C CARBONNEUTRAL (01372): Clarification on Matters Relating to Media Reports and the Stock Exchange's Disciplinary Action Announcement

C CARBONNEUTRAL (01372) issued an announcement. This announcement is made voluntarily by the board of directors (the "Board") of C CARBONNEUTRAL Development Group Limited (the "Company", together with its subsidiaries, the "Group") to provide shareholders and potential investors of the Company with supplementary factual background and clarification regarding the two core matters involved in the disciplinary action announcement published by The Stock Exchange of Hong Kong Limited (the "Stock Exchange") on 3 November 2026 (the "Announcement"). I. Regarding the "overstatement" of carbon credit assets not a deliberate overstatement, but caused by timing differences in VCS issuance The Stock Exchange's announcement pointed out that the Company's second interim results and second interim report for the 12 months ended 31 December 2023 overstated carbon credit assets by approximately HK$58.7 million. The Board wishes to clarify that this difference did not arise from artificial inflation of asset value, but from a mismatch between the timing of issuance of Verified Carbon Units (VCUs) for the relevant carbon credit assets in the Verra Registry and the timing of recognition in the financial reports. The Group's carbon credit assets are mainly projects under the Verified Carbon Standard (VCS), and the relevant projects have completed development in accordance with the requirements of the Verra mechanism and have been formally submitted to Verra for registration. However, during 2023, Verra initiated additional reviews and suspension procedures for certain methodologies and project types, causing a significant slowdown in project review and VCU issuance progress across the Verra platform. As a result, the VCS verified emission reductions of the Group's relevant projects were not able to complete issuance and enter the Group's Verra Registry account before the end of the 2023 financial reporting period. When preparing the 2023 second interim financial information, management recognized the relevant carbon credit assets based on the expected number of VCUs and fair value, on the judgment that the projects had been submitted to Verra for registration and would under normal circumstances be expected to complete issuance within a short period. The basis of this judgment was the development progress and commercial substance of the projects under the Verra mechanism, rather than an intention to inflate assets. However, ultimately because Verra's approval cycle exceeded expectations, the relevant VCUs were not able to be "credited" before the end of the financial reporting period, resulting in a difference between the amount of assets recognized and the carbon credit assets actually held at the end of the reporting period. The Stock Exchange's Listing Committee subsequently determined, applying the strict criteria of financial reporting standards, that such difference constituted an overstatement. The Board acknowledges that there is room for improvement in the compliance review of financial reporting where amounts were recorded before the recognition conditions for the relevant assets had been fully satisfied. The Board has caused management, in subsequent financial reports, to strictly use the actual issuance of VCUs and their entry into the Group's Registry account as the basis for the timing of asset recognition, so as to avoid similar timing differences again affecting the accuracy of financial disclosure. II. Regarding the failure to timely announce the acquisition of a mainland company the acquisition has been completed, and there was negligence in the timing of disclosure The Stock Exchange's announcement also pointed out that in March 2024, the Company acquired a company in mainland China for HK$30 million but failed to timely make disclosure in accordance with the requirements of Chapter 13 and Chapter 14 of the Listing Rules (the "Listing Rules"). The Board confirms that the acquisition has been completed and provides the following explanation regarding the negligence in the timing of disclosure. The intention for the acquisition had been formed within the Company's internal decision-making process, and management at the time had initiated the corresponding internal assessment and authorization process for the acquisition intention. However, after completion of the acquisition, the team responsible for handling disclosure matters, due to insufficient understanding of the triggering point and announcement deadline requirements for discloseable transactions under the Listing Rules, failed to timely submit the completion of the acquisition to the Board and publish an announcement. This omission was unintentional and inadvertent, and was not a deliberate concealment of transaction information. Upon learning of the relevant circumstances, the Board immediately took remedial actions, including causing the Company to publish the relevant announcement as required by the Stock Exchange, so as to restore compliance of its disclosure status. The Board deeply regrets the above disclosure delay and has instructed the internal control and compliance department to establish more prudent verification mechanisms for the identification, size tests and announcement deadlines of discloseable transactions. III. Remedial measures To prevent recurrence of similar matters, the Board has resolved and is implementing the following remedial measures: (1) Strengthen the financial verification mechanism for carbon asset recognition: In respect of the accounting recognition of carbon credit assets, establish a recognition policy with actual crediting in the Verra Registry as a precondition. The finance department must obtain the actual holdings records of the Registry account at each reporting period end, and the external auditors shall conduct a special review of the recognition timing to ensure that financial disclosure is consistent with the actual asset status. (2) Improve internal controls for discloseable transactions: Amend the Group's "Discloseable Transactions Management Policy" to make clear that any external investment or acquisition triggers the compliance department's size test and disclosure deadline assessment at the stage of signing the intention document, and the compliance department has the authority to suspend the transaction closing process before the announcement is published. (3) Mandatory compliance training and pre-clearance mechanism with external advisers: All directors and senior management involved in Chapters 13, 14 and 14A of the Listing Rules must complete compliance training courses recognized by the Stock Exchange; thereafter, for any project involving discloseable transactions, a written opinion from external legal advisers on disclosure obligations must be obtained before submission to the Board for consideration. (4) Internal reporting system for continuous disclosure status: The compliance department must submit to the Board's audit committee on a monthly basis a ledger of discloseable transactions and material progress of carbon assets, ensuring that any matter triggering disclosure obligations enters the announcement process within the shortest time reasonably practicable. The Board hereby emphasizes that the Group's carbon asset development business continues to advance, and the registration and issuance work of the relevant VCS projects has never ceased. The Company will continue to maintain communication with Verra, track the approval progress of projects with unfinished issuance, and carry out corresponding accounting treatment and disclosure in accordance with applicable standards after the VCUs are actually credited. The Company will also prudently assess the impact of the Stock Exchange's disciplinary action and will publish further announcements on any material progress in due course.