Contents 3 Corporate Information 4 Chairman’s Statement 7 Management Discussion and Analysis 9 Board of Directors and Senior Management 13 Corporate Governance Report 21 Directors’ Report 30 Independent Auditor’s Report 32 Consolidated Statement of Comprehensive Income 34 Consolidated Statement of Financial Position 36 Consolidated Statement of Changes in Equity 38 Consolidated Statement of Cash Flows 41 Notes to the Consolidated Financial Statements 124 Financial Summary Reduce•••••• Corporate InformatIon 03 Board of directors registered office executive directors Cricket Square Mr. Yu Chang Jian (Chairman, Hutchins Drive appointed on 27 May 2011) P.O. Box 2681 Mr. Cao Guo Xian (Chief Executive Officer, Grand Cayman KY1-1111 appointed on 4 July 2011) Cayman Islands Mr. Liu Xiao Guang (Appointed on 27 May 2011) head office aNd priNcipal place of Mr. Marcello Appella BusiNess Mr. Tang Zhi Bin Unit 1613–1618, (Appointed on 27 May 2011) 16th Floor, Bank of America Tower, Non-executive director 12 Harcourt Road, Central, Mr. Lim Jui Kian Hong Kong alternate Non-executive director auditors Mr. Cai Qiao Herman Deloitte Touche Tohmatsu (Alternate Director to Mr. Lim Jui Kian) legal adviser independent Non-executive directors Conyers Dill and Pearman Mr. Lo Ming Chi, Charles Jun He Law offices Mr. Pao Ping Wing King & Wood Mallesons Mr. Kwan Hung Sang, Francis Mr. Cheng Kai Tai, Allen priNcipal BaNkers Bank of China (Hong Kong) Limited committees The Hongkong and Shanghai Banking Corporation Limited audit committee share registrars aNd traNsfer offices Mr. Lo Ming Chi, Charles (Chairman) Mr. Pao Ping Wing principal registrar in cayman islands Mr. Kwan Hung Sang, Francis Butterfield Fulcrum Group (Cayman) Limited Mr. Lim Jui Kian Butterfield House 68 Fort Street Nomination committee P. O. Box 705 Mr. Yu Chang Jian (Chairman, George Town appointed on 27 May 2011) Grand Cayman Mr. Lo Ming Chi, Charles Cayman Islands Mr. Pao Ping Wing Mr. Kwan Hung Sang, Francis Branch registrar in hong kong Tricor Investor Services Limited remuneration committee 26th Floor, Tesbury Centre Mr. Pao Ping Wing (Chairman) 28 Queen’s Road East Mr. Kwan Hung Sang, Francis Wanchai Mr. Yu Chang Jian Hong Kong (Appointed on 27 May 2011) corporate WeBsite compaNy secretary www.neeh.com.hk Ms. Wong Bing Ni stock code authorized represeNtatives 03989 Mr. Yu Chang Jian Ms. Wong Bing Ni Annual Report 2011 04 ChaIrman’s statement The year 2011 was a key milestone for the development of New Environmental Energy Holdings Limited (the “Group”). Through the placing of shares on 23 May 2011, the Group introduced Beijing Capital (Hong Kong) Limited (“Beijing Capital HK”) as its strategic shareholder. Beijing Capital HK is directly owned by Beijing Capital Co., Ltd. (“Beijing Capital”, SSE stock code: 600008), which is a listed company under Beijing Capital Group Co., Ltd. Beijing Capital Group Co., Ltd. is a state-owned enterprise owned by the People’s Government of Beijing Municipality and directly under the supervision of the State-Owned Assets Supervision and Administration Commission of the Beijing Municipality. Among all of the listed A-share companies in the PRC, Beijing Capital is the largest water service enterprise in the PRC. It has been awarded “10 Most Influential Water Service Enterprises in the PRC” (「中國水業十大影響 力企業」) by the industry for 9 consecutive years. Its water treatment capacity amounted to about 13 million tonnes per day, which was ranked among the top 10 in the world. Currently, Beijing Capital has water service projects in 15 provinces and 35 municipalities including Beijing, Hunan, Shandong, Shanxi and Anhui, covering a population of 28 million. The introduction of Beijing Capital as one of its substantial shareholders was a key strategic decision made by the Group. The Board of Directors expected that, through share acquisition, Beijing Capital would bring irreplaceable synergic effect for the business expansion of the Group and, at the same time, further improve the professional services in the environmental protection industry and governance of the Group. On 27 May 2011, the Board of the Group announced that I and Mr. Liu Xiao Guang were appointed as executive directors and I was also appointed as the chairman. Subsequently, on 4 July 2011, Mr. Cao Guo Xian was appointed as an executive director and the chief executive officer by the Board. As a result, a management team with extensive experience in the environmental protection industry was formed. Each member of the Board, including Mr. Liu Xiao Guang, possesses profound experience and unique insights in the areas of international capital market, investment banking, project investment, operation management, urban infrastructure and environmental protection. We have a vision to diversify the business scope of the Group to elevate its services to a more specified and professional level. Meanwhile, in order to fully prepare and position the Group for future business mergers and acquisitions and expansion, the Group improves its standard of the existing professional departments including legal, financial, technical and engineering management departments as well as the project management department. Over the last year, under the leadership of Mr. Cao Guo Xian, the new chief executive officer, the management strove hard to a clearer future development strategy for the Group. The Group was determined to increase its market share in the solid waste-to-energy treatment sector and become the leading player driving the industry forward. Driven by the 12th Five Year Plan, the value of output of the solid waste industry in the PRC will amount to approximately RMB336 billion. Refuse incineration plants will cover all directly-controlled municipalities, provincial capital cities and cities listed independently on the state plan. Over 80% of the domestic garbage for all cities in the PRC will be subject to harmless treatment. Leveraging on the close relationship established by Beijing Capital with the local governments in respect of water service business as well as the its networking resources, the Group will be able to benefit from the business opportunities arising from the state policies. ChaIrman’s statement (Continued) 05 Globally, imminent crises like pollution, climate change and energy shortage as well as the nuclear power accident in Japan prompted the government of different countries to review their energy policies. Currently, land filling and incineration facilities in the PRC can no longer accommodate the ever-increasing garbage output, leading to an urging market demand on effective waste treatment. We have the bounded duty to provide local governments with one-stop garbage management solutions that perfectly meet the domestic needs. We aim to serve people of the nation by bringing about a better living environment. Looking forward, the Group will further develop an integrated industry chain on waste treatment, devote its efforts in business investment and mergers and acquisitions which are value-adding to the environmental industry, with an aim to achieve sustainable development in the urban environmental industry. Chairman mr. yu chang Jian Annual Report 2011 Reuse•••••• MANAGEMENT DIsCUSSION AND ANALYsIs 07 overvieW The Group’s revenue, from its continuing operations, reached approximately HK$49.0 million, representing decrease of approximately 74.9% over last year. The net loss attributable to the owners of the Company amounted to approximately HK$325.5 million for the year under review. tradiNg of apparel aNd accessories During the year under review, the Group’s revenue from its trading of apparel and accessories business reached approximately HK$28.9 million, representing decrease of approximately 79.9%, as compared to last year, which accounted for approximately 59.0% of the Group’s revenue in the financial year 2011. For the year under review, its gross loss is approximately 97.0%. Waste treatmeNt aNd Waste-to-Energy BusiNess During the year under review, the Group’s revenue from its waste treatment and waste-to-energy business reached approximately HK$20.1 million, representing decrease of approximately 61.0%, as compared to last year, which accounted for approximately 41.0% of the Group’s revenue in the financial year 2011. For the year under review, its gross loss is approximately 175.0%. operatiNg expeNses In 2011, the Group’s distribution and selling expenses of the continuing operations, decreased significantly by 96.4% to HK$0.1 million, as compared to last year, the decrease is mainly attributable to the manufacturing of apparel and accessories business, which was disposed of and completed on 30 November 2010. The Group’s administrative expenses of the continuing operations decreased by 62.1% from HK$139.0 million to HK$52.7 million during the year under review, the decrease is mainly attributable to the manufacturing of apparel and accessories business, which was disposed of and completed on 30 November 2010. fiNaNce costs Finance costs, for the Group’s continuing operations, decreased by 25.9% to HK$60.2 million, as compared to last year. The decrease is mainly attributable to the decrease in the interests on promissory notes and borrowings. liquidity, fiNaNcial resources aNd capital structure As at 31 December 2011, the Group had cash and bank balances of HK$54.9 million, primarily denominated in RMB and HK dollars (31 December 2010: HK$37.8 million), and total borrowings of HK$52.3 million (31 December 2010: HK$67.7 million), all of which are short-term borrowings. The Group’s borrowings were denominated in RMB and HK dollars. As at 31 December 2011, all of the Group’s borrowings were subject to fixed interest rates. The net gearing ratio, which is calculated on the basis of total borrowings (net of cash and bank balances) over the Group’s total shareholders’ equity, was 0.44 as at 31 December 2010. Net gearing ratio has not been calculated as at 31 December 2011 as cash and cash equivalent exceeded borrowings as at 31 December 2011.