Autohome Inc. — Proxy Solicitation & Information Statement 2013

Sep 6, 2013

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt about any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountants or other professional advisers.

If you have sold or transferred all your securities in Golik Holdings Limited (the ‘‘Company’’), you should at once hand this circular to the purchaser, transferee or the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

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 in reliance upon the whole or any part of the contents of this circular.

GOLIK HOLDINGS LIMITED

��������*

(Incorporated in Bermuda with limited liability)

(Stock Code: 1118)

(1) DISCLOSEABLE AND CONNECTED TRANSACTION — THE EQUIPMENT SALE AND PURCHASE AGREEMENT; (2) CONTINUING CONNECTED TRANSACTIONS — THE EQUIPMENT LEASE AGREEMENT; AND

(3) CONTINUING CONNECTED TRANSACTIONS — RENEWAL OF ANNUAL CAPS UNDER THE PROPERTY LEASE AGREEMENT AND THE PROCESSING AGREEMENT

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

==> picture [77 x 47] intentionally omitted <==

Capitalised terms used in this cover have the same meanings as those defined in this circular.

A letter from the Board is set out on pages 5 to 17 of this circular. A letter from the Independent Board Committee is set out on pages 18 to 19 of this circular.

A letter from Donvex Capital Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders is set out on pages 20 to 34 of this circular.

• For identification purpose only

6 September 2013

CONTENTS

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from	the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Letter from	Donvex Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Appendix I	— Valuation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35
Appendix II	— General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	49

– i –

DEFINITIONS

In this circular, the following expressions shall have the meanings set out below unless the context requires otherwise:

• ‘‘Acquisition’’

• the acquisition of the Subject Equipment at the Purchase Price pursuant to the Equipment Sale and Purchase Agreement;

• ‘‘Aggregate Renewed Annual Caps’’

• the aggregate renewed annual caps for the transactions contemplated under the Property Lease Agreement and the Processing Agreement for the three years ending 31 December 2016;

• ‘‘Announcement’’

• the announcement of the Company dated 1 August 2013 in relation to, among other things, the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Caps;

• ‘‘associates’’

has the meaning ascribed thereto under the Listing Rules;

• ‘‘Board’’

the board of Directors;

• ‘‘China Rope’’

China Rope Holdings Limited, a limited company incorporated in Hong Kong which is an indirect whollyowned subsidiary of the Company;

• ‘‘Company’’

• Golik Holdings Limited, an exempted company incorporated in Bermuda with limited liability, whose issued shares are listed on the Main Board of the Stock Exchange;

• ‘‘connected person(s)’’

• has the meaning ascribed thereto under the Listing Rules;

• ‘‘Continuing Connected Transactions A’’

• the continuing connected transactions contemplated under the Property Lease Agreement and the Processing Agreement;

• ‘‘Continuing Connected Transactions B’’

• the continuing connected transactions contemplated under the Equipment Lease Agreement;

• ‘‘Director(s)’’

• director(s) of the Company;

• ‘‘Equipment Lease Agreement’’

the Equipment Lease Agreement dated 1 August 2013 entered into between TJ Goldsun and Flourish Steel whereby TJ Goldsun agreed to lease the Subject Equipment to Flourish Steel for a term of 20 years;

– 1 –

DEFINITIONS

• ‘‘Equipment Sale and Purchase the Sale and Purchase Agreement dated 1 August 2013 Agreement’’ entered into between TJ Goldsun and Flourish Steel whereby Flourish Steel has agreed to sell and TJ Goldsun has agreed to purchase the Subject Equipment;

• ‘‘First Installment’’ the first installment of the Purchase Price, which shall be made within seven days of the effective date of the Equipment Sale and Purchase Agreement;

• ‘‘Flourish Steel’’ 天津冶金集團中興盛達鋼業有限公司 (Tianjin Metallurgy Group Flourish Steel Industrial Co., Ltd.*), a company incorporated in the PRC with limited liability, a connected person of the Company;

• ‘‘GDP’’ Gross Domestic Product;

• ‘‘Group’’ the Company and its subsidiaries;

• ‘‘HK$’’

• Hong Kong dollars, the lawful currency of Hong Kong;

• ‘‘Hong Kong’’

• the Hong Kong Special Administrative Region of the PRC;

• ‘‘Independent Board Committee’’

• the independent committee of the Board, comprising Mr. Yu Kwok Kan, Stephen, Mr. Chan Yat Yan and Mr. Lo Yip Tong, all of whom are Independent Non-executive Directors, formed to advise the Independent Shareholders in respect of the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Caps;

• ‘‘Independent Financial Advisor’’ or ‘‘Donvex Capital’’

• Donvex Capital Limited, a licensed corporation to carry out business in Type 6 (advising on corporate finance) regulated activities as defined under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), being the independent financial adviser to the Company in respect of, among other things, the Acquisition, Continuing Connected Transactions B and Aggregate Renewed Annual Caps;

• ‘‘Independent Shareholders’’

• Shareholder(s) who is/are not required to abstain from voting at the general meeting in relation to the resolution(s) for, among other things, approving (i) the Equipment Sale and Purchase Agreement and the Acquisition; (ii) the Equipment Lease Agreement and Continuing Connected Transactions B; and (iii) the Aggregate Renewed Annual Caps;

– 2 –

DEFINITIONS

• ‘‘Independent Third Party’’

• independent third parties who are not connected persons of the Company as defined in the Listing Rules and are independent of the Company and the connected persons of the Company;

• ‘‘Latest Practicable Date’’ 4 September 2013, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein;

• ‘‘Listing Rules’’

• the Rules Governing the Listing of Securities on the Stock Exchange;

• ‘‘Mr. Pang’’

• Mr. Pang Tak Chung, an Executive Director and a substantial Shareholder;

• ‘‘PRC’’

• the People’s Republic of China (for the purpose of this circular, excludes Hong Kong, Macau Special Administrative Region of the PRC and Taiwan);

• ‘‘Processing Agreement’’

• the processing agreement dated 30 December 2010 entered into between Flourish Steel as service provider and TJ Goldsun as service receiver in relation to the processing of steel wires;

• ‘‘Properties’’

• the properties located adjacent to the east side of TianjinCangzhou Expressway, Jinghai Economic Development Zone, Tianjin City, PRC (中國天津市靜海開發區津滄高 速東側) and consist of (i) a main plant of steel structure with 23,944 square metres; (ii) a plant of steel structure with 5,346 square metres; and (iii) an office premises with 3,061 square metres;

• ‘‘Property Lease Agreement’’

• the property lease agreement dated 30 December 2010 entered into between Flourish Steel as landlord and TJ Goldsun as tenant in relation to the lease of the Properties;

• ‘‘Purchase Price’’

• the consideration in the total sum of RMB24,960,000 (equivalent to approximately HK$31,594,937) payable by TJ Goldsun to Flourish Steel pursuant to the Equipment Sale and Purchase Agreement;

• ‘‘RMB’’

• Renminbi, the lawful currency of the PRC;

• ‘‘SFO’’

• The Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);

– 3 –

DEFINITIONS

• ‘‘Share(s)’’

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

• ‘‘Shareholders’’

• holder(s) of the Share(s);

• ‘‘Stock Exchange’’

The Stock Exchange of Hong Kong Limited;

• ‘‘Subject Equipment’’

• the assets to be acquired pursuant to the Equipment Sale and Purchase Agreement, including (i) equipment for part of the manufacturing process of steel wire ropes for elevators; and (ii) electric cables;

• ‘‘substantial shareholder’’

has the meaning ascribed thereto under the Listing Rules;

• ‘‘TJ Goldsun’’

• 天津高盛鋼絲繩有限公司 (Tianjin Goldsun Wire Rope Ltd.), a sino-foreign equity joint venture company incorporated in the PRC which is a 70.5% indirect non wholly-owned subsidiary of the Company;

• ‘‘TJ Metallurgy’’

• 天津冶金鋼線鋼纜集團有限公司 (Tianjin Metallurgy Steel Wire and Cable Group Ltd.*), a wholly stateowned limited liability company incorporated in the PRC. It owns 29.5% of the registered capital of TJ Goldsun and is a substantial shareholder of TJ Goldsun and therefore it is a connected person of the Company;

• ‘‘TJMG’’

• 天津冶金集團有限公司 (Tianjin Metallurgy Group Ltd.*);

• ‘‘TJSASAC’’

• the State-owned Assets Supervision and Administration Commission of Tianjin Municipal People’s Government;

• ‘‘Valuer’’

• 天津華夏金信資產評估有限公司 (Tianjin Huaxia Jinxin Assets Appraisals Ltd.*), a third party independent to the Company; and

• ‘‘%’’ per cent.

The conversion of RMB into HK$ is based on the exchange rate of HK$1.00 to RMB0.79. The conversion is for the purpose of illustration only and does not constitute a representation that any amount in RMB or HK$ has been, could have been or may be converted at the above rate or any other rates at all.

• For identification purpose only

– 4 –

LETTER FROM THE BOARD

GOLIK HOLDINGS LIMITED ��������*

(Incorporated in Bermuda with limited liability) (Stock Code: 1118)

Executive Directors:

Mr. Pang Tak Chung (Chairman) Mr. Ho Wai Yu, Sammy (Vice Chairman) Mr. John Cyril Fletcher Ms. Pang Wan Ping

Registered Office: Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Independent Non-executive Directors: Mr. Yu Kwok Kan, Stephen Mr. Chan Yat Yan Mr. Lo Yip Tong

Head Office and Principal Place of Business: Suite 5608, Central Plaza 18 Harbour Road Wanchai Hong Kong 6 September 2013

To the Shareholders,

Dear Sir or Madam,

(1) DISCLOSEABLE AND CONNECTED TRANSACTION — THE EQUIPMENT SALE AND PURCHASE AGREEMENT; (2) CONTINUING CONNECTED TRANSACTIONS — THE EQUIPMENT LEASE AGREEMENT;

AND

(3) CONTINUING CONNECTED TRANSACTIONS — RENEWAL OF ANNUAL CAPS UNDER THE PROPERTY LEASE AGREEMENT AND THE PROCESSING AGREEMENT

INTRODUCTION

Reference is made to the Announcement. The Company announced on 1 August 2013 that:

• (1) on 1 August 2013, TJ Goldsun and Flourish Steel entered into the Equipment Sale and Purchase Agreement, pursuant to which Flourish Steel has agreed to sell and TJ Goldsun has agreed to purchase the Subject Equipment at the Purchase Price;

• For identification purpose only

– 5 –

LETTER FROM THE BOARD

• (2) on 1 August 2013, TJ Goldsun and Flourish Steel entered into the Equipment Lease Agreement, pursuant to which TJ Goldsun agreed to lease the Subject Equipment to Flourish Steel for a term of 20 years; and

• (3) the annual caps for the Property Lease Agreement and the Processing Agreement for the three years ending 31 December 2016 will be renewed and approval in connection therewith will be obtained from the Independent Shareholders.

Reference is also made to the announcement of the Company dated 21 August 2013 relating to, among other things, the grant of waiver from compliance with Rule 14A.43 of the Listing Rules from the Stock Exchange. Continuing Connected Transactions B should also be subject to the reporting, announcement, Independent Shareholders’ approval and annual review requirements pursuant to Chapter 14A of the Listing Rules.

TJ Goldsun is an indirect non wholly-owned subsidiary of the Company, in which the Company indirectly owns its 70.5% interests. As at the date of the Announcement, TJ Goldsun has a registered capital of RMB60,000,000 and is owned as to 70.5% by China Rope and as to 29.5% by TJ Metallurgy.

TJ Metallurgy is a wholly state-owned limited liability company incorporated in the PRC, which is indirectly wholly-owned by TJSASAC, through its indirect wholly-owned subsidiary TJMG. Since TJ Metallurgy is a substantial shareholder of TJ Goldsun, it is a connected person of the Company. TJ Metallurgy has 7.12% interest in Flourish Steel.

Flourish Steel is a company incorporated in the PRC with limited liability. To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, Flourish Steel is owned by three state-owned companies incorporated in the PRC and wholly-owned by TJSASAC, namely TJMG, 天津市冶金集團（控股）有限公司 (Tianjin Metallurgy Group (Holdings) Ltd.*) and TJ Metallurgy, as to 85.65%, 7.23% and 7.12% respectively. As both TJ Metallurgy and Flourish Steel are subsidiaries of TJMG, Flourish Steel is an associate of TJ Metallurgy and hence a connected person of the Company.

The purpose of this circular is to provide you with further information regarding, among other things, (i) the Equipment Sale and Purchase Agreement and the Acquisition; (ii) the Equipment Lease Agreement and Continuing Connected Transactions B; and (iii) the Aggregate Renewed Annual Caps; the recommendation of the Independent Board Committee to the Independent Shareholders in relation to (i) the Equipment Sale and Purchase Agreement and the Acquisition; (ii) the Equipment Lease Agreement and Continuing Connected Transactions B; and (iii) the Aggregate Renewed Annual Caps; and the advice from Donvex Capital to the Independent Board Committee and the Independent Shareholders in respect of (i) the Equipment Sale and Purchase Agreement and the Acquisition; (ii) the Equipment Lease Agreement and Continuing Connected Transactions B; and (iii) the Aggregate Renewed Annual Caps.

• For identification purpose only

– 6 –

LETTER FROM THE BOARD

(1) DISCLOSEABLE AND CONNECTED TRANSACTION — THE EQUIPMENT SALE AND PURCHASE AGREEMENT

Date

1 August 2013

Parties

• (1) TJ Goldsun, as the purchaser; and

• (2) Flourish Steel, as the vendor.

Assets to be acquired

Pursuant to the Equipment Sale and Purchase Agreement, Flourish Steel has agreed to sell and TJ Goldsun has agreed to purchase (i) equipment for part of the manufacturing process of steel wire ropes for elevators; and (ii) electric cables. The original purchase cost of the Subject Equipment is approximately RMB21,560,000 (equivalent to approximately HK$27,291,139). Flourish Steel will also make available the know-how in relation to the operation of the Subject Equipment to TJ Goldsun as stipulated in the Equipment Sale and Purchase Agreement.

The Subject Equipment, together with all related manuals and financial documents for the Subject Equipment, will be delivered by Flourish Steel to TJ Goldsun within 7 days from the receipt of the First Installment.

Consideration

The Purchase Price payable by TJ Goldsun is RMB24,960,000 (equivalent to approximately HK$31,594,937). The Purchase Price was determined after arm’s length negotiation between TJ Goldsun and Flourish Steel with reference to appraisal value of the Subject Equipment as reflected in the valuation report issued by the Valuer dated 2 May 2013 in the sum of approximately RMB21,333,400 (equivalent to approximately HK$27,004,304), plus 17% applicable value-added-tax in the sum of approximately RMB3,626,600 (equivalent to approximately HK$4,590,633). The valuation was conducted by the Valuer based on the cost method in compliance with the relevant PRC laws and regulations and valuation standards by deducting the depreciation from the market value of the replacement cost of the Subject Equipment, and taking into account the results of its site visit and market research. For details, please refer to Appendix I — Valuation Report to this circular.

To the best knowledge of the Directors, the Subject Equipment were acquired by Flourish Steel during 2009 to 2010 and have been used by Flourish Steel since 2011 after installation. The Group does not possess the equipment identical to, or carrying the same function as, the Subject Equipment. Based on the experience of the management, the Company estimates that the Subject Equipment shall have useful life of more than 20 years in normal circumstances.

– 7 –

LETTER FROM THE BOARD

The Group intends to fund the Purchase Price from its internal resources. The Directors consider that the Equipment Sale and Purchase Agreement was entered into on normal commercial terms and on terms that are fair and reasonable and that the Acquisition is in the interest of the Company and its shareholders as a whole.

Payment Terms

The Purchase Price shall be paid in cash by TJ Goldsun to Flourish Steel in the following manner:

• (1) RMB12,500,000 (equivalent to approximately HK$15,822,785) payable within seven days from the date of the Equipment Sale and Purchase Agreement;

• (2) RMB6,000,000 (equivalent to approximately HK$7,594,937) payable in the third quarter of 2013; and

• (3) RMB6,460,000 (equivalent to approximately HK$8,177,215) payable in the forth quarter of 2013.

(2) CONTINUING CONNECTED TRANSACTIONS — CONTINUING CONNECTED TRANSACTIONS B — THE EQUIPMENT LEASE AGREEMENT

Date

1 August 2013

Parties

• (1) TJ Goldsun, as the lessor; and

• (2) Flourish Steel, as the lessee.

Principal Terms

Pursuant to the Equipment Lease Agreement, TJ Goldsun has agreed to lease the Subject Equipment to Flourish Steel for a term of 20 years commencing from 1 August 2013.

The monthly rent payable by Flourish Steel to TJ Goldsun under the Equipment Lease Agreement shall be RMB110,000 (equivalent to approximately HK$139,241) payable quarterly. The monthly rent was determined after arm’s length negotiation between TJ Goldsun and Flourish Steel based on the Purchase Price (RMB24,960,000) and the period of lease (20 years), since to the best knowledge of the Directors there was no prevailing market rate available.

During the term of the Equipment Lease Agreement, Flourish Steel shall be responsible for assigning operators for the operation of the Subject Equipment, and all costs in connection with the operation and maintenance of the Subject Equipment. Pursuant to the Equipment Lease Agreement, Flourish Steel will be entitled to use the Subject Equipment during the term while TJ Goldsun has the title of the Subject Equipment.

– 8 –

LETTER FROM THE BOARD

Annual Caps and Historical Transaction Amounts

The rent payable by Flourish Steel under the Equipment Lease Agreement will remain unchange throughout the entire terms. The annual caps under the Equipment Lease Agreement for the three years ending 31 December 2015 are as follows:

Annual Cap	For the year ending 31 December 2013 2014 2015 (RMB) (RMB) (RMB) 550,000 1,320,000 1,320,000

TJ Goldsun did not conduct any relevant transaction in relation to the Subject Equipment with Flourish Steel.

REASONS FOR AND BENEFITS OF THE ACQUISITION AND THE EQUIPMENT LEASE AGREEMENT

Pursuant to the Equipment Sale and Purchase Agreement, Flourish Steel undertakes that it will provide assistance to TJ Goldsun to obtain the relevant approvals and licences in connection with the manufacturing of steel wire ropes for elevators in the PRC (the ‘‘Licence’’). The Directors believe that the Acquisition as well as the assistance from Flourish Steel will be conducive to TJ Goldsun’s proposed application of the Licence.

The relocation and new Licence

TJ Goldsun relocated its manufacturing plant from Hexi District, Tianjin to Jinghai Economic Development Zone in 2011 (the ‘‘Relocation’’), which are under the administration of different local government authorities, although both are in Tianjin City, the PRC, in order to comply with a relocation notice from a PRC government authority. Before the Relocation, TJ Goldsun was a sole holder of the Licence which held a Licence to be expired in September 2012. After the Relocation in 2011, TJ Goldsun disposed certain equipment relating to upstream manufacturing steps of steel wire ropes for elevator’s which are considered old and inefficient.

As the old Licence was set to be expired and new manufacturing plant is administered by another local government authority, TJ Goldsun has to re-apply for new Licence from the relevant government authority.

TJ Goldsun now is a supplemental holder of the Licence granted jointly to Flourish Steel and TJ Goldsun. A sole (or a primary) holder of the Licence is permitted to manufacture a wide range of steel wire rope products and semi-products with different specifications as set out in the Licence, which will enable such holder to engage in the whole process and participate in every steps of the manufacturing of steel wire ropes for elevators. In general, a supplemental holder of the Licence is permitted to manufacture part of the elevator steel wire rope products and semi-products permitted to be manufactured by the primary holder of the Licence. TJ Goldsun’s elevator steel wire rope manufacturing business of TJ Goldsun was not affected as TJ Goldsun was only involved in part of but not the whole manufacturing process, therefore there was no material impact to the operation of the Group. Besides, taking into account the

– 9 –

LETTER FROM THE BOARD

fact that, apart from steel wire ropes for elevators, the Group also diversified into the processing and manufacturing of steel wires and other steel wire products, there was no material financial impact to the Group.

Pursuant to the Detailed Rules for Implementation of the Licence in relation to the manufacturing of steel wire ropes (鋼絲繩產品生產許可證實施細則) (the ‘‘Steel Wire Rope Rules’’) published by General Administration of Quality Supervision, Inspection and Quarantine of the PRC (國家質量監督檢驗檢疫總局) in January 2011 and implemented in March 2011, one condition for the application of the Licence is that the applicant should possess the equipment necessary for the whole manufacturing process. By acquiring the Subject Equipment, TJ Goldsun will have the title of the Subject Equipment and that will allow TJ Goldsun to meet the condition for the application of the Licence.

The importance of being a sole holder of the Licence

In light of (i) the fact that TJ Goldsun has to re-apply for new Licence as a result of the Relocation and the expiration of the old Licence; and (ii) the conditions for the application of the Licence under the Steal Wire Rope Rules, TJ Goldsun currently relies on the Licence granted jointly to Flourish Steel and TJ Goldsun as a supplemental holder of the Licence. The Directors are of the view that, the Acquisition will allow TJ Goldsun to meet the minimum condition of application and to obtain the Licence at costs affordable by the Group.

After being a sole holder of the Licence, TJ Goldsun will become a manufacturer permitted to manufacture fully-processed elevator steel wire ropes independently without relying on the Licence jointly granted to Flourish Steel and TJ Goldsun. The Directors consider that it is important for TJ Goldsun to be a sole (or a primary) holder of the Licence for its development and the benefits of the same are summarized as follows:

• (i) The Group can be benefited from the business opportunities created from the enhanced brand image of TJ Goldsun as a sole (or a primary) holder of the Licence, which may boost the revenue. Only sole (or primary) holders of the Licence, but not supplemental holders of the Licence, can be officially shown on the register of Licence holders available for public search on the internet. The Company noticed that certain customers of TJ Goldsun had enquired and might have concern over TJ Goldsun’s licensing status and consider that it is important for TJ Goldsun to possess its own Licence to gain client confidence, in light of its current market reputation in the PRC elevator steel wire ropes products market.

– 10 –

LETTER FROM THE BOARD

• (ii) The market position of TJ Goldsun will be strengthened as TJ Goldsun will become a manufacturer permitted to manufacture fully-processed elevator steel wire ropes, and will be able to a wider range of elevator steel wire rope products to meet clients’ needs which would allow TJ Goldsun to capture the opportunities arising from the potential growth of demand of steel wire ropes as a result of the increasing demand of elevator in the PRC.

• (iii) TJ Goldsun will enjoy more flexibility as it will be free to engage in its desirable manufacturing steps, in particular manufacturing steps with higher profit margin. TJ Goldsun will then be able to focus on the manufacturing steps which produce considerably less pollution and with higher profit margin by itself, such as steps for minidrawing, twisting and laying up of steel wire ropes, while on the other hand, it may outsource certain upstream manufacturing steps with lower profit margin, such as heat treatment and phosphating of steel wires.

The reasons for having both the Equipment Sale and Purchase Agreement and the Equipment Lease Agreement

Pursuant to the Equipment Lease Agreement, the Subject Equipment acquired by the TJ Goldsun under the Equipment Sale and Purchase Agreement will be leased back to Flourish Steel, while Flourish Steel will be responsible for the operation and maintenance of the Subject Equipment. Taking into account that the Subject Equipment is essential for TJ Goldsun’s proposed application of the Licence and the importance of the Licence for TJ Goldsun’s development, by making such arrangement as part and parcel of the Acquisition, TJ Goldsun does not have to and will not be involved in the operation and maintenance of the Subject Equipment after the Acquisition and hence the production costs in association with the Subject Equipment can be saved. TJ Goldsun’s proposed application of the Licence will not be affected by such arrangement given that the Subject Equipment will be owned by TJ Goldsun.

The total rent entitled by TJ Goldsun from Flourish Steel during the entire term of the Equipment Lease Agreement is RMB26,400,000 (equivalent to approximately HK$33,417,722), which is more or less the same as the Purchase Price paid by TJ Goldsun to Flourish Steel. TJ Goldsun currently has no intention to operate the Subject Equipment in view of the extra operation and maintenance costs expected to be involved, including but not limited to costs and investments in relation to the modification and expansion of TJ Goldsun’s existing manufacturing plant and the environmental expenditure expected to be incurred.

Although it appears that there is no significant return considering only the rental income under the Equipment Lease Agreement alone, the Directors are of the view that the importance of TJ Goldsun being a sole holder of the Licence should also be considered and the entire arrangement should be considered as a whole. As mentioned above, the Acquisition is essential for TJ Goldsun’s proposed application of the Licence and the Licence is important for TJ Goldsun’s development. By entering in the Equipment Lease Agreement, TJ Goldsun will be able to be compensated more or less the same as the Purchase Price paid from the rental income within the lease term. In light of the size and distinctiveness of the Subject Equipment, the Directors consider that it would be difficult to identify another possible lessee in the region other than Flourish Steel. By leasing the Subject Equipment back to Flourish Steel, which is an

– 11 –

LETTER FROM THE BOARD

immediately available lessee, rather than to idle the Subject Equipment for the entire term of the Equipment Lease Agreement in a worst-case scenario, TJ Goldsun will at least be able to recover the Purchase Price in full, and will lessen the time value impact on the rental income.

The term of the Equipment Lease Agreement is 20 years commencing from 1 August 2013. The term of the Equipment Lease Agreement was determined after the negotiation between the Group and Flourish Steel, by reference to the length of the term of the Property Lease Agreement and the Processing Agreement, which are both 20 years. Further, as disclosed in the paragraph headed ‘‘Consideration’’ above, it is estimated that the Subject Equipment shall have useful life of more than 20 years in normal circumstances. Donvex Capital has been appointed as the independent financial adviser to the Company to explain, among other things, why a longer period for the Equipment Lease Agreement is required and to confirm that it is normal business practice for agreements of this type to be of such duration. Please refer to the Announcement and the section headed ‘‘Letter from Donvex Capital’’ for further detail. The arrangement under the Equipment Sale and Purchase Agreement and the Equipment Lease Agreement does not constitute a finance lease given that the form and substance of the arrangement are different to a finance lease, such as the fact that TJ Goldsun will remain as the legal owner of the Subject Equipment regardless of the expiration of the term of the Equipment Lease Agreement and Flourish Steel has no option to acquire ownership of the Subject Equipment under the said arrangement. The Subject Equipment will be recorded as property, plant and equipment of the Group in the Company’s consolidated financial statements and will be depreciated over 15 years.

The Directors (including Independent Non-executive Directors) are of the view that the terms of the Equipment Lease Agreement (including the annual caps for its entire terms) and Continuing Connected Transactions B, although are not conducted in the ordinary and usual course of business of the Group, are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole. None of the Directors has a material interest in the Equipment Lease Agreement or, is required to abstain from voting on the Board resolution for considering and approving the Equipment Lease Agreement.

(3) CONTINUING CONNECTED TRANSACTIONS — CONTINUING CONNECTED TRANSACTIONS A — RENEWAL OF ANNUAL CAPS UNDER THE PROPERTY LEASE AGREEMENT AND THE PROCESSING AGREEMENT

Introduction

Reference is made to the Announcement, the announcement of the Company dated 30 December 2010 and the circular of the Company dated 20 January 2011, in relation to, among other matters, the Property Lease Agreement and the Processing Agreement.

On 30 December 2010, TJ Goldsun has entered into (i) the Property Lease Agreement with Flourish Steel, pursuant to which TJ Goldsun agreed to lease the Properties from Flourish Steel for a term of 20 years commencing from 1 January 2011 and ending on 31 December 2030; and (ii) the Processing Agreement with Flourish Steel, pursuant to which Flourish Steel agreed to provide processing service of steel wires to TJ Goldsun for a term of 20 years commencing from 1 January 2011 and ending on 31 December 2030.

– 12 –

LETTER FROM THE BOARD

Continuing Connected Transactions A are continuing connected transactions and the annual caps under the Property Lease Agreement and the Processing Agreement have been aggregated.

As disclosed in the Announcement and the circular of the Company dated 20 January 2011, it was not practicable to the Company to determine estimated annual caps for the utilities expenses and processing charges for 20 years but only the first three years of the terms. As such, the aggregate annual caps for Continuing Connected Transactions A for the remainder of the respective terms (the period commencing from 1 January 2014 to 31 December 2030), have not yet been approved by the Independent Shareholders. In connection therewith, approval of the renewal of the annual caps for the Property Lease Agreement and the Processing Agreement for the three years ending 31 December 2016 will be obtained from the Independent Shareholders.

Historical Transaction Amounts and Renewed Annual Caps

Set out below are (i) the historical transaction amounts paid by TJ Goldsun to Flourish Steel under the Property Lease Agreement and the Processing Agreement for the two years ended 31 December 2012 and the six months ended 30 June 2013, and the aggregate historical transaction amounts in respect of Continuing Connected Transactions A; and (ii) the annual caps of the amount payable by TJ Goldsun to Flourish Steel under each of the Property Lease Agreement and the Processing Agreement for the three years ending 31 December 2016, and the Aggregate Renewed Annual Caps:

The Property Lease Agreement (Note 1) Rental (Note 3) Actual utilities expenses/ Estimated utilities expenses (Note 4) Aggregate amount The Processing Agreement (Note 2) Actual processing charges/Estimated processing charges payable (Note 5) Continuing Connected Transactions A Historical Transaction Amounts/Aggregate Renewed Annual Caps	Historical Transaction Amounts For the year ended 31 December For the six months ended 30 June 2011 2012 2013 (RMB) (RMB) (RMB) 5,500,000 5,500,000 2,750,000 8,396,938 10,045,911 5,132,343 13,896,938 15,545,911 7,882,343 18,696,544 26,746,774 14,896,678 32,593,482 42,292,685 22,779,021	Renewed Annual Caps For the year ending 31 December 2014 2015 2016 (RMB) (RMB) (RMB) 5,500,000 5,500,000 6,050,000 13,800,000 15,200,000 16,750,000 19,300,000 20,700,000 22,800,000 50,100,000 55,100,000 60,600,000 69,400,000 75,800,000 83,400,000	Renewed Annual Caps For the year ending 31 December 2014 2015 2016 (RMB) (RMB) (RMB) 5,500,000 5,500,000 6,050,000 13,800,000 15,200,000 16,750,000 19,300,000 20,700,000 22,800,000 50,100,000 55,100,000 60,600,000 69,400,000 75,800,000 83,400,000
			22,800,000
			60,600,000
			83,400,000

– 13 –

LETTER FROM THE BOARD

Notes:

• (1) The annual caps for the transactions under the Property Lease Agreement were determined after taking into account of the agreed rent under the Property Lease Agreement and the estimated utilities expenses (including water, electricity, gas, etc.) payable by TJ Goldsun to Flourish Steel.

• (2) The annual caps for the transactions under the Processing Agreement were determined taking into account the estimated processing charges payable by TJ Goldsun to Flourish Steel.

• (3) Pursuant to the Property Lease Agreement, the rental is subject to adjustment once for every five years. The actual amount of adjustment is to be negotiated between the parties to the Property Lease Agreement but in any event shall not exceed 10% of the preceding annual rental. In determining the renewed annual caps of the rental under the Property Lease Agreement, assumption of a 10% increase in the rental payable by TJ Goldsun during the year ending 31 December 2016 has been made, with reference to the historical inflation rate in the PRC since 2011 ranged from approximately 2% to 6% as reported by the National Bureau of Statistics of the PRC. TJ Goldsun shall pay the rental quarterly in advance on or before the 10th day at the commencement of each quarter.

• (4) The utilities expenses, which is based on the actual usage of TJ Goldsun, shall be payable to Flourish Steel within 15 days upon receiving the relevant invoices from Flourish Steel.

• (5) The processing charges are payable to Flourish Steel monthly, base on the monthly processing amount approved by TJ Goldsun.

The annual caps for the transactions under the Property Lease Agreement for the three years ending 31 December 2016 were determined after taking into account of the agreed rental under the Property Lease Agreement and the estimated utilities expenses for the three years ending 31 December 2016. The estimated utilities expenses are based on a number of factors including: (i) the maximum annual production capacity for the three years ending 31 December 2016; (ii) the historical utilities expenses and production quantity for the years ended 31 December 2011 and 2012 and the six months ended 30 June 2013; and (iii) the estimated inflation of utilities expenses for the three years ending 31 December 2016.

As disclosed in the circular of the Company dated 20 January 2011, the processing charges under the Processing Agreement should base on the average market price of processing steel wires with the same specifications. The Group has regularly checked the available market comparables in Tianjin, i.e. the processing charges of steel wires with similar specifications, since the entering into of the Processing Agreement. Such market comparables are subject to the approval by both parties.

The annual caps for the transactions under the Processing Agreement for the three years ending 31 December 2016 are estimated after taking into account: (i) the annual target quantity of 35,000 tons of steel wires (the maximum processing quantity agreed under the Processing Agreement) will be processed by Flourish Steel for the three years ending 31 December 2016, taking into account the actual processing quantity of approximately 17,500 tons, 25,100 tons and 13,400 tons for the two years ended 31 December 2012 and the six months ended 30 June 2013 respectively, which shows an increasing trend; (ii) the weighted average unit processing cost (based on the estimated processing quantity of wire ropes with different specifications, which could be priced from a few hundred yuan up to two thousand yuan depends on the specifications, and the present processing unit price with reference to the market price); and (iii) the estimated inflation of processing charges for the three years ending 31 December 2016, with reference to the historical GDP of the PRC.

– 14 –

LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE PROPERTY LEASE AGREEMENT AND THE PROCESSING AGREEMENT

Reference is made to the circular of the Company dated 20 January 2011 for the reasons and benefits for the Property Lease Agreement and the Processing Agreement. The Group entered into the Property Lease Agreement to relocate the existing manufacturing plant to the Properties that is located in an industrial park with consummated environmental protection facility in order to comply with a relocation notice issued by a PRC government authority.

By entering into the Processing Agreement and engaging Flourish Steel as service provider for upstream processing of steel wire ropes, it was expected that significant amount of costs and expenses relating to the environmental protection can be saved. Further, the transportation costs would be reduced by the fact that the processing plant of Flourish Steel and the Properties were in the same industrial park and the technical staff of TJ Goldsun could have a close monitor over the processing quality and efficiency of Flourish Steel.

The Directors (including Independent Non-executive Directors) considered that the terms of the Property Lease Agreement and the Processing Agreement and Continuing Connected Transactions A have been conducted in the ordinary and usual course of business of the Group and are on normal commercial terms; and the terms of each of the Property Lease Agreement and the Processing Agreement and the Aggregate Renewed Annual Caps are fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

INFORMATION OF THE GROUP, TJ GOLDSUN AND FLOURISH STEEL

The Group is principally engaged in the manufacturing and sale of metal products and building construction materials. The Company is an investment holding company and TJ Goldsun is engaged in the manufacturing and sales of steel wire ropes for elevators in the PRC. Flourish Steel is principally engaged in processing of various metallic products and cables, and manufacturing and sales of metallurgic product.

LISTING RULES IMPLICATIONS

As at the Latest Practicable Date, as both TJ Metallurgy and Flourish Steel are subsidiary of TJMG, Flourish Steel is therefore an associate of TJ Metallurgy which is a substantial shareholder of TJ Goldsun, and hence a connected person of the Company.

The Acquisition constitutes a connected transaction of the Company. As the applicable percentage ratios in respect of the Purchase Price exceed 5% and the Purchase Price is more than HK$10,000,000, the Equipment Sale and Purchase Agreement is therefore subject to the reporting, announcement and Independent Shareholders’ approval requirements pursuant to Chapter 14A of the Listing Rules. As one or more of the applicable percentage ratios (as defined in the Listing Rules) in respect of the Acquisition exceed 5% but less than 25%, the Acquisition also constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules. To the best knowledge, information and belief of the Directors, no Director has material interest in the Acquisition.

– 15 –

LETTER FROM THE BOARD

Continuing Connected Transactions B constitute continuing connected transactions of the Company. Although the applicable percentage ratios of the annual caps under the Equipment Lease Agreement exceed 0.1% but are less than 5%, as disclosed in the announcement of the Company dated 21 August 2013, in light of the arrangement under the Equipment Sale and Purchase Agreement and the Equipment Lease Agreement that the Subject Equipment acquired by TJ Goldsun will be leased back to Flourish Steel for a term of 20 years, the terms of the Equipment Lease Agreement (including the annual caps for its entire terms) and the Continuing Connected Transactions B should also be subject to the reporting, announcement, Independent Shareholders’ approval and annual review requirements pursuant to Chapter 14A of the Listing Rules. To the best knowledge, information and belief of the Directors, no Director has material interest in Continuing Connected Transactions B.

As disclosed in the circular of the Company dated 20 January 2011, Continuing Connected Transactions A are continuing connected transactions of the Company. As the applicable percentage ratios in respect of the Aggregate Renewed Annual Caps will exceed 25% and the aggregate annual consideration is more than HK$10,000,000, the Aggregate Renewed Annual Caps are therefore subject to the reporting, announcement, Independent Shareholders’ approval and annual review requirements pursuant to Chapter 14A of the Listing Rules. To the best knowledge, information and belief of the Directors, no Director has material interest in the Property Lease Agreement and the Processing Agreement.

No Shareholders is required to abstain from voting if the Company has to convene a general meeting to approve the Acquisition, Continuing Connected Transactions B and Aggregate Renewed Annual Caps. On 1 August 2013, a closely allied group of Shareholders, namely, Mr. Pang (an Executive Director and a substantial Shareholder) and Golik Investments Ltd. (a company wholly owned by Mr. Pang), holding 151,674,708 Shares and 195,646,500 Shares respectively as at the Latest Practicable Date (representing an aggregate of approximately 61.81% of the entire issued share capital of the Company and having the right to attend and vote at such general meeting), have given to the Company their written approval for the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Caps.

As such, an application has been made to the Stock Exchange for a waiver of the requirement of the Independent Shareholders’ approval to the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Caps be given by a majority vote at a general meeting of the Shareholders and to accept a written Independent Shareholders’ approval pursuant to Rule 14A.43 of the Listing Rules and the Stock Exchange granted such a wavier to the Company. Details of which are set out in the announcement of the Company dated 21 August 2013.

FORMATION OF THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee, comprising all Independent Non-executive Directors, has been formed to advise the Independent Shareholders as to whether the Acquisition, Continuing Connected Transactions B and Aggregate Renewed Annual Caps are in the interests of the Company and the Shareholders as a whole and are fair and reasonable so far as the Shareholders are concerned.

– 16 –

LETTER FROM THE BOARD

Donvex Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the Acquisition, Continuing Connected Transactions B and Aggregate Renewed Annual Caps are fair and reasonable so far as the Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole.

RECOMMENDATIONS

Your attention is drawn to the letter from the Independent Board Committee set out on pages 18 to 19 of this circular. Your attention is also drawn to the letter of advice from Donvex Capital which contains, among other things, their advice to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Caps, and the principal factors and reasons considered by them in arriving at such advice. The text of the letter from Donvex Capital is set out on pages 20 to 34 of this circular.

The Independent Board Committee, having taken into account of the advice of Donvex Capital, considers that the terms of each of the Equipment Sale and Purchase Agreement and the Equipment Lease Agreement (including the annual caps for its entire terms) are on normal commercial terms and are in the interests of the Company and the Shareholders as a whole, and the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Caps are fair and reasonable so far as the Company and the Independent Shareholders are concerned. If a general meeting of the Shareholders has to be held for the purpose of considering and approving the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Caps, the Directors (including Independent Non-executive Directors) would recommend the Independent Shareholders to vote in favour of the relevant resolution(s) to approve the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Caps.

ADDITIONAL INFORMATION

Your attention is drawn to the information contained in the appendix to this circular.

Yours faithfully, For and on behalf of Golik Holdings Limited Pang Tak Chung Chairman

– 17 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

GOLIK HOLDINGS LIMITED ��������*

(Incorporated in Bermuda with limited liability) (Stock Code: 1118)

6 September 2013

To the Independent Shareholders,

Dear Sir or Madam,

(1) DISCLOSEABLE AND CONNECTED TRANSACTION — THE EQUIPMENT SALE AND PURCHASE AGREEMENT;

(2) CONTINUING CONNECTED TRANSACTIONS — THE EQUIPMENT LEASE AGREEMENT; AND

(3) CONTINUING CONNECTED TRANSACTIONS — RENEWAL OF ANNUAL CAPS UNDER THE PROPERTY LEASE AGREEMENT AND THE PROCESSING AGREEMENT

We refer to the circular issued by the Company to the Shareholders dated 6 September 2013 (the ‘‘Circular’’), of which this letter forms part. Terms defined in the Circular shall bear the same meanings when used herein unless the context requires otherwise.

We have been appointed by the Board as the Independent Board Committee to advise you in connection with the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Caps and to advise you as to whether, in our opinion, the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Cap are fair and reasonable so far as the Shareholders are concerned. Details of the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Cap are set out in the letter from the Board contained in the Circular. Donvex Capital has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Cap. Details of its advice and the principal factors taken into consideration in arriving at its recommendations are set out in the letter from Donvex Capital contained in the Circular.

Having considered the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Cap and taking into account the information contained in the Circular and the advice of Donvex Capital, we are of the opinion that the terms of each of the Equipment Sale and Purchase Agreement and the Equipment Lease Agreement (including the annual caps for its entire terms) are on normal commercial terms; the Acquisition, Continuing Connected

• For identification purpose only

– 18 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Transactions B and the Aggregate Renewed Annual Cap are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, if a general meeting of the Shareholders has to be held for the purpose of considering and, if thought fit, approving the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Cap, we would recommend the Shareholders to vote in favour of the resolution(s) in this regard.

Yours faithfully, Golik Holdings Limited Mr. Yu Kwok Kan, Stephen Mr. Chan Yat Yan Mr. Lo Yip Tong Independent Non-executive Directors

– 19 –

LETTER FROM DONVEX CAPITAL

The following is the full text of the letter from Donvex Capital Limited setting out their advice to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

==> picture [116 x 71] intentionally omitted <==

Unit 1305, 13th Floor Carpo Commercial Building 18–20 Lyndhurst Terrace Central Hong Kong

6 September 2013

The Independent Board Committee and the Independent Shareholders of Golik Holdings Limited

Dear Sirs,

(1) DISCLOSEABLE AND CONNECTED TRANSACTION — THE EQUIPMENT SALE AND PURCHASE AGREEMENT; (2) CONTINUING CONNECTED TRANSACTIONS — THE EQUIPMENT LEASE AGREEMENT; AND

(3) CONTINUING CONNECTED TRANSACTIONS — RENEWAL OF ANNUAL CAPS UNDER THE PROPERTY LEASE AGREEMENT AND THE PROCESSING AGREEMENT

INTRODUCTION

We refer to our engagement as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to (i) the Equipment Sale and Purchase Agreement; (ii) the Equipment Lease Agreement; and (iii) the Aggregate Renewed Annual Caps, details of which are set out in the letter from the Board contained in the circular of the Company dated 6 September 2013 to the Shareholders (the ‘‘Circular’’), of which this letter forms part. Terms used herein have the same meanings as those defined in the Circular unless otherwise stated.

On 1 August 2013, TJ Goldsun, an indirect non wholly-owned subsidiary of the Company, has entered into the Equipment Sale and Purchase Agreement with Flourish Steel, for the sale and purchase of the Subject Equipment at the Purchase Price of RMB24,960,000 (equivalent to approximately HK$31,594,937).

On 1 August 2013, TJ Goldsun has entered into the Equipment Lease Agreement with Flourish Steel in respect of the lease of the Subject Equipment by TJ Goldsun to Flourish Steel for a term of 20 years commencing from the date of the Equipment Lease Agreement.

– 20 –

LETTER FROM DONVEX CAPITAL

On 30 December 2010, TJ Goldsun has entered into (i) the Property Lease Agreement with Flourish Steel, pursuant to which TJ Goldsun agreed to lease the Properties from Flourish Steel for a term of 20 years commencing from 1 January 2011 and ending on 31 December 2030; and (ii) the Processing Agreement with Flourish Steel, pursuant to which Flourish Steel agreed to provide processing service of steel wires to TJ Goldsun for a term of 20 years commencing from 1 January 2011 and ending on 31 December 2030.

The aggregate annual caps for Continuing Connected Transactions A other than the first three years of the terms, have not yet been approved by the Independent Shareholders. In connection therewith, approval of the Aggregate Renewed Annual Caps has to be obtained from the Independent Shareholders.

As at the date of this Circular, Flourish Steel is an associate of the substantial shareholder of TJ Goldsun and therefore is a connected person of the Company. As such, the Acquisition constitutes a connected transaction of the Company and the transactions contemplated under the Equipment Lease Agreement, the Property Lease Agreement and the Processing Agreement constitute continuing connected transactions of the Company.

Given that the applicable percentage ratios in respect of the Purchase Price under the Acquisition exceed 5% and such Purchase Price is more than HK$10,000,000, the Acquisition constitutes a discloseable and connected transaction of the Company and is therefore subject to the reporting, announcement and Independent Shareholders’ approval requirements pursuant to Chapter 14 and Chapter 14A of the Listing Rules.

In light of the arrangement under the Equipment Sale and Purchase Agreement and the Equipment Lease Agreement that the Subject Equipment acquired by TJ Goldsun will be leased back to Flourish Steel for a term of 20 years, as the Acquisition is a non-exempt connected transaction subject to the Independent Shareholders’ approval requirement, the terms of the Equipment Lease Agreement (including the annual caps for its entire terms) and Continuing Connected Transactions B should also be subject to the reporting, announcement, Independent Shareholders’ approval and annual review requirements pursuant to Chapter 14A of the Listing Rules.

As the applicable percentage ratios in respect of the Aggregate Renewed Annual Caps will exceed 25% and the aggregate annual consideration is more than HK$10,000,000, the Aggregate Renewed Annual Caps are therefore subject to the reporting, announcement, Independent Shareholders’ approval and annual review requirements pursuant to Chapter 14A of the Listing Rules.

No Shareholders is required to abstain from voting if the Company has to convene a general meeting to approve the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Caps. On 1 August 2013, a closely allied group of Shareholders, namely, Mr. Pang (an Executive Director and a substantial Shareholder) and Golik Investments Ltd. (a company wholly owned by Mr. Pang), holding 151,674,708 Shares and 195,646,500 Shares respectively as at the Latest Practicable Date (representing an aggregate of approximately 61.81% of the entire issued share capital of the Company and having the right to attend and vote at such general meeting), have given to the Company their written approval for the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Caps.

– 21 –

LETTER FROM DONVEX CAPITAL

As such, an application for waiver of the Shareholders’ meeting was made to the Stock Exchange pursuant to Rule 14A.43 of the Listing Rules has been made on 6 August 2013. On 7 August 2013, the Stock Exchange has granted the said waiver to the Company.

Mr. Yu Kwok Kan, Stephen, Mr. Chan Yat Yan and Mr. Lo Yip Tong, the Independent Nonexecutive Directors, have been appointed as members of the Independent Board Committee to advise the Independent Shareholders as to whether the terms of the Equipment Sale and Purchase Agreement, the Equipment Lease Agreement and the Aggregate Renewed Annual Caps are (i) on normal commercial terms; (ii) in the ordinary and usual course of business of the Group; (iii) fair and reasonable as far as the Independent Shareholders are concerned; and (iv) in the interests of the Company and the Shareholders as a whole; and to advise the Independent Shareholders as to whether to vote in favour of the relevant resolution(s) to approve the Acquisition, Continuing Connected Transactions B and the Aggregate Renewed Annual Caps. Being the Independent Financial Adviser, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders in such regard.

BASIS OF OUR OPINION

In formulating our opinion, we consider that we have reviewed sufficient and relevant information and documents and have taken reasonable steps as required under Rule 13.80 of the Listing Rules to reach an informed view and to provide a reasonable basis for our recommendation. We have relied on the information, statements, opinion and representations contained or referred to in this circular and all information and representations which have been provided by the Directors, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so at the date hereof. We have also assumed that all statements of belief, opinion and intention of the Directors as set out in the letter from the Board contained in this circular were reasonable made after due and careful inquiry. We have also sought and obtained confirmation from the Company that no material facts have been omitted from the information provided and referred to in this circular.

The Company confirmed that it has provided us with all currently available information and documents which are available under present circumstances to enable us to reach an informed view and we have relied on the accuracy of the information contained in this circular so as to provide a reasonable basis of our opinion. We have no reason to suspect that any material facts or information, which is known to the Company, have been omitted or withheld from the information supplied or opinions expressed in this circular nor to doubt the truth and accuracy of the information and facts, or the reasonableness of the opinions expressed by the Company and the Directors which have been provided to us. We have not, however, carried out any independent verification on the information provided to us by the Directors, nor have we conducted any form of independent in-depth investigation into business and affairs of the prospects of the Company, Flourish Steel or any of their respective subsidiaries or associates.

– 22 –

LETTER FROM DONVEX CAPITAL

PRINCIPAL FACTORS AND REASONS CONSIDERED FOR THE EQUIPMENT SALE AND PURCHASE AGREEMENT

In arriving at our opinion in respect of the Equipment Sale and Purchase Agreement, we have considered the following principal factors and reasons:

1. Information of the Group, TJ Goldsun and Flourish Steel

The Group is principally engaged in the manufacturing and sale of metal products and building construction materials. TJ Goldsun is an indirect non wholly-owned subsidiary of the Company and engaged in the manufacturing and sales of steel wire ropes for elevators. Flourish Steel is a company incorporated in the PRC with limited liability and principally engaged in processing of various metallic products and cables, and manufacturing and sales of metallurgic products.

2. Background of the Equipment Sale and Purchase Agreement

On 1 August 2013, TJ Goldsun entered into the Equipment Sale and Purchase Agreement with Flourish Steel, pursuant to which, Flourish Steel has agreed to sell and TJ Goldsun has agreed to purchase (i) equipment for part of the manufacturing process of steel wire ropes for elevators; and (ii) electric cables. The original purchase cost of the Subject Equipment is approximately RMB21,560,000 (equivalent to approximately HK$27,291,139), which were acquired by Flourish Steel during 2009 to 2010 and have been used by Flourish Steel since 2011 after installation. The Company did not possess the equipment identical to, or carrying the same function as the Subject Equipment. Flourish Steel will also make available the know-how in relation to the operation of the Subject Equipment to TJ Goldsun as stipulated in the Equipment Sale and Purchase Agreement.

3. Licencing Issue of TJ Goldsun

TJ Goldsun used to be a supplemental licence holder of the licences in connection with the manufacturing of steel wire ropes for elevators in the PRC (the ‘‘Licence’’) granted to Flourish Steel. Flourish Steel, being the primary holder of the Licence, is permitted to manufacture a wide range of steel wire rope products and semi-products with different specifications as set out in the Licence, which will enable such holder to engage in the whole process and participate in every steps of the manufacturing of steel wire ropes for elevators. On the other hand, TJ Goldsun, being the supplemental holder of the Licence, is permitted to manufacture part of the elevator steel wire rope products and semi-products permitted to be manufactured by the primary holder of the Licence. Besides, only sole (or primary) holders of the Licence, but not the supplemental holders of the Licence, could be officially shown on the register of Licence holders available for public search on the internet.

Pursuant to the licencing policy in the PRC, the applicant of the Licence should possess the equipment necessary for the whole manufacturing process. After the completion of the Acquisition, TJ Goldsun will have the title of the Subject Equipment which will allow TJ Goldsun to meet the criteria for the application of the Licence.

– 23 –

LETTER FROM DONVEX CAPITAL

For the purpose of, among other things, expansion of the Group’s elevator business and in order to obtain certain tax benefits, TJ Goldsun relocated its manufacturing plant from Hexi District, Tianjin to Jinghai Economic Development Zone in 2011 (the ‘‘Relocation’’), which are under the administration of different local government authorities, although both are in Tianjin City. After the Relocation, TJ Goldsun would like to apply as the sole holder of the Licence in order to engage in the whole process and participate in every steps of the manufacturing of steel wire ropes for elevators independently. The elevator steel wire rope manufacturing business of TJ Goldsun was not affected during the application period, given that TJ Goldsun was involved in part of but not the whole manufacturing process. Therefore there was no material impact to the operation of TJ Goldsun.

4. Industry Overview

In accordance with the report with title ‘‘Research on China’s Elevator Industry, 2013– 2017’’ in May 2013 issued by Huidian Research, one of the leading industry consulting & market survey firm in China who provides market research, consumer survey, expert interview, project survey, competition intelligence service for numerous Fortune Global 500 Corporations, it stated that China is the largest country in terms of elevator’s production sales volume and installation. Driven by the rapid urbanization in China, the annual sales volume of China’s elevators approximately accounts for 50% of the world’s sales volume. In 2012, the production of elevators totaled 529 thousand sets in China (including 57 thousand sets of escalators), with a net increase of 72 thousand sets compared with 457 thousand sets in 2011 (a 15.8% increase year-on-year). The domestic demand was 476 thousand sets, a year-on-year growth of 15.8%.

In accordance with the report under the title ‘‘Elevators in China to 2013’’ in December 2009 issued by The Freedonia Group, Inc., one of the leading international industry market research company which provides its clients with information and analysis needed to make informed strategic decisions for their businesses, it stated that that the elevator industry in China worth over RMB66 billion.

Based on the above information, it is reasonable to conclude that the potential growth of steel wire rope in China, being one of the essential component of elevator, is enormous as a result of the increase demand of elevator due to rapid urbanization in China.

5. Reason for entering into the Equipment Sale and Purchase Agreement

By acquiring the Subject Equipment, TJ Goldsun will be able to apply the Licence. In addition, pursuant to the Equipment Sale and Purchase Agreement, Flourish Steel undertakes that it will provide assistance to TJ Goldsun to obtain the Licence. The Directors believe that the Acquisition as well as the assistance from Flourish Steel will be conducive to TJ Goldsun’s proposed application of the Licence, which will facilitate the financial performance of TJ Goldsun as the Directors believe that the brand image of TJ Goldsun will be enhanced as a sole (or primary) holder of the Licence and accordingly broadening its customer base. Should TJ Goldsun be granted the Licence, it can establish

– 24 –

LETTER FROM DONVEX CAPITAL

a stronger market position by offering a wider range of elevator steel wire rope products to its customers, which may in turn boost the revenue generated from the Group’s metal products.

As a sole (or primary) holder of the Licence, TJ Goldsun as a manufacturer capable of manufacturing fully-processed elevator steel wire ropes independently without relying on the Licence granted to Flourish Steel, will enjoy more flexibility being free to engage in its desire manufacturing steps and a better image in the market position. TJ Goldsun will then be able to focus on the manufacturing steps with higher profit margin by itself, while on the other hand, it may outsource the production steps with lower profit margin.

The Directors (including Independent Non-executive Directors) are of the view that the Equipment Sales and Purchase Agreement were entered into on normal commercial terms and the terms of the Equipment Sale and Purchase Agreement and the Acquisition are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

6. Basis of the Acquisition

The Purchase Price payable by TJ Goldsun is RMB24,960,000 (equivalent to approximately HK$31,594,937). The Purchase Price was determined after arm’s length negotiation between TJ Goldsun and Flourish Steel with reference to appraisal value of the Subject Equipment as reflected in the valuation report issued by the Valuer dated 2 May 2013 in the sum of approximately RMB21,333,400 (equivalent to approximately HK$27,004,304) plus 17% applicable value added tax in the sum of approximately RMB3,626,600 (equivalent to approximately HK$4,590,633).

We have reviewed and enquired the Valuer’s qualification and experience in relation to the performance of the valuation. We understand that they are a registered valuation company with handful experience in performing valuation for asset and machinery transactions of listed companies in Hong Kong and the PRC. The Valuer confirmed that it is an independent third party to the Company, TJ Goldsun and Flourish Steel. We also reviewed the terms of the Valuer’s engagement, in particular, their scope of work, and noted that it is appropriate to the opinion required to be given and there is no limitation on the scope of work which might adversely impact on the degree of assurance given by them in the valuation report.

We have reviewed the valuation report issued by the Valuer dated 2 May 2013 and also discussed with the Valuer regarding, among other things, the basis and assumptions made and the methodology adopted in conducting the valuation of the Subject Equipment. We understand that the Valuer has (i) adopted the cost method for the conclusion of the valuation under which the value of the Subject Equipment was accessed by deducting the wear and tear or depreciation incurred by the Subject Equipment from the costs necessary for the re-acquisition of the new equipment under present condition to determine the assessed value of the Subject Equipment; and (ii) conducted site visit and market research for the valuation. In light of the above, we are of the view that the valuation report has been reasonably prepared and is normal in nature without any unusual assumption, and the basis of the valuation report is fair and reasonable.

– 25 –

LETTER FROM DONVEX CAPITAL

In view of the above basis of the Acquisition and given the fact that (i) the possession of the Subject Equipment is the criteria to obtain the Licence; (ii) the Subject Equipment acquired by the TJ Goldsun under the Equipment Sale and Purchase Agreement will be leased to Flourish Steel in accordance with the Equipment Lease Agreement; (iii) the total rent entitled by TJ Goldsun from Flourish Steel during the entire term of the Equipment Lease Agreement is RMB26,400,000 (equivalent to approximately HK$33,417,722), which is more or less the same as the Purchase Price paid by TJ Goldsun to Flourish Steel; and (iv) the reasonableness of the valuation report on the Subject Equipment, we are in the opinion that the terms of the Equipment Sales and Purchase Agreement and the Acquisition are fair and reasonable, and in the interest of the Group and the Shareholders as a whole.

7. Other terms

Payment terms of the Equipment Sale and Purchase Agreement

Under the Equipment Sale and Purchase Agreement, payments shall be paid in cash by TJ Goldsun to Flourish Steel in the following manner:

• (1) RMB12,500,000 (equivalent to approximately HK$15,822,785) payable within seven days from the date of the Equipment Sale and Purchase Agreement;

• (2) RMB6,000,000 (equivalent to approximately HK$7,594,937) payable in the third quarter of 2013; and

• (3) RMB6,460,000 (equivalent to approximately HK$8,177,215) payable in the fourth quarter of 2013.

The Group intends to fund the Purchase Price from its internal resources. The Directors consider that the Equipment Sale and Purchase Agreement was entered into on normal commercial terms and on terms that are fair and reasonable and the Acquisition is in the interests of the Company and its shareholders as a whole.

8. Financial information

• (i) Net asset value

According to the 2012 annual report of the Company for the financial year ended 31 December 2012, the total equity attributable to Shareholders of the Company as at 31 December 2012 was approximately HK$794,726,000. As advised by the Directors, the Group’s net asset value would not be materially affected upon completion of the Equipment Sale and Purchase Agreement.

– 26 –

LETTER FROM DONVEX CAPITAL

(ii) Working capital

According to the 2012 annual report of the Company for the financial year ended 31 December 2012, the total bank balances and cash of the Group amounted to approximately HK$373,466,000. As advised by the Directors, since the Purchase Price shall be paid in cash by TJ Goldsun to Flourish Steel, the Group’s working capital is therefore expected to decrease slightly as a result of the cash outflow.

It should be noted that the above-mentioned analyses are for illustrative purpose only and does not purport to represent how the financial positions of the Group will be upon the completion of the Equipment Sale and Purchase Agreement.

PRINCIPAL FACTORS AND REASONS CONSIDERED FOR THE EQUIPMENT LEASE AGREEMENT

In arriving at our opinion in respect of the Equipment Lease Agreement, we have considered the following principal factors and reasons:

1. Background of the Equipment Lease Agreement

On 1 August 2013, TJ Goldsun has entered into the Equipment Lease Agreement with Flourish Steel, pursuant to which, TJ Goldsun has agreed to lease the Subject Equipment to Flourish Steel for a term of 20 years commencing from 1 August 2013. The monthly rent payable by Flourish Steel to TJ Goldsun under the Equipment Lease Agreement shall be RMB110,000 (equivalent to approximately HK$139,241) payable quarterly. The total rent entitled by TJ Goldsun from Flourish Steel during the entire term of the Equipment Lease Agreement is RMB26,400,000 (equivalent to approximately HK$33,417,722), which is more or less the same as the Purchase Price paid by TJ Goldsun to Flourish Steel.

2. Reason for the Equipment Lease Agreement

Pursuant to the Equipment Lease Agreement, the Subject Equipment acquired by the TJ Goldsun under the Equipment Sale and Purchase Agreement will be leased to Flourish Steel, while Flourish Steel will be responsible for the operation and maintenance of the Subject Equipment. By making such arrangement, TJ Goldsun will not be involved in the operation and maintenance of the Subject Equipment after the Acquisition and hence the production costs in association with the Subject Equipment can be reduced. In addition, huge amount of acid waste and sewage will be generated during the upstream processing of steel wire ropes such as heat treatment and phosphating. Party who engages these steps will be responsible for the environmental expenditure. By outsourcing the preceding steps through the Equipment Lease Agreement, cost could be saved by TJ Goldsun. TJ Goldsun can therefore focus its human and financial resources in other manufacturing businesses with higher profit margin, while its proposed application of the Licence will not be affected by such arrangement.

– 27 –

LETTER FROM DONVEX CAPITAL

The Directors (including Independent Non-executive Directors) are of the view that the terms of the Equipment Lease Agreement (including the annual caps for its entire terms) and the Continuing Connected Transactions B are conducted in the ordinary and usual course of business of the Group and are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

3. Annual Caps and Historical Transaction Amounts

The rent payable by Flourish Steel under the Equipment Lease Agreement will remain unchange throughout the entire terms. The annual caps under the Equipment Lease Agreement for the three years ending 31 December 2015 are as follows:

Annual Caps	For the year ending 31 December 2013 2014 2015 (RMB) (RMB) (RMB) 550,000 1,320,000 1,320,000

TJ Goldsun did not conduct any relevant transaction in relation to the Subject Equipment with Flourish Steel.

4. Basis of the Rent

The monthly rent was determined after arm’s length negotiation between TJ Goldsun and Flourish Steel based on the Purchase Price (RMB24,960,000) and the period of lease (20 years), since to the best knowledge of the Directors there was no prevailing market rate available. The total rent entitled by TJ Goldsun from Flourish Steel during the entire term of the Equipment Lease Agreement is RMB26,400,000 (equivalent to approximately HK$33,417,722), which is more or less the same as the Purchase Price paid by TJ Goldsun to Flourish Steel. We are of the view that the monthly rent determined based on the Purchase Price, which had been evaluated in the Valuation Report, is fair and reasonable.

Consider that (i) the Acquisition enables TJ Goldsun to apply the Licence, which will enhance the brand image and broaden the customer base of TJ Goldsun, and may finally boost the revenue generated from the Group’s metal products; (ii) TJ Goldsun would be able to compensate more or less the same as the Purchase Price paid from the rental income within the lease period; (iii) TJ Goldsun will not be responsible for the costs in connection with the operation and maintenance of the Subject Equipment as well as the environmental expenditure incurred during the upstream processing steps, which would be able to compensate the time value forgone to certain extent; and (iv) the potential growth of the demand of steel wire as a result of the increase demand of elevator in China as stated in the section under ‘‘Industry Overview’’, we are of the view that the benefits of the Acquisition, including the revenue to be generated from the Acquisition and the cost saving in relation to the environmental expenditure as a result of the outsourced production steps to Flourish Steel, outweigh the time value impact on the pro-longed rental income in accordance with the 20 years of the Equipment Lease Agreement.

– 28 –

LETTER FROM DONVEX CAPITAL

5. Terms of the Equipment Lease Agreement

The term of the Equipment Lease Agreement is 20 years commencing from 1 August 2013. Based on the experience of the management, the Company estimates that the Subject Equipment shall have useful life or more than 20 years. It will be depreciated over 15 years, which follows the same accounting treatment to equipment in TJ Goldsun. We have discussed with the management of the Company and understands that to enter into the Equipment Lease Agreement, it could (i) guarantee a stable cash inflow to the Company; (ii) provide the total rental income to TJ Goldsun which is more or less similar to the Purchase Price of the Subject Equipment under the Equipment Sale and Purchase Agreement for recovery of the Purchase Price; and (iii) allow Flourish Steel to be responsible for the operation and repair and maintenance of the Subject Equipment while TJ Goldsun has the title of the Subject Equipment for the application of the Licence.

The licensing issue to TJ Goldsun is a unique issue and thus no similar contracts had been conducted by other companies. In order to be qualified in applying the Licence and outsource the production steps with lower profit margin, TJ Goldsun entered into the Equipment Lease Agreement as a result. By considering the costs saved and the benefits to TJ Goldsun after getting the Licence, we are of the view that it is commercially desirable to secure a term of longer than three years for the Equipment Lease Agreement. Therefore, we concur with the view of the Directors that the terms of the Equipment Lease Agreement (including the annual caps for its entire terms) and Continuing Connected Transactions B are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole, although they are not conducted in the ordinary and usual course of business of the Group.

6. Reason for having both the Equipment Sale and Purchase Agreement and the Equipment Lease Agreement

We consider both the Acquisition and the Equipment Lease Agreement part and parcel transaction after taking into account the following factors on a complete picture basis: (i) TJ Goldsun will be a manufacturer of fully-processed elevator steel wire ropes as a sole holder of the Licence, which will enhance its brand image and create new business opportunities; (ii) the advancement in market position as a manufacturer capable of manufacturing fully-processed elevator steel wire ropes; (iii) as the costs in connection with the operation and maintenance of the Subject Equipment in addition to the environmental expenditure incurred during the upstream processing steps are significant, by leasing back the Subject Equipment to Flourish Steel enables TJ Goldsun to enjoy the flexibility in choosing the manufacturing steps with higher profit margin; and (iv) the potential growth of the demand of steel wire as a result of the increase demand of elevator in China as stated in the section under ‘‘Industry Overview’’. In view of the above factors, we concur with the view of the Directors that although there is no significant return considering only the rental income under the Equipment Lease Agreement alone, by considering the arrangement as a whole, the benefits of the Acquisition, in particular the long term benefits and business prospects as a sole holder of the Licence, would outweigh the ‘‘opportunity cost’’ of the Purchase Price which is the pro-longed rental income. We

– 29 –

LETTER FROM DONVEX CAPITAL

are of the view that the Acquisition and the Equipment Lease Agreement are on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

PRINCIPAL FACTORS AND REASONS CONSIDERED FOR THE AGGREGATE RENEWED ANNUAL CAPS

In arriving at our opinion in respect of the Aggregate Renewed Annual Caps, we have considered the following principal factors and reasons:

1. Background of the Property Lease Agreement and the Processing Agreement

On 30 December 2010, TJ Goldsun has entered into (i) the Property Lease Agreement with Flourish Steel, pursuant to which TJ Goldsun agreed to lease the Properties from Flourish Steel for a term of twenty years commencing from 1 January 2011 and ending on 31 December 2030; and (ii) the Processing Agreement with Flourish Steel, pursuant to which Flourish Steel agreed to provide processing service of steel wires to TJ Goldsun for a term of twenty years commencing from 1 January 2011 and ending on 31 December 2030.

2. Reason for the Aggregate Renewed Annual Caps

As disclosed in the circular of the Company dated 20 January 2011, it was not practicable to the Company to determine estimated annual caps for the utilities expenses and processing charges for 20 years but only the first three years of the terms. As such, the aggregate annual caps for Continuing Connected Transactions A for the remainder of the respective terms (the period commencing from 1 January 2014 to 31 December 2030), have not yet been approved by the Independent Shareholders. In connection therewith, approval of the Aggregate Renewed Annual Caps has to be obtained from the Independent Shareholders.

– 30 –

LETTER FROM DONVEX CAPITAL

3. Historical Transaction Amounts and the Aggregate Renewed Annual Caps

Set out below are (i) the historical transaction amounts paid by TJ Goldsun to Flourish Steel under the Property Lease Agreement and the Processing Agreement for the two years ended 31 December 2012 and the six months ended 30 June 2013, and the aggregated historical transaction amounts in respect of Continuing Connected Transactions A; and (ii) the annual caps of the amount payable by TJ Goldsun to Flourish Steel under each of the Property Lease Agreement and the Processing Agreement for the three years ending 31 December 2016, and the Aggregate Renewed Annual Caps:

The Property Lease Agreement (Note 1) Rental (Note 3) Actual utilities expenses/ Estimated utilities expenses (Note 4) Aggregate amount The Processing Agreement (Note 2) Actual processing charges/ Estimated processing charges payable (Note 5) Continuing Connected Transactions A Historical Transaction Amounts/Aggregate Renewed Annual Caps	Historical Transaction For the year ended 31 December 2011 2012 (RMB) (RMB) 5,500,000 5,500,000 8,396,938 10,045,911 13,896,938 15,545,911 18,696,544 26,746,774 32,593,482 42,292,685	Amounts For the six months ended 30 June 2013 (RMB) 2,750,000 5,132,343 7,882,343 14,896,678 22,779,021	Renewed Annual Caps For the year ending 31 December 2014 2015 2016 (RMB) (RMB) (RMB) 5,500,000 5,500,000 6,050,000 13,800,000 15,200,000 16,750,000 19,300,000 20,700,000 22,800,000 50,100,000 55,100,000 60,600,000 69,400,000 75,800,000 83,400,000	Renewed Annual Caps For the year ending 31 December 2014 2015 2016 (RMB) (RMB) (RMB) 5,500,000 5,500,000 6,050,000 13,800,000 15,200,000 16,750,000 19,300,000 20,700,000 22,800,000 50,100,000 55,100,000 60,600,000 69,400,000 75,800,000 83,400,000
				22,800,000
				60,600,000
				83,400,000

Notes:

• (1) The annual caps for the transactions under the Property Lease Agreement were determined after taking into account of the agreed rent under the Property Lease Agreement and the estimated utilities expenses (including water, electricity, gas, etc.) payable by TJ Goldsun to Flourish Steel.

• (2) The annual caps for the transactions under the Processing Agreement were determined taking into account the estimated processing charges payable by TJ Goldsun to Flourish Steel.

• (3) Pursuant to the Property Lease Agreement, the rental is subject to adjustment once for every five years. The actual amount of adjustment is to be negotiated between the parties to the Property Lease Agreement but in any event shall not exceed 10% of the preceding annual rental. In determining the renewed annual caps of the rental under the Property Lease Agreement, assumption of a 10% increase in the rental payable by TJ Goldsun during the year ending 31 December 2016 has been made, with reference to the historical inflation rate in the PRC ranged from approximately 2% to 6% as reported by the National Bureau of Statistics of the PRC since 2011. TJ Goldsun shall pay the rental quarterly in advance on or before the 10th day at the commencement of each quarter.

• (4) The utilities expenses, which is based on the actual usage of TJ Goldsun, shall be payable to Flourish Steel within 15 days upon receiving the relevant invoices from Flourish Steel.

• (5) The processing charges are payable to Flourish Steel monthly, based on the monthly processing amount approved by TJ Goldsun.

– 31 –

LETTER FROM DONVEX CAPITAL

4. Basis of the Aggregate Renewed Annual Caps

The annual caps for the transactions under the Property Lease Agreement for the three years ending 31 December 2016 were determined after taking into account of the agreed rental under the Property Lease Agreement and the estimated utilities expenses for the three years ending 31 December 2016. The estimated utilities expenses are based on a number of factors including: (i) the maximum annual production capacity for the three years ending 31 December 2016; (ii) the historical utilities expenses and production quantity for the years ended 31 December 2011 and 2012 and the six months ended 30 June 2013; and (iii) the estimated inflation of utilities expenses for the three years ending 31 December 2016.

As disclosed in the circular of the Company dated 20 January 2011, the processing charges under the Processing Agreement should base on the average market price of processing steel wires with the same specifications. The Group has regularly checked the available market comparables in Tianjin, i.e. the processing charges of steel wires with similar specifications, since the entering into of the Processing Agreement. We have reviewed the information and the calculation of the historical transaction provided by the Company, the above mentioned mechanism in determining the processing charge ensures a relatively stable charges and will not out of reasonable range. We are in the view that the above mechanism is effective.

The annual caps for the transactions under the Processing Agreement for the three years ending 31 December 2016 are estimated after taking into account: (i) the annual target quantity of 35,000 tons of steel wires (the maximum processing quantity agreed under the Processing Agreement) will be processed by Flourish Steel for the three years ending 31 December 2016; (ii) the weighted average unit processing cost (based on the estimated processing quantity of wire ropes with different specifications, which could be priced from a few hundred yuan up to two thousand yuan depends on the specifications, and the present processing unit price with reference to the market price); and (iii) the estimated inflation of processing charges for the three years ending 31 December 2016, taking into account the historical GDP of the PRC.

We are of the view that the Aggregate Renewed Annual Caps are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole after considering the following factors:

The renewed annual caps under the Property Lease Agreement

• (i) Pursuant to the Property Lease Agreement, the rental is subject to adjustment once for every five years. Although the actual amount of adjustment is to be negotiated between the parties to the Property Lease Agreement, it shall not exceed 10% of the preceding annual rental. Having considered the ceiling of adjustment being set in the Property Lease Agreement, the renewed annual caps under the Property Lease Agreement are fair and reasonable and in the interests of the Company and Shareholders as a whole.

– 32 –

LETTER FROM DONVEX CAPITAL

• (ii) The utilities expenses incurred by TJ Goldsun for the two years ended 31 December 2012 and for the six months ended 30 June 2013 were approximately RMB8.40 million, RMB10.05 million and RMB5.13 million respectively. Based on the forecast utilities expenses, we consider that such forecast is reasonable, which the figures are based on historical expenses, annual production capacity and inflation. As such, we concur with the view of the Directors that the renewed annual caps under the Properties Lease Agreement are in the interests of the Company and Shareholders as a whole.

The renewed annual caps under the Processing Agreement

• (i) TJ Goldsun used to engage several factories in different places outside the industrial park to provide upstream processing service of steel wire ropes but the quality control of processing of steel wires was difficult to observe and the transportation costs between different factories to factories were high.

• (ii) Flourish Steel has processed approximately 17,500 tons, 25,100 tons and 13,400 tons respectively for the two years ended 31 December 2012 and for the six months ended 30 June 2013. As we have the Chinese New Year in the first half of 2013, the actual operating period was approximately five and a half months, which implies the total processing tons would reach approximately 30,000 tons in proportion to the production for the first six months in 2013. By considering the increasing trend during the respective period, we are of the view that achieving the target quantity (35,000 tons) for each of the next three years is a fair and reasonable estimation.

• (iii) By taking into account the estimated increment of the processing volume and the inflation of processing charges, although the renewed annual caps of the Processing Agreement will be increased significantly, we are of the view that the renewed annual caps are fair and reasonable. As such, we concur with the view of the Directors that the renewed annual caps under the Processing Agreement are in the interest of the Company and Shareholders as a whole.

RECOMMENDATION

Having considered the abovementioned principal factors and reasons, we are of the view that (i) the Equipment Sale and Purchase Agreement; and (ii) the Aggregate Renewed Annual Caps, are all (i) on normal commercial terms; (ii) in the ordinary and usual course of business; (iii) fair and reasonable so far as the Independent Shareholders are concerned; and (iv) in the interest of the Company and the Shareholders as a whole. We are of the view that the Equipment Lease Agreement is on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole, although it is not conducted in the ordinary and usual course of business of the Group. By considering the costs saved and the benefits to the Company after getting the Licence stated above, we are of the view that it is commercially desirable to enter into the Equipment Lease Agreement.

– 33 –

LETTER FROM DONVEX CAPITAL

Accordingly, we advise the Independent Board Committee to recommend the Independent Shareholders, to vote in favour of the Acquisition, Continuing Connected Transaction B and the Aggregate Renewed Annual Caps at the EGM.

Yours faithfully, For and on behalf of Donvex Capital Limited Vincent Chung Responsible Officer

– 34 –

VALUATION REPORT

APPENDIX I

The following is the English translation of the main text of the asset valuation report prepared by the Valuer on the value of the Subject Equipment as at 31 March 2013.

STATEMENT OF REGISTERED VALUERS

1. We have complied with relevant laws, regulations and asset valuation standards and adhered to the principles of independence, objectivity and impartiality in carrying out this asset valuation. According to the information collected by us during the valuation process, the contents of the valuation report are objective and we shall assume corresponding legal responsibilities for the justification of the valuation conclusion.

2. The list of assets related to the valuation subject has been declared, signed and sealed for confirmation by the client. The client and the relevant parties are responsible for the authenticity, legality and completeness of the materials provided by them as well as the proper use of the valuation report.

3. We have no existing or prospective beneficial relationship with the valuation subject in the valuation report, and have neither existing or prospective beneficial relationship with nor bias against the relevant parties. We and all staff participating in the valuation are not interested in any valued party and the relevant client.

4. We have conducted on-site investigation into the valuation subject and the assets involved in the valuation report. We have paid due attention to the legal titles of the valuation subject and the assets involved, verified the information on such legal titles, made truthful disclosure of the problems we have identified and requested the client and the relevant parties to optimize the title issues to meet the requirements for presenting the valuation report. However, there is no guarantee to the legal titles of the valuation subject.

5. Our valuation report have complied with the principles of independence, objectivity and impartiality as well as the asset valuation standards, and is subject to the valuation assumptions and limiting conditions. The analysis, judgment and conclusion made in the valuation report are also subject to the assumptions and limiting conditions herein. Users of the valuation report should carefully consider the assumptions, limiting conditions, special issues and their impact on the valuation conclusion. We hereby remind users of the valuation report to pay due attention to the special issues and restricted use of the valuation report.

6. We have carried out this asset valuation for the purpose of performing valuation of the relevant asset of the valued enterprise and expressing our own professional opinion. We assume no responsibility for the decisions made by the client. We hereby remind the client and relevant users of the report that the valuation conclusion shall not be regarded as a guarantee of the value of the valued assets to be realized in the market. It is the responsibility of relevant users of the report to use the valuation conclusion properly.

7. The valuation report can only be used according to the valuation purposes and usages stated in the valuation report. Users of the valuation report should use the report in whole. The undersigning registered asset valuers and the firm of the valuers take no responsibility for any consequences arising from the improper use of the valuation report.

– 35 –

VALUATION REPORT

APPENDIX I

ASSET VALUATION REPORT

ON CERTAIN WORKS UNDER CONSTRUCTION IN RESPECT OF THE PROPOSED TRANSFER OF ASSETS BY

TIANJIN METALLURGY GROUP FLOURISH STEEL INDUSTRIAL CO., LTD. Hua Xia Jin Xin Ping Bao Zi [2013] No. 068

To Tianjin Metallurgy Group Flourish Steel Industrial Co., Ltd.

Tianjin Huaxia Jinxin Assets Appraisal Company Limited was engaged by Tianjin Metallurgy Group Flourish Steel Industrial Co., Ltd. to assess the market value as at 31 March 2013 of certain works under construction, which is the subject of the proposed transfer of assets by Tianjin Metallurgy Group Flourish Steel Industrial Co., Ltd.. In valuing the assets, cost method was adopted. According to the required valuation procedure, the valuation was conducted pursuant to the relevant laws, regulations and asset valuation standards. The asset valuation and valuation conclusion are hereby reported as follows:

I. INFORMATION ON THE CLIENT, VALUED PARTY AND OTHER AGREED USERS OF THE VALUATION REPORT UNDER THE ENGAGEMENT LETTER

(I) The client and the valued party:

The client of this valuation is Tianjin Metallurgy Group Flourish Steel Industrial Co., Ltd..

Domicile and place of business: 1 First Road, North District, Jinghai Economic Development Zone, Tianjin City Legal representative: Wang Hui Qing Registered and paid-up capital: Renminbi four hundred and ninety-seven million eight hundred and forty-four thousand and five hundred Type of company: Limited liability company

– 36 –

APPENDIX I

VALUATION REPORT

Major scope of business:

processing of wire rods; calendering and processing of commonly used non-ferrous metals; manufacturing, processing, providing relevant technical consultation services of and promoting metal ropes and products, low relaxation prestressed steel wires, metal parts for construction uses, metal structures, optical fiber cables, power wires and cables, metal cutting machines, metal cutting and welding equipment, casting machines, parts and components of machines and materials for welding; import and export of goods and technologies (other than those restricted by laws and regulations); leasing of self-owned properties, labor services; storage and logistics (other than dangerous goods); heat generation and supply; property management; sales of steel; and sales of low relaxation pre-stressed steel wires. (The above scopes of business involving industry permits are operated within the valid period and those involving specialized businesses are operated in accordance with the relevant provisions of the state)

(II) Other agreed users of the valuation report under the engagement letter:

The valuation report is for the exclusive use by the client for achieving the purposes of the valuation. No other user unrelated to the purposes of such report has been approved by the client.

II. PURPOSE OF VALUATION

The purpose of this asset valuation is to provide a reference basis for the value of certain works under construction in respect of the proposed transfer of assets by the client.

Such economic activity has been approved and documented in ‘‘Reply from Metallurgy Group Regarding the Steel Wire Ropes Production Permits of Flourish Steel’’, Jin Ye Zi [2013] No. 100 of Tianjin Metallurgy Group Ltd..

– 37 –

VALUATION REPORT

APPENDIX I

III. THE SUBJECT AND SCOPE OF VALUATION

As requested by the client, the subject and scope of this valuation are related to certain works under construction of Tianjin Metallurgy Group Flourish Steel Industrial Co., Ltd..

The details are as follows:

Unit: Renminbi

Type of assets Non-current assets Included in: works under construction Total assets	Original carrying value 21,560,166.14 21,560,166.14 21,560,166.14	Net carrying value 21,560,166.14 21,560,166.14
		21,560,166.14

The subject and scope of valuation under such engagement are consistent with the valuation subject and scope of valuation involved in the economic activity.

IV. VALUE TYPE AND ITS DEFINITION

Based on the purpose of this valuation, market conditions and valuation subject etc., there is no specific restriction or requirement regarding the market conditions and usage of the valuation subject. This valuation adopted market value as its value type, the definition of which is as follow:

The market value refers to the estimated amount for which the valuation subject should exchange on the valuation date in an arm’s length transaction under the situation that the willing buyer and the willing seller have acted respectively on rational grounds and without compulsion.

V. VALUATION DATE

The date of this asset valuation is 31 March 2013, which is determined based on the following factors:

1. considering whether the date is beneficial for the valuation subject to carry out asset valuation at the end of the period or not;

2. mutually agreed by Tianjin Metallurgy Group Flourish Steel Industrial Co., Ltd. and the valuation firm.

– 38 –

VALUATION REPORT

APPENDIX I

VI. BASIS OF VALUATION

• (I) Basis of the economic activity:

• ‘‘Instructions Regarding the Steel Wire Ropes Production Permits’’, Zhong Xing Sheng Da Ban Zi [2013] No. 10 of Tianjin Metallurgy Group Flourish Steel Industrial Co., Ltd.;

• ‘‘Reply from Metallurgy Group Regarding the Steel Wire Ropes Production Permits of Flourish Steel’’, Jin Ye Zi [2013] No. 100 of Tianjin Metallurgy Group Ltd.;

• (II) Legal and regulation basis:

• ‘‘Company Law of the People’s Republic of China’’;

• ‘‘Law on the State-owned Assets of Enterprises of the People’s Republic of China’’;

• ‘‘Contract Law of the People’s Republic of China’’;

• ‘‘Real Right Law of the People’s Republic of China’’;

• ‘‘Guaranty Law of the People’s Republic of China’’;

• ‘‘Administrative Measures for State-owned Assets Valuation’’, Order (1991) No. 91 of the State Council of the People’s Republic of China;

• ‘‘Implementation Rules of the Administrative Measures for State-owned Assets Valuation’’, Document (1992) No. 36 of the original Office of the National State-owned Assets Administration Bureau;

• ‘‘Provisional Administrative Measures for State-owned Assets Valuation of Enterprises’’, Order (2005) No. 12 of the State-owned Assets Supervision and Administration Commission of the State Council;

• ‘‘Provisional Regulations for Supervision and Administration of State-owned Assets of Enterprises’’, Order No. 378 of the State Council;

• ‘‘Notice Regarding Reinforcement of the Administration of State-owned Assets Valuation of Enterprises’’, Guo Zi Fa Chan Quan [2006] No. 274;

• ‘‘Provisional Measures for the Administration of State-owned Asset Valuation in Tianjin’’, Jin Guo Zi Chan Quan (2007) No. 40 of the State-owned Assets Supervision and Administration Commission of Tianjin Municipal People’s Government;

– 39 –

VALUATION REPORT

APPENDIX I

1. ‘‘Accounting Standards — Basic Standards’’ promulgated in 2006 as well as ‘‘Corporate Accounting Standards’’ and ‘‘Corporate Accounting System’’ promulgated before 15 February 2006 by the Ministry of Finance;

2. Other relevant legal and regulation basis.

3. (III) Basis of valuation standard:

4. ‘‘Asset Valuation Standards — Basic Standards’’ and ‘‘Code of Ethics on Asset Valuation — Basic Standards’’, Cai Qi [2004] No. 20 of the Ministry of Finance;

5. ‘‘Guiding Opinions for Certified Assets Valuers on Legal Titles of Valuation Subjects’’, Hui Xie [2003] No. 18 of the Chinese Institute of Certified Public Accountants;

6. Zhong Ping Xie [2007] No. 189 of China Appraisal Society

   • (1) ‘‘Asset Valuation Standards — Valuation Report’’;

   • (2) ‘‘Asset Valuation Standards — Valuation Procedure’’;

   • (3) ‘‘Asset Valuation Standards — Engagement Letter’’;

   • (4) ‘‘Asset Valuation Standards — Working Paper’’;

   • (5) ‘‘Asset Valuation Standards — Machinery and Equipment’’;

   • (6) ‘‘Guiding Opinions for Value Types under Asset Valuation’’.

7. ‘‘Guidelines for Valuation Report of State-owned Assets of Enterprises’’, Zhong Ping Xie [2008] No. 218 of China Appraisal Society;

8. ‘‘Guidelines on Quality Control of Business Operations of Valuation Firms’’, Zhong Ping Xie [2010] No. 214 of China Appraisal Society;

(IV) Basis of titles:

1. Business licenses of the client and the valued party as legal persons;

2. Invoices and transaction contracts of material asset acquisitions;

3. Other explanations in relation to property ownership of assets.

– 40 –

VALUATION REPORT

APPENDIX I

• (V) Basis of pricing:

• On-site investigation and record etc. by the valuers;

• ‘‘Handbook for Data and Parameters Commonly Used in Asset Valuation’’ (Second Edition);

• ‘‘Manual of Quotation of Mechanical and Electrical Products’’ of the China Machinery Industry Information Institute in 2013;

• Other relevant quotation information and parameter information, and other relevant information known and collected by the valuers.

• (VI) Other information:

• List of asset valuation details provided by the valued party;

• Other information related to the asset valuation provided by the valued party.

VII. VALUATION METHOD

The selection of valuation method depends on the valuation purposes. As for works under construction — equipment installation, the cost method was applied. The cost method is an asset valuation method by deducting the wear and tear or depreciation incurred by the valued assets from the costs necessary for the re-acquisition or construction of the new valued assets under present conditions to determine the assessed value of the valued assets. The calculation formula is as follows: Assessed value = full replacement cost × residue ratio.

VIII. VALUATION PROCEDURES, IMPLEMENTATION PROCESS OF METHOD AND RELEVANT CAUTIONS

Upon accepting the asset valuation engagement, we selected asset valuers to form a specialized asset valuation team and visited the enterprise and commenced its valuation works on 31 March 2013. The valuation report was issued on 2 May 2013. The specific process was as follows:

• (I) Identification of the basic matters for the valuation:

The basic information on the client, the valued party and other users of the valuation report (other than the client) were obtained, and important matters, such as the purpose of valuation, valuation subject and scope of valuation, value type and valuation date, were identified. Comprehensive analysis and evaluation on the professional competence, independence and business risks of the valuation firm were carried out based on the specific conditions of the valued business before the valuation firm accepted the valuation engagement.

– 41 –

VALUATION REPORT

APPENDIX I

(II) Signing of the engagement letter:

We have accepted the project engagement and signed the engagement letter for asset valuation with the client.

• (III) Preparation of valuation plan:

A project leader was chosen to form a valuation team, to determine the key valuation works such as specific steps, scheduling, staff arrangement and technical proposals, and to prepare the valuation plan.

• (IV) On-site investigation:

Appropriate on-site investigation into the valued assets was carried out based on the specific conditions of the valuation engagement. The valued party was instructed to inspect and report assets, verify valuation information reported, check and verify assets, confirm the legal titles, economic and technical conditions, usage, quality and wear and tear of the assets, and form the investigation record.

• (V) Collection of information for valuation:

The registered assets valuers requested the client or the valued party to provide detailed information on the subject and scope of valuation, and conducted audit and verification on information provided by the client or the valued party; conducted investigations by making inquiries, external confirmations, cross-check, physical investigation, exploration and investigation, obtained basic information required for the valuation engagement, confirmed the existing state of the valuation subject and ensured the legal titles of the valuation subject; reviewed relevant information, conducted market survey and price quotation, collected market information, including information obtained directly and independently from channels such as the market, information obtained from relevant parties such as the client and the valued party, information obtained from government departments, various professional organizations and other relevant departments etc..

(VI) Valuation and estimation:

Necessary analysis, induction and arrangement were made to the valuation information collected based on the specific conditions of the valuation engagement to form the basis of the valuation and estimation. The applicability of asset valuation method was analyzed with reference to relevant factors such as the valuation subject, value type and the status of collection of valuation information, so as to select the proper valuation method. Appropriate formula and parameters were used in the analysis, calculation and judgment based on the valuation method adopted to form the preliminary valuation conclusion. Comprehensive analysis was carried out on the preliminary valuation conclusion to reach the final valuation conclusion.

– 42 –

VALUATION REPORT

APPENDIX I

Assessment process:

Assessment of works under construction

1. Overview of equipment installation works

The valued works under construction — 41 installed equipment and 3,677 meters of cable, mainly included 1 set of each model 1.4–3.0 and 0.8–2.0 pickling and phosphating heat treatment production line, 1 set of pickle line, 2 sets of each model LZ4/560+8/500 and LZ9/400 wire drawing machines, 1 set of each model LZ7/600 and LZ9/600 straight wire drawing machine. All equipment was kept in plant of Tianjin Metallurgy Group Flourish Steel Industrial Co., Ltd. located at First Road, North District, Jinghai Economic Development Zone, Tianjin City. The equipment was in use during the course of on-site investigation. Therefore, replacement cost method was adopted in this valuation.

By reviewing the accounting evidences and carrying out on-site investigation, valuers noted that the carrying value of equipment installation works under construction was in line with that stated in the equipment purchase contract. Carrying value refers to the price set out in the purchase contract including installation, adjustment and testing, transportation and packaging fees, net of value-added tax and basic fees. Most of the machinery and equipment were purchased by Tianjin Metallurgy Group Flourish Steel Industrial Co., Ltd. from 2009 to 2010. The equipment was in use during the course of on-site investigation. Therefore, no depreciation is made.

2. Assumption for the valuation

Based on the purpose of this valuation, it is assumed that all the machinery and equipment were used continuously for existing purpose in existing place.

1. Valuation process of the machinery and equipment

A. Determination of full replacement cost

Upon reviewing relevant information such as equipment purchase contract and invoices, collecting and analyzing extensive information, carrying out analysis, considering expenses and capital costs, the valuers have determined the full replacement cost based on the assets of the entity.

– 43 –

VALUATION REPORT

APPENDIX I

B. Determination of residue ratio

Upon carrying out on-site investigation for the equipment and technology assessment, the valuers have determined the residue ratio based on the equipment valuation list provided by the valued party as well as the performance, actual useful life and maintenance conditions of the equipment.

Integrated residue ratio = residue ratio obtained from on-site investigation × 60% + residue ratio determined by useful life × 40%

• C. Determination of assessed value

The calculation formula is as follows:

Assessed value = full replacement cost × integrated residue ratio

• (VII) Preparation and submission of valuation report:

The registered assets valuers prepared the valuation report in accordance with the requirements of the relevant laws, regulations and asset valuation standards, whereas the valuation firm conducted internal audit necessary for preparing the valuation report and conducted the valuation procedures in accordance with the relevant laws, regulations, asset valuation standards and internal quality control system.

Prior to the submission of the formal valuation report, necessary communication has been conducted with the client or the relevant party authorized by the client without affecting the independent judgment of the valuation conclusion.

Upon completion of the abovementioned valuation procedures, a valuation report will be issued by the valuation firm to which the registered assets valuers belonged and the valuation report will be submitted to the client as required by the engagement letter.

IX. ASSUMPTION FOR THE VALUATION

• (I) Trading Assumption: It is assumed in the valuation report that all the assets to be valued were the subject of a transaction and the valuers assessed the assets according to the trading terms and other assumed market conditions.

• (II) Open Market Assumption: It is assumed in the valuation report that all the assets to be valued were intended to be put on fully developed and mature market.

• (III) Continuing Use Assumption: It is assumed in the valuation report that all the assets to be valued were being and would continue to be used.

• (IV) Truthfulness Assumption: It is assumed in the valuation report that all the information provided by the client was true, legitimate and complete.

– 44 –

VALUATION REPORT

APPENDIX I

• (V) Valuation Procedure Assumption: Information not verified or unable to be verified were being used in conducting detailed on-site investigation or for the reason of infeasibility of on-site investigation and assumptions regarding its condition and truthfulness of the information were as follows:

• As to the legal status or other related issues of the assets to be valued, we conducted general investigation pursuant to the requirement of the standards. Save as disclosed in the working report, the assets to be valued enjoy good and marketable title.

• We assumed information being relied on in reaching all or some of the valuation conclusion, which was provided by the client and other parties, was reliable while provided no guarantee of its truthfulness.

• Save as disclosed in the valuation report, full compliance by the client with the existing national and regional laws and regulations is assumed.

• We have no obligation and are not obliged to update the valuation report according to the changing market environment and events and market condition that may occur after the valuation date.

• The client was assumed to have satisfied all the obligations of the asset owners and exercised effective control over the assets competently.

• All the enhancements done to the assets were in compliance with all the relevant provisions of the law provisions and legal, planning and engineering requirement of surprising authorities.

• No significant changes would be made to existing national laws, regulations and fundamental policies and no deterioration of the macro-economics of the country would occur.

• No significant adverse impacts would be caused by other unpredictable factors and force majeure.

• No significant change in the existing taxation law applicable to the valuation report and the taxation rate would remain unchanged and all applicable laws, regulations would be complied.

• No significant change in the political, economic and social environment of the domiciles of all the counterparties.

  • (1) No significant change to the existing applicable laws, regulations and policies and the macro-economics of the country and no significant adverse impacts caused by unpredictable factors and force majeure.

  • (2) Unless stated otherwise, full compliance with relevant laws and regulations by the client was assumed.

– 45 –

VALUATION REPORT

APPENDIX I

• (3) No significant change to the applicable interest rate, exchange rate, tax evaluation criteria and charge levied under the policies.

• (4) No other force majeure and unpredictable factor may have significant adverse impact to the enterprise.

X. VALUATION CONCLUSION

In view of the above, Tianjin Huaxia Jinxin Assets Appraisal Company Limited was engaged by Tianjin Metallurgy Group Flourish Steel Industrial Co., Ltd. to assess the market value as at 31 March 2013 of certain works under construction, which is the subject of the proposed transfer of assets by Tianjin Metallurgy Group Flourish Steel Industrial Co., Ltd.. In valuing the assets, cost method was adopted. According to the required valuation procedure, the valuation was conducted pursuant to the relevant laws, regulations and asset valuation standards.

Cost method was mainly used in arriving at the valuation of the assets after on-site investigation, market survey, consultation and estimation. The final valuation conclusion is the outcome derived from the cost method.

The carrying value and assessed value of the assets as at 31 March 2013 were RMB21,560,200 and RMB21,333,400 respectively with a valuation decrease of RMB226,700 and the rate of decrease is 1.05%. The valuation was commissioned by Tianjin Metallurgy Group Flourish Steel Industrial Co., Ltd..

Valuation results set out in the below table (in ten thousand RMB)

Item Non-current assets Included in: works under construction Total assets	Carrying value A 2,156.02 2,156.02 2,156.02	Assessed value B 2,133.34 2,133.34 2,133.34	Increase/ decrease C=B–A –22.67 –22.67 –22.67	Rate of increase % D=C/A× 100% –1.05 –1.05
				–1.05

XI. SPECIAL ISSUES

Set out below issues indicated in the course of valuation, which is beyond the assessment of the valuers in terms of scope and competency, may have impact on the valuation conclusion:

1. Value-added tax was not taken into account in the replacement value of the machinery of unit valued. Relevant value-added tax under the state taxation law shall be considered in asset disposal by the unit valued;

– 46 –

VALUATION REPORT

APPENDIX I

1. Relevant taxation that may incur to the entity due to increase or decrease in value after the purpose of the valuation fulfilled was not considered.

Attention of the users of the report is drawn to the above issues.

XII. RESTRICTED USE OF THE VALUATION REPORT

• (I) Purposes and usages of the valuation report are restricted to those stated in the valuation report.

• (II) Unless required by laws and regulations and mutually agreed between the parties, extraction, quotation and disclosure of the report in whole or partially are subject to the review by the valuation firm.

• (III) The use of the valuation report is restricted to the users stated in the report. The valuers and the firm of the valuers bear no responsibility to the consequences of improper use of the valuation report.

• (IV) The valuation conclusion of the report is valid for 1 year starting from 31 March 2013 and ending on 30 March 2014. If the purpose of the valuation is fulfilled during the period, valuation conclusion shall be deemed as base value and reference for consideration subject to subsequent event adjustment. If fulfilled after the period, revaluation of the assets shall be conducted.

XIII. DATE OF THE VALUATION REPORT

The valuation report is dated 2 May 2013.

• Note: In the event of any inconsistency between the above English translation and the original text of the valuation report in Chinese, the original version in Chinese shall prevail.

– 47 –

VALUATION REPORT

APPENDIX I

Name, model, specification and quantity of equipment

Serial
No.	Item	Specification	and	model	Quantity	Unit
1	Pickling and phosphating	1.4–3.0			1	Set
	continuous heat treatment
	production line
2	Pickling and phosphating	0.8–2.0			1	Set
	continuous heat treatment
	production line
3	Straight wire drawing machine	LZ4/560+8/500			2	Sets
4	Straight wire drawing machine	LZ9/400			2	Sets
5	Straight wire drawing machine	LZ7/600			1	Set
6	Straight wire drawing machine	LZ9/600			1	Set
7	Single-stage single-suction	SLS125–200			1	Set
	vertical centrifugal pump
8	Frequency conversion cabinet	LBP-GM-37/1			1	Set
9	Single-stage single-suction	SLS200–500(I)CT			2	Sets
	vertical centrifugal pump
10	Frequency conversion cabinet	LBP-GM-75/1			2	Sets
11	Unsealed automatic vertical pump	350SLFZ-AD			1	Set
12	Control cabinet	LEC-2HL-Y-110			1	Set
13	Square counterflow cooling tower	(LxB≤6.8mx 6.8m		per set)	1	Set
		cooling capacity		is
		Q=500m3/h
14	Screw air compressor	SA185W air capacity			1	Set
		30.4m3/min	exhaust
		pressure 0.85MPa(380V)
15	Screw air compressor	SAV185W (frequency			1	Set
		conversion)	air capacity
		30.4m3/min	exhaust
		pressure 0.85MPa(380V)
16	Fiberglass-reinforced plastics	10m3 0.5MPa			1	Set
	(FRP) acid tank
17	DS-import improved welder	DS-II Φ0.6–3.0mm			4	Sets
18	DS-import improved welder	DS110–2 Φ0.8–4.0mm			2	Sets
19	DS-import improved welder	DS-III(3KVA) Φ1.5–6.5mm			4	Sets
20	Spool change machine	1250/800			2	Sets
21	Funnel	YC-5			2	Sets
22	Pointing machine	Φ0.6–6.0			2	Sets
23	Pointing machine	Φ1.0–7.0			4	Sets
24	Cable	YJV22–3*240mm2			3,677	Meters
25	Fully-enclosed automatic pickling	HFZ-I			1	Set
	line
		Total		41 sets of	equipment
			and 3,677 meters of cable

– 48 –

GENERAL INFORMATION

APPENDIX II

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose giving information with regard to the Company. The Directors having made all reasonable enquires, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Interests of Directors and chief executive of the Company

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in the Shares, underlying Shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to section 352 of the SFO, to be entered in the register referred therein; or (iii) were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, were as follows:

Long position in the Shares:

Number of Shares

				Approximate
				percentage† of
				the issued
				share capital
		Held by		of the
	Personal	controlled		Company
Name of Directors	interest	corporation	Total	(%)
Mr. Pang (Note)	151,674,708	195,646,500	347,321,208	61.81%
Mr. Ho Wai Yu, Sammy	2,000	—	2,000	0.00%
Mr. John Cyril Fletcher	420,000	—	420,000	0.07%

Note: The 195,646,500 Shares are held by Golik Investments Ltd. which is wholly owned by Mr. Pang.

• The percentage represents the number of Shares interested divided by the number of the Company’s issued Shares as at the Latest Practicable Date

– 49 –

GENERAL INFORMATION

APPENDIX II

Interest in subsidiaries:

As at the Latest Practicable Date, Mr. Pang has 5,850 and 20,000 non-voting deferred shares in Golik Metal Industrial Company Limited held by himself and World Producer Limited, a controlled corporation, respectively. World Producer Limited is wholly owned by Mr. Pang.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests and short positions in the Shares, underlying Shares or debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers under the Listing Rules.

(b) Interests of substantial shareholders of the Company

So far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, the following person had, or was deemed to have, interests or short positions in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who is, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Company or any other member of the Group:

Long position in the Shares and underlying shares of equity derivatives of the Company:

						Approximate
						percentage† of
						the issued
						share capital
					Number of	of the
Name				Nature of interests	Shares held	Company (%)
Golik	Investments	Ltd.	(Note)	Beneficial Owner	195,646,500	34.82%

Note: Golik Investments Ltd. is wholly owned by Mr. Pang and of which he is also a director.

† The percentage represents the number of ordinary Shares interested divided by the number of the Company’s issued Shares as at the Latest Practicable Date

– 50 –

GENERAL INFORMATION

APPENDIX II

Save as disclosed above, as at the Latest Practicable Date, no person, other than the Directors, whose interests are set out in the section headed ‘‘Interests of Directors and chief executive of the Company’’ above, had registered an interest or short position in the Shares or underlying Shares of the Company that was required to be recorded pursuant to Section 336 of the SFO.

3. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation).

4. OTHER INTERESTS OF THE DIRECTORS

As at the Latest Practicable Date:

• (a) none of the Directors had any direct or indirect interest in any assets which have, since 31 December 2012, being the date of the latest published audited consolidated financial statements of the Group were made up, been acquired or disposed of by, or leased to, or are proposed to be acquired or disposed of by, or leased to any member of the Group; and

• (b) none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group which contract or arrangement is subsisting as at the date of this circular and which is significant in relation to the business of the Group as a whole.

5. EXPERT’S CONSENT AND QUALIFICATION

The following is the qualification of the professional adviser who has given opinion or advice which is contained in this circular:

Name Qualification

Donvex Capital Limited a licensed corporation under the SFO to carry out Type 6 (advising on corporate finance) regulated activity under the SFO

天津華夏金信資產評估有限公司 a qualified valuation institution in the PRC (Tianjin Huaxia Jinxin Assets Appraisals Ltd.*)

Each of the experts named above has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter or report and all reference to its name in the form and context in which they appear.

• For identification purpose only

– 51 –

GENERAL INFORMATION

APPENDIX II

As at the Latest Practicable Date, each of the experts named above was not beneficially interested in the share capital of any member of the Group nor did it has any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group nor did it have any interest, either direct or indirect, in any assets which have been, since the date to which the latest published audited consolidated financial statements of the Group were made up, acquired, disposed of by, or leased to, or are proposed to be acquired or disposed of by, or leased to any member of the Group.

6. COMPETING INTERESTS

None of the Directors and his associates is interested directly or indirectly in a business, apart from his interest in the Company, which competes or is likely to compete with the business of the Group.

7. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2012, being the date to which the latest published audited consolidated financial statements of the Group were made up.

8. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal place of business during normal business hours from 9:00 a.m. to 12:30 p.m. and from 2:00 p.m. to 5:30 p.m. (other than Saturdays, Sundays and public holidays in Hong Kong) at the principal place of business of the Company at Suite 5608, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong from the date of this circular up to and including 23 September 2013:

• (a) the Equipment Sales and Purchase Agreement;

• (b) the Equipment Lease Agreement;

• (c) the Property Lease Agreement and the Processing Agreement;

• (d) the letter of recommendation from the Independent Board Committee, the text of which is set out on pages 18 to 19 of this circular;

• (e) the letter from Donvex Capital, the text of which is set out on pages 20 to 34 of this circular;

• (f) the valuation report issued by the Valuer, the text of which is set out on pages 35 to 48 of this circular; and

• (g) the written consents from each of the experts as referred to in paragraph 5 of this appendix.

9. MISCELLANEOUS

The Chinese translation of this circular is for reference only, the English version shall prevail, except for Appendix I — Valuation Report.

– 52 –