DIT Group Limited - Capital/Financing Update 2014

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in South East Group Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank manager, licensed securities dealer or registered institution in securities or other agent through whom the sale was effected for transmission to the purchaser or the transferee.

This circular is not an offer of, nor is it intended to invite offers for, securities of the Company. Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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(Incorporated in Bermuda with limited liability) (Stock Code: 726)

(1) PROPOSED RIGHTS ISSUE ON THE BASIS OF EIGHT RIGHTS SHARES FOR ONE EXISTING SHARE HELD ON THE RECORD DATE;

(2) CHANGE IN BOARD LOT SIZE;

AND

(3) NOTICE OF SPECIAL GENERAL MEETING

Financial Adviser to the Company

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Underwriter to the Rights Issue

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

Terms used in this cover shall have the same meanings as defined in this circular.

A letter from the Board is set out on pages 10 to 29 of this circular. A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on page 30 of this circular. A letter from Gram Capital, the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 31 to 44 of this circular.

It should be noted that the Underwriting Agreement contains provisions granting the Underwriter the right to terminate the obligations of the Underwriter thereunder on the occurrence of certain events. These certain events are set out in the paragraph headed “Termination of the Underwriting Agreement” on page 21 of this circular. If the Underwriting Agreement is terminated by the Underwriter or does not become unconditional, the Rights Issue will not proceed.

A notice convening the SGM to be held at Joint Professional Centre, Unit 1, Ground Floor, The Center, 99 Queen’s Road Central, Hong Kong at 3:00 p.m. on Wednesday, 24 September 2014 is set out on pages 63 to 64 of this circular. A form of proxy for use at the meeting is enclosed. Whether or not you intend to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the branch share registrar of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible but in any event not less than 48 hours before the time of the holding of the meeting or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish, in such event, the form of proxy shall be deemed to be revoked.

5 September 2014

* For identification purposes only

	Page
Expected timetable.......................................................................................................................	1
Definitions......................................................................................................................................	3
Termination of the Underwriting Agreement...........................................................................	8
Letter from the Board..................................................................................................................	10
Letter from the Independent Board Committee......................................................................	30
Letter from Gram Capital...........................................................................................................	31
Appendix I — Financial information of the Group.................................................................	45
Appendix II — Unaudited pro forma financial information..................................................	47
Appendix III — General information........................................................................................	52
Notice of SGM...............................................................................................................................	63

– i –

EXPECTED TIMETABLE

The expected timetable for the Rights Issue and Change in Board Lot Size set out below is indicative only and it has been prepared on the assumption that the Rights Issue will be approved by the Independent Shareholders at the SGM. The expected timetable is subject to change, and any such change will be announced in a separate announcement by the Company as and when appropriate.

Event

2014 (Hong Kong time)

Latest time for return of form of proxy for the SGM (not less than 48 hours prior to time of SGM)

3:00 p.m. on Monday, 22 September

SGM

Announcement of results of the SGM Last day of dealings in the Shares on a cum-rights basis

3:00 p.m. on Wednesday, 24 September Wednesday, 24 September Thursday, 25 September

First day of dealings in the Shares on an ex-rights basis

Friday, 26 September

Latest time for lodging transfers of the Shares in order to be qualified for the Rights Issue

4:30 p.m. on Monday, 29 September

Register of members closed (both dates inclusive) Tuesday, 30 September to Monday, 6 October Record Date Monday, 6 October Register of members re-opens Tuesday, 7 October Prospectus Documents expected to be despatched Wednesday, 8 October First day of dealings in nil-paid Rights Shares 9:00 a.m. on Friday, 10 October Latest time for splitting of the nil-paid 4:30 p.m. on Tuesday, 14 October Rights Shares

Monday, 6 October Tuesday, 7 October

Wednesday, 8 October 9:00 a.m. on Friday, 10 October 4:30 p.m. on Tuesday, 14 October

Last day of dealings in the nil-paid Rights Shares

Latest time for acceptance of and payment for the Rights Shares and application and payment for excess Rights Shares

4:00 p.m. on Friday, 17 October 4:00 p.m. on Wednesday, 22 October

Rights Issue expected to become unconditional

4:00 p.m. on Tuesday, 28 October

– 1 –

EXPECTED TIMETABLE

Event

2014 (Hong Kong time)

Announcement of results of acceptance and excess application of the Rights Issue

Wednesday, 29 October

Refund cheques in respect of wholly or partially unsuccessful applications for excess Rights Shares expected to be posted on or before

Thursday, 30 October

Certificate for the Rights Shares expected to be despatched on or before

Thursday, 30 October

Dealings in fully-paid Rights Shares commence

Effective date of change of board lot size from 2,000 Shares to 20,000 Shares

9:00 a.m. on Friday, 31 October 9:00 a.m. on Friday, 31 October

Designated brokers starts to stand in the market to provide matching services for sale and purchase of odd lots of Shares

9:00 a.m. on Friday, 31 October

Designated brokers ceases to stand in the market to provide matching services for sale and purchase of odd lots of shares

4:00 p.m. on Friday, 21 November

EFFECT OF BAD WEATHER ON THE LATEST ACCEPTANCE DATE

The Latest Time For Acceptance of and payment for the Rights Shares will be postponed if there is:

a tropical cyclone warning signal number 8 or above, or
a “black” rainstorm warning
i. in force in Hong Kong at any local time before 12:00 noon and no longer in force after 12:00 noon on Wednesday, 22 October 2014. The latest time for acceptance of and payment for the Rights Shares and for application and payment for excess Rights Shares will be extended to 5:00 p.m. on the same Business Day; or
ii. in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on Wednesday, 22 October 2014, the latest time for acceptance of and payment for the Rights Shares and for application and payment for excess Rights Shares will be rescheduled to 4:00 p.m. on the following Business Day which does not have either of those warnings in force in Hong Kong at any time between 9:00 a.m. and 4:00 p.m..

If the latest time for acceptance of and payment for the Rights Shares and for application and payment for excess Rights Shares is postponed in accordance with the foregoing, the dates mentioned in this section may be affected. An announcement will be made by the Company in such event as soon as possible.

– 2 –

DEFINITIONS

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

“acting in concert”

has the meaning ascribed thereto under the Takeovers Code

“Announcement”
the announcement of the Company dated 11 August 2014 in relation to, among other things, the Rights Issue and Change in Board Lot Size
“associates”

has the meaning ascribed thereto under the Listing Rules

“Board”

the board of Directors

“Business Day”
a day (other than a Saturday, Sunday or public holiday) on which licensed banks in Hong Kong are generally open for business throughout their normal business hours
“CCASS”
the Central Clearing and Settlement System established and operated by HKSCC
“Change in Board Lot Size”
the proposed change in board lot size of the Shares for trading on the Stock Exchange from 2,000 Shares to 20,000 Shares
“Company”
South East Group Limited, a company incorporated in Bermuda and the shares of which are listed on the main board of the Stock Exchange
“Complying Applications”
valid applications under the PAL(s) and EAF(s) made in accordance with the terms of the Prospectus Documents together with cheques or cashier’s orders or other remittances for the full amount payable in respect of the Rights Shares being applied for under such PAL(s) and/or EAF(s)
“Convertible Bond”
the convertible bond in the principal amount of Hong Kong dollars sixty eight million (HK$68,000,000), issued by the Company carrying an interest of three per cent. (3%) per annum with conversion price of HK$0.418 per conversion share
“Director(s)”

director(s) of the Company

“EAF”

the form(s) of application for use by the Qualifying Shareholders to apply for excess Rights Shares, being in such usual form as may be agreed between the Company and the Underwriter

“Earnest Money”

earnest money of HK$22 million payable by the Company to the Vendor, subject to the terms and conditions of the Framework Agreement

– 3 –

DEFINITIONS

“Formal Agreement”
“Framework Agreement”
“Group”
“HKSCC”
“Hong Kong”
“Independent Board Committee”
“Independent Financial Adviser” or “Gram Capital”
“Independent Shareholder(s)”
“Independent Third Party(ies)”
“Last Trading Day”
“Latest Practicable Date”

a formal sale and purchase agreement to be entered in relation to the Proposed Acquisition

the framework agreement dated 26 February 2014 (as supplemented by two supplemental agreements dated 23 May 2014 and 22 August 2014 respectively) entered into by the Company and the Vendor in relation to the Proposed Acquisition

the Company and its subsidiaries from time to time

Hong Kong Securities Clearing Company Limited

The Hong Kong Special Administrative Region of the People’s Republic of China
an independent board committee comprising all independent non-executive Directors namely Mr. Ling Kit Wah, Joseph, Mr. Ng Kwok Wai and Mr. Lee Chi Hwa, Joshua to advise the Independent Shareholders as to whether the Rights Issue are fair and reasonable and are in the interests of the Company and the Shareholders as a whole
Gram Capital Limited, a licensed corporation to carry out Type 6 (advising on corporate finance) regulated activity under the SFO, being the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the proposed Rights Issue
Shareholders other than those who are involved in or interested in the Underwriting Agreement and the Rights Issue, and who are required to abstain from voting in respect thereto at the SGM pursuant to the Listing Rules
third parties independent of and not connected with the Directors, chief executive and substantial Shareholders of the Company or any of its subsidiaries, or any of their respective associates
11 August 2014, being the date of the Underwriting Agreement, which is a Stock Exchange trading day
4 September 2014, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information referred to in this circular

– 4 –

DEFINITIONS

“Latest Time For Acceptance”
4:00 p.m. on Wednesday, 22 October 2014, or such later time or date as may be agreed between the Underwriter and the Company in writing, being the latest time for acceptance of, and payment for, the Rights Shares as described in the Prospectus Documents
“Listing Committee”
has the meaning ascribed to this term under the Listing Rules
“Listing Rules”
the Rules Governing the Listing of Securities on the Stock Exchange
“Non-Qualifying Shareholder(s)”
those Overseas Shareholders whom the Directors, based on legal advice provided by the Company’s legal advisers, consider it necessary or expedient not to offer the Rights Issue to such Shareholders on account either of legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place
“Overseas Letter”
a letter from the Company to the Non-Qualifying Shareholders explaining the circumstances in which the Non-Qualifying Shareholders are not permitted to participate in the Rights Issue
“Overseas Shareholder(s)”
Shareholder(s) whose name(s) appear(s) on the register of members of the Company at the close of business on the Record Date and whose address(es) as shown on such register is (are) outside Hong Kong
“PAL(s)” the renounceable provisional allotment letter(s) proposed to be issued to the Qualifying Shareholders in connection with the Rights Issue
“Posting Date”
Wednesday, 8 October 2014 or such other date as the Underwriter may agree in writing with the Company, as the date of despatch of the Prospectus Documents to the Qualifying Shareholders or the Prospectus and the Overseas Letter for information only (as the case may be) to the Non-Qualifying Shareholders
“PRC”
the Peoples’ Republic of China, which for the purpose of this circular, shall exclude, Hong Kong, Macau Special Administrative Region of the PRC and Taiwan
“Properties”
certain properties located in Shenzhen, the PRC under the Framework Agreement

– 5 –

DEFINITIONS

“Proposed Acquisition” the proposed acquisition of the Properties in Shenzhen, the PRC as contemplated under the Framework Agreement
“Prospectus” the prospectus to be despatched to the Shareholders containing details of the Rights Issue
“Prospectus Documents” the Prospectus, the PAL(s) and EAF(s)
“Qualifying Shareholders” Shareholders, other than the Non-Qualifying Shareholders, whose name(s) appear on the register of members of the Company at the close of business on the Record Date
“Record Date” Monday, 6 October 2014 (or such other date as the Underwriter may agree in writing with the Company), as the date by reference to which entitlements to the Rights Issue are expected to be determined
“Registrar” Computershare Hong Kong Investor Services Limited, the branch share registrar of the Company in Hong Kong
“Rights Issue” the proposed issue by way of rights of eight (8) Rights Shares for every one (1) existing Share to Qualifying Shareholders held on the Record Date at the Subscription Price pursuant to the terms and conditions of the Underwriting Agreement and the Prospectus Documents
“Rights Shares” new Shares to be allotted and issued under the Rights Issue, being 2,919,647,040 Shares
“Settlement Date” Tuesday, 28 October 2014, being the fourth Business Day following the Latest Time For Acceptance (or such other date as the Underwriter and the Company may agree in writing)
“SFC”
the Securities and Futures Commission of Hong Kong
“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) as amended from time to time
“SGM”
the special general meeting of the Company to be convened and held on or about 3:00 p.m. on Wednesday, 24 September 2014 (or such other date as the Company and the Underwriter may agree) to consider and approve, among other things, the Rights Issue and the transactions contemplated thereunder
“Share(s)”
ordinary share(s) of HK$0.1 each in the share capital of the Company

– 6 –

DEFINITIONS

“Shareholder(s)”

holder(s) of issued Share(s)

“Stock Exchange”

The Stock Exchange of Hong Kong Limited

“Subscription Price”
the subscription price of HK$0.1 per Rights Share under the Rights Issue
“Takeovers Code”
the Code on Takeovers and Mergers issued by the SFC as amended from time to time
“Undertaking” the irrevocable undertaking given by Viva Shine in favour of the Company and the Underwriter
“Underwriter”
Kingston Securities Limited, a licensed corporation to carry out business in type 1 (dealing in securities) regulated activity under SFO
“Underwriting Agreement”
the underwriting agreement dated 11 August 2014 entered into between the Company and the Underwriter in relation to the underwriting and certain other arrangements in respect of the Rights Issue
“Underwritten Shares”
all the Rights Shares (other than the Rights Shares that will be provisionally allotted to Viva Shine), which are fully underwritten by the Underwriter in accordance with the terms and subject to the conditions set out in the Underwriting Agreement
“Untaken Shares”
those (if any) of the Underwritten Shares for which Complying Applications had not been lodged for acceptance, or received, as the case may be, on or before the Latest Time For Acceptance
“Viva Shine”
Viva Shine Limited, a company incorporated in the British Virgin Islands, who holds 92,000,000 Shares and the Convertible Bond as at the Latest Practicable Date
“HK$”

Hong Kong dollar, the lawful currency of Hong Kong

“%” or “per cent.”
percentage or per centum

– 7 –

TERMINATION OF THE UNDERWRITING AGREEMENT

If, prior to 4:00 p.m. on the Settlement Date:

(i) in the absolute opinion of the Underwriter, the success of the Rights Issue would be materially and adversely affected by:
(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the absolute opinion of the Underwriter materially and adversely affect the business or the financial or trading position of the Group as a whole or is materially adverse in the context of the Rights Issue; or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreement) of a political, military, financial, economic or other nature, or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the absolute opinion of the Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or
(c) any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out which would, in the absolute opinion of the Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or
(ii) any material adverse change in market conditions (including without limitation, a change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or restriction of trading in securities, and a change in currency conditions for the purpose of this clause includes a change in the system under which the value of the Hong Kong currency is pegged with that of the currency of the United States of America) occurs which in the absolute opinion of the Underwriter makes it inexpedient or in advisable to proceed with the Rights Issue; or
(iii) the Prospectus when published contains information (either as to business prospects or the condition of the Group or as to its compliance with any laws or the Listing Rules or any applicable regulations) which has not prior to the date hereof been publicly announced or published by the Company and which may in the absolute opinion of the Underwriter be material to the Group as a whole upon completion of the Rights Issue and is likely to affect materially and adversely the success of the Rights Issue.

The Underwriter shall be entitled by notice in writing to the Company, served prior to 4:00 p.m. on the Settlement Date, to terminate the Underwriting Agreement.

The Underwriter shall be entitled by notice in writing to rescind the Underwriting Agreement if prior to 4:00 p.m. on the Settlement Date any material breach of any of the representations, warranties or undertakings contained in the Underwriting Agreement comes to the knowledge of the Underwriter.

– 8 –

TERMINATION OF THE UNDERWRITING AGREEMENT

Any such notice shall be served by the Underwriter prior to 4:00 p.m. on the Settlement Date.

If prior to 4:00 p.m. on the Settlement Date, any such notice as referred to above is given by the Underwriter, the obligations of all parties under the Underwriting Agreement shall terminate forthwith and no party shall have any claim against any other party for costs, damages, compensation or otherwise save for any antecedent breaches.

– 9 –

LETTER FROM THE BOARD

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(Incorporated in Bermuda with limited liability) (Stock Code: 726)

Executive Directors: YU Shengming (Chairman) MOCK Wai Yin (Deputy Chairman, Chief Executive Officer) CHAN Chi Yuen

Non-executive Director: CHEN Xiaoping

Independent non-executive Directors: NG Kwok Wai LEE Chi Hwa, Joshua LING Kit Wah, Joseph

Registered Office: Canon’s Court 22 Victoria Street Hamilton HM12 Bermuda Principal place of business in Hong Kong: 12th Floor, Entertainment Building 30 Queen’s Road Central Hong Kong

5 September 2014

To the Shareholders

Dear Sir or Madam,

(1) PROPOSED RIGHTS ISSUE ON THE BASIS OF EIGHT RIGHTS SHARES FOR ONE EXISTING SHARE HELD ON THE RECORD DATE;

(2) CHANGE IN BOARD LOT SIZE;

AND

(3) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

Reference is made to the Announcement and the announcement of the Company dated 13 August 2014 respectively in relation to, among other matters, the Rights Issue in the proportion of eight (8) Rights Shares for every one (1) existing Share held on the Record Date and the Change in Board Lot Size.

The purpose of this circular is to provide you with (i) further details of the Rights Issue and the Change in Board Lot Size; (ii) the recommendation from the Independent Board Committee to the Independent Shareholders in relation to the Rights Issue; (iii) the advice from Gram Capital to the Independent Board Committee and the Independent Shareholders in relation to the Rights Issue; (iv) financial information of the Group; and (v) the notice of SGM.

* For identification purposes only

– 10 –

LETTER FROM THE BOARD

PROPOSED RIGHTS ISSUE

Issue statistics

Basis of the Rights Issue:

Eight (8) Rights Shares for every one (1) existing Share held on the Record Date

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

364,955,880 Shares

Number of Rights Shares:

2,919,647,040 Rights Shares

Number of Rights Shares undertaken to be taken by Viva Shine:

Pursuant to the Undertaking, Viva Shine has irrevocably undertaken in favour of the Company and the Underwriter that, among others, it will (i) save for the existing charges over the 92,000,000 Shares and the Convertible Bond, not to sell or otherwise dispose of or convert the whole or any part of the outstanding principal amount of the Convertible Bond at any time from the date of the Undertaking and up to the close of business on the Record Date, (ii) accept to and pay for in full or procure the acceptance and payment for full by its associates or nominees for, the 736,000,000 Rights Shares provisionally allotted to Viva Shine prior to the Latest Time For Acceptance; (iii) not apply for any Rights Shares in excess of those provisionally allotted thereto as referred to paragraph (ii); and (iv) the 92,000,000 Shares will remain beneficially owned by it as at the date of the Undertaking and up to the close of business on the Record Date

Number of Underwritten Shares

2,183,647,040 Rights Shares, being the number of the Rights Shares less the aggregate number of the Rights Shares agreed to be taken up pursuant to the Undertaking. Accordingly, the Rights Issue is fully underwritten

Aggregate nominal value of the Rights Shares: HK$291,964,704.00 Subscription price: HK$0.1 per Rights Share Net subscription price: HK$0.097 per Right Share The enlarged issued share capital upon 3,284,602,920 Shares completion of the Rights Issue (assuming no new Shares will be issued or repurchased by the Company and no Convertible Bond is converted on or before the Record Date):

– 11 –

LETTER FROM THE BOARD

As at the Latest Practicable Date, save for the Undertaking, the Board has not received any information from any substantial Shareholders of their intention to take up the Rights Shares.

As at the Latest Practicable Date, there are outstanding Convertible Bond with an aggregate principal amount of HK$68,000,000 convertible into 162,679,425 new Shares at the conversion price of HK$0.418 per conversion share (subject to adjustments). Save for the Convertible Bond, the Company does not have any other derivatives, options, warrants and conversion rights or other similar rights which are convertible or exchangeable into Shares.

The number of Rights Shares is arrived at based on eight (8) Rights Shares for every one (1) existing Share held on the Record Date, taking into account (i) the 364,955,880 Shares in issue as at the Latest Practicable Date; (ii) assuming no new Share will be issued or repurchased by the Company on or before the Record Date; and (iii) no Convertible Bond is converted on or before the Record Date. The Rights Shares would represent 800% of the Company’s existing issued share capital and approximately 88.89% of the Company’s issued share capital as enlarged by the issue of the Rights Shares.

Subscription price

The Subscription Price is HK$0.1 per Rights Share, payable in full by a Qualifying Shareholder upon acceptance of the provisional allotments of the Rights Shares and, where applicable, application for excess Rights Shares or when a transferee of nil-paid Rights Shares applies for the Rights Shares. The Subscription Price represents:

(i) a discount of approximately 71.43% to the closing price of HK$0.350 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 72.14% to the average closing prices of approximately HK$0.359 per Share for the last 5 trading days as quoted on the Stock Exchange up to and including the Last Trading Day;
(iii) a discount of approximately 21.88% to the theoretical ex-rights price of approximately HK$0.128 per Share after the Rights Issue, calculated based on the closing price of HK$0.350 per Share as quoted on the Stock Exchange on the Last Trading Day;
(iv) a discount of approximately 73.96% to the average of the closing prices of HK$0.384 per Share for the last 10 trading days as quoted on the Stock Exchange up to and including the Last Trading Day;
(v) a discount of approximately 64.91% to the closing price of HK$0.285 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

– 12 –

LETTER FROM THE BOARD

The Subscription Price was a commercial decision and was arrived at after arm’s length negotiation between the Company and the Underwriter with reference to the following factors:

i) the capital needs of the Group

The Group’s business operations were principally related to the selling of completed properties and leasing of properties for rental income in the PRC. As disclosed in the announcements of the Company dated 26 February 2014, 23 May 2014 and 22 August 2014 respectively, the Company entered into the Framework Agreement in relation to the Proposed Acquisition. The Properties are located in the Luohu district of Shenzhen which is a prosperous area and one of the most well developed districts in Shenzhen. The consideration of the Proposed Acquisition will be determined after further negotiation between the vendor (the “Vendor”) and the Company with reference to the finalized market value of the Properties to be evaluated by an independent valuer engaged by the Company. The preliminary valuation of the Properties as appraised by the independent valuer is approximately RMB400 million (equivalent to approximately HK$500 million at the exchange rate of RMB1: HK$1.25). As requested by the Vendor, the consideration will be satisfied by the Company in the combination of cash, the issuance of consideration shares, promissory notes or/and convertible notes by the Company, whereas the cash portion of the consideration shall be not less than HK$300 million. If (i) the Formal Agreement is not entered into on or before the long stop date of the Framework Agreement; or (ii) the Formal Agreement is entered into but completion of the Proposed Acquisition for whatever causes does not take place; or (iii) the Framework Agreement is terminated for whatever causes, the Earnest Money (if paid) shall be refunded forthwith to the Company. If the Formal Agreement is entered into and the parties thereto proceed to completion of the Proposed Acquisition, the Earnest Money will be treated as part payment of the consideration and will be dealt with pursuant to the Formal Agreement. As at the Latest Practicable Date, negotiations and discussions between the Company and the Vendor as regards the Proposed Acquisition were still ongoing. By entering into a second supplemental framework agreement between the Company and the Vendor on 22 August 2014, the Company’s exclusive right to the Properties was extended for three more months and hence the long stop date of the Framework Agreement will fall on 25 November 2014. As the Company does not have sufficient resources to finance the payment of the Earnest Money of HK$22 million under the Framework Agreement, it is difficult to make much progress on the negotiations on the terms and conditions in relation to the Proposed Acquisition with the Vendor. Accordingly, the Company is in imminent need for new capital to finance the Proposed Acquisition.

ii) the financial position of the Group

For the year ended 31 March 2014, turnover of approximately HK$401,000 was recorded from property sales and rental income of approximately HK$416,000. As at 31 March 2014, a gross floor area of only 7,845 square meters of completed commercial properties in Zouping, Shandong Province, the PRC was remained at the Group. As at the Latest Practicable Date, the Convertible Bond in the principal amount of HK$68 million due in May 2016 with an interest rate per annum of 3% remains outstanding and without significant improvement on the Group’s business performance, it is not expected that the Convertible Bond can be repaid in full upon the date of maturity in May 2016.

– 13 –

LETTER FROM THE BOARD

As at 31 March 2014, the Group recorded audited net assets of approximately HK$178,000 with cash and cash equivalents of approximately HK$27.15 million, which is retained for future administrative expenses of the Group as it is not expected that the existing businesses of the Group would be able to generate significant positive cash inflow to the Group. Accordingly, the Group is in need of new capital for its continual developments.

iii) the market value of the Shares

The Group recorded turnover of approximately HK$0.82 million and HK$0.73 million and net loss after taxation of approximately HK$6.99 million and HK$16.86 million respectively for the year ended 31 March 2014 and 31 March 2013. The Group’s financial performance in the past was unsatisfactory. Since December 2013, the closing prices of the Shares have demonstrated a sliding trend.

Taking into account all these factors, and the alternative financing methods the Company had considered as set out in the Announcement, the Board (including the independent non-executive Directors having consulted Gram Capital) is of the view that the terms of the Rights Issue, including the Subscription Price and the subscription ratio, are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

The deep discount to the recent closing price of the Shares represented by the Subscription Price is made with a view to encourage the Qualifying Shareholders to participate in the Rights Issue and maintain their shareholdings in the Company accordingly and take part in the future growth of the Company. In addition, as indicated to the Company during the negotiation of the Underwriting Agreement, given the abovementioned factors, a subscription price with deeper discount to the closing price of the Shares is necessary to induce the Underwriter to take up the underwriting commitment of the Underwritten Shares, which is an essential part of the Rights Issue.

Basis of provisional allotment

The basis of the provisional allotment shall be eight (8) Rights Shares for every one (1) existing Share held by the Qualifying Shareholders on the Record Date at the Subscription Price. Application for all or any part of a Qualifying Shareholder’s provisional allotment should be made by completing the PAL and lodging the same with remittance for the Rights Shares being applied therefor. On the same basis, no fractional entitlements to the Rights Shares will arise under the Rights Issue.

Qualifying Shareholders

The Rights Issue is only available to the Qualifying Shareholders and will not be extended to the Non-Qualifying Shareholders. The Company will send (i) the Prospectus Documents to the Qualifying Shareholders and (ii) the Overseas Letter together with the Prospectus to the Non-Qualifying Shareholders for information only. To qualify for the Rights Issue, a Shareholder must:

(i) be registered as a member of the Company at the close of business on the Record Date; and
(ii) not be a Non-Qualifying Shareholder.

– 14 –

LETTER FROM THE BOARD

Shareholders whose Shares are held by nominee companies should note that the Board will regard a nominee company as a single Shareholder according to the register of members of the Company. Shareholders with their Shares held by nominee companies are advised to consider whether they would like to arrange for registration of the relevant Shares in the name of the beneficial owner(s) prior to the Record Date.

In order to be registered as members of the Company at the close of business on the Record Date, Shareholders must lodge any transfers of Shares (together with the relevant share certificates) with the Registrar for registration no later than 4:30 p.m. on Monday, 29 September 2014. It is expected that the last day of dealings in the Shares on a cum-rights basis is Thursday, 25 September 2014 and the Shares will be dealt with on an ex-rights basis from Friday, 26 September 2014.

The register of members will be closed from Tuesday, 30 September 2014 to Monday, 6 October 2014 (both dates inclusive) and the Record Date will be on Monday, 6 October 2014. No transfers of Shares will be registered during the book closure period.

Rights of Overseas Shareholders

The Prospectus Documents will not be registered or filed under the applicable securities or equivalent legislation of any jurisdiction other than Hong Kong. Shareholders whose names appear on the registers of members of the Company at the close of business on the Record Date may not be eligible to take part in the Rights Issue. Based on the register of members of the Company as at the Latest Practicable Date, the Company had one Shareholder with address in the United Kingdom. Save for the aforesaid, the Directors confirm that there is no other Overseas Shareholder as at the Latest Practicable Date.

In compliance with the necessary requirements of the Listing Rules, the Company had made enquiries with its legal adviser regarding the feasibility of extending the Rights Issue to the Overseas Shareholders.

The Company has been advised by its legal advisers on the English law that it is not necessary to file, register or record the Rights Issue prospectus in any public place or elsewhere in England, and that the Application Forms may be sent to the Overseas Shareholder with registered address in the United Kingdom.

Based on the advice of the Company’s legal advisers on the English law, the Directors believe that the Prospectus Documents would not be required to be registered under the laws and regulations of the United Kingdom and may be despatched to the Oversea Shareholder with the registered address in the United Kingdom without any restrictions. In view of the above, the Directors have decided to extend the Rights Issue to such Oversea Shareholder with the registered address in the United Kingdom. Such Oversea Shareholder, together with the Shareholders with registered addressed in Hong Kong, are Qualifying Shareholders.

The Company will continue to ascertain whether there is any other Overseas Shareholder on the Record Date and will, if necessary, make further enquiries with its legal advisers in other overseas jurisdiction(s) regarding the feasibility of extending the Rights Issue to such other Overseas Shareholders on the Record Date.

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LETTER FROM THE BOARD

Further information in this connection will be set out in the Prospectus Documents containing, among other things, details of the Rights Issue, to be despatched to the Qualifying Shareholders on the Posting Date. The Company will send copies of the Prospectus and the Overseas Letter to the NonQualifying Shareholders for their information only, but will not send any PAL and EAF to them on the Posting Date.

Arrangements will be made for the Rights Shares which would otherwise have been provisionally allotted to the Non-Qualifying Shareholders to be sold in the market in their nil-paid form as soon as practicable after dealings in the nil-paid Rights Shares commence and before dealings in nil-paid Rights Shares end, if a premium (net of expenses) can be obtained. The proceeds from such sale, less expenses, of more than HK$100 will be paid pro rata to the Non-Qualifying Shareholders. The Company will retain individual amounts of HK$100 or less for its own benefit. Any unsold entitlement of Non-Qualifying Shareholders, together with any Rights Shares provisionally allotted but not accepted by the Qualifying Shareholders or otherwise not subscribed for by transferees of nil-paid Rights Shares, will be made available for excess application on EAFs by the Qualifying Shareholders.

Overseas Shareholders should note that they may or may not be entitled to the Rights Issue, subject to the results of enquiries made by the Directors pursuant to Rule 13.36(2)(a) of the Listing Rules. Accordingly, Overseas Shareholders should exercise caution when dealing in the Shares.

Application for excess Rights Shares

Qualifying Shareholders may apply, by way of excess application, for any unsold entitlements to the Rights Shares of the Non-Qualifying Shareholders and for any Rights Shares provisionally allotted but not accepted.

Applications for excess Rights Shares can only be made by Qualifying Shareholders and only by completing the EAFs (in accordance with the instructions printed thereon) for application for excess Rights Shares and lodging the same with a separate remittance for the excess Rights Shares being applied for by no later than the Latest Time For Acceptance. The Directors will allocate the excess Rights Shares at their discretion on a fair and equitable basis and as far as practicable on the following principles:

subject to availability of excess Rights Shares for all such applications, preference will be given to applications for less than a board lot of Rights Shares where they appear to the Directors that such applications are made to top-up odd lots holdings to whole lot holdings and that such applications are not made with the intention to abuse this mechanism; and
subject to availability of excess Rights Shares after allocation under principle (1) above, any further remaining excess Rights Shares will be allocated to the Qualifying Shareholders based on a sliding scale with reference to the number of the excess Rights Shares applied for by them with flexibility to round up to whole board lots at the discretion of the Directors (i.e. the Qualifying Shareholders applying for a smaller number of the Rights Shares will be allocated a higher percentage of the excess Rights Shares they have applied for; whereas the Qualifying Shareholders applying for a larger number of Rights Shares will be allocated a lower percentage of the excess Rights Shares than those applying for a smaller number).

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LETTER FROM THE BOARD

In the event that the Company discovered that certain excess applications may have been made with the intention to abuse the mechanism under principle (1) above, the Board reserves the rights and absolute discretion to reject any excess applications which appears to them to be made with intention to abuse the top up odd lots mechanism while other applications are not affected and will be allocated according to the above principles (1) and (2).

Investors with their Shares held by a nominee company (including HKSCC) should note that the Board will regard the nominee company (including HKSCC Nominees Limited) whose name appears on the register of members of the Company as a single Shareholder under the aforesaid arrangement in relation to the top-up of odd-lots for allocation of excess Rights Shares. Accordingly, the Shareholders should note that the aforesaid arrangement in relation to the allocation of the excess Rights Shares will not be extended to individual beneficial owners who hold Shares through a registered nominee. Investors with their Shares held by a nominee company are advised to consider whether they would like to arrange for the registration of the relevant Shares in their own name prior to the Record Date. Shareholders and investors should consult their professional advisers if they are in any doubt as to their status.

Investors whose Shares are held by their nominee(s) (including HKSCC) and who would like to have their names registered on the register of members of the Company, must lodge all necessary documents with the Registrar for completion of the relevant registration by 4:30 p.m. on Monday, 29 September 2014.

Fractional of the Rights Shares (if any)

On the basis of provisional allotment of eight (8) Rights Shares for every one (1) Share held by the Qualifying Shareholders on the Record Date, no fractional entitlements to the Rights Shares will arise under the Rights Issue.

Status of the Rights Shares

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

Certificates for the Rights Shares

Subject to the fulfillment of the conditions of the Rights Issue, certificates for all fully-paid Rights Shares are expected to be posted to those entitled thereto by ordinary post at their own risk on or before Thursday, 30 October 2014.

Refund cheques for Rights Issue

Refund cheques in respect of wholly or partially unsuccessful applications for excess Rights Shares (if any) are expected to be posted on or before Thursday, 30 October 2014 by ordinary post to the applicants at their own risk.

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LETTER FROM THE BOARD

Application for listings

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Rights Shares in both their nil-paid and fully-paid forms to be issued and allotted pursuant to the Rights Issue. The nil-paid Rights Shares shall have the same board lot size as the Shares, i.e. 20,000 Shares in one board lot.

No part of the securities of the Company is listed or dealt in or on which listing or permission to deal is being or is proposed to be sought on any other stock exchange.

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

All necessary arrangements will be made to enable the Rights Shares (in both their nil-paid and fullypaid forms) to be admitted into CCASS.

Dealings in the Rights Shares in both their nil-paid and fully-paid forms (both in the proposed new board lots of 20,000) which are registered in the branch register of members of the Company in Hong Kong will be subject to the payment of stamp duty, Stock Exchange trading fee, transaction levy or any other applicable fees and charges in Hong Kong.

UNDERWRITING ARRANGEMENTS

Underwriting Agreement

Date:

11 August 2014 (after trading hours)

Underwriter:

Kingston Securities Limited

To the best of the Directors’ knowledge, information and belief, Kingston Securities Limited and its associates are Independent Third Parties.

Total number of Rights Shares:

2,919,647,040 Rights Shares (assuming no new Share being issued and no Share being repurchased by the Company on or before the Record Date)

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LETTER FROM THE BOARD

Total number of Underwritten Shares:

Commission:

2,183,647,040 Rights Shares (having taken into account the Undertaking and on the basis that no new Share being issued, and being repurchased by the Company on or before the Record Date), being the total number of Rights Shares less 736,000,000 Rights Shares that Viva Shine has undertaken to subscribe and pay for or procure subscription and payment for pursuant to the Undertaking.

The Company will pay the Underwriter an underwriting commission at 2.5% of the aggregate Subscription Price in respect of the Underwritten Shares for the Underwriter has agreed to subscribe or procure subscription together with all costs, fees and out-of-pocket expenses properly incurred by the Underwriter in connection with the Rights Issue. The underwriting commission mentioned above shall not be payable if the Underwriting Agreement does not become unconditional or if it is terminated by the Underwriter, but the Company shall continue to pay all pre-agreed reasonable costs, fees and out-of-pocket expenses properly incurred by the Underwriter in respect of the Rights Issue, including a financial advisory and documentation fee.

The commission rates were determined after arms’ length negotiations between the Company and the Underwriter with reference to, among other things, the scale of the Rights Issue and the market rate, and the Board (including the independent nonexecutive Directors having consulted Gram Capital) considers that the underwriting commission rate is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Pursuant to the Underwriting Agreement, the Underwriter shall not subscribe, for its own account, for such number of Untaken Shares which will result in the shareholding of it and parties acting in concert (within the meaning of the Takeovers Code) with it in the Company to exceed 19.9% of the voting rights of the Company upon the completion of the Rights Issue. The Underwriter shall also use its best endeavours to ensure that each of the subscribers or sub-underwriter(s) of the Untaken Shares procured by it (i) shall be an Independent Third Party of, not acting in concert (within the meaning of the Takeovers Code) with and not connected with the Company, any of the Directors or chief executive of the Company or substantial Shareholders or their respective associates; and (ii) save for the Underwriter itself and its associates, shall not, together with any party acting in concert (within the meaning of the Takeovers Code) with it, hold 10.0% or more of the voting rights of the Company upon completion of the Rights Issue.

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LETTER FROM THE BOARD

Conditions of the Rights Issue

The Rights Issue is conditional upon the following conditions being fulfilled or waived (as appropriate):

(i) the passing of all the necessary resolution(s) by the Board to approve the Underwriting Agreement (including the Rights Issue and the transactions contemplated thereunder);
(ii) the passing of the necessary resolution(s) at the SGM to approve the Underwriting Agreement and the Rights Issue and the transactions contemplated thereunder (including but not limited to the allotment and issue of the Rights Shares) by the Independent Shareholders;
(iii) the delivery to the Stock Exchange for authorisation and the registration by and filing with the Registrar of Companies in Hong Kong of one copy of each of the Prospectus Documents and otherwise in accordance with the Listing Rules and the Companies (Winding Up and Miscellaneous Provisions) Ordinance not later than the Posting Date;
(iv) the posting of copies of the Prospectus Documents to the Qualifying Shareholders;
(v) compliance with and performance by the Company of certain undertakings and obligations under the terms of the Underwriting Agreement;
(vi) the Listing Committee of the Stock Exchange granting or agreeing to grant (subject to allotment) the listing of, and permission to deal in, the Rights Shares in their nil-paid and fully-paid forms and such listings and permission to deal not having been withdrawn or revoked by no later than the first day of their dealings on the Stock Exchange;
(vii) the Shares remaining listed on the Stock Exchange at all times prior to the Settlement Date and the listing of the Shares not having been withdrawn or the trading of the Shares not having been suspended for a consecutive period of more than 5 trading days;
(viii) the Underwriting Agreement not being terminated by the Underwriter pursuant to the terms thereof; and
(ix) the compliance by Viva Shine with its undertakings and obligations under the Irrevocable Undertaking given in favour of the Company and the Underwriter from the date of the Irrevocable Undertaking up to the Latest Time for Acceptance.

The conditions set out above (other than conditions (v) and (vii) which can only be waived by the Underwriter) are incapable of being waived. If the event that the above conditions (i), (ii), (iii) and (iv) have not been satisfied on or before the Posting Date or in the event that the above conditions (v), (vi), (vii), (viii) and (ix) have not satisfied and/or waived by the Underwriter in whole or in part (as the case may be) on or before 4:00 p.m. on the Settlement Date or such other time and date as specified therein (or, in each case, such later date as the Underwriter and the Company may agree in writing), the Underwriting Agreement shall terminate and all liabilities of the parties to the Underwriting Agreement shall cease and determine and neither party shall have any claim against the other, save for any antecedent breaches. As at the Latest Practicable Date, condition (i) above has been fulfilled.

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LETTER FROM THE BOARD

Termination of the Underwriting Agreement

If, prior to 4:00 p.m. on the Settlement Date:

(i) in the absolute opinion of the Underwriter, the success of the Rights Issue would be materially and adversely affected by:
(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the absolute opinion of the Underwriter materially and adversely affect the business or the financial or trading position of the Group as a whole or is materially adverse in the context of the Rights Issue; or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreement) of a political, military, financial, economic or other nature, or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the absolute opinion of the Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or
(c) any act of God, war, riot, public disorder, civil commotion, fire, flood, explosion, epidemic, terrorism, strike or lock-out which would, in the absolute opinion of the Underwriter materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole; or
(ii) any material adverse change in market conditions (including without limitation, a change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or restriction of trading in securities, and a change in currency conditions for the purpose of this clause includes a change in the system under which the value of the Hong Kong currency is pegged with that of the currency of the United States of America) occurs which in the absolute opinion of the Underwriter makes it inexpedient or in advisable to proceed with the Rights Issue; or
(iii) the Prospectus when published contains information (either as to business prospects or the condition of the Group or as to its compliance with any laws or the Listing Rules or any applicable regulations) which has not prior to the date hereof been publicly announced or published by the Company and which may in the absolute opinion of the Underwriter be material to the Group as a whole upon completion of the Rights Issue and is likely to affect materially and adversely the success of the Rights Issue.

The Underwriter shall be entitled by notice in writing to the Company, served prior to 4:00 p.m. on the Settlement Date, to terminate the Underwriting Agreement.

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LETTER FROM THE BOARD

Any such notice shall be served by the Underwriter prior to 4:00 p.m. on the Settlement Date.

WARNING OF THE RISKS OF DEALING IN THE SHARES AND THE NIL-PAID RIGHTS SHARES

The last day of dealing in the Shares on a cum-rights basis is Thursday, 25 September 2014. The Shares will be dealt in on an ex-rights basis commencing from Friday, 26 September 2014. Dealings in the Rights Shares in the nil-paid form are expected to take place from Friday, 10 October 2014 to Friday, 17 October 2014 (both days inclusive). Shareholders and potential investors should note that dealing in the Shares and/or nil-paid Rights Shares will take place while the conditions to which the Underwriting Agreement is subject remain unfulfilled. If the conditions of the Underwriting Agreement are not fulfilled or the Underwriting Agreement is terminated by the Underwriter, the Rights Issue will not proceed.

Any dealings in the Shares from the date of the Announcement and up to 4:00 p.m. on Tuesday, 28 October 2014, being the time and date by which all the conditions of the Rights Issue are to be fulfilled and when the right of the Underwriter to terminate the Underwriting Agreement is to lapse, and any dealings in the Rights Shares in their nil-paid form between Friday, 10 October 2014 and Friday, 17 October 2014, both days inclusive, are accordingly subject to the risk that the Rights Issue may not proceed. Shareholders and potential investors should therefore exercise caution when dealing in the Shares or the Rights Shares in their nil-paid form and, if they are in any doubt about their position, they should consult their professional adviser(s).

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LETTER FROM THE BOARD

REASONS FOR AND BENEFITS OF THE RIGHTS ISSUE AND INTENDED USE OF PROCEEDS

The Group is principally engaged in the business of property development and investment.

Since the year ended 31 March 2010, sales of properties have been the major focus and the only source of revenue for the Group. However, due to corrections in the property market and tightened credit policy in the PRC over the past few years, it became challenging for the Group to identify suitable investment opportunities in the property market and thus the Group relied on selling existing properties on hand to derive its income. As illustrated in the 2014 annual report of the Company, as at 31 March 2014, after the Group sold all its car park units and certain developed commercial properties in the previous years, there only remained a gross floor area of approximately 7,845 square meters of completed commercial properties in Zouping, Shandong Province, the PRC, which was held by the Group. Taking into account of the above, the Board is of the view that there is imminent need for the Group to develop new business and has therefore been actively and cautiously exploring suitable investment opportunities.

As disclosed in the announcements of the Company dated 26 February 2014, 23 May 2014 and 22 August 2014 respectively, the Company entered into the Framework Agreement in relation to the Proposed Acquisition. Set out below is the information on the Properties under the Proposed Acquisition:

			Current rental
Address	Gross Floor Area	Current usage	income monthly
No. 2010-2020,	Approximately	Commercial	Approximately
Chun Feng Road,	15,000 square meters		RMB650,000
Luohu District,
Shenzhen,
Guangdong, PRC
(the “First Property”)
No. 2-16, Xiang Xi Road,	Approximately	Commercial/Residential	Approximately
Luohu District,	4,400 square meters		RMB300,000
Shenzhen,
Guangdong, PRC
(the “Second Property”)

The Properties are multi-function commercial/residential properties located in the Luohu district of Shenzhen which is a prosperous area and one of the most well developed districts in Shenzhen and the Proposed Acquisition is one of the investment opportunities reviewed by the Board with prime location and enormous potentials for investment.

According to the information as provided by the Vendor, the First Property comprises an 8-storey commercial building completed in 2003 with a total gross floor area of approximately 15,000 square meters and it also includes 62 open car parking spaces on the ground floor. The Second Property comprises a 6-storey commercial/residential building completed in 1991 with a gross floor area of approximately 4,400 square meters.

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LETTER FROM THE BOARD

Based on the latest market statistics, the average rental income in such area for building with commercial usage could reach around RMB70 per square meters on average, while for building with residential usage could reach around RMB70 to RMB90 per square meters on average. As advised by the Vendor, the current rental income received from the Properties was below the market average and this is because some of the existing tenants have a long tenancy relationship with the Vendor and some units are for self-usage.

The preliminary valuation prepared by an independent valuer indicates that the Properties are valued at a total of approximately RMB400 million (equivalent to approximately HK$500 million at the exchange rate of RMB1: HK$1.25). The Company has been conducting a feasibility study on the redevelopment plan to rebuild/refurnish the Properties into scaled multi-function commercial/residential properties, which is expected to substantially increase the value of the Properties in the future, for rental and/or sale purpose (the proportion of which will be determined by the then market conditions). After the Proposed Acquisition is completed, the Company expects to obtain borrowings from banks/ financial institutions for the implementation of the re-development plan as mentioned above. However, in the event that the Company is unable to obtain the said borrowings, the re-development plan will be delayed and the Properties are expected to continue to generate stable rental income to the Group. The re-development plan will be implemented immediately after sufficient funding has been obtained by the Company.

As at the Latest Practicable Date, the Company does not have sufficient resources to finance the payment of the Earnest Money of HK$22 million under the Framework Agreement and thus it is difficult to make any significant progress on the negotiations on the terms and conditions in relation to the Proposed Acquisition. Accordingly, the Company is in imminent need for new capital to carry on its business expansion and developments.

Fund raising methods comparison

Since the entering into of the Framework Agreement, the Company has attempted to seek for debt financing from both commercial banks and financial institutions. However, the Company was unable to obtain any debt financing at terms acceptable to the Company due to the facts that (i) the Group do not have any significant assets as collaterals; and (ii) the size of the Convertible Bond, which to be due in May 2016. Given that debt financing is not available to the Company, the Board has considered other fund raising methods available to the Group. Among different fund raising methods, the Directors have focused on evaluating the possibilities of carrying out fund raising through rights issue or open offer as they are relatively larger in scale as compared to placing of new shares in view of the recent market capitalization of the Company of approximately HK$104.01 million as at the Latest Practicable Date. In addition, rights issue or open offer are pre-emptive in nature, allowing Qualifying Shareholders to maintain their respective pro-rata shareholding through their participation and causes no interests burden to the Group.

In comparison between rights issue and open offer, the Rights Issue allows the Qualifying Shareholders who participate to (a) increase its interests in the shareholding of the Company by (i) acquiring additional rights entitlement in the open market (subject to the availability); and/or (ii) applying through excess applications for Rights Shares or (b) decreasing its interests in the shareholding of the Company by disposing their rights entitlements in the open market (subject to availability). As an open offer does not allow the trading of rights entitlements, the Rights Issue is preferred.

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LETTER FROM THE BOARD

Benefits of the Rights Issue

The Rights Issue will allow the Company to strengthen its capital base and liquidity without incurring interest costs. The Rights Issue will also allow the Company to materially reduce its gearing ratio, thereby improving the financial health of the Group. Taking into account the capital needs of the Group, the benefits of the Rights Issue and the availability and comparison with other financing alternatives, the Board (including the independent non-executive Directors having consulted Gram Capital) is of the view that the Rights Issue is in the interests of the Company and the Shareholders as a whole.

Intended use of proceeds

The gross proceeds from the Rights Issue will be approximately HK$292 million before expenses. The estimated expenses in relation to the Rights Issue, including the financial, legal, and other professional advisory fees, underwriting commission, printing and translation expenses will be borne by the Company. The estimated net proceeds of the Rights Issue will be approximately HK$283 million. The Company intends to apply the net proceeds from the Rights Issue principally for future development of the Group, including but not limited to for the payment of the cash portion of the consideration of the Proposed Acquisition while the remaining proceeds (if not utilized) will be applied for other investment opportunities identified and/or the business development of the Group and/or general working capital. In the event that the Proposed Acquisition cannot be completed, the Company will continue to seek for other investment opportunities with prospect and reasonable return and apply the proceeds from the Rights Issue on these opportunities as and when necessary.

However, save for the Proposed Acquisition, as at the Latest Practicable Date, the Company has not entered into any discussions/ negotiations on other potential investment opportunities which may utilize the net proceeds from the Rights Issue.

Independent Shareholders and Qualifying Shareholders

The proposed Rights Issue shall be conducted on the basis of eight (8) Rights Shares for every one (1) existing Share held on the Record Date. The Board considers that any potential dilution impact should be balanced against by the following factors:

Independent Shareholders are given the chances to express their views on the terms of the Rights Issue and the Underwriting Agreement through their votes at the SGM;
Qualifying Shareholders have their choices whether to accept the Rights Issue or not;
Qualifying Shareholders have the opportunity to realize their nil-paid rights to subscribe for the Rights Shares in the market;
the Rights Issue offers Qualifying Shareholders a chance to subscribe for their pro-rata Rights Shares for the purpose of maintaining their respective existing shareholding interests in the Company at a relatively low price as compared to the historical and prevailing market price of the Shares; and
those Qualifying Shareholders who choose to accept the Rights Issue in full can maintain their respective existing shareholding interests in the Company after the Rights Issue.

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LETTER FROM THE BOARD

Having considered the above, the Board considers the potential dilution effect on the shareholding interests of the Qualifying Shareholders, which may only happen when the Qualifying Shareholders do not subscribe for their pro-rata Rights Shares, to be acceptable. Having taken into account the terms of the Rights Issue, the Board (including the independent non-executive Directors having consulted Gram Capital) considers that the Rights Issue is fair and reasonable and in the interests of the Company and the Shareholders as a whole. Furthermore, it also offers all the Qualifying Shareholders an equal opportunity to participate in the enlargement of the capital base of the Company and enables the Qualifying Shareholders to maintain their proportionate interests in the Company to participate in the future development of the Company should they wish to do so.

However, those Qualifying Shareholders who do not take up the Rights Shares to which they are entitled should note that their shareholdings in the Company will be diluted.

PREVIOUS FUND RAISING EXERCISE OF THE COMPANY

The Company has not conducted any other fund raising exercise in the past twelve months immediately prior to the date of the Announcement.

SHAREHOLDING STRUCTURE OF THE COMPANY

The table below depicts the possible shareholding structure of the Company as at the Latest Practicable Date and the possible changes upon completion of the Rights Issue, on the basis of the public information available to the Company as of the Latest Practicable Date, after the Directors having making reasonable enquiries and assuming there is no other changes in the shareholding structure of the Company since the Latest Practicable Date:—

Shareholders Viva Shine_(Note 3) Mr. Chen Xiaoping(Note 4) Public The Underwriter(Note 5)_ Other public Shareholders Total	As at the Latest Practicable Date Number of Shares Approx. % 92,000,000 25.21 314,000 0.09 — — 272,641,880 74.70 364,955,880 100.00	Immediately after completion of the Rights Issues Assuming none of the Rights Shares are subscribed by the Qualifying Shareholders Assuming all Right Shares (except for the are subscribed by the Underwriter and Viva Qualifying Shareholders Shine)(Notes 1 & 2) Number of Number of Shares Approx. % Shares Approx. % 828,000,000 25.21 828,000,000 25.21 2,826,000 0.09 314,000 0.01 — — 2,183,647,040 66.48 2,453,776,920 74.70 272,641,880 8.30 3,284,602,920 100.00 3,284,602,920 100.00	Immediately after completion of the Rights Issues Assuming none of the Rights Shares are subscribed by the Qualifying Shareholders Assuming all Right Shares (except for the are subscribed by the Underwriter and Viva Qualifying Shareholders Shine)(Notes 1 & 2) Number of Number of Shares Approx. % Shares Approx. % 828,000,000 25.21 828,000,000 25.21 2,826,000 0.09 314,000 0.01 — — 2,183,647,040 66.48 2,453,776,920 74.70 272,641,880 8.30 3,284,602,920 100.00 3,284,602,920 100.00
			100.00

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LETTER FROM THE BOARD

Notes:

The above scenario is for illustrative purpose only and will unlikely occur.
The Company will ensure the compliance with the public float requirements under Rule 8.08 of the Listing Rules upon completion of the Rights Issue.
Viva Shine is owned as to 50% by Mr. Yu Shengming and 50% by Mr. Wang Guoli. Viva Shine is also interested in the Convertible Bond of principal amount of HK$68,000,000 which are convertible into a maximum of 162,679,425 Shares at the price of HK$0.418 per Shares (subject to adjustment) as at the Latest Practicable Date. Mr. Yu Shengming, being the chairman of the Company and an executive Director, and Mr. Wang Guoli are deemed to be interested in the Shares and the Convertible Bond held by Viva Shine. Both the 92,000,000 Shares and the Convertible Bond are subject to share charges.
Mr. Chen Xiaoping is a non-executive Director.
Under the Underwriting Agreement, in the event of the Underwriter being called upon to subscribe for or procure subscribers for the Underwritten Shares:
(i) the Underwriter shall not subscribe, for its own account, for such number of Underwritten Shares which will result in the shareholding of it and parties acting in concert (within the meaning of the Takeovers Code) with it in the Company to exceed 19.9% of the voting rights of the Company upon the completion of the Rights Issue; and
(ii) the Underwriter shall use its best endeavours to ensure that each of the subscribers of the Underwritten Shares procured by it (1) shall be Independent Third Party of, not acting in concert (within the meaning of the Takeovers Code) with and not connected with the Company, any of the Directors or chief executive or substantial Shareholders or their respective associates; and (2) save for the Underwriter itself and its associates, shall not, together with any party acting in concert (within the meaning of the Takeovers Code) with it, hold 10.0% or more of the voting rights of the Company upon completion of the Rights Issue.

POSSIBLE ADJUSTMENT TO THE CONVERSION PRICE OF THE CONVERTIBLE BOND

As a result of the Rights Issue, the conversion price of the Convertible Bond may be adjusted in accordance with the terms and conditions of the Convertible Bond. The Company will instruct its auditors or other firm of accountants to certify the adjustments, if any, to the Convertible Bond and will inform the holder of the Convertible Bond of the adjustments, if any, accordingly. Further announcement will be made by the Company in respect of such adjustments as and when appropriate.

CHANGE IN BOARD LOT SIZE

The Board proposes that, subject to the completion of the Rights Issue, the board lot size of the Shares for trading on the Stock Exchange will be changed from 2,000 Shares to 20,000 Shares with effect from 9:00 a.m. on Friday, 31 October 2014.

In order to facilitate the trading of odd lots (if any), the Company will arrange odd lot matching services during Friday, 31 October 2014 to Friday, 21 November 2014 (both dates inclusive). Shareholders should note that matching of the sale and purchase of odd lots of the Shares is on a best effort basis and successful matching of the sale and purchase of such odd lots is not guaranteed.

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LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

In compliance with Rule 7.19(6) of the Listing Rules, the Rights Issue must be made conditional on approval of the Independent Shareholders by way of poll at the SGM on which any controlling Shareholders (as defined in the Listing Rules) and their associates or, where there are no controlling Shareholders, the Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates shall abstain from voting in favour of the Rights Issue.

As at the Latest Practicable Date, there is no controlling Shareholder (as defined in the Listing Rules). Accordingly, (i) Viva Shine, which is owned as to 50% by Mr. Yu Shingming, the chairman of the Company and an executive Director, and is interested in 92,000,000 Shares and controls or is entitled to exercise control over the voting rights in respect of such number of Shares, representing approximately 25.21% of the issued share capital of the Company; and (ii) Mr. Chen Xiaoping, a non-executive Director, who is interested in 314,000 Shares and controls or is entitled to exercise control over the voting rights in respect of such number of Shares, representing approximately 0.08% of the issued share capital of the company, will abstain from voting in favour of the resolution approving the Rights Issue and the transactions contemplated thereunder at the SGM.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company and their respective associates, hold any Shares and none of the Shareholders are required to abstain from voting in favour of the proposed resolution approving the Rights Issue at the SGM pursuant to the Listing Rules and/or the bye-laws of the Company.

The Rights Issue is conditional on, among other things, the relevant resolution being approved by the Independent Shareholders at the SGM. The Independent Board Committee comprising all the independent non-executive Directors has been established by the Company to advise the Independent Shareholders as to whether the terms of the Rights Issue are fair and reasonable and as to voting in respect thereof at the SGM. Gram Capital has been appointed as an Independent Financial Adivser to advise the independent board committee of the Company and the Independent Shareholders in this regard.

INDEPENDENT BOARD COMMITTEE

The Company has established the Independent Board Committee, which comprises all independent non-executive Directors, namely Mr. Ling Kit Wah, Joseph, Mr. Ng Kwok Wai and Mr. Lee Chi Hwa, Joshua, to advise the Independent Shareholders as to whether the terms of the Rights Issue are fair and reasonable and whether the Rights Issue is in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote, taking into account the recommendations of Gram Capital.

In this connection, the Company has appointed Gram Capital as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders as to whether the terms of the Rights Issue are fair and reasonable and whether the Rights Issue is in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote.

The Prospectus Documents setting out details of the Rights Issue will be despatched to the Qualifying Shareholders as soon as practicable, subject to the conditions of the Rights Issue being satisfied.

– 28 –

LETTER FROM THE BOARD

SGM

A notice of the SGM to be held at 3:00 p.m. on 24 September 2014 at Joint Professional Centre, Unit 1, Ground Floor, The Center, 99 Queen’s Road Central, Hong Kong is set out on pages 63 to 64 of this circular for the purpose of considering and, if thought fit, approving the Rights Issue.

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

The 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 and return the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Registrar of 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, as soon as possible and in any event not later than 48 hours before the time appointed for the holding of 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 of it, if you so wish.

Subject to the Rights Issue being approved at the SGM, the Prospectus or Prospectus Documents, where appropriate, containing further information on the Rights Issue will be despatched to the Shareholders as soon as practicable.

RECOMMENDATION

The Directors believe that the terms of the Rights Issue are fair and reasonable and in the interests of the Company and the Shareholders as a whole and recommend the Independent Shareholders to vote in favour of the resolution to be proposed at the SGM. You are advised to read carefully the letter from the Independent Board Committee regarding the Rights Issue on page 30 of this circular. The Independent Board Committee, having taken into account the advice of Gram Capital, the text of which is set out on pages 31 to 44 of this circular, considers that the terms of the Rights Issue are fair and reasonable insofar as the Independent Shareholders are concerned.

FURTHER INFORMATION

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

Yours faithfully, For and on behalf of the Board South East Group Limited Yu Shengming

Executive Director and Chairman

– 29 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

The following is the text of the letter from the Independent Board Committee setting out its recommendation to the Independent Shareholders in relation to the Rights Issue.

==> picture [241 x 41] intentionally omitted <==

(Incorporated in Bermuda with limited liability) (Stock Code: 726)

5 September 2014

To the Independent Shareholders

Dear Sir or Madam,

PROPOSED RIGHTS ISSUE ON THE BASIS OF EIGHT RIGHTS SHARES FOR EVERY ONE EXISTING SHARE HELD ON THE RECORD DATE

We refer to the circular of the Company dated 5 September 2014 (the “ Circular ”) of which this letter forms part. Unless the context specifies otherwise, capitalised terms used herein have the same meanings as defined in the Circular.

We have been appointed by the Board as members to form the Independent Board Committee to advise the Independent Shareholders as to whether the terms of the Rights Issue are fair and reasonable insofar as the Independent Shareholders are concerned.

Gram Capital has been appointed to advise the Independent Board Committee and the Independent Shareholders in this respect.

Having taken into account the terms of the Rights Issue and the advice of Gram Capital, we are of the opinion that the Rights Issue is on normal commercial terms, are in the interests of the Company and the Shareholders as a whole and the terms of which are fair and reasonable insofar as the Company and the Independent Shareholders are concerned. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the SGM to approve the Rights Issue.

Yours faithfully, For and on behalf of Independent Board Committee of

South East Group Limited

Mr. Ng Kwok Wai Mr. Lee Chi Hwa, Joshua Independent non-executive Director Independent non-executive Director

Mr. Ling Kit Wah, Joseph

Independent non-executive Director

* For identification purposes only

– 30 –

LETTER FROM GRAM CAPITAL

Set out below is the text of a letter received from Gram Capital, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Rights Issue for the purpose of inclusion in this circular.

==> picture [189 x 36] intentionally omitted <==

Room 1209, 12/F. Nan Fung Tower 173 Des Voeux Road Central Hong Kong 5 September 2014

To: The independent board committee and the independent shareholders of South East Group Limited

Dear Sirs,

PROPOSED RIGHTS ISSUE ON THE BASIS OF EIGHT RIGHTS SHARES FOR EVERY ONE EXISTING SHARE HELD ON THE RECORD DATE AT HK$0.1 PER RIGHTS SHARE

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Rights Issue, details of which are set out in the letter from the Board (the “ Board Letter ”) contained in the circular dated 5 September 2014 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 11 August 2014, the Board announced that the Company proposes to raise approximately HK$292 million (before expenses) by issuing 2,919,647,040 Rights Shares to the Qualifying Shareholders by way of the Rights Issue at the Subscription Price of HK$0.1 per Rights Share on the basis of eight Rights Shares for every one existing Share held on the Record Date. The Rights Issue is fully underwritten by the Underwriter.

According to the Board Letter, the Rights Issue is conditional on, among other things, the relevant resolutions being approved by the Independent Shareholders at the SGM on which any controlling shareholders of the Company (as defined in the Listing Rules) and their associates or, where there are no controlling shareholders, the Directors (excluding the independent non-executive Directors) and the chief executive of the Company and their respective associates shall abstain from voting.

The Independent Board Committee comprising Mr. Ling Kit Wah, Joseph, Mr. Ng Kwok Wai and Mr. Lee Chi Hwa, Johsua (all being independent non-executive Directors) has been established to advise the Independent Shareholders (i) as to whether the terms of the Rights Issue and the Underwriting Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned and the Rights Issue is in the interests of the Company and the Shareholders

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LETTER FROM GRAM CAPITAL

as a whole; and (ii) on how to vote in relation to the Rights Issue at the SGM. We, Gram Capital Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this respect.

Apart from the advisory fee and expenses payable to us in connection with our appointment as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, no arrangement exists whereby we shall receive any other fees or benefits from the Company.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the statements, information, opinions and representations contained or referred to in the Circular and the information and representations as provided to us by the Directors. We have assumed that all information and representations that have been provided by the Directors, for which they are solely and wholly responsible, are true and accurate at the time when they were made and continue to be so as at the Latest Practicable Date. We have also assumed that all statements of belief, opinion, expectation and intention made by the Directors in the Circular were reasonably made after due enquiry and careful consideration. We have no reason to suspect that any material facts or information have been withheld or to doubt the truth, accuracy and completeness of the information and facts contained in the Circular, or the reasonableness of the opinions expressed by the Company, its advisers and/or the Directors, which have been provided to us. Our opinion is based on the Directors’ representation and confirmation that there are no undisclosed private agreements/arrangements or implied understanding with anyone concerning the Rights Issue. We consider that we have taken sufficient and necessary steps on which to form a reasonable basis and an informed view for our opinion in compliance with Rule 13.80 of the Listing Rules.

The Directors have collectively and individually accepted full responsibility for the accuracy of the information contained in the Circular and have confirmed, having made all reasonable enquiries, which to the best of their knowledge and belief, that the information contained in the 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 in the Circular or the Circular misleading. We, as the Independent Financial Adviser, take no responsibility for the contents of any part of the Circular, save and except for this letter of advice.

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent indepth investigation into the business and affairs of the Company, the Underwriter or their respective subsidiaries or associates, nor have we considered the taxation implication on the Group or the Shareholders as a result of the Rights Issue. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date or to update, revise or reaffirm our opinion. In addition, nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Shares or any other securities of the Company.

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LETTER FROM GRAM CAPITAL

Lastly, where information in this letter has been extracted from published or otherwise publicly available sources, the sole responsibility of Gram Capital is to ensure that such information has been correctly extracted from the relevant sources.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion in respect of the Rights Issue, we have taken into consideration the following principal factors and reasons:

1. Background of and reasons for the Rights Issue

Business and financial overview of the Group

As referred to in the Board Letter, the Group is principally engaged in the business of property development and investment.

Set out below are the audited consolidated financial results of the Group for the two financial years ended 31 March 2014 as extracted from the Company’s annual report for the financial year ended 31 March 2014 (the “ 2013/14 Annual Report ”):

			Year on
			year change from
	For the year ended For the year ended		FY2012/2013 to
	31 March 2014	31 March 2013	FY2013/2014
	HK$’000	HK$’000	%
Turnover	817	732	11.6
Loss for the year	(6,990)	(16,857)	(58.5)
			Year on
	As at	As at	year change from
	31 March 2014	31 March 2013	2013 to 2014
	HK$’000	HK$’000	%
Cash and cash equivalents	27,151	39,855	(31.9)
Net assets	178	2,663	(93.3)

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LETTER FROM GRAM CAPITAL

As disclosed in the 2013/14 Annual Report, there only remained a gross floor area of approximately 7,845 square meters of completed commercial properties in Zouping, Shandong Province, the PRC (the “ Remaining Properties ”), which was held by the Group as at 31 March 2014. For the financial year ended 31 March 2014, the Group recorded minimal turnover of approximately HK$817,000, of which approximately HK$401,000 was recorded from property sales attributable to the aforementioned properties and rental income of approximately HK$416,000 was generated from leasing out part of such properties. During the same said financial year under review, the Group’s loss for the year was approximately HK$7 million, representing a decrease of approximately 58.5% as compared to the prior financial year. With reference to the 2013/14 Annual Report, such substantial reduction in loss was mainly attributable to fair value gains on reclassification from properties held for sale to investment properties.

As extracted from the Board Letter and further confirmed by the Directors, sales of properties have been the major focus and the only source of revenue for the Group since the financial year ended 31 March 2010. However, due to corrections in the property market and tightened credit policy in the PRC over the past few years, it has been increasingly challenging for the Group to identify suitable investment opportunities in the property market and thus the Group relied on selling existing properties on hand to derive its income. Taking into account of the aforesaid and that the Group only had the Remaining Properties for rental purpose in the future, the Board is of the view that there is imminent need for the Group to develop new business and has therefore been actively and cautiously exploring suitable investment opportunities. For this reason, the Company entered into the Framework Agreement (as amended by two supplemental agreements) in relation to the Proposed Acquisition on 26 February 2014. Shareholders may refer to the announcements of the Company dated 26 February 2014, 23 May 2014 and 22 August 2014 for details regarding the Proposed Acquisition.

Reasons for the Rights Issue

As mentioned in the foregoing, sales of properties have been the major focus and the only source of revenue for the Group since the financial year ended 31 March 2010 and the Group only had the Remaining Properties for rental purpose in the future. As such, the Board is of the view that there is imminent need for the Group to develop new business and has therefore been actively and cautiously exploring suitable investment opportunities. For this reason, the Company entered into the Framework Agreement (as amended by two supplemental agreements) in relation to the Proposed Acquisition on 26 February 2014. As referred to in the Board Letter, the Properties under the Proposed Acquisition are multi-function commercial/residential properties located in the Luohu district of Shenzhen, the PRC which is a prosperous area and one of the most well developed districts in Shenzhen. The Board considered the Proposed Acquisition to be one of the investment opportunities with enormous potentials for investment.

The consideration of the Proposed Acquisition will be determined after further negotiations between the Vendor and the Company with reference to the finalised market value of the Properties to be evaluated by an independent valuer engaged by the Company. The preliminary valuation of the Properties as appraised by the independent valuer was approximately RMB400 million (equivalent to approximately HK$500 million). As requested by the Vendor, the

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LETTER FROM GRAM CAPITAL

consideration will be satisfied by the Company in the combination of cash, issuance of consideration shares, promissory notes or/and convertible notes by the Company, but the cash portion of the consideration shall be not less than HK$300 million. Pursuant to the Framework Agreement, the Company shall pay the Earnest Money in the amount of HK$22 million to the Vendor upon completion of a preliminary due diligence review on the Properties (to the satisfaction of the Company at its own discretion) on or before the long stop date on 25 November 2014. As at 31 July 2014, the Group had unaudited cash and cash equivalents of approximately HK$24.7 million. The Directors further confirmed that the Group did not have sufficient resources to finance payment of the Earnest Money since the Group mainly utilises its existing cash on hand for daily operations. Given that the Group may not be able to settle the Earnest Money, it is difficult to make any significant progress on the negotiations of the terms and conditions of the Proposed Acquisition.

The estimated net proceeds of the Rights Issue will be approximately HK$283 million. As confirmed by the Directors, the Company intends to apply the net proceeds from the Rights Issue principally for future development of the Group, including but not limited to payment of the cash portion of the consideration of the Proposed Acquisition. The remaining proceeds from the Rights Issue, if not utilised, will be applied for other investment opportunities identified and/or business development of the Group and/or general working capital. In the event that the Proposed Acquisition cannot be completed, the Company will continue to seek for other investment opportunities with prospect and reasonable return and apply the proceeds from the Rights Issue on these opportunities as and when necessary. However, save for the Proposed Acquisition, as at the Latest Practicable Date, the Company had not entered into any discussions/ negotiations on other potential investment opportunities which may utilise the net proceeds from the Rights Issue.

In view of (i) the historical unsatisfactory financial performance of the Group and its tight liquidity position; (ii) the Group’s need for new capital for business expansion and developments (without limitation to the Proposed Acquisition) in order to revive its future business; and (iii) the proposed use of proceeds from the Rights Issue, we concur with the Directors that the reasons for the Rights Issue are justifiable.

Other financing alternatives available to the Group

As advised by the Directors, the Board has considered various fund raising methods to satisfy the Group’s imminent need for new capital. In this relation, we have enquired into and were informed by the Directors that the Company has attempted to seek debt financing from both commercial banks and financial institutions following the entering into of the Framework Agreement. Nevertheless, the Company was unable to obtain any debt financing at terms acceptable to the Company due to the facts that (i) the Group does not have any significant assets as collaterals (as depicted under the sub-section headed “Business and financial overview of the Group” of this letter, the Group had net assets of HK$178,000 only as at 31 March 2014); and (ii) the Convertible Bond in the principal amount of HK$68 million will be due in May 2016.

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LETTER FROM GRAM CAPITAL

As debt financing is not available to the Company, the Board has considered equity financing and has focused on evaluating the possibilities of carrying out fund raising through rights issue or open offer as they are relatively larger in scale as compared to placing of new Shares in view of that the market capitalisation of the Company has been around HK$100 million recently. Moreover, rights issue or open offer are both pre-emptive in nature, allowing the qualifying shareholders to maintain their respective pro-rata shareholdings through their participation and would cause no interests burden onto the Group. In comparison between rights issue and open offer, a rights issue allows the qualifying shareholders who participate to (i) increase their shareholding interests in the Company by (a) acquiring additional rights entitlements in the open market (subject to availability); and/or (b) applying through excess applications for the rights shares; or otherwise (ii) reduce its shareholding interests in the Company by disposing their rights entitlements in the open market (subject to availability). As an open offer does not allow the trading of rights entitlements, the Board is of the view that rights issue is more preferable than open offer, not to mention that rights issue will also allow the Company to (i) strengthen its capital base and liquidity without incurring interest costs; and (ii) reduce its gearing ratio and thereby improving the financial position of the Group.

Having taken into account the capital need of the Group without limitation to the Proposed Acquisition, the possible benefits of the Rights Issue as well as the availability of and comparison with other financing alternatives, we concur with the Directors that the Rights Issue is in the interests of the Company and the Shareholders as a whole.

2. Principal terms of the Rights Issue

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

Basis of the Rights Issue: Eight Rights Shares for every one existing Share held on the Record Date Subscription Price: HK$0.1 per Rights Share Number of Shares in issue 364,955,880 Shares as at the Latest Practicable Date: Number of Rights Shares: 2,919,647,040 Rights Shares (assuming no new Share being issued and no Share being repurchased by the Company on or before the Record Date)

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LETTER FROM GRAM CAPITAL

The Subscription Price represents:

(a) a discount of approximately 64.91% to the closing price of HK$0.285 per Share as quoted on the Stock Exchange on the Last Practicable Date;
(b) a discount of approximately 71.43% to the closing price of HK$0.350 per Share as quoted on the Stock Exchange on the Last Trading Day;
(c) a discount of approximately 72.14% to the average closing price of approximately HK$0.359 per Share for the last five consecutive trading days up to and including the Last Trading Day as quoted on the Stock Exchange;
(d) a discount of approximately 73.96% to the average closing price of approximately HK$0.384 per Share for the last ten consecutive trading days up to and including the Last Trading Day as quoted on the Stock Exchange;
(e) a discount of approximately 17.36% to the theoretical ex-rights price (assuming there is no new Share being issued and no Share being repurchased by the Company from the Latest Practicable Date to on or before the Record Date) of approximately HK$0.121 per Share after the Rights Issue, calculated based on the closing price of HK$0.285 per Share as quoted on the Stock Exchange on the Latest Practicable Date; and
(f) a discount of approximately 21.88% to the theoretical ex-rights price (assuming there is no new Share being issued and no Share being repurchased by the Company from the Last Trading Day to on or before the Record Date) of approximately HK$0.128 per Share after the Rights Issue, calculated based on the closing price of HK$0.350 per Share as quoted on the Stock Exchange on the Last Trading Day.

As confirmed by the Directors, the determination of the Subscription Price and subscription ratio was a commercial decision made by the Company after arm’s length negotiations between the Company and the Underwriter, having considered, among other things, (i) the capital need of the Group; (ii) the financial position of the Group; and (iii) the market value of the Shares. A detailed elaboration of the basis of the Subscription Price is included under the sub-section headed “Subscription Price” of the Board Letter.

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LETTER FROM GRAM CAPITAL

3. Analyses on the Subscription Price

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

Review on Share price performance

The following table illustrates the highest and lowest closing prices and the average closing price of the Shares as quoted on the Stock Exchange in each month during the period commencing from 1 August 2013 up to and including the Last Trading Day, representing the latest 12-month period prior to and including the date of the Underwriting Agreement (the “ Review Period ”):

				No. of trading
	Highest	Lowest	Average daily	days in each
Month	closing price	closing price	closing price	month
	(HK$)	(HK$)	(HK$)
2013
August	0.310	0.270	0.280	21
September	0.360	0.275	0.313	20
October	0.530	0.315	0.407	21
November	0.980	0.510	0.815	21
December	0.790	0.670	0.735	20
2014
January	0.710	0.550	0.619	21
February	0.640	0.580	0.603	19
March	0.600	0.470	0.516	21
April	0.580	0.450	0.496	20
May	0.510	0.420	0.456	20
June	0.510	0.420	0.453	20
July_(Note)_	0.485	0.375	0.410	22
August (up to and
including the
Last Trading Day)	0.380	0.350	0.364	7

Source: the Stock Exchange web-site (www.hkex.com.hk)

Note: Trading in the Shares was halted on 30 July 2014 (with effect from 3:26 p.m.).

As shown by the above table, the market price of the Shares reached the peak in November 2013 and demonstrated a persistent decreasing trend thereafter.

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LETTER FROM GRAM CAPITAL

Review on trading liquidity of the Shares

The average daily number of the Shares traded per month, and the respective percentages of the Shares’ monthly trading volume as compared to (i) the total number of issued Shares held by the public as at the Last Trading Day; and (ii) the total number of issued Shares as at the Last Trading Day, during the Review Period are tabulated as follows:

			% of the Average
			Volume to total	% of the Average
			number of issued	Volume to total
		Average daily	Shares held by the	number of issued
	No. of trading	trading volume	public as at the	Shares as at the
	days in each	(the “Average	Last Trading Day	Last Trading Day
Month	month	Volume”)	(Note 2)	(Note 3)
		Shares	%	%
2013
August	21	68,333	0.03	0.02
September	20	1,042,694	0.38	0.29
October	21	3,556,707	1.30	0.97
November	21	5,301,429	1.94	1.45
December	20	2,010,260	0.74	0.55
2014
January	21	296,143	0.11	0.08
February	19	385,989	0.14	0.11
March	21	480,000	0.18	0.13
April	20	382,310	0.14	0.10
May	20	648,550	0.24	0.18
June	20	1,835,250	0.67	0.50
July_(Note 1)_	22	6,321,182	2.32	1.73
August (up to and
including the
Last Trading Day)	7	2,416,857	0.89	0.66

Source: the Stock Exchange web-site (www.hkex.com.hk)

Notes:

Trading in the Shares was halted on 30 July 2014 (with effect from 3:26 p.m.).
Based on 272,641,880 Shares held by the public as at the Last Trading Day.
Based on 364,955,880 Shares in issue as at the Last Trading Day.

The above table illustrates that the average daily trading volume of the Shares per month had been thin during the Review Period. Save and except for October 2013, November 2013 and July 2014, an average of less than 1% of the total number of issued Shares held by the public were traded.

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LETTER FROM GRAM CAPITAL

Comparison with other rights issue transactions

As part of our analyses, we have also searched for the rights issue transactions (the “ Comparables ”) which were announced from 1 May 2014 up to the Last Trading Day (being the approximate four-month period prior to and including the Last Trading Day, representing the latest available information before the Rights Issue) by companies listed on the Stock Exchange so as to reflect the general trend of rights issue transactions in the recent market. To the best of our knowledge and as far as we are aware of, we found ten rights issue transactions which met the aforesaid criteria. Shareholders should note that the businesses, operations and prospects of the Company are not the same as the Comparables and we have not conducted any independent verification with regard to the businesses and operations of the Comparables.

Summarised below is our relevant finding:

				Discount of the
				subscription
				price to the
				theoretical
			Discount of the	ex-rights
			subscription	price per share
			price to the	based on the
			closing price	closing price
			per share on	per share on
			the last trading	the last trading
			days prior to/on	days prior to/on
			the date of the	the date of the		Maximum
			announcements	announcements		dilution
			in relation to	in relation to the		to the then
		Date of	the respective	respective	Underwriting	existing public	Basis of
Company name	Stock code	announcement	rights issue	rights issue	commission	shareholders	entitlement
			%	%	%	percent point
SMI Culture Group Holdings Limited	2366	8 August 2014	(83.33 )	(35.66 )	4.50	47.87	8 to 1
China Gamma Group Limited	164	13 July 2014	(59.76 )	(49.74 )	1.00	21.76	1 to 2
Opes Asia Development Limited	810	11 July 2014	(67.21 )	(29.10 )	2.50	69.13	4 to 1
Sau San Tong Holdings Limited	8200	10 July 2014	(77.27 )	(45.95 )	2.50	56.79	3 to 1
Applied Development Holdings Limited	519	3 July 2014	(67.30 )	(57.90 )	2.50	16.94	1 to 2
Vision Fame International Holding Limited	1315	19 June 2014	(20.00 )	(11.11 )	1.00	12.50	1 to 1
HKT Trust and HKT Limited	6823	13 June 2014	(20.65 )	(18.08 )	2.20	3.38	18 to 100
eForce Holdings Limited	943	22 May 2014	(80.39 )	(19.43 )	3.00	83.32	16 to 1
Uni-President China Holdings Limited	220	11 May 2014	(29.60 )	(26.00 )	1.20	4.92	1 to 5
National Arts Entertainment and
Culture Group Limited	8228	2 May 2014	(70.16 )	(25.10 )	2.50	48.02	6 to 1
Minimum			(20.00 )	(11.11 )	1.00	3.38
Maximum			(83.33 )	(57.90 )	4.50	83.32
Average			(57.57 )	(31.81 )	2.29	36.46
The Company	726		(71.43 )	(21.88 )	2.50	66.40	8 to 1

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

Note: based on the shareholding on the date of the announcements in relation to the respective rights issue and assuming there was no new share being issued and no share being repurchased by the listed companies on or before the respective record dates

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LETTER FROM GRAM CAPITAL

As shown by the above table, the subscription prices of the Comparables represented discounts of approximately 20.00% to 83.33% to the respective closing prices of their shares on the last trading days prior to/on the date of the release of the respective rights issue announcements (the “ LTD Market Range ”). The discount of approximately 71.43% to the closing price of the Shares on the Last Trading Day as represented by the Subscription Price (the “ LTD Discount ”) hence falls within the LTD Market Range

Furthermore, the subscription prices of the Comparables represented discounts of approximately 11.11% to 57.90% to the respective theoretical ex-rights prices of their shares on the last trading days prior to/on the date of the release of the respective rights issue announcements (the “ TEEP Market Range ”). The discount of approximately 21.88% to the theoretical ex-rights price as represented by the Subscription Price (the “ TEEP Discount ”) hence also falls within the TEEP Market Range.

Conclusion

As all Qualifying Shareholders are entitled to subscribe for the Rights Shares in the same proportion to his/her/its existing shareholding in the Company held on the Record Date, the Directors considered that the deep discount to the recent closing prices of the Shares as represented by the Subscription Price was made with a view to encourage the Qualifying Shareholders to participate in the Rights Issue and maintain their respective shareholding interests in the Company accordingly, and to take part in the future growth of the Company. In light of (i) the overall decreasing market price and the thin trading volume of the Shares in the open market during the Review Period; (ii) the historical unsatisfactory financial performance of the Group and its tight liquidity position; and (iii) the Group’s need for new capital for business expansion and developments in order to revive its future business, we concur with the Directors that it would be difficult to attract the Qualifying Shareholders to further invest in the Company through the Rights Issue if the Subscription Price was not set at rather deep discount to the historical closing prices of the Shares. Given also that the LTD Discount and the TEEP Discount are not exceptional as compared with the Comparables, we are of the opinion that the Subscription Price is fair and reasonable so far as the Independent Shareholders are concerned.

4. Underwriting arrangement

Pursuant to the Underwriting Agreement, the Underwriter has conditionally agreed to underwrite the Rights Shares not subscribed for by the Qualifying Shareholders on a fully underwritten basis, subject to the terms and conditions of the Underwriting Agreement with an underwriting commission of 2.5% of the aggregate Subscription Price in respect of the number of Underwritten Shares (the “ Underwriting Commission ”). As confirmed by the Directors, the Underwriting Commission was determined after arm’s length negotiations between the Company and the Underwriter with reference to, among other things, the scale of the Rights Issue and the market rate. The Board considered that the Underwriting Commission is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

– 41 –

LETTER FROM GRAM CAPITAL

From the table under the sub-section headed “Comparison with other rights issue transactions” of this letter, we noted that the Underwriting Commission falls within the range of commissions of 1 to 4.5% received by underwriters in other rights issue transactions. Given the same, we are of the opinion that the Underwriting Commission is in line with common market practice.

5. Application for excess Rights Shares

As stated in the Board Letter, Qualifying Shareholders may apply, by way of excess application, for any unsold entitlements to the Rights Shares of the Non-Qualifying Shareholders and for any Rights Shares provisionally allotted but not accepted.

Applications for excess Rights Shares can only be made by Qualifying Shareholders and only by completing the EAFs and lodging the same with a separate remittance for the excess Rights Shares being applied for by no later than the Latest Time For Acceptance. The Directors will allocate the excess Rights Shares at their discretion on a fair and equitable basis on the principles as stated under the sub-section headed “Application for excess Rights Shares” of the Board Letter.

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

6. Possible dilution of the shareholding interests of the existing public Shareholders

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

As in all other cases of rights issues and open offers, dilution on the shareholdings of those Qualifying Shareholders who do not take up in full their assured entitlements under the Rights Issue is inevitable. Nonetheless, Qualifying Shareholders who do not accept the Rights Issue can, subject to the then prevailing market conditions, consider selling their nil-paid rights to subscribe for the Rights Shares in the market. In such case, where all Qualifying Shareholders do not accept the Rights Issue and hence the Underwriter is obligated to take up the unsubscribed Rights Shares, the shareholding interests of the Qualifying Shareholders in the Company will be diluted by a maximum of 66.40 percent point. Details of such dilution effect are presented in the table under the sub-section headed “Shareholding structure of the Company” of the Board Letter.

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

Independent Shareholders are given the chances to express their views on the terms of the Rights Issue and the Underwriting Agreement through their votes at the SGM;

– 42 –

LETTER FROM GRAM CAPITAL

Qualifying Shareholders have their choices of whether to accept the Rights Issue or not;
Qualifying Shareholders have the opportunity to realise their nil-paid rights to subscribe for the Rights Shares in the market;
the Rights Issue offers the Qualifying Shareholders a chance to subscribe for their prorata Rights Shares for the purpose of maintaining their respective existing shareholding interests in the Company at a relatively low price as compared to the historical and prevailing market prices of the Shares; and
those Qualifying Shareholders who choose to accept the Rights Issue in full can maintain their respective existing shareholding interests in the Company after the Rights Issue.

In addition, we noted from the Comparables as detailed in the table under the sub-section headed “Comparison with other rights issue transactions” of this letter that the maximum dilution led by rights issue transactions on the shareholdings of the then existing public shareholders of the relevant listed companies ranged from approximately 3.38 percent point to 83.32 percent point. As such, the maximum dilution on the shareholding interests of the existing public Shareholders of approximately 66.40 percent point as a result of the Rights Issue falls within the said market range.

Having considered the above, we concur with the Directors that the potential dilution to the shareholding interests of the existing public Shareholders in the Company, which may only happen when the Qualifying Shareholders do not subscribe for their pro-rata Rights Shares, is acceptable.

7. Possible financial effects of the Rights Issue

Effect on net tangible assets

An unaudited pro forma statement of adjusted consolidated net tangible asset value (“ NTAV ”) of the Group attributable to equity holders of the Company as at 31 March 2014 as if the Rights Issue had taken place on 31 March 2014 is set out in Appendix II to the Circular (the “ Statement ”).

Based on the Statement, the unaudited consolidated NTAV of the Group was approximately HK$178,000 as at 31 March 2014. Upon completion of the Rights Issue, the unaudited pro forma adjusted consolidated NTAV of the Group would become approximately HK$283,143,000 and approximately HK8.62 cents per Share based on the Statement.

– 43 –

LETTER FROM GRAM CAPITAL

Effect on gearing and working capital

With reference to the 2013/14 Annual Report, the gearing level of the Group (calculated as total borrowings to total assets of the Group) was approximately 92% as at 31 March 2014. As confirmed by the Directors, the total assets of the Group would be enlarged upon completion of the Rights Issue but the total borrowings of the Group are not expected to change due to the Rights Issue. Consequently, the gearing level of the Group would be lowered.

As also advised by the Directors, as part of the net proceeds from the Rights Issue (if not utilised) will be used as general working capital of the Group, the working capital position of the Group may be improved upon completion of the Rights Issue.

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

RECOMMENDATION

Having taken into consideration the factors and reasons as stated above, we are of the opinion that (i) the terms of the Rights Issue and the Underwriting Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned; and (ii) the Rights Issue is in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the relevant resolution to be proposed at the SGM to approve the Rights Issue and we recommend the Independent Shareholders to vote in favour of the resolution in this regard.

Yours faithfully, For and on behalf of Gram Capital Limited Doris Sing Director

Note: Ms. Doris Sing is a licensed person registered with the SFC and a responsible officer of Gram Capital Limited to carry out Type 6 (advising on corporate finance) regulated activity under the SFO. She has around 11 years of experience in the corporate finance industry.

– 44 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL SUMMARY AND INDEPENDENT AUDITOR’S REPORTS

The audited financial information of the Group for each of the three years ended 31 March 2012, 2013 and 2014 are set out in the annual reports of the Company for the years ended 31 March 2012 (pages 21 to 66), 2013 (pages 24 to 70) and 2014 (pages 28 to 78) respectively.

The above-mentioned financial information has been published on both the website of the Stock Exchange (www.hkex.com.hk) and the website of the Company (http://southeastgroup.todayir.com). The auditors of the Company have not issued any qualified opinion on the Group’s financial statements for the financial years ended 31 March 2012, 2013 and 2014.

2. STATEMENT OF INDEBTEDNESS

Borrowings

As at the close of business on 31 July 2014, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group had an outstanding liability under the Convertible Bond due on 7 May 2016 with the principal amount of HK$68,000,000 carrying the interest of 3% per annum and convertible into the maximum of 162,679,425 Shares at the price of HK$0.418 per Share (subject to adjustment).

Save as set out above, the Group did not have any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance leases, hire purchase commitments, guarantees or other material contingent liabilities.

Contingent liabilities

The Group had no material contingent liabilities as at 31 July 2014.

Disclaimer

Save as aforesaid or as otherwise mentioned herein, and apart from intra-group liabilities, the Group did not have any outstanding borrowings, mortgages, charges, debentures, loan capital and overdraft, debt securities or other similar indebtedness, finance leases or hire purchase commitment, liabilities under acceptances or acceptance credits or any guarantees or other material contingent liabilities as at the close of business since 31 July 2014, being the latest practicable date for the purpose of this statement of indebtedness is made up to the Latest Practicable Date.

Save as aforesaid, the Directors are not aware of any material changes in the indebtedness, contingent liabilities and commitments of the Group since 31 July 2014, the date to which the indebtedness statement is made and up to the Latest Practicable Date.

– 45 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

3. WORKING CAPITAL

The Directors, after due and careful enquiry, are of the opinion that taking into account the financial resources presently available to the Group including the Group’s internally generated funds and the estimated net proceeds from the Rights Issue (if the Rights Issue becomes unconditional), and in the absent of unforeseen circumstances, the Group will have sufficient working capital for its normal business, that is for at least the next 12 months from the date of this circular.

4. FINANCIAL AND TRADING PROSPECTS

At 31 March 2014, there was a gross floor area of approximately 7,845 square metres (2013: 7,985 square metres) of commercial properties held by the Group in Zouping, Shandong, the PRC. Turnover of approximately HK$401,000 was recorded from property sales attributable to the aforementioned properties during the year ended 31 March 2014 (2013: HK$732,000 generated from sale of car parking space in Shanghai Pudong, the PRC). Rental income of approximately HK$416,000 was recorded for the year ended 31 March 2014, which was generated from leasing out part of the commercial properties concerned.

During the year ended 31 March 2014, the Board has been reorganized. Under the leadership of the reorganized Board, the Group has made an effort to explore quality properties with a view to expand its property portfolio so as to enhance performance and sustain growth in this business. As disclosed in the Company’s announcements dated 26 February 2014, 23 May 2014 and 22 August 2014 respectively, the Company entered into the Framework Agreement relating to the Proposed Acquisition. Taking into consideration of the growing trend in Shenzhen commercial and residential property markets, it is believed that the Proposed Acquisition, if materialized, will generate steady income for the Group’s continuous development. The Company will strive to boost its business development and enhance financial and operating performance, so as to create better returns for shareholders in the long run. To pursue in this direction, the Group will continue looking for business opportunities and potential acquisitions actively. It will also actively seek for market opportunities in order to broaden its capital base and to enhance its income source.

– 46 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

1. STATEMENT OF UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The following unaudited pro forma statement of adjusted consolidated net tangible assets of the Group attributable to the equity owners of the Company prepared by the Directors in accordance with paragraph 4.29 of the Listing Rules is set out below to illustrate the effect of the Rights Issue on the consolidated net tangible assets of the Group attributable to the equity holders of the Company as at 31 March 2014 as if the Rights Issue had taken place on that date.

The unaudited pro forma statement of adjusted consolidated net tangible assets of the Group has been prepared for illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the financial position of the Group as at 31 March 2014 or at any future date.

Audited
consolidated
net tangible assets
of the Group
attributable to
the owners of the
Company as at
31 March 2014
HK$’000
(Note 1)
Rights Issue of 2,919,647,040
Rights Shares to be issued
at subscription price of
HK$0.1 per Rights Share
178
Audited consolidated net tangible
assets of the Group per share
attributable to the owners of the
Company as at 31 March 2014
before the completion of the
Rights Issue_(Note 3)
Unaudited pro forma adjusted
consolidated net tangible assets of
the Group per share attributable to
the owners of the Company as at
31 March 2014 immediately after
the completion of the Rights Issue
(Note 4)_

Unaudited pro
forma adjusted
consolidated net
tangible assets of the
Group attributable
to the owners of
the Company
Estimated net
immediately after
proceeds from
the completion
the Rights Issue
Rights Issue
HK$’000
HK$’000
(Note 2)
282,965
283,143
HK0.05 cents
HK8.62 cents

– 47 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

Notes:

(1) The audited consolidated net tangible assets attributable to the owners of the Company as at 31 March 2014 of approximately HK$178,000 is extracted from the published audited consolidated statement of financial position of the Group as at 31 March 2014.
(2) The estimated net proceeds from the Rights Issue of approximately HK$282,965,000 are based on 2,919,647,040 Rights Shares to be issued (based on 364,955,880 shares in issue as at the latest practicable date and assuming no convertible bonds would be converted) at the subscription price of HK$0.1 per Rights Share and after deduction of estimated related expenses, including among others, financial advisory fee and other professional fees, which are directly attributable to the Rights Issue, of approximately HK$9,000,000.
(3) The audited consolidated net tangible assets of the Group per share attributable to the owners of the Company as at 31 March 2014 before the completion of the Rights Issue is determined based on the audited consolidated net tangible assets of the Group attributable to the owners of the Company as at 31 March 2014 of approximately HK$178,000 as disclosed in note (1) above, divided by 364,955,880 shares which represents the Company’s shares in issue as at 31 March 2014.
(4) Unaudited pro forma adjusted consolidated net tangible assets of the Group per share attributable to the owners of the Company as at 31 March 2014 immediately after the completion of the Rights Issue is determined based on the unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to the owners of the Company immediately after the completion of Rights Issue of approximately HK$283,143,000 divided by 3,284,602,920 shares which represents 364,955,880 shares in issue as at 31 March 2014 and 2,919,647,040 Rights Shares to be issued pursuant to the Rights Issue.
(5) No adjustments have been made to the unaudited pro forma adjusted consolidated net tangible assets of the Group to reflect any trading results or other transactions of the Group entered into subsequent to 31 March 2014.

– 48 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

2. REPORT ON THE UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

Certified Public Accountants

22/F, Tai Yau Building 181 Johnston Road Wanchai, Hong Kong Tel : +852 2521 2328 Fax : +852 2525 9890 Email : [email protected] www.EastAsiaSentinel.com Ref: 111364

5 September 2014

The Board of Directors South East Group Limited 12/F., Entertainment Building, 30 Queen’s Road Central, Hong Kong

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

Dear Sirs,

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of South East Group Limited (the “Company’’) and its subsidiaries (collectively the “Group’’) by the Directors for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma statement of adjusted consolidated net tangible assets of the Group as at 31 March 2014, and related notes (the “Unaudited Pro Forma Financial Information’’) as set out in Appendix II of the Company’s circular dated 5 September 2014 (the “Circular”), in connection with the proposed rights issue of shares of the Company (the “Rights Issue”). The applicable criteria on the basis of which the Directors have compiled the Unaudited Pro Forma Financial Information are described in Appendix II of the Circular.

The Unaudited Pro Forma Financial Information has been compiled by the Directors to illustrate the impact of the Rights Issue on the Group’s consolidated net tangible assets attributable to owners of the Company as at 31 March 2014 as if the Rights Issue had taken place on 31 March 2014. As part of this process, information about the Group’s financial position has been extracted by the Directors from the Group’s consolidated financial statements as included in the annual report for the year ended 31 March 2014, on which an audit report has been published.

– 49 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The Directors are responsible for compiling the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘’Listing Rules’’) and with reference to Accounting Guideline 7 ‘’Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars’’ (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (‘’HKICPA’’).

Reporting Accountants’ Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420 ‘’Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus’’, issued by the HKICPA. This standard requires that the reporting accountant complies with ethical requirements and plans and performs procedures to obtain reasonable assurance about whether the Directors have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Unaudited Pro Forma Financial Information.

The purpose of Unaudited Pro Forma Financial Information included in an investment circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Rights Issue at 31 March 2014 would have been as presented.

– 50 –

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

A reasonable assurance engagement to report on whether the Unaudited Pro Forma Financial Information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the Unaudited Pro Forma Financial Information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

the related pro forma adjustments give appropriate effect to those criteria; and
the Unaudited Pro Forma Financial Information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountants’ judgment, having regard to the reporting accountants’ understanding of the nature of the Group, the event or transaction in respect of which the Unaudited Pro Forma Financial Information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the Unaudited Pro Forma Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

(a) the Unaudited Pro Forma Financial Information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Yours faithfully,

East Asia Sentinel Limited Certified Public Accountants Yim Wing Yee

Director Practising Certificate No. P05906

– 51 –

GENERAL INFORMATION

APPENDIX III

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. SHARE CAPITAL

The authorised and issued share capital of the Company as at the Latest Practicable Date were, and immediately following the completion of the Rights Issue (assuming no new Shares will be issued or repurchased by the Company and no Convertible Bond is converted on or before Record Date) will be, as follows:

Authorised capital: 4,000,000,000 ordinary shares of HK$0.1 each ssued and fully paid or credited as fully paid: ordinary shares of HK$0.1 each 364,955,880 as at the Latest Practicable Date Rights Shares to be issued upon 2,919,647,040 completion of the Rights Issues Shares upon completion of the 3,284,602,920 Rights Issues	HK$ 400,000,000.00

	36,495,588.00 291,964,704.00
	328,460,292.00

Authorised capital:

Issued and fully paid or credited as fully paid:

All the Shares in issue and the Rights Shares (when allotted and fully paid) to be issued rank pari passu with each other in all respects including as regards to dividends and voting rights.

– 52 –

GENERAL INFORMATION

APPENDIX III

No part of the share capital or any other securities of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed or sought for the Shares or Rights Shares or any other securities of the Company to be listed or dealt in on any other stock exchange.

There is no arrangement under which future dividends are/will be waived or agreed to be waived.

3. DISCLOSURE OF INTERESTS

(a) Director’s and chief executive’s interests in the Company

As at the Latest Practicable Date, the interests and short positions of the Directors or chief executives of the Company and their associates in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), (i) which would have 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) which were required to be entered in the register referred to therein pursuant to section 352 of the SFO; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “ Model Code ”) contained in the Listing Rules, were as follows:

Long positions in the Shares

					Approximately
			Number of		percentage of the
	Nature of	Number of	underlying		Company’s issued
Name	interest	Shares held	Shares held	Total	share capital
Yu Shengming	Interest of	828,000,000	162,679,425	990,679,425	271.45%
	controlled	(Note 1)	(Note 2)
	corporation
Chen Xiaoping	Beneficiary	314,000	—	314,000	0.09%
	owner	(Note 3)

Notes:

Out of which, 92,000,000 Shares are beneficially owned by Viva Shine, a company beneficially owned as to 50% by Mr. Yu Shengming (“ Mr. Yu ”), the chairman and an executive Director and 50% by Mr. Wang Guoli (“ Mr. Wang ”) and 736,000,000 Shares are the Rights Shares which Viva Shine agreed to be taken up pursuant to the Undertaking.
Through his equity interest in Viva Shine as disclosed above, Mr. Yu is deemed to be interested in 162,679,425 underlying Shares to be derived from the Convertible Bond with an outstanding principal amount of HK$68 million due in May 2016. Viva Shine is the beneficial owner of the Convertible Bond.
Mr. Chen Xiaoping is a non-executive Director.

– 53 –

APPENDIX III

GENERAL INFORMATION

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) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

(b) Substantial shareholders and other persons’ interests in Shares and underlying Shares

As at the Latest Practicable Date, according to the register kept by the Company pursuant to section 336 of the SFO, the following person(s) (other than the Directors and the chief executive of the Company) has, or is deemed to have, interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, details of which are set out as follows:

					Approximately
					attributable
			Number of		percentage of
	Nature of	Number of	underlying		shareholding of
Name	interest	Shares held	Shares held	Total	the Company
Viva Shine_(Note 1)_	Beneficial	828,000,000	162,679,425	990,679,425	30.16%
	owner			(Note 2)
Wang Guoli_(Note 1)_	Interest of	828,000,000	162,679,425	990,679,425	30.16%
	a controlled			(Note 2)
	corporation
The Underwriter	Beneficial	2,183,647,040	—	2,183,647,040	66.48%
(Note 3)	owner
Galaxy Sky	Interest in	2,183,647,040	—	2,183,647,040	66.48%
Investments	controlled
Limited_(Note 3)_	corporation
Kingston Capital	Interest in	2,183,647,040	—	2,183,647,040	66.48%
Asia Limited	controlled
(Note 3)	corporation
Kingston Financial	Interest in	2,183,647,040	—	2,183,647,040	66.48%
Group Limited	controlled
(Note 3)	corporation
Active Dynamic	Interest in	2,183,647,040	—	2,183,647,040	66.48%
Limited_(Note 3)_	controlled
	corporation
Ms. Chu Yuet Wah	Interest in	2,183,647,040	—	2,183,647,040	66.48%
(Note 3)	controlled
	corporation

– 54 –

GENERAL INFORMATION

APPENDIX III

Note:

Viva Shine is beneficially interested in (i) 92,000,000 Shares (ii) 736,000,000 Right Shares which Viva Shine agreed to be taken up pursuant to the undertaking and (iii) the Convertible Bond convertible into a maximum of 162,679,425 Shares at the price of HK$0.418 per Share (subject to adjustment). Viva Shine is a company owned as to 50% by Mr. Yu and 50% by Mr. Wang. Under Part XV of the SFO, each of Mr. Yu and Mr. Wang is deemed to have an interest in the same parcel of shares and in the Convertible Bond beneficially owned by Viva Shine. Both the 92,000,000 Shares and the Convertible Bond are subject to share charges.
Assuming the Rights Shares are subscribed by Viva Shine immediately after completion of the Right Issue.
The 2,183,647,040 Shares are the Rights Shares which the Underwriter is interested under the Underwriting Agreement on the assumption of no Qualifying Shareholders take up their respective entitlements under the Rights Issue. The Underwriter is a wholly-owned subsidiary of Galaxy Sky Investments Limited, which is wholly owned by Kingston Capital Asia Limited. Kingston Capital Asia Limited is wholly owned by Kingston Financial Group Limited. Active Dynamic Limited owns 40.24% interest in Kingston Financial Group Limited. Ms. Chu Yuet Wah owns 100% interest in Active Dynamic Limited.

Save as disclosed above, as at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware of any other person (other than the Directors and the chief executive of the Company) who had, or was deemed to have, interests or short positions in the Shares or underlying Shares, which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the Group or, who was substantial Shareholder as recorded in the register required to be kept by the Company under Section 336 of the SFO.

4. DIRECTORS’ INTERESTS IN CONTRACT AND ASSETS

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any assets which have been, since 31 March 2014 (being the date to which the latest published audited financial statements of the Company were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of Directors was materially interested in any subsisting contract or arrangement which is significant in relation to the business of the Group.

5. 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)).

– 55 –

GENERAL INFORMATION

APPENDIX III

6. EXPERTS

The following is the qualification of the experts who have given opinion or advice which is contained in this circular:

Name Qualifications East Asia Sentinel Limited Certified Public Accountants Gram Capital Limited a licensed corporation to carry on type 6 (advising on corporate finance) regulated activities as set out in schedule 5 to the SFO

Each of East Asia Sentinel Limited and Gram Capital Limited has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of their letter or its name in the form and context in which it appears.

Each of East Asia Sentinel Limited and Gram Capital Limited does not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, East Asia Sentinel Limited and Gram Capital Limited did not have any interest, either directly or indirectly, in any assets which have been since 31 March 2014 (being the date to which the latest published audited accounts of the Company were made up) acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

7. LITIGATION

As at the Latest Practicable Date, so far as the Directors were aware of, no members of the Group was involved in any litigation or arbitration of material importance and no litigation or claim of material importance known to the Directors to be pending or threatened by or against the Group.

8. MATERIAL CONTRACTS

The following contracts (not being contracts in the ordinary course of business) have been entered into by the Company or any of its subsidiaries within the two years immediately preceding the date of this circular and are or may be material:

(a) the Framework Agreement; and
(b) the Underwriting Agreement.

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GENERAL INFORMATION

APPENDIX III

9. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and the controlling Shareholders or their respective associates had any interests in businesses which competed or might compete with the businesses of the Group or had any other conflict of interests with the Group.

10. MATERIAL ADVERSE CHANGE

Save as disclosed herein, the Directors are not aware of any material adverse change in the financial position or trading position of the Group since 31 March 2014, being the date to which the latest published audited financial statements of the Group was made up.

11. EXPENSES

The expenses in connection with the Rights Issue, including underwriting commission, financial advisory fees, printing, registration, translation, legal and accountancy charges are estimated to amount approximately HK$9 million and are payable by the Company.

12. CORPORATE INFORMATION AND PARTIES INVOLVED IN THE RIGHTS ISSUE

Company secretary Ms. Chan Sau Chee, an associate member of the Hong Kong Institute of Company Secretaries and the Institute of Chartered Secretaries and Administrators

Authorised representatives Mr. Mock Wai Yin 12th Floor, Entertainment Building 30 Queen’s Road Central Hong Kong Ms. Chan Sau Chee 12th Floor, Entertainment Building 30 Queen’s Road Central Hong Kong Registered Office Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda Head office and principal place 12th Floor, Entertainment Building of business in Hong Kong 30 Queen’s Road Central Hong Kong

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GENERAL INFORMATION

APPENDIX III

Auditors East Asia Sentinel Limited Certified Public Accountants 22nd Floor, Tai Yau Building 181 Johnston Road Wanchai Hong Kong Legal adviser to the Company As to Hong Kong law: Michael Li & Co. 19/F, Prosperity Tower No. 39 Queen’s Road Central Central, Hong Kong As to Bermuda law: Conyers Dill & Pearman 2901 One Exchange Square 8 Connaught Place Central, Hong Kong Financial adviser to the Company Kingston Corporate Finance Limited Suite 2801, 28th Floor One IFC, 1 Harbour View Street Central, Hong Kong Independent Financial Adviser Gram Capital Limited Suite 1209, 12/F Nan Fung Tower 173 Des Voeux Road Central Hong Kong Principal share registrar MUFG Fund Services (Bermuda) Limited The Belvedere Building 69 Pitts Bay Road Pembroke HM08 Bermuda Hong Kong branch share registrar Computershare Hong Kong Investor Services Limited 17M Floor, Hopewell Centre 183 Queen’s Road East Wanchai Hong Kong Principal banker Industrial and Commercial Bank of China (Asia) Limited 33/F, 1CBC Tower 3 Garden Road, Central Hong Kong

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GENERAL INFORMATION

APPENDIX III

13. PARTICULARS OF DIRECTORS

(a) Name and address of Directors

Name Address Executive Directors Mr. Yu Shengming 12th Floor, Entertainment Building, 30 Queen’s Road Central, Hong Kong Mr. Mock Wai Yin 12th Floor, Entertainment Building, 30 Queen’s Road Central, Hong Kong Mr. Chan Chi Yuen 12th Floor, Entertainment Building, 30 Queen’s Road Central, Hong Kong Non-executive Director Mr. Chen Xiaoping 12th Floor, Entertainment Building, 30 Queen’s Road Central, Hong Kong

Independent non-executive Directors

Mr. Ng Kwok Wai 12th Floor, Entertainment Building, 30 Queen’s Road Central, Hong Kong
Mr. Lee Chi Hwa, Joshua 12th Floor, Entertainment Building, 30 Queen’s Road Central, Hong Kong
Mr. Ling Kit Wah, Joseph 12th Floor, Entertainment Building, 30 Queen’s Road Central, Hong Kong

(b) Profiles of Directors

Executive Directors

Mr. Yu, aged 48, was appointed as the chairman and an executive director of the Company on 20 December 2013. Mr. Yu is currently the chairman of 招誠集團 (Zhao Cheng Group) in Shenzhen. 招誠集團 (Zhao Cheng Group) is a leading conglomerate engaged in diversified business such as trading of construction materials, leasing of property, project investment, tourist real estate and financial services. He also dedicates himself into social and public affairs and holds a number of important positions in political and business fields, namely the delegate of the 12th session of the People’s Congress of Guangdong Municipality, the honourable chairman of the Confederacy of Hong Kong Shan Wei Clansmen Limited and the deputy chairman of the China Furniture & Decoration Chamber of Commerce. Mr. Yu is a beneficial owner of 50% equity interests in and also a director of Viva Shine Limited which in turn is the beneficial owner of (i) 92,000,000

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GENERAL INFORMATION

APPENDIX III

Shares representing approximately 25.21% of the issued share capital of the Company; and (ii) the Convertible Bond. Mr. Yu is responsible for the overall strategic planning for business development and management of the Group.

The English names of the PRC entities marked with “*” are for identification purposes only. In case of any inconsistency, the Chinese names shall prevail.

Mr. Mock Wai Yin, aged 42, was appointed as the deputy chairman, chief executive officer and an executive director of the Company on 20 December 2013, and is a member of the Remuneration Committee and the Nomination Committee of the Company. He is also a director of various subsidiaries of the Company. Mr. Mock holds a Master of Philosophy in Biochemistry from The Chinese University of Hong Kong and a Master of Science in Hazard Analysis and Critical Control Point from University of Salford. He also holds a Postgraduate Diploma in Professional Accounting. Mr. Mock has 14 years of experience in research analysis and over 2 years of world-wide experience in natural resources, project investment and property development as well as project valuation and budget management. Currently, he is a director of a company which provides advisory services in relation to client’s project investments. Mr. Mock is responsible for overseeing the daily operations of the Group and in executing the corporate strategy.

Mr. Chan Chi Yuen, aged 47, was appointed as an executive director of the Company on 20 December 2013. Mr. Chan holds a Bachelor degree with honours in Business Administration and a Master of Science degree in Corporate Governance and Directorship. He is a fellow of the Hong Kong Institute of Certified Public Accountants and The Association of Chartered Certified Accountants in the United Kingdom and an associate of The Institute of Chartered Accountants in England and Wales. Mr. Chan is a practising certified public accountant and has extensive experience in financial management, corporate development, corporate finance and corporate governance. Mr. Chan is currently an executive director and the chief executive officer of Noble Century Investment Holdings Limited, an independent non-executive director of Asia Energy Logistics Group Limited, China Gamma Group Limited, China Sandi Holdings Limited, Jun Yang Solar Power Investments Limited, Media Asia Group Holdings Limited, New Times Energy Corporation Limited and U-RIGHT International Holdings Limited. Mr. Chan was an executive director of Kong Sun Holdings Limited from February 2007 to November 2009 and from December 2011 to September 2013, and an independent non-executive director of The Hong Kong Building and Loan Agency Limited from October 2009 to February 2011, Richly Field China Development Limited from February 2009 to August 2010 and Superb Summit International Timber Company Limited (currently known as Superb Summit International Group Limited) from April 2007 to June 2010. The issued shares of all the aforesaid companies are listed and traded on the Stock Exchange.

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GENERAL INFORMATION

APPENDIX III

Non-executive Director

Mr. Chen Xiaoping, aged 62, was re-designated as a non-executive director of the Company on 20 December 2013, and is currently a member of the Audit Committee of the Company. Before his re-designation, Mr. Chen had assumed the roles of an executive director and the chief executive officer of the Company since September 2007. Mr. Chen worked at senior management positions in banking and other business fields in the past twenty five years, such as Director of Kleinwort Benson Group, Senior Adviser of Global Interactive Technology AG and Financial Adviser of CNT Group.

Independent non-executive Directors

Mr. Ng Kwok Wai, aged 37, was appointed as an independent non-executive director of the Company on 20 December 2013. He is the chairman of the Remuneration Committee and the Nomination Committee; and a member of the Audit Committee of the Company. Mr. Ng holds a bachelor degree in accounting and finance. He has over 10 years of experience in the field of accounting and finance.

Mr. Lee Chi Hwa, Joshua, aged 42, was appointed as an independent non-executive director of the Company on 20 December 2013. He is the chairman of the Audit Committee and a member of the Remuneration Committee and the Nomination Committee of the Company. Mr. Lee is a fellow member of the Association of Chartered Certified Accountants and a member of Hong Kong Institute of Certified Public Accountants. Mr. Lee has extensive experience in the fields of auditing, accounting and finance. Mr. Lee currently serves as an independent non-executive director of China Fortune Investments (Holding) Limited (stock code: 8116) and Code Agriculture (Holdings) Limited (stock code: 8153), both are listed on the Growth Enterprise Market (the “ GEM ”) of the Stock Exchange. He was an independent non-executive director of King Stone Energy Group Limited (stock code: 663) from January 2012 to April 2013.

Mr. Ling Kit Wah, Joseph, aged 57, was appointed as an independent non-executive director of the Company on 7 October 2013. Mr. Ling graduated from the University of Windsor with the Bachelor of Commerce (Hons) in business administration in June 1981. Mr. Ling has over 20 years’ experience in investment banking, direct investment and corporate finance in Hong Kong and Asia Pacific. During the period from January 1985 to September 2000, Mr. Ling worked for various banks, including, inter alia, Citigroup Australia Limited, The Hongkong and Shanghai Banking Corporation and Internationale Nederlanden Bank N.V. in private banking division. Mr. Ling was appointed as an executive director of China Seven Star Holdings Ltd (formerly known as Singapore Hong Kong Properties Investment Ltd., a company listed on the Stock Exchange from October 2001 to November 2002, and then as a senior vice president of VXL Management Services Limited from March 2005 to April 2007. Then, he was appointed as an executive vice president of Pacific Star Group, a Singapore-based property investment company during the period from January 2008 to July 2009. Mr. Ling is currently an independent director of East Asia Sports International Limited, a company listed on the stock market in Korea. He is also an independent non-executive director, the chairman of the remuneration committee and a member of the audit committee of ZMFY Automobile Glass Services Limited (a company listed on the GEM of the Stock Exchange).

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GENERAL INFORMATION

APPENDIX III

14. MISCELLANEOUS

(A) This circular and the accompanying form of proxy have been prepared in both English and Chinese. In the case of any discrepancies, the English texts shall prevail over their respective Chinese texts.
(B) As at the Latest Practicable Date, there was no capital of any member of the Group which was under option, or agreed conditionally or unconditionally to be put under option.
(C) As at the Latest Practicable Date, there was no restriction affecting the remittance of profits or repatriation of capital into Hong Kong from outside Hong Kong.
(D) As at the Latest Practicable Date, the Group had sufficient foreign exchange to pay forecasted or planned dividends and to meet its foreign exchange liabilities as they become due.

15. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection during normal business hours at the head office and principal place of business in Hong Kong of the Company at 12th Floor, Entertainment Building, 30 Queen’s Road Central, Hong Kong from the date of this circular up to and including the Latest Practicable Date and at the SGM:

(a) the memorandum of association and bye-laws of the Company;
(b) the annual reports of the Company for each of the two years ended 31 March 2013 and 2014;
(c) the letter from the Independent Board Committee, the text of which is set out on page 30 of this circular;
(d) the letter of advice from Gram Capital, the text of which is set out on pages 31 to 44 of this circular;
(e) the accountants’ report from East Asia Sentinel Limited on the unaudited pro forma financial information following completion of the Rights Issue, the text of which is set out in Appendix II to this circular;
(f) the written consents referred to in the paragraph headed “Experts” in this appendix;
(g) the material contracts as referred to in the paragraph headed “Material contracts” in this appendix; and
(h) this circular.

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NOTICE OF SGM

==> picture [241 x 41] intentionally omitted <==

(Incorporated in Bermuda with limited liability) (Stock Code: 726)

NOTICE IS HEREBY GIVEN THAT a special general meeting (the “ SGM ”) of South East Group Limited (the “ Company ”) will be held at 3:00 p.m. on Wednesday, 24 September 2014 at Joint Professional Centre, Unit 1, Ground Floor, The Center, 99 Queen’s Road Central, Hong Kong for the purpose of considering and, if thought fit, passing with or without amendments, the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT

(a) subject to the fulfilment of the conditions of the Underwriting Agreement (as defined below), the Rights Issues (as defined below) and the transactions contemplated thereunder by and are hereby approved;
(b) the underwriting agreement (the “ Underwriting Agreement ”) dated 11 August 2014 and entered into among the Company and Kingston Securities Limited (the “ Underwriter ”) (a copy of which has been produced to the SGM marked “A” and signed by the chairman of the SGM for the purpose of identification) and the transactions contemplated thereunder be and are hereby approved, confirmed and ratified;
(c) subject to the fulfilment of the conditions set out in the Underwriting Agreement, the issue by way of rights issue (the “ Rights Issue ”) of 2,919,647,040 shares (the “ Rights Shares ”) of HK$0.1 each in the share capital of the Company to the shareholders (the “ Qualifying Shareholders ”) of the Company whose names appear on the register of members of the Company on the date by reference to which entitlements to the Rights Issue are to be determined (the “ Record Date ”) (excluding those shareholders (the “ Non-Qualifying Shareholders ”) of the Company with registered addresses as shown in the register of members of the Company at the close of business on the Record Date in places outside Hong Kong in respect of whom the board (the “ Board ”) of directors (the “ Directors ”) of the Company consider it necessary or expedient not to offer the Rights Shares after making the relevant enquiries regarding the legal restrictions under the laws of the relevant places and the requirements of the relevant regulatory body or stock exchange in those places) on the basis of eight Rights Shares for every existing share of HK$0.1 each in the share capital of the Company then held is hereby approved, confirmed and ratified;

* For identification purposes only

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NOTICE OF SGM

(d) any Directors be and is hereby authorised to allot and issue the Rights Shares pursuant to or in connection with the Rights Issue notwithstanding that the same may be offered, allotted or issued otherwise than pro rata to the Qualifying Shareholders and, in particular, the Directors be and are hereby authorised to make such exclusions or other arrangements in relation to NonQualifying Shareholders as they deem necessary or expedient having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory outside Hong Kong applicable to the Company;
(e) any Director be and is hereby authorised to sign and execute such documents and do all such acts and things in connection with the Rights Issue or as they consider necessary, desirable or expedient in connection with the implementation of or giving effect to the Rights Issue, the Underwriting Agreement and the transactions contemplated thereunder.”

By the order of the Board South East Group Limited Yu Shengming Executive Director and Chairman

Hong Kong, 5 September 2014

Registered Office: Canon’s Court 22 Victoria Street Hamilton HM 12 Bermuda

Principal place of business in Hong Kong: 12th Floor, Entertainment Building 30 Queen’s Road Central Hong Kong

Notes:

A member entitled to attend and vote at the SGM is entitled to appoint one or more than one proxy to attend and, subject to the provisions of the bye-laws of the Company, to vote on his behalf. A proxy need not be a member of the Company but must be present in person at the SGM to represent the member. If more than one proxy is so appointed, the appointment shall specify the number and class of shares in respect of which each such proxy is so appointed.
A form of proxy for use at the SGM is enclosed. Whether or not you intend to attend the SGM in person, you are encouraged to complete and return the enclosed form of proxy in accordance with the instructions printed thereon. Completion and return of a form of proxy will not preclude a member from attending in person and voting at the SGM or any adjournment thereof, should he so wish, in such event, the form of proxy shall be deemed to be revoked.
In order to be valid, the form of proxy, together with a power of attorney or other authority, if any, under which it is signed, or a certified copy of such power or authority must be deposited at the Registrar of 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the SGM or any adjournment thereof.
In the case of joint holders of shares, any one of such holders may vote at the SGM, either personally or by proxy, in respect of such share as if he was solely entitled thereto, but if more than one of such joint holder are present at the SGM personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such shares shall alone be entitled to vote in respect thereof.
Pursuant to the Listing Rules, the voting on the ordinary resolution at the SGM will be conducted by way of poll.

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AI assistant

DIT Group Limited — Capital/Financing Update 2014

49427_rns_2014-09-05_aae01780-3a0d-4b0a-ae9a-aaf45c01547c.pdf

(1) PROPOSED RIGHTS ISSUE ON THE BASIS OF EIGHT RIGHTS SHARES FOR ONE EXISTING SHARE HELD ON THE RECORD DATE;

(2) CHANGE IN BOARD LOT SIZE;

AND

(3) NOTICE OF SPECIAL GENERAL MEETING

Financial Adviser to the Company

Underwriter to the Rights Issue

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

CONTENTS

EXPECTED TIMETABLE

Event

2014 (Hong Kong time)

SGM

Event

2014 (Hong Kong time)

EFFECT OF BAD WEATHER ON THE LATEST ACCEPTANCE DATE

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

(1) PROPOSED RIGHTS ISSUE ON THE BASIS OF EIGHT RIGHTS SHARES FOR ONE EXISTING SHARE HELD ON THE RECORD DATE;

(2) CHANGE IN BOARD LOT SIZE;

AND

(3) NOTICE OF SPECIAL GENERAL MEETING

INTRODUCTION

PROPOSED RIGHTS ISSUE

Issue statistics

Subscription price

i) the capital needs of the Group

ii) the financial position of the Group

iii) the market value of the Shares

Basis of provisional allotment

Qualifying Shareholders

Rights of Overseas Shareholders

Application for excess Rights Shares

Fractional of the Rights Shares (if any)

Status of the Rights Shares

Certificates for the Rights Shares

Refund cheques for Rights Issue

Application for listings

UNDERWRITING ARRANGEMENTS

Underwriting Agreement

LETTER FROM THE BOARD

Conditions of the Rights Issue

Termination of the Underwriting Agreement

LETTER FROM THE BOARD

WARNING OF THE RISKS OF DEALING IN THE SHARES AND THE NIL-PAID RIGHTS SHARES

REASONS FOR AND BENEFITS OF THE RIGHTS ISSUE AND INTENDED USE OF PROCEEDS

Fund raising methods comparison

Benefits of the Rights Issue

Intended use of proceeds

Independent Shareholders and Qualifying Shareholders

LETTER FROM THE BOARD

However, those Qualifying Shareholders who do not take up the Rights Shares to which they are entitled should note that their shareholdings in the Company will be diluted.

PREVIOUS FUND RAISING EXERCISE OF THE COMPANY

SHAREHOLDING STRUCTURE OF THE COMPANY

LETTER FROM THE BOARD

POSSIBLE ADJUSTMENT TO THE CONVERSION PRICE OF THE CONVERTIBLE BOND

CHANGE IN BOARD LOT SIZE

LISTING RULES IMPLICATIONS

INDEPENDENT BOARD COMMITTEE

SGM

RECOMMENDATION

FURTHER INFORMATION

PROPOSED RIGHTS ISSUE ON THE BASIS OF EIGHT RIGHTS SHARES FOR EVERY ONE EXISTING SHARE HELD ON THE RECORD DATE

South East Group Limited

Mr. Ling Kit Wah, Joseph

PROPOSED RIGHTS ISSUE ON THE BASIS OF EIGHT RIGHTS SHARES FOR EVERY ONE EXISTING SHARE HELD ON THE RECORD DATE AT HK$0.1 PER RIGHTS SHARE

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background of and reasons for the Rights Issue

Reasons for the Rights Issue

Other financing alternatives available to the Group

2. Principal terms of the Rights Issue

LETTER FROM GRAM CAPITAL

3. Analyses on the Subscription Price

DIT Group Limited Capital/Financing Update 2014