THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in China Sandi Holdings Limited, you should at once hand this circular accompanying with the form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale was effected for transmission to the purchaser or the transferee.

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

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities in the Company.

CHINA SANDI HOLDINGS LIMITED 中國三迪控股有限公司

(incorporated in Bermuda with limited liability)

(Stock Code: 910)

(1) PROPOSED RIGHTS ISSUE ON THE BASIS OF TWO RIGHTS SHARES FOR EVERY ONE EXISTING ORDINARY SHARE HELD ON THE RECORD DATE; (2) APPLICATION FOR WHITEWASH WAIVER; (3) PROPOSED CHANGE OF BOARD LOT SIZE; AND

(4) NOTICE OF SPECIAL GENERAL MEETING

Financial adviser to the Company

Sole underwriter to the Rights Issue United Century International Limited

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

Nuada Limited

Corporate Finance Advisory

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

A letter from the Board is set out on pages 14 to 50 of this circular. A letter of recommendation from the IBC to the Independent Shareholders is set out on pages 51 to 52 of this circular. A letter of advice from the IFA to the IBC and the Independent Shareholders in relation to the Rights Issue, the Absence of Excess Application Arrangement, the Underwriting Arrangement and the Whitewash Waiver is set out on pages 53 to 86 of this circular.

A notice convening the SGM to be held at 6/F, Ibis Hong Kong Central & Sheung Wan Hotel, No. 28 Des Voeux Road West, Sheung Wan, Hong Kong on Monday, 28 December 2015 at 11:00 a.m. is set out on pages SGM-1 to SGM-3 of this circular. A form of proxy for the SGM is enclosed with this circular. Whether or not you intend to attend the SGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to the office of the Company’s Hong Kong branch share registrar, Tricor Tengis Limited, at Level 22, Hopewell Centre, No. 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM if you so wish.

Shareholders and potential investors should note that the Rights Issue is conditional upon (i) the fulfilment of the conditions set out under the section headed “Conditions of the Rights Issue” in the Letter from the Board; and (ii) the Underwriting Agreement not having terminated in accordance with its terms as set out in the section headed “Termination of the Underwriting Agreement” in this circular. Accordingly, the Rights Issue may or may not proceed. Shareholders and potential investors should exercise caution when dealing in the securities of the Company, and if they are in any doubt about their positions, they should consult their professional advisers.

Shareholders and potential investors should note that the Ordinary Shares are expected to be dealt in on an ex-rights basis commencing from Monday, 4 January 2016 and that dealings in the Ordinary Shares will take place while the conditions to which the Rights Issue is subject remain unfulfilled. Any Shareholders or other persons dealing in the Ordinary Shares up to the date on which all conditions to which the Rights Issue is subject are fulfilled (which is expected to be at 4:00 p.m. on Friday, 29 January 2016), will accordingly bear the risk that the Rights Issue cannot become unconditional and may not proceed. Any Shareholders or other persons contemplating selling or purchasing the Ordinary Shares, who are in any doubt about their positions, are recommended to consult their professional advisers.

9 December 2015

Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Expected Timetable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Letter from the IBC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	51
Letter from the IFA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	53
Appendix I – Financial Information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II – Unaudited Pro Forma Financial Information
of the Enlarged Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
Appendix III – Valuation Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
Appendix IV – General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

– i –

DEFINITIONS

In this circular, unless the context requires otherwise, the following expressions have the following meanings:

“Absence of Excess Application the absence of any arrangements for application for the Rights Arrangement” Shares by the Qualifying Shareholders in excess of their entitlements under the Rights Issue;
“Amika Guo”
Ms. Amika Lan E Guo, an executive Director and the daughter of Mr. Guo;
“associate” has the meaning ascribed thereto under the Listing Rules;
“Best China”
Best China Limited, a company incorporated in BVI and a Shareholder ultimately controlled by Mrs. Chu as at the LPD;
“Board”

the board of Directors;

“Bonds Placing” the placing of bonds by the Company as announced in the Bonds Placing Announcement;
“Bonds Placing Announcement” the announcement of the Company dated 28 April 2015 in relation to the placing of the bonds of the Company up to an aggregate principal amount of HK$200 million;

“Business Day” any day (other than a Saturday, Sunday or public holiday and any day on which a tropical cyclone warning signal no. 8 or above or a “black” rainstorm warning signal is hoisted in Hong Kong at any time between 9:00 a.m. and 4:00 p.m.) on which licensed banks in Hong Kong are generally open for business throughout their normal business hours;

“BVI” the British Virgin Islands;
“CCASS”
the Central Clearing and Settlement System established and operated by HKSCC;

“Change in Board Lot Size” the proposed change in board lot size of the Ordinary Shares for trading on the Stock Exchange from 2,000 shares to 12,000 shares;

– 1 –

DEFINITIONS

“Code Independent Shareholders” Shareholders other than (i) the Concert Group; (ii) Best China; and (iii) those who are involved in or interested in the Rights Issue (save for any assured entitlements to the Rights Issue), the Underwriting Agreement and/or the Whitewash Waiver and their respective associates who are required by the Takeovers Code to abstain from voting on the relevant resolution(s) at a general meeting of the Company for the consideration and approval of the Rights Issue, the Underwriting Agreement and the Whitewash Waiver;
“Committed Shares” 400,000,000 Rights Shares to be provisionally allotted to United Century (in its capacity as a Shareholder) by the Company for subscription under the Rights Issue, which United Century (in its capacity as a Shareholder) irrevocably undertakes to accept and subscribe pursuant to the United Century Undertaking;
“Company” China Sandi Holdings Limited, a company incorporated in Bermuda with limited liability, the ordinary shares of which are listed on the Main Board of the Stock Exchange;
“Concert Group”
Mr. Guo, United Century and parties acting in concert with any of them;
“connected person” has the meaning ascribed thereto under the Listing Rules;
“controlling shareholder” has the meaning ascribed thereto under the Listing Rules;
“CPS” an aggregate of 601,666,666 non-redeemable convertible preference shares of nominal value of HK$0.01 in the capital of the Company, entitling the holders thereof to convert one convertible preference share into one new Ordinary Share at the initial conversion price of HK$3 per share (subject to adjustment);
“CWMO” Companies (Winding Up and Miscellaneous Provisions) Ordinance, Chapter 32 of the Laws of Hong Kong (as amended from time to time);
“Director(s)” the director(s) of the Company;

– 2 –

DEFINITIONS

“Executive” the Executive Director of the Corporate Finance Division of the SFC or any of his delegate;
“Fujian Sinco” 福建先科實業有限公司 (Fujian Sinco Industrial Co. Ltd.*), a wholly-owned subsidiary of the Company established in the PRC;
“Fujian Jiake” Fujian Jiake Industrial Company Limited* (福建佳科實業有限公司), a non wholly-owned subsidiary of the Company established in the PRC;
“Fuzhou Gaojia” 福州高佳房地產開發有限公司 (Fuzhou Gaojia Real Estate Development Co., Ltd.*), a company established in the PRC and ultimately controlled by Mr. Guo;
“Group” the Company and its subsidiaries; “HKSCC” Hong Kong Securities Clearing Company Limited; “HK$” Hong Kong dollar, the lawful currency of Hong Kong; “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China;
“IBC” the independent board committee of the Company established in accordance with (i) the Takeovers Code to advise the Code Independent Shareholders on the Rights Issue, the Underwriting Agreement and the Whitewash Waiver; and (ii) the Listing Rules to advise the LR Independent Shareholders on the Rights Issue and the Absence of Excess Application Arrangement;
"IBC Letter" the letter from the IBC as set out in the section headed "Letter from the IBC" in this circular;
"IBC Members" the members of the IBC, comprising the independent nonexecutive Directors only;

– 3 –

DEFINITIONS

“IFA” or “Independent Financial Adviser”
Nuada Limited, a corporation licensed to conduct Type 6 (advising on corporate finance) regulated activity under the SFO, being the independent financial adviser to (i) the IBC and the Code Independent Shareholders on the Rights Issue, the Underwriting Agreement and the Whitewash Waiver for the purposes of the Takeovers Code; and (ii) the IBC and the LR Independent Shareholders on the Rights Issue and the Absence of Excess Application Arrangement for the purposes of the Listing Rules;
“Independent Shareholders” the Code Independent Shareholders and the LR Independent Shareholders;
“Issued Ordinary Capital”
the issued capital of the Company represented by the Ordinary Shares in issue only from time to time;
"Kingston Corporate Finance"
Kingston Corporate Finance Limited, a corporation licensed to carry out Type 6 (advising on corporate finance) regulated activity under the SFO which is ultimately controlled by Mrs. Chu and the financial adviser to the Company for the Rights Issue;
“King Partner”
King Partner Holdings Limited, a company incorporated in the BVI which is directly and wholly-owned by Mr. Guo;
“King Partner CPS’
180,500,000 CPS held by King Partner convertible into 180,500,000 new Ordinary Shares;
“King Partner Undertaking”
the letter of undertaking dated 28 October 2015 given by King Partner to the Company, pursuant to which King Partner undertakes, among other things, not to dispose of or convert any of the King Partner CPS before completion of the Rights Issue;
“Latest Practicable Date” or “LPD”
7 December 2015, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular;
“Last Trading Day”
28 October 2015, being the date of the Underwriting Agreement and the last trading day for the Ordinary Shares on the Stock Exchange prior to the release of the Rights Issue Announcement;

– 4 –

DEFINITIONS

“Latest Termination Time”
“Latest Time for Acceptance”
“Letter from the Board”
“Letter from the IFA”
“Listing Rules”
“LR Independent Shareholders”
“Mr. Guo”
“Mrs. Chu”
4:00 p.m. on 29 January 2016 or such other time and/or date as may be agreed in writing between the Company and United Century, being the latest time to terminate the Underwriting Agreement pursuant to the terms thereof;
4:00 p.m. on Wednesday, 27 January 2016 or such other time or date as may be agreed between United Century and the Company, being the latest time for acceptance of, and payment for, the Rights Shares as will be described in the Prospectus Documents. If there is a black rainstorm warning signal or a tropical cyclone warning signal number 8 or above in force in Hong Kong on such day at any time between 12:00 noon and 4:00 p.m., the latest time for acceptance will be postponed to 4:00 p.m. on the next Business Day which does not have either of those warnings in force in Hong Kong at any time between 9:00 a.m. and 4:00 p.m.;
the section headed “Letter from the Board” in this circular;
the section headed “Letter from the IFA” in this circular;
the Rules Governing the Listing of Securities on the Stock Exchange (as amended from time to time);
(i) in relation to the Rights Issue, means Shareholders other than those who are prohibited from voting in favour of the resolution for the approval of the Rights Issue pursuant to Rule 7.19(6) of the Listing Rules; and (ii) in relation to the Absence of Excess Application Arrangement, means Shareholders other than those who have a material interest in the relevant arrangements of the Rights Issue within the meaning of Rule 7.21 of the Listing Rules, in each case further excluding those Shareholders who are otherwise required to abstain from voting under the Listing Rules;
Mr. Guo Jiadi, an executive Director and the chairman of the Company and the father of Amika Guo, an executive Director;

Mrs. Chu Yuet Wah, the controlling shareholder of Best China;

– 5 –

DEFINITIONS

“Non-Qualifying Letter”
a letter from the Company to the Non-Qualifying Shareholders advising them of the arrangements made for their entitlements under the Rights Issue, in a form to be agreed between the Company and United Century;
“Non-Qualifying Shareholder(s)”
those Shareholders whose addresses as shown on the register of members of the Company on the Record Date are outside Hong Kong whom the Directors, based on legal opinions provided by the Company’s legal advisers, consider it necessary or expedient not to offer the Rights Shares to such Shareholders on account either of legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place;
“Ordinary Share(s)” ordinary share of HK$0.01 each in the share capital of the Company;
“Outstanding CPS” those CPS which remain outstanding and convertible as at the LPD, being an aggregate of 401,666,666 CPS comprising the United Century CPS and the King Partner CPS, all of which are indirectly owned by Mr. Guo;
“Overseas Shareholder(s)” Shareholder(s) whose name(s) appear(s) on the register of members of the Company at the close of business on the Record Date and whose address(es) as shown on such register is (are) outside Hong Kong;
“PAL(s)” the renounceable provisional allotment letter(s) proposed to be issued to the Qualifying Shareholders in connection with the Rights Issue;
“PRC” the People’s Republic of China which, for the purposes of this circular, excludes Taiwan, Hong Kong and the Macau Special Administrative Region;
“Prospectus” the prospectus relating to the Rights Issue to be despatched to the Shareholders on the Prospectus Issue Date;
“Prospectus Documents”

the Prospectus and the PAL;

– 6 –

DEFINITIONS

“Prospectus Issue Date” 13 January 2016 or such other date as may be agreed in writing between the Company and United Century for the despatch of the Prospectus Documents;
“Qualifying Shareholder(s)” Shareholders whose names appear on the register of members of the Company at 4:00 p.m. on the Record Date other than the Non-Qualifying Shareholders;
“Record Date” 12 January 2016 or such other date that the Company and United Century may agree in writing as the date for determination of entitlements to participate in the Rights Issue;
“Relevant Period” the period commencing on 28 April 2015 (being the date falling six months immediately prior to the date of the Rights Issue Announcement), and ending on the LPD;
“Rights Issue” the proposed issue by way of rights on the basis of two Rights Shares for every one existing Ordinary Share in issue and held on the Record Date at the Subscription Price on the terms and subject to the conditions set out in the Underwriting Agreement and the Prospectus Documents;
“Rights Issue Announcement” the announcement of the Company dated 28 October 2015 under which, among other things, the Rights Issue was announced;
“Rights Share(s)” 1,648,924,892 new Ordinary Shares to be issued and allotted under the Rights Issue;
“SFC” the Securities and Futures Commission of Hong Kong; “SFO” Securities and Futures Ordinance (Chapter 571, Laws of Hong Kong);
“SGM” the special general meeting of the Company to be held on Monday, 28 December 2015 for the appropriate Shareholders to consider and, if thought fit, approve the Rights Issue, the Absence of Excess Application Arrangement, the Underwriting Agreement and the Whitewash Waiver;
“Shareholder(s)” holder(s) of Ordinary Shares;

– 7 –

DEFINITIONS

“Shares Placing” the placing of up to 137,410,000 new Ordinary Shares at the placing price of HK$0.37 per share as announced in the Shares Placing Announcement;
“Shares Placing Announcement” the announcement of the Company dated 29 April 2015 in relation to the Shares Placing;
“Stock Exchange” The Stock Exchange of Hong Kong Limited;
“Subscription Price” HK$0.20 per Rights Share;
“substantial shareholder” has the meaning ascribed thereto under the Listing Rules;
“Takeovers Code” the Code on Takeovers and Mergers (as amended from time to time);
“Transactions” collectively, the Rights Issue, the Absence of Excess Application Arrangement, the Underwriting Agreement and the Whitewash Waiver;
“Underwriting Agreement” the underwriting agreement dated 28 October 2015 entered into between the Company and United Century in relation to the underwriting arrangement in respect of the Rights Issue;
“Underwritten Shares” 1,248,924,892 Rights Shares to be underwritten by United Century pursuant to the terms of the Underwriting Agreement;
“United Century”
United Century International Limited, a company incorporated in the BVI which is directly and wholly-owned by Mr. Guo and the sole underwriter under the Underwriting Agreement;
“United Century CPS” 221,166,666 CPS held by United Century convertible into 221,166,666 new Ordinary Shares;
“United Century Undertaking”
the letter of undertaking dated 28 October 2015 given by United Century (in its capacity as a Shareholder) to the Company, pursuant to which United Century undertakes, among other things, to (together with and/or its nominee) accept the Committed Shares;

– 8 –

DEFINITIONS

“Whitewash Waiver”

“%” or “per cent.”

a waiver from the Executive pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code in respect of United Century’s obligation to make a mandatory offer under Rule 26.1 of the Takeovers Code for all the securities of the Company not already owned or agreed to be acquired by the Concert Group as a result of its underwriting obligations under the Underwriting Agreement; and

per cent.

For identification purpose only

– 9 –

EXPECTED TIMETABLE

The expected timetable for the Rights Issue, the Change in Board Lot Size and the associated trading arrangement are as follows:

Time

Event

(if applicable) Date

Latest time for lodging transfer of 4:30 p.m. on Ordinary Shares to qualify for attendance and voting at the SGM

Tuesday, 22 December 2015

Closure of register of members of the Company to determine qualification for attendance and voting at the SGM

Wednesday, 23 December 2015 to Monday, 28 December 2015 (both days inclusive)

Latest time for lodging forms of 11:00 a.m. on Saturday, 26 December 2015 proxy for the purpose of the SGM (Note 2) Record date for attendance and Monday, 28 December 2015 voting at the SGM Expected date and time of the SGM 11:00 a.m. on Monday, 28 December 2015 Publication of the announcement on Monday, 28 December 2015 the poll results of the SGM Last day of dealings in the Ordinary Thursday, 31 December 2015 Shares on cum-rights basis Ex-date (the first day of dealings in Monday, 4 January 2016 the Ordinary Shares on ex-rights basis) Latest time for the Shareholders to 4:30 p.m. on Tuesday, 5 January 2016 lodge transfer of the Ordinary Shares in order to qualify for the Rights Issue Closure of register of members of the Wednesday, 6 January 2016 to Company Tuesday, 12 January 2016 (both dates inclusive)

– 10 –

EXPECTED TIMETABLE

	Time
Event	(if applicable)	Date
Record Date		Tuesday, 12 January 2016
Register of members of the Company		Wednesday, 13 January 2016
re-opens
Despatch of Prospectus Documents		Wednesday, 13 January 2016
First day of dealings in nil-paid	9:00 a.m. on	Friday, 15 January 2016
Rights Shares
Latest time for splitting nil-paid	4:30 p.m. on	Tuesday, 19 January 2016
Rights Shares
Last day of dealings in nil-paid	4:00 p.m. on	Friday, 22 January 2016
Rights Shares
Latest time for acceptance of, and	4:00 p.m. on	Wednesday, 27 January 2016
payment for, the Rights Shares
L a t e s t t i m e t o t e r m i n a t e t h e	4:00 p.m. on	Friday, 29 January 2016
Underwriting Agreement and
for the Rights Issue to become
unconditional
Publication of the announcement on		Wednesday, 3 February 2016
the results of the Rights Issue
Certificates for fully paid Rights		Thursday, 4 February 2016
Shares and (if applicable) refund
cheques to be despatched on or
before_(Note 3)_
Commencement of dealings in fully-	9:00 a.m. on	Friday, 5 February 2016
paid Rights Shares
Last day for trading of the Ordinary		Friday, 5 February 2016
Shares in the old board lot of 2,000
shares

– 11 –

EXPECTED TIMETABLE

Time Event (if applicable) Date

Effective date for the Change in 9:00 a.m. on Thursday, 11 February 2016 Board Lot Size from the old board lot of 2,000 shares to the new board lot of 12,000 shares Designated broker starts to stand in 9:00 a.m. on Thursday, 11 February 2016 the market to provide matching services for sale and purchase of odd lots of the Ordinary Shares Designated broker ceases to stand 4:00 p.m. on Friday, 4 March 2016 in the market to provide matching services for sale and purchase of odd lots of the Ordinary Shares

Notes:

1. All times stated in this circular refer to Hong Kong time.

2. A collection box will be made available for the collection of the forms of proxy (including public holidays) at the office of the Company’s Hong Kong branch share registrar, Tricor Tengis Limited, at Level 22, Hopewell Centre, No. 183 Queen’s Road East, Hong Kong.

3. Shareholders should note that on the date on which certificates for the fully paid Rights Shares are expected to be despatched (i.e. Thursday, 4 February 2016), the Ordinary Shares would still be trading in the old board lot of 2,000 shares.

The Company will make further announcement(s) if there is any change to the above timetable. Dates or deadlines specified in this circular for events in the above timetable for (or otherwise in relation to) the Rights Issue and the Change in Board Lot Size are indicative only and may be extended or varied by the Company. Any changes to the expected timetable for the Rights Issue and the Change in Board Lot Size, if required, will be published or notified to the Shareholders as and when appropriate.

The register of members of the Company for the SGM will be closed from Wednesday, 23 December 2015 to Monday, 28 December 2015, both days inclusive, during which period no transfer of the Ordinary Shares can be registered. In order to qualify for attending and voting at the SGM, all transfer forms accompanied by the relevant share certificate(s) must be lodged for registration with the Company’s Hong Kong branch share registrar, Tricor Tengis Limited, not later than 4:30 p.m. on Tuesday, 22 December 2015.

– 12 –

EXPECTED TIMETABLE

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE RIGHTS SHARES

If there is a ‘black’ rainstorm warning or a tropical cyclone warning signal number 8 or above in force in Hong Kong on Wednesday, 27 January 2016, being the date of the Latest Time for Acceptance:

(i) at any time before 12:00 noon and no longer in force after 12:00 noon, the Latest Time for Acceptance will be postponed to 5:00 p.m. on the same Business Day; or
(ii) at any time between 12:00 noon and 4:00 p.m., the Latest Time for Acceptance will be rescheduled to 4:00 p.m. on the next Business Day which does not have either of those warnings in force in Hong Kong at any time between 9:00 a.m. and 4:00 p.m..

Under the above circumstances, the dates mentioned in the expected timetable above may be affected. The Company will notify the Shareholders by way of announcement(s) of any change to the expected timetable as soon as practicable.

– 13 –

LETTER FROM THE BOARD

CHINA SANDI HOLDINGS LIMITED 中國三迪控股有限公司

(incorporated in Bermuda with limited liability) (Stock Code: 910)

Executive Directors: Mr. Guo Jiadi Ms. Amika Lan E Guo Mr. Lin Jianbin

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

Independent Non-Executive Directors:

Dr. Wong Yun Kuen

Mr. Chan Yee Ping, Michael

Mr. Yu Pak Yan, Peter Mr. Zheng Jinyun Mr. Zheng Yurui

Head office and principal place of business in Hong Kong Unit 3309, 33/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central Sheung Wan, Hong Kong

9 December 2015

To the Shareholders and, for information only, holders of convertible preference shares

Dear Sir/Madam,

(1) PROPOSED RIGHTS ISSUE ON THE BASIS OF TWO RIGHTS SHARES FOR EVERY ONE EXISTING ORDINARY SHARE

HELD ON THE RECORD DATE;

(2) APPLICATION FOR WHITEWASH WAIVER;

(3) PROPOSED CHANGE OF BOARD LOT SIZE; AND

(4) NOTICE OF SPECIAL GENERAL MEETING

– 14 –

LETTER FROM THE BOARD

INTRODUCTION

Reference is made to the Rights Issue Announcement in relation to, among other things, the Rights Issue and the Whitewash Waiver.

The purpose of this circular is to provide you with, among other things, further details of (i) the Rights Issue, the Absence of Excess Application Arrangement, the Underwriting Agreement and the Whitewash Waiver; (ii) a letter of recommendation from the IBC to the Independent Shareholders in relation to the Rights Issue, the Absence of Excess Application Arrangement, the Underwriting Agreement and the Whitewash Waiver; (iii) a letter of advice from the IFA to the IBC and the Independent Shareholders in relation to the Rights Issue, the Absence of Excess Application Arrangement, the Underwriting Agreement and the Whitewash Waiver; and (v) a notice of the SGM.

The Board proposes to raise approximately HK$329.8 million before expenses by way of the Rights Issue, details of which are summarised below:

PROPOSED RIGHTS ISSUE

Basis of the Rights Issue : two Rights Shares for every one existing Ordinary Share held on the Record Date Subscription Price : HK$0.20 per Rights Share of nominal value of HK$0.01 each Number of Ordinary Shares in issue : 824,462,446 Ordinary Shares as at the LPD Number of Rights Shares : 1,648,924,892 Rights Shares (assuming no change in the number of issued Ordinary Shares from the LPD and up to and including the Record Date) with aggregate nominal value of HK$16,489,248.92 Maximum number of Underwritten : 1,248,924,892 Rights Shares Shares underwritten by United Century as the sole underwriter Number of Ordinary Shares in issue : 2,473,387,338 Ordinary Shares (based on the upon completion of the Rights Issue number of Ordinary Shares in issue as at the LPD and assuming no further issue of new Ordinary Shares or repurchase of Ordinary Shares on or before the Record Date)

– 15 –

LETTER FROM THE BOARD

As at the LPD, save and except for the Outstanding CPS, the Company has no outstanding share options, convertible securities, options or warrants in issue which confer any right to subscribe for, convert or exchange into the Ordinary Shares. Please refer to the section headed “Undertakings not to convert the Outstanding CPS and adjustment to the conversion price of the CPS” for more information.

Subscription Price

The Subscription Price for the Rights Shares is HK$0.20 per Rights Share, payable in full by a Qualifying Shareholder upon acceptance of the relevant provisional allotment of Rights Shares or when a transferee of nil-paid Rights Shares applies for the Rights Shares.

The Subscription Price represents:

(a) a discount of approximately 55.56% to the closing price of HK$0.45 per Ordinary Share, based on the closing price of HK$0.45 per Ordinary Share as quoted on the Stock Exchange on the LPD;
(b) a discount of approximately 65.52% to the closing price of HK$0.58 per Ordinary Share, based on the closing price of HK$0.58 per Ordinary Share as quoted on the Stock Exchange on the Last Trading Day;
(c) a discount of approximately 64.91% to the average closing price of approximately HK$0.57 per Ordinary Share for the five consecutive trading days ended on the Last Trading Day;
(d) a discount of approximately 64.91% to the average closing price of approximately HK$0.57 per Ordinary Share for the ten consecutive trading days ended on the Last Trading Day;
(e) a discount of approximately 38.76% to the theoretical ex-rights price of approximately HK$0.3266 per Ordinary Share, based on the closing price of HK$0.58 per Ordinary Share as quoted on the Stock Exchange on the Last Trading Day;
(f) a discount of approximately 94.90% to the audited consolidated net tangible asset value per Ordinary Share of approximately HK$3.92 (based on the latest published audited consolidated net asset value of the Group attributable to the Shareholders of approximately HK$2,692,816,000 as at 31 March 2015 and 687,052,446 Ordinary Shares in issue as at 31 March 2015); and

– 16 –

LETTER FROM THE BOARD

(g) a discount of approximately 93.98% to the unaudited consolidated net tangible asset value per Ordinary Share of approximately HK$3.32 (based on the latest published unaudited consolidated net asset value of the Group attributable to the Shareholders of approximately HK$2,740,224,000 as at 30 September 2015 and 824,462,446 Ordinary Shares in issue as at 30 September 2015 and the LPD).

The Subscription Price was determined after arm’s length negotiations between the Company and United Century with reference to the market price of the Ordinary Shares prior to the Last Trading Day, the recent volatility of the Hong Kong stock market and the prevailing market conditions. In particular, the Company and United Century have considered (i) the closing price on the Last Trading Day; (ii) the Subscription Price’s respective discount rates to the simple average closing prices of the Ordinary Shares as illustrated above; (iii) the Ordinary Shares had been generally trading in the downward trend from the highest closing price of HK$1.16 on 3 June 2015 to HK$0.58 on the Last Trading Day; and (iv) the comparison of discounts represented by the Subscription Price to the closing price of the Ordinary Shares to that of other rights issue/ open offer precedent cases announced by companies listed on the Stock Exchange, to assess and determine the Subscription Price with an objective of encouraging the Qualifying Shareholders to participate in the Rights Issue and the potential growth of the Group in the future.

In relation to (iii) above, please also refer to the chart set out below:

Chart on trading trend of the Ordinary Shares from 29 April 2015 to the LPD

==> picture [425 x 178] intentionally omitted <==

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

1.4
1.2
Maximum
1.0
0.8
0.6
0.4 Minimum
0.2 Subscription Price
0.0
2015/4/29 2015/5/29 2015/6/29 2015/7/29 2015/8/29 2015/9/29 2015/10/29 LPD
----- End of picture text -----

– 17 –

LETTER FROM THE BOARD

In relation to (iv) above (i.e. comparison of discounts represented by the Subscription Price to the closing price of the Ordinary Shares to that of other rights issue or open offer precedent cases announced by companies listed on the Stock Exchange), the Company has reviewed the announcements issued by other companies in the three-months’ period ended on the date of the Underwriting Agreement i.e. from 29 July 2015 to 28 October 2015. In this regard, please refer to table below for more details:

						Premium/
						(discount)
						of issue price
						to closing	Premium/
						price or	(discount)
						adjusted	of issue
						closing price	price to
			Date of	Basis of	Open offer/	on last	the theoretical	Fully	Level of
No.	Company name	Stock code	announcement	entitlement	rights issue	trading day	ex-rights price	underwritten	acceptance
						(Note 2)			(Note 3)
1	GR Properties Limited	108	26 October 2015	1 for 2	rights issue	–25.29%	–18.41%	Yes	92.08%
2	Well Way Group Limited	8063	8 October 2015	1 for 1	rights issue	–28.57%	–16.67%	Yes	N.A.
3	Shihua Development Company	485	7 October 2015	4 for 1	open offer	–82.50%	–48.60%	Yes	N.A.
	Limited
4	Real Nutriceutical Group	2010	5 October 2015	9 for 40	rights issue	–30.77%	–26.65%	Yes	N.A.
	Limited
5	Zhi Cheng Holdings Limited	8130	2 October 2015	1 for 2	open offer	–77.78%	–70.00%	Yes	N.A.
6	Greater China Financial	431	1 October 2015	1 for 2	rights issue	–45.00%	–35.29%	Yes	6.72 times
	Holdings Limited
7	China Resources and	269	29 September 2015	4 for 1	rights issue	–82.80%	–49.00%	Yes	N.A.
	Transportation Group Limited
8	First Credit Finance Group	8215	18 September 2015	12 for 1	rights issue	–51.40%	–7.55%	Yes	N.A.
	Limited
9	Fosun International Limited	656	10 September 2015	56 for 500	rights issue	0.00%	0.00%	Yes	119.21%
10	SEEC Media Group Limited	205	9 September 2015	5 for 1	open offer	–67.95%	–25.93%	Yes	N.A.
	(Note 4)
11	China Investment and Finance	1226	9 September 2015	8 for 1	open offer	–64.79%	–16.94%	Yes	N.A.
	Group Limited
12	Kingwell Group Limited	1195	8 September 2015	1 for 9	open offer	–46.67%	–44.06%	Yes	86.23%
13	Flying Financial Service	8030	7 September 2015	1 for 2	open offer	–48.05%	–38.18%	Yes	786.15%
	Holdings Limited
14	Fortune Sun (China) Holdings	352	1 September 2015	1 for 5	rights issue	–28.57%	–24.78%	Yes	862.96%
	Limited
15	Megalogic Technology Holdings	8242	1 September 2015	3 for 1	open offer	–29.82%	–9.50%	Yes	N.A.
	Limited
16	HNA International Investment	521	30 August 2015	9 for 5	rights issue	–20.00%	–8.29%	Yes	38.41%
	Holdings Limited
17	Legend Strategy International	1355	28 August 2015	1 for 4	open offer	–36.51%	–31.62%	Yes	88.12%
	Holdings Group Company
	Limited

– 18 –

LETTER FROM THE BOARD

						Premium/
						(discount)
						of issue price
						to closing	Premium/
						price or	(discount)
						adjusted	of issue
						closing price	price to
			Date of	Basis of	Open offer/	on last	the theoretical	Fully	Level of
No.	Company name	Stock code	announcement	entitlement	rights issue	trading day	ex-rights price	underwritten	acceptance
						(Note 2)			(Note 3)
18	Group Sense (International)	601	20 August 2015	1 for 1	open offer	–44.44%	–28.57%	Yes	768.19%
	Limited
19	SEEC Media Group Limited	205	19 August 2015	3 for 1	open offer	–62.96%	–30.07%	Yes	N.A.
20	Chong Hing Bank Limited	1111	17 August 2015	1 for 2	rights issue	–26.03%	–19.00%	Yes	87.5%
21	Lerado Group (Holding)	1225	14 August 2015	3 for 1	open offer	–68.09%	–34.78%	Yes	N.A.
	Company Limited
22	Huili Resources (Group)	1303	12 August 2015	1 for 2	open offer	–57.26%	–47.20%	Yes	252.28%
	Limited
23	Neo Telemedia Limited	8167	11 August 2015	1 for 2	open offer	–77.51%	–69.67%	Yes	N.A.
24	Easyknit Enterprises Holdings	616	6 August 2015	20 for 1	rights issue	–88.00%	–26.15%	Yes	69.52%
	Limited
25	U-Home Group Holdings	2327	4 August 2015	1 for 2	open offer	–17.46%	–12.36%	Yes	67.61%
	Limited
26	Celestial Asia Securities	1049	31 July 2015	1 for 2	rights issue	–57.45%	–47.37%	Yes	3,446.91%
	Holdings Limited
27	International Standard Resources	91	30 July 2015	1 for 4	open offer	–34.12%	–29.29%	Yes	83.63%
	Holdings Limited
					min	–88.00%	–70.00%
					max	0.00%	0.00%
					median	–45.00%	–28.57%
	The Company	910	28 October 2015	2 for 1	rights issue	–65.52%	–38.76%	Yes	N.A.

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

Notes:

Save as referred to in note 4 below, the above table is based solely on the information disclosed in (i) the initial announcements of the listed companies named in the above table and (ii) the relevant announcements on the results of the open offer/rights issue published up to LPD (inclusive), respectively.
According to the relevant announcements of the listed companies named in the above table, the relevant closing prices had been adjusted, where applicable, after taking into account the effect of the capital reorganization such as shares consolidation, shares sub-divisions and reduction of capital as more particularly described in the relevant initial announcements.
N.A. represents the results of the rights issue/open offer which have not yet been published as at the LPD.

– 19 –

LETTER FROM THE BOARD

The initial announcement of the open offer of SEEC Media Group Limited was dated 19 August 2015 as set out in item No. 19 in the above table. SEEC Media Group Limited announced the change of the terms of open offer in its announcement dated 9 September 2015.

The Directors (excluding (i) Mr. Guo who was required to abstain from voting on the relevant Board resolution(s) approving the Transactions by virtue of him having a material interest in the Transactions; (ii) Amika Guo who was required to abstain from voting on the relevant Board resolution(s) approving the Transactions under the Company’s constitution by virtue of her being the daughter of Mr. Guo and therefore an associate of Mr. Guo; and (iii) the IBC Members) consider the terms of the Rights Issue, including the Subscription Price which has been set at a discount to the closing prices of the Ordinary Shares as stated in this sub-section with an objective to encourage existing Shareholders to take up their entitlements so as to participate in the potential growth of the Group, to be fair and reasonable and in the best interests of the Company and the Shareholders as a whole. Please refer to the IBC Letter for more details on the view of the independent non-executive Directors. The net price per Rights Share upon full acceptance of the relevant provisional allotment of the Rights Shares will be approximately HK$0.196.

Status of the Rights Shares

The Rights Shares, when allotted and fully paid, will rank pari passu in all respects with the Ordinary Shares then in issue. Holders of fully-paid Rights Shares will be entitled to receive all future dividends and distributions which are declared, made or paid after the date of allotment of the Rights Shares in their fully-paid form.

Qualifying Shareholders and closure of register of members

The Company will send the Prospectus Documents to the Qualifying Shareholders only. To qualify for the Rights Issue, a Shareholder must:

(a) be registered as a member of the Company at the close of business on the Record Date; and
(b) be a Qualifying Shareholder.

Application for all or any part of a Qualifying Shareholder’s provisional allotment should be made by completing the PAL and lodging the same with a remittance for the Rights Shares being applied for.

– 20 –

LETTER FROM THE BOARD

In order to be registered as members of the Company at the close of business on the Record Date, owners of the Ordinary Shares must lodge any transfers of the Ordinary Shares (together with the relevant share certificates) with Tricor Tengis Limited, the branch share registrar of the Company in Hong Kong, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on Tuesday, 5 January 2016. The register of members of the Company will be closed from Wednesday, 6 January 2016 to Tuesday, 12 January 2016, both days inclusive, for determining entitlements to the Rights Issue. No transfer of the Ordinary Shares will be registered during this period.

Rights of Overseas Shareholders

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

In compliance with the necessary requirements of the Listing Rules, the Company will make enquiries regarding the feasibility of extending the Rights Issue to the Overseas Shareholders (if any). If, based on legal opinions, the Directors consider that it is necessary or expedient not to offer the Rights Shares to the Overseas Shareholders on account either of the legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place, the Rights Issue will not be available to such Overseas Shareholders. Further information in this connection will be set out in the Prospectus Documents containing, among other things, details of the Rights Issue, which are expected to be despatched to the Qualifying Shareholders on Wednesday, 13 January 2016. The Company will send copies of the Prospectus to the NonQualifying Shareholders for their information only, but will not send the PAL to them.

Arrangements will be made for the Rights Shares which would otherwise have been provisionally allotted to the Non-Qualifying Shareholders to be sold in the market in their nil-paid form as soon as practicable after dealings in the nil-paid Rights Shares commence, if a premium (net of expenses) can be obtained. The proceeds of such sale, less expenses, of more than HK$100 will be paid pro rata to the Non-Qualifying Shareholders. The Company will retain individual amounts of HK$100 or less for the benefit of the Company. Any unsold entitlement of the Non-Qualifying Shareholders, together with any Rights Shares provisionally allotted but not accepted, will be taken up by United Century pursuant to the Underwriting Agreement.

Overseas Shareholders should note that they may or may not be entitled to the Rights Issue. Accordingly, Overseas Shareholders should exercise caution when dealing in the securities of the Company.

– 21 –

LETTER FROM THE BOARD

Fractions of Rights Shares

On the basis of provisional allotment of two Rights Shares for every one Ordinary Share held by the Qualifying Shareholders on the Record Date, no fractional entitlements to the Rights Shares will arise under the Rights Issue.

No arrangement for application for excess Rights Shares

The Board is of the view that the Rights Issue gives the Qualifying Shareholders an equal and fair opportunity to maintain their respective pro rata shareholding interests in the Company and is negotiated on an arm’s length basis with United Century, the sole underwriter of the Rights issue. If application for excess Rights Shares is arranged, the Company will be required to put in additional effort to administer the excess application procedures, including preparing and arranging the excess application, reviewing the relevant documents, liaising with professional parties and printing of application forms, etc. It is estimated that an additional cost of approximately HK$100,000 will be incurred to administer the excess application procedures, which is not cost effective from the viewpoint of the Company, especially after taking into account that the Group was in loss-making position in the last two financial years ended 31 March 2014 and 2015 respectively. The Board considers that it is important for the Group to minimise all costs which may be incurred during the fund-raising process. Notwithstanding that excess application arrangement will not be made available to the Qualifying Shareholders, the Board considers that offering a discount on the Subscription Price would encourage the Qualifying Shareholders to participate in the Rights Issue and the potential growth of the Group. Further, Shareholders may acquire additional rights entitlement in the open market (subject to availability). Moreover, (i) the Absence of Excess Application Arrangement is subject to the approval of the LR Independent Shareholders who have been provided with advice from the IFA in accordance with the Listing Rules; and (ii) the sole underwriter, namely United Century, being materially interested in the Absence of Excess Application Arrangement, is required to abstain from voting on the resolution for the approval of the Absence of Excess Application Arrangement at the SGM. After taking into account, among other things, that Shareholders may acquire additional rights entitlement in the open market (subject to availability), that the Absence of Excess Application Arrangement is subject to the approval of the LR Independent Shareholders and the additional efforts and cost to administer application for excess Rights Shares, the Board is of the view that the interest of the Shareholders are adequately safeguarded notwithstanding that no arrangement has been made for application of excess Rights Shares. As such, the Board concluded that the Absence of Excess Application Arrangement is in the interests of the Shareholders and the Group as a whole. Accordingly, no excess Rights Shares will be offered to the Qualifying Shareholders and any Rights Shares not taken up by the Qualifying Shareholders will be underwritten by United Century pursuant to the Underwriting Agreement.

In compliance with Rule 7.21 of the Listing Rules, the Absence of Excess Application Arrangement must be specifically approved by the LR Independent Shareholders at the SGM.

– 22 –

LETTER FROM THE BOARD

Application for listing

The Company will apply to the Stock Exchange for the listing of, and permission to deal in, the Rights Shares in both their nil-paid and fully-paid forms to be issued and allotted pursuant to the Rights Issue.

Subject to the granting of the listing of, and permission to deal in, the Rights Shares in both their nil-paid and fully-paid forms on the Stock Exchange, the Rights Shares in both their nilpaid and fully-paid forms will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the respective commencement dates of dealings in the Rights Shares in both their nil-paid and fully-paid forms on the Stock Exchange or such other dates as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second settlement day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Dealings in the Rights Shares in both their nil-paid and fully-paid forms, which are registered in the register of members of the Company in Hong Kong, will be subject to the payment of stamp duty and other applicable fees and charges in Hong Kong.

Share certificates for the Rights Shares and refund cheques (if applicable)

Subject to the fulfilment of the conditions of the Rights Issue, certificates for all fully-paid Rights Shares are expected to be posted to those entitled thereto by ordinary post at their own risk on or before Thursday, 4 February 2016. If the Rights Issue is terminated, refund cheques will be despatched on or before Thursday, 4 February 2016 by ordinary post at the respective Shareholders’ own risk.

Conditions of the Rights Issue

The Rights Issue is conditional upon the Underwriting Agreement becoming unconditional and not being terminated in accordance with its terms or otherwise. The conditions of the Underwriting Agreement are set out in the sub-section headed “Conditions of the Underwriting Agreement” below.

If the conditions of the Underwriting Agreement are not fulfilled, the Rights Issue will not proceed.

– 23 –

LETTER FROM THE BOARD

United Century Undertaking

Pursuant to the United Century Undertaking, United Century (in its capacity as a Shareholder) has given an irrevocable and unconditional undertaking in favour of the Company:

(a) to subscribe for or procure the subscription of the Committed Shares;
(b) not to (i) sell or otherwise dispose of any of the United Century CPS and the Ordinary Shares owned by it; (ii) convert any of the United Century CPS; or (iii) exercise any warrants, options or any rights in whatever forms or descriptions it has to acquire additional interest in the capital of the Company before completion of the Rights Issue; and
(c) that the Ordinary Shares and the United Century CPS registered under its name or in the name of its nominees will remain so registered at the close of business on the Record Date up to and including the date on which the Rights Issue shall complete.

For the avoidance of doubt, the Committed Shares do not include the Rights Shares not taken up by other Qualifying Shareholders and fall to be underwritten by United Century in its capacity as the sole underwriter under the Underwriting Agreement.

As at the LPD, United Century is the sole substantial shareholder of the Company.

UNDERWRITING AGREEMENT

The Rights Issue is fully underwritten by United Century upon and subject to the terms of the Underwriting Agreement. Set out below is a summary of the principal terms of the Underwriting Agreement and relevant information: Date: 28 October 2015 Sole underwriter: United Century Number of Underwritten 1,248,924,892 Rights Shares Shares: Commission: 1.5% of the total Subscription Price in respect of 1,248,924,892 Underwritten Shares, being the maximum number of Underwritten Shares to be taken up by United Century

– 24 –

LETTER FROM THE BOARD

United Century is a connected person of the Company by virtue of it being a substantial shareholder of the Company. Please refer to the section headed “Information on United Century and the Concert Group” below for more details. After the Company had formed the intention to raise funds by way of rights issue, it approached United Century to underwrite the Rights Issue and United Century expressed its willingness to support and underwrite the Rights Issue. After balancing other relevant factors as disclosed more specifically below, the Company had not approached any independent underwriters for the underwriting of the Rights Issue as the Company was mindful of the laws and regulations in Hong Kong pertaining to the need to keep inside information confidential pending an announcement and not putting any person in a privileged dealing position. As the Rights Issue is a piece of highly material and price sensitive information, the Company did not consider approaching multiple potential underwriters with whom it did not have prior business relationship to be conducive to compliance with the relevant laws and regulation. Additionally, after considering the commercial terms of the Rights Issue which include, among others: (i) the Rights Issue being fully underwritten; (ii) the amount and size of the gross proceeds of the Rights Issue; (iii) the terms of the Rights Issue being in accordance with market practice; (iv) the confidentiality of the possible fund-raising intention of the Company, the Company decided to choose United Century as its sole underwriter and not to approach other possible underwriters. The Company has not conducted any fund raising activities in the last 12 months which involved underwriting arrangement and does not have a practice on not approaching independent underwriters. The Company will take into account all the circumstances of the case, in particular the interest of the Shareholders as whole in deciding whether to approach independent underwriters. The factors that the Company has taken into account in determining to approach United Century only, but not other underwriters, included (without limitation) the likelihood of finding underwriters who have interest to underwrite the Rights Issue given the conditions of the Group (such as recent financial performance, trading volume of the Ordinary Shares), the expected time that would be required on negotiation the likelihood of concluding the negotiations on terms acceptable to the Company and being more confident of keeping the rights issue proposal confidential if the Company can minimise the number of potential underwriters to be approached. After taking into account and balancing the factors described above, the Company concluded that it is in the best interest of the Group and the Shareholders as a whole to approach United Century only. For the purpose of providing more information on the expected time of negotiation, the Company disclosed that it took approximately one day for the Company and United Century to agree on the principal terms of the Underwriting Agreement (i.e. the subscription price, basis of the rights issue, commission rate and conditions precedent).

– 25 –

LETTER FROM THE BOARD

The Company considers that the terms of the Rights Issue is accordance with market practice such as being subject to fulfilment of conditions commonly seen in transaction of this type (for examples, obtaining shareholders’ approval as required under the applicable laws and conditions and underwriter’s rights of termination and payment of underwriting commission). After taking into account that approaching United Century is more likely to successfully reaching an agreement and sooner given that United Century, being a substantial shareholder, is more familiar with the affairs of the Group, that negotiations with independent underwriter is more likely to involve their legal and other advisers which mean a longer negotiation process, the Company considers that it is reasonable to expect that appointing United Century as underwriter would be more cost effective. As disclosed above, United Century expressed its willingness to support and underwrite. On the other hand, given that the Group was in a loss-making positions in the last two financial years ended 31 March 2014 and 2015 respectively and the relatively low trading volume of the Ordinary Shares, the Company considers that it is reasonable to expect that it would be more difficult to find underwriters (if any) who are interested to underwrite the Rights Issue and assuming that there are underwriters which would have interest to underwrite the Rights Issue, additional time would be needed to negotiate the terms of the underwriting arrangement. On the other hand, United Century responded to the Company swiftly and positively after it was approached by the Company. The Company therefore continued the negotiation on underwriting the Rights Issue with United Century and had not approached other underwriters.

The amount of commission was determined after arm’s length negotiation between the Company and United Century by reference to the size of the Rights Issue and the market condition. The Directors (excluding (i) Mr. Guo who was required to abstain from voting on the relevant Board resolution(s) approving the Transactions by virtue of him having a material interest in the Transactions; (ii) Amika Guo who was required to abstain from voting on the relevant Board resolution(s) approving the Transactions under the Company’s constitution by virtue of her being the daughter of Mr. Guo and therefore an associate of Mr. Guo; and (iii) the IBC Members) consider that the terms of the Underwriting Agreement (including the commission rate) are fair and reasonable and in the interests of the Company and the Shareholders as a whole. The payment of the underwriting commission by the Company to United Century in its capacity as an underwriter pursuant to the Underwriting Agreement constitutes a connected transaction of the Company but is exempt from independent shareholders’ approval under the Listing Rules. Please refer to the section headed “Listing Rules Implications” below for more details. Please refer to the IBC Letter for more details on the view of the independent non-executive Directors.

– 26 –

LETTER FROM THE BOARD

Conditions of the Underwriting Agreement

The conditions precedent to completion of the Underwriting Agreement are summarised below:

(a) the passing of the necessary resolution(s) by way of poll by the Shareholders who are entitled to vote on such resolution(s) under the applicable laws and regulations (including without limitation the Listing Rules and/or the Takeovers Code, as applicable) at a general meeting of the Company approving each of the followings:
(i) the Rights Issue;
(ii) the Absence of Excess Application Arrangement;
(iii) the Underwriting Agreement; and
(iv) the Whitewash Waiver;
(b) the Executive having granted the Whitewash Waiver and not having withdrawn or revoked such grant and the fulfilment of all conditions (if any) attached to the Whitewash Waiver;
(c) the delivery to the Stock Exchange and registration with the Registrar of Companies in Hong Kong respectively of one copy of each of the Prospectus Documents duly signed by two Directors (or by their agents duly authorised in writing) in accordance with the CWMO as approved by resolution of the board of Directors and all other documents required to be attached thereto not later than the Prospectus Issue Date and otherwise in compliance with the Listing Rules and the CWMO;
(d) the posting of the Prospectus Documents to the Qualifying Shareholders and the posting of the Non-Qualifying Letter accompanied by a Prospectus stamped “For Information Only” to the Non-Qualifying Shareholders on the Prospectus Issue Date;
(e) the Listing Committee of the Stock Exchange granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked the listing of, and the permission to deal in, the Rights Shares (in their nil-paid and fully-paid forms) by no later than the first day of their dealings;
(f) the Underwriting Agreement not being terminated by United Century before the Latest Termination Time pursuant to the terms thereof;

– 27 –

LETTER FROM THE BOARD

(g) United Century not being discharged or released from its obligations under the Underwriting Agreement before the Latest Termination Time pursuant to the terms thereof; and
(h) compliance with and performance by the Company of all its undertakings and obligations in relation to the implementation of the Rights Issue as stipulated under the Underwriting Agreement, such as offering the Rights Shares to the Qualifying Shareholders at the Subscription Price on the terms and bearing such rights as set out in the Prospectus Documents, allotting and issuing the Rights Shares in accordance with the Prospectus Documents.

None of the above conditions can be waived. If the conditions precedent are not satisfied by the Latest Termination Time or such other date as the Company and United Century may agree, the Underwriting Agreement shall be terminated and no party shall have any claim against the other party (save for any antecedent breaches of the Underwriting Agreement) save that all such reasonable expenses as may have been properly incurred by United Century in connection with the Rights Issue shall be borne by the Company.

None of the conditions of the Underwriting Agreement have been fulfilled as at the LPD. The resolution(s) referred to in (a) above will be considered by the LR Independent Shareholders and/ or the Code Independent Shareholders at the SGM. Please refer to the section headed “Eligibility to vote at the SGM” below for more information in this regard.

Termination of the Underwriting Agreement

United Century reserves the right to terminate the arrangements set out in the Underwriting Agreement by notice in writing given to the Company at any time prior to the Latest Termination Time, if one or more of the events or matters (whether or not forming part of a series of events) specified in the Underwriting Agreement as summarised below shall occur, arise, or exist:

(a) United Century shall become aware of the fact that, or shall have reasonable cause to believe that, any of the warranties given by the Company under the Underwriting Agreement was (when originally given or when repeated in accordance with the provisions of the Underwriting Agreement) untrue, inaccurate, misleading or breached; or

– 28 –

LETTER FROM THE BOARD

(b) (i) any new law or regulation is enacted, or there is any change in existing laws or regulations or any change in the interpretation or application thereof by any court or other competent authority, whether in Hong Kong or elsewhere; or
(ii) any change in local, national or international political, financial or economic conditions; or
(iii) any local, national or international outbreak or escalation of hostilities, or armed conflict; or
(iv) any change of an exceptional nature in local, national or international equity securities or currency markets; or
(v) any other material adverse change in relation to the business or the financial or trading position or prospects of the Group as a whole; or
(vi) trading of any securities of the Company being suspended for 5 consecutive days on any exchange; or
(vii) any change or development involving a prospective change in taxation or exchange controls in Hong Kong or elsewhere, which event or events, in the sole and absolute discretion of United Century, is or are:–
1. likely to have a material adverse effect on the business or financial or trading position or prospects of the Group as a whole;
2. likely to have a material adverse effect on the success of the Rights Issue or the level of Rights Shares taken up; or
3. so material as to make it inappropriate, inadvisable or inexpedient to proceed further with the Rights Issue.

– 29 –

LETTER FROM THE BOARD

United Century is also entitled by notice in writing prior to the Latest Termination Time to treat the matters or events summarised below as releasing and discharging it from its obligations under the Underwriting Agreement:

(a) the Company commits any material breach of or omits to observe any of the material obligations or undertakings expressed to be assumed by it under the Underwriting Agreement;
(b) United Century shall become aware of that any of the material warranties given by the Company under the Underwriting Agreement was, when given, untrue or inaccurate and that United Century shall, in its sole and absolute opinion, determine that any such untrue warranty represents or may represent a material adverse change in the financial or trading position or prospects of the Group taken as a whole or is otherwise likely to have a prejudicial effect on the Rights Issue; or
(c) the Company shall, after any matter or event which has occurred or come to the Company’s attention such matter or event would render untrue, inaccurate or misleading any statements contained in the Prospectus Documents, fail to promptly send out any announcement or circular (after the despatch of the Prospectus Documents), in such manner (and as appropriate with such contents) as United Century may reasonably request for the purpose of preventing the creation of a false market in the securities of the Company.

Upon the giving of the notice in writing from United Century to terminate the Underwriting Agreement or to treat itself as released or discharged from its obligations under the Underwriting Agreement referred to above, all obligations of United Century under the Underwriting Agreement shall cease and determine and no party shall have any claim against any other party in respect of any matter or thing arising out of or in connection with the Underwriting Agreement except in respect of any antecedent breach of the Underwriting Agreement; provided however that the Company shall remain liable to pay all reasonable costs, charges and expenses which may have been incurred by United Century in connection with the Rights Issue.

If United Century terminates the Underwriting Agreement or is otherwise discharged from its obligations thereunder or if the conditions precedent to completion of the Underwriting Agreement have not been fulfilled in accordance therewith, the Rights Issue will not proceed.

– 30 –

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

Set out below is the shareholding structure of the Company as at the LPD and immediately upon completion of the Rights Issue assuming that (i) no Ordinary Shares are allotted and issued or repurchased by the Company on or before the Record Date; and (ii) there are no Non-Qualifying Shareholders:

==> picture [426 x 283] intentionally omitted <==

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

Completion of the Rights
Issue assuming no
Qualifying Shareholders
Immediately after completion (with the exception of
of the Rights Issue assuming United Century) have taken
all the Qualifying Shareholders up any of the Rights Shares
have taken up their respective and United Century has
entitlements of Rights Shares taken up the Rights Shares
Shareholders As at the LPD in full to the maximum extent
Number of Number of Number of
Ordinary Ordinary Ordinary
Shares % Shares % Shares %
Concert Group (Note 1) 200,000,000 24.26 600,000,000 24.26 1,848,924,892 74.75
Public Shareholders
Best China Limited (Note 2) 42,500,000 5.15 127,500,000 5.15 42,500,000 1.72
Other public Shareholders 581,962,446 70.59 1,745,887,338 70.59 581,962,446 23.53
Total 824,462,446 100.00 2,473,387,338 100.00 2,473,387,338 100.00
----- End of picture text -----

Notes:

These 200,000,000 Ordinary Shares are held by United Century, a company wholly-owned by Mr. Guo. By virtue of the SFO, Mr. Guo, an executive Director, is deemed to be interested in these shares.
Best China, a substantial shareholder for the purpose of Part XV of the SFO, is wholly-owned by Mrs. Chu. Mrs. Chu is the ultimate controlling shareholder of Kingston Corporate Finance, the financial adviser to the Company for the Rights Issue.
Except for Mr. Guo, none of the Directors have any interest in the Ordinary Shares, CPS or other securities of the Company as at the LPD.

– 31 –

LETTER FROM THE BOARD

Upon completion of the Rights Issue, those Qualifying Shareholders who elect to subscribe for in full of their assured entitlements under the Rights Issue will retain their current shareholding percentage and investments in the Company. Those Qualifying Shareholders who elect not to subscribe in full for their assured entitlements under the Rights Issue would be diluted by a maximum of approximately 66.67% in terms of shareholding interests (when compared with their shareholding as at the LPD). In light of the relative low Subscription Price at HK$0.20 per Rights Share, the Board considers that the Rights Issue is attractive to the Shareholders and is confident that they will subscribe for their respective entitlements to maintain their existing shareholding. On this basis, the Board expects that the actual dilution effect will be lower than the theoretical maximum dilution effect as described above.

As at the LPD, the Company anticipated that it would be able to fulfil the minimum public float requirement under Rule 8.08(1)(a) of the Listing Rules. Under the scenario where no Qualifying Shareholders (except for United Century) have taken up any of the Rights Shares and United Century has taken up all the Underwritten Shares, the public float will be approximately 25.25% immediately upon completion of the Rights Issue, which demonstrates that the Company will maintain the minimum public float requirement in compliance with Rule 8.08 of the Listing Rules. Moreover, although maintenance of public float by the Company is not a condition precedent of the Underwriting Agreement, under the Underwriting Agreement, United Century has undertaken to the Company that it shall use all reasonable endeavours to ensure that the public float requirements under Rule 8.08(1)(a) of the Listing Rules will be fulfilled by the Company upon completion of the Rights Issue. If the shareholding of the Company held by public Shareholders is less than 25% before the close of the Rights Issue, the Company will, in accordance with the undertaking given by United Century under the Underwriting Agreement, request United Century to use all reasonable measures to ensure that the Company can maintain the requisite public float including, if appropriate, United Century to arrange for a placing agent for the placing down of the Ordinary Shares held by United Century after the completion of the Rights Issue to ensure that the percentage of the Ordinary Shares held by the public Shareholders will be 25% or more to comply with Rule 8.08 of the Listing Rules.

REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

The Group is principally engaged in property development and holding of property for investment and rental purpose. Currently, the Group owns a shopping mall in Fuzhou as an investment property and, as disclosed in the interim report of the Group for the six months ended 30 September 2015, the Group is seeking for opportunities to acquire optimal scale land parcels or completed properties for development and investment continuously. The Group is optimistic to the residential and commercial property market of Mainland China in the long run and has identified Shanghai as the primary target to expand the Group’s future investment due to Shanghai’s status as the leading financial and economic centre of the PRC.

– 32 –

LETTER FROM THE BOARD

As the Shanghai Municipal Bureau of Planning and Land Resources* (上海市規劃和國土資源管理局) offers land use rights of residential or commercial properties in Shanghai for acquisition through public auction, tender or listing for sale process from time to time and on an irregular basis, the Directors are of the view that it is necessary to strengthen the financial position of the Group in order to facilitate the Group to make future investments in residential or commercial properties in Shanghai in a timely manner should the opportunities arise.

The Company formed the intention to invest in the residential or commercial properties in Shanghai in about September 2015 after termination of the Xi’an project as described in more details in the announcement of the Company dated 23 July 2015 (“ Xi’an Project Termination Announcement ”). As at the LPD, the Company has not yet identified the exact investment target. Subject to the availability of opportunities, it is the intention of the Company to target land located in the Songjiang New City International Ecological Business District in the Songjiang District of Shanghai (上海市松江區松江國際生態商務區) (the “ International Ecological Business District ”). Subject to, among other things, the then market conditions and other commercial and economic factors, the Company intends to invest approximately HK$560 million of which approximately (i) HK$160 million represents the cost of land (on the basis of HK$4,000 per square metre and a total gross floor area of 40,000 square metres); and (ii) HK$400 million represents the construction cost (on the basis of HK$10,000 per square metre and a total gross floor area of 40,000 square metres). The basis of HK$4,000 per square metre as the estimated cost of land and the size of land targeted by the Group are formed on the basis of the experience of the management, the property market condition as at the LPD and the anticipated resources available to the Group. Based on the information obtained from the website of Ministry of Land and Resources (國土資源部), the Company understands that in a recent transaction comparable in terms of size and usage (i.e. total floor area of approximately 40,000 square metres and for commercial use) occurred in about July 2015, a piece of land of a total gross floor area of approximately 52,200 square metres for commercial purpose was successfully sold in Shanghai at the price of approximately RMB2,900 (or approximately HK$3,500) per square metre. After also taking into account that the property market of Shanghai remained relatively stable as at the LPD and the anticipated resources available to the Group, the Company estimated that the cost of land for its investment in Shanghai to be approximately HK$4,000 per square metre. The estimated total capital commitment of HK$560 million will be funded by the proceeds raised from the Rights Issue to the extent of HK$221.6 million and the balance of approximately HK$338.4 million is expected to be funded partly by the proceeds from the Bonds Placing (being approximately HK$9.3 million), internal resources and/or other means of financing, including but not limited to debt and/or equity financing depending on the then market conditions and the financial conditions of the Group.

– 33 –

LETTER FROM THE BOARD

Based on the information available from the website of the International Ecological Business District, the International Ecological Business District has an area of approximately 4.14 square kilometres and is located in the Songjiang District of Shanghai. Songjiang is the centre of the Yangtze River Delta Economic Zone. It takes only about 40 minutes to reach the Shanghai Pudong International Airport (上海浦東國際機場) from the University Town Station of line number 9 of the light rail which is about 100 metres from the International Ecological Business District. The Company intended to target land located in the International Ecological Business District because of its satisfactory location in Shanghai. It is also expected that the land that may be available for acquisition in the International Ecological Business District would include lands of area smaller than those available for acquisition in the centre of Shanghai and that suits the intended investment amount of the Group.

In the Xian Project Termination Announcement, the Company announced that Fujian Jianke, a non wholly-owned subsidiary of the Company, was in negotiation with 西安曲江大明宮遺址區保護改造辦公室 (Xi’an Qujiang Daming Palace Heritage Area Protection and Reconstruction Office) (“ Reconstruction Office* ”) for the termination of the Xi’an Project (as defined in the Xian Project Termination Announcement). As disclosed in the Xi’an Project Termination Announcement, the reason for the termination of the Xi’an Project was that the public bidding of the land in relation to the Xi’an Project would not be able to take place as notified by the Reconstruction Office, which was a situation beyond the control of the Group. As disclosed in the above in this section, the Group is optimistic to the residential and commercial property market of Mainland China in the long run and given the nature and manner of the supply of land in Shanghai as described above, it is necessary for the Group to strengthen its financial position in order to facilitate the Group to make future investments in residential or commercial properties in Shanghai in a timely manner should the opportunities arise. The termination of the Xi’an Project also prompted the Group to seek fresh investment opportunities as soon as possible in order to generate return for the Shareholders. Moreover, the sentiment of the stock market and the capital market has also improved as compared with the few months before the Rights Issue Announcement. Further, the Company has also successfully secured the underwriting obligations from United Century, the Company therefore proceed with the rights issue in October 2015 to raise funds for the purposes as described in this circular.

The Board considers that it is prudent to finance the Group’s long-term growth by longterm financing, preferably in the form of equity which will not increase the Group’s finance costs. The Rights Issue will give the Qualifying Shareholders an equal opportunity to maintain their proportionate interests in the Company and to continue to participate in the future development of the Group. Accordingly, the Board considers that fund raising through the Rights Issue is in the interests of the Company and the Shareholders as a whole.

– 34 –

LETTER FROM THE BOARD

Before determining to raise funds by way of rights issue, the Company has considered alternative ways of financing such as debt financing, placing of new Ordinary Shares and open offer. In relation to debt financing, the Company considered that the amounts that can be raised by way of debt financing is expected to be lower than the amount to be raised by the Company through the Rights Issue and additional borrowings would create extra interested burden on the Group. The Company had approached several financial institutions in Hong Kong but had not been given terms acceptable to the Company as the loan amount that those financial institutions indicated in the initial contact that they would consider would be relatively small (being tens of million) without indicating the exact amounts or range of amounts. Those financial institutions had indicated that the applicable interest rates would be in line with market practice and that collateral would be required. Since the Group was looking for loan facility in the region of HK$250 million to HK$350 million, the Board believes that based on the initial feedback from those financial institutions and that the Group was in a loss-making positions in the last two financial years ended 31 March 2014 and 2015 respectively, it would be more difficult for the Company to secure a loan facility in an amount desired by the Company. As such, the Company had not proceeded with negotiation with those financial institutions further after the initial contact. Further, debt financing is more likely to be subject to lengthy due diligence and negotiations with financial institutions and provision of collateral.

In relation to fund raising in the form of equity, the Company had also considered placing of new Ordinary Shares and open offer. After due and careful consideration, the Company considered that (a) placing of new Ordinary Shares would only be available to placees who may not be the existing Shareholders and would dilute the shareholding of the existing Shareholders; and (b) an open offer does not offer the Qualifying Shareholders the option to sell the nil-paid Rights Shares in the market. As an open offer does not allow the trading of rights entitlements, right issue is preferred accordingly.

In view of the above, the Board considered that rights issue is the most suitable equity financing method available to the Group as (i) the Qualifying Shareholders have the option to subscribe for the Rights Shares at their sole discretion; (ii) the Qualifying Shareholders who do not take up their entitlements can sell the nil-paid Rights Shares in the market; and (iii) the Rights Issue offers all the Qualifying Shareholders an opportunity to participate in the enlargement of the capital base of the Company and enables the Qualifying Shareholders to maintain their proportionate interests in the Company and continue to participate in the future development of the Group should they so wish. Moreover, each Transaction is subject to the approval of the Code Independent Shareholders and/or the LR Independent Shareholders who have been provided with advice from the IFA in accordance with the Takeovers Code and the Listing Rules. Accordingly, the Company is of the view that the interest of the Shareholders are adequately safeguarded.

– 35 –

LETTER FROM THE BOARD

As at the LPD, save and except for the repayment of bank loans of approximately of HK$140 million and general working capital (both are intended to be financed by the Group’s internal resources) and the abovementioned funding needs, the Group had not identified any material and notable funding needs in the forthcoming twelve months. If there is any deviation on future plans due to dynamic business environment which may lead to possible changes in the future funding need, the Group will consider various fund raising plans including but not limited to loans from banks or financial institutions and/or debt and/or equity fund raising methods in the capital market according to the then cost of capital, timeliness of the availability of the fund and various commercial factors as the case may apply. As at the Latest Practicable Date, except for the Rights Issue, the Company had no other fund raising plan in the forthcoming twelve months. However, if the Group enter into definitive binding agreement(s) in relation to the proposed acquisition of a company involving in the business of exploration and production of coalbed methane and provision of related technical services and consultation services as announced in the announcement of the Company dated 24 August 2015 (“ Proposed Acquisition ”), the Company may raise further funds. As at the LPD, the Company was still in the course of conducting due diligence on the relevant target company, the earnest money had not yet been paid and the parties had not entered into any definitive agreement(s). Assuming that definitive binding agreement(s) in relation to the Proposed Acquisition is entered into and financing is required, the Group will, subject to the then market conditions and the financial conditions of the Group, consider further debt or equity financing.

With the funding needs amount as estimated by the Board together with the purposive subscription price, the Board comes up with the resulting two for one Rights Issue. If the Shareholders (other than United Century) elect not to participate in the Rights Issue, their aggregate shareholding will decrease from 75.74% to 25.25%, resulting a maximum dilution of 66.67% to their existing shareholdings. In light of the relative low subscription price at HK$0.20 per Rights Share, the Board considers that the Rights Issue is attractive to the Shareholders and is confident that they will subscribe for their respective entitlements to maintain their existing shareholding. On this basis, the Board expects that the actual dilution effect will be lower than the theoretical maximum dilution effect as described above.

It is expected that the gross proceeds raise from the Rights Issue will be not less than approximately HK$329.8 million before expenses. The estimated expenses in relation to the Rights Issue, including financial, legal, and other professional advisory fees, underwriting commission, printing and translation expenses will be borne by the Company. It is expected that the estimated net proceeds raise from the Rights Issue will be not less than approximately HK$323 million. The Company intends to apply the net proceeds from the Rights Issue in the following manner: (i) not more than approximately 70% or HK$226.1 million for acquiring State owned land use right(s) and financing potential residential or commercial properties property development project(s) in Shanghai; (ii) approximately 20% or HK$64.6 million for repayment of the debts of the Group principally consisted of bank loans; and (iii) approximately 10% or HK$32.3 million as working capital of the Group.

– 36 –

LETTER FROM THE BOARD

To the extent that the net proceeds are not immediately used for the purposes described above, they will be placed in short term demand deposits with banks in Hong Kong and/or through money market instruments.

The Directors (excluding (i) Mr. Guo who was required to abstain from voting on the relevant Board resolution(s) approving the Transactions; (ii) Amika Guo who was required to abstain from voting on the relevant Board resolution(s) approving the Transactions under the Company’s constitution by virtue of her being the daughter of Mr. Guo and therefore an associate of Mr. Guo; and (iii) the IBC Members) consider that the terms of the Transactions are fair and reasonable and in the interests of the Company and the Shareholders as a whole and that the interest of the Shareholders are adequately safeguarded after taking into account all the material factors (including the potential dilution impact) and for the following reasons:

(a) the Qualifying Shareholders have the option to subscribe for the Rights Shares at their sole discretion;
(b) the Qualifying Shareholders who do not take up their entitlements can sell the nil-paid Rights Shares in the market;
(c) the Rights Issue offers all the Qualifying Shareholders an equal opportunity to participate in the enlargement of the capital base of the Company and enables the Qualifying Shareholders to maintain their proportionate interests in the Company and continue to participate in the future development of the Group should they so wish;
(d) a discount on the Subscription Price is being offered to encourage Qualifying Shareholders to participate in the Rights Issue which is not an uncommon practice in rights issue arrangement for companies listed on the Stock Exchange;
(e) the Independent Shareholders are offered a chance to express their views on the terms of the Rights Issue, the Absence of Excess Application Arrangement, the Underwriting Agreement, the Whitewash Waiver and the transactions contemplated thereunder through their votes at the SGM;
(f) this circular contains all information necessary to allow the Independent Shareholders to make a properly informed decision;
(g) each Transaction is subject to the approval of the Code Independent Shareholders and/ or the LR Independent Shareholders who have been provided with advice from the IFA in accordance with the Takeovers Code and the Listing Rules; and
(h) the entire potential dilution effect on the shareholding of the Shareholders will only happen when all the Qualifying Shareholders do not subscribe for their pro-rata Rights Shares, which will be an extreme situation.

– 37 –

LETTER FROM THE BOARD

For more details on the view of the independent non-executive Directors, please refer to the IBC Letter.

FUND RAISING EXERCISE OF THE COMPANY IN THE PAST 12 MONTHS AND CHANGE IN USE OF PROCEEDS RAISED FROM SHARES PLACING

		Net proceeds
Date of	Fund raising	raised	Intended use of	Actual use of
announcement	activity	(approximately)	net proceeds	net proceeds
28 April 2015 and	Placing of bonds up	Approximately	Financing potential	Not utilised yet as at
22 July 2015	to an aggregate	HK$9.3 million	property	the LPD
	principal amount of		development
	HK$200,000,000		and investment
			project(s) in the
			PRC.
29 April 2015 and	Placing of	Approximately	Financing potential	Approximately
15 May 2015	137,410,000 new	HK$49.3 million	property	HK$35 million had
	Ordinary Shares		development	been utilised to
	at the price of		and investment	repay bank loans
	HK$0.37 each		project(s) of the	and other debts
			Group in the	of the Group.
			PRC	HK$3 million had
				been utilised as
				general working
				capital (salaries,
				rental, general
				administration
				expenses legal and
				professional fees)
				Approximately
				HK$11.3 million
				has not been
				utilised yet as at
				the LPD

– 38 –

LETTER FROM THE BOARD

Save as disclosed in this circular, the Company had not conducted any other fund raising exercise in the past 12 months immediately preceding the LPD.

In the Bonds Placing Announcement, it was announced that the placing agent appointed by the Company shall, on a best effort basis, procure placees to subscribe for the Series 1 Bonds and the Series 2 Bonds (each as defined in the Bonds Placing Announcement) up to an aggregate principal amount of HK$200 million. In the announcement of the Company dated 22 July 2015, it was announced that the principal terms of the Series 1 Bonds was changed to cater for the logistics of interest payment. The placing period for the placing of the bonds expired on 27 October 2015. Upon expiry of the placing period, an aggregate principal amount of HK$11 million of the Series 1 Bonds had been successfully placed.

With respect to the funds raised from the Shares Placing, approximately HK$35 million was utilised to repay debts of the Group in June and September 2015 and a further HK$3 million was utilised for financing operating expenses instead of applying for financing potential property development and investment project(s) of the Group in the PRC as disclosed in the Shares Placing Announcement. The debts repaid included bank loans (approximately HK$16.3 million) and interestfree loans owed to companies controlled by Mr. Guo (approximately HK$18.7 million) provided to the Group as working capital and for repayment of debts owed by the Group to third parties. As the Company has not identified any property development and investment project(s) in the PRC with satisfactory potential returns since completion of the Shares Placing, the Directors resolved to apply part of the proceeds from the Shares Placing to reduce the debts of the Group which would otherwise be left idle. The Directors considered that such change in use of the proceeds from the Shares Placing would reduce interest expenses, lower the gearing ratio of the Group and allow the Group to meet its more imminent financial needs and is therefore an appropriate use of the Shares Placing proceeds and in the interest of the Shareholders and the Group as a whole.

The Company intends to apply the proceeds raised from the Shares Placing that has not yet been utilised as at the LPD (being approximately HK$11.3 million) as general working capital instead for financing potential property development and investment project(s) in the PRC as previously announced. As disclosed in the preceding paragraph, the Company has not identified property development and investment project(s) in the PRC with satisfactory potential returns since completion of the Shares Placing, the Directors therefore resolved to apply the unused proceeds in the amount of HK$11.3 million as general working capital. The Directors considered that such change in use of the proceeds will allow the Group to deal with its more imminent financial needs and is therefore an appropriate use of the Shares Placing proceeds and in the interest of the Shareholders and the Group as a whole. As to the proceeds raised from the Bonds Placing, the Company intends to utilise for financing potential property development and investment project(s) in the PRC as announced in the Bonds Placing Announcement. As at the LPD, both of the unutilised proceeds raised from the Bonds Placing and the Shares Placing were put in saving accounts maintained with financial institutions in Hong Kong.

– 39 –

LETTER FROM THE BOARD

UNDERTAKINGS NOT TO CONVERT THE OUTSTANDING CPS AND ADJUSTMENT TO THE CONVERSION PRICE OF THE CPS

The issue of the CPS was approved by the Shareholders at the special general meeting held on 30 January 2012. As at the LPD, only the Outstanding CPS (being 401,666,666 CPS) remained outstanding and convertible. The Outstanding CPS comprise the United Century CPS and the King Partner CPS, all of which are indirectly owned by Mr. Guo. Upon full conversion of the Outstanding CPS, the Company would be required to issue up to 401,666,666 new Ordinary Shares at the initial conversion price of HK$3 each. According to the terms and conditions of the CPS, the CPS rank (a) in priority to the Ordinary Shares and any other class of shares on a return of capital on liquidation; and (b) pari passu with the Ordinary Shares as to any dividends accumulated on the CPS. However, holders of the CPS are not permitted to attend or vote at meetings of the Company unless a resolution is proposed to vary the rights of holders of the CPS or a resolution is proposed for the winding up of the Company.

As disclosed in the section headed “United Century Undertaking” above, United Century has undertaken to the Company, among other things, that it would not dispose of or convert any of the United Century CPS before completion of the Rights Issue. Pursuant to the King Partner Undertaking, King Partner has also undertaken to the Company, among other things, that it would not dispose of or convert any of the King Partner CPS before completion of the Rights Issue.

Save for the Outstanding CPS, the Company did not have any outstanding derivatives, options, warrants and conversion rights or similar rights or securities in issue as at LPD which confer any right to subscribe for, convert or exchange into, the Ordinary Shares.

According to the terms and conditions of the CPS, adjustment to the conversion price may be required as a result of the Rights Issue. Further announcement(s) will be made by the Company in this regard as and when appropriate.

INFORMATION ON UNITED CENTURY AND THE CONCERT GROUP

United Century is not involved in the business of underwriting.

United Century is an investment holding company which is incorporated in the BVI and is directly and wholly-owned by Mr. Guo. Mr. Guo is the sole director of United Century.

It is the intention of United Century to continue carrying on the businesses and the proposed businesses of the Group as at the date of the Rights Issue Announcement and to continue the employment of the employees of the Group. United Century has no intention to introduce any changes to the businesses and the proposed businesses of the Group as at the date of the Rights Issue Announcement including redeployment of the fixed assets of the Group.

– 40 –

LETTER FROM THE BOARD

As at the LPD, the Concert Group has not received any irrevocable commitment to vote for or against the proposed resolution approving the Whitewash Waiver at the SGM.

Save for the transactions contemplated under the Underwriting Agreement, the United Century Undertaking and the King Partner Undertaking, there is no arrangement (whether by way of option, indemnity or otherwise) under Note 8 to Rule 22 of the Takeovers Code in relation to the Ordinary Shares or the shares of United Century entered into by any member of the Concert Group and which might be material to the Rights Issue, the Underwriting Agreement and/or the Whitewash Waiver.

As at the LPD, the Concert Group held (i) 200,000,000 issued Ordinary Shares; and (ii) the Outstanding CPS which, if fully converted, would require the Company to issue up to 401,666,666 new Ordinary Shares at the initial conversion price of HK$3 each. Save as disclosed above, the Concert Group does not hold or has control or direction over any other shares, rights over shares, convertible securities, warrants or options of the Company, or any outstanding derivative in respect of relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company.

United Century has confirmed that (for itself and on behalf of the members of the Concert Group) none of the members of the Concert Group has acquired any voting rights of the Company or dealt in any relevant securities of the Company (as defined in Note 4 to Rule 22 of the Takeovers Code) in the six months prior to, and up to and including the LPD. United Century has further confirmed that (for itself and on behalf of the members of the Concert Group) none of the members of the Concert Group had subscribed for or otherwise acquired any securities of the Company in the Shares Placing.

As at the LPD, save for the Underwriting Agreement, there is no arrangement or agreement to which a member of the Concert Group is a party which relates to the circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Rights Issue, the Underwriting Agreement and/or the Whitewash Waiver.

There is no relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company which any members of the Concert Group has borrowed or lent as at the LPD.

– 41 –

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

Approval of the Rights Issue and the Absence of Excess Application Arrangement by the LR Independent Shareholders

According to Rule 7.19(6)(a) of the Listing Rules, as the proposed Rights Issue will increase the issued share capital or the market capitalisation of the Company by more than 50%, the Rights Issue is subject to the approval of the LR Independent Shareholders at the SGM by way of poll and any controlling shareholder of the Company and their associates or, where there is no controlling shareholder, the Directors (other than independent non-executive Directors), the chief executive of the Company and their respective associates shall abstain from voting in favour of the resolution(s) relating to the Rights Issue and the transactions contemplated thereunder. As at the LPD, the Company had no controlling shareholder. Accordingly, the Directors (other than independent nonexecutive Directors), the chief executive of the Company and their respective associates shall abstain from voting in favour of the resolution(s) relating to the Rights Issue and the transactions contemplated thereunder.

As no excess application for the Rights Shares is available under the Rights Issue and the Rights Issue is underwritten by United Century, who is a substantial shareholder of the Company by virtue of it being interested in approximately 24.26% of the Issued Ordinary Capital as at the LPD, pursuant to Rule 7.21(2) of the Listing Rules, specific approval shall be obtained from the Shareholders and those persons who have a material interest in the arrangement of the Rights Issue must abstain from voting on the Rights Issue at the relevant general meeting of the Company. Accordingly, the Absence of Excess Application Arrangement is subject to the approval of the LR Independent Shareholders. United Century and its associate(s) shall abstain from voting at the SGM on the resolution to approve the Absence of Excess Application Arrangement by virtue of United Century being the sole underwriter under the Underwriting Agreement and it therefore has a material interest in the Rights Issue, the Absence of Excess Application Arrangement and the Underwriting Agreement.

In addition to the persons who are required to abstain from voting as more specifically disclosed above, Best China, a Shareholder holding approximately 5.15% of the Issued Ordinary Capital as at the LPD will also be required to abstain from voting on the resolutions for the approval of the Rights Issue and the Absence of Excess Application Arrangement by virtue of it and Kingston Corporate Finance, the financial adviser to the Company for the Rights Issue, both being ultimately controlled by the same person (namely, Mrs. Chu) and therefore considered to be having a material interest in the Rights Issue and the Absence of Excess Application under Rule 2.15 of the Listing Rules.

– 42 –

LETTER FROM THE BOARD

Connected transactions

The allotment and issue of the untaken Rights Shares to United Century in accordance with the Underwriting Agreement is, pursuant to Rule 14A.92(2)(b) of the Listing Rules, exempt from the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. The Rights Issue will be conducted in compliance with Rule 7.21 of the Listing Rules.

In addition, the payment of underwriting commission by the Company to United Century in its capacity as an underwriter also constitutes a connected transaction of the Company. As the Underwriting Agreement is on normal commercial terms and the relevant percentage ratios (as defined under the Listing Rules) regarding the amount of underwriting commission payable by the Company are less than 5%, it is subject to reporting and announcement requirements but is exempt from the independent shareholders’ approval requirement under Rule 14A.76(2)(a) of the Listing Rules.

Disclosure under Rule 2.17 of the Listing Rules

As at the LPD, United Century and its associate(s) held 200,000,000 Ordinary Shares carrying voting right, representing approximately 24.26% of the Issued Ordinary Capital. United Century and its associate(s) will be required to abstain from voting on the resolutions to be considered at the SGM in relation to the Rights Issue and the Absence of Excess Application Arrangement by virtue of United Century and its associate(s) being interested in the Rights Issue and the Absence of Excess Application Arrangement. To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, as at the LPD:

(a) there was no voting trust or other agreement or arrangement or understanding entered into by or binding upon United Century and its associate(s) whereby they had or might have temporarily or permanently passed control over the exercise of the voting right in respect of their shares in the Company to a third party, whether generally or on a caseby-case basis;
(b) United Century and its associate(s) were not subject to any obligation or entitlement whereby they had or might have temporarily or permanently passed control over the exercise of the voting right in respect of their shares in the Company to a third party, whether generally or on a case-by-case basis; and
(c) there would not be any discrepancy between United Century and its associates’ beneficial shareholding interest of the Company and the number of shares in the Company in respect of which they would control or would be entitled to exercise control over the voting right at the SGM.

– 43 –

LETTER FROM THE BOARD

TAKEOVERS CODE IMPLICATIONS AND APPLICATION FOR THE WHITEWASH WAIVER

Upon completion of the Rights Issue, assuming (i) no Ordinary Shares being issued and/or repurchased by the Company from the LPD and up to and including the Record Date and (ii) no acceptance by the Qualifying Shareholders (except United Century) under the Rights Issue, United Century will be required to take up 1,248,924,892 Rights Shares pursuant to its underwriting obligation and it will make the total shareholding of the Concert Group increase from 200,000,000 Ordinary Shares, representing approximately 24.26% of the Issued Ordinary Capital as at the date of the Rights Issue Announcement, to 1,848,924,892 Ordinary Shares, representing approximately 74.75% of the Issued Ordinary Capital as enlarged by the Rights Issue. As the total shareholding of the Concert Group would as a result be increased from below 30% as at the Rights Issue Announcement to more than 30% and exceeding 50% of the total Issued Ordinary Capital upon completion of the Rights Issue, United Century would be required to make a mandatory general offer for all the issued Ordinary Shares and other securities of the Company (other than those already owned or agreed to be acquired by the Concert Group) under Rule 26.1 of the Takeovers Code as a result of its underwriting obligations under the Underwriting Agreement, unless the Whitewash Waiver is granted by the Executive. If the Whitewash Waiver is approved by the Code Independent Shareholders and the shareholding of the Concert Group exceeds 50% after completion of the Rights Issue, United Century may further increase its shareholding in the Company without incurring any further obligations under Rule 26 of the Takeovers Code to make a general offer.

United Century has made an application to the Executive for the granting of the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code. The Whitewash Waiver will be conditional on, among other things, approval by the Code Independent Shareholders at a general meeting of the Company. The resolution(s) proposed to be voted at the relevant general meeting (i.e. the SGM) will be conducted by way of poll. Pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code, as United Century is interested in the Whitewash Waiver, United Century and other members of the Concert Group and those Shareholders who are involved in or interested in the Rights Issue, the Underwriting Agreement and/or the Whitewash Waiver are required to abstain from voting on the resolution(s) to be considered at the SGM in relation to the Rights Issue, the Underwriting Agreement and the Whitewash Waiver.

The Whitewash Waiver, if granted by the Executive, would be subject to, among other things, the approval by the Code Independent Shareholders at the SGM, by way of poll.

– 44 –

LETTER FROM THE BOARD

The Executive has indicated that it will agree, subject to the approval by the Code Independent Shareholders at the SGM, by way of poll, to waive the Concert Group from any obligation to make a general offer for all the issued Ordinary Shares and other securities of the Company (other than those already owned or agreed to acquired by the Concert Group) under Rule 26 of the Takeovers Code as a result of its underwriting obligations under the Underwriting Agreement.

ELIGIBILITY TO VOTE AT THE SGM

As disclosed in the section headed “Conditions of the Underwriting Agreement” in the Letter from the Board, one of the conditions precedent to completion of the Underwriting Agreement is the passing of the necessary resolution(s) by the Shareholders who are entitled to vote on such resolution(s) under the applicable laws and regulations (including without limitation the Listing Rules and/or the Takeovers Code, as applicable) at a general meeting of the Company approving each of the Rights Issue, the Absence of Excess Application Arrangement, the Underwriting Agreement and the Whitewash Waiver. Set out below is a table specifying the Shareholders who will be required to abstain from voting on (or voting in favour of) the resolutions for the approval of the Transactions under the Listing Rules and the Takeovers Code and the Shareholders who will be entitled to vote:

Shareholders required

Transaction

to abstain from Shareholders required voting (or voting in to abstain from favour of) under the voting under the Shareholders eligible Listing Rules Takeovers Code to vote

Rights Issue

(i) The Directors (other (i) The Concert Group; Shareholders who than independent (ii) Best China; qualified as both non-executive and (iii) those who LR Independent Directors), the are involved in or Shareholders and chief executive of interested in the Code Independent the Company and Rights Issue (save Shareholders their respective for any assured associates and entitlements to those Shareholders the Rights Issue), who are otherwise the Underwriting required to abstain Agreement and/ from voting under or the Whitewash the Listing Rules (i.e. Waiver and their United Century and respective associates its associate(s) and Best China)

– 45 –

LETTER FROM THE BOARD

Transaction

Shareholders required to abstain from Shareholders required voting (or voting in to abstain from favour of) under the voting under the Shareholders eligible Listing Rules Takeovers Code to vote

Absence of Excess Those persons who Application have a material Arrangement interest in the relevant arrangement of the Rights Issue within the meaning of Rule 7.21 of the Listing Rules (i.e. United Century and its associate(s) and Best China)
N.A. LR Independent Shareholders

Underwriting N.A. (i) The Concert Group; Code Independent Agreement (ii) Best China; Shareholders and (iii) those who are involved in or interested in the Rights Issue (save for any assured entitlements to the Rights Issue), the Underwriting Agreement and/ or the Whitewash Waiver and their respective associates

– 46 –

LETTER FROM THE BOARD

Shareholders required to abstain from Shareholders required voting (or voting in to abstain from favour of) under the voting under the Shareholders eligible Transaction Listing Rules Takeovers Code to vote Whitewash Waiver N.A. (i) The Concert Group; Code Independent (ii) Best China; Shareholders and (iii) those who are involved in or interested in the Rights Issue (save for any assured entitlements to the Rights Issue), the Underwriting Agreement and/ or the Whitewash Waiver and their respective associates

CHANGE IN BOARD LOT SIZE

The Ordinary Shares are currently traded in board lots of 2,000 shares. In order to increase the value of each board lot of the Ordinary Shares so that the value of each board lot will not be less than HK$2,000, the Board proposes to change the board lot size of the Ordinary Shares for trading on the Stock Exchange from 2,000 shares to 12,000 shares. Subject to the Underwriting Agreement becoming unconditional and not being terminated in accordance with its terms or otherwise, the Change in Board Lot Size is expected to come into effect on Thursday, 11 February 2016.

The Change in Board Lot Size will not result in any change in the relative rights of the Shareholders. The Board is of the opinion that the Change in Board Lot Size will increase the monetary value of each board lot which will reduce the transaction costs (such as custodian fee which is usually chargeable on a per board lot basis by securities houses) per Ordinary Share for dealing in the Ordinary Shares, and is therefore in the interests of the Company and its Shareholders as a whole.

Based on the theoretical ex-rights price of approximately HK$0.33 per Ordinary Share (calculated based on the closing price of HK$0.58 per Ordinary Share as quoted on the Stock Exchange on the Last Trading Day), the market value of each existing board lot is HK$1,160 and the estimated market value of each proposed new board lot is HK$3,960.

– 47 –

LETTER FROM THE BOARD

In relation to the Change in Board Lot Size, the Company proposes to appoint an agent who shall, on a best effort basis, arrange for matching services to the Shareholders who wish to dispose of their holdings of odd lots of the Ordinary Shares or to round them up to board lot(s) during the period from 9:00 a.m. on Thursday, 11 February 2016 to 4:00 p.m. on Friday, 4 March 2016 (both dates inclusive).

WARNING OF THE RISK OF DEALINGS IN THE SECURITIES OF THE COMPANY

Shareholders and potential investors should note that the Rights Issue is conditional upon the Underwriting Agreement having become unconditional and United Century not having terminated the Underwriting Agreement in accordance with the terms thereof. Accordingly, the Rights Issue may or may not proceed. Shareholders and potential investors should exercise extreme caution when dealing in the securities of the Company, and if they are in any doubt about their position, they should consult their professional advisers. Shareholders should note that the Ordinary Shares will be dealt in on an ex-entitlement basis commencing from Monday, 4 January 2016 and that dealings in the Ordinary Shares will take place while the conditions to which the Underwriting Agreement are subject remain unfulfilled. Any Shareholder or other person dealing in the Ordinary Shares up to the date on which all conditions to the Rights Issue are fulfilled, will accordingly bear the risk that the Rights Issue cannot become unconditional and may not proceed. Any Shareholder or other person contemplating selling or purchasing Ordinary Shares, who is in any doubt about his/ her position, is recommended to consult his/her own professional adviser.

POSITIVE ALERT ANNOUNCEMENT AND PROFIT FORECAST

Reference is made to the announcement of the Company dated 17 November 2015 (“ Profit Alert Announcement ”) whereby, among other things, it was announced that the Group expected to record an unaudited profit for the six months ended 30 September 2015 as compared to the consolidated net loss for the corresponding period ended 30 September 2014 (“ Profit Alert ”), which was mainly attributable to the increase in the fair value gain on investment property. As disclosed in the Profit Alert Announcement, the Profit Alert constitutes a profit forecast under Rule 10 of the Takeovers Code and would need to be reported on by both the Company’s financial adviser and its accountants or auditors in accordance with Rule 10.4 of the Code. In this regard, the Profit Alert has been reported on by the IFA and BDO Limited (the auditors of the Company) in accordance with Rule 10 of the Takeovers Code as disclosed in the announcement of the Company dated 23 November 2015. Subsequent to the Profit Alert Announcement and the announcement of the Company dated 23 November 2015 as described above, the Company had issued the interim results of the Group for the six months ended 30 September 2015 in its announcement dated 30 November 2015. For more details on the financial information of the Group for the six months ended 30 September 2015, please refer to the section headed “3. Unaudited Financial Statements for the Six Months Ended 30 September 2015” in Appendix I to this circular.

– 48 –

LETTER FROM THE BOARD

SGM

A notice convening the SGM to be held at 6/F, Ibis Hong Kong Central & Sheung Wan Hotel, No. 28 Des Voeux Road West, Sheung Wan, Hong Kong on Monday, 28 December 2015 at 11:00 a.m. is set out on pages SGM-1 to SGM-3 of this circular. A form of proxy for the SGM is enclosed with this circular. Whether or not you intend to attend the SGM, you are requested to complete the form of proxy in accordance with the instructions printed thereon and return the same to Tricor Tengis Limited, the branch share registrar of the Company in Hong Kong, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not less than 48 hours before appointed for the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM if you so wish.

The ordinary resolution(s) to approve the Rights Issue, the Absence of Excess Application Arrangement, the Underwriting Agreement and the Whitewash Waiver at the SGM will be taken by poll and an announcement on the results of the SGM will be made by the Company after the conclusion of the SGM.

RECOMMENDATION

In addition to the information contained in the sections immediately preceding this section headed “Recommendation”, your attention is drawn to the IBC Letter which contains IBC’s recommendation to (i) the Code Independent Shareholders as to voting at the SGM in relation to the Rights Issue, the Underwriting Agreement and the Whitewash Waiver and (ii) the LR Independent Shareholders as to voting at the SGM in relation to the Rights Issue and the Absence of Excess Application Arrangement.

Your attention is also drawn to the Letter from the IFA which contains its advice to (i) the IBC and the Code Independent Shareholders in relation to the Rights Issue, the Underwriting Agreement and the Whitewash Waiver and (ii) the IBC and the LR Independent Shareholders in relation to the Rights Issue and the Absence of Excess Application Arrangement and the principal factors and reasons considered by it in arriving thereat.

– 49 –

LETTER FROM THE BOARD

The Directors ((i) excluding Mr. Guo who was required to abstain from voting on the relevant Board resolution(s) approving the Transactions; (ii) Amika Guo who was required to abstain from voting on the relevant Board resolution(s) approving the Transactions under the Company’s constitution by virtue of her being the daughter of Mr. Guo and therefore an associate of Mr. Guo; and (iii) the IBC Members) consider that the Rights Issue, the Absence of Excess Application Arrangement, the Underwriting Agreement and the Whitewash Waiver are fair and reasonable and are in the interest of the Company and the Shareholders as a whole. Accordingly, the Directors (excluding Mr. Guo and Amika Guo) recommend (x) the Code Independent Shareholders to vote in favour of the resolution(s) to be proposed at the SGM to approve the Rights Issue, the Underwriting Agreement and the Whitewash Waiver and (y) the LR Independent Shareholders to vote in favour of the resolution(s) to be proposed at the SGM to approve the Rights Issue and the Absence of Excess Application Arrangement. Please refer to the IBC Letter for details of the view of the independent non-executive Directors and their recommendations on voting to the Independent Shareholders.

ADDITIONAL INFORMATION

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

By order of the Board China Sandi Holdings Limited Guo Jiadi Chairman

– 50 –

LETTER FROM THE IBC

CHINA SANDI HOLDINGS LIMITED 中國三迪控股有限公司 (incorporated in Bermuda with limited liability) (Stock Code: 910)

9 December 2015

To the Independent Shareholders

Dear Sir or Madam,

(1) PROPOSED RIGHTS ISSUE ON THE BASIS OF TWO RIGHTS SHARES FOR EVERY ONE EXISTING ORDINARY SHARE HELD ON THE RECORD DATE; AND

(2) APPLICATION FOR WHITEWASH WAIVER

We refer to the circular of the Company to the Shareholders dated the date of this letter (the “ Circular ”), in which this letter forms part. Unless the context otherwise requires, capitalised terms used in this letter have the same meanings as defined in the Circular.

For the purposes of the Takeovers Code, we have been appointed as the IBC to consider the Rights Issue, the Underwriting Agreement and the Whitewash Waiver and to advise the Code Independent Shareholders as to the fairness and reasonableness of the Rights Issue, the Underwriting Agreement and the Whitewash Waiver. For the purposes of the Listing Rules, we have been appointed as the IBC to consider the Rights Issue and the Absence of Excess Application Arrangement and to advise the LR Independent Shareholders as to the fairness and reasonableness of the Rights Issue and the Absence of Excess Application Arrangement. We are required to recommend whether or not the Code Independent Shareholders or the LR Independent Shareholders (as the case may be) should vote for the resolution(s) to be proposed at the SGM to approve the Rights Issue, the Absence of Excess Application Arrangement, the Underwriting Agreement and the Whitewash Waiver, as applicable.

– 51 –

LETTER FROM THE IBC

The IFA, namely Nuada Limited, has been appointed with the IBC’s approval to advise (i) the IBC and the Code Independent Shareholders in relation to the Rights Issue, the Underwriting Agreement and the Whitewash Waiver; and (ii) the IBC and the LR Independent Shareholders in relation to the Rights Issue and the Absence of Excess Application Arrangement.

We wish to draw your attention to the “Letter from the IFA” to the IBC, the Code Independent Shareholders and the LR Independent Shareholders which contains its advice to us in relation to the Rights Issue, the Absence of Excess Application Arrangement, the Underwriting Agreement and the Whitewash Waiver as set out in this circular. We also draw your attention to the “Letter from the Board” set out in this circular.

Having taken into account the principal factors and reasons considered by and the opinion of the IFA as stated in its letter of advice, we are of the view that the terms of the Rights Issue, the Absence of Excess Application Arrangement, the Underwriting Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole, and are of the view that the Whitewash Waiver, which is to facilitate the implementation of the Rights Issue, is fair and reasonable and in the interests of the Company and the Shareholders as a whole. We therefore recommend (i) the Code Independent Shareholders to vote in favour of the resolution(s) to be proposed at the SGM for the approval of the Rights Issue, the Underwriting Agreement and the Whitewash Waiver; and (ii) the LR Independent Shareholders to vote in favour of the resolution(s) to be proposed at the SGM for the approval of the Rights Issue and the Absence of Excess Application Arrangement.

Yours faithfully, For and on behalf of the IBC

Dr.
Wong	Mr. Chan		Mr.	Mr.
Yun	Yee Ping,	Mr. Yu	Zheng	Zheng
Kuen	Michael	Pak Yan, Peter	Jinyun	Yurui

Independent non-executive Directors

– 52 –

LETTER FROM THE IFA

The following is the text of a letter of advice to the IBC and the Independent Shareholders from Nuada Limited dated 9 December 2015 prepared for the purpose of inclusion in this circular.

Nuada Limited

Corporate Finance Advisory

Unit 1805-08, 18/F OfficePlus @Sheung Wan 93-103 Wing Lok Street Sheung Wan, Hong Kong ��93-103 � ��18 ��1805-08 �

9 December 2015

To the independent board committee
and the independent shareholders of
China Sandi Holdings Limited

Dear Sirs,

(I) PROPOSED RIGHTS ISSUE ON THE BASIS OF TWO (2) RIGHTS SHARES FOR EVERY ONE (1) EXISTING ORDINARY SHARE HELD ON THE RECORD DATE; AND

(II) APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

We refer to our appointment to advise the IBC and the Independent Shareholders in connection with the Rights Issue, the Underwriting Agreement, the Absence of Excess Application Arrangement and the Whitewash Waiver, details of which are set out in the letter from the Board (the “ Letter ”) in the Company’s circular dated 9 December 2015 (the “ Circular ”) to the Shareholders, of which this letter forms part. Our appointment as the Independent Financial Adviser has been approved by the IBC. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

In the Rights Issue Announcement, it was announced that the Company proposed to implement the Rights Issue on the basis of two (2) Rights Shares for every one (1) Ordinary Share held on the Record Date at the Subscription Price of HK$0.20 per Rights Share. The Company will raise approximately HK$329.8 million before expenses (based on the number of Ordinary Shares in issue and assuming no further issue of new shares or repurchase of Ordinary Shares on or before the Record Date) by way of the issue of 1,648,924,892 Rights Shares.

– 53 –

LETTER FROM THE IFA

The Rights Issue is only available to the Qualifying Shareholders and will not be extended to the Non-Qualifying Shareholders. Qualifying Shareholders must be registered as a member of the Company as at the close of business on the Record Date, and not be Non-Qualifying Shareholders. Qualifying Shareholders will not be entitled to apply for Rights Shares in excess of their respective provisional allotment under the Rights Issue. As no excess application for the Rights Issue is available pursuant to the Underwriting Agreement, specific approval shall be obtained from the LR Independent Shareholders and those persons who have a material interest in the arrangement of the Rights Issue must abstain from voting on the Rights Issue at the SGM. Accordingly, the Absence of Excess Application Arrangement is subject to the approval of the LR Independent Shareholders.

As at the Latest Practicable Date, United Century held 200,000,000 Ordinary Shares, representing approximately 24.26% of the Issued Ordinary Capital.

Pursuant to the United Century Undertaking, United Century (in its capacity as a Shareholder) has unconditionally and irrevocably undertaken to the Company, that it will not dispose of the Ordinary Shares and the United Century CPS held by it and will not convert any of the United Century CPS before completion of the Rights Issue and will accept the Committed Shares, being a total of 400,000,000 Rights Shares representing its full entitlement under the Rights Issue.

King Partner has also provided the King Partner Undertaking to undertake the Company, among other things, that it would not dispose of or convert any of the King Partner CPS before completion of the Rights Issue.

The allotment and issue of the untaken Rights Shares to United Century as the sole underwriter is, pursuant to Rule 14A.92(2)(b) of the Listing Rules, exempt from the reporting, announcement and independent shareholder’s approval requirements under Chapter 14A of the Listing Rules. The payment of underwriting commission to United Century in its capacity as an underwriter also constitutes a connected transaction of the Company. It is stated in the Letter that as the Underwriting Agreement is on normal commercial terms and the relevant percentage ratios (as defined under the Listing Rules) regarding the amount of underwriting commission payable by the Company are less than 5%, it is subject to reporting and announcement requirements but is exempt from the independent shareholder’s approval requirement under Rule 14A.76(2)(a) of the Listing Rules.

– 54 –

LETTER FROM THE IFA

The Rights Issue is underwritten by United Century who is a substantial shareholder (as defined in the Listing Rules) of the Company. United Century has (in addition to its commitment to accept 400,000,000 Rights Shares pursuant to the United Century Undertaking) conditionally agreed to underwrite a maximum of 1,248,924,892 Rights Share and it will make the total shareholding of the Concert Group increase from 200,000,000 Ordinary Shares (approximately 24.26% of the Issued Ordinary Capital as at the Latest Practicable Date) to 1,848,924,892 Ordinary Shares (approximately 74.75% of the Issued Ordinary Capital as enlarged by the Rights issue). As the total shareholding of the Concert Group would be increased from below 30% as at the Latest Practicable Date to more than 30% and exceeding 50% of the total Issued Ordinary Capital upon completion of the Rights Issue, United Century would be required to make a mandatory general offer for all the issued Ordinary Shares and other securities of the Company (other than those already owned or agreed to be acquired by the Concert Group) under Rule 26.1 of the Takeovers Code unless the Whitewash Waiver is granted by the Executive.

As the Rights Issue will increase the issued share capital of the Company by more than 50%, pursuant to Rule 7.19(6) of the Listing Rules, (i) the Rights Issue is subject to approval of the LR Independent Shareholders at the SGM by poll in accordance with the requirements of the Listing Rules; and (ii) any controlling Shareholders and their associates or, where there are no controlling Shareholders, the Directors (excluding the independent non-executive Directors), the chief executive of the Company and their respective associates shall abstain from voting in favour of the resolutions relating to the Rights Issue at the SGM.

In addition to the persons who are required to abstain from voting as disclosed above, Best China, a Shareholder, held 42,500,000 Ordinary Shares, representing approximately 5.15% of the Issued Ordinary Capital as at the Latest Practicable Date. Best China and Kingston Corporate Finance (the financial adviser of the Company under the Rights Issue) are being ultimately controlled by Mrs. Chu as at the Latest Practicable Date and therefore are considered to be having a material interest in the Rights Issue and the Absence of Excess Application Arrangement under Rule 2.15 of the Listing Rules. Therefore, Best China will also be required to abstain from voting on the resolutions for the approval of the Rights Issue and the Absence of Excess Application Arrangement by virtue of it.

– 55 –

LETTER FROM THE IFA

The IBC, comprising Dr. Wong Yun Kuen, Mr. Chan Yee Ping, Michael, Mr. Yu Pak Yan, Mr. Zheng Jinyun and Mr. Zheng Yurui, all being the independent non-executive Directors, has been established to advise (i) the Code Independent Shareholders as to whether the terms of the Rights Issue, the Underwriting Agreement and the Whitewash Waiver are fair and reasonable and how to vote on the relevant resolutions; and (ii) the LR Independent Shareholders as to whether the Rights Issue and the Absence of Excess Application Arrangement are fair and reasonable and in the interests of the Company and the Shareholders as a whole, and to advise the LR Independent Shareholders on how to vote on the relevant resolutions, taking into account of our recommendations.

We, Nuada Limited, have been appointed as the Independent Financial Adviser to advise the IBC and the Independent Shareholders in this regard. During the two years prior to the date of the Underwriting Agreement, we were appointed (i) as the independent financial adviser of the Company on 30 July 2014 in respect of a transaction to provide our independent view to the independent board committee and the independent shareholders of the Company (Please refer to the Company’s circular dated 27 August 2014 for the detailed information of the aforesaid transaction); and (ii) as an independent financial adviser of the Company on 4 February 2015 in respect of a transaction to provide our independent view to the independent shareholders and the independent shareholders of the Company but such appointment was subsequently terminated on 29 October 2015.

Apart from normal professional fees for our services to the Company in connection with the previous appointments as mentioned above, as well as this engagement as the Independent Financial Adviser in respect of the Rights Issue (including the Absence of Excess Application Arrangement) and the Whitewash Waiver, no other arrangement exists whereby we will receive any fees and/or benefits from the Group or any other parties that could reasonably be regarded as relevant to our independence. We were not aware of any relationships or interests between us and the Company, Directors, chief executive, United Century, King Partner, Mr. Guo, Amika Guo and their family members or their respective substantial shareholders and respective associates, or any party acting, or presumed to be acting, in concert with any of the above, or any company controlled by any of them. Accordingly, we consider that the aforementioned previous appointments would not affect our independence, and that we comply with Rule 2.6 of the Takeovers Code and Rule 13.84 of the Listing Rules and are eligible to give independent advice in respect of the Rights Issue, the Underwriting Agreement, the Absence of Excess Application Arrangement and the Whitewash Waiver to the IBC and the Independent Shareholders.

– 56 –

LETTER FROM THE IFA

Our role as the Independent Financial Adviser is to (i) give our independent opinion to the IBC and the Code Independent Shareholders as to whether the terms of the Rights Issue, the Underwriting Agreement and the Whitewash Waiver are fair and reasonable so far as the Code Independent Shareholders are concerned and are in the interests of the Company and the Code Independent Shareholders as a whole; (ii) give our independent opinion to the IBC and LR Independent Shareholders as to whether the terms of the Rights Issue and the Absence of Excess Application Arrangement are fair and reasonable so far as the LR Independent Shareholders are concerned and are in the interests of the Company and the LR Independent Shareholders as a whole; and (iii) advise the Code Independent Shareholders and LR Independent Shareholders on how to vote in relation to (i) and (ii) above respectively.

BASIS OF OUR OPINION

In formulating our opinion to the IBC and the Independent Shareholders, we have relied on the accuracy of the statements, information, opinions and representations contained or referred to in the Circular and the information and representations provided to us by the Company, the Directors and the management of the Company. We have no reason to believe that any information and representations relied on by us in forming our opinion is untrue, inaccurate or misleading, nor are we aware of any material facts the omission of which would render the information provided and the representations made to us untrue, inaccurate or misleading. We have assumed that all information, representations and opinions contained or referred to in the Circular, which have been provided by the Company, the Directors and the management of the Company and for which they are solely and wholly responsible, were true and accurate at the time when they were made and continue to be true up to the Latest Practicable Date. Should there be any material changes after the Latest Practicable Date, the Shareholders would be notified by the Company as soon as possible.

The Directors collectively and individually accept full responsibility, including particulars given in compliance with the Listing Rules and the Takeover Code 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 the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other facts the omission of which would make any statement in the Circular misleading.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-depth investigation into the business and affairs of the Company, its subsidiaries or associates, nor have we considered the tax implication on the Group as a result of the Rights Issue and the Whitewash Waiver.

– 57 –

LETTER FROM THE IFA

We have also not considered the tax consequences on the Qualifying Shareholders arising from the subscription for, holding of or dealing in the Rights Shares or otherwise, since these are particular to their own circumstances. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Ordinary Shares or any other securities of the Company.

This letter is issued for the information for the IBC and the Independent Shareholders solely in connection with their consideration on the Rights Issue, the Underwriting Agreement, the Whitewash Wavier and the Absence of Excess Application Arrangement and, except for its inclusion in the Circular, is not be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our recommendation in relation to the Rights issue, the Underwriting Agreement, the Absence of Excess Application Arrangement and the Whitewash Waiver, we have taken into consideration the following principal factors and reasons:

1. Background information of the Group

The Group is principally engaged in property development and holding of property for investment and rental purpose.

As stated in the Letter, the Group currently owns a shopping mall in Fuzhou, the PRC as an investment property. As stated in the Company’s annual report for the year ended 31 March 2015 (the “ Annual Report ”), the Group is seeking for opportunities to acquire optimal scale land parcels or completed properties for development and investment continuously.

The table below is the general financial information of the Group for (i) the years ended 31 March 2014 and 2015; and (ii) the six-month periods ended 30 September 2014 and 2015 which are extracted from the Annual Report and the Company’s interim report for the six-month period ended 30 September 2015 (the “ Interim Report ”).

– 58 –

LETTER FROM THE IFA

Table A: Details regarding the financial performance and financial position of the Group

	For the six	For the six	For the year	For the year
	months ended	months ended	ended	ended
	30 September 2015	30 September 2014	31 March 2015	31 March 2014
	(unaudited)	(unaudited)	(audited)	(audited)
	*HK$’000*	HK$’000	*HK$’000*	HK$’000
Financial performance
Total revenue	56,062	67,368	132,964	130,798
– Rental income	20,635	23,452	48,967	46,728
– Property management and
related fee income	35,427	43,916	83,997	84,070
Fair value gain/(loss) on an
investment property	74,356	(190,017)	(380,264)	557,925
(Loss)/Profit for the year from
continuing operation	–	–	(266,524)	351,830
Loss for the year from
discontinued operations	–	–	–	(791,095)
Profit/(loss) for the period/year	107,354	(148,869)	(266,524)	(439,265)
	As at	As at	As at	As at
	30 September 2015	30 September 2014	31 March 2015	31 March 2014
	(unaudited)	(unaudited)	(audited)	(audited)
	*HK$’000*	HK$’000	*HK$’000*	HK$’000
Financial position
Investment property	3,890,880	4,161,396	3,985,783	4,295,700
Cash and cash equivalent	26,213	5,934	15,626	449,170

Annual results of the Group

As stated in the Annual Report, the audited and consolidated total revenue of the Company increased from approximately HK$130.8 million for the year ended 31 March 2014 (“ FY2014 ”) to approximately HK$133.0 million for the year ended 31 March 2015 (“ FY2015 ”), representing an increase of approximately 1.66% which are contributed from the increase in rental income and the slightly decrease in property management and related fee income. As stated in the Annual Report and according to the management of the Company, the slight decrease in property management and related fee income were due to the decrease in the occupancy rate of the shopping mall in Fuzhou from approximately 92.80% for FY2014 to approximately 82.10% for FY2015, representing a decrease of approximately 10.7%. The decrease in the occupancy rate was mainly due to the adverse market condition in rental business for the shopping malls and the intense competitions from other shopping malls. Despite the drop in management and related fee income, the overall rental income, however, increased as the unit rent per square feet for the shopping mall was adjusted for FY2015. The rental income of the Group was approximately HK$49.0 million for FY2015, representing an increase of approximately 4.79%, as compared to that of approximately HK$46.7 million for FY2014.

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LETTER FROM THE IFA

Since the decrease in occupancy rate of approximately 10.7% occurred, the fair value of the Group’s investment property was affected which contributed a decrease in fair value of investment property from approximately HK$4,295.7 million as at 31 March 2014 to approximately HK$3,985.8 million as at 31 March 2015, representing a decrease of approximately 7.21%. Approximately HK$380.3 million of fair value loss on investment properties contributed much loss for FY2015, as compared with the fair value gain on investment properties of approximately HK$557.9 million in FY2014, and was the main factor for the loss of the Group for FY2015. For FY2015, the Group suffered from the loss of approximately HK$266.5 million.

Although there was a fair value gain on investment properties for FY2014, the loss from disposal on the ecological forestry business of the Group contributed the substantial loss of approximately HK791.1 million and as a result the Group incurred the loss of approximately HK$439.3 million for FY2014. According to the management of the Company, the disposal on the discontinued ecological forestry business was a one-off transaction. Details of the disposal on the ecological forestry business can be referred to the Company’s circular dated 10 January 2014.

The Group had a balance of cash and cash equivalent of approximately HK$15.6 million as at 31 March 2015, representing a substantial drop of approximately 96.52% as compared to that of approximately HK$449.2 million as at 31 March 2014. According to the management of the Company, the substantial decrease of cash and cash equivalent was due to the early redemption of all the convertible notes payable in the principal amounts of approximately HK$400 million on 5 June 2014 and approximately HK$61.7 million on 23 March 2015 respectively. As stated in the announcement of the Company dated 23 March 2015, the redemption was made at the request of the holders of the convertible notes (who are the associates of Mr. Guo) and although the convertible notes were non-interest bearing, the Directors considered that the early redemption of such convertible notes can reduce the imputed interest expenses for the Group and the Shareholders would be benefited from the elimination of the potential dilution effect by the conversion of such convertible notes. (Details of which is referred to the Company’s announcement dated 5 June 2014 and 23 March 2015).

Subsequent to 31 March 2015, the Company had conducted the following fund raising activities: (i) the placing of bonds with the net proceed of approximately HK$9.3 million as announced on 28 April 2015 and 22 July 2015; and (ii) the placing of 137,410,000 new Ordinary Shares at the price of HK$0.37 each, with the net proceed of approximately HK$49.3 million as completed on 15 May 2015 of which approximately HK$35.0 million and HK$3.0 million have been utilized to repay bank loans and other debts of the Group and as general working capital respectively.

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LETTER FROM THE IFA

Interim results of the Group

According to the Interim Report, the Group recorded a decrease in unaudited revenue from approximately HK$67.4 million for the six months ended 30 September 2014 (“ IP2014 ”) to approximately HK$56.1 million for the six months ended 30 September 2015 (“ IP2015 ”), representing a decrease of approximately 16.78% and such drop in revenue was mainly due to the decrease in rental income and property management and related fee income. As mentioned in the Interim Report, the Group’s shopping mall in Fuzhou had an occupancy rate of approximately 67.1% for IP2015, representing a decrease in the occupancy rate of approximately 19.2% as compared to that of approximately 86.3% for IP2014. We are advised by the management of the Company that the decrease in occupancy rate was due to (i) the intense competitions from other shopping malls, (ii) renovation works on one of the floor of the Fuzhou shopping mall and; (iii) the construction works of the Fuzhou subway transportation in front of the Fuzhou shopping mall. As the renovation works on one of the floor of the Fuzhou Shopping mall have been completed in 2015 and a new exit of subway transportation will be located in front of the Fuzhou shopping mall upon the completion of such construction works next year, the Directors expect that the occupancy rate of the Fuzhou shopping mall can improve next year.

For IP2015, the Group recorded a fair value gain for the Fuzhou shopping mall of approximately HK$74.4 million as compared to a fair value loss of approximately HK$107.4 million and therefore, the Group’s financial results had a turnaround performance mainly due to such fair value gain.

The Group recorded a balance of cash and cash equivalent of approximately HK$26.2 million as at 30 September 2015, representing an increase of approximately 67.75% as compared to that of approximately HK$15.6 million as at 31 March 2015.

Given that (i) the improvement of cash position as at 30 September 2015 as compared to that as at 31 March 2015 was mainly due to the placing of bonds in amount of approximately HK$9.3 million and the placing of new Ordinary Shares in amount of approximately HK$49.3 million, both were conducted after 31 March 2015; (ii) the turnaround financial result of the Group for IP2015 had no impact on the cash position of the Group as such turnaround performance was mainly due to the fair value gain for Fuzhou shopping mall; and (iii) the needs of fund for acquiring optimal scale land parcels or completed properties for development and investment in Shanghai as analyzed in the paragraph headed “2. Reasons for the Rights Issue and use of proceeds” of this letter, we are of the view that the Rights Issue can strengthen the financial position of the Group and is beneficial to the Group.

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LETTER FROM THE IFA

2. Reasons for the Rights Issue and use of proceeds

The Group is principally engaged in property investment and development in the PRC and the major source of revenue of which is from rental income and property management and related fee income. As stated in the Annual Report, the Group holds an investment property of shopping mall in Fuzhou which is one of the continuing operations of property investment. To assess the prospects of the property market (including residential property, commercial property, industrial property, etc) in Fuzhou, we have reviewed the statistics published by the Bureau of Statistics of Fuzhou and the details are set out as follows:

Table B: Statistics of Fuzhou, the PRC

					Cumulative
					annual growth
Indicators					rate (“CAGR”)
(Fuzhou)	2011	2012	2013	2014	(%)
	Renminbi (“RMB”)	RMB	RMB	RMB
Gross domestic products	373.48 billion	421.83 billion	467.85 billion	516.92 billion	11.44
Investment amounts of	RMB	RMB	RMB	RMB
property market_(Note)_	95.65 billion	97.23 billion	126.48 billion	145.51 billion	15.01
Retail consumption	RMB	RMB	RMB	RMB	16.29
	194.78 billion	231.98 billion	268.17 billion	306.29 billion

Source: Bureau of Statistics of Fuzhou

Note: Being an aggregate total investment costs for construction and acquisition of properties (including first-hand properties and second-hand properties)

According to Table B, the gross domestic products in Fuzhou rose from approximately RMB373.48 billion in 2011 to approximately RMB516.92 billion in 2014, representing an increase of CAGR of approximately 11.44%. Regarding the investment amounts of property market in Fuzhou, it increased from approximately RMB95.65 billion in 2011 to approximately RMB145.51 billion in 2014, representing an increase of CAGR of approximately 15.01%. In relation to the retail consumption, the total retail consumption in Fuzhou increased from approximately RMB194.78 billion in 2011 to approximately RMB306.29 million in 2014, representing an increase of CAGR of approximately 16.29%. Based on the above data, we note that the economy in Fuzhou and its property market had a steady growth in the recent years and the continuous growth of retail consumption in Fuzhou will be beneficial to the retail business of the Group’s Fuzhou shopping mall.

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LETTER FROM THE IFA

During the year from 2013 to 2015, the Group had involved in a property investment through the formation of joint venture in Xian, the PRC (“ Xi’an Project ”) (Please refer to (i) the announcements dated 7 August 2013, 2 October 2013, 30 July 2014, 24 September 2014 and 23 July 2015; and (ii) the circulars dated 4 September 2013 and 27 August 2014 for details). However, the Xi’an Project terminated on 23 July 2015 as the public bidding of the land in relation to the Xi’an Project would not be able to take place as notified by the Xi’an Qujiang Daming Palace Heritage Area Protection and Reconstruction Office (西安曲江大明宮遺址區保護改造辦公室). According to the management of the Company, the termination of Xi’an Project was a situation beyond the control of the Group. After that, the management of the Company considered the Xi’an Project prompted the Group to seek fresh investment opportunities as soon as possible in order to generate return for the Shareholders.

Meanwhile, the Group had utilised the funds raised from Shares Placing to (i) repay total amount of the Group’s debts approximately HK$35 million in June 2015 and September 2015 respectively; and (ii) finance operating expenses in the amount of approximately HK$3 million. As stated in the Letter, we understand that the actual uses of proceeds from Shares Placing mentioned above are not the intended use of proceeds in the Shares Placing Announcement. As the management of the Company has not identified any property development and investment project(s) in the PRC with satisfactory potential returns up to September 2015, the Directors resolved to apply part of the proceeds from the Shares Placing to reduce the debts of the Group which would otherwise be left idle. On late September 2015, the Group started to evaluate the investment in property development and investment projects(s) in Shanghai and formulate its fund raising plan. Despite the Company had changed its use of proceed from the Shares Placing for repayment of debts with a view to reduce interest expenses and lower the gearing ratio of the Group, we consider that the timing of the Rights Issue is appropriate as funds raised from the Rights Issue are needed to be ready for acquisition and the development of stated-owned land use right(s), residential property or commercial property development project(s) in Shanghai when opportunities arise, particularly for public auction, tender or listing for sale process.

Furthermore, the Group had entered into (i) the strategic co-operation memorandum of understanding (“ Strategic MOU ”) dated 2 April 2015 between Shanghai Zhong Zhan Industrial Investment Co., Ltd (上海中展實業投資有限公司) and the Group for the hotel, elderly care related or tourism related property investment and development opportunities in eastern part of the PRC (Details are set out in the announcement of the Company dated 2 April 2015); and (ii) the letter of intent (“ Letter of Intent ”) dated 24 August 2015 among Shannan Tianyuan Investment Centre (山南天源投資中心), Shannan Shengyuan Investment Centre* (山南盛源投資中心) and the Group for the exploration and production of coalbed methane and provision of related technical services and consultation services (Details are set out in the announcement of the Company dated 24 August 2015).

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LETTER FROM THE IFA

According to the management of the Company, the Strategic MOU offers an opportunity to expand its property development and holding of property for investment. We have discussed with the management of Company and understand that that the proposed investment in hotel, elderly care related or tourism related property investment and development projects will mainly focused in Shanghai City and Zhejiang Province, both being the eastern part of the PRC. Based on our review on the statistics from National Bureau of Statistics of China, we note that average life expectancy in Shanghai City and Zhejiang Province increases from 78.14 years old in 2000 to approximately 80.26 years old in 2010 and from 74.70 years old in 2000 to approximately 77.73 years old in 2010, respectively. Based on the Shanghai Statistical Yearbook 2014 issued by PRC government in 2013, the number of domestic tourists (per headcount) visiting Shanghai increased from approximately 22.43 billion in 2010 to approximately 25.99 billion in 2013, representing an increase of CAGR of approximately 5.03%. Accordingly to Zhejiang Provincial Bureau of Statistics, the number of domestic tourists (per headcount) visiting Zhejiang Province increased from approximately 295 million in 2010 to approximately 434 million in 2013, representing an increase of CAGR of approximately 13.73%. In view of the increase of average life expectancy and number of domestic tourists (per headcount) visiting Shanghai and Zhejiang Province, we consider the prospects of hotel, elderly care related or tourism related property investment and development projects are optimistic.

Although the proposed investment as stated in the Letter of Intent may not be the existing principal activity of the Company, the management of the Company believes that it may generate future Shareholder’s return through such individual investment. As at the Latest Practicable Date, there are in the progress to finalise the investments in relation to the Strategic MOU and Letter of Intent, we consider there are no material impacts to the prospects of the Group at present.

The Group proposed to raise funds through Rights Issue for the opportunities to acquire optimal scale land parcels or completed properties for development and investment continuously in Shanghai, the PRC as mentioned in the paragraph headed “1. Background information of the Group” of this letter. The Group is optimistic to the residential or commercial property market of the PRC in long run and has identified Shanghai as the primary target to expand the Group’s future investment as the management of the Company considers that Shanghai acts as the leading financial and economic centre of the PRC. According to the statistical information from the National Bureau of Statistics of China, the gross domestic products of four major direct-controlled municipalities in 2014 were approximately RMB2,356.09 billion in Shanghai, approximately RMB2,133.08 billion in Beijing, approximately RMB1,572.25 billion in Tianjin and approximately RMB1,426.54 billion in Chongqing respectively. Besides, based on such statistics, the aggregate sale amount in properties in Shanghai was the highest among other direct-controlled municipalities in PRC for 2014.

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LETTER FROM THE IFA

Despite the Company has no prior property development and investment experience other than that in Fuzhou, we are advised by the management of the Company that Mr. Guo, being one of the management of the Company, has about 10 years experience in property development and investment experience in Shanghai. As advised by the Directors, Mr. Guo had two Shanghai property development and investment projects in 2009 and 2013, of which (i) the investment amounts was approximately RMB3 billion and approximately RMB1 billion, respectively; and (ii) the gross saleable area of such two property projects was approximately 120,000 square meters and approximately 88,000 square meters, respectively. On the basis that (i) Shanghai is one of the leading financial and economic centres in the PRC; and (ii) Mr. Guo, being one of the management of the Company, has the relevant property development and investment experience in Shanghai. Therefore, we concur with the Board’s view in selecting Shanghai as its primary target for acquiring stated-owned land use right(s) and financing potential the residential property or commercial property development projects.

We also take into account: (i) the Xi’an Project was an individual event which is out of the control of the Group; (ii) the use of funds from Shares Placing for repayment of the Group’s debts can help to lower the amount of debts and reduce the burden of interest expenses; (iii) the Group had experience in property investment and development in the PRC; (iv) the management of the company has about 10 years experience in property development and investment in Shanghai; and (v) the potential of the property development in Shanghai, the PRC as analyse in more details in the below paragraph of this section, we are of the view that the Rights Issue is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

As stated in the Letter, the gross proceed from the Rights Issue will be not less than approximately HK$329.8 million before expenses and the estimated net proceeds from the Rights Issue will be not less than approximately HK$323 million. The Company intends to apply the net proceeds from the Rights Issue as to (i) approximately not more than 70% or HK$226.1 million for acquiring stated-owned land use right(s) and financing potential residential or commercial property development project(s) in Shanghai; (ii) approximately 20% or HK$64.6 million for repayment of the debts of the Group principally consisted of bank loans; and (iii) approximately 10% or HK$32.3 million as general working capital of the Group.

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LETTER FROM THE IFA

In order to assess the potential development of property market (including residential property, commercial property, industrial property, etc) in Shanghai, the PRC, we have studied the statistics published by the Bureau of Statistics of Shanghai as follows:

Table C: Statistics of Shanghai, the PRC

Indicators					CAGR
(Shanghai)	2011	2012	2013	2014	(%)
Gross domestic products	RMB	RMB	RMB	RMB	7.07
	1,919.57 billion	2,010.13 billion	2,160.21 billion	2,356.09 billion
Gross domestic products of	RMB	RMB	RMB	RMB	14.51
property market_(Note 1)_	101.97 billion	108.60 billion	134.38 billion	153.10 billion
Investment amounts of	RMB	RMB	RMB	RMB	12.34
property market_(Note 2)_	227.39 billion	240.45 billion	283.51 billion	322.41 billion
Finished properties_(Note 3)_	2,240.62	2,305.06	2,254.44	2,313.29	1.07
	ten thousand	ten thousand	ten thousand	ten thousand
	square meters	square meters	square meters	square meters
Sold properties_(Note 4)_	1,771.30	1,898.46	2,382.20	2,084.66	5.58
	ten thousand	ten thousand	ten thousand	ten thousand
	square meters	square meters	square meters	square meters
Household disposable	RMB36,230	RMB40,188	RMB43,851	RMB47,710
income per capita

Source: Bureau of Statistics of Shanghai

Note:

1. Being the monetary value of all the finished goods and services (including but not limited to finished properties, property management services, valuation services, legal services, etc) produced in first-hand properties market and second-hand properties market in Shanghai in a specific period of time.

2. Being an aggregate total investment costs for construction and acquisition of properties (including first-hand properties and second-hand properties)

3. Being the properties which construction are completed and ready for living or use

4. Including both first-hand properties and second-hand properties

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LETTER FROM THE IFA

As stated in Table C, the gross domestic products in Shanghai increased from approximately RMB1,919.57 billion in 2011 to approximately RMB2,356.09 billion in 2014, representing an increase of CAGR approximately 7.07%. The gross domestic products of property market in Shanghai increased from approximately RMB101.97 billion in 2011 to approximately RMB153.10 billion in 2014, representing an increase of CAGR approximately 14.51%. Regarding investment amounts of property market in Shanghai, it increased from approximately RMB227.39 billion in 2011 to approximately RMB322.41 billion in 2014, representing an increase of CAGR approximately 12.34%. Furthermore, the square meters of finished properties and sold properties are also on the growth line of CAGR from 2011 to 2014, representing an increase of CAGR of approximately 1.07% and 5.58% respectively. We note that the aggregate size of the finished properties produced in 2013 was smaller than the size of the sold properties but such situation reversed in 2014. We have reviewed the Notice of Property Market Control (國務院辦公廳關於繼續做好房地產市場調控工作的通知) issued by State Council of the PRC on 26 February 2013 and understand that the central government of the PRC put efforts to cool down the country’s over-heating property market at the time. As the above cooling down policy by the central government applied to the whole country but not particularly in Shanghai property market, we consider such cooling down policy will not affect our view on the prospects of the Shanghai property market. Based on the above findings, we note that the economy in Shanghai and its property market had a steady growth momentum in the recent years.

Meanwhile, the household disposable income per capita increased from approximately RMB36,230 in 2011 to approximately RMB47,710 in 2014, representing an increase of CAGR approximately 9.61%.

As at the Latest Practicable Date, the Company has not yet identified the specific investment target in Shanghai. As stated in the Letter and subject to the availability of opportunities, it is the intention of the Company to target land located in the Songjiang New City International Ecological Business District in the Songjiang District of Shanghai (上海市松江區松江國際生態商務區) (the “ International Ecological Business District ”) (Please refer to the paragraph headed “ Reasons for the Rights Issue and Use of Proceeds* ” in the Letter for detailed information of the investment target). In the event that, suitable land parcels or property acquisition located in the International Ecological Business District opportunities arise, the Board could proceed with such acquisition through public auction, tender or listing for sale process by using the proceeds from the Rights Issue on hand. The Company will comply to all the rules, requirements and procedures under Chapter 14 of the Listing Rule including but not limited to reporting, announcement, circular issuance and shareholder’s approval. According to the management of the Company, the Group expects to start identifying the stated-owned land use right(s), residential property or commercial property development projects in Shanghai with the primary focus on the land located in

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LETTER FROM THE IFA

International Ecological Business District upon completion of the Rights Issue. As (i) funds raised from the Rights Issue are needed to be ready for acquisition of stated-owned land use right(s), residential property or commercial property development project(s) in Shanghai when opportunities arise, particularly for public auction, tender or listing for sale process; (ii) the primary investment target is the land located in International Ecological Business District; and (iii) the Hang Seng Index rose from approximately 21,612 points on 28 August 2015 to approximately 22,956 points on 28 October 2015 (i.e. the date of Underwriting Agreement) which reflected the sentiment of the stock market has improved in the recent two months before the Rights Issue Announcement, we are of the view that the timing for the Rights Issue is appropriate.

Furthermore, taking into consideration that it is prudent to finance the Group’s longterm growth with long-term funding in the form of equity, which will not have refinancing risk for the land parcels or properties acquisition (please refer to the paragraph headed “3. Other fund raising alternatives considered by the Group and the reasons for choosing the Rights Issue as funding method” below in this letter for detailed discussion).

Taking into account that (i) the gross domestic products of property market in Shanghai maintained its growth in recent years; (ii) the investment amount of property market in Shanghai increased continuously from 2011 to 2014; and (iii) the standby funding are needed for acquiring land parcels or completed properties through public auction, tender or listing for sale process when the acquisition opportunities arise, we are of the view and concur with the view of the management of the Company that the use of the proceeds is in line with the Company’s existing business strategy and can reduce the overall financial cost of the Group, and therefore is in the interests of the Company and the Shareholders as a whole.

3. Other fund raising alternatives considered by the Group and the reasons for choosing the Rights Issue as funding method

As stated in the Letter and discussed with the management of the Company, we note that the Board has considered other alternative means of fund raising before resolving to the Rights Issue including the followings:

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LETTER FROM THE IFA

(a) Debt Financing

According to the management of the Company, debt financing may subject to lengthy due diligence and negotiations with financial institutions and provision of collateral, in particular given that the Group recorded a substantial losses in the two recent financial years. Also, it would incur extra interest burden to the Group. Meanwhile, the management of the Company considered that the amounts that can be raised through debt financing are expected to be lower than the amount that can be raised through Rights Issue. We also understand from the management of the Company that (i) despite the interests rates would be in line with market practice, significant amount of collateral was required for the borrowings; (ii) the proposed debt amount offered by the financial institutions was not enough for the Group to conduct its property investment and development in the Shanghai Project; and (iii) no definite terms were agreed as the financial institutions would take times to conduct thorough due diligence procedure to the Group as the Group was in a loss making position in recent years. We have discussed with the management of the Company regarding the above negotiations with several financial institutions in Hong Kong for the debt financing. Since the Group was looking for loan facility in the region of HK$250 million to HK$350 million, the Board believes that based on the initial feedback from those financial institutions and that the Group was in a loss-making positions in the last two financial years ended 31 March 2014 and 2015 respectively, it would be more difficult for the Company to secure a loan facility in an amount desired by the Company. As such, the Company had not proceeded with negotiation with those financial institutions further after the initial contact. As no term sheets were provided by such financial institutions, we cannot carry out any independent review in relation to the above terms.

Shall the return of the proposed property investment and development be higher than the cost of debt, we consider the debt financing may be a more desirable fund raising method than the equity fund raising method in view of the dilution effect to the Shareholders. However, given that (i) the Group recorded continuous losses in recent years; and (ii) the size of the fund raised from the debt financing may probably not be sufficient for the property investment purpose of the Group, we consider that the debt financing may not be a possible fund raising method available to the Group at present.

The Board is of the view that it is prudent to finance the Group’s long-term growth by long-term financing, preferably in the form of equity which will not increase the Group’s finance costs. Therefore, the Board considered that debt financing is not an appropriate option to obtain additional funds in view of the funding size of the Rights Issue.

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LETTER FROM THE IFA

(b) Placing of new Shares and open offer

As advised by the management of the Company, (i) placing of new Ordinary Shares would only be available to placees who may not be the existing Shareholders and would dilute the shareholding of the existing Shareholders; and (ii) an open offer does not offer the Qualifying Shareholders the option to sell the nil-paid Rights Shares in the market.

In view of the above, the Board considers that the Rights Issue is the most suitable equity financing method available to the Group as (i) the Qualifying Shareholders have the option to subscribe for the Rights Shares at their sole discretion; (ii) the Qualifying Shareholders who do not take up their entitlements can sell the nilpaid Rights Shares in the market; and (iii) the Rights Issue offers all the Qualifying Shareholders to participate in the enlargement of the capital base of the Company and enables the Qualifying Shareholders to maintain their proportionate interests in the Company and continue to participate in the future development of the Company should they wish to do so.

After considering that (i) debt financing and bank borrowing would incur extra interest burden and render the Group subject to repayment obligations in the future; (ii) any placing of new Ordinary Shares without first offering the existing Shareholders the opportunity to participate in the Company’s equity fund raising exercise would result in dilution of shareholding of the existing Shareholders; (iii) open offer does not offer the Qualifying Shareholders the option to sell the nil-paid Rights Shares in the market; and (iv) the Rights Issue will enable the Shareholders to maintain their proportionate interests in the Company should they so wish, we are of the view and concur with the view of the management of the Company that the Rights Issue is fair and reasonable and in the interests of Company and Shareholders as a whole.

4. Principal terms of the Rights Issue

(a) Basis of the Rights Issue

In the Rights Issue Announcement, it was announced that the Company proposed to raise approximately HK$329.8 million before expenses by issuing 1,648,924,892 Rights Shares at the Subscription Price of HK$0.20 per Rights Share on the basis of two (2) Rights Shares for every one (1) Ordinary Share held by the Qualifying Shareholders on the Record Date. Qualifying Shareholders will not be entitled to apply for Rights Shares in excess of their respective provisional allotment under the Rights Issue. The Rights Issue is only available to the Qualifying Shareholders and will not be extended to the Non-Qualifying Shareholders.

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LETTER FROM THE IFA

As at date of the Underwriting Agreement and the Latest Practicable Date, save and except for the Outstanding CPS, the Company has no outstanding share options, other convertible securities, or warrants in issue which confer any right to subscribe for, convert or exchange into Ordinary Shares.

(b) Subscription Price

The Subscription Price is HK$0.20 per Rights Share, which will be payable in full by Qualifying Shareholder upon acceptance of the relevant provisional allotment of the Rights Shares under Rights Issue or when a transferee of nil-paid Rights Shares applies for the Rights Shares. The Subscription Price represents:

(i) a discount of approximately 55.56% to the closing price of HK$0.45 per Ordinary Share, based on the closing price of HK$0.45 per Ordinary Share as quoted on Stock Exchange on the Latest Practicable Date;
(ii) a discount of approximately 65.52% to the closing price of HK$0.58 per Ordinary Share, based on the closing price of HK$0.58 per Ordinary Share as quoted on Stock Exchange on the Last Trading Day;
(iii) a discount of approximately 64.91% to the average closing price of approximately HK$0.57 per Ordinary Share for the five consecutive trading days ended on the Last Trading Day;
(iv) a discount of approximately 64.91% to the average closing price of approximately HK$0.57 per Ordinary Share for the ten consecutive trading days ended on the Last Trading Day;
(v) a discount of approximately 38.76% to the theoretical ex-rights price of approximately HK$0.3266 per Ordinary Share, based on the closing price of HK$0.58 per Ordinary Share as quoted on the Stock Exchange on the Last Trading Day;
(vi) a discount of approximately 94.90% to the audited consolidated net tangible asset value of approximately HK$3.92 per Ordinary Share, based on the latest published audited consolidated net asset value of the Group attributable to the Shareholders of approximately HK2,692,816,000 as at 31 March 2015 and 687,052,446 Ordinary Shares in issue as at 31 March 2015; and

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LETTER FROM THE IFA

(vii) a discount of approximately 93.98% to the unaudited consolidated net tangible asset value per Ordinary Share of approximately HK$3.32 (based on the latest published unaudited consolidated net asset value of the Group attributable to the Shareholders of approximately HK$2,740,224,000 as at 30 September 2015 and 824,462,446 Ordinary Shares in issue as at 30 September 2015 and the Latest Practicable Date).

(c) Subscription ratio

Pursuant to the Underwriting Agreement, the subscription ratio is on the basis of two (2) Rights Shares for every (1) one existing Ordinary Share held on the Record Date. With the funding needs amount as estimated by the Board together with the purposive subscription price, the Board comes up with the resulting of existing subscription ratio. If the Shareholders (other than United Century) elect not to participate in the Rights Issue, their aggregate shareholding will decrease from approximately 75.74% to approximately 25.25%, resulting a maximum of approximately 66.67% dilution to their existing shareholdings.

In light of the deep discount of Subscription Price at HK$0.20 per Rights Share, the Board considers that the Rights Issue can encourage the Shareholders to participate in the Rights Issue and accordingly maintain their shareholdings in the Company and participate in the future growth of the Company. On this basis, the Board expects that the actual dilution effect upon completion of the Rights Issue will be lower than the theoretical maximum dilution effect of approximately 66.67% dilution to the Shareholders’ existing shareholdings as described above. Although there was no specific investment target identified yet by the Company and no definitive agreement entered by the Company in relation to the acquisition of stated-owned land use right(s), residential property or commercial property development project(s) in Shanghai, the funds raised from the Rights Issue are needed when opportunities arise after taking into account of other fund raising alternatives as analyzed in the paragraph headed “3. Other fund raising alternatives considered by the Group and the reasons for choosing the Rights Issue as funding method” of this letter.

Taking into account that: (i) the deep discount of Subscription Price can encourage the Shareholders to participate in the Rights Issue; (ii) the actual dilution effect upon completion of the Rights Issue is expected to be lower than the theoretical maximum dilution effect of approximately 66.67% dilution of the Shareholders’ existing shareholdings; and (iii) the funds raised from the Rights Issue are needed for the future property development project(s) in Shanghai, we are of the view that the subscription ratio is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE IFA

(d) Comparison to other rights issues

To assess the fairness and reasonableness of the terms of the Rights Issue, we have considered applying a comparable analysis to companies listed on the Stock Exchange that (i) having similar industry of the Group in terms of principal business, operations and financial position; and (ii) involving rights issue exercises within the last 12 months period which could represent the recent trend of the rights issue transactions in the prevailing market condition. However, we have not been able to identify suitable comparable companies with the above selection criteria. Thus, we consider the aforesaid comparable analysis is not applicable.

(e) Historical Ordinary Share price performance

In order to assess the fairness and reasonableness of the Subscription Price, we have reviewed the daily closing price of the Shares (the “ Closing Price(s) ”) during the twelve-month period from 28 October 2014 up to the date of the Underwriting Agreement (being 12 months prior to the date of the Underwriting Agreement) (the “ Review Period ”). We consider a period of twelve months is long enough to capture the recent price movements of the Ordinary Shares so that a reasonable comparison between the Closing Prices and the Subscription Price can be conducted. Set out below is the Closing Prices as quoted from the Stock Exchange.

Graph A: Historical price of the Ordinary Share

==> picture [353 x 203] intentionally omitted <==

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

1.4
1.2
1.1
0.8
0.6
0.4
0.2
Subscription Price of HK$0.20 per Rights Share
0
28/10/201428/10/201428/10/201428/1/201528/2/201531/3/201530/4/201531/5/201530/6/201531/7/201531/8/201530/9/2015
----- End of picture text -----

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

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LETTER FROM THE IFA

As shown in the above Graph A, we note that the Closing Prices climbed up from HK$0.45 on 28 April 2015 to HK$1.16 on 3 June 2015. During such period, the Company announced a placing of bond and raised a net proceed of approximately HK$9.3 million and a placing of new Shares and raised a net proceed of approximately HK$49.3 million. We have reviewed the Hang Seng Index during such period and note that the Hang Seng Index dropped from 28,442 points on 28 April 2015 to 27,657 points on 3 June 2015 which inversely co-related to the Ordinary Share price performance of the Company. Other than the above fund raising activities, there were no other material transactions or price sensitive information announced by the Company during such period. As confirmed by the Directors, there was no material change to the business of the Group during such period. Therefore, it is hard to form our view that the surge of the closing price during such period had to relate to the abovementioned fund raising activities. The Closing Prices gradually dropped since 3 June 2015 and showed a general downward trend since then. The highest Closing Price and the lowest Closing Price are HK$1.16 on 3 June 2015 and HK$0.385 on 15 January 2015 and 24 March 2015 respectively. We noted that the Subscription Price of HK$0.20 per Rights Share is lower than all the Closing Prices during the Review Period, representing a discount of approximately 48.05%, 82.76% and 65.20% to the lowest Closing Price, the highest Closing Price and the average Closing Price of the Review Period respectively.

According to the management of the Company, the Subscription Price was made by the Company after arm’s length negotiation between the Company and United Century with reference to the market price of the Ordinary Shares prior to the Last Trading Day and the prevailing market conditions. As the Rights Shares are offered to all the Qualifying Shareholders, we are advised by the Directors that they would like to set and maintain the Subscription Price at existing discount level (by adopting the current subscription ratio) that would encourage the Qualifying Shareholders to participate in the Rights Issue in order to maintain their shareholdings in the Company accordingly and participate in the future growth of the Company.

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LETTER FROM THE IFA

(f) Underwriting arrangement

United Century is a connected person of the Company by virtue of it being a substantial shareholder of the Company. After the Company had formed the intention to raise funds by way of rights issue, it approached United Century to underwrite the Rights Issue and United Century expressed its willingness to support and underwrite the Rights Issue. After balancing other relevant factors as disclosed more specifically below, the Company had not approached any independent underwriters for the underwriting of the Rights Issue as the Company was mindful of the laws and regulations in Hong Kong pertaining to the need to keep inside information confidential pending an announcement and not putting any person in a privileged dealing position. As the Rights Issue is a piece of highly material and price sensitive information, the Company did not consider approaching multiple potential underwriters with whom it did not have prior business relationship to be conducive to compliance with the relevant laws and regulation. Additionally, after considering the commercial terms of the Rights Issue which include, among others: (i) the Rights Issue being fully underwritten; (ii) the amount and size of the gross proceeds of the Rights Issue; (iii) the terms of the Rights Issue being in accordance with market practice; (iv) the confidentiality of the possible fund-raising intention of the Company, the Company decided to choose United Century as its sole underwriter and not to approach other possible underwriters. The Company has not conducted any fund raising activities in the last 12 months which involved hard underwriting arrangement and does not have a practice on not approaching independent underwriters. The Company will take into account all the circumstances of the case, in particular the interests of the Shareholders as whole in deciding whether to approach independent underwriters. The factors that the Company has taken into account in determining to approach United Century only, but not other underwriters, included (without limitation) the likelihood of finding underwriters who may have interests to underwrite the Rights Issue given the conditions of the Group (such as recent financial performance, trading volume of the Ordinary Shares), the expected time that would be required on negotiation the likelihood of concluding the negotiations on terms acceptable to the Company and being more confident of keeping the rights issue proposal confidential if the Company can minimize the number of potential underwriters to be approached. After taking into account and balancing the factors described above, the Company concluded that it is in the best interests of the Group and the Shareholders as a whole to approach United Century only. For the purpose of providing more information on the expected time of negotiation, the Company disclosed that it took approximately one day for the Company and United Century to agree on the principal terms of the Underwriting Agreement (i.e. the subscription price, basis of the rights issue, commission rate and conditions precedent).

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LETTER FROM THE IFA

The Company considers that the terms of the Rights Issue is accordance with market practice such as being subject to fulfilment of conditions commonly seen in transaction of this type (for examples, obtaining shareholders’ approval as required under the applicable laws and conditions and underwriter’s rights of termination and payment of underwriting commission). After taking into account that approaching United Century is more likely to successfully reaching an agreement and sooner given that United Century, being a substantial shareholder, is more familiar with the affairs of the Group, that negotiations with independent underwriter is more likely to involve their legal and other advisers which mean a longer negotiation process, the Company considers that it is reasonable to expect that appointing United Century as underwriter would be more cost effective. As disclosed above, United Century expressed its willingness to support and underwrite. On the other hand, given that the Group was in a loss-making positions in the last two financial years ended 31 March 2014 and 2015 respectively and the relatively low trading volume of the Ordinary Shares, the Company considers that it is reasonable to expect that it would be more difficult to find underwriters (if any) who are interested to underwrite the Rights Issue and assuming that there are underwriters which would have interests to underwrite the Rights Issue, additional time would be needed to negotiate the terms of the underwriting arrangement. On the other hand, United Century responded to the Company swiftly and positively after it was approached by the Company. The Company therefore continued the negotiation on underwriting the Rights Issue with United Century and had not approached other underwriters.

Although the Company had not approached other independent underwriters to obtain best available term in the Rights Issue which may not be the best practice, we consider that the foregoing should be balanced against the following factors:

(i) the existing terms of the Rights Issue including the Subscription Price and the subscription ratio is fair and reasonable as discussed in the above paragraph headed “4. Principal terms of the Rights Issue” of this letter;
(ii) the underwriting commission for the Rights Issue is in line with the market practice as discussed in the below paragraph headed “5. Underwriting commission” of this letter;
(iii) negotiations with independent underwriter is more likely to involve their legal and other advisers which mean a longer negotiation process; and

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LETTER FROM THE IFA

(iv) the Group was in a loss-making positions in the last two financial years ended 31 March 2014 and 2015 respectively and the relatively low trading volume of the Ordinary Shares which are reasonable to expect that it would be more difficult to find underwriters (if any) who are interested to underwrite the Rights Issue.

Therefore, we are of the view that the Rights Issue is fair and reasonable and in the interests of the Company and the Shareholders as a whole even though the Company did not approach independent underwriters to obtain best available terms.

Having considered that (i) the general downing trend of the Closing Prices in the recent half year; and (ii) the need to encourage all the Qualifying Shareholders to participate in the Rights Issue and accordingly maintain their shareholdings in the Company and participate in the future growth of the Company, we are of the view and concur with the view of the Directors that the subscription ratio on the basis of two (2) Rights Shares for every (1) one existing Ordinary Share held on the Record Date, the Subscription Price and the Underwriting Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

5. Underwriting commission

Pursuant to the Underwriting Agreement, the Company agrees to pay United Century, who is the connected underwriter of the Company, an underwriting commission of 1.5% of the aggregate Subscription Price. The payment of the underwriting commission pursuant to the Underwriting Agreement constitutes a connected transaction of the Company which is exempt from shareholder’s approval under the Listing Rules. Details can be referred to the paragraph headed “Listing Rules Implications” of the Letter.

The amount of commission was determined after arm’s length negotiation between the Company and United Century by reference to the size of the Rights Issue and the market condition. We have also reviewed all the proposed rights issue, with the absence of application for excess rights share as a selection criterion, announced by the other listed issuers in the recent six-month period ended on the date of the Underwriting Agreement i.e. from 28 April 2015 to 28 October 2015 (“ Other Rights Issues ”). We consider that the six-month review period immediately preceding the date of the Underwriting Agreement is appropriate as it represents the then prevailing market conditions and sentiments when Other Rights Issues were conducted. We included the absence of application for excess rights share into the selection criterion because the absence of which may increase the underwriters’ risk exposure to take up the underwritten shares and lead to the increase of the underwriting commission. However, given the differences in business nature, financial performance, financial position and funding requirements for different listed issuers, we consider that the Other Rights Issues might not constitute an absolute close reference to the Rights Issue.

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LETTER FROM THE IFA

Table D: Details regarding the Other Rights Issue:

				Monetary
				value of the	Connected
				underwriting	person(s) as
	Name of	Stock	Date of initial	obligation	underwriter(s)	Commission
No.	company	code	announcement	(HK$)	(Y/N)	(%)
1	Gayety Holdings	8179	26 June 2015	141,116,220	N	1.50
	Limited					(note)
2	King Stone Energy	663	26 June 2015	127,470,034	N	2.50
	Group Limited
3	Hua Xia Healthcare	8143	22 June 2015	149,923,135	N	2.75
	Holdings Limited
4	Rui Kang	8037	11 June 2015	244,797,206	N	3.50
	Pharmaceutical
	Group Investments
	Limited
5	Jia Meng Holdings	8101	9 June 2015	184,749,984	N	3.50
	Limited
			Mean			2.75
			Maximum			3.50
			Minimum			1.50
	The Company	910	28 October 2015	249,784,978	Y	1.50

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

Notes: One underwriter is entitled to 0.5% and the other underwriter is entitled to 1.0%

As stated in the Table D, the underwriting commission of Other Rights Issues ranged from 1.50% to 3.50%, with a mean of approximately 2.75%. As the underwriting commission of the Rights Issue of 1.50% represented the lowest amongst the Other Rights Issues, we are of the view and concur with the view of the Directors (excluding (i) Mr. Guo who was required to abstain from voting on the relevant Board resolution(s) approving the Transactions by virtue of him having a material interest in these Transactions; (ii) Amika Guo who was required to abstain from voting on the relevant Board resolution(s) approving the Transactions under the Company’s constitution by virtue of her being the daughter of Mr. Guo and therefore an associate of Mr. Guo; and (iii) the IBC Members) that the underwriting commission under the Rights Issue is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE IFA

6. Absence of Excess Application Arrangement

According to the Letter and the management of the Company, taking into account that the Rights Issue will give Qualifying Shareholders an equal and fair opportunity to participate in the Company’s future development by subscribing for his/her/its entitlements under the Right Issue and the Underwriting Agreement is negotiated on an arm’s length basis with United Century, the Directors consider that if application for excess Rights Shares is arranged, the Company would be required to put in additional effort to administer the excess application procedures including preparing and arranging the excess application, reviewing the relevant documents, liaising with professional parties and printing of application forms, etc. It is estimated that an additional cost of approximately HK$100,000 to administer the excess application procedures will be incurred, which is not cost effective from the viewpoint of the Company, especially after taking into account that the Group was in loss-making position in recent two financial year as mentioned in the paragraph headed “1. Background information of the Group” above of this letter. The Board considers that it is important for the Group to minimize all costs which may be incurred during the fund-raising process. Therefore, the Board decided that the Qualifying Shareholders would not be entitled to apply for any Rights Shares which are in excess of their assured entitlements. Any Rights Shares not taken up by the Qualifying Shareholders will be taken up by United Century. Notwithstanding that excess application arrangement will not be made available to the Qualifying Shareholders, the Board considers that offering a discount on the Subscription Price would encourage the Qualifying Shareholders to participate in the Rights Issue and the potential growth of the Group.

Furthermore, Shareholders may acquire additional rights entitlement in the open market (subject to availability). Moreover, (i) the Absence of Excess Application Arrangement is subject to the approval of the LR Independent Shareholders who have been provided with advice from us in accordance with the Listing Rules; (ii) the sole underwriter, namely United Century, being materially interested in the Absence of Excess Application Arrangement, is required to abstain from voting on the resolution of the approval of the Absence of Excess Application Arrangement at the SGM; and (iii) Best China, being materially interested in the Absence of Excess Application Arrangement, is required to abstain from voting on the resolution of the approval of the Absence of Excess Application Arrangement at the SGM.

After taking into account, among other things, (i) Shareholders may acquire additional rights entitlements in the open market (subject to availability); and (ii) the Absence of Excess Application Arrangement is subject to the approval of the LR Independent Shareholders and the additional efforts and cost to administer application for excess Rights Shares, the Board is of the view that the interests of the Shareholders are adequately safeguarded notwithstanding that no arrangement has been made for application of excess Rights Shares. In light of the above, the Board is of the view that the Absence of Excess Application Arrangement is in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE IFA

Therefore, there is no arrangement for the Qualifying Shareholders to apply for any Rights Share which are in excess of his/her/its entitlement, however, we noted that the Company has set the Subscription Price at a considerable discount to the prevailing market price of the Ordinary Shares so as to encourage the Qualifying Shareholders, who are positive to the future development of the Company, to exercise its rights to subscribe for the Rights Shares.

We consider that the Absence of Excess Application Arrangement may not be desirable from the point of view of those Qualifying Shareholders who wish to take up more Rights Shares in excess of their assured entitlement. However, we consider that the aforesaid should be balanced against the fact that (i) the Absence of Excess Application Arrangement does not alter the intention of the Rights Issue of encouraging all Qualifying Shareholders to maintain their respective shareholdings in the Company; (ii) the intention of the Directors to set the Subscription Price at a level that would encourage the Qualifying Shareholders to participate in the Rights Issue; (iii) all the Qualifying Shareholders are offered the opportunities to decide whether to accept the Rights Issue or not; (iv) all the LR Independent Shareholders are offered the rights whether to accept the Absence of Excess Application Arrangement or not; (v) United Century, being the sole underwriter and materially interested in the Absence of Excess Application Arrangement, is required to abstain from voting on the resolution of the approval of the Absence of Excess Application Arrangement at the SGM; (vi) Best China, being materially interested in the Absence of Excess Application Arrangement, is required to abstain from voting on the resolution of the approval of the Absence of Excess Application Arrangement at the SGM; (vii) additional effort will be required to arrange the excess application procedures which is different from the Director’s intention of minimizing all costs which may be incurred; and (viii) the underwriting commission of the Company represented the lowest amongst the Other Rights Issue. The Absence of Excess Application Arrangement therefore may not be considered as material to the Qualifying Shareholders.

7. Potential dilution effect on the interests of the Independent Shareholders

However, we consider such scenario of maximum dilution is unlikely to occur since it assumes that the majority of the Independent Shareholders have voted in favour of the Rights Issue at the SGM but not to subscribe for any of their assured entitlements which is a complete misalignment between the voting behaviour of the Independent Shareholders and their decision not to participate in the Rights Issue.

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LETTER FROM THE IFA

We are aware of the aforementioned potential dilution effect to the Independent Shareholders’ shareholding interests in the Company. Nonetheless, we consider that the foregoing should be balanced against by the following factors:

the Independent Shareholders are offered a chance to express their view on the terms of the Rights Issue, the Underwriting Agreement, the Absence of Excess Application Arrangement, the Whitewash Waiver and the transactions contemplated thereunder through their votes at the SGM;
the Qualifying Shareholders have their choices whether to accept the Rights Issue, the Underwriting Agreement, the Absence of Excess Application Arrangement and the Whitewash Waiver;
the Qualifying Shareholders have the option to subscribe for the Rights Shares at their sole discretion;
the Qualifying Shareholders have the opportunity to realize their nil-paid Rights Shares in the market (subject to availability) if they do not take up their entitlements;
Qualifying Shareholders who wish to increase their shareholding interests in the Company through the Rights Issue may, subject to availability, acquire additional nil-paid Rights Shares in the market; and
the Rights Issue offers the Qualifying Shareholders a chance to subscribe for their pro-rata Rights Shares for the purpose of (i) maintaining their respective existing shareholding interests in the Company at a relatively lower price as compared to the historical and prevailing market price of the Shares; and (ii) participating in the future development of the Group should they so wish.

We have taken into account the following factors: (i) the Rights Issue would provide funding for the Group to expand its business in property development and investment in the PRC as stated in the paragraph headed “2. Reasons for the Rights Issue and use of proceeds” above of this letter; (ii) the Rights Issue would strengthen the capital base of the Group; (iii) the Rights Issue is on the basis that all Qualifying Shareholders have been offered the same opportunity to maintain their proportionate interests in the Company and allows the Qualifying Shareholders to participate in the growth of the Company; (iv) the inherent dilutive nature of Rights Issue in general if the existing Shareholders do not take up his/her/ its entitlements under the Rights Issue; and (v) the discount of the Subscription Price (including the subscription ratio) to the prevailing market price of the Ordinary Shares was necessary to encourage the Qualifying Shareholders to participate in the Rights Issue. Based on the above, we consider that the possible dilution effect on the existing public Shareholders, which may only happen when the Qualifying Shareholders do not subscribe for their pro-rata Rights Shares, to be acceptable.

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LETTER FROM THE IFA

8. Financial effect of the Rights Issue on net tangible assets

According to the unaudited pro-forma financial information of the Group set out in Appendix II to the Circular, the unaudited consolidated net tangible assets of the Group was approximately HK$2,740.23 million as at 30 September 2015. The unaudited pro forma adjusted consolidated net tangible assets of the Group would increase to approximately HK$3,063.23 million as at 30 September 2015 upon completion of the Rights Issue on 30 September 2015.

Upon completion of the Rights Issue, the unaudited pro forma adjusted consolidated net tangible assets of the Group per Share as at 30 September 2015 would decrease from approximately HK$3.32 to approximately HK$1.24, representing a decrease of approximately 62.65%. Having taken into account the fact that: (i) the Rights Issue would provide the funding for the Group to expand its property investment and development in future; (ii) the Rights Issue would strengthen the capital base of the Group; (iii) the Rights Issue is on the basis that all Qualifying Shareholders have been offered the same opportunity to maintain their proportional interests in the Company and allows the Qualifying Shareholders to participate in the growth of the Company; and (iv) the shareholding of Shareholders would not be diluted if the existing Shareholders take up his/her/its entitlements under the Rights Issue, we are of the view that the aforesaid decrease in unaudited pro forma adjusted consolidated net tangible assets per share is justifiable.

9. Whitewash Waiver

As at the Latest Practicable Date, the Concert Group owns, controls or has direction over 200,000,000 Ordinary Shares, representing approximately 24.26% of the existing issued share capital of the Company.

United Century and King Partner are companies incorporated in BVI directly and wholly owned by Mr. Guo. As at the Latest Practicable Date, United Century and King Partner owned the United Century CPS and the King Partner CPS respectively, representing a total number of 401,666,666 CPS. Upon full conversion of the Outstanding CPS, the Company would be required to issue up to 401,666,666 new Ordinary Shares at the initial conversion price of HK$3 each. Pursuant to the terms and conditions of the CPS, the CPS (i) rank in priority to the Ordinary Shares and any other class of shares on a return of capital on liquidation; (ii) rank pari passu with the Ordinary Shares as to any dividends accumulated on the CPS; and (iii) are not permitted to attend or vote at meetings of the Company unless a resolution is proposed to vary the rights of holders of the CPS or a resolution is proposed for the winding up of the Company.

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LETTER FROM THE IFA

Save for the Outstanding CPS, the Company did not have any outstanding derivatives, options, warrants and conversion rights or similar rights or securities in issue as at the Latest Practicable Date which confer any right to subscribe for, convert or exchange into, Ordinary Shares.

Pursuant to the United Century Undertaking, United Century (in its capacity as a Shareholder) has given an irrecoverable and unconditional undertaking in favour of the Company:

(i) to subscribe for or procure the subscription of the Committed Shares;
(ii) not to (i) sell or otherwise dispose of any of the United Century CPS and the Ordinary Shares owned by it; (ii) convert any of the United Century CPS; or (iii) exercise any warrants, options or any rights in whatever forms or descriptions it has to acquire additional interest in the capital of the Company before completion of the Rights Issue; and
(iii) that the Ordinary Shares and the United Century CPS registered under its name or in the name of its nominees will remain so registered at the close of business on the Record Date up to and including the date on which the Rights Issue shall complete.

Pursuant to the King Partner Undertaking, King Partner has also undertaken to the Company, among other things, that it would not dispose of or convert any of the King Partner CPS before completion of the Rights Issue.

For the avoidance of doubt, the Committed Shares do not include the Rights Shares not taken up by other Qualifying Shareholders and fall to be underwritten by United Century in capacity as the sole underwriter under the Underwriting Agreement.

As at the Latest Practicable Date, United Century is the sole substantial Shareholder of the Company.

The maximum number of Rights Shares which could be taken up by Concert Group under the Rights Issue and the Underwriting Agreement is 1,648,924,892 Rights Shares.

Assuming:

(i) no Ordinary Shares being issued and/or repurchased by the Company from the Latest Practicable Date and up to and including the Record Date; and
(ii) no acceptance by the Qualifying Shareholders (except United Century) under the Rights Issue,

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LETTER FROM THE IFA

United Century will be required to take up 1,248,924,892 Rights Shares pursuant to its underwriting obligation and 400,000,000 Committed Shares pursuant to the United Century Undertaking and it will make the total shareholding of the Concert Group increase from 200,000,000 Ordinary Shares, representing approximately 24.26% of the Issued Ordinary Capital as at the Latest Practicable Date, to 1,848,924,892 Ordinary Shares, representing approximately 74.75% of the Issued Ordinary Capital as enlarged by the Rights Issue.

As the total shareholding of the Concert Group would as a result be increased from below 30% as at the Latest Practicable Date to more than 30% and exceeding 50% of the total Issued Ordinary Capital upon completion of the Rights Issue, United Century would be required to make a mandatory general offer for all the issued Ordinary Shares and other securities of the Company (other than those already owned or agreed to be acquired by the Concert Group) under Rule 26.1 of the Takeovers Code as a result of its underwriting obligations under the Underwriting Agreement, unless the Whitewash Waiver is granted by the Executive. If the Whitewash Waiver is approved by the Code Independent Shareholders and the shareholding of the Concert Group exceeds 50% after completion of the Rights Issue, the Concert Group may further increase its shareholding in the Company without incurring any further obligations under Rule 26 of the Takeovers Code to make a general offer.

United Century has made an application to the Executive for the granting of the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code. The Whitewash Waiver will be conditional on, among other things, approval by the Code Independent Shareholders at the SGM of the Company. The resolution(s) proposed to be voted at the relevant general meeting (i.e. the SGM) will be conducted by way of poll. Pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code, as United Century is interested in the Whitewash Waiver, United Century and other members of the Concert Group and those Shareholders who are involved in or interested in the Rights Issue, the Underwriting Agreement and/or the Whitewash Waiver are required to abstain from voting on the resolution(s) to be considered at the SGM in relation to the Rights Issue, the Underwriting Agreement and the Whitewash Waiver.

Based on the analysis of the benefits and terms of the Rights Issue, we consider that the Rights Issue is in the interests of the Company and the Code Independent Shareholders as a whole. If the Whitewash Waiver is not approved by the Code Independent Shareholders at the SGM, the Rights Issue will not proceed and the Company will lose all the benefits that are expected to be brought by the completion of the Rights Issue, i.e. the future growth of business development of the Group in the property market of the PRC. Accordingly, we are of the view that for the purposes of implementing the Rights Issue, the approval of the Whitewash Waiver by the Code Independent Shareholders at the SGM is in the interests of the Company and the Code Independent Shareholders as a whole.

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LETTER FROM THE IFA

RECOMMENDATION

Having taken into consideration of the principal factors and reasons as mentioned in the section headed “Principal factors and reasons considered” above, including:

(i) the cash position of the Group as at 30 September 2015 in amount of approximately HK$26.2 million is insufficient for the Company to acquire a sizable stated-owned land use right(s), residential property or commercial property development project(s) and develop such project as detailed in the paragraph headed “2. Reasons for the Rights Issue and use of proceeds” of this letter as the funding need for such project is approximately HK$226.1 million and the standby funding are needed when public auction, tender or listing for sale process is required when the acquisition opportunities arise;
(ii) the use of the proceeds for the Rights Issue is in line with the Company’s existing business strategy for property investment (such as. its investment in Fuzhou shopping mall) and its primary investment target will focus on the properties located in Shanghai, the leading financial and economic centre of the PRC in where Mr. Guo, being one of the management of the Company, has the relevant property development and investment experience;
(iii) the Company cannot obtain any bank loans for the target amount of HK$250 million to HK$350 million when negotiated with the financial institutions before the Company decided to conduct the Rights Issue;
(iv) taking into account the benefits and cost of each of the alternatives, the Rights Issue is the appropriate means of funding raising activities to strengthen its capital base without increasing the interest burden of the Group and minimizing the cost of fund raising;
(v) the discount of the Subscription Price to market price is necessary to encourage all the Qualifying Shareholders to participate in the Rights Issue;
(vi) the underwriting commission of the Rights issue is fair and reasonable;
(vii) the Absence of Excess Application Arrangement which can lower the additional costs; and
(viii) the potential dilution effect to the existing Shareholders of approximately 66.67%, which may only happen when the Qualifying Shareholders do not subscribe for their pro-rata Rights Shares, is acceptable as discussed in the paragraph headed “Potential dilution effect on the interests of the Independent Shareholders” of this letter,

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LETTER FROM THE IFA

We consider that (i) the terms of the Rights Issue and the Underwriting Agreement are fair and reasonable so far as the Code Independent Shareholders are concerned and the Rights Issue and the entering of the Underwriting Agreement are in the interests of the Company and the Code Independent Shareholders as a whole; and (ii) the terms of the Rights Issue and the Absence of Excess Application Arrangement are fair and reasonable so far as the LR Independent Shareholders are concerned and the Rights Issue and the Absence of Excess Application Arrangement are in the interests of the Company and the LR Independent Shareholders as a whole. Accordingly, we would advise the IBC to recommend to (a) the Code Independent Shareholders to vote in favour of the relevant resolution(s) to approve the Rights Issue and the Underwriting Agreement to be proposed at the SGM and (b) the LR Independent Shareholders to vote in favour of the relevant resolution(s) to approve the Rights Issue and the Absence of Excess Application Arrangement to be proposed at the SGM.

The Rights Issue is conditional upon the approval of the Whitewash Wavier. If the Whitewash Waiver is not approved, the Rights Issue will not proceed. Having taken into account our recommendation on the Rights Issue above, we consider the Whitewash Waiver is fair and reasonable so far as the Code Independent Shareholders are concerned and is in the interests of the Company and the Code Independent Shareholders as a whole. Accordingly, we would advise the IBC to recommend to the Code Independent Shareholders to vote in favour of the relevant resolution to approve the Whitewash Waiver to be proposed at the SGM.

Yours faithfully, For and on behalf of Nuada Limited Kim Chan Director

Mr. Kim Chan is a person licensed to carry out type 6 (advising on corporate finance) regulated activity under the SFO and is a responsible officer of Nuada Limited who has over 16 years of experience in corporate finance industry.

– 86 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL INFORMATION

The financial information of the Group for the three financial years ended 31 March 2013, 31 March 2014 and 31 March 2015 respectively had been set out in the annual reports of the Company for these three years respectively and are available on the website of the Stock Exchange as specifically set out below:

Financial year ended Website 31 March 2013 http://www.hkexnews.hk/listedco/listconews/SEHK/2013/0717/ LTN20130717163.pdf 31 March 2014 http://www.hkexnews.hk/listedco/listconews/SEHK/2014/0723/ LTN20140723318.pdf 31 March 2015 http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0716/ LTN20150716698.pdf

The above annual reports are also available at the website of the Company at http://www. chinasandi.com.hk.

The unaudited financial information of the Group for the six months ended 30 September 2015 had been set out in the interim report of the Company for such period and is available at the websites of the Stock Exchange and the Company as specifically set out below:

Stock http://www.hkexnews.hk/listedco/listconews/SEHK/2015/1203/LTN20151203496.pdf Exchange website Company’s http://www.chinasandi.com.hk website

Set out below is a summary of the consolidated financial information of the Group for each of the three financial years ended 31 March 2013, 2014 and 2015 and the six months ended 30 September 2015 respectively, as extracted from the relevant annual (or interim) results announcements or reports of the Company. The Company’s auditors, BDO Limited had not issued any qualified opinion on the Group’s financial statements for the three financial years ended 31 March 2015.

– I-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 March 2015 2014 2013 HK$’000 HK$’000 HK$’000 132,964 130,798 118,658 4,459 1,722 811 66,451 (25,592) 76,309 (380,264) 557,925 51,953 (1,257) (3,273) (20,754) (155) – – (56,530) – – (9,308) (10,940) (7,654) (1,606) (1,696) (1,660) (33,459) (43,943) (42,441) (77,811) (110,582) (97,242) (356,516) 494,419 77,980 89,992 (142,589) (18,233) (266,524) 351,830 59,747 – (791,095) 95,867 (266,524) (439,265) 155,614 44,547 44,711 33,174 (8,066) 2,170 5,741 – (689,230) – 155 – – 36,636 (642,349) 38,915 (229,888) (1,081,614) 194,529	For the year ended 31 March 2015 2014 2013 HK$’000 HK$’000 HK$’000 132,964 130,798 118,658 4,459 1,722 811 66,451 (25,592) 76,309 (380,264) 557,925 51,953 (1,257) (3,273) (20,754) (155) – – (56,530) – – (9,308) (10,940) (7,654) (1,606) (1,696) (1,660) (33,459) (43,943) (42,441) (77,811) (110,582) (97,242) (356,516) 494,419 77,980 89,992 (142,589) (18,233) (266,524) 351,830 59,747 – (791,095) 95,867 (266,524) (439,265) 155,614 44,547 44,711 33,174 (8,066) 2,170 5,741 – (689,230) – 155 – – 36,636 (642,349) 38,915 (229,888) (1,081,614) 194,529	For the six months ended 30 September 2015 2014 HK$’000 HK$’000 56,062 67,368 2,265 1,613 49,367 49,018 74,356 (190,017) – (1,087) – – – (50,907) (3,180) (4,659) (781) (830) (16,479) (17,613) (32,201) (45,713) 129,409 (192,827) (22,055) 43,958 107,354 (148,869) – – 107,354 (148,869) (110,645) 36,082 – 2,965 – – – – (110,645) 39,047 (3,291) (109,822)
2015 HK$’000 132,964 4,459 66,451 (380,264) (1,257) (155) (56,530) (9,308) (1,606) (33,459) (77,811) (356,516) 89,992 (266,524) – (266,524) 44,547 (8,066) – 155 36,636 (229,888)	2014 HK$’000 130,798 1,722 (25,592) 557,925 (3,273) – – (10,940) (1,696) (43,943) (110,582) 494,419 (142,589) 351,830 (791,095) (439,265) 44,711 2,170 (689,230) – (642,349) (1,081,614)	2015 HK$’000 56,062 2,265 49,367 74,356 – – – (3,180) (781) (16,479) (32,201) 129,409 (22,055) 107,354 – 107,354 (110,645) – – – (110,645) (3,291)

– I-2 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Results					For the six months ended	For the six months ended
	For the	year ended 31	March		30 September
	2015	2014		2013	2015	2014
	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000
(Loss)/profit attributable to:
Owners of the Company	(266,506)	(439,261)	155,614		107,368	(148,857)
Non-controlling interests	(18)	(4)		–	(14)	(12)
	(266,524)	(439,265)	155,614		107,354	(148,869)
Total comprehensive income attributable to:
Owners of the Company	(230,309)	(1,081,236)	194,529		(2,112)	(110,151)
Non-controlling interests	421	(378)		–	(1,179)	329
	(229,888)	(1,081,614)	194,529		(3,291)	(109,822)
(Loss)/earnings per share	HK(24) cents	HK(40) cents	HK14	cents	HK9.00 cents	HK(13.67) cents
From continuing and discontinued
operations:
– Basic	HK(24) cents	HK(32) cents	HK14	cents	HK9 cents	HK(14) cents
– Diluted	HK(24) cents	HK(32) cents	HK14	cents	HK9 cents	HK(14) cents
From continuing operations:
– Basic	HK(24) cents	HK(32) cents	HK5	cents	HK9 cents	HK(14) cents
– Diluted	HK(24) cents	HK31 cents	HK5	cents	HK9 cents	HK(14) cents
Dividends
Dividend	–	–		–	–	–
Dividend per share_(HK$)_	–	–		–	–	–

BDO Limited, the auditor of the Company did not issue any qualified opinion on the financial statements of the Group for each of the years ended 31 March 2013, 2014 and 2015. The Group had no items which are exceptional because of size, nature or incidence for each of the years ended 31 March 2013, 2014 and 2015 and for the six months ended 30 September 2015.

– I-3 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2015

The audited consolidated financial statements of the Company for the year ended 31 March 2015 set out below were reproduced from the Company’s annual report for the financial year ended 31 March 2015.

C O N S O L I DAT E D S TAT E M E N T O F P RO F I T O R L O S S A N D OT H E R COMPREHENSIVE INCOME

For the year ended 31 March 2015

Notes Continuing operations: Revenue 8 Other income 8 Other net gains and losses 10 Fair value (loss)/gain on an investment property 21 Fair value loss on derivative financial instrument 37 Impairment loss on available-for-sale investments 30 Loss on early redemption of convertible notes 37 Staff costs 13 Depreciation of property, plant and equipment 20 Other operating expenses Finance costs 11 (Loss)/profit before income tax 13 Income tax credit/(expense) 12 (Loss)/profit for the year from continuing operations Discontinued operations: Loss for the year from discontinued operations 14 Loss for the year Other comprehensive income, after tax, that may be reclassified subsequently to profit or loss: 16 Exchange differences on translating foreign operations	2015 HK$’000 132,964 4,459 66,451 (380,264) (1,257) (155) (56,530) (9,308) (1,606) (33,459) (77,811) (356,516) 89,992 (266,524) – (266,524) 44,547 (8,066)	2014 HK$’000 130,798 1,722 (25,592) 557,925 (3,273) – – (10,940) (1,696) (43,943) (110,582) 494,419 (142,589) 351,830 (791,095) (439,265) 44,711 2,170

– I-4 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes Fair value (loss)/gain on available-for-sale financial assets Reclassification adjustment upon disposal of subsidiaries Reclassification to profit or loss Other comprehensive income for the year, after tax Total comprehensive income for the year Loss attributable to: Owners of the Company Non-controlling interests Total comprehensive income attributable to: Owners of the Company Non-controlling interests (Loss)/earnings per share 17 From continuing and discontinued operations: – Basic – Diluted From continuing operations: – Basic – Diluted	2015 HK$’000 – 155 36,636 (229,888) (266,506) (18) (266,524) (230,309) 421 (229,888) HK(24) cents HK(24) cents HK(24) cents HK(24) cents	2014 HK$’000 (689,230) – (642,349) (1,081,614) (439,261) (4) (439,265) (1,081,236) (378) (1,081,614) HK(32) cents HK(32) cents HK(32) cents HK31 cents

– I-5 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF FINANCIAL

At 31 March 2015

Notes Non-current assets Biological assets 26 Investment property 21 Property, plant and equipment 20 Construction in progress 22 Intangible assets 24 Available-for-sale investments 30 Derivative financial instrument 37 Total non-current assets Current assets Trade receivables 28 Prepaid lease payments 23 Other receivables, deposits and prepayments 27 Investments held for trading 29 Cash and cash equivalents 31 Total current assets Total assets Current liabilities Trade payables 39 Other payables and accruals 36 Amounts due to related parties 46(b)(i) Bank and other borrowings 40 Tax payable Total current liabilities Net current assets Total assets less current liabilities	2015 HK$’000 – 3,985,783 4,712 – – – – 3,990,495 1,683 – 156,630 141,017 15,626 314,956 4,305,451 10,888 87,455 14,075 115,625 – 228,043 86,913 4,077,408	2014 HK$’000 – 4,295,700 6,118 – – 8,066 3,617
		4,313,501 4,313 – 156,882 94,321 449,170
		704,686
		5,018,187
		15,554 70,360 9,668 41,209 3,527
		140,318
		564,368
		4,877,869

– I-6 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes Non-current liabilities Convertible notes payable 37 Deferred taxation 38 Bank and other borrowings 40 Total non-current liabilities Net assets Capital and reserves attributable to owners of the Company Share capital 32 Reserves Equity attributable to owners of the Company Non-controlling interests 41 Total equity	2015 HK$’000 – 727,042 629,877 1,356,919 2,720,489 6,871 2,685,945 2,692,816 27,673 2,720,489	2014 HK$’000 330,802 800,804 732,368
		1,863,974
		3,013,895
		6,871 2,980,554
		2,987,425 26,470
		3,013,895

– I-7 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2015

											Equity
		Convertible	Share	Share-based			Exchange	Conversion	Investment		attributable	Non-
	Share	preference	premium	compensation	Statutory	Capital	fluctuation	option	Revaluation	Accumulated	to owners of	controlling
	capital	share	account	reserve	reserve fund	reserve	reserve	reserve	reserve	losses	the Company	interests	Total
	HK$’000	HK’$000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
		(notes 32						(notes ii
	(note 32)	and 33)			(note i)			and 37)				(note 41)
At 1 April 2013	6,871	283,858	3,284,858	50,695	137,290	4,922	671,192	69,742	5,741	(446,134)	4,069,035	66	4,069,101
Loss for the year	–	–	–	–	–	–	–	–	–	(439,261)	(439,261)	(4)	(439,265)
Other comprehensive
income	–	–	–	–	–	–	(644,145)	–	2,170	–	(641,975)	(374)	(642,349)
Total comprehensive
income	–	–	–	–	–	–	(644,145)	–	2,170	(439,261)	(1,081,236)	(378)	(1,081,614)
Exchange alignment	–	–	–	–	–	–	(374)	–	–	–	(374)	374	–
Incorporation of a
subsidiary	–	–	–	–	–	–	–	–	–	–	–	26,474	26,474
Release of reserve
upon disposal of
a subsidiary	–	–	–	–	(137,290)	–	–	–	–	137,290	–	–	–
Disposal of
subsidiaries	–	–	–	–	–	–	–	–	–	–	–	(66)	(66)
At 31 March 2014	6,871	283,858	3,284,858	50,695	–	4,922	26,673	69,742	7,911	(748,105)	2,987,425	26,470	3,013,895
Loss for the year	–	–	–	–	–	–	–	–	–	(266,506)	(266,506)	(18)	(266,524)
Other comprehensive
income	–	–	–	–	–	–	44,108	–	(8,066)	–	36,042	439	36,481
Reclassification to
profit or loss	–	–	–	–	–	–	–	–	155	–	155	–	155
Total comprehensive
income	–	–	–	–	–	–	44,108	–	(7,911)	(266,506)	(230,309)	421	(229,888)
Early redemption of
convertible notes	–	–	–	–	–	–	–	(65,111)	–	–	(65,111)	–	(65,111)
Transfer upon
redemption of
convertible notes	–	–	–	–	–	–	–	(4,631)	–	4,631	–	–	–
Lapse of share option	–	–	–	(39,934)	–	–	–	–	–	39,934	–	–	–
Contribution from
non-controlling
interest_(note 41)_	–	–	–	–	–	811	–	–	–	–	811	782	1,593
At 31 March 2015	6,871	283,858	3,284,858	10,761	–	5,733	70, 781	–	–	(970,046)	2,692,816	27,673	2,720,489

Notes:

(i) In accordance with the relevant the People’s Republic of China (“ PRC “) regulations, the subsidiaries of the Group established in the PRC are required to transfer not less than 10% of the profit after income tax to a statutory reserve fund until the fund aggregate to 50% of their respective registered capital. The statutory reserve fund can be converted into share capital of the subsidiaries, and subject to certain restrictions as set out in the relevant PRC regulations, the statutory reserve fund may be used to offset the accumulated losses of the subsidiaries.
(ii) Conversion option reserve represents equity portion of convertible notes issued by the Company and are transferred to the share premium account upon exercise of the conversion rights vested with the convertible note instruments; or directly released to retained profits/accumulated losses when the convertible notes are redeemed.

– I-8 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 March 2015

Notes Cash flows from operating activities (Loss)/profit before income tax – continuing operations Loss before income tax – discontinued operations Bank Interest income Dividend income from listed investments Interest income from debts securities Finance cost Depreciation on property, plant and equipment Net realised (gain)/loss on disposal of investments held for trading Fair value gain on investments held for trading Fair value loss on derivative financial instrument Fair value loss/(gain) on an investment property Release of prepaid lease payments Impairment loss on available-for-sale investment Loss on early redemption of convertible notes Impairment on other receivables Write-off of property plant and equipment Loss on changes in fair value less costs to sell of biological assets Loss on disposal of property, plant and equipment Gain on disposal of subsidiaries 42 Loss on measurement of disposed group Effect of foreign exchange difference Operating profit before working capital changes Decrease/(increase) in trade receivables Decrease/(increase) in other receivables, deposit and prepayments Increase in investments held for trading Decrease in amounts due from related parties (Decrease)/increase in trade payables Increase in other payables and accruals Cash generated from/(used in) operations PRC income tax paid	2015 HK$’000 (356,516) – (557) (1,062) (2,840) 77,811 1,606 (28,972) (37,479) 1,257 380,264 – 155 56,530 378 – – – – – (443) 90,132 2,701 3,074 19,755 – (4,922) 16,086 126,826 –	2014 HK$’000 494,419 (791,095) (913) (908) – 115,677 5,161 44,915 (19,323) 3,273 (557,925) 16,580 – – – 651 518,934 440 (674,750) 909,280 (21,738) 42,678 (4,320) (162,145) 52,058 494 5,798 27,919 (37,518) –

– I-9 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes Net cash generated from/(used in) operating activities Cash flows from investing activities Interest received Dividend income received from listed investments Interest income from debts securities Increase of biological assets due to plantation Purchase of property, plant and equipment Payments to construction of investment properties Settlement of payable of acquisition of biological assets (including prepaid lease payments) Increase in construction in progress Disposal of subsidiaries, net of cash disposed Net cash generated from investing activities Cash flows from financing activities Proceeds from new bank and other borrowings Repayment of bank borrowings Payment for early redemption of convertible notes Interest paid Contribution from non-controlling interests Increase in amounts due to related parties Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes Cash and cash equivalents at end of year Analysis of balances of cash and cash equivalents at end of year Bank and cash balances	2015 HK$’000 126,826 557 1,062 2,129 – (160) (1,858) – – – 1,730 – (41,209) (461,676) (65,176) 1,593 4,300 (562,168) (433,612) 449,170 68 15,626 15,626	2014 HK$’000 (37,518) 913 908 – (7,882) (1,981) (13,566) (706) (1,526) 396,836 372,996 60,539 (35,559) – (68,752) 26,474 7,050 (10,248) 325,230 120,745 3,195 449,170 449,170

– I-10 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 March 2015

1. GENERAL

The Company was incorporated in Bermuda as an exempted company with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited. The address of registered office and principal place of business of the Company are disclosed in corporate information to the annual report.

The principal activity of the Company is investment holding. The principal activities of the Company’s principal subsidiaries are engaged in holding of property for investment and rental purpose and property development.

2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

(a) Adoption of new/revised HKFRSs – effective 1 April 2014

The Group has adopted the following new/revised HKFRSs (which include all HKFRSs, Hong Kong Accounting Standards (“ HKAS ”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”) that are relevant to its operations and effective for annual periods beginning on or after 1 April 2014.

Amendments to HKAS 32	Offsetting Financial Assets and Financial Liabilities
Amendments to HKAS 36	Impairment of Assets
Amendments to HKAS 39	Novation of Derivatives and Continuation of Hedge
	Accounting
HK(IFRIC) 21	Levies

The adoption of the new/revised HKFRSs in the current year has had no material effect on the Group’s consolidated financial statements.

– I-11 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) New/revised HKFRSs that have been issued but are not yet effective

The following new/revised HKFRSs, potentially relevant to the Group’s operations, have been issued, but are not yet effective and have not been early adopted by the Group.

HKFRS 9 Financial Instruments[1] HKFRS 15 Revenue from contracts with customers[2] Amendments to HKFRS10, Investment entities: Applying the consolidation HKFRS 12 and HKAS 28 exception[4] Amendments to HKFRS 10 and Sale or contribution of assets between an investor HKAS 28 and its associate or joint venture[4] Amendments to HKFRS 11 Accounting for acquisitions of interests in joint operations[4] Amendments to HKAS 1 Disclosure initiative[4] Amendments to HKAS 16 and Clarification of acceptable methods of depreciation HKAS 38 and amortization[4] Amendments to HKAS 16 and Agriculture: Bearer plants[4] HKAS 41 Amendments to HKAS 19 Defined benefit plans: Employee contributions[3] Amendments to HKAS 27 Equity method in separate financial statements[4] Amendments to HKFRSs Annual improvements to HKFRSs 2010–2012 cycle[5] Amendments to HKFRSs Annual improvements to HKFRSs 2011–2013 cycle[3] Amendments to HKFRSs Annual improvements to HKFRSs 2012–2014 cycle[4]

1 Effective for annual periods beginning on or after 1 January 2018 2 Effective for annual periods beginning on or after 1 January 2017 3 Effective for annual periods beginning on or after 1 July 2014 4 Effective for annual periods beginning on or after 1 January 2016 5 Effective for annual periods beginning, or transactions occurring, on or after 1 July 2014

HKFRS 9 (2014) – Financial Instruments

HKFRS 9 introduces new requirements for the classification and measurement of financial assets. Debt instruments that are held within a business model whose objective is to hold assets in order to collect contractual cash flows (the business model test) and that have contractual terms that give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (the contractual cash flow characteristics test) are generally measured at amortised cost. Debt instruments that meet the contractual cash flow characteristics test are measured at FVTOCI if the objective of the entity’s business model is both to hold and collect the contractual cash flows and to sell the financial assets. Entities may make an irrevocable election at initial recognition to measure equity instruments that are not held for trading at FVTOCI. All other debt and equity instruments are measured at FVTPL.

HKFRS 9 (2014) – Financial Instruments HKFRS 9 includes a new expected loss impairment model for all financial assets not measured at FVTPL replacing the incurred loss model in HKAS 39 and new general hedge accounting requirements to allow entities to better reflect their risk management activities in financial statements.

– I-12 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

HKFRS 9 carries forward the recognition, classification and measurement requirements for financial liabilities from HKAS 39, except for financial liabilities designated at FVTPL, where the amount of change in fair value attributable to change in credit risk of the liability is recognised in other comprehensive income unless that would create or enlarge an accounting mismatch. In addition, HKFRS 9 retains the requirements in HKAS 39 for derecognition of financial assets and financial liabilities.

HKFRS 15 – Revenue from Contracts with Customers

The new standard establishes a single revenue recognition framework. The core principle of the framework is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. HKFRS 15 supersedes existing revenue recognition guidance including HKAS 18 Revenue, HKAS 11 Construction Contracts and related interpretations.

HKFRS 15 requires the application of a 5 steps approach to revenue recognition:

Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to each performance obligation
Step 5: Recognise revenue when each performance obligation is satisfied

HKFRS 15 includes specific guidance on particular revenue related topics that may change the current approach taken under HKFRS. The standard also significantly enhances the qualitative and quantitative disclosures related to revenue.

The Group is in the process of making an assessment of the potential impact of these new/revised HKFRSs and is not yet in a position to state whether substantial changes to the Group’s accounting policies and presentation of the financial statements will be resulted.

(c) Early adoption of Listing Rule regarding to New Hong Kong Companies Ordinance provisions relating to the preparation of financial statements

The requirements of Part 9 “Accounts and Audit” of the Hong Kong Companies Ordinance, Cap. 622 came into effect for the first time, during the current financial year. The adoption of the requirements has primarily impacted the presentation and disclosure of certain information in the consolidated financial statements. These changes mainly include the presentation of the Company’s statement of financial position as a note disclosure instead of a primary statement, updating any references to the Companies Ordinance to refer to the current Companies Ordinance and replacing certain terminology no longer used in the Companies Ordinance with terminology used in HKFRS.

– I-13 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. BASIS OF PREPARATION

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with all applicable HKFRSs and the disclosure requirements of Hong Kong Companies Ordinance. In addition, the financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

(b) Basis of measurement

The consolidated financial statements have been prepared under the historical cost basis except for investment property and financial instruments which are measured at fair value as explained in the accounting policies set out below.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristic of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2 “Share-based Payment”.

(c) Functional and presentation currency

These consolidated financial statements are presented in Hong Kong dollars (“ HK$ ”), which is the same as the functional currency of the Company.

4. SIGNIFICANT ACCOUNTING POLICIES

(a) Business combination and basis of consolidation

The consolidated financial statements comprise of the financial statements of the Company and its subsidiaries (“ the Group “). Inter-company transactions and balances between group companies together with unrealised profits are eliminated in full in preparing the consolidated financial statements. Unrealised losses are also eliminated unless the transaction provides evidence of impairment on the asset transferred, in which case the loss is recognised in profit or loss.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the dates of acquisition or up to the dates of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

– I-14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Acquisition of subsidiaries or businesses is accounted for using the acquisition method. The cost of an acquisition is measured at the aggregate of the acquisition-date fair value of assets transferred, liabilities incurred and equity interests issued by the Group, as the acquirer. The identifiable assets acquired and liabilities assumed are principally measured at acquisitiondate fair value. The Group’s previously held equity interest in the acquiree is re-measured at acquisition-date fair value and the resulting gains or losses are recognised in profit or loss. The Group may elect, on a transaction-by-transaction basis, to measure the non-controlling interest that represent present ownership interests in the subsidiary either at fair value or at the proportionate share of the acquiree’s identifiable net assets. All other non-controlling interests are measured at fair value unless another measurement basis is required by HKFRSs. Acquisitionrelated costs incurred are expensed unless they are incurred in issuing equity instruments in which case the costs are deducted from equity.

Any contingent consideration to be transferred by the acquirer is recognised at acquisition-date fair value. Subsequent adjustments to consideration are recognised against goodwill only to the extent that they arise from new information obtained within the measurement period (a maximum of 12 months from the acquisition date) about the fair value at the acquisition date. All other subsequent adjustments to contingent consideration classified as an asset or a liability are recognised in profit or loss.

Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group’s interest and the non-controlling interest are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interest. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for in the same manner as would be required if the relevant assets or liabilities were disposed of.

Subsequent to acquisition, the carrying amount of non-controlling interests that represent present ownership interests in the subsidiary is the amount of those interests at initial recognition plus such non-controlling interests’ share of subsequent changes in equity. Total comprehensive income is attributed to such non-controlling interests even if this results in those non-controlling interests having a deficit balance.

(b) Subsidiaries

A subsidiary is an investee over which the Company is able to exercise control. The Company controls an investee if all of the following elements are present: power over the investee, exposure, or rights, to variable returns from the investee, and the ability to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

– I-15 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

In the Company’s statement of financial position, investments in subsidiaries are stated at cost less impairment loss, if any. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

(c) Goodwill

Goodwill is initially recognised at cost being the excess of the aggregate of consideration transferred and the amount recognised for non-controlling interests over the fair value of identifiable assets, liabilities and contingent liabilities acquired.

Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is recognised in profit or loss on the acquisition date, after re-assessment.

Goodwill is measured at cost less impairment losses. For the purpose of impairment testing, goodwill arising from an acquisition is allocated to each of the relevant cash-generating units that are expected to benefit from the synergies of the acquisition. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, and whenever there is an indication that the unit may be impaired.

For goodwill arising on an acquisition in a financial year, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that financial year. When 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 to each asset in the unit. Any impairment loss for goodwill is recognised in profit or loss and is not reversed in subsequent periods.

(d) Intangible assets

Patent

Patent was stated in the consolidated statement of financial position at cost less accumulated amortisation (where the estimated useful life is other than indefinite) and accumulated impairment losses. Amortisation of patent is charged to profit or loss on a straight line basis over its estimated useful life unless such life is indefinite. The patent is amortised from the date they are available for use and its estimated useful life is 20 years. Both the period and method of amortisation and any conclusion drawn about the useful life of the patent are reviewed annually.

(e) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

The cost of property, plant and equipment includes its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use.

– I-16 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are recognised as an expense in profit or loss during the financial period in which they are incurred.

Property, plant and equipment other than construction-in-progress are depreciated so as to write-off their cost or valuation net of expected residual value over their estimated useful lives on a straight-line basis. The useful lives, residual value and depreciation method are reviewed, and adjusted if appropriate, at the end of each reporting period. The useful lives are as follows:

Leasehold improvements	5 years
Turnpike	10 years
Building and construction	5 years
Plant and machinery	10 years
Furniture, office equipment and motor vehicles	5–10 years

Construction-in-progress is stated at cost less impairment losses. Cost comprises direct costs of construction as well as borrowing costs capitalised during the periods of construction and installation. Capitalisation of these costs ceases and the construction in progress is transferred to the appropriate class of property, plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided for in respect of construction-in-progress until it is completed and ready for its intended use.

An asset is written down immediately to its recoverable amount if its carrying amount is higher than the asset’s estimated recoverable amount.

The gain or loss on disposal of an item of property, plant and equipment is the difference between the net sale proceeds and its carrying amount, and is recognised in profit or loss on disposal.

(f) Investment property

Investment property is property held either to earn rentals or for capital appreciation or for both, but not held for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes.

Investment property is measured at cost on initial recognition and subsequently at fair value with any change therein recognised in profit or loss.

(g) Prepaid lease payments

Prepaid lease payments represent upfront premium paid for use of land. These payments are stated at cost and are amortised over the period of the lease on a straight-line basis as an expense.

An asset is written down immediately to its recoverable amount if its carrying amount is higher than the asset’s estimated recoverable amount.

– I-17 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(h) Biological assets

Biological assets are living plants involved in the agricultural activities of the transformation of biological assets into agricultural produce for sale or into additional biological assets. Biological assets and agricultural produce, other than paper mulberry saplings and paper mulberry tree stumps, are measured at fair value less costs to sell at initial recognition and at the end of each reporting period. The fair value less costs to sell at the time of harvest is deemed as the cost of agricultural produce for further processing, if applicable.

If an active market exists for a biological asset or agricultural produce with reference to comparable species, growing condition and expected yield of the crops, the quoted price in that market is adopted for determining the fair value of that asset. If an active market does not exist, the Group uses the most recent market transaction price, provided that there has not been a significant change in economic circumstances between the transaction date and the end of reporting period, or the market prices for similar assets adjusted to reflect differences to determine fair values or as determined by independent professional valuers. The gain or loss arising on initial recognition and subsequent changes in fair values less costs to sell of biological assets is recognised in profit or loss in the period in which it arise. Upon the sale of the agricultural produce as forestry products, the carrying amount is transferred to cost of forestry products sold are recognised in profit or loss.

Paper mulberry saplings in the absence of an active open market in which they are traded are stated at their initial cost of acquisition and transferred to the carrying value of stumps upon commencement of plantation.

Plantation expenditure on paper mulberry trees and the purchase cost of saplings for plantation were capitalised as costs for cultivation of stumps. Stumps were stated at cost less accumulated amortisation and accumulated impairment in the absence of an active open market in which they were traded. Stumps were amortised on the straight line basis over their estimated useful lives of 8 years.

(i) Impairment of other assets

At the end of each reporting period, the Group reviews the carrying amounts of the following assets to determine whether there is any indication that those assets have suffered an impairment loss or an impairment loss previously recognised no longer exists or may have decreased:

Property, plant and equipment
– Intangible assets – Prepaid lease payment – Interests in subsidiaries

If the recoverable amount (i.e. the greater of the fair value less costs to sell and value in use) of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount under another HKFRS, in which case the impairment loss is treated as a revaluation decrease under that HKFRS.

– I-18 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, to the extent 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 in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount under another HKFRS, in which case the reversal of the impairment loss is treated as a revaluation increase under that HKFRS.

(j) Leasing

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

The Group as lessor

Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.

Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense on the straight-line basis over the lease term.

The Group as lessee

Assets held under finance leases are initially recognised as assets at their fair value or, if lower, the present value of the minimum lease payments. The corresponding lease commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest element is charged to profit or loss over the period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital element reduces the balance owed to the lessor.

The total rentals payable under the operating leases are recognised in profit or loss on a straight-line basis over the lease term. Lease incentives received are recognised as an integrated part of the total rental expense, over the term of the lease.

– I-19 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(k) Financial instruments

(i) Financial assets

The Group classifies its financial assets at initial recognition, depending on the purpose for which the asset was acquired. Financial assets at fair value through profit or loss are initially measured at fair value and all other financial assets are initially measured at fair value plus transaction costs that are directly attributable to the acquisition of the financial assets. Regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned.

Investments held for trading

These assets include financial assets held for trading. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments.

Where a contract contains one or more embedded derivatives, the entire hybrid contract may be designated as a financial asset at fair value through profit or loss, except where the embedded derivative does not significantly modify the cash flows or it is clear that separation of the embedded derivative is prohibited.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value, with changes in fair value recognised in profit or loss in the period in which they arise

Loans and receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade debtors), and also incorporate other types of contractual monetary assets. Subsequent to initial recognition, they are carried at amortised cost using the effective interest method, less any identified impairment losses.

Available-for-sale financial assets

These assets are non-derivative financial assets that are designated as availablefor-sale or are not included in other categories of financial assets. Subsequent to initial recognition, these assets are carried at fair value with changes in fair value recognised in other comprehensive income.

For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments, they are measured at cost less any identified impairment losses.

– I-20 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) Impairment loss on financial assets

The Group assesses, at the end of each reporting period, whether there is any objective evidence that a financial asset is impaired. Financial asset is impaired if there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated. Evidence of impairment may include:

significant financial difficulty of the debtor;
a breach of contract, such as a default or delinquency in interest or principal payments;
granting concession to a debtor because of debtor’s financial difficulty;
it becoming probable that the debtor will enter bankruptcy or other financial reorganisation.

For loan and receivables

An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. The carrying amount of the financial asset is reduced through the use of an allowance account. When any part of financial asset is determined as uncollectible, it is written off against the allowance account for the relevant financial asset.

For available-for-sale financial assets

Where a decline in the fair value constitutes objective evidence of impairment, the amount of the loss is reclassified from equity and recognised in profit or loss.

Any impairment losses on available-for-sale debt investments are subsequently reversed in profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

For available-for-sale equity investment, any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income.

For available-for-sale equity investment that is carried at cost, the amount of impairment loss is measured as the difference between the carrying amount of the asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss is not reversed.

– I-21 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iii) Financial liabilities

The Group has one category of financial liabilities being financial liabilities at amortised costs. These liabilities, including trade and other payables, borrowings and amounts due to related companies, are initially measured at fair value, net of directly attributable transaction costs incurred and are subsequently measured at amortised cost, using the effective interest method. The related interest expense is recognised in profit or loss.

Gains or losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process.

(iv) Convertible notes

Convertible notes issued by the Group that contain liability, early redemption option and conversion option component are classified separately into their respective items on initial recognition. The early redemption option represents the Company’s option to early redeem before maturity date. Conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instruments is classified as an equity instrument. At the date of issue, the redemption option component is recognised at fair value and classified as derivative financial instrument.

On initial recognition, the fair value of the liability component is determined using the discounted cash flow at an effective interest rate. The difference between the proceeds of the issue of the convertible notes and the fair value assigned to the liability component, representing the conversion option for the holder to convert the loan notes into equity, is included in equity (conversion option reserve).

In subsequent reporting periods, the liability component of the convertible notes is carried at amortised cost using the effective interest method. The early redemption option component is measured at fair value with change in fair value recognised in profit or loss. The equity component, represented by the option to convert the liability component into ordinary shares of the Company, will remain in the convertible option reserve until the conversion option is exercised, in which case, the convertible option reserve and the carrying value of the liability component at the time of conversion, is transferred to share capital and share premium as consideration for the shares issued. When the notes are redeemed, and difference between the redemption amount and the carrying amounts of both components is recognised in profit or loss. Where the conversion option remains unexercised at the maturity date, the balance stated in the convertible option reserve will be released to retained profits. No gain or loss is recognised in profit or loss upon conversion or expiration of the conversion option.

– I-22 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(v) Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or liability, or where appropriate, a shorter period.

(vi) Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

(vii) Convertible preference shares

Convertible preference shares in which the Group has no contractual obligation to redeem and will only be converted to the Group’s own equity instruments, which is classified as equity items and measured at fair value at initial recognition.

When the convertible preference shares are converted, the convertible preference shares are transferred to ordinary share capital and share premium. Transaction costs relating to issuance of the equity instrument are charged directly to equity.

(viii) Derecognition

The Group derecognises a financial asset when the contractual rights to the future cash flows in relation to the financial asset expire or when the financial asset has been transferred and the transfer meets the criteria for derecognition in accordance with HKAS 39.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires.

(l) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customers returns and other similar allowances:

(i) Revenue from the sale of goods and forestry products, on the transfer of risks and rewards of ownership, which generally coincides with the time the goods and forestry products are delivered to customers and title has passed;
(ii) Rental income from properties letting under operating leases is recognised on a straight line basis over the lease terms;
(iii) Property management income and related fee is recognised when the services are rendered;

– I-23 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iv) Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the effective interest rates applicable; and
(v) Dividend income is recognised when the shareholders’ rights to receive payment is established.

(m) Foreign currencies

Transactions entered into by group entities in currencies other than the currency of the primary economic environment in which it/they operate(s) (the “ functional currency ”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the end of reporting period. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised in other comprehensive income, in which case, the exchange differences are also recognised in other comprehensive income.

On consolidation, income and expense items of foreign operations are translated into the presentation currency of the Group (i.e. Hong Kong dollars) at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the rates approximating to those ruling when the transactions took place are used. All assets and liabilities of foreign operations are translated at the rate ruling at the end of reporting period. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity as foreign exchange reserve (attributed to non-controlling interests as appropriate). Exchange differences recognised in profit or loss of group entities’ separate financial statements on the translation of long-term monetary items forming part of the Group’s net investment in the foreign operation concerned are reclassified to other comprehensive income and accumulated in equity as foreign exchange reserve.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are reclassified to profit or loss as part of the profit or loss on disposal.

Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign operation on or after 1 January 2005 are treated as assets and liabilities of that foreign operation and translated at the rate of exchange prevailing at the end of reporting period. Exchange differences arising are recognised in the foreign exchange reserve.

– I-24 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(n) Employee benefits

(i) Short term employee benefits

Short term employee benefits are employee benefits (other than termination benefits) that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render the related service. Short term employee benefits are recognised in the year when the employees render the related service.

(ii) Defined contribution retirement plan

Contributions to defined contribution retirement plans are recognised as an expense in profit or loss when the services are rendered by the employees.

(iii) Termination benefits

Termination benefits are recognised on the earlier of when the Group can no longer withdraw the offer of those benefits and when the Group recognises restructuring costs involving the payment of termination benefits.

(o) Share-based payments

Where share options are awarded to employees and others providing similar services, the fair value of the options at the date of grant is recognised in profit or loss over the vesting period with a corresponding increase in the employee share option reserve within equity. Nonmarket vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at the end of each reporting period so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Fair value is measured using the Option Pricing Model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of nontransferability, exercise restrictions and behavioural considerations.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also recognised in profit or loss over the remaining vesting period.

Where equity instruments are granted to persons other than employees and others providing similar services, the fair value of goods or services received is recognised in profit or loss unless the goods or services qualify for recognition as assets. A corresponding increase in equity is recognised.

– I-25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(p) Government grants

Government grants are recognised when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognised as revenue in profit or loss on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively recognised in profit or loss over the useful life of the asset by way of reduced depreciation expense.

Received grants that have not yet fulfill the recognition conditions are recognised as deferred revenue in the statement of financial position.

(q) Research and development costs

Research costs are charged to profit or loss in the period in which they are incurred. Development costs are expensed as incurred, except where a specific project is undertaken, the technical feasibility of the product under development has been demonstrated, costs are identifiable and a market exists for the product such that the development costs are expected to be recoverable from related future economic benefit. Such development costs are recognised as deferred development costs in the statement of financial position and amortised on a straightline basis over period over which the deferred development costs is expected to confer economic benefits, commencing from the date the product is available-for-sale. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

(r) Borrowing costs

Borrowing costs attributable directly to the acquisition, construction or production of qualifying assets which require a substantial period of time to be ready for their intended use or sale, are capitalised as part of the cost of those assets. Income earned on temporary investments of specific borrowings pending their expenditure on those assets is deducted from borrowing costs capitalised. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

(s) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, which will probably result in an outflow of economic benefits that can be reasonably estimated.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, the existence of which will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

– I-26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(t) Income taxes

Income taxes for the year comprise current tax and deferred tax.

Current tax is based on the profit or loss from ordinary activities adjusted for items that are non-assessable or disallowable for income tax purposes and is calculated using tax rates that have been enacted or substantively enacted at the end of reporting period.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for tax purposes. Except for goodwill and recognised assets and liabilities that affect neither accounting nor taxable profits, deferred tax liabilities are recognised for all temporary differences. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is measured at the tax rates appropriate to the expected manner in which the carrying amount of the asset or liability is realised or settled and that have been enacted or substantively enacted at the end of reporting period.

An exception to the general requirement on determining the appropriate tax rate used in measuring deferred tax amount is when an investment property is carried at fair value under HKAS 40 “Investment Property”. Unless the presumption is rebutted, the deferred tax amounts on these investment properties are measured using the tax rates that would apply on sale of these investment properties at their carrying amounts at the reporting date. The presumption is rebutted when the investment property is depreciable and is held within a business model whose objective is to consume substantially all the economic benefits embodied in the property over time, rather than through sale.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the 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.

Income taxes are recognised in profit or loss except when they relate to items recognised in other comprehensive income in which case the taxes are also recognised in other comprehensive income or when they related to items recognised directly in equity in which case the taxes are also recognised directly in equity.

(u) Related party

(a) A person or a close member of that person’s family is related to the Group if that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of key management personnel of the Group or the Company’s parent.

– I-27 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(b) An entity is related to the Group if any of the following conditions apply:
(i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the benefit of the employees of the Group or an entity related to the Group.
(vi) The entity is controlled or jointly controlled by a person identified in (a).
(vii) A person identified in (a)(i) has significant influence over the entity or is a member of key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include:

(i) that person’s children and spouse or domestic partner;
(ii) children of that person’s spouse or domestic partner; and
(iii) dependents of that person or that person’s spouse or domestic partner.

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

– I-28 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Judgements made by management in the application of HKFRSs that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed below.

(a) Useful lives of property, plant and equipment

Management estimates the expected useful lives for its property, plant and equipment and determines the related depreciation policy. The estimated useful life of the property, plant and equipment and the residual value reflects management’s estimates of the number of years that the Group intends to derive future economic benefits from the use of property, plant and equipment. It could change significantly as a result of technological innovations in response to industry cycles. The depreciation expenses in future accounting periods may be adjusted if there are significant changes in those estimates.

(b) Recoverability of trade and other receivables

Recoverability of the trade and other receivable are reviewed by management based on the receivables’ aging characteristics, management evaluation of the current creditworthiness and past collection history of each customer and debtor. Judgement is required in assessing the ultimate realisation of these receivables, and the financial conditions of the customers and debtors may undergo adverse changes since the last management evaluation. If the financial conditions of the customers and debtors were to deteriorate, resulting in an impairment of their ability to make payments, additional provision may be required in future accounting periods.

(c) Fair value of investment property

Investment property is stated at fair value based on the valuation performed by an independent professional valuer. In determining the fair value, the valuer has based on a method of valuation which involves certain estimates of market conditions. In relying on the valuation report, the directors have exercised their judgements and are satisfied that the assumptions used in the valuation is reflective of the current market conditions. Changes to these assumptions would result in changes in the fair value of the investment property and the corresponding adjustment to the amount of gain or loss would be recognised in profit or loss.

(d) Fair value of derivative financial instrument

The fair value of derivative financial instrument is estimated by an independent professional valuer. In determining the fair value, the valuer has based on a method of valuation which involves certain estimates of market conditions. In relying on the valuation reports, the directors have exercised their judgements and are satisfied that the assumptions used in the valuation is reflective of the current market conditions. Changes to these assumptions and market conditions would result in changes in fair value of derivative financial instrument and the corresponding adjustment to the amount of gain or loss would be recognised in profit or loss.

(e) Income taxes

Determining income tax provisions and deferred taxation involves judgement on the current and future tax treatment of certain transactions. The Group carefully evaluates tax implications of transactions and tax provisions are set up accordingly. The tax treatment of such transactions is reconsidered periodically to take into account all changes in tax legislations.

– I-29 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. CAPITAL RISK MANAGEMENT

The Group’s objective of managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce cost of capital. There was no change in capital management policies and objectives from prior periods.

The capital structure of the Group consists of debts, which includes convertible notes payable disclosed in note 37, bank and other borrowings disclosed in note 40, cash and cash equivalents and equity attributable to owners of the Company, comprising share capital, retained earnings and reserves as disclosed in notes 31, 32 and 35 respectively.

The gearing ratio at the year end was as follows:

Net debts Total equity Net debts to equity ratio	2015 *HK$’000* 729,876 2,692,816 27%	2014 HK$’000 655,209

		2,987,425

		22%

7. FINANCIAL RISK MANAGEMENT

Exposure to credit risk, liquidity risk, interest rate risk and currency risks arises in the normal course of the Group’s business. The Group is also exposed to equity price risk arising from its equity investments in other entities.

These risks are limited by the Group’s financial management policies and practices described below.

(a) Credit risk

The carrying amounts of cash and cash equivalents, trade and other receivables except for prepayments, present the Group with credit risk regarding its financial assets. The maximum exposure is the carrying amounts of the respective financial assets at the end of reporting period. The Group has a concentration of credit risk in relation to certain of its major customers.

The Group has a credit policy in place and the exposure to credit risk is managed through the application of credit approvals, credit limits and monitoring procedures. In addition, the Group reviews the recoverable amount of each individual trade and other receivables at the end of each reporting period to ensure that adequate impairment losses are made for balances with recoverability problem.

– I-30 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer and debtor. The default risk of the industry and country in which customers operate also has an influence on credit risk but to a lesser extent. At the end of reporting period, the Group has no significant concentration of credit risk.

Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade and other receivables are set out in notes 27 and 28.

The credit risk of the Group’s other financial assets, which comprise cash and cash equivalents, is limited because the counterparties are banks with sound credit-ratings.

(b) Liquidity risk

Individual operating entities within the Group are responsible for their own cash management, including the short term investment of cash surpluses and the raising of loans to cover expected cash demands, subject to approval by the parent company’s board when the borrowings exceed certain predetermined levels of authority. The Group’s policy is to regularly monitor its liquidity requirements and maintains sufficient reserves of cash and readily realisable marketable securities to meet its liquidity requirement in the short and longer term.

The following table details the remaining contractual maturities at the end of reporting period of the Group’s non-derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates, or if floating, based on current rates at the end of reporting period) and the earliest date the Group can be required to pay.

2015 Trade payables Other payables and accruals Amount due to related companies Bank and other borrowings 2014 Trade payables Other payables and accruals Convertible notes payable Amount due to related companies Bank and other borrowings	Carrying amount Total contractual undiscounted cash flow HK$’000 HK$’000 10,888 10,888 77,227 77,227 14,075 14,075 745,502 987,723 847,692 1,089,913 15,554 15,554 53,019 53,019 330,802 461,676 9,668 9,668 773,577 1,087,119 1,182,620 1,627,036	Within 1 year or on demand HK$’000 10,888 77,227 14,075 179,088 281,278 15,554 53,019 – 9,668 108,773 187,014	More than 1 year but less than 2 years More than 2 years but less than 5 years HK$’000 HK$’000 – – – – – – 150,381 458,017 150,381 458,017 – – – – – 461,676 – – 178,276 438,078 178,276 899,754	More than 5 years HK$’000 – – – 200,237
				200,237

				– – – – 361,992
				361,992

– I-31 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) Interest rate risk

The Group’s interest rate risk arises primarily from convertible notes and bank borrowing as disclosed in notes 37 and 40 respectively. These financial instruments issued at fixed rates expose the Group to fair value interest rate risk. The Group has no cash flow interest rate risk as there are no borrowings which bear floating interests rates. The Group has not used any financial instruments to hedge potential fluctuation in interest rates.

(d) Currency risk

The Group mainly operates in the PRC with most of the transactions denominated and settled in Renminbi (“ RMB ”) which is not freely convertible into other foreign currencies. Conversion of RMB into foreign currencies is subject to rules and regulations of foreign exchange control promulgated by the PRC government. The PRC subsidiaries of the Company transact in their functional currency and therefore no currency risk is expected to arise in respect of these subsidiaries. The Company’s financial statements are presented in Hong Kong dollar (“ HKD ”) and fluctuations of RMB against HKD will result in adjustment to financial amounts. The Group currently does not utilise any forward contracts, currency borrowings or other means to hedge against its foreign currency exposure.

(e) Equity price risk

The Group is exposed to equity price changes arising from equity instruments classified as financial assets at fair value through profit or loss and available-for-sale equity investment. All of these investments are listed.

The Group’s listed investments are listed on the Stock Exchange of Hong Kong except for the equity securities listed in London held in the available-for-sales investments. Decisions to buy and sell securities are based on daily monitoring of the performance of individual securities compared to that of the Index and other industry indicators, as well as the Group’s liquidity needs. Listed investments held in the available-for-sale portfolio have been chosen based on their longer term growth potential and are monitored regularly for performance against expectations.

Sensitivity analysis

The sensitivity analysis on equity price risk includes the Group’s financial instruments, which fair value or future cash flows will fluctuate because of changes in their corresponding or underlying asset’s equity price. If the prices of the availablefor-sale investments had been 10% higher/lower, the Group’s reserves would increase/ decrease by HK$Nil (2014: HK$807,000). If the price of the investments held for trading had been 10% higher/lower, loss for the year would decrease/increase by HK$14,102,000 (2014: HK$9,432,000) and reserves would decrease/increase by HK$14,102,000 (2014: HK$9,432,000).

– I-32 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. REVENUE AND OTHER INCOME

Revenue represents income generated from the principal activities of the Group. Revenue and other income recognised during the year are as follows:

Continuing operations: Revenue Rental income Property management and related fee income Other income Bank interest income Dividend income from listed investments Interest income from debts securities Discontinued operations: Revenue Sale of forestry products Other income Bank interest income Government grant income Others	2015 *HK$’000* 48,967 83,997 132,964 557 1,062 2,840 4,459 137,423 – – – – – –	2014 HK$’000 46,728 84,070
		130,798 814 908 –
		1,722
		132,520

		40
		99 3,721 19
		3,839
		3,879

– I-33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. SEGMENTAL INFORMATION

The Group determines its operating segments based on the reports reviewed by the chief operating decision- maker that are used to make strategic decisions.

The Group has identified three reportable segments, the business of ecological forestry operation, property investment and property development. During the year ended 31 March 2014, the ecological forestry business was presented as discontinued operations which details were set out in note 10 to the financial statements. The ecological forestry business was disposed of on 28 March 2014. The following summary describes the operations in each of the Group’s reportable segments:

Continuing operations:

Property investment business – letting properties and providing property management services
Property development business – development of properties

Discontinued operations:

Ecological forestry business – sale of forestry goods and products

During the years ended 31 March 2015 and 2014, there are no inter-segment transactions made. Central revenue and expenses are not allocated to the operating segments as they are not included in the measure of the segments’ profit/(loss) that is used by the chief operating decision-maker for assessment of segment performance.

– I-34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

i. Business Segments

The following is an analysis of the Group’s revenue and results by operating and reportable segments:

Revenue from: External sales Inter-segment sales Reportable segment revenue Reportable segment (loss)/profit Interest revenue Interest expense Depreciation and amortisation Release of prepaid lease payment Loss arising from changes in fair value less costs to sell of biological assets Fair value (loss)/gain on an investment property	Continuing operations Discontinued operations Property investment business Property development business Ecological forestry business 2015 2014 2015 2014 2015 2014 *HK$’000* HK$’000 *HK$’000* HK$’000 *HK$’000* HK$’000 132,964 130,798 – – – 40 – – – – – – 132,964 130,798 – – – 40 (343,447) 579,904 (36) (7) – (791,095) 12 446 – 126 – 99 (66,218) (74,322) – – – (5,095) (568) (661) – – – (3,465) – – – – – (16,580) – – – – – (518,934) (380,264) 557,925 – – – –	Total 2015 2014 *HK$’000* HK$’000 132,964 130,838 – – 132,964 130,838 (343,483) (211,198) 12 671 (66,218) (79,417) (568) (4,126) – (16,580) – (518,934) (380,264) 557,925	Total 2015 2014 *HK$’000* HK$’000 132,964 130,838 – – 132,964 130,838 (343,483) (211,198) 12 671 (66,218) (79,417) (568) (4,126) – (16,580) – (518,934) (380,264) 557,925
			130,838

			(211,198)

			671 (79,417) (4,126) (16,580) (518,934) 557,925

Assets and liabilities information

		Continuing	operations
	Property	investment	Property	development
	business		business		Total
	2015	2014	2015	2014	2015	2014
	*HK$’000*	HK$’000	*HK$’000*	HK$’000	*HK$’000*	HK$’000
Segment assets	4,004,122	4,308,432	153,941	149,904	4,158,063	4,458,336
Addition to non-current
assets	1,971	14,064	–	–	1,971	14,064
Segment liabilities	1,568,351	1,661,694	–	–	1,568,351	1,661,694

– I-35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

ii. Reconciliation of reportable segment revenues, profit or loss, assets and liabilities

Revenue Reportable segment revenue Elimination of inter-segment revenue Consolidated revenue Loss before income tax Reportable segment (loss)/profit Segment loss from discontinued operations Fair value gain on investments held for trading Net realised gain/(loss) on disposal of investments held for trading Finance costs Fair value loss on derivative financial instrument Impairment loss on available-for-sale investments Loss on early redemption of convertible notes Unallocated corporate expenses Consolidated loss before income tax expense Assets Reportable segment assets Non-current financial assets Cash at bank Investments held for trading Unallocated corporate assets Consolidated total assets	2015 *HK$’000* 132,964 – 132,964 2015 *HK$’000* (343,483) – 37,479 28,972 (11,594) (1,257) (155) (56,530) (9,948) (356,516) 2015 *HK$’000* 4,158,063 – 654 141,017 5,717 4,305,451	2014 HK$’000 130,838 – 130,838 2014 HK$’000 579,897 (791,095) 19,323 (44,915) (36,260) (3,273) – – (20,353) (296,676) 2014 HK$’000 4,458,336 11,683 444,645 94,321 9,202 5,018,187

– I-36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Liabilities Reportable segment liabilities Convertible notes payables Unallocated corporate liabilities Consolidated total liabilities	2015 *HK$’000* 1,568,351 – 16,611 1,584,962	2014 HK$’000 1,661,694 330,802 11,796
		2,004,292

iii. Geographical information

During the years 2015 and 2014, the Group’s major operations and assets are situated in the People’s Republic of China (“ PRC “) in which all of its revenue was derived.

iv. Major customers

There are no customer contributing over 10% of the Group’s turnover for the year ended 31 March 2015 and 2014.

10. OTHER NET GAINS AND LOSSES

Continuing operations: Fair value gain on investments held for trading Net realised gain/(loss) on disposal of investments held for trading Net gain/(loss) on investments held for trading Discontinued operations: Loss on disposal of property, plant and equipment Net exchange gain Others	2015 *HK$’000* 37,479 28,972 66,451 – – – –	2014 HK$’000 19,323 (44,915)
		(25,592)

		(440) 132 251
		(57)

– I-37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. FINANCE COSTS

Continuing operations: Interest on bank and other borrowings Imputed interest on convertible notes Discontinued operations: Imputed interest arising from the discounting of the consideration payables for the acquisitions of certain forest farms INCOME TAX Continuing operations: Current tax – PRC tax – Provision for the year – Over provision in respect of prior year Deferred tax credit/(expense) Income tax credit/(expense)	2015 *HK$’000* 66,217 11,594 77,811 – 2015 *HK$’000* – 3,563 3,563 86,429 89,992	2014 HK$’000 74,322 36,260 110,582 5,095 2014 HK$’000 – – – (142,589) (142,589)

12. INCOME TAX

Hong Kong profits tax has been provided at 16.5% based on the estimated assessable profit for the current and prior years. No provision of Hong Kong profits tax was made as there was no assessable profits derived for both years.

The Group’s subsidiaries in the PRC were subject to the PRC income tax.

The State Council released the Implementation Rules to the Corporate Income Tax Law on 6 December 2007 (the “ Implementation Rules ”). According to the Implementation Rules, an entity engaged in forestry business is entitled to full exemption from the PRC enterprise income tax commencing from 1 January 2008.

Pursuant to the Implementation Rules, Wan Fu Chun Forest Resources Development Company Limited (“ WFC ”), a wholly-owned subsidiary of the Group before disposal should be entitled to full exemption from the PRC enterprise income tax as it is operating in forestry business. However, WFC had not obtained the exemption approval from the PRC tax authority. Accordingly, WFC was subject to enterprise income tax rate of 25% for the year ended 31 March 2014.

– I-38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Yunnan Shenyu New Energy Company Limited (“ Yunnan Shenyu ”), a wholly owned subsidiary of the Group before disposal, was also operating in forestry business during the year ended 31 March 2014. Pursuant to the approval obtained from the relevant PRC tax authority, Yunnan Shenyu is entitled to a tax concession period whereby it is fully exempted from PRC enterprise income tax for the calendar year ended 31 December 2010. Yunnan Shenyu did not apply for tax exemption as it sustained loss for the year ended 31 March 2014.

Both WFC and Yunnan Shenyu were disposed of on 28 March 2014.

The applicable PRC enterprise income tax is 25% for 2014 and 2015 for other PRC subsidiaries.

The income tax expense for the year can be reconciled to the Group’s (loss)/profit before income tax per the consolidated statement of profit or loss and other comprehensive income differs from the theoretical amount that would arise using the Hong Kong profits tax rate as follows:

Continued operations: (Loss)/profit before income tax Tax calculated at Hong Kong profits tax rate of 16.5% (2014: 16.5%) Effect of different tax rates of subsidiaries operating in other jurisdictions Tax effect of revenue not taxable for tax purposes Tax effect of expense that are not deductible for tax purposes Unrecognised temporary differences and tax losses Over provision in prior year Income tax (credit)/expense Discontinued operations: Loss before income tax Tax calculated at Hong Kong profits tax rate of 16.5% Effect of different tax rates of subsidiaries operating in other jurisdictions Tax effect of revenue not taxable for tax purposes Tax effect of expense that are not deductible for tax purposes Unrecognised temporary differences and tax losses Income tax expense	2015 *HK$’000* (356,516) (58,825) (40,709) (90) 12,060 1,135 (3,563) (89,992) – – – – – – –	2014 HK$’000 494,419 81,579 53,381 – 6,698 931 – 142,589 (791,095) (130,531) (47,305) (140,573) 287,728 30,681 –

– I-39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. (LOSS)/PROFIT BEFORE INCOME TAX

The Group’s (loss)/profit before income tax is arrived at after charging:

Continuing operations: Auditor’s remuneration Minimum lease payments under operating leases on leasehold properties Impairment on other receivable Staff costs (including directors’ emoluments): Wages and salaries Retirement benefits scheme contribution Discontinued operations: Auditor’s remuneration Minimum lease payments under operating leases on leasehold properties Staff costs (including directors’ emoluments): Wages and salaries Retirement benefits scheme contribution		2015 *HK$’000* 490 1,920 378		2014 HK$’000 1,850 1,861 –
		8,859 449		10,494 446
		9,308 – –		10,940 478 1,458
		– –		4,900 924
		–		5,824

14. DISCONTINUED OPERATIONS

On 27 September 2013 and 25 October 2013, the Company entered into a share transfer agreement and a supplemental agreement with the purchaser, respectively, pursuant to which the Company conditionally agreed to sell, and the purchaser conditionally agreed to purchase (i) the entire equity interest in Success Standard Investments Limited, a wholly-owned subsidiary of the Company, which holds the ecological forestry business of the Group at HK$399,999,900 and (ii) a sale loan at HK$100, at a total aggregate consideration of HK$400 million. The transaction completed on 28 March 2014.

– I-40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The ecological forestry business was classified as discontinued operations and the related results for the year ended 31 March 2014 were as follows:

Notes
Turnover
8
Cost of inventories and forestry products sold
Other income
8
Other gains and losses
10
Loss arising from changes in fair value less costs to sell of biological
asset
26
Depreciation of property, plant and equipment
20
Release of prepaid lease payment
23
Other operating expenses
Finance cost
11
Loss before income tax expense from operations
Income tax expense
12
Loss before after tax expense from operations
Loss on measurement of disposed group at initial recognition
Gain on disposal of subsidiaries, net of tax
42
Loss for the year from discontinued operations

1/4/2013 to
28/3/2014
HK$’000
40
(33)
3,839
(57)
(518,934)
(3,465)
(16,580)
(16,280)
(5,095)
(556,565)
–
(556,565)
(909,280)
674,750
(791,095)

The net cash flows of the discontinued operations for the year ended 31 March 2014 were as follows:

Net cash outflows from operating activities Net cash outflows from investing activities Net cash outflows from financing activities Effect of foreign exchange differences Net cash flows incurred by the discontinued operations	1/4/2013 to 28/3/2014 HK$’000 (20,809) (10,879) (1,025) 5,850 (26,863)

– I-41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. LOSS ATTRIBUTABLE TO OWNERS OF THE COMPANY AND DIVIDEND

Loss attributable to owners of the Company for the year ended 31 March 2015 dealt with in the financial statements of the Company was approximately HK$82,502,000 (2014: HK$1,537,096,000).

No dividend was paid or proposed during the year ended 31 March 2015 (2014: HK$Nil), nor has any dividend been proposed since 31 March 2015.

16. OTHER COMPREHENSIVE INCOME, AFTER TAX

Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations Fair value (loss)/gain on available- for-sale financial assets Reclassification adjustment upon disposal of subsidiaries Reclassification to profit or loss	Before-tax- amount *HK$’000* 44,547 (8,066) – 155 36,636	2015 Tax expense/ (benefits) *HK$’000* – – – – –	Net-of-tax amount *HK$’000* 44,547 (8,066) – 155 36,636	Before-tax- amount HK$’000 44,711 2,170 (689,230) – (642,349)	2014 Tax expense/ (benefits) HK$’000 – – – – –	Net-of-tax amount HK$’000 44,711 2,170 (689,230) (642,349)

17. (LOSS)/EARNINGS PER SHARE

For continuing and discontinued operations:

The calculation of basic and diluted loss per share attributable to the owners of the Company is based on the following data:

Loss attributable to owners of the Company

Loss for the purposes of basic earnings per share Effect of dilutive potential ordinary shares: Share options Convertible notes Loss for the purposes of diluted loss per share	2015 *HK$’000* (266,506) – – (266,506)	2014 HK$’000 (439,265) – 39,532 (399,733)

– I-42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Weighted average number of ordinary shares and convertible preference shares

Weighted average number of ordinary shares and convertible preference shares for the purposes of basic loss per share Effect of dilutive potential ordinary shares: Share options Convertible notes Weighted average number of ordinary shares and convertible preference shares for the purposes of diluted loss per share	Number of shares 2015 2014 *000* 000 1,088,719 1,088,719 – – – 153,892 1,088,719 1,242,611	Number of shares 2015 2014 *000* 000 1,088,719 1,088,719 – – – 153,892 1,088,719 1,242,611
		1,242,611

The calculation of basic loss per share attributable to the owners of the Company for the year ended 31 March 2015 is based on the loss attributable to the owners of the Company of approximately HK$266.5 million (2014: HK$439.3 million) and on the weighted average number of 1,088,719,000 (2014: 1,088,719,000) ordinary shares and convertible preference shares during the year.

Share options:

For the year ended 31 March 2015 and 2014, the computation of diluted loss per share does not assume the exercise of share options since the exercise price of those share options is higher than the average market price of the Company’s shares for year 2015 and 2014.

Convertible notes:

In calculating the diluted loss per share attributable to the owners of the Company for the year ended 31 March 2015 for continuing operations, the adding back of imputed interest on the potential issue of shares arising from the conversion of the Company’s convertible notes of HK$11.6 million, adding back of fair value loss of HK$1.3 million and loss on early redemption of convertible note of HK$56.5 million are not taken into account as they would decrease the loss per share attributable to the owners of the Company and have an anti-dilutive effect. Therefore, the diluted loss per share attributable to the owners of the Company for the year ended 31 March 2015 is based on the loss attributable to the owners of the Company of approximately HK$266.5 million and on the weighted average number of 1,088,719,000 ordinary shares and convertible preference shares during the year ended 31 March 2015.

– I-43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

In calculating the diluted earnings per share attributable to the owners of the Company for the year ended 31 March 2014 for continuing operations, the adding back of imputed interest on the potential issue of shares arising from the conversion of the Company’s convertible notes of HK$36.2 million and adding back of fair value loss of HK$3.3 million would decrease the earnings per share attributable to the owners of the Company and are taken into account as they have a dilutive effect. Therefore, the diluted loss per share attributable to the owners of the Company for the year ended 31 March 2014 for continuing and discontinued operations is based on the loss attributable to the owners of the Company of approximately HK$399.7 million and on the weighted average number of 1,242,611,000 ordinary shares and convertible preference shares during the year ended 31 March 2014.

For continuing operations:

The calculation of the basic and diluted (loss)/earnings per share from continuing operations attributable to the owners of the Company is based on the following data:

(Loss)/earnings figures are calculated as follows:

Loss for the year attributable to owners of the Company Less: Loss for the year from discontinued operations (Loss)/earnings for the purposes of basic earnings per share from continuing operations Effect of dilutive potential ordinary shares: Share options Convertible notes (Loss)/earnings for the purposes of diluted earnings per share from continuing operation	2015 *HK$’000* (266,506) – (266,506) – – (266,506)	2014 HK$’000 (439,261) (791,095) 351,834 – 39,532 391,366

The denominators used are the same as those detailed above for both basic and diluted (loss)/ earnings per share of the continuing and discontinued operations.

For discontinued operations:

For the year ended 31 March 2014, basic loss per share for the discontinued operation is HK73 cents per share and diluted loss per share for the discontinued operation is HK73 cents per share, based on the loss for the year from the discontinued operations of HK$791.1 million and the denominators of 1,088,719,000 ordinary shares.

– I-44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. DIRECTORS’ REMUNERATION

The emoluments paid or payable to the Company’s directors for the years ended 31 March 2015 and 2014 were as follows:

Chairman: Guo Jiadi (i) Executive directors: Amika Lan E Guo (iii) Chi Chi Hung Kenneth (ii) Zhang Jianchan (iv) Lin Jianbin (v) Non-executive director: Chi Chi Hung Kenneth (ii) Independent non-executive directors: Wong Yun Kuen Chan Chi Yuen (vi) Chan Yee Ping, Michael (vii) Yu Pak Yan Peter Zheng Jinyun Zheng Yurui	Fees *HK$’000* 547 – – 112 – 20 100 25 44 100 60 60 1,068	Salaries, allowances and benefits in kind *HK$’000* – 393 1500 255 29 – – – – – – – 2,177	Year ended 31 Discretionary bonuses *HK$’000* – – 150 – – – – – – – – – 150	March 2015 Retirement benefit schemes contributions *HK$’000* – 14 15 55 – – – – – – – – 84	Share- based payments *HK$’000* – – – – – – – – – – – – –	Total *HK$’000* 547 407 1,665 422 29 20 100 25 44 100 60 60
						3,479

– I-45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Chairman: Chi Chi Hung Kenneth Executive director: Zhang Jianchan Independent non-executive directors: Wong Yun Kuen Chan Chi Yuen Yu Pak Yan Peter Zheng Jinyun Zheng Yurui	Fees HK$’000 – 120 100 100 100 60 60 540	Salaries, allowances and benefits in kind HK$’000 1,800 291 – – – – – 2,091	Year ended 31 Discretionary bonuses HK$’000 150 – – – – – – 150	March 2014 Retirement benefit schemes contributions HK$’000 15 55 – – – – – 70	Share- based payments HK$’000 – – – – – – – –	Total HK$’000 1,965 466 100 100 100 60 60
						2,851

(i) Mr. Guo Jiadi appointed as Executive Director on 12 December 2014.
(ii) Mr. Chi Chi Hung Kenneth was re-designated from Executive Director to Non-Executive Director on 31 January 2015.
(iii) Ms. Amika Lan E Guo appointed as Executive Director on 9 July 2014.
(iv) Ms. Zhang Jianchan resigned as Executive Director on 5 March 2015.
(v) Mr. Lin Jianbin appointed as Executive Director on 5 March 2015.
(vi) Mr. Chan Chi Yuen resigned as Independent Non-Executive Director on 9 July 2014.
(vii) Mr. Chan Yee Ping, Michael appointed as Independent Non-Executive Director on 9 July 2014.

Comparative information has been prepared with reference to the provisions in the Ordinance and the Regulation.

There was no arrangement under which a director of the Company waived or agreed to waive any emoluments during the year. During the year, no emoluments were paid by the Group to the directors of the Company as an inducement to join, or upon joining the Group, or as compensation for loss of office.

– I-46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

19. EMPLOYEES’ EMOLUMENTS

The emoluments of the five individuals with highest emoluments in the Group for the year included one (2014: (two) director, details of whose emoluments have been disclosed above.

Details of the emoluments of the remaining four (2014: (three) non-directors, highest paid individuals for the year are as follows:

Salaries, allowances and benefits in kinds Retirement benefits scheme contributions	2015 *HK$’000* 2,961 51 3,012	2014 HK$’000 4,082 30
		4,112

The emoluments fell within the following bands:

	Number of individuals
	2015	2014
HK$
Nil to 1,000,000	2	1
1,000,001 to 1,500,000	2	1
1,500,001 to 2,000,000	–	–
2,000,001 to 2,500,000	–	1

The emoluments paid or payable to the member of senior management were within the following bands:

	Number of individuals
	2015	2014
HK$
Nil to 1,000,000	–	–
1,000,001 to 1,500,000	1	1

– I-47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

20. PROPERTY, PLANT AND EQUIPMENT

Leasehold improvements HK$’000 Cost At 1 April 2013 7,139 Exchange adjustment 124 Additions 476 Disposals/write-off – Loss on measurement at fair value less cost to sell (4,775) At 31 March 2014 2,964 Exchange adjustment 14 Additions – At 31 March 2015 2,978 Accumulated depreciation At 1 April 2013 5,010 Exchange adjustment 110 Depreciation 439 Write back on disposal/write-off – Loss on measurement at fair value less cost to sell (4,267) At 31 March 2014 1,292 Exchange adjustment 3 Depreciation 382 At 31 March 2015 1,677 Net book value 31 March 2015 1,301 31 March 2014 1,672	Building and construction HK$’000 25,643 707 – (3,861) (22,489) – – – – 12,317 339 1,788 (3,668) (10,776) – – – – – –	Turnpike HK$’000 12,072 332 – – (12,404) – – – – 2,414 67 620 – (3,101) – – – – – –	Plant and machinery HK$’000 5,701 154 9 (16) (5,848) – – – – 2,214 48 338 – (2,600) – – – – – –	Furniture, office equipment and motor vehicles HK$’000 17,250 278 1,496 (3,286) (7,222) 8,516 51 160 8,727 7,563 146 1,976 (2,404) (3,211) 4,070 22 1,224 5,316 3,411 4,446	Total HK$’000 67,805 1,595 1,981 (7,163) (52,738)
					11,480 65 160
					11,705

					29,518 710 5,161 (6,072) (23,955)
					5,362 25 1,606
					6,993

					4,712

					6,118

The Group has reviewed the residual values used for the purposes of depreciation calculations in the light of the definition of residual value in the accounting standard. The review did not highlight any requirement for an adjustment to the residual values used in the current or prior periods. These residual values will be reviewed and updated annually in the future.

– I-48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. INVESTMENT PROPERTY

At 1 April Additional costs Fair value (loss)/gain Exchange adjustment At 31 March	2015 *HK$’000* 4,295,700 1,858 (380,264) 68,489 3,985,783	2014 HK$’000 3,695,341 13,566 557,925 28,868
		4,295,700

The investment property is located in Taijiang District, Fuzhou, the PRC. It is a 7-storey (plus two basement levels) furniture shopping mall. The investment property is pledged to banks to secure bank borrowings (note

40).

The investment property is held under a medium-term lease.

Fair value hierarchy

The fair value measurement of the Group’s investment property as at the end of reporting period is using significant unobservable inputs (level 3).

During the year, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of Level 3.

The valuation of the Group’s investment property in mainland China, assessed by Asset Appraisal Limited, an independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued, was based on the direct capitalisation approach.

The direct capitalisation approach was based on the net rental income that can be generated from the property under the leases to be executed for the property with due allowance on the reversionary interest upon expiry of the leases as assessed by the comparison method on vacant possession basis. Discount rate at an opportunity cost of capital is considered in arriving the present value of rental income.

Reconciliation of fair value measurements categorised within Level 3 of the fair value hierarchy.

At 1 April 2014 Additional costs Fair value loss Exchange adjustment At 31 March 2015	Total HK$’000 4,295,700 1,858 (380,264) 68,489
	3,985,783

– I-49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Below is a summary of the valuation techniques used and the key unobservable inputs to the valuation of investments property categorised with Level 3 of the fair value hierarchy:

				Relationship of
	Valuation	Significant		unobservable inputs to
	techniques	unobservable inputs	Range	fair value
Mainland China	Direct capitalization	Discount rate	6.0% (2014: 5.8%)	The higher the discount
– Furniture shopping mall	approach			rate, the lower the fair
				value
		Rental value (per	RMB50 to RMB200	The higher the rental
		square metre and	(2014: RMB60 to	value, the higher the
		per month)	RMB500)	fair value
		Price per square	RMB15,000 to	The higher the price per
		metre	RMB70,100	square metre, the higher
			(2014: RMB15,000	the fair value
			to RMB76,100)

There was no change to the valuation techniques during the year.

The fair value measurement is based on the above property’s highest and best use, which does not differ from their actual use.

22. CONSTRUCTION IN PROGRESS

At 1 April 2013 Additions Exchange adjustment Loss on measurement at fair value less cost to sell At 31 March 2014 and 2015	HK$’000 10,569 1,526 292 (12,387) –

The construction in progress mainly represented a production factory development project in Shuangbai county of Yunnan province. During the year ended 31 March 2014, the ecological forestry business was disposed of as detailed in note 14.

– I-50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23. PREPAID LEASE PAYMENTS

The Group’s prepaid lease payments represent land use rights in the PRC under a medium term lease. During the year ended 31 March 2014, the ecological forestry business was disposed of as detailed in note 14. Movements during the year ended 31 March 2014 were as follows:

At 1 April 2013 Exchange adjustment Amount released to profit or loss Loss on measurement at fair value less cost to sell At 31 March 2014 and 2015	HK$’000 860,951 23,739 (16,580) (868,110) –

24. INTANGIBLE ASSETS

Cost: At 1 April 2013 Disposal of subsidiaries At 31 March 2014 and 2015 Accumulated amortisation and impairment: At 1 April 2013 Disposal of subsidiaries At 31 March 2014 and 2015 Net carrying amount: At 31 March 2014 and 2015	Goodwill HK$’000 189,607 (189,607) – 189,607 (189,607) – –	Patent HK$’000 541,441 (541,441) – 541,441 (541,441) – –	Total HK$’000 731,048 (731,048) – 731,048 (731,048) – –

Goodwill

Goodwill acquired in a business combination was allocated, at acquisition, to the cashgenerating units at their carrying amounts, in ecological forestry business segment.

In prior years, with reference to an independent valuation performed by an independent valuer on the recoverable amount of both cash-generating units, which had taken into account of the reduction in the development size of both paper mulberry trees business and Jatropha based bio-diesel business, the Group’s latest business development strategies and current economic environment, the entire carrying amount of goodwill was impaired.

– I-51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Patent

The Group’s patent was in relation to the technology in the coding protein and application of a Broussonetia Papyrifera Dehydration-Responsive Element Binding transcription factor gene to regulate and enhance the tolerance of Broussonetia Papyrifera to stress conditions such as drought, low temperature and high salt.

Patent amortisation was provided on a straight-line basis over the estimated useful live of 20 years.

The directors had performed impairment assessment of patent at in prior years and a wrote-off its carrying value as the Group decided to terminate the paper mulberry trees business in view of the Group’s latest business development strategies and current economic environment.

During the year ended 31 March 2014, the ecological forestry business was disposed of as detailed in note 14.

25. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Due from subsidiaries Less: impairment losses	2015 *HK$’000* 4,291 1,509,454 (110,713) 1,403,032	2014 HK$’000 4,291 1,537,240 (114,507) 1,427,024

At 31 March 2015 and 2014, the amounts due from subsidiaries principally represent advances which are unsecured and interest-free. These advances are considered as quasi-equity loans to the subsidiaries of which the repayment/settlement is neither planned nor likely to happen in the foreseeable future.

An impairment was recognised for certain investments in subsidiaries and amounts due from subsidiaries with a carrying amount of HK$110,713,000 (2014: HK$114,507,000) (before deducting the impairment loss) because the respective subsidiaries had been loss-making for some time and no future economic benefits was expected.

– I-52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Particulars of the Company’s principal subsidiaries as at 31 March 2015 were as follows:

			Percentage
	Place of		of equity
	incorporation/		attributable
	establishment	Paid-up share/	to the	Principal
Name	and operation	registered capital	Company	activities
Indirectly held
Fujian Sinco Industrial	The PRC	Paid-up and registered	100%	Property
Company Limited (the		RMB290,000,000		investment
“Fujian Sinco”)
Fujian Jiake Industrial	The PRC	Paid-up	51%	Property
Company Limited (the		RMB131,200,000		development
“Fujian Jiake”)		Registered
		RMB216,000,000
S t r i k e A g a i n G r o u p	BVI	50,000 shares of	100%	Trading of
Limited		US$1 each		securities

The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

26. BIOLOGICAL ASSETS

As at 1 April 2013 Exchange adjustment Loss arising from changes in fair value less costs to sell_(note 14) Plantation expenditure incurred Disposal of subsidiaries(note 42)_ As at 31 March 2014 and 2015	Jatropha HK$’000 (note (a)) 125,702 1,871 (41,369) 7,690 (93,894) –	Other forest assets HK$’000 (note (b)) 1,322,112 21,727 (477,565) 192 (866,466) –	Total HK$’000 1,447,814 23,598 (518,934) 7,882 (960,360)
			–

During the year ended 31 March 2014, the ecological forestry business was disposed of as detailed in note 14.

– I-53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes:

(a) Jatropha

The Group’s Jatropha are located in Yunnan Province, the PRC. They were valued by an independent valuer (the “ Valuer ”) as at 28 March 2014, date of disposal, under the Net Present Value approach “NPV” approach.

In valuing the Group’s Jatropha, the Valuer employed NPV approach by using a discount rate of 15.65% and the following major assumptions:

The cash flows are those arising from the current rotation of Jatropha only. No account is taken of revenues or costs from re-establishment following harvest, or of land not yet planted.
The estimated jatropha seed yield at maturity for the jatropha plantations are 100kg/mu which is estimated to be achieved in 5 years.

(b) Other forest assets

Other forest assets were standing trees in the natural, man-made and mixed forest farms located in various locations in the PRC.

The Group’s other forest assets in the PRC were independently valued by valuer as at 28 March 2014. In valuing the Group’s other forest assets, the Valuer applied the income expectation approach based on projected wood flows of the Group’s forest assets, the projected future after 10% harvest tax cash flows, based on their assessment of current timber log price, and a discounted rate of 15.65%.

The principal valuation methodology and assumptions adopted are as follows:

Annual logging volume was based on the growth rate of the forests.
The cash flows are those arising from the current rotation of trees only. No account is taken of revenues or costs from re-establishment following harvest, or of land not yet planted.
The cash flows do not take into account income tax and finance costs.
The cash flows have been prepared in real terms and have not therefore included inflationary effects.
The impact of any planned future activity of the business that may impact the pricing of the logs harvested from the forest is not taken into account.
Costs are current average cost. No allowance has been made for cost improvements in future operations.

– I-54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

27. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Other receivables Deposits Prepayments Less: Impairment loss	2015 *HK$’000* 3,782 152,894 335 157,011 (381) 156,630	2014 HK$’000 6,338 150,421 123
		156,882 –
		156,882

Movements in the provision for impairment of other receivables are as follows:

At 1 April Impairment loss recognised Disposal of subsidiaries Exchange adjustment At 31 March	2015 *HK$’000* – 378 – 3 381	2014 HK$’000 75,552 – (76,337) 785
		–

During the year ended 31 March 2014, the ecological forestry business was disposed of as detailed in note 14.

The Group did not hold any collateral or other credit enhancement over these balances. The carrying amounts of the remaining other receivables that were neither past due nor impaired relate to other debtors for whom there was no recent history of default.

28. TRADE RECEIVABLES

	2015	2014
	*HK$’000*	HK$’000
Trade receivables	1,683	4,313

The Group normally received rental income one month in advance. The Group seeks to maintain strict control over its outstanding receivables to recognised credit risk, with overdue balances regularly reviewed by senior management. Trade receivables are generally non-interest bearing and their carrying amounts approximate their fair values. The Group did not hold any collateral over these balances.

– I-55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(i) The ageing analysis of the trade receivables as at the end of reporting period, based on the invoice date, was as follows:

		2015		2014
		*HK$’000*		HK$’000
	0-90 days	1,637		4,313
	91-180 days	46		–
		1,683		4,313

(ii)	The movement in the impairment loss of trade receivables during the		year:
		2015		2014
		*HK$’000*		HK$’000
	As at 1 April	–		45,097
	Less: Disposal of subsidiaries	–		(45,566)
	Exchange adjustment	–		469
	As at 31 March	–		–

INVESTMENTS HELD FOR TRADING
		2015		2014
		*HK$’000*		HK$’000
Equity securities listed in Hong Kong, at fair value		111,706		94,431
Debt securities listed in Hong Kong, at fair value		29,311		–
		141,017		94,431

29. INVESTMENTS HELD FOR TRADING

The above equity and debt securities are classified as investments held for trading as they have been acquired principally for the purpose of selling in the near term, or are part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short- term profit-taking. Changes in their fair values are recorded in profit or loss (note 10).

30. AVAILABLE-FOR-SALE INVESTMENTS

	2015	2014
	*HK$’000*	HK$’000
Equity securities listed in London, at fair value	–	8,066

The above investments represent investments in listed equity securities which are designated as available-for- sale investments by the directors. They offer the Group the opportunity for return through dividend income and fair value gains. They have no fixed maturity or coupon rate. Fair value of these securities is based on quoted market prices as at the end of reporting period and the assessment of possible limitation on disposal of these securities.

– I-56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

31. CASH AND CASH EQUIVALENTS

At 31 March 2015, the cash and cash equivalents denominated in RMB amounted to approximately HK$15 million (2014: HK$4 million). Conversion of RMB into foreign currencies is subject to the PRC’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations. The remaining balance of the cash and cash equivalents of the Company was denominated in Hong Kong dollar.

32. SHARE CAPITAL

Authorised: Ordinary shares of HK$0.01 each Convertible preference shares Issued and fully paid: Ordinary shares of HK$0.01 each Convertible preference shares	2015 Number of shares *‘000* 200,000,000 602,000 2015 Number of shares *‘000* 687,053 401,667	2015 Amount *HK$’000* 2,000,000 6,020 2015 Amount *HK$’000* 6,871 283,858	2014 Number of shares ‘000 200,000,000 602,000 2014 Number of shares ‘000 687,053 401,667	2014 Amount HK$’000 2,000,000

				6,020

				2014 Amount HK$’000 6,871

				283,858

33. CONVERTIBLE PREFERENCE SHARES

On 30 January 2012, the Company issued 601,666,666 convertible preference shares. One convertible preference share of notional value of HK$3 each shall be convertible into one new ordinary share, subject to adjustment in the customary manner, including share consolidations, share subdivision, capitalisation issues, capital distributions, rights issues and issues of other securities for cash as discount of more than 20%. The convertible preference shares rank (a) in priority to the ordinary shares of the Company and any other class of shares to return of capital; and (b) pari passu with ordinary shares of the Company as to any dividends accumulated on the convertible preference shares. The convertible preference shares do not carry any voting rights. The convertible preference shares are non-redeemable and are not listed on any stock exchange. The fair value of the convertible preference shares at the initial recognition was credited to convertible preference shares.

No convertible preference shares were converted into ordinary share during the year ended 31 March 2015 and 2014.

– I-57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

34. EQUITY-SETTLED SHARE-BASED TRANSACTIONS

The Company operates an equity-settled, share-based compensation plan for the purpose of providing incentives and rewards to eligible participants for their contribution to the success of the Group’s operations. Pursuant to this objective, on 25 October 1998, the Company adopted a share option scheme (the “ Scheme 1998 ”) whose eligible participants include directors and employees of the Company and its subsidiaries as determined by the directors of the Company.

In compliance with the amendments to the Listing Rules, the directors of the Company consider that it is in the interest of the Company to terminate the Scheme 1998 and to adopt a share option scheme (the “ Old Scheme ”). An ordinary resolution was passed at the annual general meeting of the Company held on 23 November 2001 for the approval of the said adoption of the Old Scheme and termination of the Scheme 1998.

Eligible participants of the Old Scheme include directors and employees of the Company and its subsidiaries. The Old Scheme was terminated on 16 September 2011. The outstanding options granted shall continue to be valid and exercisable after the termination of the Old Scheme.

At the annual general meeting of the Company held on 16 September 2011, the shareholders of the Company approved the adoption of a new share option scheme (the “ New Scheme ”) and the termination of the Old Scheme. The purpose of the New Scheme is to provide the Company with a flexible and effective means of incentivizing, rewarding, remunerating, compensating and/or providing benefits to the Participants. There appears to be no material difference between the terms of the Old Scheme and New Scheme, other than the scope of participants which, under the New Scheme, is more specific than that covered under the Old Scheme. The New Scheme covers any employee (full time and part time) holding salaries, consultants, agents, contractors, consumers and suppliers as the Board in its sole discretion considers eligible. Moreover, in relation to the various circumstances under which an Option will lapse, e.g. death and termination of employment, the periods following such circumstances during which an option-holder may exercise their options are different under the two schemes.

The exercise price, vesting period, the exercisable period and the number of Shares subject to each option will be determined by the Board at the time of grant. No option was granted by the Company under the New Scheme since its adoption to the date of this report.

The maximum number of unexercised share options currently permitted to be granted under the New Scheme is an amount equivalent, upon their exercise, to 30% of the shares of the Company in issue at any time. The maximum number of shares issuable under share options to each eligible participant in the New Scheme within any 12-month period is limited to 1% of the shares of the Company in issue at any time. Any further grant of share options in excess of this limit is subject to shareholders’ approval in a general meeting.

Share options granted to a director or substantial shareholder of the Company, or to any of their associates, are subject to approval in advance by the independent non-executive directors of the Company. In addition, any share options granted to a substantial shareholder or an independent nonexecutive director of the Company, or to any of their associates, in excess of 0.1% of the shares of the Company in issue at any time and with an aggregate value (based on the price of the Company’s shares at the date of the grant) in excess of HK$5 million, within any 12-month period, are subject to shareholders’ approval in advance in a general meeting.

– I-58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The offer of a grant of share options may be accepted within the date specified in the offer, upon payment of a nominal consideration of HK$1 in total by the grantee. The exercise period of the share options granted is determinable by the directors of the Company, and commences after a certain vesting period and ends on a date which is not later than 10 years from the date of the grant of the share options or the expiry date of the New SO Scheme, if earlier.

On 30 November 2011, a special resolution was passed at a special general meeting to approve the Capital Reorganisation effective on 1 December 2011. The exercise prices and the number of shares which may be issued upon exercise of share options granted have been adjusted subsequent to the implementation of the Share Consolidation and Capital Reduction.

On 27 March 2007, a total of 9,255,000 share options were granted to the directors and employees of the Group at a cash consideration of HK$1 per grantee which entitle the grantees to subscribe for new ordinary shares of the Company at an exercise price of HK$19.60 per share. The option shall be vested in the following manner:

Starting from

1 April 2007 Not more than 40% 2 April 2007 to 1 April 2008 Not more than 70% 2 April 2008 to 1 April 2009 The outstanding balance

On 2 October 2007, a total of 450,000 shares options were granted to the directors of the Group at a cash consideration of HK$1 per grantee which entitle the grantees to subscribe for new ordinary shares of the Company at an exercise price of HK$52.20 per share. The option shall be vested in the following manner:

Starting from 3 October 2007 Not more than 40% 4 October 2007 to 3 October 2008 Not more than 70% 4 October 2008 to 3 October 2009 The outstanding balance

On 30 September 2008, a total of 7,450,000 shares options were granted to the directors and employees of the Group at a cash consideration of HK$1 per grantee which entitle the grantees to subscribe for new ordinary shares of the Company at an exercise price of HK$7.80 per share. The option shall be exercisable in the following manner:

Starting from 30 September 2008 100%

On 30 October 2008, a total of 600,000 shares options were granted to the employees of the Group at a cash consideration of HK$1 per grantee which entitle the grantees to subscribe for new ordinary shares of the Company at an exercise price of HK$4.84 per share. The option shall be vested in the following manner:

Starting from 30 October 2008 Not more than 40% 1 November 2008 to 30 October 2009 Not more than 70% 1 November 2009 to 30 October 2010 The outstanding balance

On 23 January 2009, a total of 1,000,000 shares options were granted to the directors of the Group at a cash consideration of HK$1 per grantee which entitle the grantees to subscribe for new ordinary shares of the Company at an exercise price of HK$5.72 per share. The option shall be vested in the following manner:

– I-59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Starting from

23 January 2009 Not more than 40% 24 January 2009 to 23 January 2010 Not more than 70% 24 January 2010 to 23 January 2011 The outstanding balance

On 9 February 2009, a total of 15,330,000 shares options were granted to the directors and employees of the Group at a cash consideration of HK$1 per grantee which entitle the grantees to subscribe for new ordinary shares of the Company at an exercise price of HK$5.90 per share. The option shall be vested in the following

manner:

Starting from 10 February 2009 Not more than 40% 11 February 2009 to 10 February 2010 Not more than 70% 11 February 2010 to 10 February 2011 The outstanding balance

On 2 March 2010, a total of 32,905,000 shares options were granted to the directors, consultants and employees of the Group at a cash consideration of HK$1 per grantee which entitle the grantees to subscribe for new ordinary shares of the Company at an exercise price of HK$5.80 per share. The option shall be vested in the following manner:

For director
Starting from	2 March 2010	100%
For employee and
consultants
Starting from	2 March 2010	Not more than 42%
	3 March 2010 to 2 March 2011	The outstanding balance

(a) The terms and conditions of the share options that existed at 31 March 2015 and 2014 is as follows:

			Contractual	Contractual
Date of grant	Vesting period	Exercise period	exercise price	life of options	Number of options
					2015	2014
Options granted to	ex-directors:
27 March 2007	2 years from	1 April 2007 to	HK$19.60	10 years	300,000	300,000
	the date of grant	31 March 2017
30 September 2008	Immediately	30 September 2008 to	HK$7.80	10 years	300,000	300,000
		29 September 2018
9 February 2009	2 years from	9 February 2009 to	HK$5.90	10 years	500,000	500,000
	the date of grant	8 February 2019
Options granted to	employees and consultants:
27 March 2007	2 years from	1 April 2007 to	HK$19.60	10 years	300,000	1,030,000
	the date of grant	31 March 2017
2 October 2007	2 years from	3 October 2007 to	HK$52.20	10 years	–	300,000
	the date of grant	2 October 2017

– I-60 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Date of grant Vesting period Exercise period Contractual exercise price Contractual life of options 30 September 2008 Immediately 30 September 2008 to 29 September 2018 HK$7.80 10 years 30 October 2008 2 years from the date of grant 30 October 2008 to 29 October 2018 HK$4.84 10 years 23 January 2009 2 years from the date of grant 23 January 2009 to 22 January 2019 HK$5.72 10 years 9 February 2009 2 years from the date of grant 9 February 2009 to 8 February 2019 HK$5.90 10 years	Number of options 2015 2014 1,000,000 5,150,000 – 500,000 – 1,000,000 700,000 5,680,000 3,100,000 14,760,000	Number of options 2015 2014 1,000,000 5,150,000 – 500,000 – 1,000,000 700,000 5,680,000 3,100,000 14,760,000
		14,760,000

As at 31 March 2015, the Company had 3,100,000 (2014: 14,760,000) share options outstanding under the Scheme, which represented approximately 0.45% (2014: 2%) of the Company’s shares in issue as at that date. The exercise in full of the remaining share options would, under the present capital structure of the Company, result in the issue of 3,100,000 (2014: 14,760,000) additional ordinary shares of the Company and additional share capital of HK$31,000 (2014: HK$147,600) and share premium of HK$28,954,000 (2014: HK$128,707,200) (before issue expenses).

(b) The number and weighted average exercise prices of share options are as follows:

	2015		2014
	Weighted		Weighted
	average	Number of	average	Number of
	exercise price	options	exercise price	options
	*HK$*		HK$
Outstanding at beginning of year	8.73	14,760,000	8.73	14,760,000
Lapsed during the year_(note)_	8.56	(11,660,000)	N/A	–
Outstanding at end of year	9.35	3,100,000	8.73	14,760,000
Exercisable at end of year	9.35	3,100,000	8.73	14,760,000

Note: The number of share options lapsed during the year was due to resignation of the grantee.

The exercise price of the share options is determinable by the directors of the Company, but may not be less than the highest of: (i) the closing price of the Company’s shares as stated in the Stock Exchange’s daily quotations sheet on the date of the offer of grant, which must be a trading day; (ii) the average closing price of the Company’s shares as stated in the Stock Exchange’s daily quotations sheets for the five trading days immediately preceding the date of the offer of the grant; and (iii) the nominal value of the Company’s shares.

– I-61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The options outstanding at the year end of the 31 March 2015 have a weighted average remaining contractual life of 3.35 years (2014: 4.52 years).

There was no grant of equity-settled share options and no equity-settled share-based payment was charged to profit or loss during the years ended 31 March 2015 and 2014.

35. RESERVES

The Company

At 1 April 2013 Loss and total comprehensive income for the year At 31 March 2014 Loss for the year Other comprehensive income Reclassification to profit or loss Total comprehensive income for the year Early redemption of convertible notes Transfer upon redemption of convertible notes Lapse of share option At 31 March 2015	Convertible preference share HK$’000 (note 33) 283,858 – 283,858 – – – – – – – 283,858	Share premium account Conversion option reserve Share-based compensation reserve HK$’000 HK$’000 HK$’000 (note i) (note ii) 3,284,858 69,742 50,695 – – – 3,284,858 69,742 50,695 – – – – – – – – – – – – – (65,111) – – (4,631) – – – (39,934) 3,284,858 – 10,761	Investment revaluation reserve HK$’000 5,741 2,170 7,911 – (8,066) 155 (7,911) – – – –	Accumulated losses HK$’000 (506,498) (1,643,332) (2,149,830) (78,708) – – (78,708) – 4,631 39,934 (2,183,973)	Total HK$’000 3,188,396 (1,641,162)
					1,547,234
					(78,708) (8,066) 155
					(86,619) (65,111) – –
					1,395,504

Notes:

(i) Conversion option reserve represents equity portion of convertible notes issued by the Company.
(ii) Share-based compensation reserve represents the fair value of the actual or estimated number of unexercised share options granted to employees, directors and consultants of the Company recognised in accordance with the accounting policy adopted for share-based payments.
(iii) Distributability of reserves

As at 31 March 2015, the aggregate amount of reserves available for distribution to equity shareholders of the Company, as calculated under the provisions of Part 6 of the Hong Kong Companies Ordinance and including the distributable amounts disclosed above, was HK$1,111,646,000 (2014: HK$1,263,376,000).

– I-62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

36. OTHER PAYABLES AND ACCRUALS

Other payables and accruals Deposits received from tenants Accrued bank loan interests Received in advance	2015 *HK$’000* 50,284 17,359 9,584 10,228 87,455	2014 HK$’000 18,236 17,324 17,459 17,341
		70,360

37. CONVERTIBLE NOTES PAYABLE

The Company issued convertible notes with an aggregate principal amount of HK$461,676,000 as part of consideration of the acquisition of subsidiaries in February 2012. The convertible notes carry zero-coupon interest rate and have a maturity period of 5 years from the date of issue. The expiry date is 13 July 2017.

The holders are entitled to convert the convertible notes into ordinary shares of the Company at an initial conversion price of HK$3 per conversion share at any time during the period commencing from the date of issuance of the convertible notes. The conversion price is subject to adjustments upon the occurrence of, among other matters, subdivision or consolidations of shares, capitalisation issues, rights issues, issues of shares at discount of more than 20% and other dilutive events in accordance with the terms and conditions of the convertible notes.

The Company shall have the right to redeem any portion of the convertible notes outstanding at an amount equals to the principal amount of the convertible notes in its sole and absolute discretion at any time and from time to time prior to the date falling on the seventh business day prior to the maturity date by giving to the holders not less than 10 business days’ prior written notice.

The holders shall have the right at any time before the date falling on the seventh business day prior to the maturity date to request the Company to redeem the whole or part of the outstanding principal amount of the convertible notes at a price equal to 100% of the amount to be redeemed, provided that the Company, having regard to the financial situation of the Group, accepts the request of the holders for early redemption.

The fair value of the convertible notes, at the initial recognition, was HK$287,919,000, comprising liability component of HK$258,280,000, conversion option component of HK$69,742,000 and early redemption option of HK$40,103,000. The conversion option component was credited to conversion option reserve and the early redemption option was recorded in derivative financial instrument under non-current assets.

On 6 June 2014 and 26 March 2015, the Company early redeemed convertible notes with principal amount of HK$400,000,000 and HK$61,676,000, respectively, which held by two noteholders, Deluxe Pacific Limited and Acelead Limited. Both noteholders were beneficially owned by Mr. Guo Jiadi, the director and major shareholder of the Company. The fair value of the liability component and early redemption option was re- measured at the date of redemption. As a result, a loss of HK$56,530,000 was recognised to the profit or loss. Upon the redemption of all convertible notes, the remaining value of the conversion option reserve of HK$4,631,000 was released to accumulated losses.

– I-63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group’s movements of the liability and derivative financial instrument components are as follows:

At 31 March 2013 Imputed interest expense_(note 11) Change in the fair value At 31 March 2014 Imputed interest expense(note 11)_ Change in the fair value Early redemption during the year At 31 March 2015	Liability component HK$’000 294,542 36,260 – 330,802 11,594 – (342,396) –	Derivative financial instrument HK$’000 (6,890) – 3,273 (3,617) – 1,257 2,360 –

The liability component was re-measured by an independent valuer using discounted cash flow at an effective interest rate of 5% at 6 June 2014 and 26 March 2015, dates of redemption.

Fair value hierarchy

The fair value measurement of the Group’s derivative financial instrument at the end of reporting period or redemption date has been categorised into the three-level fair value hierarchy as defined in HKFRS 13 Fair value measurement (see note 2(a) and 47). The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique.

The Group’s policy is to recognise transfers between levels of fair value hierarchy at the end of the reporting period in which they occur. There were no transfers between levels during the year.

Valuation techniques and inputs used in Level 3 fair value measurement

The Group determined the fair value of the early redemption option based on the valuation performed by an independent valuer using the Binomial Tree Pricing Model. The major unobservable inputs into the models were as follows:

Notes Expected volatility (a), (b) Notes:	At 31 March 2014 66%

(a) Expected volatility was determined by calculating the historical volatility of the Company’s share price cover the period same as the remaining life of the convertible notes before date of valuation.
(b) The higher the amount, the higher the fair value.

– I-64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

During the year, a loss of HK$1,257,000 (2014: HK$3,273,000) was recognised as a change in fair value of derivative financial instrument.

38. DEFERRED TAXATION

(a) The following are the deferred tax liabilities recognised by the Group and movements thereon during the current and prior years:

Notes At 1 April 2013 Deferred tax charged to profit or loss 12 Exchange adjustment At 31 March 2014 Deferred tax credited to profit or loss 12 Exchange adjustment At 31 March 2015	Fair value change on investment property HK$’000 653,908 142,589 4,307
	800,804 (86,429) 12,667
	727,042

(b) Deferred income tax assets were recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through the future taxable profits is probable. The Group has unrecognised tax losses of HK$243,018,000 (2014: HK$223,066,000) to be carried forward for offset against future taxable income which included tax losses of HK$96,546,000 (2014: HK$75,939,000) may be carried forward against future taxable income for a period of five years in accordance with the PRC tax law. The remaining tax losses may be carried forward indefinitely.

39. TRADE PAYABLES

The Group normally obtains credit terms ranging from 30 to 120 days from its suppliers. An ageing analysis of the trade payables as at the end of reporting date, based on the receipt of goods purchased, was as follows:

Current or less than 1 month 1 to 3 months More than 3 months but less than 12 months More than 12 months	2015 *HK$’000* 4 66 571 10,247 10,888	2014 HK$’000 4,162 1,315 2,965 7,112
		15,554

– I-65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Directors consider that the carrying amount of the Group’s trade payables at 31 March 2015 and 2014 approximates their fair values.

40. BANK AND OTHER BORROWINGS

Notes Bank loans – secured (i) Other loan – unsecured (ii)	2015 HK$’000 683,963 61,539 745,502	2014 HK$’000 713,038 60,539
		773,577

Total current and non-current bank and other borrowings were repayable as follows:

Loans repayable: Within one year More than one year, but not exceeding two years More than two years, but not exceeding five years After five years Portion classified as current liabilities Portion classified as non-current liabilities	2015 *HK$’000* 115,625 95,013 347,986 186,878 745,502 (115,625) 629,877	2014 HK$’000 41,209 120,452 289,942 321,974
		773,577 (41,209)
		732,368

The amounts due are based on the scheduled repayment dates in the loan agreements. The loan agreements do not contain any repayment on demand clause.

Notes:

(i) The bank loans are secured by the subsidiary’s investment property with carrying value of approximately HK$3,985,783,000 (2014: HK$4,295,700,000). As at 31 March 2015, the bank loans include loan principal amounts of HK$159,939,000 (2014: HK$173,576,000) and HK$564,864,000 (2014: HK$580,669,000) which bear interest at 7.86% (2014: 7.86%) per annum and 7.86% (2014: 8.16%) per annum respectively and are repayable by instalments up to 26 September 2020 and 29 April 2021 respectively. Mr. Guo Jiadi, director of the Company, has granted a guarantee to a bank for the bank loan with principal amount of HK$159,939,000 (2014: HK$173,576,000), in which the guarantee is to fulfill the covenants of bank facilities if the subsidiary has breached the covenants of bank facilities.
(ii) The other loan is unsecured, interest bearing at 13% per annum and is repayable on 9 June 2015 by one-off payment.

– I-66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

41. NON-CONTROLLING INTERESTS

Fujian Jiake, established on 24 September 2013 in the PRC and a 51% indirectly owned subsidiary of the Company, has material non-controlling interests (“ NCI ”). As set out in note 25, the registered capital is RMB216,000,000, in which RMB110,000,000 and RMB106,000,000 are attributable to Fujian Sinco and Fuzhou Gaojia Real Estate development Co., Ltd. (“ Fuzhou Gaojia ”) respectively. Fuzhou Gaojia is beneficially owned and controlled by Mr. Guo Jiadi, a director and major shareholder of the Company. As at 31 March 2014, Fujian Sinco’s portion is paid up fully and RMB21,200,000 was paid up by Fuzhou Gaojia. The unpaid capital of RMB84,800,000 will be settled within one year since the date of establishment according to the cooperate agreement dated 7 August 2013.

On 30 July 2014, Fujian Sinco and Fuzhou Gaojia has entered into a supplemental agreement (the “ Supplemental Agreement ”) to amend the capital contribution schedule for Fujian Jiake. Pursuant to the Supplemental Agreement, the requirement of paying the remaining amount of capital contribution is extended to 24 months from the date of establishment of Fujian Jiake but shall not be later than the announcement of the land bidding result. Both parties also agreed that starting from 24 September 2014, Fuzhou Gaojia shall pay an interest to Fujian Jiake on the unpaid capital at an interest rate of 6% per annum and payable on a quarterly basis as Fujian Sinco has already made its entire contribution. During the year ended 31 March 2015, an interest of RMB1,260,000 (equivalent to approximately HK$1,593,000) was received and recognised as capital contribution.

All the other subsidiaries are directly or indirectly wholly owned by the Company.

Summarised financial information in relation to Fujian Jiake, before intra-group eliminations, is presented below:

For the year/period ended 31 March Revenue Loss for the year Loss allocated to NCI For the year/period ended 31 March Cash outflows from operating activities Cash inflows from financing activities Cash inflows from investing activities Net cash inflows As at 31 March Current assets Net assets Accumulated non-controlling interests	2015 *HK$’000* – 36 18 (37) 1,593 – 1,556 168,094 168,094 27,673	2014 HK$’000 – 8 4 (163,909) 163,836 126 53 163,828 163,828 26,470

– I-67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

42. DISPOSAL OF SUBSIDIARIES

As set out in note 14, on 28 March 2014, the Group disposed of the entire interest in the ecological forestry business, through the disposal of 100% equity interest in Success Standard Investments Limited and a Sale Loan.

The net assets of the disposed group at the date of disposal were as follows:

Biological assets
Inventories
Trade receivables
Other receivables, deposits and prepayments
Cash and cash equivalents
Trade payables
Deferred revenue
Other payables and accruals
Tax payables
Long term payables
Net assets disposed of
Gain on disposal:
Cash consideration received
Net assets disposed of
Release of translation reserve upon disposal of subsidiaries
Expenses directly attributable to the disposal
Non-controlling interest
Gain on disposal
Net cash inflow arising on disposal:
Cash consideration
Cash and bank balances disposed of

Net carrying
value
HK$’000
960,360
3,480
722
10,150
3,164
(18,795)
(60,295)
(332,725)
(84,498)
(70,738)
410,825
HK$’000
400,000
(410,825)
689,230
(3,721)
66
674,750
400,000
(3,164)
396,836

An amount of approximately HK$1,342 million due to the Group by the disposed group represented the Sale Loan and was sold to the Purchaser at the date of disposal.

– I-68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

43. CONTINGENT LIABILITIES

At 31 March 2015 and 2014, the Company and the Group did not have any contingent liabilities.

44. LEASES

The Group leases its office properties for the year ended 31 March 2015 and 2014. Leases for office properties are negotiated for term for two years.

The Group as lessee

The lease payment recognised as an expenses are as follows:

		2015	2014
	Note	*HK$’000*	HK$’000
Minimum lease payments	13	1,920	3,319

The Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Within one year In the second to fifth years, inclusive	2015 *HK$’000* 1,600 – 1,600	2014 HK$’000 1,974 1,600
		3,574

The Group as lessor

The Group’s shopping mall was leased to a number of tenants for varying terms.

Not later than one year Later than one year and not later than five years Later than five years	2015 *HK$’000* 54,395 54,444 63,184 172,023	2014 HK$’000 62,546 57,835 81,536
		201,917

– I-69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

45. CAPITAL COMMITMENTS

At 31 March 2015 and 2014, the Group had the following commitments:

	2015	2014
	*HK$’000*	HK$’000
Capital commitments contracted but not provided for:
Construction in progress	1,162	–

46. RELATED PARTY TRANSACTIONS

Save as those disclosed elsewhere in the financial statements, details of the Group’s significant related party transactions as at follows:

(a) Key management personnel compensation

The remuneration of Directors and other members of key management personnel during the year was as follows:

Salaries and other short-term employee benefits Post-employment benefits	Year ended 31 March 2015 *HK$’000* 3,395 84 3,479	Year ended 31 March 2014 HK$’000 2,490 15
		2,505

(b) Transactions/balances with related parties

(i) Amounts due to related parties are unsecured, interest free and repayable on demand.
(ii) Mr. Guo Jiadi has granted a guarantee to a bank for the bank loan with principal amount of HK$159,939,000 (2014: HK$173,576,000), for due performance of the covenants of bank facilities granted to a subsidiary of the Company.
(iii) During the year ended 31 March 2015, a rental agreement for leasing a portion of a floor of the shopping mall in Fuzhou was entered into between the Group and a company of which Mr. Guo Jiadi was beneficially interested in. Rental income charged for the year amounted to HK$908,000 (2014: HK$380,000).

– I-70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The carrying amounts of the Group’s financial assets and financial liabilities as at 31 March 2015 and 2014 are categorised as follows:

Financial Assets Investments held for trading Derivative financial instrument Available-for-sale investment measured at fair value Loan and receivable (including cash and bank balances) Financial Liabilities Financial liabilities measured at amortised cost	2015 *HK$’000* 141,017 – – 173,604 847,692	2014 HK$’000 94,321 3,617 8,066 610,365

		1,182,620

(a) Financial instruments not measured at fair value

Financial instruments not measured at fair value include cash and cash equivalents, trade receivables, other receivables, deposits and prepayments, amount due from non-controlling interest, trade payables, other payables and accruals, amounts due to related parties, bank and other borrowings and convertible notes payable.

Due to their short term nature, the carrying value of cash and cash equivalents, trade receivables, other receivables, deposits and prepayments, trade payables, other payables and accruals and bank and other borrowings approximates fair value.

(b) Financial instruments measured at fair value

The fair value of financial assets and liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices.

The fair value of derivative financial instrument for disclosure purposes has been determined using

Binomial Tree Pricing Model and is classified as level 3 in the fair value hierarchy.

The valuation techniques and significant unobservable inputs used in determining the fair value measurement of level 3 financial instruments, as well as the relationship between key observable inputs and fair value are set out below.

Information about level 3 fair value measurements

The fair value of the derivative financial instrument is estimated using Binomial Tree Pricing Model.

Significant unobservable inputs

Expected volatility

66%

– I-71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The higher the expected volatility, the higher the fair value of the derivative financial instruments. There were no changes in valuation techniques during the year. The fair values of financial assets and financial liabilities are determined as follows:

the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market price; and
the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions.

The following table provides an analysis of financial instruments carried at fair value by level of fair value hierarchy:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and
Level 3: Inputs for the asset or liability that are not based on observable market data.

31 March 2015

	Level 1	Level 2	Level 3	Total
	HK$’000	HK$’000	HK$’000	HK$’000
Investments held for trading – listed	141,017	–	–	141,017
31 March 2014
	Level 1	Level 2	Level 3	Total
	HK$’000	HK$’000	HK$’000	HK$’000
Investments held for trading – listed	94,321	–	–	94,321
Available-for-sale investments – listed	8,066	–	–	8,066
Derivative financial instrument	–	–	3,617	3,617

During both years, there were no significant transfer between level measurement hierarchy.

– I-72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

48. STATEMENT OF FINANCIAL POSITION OF THE COMPANY

at 31 March 2015 Notes Non-current assets Interests in subsidiaries 25 Property, plant and equipment Available-for-sale investments Derivative financial instrument Total non-current assets Current assets Other receivables, deposits and prepayments Cash and cash equivalents Total current assets Total assets Current liability Other payables and accruals Amount due to a related company Net current (liabilities)/assets Total assets less current liability Non-current liability Convertible notes payable Net assets Capital and reserves Share capital 32 Reserves 35 Total equity	2015 *HK$’000* 1,403,032 1,949 – – 1,404,981 2,453 582 3,035 1,408,016 5,293 348 5,641 (2,606) 1,402,375 – 1,402,375 6,871 1,395,504 1,402,375	2014 HK$’000 1,427,024 2,860 8,066 3,617
		1,441,567
		6,138 444,511
		450,649
		1,892,216
		7,309 –
		7,309

		443,340

		1,884,907

		330,802
		1,554,105
		6,871 1,547,234
		1,554,105

– I-73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

49. EVENTS AFTER THE REPORTING PERIOD

As disclosed in the Company’s announcement dated 28 April 2015, the Company entered into the Placing Agreement to which the Placing Agent has agreed to endeavor to procure Place who are not and whose ultimate beneficial owner(s), if applicable, are not, connected persons of the Company on a best effort basis to subscribe for the Series 1 Bonds and the Series 2 Bonds up to an aggregate principal amount of up to HK$200,000,000 within the Placing Period. The Bonds will be placed in denomination of HK$1,000,000.

As disclosed in the Company’s announcement dated 29 April 2015, the Company entered into the Placing Agreement through Placing Agent, to place 137,410,000 Placing Shares at the Placing Price of HK$0.37 per Placing Share. The completion of the Placing took place on 15 May 2015 in accordance with the terms and conditions of the Placing Agreement.

50. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the Board of Directors on 23 June 2015.

3. UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015

The unaudited consolidated financial statements of the Company for the six months ended 30 September 2015 set out below is extracted from the interim report of the Company for the six months ended 30 September 2015 which is also available on the website of the Stock Exchange at http://www.hkexnews.hk/listedco/listconews/SEHK/2015/1203/LTN20151203496.pdf and the website of the Company at http://www.chinasandi.com.hk.

– I-74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Notes
Revenue
3
Other income
3
Other net gains
5
Fair value gain/(loss) on investment property
Fair value loss on derivative financial instrument
Loss on early redemption of convertible notes
Staff costs
Depreciation of property, plant and equipment
Other operating expenses
Finance costs
7
Profit/(loss) before income tax
6
Income tax (expense)/credit
8
Profit/(loss) for the period
Other comprehensive income, after tax, that
may be reclassified subsequently to profit
or loss:
Exchange differences on translating foreign
operations
Fair value gain on available-for-sale financial
assets
Other comprehensive income for the period,
after tax
Total comprehensive income for the period
Profit/(loss) attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
Earnings/(loss) per share
– Basic and diluted
10

For the six months ended
30 September
2015
2014
(Unaudited)
(Unaudited)
HK$’000
HK$’000
56,062
67,368
2,265
1,613
49,367
49,018
74,356
(190,017)
–
(1,087)
–
(50,907)
(3,180)
(4,659)
(781)
(830)
(16,479)
(17,613)
(32,201)
(45,713)
129,409
(192,827)
(22,055)
43,958
107,354
(148,869)
(110,645)
36,082
–
2,965
(110,645)
39,047
(3,291)
(109,822)
107,368
(148,857)
(14)
(12)
107,354
(148,869)
(2,112)
(110,151)
(1,179)
329
(3,291)
(109,822)
HK9.00 cents
HK(13.67) cents

– I-75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Notes Non-current assets Investment property Property, plant and equipment 11 Total non-current assets Current assets Trade receivables 12 Other receivables, deposits and prepayments Investments held for trading 13 Cash and cash equivalents Total current assets Total assets Current liabilities Trade payables 16 Other payables and accruals Amounts due to related parties 21(a) Bank and other borrowings 17 Total current liabilities Net current assets Total assets less current liabilities Non-current liabilities Deferred taxation Bank and other borrowings 17 Total non-current liabilities Net assets Capital and reserves attributable to owners of the Company Share Capital 14 Reserves 15 Equity attributable to owners of the Company Non-controlling interest Total equity	At 30 September 2015 (Unaudited) *HK$’000* 3,890,880 3,971 3,894,851 2,772 110,882 190,384 26,213 330,251 4,225,102 9,725 48,698 36,194 78,036 172,653 157,598 4,052,449 717,874 567,857 1,285,731 2,766,718 8,245 2,731,979 2,740,224 26,494 2,766,718	At 31 March 2015 (Audited) HK$’000 3,985,783 4,712
		3,990,495
		1,683 156,630 141,017 15,626
		314,956
		4,305,451
		10,888 87,455 14,075 115,625
		228,043

		86,913 4,077,408 727,042 629,877
		1,356,919
		2,720,489

		6,871 2,685,945
		2,692,816 27,673
		2,720,489

– I-76 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Cash flows from operating activities
Profit/(loss) before income tax
Bank interest income
Dividend income from listed investments
Interest income from debts securities
Finance costs
Depreciation of property, plant and equipment
Net realised gain on disposal of investments held for
trading
Fair value gain on investments held for trading
Fair value loss on derivative financial instrument
Fair value (gain)/loss on an investment property
Loss on early redemption of convertible notes
Effect of foreign exchange difference
Operating profit before working capital changes
Increase in trade receivables
Decrease/(increase) in other receivables, deposits and
prepayments
Decrease in investments held for trading
Decrease in trade payables
(Decrease)/increase in other payables and accruals
Cash generated from operations
PRC income tax paid
Net cash generated from operating activities
Cash flows from investing activities
Interest received
Dividend income received from listed investments
Interest income received from debt securities
Purchase of property, plant and equipment
Payments to construction of investment property
Net cash generated from investing activities

For the six months ended
30 September
2015
2014
(Unaudited)
(Unaudited)
HK$’000
HK$’000
129,409
(192,827)
(53)
(551)
(81)
(1,062)
(2,131)
–
32,201
45,713
781
830
–
(17,179)
(49,367)
(31,839)
–
1,087
(74,356)
190,017
–
50,907
2,034
–
38,437
45,096
(1,178)
(336)
40,439
(39,871)
–
3,076
(724)
(5,333)
(36,424)
5,887
40,550
8,519
–
–
40,550
8,519
53
551
81
1,062
2,131
–
(128)
(76)
(651)
(288)
1,486
1,249

– I-77 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Cash flows from financing activities
Repayment of bank borrowings
Payment of early redemption of convertible notes
Interest paid
Proceeds from issue of ordinary shares
Proceeds from issue of bonds
Increase/(decrease) in amounts due to related parties
Net cash used in financing activities
Net increase/(decrease) in cash and
cash equivalents
Cash and cash equivalents at beginning of period
Effect of foreign exchange rate changes
Cash and cash equivalents at end of period
Analysis of balance of cash and cash
equivalents at end of period
Bank and cash balances

For the six months ended
30 September
2015
2014
(Unaudited)
(Unaudited)
HK$’000
HK$’000
(84,387)
(18,973)
–
(400,000)
(28,612)
(34,038)
49,520
–
9,267
–
23,121
(379)
(31,091)
(453,390)
10,945
(443,622)
15,626
449,170
(358)
386
26,213
5,934
26,213
5,934

– I-78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Balance at 1 April 2015 (Audited) Loss for the period Other comprehensive income Total comprehensive income Lapse of share option Issue of ordinary shares_(note 14)_ Balance at 30 September 2015 (Unaudited) Balance at 1 April 2014 (Audited) Loss for the period Other comprehensive income Total comprehensive income Early redemption of convertible notes Transfer upon redemption of convertible notes Balance at 30 September 2014 (Unaudited)	For the six months ended 30 September 2015 Share capital Convertible preference share Share premium and other reserves Accumulated losses Equity attributable to owners of the Company Non-controlling interest *HK$’000* *HK$’000* *HK$’000* *HK$’000* *HK$’000* *HK$’000* 6,871 283,858 3,372,133 (970,046) 2,692,816 27,673 – – – 107,368 107,368 (14) – – (109,480) – (109,480) (1,165) – – (109,480) 107,368 (2,112) (1,179) – – (10,761) 10,761 – – 1,374 – 48,146 – 49,520 – 8,245 283,858 3,300,038 (851,917) 2,740,224 26,494 For the six months ended 30 September 2014 Share capital Convertible preference share Share premium and other reserves Accumulated losses Equity attributable to owners of the Company Non- controlling interest HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 6,871 283,858 3,444,801 (748,105) 2,987,425 26,470 – – – (148,857) (148,857) (12) – – 38,706 – 38,706 341 – – 38,706 (148,857) (110,151) 329 – – (58,550) – (58,550) – – – (1,875) 1,875 – – 6,871 283,858 3,423,082 (895,087) 2,818,724 26,799	Total *HK$’000* 2,720,489 107,354 (110,645)
		(3,291) – 49,520
		2,766,718

		Total HK$’000 3,013,895 (148,869) 39,047
		(109,822) (58,550) –
		2,845,523

– I-79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. GENERAL

China Sandi Holdings Limited (the “Company“) was incorporated in Bermuda as an exempted company with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’). The address of registered office and principal place of business of the Company are located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and Unit 3309, 33/F., West Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong respectively.

The principal activity of the Company is investment holding. The Company and its Subsidiaries (referred to as the “Group“) are engaged in property investment and property development.

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS AND ACCOUNTING POLICIES

The unaudited condensed consolidated interim financial statements of the Group for the six months ended 30 September 2015 (the “Interim Financial statements”) have been prepared in accordance with the applicable disclosure requirements of Appendix 16 of the Rules Governing the Listing of Securities on the Stock Exchange and the Hong Kong Accounting standard (the “HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

The Interim Financial statements have been prepared under the historical cost basis except for investment property and certain financial instruments which are measured at fair value.

The accounting policies adopted for preparation of the Interim Financial Statements are consistent with those applied in the preparation of the annual financial statements of the Group for the year ended 31 March 2015 (the “Annual Financial statements”), except for the adoption of the new and revised Hong Kong Financial Reporting standards (the “HKFRSs”) (which in collective term includes all applicable HKFRSs, Hong Kong Accounting standards (the “HKASs”) and Interpretations) issued by the HKICPA as disclosed in note 2 to these Interim Financial Statements.

In addition, in the current interim period, the Group has applied, for the first time, the following new and revised Hong Kong Financial Reporting standards (“new or revised HKFRSs”) issued by the HKICPA, which are effective for the Interim Financial Statements.

Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions HKFRSs (Amendments) Annual Improvements 2010-2012 Cycle HKFRSs (Amendments) Annual Improvements 2011-2013 Cycle

There are no other amended standards or interpretations that are effective for the first time for the accounting period beginning on or after 1 April 2015 that would be expected to have a material impact on the Group.

– I-80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group has not early applied the following new and revised standards, amendments or interpretations which have been issued but are not yet effective.

HKFRSs (Amendments) Annual Improvements 2012-2014 Cycle[1] Amendments to HKAS 1 Disclosure Initiative[1] Amendments to HKAS 16 and Clarification of Acceptable Methods of Depreciation and HKAS 38 Amortisation[1] Amendments to HKAS 27 Equity Method in Separate Financial Statements[1] HKFRS 9 (2014) Financial Instruments[3] HKFRS 14 Regulatory Deferral Accounts[1] HKFRS 15 Revenue from Contracts with Customers[2] 1 Effective for annual periods beginning on or after 1 January 2016 2 Effective for annual periods beginning on or after 1 January 2017 3 Effective for annual periods beginning on or after 1 January 2018

The Group has not early adopted any new standards and is in the process of making an assessment of the potential impact on the Group’s financial statements and is not in a position to estimate the effects.

3. REVENUE AND OTHER INCOME

Revenue represents income generated from the principal activities of the Group. Revenue and other income recognised during the period are as follows:

Revenue Other income Bank interest income Dividend income from listed investments Interest income from debts securities	For the six months ended 30 September 2015 2014 (Unaudited) (Unaudited) *HK$’000* HK$’000 56,062 67,368 53 551 81 1,062 2,131 – 2,265 1,613 58,327 68,981	For the six months ended 30 September 2015 2014 (Unaudited) (Unaudited) *HK$’000* HK$’000 56,062 67,368 53 551 81 1,062 2,131 – 2,265 1,613 58,327 68,981
		1,613
		68,981

– I-81 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. SEGMENTAL INFORMATION

Reportable segment

The Group determines its operating segments based on the reports reviewed by the chief operating decision-maker that are used to make strategic decisions.

The Group has identified two reportable segments, the business of property investment and property development. The following summary describes the operations in each of the Group’s reportable segments:

Property investment business – letting properties and providing property management services
Property development business – development of properties

During the periods ended 30 September 2015 and 2014, there are no inter-segment transactions made. Central revenue and expenses are not allocated to the operating segments as they are not included in the measure of the segments’ profit/(loss) that is used by the chief operating decisionmaker for assessment of segment performance.

(a) Business Segments

The following is an analysis of the Group’s revenue and results by operating and reportable segments:

Reportable segment revenue Reportable segment profit/(loss) Interest revenue Interest expense Depreciation Income tax (expense)/credit Fair value gain/(loss) on investment property	Property investment business Property development business For the six months ended 30 September For the six months ended 30 September 2015 2014 2015 2014 (Unaudited) (Unaudited) (Unaudited) (Unaudited) *HK$’000* HK$’000 *HK$’000* HK$’000 56,062 67,368 – – 83,030 (174,997) (28) (25) 6 6 1 – (31,993) (36,744) – – (260) (312) – – (22,055) 43,958 – – 74,356 (190,017) – –	Total For the six months ended 30 September 2015 2014 (Unaudited) (Unaudited) *HK$’000* HK$’000 56,062 67,368 83,002 (175,022) 7 6 (31,993) (36,744) (260) (312) (22,055) 43,958 74,356 (190,017)	Total For the six months ended 30 September 2015 2014 (Unaudited) (Unaudited) *HK$’000* HK$’000 56,062 67,368 83,002 (175,022) 7 6 (31,993) (36,744) (260) (312) (22,055) 43,958 74,356 (190,017)
			(175,022)
			6 (36,744) (312) 43,958 (190,017)

– I-82 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Assets and liabilities information

	Property investment business	Property investment business	Property development business	Property development business	Total
	At	At	At	At	At	At
	30 September	31 March	30 September	31 March	30 September	31 March
	2015	2015	2015	2015	2015	2015
	(Unaudited)	(Audited)	(Unaudited)	(Audited)	(Unaudited)	(Audited)
	*HK$’000*	HK$’000	*HK$’000*	HK$’000	*HK$’000*	HK$’000
Segment assets	3,902,482	4,004,122	103,415	153,941	4,005,897	4,158,063
Addition to non-current assets	761	1,971	–	–	761	1,971
Segment liabilities	1,408,460	1,568,351	33,559	–	1,442,019	1,568,351

(b) Reconciliation of reportable segment revenues and profit or loss

Revenue
Reportable segment revenue
Elimination of inter-segment revenue
Consolidated revenue
Profit/(loss) before income tax
Reportable segment profit/(loss)
Fair value gain on investments held for trading
Net realised gain on disposal of investments held for
trading
Unallocated corporate income
Loss on early redemption of convertible notes
Finance costs
Fair value loss on derivative financial instrument
Unallocated corporate expenses
Consolidated profit/(loss) before income tax

For the six months ended
30 September
2015
2014
(Unaudited)
(Unaudited)
HK$’000
HK$’000
56,062
67,368
–
–
56,062
67,368
For the six months ended
30 September
2015
2014
(Unaudited)
(Unaudited)
HK$’000
HK$’000
83,002
(175,022)
49,367
31,839
–
17,179
2,233
1,607
–
(50,907)
(208)
(8,969)
–
(1,087)
(4,985)
(7,467)
129,409
(192,827)

– I-83 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) Geographical information

During the periods ended 30 September 2015 and 2014, the Group’s major operations and assets are situated in the People’s Republic of China (“PRC”) in which all of its revenue was derived.

(d) Major customers

There are no customer contributing over 10% of the Group’s turnover for the periods ended 30 September 2015 and 2014.

5. OTHER NET GAINS

Fair value gain on investments held for trading Net realised gain on disposal of investments held for trading	For the six months ended 30 September 2015 2014 (Unaudited) (Unaudited) *HK$’000* HK$’000 49,367 31,839 – 17,179 49,367 49,018	For the six months ended 30 September 2015 2014 (Unaudited) (Unaudited) *HK$’000* HK$’000 49,367 31,839 – 17,179 49,367 49,018
		49,018

6. PROFIT/(LOSS) BEFORE INCOME TAX

The Group’s profit/(loss) before income tax is arrived at after charging:

	For the six months	For the six months	ended
	30	September
		2015	2014
		(Unaudited)	(Unaudited)
		*HK$’000*	HK$’000
Auditor’s remuneration		90	90
Depreciation of property, plant and equipment		781	830
Minimum lease payments under operating leases on leasehold
properties		960	960
Staff costs (including directors’ emoluments):
Basic salaries and allowances		2,976	4,446
Retirement benefits scheme contribution		204	213

– I-84 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. FINANCE COSTS

Imputed interest on convertible notes Interest on bank and other borrowings Interest on bonds	For the six months ended 30 September 2015 2014 (Unaudited) (Unaudited) *HK$’000* HK$’000 – 8,969 31,993 36,744 208 – 32,201 45,713	For the six months ended 30 September 2015 2014 (Unaudited) (Unaudited) *HK$’000* HK$’000 – 8,969 31,993 36,744 208 – 32,201 45,713
		45,713

8. INCOME TAX EXPENSE/(CREDIT)

	For the six	months	ended
	30 September
	2015		2014
	(Unaudited)	(Unaudited)
	*HK$’000*	HK$’000
PRC enterprise income tax – deferred tax expense/(credit)	22,055		(43,958)

Hong Kong profits tax has been provided at 16.5% based on the estimated assessable profit for the current period and prior years. No provision of Hong Kong profits tax was made as there was no assessable profit derived for current period and last period.

The Group’s subsidiaries in the PRC are subject to the PRC enterprise income tax. The applicable PRC enterprise income tax is 25%.

9. LOSS FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE COMPANY AND DIVIDEND

Loss attributable to owners of the Company for the period ended 30 September 2015 dealt with in the financial statements of the Company was approximately HK$4,856,000 (for the six months ended 30 September 2014: HK$67,628,000).

No dividend was paid or proposed during the period ended 30 September 2015 (for the six months ended 30 September 2014: Nil), nor has any dividend been proposed since 30 September 2015.

– I-85 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

10. EARNINGS/(LOSS) PER SHARE

The calculation of basic and diluted earnings/(loss) per share attributable to owners of the Company is based on the following data:

Profit/(loss) attributable to owners of the Company
Profit/(loss) for the purpose of basic earnings per share
Effect of dilutive potential ordinary shares:
Share options
Convertible notes
Profit/(loss) for the purpose of diluted earnings/(loss) per share
calculation
Weighted average number of ordinary shares and convertible
preference shares for the purposes of basic earnings/(loss)
per share
Effect of dilutive potential ordinary shares:
Share options
Convertible notes
Weighted average number of ordinary shares and convertible
preference shares for the purposes of diluted earnings/(loss)
per share

For the six months ended
30 September
2015
2014
(Unaudited)
(Unaudited)
HK$’000
HK$’000
107,368
(148,857)
–
–
–
–
107,368
(148,857)
Number of shares
’000
’000
1,192,909
1,088,719
–
–
–
–
1,192,909
1,088,719

Share options:

For the periods ended 30 September 2015 and 2014, the computation of diluted earnings/(loss) per share does not assume the exercise of share options since the exercise price of those share options is higher than the average market price of the Company’s shares for 2015 and 2014.

Convertible notes:

In calculating the diluted loss per share attributable to the owners of the Company for the period ended 30 September 2014, the adding back of imputed interest on the potential issue of shares arising from the conversion of the Company’s convertible notes of HK$9.0 million; adding back of fair value loss of HK$1.2 million and loss on early redemption of convertible note of HK$50.9 million are not taken into account as they would decrease the loss per share attributable to the owners of the Company and have an anti-dilutive effect.

– I-86 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

On 6 June 2014 and 26 March 2015, the Company early redeemed all the convertible notes and there were no convertible notes held by the Company during the period ended 30 September 2015.

11. PROPERTY, PLANT AND EQUIPMENT

During the period, additions of property, plant and equipment amounted to approximately HK$128,000 (for the six months ended 30 September 2014: HK$76,000).

12. TRADE RECEIVABLES

The Group normally received rental income one month in advance. The Group seeks to maintain strict control over its outstanding receivables to recognised credit risk, with overdue balances regularly reviewed by senior management. The ageing analysis of the trade receivables as at the end of reporting period, based on the date of revenue recognition, is as follows:

0-90 days 91-180 days Over 180 days INVESTMENTS HELD FOR TRADING Equity securities listed in Hong Kong, at fair value Debt securities listed in Hong Kong, at fair value	At 30 September 2015 (Unaudited) *HK$’000* 2,472 208 92 2,772 At 30 September 2015 (Unaudited) *HK$’000* 160,469 29,915 190,384	At 31 March 2015 (Audited) HK$’000 1,637 46 –
		1,683

		At 31 March 2015 (Audited) HK$’000 111,706 29,311
		141,017

13. INVESTMENTS HELD FOR TRADING

– I-87 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. SHARE CAPITAL

Authorised: Ordinary shares of HK$0.01 each Convertible preference shares Issued and fully paid: Ordinary shares of HK$0.01 each At beginning of period/year Issue of ordinary shares_(note)_ At end of period/year Convertible preference shares	At 30 September 2015 Number of shares Amount ’000 HK$’000 (Unaudited) 200,000,000 2,000,000 602,000 6,020 Number of shares Amount ’000 HK$’000 (Unaudited) 687,053 6,871 137,410 1,374 824,463 8,245 401,667 283,858	At 31 Number of shares ’000 200,000,000 602,000 Number of shares ’000 687,053 – 687,053 401,667	March 2015 Amount HK$’000 2,000,000
			6,020
			Amount HK$’000 6,871 –
			6,871
			283,858

Note:

On 15 May 2015, the Company issued 137,410,000 ordinary shares with par value of HK$0.01 each, at a price of HK$0.37 per share by way of a placing. The net proceeds from the placing, after deducting the related placing commission, professional fees and all related expenses, is approximately HK$49,520,000, out of which HK$1,374,000 and HK$48,146,000 were recorded in share capital and share premium respectively.

– I-88 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

15. RESERVES

Balance at 1 April 2015 (Audited) Profit for the period Other comprehensive income Total comprehensive income Lapse of share options Issue of ordinary shares_(note 14)_ Balance at 30 September 2015 (Unaudited)	Share premium account HK$’000 3,284,858 – – – – 48,146 3,333,004	Convertible preference share Share-based compensation reserve HK$’000 HK$’000 283,858 10,761 – – – – – – – (10,761) – – 283,858 –	Investment revaluation reserve HK$’000 – – – – – – –	Capital reserve HK$’000 5,733 – – – – – 5,733	Exchange fluctuation reserve HK$’000 70,781 – (109,480) (109,480) – – (38,699)	Conversion option reserve HK$’000 – – – – – – –	Accumulated losses HK$’000 (970,046) 107,368 – 107,368 10,761 – (851,917)	Total HK$’000 2,685,945 107,368 (109,480)
								(2,112) – 48,146
								2,731,979

16. TRADE PAYABLES

The Group normally obtains credit terms ranging from 30 to 120 days from its suppliers. An ageing analysis of the trade payables as at the end of reporting period, based on the receipt of goods purchased, was as follows:

Current or less than 1 month 1 to 3 months More than 3 months but less than 12 months More than 12 months	At 30 September 2015 (Unaudited) *HK$’000* – 2 300 9,423 9,725	At 31 March 2015 (Audited) HK$’000 4 66 571 10,247
		10,888

– I-89 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17. BANK AND OTHER BORROWINGS

Notes Bank loans – secured (i) Other loan – unsecured (ii) Long term bond (iii) Total current and non-current bank and other borrowing were repayable as follows: Loans repayable: Within one year More than one year, but not exceeding two years More than two years, but not exceeding five years After five years Portion classified as current liabilities Portion classified as non-current liabilities	At 30 September 2015 (Unaudited) HK$’000 636,561 – 9,332 645,893 78,036 92,456 365,399 110,002 645,893 (78,036) 567,857	At 31 March 2015 (Audited) HK$’000 683,963 61,539 – 745,502 115,625 95,013 347,986 186,878 745,502 (115,625) 629,877

(i) The bank loans are secured by the subsidiary’s investment property with carrying value of approximately HK$3,890,880,000 (as at 31 March 2015: HK$3,985,783,000). As at 30 September 2015, the bank loans include loan principal amounts of HK$143,476,000 (as at 31 March 2015: HK$159,939,000) and HK$528,917,000 (as at 31 March 2015: HK$564,864,000) which bear interest at 7.86% (as at 31 March 2015: 7.86%) per annum and 7.86% (as at 31 March 2015: 7.86%) per annum respectively are repayable by instalments up to 26 September 2020 and 29 April 2021 respectively. Mr. Guo Jiadi, director of the Company, has granted a guarantee to a bank for the bank loan with principal amount of HK$143,476,000 (as at 31 March 2015: HK$159,939,000), in which the guarantee is to fulfill the covenants of bank facilities if the subsidiary has breached the covenants of bank facilities.
(ii) The other loan was unsecured, interest bearing at 13% per annum and was repaid on 9 June 2015.

– I-90 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iii) On 24 July 2015, the Company with The Bank of New York Mellon, acting through its Hong Kong Branch, as the bond agent, issued a long term unsecured bond of HK$11,000,000, with a maturity period of 4 years and a fixed nominal interest rate of 7% per annum. The principal will be repaid at the end of the term on 23 July 2019. The interest will be payable semi-annually in arrears on 23 January and 23 July in each year prior to the earlier of the maturity date and the redemption date.

18. CAPITAL COMMITMENTS

As at 30 September 2015 and 31 March 2015, the Group had the following commitments:

	At	At
	30 September	31 March
	2015	2015
	(Unaudited)	(Audited)
	*HK$’000*	HK$’000
Capital commitments contracted but not provided for:
Construction in progress	735	1,162

19. LEASES

The Group leases its office properties for the periods ended 30 September 2015 and 2014. Leases for office properties are negotiated for terms for two years.

The Group as lessee

At 30 September 2015 and 31 March 2015, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

	At	At
	30 September	31 March
	2015	2015
	(Unaudited)	(Audited)
	*HK$’000*	HK$’000
Within one year	640	1,600

– I-91 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group as lessor

The Group’s shopping mall was leased to a number of tenants for varying terms.

Within one year In the second to fifth years, inclusive More than five years	At 30 September 2015 (Unaudited) *HK$’000* 85,800 52,352 56,563 194,715	At 31 March 2015 (Audited) HK$’000 54,395 54,444 63,184
		172,023

20. CONTINGENT LIABILITIES

As at 30 September 2015 and 31 March 2015, the Company and the Group did not have contingent liabilities.

21. RELATED PARTY TRANSACTIONS

Save as disclosed elsewhere in this financial statement, the Group has the following balances and transactions with related parties:

(a) Amounts due to related parties are unsecured, interest-free and repayable on demand.
(b) Mr. Guo Jiadi has granted a guarantee to a bank for the bank loan with principal amount of HK$143,476,000 (as at 31 March 2015: HK$159,939,000), for due performance of the covenants of bank facilities granted to a subsidiary of the Company.
(c) A rental agreement for leasing a portion of a floor of the shopping mall in Fuzhou was signed between the Group and a company of which Mr. Guo Jiadi was beneficially interested in. Rental income charged for the period amounted to HK$450,000 (for the period ended 30 September 2014: HK$455,000).

22. EVENTS AFTER THE REPORTING PERIOD

As disclosed in the Company’s announcement dated 28 October 2015, the Company proposes to implement rights issue on the basis of two rights shares for every one ordinary share held on the record date on 16 December 2015 or such other date that the Company and United Century International Limited, the sole underwriter of the rights issue, may agree in writing, at the subscription price of HK$0.20 per rights share. The Company will raise proceeds of approximately HK$329,800,000 before expenses by way of issue of 1,648,924,892 rights shares.

– I-92 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. INDEBTEDNESS STATEMENT

As at 31 October 2015, being the latest practicable date for the purpose of ascertaining the indebtedness of the Group prior to the printing of this circular, the details of the Group’s outstanding borrowings, convertible bonds and contingent liabilities in respect of guarantees were set out as follows:

	Notes	HK$’000
Bank borrowings – secured and unguaranteed	(i)	529,491
Bank borrowings – secured and guaranteed	(i)	143,632
Other borrowings – unsecured and unguaranteed	(ii)	36,230
Bonds payable – unsecured and unguaranteed	(iii)	11,000

Notes:

(i) The bank loans are secured by the subsidiary’s investment property. As at 31 October 2015, the bank loans include loan principal amounts of HK$143,632,000 and HK$529,491,000 which bear interest at 7.86% per annum and 7.86% per annum respectively and are repayable by instalments up to 26 September 2020 and 29 April 2021 respectively. Mr. Guo Jiadi, director of the Company, has granted a guarantee to a bank for the bank loan with principal amount of HK$143,632,000, in which the guarantee is to fulfill the covenants of bank facilities if the subsidiary has breached the covenants of bank facilities.
(ii) The Group had unsecured advance of approximately HK$36,230,000 from some companies controlled by Mr. Guo Jiadi.
(iii) On 24 July 2015, the Company with The Bank of New York Mellon, acting through its Hong Kong Branch, as the bond agent, issued a long term unsecured bond of HK$11,000,000, with a maturity period of 4 years and a fixed nominal interest rate of 7% per annum. The principal will be repaid at the end of the term on 23 July 2019. The interest will be payable semi-annually in arrears on 23 January and 23 July in each year prior to the earlier of the maturity date and the redemption date.

As at 31 October 2015, the Group had no contingent liability arising in the ordinary course of business.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities and normal accounts payable in the ordinary course of business, as of 31 October 2015, the Group did not have other outstanding mortgages, charges, debentures or other loan capital, bank overdrafts or loans, other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptance or acceptance credits, guarantees or other material contingent liabilities.

– I-93 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Group is principally engaged in property development and holding of property for investment and rental purpose. Currently, the Group owns a shopping mall in Fuzhou as an investment property.

For the six months ended 30 September 2015, the Group recorded a turnover of approximately HK$56.1 million, representing a decrease of 16.8% compared with the corresponding period ended 30 September 2014 and the Group’s profit attributable to shareholders was approximately HK$107.4 million, and its basic earnings per share for the period was HK9 cents (2014: loss of HK$148.9 million, representing a loss per share of HK13.67 cents).

The current property investment business is mainly operated by Fujian Sinco Industrial Co., Ltd. (“Fujian Sinco”) which is engaged in development, operation and management of a home improvement plaza (“Sandi Plaza”). During the period under review, the Group recorded the rental, management and related fee income of approximately HK$56.1 million (2014: HK$67.4 million) The Sandi Plaza had an occupancy rate of approximately 67.1% which represent a decrease in the occupancy rate as compared to corresponding period in 2014 of approximately 86.3%. The decrease in occupancy rate is a result of the continuous competitions from other shopping malls, renovation works on one entire floor of the Sandi Plaza carrying out during the period under review and the construction works of the Fuzhou subway transportation in front of the Sandi Plaza, which posted a negative impact to the occupancy rate.

Nevertheless, the Board is confident on this property investment business and believes it will continuously bring a positive and stable return to the Group in the future.

The Directors expect that the property investment business will increase the income stream of the Group, bring stable earning to the Group, increase the return on equity and bring a long term benefit to the Group.

The Group is optimistic to the residential and commercial property market of Mainland China in the long run and is seeking for opportunities to acquire optimal scale land parcels or completed properties for development and investment continuously and has identified Shanghai as the primary target to expand the Group’s future investment due to Shanghai’s status as the leading financial and economic centre of the PRC. The termination of the Xi’an Project also prompted the Group to seek fresh investment opportunities as soon as possible in order to generate return for the Shareholders.

6. WORKING CAPITAL

The Directors, after due and careful enquiry, are of the opinion that after taking into account the internal financial resources of the Group, the available credit facilities and the effect of the Rights Issue, the Group will have sufficient working capital for at least the next twelve months from the date of this circular.

– I-94 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. MATERIAL CHANGE

The Directors confirm that, save as disclosed below, there had been no material change in the financial or trading position or outlook of the Group since 31 March 2015, being the date to which the latest published audited consolidated financial statements of the Group were made up, up to and including the Latest Practicable Date:

(a) a strategic cooperation memorandum of understanding (“Strategic Cooperation MOU”) dated 2 April 2015 was entered into between Shanghai Zhong Zhan Industrial Investment Co., Ltd.* (上海中展實業投資有限公司) and the World Power Group Holdings Limited. World Power Group Holdings Limited is a company incorporated under the laws of Hong Kong with limited liability and is wholly owned by the Company. The Strategic Cooperation MOU was used to look for hotel, elderly care related or tourism related property investment and development opportunities in eastern part of the PRC for one year from the date of the Strategic Cooperation MOU or such later date as mutually agreed. Further details are set out in the announcement of the Company dated 2 April 2015;
(b) a placing agreement dated 28 April 2015 was entered into between the Company and China Securities (International) Corporate Finance Company Limited (“CSCI”) as placing agent in respect of the placing of up to the aggregate principal amount of HK$200,000,000 through issue of series 1 bonds and series 2 bonds. The aggregate principal amount of series 1 bonds and series 2 bonds are up to the maximum amount of HK$100,000,000 and HK$100,000,000 respectively. CSCI, the placees and the ultimate beneficial owner(s) are independent third parties not connected with the Company and its connected persons. On 22 July 2015, (i) the placing of bonds was still in progress and none of the series 1 bonds had been placed; and (ii) the principal terms of the series 1 bonds had been changed and amended. The placing period for the placing of the bonds expired on 27 October 2015. Upon expiry of the placing period, an aggregate principal amount of HK$11 million of the series 1 bonds had been successfully placed. Further details are set out in the announcements of the Company dated 28 April 2015 and 22 July 2015;
(c) a placing agreement dated 29 April 2015 was entered into between the Company and Kingston Securities Limited (“Kingston”) as placing agent in respect of the placing of up to 137,410,000 Shares at the placing price of HK$0.37 per Ordinary Share to not less than six placees who and whose ultimate beneficial owners are independent third parties not connected with the Company and its connected persons with net proceeds of approximately HK$49.3 million which had strengthened the financial position of the Group. Further details are set out in the announcements of the Company dated 29 April 2015 and 15 May 2015 respectively;

– I-95 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(d) the Company announced the termination of a commercial property development project in Xian, the PRC on 23 July 2015 due to the public bidding of the land located at Xian Qujiang Daming Palace Heritage Area* (西安曲江大明宮遺址區) will not be able to take place by 31 October 2015. Further details are set out in the announcements dated 7 August 2013, 2 October 2013, 30 July 2014, 24 September 2014 and 23 July 2015, the circulars dated 4 September 2013 and 27 August 2014;
(e) a letter of intent dated 24 August 2015 was entered into among the Company as purchaser, the Shannan Tianyuan Investment Centre (山南天源投資中心) (“Shannan Tianyuan”) as first vendor and Shannan Shengyuan Investment Centre (山南盛源投資中心) (“Shannan Shengyuan”) as second vendor in respect of the proposed acquisition of a part of or the entire equity interests in Jiangsu Guosheng Hengtai Energy Development Co., Ltd* (江蘇國盛恆泰能源發展有限公司) (“Jiangsu Guosheng”). Jiangsu Guosheng is principally engaged in the business of exploration and production of coalbed methane and provision of related technical services and consultation services. Shannan Tianyuan, Shannan Shengyuan and their respective ultimate beneficial owners are independent third party to the Company and its connected persons. Further details are set out in the announcement dated 24 August 2015;
(f) the Rights Issue, the Underwriting Agreement, the Absence of Excess Application Arrangement and the Whitewash Waiver; and
(g) the Group recorded an unaudited profit after tax of approximately HK$107,354,000 for the six months ended 30 September 2015 as compared to the loss after tax of approximately HK$148,869,000 for the corresponding period ended 30 September 2014, which was mainly attributable to the increase in the fair value gain on the investment property as disclosed in the Company’s interim results announcement dated 30 November 2015.

– I-96 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

For illustrative purpose only, set out below is the unaudited pro forma statement of adjusted consolidated net tangible assets of the Group after completion of the Rights Issue. Although reasonable care has been exercised in preparing the unaudited pro forma financial information, Shareholders who read the information should bear in mind that these figures are inherently subject to adjustments and may not give a complete picture of the Group’s financial results and positions for the financial periods concerned.

A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The following is the unaudited pro forma statement of adjusted consolidated net tangible assets of the Group (the “ Unaudited Pro Forma Financial Information ”) prepared by the Directors in accordance with Rule 4.29 of the Listing Rules to illustrate the effect of the Rights Issue, which involves the issue of 1,648,924,892 Rights Shares at the Subscription Price of HK$0.20 per Rights Share on the basis of two Rights Shares for every one existing Shares in issue held on the Record Date, on the unaudited consolidated net tangible assets of the Group attributable to owners of the Company as if the Rights Issue had taken place on 30 September 2015.

The Unaudited Pro Forma Financial Information of the Group is prepared based on the unaudited consolidated net tangible assets of the Group attributable to owners of the Company derived from the consolidated statement of financial position of the Group as at 30 September 2015, as extracted from the published interim result announcement of the Company for the six months ended 30 September 2015 and is adjusted for the effect of the Rights Issue.

The Unaudited Pro Forma Financial Information of the Group has been prepared for illustrative purpose only, based on the judgements, estimates and assumptions of the Directors, and because of its hypothetical nature, it may not give a true picture of the financial position of the Group had the Rights Issue actually been completed on 30 September 2015 or at any future date.

– II-1 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Issue of 1,648,924,892 Rights Shares at Subscription Price of HK$0.20 per Rights Share_(Note 1) Consolidated net tangible assets of the Group attributable to the owners of the Company per Share as at 30 September(Note 2) Unaudited pro forma adjusted consolidated net tangible assets per Share attributable to the owners of the Company after completion of Rights Issue(Note 4)_	Unaudited consolidated net tangible assets of the Group attributable to owners of the Company as at 30 September 2015 HK$’000 2,740,224 HK$ 3.32	Estimated net proceeds of the Rights Issue (Note 3) HK$’000 323,000	Unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to the owners of the Company after completion of the Rights Issue HK$’000 3,063,224

			HK$ 1.24

Notes:

1) The Rights Issue of 1,648,924,892 Rights Shares is calculated on the basis of two Rights Shares for every one existing Shares and 824,462,446 Shares in issue as at the Latest Practicable Date.
2) The calculation of consolidated net tangible assets of the Group attributable to the owners of the Company per Share is based on 824,462,446 Shares in issue as at 30 September 2015.

– II-2 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

3) The estimated net proceeds of the Rights Issue of approximately HK$323,000,000 is calculated based on 1,648,924,892 Rights Shares to be issued at the Subscription Price of HK$0.20 per Rights Share and after deduction of the estimated related expenses of approximately HK$6,800,000.
4) The unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to the owners of the Company per Share is arrived at on the bases that 2,473,387,338 Shares, which represents 824,462,446 Shares in issue as at 30 September 2015 and 1,648,924,892 Rights Shares to be issued, pursuant to the Rights Issue, were in issue assuming that the Rights Issue had been completed on 30 September 2015.
5) The unaudited pro forma financial information of the Group presented above does not take account of any trading result or other transactions of the Group entered into subsequent to 30 September 2015.

– II-3 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

B. ACCOUNTANT’S REPORT ON THE UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The following is the report on the unaudited pro forma financial information issued by BDO Limited for the purpose of inclusion in this circular.

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The Board of Directors

China Sandi Holdings Limited

Unit 3309, 33/F, West Tower Shun Tak Centre 168-200 Connaught Road Central Hong Kong

Independent Reporting Accountant’s Assurance Report on the Compilation of Unaudited Pro Forma Financial Information Included in a Circular To the Directors of China Sandi Holdings Limited

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of China Sandi Holdings Limited (the “ Company ”) and its subsidiaries (hereinafter collectively referred to as the “ Group ”) by the directors of the Company for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma statement of adjusted consolidated net tangible assets of the Group as at 30 September 2015 and related notes (the “ Unaudited Pro Forma Financial Information ”) as set out on pages II-1 to II-3 of the Company’s circular dated 9 December 2015 (the “ Circular ”) in connection with the Rights Issue (as defined in the Circular). The applicable criteria on the basis of which the directors have compiled the Unaudited Pro Forma Financial Information are described on pages II-1 to II-3.

The Unaudited Pro Forma Financial Information has been compiled by the directors to illustrate the impact of Rights Issue on the Group’s financial position as at 30 September 2015 as if the Rights Issue had taken place at 30 September 2015. As part of this process, information about the Group’s unaudited consolidated net assets has been extracted by the directors from the Group’s consolidated financial statements for the six months ended 30 September 2015, on which an unaudited interim report has been published.

– II-4 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The directors are responsible for compiling the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 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” (“ AG 7 ”) issued by the Hong Kong Institute of Certified Public Accountants (the “ HKICPA ”).

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information 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 Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus”, issued by the HKICPA. This standard requires that the reporting accountant complies with ethical requirements and plans and performs procedures to obtain reasonable assurance about whether the directors have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Unaudited Pro Forma Financial Information.

The purpose of Unaudited Pro Forma Financial Information included in the circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Rights Issue at 30 September 2015 would have been as presented.

A reasonable assurance engagement to report on whether the Unaudited Pro Forma Financial Information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the Unaudited Pro Forma Financial Information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

The related unaudited pro forma adjustments give appropriate effect to those criteria; and
The Unaudited Pro Forma Financial Information reflects the proper application of those adjustments to the unadjusted financial information.

– II-5 –

APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the Group, the event or transaction in respect of which the Unaudited Pro Forma Financial Information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the Unaudited Pro Forma Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

BDO Limited Certified Public Accountants

Hong Kong, 9 December 2015

– II-6 –

VALUATION REPORT

APPENDIX III

The following is the text of a letter and a valuation certificate, prepared for the purpose of incorporation in this circular received from Chung Hin Appraisal Limited, an independent valuer, in connection with its valuation as at 30 September 2015 of the property interests of the Group.

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� Chung Hin
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Appraisal Limited
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Unit 1102, 11/F., Pacific Plaza 418 Des Voeux Road West Hong Kong Tel: (852) 5343 7584 Email: [email protected]

Date: 9 December 2015

The Board of Directors China Sandi Holdings Limited Unit 3309, West Tower, Shun Tak Centre 168-200 Connaught Road Central Sheung Wan, Hong Kong

Dear Sirs,

INSTRUCTIONS

In accordance with your instructions for us to value a property in which China Sandi Holdings Limited (the “ Company ”) and its subsidiaries (hereinafter together referred to as the “ Group ”) have interests in the People’s Republic of China (the “ PRC ”), we confirm that we have carried out property inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the property interests as at 30 September 2015.

This letter which forms part of our valuation report explains the basis and methodologies of valuation, clarifying assumptions, valuation considerations, title investigation and limiting conditions of this valuation.

BASIS OF VALUATION

Our valuation of the property interests 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 valuation date between a willing buyer and a willing seller in an arm’s – length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

– III-1 –

VALUATION REPORT

APPENDIX III

VALUATION METHODOLOGY

We have valued the property interests on market basis and the direct comparison method is adopted where comparison based on comparable sales evidence is made. Comparable properties of similar size, character and location are analysed and carefully weighted against all the respective advantages and disadvantages of each property in order to arrive at a fair comparison of values.

In valuing the property interests, which are subject to tenancies, we have adopted the investment method on the basis of capitalization of the net rental incomes with due allowance for reversionary income potential. The direct comparison method is also adopted in estimating the values of their reversionary interest (if any).

VALUATION CONSIDERATIONS

In valuing the property interests, 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, Rule 11 of the Code on Takeovers and Mergers issued by the Securities and Futures Commission and the HKIS Valuation Standards 2012 Edition published by The Hong Kong Institute of Surveyors.

VALUATION ASSUMPTIONS

Our valuations have been made on the assumption that the seller sells the property interests on the open market in their existing states without the benefit of a deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangements, which could serve to affect the values of the property interests.

In undertaking our valuation, we have assumed that, unless otherwise stated, transferable land use rights in respect of the property interests for specific terms at nominal annual land use fees have been granted and that any premium payable has already been fully paid. We have also assumed that the owners of the properties have enforceable titles to the properties and have free and uninterrupted rights to use, occupy or assign the properties for the whole of the respective unexpired terms as granted.

No allowance has been made in our report for any outstanding or additional land premium, charges, mortgages or amounts owing on the property interests valued nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property interests are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their values.

Other special assumptions of the property interests, if any, have been stated out in the footnotes of the valuation certificate attached herewith.

– III-2 –

VALUATION REPORT

APPENDIX III

TAX LIABILITY

There may be potential tax liability which would arise if the property interests were to be sold. Should disposal of the property interests located in the PRC in our report be conducted, as advised by the Company, the potential tax liabilities arising may include business tax (5% on the transaction amount), urban maintenance and construction tax (7% of business tax), education tax (3% of business tax), corporate income tax (25% on net profit upon disposal); stamp duty (0.05% on the transaction amount) and land appreciation tax (30% to 60% on the net appreciated amount less deductibles). The Company has further confirmed that the Company has no intention to dispose of the property interests as the property interests are held for long-term investment. The likelihood of any tax liability being crystallized is remote.

TITLE INVESTIGATION

We have been, in some instances, shown copies of various title documents and other documents relating to the property interests and have made relevant enquiries. We have not examined the original documents to verify the existing title to the property interests and any material encumbrances that might be attached to the property interests or any lease amendments. However, we have relied considerably on the information given by the Company’s PRC legal adviser, Fujian Bose Law Firm (福建博世律師事務所), concerning the validity of the Group’s title to the property interests located in the PRC.

LIMITING CONDITIONS

We have inspected the exterior, and wherever possible, the interior of the properties but no structural survey had been made. In the course of our inspection, we did not note any serious defects. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. Further, no test has been carried out on any of the building services. All dimensions, measurements and areas are only approximates. We have not been able to carry out detailed on-site measurements to verify the site and floor areas of the properties and we have assumed that the areas shown on the copies of documents handed to us are correct.

The site inspection of the property was carried out by Mr. Ian Ng, who is a registered surveyor, in November 2015.

We have relied to a considerable extent on information provided by the Group and have accepted advice given to us on such matters, in particular, but not limited to, the sales records, tenure, planning approvals, statutory notices, easements, particulars of occupancy, site and floor areas and all other relevant matters in the identification of the property interests.

– III-3 –

VALUATION REPORT

APPENDIX III

We have had no reason to doubt the truth and accuracy of the information provided to us by the Group. We have also been advised by the Group 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.

Liability in connection with this valuation report is limited to the client to whom this report is addressed and for the purpose for which it is carried out only. We will accept no liability to any other parties or any other purposes.

This report is to be used only for the purpose stated herein, any use or reliance for any other purpose, by you or third parties, is invalid. No reference to our name or our report in whole or in part, in any document you prepare and/or distribute to third parties may be made without written consent.

EXCHANGE RATE

Unless otherwise stated, all monetary amounts stated in this report are in Renminbi (RMB).

Our valuation certificate is herewith attached.

Yours faithfully, For and on behalf of

Chung Hin Appraisal Limited

Ian Ng

MHKIS RPS(GP) Senior Vice President

Mr. Ian Ng is a Registered Professional Surveyor with over 10 years’ experience in valuation of properties in HKSAR, Macau SAR and mainland China. Mr. Ng is a Professional Member of The Hong Kong Institute of Surveyors.

– III-4 –

VALUATION REPORT

APPENDIX III

VALUATION CERTIFICATE

Property interests held by the Group for investment in the PRC

Property Description and Tenure

Market Value in Existing State as at 30 September Particular of Occupancy 2015

Sandi Home Plaza, The property comprises a parcel of No. 173 Gongye land with an area of approximately Road, Yizhou 25,321 sq.m. erected thereon a 7-storey Jiedao, Taijiang shopping mall plus 2 basement levels District, Fuzhou completed in about 2011. City, Fujian Province, the PRC The property is situated on Gongye Road in Taijiang District of Fuzhou City. Developments in the vicinity are mainly residential, commercial and community facilities developments.
The total gross floor area of the property is approximately 113,251.8 sq.m. including 321 carparking spaces with the breakdowns as follows:
Portions of the property RMB3,200,000,000 with a total lettable area of approximately (Renminbi 57,521 sq.m. are Three Billion currently subject to Two Hundred various tenancies for Million) commercial purpose with the latest expiring on 31 August 2026 at a total monthly rental of RMB6,565,689 inclusive of management service fee.
The remaining portions of the property are either vacant or occupied by the Group.

Portion Above Ground Below Ground Total:	Gross Floor Area Approx (sq.m.) 76,446.92 36,804.88
	113,251.80

The land use rights of the property were granted for a term expiring on 3 March 2050 for retail (shopping mall) use and 3 March 2060 for carparking and public green space uses.

– III-5 –

VALUATION REPORT

APPENDIX III

Notes:

(1) Pursuant to two State-owned Land Use Rights Certificates – Rong Guo Yong (2012) Di No. 00203900135 (榕國用(2012)第00203900135號) and Rong Guo Yong (2012) Di No. 32034900183 (榕國用(2012) 第32034900183號) dated 12 June 2012 and 6 August 2012 respectively issued by Fuzhou City Land Resources Bureau (福州市國土資源局), the land use rights of the property with a total site area of approximately 25,321 sq.m. were granted to Fujian Sinco Industrial Co. Ltd. (福建先科實業有限公司) for a term expiring on 3 March 2050 for retail (shopping mall) use and 3 March 2060 for carparking and public green space uses.
(2) Pursuant to two Building Ownership Certificates – Rong Fang Quan Zheng R Zi Di No. 1219568 (榕房權証 R 字第1219568號) and Rong Fang Quan Zheng R Zi Di No. 1234625 (榕房權証 R 字第1234625號 registered on 4 June 2012 and 7 September 2012 respectively issued by Fuzhou City Housing Security and Housing Authority (福州市住房保障和房產管理局), the building ownership rights of a shopping mall together with carparking spaces with a total gross floor area of approximately 113,251.8 sq.m. are owned by Fujian Sinco Industrial Co. Ltd..
(3) Fujian Sinco Industrial Co. Ltd. is a wholly-owned subsidiary of the Company.
(4) The major certificates and permits of the property are summarized as follows:
(i) State-owned Land Use Rights Certificate Yes (ii) Building Ownership Certificate Yes
(5) We have been provided with a legal opinion regarding the property interests by the Company’s PRC legal adviser, which contains, inter alia, the following:
(i) Fujian Sinco Industrial Co. Ltd. legally owns the property;
(ii) The property is subject to mortgages in favour of Industrial and Commercial Bank of China Limited Fuzhou Nanmen Branch (中國工商銀行股份有限公司福州南門支行) and China CITIC Bank Corporation Limited Fuzhou Branch (中信銀行股份有限公司福州分行) and the transfer, lease, mortgage and otherwise dispose of the property shall be subject to the prior consent from the mortgagees; and
(iii) The land premium has been paid in full.
(6) According to the information from the Company, there is no litigation dispute and there is no plan for renovation or change of use of the property.

– III-6 –

GENERAL INFORMATION

APPENDIX IV

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules and the Takeovers Code for the purpose of giving information with regard to the Group. 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.

The Directors jointly and severally accept full responsibility for the accuracy of information contained in this circular and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

SHARE CAPITAL

(a) Authorised and issued capital

The authorised and issued share capital of the Company (i) as at the LPD; and (ii) immediately after completion of the Rights Issue is set out as follows:–

(i) as at the LPD

Authorised: 200,000,000,000 Ordinary Shares 602,000,000 CPS 200,602,000,000 Total Issued and fully paid: 824,462,446 Ordinary Shares 401,666,666 CPS 1,226,129,112 Total	HK$ 2,000,000,000.00 6,020,000.00
	2,006,020,000.00

	8,244,624.46 4,016,666.66
	12,261,291.12

– IV-1 –

GENERAL INFORMATION

APPENDIX IV

(ii) immediately after completion of the Rights Issue

Authorised:

HK$

200,000,000,000 Ordinary Shares 602,000,000 CPS 200,602,000,000 Total ssued and fully paid: 824,462,446 Ordinary Shares in issue as at the LPD 401,666,666 CPS in issue as at the LPD 1,648,924,892 Rights Shares to be issued pursuant to the Rights Issue 2,875,054,004 Total	2,000,000,000.00 6,020,000.00
	2,006,020,000.00

	8,244,624.46 4,016,666.66 16,489,248.92
	28,750,540.04

Issued and fully paid:

The Rights Shares, when allotted, issued and fully paid, will rank pari passu in all respects, including the rights to dividends, voting and return of capital, with the Ordinary Shares then in issue. Holders of fully-paid Rights Shares will be entitled to receive all future dividends and distributions which are declared, made or paid after the date of allotment of the Rights Shares in their fully-paid form.

Subsequent to 31 March 2015, being the end of the last financial year of the Company, and up to the Latest Practicable Date, the Company had issued 137,410,000 Ordinary Shares.

None of the securities of the Company are listed or dealt in on any other stock exchange other than the Stock Exchange and no such listing or permission to deal is being or proposed to be sought.

(b) Convertible notes, warrants and share options

As at the Latest Practicable Date, the Company had the United Century CPS and the King Partner CPS in issue which conferred rights on the holders thereof to subscribe for, convert or exchange up to a maximum of 401,666,666 Ordinary Shares at the initial conversion price of HK$3 (subject to adjustment).

– IV-2 –

GENERAL INFORMATION

APPENDIX IV

In accordance with the terms and conditions of the CPS, any holders of the CPS may exercise the conversion right attached to the CPS at any time during the conversion period subject to, among other thing, every act of the legislature of Hong Kong or Bermuda for the time being in force applying to or affecting the Company, the bye-laws of the Company by delivering a duly signed and completed conversion notice to the Company accompanied by, among other things (i) the certificates in respect of the relevant CPS and (ii) banker’s cashier orders or similar instruments payable to the Company in respect of all taxes and stamp, issue and registration duties (if any) arising on conversion.

Save as disclosed above, the Company had no outstanding share options, convertible securities, options or warrants in issue which confer any right to subscribe for, convert or exchange into Ordinary Shares as at the Latest Practicable Date.

PARTICULARS OF THE DIRECTORS

Mr. Guo Jiadi (郭加迪), an executive Director

Mr. Guo, aged 56, is a merchant and has been the Chairman and an executive Director of the Company since 12 December 2014. Mr. Guo is also (A) a director of each of the following subsidiaries of the Company: (1) Grand Supreme Limited; (2) Grandbiz Holdings Limited; (3) Great Peace Global Group Limited; (4) Strike Again Group Limited; (5) World Power Group Holdings Limited; (6) Shenyu Timber Company Limited; (7) Mazy International Limited; (8) Great Team Capital Investment Limited; (9) Grand International Development Limited; (10) Fujian Sinco; (11) Fujian Jiake Industrial Company Limited (福建佳科實業有限公司); and (12) Fujian Xiangbo Industrial Development Company Limited (福建翔博實業發展有限公司); (B) chairman of the board of directors of Fujian Sinco; (C) the general manager of the subsidiary named in (11) above; and (D) the legal representatives of each of the subsidiaries named in (10), (11) and (12) above. Mr. Guo is also an ultimate beneficial owner of a substantial shareholder of the Company.

Mr. Guo started his business in international trading and, in 20 years, diversified into businesses including footwear manufacturing, chemical technology, mining, real estate development and hotel investment with presence throughout Europe, the United States, Hong Kong, Shanghai, Fujian, Shaanxi and Jilin. Mr. Guo has over 25 years of experience in trading business and over 15 years of experience in property development.

– IV-3 –

GENERAL INFORMATION

APPENDIX IV

Mr. Guo entered into the property market in the PRC by establishing Fuzhou Gaojia and has since acted as its chairman. Fuzhou Gaojia has obtained 中華人民共和國房地產開發企業資質證書(壹級) (Qualification Certificate (Class 1) for Real Estate Development Enterprise in the PRC) from 中華人民共和國住房和城鄉建設部 (Department of Housing and Urban and Rural Development of the PRC). Fuzhou Gaojia has completed certain real estate projects in Fuzhou and Putian.

Mr. Guo is the father of Ms. Amika Lan E Guo, an executive Director. Apart from the aforesaid, Mr. Guo does not have any other relationship with any Director, senior management, substantial or controlling shareholder(s) of the Company. Mr. Guo does not have and did not have any current or past directorships in other listed public companies in the last three years.

Ms. Amika Lan E Guo, an executive Director

Ms. Guo, aged 30, has been an executive Director since 9 July 2014, and was appointed an authorised representative on 20 March 2015. Ms. Guo is also a director of the subsidiaries named in (1) to (9) as referred to in the particulars of Mr. Guo disclosed above. Ms. Guo graduated from Simon Fraser University in Canada with a bachelor degree of Business Administration in Human Resources Management. She also holds a MBA degree from The University of Hong Kong. Ms. Guo is a human resource professional with a strong knowledge in recruitment, employee relations, leadership and employee development, compensation and benefits. She has provided human resource services to both private and public companies. She will be focused on formulating and implementing human resource strategies and setting up corporate governance practices for the Group.

Ms. Guo is the daughter of Mr. Guo Jiadi, who is the Chairman and an executive Director and the ultimate beneficial owner of a substantial shareholder of the Company (namely, United Century). Save as disclosed above, Ms. Guo does not have any other relationship with any Director, senior management, substantial or controlling shareholder(s) of the Company. Ms. Guo does not have and did not have any current or past directorships in other listed public companies in the last three years.

Mr. Lin Jianbin (林建濱), an executive Director

Mr. Lin, aged 44, was appointed as an executive Director of the Company with effect from 5 March 2015. Mr. Lin is the also the financial controller of Fujian Sinco. Mr. Lin obtained a MBA degree from the Open University of Hong Kong and a bachelor’s degree in Fujian Institute of Financial Administrators (福建金融管理幹部學院). Prior to joining the Group, he worked in banks and commercial sector including property development and construction companies for over ten years. Mr. Lin is responsible for the financial and operating performance for the various subsidiaries of the Company in the PRC.

– IV-4 –

GENERAL INFORMATION

APPENDIX IV

Mr. Lin does not have any relationship with any Director, senior management, substantial or controlling shareholder(s) of the Company. Mr. Lin does not have and did not have any current or past directorships in other listed public companies in the last three years.

Dr. Wong Yun Kuen (黃潤權), an independent non-executive Director

Dr. Wong, aged 58, has been an independent non-executive Director on 18 September 2009. Dr. Wong was appointed as the chairman of the Nomination Committee and a member of the Audit Committee and Remuneration Committee of the Company. He received his Ph.D. degree from Harvard University, and was “Distinguished Visiting Scholar” at Wharton School of the University of Pennsylvania. Dr. Wong is an Adjunct Professor of Syracuse University, USA and he has worked in financial industries in the United States and Hong Kong for many years, and has considerable experience in corporate finance, investment and derivative products. He is a member of the Hong Kong Securities Institute.

Dr. Wong is an executive director of UBA Investments Limited (stock code: 768) from 30 August 2004 and became its chairman since 30 April 2015, and is an independent non-executive director of Sincere Watch (Hong Kong) Limited (stock code: 444) since 18 September 2012, Bauhaus International (Holdings) Limited (stock code: 483) and Far East Holdings International Limited (stock code: 36) since 1 December 2014. Dr. Wong was an independent non-executive director of Harmony Asset Limited (stock code: 428) from 3 September 2004 to 1 January 2015, KuangChi Science Limited (formerly known as “Climax International Co., Limited”) (stock code: 439) from 26 June 2007 to 23 August 2014, Kaisun Energy Group Limited (stock code: 8203), GT Group Holdings Limited (formerly known as “China Yunnan Tin Minerals Group Company Limited”) (stock code: 263) and Kong Sun Holdings Limited (stock code: 295) from 20 April 2007 to 7 November 2014, Kingston Financial Group Limited (stock code: 1031), Guocang Group Limited (formerly known as “Hua Yi Copper Holdings Limited”) (stock code: 559) and Huajun Holdings Limited (formerly known as New Island Development Holdings Limited) (stock code: 377) from 21 October 2010 to 25 September 2014. Dr. Wong was an independent non-executive director of Hong Kong Life Sciences & Technologies Group Limited (formerly known as “ZMAY Holdings Limited”) (stock code: 8085), from November 2009 to September 2012.

Dr. Wong does not have any relationship with any Director, senior management, substantial or controlling shareholder(s) of the Company.

– IV-5 –

GENERAL INFORMATION

APPENDIX IV

Mr. Chan Yee Ping, Michael (陳貽平), an independent non-executive Director

Mr. Chan, aged 38, has been an independent non-executive Director since 9 July 2014. Mr. Chan was also appointed as the chairman of the Audit Committee and a member of the Nomination Committee and Remuneration Committee of the Company. Mr. Chan holds a Bachelor Degree (Honours) in Accountancy from The Hong Kong Polytechnic University. He is a member with practicing certificate of the Hong Kong Institute of Certified Public Accountants, and a fellow member of the Association of Chartered Certified Accountants. He has over 10 years of working experience in the fields of accounting and audit, corporate secretarial management and corporate governance.

He is currently the company secretary of Birmingham International Holdings Limited (Stock Code: 2309) and China Sunshine Paper Holdings Company Limited (Stock Code: 2002), which are listed on the Main Board of the Stock Exchange, as well as Northeast Electric Development Co., Limited (Stock Code: 0042), a joint stock limited company incorporated in the PRC and listed on the Shenzhen Stock Exchange and the Main Board of the Stock Exchange respectively. He was also an independent non-executive director of Yueshou Environmental Holdings Limited (Stock code: 1191) from 7 October 2013 to 17 July 2014. Mr. Chan has been an independent non-executive director of China Renji Medical Group Limited (Stock code: 648) since 15 July 2014. Mr. Chan is the director of MCI CPA Limited.

Mr. Chan does not have any relationship with any Director, senior management, substantial or controlling shareholder(s) of the Company.

Mr. Yu Pak Yan, Peter (余伯仁), an independent non-executive Director

Mr. Yu, aged 65, has been an independent non-executive Director since 31 December 2010. Mr. Yu was also appointed as the chairman of the Remuneration Committee and a member of the Audit Committee and the Nomination Committee of the Company. Mr. Yu has over 30 years of experience in real estate and financial services industries. Mr. Yu obtained a Bachelor Degree in Management from Youngstown State University in Ohio, USA and a Master of Science Degree in Financial Services from American College in Pennsylvania, USA. Mr. Yu is a member of the Certified Commercial Investment Member Institute and was the first Chinese-American elected to the board of the San Francisco Association of Realtors. Mr. Yu worked in Pacific Union Real Estate Company in the United States from 1980 to 1995 and held senior positions in MetLife and New York Life Insurance Company in managing Asian customers in North America.

– IV-6 –

APPENDIX IV

GENERAL INFORMATION

Mr. Yu has been an executive director of Far East Holdings International Limited (stock code: 36) since 12 November 2014, is currently an independent non-executive director of Kingston Financial Group Limited (stock code: 1031) and Noble Century Investment Holdings Limited (formerly known as “Sam Woo Holdings Limited”) (stock coded: 2322). He was an executive director of Kong Sun Holdings Limited (stock code: 295) from 1 August 2008 to 30 September 2013 and became its chairman from 30 September 2013 to 1 September 2014, Mr. Yu was an independent non-executive director of GET Holdings Limited (formerly known as M Dream Inworld Limited) (stock code: 8100) from 30 July 2010 to 29 January 2014.

Mr. Yu does not have any relationship with any Director, senior management, substantial or controlling shareholder(s) of the Company.

Mr. Zheng Jinyun (鄭金雲), an independent non-executive Director

Mr. Zheng, aged 53, has been an independent non-executive Director on 11 April 2012. Mr. Zheng Jinyun completed the China CEO Management Innovation Executive Program with the relevant certificate of Shanghai Jiao Tong University in 2003 and completed the CEO Innovation Executive Program (總裁高級研修班) with the relevant certificate of Fudan University in 2005. Mr. Zheng Jinyun has commenced his own international trading business since 1978 and expanded his business to the global market. Mr. Zheng Jinyun started to expand his business to the development and management of residential and commercial properties in 2006. Mr. Zheng Jinyun is the committee member of the current Chinese People’s Political Consultative Conference of Fujian Province (福建省人民政治協商會議委員) and the honorable citizen of Putian City (莆田市榮譽市民).

Mr. Zheng Jinyun does not have any relationship with any Director, senior management, substantial or controlling shareholder(s) of the Company. Mr. Zheng does not have and did not have any current or past directorships in other listed public companies in the last three years.

Mr. Zheng Yurui (鄭玉瑞), an independent non-executive Director

Mr. Zheng, aged 61, has been an independent non-executive Director on 11 April 2012. Mr. Zheng Yurui graduated from Party School of Central Committee of C.P.C. with undergraduate diploma in 1999, majoring in administration and he is a senior economist. From 1971 to 1998, Mr. Zheng Yurui worked in several state-owned companies and private companies including a factory in which he acted as a deputy general manager. From 1998 to the present, Mr. Zheng Yurui founded his own footwear manufacturing company, acting the chairman. From 2008 to the present, Mr. Zheng Yurui has served as a director of a property development company concurrently. Mr. Zheng Yurui is the representative of the Tenth and Eleventh People’s Congress of Fujian Province (福建省第十屆、第十一屆人民代表大會) and the representative of the Fourth, the Fifth, and the Sixth People’s Congress of Putian City (莆田市第四屆、第五屆、第六屆人民代表大會).

– IV-7 –

GENERAL INFORMATION

APPENDIX IV

Mr. Zheng Yurui does not have any relationship with any Director, senior management, substantial or controlling shareholder(s) of the Company. Mr. Zheng does not have and did not have any current or past directorships in other listed public companies in the last three years.

CORPORATE INFORMATION AND PARTIES INVOLVED IN THE RIGHTS ISSUE

Executive Directors

Mr. Guo Jiadi (Chairman) Ms. Amika Lan E Guo Mr. Lin Jianbin

Independent non-executive Directors Dr. Wong Yun Kuen Mr. Chan Yee Ping, Michael Mr. Yu Pak Yan, Peter Mr. Zheng Jinyun Mr. Zheng Yurui

Business address of the Directors Unit 3309 33/F, West Tower Shun Tak Centre 168-200 Connaught Road Central Hong Kong Registered office Clarendon House 2 Church Street Hamilton HM 11 Bermuda

– IV-8 –

GENERAL INFORMATION

APPENDIX IV

Head office and principal place Unit 3309 of business in Hong Kong 33/F, West Tower Shun Tak Centre 168-200 Connaught Road Central Hong Kong Company Secretary Mr. Chiu Ngam, Chris Fellow member of the Hong Kong Institute of Certified Public Accountants Member of the American Institute of Certified Public Accountants Sole underwriter United Century International Limited Palm Grove House, P. O. Box 438 Road Town, Tortola, VG 1110, BVI Authorised representatives Ms. Amika Lan E Guo Unit 3309 33/F, West Tower Shun Tak Centre 168-200 Connaught Road Central Hong Kong Mr. Chiu Ngam, Chris Unit 3309 33/F, West Tower Shun Tak Centre 168-200 Connaught Road Central Hong Kong Auditor BDO Limited 25th Floor, Wing On Centre 111 Connaught Road Central Hong Kong Certified Public Accountants Financial adviser to the Company Kingston Corporate Finance Limited Unit 2801, 28th Floor One International Finance Centre 1 Harbour View Street Central, Hong Kong

– IV-9 –

GENERAL INFORMATION

APPENDIX IV

Independent Financial Adviser to the IBC and the Independent Shareholders

Nuada Limited Unit 1805-08, 18/F OfficePlus@Sheung Wan 93-103 Wing Lok Street, Sheung Wan, Hong Kong

Legal advisers to the Company

Minter Ellison

Level 25, One Pacific Place 88 Queensway Hong Kong

Property valuer of the Company

Chung Hin Appraisal Limited Unit 1102, 11/F., Pacific Plaza 418 Des Voeux Road West Hong Kong

Principal share registrar and transfer office in Bermuda
Codan Services Limited
Clarendon House 2 Church Street Hamilton HM 11 Bermuda
Branch share registrar and Tricor Tengis Limited transfer office in Hong Kong Level 22, Hopewell Centre 183 Queen’s Road East Hong Kong
Principal bankers Bank of China (Hong Kong) Limited 1 Garden Road
Hong Kong

Chiyu Banking Corporation Limited 4/F 78 Des Voeux Road Central Hong Kong

Bank of Communications Co. Limited 2/F, 563 Nathan Road, Kowloon Hong Kong

– IV-10 –

GENERAL INFORMATION

APPENDIX IV

The Bank of East Asia Limited 10 Des Voeux Road Central Hong Kong Hang Seng Bank Limited 83 Des Voeux Road Central Hong Kong Website of the Company http://www.chinasandi.com.hk

MARKET PRICES

The table below shows the closing prices of the Ordinary Shares on the Stock Exchange on (i) the last trading day on which trading in the Ordinary Shares took place in each of the calendar months during the period commencing six calendar months immediately preceding the date of the Rights Issue Announcement and ending on the Latest Practicable Date; (ii) 27 October 2015, being the last trading day prior to the publication of the Rights Issue Announcement; and (iii) the Latest Practicable Date.

	Closing Price of
	the Ordinary
Date	Shares
	(HK$)
30 April 2015	0.66
29 May 2015	0.81
30 June 2015	0.86
31 July 2015	0.70
31 August 2015	0.61
30 September 2015	0.57
28 October 2015 (being the last trading day immediately preceding the date
of the Rights Issue Announcement)	0.58
Latest Practicable Date	0.45

The highest and lowest closing prices per Ordinary Share recorded on the Stock Exchange during the Relevant Period were HK$0.86 on 30 June 2015 and HK$0.45 on the LPD (i.e. 7 December 2015) respectively.

– IV-11 –

GENERAL INFORMATION

APPENDIX IV

DISCLOSURE OF INTERESTS OF DIRECTORS AND CHIEF EXECUTIVES

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

(a) Long positions in the shares and underlying shares of the Company

				Approximate
				percentage of
				the Issued
			Number of	Ordinary Capital
Name of Director	Capacity	Number of shares	underlying shares	as at the LPD
Mr. Guo Jiadi	Interest of controlled	200,000,000_(Note 1)_	See notes 2 & 4	24.26
	corporation
	Interest of controlled	See Note 1	221,166,666	26.83
	corporation		(Notes 2 & 4)
	Interest of controlled	Nil	180,500,000	21.89
	corporation		(Notes 3 & 4)

Notes:

These 200,000,000 Ordinary Shares were held by United Century, a company whollyowned by Mr. Guo. In addition, Mr. Guo is interested in 1,248,924,892 Ordinary Shares, being the maximum number of Rights Shares which United Century may be required to underwrite under the Underwriting Agreement. By virtue of the SFO, Mr. Guo is deemed to be interested in the Ordinary Shares which United Century are interested.
These 221,166,666 underlying Ordinary Shares were held by United Century, a company wholly-owned by Mr. Guo. By virtue of the SFO, Mr. Guo is deemed to be interested in these underlying Ordinary Shares.
These 180,500,000 underlying Ordinary Shares were held by King Partner, a company wholly-owned by Mr. Guo. By virtue of the SFO, Mr. Guo is deemed to be interested in these underlying Ordinary Shares.

– IV-12 –

GENERAL INFORMATION

APPENDIX IV

These are Ordinary Shares issuable upon exercise of the conversion rights pursuant to the terms and condition of the CPS at the initial conversion price of HK$3 per share (subject to adjustment) during the period from 16 February 2012 to 4:00 p.m. (Hong Kong time) on the date of all CPS being converted or purchased in full (or such earlier date as may be required under the applicable laws of Bermuda, Hong Kong and the Company’s constitution (“ CPS Conversion Period ”).

(b) Long positions in associated corporation

			Approximately
	Name of associated		percentage of
Name of Director	corporation	Capacity	registered capital
Mr. Guo Jiadi	Fujian Jiake	Interest of controlled	49%
		corporation_(Note)_

Note:

Mr. Guo’s interest in Fujian Jiake is held through Fuzhou Gaojia, a company established in the PRC and ultimately controlled by Mr. Guo.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or the chief executives of the Company or their respective associates had any interests or short positions in the shares or, in respect of equity derivatives, underlying shares in, or debentures of, the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they have taken or deemed to have under such provisions of the SFO) or which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or were required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

DISCLOSURE OF INTERESTS OF SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the interests and short positions of Shareholders (not being Directors or the chief executives of the Company) in the shares and underlying shares of the Company which were notified to the Company and the Stock Exchange pursuant to Divisions 2 and 3 of Part XV of the SFO and required to be entered in the register maintained by the Company pursuant to section 336 of the SFO were as follows:

– IV-13 –

GENERAL INFORMATION

APPENDIX IV

Long positions of substantial shareholders in the shares and underlying shares of the Company

					Approximate
					percentage of
					the
					Issued Ordinary
Name of				Number of	Capital as at the
Shareholder	Capacity	Number of shares	underlying shares		LPD
United Century	Beneficial owner	200,000,000_(Note 2)_		See Note 3	24.26
(Note 1)
	Beneficial owner		221,166,666_(Note 3)_		26.83
King Partner	Beneficial owner	Nil	180,500,000_(Note 5)_		21.89
(Note 4)
Best China	Beneficial owner	42,500,000		Nil	5.15
(Note 6)
Chu Yuet Wah	Interest in controlled	42,500,000		Nil	5.15
(Note 6)	corporation

Notes:

United Century is a company incorporated in the BVI and is wholly-owned by Mr. Guo. Mr. Guo is also the sole director of United Century.
These are Ordinary Shares in issue. In addition, United Century is interested in 1,248,924,892 Ordinary Shares, being the maximum number of Rights Shares which it may be required to underwrite under the Underwriting Agreement.
These are Ordinary Shares issuable upon exercise of the conversion rights pursuant to the terms and condition of the CPS at the initial conversion price of HK$3 per share (subject to adjustment) during the CPS Conversion Period.
King Partner is a company incorporated in the BVI and is wholly-owned by Mr. Guo. Mr. Guo is also the sole director of King Partner.
These are Ordinary Shares issuable upon exercise of the conversion rights pursuant to the terms and condition of the CPS at the initial conversion price of HK$3 per share (subject to adjustment) during the CPS Conversion Period.
According to the individual substantial shareholder notice filed by Mrs. Chu, Best China is a corporation controlled by her. By virtue of the SFO, Mrs. Chu is deemed to be interested in these Ordinary Shares.

– IV-14 –

GENERAL INFORMATION

APPENDIX IV

ADDITIONAL DISCLOSURE

As at the Latest Practicable Date:

(a) the Group did not have any beneficial interest in the relevant securities of United Century;
(b) during the Relevant Period, none of the Group or the Directors had any dealings for value in the relevant securities of United Century;
(c) save as disclosed in the paragraph headed “DISCLOSURE OF INTERESTS OF DIRECTORS AND CHIEF EXECUTIVES” in this appendix, none of the Directors was interested in any Ordinary Shares, convertible preference shares, convertible securities, warrants, options or derivatives of the Company or similar rights which are convertible or exchangeable into any Ordinary Shares;
(d) none of the Directors had any beneficial interest in the relevant securities of United Century or its associates save and except that Mr. Guo (an executive Director) was the sole beneficial owner of United Century and King Partner, an associate of United Century;
(e) during the Relevant Period, none of the Directors, United Century, the director(s) of United Century or parties acting in concert with United Century had any dealings for value in the relevant securities of the Company;
(f) no relevant securities in the Company was owned or controlled by a subsidiary of the Company or by a pension fund of any member of the Group or by Kingston Corporate Finance (the financial adviser to the Company in relation to the Rights Issue), the IFA or by any adviser to the Company as specified in class (2) of the definition of associates (excluding exempt principal traders) under the Takeovers Code save and except that Mrs. Chu, the ultimate controlling shareholder of Kingston Corporate Finance, held approximately 5.15% of the Issued Ordinary Capital as at the LPD through a company controlled by her (namely, Best China);
(g) during the Relevant Period, none of the persons referred to in paragraph (f) above had any dealings for value in the relevant securities in the Company;
(h) save for the transactions contemplated by the Underwriting Agreement, the United Century Undertaking and the King Partner Undertaking, there was no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code existed between United Century or persons acting in concert with it and any other persons;

– IV-15 –

GENERAL INFORMATION

APPENDIX IV

(i) no relevant securities in the Company was managed on a discretionary basis by fund managers (other than exempt fund managers) connected with the Company and there was no dealings for value in relevant securities in the Company by such person(s) during the Relevant Period;
(j) (i) no person (including the Directors) had, prior to the posting of this circular, irrevocably committed themselves to vote for or against the Rights Issue, the Underwriting Agreement and/or the Whitewash Waiver or to accept or reject the Rights Issue except for United Century pursuant to the United Century Undertaking; and (ii) Mr. Guo, being the only Director who had beneficial shareholding in the Company, is required to abstain from voting on the Transactions;
(k) no relevant securities in the Company had been borrowed or lent by the Concert Group, the Company or any Directors;
(l) save for the underwriting commission as disclosed in the section headed “Letter from the Board – Underwriting Agreement” in this circular payable to United Century, being a company wholly-owned by Mr. Guo (an executive Director) and of which Mr. Guo is the sole director, no benefit (other than statutory compensation) would be given to any Director as compensation for loss of office or otherwise in connection with the Rights Issue, the Underwriting Agreement and/or the Whitewash Waiver;
(m) save for the Underwriting Agreement, the United Century Undertaking and the King Partner Undertaking, no agreement, arrangement or understanding (including any compensation arrangement) existed between (i) the Concert Group and any Director, recent Director, shareholder or recent shareholder of the Company which had any connection with or dependence upon the Rights Issue, the Underwriting Agreement and/or the Whitewash Waiver; and (ii) any Director and any other person which is conditional on or dependent upon the outcome of the Rights Issue, the Underwriting Agreement and/or the Whitewash Waiver or otherwise connected with the Rights Issue, the Underwriting Agreement and/or the Whitewash Waiver;
(n) save for the Underwriting Agreement, no material contracts had been entered into by United Century in which any Director had any a material personal interest;
(o) during the Relevant Period, none of the Directors, United Century, the director(s) of United Century or parties acting in concert with United Century had any dealings for value in the relevant securities of the Company;
(p) save for the interests of United Century and persons acting in concert with it (namely, Mr. Guo and King Partner) as disclosed in the paragraphs headed “DISCLOSURE OF INTERESTS OF DIRECTORS AND CHIEF EXECUTIVES” and “DISCLOSURE OF INTERESTS SUBSTANTIAL SHAREHOLDERS” in this appendix, United Century and persons acting in concert with it was not interested in any Ordinary Shares, convertible preference shares, convertible securities, warrants, options or derivatives of the Company or similar rights which are convertible or exchangeable into any Ordinary Shares;

– IV-16 –

GENERAL INFORMATION

APPENDIX IV

(q) save as disclosed in the paragraph headed “DISCLOSURE OF INTERESTS OF DIRECTORS AND CHIEF EXECUTIVES” in this appendix, the sole director of United Century (namely, Mr. Guo) was not interested in any Ordinary Shares, convertible preference shares, convertible securities, warrants, options or derivatives of the Company or similar rights which are convertible or exchangeable into any Ordinary Shares; and
(r) save for the Underwriting Agreement, there was no agreement or arrangement to which United Century was a party which related to the circumstances in which it may or may not invoke or seek to invoke a condition to the Rights Issue, the Underwriting Agreement and/or the Whitewash Waiver.

DIRECTORS’ INTERESTS IN ASSETS/CONTRACTS AND OTHER INTERESTS

Save for the material contracts set out in paragraphs (a) and (d) of the section headed “Material Contracts” in this appendix, there was no contract or arrangement in which any of the Directors is materially interested and which is significant in relation to the business of the Group subsisted as at the Latest Practicable Date.

As at the Latest Practicable Date, none of the Directors have, or have had, any direct or indirect interests in any assets which have been acquired or disposed of by or leased to, or which are proposed to be acquired or disposed of by or leased to, any member of the Group since 31 March 2015, the date to which the latest published audited consolidated financial statements of the Group were made up.

COMPETING INTERESTS

As at the Latest Practicable Date, save and except for Mr. Guo, an executive Director, none of the Directors nor their respective associates had any businesses or interests that compete or might compete with the business of the Group or any other conflict of interests with the Group.

Mr. Guo carries out property development and investment businesses in the PRC through Fujian Sandi Property Development Company Limited (“ Fujian Sandi ”) and Fuzhou Gaojia. To deal with the potential conflict of interests between Mr. Guo and the Company, each of Mr. Guo, Fujian Sandi and Fuzhou Gaojia had given its non-compete undertakings in favour of the Company on the terms as disclosed in the section headed “Report of the Directors – Directors’ Interests in a Competing Business” on page 38 of the annual report of the Company for the financial year ended 31 March 2015.

– IV-17 –

GENERAL INFORMATION

APPENDIX IV

LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation, arbitration or claims of material importance and, so far as the Directors were aware, no litigation or claim of material importance was pending or threatened by or against any member of the Group.

MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business carried on or intended to be carried on by the Company or any of its subsidiaries) had been entered into by the members of the Group within the two years immediately preceding the date of the commencement of the offer period (having the meaning ascribed to it in the Takeovers Code) in respect of the Rights Issue, being 28 October 2015, and up to the Latest Practicable Date which are or may be material:

(a) the conditional second supplemental agreement dated 30 July 2014 entered between (A) Fujian Sinco and (B) Fujian Gaojia whereby, among other things:
(i) the term governing capital contribution under the joint venture agreement entered into between Fujian Sinco and Fujian Gaojia dated 7 August 2013 (“ Fujian Jiake JV Agreement ”) (as supplemented by a supplemental agreement dated 30 August 2013) in relation to the formation of Fujian Jiake was amended as “after contributing 20% of the respective total capital contribution by Fujian Sinco and Fuzhou Gaojia, they are required to contribute the remaining 80% of total capital contribution within 24 months from the date of establishment of Fujian Jiake (i.e. 24 September 2013) as shown on the business license of Fujian Jiake, but shall not be later than the date of the construction land use right transfer notice (“ Transfer Notice ”) making by 西安市新城區國土資源局 (The Bureau of Land and Resources of Xincheng District of Xi’an) in relation to the plot of land located at 西安曲江大明宮遺址區 (Xi’an Qujiang Daming Palace Heritage Area) with a total site area of approximately 40 mu (畝)”; and

– IV-18 –

GENERAL INFORMATION

APPENDIX IV

(ii) Fuzhou Gaojia shall pay a fee to Fujian Jiake on any outstanding amount of the capital contribution due from it to Fujian Jiake at a rate of 6% per annum from time to time, which is determined with reference to the prevailing lending interest rates offered by the commercial banks in the PRC, and shall be payable on a quarterly basis. The agreed fee to be paid by Fuzhou Gaojia to Fujian Jiake in consideration for the variations of term to the Fujian Jiake JV Agreement shall be calculated from 25 September 2014, being the date immediately after the latest date for Fuzhou Gaojia to make its remaining capital contribution pursuant to the original term of the Fujian Jiake JV Agreement, onwards;
(b) the conditional placing agreement dated 28 April 2015 entered into between the Company and China Securities (International) Corporate Finance Company Limited (‘‘ Bonds Placing Agent ’’) as the placing agent, in relation to the placing of bonds up to an aggregate principal amount of HK$200,000,000, whereby, among other things, the Bonds Placing Agent would receive 1% of the issue of the bonds multiplied by such principal amount of the bonds successfully placed by the Bonds Placing Agent;
(c) the conditional placing agreement dated 29 April 2015 entered into between the Company and Kingston Securities Limited (‘‘ Shares Placing Agent ’’) as placing agent in relation to the placing of a maximum of 137,410,000 new Ordinary Shares whereby, among other things, the Shares Placing Agent would receive a commission of 2.5% of the amount equal to the placing price (being HK$0.37 per share) multiplied by the actual number of the placing shares successfully placed by Shares Placing Agent; and
(d) the Underwriting Agreement.

Save and except for the parties set out below who were the connected persons of the Company as at the date of the relevant material contracts, each of the counter parties to the material contracts referred to above were parties independent of and not connected with the Company and its connected persons as at the date of the relevant material contracts:

(i) Fujian Gaojia, a party to the material contract set out in paragraph (a) above; and
(ii) United Century, a party to the material contract set out in paragraph (d) above.

– IV-19 –

GENERAL INFORMATION

APPENDIX IV

SERVICE CONTRACTS

Set out below are certain particulars of the respective service contracts entered into between the Company and (i) Amika Guo, an executive Director, being a contract which had been amended on 1 July 2015 and, therefore, is a service contract amended within 6 months before the date of the Rights Issue Announcement; and (ii) Dr. Wong Yun Kuen, an independent non-executive Director, which was entered into on 18 September 2015 and, therefore, is a service contract entered into within 6 months before the date of the Rights Issue Announcement:

Amount of fixed remuneration payable, excluding Name of Director Expiry date of the contract arrangements for pension payments [(Note 1)] Ms. Amika Lan E Guo 8 July 2017 HK$65,000 per month [(Note 2)] Dr. Wong Yun Kuen 17 September 2018 [(Note 3)] HK$25,000 for every 3 months

Notes:

None of Amika Guo and Dr. Wong Yun Kuen were entitled to any variable remuneration payable under their respective service contracts.
The fixed remuneration payable under the service contract between the Company and Amika Guo was increased from HK$45,000 per month to HK$65,000 per month with effect from 1 July 2015. Amika Guo was appointed as an executive Director on 9 July 2014 and did not have any previous service contract with the Group as a director prior to her existing service contract as disclosed in this circular.
This service contract was entered into after the previous service contract between the Company and Dr. Wong expired on 17 September 2015. Under the previous service contract between Dr. Wong and the Company for a term of three years commenced on 18 September 2012 and ended on 16 September 2015, Dr. Wong was entitled to a fixed remuneration of HK$25,000 for every three months. Dr. Wong was not entitled to any variable remuneration under his previous service contract.

As at the Latest Practicable Date and save as disclosed in this circular:

(a) there was no service contract with the Company or any of its subsidiaries or associated companies in force for the Directors (i) which (including both continuous and fixed term contracts) has been entered into or amended within 6 months before the date of the Rights Issue Announcement; (ii) which is a continuous contract with a notice period of 12 months or more; or (iii) which is a fixed term contract with more than 12 months to run irrespective of the notice period.

– IV-20 –

GENERAL INFORMATION

APPENDIX IV

(b) none of the Directors had any existing or proposed service contracts with the Company or any member of the Group which does not expire or is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

EXPERTS AND CONSENTS

The following are the qualifications of the experts who have given opinions or advice contained in this circular:

Name Qualification BDO Limited Certified Public Accountants Nuada Limited a corporation licensed to conduct Type 6 (advising on corporate finance) regulated activity under the SFO Chung Hin Appraisal Limited Independent Property Valuer Fujian Bose Law Firm PRC Legal Adviser

As at the Latest Practicable Date, the above experts did not have any shareholding, directly or indirectly, 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. As at the Latest Practicable Date, the above experts did not have any direct or indirect interest in any assets which have been acquired, or disposed of by, or leased to any member of the Group, or were proposed to be acquired, or disposed of by, or leased to any member of the Group since 31 March 2015, the date to which the latest published audited consolidated financial statements of the Group were made up.

Each of the above experts has given and has not withdrawn its written consent to the issue of this circular, with the inclusion therein of its letter(s), report(s), opinion and/or the references to its name in the form and context in which they appear.

EXPENSES

The expenses in connection with the Rights Issue, including underwriting commission, financial advisory fees, printing, registration, legal and accounting fees, are estimated to be approximately HK$6.8 million and will be payable by the Company.

– IV-21 –

GENERAL INFORMATION

APPENDIX IV

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection on any business day from the date of this circular up to and including the date of the completion of the Rights Issue during normal business hours from 9:00 a.m. to 5:00 p.m. (except Saturdays and public holidays) at the principal office of the Company at Unit 3309, 33/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong and will also be available on the websites of the Company http://www.chinasandi.com.hk and the SFC at http://www.sfc.hk:

(a) the memorandum of association and the bye-laws of the Company;
(b) the memorandum and articles of association of United Century;
(c) the annual reports of the Company for the two financial years ended 31 March 2014 and 31 March 2015 respectively;
(d) the Letter from the Board, the text of which is set out on pages 14 to 50 of this circular;
(e) the IBC Letter, the text of which is set out on pages 51 to 52 of this circular;
(f) the Letter from the IFA, the text of which is set out on pages 53 to 86 of this circular;
(g) the report on the unaudited pro forma statement of the Group issued by BDO Limited, the text of which is set out in Appendix II to this circular;
(h) the valuation report on the property interests of the Group prepared by Chung Hin Appraisal Limited, the text of which is set out in Appendix III to this circular;
(i) the written consents from the experts referred to in the paragraph headed “Experts and Consents” in this appendix;
(j) the written consent from Kingston Corporate Finance that it has given and has not withdrawn its written consent to the issue of this circular with the inclusion of and reference to its name in the form and context in which it appears;
(k) the service contracts as referred to in the paragraph headed “Service Contracts” in this appendix;
(l) the material contracts as referred to in the paragraph headed “Material Contracts” in this appendix;

– IV-22 –

GENERAL INFORMATION

APPENDIX IV

(m) the United Century Undertaking;
(n) the King Partner Undertaking;
(o) this circular; and
(p) the interim report of the Company for the six months ended 30 September 2015.

MISCELLANEOUS

(a) The registered office of United Century is situated at Palm Grove House, P. O. Box 438 Road Town, Tortola, VG 1110, BVI.
(b) As at the Latest Practicable Date, there was no agreement, arrangement or understanding between United Century (and parties acting in concert with it) and any other person whereby the shares to be acquired under the Rights Issue will be transferred, changed or pledged to any other persons.
(c) In the event of inconsistency, the English text of this circular shall prevail over the Chinese text.

– IV-23 –

NOTICE OF SGM

CHINA SANDI HOLDINGS LIMITED 中國三迪控股有限公司 (incorporated in Bermuda with limited liability) (Stock Code: 910)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting (the “ SGM ”) of China Sandi Holdings Limited (the “ Company ”) will be held at 11:00 a.m. on Monday, 28 December 2015 at 6/F, Ibis Hong Kong Central & Sheung Wan Hotel, No. 28 Des Voeux Road West, Sheung Wan, Hong Kong to consider and, if thought fit, approve, with or without modifications, the following resolutions as ordinary resolutions. Unless otherwise indicated, capitalised terms used in this notice and the following resolutions shall have the same meanings as those defined in the circular of the Company dated 9 December 2015 (the “ Circular ”) of which the notice convening the SGM forms part.

ORDINARY RESOLUTIONS

“ THAT subject to (i) the passing of each of the resolutions numbered 2, 3 and 4 set out in this notice of meeting; and (ii) fulfillment of the conditions of the Underwriting Agreement (a copy of which has been produced to this meeting marked “A” and signed by the chairperson of this meeting for the purpose of identification) and such agreement not being terminated in accordance with its terms:
(a) the allotment and issue by way of rights issue of not less than 1,648,924,892 Rights Shares at the Subscription Price of HK$0.20 per Rights Share to the Qualifying Shareholders whose names appear on the register of members of the Company on 12 January 2016 (or such other date as the Company and United Century may agree to be the Record Date) on the basis of two Rights Shares for every one Ordinary Share held on the Record Date and otherwise on the terms and conditions as set out in the Circular be and is hereby approved;

– SGM-1 –

NOTICE OF SGM

(b) the Directors be and are hereby authorised to allot and issue the Rights Shares pursuant to or in connection with the Rights Issue to the Qualifying Shareholders and, in particular, the Directors may make such exclusion or other arrangements in relation to the Non-Qualifying Shareholders as they deem necessary or expedient having regard to any restrictions or obligations under the laws and/ or regulations of, or the rules and/or requirements of any recognised regulatory body or any stock exchange in, any territory outside Hong Kong; and
(c) any one Director be and is hereby authorised to sign and execute such documents (including but not limited to deeds) and do all such acts and things incidental to the Rights Issue as he considers necessary or otherwise expedient in connection with the implementation of or giving effect to the Rights Issue and the transactions contemplated thereunder or in this resolution (including but not limited to the use of the common seal of the Company)”.;
“ THAT subject to the passing of each of the resolutions numbered 1, 3 and 4 set out in this notice of meeting, the absence of arrangements for application for the Rights Shares by the Qualifying Shareholders in excess of their entitlements under the Rights Issue as referred to in Rule 7.21 of the Listing Rules be and is hereby approved.”
“ THAT subject to the passing of each of the resolutions numbered 1, 2 and 4 set out in this notice of meeting:
(a) the entering into the Underwriting Agreement by the Company be and is hereby approved, confirmed and ratified and the performance of the transactions contemplated thereunder by the Company (including but not limited to the arrangements for taking up of the underwritten Rights Shares, if any, by United Century, the sole underwriter) be and are hereby approved; and
(b) any one Director be and is hereby authorised to sign and execute such documents (including but not limited to deeds) and do all such acts and things incidental to the Underwriting Agreement as he considers necessary or otherwise expedient in connection with the implementation of or giving effect to the Underwriting Agreement (including without limitation entering into supplemental agreement(s) in relation to the Underwriting Agreement) and the transactions contemplated thereunder or in this resolution (including but not limited to the use of the common seal of the Company).”

– SGM-2 –

NOTICE OF SGM

“ THAT subject to (i) the passing of each of the resolutions numbered 1, 2 and 3 set out in this notice of meeting; and (ii) the Executive granting to United Century the Whitewash Waiver and the satisfaction of any condition(s) attached to the Whitewash Waiver and such other necessary waiver or consent of the Executive for the transactions contemplated under the Rights Issue and/or the Underwriting Agreement (if any), the waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code waiving any obligation on the part of United Century to make a mandatory general offer for all the securities of the Company not already owned or agreed to be acquired by the Concert Group as a result of United Century’s underwriting obligations under the Underwriting Agreement be and is hereby approved.”

By order of the Board China Sandi Holdings Limited Guo Jiadi Chairman

Hong Kong, 9 December 2015

As at the date of this notice, the Board comprises Mr. Guo Jiadi, Ms. Amika Lan E Guo and Mr. Lin Jianbin, being executive Directors; and Dr. Wong Yun Kuen, Mr. Chan Yee Ping, Michael, Mr. Yu Pak Yan, Peter, Mr. Zheng Jinyun and Mr. Zheng Yurui, being independent nonexecutive Directors.

Registered office: Head office and principal place of business Clarendon House in Hong Kong: 2 Church Street Unit 3309 Hamilton HM 11 33/F, West Tower Bermuda Shun Tak Centre 168–200 Connaught Road Central Hong Kong

Notes:

Any shareholder entitled to attend and vote at the meeting convened by the above notice is entitled to appoint another person as his proxy to attend and, subject to the provisions of the Bye-laws of the Company, vote in his stead. The proxy needs not be a shareholder of the Company.
In order to be valid, the enclosed form of proxy must be deposited together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority, at the offices of the Company’s Hong Kong branch share registrar, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong not less than 48 hours before the time for holding the meeting or adjourned meeting.
The Register of Members of the Company will be temporarily closed from Wednesday, 23 December 2015 to Monday, 28 December 2015, both days inclusive, during which period no transfer of shares will be effected. In order to qualify for the attendance at the Company’s special general meeting to be held on Monday, 28 December 2015, all completed transfer forms accompanied by the relevant share certificates must be lodged with the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited at Level 22 Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration not later than 4:30 p.m. on Tuesday, 22 December 2015.

– SGM-3 –

AI assistant

C&D Property Management Group Co., Ltd — Proxy Solicitation & Information Statement 2015

50406_rns_2015-12-08_1135d77c-7765-4eb1-a420-cab00ef10fdb.pdf

Nuada Limited

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

Time

Event

EXPECTED TIMETABLE

EXPECTED TIMETABLE

Time Event (if applicable) Date

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE RIGHTS SHARES

(1) PROPOSED RIGHTS ISSUE ON THE BASIS OF TWO RIGHTS SHARES FOR EVERY ONE EXISTING ORDINARY SHARE

HELD ON THE RECORD DATE;

(3) PROPOSED CHANGE OF BOARD LOT SIZE; AND

(4) NOTICE OF SPECIAL GENERAL MEETING

LETTER FROM THE BOARD

INTRODUCTION

PROPOSED RIGHTS ISSUE

LETTER FROM THE BOARD

Subscription Price

LETTER FROM THE BOARD

Chart on trading trend of the Ordinary Shares from 29 April 2015 to the LPD

LETTER FROM THE BOARD

Status of the Rights Shares

Qualifying Shareholders and closure of register of members

LETTER FROM THE BOARD

Rights of Overseas Shareholders

Fractions of Rights Shares

No arrangement for application for excess Rights Shares

Application for listing

Share certificates for the Rights Shares and refund cheques (if applicable)

Conditions of the Rights Issue

LETTER FROM THE BOARD

United Century Undertaking

UNDERWRITING AGREEMENT

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Conditions of the Underwriting Agreement

LETTER FROM THE BOARD

Termination of the Underwriting Agreement

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

LETTER FROM THE BOARD

REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

FUND RAISING EXERCISE OF THE COMPANY IN THE PAST 12 MONTHS AND CHANGE IN USE OF PROCEEDS RAISED FROM SHARES PLACING

UNDERTAKINGS NOT TO CONVERT THE OUTSTANDING CPS AND ADJUSTMENT TO THE CONVERSION PRICE OF THE CPS

INFORMATION ON UNITED CENTURY AND THE CONCERT GROUP

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

Approval of the Rights Issue and the Absence of Excess Application Arrangement by the LR Independent Shareholders

Connected transactions

Disclosure under Rule 2.17 of the Listing Rules

TAKEOVERS CODE IMPLICATIONS AND APPLICATION FOR THE WHITEWASH WAIVER

LETTER FROM THE BOARD

ELIGIBILITY TO VOTE AT THE SGM

Shareholders required

Transaction

LETTER FROM THE BOARD

LETTER FROM THE BOARD

CHANGE IN BOARD LOT SIZE

LETTER FROM THE BOARD

WARNING OF THE RISK OF DEALINGS IN THE SECURITIES OF THE COMPANY

POSITIVE ALERT ANNOUNCEMENT AND PROFIT FORECAST

SGM

RECOMMENDATION

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

LETTER FROM THE IBC

C&D Property Management Group Co., Ltd Proxy Solicitation & Information Statement 2015

CHINA SANDI HOLDINGS LIMITED 中國三迪控股有限公司 (incorporated in Bermuda with limited liability) (Stock Code: 910)