(2) PROPOSED SHARE CONSOLIDATION - irasia.com

If you are in any doubt as to any aspect of this Circular or as to the action to be taken, you should consult your licensed securities dealer, bankmanager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in China Yunnan Tin Minerals Group Company Limited, you should at once hand this Circular andaccompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sales ortransfer was effected for transmission to the purchaser or the transferee.

This Circular appears for information only and does not constitute an invitation or offer to shareholders or any other persons to acquire, purchase, orsubscribe for securities of the Company.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this Circular,make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or inreliance upon the whole or any part of the contents of this Circular.

(Incorporated in Hong Kong with limited liability)

(Stock Code: 263)

(1) VERY SUBSTANTIAL ACQUISITION ANDCONNECTED TRANSACTION;

(2) PROPOSED SHARE CONSOLIDATION;(3) PROPOSED RIGHTS ISSUE ON THE BASIS OF NINE RIGHTS SHARES

FOR EVERY ONE CONSOLIDATED SHARE HELDAT THE RECORD DATE;

AND(4) NOTICE OF EXTRAORDINARY GENERAL MEETING

Underwriter to the Proposed Rights Issue

FREEMAN SECURITIES LIMITED

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

A letter from the Board is set out on pages 10 to 63 of this Circular.

A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 64 to 65 of thisCircular. A letter from Nuada Limited, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders,containing its advice in respect of the Rights Issue, is set out on pages 66 to 90 of this Circular.

A notice convening an extraordinary general meeting of China Yunnan Tin Minerals Group Company Limited to be held at Falcon Room II,Basement, Gloucester Luk Kwok Hong Kong, 72 Gloucester Road, Wanchai, Hong Kong on Thursday, 5 February 2015 at 11:00 a.m. to approve thematters referred herein is set out on pages 195 to 198 of this Circular.

If you do not intend to attend and vote at such meeting in person, you are requested to complete the form of proxy enclosed in accordance with theinstructions printed thereon and return it to the Company’s branch share registrars in Hong Kong, Tricor Secretaries Limited at Level 22, HopewellCentre, 183 Queen’s Road East, Hong Kong as soon as practicable but in any event no later than 48 hours before the time appointed for holding suchmeeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at themeeting or any adjourned meeting should you so wish.

The Shares will be dealt in on an ex-rights basis from 9:00 a.m. on Wednesday, 11 February 2015. Dealings in the Rights Shares in their nil-paidform will take place from Thursday, 26 February 2015 to Thursday, 5 March 2015 (both dates inclusive). The Underwriter has conditionallyagreed to fully underwrite not less than 700,958,385 Underwritten Shares but not more than 703,352,934 Underwritten Shares not taken upby the Qualifying Shareholders pursuant to the Underwriting Agreement. It is expected that the conditions referred to in the section headed‘‘Conditions of the Rights Issue’’ in this Circular are to be fulfilled on or before 4:00 p.m. on Friday, 13 March 2015. If the conditions referred toin that section are not fulfilled, the Underwriting Agreement shall terminate and the Rights Issue will not proceed. Any person contemplatingbuying or selling Existing Shares or Consolidated Shares from the date of this Circular and up to the date on which all the conditions of the RightsIssue are fulfilled, and any dealings in the Rights Shares in their nil-paid form between Thursday, 26 February 2015 and Thursday, 5 March 2015(both dates inclusive) will accordingly bear the risk that the Rights Issue may not become unconditional and/or may not proceed. Any personcontemplating dealing in the Shares and/or the Rights Shares in their nil-paid form are recommended to consult his/her/its/their ownprofessional adviser.

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

24 December 2014

Page

Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Termination of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

Appendix I — Financial Information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Appendix II — Unaudited Pro Forma Statement of Adjusted ConsolidatedNet Tangible Assets of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

Appendix III — Financial Information of the Target Group . . . . . . . . . . . . . . . . . . . 119

Appendix IV — Unaudited Pro Forma Financial Information ofthe Enlarged Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

Appendix V — Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

Appendix VI — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195

CONTENTS

– i –

The expected timetable is set out below:

Hong Kong Times

Latest time for lodging proxy forms for the EGM . . . . . . . . . . . . . . .11:00 a.m. on Tuesday,3 February 2015

Expected time and date of the EGM toapprove the Proposed Share Consolidationand Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . 11:00 a.m. on Thursday, 5 February 2015

Announcement of the results of the EGM . . . . . . . . . . . . . . . . . . Thursday, 5 February 2015

Effective date of the Share Consolidation . . . . . . . . . . . . . . . . . . . . Friday, 6 February 2015

Commencement of dealings in the Consolidated Shares. . . . . . . . . . . . . .9:00 a.m. on Friday,6 February 2015

First day of free exchange of certificates for theExisting Shares into new certificates for theConsolidated Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 6 February 2015

Original counter for trading in board lots of 4,000(in form of existing share certificates)temporarily closes. . . . . . . . . . . . . . . . . . . . . . . . . . 9:00 a.m. on Friday, 6 February 2015

Temporary counter for trading in board lots of800 Consolidated Shares (in the form ofexisting share certificates) opens. . . . . . . . . . . . . . . . 9:00 a.m. on Friday, 6 February 2015

Last day of dealings in the Consolidated Shareson a cum-rights basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 10 February 2015

Commencement of dealings in the ConsolidatedShares on an ex-rights basis . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 11 February 2015

Latest time for lodging transfer of theConsolidated Shares in order to be qualifiedfor the Rights Issue. . . . . . . . . . . . . . . . . . . . . . 4:30 p.m. on Thursday, 12 February 2015

Closure of register of members to determine theeligibility of the Rights Issue (both dates inclusive). . . . . . . . . Friday, 13 February 2015 to

Monday, 23 February 2015

Record Date for the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . Monday, 23 February 2015

Register of members re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 24 February 2015

Despatch of the Prospectus Documents . . . . . . . . . . . . . . . . . . . . Tuesday, 24 February 2015

EXPECTED TIMETABLE

– ii –

Hong Kong Times

Original counter for trading in the Consolidated Sharesin board lots of 4,000 Consolidated Shares(in the form of new share certificates forConsolidated Shares) re-opens . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:00 a.m. on Tuesday,

24 February 2015

Parallel trading in the Consolidated Shares(in the form of new and existing certificates) commences . . . . . . . . . 9:00 a.m. on Tuesday,

24 February 2015

Designated broker starts to stand in the marketto provide matching services for the sale andpurchase of odd lots of the Consolidated Shares . . . . . . . . . . . . . . . 9:00 a.m. on Tuesday,

24 February 2015

First day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . 9:00 a.m. on Thursday,26 February 2015

Latest time for splitting nil-paid Rights Shares . . . . . . . . . . . . . . . . . 4:30 p.m. on Monday,2 March 2015

Last day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . .4:00 p.m. on Thursday,5 March 2015

Latest time for acceptance of, and payment for,the Rights Shares and application for excessRights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Tuesday,

10 March 2015

Latest time for termination of the UnderwritingAgreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Friday,

13 March 2015

Designated broker ceases to stand in the market toprovide matching services for the sale and purchase ofodd lots of the Consolidated Shares closes . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Monday,

16 March 2015

Temporary counter for trading in board lots of800 Consolidated Shares (in the form ofexisting share certificates) closes . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Monday,

16 March 2015

Parallel trading in the Consolidated Shares(in the form of new and existing certificates) ends . . . . . . . . . . . . . 4:00 p.m. on Monday,

16 March 2015

EXPECTED TIMETABLE

– iii –

Hong Kong Times

Last day of free exchange of certificates for theExisting Shares into new certificates for theConsolidated Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:30 p.m. on Wednesday,

18 March 2015

Announcement for result of the Rights Issue . . . . . . . . . . . . . . . . . Thursday, 19 March 2015

Refund cheques for wholly and partiallyunsuccessful applications for excess RightsShares expected to be posted . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 20 March 2015

Certificates for the fully-paid Rights Sharesexpected to be despatched . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 20 March 2015

Dealings in fully-paid Rights Shares commence . . . . . . . . . . . . . . . . . 9:00 a.m. on Monday,23 March 2015

The above timetable refers to Hong Kong Times. Dates or deadlines specified in thisCircular are indicative only and may be varied by agreement between the Company and theUnderwriter. Any consequential changes to the expected timetable will be published or notifiedto the Shareholders as and when appropriate.

Effect of bad weather on the latest time for acceptance of and payment for the RightsIssue and for application and payment for excess Rights Shares

If there is:

. a tropical cyclone warning signal number 8 or above, or

. a ‘‘black’’ rainstorm warning

(i) in force in Hong Kong at any local time before 12:00 noon and no longer in forceafter 12:00 noon on Tuesday, 10 March 2015, the latest time of acceptance of andpayment for the Rights Shares will not take place at 4:00 p.m. on Tuesday, 10 March2015, but will be extended to 5:00 p.m. on the same day instead; and

(ii) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. onTuesday, 10 March 2015, the latest time of acceptance of and payment for the RightsShares will not take place at 4:00 p.m. on Tuesday, 10 March 2015, but will berescheduled to 4:00 p.m. on the following Business Day which does not have eitherof those warnings in force at any time between 9:00 a.m. and 4:00 p.m..

If the latest time for acceptance of and payment for the Rights Shares does not take placeon Tuesday, 10 March 2015, the dates mentioned in the section headed ‘‘Expected timetable’’in this Circular may be affected. A further announcement will be made by the Company insuch event.

EXPECTED TIMETABLE

– iv –

In this Circular, the following expressions have the following meanings unless the contextrequires otherwise:

‘‘acting in concert’’ has the meaning ascribed thereto under the Takeovers Code

‘‘Acquisition’’ acquisition of 40,000 ordinary shares of US$1.00 each inthe Target Company, representing 40% of the issued sharecapital of the Target Company pursuant to the Sale andPurchase Agreement

‘‘associate(s)’’ has the meaning ascribed thereto under the Listing Rules

‘‘Board’’ the board of Directors

‘‘Business Day(s)’’ means a day on which banks in Hong Kong are open forbusiness other than (i) a Saturday or (ii) a ‘‘generalholiday’’ as defined in Section 2 of the General HolidaysOrdinance Cap.149, or one of the days specified from timeto time in the schedule to that Ordinance as being ‘‘generalholidays’’ under Section 3 thereof or (iii) a day on which ablack rainstorm warning or tropical cyclone warning signalnumber 8 or above is hoisted in Hong Kong at any timebetween 9:00 a.m. and 12:00 noon and is not lowered at orbefore 12:00 noon and ‘‘Business Days’’ shall be construedaccordingly

‘‘BVI’’ the British Virgin Islands

‘‘CCASS’’ the Central Clearing and Settlement System established andoperated by HKSCC

‘‘Circular’’ a circular containing, among other things, (i) further detailsof the Acquisition; (ii) financial information and otherinformation of the Target Group; (iii) the pro formafinancial information of the Enlarged Group as a result ofthe Acquisition and the Rights Issue; (iv) valuation reportof the Development Project; (v) details of the ShareConsolidation and the Rights Issue; (vi) the letter from theIndependent Financial Adviser to advise the IndependentShareholders and the Independent Board Committeeregarding the Acquisition and the Rights Issue; and (vii) anotice of the EGM to be despatched by the Company to theShareholders

‘‘Companies Ordinance’’ the Companies Ordinance, Chapter 622 of the Laws ofHong Kong

DEFINITIONS

– 1 –

‘‘Company’’ China Yunnan Tin Minerals Group Company Limited(Stock Code: 263), a company incorporated in Hong Kongwith limited liability, the Shares of which are listed on themain board of the Stock Exchange

‘‘Completion’’ the completion of the Sale and Purchase Agreement and/orthe Rights Issue, as the context may require

‘‘Connected person(s)’’ has the meaning ascribed thereto under the Listing Rules

‘‘Consideration’’ the consideration of the Acquisition

‘‘Consolidated Share(s)’’ ordinary share(s) each in the share capital of the Companyimmediately following and arising from the consolidation ofevery five (5) Existing Shares

‘‘Development Project’’ means the development project of residential andcommercial complex known as ‘‘金唐新城市廣場’’

comprising Phase I & Phase II on the Land with anapproximately aggregate gross floor area of 187,273.79square meters

‘‘Development Project— Phase I’’

means phase I of the Development Project known as ‘‘金唐

新城市廣場一期’’ with a gross floor area of approximate21,581.20 square meters

‘‘Development Project— Phase II’’

means phase II of the Development Project known as ‘‘金唐

新城市廣場二期’’ with a gross floor area of approximate165,692.59 square meters

‘‘Directors’’ the directors of the Company

‘‘EAF(s)’’ or ‘‘ExcessApplication Form(s)’’

the form of application for use by the QualifyingShareholders who wish to apply for excess Rights Shares,being in such usual form as may be agreed between theCompany and the Underwriter

‘‘EGM’’ the extraordinary general meeting of the Company to beconvened for the purpose of considering and, if thought fit,approving the Acquisition, the Sale and PurchaseAgreement, the Share Consolidation and the Rights Issueand the transactions contemplated thereunder

‘‘Enlarged Group’’ the Group and the Target Group upon Completion

DEFINITIONS

– 2 –

‘‘Excluded Shareholder(s)’’ the Overseas Shareholders at the Record Date where theDirectors, based on opinions provided by the Company’slegal advisers, consider it necessary or expedient not tooffer the Rights Shares to such Shareholders on accounteither of legal restrictions under the laws of the relevantplace or the requirements of the relevant regulatory body orstock exchange in that place

‘‘Existing Share(s)’’ the ordinary share(s) each in the existing share capital ofthe Company before the Share Consolidation becomingeffective

‘‘GFA’’ gross floor area

‘‘Group’’ the Company and its subsidiaries

‘‘HKFRS’’ the Hong Kong Financial Reporting Standards issued by theHong Kong Institute of Certified Public Accountants

‘‘HKSCC’’ Hong Kong Securities Clearing Company Limited

‘‘Hong Kong’’ the Hong Kong Special Administrative Region of thePeople’s Republic of China

‘‘Independent BoardCommittee’’

the independent board committee of the Board, comprisingof Dr. Wong Yun Kuen, Mr. Wong Shun Loy and Mr. HuChao, being all the independent non-executive Directors,established for the purpose of, among, other things,advising the Independent Shareholders in respect of theAcquisition, the Sale and Purchase Agreement and thetransactions contemplated thereunder

‘‘Independent FinancialAdviser’’

Nuada Limited, a licensed corporation to carry out businessin Type 6 (advising on corporate finance) regulated activityunder the SFO, being the independent financial adviser tothe Independent Board Committee and the IndependentShareholders in respect of the Acquisition and the RightsIssue

‘‘Independent Shareholders’’ the Shareholders other than those who are required toabstain from voting at the EGM under the Listing Rules inrelation to the resolution(s) approving the Acquisition, theSale and Purchase Agreement, the Rights Issue and thetransactions contemplated thereunder and their respectiveassociates

DEFINITIONS

– 3 –

‘‘Independent Third Party(ies)’’ person(s) or company(ies) who/which is/are not connectedwith the Company, any of the director, chief executive orsubstantial shareholders (as defined under the Listing Rules)

‘‘Issue Date’’ the date of issue of each of the Convertible Notes

‘‘Jintang’’ Kim Dynasty Realty & Development Co. Ltd. (重慶金唐房

地產開發有限公司), a wholly foreign owned enterpriseestablished in the PRC on 29 July 2002, the registeredcapital of which is US$3 million

‘‘Land’’ the piece of land situate at Long Tower Street* in the westsouthern part of the Yubei Zone, Chongqing City (重慶渝北

區龍塔街道) in the PRC with a site area of approximately30,817 square meters

‘‘Last Trading Day’’ 24 June 2014, being the last trading day for the ExistingShares on the Stock Exchange before the release of theannouncement in relation to the Acquisition

‘‘Latest Practicable Date’’ 22 December 2014, being the latest practicable date prior tothe printing of this Circular for the purpose of ascertainingcertain information contained herein

‘‘Latest Time for Acceptance’’ 4:00 p.m. on Tuesday, 10 March 2015 or such later time ordate as may be agreed between the Underwriter and theCompany, being the latest time for acceptance of, andpayment for, the Rights Shares as described in theProspectus Documents

‘‘Latest Time for Termination’’ 4:00 p.m. on Friday, 13 March 2015, or such other time asmay be agreed between the Company and the Underwriter

‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the StockExchange

‘‘Loan Agreements’’ a loan agreement entered into between Jintang and AnxinTrust Investment Company Limited (‘‘Anxin’’) dated 21August 2013 for banking facilities currently in theaggregate principal amount of RMB900 million togetherwith all ancillary securities documentations

‘‘Long Stop Date’’ 30 June 2015 or such other later date as shall be agreed bythe Purchaser and the Vendor in writing

‘‘Maturity Date’’ the day last preceding the fifth anniversary of the IssueDate or, if that is not a Business Day, the first BusinessDay thereafter

DEFINITIONS

– 4 –

‘‘Mr. Liang’’ Mr. Liang Shan, being the ultimate beneficial owner of theVendor, the executive Director of the Company

‘‘Overseas Shareholder(s)’’ the Shareholder(s) whose address(es) on the register ofmember of the Company are outside Hong Kong at theclose of the business on the Record Date

‘‘PAL(s)’’ provisional allotment letter(s) for the Rights Issue

‘‘PRC’’ the People’s Republic of China, which for the purpose ofthis Circular excludes Hong Kong, Macau and Taiwan

‘‘Prospectus’’ the prospectus to be despatched to the Shareholders on theProspectus Posting Date in connection with the Rights Issuein such form as may be agreed between the Company andthe Underwriter

‘‘Prospectus Documents’’ the Prospectus, the PAL(s) and EAF(s)

‘‘Prospectus Posting Date’’ Tuesday, 24 February 2015 or such other day as may beagreed between the Company and the Underwriter, beingthe date of despatch of the Prospectus Documents

‘‘Purchaser’’ Max Leap Asia Limited, a company incorporated in the BVIwith limited liability on 27 March 2014, which is whollyowned by the Company

‘‘Qualifying Shareholders’’ the Shareholders, whose names appear on the register ofmembers of the Company as at the Record Date, other thanthe Excluded Shareholders

‘‘Record Date’’ Monday, 23 February 2015, being the date by reference towhich entitlements to the Rights Issue will be determined

‘‘Registrar’’ Tricor Secretaries Limited, Level 22, Hopewell Centre, 183Queen’s Road East, Hong Kong, the Company’s branchshare registrar and transfer office in Hong Kong

‘‘Rights Issue’’ the proposed issue by way of rights of Rights Shares at aprice of HK$0.6 per Rights Shares on the basis of nine (9)Rights Shares for every one (1) Consolidated Share thenheld on the Record Date

DEFINITIONS

– 5 –

‘‘Rights Share(s)’’ Not less than 700,958,385 Consolidated Shares and notmore than 703,352,934 Consolidated Shares, proposed to beoffered to the Qualifying Shareholders for subscription onthe basis of nine (9) Rights Shares for every one (1)Consolidated Share held at the Record Date pursuant to theRights Issue

‘‘Sale and Purchase Agreement’’ the sale and purchase agreement dated 24 June 2014 asamended and supplemented by the supplemental agreementsdated 18 August 2014 and 24 October 2014 entered intoamong the Purchaser and the Vendor in relation to theAcquisition

‘‘Sale Shares’’ 40,000 ordinary shares of US$1.00 each issued by theTarget Company to the Vendor, representing 40% of theissued share capital of the Target Company, to be boughtand sold on the terms of the Sale and Purchase Agreement

‘‘Scheme Mandate Limit’’ the maximum number of Shares which may be issued uponexercise of all Share Options to be granted under the ShareOption Scheme

‘‘SFC’’ the Securities and Futures Commission of Hong Kong

‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of theLaws of Hong Kong)

‘‘Share(s)’’ ordinary shares in the share capital of the Company

‘‘Share Consolidation’’ the consolidation of every five (5) Existing Shares each inthe capital of the Company into one (1) Consolidated Share

‘‘Shareholders’’ holders of the Share(s)

‘‘Share Option(s)’’ the options granted by the Company to subscribe forExisting Shares or the Consolidated Shares (as the casemay be) pursuant to the Share Option Scheme

‘‘Share Options Scheme’’ the share option scheme adopted by the Company on 8November 2006 at the extraordinary general meeting of theCompany

‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited

‘‘Subscription Price’’ the subscription price of HK$0.6 per Rights Share

‘‘subsidiary’’ or ‘‘subsidiaries’’ has the meaning ascribed thereto under the Listing Rules

‘‘Takeovers Code’’ the Hong Kong Code on Takeovers and Mergers

DEFINITIONS

– 6 –

‘‘Target Company’’ China Sky Holdings Limited (中天控股有限公司), acompany incorporated in BVI with limited liability on 9May 2002, which is owned as to 87.2% and 12.8% byPerfect Ease and an individual respectively

‘‘Target Group’’ the Target Company and Jintang

‘‘Underwriter’’ Freeman Securities Limited, a licensed corporation to carryout business in Type 1 (dealing in securities) regulatedactivities under the SFO

‘‘Underwriting Agreement’’ the underwriting agreement dated 18 August 2014 asamended and supplemented by the supplemental agreementdated 24 October 2014 entered into between the Companyand the Underwriter in relation to the Rights Issue

‘‘Underwritten Shares’’ not less than 700,958,385 Underwritten Shares and notmore than 703,352,934 Underwritten Shares, not taken upby the Qualifying Shareholders

‘‘Valuation’’ the valuation of the market value of the DevelopmentProject expressed in RMB

‘‘Valuation Report’’ the valuation report to be prepared and issued by anindependent valuer, in respect of the Valuation

‘‘Vendor’’ Perfect Ease International Limited, a company incorporatedin the BVI with limited liability on 2 January 2013, whichis wholly owned by Mr. Liang

‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong

‘‘RMB’’ Renminbi, the lawful currency of the PRC

‘‘%’’ per cent

Note: The exchange rate of HK$1.25 = RMB1.00 adopted in this Circular is for illustration purpose only unlessotherwise stated. It does not represent that the amounts in RMB were or may have been converted into HK$at such exchange rate or any exchange rate or at all.

DEFINITIONS

– 7 –

Termination of the Underwriting Agreement

If at any time between the date hereof and 4:00 p.m. on the Latest Time for Termination,one or more of the following events or matters (whether or not forming part of a series ofevents) shall occur, arise or exist:

(a) the Underwriter shall become aware of the fact that, or shall have reasonable causeto believe that, (i) any of the representations or warranties contained in theUnderwriting Agreement is untrue, inaccurate, misleading or breached; or (ii) anyevent occurring or matter arising on or after the date of the Underwriting Agreementand prior to the Latest Time for Termination which if it had occurred or arisen beforethe date of the Underwriting Agreement would have rendered any of therepresentations or warranties contained hereunder untrue, inaccurate, misleading orbreached, and in each case the same is (in the reasonable opinion of the Underwriter)material in the context of the Rights Issue; or

(b) any material adverse change in market conditions (including, without limitation, achange in fiscal or monetary policy or foreign exchange or currency markets,suspension or restriction of trading in securities, imposition of economic sanctions,on Hong Kong, the PRC or other jurisdiction relevant to the Group or any memberof the Group) occurs which in the reasonable opinion of the Underwriter makes itinexpedient or inadvisable to proceed with the Rights Issue; or

(c) (i) any new law or regulation is enacted, or there is any change in existing laws orregulations or any change in the interpretation or application thereof by anycourt or other competent authority, whether in Hong Kong or elsewhere;

(ii) any change in local, national or international financial, political, industrial oreconomic conditions;

(iii) any change of an exceptional nature in local, national or international equitysecurities or currency markets;

(iv) any local, national or international outbreak or escalation of hostilities,insurrection or armed conflict;

(v) any moratorium, suspension or material restriction on trading in securitiesgenerally on the Stock Exchange;

(vi) any change or development involving a prospective change in taxation orexchange controls in Hong Kong or elsewhere; or

(vii) any act of God, war, riot, public disorder, civil commotion, terrorism, strike orlock-out;

TERMINATION OF THE UNDERWRITING AGREEMENT

– 8 –

which event or events is or are in the reasonable opinion of the Underwriter:

(1) likely to have a material adverse effect on the business, financial position orprospects of the Group taken as a whole; or

(2) likely to have a material adverse effect on the success of the Rights Issue or thelevel of Rights Shares taken up; or

(3) so material as to make it inappropriate, inadvisable or inexpedient to proceedfurther with the Rights Issue,

then and in such case, the Underwriter may, in addition to and without prejudice to any otherremedies to which the Underwriter may be entitled, by notice in writing to the Companyterminate the Underwriting Agreement forthwith. Upon the giving of such notice by theUnderwriter, all obligations of the Underwriter hereunder shall cease and determine (save forany antecedent breaches thereof) and no party shall have any claim against any other party inrespect of any matter or thing arising out of or in connection with the Underwriting Agreementsave for any antecedent breach.

TERMINATION OF THE UNDERWRITING AGREEMENT

– 9 –


(Stock Code: 263)

Executive Directors:Dr. Zhang Guoqing (Chairman)Ms. Ng Shin Kwan, ChristineMr. Lee JalenMr. Chan Ah FeiMr. Lee Yuk FatMr. Liang Shan

Independent non-executive Directors:Dr. Wong Yun KuenMr. Wong Shun LoyMr. Hu Chao

Registered office and head office andprincipal place of business:

Units 2502–5, 25th Floor,Harbour Centre,25 Harbour Road,Wanchai,Hong Kong

24 December 2014

To the Shareholders

Dear Sir or Madam,


(2) PROPOSED SHARE CONSOLIDATION;AND

(3) PROPOSED RIGHTS ISSUE ON THE BASIS OF NINE RIGHTS SHARESFOR EVERY ONE CONSOLIDATED SHARE HELD

AT THE RECORD DATE

INTRODUCTION

On 18 August 2014, the Board announced that on 24 June 2014, (after trading hours), thePurchaser (being a wholly-owned subsidiary of the Company) and the Vendor entered into theSale and Purchase Agreement (as amended and supplemented by the supplemental agreementdated 18 August 2014), pursuant to which the Purchaser has conditionally agreed to acquireand the Vendor has conditionally agreed to sell the Sale Shares, representing 40% of the totalissued share capital of the Target Company at the consideration of HK$370,000,000.

LETTER FROM THE BOARD

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As the highest applicable percentage ratio (as defined under Chapter 14 of the ListingRules) in respect of the Acquisition is more than 100%, the Acquisition constitutes a verysubstantial acquisition for the Company. In addition, the ultimate beneficial owner of theVendor is Mr. Liang who is the executive Director of the Company. Accordingly, the Vendoris a Connected person of the Company under the Listing Rules and the Acquisition alsoconstitutes a connected transaction of the Company under Rule 14A.25 of the Listing Rules.

On the same day, the Company announced that it intends to put forward a proposal to theShareholders to effect the Share Consolidation which involves the consolidation of every five(5) issued Existing Shares each into one (1) Consolidated Share.

Conditional upon the Share Consolidation becoming effective, the Company proposes toraise not less than approximately HK$420.6 million but not more than approximately HK$422million, before expenses, by way of Rights Issue of not less than 700,958,385 Rights Shares(assuming no issue of new Shares, no further repurchase of Shares or no grant of Share Optionunder the Scheme Mandate Limit on or before the Record Date) and not more than703,352,934 Rights Shares (assuming no issue of new Shares or no further repurchase ofShares on or before the Record Date), at the Subscription Price of HK$0.6 per Rights Share onthe basis of nine (9) Rights Shares for every one (1) Consolidated Share held at the RecordDate and payable in full on acceptance.

Furthermore, the Board also announced that, after trading hours on 24 October 2014, (i)the Purchaser and the Vendor entered into the supplemental agreement to the Sale and PurchaseAgreement (‘‘SPA Supplemental Agreement’’) to extend the Long Stop Date from 31 December2014 to 30 June 2015; and (ii) the Company and the Underwriter entered into the supplementalagreement to the Underwriting Agreement (‘‘Underwriting Supplemental Agreement’’) toextend the long stop date of the Underwriting Agreement from 31 December 2014 to 30 June2015.

Save as disclosed above, all other terms of the Sale and Purchase Agreement and theUnderwriting Agreement shall remain unchanged and in full force and effect.

The Independent Board Committee comprising all the independent non-executiveDirectors has been established by the Company to advise the Independent Shareholders on asto whether the terms of the Acquisition and the Rights Issue are fair and reasonable andwhether the Acquisition and the Rights Issue are in the interests of the Company and theShareholders as a whole, and to advise the Independent Shareholders on how to vote, takinginto account the recommendations of the Independent Financial Adviser. In this connection,Nuada Limited has been appointed as the Independent Financial Adviser to advise theIndependent Board Committee and the Independent Shareholders as to whether the terms theAcquisition and the Rights Issue are fair and reasonable in this regard. The appointment of theIndependent Financial Adviser has been duly approved by the Independent Board Committee.

The purpose of this Circular is to provide you with, among other things, (i) further detailsof the Acquisition; (ii) financial information and other information of the Target Group; (iii)the pro forma financial information of the Enlarged Group as a result of the Acquisition andthe Rights Issue; (iv) valuation report of the Development Project; (v) details of the ShareConsolidation and the Rights Issue; (vi) the letter from the Independent Financial Adviser to


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advise the Independent Shareholders and the Independent Board Committee regarding theAcquisition and the Rights Issue; and (vii) a notice of the EGM at which an ordinaryresolutions will be proposed to consider and, if thought fit, to approve the Acquisition, ShareConsolidation and the Rights Issue.

PRINCIPAL TERMS OF THE SALE AND PURCHASE AGREEMENT

Date: 24 June 2014 (after trading hours) (as amended by the supplementalagreements dated 18 August 2014 and 24 October 2014)

Parties

Purchaser: Max Leap Asia Limited, a wholly-owned subsidiary of the Company

Vendor: Perfect Ease International Limited

The Vendor, i.e. Perfect Ease International Limited, is a company incorporated in BVI andis an investment holding company. The sole director of the Vendor is Mr. Liang. As at theLatest Practicable Date, the Vendor holds 87.2% of the Target Company and the TargetCompany directly holds 100% equity interests in Jintang. Jintang is a company established inthe PRC and is the operating subsidiary of the Target Group. Jintang is principally engaged inthe development, construction and building management of the Development Project which islocated in Chongqing, the PRC.

Assets to be acquired

Pursuant to the Sale and Purchase Agreement, the Company agreed to purchase and theVendor agreed to sell the Sale Shares, representing 40% of the total issued share capital of theTarget Company.

For further information on the Target Group, please refer to paragraph headed‘‘Information on the Target Group’’.

Consideration

The Consideration for the Acquisition is HK$370,000,000, which shall be settled by cashupon Completion of the Sale and Purchase Agreement. It is to be financed by the net proceedsto be raised from the Rights Issue.

The Consideration was determined after arm’s length negotiations between the Companyand the Vendor, and taking into account the Valuation of not less than RMB1,000 million asstated in the Valuation Report to be prepared by an independent valuer.

The original purchase cost of 87.2% equity interest in the Target Company paid by Mr.Liang was RMB777,713,404 when the Vendor acquired 87.2% equity interest in the TargetCompany on 10 July 2013. As advised by the Vendor and as at the date of the Sale andPurchase Agreement, the Target Company was indebted to the Vendor a total sum ofapproximately RMB17.7 million as interest-free shareholder’s loan.


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Taking into account the above factors, the Board is of the view that the Consideration isfair and reasonable.

Conditions precedent

Completion is conditional upon the following conditions having been fulfilled or waived(as the case may be):

(a) The Purchaser having received a legal opinion on PRC laws (in such form andsubstance to the Purchaser’s reasonable satisfaction) covering the following majorissues:

(i) Jintang having been duly established and validly subsisting;

(ii) the legality of the operation and business of Jintang in all material respects;

(iii) Jintang having obtained all the waivers, licenses, consents or permits necessaryfor their operation and business and all such licenses, consents and permitsbeing in full force and effect;

(iv) the legality and validity of Jintang’s ownership to the land use rights of theLand;

(v) the designated user and area of the Land;

(vi) Jintang having obtained all necessary permits and approvals for the constructionand development of the Development Project and such permits and approvalsbeing valid and subsisting;

(vii) the legality and validity of the material contracts entered into by Jintang;

(b) the Purchaser having conducted and completed due diligence on all business, assetsand liabilities, legal and financial matters and all such other matters as deemednecessary by the Purchaser in its absolute discretion, in relation to the Target Group,and the Purchaser being satisfied with the results of such due diligence in itsabsolute discretion;

(c) the Purchaser having received the Valuation Report in form and substancesatisfactory to the Purchaser and the Valuation as stated in the Valuation Reportshall be not less than RMB1,000 million;

(d) the EGM having been duly convened at which resolutions shall have been passed bythe Independent Shareholders, by way of a poll to approve (i) the Sale and PurchaseAgreement and the transactions contemplated thereunder in accordance with theListing Rules; and (ii) any connected transaction requiring approval of theIndependent Shareholders pursuant to the Listing Rules as a result of transactionscontemplated under the Sale and Purchase Agreement;


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(e) if applicable, the obtaining of all consents from any relevant government orregulatory authorities or third parties which are necessary in connection with theexecution and performance of the Sale and Purchase Agreement and any of thetransactions contemplated thereunder;

(f) the simultaneous and successful completion of the Rights Issue;

(g) the Purchaser being satisfied that on or before Completion the Vendor’s warrantiesremain true and accurate in all material respects and are not misleading nor in breachin any material respect; and

(h) in respect of Development Project — Phase II, Jintang shall obtain the ConstructionPlanning Permit (建設工程規劃許可證) with respect to the gross floor area ofapproximate 165,692.59 square meters.

The Purchaser may at its absolute discretion at any time waive in writing the condition setout in condition precedent (c) and such waiver may be made subject to such terms andconditions as are determined by the Purchaser, but all other conditions set out above cannot bewaived.

As at the Latest Practicable Date, conditions (c) and (h) to the Sale and PurchaseAgreement have been fulfilled. Save for disclosed, none of the other conditions precedent tothe Sale and Purchase Agreement has been fulfilled or waived.

If the above conditions precedent have not been waived (where applicable) or fulfilled onor before the Long Stop Date for whatever reason, the Sale and Purchase Agreement shallcease and determine, thereafter neither party shall have any obligations and liability towardseach other hereunder save for any antecedent breaches of the terms hereof.

Adjustment to Consideration

If the Valuation as stated in the Valuation Report shall be less than the amount ofRMB1,000 million as stated in the condition precedent (c) and the Purchaser elects at its solediscretion to waive the condition precedent (c) as stated above, then a downward adjustment(the ‘‘Adjustment’’) shall be made to the Consideration and the amount of Adjustment shall bededucted from the Consideration payable by the Purchaser as follows:

Adjustment = (a – b) x 40%

Whereas:

a being the amount specified under condition precedent (c); and

b being the Valuation as stated in the Valuation Report.

Exchange Rate: RMB1 = HK$1.25


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For avoidance of doubt, no adjustment of the Consideration is required if the Valuation asstated in the Valuation Report is equal or above the amount of RMB1,000 million. There is nolimit on the downward Adjustment to Consideration.

Completion

Completion shall take place on or before the third Business Day after the date on whichthe above-mentioned conditions shall have been satisfied or, if applicable, waived by thePurchaser or such other date as the Purchaser and the Vendor may agree in writing.

Upon Completion, the Company will be beneficially interested in the 40% equity interestsin the Target Company and the Target Group will become an associate of the Company.

Pursuant to the Sale and Purchase Agreement, the Purchaser shall be entitled to nominateat any time so long as the Purchaser shall remain as a shareholder of the Target Company aswell as of Jintang and the Target Company and Jintang shall accept such nomination,nominee(s) as director(s) of the Target Company in proportion to its and other shareholder(s)’respective shareholdings in the Target Company.

Pursuant to the Sale and Purchase Agreement, without prejudice to the obligation of theTarget Company producing its annual consolidated account and distribution of dividend (ifany) every year, as soon as all units of the Development Project having been sold, the Vendorundertakes to procure consolidated audited account (the ‘‘Final Accounts’’) of the Target Groupand procure the Target Company to distribute by way of dividends all profits after taxationwithin 3 months of the date of the Final Accounts, provided that no dividends shall bedistributed before (i) all external borrowings and all interests (if any) accrued thereon and othercharges and liabilities (if any) payable in connection therewith; and (ii) all loans provided bythe shareholders of the Target Company (if any) are repaid full.

Notwithstanding the above provision under the Sale and Purchase Agreement,shareholders of Jintang can procure Jintang to distribute profits after taxation at any timesubject to the Articles of Jintang. The Vendor will prepare sales progress report every sixmonths so that the Target Company will sell all the units as soon as practicable as it hope thatthe units can be sold at a good price to bring shareholders more benefits. Moreover,shareholder’s meeting would be held for every six months for updating shareholders about thefinancial performance and the status of selling properties for ensuring the Target Company istrying its best to contribute benefit to shareholders. In this way, the Board considers that theCompany can ensure proper monitor of progress of the Development Project and theAcquisition is fair and reasonable and in the interests of the Shareholders.

As advised by the Vendor, according to the Articles of Jintang, shareholders of Jintangwill review the financial performance of Jintang after all units of the Development Project wassold. The distribution of dividends will be subject to the board approval of Jintang afterconsidering such factors like the financial performance, cash position, loan repayment, taxpayment, existing reserves or business development of Jintang. The tentative date of to decidethe first distribution of dividends will be on or before March 2017 when the board meeting ofJintang was held whereby audited accounts of Jintang for the year ended 31 December 2016


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was reviewed by the board. An announcement will be made by the Company to provideShareholders with updated information relating to the first distribution of dividends of Jintangafter the board meeting of Jintang was held on or before March 2017.

Since Jintang is a wholly-foreign owned enterprise established in the PRC, the remittanceof funds from the PRC to outside the PRC is subject to foreign exchange control in the PRC.For the foreign exchange control restriction in relation to the Target Group and possible impacton the Company, please refer to the Risk Factors section, ‘‘Fluctuations in RMB exchange ratemay materially and adversely affect investments’’.

As advised by the Vendor, the Target Company will be dissolved and distribute all assetsafter selling all the units of the Development Project and the Target Company has not anyfuture business plan/strategy after selling all the property units as at the Latest PracticableDate.

In case of distribution of dividends in accordance with the above terms, the Company willbe able to share returns (in terms of dividends) and cash flow from the Target Group.

The terms of the Sale and Purchase Agreement were determined after arm’s lengthnegotiations and on normal commercial terms. The Board considers the terms and conditions ofthe Sale and Purchase Agreement to be on normal commercial terms, to be fair and reasonableand in the interests of the Company and the Shareholders as a whole.

INFORMATION ON THE TARGET GROUP

Set out below is the group structure, business and financial information of the TargetGroup based on the information provided by the Vendor.


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Group structure of the Target Group

The Target Company is a company incorporated in the BVI and is a non-wholly-ownedsubsidiary of the Vendor. Set out below is the shareholding structure of the Target Groupbefore the Acquisition:

100%

100%

87.2%

100%

Mr. Liang

Chainray InternationalLimited

Vendor

Target Company

Jintang(Established in the PRC)

Set out below is the shareholding structure of the Target Group upon Completion:

47.2% 40%

100%

Vendor The Company

Target Companyexisting business

of the Group

Jintang(Established in the PRC)


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Set out below is the audited consolidated turnover, net loss before tax and after tax of theTarget Group for the three years ended 31 December 2013 and the six months period ended 30June 2014 and the audited net assets of the Target Group as at 31 December 2011, 2012 and2013 and 30 June 2014 based on the consolidated financial statements of the Target Group asextracted from the Accountants’ Report as shown in Appendix III to this Circular:

Six monthsperiod ended

30 June For the year ended 31 December2014 2013 2012 2011

HK$’000 HK$’000 HK$’000 HK$’000(audited) (audited) (audited) (audited)

Turnover (note 1) — — — —

Net loss before tax (6,840) (6,430) (4,125) (3,271)Net loss after tax (6,840) (6,430) (4,125) (3,271)

As at30 June As at 31 December

2014 2013 2012 2011HK$’000 HK$’000 HK$’000 HK$’000(audited) (audited) (audited) (audited)

Net liabilities 22,568 15,693 9,613 5,583

Note 1: Revenue was recognised under the General Accepted Accounting Principles in the PRC becausesales proceeds received from pre-sale of the commercial flats in the PRC is required to berecognised as revenue of the entity under the PRC tax laws. According to the HKFRS, incomearising from the sales of properties held for sale is recognised upon the later of the execution of theformal sale and purchase agreement and the issue of occupation permit/completion certificate by therelevant government authorities, which is taken to be the point in time when the risks and rewardsof ownership of the property have passed to the buyer. Deposits and instalments received onproperties sold prior to the date of revenue recognition are included in the consolidated statementsof financial position. Accordingly, sales proceeds received from pre-sale of the property units willnot be recognized as income. As at the Latest Practicable Date and as advised by the Vendor, 142property units out of a total of 269 property units constructed under Phase I of the DevelopmentProject were sold. As at the Latest Practicable Date and subsequent to 30 June 2014, formal saleand purchase agreement(s) were executed and the occupation permit/completion certificate(s) wereissued by the relevant government authorities for 50 property units which has been pre-soldpreviously.


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Industry Overview

(1) Industry overview on the property development industry

(a) The PRC Economy

The PRC economy has grown significantly since the PRC Government introducedeconomic reforms in the late 1970’s, and its accession to the World Trade Organization in2001 has further accelerated the reform of the PRC economy.

According to the data from National Bureau of Statistics of the PRC, the grossdomestic product (‘‘GDP’’) of the PRC grew at a compound annual growth rate (the‘‘CAGR’’) of approximately 10.8% from 2009 to 2013. The table below set out certainselected economic statistics of the PRC for the periods indicated.

2009 2010 2011 2012 2013

Nominal GDP (RMB in billions) 34,090.2 40,151.2 47,310.4 51,947.0 56,884.5GDP per capita (RMB) 25,607.53 30,015.05 35,197.79 38,459.47 41,907.59

Sources: Website of National Bureau of Statistics of the PRC.

(b) Property market in the PRC

The economic growth, increase in disposable income and the increase in urbanizationrate are key factors in sustaining the growth of the property market.

From 2009 to 2013, according to the National Bureau of Statistics of the PRC, thePRC’s urbanization rate (i.e. the proportion of population residing in urban areas)increased from 48.3% to 53.7% and urban population increased from 645.1 million to731.1 million during the same period, representing a CARG of approximately 2.7%. Inline with the nominal GDP growth, the PRC’s per capita consumption level for urbanhouseholds increased from RMB14,904 in 2009 to RMB22,880 in 2013, implyingincreased purchasing power for urban households throughout the PRC. The followingtable set forth selected figures showing the urbanization rate and consumption level of theurban population in the PRC for the years indicated.

2009 2010 2011 2012 2013

Urban population (millions) 645.1 669.8 690.8 711.8 731.1Total population (millions) 1,334.5 1,340.9 1,347.4 1,354.0 1,360.7Urbanization rate (%) 48.3 50.0 51.3 52.6 53.7Per capita consumption level of urban

households (RMB) 14,904 16,546 19,108 21,035 22,880

Source: China Statistical Yearbook 2013


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The continuous upward trend in the PRC real estate industry is backed by risingprices and strong demand. According to the National Bureau of Statistics of the PRC, theGFA commodity housing sold and the GFA commodity residential housing sold are1,305.5 million square meters and 1,157.2 million square meters in 2013, representingapproximately 17.3% and 17.5% increase as compared to 2012 respectively. Prices forreal estate in the PRC also increased from 2009 to 2012. According to the NationalBureau of Statistics of the PRC, the overall property market shown a steady growth from2009 to 2012. The average price per sq.m. for both commodity residential and officehousing, increased from RMB4,459 per sq.m. in 2009 to RMB5,429.93 per sq.m. in 2012(representing a CARG of approximately 5.1%) and from RMB10,608 per sq.m. in 2009 toRMB12,306.41 per sq.m. in 2012 (representing a CARG of approximately 3.8%). Thetable below sets forth certain information on the major supply and demand indicators forthe years indicated.

2009 2010 2011 2012 2013

Investment in real estate (RMB in billions) 3,624.2 4,825.9 6,179.7 7,180.4 8,601.3Total GFA completed (sq.m. in millions) 726.8 787.4 926.2 994.2 1,014.3Total GFA commodity housing sold

(sq.m. in millions) 947.6 1,047.6 1,093.7 1,113.0 1,305.5Total GFA commodity residential housing

sold (sq.m. in millions) 861.8 933.8 965.3 984.7 1,157.2Total GFA commodity office sold

(sq.m. in millions) 15.4 18.9 20.0 22.5 N/A#

Average sales price of commodity housing(RMB per sq.m.) 4,681.00 5,032.00 5,357.10 5,790.99 N/A#

Average sales price of commodityresidential housing(RMB per sq.m.) 4,459.00 4,725.00 4,993.17 5,429.93 N/A#

Average sales price of commodity office(RMB per sq.m.) 10,608.00 11,406.00 12,327.28 12,306.41 N/A#

# The figure is not yet available

Sources:

1. China Statistical Yearbook 2013

2. Website of National Bureau of Statistical of the PRC

(2) Industry overview on the property development industry in Chongqing City

(a) Background

Chongqing City is located along the western part of the PRC. Chongqing has a totalland area of 82,400 km2 (equivalent to 8,239,900 hectares), of which 6,163,400 hectaresare agricultural land (accounting for 74.85% of the total land area) with an arable land percapita of 0.084 hectares, 528,600 hectares are construction land (accounting for 6.42% ofthe land area) mainly developed by way of external expansion resulting in a rapid growthof land size, and 1,541,900 hectares are unused land (accounting for 18.73% of the total


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land area). Only 2.1% of the unused land reserve (i.e. 32,900 hectares) can be reclaimedas arable land and the distribution is relatively concentrated, with 16,100 hectares ofwhich are located in Qianjiang development zone with greater development difficulty.

Chongqing is divided into 38 administrative divisions (autonomous counties),consisting of 19 districts and 19 counties (autonomous counties) with Central Downtownas the core, which constitutes an organic combination of large, medium and small citiesand thus a modern urban cluster network. The city has a total registered population of33.43 million and a permanent population of 29.45 million, while the urbanization rate ofpermanent population is 57%.

(b) Condition of the land market

Total of 222 lands for residential, commercial and financial usage in the main city ofChongqing were put up for sale as announced by the Chongqing Land Transaction Centreduring January to December 2013, representing an increase of 39 lands as compared to thecorresponding period of 2012. The total transaction area was RMB20.31 million sq.m.,representing a year-on-year increase of 27%. The transaction amount in 2013 hassubstantially increased by 56% to RMB 116.4 billion over that of the previous year.

(c) The condition of the real estate market

In 2013, under the main theme of progress with stability of the domestic economy,the overall operation of the real estate market of Chongqing was relatively stable. It wasreflected by the fact that the investment in real estate development maintained steadygrowth after dragged down; area of commodity housing which has commenced, undergoneand completed construction achieved a healthy growth after a short-term fluctuation at thebeginning of the year; since the growth rate in saleable area of commodity housingcontinuously fell after reaching its peak, the pace of growth of the three major sources offund of the real estate development enterprises was slowed down and adequacy of fundingprotection slightly dropped. The investment of the completed real estate developmentbroke through RMB300.0 billion, attaining RMB 301.278 billion, representing a 20.1%increase from the same period last year. For the type of development investment, totalinvestment in commodity residential housing in Chongqing was RMB204.424 billion in2013, representing an increase of 19.8% over the corresponding period last year. For thecomposition of development investment, the investment in respect of installation ofrelevant facilities for Chongqing’s real estate was RMB210.641 billion in 2013,representing an increase of 17.7% over the corresponding period last year. Following theintroduction of ‘‘National Five Measures (國五條)’’ (detail of which was stated in laterparagraph), as a result of ‘‘Increase in supply of ordinary commodity housing and land (增加普通商品住房供給及供地供應)’’, the Business Climate Index and the EntrepreneurConfidence Index for real estate enterprises in the Chongqing City moved upward and theenterprises steadily pushed forward new construction projects and speeded up the progressof projects under construction. The construction area of commodity housing in the citywas 262.5189 million sq.m., representing a year-on-year increase of 19.3%; The newconstruction area of commodity housing in the city was 76.4163 million sq.m., up 31.4%;the completed construction area of commodity housing slightly decreased due to


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construction cycle and last year’s base figures. The completed area of commodity housingin the city decreased by 4.7% to 30.8436 million sq.m.. The saleable area of commodityhousing in the city was 48.1756 million sq.m. in 2013, representing a year-on-yearincrease of 6.5%, of which the saleable area of commodity residential housing was43.5919 million sq.m., representing an increase of 6.2%. For the past 4 years since 2010,the saleable area of commodity housing in the city maintained at about 45.00 millionsq.m. on a yearly basis, indicating that the sales market of the real estate in our cityremained its steady development trend. The growth rate for the saleable area ofcommodity housing in the city shows a trend of decline after the boost and continuouslydropped to a single digit growth.

The number of market participants in Yubei Zone is not less than two hundred. Thecompetition is intense. As the PRC government tightens its control over the residentialproperty market, commercial properties have become the choice of investment in therecent two years. A lot of residential property developers have begun to participate in thedevelopment of commercial properties. In Chongqing, a lot of integrated propertydevelopers have emerged. High-rise commercial complex, office buildings, shoppingcenters were developed. The occupancy rates for residential, office premises and shoppingmall are 74.4%, 64.5% and 86.1% respectively in 2013, according to Jones Lang LaSalleand ifeng.com. As per Jones Lang LaSalle, the occupancy rate of office premises inChongqing was increased from 64.5% in the fourth quarter 2013 to 65.7% in the secondquarter 2014. According to CBRE, the occupancy rate of office premises in Chongqingwas increased to 68.7% in the third quarter 2014 (source: http://money.163.com/14/1021/10/A92TNPQS00254TI5.html). In view of the increasing occupancy rate of office premises inChongqing, the Board is of the view that the prospect of the Development Project ispromising.

Under the direction of the PRC government, the strategy to develop the western partof China is being implemented in depth, which is favorable to the development ofChongqing. During the ‘‘12th Five-year Plan’’ period, Yubei Zone (渝北區) will enter agolden period of economic development. It is expected that the urban population willincrease and demand for residential flats will be finally increased. Moreover, the centralpark of Chongqing City in Yubei Zone will enhance the value of premium location inYubei Zone. In particular, Chongqing city will enter into the ‘‘Second Ring era’’ in which24 cluster areas (24個大型聚居區) will be formed between the inner ring and the secondring of Chongqing, of which Yubei Zone will occupy one-third and its location populationis expected to increase by 2 million by 2015. (Source: http://wenku.baidu.com/view/29fb98f17c1cfad6195fa71f.html)


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(3) Measures Taken by PRC Government in Recent Years Relating to PRC PropertyMarket

(a) Real estate policies

Since 2010, in response to the surging property prices in certain cities and excessivepurchases for investment and speculation, the Central Government imposed ‘‘NationalEleven Measures (國十一條)’’, ‘‘National Ten New Measures (新國十條)’’ and ‘‘9.29 NewPolicies (9.29新政)’’ for macroeconomic control over real estate market in January, Apriland September 2010 respectively. Meanwhile, in March 2010, the Ministry of Land andResource of the People’s Republic of China issued the ‘‘Notice on Several Issuesconcerning the Reinforcement on Provision and Supervision over the Land Use forProperty Development (關於加強房地產用地供應和監管有關問題的通知)’’ whichreinforces the pertinence and flexibility of land policy relating to macro-control measureson the real estate market.

On 26 January 2011, eight control measures over the real estate, ‘‘Eight New StateRegulation (新國八條)’’, were promulgated in the meeting of the Standing Committee ofthe State Council. A tight control on the real estate sector was exercised on a nationwidescale by controlling housing prices, enhancing affordable housing, introducing stringentaccountability system and expanding scope of control policies. On 12 July, in view of thesubsisting inflation pressure of the housing price in several cities, the State Council statedthat it is necessary to adhere to the direction of the control measures while maintain itscontrol efforts; the cities subject to housing purchase restrictions is required to continue tostringently imposed the relative policies, and tier two and three cities must adoptnecessary purchase restrictions measures against the upsurging real estate prices. On 29October, it is emphasized that local governments must adhere to their responsibilities toexecute policies strictly, further ensure the effective implementation of property marketregulatory measures, increase ordinary commodity residential housing and promotereasonable adjustments in housing prices. Under such intensive control measures, the yearof 2011is a year with the most stringent property market regulatory measures and the mosteffective implementation of policies. Both the sales volume and price in real estatemarkets dropped in various cities of the nation in the second half of 2011.

On 20 February 2013, ‘‘National New Measures (國五條)’’ was also promulgated bythe State Council in order to improve property market austerity measures. This new policymainly focuses on five areas including: 1. completing a system of responsibility forstabilizing housing prices, which required 35 major cities of the PRC to establish andannounce the annual target of price control over the new commodity housing; 2.restraining purchases of housing for speculation and investment purposes and executinghousing purchase restrictions stringently; 3. expanding the supply of both ordinarycommodity housing and of land; 4. accelerating construction of affordable housingprojects; 5. Strengthen market regulation. Under the policies of ‘‘National New Measures(國五條)’’ and in the market of slowed down economic growth, the property developmentmarket was relatively strong.


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In recent years, the central government and relevant ministries have emphasised fortimes that the effort in controlling on the real estate market would not be loosened toensure the effective implementation of the control measures and to lower the propertyprices to a reasonable level. Introduction of the relevant policies has helped to control theexcessive increase of land prices, contributing a stable and healthy real estate market to acertain extent.

(b) Monetary Policies

To adhere with relevant real estate control policies, exchange of currencies isregulated in an appropriate manner. From January 2010 to July 2011, the central bankincreased deposit reserve ratio requirement for 11 times in less than two years. Thedeposit reserve requirement ratio increased from the original 15.5% to 21.5% (21.5% forlarge financial institutions and 18% for small and medium financial institutions). Suchfrequent upward adjustment is first seen in the history. Although the requirement wasadjusted downward for three times later in December 2011, February 2012 and May 2012,the deposit reserve ratio requirement remains at a high level. During the same period,interest rate for RMB deposits and loans also experienced five upward and two downwardadjustments. Interest rate of the one-year loan was adjusted from 5.31% before 2010 to6.31%.

The differentiation credit policies continued to intensify. The ‘‘Eight New StateRegulation (新國八條)’’ required that for the second property acquired, the proportion ofinitial deposit should not be lower than 60%, the loan interests should not be lower than1.1 times of benchmark interest rate and for third property afterwards, issuance of loansshould be suspended. Increase in proportion of initial deposit and interest rate directlyincreased the cost to purchase properties, in some way controlled the demand in propertymarket.

(c) Financial Policies

In January 2011, the Ministry of Finance Issued ‘‘Notice on Policy of Business Taxon Personal Residential Properties (關於個人住房轉讓營業稅政策的通知)’’, business taxon external sales of ordinary residential properties acquired 5 years or less would becalculated by the transaction amount rather than price different, to further tacklespeculating activities.

In January 2011, as the pilot cities for reform of property taxes, Chongqing andShanghai formally started the imposition of property tax. The issuance of‘‘Implementation Rules of Collection and Administration of Chongqing PersonalResidential Property Tax (重慶個人住房房產稅徵收管理實施細則)’’ marked thebeginning of the operation stage of property tax reforms, the main content is as follow:

(i) For the nine districts in the main city of Chongqing, individuals who own singlecommodity housing and newly purchased high-class residential housing (refersto the unit with transaction price per gross floor area reaching 2 times or moreof the average transaction price per gross floor area of the newly-constructedcommodity housing in the nine districts in the main city for the past two years)


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are required to pay property tax. The tax rates for properties with the transactionprice per gross floor area below 3 times, 3 times to 4 times and 4 times orabove of average transaction price per gross floor area of the newly-constructedcommodity housing in the nine districts in the main city for the past two yearsare 0.5%, 1% and 1.2% respectively.

(ii) Individuals without permanent residence, enterprise or job in Chongqing shallbe subject to the property tax of 0.5% for their second newly-purchasedordinary property and other property purchased afterwards.

Meanwhile, the Chongqing local tax authority issued ‘‘Notice of Chongqing local taxauthority on Adjusting Prepaid Tax Rate of Land Appreciation Tax (重慶市地方稅務局關

於調整土地增值稅預徵率有關問題的通告)’’ to regulate property market through LandAppreciation tax, the main content is as follow:

(i) The prepaid rate for ordinary model residence is 2%.

(ii) The prepaid rate for extraordinary model residential and non-residentialbuildings (such as commodity residential housing and garage) is 3.5%.

(iii) The prepaid rate for single commercial apartment is 5%.

From the abovementioned, it is noted that the State and Chongqing regulated propertymarket by imposing policies that increased actual supply, strengthening regulation on lands forproperty use, strictly tackling adverse land hoarding and control of property market, tighteningproperty credit and amending tax payment, to achieve regulation of property market andsuppressing speculating demand,and in turn property price will return to a reasonable level,which is affordable for residence, thereby enhancing their purchasing power.

Business of the Target Group

The Target Company is a company incorporated in the BVI and is owned as to 87.2% bythe Vendor as at the date of the Sale and Purchase Agreement. Jintang is the operatingsubsidiary of the Target Group which is principally engaged in the business of development,construction and building management of the ‘‘Development Project’’ comprising theresidential and commercial complex known as ‘‘Jintang New City Plaza*’’ (金唐新城市廣場)in Chongqing, the PRC.

The piece of land of the Development Project situate at Long Tower Street* in the westsouthern part of the Yubei Zone, Chongqing City (重慶渝北區龍塔街道) in the PRC with asite area of approximately 30,817 square meters. The total gross floor area designated forresidential use is 53,883.20 square meters; for shopping mall (商鋪) is 36,012.85 squaremeters; for office premises is 40,865.48 square meters; for car parking areas and other uses is56,512.26 square meters respectively. The terms for the grant of the land use right of the Landare 52 years for the residential portion and 22 years for the commercial portion. After thecompletion of the Development Project, it is expected to be a new landmark area near thecentral business district of the Yubei Zone.


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Under the direction of the PRC government, the strategy to develop the western part ofChina is being implemented in depth, which is favorable to the development of Chongqing.During the ‘‘12th Five-year Plan’’ period, Yubei Zone (渝北區) will enter a golden period ofeconomic development. With the continuous growth of the regional economy, driven by theacceleration of urbanization and growing population, the demand for properties is increasing.

Jintang New City Plaza* (金唐新城市廣場) is located at the Longta area, which is thecenter of Huangnibang (黃泥塝) business district of Yubei Zone (渝北區), and is adjacent toJaizhou business district (嘉州商圈) and Guanyinqiao business district (觀音橋商圈) ofJiangbei Zone (江北區). The neighboring Jiazhou business district (嘉州商圈) is the corebusiness district which is planned in the later stage of the ‘‘11th Five-year Plan’’ (十一五) inYubei Zone. Guanyinqiao business district (觀音橋商圈) is a more recent but the fastest-growing business district of Chongqing. The expansion of Guanyinqiao business district (觀音

橋商圈) is expected to be completed in 2016. At that time, ‘‘Jintang New City Plaza*’’ (金唐新

城市廣場) will be closely connected with Guanyinqiao business district (觀音橋商圈)separated only by one highway. It will become an important link between Yubei Zone (渝北

區) and other business districts in Chongqing. Located at the intersection of these businessdistricts, ‘‘Jintang New City Plaza*’’ (金唐新城市廣場) will benefit from the combinedenormous demand for housing, office and commercial units. Also, the construction ofChongqing Central Park (重慶中央公園) will further enhance the value of Yubei Zone (渝北

區). Please see below geographical map:

重慶金唐新城市廣場

觀音橋地鐵站

觀音橋商圈

嘉州商圈

江北嘴CBD

解放埤CBD


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The average selling prices of residential housing units, office units, commercial units andparking lots in the surroundings of Jintang New City Plaza* (金唐新城市廣場) areRMB13,000/m², RMB16,000/m², RMB80,000/m² and RMB180,000/unit respectively. (source:Centaline Property Agency Limited in China).

‘‘Jintang New City Plaza*’’ (金唐新城市廣場) enjoys competitive advantages in YubeiZone (渝北區) due to its geographical location and market positioning. Geographically, theproject is located within Huangnibang (黃泥塝). Huangnibang (黃泥塝) is within Jiangbeidistrict (江北區) in Chongqing in adjacent to many business districts like Guanyinqiao businessdistrict (觀音橋商圈) and Jiefangbei business district (解放碑商業圈), etc. In terms oftransportation, the project is located within 50 meters of Huangnibang (黃泥塝) station of lightrail line 6, which is also adjacent to light rail line 3. It only takes 30 minutes from the projectlocation to get to Chongqing Jiangbei Airport (重慶江北國際機場) by line 3 of the light rail. Abus station is only 10 meters away from the project location, and there are around 20 busroutes passing the station. There are large scale supermarkets in the surrounding area whichcan satisfy the basic demands of the residents. In the past ten years, the development planningof Huangnibang (黃泥塝) has been limited to residential use, resulting in the shortage ofcommercial and office buildings, as well as high-end hotels. The shortage is particularlyevident in the recent two years. ‘‘Jintang New City Plaza*’’ (金唐新城市廣場) targets at theunmet market need for commercial, office and hotel properties in Yubei Zone (渝北區), as wellas the neighboring Jiangbei (江北) and Huangnibang (黃泥塝) districts. It aims to become alandmark project which incorporates themed commercial, leisure and entertainment elements.With the above unique positioning and geographical advantage, ‘‘Jintang New City Plaza*’’ (金唐新城市廣場) enjoys competitive advantages in the real estate market in Yubei Zone (渝北

區).

In the process of developing and constructing ‘‘Jintang New City Plaza*’’ (金唐新城市廣

場) project, the Target Group followed stringent procedures in selecting constructioncontractors to ensure the quality of the project. Firstly, it determined the level of thecontractor Target Group to be of Grade A or Level 1 qualification. Secondly, it deliveredtender invitation to the companies passing the field investigations. Thirdly, it invited, evaluatedand decided on the bids received and entered into formal construction contracts with thechosen contractors. The Target Group employs a construction project manager for monitoringthe performance of the contractors. The project manager sends reports on the performance ofthe contractors to the department of construction of the Target Group on a monthly basis.

Standards for Grade A qualifications means:

1. The enterprise has a registered capital of more than RMB300 million.

2. The enterprise has net assets of more than RMB360 million.

3. The enterprise has an annual certified project income of more than RMB1.5 billionfor each of the recent 3 years.

4. The enterprise satisfies other conditions of the Grade I qualification.


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Standards for Grade I qualification means:

1. An enterprise, in the capacity of a master contractor or major sub-contractor, hasundertaken 4 or more of the following 6 projects with satisfactory performance in therecent 5 years:

(1) Construction of buildings of 25 or more storeys;

(2) Structures or buildings with a height of over 100 meters;

(3) Housing construction with a single gross floor area of over 30,000 squaremeters;

(4) Housing construction with a single span of over 30 meters;

(5) Residential district or complex with a gross floor area of over 100,000 squaremeters;

(6) Housing construction with a single contract value of over RMB100 million.

2. The management of the enterprise have over 10 years’ experience in projectmanagement or possess senior professional titles; the chief engineer has over 10years’ experience in building construction management and possesses a seniorprofessional title; the chief accountant possesses the professional title of senioraccountant; and the chief economist possesses a senior professional title. Theenterprise has a workforce of not less than 300 project management and economicmanagement personnel with professional titles, including no less than 200engineering technicians of whom no less than 10 possess senior professional titleand no less than 60 possess intermediate profession title.

The enterprise has a team of project managers of whom no less than 12 possessGrade I qualification.

3. The enterprise has a registered capital of more than RMB50 million and net assets ofmore than RMB60 million.

4. The enterprise has a maximum certified project income of more than RMB0.2 billionfor each of the recent 3 years.

5. The enterprise has the applicable construction machinery and quality assuranceequipment for the contracted projects.

As at the Latest Practicable Date, the building construction of the Development Project —Phase I has been completed and the Development Project — Phase I comprises of a residentialblock with 252 residential flats and 17 shopping mall units which are ready for pre-sale byJune 2012. The construction of the Development Project — Phase II has been commenced inMay 2014 and the piling work has been completed. The Development Project — Phase II isdesignated to comprise of 6 blocks of commercial and residential complex. Barring anyunforeseen circumstances, the building construction work is expected to be completed by 2016.


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As advised by the Vendor, as at the Latest Practicable Date, all units (including both thecommercial and residential buildings) under the Phase I and Phase II of the DevelopmentProject are expected to be ready for pre-sale or sale after building construction has beencompleted and all the property units developed under Phase I and Phase II of the DevelopmentProject are expected to be sold out after completion of construction.

The following table presents the property information of the Development Project —

Phase I and Phase II by different types of usage:

Usage of properties

The no. of

saleable units

The no. of

sold units

Gross floor

area

Saleable

gross floor

area

Contracted

sale amount

Contracted

gross floor

area

Average

contracted

selling price/

unit

(m2) (m2) (RMB) (m2) (RMB)

Phase I

(Block 4)

Residential usage 252 142 17,759.60 17,759.60 92,341,936.00 9,157.99 650,295.32

Commercial usage

(shopping mall) 17 — 3,821.60 3,561.62

Office

Car park and other

Phase II

(Block 1, 2, 3,

5, 6, 7)

Residential usage 700 — 36,123.60

Commercial usage

(shopping mall) 32,191.25

Office 40,865.48

Car park and other 1,404 — 56,512.26

Total

Residential usage 952 142 53,883.20 17,759.60 92,341,936.00 9,157.99

Commercial usage

(shopping mall) 17 — 36,012.85 3,561.62 — —

Office — — 40,865.48 — — —

Car park and other 1,404 — 56,512.26 — — —

As at the Latest Practicable Date and as advised by the Vendor, 142 property units out ofa total of 269 property units constructed under Phase I of the Development Project were soldand transfer of property title of 50 property units was completed in October 2014. The relevantsales of approximately RMB35.27 million (equivalent to approximately HK$44.08 million) andcost of sales of approximately RMB24.63 million (equivalent to approximately HK$30.79million) are to be recognised for the transfer of the property title of 50 property units in thefinancial statements of the Target Company.

After Mr. Liang acquired equity interest in the Target Company, Jintang stopped theselling of the remaining properties under Phase I. As internal decoration was finished inOctober 2014 and the great time, ‘‘Gold Nine Silver Ten’’ for the sale of properties has passed.In order to have higher selling price, it is expected the selling will resume in March or April2015 as advised by the Vendor. As advised by the Vendor, no other certificates, licenses,consents or permits in respect of the Phase I of the Development Project is needed for suchrestructure of the building and the site infrastructure.

Save for Consideration payable under the Sale and Purchase Agreement, there is no othercapital commitment or contractual commitment on the part of the Group regarding theAcquisition as at the Latest Practicable Date.


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Moreover, pursuant to the Sale and Purchase Agreement, the Vendor undertakes to thePurchaser that all planning, construction, renovation and fitting-out works of the DevelopmentProject shall be completed to the reasonable satisfaction of the Purchaser within 5 years fromthe Completion of the Sale and Purchase Agreement. The terms that Vendor undertake to thePurchaser that all planning, construction, renovation and fitting-out works of the DevelopmentProject shall be completed to the reasonable satisfaction of the Purchaser within 5 years fromthe Completion of the Sale and Purchase Agreement was determined after considering the extratime is allowed for the Development Project to complete given unforeseen circumstanceshappen although it is expected to be completed on or before the end of 2016 according to theexisting time schedule of the Jintang and barring any unforeseen circumstances.

According to the management of the Company, the Company can take legal action againstthe Vendor if the planning, construction, renovation and fitting-out works of the DevelopmentProject was not completed to the reasonable satisfaction of the Purchaser within 5 years fromthe Completion of the Sale and Purchase Agreement.

The following summarises certificate, license, consent or permit of Jintang:

Certificates, license,consent or permits Date of issue Issuing authority Description

Interim QualificationCertificate(暫定資質證書)

4 April 2014 Ministry of Housing and Urban-Rural Development of the PRC(中華人民共和國住房和城鄉建設部)

For development of the DevelopmentProject — Phase I and Phase II

Chongqing Real Estate TitleCertificate*(重慶市房地產權證)

16 July 2012 Chongqing Administration ofLand, Resources and Housing(重慶市國土資源和房屋管理局)

For the Development Project — PhaseI & Phase II — specify the landuseright of Jintang with a total site area ofapproximately 30,817 square meters fora term of 52 years from the date ofissue of the certificate

Construction Landuse PlanningPermit*(建設用地規劃許可證)

5 January 2010 Chongqing Urban PlanningBureau(重慶市規劃局)

For the Development Project — PhaseI & Phase II — specify the proposedlanduse

Construction Planning Permit*(建設工程規劃許可證)

5 April 2012 Chongqing Urban PlanningBureau(重慶市規劃局)

For the Development Project — PhaseI — specify the proposed constructionplanning in respect of a gross floorarea of approximate 21,581.20 squaremeters

Construction Planning Permit*(建設工程規劃許可證)

14 April 2014 and12 December2014

Chongqing Urban PlanningBureau(重慶市規劃局)

For the Development Project — PhaseII — specify the proposed constructionplanning in respect of a gross floorarea of approximate 165,692.59 squaremeters (note 1)

Construction Work Permit*(建設工程施工許可證)

12 April 2011 Chongqing MunicipalCommission of Urban-RuralDevelopment(重慶市城鄉建設委員會)

For the Development Project — PhaseI specify the proposed constructionwork including the design company,construction company and supervisioncompany


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Certificates, license,consent or permits Date of issue Issuing authority Description

Construction Work Permit*(建設工程施工許可證)

12 May 2014 Chongqing MunicipalCommission of Urban-RuralDevelopment(重慶市城鄉建設委員會)

For the Development Project — PhaseII — specify the proposed constructionwork including the design company,construction company and supervisioncompany in respect of a gross floorarea of approximately 165,692.59square meters (Note 2)

Pre-sale permit for properties*(重慶市商品房預售(預租)許可證)

1 April 2013 Chongqing Administration ofLand, Resources and Housing(重慶市國土資源和房屋管理局)

For the Development Project — PhaseI in respect pre-sale of residentialcomplex

Pre-sale permit for properties*(重慶市商品房預售(預租)許可證)

21 August 2013 Chongqing Administration ofLand, Resources and Housing(重慶市國土資源和房屋管理局)

For the Development Project — PhaseI:in respect pre-sale of commercialcomplex

Note 1: The Construction Planning Permit* (建設工程規劃許可證) in respect of a gross floor area ofapproximate 20,205.17 square meters has been obtained on 12 December 2014.

Note 2: Jintang will apply the Construction Work Permit* (建設工程施工許可證) in respect of a gross floorarea of approximate 20,205.17 square meters on or before January 2015.

As advised by the Vendor and the PRC legal adviser, all of the above certificates andpermits in respect of the Development Project obtained by Jintang are valid as at the LatestPracticable Date and there are no legal impediments for the Jintang to renew such certificates,licenses, consents or permits in respect of the Development Project.

As advised by the Vendor and the PRC legal adviser, there are no legal impediments forthe Jintang to obtain such certificates, licenses, consents or permits in respect of theDevelopment Project.

Major management of the Target Group

(1) Mr. Tsang Wen Yao (曾文佑)

Mr. Tsang Wen Yao (‘‘Mr. Tsang’’), aged 51, the Chairman and legal representative ofJintang, takes full responsibilities in projects development and construction and focuses on themanagement of the development department, engineering department and sales department. Hegraduated from the School of Architecture and Civil Engineering of XiaMen University (廈門

大學). He possesses years of experience in commercial real estate development in the PRC andheld various positions in real estate companies in the PRC. The Vendor believes that hisextensive experience in real estate industry is important to future business development of theTarget Group, and intends to retain him as a senior management of the Target Group.


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(2) Mr. Wu Hong Guang (武宏光)

Mr. Wu Hong Guang (‘‘Mr. Wu’’), aged 51, holds the degree in Organic Synthesis ofBeijing University of Chemical Technology (previously known as Beijing College of ChemicalTechnology) and is a postgraduate in Political Economics of Renmin University of China andobtained the qualification as a senior professional manager in 2008. He possesses years ofexperience in commercial real estate development in the PRC and has worked for BeijingChemical Industry Council. The Vendor believes that his extensive experience in real estateindustry is important to future business development of the Target Group, and intends to retainhim as a senior management of the Target Group. Mr. Wu was appointed as the executivedirector of Carnival Group International Holdings Limited (a company listed on the MainBoard of the Stock Exchange, stock code: 0996) during 8 June 2011 to 28 March 2013.

Loan Agreement of the Target Group

On 21 August 2013, Jintang as borrower and Anxin Trust Investment Company Limited*(安信信托投資股份有限公司) (‘‘Anxin’’) as the trust arranger for and on behalf of GuosenSecurities Company Limited* (國信證券股份有限公司) entered into a Loan Agreement,pursuant to which Anxin agreed to pay Jintang an amount of RMB900 million in the form ofentrustment loan (the‘‘Entrustment Loan’’) for the purpose of financing the DevelopmentProject. The Entrustment Loan matures on the date falling 24 months after the date theEntrustment Loan was made. To secure the Entrustment Loan, (i) the Land were charged infavour of Anxin; (ii) properties under the Development Project — Phase I & II were charged infavour of Anxin; and (iii) a personal guarantee by the legal representative of Jintang wasprovided in favour of Anxin. As at the date of the Sale and Purchase Agreement, the amount ofentrustment loan outstanding is RMB900 million.

Total investment costs

As advised by the Vendor, the total development costs of the Development Project isestimated to be approximately RMB1,728.59 million (equivalent to approximatelyHK$2,160.74 million), comprising (i) the building and utility costs of RMB1,158.13 million(equivalent to approximately HK$1,447.66 million); (ii) the professional and management feesof approximately RMB30.75 million (equivalent to approximately HK$38.44 million); (iii) thefinancing expenses of approximately RMB307.08 million (equivalent to approximatelyHK$383.85 million); and (iv) sales tax and fees of RMB232.63 million (equivalent toapproximately HK$290.79 million). RMB366.19 million (equivalent to approximatelyHK$457.74 million) was utilized as at 30 June 2014.

It is intended that funds required for the development of the Development Project asstated above will be financed as to (i) by the Entrustment Loan; (ii) by income to be generatedby sale of the residential and commercial complex of the Development Project; and (iii) byfunds to be raised by Jintang from other bank borrowings in particular, the total bankborrowings of the Target Group shall not exceed RMB900 million and the term of which shallnot be more than 5 years from the Completion of the Sale and Purchase Agreement.


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Risk factors

(1) Risk factors relating to the operation of property development business

1. Substantial capital resources are required to fund the property development

Property development of the Target Group is capital intensive. The Companybelieves that the ability of the Target Group to secure sufficient financing for propertydevelopment depends on a number of factors that are beyond the control of the Company,including market conditions in the capital markets, lenders’ perception of creditworthinessof the Target Group, the PRC economy and the PRC regulations that affect theavailability and finance costs for real estate companies.

It cannot be assured that sufficient funding can be obtained by the Target Group tofinance develop future projects or meet other capital needs as and when required at acommercially reasonable cost or at all. Failure to obtain adequate funding at acommercially reasonable cost may limit the ability of the Target Group to commence newprojects or to continue the development of existing projects. Such failure may alsoincrease the finance costs of the Target Group.

2. The slow down of the PRC’s economic growth and the global financial crisis mayaffect the Target Group’s business. It could limit the Target Group’s ability tocontinue to finance its working capital and to meet its liquidity requirements andmaterially and adversely affect its financial position and results of operations

The Target Group operates in a capital intensive industry and has historicallyfinanced, and is expected to continue to finance in the future, their working capital andliquidity requirements primarily through proceeds from the pre-sale and sale of properties,borrowings from financial institutions and capital contributions and advances fromshareholders. The PRC property market has experienced fluctuations in market conditions,property sales volumes and prices in recent years, especially as a result of the slow downin PRC’s economic growth, the PRC credit environment and the global economic andfinancial crisis. These factors have also resulted in banks and other financial institutionsbecoming less willing to make credit available to property purchasers and companies inthe property development industry. In particular, during economic downturns or marketslowdown’s as has been the case for the PRC property market recently, potentialpurchasers or purchasers of properties tend to become more prudent and act morecautiously out of concern for further declines of property prices and may even terminateor defer their decisions to purchase property.

3. Property development business of the Target Group may be adversely affected bychanges in interest rates

The Target Group relies on borrowings to finance a substantial part of the projectdevelopments. Many customers also need to finance their purchase of properties of theTarget Group through mortgage loans. Any increase in the interest rates will increase the


– 33 –

finance costs of the Target Group and also increase the costs of customers to purchaseproperties with mortgages and therefore adversely affect business, financial and results ofoperation of the Target Group.

4. Results of operations may be materially and adversely affected if the Target Groupfails to obtain, or there are material delays in obtaining, requisite governmentalapprovals for the property developments of the Target Group

The property industry in the PRC is heavily regulated by the PRC government.Property developers in the PRC must comply with various requirements mandated bynational and local laws and regulations, including the policies and procedures establishedby local authorities designed for the implementation of such laws and regulations. In orderto develop and complete a property development, at various stages of the propertydevelopment, a property developer must obtain various permits, licenses, certificates andother approvals from the relevant administrative authorities including a land use rightscertificate, a construction land planning permit, a construction works planning permit, aconstruction works commencement permit and a pre-sale permit or confirmation ofcompletion and acceptance. Each approval may depend on the satisfaction of certainconditions. It cannot be assured that there will be no material delays or other impedimentsfor the Target Group in fulfilling the conditions precedent to the approvals, or to adapt tonew laws, regulations or policies that may come into effect from time to time with respectto the property industry in general or the particular processes with respect to regulatoryapprovals. There may also be delays on the part of the relevant regulatory bodies inreviewing applications and granting approvals to the Target Group. If the Target Groupfails to obtain, or encounter material delays in obtaining, the requisite governmentalapprovals, the schedule of the completion and sale of developments could be substantiallydisrupted and any such disruption would materially and adversely affect the business,results of operations and financial condition of the Target Group.

5. Intense competition with respect to the property development business

The property industry in the PRC is highly competitive and the Target Group facescompetition as to its property development business from major domestic developers and,to a lesser extent, foreign developers primarily from Asia. Competition among propertydevelopers may result in increased costs for the acquisition of land for development,increased costs for raw materials, shortages of skilled contractors, oversupply ofproperties, decrease in property prices in certain parts of the PRC, a slowdown in the rateat which new property developments will be approved and/or reviewed by the relevantgovernment authorities and an increase in administrative costs for hiring or retainingqualified personnel, any of which may adversely affect the business and financialcondition of the Target Group. Certain of the competitors of the Target Group are wellcapitalized and have greater financial, marketing and other resources than the TargetGroup has. Some property developers may be able to respond to changes in marketconditions more promptly and effectively than the Target Group can, or may be morecompetitive in acquiring land through auction or other processes. If the Target Group isunable to maintain a competitive position with respect to the acquisition of land, adapt to


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changing market conditions or otherwise compete successfully with its competitors, theprospects, business, financial condition and results of operations of the Target Group maybe materially and adversely affected.

6. Volatility in the price of construction materials

The results of operations and financial performance of the Target Group will beaffected by volatility in the price of construction materials. The costs of constructionmaterials constitute the most substantial item among the construction costs, thus any risein the costs of construction materials may result in higher fees charged by the constructioncontractors of the Target Group. Given that the costs of the aforesaid constructionmaterials have been fluctuating in the PRC, it is challenging for the Target Group tomaintain a consistent gross profit margin for the properties of the Target Group. In theevent that the Target Group is not able to (i) source the same construction materials atcompetitive cost level or (ii) pass any or all of the increased costs to the customers of theTarget Group without affecting the quantity demanded, the profitability of the TargetGroup may be adversely affected.

7. Material delays in completing the property development projects

Property development projects require substantial capital expenditures prior to andduring the construction period and the construction of a property project may generatepositive cash flows through pre-sales, sales or leases. The progress and costs for adevelopment project can be adversely affected by many factors, including, withoutlimitation:

. delays in obtaining necessary licenses, permits or approvals from governmentagencies or authorities;

. relocation of existing residents and/or demolishment of existing structures;

. shortages of materials, equipment, contractors and skilled labor;

. labor disputes;

. construction accidents;

. natural catastrophes;

. adverse weather conditions;

. discovery of artifacts in the construction site; and

. changes in government policies.

Construction delays or failure to complete the construction of a project according toits planned specifications, schedule or budget as a result of the above factors may affectthe financial condition and results of operations and may also cause damage to itsreputation. It cannot be assured that there will not be any significant delays in completion


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or delivery or that the Target Group will not be subject to any liabilities for any suchdelays. In addition, if a pre-sold property development is not completed on time, thepurchaser may be entitled to compensation for late delivery. If the delay extends beyondthe contractually specified period, the purchaser would be entitled to terminate thepurchase contract and claim damages. Therefore, any delay in completion of propertydevelopments could have a material adverse impact on business, financial condition,results of operations and reputation of the Target Group.

8. Natural disaster or bad weather that may disrupt operations and damage theproperties in Chongqing Project

In the event of any natural disaster or bad weather in Chongqing, the ChongqingProject may be disrupted and the Target Group’s results of operations could be adverselyaffected. There is no assurance that the insurance coverage will be sufficient to fullyindemnify the Target Group against all direct and indirect costs, including loss ofbusiness, that could result from substantial damage to, or partial or complete destructionof, properties in the Chongqing Project or other damage to the infrastructure or economyof Chongqing as a result of such events.

9. The Target Group relies on the performance of external contractors and suppliers todeliver its projects on time and up to its specified quality standards.

The Target Group does not carry out construction work on its projects. The TargetGroup engages external construction contractors, certified engineering supervisorycompanies, service providers and suppliers to provide them with construction and relatedservices and various types of construction materials as well as other services such asdesign and interior decoration which the Target Group monitors through their constructiondepartment in each project company. In general, contractors are selected through tender byinvitation.

There is no assurance that the services rendered or materials supplied by any of theseexternal contractors and suppliers will always be satisfactory or meet the qualityrequirements of the Target Group. In the event that the performance of the externalcontractors and suppliers falls short of the standards, or any of such contractors orsuppliers encounters financial, operational or managerial difficulties and/or results in anyactual or potential dispute, this may disrupt the construction progress of the TargetGroup’s property developments and the Target Group may incur additional costs in respectof remedial actions to be taken (including the replacement of such contractors orsuppliers) as well as potential compensation payable to the customers for delay incompletion and delivery of property developments. Moreover, the Target Group maysuffer damage to reputation and additional financial costs as a result of such delay to itsproperty developments.

10. The Target Group’s business is subject to extensive governmental regulation.

The Target Group is engaged in property development in the PRC which is subject toextensive governmental regulation. As with other PRC property developers, the TargetGroup must comply with various requirements mandated by the PRC laws and regulations,


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including the policies and procedures established by local authorities designed toimplement such laws and regulations. Should the Target Group be involved in anyincidents of non-compliance, the Target Group could be subject to various regulatory oradministrative penalties and such incidents may have material adverse impacts on theTarget Group’s business, results of operations and financial condition.

In particular, the PRC government exerts considerable direct and indirect influenceon the development of the PRC property sector by imposing industry policies and othereconomic measures, such as control over the supply of land for property development andrestriction or other regulation of foreign exchange, property financing, taxation andforeign investment. Through these policies and measures, the PRC government mayrestrict or reduce land available for property development, raise benchmark interest ratesof commercial banks, place additional limitations on the ability of commercial banks tomake loans to property developers and property purchasers, impose additional taxes, suchas property tax, and levies on property sales, and restrict foreign investment in the PRCproperty sector. Many of the policies in the property industry carried out by the PRCgovernment are unprecedented and are expected to be refined and improved over time.Changes in political, economic and social factors may also lead to further adjustments ofsuch policies. This refining and adjustment process may not necessarily have a positiveeffect on the Target Group’s operations or future business development. There is noassurance that the PRC government will not adopt additional and more stringent industrypolicies, regulations and measures in the future. If the Target Group fails to adapt itsoperations to new policies, regulations and measures that may come into effect from timeto time with respect to the property industry, such policy changes may disrupt the TargetGroup’s business or cause it to incur additional costs, and the Target Group’s businessprospects, results of operations and financial condition may be materially and adverselyaffected.

11. Success in the property development business of the Company depends on thecontinuing services of the Target Group’s senior management team and other keypersonnel

Future success in the property development business of the Company dependsheavily upon the continuing services of the Target Group’s executive Directors andmembers of its senior management team. If one or more of the senior executives or otherpersonnel are unable or unwilling to continue in their present positions, the Target Groupmay not be able to replace them easily or at all, and the business of the Target Group maybe disrupted and financial condition and results of operations may be materially andadversely affected. As competition in the PRC for senior management and key personnelwith experience in property development is intense, and the pool of qualified candidates isvery limited, the Target Group may not be able to retain the services of its seniorexecutives or key personnel, or attract and retain high-quality senior executives or keypersonnel in the future. If the Target Group fails to attract and retain qualified personnel,Target Group’s business and prospects may be adversely affected.


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12. The Target Group may suffer losses arising from uninsured risks

There are certain losses for which insurance is not available on commerciallypracticable terms, such as losses suffered due to earthquake, typhoon, flooding, war andcivil disorder. If the Target Group suffers from any losses, damages or liabilities in thecourse of its operations and property development, the Target Group may not havesufficient funds to cover any such losses, damages or liabilities or to replace any propertydevelopment that has been destroyed. In addition, any payment the Target Group makes tocover any losses, damages or liabilities may have a material adverse effect on its business,financial condition and results of operations.

(2) Risk factors relating to the PRC

1. Changes in PRC economic, political and social conditions, as well as governmentpolicies, could have a material adverse effect on business, financial condition,results of operations and prospects of the Target Group

The business of property development of the Target Group is conducted in the PRC.Accordingly, the business, financial condition, results of operations and prospects of theTarget Group are, to a certain degree, subject to economic, political and socialdevelopments in the PRC. The PRC economy differs from the economies of mostdeveloped countries in many respects, including the extent of government involvement,level of development, growth rate, control of foreign exchange and allocation ofresources. Certain measures taken by the PRC government to guide the allocation ofresources may benefit the overall economy of the PRC but may, however, also have anegative effect on the Target Group. For example, the business, financial condition,results of operations and prospects of the Target Group may be adversely affected bygovernment control over capital investments, changes in tax regulations that are applicableto the Target Group, change in interest rates and statutory reserve rates for banks orgovernment control in bank lending activities.

2. Fluctuations in RMB exchange rate may materially and adversely affect investments.

RMB is not a freely convertible currency. The Target Group receives all of itsrevenue in RMB and will need to convert RMB into foreign currencies for payment ofdividends to the shareholders, therefore, any material revaluation on RMB may have amaterial adverse effect on dividend values payable denominated in foreign currencies. Inaddition, the conversion of RMB into other currencies is subject to a number of foreignexchange control rules, regulations and notices issued by the PRC government. In general,foreign investment enterprises are permitted to convert RMB to foreign currencies forcurrent account transactions (including, for example, distribution of profits and paymentof dividends to foreign investors) through designated foreign exchange banks followingprescribed procedural requirements. Control over conversion of RMB to foreign currenciesfor capital account transactions (including, for example, direct investment, loan andinvestment in securities) is more stringent and such conversion is subject to a number oflimitations. The requirement for the Target Group to pay dividends in a currency otherthan RMB to the shareholders may expose the Target Group to foreign exchange risk.


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Under the current foreign exchange control system, there is no assurance that the TargetGroup will be able to obtain sufficient foreign currency to pay dividends or satisfy otherforeign exchange requirements in the future.

(3) Risk relating to this Circular

1. Certain statistics and other information relating to the economy and the PRCproperty development industry contained in this Circular were derived from variousofficial sources and government publications and have not been independentlyverified and may not be reliable.

Statistics, industry data and other information relating to the economy and the PRCproperty development industry contained in this Circular have been derived from variousofficial government publications with information provided by the PRC and othergovernment agencies. Although the Company believes that the sources of the informationand statistics are appropriate sources for such information and statistics and have takenreasonable care in extracting and reproducing such information and statistics, and has noreason to believe that such information and statistics is false or misleading or that any facthas been omitted that would render such information and statistics false or misleading, theCompany or its Directors, agents and advisers cannot assure you or make anyrepresentation as to the accuracy or completeness of such information and statistics.Shareholders should give careful consideration as to how much weight or importance theShareholders should attach or place on such statistics, projected industry data and otherinformation relating to the economy and the industry.

Any of the above factors could have a material adverse effect on the business,financial condition and results of operations of the Target Group.

PROPOSED SHARE CONSOLIDATION

The Company intends to put forward a proposal to the Shareholders to effect the ShareConsolidation which involves the consolidation of every five (5) issued Shares each into one(1) Consolidated Share.

Effects of the Share Consolidation

As at the Latest Practicable Date, 389,421,327 Existing Shares have been issued and thereare 1,330,308 Share Options granted and outstanding. Assuming that no further Existing Sharesare issued or repurchased between the Latest Practicable Date and the date of the EGM,immediately after the Share Consolidation, not less than 77,884,265 Consolidated Shares andnot more than 78,150,326 Consolidated Shares will be in issue.

Upon the Share Consolidation becoming effective, the Consolidated Shares will rank paripassu in all respects with each other in accordance with the Company’s articles of association.No fractional Consolidated Shares will be issued by the Company. Any fractional entitlementsof the Consolidated Shares will be aggregated and sold for the benefits of the Company.


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The board lots size of 4,000 Consolidated Shares will remain unchanged after ShareConsolidation becoming effective.

The board lot size for trading in the Shares is 4,000 Shares at present. After the ShareConsolidation becoming effective, the board lot size for trading in the Consolidated Shares willremain as 4,000 Consolidated Shares. Based on the closing price of HK$0.345 per Share (orHK$1.725 per Consolidated Share assuming the Share Consolidation becoming effective) onthe Last Trading Day, the value of each board lot of 4,000 Shares was HK$1,380 (or eachboard lot of 4,000 Consolidated Shares would be HK$6,900 assuming the Share Consolidationbecoming effective). Based on the closing price of HK$0.25 per Share (or HK$1.25 perConsolidated Share assuming the Share Consolidation becoming effective) as at the LatestPracticable Date, the value of each board lot of 4,000 Existing Shares was HK$1,000 (or eachboard lot of 4,000 Consolidated Shares would be HK$5,000 assuming the Share Consolidationbecoming effective).

The Company has a share option scheme which was approved in a shareholders’ specialgeneral meeting on 8 November 2006 (the ‘‘Share Option Scheme’’). As at Latest PracticableDate, 1,330,308 share options were granted or exercised under the Share Option Scheme. As aresult of the Share Consolidation, the number of outstanding Share Options will be adjusted to266,061 Consolidated Shares with an exercise price of HK$484.

Other than the expenses to be incurred, the implementation of the Share Consolidationwill not alter the underlying assets, business operations, management or financial position ofthe Company or the interests or rights of the Shareholders.

Odd lots arrangements and matching services

In order to facilitate the trading of odd lots (if any) of the Consolidated Shares arisingfrom the Share Consolidation, a designated broker has been appointed to match the purchaseand sale of odd lots of the Consolidated Shares at the relevant market price per ConsolidatedShare for the period from 9:00 a.m. on Tuesday, 24 February 2015 to 4:00 p.m. on Monday,16 March 2015 (both dates inclusive). Holders of odd lots of the Consolidated Shares shouldnote that successful matching of the sale and purchase of odd lots of the Consolidated Shares isnot guaranteed. Any Shareholder, who is in any doubt about the odd lot arrangement, isrecommended to consult his/her/its own professional advisers. Details of the matching servicewill be provided in the Circular to be despatched to the Shareholders.

Holders of odd lots of the Consolidated Shares who wish to take advantage of this facilityeither to dispose of their odd lots of the Consolidated Shares or top up to a full board lotmay, directly or through their brokers, contact Ms. Hong Ming Kiu, May of the Underwriterof 1601, 16/F., China United Centre, 28 Marble Road, North Point, Hong Kong by phone at(852) 3513 8002 or by fax at (852) 2815 6728 during this period. Holders of odd lots of theConsolidated Shares should note that successful matching of the sale and purchase of odd lotsof the Consolidated Shares is not guaranteed. Any Shareholder, who is in any doubt about theodd lot arrangement, is recommended to consult his/her/its own professional advisers.


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Conditions of the Share Consolidation

The Share Consolidation is conditional upon the following:

(i) the passing of the necessary resolution(s) by the Shareholders to approve the ShareConsolidation at the EGM to be convened by the Company; and

(ii) the Listing Committee of the Stock Exchange granting the listing of and permissionto deal in, the Consolidated Shares arising from the Share Consolidation.

Assuming the above conditions are fulfilled, it is expected that the Share Consolidationwill become effective on the business day next following the date that the relevant resolution(s)approving the Share Consolidation.

Listing and Dealings

Application has been made to the Listing Committee of the Stock Exchange for thegranting of the listing of, and permission to deal in, the Consolidated Shares arising from theShare Consolidation and those Consolidated Shares which may fall to be issued pursuant to theexercise of the Share Options.

Subject to the granting of the listing of, and permission to deal in, the ConsolidatedShares on the Stock Exchange, the Consolidated Shares will be accepted as eligible securitiesby HKSCC for deposit, clearance and settlement in CCASS with effect from thecommencement date of dealings in the Consolidated Shares on the Stock Exchange or suchother date as determined by HKSCC. Settlement of transactions between participants of theStock Exchange on any trading day is required to take place in CCASS on the second tradingday thereafter. All activities under CCASS are subject to the general rules of CCASS andCCASS operational procedures in effect from time to time.

Exchange of Share certificates

Subject to the Share Consolidation having become effective, Shareholders may during thespecified period submit share certificates for Existing Shares to the Company’s share registrarin Hong Kong, Tricor Secretaries Limited at Level 22, Hopewell Centre, 183 Queen’s RoadEast, Hong Kong, in exchange, at the expense of the Company, for new share certificates forConsolidated Shares. Thereafter, certificates for Existing Shares will be accepted for exchangeonly on payment of a fee of HK$2.50 (or such higher amount as may be allowed by the StockExchange from time to time) for each share certificate for Existing Shares cancelled or eachnew share certificate issued for Consolidated Shares, whichever number of certificatescancelled/issued is higher. The existing certificates will be valid for trading and settlement upto 4:00 p.m. on Tuesday, 24 February 2015, being the latest time for trading in board lot of4,000 Consolidated Shares in the form of existing certificates (or such other date which will beannounced by the Company) and certificates for Existing Shares will continue to be goodevidence of legal title and may be exchanged for certificates for Consolidated Shares at anytime.


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The new share certificates for the Consolidated Shares will be issued in yellow colour inorder to distinguish them from the existing blue colour.

Trading arrangement for the Consolidated Shares

Subject to the Share Consolidation becoming effective, the arrangements proposed fordealings in the Consolidated Shares are expected to be as follows:

(i) from 9:00 a.m. on Friday, 6 February 2015, the original counter for trading in theExisting Shares in board lots of 4,000 Existing Shares will be temporarily closed anda temporary counter for trading in the Consolidated Shares in board lots of 800Consolidated Shares will be set up and opened;

(ii) with effect from 9:00 a.m. on Tuesday, 24 February 2015, the original counter fortrading in the Consolidated Shares will be re-opened in board lots of 4,000Consolidated Shares;

(iii) during the period from 9:00 a.m. on Tuesday, 24 February 2015 to 4:00 p.m. onMonday, 16 March 2015 (both dates inclusive), there will be parallel trading at theabove two counters; and

(iv) the temporary counter for trading in the Consolidated Shares in board lots of 800Consolidated Shares will be removed after the close of trading at 4:00 p.m. onMonday, 16 March 2015. Thereafter, trading will only be in board lots of 4,000Consolidated Shares with new share certificates and the existing share certificates forthe Existing Shares will cease to be marketable and will not be acceptable for dealingand settlement purposes.

However, such certificates will remain effective as documents of title on the basis of nine(9) Existing Shares for one (1) Consolidated Share.

Reasons for the Share Consolidation

Since the last capital reorganisation of the Company with effective from 18 January 2012(as stated in the announcement of the Company dated 18 January 2012), the Company did notcarry out any capital restructure.

Since the financial year ended 31 December 2009, the Company has been making loss. Inview of the recent turnaround of the financial performance of the Group (which recorded aprofit attributable to the Company’s shareholders of approximately HK$29,947,000 for the sixmonths ended 30 June 2014 and a loss attributable to the Company’s shareholders ofHK$67,991,000 in the corresponding period in 2013) as stated in the interim report of theCompany for the period ended 30 June 2014, the net asset value per Share (calculated based on389,421,327 Shares) increased from approximately HK$3.14 (based on the net assets of theCompany as at 31 December 2013) to approximately HK$3.19 (based on the net assets of theCompany as at 30 June 2014). On the other hand, using the closing price of the Shares ofHK$0.345 per Share as quoted on the Stock Exchange on 24 June 2014 as a reference, theCompany is trading at a price-to-book (PB) of only approximately 0.11X. The Directors


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therefore believes that the Company is extremely undervalued. It is expected that the ShareConsolidation would bring about a corresponding upward adjustments in the trading price ofthe Consolidated Shares (i.e. based on the closing price of HK$0.345 per Existing Shares asquoted on the Stock Exchange on the Last Trading Day, the trading price of the ConsolidatedShares will be HK$1.725) on the Stock Exchange. Therefore, the Board believes that theadjusted share price of the Company upon the completion of the Share Consolidation willprovide greater opportunity and flexibility for equity fund raising of the Company in future andmay attract more investors and extend the shareholders base of the Company. The Boardtherefore believes that the Share Consolidation better prepare the Company for future fundraising activities and therefore the Share Consolidation is in the interests of the Company andthe Shareholders as a whole.

Shareholders or potential investors should note that (i) significant number of odd lotswill be created after the Share Consolidation; (ii) odd lots arrangements do not guaranteesuccessful matching of all odd lots at the relevant market price; and (iii) odd lots might besold below the market price in the market.

PROPOSED RIGHTS ISSUE

The Rights Issue is proposed to take place after the Share Consolidation becomingeffective.

Issue statistics

Basis of the Rights Issue: Nine (9) Rights Shares for every one (1) issuedConsolidated Share held at the Record Date andpayable in full on acceptance

Subscription Price : HK$0.6 per Rights Share

Number of Existing Shares in issueas at the Latest Practicable Date:

389,421,327 Existing Shares

Number of Consolidated Sharesin issue upon the ShareConsolidation becoming effective:

Not less than 77,884,265 Consolidated Shares(assuming no issue of new Shares, no furtherrepurchase of Shares or no grant of Share Optionunder the Scheme Mandate Limit on or before theRecord Date) and not more than 78,150,326Consolidated Shares (assuming no issue of newShares or no further repurchase of Shares on orbefore the Record Date)

Number of Rights Shares : Not less than 700,958,385 Rights Shares and notmore than 703,352,934 Rights Shares

Number of Consolidated Sharesin issue upon completion of theRights Issue:

Not less than 778,842,650 Consolidated Sharesand not more than 781,503,260 ConsolidatedShares


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Save for the outstanding 1,330,308 Share Options, the Company has no derivatives,options, warrants and conversion rights or other similar rights which are convertible orexchangeable into shares of the Company as at the Latest Practicable Date.

As at the Latest Practicable Date, the Directors have not received any information fromany substantial Shareholders (there are no substantial Shareholders as at the Latest PracticableDate) of their intention to take up the Rights Shares provisionally allotted or offered to them orto be provisionally allotted or offered to them.

Subscription Price

The Subscription Price is HK$0.6 per Rights Share, payable in full by a QualifyingShareholder upon acceptance of the provisional allotment of the Rights Shares under the RightsIssue and, where applicable, application for excess Rights Shares or when a transferee of nil-paid Rights Shares applies for the Rights Shares.

The Subscription Price represents:

(i) a discount of approximately 65.22% to the adjusted closing price of HK$1.725 perConsolidated Share, based on the closing price of HK$0.345 per Existing Share as quotedon the Stock Exchange on the Last Trading Day and adjusted for the effect of the ShareConsolidation;

(ii) a discount of approximately 65.42% to the adjusted average closing price of HK$1.735per Consolidated Share, based on the average closing price of HK$0.347 per ExistingShare as quoted on the Stock Exchange for the 5 consecutive trading days up to andincluding the Last Trading Day and adjusted for the effect of the Share Consolidation;

(iii) a discount of approximately 15.79% to the theoretical ex-rights price of HK$0.7125 perConsolidated Share after the Rights Issue, based on the closing price of HK$0.345 perExisting Share as quoted on the Stock Exchange on the Last Trading Day and adjusted forthe effect of the Share Consolidation; and

(iv) a discount of approximately 52.0% to the adjusted closing price of HK$1.25 perConsolidated Share, based on the closing price of HK$0.25 per Existing Share as quotedon the Stock Exchange on the Latest Practicable Date and adjusted for the effect of theShare Consolidation.

Basis of determining the Subscription Price

The Subscription Price was arrived at after arm’s length negotiation between the Companyand the Underwriters with reference to (i) the low trading liquidity of the Shares for the recent12 months since the date of the Underwriting Agreement; (ii) the prevailing market price of theShares as described above; (iii) the net loss and the financial positions of the Group for thepast years; and (iv) having considered the future business development of the Group. EachQualifying Shareholder is entitled to subscribe for the Rights Shares at the Subscription Pricein proportion to his/her/its existing shareholding in the Company.


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As the estimated net proceeds from the Rights Issue will be approximately HK$404.26million to HK$405.65 million (assuming no further issue of new shares of the Company on orbefore the Record Date), the net price per Rights Share will be approximately HK$0.5767 toHK$0.57671.

Basis of provisional allotment and fractions to the Rights Shares

On the basis of provisional allotment of nine (9) Rights Shares for every one (1)Consolidated Share held by the Qualifying Shareholders on the Record Date, application for allor any part of a Qualifying Shareholder’s provisional allotment should be made by completingthe PAL and lodging the same with a remittance for the Rights Shares being applied therefor.On the same basis, no fractional entitlements to the Rights Shares will arise under the RightsIssue.

Qualifying Shareholders

To qualify for the Rights Issue, a Shareholder must be registered as a member of theCompany and not being Excluded Shareholders at the Record Date. In order to be registered asmembers of the Company at the Record Date, all transfers of the Shares must be lodged(together with the relevant share certificate(s)) with the Company’s branch share registrar inHong Kong by 4:30 p.m. (Hong Kong time) on Friday, 23 January 2015.

The Company’s branch share registrar in Hong Kong is:

Tricor Secretaries LimitedLevel 22, Hopewell Centre,

183 Queen’s Road East, Hong Kong

Rights of the Excluded Shareholders

The Prospectus Documents are not intended to be registered under the applicablesecurities legislation of any jurisdiction other than Hong Kong.

As at the Latest Practicable Date, the Company had certain Shareholders whose addressesas shown on the register of members of the Company were located outside Hong Kong.

According to the register of members of the Company as at the Latest Practicable Date,there were eight Shareholders with registered addresses in five jurisdictions outside Hong Kongshown on such register, namely, BVI, Macau, Australia, Canada and the USA.

In accordance with Rule 13.36(2)(a) of the Listing Rules, the Company has madeenquiries with the Company’s overseas legal advisors regarding the feasibility of extending theoffer of the Rights Shares to Overseas Shareholders.

Based on the advice provided by the legal adviser on the laws of Macau, it would belawful for the Company to offer the Rights Shares to those Shareholders with registeredaddresses in Macau, even though the Prospectus Documents will not be registered in Macau.


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Therefore, the Directors have decided to extend the Rights Issue to such Overseas Shareholderswith registered addresses located in Macau as shown on the register of members of theCompany as at the Record Date.

Based on the advice provided by the legal advisers on the laws of BVI, the laws ofAustralia and the laws of Canada and having regard the likely costs and time involved ifoverseas compliance were to be observed, the Company is of the opinion that it would benecessary or expedient to exclude such Overseas Shareholders whose registered addresses arein BVI, Australia and Canada as shown on the register of members of the Company as at theRecord Date. Accordingly, the Overseas Shareholders whose registered addresses are in BVI,Australia and Canada will be regarded as Non-Qualifying Shareholders.

After making due enquiries on the laws of the USA and having regard the likely costs andtime involved if overseas compliance were to be observed, the Company is of the opinion thatit would be necessary or expedient to exclude such Overseas Shareholder whose registeredaddress is in the USA as shown on the register of members of the Company as at the RecordDate. Accordingly, the Overseas Shareholder whose registered address is in the USA will beregarded as a Non-Qualifying Shareholder.

The Company will continue to ascertain whether there is any other Overseas Shareholderon the Record Date and will, if necessary, make further enquiries with legal adviser(s) in otheroverseas jurisdiction(s) regarding the feasibility of extending the Rights Issue to such otherOverseas Shareholders on the Record Date and make relevant disclosures in the Prospectus.

The Company will send the Prospectus to the Excluded Shareholders for their informationonly. The Company will not send any PAL and EAF to them. The Excluded Shareholders willbe entitled to attend and vote at the EGM.

Arrangements will be made for the Rights Shares which would otherwise have beenprovisionally allotted to the Excluded Shareholders to be sold in the market in their nil-paidform as soon as practicable after dealings in the Rights Shares in their nil-paid form commenceand before dealings in the Rights Shares in their nil-paid form end, if a premium (net ofexpenses) can be obtained. The proceeds of such sale, less expenses, will be paid to theExcluded Shareholders pro-rata to their shareholdings held at the Record Date. In light of theadministrative costs, the Company will retain individual amounts of HK$100 or less for itsown benefit. Any unsold entitlement of Excluded Shareholders to the Rights Shares, togetherwith any unsold Rights Shares created by adding together any Rights Shares provisionallyallotted but not accepted by the Qualifying Shareholders or otherwise subscribed for bytransferees of nil-paid Rights Shares, will be made available for excess applications by theQualifying Shareholders.

Application for excess Rights Shares

Qualifying Shareholders may apply, by way of excess application, for any unsoldentitlements of the Excluded Shareholders and for any Rights Shares provisionally allotted butnot accepted.


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Any Qualifying Shareholder wishing to apply for any Rights Shares in addition tohis/her/its provisional allotment must complete and sign the EAF as indicated thereon andlodge it, together with a separate remittance for the amount payable on application inrespect of the excess Rights Shares applied for, with the Registrar so as to be received byno later than 4:00 p.m. on Tuesday, 10 March 2015. All remittances must be made bycheque or cashier’s order in Hong Kong dollars.

The Directors will allocate the excess Rights Shares on a fair and equitable basis. Subjectto availability of the excess Rights Shares, the excess Rights Shares will be allocated to thosewho have applied for excess Rights Shares on a pro rata basis by reference to the number ofexcess Rights Shares being applied for under each application. There is no odd lot arrangementafter the excess Rights Shares are allotted. If the aggregate number of Rights Shares not takenup by the Qualifying Shareholders under PALs is greater than the aggregate number of excessRights Shares applied for through EAFs, the Directors will allocate to each QualifyingShareholder who applies for excess Rights Shares in full application. No preference will begiven to topping up odd lots to whole board lots.

The Board will at its sole discretion consider to reject any application for excess RightsShares in the event that the Board is aware of any unusual patterns of excess applications andhas reason to believe that any application may have been made with the intention to abuse theabove-mentioned mechanism.

Any fractional entitlement for the excess Rights Shares will be rounded up to the nearestwhole number to the best effort and issued to such Qualifying Shareholder who applies forexcess Rights Shares.

Investors with their Shares held by a nominee company should note that the Board willregard the nominee company (including HKSCC Nominees Limited) as a single Shareholderaccording to the register of members of the Company. Accordingly, the Shareholders shouldnote that the aforesaid arrangement in relation to the allocation of the excess Rights Shares willnot be extended to beneficial owners individually.

The allocation of excess Rights Shares (if any) to the Qualifying Shareholders will beannounced by the Company on or about 19 March 2015. If no excess Rights Shares are allottedto the Qualifying Shareholders, it is expected that a cheque for the amount tendered onapplication will be refunded in full without interest on or before 20 March 2015. If the numberof excess Rights Shares allotted to the Qualifying Shareholders is less than that applied for, acheque for the amount of the surplus application monies are also expected to be refunded tothem without interest on or before 20 March 2015.

All cheques and cashier’s orders will be presented for payment immediately followingreceipt and all interest earned on such monies (if any) will be retained for the benefit of theCompany. Completion and return of the EAF together with a cheque or cashier’s order inpayment for excess Rights Shares applied for will constitute a warranty by the applicant thatthe cheque or the cashier’s order will be honoured on first presentation. If any cheque orcashier’s order accompanying a completed EAF is dishonoured on first presentation, withoutprejudice to the other rights of the Company, such EAF is liable to be rejected.


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Completion and return of the EAF by anyone outside Hong Kong will constitute awarranty and representation to the Company that all these local registration, legal andregulatory requirements of such relevant jurisdictions other than Hong Kong in connection withthe EAF and any application under it, have been, or will be, duly complied with. For theavoidance of doubt neither HKSCC nor HKSCC Nominees Limited is subject to any of therepresentations and warranties.

The EAF is for use only by the person(s) to whom it is addressed and is not transferable.All documents, including refund cheques for wholly or partially unsuccessful applications forexcess Rights Shares, will be despatched by ordinary post at the risk of the persons entitledthereto to their respective registered addresses as shown in the register of members of theCompany on the Record Date.

If the Underwriter exercises the right to terminate the Underwriting Agreement or if theconditions of the Rights Issue are not fulfilled or waived (as applicable), the monies receivedin respect of the relevant applications for excess Rights Shares will be returned to theapplicants, or in case of joint applicants, to the first-named person, without interest by meansof cheques despatched by the ordinary post to their respective addresses at their own risk assoon as practicable thereafter.

Closure of register of members

The register of members of the Company, in relation to the Rights Issue, will be closedfrom Friday, 13 February 2015 to Monday, 23 February 2015, both dates inclusive. No transferof shares of the Company will be registered during this period.

Status of the Rights Shares

The Rights Shares (when allotted, fully paid or credited as fully paid and issued) will rankpari passu in all respects with the Consolidated Shares in issue on the date of allotment andissue of the Rights Shares. Holders of the Rights Shares will be entitled to receive all futuredividends and distributions which are declared, made or paid on or after the date of allotmentand issue of the Rights Shares. Dealings in the Rights Shares will be subject to payment ofstamp duty in Hong Kong.

Share certificates for the Rights Shares and refund cheques

Subject to the fulfillment of the conditions of the Rights Issue, certificates for all fullypaid Rights Shares are expected to be posted to the Qualifying Shareholders who have acceptedand applied for (where appropriate), and paid for the Rights Shares on 20 March 2015 byordinary post at their own risk. Refund cheques in respect of wholly or partially unsuccessfulapplications for excess Rights Shares (if any) are also expected to be posted on 20 March 2015by ordinary post to the applicants at their own risk.

The first day of dealing in the Rights Shares in their fully-paid form is expected tocommence on 9:00 a.m. on Monday, 23 March 2015.


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Application for listing

Upon approval by the Independent Shareholders at the EGM, the Company will apply tothe Listing Committee of the Stock Exchange for the listing of and permission to deal in, theRights Shares in both their nil-paid and fully-paid forms to be issued and allotted pursuant tothe Rights Issue.

Subject to the granting of the listing of, and permission to deal in, Rights Shares in bothnil-paid and fully-paid forms on the Stock Exchange, Rights Shares in both their nil-paid andfully-paid forms will be accepted as eligible securities by HKSCC for deposit, clearance andsettlement in CCASS with effect from the commencement dates of dealings in Rights Shares inboth their nil-paid and fully-paid forms on the Stock Exchange or such other date asdetermined by HKSCC. Settlement of transactions between participants of the Stock Exchangeon any trading day is required to take place in CCASS on the second trading day thereafter.All activities under CCASS are subject to the general rules of CCASS and CCASS operationalprocedures in effect from time to time.

Both nil-paid Rights Shares and fully-paid Right Shares will be traded in board lots of4,000 Consolidated Shares.

Dealings in the Rights Shares in both nil-paid and fully-paid forms which are registered inthe branch register of members of the Company in Hong Kong will be subject to the paymentof stamp duty, Stock Exchange trading fee, transaction levy, investor compensation levy or anyother applicable fees and charges in Hong Kong.

UNDERWRITING ARRANGEMENT

The Underwriting Agreement

Date: 18 August 2014

Underwriter: Freeman Securities Limited

Total number of Rights Sharesbeing underwritten by theUnderwriter:

The Underwriter has conditionally agreed to fullyunderwrite not less than 700,958,385 Underwritten Sharesand not more than 703,352,934 Underwritten Shares, nottaken up by the Qualifying Shareholders

Commission: 3.0% of the aggregate Subscription Price in respect of themaximum number of Underwritten Shares as determined onthe Record Date

The Underwriter and its ultimate beneficial owners are third parties independent of andnot connected with the Company and its Connected persons.

Pursuant to the Underwriting Agreement, the Company also undertakes to the Underwriterthat the Company shall not from the date of the Underwriting Agreement until the Record Dateallot or issue any Shares whether those Shares are allotted or issued pursuant to the general


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mandate of the Company or otherwise, or grant any options, warrants, subscription rights orother securities convertible into, exchangeable for or which carry rights to acquire Shares(other than the issue of Shares upon exercise of the Share Options) without the writtenapproval of the Underwriter.

The Board considers the terms of the Underwriting Agreement including the commissionrate accord with market practice and are fair and reasonable so far as the Company and theShareholders are concerned.

In the event that the above conditions have not been fulfilled by the Underwriter in allrespects by or at the time and/or date specified therefor (or if no time or date is specified, 30June 2015) (or such later date(s) as the Underwriter may agree with the Company), allliabilities of the parties to the Underwriting Agreement shall cease and determine and no partyshall have any claim against the other party save for any antecedent breach of the UnderwritingAgreement and all such reasonable costs, fees and other out-of-pocket expenses as have beenproperly incurred by the Underwriter in connection with the underwriting of the UnderwrittenShares by the Underwriter shall be borne by the Company, and the Rights Issue will notproceed.

Termination of the Underwriting Agreement

If at any time between the date hereof and 4:00 p.m. on the Latest Time for Termination,one or more of the following events or matters (whether or not forming part of a series ofevents) shall occur, arise or exist:

(a) the Underwriter shall become aware of the fact that, or shall have reasonable causeto believe that, (i) any of the representations or warranties contained in theUnderwriting Agreement is untrue, inaccurate, misleading or breached; or (ii) anyevent occurring or matter arising on or after the date of the Underwriting Agreementand prior to the Latest Time for Termination which if it had occurred or arisen beforethe date of the Underwriting Agreement would have rendered any of therepresentations or warranties contained hereunder untrue, inaccurate, misleading orbreached, and in each case the same is (in the reasonable opinion of the Underwriter)material in the context of the Rights Issue; or

(b) any material adverse change in market conditions (including, without limitation, achange in fiscal or monetary policy or foreign exchange or currency markets,suspension or restriction of trading in securities, imposition of economic sanctions,on Hong Kong, the PRC or other jurisdiction relevant to the Group or any memberof the Group) occurs which in the reasonable opinion of the Underwriter makes itinexpedient or inadvisable to proceed with the Rights Issue; or

(c) (i) any new law or regulation is enacted, or there is any change in existing laws orregulations or any change in the interpretation or application thereof by anycourt or other competent authority, whether in Hong Kong or elsewhere;

(ii) any change in local, national or international financial, political, industrial oreconomic conditions;


– 50 –

(iii) any change of an exceptional nature in local, national or international equitysecurities or currency markets;

(iv) any local, national or international outbreak or escalation of hostilities,insurrection or armed conflict;

(v) any moratorium, suspension or material restriction on trading in securitiesgenerally on the Stock Exchange;

(vi) any change or development involving a prospective change in taxation orexchange controls in Hong Kong or elsewhere; or

(vii) any act of God, war, riot, public disorder, civil commotion, terrorism, strike orlock-out;

which event or events is or are in the reasonable opinion of the Underwriter:

(1) likely to have a material adverse effect on the business, financial position orprospects of the Group taken as a whole; or

(2) likely to have a material adverse effect on the success of the Rights Issue or thelevel of Rights Shares taken up; or

(3) so material as to make it inappropriate, inadvisable or inexpedient to proceedfurther with the Rights Issue,

then and in such case, the Underwriter may, in addition to and without prejudice to any otherremedies to which the Underwriter may be entitled, by notice in writing to the Companyterminate the Underwriting Agreement forthwith. Upon the giving of such notice by theUnderwriter, all obligations of the Underwriter hereunder shall cease and determine (save forany antecedent breaches thereof) and no party shall have any claim against any other party inrespect of any matter or thing arising out of or in connection with the Underwriting Agreementsave for any antecedent breach.

Conditions of the Rights Issue

The Rights Issue is conditional upon the following being fulfilled:

(i) the passing of the relevant resolutions in respect of the Share Consolidation, theRights Issue and any transactions contemplated hereunder by the IndependentShareholders at the EGM in accordance with the Listing Rules;

(ii) the Share Consolidation becoming effective;

(iii) the simultaneous and successful completion of the Acquisition pursuant to the Saleand Purchase Agreement;


– 51 –

(iv) the Listing Committee of the Stock Exchange agreeing to grant the listing of, andpermission to deal in, the Rights Shares in their nil-paid and fully-paid forms eitherunconditionally or subject to such conditions which the Underwriter, in itsreasonable opinion, accepts and the subsequent satisfaction of such conditions (ifany);

(v) the delivery to the Stock Exchange and filing and registration with the Registrar ofCompanies in Hong Kong respectively of one copy of each of the ProspectusDocuments each duly certified by two Directors (or by their agents duly authorisedin writing) on or before Posting Date in compliance with the Companies Ordinance(and all other documents required to be attached thereto) and otherwise complyingwith the requirements of the Companies Ordinance and the Listing Rules;

(vi) the posting of the Prospectus Documents to the Qualifying Holders; and

(vii) the Underwriter having not terminated the Underwriting Agreement.

As one of the conditions of the Rights Issue is the simultaneous and successfulcompletion of the Acquisition pursuant to the Sale and Purchase Agreement, the timing ofcompletion of the Acquisition will affect the timing of completion of the Right Issue andvice versa. There might be a possible delay or non-completion of the Rights Issue due tothe Acquisition.

If the Rights Issue cannot be completed simultaneously with the Acquisition on or prior tothe date when the certificates for the fully-paid Rights Shares are expected to be despatched,the Rights Issue shall be terminated and the Company will refund cheques in respect of allacceptance of, and payment for, the Rights Shares and all applications (whether successful orunsuccessful) for excess Rights Shares by ordinary posts to the applicants at their own risk on20 March 2015.

Furthermore, in order to let Shareholders and investors to have updated information on theAcquisition, the Company will make separate announcement one day before last cum-right dayabout the progress of the Acquisition.

In the event that the above conditions have not been fulfilled by the Underwriter in allrespects by or at the time and/or date specified therefor (or if no time or date is specified, 30June 2015) (or such later date(s) as the Underwriter may agree with the Company), allliabilities of the parties to the Underwriting Agreement shall cease and determine and no partyshall have any claim against the other party save for any antecedent breach of the UnderwritingAgreement and all such reasonable costs, fees and other out-of-pocket expenses as have beenproperly incurred by the Underwriter in connection with the underwriting of the UnderwrittenShares by the Underwriter shall be borne by the Company, and the Rights Issue will notproceed.


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WARNING OF THE RISKS OF DEALINGS IN THE SHARES AND RIGHTS SHARESIN NIL-PAID FORM

The Rights Issue is fully underwritten by the Underwriter and is conditional uponthe fulfilment of the conditions set out in the section headed ‘‘Conditions of the RightsIssue’’ in this Circular. In particular, the Rights Issue is conditional upon:

(i) the Listing Committee granting or agreeing to grant (subject to allotment), andnot having revoked, listing of, and permission to deal in, the Rights Shares innil-paid and fully-paid forms prior to 9:00 a.m. on Thursday, 26 February 2015,being the expected date of commencement of dealings in the Rights Shares innil-paid form (or such other date as may be agreed between the Company andthe Underwriter);

(ii) the obligations of the Underwriter under the Underwriting Agreement becomingunconditional and the Underwriting Agreement not being terminated inaccordance with its terms (set out in the section headed “Termination of theUnderwriting Agreement” in this Circular); and

(iii) the simultaneous and successful completion of the Acquisition pursuant to theSale and Purchase Agreement.

If the conditions of the Rights Issue are not fulfilled or if the Underwriter exercisesits right to terminate the Underwriting Agreement pursuant to the terms therein, theRights Issue will not proceed.

Any persons contemplating buying or selling Shares from the date of this Circular upto the date on which all the conditions of the Rights Issue are fulfilled, and any dealingsin the Rights Shares in their nil-paid form between 26 February 2015 to 5 March 2015(both dates inclusive), bear the risk that the Rights Issue may not become unconditionalor may not proceed. Any Shareholders or other persons contemplating dealing in theShares or nil-paid Rights Shares are recommended to consult their own professionaladvisers.


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EFFECT ON THE SHAREHOLDING STRUCTURE

The changes in the shareholding structure of the Company arising from ShareConsolidation and the Rights Issue assuming (i) no exercise of 1,330,308 Share Optionsgranted and outstanding; and (ii) full exercise of exercise of 1,330,308 Share Options grantedand outstanding are as follows:

scenario 1: no exercise of share options

Name of ShareholdersAs at the

Latest Practicable Date

Immediately after the ShareConsolidation but before

completion of the Rights Issue(Note 2)

Immediately after completion ofthe Rights Issue (all RightsShares are subscribed by the

Qualifying Shareholders)

Immediately after completion ofthe Rights Issue (none of the

Rights Shares are subscribed bythe Qualifying Shareholders)

(Notes 3 to 6)

No. of Shares Approximate %

No. ofConsolidated

Shares Approximate %

No. ofConsolidated


No. ofConsolidated


DirectorDr. Wong Yun Kuen

(Note 1) 9,000 0.00% 1,800 0.00% 18,000 0.00% 1,800 0.00%Holder of share options — 0.00% — 0.00% — 0.00% — 0.00%

Public Shareholders:Underwriter — 0.00% — 0.00% — 0.00% 700,958,385 90.00%Other public Shareholders 389,412,327 100.00% 77,882,465 100.00% 778,824,650 100.00% 77,882,465 10.00%

389,421,327 100.00% 77,884,265 100.00% 778,842,650 100.00% 778,842,650 100.00%

scenario 2: full exercise of share options

Name of ShareholdersAs at the

Latest Practicable Date

Immediately after the ShareConsolidation but before

completion of the Rights Issue(Note 2)

Immediately after completion ofthe Rights Issue (all RightsShares are subscribed by the

Qualifying Shareholders)

Immediately after completion ofthe Rights Issue (none of the

Rights Shares are subscribed bythe Qualifying Shareholders)

(Notes 3 to 6)

No. of Shares Approximate %

No. ofConsolidated


No. ofConsolidated


No. ofConsolidated


DirectorDr. Wong Yun Kuen

(Note 1) 9,000 0.00% 1,800 0.00% 18,000 0.00% 1,800 0.00%Holder of share options 1,330,308 0.34% 266,061 0.34% 2,660,610 0.34% 266,061 0.03%

Public Shareholders:Underwriter — 0.00% — 0.00% — 0.00% 703,352,934 90.00%Other public Shareholders 389,412,327 99.66% 77,882,465 99.66% 778,824,650 99.66% 77,882,465 9.97%

390,751,635 100.00% 78,150,326 100.00% 781,503,260 100.00% 781,503,260 100.00%

Notes:

1. Dr. Wong Yun Kuen is an independent non-executive Director.

2 Upon completion of the Share Consolidation, no fractional Consolidated Shares will be issued.


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3 This scenario is for illustrative purpose only and will never occur. Pursuant to the Underwriting Agreement,the Underwriter confirms that it has sub-underwritten its underwriting obligations under the UnderwritingAgreement to sub-underwriters and declares that it has no intention of becoming, whether by itself or togetherwith the parties acting in concert with it (if any), the controlling shareholder (as defined in the Listing Rules)of the Company as a result of performance of its obligations under the Underwriting Agreement. Accordingly,the Underwriter:

(i) confirms that, without prejudice in any event to the Underwriter’s obligations to procure subscriptionfor the Underwritten Shares not taken up under the Underwriting Agreement, it shall, whether by itselfor together with the parties acting in concert with it (if any), be under no circumstances hold 29.9% ormore of the issued share capital of the Company immediately after completion of the Rights Issue; and

(ii) agrees that it shall, in fulfillment of the Underwriter’s obligations under the Underwriting Agreement tosubscribe for (or procure subscribers for) any Underwritten Shares, take appropriate steps such as sub-underwriting all or part of the Underwritten Shares thereunder (sub-underwriter(s) not being party(ies)acting in concert with the Underwriter) to ensure that the Underwriter, together with the parties actingin concert with it (if any) will not become the controlling shareholder of the Company immediately aftercompletion of the Rights Issue.

4 Pursuant to the Underwriting Agreement, the Underwriter further undertakes to the Company that, withoutprejudice in any event to the Underwriter’s obligations to procure subscription for the Underwritten Shares nottaken up under the Underwriting Agreement or otherwise, it shall ensure (i) that the subscribers for anyUnderwritten Shares (collectively the "Relevant Subscribers") are independent of and not connected or actingin concert with the directors, chief executive or substantial Shareholders of the Company or any of itssubsidiaries or any of their respective associates and (ii) that no such Relevant Subscriber shall be procured ifallotment and issue of any Rights Shares to it would result in it and persons acting in concert with it, whenaggregated with the total number of Shares (if any) already held by them, holding 29.9% or more of theenlarged issued share capital of the Company immediately after completion of the Rights Issue.

5 Pursuant to the Underwriting Agreement, the Underwriter undertakes that in the event that the Underwriter orany of the sub-underwriters mentioned above is required to take up the Rights Shares pursuant to theirunderwriting/sub-underwriting obligations, (i) the Underwriter will not and shall procure that each sub-underwriter will not, whether by itself or together with the parties acting in concert with it (if any), own29.9% or more of the issued share capital of the Company immediately after the Rights Issue; and (ii) theUnderwriter shall and shall cause the sub-underwriters to procure independent placees to take up such numberof Rights Shares as necessary to ensure that the public float requirements under Rule 8.08 of the Listing Rulesare complied with.

6 The Company will ensure the compliance with the public float requirements under Rule 8.08 of the ListingRules upon completion of the Rights Issue.

The Underwriter has sub-underwritten its underwriting commitment to 12 sub-underwriters. The list of sub-underwriters and the minimum and maximum number of RightsShares sub-underwritten to each of them are listed out as below:

scenario 1: assuming no exercise of share options

HEC Securities Limited 230,000,000 Rights SharesEnerchine Securities Limited 230,000,000 Rights SharesAu Yeung Kai Wah 24,130,385 Rights SharesKitchell, Osman Bin 24,092,000 Rights SharesKwong Kai Sing, Benny 24,092,000 Rights SharesShimazaki, Koji 24,092,000 Rights SharesYu Man Fung, Alice 24,092,000 Rights SharesLam Wai Ming 24,092,000 Rights SharesLam Suk Ping 24,092,000 Rights SharesChow Kam Wah 24,092,000 Rights SharesYao Man Yi 24,092,000 Rights SharesShum Ming Choy 24,092,000 Rights Shares


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scenario 2: full exercise of share options

HEC Securities Limited 230,000,000 Rights SharesEnerchine Securities Limited 230,000,000 Rights SharesAu Yeung Kai Wah 24,364,934 Rights SharesKitchell, Osman Bin 24,332,000 Rights SharesKwong Kai Sing, Benny 24,332,000 Rights SharesShimazaki, Koji 24,332,000 Rights SharesYu Man Fung, Alice 24,332,000 Rights SharesLam Wai Ming 24,332,000 Rights SharesLam Suk Ping 24,332,000 Rights SharesChow Kam Wah 24,332,000 Rights SharesYao Man Yi 24,332,000 Rights SharesShum Ming Choy 24,332,000 Rights Shares

Each of the 12 sub-underwriters and its respective ultimate beneficial owners (ifapplicable) are third parties independent of and not connected with the Company and itsconnected persons as well as the Underwriter and each of the 12 sub-underwriters areindependent of each other such that the Takeovers Code obligations and/or public float issuewill not be triggered as a result of the Rights Issue.

As at the Latest Practicable Date, an associate of the Underwriter holds 32,579,800Shares, representing approximately 8.37% of the total issued share capital of the Company.Therefore, the associate of the Underwriter, to the extent the number of Shares it holds on thedate of the EGM, will abstain from voting in respect of the resolution to approve the RightsIssue.

FINANCIAL IMPACT OF THE ACQUISITION AND THE RIGHTS ISSUE

Financial effects of the Acquisition and the Rights Issue

The financial impact of the Acquisition is set out in Appendix IV to this Circular. Pleaserefer to the Appendix IV to this Circular for basis of preparing the unaudited pro formafinancial information on the Enlarged Group after Completion. Upon Completion, the Companywill be beneficially interested in the 40% equity interests in the Target Company and theTarget Group will become an associate of the Group.

Earnings

The Group recorded an audited turnover of approximately HK$4,400,000 and loss for theyear of approximately HK$182,000. As shown in the unaudited pro forma financial informationof the Enlarged Group contained in Appendix IV to this Circular, the turnover of the EnlargedGroup on a consolidated basis will remain the same.

As shown in the unaudited pro forma financial information of the Enlarged Groupcontained in Appendix IV to this Circular, the Enlarged Group recorded a loss for the year ona consolidated basis of approximately HK$2,754,000.


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Assets

The Group has an unaudited total assets of approximately HK$1,343,586,000 as at 30June 2014. The Acquisition would increase the total assets of the Enlarged Group by theamount of approximately HK$404,263,000 to approximately HK$1,747,849,000 as shown inthe unaudited pro forma financial information of the Enlarged Group contained in Appendix IVto this Circular. The increase was mainly due to an increase in cash and bank balance ofapproximately HK$404,263,000 as a result of completion of Rights Issue.

The Group has an unaudited net asset value of approximately HK$1,241,620,000 as at 30June 2014. The Acquisition would increase the net asset value of the Enlarged Group by theamount of HK$404,263,000 to approximately HK$1,645,883,000 as shown in the unauditedpro forma financial information of the Enlarged Group contained in Appendix IV to thisCircular.

The fair value of adjusted net assets of the Target Group to be acquired by the Group iscalculated as follows (as extracted from the Appendix IV — Unaudited Pro Forma FinancialInformation of the Enlarged Group):

HK$’000

Net liabilities of the Target Group attributable to owners of TargetCompany (as shown in the consolidated statement of financial positionas at 30 June 2014 of the Target Group as set out in Appendix III tothe Circular) (22,568)

Proportion of the Group’s ownership interest in Target Group of 40% (9,027)Goodwill 16,226Effect of fair value adjustments at the Acquisition 326,720Sale loan 36,081

Carrying amount of the Group’s interest in the Target Group 370,000

As shown in the Unaudited Pro Forma Financial Information of the Enlarged Group, thereis a goodwill of HK$16,226,000 which is the results of the difference between the fair value ofadjusted net assets of the Target Group and the Consideration of HK$370,000,000.

Effect of fair value adjustments at the Acquisition of approximately HK$326.72 million(as shown in the table above and calculated based on a discounted value under the Valuation)is expected to be adjusted to HK$345.28 million upon Completion since (i) upon Completion,the Target Group will be revalued again; (ii) Completion is expected to take place on or beforeearly March and by then the Development Project — Phase I will be completed (as advised bythe Vendor, Development Project — Phase I is scheduled to be completed by the end of 2014);(iii) the discounted value of the Development Project — Phase I is no longer required uponCompletion and therefore, the current market value of the Development Project — Phase I(without being discounted) will be fully reflected.


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We refer to page 166 of the Circular and explain the calculation of effect of 40% fair

value adjustments and recognition of deferred tax attributable to the Group upon the

Completion of the Acquisition (i.e. HK$326,720,000) as below (approximate figure in HK$’

million were used):

Valuation = HK$1,539 million (page 178 of the Circular)

Fair value adjustments x 40% = HK$1,089.1 million (i.e. HK$1,539 million –

HK$449.9 million Note 1) x 40%

= HK$435.64 million

Deferred tax liabilities at tax

rate of 25% x 40%

= HK$1,089.1 million x 25% x 40%

= HK$108.91 million

Effect of fair value

adjustments at the

Acquisition

= HK$435.64 million – 108.91 million

= HK$326.73 million

Note 1: HK$449.9 million is the Properties held for sale as shown on page 131 of the Circular

According to the Valuer, the market value of the property of HK$1,539 million excludes a

discounted value calculated based on 15% of the valuation of Phase I of the property of

RMB386,909,528, i.e. approximately RMB58 million (HK$73 million) multiplied by 84.71%

and this ‘‘discounted value (i.e.HK$61.84 million). However, Completion is expected to take

place on or before early March and by then the Development Project — Phase I will be

completed, such ‘‘discounted value’’ is expected to be added back to calculate the Valuation. In

this way, the Valuation will be increased by HK$61.84 million. Therefore, the effect of 40%

fair value adjustments and recognition of deferred tax attributable to the Group upon the

Completion of the Acquisition (i.e. HK$345.28 million) will be revised as below:

Valuation = HK$1,539 million + HK$61.84 million

Fair value adjustments x 40% = HK$1,150.94 million (i.e. HK$1,539 million

+ HK$61.84 million – HK$449.9 million) x 40%

= HK$460.37 million

Deferred tax liabilities at tax

rate of 25% x 40%

= HK$1,150.94 million x 25% x 40%

= HK$115.09 million

Revised Effect of fair value

adjustments at the

Acquisition

= HK$460.37 million – HK$115.09 million

= HK$345.28 million


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In view of increase of effect of fair value adjustments at the Acquisition by HK$18.55

million (HK$345.28 million–HK$326.73 million) which is above HK$16.22 million goodwill,

there is no goodwill upon Completion.

In view of the above, the Board considers that no goodwill arising on the Proposed

Acquisition would arise upon Completion.

Liabilities

The Group has an unaudited current liabilities and non-current liabilities of approximately

HK$51,966,000 and HK$50,000,000 respectively as at 30 June 2014. The current liabilities

and non-current liabilities of the Enlarged Group remain the same as shown in the unaudited

pro forma financial information of the Enlarged Group contained in Appendix IV to this

Circular.

REASONS FOR AND BENEFITS OF THE ACQUISITION, THE RIGHTS ISSUE AND

THE USE OF PROCEEDS

The Group is principally engaged in the trading of goods, financing, brokerage and

securities investment and iron ore mining businesses.

As stated in the annual report 2013 of the Company, during the year under review, the

turnover of the Group was down by approximately 67% to approximately HK$4,400,000

(2012: HK$13,500,000) and the gross profit was decreased by approximately 73% to

approximately HK$2,916,000 (2012: HK$10,745,000). For the year ended 31 December 2013,

the Group recorded a loss attributable to equity holders of the Company of approximately

HK$178,000 (2012: HK$246,300,000), representing a decrease of approximately 99.93% when

compared to last year. As stated in the interim report of the Company for the six months period

ended 30 June 2014, the turnover of the Group for the period was decreased by approximately

9% to approximately HK$1,628,000 (2013: HK$1,786,000) with gross profit dropped by

approximately 16% to approximately HK$1,308,000 (2013: HK$1,548,000). During the same

period, the Group recorded a profit attributable to the Company’s shareholders of

approximately HK$29,947,000 (2013: loss attributable to the Company’s shareholders of

HK$67,991,000) and earnings per share was approximately 7.69 HK cents (2013: loss per

share of 17.5 HK cents) due mainly to the recognition of unrealised gain on investment of

marketable securities from the Group’s securities investment operation. As at 31 December

2013, the total assets and current assets of the Company were HK$515,766,000 and

HK$866,512,000 respectively, of which HK$234,333,000 and HK$405,370,000 belong to

available-for-sale financial assets and financial assets at fair value through profit or loss

respectively. At 30 June 2014, the Group had current assets of approximately HK$887,415,000

(at 31 December 2013: HK$866,512,000) and liquid assets comprising bank balances and

marketable Hong Kong listed securities totaling approximately HK$543,699,000 (excluding

bank balances held under segregated trust accounts) (at 31 December 2013: HK$456,868,000).

As stated in the annual report 2013 of the Company, it is noted that the Group’s strategy

is to continue identifying suitable mineral projects that may have a good profit and/or

development potential for investment with the objectives of enhancing the Group’s business

operations and, more importantly, maximizing the long term return for shareholders of the


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Company. In February and June 2013, the Group entered into an acquisition agreement and asupplemental agreement in relation to the acquisition of a target group which is principallyengaged in the iron ore mining and ore processing operation in Xinjiang Uygur AutonomousRegion, the PRC. The Board believes that the acquisition represents a valuable investmentopportunity for the Group, having considered the amount of proved and probable reserves aswell as indicated resources at the target mines and the future growth opportunity of the targetmines to generate revenue and cash flow to the Group.

While focusing on its principal business and the acquisition of the new target group iniron ore mining business, the Board believes that the Acquisition is in line with the Group’sinvestment strategy to bring investment return to the Group and would allow the Group to tapinto the real estate business in the PRC with growth potential after having considered theconstruction progress and future prospects of the Development Project, the existing financingcapacity of the Target Group as well as the ability of the Target Group to generate returns andcash flow to the Group.

As described above, the Acquisition is to be funded by the net proceeds from the RightsIssue. The Board therefore considers that the Rights Issue represents an opportunity for theCompany to enhance its working capital and strengthen its capital base and financial position.Upon completion of the Rights Issue, the Company will be in a good position to capture thepotential business opportunity from the Acquisition and to enhance its earning potential, andtherefore enhance the overall value of the Shares. Moreover, the Board is of the view that it isin the interests of the Company and its Shareholders as a whole to raise the capital whichthrough the Rights Issue since it would allow the Qualifying Shareholders to maintain theirrespective pro rata shareholdings in the Company and participate in the future growth anddevelopment of the Group.

In view of the (i) business potentials of the Target Group to generate returns and cashflow to the Group which will strengthen the financial position of the Group and might lead to aturnaround from a net loss to a net profit in future; (ii) the financial position of the Group andthe needs to preserve existing financial resources of the Group for the existing projects; (iii)the Rights Issue allows the Qualifying Shareholders to maintain their respective pro ratashareholdings in the Company and participate in the future growth and development of theGroup, the Board considers that (i) it is suitable to raise additional funds by way of the RightsIssue when the Group identifies appropriate business opportunities in relation to theAcquisition; (ii) the terms of each of the Sale and Purchase Agreement and the Rights Issueare on normal commercial terms and are fair and reasonable; and (iii) the Acquisition and theRights Issue as a whole are in the interest of the Shareholders and the Group as a whole.

Conditional upon the Share Consolidation becoming effective, the Company proposes toraise not less than approximately HK$420.6 million but not more than approximately HK$422million, before expenses, by way of Rights Issue. The estimated net proceeds from the RightsIssue will be approximately HK$404.26 million to HK$405.65 million and are intended to beused for payment of cash consideration of HK$370 million for the Acquisition and theremaining amount of proceeds (if any) for general working capital purposes of the Company.


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POSSIBLE ADJUSTMENTS TO THE SHARE OPTIONS

As a result of the Share Consolidation and the Rights Issue, adjustments may need to bemade to the exercise price and other rights (if any) pursuant to the terms of the share optionscheme of the Company if necessary and the Company will make announcement accordingly.

FUND RAISING ACTIVITIES OF THE COMPANY FOR THE PAST 12 MONTHS

The Company has not conducted any equity fund raising activity in the past 12 monthsimmediately preceding the Latest Practicable Date.

TAXATION

Qualifying Shareholders are recommended to consult their professional advisers if theyare in any doubt as to the tax implications of the holding or disposal of, or dealing in theRights Shares in both their nil-paid and fully-paid forms, as regards the Excluded Shareholders,their receipt of the net proceeds of sale of the Rights Shares otherwise falling to be issued tothem under the Rights Issue. It is emphasized that none of the Company, its Directors or anyother parties involved in the Rights Issue accepts responsibility for any tax effects or liabilitiesof holders of the Rights Shares resulting from the purchase, holding or disposal of, or dealingin the Rights Shares in both their nil-paid and fully-paid forms.

LISTING RULES IMPLICATIONS

As the highest applicable percentage ratio (as defined under Chapter 14 of the ListingRules) in respect of the Acquisition is more than 100%, the Acquisition constitutes a verysubstantial acquisition for the Company.

In addition, the ultimate beneficial owner of the Vendor is Mr. Liang who is the executiveDirector of the Company. Accordingly, the Vendor is a Connected person of the Companyunder the Listing Rules and the Acquisition also constitutes a connected transaction of theCompany under Rule 14A.25 of the Listing Rules and is subject to the reporting,announcement and Independent Shareholders’ approval requirements under Chapter 14A of theListing Rules. The Vendor and Mr. Liang are also considered to have material interest in theAcquisition. As at the Latest Practicable Date, Mr. Liang does not hold any interest in theShares. As such, no Shareholders will be required to abstain from voting on the resolution(s)approving the Acquisition, the Sale and Purchase Agreement and the transactions contemplatedthereunder at the EGM. Voting at the EGM will be conducted by poll.

The Rights Issue is subject to, among other things, the approval by the IndependentShareholders at the EGM. Pursuant to Rule 7.19(6) of the Listing Rules, any controllingShareholder and their associates, or where there are no controlling Shareholders, the Directors(excluding the independent non-executive Directors), the chief executive of the company andtheir respective associates will abstain from voting in favour of the resolutions relating to theRights Issue. As at the Latest Practicable Date, there is no controlling Shareholder. As at theLatest Practicable Date, Dr. Wong Yun Kuen, the independent non-executive Director, holds


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9,000 Existing Shares. Save as disclosed, as at the Latest Practicable Date, none of theDirectors (excluding the independent non-executive Directors), the chief executive of theCompany and their respective associates has any Shares.


Save as disclosed, none of the Shareholders or Directors are required to abstain fromvoting on the resolutions approving the Acquisition, the Sale and Purchase Agreement, theRights Issue and the transactions contemplated thereunder the EGM.

The Company has established an independent board committee to advise the IndependentShareholders as to whether the terms of the Acquisition and Rights Issue are fair andreasonable and whether the Acquisition and the Rights Issue are in the interests of theCompany and the Shareholders as a whole, and to advise the Independent Shareholders on howto vote, taking into account the recommendations of the independent financial adviser. In thisconnection, the Company will appoint an independent financial adviser to advise theindependent board committee and the Independent Shareholders as to whether the terms of theAcquisition and the Rights Issue are fair and reasonable.

Upon passing of the necessary resolution(s) by the Shareholders (where applicable, theIndependent Shareholders) at the EGM approving the Share Consolidation and the Rights Issueand upon the Share Consolidation becoming effective, the Prospectus Documents setting outdetails of the Rights Issue will be despatched to the Qualifying Shareholders as soon aspracticable whereas the Prospectus will be despatched to the Excluded Shareholders for theirinformation only.

EGM

The EGM will be convened and held for Shareholders to consider and, if thought fit, toapprove the Sale and Purchase Agreement, the Acquisition, Share Consolidation and the RightsIssue.

The notice convening the EGM is set out on pages 195 to 198 of this Circular. The EGMwill be convened at Falcon Room II, Basement, Gloucester Luk Kwok Hong Kong, 72Gloucester Road, Wanchai, Hong Kong at 11:00 a.m. on Thursday, 5 February 2015 for thepurpose of considering and, if thought fit, approving the Acquisition, the Sale and PurchaseAgreement, Share Consolidation and the Rights Issue.

A form of proxy for use at the EGM is enclosed. Whether or not you are able to attendthe EGM in person, please complete the accompanying form of proxy in accordance with theinstructions printed thereon and return the same to the Registrar, Tricor Secretaries Limited, atLevel 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any


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event not less than 48 hours before the time appointed for the holding of the EGM. Completionand return of a form of proxy will not preclude you from attending and voting in person at theEGM or any adjournment thereof should you so wish.

Shareholders and potential investors are reminded that each of the Acquisition andthe Rights Issue is subject to, among other things, fulfillment of the conditions set out inthe paragraphs headed ‘‘Conditions Precedent’’ above. There is no assurance that any ofthe conditions to the Sale and Purchase Agreement and the Underwriting Agreement willbe fulfilled or waived, and the Acquisition and the Rights Issue may or may not proceed.Shareholders and potential investors should exercise caution when dealing in Shares.

RECOMMENDATION

You are advised to read carefully the letter from the Independent Board Committee andthe letter from the Independent Financial Adviser set out on pages 64 and 65 and pages 66 to90 respectively of this Circular. The Independent Board Committee, having taken into accountthe advice of the Independent Financial Adviser, considers that each of the Acquisition and theRights is on normal commercial terms, the terms of the Acquisition and the Rights Issue arefair and reasonable so far as the Independent Shareholders are concerned and the Acquisitionand the Rights Issue is in the interests of the Company and the Shareholders as a whole.Accordingly, the Independent Board Committee recommends the Independent Shareholders tovote in favour of the proposed resolutions approving the Acquisition and the Rights Issue atthe EGM.

Accordingly, the Directors believe that the terms of the Acquisition, the Sale and PurchaseAgreement, the Share Consolidation and the Rights Issue are fair and reasonable and in theinterests of the Company and the Shareholders as a whole, therefore, the Directors recommendShareholders or the Independent Shareholders to vote in favour of the relevant resolutions to beproposed at the EGM to approve the Acquisition, the Sale and Purchase Agreement, the ShareConsolidation and the Rights Issue and the transactions contemplated thereunder.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to thisCircular.

Yours faithfully,By order of the Board

China Yunnan Tin Minerals Group Company LimitedZhang Guoqing

Chairman

* The English transliteration of the Chinese names in this Circular, where indicated, is included for informationonly, and should not be regarded as the official English names of such Chinese names.


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The following is the text of the letter of recommendation, prepared for the purpose ofincorporation in this Circular, from the Independent Board Committee to the IndependentShareholders regarding the Acquisition and the Rights Issue:


(Stock Code: 263)

24 December 2014

To the Independent Shareholders

Dear Sir or Madam,


AND(2) PROPOSED RIGHTS ISSUE ON THE BASIS OF NINE RIGHTS SHARES

FOR EVERY ONE CONSOLIDATED SHARE HELDAT THE RECORD DATE

We refer to the circular of the Company dated 24 December 2014 (the ‘‘Circular’’) ofwhich this letter forms part. Unless the context specifies otherwise, capitalised terms usedherein have the same meanings as defined in the Circular.

We have been appointed by the Company as the Independent Board Committee to advisethe Independent Shareholders as to whether the terms of the Acquisition and the Rights Issueare fair and reasonable insofar as the Independent Shareholders are concerned. The IndependentFinancial Adviser has been appointed to advise the Independent Shareholders and theIndependent Board Committee in this respect.

Having taken into account the principal reasons and factors considered by, and the adviceof, the Independent Financial Adviser as set out in its letter of advice to the IndependentShareholders and the Independent Board Committee on pages 66 to 90 of the Circular, we areof the opinion that each of the Acquisition and the Rights Issue is on normal commercial termsand is in the interests of the Company and the Shareholders as a whole and the terms of which

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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are fair and reasonable insofar as the Company and the Shareholders are concerned.Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinaryresolutions to be proposed at the EGM to approve the Acquisition and the Rights Issue.

Yours faithfully,For and on behalf of

Independent Board Committee

Dr. Wong Yun Kuen Mr. Wong Shun Loy Mr. Hu ChaoIndependent non-Executive Directors

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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The following is the text of a letter of advice to the Independent Board Committee and theIndependent Shareholders from Nuada Limited dated 24 December 2014 in relation to theAcquisition and the Rights Issue for the purpose of inclusion in this circular.

Unit 1805-08, 18/FOfficePlus@Sheung Wan93-103 Wing Lok Street Sheung Wan, Hong Kong香港上環永樂街93-103號協成行上環中心18樓1805-08室

24 December 2014

To the Independent Board Committeeand the Independent Shareholders ofChina Yunnan Tin Minerals Group Company Limited

Dear Sirs,

(1) VERY SUBSTANTIAL ACQUISITION ANDCONNECTED TRANSACTION; AND

(2) PROPOSED RIGHTS ISSUE ON THE BASIS OF NINE RIGHTS SHARESFOR EVERY ONE CONSOLIDATED SHARE HELD

AT THE RECORD DATE

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise theIndependent Board Committee and the Independent Shareholders with respect to theAcquisition and the Rights Issue, details of which are set out in the letter from the Boardcontained in the Circular (the ‘‘Board’s Letter’’). Capitalised terms used in this letter shallhave the same meanings ascribed to them in the circular of the Company dated 24 December2014 (the ‘‘Circular’’) unless the context otherwise requires.

On 24 June 2014, the Purchaser (being a wholly-owned subsidiary of the Company) andthe Vendor entered into the Sale and Purchase Agreement (as amended and supplemented bythe supplemental agreements dated 18 August 2014 and 24 October 2014 respectively),pursuant to which the Purchaser has conditionally agreed to acquire and the Vendor hasconditionally agreed to sell the Sale Shares, representing 40% of the total issued share capitalof the Target Company at the consideration of HK$370.0 million. Upon Completion, theCompany will be beneficially owned the 40% equity interests in the Target Company and theTarget Group will become an associate of the Company.

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

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On 18 August 2014, the Company announced, among other things, the Acquisition andthat conditional upon the Share Consolidation becoming effective, the Company proposed toraise approximately not less than approximately HK$420.6 million but not more thanapproximately HK$422.0 million, before expenses, by way of the Rights Issue of not less than700,958,385 Rights Shares (assuming no issue of new Shares, no further repurchase of Sharesor no grant of Share Option under the Scheme Mandate Limited on or before the Record Date)and not more than 703,352,934 Rights Shares (assuming no issue of new Shares or no furtherrepurchase of Shares on or before the Record Date), at the Subscription Price of HK$0.6 perRights Share on the basis of nine (9) Rights Shares for every one (1) Consolidated Share heldat the Record Date and payable in full on acceptance.

Furthermore, the Board also announced that, after trading hours on 24 October 2014, (i)the Purchaser and the Vendor entered into another supplemental agreement to the Sale andPurchase Agreement to extend the Long Stop Date from 31 December 2014 to 30 June 2015;and (ii) the Company and the Underwriter entered into the supplemental agreement to theUnderwriting Agreement to extend the long stop date of the Underwriting Agreement from 31December 2014 to 30 June 2015.

The net proceeds from the Rights Issue will be approximately HK$404.26 million toHK$405.65 million and are intended to be used for payment of cash consideration ofHK$370.0 million for the Acquisition and the remaining amount of the proceeds (if any) forgeneral working capital purposes of the Group.

As the highest applicable percentage ratio (as defined under Chapter 14 of the ListingRules) in respect of the Acquisition is more than 100%, the Acquisition constitutes a verysubstantial acquisition of the Company. In addition, the ultimate beneficial owner of theVendor is Mr. Liang who is the executive Director of the Company. Accordingly, the Vendoris a Connected person of the Company under the Listing Rules, and the Acquisition alsoconstitutes a connected transaction of the Company under Rule 14A.25 of the Listing Rule andis subject to the reporting, announcement and Independent Shareholders’ approval requirementsunder Chapter 14A of the Listing Rules. The Vendor and Mr. Liang are also considered tohave material interest in the Acquisition. As at the Latest Practicable Date, Mr. Liang does nothave any interest in the Shares. As such, no Shareholders will be required to abstain fromvoting on the resolution(s) approving the Acquisition, the Sale and Purchase Agreement andthe transactions contemplated thereunder at the EGM. Voting at the EGM will be conducted bypoll.

The Rights Issue is subject to, among other things, the approval by the IndependentShareholders at the EGM. Pursuant to Rule 7.19(6) of the Listing Rules, any controllingShareholders and their associates or, where there are no controlling Shareholders, the Directors(excluding the independent non-executive Directors), the chief executive of the Company andtheir respective associates will abstain from voting in favour of the resolutions relating to theRights Issue. As at the Latest Practicable Date, there is no controlling Shareholder. As at theLatest Practicable Date, Dr. Wong Yun Kuen, the independent non-executive Director, holds9,000 Existing Shares. Save as disclosed, as at the Latest Practicable Date, and none of theDirectors (excluding the independent non-executive Directors), the chief executive of theCompany and their respectively associates has any Shares.


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Save as disclosed, none of the Shareholders or Directors are required to abstain fromvoting on the resolutions approving the Acquisition, the Sale and Purchase Agreement, theRights Issue and the transactions contemplated thereunder the EGM.

The Independent Board Committee comprising all the independent non-executiveDirectors has been formed to advise the Independent Shareholders as to (i) whether the termsof the Sale and Purchase Agreement are on normal commercial terms and fair and reasonableand whether the Acquisition is in the interests of the Company and the Shareholders as awhole; and (ii) whether the terms of the Rights Issue are fair and reasonable and whether theRights Issue is in the interests of the Company and the Shareholders as a whole; and (iii) howto vote. We have been appointed by the Company as the independent financial adviser toadvise the Independent Board Committee and the Independent Shareholders in those regards.

Nuada Limited is independent of and not connected with any members of the Group orany of their substantial shareholders, directors or chief executives, or any of their respectiveassociates, and is accordingly qualified to give an independent advice in respect of theAcquisition and the Rights Issue.

BASIS OF OUR OPINION

In formulating our opinion and recommendations, we have relied on the accuracy of theinformation, opinions and representations contained or referred to in the Circular and providedto us by the Company, the Directors, the management of the Company and the Vendor. Wehave assumed that all information, opinions and representations contained or referred to in theCircular were true and accurate at the time when they were made and continued to be true andaccurate at the date of the EGM. We have also assumed that all statements of belief, opinionand intention made by the Directors in the Circular were reasonably made after due enquiriesand considerations. We have no reason to doubt that any relevant information has beenwithheld, nor are we aware of any fact or circumstance which would render the informationprovided and representations and opinions made to us untrue, inaccurate or misleading. Weconsider that we have reviewed sufficient information to enable us to reach an informed viewand to justify reliance on the accuracy of the information contained in the Circular to provide areasonable basis for our opinions and recommendations.

The Directors collectively and severally accept full responsibility for the accuracy of theinformation contained in the Circular. Having made all reasonable enquiries, the Directors haveconfirmed that, to the best of their knowledge, there are no other facts or representations theomission of which would make any statement in the Circular, including this letter, misleading.We have not, however, carried out any independent verification of the information provided bythe Company, the Directors, the management of the Company and the Vendor, nor have weconducted an independent investigation into the business and affairs, financial condition andfuture prospects of the Group and/or the Target Group.


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We have not studied, investigated nor verified the validity of all legal aspects of, andprocedural aspects for, the Sale and Purchase Agreement and the Underwriting Agreement. Wehave further assumed that all material governmental, regulatory or other consents, rights,waivers, authorisations, licenses, clearances and approvals necessary for the effectiveness andimplementation of the Sale and Purchase Agreement and the Underwriting Agreement has beenor will be obtained and will not be withdrawn without any adverse effect on the Group, theassets and liabilities of the Group or the contemplated benefits to the Group as derived fromthe Acquisition and the Rights Issue.

Our opinion is necessarily based upon the financial, economic (including exchange ratesand interest rates), market, regulatory and other conditions as they exist on, and the facts,information, representations and opinions made available to us as of the Latest PracticableDate. Our opinion does not in any manner address the Company’s own decision to proceedwith the Acquisition and the Rights Issue. We disclaim any undertaking or obligation to adviseany person of any change in any fact or matter affecting the opinion expressed herein, whichmay come or be brought to our attention after the Latest Practicable Date.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Acquisition and the Rights Issue, we havetaken into consideration the following principal factors and reasons:

Background and business of the Group

The Group is principally engaged in the trading of goods, financing, brokerage andsecurities investment and iron ore mining business.


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The followings summarize the financial results of the Group for the two years ended 31December 2013, as extracted from the annual report 2013 of the Company (the ‘‘AnnualReport 2013’’) and for the six months period ended 30 June 2014, as extracted from theinterim report 2014 of the Company (the ‘‘Interim Report 2014’’):

For the year ended31 December

For thesix months

ended30 June

2013 2012 2014HK$’000 HK$’000 HK$’000

Turnover 4,400 13,500 1,628Cost of sales (1,484) (2,755) (320)

Gross profit 2,916 10,745 1,308Net gain/(loss) on financial assets at fairvalue through profit or loss 49,412 (94,654) 102,508

Impairment loss reversed/(recognised)in respect of mining right 17,000 (174,019) (59,000)

Impairment loss on goodwill — (38,679) —

Impairment loss property, plant andequipment — (931) —

Gain on disposal of subsidiaries and ajoint venture — 17,531 —

Gain on disposal of available-for salefinancial assets 3,555 — —

Other income 5,099 5,375 1,870Administrative expenses (72,343) (69,284) (30,377)Finance costs (1,115) (124) (1,112)Share of profit of a joint venture — 2,134 —

Profit/(loss) before taxation 4,524 (341,906) 15,197Income tax (expenses)/credit (4,706) 94,000 14,750

Profit/Loss for the year (182) (247,906) 29,947

Attributable to:Owners of the Company (178) (246,300) 29,947Non-controlling interests (4) (1,606) —


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As stated in the Annual Report 2013, for the year ended 31 December 2013, the turnoverof the Group was down by approximately 67.4% to approximately HK$4.4 million (2012:approximately HK$13.5 million), of which approximately HK$329,000 was attributable to thebusiness segment of provision of finance and approximately HK$4.1 million was attributable tobrokerage and securities investment and the gross profit was decreased by approximately72.9% to approximately HK$2.9 million (2012: approximately HK$10.7 million). For the yearended 31 December 2013, the Group recorded a loss attributable to equity holders of theCompany of approximately HK$178,000 (2012: approximately HK$246.3 million),representing a decrease of approximately 99.9% when compared to that for the previous year.Such decrease in loss was mainly due to the recognition of a gain on financial assets at fairvalue through profit or loss of approximately HK$49.4 million (2012: loss on financial assetsat fair value through profit or loss of approximately HK$94.7 million) and reversal ofimpairment loss on the mining right of approximately HK$17.0 million (2012: impairment losson the mining rights of approximately HK$174.0 million).

With reference to the Interim Report 2014, for the six months period ended 30 June 2014,the turnover of the Group was down by approximately 11.1% to approximately HK$1.6 millionwhen compared to that in the same period in previous year (approximately HK$1.8 million), ofwhich all was attributed from brokerage and securities investment and the gross profit wasdecreased by approximately 13.3% to approximately HK$1.3 million when compared to that inthe same period in previous year (approximately HK$1.5 million).

As noted in the Annual Report 2013, the Group’s strategy is to continue identifyingsuitable mineral projects that may have a good profit and/or development potential forinvestment with the objectives of enhancing the Group’s business operations and, moreimportantly, maximizing the long term return for Shareholders. Also, as stated in the InterimReport 2014, the Group will continue to actively seek for attractive investment opportunitieswhich will create substantial value to the Shareholders. For information purposes, in February2013 and June 2013, the Group entered into an acquisition agreement and a supplementalagreement in relation to the acquisition of a target group which is principally engaged in theiron ore mining and ore processing operation in Xinjiang Uygur Autonomous Region, the PRC,details of which are set out in the announcement dated 12 December 2013 of the Company. Asat the Latest Practicable Date, such acquisition, which is subject to conditions precedent, hadnot been completed and, may or may not proceed.

As at 30 June 2014, the Group had (i) net assets of approximately HK$1,241.6 millionand net current assets of approximately HK$835.4 million; (ii) total assets of approximatelyHK$1,343.6 million (mainly comprising mining right of approximately HK$200.0 million,available-for-sale financial assets of approximately HK$235.4 million, earnest money ofapproximately HK$300.0 million and financial assets at fair value through profit or loss ofapproximately HK$508.6 million), with bank balance held under segregated trust accounts ofapproximately HK$15.5 million and bank balance and cash of approximately HK$35.1 million;and (iii) total liabilities of approximately HK$102.0 million, with current liabilities ofapproximately HK$52.0 million (comprising trade and other payables, tax payable andprovision) and non-current liabilities of approximately HK$50.0 million (being deferred taxliabilities).


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Information of the Target Group

As at the Latest Practicable Date, the Vendor holds 87.2% of the Target Company and theTarget Company directly holds 100% equity interests in Jintang. The ultimate beneficial ownerand the sole director of the Vendor is Mr. Liang.

The Development Project

Jintang is a company established in the PRC and is the operating subsidiary of the TargetGroup. Jintang is principally engaged in the business of development, construction andbuilding management of the Development Project, comprising the residential and commercialcomplex known as ‘‘Jintang New City Plaza*’’ (金唐新城市廣場), which is located inChongqing, the PRC. The piece of land of the Development Project situates at Long TowerStreet* in the west southern part of the Yubei Zone, Chongqing City (重慶渝北區龍塔街道) inthe PRC with a site area of approximately 30,817 square meters. The total gross floor areadesignated for residential use is 53,883.20 square meters; for shopping mall is 36,012.85square meters; for office premises is 40,865.48 square meters; for car parking areas and otheruses is 56,512.26 square meters respectively. The terms for the grant of the land use right ofthe Land are 52 years from the date of grant, i.e. to 25 July 2064 for the residential portion and22 years from the date of grant, i.e. to 25 July 2034 for the commercial portion. After thecompletion of the Development Project, it is expected to be a new landmark area near thecentral business district of the Yubei Zone.

As disclosed in the Board’s Letter, as at the Latest Practicable Date,

(i) the building construction of the Development Project — Phase I has been completed(which comprises a residential block with 252 residential flats and 17 shopping mall)which are ready for pre-sale by June 2012 (the ‘‘1st Pre-sale’’);

(ii) the construction of the Development Project — Phase II has been commenced inMay 2014 and the piling work has been completed (which is designated to comprise6 blocks of commercial and residential complex) and barring any unforeseencircumstances, the building construction work is expected to be completed by 2016;

(iii) as advised by the Vendor, all units (including both the commercial and residentialbuildings) under Phase I and Phase II of the Development Project are expected to beready for pre-sale or sale after building construction has been completed and all theproperty units developed under Phase I and Phase II of the Development Project areexpected to be sold out after completion of construction;

(iv) as advised by the Vendor, 142 property units out of a total of 269 property unitsconstructed under Phase I of the Development Project were sold and transfer ofproperty title of 50 property units was completed in October 2014;


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(v) after Mr. Liang acquired equity interest in the Target Company, Jintang stopped theselling of the remaining properties under Phase I as Mr. Liang wanted to carry outthe restructure of the building and the site infrastructure in order to have higherselling price and it is expected the selling will resume in March or April 2015; and

(vi) the internal construction and infrastructure of the Development Project — Phase I isexpected to be completed by the end of 2014, and as advised by the Vendor, noother certificates, licenses, consents or permits in respect of the Phase I of theDevelopment Project is needed for such restructure of the building and the siteinfrastructure.

Moreover, pursuant to the Sale and Purchase Agreement, the Vendor undertakes to thePurchaser that all planning, construction, renovation and fitting-out works of the DevelopmentProject shall be completed to the reasonable satisfaction of the Purchaser within 5 years fromthe Completion of the Sale and Purchase Agreement. According to the management of theCompany, the Company can take legal action against the Vendor if the planning, construction,renovation and fitting-out works of the Development Project were not completed to thereasonable satisfaction of the Purchaser within 5 years from the Completion of the Sale andPurchase Agreement. Shareholders should note that if the aforesaid development schedulepostpone, there may be adversely affect to the Group’s financial performance.

As advised by the Company, as at the Latest Practicable Date, the Company has revieweddocuments and contracts related to the Development Project, and the cash flow forecast of theJintang prepared by the Vendor to ensure that the Vendor would have sufficient resources tofulfill its undertaking to complete all the development works within the 5 years’ period. Also,the Company engaged a PRC legal adviser to conduct a legal due diligence regarding theestablishment of Jintang and the operation of Jintang regarding the Development Project.

Based on the documents that the Company has reviewed as stated above, we are of theview that the due diligence exercise works performed by the Company is effective. In addition,(i) as the construction work of the Phase I was completed and the construction work of thePhase II has been commenced in May 2014 and (ii) the piling work has been completed as atthe Latest Practicable Date, we are of the view that the due diligence exercise work performedby the Company is effective. As such, we consider that the terms of the Acquisition will notnecessarily be affected.

Details regarding the certificates, licenses, consent or permits (the ‘‘Documents’’)obtained by Jintang in respect of the Development Project are listed out in the section headed‘‘Business of the Target Group’’ under the section headed ‘‘INFORMATION ON THETARGET GROUP’’ in the Board’s Letter. As disclosed in the Board’s Letter, as advised by theVendor and the PRC legal adviser of the Company, all of the Documents are valid as at theLatest Practicable Date, there are no legal impediments for Jintang to renew such Documents,and there are no legal impediments for Jintang to obtain such Documents. According to thefinal draft of the legal opinion prepared by the PRC legal adviser of the Company, weunderstand that the establishment of Jintang and the business operation of the Jintang compliedwith relevant PRC law.


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According to Board’s Letter, the Development Project is a residential and commercialcomplex located in Yubei Zone, Chongqing. In order to find out the recent trend of theeconomic development of Chongqing, we review the recent economic performance ofChongqing. According to the website of Chongqing Municipal Bureau of Statistics (YubeiZone is one of the area in Chongqing), we noted that (i) the dollar value of the fixed assetinvestment in Chongqing amounted to approximately RMB762.3 billion for the eight monthsended 31 August 2014, an increase of approximately 18.0% when compared to that in the sameperiod for the previous year; (ii) the dollar value of the spending on retail consumer productsin Chongqing amounted to approximately RMB287.5 billion for the seven month ended 31 July2014, an increase of approximately 13.1% when compared to that in the same period for theprevious year; (iii) the gross domestic product in Chongqing amounted to approximatelyRMB644.1 billion for the six month ended 30 June 2014, an increase of approximately 10.9%when compared to that in the same period for the previous year; and (iv) the dollar value of thecapital investment in real estate in Chongqing amounted to approximately RMB215.1 billionfor the eight months ended 31 August 2014, an increase of approximately 21.2% whencompared to that in the same period for the previous year. For the Urban FunctionDevelopment Zone (where Yubei Zone is one of the five zones) in particular, the grossdomestic product in the aforesaid zone amounted to approximately RMB162.6 billion for thesix month period ended 30 June 2014, an increase of approximately 13.0% when compared tothat in the same period for the previous year and is higher than the growth rate of Chongqingas stated above. According to the website of the Chongqing Yubei People’s Government, theinvestment in property development in Yubei was approximately RMB9.16 billion for the fourmonths period ended 30 April 2014, an increase of approximately 8.1% when compared to thatin the same period for the previous year. The area of property sold in Yubei amounted toapproximately 1.2 million square meter for the four months period ended 30 April 2014, anincrease of approximately 1.2% when compared to that in the same period for the previous yearand the average selling price of resident unit and retail shop was amounted to approximatelyRMB8,144 per square meter and RMB14,043 per square meter respectively for the four monthsperiod ended 30 April 2014, an increase of approximately 7.1% and 4.6% respectively whencompared to that in the same period for the previous year. Based on the above statisticalinformation, we are of the view that the economic condition in Chongqing is experiencing anupward trend. Shareholders should note that the above view involves uncertainties and is basedon the recent economic data of Chongqing published by Chongqing Municipal Bureau ofStatistics. The economic performance and property market in the PRC is subject to fluctuationand uncertainties in the future, depending on a number of factors including the generaleconomic conditions, policies on purchase restriction, mortgage policies and relatedimplementation by banks, interest rates, market expectation and speculation, and inventoriesand supply of properties.


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Financial information of the Target Group

Set out below are the consolidated financial information of the Target Group for each ofthe three financial years ended 31 December 2011, 2012 and 2013 and the six months ended30 June 2013 prepared in accordance with HKFRS as extracted from Appendix III to theCircular:

For the financial year ended31 December

Six monthsended

30 June2011 2012 2013 2014

(HK$’000) (HK$’000) (HK$’000) (HK$’000)(audited) (audited) (audited) (audited)

Turnover — — — —

Gross profit — — — —

Net profit/(loss) before tax (3,271) (4,125) (6,430) (6,840)Net profit/(loss) after tax (3,271) (4,125) (6,430) (6,840)

As at 31 DecemberAs at

30 June2011 2012 2013 2014

(HK$’000) (HK$’000) (HK$’000) (HK$’000)(audited) (audited) (audited) (audited)

Non-current assets 282 253 3,372 4,509Current assets 192,871 232,184 1,369,401 1,398,168Non-current liabilities — — 1,141,408 1,132,931Current liabilities 198,736 242,050 247,058 292,314

Net liabilities (5,583) (9,613) (15,693) (22,568)Net current assets/(liabilities) (5,865) (9,866) 1,122,343 1,105,854

For the year ended 31 December 2013, the Target Group did not record any revenue andrecorded audited net loss of approximately HK$6.4 million. For the six months ended 30 June2014, the Target Group did not record any revenue and recorded audited net loss ofapproximately HK$6.8 million.

As at 30 June 2014, the Target Group recorded audited net liabilities of approximatelyHK$22.6 million and net current assets of approximately HK$1,105.9 million, with currentassets mainly comprising (i) properties for sale of approximately HK$449.9 million; (ii) loanreceivable of approximately HK$52.4 million; (iii) deposits, prepayments and other receivablesof approximately HK$845.1 million; (iv) pledged bank deposits of approximately HK$6.3million;and (v) bank balance and cash of approximately HK$44.4 million and liabilitiescomprising (i) trade payables of approximately HK$6.7 million; (ii) deposits from sale of


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properties of approximately HK$82.5 million; (iii) accrued liabilities and other payable ofapproximately HK$96.4 million; (iv) amount due to a related company of approximatelyHK$16.6 million; and (v) amounts due to shareholders of approximately HK$90.2 million.

As disclosed in the Board’s Letter, as advised by the Vendor and as at the date of the Saleand Purchase Agreement, the Target Company was indebted to the Vendor a total sum ofapproximately RMB17.7 million as interest-free shareholder’s loan.

According to the HKFRS, sales proceeds received from pre-sale of the residential unit willnot be recognized as income. According to the Company, as advised by the Vendor, salesproceeds received from pre-sale of the residential unit amounted to approximately RMB92.3million as at the Latest Practicable Date.

Loan Agreement of the Target Group

On 21 August 2013, Jintang as borrower and Anxin Trust Investment Company Limited*(安信信托投資股份有限公司) (‘‘Anxin’’) as the trust arranger for and on behalf of GuosenSecurities Company Limited* (國信證券股份有限公司) entered into a Loan Agreement,pursuant to which Anxin agreed to pay Jintang an amount of RMB900 million in the form ofentrustment loan (the ‘‘Entrustment Loan’’) for the purpose of financing the DevelopmentProject. The Entrustment Loan matures on the date falling 24 months after the date theEntrustment Loan was made. To secure the Entrustment Loan, (i) the Land were charged infavour of Anxin; (ii) properties under the Development Project — Phase I & II were charged infavour of Anxin; and (iii) a personal guarantee by the legal representative of Jintang wasprovided in favour of Anxin. As at the date of the Sale and Purchase Agreement, the amount ofentrustment loan outstanding is RMB900 million.

Reasons for the Acquisition and the Rights Issue

As mentioned above, the Group is principally engaged in the trading of goods, financing,brokerage and securities investment and iron ore mining business. As advised by the Company,while focusing on its principal business and the acquisition of the new target group in iron oremining business, the Board believes that the Acquisition is in line with the Group’s investmentstrategy to bring investment return to the Group and would allow the Group to tap into the realestate business in the PRC with growth potential after having considered the constructionprogress and future prospects of the Development Project, the existing financing capacity ofthe Target Group as well as the ability of the Target Group to generate returns and cash flow tothe Group.

The Acquisition is to be funded by the net proceeds from the Rights Issue. The Boardtherefore considers that the Rights Issue represents an opportunity for the Company to enhanceits working capital and strengthen its capital base and financial position. Upon completion ofthe Rights Issue, the Company will be in a good position to capture the potential businessopportunity from the Acquisition and to enhance its earning potential, and therefore enhancethe overall value of the Shares. Moreover, the Board is of the view that it is in the interests ofthe Company and its Shareholders as a whole to raise the capital which through the Rights


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Issue since it would allow the Qualifying Shareholders to maintain their respective pro-ratashareholdings in the Company and participate in the future growth and development of theGroup.

Having taken into account:

(a) the principal activities of the Target Group in development, construction and buildingmanagement of the Development Project, comprising the residential and commercialcomplex, namely ‘‘Jintang New City Plaza*’’ (金唐新城市廣場), located inChongqing, the PRC, with a site area of approximately 30,817 square meters, and itstotal gross floor area designated for residential use is 53,883.20 square meters; forshopping mall is 36,012.85 square meters; for office premises is 40,865.48 squaremeters; for car parking areas and other uses is 56,512.26 square meters respectively;and

(b) the progress of the Development Project as detailed in the section headed‘‘Information of the Target Group’’ above, in particular

(i) the completion of the Development Project — Phase I (which comprises aresidential block with 252 residential flats and 17 shopping mall),

(ii) 142 property units out of a total of 269 property units constructed under Phase Iof the Development Project were sold under the 1st Pre-sale and transfer ofproperty title of 50 property units was completed in October 2014,

(iii) the commencement of the construction of the Development Project — Phase IIin May 2014 (which is designated to comprise 6 blocks of commercial andresidential complex) and the piling work has been completed,

(iv) barring any unforeseen circumstances, the building construction work of theDevelopment Project — Phase II is expected to be completed by 2016; and

(c) the recent economic condition in Chongqing City and Yubei Zone and the propertymarket in Yubei zone as stated in paragraph headed ‘‘The Development Project’’under section headed ‘‘Information of the Target Group’’ above,

we consider the Acquisition, which is not in the ordinary and usual course of business of theGroup, provides the Group with the investment opportunity to enhance its investment portfoliosand tap in the property market in the PRC, with the potentials to generate investment returnfrom the sale of the property units upon completion of the Development Project and/or capturethe benefits of any possible appreciation of the property value.

Furthermore, we consider the Rights Issue as appropriate and feasible means of fundraising for the Group for financing the Acquisition taking into account: (i) the Rights Issuewould enable the Group to raise additional capital for financing the Acquisition withoutaffecting the existing financial position and the liquidity of the Group; (ii) the Rights Issuewould not incur interest burden to the Group as compared to debt financing; (iii) the RightsIssue offers all the Qualifying Shareholders equal opportunity to subscribe for their pro-rata


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provisional entitlement of the Rights Shares and hence avoids dilution, and participate in thepossible future growth and development of the Group if they wish to do so; and (iv) the RightsIssue provides the Qualifying Shareholders who decide not to take up their entitlements underthe Rights Issue with the opportunity to sell the nil-paid Rights Shares in the market foreconomic benefits.

Principal terms of the Acquisition

Consideration for the Acquisition

The Consideration for the Acquisition is HK$370.0 million which shall be settled by cashupon Completion of the Sale and Purchase Agreement.

We note that the Consideration was determined after arm’s length negotiations betweenthe Company and the Vendor, and taking into account the Valuation of not less thanRMB1,000 million as stated in the relevant valuation report to be prepared by an independentvaluer (being one of the conditions precedent of the Acquisition under the Sale and PurchaseAgreement).

Save for Consideration payable under the Sale and Purchase Agreement, there is no othercapital commitment or contractual commitment on the part of the Group regarding theAcquisition as at the Latest Practicable Date.

We have performed the steps pursuant to Rule 13.80 of the Listing Rules includingreviewing the terms of engagement regarding the preparation of the Valuer’s valuation report asset out in Appendix V to the Circular (the ‘‘Valuation Report’’). We have also inquired andreviewed the track record of the Valuer and understand that the Valuer’s group is anestablished professional asset valuer and they have been involving in special assets andbusiness valuation for companies in Hong Kong, the PRC and Asian for internal reference orlisting purpose on the Stock Exchange and Singapore Stock Exchange since 1980s, and that wenote that the Valuer has the relevant experience and expertise in providing valuation servicesfor Hong Kong listed companies. As confirmed by the Valuer, the Valuer does not have anycurrent or prior relationship with the Company, the other party to the transaction, andconnected persons (as defined under the Listing Rules) of the Company and/or the other partyto the transaction. We have also reviewed the Valuation Report containing the valuation of theproperty interest held by Jintang (being the Development Project) as at 30 September 2014 asprepared by the Valuer, including the descriptions, assumptions and calculations containedtherein. Based on our review of the Valuation Report and our discussions with the Valuer, weunderstand that for the property interests which were held by Jintang for the DevelopmentProject as at 30 September 2014, the Valuer adopted the direct comparison approach. For theproperty interests which were under the Development Project as at 30 September 2014, theValuer adopted the direct comparison approach by making reference to comparable salesevidence as available in the relevant market and also took into account the expendedconstruction cost and the cost that will be expended to complete the Development Project as at30 September 2014. The Valuer has confirmed that the aforesaid approach is commonlyadopted and appropriate approaches for the valuation of such kind of properties. We aretherefore of the view that the Valuer has applied a reasonable and commonly adopted approachto prepare the valuation.


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Based on the Valuation Report, the appraised value of the Development Project isapproximately HK$1,539 million as at 30 September 2014 (the ‘‘Appraised Value’’).Accordingly, the Consideration represents discount of approximately 39.9% over the AppraisedValue attributable to 40% interest in the Development Project of approximately HK$615.6million.

Shareholders should note that as stated in the Appendix IV ‘‘Unaudited Pro FormaFinancial Information of the Enlarged Group’’ (the ‘‘Pro Forma Financial Information’’) inthis circular, since the actual net carrying amounts of the identifiable assets and liabilities ofthe Target Group to be acquired would be different from their estimated adjusted net assets ofthe Target Group (the cost that will be expended to complete the Development Project and therevenue from the sale of the units in the Development Project is based on the estimation by theValuer as stated above) used in the preparation of the unaudited pro forma financialinformation in the aforesaid Appendix IV, the actual financial position of the Enlarged Groupupon the Completion might be materially different from financial position of the EnlargedGroup as shown in the Pro Forma Financial Information.

Since the Acquisition is to acquire 40% equity interests of the Target Company whichconsists of not only the Development Project, but also the assets and liabilities of the TargetCompany, we also review the unaudited pro-forma financial information of the Enlarged Groupaccording to the Pro Forma Financial Information.

According to the Pro Forma Financial Information, we noted that there would be agoodwill of approximately HK$16.2 million upon completion of the Acquisition. According tothe notes to the consolidated financial statements of Annual Report 2013, we understand thatthe definition of goodwill is goodwill arising on an acquisition of a business or a joint venture(which is accounted for using proportionate consolidation) for which the agreement date is onor after 1 January 2005 represents the excess of the cost of acquisition over the Group’sinterest in the fair value of the identifiable assets, liabilities and contingent liabilities of therelevant business or joint venture at the date of acquisition.

According to the Vendor and the Board’s Letter, we noted that as at the Latest PracticableDate, the building construction of the Development Project — Phase I has been completed.After discussion with the Valuer, we understand that since the building construction of theDevelopment Project — Phase I has been completed, the developer’s profit for DevelopmentProject — Phase I, one of the cost factor in the valuation of the market value of the propertyinterest of the Development Project, can be taken out.

The adjusted appraised value of the Development Project after taken out the cost factor ofthe developer’s profit for Development Project — Phase I (the ‘‘Adjusted Appraised Value’’)is approximately HK$1,600.8 million and the fair value adjustments of the Adjusted AppraisedValue (deducting the amount of the properties for sale i.e. approximately HK$449.9 million asstated in the ‘‘Financial information of the Target Group’’ in Appendix III of the Circular fromthe Adjusted Appraised Value) is approximately HK$1,150.9 million.


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After deducting the deferred tax liabilities at tax rate of 25% and counting 40% interest ofthe Development Project as the Company acquire 40% of the issued share capital of the TargetCompany, market value of the 40% interest of the Development Project is approximatelyHK$345.3 million.

Based on the market value of the 40% interest of the Development Project ofapproximately HK$345.3 million as stated above and according to notes 2.2 of the Pro FormaFinancial Information, we noted that the fair value of adjusted net assets of the Target Group tobe acquired by the Group is amounted to approximately HK$372.4 million which is larger thanthe carrying amount of the Group’s interest in the Target Group (i.e. the amount of theConsideration). Based on the above analysis, there would be no goodwill raised.

In addition, according to the paragraph headed ‘‘Assets’’ in the Board’s Letter, effect offair value adjustments at the Acquisition is expected to be adjusted to HK$345.3 million uponCompletion since (i) upon Completion, the Target Group will be revalued again; (ii)Completion is expected to take place on or before early March 2015 and by then theDevelopment Project — Phase I will be completed, as advised by the Vendor, DevelopmentProject — Phase I is scheduled to be completed by the end of 2014 (as at the Latest PracticableDate, the building construction of the Development Project — Phase I has been completed);and (iii) the discounted value of the Development Project — Phase I has no longer requiredupon Completion and therefore, the current market value of the Development Project — PhaseI (without being discounted) will be fully reflected.

The Shareholders should note that since the fair value of adjusted net assets of the TargetGroup to be acquired by the Group is amounted to approximately HK$372.4 million as statedabove is based on the Valuation Report. The market value of the Development Project as statedin the Valuation Report is estimated by the Valuer based on the direct comparison approach bymaking reference to comparable sales evidences as available in the relevant market and havealso taken into account the expended construction costs and the costs that will be expended tocomplete the development and the Development Project is subject to some uncertainty as statedin the paragraph headed ‘‘Risk factors’’ in the Board’s Letter, therefore, the actual financialposition of the Enlarged Group upon Completion might be materially different from financialposition of the Enlarged Group as shown above. If the process of the construction developmentis affected by the factors as stated in the Board’s Letter or the sale performance of theDevelopment Project is not well, the financial contribution from the Development Project tothe Group would be affected. Since we cannot predict the actual financial position of theEnlarged Group upon Completion, we cannot opine the actual outcome of Acquisition to theEnlarged Group. However, given (i) the reasons for the Acquisition and Rights Issue; (ii) thefair value of adjusted net assets of the Target Group to be acquired by the Group is amountedto approximately HK$372.4 million which is larger than the carrying amount of the Group’sinterest in the Target Group (i.e. the amount of the Consideration); and (iii) the economiccondition in Chongqing (where the Development Project is located) is experiencing an upwardtrend as stated above, we are of the view and concur the view of the Directors that theAcquisition is in the interests of the Company and the Shareholders as a whole.


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In addition to the analysis as stated above, we also conduct another analysis withreference to the figures of (i) actual costs expended, (ii) prepayments, (iii) capital commitmentand (iv) other future expenses estimated related to the Development Project by the managementof the Vendor. According to the management of the Vendor, we understand that the sum of theaforesaid costs is approximately RMB1,728.6 million (equivalent to approximately HK$2,187.8million). Based on the aforesaid actual costs of approximately RMB1,728.6 million (equivalentto approximately HK$2,187.8 million), the capital value of the Development Project whencompleted of approximately RMB3,008 million (equivalent to approximately HK$3,807million) as stated in the Valuation Report and the calculation methods as stated in the ProForma Financial Information, the fair value of adjusted net assets of the Target Group to beacquired by the Group would be approximately HK$438.6 million. The calculation is as follow:the capital value of the Development Project (i.e. approximately RMB3,008 million (equivalentto approximately HK$3,807 million) as stated in the Valuation Report minus the sum of theaforesaid actual cost (i.e. approximately RMB1,728.6 million (equivalent to approximatelyHK$2,187.8 million) and then multiplied by the discount rate adopted by the Valuer (i.e.84.71% as stated in the Board’s Letter). And then deducting the deferred tax liabilities at taxrate of 25% and counting 40% interest of the Development Project as the Company acquire40% of the issued share capital of the Target Company, the revised effect of fair valueadjustment as the Acquisition (using actual cost calculation) is approximately HK$411.5million. Based on the revised effect of fair value adjustments as the Acquisition (using actualcost calculation) as stated above of approximately HK$411.5 million as stated above andaccording to the calculation method as stated in notes 2.2 of the Pro Forma FinancialInformation, we noted that the fair value of adjusted net assets of the Target Group to beacquired by the Group is amounted to approximately HK$438.6 million which is larger thanthe carrying amount of the Group’s interest in the Target Group (i.e. HK$370 million, theamount of the Consideration). The calculation is as follow: proportion of the Group’sownership interest in Target Group (i.e. approximately net liability of approximately HK$9.0million plus the aforesaid amount of the effect of fair value adjustments as the Acquisition(using actual cost calculation) (i.e. approximately HK$411.5 million) plus the amount of saleloan (i.e. approximately HK$36.1 million). The exchange rate used in the aforesaid calculationis 1RMB equal to HK$1.265625.

As the aforesaid fair value is larger than the Consideration, we are of the view and concurwith the view of the management of the Company that the Consideration is on normalcommercial terms, and fair and reasonable.

Nevertheless, the Independent Shareholders should note that the valuation of theDevelopment Project may be subject to changes from time to time both prior to or afterCompletion due to fluctuations in the property market in Chongqing, the PRC, in particular ifthe state development policy in the nation and/or Chongqing or the economic condition haschanged, and the Valuation Report and the Appraised Value do not in any manner constituteprofit forecast of the Development Project, the Target Group and/or the Group, and theprofitability of the Target Group and/or the Group is not guaranteed. Furthermore, theDevelopment Project may be subject to a number of operational risks, including but not limitedto any delay and/or non-completion of the Development Project, and any failure and/orinterruptions to obtain the relevant licenses or permits for construction and/or sales of theproperties of the Development Project. Independent Shareholders’ attention is also drawn to therisk factors relating to the Development Project disclosed under the sub-section headed ‘‘Riskfactors’’ under the section headed ‘‘INFORMATION ON THE TARGET GROUP’’ in the


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Board’s Letter. The abovementioned risks may cause delay or even failure in the Acquisitionand thus, adversely affect the profitability of the Group. However, as at the Latest PracticableDate, we do not aware the occurrence of the aforesaid risk factors based on the informationprovided by the Company, the Vendor and legal opinion prepared by the PRC legal adviserappointed by the Company and we are of the view that the aforesaid risk factors would notinfluence our view as stated in the paragraph headed ‘‘Recommendation’’ regarding theAcquisition below.

Adjustment to Consideration

Pursuant to the Sale and Purchase Agreement, if the Valuation as stated in the ValuationReport shall be less than the amount of RMB1,000 million (the ‘‘Shortfall’’) as stated in therelevant condition precedent under the Sale and Purchase Agreement (the ‘‘ValuationCondition’’) and the Purchaser elects at its sole discretion to waive the Valuation Condition,then a downward adjustment (the ‘‘Adjustment’’) shall be made to the Consideration and theamount of Adjustment shall be deducted from the Consideration payable by the Purchaser asfollows:

Adjustment = (a–b) x 40%

Whereas:

a being the amount specified under the Valuation Condition; and

b being the Valuation as stated in the Valuation Report.

Exchange Rate: RMB1 = HK$1.25

For avoidance of doubt, no adjustment of the Consideration is required if the Valuation asstated in the Valuation Report is equal or above the amount of RMB1,000 million. There is nolimit on the downward Adjustment to Consideration.

Given it is at the discretion of the Purchaser to waive the Valuation Condition, and insuch case, the Consideration would be adjusted downward based on the Shortfall attributable to40% interest in the Development Project on dollar-to-dollar basis, we consider such adjustmentterms to be fair and reasonable.

Other terms

Pursuant to the Sale and Purchase Agreement, without prejudice to the obligation of theTarget Company producing its annual consolidated account and distribution of dividend everyyear, as soon as all units of the Development Project having been sold, the Vendor undertakesto procure consolidated audited account (the ‘‘Final Accounts’’) of the Target Group andprocure the Target Company to distribute by way of dividends all profits after taxation within3 months of the date of the Final Accounts, provided that no dividends shall be distributedbefore (i) all external borrowings and all interests (if any) accrued thereon and other chargesand liabilities (if any) payable in connection therewith; and (ii) all loans provided by theshareholders of the Target Company (if any) are repaid full.


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In case of distribution of dividends in accordance with the above terms, the Company willbe able to share returns (in terms of dividends) and cash flow from the Target Group. Weconsider that such above terms would ensure the Company to enjoy investment return withcash inflow upon all units of the Development Project sold, and are on normal commercialterms, fair and reasonable, and in the interests of the Company and the Shareholders as awhole.

Principal terms of the Rights Issue

Pursuant to the terms of the Rights Issue, the Company will issue not less than700,958,385 Rights Shares and not more than 703,352,934 Rights Shares at the SubscriptionPrice of HK$0.6 per Rights Share on the basis of nine (9) Rights Shares for every one (1)Consolidated Share held at the Record Date and payable in full on acceptance. The RightsShares (when allotted, fully paid or credited as fully paid and issued) will rank pari passu in allrespects with the Consolidated Shares in issue on the date of allotment and issue of the RightsShares. Holders of the Rights Shares will be entitled to receive all future dividends anddistributions which are declared, made or paid on or after the date of allotment and issue of theRights Shares. Qualifying Shareholders may apply, by way of excess application, for anyunsold entitlements of the Excluded Shareholders for any Rights Shares provisionally allottedbut not accepted.

The Subscription Price

The Subscription Price of HK$0.6 per Rights Share represents:

(i) a discount of approximately 65.22% to the adjusted closing price of HK$1.725 perConsolidated Share, based on the closing price of HK$0.345 per Existing Share asquoted on the Stock Exchange on the Last Trading Day and adjusted for the effect ofthe Share Consolidation;

(ii) a discount of approximately 65.42% to the adjusted average closing price ofHK$1.735 per Consolidated Share, based on the average closing price of HK$0.347per Existing Share as quoted on the Stock Exchange for the 5 consecutive tradingdays up to and including the Last Trading Day and adjusted for the effect of theShare Consolidation;

(iii) a discount of approximately 15.79% to the theoretical ex-rights price of HK$0.7125per Consolidated Share after the Rights Issue, based on the closing price ofHK$0.345 per Existing Share as quoted on the Stock Exchange on the Last TradingDay and adjusted for the effect of the Share Consolidation; and

(iv) a discount of approximately 52% to the adjusted closing price of HK$1.25 perConsolidated Share, based on the closing price of HK$0.25 per Existing Share asquoted on the Stock Exchange on the Latest Practicable Date and adjusted for theeffect of the Share Consolidation.


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Historical share price performance

In order to assess the fairness and reasonableness of the Subscription Price, we haveattempted to review the trading price of the Existing Shares for the period from 1 August 2013up to the date of the Underwriting Agreement, being the 12 calendar months prior to and up tothe Last Trading Day (the ‘‘Review Period’’), for the purpose of illustrating the trend of theshare price performance of the Consolidated Shares (adjusted for the effect of the ShareConsolidation). We adopt a length of 12 month as the Review Period for analyzing the adjustedclosing price of the Consolidated Shares (as adjusted for the effect of the Share Consolidation)is to illustrate the trend of the share price performance of the Consolidated Shares (adjusted forthe effect of the Share Consolidation) covering the publication of the interim financial results2013 and the Annual Report 2013 and thereafter prior to the Last Trading Day. As trading ofthe Existing Shares was suspended from 1 August 2013 to 12 December 2013 during theReview Period, the graph below illustrates the closing price level of the Consolidated Shares(as adjusted for the effect of the Share Consolidation) from 13 December 2013 onwards up tothe Last Trading Day.

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

3/6/

2014

24/6

/201

4

2/5/

2014

1/4/

2014

3/3/

2014

4/2/

2014

2/1/

2014

13/1

2/20

13

Adjusted Closing Price

Hon

g K

ong

Dol

lar

Data source: Website of the Stock Exchange (www.hkex.com.hk).

During the Review Period, the adjusted closing price of the Consolidated Shares (asadjusted for the effect of the Share Consolidation) ranged from the lowest of HK$1.350 perConsolidated Share (based on the closing price of HK$0.270 per Existing Share as quoted onthe Stock Exchange on 27 December 2013) to the highest of HK$1.875 per Consolidated Share(based on the closing price of HK$0.375 per Existing Share as quoted on the Stock Exchangeon 26 February 2014, 30 May 2014, 3 June 2014, 5 June 2014 and 12 June 2014). We notethat the Subscription Price represents discounts to the closing prices of the Consolidated Sharesduring the Review Period, representing a discount of approximately 55.56% to the adjustedlowest closing price of HK$1.350 per Consolidated Share (as adjusted for the effect of theShare Consolidation), and a discount of 68.0% to the adjusted highest closing price ofHK$1.875 per Consolidated Share (as adjusted for the effect of the Share Consolidation).


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Historical trading volume

The table below sets out (i) the average daily trading volume of the Consolidated Shares(as adjusted for the effect of the Share Consolidation) (the ‘‘Average Volume’’); and (ii) thepercentage of the Average Volume to the total number of 77,884,265 Consolidated Shares (asadjusted for the effect of the Share Consolidation) in issue as at the Last Trading Day (the‘‘Total Issued Shares’’) for each of months during the Review Period:

Average Volume(approximately)

Percentage ofAverage Volume

to the TotalIssue Shares

(%)

2013August (Note) 0 0September (Note) 0 0October (Note) 0 0November (Note) 0 0December (Note) 375,191 0.482

2014January 179,355 0.230February 117,040 0.150March 80,739 0.104April 52,074 0.067May 71,484 0.092June (up to the Last Trading Day) 86,026 0.110

Monthly/Period average 145,981 0.18750Daily average 122,347 0.157

Note: Trading of the Existing Shares was suspended from 1 August 2013 to 12 December 2013 during theReview Period.

Data source: Website of the Stock Exchange (www.hkex.com.hk).

As illustrated in the table above, the trading volume of the Consolidated Shares (asadjusted for the effect of the Share Consolidation) during the Review Period has (i) the highestaverage daily trading volume amounted to 375,191 Consolidated Shares (as adjusted for theeffect of the Share Consolidation) recorded in December 2013, representing approximately0.482% of the total number of issued Consolidated Shares (as adjusted for the effect of theShare Consolidation) in issue as at the Last Trading Day and (ii) the lowest average dailytrading volume amounted to 52,074 Consolidated Shares (as adjusted for the effect of the ShareConsolidation) recorded in April 2014, representing approximately 0.067% of the total numberof issued Consolidated Shares (as adjusted for the effect of the Share Consolidation) in issue asat the Last Trading Day. The monthly/period mean of the average daily trading volume and thedaily mean of the average daily trading volume during the Review Period were 145,981


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Consolidated Shares (as adjusted for the effect of the Share Consolidation) and 122,347Consolidated Shares (as adjusted for the effect of the Share Consolidation) respectively. As wenoted that both the monthly/period average daily trading volume and the average daily tradingvolume are below 0.3%, which is the liquidity ratio based on the daily turnover to the totalmarket capitalization of the Hong Kong stock market in September 2014, we consider that thetrading volume of the Consolidated Shares (as adjusted for the effect of the ShareConsolidation) is relatively low.

Comparison with other rights issues

We have attempted to review all the rights issues announced by companies listed on theStock Exchange in the six calendar months prior to and up to the date of the UnderwritingAgreement and identified 24 rights issues initially announced during the period (the ‘‘RightsIssue Comparable(s)’’). We consider that a review period of six calendar months prior and upto the date of the Underwriting Agreement is appropriate to capture the recent market practicebecause the Rights Issue Comparables are considered for the purpose of taking a marketgeneral reference for the recent market practice in relation to the issue prices under other rightsissues as compared to the relevant prevailing market share prices under the recent marketconditions and sentiments. However, given their discrepancies with the Group in terms ofbusiness nature, financial performance, financial position as well as funding requirements, weconsider the Rights Issues Comparables might not constitute close reference with the RightsIssue, but just a market general reference for the recent market practice in relation to the issueprices under other rights issues as compared to the relevant prevailing market share prices.

Details regarding the Rights Issue Comparables are set out below:

No.Initialannouncement Company

Stockcode

Basis ofentitlement

Premium/(Discount) of

issue priceover/to

closing priceon last

trading day


issue over/to the

theoreticalex-rights

price

Excessapplication

(Y/N)Underwritingcommission

Maximumdilution

(Note 1) (Note 1) (Note 2)(%)

1. 17 August 2014 China Renji Medical Group Limited 648 1 for 2 (52.60) (42.60) N 4.00% 33.332. 12 August 2014 China New Economy Fund Limited 80 1 for 2 (36.36) (27.59) N 2.50% 33.333. 11 August 2014 South East Group Limited 726 8 for 1 (71.43) (21.88) Y 2.50% 88.894. 8 August 2014 SMI Culture Group Holdings Limited 2366 8 for 1 (83.33) (35.66) Y 4.5% 88.895. 13 July 2014 China Gamma Group Limited 164 1 for 2 (59.76) (49.74) Y 1.00% 33.336 11 July 2014 Opes Asia Development Limited 810 4 for 1 (67.21) (29.10) N 2.50% 80.007. 10 July 2014 Sau San Tong Holdings Limited 8200 3 for 1 (77.27) (45.95) Y 2.50% 75.008. 3 July 2014 Applied Development Holdings Limited 519 1 for 2 (67.29) (57.88) Y 2.50% 33.339. 19 June 2014 Vision Fame International

Holdings Limited1315 1 for 1 (20.00) (11.11) N 1.00% 50.00

10. 13 June 2014 HKT Trust and HKT Limited 6823 18 for 100 (20.65) (18.08) N 2.20% 15.2511. 22 May 2014 eForce Holdings Limited 943 16 for 1 (80.39) (19.43) Y 3.00% 94.1212. 11 May 2014 Uni-President China Holdings Ltd. 220 1 for 5 (29.60) (26.00) Y 1.20% 16.6713. 2 May 2014 National Arts Entertainment and

Culture Group Ltd.8228 6 for 1 (70.16) (25.10) Y 2.50% 85.71

14. 22 April 2014 Haitong International SecuritiesGroup Ltd.

665 1 for 2 (11.21) (7.77) Y NIL 33.33


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No.Initialannouncement Company

Stockcode

Basis ofentitlement


issue priceover/to

closing priceon last

trading day


issue over/to the

theoreticalex-rights

price

Excessapplication

(Y/N)Underwritingcommission

Maximumdilution

(Note 1) (Note 1) (Note 2)(%)

15. 11 Apr 2014 Merdeka Resources Holdings Ltd. 8163 4 for 1 (75.16) (38.46) N 3.50% 80.0016. 11 Apr 2014 China Primary Resources Holdings Ltd. 8117 1 for 2 (56.70) (46.60) Y NIL 33.3317. 9 April 2014 CMMB Vision Holdings Ltd. 471 2 for 1

(1 bonusshare for 2

rights shares)

(34.20) 13.60 N 2.50% 75.00

18. 9 April 2014 Fosun International Ltd. 656 39 for 500 — — Y NIL 7.2419. 26 March 2014 Dah Sing Financial Holdings Ltd. 440 13 for 100 (33.99) (31.30) Y 2.25% 11.5020. 26 March 2014 Dah Sing Banking Group Ltd. 2356 12 for 100 (33.33) (30.86) Y 2.25% 10.7121. 21 March 2014 Computech Holdings Ltd. 8081 1 for 2 (23.35) (16.88) Y 3.5% 33.3322. 13 March 2014 New World Development Company Ltd. 17 1 for 3 (36.30) (30.00) Y 2.50% 25.0023. 4 March 2014 Sincere Watch (Hong Kong) Ltd. 444 1 for 2 (67.91) (58.53) Y 2.50% 33.3324. 3 March 2014 Oriental Unicorn Agricultural Group Ltd. 8120 13 for 2 (57.33) (15.21) Y 3.50% 86.67

Average (50.68) (28.01) 48.22Minimum (Note 3) (11.21)

(Note 3)(7.77)

(Note 3)7.24

Maximum (83.33) (58.53) 94.12

The Rights Issue (65.22) (14.57) Y 90.00

Notes:

1. Based on the figures disclosed in the initial announcement of the Rights Issue Comparablesrespectively.

2. Maximum dilution effect of each rights issue is calculated as: (number of rights shares to be issuedunder the basis of entitlement)/(number of existing shares held for the entitlement for the rights sharesunder the basis of entitlement + number of rights shares to be issued under the basis of entitlement) x100%).

3. Showing the minimum discounts of the Rights Issues Comparables for analysis purpose. For avoidanceof doubt, one Rights Issues Comparable set the issue price equal to the closing price of the relevantshares on the relevant last trading day.

As shown on the above list of the Rights Issues Comparables, the issue prices of most theRights Issues Comparables are set at discounts to the closing price of the relevant shares on therelevant last trading day, ranging from a discount of approximately 11.21% to 83.33% (exceptone Rights Issues Comparable set at the issue price equal to the closing price on the relevantlast trading day), with an average discount of approximately 50.68%. The discount representedby the Subscription Price to the closing price of the Consolidated Shares (as adjusted for theeffect of the Share Consolidation) on the Last Trading Day of approximately 65.22% is abovethe average discount, but within the range of discounts, of the Rights Issue Comparables. Wealso noted that out of the 24 comparables, 13 of which set the issue price of the rights shares atdiscount deeper than the average discount and 10 of which incurred dilution effect higher thanthe average dilution effect.


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Notwithstanding the maximum dilution effect of the Rights Issue is at the highest end ofthe range, taking into account (i) the fund requirement of the Group raise capital for theAcquisition (with the cash consideration of HK$370.0 million), and (ii) the determination ofthe Issue Price with discounts to prevailing market price so as to increase the attractiveness ofthe Rights Issue to the Qualifying Shareholders and to induce the Underwriter to participate inthe underwriting of the Rights Issue, we consider that the maximum dilution effect of theRights Issues is acceptable.

According to the management of the Company, the Company did not approach otherunderwriters. After discussion with the management of the Company, we understand that basedon (i) the financial performance of the Group is poor as the Group’s revenue decreased fromapproximately HK$13.5 million for the year ended 31 December 2012 to approximatelyHK$4.4 million for the year ended 31 December 2013 which represent an decrease ofapproximately 67.4% and it further decreased to approximately HK$1.6 million for the sixmonth period ended 30 June 2014 (represent an decrease of approximately 11% whencompared with that for the same period in previous year) as stated in paragraph headed‘‘Background and business of the Group’’ above; and (ii) the trading liquidity of the Share isrelative low — as both the monthly/period average daily trading volume of the Shares and theaverage daily trading volume of the Shares are below 0.3%, which is the liquidity ratio basedon the daily turnover to the total market capitalization of the Hong Kong Stock market inSeptember 2014, the management of the Company are of the view that it is difficult for theCompany to find other underwriter to underwrite the rights issue and are of the view that theterms of rights issue from other potential underwriters should not be more favourable to theterms of the Rights Issue. The reason why the Company approach the Underwriter tounderwrite the Rights Issue is because there was previous business relationship between theUnderwriter and the Company as the Underwriter was acted as the placing agent of theCompany in other fund raising activity as stated in the Company’s announcement dated 21January 2014 and can save the time for due diligence work when compared with approachingother new potential underwriters. Based on the above, we are of the view and concur with theview of the management of the Company that it is difficult for the Company to find otherunderwriter to underwrite the rights issue and the terms of rights issue from other potentialunderwriters should not be more favourable to the terms of the Rights Issue.

As such, we consider that the Subscription Price is fair and reasonable.

Potential dilution effect on the existing shareholdings of the Company

All Qualifying Shareholders are entitled to subscribe for the Rights Shares. For thoseQualifying Shareholders who take up their entitlements in full under the Rights Issue, theirshareholding interests in the Company will remain unchanged upon completion of the RightsIssue. For those Qualifying Shareholders who opt not to take up their entitlements in full underthe Rights Issue, depending on the extent to which they take up their entitlements, theirshareholding interests will be diluted. For illustration purpose, the changes in the shareholdingstructure of the Company arising from the Rights Issue is set out in the section headed‘‘EFFECT ON THE SHAREHOLDING STRUCTURE’’ in the Board’s Letter. Based on the


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basis of entitlement under the Rights Issue, being nine Rights Shares for every oneConsolidated Share held at the Record Date, the maximum dilution effect of the Rights Issueis 90% for those Shareholders who do not take up any Rights Shares.

It is also noted that the maximum dilution effect of the Rights Issue is within the range,though at the highest end of the range, of maximum dilution of the Rights Issues Comparables,details of which are set out in the table of the Rights Issue Comparables under the sub-sectionheaded ‘‘Comparison with other rights issues’’ above. Notwithstanding the maximum dilutioneffect of the Rights Issue is at the highest end of the range, taking into account (i) the fundingrequirement of the Group to raise capital for the Acquisition; (ii) the determination of the IssuePrice with discounts to prevailing market price so as to increase the attractiveness of the RightsIssue to the Qualifying Shareholders and to induce the Underwriter to participate in theunderwriting of the Rights Issue; (iii) the inherent dilutive nature of rights issue in general ifthe existing Shareholder did not take up his/her/its entitlements thereunder; and (iv) the RightsIssue offers all the Qualifying Shareholders equal opportunity to subscribe for their pro-rataprovisional entitlement of the Rights Shares and hence avoids dilution, and participate in thepossible future growth and development of the Group if they wish to do so, we consider thatthe maximum dilution effect of the Rights Issues is acceptable.

Underwriting commission

The underwriting commission for the Rights Issue under the Underwriting Agreement is3.0 % of the aggregate Subscription Price in respect of the maximum number of UnderwrittenShares as determined on the Record Date. We have identified 24 rights issues, being all therights issues initially announced by companies listed on the Stock Exchange during the sixcalendar months prior to and up to the date of the Underwriting Agreement, and noted that theunderwriting commission thereof ranged from nil to 4.0%, we consider that underwritingcommission of 3.0% for the Rights Issue under the Underwriting Agreement accords with anddoes not deviate from market practice, and fair and reasonable.

Conclusion

Having considered (i) the Acquisition provides the Group with the investment opportunityto enhance its investment portfolios and tap in the property market in the PRC, with thepotentials to generate investment return from the sale of the property units upon completion ofthe Development Project and/or capture the benefits of any possible appreciation of theproperty value; and (ii) the fairness and reasonableness of the terms of the Sale and PurchaseAgreement, including the Consideration as detailed above, we consider that the Acquisition,which is not in the ordinary course of business of the Group, is in the interests of the Companyand the Shareholders as a whole, on normal commercial terms and fair and reasonable.

Having considered (i) the Rights Issue enable the Group raise funds for financing theAcquisition without affecting the existing financial position and liquidity of the Group andincurring any interest burden to the Group; (ii) the fairness and reasonableness of theSubscription Price as detailed above; (iii) the maximum dilution effect of the Rights Issue isacceptable as detailed above; (iv) the Rights Issue allows the Qualifying Shareholders to enjoyan equal opportunity to participate in the enlargement of the capital base of the Company andenables them to maintain their proportionate interests in the Company and continue to


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participate in the future development of the Group should they wish to do so; and (v) theRights Issue provides the Qualifying Shareholders who decide not to take up their entitlementsunder the Rights Issue with the opportunity to sell the nil-paid Rights Shares in the market foreconomic benefits, we consider that the Rights Issue is in the interests of the Company and theShareholders as a whole and the terms of the Rights Issue are fair and reasonable.

RECOMMENDATION

Taking into consideration principal factors and reasons considered above, we consider that(i) the terms of the Acquisition and the Rights Issue are fair and reasonable; (ii) theAcquisition, which is not in the ordinary and usual course of business of the Group, is onnormal commercial terms; and (iii) the Acquisition and the Rights Issue are in the interests ofthe Company and the Shareholders as a whole. Accordingly, we advise the Independent BoardCommittee to recommend the Independent Shareholders and recommend the IndependentShareholders to vote in favour of the relevant resolutions to approve the Acquisition and theRights Issue at the EGM.


Nuada LimitedPo Chan

Executive Director

Ms. Po Chan is a person licensed to carry out type 6 (advising on corporate finance)regulated activity under the SFO and is a responsible officer of Nuada Limited who has over14 years of experience in corporate finance industry.


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FINANCIAL SUMMARY OF THE GROUP

The published audited consolidated financial statements of the Group for the three yearsended 31 December 2011, 2012 and 2013 are disclosed in the annual reports of the Companyfor the three years ended 31 December 2011, 2012 and 2013 and the interim report of theCompany for the six months period ended 30 June 2014. They can be accessed on the websitesof the Company (http://www.cytmg.com) and the Stock Exchange (http://www.hkexnews.hk).

Please see below quick link to the interim report for the six months ended 30 June 2014of the Company:

http://www.hkexnews.hk/listedco/listconews/SEHK/2014/0912/LTN20140912301.pdf

Please see below quick link to the annual report for the year ended 31 December 2013 ofthe Company:






INDEBTEDNESS

Borrowings

Save as disclosed in ‘‘Financial Information of the Group — Indebtedness — Contingentliabilities’’ below, at the close of business on 31 October 2014, being the latest practicable datefor the purpose of preparing this indebtedness statement prior to the printing of this Circular,apart from intra-group liabilities and normal trade payables, the Group did not have, at theclose of business on 31 October 2014, any other debt securities issued and outstanding, orauthorised or otherwise created but unissued, any other term loans, any other borrowings orindebtedness in the nature of borrowings including bank overdrafts and liabilities underacceptance (other than normal trade bills) or acceptance credits or hire purchase commitments,any other mortgages and charges or any guarantees or any finance lease commitments ormaterial contingent liabilities.

Contingent liabilities

A subsidiary of the Company, which is principally engaged in securities brokeragebusiness, might be subject to a maximum penalty of HK$10,000,000 payable to theenforcement agency in relation to certain allegedly irregular transactions conducted by a

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

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former employee of the subsidiary. The matter is currently under investigation by theenforcement agency. As the ultimate outcome of the matter cannot be reasonably predicted, themaximum penalty of HK$10,000,000 has been regarded as a contingent liability of the Group.

Save as disclosed above, as at the close of business on 31 October 2014, being the latestpracticable date for the purpose of this indebtedness statement prior to the printing of thisCircular, the Group did not have any contingent liabilities or guarantees.

FINANCIAL AND TRADING PROSPECT OF THE GROUP

In the coming financial year, the Group will continue to be principally engaged in thetrading of goods, financing, brokerage and securities investment and iron ore miningbusinesses. The Group has been identifying and exploring suitable project and/or investmentwith the objective of enhancing the Group’s business operations and, more importantly,maximizing the long term return for the shareholders. While focusing on its principal business,this Acquisition would allow the Group to tap into the real estate business in the PRC and theBoard believes that the Acquisition represents a valuable investment opportunity for the Group.

For the property development and property investment market in the PRC, in order tobetter implement the classified readjustment and control measures put forward by the PRCcentral government, more Chinese cities are rolling out measures to encourage home purchasesand withdraw their limited property purchase policies. In respect of mortgage loans, althoughcredit conditions may not be drastically relaxed, constraints from the tight capital market willbe eased through the PRC central government’s promotion of various limited and targetedpolicy measures. In addition, the introduction of the two-child policy and rural land reforms arelikely to boost housing demand. As a result, it is expected that the property market willgradually improve.

The Board believes that the Acquisition is in line with the Group’s investment strategy tobring investment return to the Group and would allow the Group to tap into the real estatebusiness in the PRC with growth potential after having considered the construction progressand future prospects of the Development Project, the existing financing capacity of the TargetGroup as well as the ability of the Target Group to generate returns and cash flow to theGroup.

WORKING CAPITAL

The Directors, after due and careful enquiry, are of the opinion that, in the absence ofunforeseeable circumstances and after taking into account the effect of the Acquisition, theinternal resources of the Group and the estimated net proceeds from the Rights Issue, theGroup has sufficient working capital for its normal business for at least the next 12 monthsfrom the date of publication of this Circular.

MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adversechange in the financial or trading position of the Group since 31 December 2013, the date towhich the latest published audited consolidated financial statements of the Company were


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made up. As at the Latest Practicable Date, the Directors were not aware of any information inrelation to any material adverse change which is discloseable under Inside InformationProvisions under Part XIVA of the Securities and Futures Ordinance (Cap. 571 of the Laws ofHong Kong).

FOREIGN EXCHANGE

The monetary assets and liabilities and business transactions of the Group are mainlycarried and conducted in Hong Kong dollars, Renminbi, US dollars and Australian dollars. TheGroup maintains a prudent strategy in its foreign currency risk management, and to a largeextent, foreign exchange risks are minimised via balancing the foreign currency monetaryassets versus the corresponding currency liabilities, and foreign currency revenues versus thecorresponding currency expenditures. In light of the above, it is considered that the Group’sexposure to foreign exchange risks is not significant and no hedging measure has beenundertaken and is considered necessary by the Group.

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

For the six months ended 30 June 2014

Interim Results

The Company and its subsidiaries (collectively referred to as the ‘‘Group’’) recorded aprofit attributable to the Company’s shareholders of approximately HK$29,947,000 for the sixmonths ended 30 June 2014 (2013: loss attributable to the Company’s shareholders ofHK$67,991,000) and earnings per share was approximately 7.69 HK cents (2013: loss pershare of 17.5 HK cents) due mainly to the recognition of unrealised gain on investment ofmarketable securities from the Group’s securities investment operation.

Business Review

During the period under review, the Group’s businesses included trading of goods,provision of finance, brokerage and securities investment as well as minerals operation. Theturnover of the Group for the period was decreased by approximately 9% to approximatelyHK$1,628,000 (2013: HK$1,786,000) with gross profit dropped by approximately 16% toapproximately HK$1,308,000 (2013: HK$1,548,000).

Trading operation

The Group’s trading operation remained inactive and did not generate any turnover for theperiod under review (2013: Nil). Although the Group has been placing its focus in thedevelopment of its other businesses in the past period, yet it will continue to explore suitablebusiness opportunities on trading in the future.


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Finance operation

During the period under review, the finance operation was inactive and there was noturnover derived from this operation (2013: HK$329,000), resulting in an operating loss ofapproximately HK$1,614,000 (2013: operating profit of HK$168,000). The increase inoperating expenses for the finance operation over the period under review was mainly due toallocation of the Group’s certain operating expenses to this division during the period.

Brokerage and securities investment operation

The turnover of the brokerage and securities investment operation, being mainly thebrokerage and commission income of the Group’s securities brokerage division, increased byapproximately 12% to approximately HK$1,628,000 (2013: HK$1,457,000) for the periodunder review. Such increase was caused by the higher transaction volume of the securitiesbrokerage activities during the period under review.

The overall performance of this operation for the period under review recorded a profit ofapproximately HK$102,473,000 (2013: operating loss of HK$92,410,000) mainly as a result ofthe recognition of an unrealised gain on investment in securities amounting to approximatelyHK$116,273,000 (2013: unrealised loss of HK$89,883,000). Such unrealised gain oninvestment in securities was attributable to the increase in the market price of listed securitiesheld by the Group for investment purpose. As at 30 June 2014, the market value of the Group’slisted securities portfolio amounted to approximately HK$508,636,000 (at 31 December 2013:HK$405,370,000).

Minerals operation

Minerals operation is one of the principal activities of the Group. Our mixed metal mine(the ‘‘Mine’’) located at approximately 39 kilometers south-east of the Lian Nan County Townand approximately 1.6 kilometer south-west of the Baidaitou Village Shanlian Township ofGuangdong Province in the People’s Republic of China (the ‘‘PRC’’) covers an area ofapproximately 0.4197 square kilometers. Based on a geological study prepared by 湖南省地質

礦產勘查開發局四零八隊 (literally translated as the Hunan Province Geological MineralExploration in Development Bureau Team No. 408) as stated in the technical report, theestimated iron resources within the Mine is approximately 1,627,400 tons with an averagegrade of around 44.71% to 61.86%. Also, there are small amount of copper, lead and tinresources.

On 16 February 2012, a notice issued by the Department of Land and Resources of LianNan Yao Autonomous County (連南瑤族自治縣國土資源局) (the ‘‘Department’’) ordering thesuspension of all mining operations in the Lian Nan County until further notice (the ‘‘Order’’).During the period, the minerals operation on the Mine was seriously obstructed due to theOrder. The Group has been in continuous contact with the relevant government authorities ofthe PRC (the ‘‘Authorities’’) pursuing when the Order will be uplifted so that the miningoperations can be resumed. But up to the date of this report, no concrete and clear indicationhas still been provided by the Authorities as to when the Order will be uplifted.


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Same as the previous years, there were persistent rainstorms in the southern part of Chinaduring the period under review and this continued to cause hindrance to the progress of therepair works to be done to the roads and highways surrounding and leading up to the Mine.Although the PRC Government as well as the Group have started repair work for the highwayand the roads leading to the Mine respectively, yet in view of the poor weather condition andsevere damages to the highway and the roads, further repair work is still required to be done toenable full accessibility of the area surrounding and leading up to the Mine, by cars, trucks andother transportations.

The Group will issue further announcement(s) on any significant development withrespect to its mining operations as and when necessary.

Due to the Order and the heavy rainstorms in the first half of 2014, the Group has notbeen able to generate any turnover from its minerals operation (2013: Nil) and recorded anoperating loss of approximately HK$61,127,000 on this operation (2013: operating profit ofHK$69,693,000) during the period under review. The operating loss on the mining operationswas mainly resulted from the impairment loss of HK$59,000,000 (2013: reverse of impairmentof HK$73,000,000) on the mining right as a result of the decrease in market price of iron oreproducts from RMB1,020 per metric tonne as at 31 December 2013 to the RMB810 per metrictonne as at 30 June 2014.

Financial Review

Liquidity, Financial Resources and Capital Structure

At 30 June 2014, the Group had current assets of approximately HK$887,415,000 (at 31December 2013: HK$866,512,000) and liquid assets comprising bank balances and marketableHong Kong listed securities totaling approximately HK$543,699,000 (excluding bank balancesheld under segregated trust accounts) (at 31 December 2013: HK$456,868,000). The Group’scurrent ratio, calculated on the basis of current assets of HK$887,415,000 over currentliabilities of approximately HK$51,966,000, was at strong level of approximately 17.08 (at 31December 2013: ratio of 8.98). As at 30 June 2014, the Group had no bank and otherborrowings (at 31 December 2013: Nil) and no finance lease obligation (at 31 December 2013:Nil).

At the end of the review period, the equity attributable to the Company’s shareholdersamounting to approximately HK$1,238,240,000 (at 31 December 2013: HK$1,217,693,000),which is equivalent to a consolidated net asset value of about approximately HK$3.19 pershare of the Company (at 31 December 2013: HK$3.14 per share).

On 21 January 2014, the Company entered into a placing agreement (the ‘‘PlacingAgreement’’) with Freeman Securities Limited (the ‘‘Placing Agent’’), pursuant to which thePlacing Agent conditionally agreed to procure subscribers to subscribe for the convertible notesin the aggregate principal amount of up to HK$400,000,000. On 25 March 2014, the Companyand the Placing Agent mutually agreed to terminate the Placing Agreement by entering into atermination agreement. Details of the transaction were set out in the announcements of theCompany dated 21 January 2014 and 25 March 2014.


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Foreign Currency Management

The monetary assets and liabilities and business transactions of the Group are mainlycarried and conducted in Hong Kong dollars, Renminbi, US dollars and Australian dollars. TheGroup maintains a prudent strategy in its foreign currency risk management, and to a largeextent, foreign exchange risks are minimised via balancing the foreign currency monetaryassets versus the corresponding currency liabilities, and foreign currency revenues versus thecorresponding currency expenditures. In light of the above, it is considered that the Group’sexposure to foreign exchange risks is not significant and no hedging measure has beenundertaken and is considered necessary by the Group.

Pledge of Assets

At 30 June 2014, the Group had no fixed asset (at 31 December 2013: Nil) being pledgedas security for the Group’s finance lease obligation.

Capital Commitment

The Group had no capital commitments as at 30 June 2014 (at 31 December 2013: Nil).

Contingent Liability

A subsidiary of the Company, which is principally engaged in securities brokeragebusiness, may be subject to a maximum penalty of HK$10,000,000 payable to the enforcementagency in relation to certain allegedly irregular transactions conducted by a former employee ofthe subsidiary. The matter is currently under investigation by the enforcement agency. As theultimate outcome of the matter cannot be reasonably predicted, the maximum penalty ofHK$10,000,000 has been regarded as a contingent liability of the Group.

Material Acquisitions and Disposals

(1) Reference is made to the announcements of the Company dated 14 February 2013,25 February 2013, 26 June 2013, 6 December 2013, 12 December 2013, 28 February2014, 31 March 2014 and 30 May 2014. Terms used hereinafter are defined in theabove announcements.

On 8 February 2013, the Group entered into a sale and purchase agreement inrelation to the acquisition of Target Group at an aggregate consideration ofHK$1,200,000,000 (subject to adjustment).

The Consideration will be satisfied as to HK$690,000,000 in cash, as toHK$210,000,000 by the allotment and issue of the Consideration Shares and as toHK$300,000,000 by the issue of the Convertible Bonds. The Target Group isprincipally engaged in the iron ore mining and ore processing operation in XinjiangUygur Autonomous Region, the PRC. On 26 June 2013, the Group and the Vendorexecuted a supplemental agreement and agreed to amend certain terms of the sale


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and purchase agreement, principally relating to (1) the adjustment mechanisms ofConsideration as set out in the sale and purchase agreement and (2) inclusion ofcondition precedents(s) that cannot be waived by the parties.

(2) Reference is made to the announcements of the Company dated 25 June 2014 and 18August 2014. Terms used hereinafter are defined in the above announcements.

On 24 June 2014, the Group entered into the Sale and Purchase Agreement (asamended by the supplemental agreement dated 18 August 2014) and a placingagreement in relation to acquisition of 40% of the total issued share capital in theTarget Company at the cash consideration of HK$370,000,000 (‘‘the Acquisition’’)and propose to issue of convertible notes by the Company as the fund raisingexercise for the Acquisition. Upon completion, the Target Company will become anassociate of the Company. The Target Group is principally engaged in the businessof development, construction and building management of the ‘‘DevelopmentProject’’ comprising the residential and commercial complex known as ‘‘JintangNew City Plaza’’ (金唐新城市廣場) in Chongqing, the PRC. On 18 August 2014, theCompany and Freeman Securities Limited as the placing agent mutually agreed toterminate the placing agreement by entering into a termination agreement. On thesame date, the Company and Freeman Securities Limited as the Underwriter enteredinto the underwriter agreement, the details of which is described as below.

In addition, the Company intends to put forward a proposal to the Shareholders toeffect the Share Consolidation and the Company entered into the UnderwritingAgreement with the Underwriter on 18 August 2014. The Rights Issue is proposed totake place after Share Consolidation becoming effective. The net proceeds from theRights Issue are intended to be used for payment of cash consideration ofHK$370,000,000 for the Acquisition and the remaining amount of the proceeds (ifany) for general working capital purposes of the Company.

Details of the Acquisition, proposed Share Consolidation and proposed Rights Issueare set out in the announcements of the Company dated 25 June 2014 and 18 August2014.

Employees and Remuneration Policy

At 30 June 2014, the Group had approximately 65 employees (at 30 June 2013: 69employees) including executive directors. Total staff costs incurred during the period(including directors’ remuneration) was approximately HK$9,167,000, representing an increaseof approximately 6% when compared to HK$8,643,000 as recorded in the same period of lastyear. The Group generally remunerates its employees with reference to their qualifications,experience and work performance as well as to market benchmarks. Benefits offered by theGroup to its employees included discretionary bonus, mandatory provident fund scheme, shareoptions, training subsidies as well as medical insurance.


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Business Prospects

The Group expects that the world economy growth rebound is underway in the later partof 2014. In PRC, the authorities have resorted to limited and targeted policy measures tosupport relevant business activities in the second half of the year, including tax relief for smalland medium enterprises, accelerated fiscal and infrastructure spending, and targeted cuts inrequired reserve ratios. In the United States, the improving job market and increasing factoryproduction are also expected to drive a rebound in growth of business activities. However, theGroup will remain alert and prudent in making its decisions on investments given that thefuture potential and growth of the global economy is still uncertain, taking into account theexisting and possible downside risks, for example the geopolitical risks in the Middle-Eastcould lead higher risks of an oil price spike, Ukraine crisis is still unresolved and the progressof the structural economic reform in some developed countries still remain slow.

For the minerals operation of the Mine, the Group will continue to follow up with thePRC Authorities and make necessary preparation for the recommencement of the miningoperation in the near future. The Group anticipates that as soon as the Order is uplifted, theproduction of the Mine will resume and the Group is confident of the prospect of the resourcesand mining businesses in the long run. Meanwhile, the Group will continue to actively seek forattractive investment opportunities which will create substantial value to shareholders of theCompany.

Modified Review Report

The Company’s auditors have modified their review conclusion on the Group’s interimfinancial report for the six months ended 30 June 2014, an extract of which is as follows:

‘‘CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe thatthe interim financial information is not prepared, in all material respects, in accordancewith HKAS 34.

EMPHASIS OF SIGNIFICANT MATTER

Without qualifying our conclusion above, we draw attention to Note 11 to thecondensed consolidated financial statements of the Group for the six-month ended 30 June2014 (the ‘‘2014 Interim Report’’). As disclosed therein, the mining operation of theGroup as well as all mining operations in the Lian Nan County were suspended by therelevant government authorities of the People’s Republic of China (the ‘‘Order’’) sinceearly 2012 until further notice. Up to the reporting date of the 2014 Interim Report, thereis still no announcement as to when the Order will be uplifted. Based on the informationavailable to the Group, the Group expects that the Order will be uplifted in the near futureand in any event, no later than the end of 2015.

The mining right of the Group was valued at HK$200,000,000 as at 30 June 2014,using discounted cash flow method based on the assumption that the Order will beuplifted before the end of 2015. Should there be any further delay in the uplift of the


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Order or in the completion of the repairing work of the mine, the value of the miningright of the Group may possibly be affected and further provision on impairment loss ofthe mining right may therefore be necessary.’’

For the year ended 31 December 2013

Business Review

During the year under review, the turnover of the Group was down by approximately 67%to approximately HK$4,400,000 (2012: HK$13,500,000) and the gross profit was decreased byapproximately 73% to approximately HK$2,916,000 (2012: HK$10,745,000). Such asignificant decrease in turnover was mainly attributable to decreased activity in the financeoperation and the suspension of the mining activities on the Mine as discussed in theChairman’s Statement.

For the year ended 31 December 2013, the Group recorded a loss attributable to equityholders of the Company of approximately HK$178,000 (2012: HK$246,300,000), representinga decrease of approximately 99.93% when compared to last year. Such an improvement wasmainly due to the recognition a gain on financial assets at fair value through profit or loss ofapproximately HK$49,412,000 (2012: loss on financial assets at fair value through profit orloss of HK$94,654,000) and reversal of impairment on mining right of approximatelyHK$17,000,000 (2012: impairment loss on mining right of HK$174,019,000).

Operations Review

Minerals Operation

Minerals operation is one of the principal activities of the Group. Our mixed metal mine(‘‘Mine’’), located approximately 39 kilometers south-east of the Lian Nan County Town andapproximately 1.6 kilometers south-west of the Baidaitou Village Shanlian Township ofGuangdong Province in the PRC, covers an area of approximately 0.4197 km2. Based on ageological study prepared by 湖南省地質礦產勘查開發局四零八隊 (literally translated as theHunan Province Geological Mineral Exploration in Development Bureau Team No. 408) asstated in the technical report, the estimated iron resources within the Mine is approximately1,627,400 tons with an average grade of around 44.71% to 61.86%. Also, there are smallamount of copper, lead and tin resources.

On 16 February 2012, a notice issued by the Department of Land and Resources of LianNan Yao Autonomous County (連南瑤族自治縣國土資源局) (the ‘‘Department’’) ordering thesuspension of all mining operations in the Lian Nan County until further notice (the ‘‘Order’’).During the year, the minerals operation on the Mine was seriously obstructed due to the Order.The Group has been continuing to pursue the uplift of the Order with the relevantgovernmental authorities of the PRC (the ‘‘Authorities’’), but up to the date of this report,there is still no concrete and clear indication given by the Authorities as to when the Order willbe uplifted.


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The poor weather condition in 2013 also had adverse impacts on the minerals operation.The southern part of China has been experiencing constant rainfalls throughout the year. Thenit was subject to attack by two extraordinary strong typhoons in August and September 2013,which brought heavy rainfalls and triggered floods and landslides. Although the PRCGovernment as well as the Group have started repair work for the highway and the roadsleading to the Mine respectively, yet in view of the severe damages to the highway and theroads, further repair work is still required to be done to enable full accessibility of the areasurrounding and leading up to the Mine, by cars, trucks and other transportations.

The Group will issue further announcement(s) on any significant development withrespect to its mining operations as and when necessary.

Due to the heavy rainstorms during the year and suspension of all mining operations onthe Mine by the Order, the Group has no turnover generated from its minerals operation (2012:HK$1,888,000) and recorded an operating profit of approximately HK$9,399,000 (2012:operating loss of HK$222,562,000) during the year. The operating profit on the miningoperations was mainly resulted from the reversal of impairment loss of approximatelyHK$17,000,000 on the mining right (2012: impairment loss on mining right ofHK$174,019,000).

Trading Operation

During the year under review, the trading operation was inactive and therefore no turnoverwas generated (2012: Nil).

Finance Operation

The interest income and operating loss generated by the financing operation wereapproximately HK$329,000 (2012: HK$8,214,000) and approximately HK$717,000 (2012:operating profit on HK$7,336,000) respectively. Such decreases were primarily attributable tothe lower average balance of loans advanced to customers as compared to last year. It is theGroup’s policy to adopt a prudent approach and regularly review the composition of the loansportfolio and lending rates charged in order to maximise the return and minimise the risks ofthe financial operation.

Brokerage and Securities Investment Operation

The turnover of the brokerage and securities investment operation, being mainly thebrokerage and commission income of the Group’s securities brokerage division, increased byapproximately 20% to approximately HK$4,071,000 (2012: HK$3,398,000). Such an increasewas primarily attributable to the higher transaction volume of the securities brokerageactivities. The overall performance of the operation recorded a profit of approximatelyHK$51,225,000 (2012: operation loss of HK$94,822,000). The profit incurred for the operationwas primarily attributable to the unrealised gain on investment in securities which amounted toapproximately HK$62,736,000 (2012: unrealised loss of HK$84,684,000), resulted mainly fromthe increase in the market prices of listed securities held by the Group for investment purpose.As at 31 December 2013, the market value of the Group’s listed securities portfolio wasapproximately HK$405,370,000 (2012: HK$352,974,000).


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Financial Review


At 31 December 2013, the Group had current assets of approximately HK$866,512,000(2012: HK$840,355,000) and liquid assets comprising bank balances and marketable HongKong listed securities totaling approximately HK$456,868,000 (excluding pledged bankbalances held under segregated trust accounts) (2012: HK$713,502,000). The significantdecrease in the liquid assets was mainly due to the payment of earnest money made pursuant tothe acquisition agreement entered into by the Group on 8 February 2013 regarding theproposed acquisition of the Target Company. The Group’s current ratio, calculated on the basisof current assets of approximately HK$866,512,000 (2012: HK$840,355,000) over currentliabilities of approximately HK$96,455,000 (2012: HK$73,614,000) was at strong level ofapproximately 8.98 (2012: 11.42). The Group had no bank and other borrowings (2012: Nil)and no finance lease obligation (2012: Nil) at the end of the reporting period.

At the end of the reporting period, the equity attributable to Company’s equity ownersamounting to approximately HK$1,217,693,000 (2012: HK$1,216,238,000), representing anincrease of approximately 0.12% compared to 2012, which was equivalent to a consolidated netasset value of about approximately HK$3.14 per share of the Company (2012: HK$3.13 pershare).


The monetary assets and liabilities and business transactions of the Group are mainlycarried and conducted in Hong Kong dollars, Renminbi (the ‘‘RMB’’), US dollars andAustralian dollars. The Group maintains a prudent strategy in its foreign currency riskmanagement, to a large extent, foreign exchange risks are minimised via balancing the foreigncurrency monetary assets versus the corresponding currency liabilities, and foreign currencyrevenues versus the corresponding currency expenditures. In light of the above, it is consideredthat the Group’s exposure to foreign exchange risks is not significant and no hedging measurehas been undertaken by the Group.

Pledge of Asset

At 31 December 2013, the Group has no fixed assets (2012: Nil) pledged as security forany credit facilities granted to the Group.

Capital Commitment

The Group has no capital commitments as at 31 December 2013 (2012: HK$4,800,000).


A subsidiary of the Company principally engaged in securities brokerage business may besubject to a maximum penalty of HK$10,000,000 to the enforcement agency in relation tocertain allegedly irregular transactions conducted by a former employee of the subsidiary. The


– 101 –

matters are currently under investigation by the enforcement agency. As the ultimate outcomeof the matter cannot be reasonably predicted, it is reasonable for the Group to assume that thecontingent liability of this case will be the maximum penalty of HK$10,000,000.

Material Acquisition and Disposal

Reference is made to the announcements of the Company dated 14 February 2013, 25February 2013, 26 June 2013, 6 December 2013, 12 December 2013 and 28 February 2014. On8 February 2013, the Group entered into a sale and purchase agreement in relation to theacquisition of Target Group at an aggregate consideration of HK$1,200,000,000 (subject toadjustment). Terms used hereinafter are defined in the above announcements.

The Consideration will be satisfied as to HK$690,000,000 in cash, as to HK$210,000,000by the allotment and issue of the Consideration Shares and as to HK$300,000,000 by the issueof the Convertible Bonds. The Target Group is principally engaged in the iron ore mining andore processing operation in Xinjiang Uygur Autonomous Region, the PRC. On 26 June 2013,the Group and the vendor executed a supplemental agreement and agreed to amend certainterms of the sale and purchase agreement, principally relating to (1) the adjustmentmechanisms of Consideration as set out in the sale and purchase agreement and (2) inclusionof condition precedents(s) that cannot be waived by the parties.

Significant event after the reporting period

The following is the significant event which has taken place subsequent to the end of thereporting period:

On 21 January 2014, the Company entered into a placing agreement (the ‘‘PlacingAgreement’’) with Freeman Securities Limited (the’’Placing Agent’’), pursuant to which thePlacing Agent has conditionally agreed to procure subscribers to subscribe for the convertiblenotes in the aggregate principal amount of up to HK$400,000,000. On 25 March 2014, theCompany and the Placing Agent mutually agreed to terminate the Placing Agreement byentering into a termination agreement. Details of the transaction are set out in theannouncements of the Company dated 21 January 2014 and 25 March 2014.


At 31 December 2013, the Group had approximately 65 (2012: 68) employees includingexecutive directors. Total staff costs incurred during the year (including directors’remuneration) was approximately HK$18,516,000 and increased by approximately 14% whencompared to approximately HK$16,252,000 in 2012. The Group generally remunerates itsemployees with reference to their qualifications, experience and work performance as well asto market benchmarks. Benefits offered by the Group to its employees included discretionarybonus, mandatory provident fund scheme, share options, training subsidies as well as medicalinsurance.


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Modified Audit Report

The Company’s auditors have modified their report on the Group’s consolidated financialstatements for the year ended 31 December 2013, an extract of which is as follows:

‘‘OPINION

In our opinion, the consolidated financial statements give a true and fair view of thestate of affairs of the Company and of the Group as at 31 December 2013 and of theGroup’s loss and cash flows for the year then ended in accordance with Hong KongFinancial Reporting Standards and have been properly prepared in accordance with theHong Kong Companies Ordinance.

EMPHASIS OF MATTER

Without qualifying our opinion, we draw attention to Note 19 to the consolidatedfinancial statements of the Group for the year ended 31 December 2013 (the ‘‘2013Annual Report’’). As disclosed therein, the mining operation of the Group as well as allmining operations in the Lian Nan County were suspended by the relevant authorities ofthe PRC Government (the ‘‘Order’’) since early 2012 until further notice. Up to thereporting date of the 2013 Annual Report, there is still no announcement as to when theOrder will be uplifted. Based on the information available to the Group, the Groupexpects that the Order will be uplifted in the near future and in any event, no later thanthe end of 2015. The mining right of the Group was valued at HK$259,000,000 as at 31December 2013, using discounted cash flow method based on the assumption that theOrder will be uplifted before the end of 2015. Should there be any further delay in theuplift of the Order, the value of the mining right of the Group may possibly be affectedand further provision on impairment loss of the mining right may therefore be necessary.’’


Business Review

Due to the slow recovery of global economy, continuing deterioration of the Europeandebt crisis and the potential fiscal cliff in the United Stated of America, market conditionsremain uncertain and complicated in 2012. During the year under review, the turnover of theGroup was down by approximately 58% to approximately HK$13,500,000 (2011:HK$31,886,000) and the gross profit was slightly increased by approximately 3.2% toapproximately HK$10,745,000 (2011: HK$10,407,000). Such significant decrease in turnoverwas mainly attributable to the suspension of the mining activities on the Mine by theDepartment which seriously hindered the commercial production of the Mine.

For the year ended 31 December 2012, the Group recorded a loss attributable to equityholders of the Company of approximately HK$246,300,000 (2011: HK$436,350,000),representing an decrease of approximately 44% when compared to last year.


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Operations Review

Minerals Operation

Minerals operation is one of the principal activities of the Group. Our Mine, locatedapproximately 39 kilometers south-east of the Liannan County Town and approximately 1.6kilometers south-west of the Baidaitou Village Shanlian Township of Guangdong Province inthe PRC, covers an area of approximately 0.4197 km2. Based on a geological study preparedby 湖南省地質礦產勘查開發局四零八隊 (literally translated as the Hunan Province GeologicalMineral Exploration in Development Bureau Team No. 408) as stated in the technical report,the estimated iron resources within the Mine is approximately 1,627,400 tons with an averagegrade of around 44.71% to 61.86%. Also, there are small amount of copper, lead and tinresources.

Contribution of the minerals operation to the Group’s turnover accounted forapproximately HK$1,888,000 (2011: HK$12,976,000) and recorded a loss of approximatelyHK$222,562,000 (2011: HK$245,635,000) from (i) the trading and processing of iron orepurchased from other suppliers and (ii) trading and sales of iron ore extracted from the Mine.As at 31 December 2012, an impairment loss of mining right of approximatelyHK$174,019,000 has been recognised (2011: HK$142,000,000) as a result of adverseinfluence on international markets on iron ore product prices and delay of production scheduledue to the Order.

During the year, the minerals operation was seriously obstructed due to the suspension ofmining operation activities on the Mine by the Department since 16 February 2012.

On 31 October 2011, there was a serious geological disaster caused by the Lian NanCounty Damaishan Mine (連南縣大麥山礦業場). On 16 February 2012, the Department issueda notice announcing that a complete review of all mining operations was to be conducted bythe relevant departments of the said county and ordering the suspension of all miningoperations in the Lian Nan County until further notice and/or approval (the ‘‘Order’’). TheGroup, along with other mining operators in the vicinity, has been checking with the relevantauthorities of the People’s Republic of China (the ‘‘PRC Authorities’’) as to when the Orderwill be uplifted and the response, so far, appears to be positive. Although there is no clear dateset, the Group expects that the Order will be uplifted in the near future and should there be nounusual circumstances to be occurred, the Group is optimistic that the Order will be upliftedbefore the end of 2013. In this regard, the Group will continue following up with the PRCAuthorities and make necessary preparation for the recommencement of the mining operationin the near future.

References are made to the announcements of the Company dated 12 March 2012, 11June 2012, 10 September 2012 and 7 December 2012 in relation to the entering into a non-legally binding Memorandum of Understanding (‘‘MOU’’) about the proposed acquisition ofthe Target Company. Target Group is mainly engaged in the iron ore mining and oreprocessing operation in Xinjiang Uygur Autonomous Region, the PRC. On 8 February 2013,the terms have been concluded and the Group has entered into an acquisition agreementregarding the above proposed acquisition. Details of the transaction is being prepared and willbe published as soon as practicable.


– 104 –

Trading Operation

During the year under review, the trading operation was inactive and therefore no turnoverderived (2011: Nil), primarily due to the volatility of the iron ore market which positioned theGroup to encounter difficulties in finalising trade deals.

Finance Operation

The interest income and operating profit generated by the financing operation wereapproximately HK$8,214,000 (2011: HK$15,958,000) and approximately HK$7,336,000 (2011:HK$16,074,000) respectively. Such decreases were primarily attributable to the lower averagebalance of loans advanced to customers compare to last year. It is the Group’s policy to adopt aprudent approach and regularly review the composition of the loan portfolio and lending ratescharged in order to maximise the return of the operation.

Brokerage and Securities Investment Operation

The turnover of the brokerage and securities investment operation, being mainly thebrokerage and commission income of the Group’s securities brokerage division, increased byapproximately 15% to approximately HK$3,398,000 (2011: HK$2,952,000). Such increase wasprimarily attributable to the commission income received for participation in fund raisingactivities of our clients. The overall performance of the operation recorded a loss ofapproximately HK$94,822,000 (2011: HK$181,056,000). The loss incurred for the operationwas primarily attributable to the realised and unrealised loss on investment in securities duringthe year amounting to approximately HK$94,654,000 (2011: HK$172,975,000), resultingmainly from the decline in the market prices of listed securities held by the Group forinvestment purpose. As at 31 December 2012, the market value of the Group’s listed securitiesportfolio was approximately HK$352,974,000 (2011: HK$402,060,000).

Financial Review


At 31 December 2012, the Group had current assets of approximately HK$840,355,000(2011: HK$840,821,000) and liquid assets comprising bank balances and marketable HongKong listed securities totaling approximately HK$713,502,000 (excluding pledged bankbalances held under segregated trust accounts) (2011: HK$489,314,000). The Group’s currentratio, calculated on the basis of current assets of approximately HK$840,355,000 (2011:HK$840,821,000) over current liabilities of approximately HK$73,614,000 (2011:HK$33,836,000) was at strong level of approximately 11.4 (2011: 24.8). The Group had nobank and other borrowings (2011: Nil) and no finance lease obligation (2011: Nil) at the endof the reporting period.

The Group issued a total of 64,900,000 new shares during the year as a result of shareplacement to investors issued as part of the consideration for the general working capital. Atthe end of the reporting period, the equity attributable to Company’s equity owners amountingto approximately HK$1,216,238,000 (2011: HK$1,464,607,000), representing a decrease of


– 105 –

approximately 17% compared to 2011, which was equivalent to a consolidated net asset valueof about approximately HK$3.13 per share of the Company (2011: HK$4.51 per share (restatedfor the share consolidation effective in January 2012)).


The monetary assets and liabilities and business transactions of the Group are mainlycarried and conducted in Hong Kong dollars, Renminbi, US dollars and Australian dollars. TheGroup maintains a prudent strategy in its foreign currency risk management, to a large extent,foreign exchange risks are minimised via balancing the foreign currency monetary assets versusthe corresponding currency liabilities, and foreign currency revenues versus the correspondingcurrency expenditures. In light of the above, it is considered that the Group’s exposure toforeign exchange risks is not significant and no hedging measure has been undertaken by theGroup.

Pledge of Asset

At 31 December 2012, the Group has no fixed assets (2011: Nil) pledged as security forany credit facilities granted to the Group.

Capital Commitment

At 31 December 2012, the Group has capital commitments of HK$4,800,000 in respect ofthe acquisition of property, plant and equipment (2011: HK$8,300,000).


A subsidiary of the Company principally engaged in securities brokerage may be subjectto a maximum penalty of HK$10,000,000 to the enforcement agency in relation to certainallegedly irregular transactions conducted by a former employee of the subsidiary. The mattersare currently under investigation by the enforcement agency. As the ultimate outcome of thematters cannot be reasonably predicted, the maximum penalty of HK$10,000,000 is consideredas a contingent liability of the Group.

Material Acquisition and Disposal

Reference is made to the Company’s announcement dated on 12 August 2011 and circulardated on 29 September 2011. The Company and Treasure Smart Limited (‘‘Treasure Smart’’)entered into a sale and purchase agreement for the sale and purchase of the entire issued sharecapital (the ‘‘JCE Sale Share’’) in and shareholders’ loan (the ‘‘JCE Sale Debt’’) debt extendedto Broadmeadow Investments Limited (‘‘Broadmeadow’’), a wholly-owned subsidiary of theCompany, which indirectly holds 30% equity interest in Shanghai Hong Qiao FriendshipShopping Center Company Limited (‘‘Hong Qiao’’). Pursuant to the agreement, the Companyagreed to sell the JCE Sale Share and the JCE Sale Debt and Treasure Smart agreed topurchase the JCE Sale Share and the JCE Sale Debt for an aggregate consideration ofHK$80,000,000. The transaction was completed on 28 February 2012 and Hong Qiao ceased to


– 106 –

be a jointly controlled entity of the Group since then. The gain on disposal of Broadmeadow ofapproximately HK$17,531,000 (including HK$12,107,000 arose from reclassification oftranslation reserve from equity to profit or loss) was recognised in the accounts of the Group.

Significant events after the reporting period

The followings are the significant events took place subsequent to the end of the reportingperiod:

(i) References are made to the announcements of the Company dated 12 March 2012, 11June 2012, 10 September 2012 and 7 December 2012 in relation to the entering intoof the MOU. On 8 February 2013, the terms have been concluded and the Companyhas entered into an acquisition agreement in relation to the acquisition of TargetCompany, Target Group is principally engaged in the iron ore mining and oreprocessing operation in Xinjiang Uygur Autonomous Region, the PRC.

(ii) On 21 March 2013, the Company as vendor entered into a sale and purchaseagreement with Freeman Financial Corporation Limited (‘‘Freeman Financial’’, acompany listed on main board of The Stock Exchange of Hong Kong Limited (stockcode: 279)) and Dynastic Union Limited (the ‘‘Purchaser’’), pursuant to which theCompany has conditionally agreed to dispose approximately 8.77% of the issuedshare capital of Freeman Securities Limited to Purchaser at a consideration ofHK$16,140,000. Such consideration will be satisfied by (i) cash payment ofHK$5,115,000 and (ii) issue and allotment of 105,000,000 new shares of FreemanFinancial with par value of HK$0.05 each at the issue price of HK$0.105 per shareto vendor. The transaction is expected to be completed on 28 March 2013. Details ofthe transaction are set out in the announcement of the Company dated 21 March2013.


At 31 December 2012, the Group had approximately 68 (2011: 97) employees includingexecutive directors. Total staff costs incurred during the year (including directors’remuneration) was approximately HK$16,252,000 and decreased by approximately 7.6% whencompared to approximately HK$17,586,000 in 2011. The Group generally remunerates itsemployees with reference to their qualifications, experience and work performance as well asto market benchmarks. Benefits offered by the Group to its employees included discretionarybonus, mandatory provident fund scheme, share options, training subsidies as well as medicalinsurance.


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Modified Audit Report

The Company’s auditors have modified their report on the Group’s consolidated financialstatements for the year ended 31 December 2012, an extract of which is as follows:

‘‘OPINION

In our opinion, the consolidated financial statements give a true and fair view of thestate of affairs of the Company and of the Group as at 31 December 2012 and of theGroup’s loss and cash flows for the year then ended in accordance with Hong KongFinancial Reporting Standards and have been properly prepared in accordance with theHong Kong Companies Ordinance.

EMPHASIS OF MATTER

Without qualifying our opinion, we draw attention to Note 19 to the consolidatedfinancial statements of the Group for the year ended 31 December 2012 (the ‘‘2012Annual Report’’). As disclosed therein, the mining operation of the Group as well as allmining operations in the Lian Nan County were suspended by the relevant authorities ofthe PRC Government (the ‘‘Order’’) since early 2012 until further notice. Up to thereporting date of the 2012 Annual Report, there is still no announcement as to when theOrder will be uplifted. Based on the information available to the Group, the Groupexpects that the Order will be uplifted in the near future and in any event, no later thanthe end of 2013. The mining right of the Group was valued at HK$242,000,000 as at 31December 2012, using discounted cash flow method based on the assumption that theOrder will be uplifted before the end of 2013. Should there be any further delay in theuplift of the Order, the value of the mining right of the Group may possibly be affectedand further provision on impairment loss of the mining right may therefore be necessary.’’


Business Review

Due to the slow recovery of global economy and the spread of European debt crisis, 2011was the most uncertain and unstable year since the financial turmoil in 2008. During the yearunder review, the turnover of the Group was down by approximately 13% to approximatelyHK$31,886,000 (2010: HK$36,618,000) and the gross profit also decreased by approximately56% to approximately HK$10,407,000 (2010: HK$23,810,000). Such decline was mainlyattributable to the unexpected heavy rainstorms in the Southern China Region together with thegovernment road works which have seriously hindered the commercial production of the Mine.

For the year ended 31 December 2011, the Group recorded a loss attributable to equityholders of the Company of approximately HK$436,350,000 (2010: HK$186,794,000),representing an increase of approximately 134% when compared to last year.


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Operations Review

Minerals operation

Contribution of the mineral operation to the Group’s turnover accounted for approximatelyHK$12,976,000 (2010: HK$11,255,000), which remained at a low level as in last year. Thiswas primarily due to the effect of persistent rainstorms in the Southern China Region togetherwith the government road works during the year. The mineral operation recorded a loss ofapproximately HK$245,635,000 (2010: HK$63,478,000) from sales of iron ore extracted fromthe Mine located in Guangdong Province in the PRC. Furthermore, the PRC’s iron ore priceshave dropped significantly by approximately 33% throughout the year of 2011 under thedampening effects of global economic conditions. As at 31 December 2011, an impairment lossof mining right of approximately HK$142,000,000 has been recognised (2010 :HK$60,000,000) as a result of adverse influence on international markets on iron ore prices.

Since our mine operation was severely hindered, with an aim to utilise our manufacturingfacilities, our Group has been horizontally integrated to process purchased iron ores and lowgrade iron powder from other mine fields into higher grade iron ore powder for sale in themarket.

During the year, the Group also entered into a non-legally binding Memorandum ofUnderstanding (‘‘MOU’’) and three non-legally binding supplemental MOU in relation to theproposed acquisition of 80% of the entire issued share capital in Jointwin Holdings Limited(‘‘Jointwin’’), a company indirectly holds 100% interest in a copper, lead and zinc mine locatedin Inner Mongolia Autonomous Region of the PRC (the ‘‘Proposed Acquisition’’). However,the parties agreed to terminate discussions relating to the Proposed Acquisition on 30September 2011, due to a mismatch of expectations in respect of technical work that isrequired to be undertaken during the due diligence process. Following the termination, earnestmoney of HK$200,000,000 paid by the Group to Jointwin in relation to the ProposedAcquisition has been fully refunded without interest.

Trading operation

During the year under review, the trading operation was inactive and therefore no turnoverderived (2010: HK$ Nil). These significant declines were primarily due to the volatility of theiron ore market and the Group has encountered difficulties in finalising trade deals.

Finance operation

The interest income and operating profit generated by the financing operation wereapproximately HK$15,958,000 (2010: HK$16,171,000) and approximately HK$16,074,000(2010: HK$16,162,000) respectively, which remained at a similar level as in last year. It is theGroup’s policy to regularly review the composition of the loan portfolio and lending ratescharged in order to maximise the return of the operation.


– 109 –

Brokerage and securities investment operation

The turnover of the brokerage and securities investment operation, being mainly thebrokerage and commission income of the Group’s securities brokerage division, decreased byapproximately 68% to approximately HK$2,952,000 (2010: HK$9,192,000). Such sharpdecrease was primarily attributed to the lower transaction volume of the securities brokerageactivities and commission income received for participation in fund raising activities of ourclients. The overall performance of the operation deteriorated in 2011 and posted a loss ofapproximately HK$181,056,000 (2010: HK$117,487,000). The loss incurred for the operationwas primarily attributable to the net loss on investment in securities during the year amountingto approximately HK$172,975,000 (2010: HK$119,099,000), resulting mainly from the declinein the market prices of listed securities held by the group for investment purpose. As of the endof the reporting period, the market value of the Group’s listed securities portfolio wasapproximately HK$402,060,000 (2010: HK$296,348,000).

Jointly Controlled Entity

Shanghai Hong Qiao Friendship Shopping Center Co., Ltd. (‘‘Hong Qiao’’), the Group’s30% owned jointly controlled entity, continued to deliver profitable results in 2011. Hong Qiaooperates an upmarket department store in Shanghai, the PRC. Due to the recovery of consumerspending in Shanghai, the turnover of Hong Qiao increased by approximately 9.6% toapproximately HK$761,725,000 (2010: HK$695,191,000) for the year and the Group’s share ofprofit of Hong Qiao also slightly increased to approximately HK$11,639,000 (2010:HK$11,553,000).

In order to streamline its business focus by concentrating on the minerals operations, on12 August 2011, the Company entered into a disposal agreement relating to the disposal of theentire issued share capital of Broadmeadow Investments Limited, which was completed on 28February 2012. Details of the disposal are further appended in the section headed ‘‘Significantevents after the reporting period’’.

Financial Review


At 31 December 2011, the Group had current assets of approximately HK$840,821,000(2010: HK$765,775,000) and liquid assets comprising bank balances and marketable HongKong listed securities totaling approximately HK$489,314,000 (excluding pledged bankbalances held under segregated trust accounts) (2010: HK$443,762,000). The Group’s currentratio, calculated on the basis of current assets of approximately HK$840,821,000 over currentliabilities of approximately HK$33,836,000 was at strong level of approximately 24.8 (2010:18.7). The Group had no bank and other borrowings (2010: Nil) and no finance leaseobligation (2010: HK$383,000) at the end of the reporting period.

The Group issued a total of approximately 5,890 million new shares during the year as aresult of rights issue and share placement to investors issued as part of the consideration forthe general working capital. At the end of the reporting period, the equity attributable toCompany’s equity owners amounting to approximately HK$1,464,607,000 (2010 :


– 110 –

HK$1,369,500,000), representing a slight increase of approximately 7% compared to 2010,which was equivalent to a consolidated net asset value of about approximately HK$0.23 pershare of the Company (2010: HK$2.29 per share).


The monetary assets and liabilities and business transactions of the Group are mainlycarried and conducted in Hong Kong dollars, Renminbi, US dollars and Australian dollars. TheGroup maintains a prudent strategy in its foreign currency risk management, to a large extent,foreign exchange risks are minimised via balancing the foreign currency monetary assets versusthe corresponding currency liabilities, and foreign currency revenues versus the correspondingcurrency expenditures. In light of the above, it is considered that the Group’s exposure toforeign exchange risks is not significant and no hedging measure has been undertaken by theGroup.

Pledge of Asset

At 31 December 2011, the Group has no fixed assets (2010: HK$1,272,000) pledged assecurity for the Group’s finance lease obligation.

Capital Commitment

At 31 December 2011, the Group has capital commitments of HK$8,300,000 in respect ofthe acquisition of property, plant and equipment (2010: HK$4,704,000).


A subsidiary of the Company principally engaged in securities brokerage may be subjectto a maximum penalty of HK$10,000,000 to the enforcement agency in relation to certainallegedly irregular transactions conducted by a former employee of the subsidiary. The mattersare currently under investigation by the enforcement agency. As the ultimate outcome of thematters cannot be reasonably predicted, the maximum penalty of HK$10,000,000 is consideredas a contingent liability of the Group.

Significant events after the reporting period

(1) On 5 January 2012, a special resolution approving the capital reorganisation waspassed at the extraordinary general meeting of the Company, and the capitalreorganisation became effective on 18 January 2012. Details of the capitalreorganisation are set out in the circular of the Company dated 5 December 2011.

(2) On 8 February 2012, the Company entered into a placing agreement with ChungNam Securities Limited (the ‘‘Placing Agent’’) pursuant to which the Placing Agenthas conditionally agreed to place a total of 64,900,000 new shares on a fullyunderwritten basis, to not less than six placees, at a price of HK$0.365 per placingshares and it was completed on 17 February 2012. Details of the transactions are setout in the announcements of the Company dated 8 February 2012 and 17 February2012.


– 111 –

(3) On 28 February 2012, the disposal of the entire issued share capital of BroadmeadowInvestments Limited (‘‘Broadmeadow’’) was completed, where the balance paymentof HK$70,000,000 was fully received on the same date. Following the completion,Broadmeadow ceased to be a subsidiary of the Company.


At 31 December 2011, the Group had approximately 97 (2010: 84) employees includingexecutive directors. Total staff costs incurred during the year (including directors’remuneration) was approximately HK$17,586,000 and increased by approximately 11% whencompared to approximately HK$15,812,000 in 2010. The increase in staff costs was in linewith the increase in number of staff headcounts. The Group generally remunerates itsemployees with reference to their qualifications, experience and work performance as well asto market benchmarks. Benefits offered by the Group to its employees included discretionarybonus, mandatory provident fund scheme, share options, training subsidies as well as medicalinsurance.


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A. STATEMENT OF UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NETTANGIBLE ASSETS

The statement of unaudited pro forma adjusted consolidated net tangible assets of theGroup prepared in accordance with paragraph 29 of Chapter 4 of the Listing Rules is set outbelow to illustrate the effects of the Rights Issue on the consolidated net tangible assets of theGroup as if the Share Consolidated and the Rights Issue had taken place on 30 June 2014.

The statement of unaudited pro forma adjusted consolidated net tangible assets of theGroup has been prepared for illustrative purposes only, based on the judgements andassumptions of the Directors of the Company, and because of its hypothetical nature, may notgive a true picture of the financial position of the Group following the Rights Issue.

The following statement of unaudited pro forma adjusted consolidated net tangible assetsof the Group is based on the unaudited consolidated net tangible assets of the Group as at 30June 2014, adjusted as described below:

Minimumnumber of

700,958,385Rights Sharesto be issued

Maximumnumber of


HK$’000 HK$’000

Unaudited consolidated net assets as at 30 June 2014(Note a) 1,241,620 1,241,620

Less: Unaudited consolidated intangible assets as at 30June 2014 (Note b) (200,000) (200,000)

Unaudited consolidated net tangible assets as at 30 June2014 1,041,620 1,041,620

Add: Estimated proceeds less related expenses from theRights Issue (Note c) 404,263 405,656

Add: Cost of investment in Target Group (Note d) 370,000 370,000Less: Payment of the consideration for the ProposedAcquisition (Note e) (370,000) (370,000)

Less: Goodwill arising on the Proposed Acquisition(Note f) (16,226) (16,226)

Unaudited pro forma adjusted consolidated net tangibleassets of the Group attributable to the owners of theCompany after the completion of the Rights Issue 1,429,657 1,431,050

APPENDIX II UNAUDITED PRO FORMA STATEMENT OF ADJUSTEDCONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

– 113 –

Minimumnumber of


Maximumnumber of


HK$’000 HK$’000Unaudited consolidated net tangible assets per shareattributable to the owners of the Company prior to theShare Consolidation, Rights Issue and ProposedAcquisition (Note g) HK$2.67 HK$2.67

Unaudited consolidated net tangible assets per shareattributable to the owners of the Companyimmediately after implementation of the ShareConsolidation and prior to the Rights Issue and theProposed Acquisition HK$13.37 HK$13.33

(Note h) (Note i)

Unaudited pro forma adjusted consolidated net tangibleassets per share attributable to the owners of theCompany after implementation of the ShareConsolidation, completion of the Rights Issue and theProposed Acquisition HK$1.84 HK$1.83

(Note j) (Note k)

Notes:

a. Reference is made to the published interim report of the Company for the six months ended 30 June2014.

b. The unaudited consolidated intangible assets of the Group as at 30 June 2014 attributable to the ownersof the Company represented the mining right of HK$200,000,000 as extracted from the publishedinterim report of the Company for the six months ended 30 June 2014.

c. The estimated proceeds less related expenses from the Rights Issue of approximately HK$404,263,000and HK$405,656,000 are calculated based on the minimum number of 700,958,385 Rights Shares andmaximum number of 703,352,934 Rights Shares, respectively, to be issued at the subscription price ofHK$0.60 per Rights Share and after deduction of estimated related expenses of approximatelyHK$16,340,000.

d. The pro forma adjustment represents the recognition of the cost of investment in Target Group.

e. The pro forma adjustment reflects the Company’s intention to utilise the net proceeds of the RightsIssue for payment of the consideration for the Proposed Acquisition.

f. The goodwill arising on the Proposed Acquisition represents an intangible asset and is included in thecarrying amount of the Group’s interest in Target Group in accordance with the requirements of HKAS28 ‘‘Investments in Associates and Joint Ventures’’.


– 114 –

g. Based on 389,421,327 shares in issue as at 30 June 2014 before implementation of the ShareConsolidation and before completion of the Rights Issue and the Proposed Acquisition.

h. Based on 77,884,265 Consolidated Shares, assuming that the Share Consolidation had been completedon 30 June 2014. The calculation takes no account of any shares to be issued upon exercise of shareoption.

i. Based on 78,150,326 Consolidated Shares, assuming that the 1,330,308 share options outstanding as at30 June 2014 had been exercised and the Share Consolidation had been completed on 30 June 2014.The calculation takes no account of any proceeds from the exercise of share option.

j. Based on 778,842,650 shares, comprising (i) 77,884,265 Consolidated Shares in issue and (ii)700,958,385 Rights Shares to be issued, assuming that none of the outstanding share options areexercised on or before the Latest Practicable Date.

k. Based on 781,503,260 shares, comprising (i) 77,884,265 Consolidated Shares in issue; (ii) 266,061Consolidated Shares to be issued upon exercise of the outstanding share options and (iii) 703,352,934Rights Shares to be issued, assuming that the outstanding share options are exercised in full on orbefore the Latest Practicable Date.

l. No adjustment has been made to the unaudited pro forma statement of adjusted consolidated nettangible assets of the Group to reflect any trading results or other transactions of the Group entered intosubsequent to 30 June 2014.


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B. ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA STATEMENTOF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The following is the text of a report received from Pan-China (H.K.) CPA Limited,Certified Public Accountants, Hong Kong, for the purpose of incorporation in the Circular.

The Board of DirectorsChina Yunnan Tin Minerals Group Company LimitedUnit 2502–5, 25th FloorHarbour Centre, 25 Harbour RoadWanchaiHong Kong

Dear Sirs,

We have completed our assurance engagement to report on the compilation of unauditedpro forma financial information of China Yunnan Tin Minerals Group Company Limited (the‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) by thedirectors of the Company (the ‘‘Directors’’) for illustrative purposes only. The unaudited proforma financial information consists of the statement of unaudited pro forma adjustedconsolidated net tangible assets of the Group as at 30 June 2014, and related notes as set outon Section A of Appendix II to the circular issued by the Company dated 24 December 2014(the ‘‘Circular’’). The applicable criteria on the basis of which Directors have compiled the proforma financial information are described in Section A of Appendix II to the Circular.

The unaudited pro forma financial information has been compiled by the Directors toillustrate the impact of the proposed rights issue on the basis of nine rights shares for everyone Consolidated Share (as defined in the Circular) held on the Record Date (the ‘‘RightsIssue’’) of the Company. As part of this process, information about the Group’s unauditedconsolidated net assets has been extracted by the Directors from the Group’s unauditedconsolidated financial statements for the six months ended 30 June 2014, on which a reviewreport has been published, and the modified review conclusion is set out on pages 98 to 99 ofthe Circular.

Director’s Responsibility for the Unaudited Pro Forma Financial Information

The Directors are responsible for compiling the unaudited pro forma financial informationin accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on TheStock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and with reference toAccounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion inInvestment Circulars’’ (‘‘AG 7’’) issued by the Hong Kong Institute of Certified PublicAccountants (‘‘HKICPA’’).


– 116 –

Report Accountant’s Responsibilities

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

We conducted our engagement in accordance with Hong Kong Standard on AssuranceEngagements (HKSAE) 3420, Assurance Engagements to Report on the Compilation of ProForma Financial Information Included in a Prospectus, issued by the HKICPA. This standardrequires that the reporting accountant comply with ethical requirements and plan and performprocedures to obtain reasonable assurance about whether Directors has compiled the unauditedpro forma financial information in accordance with paragraph 4.29 of the Listing Rules andwith reference to AG 7 issued by the HKICPA.

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

The purpose of unaudited pro forma financial information included in an investmentcircular is solely to illustrate the impact of a significant event or transaction on unadjustedfinancial information of the Group as if the event had occurred or the transaction had beenundertaken at an earlier date selected for purposes of the illustration. Accordingly, we do notprovide any assurance that the actual outcome of the event or transaction at 30 June 2014would have been as presented.

A reasonable assurance engagement to report on whether the unaudited pro formafinancial information has been properly compiled on the basis of the applicable criteriainvolves performing procedures to assess whether the applicable criteria used by Directors inthe compilation of the unaudited pro forma financial information provide a reasonable basis forpresenting the significant effects directly attributable to the event or transaction, and to obtainsufficient appropriate evidence about whether:

. The related unaudited pro forma adjustments give appropriate effect to those criteria;and

. The unaudited pro forma financial information reflects the proper application ofthose adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountant’s judgment, having regard tothe reporting accountant’s understanding of the nature of the Group, the event or transaction inrespect of which the unaudited pro forma financial information has been compiled, and otherrelevant engagement circumstances.


– 117 –

The engagement also involves evaluating the overall presentation of the unaudited proforma financial information.

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

Opinion

In our opinion:

(a) the unaudited pro forma financial information has been properly compiled on thebasis stated;

(b) such basis is consistent with the accounting policies of the Group; and

(c) the adjustments are appropriate for the purposes of the unaudited pro forma financialinformation as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Yours faithfully

PAN-CHINA (H.K.) CPA LIMITEDCertified Public AccountantsHong Kong, 24 December 2014

Lee Ping KaiPractising Certificate Number: P02976


– 118 –

A. MANAGEMENT DISCUSSION AND ANALYSIS ON THE TARGET GROUP

Set out below is the management discussion and analysis of the Target Group’s businessand performance for the three years ended 31 December 2011, 2012 and 2013 and for the sixmonths ended 30 June 2014.

(i) For the year ended 31 December 2011

Business review

In 2011, the Target Group was principally engaged in business of development,construction and building management of the ‘‘Development Project’’ comprising theresidential and commercial complex known as ‘‘Jintang New City Plaza’’(金唐新城

市廣場) in Chongqing, the PRC.

Financial review

During the year ended 31 December 2011, no revenue was recorded in theTarget Group.

During the year ended 31 December 2011, the selling and distribution expenseswere approximately HK$1.3 million, mainly comprising the advertising expenses,sales centre equipment and sales commission.

During the year ended 31 December 2011, the administrative expenses wereapproximately HK$3.6 million, mainly comprising the staff costs, depreciation,travelling and rental expenses.

During the year under review, the loss for the year attributable to the owners ofthe Target Group was approximately HK$3.3 million.

Capital structure, liquidity and financial resources

As at 31 December 2011, pledged bank deposits and bank balances and cashamounted to approximately HK$79.2 million. The Target Group had borrowing ofapproximately HK$158.4 million as at 31 December 2011. The Target Group’scurrent ratio, being the ratio of current assets to current liabilities, was approximately0.97 times.

As at 31 December 2011, the Target Group’s major borrowing included shortterm loan provided by a non-bank financial institution in the PRC. All of the loanhad been denominated in RMB made on a fixed interest rate basis. The Target Grouphad settled the loan by its internal funding in 2012.

Treasury policies

The Target Group adopted a balance funding and treasury policies in cash andfinancial management. Cash was generally placed in short-term deposits mostlydenominated in RMB.

APPENDIX III FINANCIAL INFORMATION OF THE TARGET GROUP

– 119 –

The Target Group’s financing requirements were regularly reviewed by themanagement.

Substantial acquisition and disposal and material investment

There were no substantial acquisitions and disposals and material investmentmade by the Target Group during the year ended 31 December 2011.

Charge of assets in the Target Group

As at 31 December 2011, the Target Group had pledged bank deposits ofapproximately HK$1.2 million to bank in order to obtain general banking facilities.


As at 31 December 2011, the Target Group did not have any materialcontingent liabilities.

Outlook and future prospect

Looking into the future, the Target Group was focused on its core businesses,namely, businesses related to development, construction and building management ofthe ‘‘Development Project’’ comprising the residential and commercial complexknown as ‘‘Jintang New City Plaza’’ (金唐新城市廣場) in Chongqing, the PRC.

Employees and remuneration policies

As of 31 December 2011, the Target Group had 18 full-time employees. Duringthe year under review, the staff cost was approximately HK$2.3 million.

Dividend

During the year ended 31 December 2011, the Target Group did not declare orpay any dividend.

(ii) For the year ended 31 December 2012

Business review

In 2012, the Target Group continued to principally engage in business ofdevelopment, construction and building management of the ‘‘Development Project’’comprising the residential and commercial complex known as ‘‘Jintang New CityPlaza’’ (金唐新城市廣場) in Chongqing, the PRC.

Financial review

During the year ended 31 December 2012, no turnover was recorded in theTarget Group.


– 120 –

The selling and distribution expenses for the year ended 31 December 2012were approximately HK$2.5 million, representing an increase of 92.3% as comparedagainst that for the year ended 31 December 2011. This was mainly attributable tothe increase in advertising expenses.

The administrative expenses for the year ended 31 December 2012 wereapproximately HK$3.5 million, representing an decrease of 2.8% as comparedagainst that for the year ended 31 December 2011. This was mainly attributable tothe decrease in the staff cost.

During the year under review, the loss for the year attributable to the owners ofthe Target Group was approximately HK$4.1 million, representing an increase of24.2% as compared against a loss of approximately HK$3.3 million for the yearended 31 December 2011. This was mainly attributed to the substantial increase inadvertising expenses.


As at 31 December 2012, bank balances and cash amounted to approximatelyHK$82.5 million. The Target Group had borrowing of approximately HK$30.7million as at 31 December 2012. The Target Group’s current ratio, being the ratio ofcurrent assets to current liabilities, was approximately 0.96 times.

As at 31 December 2012, the Target Group’s major borrowing included shortterm loan provided by a non-bank financial institution in the PRC. All of the loanhad been denominated in RMB made on a fixed interest rate basis. The Target Grouphad settled the loan by short-term entrustment loan in 2013.

Treasury policies

The Target Group adopts a balance funding and treasury policies in cash andfinancial management. Cash was generally placed in short-term deposits mostlydenominated in RMB.





As at 31 December 2012, the Target Group had no pledge of assets and bankdeposits in order to obtain general banking facilities or short-term bank borrowings.


– 121 –




Looking into the future, the Target Group would continue to focus on its corebusinesses, namely, businesses related to development, construction and buildingmanagement of the ‘‘Development Project’’ comprising the residential andcommercial complex known as ‘‘Jintang New City Plaza’’ (金唐新城市廣場) inChongqing, the PRC.



Dividend


(iii) For the year ended 31 December 2013

Business review

In 2013, the Target Group continued to principally engage in business ofdevelopment, construction and building management of the ‘‘Development Project’’comprising the residential and commercial complex known as ‘‘Jintang New CityPlaza’’ (金唐新城市廣場) in Chongqing, the PRC.

Financial review

During the year ended 31 December 2013, no turnover was recorded for theTarget Group.

The selling and distribution expenses for the year ended 31 December 2013were approximately HK$4.2 million, representing an increase of 68.0% as comparedagainst that for the year ended 31 December 2012. This was mainly attributable tothe increase in sales commission.

The administrative expenses for the year ended 31 December 2013 wereapproximately HK$4.1 million, representing an increase of 17.1% as comparedagainst that for the year ended 31 December 2012. This was mainly attributable tothe increase in travelling expenses and office expenses.


– 122 –

During the year under review, the loss for the year attributable to the owners ofthe Target Group was approximately HK$6.4 million, representing an increase of56.1% as compared against a loss of approximately HK$4.1 million for the yearended 31 December 2012. This was mainly attributed to the substantial increase inpromotion expenses, travelling expenses and office expenses.


As at 31 December 2013, bank balances and cash amounted to approximatelyHK$34.4 million. The Target Group had borrowing of approximately HK$1,141.4million as at 31 December 2013. The Target Group’s current ratio, being the ratio ofcurrent assets to current liabilities, was approximately 5.5 times.

As at 31 December 2013, the Target Group’s major borrowing included anentrustment loan provided by a trust arranger for and on behalf of Guosen SecuritiesCompany Limited in the PRC. The loans had been denominated in RMB made on afixed interest rate basis. The Target Group intended to refinance certain borrowingupon expiry.

Treasury policies






As at 31 December 2013, the Target Group had pledged the piece of land of theDevelopment Project situate at Long Tower Street in the western part of the YubeiZone, Chongqing City (重慶市渝北區龍塔街道) in the PRC with a site area ofapproximately 30,817 square meters (‘‘the Land’’) and properties under theDevelopment Project — Phase I & II to trust arranger to secure certain loanfacilities granted to the Target Group.




– 123 –





Dividend


(iv) For the six months ended 30 June 2014

Business review

During the six months ended 30 June 2014, the Target Group continued toprincipally engage in business of development, construction and buildingmanagement of the ‘‘Development Project’’ comprising the residential andcommercial complex known as ‘‘Jintang New City Plaza’’ (金唐新城市廣場) inChongqing, the PRC.

Financial review

During the six months ended 30 June 2014, no turnover was recorded in theTarget Group.

The selling and distribution expenses for the six months ended 30 June 2014were approximately HK$2.5 million, representing a increase of 66.7% as comparedagainst that for the six months ended 30 June 2013. This was mainly attributable tothe increase in advertising expenses.

The administrative expenses for the six months ended 30 June 2014 wereapproximately HK$5.3 million, representing an increase of 253% as comparedagainst that for the six months ended 30 June 2013. This was mainly attributable tothe increase in the compensation fees and staff cost. Compensation fee is the penaltyfee for delay for delivery of property units due to the fact that internal decorationwas finished in October. In the sale and purchase agreement of property units, thereis an agreement between seller and purchasers that the seller should pass propertytitle to purchaser on or before an agreed date otherwise the penalty have to be paidby seller to purchaser by following the agreed terms.


– 124 –

During the period under review, the loss for the period attributable to theowners of the Target Group was approximately HK$6.8 million, representing anincrease of 209% as compared against a loss of HK$2.2 million for the six monthsended 30 June 2013. This was mainly attributed to the increase in advertisingexpenses and compensation fees.


As at 30 June 2014, pledged bank deposits and bank balances and cashamounted to approximately HK$50.7 million. The Target Group had borrowings ofapproximately HK$1,132.9 million as at 30 June 2014. The Target Group’s currentratio, being the ratio of current assets to current liabilities, was approximately 4.8times.

As at 30 June 2014, the Target Group’s major borrowing included anentrustment loan provided by a trust arranger for and on behalf of Guosen SecuritiesCompany Limited in the PRC. The loan had been denominated in RMB made on afixed interest rate basis.

Treasury policies




There were no substantial acquisitions and disposals and material investmentmade by the Target Group during the six months ended 30 June 2014.


As at 30 June 2014, the Target Group had pledged bank deposits ofapproximately HK$6.3 million to banks in order to obtain general banking facilities.

As at 30 June 2014, the Target Group had pledged the Land and propertiesunder the Development Project — Phase I & II to trust arranger to secure certainloan facilities granted to the Target Group.


As at 30 June 2014, the Target Group did not have any material contingentliabilities.


– 125 –




As of 30 June 2014, the Target Group had 61 full-time employees. During theperiod under review, the staff cost was approximately HK$2.5 million.

Dividend

During the six months ended 30 June 2014, the Target Group did not declare orpay any dividend.


– 126 –

B. ACCOUNTANTS’ REPORT OF THE TARGET GROUP

The following is the text of a report received from the reporting accountants, HLBHodgson Impey Cheng Limited, Certified Public Accountants, Hong Kong, prepared forincorporation in this Circular.

31/F, Gloucester TowerThe Landmark11 Pedder StreetCentralHong Kong

24 December 2014

The DirectorsChina Yunnan Tin Minerals Group Company Limited

Dear Sirs,

We set out below our report on the financial information (the ‘‘Financial Information’’)regarding China Sky Holdings Limited (the ‘‘Target Company’’) and its subsidiary (hereinaftercollectively referred to as the ‘‘Target Group’’) for the years ended 31 December 2011, 2012and 2013 and for the six months period ended 30 June 2014 (the ‘‘Relevant Periods’’), forinclusion in a circular (the ‘‘Circular’’) issued by China Yunnan Tin Minerals Group CompanyLimited (the ‘‘Company’’) dated 24 December 2014 in connection with, among others, theproposed acquisition of 40% of the total issued share capital of the Target Company (the‘‘Acquisition’’).

The Target Company was incorporated in the British Virgin Islands (‘‘BVI’’) as a limitedliability company on 9 May 2002. The principal activity of the Target Company is investmentholding.

As at the date of this report, the Target Company has the following subsidiary:

Name of subsidiary

Legal form,date and place ofestablishment/operation

Fully paidregisteredcapital

Proportionownershipinterestheld bythe TargetCompany Principal activities

重慶金唐房地產開發有

限公司 (transliterateas Kim DynastyRealty &Development Co.Ltd.) (‘‘Jintang’’)

Limited liability company(wholly-foreign-ownedenterprise) establishedon 29 July 2002, thePeople’s Republic ofChina (‘‘PRC’’)

US$3,000,000 100%(direct)

Development, constructionand buildingmanagement of thedevelopment projectcomprising theresidential andcommercial complex inChongqing, the PRC


– 127 –

The Target Group has adopted 31 December as their financial year end date.

No audited financial statements have been prepared for the Target Company since its dateof incorporation as it was incorporated in a country where is no statutory audit requirement.

The statutory financial statements of the Jintang during the financial year 31 December2011, 2012 and 2013 were prepared in accordance with the relevant accounting rules andfinancial regulations applicable to enterprises established in the PRC and were audited by 北京

中瑞誠聯合會計師事務所(Beijing ZhongRuiCheng The United Certifies Public Accountants),Certified Public Accountants registered in the PRC.

For the purpose of this report, the directors of the Target Company have prepared theconsolidated financial statements of the Target Group for the Relevant Periods (the‘‘Underlying Financial Statements’’) in accordance with Hong Kong Financial ReportingStandards (‘‘HKFRSs’’) issued by the Hong Kong Institute of Certified Public Accountants(‘‘HKICPA’’).

We have undertaken an independent audit on the Underlying Financial Statements for theRelevant Periods in accordance with Hong Kong Standards on Auditing issued by theHKICPA. We have examined the Underlying Financial Statements in accordance with theAuditing Guideline 3.340 ‘‘Prospectuses and the Reporting Accountant’’ as recommended bythe HKICPA.

The Financial Information of the Target Group for the Relevant Periods set out in thisreport has been prepared from the Underlying Financial Statements, and no adjustments to theUnderlying Financial Statements are considered necessary in the preparation of this report forinclusion in the Circular.

The Underlying Financial Statements are the responsibility of the directors of the TargetCompany who approved their issue. The directors of the Company are responsible for thecontents of the Circular in which this report is included. It is our responsibility to compile theFinancial Information set out in this report from the Underlying Financial Statements, to forman independent opinion on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information together with the notes thereon gives, for thepurpose of this report, a true and fair view of the consolidated state of affairs of the TargetGroup as at 31 December 2011, 2012 and 2013 and 30 June 2014, and of the consolidatedresults and consolidated cash flows of the Target Group for the Relevant Periods.


– 128 –

We draw attention to Note 3 of Section II below which indicates that the Target Grouphad net liabilities of approximately HK$22,568,000 at 30 June 2014. In addition, the TargetGroup incurred net losses of approximately HK$3,271,000, HK$4,125,000, HK$6,430,000 andHK$6,840,000 for the years ended 31 December 2011, 2012 and 2013 and the six monthsperiod ended 30 June 2014, respectively. These matters, along with other matters as set forth inNote 3 of Section II below, indicate the existence of a material uncertainty which may castsignificant doubt on the Target Group’s ability to continue as a going concern.

The comparative consolidated statements of profit or loss and other comprehensiveincome, consolidated statements of changes in equity and consolidated statements of cash flowsof the Target Group for the six months period ended 30 June 2013, together with the notesthereon have been extracted from the Target Group’s unaudited financial information for thesame period (the ‘‘30 June 2013 Financial Information’’), which was prepared by the directorsof the Target Company solely for the purpose of this report. We have reviewed the 30 June2013 Financial Information in accordance with the Hong Kong Standard of ReviewEngagements 2410 ‘‘Review of Interim Financial Information Performed by the IndependentAuditor of the Entity’’ issued by the HKICPA. Our review of the 30 June 2013 FinancialInformation consisted of making enquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. A review issubstantially less in scope than an audit conducted in accordance with Hong Kong Standardson Auditing and consequently does not enable us to obtain assurance that we would becomeaware of all significant matters that might be identified in an audit. Accordingly, we do notexpress an audit opinion on the 30 June 2013 Financial Information. Based on our review,nothing has come to our attention that causes us to believe that the 30 June 2013 FinancialInformation is not prepared, in all material respects, in accordance with the accounting policiesconsistent with those used in the preparation of the Financial Information which conform withHKFRSs.


– 129 –

I. FINANCIAL INFORMATION OF THE TARGET GROUP

Consolidated statements of profit or loss and other comprehensive income

Year ended 31 DecemberSix months periodended 30 June

2011 2012 2013 2013 2014Notes HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(unaudited)

Revenue 5 — — — — —

Cost of sales — — — — —

Gross profit — — — — —

Other income and net gains 6 1,719 1,977 1,950 773 1,017Selling and distribution

expenses (1,347) (2,515) (4,232) (1,463) (2,509)Administrative expenses (3,643) (3,542) (4,148) (1,500) (5,348)Finance costs 7 — (45) — — —

Loss before tax (3,271) (4,125) (6,430) (2,190) (6,840)Income tax expense 8 — — — — —

Loss for the year/period 9 (3,271) (4,125) (6,430) (2,190) (6,840)

Other comprehensive income/(expense), net of incometax

Item that may be reclassifiedsubsequently to profit orloss:

Exchange differences arisingon translation of foreignoperations 679 95 350 260 (35)

Other comprehensive income/(expense) for the year/period, net of income tax 679 95 350 260 (35)

Total comprehensive expensefor the year/period (2,592) (4,030) (6,080) (1,930) (6,875)

Loss attributable to ownersof the Target Company (3,271) (4,125) (6,430) (2,190) (6,840)

Total comprehensive expenseattributable to owners ofthe Target Company (2,592) (4,030) (6,080) (1,930) (6,875)

Details of dividend are disclosed in Note 11 to the Financial Information.


– 130 –

Consolidated statements of financial position

At 31 DecemberAt

30 June2011 2012 2013 2014

Notes HK$’000 HK$’000 HK$’000 HK$’000

Non-current assetsProperty, plant and equipment 13 282 253 3,372 4,509

Current assetsProperties for sale 14 110,828 142,719 277,163 449,936Loan receivable 15 — — — 52,442Deposits, prepayments and

other receivables 16 2,881 6,202 1,057,782 845,107Amounts due from directors 17 — 772 29 6Pledged bank deposits 18 1,221 — — 6,294Bank balances and cash 18 77,941 82,491 34,427 44,383

192,871 232,184 1,369,401 1,398,168

Total assets 193,153 232,437 1,372,773 1,402,677

Current liabilitiesTrade payables 19 3,909 1,239 — 6,700Deposits from sale of properties 20 — 29,447 78,166 82,481Accrued liabilities and other

payables 21 13,393 157,543 61,574 96,351Amount due to a related company 22 — 418 16,783 16,580Amounts due to shareholders 22 22,713 22,724 90,535 90,202Amounts due to directors 17 312 — — —

Borrowings — current portions 23 158,409 30,679 — —

198,736 242,050 247,058 292,314

Net current (liabilities)/assets (5,865) (9,866) 1,122,343 1,105,854

Total assets less current liabilities (5,583) (9,613) 1,125,715 1,110,363

Capital and reservesShare capital 24 780 780 780 780Reserves (6,363) (10,393) (16,473) (23,348)

Total equity (5,583) (9,613) (15,693) (22,568)

Non-current liabilitiesBorrowings 23 — — 1,141,408 1,132,931

(5,583) (9,613) 1,125,715 1,110,363


– 131 –

Consolidated statements of changes in equity

Sharecapital

Foreigncurrency

translationreserve

Accumulatedlosses

Attributableto owners ofthe TargetCompany

HK$’000 HK$’000 HK$’000 HK$’000(Note 24)

Balance at 1 January 2011 780 4,758 (8,529) (2,991)Loss for the year — — (3,271) (3,271)Exchange differences arising on translation

of overseas operations — 679 — 679

Total comprehensive income/(expense)for the year — 679 (3,271) (2,592)

Balance at 31 December 2011 and1 January 2012 780 5,437 (11,800) (5,583)

Loss for the year — — (4,125) (4,125)Exchange differences arising on translation


Total comprehensive income/(expense)for the year — 95 (4,125) (4,030)


Loss for the year — — (6,430) (6,430)Exchange differences arising on translation


Total comprehensive income/(expense) forthe year — 350 (6,430) (6,080)


Loss for the period — — (6,840) (6,840)Exchange differences arising on translation

of overseas operations — (35) — (35)

Total comprehensive expense for the period — (35) (6,840) (6,875)

Balance at 30 June 2014 780 5,847 (29,195) (22,568)

(Unaudited)Balance at 1 January 2013 780 5,532 (15,925) (9,613)Loss for the period — — (2,190) (2,190)Exchange differences arising on translation


Total comprehensive income/(expense)for the period — 260 (2,190) (1,930)

Balance at 30 June 2013 780 5,792 (18,115) (11,543)


– 132 –

Consolidated statements of cash flows

Year ended 31 DecemberSix months period ended

30 June2011 2012 2013 2013 2014

Note HK$’000 HK$’000 HK$’000 HK$’000 HK$’000(unaudited)

Cash flows from operatingactivities

Loss before tax (3,271) (4,125) (6,430) (2,190) (6,840)Adjustments for:

Finance costs — 45 — — —

Loss on disposal ofproperty, plant andequipment — — 14 — 10

Depreciation of property,plant and equipment 171 189 153 79 222

Interest income (1,657) (1,966) (1,927) (750) (1,017)

Movement in working capital (4,757) (5,857) (8,190) (2,861) (7,625)Properties for sale (44,883) (21,789) (39,823) (10,227) (96,100)Deposits, prepayments and

other receivables (967) (3,304) (1,037,419) (4,584) 206,140Amounts due from directors 51 (773) 751 (635) 29Trade payables 3,850 (2,691) (1,263) (1,254) 6,718Deposits from sale of

properties — 29,452 47,099 30,302 4,909Accrued liabilities and

other payables 77 144,102 (155,165) (17,586) 10,081Amounts due to

shareholders 10 11 66,912 10 170Amounts due to directors 307 (314) — — —

Amount due to a relatedcompany — 418 16,134 (87) (79)

Net cash (used in)/generatedfrom operating activities (46,312) 139,255 (1,110,964) (6,922) 124,243


– 133 –


30 June2011 2012 2013 2013 2014

Note HK$’000 HK$’000 HK$’000 HK$’000 HK$’000(unaudited)

Cash flows from investingactivities

Payments for property, plantand equipment (26) (159) (3,247) (29) (1,399)

Proceeds from disposal ofproperty, plant andequipment — — 9 — 1

Advance on loan receivable — — — — (52,587)(Increase)/decrease in pledged

bank deposits (1,202) 1,227 — — (6,311)Interest received 1,657 1,966 1,927 750 254

Net cash generated from/(used in) investingactivities 429 3,034 (1,311) 721 (60,042)

Cash flows from financingactivities

Repayment of borrowings 22,911 (159,291) (31,285) — —

Proceeds from borrowings — 30,684 1,126,267 31,044 —

Interest paid (11,196) (9,554) (32,860) (4,250) (53,963)

Net cash (used in)/generatedfrom financing activities 11,715 (138,161) 1,062,122 26,794 (53,963)

Net (decrease)/increase incash and cash equivalents (34,168) 4,128 (50,153) 20,593 10,238

Cash and cash equivalents atthe beginning of the year/period 108,608 77,941 82,491 82,491 34,427

Effects of exchange ratechanges on the balance ofcash held in foreigncurrencies 3,501 422 2,089 1,950 (282)

Cash and cash equivalents atthe end of the year/period 77,941 82,491 34,427 105,034 44,383

Analysis of the balances ofcash and cash equivalents

Bank balances and cash 18 77,941 82,491 34,427 105,034 44,383


– 134 –

II. NOTES TO THE FINANCIAL INFORMATION OF THE TARGET GROUP

1. GENERAL INFORMATION

The Target Company was incorporated in the BVI as a limited liability company on 9 May 2002. At thedate of this report, in the opinion of the directors of the Target Company, Perfect Ease International Limited,a limited liability company incorporated in the BVI, is the immediate holding company; ChainrayInternational Limited, a company incorporated in the BVI, is the ultimate holding company and Mr. LiangShan (‘‘Mr. Liang’’), is the ultimate controlling party of the Target Company. The address of its registeredoffice is Sea Meadow House, Blackburne Highway, (P.O. Box 116), Road Town, Tortola, BVI. The principalactivity of the Target Company is investment holding.

The functional currency of the Target Group is Renminbi (‘‘RMB’’). For the convenience of theFinancial Information users, the results and financial position of the Target Group is presented in Hong Kongdollars (‘‘HK$’’).

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, theTarget Group has throughout the Relevant Periods consistently adopted Hong Kong Accounting Standards(‘‘HKAS’’), HKFRSs, amendments and interpretations, which are effective for accounting period beginning on1 January 2014 throughout the Relevant Periods.

At the date of this report, the HKICPA has issued the following new and revised standards, amendmentsand interpretations that have been issued but are not yet effective:

HKFRSs (Amendments) Annual Improvements to HKFRSs 2010–2012 Cycle5

HKFRSs (Amendments) Annual Improvements to HKFRSs 2011–2013 Cycle1

HKFRS 9 Financial Instruments4

HKFRS 9 and HKFRS 7 andHKAS 39

Hedge Accounting and Amendments to HKFRS 9,HKFRS 7 and HKAS 394

HKFRS 10 and HKAS 28 (Amendments) Consolidated Financial Statements and Investment inAssociates and Joint Ventures — Sale orContribution of Assets between an Investor and itsAssociate or Joint Venture2

HKFRS 11 (Amendments) Accounting for Acquisitions of Interests in JointOperations2

HKFRS 14 Regulatory Deferral Accounts2

HKFRS 15 Revenue from Contracts with Customers3

HKAS 16 and HKAS 38(Amendments)

Clarification of Acceptable Methods of Depreciationand Amortisation2

HKAS 19 (Amendments) Defined Benefit Plans: Employee Contributions1

HKAS 16 and HKAS 41 (Amendments) Agriculture: Bearer Plants2

1 Effective for annual periods beginning on or after 1 July 2014.2 Effective for annual periods beginning on or after 1 January 2016.3 Effective for annual periods beginning on or after 1 January 2017.4 Effective for annual periods beginning on or after 1 January 2018.5 Effective for annual periods beginning on or after 1 July 2014, with limited exceptions.

The directors of the Target Company anticipate that the application of these new and revised standards,amendments and interpretations will have no material impact on the Target Group’s financial performance andpositions.


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3. SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

The Financial Information have been prepared in accordance with HKFRSs issued by theHKICPA. In addition, the Financial Information include applicable disclosures required by the RulesGoverning the Listing of Securities on The Stock Exchange of Hong Kong Limited and by the HongKong Companies Ordinance.

Basis of preparation

The Financial Information have been prepared on the historical cost basis at the end of theRelevant Periods. Historical cost is generally based on the fair value of the consideration given inexchange for goods and services.

At the end of each reporting years/period stated in the Relevant Periods, the Target Group had netliabilities of approximately HK$5,583,000, HK$9,613,000, HK$15,693,000 and HK$22,568,000 as at31 December 2011, 2012 and 2013 and 30 June 2014, respectively. In addition, the Target Groupincurred net losses of approximately HK$3,271,000, HK$4,125,000, HK$6,430,000 and HK$6,840,000for the years ended 31 December 2011, 2012 and 2013 and the six months period ended 30 June 2014,respectively. Accordingly, as at the date of this report, the Target Group is reliant on its holdingcompanies and Mr. Liang for support in order to meet its existing short term financial obligations.

The directors of the Target Company are aware that, due to the above conditions, a materialuncertainty exists which may cast doubt upon the Target Group’s ability to continue as a going concern.However, the directors of Target Company are of the opinion that there is a reasonable expectation thatthe Target Group will be able to continue as going concerns on the basis that its holding companies andMr. Liang will continue to provide funding to the Target Group up until the date of completion of theAcquisition and the Mr. Liang and the Company will provide ongoing funding to the Target Group aftercompletion of the Acquisition.

Consequently, the directors of the Target Company have concluded that the Target Group will beable to continue as a going concern and has prepared the Financial Information on a going concernbasis, which contemplates the continuity of normal business activity and the realisation of assets and thesettlement of liabilities in the normal course of business.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date, regardless of whether thatprice is directly observable or estimated using another valuation technique. In estimating the fair valueof an asset or a liability, the Target Group takes into account the characteristics of the asset or liabilityif market participants would take those characteristics into account when pricing the asset or liability atthe measurement date. Fair value for measurement and/or disclosure purposes in the FinancialInformation is determined on such a basis, except for share-based payment transactions that are withinthe scope of HKFRS 2, leasing transactions that are within the scope of HKAS 17, and measurementsthat have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2or value in use in HKAS 36.

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

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

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

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


– 136 –

The principal accounting policies are set out below.

Basis of consolidation

The Financial Information incorporate the financial statements of the Target Company and entitycontrolled by the Target Company. Control is achieved when the Target Company:

. has power over the investee;

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

. has the ability to use its power to affect its returns.

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

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

Profit or loss and each item of other comprehensive income are attributed to the owner of theTarget Company and to the non-controlling interests. Total comprehensive income of subsidiaries isattributed to the owner of the Target Company and to the non-controlling interests even if this results inthe non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring theiraccounting policies into line with the Target Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating totransactions between members of the Target Group are eliminated in full on consolidation.

Revenue recognition

Income arising from the sales of properties for sale is recognised upon the later of the executionof the formal sale and purchase agreement and the issue of occupation permit/completion certificate bythe relevant government authorities, which is taken to be the point in time when the risks and rewardsof ownership of the property have passed to the buyer. Deposits and instalments received on propertiessold prior to the date of revenue recognition are included in the consolidated statements of financialposition.

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

Leasing

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


– 137 –

The Target Group as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the leaseterm, except where another systematic basis is more representative of the time pattern in whicheconomic benefits from the leased asset are consumed. Contingent rentals arising under operating leasesare recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives arerecognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rentalexpense on a straight-line basis, except where another systematic basis is more representative of thetime pattern in which economic benefits from the leased asset are consumed.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currenciesother than the entity’s functional currency (foreign currencies) are recognised at the rates of exchangeprevailing at the dates of the transactions. At the end of the Relevant Periods, monetary itemsdenominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetaryitems carried at fair value that are denominated in foreign currencies are retranslated at the ratesprevailing at the date when the fair value was determined. Non-monetary items that are measured interms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognised in profit or loss in the period in whichthey arise except for:

. exchange differences on foreign currency borrowings relating to assets under constructionfor future productive use, which are included in the cost of those assets when they areregarded as an adjustment to interest costs on those foreign currency borrowings;

. exchange differences on transactions entered into in order to hedge certain foreign currencyrisks; and

. exchange differences on monetary items receivable from or payable to a foreign operationfor which settlement is neither planned nor likely to occur (therefore forming part of the netinvestment in the foreign operation), which are recognised initially in other comprehensiveincome and reclassified from equity to profit or loss on repayment of the monetary items.

For the purposes of presenting consolidated financial statements, the assets and liabilities of theTarget Group’s foreign operations are translated into the presentation currency of the Target Company(i.e. Hong Kong dollars) using exchange rates prevailing at the end of each reporting period. Incomeand expense items are translated at the average exchange rates for the period, unless exchange ratesfluctuate significantly during that period, in which case the exchange rates at the dates of thetransactions are used. Exchange differences arising, if any, are recognised in other comprehensiveincome and accumulated in equity under the heading of foreign currency translation reserve (attributedto non-controlling interests as appropriate).

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifyingassets, which are assets that necessarily take a substantial period of time to get ready for their intendeduse or sale, are added to the cost of those assets, until such time as the assets are substantially ready fortheir intended use or sale.

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


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Taxation

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

Current tax

The tax currently payable is based on taxable profit for the Relevant Periods. Taxable profitdiffers from ‘‘profit before tax’’ as reported in the consolidated statements of profit or loss and othercomprehensive income because of items of income or expense that are taxable or deductible in otheryears and items that are never taxable or deductible. The Target Group’s liability for current tax iscalculated using tax rates that have been enacted or substantively enacted by the end of each of theRelevant Periods.

Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets andliabilities in the consolidated financial statements and the corresponding tax bases used in thecomputation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporarydifferences. Deferred tax assets are generally recognised for all deductible temporary differences to theextent that it is probable that taxable profits will be available against which those deductible temporarydifferences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporarydifference arises from goodwill or from the initial recognition (other than in a business combination) ofother assets and liabilities in a transaction that affects neither the taxable profit nor the accountingprofit.

Deferred tax liabilities are recognised for taxable temporary differences associated withinvestments in subsidiaries, except where the Target Group is able to control the reversal of thetemporary difference and it is probable that the temporary difference will not reverse in the foreseeablefuture. Deferred tax assets arising from deductible temporary differences associated with suchinvestments and interests are only recognised to the extent that it is probable that there will besufficient taxable profits against which to utilise the benefits of the temporary differences and they areexpected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each of the Relevant Periodsand reduced to the extent that it is no longer probable that sufficient taxable profits will be available toallow 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 theperiod in which the liability is settled or the asset realised, based on tax rates (and tax laws) that havebeen enacted or substantively enacted by the end of each of the Relevant Periods.

The measurement of deferred tax liabilities and assets reflects the tax consequences that wouldfollow from the manner in which the Target Group expects, at the end of each of the Relevant Periods,to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax for the Relevant Periods

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


– 139 –

Property, plant and equipment

Property, plant and equipment held for use in the production or supply of goods or services, orfor administrative purposes are stated in the consolidated statements of financial position at cost lesssubsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of assets less their residual values over theiruseful lives, using the straight line method. The estimated useful lives, residual values and depreciationmethod are reviewed at the end of each of the Relevant Periods, with the effect of any changes inestimate accounted for on a prospective basis.

An item of property, plant and equipment is derecognised upon disposal or when no futureeconomic benefits are expected to arise from the continued use of the asset. Any gain or loss arising onthe disposal or retirement of an item of property, plant and equipment is determined as the differencebetween the sales proceeds and the carrying amount of the asset is recognised in profit or loss.

Impairment of tangible and intangible assets other than goodwill

At the end of the Relevant Periods, the Target Group reviews the carrying amounts of its tangibleand intangible assets with finite useful lives to determine whether there is any indication that thoseassets have suffered an impairment loss. If any such indication exists, the recoverable amount of theasset is estimated in order to determine the extent of the impairment loss (if any). When it is notpossible to estimate the recoverable amount of an individual asset, the Target Group estimates therecoverable amount of the cash-generating unit to which the asset belongs. When a reasonable andconsistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for whicha reasonable and consistent allocation basis can be identified.

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

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than itscarrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to itsrecoverable amount. An impairment loss is recognised immediately in profit or loss.

When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increasedcarrying amount does not exceed the carrying amount that would have been determined had noimpairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of animpairment loss is recognised immediately in profit or loss.

Property under development

Property under development for sale in the ordinary course of business is included in currentassets and stated at the lower of cost and net realisable value. Costs relating to the development of theproperties include land cost, construction cost and other direct development expenditure.

Provisions

Provisions are recognised when the Target Group has a present obligation (legal or constructive)as a result of a past event, it is probable that the Target Group will be required to settle the obligation,and a reliable estimate can be made of the amount of the obligation.


– 140 –

The amount recognised as a provision is the best estimate of the consideration required to settlethe present obligation at the end of each of the Relevant Periods, taking into account the risks anduncertainties surrounding the obligation. When a provision is measured using the cash flows estimatedto settle the present obligation, its carrying amount is the present value of those cash flows (where theeffect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to berecovered from a third party, a receivable is recognised as an asset if it is virtually certain thatreimbursement will be received and the amount of the receivable can be measured reliably.

Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to thecontractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs thatare directly attributable to the acquisition or issue of financial assets and financial liabilities are addedto or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initialrecognition.

Financial assets

Financial assets are classified as ‘‘loans and receivables’’. All regular way purchases or sales offinancial assets are recognised and derecognised on a trade date basis. Regular way purchases or salesare purchases or sales of financial assets that require delivery of assets within the time frame establishedby regulation or convention in the marketplace.

Effective interest method

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

Income is recognised on an effective interest basis for debt instruments.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments thatare not quoted in an active market. Loans and receivables (including deposits and other receivables,loan receivable, amounts due from directors and pledged bank deposits and bank balances and cash) aremeasured at amortised cost using the effective interest method, less any impairment.

Interest income is recognised by applying the effective interest rate, except for short-termreceivables where the recognition of interest would be immaterial.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each of the RelevantPeriods. Financial assets are considered to be impaired when there is objective evidence that, as a resultof one or more events that occurred after the initial recognition of the financial asset, the estimatedfuture cash flows of the investment have been affected.


– 141 –

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

. significant financial difficulty of the issuer or counterparty; or

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

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

. the disappearance of an active market for that financial asset because of financialdifficulties.

For certain categories of financial assets, such as trade receivables, assets that are assessed not tobe impaired individually are, in addition, assessed for impairment on a collective basis. Objectiveevidence of impairment for a portfolio of receivables could include the Target Group’s past experienceof collecting payments, an increase in the number of delayed payments in the portfolio past the averagecredit period, as well as observable changes in national or local economic conditions that correlate withdefault on receivables.

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

The carrying amount of the financial asset is reduced by the impairment loss directly for allfinancial assets with the exception of trade receivables, where the carrying amount is reduced throughthe use of an allowance account. When a trade receivable is considered uncollectible, it is written offagainst the allowance account. Subsequent recoveries of amounts previously written off are creditedagainst the allowance account. Changes in the carrying amount of the allowance account are recognisedin profit or loss.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of theimpairment loss decreases and the decrease can be related objectively to an event occurring after theimpairment was recognised, the previously recognised impairment loss is reversed through profit or lossto the extent that the carrying amount of the investment at the date the impairment is reversed does notexceed what the amortised cost would have been had the impairment not been recognised.

Financial liabilities and equity instruments

Classification as debt or equity

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

Equity instruments

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

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

Financial liabilities

Financial liabilities (including trade payables, accrued liabilities and other payables, amount dueto a related company, amounts due to shareholders, amounts due to directors and borrowings) aresubsequently measured at amortised cost using the effective interest method.


– 142 –

Effective interest method

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

Interest expense is recognised on an effective interest basis.

Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments toreimburse the holder for a loss it incurs because a specified debtor fails to make payments when due inaccordance with the terms of a debt instrument.

Financial guarantee contracts issued by the Target Group are initially measured at their fair valuesand, if not designated as at FVTPL, are subsequently measured at the higher of:

. the amount of the obligation under the contract, as determined in accordance with HKAS37 Provisions, Contingent Liabilities and Contingent Assets; and

. the amount initially recognised less, where appropriate, cumulative amortisation recognisedin accordance with the revenue recognition policies.

Derecognition

The Target Group derecognises a financial asset only when the contractual rights to the cashflows from the asset expire, or when it transfers the financial asset and substantially all the risks andrewards of ownership of the asset to another entity. If the Target Group neither transfers nor retainssubstantially all the risks and rewards of ownership and continues to control the transferred asset, theTarget Group continues to recognise the asset to the extent of its continuing involvement and recognisesan associated liability. If the Target Group retains substantially all the risks and rewards of ownershipof a transferred financial asset, the Target Group continues to recognise the financial asset and alsorecognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carryingamount and the sum of the consideration received and receivable and the cumulative gain or loss thathad been recognised in other comprehensive income and accumulated in equity is recognised in profitor loss.

On derecognition of a financial asset other than in its entirety, the Target Group allocates theprevious carrying amount of the financial asset between the part it continues to recognise, and the partit no longer recognises on the basis of the relative fair values of those parts on the date of the transfer.The difference between the carrying amount allocated to the part that is no longer recognised and thesum of the consideration received for the part no longer recognised and any cumulative gain or lossallocated to it that had been recognised in other comprehensive income is recognised in profit or loss. Acumulative gain or loss that had been recognised in other comprehensive income is allocated betweenthe part that continues to be recognised and the part that is no longer recognised on the basis of therelative fair values of those parts.

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


– 143 –

Related parties

A party is considered to be related to the Target Group if:

(a) the party is a person or a close member of that person’s family and that person:

(i) has control or joint control over the Target Group;

(ii) has significant influence over the Target Group; or

(iii) is a member of the key management personnel of the Target Group or of a parent ofthe Target Group;

or

(b) the party is an entity where any of the following conditions applies:

(i) the entity and the Target Group are members of the same group;

(ii) one entity is an associate or joint venture of the other entity;

(iii) the entity and the Target Group are joint ventures of the same third party;

(iv) one entity is a joint venture of a third entity and the other entity is an associate of thethird entity;

(v) the entity is a post-employment benefit plan for the benefit of employees of either theTarget Group or an entity related to the Target Group;

(vi) the entity is controlled or jointly controlled by a person identified in (a); and

(vii) a person identified in (a)(i) has significant influence over the entity or is a member ofthe key management personnel of the entity (or of a parent of the entity).

Retire benefits schemes

Payments to defined contribution retirement benefit plans and state-managed retirement benefitscheme are recognised as an expense when employees have rendered service entitling them to thecontributions.

Cash and cash equivalents

For the purpose of the consolidated statements of cash flows, cash and cash equivalents comprisecash on hand and demand deposits, and short-term highly liquid investments that are readily convertibleinto known amounts of cash, are subject to an insignificant risk of changes in value, and have a shortmaturity of generally within three months when acquired, less bank overdrafts which are repayable ondemand and form an integral part of the Target Group’s cash management.


– 144 –

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATIONUNCERTAINTY

In the application of the Target Group’s accounting policies, which are described in Note 3,management is required to make judgements, estimates and assumptions about the carrying amounts of assetsand liabilities that are not readily apparent from other sources. The estimates and underlying assumptions arebased on historical experience and other factors that are considered to be relevant. Actual results may differfrom these estimates.

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

Critical judgements in applying accounting policies

The following are the key sources of estimation uncertainty at the end of the Relevant Periodsthat may have a significant risk of causing a material adjustment to the carrying amounts of assets andliabilities within the next financial period are discussed below.

Estimated useful lives of property, plant and equipment

Management determines the estimated useful lives and related depreciation and amortisationcharges for its property, plant and equipment. This estimate is based on the historical experience of theactual useful lives of property, plant and equipment of similar nature and functions. It could changesignificantly as a result of technical innovations and competitor actions in response to severe industrycycles. Management will increase the depreciation and amortisation charges where useful lives are lessthan previously estimated, or it will write-off or write-down technically obsolete or non-strategic assetsthat have been abandoned or sold.

5. REVENUE AND SEGMENT INFORMATION

The Target Group did not generate any turnover during the Relevant Periods. The directors of theTarget Company consider that the business for the Relevant Periods of the Target Group has only oneoperating segments, properties development in the PRC, whose operating results were reviewed regularly bythe chief operating decision maker (‘‘CODM’’), the directors of the Target Company, to make decisions aboutresources to be allocated to the segment and assess its performance. Accordingly, no segment revenue, results,assets and liabilities are presented by the CODM for the Relevant Periods.

6. OTHER INCOME AND NET GAINS


30 June2011 2012 2013 2013 2014

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000(unaudited)

Bank interest income 1,657 1,966 1,927 750 254Loan interest income — — — — 763Others 62 11 23 23 —

1,719 1,977 1,950 773 1,017


– 145 –

7. FINANCE COSTS


30 June2011 2012 2013 2013 2014


Interest onborrowings,wholly repayablewithin five years 10,462 9,554 88,122 4,250 79,215

Less: amountcapitalised (Note) (10,462) (9,509) (88,122) (4,250) (79,215)

— 45 — — —

Note: Finance costs had been capitalised to property development project regarding properties for salelocated in the PRC.

8. INCOME TAX EXPENSE

Pursuant to the rules and regulations of the BVI, the Target Company is not subject to any income taxin the BVI.

The Jintang is subject to the PRC Enterprise Income Tax (‘‘EIT’’) at the rate of 25% for the RelevantPeriods on their respective estimated assessable profits.

No provision for the PRC EIT has been made as the Jintang has no assessable profit during theRelevant Periods.

The tax charge for the Relevant Periods can be reconciled to loss before tax per the consolidatedstatements of profit or loss and other comprehensive income as follows:


30 June2011 2012 2013 2013 2014


Loss before tax (3,271) (4,125) (6,430) (2,190) (6,840)

Tax at domestic taxrates applicable toprofits of taxableentity (818) (1,031) (1,608) (548) (1,710)

Tax effect ofexpense notdeductible for taxpurpose 818 1,031 1,608 548 1,710

Income tax expensefor the RelevantPeriods — — — — —

No deferred tax assets and liabilities have been recognised in the financial statement as the TargetGroup did not have not material temporary difference arising between the tax bases of assets and liabilitiesand their carrying amounts during the Relevant Periods.


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9. LOSS FOR THE RELEVANT PERIODS

Loss for the Relevant Periods have been arrived at after charging/(crediting):


30 June2011 2012 2013 2013 2014


Depreciation ofproperty, plantand equipment 171 189 153 79 222

Auditors’remuneration 39 44 46 — —

Loss on disposal ofproperty, plantand equipment — — 14 — 10

Operating leaserentals in respectof rented premises 181 273 255 138 —

Directors’ and thechief executive’semoluments(Note 10) 72 74 138 37 159

Other employees’salaries andbenefits 1,982 1,733 2,316 758 2,162

Less: amountcapitalised(Note) (765) (398) (1,129) (201) (1,367)

1,289 1,409 1,325 594 954Contributions to

retirement benefitsschemes,excluding those ofdirectors 260 168 218 81 201

Total employeebenefits expense 1,549 1,577 1,543 675 1,155

Note: Certain cost included in employees’ salaries and benefits expenses had been capitalised toproperty development project regarding properties for sale located in the PRC.


– 147 –

10. DIRECTORS’, CHIEF EXECUTIVE’S AND EMPLOYEES’ EMOLUMENTS

Directors’ emoluments

The emoluments of the directors of the Target Company for the Relevant Periods are set outbelow:

FeeSalaries and

other benefits

Retirementscheme

contributions TotalHK$’000 HK$’000 HK$’000 HK$’000

Year ended 31 December 2011Mr. Balonan Jose (Note (a)) — 72 — 72Mr. Huang Jianhua (Note (b)) — — — —

— 72 — 72


— 74 — 74


Ms. Balonan Letty Kho (Note (c)) — — — —

Mr. Liang Shan (Note (d)) — — — —

Mr. Wu Hongguang (Note (e)) — 94 — 94Mr. Chen Jianjun (Note (f)) — — — —

— 138 — 138

(Unaudited)Six months period ended 30

June 2013Mr. Balonan Jose (Note (a)) — 37 — 37Mr. Huang Jianhua (Note (b)) — — — —

— 37 — 37

Six months period ended 30June 2014

Ms. Balonan Letty Kho (Note (c)) — — — —

Mr. Liang Shan (Note (d)) — — — —

Mr. Wu Hongguang (Note (e)) — 159 — 159Mr. Chen Jianjun (Note (f)) — — — —

— 159 — 159

Notes:

(a) Mr. Balonan Jose resigned as a director on 13 August 2013(b) Mr. Huang Jianhua resigned as a director on 9 December 2013.(c) Ms. Balonan Letty Kho was appointed as a director on 13 August 2013.(d) Mr. Liang Shan was appointed as a director on 13 August 2013.(e) Mr. Wu Hongguang was appointed as a director on 9 December 2013.(f) Mr. Chen Jianjun was appointed as a director on 9 December 2013.


– 148 –

During the Relevant Periods, no chief executive of the Target Group has been appointed and noemolument was paid to the chief executive of the Target Group.

During the Relevant Periods, no emoluments were paid by the Target Group to the directors ofthe Target Company as an inducement to join or upon joining the Target Group or as compensation forloss of office.

Neither the chief executive nor any of the directors waived or agreed to waive any emolumentsduring the Relevant Periods.

Employees’ emoluments

Of the five individuals with the highest emoluments in the Target Group, none of them wasdirector of the Target Company during the year ended 31 December 2011 and one of them was directorof the Target Company whose emoluments are included in the disclosures above during the year ended31 December 2012 and 2013 and six months period ended 30 June 2013 and 2014. The emoluments ofthe above non-directors, highest paid individuals were as follows:


30 June2011 2012 2013 2013 2014


Salaries and otherbenefits 787 715 423 295 398

Contributions toretirement benefitsschemes 3 5 — — —

Total emoluments 790 720 423 295 398

The emoluments of each of the above non-directors, highest paid individuals were belowHK$1,000,000.

During the Relevant Periods, no emoluments were paid by the Target Group to the above highestpaid individuals as (i) an inducement to join or upon joining the Target Group; or (ii) as compensationfor loss of office. No such emoluments were agreed to be waived by the relevant individuals.

11. DIVIDEND

No dividend has been declared by the Target Company during the Relevant Periods.

12. LOSS PER SHARE

Loss per share have not been presented as such information is not meaningful having regard to thepurpose of this report.


– 149 –

13. PROPERTY, PLANT AND EQUIPMENT

Computerand

equipmentFurniture

and fixturesMotor

vehicles TotalHK$’000 HK$’000 HK$’000 HK$’000

CostBalance at 1 January 2011 409 — 542 951Additions 26 — — 26Effect of foreign currency exchange

differences 15 — 20 35

Balance at 31 December 2011 and1 January 2012 450 — 562 1,012

Additions 159 — — 159Effect of foreign currency exchange


Balance at 31 December 2012 and1 January 2013 612 — 565 1,177

Additions 257 — 2,990 3,247Disposals (451) — — (451)Effect of foreign currency exchange


Balance at 31 December 2013 and1 January 2014 435 — 3,613 4,048

Additions 285 353 761 1,399Disposals — — (240) (240)Effect of foreign currency exchange

differences (4) (1) (29) (34)

Balance at 30 June 2014 716 352 4,105 5,173


– 150 –

Computerand

equipmentFurniture

and fixturesMotor

vehicles TotalHK$’000 HK$’000 HK$’000 HK$’000

Accumulated depreciation andimpairment

Balance at 1 January 2011 214 — 323 537Depreciation expense 79 — 92 171Effect of foreign currency exchange


Balance at 31 December 2011 and1 January 2012 302 — 428 730

Depreciation expense 145 — 44 189Effect of foreign currency exchange



Eliminated on disposals (428) — — (428)Depreciation expense 62 — 91 153Effect of foreign currency exchange



Eliminated on disposals — — (229) (229)Depreciation expense 32 20 170 222Effect of foreign currency exchange

differences (1) — (4) (5)

Balance at 30 June 2014 124 20 520 664

Carrying amounts

Balance at 31 December 2011 148 — 134 282

Balance at 31 December 2012 164 — 89 253

Balance at 31 December 2013 342 — 3,030 3,372

Balance at 30 June 2014 592 332 3,585 4,509

The above items of property, plant and equipment are depreciated on a straight-line basis at thefollowing rates per annum:

Computer and equipment 20%Furniture and fixtures 20%Motor vehicles 10–20%


– 151 –

14. PROPERTIES FOR SALE

At 31 December At 30 June2011 2012 2013 2014

HK$’000 HK$’000 HK$’000 HK$’000

Properties for sale under development 110,828 142,719 277,163 449,936

Properties for sale under development with a carrying amount of approximately Nil, Nil,HK$188,950,000 and HK$306,325,000 as at 31 December 2011, 2012 and 2013 and 30 June 2014respectively were pledged to secure the Target Group’s borrowings (Note 23).

The properties for sale are situated in the PRC under medium-term lease.

15. LOAN RECEIVABLE

At 31 December 2011, 2012 and 2013 and 30 June 2014, loans to third party with aggregate principalamounting to approximately Nil, Nil, Nil and HK$52,442,000 respectively, this amount was unsecured, bearinterest at 4.6% per annum and repayable within one year and thus classified as current assets.

The loan receivable was due for settlement at the date specified in the loan agreement. The followingtable illustrated the aging analysis, based on the loan drawdown date, of the loan receivable outstanding at theend of the Relevant Periods:


HK$’000 HK$’000 HK$’000 HK$’000

Current — — — 52,442

The balance was neither past due nor impaired as at 31 December 2011, 2012 and 2013 and 30 June2014.

16. DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES


HK$’000 HK$’000 HK$’000 HK$’000

Deposits paid 913 2,076 1,491 3,770Prepayments:

— construction contracts — — 711,477 707,335— pre-sale related taxes — 2,075 7,144 7,528— others 113 114 699 62,696

Other receivables (Note) 1,855 1,937 336,971 63,778

2,881 6,202 1,057,782 845,107

Note: Other receivables are unsecured, interest-free and recoverable within one year. All balances areneither past due nor impaired as at 31 December 2011, 2012 and 2013 and 30 June 2014. At thedate of this report, approximately HK$62,941,000 had been settled by third parties.


– 152 –

17. AMOUNTS DUE FROM/(TO) DIRECTORS

(a) Amounts due from directors


HK$’000 HK$’000 HK$’000 HK$’000

Mr. Balonan Jose — 772 — —

Mr. Wu Hongguang — — 29 6

— 772 29 6

The maximum amount outstanding in respect of amounts due from directors disclosed pursuant tothe Hong Kong Companies Ordinance is as follows:

Highest balance outstandingduring the year ended 31 December

Highestbalance

outstandingduring

the periodended

30 June2011 2012 2013 2014

HK$’000 HK$’000 HK$’000 HK$’000

Mr. Balonan Jose — 1,031 — —

Mr. Wu Hongguang — — 479 29

The amounts due were unsecured, interest-free and repayable on demand.

(b) Amounts due to directors

The amounts due were unsecured, interest-free and repayable on demand.

18. PLEDGED BANK DEPOSITS/BANK BALANCES AND CASH

Bank balances and cash comprise cash held by the Target Group and short-term bank deposits with anoriginal maturity of three months or less which carry interest at daily bank deposit rates.

Pledged bank deposits represent deposits pledged to banks to secure note payables banking facilitiesgranted to the Target Group. Deposits amounting to approximately HK$1,221,000, Nil, Nil and HK$6,294,000as at 31 December 2011, 2012 and 2013 and 30 June 2014 respectively, have a maturity period within oneyear and are therefore classified as current assets. They carry fixed rate interest at 3.10%, Nil, Nil and 3.05%per annum as at 31 December 2011, 2012 and 2013 and 30 June 2014 respectively. The pledged bank depositswill be released upon the settlement of relevant note payables. Pledged bank deposits are denominated inRMB.

The Target Group’s pledged bank deposits and bank balances and cash with an aggregate amount ofapproximately HK$79,135,000, HK$82,467,000, HK$34,427,000, and HK$50,547,000 as at 31 December2011, 2012 and 2013 and 30 June 2014 respectively, were denominated in RMB which is not a freelyconvertible currency in the international market. The government of the PRC has implemented foreignexchange control and the remittance of these funds out of the PRC is subject to exchange restrictions imposedby the government of the PRC.


– 153 –

At 31 December 2011, 2012 and 2013 and 30 June 2014, bank balances of approximatelyHK$1,725,000, HK$8,026,000, HK$8,687,000 and HK$27,375,000 are solely for certain designated propertydevelopment projects in the PRC.

19. TRADE PAYABLES

Trade payables comprise amounts outstanding for trade purposes and ongoing costs.


HK$’000 HK$’000 HK$’000 HK$’000

Trade payables 2,688 1,239 — 406Note payables (Note) 1,221 — — 6,294

3,909 1,239 — 6,700

Note: The note payables were secured by pledged bank deposits amounting to approximatelyHK$1,221,000, Nil, Nil and HK$6,294,000 as at 31 December 2011, 2012 and 2013 and 30June 2014 respectively.

The following is an aged analysis of trade payables at the end of each reporting period:


HK$’000 HK$’000 HK$’000 HK$’000

0–30 days 2,688 1,239 — 406

Trade payables are expected to be settled within one year or are payable on demand. The carryingamounts of trade payables were denominated in RMB.

20. DEPOSITS FROM SALE OF PROPERTIES

Deposits from sale of properties are instalment received on properties sold prior to the date of theexecution of the formal sale and purchase agreement and the issue of occupation permit/completion certificateby the relevant government authorities in the PRC.

21. ACCRUED LIABILITIES AND OTHER PAYABLES


HK$’000 HK$’000 HK$’000 HK$’000

Deposits received 1,379 1,425 3,080 8,933Construction cost payables — 126 131 2,709Other payables 11,804 155,783 1,294 1,739Accrued interests — — 56,005 80,772Accruals 210 209 1,064 2,198

13,393 157,543 61,574 96,351

22. AMOUNT(S) DUE TO A RELATED COMPANY/SHAREHOLDERS

The amount(s) due were unsecured, interest-free and repayable on demand.


– 154 –

23. BORROWINGS


HK$’000 HK$’000 HK$’000 HK$’000

Borrowings— unsecured 158,409 30,679 — —

— secured — — 1,141,408 1,132,931

158,409 30,679 1,141,408 1,132,931


HK$’000 HK$’000 HK$’000 HK$’000

Carrying amount repayable:On demand or within one year 158,409 30,679 — —

More than one year but notexceeding two years — — 1,141,408 1,132,931

158,409 30,679 1,141,408 1,132,931

The secured borrowings as at 31 December 2011, 2012 and 2013 and 30 June 2014 respectively weresecured by:


HK$’000 HK$’000 HK$’000 HK$’000

Properties for sale — — 188,950 306,325

The average effective interest rate on borrowings approximated 8%, 19%, 15% and 15% per annum at31 December 2011, 2012 and 2013 and 30 June 2014 respectively.

As at 31 December 2011, 2012 and 2013 and 30 June 2014, the borrowings of approximately Nil, Nil,HK$1,141,408,000 and HK$1,132,931,000 respectively were guaranteed by the legal representative, Mr.Tsang Wenyao, a director of the Jintang.

As at 31 December 2011, 2012 and 2013 and 30 June 2014, all of the borrowings were denominated inRMB.


– 155 –

24. SHARE CAPITAL


Number ofshares

Number ofshares

Number ofshares

Number ofshares

Authorised, issued and fully paidOrdinary shares of US$1 each 100,000 100,000 100,000 100,000

At 31 December At 30 June2011 2012 2013 2014US$ US$ US$ US$

Authorised, issued and fully paidOrdinary shares of US$1 each 100,000 100,000 100,000 100,000


HK$’000 HK$’000 HK$’000 HK$’000

Shown on the consolidatedstatements of financial position 780 780 780 780

25. RETIREMENT BENEFIT SCHEMES

The employees of the Target Group in the PRC are members of a state-managed retirement benefit planoperated by the government of the PRC. The Target Group is required to contribute a specified percentage ofpayroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Target Groupwith respect to the retirement benefit plan is to make the specified contributions. The total expensesrecognised in the consolidated statements of profit or loss and other comprehensive income amounted toapproximately HK$260,000, HK$168,000, HK$218,000 and HK$201,000 for the years ended 31 December2011, 2012 and 2013 and for the six months period ended 30 June 2014 respectively, and representedcontributions payable to these plans by the Target Group at rates specified in the rules of plans.

26. CAPITAL COMMITMENTS


HK$’000 HK$’000 HK$’000 HK$’000

Capital expenditure contracted butnot provided for (Note) 32,237 38,416 517,117 514,409

Note: The above commitments were construction related costs on development of the Target Group’sproperties for sale in the PRC.

27. RELATED PARTY TRANSACTIONS

The emoluments of the directors, who are also identified as members of key management of the TargetGroup, are set out in Note 10.

Other than the balances with related parties disclosed in respective notes, the Target Group has nosignificant transactions with related parties during the Relevant Periods.


– 156 –

28. OPERATING LEASES

The Target Group as lessee

At the end of the Relevant Periods, the Target Group had commitments for future minimum leasepayments under non-cancellable operating leases which fall due as follows:


HK$’000 HK$’000 HK$’000 HK$’000

Within one year 268 251 — —

In the second to fifth yearsinclusive 245 — — —

Minimum lease payments paidunder operating leases 513 251 — —

Operating leases related to the premises are negotiated for terms ranging from 1 year to 2 yearsfor the Relevant Periods. The Target Group does not have an option to purchase the leased asset at theexpiry of the lease period.

29. CAPITAL MANAGEMENT

Target Company manages its capital to ensure that the entities in the Target Group will be able tocontinue as a going concern while maximising the return to stakeholders through the optimisation of the debtand equity balance. The Target Group’s overall strategy remains unchanged during the Relevant Periods.

The capital structure of the Target Group consists of net debt which includes amount due to a relatedcompany, amounts due to shareholders, amounts due to directors and borrowings, net of cash and cashequivalents and equity attributable to owners of the Target Company (comprising share capital and reserves).

The Target Group is not subject to any externally imposed capital requirements.


– 157 –

Net debt-to-equity ratio

The directors of the Target Company review the capital structure regularly. As part of this review,the directors of the Target Company consider the cost of capital and the risks associated with each classof the capital. The Target Company seeks to balance its overall capital structure through the payment ofdividends, new share issues as well as the issue of new debt or the redemption of existing debt.

The net debt to equity ratio at the end of the Relevant Periods was as follows:


HK$’000 HK$’000 HK$’000 HK$’000

Debts (i) 181,434 53,821 1,248,726 1,239,713Cash and cash equivalents (ii) (79,162) (82,491) (34,427) (50,677)

Net debt 102,272 (28,670) 1,214,299 1,189,036Total equity (iii) (5,583) (9,613) (15,693) (22,568)

Net debt-to-equity ratio N/A N/A N/A N/A

(i) Debt is defined as amounts due to directors, amount due to a related company, amounts dueto shareholders and borrowings.

(ii) Cash and cash equivalents is defined as pledged bank deposits and bank balances and cash,as detailed in Note 18.

(iii) Equity includes all capital and reserves of the Target Company.

30. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments


HK$’000 HK$’000 HK$’000 HK$’000

Financial assets:Loan and receivables

Deposits and other receivables 2,768 4,013 338,462 67,548Loan receivable — — — 52,442Amounts due from directors — 772 29 6Pledged bank deposits 1,221 — — 6,294Bank balances and cash 77,941 82,491 34,427 44,383

81,930 87,276 372,918 170,673


– 158 –


HK$’000 HK$’000 HK$’000 HK$’000

Financial liabilities:At amortised costs

Trade payables 3,909 1,239 — 6,700Accrued liabilities and other

payables 13,393 157,543 61,574 96,351Amount due to a related

company — 418 16,783 16,580Amounts due to shareholders 22,713 22,724 90,535 90,202Amounts due to directors 312 — — —

Borrowings 158,409 30,679 1,141,408 1,132,931

198,736 212,603 1,310,300 1,342,764

(b) Financial risk management objectives and policies

The Target Group’s major financial instruments include deposits and other receivables, loanreceivable, amounts due from directors, pledged bank deposits, bank balances and cash, trade and otherpayables, amount due to a related company, amounts due to shareholders, amounts due to directors andborrowings. Details of these financial instruments are disclosed in respective notes. The risks associatedwith certain of these financial instruments include market risk (including foreign currency risk, interestrate risk and other price risk), credit risk and liquidity risk. The policies on how to mitigate these risksare set out below. The management of the Target Group manages and monitors these exposures toensure appropriate measures are implemented on a timely and effective manner.

There has been no significant change to the types of the Target Group’s exposure in respect offinancial instruments or the manner in which it manages and measures the risks during the RelevantPeriods.

Market risk

Foreign currency risk management

Transactional currency exposures arise from sales or purchases by operating units incurrencies other than the units’ functional currency. Substantially all the Target Group’s sales andpurchases are denominated in the functional currency of the operating units making the sales (i.e.RMB), and substantially all the costs are denominated in the units’ functional currency.Accordingly, the directors of the Target Company consider that the Target Group is not exposedto significant foreign currency risk.

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

Interest rate risk management

The Target Group is exposed to fair value interest rate risk in relation to fixed-rateborrowings. The Target Group does not have formal policies on interest rate risk. During theRelevant Periods, the Target Group’s borrowings were all denominated in RMB.

The Target Group’s exposures to interest rates on financial liabilities are detailed in theliquidity risk management section of this note.


– 159 –

Equity price risk management

As the Target Group has no significant investments in financial instruments at fair values asat 31 December 2011, 2012 and 2013 and 30 June 2014, the Target Group is not exposed tosignificant equity price risk.

Credit risk management

The Target Group’s maximum exposure to credit risk which will cause a financial loss tothe Target Group due to failure to discharge on obligation by the counterparties is arising fromthe carrying amount of the respective recognised financial assets as stated in the consolidatedstatements of financial position.

Credit risk refers to the risk that debtors will default on their obligations to repay theamounts due to the Target Group, resulting in a loss to the Target Group. The Target Group hasadopted procedures in extending credit terms to loan borrowers and in monitoring its credit risk.The credit policy on extending credit terms to loan borrowers includes assessing and evaluatingloan borrowers’ creditworthiness and financial standing. Management also closely monitors alloutstanding debts and reviews the collectability of other receivables periodically. At the end ofthe Relevant Periods, the Target Group has a concentration of credit risk as 100% (31 December2011: Nil, 31 December 2012: Nil and 31 December 2013: Nil) at 30 June 2014 of the total loanreceivable was due from the Target Group’s largest borrower.

The credit risk on liquid funds is limited because the counterparties are banks with goodreputation or high credit ratings assigned by international credit-rating agencies.

Liquidity risk management

In the management of the liquidity risk, the Target Group monitors and maintains a level ofcash and cash equivalents deemed adequate by the management to finance the Target Group’soperations and mitigate the effects of fluctuations in cash flows.

The following table details the Target Group’s remaining contractual maturity for itsfinancial liabilities. The table has been drawn up based on the undiscounted cash flows offinancial liabilities based on the earliest date on which the Target Group can be required to pay.The table includes both contractual interest and principal cash flows.

Interest rate

On demand orwithin1 year

More than1 year but less

than 5 yearsMore than

5 years

Totalundiscounted

cash flowsCarryingamount

% HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 31 December 2011Non-derivative financial

liabilitiesTrade payables — 3,909 — — 3,909 3,909Accrued liabilities and

other payables — 13,393 — — 13,393 13,393Amounts due to

shareholders — 22,713 — — 22,713 22,713Amounts due to directors — 312 — — 312 312Borrowings 8 165,276 — — 165,276 158,409

205,603 — — 205,603 198,736


– 160 –

Interest rate

On demand orwithin1 year

More than1 year but less

than 5 yearsMore than

5 years

Totalundiscounted

cash flowsCarryingamount

% HK$’000 HK$’000 HK$’000 HK$’000 HK$’000



other payables — 157,543 — — 157,543 157,543Amount due to a related

company — 418 — — 418 418Amounts due to

shareholders — 22,724 — — 22,724 22,724Borrowings 19 35,104 — — 35,104 30,679

217,028 — — 217,028 212,603


liabilitiesAccrued liabilities and


company — 16,783 — — 16,783 16,783Amounts due to

shareholders — 90,535 — — 90,535 90,535Borrowings 15 159,956 1,245,358 — 1,405,314 1,141,408

328,848 1,245,358 — 1,574,206 1,310,300

At 30 June 2014Non-derivative financial



company — 16,580 — — 16,580 16,580Amounts due to

shareholders — 90,202 — — 90,202 90,202Borrowings 15 96,343 1,157,112 — 1,253,455 1,132,931

306,176 1,157,112 — 1,463,288 1,342,764

(c) Fair value measurements recognised in the consolidated statements of financial position

At the end of the Relevant Periods, the Target Group did not have any assets and liabilities thatwere measured at the above fair value measurements hierarchy.

During the Relevant Periods, there were no transfers of fair value measurements between Level 1and Level 2 and no transfers into or out of Level 3.

The directors of the Target Company consider that the carrying amounts of financial assets andfinancial liabilities recorded at amortised cost or cost in the Financial Information approximate their fairvalues.

III. EVENTS AFTER THE END OF THE RELEVANT PERIODS

Save as disclosed elsewhere in the Financial Information, no other significant event tookplace subsequent to 30 June 2014.


– 161 –

IV. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Target Group have been prepared in respect of anyperiod subsequent to 30 June 2014.

Yours faithfully,HLB Hodgson Impey Cheng Limited

Certified Public AccountantsJonathan T.S. Lai

Practising Certificate Number: P04165Hong Kong


– 162 –

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGEDGROUP

1. Introduction

The unaudited pro forma financial information of the Enlarged Group, comprisingthe unaudited pro forma consolidated statement of financial position, the unaudited proforma consolidated statement of profit or loss and other comprehensive income and theunaudited pro forma consolidated statement of cash flows of the Enlarged Group (the‘‘Pro Forma Financial Information’’), has been prepared by the Directors to illustrate theeffects of the Acquisition, the Share Consolidation and the Rights Issue.

The Pro Forma Financial Information should be read in conjunction with thefinancial information of the Target Group as set out in Appendix III and other financialinformation included elsewhere in this Circular. The Pro Forma Financial Informationdoes not take account of any trading or other transactions subsequent to the date of thefinancial statements included in the Pro Forma Financial Information.

2. Unaudited pro forma consolidated statement of financial position

The following is the unaudited pro forma consolidated statement of financial positionof the Enlarged Group as if the Acquisition, the Share Consolidation and the Rights Issuehad been completed at the date reported on. The unaudited pro forma consolidatedstatement of financial position has been prepared based on the unaudited condensedconsolidated statement of financial position of the Group as at 30 June 2014 as extractedfrom the published interim report of the Company for the six months period ended 30June 2014, after incorporating the pro forma adjustments as described in theaccompanying notes to illustrate the effects of the Acquisition, the Share Consolidationand the Rights Issue.

The unaudited pro forma consolidated statement of financial position has beenprepared for illustrative purposes only, based on the judgments and assumptions of theDirectors, and, because of its hypothetical nature, it may not give a true picture of thefinancial position of the Group as at 30 June 2014 or any future dates.

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATION OFTHE ENLARGED GROUP

– 163 –

The Groupas at 30

June 2014Pro forma

adjustments Notes

Pro formaEnlarged

GroupHK$’000 HK$’000 HK$’000

Non-current assetsProperty, plant and equipment 18,527 18,527Available-for-sale financialassets 235,414 235,414

Interests in an associate — 370,000 2.2 370,000Other assets 2,230 2,230Mining right 200,000 200,000

456,171 826,171

Current assetsInventories 924 924Trade and other receivables 27,114 27,114Earnest money 300,000 300,000Financial assets at fair valuethrough profit or loss 508,636 508,636

Tax recoverable 217 217Bank balances held undersegregated trust accounts 15,461 15,461

Bank balances and cash 35,063 404,263(370,000)

2.12.2

69,326

887,415 921,678

Current liabilitiesTrade and other payables 43,706 43,706Tax payable 260 260Provision 8,000 8,000

51,966 51,966

Net current assets 835,449 869,712

Total assets less currentliabilities 1,291,620 1,695,883


– 164 –

The Groupas at 30

June 2014Pro forma

adjustments Notes

Pro formaEnlarged

GroupHK$’000 HK$’000 HK$’000

Non-current liabilitiesDeferred tax liabilities 50,000 50,000

Net assets 1,241,620 1,645,883

Capital and reservesShare Capital 2,269,674 404,263 2.1 2,673,937Reserves (1,031,434) (1,031,434)

Equity attributable to ownersof the Company 1,238,240 1,642,503

Non-controlling interests 3,380 3,380

Total equity 1,241,620 1,645,883

Notes to unaudited pro forma consolidated statement of financial position:

2.1 The adjustment reflects the estimated net proceeds of the Rights Issue of approximatelyHK$404,263,000, (assuming no issue of new shares, no further repurchases of shares or no grantof share option under the Scheme Mandate Limit) as if the Share Consolidation and Rights Issuehad been completed at the date reported on.

2.2 Pursuant to the Sale and Purchase Agreement, the Group will utilise the net proceeds of theRights Issue of HK$370,000,000 for the Acquisition. Upon the Completion of the Acquisition, theGroup will recognise 40% equity interest in the Target Group as an interest in an associate inaccordance with Hong Kong Accounting Standard 28 ‘‘Investments in Associates and JointVentures’’ (‘‘HKAS 28’’) issued by the Hong Kong Institute of Certified Public Accountants. Onacquisition of the investment, the difference between the cost of the investment and the Group’sshare of the net fair value of the associate’s identifiable assets and liabilities is accounted for asgoodwill and is included in the carrying amount of the investment.

For the purpose of preparation of the unaudited pro forma consolidated statement of financialposition of the Enlarged Group, the Directors consider that no impairment is required in respectof the interest in an associate taking into account the business potential of the Target Group.After the completion of the Acquisition, the Group will determine at each reporting date whetherthere is any objective evidence that the interests in an associate is impaired in accordance withHKAS 36 ‘‘Impairment of Assets’’ as a single asset. If this is the case, the Group calculates theamount of impairment as the difference between the recoverable amount of the associate and itscarrying value and recognises the amount adjacent to ‘‘share of profit/(loss) of associate’’ in theconsolidated statement of profit or loss and other comprehensive income.

The adjustment represents the recognition of the interest in an associate of HK$370,000,000representing the adjusted net assets of the Target Group to be acquired by the Group and upon theCompletion, as if the Completion had taken place at the date reported on.


– 165 –

The fair value of adjusted net assets of the Target Group to be acquired is calculated as follows:

HK$’000

Net liabilities of the Target Groupattributable to owners of Target Company

(as shown in the consolidated statement offinancial position as at 30 June 2014 of the TargetGroup as set out in Appendix III to the Circular) (22,568)

Proportion of the Group’s ownership interests in Target Group of 40% (9,027)Goodwill 16,226Effect of fair value adjustments at the Acquisition (Note 2.2 (a)) 326,720Sale Loan (Note 2.2 (b)) 36,081

Carrying amount of the Group’s interest in the Target Group 370,000

Since the actual net carrying amounts of the identifiable assets and liabilities of the Target Groupto be acquired would be different from their estimated adjusted net assets of the Target Groupused in the preparation of the Unaudited Pro Forma Financial Information, the actual financialposition of the Enlarged Group upon the Completion might be materially different from financialposition of the Enlarged Group as shown in the unaudited pro forma consolidated statement offinancial position of the Enlarged Group.

(a) The adjustments represent the fair value adjustment on properties for sale underdevelopment of the Target Group of approximately HK$1,089,064,000, and the recognitionof deferred tax liabilities on such fair value adjustment at the PRC Enterprise Income Taxrate of 25%. The estimated fair value of the properties for sale under development of theTarget Group as at 30 June 2014 is determined by Directors with reference to a professionalvaluation conducted by Vigers Appraisal And Consulting Limited on 30 September 2014.

Deferred tax liabilities on fair value adjustment is as follows:

Properties for sale under development HK$’000

Fair value adjustment 1,089,064

Deferred tax liabilities at tax rate of 25% 272,266

Effect of 40% fair value adjustment and recognition of deferred tax liabilities attributable tothe Group upon the Completion of the Acquisition:

Properties for sale under development HK$’000

Fair value adjustment 435,626Deferred tax liabilities at tax rate of 25% (108,906)

326,720

(b) The Sale Loan represents 40% of the entire amount of the shareholder’s loan (as shown inthe consolidated statement of financial position as at 30 June 2014 of the Target Group asset out in Appendix III to the Circular) owing by the Target Group to the Vendor ofapproximately HK$90,202,000 as at 30 June 2014.


– 166 –

3. Unaudited pro forma consolidated statement of profit or loss and othercomprehensive income

The following is the unaudited pro forma consolidated statement of profit or loss andother comprehensive income of the Enlarged Group as if the Acquisition, the ShareConsolidation and the Rights Issue had been completed at the commencement of theperiod reported on. The unaudited pro forma consolidated statement of profit or loss andother comprehensive income has been prepared based on the audited consolidatedstatement of profit or loss and other comprehensive income of the Group for the yearended 31 December 2013 as extracted from the published annual report of the Companyfor the year ended 31 December 2013, after incorporating the pro forma adjustment asdescribed in accompany notes, to illustrate the effects of the Acquisition, the ShareConsolidation and the Rights Issue.

The unaudited pro forma consolidated statement of profit or loss and othercomprehensive income has been prepared for illustrative purposes only, based on thejudgements and assumptions of the Directors, and, because of its hypothetical nature, itmay not give a true picture of the results of the Group for the year ended 31 December2013 or any future dates.

The GroupFor the year

ended 31December

2013Pro formaadjustment Note

Pro formaEnlarged

GroupHK$’000 HK$’000 HK$’000

Turnover 4,400 4,400Cost of sales (1,484) (1,484)

Gross profit 2,916 2,916Net gain on financial assets atfair value through profit orloss 49,412 49,412

Impairment loss reversed inrespect of mining right 17,000 17,000

Gain on disposal of available-for-sale financial assets 3,555 3,555

Other income 5,099 5,099Administrative expenses (72,343) (72,343)Finance costs (1,115) (1,115)Share of loss of an associate — (2,572) 3.1 (2,572)

Profit before taxation 4,524 1,952Income tax expenses (4,706) (4,706)

Loss for the year (182) (2,754)

Attributable to:Owners of the Company (178) (2,750)Non-controlling interests (4) (4)

(182) (2,754)


– 167 –


ended 31December

2013Pro formaadjustment Note

Pro formaEnlarged

GroupHK$’000 HK$’000 HK$’000

Loss for the year (182) (2,754)

Other comprehensive incomeItems that may be subsequentlyreclassified to profit or loss:

Exchange differences arising ontranslation of overseasoperations 6,676 140 3.1 6,816

Fair value change in available-for-sale financial assets (5,043) (5,043)

Other comprehensive income forthe year (net of tax) 1,633 1,773

Total comprehensive income/(expenses) for the year 1,451 (981)

Attributable to:Owners of the Company 1,455 (977)Non-controlling interests (4) (4)

1,451 (981)

Note to unaudited pro forma consolidated statement of profit or loss and other comprehensive income:

3.1 The adjustment represents the Group’s share of 40% of the results of the Target Group for theyear ended 31 December 2013 under the equity method in accordance with HKAS 28, as if theCompletion had been taken place at the commencement of the period reported on. Thisadjustment is expected to have a continuing effect on the Enlarged Group.


– 168 –

4. Unaudited pro forma consolidated statement of cash flows

The following is the unaudited pro forma consolidated statement of cash flows of theEnlarged Group as if the Acquisition, the Share Consolidation and the Rights Issue hadbeen completed at the commencement of the period reported on. The unaudited pro formaconsolidated statement of cash flows has been prepared based on the consolidatedstatement of cash flows of the Group for the year ended 31 December 2013 as extractedfrom the published annual report of the Company for the year ended 31 December 2013,after incorporating the pro forma adjustments as described in the accompanying notes toillustrate the effects of the Acquisition, the Share Consolidation and the Rights Issue.

The unaudited pro forma consolidated statement of cash flows has been prepared forillustrative purposes only, based on the judgements and assumptions of the Directors, and,because of its hypothetical nature, it may not give a true picture of the cash flows of theGroup for the year ended 31 December 2013 or any future dates.


ended31 December

2013Pro forma

adjustments Notes

Pro formaEnlarged

GroupHK$’000 HK$’000 HK$’000

Cash flows from operatingactivities

Loss for the year (182) (2,572) 3.1 (2,754)Adjustments for:Income tax expenses 4,706 4,706Finance costs 1,115 1,115Share of loss of an associate — 2,572 3.1 2,572Bank interest income (9) (9)Depreciation of property,plant and equipment 3,603 3,603

Impairment loss reversed inrespect of mining right (17,000) (17,000)

Unrealised gain on financialassets at fair value throughprofit or loss (62,736) (62,736)

Gain on disposal of property,plant and equipment (80) (80)

Gain on disposal ofavailable-for-sale financialassets (3,555) (3,555)


– 169 –


ended31 December

2013Pro forma

adjustments Notes

Pro formaEnlarged

GroupHK$’000 HK$’000 HK$’000

Operating cash flows beforemovements in workingcapital (74,138) (74,138)

Increase in inventories (55) (55)Decrease in trade and otherreceivables 431 431

Decrease in bank balancesheld under segregated trustaccounts 16,740 16,740

Increase in trade and otherpayables 22,615 22,615

Cash used in operations (34,407) (34,407)Interest paid (1,115) (1,115)Hong Kong and PRC taxrefunded 93 93

Hong Kong and PRC taxpaid (230) (230)

Net cash used in operatingactivities (35,659) (35,659)

Cash flows from investingactivities

Interest received, other thanfrom investments 9 9

Acquisition of property, plantand equipment (12,930) (12,930)

Proceeds from disposal ofproperty, plant andequipment 80 80

Decrease in financial assetsat fair value through profitor loss 23,780 23,780

Proceeds from disposal ofavailable-for-sale financialassets 5,115 5,115

Payment of consideration forthe Acquisition — (370,000) 4.1 (370,000)

Earnest money paid (300,000) (300,000)


– 170 –


ended31 December

2013Pro forma

adjustments Notes

Pro formaEnlarged

GroupHK$’000 HK$’000 HK$’000

Net cash used in investingactivities (283,946) (653,946)

Cash flows from financingactivities

Estimated net proceeds fromthe Rights Issue — 404,263 4.2 404,263

Net cash generated fromfinancing activities — 404,263

Net decrease in cash andcash equivalents (319,605) (285,342)

Effect of foreign exchangerate changes 10,575 10,575

Cash and cash equivalentsbrought forward 360,528 360,528

Cash and cash equivalentscarried forward,represented by bankbalances and cash 51,498 85,761

Notes to unaudited pro forma consolidated statement of cash flows:

4.1 The adjustment reflects the payment of the consideration for the Acquisition of HK$370,000,000,as if the Acquisition had been completed at the commencement of the period reported on. Thisadjustment is not expected to have a continuing effect on the Enlarged Group.

4.2 The adjustment reflects the estimated net proceeds of the Rights Issue of approximatelyHK$404,263,000, as if the Share Consolidation and the Rights Issue had been completed at thecommencement of the period reported on. This adjustment is not expected to have a continuingeffect on the Enlarged Group.


– 171 –

B. INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THECOMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION OFTHE ENLARGED GROUP

31/F, Gloucester TowerThe Landmark11 Pedder Street CentralHong Kong

24 December 2014

TO THE DIRECTORS OF CHINA YUNNAN TIN MINERALS GROUP COMPANYLIMITED

We have completed our assurance engagement to report on the compilation of unauditedpro forma financial information of China Yunnan Tin Minerals Group Company Limited (the‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) andChina Sky Holdings Limited (the ‘‘Target Company’’) and its subsidiary (the ‘‘Target Group’’and together with the Group collectively referred to as the ‘‘Enlarged Group’’) (the ‘‘UnauditedPro Forma Financial Information’’) by the directors of the Company (the ‘‘Directors’’) forillustrative purpose only. The Unaudited Pro Forma Financial Information consists of theunaudited pro forma consolidated statement of financial position as at 30 June 2014, theunaudited pro forma consolidated statement of profit or loss and other comprehensive incomefor the year ended 31 December 2013, the unaudited pro forma consolidated statement of cashflows for the year ended 31 December 2013 and related notes as set out on pages 163 to 171 inAppendix IV of the circular dated 24 December 2014 (the ‘‘Circular’’). The applicable criteriaon the basis of which the Directors have compiled the Unaudited Pro Forma FinancialInformation are described on pages 163 to 171 of the Circular.

The Unaudited Pro Forma Financial Information has been compiled by the Directors toillustrate the impact of (i) the very substantial acquisition and connected transaction in relationto the proposed acquisition of 40% of issued share capital of the Target Company; (ii) theproposed share consolidation of every five issued shares each into one consolidated share(‘‘Consolidated Share’’) (the ‘‘Share Consolidation’’); and (iii) the proposed issue by way ofrights of 700,958,385 rights shares (assuming no issue of new shares, no further repurchase ofshares or no grant of share option under the Scheme Mandate Limit on or before the RecordDate) at HK$0.6 per rights share on the basis of nine rights shares for every one ConsolidatedShare of the Company (the ‘‘Rights Issue’’) on the Enlarged Group’s financial position as at 30June 2014 and the Enlarged Group’s financial performance and cash flows for the year ended31 December 2013 as if the Acquisition, the Share Consolidation and the Rights Issue hadtaken place at 30 June 2014 and 1 January 2013, respectively. As part of this process,information about the Group’s financial position as at 30 June 2014 has been extracted by theDirectors from the Company’s published interim report dated 27 August 2014. The Group’sfinancial performance and cash flows has been extracted by the Directors from the Group’sconsolidated financial statements for the year ended 31 December 2013 as set out in the annualreport of the Company dated 27 March 2014.


– 172 –

DIRECTORS’ RESPONSIBILITY FOR THE UNAUDITED PRO FORMA FINANCIALINFORMATION

The Directors are responsible for compiling the Unaudited Pro Forma FinancialInformation in accordance with paragraph 4.29 of the Rules Governing the Listing ofSecurities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and withreference to Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information forInclusion in Investment Circulars’’ (‘‘AG 7’’) issued by the Hong Kong Institute of CertifiedPublic Accountants (the ‘‘HKICPA’’).

REPORTING ACCOUNTANTS’ RESPONSIBILITY

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of theListing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion toyou. We do not accept any responsibility for any reports previously given by us on anyfinancial information used in the compilation of the Unaudited Pro Forma FinancialInformation beyond that owed to those to whom those reports were addressed by us at thedates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on AssuranceEngagement 3420 ‘‘Assurance Engagements to Report on the Compilation of Pro FormaFinancial Information Included in a Prospectus’’ issued by the HKICPA. This standard requiresthat the reporting accountants comply with ethical requirements and plan and performprocedures to obtain reasonable assurance about whether the Directors have compiled theUnaudited Pro Forma Financial Information, in accordance with paragraph 4.29 of the ListingRules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing anyreports or opinions on any historical financial information used in compiling the Unaudited ProForma Financial Information, nor have we, in the course of this engagement, performed anaudit or review of the financial information used in compiling the Unaudited Pro FormaFinancial Information.

The purpose of Unaudited Pro Forma Financial Information included in the Circular issolely to illustrate the impact of a significant event or transaction on unadjusted financialinformation of the Group as if the event had occurred or the transaction had been undertaken atan earlier date selected for purposes of the illustration. Accordingly, we do not provide anyassurance that the actual outcome of the event or transaction would have been as presented.


– 173 –

A reasonable assurance engagement to report on whether the Unaudited Pro FormaFinancial Information has been properly compiled on the basis of the applicable criteriainvolves performing procedures to assess whether the applicable criteria used by the Directorsin the compilation of the Unaudited Pro Forma Financial Information provide a reasonablebasis for presenting the significant effects directly attributable to the event or transaction, andto obtain sufficient appropriate evidence about whether:

— the related pro forma adjustments give appropriate effect to those criteria; and

— the Unaudited Pro Forma Financial Information reflects the proper application ofthose adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgement, having regard tothe reporting accountants’ understanding of the nature of the Group, the event or transaction inrespect of which the Unaudited Pro Forma Financial Information has been compiled, and otherrelevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the Unaudited ProForma Financial Information.

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

OPINION

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled on thebasis stated;

(b) such basis is consistent with the accounting policies of the Group; and

(c) the adjustments are appropriate for the purposes of the Unaudited Pro FormaFinancial Information as disclosed pursuant to paragraph 4.29(1) of the ListingRules.

Yours faithfully,HLB Hodgson Impey Cheng Limited

Certified Public AccountantsJonathan T.S. Lai

Practising Certificate Number: P04165Hong Kong


– 174 –

The following is the text of a letter and a valuation certificate, prepared for the purposeof incorporation in this Circular received from Vigers Appraisal & Consulting Limited, anindependent valuer, in connection with its valuation as at 30 September 2014 of theDevelopment Project.

Vigers Appraisal & Consulting LimitedInternational Assets Appraisal Consultants

10th Floor, The Grande Building398 Kwun Tong RoadKowloonHong Kong

24 December 2014

The DirectorsChina Yunnan Tin Minerals Group Company LimitedUnit 2502–5, 25th FloorHarbour CentreNo. 25 Harbour RoadWanchaiHong Kong

Dear Sirs,

In accordance with the instructions of China Yunnan Tin Minerals Group CompanyLimited (the ‘‘Company’’) for us to value the property interest held by Kim Dynasty Realty &Development Co. Ltd. (重慶金唐房地產開發有限公司) (‘‘Jintang’’) in the People’s Republic ofChina (‘‘the PRC’’), we confirm that we have carried out inspections, made relevant enquiriesand obtained such further information as we consider necessary for the purpose of providingyou with our opinion of the market value of such property interest as at 30 September 2014(‘‘date of valuation’’) for the purpose of incorporation in the Circular.

Our valuation is our opinion of the market value of the property interest which we woulddefine market value as intended to mean ‘‘the estimated amount for which an asset or liabilityshould exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had each acted knowledgeably,prudently and without compulsion’’.

In valuing the property interests, which are held by Jintang under development in thePRC, we have valued on the basis that the property will be developed and completed inaccordance with the latest development proposal as provided to us by the Company. We haveassumed that all consents, approvals and licences from relevant government authorities for thedevelopment proposal have been obtained or will be obtained without onerous conditions orundue time delays. We have also assumed that the design and construction of the developmentare in compliance with the local planning regulations and have been approved by the relevantauthorities. In arriving at our opinion of value, we have adopted the direct comparison

APPENDIX V VALUATION REPORT

– 175 –

approach by making reference to comparable sales evidences as available in the relevantmarket and have also taken into account the expended construction costs and the costs that willbe expended to complete the development to reflect the quality of the completed development.

Our valuation has been made on the assumption that the owner sells the property intereston the open market in its existing state without the benefit of a deferred terms contract,leaseback, joint venture, management agreement or any similar arrangement which would serveto increase the value of the property interest. In addition, no forced sale situation in anymanner is assumed in our valuation.

We have not caused title searches to be made for the property interest at the relevantgovernment bureau in the PRC. We have been provided with certain extracts of title documentsrelating to the property interest. However, we have not inspected the original documents toverify the ownership, encumbrances or the existence of any subsequent amendments which maynot appear on the copies handed to us. In undertaking our valuation for the property interest,we have relied on the legal opinion (the ‘‘PRC legal opinion’’) provided by the Company’sPRC legal adviser, Dacheng Law Offices.

We have relied to a considerable extent on information provided by the Company andhave accepted advice given to us by the Company on such matters as planning approvals orstatutory notices, easements, tenure, occupation, lettings, site and floor areas and in theidentification of the property and other relevant matter. We have also been advised by theCompany that no material facts had been concealed or omitted in the information provided tous. All documents have been used for reference only.

All dimensions, measurements and areas included in the valuation certificate are based oninformation contained in the documents provided to us by the Company and areapproximations only. No on-site measurement has been taken.

We have inspected the exterior and, where possible, the interior of the property. However,we have not carried out a structural survey nor have we inspected woodwork or other parts ofthe structures which are covered, unexposed or inaccessible and we are therefore unable toreport that any such parts of the property are free from defect. No tests were carried out on anyof the services.

No allowance has been made in our valuation for any charges, mortgages or amountsowing on the property interest nor for any expenses or taxation which may be incurred ineffecting a sale. Unless otherwise stated, it is assumed that the property interest is free fromencumbrances, restrictions and outgoings of an onerous nature which could affect its value.

Our valuation is prepared in accordance with the HKIS Valuation Standards (2012Edition) published by The Hong Kong Institute of Surveyors (HKIS) and the requirements setout in Chapter 5 and Practice Note 12 to the Rules Governing the Listing of Securities issuedby The Stock Exchange of Hong Kong Limited and Rule 11 of the Codes on Takeovers andMergers and Share Repurchases issued by the Securities and Futures Commission.


– 176 –

Unless otherwise stated, all money amounts stated are in Renminbi (RMB). The exchangerate used in valuing the property interest in the PRC as at 30 September 2014 wasHK$1=RMB0.79. There has been no significant fluctuation in the exchange rate for Renminbiagainst Hong Kong Dollars (HK$) between that date and the date of this letter.

We enclose herewith a valuation certificate.


Vigers Appraisal & Consulting LimitedRaymond Ho Kai Kwong

Registered Professional Surveyor (GP)MRICS MHKIS MSc(e-com)China Real Estate Appraiser

Managing Director

Note: Mr. Raymond Ho Kai Kwong, Chartered Surveyor, MRICS MHKIS MSc(e-com), has over twenty sevenyears’ experiences in undertaking valuations of properties in Hong Kong and has over twenty years’experiences in valuations of properties in the PRC.


– 177 –

VALUATION CERTIFICATE

Property interest held by Jintang under development in the PRC

Property Description and TenureParticulars ofoccupancy

Market Value inexisting state as at30 September 2014

A development projectknown as ‘‘Jintang NewCity Plaza (金唐新城市

廣場)’’ located atLongta Street, YubeiDistrict, ChongqingCity, the PRC

The property comprises a parcel ofland (Lot No.: YB0040210070003)having a site area of approximately30,817 sq.m.

The property has been planned to bedeveloped into a compositeresidential, office and commercialdevelopment in 2 phases.

According to the Company, theplanned gross floor area of theproperty is as follows:

Use

ApproximateGross Floor

Area(sq.m.)

Residential (Phase I) 17,759.60Residential (Phase II) 36,123.60Commercial (shopping

mall) (Phase I) 3,821.60Commercial (shopping

mall) (Phase II) 32,191.25Office (Phase II) 40,865.48Carpark and others

(Phase II) 56,512.26

Total: 187,273.79

According to the Company, Phase Iof the property is scheduled to becompleted by the end of 2014 andPhase II of the property is scheduledto be completed in 2016.

The property is held with the landuse rights for terms expiring on25 July 2064 and 25 July 2034 forresidential and commercial usesrespectively.

Phase I of the propertywas under internaldecoration and PhaseII of the property wasunder construction offoundation as at thedate of valuation.

RMB1,216,000,000

(equivalent toapproximately

HK$1,539,000,000)

Notes:

1. According to a Chongqing Real Estate Title Certificate (重慶市房地產權證) (Document No.: 201D Fang DeZheng 2013 Zi No. 00566) issued by Chongqing Administration of Land, Resources and Housing on 27August 2013, the land use rights of the property having a site area of approximately 30,817 sq.m. have beengranted to Jintang for terms expiring on 25 July 2064 and 25 July 2034 for residential and commercial usesrespectively.


– 178 –

2. According to a Construction Landuse Planning Permit (建設用地規劃許可證) (Document No.: De Zi No. Jian500136201000002) issued by Chongqing Urban Planning Bureau on 5 January 2010, the property with a sitearea of approximately 30,817 sq.m. is in compliance with the urban construction requirements.

3. According to a Construction Planning Permit (建設工程規劃許可證) (Document No.: Jian Zi No.500136201200029) issued by Chongqing Urban Planning Bureau on 5 April 2012, the construction works ofPhase I of the property with a total gross floor area of 21,581.20 sq.m. are in compliance with the urbanconstruction requirements and are approved.

4. According to 2 Construction Planning Permits (建設工程規劃許可證) (Document Nos.: Jian Zi Nos.500112201400524 and 500112201400610) issued by Chongqing Urban Planning Bureau on 14 April 2014 and12 December 2014 respectively, the construction works of Phase II of the property with a total gross floorarea of 165,692.59 sq.m. are in compliance with the urban construction requirements and are approved.

5. According to 2 Construction Work Permits (建築工程施工許可證) (Document Nos.: 500000201104120101and 500000201405120101) issued by Chongqing Municipal Commission of Urban-Rural Development on 12April 2011 and 12 May 2014 respectively, the construction works of Phases I and II of the property are incompliance with the requirements for works commencement and are approved.

6. According to 2 Pre-sale Permits for Properties (商品房預售(預租)許可證) (Document Nos. Yu Guo Tu FangGuan (2012) Yu Zi No. 341 Fu No. 1 and Yu Guo Tu Fang Guan (2013) Yu Zi No. 633) issued byChongqing Administration of Land, Resources and Housing on 1 April 2013 and 21 August 2013respectively, the residential and commercial units of Phase I of the property are permitted for presale.

7. According to the information provided by the Company, portions of the residential units of Phase I of theproperty with a total gross floor area of approximately 9,021.56 sq.m. had been presold at a totalconsideration of RMB90,417,749. We have included such portions in our valuation and taken into accountsuch amount.

8. According to the Company, the development cost expended in the property as at 30 June 2014 wasapproximately RMB366.19 million and the development cost to complete the property is estimated to beapproximately RMB1,362.4 million.

9. The capital value when completed of the proposed development is approximately RMB3,008,000,000.

10. The PRC legal opinion states, inter alia, the following:

(i) Jintang is the legal land user of the property and has obtained the relevant real estate title certificate andapprovals for the development of the property.

(ii) The property is subject to a mortgage in favour of Anxin Trust Co., Ltd.

11. The status of title and grant of major approvals and permits in accordance with the PRC legal opinion andinformation provided by the Company are as follows:

(i) Chongqing Real Estate Title Certificate Yes

(ii) Construction Landuse Planning Permit Yes

(iii) Construction Planning Permit Yes

(iv) Construction Work Permit Yes (Portion)

(v) Pre-sale Permit for Properties Yes (for Phase I)

12. The property was inspected by Mr. Li Hui, China Real Estate Appraiser, on 29 August 2014.


– 179 –

13. We are of the view that the property is the material property held by Jintang.

Details of the material property:

(a) General description oflocation of the property

: The property is located at Longta Street in Yubei District, where is in thenorthwestern part of the city centre of Chongqing City. The locality is adeveloped residential and commercial area where many residential andcommercial developments are located. It has been witnessed that the overalltransaction volume of residential, office and commercial units in YubeiDistrict has gone through a period of consolidation in the third quarter of2014 while the price level is stabilizing without obvious downwardadjustment. The general price levels of residential, office and commercialunits in the region were about RMB10,000 – RMB13,000/sq.m., RMB13,000– RMB17,000/sq.m. and RMB40,000 – RMB80,000/sq.m. respectively.

(b) Details of encumbrances,liens, pledges,mortgages against theproperty

: See note 10

(c) Environmental Issue : No environmental impact assessment has been carried out.

(d) Details of investigations,notices, pendinglitigation, breaches oflaw or title defects

: See note 10

14. The market value of the property of HK$1,539 million excludes a discounted value calculated based on 15%of the valuation of Phase I of the property of RMB386,909,528, i.e. approximately RMB58 million (HK$73million) multiplied by 84.71% (i.e. HK$61.84 million).


– 180 –

1. RESPONSIBILITY STATEMENT

This Circular, for which the Directors collectively and individually accept fullresponsibility, includes particulars given in compliance with the Listing Rules for the purposeof giving information with regard to the Company. The Directors having made all reasonableenquiries, confirm that to the best of their knowledge and belief the information contained inthis Circular is accurate and complete in all material respect and not misleading or deceptive,and there are no other matters the omission of which would make any statement hereinmisleading.

2. SHARE CAPITAL

The issued and fully paid share capital of the Company (i) as at the Latest PracticableDate; and (ii) immediately following completion of the Share Consolidation and the RightsIssue becoming effective were as follows:

(i) As at the Latest Practicable Date

Issued and fully paid:

389,421,327 Shares

(ii) Immediately following the completion of the Share Consolidation and the RightsIssue becoming effective (assuming no issue of new Shares, no repurchase ofShares or no grant of Share Options under the Scheme Mandate Limit from theLatest Practicable Date up to the Record Date)

Issued and fully paid:

77,884,265 Shares in issue as at the Record Date700,958,385 Minimum number of Rights Shares to be allotted and issued under

the Rights Issue

778,842,650

78,150,326 Share in issue assuming 266,061 share options (after taking intoaccount effect of Share Consolidation) are exercised

703,352,934 Maximum number of Rights Shares to be allotted and issued underthe Rights Issue

781,503,260

All of the Existing Shares and the Rights Shares in issue and to be issued (when fullypaid) rank and will rank pari passu with each other in all respects, including, in particular, asto dividends, voting rights and return of capital. The Existing Shares and the Rights Shares areor will be listed on the main board of the Stock Exchange.

APPENDIX VI GENERAL INFORMATION

– 181 –

So far as the Directors are aware, there is no restriction affecting the remittance of profitor repatriation of capital into Hong Kong from outside Hong Kong other than the PRC, whichthe Group is required to comply with the relevant PRC laws and regulations before theremittance of profit or repatriation of capital into Hong Kong.

No part of the share capital or any other securities of the Company is listed or dealt in onany stock exchange other than the Stock Exchange and no application is being made or iscurrently proposed or sought for the Existing Shares or the Rights Shares or any othersecurities of the Company to be listed or dealt in on any other stock exchange.

As at the Latest Practicable Date, save for the Share Options, the Company has noderivatives, options, warrants and conversion rights or other similar rights which areconvertible or exchangeable into shares of the Company.

As at the Latest Practicable Date, none of the capital of any member of the Group wasunder option, or agreed conditionally or unconditionally to be put under option.

As at the Latest Practicable Date, there were no arrangements under which futuredividends are waived or agreed to be waived.

3. DISCLOSURE OF INTERESTS BY DIRECTORS

As at the Latest Practicable Date, the interests and short positions of the Directors andchief executives of the Company or their respective associates in the shares, underlying sharesand debentures of the Company and its associated corporations (within the meaning of Part XVof the SFO) which are required to be notified to the Company and the Stock Exchangepursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positionswhich were taken or deemed to have under such provisions of the SFO), or which wererequired, pursuant to section 352 of the SFO, to be entered in the register referred to therein, orwhich were required, pursuant to the Model Code for Securities Transactions by Directors ofListed Issuers contained in the Listing Rules (the ‘‘Model Code’’), to be notified to theCompany and the Stock Exchange, were as follows:

Name of director CapacityNumber of

shares

Number ofunderlying

sharesTotal

interests

Approximatepercentage of

the issuedshare capital

of theCompany

Ng Shin Kwan,Christine

Beneficial owner — 211,455(Note 1)

211,455 0.05%

Wong Yun Kuen Beneficial owner 9,000 655(Note 2)

9,655 0.00%


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Notes:

1 This represents the interest of Ms. Ng Shin Kwan, Christine in 211,455 underlying shares issuableunder the share options granted by the Company to her on 3 December 2007 under the Share OptionScheme. The consideration paid by Ms. Ng Shin Kwan, Christine on acceptance of the share optionsgranted was HK$1.00. The exercise price is HK$96.80 per share and the exercisable period is between 3December 2007 and 2 December 2017.

2 This represents the interest of Dr. Wong Yun Kuen in 655 underlying shares issuable under the shareoptions granted by the Company to him on 3 December 2007 under the Share Option Scheme. Theconsideration paid by Dr. Wong Yun Kuen on acceptance of the share options granted was HK$1.00.The exercise price is HK$96.80 per share and the exercisable period is between 3 December 2007 and 2December 2017.

Save as disclosed above, as at Latest Practicable Date, none of the directors or chiefexecutive of the Company had any interests or short positions in the shares, underlying sharesand debentures of the Company or any of its associated corporations (within the meaning ofPart XV of the SFO) which were required to be recorded in the register kept by the Companypursuant to section 352 of the SFO or as otherwise notified to the Company and the StockExchange pursuant to the Model Code.

Interests in underlying Shares

The Directors have been granted options under the Share Option Scheme. As at theLatest Practicable Date, the Share Options still outstanding under the Share OptionScheme in respect of the Directors’ interests are as follows:

DirectorsDate ofgrant Exercisable period

Exerciseprice per

Share

Number of theShare Optionsoutstanding asat the LatestPracticable

DateHK$

Ng Shin Kwan,Christine

3.12.2007 3 December 2007 to2 December 2017

96.8 211,455

Wong Yun Kuen 3.12.2007 3 December 2007 to2 December 2017

96.8 655

Total: 212,110

Save as disclosed above, as at the Latest Practicable Date, none of the Directors orchief executives of the Company or their respective associates had any interests or shortpositions in the shares, underlying shares or debentures of the Company or its associatedcorporations (within Part XV of the SFO) which were required to be notified to theCompany and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO(including interests and short positions which they were taken or deemed to have under


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such provisions of the SFO), or which were required, pursuant to section 352 of the SFO,to be entered in the register referred to therein, or which were required, pursuant to theModel Code, to be notified to the Company and the Stock Exchange.

4. INTERESTS AND SHORT POSITIONS OF SUBSTANTIAL SHAREHOLDERS

Save as disclosed below, as at the Latest Practicable Date, according to the register ofinterest kept by the Company under Section 336 of the SFO and so far as was known to theDirectors, no other person or companies had an interest or short positions in Shares orunderlying Shares which would fall to be disclosed to the Company under the provisions ofDivisions 2 and 3 of Part XV of the SFO, or who were, directly or indirectly, interested in 5%or more of the nominal value of any class of share capital carrying rights to vote in allcircumstances at general meetings of any other member of the Group or had any option inrespect of such capital:

Long/short position in the Shares and underlying Shares of the Company

Name of theShareholder Capacity

Number ofthe Shares

Totalinterests

Approximatepercentage

of the issuedshare capital

of theCompany

HEC CapitalLimited

Interest held bycontrolled corporation

37,931,883 37,931,883 9.74%

Freeman FinancialCorporationLimited

Interest held bycontrolled corporation

32,579,800 32,579,800 8.37%

5. DIRECTORS’ INTERESTS IN COMPETING BUSINESS, ASSETS/CONTRACTS

Save for the 47.2% equity interests in the Target Company which is beneficially owned byMr. Liang (the executive Director), the Directors are not aware that any Director or hisrespective associate had, as at the Latest Practicable Date, any interest in any business whichcompetes or is likely to compete, either directly or indirectly, with the business of the Groupwhich would be required to be disclosed under the Listing Rules.

No contract of significance in relation to the Group’s business to which the Company orany of its subsidiaries was a party and in which a Director had a material interest, whetherdirectly or indirectly subsisted as at the Latest Practicable Date.

As at the Latest Practicable Date, none of the Directors has, or has had, any direct orindirect interest in any assets which have been acquired, disposed of or leased to or which areproposed to be acquired, disposed of or leased to the Company or any of their respectivesubsidiaries, respectively, since 31 December 2013, the date to which the latest publishedaudited consolidated financial statements of the Group were made up.


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There is no contract or arrangement entered into by any member of the Group, subsistingas at the Latest Practicable Date in which any of the Directors is materially interested andwhich is significant in relation to the business of the Group as a whole.

6. EXPERTS AND CONSENT

The following are the qualifications of the experts who have given opinions or advice,which are contained in this Circular:

Name Qualification

Pan-China (H.K.) CPALimited

Certified Public Accountants

HLB Hodgson lmpeyCheng Limited

Certified Public Accountants

Nuada Limited a licensed corporation to carry out business in Type 6(advising on corporate finance) regulated activity under SFO

Dacheng Law Offices PRC legal adviser to the Company

Vigers Appraisal &Consulting Limited

Professional surveyors and valuers

As at the Latest Practicable Date, each of Pan-China (H.K.) CPA Limited, HLB Hodgsonlmpey Cheng Limited, Nuada Limited, Dacheng Law Offices and Vigers Appraisal &Consulting Limited did not have any direct or indirect shareholdings in any member of theGroup, or any right (whether legally enforceable or not) to subscribe for or to nominatepersons to subscribe for securities in any member of the Group, or any interests, directly orindirectly, in any assets which have been acquired, disposed of or leased to or which areproposed to be acquired, disposed of by or leased to any member of the Group, respectively,since 31 December 2013, being the date to which the latest published audited consolidatedfinancial statements of the Company were made up.

Each of the above experts has given and has not withdrawn its written consent to the issueof this Circular with the inclusion therein of its reports and references to its name in the formand context in which they appear.

7. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered into or proposed toenter into any service contracts with the Company or any other member of the Group(excluding contracts expiring or determinable by the Company within a year without paymentof any compensation (other than statutory compensation)).


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8. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries wasengaged in any litigation or arbitration or claim which is in the opinion of the Directors ofmaterial importance and no litigation or claim which is in the opinion of the Directors ofmaterial importance to be pending or threatened by or against any member of the Group.

9. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have beenentered into by members of the Group within the two years preceding the date of this Circularand are or may be material:

(1) an acquisition agreement dated 8 February 2013 (as amended and supplemented by asupplemental agreement entered into between the same parties dated 26 June 2013)amongst Hugo Smart Limited (a wholly-owned subsidiary of the Company), CharterBonus Limited (as the vendor) and the guarantor in relation to the acquisition ofMega Marks Limited at the aggregate consideration of HK$1,200 million (subject toadjustment) as announced on 12 December 2013 by the Company;

(2) a sale and purchase agreement dated 21 March 2013 entered into between a wholly-owned subsidiary of the Company as vendor and Freeman Financial CorporationLimited and Dynastic Union Limited (as the purchaser), pursuant to which thevendor has conditionally agreed to dispose approximately 8.77% of the issued sharecapital of Freeman Securities Limited to purchaser at a consideration ofHK$16,140,000 as announced on 21 March 2013 by the Company;

(3) an extension notice signed by Hugo Smart Limited (a wholly-owned subsidiary ofthe Company) on 6 December 2013 to extend the long stop date of the acquisition ofMega Marks Limited to 31 March 2014 or such other date as Hugo Smart Limitedmay agree in writing as announced on 6 December 2013 by the Company;

(4) a placing agreement dated 21 January 2014 entered into between the Company andFreeman Securities Limited as the placing agent, pursuant to which the placing agenthas conditionally agreed to procure subscribers to subscribe for the convertible notesin the aggregate principal amount of up to HK$400 million;

(5) an agreement of termination dated 25 March 2014 entered into between the Companyand Freeman Securities Limited as the placing agent, pursuant to which the partiesmutually agreed to terminate the placing agreement which was described in (4);

(6) a further extension notice signed by Hugo Smart Limited (a wholly-owned subsidiaryof the Company) on 31 March 2014 to further extend the long stop date of theacquisition of Mega Marks Limited to 31 December 2014 or such other date as HugoSmart Limited may agree in writing as announced on 31 March 2014 by theCompany;


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(7) an acquisition agreement dated 24 June 2014 (as amended and supplemented by asupplemental agreement entered into between the same parties dated 18 August2014) amongst the Purchaser and the Vendor in relation to acquisition of 40% of thetotal issued share capital in the Target Company at the cash consideration of HK$370million as announced on 18 August 2014 by the Company;

(8) a placing agreement dated 24 June 2014 amongst the Company and FreemanSecurities Limited (as a placing agent) for the purpose of procuring, on best effortbasis, subscribers to subscribe for up to HK$400 million principal amount of theconvertible notes issued by the Company and the net proceed are intended to be usedfor the cash consideration payment of the above acquisition which was described in(7);

(9) an agreement of termination dated 18 August 2014 entered into between theCompany and Freeman Securities Limited as the placing agent, pursuant to which theparties mutually agreed to terminate the placing agreement which was described in(8);

(10) the underwriting agreement dated 18 August 2014 entered into between the Companyand the Underwriter, the Rights Issue is proposed to take place after ShareConsolidation becoming effective. The net proceeds from the Rights Issue areintended to be used for payment of cash consideration of HK$370 million for theabove acquisition which described in (7) and the remaining amount of the proceeds(if any) for general working capital purposes of the Group as announced on 18August 2014 by the Company;

(11) as announced on 24 October 2014 by the Company, on 24 October 2014 (i) thePurchaser and the Vendor entered into the supplemental agreement to the Sale andPurchase Agreement to extend the Long Stop Date from 31 December 2014 to 30June 2015 which was described in (7); and (ii) the Company and the Underwriterentered into the supplemental agreement to the Underwriting Agreement to extendthe Long Stop Date from 31 December 2014 to 30 June 2015 which was described in(10); and

(12) a further extension notice signed by Hugo Smart Limited (a wholly-owned subsidiaryof the Company) on 31 October 2014 to further extend the long stop date of theacquisition of Mega Marks Limited to 30 June 2015 or such other date as HugoSmart Limited may agree in writing as announced on 31 October 2014 by theCompany.


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10. CORPORATE INFORMATION AND PARTIES INVOLVED IN THE RIGHTSISSUE

Registered office & Head officeand principal place of businessin Hong Kong

Units 2502–5, 25th FloorHarbour Centre25 Harbour RoadWanchaiHong Kong

Authorised representatives Ms. Ng Shin Kwan, ChristineUnits 2502–5, 25th FloorHarbour Centre25 Harbour RoadWanchaiHong Kong

Mr. Leung Ka WaiUnits 2502–5, 25th FloorHarbour Centre25 Harbour RoadWanchaiHong Kong

Company secretary Mr. Leung Ka WaiUnits 2502–5, 25th FloorHarbour Centre25 Harbour RoadWanchaiHong Kong

Legal advisers to the Companyin relation to the Rights Issue

Ching & SolicitorsSuites 2201–0322/F., China United Centre28 Marble RoadNorth PointHong Kong

Auditors and reporting accountants Pan-China (H.K.) CPA Limited11/F., Hong Kong Trade Centre161–167 Des Voeux Road CentralHong Kong

HLB Hodgson Impey Cheng Limited31/F, Gloucester TowerThe Landmark11 Pedder StreetCentralHong Kong


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Independent Financial Adviser Nuada LimitedUnit 1805–08, 18/FOfficePlus@Sheung Wan93–103 Wing Lok StreetSheung WanHong Kong

Underwriter Freeman Securities LimitedRoom 160116/F., China United Centre28 Marble RoadNorth PointHong Kong

Share registrar and transfer officeof the Company in Hong Kong

Tricor Secretaries LimitedLevel 22Hopewell Centre183 Queen’s Road EastHong Kong

Principal banker Bank of China (Hong Kong) LimitedShop 4, G/FCauseway Centre28 Harbour RoadWanchaiHong Kong

Bank of Communications Co., Ltd.,G/F, 32–34 Johnston RoadHong Kong

The Hongkong and Shanghai BankingCorporation Limited

1 Queen’s Road CentralHong Kong

Agricultural Bank of ChinaLi Bu Sub-BranchYang Shan XianGuangdong Province


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11. EXPENSES

The expenses in connection with the Rights Issue, including financial advisory fees,underwriting commission, printing, registration, translation, legal and accountancy charges areestimated to be approximately HK$16.34 million, which are payable by the Company.

12. PARTICULARS OF DIRECTORS

(a) Name and address of the Directors

Name Address

Executive Director:

Dr. Zhang Guoqing (Chairman) Units 2502–5, 25th FloorHarbour Centre25 Harbour RoadWanchaiHong Kong

Ms. Ng Shin Kwan, Christine Units 2502–5, 25th FloorHarbour Centre25 Harbour RoadWanchaiHong Kong

Mr. Lee Jalen Units 2502–5, 25th FloorHarbour Centre25 Harbour RoadWanchaiHong Kong

Mr. Chan Ah Fei Units 2502–5, 25th FloorHarbour Centre25 Harbour RoadWanchaiHong Kong

Mr. Lee Yuk Fat Units 2502–5, 25th FloorHarbour Centre25 Harbour RoadWanchaiHong Kong


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Name Address

Mr. Liang Shan Units 2502–5, 25th FloorHarbour Centre25 Harbour RoadWanchaiHong Kong

Independent non-executive Directors:

Dr. Wong Yun Kuen Units 2502–5, 25th FloorHarbour Centre25 Harbour RoadWanchaiHong Kong

Mr. Wong Shun Loy Units 2502–5, 25th FloorHarbour Centre25 Harbour RoadWanchaiHong Kong

Mr. Hu Chao Units 2502–5, 25th FloorHarbour Centre25 Harbour RoadWanchaiHong Kong

(b) Profiles of the Directors

Executive Directors

Dr. Zhang Guoqing, aged 54, has been Executive Director and Chairman ofthe Company since November 2010. Dr. Zhang is a material scientist graduated fromNortheastern University in the People’s Republic of China (the ‘‘PRC’’) and obtaineda Ph.D. degree in Material Science from South Central University in the PRC. He isalso a recipient of a number of scientific awards in China. Dr. Zhang possessesextensive experience in corporate management, business development, corporatefinance and research and development of metal alloys in the PRC and Australia, andwas previously the Deputy General Manager of Sino-Platinum Metals CompanyLimited, a company whose shares are listed on the Shanghai Stock Exchange. Dr.Zhang currently holds various executive positions in Australia and is vice chairmanand general manager of Yunnan Tin Australia Investment Holding Company Pty Ltd.He was also a director of Aurelia Metals Limited (‘‘Aurelia’’, a company whoseshares are listed on the Australian Securities Exchange, formerly known as YTCResources Limited) from February 2008 to November 2011.


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Ms. Ng Shin Kwan, Christine, aged 45, has been Executive Director of theCompany since August 2007. Ms. Ng holds a Bachelor of Economics degree fromUniversity of Sydney in Australia and has over 15 years of experience in businessdevelopment, corporate management and investment fields and held executivepositions in various investment and securities companies. Ms. Ng was a director ofAurelia from June 2008 to November 2013.

Mr. Lee Jalen, aged 51, has been Executive Director of the Company sinceJanuary 2010. Mr. Lee has extensive experience in mineral trading and corporatemanagement and development in the PRC and had worked as a consultant of asubsidiary of the Company for providing consultancy services for its mining businessin the PRC.

Mr. Chan Ah Fei, aged 52, has been Executive Director of the Company sinceNovember 2010. Mr. Chan has more than 20 years of experience as key managementin electric power supply, telecommunications, geological surveying and miningbusinesses. He received a geological surveying qualification from 甘肅蘭州礦業學院

(literally translated as Gansu Lanzhou Mining Academy). Mr. Chan has founded 青

海創綠投資管理有限公司 (literally translated as Qinghai Chuanglu InvestmentManagement Limited) since 2000, which is principally engaged in provision ofconsultancy service in relation to mining rights, including the mineral exploitation,extraction, processing and production at mines primarily located in the northwesternand southwestern regions of the PRC. Mr. Chan is currently a director of Great WallHong Kong Investment Co. Limited, which provides advisory services in relation togeological surveying and mining.

Mr. Lee Yuk Fat, aged 42, has been Executive Director of the Company sinceNovember 2010. Mr. Lee is a manager of the China division and a member of theinvestment committee for subsidiaries of the Company. He also holds directorships invarious subsidiaries of the Company. Mr. Lee has more than 10 years of experiencein the finance and securities industry and is a chairman of board of director of PicoZeman Securities (HK) Limited. He was also a director of Hong Kong Energy andMinerals United Associations, a non-profit making entity aiming to gather congruentpower and to increase business opportunities in the energy and minerals sector tillAugust 2014.

Mr. Liang Shan, aged 51, has been Executive Director of the Company sinceJanuary 2014. Mr. Liang graduated from the Graduate School of Chinese Academyof Social Sciences with a master degree in monetary and banking studies (貨幣銀行

學專業學習) of the Faculty of Finance and Economics (財貿經濟系). He hasextensive experience in banking industry, iron ore trading and property developmentand has worked for various companies as director and general manager in the past.


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Independent non-Executive Directors

Dr. Wong Yun Kuen, aged 57, has been Independent Non-executive Directorof the Company since September 2004. Dr. Wong received a Ph.D. Degree fromHarvard University, and was ‘‘Distinguished Visiting Scholar’’ at Wharton School ofthe University of Pennsylvania. Dr. Wong has worked in financial industries in theUnited States and Hong Kong for more than 10 years, and has considerableexperience in corporate finance, investment and derivative products. He is a memberof Hong Kong Securities Institute. Dr. Wong is an executive director of UBAInvestments Limited, and the independent non-executive director of BauhausInternational (Holdings) Limited, China Sandi Holdings Limited, Far East HoldingsInternational Limited, Guocang Group Limited, Harmony Asset Limited, KaisunEnergy Group Limited, Kingston Financial Group Limited and Sincere Watch (HongKong) Limited. Dr. Wong was also an independent non-executive director of HongKong Life Sciences and Technologies Group Limited from November 2009 toSeptember 2012, Kong Sun Holdings Limited from April 2007 to November 2014,KuangChi Science Limited (formerly known as Climax International CompanyLimited) from June 2007 to August 2014 and New Island Development HoldingsLimited from October 2010 to September 2014. All these companies mentioned inthis paragraph are listed companies in Hong Kong and Harmony Asset Limited isalso a company listed on Toronto Stock Exchange.

Mr. Wong Shun Loy, aged 50, has been Independent Non-executive Directorof the Company since March 2012. Mr. Wong is a Certified Public Accountant(Practising) in Hong Kong and a fellow member of the Hong Kong Institute ofCertified Public Accountants. He obtained an Executive Master of BusinessAdministration from Colorado University of Commerce in USA. Mr. Wong hasextensive experience in banking, finance and accounting. He is the proprietor of S.L.Wong & Co. and an independent director of Nanchong City Commercial Bank.

Mr. Hu Chao, aged 31, has been Independent Non-executive Director of theCompany since March 2012. Mr. Hu obtained a Bachelor Degree in Law from theHunnan University of Technology (formerly known as Zhuzhou Institute ofTechnology). He has extensive experience in legal consultation and had beenproviding consultancy services for various businesses in the PRC.

Senior Management

Mr. Leung Ka Wai, aged 34, has been appointed as Finance Manager and theCompany Secretary of the Company since June 2012. Mr. Leung is a Certified PublicAccountant of the Hong Kong Institute of Certified Public Accountants and holds abachelor’s degree in Economics and a postgraduate diploma in professionalaccountancy from the Chinese University of Hong Kong. Mr. Leung has over eightyears of experience in auditing, finance and accounting and corporate secretarialfunctions.


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13. GENERAL

(a) As at the Latest Practicable Date, there was no agreement, arrangement orunderstanding between the Underwriter and any other persons whereby the Shares tobe acquired under the Rights Issue will be transferred, charged or pledged to anyother persons.

(b) The English text of this Circular shall prevail over the Chinese text.

14. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the principal place ofbusiness of the Company, at Units 2502–5, 25/F, Harbour Centre, 25 Harbour Road, Wanchai,Hong Kong during normal business hours on any weekday other than public holidays, from thedate of this Circular up to and including the date of the EGM (i.e. being not less than 14 days):

(a) the memorandum and articles of association of the Company;

(b) the annual reports of the Company for the two financial years ended 31 December2013 and the interim report of the Company for the six months ended 30 June 2014;

(c) the written consents referred to in the paragraph headed ‘‘Experts and Consents’’ tothis Appendix;

(d) the material contracts referred to in the paragraph headed ‘‘Material Contracts’’ tothis Appendix;

(e) the unaudited pro forma financial information of the Group as set out in Appendix IIto this Circular;

(f) the accountants’ report of the Target Group as set out in Appendix III to thisCircular;

(g) the unaudited pro forma financial information of the Enlarged Group as set out inAppendix IV to this Circular;

(h) the letter from the Board, the text of which is set out on pages 10 to 63 of thisCircular;

(i) the letter from the Independent Board Committee, the text of which is set out onpages 64 to 65 of this Circular;

(j) the letter from the Independent Financial Adviser to the Independent BoardCommittee and the Independent Shareholders, the text of which is set out on pages66 to 90 of this Circular;

(k) the letter from Pan-China (H.K.) Limited the reporting accountants, in respect of theunaudited pro forma statement of the adjusted consolidated net tangible assets of theGroup, the text of which is set out in Appendix II of this circular; and

(l) this Circular.


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(Stock Code: 263)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the ‘‘Meeting’’) ofChina Yunnan Tin Minerals Group Company Limited (the ‘‘Company’’) will be held at FalconRoom II, Basement, Gloucester Luk Kwok Hong Kong, 72 Gloucester Road, Wanchai, HongKong on Thursday, 5 February 2015 at 11:00 a.m. for the purpose of considering and, ifthought fit, passing the following resolutions which will be proposed as ordinary resolutionswith or without amendment:

ORDINARY RESOLUTIONS

1. ‘‘THAT

(a) the conditional sale and purchase agreement dated 24 June 2014 and thesupplemental agreements dated 18 August 2014 and 24 October 2014 (the ‘‘Saleand Purchase Agreement’’) (a copy of which having been produced at theMeeting and signed by the Chairman of the Meeting for the purpose ofidentification) entered into between Perfect Ease International Limited (the‘‘Vendor’’) as vendor and Max Leap Asia Limited, an indirect wholly-ownedsubsidiary of the Company (the ‘‘Purchaser’’), as purchaser, in respect of theacquisition of the 40% of the issued share capital of China Sky HoldingsLimited at the consideration of HK$370 million and all the transactionscontemplated under the Sale and Purchase Agreement, be and are herebyapproved, ratified and confirmed;

(b) the directors of the Company be and are hereby authorized to sign, execute,perfect and deliver all such documents and do all such deeds, acts, matters andthings (including under seal where applicable) as they may in their absolutediscretion consider necessary or desirable for the purpose of or in connectionwith the implementation of the Sale and Purchase Agreement and all otherdocuments in connection thereunder and all transactions and other matterscontemplated thereunder or ancillary thereto, to waive compliance from and/oragree to any amendment or supplement to any of the provisions of the Sale andPurchase Agreement and all other documents in connection thereunder which intheir opinion is necessary or desirable to effect or implement any other mattersreferred to in this resolution.’’

NOTICE OF EXTRAORDINARY GENERAL MEETING

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2. ‘‘THAT, conditional upon the Listing Committee of The Stock Exchange of HongKong Limited (the ‘‘Stock Exchange’’) granting the listing of, and permission todeal in, the Consolidated Shares (as defined below):

(a) with effect from the date of passing of this resolution by the shareholders of theCompany, every five (5) existing shares in the issued share capital of theCompany be consolidated into one (1) share (the ‘‘Consolidated Share’’) in theissued share capital of the Company (the ‘‘Share Consolidation’’);

(b) all of the Consolidated Shares resulting from the Share Consolidation shall rankpari passu in all respects with each other and have the rights and privileges andbe subject to the restrictions contained in the articles of association of theCompany;

(c) all fractional Consolidated Shares shall be disregarded and not be issued to theshareholders of the Company and any fractional entitlements to the issuedConsolidated Shares will be aggregated and, if possible, sold and the netproceeds shall be retained for the benefit of the Company by an agent appointedby the Company’s board of directors for that purpose; and

(d) any one director of the Company (the ‘‘Directors’’) be and is authorised toapprove, sign and execute such documents and take any and all steps, and to doand/or procure to be done any and all acts and things which in his/her opinionmay be necessary, desirable or expedient to implement and carry into effect thisresolution.’’

3. ‘‘THAT

(a) subject to and conditional upon the passing of the resolution numbered 2 andconditional upon fulfillment of the conditions of the Underwriting Agreement(as defined below), the Rights Issue (as defined below) and the transactionscontemplated thereunder be and are hereby approved;

(b) the underwriting agreement in respect of the Rights Issue (as definedhereinbelow) dated 18 August 2014 and made between the Company andFreeman Securities Limited and supplemental agreement dated 24 October 2014(the ‘‘Underwriting Agreement’’) (a copy of which has been produced to theMeeting marked ‘‘A’’ and signed by the Chairman of the Meeting for thepurpose of identification) and the transaction contemplated thereunder be andare hereby approved, confirmed and ratified;

(c) subject to the fulfillment of the conditions set out in the UnderwritingAgreement, the allotment and issue of not less than 700,958,385 new shares butnot more than 703,352,934 (the ‘‘Rights Shares’’) in the share capital of theCompany (the ‘‘Shares’’) pursuant to an offer by way of rights to the holders ofShares (the ‘‘Shareholders’’) at the subscription price of HK$0.6 per RightsShare on the basis of nine Rights Shares for every Share held by theShareholders whose names appear on the register of members of the Company


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on 23 February 2015 (the ‘‘Record Date’’) as described in further details in a

circular issued by the Company dated 24 December 2014 and on and subject to

such terms and conditions as may be determined by the directors of the

Company (the ‘‘Rights Issue’’), be and is hereby approved, confirmed and

ratified;

(d) the Directors be and are hereby authorised to allot and issue the Rights Shares

pursuant to or in connection with the Rights Issue notwithstanding that the same

may be offered, allotted or issued otherwise than pro rata to the existing

Shareholders and, in particular, the Directors may make such exclusions or

other arrangements in relation to any Shareholders whose addresses as of the

Record Date are outside of Hong Kong (if any) as they deem necessary or

expedient having regard to any restrictions or obligations under the laws of, or

the requirements of any recognized regulatory body or any stock exchange in,

any territory outside Hong Kong, and to do all such acts and things as they

consider necessary, desirable or expedient to give effect to any or all other

transactions contemplated in this resolution; and

(e) the Directors be and hereby authorised to do all acts and things in connection

with the allotment and issue of the Rights Shares, the implementation of the

Rights issue and the Underwriting Agreement, the exercise or enforcement of

any of the Company’s rights under the Underwriting Agreement.’’

By Order of the Board

China Yunnan Tin Minerals Group Company Limited

Zhang Guoqing

Chairman

Hong Kong, 24 December 2014

Registered office and head office and principal place of business:

Units 2502–5, 25th Floor

Harbour Centre

25 Harbour Road

Wanchai

Hong Kong


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Notes:

1. A form of proxy for use at the meeting is enclosed herewith.

2. Any member of the Company entitled to attend and vote at the meeting shall be entitled to appoint anotherperson as his proxy to attend and vote instead of him. A member of the Company who is the holder of two ormore shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting ofthe Company. A proxy need not be a member of the Company.

3. Where there are joint registered holders of any share, any one of such persons may vote at the meeting, eitherpersonally or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one ofsuch joint holders is present at the meeting personally or by proxy, that one of the said persons so presentwhose name stands first on the register of members of the Company in respect of such share shall alone beentitled to vote in respect thereof.

4. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney dulyauthorised in writing, or if the appointor is a corporation, either under seal or under the hand of an officer orattorney duly authorised.

5. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it issigned or a notarially certified copy of that power or authority shall be deposited at the office of theCompany’s share registrar in Hong Kong, Tricor Secretaries Limited, at Level 22, Hopewell Centre, 183Queen’s Road East, Hong Kong, not less than 48 hours before the time for holding the meeting or adjournedmeeting or poll (as the case may be) at which the person named in such instrument proposes to vote, and indefault the instrument of proxy shall not be treated as valid.

6. Delivery of an instrument appointing a proxy shall not preclude a member from attending and voting inperson at the meeting or poll concerned and, in such event, the instrument appointing a proxy shall be deemedto be revoked.

As at the date of this notice, the Board of Directors of the Company comprises sixexecutive Directors, namely Dr. Zhang Guoqing (Chairman), Ms. Ng Shin Kwan, Christine,Mr. Lee Jalen, Mr. Chan Ah Fei, Mr. Lee Yuk Fat and Mr. Liang Shan; and three independentnon-executive Directors, namely Dr. Wong Yun Kuen, Mr. Wong Shun Loy and Mr. Hu Chao.


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(2) PROPOSED SHARE CONSOLIDATION - irasia.com

Documents

Transcript of (2) PROPOSED SHARE CONSOLIDATION - irasia.com