Central Development Holdings Limited — Capital/Financing Update 2011

May 26, 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 liabilities whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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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)

MAJOR TRANSACTION IN RELATION TO

ENTERING INTO THE SECOND CAPITAL INCREASE AGREEMENT

THE SECOND CAPITAL INCREASE AGREEMENT

On 26 May 2011, the Subscriber, a wholly-owned subsidiary of the Company, exercised part of the Subscription Right and entered into the Second Capital Increase Agreement with the Target Company, pursuant to which the total registered capital of the Target Company will be increased and the Subscriber will subscribe for the additional registered capital of the Target Company for a total cash consideration of RMB1,818,000,000, resulting in the Company indirectly holding a 51% equity interest in the Target Company upon Completion.

LISTING RULES IMPLICATIONS

As the ratios set out in the Listing Rules for the Second Subscription exceed 25% but are less than 100%, the Second Subscription constitutes a major transaction of the Company under the Listing Rules and is therefore subject to announcement and shareholders’ approval requirements under the Listing Rules.

CIRCULAR

A circular, containing amongst other things, (a) further information in respect of the Second Subscription; (b) the financial information on the Group and the unaudited pro forma financial information of the Enlarged Group; (c) the accountants’ reports of the Target Company and its subsidiaries; and (d) the notice of the EGM, will be despatched to the Shareholders on or before 17 June 2011.

* For identification purposes only

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Reference is made to the First Capital Increase Announcement in relation to, among others, the subscription for the registered capital of the Target Company.

The Board is pleased to announce that on 26 May 2011 (after trading hours), pursuant to the exercise of part of the Subscription Right and following arm’s length negotiation, the Subscriber, a whollyowned subsidiary of the Company, entered into the Second Capital Increase Agreement with the Target Company, pursuant to which the total registered capital of the Target Company will be increased from RMB449,438,202 to RMB816,326,530, and the Subscriber 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. Set out below are the major terms of the Second Capital Increase Agreement.

THE SECOND CAPITAL INCREASE AGREEMENT

Date

26 May 2011

Parties

• (i) the Subscriber, a wholly-owned subsidiary of the Company; and

• (ii) the Target Company

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, the Target Company and its ultimate beneficial owners (other than the Subscriber) are third parties independent of the Company and its connected persons.

The Second Subscription

As at the date of this announcement, the Target Company has a total registered capital of RMB449,438,202 which has been fully paid up. Pursuant to the Second Capital Increase Agreement, the total registered capital of the Target Company will be increased from RMB449,438,202 to RMB816,326,530, and the Subscriber agreed to subscribe for the additional registered capital of RMB366,888,328 at a total cash consideration of RMB1,818,000,000.

Upon Completion, the Company, through the Subscriber, will indirectly hold a 51% equity interest in the Target Company.

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Pursuant to the Second Capital Increase Agreement, the Consideration of RMB1,818,000,000 is payable by the Subscriber as follows: (i) the first installment of RMB909,000,000 equivalent to 50% of the Consideration is payable by the Subscriber on the date of Completion; (ii) the second installment of RMB454,500,000 equivalent to 25% of the Consideration is payable by the Subscriber to the Target Company within 15 business days from the date of issuance of the new business license of the Target Company; and (iii) the third installment of RMB454,500,000 equivalent to the balance of the Consideration is payable by the Subscriber to the Target Company within 30 business days from the date of issuance of the new business license of the Target Company.

The terms of the Second Capital Increase Agreement including the Consideration were based on normal commercial terms and determined after arm’s length negotiations between the Company and the Target Company with reference to a number of factors, including but not limited to, (i) the consideration of RMB500,000,000 paid by the Subscriber for the subscription in the Target Company of 11% equity interest as disclosed in the First Capital Increase Announcement; (ii) the current status of the construction of the expressway by the Target Company as described below, and (iii) the future growth potential of the Target Company.

Conditions Precedent

The Second Capital Increase Agreement will be completed upon satisfaction of the following conditions:

• (i) the Subscriber having satisfied with the due diligence review on the Target Company, including but not limited to the legal opinion and due diligence report in respect of the contents and form issued by the PRC legal advisers acceptable to the Subscriber and the consolidated financial statements of the Target Company for the last three years (or other agreed period by the Subscriber) in respect of the contents and form issued by the accountant firm acceptable to the Subscriber;

• (ii) the approval from each of the other existing shareholders of the Target Company, all internal and valid authorisations and approvals from them and the Subscriber and all approvals from the approving authorities and the third party who has the interests (e.g. creditors, bank creditors (if applicable), etc.) in relation to the Second Subscription having been obtained, including but not limited to the irrevocable and unconditional approval from the department of commerce for the following matters:

• (a) each of the other existing shareholders of the Target Company and the Subscriber has performed its internal and valid authorisation and approval procedure respectively in accordance with the applicable laws, including each of the other existing shareholders of the Target Company has performed the obligation of the approval or filing procedure (if applicable) for the change in the state-owned assets in relation to the Subscription and the Second Subscription as required under the laws.

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• (b) with respect to the Second Subscription and Second Transaction Documents, the department of commerce has issued the approval for the Second Subscription and the approval certificate for enterprise invested by Taiwan, Hong Kong, Macao and overseas Chinese investors which indicates that the Subscriber holds a 51% equity interest in the Target Company;

• (c) the Target Company can continue to operate and develop its existing businesses after the Second Subscription;

• (d) the Subscriber has satisfied with the Second Joint Venture Agreement in respect of the contents and form; and

• (e) the Subscriber has satisfied with the Amended and Restated Articles of Association in respect of the contents and form;

• (iii) all representations and warranties given by the Target Company pursuant to the Second Capital Increase Agreement, the disclosure list made by the Target Company and any attachment of the Second Capital Increase Agreement are true, accurate, correct, complete and not misleading as at the date of Completion;

• (iv) (a) all obligations, agreements and undertakings pursuant to each of the Second Transaction Documents to which the Target Company is a party which shall be performed before the date of Completion having been fulfilled by the Target Company in all material respects without any breach or sustained breach; and (b) each of the Second Transaction Documents having been duly signed and delivered by the Target Company which constitutes a legal, valid and binding obligation and can be enforceable on the Target Company and the original of the signed Second Transaction Documents having been obtained by the Subscriber;

• (v) the Target Company not breaching and the Second Subscription not resulting in breaching in all material respects of:

• (a) any provision under any document to which the Target Company is a party or has binding effect to the Target Company (including but not limited to the Second Capital Increase Agreement and other Second Transaction Documents); or

• (b) any law, regulation or rule;

• (vi) since 31 December 2010, no material adverse effect on the businesses, assets or operation of the Target Company having been found or known;

• (vii) a foreign exchange capital account at a major commercial bank in the PRC having been opened by the Target Company, and notified to the Subscriber in writing;

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(viii) the candidates nominated by the Subscriber as the directors of the Target Company having been appointed through the proper procedure;

• (ix) the necessary authorizations and documents for the Second Subscription having been obtained by the Target Company before the date of Completion;

• (x) the approval of the Second Capital Increase Agreement and the Second Subscription by the Shareholders at the general meeting of the Company; and

• (xi) the securing of sufficient funding for the settlement of the Consideration by the Subscriber.

The Subscriber may, in its absolute discretion, waive the Conditions Precedent (i), (iii), (iv), (v), (vi), (viii) and (ix). If any of the Conditions Precedent (save for the Conditions Precedent (iii), (iv)(a), (v) and (vi)) has not been fulfilled by 31 December 2011 or such other date as the Subscriber may agree or fully or partly waived by the Subscriber in writing or the Conditions Precedent (iii), (iv)(a), (v) and (vi) have not been fulfilled or waived at the time when any of other Conditions Precedent has been fulfilled or waived, the Second Capital Increase Agreement can be terminated by the Subscriber and no party will have any liability under them (without prejudice to the rights of the parties in respect of any antecedent breaches).

The Company intends to raise funds for the settlement of the Consideration by way of equity issue, convertible issue or a combination of both. The Company has not finalised the terms of such funding or entered into any binding agreement in this regard. Further announcement will be issued by the Company if and when the details are finalised for compliance with the Listing Rules.

Completion

Completion will take place on the third business day from the date on which the Conditions Precedent (save for the Conditions Precedent (iii), (iv)(a), (v) and (vi)) have been satisfied or waived by the Subscriber or such other date set by the Subscriber.

INFORMATION ON THE TARGET COMPANY

The Target Company is a company incorporated in the PRC with limited liability, and is principally engaged in expressway and auxiliary facility investment, operation, management and maintenance.

Based on the unaudited accounts of the Target Company prepared in accordance with HKFRS, the turnover of the Target Company for the two years ended 31 December 2010 was nil, net loss for the year ended 31 December 2009 was approximately RMB259 million and for the year ended 31 December 2010 was approximately RMB256 million, and as at 31 December 2010, the total assets and net liabilities of the Target Company were approximately RMB1,862 million and RMB825 million respectively.

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REASONS FOR AND BENEFITS OF THE SECOND SUBSCRIPTION

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.

According to the information provided by the Target Company, it 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 expressway is designed to sustain 100-ton trucks whereas most other expressways in the PRC can only allow 50-ton trucks. The proposed toll fee for the expressway is RMB0.15 per ton per km. The expressway is currently under construction and expected to be opened to traffic in January 2013. The expressway is a priority project under the “Eleventh Five-Year Plan” of the PRC, and is of strategic importance for energy logistics in Northern China. As at the date of this announcement, about 20% of the construction has already been completed. It is considered that the expressway will improve the carrying capacity of the existing roads from Inner Mongolia Autonomous Region to Northern China, ease traffic congestion as a result of an increasing number of vehicles for coal transportation and resolve the serious deficiencies currently faced by Inner Mongolia with respect to coal distribution.

As disclosed in the First Announcement, in line with the Company’s business strategy of diversification into a new line of business that has significant growth potential, the Company signed the letter of intent with respect of the proposed investment in the Target Company. The Board considers that this investment represents a good opportunity for the Group to participate in a promising infrastructure project in the PRC, which will benefit the Group in the long term. The Board also considers that this project, when compared to other PRC expressway projects, has higher commercial value and once it is opened to traffic it will produce desirable cash flows and profits, and bring the Company desirable returns. The Second Subscription represents the second stage of investment in the Target Company pursuant to a partial exercise of the Subscription Right.

Having considered the aforesaid factors, the Board believes that the terms of the Second Subscription contemplated under the Second Capital Increase Agreement (including the Consideration) are fair and reasonable and the entering into the Second Capital Increase Agreement is in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As the ratios set out in the Listing Rules for the Second Subscription exceed 25% but are less than 100%, the Second Subscription constitutes a major transaction of the Company under the Listing Rules and is therefore subject to announcement and shareholders’ approval requirements under the Listing Rules.

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GENERAL

A circular, containing amongst other things, (a) further information in respect of the Second Subscription; (b) the financial information on the Group and the unaudited pro forma financial information of the Enlarged Group; (c) the accountants’ reports of the Target Company and its subsidiaries; and (d) the notice of the EGM, will be despatched to the Shareholders on or before 17 June 2011.

DEFINITIONS

In this announcement, the terms defined in the First Capital Increase Announcement will bear the same meaning and the following expressions have the meanings set out below unless the context otherwise requires:

• “Amended and Restated amended and restated articles of association of the Target Company Articles of Association” to be entered into between the Subscriber and the other existing shareholders of the Target Company with respect to the Second Subscription

• “Completion” completion of the Second Capital Increase Agreement

• “Conditions Precedent” the conditions precedent to Completion, as set out under the section headed “Conditions Precedent” in this announcement

• “Consideration” the total consideration of RMB1,818,000,000 for the Second Subscription

• “EGM” the extraordinary general meeting of the Company to be convened and to consider and, if thought fit, approve, among other things, the Second Subscription

• “Enlarged Group” the Company and its subsidiaries upon Completion

• “First Announcement” the announcement of the Company dated 13 January 2011

• “First Capital Increase the announcement of the Company dated 21 April 2011 Announcement”

• “HKFRS” the Hong Kong Financial Reporting Standard

• “Second Capital Increase the capital increase agreement dated 26 May 2011 entered into between Agreement” the Subscriber and the Target Company

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“Second Joint Venture the amended and restated joint venture agreement to be entered into Agreement” between the Subscriber and the other existing shareholders of the Target Company with respect to the Second Subscription

• “Second Subscription” the subscription of an equity interest in the Target Company, pursuant to the Second Capital Increase Agreement

• “Second Transaction the Second Capital Increase Agreement, the Second Joint Venture Documents” Agreement and the Amended and Restated Articles of Association

“Subscription Right” shall have the meaning defined in the First Capital Increase Announcement

By Order of the Board

China Timber Resources Group Limited Cao Zhong Chairman

Hong Kong, 26 May 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 namely 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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