Automated Systems Holdings Limited — Proxy Solicitation & Information Statement 2013

May 9, 2013

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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.

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

If you have sold or otherwise transferred all your shares in COL Capital Limited, you should at once hand this circular to the purchaser(s) or transferee(s) or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

(Incorporated in Bermuda with limited liability) (Stock Code: 383)

MAJOR TRANSACTION RELATING TO ACQUISITION OF SHARES OF EXTRA EARN HOLDINGS LIMITED

A letter from the Board is set out is set out on pages 4 to 51 of this circular.

10 May 2013

CONTENTS

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
APPENDIX I – FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . . . . . . . . .	52
APPENDIX II – FINANCIAL INFORMATION ON EXTRA EARN. . . . . . . . . . . . . . . . . . .	54
APPENDIX III – FINANCIAL INFORMATION ON JIATAI TONGREN. . . . . . . . . . . . . . . .	128
APPENDIX IV – UNAUDITED PRO FORMA FINANCIAL STATEMENT
OF THE ENLARGED GROUP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	214
APPENDIX V – PROPERTY VALUATION REPORT ON THE TARGET GROUP. . . . . . . .	219
APPENDIX VI – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	254

– i –

DEFINITIONS

In this circular, the following expressions have the meanings respectively set opposite them unless the context otherwise requires:

“Announcement” the announcement dated 19 September 2012 issued by the Company in relation to the Acquisition

• “Acquisition” the acquisition of the Sale Shares by the Purchaser

• “Board”

the board of Directors

• “Company”

• COL Capital Limited, a company incorporated in Bermuda with limited liability, the Shares of which are listed on the Main Board of the Stock Exchange

• “Completion” completion of the Acquisition

• “Consideration” the consideration payable by the Company for the acquisition of the Sale Shares

• “Directors” the directors of the Company

• “Enlarged Group” The Group following completion of the Acquisition and Extra Earn Asset Reorganization

• “Extra Earn”

• Extra Earn Holdings Limited, a company incorporated in the British Virgin Islands with limited liability

• “Extra Earn Asset Reorganization” the asset reorganization of Extra Earn by means of the transfer of an aggregate of approximately 41.99% of the registered capital of Jiatai Tongren to, and the repurchase and cancellation of Extra Earn’s approximately 41.99% issued shares (excluding the Purchaser) from, the other shareholders of Extra Earn further detailed on pages 6 and 7 of this circular

• “Group” the Company and its subsidiaries

• “HK$”

• Hong Kong dollars, the lawful currency of Hong Kong

• “Hong Kong”

Hong Kong Special Administrative Region of the PRC

• “Independent Third Party(ies)”

party(ies) who, together with his/her ultimate beneficial owner(s) is/are persons independent of the Company and its connected persons (as defined in the Listing Rules)

– 1 –

DEFINITIONS

“Jiatai Tongren” Jiatai Tongren (Lianyungang) Healthcare Investment Company Limited（嘉泰同仁（連雲港）醫療產業投資有限公司）(formerly known as Lianyungang Jiatai City Development Co., Ltd.（連 雲港嘉泰城市發展有限公司）), a company established in the PRC with limited liability and is directly and wholly-owned by Extra Earn. The sole investment of Extra Earn

• “Latest Practicable Date” 7 May 2013 being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein

• “Listing Rules” Rules Governing the Listing of Securities on Stock Exchange

• “PRC” the People’s Republic of China

• “Percentage Ratio(s)” percentage ratio(s) as set out in Rule 14.07 of the Listing Rules to be applied for determining the classification of a transaction

• “Purchaser” Champion Record Limited, a company incorporated in the British Virgin Islands with limited liability and an indirect wholly-owned subsidiary of the Company

• “S&P Agreement” the agreement dated 19 September 2012 entered into between the Vendor and the Purchaser in relation to the acquisition of the Sale Shares

• “Sale Shares” 90,000 ordinary shares in the issued share capital of Extra Earn

• “Share(s)” ordinary share(s) of HK$0.01 each in the issued share capital of the Company

• “Shareholder(s)” holder(s) of the Shares

• “Stock Exchange” The Stock Exchange of Hong Kong Limited

• “Target Group” Extra Earn and its subsidiaries (prior to the Extra Earn Asset Reorganization) and where applicable Jiatai Tongren and its subsidiaries (after the Extra Earn Asset Reorganization)

• “Vendor” Highest Score Limited, a company incorporated in the British Virgin Islands with limited liability

– 2 –

DEFINITIONS

“Vigor Online”

Vigor Online Offshore Limited, a company incorporated in the British Virgin Islands with limited liability and a controlling Shareholder holding 391,125,707 Shares representing approximately 72.13% of the entired issued share capital of the Company as at the Latest Practicable Date (holding 390,325,707 Shares representing approximately 71.89% of the entire issued share capital of the Company as at the date of the S&P Agreement)

“%” per cent

– 3 –

LETTER FROM THE BOARD

(Incorporated in Bermuda with limited liability)

(Stock Code: 383)

Executive Directors:

Ms. Chong Sok Un (Chairman) Dato’ Wong Peng Chong Mr. Kong Muk Yin

Registered Office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Independent Non-executive Directors:

Mr. Lau Siu Ki Mr. Ma Wah Yan Mr. Zhang Jian

Head office and principal place of business in Hong Kong: 47th Floor China Online Centre 333 Lockhart Road Wan Chai Hong Kong

10 May 2013

To the shareholders of the Company

Dear Sir or Madam,

MAJOR TRANSACTION RELATING TO THE ACQUISITION OF SHARES OF EXTRA EARN HOLDINGS LIMITED

This circular is despatched to Shareholders for information purpose only. No general meeting will be convened for approving the Acquisition as Vigor Online, the controlling Shareholder holding 390,325,707 Shares, representing approximately 71.89% of the issued share capital of the Company as at the date of the S&P Agreement, has already provided a written approval of the entering into of the S&P Agreement. Furthermore, as no Shareholder has material interest in the Acquisition which is different from other Shareholders, no Shareholder would be required to abstain from voting in respect of the Acquisition if a general meeting were convened for approving the Acquisition.

– 4 –

LETTER FROM THE BOARD

INTRODUCTION

Reference is made to the Announcement whereby the Board announced that on 29 September 2012 (after trading hours), the Purchaser, an direct wholly-owned subsidiary of the Company and the Vendor entered into the S&P Agreement, pursuant to which the Vendor has agreed to sell the Sale Shares for an aggregate consideration of HK$89,860,000. Completion took place on the date of the S&P Agreement.

As the relevant Percentage Ratios for the Acquisition under Rule 14.07 exceeds 25% but is below 100%, the Acquisition constitutes a major transaction for the Company and is subject to approval of the Shareholders. The Company has obtained a written shareholder’s approval for the Acquisition from Vigor Online which held approximately 71.89% of the total issued share capital of the Company as at the date of the S&P Agreement. Accordingly, no general meeting for the Shareholders’ approval of the Acquisition will be held.

The purpose of this circular is to provide you with, among other things, details of the Acquisition.

THE ACQUISITION

The Vendor

Highest Score Limited, an investment holding company incorporated in the British Virgin Islands

The Purchaser

Champion Record Limited

To the best knowledge, information and belief of the Directors having made all reasonable enquiry and so far as the Directors are aware, the Vendor of the Sale Shares is an Independent Third Party.

Assets acquired

The Sale Shares represent approximately 19.34% of the entire issued share capital of Extra Earn.

There are no contractual restrictions which are applicable to the subsequent sale of the Sale Shares.

– 5 –

LETTER FROM THE BOARD

The Company, through the Purchaser being its wholly-owned subsidiary, is already beneficially interested in 180,000 shares in Extra Earn, representing approximately 38.67% of the entire issued share capital of Extra Earn as at the date of the S&P Agreement. Following the Completion, the Company will become beneficially interested in an aggregate of 270,000 shares in Extra Earn, representing approximately 58.01% of the entire issued share capital of Extra Earn. Extra Earn will therefore become a non wholly-owned subsidiary of the Company after the Completion with its sole investment being the holding of the entire registered capital of Jiatai Tongren.

Consideration

The Consideration payable for the Sale Shares is HK$89,860,000.

The Consideration has been satisfied by the Purchaser issuing a promissory note to the Vendor on Completion. Pursuant to the promissory note, the Purchaser has promised to pay to the Vendor the Consideration on or before 19 September 2013. Interest at the rate of 12% per annum shall accrue on the outstanding amount under the promissory note commencing from the date of the Completion.

The Consideration was determined after arm’s length negotiations between parties with reference to unaudited consolidated net assets value of Extra Earn.

Extra Earn Asset Reorganization

Simultaneous with Completion, Extra Earn conducted the Extra Earn Asset Reorganization with details as follows:

• (i) Extra Earn disposed of, at book carrying value, 38.67% of the registered capital of Jiatai Tongren at a total consideration of HK$255,749,000 to Greatime Management Corp. (“GTM”), a then shareholder of Extra Earn;

• (ii) Extra Earn repurchased 38.67% of the issued share capital of Extra Earn at a consideration of HK$219,173,000 from GTM. These repurchased shares of Extra Earn were cancelled accordingly;

• (iii) The consideration for the disposal of 38.67% of the registered capital of Jiatai Tongren as mentioned in (i) above is set off against the amount payable for the share repurchase of 38.67% of Extra Earn as mentioned in (ii) above and a shareholder’s loan of HK$36,576,000 owed by Extra Earn to GTM;

• (iv) Extra Earn disposed of, at book carrying value, 3.32% of the registered capital of Jiatai Tongren at a total consideration of HK$21,959,000 to Asia Alliance Holdings Company Limited (“AAH”), a then shareholder of Extra Earn;

– 6 –

LETTER FROM THE BOARD

• (v) Extra Earn repurchased 3.32% of the issued share capital of Extra Earn at a consideration of HK$18,834,000 from AAH. These repurchased shares of Extra Earn were cancelled accordingly; and

• (vi) The consideration for the disposal of 3.32% of the registered capital of Jiatai Tongren as mentioned in (iv) above is set off against the amount payable for the share repurchase of 3.32% of Extra Earn as mentioned in (v) above and a shareholder’s loan of HK$3,125,000 owed by Extra Earn to AAH.

Simultaneous with the Extra Earn Asset Reorganization, Extra Earn disposed of, at book carrying value, 58.01% of the registered capital of Jiatai Tongren at a consideration of HK$383,656,000 to the Company.

GTM is an investment holding company incorporated in the British Virgin Islands. To the best knowledge, information and belief of the Directors having made all reasonable enquiry that before Completion, GTM and its ultimate beneficial owner are Independent Third Parties.

AAH is a company incorporated in Japan whose shares are listed on the Tokyo Stock Exchange, Inc. To the best knowledge, information and belief of the Directors having made all reasonable enquiry, save for the Groups holding of approximately 9.2% of the issued share capital of AAH as at Latest Practicable Date respectivley, that AAH and its ultimate beneficial owner are Independent Third Parties.

Information on the Group

The principal business of the Company is investment holding and through its subsidiaries engaged in securities trading and investments, provision of financial services, property investment and strategic investment.

Information on the Target Group

Extra Earn is a company incorporated in the British Virgin Islands with limited liability. Extra Earn’s principal activity is investment holding with its sole investment being the holding of the entire registered capital of Jiatai Tongren. Following the issue of new shares by Extra Earn in June 2012, the Group’s shareholding in Extra Earn decreased to approximately 38.67% from 40%. Upon Completion and following the Extra Earn Asset Reorganisation, Extra Earn became an indirect wholly-owned subsidiary of the Company and has no assets and liabilities save for intra-group liabilities.

Upon Completion and following the Extra Earn Asset Reorganisation, the Company became directly interested in Jiatai Tongren representing approximately 58.01% of the entire registered capital of Jiatai Tongren.

Set out below is the Group chart (i) prior to the Acquisition; (ii) following Completion and (iii) following Completion and the Extra Earn Asset Reorganisation:

– 7 –

LETTER FROM THE BOARD

(i) Prior to the Acquisition

==> picture [87 x 212] intentionally omitted <==

----- Start of picture text -----

The Company
100%
Purchaser
38.67%
Extra Earn
100%
Jiatai Tongren
----- End of picture text -----

(ii) Following Completion of the Acquisition

==> picture [87 x 213] intentionally omitted <==

----- Start of picture text -----

The Company
100%
Purchaser
58.01%
Extra Earn
100%
Jiatai Tongren
----- End of picture text -----

(iii) Following Completion of the Acquisition and the Extra Earn Asset Reorganisation

==> picture [286 x 160] intentionally omitted <==

----- Start of picture text -----

The Company
100%
58.01%
Purchaser
66.67%
100%
Jiatai Tongren
Extra Earn
----- End of picture text -----

– 8 –

LETTER FROM THE BOARD

Jiatai Tongren (formerly known as Lianyungang Jiatai City Development Company Limited) （連雲港嘉泰城市發展有限公司）is a wholly foreign owned enterprise with limited liability established in the Lianyungang Economic and Technological Development Zone, Jiangsu Province, the PRC. Jiatai Tongren, through its subsidiaries, engages in the investment in and operation of healthcare and hospital businesses, trading of medical equipment and related supplies, property investment and development, and other investments in the PRC.

Currently the Target Group consists of 13 subsidiaries, among which Tongren Healthcare Industry Group Company Limited (“Tongren Healthcare”), an intermediate holding companies directly and indirectly interested in the Nanjing Tongren Hospital Company Limited（南京同仁醫院 – a class III integrated hospital, “Nanjing Tongren Hospital”), Kunming Tongren Hospital Company Limited（昆 明同仁醫院 – a class III integrated hospital, “Kunming Tongren Hospital”) and Yunnan Xin Xinhua Hospital（雲南新新華醫院 – a class II integrated hospital, “Yunnan Xin Xinhua Hospital”). As at 31 December 2012, the Target Group has 2,104 employees inclusive of medical and technical staff.

Background Information

Formerly known as Lianyungang Jiatai City Development Company Limited, Jiatai Tongren was engaged in the businesses of urban infrastructure development and property investment and development in Lianyungang Economic and Technological Development Zone since its establishment in 2006. The Target Group has discontinued its business of urban infrastructure development in 2012.

Following the acquisition of an equity interest in Tongren Healthcare in June 2010, the Target Group diversified its business scope to investment in and management and operation of healthcare and hospital businesses, trading of medical equipment and related supplies, and other investments and has changed its business name in November 2012 to better reflect the new business scope.

In 2003, Tongren Healthcare has been licensed by Beijing Tongren Hospital affiliated to Capital Medical University（首都醫科大學附屬北京同仁醫院）to use the trademark “Tongren（同仁）” for a period of 30 years for its own hospitals and other healthcare institutions or entities invested by it in major cities and provinces in the PRC such as Guangzhou, Kunming, Nanjing, Henan, Dalian, Hebei and Hainan.

Hospital Operations

The Target Group operates three integrated hospitals, offering a wide range of comprehensive clinical and healthcare services as follows:

• (i) the Nanjing Tongren Hospital, a class III integrated hospital, opened in 2007 and is located at Jiangning Development Zone, Nanjing, Jiangsu Province, the PRC. The Nanjing Tongren Hospital, with a site area of 136 Mu and gross floor area of 121,000 sqm, consists of a 4-storey main building and two 12-storey buildings, with a planned operating capacity of 1,200 beds, 4,000 out-patience visits per day, 250 emergency room visits per day and 150 operation room usages per day.

– 9 –

LETTER FROM THE BOARD

For 2012, there were 485,000 out-patience visits, 36,000 body-check visits and 20,000 in-patience visits. Currently, there are 650 beds opened, 27 clinical departments, 7 medical technical centres and a body-check centre (being the largest in Nanjing City) operated in Nanjing Tongren Hospital with 964 medical and technical staff and employees.

• (ii) the Kunming Tongren Hospital, a class III integrated hospital, opened in 2010 and is located at Kunming, Yunnan Province, the PRC. The Kunming Tongren Hospital, with a site area of 150 Mu and gross floor area of 70,000 sqm, consists of an out-patient building, a medical technical building and an in-patient building, with a planned operating capacity of 500 beds, 20 clinical departments, 6 medical technical centres and a body-check centre (being the most comprehensive in Yunnan) for the first phase.

For 2012, there were 100,000 out-patience visits, 38,000 body-check visits and 7,143 in-patience visits. Currently, there are 357 beds opened in Kunming Tongren Hospital with 652 medical and technical staff and employees.

• (iii) the Yunnan Xin Xinhua Hospital, a class II integrated hospital, opened in 2004 and is located at Kunming, Yunnan Province, the PRC.

For 2012, there were 108,000 out-patience visits, 5,400 body-check visits and 6,263 inpatience visits. Currently, there are 240 beds, 25 clinical departments and 5 medical technical centres operated in Yunnan Xin Xinhua Hospital with 372 medical and technical staff and employees.

Property Investment and Development

The Target Group is engaged in the businesses of property investment and development in the PRC and has completed various development projects such as the Cambridge Riverside（康橋水岸）, a residential development project in Nanjing with a total gross floor area of 250,000 sq.m. in 2010, the Dianchi Yinxiang Garden（滇池印象花园）, a residential development project in Kunming with a total gross floor area of 170,000 sq.m. in 2010 and the Kangya Garden（康雅苑）Phase I, a residential development project in Jiangning Development Zone, Nanjing with total gross area of 50,000 sq.m. in 2011.

Currently Kangya Garden（康雅苑）Phase 2 and 3 are under development with a total gross floor area of approximately 125,400 sq.m., consisting of four 11-storey blocks and four 17-storey blocks, totalling 791 residential units, 22 commercial units and certain car parking spaces. The construction for the 2 phases is expected to be completed in June 2013 and June 2015 respectively.

– 10 –

LETTER FROM THE BOARD

Further, the Target Group owns (i) two pieces of vacant land with site area of 276 Mu in Lianyungang Economic and Technological Development Zone, the PRC and (ii) two plots of elderly care use land consisting of:

• (a) the Nanjing elderly care use land nearby Nanjing Tongren Hospital, with a site area of 103.46 Mu and planned gross floor area of 110,000 sq.m. Currently, three buildings with site area of 31 Mu and gross floor area of 18,756 sq.m. were built and used as rehabilitation centre and staff quarter. There is about 72.46 Mu which remains undeveloped.

• (b) the Kunming elderly care use land nearby Kunming Tongren Hospital, with a site area of 155 Mu. Currently, one building with site area of 17 Mu and gross floor area of 4,699 sq.m. was built and used as office building. There is about 138 Mu which remains undeveloped with a planned gross floor area of 150,000 sq.m.

Based on the accountants’ report of Extra Earn as set out in Appendix II, the following is the consolidated financial information of Extra Earn for the three years ended 31 December 2012 which were prepared in accordance with Hong Kong accounting standards:

	For the year ended	For the year ended	For the year ended
	31 December 2012	31 December 2011	31 December 2010
	(audited)	(audited)	(audited)
	HK$’000	HK$’000	HK$’000
Net loss before tax	118,926	71,212	27,385
Net loss after tax	118,926	71,212	27,385
Net asset value	319,825	662,995	664,108

Based on the accountants’ report of Jiatai Tongren as set out in Appendix III, the following is the consolidated financial information of Jiatai Tongren Group for the three years ended 31 December 2012 which were prepared in accordance with Hong Kong accounting standards:

	For the year ended	For the year ended	For the year ended
	31 December 2012	31 December 2011	31 December 2010
	(audited)	(audited)	(audited)
	HK$’000	HK$’000	HK$’000
Net loss before tax	161,638	67,440	16,401
Net loss after tax	160,152	64,924	19,413
Net asset value	865,216	793,551	782,605

– 11 –

LETTER FROM THE BOARD

Overview of the PRC Healthcare Industry

Overview of PRC Healthcare Industry

Healthcare services is an area vital to national well-being and people’s livelihood. With economic growth, ageing population, growing middle class, increased incidence rate caused by unhealthy lifestyle, environmental pollution and the Chinese’s enhanced awareness of healthcare, the demand for healthcare services in China showed a rapid upwards trend in general in recent years. According to China Health Statistical Yearbook 2011, the total number of patients treated at healthcare institutions in China in 2011 was 6.27 billion times, representing a year-on-year increase of 7.4% and an average treatment of 4.63 person times per capita.

In terms of hard demand, the ageing population in China has led to the increase in incidence of chronic and deadly diseases and in turn the increase in the demand for healthcare services. Take cardiovascular diseases as an example, the incidence of high blood pressure among people above 65 is 55%, twice that of young and middle-aged adults. China entered an accelerated ageing phase following 2010. The number of aged population grew at a compound annual growth rate (“CAGR”) of 3.2% between 2000 and 2010, and is expected to grow at 5% between 2010 and 2020, which will significantly boost the demand for healthcare services.

In terms of soft demand, improved living standards and social security system has enabled people to focus more on their health, which has stimulated the demand for treatment of minor illnesses and non-deadly diseases and healthcare services and has led to a significant increase in hospitalizing rate. The percentage of patients visiting physicians within two weeks in 1993 were 42.4% and 33.7% for urban and rural areas, respectively, and increased to 47.90% and 35.60% for urban and rural areas, respectively, in 2008.

In terms of supply, providing healthcare services requires extremely high professional skills. As it relates to people’s well-being, the price of healthcare services are under the control of the government and at an artificially low level. Currently government funding alone cannot meet increasingly diversified demand for healthcare services. There are often long lines of patients waiting for treatment in public Class III integrated hospitals, indicating the imbalance of supply and demand (there are only 1.42 persons providing healthcare services for every 1,000 persons in China, far lower than the global average of 2.38). On the other hand, in addition to the undersupply in absolute terms, the growing demand for high-end healthcare services and the lack of high-end medical professionals constitutes another major factor.

– 12 –

LETTER FROM THE BOARD

The new round of healthcare reform shows a direction of “meeting basic demand with public welfare and high-end demand with market mechanism”（基本需求公益化，高端需求市場化）. The PRC government is expected to spend limited resources in basic public welfare services, and the pricing of high-end healthcare services will be set in line with the supply and demand in the market. The PRC government is not expected to impose too many restrictions other than regulating and monitoring, and the core competitiveness of healthcare institutions in attracting talents and consumers will be the quality of services. As such, private hospitals will have better opportunities for development, and the state also encourages private capital investment in healthcare services. Currently the majority of the private capital is invested in high-end service areas where there are fewer government investments, such as cosmetic and plastic surgery, obstetrics and ophthalmology.

Private Healthcare Market

China’s first private hospital was established in 1980s. Following the year of 2000, private hospitals in China experienced fast growth. During the period from 2006 to 2010, the number of private hospitals in China increased from 4,105 to 7,068, representing a CAGR of 11.55%; the number of patients treated at private hospitals increased from 85,247,500 times to 165,821,900 person times, representing a CAGR of 18.10%. It is expected that the total value of the healthcare consumption market in China for the period from 2010 to 2015 will exceed RMB1,500 billion. The private healthcare service market in China is still at an early stage of development, and there are much room for development and great investment potential.

Private Hospitals in Jiangsu Province

As for the number and distribution of healthcare institutions, there were a total of 625 private hospitals in Jiangsu Province as at the end of 2010, of which 421 or 67.36% were integrated hospitals and 170 or 27.20% were specialized hospitals.

As for the quality and efficiency of treatment services provided by healthcare institutions, in 2010, the number of patients treated at private healthcare institutions in Jiangsu Province was 22,524,900 times with admissions of 918,700 persons, the number of surgery on in-patients was 351,300 times, and the average number of treatment by per doctor per day was 7.5 times. Compared with public hospitals in Jiangsu Province, there is still much room for improvement in the quality and efficiency of healthcare services provided by private hospitals.

As for the competition between private hospitals and public hospitals, the total number of public hospitals in Jiangsu Province was 530, compared to 625 for private hospitals as at the end of 2010. Jiangsu Province is the only province in China that has more private hospitals than public hospitals. Private hospitals in Jiangsu Province have advantages in both integrated hospitals and specialized hospitals. The “service appearance” of public hospitals in Jiangsu Province is also changing. Public hospitals have begun to be engaged in ophthalmology and cosmetology on which private hospitals focus. Although private hospitals in Jiangsu Province have strong awareness of market, service and competition, the market “cake” has not become bigger and the competition has intensified.

– 13 –

LETTER FROM THE BOARD

As a major province with developed economy, the total healthcare expenses of Jiangsu Province in 2009 were RMB140.295 billion, her than the national average. The number of healthcare institutions in Jiangsu Province is too small instead of too large. Officials of the Provincial Health Department of Jiangsu Province mentioned at a plenary sessions of the provincial government that the provincial government would, on the basis of effectively performance of duties, fully introduce market mechanism to add new healthcare institutions, adjust exiting healthcare institutions and incentive mechanism, in order to form a more open and vigorous competitive landscape whereby healthcare institutions of all types of ownerships can equally compete with each other.

In June 2011, Jiangsu Provincial Government issued the Implementation Opinions on Further Encouraging and Guiding Private Capital to Establish Healthcare Institutions （關於進一步鼓勵和引導社會資本舉辦醫療機構的實施意見）, encouraging private capital to establish different kinds of healthcare institutions, expanding the range of the healthcare industry where foreign capital is allowed, as well as encouraging a rational flow of healthcare personnel between “public” and “non-public” hospitals.

Private Hospitals in Yunnan Province

As at the end of 2010, there were a total of 346 private hospitals in Yunnan Province, of which 237 or 68.50% were integrated hospitals, and 90 or 26.01% were specialized hospitals. In 2010, the total number of patients treated at private healthcare institutions in Yunnan Province was 6,212,300 times with admissions of 494,100 persons, the number of surgery on inpatients was 136,400 times, the number of emergency admissions per hundred outpatients was 8.17 persons, and the average number of treatment by per doctor per day was 4.5 times. By the numbers, public hospitals dominated the healthcare market in Yunnan Province, as evident by a total of 434 public hospitals compared to 346 private hospitals in Yunnan Province as at the end of 2010. Private hospitals have the advantage of scale in the area of specialized hospital and integrated traditional Chinese and western medicine hospital

The Opinions of the People’s Government of Yunnan Province on Accelerating the Development of Private Healthcare Institutions (Draft for Soliciting Opinions)（雲南省人民政府關於加快發展民 營醫療機構的意見（徵求意見稿））introduced 12 major policies to support the development of private healthcare institutions, including expressly specifying related tax policies, relaxing market access for private healthcare institutions, encouraging investment in constructing all kinds of healthcare institutions, and actively guiding private healthcare institutions in enhancing the building of talent teams and cultivating talents.

Overview of the PRC Real Estate Industry

As a niche industry of the tertiary industry, the real estate sector plays an important role in the tertiary industry and even in the entire national economy. The performance and trend of development of the real estate sector is closely related to the macro-control policies and changes in macro-economic conditions. The cycle of the real estate sector is substantially the same as that of macro-economic conditions.

– 14 –

LETTER FROM THE BOARD

Owing to global economic crisis, domestic economy operating well below trend and the macrocontrol policies, the investment in property development in China continued to grow at a low rate in 2012. According to a statistics of the National Bureau Statistics of China, the completed investment in property development in China amounted to RMB7,180.38 billion in 2012, representing a year-onyear increase of 16.2% which is 11.7 percentage points lower than that of the previous year.

As affected by the macro-control policies, the performance of the real estate market in China since 2012 was characterized by the following: (i) the investment in property development in China continued to grow at a low rate; (ii) facing huge downwards pressure on real economy, the loans provided by banks to the real estate sector showed a trend of “aimed easing”, and the funding shortage for property developers in China was somehow alleviated; (iii) as a result of the slower growth of both of the accumulated construction area and new construction area of commodity housing in China, the growth of the accumulated completed area of commodity housing in China also slowed and the total market supply recorded slow growth; (iv) benefiting from fine-tuning of macro-control policies by local governments and the gradual implementation of policies on lowering deposit reserve ratio and interest rate, market expectations changed significantly, which had led to the release of certain purchasing power. As such, the decrease in the area of commodity housing sold in China continued to narrow and it achieved positive growth in November 2012, for the first time in the year, and the sales of commodity housing in China continued to grow, though its growth for the full year was still less than that of the previous year; and (v) the momentum of soaring housing prices in the first ten months of 2012 was curbed to a certain degree, and the housing prices started to rebound as housing trading volume significantly increased in late 2012. Since the introduction of the new Five National Measures（國五條）in February 2013, commodity housing prices further rose in the short term, although there are many uncertainties about the trend of housing prices in the longer term.

In terms of supply structure, residential properties continued to represent the largest and dominating demand in the real estate sector. However, as a result of a series of macro-control policies, property developers actively made strategic plans for commercial properties. The investment in office building and commercial properties in China maintained fast growth, while the investment in residential properties continued to grow slowly in 2012. In terms of regional distribution, the growth rate of real estate investment in eastern China remained low since 2012, but the amount of investment it attracted was still much higher than those of central and western China.

Overview of the PRC Elderly Care Industry

China’s ageing society is characterized by large elderly population, fast growth of the number of the elderly and an apparent trend of ageing. As at the end of 2009, the number of the elderly over 60 reached 167 million, representing 12.5% of the total population in China. It is expected one out of three people will be aged by 2050. Also, subject to the PRC family structure of “421 (four aged, one couple and one child)”, the elderly care issue has become a major social issue affecting fairness and stability of the country. The elderly care industry has become an emerging industry in China with huge potential. As stated in the Planning for the Establishment of Social System of Elderly Care Services (2011-2015)（社會養老服務體系建設規劃（2011-2015年）), the potential market size of elderly care treatment and healthcare services will exceed RMB450 billion by 2015.

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LETTER FROM THE BOARD

As a comprehensive industry incorporating production, operation and servicing, the elderly care industry has a long industry chain and involves a variety of areas. Depending on the basic and deep needs of the elderly, the elderly care industry comprises the main sector, related sectors and derivative sectors. In view of the reality of elderly care in China and overseas, there are three core directions for the elderly care industry, namely elderly care real estate, elderly care treatment and healthcare services.

Elderly care real estate is most common in current China, while elderly care treatment is most developed overseas. The elderly care industry in China is still at a testing stage, either elderly care real estate or elderly care treatment alone does not work. According to industry practitioners, the rate of return on investments of elderly care real estate was less than 10%, with a period of return of approximately 10 years, while the elderly care treatment and healthcare services require support from a well-developed healthcare insurance system and management experience and require longer period of operation and have more uncertainties. A brand new thinking is needed to make elderly care real estate practicable.

Presently the main product offering of the elderly care real estate in China is as follows: improved versions of elderly care institutions launched by insurance funds, such as nursing homes, which are operated as long-term commercial property projects, as well as elderly care real estate projects launched by property developers, which in general treat elderly care real estate sector as an important area for development and transformation like commercial real estate and tourism real estate. Various well-established PRC property developers have established their own teams to research elderly care real estate, while insurance companies link elderly care community to the pension insurance policies sold by them, which generate long-term revenue and is suitable for investment in elderly care real estate projects. A PRC insurance company has invested RMB4 billion in building an elderly care community, which is the first pilot investment in elderly care community in the PRC insurance industry.

Factors restraining the development of the PRC elderly care industry are mainly the lack of supporting laws and policies, undeveloped financial products, traditions, concepts and filial piety culture, potential legal disputes and the lack of ancillary facilities. Moreover, the lack of effective policy and financial support and insufficient financial resources allocated by the government also restricted the progress of the elderly care industry.

In view of the overall positive industry outlook for the PRC healthcare industry, the PRC real estate industry and the PRC elderly care industry, the Group are of the view that the business outlook of the Target Group is positive.

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LETTER FROM THE BOARD

Business Plan

Business Model of the Target Group

The overall business model of the Target Group is a combination of healthcare operations (including elderly care service) with ancillary property development projects. The healthcare and elderly care service projects is expected the principal business endeavour of the Target Group in the long run, while ancillary property development projects are short-term supportive businesses providing profit and cashflow to further support the development of healthcare and elderly care service businesses.

For the part of healthcare operations (including elderly care service), the Target Group will continue to develop integrated hospitals to build up its reputation and influence by the establishment of a technological and professional healthcare team focusing on quality.

Being the property owner of the elderly care service projects, the Target Group will seek to cooperate and ride on the expertise of internationally renowned elderly care service providers to own and operate elderly care homes comprising elderly healthcare, rehabilitation and medical services. With the medical services being provided by the integrated hospitals of the Target Group in close proximity, elderly care centers with geographical and medical service support advantages will be formed.

Ancillary property development projects will be profitable projects which require relative low investment inputs but deliver prompt as positive financial results. By developing residential projects with land cost advantages, these projects will be able to provide cash flows to support and operate the Target Group’s long-term healthcare and elderly care service projects.

Business Plan of the Target Group

Through Tongren Healthcare, the Target Group will leverage on the renowned household brand name – Tongren to establish a strong professional healthcare team to provide high-quality and professional healthcare services for customers in the region and vigorously develop specialized chain services.

The Target Group currently operates three integrated hospitals in Nanjing and Kunming which operates a number of international cooperation projects such as the Sino-US orthopedics and spinal cord injury treatment center in Kunming Tongren Hospital and will continue to develop specialized chain services such as high-end obstetrics, oral cavity and otorhinolaryngology.

The Target Group will seek and cooperate with international renowned elderly care service providers and domestic insurance companies as partners to develop and operate specialized elderly care communities incorporating elements of residence, healthcare, rehabilitation and medical services at lands of the Target Group’s integrated hospital.

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LETTER FROM THE BOARD

The Target Group will continue to develop and construct residential and commercial properties, as part of its complementary business, to fund the operation and development of its elderly care service business by way of developing hospitals together with residential and commercial properties, combining healthcare services with residential and commercial under the brand name of “Tongren Elderly Care and Healthcare Industry City”（同仁養老健康產业城）.

Management Experience of the Target Group

Mr. Li Jing Hong, has a Bachelor’s degree in Accounting from Shanxi Finance and Economics University, is the general manager of Tongren Group, and has worked at China Fisheries Group, China HuaLi Group, Jiatai Tongren bringing in 28 years of extensive experience in financial management, major projects, real estate, medical industry and all aspects of company management and various extensive and in depth experiences in urban infrastructure development such as the urban infrastructure development project in Lianyungang, property investment and development such as the property development projects – Cambridge Riverside in Nanjing, Dianchi Yinxiang Garden in Kunming and Kangya Garden Phase I, in Nanjing, as well as many years of overseas work and life experience with strong international vision. Mr. Li is now the director and legal representative of Jiatai Tongren.

Dr. Jonathan Seah, Doctor of Medicine degree from the Royal College of Surgeons, and with a MBA from Harvard Business School, is the chairman of Tongren Group. Dr. Seah, once served as a doctor at the National University of Singapore hospital and worked as vice chairman of Merrill Lynch Investment Bank in San Francisco and Singapore, and was also the chief executive of Parkway Health China & North Asia Division in PRC region before, the Asia’s largest medical service organization, with extensive experience in building a network of medical facilities through both greenfield projects and acquisitions, and a team of 500 healthcare professionals, managers, and other staff to provide international-level healthcare services in China, with operations in Shanghai and Chengdu. Dr. Seah was also the former president of the Shanghai Commerce Chamber of Singapore and the specially invited committee of Shanghai Youth Federation. Dr. Seah is currently the Director of Tongren Healthcare, Ocean Department Company, and Learning & Interesting, an education-network company.

Mr. Guo Mei Bao, has a Bachelor’s degree in Accounting majoring in Economics from NanChang University, a MBA from the Open University of Macao, is a certified public accountant in the PRC, is the vice general manager and CFO of Tongren Healthcare, and has worked at in Guangdong GSL electronics company, Guangdong JinYu Golf Club, Jiatai Tongren and so on, bringing in 16 years of extensive experiences in financial management in China and foreign company, and in enterprise operation management and various extensive and in depth experiences in urban infrastructure development such as the urban infrastructure development project in Lianyungang, property investment and development such as the property development projects – Cambridge Riverside in Nanjing, Dianchi Yinxiang Garden in Kunming and Kangya Garden Phase I, in Nanjing.

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LETTER FROM THE BOARD

Ms. Jiang Dong Hui, has a Bachelor’s degree in Economic majoring in economic management of Central University of Finance and Economics, an international MBA from Peking University – the National University of Singapore, is a certified public accountant in the PRC, is the vice manager of Tongren Healthcare, successively working in China BlueStar Group, Tianjin TaiDa International Cardiovascular Disease Hospital, bringing in more than 10 years of extensive experiences in enterprise groups, medical industry investment and financing with scope related mainly in company’s IPO, refinancing, merger and acquisition and reorganization of companies; having thorough system studies in medical and health investment markets of the PRC.

Dr. Lu Chong Lin, has a Bachelor degree in medicine from Zunyi Medical College, is the medical management director of Tongren Healthcare, and has worked at in the Mining Bureau General Hospital of Guizhou Guiyang LinDong, the second hospital of Nanjing, bringing in 30 years of extensive experiences as a clinical physician and about 20 years of working experiences of quality management in the Tier-Three Level of first-class hospital, and now is also the representative of Nanjing National People’s Congress and a member of Chinese Peasants and Workers Democratic Party.

Mr. Wang Gui Hua, has a Bachelor degree in economic management from Nanjing University, is the HR manager of Tongren Healthcare, bringing in 21 years of extensive experiences in human resource and administration management, and has worked in Sinopec, ARC Glassware (French company), SCA (Sweden company) and IP (American company), the latter two are one of the world’s top 500 enterprises.

Dr. Zhu Zheng Hong, came from Beijing Tongren Hospital affiliated to Capital Medical University, is the director of Nanjing Tongren Hospital, being a doctor of stomatological medicine at Beijing University, ophthalmology post-doctor and postgraduate supervisor of Capital Medical University, post-doctor of the University of Michigan, visiting scholar of Stanford University, vice chairman of the International Sleep Research Society, member of Association for the Study of Internal Fixation, member of Professional Committee of Head and Neck Cancer, Chinese Anti-Cancer Association, member of Sleep Expert Committee of Chinese Medical Doctor Association, chairman of Jiangsu Association of Social Run Medical Organization, is one of the young and middle-age academic leaders in Nanjing, and Nanjing Jiangning Talents with Green Cards.

Dr. Chen Zhi Yu, has Bachelor degree from Kunming Medical College, is the director of Kunming Tongren Hospital and also the executive director of the branch of Chinese Medical Association Yunnan Province Cardiothoracic Surgery, standing director of the Yunnan Province branch of The Chinese Red Cross. Dr. Chen once served in YanAn Hospital of Kunming before joining Jiatai Tongren, bringing in 28 years of extensive experiences as a cardiothoracic surgeons and 2 years of experiences in hospital management.

Dr. Huang Kun, has Bachelor Degree in clinical medical science from Kunming Medical College and a joint graduate degree from Kunming Medical College and La Trobe University of Australia, is the director of Yunnan Xin Xinhua Hospital of Tongren Group. Dr. Huang once served in the Third People’s hospital of Yunnan Province, bringing in 17 years extensive experiences as an anesthesiologist and about 7 years of extensive experiences in hospital management.

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LETTER FROM THE BOARD

Ms. Di Hongyuan holds a Bachelor Degree in Architecture Profession from Tongji University and is now a senior architect. She is the general manager of Kunming Tongren Industrial Development Company Limited (“Kunming Tongren Industrial”). Ms. Di served in China Bengbu Corporation for International Tech-economic Cooperation（安徽省蚌埠市國際經濟技術合作公司）, Shenzhen Economic Cooperative Development Company（深圳市經濟協作發展公司）and Shenzhen Xinte Industrial Development Company Limited（深圳市信特實業發展有限公司）. She has been the general manager of Comway Contracting (Hong Kong) Limited, China Branch since 1999 and joined Kunming Tongren Industrial in 2006.

Mr. Mao Bangping graduated from the Professional Studies in Architecture and Construction Management at Anhui Urban-Rural Construction and Environmental Protection Dianshi Professional School（安徽省城鄉建設環境保護電視中專學校建築施工與管理專業）and is the general manager of Nanjing Tongren Industrial Company Limited (“Nanjing Tongren Industrial”). He served in construction companies in Anhui, Henan and Jiangxi. Since 2006, he has been appointed as chief engineer and deputy general manager by Hainan Sanya Phoenix Waterside Development Company Limited（海南三亞鳳凰水城開發有限公司）and Jiatai Tongren respectively. He joined Nanjing Tongren Industrial in September 2010.

Risk Factor

Risks Relating to the PRC Healthcare Industry

Risk Relating to Industry Policies on Private Hospitals

In general, the healthcare industry is a public welfare cause and directly relates to people’s life and health. As such, its development heavily depends on government policies and changes in relevant regulatory policies or admission mechanism may have material effects on the investment in and exit from the industry. In addition, the last round of healthcare reform in the PRC is generally believed to not have met expectations, and the PRC government has introduced new reform measures. Existing policies on healthcare reform may be abolished or adjusted due to unexpected results arising from their implementation. As such the PRC government industry policies and other factors, such as policy responses to the global financial crisis in 2008, which are beyond the Target Group’s control, could adversely affect the demand for healthcare products and services which in turn could result in negative impact on the healthcare industry.

Risk Relating to Medical Disputes and Insurance Coverage of Private Hospitals

Due to the limits of existing medical technology, varying individual patient conditions, disease conditions and doctors’ skills and quality, and other force majeure events, there will inevitably be risk during the course of providing medical services. In particular, at a time when the doctor-patient relationship is quite intense, any accidents, whether private hospitals are responsible or not, will have adverse effects on their provision of healthcare services. Medical liability insurance may mitigate the losses brought by such risk to a certain degree, but such risk cannot be completely avoided. The Target Group maintains insurance coverage at levels required by relevant laws and regulations and determined by it to be appropriate in light of the cost of cover and the risk profiles of the business in which it operates. However, forces beyond the Target Group’s control, including market forces, may limit the scope of coverage the Target Group can obtain and the Target Group’s ability to obtain coverage at reasonable rates. Other forces beyond the Target Group’s control, such as natural disasters or terrorist attacks, may be uninsurable or simply too expensive to insure. Inadequate or insufficient insurance could expose the Target Group to large claims or could result in negative impact on the Target Group’s business, financial condition and results of operations.

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LETTER FROM THE BOARD

Risk Relating to Talents and Technology Infrastructure of Private Hospitals

In order to develop, operate and explore its healthcare services and products, the Target Group must recruit and retain professional and highly skilled medical staff and employees with various areas of expertise. Any failure to recruit or retain key personnel, the unexpected loss of key senior employees, failures in the Target Group’s succession planning and incentive plans or a failure to invest in the development of key skills could have a negative impact on the Target Group’s business, financial condition and results of operations. In addition the Target Group must compete against other companies inside and outside of the healthcare industry for suitably qualified or experienced staff and employees. Further, failure to attract and retain existing staff and employees may threaten the success of the Target Group’s operations in these markets as the Target Group risks losing the accumulated skill and knowledge if key employees leave the Target Group. Continuous investment, maintenance and upgrade of the technology, equipment and facilities is vital in order to maintain the quality of the service provided by the Target Group, failing which the prior quality of services could have a negative impact on the Target Group’s business, financial condition and results of operations.

Risks Relating to the PRC Real Estate Sector

Risk Relating to Macro-Economic Conditions

The PRC real estate sector is a cyclical industry closely correlated to macro-economic conditions. In recent years, as affected by the weak global economy and the downward pressure on China’s economy, the macro-economic environment facing the real estate sector is substantially different from the previous “golden decade” for it, and there are many more uncertainties. As such macroeconomic environment, change and volatility in general economic conditions. and other factors beyond the Target Group’s control, e.g. the global financial crisis in 2008, could reduce demand for real estate resulting in negative effect on the real estate industry.

Risk relating to Industry Policies

The development of the PRC real estate sector is not completely market-driven, and the government’s control also has significant impacts on it. At a State Council executive meeting held on 20 February 2013, the new Five National Measures were introduced, which reiterated the regulatory policies centering on loan and purchase limits and the government’s determination to rein in speculative housing purchases, as well as once again requiring local governments to announce annual housing price control targets following 2011. This represents the biggest factor to drive housing prices downwards. On the other hand, however, with the concerns that hard landing of the real estate sector may affect the overall economy, the reality of land policies, and the pressure from local debts, policymakers are also considering less radical control methods, which has subjected the real estate sector to more complicated policy risks. As such the PRC government industry policies and other factors, such as policy responses to the global financial crisis in 2008, which are beyond the Target Group’s control, could adversely affect the demand for real estate which in turn could result in negative impact on the real estate industry.

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LETTER FROM THE BOARD

Market Risk

Products of the PRC real estate sector have high values, medium production cycle and long useful life, and cannot be manufactured by industrial mass production. These unique characteristics subject the PRC real estate sector to market risks different from that facing other sectors, which comprise market price fluctuation risk (the supply and demand and market prefeces may have substantially changed when products are launched in the market), financing risk (property development requires massive funding, and property developers need to pay close attention to sources of financing, capital risk and government policies limiting housing loan and purchase), liquidity risk (products of the real estate sector have a relatively low liquidity and property developers need to secure timely and sufficient supply of funding), and credit risk (a real estate project involves a large number of participants, and property developers shall carefully select and manage partners taking into account their creditworthiness). As such, the real estate industry is highly competitive focusing factors such as the location of real estate, pricing, quality of products, brand recognition and loyalty, quality of services provided and availability of financing arrangement for customers, etc. Many of the Target Group’s competitors have already operated in the industry for longer periods of time than the Target Group and have accumulated more operational, managerial, sales and marketing experience, brand recognition, human resources and financial resources. The Group could not guarantee that some or many of the competitors will not engage in real estate business in markets or location in which the Target Group is operating or plans to operate, which will thereby increase competition and negatively impact the Target Group’s business. The Group cannot guarantee that the Group will be able to successfully compete against the current and future competitors.

Risks Relating to the PRC Elderly Care Sector

Market Risk

As an emerging market with great potential, the elderly care market is still at an early stage of development being affected by nationals’ concept of elderly care, consumption philosophy of the elderly and low pension. Professional private elderly care institutions and existing elderly care products are not yet well accepted by the market, and some professional private elderly care enterprises are struggling to survive. As such, the elderly care industry is competitive and could be focusing factors such as the availability of full medical support, location of elderly care facilities, pricing, quality of rooms, amenities and facilities, brand recognition and loyalty, geographic coverage and quality of services provided. Many of the Target Group’s competitors have already operated in the industry for longer periods of time than the Target Group and have accumulated more operational, managerial, sales and marketing experience, brand recognition, human resources and financial resources. The Group cannot guarantee that some or many of the competitors will not engage in elderly care service business in markets or location in which the Target Group is operating or plans to operate, which will thereby increase competition and negatively impact the Taregt Group’s business. The Group cannot guarantee that the Group will be able to successfully compete against the current and future competitors.

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LETTER FROM THE BOARD

Risk Relating to Industry Policies

Although the PRC government expressly encourages the development of elderly care institutions, there are still no enforceable implementation rules and no specific favorable policies for private investors to invest in the establishment of new elderly care institutions. There is no clear and liberal policy environment in general either. As such the PRC government industry policies and other factors, such as policy responses to the global financial crisis in 2008, which are beyond the Target Group’s control, could adversely affect the demand for elderly care products and services which in turn could result in negative impact on the elderly care industry.

Risks Relating to the PRC

Adverse changes in economic and political policies of the PRC government could have material adverse effect on the overall economic growth of PRC which in turn could adversely affect the businesses of the Target Group

The PRC’s economy is different, in many respects, from that of most of the developed countries such as the level of government intervention, level of economic development and growth rate, and control on foreign exchange. Though the PRC economy has achieved substantial overall growth in the past years, growth has been uneven across different regions and among various economic sectors. As the PRC experienced a reduction on its economic growth amid the global financial crisis in 2008, the PRC government has executed various measures to encourage economic development and guide the allocation of resources. While some of these measures benefit the overall PRC economy, they may have an adverse impact on the Target Group’s results of operations and financial condition in areas such as control over capital investments or changes in environmental, health, labour or tax regulations.

The Target Group is subject to the laws and regulations of PRC, changes in PRC governmental laws and regulations or non-compliance with applicable laws and regulations may have a significant impact on the Target Group’s business, financial condition and results of operations

The Target Group’s business and operations are subject to the laws and regulations of the PRC, its compliance with, inter alia, applicable environmental, health, safety, labour, social security and other laws and regulations, and the obtaining of licences and permits from the relevant PRC authorities. Although the Target Group has used its best endeavour to comply with applicable laws and regulations, the Target Group may be unable to comply with all such laws and regulations which could result in fines, penalties or lawsuits. Further, there is no assurance that the Target Group will be able to comply fully with applicable laws and regulations should there be any amendment to the existing regulatory regime or implementation of any new laws and regulations. Any changes in such government rules and regulations may increase the Target Group’s costs of compliance and have a negative impact on the Target Group’s business, financial condition and results of operations. Difficulties or failure in obtaining the required permits, licences and certificates will result in the Target Group’s inability to continue its businesses in PRC. As a result, the Target Group’s business, financial condition and results of operations may be adversely affected.

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LETTER FROM THE BOARD

The Target Group’s labour costs may increase as a result of the PRC Labour Contract Law

The PRC Labour Contract Law, which became effective on 1 January 2008, imposes various requirements on employers such as the types of contracts to be executed between an employer and an employee, and establishes time limits on probation periods and for a fixed-term employment contracts. It also requires the employer to contribute to social insurance and housing funds on behalf of its employees. As a result of the enforcement of the PRC Labour Contract Law, the Target Group’s staff and labour costs may increase, which in turn lead to an increase in the Target Group’s overall operating expenses. The Target Group may not be able to pass these increases on to the Target Group’s customers and patients due to competitive pricing pressures. With such staff and labour costs increases and any large penalties or fees related to the PRC Labour Contract Law that the Target Group may be subjected to, the Target Group’s business, financial condition and results of operations may be materially and adversely affected.

The Company is a holding company and relies on, to certain extent, the dividend payments from the Target Group

The Company is a holding company and conducts all its businesses through its operating subsidiaries in Hong Kong, the PRC and other jurisdictions. As a result, its ability to pay dividends and other distribution depends on, to a certain extent, dividends and other distributions received from the Target Group. If the Target Group incurs debt or losses, this may impair its ability to pay dividends or other distributions to the Company, which could adversely affect the Company’s ability to pay dividends to its Shareholders. Under the current PRC laws, dividends of PRC companies can only be paid out of the after-tax profits calculated according to PRC accounting principles, which differ in many respects from generally accepted accounting principles in Hong Kong and other jurisdictions. Furthermore, the PRC laws require foreign invested enterprises, such as the Target Group, to set aside part of their net profit as statutory reserves. The Target Group is required to set aside each year at least 10% of its after-tax profits for such year, as reported in its PRC statutory financial statements, to the statutory surplus reserve of such PRC companies. Such transfer of reserve may not be discontinued until the accumulated amount has reached 50% of the registered capital of the PRC companies. These statutory reserves are not available for distribution to the Company, except in liquidation. The calculation of distributable profits under the PRC Accounting Standards and Regulations differs in certain aspects from the calculation under HKFRS. As a result, the Target Group in PRC may not be able to pay any dividend in a given year to the Company if they do not have distributable profits as determined under the PRC Accounting Standards and Regulations, even if it has profits for that year as determined under HKFRS. Limitations on the ability of the Target Group to remit their entire after-tax profits to the Company in the form of dividends or other distributions could adversely affect the Company’s ability to grow, make investments that could be beneficial to its business, pay dividends and otherwise fund and conduct its business. The Company cannot assure that the Target Group will generate sufficient earnings and cash flows to pay dividends or otherwise distribute sufficient funds to the Company to enable the Company to pay dividends to the Shareholders. In addition, restrictive covenants in bank credit facilities, joint venture agreements or other arrangements that the Company or the Target Group may enter into in the future may also restrict the ability of the Target Group to pay dividends or make distributions to the Company. These restrictions could reduce the amount of dividends or other distributions the Company receive from the Target Group, which in turn would restrict its ability to pay dividends to the Shareholders.

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LETTER FROM THE BOARD

The Target Group is exposed to the risk of litigation

The Target Group could be subjected to the threat of litigation from many parties, including customers, patients, joint venture partners, suppliers, employees, regulatory authorities, and/or other relevant parties. Claims submitted to the PRC courts may include requests for punitive damages and/ or compensatory damages. Further, any litigation or fines imposed by regulatory authorities may affect the reputation and financial results of the Target Group.

Legal and Regulations

Set out below is a summary of certain aspects of PRC laws and regulations, which are relevant to the operations and business of the Target Group.

Laws and Regulations Relating to Property Development

Establishment of a Real Estate Development Enterprise

Pursuant to the PRC Urban Real Estate Administration Law 《中華人民共和國城市房地產管 理法》promulgated by the Standing Committee of National People’s Congress (the “NPC”), which became effective on 1 January 1995 and was revised on 30 August 2007 and 27 August 2009 and the Regulation on Administration of Development and Operation of Urban Real Estate《城市房地產開發 經營管理條例》promulgated by the State Council on 20 July 1998, in addition to regular enterprise establishment conditions provided in the relevant laws and administrative regulation, an enterprise which is to engage in real estate development must satisfy the minimum registered capital requirements of RMB1 million and the professional personnel requirement of no less than four full-time professional real estate/construction technicians and no less than two full-time accounting officers, each of whom must hold the relevant qualification certificate.

To establish a real estate development enterprise, the developer must apply for registration with the local State Administration for Industry and Commerce (the “SAIC”) at or above the county level and report its establishment to the department of real estate development in the location of its registration within 30 days of receipt of its business license.

A foreign investor intending to engage in the development of real estate may establish an equity joint venture, a cooperative joint venture or a wholly owned enterprise in accordance with relevant laws and regulations regarding foreign investment. Where a foreign-invested enterprise is to be established to engage in development and sale of real estate, the relevant requirements of the laws and regulations regarding foreign-invested enterprises must also be observed and relevant approvals be obtained. Prior to its registration, the enterprise must be approved by the government authorities in charge of foreign investment, upon which an Approval Certificate for a Foreign Invested Enterprise will be issued.

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LETTER FROM THE BOARD

Qualification of a Real Estate Development Enterprise

Under the Provisions on Administration of Qualifications of Real Estate Developers《房地產 開發企業資質管理規定》(the “Provisions on Administration of Qualifications”) promulgated by the Ministry of Construction on 29 March 2000, a real estate developer must apply for a qualification certificate. An enterprise may not engage in property development without a qualification certificate for real estate development. Real estate developers are divided into four classes. A Class 1 real estate developer is not restricted as to the scale of its real estate projects and may undertake a real estate development anywhere in the country, while a real estate developer of the Class 2 or lower may only undertake projects with a gross floor area less than 250,000 sq.m. and the detailed business scope of the developer of the Class 2 or lower is determined by the construction authorities at the provincial level.

Under the Provisions on Administration of Qualifications, the real estate development authorities will examine applications for qualifications submitted by real estate developers. A real estate developer that passes the qualification examination will be issued a qualification certificate of the relevant class. A developer of any qualification may only engage in the development and sale of real estate within its approved scope of business and may not engage in business which is limited to another higher classification.

For a newly established real estate developer, which passes the qualification examination, the real estate development authority will issue a provisional qualification certificate《暫定資質證書》 within 30 days of receipt by the authority of the relevant application for registration. The provisional qualification certificate will be effective for one year from its date of issuance and may be extended for not more than two additional years with the approval of the real estate development authority. The real estate developer must apply to the real estate development authority within one month before the expiry of its provisional qualification certificate for a formal qualification classification certificate.

Foreign Investment in Property Development

Since 2006, Chinese government has commenced on tightening foreign investment in the PRC real estate market by means of promulgating a series of legal and regulatory provisions.

The Catalogue for the Guidance of Foreign Investment Industries (2007 version)《外商投資產 業指導目錄（2007年修訂）》which was amended and promulgated by the Ministry of Commerce(the “MOFCOM”) and National Development and Reform Commission (the “NDRC”) in October 31, 2007 and effective as of December 1, 2007 removes the development and construction of ordinary residential properties from the category of industries for which foreign investment is encouraged, while remaining the development of a whole land lot and construction of villas, high-end hotels, premium office buildings, international conference centers, which must be jointly operated with the PRC partners, in the category of industry for which foreign investment is restricted. However, under the Catalogue for the Guidance of Foreign Investment Industries (2011 version)《外商投資產業指導目錄（2011年修 訂）》promulgated by MOFCOM and the NDRC in December 2011, the construction and operation of villas was shifted in the category of industries in which foreign investment is prohibited, meanwhile, the construction and operation of golf courses also be included in the category of the same.

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LETTER FROM THE BOARD

Years from 2006 to 2010 saw a large number of regulatory documents released by the PRC government with an attempt to controlling the foreign investment in the PRC real estate sector, mainly including the Opinions on the Access to and Administration of Foreign Investment in the Real Estate Market《關於規範房地產市場外資准入和管理的意見》(the “171 Opinions”), which was jointly issued by the Ministry of Construction, MOFCOM, NDRC, People’s Bank of China (the “PBOC”), SAIC and State Administration of Foreign Exchange(the “SAFE”) on 11 July 2006; the Notice on Further Reinforcing and Regulating the Approval and Supervision on Foreign Direct Investment in the Real Estate Industry《關於進一步加強、規範外商直接投資房地產業審批和監管的通知》(the “No. 50 Notice “), which was jointly promulgated by MOFCOM and SAFE on 23 May 2007; the Notice on Publication of the Foreign-Invested Real Estate Projects that Have Filed with MOFCOM《關於下發 第一批通過商務部備案的外商投資房地產項目名單的通知》(the “No. 130 Rule”) which was issued by the General Department of SAFE on 10 July 2007; the Notice on Better Implementation of the Filing of Foreign Investment in the Real Estate Industry《關於做好外商投資房地產業備案工作的通 知》, which was promulgated by MOFCOM on 18 June 2008; and the Notice on Reinforcing the Approval and Filing Management of Foreign-invested Real Estate Enterprises 《關於加強外商投資房地產業審批備案管理的通知》, which was promulgated by the General Office of MOFCOM on 22 November 2010. The aforesaid opinions and notices provide strict controlling measures in respect of the registered capital, domestic and offshore loans, conditions for approval, registration/filing processes, foreign exchange registration, sale and settlement in foreign currency and round-trip investment etc,.

Acquisition of Land Use Rights

All land in the PRC is owned by the State or is collectively owned. Individuals and entities may obtain land use rights and hold such land use rights for development purposes mainly in two ways: (i) a grant of land use rights by local land authorities; or (ii) a transfer of land use rights by land users who have obtained land use rights.

Grant of Land Use Rights

In general, the grant of land use rights from local land authorities may be carried out through a bilateral agreement between the relevant land authority and a grantee or by means of tender, auction or listing-for-sale as required by relevant laws, regulations and rules as applicable.

Pursuant to the Regulation on the Grant of Land Use Rights Through Bilateral Agreement《協 議出讓國有土地使用權規定》promulgated by the Ministry of Land Resources (the “MLR”), which became effective on 1 August 2003, the land authority may grant the land use rights through a bilateral agreement if there is only one prospective land user on the plot of land to be granted. However, land used for business, tourism, entertainment, residential commodity properties and other purposes for business operations shall be granted by way of competitive processes.

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LETTER FROM THE BOARD

Since year 2002, to ensure the grant of land use rights for commercial purposes is conducted openly and fairly, the PRC governmental authorities have formulated a large number of regulations, rules and notices to reinforce the administration of the grant of land, including but not limited to: the Regulations on the Grant of State-owned Land Use Rights by Tender, Auction or Listing-for-Sale 《招標拍賣掛牌出讓國有土地使用權規定》issued by the MLR in May 2002; the Regulations on the Grant of State-owned Construction Land Use Rights by Tender, Auction or Listing-for-Sale《招標拍 賣掛牌出讓國有建設用地使用權規定》which became effective on 1 November 2007; the Notice on Relevant Issues Concerning the Strengthening of Examination and Approval of Land Use in Urban Construction《關於加強城市建設用地審查報批工作有關問題的通知》promulgated by the MLR on 4 September 2003; the Notice on Strengthening Land Supply Management and Promoting Sustainable Healthy Development of Real Estate Market《關於加強土地供應管理促進房地產市場持續健康發展 的通知》issued by MLR on 24 September 2003; the Notice Regarding Supervision Work of Legal Enforcement Situation of Granting Business Land Use Rights Through Tender, Auction or Listing-forSale《關於繼續開展經營性土地使用權招標拍賣掛牌出讓情況執法監察工作的通知》jointly issued by the MLR and the Ministry of Supervision on 31 March 2004; the Urgent Notice on Further Governing and Rectifying Land Market and Strengthening Administration of Land《關於深入開展土 地市場治理整頓嚴格土地管理的緊急通知》promulgated by the General Office of the State Council on 29 April 2004; the Urgent Notice on Tightening Land Administration《關於當前進一步從嚴土地 管理的緊急通知》published by the MLR on 30 May 2006; the Notice on Issues Relating to the Strengthening of Land Control《關於加強土地調控有關問題的通知》promulgated by the State Council on 31 August 2006; the Notice on Further Strengthening the Management of the Income and Expenditure Relating to Land Grants《關於進一步加強土地出讓收支管理的通知》jointly issued by five governmental authorities, including the Ministry of Finance, Ministry of Supervision, National Audit Office of the PRC, MLR and PBOC; the Notice on Issues relating to Strict Enforcement of Adjustment Policies on Real Estate Land and Improvement of the Healthy Development of Land Market《關於 嚴格落實房地產用地調控政策促進土地市場健康發展有關問題的通知》promulgated by the MLR on 19 December 2010 and became effective on the same date; and the Notice on Further Adjustment and Control of the Real Estate Market《國務院辦公廳關於進一步做好房地產市場調控工作有關問題的 通知》issued by the General Office of the State Council on 26 January 2011.

The above regulations, rules and notices further emphasize that: (i) the land to be used for industrial and commercial purposes, including business, tourism, entertainment and residential commodity properties, or land for which there are two or more prospective land users, must be granted by way of tender, auction or listing-for-sale; (ii) entities and persons participating in the bidding of land shall state the source of capital and provide the relevant evidence; (iii) the grantee of State-owned construction land use rights shall pay the premium for the grant of State-owned land use rights fully in accordance with the land grant contract before it could proceed with the relevant procedures for grant of Stateowned land use rights registration and apply for a land use rights certificate; (iv) property developers are required to provide a down payment of no less than 50% of the land premium and are required in principle to pay all of the land premium in installments within one year; and (v) land supply for medium-to-low-price, small-to-medium-size ordinary residential commodity properties (including economically affordable housing) or low-rental residential properties, including economically affordable housing, shall be satisfied as a priority, while land use for high-end residential commodity properties shall be stringently controlled, and applications for land use right to build villas shall be suspended.

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LETTER FROM THE BOARD

Transfer of Real Estate

According to the Provisions on the Administration of Urban Real Estate Transfer《城市房地產 轉讓管理規定》(the “Transfer Provisions”) promulgated by the Ministry of Construction in August 1995, as amended in August 2001, a real estate owner may sell, donate or otherwise legally transfer real estate to another person or entity. When transferring a building, the ownership of the building and the land use rights attached are transferred together. The parties to the transfer must enter into a written real estate transfer contract and register the transfer with the competent real estate authority within 90 days of the execution of the transfer contract.

If the land use rights are initially obtained by way of a grant from a local land authority, conditions as provided by the Transfer Provisions shall be satisfied when the real estate is transferred and the term of the land use rights after the real estate transfer will be the remaining portion of the original grant obtained by the original land users.

If the land use rights transferred are initially obtained by way of allocation, the transfer shall be approved by the competent government authorities. Except as provided by relevant laws, the transferee must complete the formalities for the transfer of land use rights and pay the land premium after the transfer approval is obtained.

Pre-examination of the Construction Sites

Under the Measures for Administration of Examination and Approval for Construction Sites 《建設用地審查報批管理辦法》promulgated by the MLR on 2 March 1999 and amended on 30 November 2010 and the Measures for Administration of Preliminary Examination of Construction Project Sites 《建設項目用地預審管理辦法》promulgated by the MLR on 29 November 2008 and became effective on 1 January 2009, a real estate developer must make a preliminary application for construction to the relevant land administrative authority when carrying out a feasibility study on a construction project. Upon receipt of a preliminary application, the land administration authority will carry out a preliminary examination of various aspects of the construction project in compliance with the overall zoning plans and land supply policies of the PRC Government, and will issue a preliminary approval if it is satisfied with the result of its examination. The opinions derived from this preliminary examination are requisite documents for the approval of the construction project.

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LETTER FROM THE BOARD

Planning Permits and Construction Permits

Under the Measures for Administration on Planning of Granting and Transfer of Right to Use Urban State-owned Land《城市國有土地使用權出讓轉讓規劃管理辦法》promulgated by the Ministry of Construction on 4 December 1992 and became effective on 1 January 1993, and the Notice on Strengthening the Planning Administration of Granting and Transferring Right to Use State-owned Land《關於加強國有土地使用權出讓規劃管理工作的通知》promulgated by the Ministry of Construction on 26 December 2002 and became effective on the same date, a real estate developer shall, after signing a land grant contract, apply for an opinion on the site selection of a construction project and a construction land planning permit from the relevant city and county planning authorities. After obtaining a construction land planning permit, the real estate developer shall organise the necessary planning and design work in accordance with planning and design requirements and apply for a construction work planning permit from the relevant urban planning authority pursuant to the Law of the PRC on Urban and Rural Planning 《中華人民共和國城鄉規劃法》promulgated by Standing Committee of the NPC in October 2007 and effective on 1 January 2008.

A real estate developer must apply for a construction work commencement permit from the relevant construction administrative authority under the local people’s government above the county level pursuant to the Measures for the Administration of a Construction Permit of Construction Projects 《建築工程施工許可管理辦法》promulgated by the Ministry of Construction on 15 October 1999 and revised on and became effective on 4 July 2001.

Completion of a Real Estate Project

Construction projects shall be delivered for use only after passing the inspection and acceptance test under Article 61 of the PRC Construction Law《中華人民共和國建築法》, which became effective on 1 March 1998 and subsequently amended on 22 April 2011. A real estate development project must comply with various laws and legal requirements concerning planning, construction quality, safety and environment and technical guidance on architecture, design and construction work, as well as provisions contained in the relevant contracts.

On 30 January 2000, the State Council promulgated and implemented the Regulation on the Quality Management of Construction Projects《建設工程質量管理條例》which sets out the respective quality responsibilities and liabilities for developers, construction companies, exploration companies, design companies and construction supervision companies. After the construction of a project is complete, the real estate developer must arrange an inspection and acceptance test under the supervision of the relevant competent governmental authorities together with the relevant parties involved in the construction and experts according to the Interim Provisions on Inspection Upon Completion of Buildings and Municipal Infrastructure《房屋建築工程和市政基礎設施工程竣工驗收暫行規定》promulgated by the Ministry of Construction on 30 June 2000. The real estate developer shall submit records for filing to the departments in charge of project construction of the relevant local governmental authorities above the county level in the area where the projects are constructed within 15 days after the projects having successfully passed the completion acceptance inspection, pursuant to the Measures for the Administration on the Filing of Inspection Upon Completion of Buildings and Municipal Infrastructure 《房屋建築和市政基礎設施工程竣工驗收備案管理辦法》promulgated by the Ministry of Construction on 19 October 2009.

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LETTER FROM THE BOARD

Sale of Commodity Properties

Under the Measures for Administration of Sale of Commodity Properties《商品房銷售管理辦 法》promulgated by the Ministry of Construction on 4 April 2001 and became effective on 1 June 2001, the sale of commodity properties can include both sales prior to the completion of the properties and sales after the completion of the properties.

Pre-Sale of Commodity Properties

Any pre-sale of commodity properties must be conducted in accordance with the Measures for Administration of Pre-sale of Commodity Properties《城市商品房預售管理辦法》(the “Pre-sale Measures”) promulgated by the Ministry of Construction on 15 November 1994, as amended on 15 August 2001 and 20 July 2004. The Pre-sale Measures provide that any pre-sale of commodity properties is subject to specified procedures. The pre-sale of commodity properties shall be subject to a licensing system. If a real estate developer intends to sell commodity properties in advance, it shall apply to the real estate administrative authority to obtain a pre-sale permit. The pre-sale of commodity properties is required to meet the following conditions: (i) the related land premium having been fully paid up and a land use rights certificate having been obtained; (ii) a construction work planning permit and a construction work commencement permit having been obtained; and (iii) the funds invested in the development of the commodity properties intended for pre-sale representing 25% or more of the total investment in the project and the progress of construction and the completion and delivery dates having been properly determined. The proceeds of pre-sale of commodity properties must be used to develop the relevant project.

Pursuant to the Notice on Forwarding the Opinion of Such Departments as the Ministry of Construction on Stabilising Housing Prices《國務院辦公廳轉發建設部等部門關於做好穩定住房價 格工作意見的通知》 promulgated by the General Office of the State Council on 9 May 2005, the purchaser of a pre-sale commodity property is prohibited from transferring such property prior to the completion of its construction. Property developers are required to carry out an immediate archival filing for pre-sale contracts of commodity properties with the local authorities through a network system on a real name and real time basis.

On 13 April 2010, the Ministry of Construction issued the Notice on Further Strengthening the Supervision of Real Estate Market and Improving the Pre-sale System of Commodity Housing《關於 進一步加強房地產市場監管完善商品住房預售制度有關問題的通知》, which sets out certain measures to enhance the regulation of pre-sale of residential commodity properties. Property developers are strictly prohibited from pre-selling residential commodity properties without obtaining pre-sale permits. Within 10 days after obtaining the relevant pre-sale permits, property developers are required to make a public announcement on the units available for pre-sale and the price of each unit at one time.

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LETTER FROM THE BOARD

Sales after the Completion of Commodity Properties

Commodity properties may be put up for post-completion sale only when the preconditions for such sale have been satisfied. Under the Regulatory Measures on the Sale of Commodity Properties 《商品房銷售管理辦法》, the sale of commodity properties after the completion shall meet the following conditions: (i) the real estate development enterprise has a business licence and a qualification classification certificate for real estate development; (ii) the land use rights certificates or approval documents of land use having been obtained; (iii) the construction work planning permit and the construction work commencement permit having been obtained; (iv) the commodity properties having been completed, inspected and accepted as qualified; (v) the relocation of the original residents having been completed; (vi) the supplementary essential facilities such as the supply of water, electricity, heating and gas, and communications are ready for use, and other public facilities are ready for use, or the schedule of construction and delivery date of such facilities having been specified; and (vii) the property management plan is completed.

The Provisions on Sales of Commodity Properties at Clearly Marked Price《商品房銷售明碼 標價規定》was promulgated by the NDRC on 16 March 2011 and became effective on 1 May 2011. According to the provisions, any real estate developer or real estate agency (“real estate operators”) is required to mark the selling price explicitly and clearly for both newly-build and second-hand commodity properties. The provisions require real estate operators to clearly indicate the prices and relevant fees of commodity properties, as well as other factors affecting the prices of commodity properties to the public. With respect to the real estate development projects that have received property pre-sale licence or have completed the filing procedures for the sales of constructed properties, real estate operators shall announce all the commodity properties available for sales on at once within the specified time limit. Furthermore, with regard to a property that has been sold out, real estate operators are obliged to disclose this information and to disclose the actual transaction price. Real estate operators cannot sell commodity properties beyond the explicit marked price or charge any other fees not explicitly marked. Moreover, real estate operators may neither mislead properties purchasers with false or irregular price marking, nor engage in price fraud by using false or misleading price marking methods.

Idle Land

On 28 April 1999, the MLR promulgated the Measures on Handling of Idle Land《閒置土地 處理辦法》which determine the scope and definition of idle land and set out the corresponding punishment measures, including payment of idle land fee and repossession of idle land without compensation.

On 8 September 2007, the MLR promulgated the Notice on Strengthening the Handling of Idle Land《關於加大閒置土地處置力度的通知》. The notice sets out the principles of dealing with idle land.

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LETTER FROM THE BOARD

On 3 January 2008, the State Council issued the Notice on Promoting Saving and Intensification of Use of Land 《關於促進節約集約用地的通知》. The notice requires strict enforcement of the policies concerning dealing with idle land. If a parcel of land has been idle for two years or more, it must be resolutely taken back without making any compensation and be rearranged for other uses. If the land does not meet the statutory conditions for repossession, it must be dealt with in a timely manner and fully used after changing its original use, replacement by parity value, and arrangement of a temporary use or incorporation into governmental land reserves. If a parcel of land has been idle for more than one year but less than two years, an idle land fee must be charged, which shall be 20% of the land grant price.

On 21 September 2010, the Ministry of Construction and the MLR jointly promulgated the Notice on Further Strengthening Land Use and Construction Management Control of Real Estate 《關於進一步加強房地產用地和建設管理調控的通知》Pursuant to the notice, the land use rights granted to a property development enterprise must be withdrawn and be re-granted through a new tender, auction or listing-for-sale if such property development enterprise fails to commence the construction of a project on the land involved within the prescribed time limit due to its application for adjustment of construction planning conditions. If the land is left idle for more than one year by the property development enterprise, the property development enterprise and its controlling shareholder shall be prohibited from taking part in the tender, auction or listing-for-sale for the grant of the land use rights. Furthermore, property development enterprises must commence the construction of a housing project within one year from the date of delivery of the land as stipulated on the land grant contract, and complete the construction within three years from the commencement date of the construction.

On 1 June 2012, the MLR revised and promulgated the Measures for the Disposal of Idle Land《閑置土地處置辦法》which further clarified the scope and definition of idle land, and the corresponding punishment measures compared to the old version.

Foreign Exchange Control

A foreign-invested enterprise in the PRC and its investors shall comply with the PRC laws and regulations relating to foreign exchange control, among which, there are the PRC Regulations on the Control of Foreign Exchange《中華人民共和國外匯管理條例》which was promulgated by the State Council on 29 January 1996 and became effective on 1 April 1996 and amended on 14 January 1997 and 1 August 2008; the Regulations on Administration of Settlement, Sale and Payment of Foreign Exchange《結匯、售匯及付匯管理規定》which was promulgated by PBOC on 20 June 1996 and became effective on 1 July 1996; the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies《關於境內居民通過境外特殊目的公司融資及返程投資外匯管 理有關問題的通知》which was promulgated by SAFE on 21 October 2005 and became effective as at 1 November 2005; the Notice on Relevant Business Operations Issues on the Improvement of the Administration of Payment and Settlement of Foreign Exchange Capital of Foreign-Invested Enterprises 《關於完善外商投資企業外匯資本金支付匯管理有關業務操作問題的通知》which was issued by the General Department of SAFE on 29 August 2008, etc,.

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LETTER FROM THE BOARD

In addition to the above laws and regulations, the PRC government issued multiples of regulatory documents to strengthen foreign exchange control in the real estate development sector. The 171 Opinions forbids the foreign exchange administration approving the conversion of foreign loans into RMB if the foreign-invested real estate enterprises have not paid their registered capital in full, or have not obtained the State-owned land use rights certificate, or their internal fund for a development project is less than 35% of the total investment. Pursuant to No. 50 Notice, the local SAFE administrative authority and designated foreign exchange bank will not conduct foreign exchange purchase and settlement process for foreign-invested real estate enterprises who fails to satisfy the MOFCOM for filing requirement or to pass the joint annual examination of foreign-invested enterprises. Under No. 130 Rule, real estate enterprises with foreign investment as filed with MOFCOM are prohibited from borrowing money from overseas and those which fail to file with MOFCOM after June 1, 2007 are not allowed by SAFE or its branches either for foreign exchange registration, foreign exchange alteration registration or for sale and purchase of foreign exchange under capital account.

Environment

The laws and regulations governing the environmental protection requirements for real estate development in the PRC mainly include the PRC Environmental Protection Law《中華人民共和國環 境保護法》, the PRC Environmental Impact Assessment Law《中華人民共和國環境影響評價法》, the PRC Prevention and Control of Noise Pollution Law《中華人民共和國環境噪聲污染防治法》 and the PRC Administrative Regulations on Environmental Protection for Construction Projects《建 設項目環境保護管理條例》. Pursuant to these laws and regulations, depending on the impact of the project on the environment, an environmental impact report, an environmental impact analysis table or an environmental impact registration form must be submitted by a real estate developer before the relevant authorities grant approval for the commencement of the construction of the property development. In addition, upon completion of the property development, the relevant environmental authorities will also inspect the property to ensure compliance with the applicable environmental protection standards and regulations before the property can be delivered to the purchasers.

Real Estate Management

According to the Regulation on Property Management《物業管理條例》, enacted by the State Council on 8 June 2003 and enforced on 1 September 2003, as amended on 26 August 2007 and effective as of 1 October 2007, the PRC implements a qualification scheme system in monitoring the property management enterprises. Under the Measures for the Administration of Qualifications of Property Management Enterprises《物業管理企業資質管理辦法》promulgated by the Ministry of Construction in March 2004, as amended in November 2007, a property service enterprise must apply for assessment of its qualification by the relevant qualification approval authority. An enterprise which passes such a qualification assessment will be issued a qualification certificate. No enterprise may engage in property management without undertaking a qualification assessment conducted by the relevant authority and obtaining a qualification certificate.

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LETTER FROM THE BOARD

Taxation

The operating subsidiaries of the Target Group in the PRC are subject to a wide range of taxes under the PRC tax laws and regulations.

Corporate Income Tax

On 16 March 2007, the National People’s Congress passed the Enterprise Income Tax Law of the PRC《中華人民共和國企業所得稅法》with effect from 1 January 2008 (the “EIT Law”). The EIT Law and its implementation rules (the “New EIT Laws”) adopted a uniform tax rate of 25% for all enterprises (including foreign-invested enterprises) and revoked the current tax exemption, reduction and preferential treatments applicable to foreign-invested enterprises.

On 7 April 2008, the SAT issued the Notice on the Prepayment of Corporate Income Tax of the Real Estate Development Enterprises《關於房地產開發企業所得稅預繳問題的通知》, which requires real estate developers to prepay corporate income tax on a quarterly (or monthly) basis according to the current actual profit. Under the notice, tax prepayments in respect of income generated from pre-sale before completion of the construction of the buildings for residential, commercial use or other uses shall be paid upon the calculation of the estimated quarterly or monthly profit according to the preset estimated profit rate, which shall be readjusted according to the actual profit after the completion of the construction of the buildings and settlement of the taxable cost. With respect to non-economical and affordable housing, the preset estimated profit rate for the buildings located at provincial-level cities and suburbs shall not be less than 20%, while that for prefectural-level cities and suburbs shall not be less than 15%, and for the economically affordable housing, the preset estimated profit rate shall not be less than 3%.

On 6 March 2009, the SAT promulgated the Measures for the Treatment of Enterprise Income Tax on Real Estate Development and Operation Businesses《房地產開發經營業務企業所得稅處理辦 法》, which regulates the revenue, cost of sales, fees deduction, accounting of costs and tax treatment of specific matters of enterprises engaging in the real estate business in the PRC in relation to the imposition of corporate income tax.

On 12 May 2010, the SAT promulgated the Notice on the Confirmation of Completion Conditions for Development of Products by Real Estate Development Enterprises《關於房地產開發企業開發產 品完工條件確認問題的通知》, which provides that a property should be deemed as completed when its delivery procedures (including move-in procedures) have commenced or when the property is in fact put to use. Property developers should conduct the settlement of cost in time and calculate the amount of corporate income tax for the current year.

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LETTER FROM THE BOARD

Under the EIT Laws, enterprises are classified as either “resident enterprises” or “non-resident enterprises”. In addition to enterprises established within the PRC, enterprises established outside the PRC whose “de facto management body” which refers to a managing body that exercises, in substance, overall management and control over the production and business, personnel, accounting and assets of an enterprise are located in the PRC are considered “resident enterprises”. A resident enterprise is subject to a uniform 25% EIT rate for its global income including the dividends from its subsidiaries and exempted from withholding tax.

Under the EIT Laws, “non-resident enterprises” refer to those enterprises that do not have an establishment or place of business in the PRC, or that have such establishment or place of business but the relevant income is not effectively connected with such establishment or place of business. A PRC withholding tax at the rate of 10% is applicable to dividends payable to investors that are “nonresident enterprises” to the extent such dividends have their source within the PRC, unless there is an applicable tax treaty between the PRC and the jurisdiction in which an overseas holder resides which reduces or exempts the relevant tax.

Pursuant to the Arrangement between the PRC and Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income《內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排》(the “Tax Arrangement”) signed on 21 August 2006 and entered into force on 8 December 2006, when an enterprise in the PRC distributes dividends to Hong Kong residents who are eligible for receiving such dividends, the Hong Kong residents, if holding more than 25% equity interest in such enterprise, are generally subject to a 5% taxation of the total dividends received.

According to the Notice on Issues Regarding the Implementation of Dividend Provisions in Tax Treaties《國家稅務總局關於執行稅收協議股息條款有關問題的通知》issued by the SAT on 20 February 2009 and the Administrative Measures for Non-residents to Enjoy the Treatment Under Tax Treaties (Trial)《非居民享受稅收協議待遇管理辦法（試行）的通知》promulgated on 24 August 2009 by the SAT and effective as of 1 October 2009, a non-resident taxpayer is required to obtain the approvals from the relevant tax authorities before it may enjoy a tax reduction or waiver under the dividend provision of a tax treaty.

Pursuant to the EIT Laws, any gain realized on the transfer of equity in a PRC resident enterprise by overseas investors that are “non-resident enterprises” is subject to 10% PRC income tax (exclusive of dealing with stocks of the PRC resident enterprises on the public stock market). In addition, according to the Circular of the State Administration of Taxation on Strengthening Administration of Enterprises Income Tax on Income from Equity Transfer by Non-Resident Enterprises《國家稅務總 局關於加強非居民企業股權轉讓所得企業所得稅管理的通知》(the “Circular 698”) effective on 1 January 2008, when a foreign investor (the actual controlling party) transfers the equity in a PRC resident enterprise indirectly, if the actual tax rate adopted in the country (region) where the offshore holding company as the transferor is located is lower than 12.5% or the country (region) does not levy income tax to its resident on overseas income, then the foreign investor shall provide the documents in accordance with the Circular 698 to the local authority by which the PRC resident enterprise is governed within 30 days after the signing of the equity transfer agreement.

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LETTER FROM THE BOARD

Deed tax

Under the PRC Provisional Regulations on Deed Tax《中華人民共和國契稅暫行條例》 promulgated by the State Council on 7 July 1997 and implemented on 1 October 1997, a deed tax is chargeable to transferees of land use rights and/or property ownership within the territory of China. The deed tax rate is between 3% and 5% subject to determination by local governments at the provincial level in light of local conditions.

Business tax

Under the PRC Provisional Regulations on Business Tax《中華人民共和國營業稅暫行條例》 promulgated by the State Council on 13 December 1993, amended on 5 November 2008, and implemented on 1 January 2009, and the Detailed Implementing Rules on the PRC Provisional Regulations on Business Tax《中華人民共和國營業稅暫行條例實施細則》issued by the Ministry of Finance and the SAT on 25 December 1993, amended on 15 December 2008 and implemented on 1 January 2009, and further amended on 28 October 2011 and implemented on 1 November 2011, business tax is imposed on income derived from the furnishing of specified services and transferring of immovable property or intangible property at rates ranging from 3% to 20%, depending on the activities.

Land Appreciation Tax (the “LAT”)

Under the Provisional Regulations of the PRC on LAT《中華人民共和國土地增值稅暫行條 例》promulgated by the State Council on 13 December 1993 and became effective on 1 January 1994 and its implementing rules which were promulgated by the Ministry of Finance on 27 January 1995, the LAT applies to both domestic and foreign investors in real estate in China, irrespective of whether they are corporate entities or individuals. The tax is payable by a taxpayer on the appreciation value derived from the transfer of land use rights, buildings or other facilities on such land, after deducting certain “deductible items”. The LAT rate is progressive and ranges from 30% to 60% of the appreciation value net of the “deductible items”.

On 28 December 2006, the SAT promulgated the Notice on the Settlement Management of Land Appreciation Tax on Real Estate Enterprises《關於房地產開發企業土地增值稅清算管理有關問題的 通知》, effective on 1 February 2007. According to the notice, the LAT assessment amount shall be derived from the entire value of the real estate development project if the project was approved by the relevant authority as a unit; and for a project developed in stages, the LAT assessment amount shall be derived from the value of each individual stage of the project. A taxpayer should pay the LAT if one of the circumstances listed in the notice occurs.

On 12 May 2009, the SAT issued the Regulations of Land Appreciation Tax Settlement Administration《土地增值稅清算管理規程》, effective on 1 June 2009 with the aim of strengthening the imposition of the LAT by specifically regulating the acceptance, review of LAT settlement and tax imposition procedures.

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LETTER FROM THE BOARD

On 19 May 2010, the SAT promulgated the Notice on Issues Regarding Land Appreciation Tax Settlement《關於土地增值稅清算有關問題的通知》, which provides further clarifications and guidelines on LAT Settlement, income recognition, deductible expenses, timing of assessment and other related issues.

On 25 May 2010, the SAT promulgated the Notice on Strengthening the Levy and Administration of Land Appreciation Tax《關於加強土地增值稅徵管工作的通知》to impose further requirements on the collection of LAT. The notice provides that, except for social security housing, the minimum LAT prepayment rate shall be no less than 2% for properties in Eastern China, no less than 1.5% for properties in Central and Northeastern China and no less than 1% for properties in Western China. The LAT prepayment rate shall be determined by the local authorities based on different property types in the locality.

Urban Land Use Tax

Pursuant to the Provisional Regulations of the PRC on Urban Land Use Tax《中華人民共和國 城鎮土地使用稅暫行條例》promulgated by the State Council in September 1988, urban land use tax is levied according to the area of the urban land plot and the annual tax rate on urban land was set at between RMB0.2 and RMB10 per sq.m. On 31 December 2006, the Provisional Regulations of the PRC on Urban Land Use Tax were amended by the State Council. As at 1 January 2007, on the basis of the amended regulations, the urban land use tax is charged at a rate three times higher than the previous rate and foreign-invested enterprises are no longer exempt.

Property Tax

Under the Provisional Regulations of the PRC on Property Tax《中華人民共和國房產稅暫行 條例》promulgated by the State Council in September 1986, property tax applicable to domestic enterprises is 1.2% if it is calculated on the basis of the residual value of a property and 12% if it is calculated on the basis of the rental income of the property.

Stamp Duty

Under the Provisional Regulations of the PRC on Stamp Duty《中華人民共和國印花稅暫行條 例》promulgated by the State Council in August 1988 applying to building property transfer instruments, including property ownership transfer instruments, the duty rate is 0.05% of the amount stated therein. For permits and certificates relating to rights, including property ownership certificates and land use rights certificates, stamp duty is levied on an item-by-item basis at a rate of RMB5 per item.

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LETTER FROM THE BOARD

Municipal Maintenance Tax and Education Surcharge

Under the Provisional Regulations of the PRC on Municipal Maintenance Tax《中華人民共和 國城市維護建設稅暫行條例》promulgated by the State Council in 1985, any taxpayer, either an individual or otherwise, that is required to pay consumption tax, value-added tax or business tax is also required to pay municipal maintenance tax.

Pursuant to the Notice on Unification of the Application of Municipal Maintenance Tax and Education Surcharge by Domestic and Foreign Enterprises and Individuals《國務院關於統一內外資 企業和個人城市維護建設稅和教育費附加制度的通知》issued by the State Council on 18 October 2010 and the Notice on Relevant Issues of Imposition of Municipal Maintenance and Education Surcharge on Foreign-invested Enterprises《關於對外資企業徵收城市維護建設稅和教育費附加有關 問題的通知》 promulgated by the Ministry of Finance and the SAT on 4 November 2010, starting from 1 December 2010, foreign-invested enterprises are required to pay municipal maintenance and construction tax as well as education surcharge. Payment of urban maintenance and construction tax and education surcharge shall be based on the consumption tax, value-added tax and business tax which a taxpayer actually pays and shall be paid simultaneously with payment of the consumption tax, value-added tax and business tax. The rates of urban maintenance and construction tax shall be 7%, 5% and 1% for a taxpayer in a city, a county town or town and a place other than a city, county town or town respectively. The educational surcharge rate is 3%.

Laws and Regulations Relating to Hospital Ownership and Operation

Foreign Investment in Health Care Sector

Under the Catalogue for the Guidance of Foreign Investment Industries (2007 version)《外商 投資產業指導目錄（2007年修訂）》, medical institution falls within the category of industries for which foreign investment is restricted. Foreign investment in medical institutions is subject to joint operation with the PRC partner.

The Interim Measures for the Administration of Sino-foreign Equity Joint and Cooperative Joint Medical Institutions《中外合資、合作醫療機構管理暫行辦法》and its supplementary provisions I and II provide the criteria and procedures for the establishment of a sino-foreign equity joint and cooperative joint medical institution and the administrative requirements for the change, extension, termination and practice of sino-foreign equity joint and cooperative joint medical institutions.

Under the Catalogue for the Guidance of Foreign Investment Industries (2011 version)《外商 投資產業指導目錄（2011年修訂）》, medical institution is removed from the category of industries for which foreign investment is restricted and consequently included in the category of industries for which foreign investment is permitted.

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LETTER FROM THE BOARD

Administrative Principle of the Medical Service Market

The Regulation on the Administration of Medical Institutions 《醫療機構管理條例》promulgated by the State Council on 26 February 1994 and the Rules for the Implementation of Regulation on the Administration of Medical Institutions《醫療機構管理條例實施細則》promulgated by Ministry of Health (the “MOH”, the predecessor of National Health and Family Planning Commission) on 29 August 1994 established the general principle of governmental supervision of medical institutions.

The Guide Opinions on the Urban Medical and Health Care System Reform《關於城鎮醫藥衛 生體制改革的指導意見》jointly promulgated by eight governmental departments including the Economic System Reform Office of the State Council and the MOH on 26 February 2000 and the Implementation Opinions on the Classified Administration of Urban Medical Institution《關於城鎮醫 療機構分類管理的實施意見》jointly promulgated by four governmental departments including MOH on 1 July 2000 specified the division basis between the profit medical institution and non-profit medical institution and the procedures of determining the classification of a medical institution.

In September 2001, four governmental departments including MOH jointly promulgated the Opinions on Several Issues Concerning the Classified Administration of Urban Medical Institution 《關於城鎮醫療機構分類管理若干問題的意見》. On 19 February 2005, the State Council issued Several Opinions of the State Council on Encouraging, Supporting and Guiding the Development of Individual and Private Economy and Other Non-Public Sectors of the Economy《國務院關於鼓勵支 持和引導個體私營等非公有制經濟發展的若干意見》. The aforesaid opinions encourage and support the establishment of profit medical institutions.

Establishment and Operation of a Medical Institution

Pursuant to the Regulation on the Administration of Medical Institutions《醫療機構管理條例》 which was promulgated by the State Council on 26 February 1994 and came into effect on 1 September 1994 and the Implementation Rules of the Regulation on the Administration of Medical Institutions 《醫療機構管理條例實施細則》which was published by the MOH on 29 August 1994 and effective on 1 September 1994, the establishment of a medical institution must be in conformity with the planning of setting up medical institutions published by the local health administrative authority above the county level and satisfy the basic standards established by the health administrative authority of the State Council. Any organization or individual who is to establish a medical institution shall be subject to examination and approval by the competent health administrative authority above the county level and obtain an Approval Certificate for Establishment of Medical Institution《設置醫療機構批 准書》before other required formalities for setting up a medical institution can be proceeded with. The valid term of the Approval Certificate for Establishment of Medical Institution is determined by the health administrative authority at the provincial level.

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LETTER FROM THE BOARD

The Regulation on the Administration of Medical Institutions requires a medical institution to, before commencing on operation, apply for practice registration with the health administrative authority who has issued approval for its establishment. Upon receipt of the registration application of a medical institution, the health administrative authority will examine such application in accordance with the Regulation on the Administration of Medical Institutions and the basic standards of medical institutions and afterward issue a Practice Permits for Medical Institution《醫療機構執業許可證》(the “Practice Permits”) to the applicants who are qualified for registration. Medical institutions who have not obtained a Practice Permits are prohibited from conducting operation and medical practice in any way.

In addition, pursuant to the Interim Regulation on the Classified Registration of Urban Medical Institution《城鎮醫療機構分類登記暫行規定》which was jointly released by the MOH and the State Administration of Traditional Chinese Medicine (the “SATCM”) in 2000, the establishment of profit medical institutions are also subject to business registrations with the delegated authorizes of the SAIC.

Under the Regulation on the Administration of Medical Institutions, in case of changes of the name, location, principals, medical subjects and sickbed numbers of a medical institution, the medical institution is required to re-register with the original registration authority. The Practice Permits obtained by a medical institution is subject to regular verification by the original practice registration authorities. The Practice Permits of a medical institution with less than 100 sickbeds shall be verified once per year and that of a medical institution with 100 sickbeds or more shall be verified once per 3 years.

Pricing

Pursuant to the Guide Opinions on the Urban Medical and Health Care System Reform, the Implementation Opinions on the Classified Administration of Urban Medical Institution, the Opinions on the Reform of Management of Medical Service Price《關於改革醫療服務價格管理的意見》jointly promulgated by the State Planning Commission (the predecessor of the NDRC) and MOH in July 2000, the Opinions on Deepening the Reform of the Medical and Health Care System《關於深化醫 藥衛生體制改革的意見》and the Plan on Recent Priorities in Carrying out the Reform of the Medical and Health Care System (2009-2011)《醫藥衛生體制改革近期重點實施方案（2009-2011年）》 principally passed by the State Council on 1 January 2009, the profit medical institutions are allowed to carry out independent pricing for services and the price administration authorities will inspect and supervise the service price of the medical institutions in accordance with the Price Law of the PRC 《中華人民共和國價格法》and the Provisions on the Administrative Punishment of Price-related Violation《價格違法行為行政處罰規定》.

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LETTER FROM THE BOARD

Quality of Medical Service

Medical services provided by a medical institution in the PRC shall confirm to the quality requirement of various aspects stipulated by relevant laws and regulations including but not limited to the Circular of the Ministry of Health on Strengthening the Administration of Medical Quality 《衛生部關於加強醫療品質管制的通知》promulgated by MOH in September 1993, Regulation on the Handling of Medical Accidents《醫療事故處理條例》released by the State Council in February 2002, Regulation on the Management of Medical Records of Medical Institution《醫療機構病歷管 理規定》jointly promulgated by MOH and (the SATCM) in February 2002, the Interim Regulation on the Report of Medical Quality and Safety Accident《醫療品質安全事件報告暫行規定》promulgated by MOH on 14 January 2011 and effective as of 1 April 2011, the Measures for the Administration of Prescriptions《處方管理辦法》promulgated by MOH in February 2007 and the Guide for Hospital Management Evaluation (2008 edition)《醫院管理評價指南（2008版）》released by MOH in May 2008.

Qualification of Medical Staff

Pursuant to Law on Practicing Doctors of the PRC《中華人民共和國執業醫師法》which was enacted by the NPC on 26 June 1998 and effective as of 1 May 1999 and the Interim Measures on the Registration of Practicing Doctors《醫師執業註冊暫行辦法》Promulgated by MOH on 16 July 1999, the PRC applies qualification test system and practice registration system for practicing doctors. Practioners shall obtain the practicing doctor qualification or assistant practicing doctor qualification by passing the centralized qualification examination and register with the relevant health care administrative authority before they can start doctor practice within the registered area.

Under the Regulation on Nurses《護士條例》which was promulgated by the State Council on 23 January 2008 and became effective on 12 May 2008, the PRC carries out the qualification test system and practice registration system for nurses. Practioner shall obtain a Certification of Practicing Nurse《護士執業證書》by passing the centralized qualification examination and register with the relevant health care administrative authority before they can start nurse practice.

Foreign doctors who engage in medical practice in China shall comply with the Interim Measures for the Administration of Foreign Doctors Practicing Medicine in China for Short Terms 《外國醫師 來華短期行醫暫行管理辦法》which was promulgated by MOH on 7 October 1992 and came into force on 1 January 1993.

Medical Advertisement

According to the Advertising Law of the PRC《中華人民共和國廣告法》which was enacted by the NPC on 27 October 1994 and the Measures for the Administration of Medical Advertisements 《醫療廣告管理辦法》which was jointly amended and promulgated by SAIC and MOH on 10 November 2006 and became effective on 1 January 2007, any medical advertisement to be released by a medical institution shall be examined by the relevant health care administrative authority and obtain a Certificate for Examination of Medical advertisement《醫療廣告審查證明》.

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LETTER FROM THE BOARD

Environmental Protection

Solid wastes and sewage are usually the main wastes discharged by a medical institution in the PRC. Pursuant to the Regulations on the Administration of Medical Wastes《醫療廢物管理條例》 promulgated by the State Council on 16 June 2003 and the Measures for Medical Wastes Management of Medical and Health Institution《醫療衛生機構醫療廢物管理辦法》promulgated by MOH on 15 October 2003, the solid wastes generated from the medical service process shall be disposed by institutions which are responsible for concentrated disposal of medical wastes. The discharge of sewage by a medical institution shall comply with the Law of the PRC on the Prevention and Control of Water Pollution《中華人民共和國水污染防治法》which was enacted by the NPC on 28 February 2008 and came into force on 1 June 2008, the Law of the PRC on Prevention and Treatment of Infectious Diseases《中華人民共和國傳染病防治法》 enacted by the NPC on 21 February 1981, which was amended on 28 August 2004 and effective as of 1 December 2004 and the Requirements for Sewage Discharge of Medical Institution《醫療機構污水排放要求(GB18466-2001)》released by Administration of Quality Supervision, Inspection and Quarantine (the “AQSIQ”) in October 2001.

Laws and Regulations Relating to Trading of Medical Devices

Operating License

According to the Regulations for the Supervision and Administration of Medical Devices《醫 療器械監管管理條例》promulgated by the State Council on 4 January 2000, medical devices are classified into three different categories, Class I, Class II and Class III, based on the requirement of government control for safety and effectiveness. Class I medical devices shall be registered with the food and drug administration at the city level, while Class II and Class III at the provincial and state level respectively.

According to Measures for Supervision and Administration of Medical Device Production《醫 療器械生產監管管理辦法》promulgated by State Food and Drug Administration (the “SFDA”) on 20 July 2004, several requirements regarding, among others, personnel, facilities, technical standards, shall be met before the provincial food and drug administration issues a Medical Device Producing Enterprise License for producing Class II and/or Class III medical devices and before it applies for business license. The term of validity of a Medical Device Producing Enterprise License is five years.

According to Measures for Medical Device Registration《醫療器械註冊管理辦法》issued by SFDA on 9 August 2004, a Class II or Class III medical device is prohibited to be manufactured or distributed before the provincial level of SFDA or SFDA, as the case may be, issues a Medical Device Registration Certificate《醫療器械註冊證》for such medical device. The Medical Device Registration Certificate is valid for four years and shall be renewed six months prior to its expiry.

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LETTER FROM THE BOARD

According to the Measures for the Administration of Permits for Medical Device Operation Enterprises 《醫療器械經營企業許可證管理辦法》(the “Measures”) promulgated by SFDA on 9 August 2004, an enterprise engaging in the sale of Class II or Class III devices shall obtain a Permit for Medical Device Trading Enterprises《醫療器械經營企業許可證》, which is valid for five years and shall be renewed six months prior to its expiry. The Measures also stipulate the requirements, among others, regarding the personnel, facilities, quality control systems that a medical device trading enterprise shall meet before the relevant food and drug administration issues a Permit for Medical Device Trading Enterprises to it.

Export and Import

According to the Rules on the Application and Issuance of Medical Device Exporting Certificate 《醫療器械產品出口證明申辦規定》promulgated by State Medicine Administrative Bureau (the predecessor of the SFDA)on 6 January 1996 and the Rules Concerning the Issuance of Medical Device Exporting Certificate《關於出具醫療器械產品出口銷售證明書的管理規定》promulgated by SFDA on February 12, 2004, medical device exporting enterptes 《療器械產品出口銷售證明書》for the exportation of medical devices. The Medical Device Exporting Certificate 《醫療器械產品出口銷售 證明書》 is valid for two years. The medical device exporting enterprise shall guarantee the quality of the exported medical devices and bear any legal liabilities arising therefrom.

Pursuant to the Measures for the Supervision and Administration of the Inspection of the Imported Medical Device《進口醫療器械檢驗監督管理辦法》promulgated by AQSIQ on 30 May 2007 and effective as of 1 December 2007, medical devices to be imported into the PRC are subject to inspection by the inspection and quarantine institutions and shall obtain the Inspection and Quarantine Certificate for Goods for Entry《入境貨物檢驗檢疫證明》.

Advertisement

According to the Criteria for the Examination and Publication of Medical Device Advertisements 《醫療器械廣告審查發佈標準》 jointly promulgated by the SFDA, SAIC and MOH on April 28, 2009, no advertisement shall be published for medical devices where its production, distribution and use have been prohibited by explicit orders of the food and drug administration and for medical devices developed by medical institutions for internal use. The name, scope of application, functions, composition and working mechanism of medical devices in a medical device advertisement shall conform to those indicated in the medical device registration certificate issued by the food and drug administration.

According to the Measures for the Examination of Medical Devices Advertisements 《醫療器 械廣告審查辦法》jointly promulgated by SFDA, SAIC and MOH on April 7, 2009, an approval from the provincial food and drug administration shall be obtained for releasing any medical device advertisement to the public, except for the advertisement only bearing the name of the medical device.

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LETTER FROM THE BOARD

Pricing

In China, national and provincial price administration authorities publish price control lists, and may, from time to time, restrict retail prices for certain medical devices. Such restrictions are usually in the form of pricing guidelines. Manufacturers of selected medical devices are required to set the retail prices of their products below the relevant maximum prices contained in these pricing guidelines. The relevant price administration authorities typically determine the maximum retail price of a product on the basis of its average unit cost among various manufacturers of the product.

Pursuant to the Trial Working Plan for Centralized Purchasing of High Value Medical Supplies by Health Institutions in Eight Provinces and Municipalities 《8省市醫療機構高值醫用耗材集中採 購試點工作方案》 promulgated by MOH in August 2004, the Notice regarding Further Enhancing the Administration of Centralized Purchasing of Medical Devices《衛生部關於進一步加強醫療器械 集中採購管理的通知》 issued by MOH in June 2007 and the Notice regarding Centralized Purchasing of High Value Medical Supplies 《衛生部辦公廳關於全國高值醫用耗材集中採購有關問題的通知》 issued by MOH in January 2010, MOH requires public hospitals and healthcare institutions to follow the medical device retail prices established through tender processes.

Moreover, in November 2009, NDRC, MOH and Ministry of Human Resources and Social Security (the “MOHRSS”) jointly issued a Notice of Opinion on Reform of Pricing System of Pharmaceuticals and Medical Services 《關於印發改革藥品和醫療服務價格形成機制的意見的通 知》, pursuant to which NDRC will strengthen its intervention in the pricing of medical devices (including high value medical devices), limit the profit margins of the participants in the supply chain for medical devices and periodically announce market price information of medical devices.

Product Liability

The Product Quality Law of the PRC《中華人民共和國產品質量法》adopted by the Standing Committee of the NPC on 22 February 1993 and amended on 8 July 2000 and on 7 August 2009 is applicable to all the production and marketing activities in the PRC. Under the Product Quality Law of the PRC and the Tort Law of the PRC《中華人民共和國侵權責任法》enacted by the NPC on 26 December 2009 and effective as of July 1, 2010, the manufacturer shall assume the liability for damages caused by its product with latent defects, while the seller shall be liable for the damages resulted from the product defect caused by the fault of the seller. Where any personal or property damages are caused by a defective product, the victim may require compensation to be made by the manufacturer of the product or the seller of the product.

According to the Measures for the Recall of Medical Devices (Trial) 《醫療器械召回管理辦 法（試行）》(the “Measures for Recall”) promulgated by MOH on May 20, 2011 and effective as of 1 July 2011, medical device operation enterprises shall assist the medical device manufacturers performing their obligation of recalling medical devices with latent defects. The Measures for Recall also provide the contents and procedures for the investigation and assessment of the medical device defects and the processes for the voluntary and ordered recall of the defective products.

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LETTER FROM THE BOARD

Labour Protection

The PRC Labour Contract Law《中華人民共和國勞動合同法》and the PRC Labour Contract Law Implementation Rules《中華人民共和國勞動合同法實施條例》took effect on 1 January 2008 and 18 September 2008, respectively. These labour laws and rules set out specific provisions in relation to the execution, contents and terms of employment contracts and the rights and obligations of employees and employers.

Employers in China are required to contribute, on behalf of their employees, to a number of social security funds, including funds for basic pension insurance, unemployment insurance, basic medical insurance, work-related injury insurance, maternity insurance, and housing provident funds. These payments are made to local administrative authorities and an employer who fails to contribute may be fined and be ordered to make-up for the missed contributions. The various laws and regulations that govern the employers’ obligation to contribute to the social security funds include PRC Social Insurance Law《中華人民共和國社會保險法》promulgated by the Standing Committee of the NPC on 28 October 2010 and became effective 1 July 2011; the Interim Regulations on the Collection and Payment of Social Security Funds《社會保險費徵繳暫行條例》, which were promulgated by the State Council and became effective on 22 January 1999; the Interim Measures concerning the Maternity Insurance《企業職工生育保險試行辦法》, which were promulgated by the Ministry of Labour on 14 December 1994 and became effective on 1 January 1995; the Regulations on Occupational Injury Insurance 《工傷保險條例》, which were promulgated by the State Council on 27 April 2003 and became effective on 1 January 2004 and then amended on 20 December 2010; and the Regulations on Management of the Housing Provident Fund《住房公積金管理條例》, which were promulgated and became effective on 3 April 1999 and then amended on 24 March 2002.

REASONS FOR AND BENEFITS OF ENTERING INTO THE ACQUISITION

Before the Acquisition, the principal businesses of the Group are securities trading and investments, provision of financial services, property investment and strategic investment. Following the Completion, Extra Earn and Jiatai Tongren will become a subsidiary of the Company and its result and assets and liabilities will be consolidated into that of the Company. The Directors consider that the Acquisition is a valuable opportunity to further participate in the investment in and management and operation of healthcare and hospital businesses, trading of medical equipment and related supplies, property investment and development and other investments in the PRC and to explore and capture business opportunities in the fast growing healthcare and elderly care services business amid the trends of urbanisation and demographic shift in the PRC and secure its footing in such industries in the PRC, which is also in conformity with the Group’s strategy to seek and identify grossly undervalued investment and business opportunities in the PRC. In view of the above and further considering the management experience of the Target Group and the gain resulting from the discount on Acquisition as disclosed in the Interim Report 2012 of the Company, the Board is of the view that the terms and conditions of the S&P Agreement are fair and reasonable and the Acquisition is in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE ACQUISITION

Following the Completion, the Target Group will become a subsidiary of the Company and its result and assets and liabilities will be accounted for in the consolidated financial statements of the Group.

According to the consolidated of statement of financial position of the Group as contained in the Annual Report 2011/2012 of the Company, the audited total assets and liabilities of the Group as at 30 June 2012 were HK$3,466,029,000 and HK$1,619,083,000 respectively, whereas according to the pro forma financial information as contained in Appendix IV of this circular the unaudited total assets and total liabilities of the Enlarged Group as at 31 December 2012 were HK$6,163,231,000 and HK$3,848,329,000 following the consolidation of results and assets and liabilities of the Target Group as at 31 December 2012.

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LETTER FROM THE BOARD

The Acquisition was completed on 19 September 2012. Accordingly, the unaudited consolidated statement of financial position of the Group as at 31 December 2012 set out in the interim report dated 27 February 2013 (“Interim Report 2012”) incorporated the financial statements of Target Group. As set out in the Interim Report 2012, the unaudited total assets and total liabilities of the Group as at 31 December 2012 were HK$6,163,231,000 and HK$3,848,329,000 respectively. The assets acquired and liabilities recognised at the date of Acquisition extracted from note 21 of the Interim Report 2012 are set out below:

Property, plant and equipment Prepaid lease payments Intangible assets Interests in associates Inventories Properties under development for sale Properties held for sale Debtors, deposits and prepayments Deposit paid for acquisition of land use right for property development Pledged bank deposits Restricted bank deposits Bank balances and cash Creditor and accrued charges Consideration payable Deposits received on sales of properties Receipts in advance Amount due to an associate Bank borrowings Obligations under finance leases Deferred tax liabilities Amount due to the subsidiary of the Company Net assets acquired Less: Non-controlling interests on Jiatai Tongren’s subsidiaries

HK$’000 1,438,055 127,346 16,816 15,931 18,907 621,695 39,441 152,129 332,045 222,023 57,857 131,908 (589,626) (85,784) (247,345) (21,999) (7,966) (1,216,544) (56,613) (119,271) (54,474) 774,531 (111,901) 662,630

– 48 –

LETTER FROM THE BOARD

As set out in the interim report, the Group’s hospital operation carried out by Jaitai Tongren incurred a loss of HK$21,122,000 from the date of Acquisition to 31 December 2012. In preparing the Interim Report 2012, the directors of the Company performed impairment testing on the property, plant and equipment, prepaid lease payments and intangible assets of the Group’s hospital operation in accordance with Hong Kong Accounting Standard 36 “Impairment of Assets”. According to the result of the assessment, there is no impairment identified as the recoverable amount of the hospital operation, estimated based on value in use, using discounted cash flow method is higher than the carrying amounts of these assets as at 31 December 2012. As a result, there is no impairment. The directors confirm that they will adopt consistent accounting policies in accordance with Hong Kong Accounting Standard 36 “Impairment of Assets” and principal assumptions to assess the impairment of the Enlarged Group’s intangible assets and goodwill in the future.

It is expected the revenue the Enlarged Group will be increased and the earnings of the Enlarged Group will be increased/decreased, upon the consolidation of the results of the Target Group.

COMPLETION OF THE ACQUISITION

Following the completion of the Acquisition, the Extra Earn Asset Reorganization and the transfer of registered capital of Jiatai Tongren from Extra Earn to the Company, which took place on the date of the S&P Agreement, the Company became directly interested in Jiatai Tongren representing approximately 58.01% of the entire registered capital of Jiatai Tongren.

Upon the completion of the Acquisition, the Extra Earn Asset Reorganization and the transfer of registered capital of Jiatai Tongren from Extra Earn to the Company, Extra Earn became a whollyowned subsidiary of the Company and has no assets and liabilities save for intra-group liabilities.

IMPLICATIONS UNDER THE LISTING RULES

As the relevant Percentage Ratios for the Acquisition under Rule 14.07 exceeds 25% but is below 100%, the Acquisition constitutes a major transaction for the Company and is subject to approval of the Shareholders. The Company has obtained a written shareholder’s approval for the Acquisition from Vigor Online which held approximately 71.89% of the total issued share capital of the Company as at the date of the S&P Agreement. Accordingly, no general meeting for Shareholders’ approval of the Acquisition will be held.

FUTURE PROSPECTS OF THE ENLARGED GROUP

The second half of 2012 saw improved sentiments in the global economic environment. The pessimism over the European sovereign debt crisis was reduced by the positive measures undertaken by the European Central Bank. Further, the economic hard landing expected for the Chinese economy was avoided and instead there was robust growth evidenced in its economy. Also the threat of adverse consequences of the U.S fiscal cliff was avoided which provided some welcome relief, however brief, to the financial markets. All these contributed to a more upbeat economic and financial environment towards the end of 2012 as compared with last year.

– 49 –

LETTER FROM THE BOARD

Despite the rally seen in the global financial market in the beginning of 2013, the worry over the fragile economic conditions, political in-fighting and paralysis, with the consequential social unrest in the developed world, geo-political tension and posturing and the lack of momentum in growth in the emerging markets will continue to linger and weigh on the global economy and financial markets. Nevertheless, the Group believes that there will always be attractive investment opportunities available as companies and businesses become grossly undervalued. Upon Completion, the Enlarged Group will, through Jiatai Tongren, be also engaged in the investment in and operation of healthcare and hospital businesses, trading of medical equipment and related supplies, property investment and development, and other investment in the PRC. The Enlarged Group will continue to cautiously seek and identify such opportunities in China, Hong Kong and the Asia Pacific region and to explore and capture business opportunities in the fast growing healthcare and elderly care service businesses amid the trends of urbanisation and demographic shift in the PRC to improve its financial performance and enhance value for shareholders.

Subsequent to Completion, the Group has further subscribed for an equity interest in the registered capital of Jiatai Tongren for an amount of US$32,000,000. Upon the completion of the subscription on 17 December 2012, the Group’s shareholding in Jiatai Togren has been increased to US$81,186,679 representing approximately 69.52% of the entire registered capital of Jiatai Tongren.

By leveraging three operating integrated hospitals, the Enlarged Group aims to provide specialized chain services including high-end obstetrics, oral cavity and otorhinolaryngology services and strives to combine medical and healthcare services into elderly care real estate business to capture the business opportunity in the fast growing healthcare and elderly care services in the PRC.

Given that the Target Group has entered the healthcare and elderly care industry early in 2003, it is currently one of the few PRC private enterprises with various operating integrated hospitals, healthcare resources and reserve of lands, the Enlarged Group considers that it is well positioned to realize its strategic objectives.

In March 2013, the Target Group entered into a sale and purchase agreement to dispose of the entire registered capital of Lianyungang Chengtai Property Limited (“Lianyungang Chengtai”) for a consideration of RMB250 million. The sole asset of Lianyungang Chengtai is two pieces of vacant land with site area of 276 Mu in Lianyungang Economic and Technological Development Zone the PRC. However, given the purchaser failed to pay a deposit into a joint managed account as prescribed in the agreement, on 14 April 2013 the Enlarged Group served a notice of termination on the purchaser to terminate the agreement.

– 50 –

LETTER FROM THE BOARD

In March 2013, the Target Group entered into a cooperative agreement with Mr. Yu Zhen Kun (“Mr. Yu”), whereby, among other, the Target Group and Mr. Yu agreed to set up a joint venture specializing in eye, ear, nose and throat with a tentative investment amount of RMB80 million. The Target Group will contribute RMB60 million for a 60% interest and Mr. Yu and his professional team will contribute RMB20 million for a 40% interest. Mr. Yu is a well-known medical specialist in the PRC, specializing in ear, nose, throat, head and neck. Mr. Yu is currently the director of surgery at the ear, nose, throat, head and neck surgery department of Beijing Tongren Hospital affiliated to Capital Medical University（首都醫科大學附屬北京同仁醫院）. The Enlarged Group considers that cooperative agreement provides an invaluable opportunity to leverage on the medical expertise of Mr. Yu.

RECOMMENDATION

Although no general meeting will be convened for approving the entering into of the S&P Agreement, the Board considers that the transactions contemplated by the S&P Agreement are on normal commercial terms and the terms of the S&P Agreement are fair and reasonable and are in the interests of the Company and its Shareholders taken as a whole. Accordingly, if a general meeting were convened for approving the entering into of the S&P Agreement, the Board would have recommended the Shareholders to vote in favour of the entering into of the S&P Agreement.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this circular.

By Order of the Board COL Capital Limited Chong Sok Un Chairman

– 51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION

The Company is required to set out in this circular the information for the last three financial years with respect to the profits and losses, financial record and position, set out as a comparative table and the latest published audited balance sheet together with the notes on the annual accounts for the last financial year for the Group.

• (a) the 6-month period ended 31 December 2012 (unaudited) is disclosed in the Company’s 2012/2013 interim report published on 25 March 2013 from pages 1 to 47. Please also see below hyperlink to the Interim Report 2012:

http://www.hkexnews.hk/listedco/listconews/SEHK/2013/0325/LTN20130325003.pdf

• (b) the year ended 30 June 2012 is disclosed in the Company’s 2011/2012 annual report published on 20 September 2012 from pages 29 to 104. Please also see below hyperlink to the Annual Report 2011/2012:

http://www.hkexnews.hk/listedco/listconews/SEHK/2012/1029/LTN20121029390.pdf

• (c) the 18-month period ended 30 June 2011 is disclosed in the Company’s 2010/2011 annual report published on 22 September 2011 from pages 26 to 110. Please also see below hyperlink to the Annual Report 2010/2011:

http://www.hkexnews.hk/listedco/listconews/SEHK/2011/1031/LTN20111031009.pdf

• (d) the year ended 31 December 2009 is disclosed in the Company’s 2009 annual report published on 29 April 2010 from pages 25 to 102. Please also see below hyperlink to the Annual Report 2009:

http://www.hkexnews.hk/listedco/listconews/SEHK/2010/0429/LTN201004291401.pdf

2. STATEMENT OF INDEBTEDNESS

At the close of business on 31 March 2013, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Enlarged Group had outstanding securities margin loans of approximately HK$1,137,593,000, unsecured term loan of HK$70,000,000, promissory note of HK$91,987,000, secured bank borrowings of HK$837,074,000, unsecured bank borrowings of HK$130,192,000, Consideration payable of HK$86,792,000, amount due to an associate of HK$8,060,000, obligation under finance lease of HK$91,847,000 and bonds of HK$247,000,000. As at 31 March 2013, the Enlarged Group’s investments held for trading, interest in associates, availablefor-sale investments, pledged bank deposits, buildings (included in the property, plant and equipment), properties under development for sale and prepaid lease payments with respective carrying values of approximately HK$(946,708,000), HK$989,303,000 HK$265,786,000, HK$178,359,000, HK$584,314,000, HK$82,143,000 and HK$94,776,000 were pledged to securities houses and banks to secure credit facilities granted to the Enlarged Group.

– 52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Save as aforesaid, and apart from intra-group liabilities, the Group did not have outstanding at the close of business on 31 March 2013 any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances or acceptable credits, debentures, mortgages, charges, hire purchase commitments charges, guarantees or other material contingent liabilities

3. WORKING CAPITAL

The Directors are of the opinion that, after taking into account of the effect of the Acquisition, the Enlarged Group’s existing cash and bank balances, the present available credit facilities and margin loan facilities and the expected internally generated funds, the Enlarged Group has sufficient working capital for its present requirement for the next twelve months from the date of this circular.

4. LITIGATION

The material litigations/claims of the Group as at the Latest Practicable Date are disclosed in the paragraph headed “Litigation” in Appendix VI. Save as aforesaid, the Group had no other material litigation as at the Latest Practicable Date.

5. MATERIAL ADVERSE CHANGE

The Directors are not aware, as at the Latest Practicable Date, of any material adverse change in the financial or trading position or prospect of the Group since 30 June 2012, the date to which the latest published audited financial statements of the Group were made up.

– 53 –

FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

1. ACCOUNTANTS’ REPORT ON EXTRA EARN HOLDINGS LIMITED

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10 May 2013

The Directors

COL Capital Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding Extra Earn Holdings Limited (“Extra Earn”) and its subsidiaries (hereinafter collectively referred to as the “Extra Earn Group”) for each of the three years ended 31 December 2012 (the “Relevant Periods”), for inclusion in the circular of COL Capital Limited (the “Company”) dated 10 May 2013 in connection with the major acquisition relating to the acquisition of 19.34% equity interest in Extra Earn Holdings Limited (the “Acquisition”) for a consideration of HK$89,860,000 (the “Circular”).

Extra Earn was incorporated with limited liability in the British Virgin Islands on 16 February 2006 and acted as investment holding company. The registered address of Extra Earn is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

The particulars of Extra Earn’s subsidiaries which are all limited liability companies incorporated in the People’s Republic of China, are as follows:

	Country and date
	of establishment	Paid up and	Proportion of registered capital
Name of subsidiary	and operation	registered capital	held by Extra		Earn Group		Principal activities
			31 December			Date of
			2010	2011	2012	this report
嘉泰同仁（連雲港）醫療產業投資	People’s Republic	US$84,790,000	100%	100%	–	–	Investment holding
有限公司	of China
Jiatai Tongren (Lianyungang)	(“PRC”)
Healthcare Investment Company	6 April 2006
Limited1(“Jiatai Tongren”, and
formerly known as連雲港嘉泰
城市發展有限公司Lianyungang
Jiatai City Development Co.
Ltd.)
連雲港海畔房地產開發有限公司	PRC	RMB10,000,000	100%	100%	–	–	Property development
Lianyungang Haipan Property	9 February 2007
Development Company Limited
(“Lianyungang Haipan”)

– 54 –

APPENDIX II

FINANCIAL INFORMATION ON EXTRA EARN

	Country and date
	of establishment	Paid up and	Proportion of registered capital
Name of subsidiary	and operation	registered capital	held by Extra		Earn Group		Principal activities
			31	December		Date of
			2010	2011	2012	this report
連雲港成泰置業有限公司	PRC	RMB20,000,000	100%	100%	–	–	Property development
Lianyungang Chengtai Property	12 October 2006
Limited (“Lianyungang
Chengtai”)
洋浦兆合實業有限公司	PRC	RMB245,000,000	81.63%	81.63%	–	–	Investment holding
Yang Pu Zhao He Industrial	5 March 2008
Company Limited (“Yang Pu
Zhao He”)
同仁醫療產業集團有限公司	PRC	RMB200,000,000	72.5%	72.5%	–	–	Investment holding
Tongren Healthcare Industry Group	28 April 2003
Company Limited (“Tongren
Healthcare”)2
南京同仁實業有限公司	PRC	RMB80,000,000	80%	80%	–	–	Property development
Nanjing Tongren Industrial	19 August 2003
Company Limited (“Nanjing
Tongren Industrial”)2
北京同仁醫院管理有限公司	PRC	RMB10,000,000	100%	100%	–	–	Investment holding
Beijing Tongren Hospital	9 October 2003
Management Company Limited
(“Beijing Tongren Hospital”)2
昆明同仁實業開發有限公司	PRC	RMB80,000,000	100%	100%	–	–	Property development
Kunming Tongren Industrial	28 October 2003
Development Company Limited
(“Kunming Tongren Industrial”)2
雲南新新華醫院有限公司	PRC	RMB30,000,000	100%	100%	–	–	Operation of a hospital
Yunnan Xin Xinhua Hospital	11 November						in Kunming
Company Limited (“Yunnan Xin	2003
Xinhua Hospital”)2
北京同仁物業管理有限公司	PRC	RMB5,000,000	100%	100%	–	–	Property management
Beijing Tongren Property	2 January 2004
Management Company Limited
(“Beijing Tongren Property”)2
南京興健醫療機械有限公司	PRC	RMB10,000,000	100%	100%	–	–	Trading of medical
Nanjing Xingjian Medical	3 March 2004						equipment and
Equipment Company Limited							supplies
(“Nanjing Xianjian”)2
昆明同仁醫院有限公司	PRC	RMB80,000,000	100%	100%	–	–	Operation of a hospital
Kunming Tongren Hospital	12 September						in Kunming
Company Limited (“Kunming	2008
Tongren Hospital”)2
南京同仁醫院有限公司	PRC	RMB50,000,000	80%	80%	–	–	Operation of a hospital
Nanjing Tongren Hospital Company	9 February 2007						in Nanjing
Limited (“Nanjing Tongren
Hospital”)2

1 Jiatai Tongren was directly held by Extra Earn. All other companies were indirectly held by Extra Earn through Jiatai Tongren.

2 These entities were held by Yang Pu Zhao He.

The financial year end date of Extra Earn and its subsidiaries are 31 December.

– 55 –

FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

No audited financial statements have been prepared for Extra Earn since its date of incorporation as there is no statutory audit requirement.

The statutory financial statements of the subsidiaries of Extra Earn were prepared in accordance with the relevant accounting principles and financial regulations applicable to companies established in the PRC. They were audited by the following firms of certified public accountants registered in the PRC.

Name of subsidiary	Periods covered	Certified Public Accountants
Jiatai Tongren	Each of the three years ended	Jiangsu Zhongxing Certified
	31 December 2012	Public Accountants Company
		Limited
Lianyungang Haipan Property	Each of the three years ended	Jiangsu Zhongxing Certified
	31 December 2012	Public Accountants Company
		Limited
Lianyungang Chengtai	Each of the three years ended	Jiangsu Zhongxing Certified
	31 December 2012	Public Accountants Company
		Limited
Yang Pu Zhao He	Each of the three years ended	Hainan Haichang Certified
	31 December 2012	Public Accountants Company
		Limited
Beijing Tongren Hospital	Each of the three years ended	Jiangsu Teaching Certified
Tongren Healthcare	31 December 2012	Public Accountants Company
		Limited
Nanjing Tongren Industrial	Each of the three years ended	Jiangsu Tianmu Certified
Nanjing Tongren Hospital	31 December 2012	Public Accountants Company
Nanjing Xingjian		Limited
Kunming Tongren Industrial	Each of the three years ended	Yunnan Pingyun Certified
	31 December 2012	Public Accountants Company
		Limited

– 56 –

FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

Name of subsidiary Periods covered Certified Public Accountants Kunming Tongren Hospital Each of the three years ended Kunming Zhongtiancheng Yunnan Xin Xinhua Hospital 31 December 2012 Certified Public Accountants Company Limited Beijing Tongren Property Each of the three years ended Beijing Zhongyantong Certified 31 December 2012 Public Accountants Company Limited

For the purpose of this report, the directors of Extra Earn have prepared the consolidated management accounts of the Extra Earn Group for the Relevant Periods (“Underlying Financial Statements”) in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). We have carried out independent audit on the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

We have examined the Underlying Financial Statements in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” as recommended by the HKICPA.

The Financial Information of the Extra Earn Group for the Relevant Periods set out in this report has been prepared in accordance with HKFRSs based on the Underlying Financial Statements. No adjustments are considered necessary to adjust the Underlying Financial Statements in the preparation of this report for inclusion in the Circular.

The Underlying Financial Statements are the responsibility of the directors of Extra Earn. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of the Extra Earn Group and Extra Earn as at 31 December 2010, 2011 and 2012 and of the consolidated results and consolidated cash flows of the Extra Earn Group for the Relevant Periods.

– 57 –

FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

A. FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

NOTES Continuing operations Effective interest income on amount due from the Company Exchange gain (loss) Administrative expenses Finance costs 8 Loss before taxation Taxation 9 Loss for the year from continuing operations 10 Discontinued operations Loss for the year from discontinued operations 11 Loss for the year Other comprehensive income for the year: Exchange differences arising on translation to presentation currency Total comprehensive expense for the year

Year ended 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 – – 5,074 3,537 5,772 (1,365) (332) (60) (200) (11,177) (12,000) (8,748) (7,972) (6,288) (5,239) – – – (7,972) (6,288) (5,239) (19,413) (64,924) (113,687) (27,385) (71,212) (118,926) 17,696 39,446 6,391 (9,689) (31,766) (112,535)

– 58 –

FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

NOTES Loss for the year attributable to owners of Extra Earn: – from continuing operations – from discontinued operations Loss for the year attributable to owners of Extra Earn Loss for the year attributable to non- controlling interests: – from continuing operations – from discontinued operations Loss for the year attributable to non- controlling interests Total loss for the year Total comprehensive income (expense) attributable to: Owners of Extra Earn Non-controlling interests

Year ended 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 (7,972) (6,288) (5,239) (8,976) (26,011) (93,166) (16,948) (32,299) (98,405) – – – (10,437) (38,913) (20,521) (10,437) (38,913) (20,521) (27,385) (71,212) (118,926) 948 (1,113) (92,677) (10,637) (30,653) (19,858) (9,689) (31,766) (112,535)

– 59 –

FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

NOTES Non-current assets Property, plant and equipment 13 Prepaid lease payments 14 Intangible assets 15 Goodwill 16 Interests in associates 17 Amount due from the Company 34 Current assets Inventories 18 Properties under development for sale 19 Properties held for sale 20 Prepaid lease payments 14 Amount due from a subsidiary of the Company 34 Amounts due from customers for contract works 21 Debtors, deposits and prepayments 22 Pledged bank deposits 23 Restricted bank deposits 23 Bank balances and cash 23	As 2010 HK$’000 1,307,793 123,695 70,655 16,396 15,205 – 1,533,744 12,707 454,030 91,591 2,876 26 26,472 566,081 224,902 5,495 81,895 1,466,075	at 31 December 2011 2012 HK$’000 HK$’000 1,450,994 – 126,592 – 67,339 – 17,180 – 15,931 – – 374,980 1,678,036 374,980 16,302 – 318,103 – 50,934 – 3,014 – 31 37 – – 430,788 – 245,643 – 22,343 – 255,730 69 1,342,888 106	at 31 December 2011 2012 HK$’000 HK$’000 1,450,994 – 126,592 – 67,339 – 17,180 – 15,931 – – 374,980 1,678,036 374,980 16,302 – 318,103 – 50,934 – 3,014 – 31 37 – – 430,788 – 245,643 – 22,343 – 255,730 69 1,342,888 106
			374,980
			– – – – 37 – – – – 69
			106

– 60 –

FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

NOTES Current liabilities Creditors and accrued charges 24 Deposits received on sales of properties Receipts in advance 25 Amount due to an associate 26 Amount due to a subsidiary of the Company 34 Borrowings – due within one year 27 Obligations under finance leases – due within one year 28 Net current liabilities Total assets less current liabilities Non-current liabilities Deferred tax liabilities 29 Borrowings – due after one year 27 Obligations under finance leases – due after one year 28 Net assets Capital and reserves Share capital 30 Reserves Equity attributable to owners of Extra Earn Non-controlling interests Total equity	As 2010 HK$’000 773,890 333,240 25,243 7,602 – 587,833 20,329 1,748,137 (282,062) 1,251,682 76,664 309,591 14,510 400,765 850,917 3,510 660,598 664,108 186,809 850,917	at 31 December 2011 2012 HK$’000 HK$’000 578,805 50 55,452 – 31,671 – 7,966 – – 55,211 899,909 – 25,082 – 1,598,885 55,261 (255,997) (55,155) 1,422,039 319,825 76,265 – 475,123 – 51,500 – 602,888 – 819,151 319,825 3,510 2,106 659,485 317,719 662,995 319,825 156,156 – 819,151 319,825

– 61 –

FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

STATEMENTS OF FINANCIAL POSITION

NOTES Non-current assets Investments in subsidiaries 33 Amount due from the Company 34 Current assets Amount due from a subsidiary of the Company 34 Bank balances and cash 23 Current liabilities Accruals 24 Amount due to a subsidiary of the Company 34 Borrowings 27 Net current liabilities Net assets Capital and reserves Share capital 30 Reserves Total equity	As 2010 HK$’000 702,253 – 702,253 26 1,474 1,500 – – 119,997 119,997 (118,497) 583,756 3,510 580,246 583,756	at 31 December 2011 2012 HK$’000 HK$’000 735,816 – – 374,980 735,816 374,980 31 37 1,408 69 1,439 106 – 50 – 55,211 131,995 – 131,995 55,261 (130,556) (55,155) 605,260 319,825 3,510 2,106 601,750 317,719 605,260 319,825

– 62 –

FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

At 1 January 2010 Loss for the year Other comprehensive income (expense) for the year Total comprehensive income (expense) for the year Issue of shares Transfer upon disposal of a subsidiary Acquisition of subsidiaries (note 32) Amounts due to shareholders waived by the shareholders At 31 December 2010 Loss for the year Other comprehensive income for the year Total comprehensive income (expense) for the year			Attributable to owners of Extra Earn	Attributable to owners of Extra Earn	Non- controlling Total interests HK$’000 HK$’000 256,682 – (16,948) (10,437) 17,896 (200) 948 (10,637) 234,000 – – – – 197,446 172,478 – 664,108 186,809 (32,299) (38,913) 31,186 8,260 (1,113) (30,653)	Total equity HK$’000 256,682
	Share capital HK$’000 1,170 – – – 2,340 – – – 3,510 – – –	Share premium HK$’000 116,649 – – – 231,660 – – – 348,309 – – –	Other reserve HK$’000 – – – – – – – 172,478 172,478 – – –	Retained Statutory profits surplus Translation (accumulated reserve reserve losses) HK$’000 HK$’000 HK$’000 (Note a) 8,506 33,854 96,503 – – (16,948) – 17,896 – – 17,896 (16,948) – – – – (104) 104 – – – – – – 8,506 51,646 79,659 – – (32,299) – 31,186 – – 31,186 (32,299)
						(27,385) 17,696
						(9,689)
						234,000 – 197,446 172,478
						850,917
						(71,212) 39,446
						(31,766)

– 63 –

FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

At 31 December 2011 Loss for the year Other comprehensive income for the year Total comprehensive income (expense) for the year Issue of shares Repurchase of shares Capital contribution from a non-controlling shareholder of a subsidiary Acquisition of additional interest in a subsidiary (Note b) Loss on disposal of subsidiaries recognised as deemed distribution to shareholders Transfer upon disposal of subsidiaries (note 31(c)) At 31 December 2012			Attributable to owners of Extra Earn	Attributable to owners of Extra Earn	Non- controlling Total interests HK$’000 HK$’000 662,995 156,156 (98,405) (20,521) 5,728 663 (92,677) (19,858) 46,800 – (238,007) – – 11,159 (54,274) (82,118) (5,012) (65,339) – – 319,825 –	Total equity HK$’000 819,151
	Share capital HK$’000 3,510 – – – 121 (1,525) – – – – 2,106	Share premium HK$’000 348,309 – – – 46,679 (236,482) – – – – 158,506	Other reserve HK$’000 172,478 – – – – – – (58,633) (5,012) 58,633 167,466	Retained Statutory profits surplus Translation (accumulated reserve reserve losses) HK$’000 HK$’000 HK$’000 (Note a) 8,506 82,832 47,360 – – (98,405) – 5,728 – – 5,728 (98,405) – – – – – – – – – – 4,359 – – – – (8,506) (98,401) 48,274 – (5,482) (2,771)
						(118,926) 6,391
						(112,535)
						46,800 (238,007) 11,159 (136,392) (70,351) –
						319,825

Notes:

• (a) As stipulated by the relevant laws and regulations in the PRC, before distribution of the net profit each year, the PRC subsidiaries of Extra Earn shall set aside 10% of its net profit after taxation for the statutory surplus reserve (except where the reserve has reached 50% of paid-up capital). The reserve fund can only be used, upon approval by the board of directors and by the relevant authority, to offset accumulated losses or increase capital.

• (b) In April 2012, Extra Earn acquired further 27.5% equity interest of a subsidiary, Tongren Healthcare, at a consideration of RMB110,000,000 (equivalent to HK$136,392,000) from an independent third party. The effective equity interest in Tongren Healthcare was increased from 59.18% to 86.68%. An amount of HK$58,633,000, representing the difference between consideration paid and the carrying amount of non-controlling interests relating to 27.5% equity interest of Tongren Healthcare is debited to other reserve.

– 64 –

FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES OPERATING ACTIVITIES Loss before taxation – continuing operations – discontinued operations Adjustments for: Interest expenses Interest income Depreciation of property, plant and equipment Release of prepaid lease payments Amortisation for intangible assets Loss on disposal of subsidiaries (Gain) loss on disposal of property, plant and equipment Impairment loss recognised in respect of debtors Unrealised exchange (gain) loss Effective interest income on amount due from the Company Operating cash flows before movements in working capital Increase in inventories Decrease (increase) in properties under development for sale and properties for sale Decrease in amounts due from customers for contract works Increase in debtors, deposits and prepayments Decrease in creditors and accrued charges (Decrease) increase in deposits received on sales of properties Increase (decrease) in receipts in advance

Year ended 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 (7,972) (6,288) (5,239) (16,401) (67,440) (114,929) 33,721 81,138 82,861 (1,775) (7,414) (7,002) 20,560 57,959 55,610 1,411 2,963 2,260 3,136 6,580 5,016 – – 3,490 – (366) 561 – 1,420 5,184 (3,205) (5,817) 1,071 – – (5,074) 29,475 62,735 23,809 (2,885) (3,147) (2,605) 41,093 195,805 (69,604) 97,242 27,405 – (52,470) (135,671) (69,171) (237,310) (170,272) (14,686) (73,193) (289,528) 286,620 1,580 5,539 (9,672)

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NOTES Net cash (used in) from operations PRC taxes paid NET CASH (USED IN) FROM OPERATING ACTIVITIES INVESTING ACTIVITIES Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Placement of pledged bank deposits/ restricted bank deposits Withdrawal of pledged bank deposits/ restricted bank deposits Advance to related companies Advance to Yang Pu Zhao He Repayment from related companies Repayment from a subsidiary of the Company Acquisition of subsidiaries 32 Disposal of subsidiaries 31 Proceeds from disposal of subsidiaries before the Relevant Periods Interest received Interest received from overdue trade receivables Advance to a subsidiary of the Company NET CASH (USED IN) FROM INVESTING ACTIVITIES

Year ended 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 (196,468) (307,134) 144,691 (3,016) (1,535) (6,585) (199,484) (308,669) 138,106 (197,979) (119,531) (96,242) 315 5,258 251 (133,863) (263,028) (90,319) 66,991 225,633 78,425 (27,478) (21,991) (10,000) (116,959) – – – 26,736 13,688 101,166 – – (200,352) – – (14,848) – (135,991) 133,788 247,178 – 1,775 7,414 7,002 – 28,429 – (5) (5) (6) (387,449) 136,093 (233,192)

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NOTES FINANCING ACTIVITIES Issue of new shares New borrowings raised Repayment of borrowings Repayment of obligations under finance leases Advance from the purchaser before disposal of subsidiaries Payment on acquisition of additional interest in a subsidiary Capital contribution from a non- controlling shareholder of a subsidiary Interest paid Advance from shareholders Advance from a subsidiary of the Company Repayment to related companies Repayment to a subsidiary of the Company NET CASH FROM (USED IN) FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS EFFECT OF CHANGES IN FOREIGN EXCHANGE RATES CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT END OF THE YEAR represented by bank balances and cash

Year ended 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 234,000 – 46,800 613,814 1,177,799 1,036,152 (290,409) (728,177) (1,188,045) (9,005) (26,608) (19,969) – 9,191 – – – (49,600) – – 11,159 (31,989) (91,374) (91,783) 172,478 – 38,485 – – 54,569 (76,000) – – (108,777) – – 504,112 340,831 (162,232) (82,821) 168,255 (257,318) 8,823 5,580 1,657 155,893 81,895 255,730 81,895 255,730 69

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NOTES TO THE FINANCIAL INFORMATION

1. GENERAL

Extra Earn was incorporated with limited liability in the British Virgin Islands. It is an investment holding company. On 19 September 2012, the Company purchased 90,000 shares of Extra Earn, which represented 19.34% of the issued share capital of Extra Earn, from other shareholders of Extra Earn at a consideration of HK$89,860,000. Following the completion of this acquisition, the Company holds 270,000 shares of Extra Earn which represented 58.01% of the issued share capital of Extra Earn prior to the Extra Earn Asset Reorganisation (as defined in note 11). Simultaneously with the completion of this acquisition and pursuant to the Extra Earn Asset Reorganisation, Extra Earn repurchased 180,000 shares and 15,450 shares from the other two shareholders of Extra Earn at a consideration of approximately HK$219,173,000 and HK$18,834,000 respectively. Accordingly, Extra Earn has become a wholly-owned subsidiary of the Company. Details of the Extra Earn Asset Reorganisation are set out in note 31(c).

The principal activities of the subsidiaries of Extra Earn is sales of properties, operation of hospitals, provision of urban infra-structure development services and provision of property management services. On 31 March 2012, Extra Earn Group disposed its entire equity interest in Beijing Tongren Property and discontinued its provision of property management services. On 19 September 2012, Extra Earn disposed of its entire equity interest in Jiatai Tongren upon Extra Earn Asset Reorganisation (as defined in note 11), and thus the Extra Earn Group discontinued the activities of sales of properties, operation of hospital and provision of urban infrastructure development. Details of discontinued operations are disclosed in note 11.

The functional currency of Extra Earn and its subsidiaries is Renminbi (“RMB”), the currency of the primary economic environment in which Extra Earn and its subsidiaries operate. For the convenience of the users of the Financial Information, the Financial Information is presented in Hong Kong dollar (“HK$”).

2. BASIS OF PREPARATION OF FINANCIAL INFORMATION

In the preparation of the Underlying Financial Information, the directors of Extra Earn have given due and careful consideration to the future liquidity of Extra Earn in light of Extra Earn’s net current liabilities position of HK$55,155,000 as at 31 December 2012. In the opinion of the directors of Extra Earn, the Underlying Financial Information has been prepared on a going concern basis as the Company has agreed to provide adequate funds to enable Extra Earn to meet in full its financial obligations as they fall due for the foreseeable future.

3. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, the Extra Earn Group has consistently applied HKFRSs issued by the HKICPA that are effective for its annual accounting period beginning on 1 January 2012 throughout the Relevant Periods.

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The Extra Earn Group has not early applied the following new and revised HKFRSs that have been issued by the HKICPA but are not yet effective at the date of this report:

Amendments to HKFRSs Annual improvements to HKFRSs 2009-2011 cycle[1] Amendments to HKFRS 7 Disclosures – Offsetting financial assets and financial liabilities[1] Amendments to HKFRS 9 Mandatory effective date of HKFRS 9 and transition and HKFRS 7 disclosures[3] Amendments to HKFRS 10, Consolidated financial statements, joint arrangements HKFRS 11 and HKFRS 12 and disclosure of interests in other entities: Transition guidance[1] Amendments to HKFRS 10, Investment entities[2] HKFRS 12 and HKAS 27 HKFRS 9 Financial instruments[1] HKFRS 10 Consolidated financial statements[1] HKFRS 11 Joint arrangements[1] HKFRS 12 Disclosure of interests in other entities[1] HKFRS 13 Fair value measurement[1] Amendments to HKAS 1 Presentation of items of other comprehensive income[4] Amendments to HKAS 32 Offsetting financial assets and financial liabilities[2] HKAS 19 (Revised 2011) Employee benefits[1] HKAS 27 (Revised 2011) Separate financial statements[1] HKAS 28 (Revised 2011) Investments in associates and joint ventures[1] HK(IFRIC) – INT 20 Stripping costs in the production phase of a surface mine[1]

1 Effective for accounting periods beginning on or after 1 January 2013. 2 Effective for accounting periods beginning on or after 1 January 2014. 3 Effective for accounting periods beginning on or after 1 January 2015. 4 Effective for accounting periods beginning on or after 1 July 2012.

Amendments to HKAS 1 Presentation of items of other comprehensive income

The amendments to HKAS 1 “Presentation of items of other comprehensive income” introduce new terminology for the statement of comprehensive income. Under the amendments to HKAS 1, a ‘statement of comprehensive income’ is renamed as a ‘statement of profit or loss and other comprehensive income’. In addition, the amendments to HKAS 1 require items of other comprehensive income to be grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis – the amendments do not change the option to present items of other comprehensive income either before tax or net of tax.

The amendments to HKAS 1 are effective for annual periods beginning on or after 1 July 2012. The directors of Extra Earn anticipate that the amendments to HKAS 1 will be adopted in the Extra Earn Group’s consolidated financial statements for the annual period beginning 1 January 2013. Upon adoption, the presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.

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Other than as described above, the directors of Extra Earn anticipate that the application of the other new and revised HKFRSs will have no material impact on the results and the financial position of Extra Earn and Extra Earn Group.

4. SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared in accordance with the following accounting policies which conform with HKFRSs issued by the HKICPA. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance.

The Financial Information has been prepared on the historical cost except for the buildings which is stated in fair value, as explained in the accounting policies set out below. Historical cost is generally based on fair value of the consideration given in exchange for goods and services.

Basis of consolidation

The Financial Information incorporates the financial statements of Extra Earn and entities controlled by Extra Earn (its subsidiaries). Control is achieved where Extra Earn has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiary to bring its accounting policies into line with those used by the Extra Earn Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Non-controlling interests in subsidiaries are presented separately from the Extra Earn Group’s equity therein.

Total comprehensive income and expense of a subsidiary is attributed to the owners of Extra Earn and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Extra Earn Group’s ownership interests in existing subsidiaries

Changes in the Extra Earn Group’s ownership interests in existing subsidiaries that do not result in the Extra Earn Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Extra Earn Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the proportionate share of net assets attributable to the non-controlling interests and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of Extra Earn.

Investments in subsidiaries

Investments in subsidiaries in Extra Earns’ statement of financial position are stated at cost less accumulated impairment losses, if any.

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Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Extra Earn Group, liabilities incurred by the Extra Earn Group to the former owners of the acquiree and the equity interests issued by the Extra Earn Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

• deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 “Income taxes” and HKAS 19 “Employee benefits” respectively;

• liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Extra Earn Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with HKFRS 2 “Share-based payment” at the acquisition date; and

• assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 “Non-current assets held for sale and discontinued operations” are measured in accordance with that standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after re-assessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transactionby-transaction basis. Other types of non-controlling interests are measured at their fair value or, when applicable, on the basis specified in another standard.

Goodwill

Goodwill arising on an acquisition of a business is carried at cost less accumulated impairment losses, if any, and is presented separately in the consolidated statement of financial position.

For the purposes of impairment testing, goodwill is allocated to each of the relevant cashgenerating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination.

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A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently whenever there is an indication that the unit may be impaired. For goodwill arising on an acquisition in a reporting period, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that reporting period. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of any goodwill allocated to the unit first, and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the amount of profit or loss on disposal.

Investments in associates

An associate is an entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of an associate are incorporated in the Financial Information using the equity method of accounting. Under the equity method, investment in an associate are initially recognised in the consolidated statement of financial position at cost, and adjusted thereafter to recognise the Extra Earn Group’s share of the profit or loss and other comprehensive income of the associate. When the Extra Earn Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Extra Earn Group’s net investment in the associate), the Extra Earn Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Extra Earn Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Extra Earn Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment.

Any excess of the Extra Earn Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Extra Earn Group’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 “Impairment of assets” as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases.

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When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognised in the Financial Information only to the extent of interests in the associate that are not related to the Extra Earn Group.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold and services provided in the normal course of business, net of discounts and sales related taxes.

Revenue from the sale of goods is recognised when goods are delivered and titles have passed.

Revenue from sale of properties in the ordinary course of business is recognised when all of the following criteria are satisfied:

• the significant risks and rewards of ownership of the properties are transferred to purchasers;

• neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the properties are retained;

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits associated with the transaction will flow to the Extra Earn Group; and

• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

The above criteria are met when the construction of relevant properties has been completed, and the properties have been delivered to the purchasers pursuant to the sales agreement and the collectability of related receivables is reasonably assumed. Deposits and instalments received from purchasers on properties sold prior to meeting the above criteria on revenue recognition are included in the consolidated statement of financial position under current liabilities.

Hospital fees and charges and property management service income are recognised when services are provided.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Extra Earn Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

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Government subsidies

Government subsidies are not recognised until there is reasonable assurance that the Extra Earn Group will comply with the conditions attaching to them and that the grants will be received.

Government subsidies that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Extra Earn Group with no future related costs are recognised in profit or loss in the period in which they become receivable.

Property, plant and equipment

Property, plant and equipment (other than construction in progress) are stated in the consolidated statement of financial position at cost or fair value less subsequent accumulated depreciation and accumulated impairment losses, if any.

Buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the consolidated statement of financial position at their revalued amounts, being the fair value at the date of revaluation less any subsequent accumulated depreciation and any subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the end of the reporting period.

Any revaluation increase arising on the revaluation of buildings is recognised in other comprehensive income and accumulated in properties revaluation reserve, if any, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in carrying amount arising on revaluation of an asset is recognised in profit or loss to the extent that it exceeds the balance, if any, on the properties revaluation reserve relating to a previous revaluation of that asset. On the subsequent sale or retirement of a revalued asset, the attributable revaluation surplus is transferred to retained profits/accumulated losses.

Construction in progress includes property, plant and equipment in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Costs include professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Extra Earn Group’s accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Depreciation is recognised so as to write off the cost or revalued amount of items of property, plant and equipment (other than construction in progress) less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

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An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Prepaid lease payments

Prepaid lease payments represent the prepaid lease payments of leasehold interests in land under operating lease arrangements and are amortised on a straight-line basis over the lease terms.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the leasee. All other leases are classified as operating leases.

The Extra Earn Group as lessee

Assets held under finance leases are recognised as assets of the Extra Earn Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Extra Earn Group’s policy on borrowing costs (see the accounting policy below).

Operating lease payments are recognised as an expense on a straight-line basis over the lease term.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than its functional currency (“foreign currencies”) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions.

For the purposes of presenting the Financial Information, the assets and liabilities of the Extra Earn Group in RMB are translated into the presentation currency of the Extra Earn Group (i.e. HK$) using exchange rates prevailing at the end of each reporting period. Income and expenses items are translated at the average exchange rates for the year. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of translation reserve (attributed to non-controlling interests as appropriate).

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Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately and with finite useful lives are carried at costs less accumulated amortisation and any accumulated impairment losses.

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are recognised separately from goodwill and initially recognised their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets with finite useful lives are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is provided on a straight-line basis over their estimated useful lives (see the accounting policy in respect of impairment losses on tangible and intangible assets below).

Gains or losses arising from derecognition of an intangible asset are measured at the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss in the period when the asset is derecognised.

Impairment losses on tangible and intangible assets other than goodwill (see the accounting policy in respect of goodwill above)

At end of the reporting period, the Extra Earn Group reviews the carrying amounts of its tangible and intangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately in profit or loss.

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Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or a cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.

Construction contracts

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion that contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expense in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Where contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is shown as amounts due to customers for contract work. Amounts received before the related work is performed are included in the consolidated statement of financial position, as a liability, as advances received. Amounts billed for work performed but not yet paid by the customers are included in the consolidated statement of financial position under trade receivables.

Inventories

Inventories, which comprise drugs, other medical and general consumable for hospital operations, are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method.

Properties under development for sale

Properties under development for sale are stated at lower of cost and net realisable value. Cost comprises both the acquisition cost of land use rights and development cost of the property. Net realisable value takes into account the price ultimately expected to be realised, less the anticipated costs to completion.

Development cost of property comprises construction costs, borrowing costs capitalised according to the Extra Earn Group’s accounting policy and directly attributable cost incurred during the development period. On completion, the properties are transferred to properties held for sale.

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Properties held for sale

Properties held for sale are stated at the lower of cost and net realisable value.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit/loss before taxation as reported in the consolidated statements of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The liability of the Extra Earn Group for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of each reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with interests in subsidiaries and associates, except where the Extra Earn Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of each reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Extra Earn Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is recognised in profit or loss.

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in the other comprehensive income or directly in equity, in which case, the amount and deferred tax are also recognised in other comprehensive income or directly in equity respectively. When current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

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APPENDIX II

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statements of financial position when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

The financial assets of the Extra Earn Group are mainly loans and receivables. The classification depends on the nature and purpose of financial assets and is determined at the time of initial recognition.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest income is recognised on an effective interest basis for debt instruments.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including amounts due from the Company and subsidiary of the Company, debtors, pledged bank deposits, restricted bank deposits and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of loans and receivables below).

Impairment of loans and receivables

Loans and receivables are assessed for indicators of impairment at the end of each reporting period. Loans and receivables are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• breach of contract, such as default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial reorganisation.

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APPENDIX II

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Extra Earn Group’s past experience of collecting payments.

The amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate.

The carrying amount of all loans and receivables is reduced by the impairment loss directly. If, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Financial liabilities and equity instruments

Debt and equity instruments issued by a group equity are classified as either financial liabilities or as equity instruments in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Extra Earn Group after deducting all of its liabilities. Equity instruments issued by Extra Earn are recorded at the proceeds received, net of direct issue costs.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

Financial liabilities

Financial liabilities (including creditors and accrued charges, other advance, amount due to an associate, amount due to subsidiary of the Company and borrowings) are subsequently measured at amortised cost, using the effective interest method.

Derecognition

The Extra Earn Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when the Extra Earn Group transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

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APPENDIX II

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

The Extra Earn Group derecognises financial liabilities when, and only when, the Extra Earn Group’s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Retirement benefit costs

Payments to state-managed retirement benefits schemes are recognised as an expense when employees have rendered service entitling them to the contributions.

5. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Extra Earn Group’s accounting policies, which are described in note 4 above, the directors of Extra Earn have made various estimates based on past experience, expectations of the future and other information. Actual results may differ from these estimates. The key sources of estimation uncertainty that can significantly affect the amounts recognised in the Financial Information in the next twelve months from the end of each reporting period are set out below.

Impairment of debtors

In estimating whether impairment is required, the Extra Earn Group takes into consideration the ageing status and the likelihood of collection (including past repayment history of each customer). When there is objective evidence of impairment loss, the Extra Earn Group takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise.

The carrying amounts of trade receivables (included in debtors, deposits and prepayments) were approximately HK$198,755,000, HK$278,109,000 and nil as at 31 December 2010, 2011 and 2012, respectively, while the carrying amounts of other debtors (including receivable on the disposal of subsidiaries and other receivables) are approximately HK$320,705,000, HK$58,937,000 and nil as at 31 December 2010, 2011 and 2012, respectively.

Impairment of property, plant and equipment

Property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the assets exceeds its recoverable amount. An impairment loss is recognised for the amount by which the recoverable amount of property, plant and equipment being lower than its carrying amount. During the Relevant Periods, no property, plant and equipment was impaired based on the impairment assessment performed by management. It is possible that actual outcomes may be different from assumptions, having a material impact on the carrying amount of property, plant and equipment in the period when such estimate is revised. The carrying amount of property, plant and equipment were approximately HK$1,307,793,000, HK$1,450,994,000 and nil as at 31 December 2010, 2011 and 2012, respectively.

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APPENDIX II

Estimated impairment of goodwill and intangible assets

Determining whether goodwill and intangible assets acquired from business combination allocating to hospital operation cash-generating unit (“CGU”) are impaired requires an estimation of the value in use. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the CGU, a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, an impairment loss may arise. During the Relevant Periods, no goodwill and intangible assets were impaired based on the impairment assessment performed by management. The carrying amounts of goodwill were approximately HK$16,396,000, HK$17,180,000 and nil and the carrying amount of intangible assets were approximately HK$70,655,000, HK$67,339,000 and nil as at 31 December 2010, 2011 and 2012, respectively.

Land appreciation tax (“LAT”)

The Extra Earn Group is subject to land appreciation tax in the PRC. However, the implementation and settlement of the tax varies amongst different tax jurisdictions in various cities of the PRC and certain projects of the Extra Earn Group have not yet finalised their land appreciation tax calculations and payments with any local tax authorities in the PRC. Accordingly, significant judgment is required in determining the amount of land appreciation and its related income tax provisions. The Extra Earn Group recognised the land appreciation tax based on management’s best estimates. The final tax outcome could be different from the amounts that were initially recorded, and these differences will impact the income tax expense and the related income tax provisions in the periods in which such tax is finalised with local tax authorities.

6. FINANCIAL INSTRUMENTS

Capital risk management

The Extra Earn Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Extra Earn Group’s overall strategy remains unchanged before disposal of subsidiaries as disclosed in note 31. Upon the disposal of subsidiaries, Extra Earn’s strategy is changed to manage the capital to ensure Extra Earn to continue as going concern.

The capital structure of the Extra Earn Group consists of net debt, which includes bank borrowings, net of cash and cash equivalents and paid-up capital, various reserves and retained profits/accumulated losses.

The directors of Extra Earn review the capital structure regularly. As part of this review, the directors consider the cost and the risks associated with each class of the capital. Based on recommendations of the directors, the Extra Earn Group will balance its overall capital structure through repurchase or issue of new shares.

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APPENDIX II

Categories of financial instruments

The Extra Earn Group Financial assets Loans and receivables (including cash and cash equivalents) Financial liabilities Amortised cost Extra Earn Financial assets Loans and receivables (including cash and cash equivalents) Financial liabilities Amortised cost	As at 31 December 2010 2011 HK$’000 HK$’000 854,569 879,086 1,678,916 1,970,994 1,500 1,439 119,997 131,995	2012 HK$’000 375,086
		55,261
		375,086
		55,261

Financial risk management objectives and policies

The Extra Earn Group and Extra Earn’s major financial instruments include amount due from the Company, amounts due from and to subsidiaries of the Company, debtors, pledged bank deposits, restricted bank deposits, bank balances and cash, creditors and accrued charges, amount due to an associate, borrowings, obligations under finance leases and other advance. Details of these financial instruments are disclosed in respective notes. The risks associated with certain of these financial instruments and the policies on how to mitigate these risks are set out below. The directors of Extra Earn manage and monitor these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Market risk

Interest rate risk

There has been no change to the Extra Earn Group and Extra Earn’s exposure to interest rate risk or the manner in which it manages and measures the risk before the disposal of subsidiaries as disclosed in note 31. The interest rate risk exposure to Extra Earn becomes minimal after the disposal of subsidiaries.

The Extra Earn Group is exposed to fair value interest rate risk in relation to fixed rate obligations under finance leases and other borrowings bearing fixed rate interest. Extra Earn is exposed to fair value interest rate risk in relation to other borrowings bearing fixed rate interest.

The Extra Earn Group cash flow interest rate risk is mainly concentrated on the fluctuation of benchmark borrowing rate as quoted by People’s Bank of China arising from the bank borrowings and prevailing market interest rate arising from the bank balances.

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APPENDIX II

Sensitivity analysis

Management considers that the Extra Earn Group and Extra Earn’s exposure to future cash flow risk on variable-rate bank balances as a result of the change of market interest rate is insignificant and thus variable-rate bank balances are not included in the sensitivity analysis.

The sensitivity analysis is prepared assuming the bank borrowings outstanding at the end of the reporting period were outstanding for the whole year. If the interest rate of bank borrowings had been 100 basis point higher/lower and all other variables were held constant, the Extra Earn Group’s post-tax loss would increase/decrease by HK$7,514,000, HK$11,499,000 and nil for the year ended 31 December 2010, 2011 and 2012, respectively, after taking into account of interest capitalisation.

Currency risk

Foreign exchange risk of Extra Earn Group and Extra Earn is mainly relating to foreign currency denominated amounts due from a subsidiary of the Company and the Company bank balances and cash, accruals, amount due to a subsidiary of the Company and other borrowings. Extra Earn currently does not have a foreign currency hedging policy. However, management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

The carrying amounts of the Extra Earn’s foreign currency denominated monetary assets and liabilities during the Relevant Periods are as follows:

Monetary assets HK$ Monetary liabilities HK$	As at 31 December 2010 2011 HK$’000 HK$’000 1,500 1,439 119,997 131,995	2012 HK$’000 375,086
		55,261

The following table details the Extra Earn’s sensitivity to a 5% increase and decrease in the functional currency of Extra Earn (RMB) against HK$ and all other variables were held constant. 5% is the sensitivity rate used by management in the assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currencies denominated monetary items and adjusts its translation at the period end for a 5% change in foreign currencies rates. A positive number below indicates a decrease in post-tax loss for the year where HK$ strengthen 5% against RMB. For a 5% weakening of HK$ against RMB there would be an equal and opposite impact on the result for the year.

HK$	Year ended 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 (5,925) (6,528) 15,991

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FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

Credit risk

The Extra Earn Group’s credit risk are primarily attributable to trade receivables, other receivables, amounts due from the Company and a subsidiary of the Company, pledged bank deposits, restricted bank deposits and bank balances.

Extra Earn’s credit risk is primarily attributable to amounts due from a subsidiary of the Company and the Company.

The Extra Earn Group and Extra Earn’s maximum exposure to credit risk which will cause a financial loss to the Extra Earn Group and Extra Earn due to failure to discharge an obligation by the counterparties is the carrying amounts of the respective recognised financial assets as stated in the consolidated and Extra Earn’s statements of financial position.

In order to minimise the credit risk on hospital, construction and property management business, management of the Extra Earn Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, management reviews the recoverable amount of each individual debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts.

The Extra Earn Group have concentration of credit risk from a customer of construction business, which amounted to HK$177,000,000 and HK$229,458,000 as at 31 December 2010 and 2011, respectively. Also, the Extra Earn Group has concentration of credit risks on the amounts due from related companies as at 31 December 2010 and 2011. The directors of Extra Earn consider these counterparties with good credit worthiness based on their past repayment history. Other than these, there is no significant concentration of credit risk in receivables as the exposure spread over a number of counterparties and customers.

Receivable on disposals of subsidiaries of HK$247,178,000 as at 31 December 2010 was settled during the Relevant Periods.

Extra Earn Group and Extra Earn had concentration of credit risks on the amount due from the Company as at 31 December 2012. The directors of Extra Earn consider the Company is financially sound.

The credit risk on liquid funds is limited because the counterparties are banks with good reputation.

Liquidity risk

The Extra Earn Group had net current liabilities of HK$282,062,000, HK$255,997,000 and HK$55,155,000 as at 31 December 2010, 2011 and 2012, respectively, while Extra Earn had net current liabilities of HK$118,497,000, HK$130,556,000 and HK$55,155,000 as at 31 December 2010, 2011 and 2012, respectively. The Financial Information has been prepared on a going concern basis as the Company has agreed to provide adequate funds to enable Extra Earn to meet in full its financial obligations as they fall due for the foreseeable future.

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APPENDIX II

In the management of the liquidity risk, the Extra Earn Group and Extra Earn monitor and maintain a level of cash and cash equivalents deemed adequate by the management to finance the daily operation of the Extra Earn Group and Extra Earn and mitigate the effects of fluctuations in cash flows. Management of the Extra Earn Group and Extra Earn monitor and review periodically the conditions of loan covenants of the banking facilities and tries all efforts to comply with the loan covenants.

The following table details the Extra Earn Group and Extra Earn’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Extra Earn Group and Extra Earn can be required to pay. The maturity dates for other non-derivative financial liabilities are based on the agreed repayment dates. The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from prevailing market rate at the end of the reporting period.

The Extra Earn Group

Weighted average effective interest rate % At 31 December 2010 Non-derivative financial liabilities Creditors and accrued charges – Amount due to an associate – Bank borrowings 5.18% Obligations under finance leases 3.83%	Less than 3 months or on demand HK$’000 179,841 7,602 61,526 5,918 254,887	3 months to 1 year HK$’000 594,049 – 572,438 15,832 1,182,319	1-5 years HK$’000 – – 202,744 21,570 224,314	Total Over undiscounted 5 years cash flows HK$’000 HK$’000 – 773,890 – 7,602 175,866 1,012,574 – 43,320 175,866 1,837,386	Carrying amount HK$’000 773,890 7,602 897,424 34,839
					1,713,755

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FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

Weighted average Less than effective 3 months or interest rate on demand % HK$’000 At 31 December 2011 Non-derivative financial liabilities Creditors and accrued charges – 202,379 Amount due to an associate – 7,966 Other advance – 9,191 Bank borrowings 8.45% 284,613 Obligations under finance leases 5.48% 8,665 512,814 Weighted average Less than effective 3 months or interest rate on demand % HK$’000 At 31 December 2012 Non-derivative financial liabilities Accrued charges – 50 Amount due to a subsidiary of the Company – 55,211 55,261	3 months to 1 year HK$’000 376,426 – – 694,928 22,344 1,093,698 3 months to 1 year HK$’000 – – –	1 -5 years HK$’000 – – – 576,786 63,670 640,456 1 -5 years HK$’000 – – –	Total Over undiscounted 5 years cash flows HK$’000 HK$’000 – 578,805 – 7,966 – 9,191 – 1,556,327 2,777 97,456 2,777 2,249,745 Total Over undiscounted 5 years cash flows HK$’000 HK$’000 – 50 – 55,211 – 55,261	Carrying amount HK$’000 578,805 7,966 9,191 1,375,032 76,582
				2,047,576
				Carrying amount HK$’000 50 55,211
				55,261

Extra Earn

	Weighted
	average	Less than		Total
	effective	3 months or	3 months	undiscounted	Carrying
	interest rate	on demand	to 1 year	cash flows	amount
	%	HK$’000	HK$’000	HK$’000	HK$’000
At 31 December 2010
Non-derivative financial liabilities
Other borrowings	10%	8,847	119,997	128,844	119,997

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FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

Weighted average Less than effective 3 months or interest rate on demand % HK$’000 At 31 December 2011 Non-derivative financial liabilities Other borrowings 10% 9,730 Weighted average Less than effective 3 months or interest rate on demand % HK$’000 At 31 December 2012 Non-derivative financial liabilities Accrued charges – 50 Amount due to a subsidiary of the Company – 55,211 55,261	Total 3 months undiscounted to 1 year cash flows HK$’000 HK$’000 131,995 141,725 Total 3 months undiscounted to 1 year cash flows HK$’000 HK$’000 – 50 – 55,211 – 55,261	Carrying amount HK$’000 131,995
		Carrying amount HK$’000 50 55,211
		55,261

Fair value

The fair value of financial assets and financial liabilities of the Extra Earn Group and Extra Earn are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

The directors of Extra Earn consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the Extra Earn Group and Extra Earn’s statements of financial position approximate their fair values.

7. SEGMENT INFORMATION

Information reported to the directors of Extra Earn, being the chief operating decision maker, for the purposes of resource allocation and assessment of segment performance focuses on types of goods delivered or services rendered.

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FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

Specifically, the Extra Earn Group’s reportable and operating segments under HKFRS 8 are as follows:

Property development Sales of properties Hospital Operation of hospitals Construction Provision of urban infra-structure development services Property management Provision of property management services

The above reportable and operating segments are discontinued during year ended 31 December 2012. During the year ended 31 December 2011, management of Extra Earn decided to cease the operation of urban infra-structure development in order to focus on the healthcare business. During the year ended 31 December 2012, the property management, hospital and construction operations were disposed of 2012 pursuant to the disposal of Beijing Tongren Property and completion of the Extra Earn Asset Reorganisation. Details of the disposals are set out in note 31. The segment information does not include any amounts for the discontinued operations, which are described in details in note 11.

Segment assets and liabilities

Except for the assets and liabilities of Extra Earn, substantial portion of the Extra Earn Group’s assets and liabilities are related to discontinued operations set out in note 11. An analysis of consolidated assets and liabilities is set out below.

At 31 December 2010

Assets relating to discontinued operations Amount due from a subsidiary of the Company Bank balances and cash Consolidated assets Liabilities relating to discontinued operations Borrowings Consolidated liabilities	Consolidated HK$’000 2,998,319 26 1,474
	2,999,819
	2,028,905 119,997
	2,148,902

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FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

At 31 December 2011

Assets relating to discontinued operations Amount due from a subsidiary of the Company Bank balances and cash Consolidated assets Liabilities relating to discontinued operations Borrowings Consolidated liabilities At 31 December 2012 Amount due from the Company Amount due from a subsidiary of the Company Bank balances and cash Consolidated assets Accrued charges Amount due to a subsidiary of the Company Consolidated liabilities FINANCE COSTS Year 2010 HK$’000 Interest on: – other borrowings wholly repayable within five years 5,884 – amounts due to related companies wholly repayable within five years 5,293 11,177	Consolidated HK$’000 3,019,485 31 1,408 3,020,924 2,069,778 131,995 2,201,773 Consolidated HK$’000 374,980 37 69 375,086 50 55,211 55,261 ended 31 December 2011 2012 HK$’000 HK$’000 12,000 8,748 – – 12,000 8,748	Consolidated HK$’000 3,019,485 31 1,408	Consolidated HK$’000 3,019,485 31 1,408
		3,020,924
		2,069,778 131,995
		2,201,773
		Consolidated HK$’000 374,980 37 69
		375,086
		50 55,211
		55,261
			8,748

8. FINANCE COSTS

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FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

9. TAXATION

Hong Kong Profits Tax is calculated at 16.5% on the estimated assessable profits for Relevant Periods.

Taxation for the Relevant Periods can be reconciled to the loss before taxation from the continuing operations as follows:

Loss before taxation from continuing operation Taxation at Hong Kong Profits Tax rate of 16.5% Tax effect of income not taxable for tax purpose Tax effect of expenses not deductible for tax purpose Taxation for the year	Year 2010 HK$’000 (7,972) (1,315) (584) 1,899 –	ended 31 December 2011 2012 HK$’000 HK$’000 (6,288) (5,239) (1,038) (864) (952) (838) 1,990 1,702 – –	ended 31 December 2011 2012 HK$’000 HK$’000 (6,288) (5,239) (1,038) (864) (952) (838) 1,990 1,702 – –
			(864) (838) 1,702
			–

10. LOSS FOR THE YEAR FROM CONTINUING OPERATIONS

	Year	ended 31 December
	2010	2011	2012
	HK$’000	HK$’000	HK$’000
Loss for the year has been arrived at after
charging:
Auditor’s remuneration	–	–	–
Directors’ remuneration	–	–	–

11. DISCONTINUED OPERATIONS

During the year ended 31 December 2011, management of Extra Earn decided to cease the construction operation. Thus, construction segment is presented as discontinued operation during the Relevant Periods.

In January 2012, the Extra Earn Group entered into a sale and purchase agreement with an independent third party to dispose of the entire equity interest of Beijing Tongren Property, which carried out all of the Extra Earn Group’s property management business under the property management segment. The disposal was completed on 31 March 2012, on which date control of Beijing Tongren Property was passed to the acquirer (see note 31(b)).

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APPENDIX II

On 19 September 2012, simultaneously with the completion of the acquisition of 90,000 shares of Extra Earn by the Company, Extra Earn performed asset reorganisation by means of the transfer of the entire registered capital of Jiatai Tongren to the Company and other two shareholders, and the repurchase and cancellation of Extra Earn’s 180,000 shares and 15,450 shares (total represented 41.99% issued shares of Extra Earn and details are set out in note 30 (c)) from the other two shareholders of Extra Earn (“Extra Earn Asset Reorganisation”). Pursuant to the Extra Earn Asset Reorganisation, Extra Earn disposed of its 58.01%, 38.67% and 3.32% equity interests of Jiatai Tongren to the Company and the other two shareholders at a consideration of HK$383,656,000, HK$255,749,000 and HK$21,959,000, respectively. Upon the Extra Earn Asset Reorganisation, the hospital and property development segments are discontinued. Details of the disposal of Jiatai Tongren are set out in note 31 (c).

The loss during the Relevant Periods from the discontinued operations is analysed as follows:

Loss for the year from discontinued operations Loss for the year from discontinued operations attributable to: Owners of Extra Earn Non-controlling interests	Year 2010 HK$’000 (19,413) (8,976) (10,437) (19,413)	ended 31 December 2011 2012 HK$’000 HK$’000 (64,924) (113,687) (26,011) (93,166) (38,913) (20,521) (64,924) (113,687)

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APPENDIX II

The result of these discontinued operations for the Relevant Periods, which have been included in the consolidated statement of comprehensive income, were as follows:

Revenue Cost of sales Gross profit Other income Other gains and losses Distribution expenses Administrative expenses Finance costs Loss before taxation Tax (charge) credit Loss for the year Loss for the year attributable to: Owners of Extra Earn Non-controlling interests	Year 2010 HK$’000 403,607 (367,475) 36,132 18,612 – (2,333) (46,268) (22,544) (16,401) (3,012) (19,413) (8,976) (10,437) (19,413)	ended 31 December 2011 2012 HK$’000 HK$’000 851,607 403,279 (796,123) (373,886) 55,484 29,393 41,204 9,109 (1,054) (9,235) (5,920) (2,310) (88,016) (67,839) (69,138) (74,113) (67,440) (114,995) 2,516 1,308 (64,924) (113,687) (26,011) (93,166) (38,913) (20,521) (64,924) (113,687)

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APPENDIX II

FINANCIAL INFORMATION ON EXTRA EARN

Bank interest income Staff costs Salaries and other benefits Retirement benefits scheme contribution Auditor’s remuneration Depreciation for property, plant and equipment Release of prepaid lease payments Amortisation of intangible assets Operating lease rentals in respect of land and buildings Cost of inventories recognised as expenses Cost of properties for sale Impairment loss recognised on debtors Loss on disposal of Beijing Tongren Property (Gain) loss on disposal of property, plant and equipment Interest income from overdue debtors_(Note a) Compensation income from contractor’s breach of contract(Note b) Government grants(note c) Interest on: – bank borrowings wholly repayable within five years – bank borrowings wholly repayable after five years – finance leases – loan arrangement fee Less: Amounts capitalised (note d)_	Year ended 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 (1,775) (7,414) (7,002) 62,847 160,264 132,107 6,798 16,767 11,721 69,645 177,031 143,828 207 217 221 20,560 57,959 55,610 1,411 2,963 2,260 3,136 6,580 5,016 1,172 2,116 1,328 32,050 109,182 108,102 109,853 354,489 11,533 – 1,420 5,184 – – 3,490 – (366) 561 – (28,429) – (2,575) – – (12,623) (1,118) – 15,187 76,691 65,771 10,591 – – 1,031 3,283 3,913 – – 6,756 (4,265) (10,836) (2,327) 22,544 69,138 74,113	Year ended 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 (1,775) (7,414) (7,002) 62,847 160,264 132,107 6,798 16,767 11,721 69,645 177,031 143,828 207 217 221 20,560 57,959 55,610 1,411 2,963 2,260 3,136 6,580 5,016 1,172 2,116 1,328 32,050 109,182 108,102 109,853 354,489 11,533 – 1,420 5,184 – – 3,490 – (366) 561 – (28,429) – (2,575) – – (12,623) (1,118) – 15,187 76,691 65,771 10,591 – – 1,031 3,283 3,913 – – 6,756 (4,265) (10,836) (2,327) 22,544 69,138 74,113
		132,107 11,721
		143,828 221 55,610 2,260 5,016 1,328 108,102 11,533 5,184 3,490 561 – – –
		65,771 – 3,913 6,756 (2,327)
		74,113

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FINANCIAL INFORMATION ON EXTRA EARN

APPENDIX II

Notes:

• (a) During the Relevant Periods, the trade receivables due from the customer of the construction segment were past due for a long time. During the year ended 31 December 2011, the customer agreed to pay interest of approximately HK$28,429,000 on the past due balance to the Extra Earn Group.

• (b) During the year ended 31 December 2009, a sub-contractor of the construction segment breached the terms of the construction agreement with the Extra Earn Group. Based on the settlement agreement, among other terms, the sub-contractor compensated the Extra Earn Group HK$2,575,000 during the year ended 31 December 2010. The sub-contractor is a related company of the Extra Earn Group as it is controlled and beneficially owned by a director of Extra Earn.

• (c) The amount represented unconditional government grants granted to encourage the hospital operation in Nanjing.

• (d) During the Relevant Periods, interest expenses arising on specific loans were capitalised in properties under development for sale and buildings included in property, plant and equipment. In addition, borrowing costs capitalised arose on the general borrowing pool are calculated by applying a capitalisation rate of 3.34%, 7.49% and 7.78% per annum to expenditure on qualifying assets during the years ended 31 December 2010, 2011 and 2012.

Cash inflow/outflow from discontinued operations disclosed as follows:

	Year ended 31 December	Year ended 31 December
	2010	2011	2012
	HK$’000	HK$’000	HK$’000
Net cash (outflow) inflow for
operating activities	(103,952)	(308,564)	131,760
Net cash (outflow) inflow for
investing activities	(387,444)	136,098	(101,936)
Net cash inflow (outflow) for
financing activities	407,591	340,831	(152,936)

The carrying amount of the assets and liabilities of Beijing Tongren Property and Jiatai Tongern and its subsidiaries at the respective date of disposal are disclosed in notes 31 (b) and 31 (c) respectively.

12. DIVIDENDS AND LOSS PER SHARE

No dividend was paid or declared by Extra Earn during the Relevant Periods.

No loss per share information is presented as its inclusion, for purpose of this report, is not meaningful.

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APPENDIX II

13. PROPERTY, PLANT AND EQUIPMENT

The Extra Earn Group

Construction in progress HK$’000 COST OR VALUATION At 1 January 2010 – Exchange differences – Additions 183,427 Acquisition of subsidiaries 545,243 Transfer (557,917) Disposals – Disposal of subsidiary – Deficit on revaluation – At 31 December 2010 170,753 Exchange differences 8,162 Additions 86,279 Transfer (123,045) Disposals – Deficit on revaluation – At 31 December 2011 142,149 Additions 14,946 Transfer (13,409) Disposals – Disposal of subsidiaries (143,686) At 31 December 2012 – Consisting: At cost 170,753 At valuation – At 31 December 2010 170,753 At cost 142,149 At valuation – At 31 December 2011 142,149 DEPRECIATION At 1 January 2010 – Exchange differences – Charge for the year – Eliminated on disposals – Eliminated on revaluation – Eliminated on disposal of a subsidiary – At 31 December 2010 – Exchange differences – Charge for the year – Eliminated on disposals – Eliminated on revaluation – At 31 December 2011 – Charge for the year – Eliminated on disposals – Eliminated on disposal of subsidiaries –	Computer and medical Buildings equipment HK$’000 HK$’000 2,285 889 101 26 741 63,567 392,635 128,115 557,917 – – (337) (2,352) (93) (10,820) – 940,507 192,167 45,466 9,185 7,652 43,514 123,045 – – (5,836) (32,915) – 1,083,755 239,030 7,191 20,234 13,409 – – (1,053) (1,104,355) (258,211) – – – 192,167 940,507 – 940,507 192,167 – 239,030 1,083,755 – 1,083,755 239,030 – 495 238 172 10,582 8,223 – (101) (10,820) – – (43) – 8,746 1,061 806 31,854 22,581 – (2,823) (32,915) – – 29,310 32,328 20,570 – (338) (32,328) (49,542)	Furniture and fixtures HK$’000 – – 2,456 11 – – – – 2,467 117 1,442 – (1,450) – 2,576 185 – – (2,761) – 2,467 – 2,467 2,576 – 2,576 – 2 114 – – – 116 13 435 (92) – 472 380 – (852)	Office equipment HK$’000 – – 1,068 6,591 – (182) – – 7,477 358 3,847 – (273) – 11,409 724 – (175) (11,958) – 7,477 – 7,477 11,409 – 11,409 – 18 910 (117) – – 811 69 1,788 (69) – 2,599 1,293 (95) (3,797)	Motor vehicles HK$’000 2,715 79 316 2,612 – (16) (47) – 5,659 270 1,806 – (1,219) – 6,516 811 – (351) (6,976) – 5,659 – 5,659 6,516 – 6,516 807 38 731 (2) – (10) 1,564 97 1,301 (902) – 2,060 1,039 (334) (2,765)	Total HK$’000 5,889 206 251,575 1,075,207 – (535) (2,492) (10,820)
					1,319,030 63,558 144,540 – (8,778) (32,915)
					1,485,435 44,091 – (1,579) (1,527,947)
					–
					378,523 940,507
					1,319,030
					401,680 1,083,755
					1,485,435
					1,302 468 20,560 (220) (10,820) (53)
					11,237 2,046 57,959 (3,886) (32,915)
					34,441 55,610 (767) (89,284)

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Construction in progress HK$’000 At 31 December 2012 – CARRYING AMOUNTS At 31 December 2010 170,753 At 31 December 2011 142,149 At 31 December 2012 –	Computer and medical Buildings equipment HK$’000 HK$’000 – – 940,507 183,421 1,083,755 209,720 – –	Furniture and fixtures HK$’000 – 2,351 2,104 –	Office equipment HK$’000 – 6,666 8,810 –	Motor vehicles HK$’000 – 4,095 4,456 –	Total HK$’000 –
					1,307,793
					1,450,994
					–

Property, plant and equipment other than construction in progress are depreciated on its cost or valuation less their residual values on a straight-line basis at the following rates per annum:

Buildings	4-5%
Computer and medical equipment	10%
Furniture and fixtures	20%
Office equipment	20%
Motor vehicles	20%

The buildings of the Extra Earn Group are situated in the PRC and located on the leasehold land under medium-term leases. The construction in progress represented hospital buildings under construction which are situated in the PRC.

If the buildings had not been revalued, they would have been included in these consolidated financial statements at historical cost less accumulated depreciation of HK$940,507,000, HK$1,083,755,000 and nil as at 31 December 2010, 2011 and 2012, respectively.

The Extra Earn Group have not obtained the building certificates for the buildings with carrying value of approximately HK$940,507,000 and HK$1,083,755,000 as at 31 December 2010 and 2011, respectively.

The Extra Earn Group pledged buildings with carrying value of approximately HK$940,507,000 and HK$1,083,755,000 and construction in progress with carrying value of approximately HK$169,940,000 and HK$138,434,000 to secure general banking facilities granted to the Extra Earn Group as at 31 December 2010 and 2011, respectively.

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APPENDIX II

14. PREPAID LEASE PAYMENTS

The Extra Earn Group’s prepaid lease payments comprise: Medium-term leasehold land in the PRC Analysed for reporting purposes as: Non-current assets Current assets	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 126,571 129,606 – 123,695 126,592 – 2,876 3,014 – 126,571 129,606 –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 126,571 129,606 – 123,695 126,592 – 2,876 3,014 – 126,571 129,606 –
		– –
		–

The prepaid lease payments of the Extra Earn Group are held under medium-term lease in the PRC and amortised over the terms of the lease from 40 to 45 years.

The Extra Earn Group pledged land use rights with carrying value of approximately HK$95,505,000 and HK$97,771,000 to secure general banking facilities granted to the Extra Earn Group as at 31 December 2010 and 2011, respectively.

15. INTANGIBLE ASSETS

COST At 1 January 2010 Acquisition of subsidiaries_(note 32)_ At 31 December 2010 Exchange differences At 31 December 2011 Disposal of subsidiaries At 31 December 2012 AMORTISATION At 1 January 2010 Amortisation Exchange differences	Hospital operating licenses HK$’000 – 56,040 56,040 2,678 58,718 (58,718) – – 2,749 54	Trademark HK$’000 – 17,811 17,811 852 18,663 (18,663) – – 387 6	Total HK$’000 – 73,851
			73,851 3,530
			77,381 (77,381)
			–
			– 3,136 60

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At 31 December 2010 Amortisation Exchange differences At 31 December 2011 Amortisation Eliminated on disposal of subsidiaries At 31 December 2012 CARRYING AMOUNTS At 31 December 2010 At 31 December 2011 At 31 December 2012	Hospital operating licenses HK$’000 2,803 5,773 232 8,808 4,403 (13,211) – 53,237 49,910 –	Trademark HK$’000 393 807 34 1,234 613 (1,847) – 17,418 17,429 –	Total HK$’000 3,196 6,580 266 10,042 5,016 (15,058) – 70,655 67,339 –

The trademark and hospital operating licenses have finite useful lives. Hospital operating licenses are amortised on a straight-line basis over 10 years and trademark is amortised on a straight-line basis over 30 years.

16. GOODWILL

CARRYING AMOUNTS At 1 January 2010 Acquisition of subsidiaries_(note 32)_ At 31 December 2010 Exchange difference At 31 December 2011 Disposal of subsidiaries At 31 December 2012	HK$’000 – 16,396 16,396 784 17,180 (17,180) –

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For the purposes of impairment testing, goodwill has been allocated to the CGU of hospital operations. The recoverable amount of the CGUs has been determined based on a value in use calculations. That calculation uses cash flow projections based on financial budgets approved by management covering a 5-years period and discount rate of 15.9% and 16.1% as at 31 December 2010 and 2011. The cash flows beyond the 5-years period are extrapolated having a steady 3% growth rate for all value in use calculations. The growth rate is based on the relevant industry growth forecasts and average long-term growth rate for the relevant industry. A key assumption for the value in use calculation is the budgeted growth rate, which is determined based on past performance and management’s expectations for the market development. No impairment on goodwill is noted. Management considered there is no impairment on goodwill as at 31 December 2010 and 2011.

17. INTERESTS IN ASSOCIATES

Cost of investment in unlisted associates	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 15,205 15,931 –

The Extra Earn Group had interest in the following associates:

		Country of	Proportion of registered capital	Proportion of registered capital	Proportion of registered capital
Name of entity	Business structure	establishment	held by the	Extra Earn Group		Proportion	**of voting power held **		Principal activity
			As at	31 December		As at 31 December
			2010	2011	2012	2010	2011	2012
焦作同仁醫療產業投資有限公司	Limited liability	PRC	21.67%	21.67%	–	21.67%	21.67%	–	Hospital operation
	company								started in year 2013
大連同仁置業有限公司Dalian	Limited liability	PRC	20%	20%	–	20%	20%	–	Inactive
Tongren Property Company	company
Limited (“Dalian Tongren”)

During the Relevant Periods, the Extra Earn Group did not contribute its investment cost of RMB10,000,000 into Dalian Tongren which had been inactive since incorporation. Dalian Tongren was dissolved in July 2012. In the opinion of the directors of Extra Earn, share of the associates’ results are considered insignificant during the Relevant Periods.

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APPENDIX II

The summarised financial information in respect of the Extra Earn Group’s associate during the Relevant Periods is set out below:

Total assets Total liabilities Net assets Extra Earn Group’s share of net assets of associates Revenue Result for the year Extra Earn Group’s share of result and other comprehensive income of associates for the year	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 74,490 125,350 – (4,314) (51,821) – 70,176 73,529 – 15,205 15,931 – – – – – – – – – –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 74,490 125,350 – (4,314) (51,821) – 70,176 73,529 – 15,205 15,931 – – – – – – – – – –
		–
		–
		–
		–
		–

18. INVENTORIES

Medical consumables Medicines	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 4,627 4,574 – 8,080 11,728 – 12,707 16,302 –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 4,627 4,574 – 8,080 11,728 – 12,707 16,302 –
		–

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APPENDIX II

19. PROPERTIES UNDER DEVELOPMENT FOR SALE

Cost At the beginning of the year Additions Additions through acquisition of subsidiaries Disposal of subsidiaries Exchange adjustments Transfer to properties held for sale At the end of the year Properties under development for sales of which: – expected to be realised within 12 months – expected to be realised over 12 months	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 117,371 454,030 318,103 77,145 157,909 81,097 493,096 – – (124,690) – (399,200) 1,041 21,700 – (109,933) (315,536) – 454,030 318,103 – 220,811 – – 233,219 318,103 – 454,030 318,103 –

The properties under development for sale of the Extra Earn Group are situated in the PRC and located on the leasehold lands under medium-term leases.

The properties under development for sale with carrying amount of approximately HK$70,488,000 and HK$81,187,000 were pledged to secure certain banking facilities granted to the Extra Earn Group as at 31 December 2010 and 2011, respectively.

20. PROPERTIES HELD FOR SALE

The Extra Earn Group’s properties held for sale are situated in the PRC. All the properties held for sale are stated at cost. In the opinion of the directors of Extra Earn, properties held for sales will be realised within twelve months.

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21. AMOUNTS DUE FROM CUSTOMERS FOR CONTRACT WORKS

The Extra Earn Group

Contracts in progress at the end of the reporting period:

Contract costs incurred plus recognised profits less recognised losses Less: Progress billings Total	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 293,826 – – (267,354) – – 26,472 – –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 293,826 – – (267,354) – – 26,472 – –
		–

22. DEBTORS, DEPOSITS AND PREPAYMENTS

The Extra Earn Group Trade receivables Deposits for acquisition of land use rights for property development_(Note)_ Prepayments Receivable on the disposals of subsidiaries Amounts due from related companies Prepaid business taxes and other PRC taxes Other receivables	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 198,755 278,109 – – 67,718 – 9,994 6,299 – 247,178 – – 22,790 18,045 – 13,837 1,680 – 73,527 58,937 – 566,081 430,788 –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 198,755 278,109 – – 67,718 – 9,994 6,299 – 247,178 – – 22,790 18,045 – 13,837 1,680 – 73,527 58,937 – 566,081 430,788 –
		–

Note: As at 31 December 2011, there is a commitment to acquire land use rights for property development with remaining payment of HK$264,327,000. The amount was paid during the year ended 31 December 2012. There was no further commitment on acquisition of land use rights as at 31 December 2012.

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Trade receivables

The customers of the Extra Earn Group’s hospital operations are either settled by cash, credit card or medical insurance. For credit card payment, the banks usually pay the Extra Earn Group 7 days after the transaction date. The medical insurance companies usually pay the Extra Earn Group 90 days after the transaction date. The normal credit period granted by the Extra Earn Group to its customers of the property management business is 30 days and the customer of construction business is 180 days.

Consideration in respect of properties sold under pre-sale contracts will be fully received prior to the delivery of the properties to the purchasers.

The following is an aged analysis of trade receivables presented based on the invoice date at the end of the reporting period:

The Extra Earn Group

0 – 30 days 31 – 60 days 61 – 90 days 91 – 365 days Over 1 year but not exceeding 2 years	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 47,312 65,916 – 4,669 12,884 – 1,671 5,264 – 145,103 108,788 – – 85,257 – 198,755 278,109 –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 47,312 65,916 – 4,669 12,884 – 1,671 5,264 – 145,103 108,788 – – 85,257 – 198,755 278,109 –
		–

The Extra Earn Group have policy for recognition of impairment which is based on the evaluation of collectability and age analysis of accounts and on management’s judgment including creditworthiness and the past collection history of each customer.

Included in the Extra Earn Group’s trade receivable with aggregate carrying amount of HK$145,103,000 and HK$194,045,000 which are past due as at 31 December 2010 and 2011 respectively for which the Extra Earn Group have not provided for impairment loss because the Extra Earn Group agreed a repayment timetable with the counterparty and the counterparty was able to settle its outstanding receivable based on the timetable. The Extra Earn Group did not hold any collateral over these balances. The average age of these receivables was 185 days and 535 days as at 31 December 2010 and 2011 respectively.

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APPENDIX II

Ageing of trade receivables which are past due but not impaired

The Extra Earn Group 91 – 365 days Over 1 year but not exceeding 2 years Total	As at 31 December 2010 2011 HK$’000 HK$’000 145,103 108,788 – 85,257 145,103 194,045	As at 31 December 2010 2011 HK$’000 HK$’000 145,103 108,788 – 85,257 145,103 194,045
		194,045

Receivable on disposals of subsidiaries

Amounts represented considerations receivable from independent third parties upon the disposal of land use rights in Lianyungang through disposal of subsidiaries before the Relevant Periods. The amount was fully settled in August 2011.

Amounts due from related companies

Amounts due from related parties of HK$22,790,000 and HK$18,045,000 as at 31 December 2010 and 2011, respectively, were receivables from a company in which a director of Extra Earn has beneficial interest and control. The amounts were unsecured, non-interest bearing and repayable on demand. During the year ended 31 December 2010, 2011 and 2012, the maximum amounts outstanding from this related company were HK$22,790,000, HK$22,790,000 and HK$18,045,000, respectively and nil balance as at 1 January 2010.

23. PLEDGED BANK DEPOSITS/RESTRICTED BANK DEPOSITS/BANK BALANCES AND CASH

Pledged bank deposits

The Extra Earn Group’s bank deposits of HK$224,902,000 and HK$245,643,000 were pledged to secure the short-term general banking facilities granted to the Extra Earn Group as at 31 December 2010 and 2011, respectively. The deposits carried interest at market rates of average of 0.50% per annum and 0.50% per annum as at 31 December 2010 and 2011 respectively.

Restricted bank deposits

In accordance with the applicable government regulations, HK$5,495,000, HK$22,343,000 as at 31 December 2010 and 2011, respectively, were placed in bank deposits which could only be used in the designated property development projects. The deposits carried interest at average market rates of 0.50% per annum and 0.50% per annum as at 31 December 2010 and 2011, respectively.

Bank balances and cash

Bank balances and cash comprise cash and bank balances held by the Extra Earn Group and Extra Earn with original maturity of three months or less and carried interest at average market rates of 0.50% per annum, 0.50% per annum and 0.50% per annum as at 31 December 2010, 2011 and 2012 respectively.

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APPENDIX II

24. CREDITORS AND ACCRUED CHARGES

The Extra Earn Group Trade payables Accrued construction costs on properties under development for sale Construction costs payable for hospital buildings classified as property, plant and equipment Accrued compensation for late delivery of properties held for sales Other payables and accruals Extra Earn Other payables and accruals	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 460,915 300,914 – 35,880 51,025 – 169,089 118,433 – 32,520 15,817 – 75,486 92,616 50 773,890 578,805 50 – – 50	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 460,915 300,914 – 35,880 51,025 – 169,089 118,433 – 32,520 15,817 – 75,486 92,616 50 773,890 578,805 50 – – 50
		50
		50

Trade payables

Trade payables of hospital operations principally comprise amounts outstanding for trade purchases of medicines and consumables. Trade payables to construction contractors for construction services and property development operations comprise construction costs and other project related expenses.

The normal credit period taken for trade purchases and for construction contract payable is 30 – 60 days. An aged analysis of the Extra Earn Group’s trade payables at the end of the reporting period presented based on the invoice date is as follows:

The Extra Earn Group 0 – 30 days 31 – 60 days 61 – 90 days 91 – 365 days Over 1 year but exceeding 2 years	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 180,232 101,599 – 47,919 1,194 – 24,786 1,116 – 132,435 113,485 – 75,543 83,520 – 460,915 300,914 –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 180,232 101,599 – 47,919 1,194 – 24,786 1,116 – 132,435 113,485 – 75,543 83,520 – 460,915 300,914 –
		–

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APPENDIX II

25. RECEIPTS IN ADVANCE

Other advance_(note)_ Receipts in advance	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 – 9,191 – 25,243 22,480 – 25,243 31,671 –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 – 9,191 – 25,243 22,480 – 25,243 31,671 –
		–

• Note: During the year ended 31 December 2011, the purchaser of Beijing Tongren Property advanced HK$9,191,000 (equivalent to RMB7,500,000) to settle trade payables of Beijing Tongren Property. Details of the disposal are set out in note 31(b).

26. AMOUNT DUE TO AN ASSOCIATE

The amount is unsecured, interest-free and repayable on demand.

27. BORROWINGS

The Extra Earn Group Secured Unsecured Extra Earn Secured repayable, fixed rate and repayable within one year	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 704,441 1,172,825 – 192,983 202,207 – 897,424 1,375,032 – 119,997 131,995 –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 704,441 1,172,825 – 192,983 202,207 – 897,424 1,375,032 – 119,997 131,995 –
		–
		–

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APPENDIX II

The Extra Earn Group The borrowings are repayable as follows: Within one year Over one year but not exceeding two years Over two years but not exceeding five years Over five years Less: Amount due within one year shown under current liabilities Amount shown under non-current liabilities	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 587,833 899,909 – 70,175 294,795 – 70,175 180,328 – 169,241 – – 897,424 1,375,032 – (587,833) (899,909) – 309,591 475,123 –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 587,833 899,909 – 70,175 294,795 – 70,175 180,328 – 169,241 – – 897,424 1,375,032 – (587,833) (899,909) – 309,591 475,123 –
		– –
		–

The exposure of the Extra Earn Group’s borrowings into fixed-rate and variable-rate are as follows:

Fixed-rate Variable-rate	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 119,997 131,995 – 777,427 1,243,037 – 897,424 1,375,032 –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 119,997 131,995 – 777,427 1,243,037 – 897,424 1,375,032 –
		–

The weighted average effective interest rates per annum (which are also equal to contracted interest rates) of the variable-rate bank borrowings are as follows:

The Extra Earn Group Extra Earn	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 5.18% 8.45% N/A 10% 10% N/A	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 5.18% 8.45% N/A 10% 10% N/A
		N/A

The variable-rate borrowings were arranged at the benchmark borrowing rate quoted by the People’s Bank of China（中國人民銀行同期貸款基準利率）plus a spread.

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APPENDIX II

The Extra Earn Group’s bank borrowings of approximately HK$231,579,000 and HK$294,118,000 were guaranteed by the related companies of the Extra Earn Group as at 31 December 2010 and 2011, respectively. A director of Extra Earn has beneficial and controlling interests in these related companies.

The Extra Earn Group’s bank borrowings of approximately HK$276,842,000 and HK$250,858,000 were secured by the buildings and construction in progress (both included in property, plant and equipment) of the Extra Earn Group as set out in note 37, as at 31 December 2010 and 2011, respectively.

The remaining Extra Earn Group’s bank borrowings during the Relevant Periods were secured by the other pledge of assets as set out in note 37.

Extra Earn Group and Extra Earn’s other borrowings of HK$119,997,000 and HK$131,995,000 bore fixed interest of 10% per annum and were repayable within one year as at 31 December 2010 and 2011, respectively. The amount was secured by pledge of 60% of issued shares of Extra Earn and corporate guarantees provided by two shareholders of Extra Earn (not including the Company). The shares pledged and the corporate guarantees were released upon the repayment of the borrowings. The other borrowings were denominated in HK$.

28. OBLIGATIONS UNDER FINANCE LEASES

The Extra Earn Group Analysed for reporting purpose as: Current liabilities Non-current liabilities	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 20,329 25,082 – 14,510 51,500 – 34,839 76,582 –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 20,329 25,082 – 14,510 51,500 – 34,839 76,582 –
		–

The Extra Earn Group leased certain of its medical equipments under finance leases. The lease term was three to six years. Interest rates underlying all obligations under finance leases were fixed at from 3% to 7% per annum. No arrangement was entered into for contingent rental payments.

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APPENDIX II

Amount payable under finance leases: Within one year In more than one year but not more than two years In more than two years but not more than five years In more than five years Less: Future finance charges Present value of lease obligations Less: Amount due for settlement within one year (shown under current liabilities) Amount due for settlement after one year	Minimum lease payments As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 21,750 31,009 – 19,022 23,747 – 2,548 39,923 – – 2,777 – 43,320 97,456 – (8,481) (20,874) – 34,839 76,582 –	Present value of minimum lease payments As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 20,329 25,082 – 12,542 20,571 – 1,968 29,091 – – 1,838 – 34,839 76,582 – N/A N/A – 34,839 76,582 – (20,329) (25,082) – 14,510 51,500 –	Present value of minimum lease payments As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 20,329 25,082 – 12,542 20,571 – 1,968 29,091 – – 1,838 – 34,839 76,582 – N/A N/A – 34,839 76,582 – (20,329) (25,082) – 14,510 51,500 –
			– –
			–
			–
			–

The Extra Earn Group’s obligations under finance leases were secured by the lessor’s charge over the leased assets.

29. DEFERRED TAX LIABILITIES

The following are the major deferred tax liabilities recognised and movements thereon during the Relevant Periods.

The Extra Earn Group At 1 January 2010 Acquisition of subsidiaries_(note 32)_ Credit to profit or loss for the year Exchange adjustment At 31 December 2010 Credit to profit or loss for the year Exchange adjustment At 31 December 2011 Credit to profit or loss for the year Disposal of subsidiaries At 31 December 2012	Fair value adjustment on business combination HK$’000 – 79,604 (2,886) (54)
	76,664 (3,994) 3,595
	76,265 (1,242) (75,023)
	–

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APPENDIX II

The Extra Earn Group had unused tax losses of approximately HK$32,791,000, HK$116,587,000 and nil, deductible temporary difference of HK$32,500,000, HK$15,817,000 and nil available for offset against future profit as at 31 December 2010, 2011 and 2012, respectively. No deferred tax asset has been recognised due to the unpredictability of future profit streams. The expiry of unused tax losses was as follows:

Year 2015 Year 2016	As at 31 December 2010 2011 HK$’000 HK$’000 32,791 32,791 – 83,796 32,791 116,587	2012 HK$’000 – –
		–

Under the EIT Law of PRC, withholding tax is imposed on dividends declared in respect of profits earned by Jiatai Tongren and its subsidiaries from 1 January 2008 onwards. Deferred taxation has not been provided for in the consolidated financial statements in respect of temporary differences attributable to accumulated profits of the Jiatai Tongren’s subsidiaries amounting to HK$37,237,000 and HK$32,715,000 as at 31 December 2010 and 2011 as Extra Earn is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

30. SHARE CAPITAL

Share of US$1 each: At 1 January 2010 Issue of shares_(Note a) At 31 December 2010 and 2011 Issue of shares(Note b) Repurchases of shares(Note c)_ At 31 December 2012	Authorised, issued and fully paid US$’000 HK$’000 150 1,170 300 2,340 450 3,510 15 121 (195) (1,525) 270 2,106	Authorised, issued and fully paid US$’000 HK$’000 150 1,170 300 2,340 450 3,510 15 121 (195) (1,525) 270 2,106
		3,510 121 (1,525)
		2,106

Notes:

• (a) On 25 June 2010, Extra Earn issued new shares of 300,000 shares to a subsidiary of the Company at a consideration of HK$234,000,000. The premium of HK$231,660,000 was credited to share premium reserve.

• (b) On 10 April 2012, Extra Earn issued new shares of 15,450 shares to an independent third party at a consideration of HK$46,800,000. The premium of HK$46,679,000 was credited to share premium reserve.

• (c) Pursuant to the Extra Earn Asset Reorganisation, Extra Earn repurchased and cancelled 180,000 shares and 15,450 shares from the two shareholders at a consideration of approximately HK$219,173,000 and HK$18,834,000, respectively. The premium payable on repurchase of the shares of HK$236,482,000 was charged to share premium reserve.

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APPENDIX II

31. DISPOSAL OF SUBSIDIARIES

(a) Disposal of Lianyungang Huayuan

On 31 January 2010, the Extra Earn Group disposed of its entire equity interests in Lianyungang Huayuan to an independent third party at zero consideration. The net assets of Lianyungang Huayuan at the date of disposal were as follows:

Analysis of assets and liabilities over which control was lost: Property, plant and equipment Properties under development for sales Other receivables and prepayments Bank balances and cash Bank borrowings Advance from the purchaser Creditors and accrued charges Gross/loss on disposal of a subsidiary Cash outflow arising on disposal: Cash consideration Less: Bank balances and cash disposed of	HK$’000 2,439 124,690 18,380 14,848 (40,165) (113,977) (6,215) – – (14,848) (14,848)

Upon disposal of Lianyungang Huayuan, the accumulated exchange differences of Lianyungang Huayuan arising on translation to presentation currency of HK$104,000 is transferred from translation reserve to retained profits.

Lianyungang Huayuan contributed no revenue to the Extra Earn Group and loss of approximately HK$1,083,000 to the Extra Earn Group’s loss for the year ended 31 December 2010.

(b) Disposal of Beijing Tongren Property

As referred to in note 11, on 31 March 2012, the Extra Earn Group disposed of its entire equity interests in Beijing Tongren Property to an independent third party at zero consideration. The Extra Earn Group discontinued its property management business upon the disposal of Beijing Tongren Property.

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APPENDIX II

HK$’000

Analysis of assets and liabilities over which control was lost: Property, plant and equipment Trade receivables Other receivables and prepayments Bank balances and cash Advance from the purchaser Creditors and accrued charges Loss on disposal of a subsidiary Cash outflow arising on disposal: Cash consideration Less: Bank balances and cash disposed of	607 12,462 1,175 4,083 (9,282) (5,555) 3,490 – (4,083) (4,083)

Upon disposal of Beijing Tongren Property, the accumulated exchange differences of Beijing Tongren Property arising on translation to presentation currency of HK$805,000 is transferred from translation reserve to retained profits.

The impact of Beijing Tongren Property on the Extra Earn Group’s results and cash flows during the Relevant Periods is disclosed in note 11.

(c) Disposal of Jiatai Tongren

As referred to note 11, pursuant to the Extra Earn Asset Reorganisation on 19 September 2012, Extra Earn disposed of its 58.01%, 38.67% and 3.32% equity interests of Jiatai Tongren to the Company and the other two shareholders at a consideration of HK$383,656,000, HK$255,749,000 and HK$21,959,000, respectively.

The consideration of HK$383,656,000 has no fixed repayment terms. The directors of Extra Earn expect this amount will be repayable on 31 March 2014. Accordingly, it is classified as a non-current asset. At initial recognition, amount due from the Company is discounted for 1.5 years using effective interest rate of 3.5% per annum, and recognised at a fair value of HK$365,387,000. The consideration of HK$255,749,000 and HK$21,959,000 due from the other two shareholders were offset with the shareholders’ loans of HK$39,701,000 and the consideration payable of HK$219,173,000 and HK$18,834,000 due to these two shareholders upon the repurchases of Extra Earn’s shares from these two shareholders pursuant to set-off agreement. Thus, the fair value of the total consideration for this disposal is HK$643,095,000.

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APPENDIX II

Analysis of assets and liabilities over which the control was lost:

Property, plant and equipment Prepaid lease payments Intangible assets Goodwill Interests in associates Inventories Properties under development for sale Properties held for sale Debtors, deposits and prepayments Pledged bank deposits Restricted bank deposits Bank balances and cash Creditor and accrued charges Deposits received on sales of properties Receipts in advance Consideration payable Amount due to an associate Bank borrowings Obligations under finance leases Deferred tax liabilities Net assets disposed of Loss on disposal of subsidiaries: Consideration received and receivable Non-controlling interests on Jiatai Tongren’s subsidiaries Net assets disposed of Loss on disposal Net cash outflow arising on disposal Bank balances and cash disposed of

HK$’000 1,438,056 127,346 62,323 17,180 15,931 18,907 399,200 39,441 484,174 222,023 57,857 131,908 (504,090) (332,881) (21,999) (85,784) (7,966) (1,216,544) (56,613) (75,023) 713,446 643,095 65,339 (713,446) (5,012) (131,908)

A loss of HK$5,012,000 resulted from the disposal of Jiatai Tongren to shareholders is recognised as deemed distribution to the shareholders in the equity of Extra Earn. Upon disposal of Jiatai Tongren, other reserve of HK$58,633,000, statutory surplus reserve of HK$8,506,000 and accumulated exchange differences of Jiatai Tongren arising on translation to presentation currency of HK$97,596,000 is transferred to accumulated losses.

The impact of Jiatai Tongren on the Extra Earn’s results and cash flows during the Relevant Periods is disclosed in note 11.

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APPENDIX II

32. ACQUISITION OF SUBSIDIARIES

On 30 June 2010, the Extra Earn Group entered into a sale and purchase agreement with independent third parties to acquire 81.63% equity interest of Yang Pu Zhao He for a total consideration of RMB200,000,000 (approximately HK$233,918,000) by cash. This acquisition has been accounted for using the acquisition method. Yang Pu Zhao He is an investment holding company and its subsidiaries are engaged in property development and operations of hospitals in the PRC. The acquisition was completed on 30 June 2010.

Acquisition-related costs amounting to approximately HK$1,145,000 have been excluded from the consideration transferred and have been recognised as an expense during the year ended 31 December 2010, within the administrative expenses line item in the consolidated statement of comprehensive income.

Assets acquired and liabilities recognised at the date of acquisition are as follows:

Property, plant and equipment Prepaid lease payments Intangible assets Interests in associates Inventories Properties under development for sale Properties held for sale Debtors, deposits and prepayments_(note)_ Pledged bank deposits Restricted bank deposits Bank balances and cash Creditors and accrued charges Deposits received on sales of properties Receipts in advance Amount due to an associate Bank borrowings Obligations under finance leases Deferred taxation Amount due to Jiatai Tongren Non-controlling interests of subsidiaries held by Yang Pu Zhao He

HK$’000 1,075,207 128,009 73,851 15,205 9,822 493,096 93,618 301,375 144,881 18,644 33,566 (648,461) (406,433) (22,385) (7,602) (608,187) (24,195) (79,604) (175,439) (148,423) 266,545

Note: The fair value of trade receivables and other receivables (included in debtors, deposits and prepayments) at the date of acquisition amounted to approximately HK$21,712,000 and HK$182,979,000, respectively, which is the same as the gross contractual amounts of trade receivables and other receivables at the date of acquisition.

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APPENDIX II

Goodwill arising on acquisition:

Consideration paid Plus: Non-controlling interests_(Note)_ Less: Net assets acquired Goodwill arising on acquisition	HK$’000 233,918 49,023 (266,545) 16,396

Note: The non-controlling interests are determined by proportionate share of assets acquired and liabilities recognised of Yang Pu Zhao He and its subsidiaries at the date of acquisition.

Goodwill arose in the acquisition of Yang Pu Zhao He and its subsidiaries because consideration paid for the combination effectively included amounts in relation to the benefit of expected growth in hospital operation of Extra Earn Group. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. None of the goodwill arising on these acquisitions is expected to be deductible for tax purposes.

Net cash outflow arising on acquisition:

Cash consideration paid Less: Bank balances and cash acquired	HK$’000 (233,918) 33,566 (200,352)

Yang Pu Zhao He and its subsidiaries contributed loss for the year of HK$11,430,000 and revenue of HK$270,615,000 (included in discontinued operations) for the year ended 31 December 2010.

Had the acquisition been completed on 1 January 2010, total revenue of discontinued operations for the year ended 31 December 2010 would have been HK$529,724,000, and loss from discontinued operations for the year would have been HK$60,014,000. The pro forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Extra Earn Group that actually would have been achieved had the acquisition been completed on 1 January 2010, nor is it intended to be a projection of future results.

In determining the ‘pro-forma’ loss of the Extra Earn Group had Yang Pu Zhao He and its subsidiaries been acquired at the beginning of the year ended 31 December 2010, the directors have calculated the amortisation of intangible assets and release of prepaid lease payments, depreciation of plant and equipment acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognised in the pre-acquisition financial statements.

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APPENDIX II

33. INVESTMENTS IN SUBSIDIARIES

Cost of investment	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 702,253 735,816 –

34. AMOUNTS DUE FROM/TO SUBSIDIARIES OF THE COMPANY AND THE COMPANY

Amounts due from a subsidiary of the Company and the Company are unsecured and interest-free. Management expects the amount due from the Company to be recovered after twelve months at 31 December 2012 and the amount due from a subsidiary of the Company to be recovered within twelve months at 31 December 2012. Amount due from the Company represents consideration receivable from disposal of Jiatai Tongren as set out in note 31(c) and it is measured at fair value at initial recognition at an effective interest rate of 3.5% per annum.

Amount due to a subsidiary of the Company is unsecured and interest-free and repayable on demand.

35. OPERATING LEASE COMMITMENTS

The Extra Earn Group as lessee

At the end of each of the reporting period, the Extra Earn Group had contracted with landlords for the following future minimum lease payments under non-cancellable operating leases in respect of rented premises which fall due as follows:

	As at	As at	31 December	31 December
	2010		2011	2012
	HK$’000		HK$’000	HK$’000
Within one year	113		78	–

36. CAPITAL COMMITMENTS

Capital expenditure contracted for but not provided in the Financial Information – acquisition of property, plant and equipment	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 62,111 29,023 –

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APPENDIX II

37. PLEDGE OF ASSETS

The following assets of the Extra Earn Group were pledged to banks to secure banking facilities during the Relevant Periods:

Pledged bank deposits Buildings (included in the property, plant and equipment) Construction in progress (included in the property, plant and equipment) Prepaid lease payments Properties under development for sale	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 224,902 245,643 – 940,507 1,083,755 – 169,940 138,434 – 95,505 97,771 – 70,488 81,187 – 1,501,342 1,646,790 –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 224,902 245,643 – 940,507 1,083,755 – 169,940 138,434 – 95,505 97,771 – 70,488 81,187 – 1,501,342 1,646,790 –
		–

38. MAJOR NON-CASH TRANSACTIONS

The Extra Earn Group acquired medical equipments of approximately HK$19,649,000 and HK$64,829,000 under finance leases during the years ended 31 December 2010 and 2011, respectively.

Jiatai Tongren acquired additional 27.5% equity interests in Tongren Healthcare, an indirectly held subsidiary of Jiatai Tongren, from the non-controlling shareholder at a consideration of RMB110,000,000 (equivalent to HK$136,392,000), of which RMB40,000,000 (equivalent to HK$49,600,000) was settled by cash, in April 2012. The remaining consideration will be settled by two instalments of RMB35,000,000 (equivalent to HK$43,395,000) by 31 March 2013 and RMB35,000,000 (equivalent to HK$43,395,000) by 31 March 2014. The amount is unsecured and interest-free.

During the year ended 31 December 2012, the consideration receivables of disposal of Jiatai Tongren of HK$255,749,000 and HK$21,959,000 from the two shareholders were offset with the shareholders’ loans of HK$39,701,000 and the consideration payable upon the repurchases of Extra Earns’ shares from these two shareholders of HK$219,173,000 and HK$18,834,000 pursuant to the set-off agreements.

39. RETIREMENT BENEFITS SCHEMES

According to the relevant laws and regulations in the PRC, the Extra Earn Group are required to participate in defined contribution retirement schemes administered by the local municipal governments. The Extra Earn Group contributes funds which are calculated on certain percentage of the average employees salary as agreed by local municipal government to the scheme to fund the retirement benefits of the employees. The principal obligation of the Extra Earn Group with respect to the retirement benefits schemes is to make the required contributions under the scheme.

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APPENDIX II

40. RELATED PARTY DISCLOSURES

(i) Related party transactions

Other than the corporate guarantees from related companies as disclosed in note 27, the Extra Earn Group had the following transactions with related companies during the Relevant Periods in which a director of Extra Earn has control and beneficial interests:

The Extra Earn Group Purchases of medical equipments Compensation income from a sub- contractor	Year 2010 HK$’000 50,555 2,575	ended 31 December 2011 2012 HK$’000 HK$’000 7,124 1,203 – –

(ii) Related party balances

The Extra Earn Group’s balances with related parties are set out in notes 22, 26 and 34 respectively. Extra Earn’s balances with related parties are set out in notes 34 and 33, respectively.

(iii) Compensation of key management personnel

No emolument was paid or payable to the directors of Extra Earn who are also identified as the key management personnel of the Extra Earn Group during the Relevant Periods.

B. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Extra Earn Group, Extra Earn or any of its subsidiaries have been prepared in respect of any period subsequent to 31 December 2012.

Yours faithfully,

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

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APPENDIX II

2. MANAGEMENT DISCUSSION AND ANALYSIS ON EXTRA EARN HOLDINGS LIMITED

Upon the completion of the Acquisition, the Extra Earn Asset Reorganization and the transfer of 58.01% of the registered capital of Jiatai Tongren from Extra Earn to the Company, Extra Earn became a wholly owned subsidiary of the Company and has no assets and liabilities, save for intragroup liabilities, and accordingly all operations in property development, hospital operation, construction operation and property management were classified as discontinued operations.

Since incorporation and until Extra Earn Asset Reorganization, the sole asset of Extra Earn was the entire the registered capital of Jiatai Tongren.

A. MANAGEMENT DISCUSSION AND ANALYSIS FOR THE YEAR ENDED 31 DECEMBER 2010

Review of Operations

For the year ended 31 December 2010, turnover (continuing and discontinued operations) of Extra Earn was HK$403,607,000 and loss (continuing and discontinued operations) attributable to shareholders of Extra Earn was HK$16,948,000 mainly due to the loss from its hospital operation partially set-off by profits from its property development operation and construction operation.

Continuing operations

For the year ended 31 December 2010, turnover (continuing operations) of Extra Earn was nil and loss (continuing operations) attributable to shareholders of Extra Earn was HK$7,972,000 mainly due to the finance costs.

Discontinued operations

For the year ended 31 December 2010, turnover (discontinued operations) of Extra Earn was HK$403,607,000 and loss (discontinued operations) attributable to shareholders of Extra Earn was HK$8,976,000 mainly contributed by loss from its hospital operation partially set-off by profits from its property development and construction operation in urban infrastructure development in Lianyungang, the PRC and compensation income from contractor’s breach of contract of HK$2,575,000. Following the substantial completion of the urban infrastructure development in Lianyungang, the PRC, this continuation operation was discontinued in 2011.

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APPENDIX II

Financial Review

Liquidity, financial resources and capital structure

As at 31 December 2010, the Target Group’s non-current assets of HK$1,533,744,000 consisted of property, plant and equipment of HK$1,307,793,000; prepaid lease payments of HK$123,695,000; intangible assets of HK$70,655,000, goodwill of HK$16,396,000 and interest in associates of HK$15,205,000. The Target Group’s capital expenditure, daily operation and investments are mainly funded by cash generated from its operation, borrowings and shareholders’ fund. As at 31 December 2010, the Target Group had net current liabilities of HK$282,062,000.

Following the acquisition of 72.5% equity interest of Yang Pu Zhao He Industry Group Limited (“Yang Pu Zhao He”) in 2010, as at 31 December 2010, the total bank borrowings of the Target Group amounted to HK$897,424,000 consisting of secured bank borrowings of HK$704,441,000 and unsecured bank borrowings of HK$192,983,000. As at 31 December 2010, the Target Group’s total bank borrowings consisted of bank borrowings with maturity within one year of HK$587,833,000; over one year but not exceeding two years of HK$70,175,000; over two years but not exceeding five years of HK$70,175,000 and over five years of HK$169,241,000. As at 31 December 2010, the Target Group’s gearing ratio, calculated on the basis of the Target Group’s net borrowings (after pledged bank deposits, restricted bank deposits and bank balances and cash) over total equity was 68.8%.

As at 31 December 2010, the Target Group’s share capital amounted to HK$3,510,000.

Charge of assets

As at 31 December 2010, the Target Group’s bank deposit of HK$224,902,000; buildings (included in the property, plant and equipment) of HK$940,507,000; construction in progress (included in the property, plant and equipment) of HK$169,940,000; prepaid lease payments of HK$95,505,000 and properties under development for sales of HK$70,488,000 were pledged to banks to secure credit facilities granted to the Target Group during the year.

Capital commitment

As at 31 December 2010, the Target Group’s capital expenditure contracted for but not provided in its financial information consisted of acquisition of property, plant and equipment of HK$62,111,000.

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APPENDIX II

Contingent liabilities

The Target Group did not have any contingent liabilities during the year.

Significant Investments, Material Acquisition and Disposal

During the year ended 31 December 2010, the Target Group entered into a sale and purchase agreement with independent third parties to acquire 72.5% equity interest of Yang Pu Zhao He for a total consideration of RMB200,000,000 (approximately HK$233,918,000). Yang Pu Zhao He is an investment holding company and its subsidiaries are engaged in property development and operation of hospitals in the PRC.

In January 2010, the Target Group disposed of its entire equity interests in Lianyungang Huayuan Property Company Limited to an independent third party at zero consideration.

Foreign Exchange Fluctuation

The Target Group’s operations are mainly located in the PRC and its assets, liabilities and transactions were mainly denominated in Renminbi. The Target Group monitors its foreign exchange exposure and will consider hedging significant currency exposure should the need arise.

Employees

As at 31 December 2010, the Target Group had 1,594 employees (discontinued operations) with total staff costs of HK$69,645,000. The Target Group ensures that its employees are remunerated in line with market conditions and individual performance and the remuneration policies are reviewed on a regular basis.

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APPENDIX II

B. MANAGEMENT DISCUSSION AND ANALYSIS FOR THE YEAR ENDED 31 DECEMBER 2011

Review of Operations

For the year ended 31 December 2011, turnover (continuing and discontinued operations) of Extra Earn was HK$851,607,000 (2010: HK$403,607,000) and loss (continuing and discontinued operations) attributable to shareholders of Extra Earn was HK$32,299,000 (2010: HK$16,948,000) mainly due to the loss from hospital operation and absence of profit contribution from property development operation partially set-off by profit from construction operation.

Continuing operations

For the year ended 31 December 2011, turnover (continuing operations) of Extra Earn was nil (2010: nil) and loss (continuing operations) attributable to shareholders of Extra Earn was HK$6,288,000 (2010: HK$7,972,000) mainly due to finance costs.

Discontinued operations

For the year ended 31 December 2011, turnover (discontinued operations) of Extra Earn was HK$851,607,000 (2010: HK$403,607,000) and loss (discontinued operations) attributable to shareholders of Extra Earn was HK$26,011,000 (2010: HK$8,976,000) mainly contributed by loss from its hospital operation, absence of profit contribution from property development operation partially set-off by profits from construction operation in urban infrastructure development in Lianyungang, the PRC and interest income from overdue debtors of HK$28,429,000 (2010: nil). Following the substantial completion of the urban infrastructure development in Lianyungang, the PRC, this operation was discontinued in 2011.

Financial Review

Liquidity, financial resources and capital structure

As at 31 December 2011, the Target Group’s non-current assets of HK$1,678,036,000 (2010: HK$1,533,744,000) consisted of property, plant and equipment of HK$1,450,994,000 (2010: HK$1,307,793,000), prepaid lease payments of HK$126,592,000 (2010: HK$123,695,000); intangible assets of HK$67,339,000 (2010: HK$70,655,000), goodwill of HK$17,180,000 (2010: HK$16,396,000) and interest in associates of HK$15,931,000 (2010: HK$15,205,000). The Target Group’s capital expenditure, daily operation and investments are mainly funded by cash generated from its operation, borrowings and shareholders’ fund. As at 31 December 2011, the Target Group had net current liabilities of HK$255,997,000 (2010: HK$282,062,000).

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APPENDIX II

As at 31 December 2011, the total bank borrowings of the Target Group amounted to HK$1,375,032,000 (2010: HK$897,424,000) consisting of secured bank borrowings of HK$1,172,825,000 (2010: HK$704,441,000) and unsecured bank borrowings of HK$202,207,000 (2010: HK$192,983,000). As at 31 December 2011, the Target Group’s total bank borrowings consisted of bank borrowings with maturity within one year of HK$899,909,000 (2010: HK$587,833,000); over one year but not exceeding two years of HK$294,795,000 (2010: HK$70,175,000); over two years but not exceeding five years of HK$180,328,000 (HK$70,175,000) and over five years of nil (2010: HK$169,241,000). As at 31 December 2011, the Target Group’s gearing ratio, calculated on the basis of the Target Group’s net borrowings (after pledged bank deposits, restricted bank deposits and bank balances and cash) over total equity was 103.9% (2010: 68.8%).

As at 31 December 2011, the Target Group’s share capital amounted to HK$3,510,000 (2010: HK$3,510,000).

Charge of assets

As at 31 December 2011, the Target Group’s bank deposit of HK$245,643,000 (HK$224,902,000); buildings (included in the property, plant and equipment) of HK$1,083,755,000 (2010: HK$940,507,000); construction in progress (included in the property, plant and equipment) of HK$138,434,000 (2010: HK$169,940,000); prepaid lease payments of HK$97,771,000 (2010: HK$95,505,000) and properties under development for sales of HK$81,187,000 (2010: HK$70,488,000) were pledged to banks to secure credit facilities granted to the Target Group during the year.

Capital commitment

As at 31 December 2011, the Target Group’s capital expenditure contracted for but not provided in its financial information consisted of acquisition of property, plant and equipment of HK$29,023,000 (2010: HK$62,111,000).

Contingent liabilities

The Target Group did not have any contingent liabilities during the year.

Significant Investments, Material Acquisition and Disposal

During the year ended 31 December 2011, the Target Group has no significant investments, material acquisition and disposal.

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APPENDIX II

Foreign Exchange Fluctuation

The Target Group’s operations are mainly located in the PRC and its assets, liabilities and transactions were mainly denominated in Renminbi. The Target Group monitors its foreign exchange exposure and will consider hedging significant currency exposure should the need arise.

Employees

As at 31 December 2011, the Target Group had 1,916 employees (discontinued operations) (2010: 1,594) with total staff costs of HK$177,031,000 (2010: HK$69,645,000). The Target Group ensures that its employees are remunerated in line with market conditions and individual performance and the remuneration policies are reviewed on a regular basis.

C. MANAGEMENT DISCUSSION AND ANALYSIS FOR THE YEAR ENDED 31 DECEMBER 2012

Review of Operations

For the year ended 31 December 2012, turnover (continuing and discontinued operations) of Extra Earn was HK$403,279,000 (2011: HK$851,607,000) and loss (continuing and discontinued operations) attributable to shareholders of Extra Earn was HK$98,405,000 (2011: HK$32,299,000) mainly due to the loss from hospital and property development operations with the absence of profit contribution from construction operation.

Continuing operations

For the year ended 31 December 2012, turnover (continuing operations) of Extra Earn was HK$nil (2011: nil) and loss (continuing operations) attributable to shareholders of Extra Earn was HK$5,239,000 (2011: HK$6,288,000) mainly due finance costs.

Discontinued operations

For the year ended 31 December 2012, turnover (discontinued operations) of Extra Earn was HK$403,279,000 (2011: HK$851,607,000) and loss (discontinued operations) attributable to shareholders of Extra Earn was HK$93,166,000 (2011: HK$26,011,000) mainly due to reduced turnover from property development operation and increased loss from its hospital operation and the absence of contribution from its urban infrastructure development operation discontinued in 2011. Following the disposal of the operation in 2012, the property management operation was discontinued in 2012.

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APPENDIX II

Financial Review

Liquidity, financial resources and capital structure

As at 31 December 2012, the Target Group’s non-current assets of HK$374,980,000 (2011: HK$1,678,036,000) consisted of property, plant and equipment of nil (2011: HK$1,450,994,000); prepaid lease payments of nil (2011: HK$126,592,000); intangible assets of nil (2011: HK$67,339,000), goodwill of nil (2011: HK$17,180,000); interest in associates of nil (2011: HK$15,931,000) and amount due from the Company of HK$374,980,000 (2011: nil). The Target Group’s capital expenditure, daily operation and investments are mainly funded by cash generated from its operation, borrowings and shareholders’ fund. As at 31 December 2011, the Target Group had net current liabilities of HK$55,155,000 (2011: HK$255,997,000).

As at 31 December 2012, the total bank borrowings of the Target Group amounted to nil (2011: HK$1,375,032,000) consisting of secured bank borrowings of nil (2011: HK$1,172,825,000) and unsecured bank borrowings of nil (2011: HK$202,207,000). As at 31 December 2012, the Target Group’s total bank borrowings consisted of bank borrowings with maturity within one year of nil (2011: HK$899,909,000); over one year but not exceeding two years of nil (2011: HK$294,795,000) and over two years but not exceeding five years of nil (2011: HK$180,328,000). As at 31 December 2012, the Target Group’s gearing ratio, calculated on the basis of the Target Group’s net borrowings (after pledged bank deposits, restricted bank deposits and bank balances and cash) over total equity was nil (2011: 103.9%).

As at 31 December 2012, the Target Group’s share capital amounted to HK$2,106,000 (2011: 3,510,000) following Extra Earn Asset Reorganisation.

Charge of assets

As at 31 December 2012, no bank deposit (2011: HK$245,643,000); buildings (included in the property, plant and equipment) (2011: HK$1,083,755,000); construction in progress (included in the property, plant and equipment) (2011: HK$138,434,000); prepaid lease payments (2011: HK$97,771,000) and properties under development for sales (2011: HK$81,187,000) of the Target Group were pledged to banks to secure credit facilities granted to the Target Group.

Capital commitment

As at 31 December 2012, the Target Group’s capital expenditure contracted for but not provided in its financial information consisted of acquisition of property, plant and equipment of nil (2011: HK$29,023,000).

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APPENDIX II

Contingent liabilities

The Target Group did not have any contingent liabilities during the year.

Significant Investments, Material Acquisition and Disposal

In March 2012, the Target Group disposed of its entire equity interests in Beijing Tongren Property Management Company Limited (“Beijing Tongren Property”) to an independent third party at zero consideration. The Target Group discontinued its property management business upon the disposal of Beijing Tongren Property and recorded a loss on disposal of HK$3,456,000.

Pursuant to the Extra Earn Asset Reorganisation on 19 September 2012. Extra Earn disposed of its 58.01%, 38.67% and 3.32% equity interests of Jiatai Tongren to the Company and the other two shareholders at a consideration of HK$383,656,000, HK$255,749,000 and HK$21,959,000 respectively.

Foreign Exchange Fluctuation

The Target Group’s operations are mainly located in the PRC and its assets, liabilities and transactions were mainly denominated in Renminbi. The Target Group monitors its foreign exchange exposure and will consider hedging significant currency exposure should the need arise.

Employees

As at 31 December 2012, the Target Group had no employees (2011: 1,916 (discontinued operations)) with total staff costs of HK$143,828,000 (discontinued operations) (2011: HK$177,031,000). The Target Group ensures that its employees are remunerated in line with market conditions and individual performance and the remuneration policies are reviewed on a regular basis.

– 127 –

APPENDIX III FINANCIAL INFORMATION ON JIATAI TONGREN

1. ACCOUNTANTS’ REPORT ON JIATAI TONGREN (LIANYUNGANG) HEALTHCARE INVESTMENT COMPANY LIMITED

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10 May 2013

The Directors

COL Capital Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding 嘉泰同仁（連雲港）醫療產業投資有限公司 Jiatai Tongren (Lianyungang) Healthcare Investment Company Limited (“Jiatai Tongren”) (formerly known as 連雲港嘉泰城市發展有限 公司 Lianyungang Jiatai City Development Co. Ltd.) and its subsidiaries (hereinafter collectively referred to as the “Target Group”) for each of the three years ended 31 December 2012 (the “Relevant Periods”), for inclusion in the circular of COL Capital Limited (the “Company”) dated 10 May 2013 in connection with the major acquisition relating to the acquisition of 19.34% equity interest in Extra Earn Holdings Limited (the “Acquisition”) for a consideration of HK$89,860,000 (the “Circular”).

Jiatai Tongren was incorporated as a wholly foreign-owned enterprise with limited liability in the People’s Republic of China (the “PRC”) on 6 April 2006. The registered and paid up capital of Jiatai Tongren is US$84,790,000. During the Relevant Periods, the principal activity of Jiatai Tongren was investment holding. The registered address of Jiatai Tongren is Room 806, Floor 8, Wuchan Building, Tianshan Road, Development Zone Lianyungang 連雲港開發 區天山路物產大廈8層806室.

The particulars of Jiatai Tongren’s subsidiaries, which are all limited liability companies incorporated in the PRC are as follows:

		Paid up and
	Place and date	registered	Proportion of registered capital
Name of subsidiary	of establishment	capital		held by the Target Group			Principal activities
				31 December		Date of
			2010	2011	2012	this report
連雲港海畔房地產開發有限公司	PRC	RMB10,000,000	100%	100%	100%	100%	Property development
Lianyungang Haipan Property	9 February 2007
Development Company Limited
(“Lianyungang Haipan
Property”)1

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APPENDIX III

		Paid up and
	Place and date	registered	Proportion of registered capital
Name of subsidiary	of establishment	capital		held by the Target Group			Principal activities
				31 December		Date of
			2010	2011	2012	this report
連雲港成泰置業有限公司	PRC	RMB20,000,000	100%	100%	100%	100%	Property development
Lianyungang Chengtai Property	12 October 2006
Limited (“Lianyungang
Chengtai”)1
洋浦兆合實業有限公司	PRC	RMB245,000,000	81.63%	81.63%	81.63%	81.63%	Investment holding
Yang Pu Zhao He Industrial	5 March 2008
Company Limited (“Yang Pu
Zhao He”)1
同仁醫療產業集團有限公司	PRC	RMB200,000,000	72.5%	72.5%	100%	100%	Investment holding
Tongren Healthcare Industry	28 April 2003
Group Company Limited
(“Tongren Healthcare”)2
南京同仁實業有限公司	PRC	RMB80,000,000	80%	80%	80%	80%	Property development
Nanjing Tongren Industrial	19 August 2003
Company Limited (“Nanjing
Tongren Industrial”)2
北京同仁醫院管理有限公司	PRC	RMB10,000,000	100%	100%	100%	100%	Investment holding
Beijing Tongren Hospital	9 October 2003
Management Company Limited
(“Beijing Tongren Hospital”)2
昆明同仁實業開發有限公司	PRC	RMB80,000,000	100%	100%	100%	100%	Property development
Kunming Tongren Industrial	28 October 2003
Development Company Limited
(“Kunming Tongren Industrial”)
雲南新新華醫院有限公司	PRC	RMB30,000,000	100%	100%	100%	100%	Operation of a hospital
Yunnan Xin Xinhua Hospital	11 November						in Kunming
Company Limited (“Yunnan	2003
Xin Xinhua Hospital”)2
北京同仁物業管理有限公司	PRC	RMB5,000,000	100%	100%	–	–	Property management
Beijing Tongren Property	2 January 2004
Management Company Limited
(“Beijing Tongren Property”)2
南京興健醫療機械有限公司	PRC	RMB10,000,000	100%	100%	100%	100%	Trading of medical
Nanjing Xingjian Medical	3 March 2004						equipment and
Equipment Company Limited							supplies
(“Nanjing Xingjian”)2
南京同仁醫院有限公司	PRC	RMB50,000,000	80%	80%	80%	80%	Operation of a hospital
Nanjing Tongren Hospital	9 February 2007						in Nanjing
Company Limited (“Nanjing
Tongren Hospital”)
昆明同仁醫院有限公司	PRC	RMB80,000,000	100%	100%	100%	100%	Operation of a hospital
Kunming Tongren Hospital	12 September						in Kunming
Company Limited (“Kunming	2008
Tongren Hospital”)
東營同仁國際康城投資有限公司	PRC	RMB100,000,000	–	–	55%	55%	Not yet commence
Dongying Tongren International	24 February 2012						business
Health Centre Investment
Limited (“Dongying
Tongren”)2&3

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APPENDIX III

• 1 These companies are directly held by Jiatai Tongren. All other companies are indirectly held by Jiatai Tongren.

• 2 These companies are directly held by Yang Pu Zhao He.

• 3 Dongying Tongren’s registered capital is RMB100,000,000. Up to the date of report, its paid up capital is RMB20,000,000.

The financial year end date of Jiatai Tongren and its subsidiaries is 31 December.

The statutory financial statements of Jiatai Tongren and each of its subsidiaries were prepared in accordance with the relevant accounting principles and financial regulations applicable to companies established in the PRC. They were audited by the following firms of certified public accountants registered in the PRC.

Name of subsidiary	Periods covered	Certified Public Accountants
Jiatai Tongren	Each of the three years ended	Jiangsu Zhongxing Certified Public
	31 December 2012	Accountants Company Limited
Lianyungang Haipan Property	Each of the three years ended	Jiangsu Zhongxing Certified Public
	31 December 2012	Accountants Company Limited
Lianyungang Chengtai	Each of the three years ended	Jiangsu Zhongxing Certified Public
	31 December 2012	Accountants Company Limited
Yang Pu Zhao He	Each of the three years ended	Hainan Haichang Certified Public
	31 December 2012	Accountants Company Limited
Beijing Tongren Hospital	Each of the three years ended	Jiangsu Teaching Certified Public
Tongren Healthcare	31 December 2012	Accountants Company Limited
Nanjing Tongren Industrial	Each of the three years ended	Jiangsu Tianmu Certified Public
Nanjing Tongren Hospital	31 December 2012	Accountants Company Limited
Nanjing Xingjian
Kunming Tongren Industrial	Each of the three years ended	Yunnan Pingyun Certified Public
	31 December 2012	Accountants Company Limited
Kunming Tongren Hospital	Each of the three years ended	Kunming Zhongtiancheng Certified Public
Yunnan Xin Xinhua Hospital	31 December 2012	Accountants Company Limited
Beijing Tongren Property	Each of the three years ended	Beijing Zhongyantong Certified Public
	31 December 2012	Accountants Company Limited
Dongying Tongren	From date of incorporation	Shandong Tianhao Certified Public
	to 31 December	Accountants Company Limited

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For the purpose of this report, the directors of Jiatai Tongren have prepared the consolidated management accounts of the Target Group for the Relevant Periods (“Underlying Financial Statements”) in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). We have carried out independent audit on the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

We have examined the Underlying Financial Statements in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” as recommended by the HKICPA.

The Financial Information of the Target Group for the Relevant Periods set out in this report has been prepared in accordance with HKFRSs based on the Underlying Financial Statements. No adjustments are considered necessary to adjust the Underlying Financial Statements in the preparation of this report for inclusion in the Circular.

The Underlying Financial Statements are the responsibility of the directors of Jiatai Tongren. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of the Target Group and Jiatai Tongren as at 31 December 2010, 2011 and 2012 and of the consolidated results and consolidated cash flows of the Target Group for the Relevant Periods.

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APPENDIX III

A. FINANCIAL INFORMATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

NOTES Continuing operations Revenue 7 Cost of sales Gross profit Other income 9 Other gains and losses 10 Distribution expenses Administrative expenses Finance costs 11 Loss before taxation Tax (charge) credit 12 Loss for the year from continuing operations 13 Discontinued operations Profit (loss) for the year from discontinued operations 14 Loss for the year Other comprehensive income for the year: Exchange differences arising on translation to presentation currency Total comprehensive income (expense) for the year

Year ended 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 248,382 754,372 536,365 (221,697) (707,499) (487,324) 26,685 46,873 49,041 15,900 12,764 15,921 – (1,054) (5,801) (2,333) (5,920) (4,862) (45,061) (85,468) (104,180) (22,544) (69,138) (104,953) (27,353) (101,943) (154,834) (3,012) 2,516 1,486 (30,365) (99,427) (153,348) 10,952 34,503 (6,804) (19,413) (64,924) (160,152) 20,900 45,217 10,944 1,487 (19,707) (149,208)

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APPENDIX III

NOTES (Loss) profit for the year attributable to owners of Jiatai Tongren: – from continuing operations – from discontinued operations Loss for the year attributable to owners of Jiatai Tongren Loss for the year attributable to non- controlling interests: – from continuing operations – from discontinued operations Loss for the year attributable to non- controlling interests Total loss for the year Total comprehensive income (expense) attributable to: Owners of Jiatai Tongren Non-controlling interests

Year ended 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 (21,292) (63,690) (129,175) 12,316 37,679 (4,027) (8,976) (26,011) (133,202) (9,073) (35,737) (24,173) (1,364) (3,176) (2,777) (10,437) (38,913) (26,950) (19,413) (64,924) (160,152) 12,124 10,946 (124,097) (10,637) (30,653) (25,111) 1,487 (19,707) (149,208)

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APPENDIX III

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

NOTES Non-current assets Property, plant and equipment 16 Prepaid lease payments 17 Intangible assets 18 Goodwill 19 Interests in associates 20 Current assets Inventories 21 Properties under development for sale 22 Properties held for sale 23 Prepaid lease payments 17 Amounts due from customers for contract works 24 Debtors, deposits and prepayments 25 Pledged bank deposits 26 Restricted bank deposits 26 Bank balances and cash 26 Current liabilities Creditors and accrued charges 27 Deposits received on sales of properties Receipts in advance 28 Consideration payable on acquisition of additional interest in a subsidiary 29 Amount due to an associate 30 Bank borrowings – due within one year 31 Obligations under finance leases – due within one year 32	As 2010 HK$’000 1,307,793 123,695 70,655 16,396 15,205 1,533,744 12,707 454,030 91,591 2,876 26,472 566,081 224,902 5,495 80,421 1,464,575 773,890 333,240 25,243 – 7,602 467,836 20,329 1,628,140	at 31 December 2011 2012 HK$’000 HK$’000 1,450,994 1,470,342 126,592 125,034 67,339 61,989 17,180 17,382 15,931 16,119 1,678,036 1,690,866 16,302 16,496 318,103 804,358 50,934 33,682 3,014 3,050 – – 430,788 108,578 245,643 88,592 22,343 36,378 254,322 394,752 1,341,449 1,485,886 578,805 390,617 55,452 401,880 31,671 22,259 – 43,395 7,966 8,060 767,914 1,016,137 25,082 31,196 1,466,890 1,913,544	at 31 December 2011 2012 HK$’000 HK$’000 1,450,994 1,470,342 126,592 125,034 67,339 61,989 17,180 17,382 15,931 16,119 1,678,036 1,690,866 16,302 16,496 318,103 804,358 50,934 33,682 3,014 3,050 – – 430,788 108,578 245,643 88,592 22,343 36,378 254,322 394,752 1,341,449 1,485,886 578,805 390,617 55,452 401,880 31,671 22,259 – 43,395 7,966 8,060 767,914 1,016,137 25,082 31,196 1,466,890 1,913,544
			1,690,866
			16,496 804,358 33,682 3,050 – 108,578 88,592 36,378 394,752
			1,485,886
			390,617 401,880 22,259 43,395 8,060 1,016,137 31,196
			1,913,544

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APPENDIX III

NOTES Net current liabilities Total assets less current liabilities Non-current liabilities Deferred tax liabilities 33 Bank borrowings – due after one year 31 Obligations under finance leases – due after one year 32 Consideration payable on acquisition of additional interest in a subsidiary 29 Net assets Capital and reserves Paid-up capital 34 Reserves Equity attributable to owners of Jiatai Tongren Non-controlling interests Total equity	As 2010 HK$’000 (163,565) 1,370,179 76,664 309,591 14,510 – 400,765 969,414 658,610 123,995 782,605 186,809 969,414	at 31 December 2011 2012 HK$’000 HK$’000 (125,441) (427,658) 1,552,595 1,263,208 76,265 75,520 475,123 158,338 51,500 60,651 – 43,397 602,888 337,906 949,707 925,302 658,610 908,646 134,941 (43,430) 793,551 865,216 156,156 60,086 949,707 925,302

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FINANCIAL INFORMATION ON JIATAI TONGREN

APPENDIX III

STATEMENTS OF FINANCIAL POSITION

NOTES Non-current assets Property, plant and equipment 16 Investments in subsidiaries 37 Amounts due from subsidiaries 38 Current assets Amounts due from customer for contract works 24 Debtors and prepayments 25 Amounts due from subsidiaries 38 Pledged bank deposits 26 Bank balances and cash 26 Current liabilities Creditor and accrued charges 27 Consideration payable on acquisition of additional interest in a subsidiary 29 Amounts due to subsidiaries 38 Bank borrowings 31 Net current assets Total assets less current liabilities	As 2010 HK$’000 1,853 269,006 – 270,859 26,472 427,189 308,772 91,813 35,853 890,099 223,152 – 21,259 120,468 364,879 525,220 796,079	at 31 December 2011 2012 HK$’000 HK$’000 1,270 1,049 281,863 421,575 70,966 360,419 354,099 783,043 – – 235,679 26 497,782 496,206 165,824 – 47,066 333,049 946,351 829,281 107,946 36,984 – 43,395 12,255 24,823 316,320 324,985 436,521 430,187 509,830 399,094 863,929 1,182,137	at 31 December 2011 2012 HK$’000 HK$’000 1,270 1,049 281,863 421,575 70,966 360,419 354,099 783,043 – – 235,679 26 497,782 496,206 165,824 – 47,066 333,049 946,351 829,281 107,946 36,984 – 43,395 12,255 24,823 316,320 324,985 436,521 430,187 509,830 399,094 863,929 1,182,137
			783,043
			– 26 496,206 – 333,049
			829,281
			36,984 43,395 24,823 324,985
			430,187
			399,094
			1,182,137

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FINANCIAL INFORMATION ON JIATAI TONGREN

APPENDIX III

NOTES Non-current liabilities Consideration payable on acquisition of additional interest in a subsidiary 29 Net assets Capital and reserves Registered capital 34 Reserves 39 Total equity	As 2010 HK$’000 – 796,079 658,610 137,469 796,079	at 31 December 2011 2012 HK$’000 HK$’000 – 43,397 863,929 1,138,740 658,610 908,646 205,319 230,094 863,929 1,138,740	at 31 December 2011 2012 HK$’000 HK$’000 – 43,397 863,929 1,138,740 658,610 908,646 205,319 230,094 863,929 1,138,740
			1,138,740
			908,646 230,094
			1,138,740

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FINANCIAL INFORMATION ON JIATAI TONGREN

APPENDIX III

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Attributable to owners of Jiatai Tongren

At 1 January 2010 Loss for the year Other comprehensive income (expense) for the year Total comprehensive income (expense) for the year Increase in capital Transfer upon disposal of a subsidiary Acquisition of subsidiaries_(note 36)_ At 31 December 2010 Loss for the year Other comprehensive income for the year Total comprehensive income (expense) for the year At 31 December 2011 Loss for the year Other comprehensive income for the year	Paid-up capital HK$’000 424,610 – – – 234,000 – – 658,610 – – – 658,610 – –	Other reserve HK$’000 – – – – – – – – – – – – – –	Statutory surplus reserve HK$’000 (Note a) 8,506 – – – – – – 8,506 – – – 8,506 – –	Translation reserve HK$’000 35,284 – 21,100 21,100 – (104) – 56,280 – 36,957 36,957 93,237 – 9,105	Retained profits (accumulated losses) HK$’000 68,081 (8,976) – (8,976) – 104 – 59,209 (26,011) – (26,011) 33,198 (133,202) –	Total HK$’000 536,481 (8,976) 21,100 12,124 234,000 – – 782,605 (26,011) 36,957 10,946 793,551 (133,202) 9,105	Non- controlling interests HK$’000 – (10,437) (200) (10,637) – – 197,446 186,809 (38,913) 8,260 (30,653) 156,156 (26,950) 1,839	Total equity HK$’000 536,481
								(19,413) 20,900
								1,487
								234,000 – 197,446
								969,414
								(64,924) 45,217
								(19,707)
								949,707
								(160,152) 10,944

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FINANCIAL INFORMATION ON JIATAI TONGREN

APPENDIX III

Attributable to owners of Jiatai Tongren

Total comprehensive income (expense) for the year Increase in capital Capital contribution from a non- controlling shareholder of a subsidiary Transfer upon disposal of a subsidiary Acquisition of additional interest in a subsidiary_(Note b)_ At 31 December 2012	Paid-up capital HK$’000 – 250,036 – – – 908,646	Other reserve HK$’000 – – – – (58,633) (58,633)	Statutory surplus reserve HK$’000 (Note a) – – – – – 8,506	Translation reserve HK$’000 9,105 – – (805) 4,359 105,896	Retained profits (accumulated losses) HK$’000 (133,202) – – 805 – (99,199)	Total HK$’000 (124,097) 250,036 – – (54,274) 865,216	Non- controlling interests HK$’000 (25,111) – 11,159 – (82,118) 60,086	Total equity HK$’000 (149,208)
								250,036 11,159 – (136,392)
								925,302

Notes:

• (a) As stipulated by the relevant laws and regulations in the PRC, before distribution of the net profit each year, Jiatai Tongren shall set aside 10% of its net profit after taxation for the statutory surplus reserve (except where the reserve has reached 50% of paid-up capital). The reserve fund can only be used, upon approval by the board of directors and by the relevant authority, to offset accumulated losses or increase capital.

• (b) In April 2012, Jiatai Tongren acquired further 27.5% equity interest of a subsidiary, Tongren Healthcare, at a consideration of RMB110,000,000 (equivalent to HK$136,392,000) from an independent third party. The effective equity interest in Tongren Healthcare was increased from 59.18% to 86.68%. An amount of HK$58,633,000, representing the difference between consideration paid and the carrying amount of non-controlling interests relating to 27.5% equity interest of Tongren Healthcare is debited to other reserve.

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APPENDIX III

CONSOLIDATED STATEMENTS OF CASH FLOWS

OPERATING ACTIVITIES (Loss) profit before taxation – continuing operations – discontinued operations Adjustments for: Interest expenses Interest income Depreciation of property, plant and equipment Release of prepaid lease payments Amortisation for intangible assets Loss on disposal of subsidiaries (Gain) loss on disposal of property, plant and equipment Impairment loss recognised in respect of debtors Operating cash flows before movements in working capital Increase in inventories Decrease (increase) in properties under development for sale and properties for sale Decrease in amounts due from customers for contract works (Increase) decrease in debtors, deposits and prepayments Decrease in creditors and accrued charges (Decrease) increase in deposits received on sales of properties Increase (decrease) in receipts in advance Net cash (used in) from operations PRC taxes paid NET CASH (USED IN) FROM OPERATING ACTIVITIES

Year ended 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 (27,353) (101,943) (154,834) 10,952 34,503 (6,804) 22,544 69,138 104,953 (1,775) (7,414) (8,072) 20,560 57,959 74,835 1,411 2,963 3,044 3,136 6,580 6,132 – – 3,490 – (366) 566 – 1,420 5,235 29,475 62,840 28,545 (2,885) (3,147) (33) 41,093 195,805 (465,379) 97,242 27,405 – (52,470) (135,671) 303,922 (141,778) (170,272) (93.186) (73,193) (289,528) 355,162 1,580 5,539 (9,726) (100,936) (307,029) 119,305 (3,016) (1,535) (6,585) (103,952) (308,564) 112,720

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APPENDIX III

NOTES INVESTING ACTIVITIES Purchase of property, plant and equipment Proceeds of disposal property, plant and equipment Placement of pledged bank deposits/ restricted bank deposits Withdrawal of pledged bank deposits/ restricted bank deposits Advance to related companies Advance to Yang Pu Zhao He Repayment from related companies Repayment from a subsidiary of the company Acquisition of subsidiaries 36 Disposal of subsidiaries 35 Proceeds from disposal of subsidiaries before the Relevant Periods Interest received Interest received from overdue trade receivables NET CASH (USED IN) FROM INVESTING ACTIVITIES FINANCING ACTIVITIES Issue of new shares New bank borrowings raised Repayment of bank borrowings Repayment of obligations under finance leases Advance from the purchaser before disposal of subsidiaries Payment on acquisition of additional interest in a subsidiary Capital contribution from a non- controlling shareholder of a subsidiary Interest paid NET CASH FROM (USE IN) FINANCING ACTIVITIES

Year ended 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 (197,979) (119,531) (122,258) 315 5,258 256 (133,863) (263,028) (90,316) 66,991 225,633 235,985 (27,478) (21,991) (10,000) (116,959) – – – 26,736 13,688 101,166 – – (200,352) – – (14,848) – (4,083) 133,788 247,178 – 1,775 7,414 8,072 – 28,429 – (387,444) 136,098 31,344 234,000 – 250,036 499,814 1,052,399 1,129,146 (290,409) (614,177) (1,210,015) (9,005) (26,608) (28,111) – 9,191 – – – (49,600) – – 11,159 (26,809) (79,974) (107,307) 407,591 340,831 (4,692)

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FINANCIAL INFORMATION ON JIATAI TONGREN

APPENDIX III

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS EFFECT OF CHANGES IN FOREIGN EXCHANGE RATES CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT END OF THE YEAR represented by bank balances and cash	Year ended 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 (83,805) 168,365 139,372 8,795 5,536 1,058 155,431 80,421 254,322 80,421 254,322 394,752	Year ended 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 (83,805) 168,365 139,372 8,795 5,536 1,058 155,431 80,421 254,322 80,421 254,322 394,752
		394,752

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APPENDIX III FINANCIAL INFORMATION ON JIATAI TONGREN

NOTES TO THE FINANCIAL INFORMATION

1. GENERAL

Jiatai Tongren is an investment holding company and the principal activities of the Target Group is sales of properties, operation of hospitals, provision of urban infra-structure development services and provision of property management services. During the Relevant Periods, the Target Group ceased the operation of urban infra-structure development services in order to focus on healthcare and property development business and discontinued the provision of property management services upon disposal of subsidiaries, which are disclosed in note 14.

Extra Earn is the immediate and ultimate holding company at 31 December 2010 and 2011. The immediate holding company at 31 December 2012 and the date of this report is the Company and its ultimate holding company is Vigor Online Offshore Limited, a limited company incorporated in the British Virgin Islands.

The functional currency of Jiatai Tongren and its subsidiaries is Renminbi (“RMB”), the currency of the primary economic environment in which Jiatai Tongren and its subsidiaries operate. For the convenience of the users of the Financial Information, the Financial Information is presented in Hong Kong dollar (“HK$”).

2. BASIS OF PREPARATION OF FINANCIAL INFORMATION

In the preparation of the Underlying Financial Information, the directors of Jiatai Tongren have given due and careful consideration to the future liquidity of the Target Group in light of the Target Group’s net current liabilities position of HK$427,658,000 as at 31 December 2012. In the opinion of the directors of Jiatai Tongren, the underlying Financial Information has been prepared on a going concern basis, as the Company and the other shareholders of Jiatai Tongren have agreed to provide adequate funds to enable the Target Group to meet in full its financial obligations as they fall due for the foreseeable future.

3. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, the Target Group has consistently applied HKFRSs issued by the HKICPA that are effective for its annual accounting period beginning on 1 January 2012 throughout the Relevant Periods.

The Target Group has not early applied the following new and revised HKFRSs that have been issued by the HKICPA but are not yet effective at the date of this report:

Amendments to HKFRSs	Annual improvements to HKFRSs 2009-2011 cycle_1_
Amendments to HKFRS 7	Disclosures – Offsetting financial assets and financial
	liabilities_1_
Amendments to HKFRS 9	Mandatory effective date of HKFRS 9 and transition
and HKFRS 7	disclosures_3_

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APPENDIX III

Amendments to HKFRS 10, Consolidated financial statements, joint arrangements HKFRS 11 and HKFRS 12 and disclosure of interests in other entities: Transition guidance [1] Amendments to HKFRS 10, Investment entities [2] HKFRS 12 and HKAS 27 HKFRS 9 Financial instruments [1] HKFRS 10 Consolidated financial statements [1] HKFRS 11 Joint arrangements [1] HKFRS 12 Disclosure of interests in other entities [1] HKFRS 13 Fair value measurement [1] Amendments to HKAS 1 Presentation of items of other comprehensive income [4] Amendments to HKAS 32 Offsetting financial assets and financial liabilities [2] HKAS 19 (Revised 2011) Employee benefits [1] HKAS 27 (Revised 2011) Separate financial statements [1] HKAS 28 (Revised 2011) Investments in associates and joint ventures [1] HK(IFRIC) – INT 20 Stripping costs in the production phase of a surface mine [1]

1 Effective for accounting periods beginning on or after 1 January 2013.

2 Effective for accounting periods beginning on or after 1 January 2014.

3 Effective for accounting periods beginning on or after 1 January 2015.

4 Effective for accounting periods beginning on or after 1 July 2012.

Amendments to HKAS 1 Presentation of items of other comprehensive income

The amendments to HKAS 1 Presentation of items of other comprehensive income introduce new terminology for the statement of comprehensive income. Under the amendments to HKAS 1, a ‘statement of comprehensive income’ is renamed as a ‘statement of profit or loss and other comprehensive income’. In addition, the amendments to HKAS 1 require items of other comprehensive income to be grouped into two categories (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis – the amendments do not change the option to present items of other comprehensive income either before tax or net of tax.

The amendments to HKAS 1 are effective for annual periods beginning on or after 1 July 2012. The directors of Jiatai Tongren anticipate that the amendments to HKAS 1 will be adopted in the Target Group’s consolidated financial statements for the annual period beginning 1 January 2013. Upon adoption, the presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.

New and revised Standards on consolidation, joint arrangements, associates and disclosures

In May 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued, including HKFRS 10, HKFRS 11, HKFRS 12, HKAS 27 (Revised in 2011) and HKAS 28 (Revised in 2011).

Key requirements of HKFRS 10 and HKFRS 12 are described below.

HKFRS 10 replaces the parts of HKAS 27 “Consolidated and separate financial statements” that deal with consolidated financial statements. HKFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns

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from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. Extensive guidance has been added in HKFRS 10 to deal with complex scenarios.

HKFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in HKFRS 12 are more extensive than those in the current standards.

In June 2012, the amendments to HKFRS 10, HKFRS 11 and HKFRS 12, were issued to clarify certain transition guidance on the application of these five HKFRSs for the first time.

These five standards, together with the amendments relating to the transition guidance, are effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted provided that all of these five standards are applied early at the same time. The directors of Jiatai Tongren anticipate these five standards, together with amendments will be adopted in the Target Group’s consolidated financial statements for the annual period beginning 1 January 2013 and that the application of these five standards may not have impact on amounts reported in the Financial Information but will lead to more extensive disclosures.

HKFRS 13 Fair value measurement

HKFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of HKFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other HKFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in HKFRS 13 are more extensive than those in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under HKFRS 7 “Financial instruments: Disclosures” will be extended by HKFRS 13 to cover all assets and liabilities within its scope.

The directors anticipate that HKFRS 13 will be adopted in the Target Group’s consolidated financial statements for the annual period beginning 1 January 2013 and that the application of the new Standard is not expected to have a significant impact on the amounts reported but will result in more extensive disclosures in the Financial Information.

Other than as described above, the directors of Jiatai Tongren anticipate that the application of other new and revised HKFRSs will have no material impact on the results and the financial position of the Target Group.

4. SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared in accordance with the following accounting policies which conform with HKFRSs issued by the HKICPA. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance.

The Financial Information has been prepared on the historical cost as explained in the accounting policies set out below. Historical cost is generally based on fair value of the consideration given in exchange for goods and services.

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APPENDIX III FINANCIAL INFORMATION ON JIATAI TONGREN

Basis of consolidation

The Financial Information incorporates the financial statements of Jiatai Tongren and entities controlled by Jiatai Tongren (its subsidiaries). Control is achieved where Jiatai Tongren has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiary to bring its accounting policies into line with those used by the Target Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Non-controlling interests in subsidiaries are presented separately from the Target Group’s equity therein.

Total comprehensive income and expense of a subsidiary is attributed to the owners of Jiatai Tongren and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Target Group’s ownership interests in existing subsidiaries

Changes in the Target Group’s ownership interests in existing subsidiaries that do not result in the Target Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Target Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the proportionate share of net assets attributable to the non-controlling interests and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of Jiatai Tongren.

Investments in subsidiaries

Investments in subsidiaries are stated at cost less accumulated impairment losses, if any.

Business combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Target Group, liabilities incurred by the Target Group to the former owners of the acquiree and the equity interests issued by the Target Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.

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At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

• deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 “Income taxes” and HKAS 19 “Employee benefits” respectively;

• liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Target Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with HKFRS 2 “Share-based payment” at the acquisition date; and

• assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 “Non-current assets held for sale and discontinued operations” are measured in accordance with that standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after re-assessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transactionby-transaction basis. Other types of non-controlling interests are measured at their fair value or, when applicable, on the basis specified in another standard.

Goodwill

Goodwill arising on an acquisition of a business is carried at cost less accumulated impairment losses, if any, and is presented separately in the consolidated statement of financial position.

For the purposes of impairment testing, goodwill is allocated to each of the relevant cashgenerating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently whenever there is an indication that the unit may be impaired. For goodwill arising on an acquisition in a reporting period, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that reporting period. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of any goodwill allocated to the unit first, and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss for goodwill is not reversed in subsequent periods.

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On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the amount of profit or loss on disposal.

Investments in associates

An associate is an entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of an associate are incorporated in the Financial Information using the equity method of accounting. Under the equity method, investment in an associate are initially recognised in the consolidated statement of financial position at cost, and adjusted thereafter to recognise the Target Group’s share of the profit or loss and other comprehensive income of the associate. When the Target Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Target Group’s net investment in the associate), the Target Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Target Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Target Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment.

Any excess of the Target Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Target Group’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 “Impairment of assets” as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases.

When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognised in the Financial Information only to the extent of interests in the associate that are not related to the Target Group.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold and services provided in the normal course of business, net of discounts and sales related taxes.

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Revenue from the sale of goods is recognised when goods are delivered and titles have passed.

Revenue from sale of properties in the ordinary course of business is recognised when all of the following criteria are satisfied:

• the significant risks and rewards of ownership of the properties are transferred to purchasers;

• neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the properties are retained;

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits associated with the transaction will flow to the Target Group; and

• the costs incurred or to be incurred in respect of the transaction can be measured reliably.

The above criteria are met when the construction of relevant properties has been completed, and the properties have been delivered to the purchasers pursuant to the sales agreement and the collectability of related receivables is reasonably assumed. Deposits and instalments received from purchasers on properties sold prior to meeting the above criteria on revenue recognition are included in the consolidated statement of financial position under current liabilities.

Hospital fees and charges and property management service income are recognised when services are provided.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Target Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Government subsidies

Government subsidies are not recognised until there is reasonable assurance that the Target Group will comply with the conditions attaching to them and that the grants will be received.

Government subsidies that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Target Group with no future related costs are recognised in profit or loss in the period in which they become receivable.

Property, plant and equipment

Property, plant and equipment (other than construction in progress) are stated in the consolidated statement of financial position at cost or fair value less subsequent accumulated depreciation and accumulated impairment losses, if any.

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Buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the consolidated statement of financial position at their revalued amounts, being the fair value at the date of revaluation less any subsequent accumulated depreciation and any subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the end of the reporting period.

Any revaluation increase arising on the revaluation of buildings is recognised in other comprehensive income and accumulated in properties revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in carrying amount arising on revaluation of an asset is recognised in profit or loss to the extent that it exceeds the balance, if any, on the properties revaluation reserve relating to a previous revaluation of that asset. On the subsequent sale or retirement of a revalued asset, the attributable revaluation surplus is transferred to retained profits/accumulated losses.

Construction in progress includes property, plant and equipment in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Costs include professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Target Group’s accounting policy. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Depreciation is recognised so as to write off the cost or revalued amount of items of property, plant and equipment (other than construction in progress) less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Prepaid lease payments

Prepaid lease payments represent the prepaid lease payments of leasehold interests in land under operating lease arrangements and are amortised on a straight-line basis over the lease terms.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the leasee. All other leases are classified as operating leases.

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The Target Group as lessee

Assets held under finance leases are recognised as assets of the Target Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Target Group’s policy on borrowing costs (see the accounting policy below).

Operating lease payments are recognised as an expense on a straight-line basis over the lease term.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than its functional currency (“foreign currencies”) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions.

For the purposes of presenting the Financial Information, the assets and liabilities of the Target Group in RMB are translated into the presentation currency of the Target Group (i.e. HK$) using exchange rates prevailing at the end of each reporting period. Income and expenses items are translated at the average exchange rates for the year. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of translation reserve (attributed to non-controlling interests as appropriate).

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately and with finite useful lives are carried at costs less accumulated amortisation and any accumulated impairment losses.

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Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are recognised separately from goodwill and initially recognised their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, intangible assets with finite useful lives are carried at costs less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is provided on a straight-line basis over their estimated useful lives (see the accounting policy in respect of impairment losses on tangible and intangible assets below).

Gains or losses arising from derecognition of an intangible asset are measured at the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss in the period when the asset is derecognised.

Impairment losses on tangible and intangible assets other than goodwill (see the accounting policy in respect of goodwill above)

At end of the reporting period, the Target Group reviews the carrying amounts of its tangible and intangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or a cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or a cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.

Construction contracts

Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the end of the reporting period, measured based on the proportion that contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that the amount can be measured reliably and its receipt is considered probable.

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Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expense in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Where contract costs incurred to date plus recognised profits less recognised losses exceed progress billings, the surplus is shown as amounts due from customers for contract work. For contracts where progress billings exceed contract costs incurred to date plus recognised profits less recognised losses, the surplus is shown as amounts due to customers for contract work. Amounts received before the related work is performed are included in the consolidated statement of financial position, as a liability, as advances received. Amounts billed for work performed but not yet paid by the customers are included in the consolidated statement of financial position under trade receivables.

Inventories

Inventories, which comprise drugs, other medical and general consumable for hospital operations, are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method.

Properties under development for sale

Properties under development for sale are stated at lower of cost and net realisable value. Cost comprises both the acquisition cost of land use rights and development cost of the property. Net realisable value takes into account the price ultimately expected to be realised, less the anticipated costs to completion.

Development cost of property comprises construction costs, borrowing costs capitalised according to the Target Group’s accounting policy and directly attributable cost incurred during the development period. On completion, the properties are transferred to properties held for sale.

Properties held for sale

Properties held for sale are stated at the lower of cost and net realisable value.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit/loss before taxation as reported in the consolidated statements of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The liability of the Target Group for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of each reporting period.

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Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with interests in subsidiaries and associates, except where the Target Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of each reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Target Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is recognised in profit or loss.

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Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in the other comprehensive income or directly in equity, in which case, the amount and deferred tax are also recognised in other comprehensive income or directly in equity respectively. When current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statements of financial position when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

The financial assets of the Target Group are mainly loans and receivables. The classification depends on the nature and purpose of financial assets and is determined at the time of initial recognition.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest income is recognised on an effective interest basis for debt instruments.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including amounts due from subsidiaries debtors, pledged bank deposits, restricted bank deposits and bank balances and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of loans and receivables below).

Impairment of loans and receivables

Loans and receivables are assessed for indicators of impairment at the end of each reporting period. Loans and receivables are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

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Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• breach of contract, such as default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial reorganisation.

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Target Group’s past experience of collecting payments.

The amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate.

The carrying amount of all loans and receivables is reduced by the impairment loss directly. If, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Financial liabilities and equity instruments

Debt and equity instruments issued by a group equity are classified as either financial liabilities or as equity instruments in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Target Group after deducting all of its liabilities. Equity instruments issued by Jiatai Tongren are recorded at the proceeds received, net of direct issue costs.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

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Financial liabilities

Financial liabilities (including amounts due to subsidiaries, creditors and accrued charges, consideration payable, amount due to an associate, other advance and bank borrowings) are subsequently measured at amortised cost, using the effective interest method.

Derecognition

The Target Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when the Target Group transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

The Target Group derecognises financial liabilities when, and only when, the Target Group’s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Retirement benefit costs

Payments to state-managed retirement benefits schemes are recognised as an expense when employees have rendered service entitling them to the contributions.

5. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Target Group’s accounting policies, which are described in note 4 above, the directors of Jiatai Tongren have made various estimates based on past experience, expectations of the future and other information. Actual results may differ from these estimates. The key sources of estimation uncertainty that can significantly affect the amounts recognised in the Financial Information in the next twelve months are set out below.

Impairment of debtors

In estimating whether impairment is required, the Target Group takes into consideration the ageing status and the likelihood of collection (including past repayment history of each customer). When there is objective evidence of impairment loss, the Target Group takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise.

The carrying amounts of trade receivables (included in debtors, deposits and prepayments) are approximately HK$198,755,000 HK$278,109,000 and HK$43,036,000. The carrying amounts of other debtors (including receivable on the disposal of subsidiaries and other receivables) are approximately HK$320,705,000, HK$58,937,000 and HK$5,708,000 as at 31 December 2010, 2011 and 2012, respectively.

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Impairment of property, plant and equipment

Property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the assets exceeds its recoverable amount. An impairment loss is recognised for the amount by which the recoverable amount of property, plant and equipment being lower than its carrying amount. During the Relevant Periods, no property, plant and equipment was impaired based on the impairment assessment performed by management. It is possible that actual outcomes may be different from assumptions, having a material impact on the carrying amount of property, plant and equipment in the period when such estimate is revised. The carrying amount of property, plant and equipment are approximately HK$1,307,793,000, HK$1,450,994,000 and HK$1,470,342,000 as at 31 December 2010, 2011 and 2012, respectively.

Estimated impairment of goodwill and intangible assets

Determining whether goodwill and intangible assets acquired from business combination allocating to hospital operation cash-generating unit (“CGU”) are impaired requires an estimation of the value in use. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the CGU, a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, an impairment loss may arise. During the Relevant Periods, no goodwill and intangible assets were impaired based on the impairment assessment performed by management. The carrying amounts of goodwill are approximately HK$16,396,000, HK$17,180,000 and HK$17,382,000 and the carrying amount of intangible assets are approximately HK$70,655,000, HK$67,339,000 and HK$61,989,000 as at 31 December 2010, 2011 and 2012, respectively.

Land appreciation tax (“LAT”)

The Target Group is subject to land appreciation tax in the PRC. However, the implementation and settlement of the tax varies amongst different tax jurisdictions in various cities of the PRC and certain projects of the Target Group have not yet finalised their land appreciation tax calculations and payments with any local tax authorities in the PRC. Accordingly, significant judgment is required in determining the amount of land appreciation and its related income tax provisions. The Target Group recognised the land appreciation tax based on management’s best estimates. The final tax outcome could be different from the amounts that were initially recorded, and these differences will impact the income tax expense and the related income tax provisions in the periods in which such tax is finalised with local tax authorities.

6. FINANCIAL INSTRUMENTS

Capital risk management

The Target Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Target Group’s overall strategy remains unchanged throughout the Relevant Periods.

The capital structure of the Target Group consists of net debt, which includes bank borrowings, net of cash and cash equivalents and reserves comprising paid-up capital, other reserve, statutory surplus reserve, translation reserve and retained profits/accumulated losses.

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APPENDIX III FINANCIAL INFORMATION ON JIATAI TONGREN

The directors of Jiatai Tongren review the capital structure regularly. As part of this review, the directors consider the cost and the risks associated with each class of the capital. Based on recommendations of the directors, the Target Group will balance its overall capital structure through raising of new capital.

Categories of financial instruments

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----- Start of picture text -----

As at 31 December
2010 2011 2012
HK$’000 HK$’000 HK$’000
The Target Group
Financial assets
Loans and receivables (including
cash and cash equivalents) 853,069 877,647 583,749
Financial liabilities
Amortised cost 1,558,919 1,838,999 1,659,944
Jiatai Tongren
Financial assets
Loans and receivables (including
cash and cash equivalents) 836,627 1,017,317 1,189,700
Financial liabilities
Amortised cost 364,879 436,521 473,584
----- End of picture text -----

Financial risk management objectives and policies

The Target Group and Jiatai Tongren’s major financial instruments include amounts due from/to subsidiaries, debtors, pledged bank deposits, restricted bank deposits, bank balances and cash, creditors and accrued charges, amount due to an associate, other advance, bank borrowings, obligations under finance leases and consideration payable from acquisition of additional interest in a subsidiary. Details of these financial instruments are disclosed in respective notes. The risks associated with certain of these financial instruments and the policies on how to mitigate these risks are set out below. The directors of Jiatai Tongren manage and monitor these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Market risk

Interest rate risk

There has been no change to the Target Group and Jiatai Tongren’s exposure to interest rate risk or the manner in which it manages and measures the risk throughout the Relevant Periods.

The Target Group is exposed to fair value interest rate risk in relation to fixed rate obligations under finance leases.

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APPENDIX III

The Target Group and Jiatai Tongren’s cash flow interest rate risk is mainly concentrated on the fluctuation of benchmark borrowing rate as quoted by People’s Bank of China arising from the bank borrowings and prevailing market interest rate arising from the bank balances.

Sensitivity analysis

The management considers that the Target Group and Jiatai Tongren’s exposure to future cash flow risk on variable-rate bank balances as a result of the change of market interest rate is insignificant and thus variable-rate bank balances are not included in the sensitivity analysis.

The sensitivity analysis is prepared assuming the bank borrowings outstanding at the end of the reporting period were outstanding for the whole year. If the interest rate of bank borrowings had been 100 basis point higher/lower and all other variables were held constant, the Target Group’s post-tax loss would increase/decrease by HK$7,514,000, HK$11,499,000 and HK$10,831,000 for the year ended 31 December 2010, 2011 and 2012, respectively, after taking into account of interest capitalisation. Jiatai Tongren’s post-tax loss would increase/decrease by HK$1,205,000 for the year ended 31 December 2010 and post-tax profit would decrease/increase by HK$3,163,000 and HK$3,250,000 for the year ended 31 December 2011 and 2012, respectively.

Credit risk

The Target Group and Jiatai Tongren’s credit risk are primarily attributable to trade receivables, other receivables, pledged bank deposits, restricted bank deposits and bank balances.

The Target Group and Jiatai Tongren’s maximum exposure to credit risk which will cause a financial loss to the Target Group and Jiatai Tongren due to failure to discharge an obligation by the counterparties is the carrying amounts of the respective recognised financial assets as stated in the consolidated and Jiatai Tongren’s statements of financial position.

In order to minimise the credit risk on hospital, construction and property management business, management of the Target Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, management reviews the recoverable amount of each individual debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts.

The Target Group and Jiatai Tongren have concentration of credit risk from a customer of construction business of the Target Group and Jiatai Tongren, which amounted to HK$177,000,000 and HK$229,458,000 as at 31 December 2010 and 2011, respectively. Also, the Target Group and Jiatai Tongren have concentration of credit risks on the amounts due from related companies as at 31 December 2010, 2011 and 2012. The directors of Jiatai Tongren consider these counterparties with good credit worthiness based on their past repayment history. Other than these, there is no significant concentration of credit risk in receivables as the exposure spread over a number of counterparties and customers.

Receivable on disposal of subsidiaries of HK$247,178,000 as at 31 December 2010 is settled during the Relevant Periods.

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APPENDIX III

Jiatai Tongren had concentration of credit risk in respect of amounts due from subsidiaries. Management considered that the credit risk of the amounts due from subsidiaries is insignificant after considering the financial position of these subsidiaries.

The credit risk on liquid funds is limited because the counterparties are banks with good reputation.

Liquidity risk

The Target Group has net current liabilities of HK$163,565,000, HK$125,441,000 and HK$427,658,000 as at 31 December 2010, 2011 and 2012, respectively. The Financial Information has prepared on a going concern basis as the Company has agreed to provide adequate funds to enable the Target Group to meet in full its financial obligations as they fall due for the foreseeable future.

In the management of the liquidity risk, the Target Group and Jiatai Tongren monitor and maintain a level of cash and cash equivalents deemed adequate by the management to finance the daily operation of the Target Group and Jiatai Tongren and mitigate the effects of fluctuations in cash flows. The management of the Target Group and Jiatai Tongren monitor and review periodically the conditions of loan covenants of the existing banking facilities and tries all efforts to comply with the loan covenants.

The following table details the Target Group and Jiatai Tongren’s remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Target Group and Jiatai Tongren can be required to pay. The maturity dates for other non-derivative financial liabilities are based on the agreed repayment dates. The table includes both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from prevailing market rate at the end of the reporting period.

The Target Group

Weighted average effective interest rate % At 31 December 2010 Non-derivative financial liabilities Creditors and accrued charges – Amount due to an associate – Bank borrowings 5.18% Obligations under finance leases 3.83%	Less than 3 months or on demand HK$’000 179,841 7,602 52,679 5,918	3 months to 1 year HK$’000 594,049 – 452,441 15,832	1 -5 years HK$’000 – – 202,744 21,570	Over 5 years HK$’000 – – 175,866 –	Total undiscounted cash flows HK$’000 773,890 7,602 883,730 43,320	Carrying amount HK$’000 773,890 7,602 777,427 34,839
	246,040	1,062,322	224,314	175,866	1,708,542	1,593,758

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APPENDIX III

Weighted average effective interest rate % At 31 December 2011 Non-derivative financial liabilities Creditors and accrued charges – Other advance – Amount due to an associate – Bank borrowings 8.45% Obligations under finance leases 5.48% Weighted average effective interest rate % At 31 December 2012 Non-derivative financial liabilities Creditors and accrued charges – Amount due to an associate – Consideration payable from acquisition of additional interest in a subsidiary – Bank borrowings 8.20% Obligations under finance leases 5.98%	Less than 3 months or on demand HK$’000 202,379 9,191 7,966 274,883 8,665 503,084 Less than 3 months or on demand HK$’000 149,939 8,060 – 313,367 9,558 480,924	3 months to 1 year HK$’000 376,426 – – 562,933 22,344 961,703 3 months to 1 year HK$’000 240,678 – 43,395 749,667 28,675 1,062,415	1 -5 years HK$’000 – – – 576,786 63,670 640,456 1 -5 years HK$’000 – – 43,397 189,333 74,095 306,825	Over 5 years HK$’000 – – – – 2,777 2,777 Over 5 years HK$’000 – – – – – –	Total undiscounted cash flows HK$’000 578,805 9,191 7,966 1,414,602 97,456 2,108,020 Total undiscounted cash flows HK$’000 390,617 8,060 86,792 1,252,367 112,328 1,850,164	Carrying amount HK$’000 578,805 9,191 7,966 1,243,037 76,582
						1,915,581
						Carrying amount HK$’000 390,617 8,060 86,792 1,174,475 91,847
						1,751,791

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APPENDIX III

Jiatai Tongren

Weighted average effective interest rate % At 31 December 2010 Non-derivative financial liabilities Creditors and accrued charges – Bank borrowings 5.31% Amounts due to subsidiaries – Weighted average effective interest rate % At 31 December 2011 Non-derivative financial liabilities Creditors and accrued charges – Bank borrowings 6.56% Amounts due to subsidiaries –	Less than 3 months or on demand HK$’000 2,024 42,535 21,259 65,818 Less than 3 months or on demand HK$’000 3,817 171,071 12,255 187,143	3 months to 1 year HK$’000 221,128 80,588 – 301,716 3 months to 1 year HK$’000 104,129 149,122 – 253,251	1 -5 years HK$’000 – – – – 1 -5 years HK$’000 – – – –	Over 5 years HK$’000 – – – – Over 5 years HK$’000 – – – –	Total undiscounted cash flows HK$’000 223,152 123,123 21,259 367,534 Total undiscounted cash flows HK$’000 107,946 320,193 12,255 440,394	Carrying amount HK$’000 223,152 120,468 21,259
						364,879
						Carrying amount HK$’000 107,946 316,320 12,255
						436,521

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FINANCIAL INFORMATION ON JIATAI TONGREN

APPENDIX III

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Weighted
average Less than Total
effective 3 months or 3 months 1 -5 Over undiscounted Carrying
interest rate on demand to 1 year years 5 years cash flows amount
% HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 31 December
2012
Non-derivative
financial liabilities
Creditors and accrued
– – – –
charges 36,984 36,984 36,984
Consideration payable
from acquisition of
additional interest
– – –
in a subsidiary 43,395 43,397 86,792 86,792
Bank borrowings 6.56% 210,039 121,561 – – 331,600 324,985
Amounts due to
subsidiaries – 24,823 – – – 24,823 24,823
–
234,862 201,940 43,397 480,199 473,584
----- End of picture text -----

Fair value

The fair value of financial assets and financial liabilities of the Target Group and Jiatai Tongren are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

The directors of Jiatai Tongren consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the Target Group and Jiatai Tongren’s statements of financial position approximate their fair values.

7. REVENUE

An analysis of the Target Group’s revenue for the Relevant Periods from continuing operations is as follows: Sales of properties Hospital fees and charges Total revenue	Year 2010 HK$’000 130,433 117,949 248,382	ended 31 December 2011 2012 HK$’000 HK$’000 384,171 39,222 370,201 497,143 754,372 536,365	ended 31 December 2011 2012 HK$’000 HK$’000 384,171 39,222 370,201 497,143 754,372 536,365
			536,365

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APPENDIX III

8. SEGMENT INFORMATION

Information reported to the directors of Jiatai Tongren, being the chief operating decision maker, for the purposes of resource allocation and assessment of segment performance focuses on types of goods delivered or services rendered.

Specifically, the Target Group’s reportable and operating segments under HKFRS 8 are as follows:

Property development	Sales of properties
Hospital	Operation of hospitals
Construction	Provision of urban infra-structure development services
Property management	Provision of property management services

Construction and property management segments are discontinued during year ended 31 December 2012. Management of Jiatai Tongren decided to cease the operation of urban infra-structure development in order to focus on the healthcare business. The property management operation was disposed in 2012, details of which are set out in note 35. The segment information reported below does not include any amounts for the discontinued operations, which are described in details in note 14.

During the year ended 31 December 2010, the Target Group engaged in the new operation of hospitals through the acquisition of Yang Pu Zhao He (note 36) which is identified as new operating and reportable segment.

Segment revenues and results

The following is an analysis of the Target Group’s revenue and results by operating and reportable segment.

For the year ended 31 December 2010

Continuing operations

Revenue Segment profit (loss) Other income Central corporate expenses Finance costs Loss before taxation	Property development HK$’000 130,433 24,344	Hospital HK$’000 117,949 (18,265)	Consolidated HK$’000 248,382 6,079 2,515 (27,509) (8,438) (27,353)

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APPENDIX III

For the year ended 31 December 2011

Continuing operations

Revenue Segment loss Other income Central corporate expenses Finance costs Loss before taxation For year ended 31 December 2012	Property development HK$’000 384,171 (4,835)	Hospital HK$’000 370,201 (52,138)	Consolidated HK$’000 754,372 (56,973) 10,275 (31,625) (23,620) (101,943)

Continuing operations

Revenue Segment loss Other income Central corporate expenses Finance costs Loss before taxation	Property development HK$’000 39,222 (16,073)	Hospital HK$’000 497,143 (77,036)	Consolidated HK$’000 536,365 (93,109) 12,343 (51,521) (22,548) (154,835)

All of the segment revenue reported above is from external customers.

The accounting policies of the operating and reportable segments are the same as the Target Group’s accounting policies described in note 4. Segment profit (loss) represents the profit earned/losses incurred by each segment without allocation of certain other income, central corporate expenses and certain finance costs. This is the measure reported to the directors of Jiatai Tongren for the purpose of resource allocation and performance assessment.

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APPENDIX III

Segment assets and liabilities

The following is an analysis of the Target Group’s assets and liabilities by operating and reportable segment:

At 31 December 2010

Property development Hospital HK$’000 HK$’000 Segment assets 638,201 1,497,253 Assets relating to discontinued operations Interests in associates Property, plant and equipment Other receivables Amounts due from related companies Pledged bank deposits Bank balances and cash Consolidated assets Segment liabilities 476,954 945,502 Liabilities relating to discontinued operations Creditors and accrued charges Bank borrowings Amount due to an associate Deferred tax liabilities Consolidated liabilities	Consolidated HK$’000 2,135,454 221,337 15,205 3,095 295,115 22,790 224,902 80,421
	2,998,319
	1,422,456 226,873 34,491 260,819 7,602 76,664
	2,028,905

At 31 December 2011

Property development Hospital HK$’000 HK$’000 Segment assets 524,352 1,653,147 Assets relating to discontinued operations Interests in associates Property, plant and equipment Other receivables Amounts due from related companies Pledged bank deposits Bank balances and cash Consolidated assets	Consolidated HK$’000 2,177,499 255,191 15,931 2,484 50,370 18,045 245,643 254,322
	3,019,485

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APPENDIX III

Property development Hospital HK$’000 HK$’000 Segment liabilities 423,563 1,006,238 Liabilities relating to discontinued operations Amount due to an associate Creditors and accrued charges Bank borrowings Deferred tax liabilities Consolidated liabilities	Consolidated HK$’000 1,429,801 121,672 7,966 52,190 381,884 76,265
	2,069,778

At 31 December 2012

Property development Hospital HK$’000 HK$’000 Segment assets 1,002,669 1,655,040 Interests in associates Property, plant and equipment Other receivables Amounts due from related companies Pledged bank deposits Bank balances and cash Consolidated assets Segment liabilities 757,897 801,183 Amount due to an associate Creditors and accrued charges Bank borrowings Deferred tax liabilities Consolidated liabilities	Consolidated HK$’000 2,657,709 16,119 1,538 2,759 15,283 88,592 394,752
	3,176,752
	1,559,080 8,060 159,813 448,977 75,520
	2,251,450

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APPENDIX III FINANCIAL INFORMATION ON JIATAI TONGREN

For the purposes of monitoring segment performances and allocating resources between segments:

• all assets are allocated to operating and reportable segments other than certain property, plant and equipment, interests in associates, certain other receivables and prepayments, amounts due from related companies pledged bank deposits and bank balances and cash.

• all liabilities are allocated to operating and reportable segments other than certain other payables and accruals, amount due to an associate, consideration payable as acquisition of additional interest in a subsidiary certain bank borrowings and deferred taxation.

Other segment information

For the year ended 31 December 2010

Continuing operations

Amounts charged (credited) included in the measure of segment results or segment assets Interest income Finance costs Depreciation of property, plant and equipment Additions to property, plant and equipment Release of prepaid lease payments Amortisation of intangible assets	Property development HK$’000 – 6,714 455 2,247 784 –	Hospital HK$’000 – 7,392 19,460 1,323,330 627 3,136	Unallocated HK$’000 (1,768) 8,438 568 487 – –	Total HK$’000 (1,768) 22,544 20,483 1,326,064 1,411 3,136

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APPENDIX III

For the year ended 31 December 2011

Continuing operations

Amounts charged (credited) included in the measure of segment results or segment assets Interest income Finance costs Depreciation of property, plant and equipment Additions to property, plant and equipment Gain on disposal of property, plant and equipment Impairment loss recognised on debtors Release of prepaid lease payments Amortisation of intangible assets	Property development HK$’000 – 14,739 774 4,595 (350) – 1,646 –	Hospital HK$’000 – 30,779 56,279 139,468 (16) 1,420 1,317 6,580	Unallocated HK$’000 (7,409) 23,620 724 59 – – – –	Total HK$’000 (7,409) 69,138 57,777 144,122 (366) 1,420 2,963 6,580

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APPENDIX III

For year ended 31 December 2012

Continuing operations

Amounts charged (credited) included in the measure of segment results or segment assets Interest income Finance costs Depreciation of property, plant and equipment Additions to property, plant and equipment Loss on disposal of property, plant and equipment Impairment loss recognised on debtors Release of prepaid lease payments Amortisation of intangible assets	Property development HK$’000 – 17,114 1,257 2,197 – 1,386 1,722 –	Hospital HK$’000 – 55,430 72,659 73,748 566 3,849 1,322 6,132	Unallocated HK$’000 (8,072) 22,548 872 2,722 – – – –	Total HK$’000 (8,072) 95,092 74,788 78,667 566 5,235 3,044 6,132

The Target Group’s continuing operations are located in the PRC and all the Target Group’s revenue are generated in the PRC. The non-current assets of the Target Group are also located in the PRC.

No single customer contributed over 10% of the total revenue from continuing operations during the Relevant Periods.

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APPENDIX III

9. OTHER INCOME

Continuing operations Bank interest income Government grants_(note)_ Donation income Others	Year 2010 HK$’000 1,768 12,623 762 747 15,900	ended 31 December 2011 2012 HK$’000 HK$’000 7,409 8,072 1,118 4,513 2,489 1,434 1,748 1,902 12,764 15,921	ended 31 December 2011 2012 HK$’000 HK$’000 7,409 8,072 1,118 4,513 2,489 1,434 1,748 1,902 12,764 15,921
			15,921

Note: The amount represented unconditional government grants granted to encourage the Target Group’s hospital operation in Nanjing.

10. OTHER GAINS AND LOSSES

Continuing operations Gain (loss) on disposal of property, plant and equipment Impairment loss recognised on debtors FINANCE COSTS Continuing operations Interest on: – bank borrowings wholly repayable within five years – bank borrowings wholly repayable after five years – finance leases Loan arrangement fee Less: Amounts capitalised	Year 2010 HK$’000 – – – Year 2010 HK$’000 15,187 10,591 1,031 – (4,265) 22,544	ended 31 December 2011 2012 HK$’000 HK$’000 366 (566) (1,420) (5,235) (1,054) (5,801) ended 31 December 2011 2012 HK$’000 HK$’000 76,691 90,666 – – 3,283 6,780 – 9,861 (10,836) (2,354) 69,138 104,953	ended 31 December 2011 2012 HK$’000 HK$’000 366 (566) (1,420) (5,235) (1,054) (5,801) ended 31 December 2011 2012 HK$’000 HK$’000 76,691 90,666 – – 3,283 6,780 – 9,861 (10,836) (2,354) 69,138 104,953
			104,953

11. FINANCE COSTS

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APPENDIX III FINANCIAL INFORMATION ON JIATAI TONGREN

During the Relevant Periods, interest expenses arising on specific loans were capitalised in properties under development for sale and buildings included in property, plant and equipment. In addition, borrowing costs capitalised arose on the general borrowing pool are calculated by applying a capitalisation rate of 3.34%, 7.49% and 7.78% per annum to expenditure on qualifying assets during the years ended 31 December 2010, 2011 and 2012.

12. TAX (CHARGE) CREDIT

Continuing operations Enterprise Income Tax (“EIT”) in the PRC LAT in the PRC Deferred tax credit_(note 33)_	Year 2010 HK$’000 (769) (5,129) 2,886 (3,012)	ended 31 December 2011 2012 HK$’000 HK$’000 (644) – (834) – 3,994 1,486 2,516 1,486	ended 31 December 2011 2012 HK$’000 HK$’000 (644) – (834) – 3,994 1,486 2,516 1,486
			1,486

Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and the Implementation Regulation of the EIT Law, the EIT tax rate of the PRC subsidiaries was 25% during the Relevant Periods.

Pursuant to relevant laws and regulations in the PRC, Jiatai Tongren is exempted from PRC EIT for the two years starting from their first profit-making year (i.e. 31 December 2008), followed by a 50% tax relief for the next three years.

Under the Provisional Regulations on LAT implemented upon the issuance of the Provisional Regulations of the PRC on 27 January 1995, all gains arising from transfer of real estate property in the PRC effective from 1 January 1994 are subject to LAT at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds of sales of properties less deductible expenditures including borrowings costs and all property development expenditures.

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APPENDIX III

Tax (charge) credit for the Relevant Periods can be reconciled to the loss before taxation from continuing operations per the consolidated statement of comprehensive income as follows:

Loss before taxation Taxation at the PRC EIT rate of 25% Tax effect of expenses not deductible for tax purpose Tax effect of tax losses recognised Tax effect of utilisation of tax losses/ deductible temporary differences previously not recognised LAT Income tax effect of LAT Tax (charge) credit for the year	Year 2010 HK$’000 (27,353) 6,838 (5,020) (6,104) 5,121 (5,129) 1,282 (3,012)	ended 31 December 2011 2012 HK$’000 HK$’000 (101,943) (154,834) 25,486 38,709 (5,572) (1,681) (20,949) (36,770) 4,176 1,228 (834) – 209 – 2,516 1,486

13. LOSS FOR THE YEAR FROM CONTINUING OPERATIONS

Loss for the year has been arrived at after charging: Directors’ remuneration Staff costs Salaries and other benefits Retirement benefits scheme contribution Auditor’s remuneration Depreciation for property, plant and equipment Release of prepaid lease payments Amortisation of intangible assets (included in cost of sales) Operating lease rentals in respect of land and buildings (included in cost of sales) Cost of inventories recognised as expenses (included in cost of sales) Cost of properties for sale (included in cost of sales)	Year 2010 HK$’000 – 48,266 4,579 52,845 207 20,483 1,411 3,136 982 32,050 109,853	ended 31 December 2011 2012 HK$’000 HK$’000 – – 122,447 165,203 11,416 15,402 133,863 180,605 217 298 57,777 74,788 2,963 3,044 6,580 6,132 1,979 1,628 109,182 163,365 354,489 32,265	ended 31 December 2011 2012 HK$’000 HK$’000 – – 122,447 165,203 11,416 15,402 133,863 180,605 217 298 57,777 74,788 2,963 3,044 6,580 6,132 1,979 1,628 109,182 163,365 354,489 32,265
			165,203 15,402
			180,605 298 74,788 3,044 6,132 1,628 163,365 32,265

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APPENDIX III

14. DISCONTINUED OPERATIONS

During the year ended 31 December 2011, management of Jiatai Tongren decided to cease the construction operation. Thus, construction segment is presented as discontinued operation during the Relevant Periods.

In January 2012, the Target Group entered into a sale and purchase agreement with an independent third party to dispose of the entire equity interest of Beijing Tongren Property, which carried out all of the Target Group’s property management business under the property management segment. The disposal was completed on 31 March 2012, on which date control of Beijing Tongren Property was passed to the acquirer (see note 35(b)).

The profit (loss) during the Relevant Periods from the discontinued operations is analysed as follows:

Profit (loss) of discontinued operations Loss on disposal of subsidiaries Total Profit (loss) for the year from discontinued operation attributable to: Owners of Jiatai Tongren Non-controlling interests	Year 2010 HK$’000 10,952 – 10,952 12,316 (1,364) 10,952	ended 31 December 2011 2012 HK$’000 HK$’000 34,503 (3,314) – (3,490) 34,503 (6,804) 37,679 (4,027) (3,176) (2,777) 34,503 (6,804)

The result of the construction and property management segments for the Relevant Periods, which have been included in the consolidated statement of comprehensive income, were as follows:

Revenue Cost of sales Gross profit (loss) Other income Administrative expenses Profit (loss) for the year	Year 2010 HK$’000 155,225 (145,778) 9,447 2,712 (1,207) 10,952	ended 31 December 2011 2012 HK$’000 HK$’000 97,235 17,135 (88,624) (19,226) 8,611 (2,091) 28,440 4 (2,548) (1,227) 34,503 (3,314)

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APPENDIX III

Profit (loss) for the year attributable to: Owners of Jiatai Tongren Non-controlling interests Bank interest income Staff costs Salaries and other benefits Retirement benefits scheme contribution Depreciation of property, plant and equipment Operating lease rental in respect of land and building Interest income from overdue debtors_(Note a) Compensation income from contractor’s breach of contract(Note b)_	Year 2010 HK$’000 12,316 (1,364) 10,952 Year 2010 HK$’000 (7) 14,581 2,219 16,800 77 190 – (2,575)	ended 31 December 2011 2012 HK$’000 HK$’000 37,679 (1,961) (3,176) (1,353) 34,503 (3,314) ended 31 December 2011 2012 HK$’000 HK$’000 (5) – 37,817 11,449 5,351 1,682 43,168 13,131 182 47 137 119 (28,429) – – –	ended 31 December 2011 2012 HK$’000 HK$’000 37,679 (1,961) (3,176) (1,353) 34,503 (3,314) ended 31 December 2011 2012 HK$’000 HK$’000 (5) – 37,817 11,449 5,351 1,682 43,168 13,131 182 47 137 119 (28,429) – – –
			11,449 1,682
			13,131 47 119 – –

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APPENDIX III

Notes:

• (a) During the Relevant Periods, the trade receivables due from the customer of the construction segment were past due for a long time. During the year ended 31 December 2011, the customer agreed to pay interest of approximately HK$28,429,000 on the past due balance to the Target Group.

• (b) During the year ended 31 December 2009, a sub-contractor of the construction segment breached the terms of the construction agreement with the Target Group. Based on the settlement agreement, among other terms the sub-contractor compensated the Target Group of HK$2,575,000 during the year ended 31 December 2010. The sub-contractor is a related company of the Target Group as it is controlled and beneficially owned by a director of Jiatai Tongren.

Cash inflow/outflow from discontinued operations disclosed as follows:

	Year	ended 31 December
	2010	2011	2012
	HK$’000	HK$’000	HK$’000
Net cash (outflow) inflow for operating
activities	(318,928)	(1,589)	218,181
Net cash inflow (outflow) for investing
activities	4,119	(122)	2,282
Net cash inflow (outflow) for financing
activities	–	8,772	(1,754)

The carrying amount of the assets and liabilities of Beijing Tongren Property at the date of disposal are disclosed in note 35(b).

15. DIVIDENDS AND LOSS PER SHARE

No dividend was paid or declared by Jiatai Tongren during the Relevant Periods.

No loss per share information is presented as its inclusion, for purpose of this report, is not meaningful.

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APPENDIX III

16. PROPERTY, PLANT AND EQUIPMENT

The Target Group

Construction in progress HK$’000 COST OR VALUATION At 1 January 2010 – Exchange differences – Additions 183,427 Acquisition of subsidiaries 545,243 Transfer (557,917) Disposals – Disposal of subsidiaries – Deficit on revaluation – At 31 December 2010 170,753 Exchange differences 8,162 Additions 86,279 Transfer (123,045) Disposals – Deficit on revaluation – At 31 December 2011 142,149 Exchange differences 1,674 Additions 19,728 Transfer (18,376) Disposals – Disposal of subsidiaries – Deficit on revaluation – At 31 December 2012 145,175 Consisting: At cost 170,753 At valuation – At 31 December 2010 170,753 At cost 142,149 At valuation – At 31 December 2011 142,149 At cost 145,175 At valuation – At 31 December 2012 145,175	Buildings HK$’000 2,285 101 741 392,635 557,917 – (2,352) (10,820) 940,507 45,466 7,652 123,045 – (32,915) 1,083,755 13,281 10,261 18,376 – – (43,402) 1,082,271 – 940,507 940,507 – 1,083,755 1,083,755 – 1,082,271 1,082,271	Computer and medical equipment HK$’000 889 26 63,567 128,115 – (337) (93) – 192,167 9,185 43,514 – (5,836) – 239,030 2,816 41,569 – (1,066) (508) – 281,841 192,167 – 192,167 239,030 – 239,030 281,841 – 281,841	Furniture and fixtures HK$’000 – – 2,456 11 – – – – 2,467 117 1,442 – (1,450) – 2,576 30 187 – – – – 2,793 2,467 – 2,467 2,576 – 2,576 2,793 – 2,793	Office equipment HK$’000 – – 1,068 6,591 – (182) – – 7,477 358 3,847 – (273) – 11,409 134 4,709 – (177) – – 16,075 7,477 – 7,477 11,409 – 11,409 16,075 – 16,075	Motor vehicles HK$’000 2,715 79 316 2,612 – (16) (47) – 5,659 270 1,806 – (1,219) – 6,516 77 2,213 – (355) (284) – 8,167 5,659 – 5,659 6,516 – 6,516 8,167 – 8,167	Total HK$’000 5,889 206 251,575 1,075,207 – (535) (2,492) (10,820)
						1,319,030 63,558 144,540 – (8,778) (32,915)
						1,485,435 18,012 78,667 – (1,598) (792) (43,402)
						1,536,322
						378,523 940,507
						1,319,030
						401,680 1,083,755
						1,485,435
						454,051 1,082,271
						1,536,322

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APPENDIX III

Construction in progress HK$’000 DEPRECIATION At 1 January 2010 – Exchange differences – Charge for the year – Eliminated on disposals – Eliminated on revaluation – Eliminated on disposal of subsidiaries – At 31 December 2010 – Exchange differences – Charge for the year – Eliminated on disposals – Eliminated on revaluation – At 31 December 2011 – Exchange differences – Charge for the year – Eliminated on disposals – Eliminated on disposal of subsidiaries – Eliminated on revaluation – At 31 December 2012 – CARRYING VALUES At 31 December 2010 170,753 At 31 December 2011 142,149 At 31 December 2012 145,175	Buildings HK$’000 – 238 10,582 – (10,820) – – 1,061 31,854 – (32,915) – 596 42,806 – – (43,402) – 940,507 1,083,755 1,082,271	Computer and medical equipment HK$’000 495 172 8,223 (101) – (43) 8,746 806 22,581 (2,823) – 29,310 397 27,793 (342) (171) – 56,987 183,421 209,720 224,854	Furniture and fixtures HK$’000 – 2 114 – – – 116 13 435 (92) – 472 6 425 – – – 903 2,351 2,104 1,890	Office equipment HK$’000 – 18 910 (117) – – 811 69 1,788 (69) – 2,599 35 2,590 (96) – – 5,128 6,666 8,810 10,947	Motor vehicles HK$’000 807 38 731 (2) – (10) 1,564 97 1,301 (902) – 2,060 26 1,221 (338) (7) – 2,962 4,095 4,456 5,205	Total HK$’000 1,302 468 20,560 (220) (10,820) (53)
						11,237 2,046 57,959 (3,886) (32,915)
						34,441 1,060 74,835 (776) (178) (43,402)
						65,980
						1,307,793
						1,450,994
						1,470,342

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Jiatai Tongren

COST At 1 January 2010 Exchange differences Additions Disposals At 31 December 2010 Exchange differences Disposals At 31 December 2011 Exchange differences Additions At 31 December 2012 DEPRECIATION At 1 January 2010 Exchange differences Charge for the year Elimination on disposals At 31 December 2010 Exchange differences Charge for the year Elimination on disposals At 31 December 2011 Exchange differences Charge for the year At 31 December 2012 CARRYING VALUES At 31 December 2010 At 31 December 2011 At 31 December 2012	Computer equipment HK$’000 799 23 30 (156) 696 33 (529) 200 2 6 208 456 16 135 (100) 507 26 98 (502) 129 1 20 150 189 71 58	Motor vehicles HK$’000 2,668 78 – – 2,746 132 (543) 2,335 28 – 2,363 798 28 256 – 1,082 56 261 (263) 1,136 24 212 1,372 1,664 1,199 991	Total HK$’000 3,467 101 30 (156) 3,442 165 (1,072) 2,535 30 6 2,571 1,254 44 391 (100) 1,589 82 359 (765) 1,265 25 232 1,522 1,853 1,270 1,049

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Property, plant and equipment other than construction in progress are depreciated on its cost or fair value less their residual values on a straight-line basis at the following rates per annum:

Buildings	4-5%
Computer and medical equipment	10%
Furniture and fixtures	20%
Office equipment	20%
Motor vehicles	20%

The buildings of the Target Group are situated in the PRC and located on the leasehold land under medium-term leases. The construction in progress represented hospital buildings under construction which are situated in the PRC.

If the buildings had not been revalued, they would have been included in the Financial Information at historical cost less accumulated depreciation of HK$940,507,000, HK$1,083,755,000 and HK$1,082,271,000 as at 31 December 2010, 2011 and 2012, respectively.

The Target Group have not obtained the building certificates for the buildings with carrying value of approximately HK$940,507,000 HK$1,083,755,000 and HK$1,082,271,000 as at 31 December 2010, 2011 and 2012, respectively.

The Target Group pledged buildings with carrying value of approximately HK$940,507,000, HK$1,083,755,000 and HK$584,314,000 and construction in progress with carrying value of approximately HK$169,940,000, HK$138,434,000 and nil to secure general banking facilities granted to the Target Group as at 31 December 2010, 2011 and 2012, respectively.

17. PREPAID LEASE PAYMENTS

The Target Group’s prepaid lease payments comprise: Medium-term leasehold land in the PRC Analysed for reporting purposes as: Non-current assets Current assets	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 126,571 129,606 128,084 123,695 126,592 125,034 2,876 3,014 3,050 126,571 129,606 128,084	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 126,571 129,606 128,084 123,695 126,592 125,034 2,876 3,014 3,050 126,571 129,606 128,084
		125,034 3,050
		128,084

The prepaid lease payments of the Target Group are held under medium-term lease in the PRC and amortised over the terms of the lease from 40 to 45 years.

The Target Group pledged land use rights with carrying value of approximately HK$95,505,000, HK$97,771,000 and HK$94,776,000 to secure general banking facilities granted to the Target Group as at 31 December 2010, 2011 and 2012, respectively.

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18. INTANGIBLE ASSETS

COST At 1 January 2010 Acquisition of subsidiaries At 31 December 2010 Exchange differences At 31 December 2011 Exchange differences At 31 December 2012 AMORTISATION At 1 January 2010 Amortisation Exchange differences At 31 December 2010 Amortisation Exchange differences At 31 December 2011 Amortisation Exchange differences At 31 December 2012 CARRYING VALUES At 31 December 2010 At 31 December 2011 At 31 December 2012	Hospital operating licenses HK$’000 – 56,040 56,040 2,678 58,718 692 59,410 – 2,749 54 2,803 5,773 232 8,808 5,307 115 14,230 53,237 49,910 45,180	Trademark HK$’000 – 17,811 17,811 852 18,663 220 18,883 – 387 6 393 807 34 1,234 825 15 2,074 17,418 17,429 16,809	Total HK$’000 – 73,851
			73,851 3,530
			77,381 912
			78,293
			– 3,136 60
			3,196 6,580 266
			10,042 6,132 130
			16,304
			70,655
			67,339
			61,989

The trademark and hospital operating licenses have finite useful lives. Hospital operating licenses are amortised on a straight-line basis over 10 years and trademark is amortised on a straight-line basis over 30 years.

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19. GOODWILL

CARRYING VALUES At 1 January 2010 Acquisition of subsidiaries_(note 36)_ At 31 December 2010 Exchange difference At 31 December 2011 Exchange difference At 31 December 2012	HK$’000 – 16,396
	16,396 784
	17,180 202
	17,382

For the purposes of impairment testing, goodwill has been allocated to the CGU of hospital operations. The recoverable amount of the CGUs has been determined based on a value in use calculations. That calculation uses cash flow projections based on financial budgets approved by management covering a 5-years period and discount rate of 15.9%, 16.1% and 16.29% as at year ended 31 December 2010, 2011 and 2012. The cash flows beyond the 5-years period are extrapolated having a steady 3% growth rate for all value in use calculation. The growth rate is based on the relevant industry growth forecasts and average long-term growth rate for the relevant industry. A key assumption for the value in use calculation is the budgeted growth rate, which is determined based on past performance and management’s expectations for the market development. No impairment on goodwill is noted. Management considered there is no impairment on goodwill as at 31 December 2010, 2011 and 2012.

20. INTERESTS IN ASSOCIATES

		As at	31 December
	2010		2011	2012
	HK$’000		HK$’000	HK$’000
Cost of investment in unlisted associates	15,205		15,931	16,119

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The Target Group had interest in the following associates:

			Proportion of registered	Proportion of registered	Proportion of registered
			capital held by the		Target	Proportion of voting		power
	Business	Country of		Group			held
Name of entity	structure	establishment	As at 31 December			As at 31 December			Principal activity
			2010	2011	2012	2010	2011	2012
焦作同仁醫療產業投資有	Limited liability	PRC	21.67%	21.67%	21.67%	21.67%	21.67%	21.67%	Hospital operation
限公司	company								started in year 2013
大連同仁置業有限公司	Limited liability	PRC	20%	20%	–	20%	20%	–	Inactive
Dalian Tongren Property	company
Company Limited
(“Dalian Tongren”)

During the Relevant Periods, the Target Group did not contribute its investment cost of RMB10,000,000 into Dalian Tongren which had been inactive since incorporation. Dalian Tongren was dissolved in July 2012. In the opinion of the directors of Jiatia Tongren, share of the associates’ results are considered insignificant during the Relevant Periods.

The summarised financial information in respect of the Target Group’s associate during the Relevant Periods is set out below:

Total assets Total liabilities Net assets Target Group’s share of net assets of associates Revenue Result for the year Target Group’s share of result and other comprehensive income of associates for the year	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 74,490 125,350 126,827 (4,314) (51,821) (52,443) 70,176 73,529 74,384 15,205 15,931 16,119 – – – – – – – – –

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21. INVENTORIES

Medical consumables Medicines	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 4,627 4,574 6,570 8,080 11,728 9,926 12,707 16,302 16,496	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 4,627 4,574 6,570 8,080 11,728 9,926 12,707 16,302 16,496
		16,496

22. PROPERTIES UNDER DEVELOPMENT FOR SALE

Cost At the beginning of the year Additions Additions through acquisition of subsidiaries Disposal of subsidiaries Exchange adjustments Transfer to properties held for sale At the end of the year Properties under development for sales of which: – expected to be realised within 12 months – expected to be realised over 12 months	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 117,371 454,030 318,103 77,145 157,909 482,508 493,096 – – (124,690) – – 1,041 21,700 3,747 (109,933) (315,536) – 454,030 318,103 804,358 220,811 – 400,250 233,219 318,103 404,108 454,030 318,103 804,358	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 117,371 454,030 318,103 77,145 157,909 482,508 493,096 – – (124,690) – – 1,041 21,700 3,747 (109,933) (315,536) – 454,030 318,103 804,358 220,811 – 400,250 233,219 318,103 404,108 454,030 318,103 804,358
		804,358
		400,250 404,108
		804,358

The properties under development for sale of the Target Group are situated in the PRC and located on the leasehold lands under medium-term leases.

The properties under development for sale with carrying amount of approximately HK$70,488,000, HK$81,187,000 and HK$82,143,000 were pledged to secure certain banking facilities granted to the Target Group as at 31 December 2010, 2011 and 2012, respectively.

23. PROPERTIES HELD FOR SALE

The Target Group’s properties held for sale are situated in the PRC. All the properties held for sale are stated at cost. In the opinion of the directors of Jiatai Tongren, properties held for sales will be realised within twelve months.

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APPENDIX III

24. AMOUNTS DUE FROM CUSTOMERS FOR CONTRACT WORKS

The Target Group and Jiatai Tongren

Contracts in progress at the end of the reporting period:

Contract costs incurred plus recognised profits less recognised losses Less: Progress billings Total	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 293,826 – – (267,354) – – 26,472 – –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 293,826 – – (267,354) – – 26,472 – –
		–

25. DEBTORS, DEPOSITS AND PREPAYMENTS

The Target Group Trade receivables Deposits for acquisition of land use rights for property development_(note)_ Prepayments Receivable on the disposals of subsidiaries Amounts due from related companies Prepaid business taxes and other PRC taxes Other receivables	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 198,755 278,109 43,036 – 67,718 – 9,994 6,299 16,901 247,178 – – 22,790 18,045 15,283 13,837 1,680 27,650 73,527 58,937 5,708 566,081 430,788 108,578	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 198,755 278,109 43,036 – 67,718 – 9,994 6,299 16,901 247,178 – – 22,790 18,045 15,283 13,837 1,680 27,650 73,527 58,937 5,708 566,081 430,788 108,578
		108,578

Note: As at 31 December 2011, there is a commitment to acquire of land use rights for property development with remaining payment of HK$264,327,000. The amount is paid during the year ended 31 December 2012. There is no further commitment on acquisition of land use rights as at 31 December 2012.

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Jiatai Tongren Trade receivables Receivable on the disposals of subsidiaries Other receivables	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 177,000 229,459 – 247,178 – – 3,011 6,221 26 427,189 235,679 26	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 177,000 229,459 – 247,178 – – 3,011 6,221 26 427,189 235,679 26
		26

Trade receivables

The customers of the Target Group’s hospital operations are either settled by cash, credit card or medical insurance. For credit card payment, the banks usually pay the Target Group 7 days after the transaction date. The medical insurance companies usually pay the Target Group 90 days after the transaction date. The normal credit period granted by the Target Group to its customers of the property management business is 30 days and the customer of construction business is 180 days.

Consideration in respect of properties sold under pre-sale contracts will be fully received prior to the delivery of the properties to the purchasers.

The following is an aged analysis of trade receivables presented based on the invoice date at the end of the reporting period:

The Target Group

0 – 30 days 31 – 60 days 61 – 90 days 91 – 365 days Over 1 year but not exceeding 2 years	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 47,312 65,916 26,097 4,669 12,884 11,686 1,671 5,264 5,253 145,103 108,788 – – 85,257 – 198,755 278,109 43,036	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 47,312 65,916 26,097 4,669 12,884 11,686 1,671 5,264 5,253 145,103 108,788 – – 85,257 – 198,755 278,109 43,036
		43,036

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APPENDIX III

Jiatai Tongren

0 – 30 days 91 – 365 days Over 1 year but not exceeding 2 years	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 38,388 51,894 – 138,612 92,307 – – 85,257 – 177,000 229,458 –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 38,388 51,894 – 138,612 92,307 – – 85,257 – 177,000 229,458 –
		–

The Target Group and Jiatai Tongren have policy for recognition of impairment which is based on the evaluation of collectability and age analysis of accounts and on management’s judgment including creditworthiness and the past collection history of each customer.

Included in the Target Group’s trade receivable with aggregate carrying amount of HK$145,103,000 and HK$194,045,000 and Jiatai Tongren’s trade receivable with aggregate carrying amount of HK$138,612,000 and HK$194,045,000 which are past due as at 31 December 2010 and 2011 respectively for which the Target Group and Jiatai Tongren have not provided for impairment loss because Jiatai Tongren agreed a repayment timetable with the counterparty and the counterparty is able to settle its outstanding receivable based on the timetable. The Target Group and Jiatai Tongren do not hold any collateral over these balances. The average age of these receivables is 185 days and 535 days as at 31 December 2010 and 2011 respectively.

Ageing of trade receivables which are past due but not impaired

The Target Group 91 – 365 days Over 1 year but not exceeding 2 years Total Jiatai Tongren 91 – 365 days Over 1 year but not exceeding 2 years Total	As at 31 December 2010 2011 HK$’000 HK$’000 145,103 108,788 – 85,257 145,103 194,045 138,612 108,788 – 85,257 138,612 194,045	As at 31 December 2010 2011 HK$’000 HK$’000 145,103 108,788 – 85,257 145,103 194,045 138,612 108,788 – 85,257 138,612 194,045
		194,045
		108,788 85,257
		194,045

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Receivable on disposals of subsidiaries

Amounts represent considerations receivable from independent third parties upon the disposal of land use rights in Lianyungang through disposal of subsidiaries before the Relevant Periods. The amount was fully settled in August 2011.

Amounts due from related companies

Amounts due from related parties of HK$22,790,000, HK$18,045,000 and HK$15,283,000 as at 31 December 2010, 2011 and 2012, respectively, were receivables from a company in which a director of Jiatai Tongren has beneficial interest and control. The amount were unsecured, noninterest bearing and repayable on demand. During the year ended 31 December 2010, 2011 and 2012, the maximum amounts outstanding from this related company were HK$22,790,000, HK$22,790,000 and HK$18,045,000, respectively and nil balance as at 1 January 2010.

26. PLEDGED BANK DEPOSITS/RESTRICTED BANK DEPOSITS/BANK BALANCES AND CASH

Pledged bank deposits

The Target Group’s bank deposits of HK$224,902,000, HK$245,643,000 and HK$88,592,000 were pledge to secure the short-term general banking facilities granted to Target Group and Jiatai Tongren’s bank deposits of HK$91,813,000, HK$165,824,000 and nil were pledged to secure the short-term general banking facilities granted to Jiatai Tongren as at 31 December 2010, 2011 and 2012, respectively. The deposits carried interest at market rates of average of 0.50% per annum, 0.50% per annum and 0.50% per annum as at 31 December 2010, 2011 and 2012 respectively.

Restricted bank deposits

In accordance with the applicable government regulations, HK$5,495,000, HK$22,343,000 and HK$36,378,000 as at 31 December 2010, 2011 and 2012, respectively, were placed in bank deposits which could only be used in the designated property development projects. The deposits carried interest at average market rates of 0.50% per annum, 0.50% per annum and 0.50% per annum as at 31 December 2010, 2011 and 2012 respectively.

Bank balances and cash

Bank balances and cash comprise cash and bank balances held by the Target Group and Jiatai Tongren with original maturity of three months or less and carried interest at average market rates of 0.50% per annum, 0.50% per annum and 0.50% per annum as at 31 December 2010, 2011 and 2012 respectively.

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APPENDIX III

27. CREDITORS AND ACCRUED CHARGES

The Target Group Trade payables Accrued construction costs on properties under development for sale Construction costs payable for hospital buildings classified as property, plant and equipment Accrued compensation for late delivery of properties held for sales Other payables and accruals Jiatai Tongren Trade payables Other payables and accruals	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 460,915 300,914 252,849 35,880 51,025 14,044 169,089 118,433 29,870 32,520 15,817 10,905 75,486 92,616 82,949 773,890 578,805 390,617 221,128 104,129 35,826 2,024 3,817 1,158 223,152 107,946 36,984	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 460,915 300,914 252,849 35,880 51,025 14,044 169,089 118,433 29,870 32,520 15,817 10,905 75,486 92,616 82,949 773,890 578,805 390,617 221,128 104,129 35,826 2,024 3,817 1,158 223,152 107,946 36,984
		390,617
		35,826 1,158
		36,984

Trade payables

Trade payables of hospital operations principally comprise amounts outstanding for trade purchases of medicines and consumables. Trade payables to construction contractors for construction services and property development operations comprise construction costs and other project related expenses.

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APPENDIX III

The normal credit period taken for trade purchases and for construction contract payable is 30 – 60 days. An aged analysis of the Target Group’s trade payables at the end of the reporting period presented based on the invoice date is as follows:

The Target Group 0 – 30 days 31 – 60 days 61 – 90 days 91 – 365 days Over 1 year but exceeding 2 years Over 2 years but exceeding 5 years Jiatai Tongren 0 – 30 days 91 – 365 days Over 1 year but exceeding 2 years Over 2 years but exceeding 5 years RECEIPTS IN ADVANCE Other advance_(note)_ Receipts in advance	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 180,232 101,599 63,756 47,919 1,194 4,793 24,786 1,116 482 132,435 113,485 92,588 75,543 83,520 19,994 – – 71,236 460,915 300,914 252,849 123,764 – – 21,821 20,609 – 75,543 83,520 – – – 35,826 221,128 104,129 35,826 As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 – 9,191 – 25,243 22,480 22,259 25,243 31,671 22,259	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 180,232 101,599 63,756 47,919 1,194 4,793 24,786 1,116 482 132,435 113,485 92,588 75,543 83,520 19,994 – – 71,236 460,915 300,914 252,849 123,764 – – 21,821 20,609 – 75,543 83,520 – – – 35,826 221,128 104,129 35,826 As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 – 9,191 – 25,243 22,480 22,259 25,243 31,671 22,259
		22,259

28. RECEIPTS IN ADVANCE

Note: During the year ended 31 December 2011, the purchaser of Beijing Tongren Property advanced HK$9,191,000 (equivalent to RMB7,500,000) to settle trade payables of Beijing Tongren Property. Details of the disposals are set out in note 35.

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APPENDIX III

29. CONSIDERATION PAYABLE ON ACQUISITION OF ADDITIONAL INTEREST IN SUBSIDIARIES

Jiatai Tongren acquired additional 27.5% equity interests in 同仁醫療產業集團有限公司 Tongren Healthcare Industry Group Company Limited, an indirectly held subsidiary of Jiatai Tongren, from the non-controlling shareholder at a consideration of RMB110,000,000 (equivalent to HK$136,392,000), of which RMB40,000,000 was settled by cash, in April 2012. The remaining consideration will be settled by two instalments of RMB35,000,000 (equivalent to HK$43,395,000) by 31 March 2013 and RMB35,000,000 (equivalent to HK$43,397,000) by 31 March 2014. The amount is unsecured and interestfree.

30. AMOUNT DUE TO AN ASSOCIATE

The amount is unsecured, interest-free and repayable on demand.

31. BANK BORROWINGS

The Target Group Secured Unsecured Jiatai Tongren Secured repayable within one year Unsecured repayable within one year The Target Group The bank borrowings are repayable as follows: Within one year Over one year but not exceeding two years Over two years but not exceeding five years Over five years Less: Amount due within one year shown under current liabilities Amount shown under non-current liabilities

As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 584,444 1,040,830 1,038,810 192,983 202,207 135,665 777,427 1,243,037 1,174,475 79,532 316,320 324,985 40,936 – – 120,468 316,320 324,985 467,836 767,914 1,016,137 70,175 294,795 – 70,175 180,328 158,338 169,241 – – 777,427 1,243,037 1,174,475 (467,836) (767,914) (1,016,137) 309,591 475,123 158,338

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APPENDIX III

The weighted average effective interest rates per annum (which are also equal to contracted interest rates) of the variable rate bank borrowings are as follows:

The Target Group Jiatai Tongren	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 5.18% 8.45% 8.20% 5.31% 6.56% 6.56%	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 5.18% 8.45% 8.20% 5.31% 6.56% 6.56%
		6.56%

The variable rate borrowings represents the benchmark borrowing rate quoted by the People’s Bank of China（中國人民銀行同期貸款基準利率）plus a spread.

The Target Group’s bank borrowings of approximately HK$231,579,000, HK$294,118,000 and HK$359,578,000 were guaranteed by the related companies of the Target Group as at 31 December 2010, 2011 and 2012, respectively. A director of Jiatai Tongren has beneficial and controlling interests in these related companies.

The Target Group’s bank borrowings of approximately HK$276,842,000, HK$250,858,000 and HK$158,338,000 were secured by the buildings and construction in progress (both included in property, plant and equipment) of the Target Group (as set out in note 42), as at 31 December 2010, 2011 and 2012, respectively.

The remaining Target Group’s bank borrowings during the Relevant Periods were secured by the other pledge of assets as set out in note 42.

Jiatai Tongren’s bank borrowings of approximately HK$79,532,000, HK$63,725,000 and HK$204,588,000 were guaranteed by the related companies of Jiatai Tongren, as at 31 December 2010, 2011 and 2012, respectively. A director of Jiatai Tongren has beneficial and controlling interests in these related companies. The remaining Jiatai Tongren’s bank borrowings were secured by the pledged bank deposits.

32. OBLIGATIONS UNDER FINANCE LEASES

Analysed for reporting purpose as: Current liabilities Non-current liabilities	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 20,329 25,082 31,196 14,510 51,500 60,651 34,839 76,582 91,847	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 20,329 25,082 31,196 14,510 51,500 60,651 34,839 76,582 91,847
		91,847

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APPENDIX III

The Target Group leased certain of its medical equipments under finance leases. The lease term is three to six years. Interest rates underlying all obligations under finance leases are fixed at from 3% to 7% per annum. No arrangement was entered into for contingent rental payments.

Amount payable under finance leases: Within one year In more than one year but not more than two years In more than two years but not more than five years In more than five years Less: Future finance charges Present value of lease obligations Less: Amount due for settlement within one year (shown under current liabilities) Amount due for settlement after one year	Minimum lease payments As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 21,750 31,009 38,233 19,022 23,747 31,406 2,548 39,923 42,689 – 2,777 – 43,320 97,456 112,328 (8,481) (20,874) (20,481) 34,839 76,582 91,847	Present value of minimum lease payments As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 20,329 25,082 31,196 12,542 20,571 26,008 1,968 29,091 34,643 – 1,838 – 34,839 76,582 91,847 N/A N/A N/A 34,839 76,582 91,847 (20,329) (25,082) (31,196) 14,510 51,500 60,651	Present value of minimum lease payments As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 20,329 25,082 31,196 12,542 20,571 26,008 1,968 29,091 34,643 – 1,838 – 34,839 76,582 91,847 N/A N/A N/A 34,839 76,582 91,847 (20,329) (25,082) (31,196) 14,510 51,500 60,651
			91,847 N/A
			91,847
			(31,196)
			60,651

The Target Group’s obligations under finance leases were secured by the lessor’s charge over the leased assets.

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APPENDIX III

33. DEFERRED TAX LIABILITIES

The following are the major deferred tax liabilities recognised and movements thereon during the Relevant Periods.

At 1 January 2010 Acquisition of subsidiaries Credit to profit or loss for the year_(note 12) Exchange adjustment At 31 December 2010 Credit to profit or loss for the year(note 12) Exchange adjustment At 31 December 2011 Credit to profit or loss for the period(note 12)_ Exchange adjustment At 31 December 2012	Fair value adjustment on business combination HK$’000 – 79,604 (2,886) (54)
	76,664 (3,994) 3,595
	76,265 (1,486) 741
	75,520

Jiatai Tongren and its subsidiaries had unused tax losses of approximately HK$32,791,000, HK$116,587,000 and HK$263,667,000 and deductible temporary difference of HK$32,520,000, HK$15,817,000 and HK$10,905,000 available for offset against future profit as at 31 December 2010, 2011 and 2012, respectively. No deferred tax asset has been recognised due to the unpredictability of future profit streams. The expiry of unused tax losses was as follows:

Year 2015 Year 2016 Year 2017	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 32,791 32,791 32,791 – 83,796 83,796 – – 147,080 32,791 116,587 263,667	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 32,791 32,791 32,791 – 83,796 83,796 – – 147,080 32,791 116,587 263,667
		263,667

Under the EIT Law of PRC, withholding tax is imposed on dividends declared in respect of profits earned by Jiatai Tongren and its subsidiaries from 1 January 2008 onwards. Deferred taxation has not been provided for in the Financial Information in respect of temporary differences attributable to accumulated profits of the Jiatai Tongren’s subsidiaries amounting to HK$37,237,000, HK$32,715,000 and HK$14,056,000 as at 31 December 2010, 2011 and 2012 as Jiatai Tongren is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

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APPENDIX III

34. PAID-UP CAPITAL

The Target Group and Jiatai Tongren

Registered and fully paid: At 1 January 2010 Increase in capital At 31 December 2010 and 31 December 2011 Increase in capital At 31 December 2012	US$’000 54,559 30,077 84,636 32,154 116,790	HK$’000 (equivalent) 424,610 234,000
		658,610 250,036
		908,646

35. DISPOSAL OF SUBSIDIARIES

(a) Disposal of Lianyungang Jiatai Huayuan Property Company Limited (“Lianyungang Huayuan”)

On 31 January 2010, the Target Group disposed of its entire equity interests in Lianyungang Huayuan to an independent third party at zero consideration. The net assets of Lianyungang Huayuan at the date of disposal were as follows:

HK$’000

Analysis of assets and liabilities over which control was lost:

Property, plant and equipment Properties under development for sales Other receivables and prepayments Bank balances and cash Bank borrowings Advance from the purchaser Creditors and accrued charges Gross/loss on disposal of a subsidiary Cash outflow arising on disposal: Cash consideration Less: Bank balances and cash disposed of	2,439 124,690 18,380 14,848 (40,165) (113,977) (6,215)
	–
	– (14,848)
	(14,848)

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APPENDIX III

Upon disposal of Lianyungang Huayuan, the accumulated exchange differences of Lianyungang Huayuan arising on translation to presentation currency of HK$104,000 is transferred from translation reserve to retained profits.

Lianyungang Huayuan contributed no revenue to the Target Group and loss of approximately HK$1,083,000 to the Target Group’s loss for the year ended 31 December 2010.

(b) Disposal of Beijing Tongren Property

As referred to in note 14, on 31 March 2012, the Target Group disposed of its entire equity interests in Beijing Tongren Property to an independent third party at zero consideration. The Target Group discontinued its property management business upon the disposal of Beijing Tongren Property.

Analysis of assets and liabilities over which control was lost: Property, plant and equipment Trade receivables Other receivables and prepayments Bank balances and cash Advance from the purchaser Creditors and accrued charges Loss on disposal of a subsidiary Cash outflow arising on disposal: Cash consideration Less: Bank balances and cash disposed of	HK$’000 614 12,455 1,175 4,083 (9,282) (5,555) 3,490 – (4,083) (4,083)

Upon disposal of Beijing Tongren Property, the accumulated exchange differences of Beijing Tongren Property arising on translation to presentation currency of HK$805,000 is transferred from translation reserve to retained profits.

The impact of Beijing Tongren Property on the Target Group’s results and cash flows during the Relevant Periods is disclosed in note 14.

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APPENDIX III

36. ACQUISITION OF SUBSIDIARIES

On 30 June 2010, the Target Group entered into a sale and purchase agreement with independent third parties to acquire 81.63% equity interest of Yang Pu Zhao He for a total consideration of RMB200,000,000 (approximately HK$233,918,000) by cash. This acquisition has been accounted for using the acquisition method. Yang Pu Zhao He is an investment holding company and its subsidiaries are engaged in property development and operations of hospitals in the PRC. The acquisition is completed on 30 June 2010.

Acquisition-related costs amounting to approximately HK$1,145,000 have been excluded from the consideration transferred and have been recognised as an expense during the year ended 31 December 2010, within the administrative expenses line item in the consolidated statement of comprehensive income.

Assets acquired and liabilities recognised at the date of acquisition are as follows:

Property, plant and equipment Prepaid lease payments Intangible assets Interests in associates Inventories Properties under development for sale Properties held for sale Debtors, deposits and prepayments_(note)_ Pledged bank deposits Restricted bank deposits Bank balances and cash Creditors and accrued charges Deposits received on sales of properties Receipts in advance Amount due to an associate Bank borrowings Obligations under finance leases Deferred taxation Amount due to Jiatai Tongren Non-controlling interests of subsidiaries held by Yang Pu Zhao He

HK$’000 1,075,207 128,009 73,851 15,205 9,822 493,096 93,618 301,375 144,881 18,644 33,566 (648,461) (406,433) (22,385) (7,602) (608,187) (24,195) (79,604) (175,439) (148,423) 266,545

Note: The fair value of trade receivables and other receivables (included in debtors, deposits and prepayments) at the date of acquisition amounted to approximately HK$21,712,000 and HK$182,979,000, respectively, which is the same as the gross contractual amounts of trade receivables and other receivables at the date of acquisition.

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APPENDIX III

Goodwill arising on acquisition:

Consideration paid Plus: Non-controlling interests_(Note)_ Less: Net assets acquired Goodwill arising on acquisition	HK$’000 233,918 49,023 (266,545) 16,396

Note: The non-controlling interests are determined by proportionate share of assets acquired and liabilities recognised of Yang Pu Zhao He and its subsidiaries at the date of acquisition.

Goodwill arose in the acquisition of Yang Pu Zhao He and its subsidiaries because consideration paid for the combination effectively included amounts in relation to the benefit of expected growth in hospital operation of Target Group. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets. None of the goodwill arising on these acquisitions is expected to be deductible for tax purposes.

Net cash outflow arising on acquisition:

Cash consideration paid Less: Bank balances and cash acquired	HK$’000 (233,918) 33,566 (200,352)

Yang Pu Zhao He and its subsidiaries contributed loss for the year of HK$11,430,000 and revenue of HK$270,615,000 for the year ended 31 December 2010.

Had the acquisition been completed on 1 January 2010, total group revenue (including the discontinued operations) for the year ended 31 December 2010 would have been HK$529,724,000, and loss for the year (including the discontinued operations) would have been HK$60,014,000. The pro forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Target Group that actually would have been achieved had the acquisition been completed on 1 January 2010, nor is it intended to be a projection of future results.

In determining the ‘pro-forma’ loss of the Target Group had Yang Pu Zhao He and its subsidiaries been acquired at the beginning of the year ended 31 December 2010, the directors have calculated the amortisation of intangible assets and release of prepaid lease payments depreciation of plant and equipment acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognised in the pre-acquisition financial statements.

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APPENDIX III

37. INVESTMENTS IN SUBSIDIARIES

Unlisted investments, at cost	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 269,006 281,863 421,575

38. AMOUNTS DUE FROM/TO SUBSIDIARIES

The amounts are unsecured, interest-free and repayable on demand. In the opinion of directors of Jiatai Tongren, the amounts due from subsidiaries are recoverable/payable. Management of Jiatai Tongren expected the amounts due from subsidiaries to be recovered at the end of the reporting period as follows:

Within twelve months More than twelve months RESERVES OF JIATAI TONGREN Statutory surplus reserve HK$’000 At 1 January 2010 8,506 Loss for the year – Other comprehensive income for the year – Total comprehensive income for the year – At 31 December 2010 8,506 Profit for the year – Other comprehensive income for the year – Total comprehensive income for the year –	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 308,772 497,782 496,206 – 70,966 360,419 308,772 568,748 856,625 Translation reserve Retained profits Total HK$’000 HK$’000 HK$’000 32,418 118,282 159,206 – (43,558) (43,558) 21,821 – 21,821 21,821 (43,558) (21,737) 54,239 74,724 137,469 – 29,393 29,393 38,457 – 38,457 38,457 29,393 67,850	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 308,772 497,782 496,206 – 70,966 360,419 308,772 568,748 856,625 Translation reserve Retained profits Total HK$’000 HK$’000 HK$’000 32,418 118,282 159,206 – (43,558) (43,558) 21,821 – 21,821 21,821 (43,558) (21,737) 54,239 74,724 137,469 – 29,393 29,393 38,457 – 38,457 38,457 29,393 67,850
		856,625
		Total HK$’000 159,206
		(43,558) 21,821
		(21,737)
		137,469
		29,393 38,457
		67,850

39. RESERVES OF JIATAI TONGREN

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APPENDIX III

At 31 December 2011 Profit for the year Other comprehensive income for the year Total comprehensive income for the year At 31 December 2012	Statutory surplus reserve HK$’000 8,506 – – – 8,506	Translation reserve HK$’000 92,696 – 11,259 11,259 103,955	Retained profits HK$’000 104,117 13,516 – 13,516 117,633	Total HK$’000 205,319
				13,516 11,259
				24,775
				230,094

40. OPERATING LEASE COMMITMENTS

The Target Group as lessee

At the end of each of the reporting period, the Target Group had contracted with landlords for the following future minimum lease payments under non-cancellable operating leases in respect of rented premises which fall due as follows:

Within one year CAPITAL COMMITMENTS Capital expenditure contracted for but not provided in the Financial Information – acquisition of property, plant and equipment	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 113 78 – As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 62,111 29,023 19,581

41. CAPITAL COMMITMENTS

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APPENDIX III FINANCIAL INFORMATION ON JIATAI TONGREN

42. PLEDGE OF ASSETS

The following assets of the Target Group were pledged to banks to secure credit facilities during the Relevant Periods:

Pledged bank deposits Buildings (included in the property, plant and equipment) Construction in progress (included in the property, plant and equipment) Prepaid lease payments Properties under development for sale	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 224,902 245,643 88,592 940,507 1,083,755 584,314 169,940 138,434 – 95,505 97,771 94,776 70,488 81,187 82,143 1,501,342 1,646,790 849,825	As at 31 December 2010 2011 2012 HK$’000 HK$’000 HK$’000 224,902 245,643 88,592 940,507 1,083,755 584,314 169,940 138,434 – 95,505 97,771 94,776 70,488 81,187 82,143 1,501,342 1,646,790 849,825
		849,825

During the year ended 31 December 2012, the equity interests of Kunming Tongren Industrial and Kunming Tongren Hospital were pledged to bank for borrowings granted.

43. MAJOR NON-CASH TRANSACTIONS

The Target Group acquired medical equipments of approximately HK$19,649,000, HK$64,829,000 and HK$42,618,000 under finance leases during the years ended 31 December 2010, 2011 and 2012, respectively.

44. RETIREMENT BENEFITS SCHEMES

According to the relevant laws and regulations in the PRC, the Target Group are required to participate in defined contribution retirement schemes administered by the local municipal governments. The Target Group contributes funds which are calculated on certain percentage of the average employees salary as agreed by local municipal government to the scheme to fund the retirement benefits of the employees. The principal obligation of the Target Group with respect to the retirement benefits schemes is to make the required contributions under the scheme.

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APPENDIX III FINANCIAL INFORMATION ON JIATAI TONGREN

45. RELATED PARTY DISCLOSURES

(i) Related party transactions

Other than the corporate guarantees from related companies as disclosed in note 31, the Target Group had the following transactions with related companies during the Relevant Periods in which a director of Jiatai Tongren has control and beneficial interests:

The Target Group Purchases of medical equipments Compensation income from a sub- contractor_(note 14)_	Year 2010 HK$’000 50,555 2,575	ended 31 December 2011 2012 HK$’000 HK$’000 7,124 1,203 – –

(ii) Related party balances

The Target Group’s balances with related parties are set out in notes 25 and 30, respectively. Jiatai Tongren’s balances with related parties and subsidiaries are set out in notes 25 and 38, respectively.

(iii) Compensation of key management personnel

No emolument was paid or payable to the directors of Jiatai Tongren who are also identified as the key management personnel of the Target Group during the Relevant Periods.

B. EVENTS AFTER THE REPORTING PERIOD

On 6 March 2013, Jiatai Tongren entered into a sale and purchase agreement with an independent third party pursuant to which Jiatai Tongren agreed to dispose of entire registered capital of Lianyungang Chengtai for a consideration of RMB250,000,000 (equivalent to HK$309,981,000). On 14 April 2013, Jiatai Tongren served a notice of termination on the purchaser to terminate the agreement because the purchaser failed to pay a deposit into the joint managed account as prescribed in the agreement .

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APPENDIX III

C. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Target Group, Jiatai Tongren or any of its subsidiaries have been prepared in respect of any period subsequent to 31 December 2012.

Yours faithfully,

Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong

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APPENDIX III

2. MANAGEMENT DISCUSSION AND ANALYSIS ON JIATAI TONGREN (LIANYUNGANG) HEALTHCARE INVESTMENT COMPANY LIMITED

Following the completion of the Acquisition, the Extra Earn Asset Reorganization and the transfer of registered capital of Jiatai Tongren from Extra Earn to the Company, the Company became directly interested in Jiatai Tongren representing approximately 58.01% of the entire registered capital of Jiatai Tongren.

The Target Group consists of Jiatai Tongren and its subsidiaries. Jiatai Tongren, and through its PRC subsidiaries, is engaged in the investment in and management and operation of healthcare and hospital businesses, trading of medical equipment and related supplies, property investment and development and other investments in PRC.

A. MANAGEMENT DISCUSSION AND ANALYSIS FOR THE YEAR ENDED 31 DECEMBER 2010

Review of Operations

For the year ended 31 December 2010, turnover (continuing and discontinued operations) of Jiatai Tongren was HK$403,607,000 and loss (continuing and discontinued operations) attributable to shareholders of Jiatai Tongren was HK$8,976,000 mainly due to the loss from its hospital operation partially set-off by profits from its property development operation and discontinued operations.

Continuing operations

For the year ended 31 December 2010, turnover (continuing operations) of Jiatai Tongren was HK$248,382,000 and loss (continuing operations) attributable to shareholders of Jiatai Tongren was HK$21,292,000 mainly due to the loss from its hospital operation partially set-off by profit from its property development operation.

Discontinued operations

For the year ended 31 December 2010, turnover (discontinued operations) of Jiatai Tongren was HK$155,225,000 and profit (discontinued operations) attributable to shareholders of Jiatai Tongren was HK$12,316,000 mainly contributed by its construction operation in urban infrastructure development in Lianyungang, the PRC and compensation income from contractor’s breach of contract of HK$2,575,000. Following the substantial completion of the urban infrastructure development in Lianyungang, the PRC, this operation was discontinued in 2011.

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APPENDIX III

Segmental Review

Property development

For the year ended 31 December 2010, the property development operation of Jiatai Tongren recorded a turnover of HK$130,433,000 and segment profit of HK$24,344,000 mainly contributed by its property development projects in Kunming and Nanjing, the PRC.

Hospital operation

For the year ended 31 December 2010, the hospital operation of Jiatai Tongren recorded a turnover of HK$117,949,000 and segment loss of HK$18,265,000 mainly attributed to the loss from hospital business acquired during the year and review.

Financial Review

Liquidity, financial resources and capital structure

As at 31 December 2010, the Target Group’s non-current assets of HK$1,533,744,000 consisted of property, plant and equipment of HK$1,307,793,000; prepaid lease payments of HK$123,695,000; intangible assets of HK$70,655,000; goodwill of HK$16,396,000 and interest in associates of HK$15,205,000. The Target Group’s capital expenditure, daily operation and investments are mainly funded by cash generated from its operation, borrowings and shareholders’ fund. As at 31 December 2010, the Target Group had net current liabilities of HK$163,565,000.

Following the acquisition of 72.5% equity interest of Yang Pu Zhao He Industry Group Limited (“Yang Pu Zhao He”) in 2010, as at 31 December 2010, the total bank borrowings of the Target Group amounted to HK$777,427,000 consisting of secured bank borrowings of HK$584,444,000 and unsecured bank borrowings of HK$192,983,000. As at 31 December 2010, the Target Group’s total bank borrowings consisted of bank borrowings with maturity within one year of HK$467,836,000; over one year but not exceeding two years of HK$70,175,000; over two years but not exceeding five years of HK$70,175,000 and over five years of HK$169,241,000. As at 31 December 2010, the Target Group’s gearing ratio, calculated on the basis of the Target Group’s net borrowings (after pledged bank deposits, restricted bank deposits and bank balances and cash) over total equity was 48.1%.

As at 31 December 2010, the Target Group’s share capital (registered capital) amounted to HK$659,610,000.

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APPENDIX III

Charge of assets

As at 31 December 2010, the Target Group’s bank deposit of HK$224,902,000; buildings (included in the property, plant and equipment) of HK$940,507,000; construction in progress (included in the property, plant and equipment) of HK$169,940,000; prepaid lease payments of HK$95,505,000 and properties under development for sales of HK$70,488,000 were pledged to banks to secure credit facilities granted to the Target Group during the year.

Capital commitment

As at 31 December 2010, the Target Group’s capital expenditure contracted for but not provided in its financial information consisted of acquisition of property, plant and equipment of HK$62,111,000.

Contingent liabilities

The Target Group did not have any contingent liabilities during the year.

Significant Investments, Material Acquisition and Disposal

During the year ended 31 December 2010, the Target Group entered into a sale and purchase agreement with independent third parties to acquire 72.5% equity interest of Yang Pu Zhao He for a total consideration of RMB200,000,000 (approximately HK$233,918,000). Yang Pu Zhao He is an investment holding company and its subsidiaries are engaged in property development and operation of hospitals in the PRC.

In January 2010, the Target Group disposed of its entire equity interests in Lianyungang Huayuan Property Company Limited to an independent third party at zero consideration.

Foreign Exchange Fluctuation

The Target Group’s operations are mainly located in the PRC and its assets, liabilities and transactions were mainly denominated in Renminbi. The Target Group monitors its foreign exchange exposure and will consider hedging significant currency exposure should the need arise.

Employees

As at 31 December 2010, the Target Group had 1,594 employees with total staff costs of HK$52,845,000 for continuing operations and HK$16,800,000 for discontinued operations. The Target Group ensures that its employees are remunerated in line with market conditions and individual performance and the remuneration policies are reviewed on a regular basis.

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APPENDIX III FINANCIAL INFORMATION ON JIATAI TONGREN

B. MANAGEMENT DISCUSSION AND ANALYSIS FOR THE YEAR ENDED 31 DECEMBER 2011

Review of Operations

For the year ended 31 December 2011, turnover (continuing and discontinued operations) of Jiatai Tongren was HK$851,607,000 (2010: HK$403,607,000) and loss (continuing and discontinued operations) attributable to shareholders of Jiatai Tongren was HK$26,011,000 (2010: HK$8,976,000) mainly due to the loss from hospital operation and absence of profit contribution from property development operation partially set-off by profit from discontinued operations.

Continuing operations

For the year ended 31 December 2011, turnover (continuing operations) of Jiatai Tongren was HK$754,372,000 (2010: HK$248,382,000) and loss (continuing operations) attributable to shareholders of Jiatai Tongren was HK$63,690,000 (2010: HK$21,292,000) mainly due to the loss from its hospital operation and absence of profit contribution from property development operation.

Discontinued operations

For the year ended 31 December 2011, turnover (discontinued operations) of Jiatai Tongren was HK$97,235,000 (2010: HK$155,225,000) and profit (discontinued operations) attributable to shareholders of Jiatai Tongren was HK$37,679,000 (2010: HK$12,316,000) mainly contributed by its construction operation in urban infrastructure development in Lianyungang, the PRC and interest income from overdue debtors of HK$28,429,000 (2010: nil). Following the substantial completion of the urban infrastructure development in Lianyungang, the PRC, this operation was discontinued in 2011.

Segmental Review

Property development

For the year ended 31 December 2011, the property development operation of Jiatai Tongren recorded a turnover of HK$384,171,000 (2010: HK$130,433,000) and segment loss of HK$4,835,000 (2010: profit of HK$24,344,000) mainly contributed by its property development project in Kunming and Nanjing, the PRC amid a difficult property market environment in second tier cities in the PRC adversely affected by restrictive measures taken by the PRC Government on property market.

Hospital operation

For the year ended 31 December 2011, the hospital operation of Jiatai Tongren recorded a turnover of HK$370,201,000 and segment loss of HK$52,138,000 (2009: HK$18,265,000) mainly attributed to increased staff costs for medical and technical staffs following headcount increase and amid general increase of labour cost in the PRC and increased depreciation charges following the phased commencement of operations of hospitals.

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APPENDIX III

Financial Review

Liquidity, financial resources and capital structure

As at 31 December 2011, the Target Group’s non-current assets of HK$1,678,036,000 (2010: HK$1,533,744,000) consisted of property, plant and equipment of HK$1,450,994,000 (2010: HK$1,307,793,000); prepaid lease payments of HK$126,592,000 (2010: HK$123,695,000); intangible assets of HK$67,339,000 (2010: HK$70,655,000) goodwill of HK$17,180,000 (2010: HK$16,396,000) and interest in associates of HK$15,931,000 (2010: HK$15,205,000). The Target Group’s capital expenditure, daily operation and investments are mainly funded by cash generated from its operation, borrowings and shareholders’ fund. As at 31 December 2011, the Target Group had net current liabilities of HK$125,441,000 (2010: HK$163,565,000).

As at 31 December 2011, the total bank borrowings of the Target Group amounted to HK$1,243,037,000 (2010: HK$777,427,000) consisting of secured bank borrowings of HK$1,040,830,000 (2010: HK$584,444,000) and unsecured bank borrowings of HK$202,207,000 (2010: HK$192,983,000). As at 31 December 2011, the Target Group’s total bank borrowings consisted of bank borrowings with maturity within one year of HK$767,914,000 (2010: HK$467,836,000); over one year but not exceeding two years of HK$294,795,000 (2010: HK$70,175,000); over two years but not exceeding five years of HK$180,328,000 (HK$70,175,000) and over five years of nil (2010: HK$169,241,000). As at 31 December 2011, the Target Group’s gearing ratio, calculated on the basis of the Target Group’s net borrowings (after pledged bank deposits, restricted bank deposits and bank balances and cash) over total equity was 75.9% (2010: 48.1%).

As at 31 December 2011, the Target Group’s share capital (registered capital) amounted to HK$658,610,000 (2010: HK$658,610,000).

Charge of assets

As at 31 December 2011, the Target Group’s bank deposit of HK$245,643,000 (HK$224,902,000); buildings (included in the property, plant and equipment) of HK$1,083,755,000 (2010: HK$940,507,000); construction in progress (included in the property, plant and equipment) of HK$138,434,000 (2010: HK$169,940,000); prepaid lease payments of HK$97,771,000 (2010: HK$95,505,000) and properties under development for sales of HK$81,187,000 (2010: HK$70,488,000) were pledged to banks to secure credit facilities granted to the Target Group during the year.

Capital commitment

As at 31 December 2011, the Target Group’s capital expenditure contracted for but not provided in its financial information consisted of acquisition of property, plant and equipment of HK$29,023,000 (2010: HK$62,111,000).

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FINANCIAL INFORMATION ON JIATAI TONGREN

APPENDIX III

Contingent liabilities

The Target Group did not have any contingent liabilities during the year.

Significant Investments, Material Acquisition and Disposal

During the year ended 31 December 2011, the Target Group has no significant investments, material acquisition and disposal.

Foreign Exchange Fluctuation

The Target Group’s operations are mainly located in the PRC and its assets, liabilities and transactions were mainly denominated in Renminbi. The Target Group monitors its foreign exchange exposure and will consider hedging significant currency exposure should the need arise.

Employees

As at 31 December 2011, the Target Group had 1,916 (2010: 1,594) with total staff costs of HK$133,863,000 for continuing operations and HK$43,168,000 for discontinued operations. The Target Group ensures that its employees are remunerated in line with market conditions and individual performance and the remuneration policies are reviewed on a regular basis.

C. MANAGEMENT DISCUSSION AND ANALYSIS FOR THE YEAR ENDED 31 DECEMBER 2012

Review of Operations

For the year ended 31 December 2012, turnover (continuing and discontinued operations) of Jiatai Tongren was HK$553,500,000 (2011: HK$851,607,000) and loss (continuing and discontinued operations) attributable to shareholders of Jiatai Tongren was HK$133,202,000 (2011: HK$26,011,000) mainly due to the loss from continuing operations with the absence of profit contribution from discontinued operation.

Continuing operations

For the year ended 31 December 2012, turnover (continuing operations) of Jiatai Tongren was HK$536,365,000 (2011: HK$754,372,000) and loss (continuing operations) attributable to shareholders of Jiatai Tongren was HK$129,175,000 (2011: HK$63,690,000) mainly due the reduced turnover from its property development operation and increased loss from its hospital operation.

– 210 –

FINANCIAL INFORMATION ON JIATAI TONGREN

APPENDIX III

Discontinued operations

For the year ended 31 December 2012, turnover (discontinued operations) of Jiatai Tongren was HK$17,135,000 (2011: HK$97,235,000) and loss (discontinued operations) attributable to shareholders of Jiatai Tongren was HK$4,027,000 (2011: profit of HK$37,679,000) mainly due to the absence of contribution from its urban infrastructure development operation (2011: HK$42,285,000) discontinued in 2011. Following the disposal of the operation in 2012, the property management operation was discontinued in 2012.

Segmental Review

Property development

For the year ended 31 December 2012, the property development operation of Jiatai Tongren recorded a turnover of HK$39,222,000 (2011: HK$384,171,000) and segment loss of HK$16,073,000 (2011: HK$4,835,000) mainly due to the reduced sale of property as property development projects, Kangya Garden Phase 2 and 3, were still under construction

Hospital operation

For the year ended 31 December 2012, the hospital operation of Jiatai Tongren recorded a turnover of HK$497,143,000 (2011: HK$370,201,000) and segment loss of HK$77,036,000 (2011: HK$52,138,000) mainly attributed to the increase in medical and technical staff costs due to increase in manpower and amid the continued trend of increase in labour costs in the PRC and increase in depreciation charges following the staged launching of various operations of hospitals.

Financial Review

Liquidity, financial resources and capital structure

As at 31 December 2012, the Target Group’s non-current assets of HK$1,690,866,000 (2011: HK$1,678,036,000) consisted of property, plant and equipment of HK$1,470,342,000 (2011: HK$1,450,994,000); prepaid lease payments of HK$125,034,000 (2011: HK$126,592,000); intangible assets of HK$61,989,000 (2011: HK$67,339,000), goodwill of HK$17,382,000 (2011: HK$17,180,000) and interest in associates of HK$16,119,000 (2011: HK$15,931,000). The Target Group’s capital expenditure, daily operation and investments are mainly funded by cash generated from its operation, borrowings and shareholders’ fund. As at 31 December 2011, the Target Group had net current liabilities of HK$427,658,000 (2011: HK$125,441,000).

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FINANCIAL INFORMATION ON JIATAI TONGREN

APPENDIX III

As at 31 December 2012, the total bank borrowings of the Target Group amounted to HK$1,174,475,000 (2011: HK$1,243,037,000) consisting of secured bank borrowings of HK$1,038,810,000 (2011: HK$1,040,830,000) and unsecured bank borrowings of HK$135,665,000 (2011: HK$202,207,000). As at 31 December 2012, the Target Group’s total bank borrowings consisted of bank borrowings with maturity within one year of HK$1,016,137,000 (2011: HK$767,914,000); over one year but not exceeding two years of nil (2011: HK$294,795,000) and over two years but not exceeding five years of HK$158,338,000 (2011: HK$180,328,000). As at 31 December 2012, the Target Group’s gearing ratio, calculated on the basis of the Target Group’s net borrowings (after pledged bank deposits, restricted bank deposits and bank balances and cash) over total equity was 70.8% (2011: 75.9%).

As at 31 December 2012, the Target Group’s share capital (registered capital) amounted to HK$908,646,000 (2011: 658,610,000).

Charge of assets

As at 31 December 2012, the Target Group’s bank deposit of HK$88,592,000 (2011: HK$245,643,000); buildings (included in the property, plant and equipment) of HK$584,314,000 (2011: HK$1,083,755,000); construction in progress (included in the property, plant and equipment) of nil (2011: HK$138,434,000); prepaid lease payments of HK$94,776,000 (2011: HK$97,771,000) and properties under development for sales of HK$82,143,000 (2011: HK$81,187,000) were pledged to banks to secure credit facilities granted to the Target Group during the year.

Capital commitment

As at 31 December 2012, the Target Group’s capital expenditure contracted for but not provided in its financial information consisted of acquisition of property, plant and equipment of HK$19,581,000 (2011: HK$29,023,000).

Contingent liabilities

The Target Group did not have any contingent liabilities during the year.

Significant Investments, Material Acquisition and Disposal

In March 2012, the Target Group disposed of its entire equity interests in Beijing Tongren Property Management Company Limited (“Beijing Tongren Property”) to an independent third party at zero consideration. The Target Group discontinued its property management business upon the disposal of Beijing Tongren Property and recorded a loss on disposal of HK$3,456,000.

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FINANCIAL INFORMATION ON JIATAI TONGREN

APPENDIX III

Foreign Exchange Fluctuation

The Target Group’s operations are mainly located in the PRC and its assets, liabilities and transactions were mainly denominated in Renminbi. The Target Group monitors its foreign exchange exposure and will consider hedging significant currency exposure should the need arise.

Employees

As at 31 December 2012, the Target Group had 2,014 employees (2011: 1,916) with total staff costs of HK$180,605,000 for continuing operations and HK$13,131,000 for discontinued operations. The Target Group ensures that its employees are remunerated in line with market conditions and individual performance and the remuneration policies are reviewed on a regular basis.

– 213 –

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL STATEMENT OF THE ENLARGED GROUP

1. UNAUDITED PRO PORMA FINANCIAL INFORMATION OF THE GROUP

The unaudited pro forma financial information of the Group is prepared in accordance with paragraph 29 of Chapter 4 for illustrative purpose only to provide information about how the Acquisition might have affected the financial information of the Group.

The following is the unaudited consolidated statement of assets and liabilities of the Group as at 31 December 2012 extracted from the interim report dated 27 February 2013 published by the Company. The unaudited consolidated statement of financial position of the Group as at 31 December 2012 incorporated the financial statements of Extra Earn as the Acquisition was completed on 19 September 2012. There is no pro forma adjustment required. The initial accounting for certain properties and intangible assets acquired in this business combination, as well as the fair value of the Group’s previously held equity interest in Extra Earn, have been determined on a provisional basis. The amounts of property, plant and equipment, prepaid lease payments, intangible assets, properties under development for sale, properties held for sale, deferred tax liabilities, non-controlling interests, gain on deemed disposal of associates and discount on acquisition of subsidiaries may be adjusted accordingly. Details of the Acquisition have been set out in note 21 to the condensed consolidated financial statements of the Group in the Company’s interim report dated 27 February 2013.

Non-current assets Investment properties Property, plant and equipment Prepaid lease payments Interests in associates Available-for-sale investments Intangible assets	Unaudited consolidated statement of assets and liabilities of the Group as at 31 December 2012 Pro forma adjustments HK$’000 HK$’000 (Note) 159,227 1,476,893 123,307 1,009,932 195,874 15,552 2,980,785	Unaudited pro forma consolidated statement of assets and liabilities HK$’000 159,227 1,476,893 123,307 1,009,932 195,874 15,552 2,980,785

– 214 –

UNAUDITED PRO FORMA FINANCIAL STATEMENT OF THE ENLARGED GROUP

APPENDIX IV

Current assets Inventories Properties under development for sale Properties held for sale Prepaid lease payments Available-for-sale investments Investments held for trading Debtors, deposits and prepayments Loans receivable Taxation recoverable Pledged bank deposits Restricted bank deposits Bank balances and cash Current liabilities Creditors and accrued charges Deposits received on sales of properties Customers’ deposits and receipts in advance Consideration payable Amount due to an associate Other borrowings Obligations under finance leases – due within one year Taxation payable	Unaudited consolidated statement of assets and liabilities of the Group as at 31 December 2012 Pro forma adjustments HK$’000 HK$’000 (Note) 16,496 1,026,853 33,682 3,050 94,822 1,013,405 234,288 103,761 4,997 88,592 36,378 526,122 3,182,446 406,587 401,880 25,467 43,395 8,060 2,131,167 31,196 79,646 3,127,398	Unaudited pro forma consolidated statement of assets and liabilities HK$’000 16,496 1,026,853 33,682 3,050 94,822 1,013,405 234,288 103,761 4,997 88,592 36,378 526,122 3,182,446 406,587 401,880 25,467 43,395 8,060 2,131,167 31,196 79,646 3,127,398

– 215 –

UNAUDITED PRO FORMA FINANCIAL STATEMENT OF THE ENLARGED GROUP

APPENDIX IV

Net current assets Total assets less current liabilities Non-current liabilities Deferred tax liabilities Bank borrowings – due after one year Obligations under finance leases – due after one year Bonds Other payables Net assets	Unaudited consolidated statement of assets and liabilities of the Group as at 31 December 2012 Pro forma adjustments HK$’000 HK$’000 (Note) 55,048 3,035,833 119,576 250,307 60,651 247,000 43,397 720,931 2,314,902	Unaudited pro forma consolidated statement of assets and liabilities HK$’000 55,048 3,035,833 119,576 250,307 60,651 247,000 43,397 720,931 2,314,902

Note: No pro forma adjustment is required.

– 216 –

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL STATEMENT OF THE ENLARGED GROUP

2. ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES

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TO THE DIRECTORS OF COL CAPITAL LIMITED

We report on the unaudited pro forma consolidated statement of assets and liabilities of COL Capital Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the acquisition (“Acquisition”) of 19.34% equity interest of Extra Earn Holdings Limited (thereinafter upon completion of the Acquisition and the asset reorganisation of Extra Earn Holdings Limited by means of the transfer of an aggregate of approximately 41.99% of the registered capital Jiatai Tongren (Lianyungang) Healthcare Investment Company Limited to, and repurchase and cancellation of Extra Earn Holdings Limited’s approximately 41.99% issued shares from, the other two shareholders of Extra Earn Holdings Limited referred to as the “Enlarged Group”) might have affected the financial information presented, for inclusion in Section 1 of Appendix IV to the circular date 10 May 2013 (“Circular”). The basis of preparation of the unaudited pro forma consolidated statement of assets and liabilities is set out on page 214 of the Circular.

Respective responsibilities of directors of the Company and reporting accountants

It is the responsibility solely of the directors of the Company to prepare the unaudited pro forma consolidated statement of assets and liabilities in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants.

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the unaudited pro forma consolidated statement of assets and liabilities and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma consolidated statement of assets and liabilities beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

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APPENDIX IV UNAUDITED PRO FORMA FINANCIAL STATEMENT OF THE ENLARGED GROUP

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma consolidated statement of assets and liabilities with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma consolidated statement of assets and liabilities has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purpose of the unaudited pro forma consolidated statement of assets and liabilities as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

The unaudited pro forma consolidated statement of assets and liabilities is for illustrative purpose only.

Opinion

In our opinion:

• (a) the unaudited pro forma consolidated statement of assets and liabilities has been properly compiled by the directors of the Company on the basis stated;

• (b) such basis is consistent with the accounting policies of the Group; and

• (c) it is appropriate that no adjustment is required for the purpose of the unaudited pro forma consolidated statement of assets and liabilities as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong

• 10 May 2013

– 218 –

APPENDIX V PROPERTY VALUATION REPORT ON THE TARGET GROUP

The following is the text of a letter, summary of value and valuation certificate, prepared for the purpose of incorporation in this circular received from Asset Appraisal Limited, an independent valuer, in connection with its valuation as at 28 February 2013 of the property interests held by the Target Group.

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Rm 901 9/F On Hong Commercial Building No.145 Hennessy Road Wanchai HK 香港灣仔軒尼詩道145號安康商業大廈9樓901室 Tel: (852) 2529 9448 Fax: (852) 3521 9591

10 May 2013

The Board of Directors COL Capital Limited

Dear Sirs,

Re: Valuation of property interests situated in the People’s Republic of China

In accordance with the instructions from COL Capital Limited (referred to as the “Company”) to value the property interests (referred to as the “properties”) held by Jiatai Tongren (Lianyungang) Healthcare Investment Company Limited (referred to as “Jiatai Tongren”) or its subsidiaries (Jiatai Tongren and its subsidiaries are altogether referred to as the “Target Group”) situated in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspections of the properties, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of the properties as at 28 February 2013 (the “date of valuation”).

Basis of Valuation

Our valuation of the properties represents the market value which we would define as intended to mean “the estimated amount for which an asset or liability should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

Valuation Methodology

The properties are valued by the comparison method where comparison based on prices realised or market prices of comparable properties is made. Comparable properties of similar size, character and location are analysed and carefully weighed against all the respective advantages and disadvantages of each property in order to arrive at a fair comparison of capital values.

– 219 –

PROPERTY VALUATION REPORT ON THE TARGET GROUP

APPENDIX V

Due to the nature of the buildings and structures erected thereon, the property nos. 3 and 4 in Group II of this report have been valued on the basis of depreciated replacement cost (DRC). The assessment of the DRC requires an estimate of the market value of the land (if any) in existing use and an estimate of the new replacement (reproduction) cost of the buildings and structures and other site works as at the date of valuation, from which deductions are then made to allow for age, condition, functional obsolescence, etc.. In valuing the market value of the land portions of the properties, the comparison method has been adopted.

We have ascribed no commercial value to the properties rented by the Target Group due to the non-assignable nature of the leasehold interest or the lack of substantial profit rent.

Assumptions

Our valuation has been made on the assumption that owners sell the properties (except those properties rented by the Target Group) on the market in their existing states without the benefit of deferred terms contracts, leaseback, joint ventures, management agreements or any similar arrangement which would serve to affect the values of the properties.

For those properties held by the owners by means of long term Land Use Rights granted by the Government, we have assumed that the owner has free and uninterrupted rights to use the properties for the whole of the unexpired term of the respective land use rights. We have also assumed that they can be freely transferred on the market free from any land premium or expenses of substantial amount payable to the Government.

Other special assumptions for our valuation (if any) would be stated out in the footnotes of the valuation certificate attached herewith.

Titleship

We have been provided with copies of legal documents regarding the properties. However, we have not verified ownership of the properties and the existence of any encumbrances that would affect ownership of them.

We have also relied upon the legal opinion provided by the PRC legal advisers, namely Yunnan Youyuan Law Firm（雲南友元律師事務所）, Beijing Yingke (Nanjing) Law Firm – Nanjing Office （北京盈科（南京）律師事務所）and Jiangsu Tianwan Law Firm（江蘇田灣律師事務所）, to the Company on the relevant laws and regulations in the PRC, on the nature of land use rights or leasehold interests in the properties.

– 220 –

PROPERTY VALUATION REPORT ON THE TARGET GROUP

APPENDIX V

Limiting Conditions

No allowance has been made in our report for any charges, mortgages or amounts owing on the properties nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property is free from encumbrances, restrictions and outgoings of an onerous nature, which could affect its value. Our valuation have been made on the assumption that the seller sells the properties on the market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which could serve to affect the values of the properties.

We have relied to a very considerable extent on the information given by the Company and have accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements, particulars of occupancy, lettings, and all other relevant matters.

We have not carried out detailed site measurements to verify the correctness of the site areas in respect of the properties but have assumed that the site areas shown on the documents and official site plans handed to us are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations.

The properties were lasted inspected on between 25 October 2012 to 12 April 2013 by Mr. Liu Ho Chi, who is a member of the Hong Kong Institute of Surveyors. However, no structural survey has been made. In the course of our inspection, we did not note any serious defects. We are unable to report whether the buildings and structures of the properties are free of rot, infestation or any other structural defects. No test was carried out on any of the services of the buildings and structures of the properties.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Company. We have also sought confirmation from the Company that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and we have no reason to suspect that any material information has been withheld.

– 221 –

APPENDIX V PROPERTY VALUATION REPORT ON THE TARGET GROUP

In valuing the properties, we have complied with all the requirements contained in Chapter 5 and Practice Note 12 to the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited and the HKIS Valuation Standards (2012 Edition) published by The Hong Kong Institute of Surveyors.

Unless otherwise stated, all monetary sums stated in this report are in Renminbi (RMB).

Our summary of valuation and valuation certificate are attached herewith.

Yours faithfully, for and on behalf of

Asset Appraisal Limited

Tse Wai Leung

MFin BSc MRICS MHKIS RPS(GP) Director

Tse Wai Leung is a member of the Royal Institution of Chartered Surveyors, a member of The Hong Kong Institute of Surveyors, a Registered Professional Surveyor in General Practice and a qualified real estate appraiser in the PRC. He is on the list of Property Valuers for Undertaking Valuations for Incorporation or Reference in Listing Particulars and Circulars and Valuations in Connection with Takeovers and Mergers of the Hong Kong Institute of Surveyors, Registered Business Valuer under the Hong Kong Business Valuation Forum and has over 10 years’ experience in valuation of properties in Hong Kong, in Macau and in the PRC.

– 222 –

PROPERTY VALUATION REPORT ON THE TARGET GROUP

APPENDIX V

SUMMARY OF VALUATION

				Value of property
		Market value in	Interest attributable	interest attributable
		existing state	to the Target Group	to the Target Group
		as at	as at	as at
	Property	28 February 2013	28 February 2013	28 February 2013
		RMB	%	RMB
	Group I – Property interests held by the Target	Group for Sale
1.	Various residential units and car parking spaces	31,300,000	86.69%	27,133,970
	located in Dianchi Yinxiang Garden, western
	side of Jinjia River and southern side of
	Guangfu Road, Kunming City, Yunnan Province,
	the PRC.
2.	Various commercial and residential units and	386,800,000	69.35%	268,245,800
	car parking spaces within Kangya Garden
	located in northern side of Tongren Hospital
	and eastern side of Nan Shi Fu Zhong,
	Jiangning Development Zone, Nanjing City,
	Jiangsu Province, the PRC.
	Sub-total:	418,100,000		295,379,770
	Group II – Property interests held and operated	by the Target Group
3.	Various buildings and land located in western	708,800,000	86.69%	614,458,720
	side of Jinjia River and southern side of
	Guangfu Road, Kunming City, Yunnan Province,
	the PRC.
4.	Various buildings and land located in Nanjing	596,800,000	69.35%	413,880,800
	Tongren Hospital and Elderly Rehabilitation
	Centres, Jiangning Development Zone, Jiyin
	Avenue, Nanjing City, Jiangsu Province, the
	PRC.
	Sub-total:	1,305,600,000		1,028,339,520

– 223 –

PROPERTY VALUATION REPORT ON THE TARGET GROUP

APPENDIX V

Property Market value in existing state as at 28 February 2013 Interest attributable to the Target Group as at 28 February 2013 RMB % Group III – Property interests held by the Target Group for future development 5. Two parcels of land located in southern side of Changyu Road and eastern side of Jinqiao Road, Lingang Chanye Zone, Development Zone, Lianyungang City, Jiangsu Province, the PRC. 284,600,000 100% 6. A parcel of land located outside the Export and Processing Zone, Development Zone, Lianyungang City, Jiangsu Province, the PRC. 14,700,000 100% Sub-total: 299,300,000 Group IV – Property interests held by the Target Group under development 7. Block 9 – 12, Kangya Garden under construction located in northern side of Tongren Hospital and eastern side of Nan Shi Fu Zhong, Jiangning Development Zone, Nanjing City, Jiangsu Province, the PRC. 270,900,000 69.35% Group V – Property interests rented by the Target Group 8. Building and land nearby Erhuan Road of Jinshi Xiaoqu, Xiaozhuang Lijiaoqiao, Longquan Town, Guandu District, Kunming City, Yunnan Province, the PRC. No commercial value Sub-total: 270,900,000 Grand Total: 2,293,900,000

Value of property interest attributable to the Target Group as at 28 February 2013 RMB 284,600,000 14,700,000 299,300,000 187,869,150 No commercial value 187,869,150 1,810,888,440

– 224 –

PROPERTY VALUATION REPORT ON THE TARGET GROUP

APPENDIX V

VALUATION CERTIFICATE

Group I – Property interests held by the Target Group for Sale

• Market Value in

• Particulars of existing state as at

• Property Description and tenure occupancy 28 February 2013 RMB

• 1. Various residential units and car The property comprises 24 unsold The property is currently 31,300,000 parking spaces located in Dianchi residential units within two blocks vacant. Yinxiang International Garden, of 11-storey apartment buildings (86.69% interest western side of Jinjia River and and 279 car parking spaces within attributable to the southern side of Guangfu Road, the same development. It was Target Group: Kunming City, Yunnan Province, completed in about 2009. the PRC. 27,133,970) The total gross floor area of the

• （中國雲南省昆明市廣福路以 residential units and car parking 南、金家河以西滇池印象國際花 spaces are approximately 1,701.12 園多個住宅及車位） square metres and 13,015 square metres respectively. The land use rights of the property have been granted for a term expiring on 5 August 2074 for residential use.

Notes:

1. Pursuant to a Land Use Right Grant Contract (Ref: Kun Guo Tu Zi Chu (2004) He Tong Zi Di No. 286（昆國土資出(2004)合同字第286號）entered into between the Kunming Land Resource Administration Bureau（雲南省昆明市國土資源局, as the Grantor) and Kunming Tongren Industrial Development Co., Ltd.（昆明同仁實業開發有限公司, as the Grantee), a wholly-owned subsidiary of Jiatai Tongren, on 5 August 2004, the subject land parcel with an area of 185,809.72 square metres was granted by the Grantor to the Grantee for a land use right term of 70 years for residential use at a land premium of RMB22,336,200 which has been settled in full.

2. As revealed by a State-owned Land Use Right Certificate (Ref: Kun Guo Yong (2005) Di No. 00118（昆國用(2005)第00118號）) dated 10 March 2005, the land use rights of the subject land parcel with an area of 185,809.72 square metres are held by Kunming Tongren Industrial Development Co., Ltd. for a term expiring on 5 August 2074 for residential use.

– 225 –

APPENDIX V PROPERTY VALUATION REPORT ON THE TARGET GROUP

1. A Construction Land Use Planning Permit（建設用地規劃許可證）(Ref: Kun Gui Di Zheng (2003)2180（昆規地證(2003)2180號）) was issued by the Kunming Town Planning Bureau（昆 明市規劃局）on 26 September 2003 in the name of Kunming Tongren Hospital Co., Ltd.（昆明 同仁醫院有限公司）. The permitted use of the land parcel with an area of approximately 173,334.20 square metres is ancillary living community use.

2. As revealed by a Planning Permit of Construction Work（建設工程規劃許可證）(Ref: Kun Gui Jian Zheng No. (2006)0317（昆規建證(2006)0317號）issued by the Kunming Town Planning Bureau（昆明市規劃局）on 17 October 2006 in the name of Kunming Tongren Industrial Development Co., Ltd., the development of the ancillary living community（配套生活社區）with gross floor areas of approximately 193,485.64 square metres (superstructures) and 16,394 square metres (substructures) on the subject land parcel has been approved.

3. As revealed by a Construction Works Commencement Permit（建築工程施工許可證）(Ref: Jian Zi 2006 Di No. 16（建字2006第16號）) issued by the Kunming Dianchi National Tourist Resort Construction Bureau（昆明滇池國家旅遊度假區建設局）on 13 December 2006 in the name of Kunming Tongren Industrial Development Co., Ltd., the carrying out of construction work for the Phase I of the ancillary living community（配套生活社區）with a total gross floor area of 26,369.78 square metres has been approved.

4. As revealed by another Construction Works Commencement Permit（建築工程施工許可證）(Ref: Jian Zi 2007 Di No. 13（建字2007第13號）) issued by the Kunming Dianchi National Tourist Resort Construction Bureau（昆明滇池國家旅遊度假區建設局）on 24 August 2007 in the name of Kunming Tongren Industrial Development Co., Ltd., the carrying out of construction work for the ancillary living community (Dianchi Yinxiang Garden)（配套生活社區（滇池印象花園）) with a gross floor area of approximately 112,750 square metres has been approved.

5. As revealed by another Construction Works Commencement Permit（建築工程施工許可證）(Ref: Jian Zi 2007 Di No. 16（建字2007第16號）) issued by the Kunming Dianchi National Tourist Resort Construction Bureau（昆明滇池國家旅遊度假區建設局）on 11 October 2007 in the name of Kunming Tongren Industrial Development Co., Ltd., the carrying out of construction work for the ancillary living community (Dianchi Yinxiang Garden)（配套生活社區（滇池印象花園）) with a total gross floor area of approximately 85,036.55 square metres has been approved.

6. Pursuant to a Pre-sales Permit issued by the Kunming Real Estate Administration Authority（昆 明市房產管理局）on 14 November 2008 in the name of Kunming Tongren Industrial Development Co., Ltd., the pre-sales of the whole development (Block Nos. 1-77) with a gross floor area of 188,053 square metres was permitted.

7. In accordance with the information provided by the Group, the status of title and grant of major approvals and licences are as follows:

Land Use Right Grant Contract	: Yes
State-owned Land Use Right Certificate	: Yes
Construction Land Use Planning Permit	: Yes
Planning Permit of Construction Work	: Yes
Construction Works Commencement Permit	: Yes
Building Ownership Certificate	: No
Pre-sales Permit	: Yes

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1. The opinion from the PRC legal advisors of the Company on the property is as follows:

2. i. On 5 August 2004, the Kunming State Land Resource Administration Bureau and Kunming Tongren Industrial Development Co., Ltd. entered into a Land Use Right Grant Contract (Ref: Kun Guo Tu Zi Chu (2004) He Tong Zi Di No. 286（昆國土資出(2004)合同字第286 號）) by virtue of which the former party granted the land use rights of the subject land parcel with an area of 185,809.72 square metres to the latter party for residential purposes for a term of 70 years commencing from the land handover date at a land premium of RMB22,336,200.

3. ii. After full settlement of the land premium by Kunming Tongren Industrial Development Co., Ltd., a State-owned Land Use Right Certificate in relation to the subject land parcel was issued by the Municipal Government of Kunming to Kunming Tongren Industrial Development Co., Ltd. on 10 March 2005.

4. iii. Kunming Tongren Industrial Development Co., Ltd. has obtained various Construction Land Use Planning Permits, Planning Permits of Construction Work, Construction Works Commencement Permits and Pre-sales Permits for the property for planning approval, construction work start approval and pre-sale approval of the subject development;

5. iv. The property which comprises 24 unsold residential units with a total gross floor area of 1,701.12 square metres and 278 vehicle parking spaces with a total gross floor area of 13,015 square metres constituted the unsold portion of the subject development as at 30 January 2013;

6. v All the residential units of the property are falling within Block 57 of the subject development. Due to the change in the Original design of the subject building during its construction, the completed building is derivated from the original design that has been granted with planning approval. Therefore, Kunming Tongren Industrial Development Co., Ltd. has to complete the planning change approval for the property in order to obtain the relevant Building Ownership Certificate. As confirmed by the Group, Kunming Tongren Industrial Development Co., Ltd. will complete the relevant planning change application and obtain the Building Ownership Certificate of the property within one year. The application involves the following procedures:–

   • a. to complete the relevant planning change application and obtain the planning acceptance certificate;

   • b. to apply for the carrying out of building work satisfaction completion examination by the relevant department; and

   • c. upon completion of the above procedures, to file building ownership registration application to the relevant property administration authority and then obtain Building Ownership Rights Certificate.

7. vi. As confirmed by Kunming Tongren Industrial Development Co., Ltd., it is eligible to apply for Building Ownership Certificate for the property upon completion of the above procedures and there is no legal impediment under the existing situation.

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• vii. Kunming Tongren Industrial Development Co., Ltd. has not yet obtained any building ownership certificate for the property. In accordance to relevant PRC law, Kunming Tongren Industrial Development Co., Ltd. shall, upon completing relevant administrative procedures, be eligible to obtain the building ownership certificate for the property;

• viii. The land use rights of the subject land parcels are in the nature of granted land use rights. Upon completion of title registration procedures, they are permitted to be transferred in accordance with the PRC law. The designated land uses of the property is not allowed to be altered without prior consent;

• ix. The property is not subject to any mortgage.

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APPENDIX V

VALUATION CERTIFICATE

				Market Value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	28 February 2013
				RMB
2.	Various commercial and	The property comprises 30 unsold	The property is currently	386,800,000
	residential units and car parking	commercial units, 371 unsold	vacant.
	spaces within Kangya Garden	residential units and 345 unsold car		(69.35% interest
	located in northern side of	parking spaces and a club house		attributable to
	Tongren Hospital and eastern side	within a comprehensive residential		the Target Group:
	of Nan Shi Fu Zhong, Jiangning	development named Kang Bo
	Development Zone, Kangbo	Garden. It was completed in		268,245,800)
	Garden Nanjing City, Jiangsu	between 2012 and 2013.
	Province, the PRC.	The total gross floor area of the
	（中國江蘇省南京市江寧開發區	commercial units and residential
	南師附中以東、同仁醫院以北康	units is approximately 4,596.19
	雅苑內多個商業、住宅及車位）	square metres and 38,467.92 square
		metres respectively.

The total gross floor area of the car parking spaces and club house is approximately 11,657.51 square metres and 747.88 square metres respectively.

The land use rights of the property have been granted for a term expiring on 12 October 2076 for residential use.

Notes:

1. Pursuant to a Land Use Right Grant Contract (Ref: Jiang Ning Guo Tu Chu He No. (2005)056 （江寧國土出合 (2005)056號）) entered into between the Nanjing Jiangning District Land Administration Resources Bureau（南京市國土資源局江寧分局, as the Grantor) and Nanjing Tongren Industrial Co., Ltd.（南京同仁實業有限公司, as the Grantee), a wholly-owned subsidiary of the Jiatai Tongren on 31 October 2005, the land parcel of the property with a land area of 140,552.90 square metres was granted by the Grantor to the Grantee for a land use right term of 70 years for residential use at a land premium of RMB140,000,000 which has been settled in full.

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1. As revealed by a State-owned Land Use Right Certificate (Ref: Ning Jiang Guo Yong (2006) Di No. 16924（寧江國用(2006)第16924號）) dated 23 November 2006 issued by the Municipal Government of Nanjing City, the land use rights of a portion of the subject land parcel with an area of 13,086.10 square metres are held by Nanjing Tongren Industrial Co., Ltd. for a term expiring on 12 October 2076 for residential use.

2. As revealed by another State-owned Land Use Right Certificate (Ref: Ning Jiang Guo Yong (2008) Di No. 18109（寧江國用(2008)第18109號）) dated 16 October 2008 issued by the Municipal Government of Nanjing City, the land use rights of the remaining portion of the subject land parcel with an area of 127,467.10 square metres are held by Nanjing Tongren Co., Ltd. for a term expiring on 12 October 2076 for residential use.

3. As revealed by a Construction Land Use Planning Permit（建設用地規劃許可證）(Ref: Gui Jiang Ning Yong Di (2005) Di No. 0026（規江寧用地(2005)第0026號）) issued by the Nanjing City Town Planning Bureau（南京市規劃局）on 31 October 2005 in the name of Nanjing Tongren Industrial Co., Ltd., the permitted planning use of the subject land parcel is Residential (Type 2).

4. As revealed by four sets of Planning Permit of Construction Work（建設工程規劃許可證）(Ref: Jiang Ning Jian Zi (2007) Di No. 461（江寧建字(2007)第461號）, Jian Zi Di No. 320115200881277 （建字第 320115200881277號）, Jian Zi Di No. 320115200881443（建字第 320115200881443 號）and Jian Zi Di No. 320115201181200（建字第 320115201181200號）) all issued by the Nanjing City Jiangning District Town Planning Bureau（南京市江寧區規劃局）on between 5 August 2007 and 16 June 2011 in the name of Nanjing Tongren Industrial Co., Ltd., the development of various phases of Kang Bo Garden with a total gross floor area of 128,424.15 square metres (of which the property forms part) has been approved.

5. As revealed by five sets of Construction Works Commencement Permit（建築工程施工許可證） (Ref nos. 3201152007090900002A, 3201152008110500001A, 3201152009062300001A, 3201152007091900002A and 3201152011062800004A) all issued by the Nanjing City Jiangning District Town Planning Bureau（南京市江寧區建築工程局）on between 20 September 2007 and 30 June 2011 in the name of Nanjing Tongren Industrial Co., Ltd., the carrying out of construction work for various phases of Kang Bo Garden with a total gross floor area of 136,418.84 square metres (of which the subject property forms part) has been approved.

6. Pursuant to two Pre-sale Permits (Ref Ning Fang Xiao Nos. 201120079 and 2012200018) both issued by the Nanjing Jiangning District Housing and Urban-Rural Construction Bureau（南京市 江寧區住房及城鄉建設局）on 27 October 2011 and 5 April 2012 respectively in the name of Nanjing Tongren Industrial Co., Ltd., the pre-sale of the remaining residential units of the property has been approved.

7. Twelve sets of Building Ownership Certificates (Ref: Jiang Ning Fang Quan Zheng Dong Shan Zi Di Nos. JN00105987, JN00105989, JN00105991, JN00105993, JN00105994, JN00105996, JN00105997, JN00105999, JN00106000, JN00106006, JN00106007) all dated 8 June 2009 for to some of the retail units of the property with a total gross floor area of 1,943.92 square metres were issued in the name of Nanjing Tongren Industrial Co., Ltd.. Building Ownership Certificate for the remaining retail units are yet to be issued.

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APPENDIX V PROPERTY VALUATION REPORT ON THE TARGET GROUP

1. Two sets of Building Ownership Certificates (Ref: Ning Fang Quan Zheng Jiang Chu Zi Di Nos. JN00194510, JN00194511號）both dated 7 March 2011 for some of the residential units of the property with a total gross floor area of 279.33 square metres were issued in the name of Nanjing Tongren Industrial Co., Ltd.. Building Ownership Certificate for the remaining residential units are yet to be issued.

2. As advised by the Company, the club house of the property is not prohibited from being transferred. We have ascribed no commercial value to the club house of the property on the basis that the clubhouse shall be provided to the residents of the development as amenity facilities.

3. In accordance with the information provided by the Group, the status of title and grant of major approvals and licences are as follows:

Land Use Right Grant Contract	: Yes
State-owned Land Use Right Certificate	: Yes
Construction Land Use Planning Permit	: Yes
Planning Permit of Construction Work	: Yes
Construction Works Commencement Permit	: Yes
Building Ownership Certificate	: Yes (certain commercial and
	residential units of the property)
Pre-sales Permit	: Yes (the remaining residential units of the property)

1. The opinion from the PRC legal advisors of the Company on the property is as follows:

2. i. On 31 October 2005, the Nanjing State Land Resource Administration Bureau Jiangning Branch and Nanjing Tongren Industrial Co., Ltd. entered into a Land Use Right Grant Contract (Ref: Jiang Ning Guo Tu Chu He No. (2005)056（江寧國土出合 (2005) 056號）) by virtue of which the former party granted the land use rights of the subject land parcels with a total area of 140,552.9 square metres to the latter party for residential (Type 2) purpose for a term of 70 years commencing from the land handover date at a land premium of RMB140,000,000.

3. ii. Nanjing Tongren Industrial Co., Ltd. was issued from the Municipal Government of Nanjing a State-owned Land Use Right Certificate for a portion of the subject land parcel with an area of 13,086.1 square metres on 23 November 2006 and another State -owned Land Use Right Certificate for the remaining portion of the subject land parcel with an area of 127,467.1 square metres on 16 October 2008.

4. iii. Nanjing Tongren Industrial Co., Ltd. has obtained various Construction Land Use Planning Permits, Planning Permits of Construction Work, Construction Works Commencement Permits and Pre-sales Permits for planning approval, construction work start approval and pre-sales approval of the subject development;

5. iv. Nanjing Tongren Industrial Co., Ltd. has obtained twelve sets of Building Ownership Certificates for some commercial units of the property with a total gross floor area of 1,942.92 square metres and two Building Ownership Certificates for some residential units of the property with a total gross floor area of 278.11 square metres;

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APPENDIX V

• v. A total of 10 commercial units (Units 101-104 of Block 1 and Units 101-106 of Block 2 of the subject development) with a total gross floor area of 1,695.18 square metres are subject to a mortgage in favour of Agriculture Bank of China Limited Jiangning Branch for a loan amount of RMB20,000,000 maturing on 10 October 2013;

• vi. Portion of the land parcel held under the State-owned Land Use Right Certificate (Ref: Ning Jiang Guo Yong (2008) Di No. 18109（寧江國用(2008)第18109號）) with an area of site area of 7,275.8 square metres is subject to a mortgage in favour of Zijin Rural Commercial Bank（紫金農商行）for a total loan amount of RMB20,000,000 maturing on 6 May 2013;

• vii. Another portion of the land parcel held under the State-owned Land Use Right Certificate (Ref: Ning Jiang Guo Yong (2008) Di No. 18109（寧江國用(2008)第18109號）) with an area of site area of 11,800 square metres is subject to a mortgage in favour of Zijin Rural Commercial Bank（紫金農商行）for a total loan amount of RMB28,000,000 maturing on 2 September 2013; and

• viii. Save for the aforesaid mortgages, the property is free from any mortgage and title defect leading to arbitration or litigation; and

• ix. Nanjing Tongren Industrial Co., Ltd. has the rights to mortgage, transfer or pre-sales the property in accordance with relevant PRC law.

• x. Nanjing Tongren Industrial Co., Ltd. expected that the application of Building Ownership Certificate for the property will be completed within two years. The application involves the following procedures:-

• a. to complete the sales of the property;

• b. to provide the relevant registration document to the owner and the owner completes the building ownership registration;

• c. upon completion of the above procedures, to file building ownership registration application to the relevant property administration authority and then obtain Building Ownership Certificate.

• xi. As confirmed by Nanjing Tongren Industrial Co., Ltd., it is eligible to apply for Building Ownership Certificate for the property upon completion of the above procedures and there is no legal impediment under the existing situation.

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APPENDIX V

VALUATION CERTIFICATE

Group II – Property interests held and operated by the Target Group

• Market Value in

• Particulars of existing state as at

• Property Description and tenure occupancy 28 February 2013 RMB

• 1. Various buildings and land located The property comprises a parcel of The property is occupied 708,800,000 in western side of Jinjia River land with a site area of by the Target Group as and southern side of Guangfu approximately 192,017.71 square clinic, hospital and (86.69% interest Road, Kunming City, Yunnan metres which is partially developed ancillary office. attributable to Province, the PRC. with five blocks of single to the Target Group: 9-storey building. Those buildings include a clinic building, a hospital 614,458,720)

• （中國雲南省昆明市廣福路以 building, an ancillary office 南、金家河以西土地及建築物） building, a garbage room and an ancillary building.

Pursuant the building plan provided, the total gross floor area of the aforesaid buildings is approximately 57,212.74 square metres plus substructure gross floor area of 13,935.83 square metres.

The above buildings were completed in about 2010.

The land use rights of the property have been granted for a term expiring on 5 August 2054 for medical and health purposes.

Notes:

1. Pursuant to a Land Use Right Grant Contract (Ref: Kun Guo Tu Zi Chu (2004) He Tong Zi Di No. 285（昆國土資出(2004)合同字第285號）) entered into between the Kunming Land Resource Administration Bureau（雲南省昆明市國土資源局, as the Grantor) and Kunming Tongren Industrial Development Co., Ltd.（昆明同仁實業開發有限公司, as the Grantee), a wholly-owned subsidiary of Jiatai Tongren on 5 August 2004, the land use rights of the subject land parcel with an area of 192,017.00 square metres were granted by the Grantor to the Grantee for a land use right term of 50 years for medical and health purposes（醫療衛生用地）at a land premium of RMB18,372,200 which has been settled in full.

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APPENDIX V PROPERTY VALUATION REPORT ON THE TARGET GROUP

1. As revealed by a State-owned Land Use Right Certificate (Ref: Kun Guo Yong (2005) Di No. 00119（昆國用(2005)第00119號）) dated 10 March 2005, the land use rights of the property with an area of 192,017.71 square metres are held by Kunming Tongren Industrial Development Co., Ltd. for a term expiring on 5 August 2054 for medical and health purposes.

2. Two Construction Land Use Planning Permits（建設用地規劃許可證）(Ref: Kun Gui Di Zheng (2003)2179（昆規地證(2003)2179號）and Kun Gui Di Zheng (2003)2180（昆規地證(2003)2180 號）) in relation to two parcels of land with a total area of approximately 373,335.2 square metres (of which the subject land parcel forms part) were issued by the Kunming Town Planning Bureau （昆明市規劃局）on 26 September 2003 in the name of Kunming Tongren Industrial Development Co., Ltd.. The permitted uses of one of the two land parcels with an area of approximately 200,001 square metres are medical and health uses（醫療衛生）and the other land parcel with an area of approximately 173,334.20 square metres is permitted for ancillary living community use（配套社 區）.

3. As revealed by a Planning Permit of Construction Work（建設工程規劃許可證）(Ref: Kun Gui Jian Zheng No. (2005)2234（昆規建證(2005)2234號）) issued by the Kunming Town Planning Bureau（昆明市規劃局）on 17 October 2006 in the name of Kunming Tongren Industrial Development Co., Ltd., the development of the hospital and ancillary community（昆明同仁醫及 配套社區）with a gross floor area of approximately 70,780 square metres (superstructure) and 18,830 square metres (substructure) has been approved.

4. As revealed by a Construction Works Commencement Permit（建築工程施工許可證）(Ref: Jian Zi 2005 Di No. 025 建字2005第025號）) issued by the Kunming Dianchi National Tourist Resort Construction Bureau（昆明滇池國家旅遊度假區建設局）on 15 December 2005, the carrying out of construction work for the subject buildings with a gross floor area of approximately 70,780 square metres (superstructures) and 18,830 square metres (substructures) has been approved.

5. As advised by the Group, it is in the process of applying for the relevant Building Ownership Certificates of the subject property.

6. In accordance with the information provided by the Group, the status of title and grant of major approvals and licences are as follows:

Land Use Right Grant Contract	: Yes
State-owned Land Use Right Certificate	: Yes
Construction Land Use Planning Permit	: Yes
Planning Permit of Construction Work	: Yes
Construction Works Commencement Permit	: Yes
Building Ownership Certificate	: No

1. The opinion from the PRC legal advisors of the Company on the property is as follows:

2. i. On 5 August 2004, the Kunming State Land Resource Administration Bureau and Kunming Tongren Industrial Development Co., Ltd. entered into a Land Use Right Grant Contract (Ref: Kun Guo Tu Zi Chu (2004) He Tong Zi Di No. 285（昆國土資出(2004)合同字第285 號）) by virtue of which the former party granted the land use rights of the subject land parcel with an area of 192,017.00 square metres to the latter party for residential purposes for a term of 70 years commencing from the land handover date at a land premium of RMB18,372,200;

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PROPERTY VALUATION REPORT ON THE TARGET GROUP

• ii. After full settlement of the land premium by Kunming Tongren Industrial Development Co., Ltd., a State-owned Land Use Right Certificate in relation to the subject land parcel was issued by the Municipal Government of Kunming to Kunming Tongren Industrial Development Co., Ltd. on 10 March 2005;

• iii. Kunming Tongren Industrial Development Co., Ltd. has obtained various Construction Land Use Planning Permits, Planning Permits of Construction Work and Construction Works Commencement Permits for planning approval and construction work start approval of the property;

• iv. Building Ownership Certificate has not yet been issued to the property. In accordance to relevant PRC law, Kunming Tongren Industrial Development Co., Ltd. shall, upon completing relevant administrative procedures, obtain the building ownership certificate for the property;

• v. The land use rights of the subject land parcels are in the nature of granted land use rights. Upon completion of title registration procedures, they are permitted to be transferred in accordance with the PRC law. The designated land uses of the property is not allowed to be altered without prior consent;

• vi. Pursuant to a maximum loan amount mortgage agreement（最高額抵押合同）(ref no. 25020160-2008年馬街（抵）字 0008) between Kunming Tongren Development Co., Ltd. as the mortgagor and Industrial and Commercial Bank of China Limited – Kunming Xishi Sub-branch（中國工商銀行昆明市西市區支行）as the mortgagee, the land use rights of the property held under the State-owned Land Use Right Certificate (Ref: Kun Guo Yong (2005) Di No. 00119（昆國用(2005)第00119號）) and the buildings erected thereon have been pledged for a maximum loan amount of RMB256,000,000. As at the date of the legal opinion, the outstanding principal amount of the loan is RMB127,700,000. Besides the aforesaid loan, the property is not subject to any mortgage;

• vii. as revealed from the Hospital Zone Technical Economic Development Parameters（醫院區 技術經濟指標）, the permitted total gross floor area of the subject land parcel with an area of approximately 192,017 square metres is 295,610 square metres which has been partially utilized by the construction of the subject buildings. The unutilized gross floor area of the subject land parcel is permitted to be used for developing administrative offices, healthcare centre, general hospital, elderly apartments, medical staff quarters, rehabilitation exchange centre, children rehabilitation centre, VIP garden villa type hospital and ancillary commercial facilities; As confirmed by Kunming Tongren Industrial Development Co., Ltd., it is eligible to apply for Building Ownership Certificate for the property upon completion of the above development and relevant procedures and there is no legal impediment under the existing situation.

• viii. Building Ownership Certificates for the constructed buildings can be obtained after the completion of whole building inspection and acceptance procedures and obtaining the mortgagee’s consent. As confirmed by the Group, Kunming Tongren Industrial Development Co., Ltd. will complete the relevant registration procedure and obtain the Building Ownership Certificate for the property within one year; The application involves the following procedures:–

• a. to discharge the mortgage or obtaining the mortgagee’s consent;

• b. to complete the relevant planning change application and obtain the planning acceptance certificate;

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APPENDIX V

• c. to apply for the carrying out of building work satisfaction completion examination by the relevant department; and

• d. upon completion of the above procedures, to file building ownership registration application to the relevant property administration authority and then obtain Building Ownership Rights Certificate.

• ix. As confirmed by Kunming Tongren Industrial Development Co., Ltd., it is eligible to apply for Building Ownership Certificate for the property upon completion of the above procedures and there is no legal impediment under the existing situation.

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APPENDIX V

VALUATION CERTIFICATE

Market Value in Particulars of existing state as at occupancy 28 February 2013 RMB

Property Description and tenure occupancy 28 February 2013 RMB 4. Various buildings and land located The property comprises three The property is occupied 596,800,000 in Nanjing Tongren Hospital and parcels of land with a total site by the Target Group as Elderly Rehabilitation Centres, area of approximately 160,139.77 clinic, hospital and (69.35% interest Jiyin Avenue, Jiangning square metres (as per Land Use elderly rehabilitation attributable to Development Zone, Nanjing City, Right Certificate mentioned in centres. the Target Group: Jiangsu Province, the PRC. Note 3, 4 and 5) on which four blocks of buildings are erected. 413,880,800) Those buildings include a 12-storey （中國江蘇省南京市江寧開發區 (plus 2 basement levels) hospital 吉印大道南京同仁醫院及護理中 building and three blocks of 3 to 心之土地及建築物） 4-storey elderly rehabilitation centres.

The total gross floor area of the aforesaid buildings is approximately 139,289.36 square metres.

The above buildings were completed in about 2007.

The land use rights of the property have been granted for a term of 50 years expiring on 1 May 2054 and 20 November 2055 for medical and health purposes.

Notes:

1. Pursuant to a Land Use Right Grant Contract (Ref: Jiang Ning Guo Tu Chu He No. (2004)152 （江寧國土出合 (2004)152號）) entered into between the Nanjing Jiangning District Land Resources Administration Bureau（南京市國土資源局江寧分局, as the Grantor) and Nanjing Tongren Industrial Co., Ltd.（南京同仁實業有限公司, as the Grantee), a wholly-owned subsidiary of the Jiatai Tongren on 2 May 2004, the land parcel of the property with a land area of 91,159.87 square metres was granted by the Grantor to the Grantee for a land use right term of 50 years for medical and health purposes（醫療衛生用地）at a land premium of RMB13,673,980.50 which has been settled in full.

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APPENDIX V PROPERTY VALUATION REPORT ON THE TARGET GROUP

1. Pursuant to another Land Use Right Grant Contract (Ref: Jiang Ning Guo Tu Chu He No. (2006)056 （江寧國土出合 (2006)056號）) entered into between the Nanjing Jiangning District Land Resources Administration Bureau (as the Grantor) and Nanjing Tongren Industrial Co., Ltd. (as the Grantee) on 8 May 2006, another land parcel of the property with a land area of 68,982.9 square metres was granted by the Grantor to the Grantee for a land use right term of 50 years for medical and health purposes（醫療衛生用地）at a land premium of RMB12,416,922.00 which has been settled in full.

2. As revealed by a State-owned Land Use Right Certificate (Ref: Ning Jiang Guo Yong (2004) Di No. 10119（寧江國用(2004)第10119號）dated 18 October 2004 issued by the Municipal Government of Nanjing City, the land use rights of a portion of the subject land parcel with an area of 91,159.87 square metres are held by Nanjing Tongren Industrial Co., Ltd. for a term expiring on 1 May 2054 for medical and health purposes（醫療衛生用地）.

3. As revealed by another State-owned Land Use Right Certificate (Ref: Ning Jiang Guo Yong (2006) Di No. 07654（寧江國用(2006)第07654號）) dated 2 June 2006 issued by the Municipal Government of Nanjing City, the land use rights of another portion of the subject land parcel with an area of 44,928.7 square metres are held by Nanjing Tongren Industrial Co., Ltd. for a term expiring on 20 November 2055 for medical and health purposes（醫療衛生用地）.

4. As revealed by another State-owned Land Use Right Certificate (Ref: Ning Jiang Guo Yong (2006) Di No. 07656（寧江國用(2006)第07656號）) dated 2 June 2006 issued by the Municipal Government of Nanjing City, the land use rights of the remaining portion of the subject land parcel with an area of 24,051.2 square metres are held by Nanjing Tongren Industrial Co., Ltd. for a term expiring on 1 May 2054 for medical and health purposes（醫療衛生用地）.

5. As revealed by two sets of Construction Land Use Planning Permit（建設用地規劃許可證）(Ref: Gui Jiang Ning Yong Di (2005) Di No. 0026（規江寧用地(2005)第0026號）and Ning Jian Gui Zi (2003) Di No. 839（寧建規字(2003)第839號）) both issued by the Nanjing City Town Planning Bureau（南京市規劃局）on 8 September 2003 and 31 October 2005 respectively in the name of Nanjing Tongren Industrial Co., Ltd., the permitted planning use of the subject land parcel is Medical and Health（醫療衛生）.

6. As revealed by 3 sets of Planning Permit of Construction Work（建設工程規劃許可證）(Ref: Jiang Ning Jian Zi (2003) Di No. 859（江寧建字(2003)第859號）, Jiang Ning Jian Zi (2004) Di No. 1012（江寧建字(2004)第1012號）and Jiang Ning Jian Zi (2005) Di No. 0052（江寧建字 (2005)第0052號）) all issued by the Nanjing Jiangning District Town Planning Bureau（南京市 江寧區規劃局）on 11 December 2003, 7 December 2004 and 26 January 2005 respectively in the name of Nanjing Tongren Industrial Co., Ltd., the construction of the hospital building of the property with a total gross floor area of 89,750 square metres (superstructure) and 31,250 square metres (substructure) has been approved.

7. As revealed by another Planning Permit of Construction Work（建設工程規劃許可證）(Ref: Jiang Ning Jian Zi (2006) Di No. 384（江寧建字(2006)第384號）issued by the Nanjing Jiangning District Town Planning Bureau on 24 June 2006 in the name of Nanjing Tongren Industrial Co., Ltd., the construction of the 3 blocks of elderly rehabilitation centre of the property with a total gross floor area of 18,756 square metres has been approved.

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APPENDIX V PROPERTY VALUATION REPORT ON THE TARGET GROUP

1. As revealed by a Construction Works Commencement Permit（建築工程施工許可證）(Ref: Jiang Ning Jian Xu Zi (2005) Di No. 029（江寧建許字(2005)第029號）) issued by the Nanjing Jiangning District Construction Engineering Bureau（南京市江寧區建築工程局）on 27 January 2005 in the name of Nanjing Tongren Industrial Co., Ltd., the carrying out of construction work for the hospital building of the property with a gross floor area of 121,000 has been approved.

2. As revealed by another Construction Works Commencement Permit（建築工程施工許可證）(Ref: Jiang Ning Jian Xu Zi (2006) Di No. 074 江寧建字(2006)第074號）) issued by the Nanjing Jiangning District Construction Engineering Bureau on 20 November 2006 in the name of Nanjing Tongren Industrial Co., Ltd., the carrying out of construction work for the 3 blocks of elderly rehabilitation centre with a gross floor area of 18,756 has been approved.

3. As revealed by three Building Ownership Certificates (Ref: Ning Fang Quan Zheng Jiang Chu Zi Di Nos. JN00244465, JN00244468, JN00244469) all dated 18 April 2012, the building ownership rights of the 3 blocks of elderly rehabilitation centre with a total gross floor area of 18,289.36 square metres are held by Nanjing Tongren Industrial Co., Ltd.（南京同仁實業有限公司）.

4. As advised by the Group, it is in the process of applying for the relevant Building Ownership Certificates of the subject property.

5. In accordance with the information provided by the Group, the status of title and grant of major approvals and licences are as follows:

Land Use Right Grant Contract	: Yes
State-owned Land Use Right Certificate	: Yes
Construction Land Use Planning Permit	: Yes
Planning Permit of Construction Work	: Yes
Construction Works Commencement Permit	: Yes
Building Ownership Certificate	: Yes (for 3 elderly rehabilitation centres of
	the property)
Pre-sales Permit	: No

1. The opinion from the PRC legal advisors of the Company on the property is as follows:

2. i. On 2 May 2004 and 8 May 2006, the Nanjing State Land Resource Bureau Jiangning Branch and Nanjing Tongren Industrial Co., Ltd. entered into two sets of Land Use Right Grant Contract by virtue of which the former party granted the land use rights of the subject land parcels with a total area of 160,142.77 square metres to the latter party for medical and health purposes for a term of 50 years at a total land premium of RMB26,090,902.5.

3. ii. As approved by the Town Planning authority, the subject land parcel is allowed to be developed into a hospital, an elderly rehabilitation complex and ancillary commercial facilities with respective permissible gross floor areas of 121,000 square metres (which has been completed and commenced operations), 138,400 square metres (of which 18,289.36 square metres has been completed and commenced operations) and 10,000 square metres;

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APPENDIX V

• iii. Nanjing Tongren Industrial Co., Ltd. has obtained 3 sets of State-owned Land Use Right Certificate for the subject land parcels with a total area of 160,139.77 square metres and a Building Ownership Certificate for the 3 elderly rehabilitation centres with a total gross floor area of 18,289.36 square metres;

• iv. Nanjing Tongren Industrial Co., Ltd. has obtained various Construction Land Use Planning Permit, Planning Permit of Construction Work and Construction Works Commencement Permit for planning approval and construction work start approval of the subject development;

• v. The property is free from mortgage and any title defect leading to arbitration or litigation;

• vi. Nanjing Tongren Industrial Co., Ltd. has the rights to mortgage the hospital building of the property and can transfer the same building after obtaining Building Ownership Certificate;

• vii. Nanjing Tongren Industrial Co., Ltd. has the right to mortgage and transfer the elderly rehabilitation centres;

• viii. Nanjing Tongren Industrial Co., Ltd. has the right to mortgage the undeveloped land portion of the property and after spending more than 25% of the total investment in developing the same, it is eligible to transfer the undeveloped land portion; and

• ix. Nanjing Tongren Industrial Co., Ltd. expected that the application of Building Ownership Certificate for the property will be completed within three years. The application involves the following procedures:-

• a. to complete the building work construction;

• b. to apply for the carrying out of building work satisfaction completion examination by the relevant department; and

• c. upon completion of the above procedures, to file building ownership registration application to the relevant property administration authority and then obtain Building Ownership Rights Certificate.

• x. As confirmed by Nanjing Tongren Industrial Co., Ltd., it is eligible to apply for Building Ownership Certificate for the property upon completion of the above procedures and there is no legal impediment under the existing situation.

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APPENDIX V

VALUATION CERTIFICATE

Group III – Property interests held by the Target Group for future development

Market Value in Particulars of existing state as at Property Description and tenure occupancy 28 February 2013 RMB 5. Two parcels of land located in The property comprises two parcels The property is currently 284,600,000 southern side of Changyu Road of land with a total area of vacant. and eastern side of Jinqiao Road, approximately 184,262.70 square (100% interest Lingang Chanye Zone, metres (as per Land Use Right attributable to Development Zone, Lianyungang Certificate mentioned in 3 and 4). the Target Group: City, Jiangsu Province, the PRC. The land use rights of the property 284,600,000) （中國江蘇省連雲港市開發區臨 have been granted for a term of 50 港產業區昌紆路南及金橋路東兩 years expiring on 29 March 2082 塊土地） for residential use.

（中國江蘇省連雲港市開發區臨 港產業區昌紆路南及金橋路東兩 塊土地）

Notes:

1. Pursuant to Land Use Right Grant Contract (Ref no. 3207012011CR0177) entered into between the Lianyungang Land Resource Administration Bureau（連雲港國土資源局, as the Grantor) and Lianyungang Chengtai Property Ltd.（連雲港成泰置業有限公司, as the Grantee), a wholly-owned subsidiary of Jiatai Tongren on 9 September 2011, one of the two subject land parcels with an area of 117,600 square metres was granted by the Grantor to the Grantee for residential use at a land premium of RMB190,500,000 which has been settled in full.

2. Pursuant to another Land Use Right Grant Contract (Ref no. 3207012011CR0178) entered into between Lianyungang Land and Resource Administration Bureau (as the Grantor) and Lianyungang Chengtai Property Ltd. (as the Grantee) on 9 September 2011, the other land parcel of the property with an area of 66,664 square metres was granted by the Grantor to the Grantee for residential use at a land premium of RMB80,000,000 which has been settled in full.

3. As revealed by a State-owned Land Use Right Certificate (Ref: Lian Guo Yong (2012) Di No. LY003047（連國用(2012)第LY003047號）) dated 15 October 2012, the land use rights of one of the subject land parcels with an area of 117,598.6 square metres are held by Lianyungang Chengtai Property Ltd. for a term expiring on 29 March 2082 for residential use.

4. As revealed by another State-owned Land Use Right Certificate (Ref: Lian Guo Yong (2012) Di No. LY003046（連國用(2012)第LY003046號）) dated 15 October 2012, the land use rights of another land parcel of the property with an area of 66,664.1 square metres are held by Lianyungang Chengtai Property Ltd. for a term expiring on 29 March 2082 for residential use.

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APPENDIX V PROPERTY VALUATION REPORT ON THE TARGET GROUP

1. In accordance with the information provided by the Group, the status of title and grant of major approvals and licences are as follows:

Land Use Right Grant Contract : Yes State-owned Land Use Right Certificate : Yes

1. The opinion from the PRC legal advisors of the Company on the property is as follows:

2. i. Lianyungang Chengtai Property Ltd. has obtained the State-owned Land Use Right Certificate for the property and has the right to develop, transfer and mortgage the land use rights of the property; and

3. ii. The property is free from any mortgage.

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PROPERTY VALUATION REPORT ON THE TARGET GROUP

APPENDIX V

VALUATION CERTIFICATE

				Market Value in
			Particulars of	existing state as at
	Property	Description and tenure	occupancy	28 February 2013
				RMB
6.	A parcel of land located outside	The property comprises a parcel	The property is currently	14,700,000
	the Export and Processing Zone,	of land with a site area of	vacant.
	Development Zone, Lianyungang	approximately 6,665.5 square		(100% interest
	City, Jiangsu Province, the PRC.	metres.		attributable to
				the Target Group:
	（中國江蘇省連雲港市開發區出	The land use rights of the property
	口加工區外廣場一塊土地）	have been granted for a term		14,700,000)
		expiring on 22 November 2046 for
		commerce and finance purposes.

Notes:

1. Pursuant to the Land Use Right Grant Contract entered into between the Lianyungang State Land Resource Administration Bureau (as Grantor) and Jiatai Tongren (formerly known as Lianyungang Jiatai City Development Company Limited （連雲港嘉泰城市發展有限公司, as Grantee)) on 23 October 2006, the Grantor granted the land use rights of the subject land parcel with an area of 6,665.5 square metres to the Grantee for a land use right term of 40 years for commercial and office purposes at a land premium RMB5,100,000.

2. Pursuant to the Land Use Right Transfer Contract entered into between Lianyungang Jiatai City Development Company Limited (as Transferor) and Lianyungang Haipan Property Development Co., Ltd.（連雲港海畔房地產開發有限公司, a wholly-owned subsidiary of Jiatai Tongren, as Transferee) on 12 April 2010, the Transferor transferred all benefits and burdens of the aforesaid Land Use Right Grant Contract to the Transferee on gratuitous basis.

3. As revealed by a State-owned Land Use Right Certificate (Ref: Lian Guo Yong (2010) Di No. LY001474（連國用(2010)第LY001474號）) dated 7 May 2010, the land use rights of the property with an area of 6,665.5 square metres are held by Lianyungang Haipan Property Development Co., Ltd. for a term expiring on 22 November 2046 for commerce and finance purposes（商務金融用 地）.

4. In accordance with the information provided by the Group, the status of title and grant of major approvals and licences are as follows:

Land Use Right Transfer Contract : Yes State-owned Land Use Right Certificate : Yes

1. The opinion from the PRC legal advisors of the Company on the property is as follows:

2. i. Lianyungang Haipan Property Development Co., Ltd. has obtained the State-owned Land Use Right Certificate for the property and has the right to develop, transfer and mortgage the land use rights of the property; and

3. ii. The property is free from any mortgage.

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PROPERTY VALUATION REPORT ON THE TARGET GROUP

APPENDIX V

VALUATION CERTIFICATE

Group III – Property interests held by the Target Group under development

Market Value in Particulars of existing state as at Property Description and tenure occupancy 28 February 2013 RMB 7. Block 9 – 12, The property comprises a parcel of The property is currently 270,900,000 Kangya Garden under construction land with a site area of under construction. located in northern side of approximately 17,233 square metres (69.35% interest Tongren Hospital and eastern side on which four blocks of residential attributable to of Nan Shi Fu Zhong, apartments together with retail the Target Group: Jiangning Development Zone, facilities and underground parking Nanjing City, spaces are under construction. 187,869,150) Jiangsu Province, the PRC. The development is scheduled to be completed on 2014. Upon （中國江蘇省南京市江寧開發區 completion, the development will 南師附中以東、同仁醫院以北康 have a total superstructure and 雅苑第9-12棟在建工程） substructure gross floor areas of approximately 42,208.81 square metres and 33,574.94 square metres respectively. The land use rights of the property have been granted for a term expiring on 12 October 2076 for residential use.

Notes:

1. Pursuant to a Land Use Right Grant Contract (Ref: Jiang Ning Guo Tu Chu He No. (2005)056 （江寧國土出合(2005)056號）entered into between the Nanjing Jiangning District Land Resources Bureau（南京市國土資源局江寧分局, as the Grantor) and Nanjing Tongren Industrial Co., Ltd. （南京同仁實業有限公司, as the Grantee), a wholly-owned subsidiary of Jiatai Tongren on 31 October 2005, the land parcel of the property with an area of 140,552.90 square metres was granted by the Grantor to the Grantee for a land use right term of 70 years for residential use at a land premium of RMB140,000,000 which has been settled in full.

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APPENDIX V PROPERTY VALUATION REPORT ON THE TARGET GROUP

1. As revealed by a State-owned Land Use Right Certificate (Ref: Ning Jiang Guo Yong (2006) Di No. 16924（寧江國用(2006)第16924號）) dated 23 November 2006 issued by the Municipal Government of Nanjing City, the land use rights of a portion of the subject land parcel of the property with an area of 13,086.10 square metres are held by Nanjing Tongren Industrial Co., Ltd. (as Grantee) for a term expiring on 12 October 2076 for residential use.

2. As revealed by another State-owned Land Use Right Certificate (Ref: Ning Jiang Guo Yong (2008) Di No. 18109（寧江國用(2008)第18109號）) dated 16 October 2008 issued by the Municipal Government of Nanjing City, the land use rights of the remaining portion of the subject land parcel of the property with an area of 127,467.10 square metres are held by Nanjing Tongren Industrial Co., Ltd.) for a term expiring on 12 October 2076 for residential use.

3. As revealed by a Construction Land Use Planning Permit（建設用地規劃許可證）(Ref: Gui Jiang Ning Yong Di (2005) Di No. 0026（規江寧用地(2005)第0026號）) issued by Nanjing City Planning Bureau（南京市規劃局）on 31 October 2005 in the name of Nanjing Tongren Industrial Co., Ltd., the permitted planning use of the land subject land parcels is Residential (Type 2).

4. As revealed by a Planning Permit of Construction Work（建設工程規劃許可證）(Ref: Jian Zi Di No. 320115201281582（建字第 320115201281582號）issued by the Nanjing Planning Bureau （南京市規劃局）on 23 November 2012 in the name of Nanjing Tongren Industrial Co., Ltd., the construction of the subject buildings a total gross floor area of 75,783.75 square metres has been approved.

5. Nanjing Tongren Industrial Co., Ltd. is applying for Construction Works Commencement Permit for the property.

6. According to the information provided by the Company, as at the date of valuation, the construction costs already expended on the property and the further construction costs for completing the property are approximately RMB53,582,000 and RMB282,686,000 respectively. The market value of the property as if it were fully completed on the valuation date is RMB418,000,000.

7. In accordance with the information provided by the Group, the status of title and grant of major approvals and licences are as follows:

Land Use Right Grant Contract	: Yes
State-owned Land Use Right Certificate	: Yes
Construction Land Use Planning Permit	: Yes
Planning Permit of Construction Work	: Yes
Construction Works Commencement Permit	: No
Building Ownership Certificate	: No
Pre-sales Permit	: No

1. The opinion from the PRC legal advisors of the Company on the property is as follows:

2. i. On 31 October 2005, the Nanjing State Land Resource Administration Bureau Jiangning Branch and Nanjing Tongren Industrial Co., Ltd. entered into a Land Use Right Grant Contract (Ref: Jiang Ning Guo Tu Chu He No. (2005)056（江寧國土出合 (2005) 056號） by virtue of which the former party granted the land use rights of the subject land parcels with a total area of 140,552.9 square metres to the latter party for residential (Type 2) purposes for a term of 70 years commencing from the land handover date at a land premium of RMB140,000,000.

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APPENDIX V

PROPERTY VALUATION REPORT ON THE TARGET GROUP

• ii. Nanjing Tongren Industrial Co., Ltd. was issued from the Municipal Government of Nanjing a State-owned Land Use Right Certificate a portion of the subject land parcel with an area of 13,086.1 square metres on 23 November 2006 and another State -owned Land Use Right Certificate the remaining portion of the subject land parcel with an area of 127,467.1 square metres on 16 October 2008;

• iii. Nanjing Tongren Industrial Co., Ltd. has obtained various Construction Land Use Planning Permits and Planning Permits of Construction Work for planning approval of the subject development;

• iv. Nanjing Tongren Industrial Co., Ltd. is currently applying for the Construction Works Commencement Permit for the property;

• v. The portion of the land use rights of the property (Ref: Ning Jiang Guo Yong (2008) Di No. 18109（寧江國用(2008)第18109號）) with a site area of 19,075.8 square metres are subject to a mortgage in favour of Zijin Rural Commercial Bank（紫金農商行）for a total loan amount of RMB48,000,000;

• vi. Save for the aforesaid mortgage stated above, the property is free from any defect in rights or third party right which will lead to arbitration or litigation;

• vii. Portion of the land parcel held under the State-owned Land Use Right Certificate (Ref: Ning Jiang Guo Yong (2008) Di No. 18109（寧江國用(2008)第18109號）) with an area of site area of 7,275.8 square metres is subject to a mortgage in favour of Zijin Rural Commercial Bank（紫金農商行）for a total loan amount of RMB20,000,000 maturing on 6 May 2013;

• viii. Another portion of the land parcel held under the State-owned Land Use Right Certificate (Ref: Ning Jiang Guo Yong (2008) Di No. 18109（寧江國用(2008)第18109號）) with an area of site area of 11,800 square metres is subject to a mortgage in favour of Zijin Rural Commercial Bank（紫金農商行）for a total loan amount of RMB28,000,000 maturing on 2 September 2013;

• ix. Save for the aforesaid mortgages, the property is free from any mortgage and title defect leading to arbitration or litigation;

• x. Nanjing Tongren Industrial Co., Ltd. has the rights to mortgage, transfer or pre-sales the property (after satisfying relevant pre-sales conditions) in accordance with relevant PRC law; and

• xi. As confirmed by Nanjing Tongren Industrial Co., Ltd., it is estimated that the Construction Works Commencement Permit of the property will be obtained in June 2013; the Pre-sale Permit of the property will be obtained before the end of 2013;

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APPENDIX V

• xii. Nanjing Tongren Industrial Co., Ltd. expected that the application of Building Ownership Certificate for the property will be completed within two years. The application involves the following procedures:-

• a. to obtain the Construction Works Commencement Permit and the pre-sales permit of the property;

• b. to apply for the building work examination and satisfaction completion from the relevant department;

• c. to provide the relevant registration document to the owner and the owner completes the building ownership registration; and

• d. to complete of the above procedures and complete the building ownership registration from the relevant department

• xiii. As confirmed by Nanjing Tongren Industrial Co., Ltd., it is eligible to apply for Building Ownership Certificate for the property upon completion of the above procedures and there is no legal impediment under the existing situation.

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PROPERTY VALUATION REPORT ON THE TARGET GROUP

APPENDIX V

VALUATION CERTIFICATE

Group V – Property interests rented by the Target Group

Property

Description and tenure

Market Value in Particulars of existing state as at occupancy 28 February 2013 RMB

1. Building and land nearby The property comprises an Erhuan Road of Jinshi Xiaoqu, 11-storey hospital building, a Xiaozhuang Lijiaoqiao, 5-storey ancillary building and Longquan Town, ancillary facilities completed in Guandu District, about 1999. Kunming City, Yunnan Province, The land area and the total gross the PRC. floor area of the property are approximately 1,080 square metres （中國雲南省 and 14,000 square metres 昆明市官渡區 respectively. 龍泉鎮小莊立交橋 金實小區二環路旁 The property is held by the Group 的土地及建設物） under a tenancy for a term of 40 years commencing on 1 June 2003 and expiring on 31 May 2043 at an annual rental of RMB500,000 for the first ten years, RMB600,000 for the second ten years, RMB720,000 for the third ten years and RMB864,000 for the last ten years period exclusive of water and electricity charges.

The property is current No commercial value being occupied by a hospital namely the Yunnan Xin Xinhua Hospital. (See note 2 below)

Notes:

1. Pursuant to a tenancy agreement dated 11 June 2004, Yunnan Tongren Xinhua Hospital Company Limited（雲南同仁新華醫院有限公司 and now known as Yunnan Xin Xinhua Hospital Company Limited), a wholly-owned subsidiary of Jiatai Tongren, rented the property with a total gross floor area of approximately 14,000 square metres from Guandu Longquan Xiaozhuang Stock Cooperatives（ 官渡區龍泉鎮小莊股份合作社）for a term of 40 years commencing on 1 June 2003 and expiring on 31 May 2043 at an annual rental of RMB500,000 for the first ten years, RMB600,000 for the second ten years, RMB720,000 for the third ten years and RMB864,000 for the last ten years period exclusive of water and electricity charges.

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APPENDIX V PROPERTY VALUATION REPORT ON THE TARGET GROUP

1. Pursuant to an Escrow Agreement dated 19 May 2010 between Tongren Healthcare Industry Group Company Limited (“Tongren Healthcare”) （同仁醫療產業集團有限公司）, a subsidiary of Jiatai Tongren and Huang Kun （黄昆）, Huang Kun was vested the operating rights of the Yunnan Kunming Tongren Hospital Northern Zone (currently known as the Yunnan Xin Xinhua Hospital) for a term of 5 years commencing from 1 June 2010 and expiring on 2 May 2015. In return, Tongren Healthcare is entitled to an annual fixed return of RMB6,000,000 for the first year, RMB7,000,000 for the second year, RMB8,000,000 for the third year, RMB9,000,000 for the fourth year and RMB10,000,000 for the fifth year payable by Huang Kun quarterly.

2. The opinion from the PRC legal advisors of the Company on the property is as follows:

3. i. On 11 June 2004, Yunnan Xin Xinhua Hospital Company Limited（雲南新新華醫院有限 公司）rented the property from Guandu Longquan Xiaozhuang Stock Cooperatives（官渡 區龍泉鎮小莊股份合作社）for a term commencing on 1 June 2003 and expiring on 31 May 2043;

4. ii. The tenancy agreement does not contravene the PRC Laws and is considered legal and valid;

5. iii. Guandu Longquan Xiaozhuang Stock Cooperatives is the owner of the property of which the land use rights are in the nature of collectively-owned land use rights;

6. iv. Pursuant to aforesaid tenancy agreement, Yunnan Xin Xinhua Hospital Company Limited has the leasehold interest of the property; and

7. v. On 19 May 2010, Tongren Healthcare and Huang Kun （黄昆）entered into a Escrow Agreement（托管協議） by virtue of which Huang Kun was entitled to the operating rights of the Yunnan Kunming Tongren Hospital Northern Zone (Yunnan Xin Xinhua Hospital, 雲 南昆明同仁醫院北院區（雲南新新華醫院）) for a period from 1 June 2010 to 313 May 2015. The escrow agreement does not contravene the PRC Laws and is legal and valid.

8. We have ascribed no commercial value of the property due to the non-assignable nature of the land use rights of the property.

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APPENDIX V PROPERTY VALUATION REPORT ON THE TARGET GROUP

Property Value Reconciliation

Group 1 - Property interests held by the Target Group for Sale

	Property No. 1
	Various residential units
	and car parking spaces
	located in Dianchi Yinxiang
	International Garden,
	western side of Jinjia River
	and southern side of
	Guangfu Road, Kunming
	City, Yunnan Province,
Property	the PRC.
Carrying value as at 31 December 2012_(Note 1)_	21,469,934
Addition/(Reduction) for the 2 months ended 28 February 2013	0
(Note 2)
Depreciation for the 2 months ended 28 February 2013_(Note 2)_	0
Carrying value as at 28 February 2013_(Note 3)_	21,469,934
Valuation Report as at 28 February 2013	31,300,000

Notes:–

1. extracted from accountants’ report for year ended 31 December 2012 with Property No. 1 classified as part of the properties held for sale (Page 134 of this circular)

2. extracted from the management account for period ended 28 February 2013

3. extracted from the management account for period ended 28 February 2013

4. amount denominated in RMB are translated into HK$ at the exchange rate of approximately RMB1.00 to HK$1.24

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APPENDIX V PROPERTY VALUATION REPORT ON THE TARGET GROUP

Property Value Reconciliation

Group II – Property interests held and operated by the Target Group

		Property No. 4
	Property No. 3	Various buildings and land
	Various buildings and land	located in Nanjing Tongren
	located in western side of	Hospital and Elderly
	Jinjia River and southern	Rehabilitation Centres,
	side of Guangfu Road,	Jiangning Development
	Kunming City, Yunnan	Zone, Jiyin Avenue,
	Province,	Nanjing City, Jiangsu
Property	the PRC	Province, the PRC.
Carrying value as at 31 December 2012	574,532,747	401,618,277
(Note 1)
Addition/(Reduction) for the 2 months	2,781,509.53	1,936,467.65
ended 28 February 2013_(Note 2)_
Depreciation for the 2 months ended	0	11,022,286.96
28 February 2013_(Note 2)_
Carrying value as at 28 February 2013	577,314,256.53	392,532,457.69
(Note 3)
Valuation Report as at	708,800,000	596,800,000
28 February 2013

Notes:–

1. extracted from accountants’ report for year ended 31 December 2012 with Property No. 3 and No. 4 classified as buildings (Page 179 of this circular) and prepaid lease payments (Page 134 of this circular)

2. extracted from the management account for period ended 28 February 2013

3. extracted from the management account for period ended 28 February 2013

4. amount denominated in RMB are translated into HK$ at the exchange rate of approximately RMB1.00 to HK$1.24

– 251 –

APPENDIX V PROPERTY VALUATION REPORT ON THE TARGET GROUP

Property Value Reconciliation

Group III – Property interests held by the Target Group for future development

	Property No. 5
	Two parcels of land located	Property No. 6
	in southern side of Changyu	A parcel of land located
	Road and eastern side of	outside the Export and
	Jinqiao Road, Lingang	Processing Zone,
	Chanye Zone, Development	Development Zone,
	Zone, Lianyungang City,	Lianyungang City, Jiangsu
Property	Jiangsu Province, the PRC.	Province, the PRC.
Carrying value as at 31 December 2012	279,486,210.4	5,305,790
(Note 1)
Addition/(Reduction) for the 2 months	0	0
ended 28 February 2013_(Note 2)_
Depreciation for the 2 months ended	0	0
28 February 2013_(Note 2)_
Carrying value as at 28 February 2013	279,486,210.4	5,305,790
(Note 3)
Valuation Report as at	284,600,000	14,700,000
28 February 2013

Notes:–

1. extracted from accountants’ report for the year ended 31 December 2012 with Property No. 5 and No. 6 classified as part of the properties under development for sale (Page 134 of this circular)

2. extracted from the management account for the period ended 28 February 2013

3. extracted from the management account for the period ended 28 February 2013

4. amount denominated in RMB are translated into HK$ at the exchange rate of approximately RMB1.00 to HK$1.24

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APPENDIX V PROPERTY VALUATION REPORT ON THE TARGET GROUP

Property Value Reconciliation

Group IV – Property interests held by the Target Group Under development

Property

Property No. 2 & 7 Various commercial and Block 9 – 12, Kangya residential units and car Garden under construction parking spaces within located in northern side of Kangya Garden located in Tongren Hospital and northern side of Tongren eastern side of Nan Shi Fu Hospital and eastern side of Zhong, Jiangning Nan Shi Fu Zhong, Development Zone, Nanjing Jiangning Development City, Jiangsu Province, the Zone, Nanjing City, Jiangsu PRC. Province, the PRC.

Carrying value as at 31 December 369,617,463 2012 (Note 1)

Addition/(Reduction) for the 2 months ended 28 February 2013 (Note 2)

Depreciation for the 2 months ended 28 February 2013 (Note 2)

Carrying value as at 28 February 369,617,463 2013 (Note 3) Valuation Report as at 657,700,000 28 February 2013

Notes:–

1. extracted from accountants’ report for the year ended 31 December 2012 with Property No. 2 classified as part of the properties held for sale (Page 134 of this circular) and Property No. 7 as properties under development for sale (Page 134 of this circular)

2. extracted from the management account for the period ended 28 February 2013

3. extracted from the management account for the period ended 28 February 2013

4. pursuant accountants’ report as at 31 December 2012, Property no. 2 and 7 are combined

5. amount denominated in RMB are translated into HK$ at the exchange rate of approximately RMB1.00 to HK$1.24

– 253 –

GENERAL INFORMATION

APPENDIX VI

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 of giving information with regard to the Company. The Directors, having made all reasonable enquiries, 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) Directors’ interests

Save as disclosed below, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interest or short position in the Shares, underlying Shares or debentures of the Company or any of 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 the interests and short positions, if any, which they were taken or deemed to have under such provisions of the SFO); (ii) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to in such provisions of the SFO; or (iii) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 of the Listing Rules to be notified to the Company and the Stock Exchange:

Long position in the Shares

Number of ordinary shares of HK$0.01 each

						Percentage
						of issued
	Personal	Family	Corporate	Other		ordinary
Name of Director	interests	interests	interests	interests	Total	shares
Ms. Chong Sok Un	–	–	391,125,707	–	391,125,707	72.13%
(“Ms. Chong”)			(Note)

Note:

Vigor Online Offshore Limited, a wholly-owned subsidiary of China Spirit Limited (“China Spirit”), owns 391,125,707 ordinary shares of the Company. Ms. Chong maintains 100% beneficial interests in China Spirit. Accordingly, Ms. Chong is deemed to have corporate interest in 391,125,707 ordinary shares of the Company.

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GENERAL INFORMATION

APPENDIX VI

(b) Substantial Shareholders’ interests

Save as disclosed below, the Directors and the chief executive of the Company were not aware that there was any person who, as at the Latest Practicable Date, had an interest or short position in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would fall to be disclosed under provisions of Division 2 and 3 of Part XV of the SFO, or who, as at the Latest Practicable Date, was directly and indirectly interested in ten per cent or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of the Group.

Long positions in the Shares

		Number of	Percentage of
		ordinary	issued ordinary
Name	Capacity	shares held	shares
Ms. Chong Sok Un	Held by controlled	319,125,707	72.13%
(“Ms. Chong”)	corporation_(Note)_
China Spirit Limited	Held by controlled	391,125,707	72.13%
(“China Spirit”)	corporation_(Note)_
Vigor Online Offshore	Beneficial owner_(Note)_	391,125,707	72.13%
Limited
(“Vigor Online”)

Note:

Vigor Online, a wholly-owned subsidiary of China Spirit, owns 319,125,707 ordinary shares of the Company. Ms. Chong maintains 100% beneficial interests in China Spirit. Accordingly, Ms. Chong is deemed to have corporate interest in 391,125,707 ordinary shares of the Company.

3. DIRECTORS’ INTERESTS IN COMPETING BUSINESSES

As at the Latest Practicable Date, none of the Directors and their respective associates were considered to have interests in businesses apart from the Group’s businesses which compete, or are likely to compete, either directly or indirectly, with the businesses of the Group pursuant to Rule 8.10 of the Listing Rules.

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GENERAL INFORMATION

APPENDIX VI

4. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

As at the Latest Practicable Date, there was no contract or arrangement subsisting in which any Director was materially interested and which was significant in relation to the business of the Enlarged Group.

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which have been, since 30 June 2012 (being the date to which the latest published audited accounts of the Group were made up), (i) acquired or disposed of by; or (ii) leased to; or (iii) proposed to be acquired or disposed of by; or (iv) proposed to be leased to, any member of the Enlarged Group.

5. DIRECTORS’ SERVICE CONTRACTS

• (a) As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which does not expire or is not terminable by such member of the Group within one year without payment of compensation (other than statutory compensation).

• (b) There are no service contracts in force between any Director and the Company or any of its subsidiaries or associated companies which are continuous contracts with a notice period of 12 months or more.

• (c) There are no service contracts in force between any Director and the Company or any of its subsidiaries or associated companies which are fixed term contracts with more than 12 months to run irrespective of the notice period.

6. LITIGATION

• (a) In November 1998, a writ was issued against the Company’s subsidiaries, Hongkong Digital Television Limited (“Digital TV”, formerly known as Star Interactive Television Limited) and Star Telecom Services Limited (“STSL”, formerly known as Hong Kong Star Internet Limited) by nCube Corporation (“nCube”), claiming the sum of approximately US$1,980,000 (equivalent to approximately HK$15,305,000) plus interest in relation to the alleged purchase of two MediaCube 3000 systems by Digital TV from nCube. The claim of nCube against STSL was on the basis of a chop of STSL on the contract between Digital TV and nCube. STSL had taken legal advice and had been advised that it was very unlikely that STSL would be held liable to the claim of nCube. Digital TV was also opposing the claim of nCube and had taken legal advice.

As advised by its lawyers, Digital TV had reasonable grounds in defending the claim and, accordingly, had not made any provision in the consolidated financial statements in connection with the claim. Digital TV filed a defence in this section on 14 December 1998 and nCube had failed to take further action since that date. There was no progress since then in respect of the litigation.

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GENERAL INFORMATION

APPENDIX VI

• (b) Stellar One Corporation (“Stellar One”) served a statutory demand under Section 178 of the Companies Ordinance for the sum of approximately US$1,152,000 (equivalent to approximately HK$8,983,000) upon Digital TV in November 1998. Stellar One filed a winding up petition against Digital TV in December 1998 which was vigorously opposed by Digital TV. Digital TV applied for an order for security for the costs against Stellar One. On 4 May 1999, the Court ordered Stellar One to pay HK$200,000 to the court as security for the costs of Digital TV on or before 7 May 1999. Stellar One failed to pay that amount to the court. The petition was dismissed in November 1999 and Stellar One was to pay Digital TV its cost of the petition, which amounted to HK$254,000. Stellar One had indicated that it would proceed to arbitration in Honolulu to recover the alleged amount. Digital TV took legal advice and was advised that the arbitration proceedings had not commenced as of the date of this document.

As advised by its lawyers, Digital TV had reasonable grounds in defending the claims and, accordingly, had not made any provision in the consolidated financial statements in connection with the claims.

Save and except for the matters specified above, as at the Latest Practicable Date, neither the Company nor any of its subsidiaries is engaged in any litigation or claims of material importance and, so far as the Directors are aware, no litigation or claims of material importance are pending or threatened by or against any companies of the Enlarged Group.

7. MATERIAL CONTRACTS

Within the two years immediately preceding the date of this circular and ending on the Latest Practicable Date, the following contracts (not being contracts entered into in the ordinary course of business) have been entered into by the members of the Enlarged Group which are or may be material:

• (a) a loan agreement dated 22 June 2011 entered into between Join Capital Limited (“Join Capital”), an indirect wholly-owned subsidiary of the Company, and Mabuhay Holdings Corporation (“Mabuhay”) relating to the granting of a loan facility of up to the US$3,200,265.11 by Join Capital to Mabuhay;

• (b) the agreement dated 12 July 2011 entered into between Mission Time Holdings Limited, a direct wholly-owned subsidiary of the Company, and Capital Sharp Investment Limited (“Capital Sharp”), an Independent Third Party, in relation to the disposal of the loan note at a book carrying value of US$7,285,898.30 of the US$56,000,000 zero coupon notes due 2012 issued by Mulpha SPV Limited to Capital Sharp at a consideration of US$8,073,773.38;

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GENERAL INFORMATION

APPENDIX VI

• (c) the agreement dated 24 May 2011 (the “Disposal Agreement”) entered into between the Company, Besford International Limited (“Besford”), a direct wholly-owned subsidiary of the Company, New Able Holdings Limited and Allied Overseas Limited (each an Independent Third Party) for the sale and purchase of (i) one share in the issued share capital of Taskwell Limited (“Taskwell”), an indirect wholly-owned subsidiary of the Company; (ii) one share in the issued share capital of Rise Cheer Investments Limited (“Rise Cheer”), an indirect wholly-owned subsidiary of the Company; and (iii) all the interests, benefits and rights of and in the shareholder’s loan owed by Taskwell and Rise Cheer to Besford as at the date of completion of the said disposal pursuant to the Disposal Agreement at a total consideration of HK$1,330,657,693.40;

• (d) a loan agreement dated 4 August 2011 entered into between Join Capital as lender and Mr. Yuen Hoi Po (“Mr. Yuen”), an Independent Third Party, as borrower, relating to a short term loan of up to HK$53,000,000 granted by Join Capital to Mr. Yuen;

• (e) a supplemental agreement dated 10 January 2012 entered into between Join Capital, Mabuhay and T & M Holdings, Inc. (“T&M”), a wholly-owned subsidiary of Mabuhay, relating to the extension of the repayment date under the loan agreement dated 4 January 2011 entered into between Join Capital and Mabuhay in relation to a loan facility of HK$20 million granted by Join Capital to Mabuhay to 10 January 2013;

• (f) the sale and purchase agreement dated 16 March 2012 entered into between Yu Ming Investment Management Limited (“Yu Ming”), an Independent Third Party, as purchaser and Action Best Limited (“Action Best”), an indirect wholly-owned subsidiary of the Company as vendor in relation to the disposal of the 8% senior, unsecured convertible notes issued by FKP Limited (“FKP”) due 2016 in a principal sum of A$4 million (the “Convertible Notes I”) (the “S&P Agreement I”);

• (g) the sale and purchase agreement dated 16 March 2012 entered into between Attractive Gain Limited, an Independent Third Party as purchaser and Action Best as vendor in relation to the disposal of the 8% senior, unsecured convertible notes issued by FKP due 2016 in a principal amount of A$21 million;

• (h) a loan agreement dated 13 April 2012 entered into between Join Capital as lender and Extra Earn Holdings Limited (“Extra Earn”) as borrower relating to a loan facility of up to HK$56,000,000 granted by Join Capital to Extra Earn;

• (i) a deed of variation dated 17 April 2012 entered into between Yu Ming and Action Best pursuant to which, inter alia, the parties mutually agreed to extend the long stop date of S&P Agreement I to 15 May 2012;

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GENERAL INFORMATION

APPENDIX VI

• (j) a supplemental agreement dated 25 May 2012 entered into between Join Capital, Mabuhay and T&M in relation to extension of the repayment date under the loan agreement dated 22 June 2011 entered into between Join Capital and Mabuhay in relation to a loan facility of up to US$3,200,265.11 granted by Join Capital to Mabuhay to 25 May 2013;

• (k) a loan agreement dated 27 June 2012 entered into between Join Capital as lender, Lucky Full Investment Limited (“Lucky Full”) and Union Profit International Limited (“Union Profit”) as borrowers and Think Future Investments Limited (“Think Future”), TIDE HOLDINGS (CHINA) LIMITED (formerly known as Tide Holdings (H.K.) Limited) (“Tide Holdings”) and Sunshine City (China) Limited (“Sunshine City”) as security parties relating to the granting of a short term loan of aggregate amount in the limit of up to HK$400,000,000 (the “Loan”);

• (l) a share mortgage dated 27 June 2012 entered into between Sunshine City and Join Capital in respect of one issued share of HK$1.00 each of Lucky Full;

• (m) a share mortgage dated 27 June 2012 entered into between Sunshine City and Join Capital in respect of one issued share of HK$1.00 each of Union Profit;

• (n) a share mortgage dated 27 June 2012 entered into between Tide Holdings and Join capital in respect of one issued share of HK$1.00 each of Sunshine City;

• (o) a share mortgage dated 27 June 2012 entered into between Think Future and Join Capital in respect of one issued share of HK$1.00 each of Tide Holdings;

• (p) a share mortgage dated 27 June 2012 entered into between Jian Xiang Limited (“Jian Xiang”) and Join Capital in respect of 200 issued shares of US$1.00 each of Think Future;

• (q) a share mortgage dated 27 June 2012 entered into between Great Kingdom Holdings Limited (“Great Kingdom”) and Join Capital in respect of 400 issued shares of US$1.00 each of Think Future;

• (r) a debenture dated 27 June 2012 entered into between Union Profit and Join Capital in connection with the provision of security of the Loan;

• (s) a debenture dated 27 June 2012 entered into between Lucky Full and Join Capital in connection with the provision of security of the Loan;

• (t) a deed of assignment and subordination dated 27 June 2012 in respect of an amount of HK$20,632,772 due from Think Future to Jian Xiang;

• (u) a deed of assignment and subordination dated 27 June 2012 in respect of an amount of HK$40,000,000 due from Think Future to Great Kingdom;

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GENERAL INFORMATION

APPENDIX VI

• (v) the S&P Agreement;

• (w) the subscription agreement dated 6 December 2012 entered into between the Company and Jiatai Tongren in relation to the subscription of the equity interest in the registered capital of Jiatai Tongren;

• (x) the sale and purchase agreement dated 6 March 2013 entered into between Jiatai Tongren and Mr. Liu Guang Qing, an Independent Third Party, for the sale and purchase of the entire registered capital of Lianyuangang Chentai Property Limited 連雲港成泰置業有限 公司 at a consideration of RMB250 million; and

• (y) the cooperative agreement dated 25 March 2013 entered into between Jiatai Tongren and Mr. Yu Zhen Kun (“Mr. Yu”) in relation to inter alia, a joint venture hospital specializing in eye, ear, nose and throat with a tentative registered capital amount of RMB80,000,000 (the “Joint Venture”), in which Jiatai Tongren will contribute RMB60,000,000 for a 60% interest, and Mr. Yu and his professional team will contribute RMB20,000,000 for a 40% interest in the registered capital of the Joint Venture.

Save as disclosed above, there are no other contracts (not being contracts in the ordinary course of business) being entered into by the members of the Enlarged Group within the two years immediately preceding the Latest Practicable Date, which are or may be material.

– 260 –

GENERAL INFORMATION

APPENDIX VI

8. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading positions of the Group since 30 June 2012, being the date on which the latest published audited financial statements of the Group were made up.

9. QUALIFICATIONS OF EXPERTS

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

Name	Qualification
Deloitte Touche Tohmatsu (“Deloitte”)	Certified Public Accountants
Asset Appraisal Limited	Independent Property Valuer
Yunnan Youyuan Law Firm	PRC Lawyers
（雲南友元律師事務所）
Beijing Yingke (Nanjing) Law Firm	PRC Lawyers
– Nanjing office（北京盈科員（南京）
律師事所）
Jiangsu Tianwan Law Firm	PRC Lawyers
（江蘇田灣律師事務所）

10. CONSENTS OF EXPERTS

Deloitte, Asset Appraisal Limited, Yunnan Youyuan Law Firm, Beijing Yingke (Nanjing) Law Firm – Nanjing office and Jiangsu Tianwan Law Firm have given and have not withdrawn their written consents to the issue of this circular with the inclusion of their letters and reports and references to their names in the form and context in which they appear.

11. INTERESTS OF EXPERTS

As at the Latest Practicable Date, Deloitte, Asset Appraisal Limited, Yunnan Youyuan Law Firm, Beijing Yingke (Nanjing) Law Firm and Jiangsu Tianwan Law Firm:

• (a) did not have any shareholding in any member of the Group, or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group; and

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GENERAL INFORMATION

APPENDIX VI

• (b) were not interested, directly or indirectly, in any assets which had been acquired or disposed of by or leased to, or proposed to be acquired or disposed of by or leased to, any member of the Group since 30 June 2012, being the date on which the latest published audited consolidated accounts of the Group were made up.

12. GENERAL

• (a) The registered office of the Company is Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda.

• (b) The head office and principal place of business in Hong Kong of the Company is 47th Floor, China Online Centre, 333 Lockhart Road, Wanchai, Hong Kong.

• (c) The secretary of the Company is Ms. Fung Ching Man, Ada. She is an associate member of both The Hong Kong Institute of Chartered Secretaries and The Institute of Chartered Secretaries and Administrators.

• (d) The principal share registrar and transfer office of the Company is Butterfield Fulcrum Group (Bermuda) Limited, 26 Burnaby Street, Hamilton HM 11, Bermuda.

• (e) The Hong Kong branch share registrar and transfer office of the Company is Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

• (f) This circular is prepared in both English and Chinese. In the event of inconsistency, the English text shall prevail.

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours from 9:00 a.m. to 6:00 p.m. (except Saturdays and public holidays) at the head office and principal place of business in Hong Kong of the Company at 47/F., China Online Centre, 333 Lockhart Road, Wanchai, Hong Kong from the date of this circular up to and including 24 May 2013:–

• (a) the Memorandum of Association and Bye-laws of the Company;

• (b) the material contracts referred to under the paragraph headed “Material Contracts” in this Appendix;

• (c) the annual reports of the Company for the period of eighteen months ended 30 June 2011 and for the year ended 30 June 2012 and the interim reports of the Company for the six months ended 31 December 2011 and 31 December 2012;

• (d) the circulars of the Company dated 15 July 2011, 20 April 2012, and 31 July 2012;

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GENERAL INFORMATION

APPENDIX VI

• (e) the property valuation report on the Target Group issued by Asset Appraisal Limited, the text of which is set out on pages 219 to 253 of this circular;

• (f) the report issued by Deloitte on the Unaudited Pro Forma Financial Information of the Enlarged Group, the text of which is set out in Appendix IV of this circular;

• (g) the written consents referred to under “Consents of Expert” in this Appendix;

• (h) the comfort letter dated 10 May 2013 issued by Deloitte to the Board; and

• (i) this circular.

– 263 –