remittance for the total amounts due to Accepting Shareholders under the Offer (subject to deduction of seller’s ad valorem stamp duty payable on the Shares bought back from such Accepting Shareholders) will be made by the Company within 7 Business Days after the close of the Offer.
All references to date and time contained in this Offer Document refer to Hong Kong time.

– ii –

DEFINITIONS

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

‘‘Acceptance Form(s)’’ form(s) to be sent to the Qualifying Shareholders as part of the Offer Document for acceptance of the Offer ‘‘Accepting Shareholder(s)’’ Qualifying Shareholder(s) who accept(s) the Offer by submitting Acceptance Form(s) ‘‘acting in concert’’ shall have the meaning set out in the Takeovers Code ‘‘Announcement’’ the announcement dated 23 January 2014 made by the Company in respect of the Offer, the Buy-backs Mandate and the Whitewash Waiver ‘‘Assured Entitlement’’ the aggregate number of Shares which every Accepting Shareholder is entitled to be bought back by the Company, calculated on the basis of 2,800 Shares for every 20,000 Shares registered in the name of the relevant Accepting Shareholder ‘‘Board’’ the board of Directors ‘‘Business Day’’ a day (excluding Saturday) on which banks are generally open for business in Hong Kong ‘‘Buy-backs Code’’ Hong Kong Code on Share Buy-backs ‘‘Buy-backs Mandate’’ a specific mandate to be given by Independent Shareholders at the SGM to the Directors to buy back Shares under the Offer ‘‘CCASS’’ Central Clearing and Settlement System established and operated by Hong Kong Securities Clearing Company Limited ‘‘Codes’’ Hong Kong Codes on Takeovers and Mergers and Share Buybacks ‘‘COL’’ COL Capital Limited (a company listed on the Main Board of the Stock Exchange with stock code of 383), with its registered office at Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda, a substantial Shareholder of the Company, which was interested in an aggregate of 2,030,939,562 Shares, representing approximately 29.81% of the issued share capital of the Company as at the Latest Practicable Date and is 73.01% owned by Vigor Online Offshore Limited, a company indirectly wholly-owned by Ms. Chong Sok Un, the chairman and an executive director of the Company. The directors of COL Capital Limited are Ms. Chong Sok Un, Dato’ Wong, Mr. Kong Muk Yin, Mr. Lau Siu Ki, Mr. Ma Wah Yan and Mr. Zhang Jian

– 1 –

DEFINITIONS

‘‘Companies Ordinance’’

Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

‘‘Company’’

APAC Resources Limited, a company incorporated in Bermuda with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 1104)

‘‘Conditions’’
Conditions set out under the heading ‘‘Conditions to the Offer’’ to which the Offer is subject
‘‘Dato’ Wong’’

Dato’ Wong Peng Chong, an executive director of COL

‘‘Director(s)’’
director(s) of the Company
‘‘Excess Number of Shares’’
the number of the Shares specified in an Acceptance Form which is in excess of the Assured Entitlement of the relevant Accepting Shareholder(s)
‘‘Excess Tender(s)’’ those Shares tendered by a Qualified Shareholder in excess of their Assured Entitlement
‘‘Excluded Shareholder(s)’’

Overseas Shareholder(s) whose address, as shown on the Register of Member at the time of the receipt by the Company of his or her Acceptance Form is located in a jurisdiction the laws of which prohibit the making of the Offer to such Overseas Shareholder or otherwise require the Company to comply with additional requirements which are (in the opinion of the Board, but subject to the prior consent of the Executive) unduly onerous or burdensome, having regard to the number of Overseas Shareholders involved in that jurisdiction and the size of their shareholdings in the Company

‘‘Executive’’
the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director
‘‘Group’’
the Company and its subsidiaries
‘‘HK$’’

Hong Kong dollar(s), being the lawful currency of Hong Kong

‘‘Hong Kong’’
Hong Kong Special Administrative Region of the PRC
‘‘Independent Board Committee’’
the independent committee of the Board, comprising all independent non-executive Directors and Mr. So Kwok Hoo and Mr. Peter Anthony Curry, non-executive Directors is established to advise the Independent Shareholders in respect of the Offer, the Buy-backs Mandate and the Whitewash Waiver

– 2 –

DEFINITIONS

‘‘Independent Financial Adviser’’

Chanceton Capital Partners Limited, being the independent financial adviser to advise the Independent Board Committee in relation to the Offer, the Buy-backs Mandate and the Whitewash Waiver, with its address at Units A, 23rd Floor, CMA Building, 64–66 Connaught Road, Central, Hong Kong

‘‘Independent Shareholders’’
Shareholders other than (i) Ms. Chong Sok Un, the chairman and and an executive director of the Company, (ii) Taskwell, Rise Cheer and parties acting in concert with any of them, having a material interest in the Whitewash Waiver, (iii) Mr. Ferguson, who has been involved in the formulation of the Offer, (iv) those Shareholders who have a material interest in the Offer which is different from all the other Shareholders, and (v) those Shareholders who were involved or interested in the Whitewash Waiver
‘‘Last Trading Day’’
17 January 2014, being the last trading day prior to the day when the terms of the Offer are determined
‘‘Latest Acceptance Time’’
the latest time for receipt by the Registrar of the Acceptance Form submitted by the Qualifying Shareholders, being 4:00 p.m. on 22 April 2014, or such later date as the Company may announce in accordance with the requirements of the Takeovers Code
‘‘Latest Practicable Date’’ 10 March 2014, being the latest practicable date prior to the printing of the Offer Document for the purpose of ascertaining information contained in this Offer Document
‘‘Licensed Corporation(s)’’ a licensed corporation as defined in Part I to Schedule 1 of the SFO
‘‘Listing Rules’’
Rules Governing the Listing of Securities on the Stock Exchange
‘‘Maximum Number of Shares’’
the maximum number of the Shares to be bought back pursuant to the Offer, being 680,000,000 Shares in aggregate, representing approximately 10% of the total issued share capital of the Company as the Latest Practicable Date
‘‘Mr. Ferguson’’
Mr. Andrew Ferguson, a Director and a holder of 25,000,000 Shares, representing approximately 0.37% of the issued share capital of the Company as at the Latest Practicable Date
‘‘Offer’’
the offer by the Company to buy back the Maximum Number of Shares at the Offer Price from the Qualifying Shareholders for cancellation

– 3 –

DEFINITIONS

‘‘Offer Document’’ a circular to the Shareholders (comprising the offer document relating to the Offer, the notice of SGM, the proxy form for voting at the SGM and the Acceptance Form) to be issued in connection with the Offer, Buy-backs Mandate and the Whitewash Waiver
‘‘Offer Period’’ the period from the date of the Announcement, 23 January 2014, to the date when the Offer closes, lapses or is withdrawn
‘‘Offer Price’’ HK$0.18 being the buy-back price under the Offer
‘‘Overseas Shareholder(s)’’ Shareholder(s), whose addresses, as shown in the Register of Member, are outside Hong Kong
‘‘PRC’’ the People’s Republic of China
‘‘Qualifying Shareholder(s)’’ Shareholder(s), other than the Excluded Shareholder(s) (if any), whose names appear on the Register of Member at the close of the Offer
‘‘Register of Member’’ the register of members of the Company
‘‘Registrar’’ Tricor Secretaries Limited, the branch registrar of the Company in Hong Kong
‘‘Relevant Period’’ the period from 23 July 2013, being the date falling on the six months before the date of the Announcement, up to and including the Latest Practicable Date
‘‘Rise Cheer’’ Rise Cheer Investments Limited, a substantial Shareholder of the Company, which was interested in 1,124,640,000 Shares, representing approximately 16.51% of the issued share capital of the Company as at the Latest Practicable Date and indirectly wholly-owned by COL, with its registered office at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The directors of Rise Cheer Investments Limited are Ms. Chong Sok Un, Dato’ Wong and Mr. Kong Muk Yin
‘‘SFC’’
The Securities and Futures Commission of Hong Kong
‘‘SFO’’ Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
‘‘SGM’’

a special general meeting of the Company to be held at Lower Lobby, Plaza 3, Novotel Century Hong Kong Hotel, 238 Jaffe Road, Wanchai, Hong Kong on 4 April 2014 at 2:30 p.m. in connection with the Offer, the Buy-backs Mandate and the Whitewash Waiver

– 4 –

DEFINITIONS

‘‘Shareholder(s)’’

holder(s) of the Shares

‘‘Share(s)’’

ordinary share(s) of nominal value of HK$0.10 each in the share capital of the Company

‘‘Shougang Fushan’’
Shougang Fushan Resources Group Limited (a company listed on the Main Board of the Stock Exchange with the stock code of 639)
‘‘Stamp Duty Ordinance’’
the Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong)
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited
‘‘Surplus Shares’’
being the Maximum Number of Shares less the aggregate Assured Entitlements received
‘‘Takeovers Code’’
Hong Kong Code on Takeovers and Mergers
‘‘Taskwell’’

Taskwell Limited, a substantial Shareholder of the Company, which was interested in 906,299,562 Shares, representing approximately 13.30% of the issued share capital of the Company as at the Latest Practicable Date and indirectly wholly-owned by COL, with its registered office at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. The directors of Taskwell Limited are Ms. Chong Sok Un, Dato’ Wong and Mr. Kong Muk Yin

‘‘Title Documents’’

the relevant Share certificate(s) and/or transfer receipt(s) and/or any document(s) of title with respect to ownership of the Share(s) (and/or any satisfactory indemnity or indemnities required in respect thereof)

‘‘Whitewash Waiver’’

a waiver to be granted by the Executive in respect of the obligations of Taskwell, Rise Cheer and parties acting in concert with any of them to make a mandatory general offer in accordance with Rule 26 of the Takeovers Code for all the Shares not held by Taskwell, Rise Cheer and parties acting in concert with any of them, which obligation may otherwise arise as a result of the completion of the Offer

– 5 –

DEFINITIONS

‘‘Yu Ming’’ Yu Ming Investment Management Limited, a corporation licensed under the Securities and Futures Ordinance to carry out regulated activities of type 1 (dealing in securities), type 4 (advising on securities), type 6 (advising on corporate finance) and type 9 (asset management), and a company incorporated in Hong Kong with limited liability, being the financial adviser of the Company in respect of the Offer, with its address at Room 1801, 18th Floor, Allied Kajima Building, 138 Gloucester Road, Wanchai, Hong Kong ‘‘US’’ United States of America ‘‘US$’’ United States dollars(s), the lawful currency of United States of America ‘‘%’’ per cent.

– 6 –

LETTER FROM THE BOARD

APAC RESOURCES LIMITED

亞太資源有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1104)

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. So Kwok Hoo Mr. Peter Anthony Curry

Independent Non-executive Directors:

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

Registered office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Head office and principal place of business: 32nd Floor, China Online Centre 333 Lockhart Road Wanchai Hong Kong

13 March 2014

To the Shareholders

Dear Sir or Madam,

CONDITIONAL CASH OFFER BY

YU MING INVESTMENT MANAGEMENT LIMITED ON BEHALF OF APAC RESOURCES LIMITED TO BUY BACK UP TO 680,000,000 SHARES FOR HK$0.18 PER SHARE,

INVOLVING AN APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

On 23 January 2014, the Board announced that a conditional cash offer will be made by Yu Ming on behalf of the Company in compliance with the Codes, subject to the fulfilment of the Conditions, to buy back for cancellation up to the Maximum Number of Shares, being 680,000,000 Shares,

For identification purpose only

– 7 –

LETTER FROM THE BOARD

representing approximately 10% of the total issued share capital of the Company as at the Latest Practicable Date. Qualifying Shareholders may accept the Offer by submission of Acceptance Forms for the sale of their Shares to the Company at the Offer Price of HK$0.18 per Share.

The purpose of this Offer Document is to provide you with, among other things, (i) detailed information relating to the Offer, the Buy-backs Mandate and the Whitewash Waiver; (ii) a letter from the Independent Board Committee containing its recommendation and advice to the Independent Shareholders as to whether the Offer, the Buy-backs Mandate and the Whitewash Waiver are fair and reasonable and as to acceptance and voting; (iii) a letter of advice from the Independent Financial Adviser containing its advice to the Independent Board Committee as to whether the Offer, the Buybacks Mandate and the Whitewash Waiver are fair and reasonable and as to acceptance and voting; and (iv) a notice of the SGM to consider and approve, if thought fit, the Offer, the Buy-backs Mandate and the Whitewash Waiver.

THE OFFER

The Shares to be bought back by the Company will not exceed the Maximum Number of Shares. There is no minimum number of Shares proposed to be repurchased under the Offer. If the Offer is fully accepted, it will result in the Company paying to the Accepting Shareholders who have submitted Acceptance Forms HK$0.18 per Share, which will be paid in cash.

The maximum amount payable by the Company under the Offer is HK$122,400,000. The Offer will be satisfied by internal resources of the Group. Yu Ming has confirmed that sufficient financial resources are available to the Company to implement the Offer in full if the Maximum Number of Shares is repurchased.

The Offer will be made in full compliance with the Codes. The Offer will be conditional upon, amongst other things, (i) approval of the Offer and the Buy-backs Mandate by the Independent Shareholders voting by way of a poll at the SGM, and (ii) the Whitewash Waiver being granted by the Executive, which would be subject to the approval by the Independent Shareholders of the Whitewash Waiver taken by way of a poll at the SGM. If the Offer, the Buy-backs Mandate or the Whitewash Waiver is not approved by the Independent Shareholders, or if the Whitewash Waiver is not granted by the Executive, the Offer will lapse.

The Offer is also subject to the Conditions referred to under the section headed ‘‘Conditions to the Offer’’ in the letter from Yu Ming, as set out on page 20 of this Offer Document.

THE OFFER PRICE

The Offer Price of HK$0.18 per Share represents:

(i) a premium of approximately 27.66% over the closing price of the Shares of HK$0.141 each as quoted on the Stock Exchange on the Last Trading Day;
(ii) a premium of approximately 25.17% over the average price of HK$0.1438, being the average closing price of the Shares as quoted on the Stock Exchange for the five consecutive trading days immediately prior to and including the Last Trading Day;

– 8 –

LETTER FROM THE BOARD

(iii) a premium of approximately 23.88% over the average price of HK$0.1453, being the average closing price of the Shares as quoted on the Stock Exchange for the ten consecutive trading days immediately prior to and including the Last Trading Day;
(iv) a discount of approximately 45.78% to the Group’s net asset value of approximately HK$0.332 per Share pursuant to the latest audited consolidated accounts of the Company as at 30 June 2013;
(v) a discount of approximately 65.45% to the Group’s net asset value of approximately HK$0.521 per Share pursuant to the latest unaudited condensed consolidated accounts of the Company as at 31 December 2013; and
(vi) a premium of approximately 15.38% over the closing price of HK$0.156, being the closing price of the Shares on the Latest Practicable Date.

WHITEWASH WAIVER

Taskwell and Rise Cheer were beneficially interested in an aggregate 2,030,939,562 Shares (as to 906,299,562 Shares and 1,124,640,000 Shares respectively), representing approximately 29.81% of the total issued share capital of the Company as at the Latest Practicable Date. Taskwell and Rise Cheer are both indirect wholly-owned subsidiaries of COL. COL is 73.01% owned by Vigor Online Offshore Limited, a company indirectly wholly-owned by Ms. Chong Sok Un as at the Latest Practicable Date. Dato’ Wong, an executive director of COL, was interested in 2,700,000 Shares, representing 0.04% of the total issued share capital of the Company as at the Latest Practicable Date. Taskwell, Rise Cheer and Dato’ Wong are deemed to be acting in concert for the purposes of the Takeovers Code. Taskwell, Rise Cheer and Dato’ Wong have indicated that they will not accept the Offer for the Shares held by them as at the Latest Practicable Date. During the Relevant Period, none of Taskwell, Rise Cheer or parties acting in concert with any of them holds, controls or has directions over voting rights, rights over Shares, convertible securities, warrants, options or derivative in respect of Shares, nor has the Company received any irrevocable commitment or notification from Shareholders and Directors who hold Shares to accept or reject the Offer or vote for or against the Buy-backs Mandate or the Whitewash Waiver in the SGM.

Rule 32 of the Takeovers Code and Rule 6 of the Buy-backs Code provide that where, as a result of share buy-back, a shareholder’s proportionate interest in the voting rights of the repurchasing company increases, such interest will be treated as an acquisition for the purpose of the Takeovers Code. Consequently, depending upon the level of the Shares tendered for buy-back by the Company as stated in the Acceptance Forms and assuming that Taskwell, Rise Cheer and Dato’ Wong do not accept the Offer to tender Shares held by them, the beneficial interest in the Company’s issued share capital held by Taskwell and Rise Cheer and parties acting in concert with any of them may increase from its current level of approximately 29.85% to a maximum of approximately 33.16% upon completion of the Offer, thereby triggering a general obligation on Taskwell and Rise Cheer and parties acting in concert with any of them under Rule 26 of the Takeovers Code to make a mandatory general offer for all of the Shares not beneficially owned by Taskwell and Rise Cheer and parties acting in concert with any of them.

– 9 –

LETTER FROM THE BOARD

Accordingly, an application for the Whitewash Waiver has been made to the Executive by Taskwell and Rise Cheer. The Executive had indicated that subject to Independent Shareholders’ approval of the Whitewash being obtained at the SGM, it would agree to waive the obligations of Taskwell, Rise Cheer and parties acting in concert with them to make a general offer for Shares arising as a result of the Completion of the Offer.

The Offer, the Buy-backs Mandate and the Whitewash Waiver will be subject to the approval by the Independent Shareholders voting in person or by proxy at the SGM of special resolutions to approve by way of a poll the Offer and the Buy-backs Mandate and an ordinary resolution to approve by way of a poll the Whitewash Waiver. If the Offer, the Buy-backs Mandate or the Whitewash Waiver is not approved by the Independent Shareholders or if it is not granted by the Executive, the Offer will lapse.

DEALINGS IN SHARES BY THE COMPANY, TASKWELL AND RISE CHEER AND PARTIES ACTING IN CONCERT WITH ANY OF THEM

The Company has not repurchased any Shares since 30 June 2013, being the end of the last financial year, and will not conduct any on-market share buy-back from the Latest Practicable Date up to and including the date of the Offer closes, lapses or is withdrawn, as the case may be.

Taskwell, Rise Cheer and parties acting in concert with any of them, as well as the Directors, have confirmed that there has been no dealing in the Shares in the six months immediately prior to the Announcement and up to and including the Latest Practicable Date.

Save as disclosed in pages 9 and 140 of this Offer Document, the Company and the Directors do not hold any interest in the shares or other securities in Taskwell, Rise Cheer and COL, and have not dealt in the shares or other securities of Taskwell, Rise Cheer and COL during the Relevant Period.

OTHER ARRANGEMENTS

There is no arrangement (whether by way of option, indemnity or otherwise) in relation to the Shares entered into by the Company, Taskwell or Rise Cheer or parties acting in concert with any of them which might be material to the Offer or the Whitewash Waiver.

There is no agreement or arrangement to which the Company or Taskwell or Rise Cheer or parties acting in concert with any of them is a party which relates to circumstances in which they may or may not invoke or seek to invoke a pre-condition or a condition to the Offer or the Whitewash Waiver. None of Taskwell, Rise Cheer or parties acting in concert with any of them, as well as the Directors, has borrowed or lent any Shares or other relevant securities (as defined in Note 4 of Rule 22 of the Takeovers Code) of the Company.

OTHER APPROVALS

The Offer may be subject to the Company obtaining the approval of any other appropriate regulatory authorities whose consent is required under any applicable laws and regulations in order for the Company to validly make the Offer. The Company is not aware of any such approvals being required as at the Latest Practicable Date.

– 10 –

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURES

Set out below are a table and charts showing the shareholding structure of the Company prior to and after the completion of the Offer on the assumption that (i) the number of the Shares bought back reaches the Maximum Number of Shares; (ii) the number of the Shares in issue as at the Latest Practicable Date remains unchanged until the completion of the Offer; and (iii) Taskwell, Rise Cheer and Dato’ Wong do not accept the Offer to tender Shares held by them respectively.

Rise Cheer (Note 1) Taskwell (Note 1) Dato’ Wong (Note 2) Sub-Total of Rise Cheer, Taskwell, Dato’ Wong and parties acting in concert with any of them Shougang Fushan (Note 3) Mr. Ferguson (Note 4) Public Shareholders Total	Immediately before the Offer Shares Approx. % 1,124,640,000 16.51% 906,299,562 13.30% 2,700,000 0.04% 2,033,639,562 29.85% 956,000,000 14.03% 25,000,000 0.37% 3,797,288,428 55.75% 6,811,927,990 100.00%	Immediately after completion of the Offer assuming Shougang Fushan accepting all of their Assured Entitlement and none of the Excess Number of Shares Shares Approx. % 1,124,640,000 18.34% 906,299,562 14.78% 2,700,000 0.04% 2,033,639,562 33.16% 822,160,000 13.41% 25,000,000 0.41% 3,251,128,428 53.02% 6,131,927,990 100.00%	Immediately after completion of the Offer assuming Shougang Fushan accepting all of their Assured Entitlement and none of the Excess Number of Shares Shares Approx. % 1,124,640,000 18.34% 906,299,562 14.78% 2,700,000 0.04% 2,033,639,562 33.16% 822,160,000 13.41% 25,000,000 0.41% 3,251,128,428 53.02% 6,131,927,990 100.00%
			33.16% 13.41% 0.41% 53.02%
			100.00%

Notes:

These shares are held by (i) Rise Cheer as to 1,124,640,000 shares and (ii) Taskwell as to 906,299,562 shares, both are wholly-owned subsidiaries of Besford International Limited (‘‘Besford’’). Besford is a wholly-owned subsidiary of COL. Accordingly, COL is deemed to have interests in the shares in which Rise Cheer and Taskwell are interested. As at 30 June 2013, COL was 72.13% owned by Vigor Online Offshore Limited which in turn is a wholly-owned subsidiary of China Spirit Limited (‘‘China Spirit’’) in which Ms. Chong Sok Un maintains 100% beneficial interest. Therefore, Ms. Chong Sok Un is deemed to have interests in the shares in which COL is interested through her 100% interests in China Spirit.
Dato’ Wong has indicated that he will not accept the Offer for the Shares held by him as at the Latest Practicable Date.
These shares are held by Benefit Rich Limited, a direct wholly-owned subsidiary of Shougang Fushan, the substantial shareholders of which are Shougang Holdings (Hong Kong) Limited and Sino Life Insurance Co., Ltd., holding 29.41% and 24.01% respectively in the share capital of Shougang Fushan.

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LETTER FROM THE BOARD

Neither Shougang Fushan nor Mr. So Kwok Hoo, non-executive Director representing the interests of Shougang Fushan in the Company, was involved in the formulation or negotiation of the Offer or the Buy-backs Mandate. Shougang Fushan has not indicated its intention as regards acceptance of the Offer or whether it would vote for or against the resolution in the SGM.

Mr. Ferguson has indicated that he will not accept the Offer for the Shares held by him as at the Latest Practicable Date.

Immediately before the Offer

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==> picture [68 x 34] intentionally omitted <==

Total issued share capital: 6,811,927,990 Shares

Immediately after completion of the Offer assuming Shougang Fushan accepting all of their Assured Entitlement and none of the Excess Number of Shares

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==> picture [68 x 34] intentionally omitted <==

Total issued share capital: 6,131,927,990 Shares

REASONS AND FINANCIAL EFFECT OF THE OFFER

The Board believes it is appropriate to utilize certain of the Company’s funds to purchase the Shares and to thereby provide a mechanism for the Qualifying Shareholders to dispose of their Shares at a premium to the prevailing market prices should they wish to do so.

In view of the above factors and the letter of advice from the Independent Financial Adviser and having considered other methods of achieving its objectives with its professional advisers, the Board (including the Independent Board Committee) considers that the Offer is in the best interest of the Shareholders as it will:

(a) return part of the funds to the Qualifying Shareholders pursuant to the Offer;

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LETTER FROM THE BOARD

(b) provide an opportunity for the Qualifying Shareholders either to sell their Shares at premium to the prevailing market prices and receive cash or to increase their proportionate interests in the Company by retaining their holdings and participating in the future prospects of the Company; and
(c) have the effect of increasing the consolidated net asset value per Share and earnings per Share.

FINANCIAL EFFECTS OF THE OFFER

The unaudited pro forma consolidated financial information of the Group upon completion of the Offer illustrating the financial impact of the Offer on the net asset value per Share, earnings per Share, liabilities and working capital of the Group is set out in Appendix III of this Offer Document.

Based on the unaudited pro forma consolidated statement of financial position of the Group as set out in Appendix III of this Offer Document and assuming that the Offer had been completed on 31 December 2013 and the Maximum Number of Shares have been bought back, as a result of the completion, (i) the net asset value per Share as at 31 December 2013 would increase by approximately 7.69% from approximately HK$0.52 per Share to approximately HK$0.56 per Share; (ii) the earnings per Share (basic and diluted) for the six months ended 31 December 2013 would increase by approximately 11.08% from approximately HK19.32 cents to approximately HK21.46 cents; (iii) the working capital (expressed as net current assets) as at 31 December 2013 would decrease by approximately 19.53% from approximately HK$635,934,000 to approximately HK$511,734,000; and (iv) liabilities as at 31 December 2013 would remain unchanged at approximately HK$266,392,000.

Based on the above and having considered the funding of the Offer, the Company considers that there are no material adverse effect on the Group’s net assets per Share, earnings per Share (basic and diluted), working capital and liability as a result of the Offer.

INFORMATION ON THE GROUP

The Company is an established natural resource investment fund and commodity trading house which owns strategic interests in natural resource companies with the main business lines comprising primary strategic investment; resource investment; and commodity trading business, focused primarily on metals and energy.

FUTURE INTENTIONS OF THE GROUP

The business and management of the Group will remain unchanged and the Company’s listing on the Stock Exchange will be maintained upon completion of the Offer. It is intended that no major changes will be introduced to the businesses of the Group and the employment of the employees of the Group will be continued and the material fixed assets of the Group will not be redeployed as a result of the Offer.

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LETTER FROM THE BOARD

SGM

The notice of SGM is set out on pages 145 to 146 of this Offer Document. At the SGM, resolutions will be proposed for the purposes of considering, if thought fit, approving the Offer, the Buy-backs Mandate and the Whitewash Waiver, is set out on pages 145 to 146 of this Offer Document.

A form of proxy is enclosed with this Offer Document for use at the SGM. Whether or not you are able to attend this meeting, you are requested to complete and return the enclosed form of proxy to the branch share registrar of the Company in Hong Kong, Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong (which will be relocated to Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong with effect from 31 March 2014), not less than 48 hours before the time appointed for the holding of the meeting. Completion and return of a form of proxy will not preclude you from attending and voting at the meeting in person if you so wish.

Pursuant to Rule 2.9 of the Takeovers Code, any matter required by the Takeovers Code to be approved by Shareholder in general meetings must be conducted by way of a poll. Rule 13.39(4) of the Listing Rules, any vote of Shareholders at a general meeting must be taken by poll (except where the chairman of the meeting, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands). Accordingly, all resolutions to be proposed at the SGM as set out in notice of the SGM shall be voted by poll.

The Independent Board Committee, comprising Dr. Wong Wing Kuen, Albert, Mr. Chang Chu Fai, Johnson Francis and Mr. Robert Moyse Willcocks, as independent non-executive Directors, and Mr. So Kwok Hoo and Mr. Peter Anthony Curry, as non-executive Directors, has been formed to advise the Independent Shareholders with respect to the Offer, the Buy-backs Mandate and the Whitewash Waiver. Mr. Lee Seng Hui, an non-executive Director, is excluded from the Independent Board Committee as he is a beneficial owner of Yu Ming, the financial adviser making the Offer on behalf of the Company.

At the approval by the Independent Board Committee, the Independent Financial Adviser has been appointed to advise the Independent Board Committee as to whether the Offer, the Buy-backs Mandate and the Whitewash Waiver are fair and reasonable so far as the Independent Shareholders are concerned, whether the Offer, the Buy-backs Mandate and the Whitewash Waiver are in the interests of the Company and the Shareholders as a whole, and as to acceptance and voting for or against the Offer, the Buy-backs Mandate and the Whitewash Waiver. Independent Shareholders should note that even if he/ she votes in favour of or against the resolutions to be proposed at the SGM, he or she is free nonetheless to accept or not to accept the Offer.

GENERAL

Your attention is drawn to the letter from the Independent Board Committee set out on pages 24 to 25 of this Offer Document. Your attention is also drawn to the letter of advice from the Independent Financial Adviser which contains, among other things, its advice to the Independent Board Committee as to whether the Offer, the Buy-backs Mandate and the Whitewash Waiver are fair and reasonable and as to acceptance and voting, and the principal factors and reasons considered by it in arriving at such advice. The text of the letter from the Independent Financial Adviser is set out from pages 26 to 48 of this Offer Document.

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LETTER FROM THE BOARD

Your attention is also drawn to the principal terms of the Offer as set out in Appendix I to this Offer Document, and the statutory and general information as set out in Appendix V to this Offer Document.

Shareholders and potential investors should note that the Offer is subject to all of the Conditions being fulfilled in full and, therefore, may or may not become unconditional and the Offer may or may not proceed. Shareholders and potential investors are advised to exercise caution when dealing in the Shares. The Company will publish an announcement on or about 4 April 2014 to inform the Shareholders as to whether or not the Offer has become unconditional.

Yours faithfully, By Order of the Board APAC Resources Limited Chong Sok Un Chairman

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LETTER FROM YU MING

13 March 2014

==> picture [183 x 51] intentionally omitted <==

To the Independent Shareholders

Dear Sir or Madam,

CONDITIONAL CASH OFFER BY

YU MING INVESTMENT MANAGEMENT LIMITED ON BEHALF OF APAC RESOURCES LIMITED TO BUY BACK UP TO 680,000,000 SHARES FOR HK$0.18 PER SHARE,

INVOLVING AN APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

On 23 January 2014, the Board announced that a conditional cash offer would be made by Yu Ming on behalf of the Company in compliance with the Buy-backs Code, subject to fulfilment of the Conditions, to buy back for cancellation up to the Maximum Number of Shares, being 680,000,000 Shares, representing approximately 10% of the total issued share capital of the Company as at the Latest Practicable Date. The Qualifying Shareholders may accept the Offer by submission of Acceptance Forms for the sale of their Shares to the Company at the Offer Price of HK$0.18 per Share.

The Shares to be repurchased by the Company will not exceed the Maximum Number of Shares. There is no minimum number of Shares proposed to be bought back under the Offer. If the Offer is fully accepted, it will result in the Company paying to the Accepting Shareholders who have submitted Acceptance Forms HK$0.18 per Share, which will be paid in cash.

This letter sets out details of the terms of the Offer. Further details of the terms and conditions of the Offer are set out in Appendix I to this Offer Document and the accompanying Acceptance Form.

Your attention is drawn to the letter from the Board as set out on pages 7 to 15 of this Offer Document. You are also strongly advised to read the letter from the Independent Board Committee as set out on pages 24 to 25 of this Offer Document which contains its recommendation to the Independent Shareholders in respect of the Offer, the Buy-backs Mandate and the Whitewash Waiver, and the letter from Chanceton Capital Partners Limited as set out on pages 26 to 48 of this Offer Document containing its advice to the Independent Board Committee in respect of the Offer, the Buy-backs Mandate and the Whitewash Waiver.

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LETTER FROM YU MING

SALIENT TERMS OF THE OFFER

The Offer is being made by Yu Ming on behalf of the Company subject to fulfilment of the Conditions to buy back the Shares on the following basis up to the Maximum Number of Shares:

For every Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.18 in cash Assured Entitlement for every 20,000 Shares held . . . . . . . . . . . . . . . . . . . .2,800 Shares (Note)

Note: This number of Shares is based on Taskwell, Rise Cheer, Dato’ Wong and Mr. Ferguson indicating that they will not accept the Offer.

All Qualifying Shareholders are entitled to accept the Offer by submitting Acceptance Forms for the sale of any number of their Shares to the Company on the basis of which is set out under the section headed ‘‘Assured Entitlement and Excess Tenders’’ below.

The principle features of the Offer will be as follows:

(a) The Company will buy back up to the Maximum Number of Shares, being 680,000,000 Shares, at the Offer Price of HK$0.18 per Share.
(b) The Qualifying Shareholders may submit Acceptance Forms in respect of any number of his/ her Shares.
(c) The Offer Price will be paid in cash.
(d) Acceptance Forms which have been duly completed and received by or on behalf of the Company will be irrevocable after the Offer has been declared unconditional.
(e) The Shares specified in an Acceptance Form will be bought back in the following order:
(i) firstly, all the Shares on a pro-rata basis up to the Assured Entitlement (being 2,800 Shares for every 20,000 Shares held) of an Accepting Shareholder; and
(ii) secondly, on condition that there are Surplus Shares, that number of the Excess Tenders as is equal to the proportion which the Excess Tenders specified in the relevant Acceptance Form bears to the aggregate Excess Tenders in all the Acceptance Forms up to the Maximum Number of Shares.
(f) All Shares will be bought back free of commissions and dealing charges, but seller’s ad valorem stamp duty payable by the Qualifying Shareholders who accept the Offer and calculated at a rate of HK$1.00 for every HK$1,000 or part thereof of the market value of the Shares to be bought back under the Offer or the consideration payable by the Company in respect of relevant acceptances of the Offer, whichever is the higher, will be deducted by the Company from the amount of cash payable to an Accepting Shareholder. The Company will arrange for payment of the seller’s ad valorem stamp duty on behalf of the Accepting Shareholders on the buy-back.

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LETTER FROM YU MING

(g) All bought back Shares will be cancelled.
(h) The Shares will be bought back free from all liens, charges, encumbrances, equitable interests, rights of pre-emption or other third party rights of any nature. Accordingly, the submission of an Acceptance Form by an Accepting Shareholder will be deemed to constitute a warranty by him/her to Yu Ming and the Company that his/her Shares are sold free from all liens, charges, encumbrances, equitable interests, rights of pre-emption or other third party rights of any nature and together with all rights attaching thereto on or after the date of the Announcement (including the right to all dividends and distributions (if any) declared after the date of the Announcement).

In compliance with Rule 3 of the Buy-backs Code, the Offer will be subject to the approval by the Independent Shareholders by way of a poll. The Offer will also be subject to the other terms and conditions referred to under the section entitled at the SGM ‘‘Conditions to the Offer’’ below.

The full terms and details of the Offer are set out in Appendix I to this Offer Document.

THE OFFER PRICE

The Offer Price of HK$0.18 per Share represents:

(i) a premium of approximately 27.66% over the closing price of the Shares of HK$0.141 each as quoted on the Stock Exchange on the Last Trading Day;
(ii) a premium of approximately 25.17% over the average price of HK$0.1438, being the average closing price of the Shares as quoted on the Stock Exchange for the five consecutive trading days immediately prior to and including the Last Trading Day;
(iii) a premium of approximately 23.88% over the average price of HK$0.1453, being the average closing price of the Shares as quoted on the Stock Exchange for the ten consecutive trading days immediately prior to and including the Last Trading Day;
(iv) a discount of approximately 45.78% to the Group’s net asset value of approximately HK$0.332 per Share pursuant to the latest audited consolidated accounts of the Company as at 30 June 2013;
(v) a discount of approximately 65.45% to the Group’s net asset value of approximately HK$0.521 per Share pursuant to the latest unaudited condensed consolidated accounts of the Company as at 31 December 2013; and
(vi) a premium of approximately 15.38% over the closing price of HK$0.156, being the closing price of the Shares on the Latest Practicable Date.

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LETTER FROM YU MING

ASSURED ENTITLEMENT AND EXCESS TENDERS

As at the Latest Practicable Date, there are 6,811,927,990 Shares in issue. The Maximum Number of Shares, being 680,000,000 Shares, represent approximately 10.0% of the total issued share capital of the Company as at the Latest Practicable Date.

As at the Latest Practicable Date, Taskwell, Rise Cheer, Dato’ Wong and Mr. Ferguson have indicated that they will not accept the Offer for Shares held by them respectively.

As Taskwell, Rise Cheer, Dato’ Wong and Mr. Ferguson have indicated that they will not accept the Offer, each of the Accepting Shareholders is entitled to sell to the Company the Assured Entitlement of 2,800 Shares for every board lot of 20,000 Shares he, she or it owns as at the close of the Offer. The number of Shares which may be acquired from an Accepting Shareholder may be in excess of his or her Assured Entitlement in the event that there are Excluded Shareholders or when there are Qualifying Shareholders not submitting Acceptance Forms or the number of the Shares specified in some of the Acceptance Forms is less than the Assured Entitlements of the relevant Accepting Shareholders. The number of Shares so acquired will be dependent on the number of the Surplus Shares.

If the aggregate Excess Number of Shares falls below the Surplus Shares, all of the Excess Number of Shares will be repurchased by the Company. In the event of the aggregate Excess Number of Shares exceeding the Surplus Shares, each Accepting Shareholder whose Acceptance Form consists of Excess Number of Shares will be entitled to the buy-back by the Company of that number of the Excess Number of Shares as is equal to the proportion which the Excess Number of Shares specified in his or her Acceptance Forms bears to the aggregate Excess Number of Shares calculated in accordance with the formula below, save that the Company may in its absolute discretion round such figure up or down with the intention of avoiding (as far as practicable) Shares being held by Accepting Shareholders in odd lots or fractional entitlements:

==> picture [25 x 22] intentionally omitted <==

E = Excess Number of Shares specified in an Acceptance Form

A = aggregate Excess Number of Shares specified in all of the Acceptance Forms

S = Surplus Shares

The total number of the Shares which will be bought back by the Company will not exceed the Maximum Number of Shares.

The decision of the Company as to scaling down of acceptance of the Offer for the Excess Tenders as illustrated above and as to the odd lots or fractional entitlements will be conclusive and binding on all Shareholders.

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LETTER FROM YU MING

CONDITIONS TO THE OFFER

The Offer will be conditional upon fulfillment of all of the following conditions:

(a) the approval by the Independent Shareholders voting in person or by proxy at the SGM of special resolutions to approve by way of a poll the Offer and the Buy-backs Mandate and of an ordinary resolution to approve by way of a poll the Whitewash Waiver.;
(b) the granting of the Whitewash Waiver by the Executive; and
(c) the approval of any other appropriate regulatory authorities whose consent is required under any applicable laws and regulations in order for the Company to validly make the Offer.

None of the conditions above is waivable. As at the Latest Practicable Date, the Company is not aware of any such approval requirement as set out in condition (c) above.

If the Whitewash Waiver is not granted by the Executive, or if the resolutions to approve the Offer, the Buy-backs Mandate and the Whitewash Waiver are not passed by the Independent Shareholders at the SGM, the Offer will lapse.

The Offer is not conditional as to any minimum number of acceptances.

OVERSEAS SHAREHOLDERS

The Offer Document and Acceptance Forms will not be filed under the applicable securities or equivalent legislation or rules of any jurisdictions other than Hong Kong.

Based on the Register of Member, there were no Overseas Shareholders as at the Latest Practicable Date. Accordingly, there are no Excluded Shareholders.

PROCEDURES FOR ACCEPTANCE

The Offer is open for acceptance from the date of this Offer Document, but payment of the Offer will only be made after the Offer has become unconditional. The consideration under the Offer will not be despatched unless the Acceptance Form is completed in all respects and the Title Documents have been received by the Company. Shares tendered under the Offer shall be paid for by the Company as soon as possible and in any event within 7 Business Days after the close of the Offer.

If the Offer is declared unconditional, Qualifying Shareholders will be able to tender their Shares under the Offer for a period of a further 14 days thereafter.

In order to accept the Offer, Qualifying Shareholders should complete and return the accompanying Acceptance Form in accordance with the instructions printed in this Offer Document and the instructions printed on the Acceptance Form. The instructions in this Offer Document should be read together with the instructions on the Acceptance Form (which instructions form part of the terms of the Offer).

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LETTER FROM YU MING

In order to be valid, the completed Acceptance Form should be forwarded, together with the Title Documents for not less than the number of Shares in respect of which the relevant Qualifying Shareholder wishes to accept the Offer, by post or by hand to the Registrar at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong (which will be relocated to Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong with effect from 31 March 2014), in an envelope marked ‘‘APAC Resources Limited — 2014 Buy-back Offer’’ as soon as possible after receipt of the Acceptance Form but in any event so as to reach the Registrar by no later than 4:00 p.m. (Hong Kong time) on 22 April 2014, or such later time and/or date as the Company may, subject to the Takeovers Code, decide and announce.

No Acceptance Form received after the Latest Acceptance Time will be accepted.

If the Acceptance Form is executed by a person other than the registered holder, appropriate evidence of authority (for instance, a grant of probate or certified copy of a power of attorney) must be delivered to the Registrar with the completed Acceptance Form.

No acknowledgement of receipt of any Acceptance Form or Title Documents will be given.

Only one Acceptance Form may be submitted by each Qualifying Shareholder to the Registrar. Acceptances duly received will become irrevocable and cannot be withdrawn after the Offer has been declared unconditional.

ODD LOTS ARRANGEMENTS

The Shares are currently traded in board lots of 20,000 Shares in each. Such board lot size will not be changed as a result of the implementation of the Offer.

In view of the number of Shares in an Assured Entitlement and the manner of calculation in respect of the Excess Tenders as described above, an Accepting Shareholder may, as a result of the Offer, hold odd lots of the Shares.

For this purpose, Sun Hung Kai Investment Services Limited, whose address is at 42nd Floor, The Lee Gardens, 33 Hysan Road, Causeway Bay, Hong Kong (contact person: Mr. Andy Cheung; telephone number: 3920 2782) has been appointed by the Company as the designated broker to match sales and purchases of odd lot holdings of Shares in the market for a period of six weeks from the completion of the Offer to enable odd lot Shareholders to dispose of their odd lots or to top up their odd lots to whole board lots of 20,000 Shares. Odd lot Shareholders should note that the matching of odd lots is not guaranteed. Further details of the related arrangements will be announced after the Offer has become unconditional.

NOMINEE REGISTRATION OF SHARES

Shareholders whose Shares are held by a nominee company should note that the Board will regard the nominee company as a single Shareholder according to the Register. With a view to having equality of treatment of all Qualifying Shareholders, those registered holders of Shares who hold Shares as nominees for more than one beneficial owner should, as far as practicable, treat the holding of each beneficial owner separately. In order for beneficial owners of the Shares, whose investments are registered in nominee names (including those whose interests in the Shares are held through CCASS), to

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LETTER FROM YU MING

accept the Offer, it is essential that they provide instructions to their nominee agents of their intentions with regard to the Offer. Shareholders with their Shares held by a nominee company may consider whether they would like to arrange registration of the relevant Shares in the name of the beneficial owner(s).

RESPONSIBILITY FOR DOCUMENTS

All communications, notices, Acceptance Forms, Title Documents and remittances to be delivered or sent by, to or from any Shareholder will be delivered or sent by, to or from them, or their designated agents, at their risk and none of the Company, Yu Ming, the Registrar or any of their respective directors or any other person involved in the Offer accepts any liability for any loss or any other liabilities whatsoever which may rise as a result.

SETTLEMENT

Subject to the Offer becoming unconditional and provided that a duly completed Acceptance Form, accompanied by the Title Documents are received by the Registrar by not later than the Latest Acceptance Time and are deemed to be in order, the Registrar will inform the relevant Accepting Shareholder by post of the buy-back of his/her Shares, including the number of Shares to be bought back from his Excess Tenders, if any. At the same time, the Registrar will send, by ordinary post at that Accepting Shareholder’s risk, a remittance for such total amount as is due to that Accepting Shareholder under the Offer (subject to deduction of seller’s ad valorem stamp duty due on the buy-back of the Shares from the amount payable in cash) within 7 Business Days after the close of the Offer.

If the Excess Tenders of an Accepting Shareholder has not been bought back by the Company in full, the Title Documents in respect of the balance of such Shares or a replaced certificate therefor will be returned or sent to the Accepting Shareholder by ordinary post at his/her risk within 7 Business Days after the close of the Offer.

If the Offer does not become unconditional, the Title Documents will be returned and/or sent to each Accepting Shareholder (by ordinary post, at that Accepting Shareholder’s own risk) within 10 days of the lapse of the Offer. In such an event, the Company will make an announcement in accordance with the Takeovers Code and send a notice of lapse of the Offer to the Shareholders.

Where such Shareholder has sent one or more transfer receipt(s) and in the meantime one or more Share certificate(s) has/have been collected on that Shareholder’s behalf in respect thereof, that Shareholder will be sent (by ordinary post, at that Shareholder’s own risk) such Share certificate(s) in lieu of the transfer receipt(s).

Settlement to the consideration to which any Acceptance Shareholder is entitled under the Offer will be paid by the Offeror in full in accordance with the terms of the Offer set out in this Offer Document (including its appendices) and the accompanying Acceptance Form without regard to any lien, right of set-off, counterclaim or other analogous right to which the Offeror may otherwise be, or claim to be, entitled against such Acceptance Shareholder.

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LETTER FROM YU MING

TAX IMPLICATIONS

Qualifying Shareholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of their acceptance of the Offer. It is emphasized that none of the Company, its ultimate beneficial owners and parties acting in concert with any of them, Yu Ming, Chanceton Capital Partners Limited, the Registrar or any of their respective directors or any persons involved in the Offer accepts responsibility for any taxation effects on, or liabilities of, any person or persons as a result of acceptance of the Offer by the Qualifying Shareholders.

GENERAL

Depending upon the level of the Shares tendered for buy-back by the Company as stated in the Acceptance Forms and assuming Taskwell, Rise Cheer and Dato’ Wong not accepting the Offer to tender the Shares held by them, the beneficial interest in the Company’s issued share capital held by Taskwell or Rise Cheer and parties acting in concert with any of them may increase from its current level of approximately 29.85% to a maximum of approximately 33.16% upon completion of the Offer, thereby triggering a general obligation on Taskwell and Rise Cheer and parties acting in concert with any of them under Rule 26 of the Takeovers Code to make a mandatory general offer for all of the Shares not beneficially owned by Taskwell and Rise Cheer and parties acting in concert with any of them. Accordingly, an application for the Whitewash Waiver has been made to the Executive by Taskwell or Rise Cheer.

SGM

Further details on the terms and conditions of the Offer including, amongst other things, procedures for acceptance and settlement, acceptance period and taxation matters, are set out in Appendix I to this Offer Document and in the Acceptance Form.

Independent Shareholders are strongly advised to consider carefully the information as contained in the ‘‘Letter from the Board’’, the recommendation as contained in the ‘‘Letter from the Independent Board Committee’’ and the advice of Chanceton Capital Partners Limited as contained in the ‘‘Letter from the Independent Financial Adviser’’ of this Offer Document, and to consult their professional advisers as they see fit.

Your attention is also drawn to the information as set out in the appendices to this document which form part of the Offer Document.

Yours faithfully, For and on behalf of YU MING INVESTMENT MANAGEMENT LIMITED Lee Wa Lun, Warren Managing Director

– 23 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of a letter of the Independent Board Committee to the Independent Shareholders in respect of the Offer, the Buy-backs Mandate and the Whitewash Waiver for inclusion in this Offer Document.

APAC RESOURCES LIMITED

亞太資源有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1104)

CONDITIONAL CASH OFFER BY

YU MING INVESTMENT MANAGEMENT LIMITED ON BEHALF OF APAC RESOURCES LIMITED TO BUY BACK UP TO 680,000,000 SHARES FOR HK$0.18 PER SHARE,

INVOLVING AN APPLICATION FOR WHITEWASH WAIVER

13 March 2014

To the Independent Shareholders

Dear Sir or Madam,

We have been appointed as members of the Independent Board Committee to advise you in respect of the Offer, the Buy-backs Mandate and the Whitewash Waiver, details of which are set out in the ‘‘Letter from the Board’’ in the document of the Company dated 13 March 2014 (the ‘‘Offer Document’’), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as defined in the Offer Document unless the context requires otherwise.

Your attention is drawn to the letter from the Board as set out on pages 7 to 15 of the Offer Document and Appendix I to the Offer Document containing the principal terms of the Offer, and the letter of advice from the Independent Financial Adviser, Chanceton Capital Partners Limited (‘‘Chanceton’’) as set out on pages 26 to 48 of the Offer Document, which contains its advice and recommendation to us in respect of the Offer, the Buy-backs Mandate and the Whitewash Waiver, as well as the principal factors and reasons for its advice and recommendation.

For identification purpose only

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the factors and reasons considered by, and the opinion of, Chanceton as stated in the aforementioned letter of advice, we are of the opinion that the terms of the Offer are fair and reasonable so far as the Independent Shareholders are concerned and that the Offer and the granting of the Buy-backs Mandate and the Whitewash Waiver, which are Conditions of the Offer, are in the interests of the Company and the Shareholders as a whole. We therefore recommend the Independent Shareholders to vote in favour of the resolutions to approve the Offer, the Buy-backs Mandate and the Whitewash Waiver at the SGM.

We also concur with the advice of Chanceton and recommend the Independent Shareholders to accept the Offer. Notwithstanding our recommendations, Independent Shareholders are advised to monitor the market price of the Shares carefully during the Offer Period. If any Independent Shareholder is able to identify any opportunity to sell his/her Shares in the open market where the net proceeds from such sale will exceed the net proceeds by accepting the Offer, such Independent Shareholder should consider not to accept the Offer and should seek to sell his/her Shares if he/she wishes to and is able to do so.

Although Mr. So Kwok Hoo is a non-executive Director nominated by Shougang Fushan to represent its interest in the Company, Mr. So’s duties and obligations are owed to the Company, and not any specific Shareholder(s). Mr. So reminds Independent Shareholders that his opinion represents his own, and Shougang Fushan does not necessarily act upon his recommendations.

Yours faithfully,

INDEPENDENT BOARD COMMITTEE APAC RESOURCES LIMITED Dr. Wong Wing Kuen, Albert Mr. Chang Chu Fai, Mr. Robert Moyse Willcocks Johnson Francis Independent Non-executive Director

Mr. So Kwok Hoo Mr. Peter Anthony Curry Non-executive Director

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

13 March 2014

==> picture [151 x 33] intentionally omitted <==

To the Independent Board Committee of APAC Resources Limited

Dear Sir/Madam,

CONDITIONAL CASH OFFER BY YU MING INVESTMENT MANAGEMENT LIMITED ON BEHALF OF APAC RESOURCES LIMITED TO BUY BACK UP TO 680,000,000 SHARES FOR HK$0.18 PER SHARE, INVOLVING AN APPLICATION FOR WHITEWASH WAIVER

I. INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee in respect of the Offer, the Buy-backs Mandate and the Whitewash Waiver, details of which are set out in the letter from the Board of this Offer Document (the ‘‘Letter from the Board’’) contained in the Offer Document to the Shareholders dated 13 March 2014 (the ‘‘Offer Document’’), of which this letter forms part. This letter contains our advice to the Independent Board Committee in respect of the Offer, the Buy-backs Mandate and the Whitewash Waiver. Unless the context otherwise requires, terms defined in the Offer Document have the same meanings in this letter.

As set out in the Letter from the Board, On 23 January 2014, the Board announced that a conditional cash offer will be made by Yu Ming on behalf of the Company in compliance with the Codes, subject to the fulfilment of the Conditions, to buy back for cancellation up to the Maximum Number of Shares, being 680,000,000 Shares, representing approximately 10% of the total issued share capital of the Company as at the Latest Practicable Date. Qualifying Shareholders may accept the Offer by submission of Acceptance Forms for the sale of their Shares to the Company at the Offer Price of HK$0.18 per Share which will be paid in cash.

Taskwell and Rise Cheer were beneficially interested in an aggregate 2,030,939,562 Shares (as to 906,299,562 Shares and 1,124,640,000 Shares respectively), representing approximately 29.81% of the total issued share capital of the Company as at the Latest Practicable Date. Taskwell and Rise Cheer are both indirect wholly-owned subsidiaries of COL. COL is 73.01% owned by Vigor Online Offshore Limited, a company indirectly wholly-owned by Ms. Chong Sok Un as at the Latest Practicable Date. Dato’ Wong, an executive director of COL, is beneficially interested in 2,700,000 Shares, representing 0.04% of the total issued share capital of the Company as at the Latest Practicable Date. Taskwell, Rise Cheer and Dato’ Wong are deemed to be acting in concert for the purposes of the Takeovers Code. Taskwell, Rise Cheer and Dato’ Wong have indicated that they will not accept the Offer for the Shares held by them as at the Latest Practicable Date. Save as disclosed above during the Relevant Period, none of Taskwell, Rise Cheer or parties acting in concert with any of them holds, controls or has directions over voting rights, rights over Shares, convertible securities, warrants, options or derivative in respect of Shares, nor has the Company received any irrevocable commitment from Shareholders to accept the Offer or vote for or against the Offer, the Buy-backs Mandate or the Whitewash Waiver at the SGM.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Rule 32 of the Takeovers Code and Rule 6 of the Buy-backs Code provide that where, as a result of share buy-backs, a shareholder’s proportionate interest in the voting rights of the buy-back company increases, such interest will be treated as an acquisition for the purpose of the Takeovers Code. Consequently, depending upon the level of the Shares tendered for buy-back by the Company as stated in the Acceptance Forms and assuming that Taskwell, Rise Cheer and Dato’ Wong do not accept the Offer to tender Shares held by them, the beneficial interest in the Company’s issued share capital held by Taskwell, Rise Cheer and parties acting in concert with any of them may increase from its current level of approximately 29.85% to a maximum of approximately 33.16% upon completion of the Offer, thereby triggering a general obligation on Taskwell, Rise Cheer and parties acting in concert with any of them under Rule 26 of the Takeovers Code to make a mandatory general offer for all of the Shares not beneficially owned by Taskwell, Rise Cheer and parties acting in concert with any of them.

Accordingly, an application for the Whitewash Waiver has been made to the Executive by Taskwell and Rise Cheer. The Executive had indicated that subject to Independent Shareholders’ approval of the Whitewash being obtained at the SGM, it would agree to waive the obligations of Taskwell, Rise Cheer and parties acting in concert with them to make a mandatory general offer for Shares arising as a result of the completion of the Offer.

II. THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee, comprising all the independent non-executive Directors, namely Dr. Wong Wing Kuen, Albert, Mr. Chang Chu Fai, Johnson Francis and Mr. Robert Moyse Willcocks, and non-executive Directors, namely Mr. So Kwok Hoo and Mr. Peter Anthony Curry, has been formed to advise the Independent Shareholders with respect to the Offer, the terms of the Offer, the Buy-backs Mandate and the Whitewash Waiver. As the independent financial adviser to the Independent Board Committee, our role is to give an independent opinion to the Independent Board Committee as to whether the Offer, the terms of the Offer, the Buy-backs Mandate and the Whitewash Waiver are fair and reasonable and in the interests of the Company and the Shareholders as a whole, and as to acceptance and voting for or against the Offer, the Buy-backs Mandate and the Whitewash Waiver, and how the Independent Shareholders should vote in respect of the resolutions to approve the Offer, the Buy-backs Mandate and the Whitewash Waiver at the SGM.

III. BASIS OF OUR OPINION

In arriving at our recommendation, we have relied on the statements, information and representations contained in the Offer Document and the information and representations provided to us by the Directors and the management of the Company, including (a) the Offer Document; and (b) the Buy-backs Mandate. We have also extracted, reviewed and analysed (i) public information available, such as historical share prices and annual reports sourced from the official website of the Stock Exchange in regards of the Company and the comparable listed companies set out in the ‘‘Comparable analysis with Comparable listed companies in Hong Kong’’; and (ii) the interim results announcement of the Company for the six months ended 31 December 2013 and the annual reports of the Company for the years ended 30 June 2013 and 30 June 2012 respectively. We have assumed that all information and representations contained or referred to in the Offer Document and all information and representations which have been provided by the Directors and the management of the Company are true and accurate at the time they were made and will continue to be accurate as at the date of the despatch of the Offer Document. We have no reason to doubt the truth, accuracy and completeness of the information and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

representations provided to us by the Directors and the management of the Company. The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Offer Document and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, opinions expressed in the Offer Document have been arrived at after due and careful consideration and there are no other material facts not contained in the Offer Document the omission of which would make any such statement contained in the Offer Document, including this letter, misleading. We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any material facts or circumstances which would render the information provided and representations made to us untrue, inaccurate or misleading. We consider that we have performed all the necessary steps to enable us to reach an informed view and to justify our reliance on the information provided so as to provide a reasonable basis for our opinion.

We have not, however, carried out any independent verification of the information provided by the Directors and the management of the Company, nor have we conducted an independent investigation into the business and affairs of the Group.

Our role as the independent financial adviser is to give an independent opinion to advise the Independent Board Committee for advising the Independent Shareholders solely in connection with its consideration of the Offer, the Buy-backs Mandate and the Whitewash Waiver, except for its inclusion in the Offer Document, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

IV. PRINCIPAL FACTORS CONSIDERED

In formulating our opinion regarding the terms of the Offer, the Buy-backs Mandate and the Whitewash Waiver, we have taken into consideration the following principal factors:

1. Background

The Company, incorporated in Bermuda with limited liability, is an investment holding company. The Company and its subsidiaries are principally engaged in trading in base metals, and trading and investment of listed and unlisted securities.

2. Reasons for and benefit of the Offer

The Offer Price of HK$0.18 per Share represents:

(i) a premium of approximately 27.66% over the closing price of the Shares of HK$0.141 each as quoted on the Stock Exchange on the Last Trading Day;
(ii) a premium of approximately 25.17% over the average price of HK$0.1438, being the average closing price of the Shares as quoted on the Stock Exchange for the five consecutive trading days immediately prior to and including the Last Trading Day;
(iii) a premium of approximately 23.88% over the average price of HK$0.1453, being the average closing price of the Shares as quoted on the Stock Exchange for the ten consecutive trading days immediately prior to and including the Last Trading Day; and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(iv) a premium of approximately 15.38% over the closing price of HK$0.156, being the closing price of the Shares on the Latest Practicable Date.

Based on the audited consolidated financial statements of the Company for the year ended 30 June 2013, the net assets per Share was approximately HK$0.33 (the ‘‘Audited Net Assets per Share’’) which is calculated based on the equity attributable to owners of the Company of HK$2,258,633,000 as at 30 June 2013 over the number of Shares in issue as at 30 June 2013 of 6,811,927,990 Shares.

The Offer Price of HK$0.18 per Share represents:

(i) a discount of approximately 45.45% to the Group’s net asset value of approximately HK$0.33 per Share pursuant to the latest audited consolidated financial statements of the Company as at 30 June 2013.

Based on the unaudited condensed consolidated financial statements of the Company for the six months ended 31 December 2013, the net assets per Share was approximately HK$0.52 (the ‘‘Unaudited Net Assets per Share’’) which is calculated based on the equity attributable to owners of the Company of HK$3,548,964,000 as at 31 December 2013 over the number of Shares in issue as at 31 December 2013 of 6,811,927,990 Shares.

The Offer Price of HK$0.18 per Share represents:

(i) a discount of approximately 65.38% to the Group’s unaudited net asset value of approximately HK$0.52 per Share pursuant to the latest unaudited consolidated financial statements of the Company as at 31 December 2013.

However, the Directors have noticed that the trading prices of Shares from 30 June 2013 to the Latest Practicable Date were well below the Audited Net Assets per Share and the Unaudited Net Assets per Share as at 30 June 2013 and 31 December 2013 respectively. As a result, the Directors consider trading prices of Shares do not reflect the net asset value of the Group.

The Board believes it is appropriate to utilize certain of the Company’s funds to buy back the Shares and to thereby provide a mechanism for the Qualifying Shareholders to dispose of their Shares at a premium to the prevailing market prices should they wish to do so.

Having discussed and considered other methods of achieving its objectives with the Board (including the Independent Board Committee) with respect to the aforementioned reasons, we concur with the view of the Board as set out in the sections headed ‘‘Reasons and Financial Effect of the Offer’’ of Letter From The Board that the Offer is in the best interest of the Shareholders as it will:

(a) return part of the funds to the Shareholders pursuant to the Offer;
(b) provide an opportunity for the Qualifying Shareholders either to sell their Shares at a premium to the prevailing market prices and receive cash or to increase their proportionate interests in the Company by retaining their holdings and participating in the future prospects of the Company;
(c) have the effect of increasing the consolidated net asset value per Share; and

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(d) provide opportunities for Shareholders who wish to retain their holdings and participate in the future prospects of the Group to increase their proportionate interests in the Company with enhanced net asset value per Share and future earnings attributable to each Share held by them after the Offer.

After taking into consideration the Offer Price and the financial effects of the Offer, the Directors consider to buy back up to a maximum of 680,000,000 Shares is in the interest of the Company and the Shareholders as a whole.

The Offer Price is final and it will not be increased or revised. Shareholders and potential investors should be aware that, following the making of this statement, the Company will not be allowed to increase the Offer Price. Dealings in the Shares will continue notwithstanding the Offer may or may not become unconditional in all respects and the Offer may lapse. During such period, persons dealing in the Shares will bear the risk that the Offer may lapse. Shareholders and potential investors are advised to exercise caution when dealing in the Shares. If any Qualifying Shareholder is able to identify any opportunity to sell his/her Shares in the open market where the net proceeds from such sale will exceed the net proceeds by accepting the Offer, such Qualifying Shareholder should consider not to accept the Offer and should seek to sell his/her Shares if he/she wishes to and is able to do so. Shareholders should consult their professional advisers if in doubt.

3. Principal Terms of the Offer

We are given to understand that Yu Ming will make the Offer to the Qualifying Shareholders on behalf of the Company to buy back Shares, on the terms and subject to the conditions set out in this Offer Document up to the Maximum Number of Shares, being 680,000,000 Shares, representing approximately 10% of the total issued share capital of the Company as at the Latest Practicable Date. Qualifying Shareholders may accept the Offer by submission of Acceptance Forms for the sale of their Shares to the Company at the Offer Price of HK$0.18 per Share.

The maximum amount payable by the Company under the Offer is HK$122,400,000. The consideration for the Offer will be paid in cash and be funded out of the internal resources of the Company. Yu Ming has confirmed that sufficient financial resources are available to the Company to implement the Offer in full if the Maximum Number of Shares is bought back.

The Offer is made in full compliance with the Codes. The Offer will be conditional upon, amongst other things, (i) approval of the Offer and the Buy-backs Mandate by the Independent Shareholders voting by way of a poll at the SGM, and (ii) the Whitewash Waiver being granted by the Executive, which would be subject to the approval by the Independent Shareholders taken by way of a poll at the SGM. If either of the Offer, the Buy-backs Mandate or the Whitewash Waiver is not approved by the Independent Shareholders, or if the Whitewash Waiver is not granted by the Executive, the Offer will lapse.

The Offer is also subject to the Conditions referred to under the section headed ‘‘Conditions to the Offer’’ in the letter from Yu Ming, as set out on page 20 of this Offer Document.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

4. Background information on the Group

Set out below is a summary of the Group’s operating results and financial position extracted from the announcement of the Company dated 25 February 2014 of the interim results for the six months ended 31 December 2013 and the Company’s latest published annual report for the year ended 30 June 2013 (the ‘‘2013 Annual Report’’):

For the six months ended 31 December 2013

Revenue Gross profit Other gains and losses Other income Share of results of associates Profit for the period attributable to owners of the Company	For the six months ended 31 December 2013 (the ‘‘2013 Interim’’) 31 December 2012 (the ‘‘2012 Interim’’) HK$’000 HK$’000 (Unaudited) (Unaudited) 540,038 442,201 43,718 2,532 1,138,001 (1,840) 9,860 7,234 162,503 109,704 1,316,017 81,567

For the 2013 Interim, the Group recorded a turnover of approximately HK$540.0 million, representing an increase of approximately 22.1% from the turnover of approximately HK$442.2 million for the 2012 Interim. The Group recorded a gross profit of approximately HK$43.7 million, representing an increase of approximately 16.48 times of that for the 2012 Interim of approximately HK$2.5 million. The Group also recorded a profit attributable to the owners of the Company of approximately HK$1,316.0 million for the 2013 Interim, giving rise to a significant increase of approximately 15.13 times from approximately HK$81.6 million recorded for that of the 2012 Interim. The increase in profit of the Group for 2013 Interim was mainly attributable to the reversal of impairment losses on interests in associates of approximately HK$1,179.5 million.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For the year ended 30 June 2013

Revenue Gross profit Other gains and losses Other income Share of results of associates (Loss) for the year attributable to owners of the Company	For the year ended 30 June 2013 (the ‘‘2013 Year’’) 30 June 2012 (the ‘‘2012 Year’’) HK$’000 HK$’000 (Audited) (Audited) (Restated) 1,104,617 1,050,205 12,552 3,454 (2,387,295) (377,396) 15,545 12,037 347,152 218,792 (2,079,687) (242,967)

For the 2013 Year, the Group recorded a turnover of approximately HK$1,104.6 million, representing an increase of approximately 5.17% from the turnover of approximately HK$1,050.2 million in the 2012 Year. The Group recorded a gross profit of approximately HK$12.6 million, representing an increase of approximately 2.60 times from that for the 2012 Year of approximately HK$3.5 million. Despite an improved gross profit as compared with the 2012 Year, the Group recorded a loss of approximately HK$2,079.7 million for the 2013 Year, an increase of approximately 7.56 times on the loss of approximately HK$243.0 million recorded for the 2012 Year. The increased loss for the 2013 Year is mainly due to the impairment losses on interests in associates of approximately HK$2,111.3 million.

Non-current assets Current assets Total assets Current liabilities Total liabilities Net current assets Net assets	As at 31 December 2013 HK$’000 (Unaudited) 2,913,030 902,326 3,815,356 266,392 266,392 635,934 3,548,964	As at 30 June 2013 HK$’000 (Audited) 1,428,755 1,098,556 2,527,311 268,678 268,678 829,878 2,258,633	As at 30 June 2012 HK$’000 (Audited) (Restated) 3,651,523 1,108,170 4,759,693 117,878 117,878 990,292 4,641,815

As at 31 December 2013, the Group had total assets of approximately HK$3,815.4 million, representing an increase of approximately 51.0% from the total assets as at 30 June 2013 of approximately HK$2,527.3 million. The increase in total assets was mainly due to the reversal of impairment losses on interests in associates of approximately HK$1,179.5 million. As at 31

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

December 2013, the Group had total liabilities of approximately HK$266.4 million, representing a slight decrease of approximately 0.9% from approximately HK$268.7 million as at 30 June 2013. The decrease in total liabilities was mainly due to the decrease in bank borrowings from approximately HK$242.5 million as at 30 June 2013 to HK$184.5 million as at 31 December 2013. As at 31 December 2013, the Group had net current assets of approximately HK$635.9 million, representing a decrease of approximately 23.4% from the net current assets as at 30 June 2013 of approximately HK$829.9 million.

As at 30 June 2013, the Group had total assets of approximately HK$2,527.3 million, representing a decrease of approximately 46.9% from the total assets as at 30 June 2012 of approximately HK$4,759.7 million. The decrease in total assets was mainly due to the impairment losses on interests in associates of approximately HK$2,111.4 million. As at 30 June 2013, the Group had total liabilities of approximately HK$268.7 million, representing an increase of approximately 127.9% from approximately HK$117.9 million as at 30 June 2012. The increase in total liabilities was mainly due to the bank borrowing of an interest-bearing secured bank loan of HK$242.5 million. As at 30 June 2013, the Group had net current assets of approximately HK$829.9 million, representing a decrease of approximately 16.2% from the net current assets as at 30 June 2012 of approximately HK$990.3 million.

We note that the trading of commodities, principally iron ore, under the ‘‘commodity business’’ segment, is where the revenue of the Group has been derived from. Such business is susceptible to changes to China’s demand for iron ore and steel, and volatility of prices of these commodities.

We also note that the other business segment of the Group, the ‘resource investment’ segment, is the segment within which the Group carries out its trading and investment in listed and unlisted securities in exploration and development stage companies in the resources sector. Losses of HK$268.9 million and HK$296.4 million have been recorded for this segment in the 2013 Year and the 2012 Year respectively. The performance of this segment is susceptible to volatility of commodity prices and overall sentiment of the resources sector.

We noted from the unaudited interim results announcement of the Company dated 25 February 2014, it mentioned that the net profits of the Group for the six months ended 31 December 2013 was approximately HK$1,316.0 million, representing an increase of approximately 15.13 times as compared to approximately HK$81.6 million during the corresponding period in 2012. After reviewing the figures and discussed with the Directors, we noted that such increase was mainly attributable to a one-off non-recurring reversal of impairment losses of HK$1,179.5 million against the carrying value of the Group’s two principal listed associates (the ‘‘Reversal’’) relating to the performance of the share prices of the two principal listed associates namely Mount Gibson and Metals X. We are of the view that whether there will be a recognition of the reversal of impairment loss or even a fair value gain (when all impairment losses have been reserved) on those associates in future is highly dependent on the future performances of the share prices of such associates and the market sentiments of the Australian Stock Market. As such, it is highly uncertain as to whether the Reversal or even a fair value gain could be continued in the future. For illustrative purposes only, excluding the Reversal, the Group would have recorded net profits of approximately HK$136.5 million, representing an increase of approximately 67.38% over the corresponding period in 2012.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Regarding the 67.38% increase of net profits for the 2013 Interim over the 2012 Interim excluding the Reversal, we note that the significant increase in the share of results of associates is a major contributor to the Group. For the 2013 Interim, the share of profits of associates of the Company has increased by 48.13% from HK$109.7 million in the 2012 Interim to HK$162.5 million in the 2013 Interim. For the 2013 Year, the Group reported a significant improvement in its share of profits of associates, principally from its two major Australian listed associates, Mount Gibson Iron Limited (‘‘Mount Gibson’’) (ASX: MGX) and Metals X Limited (‘‘Metals X’’) (ASX: MLX), of HK$347.2 million compared with HK$218.8 million reported in the 2012 Year. This improved performance reflected the turnaround performance of Metals X, which turned a reported loss for the 2012 Year into a reported profit for the 2013 Year, benefited from higher throughput, higher grade ore mined, higher average realised tin prices and improved production efficiency while the contribution from Mount Gibson remained at similar level as the 2012 Year. Mount Gibson is an iron ore producer and Metals X is a tin and gold producer and nickel explorer and developer.

With the Group focuses on the resources sector and given the expected (i) continued volatility as to China’s demand for steel and iron ore; and (ii) continued uncertain sentiment of the resources sector and volatility in general commodity prices, including iron ore and gold, as indicated in the section headed ‘‘5. Financial and Trading Prospects’’ of Appendix II of this Offer Document, and taking into account of the significant fluctuations of the gross profits of the commodity business segment and losses recorded for the resources investment segment for the 2013 Year and the 2012 Year, we consider that there is no guarantee on the revenue and profitability of the Group from its commodity business and resource investment business segments in the forthcoming financial years. Furthermore, given the aforesaid that the performances of the Group’s two principal associates, Mount Gibson and Metals X are very much reliant on iron ore, tin, gold and nickel prices respectively and the demand for such commodities, there is no guarantee that the performance of these two associates or the share of results of associates of the Group could be sustained. With this uncertainty, and given both Mount Gibson and Metals X are companies listed on the Australian Stock Exchange, we consider the impairment of the interests in these associates is subject to the volatility of stock prices and other uncertainties of the market in Australia.

In view of (i) the significant increase in net profits of the Group of approximately 15.13 times during the 2013 Interim as compared to the 2012 Interim, which was mainly attributable to a one-off non-recurring reversal of impairment losses of HK$1,179.5 million against the carrying value of the Group’s two principal listed associates relating to the performance of the share prices of the two principal listed associates and is highly uncertain as to whether such increase in fair values could be continued in the future and (ii) the increase in revenue of the Group of approximately 22.1% during the 2013 Interim as compared to the 2012 Interim, which was mainly due to the strong realised iron ore prices which is subject to fluctuation in nature, we consider that the revenue and profitability of the Company are subject to uncertainties and risks on (a) commodity demand and prices and (b) the fluctuation on the share prices of the associates. Despite the great improved profitability of the Group for the 2013 Interim against the two consecutive years of losses recorded by the Group in the 2013 Year and 2012 Year, given the abovementioned volatile factors which can have a major impact on the revenue and profitability of the Group, the improvement in profitability in the 2013 Interim period may or may not be sustainable, as a result, we conclude that such volatile results of the Group has increased the overall risk in holding the

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Shares. Therefore, we are of the view that the Qualifying Shareholders may realise part of their investments at the Offer Price which offers a premium to the market price, given the volatile performance of the Company in the 2013 Interim, 2012 Year and 2013 Year.

5. The Prospect and Future Intentions of the Group

The business and management of the Group will remain unchanged and the Company’s listing on the Stock Exchange will be maintained upon completion of the Offer. It is intended that no major changes will be introduced to the businesses of the Group and the employment of the employees of the Group will be continued and material fixed assets of the Group will not be redeployed as a result of the Offer.

In arriving at our recommendations, we have reviewed the prospect of the Offer with reference to:

(a) Global economy perspective

As noted in the ‘‘Third Quarter Economic Report 2013’’ issued by the Government of Hong Kong, it was concluded that most growth in advanced economies remained subdued in the third quarter of 2013, providing meager impetus to revive their import demand. In 2013, the US economy was hampered by the fiscal retrenchment while the nascent recovery of the eurozone was still fragile. Meanwhile, the uncertainties arising from US monetary and fiscal issues along with slower growth in emerging markets also afflicted the external environment. However, the PRC economy continued to outpace other major economies.

(b) Overview of the resource equities and commodity industries

It is noted that commodity prices remained weak throughout second half of 2013 when compared with first half of 2013 with the ASX Small Resources Index down 24%; the FTSE AIM Basic Resources Index dropping 22%, and the TSX Venture Composite Index falling 13%.

Iron ore prices have weakened since the beginning of 2014 as Chinese steel mills destocked in January, however, this sets the scene for a near-term inventory build cycle which should support prices post the Chinese New Year holidays. Looking beyond this, the Group expects iron ore prices to remain at weaker levels in 2014 as significant new low cost supply comes online, against a backdrop of slowing Chinese steel growth.

Uncertainty in global markets, gold’s safe haven status and declining Exchange Traded Fund (ETF) outflows have supported the gold price in the past two months. The Group expects gold prices to fluctuate in line with sentiment around the health of the global economy.

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In late December 2013, the US government has decided to start tapering its bond purchases, illustrating consensus belief that the US market will continue to improve. Europe also appears to stabilising, and consensus forecast is for 1% growth in 2014. However, the PRC remains an area of concern. In addition to tighter credit, Chinese demand for commodities is expected to be tempered by two other issues. Firstly, the PRC government is likely to maintain its growth target around 7.5% driven by consumer demand rather than infrastructure investment. Secondly, the pollution problems in the PRC cast doubts in a potential industrial crackdown, reduction in steel output and coal consumption.

(c) Overview of the Group’s operation prospect

Having discussed with the Directors, we understand that they are of the view that while resource equities and commodity prices are likely to remain volatile, the market weakness in recent years has already started to guide the resources industry back to a more sustainable path, addressing some of the distortions and complacencies that have built up over the last decade of boom times. In the resources sector, costs are being aggressively cut, discretionary spending reeled in, and management teams are being forced to focus on cash flow generation and adding shareholder value. At the same time, greater value has begun to emerge in companies which have robust free cash flow, healthy balance sheets, exercise discipline in the use of capital, and prioritise shareholder interests. Going forward, this sets up an increasingly interesting risk-reward proposition in the resource equities and commodity industries.

We have reviewed and discussed with the Company, among other things, the financial position of the Group (including the latest unaudited condensed consolidated management accounts dated 31 December 2013, and relevant interim and annual reports of the Company, financial condition, capital and other commitments, contingent liabilities and future cash flow and financing requirements) and the trading position with respect to the Group’s suppliers and customers.

Save for (i) the information set out in the section headed 5. ‘‘Financial and Trading Prospects’’ in Appendix II; and (ii) the financial performance of the Group for the six months ended 31 December 2013 as set out in the interim results announcement of the Group dated 25 February 2014, in particular, significant improvement in the profit, net asset value and equity attributable to Shareholders, which were mainly due to improved performance of the Group’s commodity business and primary strategic investments (share of results of associates); and the partial reversal of impairment loss on interests in associates brought forward from 30 June 2013, details of which are set out in the interim results announcement of the Group for the six months ended 31 December 2013 dated 25 February 2014, the Directors confirm that there are no other material changes in the financial or trading position or outlook of the Group subsequent to 30 June 2013, being the date to which the latest audited consolidated financial statements of the Group were prepared up to and including the Latest Practicable Date.

We noted that there was a great improvement in the profitability of the Group for the 2013 Interim against the 2013 Year and 2012 Year. On the other hand, we also noted such improvement was mainly due to better operating results of the commodity business segment,

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

improvement in share of results of associates and the one-off non-recurring reversal of impairment losses which may or may not be sustainable. As a result, we are of the view that there is no guarantee on the revenue and profitability of the Group, which are much reliant on various macro factors, among others, the prices of commodities, the volatility of the share prices of its associates and their corresponding markets and the fluctuation of the China’s demand on commodities. We consider the Group is in a challenging operating atmosphere and market, which are susceptible to changes in the global economy, reference of which are stated under ‘‘Financial and trading Prospects’’ of Appendix II of this circular.

In addition, given the downward trending outlook on commodities prices and stagnant global growth as mentioned in the sections headed ‘‘Global economy perspective’’ and ‘‘Overview of the resource equities and commodity industries’’, there are possible negative impacts to the revenue and profitability of the Group owing to the challenges posed by the uncertainties and risk in the commodities industry. We are of the view that the Offer provides opportunities for Qualifying Shareholders to dispose of the Shares to realize part of their investments at a premium to the market price to mitigate the potential challenges, risk and uncertainties faced by the Group.

(d) Historical share price, trading performance and analysis on the Offer Price to the Company’s consolidated net assets per Share

In order to assess the fairness and reasonableness of the Offer Price, we have reviewed the movements in trading price of the Shares during the last 12 months up to the Latest Practicable Date.

The Review Period

The time frame chosen for share price and volume data used within the upcoming sections includes the last 12 months preceding the Last Trading Day up to the Latest Practicable Date (the ‘‘Review period’’).

During the Review Period, unfavourable economic events such as the tapering of quantitative easing by the United States and the slowing of economic growth in the PRC have happened to give severe impacts to global stock markets, including the Hong Kong stock market. Under such a situation, we are of the view that the length of period is appropriate as such adverse economic events would have given the market an opportunity to re-evaluate the fairness of the asset value, and to investigate the risk factors underneath. As such, the historical prices of the Shares are believed to be rational and representative within the period.

Historical share price and liquidity

As shown in the following table are:

(a) the monthly highest and lowest closing share prices of the Shares as quoted on the Stock Exchange during the Review Period;
(b) the average daily trading volume of Shares during the Review Period;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) the trading volume of the Shares as a percentage of the Company’s existing issued Shares; and
(d) similarly, the trading volume of the Shares as a percentage of the issued Shares held by public Shareholders:

2013 March April May June July August September October November December 2014 January February March (Note 3) 12 Month Average	Highest closing price (HK$) 0.213 0.165 0.158 0.153 0.135 0.145 0.155 0.157 0.159 0.151 0.150 0.162 0.159 0.172	Lowest closing price (HK$) 0.160 0.149 0.146 0.121 0.116 0.129 0.148 0.148 0.149 0.147 0.140 0.150 0.156 0.155	Average daily trading volume (shares) 2,049,300 3,447,700 18,600,800 1,817,300 1,413,900 1,558,100 1,905,700 1,774,700 1,709,500 1,730,300 4,720,400 14,840,470 4,220,000 4,982,348	As % of the issued Shares (Note 1) 0.030% 0.051% 0.273% 0.027% 0.021% 0.023% 0.028% 0.026% 0.025% 0.025% 0.069% 0.218% 0.062% 0.068%	As % of Shares held the issued by Public Shareholders (Note 2) 0.054% 0.091% 0.490% 0.048% 0.037% 0.041% 0.050% 0.047% 0.045% 0.046% 0.124% 0.391% 0.111% 0.122%

Notes:

Based on the total number of issued Shares of 6,811,927,990 as at the Latest Practicable Date. Based on the information available on the website of the Stock Exchange, no new Shares has been issued during the Review Period.
Based on the total number of issued Shares of 3,797,288,428 held by Public Shareholders as at the Latest Practicable Date. Based on the information available on the public websites of the Stock Exchange, there was no change of the Shares held by public Shareholders during the Review Period.
The closing prices and daily trading volume in March was accounted from the first trading day in March 2014 (3 March 2014) to the Latest Practicable Date.

From the above table, we note that the Offer Price of HK$0.18 is higher than both the 12 month average highest closing price of HK$0.172 and the 12 month average lowest closing price of HK$0.155 of the Shares within the Review Period.

As illustrated above, although the Share has been trading in the range of HK$0.136 to HK$0.171 per Share after the publication of the Announcement on 23 January 2014 to the Latest Practicable Date, we note that the Shares have been trading in the range from the highest of HK$0.218 per Share (recorded on 25 February 2013) and the lowest of HK$0.116 per Share (recorded on 9 July 2013) during the Review Period. We also note that the trading price of the Share was traded below the Offer

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Price during the period from 15 March 2013 and up to the date of the Announcement. Taking into account the Share has been trading below the Offer Price since 15 March 2013, we are of the view that the Offer Price shall be attractive enough for Qualifying Shareholders to accept the Offer.

It is also noted that the Shares has experienced thin historical daily trading volume that ranges from the lowest of 1,413,900 shares in July 2013 to the highest of 18,600,800 shares in May 2013. Given the thin historical daily trading volume of the Shares, it is uncertain as to whether there would be sufficient liquidity in the Shares for the Qualifying Shareholders to dispose of a significant number of Shares in the open market without causing an adverse impact on the market price level of the Shares.

We are aware that the Company’s Audited Net Assets per Share was approximately HK$0.33 per Share and the Company’s Unaudited Net Assets per Share was approximately HK$0.52 per Share, which the Offer Price of HK$0.18 per Share represents a discount of approximately 45.45% and 65.38% over the Audited Net Assets Per Share and the Unaudited Net Assets Per Share respectively. However, taking into account that (i) the Offer Price represents a premium over the market price of the Shares as abovementioned; (ii) the Shares has also been trading at a discount to the Audited Net Assets Per Share throughout the Review Period; and (iii) the thin trading volumes of the Shares as discussed above which raise uncertainty as to whether there would be sufficient liquidity in the Shares for the Qualifying Shareholders to dispose of a significant number of the Shares in the open market as. We are of the view that the discount of approximately 45.45% and 65.38% of the Offer Price to the Audited Net Assets Per Share and the Unaudited Net Assets Per Share respectively is fair and reasonable in this regard.

We would like to remind the Qualifying Shareholders that although the Offer Price is generally well above the closing prices of the Shares throughout the Review Period, and represents a considerable premium over the closing price of the Shares on the Latest Practicable Date, there is no guarantee that the trading price of the Shares will persistently remain and be lower than the Offer Price during and after the completion of the Offer. The Qualifying Shareholders, in particular those who may wish to realise their investments in the Shares, are thus reminded to closely monitor the market price of the Shares during the completion of the Offer. In the event that the market price of the Shares exceeds the Offer Price during the period while the Offer is open and the sales proceeds (net of transaction costs) exceed the amount receivable under the Offer, Qualifying Shareholders should consider not accepting the Offer and consider seeking to sell their Shares in the open market if they are able to do so.

(e) Comparable analysis with comparable listed companies in Hong Kong

In forming our opinion on the Offer Price, we have also considered the commonly adopted comparable approaches in evaluation of a company, namely price to earnings approach and price to book value approach. In the selection of comparables, our selection criteria is any Hong Kong listed stocks with segment(s) comprising over 60% of revenue of their respective group as recorded in its latest audited financial statements engaging in the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

trading of base metals and other metal products business. Under such criteria, we have identified an exhaustive list of 4 companies falling within the above criteria (the ‘‘Comparables’’). The following table shows (i) the price/earnings ratio and (ii) the price/ book ratio of the Comparables.

			Market			Price/book	Price/earnings
Name of the company	Stock code	Principal business activity	Capitalization	Profits/Loss	Book value	ratio	ratio
			(HK$’000)	(HK$’000)	(HK$’000)
				(Note 5)	(Note 1)	(Note 2)	(Note 7)
Poly Capital Holdings	1141	(i) supply and procurement activities	401,000	(60,928)	1,118,480	0.36	N/A
Limited		in metal minerals, recyclable metal
		materials, (ii) provision of finance
		and investments in financial
		instruments.
Prosperity International	803	(i) Mining and processing of granite	1,823,000	(318,495)	3,324,898	0.55	N/A
Holdings (H.K.)		and selling of granite products. (ii)
Limited		Trading of clinker, cement and other
		building materials. (iii) Trading of
		iron ore and raw materials (iv) Real
		estate investment and development.
China Nickel Resources	2889	(i) Trading of ore, including iron ore	765,912	(288,828)	4,139,000	0.19	N/A
Holdings Co. Ltd.		and limonitic and (ii) the
(Note 6)		manufacture and sale of special steel
		products.
CST Mining Group Ltd.	985	Acquisition, exploration, development	1,734,291	898,342	7,397,956	0.23	1.93
(Note 6)		and mining of copper and other
		mineral resources minerals; property
		investment and investments in
		financial instruments.
				Mean	0.33	N/A
				Median	0.3	N/A
				Range	0.19–0.55	N/A
The Company	1104	(i) Trading in base metals; and	1,226,147	(2,079,687)	3,548,964	0.35	N/A
		(ii) Trading and investments of listed	(Note 3)			(Note 4)
		securities

Source: The Stock Exchange

Notes:

Book values of the respective Comparables as reported in their latest available audited/unaudited financial statements.
Price/book ratio is calculated using the market capitalisation of the company as at the Latest Practicable Date divided by the book value of the company.
The market capitalisation as implied by the Offer Price times the number of issued Shares as at the Latest Practicable Date.
The market capitalisation as implied by the Offer Price divided by the book value of the Group as at 31 December 2013.
Profits (loss) of the respective Comparables as reported on their latest available audited financial statements.
The exchange rates for USD : HKD and RMB : HKD used in the analysis are 7.8 and 1.28 respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Price/earnings ratio is calculated using the market capitalisation of the Company as at the Latest Practicable Date divided by the profit (if any) of the Company.

Price/earnings ratio

We have compared the price/earnings ratio of the Group as implied by the Offer Price with those of other Comparables. Nevertheless, as the Group had recorded losses of HK$2,079.7 million and HK$243.0 million for the 2013 Year and the 2012 Year and three out of four Comparables recorded loss on their latest available audited financial statements for the latest financial year, we are of the view that the price/earnings ratio does not provide sufficient information regarding the fairness and reasonableness of the Offer Price due to the continual loss-making performance of the Group in the recent two consecutive financial years. As such, we have not computed the relevant calculation in relation to the price/earnings ratios for analysis of our Comparables.

Price/book ratio

We have also tried to compare the price/book ratio of the Group as implied by the Offer Price with those of other Comparables. As shown in the table above, the Group has a book value of approximately HK$3,549.0 million based on the unaudited condensed financial statements of the Company as at 31 December 2013 and the market capitalisation as implied by the Offer Price is approximately HK$1,226.1 million, representing approximately 0.35 times of the book value the Group (the ‘‘Offer P/B Ratio’’). In contrast, it is observed that the Comparables are trading at approximately 0.19 times to 0.55 times of their corresponding book value, where the Offer P/B Ratio falls close to the middle of this range and higher than both the mean and medium of the P/B Ratio of the Comparables. As such, we are of the view that the Offer Price can provide a higher valuation to the Shareholders, and is therefore fair and reasonable.

Other issues

Offer alternative

Taking into the account the Offer being made to all Shareholders and the level of premium of the Offer Price over the prevailing market price of the Shares, all the Shareholders are given an equal opportunity to realize their investments in the Shares at the Offer Price, if they wish to do so. We have considered if there are alternative means of share buy-backs: the Company purchasing the Shares on the market. Given the low average daily trading volume, which is less than 1.00% of the issued Shares during the Review Period, it will probably take a very long time, and it will be inefficient, for the Company to purchase in the open market such a large percentage of Shares as contemplated under the Offer. Accordingly, we are of the view that to buy back the Shares in the open market is not practicable, and the Offer is a reasonable approach made by the Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Potential increase in shareholdings for the Concert Group and non-accepting Shareholders

Reference is made in the Letter from the Board (page 11) of this Offer Document which includes a table illustrating the shareholding structure of the Company before and following the completion of the Offer. As at the Latest Practicable Date, Rise Cheer, Taskwell and Dato’ Wong were beneficially interested in an aggregate 2,033,639,562 Shares (as to 1,124,640,000 Shares owned by Rise Cheer, 906,299,562 Shares owned by Taskwell and 2,700,000 Shares owned by Dato’ Wong), representing approximately 29.85% of the total issued share capital of the Company as at the Latest Practicable Date. Taskwell and Rise Cheer are wholly-owned subsidiaries of Besford International Limited (‘‘Besford’’). Besford is a wholly-owned subsidiary of COL Capital Limited (‘‘COL’’). Accordingly, COL is deemed to have interests in the shares in which Rise Cheer and Taskwell are interested. As at the Latest Practicable Date, COL was 73.01% owned by Vigor Online Offshore Limited which in turn is a wholly-owned subsidiary of China Spirit Limited (‘‘China Spirit’’) in which Ms. Chong Sok Un maintains 100% beneficial interest. Therefore, Ms. Chong Sok Un is deemed to have interests in the shares in which COL is interested through her 100% interests in China Spirit. Dato’ Wong, an executive director of COL, is beneficially interested in 2,700,000 Shares, representing 0.04% of the total issued share capital of the Company as at the Latest Practicable Date. As such, Rise Cheer, Taskwell and Dato’ Wong are deemed to be acting in concert for the purposes of the Takeovers Code (with any parties acting in concert with them collectively called the ‘‘Concert Group’’).

Upon completion of the Offer, the shareholdings of the Concert Group and nonaccepting Shareholders may increase by a maximum of 3.31% of shareholding of the Company assuming Shougang Fushan accepting all of their Assured Entitlement and none of the Excess Number of Shares. We are of the view that such increase in shareholdings of the Concert Group is fair and reasonable for the Group and the Shareholders as a whole having considered that (i) the magnitude of the dilution in the Shareholders’ interest in the Company is acceptable. (ii) the consolidated net assets value per Share will be enhanced upon completion of the Offer as discussed under the section named ‘‘Financial Impact on the Group’’ and (iii) provide an opportunity for the Qualifying Shareholders either to sell their Shares at a premium to the prevailing market prices and receive cash or to increase their proportionate interests in the Company by retaining their holdings and participating in the future prospects of the Company

(f) Financial Impact on the Group

Financial effects upon the Completion of the Offer:

(A) Working capital and net assets value per Share

According to the unaudited pro-forma consolidated statement of financial position of the Group as set out in Appendix III of this Offer Document, as at 31 December 2013, the Unaudited Net Assets per Share was approximately HK$0.52 per Share. Upon completion of the Offer and assuming the Offer is accepted in full, the unaudited consolidated net assets of the Group attributable to the owners of the Company is

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

expected to increase to approximately HK$0.56 per Share according to the unaudited pro-forma consolidated statement of financial position of the Group as set out in Appendix III of this Offer Document. We consider that the enhancement in the unaudited consolidated net asset value per Share would be in the interest of the Shareholders and is expected to be realised and reflected in the market price of the Shares over time.

As the Offer incurs cash payable by the Company of approximately HK$124,200,000 (having taken into account the maximum consideration for the Offer and the estimated attributable expenses of approximately HK$1,800,000, the bank and cash balance of the Group would be decreased by such amount and the net assets value of the Group would be decreased from approximately HK$3,548,964,000 to approximately HK$3,424,764,000.

(B) Earnings (Loss) per Share

The unaudited consolidated earnings per Share of the Group for the six months ended 31 December 2013 was approximately HK19.32 cents per Share based on the unaudited condensed consolidated profit attributable to owners of the Company for the six months ended 31 December 2013. Upon completion of the Offer and assuming the Offer is accepted in full, the unaudited consolidated earnings per Share of the Group for the six months ended 31 December 2013 is expected to increase to approximately HK21.46 cents per Share according to the unaudited pro forma financial information as presented in Appendix III. The Company was loss-making for the 2013 Year and the 2012 Year, but recorded a turnaround performance with an unaudited consolidated profit of HK$1,316.0 million for the six months ended 31 December 2013. Having considered the fluctuation of the recent financial performance of the Company and the Group has unaudited cash and cash equivalent of approximately HK$303,131,000 as at 31 December 2013, we are of the view that the Offer could (i) return part of the funds to the Shareholders pursuant to the Offer; (ii) provide an opportunity for the Qualifying Shareholders either to sell their Shares at premium to the prevailing market prices and receive cash or to increase their proportionate interests in the Company by retaining their holdings and participating in the future prospects of the Company; and (iii) have the effect of increasing the unaudited consolidated net asset value per Share, we are of the view that the increase in earnings per Share is also in the interest of the Independent Shareholders.

(C) Liabilities

According to the unaudited pro-forma consolidated statement of financial position of the Group, the Offer will not have any material impact on the liabilities of the Group.

Having considered the expected enhancement on the net assets value per Share and the slight increase in loss per Share incurred by returning part of the funds to the Shareholders as stated above, we consider that the overall impact of the Offer on the consolidated net assets of the Group and the net assets value per Share from the Offer is

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

justifiable, notwithstanding the decrease in consolidated net assets of the Group upon completion and the Offer is fair and reasonable and is in the interests of the Shareholders and the Company as a whole.

6. Dilution effect on the shareholding interests of the Shareholders

Rise Cheer (Note 1) Taskwell (Note 1) Dato’ Wong (Note 2) Sub-Total of Rise Cheer, Dato’ Wong, Taskwell and parties acting in concert with any of them Shougang Fushan (Note 3) Mr. Ferguson (Note 4) Public Shareholders Total: Notes:	Immediately before the Offer Shares Approx.% (%) 1,124,640,000 16.51 906,299,562 13.30 2,700,000 0.04 2,033,639,562 29.85 956,000,000 14.03 25,000,000 0.37 3,797,288,428 55.75 6,811,927,990 100.00	Immediately after completion of the Offer assuming Shougang Fushan accepting all of their Assured Entitlement and none of the Excess Number of Shares Shares Approx. % (%) 1,124,640,000 18.34 906,299,562 14.78 2,700,000 0.04 2,033,639,562 33.16 822,160,000 13.41 25,000,000 0.41 3,251,128,428 53.02 6,131,927,990 100.00	Immediately after completion of the Offer assuming Shougang Fushan accepting all of their Assured Entitlement and none of the Excess Number of Shares Shares Approx. % (%) 1,124,640,000 18.34 906,299,562 14.78 2,700,000 0.04 2,033,639,562 33.16 822,160,000 13.41 25,000,000 0.41 3,251,128,428 53.02 6,131,927,990 100.00
			33.16 13.41 0.41 53.02
			100.00

These shares are held by (i) Rise Cheer as to 1,124,640,000 shares and (ii) Taskwell as to 906,299,562 shares, both are wholly-owned subsidiaries of Besford. Besford is a wholly-owned subsidiary of COL. Accordingly, COL is deemed to have interests in the shares in which Rise Cheer and Taskwell are interested. As at the Latest Practicable Date, COL was 73.01% owned by Vigor Online Offshore Limited which in turn is a whollyowned subsidiary of China Spirit Limited (‘‘China Spirit’’) in which Ms. Chong Sok Un maintains 100% beneficial interest. Therefore, Ms. Chong Sok Un is deemed to have interests in the shares in which COL is interested through her 100% interests in China Spirit.
Dato’ Wong has indicated that he will not accept the Offer for the Shares held by him as at the Latest Practicable Date.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

These shares are held by Benefit Rich Limited, a direct wholly-owned subsidiary of Shougang Fushan, the substantial shareholders of which are Shougang Holdings (Hong Kong) Limited and Sino Life Insurance Co., Ltd., holding 29.41% and 24.01% respectively in the share capital of Shougang Fushan.
Neither Shougang Fushan nor Mr. So Kwok Hoo, non-executive Director representing the interests of Shougang Fushan in the Company, was involved in the formulation or negotiation of the Offer or the Buybacks Mandate. Shougang Fushan has not indicated its intention as regards acceptance of the Offer or whether it would vote for or against the resolution in the SGM.
Mr. Ferguson has indicated that he will not accept the Offer for the Shares held by him as at the Latest Practicable Date.

Immediately before the Offer

==> picture [385 x 96] intentionally omitted <==

Total issued share capital: 6,811,927,990 Shares

Immediately after completion of the Offer assuming Shougang Fushan accepting all of their Assured Entitlement and none of the Excess Number of Shares

==> picture [385 x 96] intentionally omitted <==

Total issued share capital: 6,131,927,990 Shares

It is noted from the above tables that the percentage of Shares held by public Shareholders will be decreased from 55.75% to 53.02% following the completion of the Offer (assuming Shougang Fushan accepting all of their Assured Entitlement and none of the Excess Number of Shares), the dilutive effect of the Offer on the shareholding of public Shareholders is not significant.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

7. Whitewash waiver

As set out in the Letter from the Board, Taskwell and Rise Cheer were beneficially interested in an aggregate 2,030,939,562 Shares (as to 906,299,562 Shares and 1,124,640,000 Shares respectively), representing approximately 29.81% of the total issued share capital of the Company as at the Latest Practicable Date. Taskwell and Rise Cheer are both indirect wholly-owned subsidiaries of COL. COL is 73.01% owned by Vigor Online Offshore Limited, a company indirectly wholly-owned by Ms. Chong Sok Un as at the Latest Practicable Date. Dato’ Wong, an executive director of COL, is beneficially interested in 2,700,000 Shares, representing 0.04% of the total issued share capital of the Company as at the Latest Practicable Date. Taskwell, Rise Cheer and Dato’ Wong are deemed to be acting in concert for the purposes of the Takeovers Code. Taskwell, Rise Cheer and Dato’ Wong have indicated that they will not accept the Offer for the Shares held by them as at the Latest Practicable Date. Save as disclosed above during the Relevant Period, none of Taskwell, Rise Cheer or parties acting in concert with any of them holds, controls or has directions over voting rights, rights over Shares, convertible securities, warrants, options or derivative in respect of Shares, nor has the Company received any irrevocable commitment or notification from Shareholders and Directors who hold Shares to accept or reject the Offer or vote for or against the Buy-backs Mandate or the Whitewash Waiver in the SGM.

Rule 32 of the Takeovers Code and Rule 6 of the Buy-backs Code provide that where, as a result of share buy-back, a shareholder’s proportionate interest in the voting rights of the repurchasing company increases, such interest will be treated as an acquisition for the purpose of the Takeovers Code. Consequently, depending upon the level of the Shares tendered for buy-back by the Company as stated in the Acceptance Forms and assuming that Taskwell and Rise Cheer do not accept the Offer to tender Shares held by them, the beneficial interest in the Company’s issued share capital held by Taskwell, Rise Cheer and parties acting in concert with any of them may increase from its current level of approximately 29.85% to a maximum of approximately 33.16% upon completion of the Offer, thereby triggering a general obligation on Taskwell, Rise Cheer and parties acting in concert with any of them under Rule 26 of the Takeovers Code to make a mandatory general offer for all of the Shares not beneficially owned by Taskwell, Rise Cheer and parties acting in concert with any of them.

Accordingly, an application for the Whitewash Waiver has been made to the Executive by Taskwell and Rise Cheer. The Executive indicated that subject to Independent Shareholders’ approval of the Whitewash being obtained at the SGM, it would agree to waive the obligations of Taskwell, Rise Cheer and parties acting in concert with them to make a general offer for Shares arising as a result of the completion of the Offer.

We have noticed that the total shareholdings of the Rise Cheer, Taskwell and Dato’ Wong and parties acting in concert with any of them will increase from 29.85% to 33.16% upon completion of the Offer (assuming Shougang Fushan accepting all of their Assured Entitlement and none of the Excess Number of Shares) as discussed under the section named ‘‘Dilution effect on the shareholding interests of the Shareholders’’ in this letter. In addition, the percentage of Shares held by public Shareholders will be decreased from 55.75% to 53.02% following the completion of the Offer (assuming Shougang Fushan accepting all of their Assured Entitlement and none of the Excess Number of Shares). We consider such changes in shareholdings are not significant and is fair and reasonable. As such, we are of the view that the terms of the Offer and the Whitewash

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Waiver are fair and reasonable. Taking into account the benefits of the Offer to the Company as explained under the section named ‘‘Reasons for and benefit of the Offer’’, the Independent Board Committee are advised to advise the Independent Shareholders to vote in favour of the resolutions to approve the Offer, the Buy-backs Mandate and the Whitewash Waiver at the SGM.

V. RECOMMENDATION

Having considered the principal factors discussed above and, in particular the following,

i. the Offer Price represents a premium of approximately 27.66% over the closing price of the Shares of HK$0.141 each as quoted on the Stock Exchange on the Last Trading Day;
ii. the Offer Price represents a premium of approximately 15.38% over the closing price of HK$0.156, being the closing price of the Shares on the Latest Practicable Date;
iii. the Offer Price represents a discount of approximately 45.45% to the Group’s Audited Net Assets per Share of approximately HK$0.33 pursuant to the latest audited consolidated accounts of the Company as at 30 June 2013;
iv. the Offer Price represents a discount of approximately 65.38% to the Group’s Unaudited Net Assets per Share of approximately HK$0.52 as at 31 December 2013 as set out in the unaudited pro-forma information of the Group as set out in Appendix III of this Offer Document;
v. the Offer Price is above the historical closing prices of the Shares during most of the trading days within the Review Period;
vi. as noted in the item named ‘‘b. Overview of the resource equities and commodity industries’’ under the section of ‘‘The Prospect and Future Intentions of the Group’’ in this letter, the industry overlook of the resources equities and commodity industries are overshadowed by the global economic uncertainty, downward trending gold prices and weakened iron ore prices in 2013. With respect to all these factors, we are of the view that Qualifying Shareholders may realise part of their investments at the Offer Price which offers a premium to the market price, given the fluctuating performance of the Company in the 2013 Interim, 2013 Year and 2012 Year;
vii. the Group had recorded (i) losses of HK$2,079.7 million and HK$243.0 million for the 2013 Year and 2012 Year respectively and a provision for impairment of the Group’s interest in associates as mentioned in the announcements of the Company dated 8 July 2013 and 6 September 2013 and the Annual Report 2013; and (ii) profits of HK$1,316.02 million for the six months ended 31 December 2013 and the significant improvement of which was attributable to the Reversal. We are of the view that whether there will be a continuing recognition of the reversal of impairment loss on those associates in future is highly dependent on the future performances of the share prices of such associates. As such, it is highly uncertain as to whether the Reversal could continue in future. As such, we consider that there is no guarantee as to the sustainability of the revenue and profitability of the Group in the forthcoming financial years which may have an impact on the share price of the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Company. As such, it is uncertain as to whether there would have further opportunities for the Qualifying Shareholders to dispose of the Shares in the open market in the future which would be as rewarding as the Offer;

viii. taking into account the Share has been trading below the Offer Price since 15 March 2013, we are of the view that the Offer Price provides an opportunity for the Qualifying Shareholders to sell their Shares at premium to the prevailing market prices and hence shall be attractive enough for the Qualifying Shareholders to accept the Offer; and
ix. given the thin historical daily trading volume of the Shares, it is uncertain as to whether there would be sufficient liquidity in the Shares for the Qualifying Shareholders to dispose of a significant number of Shares in the open market without causing an adverse impact on the market price level of the Shares.

Having considered the aforementioned reasons, we are of the opinion that the terms of the Offer, the Buy-backs Mandate and the Whitewash Waiver are fair and reasonable so far as the Qualifying Shareholders are concerned. We therefore advise the Qualifying Shareholders to accept the Offer.

We also consider that the Offer, the Buy-backs Mandate and the Whitewash Waiver are in the interests of the Company and the Shareholders as a whole. We therefore advise the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolutions to approve the Offer, the Buy-backs Mandate and the Whitewash Waiver at the SGM.

Yours faithfully, For and on behalf of Chanceton Capital Partners Limited Wong Kam Wah Managing Director

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PRINCIPAL TERMS OF THE OFFER

APPENDIX I

Yu Ming will make the Offer to the Qualifying Shareholders on behalf of the Company to buy back Shares, on the terms and subject to the conditions set out in this Offer Document. The principal terms and conditions of the Offer are set out below.

TERMS AND CONDITIONS OF THE OFFER

1. The Offer

The Company will buy back Shares up to the Maximum Number of Shares at the Offer Price.

2. Conditions

The Offer will be conditional upon fulfillment of all of the following conditions:

(a) the approval by the Independent Shareholders voting in person or by proxy at the SGM of an ordinary resolution to approve by way of a poll the Whitewash Waiver, and of special resolutions to approve by way of a poll the Offer and the Buy-backs Mandate;
(b) the granting of the Whitewash Waiver by the Executive; and
(c) the approval of any other appropriate regulatory authorities whose consent is required under any applicable laws and regulations in order for the Company to validly make the Offer.

None of the conditions above is waivable. As at the Latest Practicable Date, the Company is not aware of any such approval requirement as set out in condition (c) above.

If the Whitewash Waiver is not granted by the Executive, or if the resolution to approve the Offer, the Buy-backs Mandate and the Whitewash Waiver is not passed by the Independent Shareholders at the SGM, the Offer will lapse.

The Offer is not conditional as to any minimum number of acceptances.

3. Maximum Number of Shares

The Maximum Number of Shares which will be bought back by the Company pursuant to the Offer is 680,000,000 Shares, representing approximately 10% of the issued share capital of the Company of 6,811,927,990 Shares as at the Latest Practicable Date.

4. Qualifying Shareholders

The Offer is available to all the Qualifying Shareholders whose names appear on the Register of Member as at the Latest Acceptance Time.

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APPENDIX I

Acceptance
(a) Every Qualifying Shareholder may accept the Offer for the buy-back by the Company of any number of his/her Shares at the Offer Price up to his/her entire holding as at the Latest Acceptance Time by submitting to the Registrar a duly completed Acceptance Form, accompanied by the Title Documents. Each Share may only be accepted for buy-back by the Company once.
(b) The Shares specified in an Acceptance Form will be bought back in the following order:
- (i) firstly, all the Shares on a pro-rata basis up to the Assured Entitlement of an Accepting Shareholder; and
- (ii) secondly, on condition that there are Surplus Shares, that number of the Excess Tenders as is equal to the proportion which the Excess Tenders specified in the relevant Acceptance Form bears to the aggregate Excess Tenders in all the Acceptance Forms up to the Maximum Number of Shares.
(c) The Offer Price will be paid in cash.
(d) Acceptance Forms which have been duly completed and received by the Registrar will be irrevocable after the Offer has been declared unconditional.
(e) All of the Shares bought back by the Company will be free of commissions and dealing charges, but seller’s ad valorem stamp duty payable by the Accepting Shareholders, calculated at a rate of HK$1.00 for every HK$1,000 or part thereof of the market value of the Shares to be bought back under the Offer or the consideration payable by the Company in respect of relevant acceptances of the Offer, whichever is the higher, will be deducted by the Company from the amount payable to the Accepting Shareholders. The Company will arrange for payment of the seller’s ad valorem stamp duty on behalf of the Accepting Shareholders to the Stamp Duty Office in accordance with the Stamp Duty Ordinance.
(f) All bought back Shares will be treated as cancelled in accordance with the bye-laws of the Company and will not rank for any dividends after the cancellation.
(g) Subject to the Offer becoming unconditional, the submission of an Acceptance Form by an Accepting Shareholder in the manner described in 5(a) above will be deemed to constitute a warranty from such Accepting Shareholder to Yu Ming and the Company that all Shares sold by such Shareholder under the Offer are free from all liens, charges, options, claims, equities, adverse interests, third party rights or encumbrances whatsoever and together with all rights accruing or attaching thereto, including, without limitation, the right to receive dividends and other distributions declared, if any, after the date of the Announcement.

6. Assured Entitlements and Excess Tenders

(a) Assuming that all of the Qualifying Shareholders (other than the Excluded Shareholders (if any)) becoming Accepting Shareholders and on the basis that Taskwell, Rise Cheer, Dato’ Wong and Mr. Ferguson do not accept the Offer, Qualifying Shareholders are assured of

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PRINCIPAL TERMS OF THE OFFER

APPENDIX I

being able, if they so wish, to sell to the Company approximately 14% of the Shares they hold as at the Latest Acceptance Time. By way of example, a Qualifying Shareholder holding 20,000 Shares as at the Latest Acceptance Time will be assured of being able to accept the Offer in respect of 2,800 Shares.

(b) Accepting Shareholders may accept the Offer in excess of their Assured Entitlement and the Company may buy back Excess Tenders if certain Qualifying Shareholders do not accept the Offer or accept the Offer in respect of Shares fewer than their Assured Entitlement.
(c) If the aggregate Excess Tenders fall below the total number of Surplus Shares, all of the Excess Tenders will be repurchased by the Company.
(d) In the event of the aggregate Excess Tenders exceeding the Surplus Shares, each Accepting Shareholder whose Acceptance Form consists of Excess Tenders will be entitled to the buyback by the Company of that number of the Excess Tenders as is equal to the proportion which the Excess Tenders specified in his/her Acceptance Form bears to the aggregate Excess Tenders calculated in accordance with the formula below, save that the Company may in its absolute discretion round such figure up or down with the intention of avoiding (as far as practicable) Shares being held by Accepting Shareholders in odd lots or fractional entitlements:

==> picture [25 x 21] intentionally omitted <==

E = Excess Tenders specified in an Acceptance Form

A = aggregate Excess Tenders specified in all of the Acceptance Forms

S = Surplus Shares

(e) The total number of the Shares which will be repurchased by the Company will not exceed the Maximum Number of Shares. The decision of the Company as to scaling down of acceptance of the Offer for the Excess Tenders as illustrated above and as to the odd lots or fractional entitlements will be conclusive and binding on all Shareholders.

7. Odd lots

(a) In view of the number of Shares in an Assured Entitlement and the manner of calculation in respect of the Excess Tenders as described above, an Accepting Shareholder may, as a result of the Offer, hold odd lots of the Shares.
(b) For this purpose, Sun Hung Kai Investment Services Limited, whose address is at 42nd Floor, Lee Gardens, 33 Hysan Road, Causeway Bay, Hong Kong (contact person: Mr. Andy Cheung; telephone number: 3920 2782) has been appointed by the Company as the designated broker to match sales and purchases of odd lot holdings of Shares in the market for a period of six weeks from the completion of the Offer to enable odd lot Shareholders to dispose of their odd lots or to top up their odd lots to whole board lots of 20,000 Shares.

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PRINCIPAL TERMS OF THE OFFER

APPENDIX I

Odd lot Shareholders should note that the matching of odd lots is not guaranteed. Further details of the related arrangements will be announced after the Offer has become unconditional.

8. Acceptance period

(a) The Offer is open for acceptance from the date of this Offer Document. If the Conditions are satisfied, the Offer will be open for acceptance for a further 14 days after the Offer has become unconditional. In order to be valid, an Acceptance Form must be duly completed, together with the Title Documents in respect of such number of Shares which represent not less than the number of Shares in respect of which the relevant Qualifying Shareholders intend to accept under the Offer, delivered to and received by the Registrar at or before the Latest Acceptance Time, which is currently expected to be 4:00 p.m. on 22 April 2014, or such later date as the Company may, with the prior consent of the Executive, decide and announce.
(b) The date when the last one of the Conditions is expected to be satisfied is 4 April 2014. Such date may be postponed by the Company, subject to receiving the prior consent of the Executive.

9. Irrevocable acceptances

Acceptance Forms which have been duly completed and received by the Registrar will constitute irrevocable acceptances of the Offer after the Offer has been declared unconditional.

10. General

(a) The Shares will be repurchased free from all liens, charges, encumbrances, equitable interests, rights of pre-emption or other third party rights of any nature.
(b) The Qualifying Shareholders may accept the Offer by completing the Acceptance Form in accordance with the instructions set out in the Acceptance Form (which constitute part of the terms of the Offer). An Acceptance Form may be rejected as invalid if the procedures contained in this Offer Document and in the Acceptance Form are not complied with.
(c) The Offer and all acceptances of it, the Acceptance Forms and all contracts made pursuant to the Offer, and all action taken or made or deemed to be taken or made pursuant to these terms will be governed by and construed in accordance with Hong Kong laws. Delivery of an Acceptance Form will constitute submission to the non-exclusive jurisdiction of the Hong Kong courts.
(d) The failure of any person to receive an Offer Document or an Acceptance Form will not invalidate any aspect of the Offer. Extra prints of these documents will be available to any Qualifying Shareholders at the office of the Registrar and the principal place of business of the Company during office hours between the date of despatch of the Offer Document and the Latest Acceptance Time, and on the Stock Exchange’s website at www.hkexnews.hk for at least 7 days from the date of its publication, together with the Company’s website at www.apacresources.com.

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PRINCIPAL TERMS OF THE OFFER

APPENDIX I

(e) The Company reserves the right, subject to the Codes, any applicable law or regulatory requirements, to amend the Offer Price. In the event of such amendment (which will not, for the avoidance of doubt, include an alteration of the Maximum Number of Shares), a supplemental document and a new Acceptance Form will be despatched to each of the Qualifying Shareholders. Any revised offer will be kept open for at least 14 days following the date on which the revised Offer Document is posted. If in the course of the Offer, the Company revises the terms of the Offer, all Qualifying Shareholders, whether they have accepted the Offer or not, will be entitled to the revised terms.
(f) The right of acceptance of the Offer is personal to the Qualifying Shareholder and is not capable of being assigned or renounced in favour of others or otherwise transferred by the Qualifying Shareholders.
(g) All questions as to the number of Shares bought back, the price to be paid therefor, or any alteration of such price in accordance with the terms contained herein, and the validity, form, eligibility (including the time of receipt) and acceptance for payment of any acceptance will be determined by the Company in its sole discretion, which determination will be final and binding on all of the parties (except as otherwise required under the applicable law or the Codes). The Company reserves the absolute right to reject any or all acceptances it determines not to be in proper form or the acceptance or payment for which may, in the opinion of the Company, be unlawful. The Company also reserves the absolute right (provided that this is exercised consistently with the requirements of the Codes or otherwise with the Executive’s consent) to waive any of the terms or conditions of the Offer, except the Conditions, either generally or in a particular case and any defect or irregularity in the acceptance of any particular Share or any particular holder thereof. An acceptance may be rejected as invalid unless all defects or irregularities have been cured or waived. In the event of a waiver, the consideration under the Offer will not be despatched until after the Acceptance Form is completed in all respects and the Title Documents have been received. None of the Company or the Registrar or any other person is or will be obliged to give notice of any defects or irregularities in acceptances, and none of them will incur any liability for failure to give any such notice.
(h) All communications, notices, Acceptance Forms, Title Documents and remittances to be delivered or sent by, to or from any Shareholder will be delivered or sent by, to or from them, or their designated agents, at their risk and none of the Company, Yu Ming, the Registrar or any of their respective directors or any other person involved in the Offer accepts any liability for any loss or any other liabilities whatsoever which may rise as a result.
(i) Should any Qualifying Shareholder require any assistance in completing the Acceptance Form or have any enquiries regarding the procedures for tendering and settlement or any other similar aspect of the Offer, the Qualifying Shareholders may contact the Registrar at its hotline at 2980 1333 during the period from 13 March 2014 to the closing day of the Offer (both days inclusive) between 9:00 a.m. and 4:00 p.m. (Hong Kong time) from Mondays to Fridays (other than public holidays).

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PRINCIPAL TERMS OF THE OFFER

APPENDIX I

OVERSEAS SHAREHOLDERS

The Offer Document will not be filed under the applicable securities or equivalent legislation or rules of any jurisdictions other than Hong Kong.

Based on the Register of Member, there were no Overseas Shareholders as at the Latest Practicable Date.

PROCEDURES FOR ACCEPTANCE AND SETTLEMENT

General Procedures for Acceptance
(a) In order to accept the Offer, Qualifying Shareholders should complete and return the accompanying Acceptance Form in accordance with the instructions printed in this Offer Document and the instructions printed on the Acceptance Form. The instructions in this Offer Document should be read together with the instructions on the Acceptance Form (which instructions form part of the terms of the Offer).
(b) In order to be valid, the completed Acceptance Form should be forwarded, together with the Title Documents for not less than the number of Shares in respect of which the relevant Qualifying Shareholder wishes to accept the Offer, by post or by hand to the Registrar, Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong (which will be relocated to Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong with effect from 31 March 2014), in an envelope marked ‘‘APAC Resources Limited — 2014 Buy-back Offer’’ as soon as possible after receipt of the Acceptance Form but in any event so as to reach the Registrar by no later than 4:00 p.m. (Hong Kong time) on 22 April 2014, or such later time and/or date as the Company may, subject to the Takeovers Code, decide and announce.
(c) No Acceptance Form received after the Latest Acceptance Time will be accepted.
(d) If the Acceptance Form is executed by a person other than the registered holder, appropriate evidence of authority (for instance, a grant of probate or certified copy of a power of attorney) must be delivered to the Registrar with the completed Acceptance Form.
(e) No acknowledgement of receipt of any Acceptance Form or Title Documents will be given.
(f) The Company reserves the right, at its sole discretion, to investigate, in relation to any acceptance, whether the representations and warranties set out in this Appendix I could have been properly given by the relevant Qualifying Shareholder and, if such investigation is made and as a result the Company determines (for any reason) that any such representation and/or warranty could not have been properly given, such acceptance may be rejected as invalid.
(g) In relation to any acceptance of the Offer in respect of Shares held in CCASS in the name of HKSCC Nominees Limited, HKSCC Nominees Limited shall specify in the Acceptance Form (i) the total number of Shares tendered for acceptance of the Offer by CCASS participants under the Assured Entitlements; and (ii) the total number of Shares tendered for acceptance of the Offer by CCASS participants under the Excess Tenders.

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PRINCIPAL TERMS OF THE OFFER

APPENDIX I

(h) Only one Acceptance Form may be submitted by each Qualifying Shareholder to the Registrar.

2. Nominee Holdings

(a) If the Title Documents in respect of a Qualifying Shareholder’s Shares are in the name of a nominee company or some name other than his/her own, and such Qualifying Shareholder wishes to accept the Offer (either in full or in respect of part of his holding(s) of Shares), he/ she must either:
(i) instruct the nominee company, or other nominee to accept the Offer on his/her behalf and requesting it to deliver the Acceptance Form duly completed together with the Title Documents to the Registrar, within such deadline (which may be earlier than the deadline specified under the Offer) as may be stipulated by the nominee; or
(ii) arrange for the Shares to be registered in his/her name by the Company through the Registrar, and send the Acceptance Form duly completed together with the Title Documents to the Registrar; or
(iii) where his/her Shares have been maintained with his/her licensed securities dealer/ custodian bank through CCASS, instruct his/her licensed securities dealer/custodian bank to authorize HKSCC Nominees Limited to accept the Offer on his/her behalf on or before the deadline set by HKSCC Nominees Limited. In order to meet the deadline set by HKSCC Nominees Limited, that Shareholder should check with his/her broker/ custodian bank for the timing on processing of his instruction, and submit such instruction to his broker/custodian bank as required by them; or
(iv) if that Shareholder’s Shares have been lodged with his/her Investor Participant Account with CCASS, authorize his instruction via the CCASS Phone System or CCASS Internet System on or before the deadline set by HKSCC Nominees Limited.
(b) Qualifying Shareholders with such a nominee holding of Shares should ensure that they undertake the above applicable course of action promptly so as to allow their nominee(s) sufficient time to complete the acceptance procedure on their behalf by the Latest Acceptance Time.

3. Recent Transfers

If a Qualifying Shareholder has lodged transfer(s) of Shares for registration in his/her name and has not yet received the Share certificate(s) and wishes to accept the Offer, he/she should nevertheless complete the Acceptance Form and deliver it to the Registrar together with the transfer receipt(s) duly signed by him/her at or before the Latest Acceptance Time. Such action will be deemed to be an authority to the Company or its agent(s) to collect from the Company or the Registrar on his/her behalf the relevant Share certificate(s) when issued and to deliver such Share certificate(s), subject to the terms of the Offer, as if it/they was/were delivered to the Registrar with the Acceptance Form.

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PRINCIPAL TERMS OF THE OFFER

APPENDIX I

Lost or Unavailable Share Certificates
(a) If the Title Document(s) is/are not readily available and/or is/are lost and a Qualifying Shareholder wishes to accept the Offer, the Acceptance Form should nevertheless be completed and delivered to the Registrar so as to reach the Registrar not later than the Latest Acceptance Time and the Title Documents should be forwarded to the Registrar as soon as possible thereafter and in any event before the Latest Acceptance Time.
(b) If a Qualifying Shareholder has lost his/her Title Documents, he/she should write to the Registrar and request a letter of indemnity in respect of the lost Title Documents (as the case may be) which, when completed by him/her in accordance with the instructions given, should be returned, together with the Acceptance Form and any Title Documents which are available, so as to arrive at the Registrar either by post or by hand not later than the Latest Acceptance Time. In such cases, the Qualifying Shareholder will be informed of the fees payable to the Registrar for which he/she will be responsible.
(c) Acceptances of the Offer may, at the discretion of the Company, be treated as valid even if not accompanied by the Title Documents but, in such cases, the cash consideration due will not be despatched until the relevant Title Documents has/have been received by the Registrar or in the case of lost of Title Documents, such Title Documents has been cancelled and the Register of Member has been updated.

5. Additional Acceptance Forms

If a Qualifying Shareholder has lost the accompanying Acceptance Form or such original has become unusable, and requires a replacement of such form, he/she should write to the Registrar or visit the Registrar at its office and request additional Acceptance Form for completion by such Qualifying Shareholder. Alternatively, he/she could download it from the website of the Stock Exchange at www.hkexnews.hk or the Company’s website at www.apacresources.com.

6. Settlement

6.1 Subject to the Offer becoming unconditional and provided that a duly completed Acceptance Form, accompanied by the relevant Title Documents are received by the Registrar by not later than the Latest Acceptance Time and are deemed to be in order, the Registrar will inform the relevant Accepting Shareholder by post of the buy-back of his/her Shares, including the number of Shares to be bought back from his/her Excess Tenders, if any. At the same time, the Registrar will send, by ordinary post at that Accepting Shareholder’s risk, a remittance for such total amount as is due to that Accepting Shareholder under the Offer, subject to deduction pursuant to paragraph 5(e) in the section headed ‘‘Terms and Conditions of the Offer’’ above, within 7 Business Days after the close of the Offer.

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PRINCIPAL TERMS OF THE OFFER

APPENDIX I

6.2 If the Offer does not become unconditional, the Title Documents will be returned and/or sent to each Accepting Shareholder (by ordinary post, at that Accepting Shareholder’s own risk) within 10 days of the lapse of the Offer. Where such Shareholder has sent one or more transfer receipt(s) and in the meantime one or more Share certificate(s) has/have been collected on that Shareholder’s behalf in respect thereof, that Shareholder will be sent (by ordinary post, at that Shareholder’s own risk) such Share certificate(s) in lieu of the transfer receipt(s).
6.3 If the Excess Tenders of an Accepting Shareholder has not been bought back by the Company in full, the Title Documents in respect of the balance of such Shares or a replaced certificate therefor will be returned or sent to him/her by ordinary post at his/her risk within 7 Business Days after the close of the Offer.

7. New Shareholders

Any new Shareholder may collect a copy of this Offer Document, together with the form of proxy and a blank Acceptance Form from the Registrar, Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong (which will be relocated to Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong with effect from 31 March 2014) during business hours from 13 March 2014 to the closing day of the Offer, both days inclusive. Such Shareholder may also contact the Registrar (through the enquiry general telephone line referred to in paragraph 10(i) under the section headed ‘‘Terms and Conditions of the Offer’’ above) and request a copy of this document, the accompanying form of proxy and a blank Acceptance Form (as appropriate) to be sent to his/her registered address as recorded in the Register of Member.

EFFECT OF ACCEPTANCE OF THE OFFER BY QUALIFYING SHAREHOLDERS

Each Qualifying Shareholder by whom, or on whose behalf, an Acceptance Form is executed irrevocably undertakes, represents, warrants and agrees to and with the Company and Yu Ming (so as to bind him/her, his/her personal representatives, heirs, successors and assigns) to the effect:

1. Deeming provisions

that the following provisions apply in the case of incorrectly completed, incomplete or illegible Acceptance Forms:

(a) if Box 1 of the Acceptance Form is not completed at all or a mark other than a legible number is inserted, the Qualifying Shareholder is deemed to have accepted the Offer in regard to such number of Shares as shall be equal to the number of the Shares tendered by such Qualifying Shareholder, as supported by the Title Documents, subject to scaling down; and
(b) if the total number of Shares inserted in Box 1 of the Acceptance Form is greater than the Shares tendered by the relevant Qualifying Shareholder as supported by the Title Documents, such Qualifying Shareholder will be deemed to have accepted the Offer in regard to such number of Shares as shall be equal to the number of the Shares tendered by him/her, subject to scaling down;

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PRINCIPAL TERMS OF THE OFFER

APPENDIX I

2. Representations and warranties

by delivery to the Registrar a duly completed Acceptance Form accompanied with the Title Documents, the Accepting Shareholder represents and warrants to the Company and Yu Ming:

(a) that he/she has full power and authority to tender, sell, assign and transfer all the Shares (together with all rights attaching thereto) specified in such Acceptance Form for buy-back and that the Shares are fully paid, free from all liens, charges, encumbrances, equitable interests, rights of pre-emption or other third party rights of any nature and together with all rights attaching thereto on or after the date of the Announcement (including the right to all dividends and distributions (if any) declared after the date of the Announcement); and
(b) that if he/she is a resident in or a citizen of a jurisdiction outside Hong Kong, he/she has fully observed any applicable legal or other requirements and that the Offer may be accepted by him/her lawfully under the laws of the relevant jurisdiction.

3. Appointment and authority

that the execution of the Acceptance Form constitutes:

(a) the irrevocable appointment of any director or officer of the Company or Yu Ming, or such other person as any of them may direct, as such Qualifying Shareholder’s agent (‘‘Agent’’); and
(b) an irrevocable instruction to the Agent to complete and execute the Acceptance Form and/or any other document at the Agent’s discretion on behalf of the person accepting the Offer and to do any other acts or things as may in the opinion of the Agent be necessary, expedient or desirable for the purpose of the Company repurchasing some or all of the Shares (as the Company may in its absolute discretion determine) in respect of which such person has accepted (or is deemed to have accepted) the Offer.

4. Undertakings

that by executing the Acceptance Form, he/she:

(a) agrees to ratify and confirm each and every act or thing which may be done or effected by the Company or any Agent in the proper exercise of its or his/her powers and/or authorities under the terms of the Offer;
(b) undertakes to deliver to the Registrar the Title Documents in respect of the Shares for which the Offer is (or is deemed to be) accepted, or an indemnity or indemnities acceptable to the Company in lieu thereof, or to procure the delivery of such document(s) to such person as soon as possible thereafter and, in any event, no later than the Latest Acceptance Time;
(c) accepts that the provisions of the Acceptance Form and the other terms and conditions in this document are deemed to be incorporated into the terms and conditions of the Offer;

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PRINCIPAL TERMS OF THE OFFER

APPENDIX I

(d) undertakes to execute any further documents, take any further action and give any further assurances which may be required in connection with his/her acceptance of the Offer as the Company may consider to be necessary, expedient or desirable, including without limitation, to complete the buy-back of any Shares in respect of which he/she has accepted or is deemed to have accepted the Offer free from all liens, charges, encumbrances, equitable interests, rights of pre-emption or other third party rights of any nature and together with all rights attaching thereto on or after the date when the Offer Period begins and/or to perfect any of the authorities expressed to be given hereunder;
(e) authorizes the Company or the Agent to procure the despatch by post of the consideration to which he/she is entitled at his/her risk to the first-named holder at his/her registered address in Box 4 of the Acceptance Form; and
(f) submits to the jurisdiction of the courts of Hong Kong in relation to all matters arising out of or in connection with the Offer or the Acceptance Form.

TAXATION

ANNOUNCEMENTS

Following the SGM at which the Offer, the Buy-backs Mandate and the Whitewash Waiver are to be approved by the Independent Shareholders, the Company will announce through the Stock Exchange’s website the result of the meeting and whether or not the Offer has become unconditional.
By 6:00 p.m. (or such later time as the Executive may permit) on the close of the Offer, the Company shall inform the Executive and the Stock Exchange of its decision in relation to the revision or expiry of the Offer (if any) and shall publish an announcement through the website of the Stock Exchange by 7:00 p.m. on such date stating whether the Offer has been revised or expired. A draft of such announcement must be submitted to the Executive by 6:00 p.m. for clearance and publication through the website of the Stock Exchange by 7:00 p.m. on the same day. The announcement shall (except in the case of lapse of the Offer) specify the total number of Shares (and rights over Shares) that have been accepted for buy-back pursuant to the Offer. The announcement will also set out the result of the Offer, including the details of the way in which Accepting Shareholders’ pro-rata entitlement was determined.
In calculating the number of the Shares represented by Acceptance Forms, acceptances which are not in all respects in order or are subject to verification will be stated separately.

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PRINCIPAL TERMS OF THE OFFER

APPENDIX I

INTERPRETATION

A reference in this Offer Document to a Qualifying Shareholder includes a reference to a person who, by reason of an acquisition or transfer of Shares, is entitled to execute an Acceptance Form and in the event of more than one person executing an Acceptance Form, the provisions of this document apply to them jointly and severally.
A reference in this Offer Document and the Acceptance Form to the masculine gender includes the feminine and neuter genders, and a reference to the singular includes the plural, and vice versa.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

1. SUMMARY OF FINANCIAL INFORMATION

(A) The following is a summary of the unaudited condensed consolidated financial statements of the Group for the six months ended 31 December 2013 as extracted from the relevant interim results announcement of the Company.

For the six months ended 31.12.2013 31.12.2012 HK$’000 HK$’000 (unaudited) (unaudited)

RESULTS Revenue Profit before taxation Income tax expense Profit for period Profit for the period attributable to: Owners of the Company Non-controlling interests Earnings per share (expressed in HK cents) — Basic and diluted ASSETS AND LIABILITIES Total assets Total liabilities Equity attributable to: Owners of the Company Non-controlling interests	540,038 442,201 1,322,766 81,599 (6,749) (32) 1,316,017 81,567 1,316,017 81,567 — — 1,316,017 81,567 19.32 1.20 As at 31.12.2013 30.6.2013 HK$’000 HK$’000 (unaudited) (audited) 3,815,356 2,527,311 266,392 268,678 3,548,964 2,258,633 3,548,964 2,258,633 — — 3,548,964 2,258,633

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Notes:

There are no exceptional items or extraordinary items because of size, nature or incidence in each of the six months period ended 31 December 2012 and 2013.
The Company has not paid out dividends for each of the six months ended 2012 and 2013 and the Company has no plan to alter its dividend policy.
(B) The following is a summary of the audited consolidated financial statements of the Group for the eighteen months ended 30 June 2011 and each of the two years ended 30 June 2012 (restated) and 2013, as extracted from the relevant annual reports of the Company.

RESULTS Revenue (Loss) Profit before taxation Income tax expense (Loss) Profit for the year/period (Loss) Profit for the year/period attributable to: Owners of the Company Non-controlling interests (Loss) Earnings per share (expressed in HK cents) — Basic and diluted	For the year ended 30 June 2013 2012 HK$’000 HK$’000 (restated) 1,104,617 1,050,205 (2,077,032) (241,077) (2,655) (1,890) (2,079,687) (242,967) (2,079,687) (242,967) — — (2,079,687) (242,967) (30.53) (3.55)	1.1.2010 to 30.6.2011 HK$’000 1,147,494 1,465,177 (3,108) 1,462,069 1,462,069 — 1,462,069 21.89

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

ASSETS AND LIABILITIES Total assets Total liabilities Equity attributable to: Owner of the Company Non-controlling interests	30.6.2013 HK$’000 2,527,311 268,678 2,258,633 2,258,633 — 2,258,633	As at 30.6.2012 HK$’000 (restated) 4,759,693 117,878 4,641,815 4,641,815 — 4,641,815	30.6.2011 HK$’000 6,108,171 709,571
			5,398,600
			5,398,600 —
			5,398,600

Notes:

As referred to in the Annual Report 2010/2011 of the Company, the audited consolidated financial statements of the Group for the period ended 30 June 2011 is for an extended period of eighteen months as the Company changed its year end reference date from 31 December to 30 June to align it with the reporting reference date of the Group’s primary strategic investments in Australia.
There are no exceptional items or extraordinary items because of size, nature or incidence in each of the three financial period/years ended 30 June 2011, 2012, and 2013.
No qualified opinion has been issued by the Company’s auditor, Deloitte Touche Tohmatsu, in respect of the audited consolidated financial statements for each of the three financial period/years ended 2011, 2012 and 2013.
The Company has not paid out dividends for each of three financial period/years ended 2011, 2012 and 2013 and the Company has no plan to alter its dividend policy.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2. LATEST PUBLISHED FINANCIAL INFORMATION

Set out below are the latest unaudited financial information extract from the unaudited condensed consolidated financial statements of the Group as contained in the interim results announcement of the Company for the six months ended 31 December 2013 and the audited consolidated financial information of the Group for the years ended 30 June 2013 and 2012 as extracted from the annual report of the Company for the year ended 30 June 2013.

(A) UNAUDITED FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED 31 DECEMBER 2013

Condensed Consolidated Statement of Profit or Loss

For the six months ended 31 December 2013

Notes
Revenue from sales of goods
2
Cost of sales
Other gains and losses
3
Other income
Administrative expenses
— General administrative expenses
— Equity-settled share option expenses
Finance costs
4
Share of results of associates
Profit before taxation
5
Income tax expense
6
Profit for the period attributable to owners of the
Company
Earnings per share (expressed in HK cents)
— Basic and diluted
8

Six months ended
31.12.2013
31.12.2012
HK$’000
HK$’000
(unaudited)
(unaudited)
540,038
442,201
(496,320)
(439,669)
43,718
2,532
1,138,001
(1,840)
9,860
7,234
(27,859)
(19,219)
—
(14,021)
(3,457)
(2,791)
162,503
109,704
1,322,766
81,599
(6,749)
(32)
1,316,017
81,567
19.32
1.20

– 64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income For the six months ended 31 December 2013

Profit for the period
Other comprehensive (expense) income, net of tax
Items that may be subsequently reclassified to
profit or loss:
Exchange difference arising from translation of
associates
Exchange difference arising from translation of
other foreign operations
Fair value change of available-for-sale investments
Reclassification adjustment upon disposal of
available-for-sale investments
Reclassification adjustment upon deemed disposal of
partial interests in associates
Share of investment revaluation reserve of associates
Total comprehensive income for the period attributable to
owners of the Company

Six months ended
31.12.2013
31.12.2012
HK$’000
HK$’000
(unaudited)
(unaudited)
1,316,017
81,567
(32,513)
36,947
3,477
5,361
327
241
6
—
(23)
(7,359)
3,040
(11,879)
(25,686)
23,311
1,290,331
104,878

– 65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Condensed Consolidated Statement of Financial Position

At 31 December 2013

Notes ASSETS Non-current assets Property, plant and equipment Interests in associates 9 Available-for-sale investments Financial assets designated at fair value through profit or loss Loan receivable Loan notes 10 Current assets Trade and other receivables 11 Investments held for trading 12 Pledged bank deposits Bank balances and cash Total assets EQUITY AND LIABILITIES Capital and reserves Share capital 14 Reserves Accumulated losses Current liabilities Trade and other payables 13 Bank borrowing Tax payable Total equity and liabilities Net current assets Total assets less current liabilities	31.12.2013 HK$’000 (unaudited) 2,878 2,545,776 30,073 74,156 27,548 232,599 2,913,030 89,509 201,372 308,314 303,131 902,326 3,815,356 681,193 3,028,501 (160,730) 3,548,964 76,439 184,500 5,453 266,392 3,815,356 635,934 3,548,964	30.6.2013 HK$’000 (audited) 2,011 1,301,491 18,686 77,953 28,614 — 1,428,755 27,178 233,091 345,502 492,785 1,098,556 2,527,311 681,193 3,054,187 (1,476,747) 2,258,633 25,381 242,500 797 268,678 2,527,311 829,878 2,258,633

– 66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Notes:

1. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES

The condensed consolidated financial statements have been prepared in accordance with Hong Kong Accounting Standard 34 ‘‘Interim Financial Reporting’’ issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’) as well as with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The condensed consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair values, as appropriate.

Except as described below, the accounting policies and methods of computation used in the condensed consolidated financial statements for the six months ended 31 December 2013 are the same as those followed in the preparation of the Group’s annual financial statements for the year ended 30 June 2013.

In the current interim period, the Group has applied, for the first time, certain new or revised Hong Kong Financial Reporting Standards (‘‘HKFRSs’’) issued by the HKICPA that are mandatorily effective for the current interim period.

Except as described below, the application of the other new or revised HKFRSs in the current interim period has had no material effect on the amounts reported and/or disclosures set out in these condensed consolidated financial statements.

HKFRS 13 Fair value measurement

The Group has applied HKFRS 13 for the first time in the current interim period. HKFRS 13 establishes a single source of guidance for, and disclosures about, fair value measurements, and replaces those requirements previously included in various HKFRSs. Consequential amendments have been made to HKAS 34 to require certain disclosures to be made in the interim condensed consolidated financial statements.

The scope of HKFRS 13 is broad, and applies to both financial instrument items and non-financial instrument items for which other HKFRSs require or permit fair value measurements and disclosures about fair value measurements, subject to a few exceptions. HKFRS 13 contains a new definition for ‘‘fair value’’ and defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under HKFRS 13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, HKFRS 13 includes extensive disclosure requirements.

In accordance with the transitional provisions of HKFRS 13, the Group has applied the new fair value measurement and disclosure requirements prospectively.

Amendments to HKAS 34 Interim financial reporting (as part of the annual improvements to HKFRSs 2009– 2011 cycle)

The Group has applied the amendments to HKAS 34 ‘‘Interim financial reporting’’ as part of the annual improvements to HKFRSs 2009–2011 cycle for the first time in the current interim period. The amendments to HKAS 34 clarify that the total assets and total liabilities for a particular reportable segment would be separately disclosed in the interim financial statements only when the amounts are regularly provided to the chief operating decision maker (‘‘CODM’’) and there has been a material change from the amounts disclosed in the last annual financial statements for that reportable segment.

CODM reviews assets and liabilities of the Group’s reportable segments for performance assessment and resource allocation purposes, thus the Group included total assets and total liabilities information as part of segment information.

– 67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

2. SEGMENT INFORMATION

Information regularly reviewed by the CODM, 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 business 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).

Segment results represent the profit (loss) earned by each segment without allocation of central administration costs, directors’ salaries, share of results of associates, loss on deemed disposal of partial interest in an associate, impairment loss on interest in an associate, reversal of impairment losses on interests in associates and finance costs. This is the measure reported to the CODM for the purposes of resource allocation and performance assessment.

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

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

Six months ended 31 December 2013

Revenue Gross sales proceeds from resource investment Segment profit (loss) Share of results of associates Loss on deemed disposal of partial interest in an associate Reversal of impairment losses on interests in associates Impairment loss on interest in an associate Unallocated corporate income Unallocated corporate expenses Finance costs Profit before taxation	Commodity business HK$’000 540,038 — 42,600	Resource investment HK$’000 — 81,405 (9,545)	Total HK$’000 540,038
			81,405
			33,055 162,503 (108 1,179,487 (26,190 2,050 (24,574 (3,457
			1,322,766

– 68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Six months ended 31 December 2012

Revenue Gross sales proceeds from resource investment Segment profit (loss) Share of results of associates Net gain on deemed disposal of partial interests in associates Unallocated corporate income Unallocated corporate expenses Finance costs Profit before taxation	Commodity business HK$’000 442,201 — 5,119	Resource investment HK$’000 — 125,311 (4,641)	Total HK$’000 442,201
			125,311
			478 109,704 3,359 177 (29,328) (2,791)
			81,599

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

The following is an analysis of the Group’s assets and liabilities by reportable and operating segments:

Commodity business Resource investment Total segment assets Interests in associates Loan notes Unallocated Consolidated assets Commodity business Resource investment Total segment liabilities Unallocated Consolidated liabilities	31.12.2013 HK$’000 (unaudited) 535,248 454,157 989,405 2,545,776 232,599 47,576 3,815,356 258,156 235 258,391 8,001 266,392	30.6.2013 HK$’000 (audited) 772,078 400,686
		1,172,764
		1,301,491 — 53,056
		2,527,311
		265,529 117
		265,646 3,032
		268,678

– 69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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

. all assets are allocated to reportable segments other than interests in associates, loan notes, property, plant and equipment, other receivables and certain bank balances and cash.
. all liabilities are allocated to reportable segments other than certain other payables and tax payable.
. bank borrowing is allocated while the finance costs are not allocated to respective reportable segments.

3. OTHER GAINS AND LOSSES

Fair value change of investments held for trading
(Loss) net gain on deemed disposal of partial interests in associates
Impairment loss on available-for-sale investment
Impairment loss on financial asset designated at fair value through
profit or loss
Impairment loss on loan receivable
Reversal of impairment losses on interests in associates
Impairment loss on interest in an associate
Net foreign exchange (loss) gain
(Loss) gain on disposal of available-for-sale investments
Fair value change of financial assets designated at fair value through
profit or loss
FINANCE COSTS
Interest on borrowing wholly repayable within five years:
— Bank borrowing

Six months ended
31.12.2013
31.12.2012
HK$’000
HK$’000
(unaudited)
(unaudited)
5,145
(6,521)
(108)
3,359
(11,214)
—
(2,636)
—
(1,066)
—
1,179,487
—
(26,190)
—
(3,799)
1,928
(6)
285
(1,612)
(891)
1,138,001
(1,840)
Six months ended
31.12.2013
31.12.2012
HK$’000
HK$’000
(unaudited)
(unaudited)
3,457
2,791

4. FINANCE COSTS

– 70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

5. PROFIT BEFORE TAXATION

Profit before taxation has been arrived at after charging (crediting): Staff costs, including directors’ emoluments — salaries and allowances — equity-settled share option expenses (included in administrative expenses) — staff quarters — retirement benefits schemes contributions Total staff costs Depreciation of property, plant and equipment Reversal of allowance for trade receivables Cost of goods recognised as an expense Reversal of allowance for inventories (included in cost of sales)	Six months ended 31.12.2013 31.12.2012 HK$’000 HK$’000 (unaudited) (unaudited) 11,107 7,622 — 14,021 441 432 97 120 11,645 22,195 434 326 — (3,317) 420,967 398,429 — (5,867)	Six months ended 31.12.2013 31.12.2012 HK$’000 HK$’000 (unaudited) (unaudited) 11,107 7,622 — 14,021 441 432 97 120 11,645 22,195 434 326 — (3,317) 420,967 398,429 — (5,867)
		22,195 326 (3,317) 398,429 (5,867)

6. INCOME TAX EXPENSE

Current tax Hong Kong Profits Tax Enterprise Income Tax in the People’s Republic of China (the ‘‘PRC’’)	Six months ended 31.12.2013 31.12.2012 HK$’000 HK$’000 (unaudited) (unaudited) 5,842 (820) 907 852 6,749 32	Six months ended 31.12.2013 31.12.2012 HK$’000 HK$’000 (unaudited) (unaudited) 5,842 (820) 907 852 6,749 32
		32

Hong Kong Profits Tax is calculated at 16.5% on the estimated assessable profit for both periods.

Under the Law of the PRC on Enterprise Income Tax (the ‘‘EIT Law’’) and Implementation of the EIT Law, the tax rate of the PRC subsidiaries is 25% for both periods.

7. DIVIDENDS

No dividend was paid, declared or proposed during the period, nor has any dividend been proposed since the end of the reporting period.

8. EARNINGS PER SHARE

The calculation of basic and diluted earnings per share is based on the profit attributable to owners of the Company of HK$1,316,017,000 (six months ended 31 December 2012: HK$81,567,000) and the number of 6,811,927,990 (six months ended 31 December 2012: weighted average number of 6,812,062,635) ordinary shares in issue during the six months ended 31 December 2013.

For the period ended 31 December 2012, the calculation of the diluted earnings per share did not assume the exercise of the Company’s outstanding share options as their exercise prices were higher than the average market price of the Company’s shares for the period.

– 71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

9. INTERESTS IN ASSOCIATES

Cost of investment in associates Listed in Australia Unlisted Share of post-acquisition profits and other comprehensive income, net of dividends received Impairment losses recognised Fair value of listed investments	31.12.2013 HK$’000 (unaudited) 2,223,339 50,687 1,303,115 (1,031,365) 2,545,776 2,508,707	30.6.2013 HK$’000 (audited) 2,223,339 50,687 1,212,127 (2,184,662)
		1,301,491
		1,237,392

During the period ended 31 December 2013, 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$1,179,487,000 (six months ended 31 December 2012: nil) recognised in prior years were reversed in profit or loss. The fair value of the Group’s listed associates referred to their respective closing prices as at 31 December 2013.

One of the Group’s unlisted associates engages in mineral exploration. However, the exploration license has not yet been granted by the relevant government authority to the associate. Due to the uncertainty in obtaining the exploration license and the insolvent financial position of the associate, the directors of the Company determined to recognise an impairment loss of HK$26,190,000 against the full carrying value of the associate during the period ended 31 December 2013.

10. LOAN NOTES

The Group subscribed for loan notes with a nominal value of US$30,000,000 from Mulpha SPV Limited (‘‘Mulpha’’), a limited liability company incorporated in Malaysia, at the nominal amount in November 2013. The loan notes bear 8.5% coupon interest per annum and it will mature on 26 November 2016. The 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. The 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.

11. TRADE AND OTHER RECEIVABLES

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:

0 to 90 days	31.12.2013 HK$’000 (unaudited) 70,982	30.6.2013 HK$’000 (audited) 4,919

As at 31 December 2013 and 30 June 2013, the trade receivables disclosed above are neither past due nor impaired.

– 72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

12. INVESTMENTS HELD FOR TRADING

Listed securities: — Equity securities listed in United Kingdom — Equity securities listed in United States of America — Equity securities listed in Australia — Equity securities listed in Canada	31.12.2013 HK$’000 (unaudited) 18,814 — 146,738 35,820 201,372	30.6.2013 HK$’000 (audited) 44,233 1,622 152,797 34,439
		233,091

13. TRADE AND OTHER PAYABLES

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

0 to 90 days 14. SHARE CAPITAL Ordinary shares of HK$0.10 each Authorised Issued and fully paid At 1 July 2012 Cancellation of shares repurchased At 31 December 2012, 1 July 2013 and 31 December 2013	31.12.2013 HK$’000 (unaudited) 62,866 Number of shares 20,000,000,000 6,813,047,990 (1,120,000) 6,811,927,990	30.6.2013 HK$’000 (audited) 20,407
		Share capital HK$’000 2,000,000
		681,305 (112)
		681,193

– 73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(B) AUDITED FINANCIAL INFORMATION FOR THE YEAR ENDED 30 JUNE 2013

Consolidated Statement of Profit or Loss

For the year ended 30 June 2013

Notes Revenue from sales of goods 5 Cost of sales Other gains and losses 7 Other income 8 Administrative expenses — General administrative expenses — Equity-settled share option expenses Finance costs 9 Share of results of associates Loss before taxation 10 Income tax expense 11 Loss for the year attributable to owners of the Company Loss per share (expressed in HK cents) — basic and diluted 13	2013 HK$’000 1,104,617 (1,092,065) 12,552 (2,387,295) 15,545 (44,770) (14,021) (6,195) 347,152 (2,077,032) (2,655) (2,079,687) (30.53)	2012 HK$’000 (restated) 1,050,205 (1,046,751) 3,454 (377,396) 12,037 (46,257) (28,612) (23,095) 218,792 (241,077) (1,890) (242,967) (3.55)

– 74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2013

Loss for the year Other comprehensive (expense) income, net of tax Items that may be subsequently reclassified to profit or loss: Exchange difference arising from translation of associates Exchange difference arising from translation of other foreign operations Fair value change of available-for-sale investments Impairment losses on available-for-sale investments Reclassification adjustment upon disposal of partial interest in an associate Reclassification adjustment upon deemed disposal of partial interests in associates Share of investment revaluation reserve of associates Total comprehensive expense for the year attributable to owners of the Company	2013 HK$’000 (2,079,687) (302,890) 10,092 (557) — — (7,359) (16,479) (317,193) (2,396,880)	2012 HK$’000 (Restated) (242,967) (123,746) 4,487 (21,731) 22,320 (311) — 10,363 (108,618) (351,585)

– 75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Consolidated Statement of Financial Position

At 30 June 2013

Notes ASSETS Non-current assets Property, plant and equipment 15 Interests in associates 16 Available-for-sale investments 17 Financial assets designated at fair value through profit or loss 18 Loan receivable 20 Current assets Inventories 19 Trade and other receivables and loan receivable 20 Investments held for trading 21 Pledged bank deposits 22 Bank balances and cash 22 Total assets EQUITY AND LIABILITIES Capital and reserves Share capital 25 Reserves Accumulated (losses) profits Current liabilities Trade and other payables 23 Bank borrowing 24 Tax payable Total equity and liabilities Net current assets Total assets less current liabilities	30.6.2013 HK$’000 2,011 1,301,491 18,686 77,953 28,614 1,428,755 — 27,178 233,091 345,502 492,785 1,098,556 2,527,311 681,193 3,054,187 (1,476,747) 2,258,633 25,381 242,500 797 268,678 2,527,311 829,878 2,258,633	30.6.2012 HK$’000 (restated) 1,589 3,459,522 71,465 118,947 — 3,651,523 61,932 183,237 410,611 79,748 372,642 1,108,170 4,759,693 681,305 3,428,398 532,112 4,641,815 115,572 — 2,306 117,878 4,759,693 990,292 4,641,815	1.7.2011 HK$’000 (restated) 1,370 3,418,854 52,527 — —
			3,472,751
			— 54,641 1,440,946 339,158 384,090
			2,218,835
			5,691,586
			686,329 3,548,806 746,880
			4,982,015
			6,773 689,530 13,268
			709,571
			5,691,586
			1,509,264
			4,982,015

– 76 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Consolidated Statement of Changes in Equity

For the year ended 30 June 2013

		Attributable to own	Attributable to own	ers of the Company	ers of the Company		Accumulated profits (losses) Total HK$’000 HK$’000 1,157,921 5,398,600 (411,041) (416,585) 746,880 4,982,015 (242,967) (242,967) — (108,618) (242,967) (351,585) (5,024) (17,227) — 28,612 33,223 — 532,112 4,641,815 (2,079,687) (2,079,687) — (317,193) (2,079,687) (2,396,880) (112) (323) — 14,021 70,940 — (1,476,747) 2,258,633	Accumulated profits (losses) Total HK$’000 HK$’000 1,157,921 5,398,600 (411,041) (416,585) 746,880 4,982,015 (242,967) (242,967) — (108,618) (242,967) (351,585) (5,024) (17,227) — 28,612 33,223 — 532,112 4,641,815 (2,079,687) (2,079,687) — (317,193) (2,079,687) (2,396,880) (112) (323) — 14,021 70,940 — (1,476,747) 2,258,633
Share capital HK$’000 686,329 —	Share premium HK$’000 2,782,143 —					Capital redemption reserve HK$’000 5,884 —
686,329	2,782,143	(14,980)	26,728	687,501	61,530	5,884	746,880	4,982,015
— —	— —	— —	— 10,972			— —
—	—	—	10,972			—
			— — —	— — —
681,305	2,769,940			567,911	56,919	10,908	532,112	4,641,815
— —	— —	— —				— —
—	—	—				—
			— — —	— — —
681,193	2,769,729			268,915	—	11,020

– 77 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Consolidated Statement of Cash Flows

For the year ended 30 June 2013

OPERATING ACTIVITIES Loss before taxation Adjustments for: (Reversal of allowance) allowance for inventories (Reversal of allowance) allowance for trade receivable Depreciation of property, plant and equipment Net gain on deemed disposal of partial interests in associates Equity-settled share option expenses Fair value change of investments held for trading Fair value change of financial assets designated at fair value through profit or loss Gain on disposal of partial interest in an associate Gain on disposal of an available-for-sale investment Loss on deemed disposal of an available-for-sale investment Interest income Interest expenses Impairment losses on available-for-sale investments Impairment loss on loan receivable Share of results of associates Impairment losses on interests in associates Operating cash flows before movements in working capital Decrease (increase) in trade and other receivables (Decrease) increase in trade and other payables Decrease in investments held for trading Decrease (increase) in inventories Cash generated from operations Income tax paid Net cash from operating activities	2013 HK$’000 (2,077,032) (5,867) (3,317) 701 (3,359) 14,021 193,849 13,022 — (285) 38,971 (8,609) 6,195 — 6,388 (347,152) 2,111,359 (61,115) 126,764 (90,325) 2,999 73,566 51,889 (4,164) 47,725	2012 HK$’000 (restated) (241,077) 27,812 3,317 687 — 28,612 229,160 1,173 (812) — — (10,599) 23,095 22,320 7,294 (218,792) 73,303 (54,507) (139,207) 108,799 801,175 (95,511) 620,749 (12,852) 607,897

– 78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

INVESTING ACTIVITIES Purchase of available-for-sale investments Purchase of property, plant and equipment Investment in associates Investment in financial assets designated at fair value through profit or loss Placement of pledged bank deposits Withdrawal of pledged bank deposits Proceeds from disposal of partial interest in an associate Proceeds from disposal of available-for-sale investments Dividend received from an associate Interest received Net cash (used in) from investing activities FINANCING ACTIVITIES Payments on repurchase of shares Interest paid New borrowings raised Repayments of borrowings Net cash from (used in) financing activities Net increase (decrease) in cash and cash equivalents Effect of foreign exchange rate change Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year, represented by bank balances and cash	2013 HK$’000 (6,183) (1,117) — — (1,376,916) 1,111,162 — 391 92,655 6,219 (173,789) (323) (6,061) 467,152 (224,652) 236,116 110,052 10,091 372,642 492,785	2012 HK$’000 (restated) (41,691) (902) (142,630) (120,120) (956,284) 1,215,694 3,082 — 137,429 10,599 105,177 (17,227) (23,095) — (689,530) (729,852) (16,778) 5,330 384,090 372,642

– 79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Notes to the Consolidated Financial Statements

For the year ended 30 June 2013

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 34.

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 HKAS 1 Presentation of items of other comprehensive income; Amendments to HKAS 1 As part of the annual improvements to HKFRSs 2009–2011 cycle issued in 2012; Amendments to HKAS 12 Deferred tax: Recovery of underlying assets; and HK(IFRIC)-INT 20 Stripping costs in the production phase of a surface mine.

Except as described below, the application of the other 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.

Amendments to HKAS 1 Presentation of items of other comprehensive income

The amendments to HKAS 1 introduce new terminology for statement of comprehensive income and income statement. Upon application of the amendments to HKAS 1, the Group’s statement of comprehensive income is renamed as a statement of profit or loss and other comprehensive income and income statement is renamed as a statement of profit or loss. The amendments to HKAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to HKAS 1 require additional disclosures to be made in the other comprehensive section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis — the amendments do not change the option to present items of other comprehensive income either before tax or net of tax. The amendments have been applied retrospectively, and hence the presentation of items of other comprehensive income has been modified to reflect the changes. Other than the above mentioned presentation changes, the application of the amendments to HKAS 1 does not result in any impact on profit or loss, other comprehensive income and total comprehensive income.

Amendments to HKAS 1 Presentation of financial statements (as part of the annual improvements to HKFRSs 2009–2011 cycle issued in June 2012)

Various amendments to HKFRSs were issued in June 2012, the title of which is Annual Improvements to HKFRSs (2009–2011 Cycle). The effective date of these amendments is annual periods beginning on or after 1 January 2013.

In the current year, the Group has applied for the first time the amendments to HKAS 1 in advance of the effective date (annual periods beginning on or after 1 January 2013).

– 80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

HKAS 1 requires an entity that changes accounting policies retrospectively, or makes a retrospective restatement or reclassification to present a statement of financial position as at the beginning of the preceding period (third statement of financial position). The amendments to HKAS 1 clarify that an entity is required to present a third statement of financial position only when the retrospective application, restatement or reclassification has a material effect on the information in the third statement of financial position and that related notes are not required to accompany the third statement of financial position.

In the current year, the Group has applied HK(IFRIC)-INT 20 ‘‘Stripping costs in the production phase of a surface mine’’ for the first time, which has resulted in a material effect on the information in the consolidated statement of financial position as at 1 July 2011. In accordance with the amendments to HKAS 1, the Group has therefore presented a third statement of financial position as at 1 July 2011 without the related notes.

Early application of HK(IFRIC)-INT 20 ‘‘Stripping costs in the production phase of a surface mine’’

During the current year, the Group has early applied HK(IFRIC)-INT 20, as one of its associates has early applied the equivalent interpretation. HK(IFRIC)-INT 20 has no impact to other associates and group entities.

HK(IFRIC)-INT 20 applies to waste removal costs that are incurred in surface mining activity during the production phase of the mine (‘‘production stripping costs’’). Under the interpretation, the costs from this waste removal activity (‘‘stripping’’) which provide improved access to ore is recognised as a non-current asset (‘‘stripping activity asset’’) when certain criteria are met, whereas the costs of normal on-going operational stripping activities are accounted for in accordance with HKAS 2 ‘‘Inventories’’. The stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset and classified as tangible or intangible according to the nature of the existing asset of which it forms part.

Prior to the issuance of HK(IFRIC)-INT 20, the relevant associate adopted a life-of-mine approach and deferred all costs attributable to waste stripping and recognised as an expense the amortisation of capitalised waste stripping costs over the remaining ore reserves of the relevant mine. Amortisation was provided on the units-ofproduction method, with separate calculations being made for each mineral resource. Estimated future capital and waste development costs to be incurred in accessing the reserves and measured resources were taken into account in determining amortisation charges. The units-of-production method resulted in an amortisation charge proportional to the depletion of the economically recoverable mineral resources (comprising proven and probable reserves).

The requirements in accordance with HK(IFRIC)-INT 20 differs from the associate’s previous policies in that only waste stripping costs which provide improved access to ore can be capitalised when certain criteria are met, and the capitalisation and amortisation of waste stripping costs is undertaken at the level of individual deposits or components thereof rather than on a whole-of-mine basis. In addition, specific transitional rules are provided to deal with any opening deferred stripping balances recognised under the previous accounting policies.

The equivalent of HK(IFRIC)-INT 20 has been applied by the associate prospectively to production stripping costs incurred on or after the beginning of the earliest period presented, which is 1 July 2011. Such early application has affected the amounts reported in the Group’s consolidated financial statements (see the tables below). Any previously recognised asset balance that resulted from stripping activity undertaken during the production phase (predecessor stripping asset) is reclassified as a part of an existing asset to which the stripping activity related, to the extent that there remains an identifiable component of the orebody with which the predecessor stripping asset can be associated. Such balances are then amortised over the remaining expected useful life of the identified component of the orebody to which each predecessor stripping asset balance relates. If there is no identifiable component of the orebody to which the predecessor asset relates, it has been written off through opening accumulated profits at the beginning of the earliest period presented, being 1 July 2011.

Given the nature of the associate’s mining operations and the way the associate plans to mine the remaining components of the orebodies, it has been determined that part of the associate’s predecessor stripping asset relates to components of the orebodies where the associated ore has already been extracted.

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APPENDIX II

Summary of the effects

The effects of early application described above on the results for the year ended 30 June 2012 by line items presented in the consolidated statement of profit or loss and statement of profit or loss or other comprehensive income are as follows:

Decrease in share of results of associates Decrease in impairment loss recognised on interest in an associate Decrease in loss for the year Decrease in exchange difference arising from translation of associates and other comprehensive expense for the year	2012 HK$’000 (23,374) 307,926
	284,552
	22,485

The effects of the above early application in accounting policy on the financial positions of the Group as at 1 July 2011 and 30 June 2012 are as follows:

Interests in associates Accumulated profits Exchange reserve Total effects on equity	As at 1.7.2011 (originally stated) HK$’000 3,835,439 1,157,921 693,045 1,850,966	Adjustments HK$’000 (416,585) (411,041) (5,544) (416,585)	As at 1.7.2011 (restated) HK$’000 3,418,854 746,880 687,501 1,434,381	As at 30.6.2012 (originally stated) HK$’000 3,569,070 658,601 550,970 1,209,571	Adjustments HK$’000 (Note) (109,548)	As at 30.6.2012 (restated) HK$’000 3,459,522 532,112 567,911 1,100,023
					(126,489) 16,941
					(109,548)

Note: The accumulated impact on early application of HK(IFRIC)-INT 20 resulted in reduction in interests in associates of HK$417,474,000 and accumulated profits of HK$434,415,000 respectively as at 30 June 2012, while such effect is reduced by the adjustment of impairment loss recognised in respect of interest in an associate of HK$307,926,000 due to the reduction in the carrying value of the associate.

The effects of the above early application in accounting policy on the Group’s basic and diluted loss per share for the year ended 30 June 2012 are as follows:

Figures before adjustments Adjustments arising from changes in the Group’s accounting policy in relation to: — application of HK(IFRIC)-INT 20 Figures after adjustments	2012 HK cents (7.70) 4.15
	(3.55)

The Group has not disclosed the relevant financial impacts for the year ended 30 June 2013 and as at 30 June 2013 resulting from the early application of HK(IFRIC)-INT 20, as the associate in question has determined that it is not practicable to quantify such impact.

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APPENDIX II

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

Amendments to HKFRSs	Annual improvements to HKFRSs 2009–2011 cycle1
Amendments to HKFRS 7	Disclosures — Offsetting financial assets and financial liabilities1
Amendments to HKFRS 9 and	Mandatory effective date of HKFRS 9 and transition disclosures3
HKFRS 7
Amendments to HKFRS 10,	Consolidated financial statements, joint arrangements and disclosure of
HKFRS 11 and HKFRS 12	interests in other entities: Transition guidance1
Amendments to HKFRS 10,	Investment entities2
HKFRS 12 and HKAS 27
HKFRS 9	Financial instruments3
HKFRS 10	Consolidated financial statements1
HKFRS 11	Joint arrangements1
HKFRS 12	Disclosure of interests in other entities1
HKFRS 13	Fair value measurement1
HKAS 19 (as revised in 2011)	Employee benefits1
HKAS 27 (as revised in 2011)	Separate financial statements1
HKAS 28 (as revised in 2011)	Investments in associates and joint ventures1
Amendments to HKAS 32	Offsetting financial assets and financial liabilities2
Amendments to HKAS 36	Recoverable amount disclosures for non-financial assets2
Amendments to HKAS 39	Novation of derivatives and continuation of hedge accounting2
HK(IFRIC)-INT 21	Levies2

1 Effective for annual periods beginning on or after 1 January 2013.

2 Effective for annual periods beginning on or after 1 January 2014.

3 Effective for annual periods beginning on or after 1 January 2015.

HKFRS 9 Financial instruments

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 amended in 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

Key requirements of HKFRS 9 are described as follows:

. HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 ‘‘Financial instruments: Recognition and measurement’’ to be 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. 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.
. The most significant effect of HKFRS 9 regarding the classification and measurement of financial liabilities relates to the presentation of changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

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The directors of the Company anticipate that the application of HKFRS 9 for the annual period beginning 1 July 2015 will affect the classification and measurement in respect of the Group’s available-for-sale investments. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

HKFRS 13 Fair value measurement

HKFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of HKFRS 13 is broad and it applies to both financial instrument items and non-financial instrument items for which other HKFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in HKFRS 13 are more extensive than those in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under HKFRS 7 ‘‘Financial instruments: Disclosures’’ will be extended by HKFRS 13 to cover all assets and liabilities within its scope.

HKFRS 13 will be applied in the Group’s consolidated financial statements for the annual period beginning 1 July 2013 and that the application of the new standard may result in more extensive disclosures in the consolidated financial statements.

Amendments to HKAS 36 Recoverable amount disclosures for non-financial assets

The amendments to HKAS 36 remove the requirement to disclose recoverable amounts when there has been no impairment or reversal of impairment but require the following disclosures (in addition to the others already required by HKAS 36) when an impairment is recognised or reversed and recoverable amount is based on fair value less costs of disposal:

the level of the HKFRS 13 ‘‘fair value hierarchy’’ within which the fair value measurement of the asset or cash-generating unit has been determined.
for fair value measurements at level 2 or level 3 of the fair value hierarchy: a description of the valuation techniques used and any changes in that valuation technique; key assumptions used in the measurement of fair value, including the discount rate(s) used in the current measurement and previous measure if fair value less costs of disposal is measured using a present value technique.

The directors of the Company anticipate that the amendments to HKAS 36 will be applied in the Group’s consolidated financial statements for the annual period beginning 1 July 2014 and that the application of the amendments may result in more extensive disclosures in the consolidated financial statements retrospectively.

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.

3. SIGNIFICANT ACCOUNTING POLICIES

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 Hong Kong Companies Ordinance.

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.

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APPENDIX II

The principal accounting policies are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of profit or loss from the effective date of acquisition or up to the effective date of disposal, as appropriate.

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.

Any excess of the cost of acquisition 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.

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

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APPENDIX II

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.

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.

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.

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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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.

Exchange differences arising on the settlement of monetary items, and on the retranslation of 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, or a disposal involving loss of control over a subsidiary that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), 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.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from ’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 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 goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

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.

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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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 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.

Share-based payment transactions

Equity-settled share-based payment transactions

The fair value of services received determined by reference to the fair value of share options granted at the grant date is expensed on a straight-line basis over the vesting period, with a corresponding increase in equity (share option reserve).

The Group’s share options contain both a market condition (a specified increase in share price) and a nonmarket service condition (continuing employment). Market condition is taken into account when estimating the fair value of the share options granted. The fair value of options is recognised as share option expenses over the expected vesting period on a straight-line basis for employees who satisfy the non-market service condition, irrespective of whether the market condition is satisfied. The expected vesting period is consistent with the assumptions used in estimating the fair value of the options granted and is not revised subsequently.

At the end of the reporting period, the Group revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the original estimates during the vesting period, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to share option reserve.

When share options are exercised, the amount previously recognised in share option reserve will be transferred to accumulated profits/losses. When the share options are forfeited after the expected vesting date or are still not exercised at the expiry date, the amount previously recognised in share option reserve will be transferred to accumulated profits/losses.

If a grant of share option is cancelled during the vesting period, the Group accounts for the cancellation as an acceleration of vesting, and shall therefore recognise immediately to profit or loss the amount that otherwise would have been recognised over the remainder of the vesting period.

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APPENDIX II

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.

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 cash-generating 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 to sell 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 as income immediately.

Inventories

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

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APPENDIX II

Financial assets

The Group’s financial assets are classified into one of the three categories, including financial assets designated 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 designated 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.

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.

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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).

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 and loan receivable, pledged bank deposits, 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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.

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.

Financial liabilities

Financial liabilities including trade and other payables and bank borrowing 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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.

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.

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

Revenue from trading of commodities	2013 HK$’000 1,104,617	2012 HK$’000 1,050,205

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 business 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, impairment losses on interests in associates, net gain on deemed disposal of partial interests in associates, gain on disposal of partial interest in an associate and finance costs. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and performance assessment.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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 2013

Revenue Gross sales proceeds from resource investment Segment profit (loss) Share of results of associates Impairment losses on interests in associates Net gain on deemed disposal of partial interests in associates Unallocated corporate income Unallocated corporate expenses Finance costs Loss before taxation Income tax expense Loss for the year For year ended 30 June 2012 Revenue Gross sales proceeds from resource investment Segment profit (loss) Share of results of associates Impairment loss on interest in an associate Gain on disposal of partial interest in an associate Unallocated corporate income Unallocated corporate expenses Finance costs Loss before taxation Income tax expense Loss for the year	Commodity business HK$’000 1,104,617 — 16,556 Commodity business HK$’000 1,050,205 — 5,571	Resource investment HK$’000 — 206,137 (268,911) Resource investment HK$’000 — 1,342,203 (296,401)	Total HK$’000 1,104,617 206,137 (252,355) 347,152 (2,111,359) 3,359 203 (57,837) (6,195) (2,077,032) (2,655) (2,079,687) Total HK$’000 (restated) 1,050,205 1,342,203 (290,830) 218,792 (73,303) 812 123 (73,576) (23,095) (241,077) (1,890) (242,967)

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

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APPENDIX II

Other segment information

Other segment information included in the consolidated statement of profit or loss for the year ended 30 June 2013 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	8,041	522	46	8,609
Fair value change of investments held for
trading	—	(212,840)	—	(212,840)
Fair value change of financial assets
designated at fair value through profit
or loss	—	(13,022)	—	(13,022)
Reversal of allowance for inventories	5,867	—	—	5,867
Reversal of allowance for trade
receivable	3,317	—	—	3,317

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 Share of results of associates Impairment losses on interests in associates	— — —	— — —	1,301,491 347,152 (2,111,359)	1,301,491 347,152 (2,111,359)

Other segment information included in the consolidated statement of profit or loss for the year ended 30 June 2012 are as follows:

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

Interest income Fair value change of investments held for trading Fair value change of financial assets designated at fair value through profit or loss Impairment losses on available-for-sale investments Allowance for inventories Allowance for trade receivable	Commodity business HK$’000 10,009 — — — (27,812) (3,317)	Resource investment HK$’000 553 (272,334) (1,173) (22,320) — —	Unallocated HK$’000 (restated) 37 — — — — —	Total HK$’000 (restated) 10,599 (272,334) (1,173) (22,320) (27,812) (3,317)

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 Share of results of associates Impairment loss on interest in an associate	— — —	— — —	3,459,522 218,792 (73,303)	3,459,522 218,792 (73,303)

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Segment assets and liabilities

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

Commodity business Resource investment Total segment assets Interests in associates Unallocated Consolidated assets Commodity business Resource investment Total segment liabilities Unallocated Consolidated liabilities	2013 HK$’000 772,078 400,686 1,172,764 1,301,491 53,056 2,527,311 265,529 117 265,646 3,032 268,678	2012 HK$’000 (restated) 593,939 651,198
		1,245,137 3,459,522 55,034
		4,759,693
		113,397 88
		113,485 4,393
		117,878

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, other receivables and certain bank balances and cash.
. all liabilities are allocated to reportable segments other than certain other payables and tax payable.
. bank borrowing is allocated while the finance costs are not allocated to respective reportable segments.

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.

Australia Bailiwick of Guernsey Hong Kong The PRC United Kingdom	Revenue from external customers 2013 2012 HK$’000 HK$’000 67,639 — — — 1,036,518 389,885 460 660,320 — — 1,104,617 1,050,205	Non-current assets 2013 2012 HK$’000 HK$’000 (restated) 1,237,391 3,425,975 27,971 — 1,586 1,449 36,155 33,687 399 — 1,303,502 3,461,111	Non-current assets 2013 2012 HK$’000 HK$’000 (restated) 1,237,391 3,425,975 27,971 — 1,586 1,449 36,155 33,687 399 — 1,303,502 3,461,111
			3,461,111

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FINANCIAL INFORMATION OF THE GROUP

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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:

Customer A Customer B Customer C Customer D	2013 HK$’000 778,361 162,154 N/A1 N/A1	2012 HK$’000 317,187 N/A1 441,128 163,715

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

7. OTHER GAINS AND LOSSES

Fair value change of investments held for trading (Note) Fair value change of financial assets designated at fair value through profit or loss Impairment losses on available-for-sale investments Impairment losses on interests in associates Impairment loss on loan receivable Gain on disposal of partial interest in an associate Net gain on deemed disposal of partial interests in associates Net foreign exchange loss Gain on disposal of an available-for-sale investment Loss on deemed disposal of an available-for-sale investment	2013 HK$’000 (212,840) (13,022) — (2,111,359) (6,388) — 3,359 (8,359) 285 (38,971) (2,387,295)	2012 HK$’000 (272,334) (1,173) (22,320) (73,303) (7,294) 812 — (1,784) — —
		(377,396)

Note: Net realised loss of HK$18,991,000 (2012: HK$43,174,000) on disposal of investments held for trading are included in fair value change of investments held for trading.

8. OTHER INCOME

Dividend income from investments held for trading Interest income from bank deposits Others	2013 HK$’000 616 8,609 6,320 15,545	2012 HK$’000 268 10,599 1,170
		12,037

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APPENDIX II

9. FINANCE COSTS

Interest on borrowings wholly repayable within five years: Bank borrowing Securities margin financing	2013 HK$’000 6,195 — 6,195	2012 HK$’000 10,089 13,006
		23,095

10. LOSS BEFORE TAXATION

Loss before taxation has been arrived at after charging (crediting): Staff costs, including directors’ emoluments — salaries and allowances — equity-settled share option expenses (included in administrative expenses) — staff quarters — retirement benefits schemes contributions Total staff costs Auditor’s remuneration Cost of goods recognised as an expense including a reversal of allowance for inventories of HK$5,867,000 (2012: allowance for inventories of HK$27,812,000) (Note a) Depreciation of property, plant and equipment (Reversal of allowance) allowance for trade receivable (Note b)	2013 HK$’000 17,262 13,071 869 407 31,609 830 979,551 701 (3,317)	2012 HK$’000 16,840 26,668 822 251
		44,581 750 944,851 687 3,317

Notes:

(a) Excess inventory provision was reversed when the relevant inventories were sold.

(b) Allowance recognised on trade receivable was reversed when the relevant amounts were settled.

11. INCOME TAX EXPENSE

Current tax Hong Kong Profits Tax PRC Enterprise Income Tax Under(over)provision in prior periods Total income tax expense	2013 HK$’000 (106) 1,508 1,402 1,253 2,655	2012 HK$’000 144 2,490
		2,634 (744
		1,890

Hong Kong Profits Tax is calculated at 16.5% on the estimated assessable profit for both years.

Under the Law of the People’s Republic of China 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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

Loss before taxation Tax at Hong Kong profits tax rate of 16.5% Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Tax effect of tax losses not recognised Tax effect of share of results of associates Under(over)provision in prior periods Effect of different tax rate of subsidiaries operating in other jurisdictions Others Tax charge for the year in respect of Hong Kong and the PRC	2013 HK$’000 (2,077,032) (342,710) 398,142 (2,977) 6,160 (57,280) 1,253 361 (294) 2,655	2012 HK$’000 (restated) (241,077)
		(39,778) 72,236 (2,106) 7,276 (36,101) (744) 1,107 —
		1,890

At 30 June 2013, the Group had unused tax losses of HK$117,363,000 (2012: HK$80,030,000) 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.

12. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

An analysis of remuneration paid and payable to directors of the Company for the years ended 30 June 2013 and 2012 is set out as follows:

Year ended 30 June 2013

Executive directors Ms. Chong Sok Un Mr. Andrew Ferguson (Chief Executive Officer) Mr. Kong Muk Yin Mr. Yue Jialin (note b) Non-executive directors Mr. Lee Seng Hui Mr. So Kwok Hoo Mr. Peter Anthony Curry Independent non-executive directors Dr. Wong Wing Kuen, Albert Mr. Chang Chu Fai, Johnson Francis Mr. Robert Moyse Willcocks	Fee HK$’000 40 — 240 — 190 120 120 190 190 190 1,280	Salaries and other benefits in kind HK$’000 1,200 3,665 — — — — — — — — 4,865	Share option benefits HK$’000 2,732 4,553 465 189 — 189 1,681 189 189 189 10,376	Retirement benefits schemes contributions HK$’000 — 15 — — — — — — — — 15	Total HK$’000 3,972 8,233 705 189 190 309 1,801 379 379 379
					16,536

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Year ended 30 June 2012

Executive directors Ms. Chong Sok Un Mr. Andrew Ferguson (Chief Executive Officer) Mr. Kong Muk Yin Mr. Yue Jialin Non-executive directors Mr. Lee Seng Hui Mr. So Kwok Hoo Mr. Liu Yongshun (note a) Mr. Peter Anthony Curry Independent non-executive directors Dr. Wong Wing Kuen, Albert Mr. Chang Chu Fai, Johnson Francis Mr. Robert Moyse Willcocks	Fee HK$’000 27 — 240 — 177 40 400 40 177 177 177 1,455	Salaries and other benefits in kind HK$’000 1,200 3,262 — — — — — — — — — 4,462	Share option benefits HK$’000 6,663 11,105 1,078 186 — 186 125 4,188 186 186 186 24,089	Retirement benefits schemes contributions HK$’000 — 12 — — — — — — — — — 12	Total HK$’000 7,890 14,379 1,318 186 177 226 525 4,228 363 363 363
					30,018

Notes:

(a) Mr. Liu Yongshun resigned on 1 March 2012.

(b) Mr. Yue Jialin retired and did not seek for re-election in the annual general meeting held on 5 December 2012.

During the year ended 30 June 2013, Mr. Yue Jialin waived his emoluments to the amount of HK$50,000 (2012: HK$120,000). The waived emoluments were excluded from the above disclosure.

Apart from the above, there was no arrangement under which a director waived or agreed to waive any remuneration during the years ended 30 June 2013 and 2012.

Certain directors were granted share options, based on their performance and service render to the Group, under the share option scheme of the Company, further details of which are set out in note 27. For year ended 30 June 2012, the fair value of such options, which has been amortised to profit or loss, was determined as at the date of the grant and included in the above directors’ remuneration disclosures. For year ended 30 June 2013, share options have been cancelled during the vesting period, the cancellation was accounted for as an acceleration of vesting and recognised immediately to profit or loss and included in the above directors’ remuneration disclosures.

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 2013 and 2012.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Employees’ emoluments

Of the five individuals with the highest emoluments in the Group, three (2012: three) were directors of the Company whose emoluments are included in the disclosures set out above. The emoluments of the remaining two (2012: two) individuals were as follows:

Salaries and allowances Share option benefits Retirement benefits schemes contributions Their emoluments were within the following bands: HK$1,000,001 to HK$2,000,000 HK$2,000,001 to HK$3,000,000 HK$3,000,001 to HK$4,000,000	2013 HK$’000 3,682 280 30 3,992 2013 No. of employees 1 1 —	2012 HK$’000 4,710 953 23
		5,686
		2012 No. of employees — 1 1

13. LOSS PER SHARE

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

Loss per share

The calculation of basic and diluted loss per share is based on the loss for the year ended 30 June 2013 attributable to owners of the Company of HK$2,079,687,000 (2012: loss for the year HK$242,967,000 (restated)) and weighted average number of 6,811,995,682 (2012: 6,849,283,278) ordinary shares in issue during the year.

Number of shares

Weighted average number of ordinary shares used in the calculation of basic and diluted loss per share	2013 6,811,995,682	2012 6,849,283,278

For the years ended 30 June 2013 and 2012, the calculation of the diluted loss per share did not assume the exercise of the Company’s outstanding share options since their exercise would result in a decrease in loss per share.

14. DIVIDENDS

No dividend was paid or proposed during the year ended 30 June 2013, nor has any dividend been proposed since the end of the reporting period (2012: Nil) as the Company has negative distributable reserve.

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APPENDIX II

15. PROPERTY, PLANT AND EQUIPMENT

COST At 1 July 2011 Additions Write off Exchange adjustments At 30 June 2012 Additions Write off Exchange adjustments At 30 June 2013 DEPRECIATION At 1 July 2011 Charge for the year Write off Exchange adjustments At 30 June 2012 Charge for the year Write off Exchange adjustments At 30 June 2013 CARRYING AMOUNTS At 30 June 2013 At 30 June 2012	Leasehold improvements, furniture and fixtures HK$’000 1,310 11 — — 1,321 696 — — 2,017 1,252 45 — — 1,297 83 — — 1,380 637 24	Office equipment HK$’000 109 28 — 1 138 49 (70) 2 119 71 24 — 2 97 21 (70) 2 50 69 41	Computers HK$’000 783 863 (100) 6 1,552 372 (304) 11 1,631 515 270 (100) 5 690 276 (304) 10 672 959 862	Motor vehicles HK$’000 1,762 — — 11 1,773 — — 24 1,797 756 348 — 7 1,111 321 — 19 1,451 346 662	Total HK$’000 3,964 902 (100) 18
					4,784 1,117 (374) 37
					5,564
					2,594 687 (100) 14
					3,195 701 (374) 31
					3,553
					2,011
					1,589

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

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

16. INTERESTS IN ASSOCIATES

Cost of investments in associates Listed in Australia Unlisted Share of post-acquisition profits and other comprehensive income, net of dividends received Impairment losses recognised Fair value of listed investments	30.6.2013 HK$’000 2,223,339 50,687 1,212,127 (2,184,662) 1,301,491 1,237,392	30.6.2012 HK$’000 (restated) 2,223,339 22,716 1,286,770 (73,303)
		3,459,522
		2,439,826

Details of the Group’s associates at 30 June 2013 and 2012 are as follows:

				Proportion	Proportion	Proportion
		Place of		of ownership
		incorporation/	Class	interest
	Listed/	establishment	of shares	and voting
Name of entity	unlisted	and operation	held	power	held		Principal activities
				2013	2012
平港(上海) 貿易	Unlisted	The PRC	N/A	40%		40%	Wholesales, import and export, agency
有限公司							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.
Mount Gibson Iron	Listed	Australia	Ordinary	26.61%	26.74%		Mining of hematite deposits at Tallering
Limited (‘‘MGX’’)							Peak and Koolan Island; development
(note a)							of hematite mining operations at
							Extension Hill; and exploration of
							hematite deposits in Western
							Australia.
Metals X Limited	Listed	Australia	Ordinary	24.07%	30.20%		Exploration for and the mining, treatment
(‘‘MLX’’) (note b)							and marketing of tin concentrate and
							nickel in Australia; exploration for
							phosphate in Australia; the
							development and construction of tin
							mine projects and exploration for
							precious and base metals.
Alufer Mining	Unlisted	Bailiwick of	Ordinary	26.17%		—	Mineral exploration and development of
Limited (note c)		Guernsey					bauxite in the Republic of Guinea.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Notes:

(a) During the year, the Group’s shareholdings in MGX decreased from 26.74% to 26.61% due to the following change:

MGX issued total number of 4,855,802 shares under the dividend reinvestment plan. The Group’s equity interest in MGX decreased by 0.13% to 26.61% and a loss on deemed disposal of partial interest of HK$2,570,000 was recognised in profit or loss.

(b) During the year, the Group’s shareholdings in MLX decreased from 30.20% to 24.07% due to the following change:

MLX issued total number of 335,102,853 shares in exchange for the shares of Westgold Resources Limited upon its acquisition of Westgold Resources Limited. The Group’s equity interest in MLX decreased by 6.13% to 24.07% and a gain on deemed disposal of partial interest of HK$5,929,000 was recognised in profit or loss.

(c) As at 30 June 2012 and prior to 26 June 2013, the Group had 4.92% equity interest in Alufer which was classified as available-for-sale investment and convertible bonds issued by Alufer which was classified as financial assets designated at fair value through profit or loss. On 26 June 2013, following the conversion of all convertible bonds held by the Group in issue by Alufer, the Group’s aggregate equity interest in Alufer increased from 4.92% to 26.17%. Upon completion of the conversion of convertible bonds, the Group has significant influence by participating in financial and operating policy-making processes through a representation (Chief Executive Officer of the Company) on the board of directors of Alufer, then Alufer became an associate of the Group.

On 26 June 2013, the Group recognised a loss of HK$38,971,000, in profit or loss, arising from the excess of the carrying value of the available-for-sale investment over its fair value. In addition, a loss of HK$11,029,000 is recognised in profit or loss, arising from the excess of the carrying value of the convertible bonds over its fair value.

Alufer is a mineral exploration and development company with principal assets in the form of intangible asset which relates to the exploration and evaluation costs incurred on its exploration projects in the Republic of Guinea. All projects of Alufer were in the stage of carrying out exploration activities as at 26 June 2013.

At 30 June 2013, the carrying amounts of the Group’s interests in listed associates were higher than their respective market values determined based on the closing prices of these associates as at 30 June 2013. The management of the Group carried out impairment review on the carrying amounts of its interests in listed associates individually as a single asset by comparing their recoverable amounts (higher of value in use and fair value less costs to sell) with their respective carrying amounts. In determining the value in 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.

The projected discount future cash flows conducted to determine the value in use calculation as at 30 June 2012 for MGX and MLX are no longer considered attainable as a result of the expected generally lower long term iron ore prices in the case of MGX, and the expected drop in long term nickel prices which affected the expected return on the Western Australia Wingellina nickel project of MLX. Accordingly, the revision of the estimate future cash flows (including the projected cash flows and cash from ultimate disposal of the cash-generating unit) resulted in a lower value in use as at 30 June 2013 for MGX and MLX. Consequently, the respective recoverable amounts derived from fair value less cost to sell are higher than the recoverable amounts derived from the revised value in use calculation, accordingly, the recoverable amounts of the Group’s interests in listed associates are determined as the fair value less costs to sell, the fair values are determined based on the respective closing prices as at 30 June 2013. Hence, impairment losses of HK$1,798,511,000 and HK$312,848,000 are recognised in profit or loss for MGX and MLX respectively.

At 30 June 2012, the carrying amounts of the Group’s interests in listed associates were higher than their respective market values determined based on the closing prices as at 30 June 2012. The management of the Group carried out impairment review on the carrying amounts of its interests in listed associates individually as a single asset by comparing their recoverable amounts (higher of value in use and fair value less costs to sell) with their respective carrying amounts. In determining the value in 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

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

discount the cash flow projections to net present values. Based on the assessments, the recoverable amount of the Group’s interests in MLX were less than their carrying amounts. Hence, an impairment loss of HK$73,303,000 was recognised in profit or loss for MLX.

Before the application of HK(IFRIC)-INT 20, the Group has recognised an impairment loss of HK$307,926,000 in respect of MGX during the year ended 30 June 2012 and as at 30 June 2012. Upon the application of HK(IFRIC)-INT 20, due to the reduction in the carrying value of MGX as at 30 June 2012, the impairment loss of HK$307,926,000 was fully adjusted, details as disclosed in note 2.

During the year ended 30 June 2012, the Group disposed of a total number of 250,000 shares of MGX at an aggregate consideration of A$384,860 (equivalent to HK$3,082,000) with a decrease in equity interest in MGX by 0.02% and resulted in a gain on disposal of partial interest of HK$812,000 in profit or loss.

Summarised financial information of associates is set out below:

Total assets Total liabilities Net assets Group’s share of net assets of associates Revenue Profit for the year Group’s share of results of associates Other comprehensive (expense) income Group’s share of other comprehensive (expense) income of associates 17. AVAILABLE-FOR-SALE INVESTMENTS Listed investments: — Equity securities listed in Hong Kong — Equity securities listed in Australia Unlisted investments: — Unlisted equity securities	30.6.2013 HK$’000 13,547,946 (2,868,968) 10,678,978 2,803,446 2013 HK$’000 7,645,202 1,169,382 347,152 (51,553) (16,479) 2013 HK$’000 4,677 — 4,677 14,009 18,686	30.6.2012 HK$’000 (restated) 13,827,135 (3,545,745)
		10,281,390
		2,818,830
		2012 HK$’000 (restated) 7,063,988
		955,027
		218,792
		28,105
		10,363
		2012 HK$’000 5,625 19,043
		24,668 46,797
		71,465

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The above unlisted equity investments represent investments in unlisted equity securities issued by four (2012: five) private entities incorporated in the British Virgin Islands, the United Kingdom, the United States of America, and Australia (2012: the British Virgin Islands, the United Kingdom, the United States of America, Bailiwick of Guernsey 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 fair values cannot be reliably measured.

During the year, the Group signed a share exchange agreement (‘‘Agreement’’) with an independent third party, which is listed on AIM of the London Stock Exchange. Pursuant to the Agreement, the Group transferred an available-forsale investment to a third party, in exchange for the listed issued shares of the third party of HK$19,328,000, being the fair value on the date of exchange which approximates the fair value of the available-for-sale investment on the date of exchange. The exchanged shares are classified as investment held for trading at 30 June 2013. A gain of HK$285,000 from this transaction is recognised in other gains and losses in profit or loss.

18. FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

Investment in convertible bonds designated at fair value through profit or loss Listed investments: — Convertible bonds listed in Singapore (‘‘Bond A’’) — Convertible bonds listed in the United Kingdom (‘‘Bond B’’) Unlisted investments: — Convertible bonds	2013 HK$’000 77,953 2,708 5,045 7,753 70,200 77,953	2012 HK$’000 118,947
		2,779 6,968
		9,747 109,200
		118,947

The listed investments are measured at their quoted market prices at 30 June 2013 and 2012. Major terms of the listed investments are as follows:

	Bond A	Bond B
Date of maturity (Note a)	30 April 2017	6 April 2017
Coupon rate per annum (payable semi-annually)	6%	8%
Conversion period	10 June 2012 to 20 April 2017	5 August 2012 to 6 April 2017
Conversion price	US$2.190	US$0.665
Face value	US$400,000	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 investment at 30 June 2013 represents investment in unlisted convertible bonds issued by a private entity incorporated in the British Virgin Islands (‘‘Bond D’’) (2012: Bond D and a private entity incorporated in Bailiwick of Guernsey (‘‘Bond C’’)). 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The followings are the major terms of the unlisted investment:

	Bond C	Bond D
Date of maturity	7 April 2014 (Note b)	4 June 2015 (Note c)
Coupon rate per annum	Nil	6%
Conversion price	(i) 25% of the issue price of	10% to 20% discount to the
	the ordinary share of the	exchange price upon the
	issuer upon its listing in a	occurrence of qualifying
	stock exchange; (ii) 25% of	events
	the latest issue price of the
	new ordinary share issued
	by the issuer or existing
	shares sold in an arm’s
	length transaction before
	conversion prior to listing;
	or (iii) in the case of no
	conversion or redemption
	by 7 January 2014, 25% of
	the lower of last issued or
	sold price and volume-
	weighted average issued or
	sold price per ordinary
	share of the issuer since the
	issuance date of the bond
Conversion period	23 February 2012 to	4 June 2012 to 4 June 2015
	7 April 2014
Face value	US$5,000,000	US$9,000,000

Note b: Unless previously converted or purchased or redeemed, the issuer of Bond C will redeem Bond C on the maturity date at the redemption amount which is the principal amount of the Bond C outstanding.

On 26 June 2013, the Group converted Bond C into ordinary shares of the issuer, which became an associate of the Group as disclosed in note 16.

Note c: Bond D will automatically be converted into shares of the issuer of Bond D upon the occurrence of qualifying events before the maturity date. Unless previously converted or purchased or redeemed, the issuer of Bond D will redeem Bond D on the maturity date at the redemption amount which is the principal amount of the Bond D outstanding together with outstanding interest.

Qualifying events include the submission of listing documents to the Stock Exchange; the listing in a stock exchange other than the Stock Exchange; and upon merger, acquisition or other amalgamation, whereby the assets of the issuer of Bond D are injected into a listed company or the shares of the combined entity being listed on any stock exchange. The conversion price will be 10% to 20% discount to the exchange price upon the occurrence of qualifying events. The exchange price varies depending on which qualifying event happens, i.e. listing price or acquisition price, etc.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

19. INVENTORIES

Iron ores at net realisable value 20. TRADE AND OTHER RECEIVABLES AND LOAN RECEIVABLE Trade receivables Loan receivable Other deposits and prepayment Presented as non-current asset Presented as current assets	2013 HK$’000 — 2013 HK$’000 4,919 28,614 22,259 55,792 28,614 27,178 55,792	2012 HK$’000 61,932
		2012 HK$’000 130,502 35,002 17,733
		183,237
		— 183,237
		183,237

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:

0 to 90 days 91 to 180 days Over 180 days Movement in the allowance for doubtful debts Trade receivables	2013 HK$’000 4,919 — — 4,919	2012 HK$’000 125,649 — 4,853
		130,502

At beginning of the year (Decrease) increase in allowance recognised in profit or loss At end of the year	2013 HK$’000 3,317 (3,317) —	2012 HK$’000 — 3,317
		3,317

As at 30 June 2013, the trade receivables disclosed above are neither past due nor impaired.

As at 30 June 2012, included in the Group’s trade receivable balance are debtors with aggregate carrying amount of HK$4,853,000 which were past due for which the Group considered that no provision for impairment loss was required. This was subsequently settled in full during the year ended 30 June 2013.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The loan receivable from an investee is non-interest bearing. At 30 June 2012, although the loan receivable was past due, it was still expected to be recovered within one year and classified as a current asset. During the year ended 30 June 2013, there is no repayment from the investee, the management of the Group considers that the loan will not be recovered within one year hence classified it as a non-current asset. Taking into consideration of the financial information of the investee, impairment loss of HK$6,388,000 was recognised in profit or loss during the year (2012: HK$7,294,000).

21. INVESTMENTS HELD FOR TRADING

Listed securities: — Equity securities listed in Hong Kong — Equity securities listed in the United Kingdom — Equity securities listed in the United States of America — Equity securities listed in Australia — Equity securities listed in Canada	2013 HK$’000 — 44,233 1,622 152,797 34,439 233,091	2012 HK$’000 871 19,269 2,882 321,504 66,085
		410,611

As at 30 June 2013 and 2012, 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
		Place of		shares held by	capital held by
Name	of company	incorporation	Class of shares	the Group	the Group
ABM	Resources NL (‘‘ABM’’)	Australia	Ordinary	647,911,009	19.74%

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.

22. 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 3.27% (2012: 0.01% to 4.62%) per annum. Short term deposits during the year are made for varying periods of between one day and one month depending on the immediate cash requirements of the Group, and earn interest at respective short term time deposit rates.

Pledged bank deposits represent deposits pledged to banks to secure the Group’s trade and banking facilities, and carry variable interest rates with a range from 0.06% to 3.25% (2012: 0.14% to 3.25%) per annum.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

23. TRADE AND OTHER PAYABLES

Trade payables Other payables	2013 HK$’000 20,407 4,974 25,381	2012 HK$’000 112,485 3,087
		115,572

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

0 to 90 days 24. BANK BORROWING Secured bank loan repayable within one year	2013 HK$’000 20,407 2013 HK$’000 242,500	2012 HK$’000 112,485
		2012 HK$’000 —

The loan is denominated in HK$, interest bearing at Hong Kong Interbank Offered Rate plus 2.5% per annum and will be repayable in February 2014.

25. SHARE CAPITAL

Authorised and issued share capital

Ordinary shares of HK$0.10 each Authorised Issued and fully paid: At beginning of the year Shares repurchased and cancelled (note (a)) At end of the year	2013 Number of shares Amount HK$’000 20,000,000,000 2,000,000 6,813,047,990 681,305 (1,120,000) (112) 6,811,927,990 681,193	2012 Number of shares Amount HK$’000 20,000,000,000 2,000,000 6,863,287,990 686,329 (50,240,000) (5,024 6,813,047,990 681,305	2012 Number of shares Amount HK$’000 20,000,000,000 2,000,000 6,863,287,990 686,329 (50,240,000) (5,024 6,813,047,990 681,305
			686,329 (5,024
			681,305

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Note:

(a) Repurchase of shares

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

Month of cancellation Year ended 30 June 2013 July 2012 Year ended 30 June 2012 July 2011 November 2011 December 2011 April 2012 May 2012 June 2012	Number of ordinary shares of HK$0.10 each 1,120,000 3,000,000 8,540,000 2,700,000 12,260,000 21,780,000 1,960,000 50,240,000	Price per share Highest Lowest HK$ HK$ 0.290 0.285 0.400 0.400 0.315 0.295 0.330 0.320 0.365 0.340 0.350 0.340 0.300 0.265	Aggregate amount paid HK$’000 323
			1,204 2,596 883 4,373 7,622 549
			17,227

The repurchased shares were cancelled during the year and the issued share capital of the Company was reduced by the nominal value thereof. The premium payable on repurchase of the shares of HK$211,000 (2012: HK$12,203,000) 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.

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

26. 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.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

(b) Investment revaluation reserve

At beginning of the year Share of other comprehensive (expense) income of associates Reclassification adjustment upon disposal of partial interest in an associate Reclassification adjustment upon deemed disposal of partial interests in associates Fair value change of available-for-sale investments Impairment losses on available-for-sale investments At ending of the year	2013 HK$’000 37,700 (16,479) — (1,161) (557) — 19,503	2012 HK$’000 26,728 10,363 20 — (21,731) 22,320 37,700

(c) Exchange reserve

At beginning of the year Exchange difference arising from translation of associates Exchange difference arising from translation of other foreign operations Reclassification adjustment upon disposal of partial interest in an associate Reclassification adjustment upon deemed disposal of partial interests in associates At ending of the year	2013 HK$’000 567,911 (302,890) 10,092 — (6,198) 268,915	2012 HK$’000 (restated) 687,501 (123,746) 4,487 (331) — 567,911

27. SHARE OPTION SCHEME

The Company has a share option scheme (the ‘‘Scheme’’) which was adopted on 22 September 2004 (‘‘Adoption Date’’) whereby the board of directors of the Company may 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 will expire on 21 September 2014.

Share options granted must be taken up within 28 days of the date of grant, upon payment of HK$1 per grant. Share options may be exercised in accordance with the terms of the Scheme at any time during the option period and not more than ten years after the Adoption Date. The option period will be determined by the board of directors and communicated to each grantee. The exercise price is determined by the board of directors, and will not be less than the highest of the closing price of the Company’s shares on the date of grant, the nominal value of the Company’s shares and the average closing price of the shares for the five Business Days immediately preceding the date of grant.

The total number of shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Scheme must not exceed 30% of the shares in issue from time to time. The number of shares in respect of which options may be granted to any individual in any 12-month period up to the date of grant is not permitted to exceed 1% of the shares of the Company in issue at the date of grant without approval from the Company’s shareholders. Options granted to substantial shareholders or independent non-executive directors in excess of 0.1% of the Company’s share capital or with a value in excess of HK$5 million must be approved by the Company’s shareholders in general meeting taken on a poll.

No share options were exercisable as at 30 June 2012.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

During the current year, some share options were cancelled during the vesting period, which have been accounted for as an acceleration of vesting, and share option expense of HK$14,021,000 was recognised immediately in profit or loss which otherwise would have been recognised over the remainder of the vesting period.

No share option was exercised or granted under the Scheme during the year ended 30 June 2013, with 174,000,000 share options being cancelled on 11 July 2012. Details of the share options movement during the year ended 30 June 2013 under the Scheme are as follows:

						Number of
					Number of	share options		Closing price
				Outstanding	share options	cancelled	Outstanding	immediate
		Exercise	Exercise price	as at 1 July	lapsed during	during the	as at 30 June	before date
Grantee	Date of grant	period	per share	2012	the year	year	2013	of grant	Note
			HK$					HK$
Directors
Ms. Chong Sok	29 June 2010	7 July 2011 to	1.00	52,500,000	(52,500,000)	—	—	0.55	(a)(i)(2), b(iv)
Un		6 July 2013
	29 June 2010	7 July 2012 to	1.00	45,000,000	—	(45,000,000)	—	0.55	(a)(i)(3)
		6 July 2013
Mr. Andrew	29 June 2010	7 July 2011 to	1.00	87,500,000	(87,500,000)	—	—	0.55	(a)(i)(2), b(iv)
Ferguson		6 July 2013
	29 June 2010	7 July 2012 to	1.00	75,000,000	—	(75,000,000)	—	0.55	(a)(i)(3)
		6 July 2013
Mr. Kong Muk	4 May 2010	7 July 2011 to	1.00	5,000,000	(5,000,000)	—	—	0.71	(a)(i)(2), b(iv)
Yin		6 July 2013
	4 May 2010	7 July 2012 to	1.00	5,000,000	—	(5,000,000)	—	0.71	(a)(i)(3)
		6 July 2013
Mr. Yue Jialin	4 May 2010	7 July 2010 to	1.00	2,000,000	—	(2,000,000)	—	0.71	(a)(ii)
		6 July 2013
Mr. So Kwok	4 May 2010	7 July 2010 to	1.00	2,000,000	—	(2,000,000)	—	0.71	(a)(ii)
Hoo		6 July 2013
Mr. Peter	4 May 2010	7 July 2011 to	1.00	21,000,000	(21,000,000)	—	—	0.71	(a)(i)(2), b(iv)
Anthony		6 July 2013
Curry	4 May 2010	7 July 2012 to	1.00	18,000,000	—	(18,000,000)	—	0.71	(a)(i)(3)
		6 July 2013
Dr. Wong Wing	4 May 2010	7 July 2010 to	1.00	2,000,000	—	(2,000,000)	—	0.71	(a)(ii)
Kuen, Albert		6 July 2013
Mr. Chang Chu	4 May 2010	7 July 2010 to	1.00	2,000,000	—	(2,000,000)	—	0.71	(a)(ii)
Fai, Johnson		6 July 2013
Francis
Mr. Robert	4 May 2010	7 July 2010 to	1.00	2,000,000	—	(2,000,000)	—	0.71	(a)(ii)
Moyse		6 July 2013
Willcocks

– 113 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Grantee Others Employees Employees Consultant Weighted average exercise price	Date of grant 4 May 2010 4 May 2010 28 February 2011 28 February 2011 4 May 2010 4 May 2010	Exercise period 7 July 2011 to 6 July 2013 7 July 2012 to 6 July 2013 7 July 2011 to 6 July 2013 7 July 2012 to 6 July 2013 7 July 2011 to 6 July 2013 7 July 2012 to 6 July 2013	Exercise price per share HK$ 1.00 1.00 1.00 1.00 1.00 1.00	Outstanding as at 1 July 2012 3,500,000 3,000,000 8,500,000 8,000,000 20,000,000 10,000,000	Number of share options lapsed during the year (3,500,000) — (8,500,000) — (20,000,000) —	Number of share options cancelled during the year — (3,000,000) — (8,000,000) — (10,000,000)	Outstanding as at 30 June 2013 — — — — — —	Closing price immediate before date of grant HK$ 0.71 0.71 0.50 0.50 0.71 0.71	Note (a)(i)(2), (b)(iv) (a)(i)(3) (a)(i)(2), (b)(iv) (a)(i)(3) (a)(i)(2), (b)(iv) (a)(i)(3)
				372,000,000	(198,000,000)	(174,000,000)	—
				HK$1.00	HK$1.00	HK$1.00	—

– 114 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

No share option was exercised, granted or cancelled under the Scheme during the year ended 30 June 2012. Details of the share options outstanding as at 30 June 2012 under the Scheme are as follows:

					Number of
					share options
					lapsed/		Closing price
				Outstanding	forfeited	Outstanding	immediate
		Exercise	Exercise price	as at 1 July	during the	as at 30 June	before date
Grantee	Date of grant	period	per share	2011	year	2012	of grant	Note
			HK$				HK$
Directors
Ms. Chong Sok Un	29 June 2010	7 July 2010 to	1.00	52,500,000	(52,500,000)	—	0.55	(a)(i)(1), (b)(i)
		6 July 2013
	29 June 2010	7 July 2011 to	1.00	52,500,000	—	52,500,000	0.55	(a)(i)(2)
		6 July 2013
	29 June 2010	7 July 2012 to	1.00	45,000,000	—	45,000,000	0.55	(a)(i)(3)
		6 July 2013
Mr. Andrew Ferguson	29 June 2010	7 July 2010 to	1.00	87,500,000	(87,500,000)	—	0.55	(a)(i)(1), (b)(i)
		6 July 2013
	29 June 2010	7 July 2011 to	1.00	87,500,000	—	87,500,000	0.55	(a)(i)(2)
		6 July 2013
	29 June 2010	7 July 2012 to	1.00	75,000,000	—	75,000,000	0.55	(a)(i)(3)
		6 July 2013
Mr. Kong Muk Yin	4 May 2010	7 July 2010 to	1.00	10,000,000	(10,000,000)	—	0.71	(a)(i)(1), (b)(i)
		6 July 2013
	4 May 2010	7 July 2011 to	1.00	5,000,000	—	5,000,000	0.71	(a)(i)(2)
		6 July 2013
	4 May 2010	7 July 2012 to	1.00	5,000,000	—	5,000,000	0.71	(a)(i)(3)
		6 July 2013
Mr. Yue Jialin	4 May 2010	7 July 2010 to	1.00	2,000,000	—	2,000,000	0.71	(a)(ii)
		6 July 2013
Mr. So Kwok Hoo	4 May 2010	7 July 2010 to	1.00	2,000,000	—	2,000,000	0.71	(a)(ii)
		6 July 2013
Mr. Liu Yongshun	4 May 2010	7 July 2010 to	1.00	2,000,000	(2,000,000)	—	0.71	(b)(ii)
		6 July 2013
Mr. Peter Anthony Curry	4 May 2010	7 July 2010 to	1.00	21,000,000	(21,000,000)	—	0.71	(a)(i)(1), (b)(i)
		6 July 2013
	4 May 2010	7 July 2011 to	1.00	21,000,000	—	21,000,000	0.71	(a)(i)(2)
		6 July 2013
	4 May 2010	7 July 2012 to	1.00	18,000,000	—	18,000,000	0.71	(a)(i)(3)
		6 July 2013
Dr. Wong Wing Kuen, Albert	4 May 2010	7 July 2010 to	1.00	2,000,000	—	2,000,000	0.71	(a)(ii)
		6 July 2013
Mr. Chang Chu Fai, Johnson	4 May 2010	7 July 2010 to	1.00	2,000,000	—	2,000,000	0.71	(a)(ii)
Francis		6 July 2013
Mr. Robert Moyse Willcocks	4 May 2010	7 July 2010 to	1.00	2,000,000	—	2,000,000	0.71	(a)(ii)
		6 July 2013

– 115 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Grantee Others Employees Employees Consultant Weighted average exercise price	Date of grant 4 May 2010 4 May 2010 4 May 2010 28 February 2011 28 February 2011 28 February 2011 4 May 2010 4 May 2010 4 May 2010	Exercise period 7 July 2010 to 6 July 2013 7 July 2011 to 6 July 2013 7 July 2012 to 6 July 2013 28 February 2011 to 6 July 2013 7 July 2011 to 6 July 2013 7 July 2012 to 6 July 2013 7 July 2010 to 6 July 2013 7 July 2011 to 6 July 2013 7 July 2012 to 6 July 2013	Exercise price per share HK$ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00	Outstanding as at 1 July 2011 9,000,000 9,000,000 7,000,000 8,500,000 8,500,000 8,000,000 20,000,000 20,000,000 10,000,000	Number of share options lapsed/ forfeited during the year (9,000,000) (5,500,000) (4,000,000) (8,500,000) — — (20,000,000) — —	Outstanding as at 30 June 2012 — 3,500,000 3,000,000 — 8,500,000 8,000,000 — 20,000,000 10,000,000	Closing price immediate before date of grant HK$ 0.71 0.71 0.71 0.50 0.50 0.50 0.71 0.71 0.71	Note (a)(i)(1), (b)(i) (a)(i)(2), (b)(iii) (a)(i)(3), (b)(iii) (a)(i)(4), (b)(i) (a)(i)(2) (a)(i)(3) (a)(i)(1), (b)(i) (a)(i)(2) (a)(i)(3)
				592,000,000	(220,000,000)	372,000,000
				HK$1.00	HK$1.00	HK$1.00

Notes:

(a) The relevant share options are exercisable subject to the grantees remain as employees or consultants of the Group and the following market conditions:
(i) The share options granted to these grantees:
- (1) Exercisable only if the closing price of the shares has reached HK$1.20 or above per share at any time between 7 July 2010 and 6 July 2011 (both dates inclusive) and will lapse if the share price does not hit HK$1.20 or above during such period. As the market price of the Company’s share did not reach the required level during the exercisable period, these share options lapsed on 6 July 2011. For the purpose of calculating the fair value of the share options at the date of grant, the options are initially estimated to be vested at 31 December 2010.
- (2) Exercisable only if the closing price of the shares has reached HK$1.60 or above per share at any time between 7 July 2011 and 6 July 2012 (both dates inclusive) and will lapse if the share price does not hit HK$1.60 or above during such period, or not exercise by 6 July 2012. For the purpose of calculating the fair value of the share options at the date of grant, the options are initially estimated to be vested at 31 December 2011.
- (3) Exercisable only if the closing price of the shares has reached HK$2.00 or above per share at any time between 7 July 2012 and 6 July 2013 (both dates inclusive) and will lapse if the share price does not hit HK$2.00 or above during such period, or not exercise by 6 July 2013. For the purpose of calculating the fair value of the share options at the date of grant, the options are initially estimated to be vested at 31 December 2012. The options were cancelled on 11 July 2012.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

  - (4) Exercisable only if the closing price of the shares has reached HK$1.20 or above per share at any time between 28 February 2011 and 6 July 2011 (both dates inclusive) and will lapse if the share price does not hit HK$1.20 or above during such period. As the market price of the Company’s share did not reach the required level during the exercisable period, these share options lapsed on 6 July 2011. For the purpose of calculating the fair value of the share options at the date of grant, the options are initially estimated to be vested at 30 June 2011.

(ii) The share options granted to these grantees were exercisable only if the closing price of the shares has reached HK$1.20 or above per share at any time between 7 July 2010 and 6 July 2013 (both dates inclusive) and will lapse if the share price does not hit HK$1.20 or above during such period, or not exercise by 6 July 2013. For the purpose of calculating the fair value of the share options at the date of grant, the options are initially estimated to be vested at 31 December 2011. During the year ended 30 June 2012, market conditions were not satisfied. As a result, the share options were not exercisable and remained outstanding as at 30 June 2012. The options were cancelled on 11 July 2012.
(b) (i) The share options lapsed on 6 July 2011.
(ii) With the resignation of Mr. Liu Yongshun as a director, the share options granted to him were forfeited on 1 March 2012.
(iii) With the resignation of two employees, the respective share options granted were forfeited on 21 July 2011 and 7 October 2011.
(iv) The share options lapsed on 6 July 2012.
(c) The share options granted during the period ended 30 June 2011 were measured using the Trinominal Pricing Model. The inputs into the model were summarised as follows:

Date of grant	4 May 2010	29 June 2010	28 February 2011
Expected volatility	78.87%	77.28%	66.60%
Risk-free interest rate	1.34%	1.14%	0.85%
Expected annual dividend yield	Nil	Nil	Nil
Barrier/Knock price (HK$)	1.2, 1.6 or 2.0	1.2, 1.6 or 2.0	1.2, 1.6 or 2.0
Fair value per option (HK$)	0.24 to 0.29	0.12 to 0.18	0.01 to 0.09

(d) Expected volatility was determined by using the historical volatility of the Company’s share price over the previous three years.
(e) The risk free interest rate was the yield of 3-year Exchange Fund Note at the date of grant.
(f) For the year ended 30 June 2013, the Group recognised total expenses of HK$14,021,000 for acceleration of vesting in relation to share options granted.

For the year ended 30 June 2012, the Group recognised total expenses of HK$28,612,000 in relation to share options granted.

Besides, the Group transferred the previously recognised expenses from share option reserve of HK$70,940,000 (2012: HK$33,223,000) to accumulated profits/losses for the 372,000,000 share options lapsed/cancelled during the year ended 30 June 2013 (2012: 220,000,000 share options lapsed/forfeited).

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APPENDIX II

28. COMMITMENTS

Operating lease — The Group as lessee

Minimum lease payments under operating leases in respect of rented premises and equipment during the year	2013 HK$’000 4,070	2012 HK$’000 2,761

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:

Within one year After one year but not more than five years	2013 HK$’000 2,860 732 3,592	2012 HK$’000 3,766 2,276
		6,042

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.

29. RELATED PARTY TRANSACTIONS

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

Subsidiaries of an associate, MGX Purchase of commodities Trade payables	2013 HK$’000 895,761 2013 HK$’000 7,681	2012 HK$’000 956,404
		2012 HK$’000 112,485

(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.

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APPENDIX II

(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:

Short-term employee benefits Post-employment benefits Share option benefits	2013 HK$’000 7,877 30 10,376 18,283	2012 HK$’000 7,477 24 24,089
		31,590

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.

(d) Compensation of senior management personnel

Included in the key management personnel of the Group are two (2012: two) senior management personnel of which one (2012: 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:

Short-term employee benefits Post-employment benefits Share option benefits	2013 HK$’000 5,397 30 4,553 9,980	2012 HK$’000 4,822 24 11,105
		15,951

Their emoluments were within the following bands:

	2013	2012
	No. of	No. of
	employees	employees
HK$1,000,001 to HK$2,000,000	1	1
HK$8,000,001 to HK$9,000,000	1	—
HK$14,000,001 to HK$15,000,000	—	1

30. 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.

Interests in associates Available-for-sale investments Pledged bank deposits	2013 HK$’000 862,277 — 345,502 1,207,779	2012 HK$’000 (restated) 2,395,605 19,043 79,748
		2,494,396

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APPENDIX II

31. 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$25,000 (2012: increased from HK$20,000 to HK$25,000 with effect from 1 June 2012).

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$407,000 (2012: HK$251,000) represents contributions payable to the scheme by the Group at rates specified in the rules of the respective schemes.

32. FINANCIAL INSTRUMENTS

Categories of financial instruments

Financial assets Financial assets designated at fair value through profit or loss Investments held for trading Available-for-sale investments Loans and receivables (including cash and cash equivalents) Financial liabilities Amortised cost	2013 HK$’000 77,953 233,091 18,686 884,718 1,214,448 267,661	2012 HK$’000 118,947 410,611 71,465 625,163
		1,226,186
		115,262

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 and loan receivable, pledged bank deposits, bank balances and cash, trade and other payables and bank borrowing. 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. The 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.

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 2013 and 2012 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, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

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APPENDIX II

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 receivables and trade and other payables are as follows:

USD Australian dollars (‘‘AUD’’)	Assets 2013 2012 HK$’000 HK$’000 341,344 210,185 68,081 43,623	Liabilities 2013 2012 HK$’000 HK$’000 21,931 113,172 — —

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% (2012: 10%) increase and decrease in HK$ against relevant foreign currencies and all other variables were held constant. 10% (2012: 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 outstanding foreign currencies denominated monetary items and adjusts its translation at the period end for a 10% (2012: 10%) change in foreign currencies rates. A positive number below indicates a decrease in post-tax loss for the year where foreign currencies strengthen 10% (2012: 10%) against HK$. For a 10% (2012: 10%) weakening of foreign currencies against HK$ there would be an equal and opposite impact on the post-tax loss for the year.

Decrease in post-tax loss for the year	AUD Impact 2013 2012 HK$’000 HK$’000 5,684 3,642

Interest rate risk

The Group is exposed to cash flow interest rate risk in relation to variable-rate bank borrowing and bank deposits at 30 June 2013 (2012: bank deposits) (see note 22 for details of bank balances and note 24 for details of bank borrowing). 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 borrowing 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.

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APPENDIX II

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 99% (2012: 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:

USD AUD Pound sterling (‘‘GBP’’) Canadian dollars (‘‘CAD’’)	Assets 2013 2012 HK$’000 HK$’000 86,878 161,577 154,739 342,489 48,922 24,301 34,439 66,085

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.

Sensitivity analysis

The following table details the Group’s sensitivity to a 10% (2012: 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% (2012: 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 post-tax loss for the year or increase in investment revaluation reserve where foreign currencies strengthen 10% (2012: 10%) against HK$. For a 10% (2012: 10%) weakening of foreign currencies against HK$ there would be an equal and opposite impact on the result for the post-tax loss and the investment revaluation reserve.

			2013	2012
			HK$’000	HK$’000
Decrease	in	post-tax loss for the year	18,783	33,973
Increase	in	investment revaluation reserve	1,478	8,118

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 and investments held for trading. The 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 (2012: 30% higher/lower):

. post-tax loss for the year ended 30 June 2013 would increase/decrease by HK$60,331,000 (2012: would increase/decrease by HK$105,300,000). This is mainly due to the changes in fair value of listed financial instruments (exclude listed available-for-sale investments); and

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APPENDIX II

. investment revaluation reserve would increase/decrease by HK$1,172,000 (2012: investment revaluation reserve would increase by/impairment loss would be charged to profit or loss amounting to HK$6,179,000) as a result of the changes in fair value of listed available-for-sale investments.

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. At the end of the reporting period, the Group has a certain level of concentrations of credit risk as 41% (2012: 56%) and 100% (2012: 100%) of the total trade receivables was due from a customer and three (2012: three) customers respectively, and bank balance of HK$279,044,000 (2012: HK$272,351,000) is deposited 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 20.

The Group has concentration of credit risk in respect of loan to an investee of HK$28,614,000 (2012: HK$35,002,000). Taking into consideration of the financial information of the investee, impairment loss of HK$6,388,000 was recognised in profit or loss during the year (2012: HK$7,294,000). In the opinion of the directors, the risk of non-recoverability of the carrying amount is minimal.

Liquidity risk

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

As at 30 June 2013, the Group has available unutilised trade finance facilities and margin facilities of HK$103,592,000 (2012: HK$25,115,000) and HK$553,000,000 (2012: HK$553,000,000) respectively.

Liquidity tables

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.

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APPENDIX II

As at 30 June 2013

Weighted average interest rate % Non-derivative financial liabilities Trade and other payables — Bank borrowing 2.88 As at 30 June 2012 Weighted average interest rate % Non-derivative financial liabilities Trade and other payables —	Within one year or on demand HK$’000 25,161 247,158 272,319 Within one year or on demand HK$’000 115,262	Total contractual undiscounted cash flow HK$’000 25,161 247,158 272,319 Total contractual undiscounted cash flow HK$’000 115,262	Carrying amount HK$’000 25,161 242,500
			267,661
			Carrying amount HK$’000 115,262

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.

Fair value of financial instruments

The fair value of financial assets is determined as follows:

. the fair value of financial assets with standards terms and conditions and traded in active liquid markets are determined with reference to quoted market bid prices;
. the fair value of other financial assets is determined in accordance with generally accepted pricing models based on discounted cash flow analysis; and
. the fair value of listed convertible bonds measured at fair value through profit or loss is determined in accordance with reference to quoted market bid prices.

The directors of the Company consider that the carrying amounts of the Group’s other financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate their fair values.

Fair value hierarchy of financial instruments

HKFRS 7 requires disclosure of financial instruments that are measured at fair value by level of the following fair value measurement hierarchy.

. Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities.
. Level 2 — inputs other quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
. Level 3 — inputs for the assets or liabilities that are not based on observable market data (that is, unobservable inputs).

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APPENDIX II

The following table presents the financial instruments that are measured at fair value as at the end of the reporting period.

As at 30 June 2013

Investments held for trading Available-for-sale investments Financial assets designated at fair value through profit or loss As at 30 June 2012 Investments held for trading Available-for-sale investments Financial assets designated at fair value through profit or loss	Level 1 HK$’000 233,091 4,677 7,753
	245,521
	Level 1 HK$’000 410,611 24,668 9,747
	445,026

33. 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 Prices 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 29(b).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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.

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 to sell.

As at 30 June 2012, the recoverable amounts of respective associates were determined as the value in use. 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, a material impairment loss or reversal of impairment loss may arise.

As at 30 June 2013, the projected discount future cash flows conducted to determine the value in use calculation as at 30 June 2012 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 to sell, the fair values were determined based on the listed closing prices as at 30 June 2013.

As at 30 June 2013, the carrying amount of interests in associates is HK$1,301,491,000, net of impairment losses of HK$2,184,662,000 (2012: carrying amount of interests in associates was HK$3,459,522,000, net of impairment losses of HK$73,303,000). Details of the impairment assessment are disclosed in note 16.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

34. PARTICULARS OF PRINCIPAL SUBSIDIARIES

			As	at 30 June 2013	at 30 June 2013		As	at 30 June 2012	at 30 June 2012
			Proportion of ownership		interest		Proportion of ownership		interest
	Place of
	incorporation/		Group’s				Group’s
	establishment and	Particulars of issued	effective	Held by the	Held by a		effective	Held by the	Held by a
Name of company	operation	and paid up capital	interest	Company	subsidiary		interest	Company	subsidiary		Principal activities
Accardo Investments	British Virgin Islands	US$1 ordinary share	100%	100%		—	100%	100%		—	Investment holding
Limited
APAC Resources	British Virgin Islands	US$1 ordinary share	100%	100%		—	100%	100%		—	Investment holding
Capital Limited
APAC Resources	Hong Kong	HK$1 ordinary share	100%	100%		—	100%	100%		—	Provision of
Management											management
Limited											services
APAC Resources	British Virgin Islands	US$1 ordinary share	100%	100%		—	100%	100%		—	Investment holding
Investments Limited
APAC Resources	British Virgin Islands	US$1 ordinary share	100%	100%		—	100%	100%		—	Investment holding
Strategic Holdings
Limited
Asia Cheer Trading	Hong Kong	HK$1 ordinary share	100%	100%		—	100%	100%		—	Investment holding
Limited
First Landmark Limited	British Virgin Islands	US$1 ordinary share	100%	100%		—	100%	100%		—	Investment holding
Fortune Desire	British Virgin Islands	US$1 ordinary share	100%	100%		—	100%	100%		—	Investment holding
Investments Limited
Mount Sun Investments	British Virgin Islands	US$1 ordinary share	100%	100%		—	100%	100%		—	Investment holding
Limited
Sino Chance Trading	Hong Kong	HK$1 ordinary share	100%	100%		—	100%	100%		—	Trading in
Limited											commodities
Super Grand	British Virgin Islands	US$1 ordinary share	100%	100%		—	100%	100%		—	Investment holding
Investments Limited
亞太資源(青島)	The PRC	US$29,800,000	100%	—		100%	100%	—		100%	Trading in
有限公司(note a)											commodities
瑞域(上海) 投資諮詢	The PRC	US$3,600,000	100%	100%		—	100%	100%		—	Provision of
有限公司(note a)											consultancy
											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 particular of subsidiaries which, in the opinion of directors, principally affected the results, assets or liabilities of the Group.

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APPENDIX II

Statement of Financial Position of the Company

ASSETS Investment in an associate Investments in subsidiaries Amounts due from subsidiaries Other receivables and prepayments Tax recoverable Bank balances Total assets EQUITY AND LIABILITIES Capital and reserves Share capital Others reserves Accumulated losses Liabilities Other payables Total equity and liabilities Note: a. Movement of the Company’s reserves Other re 2013 HK$’000 At beginning of the year 2,897,908 Loss for the year — Shares repurchased and cancelled (99) Equity-settled share option expenses 14,021 Lapse/forfeiture/cancellation of equity-settled share options (70,940) Others — At end of the year 2,840,890	Note a a serves 2012 HK$’000 2,909,831 — (7,179) 28,612 (33,223) (133) 2,897,908	THE COMPANY 2013 2012 HK$’000 HK$’000 22,716 22,716 6,086 10,801 1,972,888 2,739,066 507 629 — 1,829 10,694 7,720 2,012,891 2,782,761 681,193 681,305 2,840,890 2,897,908 (1,511,439) (798,237) 2,010,644 2,780,976 2,247 1,785 2,012,891 2,782,761 Accumulated losses 2013 2012 HK$’000 HK$’000 (798,237) (518,473) (784,030) (307,963) (112) (5,024) — — 70,940 33,223 — — (1,511,439) (798,237)

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APPENDIX II

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

Revenue (Loss) profit before taxation Income tax expense (Loss) profit for the year/period attributable to owners of the Company	Year ended 30 June 2013 2012 HK$’000 HK$’000 (restated) 1,104,617 1,050,205 (2,077,032) (241,077) (2,655) (1,890) (2,079,687) (242,967)	18 months ended 30 June 2011 HK$’000 (note) 1,147,494 1,465,177 (3,108) 1,462,069	Year ended 31 December 2009 2008 HK$’000 HK$’000 (note) (note) 301,420 298,613 394,379 (1,251,713) (21,776) (616) 372,603 (1,252,329)

ASSETS AND LIABILITIES

Total assets Total liabilities Equity attributable to owners of the Company	2013 HK$’000 2,527,311 (268,678) 2,258,633	As at 30 June 2012 HK$’000 (restated) 4,759,693 (117,878) 4,641,815	2011 HK$’000 (note) 6,108,171 (709,571) 5,398,600	As at 31 December 2009 2008 HK$’000 HK$’000 (note) (note) 2,993,792 1,483,698 (31,778) (212,437) 2,962,014 1,271,261

Note: The consolidated financial statements for the prior periods were not restated, as HK(IFRIC)-INT 20 has been applied prospectively on the beginning of the earliest period presented, which is 1 July 2011, as disclosed in note 2 to the consolidated financial statements.

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APPENDIX II

3. INDEBTEDNESS

At the close of business on 31 January 2014, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this Offer Document, the Group had outstanding borrowings of approximately HK$245,100,000 comprising secured bank borrowings of approximately HK$168,000,000 secured against certain term deposits of the Group and corporate guarantee of the Company; and unsecured borrowing of approximately HK$77,100,000.

Foreign currency amounts have been translated into Hong Kong dollars at the rates of exchange prevailing at the close of business of 31 January 2014.

Save as aforesaid and apart from intra-group liabilities, the Group did not have any outstanding mortgages, charges, debenture or other loan capital or bank overdrafts, loans or other similar indebtedness or hire purchase commitments, liabilities under acceptance or acceptances credits or any guarantees or other material contingent liabilities at the close of business of 31 January 2014.

4. MATERIAL CHANGE

Save for (i) the information set out in the section headed 5. ‘‘Financial and Trading Prospects’’ of this Appendix; and (ii) the financial performance of the Group for the six months ended 31 December 2013 set out in the interim results announcement of the Group, in particular, significant improvement in the profit, net asset value and equity attributable to Shareholders, which were mainly due to improved performance of the Group’s commodity business and primary strategic investments (share of results of associates); and the partial reversal of impairment loss on interests in associates brought forward from 30 June 2013, details of which are set out in the interim results announcement of the Group for the six months ended 31 December 2013 dated 25 February 2014, the Directors confirm that there are no other material changes in the financial or trading position or outlook of the Group subsequent to 30 June 2013, being the date to which the latest audited consolidated financial statements of the Group were prepared up to and including the Latest Practical Date.

5. FINANCIAL AND TRADING PROSPECTS

The start of 2014 has been a volatile time for commodities. In late December 2013, markets responded positively to the US decision to begin tapering its bond purchases. However, a series of weaker US data points and a dovish first Congressional testimony by incoming chair of the Federal Reserve System Janet Yellen have led the market to question the strength of the US economic recovery and the timing of removing ‘Quantitative Easing’ and the ‘Zero Interest Rate Policy’.

Nevertheless, China remains an area of concern for commodity markets for a number of reasons. Chinese demand for commodities has started a long-term structural shift away from minerals intensive infrastructure investment towards more consumer led demand. Additionally, in the shorter term, the Chinese government looks increasingly determined to deal with excessive pollution and rampant credit growth, which could both have a significant impact on demand for resources. The potential for a widespread credit crisis, as the People’s Bank of China attempts to discourage high risk lending, remains a particular concern for many investors. With China consuming approximately 30% to 60% of most commodities, and emerging markets also at risk as the US tapers, the outlook for commodities remains uncertain and, hence, the Group remains conservatively positioned.

– 130 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Iron ore prices have weakened since the beginning of 2014 as Chinese steel mills destocked in January 2014, however, this sets the scene for a near-term inventory build cycle which should support prices post the Chinese New Year holidays. Looking beyond this, the Group expects iron ore prices to remain at weaker levels in 2014 as significant new low cost supply comes online, against a backdrop of slowing Chinese steel growth.

The Group’s primary strategic investments are still focused on sensible low risk acquisitions and reducing costs, leaving them well positioned for a time when the investment community returns to the resources sector. Mount Gibson Iron Limited (‘‘Mount Gibson’’) (ASX: MGX), an Australian Stock Exchange listed associate of the Group, has continued to maintain a very healthy cash balance and has identified a number of near-mine exploration and development opportunities to extend mine life. Mount Gibson is comfortably on track to meet its sales guidance of 9.0 million tonnes to 9.5 million tonnes of iron ore for the 2014 financial year, however, the share price of Mount Gibson fell recently as realised pricing in the first half of the 2014 results missed analyst expectations.

Metals X Limited (‘‘Metals X’’) (ASX: MLX), an Australian Stock Exchange listed associate of the Group, is expected to continue to generate significant free cash flow in the 2014 financial year, following its recent acquisition of the Australian Higginsville and South Kalgoorlie gold producing operations from Alacer Gold Corp. (ASX: AQG), a company listed on the Australian Stock Exchange. Metals X continues to produce tin from its Renison Tin Mine in Tasmania, Australia, and the Group remains positive on the outlook for tin prices.

While the Group continues to be defensive and selective with its investments in the near term, as part of its on-going treasury management arrangements, it has applied certain of its available funds to the acquisition of a loan note in November 2013 and the granting of a loan in January 2014, details of which are set out in the respective announcements of the company dated 26 November 2013, 28 January 2014 and 4 February 2014.

– 131 –

PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX III

1. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The following is the unaudited pro forma net assets per Share of the Group as at 31 December 2013 prepared based on the unaudited condensed consolidated statement of financial position of the Group as at 31 December 2013 stated in the latest published interim results announcement of the Group for the six months ended 31 December 2013 reproduced in Appendix II to this Offer Document and adjusted for the impact of the Offer in accordance with Rules 4.29 of the Listing Rules assuming that the Offer had been completed on 31 December 2013 to illustrate the effect of the Offer on the financial position of the Group. As it is prepared for illustrative purpose only and because of its hypothetical nature, it may not give a true picture, of what the net assets and net assets per Share of the Group shall be on the actual completion of the Offer or any future date.

Non-current assets Current assets Current Liabilities (Note 2) Net current assets Net assets Equity attributable to: Owners of the Company Non-controlling interests Including: Bank balances and cash Net assets per Share	Unaudited net assets of the Group as at 31 December 2013 Pro forma adjustment (Note 1) HK$’000 HK$’000 2,913,030 902,326 (124,200) 266,392 635,934 (124,200) 3,548,964 (124,200) 3,548,964 (124,200) — 3,548,964 (124,200) 303,131 (124,200) HK$ 0.52 (Note 3)	Unaudited pro forma adjusted net assets of the Group HK$’000 2,913,030
		778,126
		266,392
		511,734
		3,424,764
		3,424,764 —
		3,424,764
		178,931
		HK$ 0.56
		(Note 4)

– 132 –

PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX III

Notes:

To reflect the consideration payable for the buy-back of 680,000,000 Shares at the price of HK$0.18 per Share payable in cash of HK$122,400,000 and the estimated expenses of HK$1,800,000 directly attributable to the Offer. The expenses include legal fees, financial advisory fees and other professional fees, which are incurred for an equity transaction and are accounted for as a reduction from equity.
The Offer will not have any material impact on the liabilities of the Group.
The unaudited net assets per Share of the Group immediately before the completion of the Offer is calculated based on the unaudited net assets of the Group as at 31 December 2013 of HK$3,548,964,000 and 6,811,927,990 Shares in issue as at 31 December 2013.
The unaudited pro forma adjusted net assets per Share of the Group immediately following the completion of the Offer is calculated based on the unaudited pro forma adjusted net assets of the Group as at 31 December 2013 of HK$3,424,764,000 and 6,131,927,990 Shares in issue following the completion of the Offer, which is 6,811,927,990 Shares in issue (immediately before the completion of the Offer as detailed above), reduced by 680,000,000 Shares bought back assuming that there is full acceptance of the Offer up to the Maximum Number of Shares.

The following unaudited pro forma earnings per Share of the Group for the six months ended 31 December 2013 is prepared based on the unaudited consolidated profit attributable to owners of the Company for the six months ended 31 December 2013 as shown in the interim results announcement of the Group for the six months ended 31 December 2013 reproduced on pages 64 to 73 in Appendix II of this Offer Document, and adjusted for the effect of the Offer as if the completion of the Offer had taken place at the beginning of the six-month period ended 31 December 2013.

It has been prepared in accordance with Rule 4.29 of the Listing Rules assuming that the Offer had been completed on 1 July 2013 to illustrate the effect of the Offer on the earnings per Share of the Group. As it is prepared for illustrative purpose only and because of its hypothetical nature, it may not give a true picture, of what the earnings per Share of the Group shall be on the actual completion of the Offer or any future period.

For the six months ended 31 December 2013 (Unaudited pro forma (Unaudited) adjusted) (Note (a)) (Note (b)) Earnings per Share (expressed in HK cents) — basic 19.32 21.46

– 133 –

PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX III

Notes:

(a) The unaudited basic earnings per Share of the Group amount for the six months ended 31 December 2013 is calculated based on the unaudited consolidated profit attributable to owners of the Company for the six months ended 31 December 2013 of HK$1,316,017,000 and the number of 6,811,927,990 Shares in issue during the six months ended 31 December 2013.
(b) The unaudited adjusted pro forma basic earnings per Share of the Group amount for the six months ended 31 December 2013 is calculated based on the unaudited consolidated profit attributable to owners of the Company for the six months ended 31 December 2013 of HK$1,316,017,000 and the adjusted number of 6,131,927,990 Shares in issue, which is the number of 6,811,927,990 Shares in issue during the six months ended 31 December 2013, reduced by 680,000,000 Shares bought back as if the completion of the Offer had taken place at 1 July 2013 and that there is full acceptance of the Offer up to the Maximum Number of Shares.

– 134 –

COMFORT LETTER

APPENDIX IV

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INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION

To the Directors of APAC Resources Limited

We have completed our assurance engagement to report on the compilation of pro forma financial information of APAC Resources Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) by the directors of the Company (the ‘‘Directors’’) for illustrative purposes only. The pro forma financial information of the Group consists of the unaudited pro forma adjusted net assets per share and the unaudited pro forma adjusted earnings per share and related notes as set out on pages 132 to 134 of Appendix III to the circular issued by the Company dated 13 March 2014 (the ‘‘Offer Document’’). The applicable criteria on the basis of which the Directors have compiled the pro forma financial information are described on pages 132 to 134 of Appendix III to the Offer Document.

The pro forma financial information has been compiled by the Directors to illustrate the impact of the conditional cash offer by Yu Ming Investment Management Limited on behalf of the Company to buy back up to 680,000,000 shares of the Company for HK$0.18 per share of the Company (the ‘‘Offer’’) on the Group’s financial position as at 31 December 2013, and financial performance for the six months ended 31 December 2013 as if the Offer had taken place at 31 December 2013 and 1 July 2013 respectively. As part of this process, information about the Group’s financial position and financial performance has been extracted by the Directors from the Group’s interim results announcement for the six months ended 31 December 2013.

Directors’ Responsibilities for the Pro Forma Financial Information

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

Reporting Accountants’ Responsibilities

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

– 135 –

COMFORT LETTER

APPENDIX IV

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

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

The purpose of pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at 31 December 2013 or 1 July 2013 would have been as presented.

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

. The related pro forma adjustments give appropriate effect to those criteria; and
. The pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgment, having regard to the reporting accountants’ understanding of the nature of the Group, the event or transaction in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the pro forma financial information.

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

– 136 –

COMFORT LETTER

APPENDIX IV

Opinion

In our opinion:

(a) the pro forma financial information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong 13 March 2014

– 137 –

STATUTORY AND GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

This Offer Document, for which the Directors jointly and severally accept full responsibility, includes particulars given in compliance with the Listing Rules and the Codes for the purpose of giving information with regard to the Company. The Directors, jointly and severally accept full responsibility for the accuracy of information contained in this Offer Document and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this Offer Document have been arrived at after due and careful consideration and there are no other facts not contained in this Offer Document, the omission of which would make any statement in this Offer Document misleading.

2. SHARE CAPITAL

The authorised and issued share capital of the Company as at the Latest Practicable Date and immediately upon completion of the Offer will be as follows:

Authorised 20,000,000,000 Shares as at the Latest Practicable Date Issued and fully paid or credited as fully paid 6,811,927,990 Shares as at the Latest Practicable Date (680,000,000) Shares proposed to be cancelled under the Offer 6,131,927,990 Shares upon the proposed Offer	HK$ 2,000,000,000 681,192,799 (68,000,000) 613,192,799

All the issued Shares rank pari passu with each other in all respects including the rights as to voting, dividends and capital.

As at the Latest Practicable Date, save for 6,811,927,990 Shares in issue, the Company does not have other class of securities, outstanding options, derivatives, warrants or other securities which are convertible or exchangeable into Shares.

3. DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at the Latest Practicable Date, the interests of the Directors and chief executives in the shares, underlying shares or debentures of the Company or any of our associated corporations (within the meaning of Part XV of the SFO), which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section

– 138 –

STATUTORY AND GENERAL INFORMATION

APPENDIX V

352 of the SFO, to be entered in the register referred to therein; or (c) to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Listing Rules, were as follows:

			Percentage of the
	Capacity/Nature	Number of	Company’s issued
Name of Director	of interest	Shares interested	share capital
Ms. Chong Sok Un	Beneficial owner and	2,030,939,562	29.81%
	interest of controlled	(Note)
	corporations
Mr. Andrew Ferguson	Beneficial owner	25,000,000	0.37%

Note: These shares are held by (i) Rise Cheer as to 1,124,640,000 shares and (ii) Taskwell as to 906,299,562 shares, both are wholly-owned subsidiaries of Besford International Limited (‘‘Besford’’). Besford is a wholly-owned subsidiary of COL. Accordingly, COL is deemed to have interests in the shares in which Rise Cheer and Taskwell are interested. As at 30 June 2013, COL was 72.13% owned by Vigor Online Offshore Limited which in turn is a wholly-owned subsidiary of China Spirit Limited (‘‘China Spirit’’) in which Ms. Chong Sok Un maintains 100% beneficial interest. Therefore, Ms. Chong Sok Un is deemed to have interests in the shares in which COL is interested through her 100% interests in China Spirit.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executives of the Company had any beneficial or deemed interests or short positions in the Shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (b) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (c) to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as contained in Appendix 10 to the Listing Rules.

– 139 –

STATUTORY AND GENERAL INFORMATION

APPENDIX V

4. INTERESTS AND SHORT POSITIONS OF SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, according to the register kept by the Company pursuant to Section 336 of the SFO and, so far as was known to the Directors or chief executive of the Company, the persons or entities, other than a Director or chief executive of the Company, who had an interest or a short position in the shares or the underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company or any other company which is a subsidiary of the Company, or in any options in respect of such share capital were as follows:

			Percentage of the
Name of persons/	Capacity/Nature	Number of	Company’s issued
corporations	of interest	Shares interested	share capital
Benefit Rich Limited	Beneficial owner	956,000,000	14.03%
	(Note 1)
Shougang Fushan	Interest of a controlled	956,000,000	14.03%
	corporation (Note 1)
Rise Cheer	Beneficial owner	1,124,640,000	16.51%
	(Note 2)
Taskwell	Beneficial owner	906,299,562	13.30%
	(Note 2)
COL	Interest of controlled	2,030,939,562	29.81%
	corporations (Note 2)

Notes:

These shares are held by Benefit Rich Limited (‘‘Benefit Rich’’), a wholly-owned subsidiary of Shougang Fushan. Accordingly, Shougang Fushan is deemed to have the same long position as Benefit Rich under the SFO.
These shares are held by (i) Rise Cheer as to 1,124,640,000 shares and (ii) Taskwell as to 906,299,562 shares, both are wholly-owned subsidiaries of Besford International Limited (‘‘Besford’’). Besford is a wholly-owned subsidiary of COL. Accordingly, COL is deemed to have interests in the shares in which Rise Cheer and Taskwell are interested. As at 30 June 2013, COL was 72.13% owned by Vigor Online Offshore Limited which in turn is a wholly-owned subsidiary of China Spirit Limited (‘‘China Spirit’’) in which Ms. Chong Sok Un maintains 100% beneficial interest. Therefore, Ms. Chong Sok Un is deemed to have interests in the shares in which COL is interested through her 100% interests in China Spirit.

– 140 –

STATUTORY AND GENERAL INFORMATION

APPENDIX V

Save as disclosed herein and so far as is known to the Directors, as at the Latest Practicable Date, no person (not being a Director or chief executive of the Company) had an interest or a short position in the shares or the underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company or any other company which is a subsidiary of the Company, or in any options in respect of such share capital.

5. SHARE BUY-BACKS AND ISSUES

The Company has not bought back or issued any Shares in the 12 month period preceding the date of the Offer Document, and has not issued any Shares since 23 January 2012, 2 years immediately preceding the date of the Announcement.

6. MARKET PRICES

The table below shows the closing prices per Share on the Stock Exchange on (i) the Latest Practicable Date; (ii) 17 January 2014, being the Last Trading Day; and (iii) the last trading day of each of the calendar months during the Relevant Period.

Date	Closing Price per Share
	HK$
31 July 2013	0.1350
30 August 2013	0.1500
30 September 2013	0.1550
31 October 2013	0.1510
29 November 2013	0.1490
31 December 2013	0.1470
17 January 2014	0.1410
30 January 2014	0.1500
Latest Practicable Date	0.1560

The highest and lowest closing price per Share as quoted on the Stock Exchange during the Relevant Period were HK$0.1620 per Share on 26 February 2014 and HK$0.1280 per Share on 23 July 2013, 24 July 2013 respectively.

7. ARRANGEMENTS AFFECTING DIRECTORS

No benefit has been or will be given to any Director as compensation for loss of office or otherwise in connection with the Offer.

As at the Latest Practicable Date, there was no agreement or arrangement between any Director and any other person which was conditional on or dependent upon the outcome of the Offer or otherwise connected with the Offer.

– 141 –

STATUTORY AND GENERAL INFORMATION

APPENDIX V

As at the Latest Practicable Date, there was no agreement, arrangement or understanding (including any compensation arrangement) that existed between the Company or any person acting in concert with it and any of the Directors, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Offer.

As at the Latest Practicable Date, there was no material contract entered into by the Company in which any Director has a material personal interest.

8. OTHER INTERESTS AND DEALINGS IN THE SHARES

During the Relevant Period, there has been no dealings in the Shares by (i) the Directors and parties acting in concert with them (including the Company), and (ii) Taskwell, Rise Cheer, COL, their directors and parties acting in concert with them.

As at the Latest Practicable Date, save for (i) the shareholdings by virtue of Taskwell, Rise Cheer and COL disclosed in page 140 of this Offer Document and (ii) 2,700,000 Shares directly held by Dato’ Wong, no parties acting in concert with Taskwell, Rise Cheer, COL and their directors had any other interest in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company.

During the Relevant Period, no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company, Taskwell, Rise Cheer, COL or any person acting in concert with them.

As at the Latest Practicable Date, no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code existed between any person who owned or controlled any shareholding in the Company with the Company or any person who is an associate (as defined in the Takeovers Code) of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate (as defined in the Takeovers Code).

During the Relevant Period, none of the Company, Taskwell, Rise Cheer, COL or parties acting in concert with them had borrowed or lent any Shares.

As at the Latest Practicable Date, none of the subsidiaries of the Company, nor pension funds of the Company or any of the Company’s subsidiaries, nor any advisers to the Company as specified in class (2) of the definition of associate (as defined in the Takeovers Code) had any interest in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company. As such, there has been no dealings in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company by any of the subsidiaries of the Company, or pension funds of the Company or any of the Company’s subsidiaries, or any advisers to the Company as specified in class (2) of the definition of associate (as defined in the Takeovers Code) but excluding exempt principal traders during the Relevant Period.

As at the Latest Practicable Date, no shareholding in the Company was managed on a discretionary basis by fund managers connected with the Company. As such, there has been no dealings in the relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company by any fund manager (other than exempt fund managers) connected with the Company who manages the shareholding in the Company on a discretionary basis during the Relevant Period.

– 142 –

STATUTORY AND GENERAL INFORMATION

APPENDIX V

9. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any service contracts in force with the Company or its subsidiaries which (i) had been entered into or amended within six months before the commencement of the Offer Period (including both continuous and fixed term contracts); (ii) or are continuous contracts with a notice period of twelve months or more; or (iii) are fixed term contracts with more than twelve months to run irrespective of the notice period.

10. EXPERTS AND CONSENTS

The following is the qualifications of the expert who has given opinions or advice, which is contained in this Offer:

Name	Qualifications
Yu Ming	a corporation licensed under the SFO to carry out regulated activities of
	type 1 (dealing in securities), type 4 (advising on securities), type 6
	(advising on corporate finance) and type 9 (asset management)
Deloitte Touche	Certified Public Accountants
Tohmatsu
Chanceton Capital	a licensed corporation to carry on Type 6 (advising on corporate finance)
Partners Limited	regulated activities as defined under SFO

As at the Latest Practicable Date, each of Yu Ming, Deloitte Touche Tohmatsu and Chanceton Capital Partners Limited has given and has not withdrawn its written consent to the issue of this Offer Document with the inclusion therein of its report and reference to its name in the form and context in which it appear in this Offer Document.

11. MATERIAL CONTRACTS

The Group did not enter into any contract which are or may be material other than those entered into in the ordinary course of business carried on or intended to be carried on by the Company or any of its subsidiaries) within the two years immediately preceding the date on which the Offer commenced.

12. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or claim of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened by or against any member of the Group.

13. GENERAL

a. The registered office of the Company is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda.

– 143 –

STATUTORY AND GENERAL INFORMATION

APPENDIX V

b. The English text of this Offer Document, the form of proxy for the SGM and the Acceptance Form shall prevail over Chinese text.

14. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection (i) on the website of the Company (www.apacresources.com); (ii) on the website of the SFC (www.sfc.hk); and (iii) at the office of the Company at 32nd Floor, China Online Center, 333 Lockhart Road, Wanchai, Hong Kong (during normal business hours on any Business Day) from the date of this Offer Document for so long as the Offer remains open for acceptance:

(a) the memorandum and articles of association of the Company;
(b) the annual report of the Company for the year ended 30 June 2013;
(c) the interim results announcement of the Company for the six months ended 31 December 2013;
(d) the report from Deloitte Touche Tohmatsu on the unaudited pro forma financial information of the Group, the text of which are set out in Appendix III;
(e) the written consent as referred to in the paragraph headed ‘‘Expert and Consent’’ in this appendix;
(f) the letter from the Board, the text of which is set out on pages 7 to 15 of this Offer Document;
(g) the letter from Yu Ming, the text of which is set out on pages 16 to 23 of this Offer Document;
(h) the letter from the Independent Board Committee, the text of which is set out on pages 24 to 25 of this Offer Document;
(i) the letter from Chanceton Capital Partners Limited, the text of which is set out on pages 26 and 48 of this Offer Document;
(j) the comfort letter issued by Deloitte Touche Tohmatsu, the text of which is set out on pages 135 to 137 of this Offer Document.

– 144 –

NOTICE OF SPECIAL GENERAL MEETING

APAC RESOURCES LIMITED

亞太資源有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 1104)

NOTICE IS HEREBY GIVEN that a special general meeting (the ‘‘SGM’’) of APAC Resources Limited (the ‘‘Company’’) will be held at Lower Lobby, Plaza 3, Novotel Century Hong Kong Hotel, 238 Jaffe Road, Wanchai, Hong Kong on 4 April 2014 at 2:30 p.m. for the following purposes:

SPECIAL RESOLUTIONS

The following resolutions (a) and (b) will each be proposed to be considered and if thought appropriate passed as a special resolution of the Company:

‘‘THAT:

(a) the conditional cash offer (‘‘Offer’’) by Yu Ming Investment Management Limited on behalf of the Company to buy back up to 680,000,000 shares of nominal value of HK$0.10 each in the issued share capital of the Company (‘‘Shares’’) at a price of HK$0.18 per Share in cash and subject to the terms and conditions set out in the Offer Document (a copy of which marked ‘‘A’’ has been produced to the SGM and initialled by the chairman of the SGM for the purpose of identification) together with the accompanying acceptance form despatched to the shareholders of the Company (the ‘‘Shareholders’’) and dated 13 March 2014 be approved, without prejudice to the existing authority of the Company under the general mandate to buy back Shares granted by the Shareholders at the annual general meeting of the Company on 5 December 2013, and that any one of the directors of the Company be and is hereby authorised to execute all such documents with or without amendments and do all such things as he/she considers desirable, necessary or expedient in connection with or to give effect to any matters relating to or in connection with the Offer including without limitation, completion of the Offer;
(b) conditional upon passing of special resolution (a) above, a mandate be and is hereby unconditionally granted to the directors of the Company to buy back up to 680,000,000 Shares at a price of HK$0.18 each and to reduce the share premium account of the Company in accordance with all applicable laws and the bye-laws of the Company for the purpose of providing for the premiums payable on the buy-back of up to 680,000,000 Shares pursuant to the Offer and any director of the Company be and is hereby authorised to execute (under the common seal of the Company if necessary and appropriate) and deliver any agreements, instruments and other documents, and do any other things, as such director shall in his/her absolute discretion deem necessary or desirable in connection with any of the matters contemplated by the foregoing;

For identification purpose only

– 145 –

NOTICE OF SPECIAL GENERAL MEETING

ORDINARY RESOLUTION

The following resolution will be proposed to be considered and if thought appropriate passed as an ordinary resolution of the Company:

(c) the waiver (‘‘Whitewash Waiver’’) in respect of any obligation under the Hong Kong Code on Takeovers and Mergers (‘‘Takeovers Code’’) and the Hong Kong Code on Share Repurchases of Taskwell Limited, Rise Cheer Investments Limited and parties acting in concert (such term as defined in the Takeovers Code) with any of them to make a mandatory general offer for the issued Shares not held by them which may, but for such Whitewash Waiver, arise upon completion of the Offer be and is hereby approved, and that any one of the directors of the Company be and is hereby authorised to execute all such documents with or without amendments and do all such things as he/she considers desirable, necessary or expedient in connection with or to give effect to any matters relating to or in connection with the Whitewash Waiver.’’

By Order of the Board APAC Resources Limited Chong Sok Un Chairman

Hong Kong, 13 March 2014

Notes:

Any member entitled to attend and vote at the meeting is entitled to appoint a proxy or, if such member is a holder of two or more shares, proxies to attend and vote in his stead. A proxy need not be a member of the Company but must attend the meeting in person to represent the appointing member.
To be valid, the form of proxy must be deposited with the branch share registrar of the Company in Hong Kong, Tricor Secretaries Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong (which will be relocated to Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong with effect from 31 March 2014) not less than 48 hours before the time appointed for the meeting or any adjournment thereof.
Where there are joint holders of any share, any one of such joint holder may vote, either in person or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint holders be present at the meeting, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.

As at the date of this notice, the Directors of the Company are:

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. So Kwok Hoo Mr. Peter Anthony Curry

Independent Non-Executive Directors: Dr. Wong Wing Kuen, Albert Mr. Chang Chu Fai, Johnson Francis Mr. Robert Moyse Willcocks

– 146 –

AI assistant

Persistence Gold Group Ltd — Proxy Solicitation & Information Statement 2014

50623_rns_2014-03-12_281d6359-3b14-4c4c-a959-b709b6c56dc6.pdf

APAC RESOURCES LIMITED

CONDITIONAL CASH OFFER

BY

INVOLVING AN APPLICATION FOR WHITEWASH WAIVER

CONTENTS

EXPECTED TIMETABLE

DEFINITIONS

DEFINITIONS

DEFINITIONS

APAC RESOURCES LIMITED

亞 太 資 源 有 限 公 司[*]

CONDITIONAL CASH OFFER BY

YU MING INVESTMENT MANAGEMENT LIMITED ON BEHALF OF APAC RESOURCES LIMITED TO BUY BACK UP TO 680,000,000 SHARES FOR HK$0.18 PER SHARE,

INVOLVING AN APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

THE OFFER

THE OFFER PRICE

WHITEWASH WAIVER

DEALINGS IN SHARES BY THE COMPANY, TASKWELL AND RISE CHEER AND PARTIES ACTING IN CONCERT WITH ANY OF THEM

OTHER ARRANGEMENTS

OTHER APPROVALS

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURES

Immediately before the Offer

REASONS AND FINANCIAL EFFECT OF THE OFFER

FINANCIAL EFFECTS OF THE OFFER

INFORMATION ON THE GROUP

FUTURE INTENTIONS OF THE GROUP

SGM

GENERAL

LETTER FROM THE BOARD

CONDITIONAL CASH OFFER BY

YU MING INVESTMENT MANAGEMENT LIMITED ON BEHALF OF APAC RESOURCES LIMITED TO BUY BACK UP TO 680,000,000 SHARES FOR HK$0.18 PER SHARE,

INVOLVING AN APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

SALIENT TERMS OF THE OFFER

THE OFFER PRICE

ASSURED ENTITLEMENT AND EXCESS TENDERS

CONDITIONS TO THE OFFER

OVERSEAS SHAREHOLDERS

PROCEDURES FOR ACCEPTANCE

LETTER FROM YU MING

ODD LOTS ARRANGEMENTS

NOMINEE REGISTRATION OF SHARES

LETTER FROM YU MING

RESPONSIBILITY FOR DOCUMENTS

SETTLEMENT

TAX IMPLICATIONS

GENERAL

SGM

APAC RESOURCES LIMITED

亞 太 資 源 有 限 公 司[*]

CONDITIONAL CASH OFFER BY

YU MING INVESTMENT MANAGEMENT LIMITED ON BEHALF OF APAC RESOURCES LIMITED TO BUY BACK UP TO 680,000,000 SHARES FOR HK$0.18 PER SHARE,

INVOLVING AN APPLICATION FOR WHITEWASH WAIVER

Yours faithfully,

CONDITIONAL CASH OFFER BY YU MING INVESTMENT MANAGEMENT LIMITED ON BEHALF OF APAC RESOURCES LIMITED TO BUY BACK UP TO 680,000,000 SHARES FOR HK$0.18 PER SHARE, INVOLVING AN APPLICATION FOR WHITEWASH WAIVER

I. INTRODUCTION

II. THE INDEPENDENT BOARD COMMITTEE

III. BASIS OF OUR OPINION

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

IV. PRINCIPAL FACTORS CONSIDERED

1. Background

2. Reasons for and benefit of the Offer

3. Principal Terms of the Offer

4. Background information on the Group

For the six months ended 31 December 2013

For the year ended 30 June 2013

5. The Prospect and Future Intentions of the Group

(a) Global economy perspective

(b) Overview of the resource equities and commodity industries

(c) Overview of the Group’s operation prospect

(d) Historical share price, trading performance and analysis on the Offer Price to the Company’s consolidated net assets per Share

The Review Period

Historical share price and liquidity

(e) Comparable analysis with comparable listed companies in Hong Kong

Price/earnings ratio

Persistence Gold Group Ltd Proxy Solicitation & Information Statement 2014

亞太資源有限公司[*]

亞太資源有限公司[*]