China Resources Building Materials Technology Holdings Limited - Proxy Solicitation & Information Statement 2017

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Landing International Development Limited, you should at once hand this circular and the accompanying forms of proxy to the purchaser(s) or the transferee(s) or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or the transferee(s).

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

The circular is for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of the Company.

Landing International Development Limited 藍鼎國際發展有限公司

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(Stock code: 582)

(1) PROPOSED CAPITAL REORGANISATION; (2) CHANGE IN BOARD LOT SIZE;

(3) PROPOSED RIGHTS ISSUE ON THE BASIS OF FIVE RIGHTS SHARES FOR EVERY ONE NEW SHARE HELD ON THE RECORD DATE;

(4) CONNECTED TRANSACTION IN RELATION TO PAYMENT OF UNDERWRITING COMMISSION;

(5) APPLICATION FOR WHITEWASH WAIVER; AND (6) NOTICE OF SPECIAL GENERAL MEETING

Financial adviser to the Company

Underwriters of the Rights Issue

Landing International Limited

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

A letter from the Board is set out on pages 16 to 42 of this circular. A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 43 to 44 of this circular. A letter of advice from Veda Capital to the Independent Board Committee and the Independent Shareholders is set out on pages 45 to 72 of this circular.

To qualify for the Rights Issue, the Shareholder must be registered as a member of the Company on the Record Date, which is currently expected to be Thursday, 30 March 2017. In order to be registered as a member of the Company on the Record Date, the Shareholders must lodge any transfers of New Shares (together with the relevant share certificate(s)) with the Share Registrar by 4:30 p.m. on Monday, 27 March 2017. The last day of dealings in New Shares on a cum-rights basis is therefore expected to be Thursday, 23 March 2017. The New Shares will be dealt with on an ex-rights basis from Friday, 24 March 2017.

A notice convening the SGM to be held at 1804A, 18/F., Tower 1, Admiralty Centre, 18 Harcourt Road, Admiralty, Hong Kong at 10:00 a.m. on Tuesday, 21 March 2017 is set out on pages SGM–1 to SGM–3 of this circular. If a Shareholder is not able to attend the SGM in person, such Shareholder is requested to complete and signedreturn theor aenclosedcertifiedformcopyofofproxysuch powerin accordanceof attorneywithtothetheinstructionsoffice of theprintedSharethereonRegistrartogetherat Levelwith22,anyHopewellpower ofCentre,attorney183orQueenother’sauthorityRoad East,(if Hongany) underKong whichas soonit asis possible and in any event not less than 48 hours before the time appointed for holding the SGM. Completion and return of the form of proxy will not preclude a ShareholderCentre, 183 Queenfrom attending’s Road East,and HongvotingKong.in person at the SGM should the Shareholder so desire. The Share Registrar is Tricor Standard Limited at Level 22, Hopewell

ofThetheRightsRightsIssueIssueis’’conditionaland the ‘‘Underwritingupon the fulfillmentAgreementof ’’theofconditionsthe ‘‘Letter(or,fromin respectthe Boardof ’’certainin thisconditions,circular. waiver thereof) as set out in the section headed ‘‘Conditions

It should be noted that the Underwriting Agreement contains provisions entitling the Underwriters by notice in writing to the Company at any time prior to the Latest Timeout underfor Terminationthe section headedto terminate‘‘Terminationits obligationsof theunderUnderwritingthe UnderwritingAgreementAgreement’’ on pageson 10thetooccurrence11 of thisofcircular.certain Ifeventsthe Underwritingincluding forceAgreementmajeure. isTheseterminatedevents areby theset Underwriters or does not become unconditional, the Rights Issue will not proceed.

The New Shares are expected to be dealt in on an ex-rights basis from Friday, 24 March 2017. Dealings in the Rights Shares in the nil-paid form will take place from Wednesday, 5 April 2017 to Wednesday, 12 April 2017. If the conditions of the Rights Issue are not fulfilled on or before 4:00 p.m. on Thursday, 20 April 2017 (or such later time and/or date as the Company and the Underwriters may determine), or the Underwriting Agreement is terminated by the Underwriters, the Rights Issue will not proceed. Any persons contemplating buying or selling Shares from the date of the Announcement up to the date on which all the conditions of the Rights Issue are fulfilled, and any dealings in the Rights Shares in their nil-paid form between Wednesday, 5 April 2017 to Wednesday, 12 April 2017, (both days inclusive), bear the risk that the Rights Issue may not become unconditional or may not proceed. Any Shareholders or other persons contemplating dealing in the Shares or nil-paid Rights Shares are recommended to consult their own professional advisers.

24 February 2017

CONTENTS

			Pages
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Summary of	the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		9
Termination	of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		10
Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			12
Letter from	the	Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Letter from	the	Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	43
Letter from	Veda Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		45
Appendix I		— Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II		— Unaudited pro forma financial information of the Group . . .	II-1
Appendix III		— Property valuation report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
Appendix IV		— Letter from PricewaterhouseCoopers on the
		profit estimate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
Appendix V		— Letter from Kingston Corporate Finance on the
		profit estimate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	V-1
Appendix VI		— General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VI-1
Notice of SGM		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	SGM-1

– i –

DEFINITIONS

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

‘‘%’’ or ‘‘per cent.’’

per cent.;

‘‘acting in concert’’
has the meaning ascribed thereto under the Takeovers Code;
‘‘Announcement’’
the announcement of the Company dated 16 January 2017 in relation to, among other things, the Capital Reorganisation, the Rights Issue, the Connected Transaction and the Whitewash Waiver;
‘‘associate(s)’’
has the meaning ascribed thereto under the Listing Rules;
‘‘Board’’
the board of Directors;
‘‘business day(s)’’
means:
(i) for the purposes of the Underwriting Agreement, any day(s) (other than a Saturday, Sunday or public holiday) on which licensed banks in Hong Kong are generally open for business throughout their normal business hours; and
(ii) for all other purposes, a day on which the Stock Exchange is open for the transaction of business;
‘‘BVI’’
the British Virgin Islands;
‘‘Callisto’’
Callisto Business Limited, a company incorporated in the BVI;
‘‘Capital Reduction’’
the proposed reduction of the issued share capital of the Company through the cancellation of the paid-up capital of the Company to the extent of HK$0.09 on each of the issued ordinary shares of par value HK$0.10 each so that the nominal value of each issued New Share will be HK$0.01 and the credits arising from the Capital Reduction will be credited to the contributed surplus account of the Company whereby the Board will be authorized to utilize credits in the contributed surplus account in such manner as permissible under the bye-laws of the Company and the Companies Act, including to set off accumulated losses of the Company;
‘‘Capital Reorganisation’’
the Capital Reduction and the Sub-Division;
‘‘CCASS’’

the Central Clearing and Settlement System established and operated by HKSCC;

– 1 –

DEFINITIONS

‘‘Companies Act’’
the Companies Act 1981 of Bermuda;
‘‘Companies Ordinance’’
the Companies Ordinance, Chapter 622 of the Laws of Hong Kong (as amended, supplemented or otherwise modified from time to time);
‘‘Companies (Winding Up and Miscellaneous Provisions) Ordinance’’
the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Chapter 32 of the Laws of Hong Kong (as amended, supplemented or otherwise modified from time to time);
‘‘Company’’
Landing International Development Limited, a company incorporated in the Cayman Islands and continued in Bermuda with limited liability, the shares of which are listed on the main board of the Stock Exchange;
‘‘Concert Party Group’’
LIL, Mr. Yang and parties acting in concert with any of them;
‘‘connected person’’
has the meaning ascribed thereto under the Listing Rules;
‘‘Connected Transaction’’
the connected transaction pursuant to the Listing Rules in relation to the payment of the Underwriting Commission;
‘‘controlling shareholder’’
has the meaning ascribed thereto under the Listing Rules;
‘‘Director(s)’’
director(s) of the Company;
‘‘EAF(s)’’
the form of application for use by the Qualifying Shareholders who wish to apply for excess Rights Shares, being in such usual form as may be agreed between the Company and the Underwriters acting for itself and on behalf of the other Underwriters;
‘‘Executive’’
the executive director of the corporate finance division of the SFC or any delegate of the executive director;
‘‘Existing Share(s)’’
ordinary share(s) of HK$0.10 each in the existing share capital of the Company, before the Capital Reorganisation becomes effective;
‘‘Group’’ the Company and its subsidiaries;
‘‘HBL’’
Happy Bay Pte. Ltd., a company incorporated under the laws of Singapore;
‘‘HK$’’

Hong Kong dollar, the lawful currency of Hong Kong;

– 2 –

DEFINITIONS

‘‘HKSCC’’
‘‘Hong Kong’’
‘‘Independent Board Committee’’
‘‘Independent Shareholders’’
‘‘Independent Third Party(ies)’’

Hong Kong Securities Clearing Company Limited;

the Hong Kong Special Administrative Region of the PRC;

an independent board committee of the Company comprising the independent non-executive Directors which has been established to advise the Independent Shareholders on the terms of the Rights Issue, the Underwriting Agreement and the Whitewash Waiver;

Shareholders other than the Concert Party Group and any Shareholders who are involved or interested in the Rights Issue, the Underwriting Agreement and/or the Whitewash Waiver and the transactions contemplated thereunder;

a person who:

(i) is not (and shall not become as a result of the consummation of the Rights Issue) a connected person of the Company and it shall not be deemed a connected person of the Company pursuant to Rules 14A.19 to 14A.21 of the Listing Rules;
(ii) is not financing the subscription of the Rights Shares directly or indirectly by a connected person of the Company;
(iii) is not accustomed to taking instructions from a connected person of the Company in relation to the acquisition, disposal, voting or other disposition of securities of the Company registered in its name or otherwise held by it; and
(iv) would not result in its aggregate holding (direct and indirect) in the total issued share capital of the Company being 10% or more of the Company’s entire issued share capital at any time;
‘‘Irrevocable Undertaking’’
‘‘Jeju Project’’
‘‘Kingston Corporate Finance’’

an irrevocable undertaking granted by LIL in favour of the Company and Kingston Securities;

the Jeju Shinhwa World (previously known as Myths and History Park) project located at Seogwangril in Andeogmyeon, Seogwipo City, Jeju, Korea;

Kingston Corporate Finance Limited, a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO;

– 3 –

DEFINITIONS

‘‘Kingston Securities’’
Kingston Securities Limited, a licensed corporation to carry out Type 1 (dealing in securities) regulated activity under the SFO;
‘‘Landing Jeju’’
Landing Jeju Development Co., Ltd., a wholly-owned subsidiary of the Company, which is incorporated in Korea;
‘‘Last Trading Day’’
11 January 2017, being the date of the Underwriting Agreement and the last trading day for the Existing Shares on the Stock Exchange prior to the release of the Announcement;
‘‘Latest Practicable Date’’
23 February 2017, being the latest practicable date prior to the printing of this circular for ascertaining certain information for the purpose of inclusion in this circular;
‘‘Latest Time for Acceptance’’
4:00 p.m. on Wednesday, 19 April 2017 or such other date and/or time as may be agreed between the Company and the Underwriters, being the latest time for acceptance of the application and payment for the Rights Shares;
‘‘Latest Time for Termination’’
the latest time that the Underwriters can terminate the Underwriting Agreement, being the second business day after the Latest time for Acceptance;
‘‘Les A’’
Les Ambassadeurs Club Limited, a company incorporated in England and Wales with limited liability;
‘‘Les A Club’’
the gambling club owned and operated by Les A;
‘‘LIL’’
Landing International Limited, a company incorporated in the British Virgin Islands and is wholly owned by Mr. Yang;
‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange;
‘‘Mr. Yang’’
Mr. Yang Zhihui, an executive Director and chairman of the Board and the controlling shareholder of the Company;
‘‘New Share(s)’’
ordinary share(s) of HK$0.01 each in the issued and unissued share capital of the Company upon the Capital Reorganisation becoming effective;

– 4 –

DEFINITIONS

‘‘Non-Qualifying Shareholders’’ those Overseas Shareholders whom the Directors, based on legal opinions provided by the Company’s legal advisers, consider it necessary or expedient not to offer the Rights Shares to such Shareholders on account either of legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place;
‘‘Overseas Shareholder(s)’’
Shareholder(s) whose name(s) appear(s) on the register of members of the Company at the close of business on the Record Date and whose address(es) as shown on such register is (are) outside Hong Kong;
‘‘PAL(s)’’
the renounceable provisional allotment letter(s) proposed to be issued to the Qualifying Shareholders in connection with the Rights Issue;
‘‘Posting Date’’
Friday, 31 March 2017 or such other date as the Underwriters may agree in writing with the Company, as the date of despatch of the Prospectus Documents to the Qualifying Shareholders or the Prospectus for information only (as the case may be) to the Non-Qualifying Shareholders;
‘‘PRC’’
People’s Republic of China;
‘‘Profit Warning Announcement’’
the profit warning announcement of the Company dated 10 January 2017 in relation to the preliminary review of the unaudited consolidated management accounts of the Group for the year ended 31 December 2016;
‘‘Prospectus’’
the prospectus to be despatched to Shareholders containing details of, among other things, the Rights Issue;
‘‘Prospectus Documents’’
the Prospectus, PAL and EAF;
‘‘Qualifying Shareholders’’
Shareholders whose names appear on the register of members of the Company on the Record Date, other than the Non-Qualifying Shareholders;
‘‘Record Date’’
Thursday, 30 March 2017 (or such other date as the Underwriters may agree in writing with the Company), as the date by reference to which entitlements to the Rights Issue are expected to be determined;
‘‘Relevant Period’’
the period beginning 6 months immediately prior to the date of the Underwriting Agreement and ending on the Latest Practicable Date;

– 5 –

DEFINITIONS

‘‘Registrar’’

the branch share registrar of the Company in Hong Kong, being Tricor Standard Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong;

‘‘Rights Issue’’
the proposed issue by way of rights on the basis of five Rights Shares for every one New Share in issue and held on the Record Date at the Subscription Price on the terms and subject to the conditions set out in the Underwriting Agreement and the Prospectus Documents;
‘‘Rights Share(s)’’ New Shares to be issued and allotted under the Rights Issue, being 102,829,396,285 New Shares;
‘‘SFC’’ the Securities and Futures Commission of Hong Kong;
‘‘SFO’’
Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (as amended, supplemented or otherwise modified from time to time);
‘‘SGM’’ special general meeting of the Company to be held at 1804A, 18/F., Tower 1, Admiralty Centre, 18 Harcourt Road, Admiralty, Hong Kong at 10:00 a.m. on Tuesday, 21 March 2017 to approve, among other things, the Capital Reorganisation, the Rights Issue, the Underwriting Agreement and the Whitewash Waiver;
‘‘Share(s)’’ the Existing Share(s) or New Share(s) (as the case may be);
‘‘Shareholder(s)’’ holder(s) of Share(s);
‘‘Specified Event’’ an event occurring or matter arising on or after the date of the Underwriting Agreement and prior to the Latest Time for Termination which, if it had occurred or arisen before the date of the Underwriting Agreement, would have rendered any of the warranties contained in the Underwriting Agreement untrue or incorrect in any material respect;
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited;
‘‘Sub-Division’’
following the Capital Reduction, the proposed sub-division of every unissued ordinary share of HK$0.10 each in the authorized but unissued share capital of the Company into ten New Shares of HK$0.01 each;
‘‘Subscription Price’’ HK$0.05 per Rights Share;

– 6 –

DEFINITIONS

‘‘subsidiary’’
‘‘taken up’’
‘‘Takeovers Code’’
‘‘Underwriters’’
‘‘Underwriting Agreement’’
‘‘Underwriting Commission’’
‘‘Underwritten Shares’’
‘‘US$’’
‘‘Veda Capital’’
has the same meaning ascribed thereto in section 15 of the Companies Ordinance and ‘‘subsidiaries’’ shall be construed accordingly;
in relation to any Rights Shares, means those Rights Shares in respect of which duly completed PALs (accompanied by cheques or banker’s cashier order for the full amount payable on application which are honoured on first or, at the option of the Company, subsequent presentation) have been received on or before the Latest Time for Acceptance and references to ‘‘take up’’ shall be construed accordingly;
the Hong Kong Code on Takeovers and Mergers;
LIL and Kingston Securities;
the underwriting agreement dated 11 January 2017 entered into between the Company and the Underwriters in relation to the underwriting arrangement in respect of the Rights Issue, as varied and supplemented by an amendment letter agreement dated 23 February 2017 made by the same parties;
has the meaning as defined in the paragraph “Commission” under the section ‘‘Proposed Rights Issue’’ contained in the Letter from the Board to this circular;
all the Rights Shares in excess of the aggregate of 35,308,546,370 Rights Shares that shall be provisionally allotted to and subscribed for by LIL pursuant to the Irrevocable Undertaking, which are fully underwritten by the Underwriters pursuant to the terms and subject to the conditions set out in the Underwriting Agreement;
United States dollar, the lawful currency of the United States;
Veda Capital Limited, a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Rights Issue, the Underwriting Agreement, the Connected Transaction, and the Whitewash Waiver; and

– 7 –

DEFINITIONS

‘‘Whitewash Waiver’’ a waiver of the obligation of LIL to make a mandatory general offer as a result of the underwriting of the Rights Issue for all the Shares not already owned, controlled or agreed to be acquired by them pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code by the Executive as referred to this circular.

The English translation of Chinese names or words in this circular, where indicated, are included for information purpose only, and should not be regarded as the official English translation of such Chinese names or words.

– 8 –

SUMMARY OF THE RIGHTS ISSUE

SUMMARY

The following information is derived from, and should be read in conjunction with, the full text of this circular:

Basis of the Rights Issue

: five Rights Shares for every one New Share held on the Record Date

Number of Existing Shares in issue as at the Latest Practicable Date

: 2 0 , 5 6 5 , 8 7 9 , 2 5 7 E x i s t i n g S h a r e s ( o r 20,565,879,257 New Shares upon the Capital Reorganisation becoming effective)

Number of Rights Shares

: 102,829,396,285 Rights Shares (assuming no change in the number of issued Shares on or before the Record Date)

Subscription Price : HK$0.05 per Rights Share

As at the Latest Practicable Date, the Company has no outstanding share options, convertible securities, options or warrants in issue which confer any right to subscribe for, convert or exchange into Shares.

– 9 –

TERMINATION OF THE UNDERWRITING AGREEMENT

If, prior to the Latest Time for Termination:

(i) in the absolute opinion of any Underwriter, the success of the Rights Issue would be materially and adversely affected by:
(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the absolute opinion of any Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Rights Issue; or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date hereof) of a political, military, financial, economic or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the absolute opinion of any Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Rights Issue or otherwise makes it inexpedient or inadvisable to proceed with the Rights Issue; or
(ii) any adverse change in market conditions (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction or trading in securities) occurs which in the absolute opinion of any Underwriter is likely to materially or adversely affect the success of the Rights Issue or otherwise makes it inexpedient or inadvisable to proceed with the Rights Issue; or
(iii) any change in the circumstances of the Company or any member of the Group occurs which in the absolute opinion of any Underwriter will adversely affect the prospects of the Company, including without limiting the generality of the foregoing, the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any of member of the Group or the destruction of any material asset of the Group; or
(iv) any event of force majeure occurs, including without limiting the generality thereof, any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out; or
(v) any other material adverse change in relation to the business or the financial or trading position or prospects of the Group as a whole occurs, whether or not ejusdem generis with any of the foregoing; or

– 10 –

TERMINATION OF THE UNDERWRITING AGREEMENT

(vi) any matter occurs which, had it arisen or been discovered immediately before the date of the Prospectus and not having been disclosed in the Prospectus, would have constituted, in the absolute opinion of any Underwriter, a material omission in the context of the Rights Issue; or
(vii) any suspension in the trading of securities generally or the Company’s securities on the Stock Exchange for a period of more than 10 consecutive business days occurs, excluding any halt or suspension in connection with the clearance of the Announcement or the Prospectus Documents or other announcements or circulars in connection with the Rights Issue; or
(viii) any moratorium, suspension or material restriction on trading of the Shares on the Stock Exchange occurs due to exceptional financial circumstances or otherwise,

any Underwriter shall be entitled by notice in writing to the Company and the other Underwriter, served prior to the Latest Time for Termination, to terminate the Underwriting Agreement. Each Underwriter will also be entitled by notice in writing to rescind the Underwriting Agreement if, prior to the Latest Time for Termination: (a) any material breach of any of the representations, warranties or undertakings contained in the Underwriting Agreement comes to the knowledge of such Underwriter; or (b) any Specified Event comes to the knowledge of such Underwriter.

In the event that the Underwriters exercise their rights to terminate or rescind the Underwriting Agreement, the Rights Issue will not proceed.

– 11 –

EXPECTED TIMETABLE

Set out below is the expected timetable for the Capital Reorganisation and the Rights Issue:

Event Date
2017
Latest time for lodging transfers of the Existing Shares
in order to qualify for attending and voting at the SGM . . . . . . . . . . . . . . . . . . . . . . 4:30 p.m. on
Friday, 17 March
Latest time for lodging forms of proxy
for the purpose of the SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on
Sunday, 19 March
Closure of register of members of the Company
for determining entitlement to attend and vote at the SGM. . . . . . . . . . . . Monday, 20 March to
Tuesday, 21 March
SGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. on
Tuesday, 21 March
Announcement of poll results of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 21 March
Effective day of the Capital Reorganisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 22 March
Commencement of dealings in New Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 22 March
Last day of dealings in New Shares on a cum-rights basis . . . . . . . . . . . . . . . . Thursday, 23 March
First day of dealings in New Shares on an ex-rights basis . . . . . . . . . . . . . . . . . . Friday, 24 March
Latest time for the Shareholders to lodge transfer
of New Shares in order to qualify for the Rights Issue. . . . . . . . . . . . . . . . . . . . . . . . 4:30 p.m. on
Monday, 27 March
Closure of register of members of the Company
(both dates inclusive). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 28 March to
Thursday, 30 March
Record Date for determining entitlements to the Rights Issue . . . . . . . . . . . . . Thursday, 30 March
Register of members of the Company re-opens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 31 March
Despatch of Prospectus Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 31 March
First day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . 9:00 a.m. on Wednesday, 5 April
Latest time for splitting nil-paid Rights Shares. . . . . . . . . . . . . . . . . 4:30 p.m. on Friday, 17 April

– 12 –

EXPECTED TIMETABLE

Event Date
2017
First day for free exchange of existing share certificates
for new share certificates for the New Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 11 April
Last day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on
Wednesday, 12 April
Latest Time for Acceptance and the applications
for excess Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on
Wednesday, 19 April
Latest time to terminate the Underwriting Agreement and
for the Rights Issue to become unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on
Thursday, 20 April
Announcement of results of the Rights Issue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 25 April
Refund cheques to be despatched in relation to wholly or
partially unsuccessful applications for excess
Rights Shares on or before. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 26 April
Certificates for fully paid Rights Shares to be
despatched on or before . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 26 April
Last day for trading of the Shares with board lot of 5,000
New Shares in the original counter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 26 April
Commencement of dealings in fully-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . 9:00 a.m. on
Thursday, 27 April
Effective date of the change in board lot size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 27 April
Designated broker starts to stand in the market to provide matching
service for the sale and purchase of odd lots of New Shares . . . . . . . . . . . . . . . . . . . 9:00 a.m. on
Thursday, 27 April
Original counter for trading in the Shares in board lot of 5,000
New Shares each becomes counter for trading in the Shares
in board lot of 60,000 New Shares each . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:00 a.m. on
Thursday, 27 April
Temporary counter for trading in the Shares in board lot of 5,000
New Shares each opens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9:00 a.m. on
Thursday, 27 April

– 13 –

EXPECTED TIMETABLE

Event Date 2017 First day of parallel trading in Shares (in new board lot of 60,000 New Shares each and old board lot of 5,000 New Shares each) . . . . . . . . . . . . . . . . 9:00 a.m. on Thursday, 27 April Temporary counter for trading in the Shares in old board lot of 5,000 New Shares each closes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Friday, 19 May Last day of parallel trading in Shares (in new board lot of 60,000 New Shares each and old board lot of 5,000 New Shares each) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Friday, 19 May Designated broker ceases to stand in the market to provide matching services for the sale and purchase of odd lots New Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Friday, 19 May Last day for free exchange of existing share certificates for new share certificates for the New Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:30 p.m. on Tuesday, 23 May

Note:

All times in this circular refer to Hong Kong local time and date.

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

Effect of bad weather on the Latest Time for Acceptance

The Latest Time for Acceptance will not take place at 4:00 p.m. on Wednesday, 19 April 2017 if there is a tropical cyclone warning signal number 8 or above, or a ‘‘black’’ rainstorm warning, if such circumstances are:

in force in Hong Kong at any local time before 12:00 noon and no longer in force after 12:00 noon on the Latest Time for Acceptance. The Latest Time for Acceptance will not take place at 4:00 p.m. on the Latest Time for Acceptance, but will be extended to 5:00 p.m. on the same business day instead; or

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EXPECTED TIMETABLE

in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on the Latest Time for Acceptance. The Latest Time for Acceptance will not take place on the Latest Time for Acceptance, but will be rescheduled to 4:00 p.m. on the following Business Day which does not have either of those warnings in force at any time between 9:00 a.m. and 4:00 p.m..

If the Latest Time for Acceptance does not take place on Wednesday, 19 April 2017, the dates mentioned in the above section headed ‘‘Expected timetable’’ in this circular may be affected. An announcement will be made by the Company in such event.

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LETTER FROM THE BOARD

Landing International Development Limited 藍鼎國際發展有限公司

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(Stock code: 582)

Directors:

Executive Directors: Mr. Yang Zhihui (Chairman) Ms. Zhou Xueyun

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

Independent non-executive Directors: Mr. Fok Ho Yin, Thomas Mr. Chen Lei Mr. Bao Jinqiao

Head office and principal place of business in Hong Kong: Suites 5801–5804, 58/F. Two International Finance Centre No. 8 Finance Street, Central Hong Kong

24 February 2017

To the Shareholders

Dear Sir or Madam,

(1) PROPOSED CAPITAL REORGANISATION;

(2) CHANGE IN BOARD LOT SIZE;

(3) PROPOSED RIGHTS ISSUE ON THE BASIS OF FIVE RIGHTS SHARES FOR EVERY ONE NEW SHARE HELD ON THE RECORD DATE;

(4) CONNECTED TRANSACTION IN RELATION TO PAYMENT OF UNDERWRITING COMMISSION;

(5) APPLICATION FOR WHITEWASH WAIVER; AND (6) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement in relation to, among others, the Capital Reorganisation, the change in board lot size, the Rights Issue, the Connected Transaction and the Whitewash Wavier.

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LETTER FROM THE BOARD

Subject to, among others, the Capital Reorganisation becoming effective, the Company proposed to implement the Rights Issue on the basis of five Rights Shares for every one New Share held on the Record Date at the Subscription Price of HK$0.05 per Rights Share. The Company will raise proceeds of approximately HK$5,141 million before expenses (assuming that there is no change in the number of issued Shares on or before the Record Date) by way of the issue of 102,829,396,285 Rights Shares. The Company also proposed to change the board lot size for trading in the Shares from 5,000 New Shares to 60,000 New Shares upon completion of the Rights Issue. The Company also proposed to apply for a Whitewash Waiver so that LIL can subscribe for the Underwritten Shares in full pursuant to its obligations under the Underwriting Agreement in relation to the Rights Issue.

The purpose of this circular is to provide you with, amongst others, (i) further information on the Capital Reorganisation, the change in board lot size, the Rights Issue, the Connected Transaction, and the Whitewash Waiver, (ii) a letter of recommendation of the Independent Board Committee to the Independent Shareholders, (iii) the letter of advice from Veda Capital in respect of the Rights Issue, the Underwriting Agreement, the Connected Transaction and the Whitewash Waiver, (iv) additional information as required under the Takeovers Code and the Listing Rules; and (v) the notice of the SGM.

The Independent Board Committee comprising all the independent non-executive Directors, namely, Mr. Fok Ho Yin, Thomas, Mr. Chen Lei and Mr. Bao Jinqiao, has been established in connection with the Rights Issue, the Underwriting Agreement, the Whitewash Waiver and the Connected Transaction.

Veda Capital has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Rights Issue, the Underwriting Agreement, the Connected Transaction and the Whitewash Waiver. Veda Capital’s appointment has been approved by the Independent Board Committee.

A notice of the SGM is set out on pages SGM-1 to SGM-3 of this circular. The letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 43 to 44 of this circular. The letter from Veda Capital containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 45 to 72 of this circular.

PROPOSED CAPITAL REORGANISATION

The Board proposes to implement the Capital Reorganisation, which will entail the Capital Reduction and the Sub-Division, details of which are as follows:

(a) the Capital Reduction involving the reduction of the issued share capital of the Company through a cancellation of the paid-up capital of the Company to the extent of HK$0.09 on each of the issued ordinary shares of HK$0.10 each so that the nominal value of each issued New Share will be HK$0.01; and
(b) the Sub-Division on the basis that every unissued ordinary share of HK$0.10 each in the authorized but unissued share capital of the Company be sub-divided into ten (10) New Shares of HK$0.01 each.

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LETTER FROM THE BOARD

The credit of HK$1,850,929,133.13 arising from the Capital Reduction will be credited to the contributed surplus account of the Company and the Board will be authorized to utilize credits in the contributed surplus account in such manner as permissible under the bye-laws of the Company and the Companies Act, including to set off accumulated losses of the Company.

As at the Latest Practicable Date, the authorised share capital of the Company was HK$10,000,000,000 comprising of 20,565,879,257 issued Existing Shares and 79,434,120,743 unissued Shares of HK$0.10.

Upon the Capital Reorganisation becoming effective and assuming that there is no change in the number of issued Shares prior to the SGM, the share capital structure of the Company will be as follows:

	Immediately before	Immediately after
	the Capital	the Capital
	Reorganisation	Reorganisation
	becoming effective	becoming effective
Authorised share capital	HK$10,000,000,000	HK$10,000,000,000
Par value	HK$0.10	HK$0.01
Number of authorised Shares	100,000,000,000	1,000,000,000,000
Amount of issued share capital	HK$2,056,587,925.70	HK$205,658,792.57
Number of issued Shares	20,565,879,257	20,565,879,257
Number of unissued Shares	79,434,120,743	979,434,120,743

The New Shares will rank pari passu in all respects with each other and there will be no change in the relative rights of the Shareholders.

The Capital Reorganisation is subject to (i) compliance with the requirements of Section 46(2) of the Companies Act and the obtaining of all necessary regulatory approvals; (ii) the approval by the Shareholders at the SGM by way of a special resolution; and (iii) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in, the New Shares.

As none of the Shareholders has any material interest in the Capital Reorganisation, no Shareholder is required to abstain from voting for such resolution at the SGM.

Application for listing

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

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LETTER FROM THE BOARD

None of the Shares are listed or dealt in on any other stock exchange other than the Stock Exchange, and at the time the Capital Reorganisation becoming effective, the New Shares in issue will not be listed or dealt in on any other stock exchange other than the Stock Exchange, and no such listing or permission to deal is being or is proposed to be sought.

Reasons for the Capital Reorganisation

The crediting of the amount of HK$1,850,929,133.13 arising from the Capital Reduction to the contributed surplus account of the Company will facilitate the payment of dividends as and when the Directors consider it appropriate in the future. The lower par value of the Shares resulting from the Capital Reorganisation will also allow the Company greater flexibility in setting the issue price for fund raising exercises, including the Subscription Price for the Rights Issue, and for any future equity fund raising exercises. Accordingly, the Capital Reorganisation is in the best interests of the Company and the Shareholders as a whole.

The Capital Reorganisation will not, of itself, alter the underlying assets, business operations, management or financial position of the Company and its subsidiaries except for the payment of related expenses.

Exchange of share certificates

The expected timetable for the Capital Reorganisation is set out on pages 12 to 15 of this circular. Upon completion of the Rights Issue, Shareholders may submit existing share certificates (in green color) in exchange for the new share certificates (in grey color) for the New Shares free of charge to the office of the Company’s branch share registrar, Tricor Standard Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, during the business hours of Tricor Standard Limited from Tuesday, 11 April 2017 to 4:30 p.m. on Tuesday, 23 May 2017. Thereafter, certificates for the New Shares will be accepted for exchange only on payment of a fee of HK$2.50 or such higher amount as from time to time be determined for each new share certificate issued or each existing share certificate submitted, whichever number of share certificate involved is higher.

CHANGE IN BOARD LOT SIZE

The Board proposes to change the board lot size for trading in the Shares from 5,000 New Shares to 60,000 New Shares upon completion of the Rights Issue with effect from 9:00 a.m. on Thursday, 27 April 2017.

Reasons for the change in board lot size

At present, the Existing Shares are traded in board lots of 5,000 Existing Shares and the market value of each board lot is HK$295 (based on the closing price of HK$0.059 per Existing Share as quoted on the Stock Exchange on the Latest Practicable Date). Based on the closing price of HK$0.059 per Existing Share on the Latest Practicable Date and assuming that the Capital Reorganisation has become effective, if the New Shares were continued to be trading in board lots of 5,000, the value of each board lot of New Shares would be HK$295. In order to increase the value of each board lot so that the value of each board lot will be not less than HK$2,000, the Board proposes to change the board lot size for trading in the Shares from

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LETTER FROM THE BOARD

5,000 New Shares to 60,000 New Shares upon completion of the Rights Issue. Had the change in board lot size become effective, the value of each board lot of New Shares would be HK$3,090 (based on the theoretical ex-entitlement price of approximately HK$0.052 per New Share calculated based on the closing price of HK$0.059 per Existing Share on the Latest Practicable Date). The Board considers that the change in board lot size will maintain the trading value for each board lot at a reasonable level to attract investors.

The Board has considered different possible sizes of new board lot and concluded that the change in board lot size to 60,000 New Shares may (i) minimise the odd lot of New Shares for those Qualifying Shareholders taken up the Rights Shares and (ii) facilitate the convenience of trading of the New Shares in the future, as it is comparatively easy to calculate the multiples of 60,000. The change in board lot size will not result in any change in the relative rights of the Shareholders. The Board is of the opinion that the change in board lot size is in the interests of the Company and its Shareholders as a whole.

Trading arrangement

In order to facilitate the trading of odd lots of the New Shares arising from the change in board lot size, the Company has appointed One China Securities Limited as the agent to provide matching service to those Shareholders who wish to top-up or sell their shareholdings of odd lots of the New Shares on a best effort basis during the period from 9:00 a.m. on Thursday, 27 April 2017 to 4:00 p.m. on Friday, 19 May 2017.

Holders of the New Shares in odd lots who wish to take advantage of this facility either to dispose of their odd lots of the New Shares or to top-up their odd lots to a full new board lot may directly or through their broker contact Mr. Marco Ko of One China Securities Limited at 2/F, Cheong K. Building, 86 Des Voeux Road Central, Central, Hong Kong (Telephone number: (852) 3188 2676) during the aforesaid period. Holders of the New Shares in odd lots should note that the matching of the sale and purchase of odd lots of the New Shares is on a best effort basis and successful matching of the sale and purchase of odd lots of the New Shares is not guaranteed. Shareholders are recommended to consult their professional advisers if they are in doubt about the above facility.

Shareholders should note that successful matching of the sale and purchase of odd lots of the New Shares is not guaranteed.

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LETTER FROM THE BOARD

PROPOSED RIGHTS ISSUE

Subject to the Capital Reorganisation having become effective, the Board proposes to implement the Rights Issue, details of which are summarised below:

Issue statistics

Basis of the Rights Issue : five Rights Shares for every one New Share held on the Record Date

Number of Existing Shares : 20,565,879,257 Existing Shares in issue as at the Latest Practicable Date

Number of Rights Shares : 102,829,396,285 Rights Shares (assuming no change in the number of issued Shares on or before the Record Date)
Subscription Price : HK$0.05 per Rights Share with nominal value of HK$0.01 each

Qualifying Shareholders

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

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

In order to be registered as members of the Company at the close of business on the Record Date, owners of Shares must lodge any transfers of Shares (together with the relevant share certificates) with the Company’s Registrar in Hong Kong, Tricor Standard Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong for registration no later than 4:30 p.m. on Monday, 27 March 2017.

Closure of register of members

The register of members of the Company will be closed from Monday, 20 March 2017 to Tuesday, 21 March 2017, both days inclusive, for determining the entitlements to the Rights Issue. No transfer of New Shares will be registered during this period.

Rights of Overseas Shareholders

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

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LETTER FROM THE BOARD

According to the register of members of the Company as at the Latest Practicable Date, there was one Shareholder with registered address in a jurisdiction outside Hong Kong shown on such register, namely, Isle of Man.

Based on the advice provided by the legal adviser on the laws of Isle of Man, there is no regulatory prohibition on the Rights Issue being extended to the Shareholder with a registered address in the Isle of Man, since the Company will be party to the Rights Issue and therefore the Rights Issue benefits from the exclusion for being treated as a regulated activity.

In view of the foregoing legal advice obtained from the Isle of Man legal adviser, the Directors have decided to extend the Rights Issue to Overseas Shareholder with registered addresses located in the Isle of Man as shown on the register of members of the Company as at the Record Date.

The Company will continue to ascertain whether there are any other Overseas Shareholders on the Record Date and will, if necessary, make further enquiries with legal adviser(s) in other overseas jurisdiction(s) regarding the feasibility of extending the Rights Issue to such other Overseas Shareholders on the Record Date and make relevant disclosures in the Prospectus. Further information in this connection will be set out in the Prospectus Documents containing, among other things, details of the Rights Issue, to be despatched to the Qualifying Shareholders on the Posting Date. The Company will send copies of the Prospectus to the Non-Qualifying Shareholders for their information only, but will not send any PAL and EAF to them on the Posting Date.

Subscription Price

The Subscription Price for the Rights Shares is HK$0.05 per Rights Share, payable in full upon acceptance of the relevant provisional allotment of Rights Shares and, where applicable, application for excess Rights Shares under the Rights Issue or when a transferee of nil-paid Rights Shares applies for the Rights Shares.

The Subscription Price represents:

(a) a discount of approximately 41.86% to the adjusted closing price of HK$0.086 per New Share, based on the closing price of HK$0.086 per Existing Share as quoted on the Stock Exchange on the Last Trading Day and adjusted for the effect of the Capital Reorganisation;
(b) a discount of approximately 43.18% to the adjusted average closing price of approximately HK$0.088 per New Share, based on the average closing price of HK$0.088 per Existing Share for the five consecutive trading days ended on the Last Trading Day and adjusted for the effect of the Capital Reorganisation;
(c) a discount of approximately 10.71% to the adjusted theoretical ex-rights price of approximately HK$0.056 per New Share, based on the closing price of HK$0.086 per Existing Share as quoted on the Stock Exchange on the Last Trading Day and adjusted for the effect of the Capital Reorganisation;

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LETTER FROM THE BOARD

(d) a discount of approximately 15.25% to the adjusted closing price of HK$0.059 per New Share, based on the closing price of HK$0.059 per Existing Share as quoted on the Stock Exchange on the Latest Practicable Date and adjusted for the effect of the Capital Reorganisation; and
(e) a discount of approximately 89.65% to the net asset value of the Company per New Share of approximately HK$0.483 as at 30 June 2016 and adjusted for the effect of the Capital Reorganisation. After taking into account the valuation of the properties held by the Group as set out in the valuation report in Appendix III of this circular, no adjustment is needed for the net asset value of the Company per New Share as at 30 June 2016.

The Subscription Price was determined after arm’s length negotiations between the Company and the Underwriters with reference to:

(a) the market price of the Existing Shares prior to the Last Trading Day, which was in general in a decreasing trend in the last three months preceding the Last Trading Day (from HK$0.195 on 11 October 2016 to HK$0.086 on the Last Trading Day);
(b) the low trading liquidity of the Shares for the last three months preceding the Last Trading Day with the average daily trading volume of the Existing Shares ranged from a low of approximately 0.01% to a high of approximately 1.75%; and
(c) the terms of rights issue transactions on the Stock Exchange conducted in the past three months prior to the date of the Underwriting Agreement, in particular, the discounts of the subscription prices to (i) the closing prices on the relevant last trading day which ranged from approximately 5.66% to 50.00% and (ii) the issuers’ net asset value per share based on their respective latest published financial statements which ranged from approximately 0.72% to 93.22%.

Based on the observations mentioned in (c) above, it is not uncommon for listed issuers in Hong Kong to set the subscription price in a rights issue at a deep discount to the closing prices and/or the net asset value per share in order to increase the attractiveness of the rights issue. Further, taking into account the fact that (i) the Company’s rights issue completed in July 2015 received total acceptances representing approximately 63.62% of the total number of rights shares available at a subscription price representing a discount of approximately 75.86% to the adjusted closing price on the relevant last trading day, as well as (ii) the large scale of the Rights Issue (approximately HK$5,065 million in net proceeds, being around 2.87 times of the Company’s market capitalisation of approximately HK$1,767 million as at the Last Trading Day), the Directors (excluding Mr. Yang who has abstained from voting but including the independent non-executive Directors whose opinion on the matter is set forth in the letter from the Independent Board Committee set out on pages 43 to 44 of this circular) consider that it is necessary to offer a relatively deep discount under the Rights Issue in order to encourage Qualifying Shareholders to participate in the Rights Issue by taking up their respective entitlements and to maintain their shareholdings in the Company and participate in the potential growth of the Group. Given that each Qualifying Shareholder is entitled to subscribe for the Rights Shares at the Subscription Price in proportion to his/her/its shareholding in the Company held on the Record Date, the interest of the Qualifying Shareholders will not be

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LETTER FROM THE BOARD

prejudiced by the discount of the Subscription Price as they are each offered an equal opportunity to participate in the Rights Issue. Rather, the deep discount and high ratio of Rights Shares will give each Qualifying Shareholder the option to maintain their respective shareholding in the Company at a relatively low price as compared to the historical market price, allowing them to have greater flexibility in determining the extent of his/her/its participation in the Rights Issue that is best suited to his/her/its own financial condition and/or investment strategy. The terms of the Rights Issue are the best terms available to the Company, having regard to the fact that the Company has contacted about 10 other financial institutions which could act as underwriters (including Kingston Securities), yet due to the scale and size of the proposed fund raising, no concrete terms of offer had been received by the Company from any other potential underwriters, and the Company was only able to reach an agreement with the Underwriters under the present terms and structure of the Rights Issue.

In view of the above and after taking into consideration the reasons for the Rights Issue as stated in the section headed ‘‘Reasons for the Rights Issue and Use of Proceeds’’ in this letter, the Directors (excluding Mr. Yang who has abstained from voting but including the independent non-executive Directors whose opinion on the matter is set forth in the letter from the Independent Board Committee set out on pages 43 to 44 of this circular) consider the Subscription Price and the discount to the relative values as indicated above, to be fair and reasonable and in the interests of the Company and the Shareholders as a whole.

The net price per Rights Share upon full acceptance of the relevant provisional allotment of Rights Shares will be approximately HK$0.0493.

Basis of provisional allotment

The basis of the provisional allotment shall be five Rights Shares for every one New Share in issue and held on the Record Date, being 102,829,396,285 Rights Shares (assuming there is no change to the number of issued Shares on or before the Record Date), at the Subscription Price of HK$0.05 per Rights Share. Application for all or any part of a Qualifying Shareholder’s provisional allotment should be made by completing the PAL and lodging the same with a remittance for the Rights Shares being applied for.

Fractions of Rights Shares

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

Status of the Rights Shares

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

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LETTER FROM THE BOARD

Application for excess Rights Shares

Qualifying Shareholders may apply, by way of excess application, for any unsold entitlements of the Non-Qualifying Shareholders and for any Rights Shares provisionally allotted but not accepted. Applications for excess Rights Shares may be made by completing the EAFs for application for excess Rights Shares and lodging the same with a separate remittance for the excess Rights Shares being applied for. The Directors will allocate the excess Rights Shares at their discretion on a pro rata basis in proportion to the number of excess Rights Shares being applied for under each application. No reference will be made to the Rights Shares comprised in applications by PAL or the number of New Shares held by the Qualifying Shareholders. No preference will be given to topping up odd lots to whole board lots.

Investors with their Shares held by a nominee company (or which are held in CCASS) should note that the Board will regard the nominee company (including HKSCC Nominees Limited) as a single Shareholder according to the register of members of the Company. Accordingly, the Shareholders should note that the aforesaid arrangement in relation to the allocation of the excess Rights Shares will not be extended to beneficial owners individually. Investors with their Shares held by a nominee company are advised to consider whether they would like to arrange for the registration of the relevant Shares in the name of the beneficial owner(s) prior to the Record Date.

Investors whose Shares are held by their nominee(s) and who would like to have their names registered on the register of members of the Company, must lodge all necessary documents with the Registrar for completion of the relevant registration by 4:30 p.m. on Monday, 27 March 2017.

Share certificates and refund cheques for Rights Issue

Subject to the fulfillment of the conditions of the Rights Issue, certificates for all fullypaid Rights Shares are expected to be posted to those entitled thereto by ordinary post at their own risk on or before Wednesday, 26 April 2017. Each Shareholder will receive one share certificate for all allotted Rights Shares. Refund cheques in respect of wholly or partially unsuccessful applications for excess Rights Shares (if any) are expected to be posted on or before Wednesday, 26 April 2017 by ordinary post to the applicants at their own risk.

Application for listing

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

No part of the equity or debt securities of the Company is listed or dealt in on which listing or permission to deal in is being or is proposed to be sought in other stock exchanges other than the Stock Exchange.

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LETTER FROM THE BOARD

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

Both nil-paid Rights Shares and fully-paid Rights Shares will be traded in the new board lots of 60,000 Rights Shares.

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

Conditions

The Rights Issue is conditional upon:

(i) the passing of the necessary resolution by the Shareholders (or, where applicable, the Independent Shareholders) at the SGM approving and confirming: (a) the Capital Reorganisation, (b) the Rights Issue and the transactions contemplated thereunder (including the Underwriting Agreement) and authorizing the Directors to allot and issue the Rights Shares (in their nil-paid and fully-paid forms), and (c) the Whitewash Waiver, each in accordance with the bye-laws of the Company, the Listing Rules and the Takeovers Code on or before the Record Date;
(ii) the delivery to the Stock Exchange for authorisation and the registration with the Registrar of Companies in Hong Kong respectively one copy of each of the Prospectus Documents duly signed by two Directors (or by their agents duly authorised in writing) in accordance with section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance as having been approved by resolutions of the Directors (and all other documents required to be attached thereto) and otherwise in compliance with the Listing Rules, the Companies Ordinance and the Companies (Winding Up and Miscellaneous Provisions) Ordinance not later than the Posting Date;
(iii) the posting of the Prospectus Documents to the Qualifying Shareholders and the posting of the Prospectus to the Non-Qualifying Shareholders, if any, for information purposes only, on or before the Posting Date;
(iv) the Listing Committee of the Stock Exchange granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked the listing of, and the permission to deal in, the Rights Shares (in their nil-paid and fully-paid forms) by no later than the first day of their dealings;

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LETTER FROM THE BOARD

(v) the Underwriting Agreement not being terminated by any of the Underwriters pursuant to the terms thereof prior to the Latest Time for Termination;
(vi) the Executive having granted to the Concert Party Group the Whitewash Waiver, and the satisfaction of all conditions (if any) attached thereto and such other necessary waiver or consent as may be required to be obtained from the Executive for the transactions contemplated under the Rights Issue;
(vii) the Capital Reorganisation having become effective on or before the Record Date;
(viii) the compliance with and performance of all the undertakings and obligations of the Company under the terms of the Underwriting Agreement;
(ix) the compliance with and performance of all the undertakings and obligations of LIL, or any of its respective associates, under the Irrevocable Undertaking to take up its entitled Rights Shares under the Rights Issue;
(x) if necessary, the obtaining of the consent or permission from the Bermuda Monetary Authority in respect of the issue of the Rights Shares; and
(xi) there being no Specified Event occurring prior to the Latest Time for Termination.

The conditions above are incapable of being waived. If the conditions are not satisfied in whole by the Latest Time for Termination or such other time and/or date as the Company and the Underwriters may agree in writing, the Underwriting Agreement will terminate and cease to be of further effect and no party may claim against the other party for costs, damages, compensation or otherwise, save for any antecedent breaches. As at the Latest Practicable Date, none of the conditions above are fulfilled.

The Rights Issue is conditional, inter alia, upon the conditions above. Accordingly, the Rights Issue may or may not proceed. Any Shareholders or other persons contemplating selling or purchasing Shares and/or nil-paid Rights Shares up to the date when the conditions of the Rights Issue are fulfilled will bear the risk that the Rights Issue could not become unconditional and may not proceed.

Approval of the Rights Issue

As the proposed Rights Issue will increase the issued share capital or the market capitalisation of the Company by more than 50%, the Rights Issue is subject to the approval of the Independent Shareholders at the SGM by way of poll.

The Underwriting Agreement

Date: 11 January 2017, as varied and supplemented by an amendment letter agreement dated 23 February 2017.

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Underwriters

Kingston Securities, which underwrites securities in its ordinary course of business. As at the Latest Practicable Date, Kingston Securities and its associates do not hold any Existing Shares.

LIL, an investment holding company wholly owned by Mr. Yang. As at the Latest Practicable Date, LIL is interested in 7,061,709,274 Existing Shares, representing approximately 34.34% of the issued share capital of the Company. LIL does not underwrite securities in its ordinary course of business.

The Underwritten Shares

All Underwritten Shares (excluding those 35,308,546,370 Rights Shares to be provisionally allotted to LIL), being 67,520,849,915 Rights Shares, subject to the terms and conditions of the Underwriting Agreement. Pursuant to the Underwriting Agreement, LIL has (in addition to its obligations under the Irrevocable Undertaking) conditionally agreed to underwrite 50,176,201,000 Rights Shares, whereas Kingston Securities has conditionally agreed to underwrite 17,344,648,915 Rights Shares.

In accordance with the terms of the Underwriting Agreement, LIL will first subscribe for such number of untaken Rights Shares that LIL would need to subscribe for pursuant to its underwriting commitment under the Underwriting Agreement. Kingston Securities will then subscribe for the remaining untaken Rights Shares not covered by LIL pursuant to its underwriting commitment under the Underwriting Agreement.

Commission

2.5% of the aggregate Subscription Price in respect of the maximum number of Underwritten Shares underwritten by Kingston Securities is payable to Kingston Securities; and 2.0% of the aggregate Subscription Price in respect of the maximum number of Underwritten Shares underwritten by LIL is payable to LIL (the ‘‘Underwriting Commission’’).

The Company and the Underwriters determined the Underwriting Commission rates after arm’s length negotiation based on the financial position of the Group and the size of the Rights Issue. The Directors noted that the underwriting commission rates charged by the underwriters of the other rights issues conducted in the three months prior to the date of the Underwriting Agreement ranged from 0.28% to 4.00%, with an average of approximately 2.54%. The Underwriting Commission charged by Kingston Securities is within such range. The rate charged by LIL, a connected person of the Company, is also within the said range, and is lower than the rate charged by Kingston Securities, an Independent Third Party. Therefore, the Directors (excluding Mr. Yang who has abstained from voting but including the independent non-executive Directors whose opinion on the matter is set forth in the letter from the Independent Board Committee set out on pages 43 to 44 of this circular) consider that the Underwriting Commission rates to be within the normal range of similar rights issue transactions.

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Taking the above into account, the Board (excluding Mr. Yang who has abstained from voting, but including the independent non-executive Directors whose opinion on the matter is set forth in the letter from the Independent Board Committee set out on pages 43 to 44 of this circular) considers that the terms of the Underwriting Agreement, including the rates of the Underwriting Commission, are in line with market practice and are fair and reasonable so far as the Company and the Shareholders are concerned.

Termination of the Underwriting Agreement

If, prior to the Latest Time for Termination:

(i) in the absolute opinion of any Underwriter, the success of the Rights Issue would be materially and adversely affected by:
(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the absolute opinion of any Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Rights Issue; or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreement) of a political, military, financial, economic or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the absolute opinion of any Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Rights Issue or otherwise makes it inexpedient or inadvisable to proceed with the Rights Issue;
(ii) any adverse change in market conditions (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction or trading in securities) occurs which in the absolute opinion of any Underwriter is likely to materially or adversely affect the success of the Rights Issue or otherwise makes it inexpedient or inadvisable to proceed with the Rights Issue;
(iii) any change in the circumstances of the Company or any member of the Group occurs which in the absolute opinion of any Underwriter will adversely affect the prospects of the Company, including without limiting the generality of the foregoing, the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any of member of the Group or the destruction of any material asset of the Group;
(iv) any event of force majeure occurs, including without limiting the generality thereof, any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out;

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(v) any other material adverse change in relation to the business or the financial or trading position or prospects of the Group as a whole occurs, whether or not ejusdem generis with any of the foregoing;
(vi) any matter occurs which, had it arisen or been discovered immediately before the date of the Prospectus and not having been disclosed in the Prospectus, would have constituted, in the absolute opinion of any Underwriter, a material omission in the context of the Rights Issue;
(vii) any suspension in the trading of securities generally or the Company’s securities on the Stock Exchange for a period of more than 10 consecutive business days occurs, excluding any halt or suspension in connection with the clearance of the announcement or the Prospectus Documents or other announcements or circulars in connection with the Rights Issue; or
(viii) any moratorium, suspension or material restriction on trading of the Shares on the Stock Exchange occurs due to exceptional financial circumstances or otherwise,

(a) any material breach of any of the representations, warranties or undertakings contained in the Underwriting Agreement comes to the knowledge of such Underwriter; or
(b) any Specified Event comes to the knowledge of such Underwriter.

Irrevocable Undertaking and the Underwriting Agreement

As at the Latest Practicable Date, LIL holds 7,061,709,274 Existing Shares, representing approximately 34.34% of the existing issued share capital of the Company. Pursuant to the Irrevocable Undertaking, LIL has unconditionally and irrevocably undertaken to the Company and Kingston Securities, that it will remain as the beneficial owner of such Shares until and including the Record Date and will accept a total of 35,308,546,370 Rights Shares, being its full entitlement under the Rights Issue.

WARNING OF THE RISKS OF DEALING IN SHARES AND RIGHTS SHARES

The Rights Issue is conditional, inter alia, upon the fulfilment of the conditions set out under the section headed ‘‘Conditions of the Rights Issue’’ of this Letter. Accordingly, the Rights Issue may or may not proceed. Any Shareholders or other persons contemplating selling or purchasing Shares and/or nil-paid Rights Shares up to the date when the conditions of the Rights Issue are fulfilled will bear the risk that the Rights Issue could not become unconditional and may not proceed. Shareholders and the public are reminded to exercise caution when dealing in the securities of the Company.

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REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

The Company is an investment holding company and the Group is principally engaged in (i) development and operation of integrated leisure and entertainment resort; (ii) gaming and entertainment facilities; (iii) property development; and (iv) design, manufacturing and sales of light-emitting diode (‘‘LED’’) and semiconductor lighting related products.

During the past 12 months, the Group has completed the following two acquisitions:

(1) Les A Acquisition

On 28 April 2016, the Group completed the acquisition of the entire issued share capital of Les A (the ‘‘Les A Acquisition’’), which owns and operates Les A Club, a premium gaming club in London’s upscale Mayfair district. Details of the Les A Acquisition are set out in the circular of the Company dated 8 April 2016.

Up to the Last Trading Day, the Group has invested a total of approximately HK$2,271 million in Les A, comprising approximately HK$1,484 million as the purchase price and approximately HK$787 million in the form of shareholder loans to support Les A’s operation and working capital. The said investment amount was first financed by commercial loans, which have been subsequently refinanced by an 18-month tenor, interest-free and security-free shareholder loan granted by LIL.

(2) Callisto Acquisition

On 3 January 2017, the Group completed the acquisition of 50% of the issued share capital of Callisto at the total consideration of approximately HK$3,189 million (the ‘‘Callisto Acquisition’’). Thereafter, the Company, through Callisto and HBL, became the sole legal and beneficial owner of Landing Jeju and the Jeju Project. Details of the Callisto Acquisition are set out in the circular of the Company dated 13 December 2016. As mentioned in said circular, the Company was then considering to fund the Callisto Acquisition by way of equity financing, but as it was uncertain whether the Company could proceed with any equity fund raising exercise, and such exercise could be time consuming which might lag behind the time of completion of the Callisto Acquisition, the Company has completed the Callisto Acquisition by means of an 18-month tenor, interestfree and security-free shareholder loan extended by LIL. The loan arrangement with LIL was only meant to be an interim measure to enable the Company to meet the completion schedule of the Callisto Acquisition.

As at the Latest Practicable Date, the Company owed to LIL shareholder loans in the aggregate amount of approximately HK$5,537 million, which are due in June 2018. It has never been the parties’ intention to rely on one single Shareholder for such large scale financings, which were required for the proper business purposes of the Group, for any extended period. Such financings were meant to be short-term bridge loans and will have to be repaid to the extent possible as soon as alternative financings are available to the Group. The 18-month term of the shareholder loans offered by LIL was intended only to provide sufficient time for the Company to devise and carry through a suitable fund raising exercise. Hence, it is the Company’s obligations to seek for and obtain suitable alternative financings as soon as the circumstances allow.

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As at 31 January 2017, the Group had cash and bank balances of approximately HK$3,862 million, among which, (i) approximately HK$3,200 million has been reserved and allocated for the development of the Jeju Project, being the intended use of the proceeds from the rights issue of the Company completed in July 2015, (ii) approximately HK$600 million has been reserved for the fund investment of the Company (details of which are set out in the announcement of the Company dated 5 December 2016) and (iii) the remaining balance of approximately HK$62 million will be applied for the working capital of the Group.

Taking into account (a) the financing needs of the Group for the upcoming period; and (b) the Company’s obligations to repay the shareholder loans due to LIL (to the extent possible) because the shareholder loans were granted as short-term bridge loans and are to be repaid as soon as alternative financings are available, the Company intends to apply the net proceeds from the Rights Issue as to:

(i) approximately HK$4,274 million for the partial repayment of the outstanding indebtedness owed by the Company to LIL; and
(ii) the remaining proceeds of not less than approximately HK$791 million for the working capital of the Group and repayments of loans and relevant finance costs payable to Independent Third Parties who are not Shareholders, and/or financing any future investment opportunities of the Group which may arise.

After the partial repayment, the outstanding amount of the shareholder loan owing to LIL will be approximately HK$1,263 million. As at the Latest Practicable Date, the Company had no plan, arrangement, understanding or intention for any potential acquisitions, and no negotiations was taking place in relation to any potential acquisition.

The Set-Off

As at the Latest Practicable Date, LIL has granted to the Company shareholder loans in the aggregate of approximately HK$5,537 million, which were used for the purpose of, among other things, satisfying the financing needs in relation to the two acquisitions mentioned above. The loans were granted on normal commercial terms or better, and are not secured by the assets of the Group.

Pursuant to the Underwriting Agreement, the total Subscription Price payable by LIL will be set off by the then outstanding loan amount owed by the Company to LIL. The total Subscription Price payable under the Underwriting Agreement (in the event that LIL is called upon to subscribe for the Underwritten Shares underwritten by LIL in full pursuant to its obligations under the Underwriting Agreement) and the Irrevocable Undertaking will be approximately HK$2,509 million and approximately HK$1,765 million respectively, and both

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will be set off against the outstanding indebtedness owed by the Company to LIL. The estimated net proceeds of the Rights Issue after the aforesaid set-off will be not less than approximately HK$791 million.

Fund raising methods comparison

In view of the Group’s financing needs, the Board has considered and discussed with financial institutions regarding fund raising methods available to the Group.

Among different fund raising methods, the Directors have focused on evaluating the possibilities of carrying out fund raising through rights issue and open offer as they are relatively larger in scale as compared to placing of new Shares under a general mandate. The Rights Issue is pre-emptive in nature, allowing Qualifying Shareholders to maintain their respective pro-rata shareholding through their participation in the Rights Issue, providing an opportunity to all Qualifying Shareholders to participate in the growth of the Group. The Rights Issue allows the Qualifying Shareholders who participate to:

(a) increase its interests in the shareholding of the Company by (i) acquiring additional rights entitlement in the open market (subject to the availability); and/or (ii) applying through excess applications for Rights Shares; or
(b) reduce its interests in the shareholding of the Company by disposing of their rights entitlements in the open market (subject to availability).

As an open offer does not allow the trading of rights entitlements and accordingly, the Rights Issue is preferred.

On the other hand, it is difficult for the Group to obtain debt financing of this scale given the current financial conditions of the Group and market conditions. The Company has approached various financial institutions for different debt financing options, but received no conclusive terms that the Directors considered acceptable. The tentative terms of financing proposed by such financial institutions, including the applicable interest rates and the collateral required to secure such debt financing, were considered to be onerous. Furthermore, additional borrowing of this scale will deteriorate the gearing position of the Group.

For the purpose of the Rights Issue, the Company has contacted about 10 other financial institutions which could act as underwriters (including Kingston Securities). Yet due to the scale and size of the proposed fund raising, no concrete terms of offer had been received by the Company from any of them except Kingston Securities and the Company was only able to reach an agreement with the Underwriters under the present terms and structure of the Rights Issue.

The Board notes that the shareholder loans granted by LIL were bridge loans, providing temporary financing support for the Les A Acquisition and the Callisto Acquisition. The 18month tenor was given to allow the Company sufficient time and space to secure other means of financing. It may not be appropriate to require one single Shareholder to shoulder the financing needs of the Group of this scale for any extended period of time while such financing needs was necessary for the proper business purposes of the Group. By participating

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in the Rights Issue, Qualifying Shareholders will indirectly be supporting the financing needs of the gaming business and integrated resort development of the Group and participating in the expansion and future business development of the Group.

The Board considers that the Rights Issue will provide the Qualifying Shareholders the opportunity to maintain their respective pro-rata shareholdings in the Company and thus a chance to share the potential growth of the Group, while the Group will be able to strengthen its financial position and to fund its various business plans without incurring additional finance costs under debt financing. The Board is aware of (a) the accumulated dilution effect to the public Shareholders of approximately 99.0% on the equity fund raisings conducted by the Company in the past 24 months (being the issue of rights shares completed on 20 July 2015 on the basis of ten rights share for every one share held on the record date of 25 June 2015 at HK$0.35 per rights shares and the Rights Issue) for Shareholders who did not or do not subscribe for their pro-rata entitlements (as at the date immediately before completion of rights shares on 20 July 2015, there were 1,264,015,453 shares held by the public shareholders, representing approximately 67.61% of the then issued share capital of the Company of 1,869,625,387 shares); and (b) the potential dilution effect of the Rights Issue of a maximum of 83.3% on the Shareholders’ shareholdings in the Company if they do not subscribe for their pro-rata Rights Shares. The Board also notes that the theoretical ex-rights price of approximately HK$0.056 per New Share after the Rights Issue represents a discount of approximately 34.9% to the adjusted closing price of HK$0.086 per Existing Share on the Last Trading Day (based on the closing price of HK$0.086 per Existing Share as quoted on the Stock Exchange on the Last Trading Day and adjusted for the effect of the Capital Reorganisation).

Nonetheless, the Directors (excluding Mr. Yang who has abstained from voting but including the independent non-executive Directors whose opinion on the matter is set forth in the letter from the Independent Board Committee set out on pages 43 to 44 of this circular) consider that the interests of the Shareholders can be safeguarded by the following:

Independent Shareholders are offered a chance to express their views on the terms of the Rights Issue, the Underwriting Agreement and the transactions contemplated thereunder through their votes at the SGM;
Qualifying Shareholders are offered a chance to subscribe for their pro-rata Rights Shares for the purpose of maintaining their respective shareholdings in the Company at a relatively low price as compared to the historical and prevailing market price of the Shares;
those Qualifying Shareholders who choose to accept the Rights Shares in full can maintain their respective shareholdings in the Company after the Rights Issue;
offering a relatively deep discount on the Subscription Price (including a discount of approximately 89.65% to the net asset value of the Company per New Share) would encourage Qualifying Shareholders to participate in the Rights Issue and accordingly maintain their shareholdings in the Company; this is not an uncommon practice in similar rights issue arrangements on the Stock Exchange;

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Qualifying Shareholders have the opportunity to realise their nil-paid Rights Shares in the market; and
the entire potential dilution effect on the shareholding of the Shareholders will only occur if all the Qualifying Shareholders do not subscribe for their pro-rata Rights Shares, which will be an extreme situation.

The Rights Issue allows the Company to repay the shareholder loans due to LIL partly in cash and partly in New Shares, as opposed to the Company repaying LIL only out of its cash balance and by means of other debt financing (if available) when the loans are due. While there is a potential dilution effect to Shareholders, this is counterbalanced by the fact that the Rights Issue will help to reduce the gearing ratio of the Company and the burden and requirement for cash outlay for the loan repayment. In addition, the participation of LIL as an Underwriter was commercially necessary to secure the terms of the current underwriting arrangement with the Underwriters.

Having considered all the factors above, the Directors (excluding Mr. Yang who has abstained from voting but including the independent non-executive Directors whose opinion on the matter is set forth in the letter from the Independent Board Committee set out on pages 43 to 44 of this circular) considers that the potential dilution effect on the shareholding interests of the Qualifying Shareholders, which may only happen when the Qualifying Shareholders do not subscribe for their pro-rata Rights Shares, to be acceptable. Accordingly, the Directors (excluding Mr. Yang who has abstained from voting but including the independent nonexecutive Directors whose opinion on the matter is set forth in the letter from the Independent Board Committee set out on pages 43 to 44 of this circular) consider that fund raising through the Rights Issue is in the interests of the Company and the Shareholders as a whole.

FUTURE FUND RAISING EXERCISES

As at the Latest Practicable Date, save for the Rights Issue, the Company does not have any concrete fund raising plans in the next 12 months. The Company will make further announcements in the future in accordance with the Listing Rules as and when appropriate if any suitable fund raising opportunities arise, having regard to the financing needs, business plans and circumstances of the Company at the time.

FUND RAISING EXERCISE OF THE COMPANY IN THE PAST 12 MONTHS

The Company had not conducted any other fund raising exercise in the past 12 months immediately preceding the Latest Practicable Date.

APPLICATION FOR WHITEWASH WAIVER

LIL is solely and beneficially owned by Mr. Yang, an executive Director and a controlling shareholder of the Company.

As at the Latest Practicable Date, LIL holds 7,061,709,274 Existing Shares, representing approximately 34.34% of the issued share capital of the Company. In the event that LIL is called upon to subscribe for the Underwritten Shares in full pursuant to its obligations under

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the Underwriting Agreement, the interest of the Concert Party Group will increase by more than 2% to approximately 75% (assuming that there is no change in the number of issued Shares on or before the Record Date).

Accordingly, the underwriting by LIL of the Underwritten Shares under Rights Issue will trigger an obligation to make a mandatory general offer under Rule 26 of the Takeovers Code for all the securities of the Company not already owned or agreed to be acquired by the Concert Party Group, unless a waiver is granted by the Executive.

As at the Latest Practicable Date: (a) the Company does not have any outstanding options, derivatives, warrants or other convertible securities; (b) except for the 7,061,709,274 Existing Shares held by LIL, none of LIL, Mr. Yang or parties acting in concert with any of them holds, controls or have direction over any outstanding options, warrants, or any securities that are convertible into Shares or any derivatives in respect of securities in the Company, or hold any relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company; (c) there are no arrangements (whether by way of option, indemnity or otherwise) in relation to the shares of LIL or the Company and which might be material to the Rights Issue, the Underwriting Agreement and the Whitewash Waiver; (d) there are no agreements or arrangements to which LIL is a party which relate to the circumstances in which the LIL may or may not invoke or seek to invoke a precondition or a condition to the Rights Issue, the Underwriting Agreement and the Whitewash Waiver; and (e) there is no borrowing or lending of any relevant securities (as defined in note 4 of Rule 22 of the Takeovers Code) of the Company by the Concert Party Group.

Application has been made to the Executive by LIL for the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code to waive the obligations of LIL to make such a mandatory general offer. Pursuant to the Takeovers Code, the Whitewash Waiver will be conditional on, among other things, the approval of the Independent Shareholders of the Company at the SGM by way of poll in accordance with the requirements of the Takeovers Code.

Shareholders and potential investors should note that the Executive may or may not grant the Whitewash Waiver. If the Whitewash Waiver is not granted by the Executive or if granted, is not approved by the Independent Shareholders, the Rights Issue will not proceed. Shareholders and potential investors are therefore reminded to exercise caution when dealings in the Shares and any other securities of the Company.

The Concert Party Group and those who are involved or interested in the transactions regarding the Rights Issue, the Underwriting Agreement and the Whitewash Waiver will not be entitled to vote on any resolutions (save for the special resolution on the Capital Reorganisation) to be proposed at the SGM.

The Executive has indicated that it intends, subject to the approval of the Independent Shareholders at the SGM, to grant the Whitewash Waiver. If the Whitewash Waiver is approved by the Independent Shareholders, then the obligation by LIL to make a mandatory general offer under Rule 26 of the Takeovers Code will be waived.

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If the Whitewash Waiver is approved by the Independent Shareholders and LIL is required to take up not less than 54,635,928,497 Rights Shares, the shareholding of the Concert Party Group will exceed 50%. In such event, the Concert Party Group may further increase its shareholding in the Company without incurring any further obligations under Rule 26 of the Takeovers Code to make a general offer.

None of LIL, Mr. Yang or parties acting in concert with any of them has any dealings in any securities of the Company (as defined in Note 4 to Rule 22 of the Takeovers Code) during the Relevant Period.

Save for the Irrevocable Undertaking from LIL which provides for irrevocable commitments to accept its entitlement of the Rights Shares, the Company has not received any irrevocable commitments to accept or reject the Rights Shares or to vote in favour of or against the Rights Issue, the Underwriting Agreement and the Whitewash Waiver.

As at the Latest Practicable Date, the Company does not believe that the Rights Issue gives rise to any concerns in relation to compliance with other applicable rules or regulations (including the Listing Rules). If a concern should arise after the release of this circular, the Company will endeavour to resolve the matter to the satisfaction of the relevant authority as soon as possible. The Company notes that the Executive may not grant the Whitewash Waiver if the Rights Issue does not comply with other applicable rules and regulations.

SHAREHOLDING STRUCTURE OF THE COMPANY

The following table shows the shareholding structures of the Company as at the Latest Practicable Date and immediately after completion of the Rights Issue.

Shareholders The Concert Party Group (Note 1) Kingston Securities (including subscribers/sub-underwriters procured by it) (Note 2) Public Total	Number of Existing Shares as at the Latest Practicable Date 7,061,709,274 0 13,504,169,983 20,565,879,257	% 34.34 0.00 65.66 100.00	Number of New Shares immediately upon the Capital Reorganisation becoming effective but before completion of the Rights Issue 7,061,709,274 0 13,504,169,983 20,565,879,257	% 34.34 0.00 65.66 100.00	Number of New Shares immediately after completion of the Rights Issue assuming all the Qualifying Shareholders have taken up their respective entitlements of Rights Shares in full 42,370,255,644 0 81,025,019,898 123,395,275,542	% 34.34 0.00 65.66 100.00	Number of New Shares immediately after completion of the Rights Issue assuming no Qualifying Shareholders (with the exception of LIL) have taken up any of the Rights Shares and the Underwriters have take up the Rights Shares to the maximum extent 92,546,456,644 17,344,648,915 13,504,169,983 123,395,275,542	% 75.00 14.05 10.95
								100.00

Note 1: All of the 7,061,709,274 Existing Shares are held by LIL, which is solely and beneficially owned by Mr. Yang. Save for LIL, the Company has no other substantial shareholder and no Director (except Mr. Yang) is interested in any Shares.

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Note 2: As at the Latest Practicable Date, Kingston Securities does not have any sub-underwriting arrangements in place. As and when any subscribers for Rights Shares and/or sub-underwriters are procured by Kingston Securities, pursuant to the terms of the Underwriting Agreement, Kingston Securities has agreed to ensure that (i) such subscribers and/or sub-underwriters are Independent Third Parties, and (ii) such subscribers and/or sub-underwriters, together with parties acting in concert, shall not hold more than 10% of the equity interest in the Company upon completion of the Rights Issue.

Upon completion of the Rights Issue, the Company is able to fulfill the minimum public float requirement under Rule 8.08(1)(a) of the Listing Rules.

IMPLICATION UNDER THE TAKEOVERS CODE

The Rights Issue will trigger a mandatory general offer required to be made by LIL under Rule 26 of the Takeovers Code, for all the Shares other than those already owned by the Concert Party Group. As set out in the section headed ‘‘Whitewash Waiver,’’ LIL has made an application to the Executive to apply for the Whitewash Waiver.

The Executive has indicated that it will grant the Whitewash Waiver subject to the approval by the Independent Shareholders on votes taken by way of poll. The Concert Party Group and their respective associates will abstain from voting at the SGM in this respect.

Should the Whitewash Waiver be granted, LIL will not be required to make a general offer upon completion of the Rights Issue.

IMPLICATION UNDER THE LISTING RULES

As at the Latest Practicable Date, LIL, a company wholly owned by Mr. Yang, is interested in 7,061,709,274 Existing Shares, representing approximately 34.34% of the issued share capital of the Company.

Accordingly, the Concert Party Group will abstain from voting at the SGM to approve the Rights Issue.

CONNECTED TRANSACTIONS

As LIL is a connected person of the Company, the entering into of the Underwriting Agreement by the Company constitutes a connected transaction for the Company under the Listing Rules. Pursuant to Rule 14A.92(2) of the Listing Rules, provided that Rule 7.21(2) of the Listing Rules has been complied with, the allotment and issue of the Underwritten Shares

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to LIL pursuant to the Underwriting Agreement will be exempted from the reporting, announcement and Independent Shareholders’ approval requirements of Chapter 14A of the Listing Rules.

As the Company has made arrangements for the Qualifying Shareholders to apply for Rights Shares in excess of their entitlements under the Rights Issue in accordance with Rule 7.21(1), Rule 7.21(2) of the Listing Rules has been complied with and the allotment and issue of the Underwritten Shares to LIL pursuant to the Underwriting Agreement will be exempted from the reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules pursuant to Rule 14A.92(2)(b) of the Listing Rules.

In respect of the entering into of the Underwriting Agreement, given LIL is a connected person of the Company, Mr. Yang, who is the sole shareholder of LIL and an executive Director of the Company, has abstained from voting for the board resolution approving the Underwriting Agreement and the transactions contemplated thereunder, including the payment of Underwriting Commission.

In addition, the payment of the Underwriting Commission to LIL constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. As the maximum Underwriting Commission to be received by the LIL pursuant to the Underwriting Agreement is approximately HK$50.18 million and one of the applicable percentage ratios (other than the profits ratio) as defined in the Listing Rules is more than 5%, it is therefore subject to reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

In respect of the payment of the Underwriting Commission by the Company to LIL, given LIL is a connected person of the Company, LIL and its associates will abstain from voting on the relevant resolution at the SGM.

The Directors (excluding Mr. Yang who has abstained from voting but including the independent non-executive Directors whose opinion on the matter is set forth in the letter from the Independent Board Committee set out on pages 43 to 44 of this circular) consider that the Company will benefit from the entering into of the Underwriting Agreement and the payment of the Underwriting Commission given LIL has agreed to underwrite the Underwritten Shares, which is not a small volume, and the Underwriting Commission rate (i.e. 2.0% of the aggregate Subscription Price in respect of the Underwritten Shares) is relatively lower than the other Independent Third Parties and the abovementioned connected transactions are on normal commercial terms.

FUTURE INTENTIONS

The Concert Party Group is optimistic about the future businesses of the Group. Following the grant and approval of the Whitewash Waiver and completion of the Rights Issue, LIL will continue to be a controlling shareholder of the Company under the Listing Rules. LIL intends to continue the existing businesses and employment of employees of the Group without any major changes including any redeployment of the fixed assets of the Company after the Rights Issue.

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LETTER FROM THE BOARD

INFORMATION OF THE GROUP

The Company is an investment holding company and the Group is principally engaged in (i) development and operation of integrated leisure and entertainment resort; (ii) gaming club and entertainment facilities; (iii) property development; and (iv) design, manufacturing and sales of light-emitting diode and semiconductor lighting related products.

The consolidated financial information of the Company for the three financial years ended 31 December 2013, 2014 and 2015 and the six months ended 30 June 2016 are summarised as follows:

	6 months
	ended	Year ended	Year ended	Year ended
	30 June	31 December	31 December	31 December
	2016	2015	2014	2013
	(unaudited)	(Audited)	(Audited)	(Audited)
	HK$’000	HK$’000	HK$’000	HK$’000
Revenue	445,295	246,500	223,318	181,075
Loss before taxation	(646,637)	(1,089,348)	(344,155)	(138,626)
Loss after taxation	(662,555)	(1,086,214)	(342,656)	(142,197)
Net assets at end of
period	9,932,409	9,688,400	4,511,086	841,506

As disclosed in the Profit Warning Announcement, the Group is expected to record an increase in the net loss for the year ended 31 December 2016 as compared to the net loss for the year ended 31 December 2015 (the ‘‘Statement’’). The Company disclosed in the Profit Warning Announcement that the increase in the net loss was mainly attributable to (i) change in fair value of financial assets at fair value through profit or loss; (ii) increase in administrative expenses, mainly staff related cost and marketing expenses, incurred in the construction and pre-opening stages of the integrated resort development and property development; and (iii) increase in other operating and administrative expenses due to expansion of the Group.

Pursuant to Rule 10.4 of the Takeovers Code, the Profit Warning Announcement is regarded as a profit forecast, and therefore has been reported on by PricewaterhouseCoopers, the reporting accountant of the Company, and Kingston Corporate Finance, the financial adviser of the Company in accordance with Rule 10 of the Takeovers Code. Please refer to Appendix IV and Appendix V to this circular for the opinions expressed by PricewaterhouseCoopers and Kingston Corporate Finance respectively.

No assumptions were involved in the making of the Statement as the estimated loss for the year ended 31 December 2016 relates to year already ended.

INFORMATION ON MR. YANG AND LIL

Mr. Yang is an executive Director and chairman of the Board and the controlling shareholder of the Company.

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LETTER FROM THE BOARD

LIL is a company incorporated in the British Virgin Islands and is wholly owned by Mr. Yang. Mr. Yang is the sole director of LIL. LIL is principally engaged in investment holding. As at the Latest Practicable Date, LIL is interested in 7,061,709,274 Existing Shares, representing approximately 34.34% of the issued share capital of the Company.

SGM

A notice convening the SGM is set out on pages SGM-1 to SGM-3 of this circular. At the SGM, resolutions will be proposed to the Shareholders and the Independent Shareholders (as the case may be) to consider and, if thought fit, approve the Capital Reorganisation, the Rights Issue, the Underwriting Agreement, the Whitewash Waiver and the Connected Transaction, where votes of the Independent Shareholders will be taken on a poll.

The result of voting taken on a poll at the SGM will be announced by the Company in accordance with the Listing Rules.

Whether or not you intend to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the Registrar, Tricor Standard Limited at Level 22, Hopewell Centre 183 Queen’s Road East, Hong Kong as soon as practicable and in any event, not less than 48 hours before the time appointed for the holding of the SGM. Delivery of a form of proxy will not preclude you from attending and voting in person at the SGM or any adjourned meeting (as the case may be) should you so desire.

RECOMMENDATION

The Directors (excluding Mr. Yang who has abstained from voting but including the independent non-executive Directors whose opinion on this matter is set forth in the letter from the Independent Board Committee set out on pages 43 to 44 of this circular) consider that the Capital Reorganisation, the Rights Issue, the Underwriting Agreement, the Whitewash Waiver and the Connected Transaction are fair and reasonable and are in the interests of the Company and the Shareholders as a whole and the terms of the Connected Transaction are on normal commercial terms. Accordingly, the Directors (including the independent non-executive Directors) recommend the Independent Shareholders to vote in favour of the resolutions to be proposed at the SGM to approve the Capital Reorganisation, the Rights Issue, the Underwriting Agreement, the Whitewash Waiver and the transactions contemplated thereunder.

Shareholders are advised to read the letter from the Independent Board Committee and the letter from Veda Capital before deciding how to vote on the resolutions to be proposed at the SGM.

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LETTER FROM THE BOARD

ADDITIONAL INFORMATION

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

Yours faithfully,

By order of the Board Landing International Development Limited Zhou Xueyun

Executive Director

– 42 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of the letter from the Independent Board Committee setting out its recommendation to the Independent Shareholders in relation to the Rights Issue, the Underwriting Agreement, the Whitewash Waiver and the Connected Transaction:

Landing International Development Limited 藍鼎國際發展有限公司

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability)

(Stock code: 582)

24 February 2017

To Independent Shareholders

Dear Sir or Madam,

(1) PROPOSED RIGHTS ISSUE ON THE BASIS OF FIVE RIGHTS SHARES FOR EVERY ONE NEW SHARE HELD ON THE RECORD DATE; (2) CONNECTED TRANSACTION IN RELATION TO PAYMENT OF UNDERWRITING COMMISSION; AND (3) APPLICATION FOR WHITEWASH WAIVER

We refer to the circular of the Company dated 24 February 2017 (the ‘‘Circular’’), of which this letter forms part. Terms used herein have the same meanings as those defined in the Circular unless otherwise specified.

We have been appointed by the Board to form the Independent Board Committee to advise the Independent Shareholders as to whether the terms of the Rights Issue, the Underwriting Agreement, the Whitewash Waiver and the Connected Transaction are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole, and to recommend how the Independent Shareholders should vote regarding the relevant proposed resolutions pursuant to the Takeovers Code at the SGM.

Veda Capital has been appointed as the independent financial adviser to advise us and the Independent Shareholders as to whether the terms of the Rights Issue, the Underwriting Agreement, the Whitewash Waiver and the Connected Transaction are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole, and to recommend how the Independent Shareholders should vote regarding the relevant proposed resolutions at the SGM. Details of the advice of Veda Capital, together with the principal factors taken into consideration in arriving at such advice, are set

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

out on pages 45 to 72 of the Circular. Your attention is also drawn to the letter from the Board set out on pages 16 to 42 to the Circular and the additional information set out in the appendices to the Circular.

Having taken into account the advice of Veda Capital, we consider that the terms of the Rights Issue, the Underwriting Agreement, the Whitewash Waiver and the Connected Transaction are fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favor of the relevant proposed resolutions to approve the terms of the Rights Issue, the Underwriting Agreement, the Connected Transaction and the Whitewash Waiver at the SGM.

Yours faithfully,

For and on behalf of the Independent Board Committee

Mr. Fok Ho Yin, Thomas Mr. Chen Lei Mr. Bao Jinqiao Independent non-executive Independent non-executive Independent non-executive Director Director Director

– 44 –

LETTER FROM VEDA CAPITAL

Set out below is the text of a letter received from Veda Capital Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Rights Issue, the Underwriting Agreement, the Connected Transaction and the Whitewash Waiver for the purpose of inclusion in this circular.

==> picture [96 x 40] intentionally omitted <==

Veda Capital Limited Room 1106, 11/F Wing On Centre 111 Connaught Road Central Hong Kong

24 February 2017

To the Independent Board Committee and the Independent Shareholders of Landing International Development Limited

Dear Sirs,

(1) PROPOSED RIGHTS ISSUE ON THE BASIS OF FIVE RIGHTS SHARES FOR EVERY ONE NEW SHARE HELD ON THE RECORD DATE; (2) CONNECTED TRANSACTION IN RELATION TO PAYMENT OF UNDERWRITING COMMISSION; AND

(3) APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Rights Issue, the Underwriting Agreement, the Connected Transaction and the Whitewash Waiver, details of which are set out in the letter from the Board (the ‘‘Board Letter’‘) contained in the circular dated 24 February 2017 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.

Reference is made to the Announcement in relation to, among others, the proposed Capital Reorganisation, the change in board lot size, the proposed Rights Issue, the Connected Transaction and the application for the Whitewash Wavier. The Company proposed to (i) implement the Capital Reorganisation, which will entail the Capital Reduction and the SubDivision; (ii) change the board lot size for trading in the Shares from 5,000 New Shares to 60,000 New Shares upon completion of the Rights Issue; and (iii) subject to the Capital Reorganisation becoming effective, to implement the Rights Issue on the basis of five Rights Shares for every one New Share held on the Record Date at the Subscription Price of HK$0.05 per Rights Share. The Company will raise proceeds of approximately HK$5,141 million before expenses (assuming that there is no change in the number of issued Shares on or before the Record Date) by way of the issue of 102,829,396,285 Rights Shares.

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LETTER FROM VEDA CAPITAL

As the Rights Issue will increase the issued share capital of the Company by more than 50%, the Rights Issue is subject to the approval of the Shareholders at the SGM by way of poll. Pursuant to Rule 7.19(6) of the Listing Rules, the Rights Issue is subject to the approval of the Shareholders in general meeting by a resolution on which any controlling shareholders and their associates or, where there are no controlling shareholders, the Directors (excluding the independent non-executive Directors) and the chief executive of the Company and their respective associates will abstain from voting. As at the Latest Practicable Date, LIL, a company wholly owned by Mr. Yang. Mr. Yang is the sole director of LIL. LIL is principally engaged in investment holding, is interested in 7,061,709,274 Existing Shares, representing approximately 34.34% of the issued share capital of the Company. Accordingly, the Concert Party Group will abstain from voting at the SGM to approve the Rights Issue.

In addition, given that LIL is a connected person of the Company, the entering into of the Underwriting Agreement by the Company and payment of the underwriting commission by the Company to LIL constitute connected transactions for the Company under the Listing Rules. As the total amount of underwriting commission payable by the Company is more than 5% of the applicable ratios under Chapter 14A of the Listing Rules, payment of the underwriting commission to LIL pursuant to the Underwriting Agreement will be subject to the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

According also to the Board Letter, the underwriting by LIL of the Underwritten Shares under the Rights Issue will trigger an obligation to make a mandatory general offer under Rule 26 of the Takeovers Code for all the securities of the Company not already owned or agreed to be acquired by the Concert Party Group, unless a waiver is granted by the Executive. An application has been made by LIL for the Whitewash Waiver to the Executive pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code, to waive the obligations of the Concert Party Group to make such a mandatory general offer. Pursuant to the Takeovers Code, the Whitewash Waiver will be conditional on, among other things, the approval of the Independent Shareholders at the SGM by way of poll in accordance with the requirements of the Takeovers Code.

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Fok Ho Yin, Thomas, Mr. Chen Lei and Mr. Bao Jinqiao, has been established to advise the Independent Shareholders on (i) whether the terms of the Rights Issue and the Underwriting Agreement (including the Connected Transaction) are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (ii) whether the Rights Issue is in the interests of the Company and the Shareholders as a whole and is conducted in the ordinary and usual course of business of the Group; (iii) whether the Whitewash Waiver is in the interests of the Company and the Shareholders as a whole; and (iv) how the Independent Shareholders should vote in respect of the resolutions to approve the Rights Issue, the Underwriting Agreement, the Connected Transaction and the Whitewash Waiver at the SGM. We, Veda Capital Limited, have been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in this respect. Our appointment has been approved by the Independent Board Committee.

– 46 –

LETTER FROM VEDA CAPITAL

Apart from normal professional fees for our services to the Company in connection with the engagements described above, no other arrangement exists whereby we will receive any fees and/or benefits from the Group. We have not acted as an independent financial adviser and have not provided any other services to the Company or any of its respective subsidiaries or their respective associates during the past two years. We are not aware of any relationships or interests between us and the Group, the Underwriters or any of their respective substantial shareholders, directors or chief executive, or any of their respective associates or concert parties as at the Latest Practicable Date. We are independent under Rule 13.84 of the Listing Rules and under the Takeovers Code to act as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in connection with the Rights Issue and the Underwriting Agreement, the Connected Transaction and the Whitewash Waiver.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors. We have assumed that such information and statements, and any representation made to us, which we have relied upon them in formulating our opinion, are true, accurate and complete in all material respects as at the Latest Practicable Date and the Shareholders will be notified of any material changes (if any) as soon as possible in accordance with Rule 9.1 of the Takeovers Code.

We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors, which have been provided to us. Our opinion is based on the Directors’ representation and confirmation that there are no undisclosed private agreements/ arrangements or implied understanding with anyone concerning the Rights Issue, the Underwriting Agreement, the Connected Transaction and the Whitewash Waiver. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules and Rule 2 of the Takeovers Code.

The 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 the Circular (other than the information relating to the Concert Party Group) 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 (other than the information relating to the Concert Party Group) or the Circular misleading.

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LETTER FROM VEDA CAPITAL

The Circular includes particulars given in compliance with the Takeovers Code. The Directors jointly and severally accept full responsibility for the accuracy of the information contained in the Circular (other than those relating to the Concert Party Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in the Circular (other than those expressed by the Concert Party Group) have been arrived at after due and careful consideration and there are no other facts not contained in the Circular, the omission of which would make any statement in the Circular misleading.

The sole director of LIL accepts full responsibility for the accuracy of the information contained in the Circular (other than those relating to the Group) and confirms, having made all reasonable enquiries, that to the best of his knowledge, opinions expressed in the Circular (other than those expressed by the Group) have been arrived at after due and careful consideration and there are no other facts not contained in the Circular, the omission of which would make any statement in the Circular misleading.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-depth investigation into the business and affairs of the Company, the Concert Party Group, or their respective subsidiaries or associates, nor have we considered the taxation implication on the Group or the Shareholders as a result of the Rights Issue and/or the Connected Transaction. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. In addition, nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Rights Issue, the Underwriting Agreement, the Connected Transaction and the Whitewash Waiver, we have taken into consideration the following principal factors and reasons:

I. THE RIGHTS ISSUE AND THE CONNECTED TRANSACTION

(a) Background of and reasons for the Rights Issue

Business and financial overview of the Group

The Company is an investment holding company and the Group is principally engaged in (i) development and operation of the integrated leisure and entertainment resort; (ii) gaming club and entertainment facilities; (iii) property development; and (iv) design, manufacturing and sales of light-emitting diode (‘‘LED’’) and semiconductor lighting related products.

– 48 –

LETTER FROM VEDA CAPITAL

Set out below are (i) the audited consolidated financial results of the Group for the two years ended 31 December 2015 as extracted from the Company’s annual report for the year ended 31 December 2015 (the ‘‘2015 Annual Report’’); and (ii) the unaudited consolidated financial results of the Group for the six months ended 30 June 2016 and 30 June 2015 as extracted from the Company’s interim report for the six months ended 30 June 2016 (the ‘‘2016 Interim Report’’) and 30 June 2015:

	For the	For the		For the six	For the six
	year ended	year ended	Year	months ended	months ended	Year
	31 December	31 December	on year	30 June	30 June	on year
	2015	2014	change %	2016	2015	change %
	(audited)	(audited)		(unaudited)	(unaudited)
		(Re-presented)
	HK$’000	HK$’000	%	HK$’000	HK$’000	%
Revenue	246,500	223,318	10.4	445,295	109,234	307.7
— Lighting business	229,103	201,951	13.4	119,905	109,234	9.8
— Property development	—	—	—	—	—	—
— Integrated resort development	—	—	—	—	—	—
— Casino business	17,397	21,367	(18.6)	325,390	—	N/A
Gross profit	46,258	58,590	(21.0)	—	20,211	N/A
Loss for the year	(1,086,214)	(342,656)	217.0	(662,555)	(173,384)	282.1

Summary consolidated statement of financial position

	As at	As at	Year	As at	As at	Year
	31 December	31 December	on year	30 June	30 June	on year
	2015	2014	change %	2016	2015	change %
	(audited)	(audited)		(unaudited)	(unaudited)
	HK$’000	HK$’000	%	HK$’000	HK$’000	%
Total assets	11,408,675	5,893,237	93.6	14,850,981	12,120,834	22.5
— Cash and bank balances	5,191,990	1,655,667	213.6	5,226,427	6,386,626	(18.2)
Total liabilities	1,720,275	1,382,151	24.5	4,918,572	7,329,532	(32.9)
Net assets	9,688,400	4,511,086	114.8	9,932,409	4,791,302	107.3

– 49 –

LETTER FROM VEDA CAPITAL

For the financial year ended 31 December 2015

For the year ended 31 December 2015, the Group recorded revenue of approximately HK$246.5 million, representing an increase of approximately 10.4% as compared to approximately HK$223.3 million as recorded in the previous year. We understand that the increase in revenue was mainly attributable to the increase in the revenue from the lighting business by approximately 13.4% from approximately HK$202.0 million for the year ended 31 December 2014 to approximately HK$229.1 million for the year ended 31 December 2015, which was mainly stimulated by price reduction resulted from the keen competition in the LED industry.

For the year ended 31 December 2015, the Group recorded a net loss of approximately HK$1,086.2 million, which represents an increase of net loss of the Company of approximately 217.0% when comparing to the net loss for approximately HK$342.7 million recorded in the previous year. Based on the 2015 Annual Report, the increase in net loss of the Company for the year ended 31 December 2015 was mainly attributable to (i) loss on disposal of subsidiaries which engaged in the property development business in Yueyang, the PRC; (ii) loss on disposal of the financial assets at fair value through profit or loss; (iii) increase in administrative expenses incurred in the construction and planning stages of the integrated resort development and property development; (iv) increase in finance costs and other operating and administrative expenses due to the Group expansion; and (v) increase in provision for impairment of assets and other receivables.

As at 31 December 2015, the Group’s (i) total assets amounted to approximately HK$11,408.7 million, representing an increase of approximately 93.6% as compared to previous year; (ii) net assets amounted to approximately HK$9,688.4 million, representing an increase of approximately 114.8% as compared to previous year; and (iii) cash and bank balances amounted to approximately HK$5,192.0 million, representing an increase of approximately 213.6% as compared to previous year.

For the six months ended 30 June 2016

For the six months ended 30 June 2016, the Group recorded revenue of approximately HK$445.3 million, representing an increase of approximately 307.7% as compared to approximately HK$109.2 million as recorded for the six months ended 30 June 2015. We understand that the increase in revenue was mainly attributable to the revenue generated from the casino business in (i) Landing Casino in Jeju after the completion of the buyback of 50% of the shares of Magical Gains Holdings Limited in 19 October 2015 and (ii) the Les A Club in London after the completion of the Les A Acquisition (as defined below).

For the six months ended 30 June 2016, the Group recorded a net loss of approximately HK$662.6 million, which represents an increase of net loss for the Company of approximately 282.1% when comparing to the net loss of approximately HK$173.4 million recorded in the corresponding period in year 2015. Based on the 2016 Interim Report, the increase in net loss of the Company for the six months ended 30 June 2016 was mainly attributable to (i) change in fair value of financial

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LETTER FROM VEDA CAPITAL

assets at fair value through profit or loss; (ii) increase in employee benefit expenses and other operating expenses incurred in the construction and planning stages of the integrated resort development and property development; and (iii) increase in employee benefit expenses and other operating expenses due to expansion of the Group.

As at 30 June 2016, the Group’s (i) total assets amounted to approximately HK$14,851.0 million, representing an increase of approximately 22.5% as compared to 30 June 2015; (ii) net assets amounted to approximately HK$9,932.4 million, representing an increase of approximately 107.3% as compared to 30 June 2015; and (iii) cash and bank balances amounted to approximately HK$5,226.4 million, representing an decrease of approximately 18.2% as compared to 30 June 2015.

Reasons for the Rights Issue and use of proceeds

As referred to in the Board Letter, during the past 12 months, the Group has completed the two acquisitions:

(1) Les A Acquisition

(2) Callisto Acquisition

On 3 January 2017, the Group completed the acquisition of 50% of the issued share capital of Callisto at the total consideration of approximately HK$3,189 million (the ‘‘Callisto Acquisition’’). Thereafter, the Company, through Callisto and HBL, became the sole legal and beneficial owner of Landing Jeju and the Jeju Project. Details of the Callisto Acquisition are set out in the circular of the Company dated 13 December 2016. As mentioned in said circular, the Company was then considering to fund the Callisto Acquisition by way of equity financing, but as it was uncertain whether the Company could proceed with any equity fund raising exercise, and such exercise could be time consuming which might lag behind the time of completion of Callisto Acquisition, the Company has completed the Callisto Acquisition by means of 18-month term, interest-free and security-free shareholder loan extended by

– 51 –

LETTER FROM VEDA CAPITAL

LIL. The loan arrangement with LIL was only meant to be an interim measure to enable the Company to meet the completion schedule of the Callisto Acquisition.

As at the Latest Practicable Date, the Company owed to LIL shareholder loans in the aggregate amount of approximately HK$5,537 million, which are due in June 2018. It has never been the parties’ intention to rely on one single Shareholder for such large scale of financings, which were required for the proper business purposes of the Group, for any extended period. Such financings were meant to be bridge loans and will have to be repaid to the extent possible as soon as alternative financings are available to the Group. The 18-month term of the shareholder loans offered by LIL was intended only to provide sufficient time for the Company to devise and carry through a suitable fund raising exercise. Hence, it is the Company’s obligations to seek for and obtain suitable alternative financings as soon as the circumstances allow.

The gross proceeds from the Rights Issue will be not less than approximately HK$5,141 million before expenses. The estimated expenses in relation to the Rights Issue, including the financial, legal, and other professional advisory fees, Underwriting Commission, printing and translation expenses will be borne by the Company. The estimated net proceeds of the Rights Issue will be not less than approximately HK$5,065 million. As at 31 January 2017, the Group had cash and bank balances of approximately HK$3,862 million, among which, (i) approximately HK$3,200 million has been reserved and allocated for the development of the Jeju Project, being the intended use of the proceeds from the rights issue of the Company completed in July 2015, (ii) approximately HK$600 million has been reserved for the fund investment of the Company (details of which are set out in the announcement of the Company dated 5 December 2016) and (iii) the remaining balance of approximately HK$62 million will be applied for the working capital of the Group.

Taking into account (a) the financing needs of the Group for the upcoming period ; and (b) the Company’s obligations to repay the shareholder loans due to LIL (to the extent possible) because the shareholder loans were granted as transitional nature and are to be repaid as soon as alternative financings are available, the Company intends to apply the net proceeds from the Rights Issue as to:

(i) approximately HK$4,274 million for the partial repayment of outstanding indebtedness of the Company to LIL; and
(ii) the remaining proceeds of not less than approximately HK$791 million for the working capital of the Group and repayments of loans and relevant finance costs payable to Independent Third Parties who are not Shareholders, and/or financing any future investment opportunities of the Group which may arise.

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LETTER FROM VEDA CAPITAL

After the partial repayment, the outstanding amount of the shareholder’s loan owing to LIL will be approximately HK$1,263 million. As at the Latest Practicable Date, the Company had no plan, arrangement, understanding or intention for any potential acquisitions, and no negotiations was taking place in relation to any potential acquisition.

The Set-Off

As at the Latest Practicable Date, LIL has granted to the Company shareholder loans in aggregate of approximately HK$5,537 million, which were used for the purpose of, among other things, satisfying the financing needs in relation to the two acquisitions mentioned above. The loans were granted on terms which are better than normal commercial terms, and are not secured by the assets of the Group.

As discussed with the Company, as at the Latest Practicable Date, there were two loans granted by Independent Third Parties of the Company to be due before the due dates of the shareholder loans payable to LIL, in July 2017 and August 2017 respectively, with principal amount of HK$33 million and HK$100 million (collectively the ‘‘Third Parties Loans’’), and such two loans will be repaid out of the remaining proceeds of approximately HK$791 million from the Rights Issue. The abovementioned shareholder loans in the aggregate amount of approximately HK$5,537 million by means of interest-free, security-free shareholder loan and due in June 2018 were extended by LIL mainly for the purpose to refinance/ finance the Les A Acquisition and the Callisto Acquisition on the basis of transitional nature that the abovementioned shareholder loans have to be repaid to the extent possible as soon as alternative financings are available to the Group.

Prospects of the Group

The Group has diversified into the gaming business since June 2014. As noted in the circular of the Company dated 8 April 2016, the Les A Acquisition was in line with the business objective of the Group. As outlined in the IR 2016, Les A Club has an international customer base comprising mainly ultra-high net worth individual customers. Like other Mayfair casinos, Les A Club has been able to gain an international competitive advantage from the reputation of the gaming industry in the United Kingdom for strong regulation, transparency, fairness and integrity. It was considered that the Les A Acquisition represented an unique and good investment

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LETTER FROM VEDA CAPITAL

opportunity that allowed the Company to step up its investment and presence in the gaming industry and to enhance the future earning capability and potential of the Group.

The Group started its flagship investment in the Jeju Project in late 2013. As further noted in the circular of the Company dated 13 December 2016, it was considered that complete ownership and control of the Jeju Project upon completion of the Callisto Acquisition will provide a good opportunity for the Group to work towards the achievement of its business vision, enhance the Company’s flexibility on the development of the Jeju Project and facilitate the Company to build up its presence and goodwill in the integrated resort and tourism sector.

As mentioned above, the shareholder loans granted by LIL were in a short-term bridge loans basis with the intention of providing temporary support to the Les A Acquisition and the Callisto Acquisition due to the time constraint as faced by the Company for the completion of respective acquisition and operation while the Company should secure other means of financing once its available. As such, by participating in the Rights Issue, Qualifying Shareholders will be indirectly supporting the financing needs of the gaming business and integrated resort development of the Group and participating in the expansion and future business development of the Company.

As discussed with the Directors, the Company will continuously seek other investment opportunities and possible acquisitions. However, as at the Latest Practicable Date, the Company had no plan, arrangement, understanding or intention for any potential acquisitions, and no negotiations was taking place in relation to any potential transaction.

We have discussed with the Directors on the future prospects of the Group and the Directors have a positive outlook for the longer term of the businesses of the Group with reference to the current operations and business of the existing principal activities of the Group, and the development and market of the gaming and integrated resort industries.

Taking into account of (i) there is no obligation for LIL, which is the controlling shareholder of the Company, to finance the Les A Acquisition and Les A’s operation and the Callisto Acquisition with interest-free and security-free shareholder loans and the shareholder loans shall be repaid when alternative financings are available; and (ii) despite the fact that approximately 84% of the net proceeds will contribute to the repayment of the shareholder loans, the way of settling the shareholder loans i.e. setting off partially by the Rights Shares and partially by cash, enables the Company to avoid a significant amount of outflow in terms of liquid asset such as cash or other equivalents, it is prudent to support the continuing development of the Group’s business activities by way of the Rights Issue which will not only strengthen the Group’s working capital base and repay the loans, but also provide all Qualifying Shareholders the opportunity to participate in the

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LETTER FROM VEDA CAPITAL

future business development of the Group through the Rights Issue at the Subscription Price, we are of the view that the Rights Issue is a suitable source of financing over the repayment of the abovementioned shareholder loans.

We concur with the Directors’ strategy to raise new equity substantial enough at this stage by means of the Rights Issue. Debt refinancing would not resolve and relieve the Group’s current interest burden and repayment obligations when they fall due. The estimated net proceeds of the Rights Issue will be not less than approximately HK$5,065 million and, as set out above, following completion of the Rights Issue and on an illustrative basis, would improve the gearing ratio of the Company with the repayment of certain debts utilising the net proceeds from the proposed Rights Issue. If the Company is able to raise the capital and repay the substantial shareholder’s loan in the coming months, it is considered that it will give a positive impact to the financial performance of the Group and allow the Group to have more flexibility for the future development and expansions.

Furthermore, to demonstrate the support in the Company’s long term future, LIL, being the controlling Shareholder beneficially interested in an aggregate of 7,061,709,274 Shares, representing approximately 34.34% of the issued share capital of the Company as at the Latest Practicable Date, had executed the Irrevocable Undertaking to take up its respective entitlement to the Rights Shares under the Rights Issue. The remaining Rights Shares have been fully underwritten by the Underwriters at arm’s length commission rate. The Rights Issue provides the Qualifying Shareholders with a means of ensuring that their percentage shareholding in the Company will not be diluted. The Shareholders who are optimistic about the prospects of the Group may take advantage of the excess application mechanism to increase their shareholding in the Company at a discount to the current market price before any underwriting obligation of the Underwriters is called upon.

The Company proposes to raise not less than approximately HK$5,141 million before expenses by way of the Rights Issue on the basis of five (5) Rights Shares for every one (1) existing Share held on the Record Date at the Subscription Price of HK$0.05 per Rights Share, payable in full on acceptance. The extent of Independent Shareholders’ dilution if they do not take up their entitlements to the Rights Shares is up to a maximum of 83.33%. In this regard, the Rights Issue may be regarded as a ‘‘heavy’’ call on Shareholders. Notwithstanding this, we can see that such call, as it is resulted from a substantial need for new equity capital to address the substantial amount of the shareholder’s loan in the aggregate amount of approximately HK$5,537 million faced by the Group due to the cost of the Les A Acquisition and the Callisto Acquisition, is justifiable and equitable to all Shareholders.

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LETTER FROM VEDA CAPITAL

Furthermore, as discussed with the Directors, taking into account of:

(a) the cash balance of the Company of approximately HK$3,862 million as at 31 January 2017 which will not be feasible to cover the shareholder loan repayments, maintain a high level of working capital and at the same time secure any investment opportunities might raise in the future as approximately HK$3,200 million, out of the current cash balance, has been reserved and allocated for the development of the Jeju Project as the intended use of proceeds from the rights issue completed in July 2015, and such current cash balance;
(b) as disclosed in the letter from the Board in this circular, the terms of the Rights Issue are the best terms available to the Company, having regard to the fact that the Company has contacted about 10 other financial institutions who could act as underwriters (including Kingston Securities), yet due to the scale and size of the proposed fund raising, no concrete terms of offer had been received by the Company from any other potential underwriters, and the Company was only able to reach an agreement with the Underwriters under the present terms and structure of the Rights Issue. The participation of LIL as an Underwriter was commercially necessary to secure the terms of the current underwriting arrangement with the Underwriters, that the underwriting commission rates charged by the respective underwriters of the rights issues conducted in the three months prior to the date of the Underwriting Agreement, as reference in the comparable table as set out in the sub-section ‘‘Comparison with other rights issue exercises’’ below, ranged from 0.28% to 4.00%, with an average of approximately 2.54%. The Underwriting Commission charged by Kingston Securities is within such range. LIL, as a connected person of the Company, has agreed to charge an Underwriting Commission rate, also within the said range, which is lower than the rate charged by Kingston Securities, an Independent Third Party. Therefore, we consider that the Underwriting Commission rates are the best available terms; and
(c) each Qualifying Shareholder is entitled to subscribe for the Rights Shares at the Subscription Price in proportion to his/her/its shareholding in the Company held on the Record Date, the interest of the Qualifying Shareholders will not be prejudiced by the discount of the Subscription Price as they are offered with an equal opportunity to participate in the Rights Issue. Rather, the deep discount and high ratio of Rights Shares will give each Qualifying Shareholder the option to maintain or further increase (by way of excess applications) their respective shareholding in the Company at a relatively low price as compared to the historical price.

We are of the view that the Rights Issue is a suitable source of financing over the repayment of the abovementioned shareholder loans.

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LETTER FROM VEDA CAPITAL

Other financing alternatives available to the Group

With reference to the Board Letter, the Board has considered and discussed with financial institutions regarding various fund raising methods available to the Group. Among different fund raising methods, the Directors have focused on evaluating the possibilities of carrying out fund raising through rights issue and open offer as they are relatively larger in scale as compared to placing of the shares under a general mandate. In comparison, the Rights Issue is pre-emptive in nature, allowing Qualifying Shareholders to maintain their respective pro-rata shareholdings through their participation in the Rights Issue. The Rights Issue allows the Qualifying Shareholders who participate to (a) increase their interests in the shareholding of the Company by (i) acquiring additional rights entitlement in the open market (subject to availability); and/or (ii) applying through excess applications for Rights Shares or (b) reduce their interests in the shareholding of the Company by disposing of their rights entitlements in the open market (subject to availability). As an open offer does not allow the trading of rights entitlements, the Rights Issue is preferred.

As further noted from the Board Letter, it is difficult for the Group to obtain debt financing of this scale given the current financial conditions of the Group and market conditions. The Company has approached various financial institutions for different debt financing options, but received no conclusive terms that the Directors considered acceptable. The tentative terms of financing proposed by such financial institutions, including the applicable interest rates and the collateral required to secure such debt financing, were considered to be onerous. In the light of unfavorable terms of debt financing, additional borrowing of this scale will deteriorate the gearing position of the Group.

Having taken into account the possible benefits of the Rights Issue as compared with other financing alternatives, we concur with the Directors that the Rights Issue is in the interests of the Company and the Shareholders as a whole although it is not conducted in the ordinary and usual course of business of the Group.

(b) Principal terms of the Rights Issue

The following table summarises the major terms of the Rights Issue:

Basis of the Rights Issue: five Rights Share for every one New Share held on the Record Date Number of Existing Shares in issue 20,565,879,257 Existing Shares as at the Latest Practicable Date: Number of Rights Shares: 102,829,396,285 Rights Shares (assuming no change in the number of issued Shares on or before the Record Date)

Subscription Price: HK$0.05 per Rights Share with nominal value of HK$0.01 each

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LETTER FROM VEDA CAPITAL

As discussed with the Company, the Subscription Price and the subscription ratio were determined, among others, as a result of arm’s length negotiations between the Company and the Underwriters, and the Company was only able to reach an agreement with the Underwriters under the present terms and structure of the Rights Issue. The determination was also driven by the recent market price of the Shares, the capital needs and financial position of the Group and the prevailing market conditions.

The Subscription Price represents:

(a) a discount of approximately 41.86% to the adjusted closing price of HK$0.086 per New Share, based on the closing price of HK$0.086 per Existing Share as quoted on the Stock Exchange on the Last Trading Day and adjusted for the effect of the Capital Reorganisation;
(b) a discount of approximately 43.18% to the adjusted average closing price of approximately HK$0.088 per New Share, based on the average closing price of HK$0.088 per Existing Share for the five consecutive trading days ended on the Last Trading Day and adjusted for the effect of the Capital Reorganisation;
(c) a discount of approximately 10.71% to the adjusted theoretical ex-rights price of approximately HK$0.056 per New Share, based on the closing price of HK$0.086 per Existing Share as quoted on the Stock Exchange on the Last Trading Day and adjusted for the effect of the Capital Reorganisation;
(d) a discount of approximately 15.25% to the adjusted closing price of HK$0.059 per New Share, based on the closing price of HK$0.059 per Existing Share as quoted on the Stock Exchange on the Latest Practicable Date and adjusted for the effect of the Capital Reorganisation; and
(e) a discount of approximately 89.65% to the net asset value of the Company per New Share of approximately HK$0.483 as at 30 June 2016 and adjusted for the effect of the Capital Reorganisation. After taking into account of the valuation report of the properties held by the Group as set out in Appendix III of the Circular, there is no adjustment needed for the net asset value of the Company per New Shares as at 30 June 2016.

As confirmed by the Directors, the Subscription Price was determined after arm’s length negotiations between the Company and the Underwriters with reference to (a) the market price of the Existing Shares prior to the Last Trading Day, which was in general in a decreasing trend; (b) the low trading liquidity of the Shares for the last three months prior to the Last Trading Day; and (c) the prevailing market conditions of the capital markets in Hong Kong.

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LETTER FROM VEDA CAPITAL

(c) Analysis on the Subscription Price

In order to assess the fairness and reasonableness of the Subscription Price, we set out the following informative analysis for illustrative purpose:

Historical Share price performance

The following chart sets out the daily closing prices of the Shares on the Stock Exchange for the period from 11 January 2016 (being the first trading day of the 12month period prior to the Last Trading Day) (the ‘‘Pre-Announcement Period’’) up to and including the Latest Practicable Date (the ‘‘Review Period’’). We consider the Review Period which covers a full year prior to the Underwriting Agreement, represents a reasonable period to provide a general overview of the recent price performance of the Shares when conducting an analysis among the historical closing prices of the Shares and the Subscription Price.

Chart 1: Share price performance against the Subscription Price during the Review Period

==> picture [409 x 259] intentionally omitted <==

Source: The Stock Exchange

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LETTER FROM VEDA CAPITAL

The Pre-Announcement Period

Prior to the release of the Announcement on 16 January 2017, the daily closing price of the Shares during the Pre-Announcement Period ranged from the lowest of HK$0.086 per Share on 11 January 2017 to the highest of HK$0.249 per Share on 5 May 2016. The average closing price of Shares within the Pre-Announcement Period was approximately HK$0.171 per Share, and the Subscription Price represents a discount of approximately 70.78% to the average closing price of Shares within the Pre-Announcement Period. The Subscription Price represents a discount to the closing price of the Shares throughout the Pre-Announcement Period and to the average closing price of Shares. We noted that the Share price substantially fluctuated during the Pre-Announcement Period.

The Post-Announcement Period

At the request of the Company, trading in the Shares was suspended from 12 January 2017 to 16 January 2017 (both days inclusive) pending the publication of the Announcement. Following the resumption of trading of Shares on 17 January 2017 and up to and including the Latest Practicable Date (the ‘‘Post-Announcement Period’’), the average of the closing price of the Shares decreased to HK$0.061 per Share, and the Subscription Price represents a discount of approximately 18.03% to the average closing price of Shares within the Post-Announcement Period. We have enquired with the Directors regarding the possible reasons for the decrease in the Share price immediately after the publication of the Announcement and were advised that save for the Rights Issue, they were not aware of any other matters which might have impact on the Share price. Therefore, we believe that the decrease in the closing prices of the Shares immediately after the release of the Announcement was probably due to the market reaction to the publication of the Announcement.

Despite the Subscription Price is set at a discount to the historical closing price of the Shares, we are advised by the Company that (a) it is not uncommon for listed issuers in Hong Kong to set the subscription price at a discount to the closing prices in order to increase attractiveness of a rights issue; (b) the scale of the Rights Issue is large and it is necessary to offer a relatively deep discount under the Rights Issue in order to encourage Qualifying Shareholders to participate in the Rights Issue by taking up their respective entitlements and to maintain or to increase (by way of excess applications) their shareholdings in the Company and participate in the potential growth of the Group; and (c) each Qualifying Shareholder is entitled to subscribe for the Rights Shares at the Subscription Price in proportion to his/her/its shareholding in the Company held on the Record Date, the interest of the Qualifying Shareholders will not be prejudiced by the discount of the Subscription Price as they are offered with an equal opportunity to participate in the Rights Issue. Rather, the deep discount and high ratio of Rights Shares will allow each Qualifying Shareholder to have the option to maintain or to increase (by way of excess applications) their respective shareholding in the Company at a relatively low price as compared to the historical price, allowing them to have greater flexibility in determining the extent of his/her/its participation in the Rights Issue that is best suited his/her/its own financial

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LETTER FROM VEDA CAPITAL

condition and/or investment strategy. In that regard, we understand from the Directors that a higher basis of entitlement as in the case of the Rights Issue of five Rights Shares for every one New Share with the Subscription Price would offer Qualifying Shareholders more flexibility in choosing to subscribe for nil to five Rights Shares for every one New Share held as compared to the aforementioned alternative scenario. The Directors believe that such additional flexibility would better cater to the varying needs of different Qualifying Shareholders with different financial resources, therefore encouraging more Qualifying Shareholders to participate in the Rights Issue.

Comparison with other rights issue exercises

Based on the information available from the Stock Exchange’s website, we have identified, after taken reasonable efforts, having considered (i) the recent volatility of the Hong Kong stock market; (ii) include sufficient number of transactions for comparison purposes; and (iii) allow the Shareholders to have a general understanding of the recent rights issue transactions being conducted in the Hong Kong stock market, an exhaustive list of 21 of the rights issues (the ‘‘Comparables’’) announced by the companies listed on the main board or growth enterprise market of the Stock Exchange within the period three months prior to the date of Underwriting Agreement being three months immediately preceding the date of the Last Trading Day. Despite the fact that the Comparables that we have identified are with different basis of entitlement that might not be exactly the same as the Rights Issue, we consider that the statistics of the Comparables as set out below can provide the Shareholders or potential investors of the Company, a general trend and data of rights issue exercises in the market for their further information to make decision with respect to the Rights Issue. In addition, Shareholders should note that the businesses, operations and prospects of the Company are not the same as the Comparables. We have not conducted any independent investigation with regard to the businesses and operations of the Comparables which shall not affect our analysis as we are comparing the general trend of rights issue exercises in the market with the Rights Issue.

Summarised below is our relevant finding:

							Premium/
						Premium/	(Discount)
						(Discount) of the	of the
					Premium/	subscription	theoretical
				Premium/	Discount of the	price over/	ex-rights
				(Discount) of the	subscription price	to the	price over/
				subscription price	over/to the	net asset value	to the
				over/to the	theoretical	attributable to	closing				Involved
				closing price	ex-rights price,	owners of	price on the	Maximum			connected
Date of	Stock		Basis of	on the last	based on the last	the company	last trading	dilution	Underwriting	Excess	person(s) as
announcement	Code	Company name	entitlement	trading day	trading day	per share	day	(Note 1)	commission	application	underwriter(s)
				%	%	%	%	%	%	Yes/No	Yes/No
13/10/2016	616	Eminence Enterprise	3 for 1	(33.12)	(6.00)	(93.75)	(28.57)	27.40	1.00	yes	no
		Limited
17/10/2016	1176	Zhuguang Holdings Group	1 for 3	(39.39)	(32.77)	9.39	(9.85)	25.00	3.00	yes	no
		Company Limited
20/10/2016	197	Heng Tai Consumables	1 for 1	(17.20)	(9.40)	(92.20)	(8.62)	50.00	3.50	yes	no
		Group Limited

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LETTER FROM VEDA CAPITAL

							Premium/
						Premium/	(Discount)
						(Discount) of the	of the
					Premium/	subscription	theoretical
				Premium/	Discount of the	price over/	ex-rights
				(Discount) of the	subscription price	to the	price over/
				subscription price	over/to the	net asset value	to the
				over/to the	theoretical	attributable to	closing				Involved
				closing price	ex-rights price,	owners of	price on the	Maximum			connected
Date of	Stock		Basis of	on the last	based on the last	the company	last trading	dilution	Underwriting	Excess	person(s) as
announcement	Code	Company name	entitlement	trading day	trading day	per share	day	(Note 1)	commission	application	underwriter(s)
				%	%	%	%	%	%	Yes/No	Yes/No
28/10/2016	273	Mason Financial Holdings	6 for 5	(45.40)	(27.40)	0.21	(24.79)	54.55	0.28	yes	no
		Limited
1/11/2016	1208	MMG Limited	1 for 2	(26.80)	(19.60)	77.14	(8.78)	33.33	2.75	yes	no
4/11/2016	80	China New Economy	3 for 2	(31.00)	(11.50)	(85.96)	(22.07)	60.00	3.50	yes	no
		Fund Limited
		(Note 2)
8/11/2016	539	Victory City International	1 for 2	(30.56)	(22.60)	(87.20)	10.28	33.33	1.00	yes	no
		Holdings Limited
11/11/2016	2324	Capital VC Limited	3 for 1	(50.00)	(20.00)	(45.89)	(37.50)	75.00	1.50	no	no
							(Note 4)
14/11/2016	30	Ban Loong Holdings	1 for 2	(25.68)	(18.70)	(9.3)	(8.58)	33.33	2.50	yes	no
		Limited
30/11/2016	622	Enerchina Holdings	1 for 2	(38.37)	(29.33)	(56.33)	(12.79)	33.33	3.00	yes	no
		Limited
1/12/2016	8203	Kaisun Energy Group	1 for 2	0.00	0.00	(37.83)	0.00	33.33	4.00	yes	yes
		Limited
2/12/2016	8200	Sau San Tong Holdings	2 for 1	5.30	1.70	(67.97)	3.47	66.67	3.00	yes	no
		Limited
9/12/2016	6108	New Ray Medicine	1 for 2	(31.25)	(10.13)	(77.55)	23.50	40.00	3.50	yes	no
		International
		Holding Limited
15/12/2016	1340	Huisheng International	1 for 2	(5.66)	(3.85)	(73.39)	(1.26)	33.33	2.50	yes	no
		Holdings Limited
20/12/2016	993	Huarong International	1.5 for 20	(17.00)	(16.00)	796.46	(1.26)	6.98	1.50	yes	no
		Financial Holdings				(Note 3)
		Limited
21/12/2016	8201	PPS International	1 for 2	(40.00)	(30.77)	(18.10)	(13.33)	33.33	2.00	yes	no
		(Holdings) Limited
21/12/2016	8165	Jian ePayment Systems	1 for 8	(7.53)	(6.72)	1,830.07	(0.86)	11.11	3.00	no	no
		Limited				(Note 3)
21/12/2016	8100	GET Holdings Limited	1 for 2	(7.10)	(4.90)	(84.93)	(2.32)	33.33	3.50	yes	no
22/12/2016	928	Tack Fiori International	1 for 1	(35.05)	(21.25)	173.37	(17.53)	50.00	2.75	yes	no
		Group Limited				(Note 3)
4/1/2017	8212	Celebrate International	3 for 1	(15.20)	(4.50)	(77.92)	(11.11)	75.00	3.00	yes	no
		Holdings Limited
		Maximum		(50.00)	(32.77)	77.14	3.47	75.00	4.00
		Minimum		5.30	1.70	(93.75)	(37.50)	6.98	0.28
		Average		(24.55)	(14.69)	(48.37)	(12.01)	40.41	2.54
		the Company	5 for 1	(41.86)	(10.71)	(88.03)	(34.88)	83.33%	2.5% for	yes	yes
									Kingston
									Securities; and
									2% for LIL

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LETTER FROM VEDA CAPITAL

Source: the relevant announcements posted on the Stock Exchange web-site (www.hkex.com.hk)

Notes:

Maximum dilution effect of each rights issue is calculated as: ((number of rights shares to be issued under the basis of entitlement)/(number of existing shares held for the entitlement for the rights shares under the basis of entitlement + number of rights shares to be issued under the basis of entitlement) x 100%), e.g. for an rights issue with basis of 1 rights share for every two (2) existing shares, the maximum dilution effect is calculated as ((1)/(1+2))*100%) = approximately 33.33%.
The effect of bonus issue associated with the rights issue has been taken into account.
The net asset value attributable to the owners of the company per shares of Huarong International Financial Holdings Limited (stock code: 993), Jian ePayment Systems Limited (stock code: 8165) and Tack Fiori International Group Limited (stock code: 928) are excluded from the calculations, as we consider these net asset value per shares of these Comparables appear to be extreme outliers as compared to the rest of the Comparables and are not appropriate, thus do not provide a meaningful analysis.
Capital VC Limited (stock code: 2324) has conducted share consolidation prior to their underlying rights issue.

Based on the above table, we noted that (i) the subscription prices to the closing price on the last trading day prior to the rights issue announcement of the Comparables ranged from a premium of approximately 5.30% to a maximum discount of approximately 50.00% (the ‘‘LTD Market Range’’), with the mean at discount of approximately 24.55% (the ‘‘LTD Market Mean’’). The discount of approximately 41.86% to the adjusted closing price per Share on the Last Trading Day as represented by the Subscription Price (the ‘‘LTD Discount’’) hence falls within the LTD Market Range and is deeper than the LTD Market Mean; (ii) the subscription prices to the theoretical ex-entitlement prices per share based on the last trading day prior to the rights issue announcement of the Comparables ranged from a premium of approximately 1.70% to a maximum discount of approximately 32.77% (the ‘‘TERP Market Range’’), with the mean at a discount of approximately 14.69% (the ‘‘TERP Market Mean’’). The discount of the Subscription Price of the Rights Issue to the theoretical ex-entitlement price per Share is approximately 10.71% (the ‘‘TERP Discount’’), which is within the range of the Comparables and lower than the mean of the Comparables; (iii) by excluding the Outliers (as defined below) given their exceptionally high premium of the subscription price as compared to the net asset value attributable to owners of the company (the ‘‘NAV’’) per share (the ‘‘PNAV’’) which may produce anomalous results to our analysis, the PNAV of the remaining Comparables ranged from a minimum discount of approximately 93.75% to a maximum of a premium of 77.14%, with the mean at a discount of approximately 48.37%. The discount of the Subscription Price of the Rights Issue as compared to the net asset value attributable to the owners of the Company per share is approximately 88.03% (based on the valuation report as set out in Appendix III of this Circular, no adjustment is needed to the NAV of the Company as at 30 June 2016), which is within the range of the Comparables and higher than the mean of the Comparables; and (iv) the theoretical ex-entitlement prices to the closing prices on the last trading day of the Comparables ranged from a premium of approximately

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LETTER FROM VEDA CAPITAL

3.47% to a maximum discount of approximately 37.50% (the ‘‘TEP Market Range’’), with a mean at discount of approximately 12.01% (the ‘‘TEP Market Mean’’). The discount of approximately 34.88% for the theoretical ex-entitlement price to the closing price per Share on the Last Trading Day of the Company (the ‘‘TEP Discount’’) falls within the TEP Market Range and its deeper than the TEP Market Mean.

According to publicly available information, the PNAV of Huarong International Financial Holdings Limited (stock code: 993), Jian ePayment Systems Limited (stock code: 8165) and Tack Fiori International Group Limited (stock code: 928) (collectively, the ‘‘Outliers’’) are exceptionally high because (i) Jian ePayment Systems Limited (stock code: 8165) and Tack Fiori International Group Limited (stock code: 928) have relatively substantially small NAV comparing with other Comparables; and (ii) the market capitalisation of Huarong International Financial Holdings Limited (stock code: 993) (‘‘Huarong International’’) as compared to its NAV is substantially larger than other Comparables that the current market capitalisation of Huarong International is not a fair reflection of Huarong International’s operating performance. We are of the view that the current market capitalisation of the Outliers and their share prices are not a fair reflection of the Outliers’ value and hence, there are substantial premium in regards to the subscription price over the PNAV. The subscription price over the PNAV of the Outliers may not be meaningful data points for our analysis. Accordingly, we believe the inclusion of the Outliers in calculation of the Comparable average will distort the result and in turn lead to a misleading conclusion. Therefore, we have not included the premiums of the subscription price over the PNAV of the Outliers in calculating of the average and maximum.

We are in the view that the Subscription Price is fair and reasonable, considering that:

(a) the LTD Discounts falls within the LTD Market Range as well as the TERP Discount falls within the TERP Market Range;
(b) despite the TEP Discount fall within the TEP Market Range and deeper than the TEP Market Mean, the TEP Discount does not provide a meaningful analysis as the Qualifying Shareholders who do not wish to participate in the Rights Issue are able to dispose his/her/its rights in the open market and the value of the such rights is subjected to market sentiment;
(c) the Subscription Price is lower than the average closing prices of the Shares throughout the Pre-Announcement Period represents a discount of approximately 70.78% and is lower than the average closing prices of the Shares throughout the Post-Announcement Period represents a discount of approximately 18.03% in the Review Period;

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LETTER FROM VEDA CAPITAL

(d) the fact that Qualifying Shareholders who take up their assured entitlements in full under the Rights Issue will be able to maintain or to increase (by way of excess applications) their respective pro-rata shareholding interests in the Company after completion of the Rights Issue;
(e) the Company in need of capital to meet its financial obligations and the Rights Issue is able to raise immediate cash in a significant amount to the Company. In addition, it is a common practice for listed issuers in Hong Kong to set the subscription price at a discount to the closing prices and/or the PNAV to in order to increase attractiveness of a rights issue, as disclosed in the above table; and
(f) taking into account that (i) the Company’s previous rights issue completed in July 2015 received total acceptances representing approximately 63.62% of the total number of rights issues available at a subscription price representing a discount of approximately 75.86% to the adjusted closing price on the respective last trading day then; and (ii) the large scale of the Rights Issue (approximately HK$5,065 million in net proceeds, being around 2.87 times of the Company’s market capitalisation of approximately HK$1,767 million as at the Last Trading Day), it is necessary to offer a relatively deep discount under the Rights Issue in order to encourage Qualifying Shareholders to participate in the Rights Issue by taking up their respective entitlements and to maintain or to increase (by way of excess applications) their shareholdings in the Company and participate in the potential growth of the Group.

Conclusion

Having considered that (i) the continuous loss-making position of the Group as discussed in the above section headed ‘‘Business and financial overview of the Group’’; (ii) the section headed in ‘‘Reasons for the Rights Issue and use of proceeds’’ and the downward trend of the prevailing trading prices of the Shares in the past five months which decreased from HK$0.210 on 27 September 2016 to HK$0.086 on the Last Trading Day; (iii) although the LTD Discount is deeper than the LTD Market Mean, the LTD Discount is within the LTD Market Range; (iv) the discount represented by the Subscription Price to the theoretical ex-entitlement price of the Shares on the Last Trading Day falls within the TERP Market Range and lower than the TERP Market Mean; (v) the discount of the PNAV to the Subscription Price is within the range of the Comparables; (vi) the common practice by the Comparables to set their rights issue at a discount to the prevailing market prices of the relevant shares before the relevant announcements; (vii) all Qualifying Shareholders are entitled to subscribe for the Rights Shares in the same proportion to their existing shareholdings in the Company held on the Record Date; (viii) the deep discount and a high ratio of Rights Shares will allow each Qualifying Shareholder to have greater flexibility in determining the extent of his/her/its participation in the Rights Issue that is most suitable for his/her/its own financial

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LETTER FROM VEDA CAPITAL

condition and/or investment strategy, we are of the view that the discount of the Subscription Price is fair and reasonable, and thus is in the interests of the Company and the Shareholders as a whole.

(d) Underwriting arrangement and the Connected Transaction

Pursuant to the Underwriting Agreement, LIL has (in addition to his obligations under the Irrevocable Undertaking) conditionally agreed to underwrite 50,176,201,000 Rights Shares; whereas Kingston Securities has conditionally agreed to underwrite 17,344,648,915 Rights Shares.

Pursuant to the Underwriting Agreement, 2.5% of the aggregate Subscription Price in respect of the maximum number of Underwritten Shares underwritten by Kingston Securities (the ‘‘Kingston Commission’’) is payable to Kingston Securities; while 2.0% of the aggregate Subscription Price in respect of the Underwritten Shares underwritten by LIL (the ‘‘LIL Commission’’) is payable to LIL. As aforementioned, payment of the underwriting commission by the Company to LIL constitutes a connected transaction for the Company.

From the table under the sub-section headed ‘‘Comparison with other rights issue exercises’’ of this letter, we noted that (i) both of the Kingston Commission and the LIL Commission fall within the range of commissions of 0.28% to 4.00% received by underwriters in other rights issue exercises; and (ii) the LIL Commission of 2.00% is lower than the 4.00% received by the underwriter in the rights issue exercise which involved connected person(s) as underwriter(s). Accordingly, we are of the opinion that the Kingston Commission and the LIL Commission are in line with market practice. We have also reviewed other major terms of the Underwriting Agreement including, but not limited to, the payment terms, the termination of the Underwriting Agreement and conditions of the Underwriting Agreement (details of which are set out in the Letter from the Board) and we are not aware of any term which is unusual. As such, we are of the view that the terms of the Underwriting Agreement and the commission charged by the Underwriters is under normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

(e) Application for excess Rights Shares

With reference to the Board Letter, Qualifying Shareholders may apply, by way of excess application, for any unsold entitlements of the Non-Qualifying Shareholders and for any Rights Shares provisionally allotted but not accepted. Applications for excess Rights Shares may be made by completing the EAFs for application for excess Rights Shares and lodging the same with a separate remittance for the excess Rights Shares being applied for. The Directors will allocate the excess Rights Shares at their discretion on a

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LETTER FROM VEDA CAPITAL

pro rata basis in proportion to the number of excess Rights Shares being applied for under each application. No reference will be made to the Rights Shares comprised in applications by PAL or the number of New Shares held by the Qualifying Shareholders. No preference will be given to topping up odd lots to whole board lots.

Taking into account the above principal terms of the Rights Issue and the Underwriting Agreement, we consider that the terms of the Rights Issue and the Underwriting Agreement (including the Connected Transaction) are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned.

(f) Possible dilution of the shareholding interests of the existing public Shareholders

The following table shows the shareholding structures of the Company as at the Latest Practicable Date and immediately after completion of the Rights Issue.

Shareholders The Concert Party Group (Note 1) Kingston Securities (including subscribers/sub-underwriters procured by it) (Note 2) Public Total	Number of Existing Shares as at the Latest Practicable Date 7,061,709,274 0 13,504,169,983 20,565,879,257	% 34.34 0.00 65.66 100.00	Number of New Shares immediately upon the Capital Reorganisation becoming effective but before completion of the Rights Issue 7,061,709,274 0 13,504,169,983 20,565,879,257	% 34.34 0.00 65.66 100.00	Number of New Shares immediately after completion of the Rights Issue assuming all the Qualifying Shareholders have taken up their respective entitlements of Rights Shares in full 42,370,255,644 0 81,025,019,898 123,395,275,542	% 34.34 0.00 65.66 100.00	Number of New Shares immediately after completion of the Rights Issue assuming no Qualifying Shareholders (with the exception of LIL) have taken up any of the Rights Shares and the Underwriters have take up the Rights Shares to the maximum extent 92,546,456,644 17,344,648,915 13,504,169,983 123,395,275,542	% 75.00 14.05 10.95
								100.00

Notes:

All of the 7,061,709,274 Existing Shares are held by LIL, which is solely and beneficially owned by Mr. Yang. Save for LIL, the Company has no other substantial shareholder and no Director (except Mr. Yang) is interested in any Shares.
As at the Latest Practicable Date, Kingston Securities does not have any sub-underwriting arrangements in place. As and when any subscribers for Rights Shares and/or sub-underwriters are procured by Kingston Securities, pursuant to the terms of the Underwriting Agreement, Kingston Securities has agreed to ensure that (i) such subscribers and/or sub-underwriters are Independent Third Parties, and (ii) such subscribers and/or sub-underwriters, together with parties acting in concert, shall not hold more than 10% of the equity interest in the Company upon completion of the Rights Issue.

All Qualifying Shareholders are entitled to subscribe for the Rights Shares. For those Qualifying Shareholders who take up their entitlements in full under the Rights Issue, their shareholding interests in the Company will remain unchanged after the Rights Issue.

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LETTER FROM VEDA CAPITAL

As in all other cases of rights issues and open offers, dilution on the shareholdings of those Qualifying Shareholders who do not take up in full their assured entitlements under the Rights Issue is inevitable. Nonetheless, Qualifying Shareholders who do not accept the Rights Issue can, subject to the then prevailing market conditions, consider selling their nil-paid rights to subscribe for the Rights Shares in the market. However, the Shareholders should note that their shareholdings in the Company will be diluted upon completion of the Rights Issue.

As at the Latest Practicable Date, the existing public Shareholders held 65.66% of the total issued share capital of the Company. If all the Qualifying Shareholders do not take up the Rights Shares to which they are entitled and the Underwriters take up all the Rights Shares, the percentage of shareholding (assuming that there is no Share being repurchased, on or before the Record Date) of the existing public Shareholders will be reduced to approximately 10.94%, representing a dilution effect on the shareholding interests of approximately 54.72% as a result of the Rights Issue. In all cases of rights issues, the dilution on the shareholding of those qualifying shareholders who do not take up in full their provisional allotments under the rights issues is inevitable. In fact, the dilution magnitude of any rights issue depends mainly on the extent of the basis of entitlement under such exercise since a higher offering ratio of new shares to existing shares has a greater dilution effect on the shareholding. However, unlike other equity fund raising alternative such as placing of new Shares where shareholding of Qualifying Shareholders are immediately diluted, the Rights Issue at least provides an opportunity for Qualifying Shareholders to maintain or to increase (by way of excess applications) their respective shareholdings in the Company.

We are aware of the potential dilution effects as just mentioned. Nonetheless, we consider that the foregoing should be balanced against by the following factors:

. Independent Shareholders are offered a chance to express their views on the terms of the Rights Issue, the Underwriting Agreement and the transactions contemplated thereunder through their votes at the SGM;
. Qualifying Shareholders are offered a chance to subscribe for their pro-rata Rights Shares for the purpose of maintaining or to increase (by way of excess applications) their respective shareholdings in the Company at a relatively low price as compared to the historical price of the Shares;
. those Qualifying Shareholders who choose to accept the Rights Shares in full can maintain their respective shareholdings in the Company after the Rights Issue;
. offering a relatively deep discount on the Subscription Price would encourage Qualifying Shareholders to participate in the Rights Issue and accordingly maintain or to increase (by way of excess applications) their shareholdings in the Company; this is not an uncommon practice in similar rights issue arrangements on the Stock Exchange;

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LETTER FROM VEDA CAPITAL

. Qualifying Shareholders have the opportunity to realise their nil-paid Rights Shares in the market;
. Shareholding dilution is inherent in rights issues in general. The entire potential dilution effect on the shareholding of the Shareholders will only occur if all the Qualifying Shareholders do not subscribe for their pro-rata Rights Shares, which will be an extreme situation; and
. considering the future development of the Company, Rights issue allows the Company to avoid a substantial cash outflow by partially setting off the shareholder loans using Rights Shares, which enable the Company to maintain a sufficient level of liquid assets such as cash for working capital and/or any investment opportunities indeed arise in the future.

Furthermore, taking into consideration of the specific financial and business situations of the Company, being (i) the capital intensive nature of the business of the Group, being the development and operation of the integrated resort, property development and casino, while as at 31 January 2017, the Company had HK$3,862 million cash or other bank deposit in which HK$3,200 million has been reserved and allocated for the development of the Jeju Project, HK$600 million has been reserved for the fund investment of the Company (details of which are set out in the announcement of the Company dated 5 December 2016) and the remaining balance of approximately HK$62 million will be applied for the working capital of the Group; (ii) it is an inappropriate approach to make comparison with other market comparables that have conducted high ratio rights issue (for which majority of the proceeds will be utilized as settlement of the existing loans for improving its gearing ratio) specifically as we consider that the business nature and the essentiality of capital requirement are dissimilar between companies, particularly given the capital intensive business nature, the existing size of loans and market capitalisation of the Group; (iii) the net proceeds from the Rights Issue intended to repay of the Third Parties Loans and the shareholder loans is a commercial decision of the Company that can strengthen its capital base; (iv) the cash level of the Company being HK$62 million is insufficient for the settlement of the Third Parties Loans (as set out in the above section sub headed ‘‘The Set-Off’’) which HK$33 million will be due in July 2017 and HK$100 million will be due August 2017 respectively; and (v) considering the size of the shareholder loans, being approximately HK$5,537 million, which represents around 3.13 times of the Company’s market capitalisation of approximately HK$1,767 million as at the Last Trading Day, we therefore consider that existing high ratio of basis of entitlement under the Rights Issue is justifiable and necessary to the Company in order to raise adequate amount of fund to satisfy the Group’s upcoming obligations and commitments.

In light of the above, we concur with the Directors that the potential dilution effect on the shareholding interests of the Qualifying Shareholders, which may only happen when the Qualifying Shareholders do not subscribe from their pro-rata Rights Shares, to be acceptable and justifiable given the abovementioned reasons. We are of the view that the possible dilution effect caused by the existing basis of entitlement under the Rights

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LETTER FROM VEDA CAPITAL

Issue (being five Rights Share for every one New Share) on the shareholding in view of each Qualifying Shareholder is fair and reasonable to the Independent Shareholders as a whole.

(g) Possible financial effects of the Rights Issue

Effect on net tangible assets

An unaudited pro forma statement of adjusted consolidated net tangible asset of the Group attributable to owners of the Company (‘‘NTAV’’) as if the Rights Issue had taken place on 30 June 2016 is set out in Appendix II to the Circular (the ‘‘Statement’’). Based on the Statement, the unaudited consolidated NTAV of the Group was approximately HK$6,243,637,000 and approximately HK$0.3 per Share prior to the Rights Issue as at 30 June 2016. Upon completion of the Rights Issue, the unaudited pro forma consolidated NTAV of the Group would become approximately HK$11,309,107,000 and approximately HK$0.09 per New Share based on the Statement.

As confirmed by the Company, upon taking into account of the valuation report of the Group as set out in Appendix III of the Circular, there is no adjustment needed for the unaudited consolidated NTAV of the Group.

Effect on working capital

As advised by the Company, as part of the net proceeds from the Rights Issue will be used as working capital of the Group, the working capital position of the Group would be improved upon completion of the Rights Issue.

It should be noted that the aforementioned analyses are for illustrative purpose only and do not purport to represent how the financial position of the Group will be upon completion of the Rights Issue.

RECOMMENDATION ON THE RIGHTS ISSUE AND THE CONNECTED TRANSACTION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that (i) the terms of the Rights Issue and the Underwriting Agreement (including the Connected Transaction) are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; (ii) the dilution effect to the Qualifying Shareholders caused by the Rights Issue is justifiable given the Group’s upcoming obligations and commitments; and (iii) the Rights Issue is in the interests of the Company and the Shareholders as a whole although it is not conducted in the ordinary and usual course of business of the Group. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution(s) to be proposed at the

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LETTER FROM VEDA CAPITAL

SGM to approve the Rights Issue and the Underwriting Agreement (including the Connected Transaction) and we recommend the Independent Shareholders to vote in favour of the resolution(s) in this regard.

II. THE WHITEWASH WAIVER

According to the Board Letter, the underwriting by LIL of the Underwritten Shares under Rights Issue will trigger an obligation to make a mandatory general offer under Rule 26 of the Takeovers Code for all the securities of the Company not already owned or agreed to be acquired by the Concert Party Group, unless a waiver is granted by the Executive.

In this regard, application has been made to the Executive by LIL for the Whitewash Waiver pursuant to Note 1 on dispensations from Rule 26 of the Takeovers Code to waive the obligations of LIL to make such a mandatory general offer. Pursuant to the Takeovers Code, the Whitewash Waiver will be conditional on, among other things, the approval of the Independent Shareholders of the Company at the SGM by way of poll in accordance with the requirements of the Takeovers Code.

Completion of the Rights Issue is conditional upon, among other things, the granting of the Whitewash Waiver by the Executive and the approval of the Independent Shareholders of relevant resolutions by way of poll at the SGM. The Executive has indicated that it intends, subject to the approval of the Independent Shareholders at the SGM, to grant the Whitewash Waiver. If the Whitewash Waiver is approved by the Independent Shareholders, then the obligation by LIL to make a mandatory general offer under Rule 26 of the Takeovers Code will be waived.

In light of (i) the reasons for the Rights Issue and the intended use of the net proceeds therefrom; and (ii) the terms of the Rights Issue and the Underwriting Agreement being fair and reasonable so far as the Independent Shareholders are concerned, we are of the opinion that the approval for the Whitewash Waiver, which is a condition for completion of the Rights Issue, is in the interests of the Company and the Shareholders as a whole and is fair and reasonable for the purpose of proceeding with the Rights Issue.

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LETTER FROM VEDA CAPITAL

RECOMMENDATION ON THE WHITEWASH WAIVER

Having taken into consideration the reasons for and possible benefits of the Rights Issue and that the Rights Issue is conditional upon the grant of the Whitewash Waiver, we consider that the Whitewash Waiver is fair and reasonable so far as the Independent Shareholders are concerned and is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the relevant resolution to be proposed at the SGM to approve the Whitewash Waiver and we recommend the Independent Shareholders to vote in favour of the resolution in this regard.

Yours faithfully, For and on behalf of Veda Capital Limited Julisa Fong Managing Director

Note:

Ms. Julisa Fong is a responsible officer under the SFO to engage in Type 6 (advising on corporate finance) regulated activity and has over 20 years of experience in investment banking and corporate finance.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL INFORMATION

Details of the consolidated financial information of the Group for each of the three financial years ended 31 December 2013, 2014 and 2015, and for the six months ended 30 June 2016 are disclosed in the following documents which have been published on the website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (www.582.com.hk):

. Interim report of the Company for the six months ended 30 June 2016 published on 12 September 2016
(www.hkexnews.hk/listedco/listconews/SEHK/2016/0912/LTN20160912609.pdf);
. Annual report of the Company for the year ended 31 December 2015 published on 22 April 2016
(www.hkexnews.hk/listedco/listconews/SEHK/2016/0422/LTN20160422021.pdf);
. Annual report of the Company for the year ended 31 December 2014 published on 28 April 2015
(www.hkexnews.hk/listedco/listconews/SEHK/2015/0428/LTN20150428470.pdf); and
. Annual report of the Company for the year ended 31 December 2013 published on 28 April 2014
(www.hkexnews.hk/listedco/listconews/SEHK/2014/0428/LTN20140428962.pdf).

– I-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following is the summary of the consolidated financial information of the Group for each of the years ended 31 December 2013, 2014 and 2015 and for the six months ended 30 June 2016 which were extracted from the Company’s 2013, 2014 and 2015 annual reports and 2016 interim report respectively.

RESULTS Revenue Loss before tax Income tax (expense) credit Loss for the year attributable to: Owners of the Company Non-controlling interest Loss per share — basic — diluted Dividends Dividends per share	Year ended 31 December 2013 2014 2015 HK$’000 HK$’000 HK$’000 181,075 223,318 246,500 (138,626) (344,155) (1,089,348) (3,571) 1,499 3,134 (137,147) (293,677) (987,971) (5,050) (48,979) (98,243) (142,197) (342,656) (1,086,214) (Restated) HK(2.89) cents HK(14.26) cents HK(77.46) cents HK(2.89) cents HK(14.26) cents HK(77.46) cents — — — — — —	For the six months ended 30 June 2016 HK$’000 445,295 (646,637) (15,918) (526,456) (136,099) (662,555) HK(2.56) cents HK(2.56) cents — —

– I-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

ASSETS AND LIABILITIES Total assets Total liabilities Net assets Equity attributable to owners of the Company Non-controlling interests Total equity	At 31 December 2013 2014 HK$’000 HK$’000 1,572,258 5,893,237 (730,752) (1,382,151) 841,506 4,511,086 768,484 3,911,132 73,022 599,954 841,506 4,511,086	2015 HK$’000 11,408,675 (1,720,275) 9,688,400 9,232,923 454,477 9,688,400	At 30 June 2016 HK$’000 14,850,981 (4,918,572) 9,932,409 8,592,008 1,340,401 9,932,409

The consolidated financial statements of the Company for the years ended 31 December 2013, 2014 and 2015 were audited by Zenith CPA Limited. No qualification was made by the auditors of the Company in respect of the audited consolidated financial statements of the Company for the years ended 31 December 2013, 2014 and 2015.

The Group did not have any items which are exceptional because of size, nature or incidence for each of the years ended 31 December 2013, 2014 and 2015 and for the six months ended 30 June 2016.

– I-3 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following is the full text of the audited consolidated financial statements of the Group for the year ended 31 December 2015 as extracted from the annual report of the Company for the year ended 31 December 2015:

Consolidated Statement of Profit or Loss

Year ended 31 December 2015

Notes REVENUE 6 Cost of sales Gross profit Other income and gains 6 Distribution and selling expenses Administrative expenses Other expenses Finance costs 7 Non-cash share option expenses Share of profits and losses of: Joint ventures Associate LOSS BEFORE TAX 8 Income tax credit 11 LOSS FOR THE YEAR Attributable to: Owners of the parent Non-controlling interests LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT For loss for the year — Basic and diluted 13	2015 HK$’000 246,500 (200,242) 46,258 119,332 (13,929) (409,982) (752,349) (78,678) — — — (1,089,348) 3,134 (1,086,214) (987,971) (98,243) (1,086,214) HK(77.46) cents	2014 HK$’000 (Re-presented) 223,318 (164,728) 58,590 60,908 (27,563) (344,434) (67,313) (20,369) (3,974) — — (344,155) 1,499 (342,656) (293,677) (48,979) (342,656) (Restated) HK(14.26) cents

– I-4 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Comprehensive Income Year ended 31 December 2015

LOSS FOR THE YEAR OTHER COMPREHENSIVE (LOSS)/INCOME Other comprehensive (loss)/income to be reclassified to profit or loss in subsequent periods: Exchange differences on translation of foreign operations Reversal of translation reserve upon deconsolidation of subsidiaries Release of translation reserve upon disposal of subsidiaries Share of other comprehensive income of: Joint ventures Associate NET OTHER COMPREHENSIVE LOSS TO BE RECLASSIFIED TO PROFIT OR LOSS IN SUBSEQUENT PERIODS AND OTHER COMPREHENSIVE LOSS FOR THE YEAR, NET OF TAX TOTAL COMPREHENSIVE LOSS FOR THE YEAR Attributable to: Owners of the parent Non-controlling interests	2015 HK$’000 (1,086,214) (203,631) — 21,414 — — (182,217) (1,268,431) (1,123,954) (144,477) (1,268,431)	2014 HK$’000 (342,656) (121,052) 74,277 — — — (46,775) (389,431) (326,167) (63,264) (389,431)

– I-5 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Financial Position

31 December 2015

Notes NON-CURRENT ASSETS Property, plant and equipment 14 Investment property 15 Prepaid land lease payments 16 Goodwill 17 Intangible assets 18 Investments in joint ventures 19 Investment in an associate 20 Total non-current assets CURRENT ASSETS Inventories 21 Properties under development 22 Trade and other receivables 23 Financial assets at fair value through profit or loss (‘‘FVTPL’’) 24 Tax recoverable Restricted cash 25 Cash and cash equivalents 25 Total current assets CURRENT LIABILITIES Trade and other payables 26 Finance lease payables 27 Interest-bearing bank borrowings 28 Deferred revenue 29 Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	2015 HK$’000 1,689,470 55,000 14,568 5,438 784,820 — — 2,549,296 45,719 1,135,733 895,187 1,575,884 14,866 — 5,191,990 8,859,379 284,294 — 83,591 — 367,885 8,491,494 11,040,790	2014 HK$’000 1,192,028 — 15,494 16,135 57,176 876,132 —
		2,156,965
		61,631 1,578,803 427,229 — 2,284 10,658 1,655,667
		3,736,272
		389,614 66,091 89,676 84
		545,465
		3,190,807
		5,347,772

– I-6 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Other payables 26 Due to a non-controlling interest 30 Deferred tax liabilities 31 Finance lease payables 27 Total non-current liabilities Net assets EQUITY Equity attributable to owners of the parent Share capital 32 Reserves Non-controlling interests Total equity	2015 HK$’000 11,040,790 4,160 1,342,125 6,105 — 1,352,390 9,688,400 2,056,588 7,176,335 9,232,923 455,477 9,688,400	2014 HK$’000 5,347,772
		— 598,826 6,280 231,580
		836,686
		4,511,086
		186,963 3,724,169
		3,911,132 599,954
		4,511,086

– I-7 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Changes in Equity Year ended 31 December 2015

Issued capital HK$’000 94,443 — — —	Share premium HK$’000 650,033 — — —	Contributed surplus HK$’000 (note a) 171,902 — — —	le to owners o Non-cash share option reserve HK$’000 — — — —	f the parent Non- distributable reserve HK$’000 (note b) 2,552 — — —	Other reserve HK$’000 (note c) — — — —	Accumulated losses HK$’000 (176,391) (293,677) — —	Total HK$’000 768,484 (293,677) (106,767) 74,277	Non- controlling interests HK$’000 73,022 (48,979) (14,285) —	Total equity HK$’000 841,506 (342,656 (121,052 74,277
— — 47,221 — 30,700 14,599 —	— — 1,369,419 (14,374) 1,236,300 773,723 —	— — — — — — —	— — — — — — 3,974	— — — — — — —	— 7,253 — — — — —	(293,677) — — — — — —	(326,167) 7,253 1,416,640 (14,374) 1,267,000 788,322 3,974	(63,264) 590,196 — — — — —	(389,431 597,449 1,416,640 (14,374 1,267,000 788,322 3,974
186,963 — — — — —	4,015,101* — — — — —	171,902* — — — — —		2,552* — — — — —	7,253* — — — — —			599,954 (98,243) (46,234) — — —	4,511,086 (1,086,214 (203,631 21,414 — —
— 1,869,625 — —	— 4,674,064 (97,944) —	— — — —	— — — (3,974)	— — — —	— — — —	(987,971) — — 3,974	(1,123,954) 6,543,689 (97,944) —	(144,477) — — —	(1,268,431 6,543,689 (97,944 —
2,056,588	8,591,221*	171,902*		2,552*	7,253*			455,477	9,688,400

These reserve amounts comprise the consolidated reserves of HK$7,176,335,000 (2014: HK$3,724,169,000) in the consolidated statement of financial position.

– I-8 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes:

(a) Contributed surplus of the Group was arisen from the Company’s capital reorganisation on 19 April 2013.
(b) The non-distributable reserve of the Group mainly represents statutory reserve requirement that the foreign investment enterprises appropriated 10% of the profit after taxation of the subsidiaries of the Company registered in the People’s Republic of China (the ‘‘PRC’’) other than Hong Kong to the nondistributable reserve under the PRC laws and regulations until the transferred amount equals to 50% of the registered capital of these PRC subsidiaries.
(c) The other reserve in an amount of HK$7,253,000 recognised in the year 2014, represents the difference between the fair value of the consideration received from share subscription of Landing Jeju and the carrying amount of the net assets attributable to the partial disposal of 50% of its equity interest.

– I-9 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Consolidated Statement of Cash Flows

Year ended 31 December 2015

Notes CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax Adjustments for: Changes in fair value of financial assets and liabilities at FVTPL, net 6 Bank interest income 6 Other interest income 6 Changes in fair value of investment property 6 Dividend Income 6 Gain on deemed disposal of subsidiaries 6 Finance costs 7 Impairment of trade and other receivables, net 8 Loss on disposal of subsidiaries 8 Loss on step acquisition 8 Impairment of goodwill 8 Impairment of intangible assets 8 Impairment of items of property, plant and equipment 8 Amortisation of prepaid land lease payments 8 Amortisation of intangible assets 8 Loss on disposal of financial assets at FVTPL, net 8 Depreciation 8 Loss on disposal of items of property, plant and equipment 8 Non-cash share option expenses Decrease in inventories Increase in properties under development (Increase)/decrease in trade and other receivables Increase in trade and other payables Increase in restricted cash Decrease in deferred revenue Cash used in operations Interest received Interest paid Overseas taxes paid Net cash flows used in operating activities	2015 HK$’000 (1,089,348) (95,528) (12,540) (4,277) (31) (4,076) — 78,678 215,004 69,808 40,262 16,135 46,180 56,676 379 7,878 308,284 49,669 275 — (316,572) 15,972 (540,025) (651,851) 139,368 (20,703) (84) (1,373,895) 12,540 (68,058) (3,060) (1,432,473)	2014 HK$’000 (344,155) (25,645) (11,478) — — — (20,422) 20,369 8,313 — — 59,000 — — 398 8,333 — 34,864 1,113 3,974 (265,336) 2,243 (910,067) 222,364 215,394 (10,658) (172) (746,232) 11,478 (30,671) (6,079) (771,504)

– I-10 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at FVTPL Proceeds from disposal of financial assets at FVTPL Purchase of items of property, plant and equipment Proceeds from disposal of items of property, plant and equipment Step acquisition of subsidiaries 34 Acquisition of assets and liabilities 35 Disposal of subsidiaries 36 Deemed disposal of subsidiaries 37 Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceed from issue of share capital 32 Share issue expenses 32 Loan from the ultimate holding company Repayment of loan from ultimate holding company Repayment of finance lease payables Loan from non-controlling interest Capital injection from non-controlling interest Repayment from joint ventures Repayment to a related company New bank and other borrowings Repayment of bank and other borrowings Net cash flows from financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of the year Effect of foreign exchange rate changes, net CASH AND CASH EQUIVALENTS AT END OF THE YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances Time deposits with original maturity of less than three months when acquired Cash and cash equivalents as stated in the statement of cash flows 25	2015 HK$’000 (2,096,534) 311,970 (609,856) — (85,506) (55,000) 746,899 — (1,788,027) 6,543,689 (97,944) — — (309,102) 789,002 — — — 1,804,027 (1,776,766) 6,952,906 3,732,406 1,655,667 (196,083) 5,191,990 1,737,829 3,454,161 5,191,990	2014 HK$’000 — — (936,914) 292 — (226,329) — (50,599) (1,213,550) 2,683,640 (14,374) 223,991 (594,000) (33,046) 552,149 597,449 125,000 (123,273) 102,251 (108,591) 3,411,196 1,426,142 265,956 (36,431) 1,655,667 354,110 1,301,557 1,655,667

– I-11 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to Financial Statements 31 December 2015

1. CORPORATE AND GROUP INFORMATION

The Company is a limited liability company incorporated in the Cayman Islands and continued in Bermuda and its shares are listed on The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’). The address of registered office is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda, and the principal place of business of the Company is located at Suites 5801–04, 58th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. The holding company and the ultimate holding company of the Company is Landing International Limited (‘‘LIL’’), which is incorporated in the British Virgin Island (‘‘BVI’’).

During the year, the Group was principally engaged in development and operation of the integrated resort (the ‘‘Integrated Resort Development’’); casino business (the ‘‘Casino Business’’); design, manufacturing and sales of the light-emitting diode (‘‘LED’’) and semiconductor lighting related products (the ‘‘Lighting Business’’); and property development (the ‘‘Property Development’’).

Information about Subsidiaries

Particulars of the Company’s subsidiaries as at 31 December 2015 are as follows:

	Place of		Percentage of	Percentage of
	incorporation/	Issued ordinary/	equity attributable
	registration and	registered share	to the Company
Name	business	capital	Directly	Indirectly	Principal activities
Upflow Limited	Hong Kong	HK$1 Ordinary share	100%	—	Dormant
Smart Million Limited	BVI	US$1 Ordinary share	100%	—	Dormant
Keenmount Limited	BVI	US$1 Ordinary share	100%	—	Investment holding
Pine Fame Limited	Hong Kong	HK$1 Ordinary share	—	100%	Investment holding
Lian Yun Gang Bo Yu	PRC	HK$780,000 Paid-up	—	100%	Investment holding
Information Consultancy		registered capital
Services Company Limited*
(Note i)
Ace Winner Holdings Limited	BVI	US$100 Ordinary	100%	—	Investment holding
(‘‘Ace Winner’’)		shares
China Opto Investment Limited	Hong Kong	HK$10,000 Ordinary	—	100%	Investment holding
		shares
Jiangsu Wenrun Optoelectronic	PRC	RMB135,000,000	—	69.44%	Design, manufacturing and sale
Co., Ltd.* (‘‘Jiangsu		Paid-up registered			of LED and semi-conductor
Wenrun’’) (Note ii)		capital			lighting related products
Jiangsu Wenrun Optoelectronic	PRC	RMB40,000,000 Paid-	—	69.44%	Design, manufacturing and sale
Technology Co., Ltd.*		up registered capital			of LED and semi-conductor
					lighting related products
Zhenjiang Wenrun Optoelectronic	PRC	RMB2,000,000 Paid-	—	69.44%	Design, manufacturing and sale
Semi-conductor Technology		up registered capital			of LED and semi-conductor
Co., Ltd.*					lighting related products

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

	Place of		Percentage of	Percentage of
	incorporation/	Issued ordinary/	equity attributable
	registration and	registered share	to the Company
Name	business	capital	Directly	Indirectly	Principal activities
Shanghai Yuji Electronic	PRC	RMB1,000,000 Paid-	—	69.44%	Sale of LED and semi-conductor
Limited*		up registered capital			lighting related products
Landing Jeju Development Co.,	South Korea	KRW165,000,000,000	50%	—	Construction, management,
Limited (‘‘Landing Jeju’’)**		Ordinary share			operation and rental of
					facilities for tourism,
					commerce, accommodation
					and recreation
Win Rich Group Limited	BVI	US$50,000 Ordinary	100%	—	Aircraft
(‘‘Win Rich’’)		shares
Landing Singapore Limited	BVI	US$100 Ordinary	100%	—	Investment holding
		shares
Landing Singapore Dev. Pte Ltd.	Singapore	SGD100 Ordinary	—	100%	Dormant
		shares
Gold Rise Management Limited#	Hong Kong	HK$1 Ordinary share	100%	—	Residential management
Rainbow Source Developments	BVI	US$100 Ordinary	100%	—	Motor vehicles
Limited		shares
Stepwide Developments Limited	BVI	US$1 Ordinary share	100%	—	Investment holding
Jumbo Step Limited#	Hong Kong	HK$1 Ordinary share	—	100%	Investment holding
Landing Korea Co., Ltd.	South Korea	KRW7,355,240,000	—	100%	Establishment of training center
		Ordinary shares
Cheong-ok Development Co., Ltd.	South Korea	KRW10,000,000	—	100%	Real estates development
(Note iii)		Ordinary shares
Empire Fame Limited	BVI	US$1 Ordinary shares	100%	—	Staff quarter
Magical Gains Holdings Limited	BVI	US$200 Ordinary	100%	—	Investment holding
(‘‘Magical Gains’’)*		shares
Ultra Matrix International Limited	BVI	US$50,000 Ordinary	—	100%	Investment holding
(‘‘Ultra Matrix’’)		shares
Grand Express Holdings Limited	Hong Kong	HK$1 Ordinary share	—	100%	Investment holding
(‘‘Grand Express Holdings’’)#
Grand Express Korea Co., Ltd.	South Korea	KRW27,176,895,000	—	100%	Casino business
(‘‘Grand Express Korea’’)		Ordinary shares
Golden House Ventures Limited	BVI	US$2 Ordinary shares	—	100%	Marketing
(‘‘Golden House’’)
Esteem Idea Limited (Note iii)	BVI	US$1 Ordinary share	100%	—	Investment holding

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Place of Percentage of incorporation/ Issued ordinary/ equity attributable registration and registered share to the Company Name business capital Directly Indirectly Principal activities Royal Dragon Limited Hong Kong HK$1 Ordinary share — 100% Property investment (‘‘Royal Dragon’’)[#] Jolly Champion Holding Limited BVI US$100 Ordinary 100% — Investment holding (Note iii) shares United Time Corporation Limited Hong Kong HK$100 Ordinary — 100% Investment holding (Note iii) shares Leisure Spring Investments BVI US$100 Ordinary 100% — Dormant Limited (Note iii) shares

Notes:

(i) This entity is registered in form of wholly-foreign-owned enterprise.
(ii) This entity is registered in form of sino-foreign equity joint venture.
(iii) These entities were incorporated during the year.
The English names of these companies referred to in these financial statements represent management’s best effort to translate the Chinese names of those companies, as no English names have been registered.
** Landing Jeju is accounted for as a subsidiary by virtue of the Company’s control over it. The Company obtained the control over the majority composition of the board of directors of Landing Jeju and 60% of the total voting rights in the board meetings of Landing Jeju.
Audited by Zenith CPA Limited

During the year, the Group acquired 50% remaining equity interest of Magical Gains and entire interest of Royal Dragon. Further details of these acquisitions are included in notes 34 and 35 to financial statements, respectively.

The Group disposed entire interest of each of Double Earn Holdings Limited and Sino Superior Limited. Further details of these disposals are included in note 36 to the financial statements.

2. BASIS OF PRESENTATION

In the preparation of these financial statements for the year ended 31 December 2015, the directors of the Company (the ‘‘Directors’’) have given careful consideration to the future liquidity of the Group in light of (i) the Group incurred a loss attributable to owners of the parent of HK$987,971,000 for the year ended 31 December 2015; and (ii) as at 31 December 2015, the Group has capital commitments of HK$1,992,236,000, interest-bearing bank borrowings of HK$83,591,000 and, amount due to a non-controlling interest of HK$1,342,125,000. Based on the cash flow projections prepared by the management of the Company with reference to the current business and financing plans of the Group, the Directors consider the Group will be able to finance its future working capital and fulfill its financial obligations as and when they fall due in the foreseeable future.

Accordingly, the consolidated financial statements have been prepared on the going concern basis.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3.1 BASIS OF PREPARATION

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (‘‘HKFRSs’’) (which include all HKFRSs, Hong Kong Accounting Standards (‘‘HKASs’’) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for investment property and financial assets at FVTPL, which have been measured at fair value. These financial statements are presented in Hong Kong dollars (‘‘HK$’’) and all values are rounded to the nearest thousand except when otherwise indicated.

Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended 31 December 2015. A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give the Group the current ability to direct the relevant activities of the investee).

When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group’s voting rights and potential voting rights.

The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Profit or loss and each component of other comprehensive income are attributed to the owners of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises (i) the assets (including goodwill) and liabilities of the subsidiary, (ii) the carrying amount of any non-controlling interest and (iii) the cumulative translation differences recorded in equity; and recognises (i) the fair value of the consideration received, (ii) the fair value of any investment retained and (iii) any resulting surplus or deficit in profit or loss. The Group’s share of components previously recognised in other comprehensive income is reclassified to profit or loss or retained profits, as appropriate, on the same basis as would be required if the Group had directly disposed of the related assets or liabilities.

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APPENDIX I

3.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

The Group has adopted the following revised standards for the first time for the current year’s financial statements.

Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions

Annual Improvements to HKFRSs 2010–2012 Cycle

Annual Improvements to HKFRSs 2011–2013 Cycle

The nature and the impact of each amendment is described below:

(a) Amendments to HKAS 19 apply to contributions from employees or third parties to defined benefit plans. The amendments simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. If the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction of service cost in the period in which the related service is rendered. The amendments have had no impact on the Group as the Group does not have defined benefit plans.
(b) The Annual Improvements to HKFRSs 2010–2012 Cycle issued in January 2014 sets out amendments to a number of HKFRSs. Details of the amendments that are effective for the current year are as follows:
. HKFRS 8 Operating Segments: Clarifies that an entity must disclose the judgements made by management in applying the aggregation criteria in HKFRS 8, including a brief description of operating segments that have been aggregated and the economic characteristics used to assess whether the segments are similar. The amendments also clarify that a reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker. The amendments have had no impact on the Group.
. HKAS 16 Property, Plant and Equipment and HKAS 38 Intangible Assets: Clarifies the treatment of gross carrying amount and accumulated depreciation or amortisation of revalued items of property, plant and equipment and intangible assets. The amendments have had no impact on the Group as the Group does not apply the revaluation model for measurement of these assets.
. HKAS 24 Related Party Disclosures: Clarifies that a management entity (i.e., an entity that provides key management personnel services) is a related party subject to related party disclosure requirements. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services. The amendment has had no impact on the Group as the Group does not receive any management services from other entities.
(c) The Annual Improvements to HKFRSs 2011–2013 Cycle issued in January 2014 sets out amendments to a number of HKFRSs. Details of the amendments that are effective for the current year are as follows:
. HKFRS 3 Business Combinations: Clarifies that joint arrangements but not joint ventures are outside the scope of HKFRS 3 and the scope exception applies only to the accounting in the financial statements of the joint arrangement itself. The amendment is applied prospectively. The amendment has had no impact on the Group as the Company is not a joint arrangement and the Group did not form any joint arrangement during the year.
. HKFRS 13 Fair Value Measurement: Clarifies that the portfolio exception in HKFRS 13 can be applied not only to financial assets and financial liabilities, but also to other contracts within the scope of HKFRS 9 or HKAS 39 as applicable. The amendment is

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

applied prospectively from the beginning of the annual period in which HKFRS 13 was initially applied. The amendment has had no impact on the Group as the Group does not apply the portfolio exception in HKFRS 13.

. HKAS 40 Investment Property: Clarifies that HKFRS 3, instead of the description of ancillary services in HKAS 40 which differentiates between investment property and owner-occupied property, is used to determine if the transaction is a purchase of an asset or a business combination. The amendment is applied prospectively for acquisitions of investment properties. The amendment has had no impact on the Group as the acquisition of investment property during the year was not a business combination and so this amendment is not applicable.

In addition, the Company has adopted the amendments to the Rules Governing the Listing of Securities on the Stock Exchange (the ‘‘Listing Rules’’) issued by the Stock Exchange relating to the disclosure of the financial information with reference to the Hong Kong Companies Ordinance (Cap. 622) during the current financial year. The main impact to the financial statements is on the presentation and disclosure of certain information in the financial statements.

3.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements.

HKFRS 9	Financial Instruments2
Amendments to HKFRS 10	Sale or Contribution of Assets between an Investor and its
and HKAS 28 (2011)	Associate or Joint Venture1
Amendments to HKFRS 10, HKFRS 12	Investment Entities: Applying the Consolidation Exception1
and HKAS 28 (2011)
Amendments to HKFRS 11	Accounting for Acquisitions of Interests in Joint Operations1
HKFRS 14	Regulatory Deferral Accounts3
HKFRS 15	Revenue from Contracts with Customers2
Amendments to HKAS 1	Disclosure Initiative1
Amendments to HKAS 16 and HKAS 38	Clarification of Acceptable Methods of Depreciation and
	Amortisation1
Amendments to HKAS 16 and HKAS 41	Agriculture: Bearer Plants1
HKAS 27 (2011)	Equity Method in Separate Financial Statements1
Annual Improvements 2012–2014 Cycle	Amendments to a number of HKFRSs1

1 Effective for annual periods beginning on or after 1 January 2016
2 Effective for annual periods beginning on or after 1 January 2018 3 Effective for an entity that first adopts HKFRSs for its annual financial statements beginning on or after 1 January 2016 and therefore is not applicable to the Group

Further information about those HKFRSs that are expected to be applicable to the Group is as follows:

In September 2014, the HKICPA issued the final version of HKFRS 9, bringing together all phases of the financial instruments project to replace HKAS 39 and all previous versions of HKFRS 9. The standard introduces new requirements for classification and measurement, impairment and hedge accounting. The Group expects to adopt HKFRS 9 from 1 January 2018. The Group is currently assessing the impact of the standard.

The amendments to HKFRS 10 and HKAS 28 (2011) address an inconsistency between the requirements in HKFRS 10 and in HKAS 28 (2011) in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The amendments require a full recognition of a gain or loss when the sale or contribution of assets between an investor and its associate or joint venture constitutes a business. For a transaction involving assets that do not constitute a business, a gain or loss resulting from the transaction is recognised in the investor’s profit or loss only to the extent of the unrelated investor’s interest in that associate or joint venture. The amendments are to be applied prospectively. The Group expects to adopt the amendments from 1 January 2016.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

HKFRS 15 establishes a new five-step model to account for revenue arising from contracts with customers. Under HKFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in HKFRS 15 provide a more structured approach for measuring and recognising revenue. The standard also introduces extensive qualitative and quantitative disclosure requirements, including disaggregation of total revenue, information about performance obligations, changes in contract asset and liability account balances between periods and key judgements and estimates. The standard will supersede all current revenue recognition requirements under HKFRSs. In September 2015, the HKICPA issued an amendment to HKFRS 15 regarding a one-year deferral of the mandatory effective date of HKFRS 15 to 1 January 2018. The Group expects to adopt HKFRS 15 on 1 January 2018 and is currently assessing the impact of HKFRS 15 upon adoption.

Amendments to HKAS 1 include narrow-focus improvements in respect of the presentation and disclosure in financial statements. The amendments clarify:

(i) the materiality requirements in HKAS 1;
(ii) that specific line items in the statement of profit or loss and the statement of financial position may be disaggregated;
(iii) that entitles have flexibility as to the order in which they present the notes to the financial statements; and
(iv) that the share of other comprehensive income of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss.

Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement of profit or loss. The Group expects to adopt the amendments from 1 January 2016. The amendments are not expected to have any significant impact on the Group’s financial statements.

Amendments to HKAS 16 and HKAS 38 clarify the principle in HKAS 16 and HKAS 38 that revenue reflects a pattern of economic benefits that are generated from operating business (of which the asset is part) rather than the economic benefits that are consumed through the use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets. The amendments are to be applied prospectively. The amendments are not expected to have any impact on the financial position or performance of the Group upon adoption on 1 January 2016 as the Group has not used a revenue-based method for the calculation of depreciation of its non-current assets.

3.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Investments in Associate and Joint Ventures

An associate is an entity in which the Group has a long term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

The Group’s investments in associate and joint ventures are stated in the consolidated statement of financial position at the Group’s share of net assets under the equity method of accounting, less any impairment losses.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group’s share of the post-acquisition results and other comprehensive income of associate and joint ventures is included in the consolidated statement of profit or loss and consolidated statement of other comprehensive income, respectively. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the consolidated statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and its associate or joint ventures are eliminated to the extent of the Group’s investments in the associate or joint ventures, except where unrealised losses provide evidence of an impairment of the asset transferred. Goodwill arising from the acquisition of associate or joint ventures is included as part of the Group’s investments in associate or joint ventures.

Business Combinations and Goodwill

Business combinations are accounted for using the acquisition method. The consideration transferred is measured at the acquisition date fair value which is the sum of the acquisition date fair values of assets transferred by the Group, liabilities assumed by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of net assets in the event of liquidation at fair value or at the proportionate share of the acquiree’s identifiable net assets. All other components of non-controlling interests are measured at fair value. Acquisition-related costs are expensed as incurred.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss.

Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability is measured at fair value with changes in fair value recognised in profit or loss. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised for non-controlling interests and any fair value of the Group’s previously held equity interests in the acquiree over the identifiable net assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than the fair value of the net assets acquired, the difference is, after reassessment, recognised in profit or loss as a gain on bargain purchase.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The Group performs its annual impairment test of goodwill at the end of each reporting period. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cashgenerating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. An impairment loss recognised for goodwill is not reversed in a subsequent period.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstances is measured based on the relative value of the operation disposed of and the portion of the cash-generating unit retained.

Fair Value Measurement

The Group measures its investment property, financial assets at FVTPL at the end of each reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 — based on quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 — based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly Level 3 — based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Impairment of Non-financial Assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, properties under development, financial assets and investment property), the asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the statement of profit or loss in the period in which it arises in those expense categories consistent with the function of the impaired asset.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

An assessment is made at the end of each reporting period as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the statement of profit or loss in the period in which it arises, unless the asset is carried at a revalued amount asset, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

Related Parties

A party is considered to be related to the Group if:

(a) the party is a person or a close member of that person’s family and that person
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the Group;

(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;
(vi) the entity is controlled or jointly controlled by a person identified in (a);
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); and
(viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the parent of the Group.

Property, Plant and Equipment and Depreciation

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the statement of profit or loss in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

Freehold land Not depreciated Buildings Over the shorter of the lease terms or 50 years Leasehold improvements 4.5% to 20% Furnitures, fixtures and office equipment 18% to 20% Motor vehicles 10% to 25% Aircraft 5% Plant, machinery and equipment 4% to 18% Gaming equipment and accessories 20% Structure 33%

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year end.

An item of property, plant and equipment including any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the statement of profit or loss in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Construction in progress represents buildings or assets under construction which are stated at cost less any impairment losses, and are not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

Investment Property

Investment property is interests in land and buildings (including the leasehold interest under an operating lease for a property which would otherwise meet the definition of an investment property) held to earn rental income and/or for capital appreciation, rather than for use in the production or supply of goods or services or for administrative purposes; or for sale in the ordinary course of business. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment property is stated at fair value, which reflects market conditions at the end of the reporting period.

Gains or losses arising from changes in the fair values of investment property is included in the statement of profit or loss in the year in which they arise.

Any gains or losses on the retirement or disposal of an investment property is recognised in the statement of profit or loss in the year of the retirement or disposal.

Intangible Assets (other than goodwill)

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value on the date of acquisition. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

lives are subsequently amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end.

Patents and licences

Purchased patents and licences with finite lives are stated at cost less any impairment losses and are amortised on the straight-line basis over their estimated useful lives of 8 to 18 years.

Casino license

Purchased casino license with infinite live is stated at cost less any impairment losses and no amortisation is provided.

Leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases.

Assets acquired through hire purchase contracts of a financing nature are accounted for as finance leases, but are depreciated over their estimated useful lives.

Where the Group is the lessee, rentals payable under operating leases net of any incentives received from the lessor are charged to the statement of profit or loss on the straight-line basis over the lease terms.

Prepaid land lease payments under operating leases are initially stated at cost and subsequently recognised on the straight-line basis over the lease terms.

Properties under Development

Properties under development are intended to be held for sale after completion.

Properties under development are stated at the lower of cost and net realisable value and comprise land costs, construction costs, borrowing costs, professional fees and other costs directly attributable to such properties incurred during the development period.

Properties under development are classified as current assets unless the construction period of the relevant property development project is expected to complete beyond the normal operating cycle. On completion, the properties are transferred to completed properties held for sale.

Investments and Other Financial Assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as financial assets at FVTPL, loans and receivables, as appropriate. When financial assets are recognised initially, they are measured at fair value plus transaction costs that are attributable to the acquisition of the financial assets, except in the case of financial assets recorded at fair value through profit or loss.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at FVTPL

Financial assets at FVTPL include financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments as defined by HKAS 39.

Financial assets at FVTPL are carried in the statement of financial position at fair value with positive net changes in fair value presented as other income and gains and negative net changes in fair value presented as other expenses in the statement of profit or loss. These net fair value changes do not include any dividends or interest earned on these financial assets.

Financial assets designated upon initial recognition as at FVTPL are designated at the date of initial recognition and only if the criteria in HKAS 39 are satisfied.

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated as at FVTPL. These embedded derivatives are measured at fair value with changes in fair value recognised in the statement of profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the FVTPL category.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such assets are subsequently measured at amortised cost using the effective interest rate method less any allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and includes fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in other income and gains in the statement of profit or loss. The loss arising from impairment is recognised in the statement of profit or loss in other expenses for loans and receivables.

Derecognition of Financial Assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when:

. the rights to receive cash flows from the asset have expired; or
. the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘‘pass-through’’ arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise the

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

transferred asset to the extent of the Group’s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Impairment of Financial Assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that occurred after the initial recognition of the asset and that loss event have an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that a debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Group first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

The amount of any impairment loss identified is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition).

The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in the statement of profit or loss. Interest income continues to be accrued on the reduced carrying amount using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans and receivables together with any associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group.

If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to other income and gain in the statement of profit or loss.

Financial Liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as loans and borrowing.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group’s financial liabilities include trade and other payables, amount due to a non-controlling interest, obligations under finance lease and interest-bearing bank borrowings.

Subsequent measurement on loan and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in the statement of profit or loss when the liabilities are derecognised as well as through the effective interest rate amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in the statement of profit or loss.

Derecognition of Financial Liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the statement of profit or loss.

Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average method and, in the case of work in progress and finished goods, comprises direct materials, direct labour and an appropriate proportion of overheads. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

Cash and Cash Equivalents

For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

For the purpose of the consolidated statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

When the effect of discounting is material, the amount recognised for a provision is the present value at the end of the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the statement of profit or loss.

Income Tax

Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is recognised outside profit or loss, either in other comprehensive income or directly in equity.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which the Group operates.

Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

. when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
. in respect of taxable temporary differences associated with investments in subsidiaries, associate and joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, the carryforward of unused tax credits and unused tax losses can be utilised, except:

. when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
. in respect of deductible temporary differences associated with investments in subsidiaries, associate and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Government Grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the costs, which it is intended to compensate, are expensed.

Revenue Recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases:

(a) from the sale of goods, when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold;
(b) interest income, on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset;
(c) casino revenues are measured by the aggregate net difference between gaming wins and losses, with liabilities recognised for funds deposited by customers before gaming play occurs and for chips in customers’ possession; and
(d) dividend income, when the shareholder’s right to receive payment has been established.

Share-based Payments

The Company operates a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. Employees (including Directors) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (‘‘equity-settled transactions’’).

The cost of equity-settled transactions with employees for grants is measured by reference to the fair value on the date at which they are granted.

The cost of equity-settled transactions is recognised in employee benefit expense, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at the end of each reporting period until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The charge or credit to the statement of profit or loss for a period represents the movement in the cumulative expense recognised as at the beginning and end of that period.

Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For awards that do not ultimately vest because non-market performance and/or service conditions have not been met, no expense is recognised. Where awards include a market or non-vesting condition, the transactions are treated as vesting irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified, if the original terms of the award are met. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payments, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the Group or the employee are not met. However, if a new award is substituted for the cancelled award, and is designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.

Other Employee Benefits

Pension scheme

The Group operates a defined contribution Mandatory Provident Fund retirement benefit scheme (the ‘‘MPF Scheme’’) under the Mandatory Provident Fund Schemes Ordinance for all of its employees. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the statement of profit or loss as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme.

The employees of the Group’s subsidiaries which operate in Mainland China are required to participate in a central pension scheme operated by the local municipal government. These subsidiaries are required to contribute certain of its payroll costs to the central pension scheme. The contributions are charged to the statement of profit or loss as they become payable in accordance with the rules of the central pension scheme.

The employees of the Group’s subsidiaries which operate in South Korea are required to participate in a defined contribution is a pension plan under which the South Korea subsidiaries pay fixed contributions into a separate entity. The contributions are recognised as employee benefit expense when a employee has rendered service.

Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised. All other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Where funds have been borrowed generally, and used for the purpose of obtaining qualifying assets, a capitalisation rate of 5% has been applied to the expenditure on the individual assets.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Foreign Currencies

These financial statements are presented in Hong Kong dollars, which is the Company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions recorded by the entities in the Group are initially recorded using their respective functional currency rates prevailing on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rates of exchange ruling at the end of the reporting period. Differences arising on settlement or translation of monetary items are recognised in the statement of profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates on the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates on the date when the fair value was measured. The gain or loss arising on translation of a non-monetary item measured at fair value is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation difference on the item whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).

The functional currencies of certain overseas subsidiaries, joint ventures and associate are currencies other than the Hong Kong dollar. As at the end of the reporting period, the assets and liabilities of these entities are translated into Hong Kong dollars at the exchange rates prevailing at the end of the reporting period and their statements of profit or loss are translated into Hong Kong dollars at the weighted average exchange rates for the year.

The resulting exchange differences are recognised in other comprehensive income and accumulated in the translation reserve. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the statement of profit or loss.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate.

For the purpose of the consolidated statement of cash flows, the cash flows of overseas subsidiaries are translated into Hong Kong dollars at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of overseas subsidiaries which arise throughout the year are translated into Hong Kong dollars at the weighted average exchange rates for the year.

4. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.

The major judgements, estimates and assumptions that have the most significant effect on the amounts recognised in the consolidated financial statements and have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are set out below:

Recognition and Allocation of Construction Cost on Properties under Development

Development costs of properties are recorded as properties under development during the construction stage and will be transferred to completed properties held for sale upon completion. Apportionment of these costs will be recognised in the statement of profit or loss upon the recognition

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

of the sale of the properties. Before the final settlement of the development costs and other costs relating to the sale of the properties, these costs are accrued by the Group based on management’s best estimate.

When developing properties, the Group may divide the development projects into phases. Specific costs directly related to the development of a phase are recorded as the cost of such phase. Costs that are common to phases are allocated to individual phases based on the estimated saleable area of the entire project.

Where the final settlement of costs and the related cost allocation is different from the initial estimates, any increase or decrease in the development costs and other costs would affect the profit or loss in future years.

Impairment of Goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating units and also to choose a suitable discount rate in order to calculate the present value of those cash flows.

Impairment of Non-financial Assets (other than Goodwill)

The Group assesses whether there are any indicators of impairment for all non-financial assets at the end of each reporting period. Indefinite life intangible assets are tested for impairment annually and at other times when such an indicator exists. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. An impairment exists when the carrying value of an asset or a cash-generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The calculation of the fair value less costs of disposal is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.

Net Realisable Value of Inventories

The Group reviews the carrying amounts of the inventories at the end of each reporting period to determine whether the inventories are carried at the lower of cost and net realisable value in accordance with the accounting policy as set out in note 3.4. Management estimates the net realisable value based on current market situation and historical experience of manufacturing and selling products of similar nature. Any change in the assumptions would increase or decrease the amount of inventories write down or the related reversals of write down made in prior years and affect the Group’s net asset value.

Impairment of Trade and Other Receivables

The Group makes impairment of trade and other receivables based on an assessment of the recoverability of the receivables. This assessment is based on the credit history of the customers and other debtors and the current market condition. The Directors reassess the impairment at the end of each reporting period. As at 31 December 2015, individually over receivables of HK$215,004,000 (2014: HK$8,313,000) have been determined to be impaired because the relevant recoverability of those debts is in doubt.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Deferred Tax on Investment Property

For the purposes of measuring deferred tax liabilities or deferred tax assets arising from investment property that are measured using the fair value model, the Directors have reviewed the Group’s investment property portfolios and concluded that the Group’s investment property is not held under a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time.

Therefore, in measuring the Group’s deferred taxation on investment property, the Directors have determined that the presumption that the carrying amounts of investment property measured using the fair value model are recovered entirely through sale is not rebutted. As a result, the Group has not recognised any deferred taxes on changes in fair value of investment property as the Group is not subject to any income taxes on disposal of its investment property. Continuous assessments on the presumption will be made by the management at each reporting date.

5. OPERATING SEGMENT INFORMATION

For management purpose, the Group currently has four reportable operating segments that operate different business activities. They are managed separately and providing different products or services which require different marketing strategies.

The principal activities of each reportable segment are as follows:

(a) Integrated Resort Development;
(b) Casino Business;
(c) Lighting Business; and
(d) Property Development.

Management monitors the results of the Group’s operating segments separately for the purpose of making decisions about resources allocation and performance assessment. Segment performance is evaluated based on reportable segment loss, which is a measure of adjusted loss before tax. The adjusted loss before tax is measured consistently with the Group’s loss before tax except that interest income, finance costs, as well as head office and corporate income and expenses are excluded from such measurement.

Segment assets exclude cash and bank balances, financial assets at FVTPL, tax recoverable, investment property, investments in joint ventures, investment in an associate and other unallocated head office and corporate assets as these assets are managed on a group basis.

Segment liabilities exclude obligations under finance lease, interest-bearing bank borrowings, amount due to a non-controlling interest, deferred tax liabilities and other unallocated head office and corporate liabilities as these liabilities are managed on a group basis.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Year ended 31 December 2015

Segment revenue: Sales to external customers Segment results Reconciliation: Interest income and unallocated income Corporate and other unallocated expenses, net Finance costs Share of profits and losses of: Joint ventures Associate Loss before tax Segment assets Reconciliation: Corporate and other unallocated assets Total assets Segment liabilities Reconciliation: Corporate and other unallocated liabilities Total liabilities Other segment information: Depreciation and amortisation Write-down of inventories to net realisable value Impairment of goodwill Impairment of intangible assets Impairment of property, plant and equipment Impairment of trade and other receivables, net	Integrated Resort Development HK$’000 — (62,604) 244,493 123,066 5,081 — — — — —	Casino Business HK$’000 17,397 (73,584) 1,135,733 — 2,398 — — — — —	Lighting Business HK$’000 229,103 (142,848) 991,909 35,377 20,956 12,437 16,135 46,180 56,676 5,004	Property Development HK$’000 — (82,228) 986,752 95,515 6,172 — — — — —	Total HK$’000 246,500 (361,264) 108,099 (757,505) (78,678) — — (1,089,348) 3,358,887 8,049,788 11,408,675 253,958 1,466,317 1,720,275 34,607 12,437 16,135 46,180 56,676 5,004

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Year ended 31 December 2014

Segment revenue: Sales to external customers Segment results Reconciliation: Interest income and unallocated income Corporate and other unallocated expenses, net Finance costs Share of profits and losses of: Joint ventures Associate Loss before tax Segment assets Reconciliation: Corporate and other unallocated assets Total assets Segment liabilities Reconciliation: Corporate and other unallocated liabilities Total liabilities Other segment information: Depreciation and amortisation Write-down of inventories to net realisable value Impairment of goodwill Impairment of trade and other receivables, net	Integrated Resort Development HK$’000 — (94,972) 1,277,592 126,629 6,180 — — —	Casino Business HK$’000 21,367 (20,261) — — 192 — — —	Lighting Business HK$’000 201,951 (76,441) 393,637 92,614 12,178 10,805 59,000 8,313	Property Development HK$’000 — (8,369) 924,573 147,954 254 — — —	Total HK$’000 223,318 (200,043) 31,900 (155,643) (20,369) — — (344,155) 2,595,802 3,297,435 5,893,237 367,197 1,014,954 1,382,151 18,804 10,805 59,000 8,313

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Geographical Information

(a) Revenue from external customers

Mainland China South Korea Other countries	2015 HK$’000 159,752 17,397 69,351 246,500	2014 HK$’000 115,602 21,367 86,349
		223,318

The revenue information above is based on the locations of the customers.

(b) Non-current assets

Hong Kong Mainland China South Korea	2015 HK$’000 467,364 87,216 1,204,458 1,759,038	2014 HK$’000 439,157 154,194 614,171
		1,207,522

The non-current assets information above is based on the locations of the assets and excludes goodwill, intangible assets, investments in joint ventures and investment in an associate.

Information about a Major Customer

During the year ended 31 December 2015, one of the external customers who each contributed over 10% of the Group’s total revenue (2014: one). The total revenue earned from the customer amounted to HK$30,913,000 (2014: HK$24,108,000).

6. REVENUE, OTHER INCOME AND GAINS

Revenue, represents the net invoiced value of goods sold, after allowances for returns and trade discounts, and aggregate of gaming wins and losses during the year.

An analysis of revenue, other income and gains is as follows:

Revenue Sale of goods Casino revenue	2015 HK$’000 229,103 17,397 246,500	2014 HK$’000 201,951 21,367
		223,318

– I-35 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Other income and gains Bank interest income Other interest income Dividend income (Note i) Government grant Changes in fair value of financial assets at FVTPL Changes in fair value of investment property Gain on deemed disposal of subsidiaries (Note ii) Others	2015 HK$’000 12,540 4,277 4,076 375 95,528 31 — 2,505 119,332	2014 HK$’000 11,478 — — 1,159 25,645 — 20,422 2,204
		60,908

Note i: Dividend income represented dividend shares received from equity investments.

Note ii: The gains on deemed disposal of interests in subsidiaries during the year ended 31 December 2014 of HK$20,422,000 arose from the dilution of the Group’s effective equity interest in Magical Gains and its subsidiaries (together, the ‘‘Magical Gains Group’’) from 100% to 50% following the issuance of 100 new ordinary shares of Magical Gains to Pearl Concept Enterprises Limited (‘‘Pearl Concept’’) on 23 December 2014.

Therefore, Magical Gains Group ceased to be subsidiaries and became joint ventures of the Group in the year ended 31 December 2014. Further details of the deconsolidation of subsidiaries are set out in note 37 to the financial statements.

7. FINANCE COSTS

An analysis of finance costs is as follows:

Interest on: Bank and other borrowings Finance leases Less: Interest capitalised	2015 HK$’000 125,015 10,620 (56,957) 78,678	2014 HK$’000 63,066 14,282 (56,979
		20,369

– I-36 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

8. LOSS BEFORE TAX

Notes The Group’s loss before tax is arrived at after charging/ (crediting): Auditor’s remuneration Cost of inventories sold Depreciation 14 Foreign exchange differences, net Amortisation of prepaid land lease payments 16 Amortisation of intangible assets 18 Minimum lease payments under operating leases of land and buildings Write-down of inventories to net realisable value Loss on disposal of item of property, plant and equipment Loss on step acquisition 34 Loss on disposal of subsidiaries 36 Loss on disposal of financial assets at FVTPL, net Impairment of goodwill 17 Impairment of intangible assets 18 Impairment of property, plant and equipment 14 Impairment of trade and other receivables, net** Employee benefits expenses (excluding Directors’ remuneration): Wages and salaries Pension scheme contributions Non-cash share option expenses Less: Amount capitalised	2015 HK$’000 1,219 139,371 49,669 1,855 379 7,878 14,071 12,437 275 40,262 69,808 308,284 16,135 46,180 56,676 215,004 118,941 3,778 — (31,105) 91,614	2014 HK$’000 1,506 114,553 34,864 4,945 398 8,333 14,796 10,805 1,113 — — — 59,000 — — 8,313 83,683 10,146 3,974 (28,353) 69,450

Included in ‘‘Cost of sales’’ in the consolidated statement of profit or loss
** Included in ‘‘Administrative expenses’’ in the consolidated statement of profit or loss
*** Included in ‘‘Other expenses’’ in the consolidated statement of profit or loss

– I-37 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. DIRECTORS’ REMUNERATION

Directors’ remuneration for the year, disclosed pursuant to the Listing Rules, section 383(1)(a), (b), (c) and (f) of the Hong Kong Companies Ordinance and Part 2 of the Companies (Disclosure of information about benefits of Directors) Regulation is as follows:

2015 Executive directors: Yang Zhihui (‘‘Mr. Yang’’) Zhou Xueyu (‘‘Ms. Zhou’’) Xu Ning (‘‘Ms. Xu’’) Ng Kwok Fai (‘‘Mr. Ng’’) Independent non-executive directors: Fok Ho Yin, Thomas (‘‘Mr. Fok’’) Chen Lei (‘‘Mr. Chen’’) Bao Jinqiao (‘‘Mr. Bao’’) (Note i) Zhang Xiaolan (‘‘Ms. Zhang’’) (Note ii) 2014 Executive directors: Mr. Yang Kong Fanbo (Note iii) Ms. Zhou Ms. Xu Ren Shunying (Note iv) Lee Siu Woo (Notes v and vi) Mr. Ng (note vii) Independent non-executive directors: Mr. Fok Mr. Chen Ms. Zhang	Fees HK$’000 19,512 2,000 2,000 6,000 29,512 202 202 60 158 622 30,134 Fees HK$’000 7,467 172 1,573 1,573 62 327 4,150 15,324 153 180 180 513 15,837	Salaries, allowances and benefits in kind HK$’000 1,667 333 1,158 15,200 18,358 30 30 — 30 90 18,448 Salaries, allowances and benefits in kind HK$’000 9,336 — 198 497 16 — 14,200 24,247 — — — — 24,247	Pension scheme contributions HK$’000 1,365 — — — 1,365 — — — — — 1,365 Pension scheme contributions HK$’000 16 — — — — — — 16 — — — — 16	Total HK$’000 22,544 2,333 3,158 21,200
				49,235 232 232 60 188
				712
				49,947
				Total HK$’000 16,819 172 1,771 2,070 78 327 18,350
				39,587 153 180 180
				513
				40,100

– I-38 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes:

(i) Appointed on 16 November 2015
(ii) Resigned on 16 November 2015
(iii) Resigned on 27 March 2014
(iv) Resigned on 27 January 2014
(v) Appointed on 20 January 2014
(vi) Resigned on 4 July 2014
(vii) Appointed on 22 April 2014

During the year ended 31 December 2014, certain Directors were granted share options, in respect of their services to the Group, under the share option scheme of the Company and no options was accepted by certain Directors before the cancellation of the options granted, further details of which are set out in note 33 to the financial statements.

There was no arrangement under which a director waived or agreed to waive any remuneration during the years ended 31 December 2015 and 2014.

10. FIVE HIGHEST PAID EMPLOYEES

The five highest paid employees during the year included two directors (2014: four directors), details of whose remuneration are set out in note 9 above. Details of the remuneration for the year of the remaining three (2014: one) highest paid employee who is neither a director nor chief executive of the Company are as follows:

Salaries, allowances and benefits in kind Pension scheme contributions	2015 HK$’000 14,380 1,204 15,584	2014 HK$’000 3,333 11
		3,344

The number of non-director highest paid employees whose remuneration fell within the following bands is as follows:

HK$3,000,001 to HK$3,500,000 HK$3,500,001 to HK$4,000,000 HK$5,500,001 to HK$6,000,000	Number of 2015 — 1 2 3	employees 2014 1 — —
		1

– I-39 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. INCOME TAX

No Hong Kong profits tax has been provided as the Group did not generate any assessable profits arising in Hong Kong during the years ended 31 December 2015 and 2014. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates.

South Korea Corporate Tax — Current PRC Enterprise Income Tax — Overprovision in prior years Deferred (note 31) Total tax credit for the year	2015 HK$’000 3,458 (174) 3,284 (6,418) (3,134)	2014 HK$’000 559 — 559 (2,058) (1,499)

A reconciliation of the tax credit applicable to loss before tax at the statutory rates of Hong Kong, where the Company is headquartered, is as follows:

Loss before tax Tax at Hong Kong profits tax rate of 16.5% Difference in tax rates of subsidiaries operating in other jurisdictions Expenses not deductible for tax Income not subject to tax Tax losses not recognised Overprovision in respect of prior years Others Income tax credit	2015 HK$’000 (1,089,348) (179,742) (9,029) 148,079 (18,509) 57,118 (174) (877) (3,134)	2014 HK$’000 (344,155) (56,785) (6,203) 62,072 (15,703) 17,285 — (2,165) (1,499)

12. DIVIDENDS

The Directors did not recommend the payment of a final dividend for the year ended 31 December 2015 (2014: nil).

– I-40 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

The calculations of basic and diluted loss per share are based on:

Loss Loss attributable to ordinary equity holders of the parent, used in the basic and diluted loss per share calculation Shares Weighted average number of ordinary shares in issue during the year used in the basic loss per share calculation as adjusted for share consolidation and rights issue which was completed on 15 June 2015 and 20 July 2015, respectively (2014: as adjusted for the share consolidation and rights issue which was completed on 15 June 2015 and 20 July 2015, respectively)	2015 2014 HK$’000 HK$’000 987,971 293,677 Number of shares 2015 2014 ’000 ’000 (Restated) 1,275,422 2,059,177	2014 HK$’000 293,677

The Group had no potentially dilutive ordinary shares in issue during the years ended 31 December 2015 and 2014.

– I-41 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. PROPERTY, PLANT AND EQUIPMENT

31 December 2015 At 31 December 2014 and at 1 January 2015: Cost Accumulated depreciation Net carrying amount At 1 January 2015, net of accumulated depreciation Addition Step acquisition from joint ventures to subsidiaries (note 34) Disposal of subsidiaries (note 36) Disposals Depreciation provided for the year (note 8) Impairment (note 8) Transfers Exchange realignment At 31 December 2015, net of accumulated depreciation and impairment At 31 December 2015 Cost Accumulated depreciation and impairment Net carrying amount 31 December 2014 At 1 January 2014: Cost Accumulated depreciation Net carrying amount At 1 January 2014, net of accumulated depreciation Additions Acquisition of assets and liabilities (note 35) Disposals Deconsolidation of subsidiaries (note 37) Depreciation provided for the year (note 8) Transfers Exchange realignment At 31 December 2014, net of accumulated depreciation and impairment At 31 December 2014 Cost Accumulated depreciation and impairment Net carrying amount	Freehold land HK$’000 427,621 — 427,621 427,621 24,227 — — — — — — (31,660) 420,188 420,188 — 420,188 23,020 — 23,020 23,020 420,844 — — — — — (16,243) 427,621 427,621 — 427,621	Building HK$’000 108,159 (9,219) 98,940 98,940 — — — — (2,113) (5,566) (3,375) (5,415) 82,471 101,451 (18,980) 82,471 92,520 (5,240) 87,280 87,280 — — — — (4,276) 18,156 (2,220) 98,940 108,159 (9,219) 98,940	Leasehold improvements HK$’000 4,762 (1,691) 3,071 3,071 1,513 26,075 — (79) (2,184) — — (1,081) 27,315 31,159 (3,844) 27,315 4,784 (333) 4,451 4,451 445 — (296) — (1,529) — — 3,071 4,762 (1,691) 3,071	Furniture, fixtures and office equipment HK$’000 21,402 (4,287) 17,115 17,115 4,890 4,338 (830) (185) (5,923) — 3,696 (833) 22,268 30,520 (8,252) 22,268 6,144 (1,953) 4,191 4,191 20,789 2,083 (140) (7,912) (2,468) 2,707 (2,135) 17,115 21,402 (4,287) 17,115	Motor vehicle HK$’000 23,766 (4,986) 18,780 18,780 10,021 2,202 (144) — (5,771) — — (810) 24,278 34,232 (9,954) 24,278 4,759 (1,919) 2,840 2,840 19,846 — (252) — (3,479) — (175) 18,780 23,766 (4,986) 18,780	Aircraft HK$’000 426,531 (12,440) 414,091 414,091 — — — — (21,327) — — — 392,764 426,531 (33,767) 392,764 — — — — 426,531 — — — (12,440) — — 414,091 426,531 (12,440) 414,091	Plant, machinery and equipment HK$’000 97,746 (30,455) 67,291 67,291 11,191 — — (11) (10,063) (51,110) — (4,114) 13,184 100,156 (86,972) 13,184 87,294 (21,508) 65,786 65,786 12,170 — — — (9,848) — (817) 67,291 97,746 (30,455) 67,291	Gaming equipment and accessories HK$’000 — — — — 7,432 18,778 — — (1,212) — — (1,033) 23,965 25,129 (1,164) 23,965 — — — — 37,901 — (717) (35,739) (137) — (1,308) — — — —	Structure HK$’000 8,041 (661) 7,380 7,380 — — — — (1,076) — 31,079 (1,679) 35,704 38,349 (2,645) 35,704 — — — — 8,349 — — — (687) — (282) 7,380 8,041 (661) 7,380	Construction in progress HK$’000 137,739 — 137,739 137,739 579,097 — — — — — (35,810) (33,693) 647,333 647,333 — 647,333 — — — — 178,092 — — (13,182) — (20,863) (6,308) 137,739 137,739 — 137,739	Total HK$’000 1,255,767 (63,739
											1,192,028
											1,192,028 638,371 51,393 (974 (275 (49,669 (56,676 (4,410 (80,318
											1,689,470
											1,855,048 (165,578
											1,689,470
											218,521 (30,953
											187,568
											187,568 1,124,967 2,083 (1,405 (56,833 (34,864 — (29,488
											1,192,028
											1,255,767 (63,739
											1,192,028

As at 31 December 2014 the net carrying amount of the Group’s fixed assets held under finance lease included in the amount of aircraft were HK$414,091,000.

– I-42 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As at 31 December 2015, certain property, plant and equipment with a net carrying amount of the Group’s of HK$50,920,000 (2014: HK$116,292,000) were pledged to banks to secure general banking facilities granted to the Group (note 28).

During the two years ended 31 December 2015 and 2014, the Group had continuously suffered loss from the Lighting Business. The Directors conducted a review of the Group’s property, plant and equipment and determined that a number of those assets included in the Lighting CGU (as defined in note 17) were impaired during the year ended 31 December 2015. Particulars of the impairment loss recognised are disclosed in note 17 to the financial statements.

15. INVESTMENT PROPERTY

Acquisition of assets and liabilities (note 35) Net gain from a fair value adjustment Carrying amount at 31 December	2015 HK$’000 54,969 31
	55,000

The Group’s investment property consist of one residential property in Hong Kong. The Directors have determined that the investment property consist of one classes of asset, i.e., residential, based on the nature, characteristics and risks of the property. The Group’s investment property was revalued on 31 December 2015 based on valuation performed by Roma Appraisals Limited (the ‘‘Valuer’’), an independent professionally qualified valuers, at HK$55,000,000. Each year, the Group’s financial controller decides to appoint which external valuer to be responsible for the external valuations of the Group’s property. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The Group’s financial controller has discussions with the valuer on the valuation assumptions and valuation results twice a year when the valuation is performed for interim and annual financial reporting.

Fair value hierarchy

The following table illustrates the fair value measurement hierarchy of the Group’s investment property:

Recurring fair value measurement for: Residential property	Fair value measurement as at 31 December 2015 using Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) HK$’000 HK$’000 HK$’000 — — 55,000	Total HK$’000 55,000

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

– I-43 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

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

Additions (note 35) Net gain from a fair value adjustment recognised in other income and gains in profit or loss Carrying amount at 31 December 2015	Commercial property HK$’000 54,969 31
	55,000

Below is a summary of the valuation techniques used and the key inputs to the valuation of investment property:

Valuation techniques Significant unobservable inputs Residential property Direct comparison Adjusted market value (HK$/square feet)	Range or weighted average 2015 HK$ 17,000 to 33,000

Under the direct comparison method, fair value is estimated using assumptions regarding the market value of the similar properties of the investment property.

A significant increase/decrease in the estimated market value in isolation would result in a significant increase/decrease in the fair value of the investment property.

16. PREPAID LAND LEASE PAYMENTS

Carrying amount at 1 January Amortisation during the year (note 8) Exchange realignment Carrying amount at 31 December Current portion included in trade and other receivables Non-current portion	2015 HK$’000 15,873 (379) (552) 14,942 (374) 14,568	2014 HK$’000 15,975 (398 296
		15,873 (379
		15,494

The Group’s prepaid land lease payments with an aggregate carrying amount of HK$14,942,000 (2014: HK$15,873,000) were pledged to a bank to secure general banking facilities granted to the Group (note 28).

– I-44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17. GOODWILL

At 1 January 2014:
Cost
Accumulated impairment
Net carrying amount
Cost at 1 January 2014, net of accumulated impairment
Impairment during the year (note 8)
At 31 December 2014
At 31 December 2014:
Cost
Accumulated impairment
Net carrying amount
Cost at 1 January 2015, net of accumulated impairment
Step acquisition from joint ventures to subsidiaries (note 34)
Impairment during the year (note 8)
Cost and net carrying amount at 31 December 2015
At 31 December 2015:
Cost
Accumulated impairment
Net carrying amount

HK$’000
203,392
(128,257)
75,135
75,135
(59,000)
16,135
203,392
(187,257)
16,135
16,135
5,438
(16,135)
5,438
208,830
(203,392)
5,438

Impairment Testing of Goodwill

Goodwill acquired through business combinations is allocated to the following cash-generating units for impairment testing.

. Lighting Business cash-generating unit (the ‘‘Lighting CGU’’); and
. Casino Business cash-generating unit (the ‘‘Casino CGU’’)

Lighting CGU

The recoverable amount of the Lighting CGU was determined by value in use approach adopted by the Valuer, an independent qualified valuer, based on a value in use calculation using cash flow projections based on financial budgets covering a five-year period approved by senior management. The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill:

Average gross margins of 20% (2014: 23%) and average revenue growth rate of 12% (2014: 10%) to reflect the deterioration of the Lighting Business with reference to the average performance in the previous years and the expected returns within the relevant industry;

– I-45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Discount rate of 12.87% (2014: 10.46%) is used with reference to the current market data for the relevant industry and comparable companies; and
Terminal growth rate of 2.48% (2014: 3.20%) is used with reference to Mainland China’s average inflation rate in the past five years.

The values assigned to the above key assumptions are consistent with external information sources.

The recoverable amount of the Lighting CGU was based on value in use and was determined with reference to the valuation report issued by the Valuer. Pursuant to the valuation report, the recoverable amount of the Lighting CGU as at 31 December 2015 was HK$75,232,000 and an impairment loss of HK$16,135,000 (2014: HK$59,000,000), HK$46,180,000 (2014: nil) (note 18) and HK$56,676,000 (2014: nil) (note 14) were recognised in respect of the goodwill, intangible assets and property, plant and equipment, respectively, to the extent that the carrying amount exceeded its recoverable amount based on the best estimate by the Directors with reference to the valuation report.

Casino CGU

The recoverable amount of the Casino CGU was determined based on a value in use calculation using cash flow projections based on financial budgets covering a five-year period approved by senior management. The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill:

Average revenue growth rate of 13% to with reference to the average performance in the past and the expected returns within the relevant industry;
Discount rate of 15.1% is used with reference to the current market data for the relevant industry and comparable companies; and
Terminal growth rate of 3% is used with reference to South Korea’s average inflation rate in the past five years.

In respect to the Casino Business, no impairment was recognised in relation to the goodwill during the year ended 31 December 2015.

The carrying amount of goodwill allocated to each of the cash-generating units is as follows:

Carrying amount of goodwill	Lighting Business 2015 2014 HK$’000 HK$’000 — 16,135	Casino Business 2015 2014 HK$’000 HK$’000 5,438 —	Total 2015 2014 HK$’000 HK$’000 5,438 16,135

– I-46 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. INTANGIBLE ASSETS

31 December 2015 Cost at 1 January 2015, net of accumulated amortisation Step acquisition from joint ventures to subsidiaries (note 34) Amortisation provided during the year (note 8) Impairment during the year Exchange realignment At 31 December 2015 At 31 December 2015: Cost Accumulated amortisation and impairment Net carrying amount 31 December 2014 Cost at 1 January 2014, net of accumulated amortisation Acquisition of assets and liabilities (note 35) Deconsolidation of subsidiaries (note 37) Amortisation provided during the year (note 8) Exchange realignment At 31 December 2014 At 31 December 2014: Cost Accumulated amortisation Net carrying amount	Patents HK$’000 33,688 — (2,653) (29,198) (1,837) — 41,801 (41,801) — 37,008 — — (2,806) (514) 33,688 44,213 (10,525) 33,688	Trademarks HK$’000 23,488 — (5,225) (16,982) (1,281) — 41,801 (41,801) — 29,423 — — (5,527) (408) 23,488 44,213 (20,725) 23,488	Casino license HK$’000 — 816,500 — — (31,680) 784,820 784,820 — 784,820 — 872,299 (815,696) — (56,603) — — — —	Total HK$’000 57,176 816,500 (7,878) (46,180) (34,798) 784,820 868,422 (83,602) 784,820 66,431 872,299 (815,696) (8,333) (57,525) 57,176 88,426 (31,250) 57,176

As at 31 December 2014, the Group’s patents of HK$33,688,000 were pledged to banks to secure general banking facilities granted to the Group (note 28).

During the two years ended 31 December 2015 and 2014, the Group had continuously suffered loss from the Lighting Business. The Directors conducted a review of the Group’s intangible assets and determined that intangible assets included in the Lighting CGU were impaired during the year ended 31 December 2015. Particulars of the impairment loss recognised are disclosed in note 17 to the financial statements.

– I-47 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

19. INVESTMENTS IN JOINT VENTURES

Share of net assets Loan to joint ventures	2015 HK$’000 — — —	2014 HK$’000 — 876,132
		876,132

As at 31 December 2014, the loan to joint ventures was unsecured, interest-free and had no fixed terms of repayment. In the opinion of the Directors, the loan was considered as part of the Company’s net investments in joint ventures.

Particulars of the Group’s joint ventures as at 31 December 2014 were as follows:

				Percentage of	Percentage of
		Place of	Ownership
	Particulars of	registration	interest		Voting	Profit
Name	issued shares	and business	Direct	Indirect	power	sharing	Principal activities
Magical Gains*	200 ordinary	BVI	50	—	50	50	Investment holding
	shares
Ultra Matrix*	50,000	BVI	—	50	50	50	Investment holding
	ordinary shares
Grand Express	1 ordinary	Hong Kong	—	50	50	50	Investment holding
Holdings	share
Grand Express	1,685,379	South Korea	—	50	50	50	Casino business
Korea*	ordinary shares

Not audited by Zenith CPA Limited

As at 31 December 2014, Magical Gains was directly held by the Company and all other joint ventures as disclosed above were wholly-owned by Magical Gains. Magical Gains Group carried Casino Business in South Korea, which was considered a material joint venture of the Group, and was accounted for using the equity method.

Upon completion of the step acquisition on 19 October 2015, Magical Gains, Ultra Matrix, Grand Express Holding, Grand Express Korea became wholly-owned subsidiaries of the Company. Further details of the step acquisition are set out in note 34 to the financial statements.

– I-48 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following table illustrates the summarised financial information of Magical Gains Group adjusted for any differences in accounting policies and recorded to the carrying amount in the consolidated financial as at 31 December 2014.

Cash and cash equivalents Other current assets Current assets Non-current assets Financial liabilities excluding trade and other payables Other current liabilities Current liabilities Non-current financial liabilities, excluding trade and other payables and provisions Non-current liabilities Net liabilities Reconciliation to the Group’s interest in the joint ventures: Proportion of the Group’s ownership Group’s share of net assets and carrying amount of the joint ventures Revenue Interest income Depreciation and amortisation Interest expenses Tax Profit and total comprehensive income for the year	HK$’000 843,001 70,523
	913,524
	879,326
	(1,838,808 —
	(1,838,808
	(7,251
	(7,251
	(53,209
	50 —
	— — — — — —

20. INVESTMENT IN AN ASSOCIATE

				2015	2014
				HK$’000	HK$’000
Share	of	net	assets	—	—

Particulars of the Group’s associate are as follows:

			Percentage of	Percentage of
		Place of	Indirect
	Particulars of	registration	Ownership	Voting	Profit	Principal
Name	issued shares	and business	interest	power	sharing	activity
Autumnglow PTE Limited*	2 ordinary shares	Singapore	50	50	50	Inactive
(‘‘Autumnglow’’)

Not audited by Zenith CPA Limited

The Group’s shareholding in the associate is held through a wholly-owned subsidiary of the Company.

– I-49 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group has discontinued the recognition of its share of losses of associate Autumnglow because the share of losses of the associate exceeded the Group’s interest in the associate and the Group has no obligation to take up further losses. The amounts of the Group’s unrecognised share of losses of this associate for the current year and cumulatively were HK$14,000 (2014: HK$5,000) and HK$19,000 (2014: HK$5,000), respectively.

Autumnglow is inactive and is accounted for using the equity method.

The following table illustrates the summarised financial information of Autumnglow adjusted for any differences in accounting policies and recorded to the carrying amount in the consolidated financial statements.

Current and net liabilities Reconciliation to the Group’s interest in an associate: Proportion of the Group’s ownership Group’s share of net assets and carrying amount of an associate Revenue Loss and total comprehensive expense for the year 21. INVENTORIES Raw materials Work in progress Finished goods Trading goods 22. PROPERTIES UNDER DEVELOPMENT Properties under development expected to be recovered: Within one year After more than one year	2015 HK$’000 (35) 50 — — (28) 2015 HK$’000 7,848 9,124 27,071 1,676 45,719 2015 HK$’000 — 1,135,733 1,135,733	2014 HK$’000 (7) 50 — — (7) 2014 HK$’000 9,076 10,897 41,658 — 61,631 2014 HK$’000 1,174,732 404,071 1,578,803

– I-50 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The analysis of land costs with an aggregate net carrying amount included in properties under development is as follows:

South Korea Freehold land Mainland China Long-term lease — leases of over 50 years	2015 HK$’000 547,344 — 547,344	2014 HK$’000 403,078 90,094
		493,172

Further particulars of the Group’s properties under development are set out on page 163 of the annual report.

23. TRADE AND OTHER RECEIVABLES

Trade receivables due from third parties Impairment Other receivables Promissory note (note 36) Prepayments Deposits Total trade and other receivables	2015 HK$’000 132,989 (36,633) 96,356 221,365 245,000 29,970 302,496 798,831 895,187	2014 HK$’000 125,265 (33,223
		92,042
		26,512 — 9,283 299,392
		335,187
		427,229

The Group’s trading terms with its customers are mainly on credit, except for new customers, where payment in advance is normally required. The credit period is generally one month, extending up to three months for major customers. Each customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables to minimise credit risk and overdue balances are reviewed regularly by senior management.

In view of the aforementioned and the fact that the Group’s trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk. The Group does not hold any collateral or other credit enhancements over its trade receivable balances. Trade receivables are non-interestbearing.

– I-51 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

An aged analysis of the trade receivables as at the end of the reporting period, based on the invoice date and net of provisions, is as follows:

Within 30 days 31 to 60 days 61 to 90 days Over 90 days	2015 HK$’000 28,175 17,965 13,854 36,362 96,356	2014 HK$’000 24,035 16,746 14,707 36,554
		92,042

The movements in provision for impairment of trade receivables are as follows:

At 1 January Impairment losses recognised Exchange realignment At 31 December	2015 HK$’000 33,223 5,455 (2,045) 36,633	2014 HK$’000 28,536 5,082 (395
		33,223

Included in the above provision for impairment of trade receivables is a provision for individually impaired trade receivables of HK$36,633,000 (2014: HK$33,223,000) with a carrying amount before provision of HK$42,203,000 (2014: HK$40,486,000).

The individually impaired trade receivables relate to customers that were in financial difficulties or were in default in principal payments and only a portion of receivables is expected to be recovered.

The aged analysis of the trade receivables that are not individually nor collectively considered to be impaired is as follows:

Neither past due nor impaired Less than 1 month past due 1 to 3 months past due Over 3 months past due	2015 HK$’000 57,667 18,245 14,874 — 90,786	2014 HK$’000 25,283 8,240 6,169 45,087
		84,779

Receivables that were neither past due nor impaired relate to a large number of diversified customers for whom there was no recent history of default.

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, the Directors are of the opinion that no provision for impairment is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable.

None of the other receivables, prepayments and deposits is either past due or impaired. The financial assets included in the above balances relate to receivables for which there was no history of default.

– I-52 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. FINANCIAL ASSETS AT FVTPL

Listed equity investments at market value (note i) Investment fund (note ii)	2015 HK$’000 610,715 965,169 1,575,884	2014 HK$’000 — —
		—

Notes:

(i) The equity investments were classified as held for trading and fair values were determined based on the quoted market bid prices available on the Stock Exchange.
(ii) The Group purchased an equity market fund from an intermediary in Hong Kong. The fair value of the investment fund was determined by the quote from the intermediary.

25. CASH AND CASH EQUIVALENTS

Cash and bank balances (note i) Time deposits Less: Restricted cash (note ii) Cash and cash equivalents	2015 HK$’000 1,737,829 3,454,161 5,197,990 — 5,191,990	2014 HK$’000 364,768 1,301,557
		1,666,325 (10,658
		1,655,667

Notes:

(i) At 31 December 2015, balances included HK$18,230,000 was used for issuance of the Group’s bills payables and HK$6,753,000 was subsequently settled up to the date of this report.
(ii) Pursuant to relevant regulations in the PRC, the Group were required to place in designated bank accounts certain amounts of pre-sale proceeds of properties as guarantee deposits for the construction of the related properties. The deposits could only be used for purchases of construction materials and payments of the construction fees of the relevant property projects when approval from relevant local government authorities was obtained. During the year, such guarantee deposits was transferred to the purchaser upon disposal of subsidiaries as set out in note 36 to the financial statements.

At the end of the reporting period, the cash and bank balances of the Group denominated in Renminbi (‘‘RMB’’) amounted to HK$27,843,000 (2014: HK$27,444,000). The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term time deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short term time deposit rates. The bank balances are deposited with creditworthy banks with no recent history of default.

– I-53 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

26. TRADE AND OTHER PAYABLES

Trade and bills payables due to third parties Accruals Deposits received Other payables Total trade and other payables Less: Non-current portion of other payables Current portion	2015 HK$’000 100,172 124,397 7,501 56,384 188,282 288,454 (4,160) 284,294	2014 HK$’000 110,973
		118,329 142,027 18,285
		278,641
		389,614 —
		389,614

An aged analysis of the trade payables as at the end of the reporting period, based on the invoice date, is as follows:

Within 30 days 31 to 60 days 61 to 90 days Over 90 days	2015 HK$’000 30,843 13,357 15,586 40,386 100,172	2014 HK$’000 71,313 12,460 9,393 17,807
		110,973

The trade payables are non-interest-bearing and are normally settled on terms of one to three months.

The other payables are non-interest-bearing and have an average term of one to three months.

– I-54 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

27. FINANCE LEASE PAYABLES

The finance lease payables were fully settled during the year. At 31 December 2014, the total future minimum leases payments under finance leases and their present values were as follows:

Within one year More than one year Total minimum lease payment Future finance charge Total net finance lease payables Portion classified as current liabilities Non-current portion 28. INTEREST-BEARING BANK BORROWINGS Secured bank loans repayable on demand or within one year	2014 Minimum lease payment Present value of minimum lease payment HKD HKD 82,740 66,091 259,032 231,580 341,772 297,671 (44,101) 297,671 (66,091) 231,580 2015 2014 HK$’000 HK$’000 83,591 89,676	2014 Minimum lease payment Present value of minimum lease payment HKD HKD 82,740 66,091 259,032 231,580 341,772 297,671 (44,101) 297,671 (66,091) 231,580 2015 2014 HK$’000 HK$’000 83,591 89,676
		297,671
		2014 HK$’000 89,676

Notes:

(a) All of the Group borrowings are secured by the Group’s assets, details of which are disclosed in note 42 to the financial statements.
(b) The effective interest rates of the Group’s borrowings ranging from 5.25% to 6.90% (2014: 5.75% to 6.90%) per annum.
(c) All bank loans are denominated in RMB.
(d) As at 31 December 2015 and 2014, the carrying amounts of the Group’s bank borrowings approximate to their fair value.

29. DEFERRED REVENUE

The deferred revenue arose as a result of the benefit received from a government loan that bore interest at 0.3% per annum during the year ended 31 December 2014.

30. DUE TO A NON-CONTROLLING INTEREST

The amount due to a non-controlling interest is unsecured, carrying interest at 5% per annum and repayable from 2019 to 2020.

– I-55 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

31. DEFERRED TAX LIABILITIES

The movements in deferred tax liabilities during the year are as follows:

At 1 January 2014 (Credited)/charged to statement of profit or loss (note 11) Exchange realignment At 31 December 2014 and at 1 January 2015 Step acquisition from joint ventures to subsidiaries (note 34) Credited to statement of profit or loss (note 11) Exchange realignment At 31 December 2015	Fair value adjustments on acquisition HK$’000 6,852 (2,083) (1) 4,768 6,105 (4,906) 138 6,105	Others HK$’000 1,429 25 58 1,512 — (1,512) — —	Total HK$’000 8,281 (2,058) 57 6,280 6,105 (6,418) 138 6,105

The Group has tax losses of HK$402,030,000 (2014: HK$104,760,000) that are available for offsetting against future profits of the companies in which the losses arose, subject to certain tax rules of the countries in which the Group operates. Deferred tax asset has not been recognised in respect of these losses as the utilisation of which is uncertain.

– I-56 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

32. SHARE CAPITAL

Authorised: Ordinary shares of HK$0.10 each (2014: HK$0.01) (notes a and b) Issued and fully paid: Ordinary shares of HK$0.10 each (2014: HK$0.01)	2015 No. of shares HK$’000 ’000 100,000,000 10,000,000 20,565,879 2,056,588	2014 No. of shares HK$’000 ’000 50,000,000 500,000 18,696,254 186,963	2014 No. of shares HK$’000 ’000 50,000,000 500,000 18,696,254 186,963
			186,963

A summary of movements in the Company’s issued share capital is as follows:

Issued and fully paid At 1 January 2014 Issue of ordinary shares by rights issue (note c) Share issue expenses Issue of ordinary shares by share subscriptions (note d) Issue of ordinary shares in relation to acquisition of a subsidiary (note e) At 31 December 2014 and 1 January 2015 Share consolidation (note a) Issue of ordinary shares by rights issue (note f) Share issue expenses At 31 December 2015	Number of shares in issue ’000 9,444,267 4,722,133 — 3,070,000 1,459,854 18,696,254 (16,826,629) 18,696,254 — 20,565,879	Issued capital HK$’000 94,443 47,221 — 30,700 14,599 186,963 — 1,869,625 — 2,056,588	Share premium HK$’000 650,033 1,369,419 (14,374) 1,236,300 773,723 4,015,101 — 4,674,064 (97,944) 8,591,221	Total HK$’000 744,476 1,416,640 (14,374 1,267,000 788,322
				4,202,064
				— 6,543,689 (97,944
				10,647,809

Notes:

(a) At the special general meeting of the Company held on 15 June 2015, the relevant resolution was passed in respect of the share consolidation of every ten issued and unissued ordinary shares of HK$0.01 each into one consolidated share of HK$0.1 each (the ‘‘Consolidated Share’’). Immediately after the share consolidation effective on 16 June 2015, the issued and fully paid ordinary share capital of the Company was 1,869,625,387 shares of HK$0.10 each.
(b) At the special general meeting of the Company held on 15 June 2015, the relevant resolution was passed to increase the authorised share capital of the Company from HK$500,000,000 to HK$10,000,000,000 by the creation of new 95,000,000,000 ordinary shares of HK$0.1 each following the share consolidation mentioned in (a) above.

– I-57 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) On 4 February 2014, the Company completed the rights issue on the basis of one rights share for every two shares held on the record date. 4,722,133,286 shares were issued at a subscription price of HK$0.30 per rights share with gross proceeds of HK$1,416,640,000, of which HK$47,221,000 was credited to share capital and HK$1,369,419,000 was debited to the share premium account. Details of which were set out in the Company’s announcements dated 20 December 2013, 23 December 2013 and 30 January 2014 and the Company’s prospectus dated 9 January 2014.
(d) On 1 April 2014, the Company completed the subscription of 810,000,000 ordinary shares of the Company at the price of HK$0.30 per subscription share to a subscriber. On the same date, the Company completed the subscriptions of 160,000,000 and 400,000,000 ordinary shares of the Company at the price of HK$0.40 per subscription share to another two subscribers respectively. Details of which were set out in the Company’s announcement dated 1 April 2014.

On 11 April 2014, the Company completed the subscription of 500,000,000 ordinary shares of the Company at the price of HK$0.40 per subscription share to a subscriber. Details of which were set out in the Company’s announcement dated 11 April 2014.

On 17 June 2014, the Company completed the subscription of 700,000,000 ordinary shares of the Company at the price of HK$0.50 per subscription share to a subscriber. Details of which were set out in the Company’s announcement dated 17 June 2014.

On 8 July 2014, the Company completed the subscription of 500,000,000 ordinary shares of the Company at the price of HK$0.50 per subscription share to a subscriber. Details of which were set out in the Company’s announcement dated 8 July 2014.

(e) On 16 June 2014, the completion of the acquisition of the entire equity interest of Ultra Matrix and together with its subsidiaries (‘‘Ultra Matrix Group’’) with an aggregate consideration of HK$875,913,000 was taken place. Upon such completion, 1,459,854,014 ordinary shares of the Company with par value of HK$0.01 each were issued as the full payment of the consideration for the acquisition. The fair value of the 1,459,854,014 ordinary shares of the Company, determined using the closing market price of HK$0.54 per share at the date of completion on 16 June 2014, amounted to HK$788,322,000. Details of which were disclosed in the announcements of the Company dated 23 March 2014, 3 April 2014 and 16 June 2014 (note 35).
(f) On 20 July 2015, the Company completed the right issue on the basis of ten rights shares for every one Consolidated Share held on the record date (the ‘‘Rights Issue’’). 18,696,254,000 shares were issued at a subscription price of HK$0.35 per rights share with gross proceeds of HK$6,543,689,000, of which HK$1,869,625,000 was credited to share capital and HK$4,674,064,000 was credited to the share premium account. Details of which were set out in the Company’s announcements dated 22 April 2015, 5 May 2015, 12 May 2015, 29 May 2015 and 17 July 2015.

These shares rank pari passu with the existing ordinary shares of the Company in all respects.

33. SHARE OPTION SCHEME

The Company operates a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations.

Under the share option scheme adopted 11 June 2010 (the ‘‘Share Option Scheme’’), the Directors may grant options to eligible participants, including the directors, other employees of the Group, suppliers of goods or services to the Group, customers of the Group, and any non-controlling interests in the Company’s subsidiaries. The Share Option Scheme will, unless otherwise cancelled or amended, remain in force for 10 years from the date of adoption.

The maximum number of shares in respect of which options may be granted under the Share Option Scheme and any other share option scheme of the Company must not exceed 10% of the shares of the Company in issue at any time.

– I-58 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Share options granted to a director, chief executive or substantial shareholder of the Company, or to any of their associates, are subject to approval in advance by the independent non-executive directors of the Company.

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

The offer of a grant of share options may be accepted within 21 days from the date of offer, upon payment of a nominal consideration of HK$1 in total by the grantee. The exercise period of the share options granted is determinable by the Directors, and commences after a certain vesting period and ends on a date which is not later than 10 years from the date of offer of the share options.

The subscription price of the share options is determinable by the Directors, but must be at least the higher of (i) the closing price of the Company’s shares as stated in the Stock Exchange’s daily quotation sheet on the date of offer of the share options which must be a business day; and (ii) the average closing price of the Company’s shares as stated in the Stock Exchange’s daily quotations sheets for the five trading days immediately preceding the date of offer. At the end of the reporting period, the Company had no share options outstanding under the Share Option Scheme and no share options were granted to the eligible participants.

Share options do not confer rights on the holders to dividends or to vote at shareholders’ meetings.

On 15 December 2014, the Company granted share options (the ‘‘Options’’) under the Share Option Scheme to certain eligible grantees (the ‘‘Grantees’’), which, subject to acceptance by the Grantees, would enable the Grantees to subscribe for an aggregate of 869,375,807 ordinary shares of the Company of HK$0.01 each in the share capital of the Company at the exercise price of HK$0.225 per new share. The Options granted are exercisable commencing from 15 December 2014 to 14 December 2024 (both dates inclusive) (the ‘‘Option Period’’). No Options will be exercisable after the expiry of the Option Period. 65,436,889 Options (the ‘‘Accepted Options’’) were accepted by the Grantees during the year ended 31 December 2014.

On 8 January 2015, as approved by the Directors and consented by each of the Grantees, the Company and the Grantees have agreed that the grant of Options to be cancelled in its entirety. No Grantee has exercised the said Options prior to such cancellation.

The following Accepted Options were outstanding under the Share Option Scheme during the year.

At 1 January Cancelled during the year Accepted during year At 31 December	2015 Weighted average exercise price Number of options HK$ per share ’000 0.225 65,437 0.225 (65,437) — — — —	2014 Weighted average exercise price Number of options HK$ per share ’000 — — — — 0.225 65,437 0.225 65,437	2014 Weighted average exercise price Number of options HK$ per share ’000 — — — — 0.225 65,437 0.225 65,437
			65,437

No Accepted Options were exercised during the year.

– I-59 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The exercise prices and exercise periods of the Accepted Options outstanding as at 31 December 2014 are as follows:

2014

Number of
Accepted Options	Exercise price*	Exercise period
’000	HK$ per share
65,437	0.225	15 December 2014 to 14 December 2024

The exercise price of the Options is subject to adjustment in the case of rights or bonus issues, or other similar changes in the Company’s share capital.

The fair value of the Accepted Options during the year ended 31 December 2014 was HK$3,974,000 (HK$0.06 each), of which the Group recognised a share option expense of HK$3,974,000 during the year ended 31 December 2014.

The fair value of Accepted Options during the year ended 31 December 2014 was estimated as at the date of grant, using a binomial model, taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used:

Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life of options (year) Weight average share price (HK$ per share)	15 December 2014 0.00 36.61 1.70 10.00 0.225

The expected life used in the model has been adjusted based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

No other feature of Accepted Options was incorporated into the measurement of fair value.

At the end of the reporting period, the Company did not have any outstanding option (2014: 65,437,000) under the Share Option Scheme.

At the date of approval of these financial statements, the Company did not have any Options outstanding under the Share Option Scheme.

34. STEP ACQUISITION FROM JOINT VENTURES TO SUBSIDIARIES AND DISPOSAL OF JOINT VENTURES

Subsequent to the deconsolidation of subsidiaries as mentioned in note 37 to the financial statements, on 29 July 2015, the Group entered into a sale and purchase agreement with Pearl Concept for the acquisition of remaining 50% of the issued share capital of Magical Gains and the loan in the principal amount of HK$875,912,000 provided by Pearl Concept to Magical Gains (the ‘‘Sale Loan’’) (The ‘‘Step Acquisition’’). Magical Gains is an investment holding company incorporated in the BVI with limited liability. Its indirect wholly-owned subsidiary is principally engaged in the Casino Business. The purchase consideration was paid as to HK$857,221,000 by cash. Details of which are set out in the Company’s circular dated 23 September 2015.

– I-60 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The fair value of the Group’s then effective equity holding immediately before the Step Acquisition of 50% in Magical Gains Group (collectively the ‘‘Existing Shareholdings’’), formed the total consideration of the Step Acquisition and was included in the calculation of goodwill on the Step Acquisition.

As at 19 October 2015, the fair values of the Existing Shareholdings held by the Group were with a negative amount of HK$40,262,000. Compared with the nil carrying amount of investment in joint ventures before valuation, the fair value loss was HK$40,262,000 (note 8) and was recognised in ‘‘Loss on step acquisition’’ under ‘‘Other expenses’’ on the face of the consolidated statement of profit or loss.

Upon the completion of the Step Acquisition, Magical Gains Group, the former 50% joint venture of the Company became wholly-owned subsidiaries of the Company. The Step Acquisition of Magical Gains Group was completed in October 2015.

The fair values of the identifiable assets and liabilities of Magical Gains Group as at the date of acquisition were as follows:

Notes
Intangible assets
18
Property, plant and equipment
14
Other receivables
Inventory
Tax receivable
Bank balances and cash
Other payables
Due to the Company
Sale Loan
Deferred tax liabilities
31
Total identifiable net assets at fair value
Sale Loan assigned to the Company
Goodwill on acquisition
17
Total consideration
Satisfied by:
Fair value of the Existing Shareholdings
Cash
Analysis of cash flows in respect of the acquisitions is as follows:
Cash and bank balances acquired
Cash consideration
Net outflow of cash and cash equivalents included in cash flows used
in investing activities

Fair value
recognised on the
Step Acquisition
HK$’000
816,500
51,393
107,112
60
20,093
771,715
(73,498)
(875,749)
(875,912)
(6,105)
(64,391)
875,912
5,438
816,959
(40,262)
857,221
816,959
771,715
(857,221)
(85,506)

The transaction costs of HK$838,000 incurred for the Step Acquisition were expensed and included in ‘‘Administrative expenses’’ in the consolidated statement of profit or loss.

– I-61 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Since the Step Acquisition, Magical Gains Group contributed HK$17,397,000 to the Group’s revenue and loss of HK$73,584,000 included in the consolidated statement of profit or loss for the year ended 31 December 2015.

Had the combination taken place at the beginning of the year ended 31 December 2015, the revenue of the Group and the loss of the Group for the year ended 31 December 2015 would have been HK$591,877,000 and HK$1,093,254,000, respectively.

35. ACQUISITION OF ASSETS AND LIABILITIES

2015

On 15 October 2015, the Group acquired 100% equity interest in Royal Dragon from an independent third party. Royal Dragon is engaged in property investment in Hong Kong.

At the time of acquisition, Royal Dragon had not actively engaged in any business and accordingly, in the opinion of the Directors, the acquisition of Royal Dragon does not constitute a business combination but an acquisition of assets and liabilities.

For accounting purpose, the cost of acquisition of HK$55,000,000 has been allocated to the following identifiable assets and liabilities of Royal Dragon as at the date of acquisition as follows:

Note Net asset acquired: Investment property 15 Other receivables Other payables Total identifiable net assets acquired Satisfied by: Cash Analysis of cash flows in respect of the acquisition of Royal Dragon is as follows: Cash consideration Net outflow of cash and cash equivalents included in cash flows used in investing activities	HK$’000 54,969 47 (16) 55,000 55,000 (55,000) (55,000)

2014

On 9 February 2014 and 21 February 2014, the Company entered into a sale and purchase agreement and supplemental agreement, respectively, with Ms. Xu, the executive director, for the acquisition of the entire issued shares of Win Rich, which was beneficially owned by Ms. Xu at the total consideration of HK$141,491,000. Win Rich was incorporated for the purpose of entering into a purchase agreement and the leasing agreements with respect to an aircraft.

At the time of acquisition, Win Rich did not actively engage in any business, accordingly, in the opinion of the Directors, the acquisition of the Win Rich does not constitute a business combination but an acquisition of assets and liabilities.

Details of which were disclosed in the announcements of the Company dated 9 February 2014, 21 February 2014 and 7 April 2014 and the circular of the Company dated 12 March 2014.

– I-62 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

On 2 April 2014, the Company entered into a sale and purchase agreement with a vendor (the ‘‘Vendor’’), an independent third party, for the acquisition of the entire issued shares of Ultra Matrix Group at a consideration of KRW120,000,000,000 by issuing 1,459,854,014 ordinary shares of the Company at HK$0.6 per share. The fair value of the said consideration as at the date of the such acquisition is HK$788,322,000. Ultra Matrix Group was incorporated for the purpose of holding a casino license in Jeju, South Korea under the Tourism Promotion Act.

At the time of acquisition, the major assets held by the Ultra Matrix Group consisted of casino license and certain assets; and accordingly, in the opinion of the Directors, the acquisition of the Ultra Matrix Group does not constitute a business combination but an acquisition of assets and liabilities.

Details of which were disclosed in the announcements of the Company dated 23 March 2014, 3 April 2014 and 16 June 2014.

For accounting purpose, the cost of acquisitions HK$1,017,404,000 (comprising cash, share consideration transferred and transaction costs) have been allocated to the following identifiable assets and liabilities of Win Rich and the Ultra Matrix Group as at the date of acquisition as follows:

Notes Net asset acquired: Property, plant and equipment 14 Intangible assets 18 Prepayments, deposits and other receivable Cash and bank balances Other payables and accruals Obligations under finance lease Total identifiable net assets acquired Satisfied by: Issuance of ordinary shares 32(e) Cash Analysis of cash flows in respect of the acquisitions is as follows: Cash and bank balances acquired Cash consideration paid for the acquisitions Net outflow of cash and cash equivalents included in cash flows used in investing activities	Ultra Matrix Group HK$’000 2,083 872,299 111,245 1,820 (111,534) — 875,913 788,322 87,591 875,913 1,820 (87,591) (85,771)	2014 Win Rich HK$’000 — — 441,589 933 (11,810) (289,221) 141,491 — 141,491 141,491 933 (141,491) (140,558)	Total HK$’000 (Unaudited) 2,083 872,299 552,834 2,753 (123,344) (289,221) 1,017,404 788,322 229,082 1,017,404 2,753 (229,082) (226,329)

– I-63 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

36. DISPOSAL OF SUBSIDIARIES

Notes Net assets disposed of: Property, plant and equipment 14 Properties under development Other receivables Tax recoverable Restricted cash Cash and bank balances Trade and other payables Sale Loan Release of translation reserve upon disposal Sale Loan assigned Loss on disposal of subsidiaries 8 Satisfied by: Cash Promissory note 23	2015 HK$’000 974 1,013,768 300,945 7,287 31,361 8,211 (314,042) (628,184) 420,320 21,414 628,184 (69,808) 1,000,110 755,110 245,000 1,000,110

An analysis of the net inflow of cash and cash equivalents in respect of the disposal of subsidiaries is as follows:

Cash and bank balances disposed of Cash consideration received Net inflow of cash and cash equivalents in respect of the disposal of subsidiaries	2015 HK$’000 (8,211) 755,110 746,899

– I-64 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

37. DECONSOLIDATION OF SUBSIDIARIES

2014

Owing to the dilution of the Group’s effective equity interest in Magical Gains from 100% to 50% upon issuance of 100 new ordinary shares of Magical Gains to a subscriber on 23 December 2014, Magical Gains Group ceased to be subsidiaries of the Group and became joint ventures of the Group during the year (note 6(ii)). Accordingly, Magical Gains Group were deconsolidated during the year ended 31 December 2014.

An analysis of the net assets deconsolidated in respect of which is as follows:

Notes Assets/(liabilities) deconsolidated: Property, plant and equipment 14 Intangible assets 18 Long-term deposit Inventories Other receivables Financial assets at FVTPL Cash and bank balances Other payables Amount due to a shareholder Reclassification to interests in joint ventures from interests in subsidiaries	HK$’000 56,833 815,696 6,798 1,549 25,585 43,388 50,599 (94,015) (1,001,132) (94,699)

An analysis of the net outflow of cash and cash equivalents in respect of the deconsolidation of Magical Gains Group is as follows:

HK$’000

Cash and bank balances deconsolidated and the net outflow of cash and cash equivalents in respect of the deconsolidation of subsidiaries (50,599)

38. DEEMED DISPOSAL OF PARTIAL INTEREST IN A SUBSIDIARY

During the year ended 31 December 2014, a shareholders agreement dated 7 February 2014, entered into between the Company, Landing Jeju, and Happy Bay Pte. Ltd. (‘‘HBL’’, as subscriber), pursuant to which the Company and HBL had conditionally agreed to pay KRW32,469,000,000 (equivalent to HK$235,000,000) and KRW82,500,000,000 (equivalent to HK$598,000,000) respectively to the Landing Jeju for subscription of its shares such that the Landing Jeju would be owned as to 50% by the Company and 50% by HBL.

The completion of the shareholders agreement took place on 27 March 2014. Upon the said completion with the increase in the share capital of the Landing Jeju, the Landing Jeju is owned as to 50% by each of the Company and HBL, and had become a non-wholly owned subsidiary of the Company, the financial results of which would continue to be consolidated into the Group’s financial statements.

Such dilution of shareholding of the Landing Jeju held by the Company from 100% to 50% was constituted a deemed disposal of the Group’s equity interest in Landing Jeju, and the difference of HK$7,253,000 between the fair value of the consideration received from share subscription of the Landing Jeju and 50% carrying amount of the net assets attributable to the deemed disposal of was recognised directly in equity as other reserve during the year ended 31 December 2014. Details of which were set out in announcements of the Company dated 9 February 2014 and 27 March 2014.

– I-65 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

39. NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

Major Non-cash Transactions

(a) During the year ended 31 December 2015, finance costs of HK$28,515,000 (2014: HK$46,677,000) and HK$26,263,000 (2014: HK$10,302,000) was capitalised to property, plant and equipment and properties under development, respectively.
(b) During the year ended 31 December 2014, the Group entered into finance lease arrangements in respect of property, plant and equipment with a total capital value at the inception of the lease of HK$41,496,000.

40. PARTLY-OWNED SUBSIDIARIES WITH MATERIAL NON-CONTROLLING INTERESTS

Details of the Group’s subsidiaries that have material non-controlling interests are set out below:

Percentage of equity interest held by non-controlling interests: Landing Jeju Jiangsu Wenrun Loss for the year allocated to non-controlling interests: Landing Jeju Jiangsu Wenrun Accumulated balances of non-controlling interests at the reporting dates: Landing Jeju Jiangsu Wenrun	2015 50% 30.56% 2015 HK$’000 (61,395) (36,848) (98,243) 425,140 30,337 455,477	2014 50% 30.56% 2014 HK$’000 (42,581) (6,398) (48,979) 532,156 67,798 599,954

– I-66 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following tables illustrate the summarised financial information of the above subsidiaries. The amounts disclosed are before any inter-company eliminations:

2015 Revenue Total expenses Loss for the year Total comprehensive loss for the year Current assets Non-current assets Current liabilities Non-current liabilities Net cash flows (used in)/from operating activities Net cash flows used in investing activities Net cash flows from financing activities Net increase in cash and cash equivalents 2014 Revenue Total expenses Loss for the year Total comprehensive loss for the year Current assets Non-current assets Current liabilities Non-current liabilities Net cash flows (used in)/from operating activities Net cash flows used in investing activities Net cash flows from financing activities Net increase/(decrease) in cash and cash equivalents	Landing Jeju HK$’000 — (129,205) (122,791) (91,242) 2,688,012 970,363 (1,461,810) (1,346,284) (638,680) (478,284) 1,578,004 461,040 Landing Jeju HK$’000 — (114,038) (104,111) (17,539) 1,812,018 602,557 (751,437) (598,826) (708,646) (382,583) 2,062,413 971,184	Jiangsu Wenrun HK$’000 229,103 (349,679) (120,576) (2,006) 192,602 80,487 (173,819) — 16,979 (11,455) 6,085 11,609 Jiangsu Wenrun HK$’000 201,951 (222,887) (20,936) (2,403) 190,801 223,838 (186,507) (6,280) 8,994 (12,929) — (3,935)

– I-67 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

41. OPERATING LEASE COMMITMENTS

The Group leases certain of its office properties and factory premises are negotiated for terms of two to three years. As at 31 December 2015, the Group had total future minimum lease payments under noncancellable operating leases falling due as follows:

Within one year In the second to fifth year inclusive	2015 HK$’000 23,986 14,362 38,348	2014 HK$’000 49,613 17,268
		66,881

42. PLEDGE OF ASSETS

At the end of the reporting period, the following assets of the Group were pledged to certain banks to secure general banking facilities granted to the Group:

Notes Property, plant and equipment 14 Prepaid land lease payment 16 Intangible assets 18	2015 HK$’000 50,920 14,942 —	2014 HK$’000 116,291 15,873 33,668

43. COMMITMENTS

In addition to the operating lease commitments detailed in note 41 to the financial statements, the Group had the following capital commitments at the end of the reporting period:

Contracted, but not provided for: Property, plant and equipment Properties being developed by the Group for sale	2015 HK$’000 1,085,686 906,550 1,992,236	2014 HK$’000 289,587 366,300
		655,887

44. RELATED PARTY TRANSACTIONS

(a) The Group entered into a sale and purchase agreement dated 29 July 2015 with Pearl Concept, the joint venture partner, for the Step Acquisition during the year. Further details of which are set out in note 34 to the financial statements.
(b) On 15 April 2015, the Company entered into an underwriting agreement with LIL and Kingston Securities Limited in relation to the underwriting arrangement in respect of the Rights Issue as set out in note 32(f) to the financial statements, as varied and supplemented by an amended and restated underwriting agreement dated 16 April 2015 made by the same parties (‘‘Underwriting Agreement’’). LIL is the controlling shareholder of the Company, which is wholly owned by Mr. Yang, an executive director. Accordingly, the transaction contemplated under the Underwriting Agreement (including the payment of the underwriting commission of HK$61,339,000 was paid to LIL) constitutes a connected transaction under Chapter 14A of the Listing Rules, which was approved by both the Board (with Mr. Yang and Ms. Xu abstained from voting) and the independent shareholders at a special general meeting held on 15 June 2015. Details have been disclosed in the circular of the Company dated 29 May 2015.

– I-68 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(c) HBL granted two shareholder’s loans of Singapore Dollar (‘‘SGD’’) 97,529,000 (equivalent to HK$614,557,000) in March 2014 and KRW115,000,000,000 (equivalent to HK$789,002,000) in November 2015 to Landing Jeju. Both the shareholder’s loans were charged interest rate at 5% per annum. HK$56,957,000 (2014: HK$22,001,000) of interest expense was capitalised into the property, plant and equipment and properties under development during the year ended 31 December 2015.
(d) On 9 February 2014 and 21 February 2014, the Company entered into a sale and purchase agreement and a supplemental agreement respectively with Ms. Xu for the acquisition of the entire issued shares of Win Rich, which is beneficially owned by Ms. Xu at the total consideration of HK$141,491,000. Win Rich was incorporated for the purpose of entering into a purchase agreement and the leasing agreements with respect to an aircraft. The relevant resolution has been passed in a special general meeting of the Company held on 28 March 2014 by way of poll. The completion of such acquisition has taken place on 7 April 2014. Details of which have been disclosed in the announcements of the Company dated 9 February 2014, 21 February 2014 and 7 April 2014 and the Company’s circular dated 12 March 2014.
(e) The remuneration of Directors and other members of key management of the Company during the reporting period, which is determined by the remuneration committee having regard to the performance of individuals and market trends, is as follows:

Short-term benefits	2015 HK$’000 55,684	2014 HK$’000 43,444

45. FINANCIAL INSTRUMENTS BY CATEGORY

The carrying amounts of each of the categories of financial instruments as at the end of the reporting period are as follows:

Financial assets

Loans and receivables Loan to joint ventures Trade and other receivables Restricted cash Cash and cash equivalents Financial assets at FVTPL Listed equity investments at market value Investment fund	2015 HK$’000 — 865,217 — 5,191,990 6,057,207 610,715 965,169 1,575,884 7,633,091	2014 HK$’000 876,132 427,229 10,658 1,655,667
		2,969,686
		— —
		—
		2,969,686

– I-69 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Financial liabilities

Financial liabilities at amortised cost Trade and other payables Interest-bearing bank borrowings Finance lease payables Due to a non-controlling interest	2015 HK$’000 164,057 83,591 — 1,342,125 1,589,773	2014 HK$’000 386,153 89,676 297,671 598,826
		1,372,326

46. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS

Management has assessed that the fair value of loan to joint ventures, cash and cash equivalents, restricted cash, trade and other receivables, trade and other payables, interest-bearing bank borrowings and finance lease payables approximate to their carrying amounts largely due to the short term maturities of these instruments.

The Group’s finance department headed by the financial controller is responsible for determining the policies and procedures for the fair value measurement of financial instruments. The financial controller reports directly to the Directors and the audit committee. At each reporting date, the finance department analyses the movements in the values of financial instruments and determines the major inputs applied in the valuation. The valuation is reviewed and approved by the Directors. The valuation process and results are discussed with the audit committee twice a year for interim and annual financial reporting.

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sales. The following methods and assumptions were used to estimate the fair values:

The fair values of the non-current portion of finance lease payables and amount due to a non-controlling interest have been calculated by discounting the expected future cash flows using rates currently available for instruments with similar terms, credit risk and remaining maturities. The Group’s own non-performance risk for finance lease payables and amount due to a non-controlling interest as at 31 December 2015 were assessed to be insignificant.

The fair values of listed equity investments are based on quoted market prices. The fair values of unlisted investment fund have been determined by the quote from the intermediary. The Directors believe that the estimated fair values resulting from the valuation technique, which are recorded in the consolidated statement of financial position, and the related changes in fair values, which are recorded in the profit or loss, are reasonable, and that they were the most appropriate values at the end of the reporting period.

Below is a summary of significant unobservable inputs to the valuation of financial instruments together with a quantitative sensitivity analysis as at 31 December 2015:

		Significant
	Valuation	unobservable		Sensitivity of fair value to
	technique	input	Range	the input
Unlisted	Quotation	Net asset values	2015:	5% increase (decrease) in
investment			USD89.87	net asset values would
fund				result in increase
				(decrease) in fair value
				by HKD48,258,000

– I-70 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Fair Value Hierarchy

The following tables illustrate the fair value measurement hierarchy of the Group’s financial instruments.

Assets measured at fair value:

As at 31 December 2015

Financial assets at FVTPL Equity investments Investment fund	Fair value measurement using Quoted prices in active markets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) HK$’000 HK$’000 HK$’000 610,715 — — — 965,169 — 610,715 965,169 —	Total HK$’000 610,715 965,169
		1,575,884

The Group did not have any financial assets and liabilities measured at fair value as at 31 December 2014.

During the year, there were no transfers of fair value measurements between Level 1 and 2 and no transfers into or out of Level 3 for both financial assets and financial liabilities (2014: Nil).

47. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

Capital Risk Management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged.

The capital structure of the Group consists of debt balance and equity balance. Debt balance consists of bank borrowings and amount due to a non-controlling interest. Equity balance consists of equity attributable to owners of the Company, comprising issued share capital and reserves.

The Directors review the capital structure on an on-going annual basis. As part of this review, the Directors consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the Directors, the Group will balance its overall capital structure through the payment of dividends, new share issues and share repurchase as well as the issue of new debt.

The Group’s major financial instruments include loan to joint ventures, trade and other receivables, restricted cash, cash and cash equivalents, financial assets at FVTPL, trade and other payables, interest-bearing bank borrowings, finance lease payables and amount due to a non-controlling interest.

– I-71 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The Group does not have any written risk management policies and guidelines. The Board reviews and agrees policies for managing each of these risks and they are summarised below:

Interest rate risk

The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s interest-bearing bank borrowings with a floating interest rate. The Group policy is to manage its interest cost using a mix of fixed and variable rate debts. The Directors do not expect there will be a significant interest rate adjustment in relation to the Group’s bank borrowings, hence no sensitivity analysis is prepared at the end of the reporting period.

Foreign current risk

Certain PRC subsidiaries of the Group’s sales and purchases that are denominated in United States dollars (‘‘US$’’), which expose the Group to foreign currency risk. The following table demonstrates the sensitivity at the end of the reporting period to a reasonably possible change in the US$ exchange rate, with all other variables held constant, the Group’s loss before tax and the Group’s equity.

Sensitivity analysis

The following table indicates the approximate change in the Group’s loss after tax (and accumulated losses) in response to reasonably possible changes in the foreign exchange rates to which the Group has significant exposure at the end of the reporting period.

	Increase/	Increase/	Increase/
	(decrease) in	(decrease) in	(decrease) in
	RMB rate	loss after tax	equity
	%	HK$’000	HK$’000
2015
If the RMB weakens against the US$	5	1,464	(1,464)
If the RMB strengthens against the US$	5	(1,464)	1,464
2014
If the RMB weakens against the US$	(5)	877	(877)
If the RMB strengthens against the US$	5	(877)	877

Credit risk

The maximum exposure to credit risk by the Group which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position.

In order to manage its credit risk, management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. Credit sales of products are only made to customers with good repayment history. In addition, the Group reviews the recoverable amount of individual debt on an on-going basis to ensure that adequate impairment losses are made for irrecoverable amounts.

The credit risk on liquid funds of the Group is limited because the counterparties are banks with good reputation.

– I-72 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Liquidity risk

In management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and mitigates the effects of fluctuations in cash flows.

The following table details the Group’s remaining contractual maturity for its financial liabilities based on the undiscounted cash flows of the financial liabilities as well as the earliest date on which the Group can be required to pay.

2015 Trade and other payables Interest-bearing bank borrowings Due to a non-controlling interest 2014 Trade and other payables Interest-bearing bank borrowings Due to a non-controlling interest Obligations under finance lease	On Demand HK$’000 103,628 — — 103,628 305,233 31,121 — — 336,354	Less than 1 month HK$’000 — 12,309 — 12,309 — — — — —	1 to 3 months HK$’000 25,998 6,619 — 32,617 84,381 — — — 84,381	3 months to 1 year HK$’000 30,271 67,222 — 97,493 — 67,301 — 82,740 150,041	Over 1 year HK$’000 4,160 — 1,735,408 1,739,568 — — 749,130 259,032 1,008,162	Total undiscounted cash flow HK$’000 164,057 86,150 1,735,408
						1,985,615
						389,614 98,422 749,130 341,772
						1,578,938

As explained in note 2 to the financial statements, the Directors have adopted or plan to adopt certain measure in order to improve the Group’s financial and cash flow positions and to maintain the Group as a going concern.

48. EVENT AFTER THE REPORTING PERIOD

There is no material event after the reporting date.

49. COMPARATIVE AMOUNTS

Certain comparative amounts have been re-presented to conform to the presentation of current year.

– I-73 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

50. STATEMENT OF FINANCIAL POSITION OF THE COMPANY

Information about the statement of financial position of the Company as at the end of the reporting date is as follows:

2015 HK$’000 NON-CURRENT ASSETS Property, plant and equipment 8,626 Due from a subsidiary 1,430,593 Investments in subsidiaries 646,789 Investments in joint ventures — Total non-current assets 2,086,008 CURRENT ASSETS Due from subsidiaries 2,290,757 Deposits and prepayments 352,308 Financial assets at FVTPL 1,575,884 Cash and bank balances 3,349,178 Total current assets 7,568,127 CURRENT LIABILITIES Accruals and other payables 23,670 Due to subsidiaries 11,406 Total current liabilities 35,076 NET CURRENT ASSETS 7,533,051 Net assets 9,619,059 EQUITY Share capital 2,056,588 Reserves (note) 7,562,471 Total equity 9,619,059 Yang Zhihui Ng Kwok Fai DIRECTOR DIRECTOR	2014 HK$’000 11,841 624,808 1,319,460 876,132
	2,832,241
	669,383 248,047 — 480,518
	1,397,948
	6,473 120,269
	126,742
	1,271,206
	4,103,447
	186,963 3,916,484
	4,103,447

– I-74 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Note:

Notes At 1 January 2014 Loss and total comprehensive loss for the year Issue of ordinary shares by rights issue 32(c) Share issue expenses Issue of ordinary shares by share subscriptions 32(d) Issue of ordinary shares in relation to acquisition of a subsidiary 32(e) Equity-settled share option arrangements At 31 December 2014 and 1 January 2015 Loss and total comprehensive loss for the year Issue of ordinary shares by rights issue 32(f) Share issue expenses Transfer of share option reserve upon cancellation of share options At 31 December 2015	Share premium HK$’000 650,033 — 1,369,419 (14,374) 1,236,300 773,723 — 4,015,101 — 4,674,064 (97,944) — 8,591,221	Contributed surplus* HK$’000 171,902 — — — — — — 171,902 — — — — 171,902	Share-based payment reserve HK$’000 — — — — — — 3,974 3,974 — — — (3,974) —	Accumulated losses HK$’000 (197,180) (77,313) — — — — — (274,493) (930,133) — — 3,974 (1,200,652)	Total HK$’000 624,755 (77,313 1,369,419 (14,374 1,236,300 773,723 3,974
					3,916,484
					(930,133 4,674,064 (97,944 —
					7,562,471

Contributed surplus of the Company was arisen from the Company’s capital reorganisation on 19 April 2013.

51. APPROVAL OF CONSOLIDATION FINANCIAL STATEMENTS

This consolidated financial statements were approved and authorised for issue by the Board on 18 March 2016.

For the year ended 31 December 2015, there were provision for impairment of other receivables (net) amounting to HK$209,549,000 (2014: HK$3,231,000), and these provisions mainly consisted of overdue receivables with long aging period and loss in credit to comply with the applicable accounting standards in accordance with the long outstanding loan and receivables.

– I-75 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

The following is the full text of the unaudited condensed consolidated interim financial information of the Group for the six months ended 30 June 2016 as extracted from the interim report of the Company for the six months ended 30 June 2016:

Condensed Consolidated Statement of Profit or Loss

Six months ended 30 June 2016

Notes
Revenue
6
Other losses, net
Special gaming tax and other related taxes to
the government
Commission and allowances to gaming
counterparties
Raw materials and consumables used
Amortisation and depreciation
Employee benefit expenses
8
Other operating expenses
Finance income/(costs), net
7
Change in fair value of financial assets at
fair value through profit or loss
(‘‘FVTPL’’)
Change in fair value of investment
properties
Share of profits and losses of:
Joint venture
Associate
LOSS BEFORE TAX
8
Income tax (expense)/credit
9
LOSS FOR THE PERIOD
Attributable to:
Owners of the Company
Non-controlling interests
LOSS PER SHARE ATTRIBUTABLE TO
ORDINARY EQUITY HOLDERS OF
THE COMPANY
11
Basic and diluted:
For loss for the period

For the six months ended
30 June
2016
2015
HK$’000
HK$’000
(Unaudited)
(Unaudited)
445,295
109,234
(19,842)
(15,394)
(14,800)
—
(59,229)
—
(84,324)
(73,643)
(37,689)
(23,170)
(200,862)
(60,958)
(376,550)
(96,054)
34,681
(38,859)
(287,361)
—
(45,956)
—
—
24,462
—
—
(646,637)
(174,382)
(15,918)
998
(662,555)
(173,384)
(526,456)
(143,906)
(136,099)
(29,478)
(662,555)
(173,384)
(Restated)
HK(2.56) cents
HK(6.18) cents

– I-76 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Statement of Comprehensive Income Six months ended 30 June 2016

LOSS FOR THE PERIOD
OTHER COMPREHENSIVE (LOSS)/INCOME
Other comprehensive (loss)/income to be reclassified to
profit or loss in subsequent period:
Change in fair value of available-for-sale investments
Exchange differences on translation of foreign operations
Release of translation reserve upon disposal of subsidiaries
Share of other comprehensive loss of:
Joint venture
Associate
OTHER COMPREHENSIVE (LOSS)/INCOME
FOR THE PERIOD, NET OF TAX
TOTAL COMPREHENSIVE (LOSS)/INCOME
FOR THE PERIOD
(Loss)/profit attributable to:
Owners of the Company
Non-controlling interests

For the six months ended
30 June
2016
2015
HK$’000
HK$’000
(Unaudited)
(Unaudited)
(662,555)
(173,384)
—
500,390
(84,603)
(38,124)
25
—
—
(8,666)
—
—
(84,578)
453,600
(747,133)
280,216
(640,915)
322,011
(106,218)
(41,795)
(747,133)
280,216

– I-77 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Statement of Financial Position

As at 30 June 2016

Notes NON-CURRENT ASSETS Property, plant and equipment 12 Investment properties 13 Prepaid land lease payments Goodwill 14 Intangible assets 15 Other receivables 17 Investment in a joint venture 16 Investment in an associate Total non-current assets CURRENT ASSETS Inventories Properties under development Trade and other receivables 17 Amount due from a joint venture 16 Financial assets at FVTPL 18 Tax recoverable Cash and bank balances Total current assets CURRENT LIABILITIES Trade and other payables 19 Bank and other borrowings 20 Income tax payable Amount due to a shareholder 21 Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	30 June 2016 HK$’000 (Unaudited) 2,341,483 239,800 14,131 316,977 2,031,394 14,444 — — 4,958,229 78,146 1,543,618 1,709,138 39,074 1,288,523 7,826 5,226,427 9,892,752 802,580 2,371,565 39,207 23,400 3,236,752 6,656,000 11,614,229	31 December 2015 HK$’000 (Audited) 1,689,470 55,000 14,568 5,438 784,820 — — —
		2,549,296
		45,719 1,135,733 895,187 — 1,575,884 14,866 5,191,990
		8,859,379
		284,294 83,591 — —
		367,885
		8,491,494
		11,040,790

– I-78 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes NON-CURRENT LIABILITIES Other payables 19 Amount due to a non-controlling interest Deferred tax liabilities Total non-current liabilities Net assets EQUITY Share capital 22 Reserves Equity attributable to owners of the Company Non-controlling interests Total equity	30 June 2016 HK$’000 (Unaudited) 4,951 1,430,247 246,622 1,681,820 9,932,409 2,056,588 6,535,420 8,592,008 1,340,401 9,932,409	31 December 2015 HK$’000 (Audited) 4,160 1,342,125 6,105
		1,352,390
		9,688,400
		2,056,588 7,176,335
		9,232,923 455,477
		9,688,400

– I-79 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Statement of Changes In Equity Six months ended 30 June 2016

Share capital HK$’000 2,056,588	Attrib Share premium Contributed surplus Translation reserve Available- for-sale investment reserve HK$’000 HK$’000 HK$’000 HK$’000 (note a) 8,591,221 171,902 (142,528) — — — — — — — (114,484) — — — 25 — — — (114,459) — — — — — 8,591,221 171,902 (256,987) — 4,015,101 171,902 (6,545) — — — — — — — — 500,390 — — (25,807) — — — (8,666) — — — (34,473) 500,390 — — — — 4,015,101 171,902 (41,018) 500,390	Attrib Share premium Contributed surplus Translation reserve Available- for-sale investment reserve HK$’000 HK$’000 HK$’000 HK$’000 (note a) 8,591,221 171,902 (142,528) — — — — — — — (114,484) — — — 25 — — — (114,459) — — — — — 8,591,221 171,902 (256,987) — 4,015,101 171,902 (6,545) — — — — — — — — 500,390 — — (25,807) — — — (8,666) — — — (34,473) 500,390 — — — — 4,015,101 171,902 (41,018) 500,390	Attrib Share premium Contributed surplus Translation reserve Available- for-sale investment reserve HK$’000 HK$’000 HK$’000 HK$’000 (note a) 8,591,221 171,902 (142,528) — — — — — — — (114,484) — — — 25 — — — (114,459) — — — — — 8,591,221 171,902 (256,987) — 4,015,101 171,902 (6,545) — — — — — — — — 500,390 — — (25,807) — — — (8,666) — — — (34,473) 500,390 — — — — 4,015,101 171,902 (41,018) 500,390	Attrib Share premium Contributed surplus Translation reserve Available- for-sale investment reserve HK$’000 HK$’000 HK$’000 HK$’000 (note a) 8,591,221 171,902 (142,528) — — — — — — — (114,484) — — — 25 — — — (114,459) — — — — — 8,591,221 171,902 (256,987) — 4,015,101 171,902 (6,545) — — — — — — — — 500,390 — — (25,807) — — — (8,666) — — — (34,473) 500,390 — — — — 4,015,101 171,902 (41,018) 500,390	utable to ow Non-cash share option reserve HK$’000 —*	ners of the Company Non- distributable reserve Other reserve Accumulated losses Total HK$’000 HK$’000 HK$’000 HK$’000 (note b) (note c) 2,552 7,253 (1,454,065) 9,232,923 — — (526,456) (526,456) — — — (114,484) — — — 25 — — (526,456) (640,915) — — — — 2,552 7,253 (1,980,521) 8,592,008 2,552 7,253 (470,068) 3,911,132 — — (143,906) (143,906) — — — 500,390 — — — (25,807) — — — (8,666) — — (613,974) 322,011 — — 3,974 — 2,552 7,253 (610,000) 4,233,143	ners of the Company Non- distributable reserve Other reserve Accumulated losses Total HK$’000 HK$’000 HK$’000 HK$’000 (note b) (note c) 2,552 7,253 (1,454,065) 9,232,923 — — (526,456) (526,456) — — — (114,484) — — — 25 — — (526,456) (640,915) — — — — 2,552 7,253 (1,980,521) 8,592,008 2,552 7,253 (470,068) 3,911,132 — — (143,906) (143,906) — — — 500,390 — — — (25,807) — — — (8,666) — — (613,974) 322,011 — — 3,974 — 2,552 7,253 (610,000) 4,233,143	ners of the Company Non- distributable reserve Other reserve Accumulated losses Total HK$’000 HK$’000 HK$’000 HK$’000 (note b) (note c) 2,552 7,253 (1,454,065) 9,232,923 — — (526,456) (526,456) — — — (114,484) — — — 25 — — (526,456) (640,915) — — — — 2,552 7,253 (1,980,521) 8,592,008 2,552 7,253 (470,068) 3,911,132 — — (143,906) (143,906) — — — 500,390 — — — (25,807) — — — (8,666) — — (613,974) 322,011 — — 3,974 — 2,552 7,253 (610,000) 4,233,143	ners of the Company Non- distributable reserve Other reserve Accumulated losses Total HK$’000 HK$’000 HK$’000 HK$’000 (note b) (note c) 2,552 7,253 (1,454,065) 9,232,923 — — (526,456) (526,456) — — — (114,484) — — — 25 — — (526,456) (640,915) — — — — 2,552 7,253 (1,980,521) 8,592,008 2,552 7,253 (470,068) 3,911,132 — — (143,906) (143,906) — — — 500,390 — — — (25,807) — — — (8,666) — — (613,974) 322,011 — — 3,974 — 2,552 7,253 (610,000) 4,233,143	Non- controlling interests HK$’000 455,477	Total equity HK$’000 9,688,400
— — —	— — —	— — —	— (114,484) 25	— — —	— — —	— — —	— — —	(526,456) — —	(526,456) (114,484) 25	(136,099) 29,881 —	(662,555 (84,603 25
— —	— —	— —	(114,459) —	— —	— —	— —	— —	(526,456) —	(640,915) —	(106,218) 991,142	(747,133 991,142
2,056,588					—					1,340,401	9,932,409
186,963	4,015,101	171,902	(6,545)	—	3,974	2,552	7,253	(470,068)	3,911,132	599,954	4,511,086
— — — —	— — — —	— — — —	— — (25,807) (8,666)	— 500,390 — —	— — — —	— — — —	— — — —	(143,906) — — —	(143,906) 500,390 (25,807) (8,666)	(29,478) — (12,317) —	(173,384 500,390 (38,124 (8,666
— —	— —	— —	(34,473) —	500,390 —	— (3,974)	— —	— —	(613,974) 3,974	322,011 —	(41,795) —	280,216 —
186,963	4,015,101	171,902	(41,018)	500,390	—	2,552	7,253	(610,000)	4,233,143	558,159	4,791,302

The consolidated reserves of approximately HK$6,535,420,000 (31 December 2015: HK$7,176,335,000) in the condensed consolidated statement of financial position comprises these reserve accounts.

– I-80 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes:

(a) The contributed surplus of the Company represents the credit arising from a capital reduction of the Company and the contributed surplus will be used to offset accumulated losses of the Company. Any credit standing in the contributed surplus account of the Company will be used in any manner permitted by laws of Bermuda and the bye-laws of the Company.
(b) The non-distributable reserve of the Group mainly represents statutory reserve requirement that the foreign investment enterprises appropriated 10% of the profit after taxation of the subsidiaries of the Company registered in the People’s Republic of China (the ‘‘PRC’’) other than Hong Kong to the nondistributable reserve under the PRC laws and regulations until the transferred amount met 50% of the registered capital of these PRC subsidiaries.
(c) The other reserve of an amount of HK$7,253,000 recognised in the year 2014, represents the difference between the fair value of the consideration received from share subscription of Landing Jeju Development Co., Ltd. and the carrying amount of the net assets attributable to the partial disposal of 50% of its equity interest.

– I-81 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Condensed Consolidated Statement of Cash Flows

Six months ended 30 June 2016

CASH FLOW FROM OPERATING ACTIVITIES
Cash generated used in operations
Interest received
Income tax refunded/(paid)
Net cash used in operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of items of property, plant and equipment
Purchase of investment property
Purchase of available-for-sale investments
Disposal of subsidiaries
Proceeds from disposal of items of property,
plant and equipment
Advance to a joint venture
Acquisition of a subsidiary
Dividend received
Net cash used in investing activities
CASH FLOW FROM FINANCING ACTIVITIES
Deposit received for rights issue
Interests paid
New bank and other borrowings
Repayment of bank and other borrowings
Amount due to a shareholder
Capital element on finance lease rental payment
Interest element on finance lease rental payment
Capital injection from non-controlling interests
Net cash generated from financing activities
NET (DECREASE)/INCREASE IN CASH AND
CASH EQUIVALENTS
Cash and cash equivalents at beginning of the period
Effect of foreign exchange rate changes, net
CASH AND CASH EQUIVALENTS AT THE END OF
THE PERIOD AND REPRESENTED BY CASH AND
BANK BALANCES

For the six months ended
30 June
2016
2015
HK$’000
HK$’000
(Unaudited)
(Unaudited)
(1,081,231)
(521,116)
13,685
5,037
13,108
(2,890)
(1,054,438)
(518,969)
(472,270)
(152,092)
(230,756)
—
—
(467,800)
161
(889)
—
90
(39,074)
—
(1,474,973)
—
798
—
(2,216,114)
(620,691)
—
5,186,580
(34,793)
(14,556)
2,627,966
774,000
(338,025)
(1,263)
23,400
—
—
(33,075)
—
(8,690)
991,142
—
3,269,690
5,902,996
(862)
4,763,336
5,191,990
1,655,667
35,299
(32,377)
5,226,427
6,386,626

– I-82 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes to the Condensed Consolidated Financial Statements

Six months ended 30 June 2016

1. CORPORATE INFORMATION

Landing International Development Limited, is a limited liability company incorporated in the Cayman Islands and continued in Bermuda, and its shares are listed on the main board of The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’).

During the period, the Group was principally engaged in development and operation of integrated leisure and entertainment resort (the ‘‘Integrated Resort Development’’); gaming club and entertainment facilities (the ‘‘Gaming Business’’); property development (the ‘‘Property Development’’); and design, manufacturing and sales of the light-emitting diode (‘‘LED’’) and semiconductor lighting related products (the ‘‘Lighting Business’’).

The condensed consolidated interim financial information is presented in HK dollar, unless otherwise stated. This condensed consolidated interim financial information has not been audited nor reviewed.

Key Events

On 28 April 2016, the Group completed the acquisition of Les Ambassadeurs Club Limited (‘‘Les A’’), a company that is principally engaged in Gaming Business in London, the United Kingdom (the ‘‘UK’’). Further details are set out in note 26 to the condensed consolidated interim financial information.

2. BASIS OF PREPARATION

This unaudited condensed consolidated interim financial information for the six months ended 30 June 2016 has been prepared in accordance with Hong Kong Accounting Standard (‘‘HKAS’’) 34, ‘‘Interim financial reporting’’ issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’). The unaudited condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2015, which have been prepared in accordance with Hong Kong Financial Reporting Standards issued by the HKICPA (‘‘HKFRSs’’).

In previous years, the Group presented an analysis of expenses recognised in consolidated statement of profit or loss using a classification based on their function.

During the period, the Board has performed a review of the content and presentation of the financial statements to ensure compliance with relevant accounting standards as well as the comparability with those of the other market participants within the same industry. In view that the Group’s results of operations is increasingly driven by the Gaming Business in particular after the acquisition of Les A in the current period, and less focus has been placed on the Lighting Business, the Board considered that it is appropriate to adopt an analysis of expenses recognised in consolidated statement of profit or loss using a classification based on their nature which would be more relevant to the Group’s circumstances and for the users of the Group’s financial statements.

The changes in presentation have been adopted retrospectively, and certain corporate figures have been restated. The changes in the presentation of the consolidated statement of profit or loss did not have any impact of the Group’s loss for the period or the calculation of the Group’s loss per share.

– I-83 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. ACCOUNTING POLICIES

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2015, as described in those annual financial statements.

(a) Amendments to HKFRSs effective for the financial year ending 31 December 2016 do not have a material impact on the Group

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

(b) Impact of standards issued but not yet applied by the entity

(i) HKFRS 9 Financial instruments

HKFRS 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. The standard does not need to be applied until 1 January 2018 but is available for early adoption. The Group is currently assessing whether it should adopt HKFRS 9 before its mandatory date.

The financial assets held by the Group include equity investments currently measured at FVTPL which would likely continue to be measured on the same basis under HKFRS 9.

Accordingly the Group does not expect the new guidance to have a significant impact on the classification and measurement of its financial assets.

There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. The derecognition rules have been transferred from HKAS 39 Financial Instruments: Recognition and Measurement and have not been changed.

The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under HKAS 39. It applies to financial assets classified at amortised cost, debt instruments measured at fair value through other comprehensive income, contract assets under HKFRS 15 Revenue from Contracts with Customers, lease receivables, loan commitments and certain financial guarantee contracts. While the Group has not yet undertaken a detailed assessment of how its impairment provisions would be affected by the new model, it may result in earlier recognition of credit losses.

The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group’s disclosures about its financial instruments particularly in the year of the adoption of the new standard.

– I-84 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(ii) HKFRS 15 Revenue from contracts with customers

The HKICPA has issued a new standard for the recognition of revenue. This will replace HKAS 18 which covers revenue arising from the sale of goods and the rendering of services and HKAS 11 which covers construction contracts.

The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer.

The standard permits either a full retrospective or a modified retrospective approach for the adoption. The new standard is effective for first interim periods within annual reporting periods beginning on or after 1 January 2018, and will allow early adoption.

Management is currently assessing the effects of applying the new standard on the Group’s financial statements.

At this stage, the Group is not able to estimate the effect of the new rules on the Group’s financial statements. The Group will make more detailed assessments of the effect. The Group does not expect to adopt the new standard before 1 January 2018.

There are no other amended standards or interpretations that are effective for the first time for this interim period that could be expected to have a material impact on the Group.

4. ESTIMATES

The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this condensed consolidated interim financial information, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2015.

5. FINANCIAL RISK MANAGEMENT

5.1 Financial Risk Factors

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk and price risk), credit risk and liquidity risk.

The interim condensed consolidated financial information does not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at 31 December 2015.

There have been no changes in the risk management policies since the year ended 31 December 2015.

– I-85 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5.2 Liquidity Risk

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

As at 30 June 2016 Trade and other payables Bank and other borrowings Amount due to a non- controlling interest Amount due to a shareholder As at 31 December 2015 Trade and bill payables Bank and other borrowings Amount due to a non- controlling interest	Less than 1 year HK$’000 720,014 2,458,282 — 23,400 3,201,696 159,897 86,150 — 246,047	Between 1 and 2 years HK$’000 — — — — — — — — —	Between 2 and 5 years HK$’000 4,951 — 1,679,008 — 1,683,959 4,160 — 1,735,408 1,739,568	Over 5 years HK$’000 — — — — — — — — —	Total HK$’000 724,965 2,458,282 1,679,008 23,400
					4,885,655
					164,057 86,150 1,735,408
					1,985,615

5.3 Fair Value Estimation

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

. Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
. Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
. Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The following table presents the Group’s financial assets and liabilities that are measured at fair value at 30 June 2016.

Assets Equity investments Investment fund Total assets	Level 1 HK$’000 475,749 — 475,749	Level 2 HK$’000 — 812,774 812,774	Level 3 HK$’000 — — —	Total HK$’000 475,749 812,774
				1,288,523

– I-86 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The following table presents the Group’s financial assets and liabilities that are measured at fair value at 31 December 2015.

Assets Equity investments Investment fund Total assets	Level 1 HK$’000 610,715 — 610,715	Level 2 HK$’000 — 965,169 965,169	Level 3 HK$’000 — — —	Total HK$’000 610,715 965,169
				1,575,884

There were no transfers among Levels 1, 2 and 3 during the period.

6. SEGMENT INFORMATION

Management of the Company has determined the operating segments based on the reports reviewed by the Group’s Chief Operating Decision Maker (‘‘CODM’’) that are used to make strategic decisions. The CODM considers the Group is operating predominantly in four operating segments as follows:

(a) Integrated Resort Development;
(b) Gaming Business;
(c) Property Development; and
(d) Lighting Business

The Group’s CODM monitors the results of the operating segments separately for the purpose of making decisions about resources allocation and performance assessment. Segment performance is evaluated based on reportable segment (loss)/profit, which is a measure of adjusted loss before tax. The adjusted loss before tax is measured consistently with the Group’s loss before tax except that finance income, finance costs, as well as head office and corporate income and expenses are excluded from such measurement.

The following table presents revenue and results information regarding the Group’s operating segments for the six months ended 30 June 2016 and 2015, respectively:

For the six months ended 30 June 2016

Revenue — external sales Segment results Unallocated corporate income Unallocated corporate expenses Finance income, net Loss before tax	Integrated Resort Development HK$’000 (Unaudited) — (42,521)	Casino Business HK$’000 (Unaudited) 325,390 82,077	Property Development HK$’000 (Unaudited) — (223,836)	Lighting Business HK$’000 (Unaudited) 119,905 (7,290)	Total HK$’000 (Unaudited) 445,295
					(191,570
					3,229 (492,977 34,681
					(646,637

– I-87 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the six months ended 30 June 2015

Revenue — external sales Segment results Unallocated corporate income Unallocated corporate expenses Finance costs, net Share of profits and losses of: Joint ventures Loss before tax	Integrated Resort Development HK$’000 (Unaudited) — (61,155)	Casino Business HK$’000 (Unaudited) — —	Property Development HK$’000 (Unaudited) — (5,495)	Lighting Business HK$’000 (Unaudited) 109,234 (19,760)	Total HK$’000 (Unaudited) 109,234
					(86,410
					1,410 (74,985 (38,859 24,462
					(174,382

Geographical Information

(a) Revenue from external customers

Mainland China South Korea UK Other countries	For the six months ended 30 June 2016 2015 HK$’000 HK$’000 (Unaudited) (Unaudited) 76,726 78,221 259,666 17,795 93,294 — 15,609 13,218 445,295 109,234	For the six months ended 30 June 2016 2015 HK$’000 HK$’000 (Unaudited) (Unaudited) 76,726 78,221 259,666 17,795 93,294 — 15,609 13,218 445,295 109,234
		109,234

The revenue information above is based on the locations of the customers.

(b) Non-current assets

Hong Kong Mainland China South Korea UK	30 June 2016 HK$’000 (Unaudited) 640,723 85,854 1,711,394 157,443 2,595,414	31 December 2015 HK$’000 (Audited) 467,364 87,216 1,204,458 —
		1,759,038

The non-current assets information above is based on the locations of the assets and excludes goodwill, intangible assets, other receivables, investments in a joint venture and an associate.

– I-88 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Information about Major Customers

During the six months ended 30 June 2016 and 2015, there was no single external customer that has contributed over 10% of the Group’s total revenue.

7. FINANCE INCOME/(COSTS), NET

Bank and other interest income
Interest income from promissory notes
Finance income
Interest expenses on bank and other borrowings
Interest expenses on finance lease
Total interest expenses on bank and other borrowings
Less: Interest expenses capitalised
Finance costs
Finance income/(costs), net
8.
LOSS BEFORE TAX
Loss before tax is arrived at after charging/(crediting):
Foreign exchange differences, net
Loss on disposal of property, plant and equipment
Minimum lease payments under operating leases of land and buildings
Write-down of inventories to net realisable value
Dividend income
Employee benefit expenses (including Directors’ remuneration):
Wages and salaries
Pension scheme contributions
Less: amounts capitalised

For the six months ended
30 June
2016
2015
HK$’000
HK$’000
(Unaudited)
(Unaudited)
18,688
5,037
18,325
—
37,013
5,037
68,017
49,108
—
8,690
68,017
57,798
(65,685)
(13,902)
2,332
43,896
34,681
(38,859)
For the six months ended
30 June
2016
2015
HK$’000
HK$’000
(Unaudited)
(Unaudited)
11,241
4,627
5
176
17,467
6,070
—
1,015
(798)
—
218,389
79,701
18,765
2,738
(36,292)
(21,481)
200,862
60,958

– I-89 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. INCOME TAX EXPENSE/(CREDIT)

No provision for Hong Kong profits tax has been made as the Group did not generate assessable profits arising in Hong Kong during the six months ended 30 June 2016 and 2015. Taxes on profits assessable elsewhere have been calculated at the tax rates prevailing in the countries in which the Group operates.

Current tax — Mainland China — South Korea Over-provision in previous year Deferred tax (credit)/charge Income tax expense/(credit)	For the six months ended 30 June 2016 2015 HK$’000 HK$’000 (Unaudited) (Unaudited) 190 32 18,500 — (2,772) — — (1,030) 15,918 (998)

10. DIVIDEND

No dividend on ordinary shares has been paid or declared by the Company for the six months ended 30 June 2016 (six months ended 30 June 2015: Nil).

11. LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE COMPANY

The calculation of basic and diluted loss per share are based on:

Loss attributable to ordinary equity holders of the Company, used in the basic and diluted loss per share calculation: Number of shares Weighted average number of ordinary shares in issue during the period used in the basic and diluted loss per share calculation (six months ended 30 June 2015: adjusted for the rights issue which was completed on 20 July 2015)	For the six months ended 30 June 2016 2015 HK$’000 HK$’000 (Unaudited) (Unaudited) (526,456) (143,906) ’000 ’000 (restated) 20,565,879 2,327,645

For the six months ended 30 June 2016 and 2015, diluted loss per share equals basic loss per share as there was no dilutive potential share.

12. PROPERTY, PLANT AND EQUIPMENT

During the six months ended 30 June 2016, the Group acquired assets with total cost of approximately HK$500,136,000 (six months ended 30 June 2015: HK$152,092,000) excluding items acquired through acquisition of subsidiaries.

– I-90 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. INVESTMENT PROPERTIES

Six months ended 30 June 2016 Net book value or valuation Opening amount as at 31 December 2015 and 1 January 2016 Additions Fair value losses Closing amount as at 30 June 2016	Investment properties HK$’000 55,000 230,756 (45,956
	239,800

The valuations of the investment properties at 30 June 2016 and 31 December 2015 were carried out by an independent qualified valuer, Roma Appraisals Limited.

The fair value measurement information for these investment properties in accordance with HKFRS 13 are given below.

Recurring fair value measurements
Investment properties
Recurring fair value measurements
Investment property

Fair value measurements at 30 June 2016
Quoted prices
in active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
HK$’000
HK$’000
HK$’000
—
—
239,800
Fair value measurements at 31 December 2015
Quoted prices
in active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
HK$’000
HK$’000
HK$’000
—
—
55,000

There were no transfers among Level 1, Level 2 and 3 during the period.

Level 3 fair values of investment properties have been derived using the direct comparison approach. The fair value is estimated using assumptions regarding the market value of the similar properties of the investment properties. A significant increase/decrease in the estimated market value in isolation would result in a significant increase/decrease in the fair value of the investment properties.

– I-91 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

14. GOODWILL

Cost At beginning of the period/year Step acquisition from joint ventures to subsidiaries Acquisition of a subsidiary (note 26) Exchange realignment Accumulated impairment At beginning of the period/year Impairment during the period/year Net carrying amount At end of the period/year	30 June 2016 HK$’000 (Unaudited) 208,830 — 338,240 (26,701) 520,369 203,392 — 203,392 316,977	31 December 2015 HK$’000 (Audited) 203,392 5,438 — —
		208,830
		187,257 16,135
		203,392
		5,438

Goodwill of HK$203,392,000 and HK$316,977,000 were allocated to Lighting Business and Gaming Business respectively. The goodwill in relation to the Lighting Business was fully impaired as at 31 December 2015.

There was no indicator for impairment on the goodwill in relation to the Gaming Business based on the current operation performance and the expected future revenue growth rate.

15. INTANGIBLE ASSETS

During the current period, the Group acquired a casino license through the acquisition of a subsidiary which represented an addition of intangible assets of the Group, details of which are disclosed in note 26.

As at 30 June 2016, the intangible assets represent the newly acquired casino license in 2016 and the casino license acquired in 2015 by step acquisition from joint ventures to subsidiaries.

16. INVESTMENT IN A JOINT VENTURE/AMOUNT DUE FROM A JOINT VENTURE

Investment in a joint venture Amount due from a joint venture	30 June 2016 HK$’000 (Unaudited) — 39,074 39,074	31 December 2015 HK$’000 (Audited) — —
		—

Amount due from a joint venture is unsecured, interest-free and has no fixed terms of repayment.

– I-92 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Particulars of the Group’s joint venture are as follows:

				Percentage	Percentage	of
	Particulars of	Place of registration	Ownership	interest	Voting		Profit
Name	issued shares	and business	Direct	Indirect		power	sharing	Principal activities
Dragon Step Global	100 ordinary shares	British Virgin Island	25	—		50%	25	Investment holding
Limited		(‘‘BVI’’)/Hong Kong
(‘‘Dragon Step’’)

Dragon Step was newly incorporated during the six months ended 30 June 2016.

The Group holds 25% of the ordinary shares of Dragon Step and controls 50% of the voting power in the general meeting. Under a shareholders’ agreement, the Group has the right to appoint one of the two directors of Dragon Step. Therefore, Dragon Step is regarded as a joint venture of the Group and its results are accounted for using the equity method.

17. TRADE AND OTHER RECEIVABLES

Trade receivables from third parties Impairment Prepayments, deposits and other receivables Total trade and other receivables Less: non-current portion Current portion	30 June 2016 HK$’000 (Unaudited) 146,652 (42,822) 103,830 1,619,752 1,723,582 (14,444) 1,709,138	31 December 2015 HK$’000 (Audited) 132,989 (36,633
		96,356 798,831
		895,187 —
		895,187

The Group allows credit periods ranged from 30 days to 90 days to its trade customers. The following is an aging analysis of trade receivables net of impairment presented based on the invoice date at the end of the reporting period:

0–30 days 31–60 days 61–90 days Over 90 days	30 June 2016 HK$’000 (Unaudited) 41,908 18,830 17,176 25,916 103,830	31 December 2015 HK$’000 (Audited) 28,175 17,965 13,854 36,362
		96,356

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APPENDIX I

18. FINANCIAL ASSETS AT FVTPL

Listed equity investments at market value (note i) Investment fund (note ii)	30 June 2016 HK$’000 475,749 812,774 1,288,523	31 December 2015 HK$’000 610,715 965,169
		1,575,884

Notes:

(i) The equity investments were classified as held for trading and fair values were determined based on the quoted market bid prices available on the Stock Exchange.
(ii) The Group purchased an equity market fund from an intermediary in Hong Kong. The fair value of the investment fund was determined by the quote from the intermediary.

19. TRADE AND OTHER PAYABLES

Trade payables to third parties Accruals, deposits received and other payables Less: non-current portion Current portion	30 June 2016 HK$’000 (Unaudited) 128,185 679,346 807,531 (4,951) 802,580	31 December 2015 HK$’000 (Audited) 100,172 188,282
		288,454 (4,160
		284,294

The following is an aging analysis of trade payables presented based on invoice date at the end of the reporting period:

0–30 days 31–60 days 61–90 days Over 90 days	30 June 2016 HK$’000 (Unaudited) 61,774 15,631 27,507 23,273 128,185	31 December 2015 HK$’000 (Audited) 30,843 13,357 15,586 40,386
		100,172

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

20. BANK AND OTHER BORROWINGS

Within one year: Bank loans, secured (note i) Other loans, unsecured (note ii) Carrying amount repayable on demand or within one year Notes:	30 June 2016 HK$’000 (Unaudited) 87,565 2,284,000 2,371,565	31 December 2015 HK$’000 (Audited) 83,591 —
		83,591

(i) Secured by the Group’s property, plant and equipment, and prepaid lease payments with the effective interest rates ranged from 5.8% to 6.6% per annum (31 December 2015: 5.25% to 6.9%). All bank loans are denominated in Renminbi.

(ii) Other loans are interest-bearing at 12% per annum and denominated in HK dollar.

21. AMOUNT DUE TO A SHAREHOLDER

The amount due to a shareholder is unsecured, interest-free and repayable on 28 June 2017.

22. SHARE CAPITAL

Authorised: At 1 January 2015 Share consolidation (note a) Increase in authorised shares (note b) At 31 December 2015, 1 January 2016 and 30 June 2016 Issued and fully paid: At 1 January 2015 Share consolidation (note a) Issue of ordinary shares by rights issue (note c) At 31 December 2015, 1 January 2016 and 30 June 2016	Number of shares ’000 50,000,000 (45,000,000) 95,000,000 100,000,000 18,696,254 (16,826,629) 18,696,254 20,565,879	Total value HK$’000 500,000 — 9,500,000
		10,000,000
		186,963 — 1,869,625
		2,056,588

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Notes:

(a) At the special general meeting of the Company held on 15 June 2015, the relevant resolution in respect of the share consolidation of every ten issued and unissued ordinary shares of HK$0.01 each into one consolidated share of HK$0.1 each (the ‘‘Consolidated Share’’) was passed. Immediately after the share consolidation becoming effective on 16 June 2015, the issued and fully paid ordinary share capital of the Company comprised 1,869,625,387 shares of HK$0.10 each.
(b) At the special general meeting of the Company held on 15 June 2015, the relevant resolution was passed to increase the authorised share capital of the Company from HK$500,000,000 to HK$10,000,000,000 by the creation of 95,000,000,000 new ordinary shares of HK$0.1 each following the share consolidation mentioned in (a) above.
(c) On 20 July 2015, the Company completed the rights issue on the basis of ten rights shares for every one Consolidated Share held on the record date (the ‘‘Rights Issue’’). 18,696,254,000 shares were issued at a subscription price of HK$0.35 per rights share with gross proceeds of HK$6,543,689,000, of which HK$1,869,625,000 was credited to share capital and HK$4,674,064,000 was credited to the share premium account. Details of the Rights Issue were set out in the Company’s announcements dated 22 April 2015, 5 May 2015, 12 May 2015, 29 May 2015 and 17 July 2015.

These shares rank pari passu with the existing ordinary shares of the Company in all respects.

23. OPERATING LEASE COMMITMENTS

As lessor:

At the end of the reporting period, the total commitments receivable under various noncancellable operating lease agreements in respect of rented premises are analysed as follows:

Within one year	30 June 2016 HK$’000 (Unaudited) 238	31 December 2015 HK$’000 (Audited) 487

As lessee:

At the end of the reporting period, the total commitments payable in respect of office and factory premises under various non-cancellable operating leases agreements are analysed as follows:

Within one year In the second year to fifth year both inclusive After five years	30 June 2016 HK$’000 (Unaudited) 65,065 183,474 1,567,061 1,815,600	31 December 2015 HK$’000 (Audited) 23,986 14,362 —
		38,348

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. COMMITMENTS

Capital Commitments

Contracted, but not provided for: Property, plant and equipment Properties being developed for sale	30 June 2016 HK$’000 (Unaudited) 3,096,562 2,958,717 6,055,279	31 December 2015 HK$’000 (Audited) 1,085,686 906,550
		1,992,236

25. PLEDGE OF ASSETS

At the end of the reporting period, the following assets of the Group were pledged to certain banks to secure general banking and borrowing facilities granted to the Group:

Property, plant and equipment Prepaid land lease payment	30 June 2016 HK$’000 (Unaudited) 70,953 14,499	31 December 2015 HK$’000 (Audited) 50,920 14,942

26. BUSINESS COMBINATIONS

On 7 December 2015, the Group and Twinwood Limited (‘‘Twinwood’’), an independent third party, entered into a sale and purchase agreement, pursuant to which the Group acquired 100% of the issued share capital of Les A at a base consideration of £137,000,000 (subject to adjustments), equivalent to approximately HK$1,542,765,000. Les A is principally engaged in Gaming Business in London, UK. The acquisition was completed on 28 April 2016. The Goodwill of approximately HK$338,240,000 arose in the acquisition of Les A because the cost of the combination included amounts in relation to the benefit of expected synergies and the assembled workforce of Les A, which cannot be recognised separately from goodwill because they do not meet the recognition criteria for identifiable intangible assets.

The following table summarises the consideration paid and the provisional fair value of the assets acquired and liabilities assumed recognised at the acquisition date.

Purchase consideration — Cash paid — Other receivable (adjustments on consideration)	28 April 2016 HK$’000 1,542,765 (60,546
	1,482,219

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Recognised amounts of identifiable assets acquired and liabilities assumed Provisional fair value: Cash and banks Property, plant and equipment Intangible asset Deferred tax assets Inventories Other receivables Tax recoverable Other payable Deferred tax liabilities Total identifiable net assets Goodwill (note 14) Acquisition-related costs (included in administrative expenses in the interim condensed consolidated statement of profit or loss for the period ended 30 June 2016) Net cash outflow on acquisition of business — cash consideration — cash and banks acquired	28 April 2016 HK$’000 67,792 171,839 1,338,299 6,419 17,962 6,130 5,699 (223,741 (246,420
	1,143,979 338,240
	1,482,219
	19,472
	HK$’000 (1,542,765 67,792
	(1,474,973)

27. RELATED PARTY TRANSACTIONS

(a) Landing Jeju Development Co. Ltd. obtained two shareholder loans of approximately Singapore Dollar 97,529,000 (equivalent to approximately HK$614,557,000) on 27 March 2014 and approximately KRW115,000,000,000 (equivalent to HK$789,002,000) on 30 November 2015 from Happy Bay Pte. The shareholder loan charged interest rate at 5% per annum. Approximately HK$33,224,000 of interest expense was capitalised into the property, plant and equipment during the six months ended 30 June 2016 (six months ended 30 June 2015: HK$13,902,000).
(b) The remuneration of Directors during the period, which was determined by the remuneration committee having regard to the performance of individuals and market trends, is as follows:

Short-term benefits	For the six months ended 30 June 2016 2015 HK$’000 HK$’000 (Unaudited) (Unaudited) 36,065 19,916

28. EVENTS AFTER THE REPORTING PERIOD

There is no material event after the reporting date.

29. APPROVAL OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

These condensed consolidated interim financial information were approved and authorised for issue by the Board on 22 August 2016.

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APPENDIX I

4. BUSINESS TREND AND FINANCIAL AND TRADING PROSPECT

According to the interim report of the Company for the six months ended 30 June 2016, the Group’s consolidated revenue was approximately HK$445,295,000 (2015: HK$109,234,000), representing an increase of 307.7% when compared to the corresponding period in 2015, mainly attributable to the gaming business after the Group completed the Les A Acquisition. A loss attributable to the owners of the Company of approximately HK$526,456,000 (2015: HK$143,906,000) was recorded. The loss for the period was mainly attributable to (i) change in fair value of financial assets at fair value through profit or loss; (ii) increase in employee benefit expenses and other operating expenses incurred in the construction and planning stages of the integrated resort development and property development; and (iii) increase in employee benefit expenses and other operating expenses due to expansion of the Group.

After the completion of the Callisto Acquisition on 3 January 2017, the Group owns and operates the entire Jeju Project. The Board considers the complete ownership of the Jeju Project to be another milestone of the Group to work towards the achievement of its business vision of becoming a leading player on the tourism, leisure and entertainment industry. The Company believes that nowadays tourists are no longer satisfied with simple and traditional tourist services. Instead, they are progressively turning towards pursuing an experience that combines shopping, dining, gaming and business that can only be provided by a world-class integrated entertainment resort. As such, it is considered that the integrated resort and related hospitality industry is of great prospect and high potential for business gains and returns. The Company will continue to review and research on the available market opportunities and will conduct suitable research and feasibility study before embarking on this expansion plan.

Under the management of the current professional team recruited by Landing Jeju, the Jeju Project has progressed in full swing according to the development plan. Completion of the Jeju Project will take place progressively from the fourth quarter of 2017 onwards, and the entire project is expected to be completed by 2019. The actual completion date of respective zone of the Jeju Project and pre-sale progress of the accommodation facilities depend on and will be affected by the construction progress, market environment and other factors.

The Group currently owns and operates two casinos, known as Landing Casino in Jeju and Les A Club in London, the United Kingdom.

Given the great potential of the tourism of South Korea, the gaming industry in South Korea is expected to gain advantage from such booming tourism. The Company aims to build up its own brand name of Landing Casino and develop it to become one of the landmarks of Jeju.

Les A Club has an international customer base comprising mainly ultra-high net worth individual customers. Like other Mayfair casinos, Les A Club has been able to gain an international competitive advantage from the reputation of the gaming industry in the United Kingdom for strong regulation, transparency, fairness and integrity. After the acquisition, Les A Club has continued its efforts in expanding its Asian customer base to complement its more traditional strength with European and Middle Eastern customers. Taking into account the

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

market position, strengths and uniqueness of Les A Club, it is considered that Les A Club will allow the Company to step up its presence in the global gaming industry and to enhance the future earning capability and potential of the Group.

Given that the products of the lighting business of the Group mainly consist of low end traditional LED products and the entry barrier of the LED lighting industry is getting lower due to the widespread of technology, since 2013, competition in the LED lighting industry has been getting keener and LED products are under immense pricing pressure due to the oversupply situation. The Company expects that the unfavorable market trend of the LED lighting industry will continue, and so the Company has been diversifying its operations into various businesses and is now focusing its resources and efforts in the integrated resort development and the gaming business of the Group. In view of the downturn of the LED lighting industry, the Company will closely monitor the market and adjust the pricing strategy to improve the performance of the lighting business or consider the possibility of downsizing or disposing of the lighting business.

The Company will continue to pay close attention to the performance of the existing businesses of the Group and strive to foster its business development and enhance financial and operating performances. To pursue this direction, save for the business developments mentioned herein, the management of the Company will proactively seek investment opportunities in other businesses with promising prospects and/or companies with a profitable track record such that the income base of the Group could be broadened and diversified.

5. STATEMENT OF INDEBTEDNESS

As at the close of business on 31 December 2016, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Group had the following indebtedness:

Borrowings

The table below sets forth the Group’s total outstanding indebtedness as at 31 December 2016:

Notes Bank borrowings (1) Other borrowings (2) Amount due to a shareholder (3) Amount due to non-controlling interests (4)	Total HK$’000 78,311 347,667 5,536,683 1,376,959
	7,339,620

Notes:

(1) Bank borrowings of approximately HK$78,311,000 were secured by property, plant and equipment and a prepaid lease payment with carrying amounts of approximately HK$63,999,000 and HK$14,234,000, respectively. The loan will mature in the next twelve months.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(2) Other borrowings of approximately HK$347,667,000 of which, the current portion of HK$152,417,000 will mature in the next twelve months; and the remaining portion of HK$195,250,000 will mature between two to five years. The borrowings were secured by investment properties and aircraft with carrying amounts of approximately HK$611,237,000.
(3) The amount due to a shareholder is unsecured, interest-free and will mature in 2018.
(4) The amounts due to a non-controlling interest are unsecured, carrying an interest rate of 5% per annum and repayable in March 2019 and November 2020.

Loan facility

As at the close of business on 31 December 2016, the Group had stand-by loan facility of HK$1,300,000,000 granted by an Independent Third Party. None of this facility was utilised as at 31 December 2016.

Contingent liabilities

As at the close of business on 31 December 2016, the Group did not have any contingent liabilities.

Disclaimer

Save as disclosed, and apart from normal trade payables and intragroup liabilities, the Group did not, as at the close of business on 31 December 2016, have any outstanding mortgages, charges or debentures, loan capital issued, or bank overdrafts and loans, debt securities or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptable credits or any hire purchase commitments, finance lease commitments, guarantees or other material contingent liabilities.

6. WORKING CAPITAL

Taking into account the net proceeds from the Rights Issue, its presently available financial resources, including internally generated funds from operations and available financial facilities of the Group, the Directors after due and careful enquiry are of the opinion that the Group has sufficient working capital for its present requirements, that is for a least the next 12 months from the date of publication of this circular, in the absence of unforeseeable circumstances.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

7. MATERIAL CHANGE

Except for the items as disclosed below, the Directors confirm that there has been no material change in the financial or trading position or outlook of the Group since 31 December 2015, being the date to which the latest published audited consolidated financial statements of the Group were made up, up to and including the Latest Practicable Date.

(1) Completion of Les A Acquisition

On 28 April 2016, the Group completed the acquisition of the entire issued share capital of Les A, which owns and operates Les A Club, a premium gaming club in London’s upscale Mayfair district. The net consideration for the Les A Acquisition was approximately HK$1,484 million. Upon completion of the Les A Acquisition, Les A becomes an indirectly wholly owned subsidiary of the Company, and its financial results, assets and liabilities are consolidated into the consolidated financial statements of the Company. Further details with respect to the above are set out in the announcements of the Company dated 10 December 2015 and 28 April 2016 and the circular of the Company dated 8 April 2016. The aggregate of the remuneration payable to and benefits in kind receivable by the Directors will not be varied in consequence of said acquisition.

(2) Subscription of interest in a private equity fund

On 5 December 2016, the Group entered into a subscription agreement with a general partner of a private equity fund, pursuant to which the Group applied to subscribe for a committed capital contribution of US$125 million to (equivalent to approximately HK$975 million) to a private fund, which operates in or derives significant business opportunities from the financial services, natural resources and/or property investments sectors. Further details with respect to the above are set out in the announcement of the Company dated 5 December 2016. Up to and including the Latest Practicable Date, the Group had contributed US$48 million (equivalent to approximately HK$374 million) to the fund.

(3) Shareholder Loans

During year 2016, LIL advanced interest-free and security-free shareholder loans to the Company, and the outstanding balance amounted to approximately HK$5,537 million as at the Latest Practicable Date.

(4) Construction and Development of the Jeju Project

The construction of the Jeju Project has commenced in February 2015 and proceeded in full swing with satisfactory progress was achieved in 2016. Since 31 December 2015 and up to and including the Latest Practicable Date, additional property, plant and equipment were acquired and additional costs were incurred for properties under development, trade and other payables and administrative and other operating expenses. The Board expected that the construction will be completed in 2019. Presale of the resort accommodation facilities commenced in April 2016.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(5) Increase in net loss for the year ended 31 December 2016 as compared to the loss for the year ended 31 December 2015

The Group expects to record an increase in net loss for the year ended 31 December 2016 as compared to the loss for the year ended 31 December 2015. The increase in loss was mainly attributable to the following factors:

(i) change in fair value of financial assets at fair value through profit or loss;
(ii) increase in administrative expenses, mainly staff related cost and marketing expenses, incurred in the construction and pre-opening stages of the integrated resort development and property development; and
(iii) increase in other operating and administrative expenses due to expansion of the Group.

The aforesaid information is only based on the preliminary review on the unaudited consolidated management accounts of the Group for the year ended 31 December 2016 and the information currently available to the Company. It should be noted that the Company is in the process of finalising its annual results for the year ended 31 December 2016 and such results may be subject to further amendments as appropriate. Further details with respect to the above are set out in the Profit Warning Announcement. The statement ‘‘The Group expects to record an increase in net loss for the year ended 31 December 2016 as compared to the loss for the year ended 31 December 2015’’, which also appeared in the Profit Warning Announcement, constitute a profit forecast under Rule 10 of the Takeovers Code and must be reported on by the financial adviser and the auditors or consultant accountants. The letter from PricewaterhouseCoopers is set out in Appendix IV of this circular and the letter from Kingston Corporate Finance is set out in Appendix V of this circular.

(6) Completion of Callisto Acquisition

On 3 January 2017, the Group completed the acquisition of 50% of the issued share capital of Callisto at the total consideration of approximately HK$3,189 million. Thereafter, the Company, through Callisto and HBL, became the sole legal and beneficial owner of Landing Jeju and the Jeju Project, and financial results, assets and liabilities of Landing Jeju are continued to be consolidated into the consolidated financial statements of the Company. Further details with respect to the above are set out in the announcements of the Company dated 14 November 2016 and 3 January 2017 and the circular of the Company dated 13 December 2016. The aggregate of the remuneration payable to and benefits in kind receivable by the Directors will not be varied in consequence of said acquisition.

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APPENDIX I

(7) Loan Facility of HK$600 million

On 12 January 2017, the Group entered into a loan agreement with a lender, an independent third party, pursuant to which the lender has advanced the Group a loan facility of HK$600 million, which was the outstanding balance as at the Latest Practicable Date.

– I-104 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The following is the unaudited pro forma statement of adjusted consolidated net tangible assets of the Group as at 30 June 2016 (the ‘‘Unaudited Pro Forma Financial Information’’) which has been prepared by the Directors in accordance with paragraph 4.29 of the Listing Rules to illustrate the effects of the Rights Issue on the unaudited consolidated net tangible assets of the Group attributable to owners of the Company as if the Rights Issue had taken place on 30 June 2016.

The Unaudited Pro Forma Financial Information is prepared based on the unaudited consolidated net tangible assets of the Group attributable to owners of the Company as at 30 June 2016, as extracted from the published interim report of the Company for the period ended 30 June 2016, after incorporating the unaudited pro forma adjustments described in the accompanying notes.

The Unaudited Pro Forma Financial Information has been prepared for illustrative purpose only, based on the judgments and assumptions of the Directors, and because of its hypothetical nature, may not give a true picture of the consolidated net tangible assets of the Group attributable to owners of the Company of the Group had the Rights Issue been completed as at 30 June 2016 or at any future date.

Based on the issue of 102,829,396,285 Rights Shares at the Subscription Price of HK$0.05 per Rights Share	Unaudited consolidated net tangible assets of the Group attributable to equity holders of the Company as at 30 June 2016 (Note 1) HK$’000 6,243,637	Add: Estimated net proceeds from Rights Issue (Note 2) HK$’000 5,065,470	Unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to equity holders of the Company immediately after the completion of the Rights Issue HK$’000 11,309,107	Unaudited consolidated net tangible assets per share attributable to the equity holders of the Company as at 30 June 2016 (Note 3) HK$ 0.30	Unaudited pro forma adjusted consolidated net tangible assets per share attributable to the equity holders of the Company after the completion of the Rights Issue (Note 4) HK$ 0.09

– II-1 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

Notes:

The unaudited consolidated net tangible assets of the Group attributable to the owners of the Company as at 30 June 2016 is based on the unaudited consolidated net assets of the Group attributable to the owners of the Company as at 30 June 2016 of HK$8,592,008,000, with an adjustment for intangible assets and goodwill as at 30 June 2016 of HK$2,031,394,000 and HK$316,977,000, respectively, as extracted from the published interim report of the Company for the period ended 30 June 2016.
The estimated net proceeds from the Rights issue are based on 102,829,396,285 Rights Shares to be issued on the basis of five Rights Shares for every one existing Share at the subscription price of HK$0.05 per Rights Share, after deduction of the related expenses of approximately HK$76,000,000.
The unaudited consolidated net tangible assets per share attributable to equity holders of the Company as at 30 June 2016 was approximately HK$0.30, which was based on the unaudited consolidated net tangible assets of the Group attributable to owners of the Company as at 30 June 2016 of approximately HK$6,243,637,000 and 20,565,879,257 shares in issue as at 30 June 2016.
The unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the Company as adjusted for the Right Issue per share is arrived at after aggregating the unaudited consolidated net tangible assets of the Group attributable to owners of the Company of HK$6,243,637,000 and the estimated net proceeds of HK$5,065,470,000 from the Rights Issue (Note 2 above) and on the basis that 20,565,879,257 shares were in issue as at 30 June 2016 and 102,829,396,285 Rights Shares were issued under the Rights Issue on 30 June 2016.
No adjustments have been made to the unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the Company to reflect any trading results or other transactions of the Group entered into subsequent to 30 June 2016.

– II-2 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

The following is the text of the independent reporting accountant’s assurance report dated 24 February 2017, prepared for the sole purpose of inclusion in this circular, received from independent reporting accountants, PricewaterhouseCoopers, in respect of the unaudited pro forma financial information of the Group.

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

To the Directors of Landing International Development Limited

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Landing International Development Limited (the ‘‘Company’’) and its subsidiaries (collectively the ‘‘Group’’) by the directors for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma statement of adjusted net tangible assets of the Group as at 30 June 2016, and related notes (the ‘‘Unaudited Pro Forma Financial Information’’) as set out on pages II-1 to II-2 of the Company’s circular dated 24 February 2017, in connection with proposed rights issue of the Company. The applicable criteria on the basis of which the directors have compiled the Unaudited Pro Forma Financial Information are described on pages II-1 to II-2.

The Unaudited Pro Forma Financial Information has been compiled by the directors to illustrate the impact of the proposed rights issue on the Group’s financial position as at 30 June 2016 as if the proposed rights issue had taken place at 30 June 2016. As part of this process, information about the Group’s financial position has been extracted by the directors from the Group’s interim report for the period ended 30 June 2016, on which no audit or review report has been published.

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The directors are responsible for compiling the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and with reference to Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ (‘‘AG 7’’) issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’).

– II-3 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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Our Independence and Quality Control

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 behaviour.

Our firm applies Hong Kong Standard on Quality Control 1 issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 ‘‘Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus’’, issued by the HKICPA. This standard requires that the reporting accountant plans and performs procedures to obtain reasonable assurance about whether the directors have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Unaudited Pro Forma Financial Information.

The purpose of unaudited pro forma financial information included in a circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the proposed rights issue at 30 June 2016 for the Group’s financial position would have been as presented.

– II-4 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

APPENDIX II

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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 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 accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the company, the event or transaction in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the unaudited pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled 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.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 24 February 2017

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PROPERTY VALUATION REPORT

APPENDIX III

The following is the text of a letter, summary of values and valuation certificates prepared for the purpose of incorporation in this circular received from Savills Valuation and Professional Services Limited, an independent valuer, in connection with their opinion of values of the Properties as at 31 January 2017.

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The Directors Landing International Development Limited Suites 5801–5804, 58/F Two International Finance Centre No. 8 Finance Street Central Hong Kong

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24 February 2017

Dear Sirs,

INSTRUCTIONS

In accordance with the instructions for us to value the properties (the ‘‘Properties’’) held by Landing International Development Limited (the ‘‘Company’’) or its subsidiaries (together referred to as the ‘‘Group’’) in the Republic of Korea, we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of market values of the Properties as at 31 January 2017 (the ‘‘valuation date’’) for circular purpose.

BASIS OF VALUATION

Our valuation is our opinion of the market value of the property concerned which we would define as intended to mean ‘‘the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion’’.

Market value is understood as the value of an asset or liability estimated without regard to costs of sale or purchase (or transaction) and without offset for any associated taxes or potential taxes.

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Our valuation is prepared in compliance with the requirements set out in Rule 11 of the Codes on Takeovers and Mergers published by the Securities and Futures Commission in Hong Kong, Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited as well as in accordance with The HKIS Valuation Standards (2012 Edition) published by The Hong Kong Institute of Surveyors.

PROPERTY CATEGORIZATION AND VALUATION METHODOLOGY

In valuing the properties in Group I, which are held for owner occupation by the Group in the Republic of Korea, we have valued such properties by the direct comparison approach assuming sale with the benefit of vacant possession by making reference to comparable sales transactions as available in the market.

In valuing the properties in Group II, which are held under development by the Group in the Republic of Korea, we have valued such properties on the basis that they will be developed and completed in accordance with the latest development proposals provided to us. We have assumed that all consents, approvals and licenses from relevant government authorities for the development proposals have been obtained without onerous conditions or delays. In arriving at our opinion of values, we have adopted the direct comparison approach by making reference to comparable sales transactions as available in the market and have also taken into account the costs expended, and will be expended to complete the developments to reflect the quality of the completed developments.

In valuing the properties in Group III, which are held for future development by the Group in the Republic of Korea, we have valued the properties by the direct comparison approach by making reference to the comparable sales transactions as available in the market.

TITLE INVESTIGATION

We have been provided with copies of extracts of the title documents relating to the Properties. However, we have not searched the original documents to verify ownership or to ascertain the existence of any amendments which may not appear on the copies provided to us. In the course of our valuation, we have relied to a considerable extent on the information given by the Group and the Group’s Korean legal adviser regarding the titles to the Properties.

VALUATION CONSIDERATION AND ASSUMPTIONS

In the course of our valuation, we have relied to a considerable extent on the information given by the Group and accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, development proposals, total and outstanding construction costs, estimated completion dates, site and floor areas and all other relevant matters. Dimensions, measurements and areas included in the valuation certificates are based on the information provided to us and are therefore only approximations. No on-site measurements have been taken. We have had no reason to doubt the truth and accuracy of the information provided to us by the Group, which is material to our valuation. We have also sought confirmation from the Group that no material facts have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view.

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No allowance has been made in our valuation for any charges, mortgages or amounts owing on any property nor for any expenses 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 their values.

SITE INSPECTION

We have inspected the exterior and where possible, the interior of the Properties. Site inspections of the Properties were carried out on 9 February 2017 by our Mr. Anthony Lau and Mr. Youngsu Hwang, who is a Korean licensed appraiser. During the course of our inspections, we did not note any serious defects. However, no structural survey has been made and we are therefore unable to report whether the Properties are free of rot, infestation or any other structural defects. No tests were carried out on any of the services. We have also not carried out investigations on site to determine the suitability of the ground conditions and the services for any future development. Our valuation is prepared on the assumption that these aspects are satisfactory and no extraordinary expenses or delays will be incurred during the construction period.

POTENTIAL TAX LIABILITIES

For the purpose of compliance with Rule 11.3 of the Codes on Takeovers and Mergers and as advised by the Group, the potential tax liabilities which would arise on the disposal of the Properties mainly comprise corporate income tax at 22%; value added tax at 10% for the building portion; acquisition tax at 3.16%; property tax from 0.24% to 0.6% and comprehensive real estate holding tax from 0.6% to 2.4%. According to our established practice, in the course of our valuation, we have neither verified nor taken into account such tax liability. As advised by the Group, there is no likelihood of such liabilities being crystallized for certain portion of Property No. 3 as the Group has enjoyed the multiple tax relief benefits for corporation income tax (100% exemption to foreign investment ratio for 5 years, 50% reduction for subsequent 2 years), customs/individual consumption tax/value added tax (100% exemption for imported capital goods for 5 years) and acquisition tax/property tax (100% exemption for 15 years) which plans to dispose within the exemption period. For portion of Property No. 3 that cannot enjoy the multiple tax relief benefits, it is likely that the relevant tax will be crystalized upon sale. As advised by the Group, the total estimated amount of potential tax liability is approximately KRW247,600,000,000 which has been fully provided for in the accounts of the Group as at 31 January 2017. There is no intention of the Group to dispose the remaining portion of the Properties.

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REMARKS

Unless otherwise stated, all monetary amounts stated are in South Korean Won (‘‘KRW’’).

We enclose herewith our summary of values and valuation certificates.

Yours faithfully,

For and on behalf of

Savills Valuation and Professional Services Limited

Anthony C K Lau Youngsu Hwang MHKIS MRICS RPS(GP) Korean licensed appraiser, MRICS(val) Director Senior Manager

Notes: Mr. Anthony C K Lau is a professional surveyor who has over 23 years’ experience in valuation of the properties in the PRC and Hong Kong, and extensive valuation experience in the Asia Pacific Region.

Mr. Youngsu Hwang is a Korean licensed appraiser who has over 10 years’ experience in valuation of the properties in the Republic of Korea and other countries in Asia.

The valuation on the Properties is supported by Savills Korea Company Limited.

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APPENDIX III

SUMMARY OF VALUES

No.
Property
Market value in
existing state as at
31 January 2017
Interest attributable
to the Group
(KRW)
Group I — Properties held for owner occupation by the Group in the Republic of Korea
1.
Headquarters of Landing Jeju
Development Limited,
Jeju City,
the Republic of Korea
11,500,000,000
100%
2.
Training center,
Saekdal-dong,
Jeju City,
the Republic of Korea
34,700,000,000
100%
Group I Sub-total:
46,200,000,000
Group II — Properties held under development by the Group in the Republic of Korea
3.
Portion of Districts A and R,
The Myth & History Park,
Jeju City,
the Republic of Korea
1,952,800,000,000
100%
4.
A parcel of land located at San 1402–1
Saekdal-dong,
Seogwipo-City,
Jeju City,
the Republic of Korea
2,200,000,000
100%
Group II Sub-total:
1,955,000,000,000

Market value
attributable to the
Group as at
31 January 2017
(KRW)
11,500,000,000
34,700,000,000

46,200,000,000
1,952,800,000,000
2,200,000,000

1,955,000,000,000

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APPENDIX III

SUMMARY OF VALUES

Market value in Market value existing state Interest attributable as at attributable to the Group as at No. Property 31 January 2017 to the Group 31 January 2017 (KRW) (KRW)

Group III — Properties held for future development by the Group in the Republic of Korea

5. Portion of Districts A and R and District H, the Myth & History Park, Jeju City, the Republic of Korea 6. Four parcels of land located at Land Lot Nos. 1052 and 1300 and San 24-3 and 35, Seogwang-ri, Andeok-myeon, Seogwipo-si, Jeju City, the Republic of Korea Group III Sub-total: Grand Total:	1,097,800,000,000 100% 35,800,000,000 100% 1,133,600,000,000 3,134,800,000,000	1,097,800,000,000 35,800,000,000
		1,133,600,000,000
		3,134,800,000,000

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VALUATION CERTIFICATE

Group I — Properties held for owner occupation by the Group in the Republic of Korea

Market value in
Particulars of existing state as at
No. Property Description and tenure occupancy 31 January 2017 1. Headquarters of Landing The property is located in 2489 Seoguipo-si As at the valuation KRW11,500,000,000 Jeju Development Limited, area in Jeju-do near Districts A, R and H of date, the property (South Korean Won Jeju City, the Myth & History Park and comprises ten was occupied by the Eleven Billion and the Republic of Korea parcels of land with a total site area of Group as office. Five Hundred Million) approximately 18,512.00 sq.m..

The property comprises seven single-storey and a 2-storey buildings with a total gross floor area of approximately 1,913.53 sq.m.. As advised by the Group, the property was completed in stages between 1995 and 2003.

The property is held under freehold land.

Notes:

Pursuant to 18 Certificates of Real Estate Ownership (Building and Land), the land use rights of ten parcels of land with a total site area of 18,512.00 sq.m. and the building ownership of the property with a total gross floor area of 1,913.53 sq.m. have been granted to Landing Jeju Development Co., Ltd. (‘‘Landing Jeju’’), a wholly-owned subsidiary of the Company.
As advised by the Group’s Korean legal adviser engaged as on the title to the property, which contains, inter alia, the following information:
i. Landing Jeju is registered as the owner of the property;
ii. the property is free from any registered mortgage or other encumbrances; and
iii. the property can be transferred to third parties without any specific restrictions.

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VALUATION CERTIFICATE

Group I — Properties held for owner occupation by the Group in the Republic of Korea

No. Property Description and tenure 2. Training center, The property is located in the southern Saekdal-dong, Seoguipo-si area in Jeju-do. It is situated at Jeju City, 27 km from Jeju International Airport and the Republic of Korea comprises two parcels of land with a total site area of approximately 9,211.00 sq.m..

Market value in Particulars of existing state as at occupancy 31 January 2017 As at the valuation KRW34,700,000,000 date, the property (South Korean Won was occupied by Thirty Four Billion and the Group as a Seven Hundred Million) training center.

The property comprises two 2-storey buildings over-mounting a 2-level basement with a total gross floor area of approximately 4,032.66 sq.m. As advised by the Group, the property was completed in 2016.

The property is held under freehold land.

Notes:

Pursuant to four Certificates of Real Estate Ownership (Building and Land), the land use rights of two parcels of land with a total site area of 9,211.00 sq.m. and the building ownership of the property with a total gross floor area of 4,032.66 sq.m. have been granted to Landing Korea Co., Ltd. (‘‘Landing Korea’’), an indirectly wholly-owned subsidiary of the Company.
As advised by the Group’s Korean legal adviser engaged as on the title to the property, which contains, inter alia, the following information:
i. Landing Korea is registered as owner of the property;
ii. the property is free from any registered mortgage or other encumbrances; and
iii. the property can be transferred to third parties without any specific restrictions.

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VALUATION CERTIFICATE

Group II — Properties held under development by the Group in the Republic of Korea

No. Property Description and tenure Particulars of occupancy 3. Portion of Districts A and R, The Myth & History Park (the ‘‘Development’’) is As at the The Myth & History Park, located in the southern Seoguipo-si area in Jeju-do. valuation date, the Jeju City, It is situated at 33 km from Jeju International property was the Republic of Korea Airport and can be reached via local Road 1135 and under the Myth and History Park Road. The Development construction. comprises a large-scale mixed development accommodating shopping mall, residential units, theme park and hotels and is being constructed on 3 plots of land namely District A, District H and District R with a total site area of approximately 2,336,041.00 sq.m.. According to the latest development proposal provided by the Group, the property will have a total gross floor area of approximately 461,350.30 sq.m.. Details of the uses and approximate gross floor areas of the property are as follows:
Portion of Districts A and R, The Myth & History Park, Jeju City, the Republic of Korea

Market value in existing state as at 31 January 2017

KRW1,952,800,000,000 (South Korean Won One Thousand Nine Hundred Fifty Two Billion and Eight Hundred Million)

District A

Use Villa Retail Hotel Theme Park Sub-total: District R Use Villa Condo Retail Sub-total: Total:	Approximate Gross Floor Area (sq.m.) 4,390.00 160,353.00 58,890.00 60,799.20
	284,432.20
	Approximate Gross Floor Area (sq.m.) 27,269.84 107,261.61 42,386.65
	176,918.10
	461,350.30

As advised by the Group, the construction works of the property are scheduled for completion in the 3rd quarter of 2017.

The property is held under freehold land.

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Notes:

Pursuant to three Land Acquisition Agreements entered into between Jeju Free International City Development Center (‘‘JDC’’) and Landing Jeju Development Co., Ltd. (‘‘Landing Jeju’’), a whollyowned subsidiary of the Company, on 25 October 2013, 5 November 2015 and 29 August 2016, Landing Jeju has agreed to acquire and JDC has agreed to sell the property at a consideration of KRW138.953827 billion.

As advised by the Group, the property only comprises portion of the land of the Land Acquisition Agreements mentioned above.

Pursuant to 75 Certificates of Real Estate Ownership (Land), the land use rights of various parcels of land with a total site area of 2,336,041 sq.m. have been granted to Landing Jeju.

As advised by the Group, the property only comprises portion of the land of the Certificates of Real Estate Ownership (Land) mentioned above.

Pursuant to two Building Permits all issued by the governor of Jeju Special Self Governing Province on 24 December 2014 and 29 August 2016, the approved construction scale of various buildings of the property is approximately 464,654.82 sq.m..

As advised by the Group, the buildings as stated in the Building Permits mentioned above only comprise portion of the property.

Pursuant to two Approvals (Second Change) of the Construction Permit issued by the governor of Jeju Special Self Governing Province on 1 August 2016 and 11 January 2017, the approved construction scale of various buildings of the property is approximately 351,649.61 sq.m..

As advised by the Group, the buildings as stated in the Approvals mentioned above only comprise portion of the property.

As advised by the Group, the total construction cost expended (excluding VAT) for the property as at the valuation date was approximately KRW344,200,000,000 whereas the total outstanding construction cost to be expended was approximately KRW743,500,000,000. We have taken into account the said amount in our valuation.
As advised by the Group, portion of the property with a total gross floor area of approximately 25,142.00 sq.m. has been pre-sold at a total consideration of approximately KRW156,995,000,000. We have taken into account the aforesaid amount in our valuation.
The market value of the property as if completed as at the valuation date is estimated to be approximately KRW3,053,000,000,000.
As advised by the Group’s Korean legal adviser engaged as on the title to the property, which contains, inter alia, the following information:
i. Landing Jeju is registered as the owner of the property;
ii. the property is free from any registered mortgage or other encumbrances; and
iii. the property can be transferred to third parties without any specific restrictions.

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VALUATION CERTIFICATE

Group II — Properties held under development by the Group in the Republic of Korea

No. Property Description and tenure 4. A parcel of land The property is located in the southern located at San 1402–1 Seoguipo-si area in Jeju-do. It is situated at Saekdal-dong, 27 km from Jeju International Airport and Seogwipo-City, comprises a parcel of land with a site area of Jeju City, approximately 1,910.00 sq.m. on which a 2- the Republic of Korea storey training building is being constructed.

Market value in Particulars of existing state as at occupancy 31 January 2017 As at the valuation KRW2,200,000,000 date, the property (South Korean Won was under Two Billion and Two construction. Hundred Million)

As advised by the Group, the total gross floor area of the property will be approximately 1,085.97 sq.m. upon completion.

As advised by the Group, the construction works of the property are scheduled for completion in the 4th quarter of 2017.

The property is held under freehold land.

Notes:

Pursuant to the Certificate of Real Estate Ownership (Land), the land use rights of a parcel of land with a site area of 1,910.00 sq.m. have been granted to Landing Korea Co., Ltd. (‘‘Landing Korea’’), an indirectly wholly-owned subsidiary of the Company.
Pursuant to the Building Permit issued by the governor of Jeju Special Self Governing Province on 28 September 2016, the approved construction scale of a building of the property is approximately 1,085.97 sq.m..
As advised by the Group, the total construction cost expended (excluding VAT) for the property as at the valuation date was approximately KRW290,000,000 whereas the total outstanding construction cost to be expended was approximately KRW3,400,000,000. We have taken into account the said amount in our valuation.
The market value of the property as if completed as at the valuation date is estimated to be approximately KRW6,900,000,000.
As advised by the Group’s Korean legal adviser engaged as on the title to the property, which contains, inter alia, the following information:
i. Landing Korea is registered as the owner of the property;
ii. the property is free from any registered mortgage or other encumbrances; and
iii. the property can be transferred to third parties without any specific restrictions.

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VALUATION CERTIFICATE

Group III — Properties held for future development by the Group in the Republic of Korea

No. Property Description and tenure 5. Portion of Districts A and The Myth & History Park (the R and District H, ‘‘Development’’) is located in the the Myth & History Park, southern Seoguipo-si area in Jeju-do. It Jeju City, is situated at 33 km from Jeju the Republic of Korea International Airport and can be reached via local Road 1135 and the Myth and History Park Road. The Development comprises a large-scale mixed development accommodating shopping mall, residential units, theme park and hotels and is being constructed on 3 plots of land namely District A, District H and District R with a total site area of approximately 2,336,041.00 sq.m..

Market value in existing Particulars of state as at occupancy 31 January 2017 As at the valuation KRW1,097,800,000,000 date, the property (South Korean Won One was vacant land Thousand Ninety Seven pending for future Billion and Eight Hundred development. Million)

According to the information provided to us, the property comprises portion of the Development and has a total site area of approximately 1,881,945.88 sq.m..

As advised by the Group, development plan for the property has not been finalized.

The property is held under freehold land.

Notes:

Pursuant to three Land Acquisition Agreements entered into between Jeju Free International City Development Center (‘‘JDC’’) and Landing Jeju Development Co., Ltd. (‘‘Landing Jeju’’), a whollyowned subsidiary of the Company, on 25 October 2013, 5 November 2015 and 29 August 2016, Landing Jeju has agreed to acquire and JDC has agreed to sell the property at a consideration of KRW138.953827 billion.

As advised by the Group, the property only comprises portion of the land of the Land Acquisition Agreements mentioned above.

Pursuant to 75 Certificates of Real Estate Ownership (Land), the land use rights of various parcels of land with a total site area of 2,336,041 sq.m. have been granted to Landing Jeju.

As advised by the Group, the property only comprises portion of the land of the Certificates of Real Estate Ownership (Land) mentioned above.

As advised by the Group’s Korean legal adviser engaged as on the title to the property, which contains, inter alia, the following information:
i. Landing Jeju is registered as the owner of the property;
ii. the property is free from any registered mortgage or other encumbrances; and
iii. the property can be transferred to third parties without any specific restrictions.

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VALUATION CERTIFICATE

Group III — Properties held for future development by the Group in the Republic of Korea

Market value in Particulars of existing state as at No. Property Description and tenure occupancy 31 January 2017 6. Four parcels of land The property is located in San 35 SeoguipoAs at the valuation KRW35,800,000,000 located at Land Lot Nos. si area in Jeju-do and near Districts A, R and date, the property (South Korean Won 1052 and 1300 and San H of the Myth & History Park and comprises was vacant land Thirty Five Billion and 24–3 and 35, four parcels of land with a total site area of pending for future Eight Hundred Million) Seogwang-ri, approximately 260,158.00 sq.m.. development. Andeok-myeon, Seogwipo-si, As advised by the Group, development plan Jeju City, for the property has not been finalized. the Republic of Korea

The property is held under freehold land.

Notes:

Pursuant to four Certificates of Real Estate Ownership (Land), the land use rights of four parcels of land with a total site area of 260,158 sq.m. have been granted to Landing Jeju Development Co., Ltd. (‘‘Landing Jeju’’), a wholly-owned subsidiary of the Company, for factory and forest uses.
As advised by the Group’s Korean legal adviser engaged as on the title to the property, which contains, inter alia, the following information:
i. Landing Jeju is registered as the owner of the property;
ii. the property is free from any registered mortgage or other encumbrances; and
iii. the property can be transferred to third parties without any specific restrictions.

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APPENDIX III

The following is the text of a letter and valuation certificate, prepared for the purpose of incorporation in this circular received from Roma Appraisals Limited, an independent valuer, in connection with its valuation as at 31 January 2017 of the Group’s properties.

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Unit 3806, 38/F, China Resources Building, 26 Harbour Road, Wan Chai, Hong Kong Tel (852) 2529 6878 Fax (852) 2529 6806 E-mail [email protected] http://www.romagroup.com

24 February 2017

Landing International Development Limited

Suites 5801–5804, 58/F., Two International Finance Centre, No. 8 Finance Street, Central, Hong Kong

Dear Sir / Madam,

Re: Property Valuation of Various Properties Located in Hong Kong and the People’s Republic of China

In accordance with your instructions for us to value the properties held by Landing International Development Limited (the ‘‘Company’’) and/or its subsidiaries (together with the Company referred to as the ‘‘Group’’) in Hong Kong and the People’s Republic of China (the ‘‘PRC’’), we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of the properties as at 31 January 2017 (the ‘‘Date of Valuation’’) for the purpose of incorporation in the Circular of the Company dated 24 February 2017.

1. BASIS OF VALUATION

Our valuations of the properties are our opinion of the market values of the concerned properties which we would define as intended to mean ‘‘the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion’’.

Market value is understood as the value of an asset or liability estimated without regard to costs of sale or purchase (or transaction) and without offset for any associated taxes or potential taxes.

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2. PROPERTY CATEGORIZATION

In the course of our valuations, the properties owned by the Group are categorized into the following groups:

. Group I (Properties held by the Group for investment purpose in Hong Kong); and
. Group II (Property held by the Group for owner-occupation in the PRC).

3. VALUATION METHODOLOGIES

In valuing the properties in Group I, we have valued the property by the direct comparison approach assuming sale of the property in its existing state with the benefit of vacant possession and by making reference to comparable sales transactions as available in the relevant market.

In valuing the property in Group II, due to the specific purpose for which most of the buildings and structures of the property have been constructed, there are no readily identifiable market comparables. Thus the buildings and structures have been valued on the basis of its depreciated replacement costs instead of direct comparison method. The depreciated replacement cost approach (‘‘DRC’’) is based on an estimate of the Market Value for the existing use of the land, plus the current cost of replacement of the existing structures less deductions for physical deterioration and all relevant forms of obsolescence and optimization. In practice, Depreciated Replacement Cost approach may be used as a substitute for the Market Value of specialized property only, due to the lack of market comparables available. Our valuation does not necessarily represent the amount that might be realized from the disposition of the property and the DRC is subject to adequate profitability of the concerned business.

4. TITLE INVESTIGATION

For the properties in Hong Kong, we have carried out land searches at Land Registry. However, we have not scrutinized all the original documents to verify ownership or to ascertain the existence of any lease amendments which may not appear on the copies handed to us.

For the properties in the PRC, we have been provided with extracts of various documents and have been advised by the Group that no further relevant documents have been produced. However, we have not examined the original documents to verify the existing titles to the properties or any amendment, which may not appear on the copies handed to us. We do not accept a liability for any interpretation which we have placed on such information which is more properly the sphere of your legal adviser. In the course of our valuations of the properties in the PRC, we have relied to a very considerable extent on the information given by the Group and the Group’s PRC legal advisor regarding the title to the properties in the PRC. All documents have been used for reference only.

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We have also relied on the advice given by the Group that the Group has valid and enforceable titles to the properties which is freely transferable, and has free and uninterrupted right to use the same, for the whole of the unexpired term granted subject to the payment of annual government rent/land use fees and all requisite land premium/purchase consideration payable have been fully settled.

5. VALUATION ASSUMPTIONS

Our valuations have been made on the assumption that the owners sell the properties in the market in their existing states without the benefit of deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangements which would serve to affect the values of such properties. In addition, no account has been taken of any option or right of pre-emption concerning or affecting the sale of the properties and no allowance has been made for the properties to be sold in one lot or to a single purchaser.

6. SOURCE OF INFORMATION

In the course of our valuations, we have relied to a very considerable extent on the information provided by the Group and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, identification of properties, particulars of occupation, site/floor areas, ages of buildings and all other relevant matters which can affect the values of the properties. All documents have been used for reference only.

We have no reason to doubt the truth and accuracy of the information provided to us. We have also been advised that no material facts have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and have no reason to suspect that any material information has been withheld.

7. VALUATION CONSIDERATION

We have inspected the exterior and, where possible, the interior of certain properties. No structural survey has been made in respect of the properties. However, in the course of our inspections, we did not note any serious defects. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. No tests were carried out on any of the building services.

We have not carried out on-site measurement to verify the site/floor areas of the properties under consideration but we have assumed that the site/floor areas shown on the documents handed to us are correct. Except as otherwise stated, all dimensions, measurements and areas included in the valuation certificates are based on information contained in the documents provided to us by the Group and are therefore approximations.

No allowance has been made in our valuations for any charges, mortgages or amounts owing on the properties nor for any expenses 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 their values.

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Our valuations are prepared in compliance with the requirements set out in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Rule 11 of Hong Kong Code on Takeovers and Mergers, and in accordance with the HKIS Valuation Standards (2012 Edition) published by The Hong Kong Institute of Surveyors.

8. REMARKS

Unless otherwise stated, all monetary amounts stated in our valuations are in Hong Kong Dollars (HK$) and Renminbi (‘‘RMB’’).

Our Summary of Values and Valuation Certificates are attached.

Dr. Alan W K Lee Nancy Chan BCom (Property) MFin PhD(BA) BSc (Hons) MHKIS MRICS MHKIS RPS(GP) AAPI CPV CPV(Business) RPS(GP) Director Senior Manager

Notes: Dr. Alan W K Lee is a Registered Professional Surveyor (General Practice), a member of Hong Kong Institute of Surveyors and an Associate of Australian Property Institute. He has over 13 years’ valuation experience in Hong Kong, Macau, the PRC, the Asia Pacific Region, European countries and American countries.

Ms. Nancy Chan is a Registered Professional Surveyor (General Practice), a member of Hong Kong Institute of Surveyors and a member of the Royal Institution of Chartered Surveyors. She has over 7 years’ experience in real estate industry and property and asset valuation in Hong Kong, Macau, the PRC, Singapore, Taiwan, United Kingdom and other overseas countries.

– III-17 –

PROPERTY VALUATION REPORT

APPENDIX III

SUMMARY OF VALUES

Group I — Properties held by the Group for investment purpose in Hong Kong

No. Property 1. House No.18 Villa Bel-Air, Bel-Air on the Peak, Island South, No. 18 Bel-Air Peak Rise, Hong Kong 2. Flat A (including the bay window, the balcony, the utility platform thereof and the air-conditioning plan room appertaining thereto) on the 27th Floor of Tower 1, and Car Parking Space No. 30 on the Ground Floor, Larvotto, No. 8 Ap Lei Chau Praya Road, Hong Kong Sub-Total:	Market Value in Existing State as at 31 January 2017 HK$186,000,000 HK$53,800,000
	HK$239,800,000

– III-18 –

PROPERTY VALUATION REPORT

APPENDIX III

Group II — Property held by the Group for owner-occupation in the PRC

No. Property 3. An Industrial Complex situated at the No. 88 Weiyi Road, Dingmao Development Zone, Xin District, Zhenjiang City, Jiangsu Province, The PRC

Market Value in Existing State as at 31 January 2017 RMB71,500,000

中國江蘇省鎮江市

新區丁卯開發區緯一路88號一的個工業綜合大樓

Sub-Total:

RMB71,500,000

– III-19 –

PROPERTY VALUATION REPORT

APPENDIX III

VALUATION CERTIFICATE

Group I — Properties held by the Group for investment purpose in Hong Kong

Market Value in Particulars of Existing State as at No. Property Description and Tenure Occupancy 31 January 2017 1. House No.18, The property comprises a whole block of As advised by the HK$186,000,000 Villa Bel-Air, 4-storey single family house with covered Group, the Bel-Air On The Peak, carpark at ground level completed in property is vacant. Island South, 2007. No.18 Bel-Air Peak Rise, The property has a saleable area of 342.2 Hong Kong sq.m. (or about 3,683.44 sq.ft.) plus a flat roof area of 43.40 sq.m. (or about 467.16 420 / 553,324th equal sq.ft.), an air-conditioning plant room and undivided shares area of 8.70 sq.m. (or about 93.65 sq.ft.) of and in Section B and a carparking area of 39.7 sq.m. (or of Inland Lot No. 8969 about 427.33 sq.ft.).

The property is held under Conditions of Grant No. UB12572 for a term of 50 years commencing on 22 May 2000.

Notes:

The registered owner of the property is Raising Tune Limited, a wholly-owned subsidiary of the Company, vide Memorial No. 16042200910076 dated 23 March 2016.
The property is subject to the following encumbrances:
a. Principal Deed of Covenant and Mutual Grant with Plan vide Memorial No. UB8868862 dated 5 February 2003 (Remarks: RE. IL 8969 S.A, S.B & R.P.);
b. Sub-Sub-Deed of Mutual Covenant with Plans vide Memorial No. 08091901400025 dated 25 August 2008;
c. Certificate of Compliance vide Memorial No. 08111200550203 dated 11 November 2008;
d. Mortgage in favour of Chinawide International Finance Limited in a consideration to secure of all moneys vide Memorial No. 16081701720017 dated 8 August 2016; and
e. Rental Assignment in favour of Chinawide International Finance Limited vide Memorial No. 16081701720021 dated 8 August 2016.
Our inspection was performed by Ms. Nancy Chan, MHKIS, MRICS, RPS(GP), BSc (Surv.) in February 2017.
The property lies within an area zoned ‘‘Other Specified Uses (Cyber-Port)’’ under Pok Fu Lam Outline Zoning Plan No. S/H10/15 gazetted on 18 February 2005.

– III-20 –

PROPERTY VALUATION REPORT

APPENDIX III

VALUATION CERTIFICATE

Market Value in Particulars of Existing State as at No. Property Description and Tenure Occupancy 31 January 2017 2. Flat A The property comprises a residential unit As advised by the HK$53,800,000 (including the bay on 27th floor and a car parking space on Group, the window, the balcony, ground floor of a 28-storey residential property is vacant. the utility platform building plus an 8-storey podium, known thereof and the airas Larvotto completed in 2010. conditioning plant Room appertaining The property has a saleable area of thereto) on the 27th 180.40 sq.m. (or about 1,941.83 sq.ft.) Floor of Tower 1 including a balcony area of 5.00 sq.m. and Car Parking Space (or about 53.82 sq.ft.) and an utility No. 30 on the Ground platform area of 2.30 sq.m. (or about Floor, Larvotto, 24.76 sq.ft.), plus ancillary areas of a bay No. 8 Ap Lei Chau window area of 1.70 sq.m. (or about Praya Road, Hong Kong 18.30 sq.ft.), an air-conditioning plant room area of 3.20 sq.m. (or about 34.44 3,656 / 1,471,404th sq.ft.), an air-conditioning platform area equal and undivided of 1.40 sq.m. (or about 15.07 sq.ft.) and a shares of and in Ap Lei private lift lobby area of 7.00 sq.m. (or Chau Inland Lot about 75.35 sq.ft.). No. 129

The property is held under Conditions of Sale No. UB12337 for a term commencing on 25 January 1995 and expiring on 30 June 2047.

Notes:

The registered owner of the property is Royal Dragon Limited, a wholly-owned subsidiary of the Company, vide Memorial Nos. 11061600900130 and 11061600900167 both dated 17 May 2011.
The property is subject to the following encumbrances:
a. Modification Letter with Plans vide Memorial No. 05111500180018 dated 9 November 2005;
b. Modification Letter vide Memorial No. 07030100250018 dated 27 February 2007;
c. Occupation Permit No. HK35/2010 (OP) vide Memorial No. 11031803350853 dated 7 December 2010;
d. Certificate of Compliance vide Memorial No. 11040602690145 dated 31 March 2011;
e. Deed of Mutual Covenant and Management Agreement with Plans in favour of Kerry Property Management Services Limited (Manager) vide Memorial No. 11051702970220 dated 27 April 2011; and
f. Legal Charge in favour of H.K. Sources Finance Limited in a consideration of HK$33,000,000 vide Memorial No. 16072201450060 dated 14 July 2016.
Our inspection was performed by Ms. Nancy Chan, MHKIS, MRICS, RPS(GP), BSc (Surv.) in February 2017.
The property lies within an area zoned ‘‘Residential (Group E)’’ under Aberdeen and Ap Lei Chau Outline Zoning Plan No. S/H15/31 gazetted on 13 January 2017.

– III-21 –

PROPERTY VALUATION REPORT

APPENDIX III

VALUATION CERTIFICATE

Group II — Property held by the Group for owner-occupation in the PRC

				Market Value in
			Particulars of	Existing State as at
No.	Property	Description and Tenure	Occupancy	31 January 2017
3.	An Industrial	The property comprises a parcel of land with a	As advised by the	RMB71,500,000
	Complex situated	site area of about 39,997.80 sq.m. and various	Group, portion of	(Please see Note No. 3
	at the No. 88	buildings and ancillary structures erected	the property with a	for details)
	Weiyi Road,	thereon, which were completed in about 2007	total GFA of 1,100
	Dingmao Development	and 2008.	sq.m. is under 2
	Zone,		monthly tenancies
	Xin District,	The property comprises nine numbers of single	with the total
	Zhenjiang City,	to five-storey buildings for workshops, office,	monthly rent of
	Jiangsu Province,	dormitories, warehouse and other ancillary uses	RMB13,308.33.
	The PRC	with a total Gross Floor Area (‘‘GFA’’) of	(Details please refer
		about 24,200.18 sq.m.. (or about 260,490.74	to Notes Nos. 6 and
	中國鎮江市新區	sq.ft.)	7)
	丁卯開發區緯一路88號
	的一個工業綜合大樓	The property also comprises three buildings	As advised by the
		without relevant title certificates for canteen	Group, the remaining
		and guard rooms uses.	portion of the
			property is owner
		The land use rights of the property have been	occupied.
		granted for a term expiring on 22 March 2055
		for industrial use.

Notes:

Pursuant to a State-owned Land Use Rights Certificate, Zhen Guo Yong 2005 Di No. 1156378 (鎮國用 2005第1156378號), issued by Zhenjiang City People’s Government (鎮江市人民政府), the land use rights of the property with a site area of 39,997.80 sq.m. have been granted to Jiangsu Wenrun Optoelectronic Technology Company Limited (‘‘Jiangsu Wenrun’’) (江蘇穩潤光電科技有限公司), a non-wholly owned subsidiary of the Group for a term expiring on 22 March 2055 for industrial use.
Pursuant to 7 Building Ownership Certificates, Zhen Fang Quan Zheng Ding Zi Di Nos.70000803, 70000804, 70000805, 70000806, 70000807, 70000809 and 70000810 (鎮房權証丁字第70000803, 70000804, 70000805, 70000806, 70000807, 70000809及 70000810號), issued by Zhenjiang City Real Estate Management Bureau (鎮江市房產管理局) all dated 22 January 2007, the property with a total GFA of 24,200.18 sq.m. for industrial and ancillary uses is legally owned by Jiangsu Wenrun.
As advised by the Group, there are three buildings situated on the land of the property with a total GFA of about 1,768.50 sq.m. without title certificates. Such buildings are used as canteen and guard rooms and we have attributed no commercial values to those buildings.
As advised by the Group, the property is effectively owned as to 69.44% by the Group.
Pursuant to a Maximum Amount Mortgage Contract No.150271913E16122601 dated 4 January 2017, in favour of Zhenjiang Ding Mao Branch of Bank of China Corporation Limited (中國銀行股份有限公司鎮江丁卯橋支行), the maximum mortgage amount is RMB66,802,700 for the period from 1 February 2016 to 31 December 2019.
Pursuant to the Tenancy Agreement in between Jiangsu Wenrun and Zhenjiang Xinglida Electronic Technology Co., Ltd (‘‘Zhenjiang Xinglida’’) (鎮江興立達電子科技有限公司) dated 1 January 2016, portion of the property with a GFA of 700 sq.m. is subject to a tenancy with annual rent of RMB84,000

– III-22 –

PROPERTY VALUATION REPORT

APPENDIX III

for a term of 1 year commencing on 1 January 2016 and expiring on 31 December 2016 for production and business operation uses. As advised by the Group, the captioned property is subject to a monthly tenancy with the Zhenjiang Xinglida for a monthly rent of RMB7,000.

Pursuant to the Tenancy Agreement in between Jiangsu Wenrun and Zhenjiang Aosai Electronic Co., Ltd (‘‘Zhenjiang Aosai’’) (鎮江奧賽電子有限公司) dated 1 January 2016, portion of the property with a GFA of 400 sq.m. is subject to a tenancy with annual rent of RMB75,700 for a term of 1 year commencing on 1 January 2016 and expiring on 31 December 2016 for production and business operation uses. As advised by the Group, portion of the captioned property is subject to a monthly tenancy with the Zhenjiang Aosai for a monthly rent of RMB6,308.33.
Our inspection was performed by Dr. Alan WK Lee in February 2017.
As advised by the Group’s PRC legal adviser engaged as to PRC Laws dated on the Latest Practicable Date, which contains, inter-alia, the following information:
a. Jiangsu Wenrun has legally obtained the land use rights of a parcel of land with a site area of 39,997.80 sq.m. and the building ownership of 9 numbers of buildings with a total GFA of 24,200.18 sq.m.; and
b. Jiangsu Wenrun is entitled to transfer, lease, mortgage and/or by other means dispose of the land use rights and the buildings of the property with relevant title certificate;
c. The mortgage contract mentioned above has been registered in the Zhenjiang City Real Estate Registration Center (鎮江市不動產登記中心) dated 16 January 2017. The Real Estate Registration Certificate No.0001344 is held by Zhenjiang Ding Mao Branch of Bank of China Corporation Limited (中國銀行股份有限公司鎮江丁卯橋支行); and
d. Jiangsu Wenrun has not obtained the Real Estate Certificates of the three buildings for canteen and guard rooms uses. As the subject buildings have not obtained proper Real Estate Certificates and Planning Certificates, the subject buildings may subject to a risk of demolition enforcement ordered by the relevant Government authorities within specified period. If the Group did not comply with the demolition order, the estimated fine amount is 10% of the total construction cost of the erected buildings.

– III-23 –

LETTER FROM PRICEWATERHOUSECOOPERS ON THE PROFIT ESTIMATE

APPENDIX IV

The following is the text of a letter received from PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purposes of incorporation in this circular.

==> picture [67 x 49] intentionally omitted <==

The Board of Directors Landing International Development Limited Suites 5801–5804, 58/F Two International Finance Centre No. 8 Finance Street Central Hong Kong

Dear Sirs,

Landing International Development Limited (the ‘‘Company’’)

PROFIT ESTIMATE FOR THE YEAR ENDED 31 DECEMBER 2016

We refer to the statement that the Group is expected to record an increase in the net loss for the year ended 31 December 2016 as compared to the net loss for the year ended 31 December 2015 (the ‘‘Profit Estimate’’) set forth in the profit warning announcement issued by the Company dated 10 January 2017 (the ‘‘Profit Warning Announcement’’).

DIRECTORS’ RESPONSIBILITIES

The Profit Estimate has been prepared by the directors of the Company based on the unaudited consolidated results based on the management accounts of the Company and its subsidiaries (the ‘‘Group’’) for the year ended 31 December 2016.

The Company’s directors are solely responsible for the Profit Estimate.

OUR INDEPENDENCE AND QUALITY CONTROL

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

– IV-1 –

LETTER FROM PRICEWATERHOUSECOOPERS ON THE PROFIT ESTIMATE

APPENDIX IV

REPORTING ACCOUNTANT’S RESPONSIBILITIES

Our responsibility is to express an opinion on the accounting policies and calculations of the Profit Estimate based on our procedures.

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 500 ‘‘Reporting on Profit Forecasts, Statements of Sufficiency of Working Capital and Statements of Indebtedness’’ and with reference to Hong Kong Standard on Assurance Engagements 3000 (Revised) ‘‘Assurance Engagements Other Than Audits or Reviews of Historical Financial Information’’ issued by the HKICPA. Those standards require that we plan and perform our work to obtain reasonable assurance as to whether, so far as the accounting policies and calculations are concerned, the Company’s directors have properly compiled the Profit Estimate in accordance with the bases adopted by the directors and as to whether the Profit Estimate is presented on a basis consistent in all material respects with the accounting policies normally adopted by the Group. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

OPINION

In our opinion, so far as the accounting policies and calculations are concerned, the Profit Estimate has been properly compiled in accordance with the bases adopted by the directors as set out in the Profit Warning Announcement and is presented on a basis consistent in all material respects with the accounting policies normally adopted by the Group as set out in the annual report of the Company for the year ended 31 December 2015 and the new or revised accounting standards issued that are effective for accounting periods beginning 1 January 2016 where applicable.

Yours faithfully, PricewaterhouseCoopers Certified Public Accountants

Hong Kong, 24 February 2017

– IV-2 –

LETTER FROM KINGSTON CORPORATE FINANCE ON THE PROFIT ESTIMATE

APPENDIX V

24 February 2017

The Board of Directors Landing International Development Limited Suites 5801–5804, 58/F Two International Finance Centre No. 8 Finance Street Central Hong Kong

Dear Sirs,

Reference is made to the circular of the Company dated 24 February 2017 (the ‘‘Circular’’), of which this letter forms part. Capitalised terms used in this letter shall have the same respective meanings as defined in the Circular unless the context otherwise required.

We refer to the statement made by the Company under the Profit Warning Announcement (the ‘‘Statement’’) that the Group is expected to record an increase in net loss for the year ended 31 December 2016 as compared to the loss for the year ended 31 December 2015. The increase in loss was mainly attributable to (i) change in fair value of financial assets at fair value through profit or loss; (ii) increase in administrative expenses, mainly staff related cost and marketing expenses, incurred in the construction and pre-opening stages of the integrated resort development and property development; and (iii) increase in other operating and administrative expenses due to expansion of the Group.

The Statement made under the Profit Warning Announcement constituted a profit forecast under Rule 10 of the Takeovers Code and must be reported on by the financial adviser and the auditors or consultant accountants. This report is issued in compliance with the requirement under Rule 10.4 and Note 1(c) to Rules 10.1 and 10.2 of the Takeovers Code.

We have reviewed the Profit Warning Announcement and other relevant information and documents (in particular, the unaudited consolidated management account of the Group for the year ended 31 December 2016 (the ‘‘Management Account’’) which you as the Directors are solely responsible for and discussed with you and the senior management of the Company the information and documents (in particular, the Management Account) provided by you which formed the key bases (i.e. the Management Account) upon which the Profit Warning Announcement have been made. In respect of the accounting policies and calculations concerned, upon which the Profit Warning Announcement have been made, we have relied upon the report as contained in Appendix IV to the Circular addressed to the Board from PricewaterhouseCoopers, being the reporting accountants of the Company. PricewaterhouseCoopers is of the opinion that so far as the accounting policies and calculations are concerned, the Profit Warning Announcement has been properly compiled with in accordance with the bases made by the directors and is presented on a basis consistent in all material respects with the accounting policies normally adopted by the Group.

On the basis of the foregoing, we are of the opinion that the Statement, for which the Directors are solely responsible, have been made with due care and consideration.

– V-1 –

LETTER FROM KINGSTON CORPORATE FINANCE ON THE PROFIT ESTIMATE

APPENDIX V

We hereby give and have not withdrawn our consent to the issue of the Circular with the inclusion therein of this report.

Yours faithfully,

For and on behalf of

Kingston Corporate Finance Limited Gregory Ho Managing Director

– V-2 –

GENERAL INFORMATION

APPENDIX VI

1. RESPONSIBILITY STATEMENTS

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 (other than the information relating to the Concert Party Group) 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 (other than the information relating to the Concert Party Group) or this circular misleading.

This circular includes particulars given in compliance with the Takeovers Code. The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this circular (other than those relating to the Concert Party Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this circular (other than those expressed by the Concert Party Group) have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

The sole director of LIL accepts full responsibility for the accuracy of the information contained in this circular (other than those relating to the Group) and confirms, having made all reasonable enquiries, that to the best of his knowledge, opinions expressed in this circular (other than those expressed by the Group) have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

2. SHARE CAPITAL

The authorised and issued share capital of the Company (i) as at the Latest Practicable Date; (ii) upon the Capital Reorganisation becoming effective; (iii) immediately after completion of the Rights Issue is set out as follows.

– VI-1 –

GENERAL INFORMATION

APPENDIX VI

Assuming no new Shares being issued or repurchased by the Company on or before the Record Date:

(i) as at the Latest Practicable Date

Authorised: 100,000,000,000 Existing Shares Issued and fully paid up: 20,565,879,257 Existing Shares upon completion of the Capital Reorganisation Authorised: 1,000,000,000,000 New Shares Issued and fully paid up: 20,565,879,257 New Shares immediately after completion of the Rights Issue Authorised: 1,000,000,000,000 New Shares Issued and fully paid up: 20,565,879,257 New Shares 102,829,396,285 Rights Shares 123,395,275,542 Total	HK$ 10,000,000,000.00
	2,056,587,925.70
	HK$ 10,000,000,000.00
	205,658,792.57
	10,000,000,000.00
	205,658,792.57 1,028,293,962.85
	1,233,952,755.42

(ii) upon completion of the Capital Reorganisation
(iii) immediately after completion of the Rights Issue

No part of the equity or debt securities of the Company is listed or dealt in, nor is listing or permission to deal in the Shares or loan capital of the Company being, or proposed to be, sought on any other stock exchange.

There are no arrangements under which future dividends will be waived or agreed to be waived. As at the Latest Practicable Date, no capital of any member of the Group was under option or agreed conditionally or unconditionally to be put under option.

Except for the Rights Shares and the commission contemplated under the Underwriting Agreement, as at the Latest Practicable Date, no Shares, options, warrants, conversion rights or any equity or debt securities of the Company was outstanding or was proposed to be issued for cash or otherwise and no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any such capital.

– VI-2 –

GENERAL INFORMATION

APPENDIX VI

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

No Shares have been issued since 31 December 2015, being the date on which the latest audited financial statements of the Group were made up.

As at the Latest Practicable Date, the Company has no other outstanding options, warrants, derivatives or other convertible securities in issue which are convertible or exchangeable into Shares.

3. DISCLOSURE OF INTERESTS

(a) Director’s interest and short positions in Shares, debentures or underlying Shares and its associated corporations

As at the Latest Practicable Date, save as disclosed below, none of the Directors or the chief executive of the Company and their respective associates had or was deemed to have any interests in the long or short positions in the Shares, underlying shares and debentures or relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company or any associated corporation (within the meaning of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO; or (ii) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules (the ‘‘Model Code’’) adopted by the Company, to be notified to the Company and the Stock Exchange.

			Approximately %
		Number of Share	of the issued
Name of Director	Capacity	interested	share capital
Mr. Yang	Held by	92,546,456,644	75.00%
	controlled	(Long)
	corporations

Notes:

(1) 7,061,709,274 Existing Shares are held by LIL whose entire issued share capital is held by Mr. Yang. Mr. Yang is the sole director of LIL. On top of the 7,061,709,274 Existing Shares, Mr. Yang is deemed to be interested in 85,484,747,370 Rights Shares in relation to LIL’s commitments under the Underwriting Agreement and the Irrevocable Undertaking.

– VI-3 –

GENERAL INFORMATION

APPENDIX VI

(b) Substantial Shareholders and other person’s interests in Shares and underlying Shares

As at the Latest Practicable Date, other than the interests disclosed above in respect of certain directors and chief executive of the Company, the interests and short positions of persons in the Shares and underlying Shares as recorded in the register required to be kept by the Company under Section 336 of the SFO, or who were, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital or relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) of the Company or any member of the Group:

			Approximately
Name of		Number of Share	% of the issued
Shareholder	Capacity	interested	share capital
LIL (Note 1)	Beneficial owner	92,546,456,644	75.00%
		(Long)
Xu Ning	Interest of spouse	92,546,456,644	75.00%
(‘‘Ms. Xu’’)		(Long)
(Note 1)
Chu Yuet Wah	Held by controlled	17,344,648,915	14.05%
(‘‘Mrs. Chu’’)	corporation	(Long)
(Note 2)
Active Dynamic	Held by controlled	17,344,648,915	14.05%
Limited (Note 3)	corporation	(Long)
Kingston Financial	Held by controlled	17,344,648,915	14.05%
Group Limited	corporation	(Long)
(Note 4)
Kingston Capital	Held by controlled	17,344,648,915	14.05%
Asia Limited	corporation	(Long)
(Note 5)
Galaxy Sky	Held by controlled	17,344,648,915	14.05%
Investments	corporation	(Long)
Limited (Note 6)
Kingston Securities	Beneficial owner	17,344,648,915	14.05%
(Note 7)		(Long)
Chu Qingzhu	Beneficial owner and	2,005,850,000	9.75%
(‘‘Mr. Chu’’)	interest of spouse	(Long)
(Note 8)
Wu Xiangning	Beneficial owner and	2,005,850,000	9.75%
(‘‘Ms. Wu’’)	interest of spouse	(Long)
(Note 9)

Notes:

LIL holds 7,061,709,274 Existing Shares and is wholly and beneficially owned by Mr. Yang. On top of the 7,061,709,274 Existing Shares, LIL is interested in 85,484,747,370 Rights Shares in relation to its commitments under the Underwriting Agreement and the Irrevocable Undertaking. Ms. Xu is the spouse of Ms. Yang. Under the SFO, Ms. Xu is deemed to be interested in the same number of Shares in which Mr. Yang is interested.
Mrs. Chu controls 100% of the interest in Active Dynamic Limited, and therefore is deemed to be interested in 17,344,648,915 Rights Shares in relation to Kingston Securities’s commitments under the Underwriting Agreement.

– VI-4 –

GENERAL INFORMATION

APPENDIX VI

Active Dynamic Limited controls 42.90% of interest in Kingston Financial Group Limited.
Kingston Financial Group Limited controls 100.00% of interest in Kingston Capital Asia Limited.
Kingston Capital Asia Limited controls 100.00% of interest in Galaxy Sky Investments Limited.
Galaxy Sky Investments Limited controls 100.00% of interest in Kingston Securities.
Kingston Securities is deemed to be interested in 17,344,648,915 Rights Shares in relation to Kingston Securities’s commitments under the Underwriting Agreement.
Mr. Chu is the beneficial owner of 1,942,850,000 Shares. Ms. Wu is the spouse of Mr. Chu. Therefore, Ms. Wu is also deemed to have interests in the Shares beneficially owned by Mr. Chu.
Ms Wu is the beneficial owner of 63,000,000 Shares. Mr. Chu is the spouse of Ms. Wu. Therefore, Mr. Chu is also deemed to have interests in the Shares beneficially owned by Ms. Wu.

4. ADDITIONAL DISCLOSURE OF INTEREST AND DEALING IN SHARES

As at the Latest Practicable Date,

(a) save for the Underwriting Agreement and the Irrevocable Undertaking, there was no agreement, arrangement or understanding between the Concert Party Group and other persons in relation to the transfer, charge or pledge of the New Shares that will be issued and allotted to LIL pursuant to the Irrevocable Undertaking or may be issued and allotted to LIL pursuant to the fulfillment of its obligations under the Underwriting Agreement;
(b) save as disclosed in the section headed ‘‘Shareholding structure of the Company’’ in the letter from the Board of this circular, none of the parties to the Underwriting Agreement or any parties acting in concert with any of them held, owned or controlled any other Shares, convertible preference shares, convertible securities, warrants, options or derivatives of the Company. In addition, save for the disposal of 13,000,000 Shares made by Mrs. Chu, an associate of Kingston Securities on 18 January 2017, none of the parties to the Underwriting Agreement and parties acting in concert with any of them had dealt for value in any Shares, convertible preference shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period;
(c) save as disclosed in paragraph headed ‘‘3. DISCLOSURE OF INTERESTS’’ in this appendix, the sole director of LIL was not interested in any Shares, convertible preference shares, convertible securities, warrants, options or derivatives of the Company or similar rights which are convertible or exchangeable into any Shares. In addition, the sole director of LIL had not dealt in any Shares, convertible preference shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period;
(d) no person had irrevocably committed themselves to vote for or against the resolution(s) to be proposed at the SGM to approve the Rights Issue, the Underwriting Agreement, the Whitewash Waiver and the Connected Transaction;

– VI-5 –

GENERAL INFORMATION

APPENDIX VI

(e) the Concert Party Group did not have any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with any other persons;
(f) none of the members of the Concert Party Group or the sole director of LIL had borrowed or lent any Shares, convertible preference shares, convertible securities, warrants, options or derivatives of the Company or similar rights which are convertible or exchangeable into Shares;
(g) save as disclosed in the paragraph headed ‘‘3. DISCLOSURE OF INTERESTS’’ in this appendix, none of the Directors was interested in any Shares, convertible preference shares, convertible securities, warrants, options or derivatives of the Company or similar rights which are convertible or exchangeable into any Shares. In addition, none of the Directors had dealt for value in any Shares, convertible preference shares, convertible securities, warrants, options or derivatives of the Company during the Relevant Period;
(h) except for Mr. Yang’s holding in LIL, none of the Company and the Directors held any shares, convertible securities, warrants, options or derivatives of LIL or similar rights which are convertible or exchangeable into shares of LIL. None of them had dealt for value in any shares, convertible securities, warrants, options or derivatives of LIL during the Relevant Period;
(i) save for the disposal of 13,000,000 Shares made by Mrs. Chu, an associate of Kingston Securities on 18 January 2017, none of (i) the subsidiaries of the Company, (ii) the pension fund of the Company or of any of its subsidiaries, nor (iii) any advisers to the Company as specified in class (2) of the definition of ‘‘associate’’ under the Takeovers Code (other than persons enjoying exempt principal trader status under the Takeovers Code), had any interest in the Shares, convertible preference shares, convertible securities, warrants, options or derivatives of the Company and none of them had dealt for value in any securities of the Company during the period from the Last Trading Day to the Latest Practicable Date;
(j) save for the disposal of 13,000,000 Shares made by Mrs. Chu, an associate of Kingston Securities on 18 January 2017, no person had any arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with the Company or any person who is an associate of the Company by virtue of classes (1), (2), (3) and (4) of the definition of associate in the Takeovers Code and none of them had dealt for value in any securities of the Company during the period from the Last Trading Day to the Latest Practicable Date;
(k) no Shares, convertible preference shares, convertible securities, warrants, options or derivatives of the Company were managed on a discretionary basis by fund managers (other than exempt fund managers) connected with the Company and none of them had dealt for value in any securities of the Company during the period from the Last Trading Day to the Latest Practicable Date;

– VI-6 –

GENERAL INFORMATION

APPENDIX VI

(l) none of the Company nor any Directors had borrowed or lent any Shares, convertible preference shares, convertible securities, warrants, options or derivatives of the Company or similar rights which are convertible or exchangeable into Shares;
(m) there was no benefit to be given to any Directors as compensation for loss of office in any member of the Group or otherwise in connection with Capital Reorganisation, the Rights Issue, the Underwriting Agreement and the Whitewash Waiver;
(n) save for the Underwriting Agreement, there was no agreement, arrangement or understanding (including any compensation arrangement) (i) between LIL, the Concert Party Group and any of the Directors, recent Directors, Shareholders or recent Shareholders having any connection with or dependence upon the Capital Reorganisation, the Rights Issue, the Underwriting Agreement and the Whitewash Waiver; and (ii) between any Directors and any other persons having any connection with or dependence upon the Capital Reorganisation, the Rights Issue, the Underwriting Agreement and the Whitewash Waiver;
(o) save for the Underwriting Agreement, as at the Latest Practicable Date, there was no contract or arrangement subsisting in which any Director was materially interested and which was significant in relation to any business of the Group;
(p) as at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been since 31 December 2015 (being the date to which the latest published audited financial statements of the Group were made up) acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group; and
(q) as at the Latest Practicable Date, except for Mr. Yang’s interest in the Shares as disclosed under the Section headed ‘‘DISCLOSURE OF INTERESTS’’ of this appendix, none of the Directors were interested in any Shares, and hence no Director would be entitled to vote for or against any of the resolutions to be proposed at the SGM. LIL will abstain from voting on the resolutions set out in the Notice of the SGM (except for resolution number 1) at the SGM.

– VI-7 –

GENERAL INFORMATION

APPENDIX VI

5. MARKET PRICES

The table below shows the closing prices of the Shares on the Stock Exchange (i) at the end of each of the six calendar months immediately preceding the Latest Practicable Date and ending on the Latest Practicable Date, (ii) 11 January 2017, being the Last Trading Day, (iii) as at the Latest Practicable Date:

	Closing price
Date	per Share
	HK$
29 July 2016	0.152
31 August 2016	0.160
30 September 2016	0.201
31 October 2016	0.187
30 November 2016	0.191
30 December 2016	0.100
11 January 2017 (the Last Trading Day)	0.086
27 January 2017	0.064
23 February 2017 (the Latest Practicable Date)	0.059

The lowest and highest closing market prices of the Shares recorded on the Stock Exchange during the Relevant Period were HK$0.052 on 14 February 2017 and HK$0.214 on 23 September 2016 respectively.

6. MATERIAL CONTRACTS

The following contracts (not being contracts entered into under the ordinary course of business of the Group) have been entered into by the Company within the two years immediately preceding the date of the Announcement and up to the Latest Practicable Date and are or may be material:

the underwriting agreement dated 15 April 2015 entered into between the Company and LIL and Kingston Securities in relation to the underwriting arrangement in respect of the rights issue, as varied and supplemented by an amended and restated underwriting agreement dated 16 April 2015 made by the same parties;
the sale and purchase agreement dated 29 July 2015 made between the Company and Pearl Concept Enterprises Limited in relation to the acquisition of 50% of the issued share capital in the capital of Magical Gains Holdings Limited held by Pearl Concept Enterprises Limited and the loan in the principal amount of HK$875,912,409 provided by Pearl Concept Enterprises Limited to Magical Gains Holdings Limited;
the sale and purchase agreement dated 29 September 2015 made between the Company and Ngai Shun Holdings Limited in relation to the disposal of, among others, the entire issued share capital of Double Earn Holdings Limited and the loan in the principal amount of approximately HK$628,000,000 provided by the Company to Double Earn Holdings Limited and its subsidiaries;

– VI-8 –

GENERAL INFORMATION

APPENDIX VI

the sale and purchase agreement dated 7 December 2015 made between United Time Corporation Limited (an indirect wholly owned subsidiary of the Company), the Company as the purchaser guarantor, Twinwood Limited and Bluestream Holdings Limited in relation to the acquisition of the entire issued share capital of Les A, excluding gaming debt receivables of Les A as at the completion date;
the conditional sale and purchase agreement in relation to the acquisition of the entire issued share capital of Callisto entered into between the Company and Algona Pte. Ltd. on 11 November 2016;
the conditional sale and purchase agreement in relation to the acquisition of 50% of the issued share capital of Autumnglow Pte. Ltd. entered into between Landing Singapore Limited (a direct wholly owned subsidiary of the Company) and Genting International Resorts Management Limited on 11 November 2016;
the subscription agreement dated 5 December 2016 entered into between Wider Success Global Limited (a direct wholly owned subsidiary of the Company) and TAR Investments (Cayman) Limited for its own behalf and on behalf of TAR Investments (Cayman) Limited Partnership and the limited partner(s) of TAR Private Equity Fund L.P.; and
the Underwriting Agreement.
SERVICE CONTRACTS

As at the Latest Practicable Date:

(a) none of the Directors had entered or proposed to enter into a service contract with the Company or any of its subsidiaries or associated companies which is not determinable by the Company within one year without payment of compensation, other than statutory compensation;
(b) none of the Directors had entered into or amended any service contracts (including both continuous and fixed term contracts) with the Company or any of its subsidiaries or any of its associated companies within six months before the Latest Practicable Date;
(c) none of the Directors had any continuous service contracts with the Company or any of its subsidiaries or associated companies with a notice period of 12 months or more; and
(d) none of the Directors had any fixed term service contracts with the Company or any of its subsidiaries or associated companies with more than 12 months to run irrespective of the notice period.

– VI-9 –

GENERAL INFORMATION

APPENDIX VI

8. LITIGATION

As at the Latest Practicable Date, no member of the Group is engaged in any litigation or arbitration of material importance and there is no litigation or claims of material importance known to the Directors to be pending or threatened by or against any member of the Group.

9. QUALIFICATION OF EXPERTS

The following are the qualifications of the experts who have given opinions or advice which are contained in this circular:

Name Qualification Kingston Corporate Finance a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO Veda Capital a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO

PricewaterhouseCoopers Certified Public Accountants

Savills Valuation and independent property valuer Professional Services Limited (‘‘Savills’’)

Roma Appraisals Limited independent property valuer (‘‘Roma’’)

10. CONSENT OF EXPERTS AND INDEPENDENT VALUERS

As at the Latest Practicable Date, each of Kingston Corporate Finance, Veda Capital, PricewaterhouseCoopers, Savills and Roma was not beneficially interested in the share capital of any member of the Group nor did it have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any Shares, convertible securities, warrants, options or derivatives which carry voting rights in any member of the Group nor did it have any interest, either direct or indirect, in any assets which have been acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2015, being the date to which the latest published audited financial statements of the Group were made up.

Each of Kingston Corporate Finance, Veda Capital, PricewaterhouseCoopers, Savills and Roma has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and/or references to its name in the form and context in which it respectively appears.

– VI-10 –

GENERAL INFORMATION

APPENDIX VI

11. COMPETING INTERESTS

None of the Directors or their respective close associates was interested in any business apart from the Group’s businesses which competes or is likely to compete, either directly or indirectly, with the Group’s business as at the Latest Practicable Date.

12. DIRECTOR’S INTEREST IN CONTRACTS AND ASSETS

As at the Latest Practicable Date, there was no contract or arrangement subsisting in which any Director was materially interested and which was significant in relation to any business of the Group. As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been since 31 December 2015 (being the date to which the latest published audited financial statements of the Group were made up) acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

13. MATERIAL ADVERSE CHANGE

Except as disclosed in the paragraph headed ‘‘Material Change’’ set out in Appendix I of this circular, as at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial position or trading position of the Group since 31 December 2015, being the date to which the latest published audited financial statements of the Group were made up.

14. EXPENSES

The expenses in connection with the Rights Issue, including underwriting commissions, financial advisory fees, printing, registration, translation, legal and accountancy charges are estimated to be approximately HK$76 million, which are payable by the Company.

15. CORPORATE INFORMATION

Registered office Clarendon House 2 Church Street Hamilton HM 11 Bermuda Principal place of business in Suites 5801–5804 Hong Kong 58/F. Two International Finance Centre No. 8 Finance Street, Central Hong Kong Authorised representatives Ms. Zhou Xueyun Suites 5801–5804 58/F. Two International Finance Centre No. 8 Finance Street, Central Hong Kong

– VI-11 –

GENERAL INFORMATION

APPENDIX VI

Ms. Lam Pui Sea Suites 5801–5804 58/F. Two International Finance Centre No. 8 Finance Street, Central Hong Kong Company secretary Ms. Lam Pui Sea Fellow member of the Hong Kong Institute of Certified Public Accountants Legal adviser to the Company As to Hong Kong law: Sidley Austin Level 39, Two International Finance Centre 8 Finance Street Central, Hong Kong Auditor and reporting PricewaterhouseCoopers accountant 22/F Prince’s Building, Central, Hong Kong Underwriters Kingston Securities Limited Suite 2801, 28th Floor One International Finance Centre 1 Harbour View Street Hong Kong Landing International Limited 263 Main Street, Road Town, Tortola, British Virgin Islands Principal share registrar in MUFG Fund Services (Bermuda) Limited Bermuda The Belvedere Building 69 Pitts Bay Road Pembroke HM08 Bermuda Branch share registrar in Hong Tricor Standard Limited Kong Level 22, Hopewell Centre 183 Queen’s Road East Hong Kong

– VI-12 –

GENERAL INFORMATION

APPENDIX VI

Principal bankers DBS Bank (Hong Kong) Limited 73/F., The Center 99 Queen’s Road Central Central, Hong Kong China Minsheng Banking Corporation Limited 36/F., Bank of American Tower 12 Harcourt Road Central, Hong Kong Financial adviser to the Kingston Corporate Finance Limited Company Suite 2801, 28th Floor One International Finance Centre 1 Harbour View Street Hong Kong Independent financial adviser to Veda Capital Limited the Independent Board Room 1106, 11/F. Committee and the 111 Connaught Road Central Independent Shareholders Sheung Wan, Hong Kong

16. PARTICULARS OF DIRECTORS AND SENIOR MANAGEMENT

(a) Name and address

Name Correspondence Address Executive Directors Mr. Yang Zhihui Suites 5801–5804, 58/F. Two International Finance Centre No. 8 Finance Street Central, Hong Kong Ms. Zhou Xueyun Suites 5801–5804, 58/F. Two International Finance Centre No. 8 Finance Street Central, Hong Kong

– VI-13 –

GENERAL INFORMATION

APPENDIX VI

Name Correspondence Address

Independent non-executive Directors

Mr. Fok Ho Yin, Thomas Suites 5801–5804, 58/F. Two International Finance Centre No. 8 Finance Street Central, Hong Kong Mr. Chen Lei Suites 5801–5804, 58/F. Two International Finance Centre No. 8 Finance Street Central, Hong Kong Mr. Bao Jinqiao Suites 5801–5804, 58/F. Two International Finance Centre No. 8 Finance Street Central, Hong Kong

(b) Qualification and position held

Executive Directors

Mr. Yang Zhihui, aged 45, is the chairman and an executive Director since 19 July 2013. Mr. Yang is responsible for the leadership and effective running of the Board. He is the sole shareholder and the director of the LIL, the controlling shareholder of the Company. He is also the founder and chairman of board of directors of Anhui Landing, which was principally engaged in real estate development business in the PRC. He had been a director of Hubei Landing Holding Co., Ltd. (shares of which are listed on Shenzhen Stock Exchange, stock code: 000971) (‘‘Hubei Landing’’) until December 2014. Mr. Yang is experienced in property development in the PRC.

Ms. Zhou Xueyun, aged 60, is an executive Director since 9 August 2013. Ms. Zhou is currently the vice president of Anhui Landing. She was a director of Hubei Landing from August 2012 to August 2013 and a director of Landing Industrial (Hubei) Co., Ltd. from June 2012 to December 2014. Ms. Zhou served as the general manager of asset operation of Anhui Tourism Group Co., Ltd. and the manager of Anxing United Corporation of Zhuhai Special Economic Zone[#] (珠海經濟特區安興聯合總公司) during the period from 2002 to 2012.

Independent non-executive Directors

Mr. Fok Ho Yin, Thomas, aged 45, is an independent non-executive Director. Mr. Fok joined the Company since 11 June 2010. He had worked in the Listing Division of the Stock Exchange and has extensive experience in the field of corporate finance and, in particular, in equity financing and financial restructuring. Mr. Fok is a member of Hong Kong Institute of Certified Public Accountants and CPA Australia, and also a Chartered Financial Analyst. Mr. Fok has been an

– VI-14 –

GENERAL INFORMATION

APPENDIX VI

executive director and chief financial officer of Jian ePayment Systems Limited (shares of which are listed on the growth enterprise market of the Stock Exchange, stock code: 8165) from September 2007 to August 2016 and is currently an independent non-executive director of each of China Smarter Energy Group Holdings Limited (formerly known as Rising Development Holdings Limited) (shares of which are listed on the main board of the Stock Exchange, stock code: 1004) and Hanbo Enterprises Holdings Limited (shares of which are listed on the main board of the Stock Exchange, stock code: 1367).

Mr. Chen Lei, aged 38, is an independent non-executive Director since 2 October 2013. Mr. Chen currently acts as an advisor of Nomura International (Hong Kong) Limited, before which he has served as an executive director of Nomura International (Hong Kong) Limited, and as analyst, associate and vice president of several investment banks. He obtained a bachelor’s degree from the University of Western Ontario.

Mr. Bao Jinqiao, aged 51, is an independent non-executive Director since 16 November 2015. Mr. Bao graduated from the Shanghai Academy of Social Sciences with a Masters Degree in Law and from Anhui University with research studies in Civil Law in 1988 respectively. He is a lawyer qualified to practise in the PRC. Mr. Bao is the founder and partner of Anhui Chengyi Law Firm since 2000. He is currently an independent non-executive director of China Healthcare Enterprise Group Limited (formerly known as Telefield International (Holdings) Limited) (shares of which are listed on the main board of the Stock Exchange, stock code: 1143).

17. MISCELLANEOUS

The registered office of the Company is at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and its head office and principal place of business is at Suites 5801–5804, 58/F, Two International Finance Centre, No. 8 Finance Street, Central, Hong Kong.
The sole director of LIL is Mr. Yang.
The registered office of LIL is at the office of CCS Trustees Limited, 263 Main Street, Road Town, Tortola, British Virgin Islands.
The secretary of the Company is Ms. Lam Pui Sea, a Certified Public Accountant of the Hong Kong Institute of Certified Public Accountants.
The auditor of the Company is, PricewaterhouseCoopers, 22/F Prince’s Building, Central, Hong Kong.
The branch share registrar of the Company is Tricor Standard Limited at Level 22, Hopewell Centre 183 Queen’s Road East, Hong Kong.

– VI-15 –

GENERAL INFORMATION

APPENDIX VI

The executive Directors of the Company are Mr. Yang (Chairman) and Ms. Zhou Xueyun. The independent non-executive Directors are Mr. Fok Ho Yin, Thomas, Mr. Chen Lei and Mr. Bao Jinqiao.
As at the Latest Practicable Date, the Company has not been informed and was not aware of any person who has committed to vote for or against the Rights Issue, the Underwriting Agreement and the Whitewash Waiver.
The English text of this circular shall prevail over the Chinese text in the case of any inconsistency.

18. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the registered office of the Company at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda and its head office and principal place of business at Suites 5801–5804, 58/F, Two International Finance Centre, No. 8 Finance Street, Central, Hong Kong during normal business hours from 9:30 a.m. to 5:30 p.m. on any weekday, except public holidays, and on the websites of the Company (www.582.com.hk) and the SFC (www.sfc.hk) between the period from the date of this circular up to and including the date of the SGM:

(a) this circular;
(b) the memorandum of continuance and bye-laws of the Company;
(c) the articles of association of LIL;
(d) the material contracts referred to in the section headed ‘‘Material Contracts’’ in this appendix;
(e) the Irrevocable Undertaking;
(f) the annual reports of the Group for each of the two years ended 31 December 2015 and 31 December 2014;
(g) the interim reports of the Group for the six months ended 30 June 2016 and 30 June 2015;
(h) the letter from the Board, the text of which is set out on pages 16 to 42 of this circular;
(i) the letter from the Independent Board Committee, the text of which is set out on pages 43 to 44 of this circular;
(j) the letter from Veda Capital, the text of which is set out on pages 45 to 72 of this circular;
(k) the accountant’s report on the unaudited pro forma financial information of the Group from PricewaterhouseCoopers, the text of which as set out in Appendix II of this circular;

– VI-16 –

GENERAL INFORMATION

APPENDIX VI

(l) the letter from PricewaterhouseCoopers on the profit estimate the text of which is set out in Appendix IV of this circular;
(m) the letter from Kingston Corporate Finance on the profit estimate, the text of which is set out in Appendix V of this circular;
(n) the property valuation reports as set out in Appendix III of this circular;
(o) the written consents referred to in the paragraph headed ‘‘Consent of Experts and Independent Valuers’’ in this appendix; and
(p) a copy of each circular issued pursuant to the requirements set out in Chapter 14 and/or Chapter 14A of the Listing Rules which has been issued since 31 December 2015.

– VI-17 –

NOTICE OF SGM

Landing International Development Limited 藍鼎國際發展有限公司

(Incorporated in the Cayman Islands and continued in Bermuda with limited liability) (Stock code: 582)

NOTICE OF SPECIAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that a special general meeting of Landing International Development Limited (the ‘‘Company’’) will be held at 1804A, 18/F., Tower 1, Admiralty Centre, 18 Harcourt Road, Admiralty, Hong Kong on Tuesday, 21 March 2017 at 10:00 a.m. for the purpose of considering and, if thought fit, passing with or without amendments, the following resolutions as special or ordinary resolutions of the Company:

SPECIAL RESOLUTION

‘‘THAT subject to and conditional upon (i) compliance by the Company with the requirements of Section 46(2) of the Companies Act 1981 of Bermuda (as amended)(‘‘Companies Act’’) in respect of the Capital Reduction (as defined below), (ii) the granting by The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’) of the listing of, and permission to deal in, the New Shares (as defined below) arising from the Capital Reorganisation, and (iii) the obtaining of all necessary approvals from the regulatory authorities or otherwise as may be required in respect of the Capital Reorganisation, with effect from the business day immediately following the date on which (1) this resolution is passed, or (2) all of the aforesaid conditions are satisfied, whichever is later:
(a) the par value of each of the issued ordinary shares of the Company (the ‘‘Shares’’) be reduced from HK$0.10 to HK$0.01 (the ‘‘New Shares’’) by cancelling the paid-up capital to the extent of HK$0.09 on each of the issued Shares so that the nominal value of each issued New Share will be HK$0.01 and the credit arising from the Capital Reduction shall be transferred to the contributed surplus account of the Company (the ‘‘Capital Reduction’’);
(b) immediately upon the Capital Reduction becoming effective, each of the authorised but unissued Shares be subdivided into 10 New Shares of HK$0.01 each (the ‘‘Share Subdivision’’, together with the Capital Reduction, the ‘‘Capital Reorganisation’’) so that immediately following the Capital Reorganisation, the authorised share capital of the Company shall be HK$10,000,000,000 divided into 1,000,000,000,000 New Shares;

– SGM-1 –

NOTICE OF SGM

(c) the Directors be and are hereby authorized to utilize credits in the contributed surplus account in such manner as permissible under the bye-laws of the Company and the Companies Act, including to set off accumulated losses of the Company; and
(d) the Directors be and are hereby authorised to do all such acts and things and execute all such documents on behalf of the Company, including under seal where applicable, as they may consider necessary or expedient to give effect to or in connection with the implementation of the Capital Reorganisation.’’

ORDINARY RESOLUTIONS

‘‘THAT subject to the passing of the resolutions number 1 and 3 and satisfaction of the conditions set out in the letter from the board under the heading ‘‘Conditions’’ included in the circular to shareholders of the Company dated 24 February 2017 (the ‘‘Circular’’):
(a) the Rights Issue (as defined in the Circular) and the transactions contemplated thereunder (including the Underwriting Agreement) (as defined in the Circular) be and are hereby approved; and
(b) any one of the directors of the Company (the ‘‘Directors’’) be and is/are hereby authorised to do all such acts and things, to sign and execute all such further documents and to take such steps as he/she may in his/her absolute discretion consider necessary, appropriate, desirable or expedient to carry out or to give effect to or in connection with the Rights Issue and the transactions contemplated thereunder (including the Underwriting Agreement).’’
‘‘THAT:
(a) subject to the granting of the Whitewash Waiver (as defined below) by the executive director of the corporate finance division of the Securities and Futures Commission of Hong Kong (or any delegate of the Executive Director) (the ‘‘Executive’’), the waiver of the obligation on the part of Landing International Limited to make a mandatory general offer to shareholders of Company for all the issued Shares not already owned or agreed to be acquired by the Concert Party Group (as defined in the Circular) upon the Rights Issue pursuant to Note 1 on Dispensations from Rule 26 of the Hong Kong Code on Takeovers and Mergers (the ‘‘Whitewash Waiver’’) be and is hereby approved;
(b) conditional upon the grant of the Whitewash Waiver by the Executive, the terms of the Rights Issue be and are hereby approved; and
(c) any Director be and is hereby authorised for and on behalf of the Company to sign, seal, execute and deliver all such documents and deeds, and do all such acts, matters and things as they may in their discretion consider necessary or desirable to implement and/or effect the Rights Issue, the Underwriting Agreement and the Whitewash Waiver.’’

– SGM-2 –

NOTICE OF SGM

‘‘THAT the underwriting commission of an amount equal to approximately HK$50,176,201.00 to be payable by the Company to Landing International Limited be and is hereby approved.’’

Yours faithfully, By order of the Board Landing International Development Limited Yang Zhihui Chairman and executive Director

Hong Kong, 24 February 2017

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

Head office and principal place of business in Hong Kong: Suites 5801–5804, 58/F Two International Finance Centre No. 8 Finance Street, Central Hong Kong

Notes:

Any member of the Company entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote instead of him. A proxy need not be a member of the Company.
A form of proxy for use at the meeting is enclosed. To be valid, the form of proxy, together with the notarially certified power of attorney or other authority (if any) under which it is signed must be lodged at the Company’s share registrars, Tricor Standard Limited, at Level 22, Hopewell Centre 183 Queen’s Road East, Hong Kong as soon as possible and in any event, not less than 48 hours before the time appointed for holding of the meeting or any adjournment thereof.
Where there are joint holders of any share, any one of such holders may vote at the meeting, either in person or by proxy, in respect of such shares as if he were solely entitled to vote, but if more than one of such joint holders be present at the meeting in person or by proxy, the person so present whose name stands first in the register of member of the Company in respect of such share shall alone be entitled to vote in respect of it.
Completion and return of the form of proxy will not preclude a member from attending the meeting and voting in person at the meeting or any adjourned meeting if he so desires. If a member attends the meeting after having deposited the form of proxy, his form of proxy will be deemed to have been revoked.
The votes to be taken at the meeting for the resolution will be by way of a poll.

– SGM-3 –

AI assistant

China Resources Building Materials Technology Holdings Limited — Proxy Solicitation & Information Statement 2017

49843_rns_2017-02-24_6e8a0092-f2fc-4ca4-a79a-be1c3022daa9.pdf

Landing International Development Limited 藍 鼎 國 際 發 展 有 限 公 司

DEFINITIONS

The English translation of Chinese names or words in this circular, where indicated, are included for information purpose only, and should not be regarded as the official English translation of such Chinese names or words.

SUMMARY

TERMINATION OF THE UNDERWRITING AGREEMENT

EXPECTED TIMETABLE

EXPECTED TIMETABLE

EXPECTED TIMETABLE

Note:

Effect of bad weather on the Latest Time for Acceptance

Landing International Development Limited 藍 鼎 國 際 發 展 有 限 公 司

(Stock code: 582)

(5) APPLICATION FOR WHITEWASH WAIVER; AND (6) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

PROPOSED CAPITAL REORGANISATION

LETTER FROM THE BOARD

Application for listing

LETTER FROM THE BOARD

Reasons for the Capital Reorganisation

Exchange of share certificates

CHANGE IN BOARD LOT SIZE

Reasons for the change in board lot size

LETTER FROM THE BOARD

Trading arrangement

PROPOSED RIGHTS ISSUE

Issue statistics

Qualifying Shareholders

Closure of register of members

Rights of Overseas Shareholders

Subscription Price

LETTER FROM THE BOARD

Basis of provisional allotment

Fractions of Rights Shares

Status of the Rights Shares

Application for excess Rights Shares

Share certificates and refund cheques for Rights Issue

Application for listing

LETTER FROM THE BOARD

Conditions

Approval of the Rights Issue

The Underwriting Agreement

Underwriters

The Underwritten Shares

Commission

LETTER FROM THE BOARD

Termination of the Underwriting Agreement

Irrevocable Undertaking and the Underwriting Agreement

WARNING OF THE RISKS OF DEALING IN SHARES AND RIGHTS SHARES

REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

(1) Les A Acquisition

(2) Callisto Acquisition

The Set-Off

Fund raising methods comparison

FUTURE FUND RAISING EXERCISES

FUND RAISING EXERCISE OF THE COMPANY IN THE PAST 12 MONTHS

APPLICATION FOR WHITEWASH WAIVER

SHAREHOLDING STRUCTURE OF THE COMPANY

IMPLICATION UNDER THE TAKEOVERS CODE

IMPLICATION UNDER THE LISTING RULES

CONNECTED TRANSACTIONS

LETTER FROM THE BOARD

FUTURE INTENTIONS

INFORMATION OF THE GROUP

INFORMATION ON MR. YANG AND LIL

LETTER FROM THE BOARD

SGM

RECOMMENDATION

ADDITIONAL INFORMATION

Landing International Development Limited 藍 鼎 國 際 發 展 有 限 公 司

(Stock code: 582)

(1) PROPOSED RIGHTS ISSUE ON THE BASIS OF FIVE RIGHTS SHARES FOR EVERY ONE NEW SHARE HELD ON THE RECORD DATE; (2) CONNECTED TRANSACTION IN RELATION TO PAYMENT OF UNDERWRITING COMMISSION; AND (3) APPLICATION FOR WHITEWASH WAIVER

Yours faithfully,

(1) PROPOSED RIGHTS ISSUE ON THE BASIS OF FIVE RIGHTS SHARES FOR EVERY ONE NEW SHARE HELD ON THE RECORD DATE; (2) CONNECTED TRANSACTION IN RELATION TO PAYMENT OF UNDERWRITING COMMISSION; AND

(3) APPLICATION FOR WHITEWASH WAIVER

INTRODUCTION

LETTER FROM VEDA CAPITAL

China Resources Building Materials Technology Holdings Limited Proxy Solicitation & Information Statement 2017

Landing International Development Limited 藍鼎國際發展有限公司

Landing International Development Limited 藍鼎國際發展有限公司

Landing International Development Limited 藍鼎國際發展有限公司