CR Construction Group Holdings Limited - Proxy Solicitation & Information Statement 2016

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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

If you have sold or transferred all your shares in Chinese People Holdings Company Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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CHINESE PEOPLE HOLDINGS COMPANY LIMITED �� (incorporated in Bermuda with limited liability) (stock code: 681)

(I) GRANT OF AWARD SHARES; (II) CONNECTED TRANSACTIONS; (III) INCREASE IN AUTHORISED SHARE CAPITAL; AND (IV) NOTICE OF SPECIAL GENERAL MEETING

Independent Financial Adviser to the Independent Shareholders

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Innovax Capital Limited

Capitalised terms used in this cover page shall have the same meanings at those defined in the section headed “Definitions” of this circular.

A letter from the Board is set out on pages 4 to 17 of this circular. A letter of advice of Innovax Capital, containing its opinion and advice to the Independent Shareholders is set out on pages 18 to 37 of this circular.

A notice convening the SGM to be held at the head office of Chinese People Holdings Company Limited, Conference Room, 1st Floor, No. 36 BDA International Business Park, No.2 Jingyuan North Street, Economic Technological Development Area, Beijing, China on Friday, 14 October 2016 at 1:30 p.m. is set out on pages 41 to 45 of this circular.

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar and transfer office in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for holding the SGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or any adjournment thereof should you so wish and, in such event, the relevant form of proxy shall be deemed to be revoked.

23 September 2016

	Page
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from Innovax Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Appendix – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	38
Notice of SGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41

– i –

DEFINITIONS

In this circular, the following terms or expressions shall have the meanings set out below, unless the context otherwise requires:

“Announcement” the announcement of the Company dated 27 July 2016 “associates” has the meaning ascribed to it under the Listing Rules “Award Shares” 208,000,000 new Shares to be granted to the Grantees “Board” the board of Directors “Business Day” a day (other than a Saturday or a Sunday) on which banks are generally open for business in Hong Kong
“China” or “PRC” the People's Republic of China, which, for the purposes of this circular, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan
“Company” Chinese People Holdings Company Limited, a company incorporated in Bermuda with limited liability, the issued Shares of which are listed on the Stock Exchange
“Connected Grantees” Mr. Zhang, Mr. Chu, Mr. Fan, Mr. Jin, Dr. Liu, Prof. Zhao and Mr. Sin, being connected persons of the Company and the grantees of the Award Shares
“connected person” has the meaning ascribed to it under the Listing Rules “Director(s)” the director(s) of the Company “Dr. Liu” Dr. Liu Junmin, an independent non-executive Director “Dr. Mo” Dr. Mo Shikang, the chairman of the Board and an executive Director and the substantial Shareholder
“Grantees” the Connected Grantees and the Non-connected Grantees “Group” the Company and its subsidiaries “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China
“Increase in Authorised Share the proposed increase in the authorised share capital of the Capital” Company from HK$560,000,000, divided into 7,999,999,999 Shares, to HK$2,660,000,000.07, divided into 38,000,000,000 Shares, by creating an additional 30,000,000,001 Shares
“Independent Shareholders” Shareholders which are not required to abstain from voting at the SGM to approve a connected transaction

– 1 –

DEFINITIONS

“Innovax Capital” Innovax Capital Limited, a licensed corporation under the SFO to conduct type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activity, appointed to advise the Independent Shareholders in respect of the grant of Award Shares to the Connected Grantees and the transactions contemplated thereunder

“Issue Date” the date of issue of Award Shares

“Latest Practicable Date” 19 September 2016, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained therein

“Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “LPG” liquefied petroleum gas “Miss Mo” Miss Mo Yunbi, an executive Director “Mr. Bian” Mr. Bian Luming, a chief operation officer of the Group “Mr. Chu” Mr. Chu Kin Wang Peleus, a deputy chairman of the Board and an executive Director “Mr. Fan” Mr. Fan Fangyi, the managing Director and an executive Director “Mr. Jin” Mr. Jin Song, a chief strategy officer of the Group, retired as a non-executive Director after the conclusion of annual general meeting of the Company held on 9 September 2016 “Mr. Li” Mr. Li Li, a chief operation officer of the Group “Mr. Liu” Mr. Liu Xuanyu, the chief administrative officer of the Group “Mr. Sin” Mr. Sin Ka Man, an independent non-executive Director “Mr. Tse” Mr. Tse Ting Kwan, the financial controller of the Company “Mr. Yang” Mr. Yang Yigui, a manager of investment banking department of the Group “Mr. Zhang” Mr. Zhang Hesheng, a deputy chairman of the Board and an executive Director “Ms. Li” Ms. Li Fun Replen, the company secretary of the Company “Ms. Yu” Ms. Yu Qianzi, the chief information officer of the Group

– 2 –

DEFINITIONS

“Non-connected Grantees” Mr. Tse, Ms. Li, Mr. Li, Mr. Liu, Mr. Bian, Ms. Yu and Mr. Yang, being the grantees of the Award Shares “Prof. Zhao” Prof. Zhao Yanyun, an independent non-executive Director “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SGM” the special general meeting of the Company to be convened and held on Friday, 14 October 2016 at 1:30 p.m. to consider and, if thought fit, approve, the grant of Award Shares and the transactions contemplated thereunder, including the allotment and issue of the Award Shares under the Specific Mandate “Shareholder(s)” holder(s) of the Share(s) “Share(s)” ordinary share(s) of HK$0.07 each in the issued share capital of the Company ‘’Specific Mandate” the specific mandate to be obtained by the Board from the Independent Shareholders (for the Connected Grantees) and the Shareholder (for the Non-connected Grantees) at the SGM for the allotment and issue of the Award Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “Vesting Period” the period from the date of fulfilment of the conditions precedent of the grant of Award Shares to 30 September 2017 “HK$” Hong Kong dollars, the lawful currency of Hong Kong “RMB” Reminbi, the lawful currency in the PRC “%” per cent.

– 3 –

LETTER FROM THE BOARD

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CHINESE PEOPLE HOLDINGS COMPANY LIMITED �� (incorporated in Bermuda with limited liability) (stock code: 681)

Executive Directors:

Dr. Mo Shikang (Chairman)

Mr. Zhang Hesheng (Deputy Chairman)

Mr. Chu Kin Wang Peleus (Deputy Chairman)

Mr. Fan Fangyi (Managing Director) Miss Mo Yunbi

Registered office:

Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Head office:

Independent non-executive Directors:

Dr. Liu Junmin Prof. Zhao Yanyun Mr. Sin Ka Man

No. 36 BDA International Business Park No. 2 Jingyuan North Street Economic Technological Development Area Beijing, China

Principal place of business

in Hong Kong:

Unit 1101, 11st Floor, Tung Ning Building, 2 Hillier Street, Central, Hong Kong

To the Shareholders

Dear Sir or Madam,

(I) GRANT OF AWARD SHARES; (II) CONNECTED TRANSACTIONS; (III) INCREASE IN AUTHORISED SHARE CAPITAL; AND (IV) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement dated 27 July 2016 pursuant to which the Board announces that the Board had resolved to grant a total of 208,000,000 Award Shares to the Grantees. As each of Mr. Zhang, Mr. Chu, Mr. Fan, Mr. Jin, Dr. Liu, Prof. Zhao and Mr. Sin are connected persons of the Company, the grant of Award Shares to the Connected Grantees constitute connected transactions on the part of the Company under Chapter 14A of the Listing Rules and will be subject to reporting, announcement and Independent Shareholders’ approval requirements. The grant of Award Shares to the Non-connected Grantees is subject to, among others, the approval by the Shareholders at the SGM.

– 4 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with, amongst other things, (i) further details of the grant of Award Shares to the Grantees; (ii) details of the Increase in Authorised Share Capital; (iii) a letter from Innovax Capital to the Independent Shareholders in respect of the grant of the Award Shares to the Connected Grantees and the transactions contemplated thereunder; (iv) the notice of SGM, and (v) other information as required under the Listing Rules.

GRANT OF AWARD SHARES

The key terms of the proposed grant of the Award Shares are set out below:

Date of grant : 27 July 2016 Total number of Award Shares : 208,000,000 Award Shares, represent (i) granted approximately 2.99% of the existing issued share capital of the Company as at the Latest Practicable Date; and (ii) approximately 2.91% of the issued share capital of the Company as enlarged by the allotment and issue of the Award Shares. Subscription Price : As the Award Shares are to be issued as award, a nominal sum of HK$1 will be payable by each of the Grantees. Value of Award Shares : HK$23,920,000 in aggregate (calculated based on the closing price of the Shares of HK$0.115 on the date of the Announcement. HK$27,248,000 in aggregate (calculated based on the closing price of the Shares of HK$0.131 on the date of the Latest Practicable Date).

– 5 –

LETTER FROM THE BOARD

Conditions precedent

: The grant of the Award Shares are conditional upon the following:
1) the passing of the necessary resolutions by Independent Shareholders (for the Connected Grantees) or Shareholders (for the Non-connected Grantees) in SGM approving the grant of the Award Shares and the transactions contemplated thereunder; and

2) the Listing Committee of the Stock Exchange granting the listing of and permission to deal in the Award Shares. Vesting Period : The Award Shares shall be vested and allotted and issued to the Grantees on 30 September 2017. Termination of employment within : If a Grantee resigns or be terminated his/her the Vesting Period employment during the Vesting Period, no Award Shares will be allotted and issued to the Grantees. Application for listing : Application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Award Shares. Specific Mandate : The Award Shares shall be allotted and issued under the Specific Mandate to be granted to the Directors at the SGM. The issue price of such new Award Shares shall be at the nominal value of the Shares.

– 6 –

LETTER FROM THE BOARD

Grantees

Name of Grantee Positions held at the Company/Group Major responsibilities Number of Award Shares granted Connected Grantees Mr. Zhang Deputy chairman of the Board and executive Director Responsible for strategic planning, business development and strategic management of the Group 15,000,000 Mr. Chu Deputy chairman of the Board and executive Director Responsible for strategic planning and financial management of the Group 69,000,000 Mr. Fan Managing Director and executive Director Responsible for management of the overall operations of the Group 22,000,000 Mr. Jin Chief strategy officer, retired as a non-executive Director after the conclusion of annual general meeting of the Company held on 9 September 2016 Assist the Board to formulate strategic plans, including industry analysis, Group’s positioning and acquisition projects, for medium and long term growth 20,000,000 Dr. Liu Independent non-executive Director Supervise management, participate in the direction of the Group's business and affairs and speak out firmly and objectively on issues that may come before the Board 5,000,000 Prof. Zhao Independent non-executive Director Supervise management, participate in the direction of the Group's business and affairs and speak out firmly and objectively on issues that may come before the Board 5,000,000 Mr. Sin Independent non-executive Director Supervise management, participate in the direction of the Group's business and affairs and speak out firmly and objectively on issues that may come before the Board 5,000,000 141,000,000	Value of Award Shares as at the date of the Announcement (Note 1) HK$ 1,725,000 7,935,000 2,530,000 2,300,000 575,000 575,000 575,000 16,215,000	Value of Award Shares as at the Latest Practicable Date (Note 2) HK$ 1,965,000 9,039,000 2,882,000 2,620,000 655,000 655,000 655,000
		18,471,000

– 7 –

LETTER FROM THE BOARD

Name of Grantee Positions held at the Company/Group Major responsibilities Number of Award Shares granted Non-connected Grantees Mr. Tse Financial controller of the Company Responsible for financial reporting 17,000,000 Ms. Li Company secretary of the Company Responsible for corporate governance and compliance 10,000,000 Mr. Li Chief operation officer of the Group Responsible for the piped gas business 10,000,000 Mr. Liu Chief administrative officer of the Group Responsible for human resources and administrative matters 12,000,000 Mr. Bian Chief operation officer of the Group Responsible for the LPG and other businesses 12,000,000 Ms. Yu Chief information officer of the Group Responsible for the information management functions 5,000,000 Mr. Yang Manager of investment banking department of the Group Responsible for mergers and acquisitions 1,000,000 67,000,000 Total: 208,000,000 Notes:	Value of Award Shares as at the date of the Announcement (Note 1) HK$ 1,955,000 1,150,000 1,150,000 1,380,000 1,380,000 575,000 115,000 7,705,000 23,920,000	Value of Award Shares as at the Latest Practicable Date (Note 2) HK$ 2,227,000 1,310,000 1,310,000 1,572,000 1,572,000 655,000 131,000
		8,777,000
		27,248,000

1. The value of the Award Shares was calculated based on the closing price of the Shares of HK$0.115 on the date of the Announcement.

2. The value of the Award Shares was calculated based on the closing price of the Shares of HK$0.131 on the Latest Practicable Date.

The Grantees are Directors and senior management of the Group. The Grantees were selected based on their positions and responsibilities at the Group. The Board considers that the Grantees are important for the continual operation and development of the Group and proposed to grant the Award Shares as incentives to the Grantees to retain talents at the Group and other reasons as set out in the section headed “REASONS AND BENEFITS OF THE GRANT OF AWARD SHARES” below.

– 8 –

LETTER FROM THE BOARD

The Board has considered granting Award Shares to Dr. Mo and Miss Mo, both being executive Directors. However, Dr. Mo considered that, as the substantial Shareholder, he will be indirectly benefited by the granting of Award Shares to the Grantees so as to retain the Grantees at the Group. Dr. Mo and Miss Mo, being Dr. Mo’s associate, opted not to be granted with Award Shares at the current time. As such, the Board resolved not to grant Award Shares to Dr. Mo and Miss Mo. There are no plans to issue award shares to Dr. Mo and/or Miss Mo in the foreseeable future.

REASONS AND BENEFITS OF THE GRANT OF AWARD SHARES

The Group is principally engaged in sales and distribution of natural gas and LPG in China including the provision of piped gas, transportation, distribution and retail of LPG and production and sale of barreled drinking water.

During the year ended 31 March 2016, the Group recorded a net loss of approximately RMB127.9 million mainly due to the non-cash impairment losses of approximately RMB320.3 million. Excluding depreciation and amortisation, impairment, finance costs and tax, the core profit for year ended 31 March 2016 would be approximately RMB297.6 million (“ EBITA ”), representing a growth of approximately 2.5% when compared with 2015. Use of EBITA to measure the core profit can eliminate certain extraneous factors and allow a clearer reflection of the operation of the Group. Further, given that the current market price of the Share is at the lower end of 52 weeks market price, the effect of profit or loss for the issue of the Award Shares, which is correlated to the share price at the date of grant, will be relatively lower, the Board considers that it is a suitable time to grant the Award Shares.

The proposed grant of the Award Shares is to (1) align the interest of the Grantees with the continue performance of the Group; (2) recognise the contributions the Grantees over years of their services; (3) motivate the Grantees; (4) provide an additional form of reward to the Grantees; and (5) attract and retain the Grantees for the continual operation and development of the Group. The number of Award Shares is determined by the Board after taking into consideration factors including, in the order of importance, performance, role, responsibilities, annual Directors’ fee or salary and years of service and taking into account the remuneration packages of other companies engaged in the piped gas and LPG industry in China (the “ Industry Comparables ”). The Industry Comparables are selected with reference to (i) all Industry Comparables are non-state owned enterprises and are engaged in the piped gas and LPG industry in China; and (ii) the profitability of the Industry Comparables. A comparison of the remuneration packages of the Directors with Industry Comparables was made and such remuneration packages were subsequently reviewed by the remuneration committee in year 2016 but no material increment were made to the Directors’ fee or emoluments so as to minimise the cash outflow of the Group.

– 9 –

LETTER FROM THE BOARD

When the average emoluments per director of the companies in the Industry Comparables are separated into two categories for analysis, in particular, (1) executive director (“ ED ”) and (2) independent non-executive director (“ INED ”) and analysed for the five-year period from 1 January 2011 to 31 December 2015 (the “ Period ”) as set out in the following table:

	2015		2014		2013		2012		2011
	ED	INED	ED	INED	ED	INED	ED	INED	ED	INED
	_RMB’000 RMB’000 _		_RMB’000 RMB’000 _		_RMB’000 RMB’000 _		_RMB’000 RMB’000 _		RMB’000 RMB’000
Company name
(Stock code)
Suchuang Gas Corporation
Ltd. (1430)	1,963	139	–	–	–	–	–	–	–	–
China Tian Lun Gas
Holdings Ltd (1600)	257	52	176	60	184	53	160	51	183	60
Binhai Investment Co. Ltd.
(2886)	1,705	215	2,165	218	1,511	209	721	161	2,447	669
Zhongyu Gas Holdings Ltd
(3633)	3,474	204	5,720	180	4,742	143	2,057	146	2,896	301
(A) Average annual
remuneration of the
Industry Comparables	1,850	153	2,687	153	2,146	135	979	120	1,842	343
(B) Average annual
remuneration of the
Connected Grantees
(Note)	924	92	1,210	103	1,177	91	1,152	106	1,099	106
The amount under-
remunerated of the
Connected Grantees
(A) – (B)	926	61	1,477	50	969	44	(173)	14	743	237

Source: website of the Stock Exchange

Note:

The average annual remuneration of the Connected Grantees who were Executive Directors and Independent Non-Executive Directors during the Period. Mr. Jin was included as he was an Executive Director from 11 April 2005 to 31 August 2015.

The aggregate of average annual remuneration per executive director and the average annual remuneration per independent non-executive director of the Industry Comparables for the Period are approximately RMB9.50 million and RMB0.90 million respectively; while the aggregate of average annual remuneration per executive Director and the average annual remuneration per independent non-executive Director for the Period are approximately RMB5.56 million and RMB0.50 million respectively. The average remuneration per executive director and the average remuneration per independent non-executive director of the Industry Comparables for the Period are higher than that of the Company’s average remuneration by a difference of approximately RMB3.94 million and RMB0.40 million respectively. Thus, the total remuneration to the Connected Grantees are underremunerated by approximately RMB16.96 million (RMB3.94 million × 4 executive Directors + RMB0.40 million × 3 independent non-executive Directors) (equivalent to approximately HK$19.78 million). Therefore, the Award Shares with the value of approximately HK$16.22 million granted to the Connected Grantees compensates this difference. Most Connected Grantees did not have increment for their annual emoluments from the year ended 31 March 2012 to the year ended 31 March 2016.

– 10 –

LETTER FROM THE BOARD

We have also compared the emoluments of Non-connected Grantees with the salary range offered in the market through the following human resources/job hunting web sites in the PRC and Hong Kong respectively.

http://www.michaelpage.com.hk http://www.kellyservices.com.hk http://www.jobmarket.com.hk http://www.aquissearch.com http://hudson.hk https://www.roberthalf.com.hk https://www.robertwalters.com.hk http://www.bankhr.com

The following is the summary for the comparison between the market ranges to the salaries for Non-connected Grantees:

Name
Average
salary for
past three
years
HK$’000
(a)
Mr. Tse
851.82
Ms. Li
668.03
Mr. Li
353.45
Mr. Liu
212.07
Mr. Bian
247.42
Ms. Yu
94.25
Mr. Yang
94.25

Annual salary range
from market(Note)
Difference
between
market
salary and
salary
From
To
Average
HK$’000
HK$’000
HK$’000
HK$’000
(b)
(a)-(b)
914.00
1,324.00
1,119.00
(267.18)
630.00
1,002.50
816.25
(148.22)
184.52
886.89
535.70
(182.25)
253.07
550.70
401.88
(189.81)
281.84
598.77
440.31
(192.89)
77.76
295.23
186.50
(92.24)
98.71
138.79
118.75
(24.50)

Note:

Annual market salary range from market was calculated with reference to the salary surveys or reports from leading professional recruitment consultancy companies in Hong Kong and the PRC respectively. The salary surveys or reports’ findings covered all major industry sectors and ranged from market leading multinationals to local and small and medium sized enterprises. The statistics provided in salary surveys or reports divided job types by “years of experience” or “size of organisation”. Only salary of similar jobs position, years of experience and size of organisation were used to compile the information of the annual salary range from market as set out above.

– 11 –

LETTER FROM THE BOARD

Depending on the performance, role and responsibilities, on average, the Grantees shall get 4.56 years of their respective annual remuneration in Award Shares.

The following is the basis on which the number of Award Shares were determined:

			Weighting	factor
	Average						Number of
	emoluments	Performance/		Period of			Award Shares
	for past three	responsibility	Role	services	Factor	Value of	to be granted
Name of Grantee	years	(Note 1)	(Note 1)	(Note 2)	multiple total	Award Shares	(Note 3)
	HK$’000					HK$’000
					(e) =	(f) =
	(a)	(b)	(c)	(d)	(b) x (c) x (d)	(a) x (e)
Mr. Zhang	1,570.91	1.10	1.00	1.13	1.24	1,947.93	15,000,000
		(Note 4)
Mr. Chu	1,701.69	2.70	2.00	0.96	5.18	8,814.76	69,000,000
		(Note 4)					(Note 5)
Mr. Fan	273.14	2.70	3.00	1.26	10.21	2,788.76	22,000,000
Mr. Jin	933.90	1.40	1.50	1.30	2.73	2,549.55	20,000,000
Mr. Tse	851.82	1.75	1.50	0.96	2.52	2,146.59	17,000,000
Ms. Li	668.03	1.30	1.50	1.03	2.01	1,342.74	10,000,000
Mr. Li	353.45	1.50	2.00	1.29	3.87	1,367.85	10,000,000
Mr. Liu	212.07	2.80	2.00	1.29	7.22	1,531.15	12,000,000
Mr. Bian	247.42	2.70	2.00	1.13	6.10	1,509.26	12,000,000
Ms. Yu_(Note 6)_	94.25	N/A	N/A	N/A	N/A	N/A	5,000,000
Mr. Yang_(Note 6)_	94.25	N/A	N/A	N/A	N/A	N/A	1,000,000

Notes:

Performance/responsibility and role factors ranged from 1 to 3, with 1 being the lowest and 3 being the highest. Performance/responsibility is measured against the achievement of goals assigned to individual Grantee. Role means the contribution of individual grantee in his/her work groups. The Board decided collectively on the performance/responsibility and role of each Grantee. The scoring was assessed by the chairman of the Board and further reviewed by remuneration committee.
Period of services represented the length of service up to 30 June 2016 with whole sum of 1 representing 10 years of services.
The average of the closing prices of the Shares in June 2016 of approximately HK$0.1244 was used to calculate the number of Award Shares. The number of Award Shares to be granted is rounded down to the nearest million.

– 12 –

LETTER FROM THE BOARD

Notes: (continued)

The major responsibilities of deputy chairman of the Board is for the strategic planning and business development of the Group. Different scoring between Mr. Chu and Mr. Zhang are mainly due to the responsibilities taken; work load and performance and time devoted.

Mr. Zhang focuses to assist and support the chairman of the Board in providing leadership in the Board. He deputises for the chairman at meetings of the Board or general meetings and to support the chairman of the Board’s role. He also acts as a member of remuneration committee of the Board to provide advice on the emoluments issue. His extensive experience in financial and capital markets in the PRC is a valuable asset to the Company for the development of the Group’s business.

Mr. Chu, on the other hand, is not only responsible for strategic planning, business development and strategic management of the Group but also is the key management responsible for finance, compliance and investor relationship, fund raising activities, acquisitions and mergers and the supervision of the senior management stationed in Hong Kong. Mr. Chu also supports the managing Director who is responsible for the daily operations of the Group. His performance is well appraised by the Board. Mr. Chu was appointed as an executive Director in December 2008 and was subsequently promoted to a deputy chairman of the Board in March 2015.

Subject to the limit of below 1% of the total issued share capital of the Company.
The salaries of Ms. Yu and Mr. Yang are far behind the market average, Award Shares are used as awards for future services and compensation for the past difference.

For the independent non-executive Directors, as they do not have any executive and management responsibility in the Group, their performance and responsibilities are not easily measurable or comparable to other Directors. Hence, each of the independent non-executive Directors was granted with 5,000,000 Award Shares, which was less than 0.1% of the existing issued share capital of the Company. Although the average value of the Award Shares granted to the Non-connected Grantees is 3.3 times of their average emoluments for the past three years, their emoluments were below the market rate (please refer to the comparison on page 11 for details), the grant of Award Shares to them are partly used to compensate for the past difference. Further, each of the Non-connected Grantees (other than Mr. Tse, Ms. Yu and Mr. Yang) has joined the Group for more than ten years and each of Mr. Tse, Ms. Yu and Mr. Yang has joined the Group for more than nine years, nine years and six years respectively. The grant of the Award Shares was also partly used as a loyalty payment to award them for their length of services at the Group and to recognise the contributions made by the Non-connected Grantees over years of their services.

The basis on which the number of Award Shares were determined was reviewed and approved by the remuneration committee of the Board. The total amount of the Award Shares granted to the Grantees is about 3% of the existing issued share capital of the Company. The cap for each of the Grantees (excluded independent non-executive Directors) and each of the independent non-executive Directors is 1.0% and 0.1% of the existing issued share capital of the Company respectively.

– 13 –

LETTER FROM THE BOARD

The Board, when determining the number of Award Shares to be grant to Mr. Chu, Mr. Fan and Mr. Jin, took into account their roles and responsibilities. Mr. Chu is the key management responsible for finance, compliance and investor relationship, fund raising activities, acquisitions and mergers and the supervision of the senior management stationed in Hong Kong. Mr. Fan is the newly promoted managing Director who is responsible for the execution of strategic plans set by the Board and the supervision of the senior management stationed in the PRC. Mr. Jin has been an executive Director for the past 10 years. He was responsible for business development and acquisitions and mergers and overall operation in the PRC. Mr. Jin was re-designated as nonexecutive Director in September 2015 and retired as non-executive Director on the conclusion of annual general meeting of the Company held on 9 September 2016, he was re-designated as a chief strategy officer of the Group and is responsible to assist the Board to formulate strategic plans, including industry analysis, Group’s positioning and acquisition projects, for medium and long-term growth.

Based on the above, the Board (including the independent non-executive Directors) is of the view that the terms of grant of the Award Shares are fair and reasonable and in the interests of the Shareholders as a whole.

EFFECTS ON SHAREHOLDING STRUCTURE

Set out below is the shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) immediately after the allotment and issue of the Award Shares.

Shareholders Dr. Mo Mr. Zhang Mr. Chu Mr. Fan Dr. Liu Prof. Zhao Mr. Sin Public Shareholders Mr. Jin Non-connected Grantees Other public Shareholders Total	As at the Latest Practicable Date No. of Shares % 1,743,917,695 25.11 323,271,282 4.65 14,004,605 0.20 – – – – – – – – – – 30,824,035 0.44 4,832,936,519 69.60 6,944,954,136 100.00	Immediately after the allotment and issue of Award Shares	Immediately after the allotment and issue of Award Shares
	No. of Shares 1,743,917,695 323,271,282 14,004,605 – – – – – 30,824,035 4,832,936,519 6,944,954,136	No. of Shares 1,743,917,695 338,271,282 83,004,605 22,000,000 5,000,000 5,000,000 5,000,000 20,000,000 97,824,035 4,832,936,519 7,152,954,136	% 24.38 4.73 1.16 0.31 0.07 0.07 0.07 0.28 1.37 67.56
			100.00

– 14 –

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

As each of Mr. Zhang, Mr. Chu, Mr. Fan, Mr. Jin, Dr. Liu, Prof. Zhao and Mr. Sin are connected person of the Company, the grant of the Award Shares to the Connected Grantees constitute connected transactions on the part of the Company under Chapter 14A of the Listing Rules and will be subject to reporting, announcement and Independent Shareholders’ approval requirements.

The grant of the Award Shares to the Non-connected Grantees is subject to, among others, the approval by the Shareholders at the SGM.

INCREASE IN AUTHORISED SHARE CAPITAL

The Company had an authorised share capital of HK$560,000,000, divided into 7,999,999,999 Shares, of which 6,944,954,136 Shares were in issue as at the Latest Practicable Date. The Board proposed to increase the authorised share capital of the Company from HK$560,000,000, divided into 7,999,999,999 Shares, to HK$2,660,000,000.07 divided into 38,000,000,000 Shares by creating an additional 30,000,000,001 Shares. The Shares shall rank pari passu with the existing Shares upon issue. Save as disclosed above, the Board has no present intention of issuing any part of the Shares.

REASONS FOR THE INCREASE IN AUTHORISED SHARE CAPITAL

In order to accommodate future issues of Shares which shall include, but not limited to, providing the Company with greater flexibility to raise fund by allotting and issuing Shares in the future as and when necessary, the Board proposed the Increase in Authorised Share Capital.

CONDITION OF THE INCREASE IN AUTHORISED SHARE CAPITAL

The Increase in Authorised Share Capital is conditional upon the passing of an ordinary resolution by the Shareholders at the SGM to approve the Increase in Authorised Share Capital.

SGM

The notice convening the SGM to be held at the head office of Chinese People Holdings Company Limited, Conference Room, 1st Floor, No. 36 BDA International Business Park, No. 2 Jingyuan North Street, Economic Technological Development Area, Beijing, China to be held on Friday, 14 October 2016 at 1:30 p.m. is set out on pages 41 to 45 of this circular. The resolution proposed to be approved at the SGM will be taken by poll and an announcement will be made by the Company after the SGM on the result of the SGM.

– 15 –

LETTER FROM THE BOARD

A form of proxy for use at the SGM is enclosed with this circular. Whether or not you are able to attend the SGM in person, you are requested to complete the form of proxy enclosed and return it to the Company’s branch share registrar and transfer office in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment meeting thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the SGM or at any adjourned meeting thereof if you so wish and, in such event, the relevant form of proxy shall be deemed to be revoked.

As at the Latest Practicable Date, each of Mr. Zhang, Mr. Chu, Mr. Tse, Mr. Li, Mr. Bian and Mr. Liu is interested in 323,271,282 Shares, 14,004,605 Shares, 128,465 Shares, 19,030,449 Shares, 10,481,915 Shares and 1,183,206 Shares respectively. Save as disclosed above, the Grantees do not have interest in any Shares. As separate resolutions for the grant of Award Shares to each Connected Grantees will be considered at the SGM, each of the Grantees and their respective associates (to the extent they have an existing interest in the Shares) is required to abstain from voting on the relevant resolution relating to the grant of Award Shares to him/her at the SGM. Each of the Connected Grantees has abstained from voting on the resolution relating to the grant of Award Shares to each of them at the Board meeting.

To the best knowledge, information and belief of the Directors, having made all reasonable enquiries, none of the Shareholders has a material interest in the Increase in Authorised Share Capital as at the Latest Practicable Date and as such, none of the Shareholders will be required to abstain from voting at the SGM in respect of the resolution relating to the Increase in Authorised Share Capital.

To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, as at the Latest Practicable Date, there is (i) no voting trust or other agreement or arrangement or understanding entered into by or binding upon its ultimate beneficial owners and their respective associates; and (ii) no obligation or entitlement of its ultimate beneficial owners and their respective associates, whereby it or he has or may have temporarily or permanently passed control over the exercise of the voting right in respect of its or his Shares to a third party, either generally or on a case-by-case basis.

– 16 –

LETTER FROM THE BOARD

INDEPENDENT BOARD COMMITTEE AND THE INDEPENDENT FINANCIAL ADVISER

As all the independent non-executive Directors will be granted with the Award Shares and have a material interest in the relevant transactions, an independent board committee will not be formed.

Innovax Capital has been appointed to advise the Independent Shareholders in relation to the grant of Award Shares to the Connected Grantees and the transactions contemplated thereunder.

RECOMMENDATION

The Board (including the independent non-executive Directors), having taken into account of the reasons set out in the paragraphs headed “REASONS AND BENEFITS OF THE GRANT OF AWARD SHARES” above and the recommendations of Innovax Capital, considers that the terms of grant of the Award Shares and the transactions contemplated thereunder 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. Accordingly, the Board recommends the Independent Shareholders to vote in favour of all the ordinary resolutions which will be proposed at the SGM for approving the grant of the Award Shares and the transactions contemplated thereunder, including the allotment and issue of the Award Shares under the Specific Mandate.

The Board considers that the Increase in Authorised Share Capital is in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM for approving the Increase in Authorised Share Capital.

ADDITIONAL INFORMATION

Your attention is drawn to the letter from Innovax Capital set out on pages 18 to 37 of this circular which contains its advice to the Independent Shareholders in relation to the grant of Awards Share to the Connected Grantees and the transactions contemplated thereunder and the principal factors and reasons considered by it in arriving its opinions.

Your attention is also drawn to other additional information as set out in the appendix to this circular.

Yours faithfully,

For and on behalf of the Board of

Chinese People Holdings Company Limited Dr. Mo Shikang

Chairman and Executive Director

– 17 –

LETTER FROM INNOVAX CAPITAL

Set out below is a full text of the letter of advice from Innovax Capital, the Independent Financial Adviser, to the Independent Shareholders in respect of the grant of Award Shares to the Connected Grantees and the transactions contemplated thereunder which has been prepared for the purpose of incorporation into this circular.

==> picture [91 x 45] intentionally omitted <==

Room 2002, 20/F Chinachem Century Tower, 178 Gloucester Road, Wan Chai, Hong Kong

GRANT OF AWARD SHARES AND CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Shareholders in respect of the Grant of 208,000,000 Award Shares to Grantees, details of which are set out in the letter from the Board (the “ Letter from the Board ”) contained in the circular dated 23 September 2016 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.

On 27 July 2016, the Board resolved to grant a total of 208,000,000 Award Shares to fourteen Selected Grantees, of which, (i) 141,000,000 Award Shares will be awarded to seven Connected Grantees; and (ii) 67,000,000 Award Shares will be awarded to seven Non-connected Grantees, all by way of issue and allotment of new Shares. As at the Latest Practicable Date, the 208,000,000 Award Shares represent i) approximately 2.99% of the existing issued share capital of the Company; and ii) approximately 2.91% of the issued share capital of the Company as enlarged by the allotment and issue of the Award Shares. The Award Shares shall be allotted and issued under the Specific Mandate to be granted to the Directors at the SGM. The Grantees are Directors and senior management of the Group. They were selected based on their positions and responsibilities at the Group. The Board considers that the Grantees are important for the continual operation and development of the Group and proposed to grant the Award Shares as incentives to the Grantees to retain them at the Group.

With reference to the Letter from the Board, seven of the Connected Grantees (namely Mr. Zhang, Mr. Chu, Mr. Fan, Mr. Jin, Dr. Liu, Prof. Zhao and Mr. Sin) are connected persons of the Company. As a result, the grant of Award Shares to the Connected Grantees constitutes connected transactions on the part of the Company under Chapter 14A of the Listing Rules and will be subject to reporting, announcement and Independent Shareholders’ approval requirements. The Connected Grantees are required to abstain from voting on the resolution relating to the grant of Award Shares to each of them at the SGM. Each of the Connected Grantees has abstained from voting on the resolution relating to the grant of Awards Shares to each of them at the Board meeting.

– 18 –

LETTER FROM INNOVAX CAPITAL

As all the independent non-executive Directors will be granted with the Award Shares and have a material interest in the relevant transactions, an independent board committee will not be formed.

We are not connected with the Directors, chief executive and Substantial Shareholders of the Group or any of their respective subsidiaries or associates and are therefore considered suitable to give independent advice to the Independent Shareholders. During the last two years, we did not have any engagement with the Company and no arrangement exists whereby we will receive any fees or benefits from the Company or any of their associates.

BASIS OF OUR OPINION

In formulating our opinion, we have relied on the accuracy of the information and representations contained in the Circular and have assumed that all information and representations made or referred to in the Circular were true at the time they were made and continue to be true as at the Latest Practicable Date. We have also relied on our discussion with the Directors and management of the Group regarding the Group, including the information and representations contained in the Circular. We have also assumed that all statements of belief, opinion and intention made by the Directors and management of the Group in the Circular were reasonably made after due enquiry. We consider that we have reviewed sufficient information to reach an informed view, to justify our reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our advice.

We have no reason to suspect that any material facts have been omitted or withheld from the information contained or opinions express in the Circular nor to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and management of the Group. We have not, however, conducted an independent in-depth investigation into the business and affairs of the Group, operations, financial position and background of the Connected Grantees nor have we carried out any independent verification of the information supplied.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion regarding the Grant of Award Shares to the Connected Grantees, we have considered the following principal factors and reasons:

1. Information of the Group

– 19 –

LETTER FROM INNOVAX CAPITAL

The following table summarises the financial information of the Group for the audited results for the two years ended 31 March 2016 and 2015 respectively prepared in accordance with Hong Kong Financial Reporting Standards (“ HKFRS ”) extracted from the annual report of the Group (“ 2016 Annual Report ”).

	For the year ended	31 March
	2016	2015
	(RMB’000)	(RMB’000)	Year change
	(audited)	(audited)	(%)
Revenue	954,335	968,325	(1.44)
– Provision of piped gas	578,556	529,872	9.19
– Transportation, distribution
and retail of LPG	372,312	434,923	(14.40)
– Production of sale of
barreled drinking water	636	65	878.46
– Lottery agency	2,831	3,465	(18.30)
(Loss) profit for the year	(127,931)	223,820	–

According to the 2016 Annual Report, the revenue for the year amounted to approximately RMB954.34 million, as compared with the revenue of approximately RMB968.33 million for the year ended 31 March 2015, representing a decrease of approximately 1.44% from 31 March 2015 to 31 March 2016. The loss for the year amounted to RMB127.93 million, as compared with the profit of approximately RMB223.82 million for the year ended 31 March 2015. The loss is mainly due to the impairment loss recognised in respect of intangible assets and property, plant and equipment of approximately RMB315.65 million and RMB4.68 million respectively. Such impairment losses are non-cash item and one-off charge to the profit and loss.

2. Reasons for and benefits of the grant of Award Shares to Connected Grantees

The Connected Grantees are the Directors and senior management of the Company, which have already been with the Group from over three to thirteen years, respectively. The 141,000,000 Award Shares to be issued and allotted to the Connected Grantees represent approximately 2.03% of the existing issued share capital of the Company, and approximately 1.97% of the issued shares capital of the Company as enlarged by the issue and allotment of the Award Shares.

– 20 –

LETTER FROM INNOVAX CAPITAL

The table below summarises the information about the Connected Grantees and the number of the Award Shares to be granted to each of them:

Name of Connected Grantees Position held at the Company/Group Major responsibilities Mr. Zhang Deputy chairman and executive Director Strategic planning, business development and strategic management of the Group Mr. Chu Deputy chairman and executive Director Strategic planning and financial management of the Group Mr. Fan Managing Director and executive Director Management of the overall operations of the Group Mr. Jin Chief strategy officer (Note 1) Assist the Board to formulate strategic plans, including industry analysis, Group’s positioning and acquisition projects, for medium and long term growth Dr. Liu Independent non-executive Director Supervise management, participate in the direction of the Group's business and affairs and speak out firmly and objectively on issues that may come before the Board Prof. Zhao Independent non-executive Director Supervise management, participate in the direction of the Group's business and affairs and speak out firmly and objectively on issues that may come before the Board Mr. Sin Independent non-executive Director Supervise management, participate in the direction of the Group's business and affairs and speak out firmly and objectively on issues that may come before the Board Total Notes:	Number of Award Shares granted Value of Award Shares as at the date of the Announcement (Note 2) HK$ 15,000,000 1,725,000 69,000,000 7,935,000 22,000,000 2,530,000 20,000,000 2,300,000 5,000,000 575,000 5,000,000 575,000 5,000,000 575,000 141,000,000 16,215,000	Value of Award Shares as at the Latest Practicable Date Percentage of the total number of issued Shares as at the Latest Practicable Date (Note 3) HK$ 1,965,000 0.22% 9,039,000 0.99% 2,882,000 0.32% 2,620,000 0.29% 655,000 0.07% 655,000 0.07% 655,000 0.07% 18,471,000 2.03%	Value of Award Shares as at the Latest Practicable Date Percentage of the total number of issued Shares as at the Latest Practicable Date (Note 3) HK$ 1,965,000 0.22% 9,039,000 0.99% 2,882,000 0.32% 2,620,000 0.29% 655,000 0.07% 655,000 0.07% 655,000 0.07% 18,471,000 2.03%
			2.03%

1. Mr. Jin retired as a non-executive Director after the conclusion of annual general meeting of the Company held on 9 September 2016.

– 21 –

LETTER FROM INNOVAX CAPITAL

Notes:

2. The value of the Award Shares was calculated based on the closing price of the Shares of HK$0.115 on the date of the Announcement.

3. The value of the Award Shares was calculated based on the closing price of the Shares of HK$0.131 on the Latest Practicable Date.

Set out below is the shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) immediately after the allotment and issue of the Award Shares.

Shareholders Dr. Mo Mr. Zhang Mr. Chu Mr. Fan Dr. Liu Prof. Zhao Mr. Sin Public Shareholders Mr. Jin Non-connected Grantees Other public Shareholders Total	As at the Latest Practicable Date No. of Shares % 1,743,917,695 25.11 323,271,282 4.65 14,004,605 0.20 – – – – – – – – – – 30,824,035 0.44 4,832,936,519 69.60 6,944,954,136 100.00	Immediately after the allotment and issue of Award Shares No. of Shares % 1,743,917,695 24.38 338,271,282 4.73 83,004,605 1.16 22,000,000 0.31 5,000,000 0.07 5,000,000 0.07 5,000,000 0.07 20,000,000 0.28 97,824,035 1.37 4,832,936,519 67.56 7,152,954,136 100.00	Immediately after the allotment and issue of Award Shares No. of Shares % 1,743,917,695 24.38 338,271,282 4.73 83,004,605 1.16 22,000,000 0.31 5,000,000 0.07 5,000,000 0.07 5,000,000 0.07 20,000,000 0.28 97,824,035 1.37 4,832,936,519 67.56 7,152,954,136 100.00
			100.00

Dr. Liu, Prof. Zhao and Mr. Sin are the independent non-executive Directors of the Company. After the grant of Award Shares, they will not hold more than 1% of the total issued Shares of the Company and accordingly are still in compliance with the independence requirement under Rule 3.13 of the Listing Rules.

The Board considers that the grant of the Award Shares to Connected Grantees provide them with incentives and will allow the Group to attract, retain and motivate talents for the continual operation and development of the Group, and align the Connected Grantees’ interest with the long-term performance of the Group. The grant of the Award Shares recognises the Connected Grantees’ continual support to the Group and their effort that will promote the Group’s future development.

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LETTER FROM INNOVAX CAPITAL

We concur with the Board’s view that the grant of the Award Shares to Connected Grantees will allow the Group to attract, retain and motivate talents for the continual operation and development of the Group. It would be in the best interests of the Connected Grantees if they continue to hold all Award Shares after the Vesting Period if the share price of the Company continues to go up. As such, the length of the Vesting Period should not affect whether the grant of the Award Shares can align the long term interest of the Connected Grantees.

We have discussed with the management of the Group and understand that the Group has considered several alternative incentive methods apart from the shares award, including cash bonuses, remuneration increment and grant of share options. Both cash bonuses and remuneration increment would incur actual cash outflow by the Group. Also, since cash bonuses and remuneration increment do not tie with the future business performance of the Group and therefore cannot serve the purpose of aligning the Connected Grantees’ interest with the long-term performance of the Group. However, unlike Award Shares, exercising share options require the option holder to pay the subscription price in order to realise the upside above the subscription price, whereas Award Shares only require the Connected Grantees to pay the initial nominal subscription price of HK$1. As the grant of Award Shares can provide higher incentive to the Connected Grantees than share options, we concur with the Board’s view that the grant of Award Shares is more appropriate mean than share options. In addition, although the Group is able to receive proceeds from the exercise of the share options, we also take into consideration that i) the Company would have profit and loss effect by granting of share options, of which the impact could be enormous as the value of share options depend on a number of variables which are either difficult to ascertain or can only be ascertained subject to a number of theoretical basis and speculative assumptions. As a result, the profit attributable to Shareholders would be inevitably affected; and ii) the financial impact to the granting of award shares is fixed and immaterial. As such we are of the view that granting Award Shares will benefit the Shareholders more, thus granting such is fair and reasonable and in the interests of the Shareholders. After careful consideration of the various alternatives, the Board considers, and we concur with its view, that the issue of the Award Shares is the most appropriate mean among these alternatives to award the Connected Grantees.

The proposed grant of the Award Shares is to (1) align the interest of selected senior executives of the Group with the continue performance of the Group; (2) recognise the contributions made by the Grantees over years of their services; (3) motivate the Grantees; (4) provide an additional form of reward to the Grantees; and (5) attract and retain Grantees for the continual operation and development of the Group. The number of Award Shares is determined by the Board after taking into consideration factors including, in the order of importance, performance, role, responsibilities, annual Directors’ fee or salary and years of service and taking into account the remuneration packages of other companies in the piped gas and LPG industry in the PRC.

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LETTER FROM INNOVAX CAPITAL

In particular, the Board, when determining the number of Award Shares to be grant to Mr. Chu, Mr. Fan and Mr. Jin, took into account their roles and responsibilities. Mr. Chu is the key management responsible for finance, compliance, investor relationship, fund raising, acquisitions and mergers and the supervision of the senior management stationed in Hong Kong. Mr. Fan is newly promoted managing Director who is responsible for the execution of strategic plans set by the Board and the supervision of the senior management stationed in the PRC. Mr. Jin has been an executive Director for the past 10 years. He was responsible for business development and acquisitions and mergers and overall operation in the PRC. Mr. Jin had been appointed as an executive director of the Group since 11 April 2005 until he was re-designated as a non-executive Director on 1 September 2015. Mr. Jin retired as a nonexecutive director on 9 September 2016, and he was re-designated as a chief strategy officer of the Group. Mr. Jin mainly assists the Board to formulate strategic plans, including industry analysis, Group’s positioning and acquisition projects, for medium and long term growth.

To assess the fairness and reasonableness of the value of the Award Shares of approximately HK$16,215,000 granted to the Connected Grantees, we have, to our best knowledge, identified 4 comparable companies (the “ Industry Comparables ”) which are listed on the Stock Exchange. The Industry Comparables are selected with reference to i) all Industry Comparables must be non-state owned enterprises and are engaged in the piped gas and LPG industry in the PRC; and ii) the Industry Comparables with the average net profit excluding the extraordinary items for five financial years ended 31 December 2015 between approximately RMB100 million to RMB200 million.

The following table illustrates the net profit (excluding the extraordinary items) for the five years ended 31 December 2015 of the Industry Comparables:-

Company Name (Stock code) China Tian Lun Gas Holdings Ltd (1600) Zhengyu Gas Holdings Ltd (3633) Binhai Investment Co. Ltd. (2886) Suchuang Gas Corporation Ltd. (1430) The Company	Year ended 31 December 2015 31 December 2014 31 December 2013 31 December 2012 31 December 2011 Average RMB million RMB million RMB million RMB million RMB million RMB million 282 241 186 137 90 187 51 286 258 229 110 187 172 168 97 93 51 116 139 112 106 N/A N/A 119 188 224 118 226 57 163

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LETTER FROM INNOVAX CAPITAL

In line with the maximum value of the Award Shares to be granted to the Connected Grantees is equivalent to five years of their respective annual remuneration, we therefore based on the average annual remuneration of the Executive Directors and Independent NonExecutive Directors for the preceding five financial years for comparison. According to the information disclosed in the annual reports from 1 January 2011 to 31 December 2015 (the “ Period ”) of the Industry Comparables, we have compared the annual remuneration of the Executive Directors and Independent Non-Executive Directors of the Group with that of the Industry Comparables for the same Period.

A summary of the average annual remuneration of the Executive Directors (the “ ED ”) and Independent Non-Executive Directors (the “ INED ”) of the Industry Comparables are set out in the table below:

	31 December 2015	31 December 2015	31 December 2014	31 December 2014	31 December 2013	31 December 2013	31 December 2012	31 December 2012	31 December 2011	31 December 2011
	ED	INED	ED	INED	ED	INED	ED	INED	ED	INED
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Company name
(Stock code)
China Tian Lun
Gas Holdings Ltd
(1600)	257	52	176	60	184	53	160	51	183	60
Zhongyu Gas
Holdings Ltd
(3633)	3,474	204	5,720	180	4,742	143	2,057	146	2,896	301
Binhai Investment Co.
Ltd. (2886)	1,705	215	2,165	218	1,511	209	721	161	2,447	669
Suchuang Gas
Corporation Ltd.
(1430)	1,963	139	–	–	–	–	–	–	–	–
AVERAGE	1,850	153	2,687	153	2,146	135	979	120	1,842	343

Source: website of the Stock Exchange

– 25 –

LETTER FROM INNOVAX CAPITAL

	31 December 2015	31 December 2015	31 December 2014	31 December 2014	31 December 2013	31 December 2013	31 December 2012	31 December 2012	31 December 2011	31 December 2011
	ED	INED	ED	INED	ED	INED	ED	INED	ED	INED
	_RMB’000 RMB’000 _		_RMB’000 RMB’000 _		_RMB’000 RMB’000 _		_RMB’000 RMB’000 _		RMB’000 RMB’000
(A) Average annual
remuneration of the
Industry Comparables	1,850	153	2,687	153	2,146	135	979	120	1,842	343
(B) Average annual
remuneration of the
Connected Grantees
(Note 1)	924	92	1,210	103	1,177	91	1,152	106	1,099	106
The amount under-remunerated
of the Connected Grantees
(A) – (B)	926	61	1,477	50	969	44	(173)	14	743	237
Note:

1. The average annual remuneration of the Connected Grantees who were Executive Directors and Independent Non-Executive Directors during the Period. Mr. Jin was included as he was an Executive Director from 11 April 2005 to 31 August 2015.

As illustrated from the table above, the total average annual remuneration of the Executive Directors and Independent Non-Executive Directors during the Period i) of the Industry Comparables is approximately RMB9.50 million and RMB0.90 million, respectively; and ii) of the Group is approximately RMB5.56 million and RMB0.50 million, respectively. The total average remuneration of the Executive Directors and Independent Non-Executive Directors for the Industry Comparables is higher than the Group’s total remuneration for the same period, by a difference of approximately RMB3.94 million and RMB0.40 million, respectively.

In another word, the four Executive Directors and three Independent Non-Executive Directors of the Group has been under-remunerated from 1 January 2011 to 31 December 2015 by RMB16.96 million (equivalent to approximately HK$19.78 million) which is in line with the Award Shares with the value of approximately HK$16.22 million. Therefore the Award Shares granted to the Connected Grantees compensates this difference.

Based on the above, we concur with the Board (including the independent nonexecutive Directors) that the terms of grant of the Award Shares are fair and reasonable and in the interests of the Shareholders as a whole.

The Group is of the view that each of the Connected Grantees plays a significant role in supporting and/or managing the Group. We consider that the Award Shares will further align their interests as key management members of the Group and Shareholders, and would further motivate them to devote their efforts to the Group’s development, which the Directors consider crucial and beneficial to the long-term development of the Group.

– 26 –

LETTER FROM INNOVAX CAPITAL

In view of the foregoing reasons for and possible benefits of the Award Shares to the Connected Grantees, we are of the opinion that the Award Shares to the Connected Grantees is in the interests of the Group and the Shareholders as a whole.

3. Principal terms of the Award Shares to the Connected Grantees

The principal terms of the allotment and issue of the Award Shares to the Connected Grantees are set out as follows:

Total number of Award Shares An aggregate of 208,000,000 Awards Shares, granted comprising (i) 141,000,000 Award Shares proposed to be issued and allotted to the Connected Grantees and (ii) 67,000,000 Award Shares proposed to be issued and allotted to the Non-connected Grantees.

Percentage of Award Shares in The aggregate of 141,000,000 new Award the share capital of the Shares proposed to be issued and allotted to the Company Connected Grantees represents approximately 2.03% of the total number of Shares in issue as at the Latest Practicable Date and approximately 1.97% of the total number of Shares in issue as enlarged by the issue and allotment of the Award Shares.

Subscription Price of Award As the Award Shares are to be issued as award, a Shares nominal sum of HK$1 will be payable by each of the Connected Grantees.

Market value of Award Shares to Based on the closing price of HK$0.115 per Connected Grantees Share as quoted on the Stock Exchange as at the date of the Announcement, the market values of 141,000,000 Award Shares is approximately HK$16,215,000.

Based on the closing price of HK$0.131 per Share as quoted on the Stock Exchange as at the Latest Practicable Date, the market values of 141,000,000 Award Shares is approximately HK$18,471,000.

– 27 –

LETTER FROM INNOVAX CAPITAL

Vesting Period

The Award Shares shall be vested and allotted and issued to the Grantees on 30 September 2017.

Termination of employment within the Vesting Period

If a Grantee resigns or be terminated his/her employment during the Vesting Period, no Shares will be allotted and issued to the Grantees.

To assess the fairness and reasonableness of the terms of the allotment and issue of the Award Shares to Connected Grantees, we have compared such terms with those of other award share allotments by comparable companies which are listed on the Stock Exchange. Based on the information available from the Stock Exchange’s website, we have, to our best knowledge, identified 31 comparable issuance (the “ Grant Comparables ”) which had announced the granting of award shares to their respective employees and/or directors during the period (the “ Review Period ”) from 29 July 2015, being 12 months preceding the appointment date on 28 July 2016 for comparison purposes. We understand that the length of the Review Period is a commonly adopted time span for our analysis which covers sufficient number of comparable companies to reflect the current practice in the market in respect of the allotment of award shares. This could also avoid a biased result obtained within a short period of time.

– 28 –

LETTER FROM INNOVAX CAPITAL

A comparison of the terms of the allotment and issue of the Award Shares to Connected Grantees and those of the Grant Comparables are set out in the table below:

Issue Terms of the Grant Comparables (exclude option awards) and the Group

							Value of	Percentage	Average
						Total	award shares	of total	percentage of
					Value of	number of	granted to	number of	number of award
		Share price			award	award	connected	award	shares to each
		as at		Total	shares as	shares	person as at	shares to	individual awardee
	Date of	date of		number of	at date of	granted to	date of	the enlarged	to the enlarged
Company name	announcement/	announcement/		award	announcement/	connected	announcement/	total issued	total issued share
(stock code)	circular	circular	Awardee(s)	shares	circular	person	circular	share capital	capital	Vesting Period
		(HK$)			(HK$)		(HK$)
CT Environmental	19 July 2016	2.40	5 connected	1,652,000	3,964,800	380,000	912,000	~0.026%	~0.006% for	Not mentioned
Group Limited			persons and						connected
(1363)			other selected						persons
			participants						(Minimal for
									each)
									~0.02% for other
									employees (Minimal
									for each)
Tencent Holdings	6 July 2016	174.30	10,383 selected	56,213,500	9,798,013,050	None of	None of	~0.59%	Minimal	Not mentioned
Limited (700)			participants			the selected	the selected
						participants is	participants is
						a connected	a connected
						person	person
Topsearch	5 July 2016	2.47	Chairman and	60,000,000	148,200,000	60,000,000	148,200,000	~4.76%	~4.76%	~4 years and
International			Executive							8 months
(Holdings)			Director
Limited (2323)
First Pacific	30 June 2016	5.62	Non-executive	893,070	5,019,053	893,070	5,019,053	~0.02%	~0.02%	Not mentioned
Company			Director
Limited (142)
Da Ming	17 June 2016	2.31	360 selected	2,864,000	6,615,840	192,000	443,520	~0.25%	~0.02% to	Immediate
International			participants						7 connected
Holdings									persons and
Limited (1090)									their family
									(Minimal for each)
									~0.23% to
									non-connected
									persons (Minimal
									for each)

– 29 –

LETTER FROM INNOVAX CAPITAL

							Value of	Percentage	Average
						Total	award shares	of total	percentage of
					Value of	number of	granted to	number of	number of award
		Share price			award	award	connected	award	shares to each
		as at		Total	shares as	shares	person as at	shares to	individual awardee
	Date of	date of		number of	at date of	granted to	date of	the enlarged	to the enlarged
Company name	announcement/	announcement/		award	announcement/	connected	announcement/	total issued	total issued share
(stock code)	circular	circular	Awardee(s)	shares	circular	person	circular	share capital	capital	Vesting Period
		(HK$)			(HK$)		(HK$)
Kaisun Energy Group	14 June 2016	0.052	Trustee	113,052,000	5,878,704	None of	None of	~2.91%	Not disclosed	Not mentioned
Limited (8203)						the selected	the selected
						participants is	participants is
						a connected	a connected
						person	person
IGG Inc. (799)	3 June 2016	4.06	Certain selected	987,737	4,010,212	None of	None of	~0.07%	Not disclosed	4 years
			participants			the selected	the selected
						participants is	participants is
						a connected	a connected
						person	person
NetDragon Websoft	20 May 2016	21.95	Vice Chairman	100,000	2,195,000	100,000	2,195,000	~0.02%	~0.02%	Immediate
Inc. (777)			and
			Executive
			Director
Esprit Holdings	29 April 2016	6.80	CEO, CFO and	3,383,572	23,008,290	1,106,776	7,526,077	~0.17%	~0.04% to CEO	~1 year and 6
Limited (330)			other senior						~0.02% to CFO	months
			management						~0.11% to senior
									management (Not
									disclosed for each)
Nature Home	25 April 2016	1.08	2 directors and	29,000,000	31,320,000	4,000,000	4,320,000	~1.98%	~0.28% to 2	Not mentioned
Holding			23 selected						directors
Company Limited			participants						(or ~0.14% each)
(2083)
									~1.70% to
									23 employees
									(or ~0.07% each)
Hengdeli Holdings	22 April 2016	0.80	3 connected and	6,252,000	5,001,600	2,640,000	2,112,000	~0.13%	~0.055% to	Immediate
Limited (3389)			11 non-						connected persons
			connected						(or ~0.018% each)
			persons
									~0.076% to
									non-connected
									persons (~0.007%
									each)

– 30 –

LETTER FROM INNOVAX CAPITAL

							Value of	Percentage	Average
						Total	award shares	of total	percentage of
					Value of	number of	granted to	number of	number of award
		Share price			award	award	connected	award	shares to each
		as at		Total	shares as	shares	person as at	shares to	individual awardee
	Date of	date of		number of	at date of	granted to	date of	the enlarged	to the enlarged
Company name	announcement/	announcement/		award	announcement/	connected	announcement/	total issued	total issued share
(stock code)	circular	circular	Awardee(s)	shares	circular	person	circular	share capital	capital	Vesting Period
		(HK$)			(HK$)		(HK$)
China Mengniu Dairy	11 April 2016	12.42	selected	14,492,753	179,999,992	2,021,593	25,108,185	0.37%	~0.04% and 0.01%	2 years
Company Limited			participants						for 2 executive
(2319)									directors
									0.32% for the
									remaining selected
									personnel (Not
									disclosed for each)
IGG Inc. (799)	8 April 2016	3.42	Certain selected	595,476	2,036,528	None of	None of	~0.04%	Not disclosed	4 years
			participants			the selected	the selected
						participants is	participants is
						a connected	a connected
						person	person
Xinming China	7 April 2016	1.49	3 directors and	13,716,666	20,437,832	754,666	1,124,452	~0.73%	~0.03% to 3	1 year
Holdings Limited			147 selected						Directors (or
(2699)			participants						~0.001% each)
									~0.70% for the
									remaining selected
									participants
									(Minimal for each)
Fosun International	1 April 2016	11.04	15 connected	5,410,000	59,726,400	2,385,000	26,330,400	~0.06%	~0.028% to	3 years
Limited (656)			persons and						connected
			54 other selected						persons (or ~0.002%
			participants						each)
									0.032% to other
									employees
									(Minimal for each)
Earthasia International	31 March 2016	1.19	32 selected	11,905,751	14,167,844	None of	None of	~2.83%	~0.088% each	~55% immediate
Holdings Limited			participants			the selected	the selected
(6128)						participants is	participants is			~45% after
						a connected	a connected			1 year and
						person	person			9 months

– 31 –

LETTER FROM INNOVAX CAPITAL

							Value of	Percentage	Average
						Total	award shares	of total	percentage of
					Value of	number of	granted to	number of	number of award
		Share price			award	award	connected	award	shares to each
		as at		Total	shares as	shares	person as at	shares to	individual awardee
	Date of	date of		number of	at date of	granted to	date of	the enlarged	to the enlarged
Company name	announcement/	announcement/		award	announcement/	connected	announcement/	total issued	total issued share
(stock code)	circular	circular	Awardee(s)	shares	circular	person	circular	share capital	capital	Vesting Period
		(HK$)			(HK$)		(HK$)
Hao Tian	29 January	0.30	10 connected	29,614,906	8,884,472	21,941,195	6,582,359	~0.89%	~0.66% to 10	Not mentioned
Development	2016		persons and						connected persons
Group Limited			11 non-						(or ~0.66% each)
(474)			connected
			persons						~0.23% to 11
									non-connected
									persons (or ~0.021%
									each)
Jiangnan Group	28 January	1.11	4 directors and	35,300,000	39,183,000	8,000,000	8,880,000	~0.87%	~0.2% to 4 directors	~3 years and 2
Limited (1366)	2016		17 selected						(or ~0.05% each)	months
			participants
									~0.67% to 17
									employees (or ~0.04%
									each)
NetDragon Websoft	21 January	17.56	22 selected	159,750	2,805,210	N/A	N/A	~0.03%	Minimal	Not mentioned
Inc. (777)	2016		participants
Tang Palace (China)	7 January 2016	1.63	6 selected	2,100,000	3,423,000	None of	None of	~0.5%	~0.08% each	Not mentioned
Holdings Limited			participants			the selected	the selected
(1181)						participants is	participants is
						a connected	a connected
						person	person
Biostime International	31 December	15.98	CEO, COO plus	932,817	14,906,416	860,710	13,754,146	~0.15%	~0.02% each for	1 year
Holdings Limited	2015		4 other						CEO and COO
(1112)			connected
			persons						~0.1% each for
			and 5 non-						other connected
			connected						persons
			persons
									~0.01% for
									non-connected
									persons
Biostime International	29 December	15.58	54 selected	1,757,635	27,383,953	None of	None of	~0.28%	0.005% each	Some for
Holdings Limited	2015		participants			the selected	the selected			~1 year
(1112)						participants is	participants is			and some
						a connected	a connected			for ~1 year
						person	person			and 3 months
Universal Health	28 December	2.88	13 selected	16,993,000	48,939,840	N/A	N/A	~0.85%	0.065% each	Not mentioned
International	2015		participants
Group Holding
Limited (2211)

– 32 –

LETTER FROM INNOVAX CAPITAL

							Value of	Percentage	Average
						Total	award shares	of total	percentage of
					Value of	number of	granted to	number of	number of award
		Share price			award	award	connected	award	shares to each
		as at		Total	shares as	shares	person as at	shares to	individual awardee
	Date of	date of		number of	at date of	granted to	date of	the enlarged	to the enlarged
Company name	announcement/	announcement/		award	announcement/	connected	announcement/	total issued	total issued share
(stock code)	circular	circular	Awardee(s)	shares	circular	person	circular	share capital	capital	Vesting Period
		(HK$)			(HK$)		(HK$)
Phoenix Healthcare	22 December	8.98	4 directors and	2,540,000	22,809,200	400,000	3,592,000	~0.3%	~0.01% each for	~3 years
Group Company	2015		61 selected						4 directors
Limited (1515)			participants
									Minimal for others
Shirble Department	16 December	0.55	60 Eligible	13,830,000	7,606,500	None of	None of	~0.55%	~0.01% each	Not mentioned
Store Holdings	2015		Employees			the eligible	the eligible
(China) Limited						employees is	employees is
(312)						a connected	a connected
						person	person
Global Brands Group	30 November	1.50	Certain	4,329,116	6,493,674	N/A	N/A	~0.05%	Not mentioned	Not mentioned
Holding Limited	2015		employees
(787)
ZMFY Automobile	12 November	0.73	6 connected	41,300,000	30,149,000	30,000,000	21,900,000	~6.25%	~4.54% for 6	~6 years
Glass Services	2015		persons and						connected persons
Limited (8135)			10 non-						(or ~0.75% each)
			connected
			persons						~1.71% for 10
									non-connected
									persons (or ~0.17%
									each)
TCL Communication	3 November	5.80	29 connected	1,980,753	11,488,367	1,980,753	11,488,367	~0.16%	~0.006% each	1 year
Technology	2015		persons
Holdings Limited
(2618)
China Pioneer Pharma	9 October 2015	3.56	CEO, CFO and	25,060,000	89,213,600	2,400,000	8,544,000	~1.88%	~0.1% for CEO	~3 years
Holdings Limited			148 selected
(1345)			employees						~0.08% for CFO
									~0.013% each for
									others
China Innovative	11 September	0.89	Executive	5,617,977	5,000,000	5,617,977	5,000,000	~0.03%	~0.03%	Not mentioned
Finance Group	2015		Director
Limited (412)			and chief
			executive
IGG Inc. (799)	10 September	2.94	Certain selected	1,000,000	2,940,000	None of	None of	~0.07%	Not mentioned	~1 year
	2015		participants			the selected	the selected
						participants is	participants is
						a connected	a connected
						person	person

Source: website of the Stock Exchange

– 33 –

LETTER FROM INNOVAX CAPITAL

The following table sets out the range of i) the percentage of total number of award shares to connected person to the enlarged total issued share capital; ii) the percentage of total number of award shares to each of the connected person to the enlarged total issued share capital; iii) the value of award shares to connected person as at the date of the announcement/circular; and iv) the value of award shares to each of the connected person as at the date of the announcement/circular.

	High	Low	Average	Range The Group	Range The Group
The percentage of total	4.76%	Minimal	N/A	Minimal –	1.97%
number of award shares to				4.76%
the connected person to the
enlarged total issued share
capital
The percentage of total number	4.76%	Minimal	N/A	Minimal –	0.28%
of award shares to each of				4.76%
the connected person to the
enlarged total issued share
capital
The value of award shares to	148.20	0.44	15.95	0.44 – 148.20	16.22
connected person as at the
date of the announcement/
circular (HK$’mil)
The value of award shares	148.20	0.02	2.91	0.02 – 148.20	2.32
to each of the connected
person as at the date of
the announcement/circular
(HK$’mil)

According to the above summary of the key figures of the Grant Comparables:

The percentage of the total number of Award Shares granted to Connected Grantees to the enlarged total issued share capital of the Group is approximately 1.97%, which is within the range from minimal to 4.76% of the Grant Comparables;
The percentage of the total number of Award Shares granted to each Connected Grantees to the enlarged total issued share capital of the Group is approximately 0.28%, which is within the range from minimal to 4.76% of the Grant Comparables;

– 34 –

LETTER FROM INNOVAX CAPITAL

The value of Award Shares granted to Connected Grantees is approximately HK$16.22 million, which is within the range from approximately HK$0.44 million to HK$148.20 million, and in line with the average value of approximately HK$15.95 million of the award shares granted to connected person of the Grant Comparables; and
The value of Award Shares granted to each Connected Grantee is approximately HK$2.32 million, which is within the range from approximately HK$0.02 million to HK$148.2 million, and slightly below the average value of approximately HK$2.91 million of the award shares granted to each connected person of the Grant Comparables.

Meanwhile, the vesting period of the Grant Comparables ranges from immediate to six years. We noted most of the Award Shares shall not be sold, transferred or otherwise disposed of within one year after the issue and allotment of the same. As a result, the Vesting Period of the Award Shares is within the range of the vesting period of the Grant Comparables.

The above comparisons with the Grant Comparables is for illustrative purposes only as each of the Grant Comparables may not be entirely comparable to the Group in terms of business activities, market capitalisation, scale of operations, financial positions, business performance, future prospects and other relevant criteria. All these factors may affect the terms of issues of award shares as indicated by the varied range of results in our comparison. Also, we would like to emphasise that the Grant Comparables do not represent an exhaustive list of comparable issue, the comparison was extracted from the public domain under our best afford and knowledge. Therefore, in forming our opinion, we have considered the results of the above comparison together with all other factors stated in this letter as a whole.

Having considered the abovementioned factors, we consider that the terms of Award Shares are fair and reasonable so far as the Independent Shareholders are concerned and it is on normal commercial terms.

4. Financial effects of the Award Shares

Earnings

According to the 2016 Annual Report, the Group recorded consolidated audited net loss attributable to the owners of the Company of approximately RMB147.28 million for the year ended 31 March 2016. The grant of the Award Shares will increase the net loss to a relatively small extent of the Group after adding the expenses relating to the allotment and issue of the Award Shares of approximately HK$300,000 in aggregate, which is calculated using the closing price of the Share of HK$0.131 as at the Latest Practicable Date.

– 35 –

LETTER FROM INNOVAX CAPITAL

Net asset value

According to the 2016 Annual Report, the Group recorded consolidated net asset value attributable to owners of the Company of approximately RMB1,439.42 million. As the allotment and issue of the Award Shares will increase the share capital of the Group but to a relatively small extent, the effect of the allotment and issue of the Award Shares on the consolidated net asset value attributable to owners of the Company is therefore minimal.

Cash flow

According to the 2016 Annual Report, the Group had cash and cash equivalents of approximately RMB305.15 million as at 31 March 2016. The allotment and issue of the Award Shares will have no effect on the cash flow of the Group other than the expenses relating to the allotment and issue of the Award Shares. However, on comparison with the alternative of increasing Director’s fee by way of cash payment to the executive Director, the allotment and issue of the Award Shares can reduce the Group’s cash outflow.

5. Effect on the shareholding structure of the Group

Upon the allotment and issue of an aggregate of 208,000,000 new Shares, comprising 141,000,000 Award Shares to Connected Grantees and 67,000,000 Award Shares to Nonconnected Grantees, the shareholding of the existing public Shareholders will be diluted from approximately 69.60% to approximately 67.56%, representing a decrease of approximately 2.04%.

Given that the dilution effect on the shareholdings of the existing Shareholders is immaterial and having considered the reasons as detailed in the section headed “Reasons for and benefits of the Grant of Award Shares to Connected Grantees” above, and the terms of the allotment and issue of the Award Shares are fair and reasonable, we are of the opinion that the shareholding dilution to the Independent Shareholders is acceptable so far as the Independent Shareholders are concerned.

– 36 –

LETTER FROM INNOVAX CAPITAL

RECOMMENDATION

After taking into account the above principal factors and reasons, we consider that the grant of the Award Shares is on normal commercial terms and in the ordinary and usual course of business of the Group and the terms of the allotment and issue of the Award Shares are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Group and the Shareholders as a whole. We therefore recommend the Independent Shareholders, and recommend the Independent Shareholders, to vote in favor of the ordinary resolutions to be proposed at the SGM to approve the grant of the Award Shares to each of the Connected Grantees.

Yours faithfully, For and on behalf of Innovax Capital Limited Keith Fung Sik Lun Director

23 September 2016

Mr. Keith Fung Sik Lun has been a responsible officer of Type 6 (advising on corporate finance) regulated activity under SFO since 2013. He has been participated in the provision of independent financial advisory services for various listed companies in Hong Kong.

– 37 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

Directors’ and chief executive’s interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, the interests or short positions of the Directors and the chief executives of the Company in the Shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provision of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules, were as follows:

Long position in the shares of the Company

					Approximately%
Name of Director	Personal interests	Family interests	Corporate interests	Total	of shareholding
	(Note 1)
Dr. Mo	608,917,695	–	1,135,000,000	1,743,917,695	25.11
			(Note 3)
Mr. Zhang	338,271,282	–	–	338,271,282	4.87
Mr. Chu	69,000,000	14,004,605	–	83,004,605	1.20
		(Note 2)
Mr. Fan	22,000,000	–	–	22,000,000	0.32
Dr. Liu	5,000,000	–	–	5,000,000	0.07
Prof. Zhao	5,000,000	–	–	5,000,000	0.07
Mr. Sin	5,000,000	–	–	5,000,000	0.07

Notes:

(1) This represents interests held by the relevant Directors as beneficial owner.
(2) This represents interests legally and beneficially held by his spouse.
(3) Dr. Mo is beneficially interested in 1,135,000,000 Shares, which interests are held by Ping Da Development Limited, a company wholly-owned by Dr. Mo. Dr. Mo is also the sole director of Ping Da Development Limited.

– 38 –

GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required (i) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or proposed Director is a director or employee of a company which has an interest or short position in the Shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. DIRECTORS’ SERVICE CONTRACTS

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

4. INTERESTS IN ASSETS, CONTRACTS OR ARRANGEMENT

As at the Latest Practicable Date, none of the Directors, proposed directors and Innovax Capital has, or had had, any direct or indirect interest in any assets which had been or are proposed to be acquired, disposed of by or leased to, any member of the Group since 31 March 2016, the date to which the latest published audited consolidated financial statements of the Company were made up. None of the Directors is materially interested in any contract or arrangement subsisting at the Latest Practicable Date which is significant in relation to the business of the Group.

5. EXPERT AND CONSENT

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

Name Qualifications Innovax Capital A licensed corporation under the SFO to conduct type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activity

– 39 –

GENERAL INFORMATION

APPENDIX

Innovax Capital has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and report and references to its name in the form and context in which it appears.

As at the Latest Practicable Date, Innovax Capital 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 interests, either direct or indirect, in any assets which have been, since the date to which the latest published audited consolidated financial statements of the Company were made up (i.e. 31 March 2016), 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.

6. MATERIAL ADVERSE CHANGE

The Directors are not aware of any circumstances or events that may give rise to a material adverse change in the financial or trading position of the Group since 31 March 2016, being the date of which the latest audited consolidated financial statement of the Group were made up.

7. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or substantial Shareholder or any of their respective associates has any interest in business which competes with or may compete with the business of the Group or has any other conflict of interests which any person has or may have with the Group.

8. MISCELLANEOUS

(a) The English text of this circular and the accompanying form of proxy shall prevail over their respective texts in case of inconsistency;
(b) The registered office of the Company is located at Canon’s Court, 22 Victoria Street, Hamilton HM 12, Bermuda;
(c) The principal place of business of the Company in Hong Kong is located at Unit 1101, 11th Floor, Tung Ning Building, 2 Hillier Street, Central, Hong Kong;
(d) The company secretary of the Company is Ms. Li Fun Replen, who is an associate member of both The Institute of Chartered Secretaries and Administrators and The Hong Kong Institute of Company Secretaries; and
(e) The Company’s branch share registrar and transfer office in Hong Kong is Tricor Tengis Limited, whose address is Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

– 40 –

NOTICE OF SGM

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CHINESE PEOPLE HOLDINGS COMPANY LIMITED �� (incorporated in Bermuda with limited liability) (stock code: 681)

NOTICE IS HEREBY GIVEN that a special general meeting (the “ SGM ”) of Chinese People Holdings Company Limited (the “ Company ”) will be held at the head office of Chinese People Holdings Company Limited, Conference Room, 1st Floor, No. 36 BDA International Business Park, No. 2 Jingyuan North Street, Economic Technological Development Area, Beijing, China on Friday, 14 October 2016 at 1:30 p.m. for the purpose of considering and, if thought fit, passing, with or without modifications, the following resolutions as ordinary resolutions of the Company:

ORDINARY RESOLUTIONS

“ THAT the allotment and issue of an aggregate of 15,000,000 ordinary shares of the Company to Mr. Zhang Hesheng, an executive director of the Company, at an aggregate subscription price of HK$1.00, subject to obtaining approval for the listing of and permission to deal in such new Shares and certain vesting conditions, be and is hereby approved and the directors of the Company be and are hereby authorised to do all such acts and things as may be necessary, desirable or expedient in order to give effect to the allotment and issue of the said 15,000,000 shares of the Company to Mr. Zhang Hesheng.”
“ THAT the allotment and issue of an aggregate of 69,000,000 ordinary shares of the Company to Mr. Chu Kin Wang Peleus, an executive director of the Company, at an aggregate subscription price of HK$1.00, subject to obtaining approval for the listing of and permission to deal in such new Shares and certain vesting conditions, be and is hereby approved and the directors of the Company be and are hereby authorised to do all such acts and things as may be necessary, desirable or expedient in order to give effect to the allotment and issue of the said 69,000,000 shares of the Company to Mr. Chu Kin Wang Peleus.”

– 41 –

NOTICE OF SGM

“ THAT the allotment and issue of an aggregate of 22,000,000 ordinary shares of the Company to Mr. Fan Fangyi, an executive director of the Company, at an aggregate subscription price of HK$1.00, subject to obtaining approval for the listing of and permission to deal in such new Shares and certain vesting conditions, be and is hereby approved and the directors of the Company be and are hereby authorised to do all such acts and things as may be necessary, desirable or expedient in order to give effect to the allotment and issue of the said 22,000,000 shares of the Company to Mr. Fan Fangyi.”
“ THAT the allotment and issue of an aggregate of 20,000,000 ordinary shares of the Company to Mr. Jin Song, a chief strategy officer of the Group, at an aggregate subscription price of HK$1.00, subject to obtaining approval for the listing of and permission to deal in such new Shares and certain vesting conditions, be and is hereby approved and the directors of the Company be and are hereby authorised to do all such acts and things as may be necessary, desirable or expedient in order to give effect to the allotment and issue of the said 20,000,000 shares of the Company to Mr. Jin Song.”
“ THAT the allotment and issue of an aggregate of 5,000,000 ordinary shares of the Company to Dr. Liu Junmin, an independent non-executive director of the Company, at an aggregate subscription price of HK$1.00, subject to obtaining approval for the listing of and permission to deal in such new Shares and certain vesting conditions, be and is hereby approved and the directors of the Company be and are hereby authorised to do all such acts and things as may be necessary, desirable or expedient in order to give effect to the allotment and issue of the said 5,000,000 shares of the Company to Dr. Liu Junmin.”
“ THAT the allotment and issue of an aggregate of 5,000,000 ordinary shares of the Company to Prof. Zhao Yanyun, an independent non-executive director of the Company, at an aggregate subscription price of HK$1.00, subject to obtaining approval for the listing of and permission to deal in such new Shares and certain vesting conditions, be and is hereby approved and the directors of the Company be and are hereby authorised to do all such acts and things as may be necessary, desirable or expedient in order to give effect to the allotment and issue of the said 5,000,000 shares of the Company to Prof. Zhao Yanyun.”
“ THAT the allotment and issue of an aggregate of 5,000,000 ordinary shares of the Company to Mr. Sin Ka Man, an independent non-executive director of the Company, at an aggregate subscription price of HK$1.00, subject to obtaining approval for the listing of and permission to deal in such new Shares and certain vesting conditions, be and is hereby approved and the directors of the Company be and are hereby authorised to do all such acts and things as may be necessary, desirable or expedient in order to give effect to the allotment and issue of the said 5,000,000 shares of the Company to Mr. Sin Ka Man.”

– 42 –

NOTICE OF SGM

“ THAT the allotment and issue of an aggregate of 17,000,000 ordinary shares of the Company to Mr. Tse Ting Kwan, the financial controller of the Company, at an aggregate subscription price of HK$1.00, subject to obtaining approval for the listing of and permission to deal in such new Shares and certain vesting conditions, be and is hereby approved and the directors of the Company be and are hereby authorised to do all such acts and things as may be necessary, desirable or expedient in order to give effect to the allotment and issue of the said 17,000,000 shares of the Company to Mr. Tse Ting Kwan.”
“ THAT the allotment and issue of an aggregate of 10,000,000 ordinary shares of the Company to Ms. Li Fun Replen, the company secretary of the Company, at an aggregate subscription price of HK$1.00, subject to obtaining approval for the listing of and permission to deal in such new Shares and certain vesting conditions, be and is hereby approved and the directors of the Company be and are hereby authorised to do all such acts and things as may be necessary, desirable or expedient in order to give effect to the allotment and issue of the said 10,000,000 shares of the Company to Ms. Li Fun Replen.”
“ THAT the allotment and issue of an aggregate of 10,000,000 ordinary shares of the Company to Mr. Li Li, a chief operation officer of the Group, at an aggregate subscription price of HK$1.00, subject to obtaining approval for the listing of and permission to deal in such new Shares and certain vesting conditions, be and is hereby approved and the directors of the Company be and are hereby authorised to do all such acts and things as may be necessary, desirable or expedient in order to give effect to the allotment and issue of the said 10,000,000 shares of the Company to Mr. Li Li.”
“ THAT the allotment and issue of an aggregate of 12,000,000 ordinary shares of the Company to Mr. Liu Xuanyu, a chief administrative officer of the Group, at an aggregate subscription price of HK$1.00, subject to obtaining approval for the listing of and permission to deal in such new Shares and certain vesting conditions, be and is hereby approved and the directors of the Company be and are hereby authorised to do all such acts and things as may be necessary, desirable or expedient in order to give effect to the allotment and issue of the said 12,000,000 shares of the Company to Mr. Liu Xuanyu.”
“ THAT the allotment and issue of an aggregate of 12,000,000 ordinary shares of the Company to Mr. Bian Luming, a chief operation officer of the Group, at an aggregate subscription price of HK$1.00, subject to obtaining approval for the listing of and permission to deal in such new Shares and certain vesting conditions, be and is hereby approved and the directors of the Company be and are hereby authorised to do all such acts and things as may be necessary, desirable or expedient in order to give effect to the allotment and issue of the said 12,000,000 shares of the Company to Mr. Bian Luming.”

– 43 –

NOTICE OF SGM

“ THAT the allotment and issue of an aggregate of 5,000,000 ordinary shares of the Company to Ms. Yu Qianzi, a chief information officer of the Group, at an aggregate subscription price of HK$1.00, subject to obtaining approval for the listing of and permission to deal in such new Shares and certain vesting conditions, be and is hereby approved and the directors of the Company be and are hereby authorised to do all such acts and things as may be necessary, desirable or expedient in order to give effect to the allotment and issue of the said 5,000,000 shares of the Company to Ms. Yu Qianzi.”
“ THAT the allotment and issue of an aggregate of 1,000,000 ordinary shares of the Company to Mr. Yang Yigui, a manager of investment banking department of the Group, at an aggregate subscription price of HK$1.00, subject to obtaining approval for the listing of and permission to deal in such new Shares and certain vesting conditions, be and is hereby approved and the directors of the Company be and are hereby authorised to do all such acts and things as may be necessary, desirable or expedient in order to give effect to the allotment and issue of the said 1,000,000 shares of the Company to Mr. Yang Yigui.”
“ THAT
(a) the authorised share capital of the Company be increased from HK$560,000,000, divided into 7,999,999,999 shares of HK$0.07 each (“ Share(s) ”), to HK$2,660,000,000.07, divided into 38,000,000,000 Shares, by the creation of an additional 30,000,000,001 Shares (the “ Increase in Authorised Share Capital ”); and
(b) any one or more of the directors of the Company be and is/are hereby authorised to do all such acts and things and execute all such documents which he/she/they consider necessary, desirable or expedient for the purpose of, or in connection with, the implementation of and giving effect to the Increase in Authorised Share Capital.”

By order of the Board

Chinese People Holdings Company Limited Dr. Mo Shikang Chairman and Executive Director

Hong Kong, 23 September 2016

– 44 –

NOTICE OF SGM

Registered office: Principal place of business in Canon’s Court Hong Kong: 22 Victoria Street Unit 1101, 11th Floor, Hamilton HM 12 Tung Ning Building, Bermuda 2 Hillier Street, Central, Hong Kong

Head office:

No. 36 BDA International Business Park No. 2 Jingyuan North Street Economic Technological Development Area Beijing, China

Notes:

A member of the Company entitled to attend and vote at the SGM is entitled to appoint one or, if he is the holder of two or more shares, more proxies to attend and vote instead of him. A proxy need not be a member of the Company.
In the case of joint holders of shares in the Company, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the vote(s) of the other joint holder(s), seniority being determined by the order in which names stand in the register of members.
In order to be valid, the form of proxy must be in writing under the hand of the appointor or of his attorney duly authorized in writing, or if the appointor is a corporation, either under seal, or under the hand of an officer or attorney or other person duly authorized, and must be deposited with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Tengis Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong (together with the power of attorney or other authority, if any, under which it is signed or a certified copy thereof) not less than 48 hours before the time fixed for holding of the SGM.
Completion and return of the form of proxy will not preclude members from attending and voting at the SGM.

– 45 –

AI assistant

CR Construction Group Holdings Limited — Proxy Solicitation & Information Statement 2016

50019_rns_2016-09-22_10bc651d-8c4b-444d-b921-0aaaf91482f4.pdf

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

CHINESE PEOPLE HOLDINGS COMPANY LIMITED ��������������� (incorporated in Bermuda with limited liability) (stock code: 681)

Executive Directors:

Registered office:

Head office:

Independent non-executive Directors:

Principal place of business

in Hong Kong:

To the Shareholders

(I) GRANT OF AWARD SHARES; (II) CONNECTED TRANSACTIONS; (III) INCREASE IN AUTHORISED SHARE CAPITAL; AND (IV) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

LETTER FROM THE BOARD

GRANT OF AWARD SHARES

LETTER FROM THE BOARD

Grantees

LETTER FROM THE BOARD

LETTER FROM THE BOARD

REASONS AND BENEFITS OF THE GRANT OF AWARD SHARES

LETTER FROM THE BOARD

LETTER FROM THE BOARD

EFFECTS ON SHAREHOLDING STRUCTURE

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

INCREASE IN AUTHORISED SHARE CAPITAL

REASONS FOR THE INCREASE IN AUTHORISED SHARE CAPITAL

CONDITION OF THE INCREASE IN AUTHORISED SHARE CAPITAL

SGM

LETTER FROM THE BOARD

INDEPENDENT BOARD COMMITTEE AND THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

ADDITIONAL INFORMATION

Chinese People Holdings Company Limited Dr. Mo Shikang

GRANT OF AWARD SHARES AND CONNECTED TRANSACTIONS

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Information of the Group

2. Reasons for and benefits of the grant of Award Shares to Connected Grantees

LETTER FROM INNOVAX CAPITAL

LETTER FROM INNOVAX CAPITAL

3. Principal terms of the Award Shares to the Connected Grantees

LETTER FROM INNOVAX CAPITAL

Vesting Period

Issue Terms of the Grant Comparables (exclude option awards) and the Group

LETTER FROM INNOVAX CAPITAL

LETTER FROM INNOVAX CAPITAL

LETTER FROM INNOVAX CAPITAL

LETTER FROM INNOVAX CAPITAL

4. Financial effects of the Award Shares

Earnings

Net asset value

Cash flow

5. Effect on the shareholding structure of the Group

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

Directors’ and chief executive’s interests and short positions in the securities of the Company and its associated corporations

Long position in the shares of the Company

APPENDIX

3. DIRECTORS’ SERVICE CONTRACTS

4. INTERESTS IN ASSETS, CONTRACTS OR ARRANGEMENT

5. EXPERT AND CONSENT

6. MATERIAL ADVERSE CHANGE

7. COMPETING INTERESTS

8. MISCELLANEOUS

NOTICE OF SGM

CHINESE PEOPLE HOLDINGS COMPANY LIMITED ��������������� (incorporated in Bermuda with limited liability) (stock code: 681)

ORDINARY RESOLUTIONS

NOTICE OF SGM

NOTICE OF SGM

NOTICE OF SGM

NOTICE OF SGM

More from CR Construction Group Holdings Limited

CR Construction Group Holdings Limited Proxy Solicitation & Information Statement 2016

CHINESE PEOPLE HOLDINGS COMPANY LIMITED �� (incorporated in Bermuda with limited liability) (stock code: 681)

CHINESE PEOPLE HOLDINGS COMPANY LIMITED �� (incorporated in Bermuda with limited liability) (stock code: 681)