Central Development Holdings Limited — Capital/Financing Update 2011

Apr 25, 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.

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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)

DISCLOSEABLE TRANSACTION IN RELATION TO ENTERING INTO THE CAPITAL INCREASE AGREEMENT

THE CAPITAL INCREASE AGREEMENT

The Board is pleased to announce that, following the First Announcement, on 21 April 2011, the Subscriber, a wholly-owned subsidiary of the Company, entered into the 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 RMB500,000,000, resulting in the Company indirectly holding a 11% equity interest in the Target Company.

Upon Completion, the Subscriber will also have the exclusive right but not obligation to subscribe for additional registered capital of the Target Company at a consideration of RMB2.5 billion to increase its equity interest in the Target Company up to 66% on or before 31 December 2011.

LISTING RULES IMPLICATIONS

As the relevant applicable percentage ratios for the Subscription exceed 5%, but are less than 25%, the Subscription constitutes a discloseable transaction of the Company under Rule 14.06(2) of the Listing Rules and is therefore subject to reporting and announcement requirements under the Listing Rules.

• For identification purposes only

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Reference is made to the First Announcement in relation to, among others, the possible subscription of equity interest in the Target Company.

The Board is pleased to announce that on 21 April 2011 (after trading hours), following arm’s length negotiations, the Subscriber, a wholly-owned subsidiary of the Company, entered into the Capital Increase Agreement with the Target Company, pursuant to which the total registered capital of the Target Company will be increased from RMB400,000,000 to RMB449,438,202, and the Subscriber agreed to subscribe for the additional registered capital of RMB49,438,202 of the Target Company at a total cash consideration of RMB500,000,000. Set out below are the major terms of the Capital Increase Agreement.

THE CAPITAL INCREASE AGREEMENT

Date

21 April 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 are third parties independent of the Company and its connected persons.

The Subscription and the Consideration

As at the date of this announcement, the Target Company had a total registered capital of RMB400,000,000 which has been fully paid up. Pursuant to the Capital Increase Agreement, the total registered capital of the Target Company will be increased from RMB400,000,000 to RMB449,438,202, and the Subscriber agreed to subscribe for the additional registered capital of RMB49,438,202 at a total cash consideration of RMB500,000,000.

Upon Completion, the Company, through the Subscriber, will indirectly hold a 11% equity interest in the Target Company.

Pursuant to the Capital Increase Agreement, the Consideration of RMB500,000,000 is payable by the Subscriber in three installments as follows: (i) the first installment of RMB250,000,000 equivalent to 50% of the Consideration is payable by the Subscriber on the date of Completion; (ii) the second installment of RMB125,000,000 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 RMB125,000,000 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.

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It is intended that the Consideration will be partly funded by the proceeds from the Placing as disclosed in the First Announcement and partly by internal resources of the Company.

The terms of the 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) existing paid-up registered capital of the Target Company of RMB400 million; (ii) the total assets value of approximately RMB3,088 million of the Target Company as at 31 December 2010; (iii) the Subscription Right (as defined below) to be granted to the Subscriber to increase its equity interest in the Target Company; (iv) the current status of the construction of the expressway by the Target Company as described below, and (v) the future growth potential of the Target Company.

Subscription Right

Upon Completion, the Subscriber will also have the exclusive right but not obligation to subscribe for additional registered capital of the Target Company at a consideration of RMB2.5 billion to increase its equity interest in the Target Company up to 66% on or before 31 December 2011 (the “Subscription Right”). Without the prior consent of the Subscriber, the Target Company and its existing equity owners cannot grant any such similar right to any other third party(ies).

If the Subscriber exercises the Subscription Right, the increase in its interest in the Target Company may constitute a notifiable transaction (as defined under the Listing Rules) for the Company and the Company will publish announcement(s) as and when appropriate to update the Shareholders pursuant to the requirements of the Listing Rules.

Conditions Precedent

The Capital Increase Agreement shall be completed upon satisfaction or waiver in writing by the Subscriber 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) 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 Subscription having been obtained, including but not limited to the irrevocable and unconditional approval from the department of commerce for the following matters:

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• (a) the Subscription under the Capital Increase Agreement and other Transaction Documents, the issuance of the approval for converting the Target Company into the enterprise invested by Taiwan, Hong Kong, Macao and overseas Chinese investors and the approval certificate for enterprise invested by Taiwan, Hong Kong, Macao and overseas Chinese investors which indicates that the Subscriber is a shareholder of the Target Company;

• (b) the Target Company can continue to operate and develop its existing businesses after converting into a sino-foreign joint venture;

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

• (d) the Subscriber has satisfied with the new articles of association of the Target Company in respect of the contents and form;

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

• (iv) (a) all obligations, agreements and undertakings pursuant to each of the 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 Transaction Documents having been duly signed and delivered by the Target Company which constitutes a legal, valid and binding obligation and can be enforceable to the Target Company and the original of the signed Transaction Documents having been obtained by the Subscriber;

• (v) the Target Company not breaching and the 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 Capital Increase Agreement and other 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; and

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

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 and the Target Company 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 Capital Increase Agreement can be ceased by the Subscriber and no party shall have any liability under them (without prejudice to the rights of the parties in respect of any antecedent breaches).

Completion

Completion shall take place on the third business day from 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 made 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, operating, management and maintenance.

Based on the audited accounts of the Target Company provided by the Target Company prepared in accordance with CASBE, turnover and net profit (both before and after taxation) of the Target Company for the two years ended 31 December 2010 were nil, and as at 31 December 2010, the total assets and net assets of the Target Company were approximately RMB3,088 million and RMB400 million respectively.

REASONS FOR AND BENEFITS OF THE 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

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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. 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 and ease traffic congestion as a result of an increasing number of vehicles for coal transportation.

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, and the Subscription represents the first stage of investment in the Target Company. The Subscription Right provides the Company the right (not obligation) to increase its participation for an upside potential.

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

LISTING RULES IMPLICATIONS

As the relevant applicable percentage ratios for the Subscription exceed 5%, but are less than 25%, the Subscription constitutes a discloseable transaction of the Company under Rule 14.06(2) of the Listing Rules and is therefore subject to reporting and announcement requirements under the Listing Rules.

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DEFINITIONS

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

“Board”	the board of Directors
“business day(s)”	a day, other than a Saturday and a day on which a tropical cyclone
	warning no. 8 or above or a “black rainstorm warning signal” is
	hoisted in Hong Kong at any time between 9:00 a.m. and 5:00
	p.m., on which licensed banks in Hong Kong are open for general
	banking business throughout their normal business hours
“Capital Increase Agreement”	the capital increase agreement dated 21 April 2011 entered into
	between the Subscriber and the Target Company
“CASBE”	the financial reporting standards and interpretations for business
	enterprises issued by the China Accounting Standards Committee
	of the China Ministry of Finance
“Company”	China Timber Resources Group Limited（中國木業資源集團有
	限公司）, a company incorporated in the Cayman Islands with
	limited liability
“Completion”	completion of the Capital Increase Agreement
“Conditions Precedent”	the conditions precedent to Completion, as set out under the
	section headed “Conditions Precedent” in this announcement
“connected person”	shall have the meaning ascribed thereto in the Listing Rules
“Consideration”	the total consideration of RMB500,000,000 for the Subscription
“Directors”	the directors of the Company
“First Announcement”	the announcement of the Company dated 13 January 2011
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC

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“Joint Venture Agreement”	the joint venture agreement to be entered into between the
	Subscriber and the existing equity owners of the Target Company
“Listing Rules”	the Rules Governing the Listing of Securities on the Stock
	Exchange
“percentage ratios”	shall have the meaning ascribed thereto in the Listing Rules
“Placing”	the placing of 1,800,000,000 new shares of the Company in
	accordance with terms of the placing agreement dated 12
	January 2011 between the Company and Guotai Junan Securities
	(Hong Kong) Limited as the placing agent to raise funds of
	approximately HK$530 million, and details of which was
	disclosed in the First Announcement
“PRC”	the People’s Republic of China, which for the purpose of this
	announcement, will exclude Hong Kong, the Macau Special
	Administrative Region of the PRC and Taiwan
“RMB”	Renminbi, the lawful currency of the PRC
“Shareholder(s)”	holder(s) of the share(s) of the Company
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscriber”	Cheer Luck Technology Limited（展裕科技有限公司）, a company
	incorporated in Hong Kong with limited liability and a wholly-
	owned subsidiary of the Company
“Subscription”	the subscription of an equity interest in the Target Company,
	pursuant to the Capital Increase 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

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“Transaction Documents”

the Capital Increase Agreement, the Joint Venture Agreement and the amended articles of association of the Target Company which is in relation to the Capital Increase Agreement and the Joint Venture Agreement

“km”

kilometre

“%”

per cent.

By Order of the Board China Timber Resources Group Limited Cao Zhong Chairman

Hong Kong, 21 April 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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