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 to be taken, you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in China Beidahuang Industry Group Holdings Limited, you should at once pass this circular, together with the enclosed form of proxy, to the purchaser or the transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer 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.

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China Beidahuang Industry Group Holdings Limited ��

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 00039)

(1) PROPOSED RESTRUCTURING INVOLVING CONNECTED TRANSACTION IN RELATION TO THE SUBSCRIPTION UNDER SPECIFIC MANDATE; CREDITORS’ SCHEME; ISSUE OF SCHEME SHARES UNDER SPECIFIC MANDATE; CONNECTED TRANSACTION AND VERY SUBSTANTIAL DISPOSAL IN RELATION TO THE DISPOSAL AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

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

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Alpha Financial Group Limited

A letter from the Board is set out on pages 12 to 47 of this circular. A letter from the Independent Board Committee to the Independent Shareholders is set out on page 48 of this circular. A letter from Alpha Financial Group Limited, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 50 to 82 of this circular.

A notice convening the extraordinary general meeting of China Beidahuang Industry Group Holdings Limited to be held at Unit E, 30/F., Tower B, Billion Centre, 1 Wang Kwong Road, Kowloon Bay, Kowloon, Hong Kong on 9 August 2024 at 10:30 a.m. is set out on pages EGM-1 to EGM-4 of this circular. Whether or not you intend to attend the extraordinary general meeting in person, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company’s branch share registrar and transfer office in Hong Kong, Union Registrars Limited, at Suites 3301-04, 33/F., Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the extraordinary general meeting or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the extraordinary general meeting or any adjournment thereof (as the case may be) should you so wish and, in such event, the instrument appointing a proxy shall be deemed to be revoked.

24 July 2024

			Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			1
LETTER FROM	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		12
LETTER FROM	THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . .		48
LETTER FROM	THE INDEPENDENT FINANCIAL ADVISER . . . . . . . . . . . . . . .		50
APPENDIX I	–	FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . .	I-1
APPENDIX II	–	FINANCIAL INFORMATION OF SHENZHEN
		QIANHAI DAHUANGYUAN . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III	–	FINANCIAL INFORMATION OF LINXIANG
		QIANGSHENG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
APPENDIX IV	–	FINANCIAL INFORMATION OF LIANYUNGANG
		HUAJIN HUAHONG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
APPENDIX V	–	FINANCIAL INFORMATION OF SHENZHEN
		MEIMING WENSHI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	V-1
APPENDIX VI	–	UNAUDITED PRO FORMA FINANCIAL
		INFORMATION OF THE RETAINED GROUP . . . . . . . . .	VI-1
APPENDIX VII	–	MANAGEMENT DISCUSSION AND ANALYSIS OF
		THE RETAINED GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-1
APPENDIX VIII	–	VALUATION REPORT ON PROPERTIES HELD BY
		THE SCHEME SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . .	VIII-1
APPENDIX IX	–	GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IX-1
NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . .			EGM-1

– i –

DEFINITIONS

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

‘‘Adjudicator’’

such person with experience in the adjudication of creditors’ claims in a liquidation as the Scheme Administrators shall nominate in their absolute discretion

‘‘Admitted Claims’’
the Claims of the Scheme Creditors against the Company which have been admitted by the Scheme Administrators or the Adjudicator in accordance with the Creditors’ Scheme, the amount of which shall not include any interest accrued on the principal owed by the Company
‘‘Affiliate(s)’’
in relation to a body corporate, any subsidiary(ies) or holding company(ies) of that body corporate, and any subsidiary(ies) of any such holding company for the time being, including companies incorporated or established outside Hong Kong
‘‘Announcement’’
the announcement of the Company dated 25 January 2024 in relation to the Proposed Restructuring
‘‘Applicable Laws’’
with respect to any person, any laws, regulations, rules, measures, guidelines, policies, treaties, judgments, determination, orders or notices of any Government Authority or stock exchange that is applicable to such person
‘‘Articles of Association’’
the articles of association of the Company currently in force, as amended from time to time
‘‘associate’’
has the meaning ascribed thereto under the Listing Rules
‘‘Board’’
the board of Directors
‘‘Business Day’’
a day on which banks in Hong Kong are open for normal banking business (other than a Saturday, a Sunday or a public holiday)
‘‘Cash Dividend’’

the amount of cash available to be paid to the Scheme Creditors as dividend from all funds of the scheme after deducting any Preferential Claims and the Scheme Costs, the amount of which shall be paid in full and final settlement of the Admitted Claims

– 1 –

DEFINITIONS

‘‘CCASS’’
‘‘China Angel Investment Management’’
‘‘China Qujiang Fund’’
‘‘CIS Fund’’
‘‘CIS Securities Asset Management’’
‘‘Claim(s)’’
‘‘close associate(s)’’
‘‘Companies Act’’
‘‘Company’’
‘‘Companies Ordinance’’

Central Clearing and Settlement System established and operated by HKSCC

China Angel Investment Management Limited, a company incorporated in the British Virgin Islands with limited liability

A sub-fund of CIS Fund, which wholly owns the Investor

CIS Fund OFC, an open-ended fund company incorporated in Hong Kong under Part IVA of the SFO
CIS Securities Asset Management Limited, a company incorporated in Hong Kong with limited liability

any unsecured debt, liability or obligation of the Company as at the date on which the Creditors’ Scheme becomes unconditional and comes into effect, whether certain or contingent, whether present, future or prospective, whether liquidated or unliquidated, whether arising at common law, in equity or by statute, in Hong Kong, the PRC or in any other jurisdiction or in any manner whatsoever and which includes without limitation a debt or liability to pay money or money’s worth, any liability in contract or tort, any liability arising out of any legal claim, whether certain or contingent, which would be provable in a winding-up of the Company under the Companies (Winding Up and Miscellaneous Provisions) Ordinance if an order for the winding-up of the Company were made on the date on which the Creditors’ Scheme becomes unconditional and comes into effect

has the meaning as ascribed to it under the Listing Rules

the Companies Act (Revised) of the Cayman Islands

China Beidahuang Industry Group Holdings Limited, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the main board of the Stock Exchange

the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) as amended from time to time

– 2 –

DEFINITIONS

‘‘Companies (Winding Up and Miscellaneous Provisions) Ordinance’’
‘‘Completion’’
‘‘Conditions Precedent’’
‘‘connected person(s)’’
‘‘Court Order’’
‘‘Creditors’’
‘‘Creditors’ Scheme’’
‘‘CSRC’’
‘‘CSRC Filings’’
the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong) as amended from time to time
the completion of the Subscription
the conditions precedent to the Subscription, the details of which are set out in the section headed ‘‘Conditions Precedent of the Subscription’’ in the letter from the Board in this circular
has the meaning ascribed thereto under the Listing Rules
the order issued by the High Court for the purpose of sanctioning the Creditors’ Scheme
all persons having Claims against the Company, other than the Preferential Creditors (to the extent of their Preferential Claims) and the Secured Creditors (to the extent of their Secured Claims)
the creditors’ scheme of arrangement the terms of which is set out in the Scheme Document, proposed by the Company to its Scheme Creditors pursuant to the Companies Ordinance

the China Securities Regulatory Commission of the PRC

the preparation and submission of the filing report in relation to the Subscription and the Scheme Share Issue and any transactions contemplated under the Proposed Restructuring and any relevant supporting materials (including, but not limited to, the PRC legal opinion to be issued by the counsel for the Company on PRC laws, where applicable) (together with the aforesaid and including any amendments, supplements and/or modifications thereof) to the CSRC pursuant to the applicable requirements under the CSRC Filing Rules

– 3 –

DEFINITIONS

‘‘CSRC Filing Rules’’
the Trial and Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies
（境內企業境外發行證券和上市管理試行辦法）a n d supporting guidelines issued by the CSRC on 17 February 2023 (as amended, supplemented or otherwise modified from time to time)
‘‘deemed connected person’’
has the meaning ascribed thereto under the Listing Rules
‘‘Director(s)’’ the director(s) of the Company
‘‘Defaulted Construction Payables’’
the default in settlement of construction payables by Lianyungang Huajin Huahong and additional penalties thereon in respect of the construction work carried out by a third party in Lianyungang, Jiangsu province, the PRC which the Group had received a notice from the contractor of the event of default and demand for payment
‘‘Disposal’’
the proposed disposal of the Interests in Scheme Subsidiaries to the Scheme Company for the benefit of the Scheme Creditors pursuant to the Creditors’ Scheme
‘‘Effective Date’’
the date on which the Creditors’ Scheme becomes unconditional and comes into effect, being the date on which all of the conditions set out in Clause 1.9 of the Creditors’ Scheme are satisfied
‘‘EGM’’
the extraordinary general meeting of the Company to be convened for the purposes of considering, and if thought fit, approving, among other matters, the Restructuring Agreement, the Subscription, the grant of the Specific Mandate, the Scheme Share Issue, the Disposal and the transactions contemplated thereunder
‘‘Enlarged Issued Share Capital’’
the total issued Shares after the completion of the Proposed Restructuring as enlarged by the allotment and issue of the Subscription Shares and the Scheme Shares
‘‘Existing Food Business’’
has the meaning as defined under the section headed ‘‘Business of the Retained Group’’ in the letter from the Board in this circular

– 4 –

DEFINITIONS

‘‘Extension Agreement’’

the agreement dated 31 May 2024 entered into between the Company and the Investor in relation to extension of the Long Stop Date

‘‘Government Authority’’ any national, provincial, municipal or local government, administrative or regulatory body or department, court or judicial bodies, tribunal, arbitrator or any body that exercises the function of a regulator, including but not limited to those in Hong Kong and the Cayman Islands

‘‘Group’’ the Company and its subsidiaries
‘‘High Court’’ the High Court of Hong Kong
‘‘HKSCC’’ Hong Kong Securities Clearing Company Limited
‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong
‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the PRC
‘‘Independent Board Committee’’

The board committee of the Company comprising all independent non-executive Directors, namely Mr, Chong Cha Hwa, Mr. Yang Yunguang and Mr. Chen Zhifeng, formed for the purpose of advising the Independent Shareholders in respect of, among others, the Subscription and the Disposal and the transactions contemplated thereunder

‘‘Independent Financial Adviser’’

Alpha Financial Group Limited, a licensed corporation to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO and the independent financial adviser appointed by the Company to advise the Independent Board Committee and the Independent Shareholders on the Subscription and the Disposal and the transactions contemplated thereunder

‘‘Independent Third Parties’’

independent third parties who are not connected persons (as defined under the Listing Rules) of the Company and are independent of and not connected with the chief executive, directors and substantial shareholders of the Company or any of their respective subsidiaries and their respective associates

– 5 –

DEFINITIONS

‘‘Independent Shareholders’’
Shareholders who are neither (i) interested in or involved in, the Restructuring Agreement, the Subscription, the grant of the Specific Mandate, the Scheme Share Issue, the Disposal and the transactions contemplated thereunder nor (ii) required to abstain from voting at the EGM, which are as at the Latest Practicable Date, to the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, Shareholders other than Mr. Chen Jiayi and his associates
‘‘Initial Cash Payment’’
a cash payment of HK$45 million, which would be derived from the Subscription Proceeds
‘‘Interests in Scheme Subsidiaries’’
interests in or assets of the Scheme Subsidiaries to be transferred to the Scheme Company for the benefit of the Scheme Creditors pursuant to the Creditors’ Scheme
‘‘Investor’’ China Dynamic (Hong Kong) Limited 中泰（香港）有限公司, a company incorporated in Hong Kong with limited liability
‘‘Last Trading Date’’ 29 March 2023, being the date of the Term Sheet
‘‘Latest Practicable Date’’
18 July 2024, being the latest practicable date prior to the printing of this circular for ascertaining certain information for inclusion in this circular
‘‘Lianyungang Huajin Huahong’’ 連雲港華金華鴻實業有限公司 (Lianyungang Huajin Huahong Industrial Co., Ltd*), a company established in the PRC and a Scheme Subsidiary
‘‘Listing Rules’’
the Rules Governing the Listing of Securities on the Stock Exchange
‘‘Linxiang Qiangsheng’’ 臨湘市強盛礦業有限責任公司 (Linxiang Qiangsheng Mining Industry Company Limited*), a company established in the PRC and a Scheme Subsidiary
‘‘Loan for Restructuring Costs’’
has the meaning as defined under the section headed ‘‘Restructuring Costs and Loan for Restructuring Costs’’ in the letter from the Board in this circular

‘‘Long Stop Date’’ 31 July 2024 (or any extended date as mutually agreed by the Investor and the Company in writing)

– 6 –

DEFINITIONS

‘‘Mineral Trading Business’’
has the meaning as defined under the section headed ‘‘Business of the Retained Group’’ in the letter from the Board in this circular
‘‘Model Code’’ Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix C3 to the Listing Rules adopted by the Company
‘‘Mr. Jiang Jianjun’’
Mr. Jiang Jianjun, a former Director who has resigned with effect from 14 June 2023
‘‘PRC’’
the People’s Republic of China, excluding, for the purposes of this circular, Hong Kong, the Macao Special Administrative Region and Taiwan
‘‘Preferential Claim(s)’’

any Claim(s) against the Company which would, if the Company were wound up on the date on which the Creditors’ Scheme becomes unconditional and comes into effect, pursuant to the Companies (Winding Up and Miscellaneous Provisions) Ordinance, be payable out of the assets of the Company pursuant to section 265 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance in priority to the general unsecured debts of the Company

‘‘Preferential Creditor(s)’’ creditors to the extent to which they have Preferential Claims against the Company
‘‘Proposed Restructuring’’
the proposed restructuring of the Group, including, but not limited to (i) the Subscription, (ii) the Scheme Share Issue, (iii) the Disposal and (iv) the Creditors’ Scheme between the Company and the Scheme Creditors
‘‘Relevant Shareholders’’
means, (i) in respect of the resolutions to be passed at the EGM in connection with the Subscription and the Disposal, the Independent Shareholders; and (ii) in respect of other resolutions to be passed at the EGM, the Shareholders
‘‘Remaining Food Business’’

has the meaning as defined under the section headed ‘‘Business of the Retained Group’’ in the letter from the Board in this circular

– 7 –

DEFINITIONS

‘‘Rental Business’’
has the meaning as defined under the section headed ‘‘Business of the Retained Group’’ in the letter from the Board in this circular
‘‘Restructuring Agreement’’ the agreement dated 25 January 2024 entered into between the Company and the Investor in relation to the Proposed Restructuring, as amended by the Extension Agreement
‘‘Restructuring Costs’’ an amount of up to HK$20,000,000, being the professional fees incurred or to be incurred by the Company in connection with the Proposed Restructuring
‘‘Retained Group’’ the Company and the Retained Subsidiaries
‘‘Retained Subsidiaries’’
the subsidiaries of the Company other than the Scheme Subsidiaries and their respective subsidiaries
‘‘Sanction Hearing’’ the hearing at which the High Court considered sanctioning the Creditors’ Scheme
‘‘Scheme Administrators’’
the persons to be elected and appointed as the administrators of the Creditors’ Scheme in accordance with the terms of the Creditors’ Scheme
‘‘Scheme Assets’’

the assets to be received by or transferred to the Scheme Company from time to time, subject to the payment of the Preferential Claims and Scheme Costs, for the benefit of the Scheme Creditors under the Creditors’ Scheme, which shall comprise of the following and will be available for distribution to the Scheme Creditors subject to the Creditors’ Scheme in discharge of their Admitted Claims: (i) the Initial Cash Payment; (ii) the proceeds from the disposal of the Interests in Scheme Subsidiaries; and (iii) any claims or rights to claim of the Company against Mr. Jiang Jianjun in respect of loss or damages to the assets of the Company and/or Group and the proceeds resulting from the realisation of such rights or claims

‘‘Scheme Company’’

a company to be incorporated in Hong Kong with limited liability, being a special purpose vehicle to be held and controlled by the Scheme Administrators

– 8 –

DEFINITIONS

‘‘Scheme Costs’’
‘‘Scheme Creditors’’
‘‘Scheme Creditors’ Committee’’
‘‘Scheme Document’’
‘‘Scheme Meeting(s)’’
‘‘Scheme Share Issue’’
‘‘Scheme Share(s)’’
‘‘Scheme Subsidiaries’’
‘‘Secured Claim(s)’’

costs, charges, expenses and disbursements properly incurred in connection with the administration and implementation of the Creditors’ Scheme including the fees and remuneration of the Scheme Administrators and the Adjudicator

all Creditors with Admitted Claims

a committee of the Scheme Creditors to be formed pursuant to the Creditors’ Scheme

the documentation filed at the High Court relating to the Creditors’ Scheme and all other documents necessary to implement the Creditors’ Scheme

the meeting(s) of the Creditors convened and held at the directions of the High Court for the purpose of considering and, if thought fit, approving the Creditors’ Scheme

the proposed issue of Scheme Shares at an issue price of HK$0.10 per Scheme Share as settlement of debt owed by the Company to the Scheme Creditors in the aggregate amount of HK$37,787,979.30, further details of which are set out in the sections headed ‘‘Steps involved in the Creditors’ Scheme’’ and ‘‘The Scheme Share Issue’’ in the letter from the Board in this circular

377,879,793 Shares to be issued under the Scheme Share Issue, which shall rank pari passu in all respects with the then existing Shares in issue on the date of allotment and issue of the Scheme Shares

a group of wholly-owned subsidiaries of the Company in the PRC, being (1) Shenzhen Qianhai Dahuangyuan, (2) Linxiang Qiangsheng, (3) Lianyungang Huajin Huahong, and (4) Shenzhen Meiming Wenshi, which underlying major assets consist of certain loan receivables, real estate properties and interests in associates, and their respective subsidiaries

Creditors’ claim(s) that is/are secured by Security Interests

– 9 –

DEFINITIONS

‘‘Secured Creditor(s)’’
Creditors whose debts are secured upon any property or assets of the Company (whether or not such debts are also secured on any property or assets of any other person)
‘‘Security Interest(s)’’
any mortgage, charge, assignment, hire-purchase, title retention, leasing, sale-and-repurchase or sale-andleaseback arrangement, pledge, lien, hypothecation, encumbrance or security interest of whatsoever kind or any other agreement having the effect of conferring security provided by the Company
‘‘SFO’’
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)
‘‘Share Option Scheme’’
the share option scheme adopted by the Company pursuant to a resolution passed at the Shareholders’ meeting held on 9 June 2017
‘‘Share(s)’’ the ordinary share(s) of HK$0.10 each in the share capital of the Company
‘‘Shareholder(s)’’ the holder(s) of the Share(s)
‘‘Shenzhen Meiming Wenshi’’ 深圳市美名問世商貿有限公司 (Shenzhen Meiming Wenshi Trading Limited), a company established in the PRC and a Scheme Subsidiary
‘‘Shenzhen Qianhai Dahuangyuan’’
深圳市前海大荒緣融資租賃有限公司 (Shenzhen Qianhai Dahuangyuan Financing Lease Co., Ltd*), a company established in the PRC and a Scheme Subsidiary
‘‘Specific Mandate’’
the specific mandate to be granted by the Shareholders to the Board at the EGM for the allotment and issue of the Subscription Shares and the Scheme Shares
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited
‘‘Subscription’’
the proposed subscription of the Subscription Shares by the Investor pursuant to the Restructuring Agreement
‘‘Subscription Price’’

the subscription price under the Subscription, being HK$0.10 per Subscription Share

– 10 –

DEFINITIONS

‘‘Subscription Proceeds’’

HK$85,000,000, being the cash proceeds from the issue of the Subscription Shares

‘‘Subscription Share(s)’’ 850,000,000 Shares to be subscribed by the Investor under the Subscription
‘‘Takeovers Code’’
the Codes on Takeovers and Mergers and Share Buy-backs issued by the Securities and Futures Commission, as amended, supplemented or otherwise modified from time to time
‘‘Term Sheet’’ the legally binding term sheet regarding Proposed Restructuring of the Group dated 29 March 2023 entered into between the Company and the Investor
‘‘Total Subscription Price’’ HK$85,000,000, being the aggregate Subscription Price for the Subscription Shares to be paid or satisfied in accordance with the Restructuring Agreement
‘‘Unadmitted Claims’’ any Claims which are not Admitted Claims
‘‘%’’
per cent.

– 11 –

LETTER FROM THE BOARD

==> picture [67 x 67] intentionally omitted <==

China Beidahuang Industry Group Holdings Limited ��

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 00039)

Executive Directors:

Mr. Jiang Jiancheng (Chairman) Mr. Liu Xiaopeng (Vice-chairman) Mr. Ke Xionghan Mr. Chen Chen

Registered Office: P.O. Box 309 Ugland House Grand Cayman KY1-1104 Cayman Islands

Non-executive Directors:

Mr. Zhao Wanjiang (Vice-chairman) Ms. Ho Wing Yan Mr. Li Dawei

Independent Non-executive Directors: Mr. Chong Cha Hwa Mr. Yang Yunguang Mr. Chen Zhifeng

Head Office and Principal Place of Business in Hong Kong: Room 225, 2/F Mega Cube 8 Wang Kwong Road Kowloon Bay Kowloon Hong Kong

24 July 2024

To the Shareholders

Dear Sir or Madam,

(1) PROPOSED RESTRUCTURING INVOLVING CONNECTED TRANSACTION IN RELATION TO THE SUBSCRIPTION UNDER SPECIFIC MANDATE; CREDITORS’ SCHEME; ISSUE OF SCHEME SHARES UNDER SPECIFIC MANDATE; CONNECTED TRANSACTION AND VERY SUBSTANTIAL DISPOSAL IN RELATION TO THE DISPOSAL AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement.

– 12 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with, among other things, (i) further details of the Proposed Restructuring and the transactions contemplated thereunder; (ii) the letter of recommendation from the Independent Board Committee to the Independent Shareholders; (iii) the letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders; (iv) the financial information of the Group and the Scheme Subsidiaries; (v) the unaudited pro forma financial information of the Retained Group; (vi) management discussion and analysis of the Retained Group; (vii) valuation report of the properties; (viii) the notice of EGM; and (ix) other information as required under the Listing Rules.

THE PROPOSED RESTRUCTURING

In or around March 2023, in light of the current liquidity constraints and financial challenges of the Company, the Company has been working closely with its professional advisers and has been exploring the Proposed Restructuring, including but not limited to the restructuring of debts by way of a Creditors’ Scheme.

The Proposed Restructuring involves the following steps:

(a) the Subscription (the Completion of which is subject to the conditions as set out in the section headed ‘‘Conditions Precedent to the Subscription’’ in the letter from the Board in this circular); and
(b) the Creditors’ Scheme, the terms of which include:
(i) the Scheme Share Issue;
(ii) the Disposal; and
(iii) the discharge of the Creditors’ Claims against the Company.

A. THE RESTRUCTURING AGREEMENT

Further to the Term Sheet entered into between the Company and the Investor on 29 March 2023, on 25 January 2024, the Company and the Investor entered into the Restructuring Agreement in respect of the conditional subscription by the Investor of 850,000,000 Subscription Shares at the Subscription Price of HK$0.10 per Share.

The terms of the Restructuring Agreement supersede and replace the Term Sheet in its entirety, and the principal terms of the Restructuring Agreement are set out below.

Date

25 January 2024

– 13 –

LETTER FROM THE BOARD

Parties

(1) the Company; and
(2) the Investor

The Subscription

Under the Restructuring Agreement, the Investor conditionally agreed to subscribe for, and the Company conditionally agreed to issue, 850,000,000 Subscription Shares at the Total Subscription Price of HK$85,000,000, representing a Subscription Price of HK$0.10 per Subscription Share.

Upon the allotment and issue of the Subscription Shares to the Investor, the Subscription Shares shall in aggregate represent approximately 11.24% of the Enlarged Issued Share Capital.

Ranking

The Subscription Shares, when allotted and issued, shall rank pari passu in all respects with the then existing Shares in issue on the date of allotment and issue of the Subscription Shares.

Use of Proceeds

Under the Restructuring Agreement, the Total Subscription Price of HK$85,000,000 will be applied towards the Proposed Restructuring and the future business operation of the Company in the following manner:

(a) HK$45,000,000 shall be paid to the Scheme Company and used, subject to the payment of any Preferential Claims and the Scheme Costs, for the benefit of the Scheme Creditors pursuant to the Creditors’ Scheme;
(b) up to HK$20,000,000 shall be used to settle the Restructuring Costs (or, where a Loan for Restructuring Costs has been made available and drawn by the Company, be offset against the Loan for Restructuring Costs); and
(c) the remaining balance of the Total Subscription Price shall be used as general working capital of the Company.

– 14 –

LETTER FROM THE BOARD

The Subscription Price

The Subscription Price of HK$0.10 per Share represents:

a discount of approximately 52.38%, based on the closing price of HK$0.210 per Share as quoted on the Stock Exchange on the Last Trading Date;
a discount of approximately 51.55%, based on the average closing price of HK$0.2064 per Share as quoted on the Stock Exchange on the five consecutive trading days up to and including the Last Trading Date;
a gain of approximately 14.94%, based on the closing price of HK$0.087 per Share as quoted on the Stock Exchange on the date of the Restructuring Agreement;
a gain of approximately 20.19%, based on the closing price of HK$0.0832 per Share as quoted on the Stock Exchange on the five consecutive trading days up to and including the date of the Restructuring Agreement;
a discount of approximately 20.70%, based on the average closing price of approximately HK$0.1261 per Share over the period commencing from 12 months prior and up to the signing of the Restructuring Agreement;
a gain of approximately 28.21%, based on the closing price of HK$0.078 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
a discount of approximately 7.41% to the net asset value per Share of approximately HK$0.108 as at 30 June 2023 (as disclosed in the Company’s 2023 interim report dated 31 August 2023); and
a premium of approximately 3.60% to the net asset value per Share of approximately HK$0.0965 as at 31 December 2023 (as disclosed in the Company’s annual report for the year ended 31 December 2023).

The net price per Subscription Share after the deduction of the relevant expenses incidental to the Subscription is estimated to be approximately HK$0.10 per Share.

– 15 –

LETTER FROM THE BOARD

The Subscription Price had been agreed between the Company and the Investor under the Term Sheet and as disclosed in the announcement of the Company dated 2 April 2023, the Subscription Price was arrived at after arm’s length negotiations between the Company and the Investor after taking into account, among other things: (i) the net asset value per Share of approximately HK$0.124 as at 31 December 2022 (as disclosed in the Company’s 2022 annual results announcement dated 31 March 2023); (ii) the financial position of the Company and the difficulty in obtaining financing from banks and financial institutions to sustain the ongoing operations of the Company; (iii) the remaining operations and assets of the Group following the expected Disposal; (iv) market sentiment in relation to investment in listed companies in similar financial situations; and (v) the Subscription being in the interests of the Company and the Shareholders as a whole.

Although there has been an increase in the Share price as against the average closing price per Share over the period commencing from 12 months prior and up to the signing of the Restructuring Agreement, the Directors note that there has been no actual improvement on the financial outlook of the Group. As such, there is little room for the Group to negotiate for an increase in the Subscription Price in any material manner.

Based on the above reasons, the Board (excluding the independent non-executive Directors whose views are, after receiving the advice from the Independent Financial Adviser, set out in the letter from the Independent Board Committee in this circular) considers that the Subscription Price, including the relevant bases and discounts to the market price of the Shares, is commercially justifiable, and represents a realistic value for prospective investors in order to raise capital for the Company within a reasonable timeframe.

Conditions Precedent to the Subscription

Completion is subject to the following conditions having been satisfied or waived, as the case may be:

(a) the approval from the Listing Committee of the Stock Exchange granting or agreeing to grant the listing of, and permission to deal in, all of the Subscription Shares and the Scheme Shares to be issued by the Company having been obtained, and such approval not having been revoked;
(b) all of the relevant resolutions in connection with the Proposed Restructuring, including but not limited to the Subscription, the Scheme Share Issue and the Disposal having been duly passed by the Relevant Shareholders at the EGM in accordance with the Listing Rules and any other Applicable Laws, and such resolutions not having been revoked or vitiated;
(c) all of the relevant resolutions in relation to the Proposed Restructuring (including the Subscription) having been duly passed by the Board;

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LETTER FROM THE BOARD

(d) sanction in respect of the Creditors’ Scheme having been granted by the High Court and an office copy of the Court Order issued by the High Court for the purpose of sanctioning the Creditors’ Scheme having been filed with the Companies Registry in Hong Kong for registration;
(e) there being no material adverse change in the financial condition, trade barriers or property, results or operations of the Company or any relevant regulations as a whole; and
(f) the representations and warranties given by the Investor in the Restructuring Agreement being true, correct, accurate, complete and not misleading at all times from the date of the Restructuring Agreement up to and including the date of Completion.

Other than Condition Precedent (e) above which can be waived by the Investor, and Condition Precedent (f) above which may be waived by the Company, none of the other Conditions Precedent can be waived.

If any of the Conditions Precedent has not been satisfied (or waived, as the case may be) by 5:00 p.m. on the Long Stop Date, the Restructuring Agreement shall automatically terminate with immediate effect, unless otherwise agreed by the Company and the Investor in writing. As at the Latest Practicable Date, save for condition (d) which was satisfied as the sanction order was filed with the Companies Registry for registration on 12 December 2023, none of the Conditions Precedent above has been fulfilled.

Completion

Completion shall take place on or before the 10[th] Business Day after the date on which all of the Conditions Precedent have been satisfied (or waived, as the case may be), but in any event on or before the Long Stop Date, at such place as the Company and the Investor may agree.

Parties’ undertakings

Under the Restructuring Agreement, the parties undertake to reasonably endeavour, and procure their Affiliates to reasonably endeavour, to implement the Creditors’ Scheme pursuant to the terms of the Scheme Document. Details of the terms of the Creditors’ Scheme are set out under the section headed ‘‘The Creditors’ Scheme’’ in the letter from the Board in this circular.

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LETTER FROM THE BOARD

Investor’s undertakings

Under the Restructuring Agreement, the Investor has irrevocably undertaken to the Company that, in connection with the Proposed Restructuring:

(a) to provide undertakings to the High Court agreeing to, and agreeing to be bound by, the terms of the Creditors’ Scheme;
(b) to cooperate with the Company and the Scheme Administrators in their preparation of the circular to be sent to the Shareholders with notice of the EGM;
(c) to execute and deliver such documents (as a deed or otherwise) and perform such acts, or procure its Affiliates to execute and deliver such documents (as a deed or otherwise) and perform such acts, as may be required by Applicable Law or as may be necessary, desirable or advisable to give full effect to the Restructuring Agreement and/or the Creditors’ Scheme, or as any party to the Restructuring Agreement may request for the purposes of giving the full benefit of the Restructuring Agreement to the requesting party or giving the full benefit of the Creditors’ Scheme to a Scheme Creditor; and
(d) to support, and to procure its Affiliates to support, the Creditors’ Scheme and to provide and cause to be provided such undertakings to the Court as are appropriate, necessary and/or advisable for the Creditors’ Scheme to be approved and/or implemented,

in each case, in accordance with the terms and subject to the conditions of the Scheme Document.

Restructuring Costs and Loan for Restructuring Costs

In the event that the Restructuring Agreement is terminated prior to Completion taking place, the Investor has undertaken to pay the Restructuring Costs to the relevant professional adviser(s) of the Company.

Further, under the Restructuring Agreement, the Investor has agreed to grant an interest-free loan facility in the principal amount of up to HK$20,000,000 to the Company for the sole purpose of settling the Restructuring Costs (the ‘‘Loan for Restructuring Costs’’). If the Restructuring Agreement is terminated prior to Completion taking place, and a Loan for Restructuring Costs has been made available and drawn by the Company, the Investor will offset on a dollar-for-dollar basis and irrevocably release the Company from repaying the Loan for Restructuring Costs due to it.

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LETTER FROM THE BOARD

B. THE CREDITORS’ SCHEME

Reference is made to the announcements of the Company dated 23 March 2023, 16 June 2023, 21 June 2023, 31 July 2023, 18 August 2023, 27 October 2023 and 20 November 2023 in which the Board announced, among other things, that the Company proposed to implement, subject to the approval by the High Court, the Creditors’ Scheme, and the results of the Scheme Meeting.

As disclosed in the announcements of the Company dated 20 November 2023 and 29 November 2023, the Scheme Meeting was convened and held on 20 November 2023, at which the Creditors’ Scheme was approved by the requisite majorities of the Scheme Creditors. At the Sanction Hearing on 29 November 2023, the Creditors’ Scheme was sanctioned without modification by the High Court.

Creditors’ claims against the Company

Based on the available books and records of the Company, the estimated total amount of claims against the Company (including the Company’s contingent liability in relation to the corporate guarantee provided by it for the Defaulted Construction Payables in the amount of approximately HK$123,093,000) was approximately HK$812 million (excluding any alleged/purported penalty interests) as at 31 December 2023. As at the date of the Scheme Meeting, 31 Creditors submitted notices of claim for voting purpose, including five direct and indirect subsidiaries of the Company, and eight former or current employees of the Group. The total amount of Claims will be subject to the Creditors’ submission of claim for dividend purpose, the admission or rejection, in whole or in part, by the administrators of the Creditors’ Scheme, and the adjudication result in the event that the Creditor is dissatisfied with the decision of the Scheme Administrators, when the Creditors’ Scheme becomes effective.

Five subsidiaries of the Company are Scheme Creditors, including Shenzhen Qianhai Dahuangyuan (which is a Scheme Subsidiary) and four other subsidiaries that will be part of the Retained Group upon completion of the Proposed Restructuring. Each of these five subsidiaries has undertaken to elect to receive cash in lieu of the Scheme Shares for full and final settlement of their respective Admitted Claims.

The Company has given a corporate guarantee to guarantee certain payment obligations of its wholly-owned subsidiary in relation to the joint and several liability that the Company assumed for the Defaulted Construction Payables, details of which has been disclosed in the annual report of the Company for the year ended 31 December 2023. The aforesaid corporate guarantee constitutes a provision of financial assistance to its whollyowned subsidiary, and therefore does not constitute a notifiable transaction under Chapter 14 of the Listing Rules.

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LETTER FROM THE BOARD

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries and based on the information available as at the Latest Practicable Date, all of the Creditors who submitted notice of claim for voting purpose are Independent Third Parties.

Steps involved in the Creditors’ Scheme

Further to the announcements of the Company dated 27 October 2023 and 29 November 2023, the Creditors’ Scheme involves the following steps for the Company:

(a) within 30 Days of the registration date of the court order sanctioning the Creditors’ Scheme with the Companies Registry in Hong Kong, or such extended date as may be agreed by the Company with the administrators of the Creditors’ Scheme, HK$45,000,000 out of the Subscription Price shall be paid to the Scheme Company;
(b) the Scheme Share Issue, under which the Company will allot and issue the Scheme Shares to the Scheme Creditors (or in the case of any Scheme Creditor who has validly elected to receive cash in lieu of the Scheme Shares that they would otherwise be entitled to receive under the Creditors’ Scheme, to the Scheme Company for the benefit of such Scheme Creditor);
(c) upon the Effective Date (or such later date agreed in writing between the Company and the Scheme Administrators), the Company shall execute all necessary documentation, as may be reasonably requested by the Scheme Administrators, for the Disposal (i.e. in order to transfer the Interests in Scheme Subsidiaries to the Scheme Company), and shall take such other steps and execute such other documents as, in the opinion of the Scheme Administrators, are necessary for the realisation of the shares in or the assets of the Scheme Subsidiaries;
(d) from the Effective Date to the date of termination of the Creditors’ Scheme in accordance with its terms, the Company shall, from time to time: (i) execute all necessary documentation, as may be reasonably requested by the Scheme Administrators, in order to assign to the Scheme Company unconditionally and irrevocably any claims or rights to claim of the Company against Mr. Jiang Jianjun; and
(e) on the Effective Date, all Claims owing by the Company to the Creditors as of the Effective Date will be discharged and released in full as against the Company. Once the Creditors’ Scheme becomes effective, the Creditors’ Scheme will remain legally binding on the Company and all Creditors (regardless of whether the Creditors (a) voted in favour of the Creditors’ Scheme, and/or (b) submitted claims for dividend purposes).

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LETTER FROM THE BOARD

Under and subject to the terms of the Creditors’ Scheme, in exchange for the Creditors’ discharge and release of their respective Claims against the Company, the Scheme Creditors will be entitled to receive the Cash Dividend and, in the case of Scheme Creditors who have not elected to receive cash in lieu of the Scheme Shares, the Scheme Shares, for full and final settlement of their respective Admitted Claims.

The Cash Dividend will consist of: (a) subject to the payment of any Preferential Claims and the Scheme Costs, up to HK$45 million from the Initial Cash Payment as part of the Subscription Proceeds, and any cash proceeds from the disposal of the Scheme Shares (where applicable); (b) the proceeds from the disposal of the Interests in Scheme Subsidiaries; and (c) any proceeds generated from the realisation of the claims or rights to claim of the Company against Mr. Jiang Jianjun in respect of loss or damage to the assets of the Company and/or Group, which will be transferred to the Scheme Company upon the Effective Date, or such later date as the Scheme Administrators may decide in accordance with the terms of the Creditors’ Scheme.

As at the Latest Practicable Date, to the best knowledge of the Board, there are no claim or rights to claim of the Company against Mr. Jiang Jianjun in respect of loss or damage to the assets of the Company and/or Group.

Save for any Preferential Claims (which will be paid by the Scheme Company in full) and the Secured Claims, the Scheme Creditors, under the terms of the Creditors’ Scheme, will receive the Cash Dividend and the Scheme Shares (or proceeds in lieu of Scheme Shares), after the settlement of any Preferential Claims and the Scheme Costs and subject to any reserve which the Scheme Administrators may make for Unadmitted Claims, proportionally based on their Admitted Claims.

The Scheme Share Issue

Under the Scheme Share Issue, 377,879,793 Shares, representing approximately 5.00% of the Enlarged Issued Share Capital, would be capitalised from the Company’s existing debts owed to the Scheme Creditors (in the approximate amount of HK$37,787,979.30) at HK$0.10 per Share, which is equal to the Subscription Price. The Scheme Shares shall rank pari passu in all respects with the then existing Shares in issue on the date of allotment and issue of the Scheme Shares. The net price per Scheme Share after the deduction of the relevant expenses incidental to the Creditors’ Scheme is estimated to be approximately HK$0.10 per Share.

The allotment, issue and registration, as well as the listing of and permission to deal in the Scheme Shares will be subject to the Court Order, approval of the Shareholders at the EGM and approval of the Stock Exchange.

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LETTER FROM THE BOARD

The Scheme Share Issue is conditional upon the Creditors’ Scheme being effective, which is subject to the satisfaction of all the conditions to the Creditors’ Scheme as set out in the section headed ‘‘Conditions precedent to the Creditors’ Scheme’’ in the letter from the Board in this circular.

The Disposal

As part of the terms of the Creditors’ Scheme, the Scheme Subsidiaries will be transferred to the Scheme Company by the Group.

It is expected that the Scheme Subsidiaries will be transferred to the Scheme Company at nil or nominal consideration.

As the Disposal is a part of the Creditors’ Scheme which would lead to the discharge and release of the Claims in full as against the Company on the Effective Date, the Directors (excluding the independent non-executive Directors whose views will, after receiving the advice from the Independent Financial Adviser, be set out in the letter from the Independent Board Committee in the circular to be despatched to the Shareholders) consider that the Disposal at nil or nominal consideration is fair and reasonable and is in the best interest of the Shareholders and the Company as a whole.

It is expected that the Scheme Subsidiaries will be transferred to the Scheme Company on the date on which the Creditors’ Scheme becomes unconditional and comes into effect or on such other date as the Scheme Administrators may decide in accordance with the terms of the Creditors’ Scheme.

Conditions precedent to the Creditors’ Scheme

The Creditors’ Scheme will be implemented and shall become binding and effective on the Company and the Creditors if the following conditions precedent are satisfied:

(a) over fifty per cent (50%) in number of the Creditors, representing at least seventy-five per cent (75%) in value of the Creditors present and voting in person (or through electronic means if applicable) or by proxy at the Scheme Meeting, voting in favour of the Creditors’ Scheme;

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LETTER FROM THE BOARD

(b) sanction in respect of the Creditors’ Scheme having been granted by the High Court and an office copy of the order of the High Court sanctioning the Creditors’ Scheme having been delivered to the Companies Registry in Hong Kong for registration; and
(c) HK$45,000,000 of the Total Subscription Price being received by the Scheme Company within thirty (30) days after the registration date of the Court Order with the Companies Registry in Hong Kong, or such extended date as may be agreed by the Company with the Scheme Administrators.

All of the conditions precedent to the Creditors’ Scheme are incapable of being waived. As at the Latest Practicable Date, condition (a) was satisfied at the Scheme Meeting held on 20 November 2023, condition (b) was satisfied as the sanction order was delivered to the Companies Registry for registration on 12 December 2023, while condition (c) has not been fulfilled.

Reasons and Benefits for the Proposed Restructuring

Since the outbreak of the COVID-19 pandemic in the early period of the year ended 31 December 2020, the operational status and financial positions of both the Group and its customers have been severely impacted, and the Group faced difficulties in collecting trade receivables. In addition, due to the pandemic-related lockdown measures, the construction of the seafood food city project in PRC, which had taken up significant amount of funds of the Group, had come to a halt in the year ended 31 December 2020 which delayed the Group’s sales plans in relation to the project. As such, the Group could not recover its investment from the project as planned. At around the same time, the Group had to continue to pay construction fees, trade payables and the principal and interest of financial borrowings to prevent default on contracts, but was struggling to obtain new loans due to its poor financial position. As a result, the Group’s cash balance decreased substantially by 84% between the beginning of the year ended 31 December 2020 and the end of the year ended 31 December 2023.

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LETTER FROM THE BOARD

As disclosed in the annual results announcement of the Company for the year ended 31 December 2022, although the revenue generated by the Group amounted to approximately HK$930.28 million, representing an increase of 0.16% as compared with the year ended 31 December 2021, and an increase of 8.29% as compared with the year ended 31 December 2020, the Group has recorded a loss (net of tax) of approximately HK$222.40 million, representing an decrease in profit (net of tax) of approximately HK$45.11 million as compared with the year ended 31 December 2021, and approximately HK$227.86 million as compared with the year ended 31 December 2020. The significant shift from net profit to net loss since the year ended 31 December 2020 was primarily attributable to the negative impacts of increase in provision for additional penalty relating to default construction payment included in administrative expense, increase in net allowance of expected credit loss, increase in impairment loss on goodwill, and increase in finance costs, etc.

The Group also recorded a decrease in net current assets from approximately HK$370.48 million as at 31 December 2020 to approximately HK$161.20 million as at 31 December 2022, which was mainly due to, inter alia, (i) significant increase of approximately 194% in other payables and accruals from approximately HK$84.21 million as at 31 December 2020 to approximately HK$247.57 million as at 31 December 2022; and (ii) substantial increase of approximately 12% in bank and other borrowings from approximately HK$393.02 million as at 31 December 2020 to approximately HK$440.04 million as at 31 December 2022.

Due to the fact that (i) the Group recorded a loss for the year ended 31 December 2022 and the year ended 31 December 2021 of approximately HK$222.40 million and HK$177.29 million, respectively; (ii) the Group has an significant amount of approximately HK$381.23 million outstanding bank and other borrowings to be paid within one year as at 31 December 2022; and (iii) the Group only has a cash or cash equivalent amount of approximately HK$14.88 million as at 31 December 2022, resulting in the Group’s inability to repay its debts that are due or soon to be due, a disclaimer opinion was issued by the Company’s auditor as the aforementioned conditions that existed as at 31 December 2022 cast significant doubt on the Group’s ability to continue as a going concern.

The Company is a holding company and its financial position is similar to that of the Group’s position. The Company’s current assets was only approximately HK$8.3 million as at 31 December 2022, while the rest of assets held by the Company were mostly its interests in the subsidiaries, but the Company’s current liabilities was approximately HK$553.54 million as at 31 December 2022, of which approximately HK$356.76 million were other borrowings. The current assets are not able to satisfy the obligation arising from the Company’s current liabilities. In the circumstances, it is clear that the Company is facing liquidity problems.

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LETTER FROM THE BOARD

Since 2021, the Company has been receiving statutory demands from several creditors and the Company has been demanded to repay overdue indebtedness of HK$82,598,953.78 as at 31 December 2022. Pursuant to section 178(1)(a) or 327(4)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, if the Company is unable to repay the relevant indebtedness within 21 days from the date of service of the relevant statutory demands, each of the relevant creditors is entitled to present a winding-up petition against the Company at any time at discretion.

As disclosed in the announcements of the Company, a number of winding-up petitions were presented against the Company. At present, all such petitions have been dismissed or withdrawn. To the best knowledge of the Board, the outstanding indebtedness owed by the Company to all Creditors (including the Company’s contingent liability in relation to the corporate guarantee provided by it for the Defaulted Construction Payables in the amount of approximately HK$123,093,000) amounted to approximately HK$812 million as at 31 December 2023. As the Company only had a cash balance of approximately HK$2,000 as at 31 December 2023, the Company is unable to repay the relevant overdue and outstanding indebtedness.

In addition, the Group’s operations in the year ended 31 December 2023 have continued to suffer from the lingering effects of COVID-19, primarily due to the slow recovery of China’s economy in early 2023. As of 31 December 2023, the Group’s total assets amounted to approximately HK$1,862.2 million, which represents a decline of approximately 4% from 31 December 2022. The net assets stood at approximately HK$611 million, indicating approximately a 22% decrease from the end of 2022.

The gross profit for the year ended 31 December 2023 was approximately HK$108 million, which is down by approximately 20% from the year ended 31 December 2022. The Group also recorded a net loss of approximately HK$145.6 million for the year ended 31 December 2023. Given the potential risks ahead, including, inter alia, possible increases in expected credit losses due to client defaults and potential impairment of right-of-use assets if the economic challenges in the PRC continue, the Group’s losses for the year ending 31 December 2024 could be further amplified.

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LETTER FROM THE BOARD

Considering the losses of approximately HK$145.6 million and approximately HK$222.4 million for the years ended 31 December 2023 and 2022 respectively. As at 31 December 2023, the Group had defaulted on repayments of its debts, including: (i) secured bonds of principal amount of HK$109,000,000 and interests thereon of approximately HK$135,360,000; (ii) unsecured bonds of principal amount of HK$249,414,000 and interests thereon of approximately HK$84,981,000; (iii) other loans in the principal amount of HK$20,800,000 and interest thereon of approximately HK$3,449,000; and (iv) default in settlement for the Defaulted Construction Payables which amounted to approximately HK$131,848,000 (and in respect of which the Group had received a notice of event of default from the contractor demanding payment). With limited cash reserves of approximately HK$13.0 million as of 31 December 2023, the Group faces significant repayment challenges.

The Board’s decision to proceed with the Disposal, as part of the Creditors’ Scheme, was based on a comprehensive assessment of various factors. These factors included (i) the potential consequence of the Company being placed under insolvent liquidation in the event of the non-materialisation of the Proposed Restructuring, (ii) the broader context of the Proposed Restructuring of which the Subscription and the Creditors’ Scheme form part, (iii) the difference between the book values of the assets and liabilities of each of the Scheme Subsidiaries and the uncertainty in their expected realisable value, considering the marketability of the underlying assets in a restricted amount of time, (iv) the significant amount of interest (and/or penalty interest) that the Company would incur if it disposed of the Scheme Subsidiaries (or their assets) itself, (v) the Company understanding that, if the proceeds from the Scheme Assets (including the Scheme Subsidiaries) exceeded the total amount of Claims, the Scheme Administrators intend to seek directions from the High Court to return the residue to the Company, and (vi) the Creditors’ Scheme would also discharge and release the contingent liability in relation to the corporate guarantee provided by the Company for the Defaulted Construction Payables.

The Board takes the view that the Proposed Restructuring pursuant to the Restructuring Agreement is a strategic and realistic response to the current market challenges which will enable the Group to reach a settlement with its indebtedness in a formal and orderly manner such that all of the Company’s indebtedness and liabilities to the Creditors will be released and discharged pursuant to the terms of the Creditors’ Scheme, which is in the interests of the Company and the Shareholders as a whole and which represents a good opportunity for the injection of new investment into the Group, without which the Company, as a holding entity and as disclosed above, would be subject to an unsustainable financial situation and would be at risk of insolvent liquidation, and the expected returns to the Shareholders and Scheme Creditors would likely be lower or become minimal. The proceeds from the Subscription after settlement of the Creditors’ Scheme and payment of professional fees and expenses for the Proposed Restructuring will be retained as working capital for the Group, which will improve the financial and liquidity position of the Group.

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LETTER FROM THE BOARD

Having considered the above, the Board is of the view that the terms of the Restructuring Agreement are on normal commercial terms that are fair and reasonable and the entering into of the Restructuring Agreement is in the best interest of the Shareholders and the Company as a whole.

COMPLIANCE WITH CSRC FILING RULES

The Company has appointed a PRC counsel to prepare the CSRC Filings. The Board understands from the advice given by the PRC counsel that, according to Rule 16 of the CSRC Filing Rules, the CSRC Filings shall be completed within 3 Business Days after the issue of the Subscription Shares and the Scheme Shares under the Proposed Restructuring. The Company shall comply with the applicable filing requirements under the CSRC Filing Rules in connection with the Subscription and the Scheme Share Issue.

FINANCIAL EFFECT OF THE DISPOSAL AND THE PROPOSED RESTRUCTURING

Assuming Interests in the Scheme Subsidiaries are disposed of, upon the completion of the Disposal, the Scheme Subsidiaries (and their respective wholly-owned and non-wholly-owned subsidiaries) will cease to be subsidiaries of the Company and their financial results will be deconsolidated from the Group’s results.

Upon the completion of the Disposal, the Group is expected to record an unaudited loss on deconsolidation of the Scheme Subsidiaries in the amount of approximately HK$736 million to the Company, representing the net asset value less release of translation reserve and noncontrolling interests of the Scheme Subsidiaries as at 31 December 2023 given the nil or nominal consideration for the Disposal. The actual loss as a result of the Disposal to be recorded by the Group is subject to audit and will be determined as at the date of the completion of the Disposal.

Under the terms of the Creditors’ Scheme (details of which are set out in the section headed ‘‘Steps involved in the Creditors’ Scheme’’ in the letter from the Board in this circular), upon it becoming effective, the Creditors will release the Company of, and the Company will be fully discharged of, all the Claims against the Company, including but not limited to any interest or penalties arising from any debts owed by the Company to the Scheme Creditors. The book value of the Company’s liabilities that is expected to be discharged and released upon the Creditors’ Scheme becoming effective is approximately HK$812 million as at 31 December 2023, of which approximately HK$614 million is owed to external parties which are not subsidiaries of the Group (and does not include the Company’s liability in relation to the corporate guarantee provided by it for the Defaulted Construction Payables in the amount of approximately HK$123,093,000).

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LETTER FROM THE BOARD

The breakdown of the liabilities expected to be discharged and released under the Creditors’ Scheme is as follows:

	Book value of
	liability
	expected to be
	discharged as
	at 31 December
Category of Company’s liabilities	2023
	(approx. HK$
	million)
Liabilities owed to third parties (Note 1)	614
Liabilities owed to subsidiaries of the Group (Note 2)	74
Contingent liability owed under the corporate guarantee
given for the Defaulted Construction Payables	123

Notes:

The liabilities includes i) secured bonds of principal amount of HK$109,000,000 and interests thereon of approximately HK$135,360,000 (the ‘‘Defaulted Secured Bonds’’); ii) unsecured bonds of principal amount of HK$244,514,000 and interests thereon of approximately HK$84,840,000 (the ‘‘Default Unsecured Bonds’’); iii) other loans of principal amount of HK$11,964,000 and interest thereon of approximately HK$1,159,000 (the ‘‘Defaulted Other Loans’’); and iv) other payables and accruals includes accrued salary owing to current or former employees, operating liabilities owing to subsidiaries of the Company and operating liabilities owing to third parties,to third parties of approximately HK$27,652,000.
Namely, owed to BAPP Ethanol Holdings Limited, Shenzhen Qianhai Dahuangyuan, China Phoenix Group Limited（中國鳳凰集團有限公司）, China Shopping Basket Group Limited（中國菜籃子集團有限公司） and China Lingnan Group Limited*（中國嶺南集團有限公司）.

Further, the Company’s contingent liabilities in relation to the corporate guarantee provided by it for the Defaulted Construction Payables would be fully discharged and released when the Creditors’ Scheme becomes effective. As at 31 December 2023, the contingent liabilities of the Company under such corporate guarantee amounted to approximately HK$123,093,000. Taking into account the Company’s corporate guarantee and the book value of the liabilities that is expected to be discharged and released, the total amount of the Company’s claims as at 31 December 2023 that the Creditors’ Scheme would apply to is estimated to be approximately HK$812 million (of which approximately HK$737 million is owed/may be owed to external parties that are not subsidiaries of the Group, including the contingent liabilities under the guarantee given for the Defaulted Construction Payables).

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LETTER FROM THE BOARD

Assuming the Proposed Restructuring will be completed, including but not limited to the completion of the Subscription, the Scheme Share Issue, the Disposal, the Creditors’ Scheme between the Company and the Scheme Creditors, and that all of the Scheme Creditors receive Scheme Shares instead of electing to receive cash in lieu, the Group is expected to recognise a net loss of approximately HK$224 million, being the difference between:

(a) the Company’s total external liabilities of approximately HK$614 million expected to be subject to the Creditors’ Scheme as at 31 December 2023; and
(b) less the sum of (i) the portion of the Company’s liabilities that is (a) settled through the Initial Cash Payment of HK$45 million and (b) capitalised into Scheme Shares in the total amount of approximately HK$37.8 million, (ii) the total scheme-related expenses of approximately HK$20 million, and (iii) the total book value of the Scheme Subsidiaries of approximately HK$736 million as at 31 December 2023.

The calculation of the aforementioned net liabilities has taken into account the release of a Secured Creditor of its Security Interest and its participation in the Creditors’ Scheme as a Scheme Creditor whereupon its entire Claim was to be treated as unsecured. The actual gain or loss as a result of the Proposed Restructuring is subject to audit and will be determined as at the date of the completion of the Proposed Restructuring.

Information on the Scheme Subsidiaries

The Scheme Subsidiaries include a group of direct and indirect wholly-owned subsidiaries of the Company in the PRC, being (1) 深圳市前海大荒緣融資租賃有限公司 (Shenzhen Qianhai Dahuangyuan Financing Lease Co., Ltd.), (2) 臨湘市強盛礦業有限責任公司 (Linxiang Qiangsheng Mining Industry Company Limited), (3) 連雲港華金華鴻實業有限公司 (Lianyungang Huajin Huahong Industrial Co., Ltd), and (4) 深圳市美名問世商貿有限公司 (Shenzhen Meiming Wenshi Trading Limited), the principal underlying assets of which consist of certain loan receivables, real estate properties and interests in associates, and their respective subsidiaries.

Set out below are the further details of the Scheme Subsidiaries as at the Latest Practicable Date:

(a) Shenzhen Qianhai Dahuangyuan Financing Lease Co., Ltd.

Shenzhen Qianhai Dahuangyuan is a company established in the PRC with limited liability and an indirect subsidiary of the Company.

Shenzhen Qianhai Dahuangyuan primarily engages in financial leasing.

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LETTER FROM THE BOARD

(b) Linxiang Qiangsheng Mining Industry Company Limited

Linxiang Qiangsheng is a company established in the PRC with limited liability and an indirect subsidiary of the Company. As at the Latest Practicable Date, Linxiang Qiangsheng directly owns 51% interest in a non-wholly owned subsidiary.

As at the Latest Practicable Date, Linxiang Qiangsheng and its non-wholly owned subsidiary are primarily engaged in the trading of mineral products, including the flotation selection of non-ferrous metals mines and sales of mineral products.

(c) Lianyungang Huajin Huahong Industrial Co., Ltd

Lianyungang Huajin Huahong is a company established in the PRC with limited liability and a direct subsidiary of the Company. Lianyungang Huajin Huahong directly or indirectly owns interests in three subsidiaries.

As at the Latest Practicable Date, Lianyungang Huajin Huahong and its subsidiaries are primarily engaged in the business of property construction and development business. The properties currently developed by them are located in Lianyungang, Jiangsu province, the PRC.

(d) Shenzhen Meiming Wenshi Trading Limited

Shenzhen Meiming Wenshi is a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company. Shenzhen Meiming Wenshi currently directly and indirectly owns interests in 24 subsidiaries, two associated companies and other financial assets.

As at the Latest Practicable Date, Shenzhen Meiming Wenshi and its subsidiaries are primarily engaged in the sale and distribution of wine and liquor and food trading in the PRC.

Given the businesses carried out by the Scheme Subsidiaries as disclosed above, the Disposal pursuant to Proposed Restructuring is expected to include core and non-core businesses of the Group, namely: (i) financial leasing, (ii) trading of mineral products, (iii) property construction and development, and (iv) distribution of wine and liquor and food trading. The Disposal is not expected to involve the entirety of the Group’s core business.

The total book value of the Scheme Subsidiaries is approximately HK$736 million as at 31 December 2023.

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LETTER FROM THE BOARD

For the years ended 31 December 2022 and 31 December 2023 and for the three months ended 31 March 2024, the revenues and net profits (both before and after taxation) attributable to the Scheme Subsidiaries, which were prepared in accordance with the Hong Kong Financial Reporting Standards (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants were approximately as follows:

			For the
	For the	For the	three months
	year ended	year ended	ended
	31 December	31 December	31 March
	2022	2023	2024
	HK$’000	HK$’000	HK$’000
Shenzhen Qianhai Dahuangyuan
Revenue	16,128	12,744	1,371
Net profits/(loss) before taxation	(5,061)	227	243
Net profits/(loss) after taxation	(4,870)	370	243
Linxiang Qiangsheng
Revenue	217,493	290,286	42,329
Net profits/(loss) before taxation	(3,987)	5,255	(947)
Net profits/(loss) after taxation	(3,987)	5,255	(937)
Lianyungang Huajin Huahong
Revenue	0	0	0
Net profits/(loss) before taxation	(5,255)	(45,216)	(3,939)
Net profits/(loss) after taxation	(5,255)	(45,216)	(3,939)
Shenzhen Meiming Wenshi
Revenue	342,611	322,240	37,892
Net profits/(loss) before taxation	(46,454)	(3,812)	(183)
Net profits/(loss) after taxation	(45,970)	(3,678)	(183)

Valuation

Based on the valuation report prepared by International Valuation Limited, the value of the properties held by the Scheme Subsidiaries (the ‘‘Properties’’) is RMB430,670,000 (equivalent to approximately HK$465,125,000) as at 30 April 2024. For details of the valuation of the Properties, please refer to the valuation report in Appendix VIII to this circular. Disclosure of the reconciliation of the net book value and the valuation as required under Rule 5.07 of the Listing Rules is set out below:

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LETTER FROM THE BOARD

Net book value of the Properties as at 31 December 2023 Valuation deficit as at 30 April 2024 Valuation of the Properties as at 30 April 2024 as set out in the valuation report in Appendix VIII to this circular	HK$’000 507,006 (41,881) 465,125

Business of the Retained Group

As at the Latest Practicable Date, the Group is engaged in the wholesale trading and distribution of food products, including wine and liquor, fruit, vegetables and grains, raw beef and live cattle (the ‘‘Existing Food Business’’).

Following the Proposed Restructuring, the Retained Group’s business will be principally comprised of the (i) wholesale trading and distribution of food such as vegetables, grains and raw beef (the ‘‘Remaining Food Business’’) and (ii) leasing and sub-leasing of commercial and other properties in Hong Kong and the PRC (the ‘‘Rental Business’’). The Retained Group may also have limited trading in mineral products, pursuant to a framework sale and purchase agreement for manganese ore entered into between a member of the Retained Group and a supplier. The Retained Group will continue to evaluate business opportunities in the mineral products trading segment following the Proposed Restructuring.

The volume of business activities and operation of the Remaining Food Business will be less than the Existing Food Business. However, the operation of the Rental Business is expected to be largely unaffected by the Disposals and Proposed Restructuring and should remain unchanged following the Proposed Restructuring.

The business model of the Retained Group is as follows:

The Remaining Food Business

The Existing Food Business and the Remaining Food Business differs in the types of food products traded. As noted above, the Existing Food Business involves the trading of wine and liquor, fruit, vegetables, grains, raw beef and live cattle, while the Remaining Food Business involves the trading of vegetables, grains and raw beef only. Apart from this, no material difference is expected between the nature of operations of the Existing Food Business and the Remaining Food Business. As part of the Disposals, the Group’s business in the trading of wine and liquor and fruit operated by the Scheme Subsidiaries and their respective subsidiaries will be disposed of.

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LETTER FROM THE BOARD

The Retained Group will procure agricultural and food products from manufacturers and agricultural suppliers and for sale/export to wholesalers in the PRC. Consistent with the Group’s current practices, the Retained Group will also outsource the necessary packaging process to third party providers. The Retained Group’s food products will be sold primarily to food products wholesalers or other distributors, who will subsequently resell the products to end consumers (including supermarkets and wet markets). As at the Latest Practicable Date, the wholesalers that would be retained in the Retained Group’s distribution network for the food products cover South, Central and Southwest China.

As with the Existing Food Business, the Remaining Food Business’ trading and distribution operations can be categorised into two scenarios:

(a) The purchase of food products occurs prior to receiving customer orders. This approach is typically adopted for food products that are non-perishable, have a steady market demand and a longer expiry period. The Retained Group will purchase these products regularly from suppliers to maintain certain inventory levels, irrespective of when customer purchase orders are received.
(b) Food products are purchased from suppliers only after receiving specific customer orders. This strategy is particularly relevant for perishable food products that have a short expiry period or would easily spoil. In these instances, the Retained Group will only procure these products from suppliers upon receiving customer orders.

The Retained Group will retain a sales and marketing team dedicated to its Remaining Food Business, and will continue to maintain a seller/buyer relationship with its wholesaler customers. Revenue recognition will take place when products are delivered (from the external packaging suppliers, as applicable) to the designated warehouses and accepted by these customers. It is expected that the Retained Group would retain and enter into framework sales agreements with its major wholesaler customers.

As part of the trading and distribution of food products, the Retained Group will continue to process and package food products before they are delivered to the Group’s customers. The processing and packaging steps, as well as the types of external service providers involved in the day-to-day operation of the Remaining Food Business would depend on the type of food products handled. The Retained Group will continue to maintain cooperative relationships with food products suppliers and external service providers to support the supply of (and where applicable, packaging of) vegetables, grains, and raw beef.

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LETTER FROM THE BOARD

The Board expects that the Retained Group will continue to leverage its competitive advantages in respect of the Remaining Food Business, including its stable and cooperative relationships with food suppliers and packaging, warehousing and logistics third party providers in the PRC, as well as employees with operational and technical capabilities, supported by an established quality control system covering the whole business process. The Board expects that following the Proposed Restructuring, the Retained Group will continue to package and market grain products under its own “大荒宴” brand, and will continue to leverage the established brand and distribution network covering South, Central and Southwest China.

In view of the Proposed Restructuring, the Group has revised the organisational structure to ensure that all employees involved in the operation of the Remaining Food Business are employed by and will remain with the Retained Group following the Disposal.

The operation of the Remaining Food Business is expected to be primarily funded by the revenue from the Remaining Food Business and Rental Business, which may also be used to fund any further expansion and development.

The Rental Business

As at the Latest Practicable Date, the Retained Group owns or has leased six investment properties that are commercial properties and logistic facilities located in Hong Kong and Shenzhen in the PRC (the ‘‘Investment Properties’’). The Rental Business is one of the Retained Group’s core businesses, and the Retained Group has been, and expects to continue to, actively explore and invest in further investment properties. No material difference between the operations of the Rental Business is expected before and after the Proposed Restructuring.

It is expected that the designated team in the Retained Group would evaluate suitable opportunities to acquire commercial properties and logistic facilities or rent land lots in Hong Kong and the PRC with business potential. Suitable properties (or land lots) are then acquired (or rent) by the Retained Group based on the results of market research and valuation. For properties that are acquired by the Retained Group, once they are acquired, the Retained Group would enter into commercial leases with tenants including manufacturers, retailers, corporations and other individuals. For land lots that are rented by the Retained Group, it would further develop the land (including designing and constructing new premises on the land, such as logistics facilities) and enter into sub-leases with sub-tenants including manufacturers, retailers, corporations and other individuals.

The Retained Group will retain its existing teams for the operations and management of Investment Properties, which includes marketing and leasing, property management, maintenance and repairs and cleaning. In particular, the property management team will continue to manage tenants and maintain security of the properties, while the maintenance and repairs team will continue to carry out regular inspections and to ensure the upkeep of the Investment Properties.

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LETTER FROM THE BOARD

The Retained Group may also engage property management service providers for management and maintenance of the Investment Properties as it sees fit. The Retained Group’s selection criteria for property management providers will include their management capability, years of operation and relevant experience in managing similar properties.

As at the Latest Practicable Date, the Retained Group owns one Investment Property. The major terms of the existing lease entered into by the Retained Group with the tenant include:

Lease term: The lease term is 10 years.
Obligation(s) of the Retained Group: The Retained Group’s obligations under the existing lease agreement include ensuring the safety of the lease property complies with the requirements under all applicable laws, regulations and rules when the lease is delivered to the lessee, and cooperating with the lessee for business formalities such as obtaining fire safety, environmental and business licenses.
Rental payment: The rent is payable by the lessee monthly. Upon signing of the lease, the lessee shall pay for the rental deposit and part of the rent payable under the lease upfront.
Renewal of lease: The lessee shall submit a written application to the lessor for extension of the lease. Upon mutual agreement, the parties will enter into a new lease. The lessee enjoys a preferential right to lease if the terms of the new lease are the same as the terms of the existing lease.

For Investment Properties on land lots rented by the Retained Group, the major terms of the existing leases entered into by the Retained Group with the sub-tenants include:

Lease term: The lease terms for the sub-lease properties vary and range from approximately 3 years to approximately 8.5 years.
Obligation(s) of the Retained Group: Generally, as the sub-lessor, the Retained Group is responsible for the maintenance (including the associated maintenance costs) of the sub-lease properties.
Rental payment: The rent is generally payable by the sub-lessees monthly. The sublessees are required to pay rental deposits to the respective sub-lessors.
Renewal of lease: The sub-leases can be extended by mutual agreement of the parties and in accordance with the procedural requirements set out under the respective subleases. The sub-lessees under certain sub-leases enjoy a preferential right to lease if the terms of the new sub-lease are the same as the terms of the existing sub-lease.

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LETTER FROM THE BOARD

The competitive advantages of the Rental Business include management experience and expertise in warehousing and logistics management, as well as long-term and stable relationship with large logistics companies in the PRC.

The marketing and leasing team of the Rental Business will continue to source tenants or sub-tenants (as applicable) by actively reaching out to prospective tenants or sub-tenants to promote and sell the Retained Group’s logistics facilities and other available properties. As with the Remaining Food Business, the Rental Business is expected to be primarily funded by the revenue from the Remaining Food Business and Rental Business, which may also be used to fund any further expansion and development.

The Mineral Trading Business

As at the Latest Practicable Date, the Group is engaged in the trading of mineral products, which include the flotation selection of non-ferrous metals mines and sales of mineral products (the ‘‘Mineral Trading Business’’). No material difference between the operations of the Mineral Products Business before and after the Proposed Restructuring is expected.

The Retained Group will purchase mineral products (e.g. manganese ores) in bulk from suppliers and pass them to external contractors for processing (including air-drying and crushing into particles) and storage. Materials that are suitable for manufacturing glass and batteries will then be extracted by the Retained Group, packaged by external contractors and delivered by thirdparty logistic companies to locations designated by customers, who are often manufacturers of glass or batteries. Revenues from the trading of mineral products are recognised at the point in time when the control of the products is transferred to the customer, generally on delivery of the products.

As of the Latest Practicable Date, the Mineral Products Business involves the framework sale and purchase agreement dated 9 December 2022 (the ‘‘Mineral Trading Agreement’’) relating to the purchase of 30,000WMT Brazilian manganese ores. The Mineral Trading Agreement was entered into between a member of the Retained Group and an existing supplier of the Group, and the total purchase price under the Mineral Trading Agreement is approximately RMB47.49 million (inclusive of tax). Under the Mineral Trading Agreement, the manganese ores are to be delivered by way of bulk cargo shipments. As of the Latest Practicable Date, part of the contracted manganese ores have been delivered to the Group, and the transactions under the Mineral Trading Agreement have not yet completed. The remaining manganese ores will be delivered to the Group/Retained Group in accordance with the terms of the Mineral Trading Agreement.

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LETTER FROM THE BOARD

Financial information of the Retained Group

Consolidated financial information of the Retained Group

	For the year	For the year
	ended	ended
	31 December	31 December
	2022	2023
	HK$ (million)	HK$ (million)
	(Note 1)	(Note 2)
Profit and Loss
Revenue	223.91	219.73
Gross profit	48.88	60.04
Net profit/(loss) before taxation	(152.92)	(101.32)
Net profit/(loss) after taxation	(153.63)	(102.32)
	As at	As at
	31 December	31 December
	2022	2023
	HK$ (million)	HK$ (million)
	(Note 1)	(Note 2)
Assets and Liabilities
Total asset	547.62	513.65
Total liabilities	(823.71)	(871.33)
Net liabilities	(276.09)	(357.68)

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LETTER FROM THE BOARD

Breakdown by business segments of the Retained Group[(Note][3)]

	For the year	For the year
	ended	ended
	31 December	31 December
	2022	2023
	HK$’000	HK$’000
	(Note 1)	(Note 2)
Remaining Food Business
Profit and Loss
Revenue	149,741	123,000
Net profits/(loss) before taxation and
extraordinary items	(7,056)	1,483
Rental Business
Profit and Loss
Revenue	74,167	96,729
Net profits/(loss) before taxation and
extraordinary items	(30,871)	11,914
	As at	As at
	31 December	31 December
	2022	2023
	HK$’000	HK$’000
	(Note 1)	(Note 2)
Remaining Food Business
Assets and Liabilities
Total assets	44,561	51,479
Total liabilities	(58,506)	(47,578)
Net assets/(liabilities)	(13,945)	3,901
Rental Business
Assets and Liabilities
Total assets	477,484	442,827
Total liabilities	(176,733)	(121,163)
Net assets/(liabilities)	300,751	321,664

– 38 –

LETTER FROM THE BOARD

Notes:

Conversion of Renminbi into Hong Kong Dollars is based on the approximate exchange rate of RMB1.00 to HK$1.17 (for illustration only).
Conversion of Renminbi into Hong Kong Dollars is based on the approximate exchange rate of RMB1.00 to HK$1.10 (for illustration only).
For the avoidance of doubt, the interest income, finance costs, as well as head office and corporate expenses of the Group, amounting to HK$115.00 million for the year ended 31 December 2022 and HK$114.71 million for the year ended 31 December 2023, have not been included in the segmental breakdown above. Additionally, the segmental breakdown does not encompass the figures of the holding companies and other companies that do not fall into these two segments. This impacts (i) total assets of HK$548 million, total liabilities of HK$824 million, and net liabilities of HK$276 million for the year ended 31 December 2022; and (ii) total assets of HK$514 million, total liabilities of HK$871 million, and net liabilities of HK$358 million for the year ended 31 December 2023.

Future plan of the Retained Group

The overall objective of the Retained Group in the two years following the Proposed Restructuring is to focus on its core businesses (i.e. Remaining Food Business and Rental Business), maintain a stable cash flow and gradually realise profitability.

The Remaining Food Business

In the next two years following the Proposed Restructuring, the Retained Group intends to further develop the Remaining Food Business with a continued focus on the trading of rice, corn and raw beef which has established upstream and downstream advantages. The Retained Group will strive to expand its existing customer base by reaching out to more customers in South, Central and Southwest China and aim to achieve an annual increase in turnover of no less than 15% to 20%. The Retained Group also aims to strictly control the costs of packaging, warehousing and logistics in the operations of the Remaining Food Business. It is expected that the Retained Group will achieve a total of RMB1 billion turnover in the two years following the Proposed Restructuring, with the net profits amounting to not less than 1% of the turnover.

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LETTER FROM THE BOARD

The Rental Business

On the Rental Business, in light of the favourable return on investment from investment properties in Hong Kong, the Retained Group will continue to identify land and properties with investment potential in the foreseeable future. The Retained Group will also closely monitor the property market in the PRC and expand the Rental Business when appropriate, depending on the market development. The Retained Group will maintain the level of gross floor area currently managed by the Group, and invest more efforts in the marketing and negotiation of leases and sub-leases. The Retained Group will strive to increase the rental revenue per square foot, with an annual growth rate of not less than that of the Consumer Price Index. In the two-year period following the Proposed Restructuring, the Retained Group aims to achieve a total rental revenue of not less than RMB200 million. The Retained Group will strive to strengthen cost control in the aspects of property management, property maintenance and water and electricity expenses, with an aim to achieve an amount of net profits of not less than 5% of the Retained Group’s rental revenue in the two-year period. In the long term, the Retained Group intends to build two to three logistics warehouses each with an area of not less than 200,000 square feet in Hong Kong, with funding from suitable financing plans to be formulated by the Retained Group.

Mineral Products Trading Business

The Retained Group will actively explore and evaluate business opportunities in the mineral products trading industry.

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LETTER FROM THE BOARD

EFFECTS ON SHAREHOLDING STRUCTURE OF THE COMPANY BEFORE AND AFTER THE PROPOSED RESTRUCTURING

For illustration purposes only, the table below sets out the shareholding structure of the Company (i) as at the Latest Practicable Date and (ii) immediately after completion of the Proposed Restructuring, assuming no other changes to the issued share capital of the Company from the date of this circular up to the date of completion of the Proposed Restructuring:

Shareholders Directors Jiang Jiancheng Ke Xionghan Chen Zhifeng Yang Yunguang Ho Wing Yan (Note 1) Li Dawei Substantial Shareholders Beidahuang Business Group (HK) International Trade Co., Limited (Note 2) Investor and/or its nominee(s) (Note 3) Scheme Creditors (Note 4)/Scheme Company Public Shareholders Mr. Jiang Jianjun (Note 5) Chen Jiayi (Note 6) Other public Shareholders (Note 7) Total	As at the Latest Practicable Date No. of Shares Approx. % 27,868,000 0.44% 10,120,000 0.16% 900,000 0.01% 900,000 0.01% 900,000 0.01% 40,000 0.00% 660,000,000 10.42% – 0.00% – 0.00% 795,910,165 12.57% 33,440,000 0.53% 4,802,233,918 75.85% 6,332,312,083 100.00%	Immediately after completion of the Proposed Restructuring No. of Shares Approx. % 27,868,000 0.37% 10,120,000 0.13% 900,000 0.01% 900,000 0.01% 900,000 0.01% 40,000 0.00% 660,000,000 8.73% 850,000,000 11.24% 377,879,793 5.00% 795,910,165 10.53% 33,440,000 0.44% 4,802,233,918 63.53% 7,560,191,876 100.00%	Immediately after completion of the Proposed Restructuring No. of Shares Approx. % 27,868,000 0.37% 10,120,000 0.13% 900,000 0.01% 900,000 0.01% 900,000 0.01% 40,000 0.00% 660,000,000 8.73% 850,000,000 11.24% 377,879,793 5.00% 795,910,165 10.53% 33,440,000 0.44% 4,802,233,918 63.53% 7,560,191,876 100.00%
			100.00%

Notes:

On 13 June 2023, 900,000 Shares were allotted and issued by the Company to Ms. Ho Wing Yan, a nonexecutive Director, pursuant to the exercise of the share options by Ms. Ho Wing Yan under the Share Option Scheme.
Beidahuang Business Group (HK) International Trade Co., Limited will cease to be a substantial shareholder (as defined in the Listing Rules) of the Company and will no longer be a connected person of the Company, and Shares held by it will be counted towards the public float of the Company, immediately following completion of the Proposed Restructuring.

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LETTER FROM THE BOARD

The Investor is a company incorporated in Hong Kong with limited liability and is a wholly-owned subsidiary of China Qujiang Fund, a sub-fund of CIS Fund, an open-ended fund company incorporated in Hong Kong. CIS Securities Asset Management, being the investment manager of CIS Fund and designated sub-funds (including China Qujiang Fund), shall be entitled to exercise, or refrain from the exercise of, any voting or other rights attaching to the Subscription Shares following Completion as CIS Securities Asset Management shall in its absolute discretion think fit, subject to any instructions given to CIS Securities Asset Management by the directors of CIS Fund.
To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries and based on the information available, all of the Scheme Creditors who submitted notices of claim for voting purpose are Independent Third Parties, including five Creditors which are subsidiaries directly or indirectly held by the Company, and eight Creditors who are current or former employees of the Company.
These 795,910,165 Shares comprise 782,966,165 Shares beneficially owned by Mr. Jiang Jianjun, and 12,944,000 Shares beneficially owned by his spouse Ms. Li Zhuoxun. Mr. Jiang Jianjun was a former Director who resigned as an executive Director with effect from 14 June 2023.
These 33,440,000 Shares are beneficially owned by Mr. Chen Jiayi, who is the father of Mr. Chen Chen, an executive Director. Mr. Chen Jiayi is also a holder of Class D Shares in CIS Fund, which sub-fund wholly owns the Investor, details of which are set out in ‘‘Information on the Investor, China Qujiang Fund and CIS Securities Asset Management’’ below.
On 13 June 2023, 1,696,000 Shares were allotted and issued by the Company to employees of the Group pursuant to the exercise of the share options by such employees under the Share Option Scheme.
Percentage figures are rounded to two decimal places, and certain percentage figures included in the above table have been subject to rounding adjustments. Accordingly, figures shown as totals may not be an arithmetic aggregation of the figures preceding them.

LISTING RULES IMPLICATION

Application has been made by the Company to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in the Subscription Shares and the Scheme Shares on the Stock Exchange.

As at the Latest Practicable Date, Mr. Chen Jiayi, an investor in China Qujiang Fund, which in turn wholly owns the Investor, holds 33,440,000 Shares, representing approximately 0.53% of the issued share capital of the Company and is the father of Mr. Chen Chen, an executive Director. Mr. Chen Guofeng, an investor in China Qujiang Fund, which in turn wholly owns the Investor, is the cousin of Mr. Chen Chen. As such, Mr. Chen Jiayi is an associate of Mr. Chen Chen and hence a connected person of the Company, and Mr. Chen Guofeng is a deemed connected person of the Company under Chapter 14A of the Listing Rules.

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LETTER FROM THE BOARD

As one of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Disposal as calculated under the Rule 14.07 of the Listing Rules, when aggregated, is 75% or more, the Disposal constitutes a very substantial disposal under Chapter 14 of the Listing Rules. Although the interest expected to be held on the date of the EGM by Mr. Chen Jiayi and Mr. Chen Guofeng in China Qujiang Fund in aggregate is 49.41% and less than 50% (and hence the Investor is not a connected person of the Company), the Board considered that the Subscription and the Disposal constitute connected transactions under Chapter 14A of the Listing Rules. Therefore, the Subscription and the Disposal are subject to the reporting, announcement and the Independent Shareholders’ approval requirements under the Listing Rules.

FUND RAISING ACTIVITIES IN THE PAST 12 MONTHS

Save for the entering into of the Term Sheet and the Restructuring Agreement, the Company has not conducted any fund raising activities by way of issuing equity securities in the 12-month period prior to the Latest Practicable Date.

INFORMATION ON THE INVESTOR, CHINA QUJIANG FUND AND CIS SECURITIES ASSET MANAGEMENT

The Investor is a company incorporated in Hong Kong with limited liability and is a whollyowned subsidiary of China Qujiang Fund, a sub-fund of CIS Fund, which is in turn an openended fund company incorporated in Hong Kong.

China Qujiang Fund has an investment fund mandate to invest in equities, bonds, debentures, currencies, financial and/or other instruments issued by private and/or listed companies in Hong Kong or other countries and/or private equity funds.

Pursuant to the undertakings given by each of the persons named below, CIS Securities Asset Management, the investment manager of designated sub-funds of CIS Fund (including China Qujiang Fund) and the securities broker for Class D Shares (being the relevant participating shares in respect of the assets and liabilities of China Qujiang Fund), is expected to hold on the date of the EGM (following the issue of capital call notices to each of the persons named below) 8,500 Class D Shares in CIS Fund on behalf of the following:

Mr. Chen Jiayi as to 3,700 Class D Shares in respect of an investment of HK$37,000,000, representing approximately 43.53% of the entire investment amount in China Qujiang Fund;
Mr. Chen Guofeng as to 500 Class D Shares in respect of an investment of HK$5,000,000, representing approximately 5.88% of the entire investment amount in China Qujiang Fund;

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LETTER FROM THE BOARD

Mr. He Meizhi as to 3,300 Class D Shares in respect of an investment of HK$33,000,000, representing approximately 38.82% of the entire investment amount in China Qujiang Fund; and
China Angel Investment Management as to 1,000 Class D Shares in respect of an investment of HK$10,000,000, representing approximately 11.76% of the entire investment amount in China Qujiang Fund.

China Angel Investment Management is wholly-owned by Mr. Jiang Qi Hang.

CIS Securities Asset Management is a corporation licensed under the SFO to carry out Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities) and Type 9 (asset management) regulated activities and is a wholly-owned subsidiary of CIS Group Limited.

CIS Securities Asset Management shall be entitled to exercise, or refrain from the exercise of, any voting or other rights attaching to the Subscription Shares following Completion as CIS Securities Asset Management shall in its absolute discretion think fit, subject to any instructions given to CIS Securities Asset Management by the directors of CIS Fund.

As at the Latest Practicable Date, Mr. Chen Jiayi, an investor in China Qujiang Fund, which in turn wholly owns the Investor, holds 33,440,000 Shares, representing approximately 0.53% of the issued share capital of the Company and is the father of Mr. Chen Chen, an executive Director. Mr. Chen Guofeng, an investor in China Qujiang Fund, which in turn wholly owns the Investor, is the cousin of Mr. Chen Chen. As such, Mr. Chen Jiayi is a connected person of the Company and Mr. Chen Guofeng is a deemed connected person of the Company under Chapter 14A of the Listing Rules.

Although the interest expected to be held on the date of the EGM by Mr. Chen Jiayi and Mr. Chen Guofeng in China Qujiang Fund in aggregate is 49.41% and therefore the Investor is not (i) an affiliate of either Mr. Chen Jiayi or Mr. Chen Guofeng, or (ii) a connected person of the Company, the Board considered that the Subscription and the Disposal constitute connected transactions under Chapter 14A of the Listing Rules.

Although Mr. Chen Chen has no direct interest in the Investor or any of its subsidiaries, or associates within the meanings prescribed by the Listing Rules, given the interest of his father in the Investor and as a Shareholder and the interest of his cousin in the Investor, Mr. Chen Chen will abstain from voting on all relevant Board resolutions concerning the Restructuring Agreement.

– 44 –

LETTER FROM THE BOARD

INFORMATION ON THE GROUP

The Group is currently principally engaged in the trading of food products business, leasing of logistic facilities in Hong Kong and office facilities in the PRC, financial leasing, trading of mineral products, construction and development of properties, and distribution of wine and liquor.

INFORMATION ON THE SCHEME COMPANY AND THE SCHEME ADMINISTRATORS

As at the Latest Practicable Date, the Scheme Company has not been incorporated. The Scheme Company will be a special purpose vehicle to be incorporated in Hong Kong and will be entirely held and controlled by the Scheme Administrators to hold and dispose of the Scheme Assets, and Scheme Shares (on trust for the benefit of Scheme Creditors)(if applicable) pursuant to the terms of the Creditors’ Scheme.

The Scheme Administrators are Messrs. Chan Man Hoi (Ivan) and Chan Chi Chung (Adrian) of Deloitte Touche Tohmatsu, or their successors to be jointly and severally appointed as scheme administrators pursuant to the terms of the Creditors’ Scheme.

The Scheme Administrators’ role under the Creditors’ Scheme is to exercise such rights and powers as are necessary and desirable to give effect to the provisions of the Creditors’ Scheme and matters incidental thereto, and shall, without limitation, also be vested with powers equivalent to those vested in a liquidator in a winding-up of a company by the High Court, save that in the Creditors’ Scheme, any power which would be exercisable by a liquidator only with the sanction of the High Court or of a committee of inspection shall only be exercisable by Scheme Administrators with the sanction of the Scheme Creditors’ Committee.

The Scheme Administrators’ main responsibility under the Creditors’ Scheme is to act in the best interests of the Scheme Creditors at all times and use their best endeavors to realise the Scheme Assets and Scheme Shares at the highest value and to distribute cash dividends and Scheme Shares to the Scheme Creditors pursuant to the Scheme.

As at the Latest Practicable Date, the Creditor’s Scheme has not become effective, and the Scheme Administrators have not identified any potential purchasers nor commenced any discussion for the disposal of the Scheme Assets.

THE INDEPENDENT BOARD COMMITTEE AND THE INDEPENDENT FINANCIAL ADVISER

An Independent Board Committee (comprising all the independent non-executive Directors) has been established to advise the Independent Shareholders in relation to, among other things, the Subscription, the Disposal and the transactions contemplated thereunder. The Company has appointed the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

– 45 –

LETTER FROM THE BOARD

GENERAL

Any Shareholder who is interested in the transactions contemplated under the Restructuring Agreement and his close associates shall abstain from voting on the relevant resolution(s) at the EGM.

As at the Latest Practicable Date, to the best of the Directors’ knowledge, information and belief after having made all reasonable enquiries, no Shareholder is interested in the Scheme Share Issue and the transactions contemplated thereunder and will be required to abstain from voting on the resolution(s) to approve the Scheme Share Issue and the transactions contemplated thereunder at the EGM.

As at the Latest Practicable Date, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, save for Mr. Chen Jiayi, none of the Shareholders has a material interest in the transactions contemplated under the Restructuring Agreement and the Disposal as at the Latest Practicable Date. Accordingly, save for Mr. Chen Jiayi and his associates, no Shareholder is required to abstain from voting on the relevant resolution(s).

EGM

A notice convening the EGM to be held at Unit E, 30/F., Tower B, Billion Centre, 1 Wang Kwong Road, Kowloon Bay, Kowloon, Hong Kong on 9 August 2024 at 10:30 a.m. is set out on pages EGM-1 to EGM-4 of this circular. Resolutions will be proposed to approve, inter alia, the Restructuring Agreement, the Subscription, the grant of the Specific Mandate, the Scheme Share Issue, the Disposal and the transactions contemplated thereunder as referred to above at the EGM.

You will find enclosed a form of proxy for use at the EGM. Whether or not you intend to attend the EGM in person, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon to the Company’s branch share registrar and transfer office in Hong Kong, Union Registrars Limited, at Suites 3301-04, 33/F., Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof (as the case may be) should you so wish and, in such event, the instrument appointing a proxy shall be deemed to be revoked.

– 46 –

LETTER FROM THE BOARD

VOTING BY POLL

Article 80 of the Articles of Association provides that at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is duly demanded. However, under Rule 13.39(4) of the Listing Rules, any vote of the shareholders at a general meeting must be taken by poll except where the chairman of the meeting, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. Accordingly, the Directors intend that the chairman of the EGM shall demand voting of the resolutions put forward at the EGM by way of poll.

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

RECOMMENDATION

The Directors consider that the Restructuring Agreement, the Subscription, the grant of the Specific Mandate, the Scheme Share Issue, the Disposal and the transactions contemplated thereunder are each in the best interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of all the resolutions to be proposed at the EGM.

Yours faithfully,

For and on behalf of the Board China Beidahuang Industry Group Holdings Limited Jiang Jiancheng

Chairman

– 47 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [67 x 67] intentionally omitted <==

China Beidahuang Industry Group Holdings Limited ��

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 00039)

24 July 2024

To the Independent Shareholders

Dear Sir or Madam,

PROPOSED RESTRUCTURING INVOLVING CONNECTED TRANSACTION IN RELATION TO THE SUBSCRIPTION UNDER SPECIFIC MANDATE; CREDITORS’ SCHEME; ISSUE OF SCHEME SHARES UNDER SPECIFIC MANDATE; AND CONNECTED TRANSACTION AND VERY SUBSTANTIAL DISPOSAL IN RELATION TO THE DISPOSAL

We refer to the circular of the Company dated 24 July 2024 (the ‘‘Circular’’) to the Shareholders, of which this letter forms part. Terms defined in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires.

We have been appointed by the Board to form the Independent Board Committee to advise you in connection with the Subscription and the Disposal and the transactions contemplated thereunder, details of which are set out in the letter from the Board in the Circular.

Alpha Financial Group Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard. We wish to draw your attention to their letter of advice which is set out on pages 50 to 82 of the Circular.

– 48 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the principal factors and reasons stated in the letter from the Independent Financial Adviser, we consider that the terms of the Subscription and the Disposal are fair and reasonable so far as the Independent Shareholders are concerned, the transactions contemplated under the Subscription and the Disposal are on normal commercial terms and in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the EGM to approve the Subscription and the Disposal and the transactions contemplated thereunder.

Yours faithfully,

Independent Board Committee

Mr. Chong Cha Hwa Mr. Yang Yunguang Mr. Chen Zhifeng Independent non-executive Independent non-executive Independent non-executive Director Director Director

– 49 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from Alpha Financial Group Limited setting out their advice to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

==> picture [144 x 41] intentionally omitted <==

Alpha Financial Group Limited

Room A, 17/F Fortune House 61 Connaught Road Central Central, Hong Kong

24 July 2024

To the Independent Board Committee and the Independent Shareholders of China Beidahuang Industry Group Holdings Limited

Dear Sirs or Madams,

PROPOSED RESTRUCTURING INVOLVING

(1) CONNECTED TRANSACTION IN RELATION TO THE SUBSCRIPTION UNDER SPECIFIC MANDATE; (2) CREDITORS’ SCHEME;

(3) ISSUE OF SCHEME SHARES UNDER SPECIFIC MANDATE; AND (4) CONNECTED TRANSACTION AND VERY SUBSTANTIAL DISPOSAL IN RELATION TO THE DISPOSAL

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in connection with the Subscription, the Disposal and the transactions contemplated thereunder, particulars of which are set out in the letter from the Board (the ‘‘Letter from the Board’’) contained in the circular dated 24 July 2024 issued by the Company to the Shareholders (the ‘‘Circular’’), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context requires otherwise.

– 50 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Further to the Term Sheet entered into between the Company and the Investor on 29 March 2023, on 25 January 2024 (after trading hours), the Company and the Investor entered into the Restructuring Agreement in respect of the conditional subscription by the Investor of 850,000,000 Subscription Shares at the Total Subscription Price of HK$85,000,000, representing a Subscription Price of HK$0.10 per Subscription Share. Upon the allotment and issue of the Subscription Shares to the Investor, the Subscription Shares shall in aggregate represent approximately 11.24% of the Enlarged Issued Share Capital.

LISTING RULES IMPLICATIONS

The Subscription is subject to, among other things, the Independent Shareholders’ approval. The Subscription Shares will be allotted and issued under the Specific Mandate to be granted by the Shareholders at the EGM.

As one of the applicable percentage ratios (as defined under the Listing Rules) in respect of the Disposal as calculated under the Rule 14.07 of the Listing Rules, when aggregated, is 75% or more, the Disposal constitutes a very substantial disposal under Chapter 14 of the Listing Rules. Although the interest held by Mr. Chen Jiayi and Mr. Chen Guofeng in China Qujiang Fund in aggregate is 49.41% and less than 50% (and hence the Investor is not a connected person of the Company), the Board considered that the Subscription and the Disposal constitute connected transactions under Chapter 14A of the Listing Rules. Therefore, the Subscription and the Disposal are subject to the reporting, announcement and the Independent Shareholders’ approval requirements under the Listing Rules.

The EGM will be convened and held for the Relevant Shareholders to consider and, if thought fit, approve, among other things, the Restructuring Agreement (including the issue of Subscription Shares under Specific Mandate), the issue of Scheme Shares under Specific Mandate, the Disposal and the transactions contemplated thereunder. Pursuant to Rule 13.39(4) of the Listing Rules, the resolution(s) will be taken by way of poll at the EGM. Any Shareholder who is interested in the transactions contemplated under the Restructuring Agreement and his close associates shall abstain from voting on the relevant resolution(s) at the EGM.

– 51 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As at the Latest Practicable Date, to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, save for Mr. Chen Jiayi, none of the Shareholders has a material interest in the transactions contemplated under the Restructuring Agreement as at the Latest Practicable Date. Accordingly, save for Mr. Chen Jiayi and his associates, no Shareholder is required to abstain from voting on the relevant resolution(s).

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee, comprising Mr. Chong Cha Hwa, Mr. Yang Yunguang and Mr. Chen Zhifeng, all being independent non-executive Directors, has been established to advise the Independent Shareholders regarding advise the Independent Shareholders as to whether the terms of the Subscription and the Disposal and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote at the EGM, taking into account the recommendations of the Independent Financial Adviser. We, Alpha Financial Group Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Subscription and the Disposal and the transactions contemplated thereunder are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

OUR INDEPENDENCE

In the last two years, prior to the Latest Practicable Date, we have not acted in any capacity in relation to any transactions of the Company. As at the Latest Practicable Date, we do not have any relationship with, or have any interest in, the Group and its associates that could reasonably be regarded as relevant to our independence. Apart from the normal professional fees payable to us in connection with this appointment as the Independent Financial Adviser, no other arrangement exists whereby we had received or will receive any fees or benefits from the Company or any other parties that could reasonably be regarded as relevant to our independence as defined under Rule 13.84 of the Listing Rules.

BASIS OF OUR OPINION

In formulating our opinion and advice, we have relied on (i) the information and facts contained or referred to in the Circular; (ii) the information supplied by the Group and its advisers; (iii) the opinions expressed by and the representations of the Directors and the management of the Group (the ‘‘Management’’); and (iv) our review of the relevant public information.

– 52 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have assumed that all the information provided, and representations and opinions expressed to us or contained or referred to in the Circular were true, accurate and complete in all respects as at the date thereof and may be relied upon and continue to be so up to the date of the EGM. We have also assumed that all statements contained and representations made or referred to in the Circular are true at the time they were made and continue to be true as at the Latest Practicable Date and continue to be so up to the date of the EGM and all such statements of belief, opinions and intentions of the Directors and the Management and those as set out or referred to in the Circular were reasonably made after due and careful enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and the Management. We have also sought and received confirmation from the Directors that no material facts have been withheld or omitted from the information provided and referred to in the Circular and that all information or representations provided to us by the Directors and the Management are true, accurate, complete and not misleading in all respects at the time they were made and continued to be so until the date of the EGM. Independent Shareholders will be informed of any material change of information and the representations made or referred to in the Circular as soon as possible up to the date of the EGM.

We consider that we have reviewed the relevant information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. In formulating our recommendation in relation to the Subscription and the Disposal and pursuant to Rule 13.80(2), we have obtained and reviewed the relevant information in relation to the Subscription and the Disposal, among others, (i) the annual report for the year ended 31 December 2022 of the Company (the ‘‘2022 Annual Report’’); (ii) the annual report for the year month ended 31 December 2023 of the Company (the ‘‘2023 Annual Report’’); (iii) the Restructuring Agreement; (iv) the Extension Agreement; (v) the Term Sheet; (vi) the Disposal Agreement; (vii) the Purchase Cooperation Framework Agreement; (viii) the Strategic Cooperation Framework Agreement; (ix) the recent announcements of the Company; and (x) the information set out in the Circular.

We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter. We consider that we have reviewed sufficient information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information provided, representations made, or opinion expressed by the Directors and the Management, nor have we conducted any form of in-depth investigation into the business, affairs, operations, financial position or future prospects of the Group, or any of its respective substantial shareholders, subsidiaries or associates.

– 53 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

This letter is issued for the information for the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the Subscription and the Disposal and, except for its inclusion in the Circular, is not to 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 opinion and recommendations to the Independent Shareholders, we have taken into consideration the following principal factors and reasons. Our conclusions are based on the results of all analyses taken as a whole.

1 Background and Financial Information

A. Information on the Group

The Group principally engages in the following six reportable operating segments:

(a) the wine and liquor segment is engaged in the sale and distribution of wine and liquor;
(b) the trading of food products segment is engaged in wholesaling and retailing of staple food, cooking oil, alcohol and beverage, frozen and fresh food, commodity hog;
(c) the construction and development segment is engaged in construction and land development;
(d) the rental segment is engaged in the leasing of logistic facilities in Hong Kong and office facilities in the PRC;
(e) the financial leasing segment is engaged in the provision of financial leasing services; and
(f) the mineral products segment is engaged in the flotation selection of non-ferrous metals mines and sales of mineral products.

– 54 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

B. Financial Information of the Group

Set out below is a summary of the audited consolidated financial results of the Group for the three years ended 31 December 2021, 2022 and 2023 (‘‘FY2021’’, ‘‘FY2022’’ and ‘‘FY2023’’, respectively) as extracted from the 2022 Annual Report and the 2023 Annual Report:

	FY2023	FY2022	FY2021
	HK$’000	HK$’000	HK$’000
	(audited)	(audited)	(audited)
Revenue	844,999	930,276	928,785
Cost of sales	(736,708)	(795,067)	(767,708)
Gross profit	108,291	135,209	161,077
Loss for the year	(145,588)	(222,399)	(177,290)
	As at	As at	As at
	31 December	31 December	31 December
	2023	2022	2021
	HK$’000	HK$’000	HK$’000
	(audited)	(audited)	(audited)
Non-current assets	678,632	761,320	1,472,952
Current assets	1,183,600	1,183,654	1,407,099
Total assets	1,862,232	1,944,974	2,880,051
Non-current liabilities	103,369	136,883	588,092
Current liabilities	1,147,626	1,022,457	1,187,563
Total liabilities	1,250,995	1,159,340	1,775,655
Cash and cash equivalents	12,996	14,880	27,433
Net current assets	35,974	161,197	219,536
Equity attributable to owners of the
Company	620,011	801,812	622,513

FY2022 vs FY2021

For FY2022, the Group’s revenue amounted to approximately HK$930.3 million (FY2021: HK$928.8 million), representing an increase of approximately 0.2% and the gross profit of the Group was approximately HK$135.2 million (FY2021: HK$161.1 million). For FY2022, the loss (net of tax) was approximately HK$222.4 million (FY2021: loss (net of tax) of HK$177.3 million). The loss (net of tax) was mainly attributable to the increase in finance costs.

– 55 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For FY2022, the trading of food products business recorded a revenue of approximately HK$464.8 million (FY2021: HK$399.5 million) and accounted for approximately 50.0% (2021: 43.0%) of the total revenue. Gross profit of this business segment for FY2022 was approximately HK$10.6 million (FY2021: HK$9.1 million). The rental business segment recorded a revenue of approximately HK$231.9 million (FY2021: HK$271.7 million) and accounted for approximately 24.9% (FY2021: 29.3%) of the total revenue for FY2022. Gross profit of this business segment for FY2022 was approximately HK$81.6 million (FY2021: HK$98.2 million).

The mineral products business segment recorded a revenue of approximately HK$217.5 million (FY2021: HK$237.1 million) and accounted for approximately 23.4% (FY2021: 25.5%) of the total revenue for FY2022. Gross profit of this business segment for FY2022 was approximately HK$30.0 million (FY2021: HK$36.0 million). The financial leasing business recorded a revenue of HK$16.1 million (FY2021: HK$20.5 million) and accounted for approximately 1.7% (FY2021: 2.2%) of the total revenue for FY2022. Gross profit of this business segment for FY2022 was approximately HK$13.0 million (FY2021: HK$17.7 million). During FY2022, there was no revenue generated from the wine and liquor business (FY2021: Nil) as the Group’s sale points and delivery services were interrupted and even temporarily suspended during the coronavirus outbreak.

As at 31 December 2022, the Group recorded cash and cash equivalents amounting to approximately HK$14.9 million (31 December 2021: HK$27.4 million), total bank and other borrowings amounted to approximately HK$440.0 million (31 December 2021: HK$521.0 million) and the net current assets value amounting to approximately HK$161.2 million (31 December 2021: HK$219.5 million). The gearing ratio of the Group as at 31 December 2022 (calculated as net debt divided by equity attributable to owners of the parent plus net debt) was approximately 53.4% (31 December 2021: 46.2%).

FY2023 vs FY2022

For FY2023, the Group’s revenue amounted to approximately HK$845.0 million (FY2022: HK$930.3 million), representing a decrease of approximately 9.2%. Gross profit of the Group was approximately HK$108.3 million (FY2022: HK$135.2 million). For FY2023, the loss (net of tax) was approximately HK$145.7 million (FY2022: loss (net of tax) of HK$222.4 million). The loss (net of tax) was mainly attributable to the increase in administrative expenses and finance costs.

– 56 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For FY2023, the trading of food products business recorded a revenue of approximately HK$445.2 million (FY2022: HK$464.8 million) and accounted for 52.7% (FY2022: 50.0%) of the total revenue. Gross profit of this business segment for FY2023 was approximately HK$13.87 million (FY2022: HK$10.6 million). The mineral products business segment recorded a revenue of approximately HK$290.3 million (FY2022: HK$217.5 million) and accounted for approximately 34.4% (FY2022: 23.4%) of the total revenue for FY2023. Gross profit of this business segment for FY2023 was approximately HK$36.4 million (FY2022: HK$30.0 million).

The rental business segment recorded a revenue of approximately HK$96.7 million (FY2022: HK$231.9 million) and accounted for approximately 11.45% (FY2022: 24.9%) of the total revenue for FY2023. Gross profit of this business segment for FY2023 was approximately HK$49.8 million (FY2022: HK$81.6 million). The decrease was mainly due to the disposal of subsidiaries which engaged in rental business to an independent third party on 8 November 2022. The financial leasing business recorded a revenue of approximately HK$12.7 million (FY2022: HK$16.1 million) and accounted for approximately 1.5% (FY2022: 1.7%) of the total revenue for FY2023. Gross profit of this business segment for FY2023 was approximately HK$8.15 million (FY2022: HK$13.0 million). During FY2023, wine and liquor business recorded a revenue of approximately HK$0.04 million (FY2022: Nil) and accounted for 0.01% of the total revenue (FY2022: Nil) as our sale points and delivery services had recovered from coronavirus outbreak. Gross profit of this business segment for FY2023 was approximately HK$0.01 million (FY2022: Nil).

As at 31 December 2023, the Group recorded cash and cash equivalents amounting to approximately HK$13.0 million (31 December 2022: HK$14.9 million), total bank and other borrowings amounted to approximately HK$441.7 million (31 December 2022: HK$440.0 million) and the net current assets value amounting to approximately HK$36.0 million (31 December 2022: HK$161.2 million). The gearing ratio of the Group as at 31 December 2023 (calculated as net debt divided by equity attributable to owners of the parent plus net debt) was approximately 63.2% (31 December 2022: 53.4%).

As described in the abovementioned annual reports of the Company, the consolidated financial statements have been prepared on a going concern basis after taking into account of the following circumstances and measures which are in place or to be implemented. Should the Group be unable to continue to operate as a going concern, adjustments would have to be made to restate the values of assets to their estimated recoverable amounts, to provide further liabilities that might arise and to reclassify non-current assets and non-current liabilities as current assets and current liabilities respectively. The effects of these potential adjustments had not been reflected in the financial statements of the Group set out in the 2022 Annual Report and 2023 Annual Report respectively.

– 57 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In view of the going concern issues, the auditor of the Company had stated that due to the significance of the matters described in the corresponding ‘‘Basis for Disclaimer of Opinion’’ section of its reports in the 2022 Annual Report and 2023 Annual Report, it had not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the consolidated financial statements of the Company. Accordingly, the auditor of the Company had disclaimed its audit opinion on the consolidated financial statements of the Group for each of the three years ended 31 December 2021, 2022 and 2023. As described in the paragraphs headed ‘‘POTENTIAL FINANCIAL EFFECTS’’ below, it is expected that upon completion of the Restructuring Plan the Group would be able to reduce its overall indebtedness. Hence, we are of the view that the abovementioned opinion of the auditor of the Company may no longer be applicable after Completion.

C. Information on the Scheme Company and Scheme Subsidiaries

For further details of the Scheme Subsidiaries, please refer to the paragraphs headed ‘‘INFORMATION ON THE SCHEME SUBSIDIARIES’’ in the Letter from the Board.

– 58 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

For FY2021, FY2022 and FY2023 and the three months ended 31 March 2024 (‘‘3M2024’’), the revenues and net profits (both before and after taxation) attributable to the Scheme Subsidiaries, which were prepared in accordance with the Hong Kong Financial Reporting Standards (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants were approximately as follows:

	3M2024	FY2023	FY2022	FY2021
	HK$’000	HK$’000	HK$’000	HK$’000
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Shenzhen Qianhai Dahuangyuan
Revenue	1,371	12,744	16,128	20,473
Profit/(loss) before taxation	243	227	(5,061)	(80,464)
Profit/(loss) after taxation	243	370	(4,870)	(80,468)
Linxiang Qiangsheng
Revenue	42,329	290,286	217,493	237,107
Profit/(loss) before taxation	(947)	5,255	(3,987)	21,592
Profit/(loss) after taxation	(937)	5,255	(3,987)	21,592
Lianyungang Huajin Huahong
Revenue	–	–	–	–
Profit/(loss) before taxation	(3,939)	(45,216)	(5,255)	(35,926)
Profit/(loss) after taxation	(3,939)	(45,216)	(5,255)	(35,926)
Shenzhen Meiming Wenshi
Revenue	37,892	322,240	342,611	253,946
Profit/(loss) before taxation	(183)	(3,812)	(46,454)	26,573
Profit/(loss) after taxation	(183)	(3,678)	(45,970)	26,011

Please refer to Appendices II, III, IV and V to this circular for further details regarding the financial information of Shenzhen Qianhai Dahuangyuan, Linxiang Qiangsheng, Lianyungang Huajin Huahong and Shenzhen Meiming Wenshi, respectively.

As at the Latest Practicable Date, the Scheme Company has not been incorporated. The Scheme Company will be a special purpose vehicle to be incorporated in Hong Kong and will be entirely held and controlled by the Scheme Administrators to hold and dispose of the Scheme Assets, and Scheme Shares (on trust for the benefit of Scheme Creditors) (if applicable) pursuant to the terms of the Creditors’ Scheme.

– 59 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

D. Information on the Investor

The Investor is a company incorporated in Hong Kong with limited liability and is a wholly-owned subsidiary of China Qujiang Fund, a sub-fund of CIS Fund, which is in turn an open-ended fund company incorporated in Hong Kong.

Mr. Chen Jiayi as to 3,700 Class D Shares in respect of an investment of HK$37,000,000, representing approximately 43.53% of the entire investment amount in China Qujiang Fund;
Mr. Chen Guofeng as to 500 Class D Shares in respect of an investment of HK$5,000,000, representing approximately 5.88% of the entire investment amount in China Qujiang Fund;

– 60 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Mr. He Meizhi as to 3,300 Class D Shares in respect of an investment of HK$33,000,000, representing approximately 38.82% of the entire investment amount in China Qujiang Fund; and
China Angel Investment Management as to 1,000 Class D Shares in respect of an investment of HK$10,000,000, representing approximately 11.76% of the entire investment amount in China Qujiang Fund.

China Angel Investment Management is wholly-owned by Mr. Jiang Qi Hang.

As at the Latest Practicable Date, Mr. Chen Jiayi, an investor in China Qujiang Fund, which in turn wholly owns the Investor, holds 33,440,000 Shares, representing approximately 0.53% of the issued share capital of the Company and is the father of Mr. Chen Chen, an executive Director. Mr. Chen Guofeng, an investor in China Qujiang Fund, which in turn wholly owns the Investor, is the cousin of Mr. Chen Chen. As such, Mr. Chen Jiayi is a connected person of the Company and Mr. Chen Guofeng is a deemed connected person of the Company under Chapter 14A of the Listing Rules.

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, save as disclosed above, the Investor and its ultimate beneficial owners, CIS Fund, CIS Securities Asset Management and its ultimate beneficial owners are Independent Third Parties as at the Latest Practicable Date. For further details, please refer to the section headed ‘‘INFORMATION ON THE INVESTOR, CHINA QUJIANG FUND AND CIS SECURITIES ASSET MANAGEMENT’’.

2 The Proposed Restructuring

As disclosed in the Letter from the Board, in or around March 2023, in light of the liquidity constraints and financial challenges of the Company, the Company has been working closely with its professional advisers and has been exploring the Proposed Restructuring, including but not limited to the restructuring of debts by way of a Creditors’ Scheme.

The Proposed Restructuring involves the following steps:

(a) the Subscription (the Completion of which is subject to the conditions as set out in the section headed ‘‘Conditions Precedent to the Subscription’’ in the Letter from the Board in this circular); and
(b) the Creditors’ Scheme, the terms of which include:
(i) the Scheme Share Issue;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(ii) the Disposal; and

(iii) the discharge of the Creditors’ Claims against the Company.

A. The Restructuring Agreement

Further to the legally binding Term Sheet entered into between the Company and the Investor on 29 March 2023, the Company and the Investor entered into the Restructuring Agreement on 25 January 2024 in respect of the conditional subscription by the Investor of 850,000,000 Subscription Shares at the Subscription Price of HK$0.10 per Share.

The terms of the Restructuring Agreement supersede and replace the Term Sheet in its entirety, and the principal terms of the Restructuring Agreement are set out below.

Date

25 January 2024

Parties

(1) the Company; and
(2) the Investor

The Subscription

Upon the allotment and issue of the Subscription Shares to the Investor, the Subscription Shares shall in aggregate represent approximately 11.24% of the Enlarged Issued Share Capital.

Ranking

The Subscription Shares, when allotted and issued, shall rank pari passu in all respects with the then existing Shares in issue on the date of allotment and issue of the Subscription Shares.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Use of Proceeds

(a) HK$45,000,000 shall be paid to the Scheme Company and used, subject to the payment of any Preferential Claims and the Scheme Costs, for the benefit of the Scheme Creditors pursuant to the Creditors’ Scheme;
(b) up to HK$20,000,000 shall be used to settle the Restructuring Costs (or, where a Loan for Restructuring Costs has been made available and drawn by the Company, be offset against the Loan for Restructuring Costs); and
(c) the remaining balance of the Total Subscription Price shall be used as general working capital of the Company.

The Subscription Price

The Subscription Price of HK$0.10 per Share represents:

a discount of approximately 52.38%, based on the closing price of HK$0.210 per Share as quoted on the Stock Exchange on the Last Trading Date;
a discount of approximately 51.55%, based on the average closing price of HK$0.2064 per Share as quoted on the Stock Exchange on the five consecutive trading days up to and including the Last Trading Date;
a gain of approximately 14.94%, based on the closing price of HK$0.087 per Share as quoted on the Stock Exchange on the date of the Restructuring Agreement;
a gain of approximately 20.19%, based on the closing price of HK$0.0832 per Share as quoted on the Stock Exchange on the five consecutive trading days up to and including the date of the Restructuring Agreement;
a discount of approximately 20.70%, based on the average closing price of approximately HK$0.1261 per Share over the period commencing from 12 months prior and up to the signing of the Restructuring Agreement;
a gain of approximately 28.21%, based on the closing price of HK$0.078 per Share as quoted on the Stock Exchange on the Latest Practicable Date;

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

a discount of approximately 7.41% to the net asset value per Share of approximately HK$0.108 as at 30 June 2023 (as disclosed in the Company’s 2023 interim report dated 31 August 2023); and
a premium of approximately 3.60% to the net asset value per Share of approximately HK$0.0965 as at 31 December 2023 (as disclosed in the 2023 Annual Report).

The net price per Subscription Share after the deduction of the relevant expenses incidental to the Subscription is estimated to be approximately HK$0.10 per Share.

According to the Letter from the Board, the Subscription Price had been agreed between the Company and the Investor under the Term Sheet and as disclosed in the announcement of the Company dated 2 April 2023, the Subscription Price was arrived at after arm’s length negotiations between the Company and the Investor after taking into account, among other things: (i) the net asset value per Share of approximately HK$0.124 as at 31 December 2022 (as disclosed in the 2022 Annual Report); (ii) the financial position of the Company and the difficulty in obtaining financing from banks and financial institutions to sustain the ongoing operations of the Company; (iii) the remaining operations and assets of the Group following the expected Disposal; (iv) the market sentiment in relation to investment in listed companies in similar financial situations; and (v) the Subscription being in the interests of the Company and the Shareholders as a whole.

With reference to the Letter from the Board, although there has been an increase in the Share price as against the average closing price per Share over the period commencing from 12 months prior and up to the signing of the Restructuring Agreement, the Directors note that there has been no actual improvement on the financial outlook of the Group. As such, there is little room for the Group to negotiate for an increase in the Subscription Price in any material manner.

B. The Creditor’s Scheme

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Creditors’ claims against the Company and the Scheme Share Issue

According to the Letter from the Board, based on the available books and records of the Company, the estimated total amount of claims against the Company (including the Company’s contingent liabilities in relation to the corporate guarantee provided by it for the Defaulted Construction Payables in the amount of approximately HK$86,238,000) was approximately HK$812 million (excluding any alleged/purported penalty interests) as at 31 December 2023. As at the date of the Scheme Meeting, 31 Creditors submitted notice of claim for voting purpose, including five direct and indirect subsidiaries of the Company, and eight former or current employees of the Group. The total amount of Claims will be subject to the Creditors’ submission of claim for dividend purpose, the admission or rejection, in whole or in part, by the administrators of the Creditors’ Scheme, and adjudication result in the event that the Creditor is dissatisfied with the decision of the Scheme Administrators, when the Creditors’ Scheme becomes effective. Five subsidiaries of the Company are Scheme Creditors, including Shenzhen Qianhai Dahuangyuan (which is a Scheme Subsidiary) and four other subsidiaries that will be part of the Retained Group upon completion of the Proposed Restructuring. Each of these five subsidiaries has undertaken to elect to receive cash in lieu of the Scheme Shares for full and final settlement of their respective Admitted Claims.

For further details regarding the steps involved in the Creditors’ Scheme, please refer to the paragraphs headed ‘‘Steps involved in the Creditors’ Scheme’’ in the Letter from the Board.

The Disposal

As part of the terms of the Creditors’ Scheme, the Scheme Subsidiaries will be transferred to the Scheme Company by the Group. It is expected that the Scheme Subsidiaries will be transferred to the Scheme Company at nil or nominal consideration.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As part of the Creditors’ Scheme, the Disposal will be effective upon the Creditors’ Scheme becoming effective (for further details, please refer to the section headed ‘‘Conditions precedent to the Creditors’ Scheme’’ in the Letter from the Board). The Disposal is subject to the Independent Shareholders’ approval at the EGM. It is expected that the Scheme Subsidiaries will be transferred to the Scheme Company on the date on which the Creditors’ Scheme becomes unconditional and comes into effect or on such other date as the Scheme Administrators may decide in accordance with the terms of the Creditors’ Scheme.

For further details regarding the Disposal, please refer to the section headed ‘‘Conditions precedent to the Creditors’ Scheme’’ in the Letter from the Board.

Conditions precedent to the Creditors’ Scheme

The Creditors’ Scheme will be implemented and shall become binding and effective on the Company and the Creditors if the following conditions precedent are satisfied:

(a) over fifty per cent (50%) in number of the Creditors, representing at least seventy-five per cent (75%) in value of the Creditors present and voting in person (or through electronic means if applicable) or by proxy at the Scheme Meeting, voting in favour of the Creditors’ Scheme;
(b) sanction in respect of the Creditors’ Scheme having been granted by the High Court and an office copy of the order of the High Court sanctioning the Creditors’ Scheme having been delivered to the Companies Registry in Hong Kong for registration; and
(c) HK$45,000,000 of the Total Subscription Price being received by the Scheme Company within thirty (30) days after the registration date of the Court Order with the Companies Registry in Hong Kong, or such extended date as may be agreed by the Company with the Scheme Administrators.

For further details of the restructuring, please refer to the section headed ‘‘THE PROPOSED RESTRUCTURING’’ in the Letter from the Board.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3 Reasons for the Proposed Restructuring

We noted from the Letter from the Board that:

(i) the Group’s revenue for FY2022 amounted to approximately HK$930.28 million, representing an increase of approximately 0.16% compared to FY2021 and approximately 8.29% compared to FY2020, respectively. However, the Group recorded a net loss of approximately HK$222.40 million, representing an increase in net loss of approximately HK$45.11 million compared to FY2021 (net loss of approximately HK$177.29 million) and approximately HK$227.86 million (net profit of approximately HK$5.46 million) compared to FY2020, respectively. The significant loss was primarily attributable to the increase in administrative expense, increase in expected credit loss, impairment of goodwill, and increase in finance costs.
(ii) the Group’s net current assets decreased from approximately HK$370.48 million as at 31 December 2020 to approximately HK$161.20 million as at 31 December 2022, mainly due to a significant increase of approximately 194% in other payables and accruals from HK$84.21 million to HK$247.57 million, and a substantial increase of approximately 12% in bank and other borrowings from HK$393.02 million to HK$440.04 million;
(iii) due to the fact that the Group recorded losses of approximately HK$222.40 million in FY2022 and HK$177.29 million in FY2021, the Group had an outstanding bank and other borrowings of approximately HK$381.23 million to be paid within one year as at 31 December 2022, and only had a cash or cash equivalent amount of approximately HK$14.88 million as at 31 December 2022, the Group’s ability to repay its debts was in significant doubt, which led the auditor to issue a disclaimer of opinion;
(iv) the Company’s current assets was only approximately HK$8.3 million as at 31 December 2022, while its current liabilities were approximately HK$553.54 million as at 31 December 2022, of which approximately HK$356.76 million were other borrowings, and as such, the current assets of the Company cannot satisfy the obligation arising from the Company’s current liabilities, indicating that the Company is facing liquidity problems.

We also noted that since 2021, the Company has been receiving statutory demands from several creditors and the Company has been demanded to repay overdue indebtedness of HK$82,598,953.78 as at 31 December 2022. Pursuant to section 178(1)(a) or 327(4)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, if the Company is unable to repay the relevant indebtedness within 21 days from the date of service of the relevant statutory demands, each of the relevant creditors is entitled to present a winding-up petition against the Company at any time at discretion.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As disclosed in the announcements of the Company, a number of winding-up petitions were presented against the Company. According to the Directors, at present, all such petitions have been dismissed or withdrawn.

With reference to the Letter from the Board, the outstanding indebtedness owed by the Company to all Creditors (including the Company’s contingent liability in relation to the corporate guarantee provided by it for the Defaulted Construction Payables in the amount of approximately HK$86,238,000) amounted to approximately HK$684 million as at 31 December 2022 and approximately HK$812 million as at 31 December 2023. As the Company only had a cash balance of approximately HK$2,000 as at 31 December 2023, the Company is unable to repay the relevant overdue and outstanding indebtedness.

4 Our Analysis on the Subscription

We have noted that issuance of subscription shares (if any) typically forms a part of a larger debt restructuring scheme, and hence may be affected by other factors such as proportion of debt/ claim being waived/relieved, settlement terms such as assets being transferred to creditors, fresh capital being raised, as well as fund raising methods such as share placings or convertible securities issuance or rights issue of shares. Given the above observation that each restructuring exercise is unique such as in terms of level of financial difficulties as well as rescue plan details, we are of the view that a comparable analysis of the Subscription Price, the issue price of the Creditors’ Shares and the amount of indebtedness to be settled by the Creditors’ Shares has its limitations.

For the purpose of providing the Independent Shareholders with a general reference for companies listed on the Stock Exchange engaged in similar transaction as those as the Proposed Restructuring, we have reviewed four transactions (‘‘Comparable Transactions’’) of companies listed on the Main Board of the Stock Exchange which involved, among other things, subscription of new shares with cash brought in and debt restructuring plans involving debt capitalisation, shares and/or convertible bonds issuance, and/or debt waiver or haircut (excluding those companies involved in the restructuring of part of their indebtedness only, such as offshore bonds) announced from 1 March 2023 and up to the date of the Restructuring Agreement, which we believe is exhaustive. We consider a period of approximately 1 year from the date of the Restructuring Agreement is adequate and illustrates the key elements of a ‘‘restructuring operation’’ under the prevailing stock market sentiment and represents a reasonable and meaningful time period to capture the recent market practice and conditions for companies engaged in similar transactions. We are of the view that a longer review period (such as 2 years) may not be able to accurately reflect recent market conditions. Based on the above, we consider the Comparable Transactions to be adequate and sufficient.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

As definition of what constitutes a ‘‘restructuring operation’’ is generic and broad, we consider that the Comparable Transactions can provide a general reference to the Independent Shareholders in respect of the structure and terms of different restructuring proposals for similar transactions in the market.

We noted that the restructuring proposal of the Comparable Transactions, the structure and terms thereof, including but not limited to, (i) business size, financial performance and financial position; (ii) the subscription price and amount and the use of proceeds; and (iii) the background of the transaction, are different from the Company. Nevertheless, we consider that the Comparable Transactions provide a meaning comparison to the Independent Shareholders in respect of the general range of discount of subscription price to closing price on the last trading day prior to the date of the respective restructuring agreements.

		Closing price
		per share on						Discount to
Date of		the last	Market		% of claims	Cash brought in	Discount to	net asset
announcement	Name	trading day	capitalisation	Debt amount	waived/haircut	from investors	closing price	value
15 March 2023	CA Cultural	HK$0.82	HK$97 million	HK$1,106.9 million	N/A	HK$94.1 million, at	(78.39)	(85.98)
	Technology Group					HK$0.1772 per
	Limited (1566)					subscription share
22 September 2023	Guangdong Adway	HK$0.395	HK$25 million	RMB668.5 million	72.2%	HK$54.5 million, at	(53.16)	N/A
	Construction					HK$0.185 per		(Note 2)
	(Group) Holdings					subscription share
	Company Limited
	(6189) (Note 3)
7 November 2023	Silk Road Logistics	HK$1.86	HK$119 million	HK$692.4 million	N/A	HK$50 million, at	(81.67)	N/A
	Holdings Limited					HK$0.341 per		(Note 2)
	(988) (Note 4)					subscription share
10 November 2023	Bay Area Gold	HK$3.5	HK$104 million	HK$5.0 billion	N/A	HK$50 million, at	(99.71)	N/A
	Group Limited					HK$0.01 per		(Note 2)
	(1194) (Note 5)					subscription share
	The Company (39)	HK$0.21	HK$1.3 billion	HK$724 million	N/A	HK$85 million, at	(52.38)	(7.41)
						HK$0.1 per		(Note 6)
						Subscription Share

Source: hkexnews.hk

Note:

(1) Information has been extracted from the relevant announcements of the respective comparables
(2) Denotes that discount to net asset value is not applicable due to the net liabilities position of the respective comparables
(3) Guangdong Adway Construction (Group) Holdings Company Limited (6189) involves subscription of domestic shares, which we took account of the subscription for H-shares comparative purposes

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(4) Listing of the shares of Silk Road Logistics Holdings Limited (988) has been subsequently cancelled on 23 April 2024
(5) Listing of the shares of Bay Area Gold Group Limited (1194) has been subsequently cancelled on 13 March 2024
(6) Based on the net asset value per Share of approximately HK$0.108 as at 30 June 2023 (as disclosed in the Company’s 2023 interim report dated 31 August 2023, which was the latest available information on the date of the Restructuring Agreement)

As show in the above table, the discount of the subscription prices of the Comparable Transactions to their respective closing prices on the last trading day prior to the date of the relevant restructuring agreements falls within a range of approximately 53.16% and approximately 99.71%, with an average of approximately 78.23%.

In addition, the Subscription forms part and parcel of the Proposed Restructuring. Based on the above Comparable Transactions analysis, we consider that a heavily discounted Subscription Price under current circumstances is inevitable. The discount of the Subscription Price to closing price on the Last Trading Date of approximately 52.38% represents a lesser discount to the Comparable Transactions. Based on the aforesaid, we consider that the Subscription Price is fair and reasonable in this regard.

5 Our Analysis on the Creditors’ Scheme

With reference to the Letter from the Board, based on the available books and records of the Company, the estimated total amount of claims against the Company (including the Company’s contingent liability in relation to the corporate guarantee provided by it for the Defaulted Construction Payables in the amount of approximately HK$86,238,000) was approximately HK$812 million (excluding any alleged/purported penalty interests) as at 31 December 2023. As at the date of the Scheme Meeting, 31 Creditors submitted notice of claim for voting purpose, including five direct and indirect subsidiaries of the Company, and eight former or current employees of the Group. The total amount of Claims will be subject to the Creditors’ submission of claim for dividend purpose, the admission or rejection, in whole or in part, by the administrators of the Creditors’ Scheme, and the adjudication result in the event that the Creditor is dissatisfied with the decision of the Scheme Administrators, when the Creditors’ Scheme becomes effective.

A. Principal terms of the Creditors’ Scheme

The Creditors’ Scheme will involve (i) the Scheme Shares Issue; (ii) the Disposal; and (iii) the discharge of the Creditors’ Claims against the Company, details of which are set out below.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Creditors’ Scheme

The Disposal

As part of the terms of the Creditors’ Scheme, the Scheme Subsidiaries will be transferred to the Scheme Company by the Group.

It is expected that the Scheme Subsidiaries will be transferred to the Scheme Company at nil or nominal consideration.

As the Disposal is a part of the Creditors’ Scheme which would lead to the discharge and release of the Claims in full as against the Company on the Effective Date, the Directors (excluding the independent non-executive Directors whose views are set out in the Letter from the Independent Board Committee in this circular) consider that the Disposal at nil or nominal consideration is fair and reasonable and is in the best interest of the Shareholders and the Company as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Conditions precedent to the Creditors’ Scheme

The Creditors’ Scheme will be implemented and shall become binding and effective on the Company and the Creditors if the following conditions precedent are satisfied:

(a) over fifty per cent (50%) in number of the Creditors, representing at least seventy-five per cent (75%) in value of the Creditors present and voting in person (or through electronic means if applicable) or by proxy at the Scheme Meeting, voting in favour of the Creditors’ Scheme;
(b) sanction in respect of the Creditors’ Scheme having been granted by the High Court and an office copy of the order of the High Court sanctioning the Creditors’ Scheme having been delivered to the Companies Registry in Hong Kong for registration; and
(c) HK$45,000,000 of the Total Subscription Price being received by the Scheme Company within thirty (30) days after the registration date of the Court Order with the Companies Registry in Hong Kong, or such extended date as may be agreed by the Company with the Scheme Administrators.

B. Evaluation of the issue price of the Scheme Shares

According to the Letter from the Board, 377,879,793 Shares, representing approximately 5.00% of the Enlarged Issued Share Capital, would be capitalised from the Company’s existing debts owed to the Scheme Creditors (in the approximate amount of HK$37,787,979.30) at HK$0.10 per Share, which is equal to the Subscription Price. The Scheme Shares shall rank pari passu in all respects with the then existing Shares in issue on the date of allotment and issue of the Scheme Shares.

Accordingly, as the issue price of the Scheme Shares is equal to the Subscription Price, we consider that the issue price of the Scheme Shares is also fair and reasonable in this regard.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

C. Evaluation on the Disposal

Under the terms of the Creditors’ Scheme (details of which are set out in the section headed ‘‘Steps involved in the Creditors’ Scheme’’ in the Letter from the Board), upon it becoming effective, the Creditors will release the Company of, and the Company will be fully discharged of, all the Claims against the Company, including but not limited to any interest or penalties arising from any debts owed by the Company to the Scheme Creditors.

The book value of the Company’s liabilities that is expected to be discharged and released upon the Creditors’ Scheme becoming effective is approximately HK$812 million as at 31 December 2023, of which approximately HK$614 million is owed to external parties which are not subsidiaries of the Group (and does not include the Company’s liability in relation to the corporate guarantee provided by it for the Defaulted Construction Payables in the amount of approximately HK$123 million).

Further, a majority portion of the total book value of the Scheme Subsidiaries consists of Properties which may be restricted to be transferred due to reasons such as conditions to be fulfilled under relevant agreements or the Properties have been subject to court orders and sealed up by courts in relation relevant legal proceedings. Accordingly, the Valuer attributed no commercial value to the Properties in the valuation certificates based on the legal opinion provided. In addition, it is also worth noting that the valuation of the Properties under the Disposal prepared by the Valuer represents a valuation deficit of approximately HK$41.9 million. For further details, please refer to the paragraphs headed ‘‘D. Valuation methodology and assumptions’’ below and the valuation report as set out in Appendix VIII to this circular. Based on the above, we believe that the underlying value of the Scheme Subsidiaries is likely to be significantly below the total book value of approximately HK$736 million as at 31 December 2023.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We noted that two of the Comparable Transactions, namely the restructuring proposals of Silk Road Logistics Holdings Limited (988) and Bay Area Gold Group Limited (1194), involved disposal of excluded subsidiaries under their creditors’ schemes as part of their respective restructuring plans. Similar to the Proposed Restructuring, the consideration of the disposal of the excluded subsidiaries under the scheme of Bay Area Gold Group Limited (1194) was estimated in nominal value and the consideration of excluded subsidiaries of Silk Road Logistics Holdings Limited (988) would be transferred to a scheme company at a nominal consideration. As both the Comparable Transactions would involve transferring the excluded subsidiaries at nominal consideration as part of their respective restructuring proposals, we understand that such arrangement of disposing excluded subsidiaries at nominal value is a common approach under creditors’ schemes.

Based on our discussion with the Management, we understand the Disposal pursuant to Proposed Restructuring is expected to include core and non-core businesses of the Group, namely: (i) financial leasing; (ii) trading of mineral products; (iii) property construction and development; and (iv) distribution of wine and liquor and food trading and the Disposal is not expected to involve the entirety of the Group’s core businesses.

Taking into account: (i) our independent work done on reviewing the Comparable Transactions as described under the section headed ‘‘4B. Comparison with comparable transactions’’ above, which shows that the discount of the Subscription Price and the issue price of the Creditors’ Shares are better than the Comparable Transactions and from the Independent Shareholders’ perspective, the dilution to their shareholders’ interest in the Company (i.e. from approximately 75.85% to approximately 63.53%) is less extreme in terms of percentage of Subscription Shares to be issued as compared to the Comparable Transactions; (ii) there is no difference between the Subscription Price and the issue price of the Creditors’ Shares; and (iii) the Creditors’ Scheme is an element of the Proposed Restructuring which is a strategic and realistic response to the current market challenges that will enable the Group to reach a settlement with its indebtedness in a formal and orderly manner such that all of the Company’s indebtedness and liabilities to the Creditors will be released and discharged pursuant to the terms of the Creditors’ Scheme. We concur with the Directors’ view that such is in the interests of the Company and the Shareholders as a whole, as the Directors are of the view that Proposed Restructuring represents a good opportunity for the injection of new investment into the Group, without which the Company, as a holding entity, would be subject to an unsustainable financial situation and would be at risk of insolvent liquidation.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We noted that the Board’s decision to proceed with the Disposal, as part of the Creditors’ Scheme, was based on a comprehensive assessment of various factors including (i) potential consequence of the Company being placed under insolvent liquidation in the event of the non-materialisation of the Proposed Restructuring; (ii) the broader context of the Proposed Restructuring of which the Subscription and the Creditors’ Scheme form part; (iii) the difference between the book values of the assets and liabilities of each of the Scheme Subsidiaries and the uncertainty in their expected realisable value, considering the marketability of the underlying assets in a restricted amount of time; (iv) the significant amount of interest (and/or penalty interest) that the Company would incur if it disposed of the Scheme Subsidiaries (or their assets) itself; (v) the Company understanding that, if the proceeds from the Scheme Assets (including the Scheme Subsidiaries) exceeded the total amount of Claims, the Scheme Administrators intend to seek directions from the High Court to return the residue to the Company; and (vi) the Creditors’ Scheme would also discharge and release the contingent liabilities in relation to the corporate guarantee provided by the Company for the Defaulted Construction Payables.

Taking into account of the aforementioned, as the Disposal is a part of the Creditors’ Scheme which would lead to the discharge and release of the Claims in full as against the Company on the Effective Date and as the Company only had a cash balance of approximately HK$2,000 as at 31 December 2023, which is unable to repay the relevant overdue and outstanding indebtedness and given that the Scheme Subsidiaries have reported continuous losses in the previous financial years, we concur with the Directors’ view that the Disposal, which forms an essential part of the corporate rescue exercise package of the Group, at nil or nominal consideration is fair and reasonable and is in the best interest of the Shareholders and the Company as a whole.

D. Valuation methodology and assumptions

International Valuation Limited (the ‘‘Valuer’’) has valued the properties held by the Scheme Subsidiaries (the ‘‘Properties’’) with an amount of approximately RMB430.7 million (equivalent to approximately HK$465.1 million) (the ‘‘Valuation’’) as at 30 April 2024. For details of the valuation of the Properties, please refer to the valuation report as set out in Appendix VIII to this circular.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In assessing the fairness and reasonableness of the Valuation, we have considered the followings:

We have reviewed and discussed with the Valuer, the methodology of, and basis and assumptions adopted for in arriving at the valuations as set out in Appendix VIII to the Circular. We have also discussed with the Valuer as to its expertise, previous valuation experiences, scope of work and valuation procedures conducted. We also understand that, in valuing the property interest, the Valuer followed requirements contained in Chapter 5 and Practice Note 12 of the Listing Rules and prepared the Valuation Report in accordance with the RICS Valuation – Global Standards published by the Royal Institution of Chartered Surveyors, the HKIS Valuation Standards published by the Hong Kong Institute of Surveyors, and the International Valuation Standards issued by the International Valuation Standards Council.

The Valuer confirmed its independence on the relationship with the Group and other parties to the Restructuring Agreement and we have obtained and reviewed the engagement letter entered into between the Valuer and the Company. We understand that the personnelin-charge of the Valuation is a Professional Member of the Royal Institution of Chartered Surveyors and a Corporate Member of the Hong Kong Institute of Surveyors in the General Practice Division, who has over 9 years’ of experience in valuation of properties in the PRC and Hong Kong.

We noted that the Valuer reviewed the title documents of the Properties and also conducted on-site inspection of the exterior and, where possible, the interior of the Properties and no irregularities were noted during the course. We understand that the Valuer relied considerably on the advice given by the Company’s PRC legal adviser. Accordingly, we have reviewed the relevant legal opinion concerning the validity of interest in the Properties, which we were given to understand the PRC legal adviser also reviewed the title documents of the Properties and made relevant enquiries to the relevant government authorities and no irregularities were noted during the course.

Based on the above, we are satisfied that the Valuer is qualified for giving its opinion as set out in the Valuation Report taken into account its relevant experience and expertise, its independence, its scope of work and the terms and scope of the engagement between the Company and the Valuer are appropriate to the opinion the Valuer is required to give.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We noted that the Valuation has been carried out on a market value basis. The Valuer have valued Property No. 1 and No. 5 on market basis and on vacant possession, and the direct comparison method is adopted where comparison based on prices realized on actual sales of comparable properties is made. Comparable properties of similar size, character and location are analyzed and carefully weighed against all the respective advantages and disadvantages of each property in order to arrive at a fair comparison of market values. In valuing Property No. 2, No. 3 and No. 4, the Valuer have valued the properties by income capitalization method by capitalizing the rental income derived from the existing tenancies, if any, with due provision for the reversionary potential of each constituent portion of the properties at appropriate capitalisation rates. When using income capitalisation method, the Valuer have mainly made reference to lettings within the relevant localities because the properties are subject to tenancy agreements/held for investment and comparables letting evidences in the relevant market are adequate.

We have reviewed the methodology and basis and assumptions adopted by the Valuer in arriving at the Valuation. The Valuer noted that such approach is a common valuation methodology and we have also reviewed similar property valuations conducted by other listed companies on the Stock Exchange and noted that such approach is commonly adopted valuation methodology in valuing properties. Accordingly, we concur with the Valuer in adopting such market approach for the purposes of the Valuation.

Based on our review of the work done by the Valuer including our discussion with the Valuer understanding the basis and assumptions adopted and reviewing of the working papers prepared by the Valuer, we are of the view that the valuation result, including the basis and assumptions adopted in arriving at the Valuation, is fair and reasonable. We were not aware of any irregularities during our discussion with the Valuer or in our review of its qualification and works, which included our review of the working papers and the comparable properties selected by the Valuer in arriving at the Valuation.

The Valuation represents a valuation deficit of approximately HK$41.9 million as compared to the net book value of the Properties as shown in its management account as at 31 December 2023 of approximately HK$507.0 million.

6 Potential Financial Effects

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Following the completion of the Proposed Restructuring, (i) the net proceeds of the Subscription will be applied as to (a) approximately HK$45 million shall be paid to the Scheme Company; (b) up to HK$20 million shall be used to settle the Restructuring Costs; and (c) the remaining balance of the Total Subscription Price shall be used as general working capital of the Company; (ii) the financial results of the Scheme Subsidiaries will be deconsolidated from the financial statements of the Group; and (iii) the Company’s obligations owed to the Scheme Creditors will be discharged in full. Accordingly, the Group would be able to reduce its overall indebtedness.

(a) the Company’s total external liabilities of approximately HK$614 million expected to be subject to the Creditors’ Scheme as at 31 December 2023; and
(b) less the sum of (i) the portion of the Company’s liabilities that is (a) settled through the Initial Cash Payment of HK$45 million and (b) capitalised into Scheme Shares in the total amount of approximately HK$37.8 million, (ii) the total scheme-related expenses of approximately HK$20 million, and (iii) the total book value of the Scheme Subsidiaries of approximately HK$736 million as at 31 December 2023.

For details and breakdown of the liabilities expected to be discharged and released under the Creditors’ Scheme, please refer to the paragraphs under ‘‘FINANCIAL EFFECT OF THE DISPOSAL AND THE PROPOSED RESTRUCTURING’’ in the Letter from the Board.

– 78 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

It is also stated in the section headed ‘‘Working Capital Statement’’ in Appendix I to the Circular that the Directors are of the opinion that, after taking into account the relief of substantial financial burden as a result of the completion of the Proposed Restructuring and the financial resources available to the Group, including cash and cash equivalents on hand and cash flows to be generated from the operating and financing activities, are of the opinion that the Group will have sufficient working capital for its present operating requirements and to repay its financial obligations as and when they fall due for at least the next twelve months from the date of this circular, in the absence of unforeseeable circumstances. Such opinion is dependent on the outcome of the following assumptions (which are subject to multiple uncertainties):

(a) endeavoring to improve the Group’s operating results and cash flows through cost control measures and will focus on the existing business of the Group;
(b) negotiating with investors with a view to obtain further financing including but not limited to equity financing, bank borrowings and issuance of new convertible bonds to improve the liquidity of the Group; and
(c) the timing of the Proposed Restructuring as planned.

Based on the above, we are of the view that the Subscription and the Scheme will have positive effects on the financial position of the Group which is favourable to Independent Shareholders.

For details regarding business, financial information and future plans of the Retained Group, please refer to the paragraphs headed ‘‘BUSINESS OF THE RETAINED GROUP’’ in the Letter from the Board, and Appendices VI and VII to this circular.

7 Dilution Effect of the Shareholding Interests

With reference to the shareholding table in the section headed ‘‘Effect of the Shareholding Structure of the Company’’ disclosed in the Letter from the Board, the shareholding interests of the public Shareholders would be diluted from 75.85% as at the Latest Practicable Date to 63.53% immediately after completion of the Proposed Restructuring, assuming no other changes to the issued share capital of the Company from the date of this circular up to the date of completion of the Proposed Restructuring.

– 79 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is the shareholding structure of the Company, assuming there is no further issue or repurchase of Shares before completion of the Rights Issue other than the allotment and issue of the Rights Shares pursuant to the Rights Issue, (i) as at the Latest Practicable Date and (ii) immediately after completion of the Proposed Restructuring, assuming no other changes to the issued share capital of the Company from the date of this circular up to the date of completion of the Proposed Restructuring:

Shareholders Directors Jiang Jiancheng Ke Xionghan Chen Zhifeng Yang Yunguang Ho Wing Yan (Note 1) Li Dawei Substantial Shareholders Beidahuang Business Group (HK) International Trade Co., Limited (Note 2) Investor and/or its nominee(s) (Note 3) Scheme Creditors (Note 4)/ Scheme Company Public Shareholders Jiang Jianjun (Note 5) Chen Jiayi (Note 6) Other public Shareholders (Note 7) Total	As at the Latest Practicable Date No. of Shares Approx. % 27,868,000 0.44% 10,120,000 0.16% 900,000 0.01% 900,000 0.01% 900,000 0.01% 40,000 0.00% 660,000,000 10.42% – 0.00% – 0.00% 795,910,165 12.57% 33,440,000 0.53% 4,802,233,918 75.85% 6,332,312,083 100.00%	Immediately after completion of the Proposed Restructuring No. of Shares Approx. % 27,868,000 0.37% 10,120,000 0.13% 900,000 0.01% 900,000 0.01% 900,000 0.01% 40,000 0.00% 660,000,000 8.73% 850,000,000 11.24% 377,879,793 5.00% 795,910,165 10.53% 33,440,000 0.44% 4,802,233,918 63.53% 7,560,191,876 100.00%	Immediately after completion of the Proposed Restructuring No. of Shares Approx. % 27,868,000 0.37% 10,120,000 0.13% 900,000 0.01% 900,000 0.01% 900,000 0.01% 40,000 0.00% 660,000,000 8.73% 850,000,000 11.24% 377,879,793 5.00% 795,910,165 10.53% 33,440,000 0.44% 4,802,233,918 63.53% 7,560,191,876 100.00%
			100.00%

– 80 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Notes:

On 13 June 2023, 900,000 Shares were allotted and issued by the Company to Ms. Ho Wing Yan, a nonexecutive Director, pursuant to the exercise of the share options by Ms. Ho Wing Yan under the Share Option Scheme.
Beidahuang Business Group (HK) International Trade Co., Limited will cease to be a substantial shareholder (as defined in the Listing Rules) of the Company and will no longer be a connected person of the Company, and Shares held by it will be counted towards the public float of the Company, immediately following completion of the Proposed Restructuring.
The Investor is a company incorporated in Hong Kong with limited liability and is a wholly-owned subsidiary of China Qujiang Fund, a sub-fund of CIS Fund, an open-ended fund company incorporated in Hong Kong. CIS Securities Asset Management, being the investment manager of CIS Fund and designated sub-funds (including China Qujiang Fund), shall be entitled to exercise, or refrain from the exercise of, any voting or other rights attaching to the Subscription Shares following Completion as CIS Securities Asset Management shall in its absolute discretion think fit, subject to any instructions given to CIS Securities Asset Management by the directors of CIS Fund.
To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries and based on the information available, all of the Scheme Creditors who submitted notices of claim for voting purpose are Independent Third Parties, including five Creditors which are subsidiaries directly or indirectly held by the Company, and eight Creditors who are current or former employees of the Company.
These 795,910,165 Shares comprise 782,966,165 Shares beneficially owned by Mr. Jiang Jianjun, and 12,944,000 Shares beneficially owned by his spouse Ms. Li Zhuoxun. Mr. Jiang Jianjun was a former Director who resigned as an executive Director with effect from 14 June 2023.
These 33,440,000 Shares are beneficially owned by Mr. Chen Jiayi, who is the father of Mr. Chen Chen, an executive Director. Mr. Chen Jiayi is also a holder of Class D Shares in CIS Fund, which sub-fund wholly owns the Investor, details of which are set out in ‘‘Information on the Investor, China Qujiang Fund and CIS Securities Asset Management’’ in the Letter from the Board.
On 13 June 2023, 1,696,000 Shares were allotted and issued by the Company to employees of the Group pursuant to the exercise of the share options by such employees under the Share Option Scheme.
Percentage figures are rounded to two decimal places, and certain percentage figures included in the above table have been subject to rounding adjustments. Accordingly, figures shown as totals may not be an arithmetic aggregation of the figures preceding them.

– 81 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

OPINION AND RECOMMENDATION

Taking into consideration of the above principal factors and reasons, we are of the opinion that the terms of the Proposed Restructuring (including the Subscription, the Issue of Scheme Shares and the Disposal) are on normal commercial terms, fair and reasonable so far as the Company and the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the relevant resolution(s) proposed at the EGM thereby approving the Proposed Restructuring and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of Alpha Financial Group Limited

Cheng Chi Ming, Andrew Managing Director

Irene Ho

Vice President

Mr. Cheng Chi Ming, Andrew is the Managing Director of Alpha Financial Group Limited and is licensed under the SFO as a Responsible Officer to conduct Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities. Mr. Cheng has over 19 years of experience in the corporate finance industry in Hong Kong.

Ms. Irene Ho is the Vice President of Alpha Financial Group Limited and is licensed under the SFO as a Responsible Officer to conduct Type 6 (advising on corporate finance) regulated activities. Ms. Ho has over 10 years of experience in the corporate finance industry in Hong Kong.

– 82 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(1) FINANCIAL INFORMATION OF THE GROUP

The financial information of the Group, together with the notes thereto, for the three years ended 31 December 2021, 2022 and 2023 were set out in the relevant annual reports of the Company. The said annual reports of the Company are available on the website of the Stock Exchange (https://www.hkexnews.hk) and the website of the Company (http://www.irasia.com/ listco/hk/chinabeidahuang):

(a) pages 66 to 232 of the annual report of the Company for the year ended 31 December 2021 published on 19 May 2022:

https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0519/2022051900774.pdf

(b) pages 58 to 224 of the annual report of the Company for the year ended 31 December 2022 published on 27 April 2023:

https://www1.hkexnews.hk/listedco/listconews/sehk/2023/0427/2023042702398.pdf

https://www1.hkexnews.hk/listedco/listconews/sehk/2024/0430/2024043003348.pdf

(2) STATEMENT OF INDEBTEDNESS

Indebtedness

As at the close of business on 31 May 2024, being the latest practicable date for the purpose of ascertaining the indebtedness of the Group prior to the printing of this circular, the Group had secured bonds of principal amount of HK$109,000,000 and interests thereon of approximately HK$156,034,000; ii) unsecured bonds of principal amount of HK$249,414,000 and interests thereon of approximately HK96,912,000; iii) other loans of principal amount of HK$20,715,000 and interest thereon of approximately HK4,516,000. In addition, the Group had outstanding bank and other borrowings other than the defaulted secured bonds and defaulted unsecured bonds and defaulted other loans of approximately HK$87,571,000 as at 31 May 2024 which were due for repayment in the twelve months from 31 May 2024, The Group had total lease liabilities of approximately HK$94,293,000 for the Group’s office premise.

I – 1

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Disclaimer

Save as referred to as above and apart from intra-group liabilities, normal trade and other payables in the ordinary course of business, the Group did not have, at the close of business on 31 May 2024, any debt securities issued and outstanding or authorised or otherwise created but unissued, term loan, bank overdrafts, loan or other similar indebtedness, liabilities under acceptances or acceptance credits, debentures, mortgages, charges, lease payables, guarantees or other material contingent liabilities.

(3) WORKING CAPITAL STATEMENT

The Directors have reviewed the Group’s cash flow projections which covered a period of at least twelve months from the date of this circular. The Directors, after due and careful enquiry and after taking into account the relief of substantial financial burden as a result of the completion of the Proposed Restructuring and the financial resources available to the Group, including cash and cash equivalents on hand and cash flows to be generated from the operating and financing activities, are of the opinion that the Group will have sufficient working capital for its present operating requirements and to repay its financial obligations as and when they fall due for at least the next twelve months from the date of this circular, in the absence of unforeseeable circumstances. Such opinion is dependent on the outcome of whether the Proposed Restructuring can be successfully proceeded.

In the event that the Group is unable to successfully accomplish the assumptions as mentioned above, the Group may not have sufficient working capital for the next twelve months from the date of this circular; and under such circumstances, the Board will continue to seek other alternatives to finance its working capital.

(4) MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2023, being the date to which the latest published audited accounts of the Group were made up.

I – 2

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(5) FINANCIAL AND TRADING PROSPECT OF THE RETAINED GROUP

Financial and Trading Prospects of the Retained Group

Following the Proposed Restructuring, the Retained Group’s business will be principally comprised of the Remaining Food Business and the Rental Business. The Retained Group may also have limited trading in mineral products, pursuant to a framework sale and purchase agreement for manganese ore entered into between a member of the Retained Group and a supplier. The Retained Group will continue to evaluate business opportunities in the mineral products trading segment following the Proposed Restructuring.

The overall objective of the Retained Group following the Proposed Restructuring will be to focus on its core businesses (i.e. Remaining Food Business and Rental Business), maintain a stable cash flow and gradually realise profitability.

Remaining Food Business

The Retained Group intends to further develop the Remaining Food Business with a continued focus on the trading of rice, corn and raw beef which has established upstream and downstream advantages. The Retained Group will strive to expand its existing customer base by reaching out to more customers in South, Central and Southwest China and aim to achieve an annual increase in turnover of no less than 15% to 20%. The Retained Group also aims to strictly control the costs of packaging, warehousing and logistics in the operations of the Remaining Food Business.

Rental Business

The Retained Group will maintain the level of gross floor area currently managed by the Group, and invest more efforts in the marketing and negotiation of leases and sub-leases. The Retained Group will strive to increase the rental revenue per square foot, with an annual growth rate of not less than that of the Consumer Price Index. In the two-year period following the Proposed Restructuring, the Retained Group aims to achieve a total rental revenue of not less than RMB200 million. The Retained Group will strive to strengthen cost control in the aspects of property management, property maintenance and water and electricity expenses, with an aim to achieve an amount of net profits of not less than 5% of the Retained Group’s rental revenue in the two-year period.

In the long term, the Retained Group intends to build two to three logistics warehouses each with an area of not less than 200,000 square feet in Hong Kong, with funding from suitable financing plans to be formulated by the Retained Group.

I – 3

FINANCIAL INFORMATION OF SHENZHEN QIANHAI DAHUANGYUAN

APPENDIX II

UNAUDITED FINANCIAL INFORMATION OF SHENZHEN QIANHAI DAHUANGYUAN

Set out below are the unaudited financial information of Shenzhen Qianhai Dahuangyuan which comprises the unaudited statements of financial position as of 31 December 2021, 2022, 2023 and 31 March 2024 and the related unaudited statements of profit or loss and other comprehensive income, the unaudited statements of changes in equity and the unaudited statements of cash flow for the years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024 (the ‘‘Relevant Periods’’), and certain explanatory notes (together, the ‘‘Unaudited Financial Information’’). The Unaudited Financial Information has been prepared solely for the purpose of inclusion in the circular to be issued by the Company in connection with the disposal of the entire equity interests in Shenzhen Qianhai Dahuangyuan in accordance with paragraph 14.68(2)(a)(i)(A) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’).

The Unaudited Financial Information is prepared by the Directors solely for the purpose of inclusion in this circular in connection with the disposal of the entire equity interests in Shenzhen Qianhai Dahuangyuan. HLB Hodgson Impey Cheng Limited was engaged to review the Unaudited Financial Information of Shenzhen Qianhai Dahuangyuan set out in pages II-1 to II-9 in accordance with Hong Kong Standard on Review Engagements 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ and with reference to Practice Note 750 ‘‘Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal’’ issued by the Hong Kong Institute of Certified Public Accountants. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable the auditor to obtain assurance that the auditors would become aware of all significant matters that might be identified in an audit. Accordingly, the auditors do not express an audit opinion.

II – 1

FINANCIAL INFORMATION OF SHENZHEN QIANHAI DAHUANGYUAN

APPENDIX II

Unaudited Statements of Profit or Loss and Other Comprehensive Income

For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

Notes Revenue Cost of sales Gross profit Other income, gains or losses Selling and distribution expenses Administrative expenses Profit from operation Net allowance of expected credit losses Profit/(loss) before taxation Taxation Profit/(loss) for the year/period Other comprehensive (expenses)/ income Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations Total comprehensive expenses for the year/period	For the year ended 31 December 2021 2022 2023 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) 20,473 16,128 12,744 – – – 20,473 16,128 12,744 27 (757) (857) (2) (1,031) (1,211) (4,531) (11,073) (7,464) 15,967 3,267 3,212 (96,431) (8,328) (2,985) (80,464) (5,061) 227 (4) 191 143 (80,468) (4,870) 370 3,827 (20,859) (4,172) (76,641) (25,729) (3,802)	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 3,186 1,371 – – 3,186 1,371 (107) – (293) (208) (1,741) (920) 1,045 243 – – 1,045 243 – – 1,045 243 (1,113) (331) (68) (88)	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 3,186 1,371 – – 3,186 1,371 (107) – (293) (208) (1,741) (920) 1,045 243 – – 1,045 243 – – 1,045 243 (1,113) (331) (68) (88)
			1,371 – (208) (920)
			243 –
			243 –
			243 (331)
			(88)

The accompanying notes form an integral part of the Unaudited Financial Information.

II – 2

FINANCIAL INFORMATION OF SHENZHEN QIANHAI DAHUANGYUAN

APPENDIX II

Unaudited Statements of Financial Position

As at 31 December 2021, 2022, 2023 and 31 March 2024

Assets Non-current assets Property, plant and equipment Investment properties Investment in associates – current account Current assets Loan receivables Prepayment, deposits and other receivables Amount due from related company Cash and cash equivalents Liabilities Current liabilities Other payables and accruals Amounts due to related company Net current assets Total assets less current liabilities Non-current liabilities Deferred tax liabilities Net assets Capital and Reserves Paid-up Capital Reserves	As 2021 HK$’000 (unaudited) 200 4,500 75,565 80,265 290,170 1,267 – 16 291,453 (1,943) (146,189) (148,132) 143,321 223,586 (561) 223,025 233,337 (10,312) 223,025	at 31 December 2022 2023 HK$’000 HK$’000 (unaudited) (unaudited) 183 52 3,362 2,342 39,519 49,418 43,064 51,812 199,358 194,597 247 172 95,658 88,539 22 4 295,285 283,312 (730) (2,083) (139,996) (139,227) (140,726) (141,310) 154,559 142,002 197,623 193,814 (327) (320) 197,296 193,494 233,337 233,337 (36,041) (39,843) 197,296 193,494	As at 31 March 2024 HK$’000 (unaudited) 21 2,339 42,366 44,726 193,719 36 98,896 10 292,661 (2,958) (140,703) (143,661) 149,000 193,726 (320) 193,406 233,337 (39,931) 193,406

The accompanying notes form an integral part of the Unaudited Financial Information.

II – 3

APPENDIX II

FINANCIAL INFORMATION OF SHENZHEN QIANHAI DAHUANGYUAN

Unaudited Statements of Changes in Equity

For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

At 1 January 2021 Loss for the year Other comprehensive income for the year At 31 December 2021 and 1 January 2022 Loss for the year Other comprehensive expense for the year At 31 December 2022 and 1 January 2023 Profit for the year Other comprehensive expense for the year	Share capital HK$’000 (unaudited) 233,337 – – 233,337 – – 233,337 – –	Capital reserve HK$’000 (unaudited) 70 – – 70 – – 70 – –	Exchange reserve HK$’000 (unaudited) 5,989 – 3,827 9,816 – (20,859) (11,043) – (4,172)	Accumulated (Losses)/ Retained earnings HK$’000 (unaudited) 60,270 (80,468) – (20,198) (4,870) – (25,068) 370 –	Total HK$’000 (unaudited) 299,666 (80,468) 3,827 223,025 (4,870) (20,859) 197,296 370 (4,172)

II – 4

APPENDIX II

FINANCIAL INFORMATION OF SHENZHEN QIANHAI DAHUANGYUAN

At 31 December 2023 and 1 January 2024 Profit for the period Other comprehensive expense for the period At 31 March 2024 At 31 December 2022 and 1 January 2023 Profit for the period Other comprehensive expense for the period At 31 March 2023	Share capital HK$’000 (unaudited) 233,337 – – 233,337 233,337 – – 233,337	Capital reserve HK$’000 (unaudited) 70 – – 70 70 – – 70	Exchange reserve HK$’000 (unaudited) (15,215) – (331) (15,546) (11,043) – (1,113) (12,156)	Accumulated (Losses)/ Retained earnings HK$’000 (unaudited) (24,698) 243 – (24,455) (25,068) 1,045 – (24,023)	Total HK$’000 (unaudited) 193,494 243 (331) 193,406 197,296 1,045 (1,113) 197,228

The accompanying notes form an integral part of the Unaudited Financial Information.

II – 5

FINANCIAL INFORMATION OF SHENZHEN QIANHAI DAHUANGYUAN

APPENDIX II

Unaudited Statements of Cash Flows

For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

Notes Cash flow generated from operating activities Profit/(loss) before taxation Adjustments for: Net allowance for expected credit losses on loan receivables Net allowance for expected credit losses on advances to associates Bank interest income Depreciation of property, plant and equipment Unrealised fair value change on investment properties Decrease/(increase) in prepayment, deposits and other receivables (Increase)/decrease in loan receivables Increase/(decrease) in other payables Cash generated from operations Tax paid Net cash generated from operating activities Cash flow used in investing activities Purchases of property, plant and equipment Net cash used in investing activities	For the year ended 31 December 2021 2022 2023 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) (80,464) (5,061) 227 91,242 (1,663) 3,365 5,189 9,991 (380) 3 – – 77 – 128 (14) 766 979 (245) 940 79 (14,261) 68,005 (2,403) 427 (1,078) 1,328 1,954 71,900 3,323 – – – 1,954 71,900 3,323 (91) – – (91) – –	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 1,045 243 – – – – – – 33 31 – – (42) (6) – – 2,429 1,005 3,465 1,273 – – 3,465 1,273 – – – –	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 1,045 243 – – – – – – 33 31 – – (42) (6) – – 2,429 1,005 3,465 1,273 – – 3,465 1,273 – – – –
			1,273 –
			1,273
			–
			–

II – 6

APPENDIX II

FINANCIAL INFORMATION OF SHENZHEN QIANHAI DAHUANGYUAN

Notes Cash flow used in financing activities Decrease in amount due to related company Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents Effect of foreign exchange rate change, net Cash and cash equivalent at end of year/period	For the year ended 31 December 2021 2022 2023 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) (1,911) (71,896) (3,341) (1,911) (71,896) (3,341) (48) 4 (18) 66 16 22 (2) 2 – 16 22 4	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) (3,469) (1,267) (3,469) (1,267) (4) 6 22 4 – – 18 10	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) (3,469) (1,267) (3,469) (1,267) (4) 6 22 4 – – 18 10
			(1,267)
			6 4 –
			10

II – 7

FINANCIAL INFORMATION OF SHENZHEN QIANHAI DAHUANGYUAN

APPENDIX II

NOTES TO THE HISTORICAL FINANCIAL INFORMATION

For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

1. GENERAL INFORMATION

深圳市前海大荒緣融資租賃有限公司 (Shenzhen Qianhai Dahuangyuan Financing Lease Co., Ltd*) (‘‘Shenzhen Qianhai Dahuangyuan’’) is a company established in the People’s Republic of China and principally engaged in financial leasing business.

Shenzhen Qianhai Dahuangyuan is an indirect wholly-owned subsidiary of China Beidahuang Industry Group Holdings Limited (the ‘‘Company’’), a public company incorporated in the Cayman Islands with its shares listed on the Main Board of The Stock Exchange of Hong Kong Limited.

2. BASIS OF PREPARATION AND PRESENTATION OF THE UNAUDITED FINANCIAL INFORMATION

The unaudited financial information of Shenzhen Qianhai Dahuangyuan for the years ended 31 December 2021, 2022, 2023 and 31 March 2024 (‘‘Unaudited Financial Information’’) has been prepared in accordance with paragraph 14.68(2)(a)(i) of the Listing Rules, and is solely for the purpose of inclusion in this circular to be issued by the Company in connection with the disposal of the entire equity interest in Shenzhen Qianhai Dahuangyuan.

The Unaudited Financial Information has been prepared by the directors of the Company in accordance with the same accounting policies as those adopted by the Company and its subsidiaries (the ‘‘Group’’) in the preparation of the consolidated financial statements of the Group for each of the years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024 (‘‘Relevant Periods’’). The consolidated financial statements of the Group have been prepared in accordance with the Hong Kong Financial Reporting Standards (‘‘HKFRSs’’) issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’).

The Unaudited Financial Information is presented in Hong Kong dollars (‘‘HK$’’) and all values are rounded to the nearest thousand (HK$’000) except when otherwise indicated. The Unaudited Financial Information are presented in HK$ which is different from the functional currency of Shenzhen Qianhai Dahuangyuan, Renminbi (‘‘RMB’’), as the directors of the Company consider that HK$ is the appropriate presentation currency in view of the place of listing of the Company.

II – 8

FINANCIAL INFORMATION OF SHENZHEN QIANHAI DAHUANGYUAN

APPENDIX II

The Unaudited Financial Information does not contain sufficient information to constitute a complete set of financial statements as defined in HKAS 1 ‘‘Presentation of Financial Statements’’ nor a set of condensed financial statements as defined in HKAS 34 ‘‘Interim Financial Reporting’’ issued by the HKICPA and read in connection with the relevant published annual reports for the Relevant Periods.

II – 9

FINANCIAL INFORMATION OF LINXIANG QIANGSHENG

APPENDIX III

UNAUDITED FINANCIAL INFORMATION OF LINXIANG QIANGSHENG

Set out below are the unaudited financial information of Linxiang Qiangsheng and its subsidiaries which comprises the unaudited consolidated statements of financial position as of 31 December 2021, 2022, 2023 and 31 March 2024 and the related unaudited consolidated statements of profit or loss and other comprehensive income, the unaudited consolidated statements of changes in equity and the unaudited consolidated statements of cash flow for the years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024 (the ‘‘Relevant Periods’’), and certain explanatory notes (together, the ‘‘Unaudited Financial Information’’). The Unaudited Financial Information has been prepared solely for the purpose of inclusion in the circular to be issued by the Company in connection with the disposal of the entire equity interests in Linxiang Qiangsheng in accordance with paragraph 14.68(2)(a)(i)(A) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’).

The Unaudited Financial Information is prepared by the Directors solely for the purpose of inclusion in this circular in connection with the disposal of the entire equity interests in Linxiang Qiangsheng. HLB Hodgson Impey Cheng Limited was engaged to review the Unaudited Financial Information of Linxiang Qiangsheng set out in pages III-1 to III-9 in accordance with Hong Kong Standard on Review Engagements 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ and with reference to Practice Note 750 ‘‘Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal’’ issued by the Hong Kong Institute of Certified Public Accountants. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable the auditor to obtain assurance that the auditors would become aware of all significant matters that might be identified in an audit. Accordingly, the auditors do not express an audit opinion.

III – 1

FINANCIAL INFORMATION OF LINXIANG QIANGSHENG

APPENDIX III

Unaudited consolidated Statements of Profit or Loss and Other Comprehensive Income For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

Revenue Cost of sales Gross profit Other income, gains or losses Selling and distribution expenses Administrative expenses Profit from operation Net allowance of expected credit losses Profit/(loss) before taxation Taxation Profit/(loss) for the year/period Other comprehensive income/(expenses) Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations Total comprehensive income/(expenses) for the year/period	For the year ended 31 December 2021 2022 2023 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) 237,107 217,493 290,286 (220,795) (201,181) (265,304) 16,312 16,312 24,982 9,711 7 1 (1,500) (1,233) (3,760) (3,141) (8,732) (10,026) 21,382 6,354 11,197 210 (10,341) (5,942) 21,592 (3,987) 5,255 – – – 21,592 (3,987) 5,255 1,242 (19,621) (4,322) 22,834 (23,608) 933	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 70,152 42,329 (64,115) (39,344) 6,037 2,985 – – (783) (551) 2,674 (3,381) 2,580 (947) – – 2,580 (947) – – 2,580 (947) (1,261) (382) 1,320 (1,329)	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 70,152 42,329 (64,115) (39,344) 6,037 2,985 – – (783) (551) 2,674 (3,381) 2,580 (947) – – 2,580 (947) – – 2,580 (947) (1,261) (382) 1,320 (1,329)
			2,985 – (551) (3,381)
			(947) –
			(947) –
			(947) (382)
			(1,329)

The accompanying notes form an integral part of the Unaudited Financial Information.

III – 2

FINANCIAL INFORMATION OF LINXIANG QIANGSHENG

APPENDIX III

Unaudited Consolidated Statements of Financial Position

As at 31 December 2021, 2022, 2023 and 31 March 2024

Assets Non-current assets Property, plant and equipment Goodwill Investment in associate – current account Current assets Inventories Trade receivables Prepayment, deposits and other receivables Cash and cash equivalents Liabilities Current liabilities Trade and bills payables Other payables and accruals Contract liabilities Amounts due to related company Net current assets Total assets less current liabilities Net assets Share Capital and reserves Share Capital Reserves	As 2021 HK$’000 (unaudited) 13,549 752 – 14,301 35,752 81,482 161,082 232 278,548 (15,671) (1,277) (2,818) (140,820) (160,586) 117,962 132,263 132,263 70,166 62,097 132,263	at 31 December 2022 2023 HK$’000 HK$’000 (unaudited) (unaudited) 9,505 7,043 686 673 1,126 1,105 11,317 8,821 80,415 87,272 78,481 81,364 83,734 82,220 24 142 242,654 250,998 (3,379) (5,505) (1,115) (3,902) – (3) (140,822) (140,821) (145,316) (150,231) 97,338 100,767 108,655 109,588 108,655 109,588 70,166 70,166 38,489 39,422 108,655 109,588	As at 31 March 2024 HK$’000 (unaudited) 7,033 672 1,103 8,808 83,001 80,643 81,780 265 245,689 (9,553) (3,424) – (133,261) (146,238) 99,451 108,259 108,259 70,166 38,093 108,259

The accompanying notes form an integral part of the Unaudited Financial Information.

III – 3

FINANCIAL INFORMATION OF LINXIANG QIANGSHENG

APPENDIX III

Unaudited Consolidated Statements of Changes in Equity

For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

At 1 January 2021 Profit for the year Other comprehensive income for the year At 31 December 2021 and 1 January 2022 Loss for the year Other comprehensive expense for the year At 31 December 2022 and 1 January 2023 Profit for the year Other comprehensive expense for the year	Share capital HK$’000 (unaudited) 70,166 – – 70,166 – – 70,166 – –	Exchange reserve HK$’000 (unaudited) (45,150) – 1,242 (43,908) – (19,621) (63,529) – (4,322)	Retained earnings HK$’000 (unaudited) 84,413 21,592 – 106,005 (3,987) – 102,018 5,255 –	Total HK$’000 (unaudited) 109,429 21,592 1,242 132,263 (3,987) (19,621) 108,655 5,255 (4,322)

III – 4

FINANCIAL INFORMATION OF LINXIANG QIANGSHENG

APPENDIX III

At 31 December 2023 and 1 January 2024 Loss for the period Other comprehensive expense for the period At 31 March 2024 At 31 December 2022 and 1 January 2023 Profit for the period Other comprehensive expense for the period At 31 March 2023	Share capital HK$’000 (unaudited) 70,166 – – 70,166 70,166 – – 70,166	Exchange reserve HK$’000 (unaudited) (67,851) – (382) (68,223) (63,529) – (1,261) (64,790)	Retained earnings HK$’000 (unaudited) 107,273 (947) – 106,326 102,018 2,580 – 104,598	Total HK$’000 (unaudited) 109,588 (947) (382) 108,259 108,665 2,580 (1,261) 109,974

The accompanying notes form an integral part of the Unaudited Financial Information.

III – 5

FINANCIAL INFORMATION OF LINXIANG QIANGSHENG

APPENDIX III

Unaudited Consolidated Statements of Cash Flows

For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

Cash flow generated from/(used in) operating activities Loss/(profit) before taxation Adjustments for: Bank interest income Net allowance for expected credit losses recognised on trade receivables Net allowance for expected credit losses recognised on other receivables Depreciation of property, plant and equipment Increase in inventories Increase in trade receivables Decrease in prepayment, deposits and other receivables Increase/(decrease) in trade payables Increase/(decrease) in other payables Increase/(decrease) in contract liabilities Cash generated from/(used in) operations Tax paid Net cash generated from/(used in) operating activities Cash flow (used in)/generated from investing activities Bank interest received Increase in amount due from associate Purchases of property, plant and equipment Net cash (used in)/generated from investing activities	For the year ended 31 December 2021 2022 2023 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) 21,592 (3,987) 5,255 (3) (3) (7) 830 620 7,636 (1,040) 9,721 (1,694) 3,078 2,966 2,299 (4,797) (49,490) (8,457) – (4,361) (13,879) 130,950 54,933 3,447 14,090 (13,301) 2,207 (75) (273) 2,830 (5,245) (2,649) 3 159,380 (5,824) (360) – – – 159,380 (5,824) (360) 3 3 7 (1,165) – (300) (23) – (297) (1,185) 7	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 2,580 947 – – – – – – 671 479 (914) (451) (5,281) (2,581) (158) 5,718 1,581 4,819 291 (5,856) – (3) (1,230) 1,178 – – (1,230) 1,178 – – – – – (160) – (160)	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 2,580 947 – – – – – – 671 479 (914) (451) (5,281) (2,581) (158) 5,718 1,581 4,819 291 (5,856) – (3) (1,230) 1,178 – – (1,230) 1,178 – – – – – (160) – (160)
			1,178 –
			1,178
			– – (160)
			(160)

III – 6

FINANCIAL INFORMATION OF LINXIANG QIANGSHENG

APPENDIX III

Cash flow (used in)/generated from financing activities (Decrease)/increase in amount due to related company Net cash (used in)/generated from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents Effect of foreign exchange rate change, net Cash and cash equivalent at end of year/period	For the year ended 31 December 2021 2022 2023 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) (158,894) 6,787 469 (158,894) 6,787 469 189 (222) 116 49 232 24 (6) 14 2 232 24 142	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 1,275 (895) 1,275 (895) 45 123 24 142 – – 69 265	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 1,275 (895) 1,275 (895) 45 123 24 142 – – 69 265
			(895)
			123 142 –
			265

III – 7

FINANCIAL INFORMATION OF LINXIANG QIANGSHENG

APPENDIX III

NOTES TO THE HISTORICAL FINANCIAL INFORMATION

For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

1. GENERAL INFORMATION

臨湘市強盛礦業有限責任公司 (Linxiang Qiangsheng Mining Industry Company Limited*) (‘‘Linxiang Qiangsheng’’) is a company established in the People’s Republic of China. Linxiang Qiangsheng directly owns 51% interest in a non-wholly owned subsidiary. Linxiang Qiangsheng and its non-wholly owned subsidiary (‘‘Linxiang Qiangsheng Group’’) are primarily engaged in the trading of mineral products, including the flotation selection of non-ferrous metals mines and sales of mineral products.

Linxiang Qiangsheng is an indirect wholly-owned subsidiary of China Beidahuang Industry Group Holdings Limited (the ‘‘Company’’), a public company incorporated in the Cayman Islands with its shares listed on the Main Board of The Stock Exchange of Hong Kong Limited.

2. BASIS OF PREPARATION AND PRESENTATION OF THE UNAUDITED FINANCIAL INFORMATION

The unaudited financial information of Linxiang qiangsheng and its subsidiaries for the years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024 (‘‘Unaudited Financial Information’’) has been prepared in accordance with paragraph 14.68(2)(a)(i) of the Listing Rules, and is solely for the purpose of inclusion in this circular to be issued by the Company in connection with the disposal of the entire equity interest in Linxiang Qiangsheng.

The Unaudited Financial Information is presented in Hong Kong dollars (‘‘HK$’’) and all values are rounded to the nearest thousand (HK$’000) except when otherwise indicated. The Unaudited Financial Information are presented in HK$ which is different from the functional currency of Linxiang Qiangsheng, Renminbi (‘‘RMB’’), as the directors of the Company consider that HK$ is the appropriate presentation currency in view of the place of listing of the Company.

III – 8

FINANCIAL INFORMATION OF LINXIANG QIANGSHENG

APPENDIX III

III – 9

FINANCIAL INFORMATION OF LIANYUNGANG HUAJIN HUAHONG

APPENDIX IV

UNAUDITED FINANCIAL INFORMATION OF LIANYUNGANG HUAJIN HUAHONG

Set out below are the unaudited financial information of Lianyungang Huajin Huahong and its subsidiaries which comprises the unaudited consolidated statements of financial position as of 31 December 2021, 2022, 2023 and 31 March 2024 and the related unaudited consolidated statements of profit or loss and other comprehensive income, the unaudited consolidated statements of changes in equity and the unaudited consolidated statements of cash flow for the years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024 (the ‘‘Relevant Periods’’), and certain explanatory notes (together, the ‘‘Unaudited Financial Information’’). The Unaudited Financial Information has been prepared solely for the purpose of inclusion in the circular to be issued by the Company in connection with the disposal of the entire equity interests in Lianyungang Huajin Huahong in accordance with paragraph 14.68(2)(a)(i)(A) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’).

The Unaudited Financial Information is prepared by the Directors solely for the purpose of inclusion in this circular in connection with the disposal of the entire equity interests in Lianyungang Huajin Huahong. HLB Hodgson Impey Cheng Limited was engaged to review the Unaudited Financial Information of Lianyungang Huajin Huahong set out in pages IV-1 to IV-10 in accordance with Hong Kong Standard on Review Engagements 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ and with reference to Practice Note 750 ‘‘Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal’’ issued by the Hong Kong Institute of Certified Public Accountants. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable the auditor to obtain assurance that the auditors would become aware of all significant matters that might be identified in an audit. Accordingly, the auditors do not express an audit opinion.

Without qualifying our conclusion, we draw attention to note 2 to the Unaudited Financial Information of Lianyungang Huajin Huahong, which indicates that Lianyungang Huajin Huahong had defaulted in repayment of its debts including, the construction payables which, including additional penalties thereon, amounted to approximately HK$120,428,000 as at 31 March 2024, in respect of which Lianyungang Huajin Huahong had received a notice from the contractor of the event of default and demand for payment. These conditions indicate the existence of a material uncertainty that may cast significant doubt about Lianyungang Huajin Huahong’s ability to continue as a going concern.

Based on the review of the Unaudited Financial Information of Lianyungang Huajin Huahong, nothing has come to the auditor’s attention that causes them to believe the Unaudited Financial Information of Lianyungang Huajin Huahong is not prepared, in all material respects, in accordance with the basis of preparation and presentation as set out in note 2 to the Unaudited Financial Information of Lianyungang Huajin Huahong.

IV – 1

APPENDIX IV FINANCIAL INFORMATION OF LIANYUNGANG HUAJIN HUAHONG

Unaudited Consolidated Statements of Profit or Loss and Other Comprehensive Income

For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

Revenue Other income, gains or losses Selling and distribution expenses Administrative expenses Profit from operation Net allowance of expected credit losses Finance costs Loss before taxation Taxation Loss for the year/period Other comprehensive (expenses)/income Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations Total comprehensive expenses for the year/period Loss for the year/period attributable to: Owners of the Company Non-controlling interests	For the year ended December 2021 2022 2023 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) – – – 3 19 10 (1,985) (1,983) (709) (33,962) (2,768) (42,209) (35,944) (4,732) (42,908) 18 (45) (33) – (478) (2,275) (35,926) (5,255) (45,216) – – – (35,926) (5,255) (45,216) 3,694 (23,464) (4,207) (32,232) (28,719) (49,423) (35,746) (5,138) (45,216) (180) (117) – (35,926) (5,255) (45,216)	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) – – – – (178) (13) (10,552) (3,360) (10,730) (3,373) – – (570) (566) (11,300) (3,939) – – (11,300) (3,939) (876) (353) (12,176) (4,292) (11,300) (3,939) – – (11,300) (3,939)	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) – – – – (178) (13) (10,552) (3,360) (10,730) (3,373) – – (570) (566) (11,300) (3,939) – – (11,300) (3,939) (876) (353) (12,176) (4,292) (11,300) (3,939) – – (11,300) (3,939)
			(3,373) – (566)
			(3,939) –
			(3,939) (353)
			(4,292)
			(3,939) –
			(3,939)

IV – 2

APPENDIX IV

FINANCIAL INFORMATION OF LIANYUNGANG HUAJIN HUAHONG

Other comprehensive expense for the year/period attributable to: Owner of the Company Non-controlling interests	For the year ended December 2021 2022 2023 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) (32,095) (28,496) (49,401) (137) (223) (22) (32,232) (28,719) (49,423)	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) (12,171) (4,289) (5) (3) (12,176) (4,292)	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) (12,171) (4,289) (5) (3) (12,176) (4,292)
			(4,292)

The accompanying notes form an integral part of the Unaudited Financial Information.

IV – 3

FINANCIAL INFORMATION OF LIANYUNGANG HUAJIN HUAHONG

APPENDIX IV

Unaudited Consolidated Statements of Financial Position

As at 31 December 2021, 2022, 2023 and 31 March 2024

Assets Non-current assets Property, plant and equipment Current assets Properties for sales Prepayment, deposits and other receivables Amounts due from related company Cash and cash equivalents Liabilities Current liabilities Trade and bills payables Other payables and accruals Contract liabilities Bank and other borrowings Amounts due to related company Net current assets Total assets less current liabilities Net assets Share Capital and reserves Share Capital Reserve Non-controlling interests	As 2021 HK$’000 (unaudited) 65 411,934 47,787 17,557 1,754 479,032 (80,549) (21,294) (114,873) – (39,524) (256,240) 222,792 222,857 222,857 173,534 50,391 223,925 (1,068) 222,857	at 31 December 2022 2023 HK$’000 HK$’000 (unaudited) (unaudited) 32 4 383,980 398,388 51,750 14,197 15,995 – 188 142 451,913 412,727 (69,745) (72,000) (26,595) (51,798) (104,700) (102,701) (18,804) (19,550) (37,963) (21,967) (257,807) (268,016) 194,106 144,711 194,138 144,715 194,138 144,715 173,534 173,534 21,895 (27,506) 195,429 146,028 (1,291) (1,313) 194,138 144,715	As at 31 March 2024 HK$’000 (unaudited) 4 387,967 9,173 – 64 397,204 (70,964) (50,164) (99,109) (18,063) (18,485) (256,785) 140,419 140,423 140,423 173,534 (31,795) 141,739 (1,316) 140,423

The accompanying notes form an integral part of the Unaudited Financial Information.

IV – 4

FINANCIAL INFORMATION OF LIANYUNGANG HUAJIN HUAHONG

APPENDIX IV

Unaudited Consolidated Statements of Changes in Equity

For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

At 1 January 2021 Loss for the year Other comprehensive income for the year At 31 December 2021 and 1 January 2022 Loss for the year Other comprehensive expense for the year At 31 December 2022 and 1 January 2023 Loss for the year Other comprehensive expense for the year	Share capital HK$’000 (unaudited) 173,534 – – 173,534 – – 173,534 – –	Exchange reserve HK$’000 (unaudited) (27,807) – 3,651 (24,156) – (23,358) (47,514) – (4,185)	Retained earnings HK$’000 (unaudited) 110,293 (35,746) – 74,547 (5,138) – 69,409 (45,216) –	Sub total HK$’000 (unaudited) 256,020 (35,746) 3,651 223,925 (5,138) (23,358) 195,429 (45,216) (4,185)	Non- controlling interest HK$’000 (unaudited) (931) (180) 43 (1,068) (117) (106) (1,291) – (22)	Total HK$’000 (unaudited) 255,089 (35,926) 3,694
						222,857 (5,255) (23,464)
						194,138 (45,216) (4,207)

IV – 5

APPENDIX IV

FINANCIAL INFORMATION OF LIANYUNGANG HUAJIN HUAHONG

At 31 December 2023 and 1 January 2024 Loss for the period Other comprehensive expense for the period At 31 March 2024 At 31 December 2022 and 1 January 2023 Loss for the period Other comprehensive expense for the period At 31 March 2023	Share capital HK$’000 (unaudited) 173,534 – – 173,534 173,534 – – 173,534	Exchange reserve HK$’000 (unaudited) (51,699) – (350) (52,049) (47,514) – (871) (48,385)	Retained earnings HK$’000 (unaudited) 24,193 (3,939) – 20,254 69,409 (11,300) – 58,109	Sub total HK$’000 (unaudited) 146,028 (3,939) (350) 141,739 195,429 (11,300) (871) 183,258	Non- controlling interest HK$’000 (unaudited) (1,313) – (3) (1,316) (1,291) – (5) (1,296)	Total HK$’000 (unaudited) 144,715 (3,939) (353)
						140,423
						194,138 (11,300) (876)
						181,962

The accompanying notes form an integral part of the Unaudited Financial Information.

IV – 6

FINANCIAL INFORMATION OF LIANYUNGANG HUAJIN HUAHONG

APPENDIX IV

Unaudited Consolidated Statements of Cash Flows

For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

Notes Cash flow generated from/(used in) operating activities Loss before taxation Adjustments for: Bank interest income Depreciation of property, plant and equipment Net allowance for expected credit losses recognised on other receivables Increase/(decrease) in properties for sale (Increase)/decrease in prepayment, deposits and other receivables (Decrease)/increase in trade payables Increase in other payables Increase/(decrease) in contract liabilities Cash generated from/(used in) operations Tax paid Net cash generated from/(used in) operating activities	For the year ended 31 December 2021 2022 2023 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) (35,926) (5,255) (45,216) (2) – – 69 28 28 (18) 45 33 31,297 (8,821) (21,907) (20,811) (8,479) 36,941 (3,217) (17,809) 3,560 20,793 7,436 25,901 23,903 (3,063) (696) 16,088 (35,918) (1,356) – – – 16,088 (35,918) (1,356)	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 10,730 (3,373) – – 7 4 – – (3,651) – 6,157 1,752 890 871 4,317 (2,017) – – (3,010) (2,763) – – (3,010) (2,763)	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 10,730 (3,373) – – 7 4 – – (3,651) – 6,157 1,752 890 871 4,317 (2,017) – – (3,010) (2,763) – – (3,010) (2,763)
			(2,763) –
			(2,763)

IV – 7

APPENDIX IV

FINANCIAL INFORMATION OF LIANYUNGANG HUAJIN HUAHONG

Notes Cash flow generated from investing activities Bank interest received New Bank loans raised Net cash generated from operating activities Cash flow (used in)/generated from financing activities Decrease/(increase) in amount due from/(to) related Company Withdrawal of bank and other borrowing Net cash (used in)/generated from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents Effect of foreign exchange rate change, net Cash and cash equivalent at end of year/period	For the year ended 31 December 2021 2022 2023 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) 2 – – – 16,700 – 2 16,700 – (15,254) 17,546 193 – – 1,114 (15,254) 17,546 1,307 836 (1,672) (49) 976 1,754 188 (58) 106 3 1,754 188 142	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) – – – – – – 2,900 2,685 – – 2,900 2,685 (110) (78) 188 142 – – 78 64	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) – – – – – – 2,900 2,685 – – 2,900 2,685 (110) (78) 188 142 – – 78 64
			–
			2,685 –
			2,685
			(78) 142 –
			64

IV – 8

FINANCIAL INFORMATION OF LIANYUNGANG HUAJIN HUAHONG

APPENDIX IV

NOTES TO THE HISTORICAL FINANCIAL INFORMATION

For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

1. GENERAL INFORMATION

連雲港華金華鴻實業有限公司(Lianyungang Huajin Huahong Industrial Co., Ltd*) (‘‘Lianyungang Huajin Huahong’’) is a company established in the People’s Republic of China (‘‘PRC’’) with limited liability and a direct subsidiary of China Beidahuang Industry Group Holdings Limited (the ‘‘Company’’), a public company incorporated in the Cayman Islands with its shares listed on the Main Board of The Stock Exchange of Hong Kong Limited. Lianyungang Huajin Huahong directly owns interests in three subsidiaries (‘‘Lianyungang Huajin Huahong Group’’). Lianyungang Huajin Huahong Group are primarily engaged in the business of property construction and development business. The properties currently developed by them are located in Lianyungang, Jiangsu province, the PRC.

2. BASIS OF PREPARATION AND PRESENTATION OF THE UNAUDITED FINANCIAL INFORMATION

The unaudited financial information of Lianyungang Huajin Huahong and its subsidiaries for the years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024 (‘‘Unaudited Financial Information’’) has been prepared in accordance with paragraph 14.68(2)(a)(i) of the Listing Rules, and is solely for the purpose of inclusion in this circular to be issued by the Company in connection with the disposal of the entire equity interest in Lianyungang Huajin Huahong.

The Unaudited Financial Information is presented in Hong Kong dollars (‘‘HK$’’) and all values are rounded to the nearest thousand (HK$’000) except when otherwise indicated. The Unaudited Financial Information are presented in HK$ which is different from the functional currency of Lianyungang Huajin Huahong, Renminbi (‘‘RMB’’), as the directors of the Company consider that HK$ is the appropriate presentation currency in view of the place of listing of the Company.

IV – 9

FINANCIAL INFORMATION OF LIANYUNGANG HUAJIN HUAHONG

APPENDIX IV

As of 31 March 2024, Lianyungang Huajin Huahong had defaulted in repayment of its debts including, the construction payables which, including additional penalties thereon, amounted to approximately HK$120,428,000 (the ‘‘Defaulted Construction Payables’’), in respect of which Lianyungang Huajin Huahong had received a notice from the contractor of the event of default and demand for payment.

The directors of the Company have assessed Lianyungang Huajin Huahong’s ability to continue as a going concern and are undertaking measures to improve the Lianyungang Huajin Huahong’s liquidity and financial position and enable Lianyungang Huajin Huahong to meet its liabilities as and when they fall due. These plans for future actions in relation to the going concern assessment, include: (i) on 25 January 2024, the Company and an investor have entered into a conditional restructuring agreement in respect of the conditional subscription by the investor of 850,000,000 subscription shares at the total subscription price of HK$85,000,000, representing a subscription price of HK$0.10 per subscription share; and (ii) a creditors’ scheme (the ‘‘Scheme’’) has been proposed by the Company to its scheme creditors whereby, in consideration for the full and final settlement of their respective admitted claims, the Company will allot and issue the scheme shares to the scheme creditors, or pay cash dividends in the case of those scheme creditors who have validly elected to receive cash in lieu of the scheme shares that they would otherwise be entitled to receive under the Scheme which will involve the disposal of certain subsidiaries at nil or nominal consideration.

The validity of the preparation of the consolidated financial statements on going concern basis depends on the successful eventual outcome of the above mentioned plans and measures, which are inherently uncertain and as at the date of this circular cannot be ascertained with reasonable certainty and are still subject to multiple uncertainties, particularly in respect of whether the Scheme and the Proposed Restructuring will eventually be successfully completed.

Should the Group fail to achieve successful outcomes from the above-mentioned plans and measures, it might not be able to continue to operate as a going concern, and adjustments would have to be made to write down the carrying amounts of the Group’s assets to their net recoverable amounts, to provide for any further liabilities that may arise and to reclassify non-current assets and non-current liabilities as current assets and current liabilities respectively. The effects of these adjustments have not been reflected in the consolidated financial statements.

IV – 10

FINANCIAL INFORMATION OF SHENZHEN MEIMING WENSHI

APPENDIX V

UNAUDITED FINANCIAL INFORMATION OF SHENZHEN MEIMING WENSHI

Set out below are the unaudited financial information of Shenzhen Meiming Wenshi and its subsidiaries which comprises the unaudited consolidated statements of financial position as of 31 December 2021, 2022, 2023 and 31 March 2024 and the related unaudited consolidated statements of profit or loss and other comprehensive income, the unaudited consolidated statements of changes in equity and the unaudited consolidated statements of cash flow for the years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024 (the ‘‘Relevant Periods’’), and certain explanatory notes (together, the ‘‘Unaudited Financial Information’’). The Unaudited Financial Information has been prepared solely for the purpose of inclusion in the circular to be issued by the Company in connection with the disposal of the entire equity interests in Shenzhen Meiming Wenshi in accordance with paragraph 14.68(2)(a)(i)(A) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’).

The Unaudited Financial Information is prepared by the Directors solely for the purpose of inclusion in this circular in connection with the disposal of the entire equity interests in Shenzhen Meiming Wenshi. HLB Hodgson Impey Cheng Limited was engaged to review the Unaudited Financial Information of Shenzhen Meiming Wenshi set out in pages V-1 to V-10 in accordance with Hong Kong Standard on Review Engagements 2410 ‘‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’’ and with reference to Practice Note 750 ‘‘Review of Financial Information under the Hong Kong Listing Rules for a Very Substantial Disposal’’ issued by the Hong Kong Institute of Certified Public Accountants. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable the auditor to obtain assurance that the auditors would become aware of all significant matters that might be identified in an audit. Accordingly, the auditors do not express an audit opinion.

Without qualifying our conclusion, we draw attention to note 2 to the Unaudited Financial Information of Shenzhen Meiming Wenshi, which indicates that Shenzhen Meiming Wenshi had net liabilities of HK$79,272,000 as at 31 March 2024. These conditions indicate the existence of a material uncertainty that may cast significant doubt about Shenzhen Meiming Wenshi’s ability to continue as a going concern.

Based on the review of the Unaudited Financial Information of Shenzhen Meiming Wenshi, nothing has come to the auditor’s attention that causes them to believe the Unaudited Financial Information of Shenzhen Meiming Wenshi is not prepared, in all material respects, in accordance with the basis of preparation and presentation as set out in note 2 to the Unaudited Financial Information of Shenzhen Meiming Wenshi.

V – 1

APPENDIX V FINANCIAL INFORMATION OF SHENZHEN MEIMING WENSHI

Unaudited Consolidated Statements of Profit or Loss and Other Comprehensive Income For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

Revenue Cost of sales Gross profit Other income, gains or losses Selling and distribution expenses Administrative expenses Profit/(loss) from operation Net allowance of expected credit losses Finance costs Share of loss of associates Profit/(loss) before taxation Taxation Profit/(loss) for the year/period Other comprehensive income/(expenses) Items that may be reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations Total comprehensive income/(expenses) for the year/period	For the year ended 31 December 2021 2022 2023 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) 253,946 342,611 322,240 (252,235) (339,160) (311,718) 1,711 3,451 10,522 5,008 3,536 1,367 (13) (8) (4,302) (4,448) (5,779) (11,971) 2,258 1,200 (4,384) 28,412 (20,738) 8,568 (3,901) (9,490) (3,121) (196) (17,426) (4,875) 26,573 (46,454) (3,812) (562) 484 134 26,011 (45,970) (3,678) 2,396 (16,053) (6,095) 28,407 (62,023) (9,773)	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 80,561 37,892 (77,930) (36,647) 2,631 1,245 330 443 (876) (454) (2,092) (1,016) (7) 218 – – (521) (401) – – (528) (183) – – (528) (183) (1,523) (1,737) (2,051) (1,920)	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 80,561 37,892 (77,930) (36,647) 2,631 1,245 330 443 (876) (454) (2,092) (1,016) (7) 218 – – (521) (401) – – (528) (183) – – (528) (183) (1,523) (1,737) (2,051) (1,920)
			1,245 443 (454) (1,016)
			218 – (401) –
			(183) –
			(183) (1,737)
			(1,920)

V – 2

APPENDIX V

FINANCIAL INFORMATION OF SHENZHEN MEIMING WENSHI

Profit/(loss) for the year/period attribute to: Owners of the Company Non-controlling interests Other comprehensive income/(expensive) for the year/period attributable to: Owners of the Company Non-controlling interests	For the year ended 31 December 2021 2022 2023 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) 27,099 (46,389) (3,000) (1,088) 419 (678) 26,011 (45,970) (3,678) 29,278 (62,027) (8,858) (871) 4 (915) 28,407 (62,023) (9,773)	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) (528) (149) – (34) (528) (183) (2,012) (1,818) (39) (102) (2,051) (1,920)	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) (528) (149) – (34) (528) (183) (2,012) (1,818) (39) (102) (2,051) (1,920)
			(183)
			(1,818) (102)
			(1,920)

The accompanying notes form an integral part of the Unaudited Financial Information.

V – 3

FINANCIAL INFORMATION OF SHENZHEN MEIMING WENSHI

APPENDIX V

Unaudited Consolidated Statements of Financial Position

As at 31 December 2021, 2022, 2023 and 31 March 2024

Assets Non-current assets Property, plant and equipment Investment properties Right-of-use assets Goodwill Investments in associate Current assets Inventories Trade receivables Prepayment, deposits and other receivables Amount due from related company Cash and cash equivalents	As 2021 HK$’000 (unaudited) 567 121,494 1,690 3,280 163,830 290,861 25,380 42,005 137,349 31,743 3,900 240,377	at 31 December 2022 2023 HK$’000 HK$’000 (unaudited) (unaudited) 269 7 108,831 106,276 – – 2,990 2,932 143,567 109,020 255,657 218,235 60,127 70,720 40,235 34,504 105,861 104,941 24,986 – 2,866 1,043 234,075 211,208	As at 31 March 2024 HK$’000 (unaudited) – 106,112 – 2,902 107,117
			216,131
			68,160 32,073 105,692 – 352
			206,277

V – 4

APPENDIX V

FINANCIAL INFORMATION OF SHENZHEN MEIMING WENSHI

Liabilities Current liabilities Trade and bills payables Other payables and accruals Contract liabilities Bank and other borrowings Amounts due to related company Tax payables Lease liabilities Net current liabilities Total assets less current liabilities Non-current liabilities Deferred tax liabilities Net liabilities Share Capital and reserves Share Capital Reserve Non-controlling interests	As 2021 HK$’000 (unaudited) (37,718) (622) (39,463) (91,378) (352,023) (288) (1,526) (523,018) (282,641) 8,220 (13,776) (5,556) 11,201 1,343 12,544 (18,100) (5,556)	at 31 December 2022 2023 HK$’000 HK$’000 (unaudited) (unaudited) (76,450) (69,256) (458) (3,224) – (7,869) (20,944) (29,586) (447,069) (384,988) (287) – – – (545,208) (494,923) (311,133) (283,715) (55,476) (65,480) (12,103) (11,872) (67,579) (77,352) 11,201 11,201 (60,684) (69,542) (49,483) (58,341) (18,096) (19,011) (67,579) (77,352)	As at 31 March 2024 HK$’000 (unaudited) (68,173) (4,177) (5,860) (50,122) (361,495) – – (489,827) (283,550) (67,419) (11,853) (79,272) 11,201 (71,360) (60,159) (19,113) (79,272)

The accompanying notes form an integral part of the Unaudited Financial Information.

V – 5

FINANCIAL INFORMATION OF SHENZHEN MEIMING WENSHI

APPENDIX V

Unaudited Consolidated Statements of Changes in Equity

For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

At 1 January 2021 Profit for the year Other comprehensive income for the year At 31 December 2021 and 1 January 2022 Loss for the year Other comprehensive expense for the year At 31 December 2022 and 1 January 2023 Loss for the year Other comprehensive expense for the year At 31 December 2023 and 1 January 2024 Loss for the period Other comprehensive expense for the period At 31 December 2022 and 1 January 2023 Loss for the period Other comprehensive expense for the period	Share capital HK$’000 (unaudited) 11,201 – – 11,201 – – 11,201 – – 11,201 – – 11,201 11,201 – – 11,201	Share premium HK$’000 (unaudited) 256,860 – – 256,860 – – 256,860 – – 256,860 – – 256,860 256,860 – – 256,860	Capital reserve HK$’000 (unaudited) 12,896 – – 12,896 – – 12,896 – – 12,896 – – 12,896 12,896 – – 12,896	Exchange reserve HK$’000 (unaudited) (58,716) – 2,179 (56,537) – (15,638) (72,175) – (5,858) (78,033) – (1,669) (79,702) (72,175) – (1,484) (73,659)	Accumulated Losses HK$’000 (unaudited) (238,975) 27,099 – (211,876) (46,389) – (258,265) (3,000) – (261,265) (149) – (261,414) (258,265) (528) – (258,793)	Sub Total HK$’000 (unaudited) (16,734) 27,049 2,179 12,544 (46,389) (15,638) (49,483) (3,000) (5,858) (58,341) (149) (1,669) (60,159) (49,483) (528) (1,484) (51,495)	Non- controlling Interest HK$’000 (unaudited) (17,229) (1,088) 217 (18,100) 49 (415) (18,096) (678) (237) (19,011) (34) (68) (19,113) (18,096) – (39) (18,135)	Total HK$’000 (unaudited) (33,963) 26,011 2,396
								(5,556) (45,970) (16,053)
								(67,579) (3,678) (6,095)
								(77,352) (183) (1,737)
								(79,272)
								(67,579) (528) (1,523)
								(69,630)

The accompanying notes form an integral part of the Unaudited Financial Information.

V – 6

FINANCIAL INFORMATION OF SHENZHEN MEIMING WENSHI

APPENDIX V

Unaudited Consolidated Statements of Cash Flows

For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

Cash flow generated from/(used in) operating activities Loss before taxation Adjustments for: Finance costs Share of loss of associates Net allowance of expected credit losses recognised on other receivables Net allowance of expected credit losses recognised on trade receivables Net allowance of expected credit losses recognised on advance to associates Depreciation of property, plant and equipment Depreciation of right-of-use assets Increase in inventories Increase/(decrease)in trade receivables Decrease/(increase) in prepayment, deposits and other receivables Increase/(decrease) in trade payables Increase/(decrease) in other payables Increase/(decrease) in contract liabilities Unrealised fair value loss/(gain) on investment properties Cash generated from/(used in) operations Tax paid Net cash generated from/(used in) operating activities	For the year ended 31 December 2021 2022 2023 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) (26,573) (46,454) (3,812) 3,103 9,490 3,557 196 17,426 4,875 (38,862) 1,855 (8,412) 7,165 (128) 218 3,285 19,011 (374) 273 256 259 1,700 1,594 – (230) (38,279) (11,831) 4,863 3,542 (11,414) 72,896 19,996 13,897 (5,955) 43,533 1,275 7,000 (16,474) 12,016 (2,631) (37,217) 7,931 (2,248) 1,970 481 23,982 (19,879) 8,666 (6) – (286) 23,976 (19,879) 8,380	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) (528) (183) 521 401 – – – – – – – – 67 71 – – (914) (451) (528) (281) (158) 718 1,681 4,819 191 (856) 1,061 (747) – – 1,393 3,491 – – 1,393 3,491	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) (528) (183) 521 401 – – – – – – – – 67 71 – – (914) (451) (528) (281) (158) 718 1,681 4,819 191 (856) 1,061 (747) – – 1,393 3,491 – – 1,393 3,491
			3,491 –
			3,491

V – 7

APPENDIX V

FINANCIAL INFORMATION OF SHENZHEN MEIMING WENSHI

Cash flow (used in)/generated from financing activities New bank and other borrowing Repayment of bank and other borrowing Repayment of lease liabilities Increase/(decrease) in amount due to related company Interest paid Net cash (used in)/generated from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents Effect of foreign exchange rate change, net Cash and cash equivalent at end of year/period	For the year ended 31 December 2021 2022 2023 HK$’000 HK$’000 HK$’000 (unaudited) (unaudited) (unaudited) 79,085 21,671 24,876 (68,339) (76,314) (20,701) (1,688) (1,655) – (29,429) 77,772 (12,035) – (2,951) (2,384) (20,371) 18,523 (10,244) 3,605 (1,356) (1,864) 391 3,900 2,866 (96) 322 41 3,900 2,866 1,043	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 24,876 40,122 (20,701) (29,586) – – (6,320) (14,317) (521) (401) (2,666) (4,182) (1,273) (691) 2,866 1,043 – – 1,593 352	For the three months ended 31 March 2023 2024 HK$’000 HK$’000 (unaudited) (unaudited) 24,876 40,122 (20,701) (29,586) – – (6,320) (14,317) (521) (401) (2,666) (4,182) (1,273) (691) 2,866 1,043 – – 1,593 352
			(4,182)
			(691) 1,043 –
			352

V – 8

FINANCIAL INFORMATION OF SHENZHEN MEIMING WENSHI

APPENDIX V

NOTES TO THE HISTORICAL FINANCIAL INFORMATION

For the three years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024

1. GENERAL INFORMATION

深圳市美名問世商貿有限公司 (Shenzhen Meiming Wenshi Trading Company Limited*) (‘‘Shenzhen Meiming Wenshi’’), a company established in the People’s Republic of China (‘‘PRC’’) with limited liability and an indirectly wholly-owned subsidiary of China Beidahuang Industry Group Holdings Limited (the ‘‘Company’’), a public company incorporated in the Cayman Islands with its shares listed on the Main Board of The Stock Exchange of Hong Kong Limited. Shenzhen Meiming Wenshi currently directly and indirectly owns interests in 24 subsidiaries, two associated companies and other financial assets. Shenzhen Meiming Wenshi and its subsidiaries are primarily engaged in the sale and distribution of wine and liquor and food trading in the PRC.

2. BASIS OF PREPARATION AND PRESENTATION OF THE UNAUDITED FINANCIAL INFORMATION

The unaudited financial information of Shenzhen Meiming Wenshi and its subsidiaries for the years ended 31 December 2021, 2022, 2023 and the three months ended 31 March 2023 and 2024 (‘‘Unaudited Financial Information’’) has been prepared in accordance with paragraph 14.68(2)(a)(i) of the Listing Rules, and is solely for the purpose of inclusion in this circular to be issued by the Company in connection with the disposal of the entire equity interest in Shenzhen Meiming Wenshi.

The Unaudited Financial Information is presented in Hong Kong dollars (‘‘HK$’’) and all values are rounded to the nearest thousand (HK$’000) except when otherwise indicated. The Unaudited Financial Information are presented in HK$ which is different from the functional currency of Shenzhen Meiming Wenshi, Renminbi (‘‘RMB’’), as the directors of the Company consider that HK$ is the appropriate presentation currency in view of the place of listing of the Company.

V – 9

FINANCIAL INFORMATION OF SHENZHEN MEIMING WENSHI

APPENDIX V

As of 31 March 2024, Shenzhen Meiming Wenshi had net liabilities of HK$79,272,000. The directors of the Company are of the opinion that Shenzhen Meiming Wenshi will be able to continue its operation for at least the next twelve months from 31 December 2023, as Shenzhen Meiming Wenshi is expected to generate positive operating cash flows to cover its obligations for the next twelve months, and therefore it is appropriate for the Unaudited Financial Information to be prepared on a going concern basis.

V – 10

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

APPENDIX VI

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

Introduction

Capitalised terms used in this Appendix VI shall have the same meanings as those defined in this circular.

The following is the illustrative unaudited pro forma financial information of the Group upon completion of disposal of entire equity interest in Shenzhen Qianhai Dahuangyuan, Linxiang Qiangsheng, Lianyungang Huajin Huahong and Shenzhen Meiming Wenshi (thereinafter referred as the ‘‘Retained Group’’), which comprises the unaudited pro forma consolidated statement of financial position of the Retained Group as at 31 December 2023 and the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and the unaudited pro forma consolidated statement of cash flows of the Retained Group for the year ended 31 December 2023 and related notes (the ‘‘Unaudited Pro Forma Financial Information’’). The Unaudited Pro Forma Financial Information has been prepared by the Directors in accordance with paragraph 4.29 of 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 (‘‘HKICPA’’), for the purpose of illustrating the effect of the proposed restructuring involving (1) connected transaction in relation to the Subscription under Specific Mandate, (2) Creditors’ Scheme, (3) issue of Scheme Shares under Specific Mandate and (4) connected transaction and very substantial disposal in relation to the Disposal.

The Unaudited Pro Forma Financial Information presented below is prepared to illustrate (i) the consolidated financial position of the Retained Group as at 31 December 2023 as if the proposed restructuring had been completed on 31 December 2023; and (ii) the results and cash flows of the Retained Group for the year ended 31 December 2023 as if the proposed restructuring had been completed on 1 January 2023. The Unaudited Pro Forma Financial Information is prepared based on the audited consolidated financial statements of the Group set out in the published annual report of the Group for the year ended 31 December 2023, after giving effect to the pro forma adjustments described in the notes that are directly attributable to the proposed restructuring and factually supportable.

The Unaudited Pro Forma Financial Information should be read in conjunction with the historical financial information of the Group as set out in the published annual report of the Group for the year ended 31 December 2023, and other financial information included elsewhere in the circular.

VI – 1

APPENDIX VI

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

Accordingly, the financial position, profit or loss and other comprehensive income, and cash flows of the Retained Group as shown in the Unaudited Pro Forma Financial Information are for illustrative purposes only, based on their judgments and a number of assumptions, estimates, uncertainties and currently available information. Because of its hypothetical nature, the unaudited pro forma financial information may not give a true picture of the financial position of the Retained Group would have been if the Disposal has been completed on 31 December 2023 or at any future date, or the financial performance and cash flows of the Retained Group for the year ended 31 December 2023 or for any future period would have been if the Disposal had been completed on 1 January 2023. Also, the carrying amounts of the identifiable net assets of Scheme Subsidiaries as at the date of completion of the Disposal may be materially different from their respective values used in the preparation of the Unaudited Pro Forma Financial Information.

VI – 2

APPENDIX VI

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

Unaudited Pro Forma Consolidated Statement of Financial Position of The Retained Group as at 31 December 2023

NON-CURRENT ASSETS Property, plant and equipment Investment properties Right-of-use assets Goodwill Other intangible assets Interests in associates CURRENT ASSETS Inventories Properties for sale Trade receivables Loan receivables Amount due from the Group Prepayments, deposits and other receivables Cash and cash equivalents CURRENT LIABILITIES Trade and bills payables Other payables and accruals Contract liabilities Bank and other borrowings Amounts due to related parties Amounts due to Group Tax payable Lease liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Deferred tax liabilities Lease liabilities Total non-current liabilities Net assets	Audited consolidated statement of financial position the Group as at 31 December 2023 Unaudited pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 1 Note 2a Note 3a Note 4a Note 5a Note 6 Note 7 36,756 (52) (7,043) (4) (7) 403,448 (2,342) (106,276) 65,051 3,605 (673) (2,932) – 169,772 (49,418) (1,105) (109,020) 678,632 163,782 (87,272) (70,720) 398,388 (398,388) 126,787 (81,364) (34,504) 194,597 (194,597) (88,539) – 88,539 287,050 (172) (82,220) (14,197) (104,941) 12,996 (4) (142) (142) (1,043) 20,000 1,183,600 146,821 (5,505) (72,000) (69,256) 406,318 (2,083) (3,902) (51,798) (3,224) (259,724) 110,573 (3) (102,701) (7,869) 441,653 (19,550) (29,586) (354,764) 3,900 (139,227) (140,821) (21,967) (384,988) 687,003 5,953 – 32,408 1,147,626 35,974 714,606 24,073 (320) (11,872) 79,296 103,369 611,237	Unaudited pro forma consolidated statement of financial position of the Retained Group for the year ended 31 December 2023 HK$’000 29,650 294,830 65,051 – – 10,229
		399,760 5,790 – 10,919 – – 85,520 31,665
		126,895 60 85,587 – 37,753 3,900 – 5,953 32,408
		158,661 (31,766) 367,994 11,881 79,296
		91,177 276,817

VI – 3

APPENDIX VI

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

EQUITY Equity attributable to owners of the Company Share capital Reserves Non-controlling interests Total equity	Audited consolidated statement of financial position the Group as at 31 December 2023 Unaudited pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 1 Note 2a Note 3a Note 4a Note 5a Note 6 Note 7 633,231 85,000 (13,220) (193,494) (109,588) (146,028) 58,341 (65,000) 16,025 620,011 (8,774) 1,313 19,011 611,237	Unaudited pro forma consolidated statement of financial position of the Retained Group for the year ended 31 December 2023 HK$’000 718,231 (452,964)
		265,267 11,550
		276,817

VI – 4

APPENDIX VI

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

Unaudited Pro Forma Consolidated Statement of Profit or Loss and Other Comprehensive Income of the Retained Group for the year ended 31 December 2023

Revenue Cost of sales Gross profit Other income, gains or losses Selling and distribution expenses Administrative expenses Profit from operation Net allowance of expected credit loss Other operating expense Finance costs Share of loss of associates Gain on disposal of subsidiaries Loss before taxation Taxation (LOSS) FOR THE YEAR Other comprehensive expense Item that may reclassified subsequently to profit or loss: Exchange differences arising on translation of foreign operations and associates Total comprehensive expense for the year	Audited consolidated statement of profit or loss of the Group for the year ended 31 December 2023 Unaudited pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 1 Note 2b Note 3b Note 4b Note 5b Note 7 Note 8 Note 8 844,999 (12,744) (290,286) (322,240) (736,708) 265,304 311,718 108,291 2,422 857 (1) (10) (1,367) (18,015) 1,211 3,760 709 4,302 (114,125) 7,464 10,026 42,209 11,971 (21,427) (414) 2,985 5,942 33 (8,568) – (100,553) 2,275 3,121 79,201 (22,468) 4,875 – (224,101) (144,862) (726) (143) (134) (145,588) (28,809) 4,172 4,322 4,207 6,095 (174,397)	Unaudited pro forma Consolidated statement of profit or loss of the Retained Group for the year ended 31 December 2023 HK$’000 219,729 (159,686)
		60,043 1,901 (8,033) (42,455)
		11,456 (22) – (15,956) (17,593) (224,101)
		(246,216) (1,003)
		(247,219) (10,013)
		257,232

VI – 5

APPENDIX VI

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

Unaudited Pro Forma Consolidated Statement of Cash Flows of the Retained Group for the year ended 31 December 2023

Loss before taxation Adjustments for: Finance costs Share of loss of associates Bank interest income Interest income Net allowance for expected credit losses recognised for trade receivables Net allowance for expected credit losses (reversal)/ recognised for other receivables Net allowance for expected credit losses recognised/ (reversal) for loan receivables Net allowance for expected credit losses (reversal)/ recognised for advances to associates Impairment loss on right-of-use assets Impairment loss on property, plant and equipment Gain on disposal of subsidiaries Depreciation of property, plant and equipment Depreciation of right-of-use assets Loss on Disposal Subsidiaries Unrealised fair value loss on investment properties Increase in properties for sale Increase in inventories Decrease/(increase) in trade receivables Decrease in prepayments, deposits and other receivables (Increase)/decrease in loan receivables Increase in trade payables Increase/(decrease) in bills payable Increase in other payables and accruals Decrease in contract liabilities Cash generated from operations Tax paid Net cash generated from operating activities	Audited consolidated statement of cashflow the Group for the year ended 31 December 2023 Unaudited pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 1 Note 2b Note 3b Note 4b Note 5b Note 6 Note 10 (144,862) (227) (5,255) 45,216 3,812 (224,101) 100,553 (3,557) 22,468 (4,875) (52) 7 (560) 7,876 (7,636) (218) (10,073) 1,694 8,412 3,365 (3,365) (33) (754) 380 374 – – – 13,897 (128) (2,299) (28) (259) 31,380 227,827 1,121 (979) (481) 24,359 (21,907) 21,907 (17,416) 8,457 11,831 15,551 13,879 11,414 18,279 (79) (3,447) (36,941) (13,897) (2,403) 2,403 984 (2,207) (3,560) (1,275) 26,350 33,947 (1,328) (2,830) (25,901) (12,016) (19,878) (3) 696 (7,931) 57,866 (56) 286 57,810	Unaudited pro forma consolidated statement of cashflow of the Retained Group for the year ended 31 December 2023 HK$’000 (325,417) 96,996 17,593 (45) (560) 22 – – – – – – 11,183 31,380 227,827 (339)
		58,640 – 2,872 40,844 (36,085) – (6,058) 26,350 (8,128) (27,116)
		51,319 230
		51,549

VI – 6

APPENDIX VI

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

CASH FLOWS USED IN INVESTING ACTIVITIES Bank interest received Purchases of property, plant and equipment Net cash from issue share Net cash outflow from disposal of subsidiaries Net cash flows used in investing activities CASH FLOWS USED IN FINANCING ACTIVITIES New bank and other borrowings Dividends paid to non-controlling interests Repayment of bank and other borrowings Repayment of lease liabilities Increase/(decrease) in amounts due to related parties Interest paid Net cash flows used in financing activities NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes, net CASH AND CASH EQUIVALENTS AT END OF YEAR	Audited consolidated statement of cashflow the Group for the year ended 31 December 2023 Unaudited pro forma adjustments HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 1 Note 2b Note 3b Note 4b Note 5b Note 6 Note 10 52 (7) (6,863) 20,000 – (3,100) (6,811) 27,857 (24,876) – (23,753) (1,114) 20,701 (47,426) 3,209 3,341 (469) (193) 12,035 (7,509) 2,384 (47,622) 3,377 14,880 (5,261) (2) (188) (41) 12,996	Unaudited pro forma consolidated statement of cashflow of the Retained Group for the year ended 31 December 2023 HK$’000 45 (6,863) 20,000 (3,100)
		10,082 2,981 – (4,166) (47,426) 17,923 (5,125)
		(35,813) 25,818 14,880 (5,492)
		35,206

VI – 7

APPENDIX VI

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

Notes to the Unaudited Pro Forma Financial Information of the Retained Group

The amounts are extracted from the audited consolidated statement financial positions, audited consolidated statement of profit or loss and other comprehensive income and the audited consolidated statement of cash flows of the Group for the year ended 31 December 2023 as set out in the published annual report of the Group dated 28 March 2024.
(a) The adjustments represent the de-recognition of assets, liabilities and total equity of Shenzhen Qianhai Dahuangyuan as at 31 December 2023, assuming the disposal of Shenzhen Qianhai Dahuangyuan had taken place on 31 December 2023. The assets, liabilities and total equity of Shenzhen Qianhai Dahuangyuan are extracted from the unaudited statement of financial position of Shenzhen Qianhai Dahuangyuan as at 31 December 2023 as set out in Appendix II to this circular.
(b) The adjustments represent the exclusion of the results and cash flows of Shenzhen Qianhai Dahuangyuan for the year ended 31 December 2023, assuming the Disposal had been taken place on 1 January 2023. The results and cash flows of Shenzhen Qianhai Dahuangyuan for the year ended 31 December 2023 are extracted from the unaudited statement of profit or loss and other comprehensive income of Shenzhen Qianhai Dahuangyuan and the unaudited statement of cash flows of the Shenzhen Qianhai Dahuangyuan set out in Appendix II to this circular.
(a) The adjustments represent the de-recognition of assets, liabilities and total equity of Linxiang Qiangsheng as at 31 December 2023, assuming the disposal of Linxiang Qiangsheng had taken place on 31 December 2023. The assets, liabilities and total equity of Linxiang Qiangsheng are extracted from the unaudited statement of financial position of Linxiang Qiangsheng as at 31 December 2023 as set out in Appendix III to this circular.
(b) The adjustments represent the exclusion of the results and cash flows of Linxiang Qiangsheng for the year ended 31 December 2023, assuming the Disposal had been taken place on 1 January 2023. The results and cash flows of Linxiang Qiangsheng for the year ended 31 December 2023 are extracted from the unaudited statement of profit or loss and other comprehensive income of Linxiang Qiangsheng and the unaudited statement of cash flows of the Linxiang Qiangsheng set out in Appendix III to this circular.

VI – 8

APPENDIX VI

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

(a) The adjustments represent the de-recognition of assets, liabilities and total equity of Lianyungang Huajin Huahong as at 31 December 2023, assuming the disposal of Lianyungang Huajin Huahong had taken place on 31 December 2023. The assets, liabilities and total equity of Lianyungang Huajin Huahong are extracted from the unaudited statement of financial position of Lianyungang Huajin Huahong as at 31 December 2023 as set out in Appendix IV to this circular.
(b) The adjustments represent the exclusion of the results and cash flows of Lianyungang Huajin Huahong for the year ended 31 December 2023, assuming the Disposal had been taken place on 1 January 2023. The results and cash flows of Lianyungang Huajin Huahong for the year ended 31 December 2023 are extracted from the unaudited statement of profit or loss and other comprehensive income of Lianyungang Huajin Huahong and the unaudited statement of cash flows of the Lianyungang Huajin Huahong set out in Appendix IV to this circular.
(a) The adjustments represent the de-recognition of assets, liabilities and total equity of Shenzhen Meiming Wenshi as at 31 December 2023, assuming the disposal of Shenzhen Meiming Wenshi had taken place on 31 December 2023. The assets, liabilities and total equity of Shenzhen Meiming Wenshi are extracted from the unaudited statement of financial position of Shenzhen Meiming Wenshi as at 31 December 2023 as set out in Appendix V to this circular.
(b) The adjustments represent the exclusion of the results and cash flows of Shenzhen Meiming Wenshi for the year ended 31 December 2023, assuming the Disposal had been taken place on 1 January 2023. The results and cash flows of Shenzhen Meiming Wenshi for the year ended 31 December 2023 are extracted from the unaudited statement of profit or loss and other comprehensive income of Shenzhen Meiming Wenshi and the unaudited statement of cash flows of the Shenzhen Meiming Wenshi set out in Appendix V to this circular.
As mentioned in the section headed ‘‘LETTER FROM THE BOARD’’, approximately HK$20,000,000 of Total Subscription Price shall be used as general working capital of the Company.

VI – 9

APPENDIX VI

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

The adjustments represent the estimated net loss charged to profit or loss and the net cash outflows arising on the Disposal, assuming the Disposal had been taken place on 31 December 2023 and is calculated as follows:

Notes
Nominal consideration
(i)
Consideration in relation to net amounts
due to the Retained Group
(ii)
Less:
– Carrying amount of assets and liabilities of
Shenzhen Qianhai Dahuangyuan
2
– Carrying amount of assets and liabilities of
Linxiang Qiangsheng
3
– Carrying amount of assets and liabilities of
Lianyungang Huajin Huahong
4
– Carrying amount of assets and liabilities of
Shenzhen Meiming Wenshi
5
Total
Release of translation reserve upon disposal of
Shenzhen Qianhai Dahuangyuan
(iii)
Release of translation reserve upon disposal of
Linxiang Qiangsheng
(iv)
Release of translation reserve upon disposal of
Lianyungang Huajin Huahong
(v)
Release of translation reserve upon disposal of
Shenzhen Meiming Wenshi
(vi)
Release of non-controlling interest upon disposal of
Lianyungang Huajin Huahong
(v)
Release of non-controlling interest upon disposal of
Shenzhen Meiming Wenshi
Total
Offset against the Loan for Restructuring:
Total liabilities as at 31 December 2023
(vii)
First distribution
(viii)
Capitalisation of existing debts
(ix)
Total
Total expenses related to Restructuring Costs
(x)
Loss on Scheme Subsidiaries

HK$’000
–
(598,464)
(598,464)
(193,494)
(109,588)
(144,715)
77,352
(968,909)
15,215
67,851
51,699
78,017
1,313
19,011
(735,803)
614,488
(45,000)
(37,787)
(204,102)
(20,000)
(224,102)

VI – 10

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

APPENDIX VI

Notes:

(i) As part of the terms of the Creditors’ Scheme, the Scheme Subsidiaries will be transferred to the Scheme Company by the Group. It is expected that the Scheme Subsidiaries will be transferred to the Scheme Company at nil or nominal consideration.
(ii) The amount represents the aggregate amount of related party balances between (a) Shenzhen Qianhai Dahuangyuan, Linxiang Qiangsheng, Lianyungang Huajin Huahong, and Shenzhen Meiming Wenshi on the one hand, and (b) the Retained Group on the other, which have been eliminated in the consolidated financial statements of the Group as at 1 January 2023, and would become receivable by the Retained Group as a consequence of the Disposal if the Disposal had taken place on 1 January 2023.

Amount due to the Retained Group Amount due from the Retained Group Net amounts due to/(from) the Retained Group	Shenzhen Qianhai Dahuangyuan 88,539 (139,227) (50,688)	Linxiang Qiangsheng – (140,821) (140,821)	Lianyungang Huajin Huahong – (21,967) (21,967)	Shenzhen Meiming Wenshi – (384,988) (384,988)	Total 88,539 (687,003)
					(598,464)

The amounts are extracted from the unaudited statements of financial position of Shenzhen Qianhai Dahuangyuan, Linxiang Qiangsheng, Lianyungang Huajin Huahong and Shenzhen Meiming Wenshi as at 31 December 2023 as set out in Appendix II, Appendix III, Appendix IV and Appendix V to this circular respectively.
(iii) The amount is extracted from the unaudited statement of changes in equity of Shenzhen Qianhai Dahuangyuan as at 31 December 2023 as set out in Appendix II to this circular, assuming the disposal of Shenzhen Qianhai Dahuangyuan had taken place on 31 December 2023.
(iv) The amount is extracted from the unaudited statement of changes in equity of Linxiang Qiangsheng as at 31 December 2023 as set out in Appendix III to this circular, assuming the disposal of Linxiang Qiangsheng had taken place on 31 December 2023.
(v) The amount is extracted from the unaudited statement of changes in equity of Lianyungang Huajin Huahong as at 31 December 2023 as set out in Appendix IV to this circular, assuming the disposal of Lianyungang Huajin Huahong had taken place on 31 December 2023.
(vi) The amount is extracted from the unaudited statement of changes in equity of Shenzhen Meiming Wenshi as at 31 December 2023 as set out in Appendix III to this circular, assuming the disposal of Shenzhen Meiming Wenshi had taken place on 31 December 2023.
(vii) As mentioned in the section headed ‘‘LETTER FROM THE BOARD’’, included in the Creditors’ Scheme of which approximately HK$614,488,000 is owned to external parties which are not subsidiaries of the Group.

VI – 11

APPENDIX VI

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

(viii) As mentioned in the section headed ‘‘LETTER FROM THE BOARD’’, under the Restructuring Agreement, approximately HK$45,000,000 shall be paid to the Scheme Company and used, subject to the payment of any Preferential Claims and the Scheme Costs, for the benefit of the Scheme Creditors pursuant to the Creditors’ Scheme.
(ix) As mentioned in the section headed ‘‘LETTER FROM THE BOARD’’, under the Scheme Share Issue, 377,879,793 Shares, representing approximately 5.00% of the Enlarged Issued Share Capital, would be capitalised from the Company’s existing debts owed to the Scheme Creditors (in the approximate amount of HK$37,787,979.30) at HK$0.10 per Share, which is equal to the Subscription Price.
(x) An amount of up to HK$20,000,000 being the professional fees incurred or to be incurred by the Company in connection with Proposed Restructuring.
The adjustment represents the gain on extinguishment of defaulted in repayments of its debts, assuming the Disposal and Creditors’ Scheme had been taken place on 1 January 2023. It is difference between the carrying amount of Scheme Creditors of approximately HK$359,414,000 as at 1 January 2023 extinguished and recognition of outstanding amount and interest accrued on Scheme Creditors of approximately HK$79,201,000 for the year ended 31 December 2023.
The adjustment represents reclassification of exchange differences of translating foreign operations at consolidation.
The adjustment represents the net cash flow from disposal of Scheme Subsidiaries, assuming the disposal had been taken place on 1 January 2023.
Apart from notes above, no other adjustment has been made to reflect any trading or other transactions of the Retained Group entered into subsequent to 31 December 2022 for the purpose of preparation of the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and the unaudited pro forma consolidated statement of cash flows of the Retained Group for the year ended 31 December 2022.
The above all pro forma adjustments are not expected to have a continuing effect on the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and unaudited pro forma consolidated statement of cash flows of the Retained Group.
The conversion of RMB into HK$ is based on the exchange rate of approximately RMB1.00 = HK$1.1045 as of 1 January 2024.

VI – 12

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

APPENDIX VI

The following is the text of a report in relation to the Unaudited Pro Forma Financial Information of the Retained Group received from HLB Hodgson Impey Cheng Limited, Certified Public Accountants. Hong Kong, for the purpose of inclusion in this circular.

31/F, Gloucester Tower Th eLandmark 1 1Pedde rSrtete Cenrtal Hon gKong

INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

To the board of directors of China Beidahuang Industry Group Holdings Limited

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of China Beidahuang Industry Group Holdings Limited (the ‘‘Company’’) and its subsidiaries (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 consolidated statement of financial position of the Retained Group as at 31 December 2023, the unaudited pro forma consolidated statement of profit or loss and other comprehensive income and the unaudited pro forma consolidated statement of cash flows of the Retained Group for the year ended 31 December 2023 and related notes as set out on page VI-1 to VI-16 of Appendix VI of the Company’s circular dated 24 July 2024 (the ‘‘Circular’’) in connection with the very substantial disposal in relation to the Company by disposal of the entire equity interest in Shenzhen Qianhai Dahuangyuan Financing Lease Co., Ltd, Linxiang Qiangsheng Mining Industry Company Limited, Lianyungang Huajin Huahong Industrial Co., Ltd and Shenzhen Meiming Wenshi Trading Limited (the ‘‘Disposal’’). The applicable criteria on the basis of which the directors of the Company have compiled the unaudited pro forma financial information are described on page VI-1 to VI-16 of Appendix VI of the Circular.

The unaudited pro forma financial information has been compiled by the directors of the Company to illustrate the impact of the Disposal on the Retained Group’s assets and liabilities as at 31 December 2023 as if the Disposal had taken place on 31 December 2023, and the Retained Group’s consolidated financial performance and cash flows for the year ended 31 December 2023 as if the Disposal had been taken place on 1 January 2023, respectively. As part of this process, information about the Retained Group’s financial position, financial performance and cash flows has been extracted by the directors of the Company from the Company’s consolidated financial statements for the year ended 31 December 2023, on which an annual report have been published.

VI – 13

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

APPENDIX VI

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The directors of the Company 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 (‘‘HKICPA’’).

Our Independence and Quality Management

We have complied with the independence and other ethical requirements of the ‘‘Code of Ethics for Professional Accountants’’ issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

Our firm applies Hong Kong Standard on Quality Management 1 ‘‘Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements’’ issued by the HKICPA, which requires the firm to design, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountants’ 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 accountants plan and perform procedures to obtain reasonable assurance about whether the directors of the Company 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.

VI – 14

APPENDIX VI

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

For the 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 an investment circular is solely to illustrate the impact of the Disposal on unadjusted financial information of the Group as if the Disposal 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 Disposal at 31 December 2023 or 1 January 2023 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.

The procedures selected depend on the reporting accountants’ judgment, having regard to the reporting accountants’ 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.

VI – 15

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE RETAINED GROUP

APPENDIX VI

Opinion

In our opinion:

(a) the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) 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.

HLB Hodgson Impey Cheng Limited

Certified Public Accountant

Kwok Tsz Chun Practising Certificate number: P06901

Hong Kong, 24 July 2024

VI – 16

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RETAINED GROUP

APPENDIX VII

The following discussion should be read in conjunction with the financial information of the Group and the historical financial information and operating data included in this circular. The financial statements of the Group have been prepared in accordance with Hong Kong Financial Reporting Standards.

Set out below is the management discussion and analysis on the Retained Group for the years ended 31 December 2021, 2022 and 2023.

FINANCIAL HIGHLIGHT

	2021	2022	2023
	HK$’000	HK$’000	HK$’000
For the year ended 31 December
Revenue	231,341	223,908	219,729
(Loss)/profit for the year	(102,575)	(153,630)	(102,319)
(Loss)/profit attributable to
owners	(100,136)	(152,285)	(110,726)
(Loss)/earnings per share
Basic (in HK cents)	(1.61)	(2.43)	(1.75)
Diluted (in HK cents)	(1.61)	(2.43)	(1.75)

FOR THE YEAR ENDED 31 DECEMBER 2021

Remaining Food Business

The food business recorded a revenue of HK$145.6 million and accounted for 62.9% of the total revenue. Gross profit of this business segment for the Year 2021 was approximately HK$18.8 million.

Rental Business

The rental business was engaged in the leasing of logistic facilities in Hong Kong and office facilities in the PRC. This business recorded a revenue of approximately HK$85.8 million and accounted for 37.1% of the total revenue. Gross profit of this business segment for the Year was approximately HK$30.8 million.

VII – 1

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RETAINED GROUP

APPENDIX VII

Liquidity and financial resources

As at 31 December 2021, the Retained Group’s total bank and other borrowings amounted to approximately HK$407.4 million. All of the Retained Group’s bank and other borrowings were denominated in Renminbi and Hong Kong dollars.

Cash and bank balances

The Retained Group’s unpledged cash and cash equivalents as at 31 December 2021 amounted to approximately HK$17.9 million, which were denominated in Hong Kong dollars and Renminbi, and the Group’s pledged deposits as at 31 December 2021 amounted to HK$Nil.

Gearing ratio and indebtedness

The gearing ratio of the Group as at 31 December 2021 (calculated as net debt divided by equity attributable to owners of the parent plus net debt) was 34.5%. The ratio was at reasonably adequate level as at 31 December 2021. Having considered the Group’s various measures, arrangements and current unpledged cash and cash equivalents, bank and other borrowings, banking facilities, possible fund raising and the business operation income, the management believed that the Group’s financial resources were sufficient for its day-to-day operations. The Group did not use financial instruments for financial hedging purposes during the Year 2021.

Charges on assets

The shares of two subsidiaries of the Company with net assets of HK$30.6 million as at 31 December 2021 were pledged for a secured bond since August 2017. As the secured bond was maturated, the bondholder has the right to take over the control of the two subsidiaries. As at 31 December 2021, the Company was in negotiation with the bondholder for extension of repayment of the bond and the two subsidiaries were still under the control of the Company.

Investment properties with fair value of approximately HK$329.0 million was pledged to the bank for the Retained Group’s borrowings and bills payables.

Funding and treasury policies

The Retained Group’s treasury policy is to manage its foreign currency exposure only when its potential financial impact is material to the Retained Group. The Retained Group will continue to monitor its foreign exchange position and, if necessary, utilize hedging tools, if available, to manage its foreign currency exposure.

VII – 2

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RETAINED GROUP

APPENDIX VII

Capital commitments

As at 31 December 2021, the Retained Group did not have any significant capital commitments.

Significant investments of the Group

The Retained Group did not have any significant investments for the year ended 31 December 2021.

Material acquisitions and disposals

The Group did not have any material acquisitions and disposals of subsidiaries and capital assets for the year ended 31 December 2021. Furthermore, the Group did not have any plans for material investments and capital assets.

Future plans for material investments or capital assets

As at 31 December 2021, the Retained Group did not have any plans for material investments and capital assets.

Employees and remuneration policies

As at 31 December 2021, the Retained Group had approximately 97 employees in Hong Kong and the PRC with total staff costs amounting to approximately HK$9.1 million. Remuneration of employees is offered at competitive standards, generally structured with reference to market terms and individual qualifications. The Company has adopted the share option scheme aiming to provide incentives to participants for their contributions to the Retained Group, and to enable the Retained Group to recruit and retain quality employees to serve the Group on a long-term basis.

Contingent liabilities

As at 31 December 2021, the Retained Group did not have any material contingent liabilities.

VII – 3

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RETAINED GROUP

APPENDIX VII

Dividend policy

Under code provision E.1.5 (which has been renumbered as code provision F.1.1 since 1 January 2022) of the CG Code, the issuer should have a policy on payment of dividends and should disclose it in the annual report. As the Company is still in its development phase and the performance will continue to be impacted by the relevant industry and economic outlook in the foreseeable future, the Board is of the opinion that it is not appropriate to adopt a dividend policy at this stage. The Board will review the Company’s status periodically and consider to adopt a dividend policy if and when appropriate.

FOR THE YEAR ENDED 31 DECEMBER 2022

Remaining Food Business

The food business recorded a revenue of HK$149.7 million and accounted for 66.9% of the total revenue. Gross profit of this business segment for the Year was approximately HK$17.4 million.

Rental Business

The rental business was engaged in the leasing of logistic facilities in Hong Kong and office facilities in the PRC. This business recorded a revenue of approximately HK$74.2 million and accounted for 33.1% of the total revenue. Gross profit of this business segment for the Year was approximately HK$31.4 million.

Liquidity and financial resources

As at 31 December 2022, the Retained Group’s total bank and other borrowings amounted to approximately HK$400.3 million. All of the Retained Group’s bank and other borrowings were denominated in Renminbi and Hong Kong dollars.

Cash and bank balances

The Retained Group’s cash and cash equivalents as at 31 December 2022 amounted to approximately HK$11.8 million, which were denominated in Hong Kong dollars and Renminbi.

VII – 4

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RETAINED GROUP

APPENDIX VII

Gearing ratio and indebtedness

The gearing ratio of the Retained Group as at 31 December 2022 (calculated as net debt divided by equity attributable to owners of the parent plus net debt) was 40.9%. The ratio was at reasonably adequate level as at 31 December 2022. Having considered the Group’s various measures, arrangements and current unpledged cash and cash equivalents, bank and other borrowings, banking facilities, possible fund raising and the business operation income, the management believes that the Retained Group’s financial resources are sufficient for its day-today operations. The Retained Group did not use financial instruments for financial hedging purposes during the Year 2022.

Charges on assets

As at 31 December 2022, investment properties with fair value of approximately HK$300.2 million and personal guarantee by shareholder of the Company and related parties were provided to banks as security for the Group’s bank borrowings and bills payable.

The shares of two subsidiaries of the Company with net assets of HK$26.39 million as at 31 December 2022 were pledged for a secured bond since August 2017. As the secured bond was maturated, the bondholder has the right to take over the control of the two subsidiaries. As at 31 December 2021, the Company was in negotiation with the bondholder for extension of repayment of the bond and the two subsidiaries were still under the control of the Company.

Funding and treasury policies

The Group’s treasury policy is to manage its foreign currency exposure only when its potential financial impact is material to the Group. The Group will continue to monitor its foreign exchange position and, if necessary, utilize hedging tools, if available, to manage its foreign currency exposure.

Capital commitments

As at 31 December 2022, the Retained Group did not have any significant capital commitments.

Significant investments of the Group

The Retained Group did not have any significant investments for the year ended 31 December 2022.

VII – 5

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RETAINED GROUP

APPENDIX VII

Material acquisitions and disposals

On 8 November 2022, the Group entered into a sale and purchase agreement to disposal of its 100% equity interest in Beijing Mumian Shangyuan Investment Management Co., Ltd and its subsidiaries which engaged in rental business to an independent third party (‘‘the Purchaser’’) for cash consideration of RMB$550,000 (equivalent to approximately HK$605,000). The disposal was completed on 25 November 2022.

Future plans for material investments or capital assets

As at 31 December 2022, the Retained Group did not have any plans for material investments and capital assets.

Employees and remuneration policies

As at 31 December 2022, the Retained Group had approximately 93 employees in Hong Kong and the PRC with total staff costs amounting to approximately HK$7.4 million. Remuneration of employees is offered at competitive standards, generally structured with reference to market terms and individual qualifications. The Company has adopted the share option scheme aiming to provide incentives to participants for their contributions to the Retained Group, and to enable the Group to recruit and retain quality employees to serve the Retained Group on a long-term basis.

Contingent liabilities

As at 31 December 2022, the Retained Group did not have any material contingent liabilities.

Dividend policy

Under code provision F.1.1 of the CG Code, the issuer should have a policy on payment of dividends and should disclose it in the annual report. As the Company is still in its development phase and the performance will continue to be impacted by the relevant industry and economic outlook in the foreseeable future, the Board is of the opinion that it is not appropriate to adopt a dividend policy at this stage. The Board will review the Company’s status periodically and consider to adopt a dividend policy if and when appropriate.

VII – 6

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RETAINED GROUP

APPENDIX VII

FOR THE YEAR ENDED 31 DECEMBER 2023

Remaining Food Business

The Retained Group recorded revenue from food business of approximately HK$123.0 million, accounting for 56.0% of the Retained Group total revenue for the year ended 31 December 2023. Gross profit of this food business of approximately HK$19.9 million.

Rental Business

The Retained Group recorded revenue from rental business of approximately HK$96.7 million, accounting for 44.0% of the Retained Group total revenue for the year ended 31 December 2023. For the same years, all the rental business was engaged in the leasing of logistic facilities in Hong Kong and office facilities in the PRC. Gross profit of this rental business of approximately HK$40.2 million.

Liquidity and financial resources

As at 31 December 2023, the Retained Group’s total bank and other borrowings amounted to approximately HK$37.8 million, which is calculated by the Retained Group’s total bank and other borrowing amounted to approximately HK$392.5 million less discharged of Creditor’ Scheme amounted to approximately HK$354.8 million. All of the Group’s bank and other borrowings were denominated in Renminbi and Hong Kong dollars. Included in bank and other borrowings was default payment for other borrowings before discharge of Creditor’ Scheme of approximately HK$379.21 million.

The bank loans, other borrowings and amounts due to related parties are charged at fixed interest rates.

Cash and bank balances

The Group’s cash and cash equivalents as at 31 December 2023 amounted to approximately HK$11.70 million, which were denominated in Hong Kong dollars and Renminbi.

VII – 7

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RETAINED GROUP

APPENDIX VII

Gearing ratio and indebtedness

The gearing ratio of the Retained Group as at 31 December 2023 (calculated as net debt divided by equity attributable to owners of the parent plus net debt) was 46.0%. The ratio was at reasonably adequate level as at 31 December 2023. Having considered the Retained Group’s various measures, arrangements and current unpledged cash and cash equivalents, bank and other borrowings, banking facilities, possible fund raising and the business operation income, the management believes that the Retained Group’s financial resources are sufficient for its day-today operations. The Group did not use financial instruments for financial hedging purposes during the Year 2023.

Charges on assets

As at 31 December 2023, investment properties with fair value of approximately HK$294.83 million and personal guarantee by a shareholder of the Company and related parties were used to secure the Group’s bank borrowings and bills payable.

The shares of two subsidiaries of the Company with net assets of HK$30.75 million as at 31 December 2023 were pledged for a secured bond since August 2017. As the secured bond has matured, the bondholder has the right to take over the control of the two subsidiaries. The pledged will be discharged upon the Creditors’ Scheme become effective.

Funding and treasury policies

The Company is negotiating with investors with a view to obtain further financing when necessary including but not limited to equity financing, bank borrowing and issuance of new convertible bonds to improve the liquidity of the Group.

Capital commitments

As at 31 December 2023, the Retained Group did not have any significant capital commitments.

Significant investments of the Group

The Retained Group did not have any significant investments for the year ended 31 December 2023.

VII – 8

MANAGEMENT DISCUSSION AND ANALYSIS OF THE RETAINED GROUP

APPENDIX VII

Material acquisitions and disposals

The Group did not have any material acquisitions and disposals of subsidiaries and capital assets for the year ended 31 December 2023.

Future plans for material investments or capital assets

As at 31 December 2023, the Retained Group did not have any plans for material investments and capital assets.

Employees and remuneration policies

As at 31 December 2023, the Retained Group had approximately 74 employees in Hong Kong and the PRC with total staff costs amounting to approximately HK$6.1 million. Remuneration of employees is offered at competitive standards, generally structured with reference to market terms and individual qualifications. The Company has adopted the share option scheme aiming to provide incentives to participants for their contributions to the Retained Group, and to enable the Group to recruit and retain quality employees to serve the Retained Group on a long-term basis.

Contingent liabilities

As at 31 December 2023, the Retained Group did not have any material contingent liabilities.

Dividend policy

VII – 9

APPENDIX VIII

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

The following is the text of a letter and valuation certificates prepared for the purpose of incorporation in this document received from International Valuation Limited, an independent valuer, in connection with its valuation as at 30 April 2024 of the properties held by the Group.

==> picture [228 x 38] intentionally omitted <==

International Valuation Limited Unit 907, 9th Floor, Wing On Plaza 62 Mody Road, Tsim Sha Tsui East Kowloon, Hong Kong Tel: 3708 7922

Date

The Board of Directors

CHINA BEIDAHUANG INDUSTRY GROUP HOLDINGS LIMITED （中國北大荒產業集團控股有限公司）

Room 225, 2/F, Mega Cube, 8 Wang Kwong Road, Kowloon Bay, Kowloon, Hong Kong

Dear Sir/Madam,

In accordance with the instruction from CHINA BEIDAHUANG INDUSTRY GROUP HOLDINGS LIMITED (the ‘‘Company’’) together with its subsidiaries (hereinafter together referred to as the ‘‘Group’’) for us to value the property interests held by the Group in the People’s Republic of China (the ‘‘PRC’’), we confirm that we made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value (‘‘Market Value’’) of the properties as at 30 April 2024 (‘‘Valuation Date’’) for public documentation purpose.

Our valuation is carried out on a Market Value basis. Market Value is defined as ‘‘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’’.

We have valued the Property No. 1 and No. 5 on market basis and on vacant possession, and the direct comparison method is adopted where comparison based on prices realized on actual sales of comparable properties is made. Comparable properties of similar size, character and location are analyzed and carefully weighed against all the respective advantages and disadvantages of each property in order to arrive at a fair comparison of market values.

VIII – 1

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

APPENDIX VIII

In valuing the Property No. 2, No. 3 and No. 4, we have valued the property by income capitalization method by capitalizing the rental income derived from the existing tenancies, if any, with due provision for the reversionary potential of each constituent portion of the properties at appropriate capitalisation rates. When using Income Capitalisation Method, we have mainly made reference to lettings within the relevant localities because the properties are subject to tenancy agreements/held for investment and comparables letting evidences in the relevant market are adequate.

Our valuation has been made on the assumption that the seller sells the properties on the open market in its existing state without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement which would serve to affect the value of the properties.

Unless stated as otherwise, we have assumed that the properties have been constructed, occupied and used in full compliance with, and without contravention of all laws, except only where otherwise stated. We have further assumed that, for any use of the properties upon which this valuation is based, all required licenses, permits, certificates and authorizations have been obtained.

Unless stated as otherwise, we have assumed that the owner of the properties has free and uninterrupted rights to use and dispose of the properties for the whole of the unexpired term of the land use rights.

No allowance has been made in our report for any charge, mortgage or amount owing on any of the property interest valued nor for any expense or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect its value.

Other special assumptions of the properties, if any, have been stated in the notes of the valuation certificate of the properties.

In valuing the property interest, we have complied with all requirements contained in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by the Stock Exchange of Hong Kong Limited; the RICS Valuation – Global Standards published by the Royal Institution of Chartered Surveyors; the HKIS Valuation Standards published by the Hong Kong Institute of Surveyors, and the International Valuation Standards issued by the International Valuation Standards Council.

We have relied to a very considerable extent on the information given by the Group and have accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements, particulars of occupancy, lettings, and all other relevant matters.

VIII – 2

APPENDIX VIII

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

We have been shown copies of various title documents including State-owned Land Use Rights Grant Contract, Real Estate Title Certificate, Construction Land Planning Permit, Construction Works Planning Permit, Construction Works Commencement Permit and other official plans or documents relating to the property interest and have made relevant enquiries. Where possible, we have examined the original documents to verify the existing title to the property interest in the PRC and any material encumbrance that might be attached to the property interest or any tenancy amendment. We have relied considerably on the advice given by the Company’s PRC legal adviser – Beijing Dacheng Law Offices, LLP (Fuzhou) (‘‘PRC Legal Adviser’’), concerning the validity of the property interest in the PRC.

We have not carried out detailed measurements to verify the correctness of the areas in respect of the properties but have assumed that the areas shown on the title documents and official site plans handed to us are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurement has been taken.

We have conducted on-site inspection of the exterior and, where possible, the interior of the properties, and obtained the photos of the target properties provided by the Group. However, we have not carried out investigation to determine the suitability of the ground conditions and services for any development thereon. Our valuation has been prepared on the assumption that these aspects are satisfactory and that no unexpected cost and delay will be incurred during construction. Moreover, no structural survey has been made, but in the course of our inspection, we did not note any serious defect. We are not, however, able to report whether the property is free of rot, infestation or any other structural defect. No tests were carried out on any of the services.

On-site inspections of the properties were carried out on 30 April 2024 (Property No. 1), 15 April 2024 (Property No. 2, No. 3 and No. 4) and 23 April 2024 (Property No. 5) by Mr. John Cheung who has obtained the master’s degree with a specialization in real estate in our Hong Kong office.

We have had no reason to doubt the truth and accuracy of the information provided to us by the Group. We have also sought confirmation from the Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to arrive at an informed view, and we have no reason to suspect that any material information has been withheld.

This valuation is to be used for the purpose stated herein. We are instructed to provide our opinion of value as per the Valuation Date only. It is based on economic, market and other conditions as they exist on, and information made available to us as of, the Valuation Date and we assume no obligation to update or otherwise revise these materials for events in the time since then.

VIII – 3

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

APPENDIX VIII

The opinion of value is based on generally accepted valuation procedures and practices that rely extensively on assumptions and considerations, not all of which can be easily quantified or ascertained exactly. While we have exercised our professional judgement in arriving at the valuation, it is urged to consider carefully the nature of such assumptions which are disclosed and should exercise caution when interpreting.

We hereby certify that we have neither present nor prospective interest in the Group or the value reported.

Unless otherwise stated, all monetary sums stated in our valuations are in Renminbi (‘‘RMB’’), the lawful currency of the PRC.

We enclose herewith the valuation summary and valuation certificates for your attention.

Yours faithfully, For and on behalf of

International Valuation Limited

Christopher Cheung

BSc (Hons), BBA (Hons), MRICS, MHKIS, RPS (GP) Director – Real Estate

Note: Mr. Christopher Cheung is a Registered Professional Surveyor (General Practice) under the Surveyors Registration Ordinance (Cap. 417) in Hong Kong. He is a Professional Member of the Royal Institution of Chartered Surveyors and a Corporate Member of the Hong Kong Institute of Surveyors in the General Practice Division. He has over 9 years’ experience in valuation of properties in the Mainland China and Hong Kong.

VIII – 4

APPENDIX VIII

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

SUMMARY OF VALUES

No.
Group I – Properties held for owner occupation by the Group
1.
No. 307, Tianlu Residential Block Nos. 306 & 307,
No. 3 Hai Wan Avenue West, Qinba Town,
Wuchuan City,
Guangdong Province,
the PRC
2.
Unit 1617, 16/F, Block 4,
COFCO Chuangzhi Industrial Zone,
Bao’an District,
Shenzhen City,
Guangdong Province,
the PRC
3.
Units 1201-1207, 12/F, Block 2,
COFCO Chuangzhi Industrial Zone,
Bao’an District,
Shenzhen City,
Guangdong Province,
the PRC
Total for properties held for owner occupation by the Group

Market Value in
existing state as at
30 April 2024
RMB
No commercial
value
(see valuation
certificate for
details)
No commercial
value
(see valuation
certificate for
details)
No commercial
value
(see valuation
certificate for
details)

–

VIII – 5

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

APPENDIX VIII

No. Group II – Property held for investment by the Group 4. Shop units at 2/F, Peng Cheng Garden, Shajing Subdistrict, Bao’an District, Shenzhen City, Guangdong Province, the PRC Total for property held for investment by the Group No. Group III – Property held for development by the Group 5. A commercial development located at the east of No. 242 Provincial Road and the north of Shawang River, Gangyu Ocean Development Zone, Ganyu District, Lianyungang City, Jiangsu Province, the PRC Total for property held for development by the Group Total for Group I, Group II and Group III	Market Value in existing state as at 30 April 2024 RMB No commercial value (see valuation certificate for details)
	–
	Market Value in existing state as at 30 April 2024 RMB No commercial value (see valuation certificate for details)
	–
	–

VIII – 6

APPENDIX VIII

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

VALUATION CERTIFICATE

Property held for owner occupation by the Group in the PRC

No. Property

No. 307, Tianlu Residential Block Nos. 306 & 307, No. 3 Hai Wan Avenue West, Qinba Town, Wuchuan City, Guangdong Province, the PRC （中華人民共和國廣東省吳川市覃巴鎮海灣大道西3號天麓306、307號住宅樓307號）

Description and Tenure

The property comprises a three-storey villa type residential building with a gross floor area (‘‘GFA’’) of approximately 253.94 sq. m. situated in a residential development known as ‘‘Loong Bay Tianlu Guanshanhai（鼎龍灣天麓觀山海）’’. As advised by the Group, the property was completed in about 2016.

Market Value in Particulars of existing state as at Occupancy 30 April 2024 RMB As advised by the No commercial Group, the property value was vacant as at the (see Note (3)) Valuation Date.

The property is designated for residential uses for a term of 70 years expiring on 30 September 2083.

Notes:

Pursuant to the Real Estate Title Certificate – Yue (2020) Wuchuan Shi Bu Dong Chan Quan Di No. 0005188 （粵(2020)吳川市不動產權第0005188號）dated 20 April 2020, the land use rights of the property with a GFA of approximately 253.94 sq. m. had been granted to Shenzhen Qianhai Dahuangyuan Financial Leasing Co., Ltd.（深圳市前海大荒緣融資租賃有限公司, ‘‘Qianhai Dahuangyuan’’）expiring on 30 September 2083 for residential uses.
According to the Civil Rulings（民事裁定書）– (2022) Yue 08 Min Chu No. 505 ((2022)粵08民初505號）dated 2 September 2022 provided by the Group, the property is sealed up by the Zhanjiang Intermediate People’s Court（湛江市中級人民法院）as at the Valuation Date.
Pursuant to the legal opinion provided by the Company’s PRC Legal Adviser, according to the requirements of Urban Real Estate Management Law of the People’s Republic of China（中華人民共和國城市房地產管理法）, the property rights that have been ruled, sealed up or restricted in other forms by judicial department and administrative department is not allowed to transfer; since the property has been subject to a court order and sealed up by the Zhanjiang Intermediate People’s Court（湛江市中級人民法院）in relation to a legal proceeding, the property may be restricted for transfer as at the Valuation Date. Therefore, we have attributed no commercial value to the property. For reference purpose, assuming that the property can be freely transferred in the market without restriction, the Market Value of the property in existing state as at the Valuation Date is RMB2,120,000.

VIII – 7

APPENDIX VIII VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

We have been provided with a legal opinion regarding the property interest by the Company’s PRC Legal Adviser, which contains, inter alia, the following:
a. The property is free from any mortgage;
b. The property is sealed up by the court and subject to a restriction on lease and transfer;
c. Qianhai Dahuangyuan is legally and validly in possession of the property; and
d. Qianhai Dahuangyuan has the rights to occupy and use the property subject to and accordance with the applicable laws and regulations.

VIII – 8

APPENDIX VIII

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

VALUATION CERTIFICATE

Property held for owner occupation by the Group in the PRC

No. Property

Unit 1617, 16/F, Block 4, COFCO Chuangzhi Industrial Zone, Bao’an District, Shenzhen City, Guangdong Province, the PRC
（中華人民共和國廣東省深圳市寶安區中糧創智廠區4棟16層 1617號房）

Description and Tenure

The property comprises the leasehold interest of an apartment unit with a gross floor area (‘‘GFA’’) of approximately 46.01 sq. m. situated at an industrial development registered as ‘‘COFCO Chuangzhi Industrial Zone（中糧創智廠區）’’ or known as ‘‘COFCO Commercial Park（中糧商務公園）’’. As advised by the Group, the property was completed in about 2015.

Market Value in Particulars of existing state as at Occupancy 30 April 2024 RMB As advised by the No commercial Group, the property value was occupied by the (see Note (3)) Group as at the Valuation Date.

According to the information provided by the Group, the property is leased to the Group by a lease purchase agreement for a term of 15 years commenced on 31 December 2015 under a tenancy agreement along with a conditional offer of transferring the land use rights from the lessor to the lessee upon the lease expiry. (see Notes (1) and (2))

Notes:

Pursuant to the COFCO Chuangzhi Industrial Zone Lease Contract（中糧創智廠區物業租賃合同, ‘‘Lease Contract’’） dated 25 September 2014 between COFCO Property (Group) Co., Ltd.（中糧地產（集團）股份有限公司, ‘‘COFCO Property’’） and Shenzhen Meiming Wenshi Trading Co., Ltd.（深圳市美名問世商貿有限公司, ‘‘Shenzhen Meiming’’） and the information provided by the Group, the property with a GFA of approximately 46.01 sq. m. situated at COFCO Chuangzhi Industrial Zone（中糧創智廠區）with land use rights which had been granted to COFCO Property for a term expiring on 28 June 2057 according to the Real Estate Title Certificate – Shen Fang Di Zi Di No. 5000427427（深房地字第5000427427號）were contracted to be leased to Shenzhen Meiming for a term of 15 years had been commenced on 31 December 2015.

VIII – 9

APPENDIX VIII VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

Pursuant to the COFCO Chuangzhi Industrial Zone Lease Contract Supplementary Agreement（中糧創智廠區物業租賃合同補充協議, ‘‘Supplementary Agreement’’） dated 25 September 2014 between COFCO Property and Shenzhen Meiming provided by the Group, upon the expiry of the lease term, COFCO Property would assist to transfer the land use rights of the property from the lessor to the lessee through application of the Real Estate Title Certificate of the property for Shenzhen Meiming if relevant conditions stated in the Lease Contract and Supplementary Agreement are fulfilled; Shenzhen Meiming would be entitled the land use rights of the property for a term expiring on 28 June 2057 in gratuitous when the above-mentioned process is completed.
Pursuant to the legal opinion provided by the Company’s PRC Legal Adviser, Shenzhen Meiming is required to fulfil certain conditions stated in the Lease Contract and Supplementary Agreement to lease and transfer the property. Since the property may be restricted for transfer as at the Valuation Date, we have therefore attributed no commercial value to the property. For reference purpose, assuming that the property can be freely transferred in the market without restriction and obtained an individual Real Estate Title Certificate, the Market Value of the property in existing state as at the Valuation Date is RMB1,050,000.
We have been provided with a legal opinion regarding the property interest by the Company’s PRC Legal Adviser, which contains, inter alia, the following:
a. As confirmed by the Group, the property is free from any mortgage and third-party encumbrances;
b. Shenzhen Meiming has the rights to use and occupy the property within the lease term and the property may be subject to restriction on lease and transfer according to the Lease Contract and Supplementary Agreement; and
c. Shenzhen Meiming is not in the possession of the property until an individual Real Estate Certificate is obtained.

VIII – 10

APPENDIX VIII

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

VALUATION CERTIFICATE

Property held for owner occupation by the Group in the PRC

No. Property

Units 1201-1207, 12/F, Block 2, COFCO Chuangzhi Industrial Zone, Bao’an District, Shenzhen City, Guangdong Province, the PRC

（中華人民共和國廣東省深圳市寶安區中糧創智廠區2棟12層 1201-1207號房）

Description and Tenure

The property comprises the leasehold interest of seven office units with a total gross floor area (‘‘GFA’’) of approximately 1,419.87 sq. m. situated at an industrial development registered as ‘‘COFCO Chuangzhi Industrial Zone（中糧創智廠區）’’ or known as ‘‘COFCO Commercial Park（中糧商務公園）’’. As advised by the Group, the property was completed in about 2015.

According to the information provided by the Group, the property is leased to the Group by a lease purchase agreement for a term of 15 years commenced on 30 September 2015 under a tenancy agreement along with a conditional offer of transferring the land use rights from the lessor to the lessee upon the lease expiry. (see Notes (1) and (2))

Market Value in Particulars of existing state as at Occupancy 30 April 2024 RMB As advised by the No commercial Group, a lettable value area of (see Note (3)) approximately 1,120.08 sq. m. of the property was subject to various intra-group leases with the latest expiry date on 31 August 2024 at a total current monthly rental of RMB315,700 inclusive of water and electricity charges and tax as at the Valuation Date.

As advised by the Group, a lettable area of approximately 140.79 sq. m. of the property was subject to a tenancy with an expiry date on 31 August 2024 at a total current monthly rental of RMB20,000 inclusive of water and electricity charges and tax with an estimated market monthly rental of about RMB8,700 under same basis as at the Valuation Date.

As advised by the Group, the remaining portion of the property was occupied by the Group

VIII – 11

APPENDIX VIII

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

Notes:

Pursuant to the COFCO Chuangzhi Industrial Zone Lease Contract（中糧創智廠區物業租賃合同, ‘‘Lease Contract’’） between COFCO Property (Group) Co., Ltd.（中糧地產（集團）股份有限公司, ‘‘COFCO Property’’） and Shenzhen Meiming Wenshi Trading Co., Ltd.（深圳市美名問世商貿有限公司, ‘‘Shenzhen Meiming’’）and the information provided by the Group, the property with a GFA of approximately 1,419.87 sq. m. situated at COFCO Chuangzhi Industrial Zone（中糧創智廠區）with land use rights which had been granted to COFCO Property for a term expiring on 28 June 2057 according to the Real Estate Title Certificate – Shen Fang Di Zi Di No. 5000427427

（深房地字第5000427427號）were contracted to be leased to Shenzhen Meiming for a term of 15 years had been commenced on 30 September 2015.

Pursuant to the COFCO Chuangzhi Industrial Zone Lease Contract Supplementary Agreement（中糧創智廠區物業租賃合同補充協議, ‘‘Supplementary Agreement’’） between COFCO Property and Shenzhen Meiming provided by the Group, upon the expiry of the lease term, COFCO Property would assist to transfer the land use rights of the property from the lessor to the lessee through application of the Real Estate Title Certificate of the property for Shenzhen Meiming if relevant conditions stated in the Lease Contract and Supplementary Agreement are fulfilled; Shenzhen Meiming would be entitled the land use rights of the property for a term expiring on 28 June 2057 in gratuitous when the above-mentioned process is completed.
Pursuant to the legal opinion provided by the Company’s PRC Legal Adviser, Shenzhen Meiming is required to fulfil certain conditions stated in the Lease Contract and Supplementary Agreement to lease and transfer the property. Since the property may be restricted for transfer as at the Valuation Date, we have therefore attributed no commercial value to the property. For reference purpose, assuming that the property can be freely transferred in the market without restriction and obtained an individual Real Estate Title Certificate, the Market Value of the property in existing state as at the Valuation Date is RMB20,800,000.
We have been provided with a legal opinion regarding the property interest by the Company’s PRC Legal Adviser, which contains, inter alia, the following:
a. As confirmed by the Group, the property is free from any mortgage and third-party encumbrances;
b. Shenzhen Meiming has the rights to use and occupy the property within the lease term and the property may be subject to restriction on lease and transfer according to the Lease Contract and Supplementary Agreement; and
c. Shenzhen Meiming is not in the possession of the property until an individual Real Estate Certificate is obtained.

VIII – 12

APPENDIX VIII

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

VALUATION CERTIFICATE

Property held for investment by the Group in the PRC

No. Property

Shop units at 2/F, Peng Cheng Garden, Shajing Subdistrict, Bao’an District, Shenzhen City, Guangdong Province, the PRC

（中華人民共和國廣東省深圳市寶安區沙井街道鵬程花園二樓鋪位）

Description and Tenure

The property comprises various shop units from two retail portions with a total gross floor area (‘‘GFA’’) of approximately 7,500 sq. m. situated on the second floor of a retail podium of a development known as ‘‘Peng Cheng Garden（鵬程花園）’’ which is erected on a collective land.

According to the information provided by the Group, the building use rights of the property were granted for a term of 70 years expiring on 10 May 2073. (see Note (1))

Market Value in Particulars of existing state as at Occupancy 30 April 2024 RMB As advised by the No commercial Group, a lettable value area of (see Note (2)) approximately 4,440 sq. m. of the property was subject to two tenancies with the latest expiry date on 31 July 2026 at a total current monthly rental of RMB124,800 inclusive of water and electricity charges and tax as at the Valuation Date.

As advised by the Group, a lettable area of approximately 3,060 sq. m. of the property was subject to a tenancy with an expiry date on 30 November 2031 at a current monthly rental of RMB76,500 inclusive of tax as at the Valuation Date.

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APPENDIX VIII

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

Notes:

Pursuant to the Building Use Rights Certificate（房屋使用權證）－Xin Fang Zi Di No. 200906（新房字第200906 號）dated 20 March 2011, the land use rights of a parcel of collective land with a site area of approximately 30,667.5 sq. m had been granted to Shenzhen Jiangshi Longhui Trading Co., Ltd.（深圳市江氏龍匯商貿有限公司, ‘‘Shenzhen Jiangshi’’）and the building use rights of the property with a total GFA of approximately 7,500 sq. m. were granted to Shenzhen Meiming Wenshi Trading Co., Ltd.（深圳市美名問世商貿有限公司, ‘‘Shenzhen Meiming’’）for a term expiring on 10 May 2073.
Pursuant to the legal opinion provided by the Company’s PRC Legal Adviser, according to the information provided by the Group, since the nature of the ownership of the land parcel where the property situated is collectively owned and Shenzhen Meiming only entitled to the building use rights of the property, the property may be restricted for use, occupy, lease and transfer. Therefore, we have attributed no commercial value to the property. For reference purpose, assuming that the property can be freely transferred in the market without restriction, the Market Value of the property in existing state as at the Valuation Date is RMB54,000,000.
We have been provided with a legal opinion regarding the property interest by the Company’s PRC Legal Adviser, which contains, inter alia, the following:
a. As confirmed by the Group, the property is free from any mortgage and third-party encumbrances;
b. Shenzhen Meiming has the rights to use and occupy the property subject to and accordance with the applicable laws and regulations; and
c. The property is subject to restriction on building alteration, lease and transfer according to the Building Contract between Shenzhen Jiangshi and Shenzhen Meiming, and the Building Use Rights Certificate.

VIII – 14

APPENDIX VIII

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

VALUATION CERTIFICATE

Property held for development by the Group in the PRC

No. Property

A commercial development located at the east of No. 242 Provincial Road and the north of Shawang River, Gangyu Ocean Development Zone, Ganyu District, Lianyungang City, Jiangsu Province, the PRC

（中華人民共和國江蘇省連雲港市贛榆區贛榆海洋開發區242省道東側、沙汪河北側的商業項目）

Market Value in Particulars of existing state as at Description and Tenure Occupancy 30 April 2024 RMB The property comprises a As advised by the No commercial parcel of land with a site area Group, the property value of approximately 62,820.00 sq. was under the (see Note (9)) m. and 21 blocks of three construction process storey commercial buildings and pending for the known as ‘‘ChinaChina Beidahuang issuance of Happy Coast City（中國北大（中國北大中國北大國北大北大大 Construction Works 荒歡樂海岸城）’’歡樂海岸城）’’樂海岸城）’’海岸城）’’岸城）’’城）’’）’’’’ erected Completion thereon which were under the Acceptance Report construction process (‘‘CIP’’).‘‘CIP’’).CIP’’).’’).). by relevant As advised by the Group, the authorities as at the construction works of the CIP Valuation Date.

The property comprises a parcel of land with a site area of approximately 62,820.00 sq. m. and 21 blocks of three storey commercial buildings known as ‘‘ChinaChina Beidahuang Happy Coast City（中國北大（中國北大中國北大國北大北大大荒歡樂海岸城）’’歡樂海岸城）’’樂海岸城）’’海岸城）’’岸城）’’城）’’）’’’’ erected thereon which were under the construction process (‘‘CIP’’).‘‘CIP’’).CIP’’).’’).). As advised by the Group, the construction works of the CIP were completed and pending for the issuance of Construction Works Completion Acceptance Report by relevant authorities as at the Valuation Date.

According to the information provided by the Group, portion of block 3 and the whole of block 17 with total lettable area of approximately 8,060.79 sq. m. were subject to two tenancies with the latest expiry date 31 December 2033 at a total monthly rental RMB953,323 as at the Valuation Date.

As advised by the Group, 21 buildings of the CIP have a total planned gross floor area (‘‘GFA’’) of approximately 57,788.95 sq. m. Upon completion, these buildings will be used for commercial purposes. The total construction cost of the CIP was estimated to be approximately RMB250 million, of which all had been incurred as at the Valuation Date.

The property is designated for commercial uses for a term expiring on 19 February 2058.

VIII – 15

APPENDIX VIII

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

Notes:

Pursuant to the State-owned Land Use Rights Grant Contract – No. 3207212017CR0052 dated 25 December 2017, the land use rights of a land parcel – Lot No.: 2017G23 with a site area of approximately 62,820 sq. m. were contracted to be granted to Lianyungang Huajin Huahong Industrial Co., Ltd.（連雲港華金華鴻實業有限公司, ‘‘Lianyungang Huajin Huahong’’）with planning details as follow:

Land Use Right Term: 40 years Usage: Commercial Plot Ratio: 51 Site Coverage: 555% Permitted Gross Floor Area: 62,000 sq. m.

Pursuant to the Real Estate Title Certificate – Su (2018) Gan Yu Qu Bu Dong Chan Quan Di No. 0002297 （蘇(2018)贛榆區不動產權第0002297號）dated 7 February 2018, the land use rights of the property with a site area of approximately 62,820.00 sq. m. had been granted to Lianyungang Huajin Huahong for a term expiring on 19 February 2058 for commercial uses.
Pursuant to the Construction Land Planning Permit – Di Zi Di No. 320721201800003（地字第320721201800003號） dated 29 January 2018, the property with a total site area of approximately 62,820 sq. m. had complied with the planning requirements with a development scale of 62,800 sq. m.
Pursuant to the Construction Works Planning Permit – Jian Zi Di No. 320721201800025（建字第320721201800025 號）dated 2 August 2018, the property with a total planned GFA of approximately 63,647.91 sq. m. had been approved for construction.
Pursuant to the Construction Works Commencement Permit – No. 320721202003170201 in favor of Lianyungang Huajin Huahong dated 17 March 2020, permission by the relevant local authority was given to commence the construction of the property with a total planned GFA of approximately 63,647.91 sq. m.
As advised by the Group, the area details of the proposed development scheme of 257 commercial units are summarized as follows:

Block	Units	Planned GFA
		(sq. m.)
1	1	3,597.48
2	18	2,522.13
3	19	7,716.11
4-1	12	1,660.31
4-2	12	1,660.31
5	15	1,715.82
6	4	2,190.07
7	1	2,477.61
8	3	4,141.55
9	28	4,679.16
10	23	3,536.20
11-1	6	731.73

VIII – 16

APPENDIX VIII

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

Block 11-2 11-3 11-4 12 13 14 15 16 17 Total:	No. of Units 6 6 6 42 15 18 18 1 3 257	Total Planned GFA (sq. m.) 731.73 731.73 731.73 4,679.01 2,072.82 2,498.16 2,460.02 4,333.70 2,921.57
		57,788.95

Pursuant to three Pre-Sale Permits in favor of Lianyungang Huajin Huahong dated 24 December 2018, 7 March 2019 and 21 May 2021, the property had been approved for pre-sale with details as follow:

Certificate No. Issue Authorities Issue Date Block Gan Fan Yu Zi Di No. (2018) 089 （贛房預字第(2018) 089號） Ganyu County Real Estate Management Office （贛榆縣房產管理處） 24/12/2018 2 4-1 4-2 5 11-1 11-2 11-3 11-4 13 14 15 Gan Fan Yu Zi Di No. (2019) 018 （贛房預字第(2019) 018號） 07/03/2019 9 10 12 Gan Fan Yu Zi Di No. (2021) 034 （贛房預字第(2021) 034號） Lianyungang Ganyu District Housing and Urban-Rural Development Bureau （連雲港市贛榆區住房及城鄉建設局） 21/05/2021 1 3 6 7 8 16 17 Total:	No. of Units 132 93 32 257	Total GFA (sq. m.) 17,516.49 12,894.37 27,378.09
		57,788.95

VIII – 17

APPENDIX VIII VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

As advised by the Group, certain portions of the property were subject to pre-sale agreements but not yet handed over to the purchasers as at the Valuation Date with details as follows:

Block 2 3 4-1 4-2 5 9 10 11-1 11-2 11-3 11-4 12 14 15 16 17 Total:	No. of Units 4 15 12 9 15 28 2 6 6 6 6 42 1 1 1 3 157	Total GFA (sq. m.) 549.74 1,605.32 1,660.31 1,244.71 1,715.82 4,679.16 235.01 731.73 731.73 731.73 731.73 4,679.01 124.86 127.24 4,333.70 2,921.57 26,803.37	Consideration (RMB) 4.47 million 12.20 million 13.28 million 7.47 million 13.73 million 23.30 million 1.97 million 5.85 million 4.02 million 4.02 million 4.13 million 25.73 million 1.00 million 1.12 million 21.58 million 16.07 million
			159.95 million

As advised by the Group and pursuant to the opinion provided by the Company’s PRC Legal Adviser, since the property has been subject to various court orders and sealed up by Lianyungang Haizhou District People’s Court（連雲港市海州區人民法院）, Linxiang People’s Court（臨湘市人民法院）, Lianyungang Ganyu District People’s Court

（連雲港市贛榆區人民法院）and Lianyungang Intermediate People’s Court（連雲港市中級人民法院）in relation to various legal proceedings, the property may be restricted for use, occupy, lease and transfer. Therefore, we have attributed no commercial value to the property. For reference purpose, assuming that the property can be freely transferred in the market without restriction, the Market Value of the property in existing state as at the Valuation Date is RMB352,700,000.

We have been provided with a legal opinion regarding the property interest by the Company’s PRC Legal Adviser, which contains, inter alia, the following:
a. The property is free from any mortgage;
b. The property is sealed up by the by Lianyungang Haizhou District People’s Court（連雲港市海州區人民法院）, Linxiang People’s Court（臨湘市人民法院）, Lianyungang Ganyu District People’s Court（連雲港市贛榆區人民法院）and Lianyungang Intermediate People’s Court（連雲港市中級人民法院）and subject to a restriction on use, occupy, lease and transfer;
c. The lessees of the property have the rights to terminate the lease agreements subject to and accordance with applicable laws and regulations;
d. Lianyungang Huajin Huahong is legally and validly in possession of the property; and

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APPENDIX VIII

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

e. Lianyungang Huajin Huahong has the rights to use, occupy and sale the property subject to and accordance with the applicable laws and regulations.
As the property is a major asset held by the Group, we are of the view that the property is a material property. Details of the material property:
a. General description of location of : The property is located at the southeast corner of the intersection of the property No. 242 Provincial Road (242 省道）and Xufu Dong Road（徐福東路）in Ganyu New City District（贛榆新城區）of Lianyungang City. It is one of the major commercial developments in the Ganyu Ocean Economic Development Zone（贛榆海洋經濟開發區）. The vicinity of the property has different cultural and commercial facilities available, including Jiangsu Marine Science & Technology Museum（江蘇海洋科技館）, tourist pier, Marine Wetland Park（海洋濕地公園）, etc. Jiangsu Ocean University seaside campus（江蘇海洋大學海濱校區）which is under construction is situated in the east of the Ganyu New City District and expect to be completed in 2026. Accessibility is considered reasonable as there are various options available for public transport such as Ganyu Station（贛榆站）and two bus terminals
（汽車客運站）. The property is served by No. 242 Province Road and G228 National Road (G228國道）.
b. Details of encumbrances, liens, : As advised by the Group, the property is sealed up by Lianyungang pledges, mortgages against the Haizhou District People’s Court（連雲港市海州區人民法院）, property Linxiang People’s Court（臨湘市人民法院）, Lianyungang Ganyu District People ’s Court（連雲港市贛榆區人民法院）and Lianyungang Intermediate People’s Court（連雲港市中級人民法院）in relation to various legal proceedings as at the Valuation Date. (see Notes (9) and (10))
c. Environmental issue : Pursuant the PRC Legal Adviser, as advised by the Group, the Group, as the developer of the property, has not yet arranged the acceptance inspection of the amenities for the environmental protection facilities. According to the relevant laws and regulations on environmental protection, the property is restricted for production or use until the amenities of environmental protection facilities have passed the acceptance inspection.
d. Details of investigations, notices, : As advised by the Group, the property is sealed up by Lianyungang pending litigation, breaches of law Haizhou District People’s Court（連雲港市海州區人民法院）, or title defects Linxiang People’s Court（臨湘市人民法院）, Lianyungang Ganyu District People ’s Court（連雲港市贛榆區人民法院）and Lianyungang Intermediate People’s Court（連雲港市中級人民法院）in relation to various legal proceedings as at the Valuation Date. (see Notes (9) and (10))

VIII – 19

APPENDIX VIII

VALUATION REPORT ON PROPERTIES HELD BY THE SCHEME SUBSIDIARIES

e. Future plans for construction, renovation, improvement or development of the property and estimated associated costs
: As advised by the Group, the property was under the construction process; the construction works of the CIP were completed and pending for the issuance of Construction Works Completion Acceptance Report by relevant authorities as at the Valuation Date.
f. Plans to dispose of or change the use of the property
: As advised by the Group, the Group was planning to dispose the property as at the Valuation Date.

VIII – 20

GENERAL INFORMATION

APPENDIX IX

(1) RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this prospectus 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 prospectus misleading.

(2) DISCLOSURE OF INTERESTS

(a) Interest of Directors

As at the Latest Practicable Date, the Directors and chief executive of the Company had the following interests and short positions in the Shares, underlying Shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

Long position in the shares of the Company

			Approximate
			percentage of
			the total
			issued share
		Number of	capital of the
Name of director	Capacity/Nature of interest	Shares held	Company
Mr. Jiang Jiancheng	Beneficial owner	27,868,000	0.440%
Mr. Ke Xionghan	Beneficial owner	10,120,000	0.160%
Mr. Chen Zhifeng	Beneficial owner	900,000	0.014%
Ms. Ho Wing Yan	Beneficial owner	900,000	0.014%
Mr. Yang Yunguang	Beneficial owner	900,000	0.014%
Mr. Li Dawei	Beneficial owner	40,000	0.001%

Notes:

(1) As at the Latest Practicable Date, the total number of issued shares of the Company was 6,332,312,083.

IX – 1

GENERAL INFORMATION

APPENDIX IX

Long position in the share options of the Company

		Number of
		underlying
	Number of	Shares in
	share options	respect of
	directly	share options
	beneficially	beneficially
Name of director	owned	owned
Mr. Chong Cha Hwa	900,000	900,000

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor chief executive of the Company has registered an interests and short positions in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

(b) Substantial Shareholders

So far as is known to the Directors, as at the Latest Practicable Date, the following persons (other than Directors or chief executives of the Company) had, or were deemed or taken to have an interest or short position in the Shares and underlying Shares, which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group:

IX – 2

GENERAL INFORMATION

APPENDIX IX

Long positions in Shares and underlying shares of equity derivatives of the Company as at the Latest Practicable Date:

			Percentage of the
		Number of	issued share
		shares held	capital of the
Name of Shareholder	Capacity	(Note 1)	Company
Beidahuang Business Group (HK)	Beneficial owner	660,000,000 (L)	10.42%
International Trade Co., Limited
(formerly known as Beidahuang (HK)
International Trade Co., Limited)
(‘‘Beidahuang HK’’)
Heilongjiang Nongken Beidahuang	Interest of controlled	660,000,000 (L)	10.42%
Business Trade Liability Group Co.,	corporation	(Note 2)
Ltd* (‘‘Beidahuang Business Group’’)
Beidahuang Agribusiness Group Co., Ltd*	Interest of controlled	660,000,000 (L)	10.42%
(formerly known as Heilongjiang	corporation	(Note 2)
Beidahuang Agribusiness Group
Corporation*) (‘‘Beidahuang Group’’)
Jiang Jianjun	Beneficial owner	782,966,165 (L)	12.36%
	Interest of spouse	12,944,000 (L)	0.20%
Li Zhuoxun	Interest of spouse	782,966,165 (L)	12.36%
		(Note 3)
	Beneficial owner	12,944,000 (L)	0.20%

For identification purpose only

Notes:

(1) The letter ‘‘L’’ denotes the person’s long position in such securities. The number of Shares are the number of Shares held as at the Latest Practicable Date and the percentage of the issued share capital of the Company is calculated on the basis of 6,332,312,083 Shares in issue as at the Latest Practicable Date.
(2) These 660,000,000 shares were held by Beidahuang HK, which was wholly owned by Beidahuang Business Group, which in turn was wholly owned by Beidahuang Group. Accordingly, each of Beidahuang Business Group and Beidahuang Group was deemed to be interested in the 660,000,000 shares held by Beidahuang HK by virtue of SFO.
(3) Ms. Li Zhuoxun is the spouse of Mr. Jiang Jianjun and is therefore deemed to be interested in all the shares held by Mr. Jiang Jianjun by virtue of the SFO.

IX – 3

GENERAL INFORMATION

APPENDIX IX

Save as disclosed above, as at the Latest Practicable Date, the Directors were not aware of any other person (other than the Directors and chief executives of the Company) who had, or was deemed to have, an interest or short position in the Shares and underlying Shares which are required to be notified to the Company and the Stock Exchange pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO, as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO.

(3) MATERIAL ADVERSE CHANGE

(4) LITIGATION

Save as disclosed below, as at the Latest Practicable Date, no litigation or claim of material importance was known to the Directors to be pending or threatened against any member of the Group.

(a) On 18 August 2015, the Company received a writ of summons issued from the High Court of Hong Kong (the ‘‘Writ’’) relating to a claim by Mr. Qu Shuncai (‘‘Mr. Qu’’), a former Director of the Company. Pursuant to the Writ, Mr. Qu claims against the Company for the sum of HK$6,069,000 being damages for the Company’s wrongful refusal of the issue of 2,500,000 shares of the Company to him upon his exercise of the share options. The trial was heard before Judge from 8 December 2022 to 14 December 2022, and on 10 February 2023, it was adjudicated by the Court that the Company shall pay damages to the Plaintiff, assessed at HK$4,394,000, and costs. The Company has decided to appeal against the said judgment, and thus the Company filed a Notice of Appeal on 6 March 2023.
(b) On 24 October 2019, the Company received a writ of summons (under HCA 1948 of 2019) issued on behalf of Gemini Funds Limited for an order to direct the Company to deliver up the share certificate of 5,000,000 (Bonus) Shares issued in January 2016 and damages to be assessed. The said Gemini Funds Limited has also taken out an application for summary judgment against the Company returnable before a Master of the High Court on 9 April 2020. The legal representative of the Company filed an Acknowledgment of Service on 6 November 2019, and the Company has filed a notice to the Court to oppose the application by the said Plaintiff to enter judgment against the Company. The hearing was heard before a Judge on 21 January 2021 and pursuant to the Judgement, the Company delivered up the said share certificate to the Plaintiff on 24 March 2021. At the same time, the Company filed a Notice to Appeal on 18 February 2021.

IX – 4

GENERAL INFORMATION

APPENDIX IX

(c) On 6 March 2023, the Company filed a Notice of Appeal to the Court to appeal against the Judgment of HCA 1867 of 2015 that the quantum of damages be HK$2,944,000.00 only.
(d) On 21 February 2023, Lianyungang Huajin Huahong received a civil ruling（民事裁定書）issued on behalf of Sun Jie（孫傑）(‘‘Sun’’) under (2023) Su 0706 Minchu No. 1584（(2023)蘇0706民初1584號）. According to the civil ruling（民事裁定書）, Sun being the plaintiff, requested (i) an order for repayment of the principal amount of borrowings amounting to RMB10,000,000 and interests thereon (with interest to be calculated at 4 times of the LPR from 19 August 2022 to the date of actual payment); (ii) an order for legal fees of RMB340,000, as well as costs of litigation and preservation expense of the case. The case has been appealed to the Lianyungang Intermediate People’s Court of Jiangsu Province and on 22 November 2023, Lianyungang Huajin Huahong received a civil judgment under (2023) Su 07 Minchuzhong No. 4275（(2023)蘇07民初終4275號）. Pursuant to the civil judgment, (a) in respect of (i) above, Lianyungang Huajin Huahong shall repay to Sun the principal amount of the borrowing of approximately RMB9,735,518.35 and interest of approximately RMB47,071.22; (b) in respect of (ii) above, Lianyungang Huajin Huahong shall pay to Sun the attorney’s fee of RMB340,000; (c) dismissed other litigation claims filed by Sun.
(e) On 23 April 2023, Lianyungang Huajin Huahong received a civil mediation（民事調解書）issued on behalf of Lianyungang Wushun Communication Engineering Co., Ltd.（連雲港吾順通信工程有限公司）(‘‘Wushun’’) under (2023) Su 0707 Minchu No. 2761（(2023)蘇0707民初2761號）. According to the civil mediation（民事調解書）, Wushun being the plaintiff, after the trial and mediation by the court, the parties voluntarily reached the following mediation: (i) Lianyungang Huajin Huahong shall pay the construction payables of RMB786,518 to Wushun in three installments, and in the case of late payment, it shall be subject to interest, which shall be calculated from 7 January 2022 to the date of actual payment with maximum amount not exceeding RMB157,303; (ii) the dispute over the construction payables between both parties shall be settled in one lump sum and there shall be no other disputes.

(5) SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of any compensation (other than statutory compensation)).

IX – 5

GENERAL INFORMATION

APPENDIX IX

(6) OTHER DISCLOSURES UNDER THE SFO

As at the Latest Practicable Date, none of the Directors was a director or employee of a company which had, or was deemed to have, an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

(7) MATERIAL CONTRACTS

The following contracts (being contracts not entered into in the ordinary course of business) had been entered into by members of the Group within two years immediately preceding the Latest Practicable Date:

(a) the strategic cooperation framework agreement dated 7 September 2022 entered into between the Company and Xishuangbanna Jinggu Agricultural Development Co., Ltd.*
（西雙版納精谷農業開發有限公司）in relation to the proposed cooperation in the import and export businesses in Southeast Asia for nil consideration;
(b) the purchase cooperation framework agreement dated 11 October 2022 entered into between the Company, Shenzhen Meiming Wenshi and Shenzhen City Huilin Soybean Technology Co., Ltd.*（深圳市匯林大豆技術有限公司）for the proposed cooperation in the purchase of commodities including but not limited to oil, soybean, sugar, etc. for nil consideration;
(c) the sale and purchase agreement dated 8 November 2022 entered into between, among others, Shenzhen Zhenxin Zhiyuan Investment Co., Ltd.（深圳市臻信致遠投資有限公司）and Mr. Liao Ping for the disposal of 55% equity interest in Beijing Mumian Shangyuan Investment Management Co., Ltd.（北京木棉上元投資管理有限公司）for a consideration of RMB550,000;
(d) the Term Sheet;
(e) the Restructuring Agreement; and
(f) the Extension Agreement.

(8) INTEREST IN ASSETS OR CONTRACTS

As at the Latest Practicable Date, no contract or arrangement of significance in relation to the Group’s business to which the Group or any of its subsidiaries was a party and in which any of the Directors had a material interest, whether directly or indirectly, subsisted as at the Latest Practicable Date.

IX – 6

GENERAL INFORMATION

APPENDIX IX

None of the Directors has any direct or indirect interests in any assets which had been acquired or disposed of by or leased to, or which are proposed to be acquired or disposed of by or lease to, the group or any of its subsidiaries during the period since 31 December 2023, the date to which the latest published audited financial statements of the group were made up, up to and including the Latest Practicable Date.

(9) DIRECTORS’ INTEREST IN COMPETING BUSINESS

As at the Latest Practicable Date, none of the Directors nor their respective close associates had any business or interests in a business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

(10) EXPERTS’ QUALIFICATIONS AND CONSENTS

The following is the qualification of the expert who has given its opinions or advice which are included in this circular:

Name Qualifications

Alpha Financial Group Limited

A corporation licensed to carry out Type 1 (dealing in securities) and Type 6 (advising on corporate finance) regulated activities under the SFO

HLB Hodgson Impey Cheng Limited

Certified Public Accountant under Professional Accountants Ordinance (Cap. 50)

Registered Public Interest Entity Auditor under Accounting and Financial Reporting Council Ordinance (Cap. 588)

International Valuation Limited Independent valuer

As at the Latest Practicable Date, each of Alpha Financial Group Limited, HLB Hodgson Impey Cheng Limited and International Valuation Limited:

(a) has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter dated 24 July 2024 and references to its names, in the form and context in which they respectively appear;
(b) did not have any shareholding, directly or indirectly, in any member of the Group or any rights (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group; and

IX – 7

GENERAL INFORMATION

APPENDIX IX

(c) did not have any direct or indirect interest in any assets which have been, since 31 December 2023 (being the date to which the latest published audited consolidated financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

(11) MISCELLANEOUS

(a) The registered office of the Company is located at P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands and the principal place of business of the Company in Hong Kong is at Room 225, 2/F, Mega Cube, 8 Wang Kwong Road, Kowloon Bay, Kowloon, Hong Kong.
(b) The branch registrar and transfer office of the Company in Hong Kong is Union Registrars Limited at Suites 3301-04, 33/F, Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong.
(c) The company secretary of the Company is Mr. Chan Kwong Leung, Eric who is an associate member of The Institute of Chartered secretaries and Administrators in the United Kingdom and The Hong Kong Institute of Chartered Secretaries.
(d) The English text of this circular shall prevail over the Chinese text in case of any inconsistency.

(12) DOCUMENTS AVAILABLE ON DISPLAY

Copies of the following documents will be published on the Stock Exchange’s website (http://www.hkexnews.hk) and the Company’s own website (http://www.irasia.com/listco/hk/ chinabeidahuang) for a period of 14 days from the date of this circular:

(a) the Term Sheet;
(b) the Restructuring Agreement;
(c) the Extension Agreement;
(d) the letter from the Independent Financial Adviser, the text of which is set out in pages 50 to 82 in this circular;
(e) the unaudited financial information of the Scheme Subsidiaries, the text of which is set out in Appendix II to Appendix V to this circular;
(f) the assurance report on the compilation of the unaudited pro forma financial information of the Retained Group, the text of which is set out in Appendix VI to this circular;

IX – 8

GENERAL INFORMATION

APPENDIX IX

(g) the valuation report issued by independent valuer in respect of properties held by the Scheme Subsidiaries, the text of which is set out in Appendix VIII to this circular; and
(h) the written consents referred to in the paragraph headed ‘‘(10) Experts’ Qualification and Consents’’ in this appendix.

IX – 9

NOTICE OF EXTRAORDINARY GENERAL MEETING

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China Beidahuang Industry Group Holdings Limited ��

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 00039)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (‘‘EGM’’) of China Beidahuang Industry Group Holdings Limited (the ‘‘Company’’) will be held at Unit E, 30/F., Tower B, Billion Centre, 1 Wang Kwong Road, Kowloon Bay, Kowloon, Hong Kong on 9 August 2024 at 10:30 a.m. for the purpose of considering and, if thought fit, passing with or without amendments, the following resolutions as ordinary resolutions of the Company (unless otherwise indicated, capitalised terms used in this notice have the same meanings as those defined in the circular of the Company dated 24 July 2024):

ORDINARY RESOLUTIONS

1. ‘‘THAT

(a) the restructuring agreement dated 25 January 2024 (‘‘Restructuring Agreement’’) and entered into between the Company and China Dynamic (Hong Kong) Limited 中泰（香港）有限公司 (the ‘‘Investor’’) in relation to the proposed restructuring of the Company and its subsidiaries (the ‘‘Group’’) and the transactions referred thereunder, including but not limited to (i) the subscription of 850,000,000 Shares by the Investor (the ‘‘Subscription Shares’’), (ii) the issue of 377,879,793 Shares (the ‘‘Scheme Shares’’) at an issue price of HK$0.10 per Scheme Share (the ‘‘Scheme Share Issue’’), (iii) the Disposal (as defined below), and (iv) the Creditors’ Scheme (as defined below), and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified in all respects;
(b) conditional upon The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’) granting the listing of, and permission to deal in the Subscription Shares, the directors (the ‘‘Directors’’, and each a ‘‘Director’’) of the Company be and hereby granted a specific mandate to allot and issue the Subscription Shares, such specific mandate being in additional to and not prejudicing or revoking any general or specific mandate(s) which has/have been from time to time be granted to the Directors by the shareholders of the Company; and

EGM – 1

NOTICE OF EXTRAORDINARY GENERAL MEETING

(c) any one Director be and is hereby authorised to do all such things and acts and execute all documents (whether under common seal or not) which he considers necessary, desirable or expedient to implement or to give effect to any matters relating to the Restructuring Agreement and the transactions contemplated thereunder.’’
‘‘THAT,
(a) the creditors’ scheme of arrangement (the ‘‘Creditors’ Scheme’’) the terms of which are disclosed in the scheme of arrangement document of the Company dated 27 October 2023 (details of which are set out in the section headed ‘‘Letter from the Board – The Creditors’ Scheme’’ in the circular of the Company dated 24 July 2024), which has been effected as a scheme under Part 13 of the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), be and are hereby approved, confirmed and ratified in all respects, subject to any modification thereof or addition thereof approved or imposed by the High Court (if any);
(b) the proposed payment of HK$45,000,000 to a company to be incorporated in Hong Kong with limited liability, being a special purpose vehicle to be held and controlled by the persons to be elected and appointed as the administrators of the Creditors’ Scheme in accordance with the terms of the Creditors’ Scheme (the ‘‘Scheme Company’’) in accordance with the terms of the Creditors’ Scheme, funded from the net proceeds of the Subscription Shares be and is hereby approved;
(c) the proposed allotment and issue of Scheme Shares in accordance with the terms of the Creditors’ Scheme be and is hereby approved;
(d) conditional upon the Stock Exchange granting the listing of, and permission to deal in the Scheme Shares, the Directors of the Company be and hereby granted a specific mandate to allot and issue the Scheme Shares, such specific mandate being in additional to and not prejudicing or revoking any general or specific mandate(s) which has/have been from time to time be granted to the Directors by the shareholders of the Company;
(e) the proposed disposal of the interests and assets of a group of wholly-owned subsidiaries of the Company in the PRC, being (1) 深圳市前海大荒緣融資有限公司 (Shenzhen Qianhai Dahuangyuan Financing Lease Co., Ltd), (2) 臨湘市強盛礦業有限責任公司 (Linxiang Qiangsheng Mining Industry Company Limited), (3) 連雲港華金華鴻實業有限公司 (Lianyungang Huajin Huahong Industrial Co., Ltd), and (4) 深圳市美名問世商貿有限公司 (Shenzhen Meiming Wenshi Trading Limited), and their respective subsidiaries to the Scheme Company pursuant to the Creditors’ Scheme (the ‘‘Disposal’’) be and is hereby approved; and

EGM – 2

NOTICE OF EXTRAORDINARY GENERAL MEETING

(f) any one Director be and is hereby authorised to do all such things and acts and execute all documents (whether under common seal or not) which he considers necessary, desirable or expedient to implement or to give effect to any matters relating to the Creditors’ Scheme and the transactions contemplated thereunder.’’

By Order of the Board China Beidahuang Industry Group Holdings Limited Jiang Jiancheng Chairman

Hong Kong, 24 July 2024

Notes:

A member of the Company entitled to attend and vote at the meeting is entitled to appoint another person as his/ her/its proxy to attend and vote on his/her/its behalf. A member who is the holder of two or more Shares may appoint more than one proxy to represent him/her/it and vote on his/her/its behalf. A proxy needs not be a member of the Company. If more than one proxy is so appointed, the appointments shall specify the number of Shares in respect of which each such proxy is so appointed.
The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed, or a notarially certified copy of such power or authority, must be lodged with the Company’s branch share registrar and transfer office in Hong Kong, Union Registrars Limited at Suites 3301-04, 33/F., Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong not less than 48 hours before the time appointed for holding the meeting or any adjournment thereof (as the case may be).
Delivery of an instrument appointing a proxy should not preclude a member from attending and voting in person at the meeting or any adjournment thereof (as the case may be) should he/she/it so wishes and, in such event, the instrument appointing a proxy shall be deemed to be revoked.
Where there are joint holders of any Shares, any one of such persons may attend and vote at the meeting personally or by proxy in respect of such Shares as if he/she were solely entitled thereto provided that if more than one of such joint holders be present at the meeting personally or by proxy, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holder(s), and for this purpose seniority will be determined by the order in which the names stand in the register of members of the Company in respect of the joint holding.
The register of members of the Company will be closed from Wednesday, 7 August 2024 to Friday, 9 August 2024 (both days inclusive) during which period no transfer of Shares will be registered and effected. In order to qualify for attending and voting at the meeting, all transfers of Shares accompanied by the relevant share certificates and the appropriate share transfer forms must be lodged with the Company’s branch share registrar and transfer office in Hong Kong, Union Registrars Limited at Suites 3301-04, 33/F., Two Chinachem Exchange Square, 338 King’s Road, North Point, Hong Kong for registration not later than 4:00 p.m. on Tuesday, 6 August 2024.

EGM – 3

NOTICE OF EXTRAORDINARY GENERAL MEETING

If Typhoon Signal No. 8 or above, or a ‘‘black’’ rainstorm warning or extreme conditions caused by super typhoons is in effect in Hong Kong at any time after 8:00 a.m. on the date of the EGM, the meeting will be adjourned. The Company will publish an announcement on the website of the Company at www.irasia.com/listco/hk/chinabeidahuang and on the HKEXnews website of The Stock Exchange of Hong Kong Limited at www.hkexnews.hk to notify shareholders of the Company of the date, time and venue of the adjourned meeting.

As at the date of this notice, the Executive Directors of the Company are Mr. Jiang Jiancheng (Chairman), Mr. Liu Xiaopeng (Vice-chairman), Mr. Ke Xionghan and Mr. Chen Chen; the Non-executive Directors of the Company are Mr. Zhao Wanjiang (Vice-chairman), Ms. Ho Wing Yan and Mr. Li Dawei; and the Independent Non-executive Directors of the Company are Mr. Chong Cha Hwa, Mr. Yang Yunguang and Mr. Chen Zhifeng.

EGM – 4

AI assistant

Chen Hsong Holdings Limited — Proxy Solicitation & Information Statement 2024

48906_rns_2024-07-23_b1d3ae0e-f237-4d5f-a499-eaa0b0d9d44f.pdf

China Beidahuang Industry Group Holdings Limited ���������������

(1) PROPOSED RESTRUCTURING INVOLVING CONNECTED TRANSACTION IN RELATION TO THE SUBSCRIPTION UNDER SPECIFIC MANDATE; CREDITORS’ SCHEME; ISSUE OF SCHEME SHARES UNDER SPECIFIC MANDATE; CONNECTED TRANSACTION AND VERY SUBSTANTIAL DISPOSAL IN RELATION TO THE DISPOSAL AND

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

Alpha Financial Group Limited

CONTENTS

DEFINITIONS

DEFINITIONS

the China Securities Regulatory Commission of the PRC

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

China Beidahuang Industry Group Holdings Limited ���������������

(2) NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

THE PROPOSED RESTRUCTURING

A. THE RESTRUCTURING AGREEMENT

Parties

The Subscription

Ranking

Use of Proceeds

LETTER FROM THE BOARD

The Subscription Price

LETTER FROM THE BOARD

Conditions Precedent to the Subscription

LETTER FROM THE BOARD

Completion

Parties’ undertakings

Investor’s undertakings

Restructuring Costs and Loan for Restructuring Costs

LETTER FROM THE BOARD

B. THE CREDITORS’ SCHEME

Creditors’ claims against the Company

LETTER FROM THE BOARD

Steps involved in the Creditors’ Scheme

LETTER FROM THE BOARD

The Scheme Share Issue

LETTER FROM THE BOARD

The Disposal

Conditions precedent to the Creditors’ Scheme

LETTER FROM THE BOARD

Reasons and Benefits for the Proposed Restructuring

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

COMPLIANCE WITH CSRC FILING RULES

FINANCIAL EFFECT OF THE DISPOSAL AND THE PROPOSED RESTRUCTURING

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Information on the Scheme Subsidiaries

(a) Shenzhen Qianhai Dahuangyuan Financing Lease Co., Ltd.

(b) Linxiang Qiangsheng Mining Industry Company Limited

(c) Lianyungang Huajin Huahong Industrial Co., Ltd

(d) Shenzhen Meiming Wenshi Trading Limited

LETTER FROM THE BOARD

Valuation

LETTER FROM THE BOARD

Business of the Retained Group

The Remaining Food Business

LETTER FROM THE BOARD

LETTER FROM THE BOARD

The Rental Business

LETTER FROM THE BOARD

LETTER FROM THE BOARD

The Mineral Trading Business

LETTER FROM THE BOARD

Financial information of the Retained Group

Consolidated financial information of the Retained Group

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Future plan of the Retained Group

Chen Hsong Holdings Limited Proxy Solicitation & Information Statement 2024

China Beidahuang Industry Group Holdings Limited ��

China Beidahuang Industry Group Holdings Limited ��

China Beidahuang Industry Group Holdings Limited ��