Central Development Holdings Limited — Capital/Financing Update 2011

Aug 2, 2011

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

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

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CHINA TIMBER RESOURCES GROUP LIMITED （中國木業資源集團有限公司 *）

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 269)

PROPOSED ISSUE OF 9% CONVERTIBLE BONDS DUE 2014

Sole Placing Agent

Deutsche Bank AG, Hong Kong Branch

On 2 August 2011, the Company entered into a subscription agreement with each of the Subscribers pursuant to which the Company has agreed to issue the First Convertible Bonds, the Second Convertible Bonds and the Third Convertible Bonds to the First Subscriber, the Second Subscriber and the Third Subscriber, respectively.

Upon completion of the Subscription Agreements and assuming full conversion of the Convertible Bonds, the Conversion Shares will represent approximately 24.76% of the Company’s existing issued share capital and approximately 19.85% of the Company’s issued share capital as enlarged by the issue of the Conversion Shares.

The estimated net proceeds from the issue of the Convertible Bonds would be approximately HK$1,990 million. The Company intends to apply the net proceeds from the issue of the Convertible Bonds to fund the Group’s capital contribution to the Target Company under the Second Capital Increase Agreement and as general working capital of the Company.

Completion of the issue of the Convertible Bonds is subject to certain conditions which are set out in the paragraph headed “Conditions Precedent” below. A circular containing details of the Subscription Agreements and a notice convening the EGM to approve the Subscription Agreements will be dispatched to the Shareholders on or before 23 August 2011.

The Company will apply to the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares.

As the Subscription Agreements may or may not complete, Shareholders and prospective investors are advised to exercise caution when dealing in the securities of the Company.

* for identification purpose only

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THE FIRST SUBSCRIPTION AGREEMENT

Date:

• 2 August 2011

Parties:

• (1) The Company; and

• (2) Li Ka Shing (Canada) Foundation, a company incorporated in Canada and is a private foundation registered with the Minister of National Revenue as a registered charity within the meaning of the Income Tax Act (Canada).

To the best knowledge, information and belief of the Directors, having made all reasonable enquires, the First Subscriber and its ultimate beneficial owners are independent third parties not connected with the Company or any of its connected persons.

Principal terms of the First Convertible Bonds

• Principal amount HK$1,300 million

• Maturity date The date falling on the third anniversary of its issue date.

• Interest The First Convertible Bonds bear interest from the issue date of the First Convertible Bonds at the rate of 9% per annum on the principal amount of the First Convertible Bonds outstanding. The interest will be payable by the Company annually in arrears.

• Conversion price HK$0.40 per Conversion Share, subject to adjustment in accordance with the terms of the First Convertible Bonds including, among other things, subdivision or consolidation of Shares, the making of a free distribution of Shares, bonus issue, the declaration of a dividend in Shares, capital distribution, issuance of options, rights or warrants, and other dilutive events such as issue of new Shares.

• Number of Conversion Shares 3,250,000,000 new Shares will be issued upon full conversion of issuable the First Convertible Bonds based on the initial conversion price of HK$0.40.

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THE SECOND SUBSCRIPTION AGREEMENT

Date:

• 2 August 2011

Parties:

• (1) The Company; and

• (2) China Life Insurance (Overseas) Company Limited, a wholly-owned subsidiary of China Life Insurance (Group) Company. Its main business covers insurance, investment, and provident fund service in Hong Kong and Macau. With “China Life” branding reputation and strong support of the parent group, China Life Insurance (Overseas) Company Limited has been rapidly growing into a leading local insurance company in Hong Kong and Macau.

To the best knowledge, information and belief of the Directors, having made all reasonable enquires, the Second Subscriber and its ultimate beneficial owners are independent third parties not connected with the Company or any of its connected persons.

Principal terms of the Second Convertible Bonds

• Principal amount HK$600 million

• Maturity date The date falling on the third anniversary of its issue date.

• Interest The Second Convertible Bonds bear interest from the issue date of the Second Convertible Bonds at the rate of 9% per annum on the principal amount of the Second Convertible Bonds outstanding. The interest will be payable by the Company annually in arrears.

• Conversion price HK$0.40 per Conversion Share, subject to adjustment in accordance with the terms of the Second Convertible Bonds including, among other things, subdivision or consolidation of Shares, the making of a free distribution of Shares, bonus issue, the declaration of a dividend in Shares, capital distribution, issuance of options, rights or warrants, and other dilutive events such as issue of new Shares.

• Number of Conversion Shares 1,500,000,000 new Shares will be issued upon full conversion of issuable the Second Convertible Bonds based on the initial conversion price of HK$0.40.

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THE THIRD SUBSCRIPTION AGREEMENT

Date:

• 2 August 2011

Parties:

• (1) The Company; and

• (2) Dr. Lo Ka Shui, who is the chairman and managing director of Great Eagle Holdings Limited and a non-executive director and the chairman of Eagle Asset Management (CP) Limited (manager of the publicly listed Champion Real Estate Investment Trust).

To the best knowledge, information and belief of the Directors, having made all reasonable enquires, the Third Subscriber is an independent third party not connected with the Company or any of its connected persons.

Principal terms of the Third Convertible Bonds

• Principal amount HK$100 million

• Maturity date The date falling on the third anniversary of its issue date.

• Interest The Third Convertible Bonds bear interest from the issue date of the Third Convertible Bonds at the rate of 9% per annum on the principal amount of the Third Convertible Bonds outstanding. The interest will be payable by the Company annually in arrears.

• Conversion price HK$0.40 per Conversion Share, subject to adjustment in accordance with the terms of the Third Convertible Bonds including, among other things, subdivision or consolidation of Shares, the making of a free distribution of Shares, bonus issue, the declaration of a dividend in Shares, capital distribution, issuance of options, rights or warrants, and other dilutive events such as issue of new Shares.

• Number of Conversion Shares 250,000,000 new Shares will be issued upon full conversion of the issuable Third Convertible Bonds based on the initial conversion price of HK$0.40.

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Other terms of the Convertible Bonds

Set out below is a summary of the other common principal terms of the Convertible Bonds:

• Issue price 100% of the principal amount of the Convertible Bonds, payable in full at completion of the Subscription Agreements.

• Conversion period Each Bondholder has the right to convert the Convertible Bonds in whole or in part into Conversion Shares at any time on or after the issue date of the Convertible Bonds up to the maturity date.

• Redemption at maturity Each Convertible Bond will be redeemed on maturity at a value equal to the aggregate of (1) 100% of the outstanding principal amount of the Convertible Bonds; and (2) all outstanding interest accrued thereon.

• Mandatory Conversion If at any time prior to the maturity date, the current market price of the Shares is more than HK$1.00 (such cut-off amount being subject to adjustment in the event of any subdivision or consolidation of the Shares) for 60 consecutive trading days, then the Company may give not less than 7 business days’ notice to the Bondholders to mandatorily convert all or any part of the Convertible Bonds.

• Redemption at the option of The Company may, at any time and from time to time, purchase the the Company Convertible Bonds at any price in the open market or otherwise in compliance with applicable laws and regulations.

The Company may also, at any time up to (and excluding) the commencement of the seven (7) calendar day period ending on (and including) the maturity date, when the principal amount of the Convertible Bonds outstanding is equal to or less than 10% of the original aggregate principal amount issued by the Company, by written notice to the Bondholders elect to redeem the whole or part of the then outstanding principal amount of the Convertible Bonds at an amount equal to 100% of the principal amount of the Convertible Bonds sought to be redeemed as specified in the redemption notice and all unpaid interest thereon.

Transferability

The Convertible Bonds will be transferable.

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Status The Convertible Bonds will represent direct, unconditional, unsubordinated and unsecured obligations of the Company and will at all times rank pari passu with all existing and future unsubordinated and unsecured obligations of the Company.

Voting A Bondholder will not be entitled to vote at any general meetings of the Company by reason only of it being a Bondholder. Listing No application will be made for the listing of the Convertible Bonds on the Stock Exchange or any other exchange.

Comparison of conversion price

The initial conversion price of HK$0.40 per Conversion Share was arrived at after arm’s length negotiation between the Company and the Subscribers and represents:

• (i) a premium of approximately 8.1% to the closing price of the Shares of HK$0.37 as quoted on the Stock Exchange on the date of the Subscription Agreements;

• (ii) a premium of approximately 8.1% to the closing price of the Shares of HK$0.37 as quoted on the Stock Exchange on the Last Trading Day;

• (iii) a premium of 11.1% to the average closing price of HK$0.36 per Share for the last 5 consecutive trading days up to and including the Last Trading Day; and

• (iv) a premium of 15.0% to the average closing price of HK$0.3478 per Share for the last 30 consecutive trading days up to and including the Last Trading Day.

Conversion Shares

Assuming full conversion of the Convertible Bonds at the conversion price of HK$0.40 per Conversion Share, the Convertible Bonds will be convertible into 5,000,000,000 new Shares, representing approximately 24.76% of the existing issued share capital of the Company and approximately 19.85% of the issued share capital of the Company as enlarged by the issue of the Conversion Shares.

The Conversion Shares have a nominal value of HK$50,000,000 and a market value of approximately HK$1,850 million based on the closing price of the Shares of HK$0.37 on 2 August 2011.

The Conversion Shares will rank pari passu in all respects with the Shares then in issue on the relevant conversion date.

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Conditions precedent

The obligations of each of the Subscribers under the relevant Subscription Agreement are conditional upon:

• (i) the Shareholders passing a resolution in general meeting to authorise the Directors to allot and issue the Conversion Shares and to issue the relevant Convertible Bonds in connection therewith;

• (ii) the Stock Exchange having granted the listing of, and permission to deal in, the Conversion Shares with respect to the Convertible Bonds;

• (iii) the representations and warranties of the Company set out in the relevant Subscription Agreement not having been breached and remaining true and accurate in all material respects and not misleading in any material respect as at the closing date;

• (iv) there being no event existing or having occurred and no condition being in existence which would (had the relevant Convertible Bonds already been issued) constitute an event of default and no event or act having occurred which would constitute an event of default; and

• (v) the Second Capital Increase Agreement becoming unconditional in accordance with the terms thereof.

Completion of each of the Subscription Agreements will take place on the fifth business day following the date upon receipt of a notice from the Company notifying the relevant Subscriber of the conditions precedent have been fulfilled. If the Conditions Precedent cannot be fulfilled by 30 October 2011, the Subscription Agreement shall terminate and cease to be of any effect.

Each of the Subscription Agreements is independent of the other and completion of each of the Subscription Agreements is not inter-conditional on the completion of the other Subscription Agreements.

APPLICATION FOR LISTING

The Company will apply to the Listing Committee of the Stock Exchange for listing of, and permission to deal in, the Conversion Shares which may fall to be issued upon conversion of the Convertible Bonds. No application will be made for the listing of the Convertible Bonds on the Stock Exchange or any other stock exchange.

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REASONS FOR THE SUBSCRIPTION AGREEMENTS AND USE OF PROCEEDS

The Company announced on 26 May 2011 that the Group has entered into the Second Capital Increase Agreement with the Target Company pursuant to which the registered capital of the Target Company will be increased from RMB449,438,202 to RMB816,326,530 and the Group agreed to subscribe for the additional registered capital of RMB366,888,328 of the Target Company at a total cash consideration of RMB1,818,000,000. Upon completion, the Group will be interested in 51% of the equity interest in the Target Company.

The Target Company is a company incorporated in the PRC with limited liability and has the exclusive right to build and operate for 30 years (excluding construction period), the first PRC heavy-duty toll expressway designed for coal transportation in the Inner Mongolia Autonomous Region that will run from the Jungar Banner（准格爾旗）which is the major coal production area located south of Hohhot（呼和浩特）in the Ordos（鄂爾多斯）, towards northeast for 265 km to Xinghe County（興和縣）which is a major logistics hub for coal distribution in northern China.

The entering into of the Subscription Agreements and the issue of the Convertible Bonds is to raise funds for the Company to finance the Second Capital Increase Agreement. The estimated net proceeds from the issue of the Convertible Bonds would be approximately HK$1,990 million. The Company intends to apply the net proceeds from the issue of the Convertible Bonds to fund the Group’s capital contribution to the Target Company under the Second Capital Increase Agreement and as general working capital of the Company.

The approval for the additional investment in the Target Company by the relevant PRC authority is progressing smoothly in accordance with the anticipated schedule and the Board will work hard to ensure that the project will be developed according to its plan.

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SHAREHOLDING OF THE COMPANY

The table below sets out the Company’s shareholding structure as at the date of this announcement and upon the full conversion of the Convertible Bonds.

China Alliance International Holding Group Limited Champion Rise International Limited (Note 2) Mr. Fung Tsun Pong_(Note 3)_ First Subscriber Second Subscriber Third Subscriber Public Shareholders Total	Shareholding as at the date of this announcement No. of Shares % 4,272,862,068 21.17 2,000,000,000 9.9 2,116,862,449 10.48 — — — — 101,800,000 0.51 11,699,259,378 57.94 20,190,783,895 100.0	Shareholding immediately after completion and upon full conversion of the Convertible Bonds (Note 1) No. of Shares % 4,272,862,068 16.96 2,000,000,000 7.94 2,116,862,449 8.40 3,250,000,000 12.90 1,500,000,000 5.95 351,800,000 1.40 11,699,259,378 46.45 25,190,783,895 100.0	Shareholding immediately after completion and upon full conversion of the Convertible Bonds (Note 1) No. of Shares % 4,272,862,068 16.96 2,000,000,000 7.94 2,116,862,449 8.40 3,250,000,000 12.90 1,500,000,000 5.95 351,800,000 1.40 11,699,259,378 46.45 25,190,783,895 100.0
			100.0

Notes:

1. Assuming no further conversion of the convertible bonds of the Company issued on 9 February 2010 and no further exercise of the warrants of the Company issued on 8 February 2010.

2. Champion Rise International Limited is wholly owned by Mr. Cao Zhong, the chairman and an executive Director.

3. Mr. Fung Tsun Pong, the vice chairman and an executive Director, holds 1,061,362,449 Shares personally and 1,055,500,000 Shares through Ocean Gain Limited, a company wholly owned by him.

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FUND RAISING ACTIVITIES OF THE COMPANY IN THE LAST 12 MONTHS

On 21 January 2011, the Company allotted and issued 1,800,000,000 new ordinary shares of HK$0.01 each of the Company to not less than six placees who are third parties independent from the Company through a placing agent at a placing price of HK$0.30 per Share, raising approximately HK$534 million net proceeds, of which approximately HK$450 million was injected into the Target Company as registered capital. The placing Shares were allotted and issued pursuant to the general mandate granted to the Directors by a resolution of the Shareholders passed at the annual general meeting held on 30 August 2010.

Save as aforesaid, the Company has not conducted other fund raising activity in the 12 months immediately preceding the date of this announcement.

GENERAL

The Group is principally engaged in forest operation and management, timber logging and trading, sale of timber products, planting of and trading in seedlings, property development and asset management.

The Conversion Shares will be issued under a specific mandate to be sought from the Shareholders. A circular containing details of the Subscription Agreements and a notice convening the EGM to approve the Subscription Agreements will be dispatched to the Shareholders on or before 23 August 2011.

DEFINITIONS

“associate”	has the meaning ascribed to it under the Listing Rules;
“Board”	the board of Directors;
“Bondholders”	holders of the Bonds;
“Company”	China Timber Resources Group Limited, a company incorporated in
	the Cayman Islands with limited liability, the Shares of which are
	listed on the Stock Exchange;
“Conditions Precedent”	the conditions precedent set out in the paragraph headed “Conditions
	Precedent” of this announcement;
“connected person”	has the meaning ascribed to it under the Listing Rules;
“Conversion Shares”	new Shares to be issued upon conversion of the Convertible Bonds;

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“Convertible Bonds”	collectively refer to the First Convertible Bonds, the Second
	Convertible Bonds and the Third Convertible Bonds;
“Directors”	the directors of the Company;
“First Convertible Bonds”	9% unlisted convertible bonds due 2014 in the aggregate principal
	amount of HK$1,300 million to be issued by the Company to the
	First Subscriber;
“First Subscriber”	Li Ka Shing (Canada) Foundation;
“First Subscription	the subscription agreement dated 2 August 2011 entered into between
Agreement”	the Company and the First Subscriber;
“Group”	the Company and its subsidiaries;
“HK$”	Hong Kong dollar, the lawful currency of Hong Kong;
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC;
“Last Trading Day”	1 August 2011, being the last full trading day immediately before the
	date of the Subscription Agreements;
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock Exchange;
“PRC”	the People’s Republic of China, excluding Hong Kong, the Macau
	Special Administrative Region and Taiwan;
“RMB”	Renminbi, the lawful currency of the PRC;
“Second Capital Increase	the capital increase agreement dated 26 May 2011 entered into
Agreement”	between a wholly-owned subsidiary of the Company and the Target
	Company;
“Second Convertible Bonds”	9% unlisted convertible bonds due 2014 in the aggregate principal
	amount of HK$600 million to be issued by the Company to the
	Second Subscriber;
“Second Subscriber”	China Life Insurance (Overseas) Company Limited;

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“Second Subscription	the subscription agreement dated 2 August 2011 entered into between
Agreement”	the Company and the Second Subscriber;
“Shareholders”	registered holders of Shares from time to time;
“Shares”	ordinary shares of HK$0.01 each in the capital of the Company;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Subscribers”	collectively refer to the First Subscriber, the Second Subscriber and
	the Third Subscriber;
“Subscription Agreements”	collectively refer to the First Subscription Agreement, the Second
	Subscription Agreement and the Third Subscription Agreement;
“Target Company”	內蒙古准興重載高速公路有限責任公司(Inner Mongolia Zhunxing
	Heavy Haul expressway Company Limited) , a company established
	under the laws of the PRC with limited liability;
“Third Convertible Bonds”	9% unlisted convertible bonds due 2014 in the aggregate principal
	amount of HK$100 million to be issued by the Company to the Third
	Subscriber;
“Third Subscriber”	Dr. Lo Ka Shui;
“Third Subscription	the subscription agreement dated 2 August 2011 entered into between
Agreement”	the Company and the Third Subscriber;
“trading day”	the day on which the Stock Exchange is open for business;
“%”	per cent.

By Order of the Board

China Timber Resources Group Limited Cao Zhong Chairman

Hong Kong, 2 August 2011

As at the date of this announcement, the Board comprises three executive Directors, namely Mr. Cao Zhong, Mr. Fung Tsun Pong and Mr. Tsang Kam Ching, David; a non-executive Director, Mr. Neil Bush and three independent non-executive Directors, namely Mr. Yip Tak On, Mr. Jing Baoli and Mr. Bao Liang Ming.

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