Fujian Holdings Limited — Proxy Solicitation & Information Statement 2016

Oct 3, 2016

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

Dealings in the Shares may be settled through CCASS established and operated by HKSCC. You should consult your licensed securities dealer, registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser for details of the settlement arrangements and how such arrangements may affect your rights and interests.

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FUJIAN HOLDINGS LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 00181)

DISCLOSEABLE AND CONNECTED TRANSACTION FORMATION OF JOINT VENTURE

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

A letter from the Board is set out on pages 4 to 10 of this circular. A letter from the Independent Board Committee is set out on page 11 of this circular. A letter from the Independent Financial Adviser is set out on pages 12 to 25 of this circular. A notice convening the EGM to be held at Ballroom, 1st Floor, South Pacific Hotel, 23 Morrison Hill Road, Wanchai, Hong Kong, on 20 October 2016 at 10:00 a.m. is set out on pages EGM-1 to EGM-2 of this circular. A form of proxy for use at the EGM, together with the reply slip, is enclosed with this circular.

Whether or not you are able to attend the EGM, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the registered office of the Company at Room 3306–08, 33rd Floor, West Tower, Shun Tak Centre, 200 Connaught Road Central, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding of the EGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish but the authority of your proxy will be invalidated forthwith.

4 October 2016

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Letter from the Independent Financial Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Appendix — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Notice of the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM-1

– i –

DEFINITIONS

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

‘‘associate(s)’’	has the meaning ascribed to it under the Listing Rules
‘‘Board’’	the board of Directors
‘‘Company’’	Fujian Holdings Limited, a company incorporated in Hong
	Kong with limited liability and the issued shares of which are
	listed on the Stock Exchange
‘‘controlling shareholder’’	has the meaning ascribed thereto under the Listing Rules
‘‘connected person(s)’’	has the meaning ascribed to it in the Listing Rules
‘‘Director(s)’’	the director(s) of the Company
‘‘EGM’’	the extraordinary general meeting of the Company to be
	convened to consider and, if appropriate, approve the
	Investment Agreement
‘‘FHGC’’	Fujian Huaxing Group Company Limited* (福建省華興集團有
	限責任公司), a company established in the PRC with limited
	liability
‘‘FHIC’’	Fujian Huaxing Industrial Company* (福建華興實業公司),
	which is deemed to be beneficially interested in 70% issued
	share capital of Sino Earn
‘‘FHIG’’	Fujian Huamin Industrial Group Company Limited* (福建華閩
	實業(集團)有限公司), a company established in the PRC with
	limited liability and a state-owned enterprise of the PRC
‘‘FHTI’’	Fujian Huaxing Trust & Investment Company* (福建華興信託
	投資公司), which is deemed to be beneficially interested in
	30% issued share capital of Sino Earn
‘‘FIDG’’	Fujian Investment & Development Group Company Limited*
	(福建省投資開發集團有限責任公司), a company established
	in the PRC with limited liability and a state-owned enterprise
	of the PRC
‘‘FIHC’’	Fujian Investment Holdings Company Limited* (華閩投資集
	團有限公司), a company established in Hong Kong with
	limited liability

– 1 –

DEFINITIONS

• ‘‘FJSOASAC’’

• the State-owned Assets Supervision and Administration Commission of Fujian Province* (福建省人民政府國有資產監 督管理委員會)

• ‘‘FTDC’’ Fujian Tourism Development Group Company Limited* (福建 省旅遊發展集團有限責任公司), a company established in the PRC with limited liability and a state-owned enterprise of the PRC

• ‘‘Group’’ the Company and its subsidiaries

• ‘‘HC Technology’’ HC Technology Capital Company Limited, a controlling Shareholder which beneficially holds 770,016,722 Shares, representing approximately 67.22% of the issued share capital of the Company

• ‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong

• ‘‘Hong Kong’’ the Hong Kong Special Administrative Region of the People’s Republic of China

• ‘‘Investment Agreement’’

• the investment and cooperation agreement dated 23 August 2016 entered into between the Company and FHIG in relation to the establishment of the Joint Venture

• ‘‘Independent Board Committee’’

• a committee of the Board established for the purpose of considering the Investment Agreement, comprising all the independent non-executive Directors who are independent of the Investment Agreement

• ‘‘Independent Financial Adviser’’ VC Capital Limited, a licensed corporation to carry out type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• ‘‘Independent Shareholders’’ Shareholders other than FHIG and its associates (which are deemed to be interested in 778,068,772 Shares in aggregate)

• ‘‘Joint Venture’’

• Fujian Huamin Leasing Company Limited* (福建華閩融資租 賃有限公司) the joint venture company to be established under the laws of the PRC with limited liability by the Company and FHIG pursuant to the Investment Agreement

– 2 –

DEFINITIONS

‘‘Latest Practicable Date’’	29 September 2016, being the latest practicable date prior to
	the printing of this circular for the purpose of ascertaining
	certain information contained in this circular
‘‘Listing Rules’’	the Rules Governing the Listing of Securities on The Stock
	Exchange
‘‘Main Board’’	the stock exchange operated by the Stock Exchange which is
	independent from and operated in parallel with the Growth
	Enterprise Market of the Stock Exchange
‘‘PRC’’	the People’s Republic of China
‘‘Pinoge’’	Pinoge Company Limited, a company established in Hong
	Kong with limited liability and a wholly-owned subsidiary of
	FTDC
‘‘RMB’’	Renminbi, the lawful currency of the PRC
‘‘SFC’’	The Securities and Futures Commission of Hong Kong
‘‘SFO’’	The Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong)
‘‘Shareholder(s)’’	the holders of the Shares
‘‘Share(s)’’	ordinary share(s) in the capital of the Company
‘‘Sino Earn’’	Sino Earn Holdings Limited, a company established in Hong
	Kong with limited liability
‘‘Stock Exchange’’	The Stock Exchange of Hong Kong Limited
‘‘subsidiary’’	has the meaning ascribed to it under the Listing Rules

• For identification purpose only. English names of the PRC established companies/entities in this circular are only literal translations of their official Chinese names.

– 3 –

LETTER FROM THE BOARD

4 October 2016

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FUJIAN HOLDINGS LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 00181)

Executive Directors Wang Xiaowu (Chairman) Chen Danyun Chen Yang

Non-executive Directors Feng Qiang Zhang Fan Wang Ruilian

Registered Office: Room 3306–08, 33rd Floor West Tower Shun Tak Centre 200 Connaught Road Central Hong Kong

Independent non-executive Directors Lam Kwong Siu Leung Hok Lim Ng Man Kung

To the Shareholders

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION FORMATION OF JOINT VENTURE

INTRODUCTION

Reference is made to the announcement of the Company dated 23 August 2016 in relation to, among other things, the Investment Agreement. The purpose of this circular is to provide you with, among other things, (i) further details of the Investment Agreement; (ii) the recommendation from the Independent Board Committee; (iii) the advice from the Independent Financial Advisor to the Independent Board Committee and the Independent Shareholders; and (iv) the notice of the EGM.

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LETTER FROM THE BOARD

INVESTMENT AGREEMENT

The principal terms of the Investment Agreement are set out below:

Date

23 August 2016

Parties

• (a) The Company

(b) FHIG

Establishment of the Joint Venture

The Company and FHIG have agreed to establish the Joint Venture. The registered capital of the Joint Venture will be RMB80 million, to which the Company and FHIG will contribute RMB40.8 million and RMB39.2 million, respectively. Upon the establishment of the Joint Venture, the Company and FHIG will hold 51% and 49%, respectively, of the equity interest in the Joint Venture. The contributions are to be paid in full within two years of the date of issuance of business license of the Joint Venture.

The total initial capital contribution of RMB80 million to the Joint Venture was determined by the parties after arm’s length negotiations with reference to the minimum level of capital contribution required for the Joint Venture to be able to take advantage of the financial benefits from the China (Fujian) Pilot Free Trade Zone (中國(福建)自由貿易試驗區) .

The capital contribution on the part of the Company will be funded from the funds raised under the open offer of the Company conducted in 2015, details of which were disclosed in the Company’s prospectus dated 28 July 2015.

Business Scope of the Joint Venture

The business scope of the Joint Venture is mainly tourism related leasing service within the Fujian Province, PRC, including but not limited to leasing of caravan compartments and cable cars.

Condition Precedent

The Company and FHIG agree that, unless otherwise agreed, the transactions under the Investment Agreement can only be undertaken after satisfaction of the condition that the Investment Agreement and the transactions thereunder having been approved by the shareholders’ meeting and the independent non-executive directors of the Company as required under the Listing Rules.

– 5 –

LETTER FROM THE BOARD

Board composition and management of the Joint Venture

The board of the Joint Venture will comprise five directors, of which two directors shall be nominated by FHIG, and three directors shall be nominated by the Company. The chairman of the board of the Joint Venture shall be nominated by the Company.

The Joint Venture shall have one general manager, who shall be appointed by the board of directors of the Joint Venture.

The Joint Venture shall also have one supervisor, who shall be nominated by FHIG.

Profit sharing of the Joint Venture

The Joint Venture will declare and make distributions to its equity holders in accordance with the proportion of their paid contributions to the Joint Venture.

ARTICLES OF ASSOCIATION

The proposed articles of association of the Joint Venture contain, amongst other things, terms reflecting the Investment Agreement and the following principal terms:

Transfer of shares and right of first refusal

In the event that a shareholder of the Joint Venture proposes to transfer its shareholding in the Joint Venture to a party who is not a shareholder of the Joint Venture, the consent of a majority of the other shareholders is required. If a majority of the other shareholders do not consent to the transfer, such shareholders who do not consent to the transfer shall purchase the shareholding proposed to be transferred, otherwise he shall be deemed to have consented to the proposed shareholding transfer.

Where consent is obtained for a proposed shareholding transfer, under the same conditions, the other shareholders of the Joint Venture shall have a right of first refusal to such transfer. Where over two shareholders exercise such right of first refusal, the shareholders shall determine the proportion of shareholding to be purchased by each shareholder through negotiation. If a conclusion is not reached by negotiation, the shareholders shall exercise their rights of first refusal in accordance with their proportions of capital contributed to the Joint Venture.

Term of business

The Joint Venture shall engage in business for a term of 30 years, calculated from the date of issuance of business license of the Joint Venture.

– 6 –

LETTER FROM THE BOARD

INFORMATION ON THE PARTIES TO THE INVESTMENT AGREEMENT

The Company is a company incorporated under the laws of Hong Kong with limited liability, the shares of which are listed on the Main Board of the Stock Exchange. The principal business activity of the Company is hotel business and property investment. The major subsidiaries of the Company are principally engaged in investment holding and hotel operations.

To the best of the knowledge, information and belief of the Directors after making reasonable enquiries, FHIG is a controlling shareholder of the Company which is established under the laws of the PRC with limited liability. It is principally engaged in the business of tourism.

DIRECTORS’ CONFIRMATION

The Directors are of the view that the Investment Agreement is on normal commercial terms which are fair and reasonable and in the interest of the Company and its shareholders as a whole.

Mr. Wang Xiaowu, an executive Director, also serves as a director of FHIG, which indirectly holds 67.92% of the issued share capital of the Company. As such, Mr. Wang Xiaowu has abstained from voting on the relevant resolution of the Board in approving the Investment Agreement. Save as disclosed above, none of the Directors had material interests in the Investment Agreement and was required to abstain from voting on the relevant resolution of the Board.

FINANCIAL IMPACT OF THE JOINT VENTURE

Upon completion of the formation of the Joint Venture, the Joint Venture will be accounted for in the consolidated accounts of the Company as a subsidiary and the amount of capital contribution provided by the Group will be recognized in the financial statements of the Joint Venture. It is expected that there will be no material change in the net assets position of the Group as a result of the establishment of the Joint Venture. As the Joint Venture will be newly formed and the capital injection is expected to be funded from the internal resources of the Group, the establishment of the Joint Venture and the capital injection are not expected to have any material impact on the earnings position of the Group.

REASONS FOR AND BENEFITS OF THE JOINT VENTURE

The properties investment, hotel operations in PRC and investment holding are the core business of the Group, and the major customers of the Group include travel agencies in the tourism industry.

The formation of Joint Venture as an investment holding company would provide a forum for the strategic consortium between the Company and FHIG as partners in the Joint Venture to pool together their respective resources, capabilities and industry expertise, allowing the Company and FHIG to evaluate the potential customers in the tourism industry and share associated risks. The formation of the Joint Venture with FHIG would allow the Group to pursue the aforementioned benefits without imposing excessive strain on the cash resources of the Group, since the capital commitment of the Joint Venture can be shared between the Company and FHIG.

– 7 –

LETTER FROM THE BOARD

Concrete business plans regarding the development of the Joint Venture business (covering, among other things, detailed development plan and project return analysis) will be developed in accordance to the prevailing market situation after the establishment of the Joint Venture. The proposed operation model of the Joint Venture business involves the purchase of assets such as caravan compartments and cable cars and the leasing out of the aforementioned assets for income.

The Company currently does not have experience in operating the relevant business of the Joint Venture, and the directors to be nominated by the Company to become directors in the board of directors of the Joint Venture do not have such experience.

The directors of the Company have many years of experience in the industries of tourism and investment management. FHIG has appointed an expert who has many years of experience and expertise in the leasing business and business management and whom will be transferred to the Joint Venture to support the board of directors of the Joint Venture in the day-to-day operation and management of the business of the Joint Venture. The expert does not have specific experience and expertise in leasing of caravan compartments and cable cars. Although the expert will be nominated by FHIG, her appointment will be subject to final approval by the Company and FHIG. The Company’s management will monitor her performance closely to ensure that the Company’s interests in the Joint Venture are safeguarded. In addition, upon the establishment of the Joint Venture, the Company will nominate and appoint further appropriate management personnel to the Joint Venture.

The Joint Venture is expected to allow the Group to take advantage of the financial benefits from the China (Fujian) Pilot Free Trade Zone, including settlement incentive (as the registered capital of the Joint Venture amounts to RMB80 million, the Joint Venture is eligible to receive a subsidy of up to RMB1 million) and business incentive (representing 0.5% of the acquisition amount of equipment). It is expected that, such financial benefits, if materialized, would have a positive effect on the Group’s revenue, granting the Group access to a profitable and more diversified range of income streams and enhancing the Group’s investment portfolio in the tourism industry.

In view of the aforesaid, the Board, after taking into account the advice of the Independent Financial Adviser, considers that the terms and conditions of the Investment Agreement and the transactions contemplated thereunder are on normal commercial terms, are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

IMPLICATIONS UNDER THE LISTING RULES

As at the Latest Practicable Date, FHIG indirectly held 67.92% of the issued share capital of the Company and was a controlling shareholder of the Company. Therefore, FHIG is a connected person of the Company for the purposes of Chapter 14A of the Listing Rules. Accordingly, the transactions contemplated under the Investment Agreement constitute connected transactions of the Company.

– 8 –

LETTER FROM THE BOARD

As one or more of the applicable percentage ratios in respect of the transactions contemplated under the Investment Agreement exceed 5% but are less than 25%, the transactions contemplated under the Investment Agreement constitute a discloseable and connected transaction of the Company which is subject to the reporting, announcement and shareholder approval requirements under the Listing Rules.

FHIG, being a controlling shareholder of the Company indirectly interested in 778,068,772 Shares, representing approximately 67.92% of the issued share capital of the Company, and its associates (including HC Technology and Pinoge, which are directly interested in 770,016,722 Shares and 8,052,050 Shares, representing approximately 67.22% and 0.7% of the issued share capital of the Company respectively, and are indirectly wholly-owned subsidiaries of FHIG) being connected persons of the Company and having material interests in the Investment Agreement (which are different from those of the Independent Shareholders), will abstain from voting at the EGM for the relevant resolution. Save for the aforesaid and to the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries as at the Latest Practicable Date, no other Shareholder was involved in or interested in the Investment Agreement or Joint Venture which requires such Shareholder to abstain from voting on the proposed resolution to approve the Investment Agreement at the EGM.

THE EGM

The EGM will be convened and held for the purposes of considering and, if thought fit, approving the Investment Agreement.

An Independent Board Committee comprising all the independent non-executive Directors has been established to consider the terms of the Investment Agreement and the transactions contemplated thereunder and to advise and make recommendations to the Independent Shareholders as to how to vote at the EGM. Mr. Lam Kwong Siu, Mr. Leung Hok Lim and Mr. Ng Man Kung have been appointed by the Board to serve as members of the Independent Board Committee. None of the members of the Independent Board Committee has any material interest in the Investment Agreement and the transactions contemplated thereunder. VC Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard.

RECOMMENDATIONS

Your attention is drawn to the letter from the Independent Board Committee regarding the Investment Agreement as set out on page 11 of this circular. Your attention is also drawn to the letter from VC Capital Limited to the Independent Board Committee and the Independent Shareholders in respect of the same matters, which is set out on pages 12 to 25 of this circular.

The Independent Board Committee, having taken into account the advice of VC Capital Limited, consider that the Investment Agreement, whilst not entered into in the ordinary and usual course of business of the Group, is on normal commercial terms, and the terms of the Investment Agreement are fair and reasonable, and in the best interests of the Company and its Shareholders as

– 9 –

LETTER FROM THE BOARD

a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the ordinary resolution at the EGM to approve the Investment Agreement and the transactions contemplated thereunder.

Accordingly, the Board (including the independent non-executive Directors) consider that the Investment Agreement is on normal commercial terms, and the terms of the Investment Agreement are fair and reasonable and in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board recommend the Shareholders to vote in favour of the ordinary resolution at the EGM to approve the Investment Agreement and the transactions contemplated thereunder.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information contained in the appendix to this circular.

By order of the Board Fujian Holdings Limited Wang Xiaowu Chairman

– 10 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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FUJIAN HOLDINGS LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 00181)

4 October 2016

To the Independent Shareholders

Dear Sirs,

DISCLOSEABLE AND CONNECTED TRANSACTION FORMATION OF JOINT VENTURE

We refer to the circular dated 4 October 2016 (the ‘‘Circular’’) of the Company of which this letter forms part. Terms used in this letter shall have the meanings as defined in the Circular unless the context requires otherwise.

We, being the independent non-executive Directors, have been appointed to form the Independent Board Committee to advise you as to whether the terms of the Investment Agreement and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and whether the Investment Agreement and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole. VC Capital Limited has been appointed as the Independent Financial Adviser in this regard. We wish to draw your attention to the letter from the Board as set out from pages 4 to 10 of the Circular and the letter from the Independent Financial Adviser as set out from pages 12 to 25 of the Circular which contain, among other things, their advice and recommendations to us regarding the Investment Agreement and the principal factors and reasons taken into consideration for their advice and recommendations.

Having taken into account the advice and recommendations of the Independent Financial Adviser and the principal factors and reasons taken into consideration by them in arriving at their opinion, we consider that the Investment Agreement, whilst not entered into in the ordinary and usual course of business of the Group, is on normal commercial terms, and the terms of the Investment Agreement are fair and reasonable, and in the best interests of the Company and its Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the resolution at the EGM to approve the Investment Agreement and the transactions contemplated thereunder.

Yours faithfully,

Mr. Lam Kwong Siu Mr. Leung Hok Lim

Mr. Ng Man Kung

Independent non-executive Directors

– 11 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of a letter of advice to the Independent Board Committee and the Independent Shareholders from VC Capital Limited in respect of the formation of the Joint Venture for the purpose of incorporation into this circular.

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4 October 2016

• To: The Independent Board Committee and the Independent Shareholders of Fujian Holdings Limited

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE FORMATION OF JOINT VENTURE

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders as to whether (i) the terms of the Investment Agreement are fair and reasonable and on normal commercial terms; and (ii) the formation of the Joint Venture is in the ordinary and usual course of business of the Group and is in the interests of the Company and the Shareholders as a whole, details of which are set out in the letter from the Board (the ‘‘Letter from the Board’’) contained in the circular of the Company to the Shareholders dated 4 October 2016 (the ‘‘Circular’’), of which this letter forms part. Capitalised terms used in this letter shall have the same meanings as those defined in the Circular unless the context otherwise requires.

On 23 August 2016, the Company announced that the Company and FHIG entered into the Investment Agreement, pursuant to which the Company and FHIG have agreed to establish the Joint Venture. The registered capital of the Joint Venture will be RMB80 million, to which the Company and FHIG will contribute RMB40.8 million and RMB39.2 million, respectively. Upon the establishment of the Joint Venture, the Company and FHIG will hold 51% and 49%, respectively, of the equity interest in the Joint Venture. The contributions are to be paid in full within two years of the date of issuance of business license of the Joint Venture.

As at the Latest Practicable Date, FHIG indirectly held approximately 67.92% of the issued share capital of the Company and is a controlling shareholder of the Company. Therefore, FHIG is a connected person of the Company for the purposes of Chapter 14A of the Listing Rules. Accordingly, the transactions contemplated under the Investment Agreement constitute connected transactions of the Company. As certain applicable percentage ratios in respect of the transactions contemplated under the Investment Agreement exceed 5% but are less than 25%, the transactions

– 12 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

contemplated under the Investment Agreement constitute a discloseable and connected transaction of the Company which is subject to the reporting, announcement and shareholder approval requirements under the Listing Rules.

FHIG and its associates (including HC Technology Capital Company Limited and Pinoge Company Limited, which as the Latest Practicable Date, are directly interested in approximately 67.22% and 0.7% of the issued share capital of the Company respectively and are indirectly whollyowned subsidiaries of FHIG) being connected persons of the Company and having material interests in the Investment Agreement (which are different from those of the Independent Shareholders), will abstain from voting at the EGM for the relevant resolution.

An Independent Board Committee, comprising Mr. Lam Kwong Siu, Mr. Ng Man Kung and Mr. Leung Hok Lim, has been established to make recommendation to the Independent Shareholders as to as to whether (i) the terms of the Investment Agreement are fair and reasonable and on normal commercial terms; (ii) the formation of the Joint Venture is in the ordinary and usual course of business and is in the interests of the of the Group and the Shareholders as a whole; and (iii) how the Independent Shareholders should vote at the EGM on the ordinary resolution regarding the transactions contemplated under the Investment Agreement.

In our capacity as the independent financial adviser to the Independent Board Committee and the Independent Shareholders, our role is to give an independent opinion as to whether (i) the terms of the Investment Agreement are fair and reasonable and on normal commercial terms; (ii) the formation of the Joint Venture is in the ordinary and usual course of business of the Group and is in the interests of the Company and the Shareholders as a whole; and (iii) how the Independent Shareholders should vote at the EGM on the ordinary resolution regarding the transactions contemplated under the Investment Agreement. Our appointment as the independent financial adviser to advise the Independent Board Committee in respect of the transactions contemplated under the Investment Agreement has been approved by the Independent Board Committee.

VC Capital Limited (‘‘VC Capital’’) is not associated with the Company, FHIG or their respective substantial shareholders or any party acting, or presumed to be acting, in concert with any of them and, accordingly, is considered eligible to give independent advice on the terms of the transactions contemplated under the Investment Agreement. Apart from normal professional fees payable to us in connection with this engagement, no arrangement exists whereby VC Capital will receive any fees or benefits from the Company, FHIG or their respective substantial shareholders or any party acting, or presumed to be acting, in concert with any of them.

In formulating our opinion, we have relied on the information and facts supplied and opinions expressed by the management of the Group. We have assumed that all information and representations provided by the management of the Group, for which they are solely responsible, were true and accurate at the time they were prepared or made and will continue to be so up to the Latest Practicable Date. Should there be any subsequent material changes which occurred during the period from the date of the Circular up to the date of the EGM and would affect or alter our opinion, we will notify the Independent Board Committee and the Independent Shareholders as soon as possible. We have no reason to doubt the truth, accuracy or completeness of the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

information and representations made to us by the management of the Group. We have been advised that no material facts have been omitted from the information supplied and opinions expressed. As such, we have no reason to suspect that any relevant information has been withheld or omitted from the information provided and referred to in the Circular or the reasonableness of the opinions and representations provided by the management of the Group to us, nor are we aware of any facts or circumstances which would render the information provided and representations made to us untrue, inaccurate or misleading.

We consider that we have reviewed sufficient information to reach an informed view, to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our opinion. We have not, however, conducted any independent investigation into the business and affairs or the future prospects of the Group, nor have we carried out any independent verification of the information provided by the management of the Group.

All Directors jointly and severally accept full responsibility for the accuracy of information contained in the Circular and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in the Circular have been arrived at after due and careful consideration and there are no other facts not contained in the Circular, the omission of which would make any statement in the Circular misleading.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion on the Investment Agreement, we have taken into consideration the following principal factors and reasons:

(1) Background information of the Company

The principal business activity of the Company is hotel business and property investment. The major subsidiaries of the Company are principally engaged in investment holding and hotel operations.

The following table summarises the financial information of the Group for each of the two years ended 31 December 2015 and the six months ended 30 June 2016 as extracted from the annual report for the Company for the year ended 31 December 2015 (the ‘‘Annual Report 2015’’) and the interim report dated 23 August 2016 (the ‘‘Interim Report 2016’’) respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Revenue — Hotel operations — Property investment Loss before tax Income tax credit Loss for the year attributable to owners of the Company Other comprehensive expense attributable to owners of the Company Items that may be reclassified subsequently to profit and loss: Exchange differences on translating foreign operations Total comprehensive expense for the year attributable to owners of the Company	For the year ended 31 December 2014 2015 HK$’ HK$’ (audited) (audited) 10,688,328 25,706,315 9,348,996 87.5% 24,320,381 94.6% 1,339,332 12.5% 1,385,934 5.4% (548,355) (2,945,335) 47,905 809,167 (500,450) (2,136,168) (614,522) (2,117,268) (1,114,972) (4,253,436)	For the six months ended 30 June 2016 HK$’ (unaudited) 13,057,403 12,378,486 94.8% 678,917 5.2% (3,074,338) (52,789) (3,127,127) (590,416) (3,717,543)	For the six months ended 30 June 2016 HK$’ (unaudited) 13,057,403 12,378,486 94.8% 678,917 5.2% (3,074,338) (52,789) (3,127,127) (590,416) (3,717,543)

(a) For the year ended 31 December 2015

The Group is principally engaged in the businesses of hotel and property development, property investment and investment holding. Currently, it (i) operates a hotel business in Xiamen, the Fujian Province, the PRC, which was the main source of revenue of the Group, representing approximately 87.5% and 94.6% of the total revenue for the year ended 31 December 2014 and the year ended 31 December 2015 respectively; and (ii) earned approximately 12.5% and 5.4% of the total revenue from the rental of certain investment properties in Hong Kong for the year ended 31 December 2014 and the year ended 31 December 2015 respectively.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following table summarises the segment revenue and results of the Group for each of the two years ended 31 December 2015 as extracted from the Annual Report.

	Property Investment	Property Investment	Hotel operations	Hotel operations
	For the year ended		For the year	ended
	31 December		31 December
	2014	2015	2014	2015
	HK$’	HK$’	HK$’	HK$’
Revenue	1,339,332	1,385,934	9,348,996	24,320,381
Segment result
before other
gains and losses:	1,162,514	1,317,235	(4,269,320)	(5,068,124)
Gain arising on
change in fair
value of
investment
properties	6,880,000	4,000,000	—	—
Segment result	8,042,514	5,317,235	(4,269,320)	(5,068,124)

Revenue generated from hotel operation increased substantially from approximately HK$9.3 million for the year ended 31 December 2014 to approximately HK$24.3 million for the year ended 31 December 2015. However, loss of relevant segment had not been improved. Hotel operation recorded segment loss of approximately HK$4.3 million and HK$5.1 million for the year ended 31 December 2014 and the year ended 31 December 2015 respectively. As mentioned in the Annual Report 2015, increasing costs from operating environment, especially from increasing wages, remained the key challenge for the hotel industry. Meanwhile, gain arising on change in fair value of investment properties reduced from approximately HK$6.9 million in the year ended 31 December 2014 to approximately HK$4.0 million in the year ended 31 December 2015. As a result, loss of the Group deteriorated from approximately HK$0.5 million for the year ended 31 December 2014 to approximately HK$2.1 million for the year ended 31 December 2015.

(b) For the six months ended 30 June 2016

Revenue generated from hotel operation and property investment represented approximately 94.8% and 5.2% of total revenue of the Group respectively for the six months ended 30 June 2016.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following table summarises the segment revenue and results of the Group for the six months ended 30 June 2015 and the six months ended 30 June 2016 as extracted from the Interim Report.

		Property	Investment	Investment	Hotel operations
		For the six	months	ended	For the six months ended
		30	June		30 June
		2015		2016	2015 2016
		HK$’		HK$’	HK$’ HK$’
		(unaudited)	(unaudited)		(unaudited) (unaudited)
Revenue		692,817		678,917	9,928,910 12,378,486
Segment	result	664,035		643,239	(3,120,398) (829,727)

For the six months ended 30 June 2016 revenue from the Group’s hotel was approximately HK$12.38 million, representing an increase of approximately 25.0% from the corresponding period in 2015; and relevant segment loss narrowed from approximately HK$3.1 million for the six months ended 30 June 2015 to approximately HK$0.8 million for the six months ended 30 June 2016. As mentioned in the Interim Report 2016, during the six months ended 30 June 2016, the Group’s principal operation was subject to pressure given the slowdown in PRC’s macro-economic growth, general downside in operating results and cyclical oversupply in the hotel industry of the PRC and other changes in the social environment. Nevertheless, the domestic hotel industry was slowly recovering from the doldrums of 2013. The Group overcame unfavourable factors and capitalised on favourable ones and market opportunities, such as enhancing sales force regarding wedding banquet and increasing number of conventions held in the hotel, and the gradual realisation of the positive effect of the Free Trade Zone in Fujian, and achieved notable results in its efforts to adjust asset mix, optimise staff allocation, enhance asset profitability and shareholders’ equity. We further discussed and understood from the management of the Company that in order to reduce the hotel segment loss, the Group (i) overcame unfavourable factors by minimizing cost, closely monitoring market trend and taking advantage of economy of scale for hotel operation as FHIG involved in chain hotels management; and (ii) capitalized on favorable factors and market opportunities by improving customer services, hotel facilities and occupancy of the shopping centre of the Group’s hotel as well as by strengthening marketing of conference and commercial services, online and mobile hotel accommodation bookings. The Group also makes use of clientele of its shareholder, Fujian Tourism Development Group Company Limited (福建省旅遊發展集團有限責任公司, ‘‘FTDC’’), to promote its hotel business.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Rental income generated from property investment was stable, which recorded at approximately HK$0.7 million and HK$0.7 million for the six months ended 30 June 2015 and 2016 respectively. Segment profits maintained at approximately HK$0.7 million and HK$0.6 million for the six months ended 30 June 2015 and 2016 respectively.

Taking into account, among others, the large central administration costs of approximately HK$3.3 million partly offset by unallocated income of approximately HK$0.2 million and share of profit of associate of approximately HK$0.2 million, the Group still recorded a loss of approximately HK$3.1 million for the six months ended 30 June 2016.

(2) Reasons and benefits of the formation of the Joint Venture

As mentioned in the Annual Report 2015 and the Interim Report 2016, the uncertainties in global economic recovery, slowdown in domestic macro-economic growth and structural oversupply in the hotel industry, etc. will continue to affect the development of the Group’s principal business. Nevertheless, the Group remained fully confident in its future development and considered that it will be well positioned to address challenges and opportunities to be brought by the implementation of the ‘‘Several Opinions of the State Council on Promoting the Reform and Development of the Tourism Industry’’ (國務院《關於促進旅遊業改革發展的 若干意見》) and the radiation effect of free trade zones in Fujian Province. The Group will leverage its strengths in the Fujian Province and seek investment opportunities in tourist related and other business areas and to integrate the industry chains of hotel, tourism and other businesses.

In view of the above, the formation of the Joint Venture with FHIG to engage mainly in tourism related leasing service within the Fujian Province, PRC, including but not limited to the leasing of caravan compartments and cable cars is in line with the Group’s business strategy. We are of the view that the formation of the Joint Venture is not in the ordinary and usual course of business of the Group; however, we concurred with the view of management of the Company that the establishment of the Joint Venture will allow the Group to take advantage of the economic benefits from the free trade zones in Fujian Province and to diversify into the business of tourism related leasing services within the Fujian Province, PRC, which would allow the Group to broaden its income streams. According to the website of China (Fujian) Pilot Free Trade Zone (中國(福建)自由貿易試驗區, www.china-fjftz.gov.cn), the free trade zones in Fujian Province measure 118.04 square kilometers covering Bìng-tang (平潭), Xiamen (廈門) and Fuzhou (福州) and the establishment was approved by the State Council on 31 December 2014. It aims to improve business environment, strengthen capability for long term development, promote cooperation between the PRC and Taiwan for economic benefits and to facilitate and serve the ‘‘belt and road’’ (一帶一路) strategy through trades and cooperation with relevant countries and districts.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We have reviewed《關於支持福建自貿試驗區融資租賃業加快發展的指導意見》 issued by閩政辦 in 2015, newly established leasing (融資租賃) companies can entitle to a one-off financial subsidy from the government. For registered capital between RMB50 million to RMB500 million, the subsidy will not exceed RMB1 million. We have also reviewed《關於加 快福建自貿區福州片區融資租賃業發展的實施意見》issued by the office of People Government of Fuzhou City (福州市人民政府辦公廳) in 2015, companies involved in the leasing business (融資租賃) in the pilot free trade zone in Fuzhou City will be granted with business incentive, which is 0.5% of the acquisition amount of equipment. Lessor and lessee will entitle to 80% and 20% of the business incentive respectively. Based on our review, we concur with the management of the Company that the Joint Venture is expected to allow the Group to take advantage of the financial benefits from the China (Fujian) Pilot Free Trade Zone.

As mentioned in the Letter from the Board, to the best of the knowledge, information and belief of the Directors after making reasonable enquiries, FHIG is principally engaged in the business of tourism. We further discussed and understood from management of the Company that FHIG and its subsidiaries involved in the businesses of travel destinations management, chain hotels management, travel related e-commerce and commercial exhibitions, sales of travel products and cooperation with travel agencies. FHIG and the Company are under the control and supervision of the State-owned Assets Supervision and Administration Commission of Fujian Province (福建省人民政府國有資產監督管理委員會, ‘‘FJSOASAC’’) through FTDC. As advised by the management of the Company, FTDC is the only company managed by FJSOASAC mainly handling tourism business in the Fujian Province. As a result, the Company would be able to share the resources from FTDC having considered that FTDC: (i) would formulate strategic plan for the development and operations of the Joint Venture based on its experience in operating tourism business; (ii) could assist the Joint Venture dealing with coordination matters given the established network of FTDC in the tourism business and its governmental background; (iii) if required, could provide funding supports to the Joint Venture; (iv) could source quality customers to the Joint Venture from its existing clientele of tourism business and/or reallocate other resources within the group to facilitate further development of the Joint Venture; and (v) if necessary, would assist the Joint Venture on recruiting quality staff through the human resource network of FTDC. Based on the above, we concur with the management of the Company that the Joint Venture will provide a platform for the Company and FHIG to contribute their respective financial resources, capabilities and/or industry expertise to identify, evaluate and develop suitable business opportunities of tourism related leasing services.

According to the official website of 福建省旅遊局 (www.fjta.gov.cn), approximately 267,200,500 tourists visited the Fujian Province in 2015, representing approximately 14.0% growth as compared with 2014. Revenue from tourism experienced approximately 16.0% growth for Fujian Province, amounting to approximately RMB314,151 million. Tours to areas of natural or ecological interest, communist party historic places and countryside as well as leisure tours in city became a consumption trend and short distance countryside tourist

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

attraction points are quite popular. During the thirteenth Five-Year Plan, 225 items in Fujian Province had been considered as the main projects for tourism development, representing approximately 59.8% growth as compared to the twelfth Five-Year Plan.

We also noted from the official website of 福建省旅遊協會 (www.fjtra.com) that in order to promote investment and consumption of the tourism industry, the State Council (國務 院) has issued the ‘‘Several Opinions of the State Council on Further Promoting the Investment and Consumption of the Tourism Industry’’ (國務院《關於進一步促進旅遊投資和 消費的若干意見》) to each province across the country in August 2015. The State Council encouraged, among others, the enhancement of travel facilities and the improvement of environment for tourist consumption; as well as the investment in tourism and development of new market to attract tourist consumption, for example, by speeding up the construction of caravan camping sites for self drive tours, by developing towns containing various elements to attract tourists such as sightseeing, leisure, vacation and shopping; and by strengthening the development of tourism related manufacturing which may cover cruise vessels, travel caravans, cable cars ropeways at attraction points and sizable entertainment facilities. According to the official website of the PRC government (www.gov.cn), in the first half of 2016, there were approximately 2,236,000,000 local tourists traveled in the PRC, representing approximately 10.47% growth as compared to the corresponding period of 2015; and there were approximately 67,870,000 tourists traveled to the PRC from other countries, representing approximately 3.8% growth as compared to the corresponding period of 2015.

Having taking into account that (i) the Company’s business strategy is to seek investment opportunities in tourist related and other business areas and the Joint Venture will provide a platform to the Group to diversify into the business of tourism related leasing services within the Fujian Province, the PRC, which may broaden its income streams; (ii) the stated-owned background of FHIG and the Company and the PRC government’s policies to promote investment and consumption of tourism industry; (iii) the stable growing trend of number of tourists to Fujian Province and the Joint Venture will be able to take advantage of the free trade zones in Fujian Province; and (iv) FHIG’s experience in the business of tourism, we concur with management of the Company that the formation of the Joint Venture is in the interests of the Company and the Shareholders as a whole.

The principal business activity of the Company is hotel business and property investment. The major subsidiaries of the Company are principally engaged in investment holding and hotel operations. As such, the Directors have years of experience in the industries of tourism and investment management. According to the Letter from the Board, the Joint Venture partner, FHIG, will transfer its existing expert who has many years of experience and expertise in the leasing business and business management to support the board of directors of the Joint Venture in the day-to-day operation and management of the business of the Joint Venture. As disclosed in the Letter from the Board, the expert to be appointed by FHIG does not have specific experience and expertise in leasing of caravan compartments and cable cars. However, based on information provided by the Company, the expert is a qualified lawyer who has over four years experience with and in charge of the risk management of a sino-

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

foreign jointly owned company. Such company was principally involved in leasing business, acquisition of leasing assets, leasing transactions consultancy and guarantees, leased assets maintenance, etc. Although the expert will be nominated by FHIG, her appointment will be subject to final approval by the Company and FHIG. The Company’s management will monitor her performance closely to ensure that the Company’s interests in the Joint Venture are safeguarded. In addition, upon the establishment of the Joint Venture, the Company will nominate and appoint further appropriate management personnel to the Joint Venture. Based on the above and the fact that FHIG is a controlling shareholder of the Company sharing common interest as a group, we concur with the management of the Company that although the Company currently does not have experience in operating the relevant business of the Joint Venture, the Joint Venture would be able to acquire suitable management to manage the business of the Joint Venture and the Company would be able to safeguard its interest in the Joint Venture.

The Company has not yet formulated any concrete business plan regarding the development of the Joint Venture. As mentioned in the Letter from the Board, concrete business plans regarding the development of the Joint Venture business (covering, among other things, detailed development plan and project return analysis) will be developed in accordance to the prevailing market situation after the establishment of the Joint Venture. The proposed operation model of the Joint Venture business involves the purchase of assets such as caravan compartments and cable cars and the leasing out of the aforementioned assets for income.

Prospect of leasing of caravan compartments

We understood from the management of the Company that caravan compartments of the Joint Venture for leasing, if materialised, will be placed on scenic spots to provide accommodations to tourists rather than for driving purpose. Certain accommodations may include a garden area to complement the leisure ambience.

Under the thirteenth Five-Year Plan, it will develop a network of about 2,000 caravan camping sites with relevant services and facilities across the PRC by the year 2020. Backed by the government policy, constructions of caravan camping sites have been speeded up across the country. In Fujian Province, caravan camping sites construction has become a popular item of tourism related investment.

Having considered that (i) the number of tourists to Fujian Province was on a stable growing trend; (ii) more caravan camping sites to be constructed under the government policy would increase number of tourist attraction points that offer tourists the opportunities to stay overnight; (iii) leasing of caravan compartments which are equipped for accommodation aims to provide leisure experience to tourists who wish to stay overnight at relevant scenic spots and (iv) self drive tour, a favorable way of travel of many PRC tourists, would encourage tourists to visit various scenic spots along the travel routes. According to 人民日報海外版—人民網 (www.paper.people.com.cn), in the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

year 2015, tourists who chose self drive tour represented over 58.5% of the total number of tourists in the PRC. We concur with management of the Company that demand for leasing of caravan compartments would increase.

Prospect of leasing of cable cars

It was mentioned in the website of China Travel Service (HK) Group Corporation (中國港中旅集團公司, www.hkcts.com) that development of ropeways is regarded as supported and encouraged item under the government policies. From year 2005 to year 2014, number of ropeways for passenger rides across the PRC increased from 747 to 925. The building of ropeways can actively promote the development of the relevant scenic spots and has become an important source of income for many scenic spots.

In view of (i) ropeways development is encouraged by the PRC government and there was increasing number of ropeways constructed for passenger rides across the PRC over the years; and (ii) the stable growing trend of number of tourists to Fujian Province, we concur with the management of the Company that the business of leasing of cable cars for passenger rides on ropeways in the Fujian Province is promising.

(3) Principal terms of the Investment Agreement

(a) Capital contribution

Pursuant to the Investment Agreement, the Company and FHIG will be obliged to make capital contribution in proportion to their respective percentage of equity interest in the Joint Venture and in accordance with the same contribution schedule as stated under the Investment Agreement. Upon the establishment of the Joint Venture, the Company and FHIG will hold 51% and 49%, respectively, of the equity interest in the Joint Venture.

The total initial capital contribution of RMB80 million to the Joint Venture was determined by the parties after arm’s length negotiations with reference to the minimum level of capital contribution required for the Joint Venture. According to the release from the PRC government namely《外商投資租賃業管理辦法(商務部令2005年第5號)》, foreign invested companies in leasing (融資租賃) business must have registered capital of no less than US$10 million.

The Company and FHIG will be obliged to contribute RMB40.8 million and RMB39.2 million respectively, in full within two years from the date of issuance of business license of the Joint Venture. As mentioned in the Letter from the Board, the capital contribution on the part of the Company will be funded from the funds raised under the open offer of the Company conducted in 2015. It was mentioned in the Company’s open offer prospectus dated 28 July 2015 that the Company intends to apply

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

the net proceeds from the Open Offer for potential investment opportunities as the Company will identify from time to time, which will be mainly tourism related opportunities in Fujian Province.

(b) Profit sharing

The Joint Venture will declare and make distributions to its equity holders in accordance with the proportion of their paid contributions to the Joint Venture.

(c) Condition precedent

The Company and FHIG agree that, unless otherwise agreed, the transactions under the Investment Agreement can only be undertaken after satisfaction of the condition that the Investment Agreement and the transactions thereunder having been approved by the shareholders’ meeting and the independent non-executive directors of the Company as required under the Listing Rules.

As at the Latest Practicable date, the above condition has not been fulfilled. We concurred with the view of the management of the Company that the condition precedent can safeguard the interest of the Company and the Shareholders.

(d) Board composition and management

The board of the Joint Venture will comprise five directors, of which two directors shall be nominated by FHIG, and three directors shall be nominated by the Company. The chairman of the board of the Joint Venture shall be nominated by the Company. The Joint Venture shall have one general manager, who shall be appointed by the board of directors of the Joint Venture. The Joint Venture shall also have one supervisor, who shall be nominated by FHIG.

(e) Transfer of shares and right of first refusal

In the event that a shareholder of the Joint Venture proposes to transfer its shareholding in the Joint Venture to a party who is not a shareholder of the Joint Venture, the consent of a majority of the other shareholders is required. If a majority of the other shareholders do not consent to the transfer, such shareholders who do not consent to the transfer shall purchase the shareholding proposed to be transferred, otherwise he shall be deemed to have consented to the proposed shareholding transfer.

Where consent is obtained for a proposed shareholding transfer, under the same conditions, the other shareholders of the Joint Venture shall have a right of first refusal to such transfer. Where over two shareholders exercise such right of first refusal, the shareholders shall determine the proportion of shareholding to be purchased by each shareholder through negotiation. If a conclusion is not reached by negotiation, the shareholders shall exercise their rights of first refusal in accordance with their proportions of capital contributed to the Joint Venture.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In view of the restriction on the transfer of shares and the right of first refusal apply to all respective shareholders of the Joint Venture, we consider such arrangement is fair and reasonable so far as the Company and the Independent Shareholders are concerned.

(f) Term of business

The Joint Venture shall engage in business for a term of 30 years, calculated from the date of issuance of business license of the Joint Venture.

Having considered the principal terms of the Investment Agreement above, in particular, (i) the capital contribution and profit sharing will be in proportion to the respective percentage of equity interest of the Company and FHIG in the Joint Venture; and (ii) the majority of the board of directors of the Joint Venture will be nominated by the Company, we are of the view that the terms of the Investment Agreement, including but not limited to the amount of capital contribution, are fair and reasonable, on normal commercial terms and in the interests of the Company and the Shareholders as a whole.

(4) Possible financial effects of the transactions contemplated under the Investment Agreement

Upon establishment of the Joint Venture, the Company will hold 51% of the equity interest in the Joint Venture, and the Joint Venture will become non-wholly owned subsidiary of the Company and its financial results will be consolidated into the results of the Group.

The management of the Company considered that the establishment of the Joint Venture pursuant to the Investment Agreement will have no immediate material impact on the consolidated earnings as well as the net asset value attributable to equity shareholders of the Company. The capital contribution on the part of the Company for the formation of the Joint Venture will be funded from the funds raised under the open offer of the Company conducted in 2015.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

RECOMMENDATION

Having taken into account the above principal factors and reasons, we consider that (i) the terms of the Investment Agreement are fair and reasonable and on normal commercial terms; and (ii) the formation of the Joint Venture is not in the ordinary and usual course of business of the Group but it 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 favor of the relevant resolution at the EGM to approve the transactions contemplated under the Investment Agreement.

Yours faithfully, For and on behalf of VC Capital Limited

Philip Chau Managing Director

Evelyn Fan Director

– 25 –

GENERAL INFORMATION

APPENDIX

RESPONSIBILITY STATEMENT

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

SHARE CAPITAL

The issued share capital of the Company as at the Latest Practicable Date and immediately following the Completion is as follows:

Number of Shares

1,145,546,000 Shares in issue as at the Latest Practicable Date

The Shares have no nominal value.

DISCLOSURE OF DIRECTORS’ INTERESTS AND SHORT POSITION IN THE COMPANY

(a) Directors’ and chief executives’ interests in Shares and short positions in the Shares

As at the Latest Practicable Date, the interests or short positions of the Directors and chief executives of the Company 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), which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO) or (b) to be recorded into the register required to be kept therein, pursuant to section 352 of the SFO, or (c) to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules were as follows:

Long and short positions in Shares

As at the Latest Practicable Date

			As at the Latest	Practicable Date
				Approximate
				percentage of total
			Number	number of Shares
Name	of Director	Capacity	of Shares	in issue
			(Note a)
Wang	Xiaowu	Personal	1,560,000 (L)	0.14%
Chen	Danyun	Personal	420,000 (L)	0.04%

Note:

(a) The letter ‘‘L’’ denotes a long position.

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GENERAL INFORMATION

APPENDIX

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor chief executives of the Company had any interests or short positions in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept by the Company under section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies.

(b) Substantial shareholders and other persons

So far as was known to the Directors, as at the Latest Practicable Date, the persons (not being Directors or chief executives of the Company) whose interests in Shares which were notified to the Company and the Stock Exchange pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO as recorded in the register to be kept under section 336 of the SFO, or who were interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any member of the Group were as follows:

Long and short positions in Shares

Substantial shareholders

Name of Shareholder Capacity HC Technology (Notes a and c) Beneficial owner FIHC (Notes a and c) Interest of controlled corporation FHIG (Notes a and c) Interest of controlled corporation FTDC (Notes a and c) Interest of controlled corporation Sino Earn (Notes b and c) Beneficial owner FHTI (Notes b and c) Interest of controlled corporation FHIC (Notes b and c) Interest of controlled corporation FHGC (Notes b and c) Interest of controlled corporation FIDG (Notes b and c) Interest of controlled corporation

As at the Latest Practicable Date

Number of Shares Approximate percentage of total number of Shares in issue (Note d) 770,016,722 (L) 67.22% 778,068,772 (L) 67.92% 778,068,772 (L) 67.92% 778,068,772 (L) 67.92% 72,553,382 (L) 6.33% 72,553,382 (L) 6.33% 72,553,382 (L) 6.33% 72,553,382 (L) 6.33% 72,553,382 (L) 6.33%

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GENERAL INFORMATION

APPENDIX

Notes:

• (a) HC Technology and its associates hold 778,068,772 Shares (representing approximately 67.92% of the issued share capital of the Company), among which (i) 770,016,722 Shares (representing approximately 67.22% of the issued share capital of the Company) are held by HC Technology; and (ii) 8,052,050 Shares (representing approximately 0.7% of the issued share capital of the Company) are held by Pinoge. The issued share capital of each of HC Technology and Pinoge is 100% beneficially owned by FIHC, which is in turn 100% beneficially owned by FHIG, which is in turn 100% beneficially owned by FTDC, a state-owned corporation under the control and supervision of FJSOASAC in the PRC. Pursuant to the SFO, each of FIHC, FHIG and FTDC is deemed to be interested in 778,068,772 Shares.

• (b) Sino Earn beneficially holds 72,553,382 Shares. The issued share capital of Sino Earn is owned as to 30% by FHTI and 70% by FHIC respectively. Both of FHTI and FHIC are 100% beneficially owned by FHGC, which is in turn 100% beneficially owned by FIDG, a state-owned corporation in the PRC under the control and supervision of FJSOASAC. Pursuant to the SFO, each of FHTI, FHIC, FHGC and FIDG is deemed to be interested in 72,553,382 Shares.

• (c) Save for the fact that both FTDC and FIDG are under the control and supervision of FJSOASAC, there is no other shareholding relationships between FTDC together with its associates (i.e. FHIG, FIHC, HC Technology, Pinoge and the Group) and FIDG together with its associates (i.e. FHGC, FHTI, FHIC and Sino Earn).

• (d) The letter ‘‘L’’ denotes a long position.

Save as disclosed above, as at the Latest Practicable Date, the Directors and chief executives of the Company were not aware of any other persons (other than the Directors and chief executives of the Company) who had, or were deemed or taken to have interests or short positions in the shares or underlying shares of the Company which would require to be disclosed to the Company pursuant to Part XV of the SFO, or which were recorded in the register required to be kept under Section 336 of the SFO or who were interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meeting of any member of the Group.

DIRECTORS’ INTEREST IN CONTRACTS AND/OR ARRANGEMENT

As at the Latest Practicable Date,

• (a) there was no contract or arrangement entered into by any member of the Group subsisting in which any Director is materially interested and which is significant to the business of the Group; and

• (b) none of the Directors, directly or indirectly, had any interest in any assets which had since 31 December 2015 (being the date to which the latest published audited financial statements of the Group were made up) been 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.

– I-3 –

GENERAL INFORMATION

APPENDIX

SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with the Company which will not expire or is not determinable by the Group within one year without payment of compensation (other than statutory compensation).

MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2015 (being the date to which the latest published audited consolidated financial statements of the Group were made up).

EXPERT AND CONSENT

The following is the qualification of the expert who has given opinion and advice, which are contained in this circular:

Name Qualification

VC Capital Limited A licensed corporation to carry out type 6 (advising on corporate finance) regulated activities under the SFO

The above expert has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter dated 4 October 2016 and references to its name in the form and context in which they appear. As at the Latest Practicable Date, the above expert:

• (1) did not have any shareholding in any member of the Group and did not have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group; and

• (2) did not have any direct or indirect interest in any assets which have been, since 31 December 2015 (being the date to which the latest published audited consolidated financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

DIRECTORS’ INTEREST IN COMPETING BUSINESS

As at the Latest Practicable Date, so far as the Directors were aware, none of the Directors or their respective associates had any interest in a business which competed or might compete with the business of the Group, or had or might have any other conflicts of interest with the Group pursuant to Rule 8.10 of the Listing Rules.

– I-4 –

GENERAL INFORMATION

APPENDIX

GENERAL

• (1) The company secretary of the Company is Mr. Chan Tao Ming, Alex, a practising member of the Hong Kong Institute of Certified Public Accountants;

• (2) The registered office of the Company is at Room 3306–08, 33rd Floor, West Tower, Shun Tak Centre, 200 Connaught Road Central, Hong Kong;

• (3) The Hong Kong branch share registrar and transfer office of the Company is Tricor Standard Limited located at Level 22, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong; and

• (4) This circular has been prepared in both English and Chinese. In the event of inconsistency, the English text of this circular and the accompany form of proxy shall prevail over their respective Chinese texts for the purpose of interpretation.

DOCUMENTS AVAILABLE FOR INSPECTION

A copy of the following documents will be made available for inspection during normal business hours on any business day at the Company’s principal place of business in Hong Kong at Room 3306–08, 33rd Floor, West Tower, Shun Tak Centre, 200 Connaught Road Central, Hong Kong from the date of this circular up to and including the date of the EGM:

• (1) the articles of association of the Company;

• (2) the letter from the Independent Board Committee, the text of which is set out on page 11 of this circular;

• (3) the letter from Independent Financial Adviser, the text of which is set out on pages 12 to page 25 of this circular;

• (4) the written consent referred to in the paragraph under the heading ‘‘Expert and Consent’’ in this appendix;

• (5) the Investment Agreement; and

• (6) this circular.

– I-5 –

NOTICE OF THE EGM

==> picture [58 x 62] intentionally omitted <==

FUJIAN HOLDINGS LIMITED

(Incorporated in Hong Kong with limited liability)

(Stock Code: 00181)

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the extraordinary general meeting (the ‘‘EGM’’) of Fujian Holdings Limited (the ‘‘Company’’) will be held at 10:00 a.m. on Thursday, 20 October 2016 at Ballroom, 1st Floor, South Pacific Hotel, 23 Morrison Hill Road, Wanchai, Hong Kong (or any adjournment thereof) to consider and, if thought fit, pass the following resolution as an ordinary resolution:

ORDINARY RESOLUTION

‘‘THAT:

• (a) the investment and cooperation agreement dated 23 August 2016 (the ‘‘Investment Agreement’’) between the Company and Fujian Huamin Industrial Group Company Limited in relation to the establishment of Fujian Huamin Leasing Company Limited, a joint venture company and be and is hereby approved, confirmed and ratified; and

• (b) any director of the Company (or any two directors of the Company, if the affixation of the common seal is necessary) be and is/are hereby authorized for and on behalf of the Company to execute (and if necessary, affix the common seal of the Company to) such other documents, instruments and agreements and to do such acts and things as he/she/ they may consider necessary, appropriate, desirable or expedient to give effect to or in connection with the Investment Agreement and the transactions contemplated thereunder.’’

By order of the Board Fujian Holdings Limited Wang Xiaowu

Chairman

Hong Kong, 4 October 2016

– EGM-1 –

NOTICE OF THE EGM

Notes:

1. Any member of the Company entitled to attend and vote at the EGM is entitled to appoint one or more proxies to attend and vote on his/her/its behalf. A proxy needs not be a member of the Company.

2. Where there are joint registered holders of any share, any one of such persons may vote at the EGM, either personally or by proxy, in respect of such share as if he/she/it were solely entitled thereto; but if more than one of such holders be present at the EGM, personally or by proxy, that one of the said persons so present whose name stands first on the register in respect of such share shall alone be entitled to vote in respect thereto.

3. A form of proxy for the EGM is enclosed herewith.

4. In order to be valid, a form of proxy must be deposited by hand or by post at the registered office of the Company at Room 3306–08, 33rd Floor, West Tower, Shun Tak Centre, 200 Connaught Road Central, Hong Kong together with the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of such power or attorney, not less than 48 hours before the time appointed for holding of the EGM or any adjournment thereof (as the case may be).

5. Shareholders or their proxies shall produce their identity documents when attending the EGM.

6. Shareholders or proxies attending the EGM should state clearly, in respect of the resolution, whether they are voting for or against the resolution. Abstention votes will not be regarded by the Company as having voting rights for the purpose of vote counts.

7. Voting on the ordinary resolution at the EGM will be conducted by way of poll.

– EGM-2 –