Professional Documents
Culture Documents
CORPORATE VISION
As an integrated water solutions provider, HanKore shall continuously strive to be at the forefront of Chinas water treatment industry and expands into other environment business sectors to include water recycling, sludge treatment and refuse treatment. Driven by HanKores core values of teamwork, innovation, integrity, dedication, passion and responsibility, the Group will keep evolving like the butterfly, to realize its missions gradually. We believe that the Group has the capability to soar new heights in Chinas water and environment sector and create higher value to its stakeholders.
CONTENTS
2 6 7 8 12 14 19 22 23 35 39 40 41 118 119 MESSAGE TO SHAREHOLDERS CORPORATE PROFILE FINANCIAL HIGHLIGHTS BUSINESS REVIEW CORPORATE OUTLOOK BOARD OF DIRECTORS KEY MANAGEMENT CORPORATE INFORMATION CORPORATE GOVERNANCE REPORT REPORT OF THE DIRECTORS STATEMENT BY DIRECTORS INDEPENDENT AUDITORS REPORT FINANCIAL REPORTS STATISTICS OF SHAREHOLDINGS NOTICE OF ANNUAL GENERAL MEETING
Message to Shareholders
Message to Shareholders
We hope that you will continue to place your trust in our ability to drive the Groups developments to emerge stronger in the international environment and water sector.
Dear Shareholders:
Since our restructuring in 2011, the Group has undergone remarkable improvements in its developments in the water industry over the past two years. Against the headwinds of a slowdown in both the global and Chinese economy, the Group has concerted its efforts to launch the Phase 2 projects. On top of that, we have made improvements to our operational management. I would like to highlight that HanKore has over the past two consecutive years achieved awards in Chinas water industry and gained several recognition from the local municipal government. The remarkable changes clearly demonstrate that HanKore has successfully transformed itself towards higher growth and positive development in the water and environment sector.
Financial Review
The Group achieved a 50.4% surge in revenue to RMB369.1 million and gained a net profit of RMB99.5 million for FY2013. The higher revenue for FY2013 was achieved on the back of a 130.0% yoy increase in construction revenue to RMB167.5 million and a 16.2% yoy increase in recurring water treatment income to RMB200.5 million which consists of water discharge fees and finance income from service concession arrangements. We saw higher gross profit margin for both our construction activities and recurring water treatment operation activities which rose from 9.0% for FY2012 to 14.3% for FY2013 and 65.0% for FY2012 to 70.1% for FY2013 respectively.
Set To Benefit from Rising Water Tariffs And More Stringent Discharge Standards
During FY2013, six of the Groups water plants received the green light to raise our water discharge fees. According to the 12 th Five-Year Plan, Chinas wastewater treatment industry will gradually shift its emphasis from the rapid development of wastewater treatment plants to the upgrading and enhancement of the in-depth operations of these plants. Along with the improvement of the facilities of wastewater treatment plants, higher capabilities of sludge treatment and more stringent water discharge standards set by the Chinese government, we foresee higher water tariffs as an inevitable trend that will significantly benefit the Group.
it is well-equipped with solid investment and financing capabilities, advanced technologies, favorable corporate branding and comprehensive wastewater solution services to attain new heights in Chinas water sector. As a one-stop wastewater treatment service solution provider, the Group incorporates its planning, designing, construction, operation and supervision in a package to offer higher value to its customers.
In our bid to be an integrated environmental solution provider, we focus on the aspects of investment, facility integration, engineering construction and operation of the environment and water sector. Looking forward, the Group will proactively seek new acquisition of water projects to increase our domestic market share in China, enhance our corporate governance and transparency and break into new areas of environment business segments to expand our potential earnings.
Executive Chairman
Corporate Profile
HanKore Environment Tech Group Limited (HanKore or the Company) and its subsidiaries (together with HanKore, collectively referred to as the HanKore Group or the Group) are an international group investing and operating in the water environment sector. Its headquarter is located in Beijing, China. Listed on the Main Board of the Singapore Stock Exchange since February 2004, HanKores core businesses comprise wastewater treatment, water recycling, water supply and sludge treatment. With its cutting-edge technology and capital advantage, the Group has expanded rapidly in Chinas water industry. The Group has successfully implemented projects in various parts of China, and in doing so has accumulated vast experience in project financing, construction and operation in the municipal public utilities area. Our strong track record has enabled the Group to be a leader in the water and environmental services market across China. The Groups long-term objective is to increase the scale of urban wastewater treatment, and actively develop the relative value chain, such as recycling water and sludge treatment. Through developing effective business models and scale development, the Group aims to become a leading integrated environmental solution provider. As of 30 June 2013, the Group has invested in a total of 11 large-scale municipal BOT (Build-OperateTransfer) and TOT (Transfer-Operate-Transfer) water treatment projects. The majority of these projects involved the financing, engineering & construction, operation, equipment and EPC in municipal utilities. These plants are to be located in Beijing and the provinces of Jiangsu, Shandong, Shaanxi and Henan etc. As a large-scale water and environmental solutions specialist, the Group is capable of delivering investment and financing, engineering, design and construction, as well as equipment and operational oversight for municipal public utility projects. The Group uses its advanced water and environmental systems technology to deliver the most effective solutions to customers that are customised to their individual needs. Our Group is also strongly committed to promoting both the economic and environmental concerns of our customers. As an urban environment resource recycling solutions provider, our Group is able to deliver a one-stop solution for local municipalities and strongly supports the development of the Chinese environmental protection industry. Our Group also advocates effective corporate social responsibility and long-term corporate sustainability, aiming to make a positive contribution to the society it operates in.
Financial Highlights
Revenue
408 360 245 196 222 102 99 369
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
Revenue (RMBmillion)
24
34
37
38
2009
2010
2011
2012
2011
2012
2013
Earnings Per Share (RMB cents) (Loss) Per Share (RMB cents)
Net Asset Value Per Ordinary Share (RMB cents) Net asset : RMB1,710,155,000 No. of shares : 4,528,085,477 NAV : RMB0.38
Business Review
Business Review
FY2013 is an eventful year for HanKore where the Group has swiftly stepped up its efforts in project upgrading and expansion and attained great achievements in the water industry.
Successful Acquisition of Engineering, Procurement and Construction (EPC) Company - Jiangsu Tongyong Environment Engineering Co., Ltd.
The Group has signed an acquisition agreement with the Jiangsu Tongyong Environment Group Co., Ltd. (JTEG) to acquire 100% stake in JTEGs wholly-owned subsidiary, Jiangsu Tongyong Environment Engineering Co., Ltd. (JTEE) in November 2012. In April this year, the Group has convened an Extraordinary General Meeting (EGM) on this acquisition agreement and on 14 June announced the completion of the acquisition. JTEE is primarily engaged in the equipment manufacturing, sales, designing and construction of environmental engineering in the environmental protection sector. As JTEE has established long-term relationships with some of Chinas well-known water investment companies and main contractors of water projects, the Jiangsu Tongyong brand is widely recognized in Chinas water industry. The Jiangsu Tongyong brand has vast geographical presence especially in Shanghai, Hainan, Guangxi, Inner Mongolia, Zhejiang, Shandong, Jiangsu and Hunan Province. Via this acquisition, the Group will also strengthen its reputation and standing in Chinas water industry and diversify its business scope to include environmental protection EPC as JTEE holds the qualifications, licenses and intellectual properties to operate in the EPC sector. The acquisition allows the Group to enhance its product value chain, increase its profitability and reinforce its market competitiveness in this sector.
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Awards
In February 2013, the Group was awarded the 2012 Chinas Top Ten Fastest Growing Water Companies which came on the heels of its 2011 Chinas New Water Enterprise award last year. Both awards were given by ChinaWaterNet, one of Chinas most influential and credible online media in the water industry. The selection of the 2012 Top Ten Fastest Growing Water Companies award was based on these criteria, namely fast growing financial results in 2012, achievement of more than 30.0% growth in operating revenue, strong development potential of the company and overall evaluation by water industry experts. The Annual ChinaWaterNet Awards has become a reliable platform with wide influence in Chinas water industry. Over the past fiscal year, the Groups project companies had won a string of awards namely: HanKore Environment Tech Group Limited Binzhou Project Company HanKore Environment Tech Group Limited Xianyang Project Company June 2012: Awarded RMB3.1 million under the Removal of Nitrogen and Phosphorus Transformation Bonus from the local government of Xianyang City. HanKore Environment Tech Group Limited Suzhou Project Company
October 2012: Awarded the title of Model Company in Performance Assessment of Wastewater Treatment in 2011 in Shandong Province by the Shandong Provincial Department of Housing and Urban-Rural Development and Shandong Provincial Department of Supervision. February 2013: Awarded the 2012 Advanced Company In Energy Saving and Emission Reduction by the Binzhou Economic Development Zone Committee and Binzhou Economic Development Zone Administration Committee. HanKore Environment Tech Group Limited Lianyungang Project Company (Dapu and Xugou wastewater treatment plants) July 2012: Awarded RMB5,000 under the Automatic Monitoring Data Acquisition and Transmission Subsidy by the Lianyungang City Environment Supervision Bureau. July 2012: Awarded RMB40,000 under the Installation of Ammonia Nitrogen Auto-monitoring Equipment Subsidy by the Lianyungang City Environment Supervision Bureau. October 2012: Awarded RMB190,000 under the Automatic Monitoring Facilities Socialization Operating Subsidy by the Lianyungang City Environment Supervision Bureau.
August 2012: Honored and recognized as Suzhou City Water Saving Education Base by the local water authority in China. HanKore Environment Tech Group Limited Kunshan Project Company August 2012: Awarded RMB1.32 million under the Upgrading and Reconstruction Subsidy from the Jiangsu Housing Development Department. November 2012: Awarded RMB100,000 under the 2012 Energy Saving and Emission Reduction Subsidy from the Kunshan Environmental Protection Bureau. April 2013: Honored the Green category (highest level of recognition) under the 2012 Company Environmental Protection Rank by the Kunshan Environmental Protection Bureau. HanKore Environment Tech Group Limited Beijing Project Company December 2012: Awarded RMB700,000 under the Special Funds for Environmental Protection from the Beijing Daxing District Environmental Protection Bureau.
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Corporate Outlook
Corporate Outlook
Looking back at 2013, the global economy is still undergoing a period of adjustment over its crisis. In the short run, the international business environment continues to be filled with complexities and uncertainties. The Chinese economy faced challenges and is trying to find a proper balance amongst staying competitive, sustaining growth, weaker consumer confidence and instability in market expectations. At the same time, developing countries have started to focus on developing the internet and driving new energy markets to hasten the worlds pace towards a third industrial revolution. Under Chinas 12 th Five-Year Plan, the planned investment for the national urban wastewater treatment and recycling of RMB430 billion clearly shows Chinas higher emphasis placed on this industry. Capital shortage is still a key factor to the development of urban wastewater treatment services in China. With the financial tightening from the local authorities, facility construction of the wastewater industry requires more capital from the market. After the implementation of the 12 th Five-Year Plan, we have foreseen that the government will continue to increase its efforts to clean up Chinas environment and further develop the environmental protection industry as one of its key emerging strategic industries. During the next three to five years, funding of the water industry will mainly come from the central government and market and rather, less from the provincial authorities. We believe that the future water industry will be propelled by higher investments from the market. Along with development in the water industry under the 12 th Five-Year Plan, HanKore, a new star in Chinas water industry, has adjusted its implementation of strategy accordingly. The Group continues to optimize its industry chain, actively incorporate provincial expansion plans, increase its water treatment capacity through upgrading and improving its project management ability. At the same time, the Group shall endeavor to be an integrated service provider to diversify its risks. In light of an ever-changing global economy, the Group will gradually broaden its focus to expand its array of solutions and services across the environment and water sector to bring in higher recurring income for the Group. Leveraging on its own assets as well as external resources, the Group will strive to equip itself with cutting edge technologies and advanced internal operating systems in order to stay relevant and competitive in the environment and water sector. To obtain long term and stable capital support, the Group has in July 2013 established its S$300 million multicurrency Medium Term Note (MTN) program, and on 1 August 2013 successfully carried out its inaugural MTN issuance of a total value of $50 million. This marks a significant milestone deal for the Group and the SGD bond market as it is the first high yield transaction from a PRC company tapping the SGD market in 2013. Not only does the MTN program open a new funding channel for the Group, but also elevate HanKores popularity in the bond market in Singapore. The income from the bond issue will be used to expand its portfolio of investments and operations. Besides this, the Group has gained recognition from several potential investors and received substantial investment from Mr Wang Yu Huei of Asdew Acquisitions Pte. Ltd. Mr Wang Yu Huei has subscribed 293,617,000 new ordinary shares with the Group in August 2013 and this shows his strong vote of confidence in the Groups potential development in the water and environment sector.
2014 will be a year of opportunities and challenges for HanKore, and we strongly believe that with the continued trust and faith from our stakeholders, we will be able to soar higher in our achievements in the water industry.
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Board of Directors
Board of Directors
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Board of Directors
Yau Wing-Yiu
Executive Director
Mr Lin joined our Group as Executive Director on 21 May 2011. He is currently the Chairman of Jade Capital Management Limited. Mr Lin is also a specialist to the State Development Bank, a member of the SME Committee of the Shenzhen Stock Exchange and the China - Italy Mandarin Fund Advisory Committee. Previously, Mr Lin was the Deputy Director of Department of Foreign Trade of Ministry of Commerce of the PRC. Mr Lin also had a leading role in the founding of the RMB fund-New Development Fund, which is invested by the China Development Bank and major State-Level development zones. Mr Lin holds a Doctor degree of Business Administration from ESC Rennes School of Business and an MBA from the Peking University School of Guanghua Management.
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Chen Da Zhi
Non-Executive Director
Mr Chen was appointed as Non-Executive Director on 21 May 2011. He is also a member of Remuneration Committee. Mr Chen is currently the Board President of Protown Technology Development Ltd. Prior to this, Mr Chen was the CEO of China InfoWorld. His other past positions are CEO of Beijing CCID Capital, NonExecutive Director of CCID Consulting Co. Ltd. (a company listed on the HKSE), and Director of Red Flags Software Co., Ltd. Mr Chen holds a Master of Arts in Journalism from the Renmin University of China and a Bachelor of Computer Science (Software Engineering) from the Nanjing University of Science.
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Board of Directors
Independent Director
Mr Lee was appointed as our Independent Director on 21 May 2011. He is the Chairman of Nominating Committee and a member of Remuneration Committee and Audit Committee. Mr Lee is currently the CEO of Longmen Group, a leading unconventional gas development company in China. He isalso theVice-President of Xian Chamber of Commerce and the Vice Chairman of the Shaanxi ProvinceInternational Chamber of Commerce. Mr Lee used to work as a commercial manager at Philips Lighting in Asia Pacific Management Center based in Taiwan. He became the product manager of Singapore Telecommunications Limited and was subsequently based in China as Sales and Marketing Director of Hutchinson Telecoms. Mr Lee was the Chief Operating Officer of Pacific Internets Hong Kong operations before joining Asia Online as the Group General Manager. Mr Lee graduated with a Bachelor degree of Business Administration from the National University of Singapore.
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Key Management
Key Management
Ge Lun Can
Cui Jun
Vice- President
Mr Cui was appointed Vice-President in Engineering Technology on 8 December 2010.
financial operations and listed companies, and is familiar with the laws and regulations relevant to these areas. Prior to joining our Group, Ms Ge was the General Manager of the Investment Development Department both at Tsinlien Group
With over 21 years of environmental engineering experience, Mr Cui brings to the Group strong technical expertise. His career achievements include
being in-charge of the project design and engineering of the North District Wastewater Treatment Plant in Shanghai, a project which won the Third-Grade Award many other waste and wastewater
Limited and Tianjin Development Holdings Limited, as well as the Deputy General Manager at Tianjin
Company
of Shanghai Science and Research. He also designed projects including commercial, residential, industrial, and municipal projects such as the mobile toilets for Ministry of Railways of the PRC. treatment
Development Holdings Limited, a company listed on the Main board of the HKSE in 1997, and Chief Representative of Tianjin Representative Office for
Tianjin Development Holdings Limited. Ms Ges other Department for Hong Kong Tsinlien Group Company
past positions include the Vice- President of Finance Ltd.(an outfit of Tianjin Municipal Government based Foreign Economic and Trade Commission and Chief Representative of Tianjin Representative Office and Department Director.
Tongji University, Shanghai, specializing in waste and wastewater treatment. As many of his students are from the environmental protection industry, Mr Cui brings to the Group an extensive network of client contracts from both the private and public sectors.
Ms Ge majored in English and graduated from the University of Tianjin Xinhua University in 1980.
Prior to working for the Group, Mr Cui worked Transportation Design Department for 20 years.
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Li Shi Hua
Vice -President
Mr Li was appointed Vice-President in investment and financing and operations on 18 January 2013.
operations and marketing in the environmental protection industry. Mr Wang was previously the Chief Designer of the Beijing Metallurgical Departments Plant Manager at Beijing Metallurgical Equipment
Mr Li has more than 13 years of experience in corporate finance in water industry. Mr Li is very policies. He has accessed to many corporate financing familiar with domestic and worldwide financing channels and fully understood the new corporate accounting standard, be good at formulating a plan Prior to joining the Group, Mr Li was the manager of corporate budget system and financial analysis. of corporate finance of Beijing Sound Global Group Limited, Financial Controller of Beijing Haisidun Vice-President and Director of Finance of Beijing Xiao Qing Environmental Protection Group. Environmental Protection Engineering Co., Ltd. and
Fusion Explosion Division, and was the Deputy Manufacturing plant. Mr Wang had also previously held the positions of Deputy General Manager at Hong Kong Jin Tai International Technology & Trade Qiang Electrical and MechanicalEquipment Co., Ltd.
Mr Wang holds a Machine Building diploma at Shenyang University and majoring Economic Management at China Central Party School (CCPS).
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Corporate Information
Board of Directors
Executive Directors:
Chen Dawei, David
- Executive Chairman
Registered Office
Clarendon House 2 Church Street Hamilton HM 11, Bermuda
- Executive Director and Chief Executive Officer - Executive Director and Chief Financial Officer - Executive Director
Head Office
Room 1105-1110,11F, Jialong International Tower, No.19 Chao Yang Park Road, Chao Yang District, Beijing 100125 China
Non-Executive Directors:
Chen Da Zhi
Independent Directors:
Lim Yu Neng, Paul Lee Kheng Joo Cheng Fong Yee, Fonda
Company Secretary
Tan Min-Li Tay Chee Wah
Auditors
Moore Stephens LLP 10 Anson Road #29-15 International Plaza Singapore 079903 Partner-in-charge: Lao Mei Leng Appointed since financial year ended June 30, 2011
Audit Committee
Lim Yu Neng, Paul (Chairman) Lee Kheng Joo Cheng Fong Yee, Fonda
Nominating Committee
Lee Kheng Joo (Chairman) Lim Yu Neng, Paul Chen Dawei, David
Principal Banker
Industrial and Commercial Bank of China Limited DBS Bank
Remuneration Committee
Cheng Fong Yee, Fonda Lee Kheng Joo Chen Da Zhi
(Chairman)
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All Directors exercise due diligence and independent judgement, and are obliged to act in good faith and consider at all times the interest of the Company. To execute its responsibilities, the Board has delegated specific functions to various sub-committees, namely, the Nominating Committee, the Remuneration Committee and the Audit Committee. These sub-committees function within written terms of reference and operating procedures, which are reviewed on a regular basis. The Board meets regularly, at least on a quarterly basis. Ad-hoc meetings are held at such times, as and when required, to address any specific significant matters that may arise. At meetings of the Board, the Directors are free to discuss and openly challenge the views presented by Management and other Directors. The decision making process is an objective one.
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Nominating Committee
Remuneration Committee
24/08/12 12/11/12 05/02/13 07/05/13 24/08/12 05/02/13 24/08/12 05/02/13 24/08/12 12/11/12 27/11/12 05/02/13 07/05/13 27/05/13 1 1 1 1 1 1 1 1 1
(1) Mr Lim Yu Neng, Paul was re-designated as the Lead Independent Director of the Company with effect from 6 February 2013. Following Mr Lims re-designation as the Lead Independent Director of the Company, Mr Lim was appointed as the Chairman of the Audit Committee of the Company and a member of the Nominating Committee of the Company with effect from 6 February 2013.
(2) Mr Yau Wing-Yiu was appointed as the Chief Financial Officer and re-designated as an Executive Director of the Company with effect from 6 February 2013. Following Mr Yaus re-designation as an Executive Director of the Company, Mr Yau ceased as the Chairman of the Audit Committee and a member of the Nominating Committee of the Company.
(3) Mr Lee Kheng Joo was appointed as a member of the Audit Committee of the Company with effect from 6 February 2013.
In lieu of physical meetings, written resolutions were also circulated for approval by members of the Board. The Companys Bye-Laws also provide for meetings by way of telephone, electronic or other communication facilities. The current members of the Board are familiar with the Groups business operations and corporate governance practices. The Nominating Committee ensures that new Board appointees are provided with information to familiarise themselves with the Groups business, strategic goals and directions and corporate governance practices. Besides that, Directors also have the opportunity to visit the Groups operational facilities and meet with the Management to gain a better understanding of the Groups business operations. At Board meetings, the Company provides ongoing education on Board processes, corporate governance practices and industry developments. Directors are encouraged to keep themselves abreast of the latest developments relevant to the business of the Group.
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The independence of each Director is assessed and reviewed annually by the NC. Each Independent Director is required to complete a Directors Independence Checklist annually to confirm his/her independence based on the guidelines as set out in the Code. For FY2013, the NC has determined that all the three Non-Executive Directors are independent. The Board has determined that it is of an appropriate size to facilitate effective decision making, and to meet the objective of having a balance of skills and experience, taking into account the size and scope of Companys operations. The current Board comprises of business leaders and professionals with industry, accounting, financial, business and management backgrounds. This composition enables the management to benefit from a diverse and objective external perspective, on issues raised before the Board. Each Director has been appointed based on the strength of his caliber, experience and his potential to contribute to the Group and its businesses. Profiles of the Directors are set out on pages 14 and 18 of this Annual Report. The Directors and the sub-committees of the Board on which they sit as at the date of this report are as follows: Name of Director Mr Chen Dawei, David Mr Nie Jian Sheng Mr Lin Zhe Ying Mr Lim Yu Neng, Paul Mr Chen Da Zhi Mr Yau WingYiu
(2) (1)
Board Executive Chairman Executive Director Executive Director Lead Independent Director NonExecutive Director Executive Director Independent Director Independent Director
(1) Mr Lim Yu Neng, Paul was re-designated as the Lead Independent Director of the Company with effect from 6 February 2013. Following Mr Lims re-designation as the Lead Independent Director of the Company, Mr Lim was appointed as the Chairman of the Audit Committee of the Company and a member of the Nominating Committee of the Company with effect from 6 February 2013.
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(3) Mr Lee Kheng Joo was appointed as a member of the Audit Committee of the Company with effect from 6 February 2013.
The Board is able to exercise objective judgment on corporate affairs independently from the Management. No individual or group of individuals is allowed to dominate the Boards decision making. The Board is of the view that, given its current structure, there is sufficiently strong independent element on the Board to enable independent exercise of objective judgment on corporate affairs of the Group by members of the Board, taking into account factors such as the number of Independent Directors on the Board, as well as the size and scope of the affairs and operations of the Group.
Board Membership
The Nominating Committee comprises Mr Lee Kheng Joo as its Chairman, Mr Lim Yu Neng, Paul and Mr Chen Dawei, David as its member with majority of whom, including the Chairman are Independent Directors. The Chairman of the Nominating Committee is not directly associated with a substantial shareholder of the Company within the meaning of the Code. The principal functions of the Nominating Committee are as follows: (1) establish procedures and make recommendations to the Board on all board appointments and renominations with regards to each Directors contribution and performance, his or her attendance at meetings of the Board or Board committees (where applicable), participation, candour and any special contributions; (2) review and determine annually whether a Director is independent, bearing in mind the considerations set out in the Code;
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In considering the re-appointment of a Director, the Nominating Committee evaluates such Directors contribution and performance, such as his or her attendance at meetings of the Board or Board committees, where applicable, participation, candour and any special contributions. All Directors are subject to the provisions of the Companys Bye-Laws whereby each Director shall retire at least once every three (3) years and shall be eligible for re-election. Mr Lim Yu Neng, Paul and Ms Cheng Fong Yee, Fonda are subject to retirement pursuant to the Companys Bye-Laws at the forthcoming AGM. The NC recommended that Mr Lim Yu Neng, Paul and Ms Cheng Fong Yee, Fonda be nominated for re-election at the forthcoming AGM. The NC conducts an annual review of Directors independence and is of the view that Mr Lim Yu Neng, Paul, Mr Lee Kheng Joo and Ms Cheng Fong Yee, Fonda are independent and that, no individual or small group of individual dominates the Boards decision-making process.
Board Performance
The NC has adopted a formal process for the evaluation of the performance of the Board. The performance criteria includes, amongst others, an evaluation of the size and composition of the Board, the Boards access to information, accountability, Board processes and Board performance in relation to discharging its principal responsibilities in terms of the financial indicators as set out in the Code. During the financial year, all Directors are requested to complete a Board Evaluation Questionnaire designed to seek their view on the various aspects of the Board performance so as to assess the overall effectiveness of the Board. The assessment process involves and includes input from the Board members before submitting to the Board for discussing and determining areas for improvement and enhancement of the Boards effectiveness as well as its implementation. Following the review, the NC assessed the Boards performance as a whole in FY2013 and is of the view that the Boards performance as a whole is satisfactorily.
Access to Information
To enable the Board to function effectively and to fulfill its responsibilities, Management strives to provide Board members with adequate information for Board meetings and on an ongoing basis. The Board is furnished with Board papers prior to any Board meeting. These papers are issued in sufficient time to enable Directors to obtain additional information or explanations from Management, if necessary. The Board also is informed of any significant developments or events relating to the Company timely. Directors are given separate and independent access to the Management team to address any enquiries and also have separate and independent access to the Company Secretary. The Company Secretary attends all Board meetings and ensures that they are conducted in accordance with the Bye-Laws of the Company and the applicable rules and regulations are complied with. When necessary, Directors can seek independent professional advice at the Companys expense.
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Annual reviews are carried out by the Remuneration Committee to ensure that key executives are appropriately rewarded, giving due regard to the financial health and business needs of the Group without being excessive and thereby maximize shareholder value. The Executive Directors have service agreements with the Company. Their compensation consists of salary, bonus, fixed fee and incentive bonus that is dependent on the Groups performance. The Groups remuneration policy is to provide compensation packages appropriate to attract, retain and motivate key executives and Directors.
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Below S$250,000
Mr Lin Zhe Ying Mr Lim Yu Neng, Paul Mr Chen Da Zhi Mr Lee Kheng Joo Ms Cheng Fong Yee, Fonda (b) 100 100 100 100 49 51 100 100 100 100 100
# The salary amount shown is inclusive of allowances, statutory contributions, all fees other than Directors fees, and other emoluments.
The level and mix of each key executives (who are not also Directors) follows: Remuneration Band and Name of Key Executive Salary# % Bonus %
Benefits in kind %
Total %
Below S$250,000
Ms Ge Lun Can Mr Cui Jun Mr Wang Wei Dong Mr Li Shi Hua
70 100 70 70
30 30 30
# The salary amount shown is inclusive of allowances, statutory contributions, all fees other than Directors fees, and other emoluments.
There are no employees of the Group who are immediate family members of a Director and whose remuneration exceeds S$150,000 during the financial year ended 30 June 2013. No Director is involved in determining his own remuneration. The remuneration of the non-executive and independent Directors is in the form of a fixed fee. The Directors fees, as a lump sum, will be subject to approval by shareholders at the forthcoming Annual General Meeting.
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Accountability
The Boards primary role is to protect and enhance long-term value and returns for shareholders. In the discharge of its duties to shareholders, the Board, when reporting the Groups financial performance via SGXNET announcements and the Annual Report, has a responsibility to present a fair assessment of the Groups financial performance, position and prospects. Management currently provides the Board with detailed management accounts of the Groups performance, position and prospects on a quarterly basis. Directors have access to the Management at all times.
Audit Committee
The Audit Committee (AC) comprises three Independent Directors and is chaired by Mr Lim Yu Neng, Paul. The other two members are Mr Lee Kheng Joo and Ms Cheng Fong Yee, Fonda. The AC meets regularly with the Groups external auditors and Management to review accounting, auditing and financial reporting matters, so as to ensure that an effective control environment is maintained in the Group. The Audit Committee also monitors proposed changes in accounting policies, reviews the internal audit functions and discusses the accounting implications of major transactions. In addition, the AC also advises the Board regarding the adequacy of the Groups internal controls and the contents and presentation of its reports. The functions of the AC include: (a) reviews with the external independent auditors their audit plan, their evaluation of the system of internal accounting controls in the course of their external audit, their letter to management and management response; reviews the quarterly and annual financial statements with management and the external independent auditors (where applicable) before submission to the board of Directors; reviews the adequacy of the Groups internal controls, including financial, operational and compliance controls and risk management policies and systems; reviews and approves the internal audit plans of the internal auditors; evaluates the effectiveness of both the internal and external audit efforts through regular meetings; determines that no unwarranted management restrictions are being placed upon either the internal or external independent auditors; recommend to the board of Directors the appointment or re-appointment of the external independent auditors for the coming year;
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The Audit Committee is authorised to investigate any matter within its terms of reference, and has full access to the Management and also full discretion to invite any Director or executive officer to attend its meetings, as well as reasonable resources to enable it to discharge its functions properly. The AC meets with the internal auditor and external auditors separately, at least once a year, without the presence of the Management to review any matter that might be raised. The AC is satisfied with the independence and objectivity of the external auditors, Moore Stephens LLP and noted that there were no non-audit services provided by the external auditor during the financial year ended 30 June 2013. The Audit Committee is satisfied with the independence and objectivity of the external auditors and has recommended to the Board the re-appointment of Moore Stephens LLP as the external auditors of the Company at the forthcoming Annual General Meeting. The Company has complied with Rules 712 and 715 of the SGX-ST Listing Manual in relation to the engagement of its auditors, which is registered with the Accounting and Corporate Regulatory Authority.
Internal Controls
The Groups internal controls and systems are designed to provide reasonable, but not absolute assurance to the integrity and reliability of the financial information and to safeguard and maintain the accountability of the assets. While no cost effective internal control system can provide absolute assurance against loss or misstatement, the Audit Committee, with the participation of the Board, has reviewed the adequacy of the Groups internal controls and systems to ensure that they are designed to provide reasonable assurance that assets are safeguarded, operational controls are in place, business risks are suitably managed, proper accounting records are maintained and the integrity of financial information used for business and publication are preserved. The internal auditors conduct annual review of the effectiveness of the Groups key internal controls including financial, operational and compliance controls and risks management. The external auditors during the conduct of their normal audit procedures may also report on matters relating to internal control. Any material noncompliance and recommendation for improvements are reported to the Audit Committee. The Audit Committee also reviews and continues to monitor the effectiveness of the actions taken by the management on the recommendations made by the internal and external auditors in this respect. Based on the work performed by the internal and external auditors (to the extent as required by the external auditor to form an opinion of the financial statements), reviews of the findings from the internal auditors on the Groups internal controls and the managements responses to the auditors recommendations for improvement to the Groups internal controls and discussions with the auditors and management, the Board, with the concurrence of the Audit Committee, is satisfied with the adequacy of the Groups internal controls, addressing financial, operational and compliance risks as at 30 June 2013 and that management has taken efforts to minimise the risk of recurrence of such lapses.
Internal Audit
The objective of the internal audit function is to provide an independent review of the effectiveness of the Groups internal controls and provide reasonable assurance to the Audit Committee and the management that the Groups risk management, controls and governance processes are adequate and effective.
31
In line with continuous disclosure obligations of the Company, and pursuant to the Singapore Exchange Securities Trading Limited (SGX-ST) Listing Rules and Bermuda Companies legislation, the Board ensures that shareholders are fully informed of all major developments that impact the Group. Information is disseminated to the shareholders on a timely basis through: (i) (ii) (iii) SGXNET announcements and press releases; Annual Reports prepared and issued to all shareholders; and Companys website at www.hankore.com at which shareholders can access information on the Group.
Quarterly results are released within 45 days of the quarter of the financial year. The Company ensures that it does not practise selective disclosure of material information. Material information is publicly released before the Company meets with investors or analysts. Shareholders are encouraged to attend the Companys Annual General Meeting to be kept informed of the Groups strategy and goals. The notice of the Annual General Meeting is despatched to shareholders, together with explanatory notes or a circular on items of special business, at least 14 working days before the meeting. The Annual General Meeting is the principal forum for dialogue with shareholders. The respective Board members will be available at the forthcoming Annual General Meeting to answer questions relating to the work of those sub-committees. Our Management acknowledges that effective communication with investors is of paramount importance to the Group. In order to reinforce mutual understanding between shareholders and the Company, we have established and maintained a number of ways to strengthen our communication with investors.
32
Shareholders are informed of shareholders meetings through notices contained in annual reports or circulars sent to all shareholders. Theses notices are also published in the Business Times and posted onto the SGXNet. If shareholders are unable to attend the meetings, the Bye-Laws allow a shareholder of the Company to appoint not more than two proxies to attend and vote instead of him. Resolutions at general meetings are on each substantially separate issue. All the resolutions at the general meetings are single item resolutions. The Chairman of the Executive, Audit, Remuneration and Nominating Committees are in attendance at the Companys AGM to address shareholders questions relating to the work of these Committees. The Companys external auditors, Moore Stephens LLP, are also invited to attend the AGM and are available to assist the Directors in addressing any relevant queries by the shareholders relating to the conduct of the audit and the preparation and content of the auditors report. (F) DEALINGS IN SECURITIES
In line with Listing Rule 1207(19) of the Listing Manual, the Group prohibits its Directors and employees from trading in the Companys securities on short-term considerations. In addition, the Group prohibits its Directors and employees from dealing in the Companys securities during the period beginning one month before the release of any financial results of the Group or if they are in possession of any unpublished material pricesensitive information relating to the Group. (G) MATERIAL CONTRACTS
There are no material contracts of the Group involving the interests of any Directors or controlling shareholders subsisting at the end of the financial year ended 30 June 2013, or entered into since the end of the previous financial year.
33
The Company has established procedures to ensure that all transactions with interested persons are reported in a timely manner to the Audit Committee and that transactions are conducted on arms length basis and not prejudicial to the interests of the shareholders. The Company does not have a general shareholders mandate for recurrent interested person transaction. The Company confirms that there were no interested person transactions during the financial year under review. (I) RISK MANAGEMENT
The risk management is subject to the Audit Committee and no other dedicated committee will be set up. The Group has appointed the financial controller of the Group to manage the risk of the Group. He is responsible for summarizing the risk management results of each department and assessing the potential material risks confronting the group according to the risk management program of the Group, formulating and implementing the risk management plan for the next year.
34
Name of directors
35
Name of director
Exercise price
Exercise period
At 21 July 2013
Number of warrants
Deemed interest Chen Dawei, David S$0.04 27/04/2011-27/04/2014 47,692,402 47,692,402 47,692,402
Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, share options, warrants or debentures of the Company or of related corporations, either at the beginning of the financial year, or date of appointment, if later or at the end of the financial year. Directors Contractual Benefits Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosed in the financial statements. Certain directors also received remuneration from related corporations in their capacity as directors and/or executives of those related corporations. Share Options (i) Options Granted Other than as disclosed in paragraph 6 of this report, there were no options to take up unissued shares of the Company or any corporation in the Group granted during the financial year. Options Exercised Other than as disclosed in paragraph 6 of this report, there were no shares of the Company or any corporation in the Group issued by virtue of the exercise of options to take up unissued shares during the financial year. Options Outstanding Other than as disclosed in paragraph 6 of this report, there were no unissued shares of the Company or any corporation in the Group under option as at the end of the financial year.
(ii)
(iii)
36
Warrants issued
Warrants expired
Each warrant entitles the warrant holder to subscribe for one new ordinary share in the Company. The warrants do not entitle the holders of the warrants, by virtue of such holdings, to any rights to participate in any share issue of any other company. During the financial year, the Company issued 6,260,530 ordinary shares pursuant to the exercise of warrants as disclosed above. As at the end of the financial year, except as reported above, no other warrants to take up unissued shares of the Company were granted and no shares were issued by virtue of the exercise of warrants to take up unissued shares of the Company. Except for the above-mentioned outstanding warrants, no other options to take up unissued shares of the Company were outstanding as at the end of the financial year. Audit Committee The members of the Audit Committee at the date of this report are as follows: Lim Yu Neng, Paul (Appointed as Chairman of Audit Committee on 6 February 2013) Lee Kheng Joo (Appointed as Audit Committee Member on 6 February 2013) Cheng Fong Yee (Member) All members of the Audit Committee are independent and non-executive directors. The Audit Committee carried out its functions as required by the Singapore Exchange Securities Trading Limited (SGX-ST) Listing Manual and the Code of Corporate Governance. Based on the internal control established and maintained by the Group, the work performed by the internal and external auditors (to the extent as required by them to form an opinion on the statutory financial statements), and the reviews conducted by management, the Audit Committee and the Board, with the concurrence of the Audit Committee, is of the opinion that the Groups internal controls addressing financial, operational and compliance risks were adequate as at 30 June 2013. The functions performed by the Audit Committee during the financial year are disclosed in the Companys Annual Report under the section on Corporate Governance Report.
37
NIE JIAN SHENG Executive Director and Chief Executive Officer 25 September 2013
38
Statement by Directors
30 June 2013
(a) The directors are of the opinion that the consolidated financial statements of the Group and the statement of financial position of the Company set out on pages 41 to 117 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 30 June 2013 and of the results, changes in equity and cash flows of the Group for the year then ended; and
(b) At the date of this statement, the directors are of the opinion that there are reasonable grounds to believe that the Group and Company will be able to pay their debts as and when they fall due as mentioned in Note 2 to the financial statements.
NIE JIAN SHENG Executive Director and Chief Executive Officer 25 September 2013
39
Moore Stephens LLP Public Accountants and Chartered Accountants Singapore 25 September 2013
40
Note
2013
RMB000 245,361 (126,606) 118,755 (50,632) (17,310) (37,892) 104,127 (1,484) 102,643 102,643 139 91,067
2012
Revenue Cost of sales Gross profit Other income Administrative expenses Finance income Finance costs
(5)
(6)
54,776
Profit before income tax Income tax Net profit for the year Other comprehensive income Total comprehensive income for the year Net profit attributable to: Owners of the Company Non-controlling interests
99,465 99,465
102,643 102,643
Total comprehensive income attributable to: Owners of the Company Non-controlling interests
99,465 99,465
102,643 102,643
- Basic
(11)
0.02 0.02
0.02 0.02
- Diluted
41
Note ASSETS
Non-current Assets Property, plant and equipment Intangible assets Financial receivables Investments in subsidiaries Goodwill Other receivables Land use rights Current Assets Financial receivables Inventories Trade and other receivables Other current assets Cash and bank balances
6,223 215,240 1,817,500 40,015 2,078,978 33,200 758 58,542 10,084 83,844 186,428 2,265,406
2,698,323
Share Capital and Reserves Share capital Reserves Equity attributable to owners of the Company Non-controlling interests Total equity Non-current Liabilities Borrowings Deferred tax liabilities Current Liabilities Trade and other payables Other financial liabilities Borrowings Provision for income tax
(22) (23)
(24) (25)
988,168 2,698,323
42
RMB000 Group 2013 As at 1 July 2012 Net profit for the year Other comprehensive income for the year Total comprehensive income for the year Issue of ordinary shares for acquisition of subsidiaries Exercise of warrants (Note 27) As at 30 June 2013 2012 As at 1 July 2011 Net profit for the year Other comprehensive income for the year Total comprehensive income for the year Exercise of warrants (Note 27) As at 30 June 2012 378,356 1,684 380,040 380,040
Share capital
RMB000
Share premium
RMB000
Total
RMB000
Total
1,171,715
1,977
62,785
(229)
1,977
62,785
14,708
(229)
1,977 1,977
62,785 62,785
(229) (229)
43
RMB000 Cash Flows from Operating Activities Profit before income tax Adjustments for:
RMB000
105,943
104,127
Depreciation of property, plant and equipment Amortisation of intangible assets Amortisation of land use rights Write-off of other receivables
11,140
1,689 2,019
10,621
Allowance for impairment loss of other receivables Write back of impairment loss of intangible assets Gain on disposal of service concession rights Write back of impairment loss of financial receivables Write-off of property, plant and equipment Net fair value gain on derivatives Unrealised foreign exchange loss Finance income Interest expense Operating cash flows before working capital changes Changes in working capital: Financial receivables Inventories
808 484
(20,000) (52,402) 79
(4,145) (376) 5
46,902 123,309
37,840 84,046
(155,889)
Trade and other receivables Other current assets Trade and other payables Cash generated from operations Interest received Income tax paid
(2,290)
(31,718)
(182)
(1,727) 7,145
(328) 17,498
449
44
RMB000
(1,775) 73
Proceeds from disposal of property, plant and equipment Net cash inflow from disposal of concession rights Net cash used in investing activities Cash Flows from Financing Activities Proceeds from bank borrowings Repayment of bank borrowings Proceeds from other loans Repayment of other loans Interest paid
(402)
(2,767) (12,918)
(787)
(9,364)
190,723
786
(89,726) 82,600
42,960
2,531
(Increase)/Decrease in bank balances pledged Net cash generated from financing activities Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial year (Note 21)
75,913 81,844
102,111
45
46
The financial statements, which are expressed in Renminbi (RMB), have been prepared in accordance with Singapore Financial Reporting Standards (FRS). The financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below. The preparation of financial statements in conformity with FRS requires the management to exercise judgement in the process of applying the Groups accounting policies. It also requires the use of certain critical accounting estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and contingent liabilities at the balance sheet date that are not readily apparent from other sources. Estimates and judgements are continually evaluated and are based on historical experience and other factors that are considered to be relevant, including expectations of future events that are believed to be reasonable under the circumstances. However, actual results may ultimately differ from these estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4.
(i)
(ii)
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(ii)
New and Revised FRS Issued But Not Yet Effective (contd)
FRS 27 Separate Financial Statements FRS 27 Separate Financial Statements will now solely address separate financial statements, the requirements for which are substantially unchanged. It is effective for annual periods beginning on or after 1 January 2014 and will not have any impact on the financial performance or the financial position of the Group and Company when implemented. FRS 110 Consolidated Financial Statements FRS 110 Consolidated Financial Statements supersedes FRS 27 Consolidated and Separate Financial Statements and INT FRS 12 Consolidation Special Purpose Entities, which is effective for annual periods beginning on or after 1 January 2014. The standard changes the definition of control and applies it to all investees to determine the scope of consolidation. FRS 110 requirements will apply to all types of potential subsidiary. It requires an investor to reassess the decision whether to consolidate an investee when events indicate that there may be a change to one of the three elements of control, i.e. power, variable returns and the ability to use power to affect returns. The Group has reassessed the entities the Group controls and does not expect any substantial change.
FRS 112 Disclosure of Interests in Other Entities FRS 112 Disclosure of Interests in Other Entities, which is effective from 1 January 2014, combines the disclosure requirements for subsidiaries, joint arrangements, associates and structured entities within a comprehensive disclosure standard. FRS 112 specifies minimum disclosures that an entity must provide. It requires for an entity to provide summarised financial information about the assets, liabilities, profi t or loss and cash flows of each subsidiary that has non-controlling interests that are material to the reporting entity. As this is a disclosure standard, it will not have any impact on the financial performance or the financial position of the Group and Company when implemented. FRS 113 Fair Value Measurement FRS 113 Fair Value Measurement provides guidance on how to measure fair values for including those for both financial and non-financial items and introduces significantly enhanced disclosures about fair values. It does not address or change the requirements on when fair values should be used. When measuring fair value, an entity is required to use valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. It establishes a fair value hierarchy for doing this. This FRS is to be applied for annual periods beginning on or after 1 January 2013. The Group is in the process of assessing the impact on the financial statements.
48
(i)
The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group entity are expressed in Renminbi (RMB), which is the functional currency of the Company and the presentation currency for the consolidated financial statements. (ii)
In preparing the financial statements of the individual entities, transactions in currencies other than the entitys functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Nonmonetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences are recognised in profit or loss in the period in which they arise except for: exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings; exchange differences on monetary items receivable from or payable to a operation for which settlement is neither planned nor likely to occur (therefore part of the net investment in the foreign operation), which are recognised in other comprehensive income and reclassified from equity to the profit or disposal or partial disposal of the net investment. foreign forming initially loss on
(iii)
The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: Assets and liabilities are translated at the closing rate at the date of the statement of financial position; Income or expense for each statements of comprehensive income or separate income statement presented (i.e. including comparatives) shall be translated at exchange rates at the dates of the transactions; and All resulting exchange differences are recognised in other comprehensive income.
49
(iii)
(c)
Basis of Consolidation
(i)
Investments in Subsidiaries
Subsidiaries are entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Investments in subsidiaries are carried at cost less accumulated impairment losses in the statement of financial position of the Company. On disposal of investments in subsidiaries, the difference between the net disposal proceeds and the carrying amount of the investments are recognised in profit or loss.
(ii) Consolidation Acquisitions of subsidiaries are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities assumed in a business combination, with limited exceptions, are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received. The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Contingent consideration arrangements arising from business combinations with acquisition dates preceding the application of revised FRS 103 are accounted for in accordance with the guidance in the previous version of FRS 103, at initial recognition, i.e. contingent consideration is recognised at fair value if it is deemed to be probable of payment and can be measured reliably at the date of the acquisition.
50
(ii) Consolidation (contd) All subsequent changes in the contingent consideration are adjusted against the cost of combination. Under the revised FRS 103, at initial recognition, contingent consideration is now required to be recognised at fair value even if it is deemed not to be probable of payment at the date of the acquisition. All subsequent changes in debt contingent consideration are recognised in the income statement, rather than the goodwill. In business combinations achieved in stages, the Group recognises any non-controlling interest in the acquiree at the date of acquisition either at fair value or at the noncontrolling interests proportionate share of the acquirees net identifiable assets. The choice of measuring non-controlling interests at fair value or at the proportionate share of the acquirees net assets applies only to instruments that represent present ownership interests and entitle their holders to a proportionate share of the net assets in the event of liquidation. All other components of non-controlling interests are measured at fair value unless another measurement basis is required by FRS. The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any) is recognised on the acquisition date at fair value, or at the noncontrolling interests proportionate share of the acquiree net identifiable assets. Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair value of the Groups previously held equity interest in the acquiree (if any), over the net fair value of the acquirees identifiable assets and liabilities is recorded as goodwill on the statement of financial position. In instances where the latter amount exceeds the former, the excess is recognised as a gain on bargain purchase in profit or loss on the acquisition date. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances. (iii) All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.
51
(iii)
(iv)
Goodwill on Consolidation
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired. For the purpose of impairment testing, goodwill acquired is allocated to each of the Groups cash-generating units that are expected to benefit from the synergies of the combination. The cash-generating unit (CGU) to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the CGU may be impaired, by comparing the carrying amount of the CGU, including the allocated goodwill, with the recoverable amount of the CGU. Where the recoverable amount of the CGU is less than the carrying amount, an impairment loss is recognised in profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent years. When goodwill forms part of a CGU and part of the operation within that CGU is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operations disposed of and the portion of the CGU retained.
(d)
Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in a manner intended by management. Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their depreciable amounts over their estimated useful lives less residual values where applicable on the following basis: Machinery 10% 20% 20% 25%
52
(e)
(f)
Concession Rights Concession rights are stated at the fair value of services provided less accumulated amortisation and impairment losses. Concession rights are amortised to the profit or loss on a straight-line method over the concession periods, which range from 25 to 32 years, from commencement of operation of the plants.
Computer Software Acquired computer software licenses are initially capitalised at cost which includes the purchase price and other directly attributed cost of preparing the asset for its intended use. Capitalised computer software licenses are subsequently carried at cost less accumulated amortisation and accumulated impairment losses. These costs are amortised to profit or loss using the straight-line method over their estimated useful lives of 10 years.
Patents and Trademark Patents and trademark are measured at cost less any accumulated amortisation and impairment losses. These costs are amortised to profit or loss using the straight-line method over their estimated useful lives, which range from 10 to 20 years. Service Concession Arrangements The Group has entered into various service concession arrangements with governing bodies or agencies of the government of the PRC (the grantors) to construct and operate water/wastewater treatment plants for concession periods of between 25 to 30 years and transfer the plants to the grantors at the end of the concession periods. Such concession arrangements fall within the scope of INT FRS 112 Service Concession Arrangements and are accounted for as follows:
(g)
(i)
Financial Receivables
The Group recognises a financial receivable arising from a service concession arrangement when it has a right to receive a fixed and determinable amount of payments during the concession period irrespective of the usage of the concession infrastructure. The financial receivable is accounted for in accordance with the accounting policy set out in Note 3(i).
53
(ii)
Intangible Assets
The Group recognises an intangible asset arising from a service concession arrangement when it has a right to charge for usage of the concession infrastructure but does not have any contractual rights under the concession agreements to receive a fixed and determinable amount of payments during the concession period. Intangible assets received as consideration for providing construction services in a service concession arrangement are measured at fair value upon initial recognition, estimated by reference to the fair value of the construction services provided. When the Group receives an intangible asset and a financial asset as consideration for providing construction services in a service concession arrangement, the Group estimates the fair value of intangible assets as the difference between the fair value of the construction services provided and the fair value of the financial assets received. The intangible asset (concession rights) is accounted for in accordance with the accounting policy set out in Note 3(f). Subsequent costs and expenditure related to infrastructure and equipment arising from the Groups commitments to the concession contracts or that increase future revenue is recognised as additions to the intangible asset and/or financial receivables are stated at cost. Capital expenditures necessary to support the Groups operation as a whole and is recognised as property, plant and equipment and accounted for in accordance with the accounting policy stated under property, plant and equipment in Note 3(d). When the Group has contractual obligations that it must fulfill as a condition of its license to: a) maintain the infrastructure to a specified standard or, b) to restore the infrastructure when the infrastructure has deteriorated below a specified condition, it recognises and measures these contractual obligations in accordance with the accounting policy for provisions. Repairs and maintenance and other expenses that are routine in nature are expensed and recognised in profit or loss as incurred.
(h)
Intangible Assets, Property, Plant and Equipment and Investments in Subsidiaries At the balance sheet date, the Group reviews the carrying amounts of its intangible assets, property, plant and equipment and investments in subsidiaries 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), on an individual asset. Where 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. Where 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 cashgenerating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
54
Intangible Assets, Property, Plant and Equipment and Investments in Subsidiaries (contd) 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 cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cashgenerating 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 cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
(i) Financial Assets Financial assets are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised if the Groups contractual rights to the cash flows from the financial asset expire or if the Group transfers the financial asset to another party without retaining control or transfers substantially all the risks and rewards of the asset. (i)
(ii)
55
Loans and Receivables 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 Groups past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 90 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.
For financial assets carried at amortised cost, the amount of the impairment is the difference between the assets carrying amount and the present value of estimated future cash flows, discounted at the financial assets original effective interest rate. 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. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. Construction Contracts A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and functions or their ultimate purpose or use. Contract costs are recognised when incurred. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the balance sheet date (percentage-of-completion method). When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of the contract costs incurred that are likely to be recovered. When it is probable that total contract costs will exceed the total contract revenue, the expected loss is recognised as an expense immediately. Contract revenue comprises the initial amount of revenue agreed in the contract and variations in the contract work and claims that can be measured reliably. A variation or a claim is only included in contract revenue when it is probable that the customer will approve the variation or negotiations have reached an advanced stage such that it is probable that the customer will accept the claim. The stage of completion is measured by reference to the contract costs incurred to date to the estimated total costs of the contracts. Costs incurred during the financial year in connection with future activity on a contract are excluded from costs incurred to date when determining the stage of completion of a contract. Such costs are shown as contracts work-in-progress on the statement of financial position unless it is not probable that such contract costs are recoverable from the customers, in which case, such costs are recognised as an expense immediately.
(k)
56
(l) Inventories Inventories are carried at the lower of cost and net realisable value. Cost is determined using the first-in-first-out method. The cost of finished goods and work-in-progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and costs necessary to make the sale. Allowance is made for obsolete and slow-moving stocks.
(m) Financial Liabilities and Equity Instrument issued by the Group (i) Classification as Debt or Equity (ii) Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.
Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.
(iii)
Financial Liabilities
Financial liabilities within the scope of FRS 39 Financial Instruments are recognised on the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss FVTPL or other financial liabilities. Finance liability is recognised initially at fair value and subsequently at amortised cost using the effective interest method. Gains and losses of financial liabilities on remeasurement, other than derivatives, are recognised in profit or loss when the liabilities are derecognised.
57
(m) Financial Liabilities and Equity Instrument issued by the Group (contd) (iii)
A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. (n) Financial Guarantees A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due. Financial guarantee contracts are initially recognised at their fair values plus transaction costs and are subsequently amortised to profit or loss over the period of the borrowing. If it is probable that the liability will be higher than the amount initially recognised less amortisation, the liability is recorded at the higher amount with the difference charged to profit or loss. (o) Borrowing Costs Borrowing costs are recognised in profit or loss as incurred except to the extent that they are capitalised. Borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of a qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditure and borrowing costs are incurred. Borrowing costs are capitalised until the assets are ready for their intended use or sale. Share Capital Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of ordinary shares are deducted against share capital. Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable for the rendering of services in the ordinary course of the Groups activities. Revenue is presented, net of value-added tax, and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue and related cost can be reliably measured, when it is probable that the collectibility of the related receivables is reasonably assured and when the specific criteria for each of the Groups activities are met as follows:
(p)
(q)
Discharge Fees from Treatment of Wastewater Discharge fees from treatment of wastewater are recognised based on the volume of wastewater treated and are recognised in the period when the services are rendered.
58
Finance Income Finance income represents the interest income on the financial receivable arising from a service concession arrangement, and is recognised using the effective interest method. Revenue from Construction Services Revenue from construction services under a service concession arrangement is recognised in accordance with the Groups accounting policy on recognition of revenue for construction contracts (Note 3(k)).
Contract Revenue from Construction Services Revenue from construction services under construction contract is recognised in accordance with Groups accounting policy on recognition of revenue for construction contracts (Note 3(k)).
Interest Income (r) Interest income is recognised on a time-proportion basis using the effective interest method. Employee Benefits The Group participates in the national schemes as defined by the laws of the countries in which it has operations. Defined contribution plans are post-employment benefit plans under which the Group pays contributions to and are recognised as an expense in profit or loss as and when they are incurred. Operating Leases Leases of property, plant and equipment in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are taken to profit or loss on a straight-line method over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.
(s)
(t) Taxation Income tax expense represents the sum of the tax currently payable and deferred tax.
(i)
Current Tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in profit or loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Groups liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
59
(ii)
Deferred Tax
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases 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 deferred tax 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, 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 and interests 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. 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 realised, based on tax rates (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. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
(iii)
60
(v)
(w)
(ii) has significant influence over the reporting entity; or (b) (iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity.
An entity is related to a reporting entity if any of the following conditions applies: (i) (ii) (iii) (iv) (v) the entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others); one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member); both entities are joint ventures of the same third party; one entity is a joint venture of a third entity and the other entity is an associate of the third entity; the entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity; the entity is controlled or jointly controlled by a person identified in (a); or
(vi)
(vii) a person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
61
Financial receivables and/or intangible assets under INT FRS 112 Service Concession Arrangements The Group recognises the consideration received or receivable in exchange for the construction services as a financial receivable and/or an intangible asset under a service concession arrangement. However, if the Group is paid for the construction services partly by a financial asset and partly by an intangible asset, it is necessary to account separately for each component of the operators consideration. The consideration received or receivable for both components shall be recognised initially at the fair value of the consideration received or receivable. The segregation of the consideration for a service concession arrangement between the financial asset component and the intangible asset component, if any, requires the Group to make an estimate of a number of factors, which include, inter alia, fair value of the construction services, expected future water treatment volume of the relevant water treatment plant over its service concession period, future guaranteed receipts and unguaranteed receipts, and also to choose a suitable discount rate in order to calculate the present value of those cash flows. These estimates, including revenue recognition under the financial asset and intangible asset components are determined by the Groups management based on their experience and assessment on current and future market conditions. The carrying amount of the intangible assets (concession rights) and financial receivables at the end of the financial year are disclosed in Notes 13 and 14 respectively. A net of reversal of impairment loss of intangible assets amounting to RMB20,000,000 (2012: Reversal of impairment loss of financial receivables and intangible assets amounting to RMB72,402,000) have been recognised during the financial year. A 5% difference in net reversal of impairment losses of financial receivables and intangible assets will result in a 0.75% (2012: 2.65%) variance in the Groups net profit after tax for the year.
Percentage of completion of construction work The Group recognises contract revenue by reference to the stage of completion of the contract activity at the end of reporting period. The stage of completion is measured based on Note 3(k) to the financial statements. Significant assumptions are required to estimate the recoverable variation works that will affect the stage of completion. The Group reviews and revises the estimates in each construction contract as the contract progresses. A 5% difference in percentage of completion of construction work will result in a 6.36% (2012: 2.66%) variance in the Groups net profit after tax for the year.
62
Impairment of non-financial assets other than investments in subsidiaries and goodwill The Group assesses whether there are any indicators of impairment for all non-financial assets at each balance sheet date. Non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. Estimating the value-in-use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. For the current financial year, no allowance for impairment has been recognised for the Groups non-financial assets (see Notes 12, 13 and 17 respectively).
Impairment of investments in subsidiaries The Company assesses at each balance sheet date whether there is any objective evidence that the investment in a subsidiary is impaired. To determine whether there is objective evidence of impairment, the Company considers factors such as the industry performance, technology changes, operational and fi nancing cash flow. Management will also consider the financial conditions and business prospects of the investment. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on the forecasted performance of the subsidiary. The carrying amounts of the Companys investments in subsidiaries at the balance sheet date are disclosed in Note 15 to the financial statements. A 5% increase/decrease in the estimated growth rate and discount rate used would not result in a recoverable amount lower than the carrying amount of investments in subsidiaries.
Impairment of loans and receivables The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Groups loans and receivables at the balance sheet date is disclosed in Notes 14, 19, 20 and 21. In prior financial year, a net of reversal of impairment loss of financial receivables amounting to RMB52,402,000 had been recognised for the Groups financial receivables. During the current financial year, an allowance for impairment of RMB484,000 (2012: RMB3,883,000) and written off of RMB808,000 (2012: RMB2,000,000) have been recognised for the Groups other receivables. A 5% difference in impairment losses of financial assets will result in a 0.05% (2012: 5% difference in net reversal of impairment losses was 1.70%) variance in the Groups net profit after tax for the year.
Impairment of Goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value-in-use of the cash-generating unit to which goodwill has been allocated. Estimating the value-in-use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and able to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of the Groups goodwill as at 30 June 2013 was RMB90,047,000 (2012: Nil). Further details are given in Note 16.
63
Fair value measurement on contingent consideration on business combination Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date as part of the consideration transferred for business combination. The determination of the fair value is based on profit forecast for the twelve months ended 31 December 2013. The key assumption taken into consideration is the performance target of Jiangsu Tongyong Environment Engineering Co., Ltd. The carrying amount of the contingent consideration on business combination at the end of the reporting period is disclosed in Note 27 (b). A 5% difference in the fair value measurement on contingent consideration on business combination from management estimates would not have any impact on the Groups profit after tax for the year.
Useful lives of property, plant and equipment Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. The Groups management estimates the useful lives of these property, plant and equipment to be within 4 to 25 years. This estimate is based on the historical experience of the actual useful lives of property, plant and equipment of a similar nature and function. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. Management will increase the depreciation charge where useful lives are less than previously estimated lives, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold. The carrying amount of the Groups property, plant and equipment at the balance sheet date is disclosed in Note 12. A 5% difference in expected useful lives of the property, plant and equipment from managements estimates would result in an approximately 0.06 % (2012: 0.05%) variance in the Groups net profit after tax for the year. Critical Judgements in Applying the Companys Accounting Policies In the process of applying the Companys accounting policies, management has made the following judgements apart from those involving estimation, which have the most significant effect on the amounts recognised in the financial statements.
(b)
Fair values of financial instruments Where the fair values of financial instruments recorded in the statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgement is required to establish fair values. The judgements include considerations of liquidity and model inputs regarding volatility and risk-free rates of return. The valuation of financial instruments is more fully described in Note 27.
64
RMB000 Construction services from service concession arrangement Revenue from construction contract Finance income from service concession arrangement 167,453
2013
2012
181,653 369,131
1,173
18,852
22,003
RMB000 Write back of allowance for impairment loss - Intangible assets (Note 13) - Financial receivables (Note 14)
2013
RMB000
2012
20,000 21,820
Gain on disposal of service concession rights (Note 13) Sundry income Net fair value gain on derivatives Foreign exchange gain
5,664
79
54,776
91,067
Included in sundry income is an amount of RMB6,400,000 (2012: RMB11,800,000) relating to one-time unconditional grants given by the PRC government. Finance Income Group
2013
RMB000 139
2012
65
RMB000 Interest expense on: - bank borrowings - other loans Bank charges 37,947 46,902 47,120 8,955 218
2013
RMB000
2012
33,924
3,916 52
37,840
37,892
RMB000 This is arrived at after charging the following items: Included in cost of sales: - cost of inventories - amortisation of intangible assets Included in administrative expenses: - amortisation of land use rights - depreciation on property, plant and equipment - rental expense on operating lease - write off of property, plant and equipment (Note 12) Included in other operating expenses: - foreign exchange loss, net - repairs and maintenance 5,198
2013
RMB000
2012
11,140
10,621
6,324
- loss on disposal of property, plant and equipment - write-off of other receivables - allowance for impairment loss of other receivables (Note 19)
927
Staff costs (including directors remuneration): - directors fees - wages and salaries
28,763
24,292
66
2013
RMB000
2012
1,899
539
1,300
262
10
There are no non-audit fees paid to the Auditors of the Company and Other Auditors. Income Tax Group
2013
RMB000
2012
- current year Deferred tax (Note 25): - current year - origination of temporary differences - reversal of temporary differences
1,764
(157)
4,871 4,714
(157)
(430)
Income Tax
6,478
The Groups tax assessable profits were entirely derived by the operations of the Groups subsidiaries in the PRC. A reconciliation of income tax expense and profit before tax multiplied by the applicable corporate tax rates are as follows: Group
RMB000 Profit before income tax Income tax calculated at applicable tax rates Tax concession Non-taxable income 105,943 30,091
2013
2012
Non-deductible expenses
(12,260) 737
(5,287)
(1,871)
(6,803) 6,478
(3,543)
67
11
2013 Profit for the year attributable to equity holders of the Company (RMB000) Weighted average number of ordinary shares outstanding during the year (000) Basic earnings per share (RMB)
2012
68
2013 Profit for the year attributable to equity holders of the Company (RMB000)
2012
Fair value gain on financial liabilities-warrants (RMB000) Adjusted profit used to determine diluted earnings per share (RMB000) Weighted average number of ordinary shares outstanding during the year for basic earnings per share (000) Adjustment for warrants (000) Adjustment for contingent consideration payable (000) Adjusted weighted average number of ordinary shares (000) Diluted earnings per share (RMB)
99,465
(4,145)
102,643
(5,664)
95,320
96,979
4,174,874
8,872 5,425
4,161,825
2,923
4,189,171 0.02
4,164,748 0.02
* The diluted earnings per share is the same as the basic earnings per share as the effect of the warrants is
anti-dilutive.
69
Machinery RMB000
RMB000
Total
2013 Cost
Group
3,208
641
20,530
18
2,235
725
409
402 811
24,140
(144) (812)
As at 30 June 2013 Accumulated depreciation and impairment losses As at 1 July 2012 Disposals Write off Charge for the year
3,867
22,534
27,212
3,128
52
14,750
1,504
(173) 16,031
(50)
133
39
17,917
1,689
(173) 19,383
(50)
3,180
172
687
6,503
639
7,829
3,024
194
18,430
(10)
2,171
(71)
402 402
21,454
2,767
(81)
As at 30 June 2012 Accumulated depreciation and impairment losses As at 1 July 2011 Write off Charge for the year As at 30 June 2012 Net book value
3,208
20,530
24,140
2,939
189
13,524
1,228
(2)
39 39
16,463
1,456
(2)
3,128
14,750
17,917
As at 30 June 2012
80
5,780
363
6,223
70
RMB000
As at 1 July 2012 Write off As at 30 June 2013 Accumulated depreciation Charge for the year Write off As at 30 June 2013 Net book value As at 1 July 2012
(383) 19
402
(383) 19
402
8 (7) 2 1
8 (7) 2 1
As at 30 June 2013 2012 Cost As at 1 July 2011 Additions As at 30 June 2012 Accumulated depreciation As at 1 July 2011 Charge for the year As at 30 June 2012 Net book value
17
17
402 402
402 402
8 8
8 8
As at 30 June 2012
394
394
71
RMB000
Total
As at 1 July 2012 Additions Disposals Acquisition of subsidiary As at 30 June 2013 Accumulated amortisation and impairment As at 1 July 2012 Additions Disposals
586,530
5,146
27,216 27,216
587,317
(229,933) 361,743
(229,933) 390,148
27,216
5,548
372,077
Reversal of impairment loss recognised in profit or loss As at 30 June 2013 Net book value
11,140
372,077
11,140
As at 30 June 2013 2012 Cost As at 1 July 2011 Additions As at 30 June 2012 Accumulated amortisation and impairment As at 1 July 2011 Additions
228,459
1,189
27,216
256,864
577,166 586,530
9,364
787 787
577,166 587,317
10,151
381,456
Reversal of impairment loss recognised in profit or loss As at 30 June 2012 Net book value
10,621
381,456
10,621
(20,000) 372,077
(20,000) 372,077
As at 30 June 2012
214,453
787
215,240
72
(b)
(c)
(ii)
(iii)
(iv) The operator has the obligation to maintain and restore the water/wastewater plant to its operational condition upon transferring to the grantor at the end of the concession period. (d)
During the current financial year, the service concession rights held by the Group for two water/ wastewater treatment plants were disposed to third parties for RMB40,671,900. The net gain arising from the disposal of the service concession rights amounted to RMB21,820,000 (Note 6). As at balance sheet date, the fair value of the outstanding proceeds due in one year and due in more than one year amounted to RMB13,026,000 (Note 19) and RMB17,052,000 (Note 19) respectively. During the current financial year, the Group has reversed an impairment loss of RMB20,000,000 (2012: RMB20,000,000) in respect of the intangible assets of the plant located in Xianyang City, PRC (collectively the Xianyang Plant). The impairment written back is made based on managements estimation of the recoverable amounts using value-in-use calculations. Consideration includes increase in actual volume of water processed and government approval on expansion of existing plant. As at 30 June 2013, the carrying amount of intangible assets that amounted to RMB228,459,000 (2012: RMB214,453,000), are pledged to secure additional loans taken up by the Group in FY2013. As at balance sheet date, the outstanding loans amounted to RMB98,724,000 (2012: Nil).
(e)
(f)
73
14
2013
RMB000 33,200
2012
Non-current
1,972,006 2,006,589
1,817,500 1,850,700
The significant aspects of the service concession arrangements are summarised as follows: (a) The arrangements are concession arrangements for water/wastewater treatment plants with various municipal governments in the PRC under INT FRS 112 Service Concession Arrangements. As the counterparties of the service concession arrangements are municipal governments in the PRC, management is of the view that the associated credit risk is not significant. These water/wastewater treatment plants which are located in 8 different cities in the PRC have concession years ranging between 25 years to 30 years, of which the Group has a contractual right under concession arrangements to receive a fixed and determinable amount of payments during the concession period irrespective of the usage of the plants. Under the terms of the arrangements, the Group will receive a yearly minimum amount of RMB193,217,000 (2012: RMB182,275,000) from the contracted parties (grantors) in exchange for services performed by the Group. The rights and obligations of these water/wastewater treatment arrangements are the same as those disclosed in Note 13.
(b)
(c) The wastewater treatment plants with service concession receivables amounting to RMB363,907,000 (2012: RMB681,729,000) are pledged to secure the loans amounting to RMB62,112,000 (2012: RMB85,667,000) for the Group. (d) The fair value of the non-current portion of financial receivables approximates its carrying amount, as management is of the opinion that the effective interest rates used are similar to market interest rates.
74
Based on the assessment for the financial year ended 30 June 2012, the Group had written back a net impairment loss of RMB52,402,000 (Note 6). Considerations included the increase in unit discharge fees and government approval on expansion or upgrade of plants. Investments in Subsidiaries Company
15
2013
RMB000
2012
At the beginning of the financial year At the end of the financial year Details of the subsidiaries at the end of the financial year are as follows:
262,409 262,409
261,882 262,409
527
incorporation
and operation
Effective interest
Held by the Company Ocean Force International Limited Joyer International Ltd Aqua Shine Group Limited HanKore International Pte Ltd Investment holding British Virgin Islands (BVI) BVI BVI Singapore 100 100
75
incorporation
and operation
Held by subsidiaries Bio-Treat Resources Limited Bio-Treat International Limited Ocean Master International Limited Sky Billion Limited Newsussex International Limited Biopower International Limited True Global Limited World Pioneer Investments Limited Trademart Developments Limited Perfect Grace Investments Limited Great Lucky Holdings Group Limited Profit Choice Investments Limited Oriental Fortune Limited New Efficient Limited Beijing Hankelin Environmental Technology Co., Ltd Investment holding Investment holding Investment holding BVI BVI BVI 100 100 100 100 100 100
Investment holding Investment holding Investment holding Investment holding Investment holding
Dormant
BVI
100
100
Dormant
Hong Kong
100
100
Dormant
Hong Kong
64
64
Dormant
Hong Kong
60
60
Investment holding Investment holding Investment holding and provision of management service
76
incorporation
and operation
Held by subsidiaries (contd) Sanmenxia HanKore Co., Ltd Construction and operation of wastewater treatment plant for provision of wastewater treatment services Construction and operation of wastewater treatment plant for provision of wastewater treatment services Construction and operation of wastewater treatment plant for provision of wastewater treatment services Construction and operation of wastewater treatment plant for provision of wastewater treatment services Construction and operation of wastewater treatment plant for provision of wastewater treatment services Construction and operation of wastewater treatment plant for provision of wastewater treatment services Construction and operation of wastewater treatment plant for provision of wastewater treatment services Construction and operation of wastewater treatment plant for provision of wastewater treatment services PRC 100 100
PRC
100
100
PRC
100
100
PRC
100
100
PRC
100
100
PRC
100
100
PRC
100
100
PRC
100
100
77
incorporation
and operation
Held by subsidiaries (contd) Suzhou Jin Di Water Co., Ltd Construction and operation of wastewater treatment plant for provision of wastewater treatment services Construction and operation of wastewater treatment plant for provision of wastewater treatment services Construction and operation of wastewater treatment plant for provision of wastewater treatment services Construction and operation of wastewater treatment plant for provision of wastewater treatment services Construction and operation of wastewater treatment plant for provision of wastewater treatment services Provide environmental protection technologies, research and development of environmental protection products, consultancy and development services of wastewater treatment technologies Investment holding Investment holding PRC 100 100
PRC
100
100
PRC
100
100
PRC
100
100
PRC
100
100
PRC
100
100
BVI PRC
100 100
78
incorporation
and operation
Held by subsidiaries (contd) Jiangsu Tongyong Environment Engineering Co., Ltd(1) Engineering, procurement and construction of equipment production, provision of equipment installation and design and construction of water treatment engineering. PRC 100
(1) These subsidiaries are acquired during the current financial year.
All the subsidiaries are audited by Moore Stephens LLP, Singapore for group consolidation purpose.
16 Goodwill On 23 May 2013, the Group acquired equity interests of 100% in Victor Best Holdings Ltd. On the date of acquisition, Victor Best Holdings Ltd was the immediate and ultimate holding company of Tianjin Hanquan Environment Technology Limited and Jiangsu Tongyong Environment Engineering Co., Ltd (collectively the Target Group). The total purchase consideration of the acquisition of Victor Best Holdings Ltd and its subsidiaries is RMB116,511,000.
Consideration transferred
2013
RMB000 Cash 21
Issuance of ordinary shares of the Company (a) Contingent consideration arrangement (b) Total
(a)
In current year, 360,000,000 new ordinary shares of the Company have been issued as part of the purchase consideration of the acquisition of the Target Group.
79
(Audited Net Profit-RMB23,000,000) x 3 These Share Consideration has been taken up in other financial liabilities (see Note 27(b)) on the basis as further disclosed in Note 4(b).
At fair value Cash and cash equivalents 3,888 8,792 2,253 27,216 297
RMB000
Trade and other receivables and other current assets Property, plant and equipment Inventories Intangible asset
Trade and other payables Amount due to Group Deferred tax liabilities
Less: Cash and cash equivalents of subsidiaries acquired Less: Purchase consideration settled via issuance of ordinary shares of the Company Less: Contingent consideration payable Net cash inflow on acquisition of subsidiaries
(77,660) (38,830)
(21)
(3,867)
80
Impairment of goodwill
The goodwill was assessed for impairment as at the balance sheet date. The recoverable amount of the cash-generating unit (CGU) is determined based on value-in-use calculations. The key assumptions for the value-in-use calculations are as follows: 2013 1. 2. 3. Estimated discount rates using pre-tax rates that reflect current market assessments of the risks specific to the CGU Cash flow forecasts (5 years) derived from the most recent financial budgets approved by management Gross margin 7.5% RMB123,694,000 24.0%
These assumptions were used for the analysis of the CGU. Management recognises the speed of technological change and the possibility of new entrants that can have a significant impact on the growth rate assumptions. The effect of new entrants is not expected to have a significant adverse impact on the forecasts included in the budget. The budgeted gross margin is based on past performance and expectations of market development. Based on managements assessment of the recoverable amounts of the CGU, no impairment on goodwill was required as at 30 June 2013.
Sensitivity analysis
Management considered the possibility of an increase or decrease in the estimated growth rate and increase in the discount rate used. A 5% decrease in the estimated growth rate and increase in the discount rate used would not result in the recoverable amount lower than the carrying amount of goodwill.
81
As at 1 July 2012 and 30 June 2013 Accumulated amortisation As at 1 July 2012 Additions
49,922
As at 30 June 2013 2012 Cost As at 1 July 2011 and 30 June 2012 Accumulated amortisation As at 1 July 2011 Additions
37,996
49,922
As at 30 June 2012
40,015
18 Inventories Group
RMB000 At cost:
2013
RMB000
2012
3,345
758
82
RMB000 Non-current
2013
RMB000
2012
RMB000
2013
RMB000
2012
17,052
Trade receivables third parties Due from subsidiaries Other receivables Sundry debtors Due from a related party
45,473
44,323
8 18,094 62,425
1,910,379
1,803,454
1,910,379 1,910,379
1,803,454 1,803,454
(4,367) 85,052
(3,883) 58,542
Other receivables pertain to outstanding proceeds arising from the disposals of service concession rights held by two subsidiaries of the Group in current year (Note 13(d)). Trade receivables are non-interest bearing and are generally on 30 to 90 days terms. The amounts due from subsidiaries and a related party are non-trade in nature, unsecured, interest-free and repayable on demand. The movement in the allowance for impairment loss is as follows: Group
RMB000 At the beginning of the year Addition At the end of the year 3,883 4,367
2013
RMB000
2012
484
3,883 3,883
Sundry debtors includes amount due from former subsidiaries of RMB3,883,000 (2012: RMB3,883,000) and amount due from third parties amounting to RMB484,000 (2012: RMB2,000,000). Owing to the slow and uncertain settlement of the debt, an allowance for impairment loss of RMB484,000 was made and recognised in profit or loss for a third party. In addition, an amount of RMB808,000 were fully written-off as management considered them to be not recoverable from a third party. In prior year, management has fully impaired the amount due from former subsidiaries amounting to RMB3,883,000 and fully written-off the amount due from a third party amounting to RMB2,000,000 as management considered them to be not recoverable. The sundry debtors are non-interest bearing, non-trade in nature, unsecured and repayable on demand.
83
2013
RMB000
2012
RMB000
2013
RMB000
2012
48 48 48
10,084 10,084
409 409
48 48
As at 30 June 2012, included in prepayments was the prepaid transaction cost of RMB422,400 as disclosed in Note 24(a)(ix). Prepayment to former shareholder of a subsidiary is in relation with the prepayment made to the former shareholder of Jiangsu Tongyong Environment Engineering Co., Ltd for the constructions of wastewater plants of the Group. Cash and Bank Balances Group Company
21
2013
RMB000 17
2012
RMB000
2013
RMB000
2012
Cash at banks
102,065 118,111
16,000
81,827 83,844
2,000
252 252
987 987
Bank balances bear an average interest rate of 1.11% (2012: 1.12%) per annum. Short-term bank deposits at the balance sheet date have a maturity period of 6 months (2012: 3 and 6 months) from the end of the financial year and bear an average interest rate of 0.39% (2012: 0.4%) per annum.
84
2013
2012
(16,000)
(2,000)
The restricted bank balances relate to bank deposits pledged to bank for bill payables (Note 26). Share Capital Group and Company 2013 No. of ordinary shares of HK$0.10 each 2013 2012 No. of ordinary shares of HK$0.10 each 2012
RMB000
RMB000
All issued ordinary shares are fully paid. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per ordinary share at meetings of the Company. All ordinary shares rank equally with regards to the Companys residual assets.
85
2013
RMB000 1,171,715
2012
RMB000 1,221,672
2013
RMB000 1,171,715
2012
Statutory reserve
1,977
(84,757) 1,151,720
62,785
1,977
490,068 1,711,740
503,757 1,675,472
The movements of the Groups reserves are set out in the Groups consolidated statement of changes in equity. (i) Share premium The share premium account may be applied only for the purposes specified in the Companies Act 1981 of Bermuda. Foreign currency translation reserve The foreign currency translation reserve is used to record foreign exchange differences arising from the translation of the financial statements of group entities whose functional currency is different from that of the Groups presentation currency. Statutory reserve The Groups subsidiaries which are incorporated in the PRC are required to appropriate 10% of the profit arrived at in accordance with PRC Generally Accepted Accounting Practices for each year to a statutory reserve. The profit arrived at must be used to set off against any accumulated losses. The appropriation to statutory reserve after offsetting against any accumulated losses must be made before the distribution of dividends to shareholders. The appropriation is required until the statutory reserve reaches 50% of the registered capital. This statutory reserve is not distributable in the form of cash dividends.
(ii)
(iii)
86
RMB000
2013
RMB000
2012
Non-current
Bank borrowings at amortised cost (a) Other loans at amortised cost (b)
446,941 467,211
20,270
30,600
Current
Bank borrowings at amortised cost (a) Other loans at amortised cost (b)
39,491
52,000
(a)
RMB000
2013
RMB000
2012
Current:
Borrowing I
Borrowing II
Borrowing III
79,000
Borrowing V
Borrowing IV
7,500 4,500
Borrowing VI
Borrowing VII
2,300
Borrowing XII
9,000 6,438
135,794
121,836
87
RMB000
2013
RMB000
2012
Non-current:
Borrowing II
Borrowing III
166,000
208,000
Borrowing VIII
8,500
29,793
364,571 486,407
421,469 446,941
25,472
283,443 364,571
81,128
(i)
Borrowing I
Borrowing I relates to a term loan facility amounting to RMB65,280,000 granted by a financial institution to a subsidiary of the Group to finance the subsidiarys acquisition of a wastewater treatment plant located in Lianyungang City, PRC. This facility was fully drawn down in prior year and the balance outstanding at 30 June 2012 has been fully repaid during the year. The loan was scheduled to be repaid within six years, with twelve equal installments of RMB5,440,000 each to be paid semi-annually in every March and September of the year, with the first installment commencing from September 2007. The loan incurred an effective interest of 6.48 % (2012: 6.34%) per annum.
88
(ii)
Borrowing II
Borrowing II relates to a term loan facility amounting to RMB390,000,000 granted by a financial institution to a subsidiary of the Group to finance its construction of a wastewater treatment plant located in Suzhou City, PRC. This facility has been fully drawn down and the balance outstanding at 30 June 2013 is RMB245,000,000 (2012: RMB285,000,000). The loan is scheduled to be repaid, commencing from November 2009, by two equal installments of RMB30,000,000 each over the first two years, followed by an installment of RMB45,000,000 for the third year, and an installment of RMB77,000,000 for the fourth year, and another four equal installments of RMB42,000,000 each over the following four years, and a last installment of RMB40,000,000 by November 2017. During the year, the loan is rescheduled to be repaid, RMB40,000,000 for the fourth year, RMB79,000,000 for the fifth year, and another three equal installments of RMB42,000,000 each over the following three years, and a last installment of RMB40,000,000 by November 2017. As a result, repayment during the year amounted to RMB40,000,000. The loan incurred effective interest at 6.73 % (2012: 7.05%) per annum. The term loan facility granted to the subsidiary includes the following covenants:
l Receipts from trade receivables from the operation of the wastewater treatment plant shall be processed through the financial institution. l No dividends to shareholders of the subsidiary shall be declared or paid until full repayment of the loan. l (iii) Assets of the wastewater treatment plant shall not be pledged or assigned to third parties.
Borrowing III
Borrowing III relates to a term loan facility amounting to RMB60,000,000 granted by a financial institution to a subsidiary of the Group to finance its construction of a wastewater treatment plant located in Beijing City, PRC. This facility has been fully drawn down and the balance outstanding at 30 June 2013 is RMB37,000,000 (2012: RMB44,500,000). In prior year, the original loan repayment was rescheduled to be repaid, commencing from May 2011, by first installment of RMB1,250,000 during the first year, followed by RMB5,500,000 in the second year, RMB6,750,000 in the third year, five equal installments of RMB7,500,000 each year by 2017, and RMB7,000,000 in 2018. The loan incurred effective interest at 6.80 % (2012: 6.80%) per annum. The term loan facility granted to the subsidiary includes the following covenants: Receipts from trade receivables from the operation of the wastewater treatment plant shall be processed through the financial institution. Guarantee from a former subsidiary, Golden Idea Bio-Engineering (Dongguan) Co., Ltd.
l l
89
(iv)
Borrowing IV
Borrowing IV relates to a term loan facility amounting to RMB42,000,000 granted by a financial institution to a subsidiary of the Group to finance its construction of a wastewater treatment plant located in Nanjing City, PRC. This facility has been fully drawn down and the balance outstanding at 30 June 2013 is RMB26,000,000 (2012: RMB30,000,000). The loan is rescheduled to be repaid, semiannually in every May and October of the year, commencing from May 2011, by four equal installments of RMB1,500,000, followed by two equal installments of RMB2,000,000 each. Since then, quarterly in every March, June, September and December of the year, by eight equal installments of RMB1,000,000 each, twelve equal installments of RMB1,250,000 each, four equal installments of RMB1,500,000 each and a last installment of RMB3,000,000 by March 2018. The loan incurred effective interest at 6.48% (2012: 7.05%) per annum. The term loan facility granted to the subsidiary includes the following covenants: Upon completion of the construction of the wastewater treatment plant (the assets) in Nanjing City, PRC, the assets shall be pledged to the bank. Guarantee from a former subsidiary, Golden Idea Bio-Engineering (Dongguan) Co., Ltd.
l l (v)
Borrowing V
Borrowing V relates to a term loan facility amounting to RMB35,000,000 granted by a financial institution to a subsidiary of the Group to finance the subsidiarys acquisition of a wastewater treatment plant located in Lianyungang City, PRC. This facility has been fully drawn down and the balance outstanding at 30 June 2013 has been fully repaid during the year (2012: RMB14,000,000) . The loan was scheduled to be repaid within five years, with ten equal installments of RMB3,500,000 each to be paid semiannually in every February and August of the year, with the first installment commencing from August 2009. The loan incurred effective interest at 6.62% (2012: 7.04%) per annum. The term loan facility granted to the subsidiary includes the following covenants: Daily bank balances shall not be less than RMB250,000.
90
(iv)
Borrowing VI
Borrowing VI relates to a term loan facility amounting to RMB20,000,000 granted by a financial institution to a subsidiary of the Group to finance its construction of a wastewater treatment plant located in Nanjing City, PRC. This facility has been fully drawn down and the balance outstanding at 30 June 2013 is RMB15,500,000 (2012: RMB17,400,000). The loan is scheduled to be repaid, annually in every November of the year, by nine installments with first installment of RMB200,000 in 2009, RMB1,000,000 in 2011, RMB1,400,000 in 2012, RMB1,900,000 in 2013, RMB2,400,000 in 2014, RMB2,700,000 in 2015, RMB3,000,000 in 2016, RMB3,500,000 in 2017 and last installment of RMB3,900,000 in 2018. The loan incurred effective interest at 8.84% (2012: 8.84%) per annum. The term loan facility granted to the subsidiary includes the following covenant: Guarantee from a former subsidiary, Golden Idea Bio-Engineering (Dongguan) Co., Ltd.
(vii) Borrowing VII Borrowing VII relates to a term loan facility amounting to RMB100,000,000 granted by a financial institution to a subsidiary of the Group to finance the subsidiarys construction of a wastewater treatment plant located in Kunshan City, PRC. This facility has been partially drawn down and the balance outstanding at 30 June 2013 is RMB36,112,000 (2012: RMB41,667,000). The loan is scheduled to be repaid in 36 quarterly installment with first installment of RMB1,389,000 starting in March 2011. The loan incurred effective interest at 6.55% (2012: 6.39%) per annum. The term loan facility granted to the subsidiary includes the following covenant:
l Assets of the wastewater treatment plant shall be pledged to the bank. (viii) Borrowing VIII Borrowing VIII relates to a long term facility amounting to RMB30,000,000 granted by a financial institution to a subsidiary of the Group in prior year to finance the subsidiarys working capital requirement. This facility has been partially drawn down and the balance outstanding at 30 June 2013 is RMB8,500,000 (2012: RMB16,500,000). The loan is scheduled to be repaid by two installments of RMB8,000,000 in 2013 and RMB8,500,000 in 2014. The loan incurred effective interest at 7.65% (2012: 6.80%) per annum. The term loan facility granted to the subsidiary includes the following covenants:
l No dividends to shareholders of the subsidiary shall be declared or paid until full repayment of the loan. l Guarantee from a third party, Jiangsu Tongyong Huanbao Co., Ltd.
91
(ix)
Borrowing IX
Borrowing IX relates to a long term facility amounting to RMB48,120,000 granted by a financial institution to a subsidiary of the Group in prior year to finance the subsidiarys working capital requirement. This facility has been fully drawn down and the balance outstanding at 30 June 2013 is RMB45,035,000 (2012: RMB26,460,000), net of transaction cost of RMB3,417,000. In prior fi nancial year, RMB422,400 was reflected as prepayment as at 30 June 2012 (Note 20). The loan is scheduled to be repaid, semi-annually in every July and December of the year, by sixteen installments with first installment of RMB4,500,000 and RMB500,000 in 2015, RMB5,500,000 and RMB500,000 in 2016, RMB6,500,000 and RMB500,000 in 2017, RMB6,500,000 and RMB500,000 in 2018, RMB5,500,000 and RMB500,000 in 2019, 2020 and 2021, and last installment of RMB5,000,000 and RMB120,000 in 2022. The loan incurred effective interest at 7.48% (2012: 7.48%) per annum. The term loan facility granted to the subsidiary includes the following covenants:
l Receipts from trade receivables from the operation of the wastewater treatment plant shall be processed through the financial institution. l No dividends to shareholders of the subsidiary shall be declared or paid until full repayment of the loan. l Guarantee from related companies, Xianyang Bai Sheng Shui Purifying Co., Ltd and Suzhou Jin Di Water Co., Ltd. (x)
Borrowing X
Borrowing X relates to a long term facility amounting to RMB44,000,000 granted by a financial institution to a subsidiary of the Group during the year to finance its construction of a wastewater treatment plant located in Xianyang City, PRC. This facility has been fully drawn down and the balance outstanding at 30 June 2013 is RMB42,793,000 (2012: Nil), net of transaction cost of RMB1,207,000. The loan is scheduled to be repaid within five years commencing in 2014, by three installments in the first year totaling RMB13,000,000, two installments in the second and third years of RMB10,000,000 each, one installment in the fourth year of RMB5,000,000 and last installment of RMB6,000,000 in 2018. The loan incurred effective interest at 7.48% (2012: Nil) per annum. The term loan facility granted to the subsidiary includes the following covenants: Intangible assets of the wastewater treatment plant shall be pledged to the bank; and Guarantee from related company, Suzhou Jin Di Water Co., Ltd.
l l
92
(xi)
Borrowing XI
Borrowing XI relates to a long term facility amounting to RMB98,000,000 granted by a financial institution to a subsidiary of the Group during the year to finance its construction of a wastewater treatment plant located in Xianyang City, PRC. This facility has been partially drawn down and the balance outstanding at 30 June 2013 is RMB55,931,000 (2012: Nil), net of transaction cost of RMB4,069,000. The loan is scheduled to be repaid semi-annually within six years, commencing in June 2014 with installment of RMB9,000,000, RMB19,000,000 in 2015, RMB20,000,000 from 2016 to 2018 and last installment of RMB10,000,000 in 2019. The loan incurred effective interest at 7.48% (2012: Nil) per annum. The term loan facility granted to the subsidiary includes the following covenants: Intangible assets of the wastewater treatment plant shall be pledged to the bank; and Guarantee from related company, Suzhou Jin Di Water Co., Ltd.
l l
(xii) Borrowing XII Borrowing XII relates to the long term facility amounting to RMB80,000,000 granted by a financial institution to a subsidiary of the Group during the year to finance the subsidiarys working capital requirement. This facility has been fully drawn down and the balance outstanding at 30 June 2013 is RMB70,864,000 (2012: Nil), net of transaction cost of RMB7,385,000. The loan is scheduled to be repaid within ten years, quarterly commencing in 2013 with RMB1,750,000, RMB7,250,000 in 2014, RMB8,250,000 in 2015 and 2016, RMB9,000,000 in 2017 and 2018, RMB10,000,000 in 2019, RMB10,500,000 in 2020, RMB9,000,000 in 2021, RMB4,500,000 in 2022 and RMB2,500,000 in 2023. The loan incurred effective interest at 7.53% (2012: Nil) per annum. The term loan facility granted to the subsidiary includes the following covenant: Guarantee from related companies, Beijing Hankelin Environmental Technology Co., Ltd and Binzhou Jin Di Co., Ltd.
93
RMB000
2013
RMB000
2012
Current:
Other loan I
Other loan II
Other loan IV
7,491
Non-current:
(i)
Other loan I
Other loan I relates to an unsecured short term facility amounting to RMB10,000,000 granted by a third party to a subsidiary of the Group in prior year to finance the subsidiarys working capital requirement. The loan was fully repaid in one lump sum during the year. The loan incurred effective interest at 18 % (2012: 18%) per annum.
(ii)
Other loan II
Other loan II relates to an unsecured short term facility amounting to RMB30,000,000 granted by the same third party as in Other loan I to a subsidiary of the Group during the year to finance the subsidiarys working capital requirement. During the year, an additional unsecured short term facility amounting to RMB20,000,000 is granted by this third party. This facility has been fully drawn down and the balance outstanding at 30 June 2013 is RMB20,000,000 (2012: RMB30,000,000) where the previous unsecured short term facility amounting RMB30,00,000 has been fully repaid during the year. The loan incurred effective interest at 22% (2012: 18%) per annum. The loan is rescheduled to be repaid on 5 August 2013. Subsequent to current year-end, the loan was fully repaid on 24 September 2013.
(iii)
94
(iii)
(iv)
Other loan IV
Other loan IV relates to an unsecured short term facility amounting to RMB7,491,000 granted by a third party to a subsidiary of the Group during the year to finance the subsidiarys working capital requirement. The loan is scheduled to be fully repaid in August 2013. The loan incurred effective interest at 10% (2012: Nil) per annum. Subsequent to current year-end, the loan was fully repaid on 20 August 2013.
(c) Carrying Amount and Fair Value Information The fair value of the Groups current bank borrowings approximate their carrying amounts. The following fair values of non-current borrowings and other loans are for information purposes only and are not recognised in the financial statements. Group
2013
RMB000
2012
467,211 469,851
395,171 402,603
The fair values of borrowings at the balance sheet date are based on expected future cash flows, discounted using market rates for similar instruments at the balance sheet date.
95
2013
RMB000
2012
25,111
14,097
The deferred tax liabilities relate to the temporary differences due to the service concession arrangements and the movement is as follows: Group
2013
RMB000 12,456
2012
Charged to income statement (Note 10) Acquisition of subsidiaries (Note 16) Balance at end of year
4,714 6,300
1,641
25,111
14,097
26
2013
RMB000 2,799
2012
RMB000
2013
RMB000
2012
Trade payables - former shareholder of a subsidiary Due to a subsidiary Due to former shareholder of a subsidiary Bill payable Sundry creditors
1,843
300
Accrued expenses
86,113
2,000
747
275
50,324
3,209 277,633
534 141,852
82
7,003
2,286
9,593
2,861
96
27
RMB000 Financial Liabilities carried at fair value through profit or loss (FVTPL) - Warrants (a) - Contingent consideration payables (b)
2013
RMB000
2012
38,830
4,061
8,919 8,919
RMB000
2013
RMB000
2012
(4,145) 4,061
958
97
(ii)
(iii)
Fair value of warrants The fair value of the warrants is estimated at both financial year-end dates, using the Binomial Valuation model. The following table lists the inputs to the option pricing model: CB Warrants 2013 PWGL Warrants GDHL Warrants
Risk-free rate (% p.a.) Exercise price (S$) Underlying share price (S$) Years to maturity (years) Dividend yield (% p.a.) Volatility (%) 2012
S$0.025 S$0.040
0.24%
S$0.040
0.22%
2 years 39.0%
S$0.040
S$0.040 S$0.040
0.22%
1 year
1 year
39.3%
39.3%
Risk-free rate (% p.a.) Exercise price (S$) Underlying share price (S$) Years to maturity (years) Dividend yield (% p.a.) Volatility (%) (b)
S$0.025 S$0.040
0.25%
S$0.040
0.18%
3 years 67.8%
S$0.040
S$0.040 S$0.040
0.18%
2 years 65.4%
2 years 65.4%
Other financial liabilities include RMB38,830,000 representing the estimated fair value of the contingent consideration payable relating to the acquisition of the Target Group (see Note 16).
98
RMB000 Salaries, bonus and related benefits Directors fee Defined contribution plans Termination benefits 10,484
2013
2012
1,135
394 12,040
27
329 6,476
29 Commitments
(i)
RMB000 Capital expenditure on purchase of property, plant and equipment and construction of plants
2013
RMB000
2012
87,262
4,264
99
(ii)
2013
2012
Between 1 to 5 years
601
30
Segment Information Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker for the purpose of resource allocation and performance assessment. Revenue reported below represents revenue generated from external customers and inter-segment revenue. Inter-segment pricing is determined on an arms length basis. The accounting policies of the reportable segments are the same as the Groups accounting policies disclosed in Note 3(u). Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets and expense, interest-bearing borrowings and related expenses and income and deferred taxes. No operating segments have been aggregated to form the following reportable operating segments.
Business segments
The Groups main business segment for the current financial year is Built-Operate-Transfer (BOT)/ Transfer-Operate-Transfer (TOT) water service fees and, construction projects and services.
Geographical segments
The Group operates predominantly in the PRC. All non-current assets are located in the PRC. Part of cash and bank balances amounting to approximately RMB667,000 and RMB1,869,000 as at 30 June 2013 (2012: RMB1,402,000 and RMB1,594,000) are located at Singapore and Hong Kong respectively.
Customer segments
No single individual customer contributed significantly to the Groups revenue. BOT/TOT wastewater treatment RMB000 Construction projects and services RMB000
RMB000
Total
Group 2013 Inter-segment revenue* Inter-segment costs* Inter-segment profit Revenue from external customers Segment results 41,508 41,508 1,173 (29,721) 41,508
(34,402) 328
26,109
48
- unallocated Profit before income tax Income tax Profit for the year Other segment items - allocated
(43,789)
(43,789) 105,943
(3,331) (6,478)
(6,129)
(349)
99,465
285
1,006
1,291 1,775
484
Additions to intangible asset- computer software Additions to intangible assets Depreciation - allocated - unallocated 5,146
402 5,146
923
45
11,140
11,140
101
RMB000
Total
Group
2013 (contd)
Amortisation of land use rights Reversal of allowance for impairment of: Allocated: - intangible assets
2,019
2,019
20,000 484
20,000 484
Allowance for impairment loss of other receivables Assets and Liabilities Segment assets Unallocated assets Total assets Segment liabilities Total liabilities
2,510,137
131,760
2,641,897 2,698,323
56,426
Unallocated liabilities
836,476
34,471
RMB000
Total
Group 2012 Revenue from external customers Inter-segment revenue Segment results Unallocated income Finance income Finance costs Income tax 245,361 245,361
151,939
151,939
5,862
Profit before income tax Profit for the year Other segment items - allocated Additions to property, plant and equipment - unallocated
665
2,102 2,767
665
Additions to intangible asset-computer software Additions to intangible assets Depreciation - unallocated - allocated 9,364
787 9,364
1,062
1,062 1,456
394
10,621
10,621 10,621
1,963
1,963 1,963
103
RMB000
Total
Group
Reversal of allowance for impairment of: - intangible assets 20,000 52,402 20,000 52,402 72,402 Allowance for impairment loss of other receivables Assets and Liabilities Segment assets Unallocated assets Total assets Segment liabilities Total liabilities 691,638 3,883 3,883
- financial receivables
2,249,800
2,249,800 2,265,406
15,606
Unallocated liabilities
691,638 733,875
42,237
31
Financial Risk Management The Groups and Companys activities exposed it to a variety of financial risks such as market risk (including interest rate risk and currency risk), credit risk and liquidity risk. The Groups and Companys overall risk management strategy, which remain unchanged from prior year, seeks to minimise adverse effects from the unpredictability of financial markets on the Groups financial performance. The Group and Company continually monitor the risk management process to ensure that an appropriate balance between risk and control is achieved. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Groups and Companys activities. The Board is responsible for setting the objectives and underlying principles of financial risk management for the Group and Company. The Board will review and agree on policies for managing each of these risks as summarised below.
RMB000
RMB000
RMB000
RMB000
RMB000
RMB000
RMB000
Total
102,111
16,000
118,111
85,052 17,052
102,111
16,000
34,583
6,675
Trade and other payables (exclude other tax payable) Other financial liabilities Total financial liabilities
Borrowings
163,285
421,469
25,472 25,472
12,000
20,270 20,270
274,424 317,315
163,285
421,469
12,000
42,891
42,891
105
RMB000
RMB000
RMB000
RMB000
RMB000
RMB000
RMB000
Total
Cash and bank balances Financial receivables - current Financial receivables - non-current
81,844
2,000
58,542 33,200
58,542 33,200
83,844
81,844
2,000
6,490
Trade and other payables Other financial liabilities Total financial liabilities Company 2013 Assets
Borrowings
161,836
161,836
283,443
81,128
81,128
12,000
12,000
30,600
141,318 150,237
8,919
141,318 719,244
569,007 8,919
283,443
30,600
252 252
252
Trade and other payables Other financial liabilities Total financial liabilities
42,891 52,484
9,593
42,891 52,484
9,593
RMB000
RMB000
RMB000
RMB000
RMB000
RMB000
RMB000
Total
987 987
987
8,919 11,780
2,861
Sensitivity Analysis
A change of 100 basis points in interest rate for the Groups variable borrowings rate would (decrease)/increase the Groups profit after tax by the amounts as shown below. This analysis assumes that all other variables, in particular foreign currency and tax rates, remain constant. Group
RMB000
2013
RMB000
2012
(4,577) 4,577
(3,948) 3,948
Interest rate risk for the Company is not significant and therefore no sensitivity analysis has been disclosed in the financial statements. Foreign Currency Risk Foreign currency risk refers to the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group and Company mainly operate in the PRC and its functional currency is in Renminbi. The Group and Company are exposed to foreign currency risk when transactions such as expenses and borrowings are denominated in currencies other than Renminbi. The currencies giving rise to this risk are primarily Singapore dollar (S$) and Hong Kong dollar (HK$).
107
667
1,869
Financial liabilities
42,891 45,129
2,238
(44,462)
Financial assets
2,559
436
Financial liabilities
(7,975)
Sensitivity Analysis A change of 5% (2012: 5%) (taking into consideration both strengthening and weakening aspect) of the following currencies against RMB at the balance sheet date would (decrease)/increase the Groups profit after income tax by the amounts as shown below. This analysis assumes that all other variables, in particular interest and tax rates, remain constant. Group
RMB000 Group
2013
RMB000
2012
- strengthened
(1,667) 1,667
(299) 299
63
(11)
11
171
81
Financial liabilities
42,891 45,042
2,151
191 191
(44,871)
(110)
109
907
79
Financial liabilities
142 142
(9,602)
(63)
A change of 5% (2012: 5%) (taking into consideration both strengthening and weakening aspect) of the following currencies against RMB at the year end date would increase/(decrease) the Companys loss after income tax by the amounts as shown below. This analysis assumes that all other variables, in particular interest and tax rates, remain constant. Company
2013
RMB000
2012
(1,683)
(360)
360
(4)
(2)
Cash and fixed deposits are placed with banks and financial institutions which are regulated. For other financial assets (including financial receivables), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties. Significant concentrations of credit risk Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is significant in relation to the Groups and Companys total credit exposure. The Groups and Companys credit exposure is concentrated mainly in the PRC.
Financial assets that are neither past due nor impaired Trade and other receivables, other current assets and financial receivables of the Group that are neither past due nor impaired amounting to RMB298,878,000 (2012: RMB229,849,000) are creditworthy companies with a good payment record with the Group. Trade and other receivables of the Company that are neither past due nor impaired amounting to RMB1,910,379,000 (2012: RMB1,803,454,000) are due from subsidiaries within the Group. Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit ratings and no history of default.
111
Financial Assets that are not past due but impaired The carrying amount of financial receivables individually determined to be impaired at the balance sheet date and the movement in the related allowance for impairment is as follows: Group
RMB000 Financial receivables-nominal amounts Less: Allowance for impairment 1,791,089 1,672,350 Movement in allowance accounts: As at beginning of the year Charge for the year
2013
2012
(118,739)
(118,739)
118,739
171,141
(89,191) 118,739
36,789
118,739
The financial receivables are tested for impairment annually or more frequently if there are indications that the financial receivables might be impaired as disclosed in Note 14. Financial assets that are past due but not impaired There is no other class of financial assets that is past due but not impaired except for trade receivables. The age analysis of trade receivables past due at the balance sheet date but not impaired is as follows: Group
RMB000 Past due within 30 days Past due 31 to 90 days Past due over 90 days 5,812 18,095 25,401 Financial assets that are past due and impaired 1,494
2013
2012
Except for other receivables past due and impaired as disclosed in Note 19, there are no financial assets which are past due and/or impaired at the date of the statement of financial position.
RMB000
651,907
187,799
381,935
82,173
Non-current borrowings
395,171
505,136
116,848
302,688
85,600
No analysis of the maturity profile of the Company has been disclosed in the financial statements as there are no non-current financial liabilities outstanding as at the year end. The contractual expiry by maturity of the financial guarantees given by a former subsidiary and a third party (see Note 24 (a)) amounting to RMB87,000,000 (2012: RMB108,400,000) is less than a year based on the allocation of the maximum amount of the financial guarantee contract to the earliest period in which the guarantee could be called on. Fair Values of Financial Assets and Liabilities Fair value is defined as the amount at which the financial instruments could be exchanged in a current transaction between knowledgeable willing parties in an arms length transaction, other than in a forced or liquidation sale. Fair values are obtained from discounted cash flow models and option pricing models as appropriate. The following methods and assumptions are used to estimate the fair values of each class of financial instruments.
(e)
(i)
Non-current borrowings
The fair value (Note 24(c)) is calculated based on discounted expected future principal and interest cash flows. The discount rates used are based on market rates for similar instruments at the balance sheet date.
113
(ii)
Financial instruments
FRS 107 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: (a) (b) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
(c)
The following table presents the financial instruments measured at fair value at 30 June 2013. Level 1 Level 2 Level 3 Total
RMB000
RMB000
RMB000
38,830 38,830
4,061 4,061
38,830 42,891
4,061
2012
Liabilities
8,919
8,919
(ii)
RMB000
RMB000
RMB000
38,830 38,830
4,061 4,061
38,830 42,891
4,061
2012
Liabilities
8,919
8,919
There was no transfer between Level 1 and 2 during the financial year.
(iii) Other financial assets and financial liabilities The fair values of financial assets and liabilities with a maturity of less than one year (including cash and cash equivalents, trade and other receivables, short-term borrowings and trade and other payables) are close approximation of their carrying amounts due to the relatively short-term maturity of these financial instruments. Fair value of financial receivables is disclosed in Note 14(d).
(f)
Capital Risk The Groups and Companys objectives when managing capital are to safeguard the Groups and Companys ability to continue as a going concern and to maintain an optimal capital structure so as to maximise shareholders value. In order to maintain or achieve an optimal capital structure, the Group and Company may adjust the amount of dividend payment, issue new shares or obtain new borrowings. There is no change in capital management policies during the year. Management monitors capital based on a net debt against equity ratio. The Groups and Companys strategies are to maintain a prudent balance between the advantage and flexibility afforded by a strong capital position and the higher return on equity that are possible with greater leverage. Consistently, the Group and Company monitor capital based on a net debt against The net debt against equity ratio is calculated by dividing net debt by total equity. calculated as total liabilities (as shown in the statement of financial position, excluding tax and deferred tax liabilities) less cash and cash equivalents. Total equity comprises plus reserves. equity ratio. Net debt is provision for share capital
115
2013
2012
2013
2012
1,710,384
1,531,760
2,120,982
2,055,512
The Group and Company are in compliance with all externally imposed capital requirements for the financial years ended 30 June 2013 and 30 June 2012. As disclosed in Note 23, the Groups subsidiaries in the PRC are required to contribute to and maintain a non-distributable statutory reserve fund whose utilisation is subject to approval by the relevant PRC authorities. This externally imposed capital requirement has been complied with by the relevant subsidiaries for the financial year ended 30 June 2013 and 30 June 2012. No dividends to shareholders of certain subsidiaries shall be declared or paid until full repayment of certain loans (Note 24). This externally imposed capital requirement has been complied with by the relevant subsidiaries for the financial year ended 30 June 2013 and 30 June 2012.
32
Subsequent Events (a) On 18 July 2013, the Company has entered into a placement agreement (Placement Agreement) with Wang Yu Huei (the Placee), whereby the Placee has agreed to subscribe for 293,617,000 new ordinary shares in the capital of the Company (Placement Shares) at the issue price of S$0.05 per Placement Share, subject to and upon the terms of the Placement Agreement. In accordance with the terms and conditions of the Placement Agreement, the proposed placement was completed on 6 August 2013 and the Placement Shares were allotted and issued to the Placee. On 23 July 2013, the Company has established a S$300,000,000 multicurrency medium term note programme (the MTN Programme). The Company has appointed a financial institution to act as the sole arranger and dealer of the MTN Programme. Under the MTN Programme, the Company may, subject to compliance with all relevant laws, regulations and directives, from time to time issue notes in series or tranches in Singapore dollars or in other currencies, in various amounts and tenors, and which may bear fixed, floating, variable or hybrid rates of interests as may be agreed between the Company and the relevant dealer(s) or may not bear interest. On 2 August 2013, the Company has issued an aggregate principle amount of S$50,000,000 7.5% Fixed Rate Notes (Notes) due 1 August 2015 under the MTN Programme. The Notes will bear interest at a fixed rate of 7.5% per annum, payable semi-annually.
(b)
(d)
(e)
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Statistics of Shareholdings
As at 23 September 2013
Authorised share capital Issued and fully paid-up capital Class of shares Number of Shares Voting rights DISTRIBUTION OF SHAREHOLDINGS SIZE OF SHAREHOLDINGS 1 ~ 999 1,000 ~ 10,000 10,001 ~ 1,000,000 1,000,001 AND ABOVE TOTAL NO. OF SHAREHOLDERS 406 1,542 4,807 251 7,006 % 5.80 22.01 68.61 3.58 100.00 NO. OF SHARES 98,592 8,361,500 703,761,705 4,109,480,680 4,821,702,477 % 0.00 0.17 14.60 85.23 100.00 : : : : : HKD600,000,000 HKD482,170,248 Ordinary shares of HKD0.10 each 4,821,702,477 One vote per ordinary share
On the basis of the information available to the Company ,approximately 65.67% of the equity securities of the Company are held in the hands of the public. This is in compliance with Rule 723 of the Listing Manual of the SGX-ST, which requires at least 10% of a listed issuers equity securities to be held by the public. TWENTY LARGEST SHAREHOLDERS NAME 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. GIANT DELIGHT HOLDINGS LIMITED HSBC (SINGAPORE) NOMINEES PTE LTD TOTAL SUMMIT TECHNOLOGY LIMITED RAFFLES NOMINEES (PTE) LTD ANCIENT JADE INTERNATIONAL HOLDINGS LIMITED MAYBANK KIM ENG SECURITIES PTE LTD OCBC SECURITIES PRIVATE LTD CITIBANK NOMINEES SINGAPORE PTE LTD BOUSTEAD SINGAPORE LIMITED DBS NOMINEES PTE LTD HUA YUAN INTERNATIONAL LIMITED CHEONG SAE PENG PHILLIP SECURITIES PTE LTD UNITED OVERSEAS BANK NOMINEES PTE LTD DB NOMINEES (S) PTE LTD LEYAU YEW TECK UOB KAY HIAN PRIVATE LIMITED DMG & PARTNERS SECURITIES PTE LTD HAN SENG JUAN HL BANK NOMINEES (SINGAPORE) PTE LTD TOTAL SUBSTANTIAL SHAREHOLDERS NAME OF SUBSTANTIAL SHAREHOLDER Giant Delight Holdings Limited Wang Yu Huei Total Summit Technology Limited DIRECT INTEREST No. of shares held 794,203,561 500,000,000 360,000,000 % DEEMED INTEREST No. of shares held % NO. OF SHARES 794,203,561 562,859,954 360,000,000 253,393,707 223,413,333 173,676,734 167,029,809 103,631,396 100,000,000 97,212,892 85,000,000 76,000,000 74,884,420 59,740,026 59,439,089 30,000,000 25,878,601 20,547,000 20,000,000 19,582,000 3,306,492,522 % 16.47 11.67 7.47 5.26 4.63 3.60 3.46 2.15 2.07 2.02 1.76 1.58 1.55 1.24 1.23 0.62 0.54 0.43 0.41 0.41 68.57
Mr Lim Yu Neng, Paul will upon re-election as Director of the Company, remain as Chairman of the Audit Committee and a member of the Nominating Committee and will be considered independent for the purposes of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited.
Ms Cheng Fong Yee, Fonda will upon re-election as Director of the Company, remain as Chairman of the Remuneration Committee and a member of the Audit Committee and will be considered independent for the purposes of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited. 4. To re-appoint Messrs Moore Stephens LLP as Auditors of the Company and to authorise the Directors to fix their remuneration. (Resolution 5) AS SPECIAL BUSINESS To consider and, if thought fit, to pass the following ordinary resolutions with or without modifications: 5. Authority to allot and issue shares (a) That, pursuant to Companys Bye-laws, and the listing rules of the Singapore Exchange Securities Trading Limited, approval be and is hereby given to the Directors of the Company at any time to such persons and upon such terms and for such purposes as the Directors may in their absolute discretion deem fit, to: (i) (ii) issue shares in the capital of the Company whether by way of right, bonus or otherwise; make or grant offers, agreements or options that might or would require shares to be issued or other transferable rights to subscribe for or purchase shares (collectively, Instruments) including but not limited to the creation and issue of warrants, debentures or other instruments convertible into shares; issue additional instruments arising from adjustments made to the number of Instruments previously issued in the event of rights, bonus or capitalisation issues; and
(iii)
119
provided always that: (i) the aggregate number of shares to be issued pursuant to this resolution (including shares to be issued in pursuance of Instruments made or granted pursuant to this resolution) does not exceed fifty per cent. (50%) of the total number of issued shares excluding treasury shares of the Company, of which the aggregate number of shares (including shares to be issued in pursuance of Instruments made or granted pursuant to this resolution) to be issued other than on a pro rata basis to existing shareholders of the Company does not exceed twenty per cent. (20%) of the total number of issued shares excluding treasury shares of the Company, and for the purpose of this resolution, the issued share capital shall be the Companys total number of issued shares excluding treasury shares at the time this resolution is passed, after adjusting for: (a) (b) new shares arising from the conversion or exercise of any convertible securities, new shares arising from exercising share options or vesting of share awards outstanding or subsisting at the time this resolution is passed provided the options or awards were granted in compliance with Part VIII of Chapter 8 of the Listing Manual of the Singapore Exchange Securities Trading Limited; and any subsequent bonus issue, consolidation or subdivision of the Companys shares, and
(ii)
(c)
such authority shall, unless revoked or varied by the Company at a general meeting, continue in force until the conclusion of the next Annual General Meeting or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier. (See Explanatory Note i) (Resolution 6) 6. Authority to allot and issue shares under the HanKore Environment Tech Group Limited Scrip Dividend Scheme That authority be and is hereby given to the Directors to allot and issue from time to time such number of shares in the Company as may be required to be allotted and issued pursuant to the HanKore Environment Tech Group Limited Scrip Dividend Scheme. (See Explanatory Note ii) (Resolution 7) Authority to grant options and issue shares under the HanKore Employee Share Option Scheme That, the Directors of the Company be and are hereby empowered to offer and grant options, and to allot and issue or transfer from time to time such number of shares as may be required to be issued or transferred pursuant to the exercise of options granted under the HanKore Employee Share Option Scheme (the Scheme) provided always that the aggregate number of shares in respect of which such options may be granted and which may be issued pursuant to the Scheme shall not exceed fifteen per cent. (15%) of the total number of issued shares excluding treasury shares of the Company from time to time. (See Explanatory Note iii) (Resolution 8)
7.
Notes: 1. 2. 3. 4. A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy in his stead. A proxy need not be a member of the Company. If the appointor is a corporation, the proxy must be executed under seal or the hand of its duly authorised officer or attorney. The instrument appointing a proxy must be deposited at the office of the Companys Singapore Share Transfer Agent, Boardroom Corporate & Advisory Services Pte Ltd at 50 Raffles Place, #32-01 Singapore Land Tower, Singapore 048623 not less than forty-eight (48) hours before the time appointed for the Annual General Meeting.
Explanatory Notes:i. The Ordinary Resolution 6 proposed in item 5 is to authorise the Directors of the Company from the date of the above Meeting until the next Annual General Meeting to issue shares and convertible securities in the Company up to an amount not exceeding in aggregate 50 percent of the total number of issued shares excluding treasury shares of the Company, of which the total number of shares and convertible securities issued other than on a pro-rata basis to existing shareholders shall not exceed 20 percent of the total number of issued shares excluding treasury shares of the Company at the time the resolution is passed, for such purposes as they consider would be in the interests of the Company. This authority will, unless revoked or varied at a general meeting, expire at the next Annual General Meeting of the Company. Pursuant to the Special General Meeting of the Company held on 28 October 2005, the shareholders of the Company approved the passing of the ordinary resolution relating to the HanKore Environment Tech Group Limited Scrip Dividend Scheme. In the circular dated 11 October 2005, the Scrip Dividend Scheme provides members with the option to elect to receive shares in lieu of the cash amount of any dividend declared on their holding of shares. The Ordinary Resolution 7 proposed in item 6, if passed, will empower the Directors of the Company to allot and issue shares in the Company pursuant to the terms and conditions of the HanKore Environment Tech Group Limited Scrip Dividend Scheme. The Ordinary Resolution 8 proposed in item 7 above, if passed, will empower the Directors of the Company, to offer and grant options and to allot and issue or transfer shares upon the exercise of such options in accordance with the HanKore Employee Share Option Scheme not exceeding 15% of the total number of issued shares excluding treasury shares of the Company from time to time.
ii.
iii.
121
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